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Selling and Saving Energy: Energy Efficiency Obligations in Liberalized Energy Markets

Louis-Gaëtan Giraudet, Matthieu Glachant, and Jean-Philippe Nicolaï

Year: 2020
Volume: Volume 41
Number: Special Issue
DOI: 10.5547/01956574.41.SI1.lgir
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Abstract:
In Europe, energy efficiency obligations are imposed on energy retailers competing in liberalized energy markets. They comply by subsidizing energy efficiency investments made by energy end-users from within or outside their customer base. We develop a model describing how competition in the energy market affects compliance strategies. We find that, instead of selecting the most cost-effective investments options, firms may either target their most elastic customers, which enables them to increase their retail price, or their competitor’s customers, which protects their sales. Allowing firms to trade obligations can restore cost-effectiveness, but reduces consumer surplus. Overall, the degree of flexibility that should be incorporated into such programs crucially depends on the degree of heterogeneity across investment costs and the relative weights governments assign to cost-effectiveness and consumer surplus.



Do Energy Efficient Firms Have Better Access to Finance?

Philipp-Bastian Brutscher, Pauline Ravillard, and Gregor Semieniuk

Year: 2021
Volume: Volume 42
Number: Number 6
DOI: 10.5547/01956574.42.6.pbru
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Abstract:
Improving energy efficiency quickly is key to mitigating climate change and requires improvements implemented in firms. As these require upfront investments, good access to external finance is important. Theory suggests that information asymmetries may prevent lenders from including energy efficiency into their lending assessment, even though higher energy efficiency increases firm cost-competitiveness and its collateral value. Empirically, little is known about the impact of energy efficiency on access to external finance. For the first time, we examine empirically the effect of a firm's higher energy efficiency on their ability to obtain loans in European Union countries by exploiting a unique firm-level dataset. We find that energy efficiency has no effect on the ability of a firm to obtain external financing compared to other indicators on the financial or operational health of the firm. The results reveal an unexploited potential for energy efficiency policy to signal when firms are energy efficient.





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