Abstract
Although this book focuses on electricity demand, this section considers the demand for energy in general. There are various reasons for this extension. First, energy demand can be described by a similar framework. Second, energy conservation is a topical issue far beyond the focus of utility conservation programs with various environmental concerns such as local (smog, air quality), international (transboundary pollution, e.g. sulfur dioxide emissions of power plants and factories), and global (the greenhouse effect attributed largely to carbon dioxide emissions from burning fossil fuels) externalities.
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Notes
Inada-type conditions, i.e. us, uq, fk, fe, ft and v′ diverging to plus infinity if the arguments vanish, guarantee interior solutions.
This confusion of engineers is due to their emphasis on η but their neglect of other attributes such as quality.
An example is Austria, where a registration tax depends on the fuel efficiency (0 % for 3 liters per 100 kms and normalized to 12 % of the sales price to make up for the shortfall from the original VAT of 32 % on luxury goods and cars to the common 20 %). A similar proposal has recently been discussed in Germany to replace the tax based on an engine’s volumes.
However, a ceteris paribus clause is necessary here, because this desire to increase comfort justifies the acquisition of efficiencies that would not pass an engineering cost comparison, see below.
For a good exposition of the implicit function theorem see Rudin (1976).
Subscript letters denote partial derivatives, e.g., Ep = ∂E/∂p. Occasionally subscript letters even indicate the derivative of scalar functions (and thus the common derivative) to highlight the (suppressed) argument.
Of course, except in those cases where the time spent on heating a home is less relevant to the beneficiaries of the service. For example, the Austrian emperors (in palace Schönbrunn in Vienna), could afford single stoves in each room and thus a comfort similar to central heating due to the fact that the servants were doing all the work.
This effect is omitted in Braithwait and Caves (1994).
As the title indicates, this specification is used in finance, and recently in the literature on endogenous growth theory, where in fact this is the only specification used because the property of a constant elasticity of marginal benefit is necessary for the existence of a ‘balanced’ growth path, see, e.g., Lucas (1988), Romer (1990).
In this section we use k to denote the capital stock to comply with the usual notation; this should not be confused with the parameter k introduced in the Example 2.2, equation (2.60).
This section can be omitted in a first reading.
After all, the experts were predicting increasing energy prices up to 1985, see Wirl-Szirucsek(1990).
This section is not essential for understanding the further arguments of this book.
Or expectation of further price increases, e.g. the IEA projected rising energy prices as late as in 1985, IEA (1985).
A similar conclusion holds for a small country, even if the energy tax is set sufficiently high, because it does not pay to improve technology (e.g., the mileage of cars) for small markets.
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© 1997 Springer Science+Business Media Dordrecht
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Wirl, F. (1997). Economic analysis of energy conservation. In: The Economics of Conservation Programs. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6301-3_2
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DOI: https://doi.org/10.1007/978-1-4615-6301-3_2
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