Editing Energy economics (section)

==History==
[[File:World energy prices 1991-2010.png|thumb|World prices for energy, 1991–2010. 2000=100.]]
Energy related issues have been actively present in economic literature since the [[1973 oil crisis]], but have their roots much further back in the history. As early as 1865, [[William Stanley Jevons|W.S. Jevons]] expressed his concern about the eventual depletion of [[coal resources]] in his book ''The Coal Question''. One of the best known early attempts to work on the economics of [[exhaustible resources]] (incl. [[fossil fuel]]) was made by [[Harold Hotelling|H. Hotelling]], who derived a price path for [[non-renewable resources]], known as [[Hotelling's rule]].<ref>{{cite journal |last=Hotelling |first=H. |title=The Economics of Exhaustible Resources |journal=[[Journal of Political Economy]] |volume=39 |issue=2 |year=1931 |pages=137–175 |jstor=1822328 |doi=10.1086/254195|s2cid=44026808 |url=http://www.e-elgar.com/shop/isbn/9781852785802 }}</ref>

Development of energy economics theory over the last two centuries can be attributed to three main economic subjects – the [[Rebound effect (conservation)|rebound effect]], the [[energy efficiency gap]] and more recently, 'green [[Nudge theory|nudges]]'.

'''[[Rebound effect (conservation)|The Rebound Effect]] (1860s to 1930s)'''[[File:Energy Economics - Instrumental Theories.png|thumb|Timeline of instrumental theories of energy economics]]

While energy efficiency is improved with new technology, expected energy savings are less-than proportional to the efficiency gains due to [[Behavioral economics|behavioural responses]].<ref name=":0">{{Citation|last1=Giraudet|first1=Louis-Gaëtan|title=The Economics of Energy Efficiency, a Historical Perspective|date=2019|url=https://halshs.archives-ouvertes.fr/halshs-02301636|language=en|access-date=2021-04-25|last2=Missemer|first2=Antoine|doi=10.1016/j.erss.2023.102973 }}</ref> There are three behavioural sub-theories to be considered: the ''direct rebound effect'', which anticipates increased use of the energy service that was improved; the ''indirect rebound effect'', which considers an increased income effect created by savings then allowing for increased energy consumption, and; the ''economy-wide effect'', which results from an increase in energy prices due to the newly developed technology improvements.<ref>{{Cite journal|date=2007-04-01|title=Technological innovation, energy efficient design and the rebound effect|url=https://www.sciencedirect.com/science/article/abs/pii/S016649720600112X|journal=Technovation|language=en|volume=27|issue=4|pages=194–203|doi=10.1016/j.technovation.2006.11.004|issn=0166-4972|last1=Herring |first1=Horace |last2=Roy |first2=Robin }}</ref>

'''[[Energy efficiency gap|The Energy Efficiency Gap]] (1980s to 1990s)'''

Suboptimal investment in improvement of energy efficiency resulting from [[market failure]]s/barriers prevents the optimal use of energy.<ref>{{Cite journal | date=2017-12-01| title=Explaining the energy efficiency gap - Expected Utility Theory versus Cumulative Prospect Theory| url=https://www.sciencedirect.com/science/article/abs/pii/S0301421517305876| journal=Energy Policy| language=en| volume=111| pages=414–426| doi=10.1016/j.enpol.2017.09.026| issn=0301-4215| last1=Häckel |first1=Björn |last2=Pfosser |first2=Stefan |last3=Tränkler |first3=Timm | bibcode=2017EnPol.111..414H}}</ref> From an economical standpoint, a [[Decision-making|rational decision-maker]] with [[perfect information]] will optimally choose between the [[Trade-off talking rational economic person|trade-off]] of initial investment and energy costs. However, due to uncertainties such as environmental externalities, the optimal potential energy efficiency is not always able to be achieved, thus creating an energy efficiency gap.

'''Green [[Nudge theory|Nudges]] (1990s to Current)'''

While the energy efficiency gap considers economical investments, it does not consider [[Behavioral economics|behavioural]] anomalies in energy consumers. Growing concerns surrounding [[climate change]] and other environmental impacts have led to what economists would describe as irrational behaviours being exhibited by energy consumers. A contribution to this has been government interventions, coined "green nudges’ by Thaler and Sustein (2008),<ref>{{Cite book|last1=Thaler|first1=Richard|title=Nudge: Improving Decisions about Health, Wealth, and Happiness|last2=Sunstein|first2=Cass|publisher=Penguin Group Australia|year=2009|isbn=9780141040011|location=Camberwell, Vic.}}</ref> such as feedback on energy bills. Now that it is realised people do not behave rationally, research into energy economics is more focused on behaviours and impacting decision-making to close the energy efficiency gap.<ref name=":0" />