NBER Publications by Karen Palmer

We analyze the cost-effectiveness of electric utility ratepayer–funded programs to promote demand-side management (DSM) and energy efficiency (EE) investments. We specify a model that relates electricity demand to previous EE DSM spending, energy prices, income, weather, and other demand factors. In contrast to previous studies, we allow EE DSM spending to have a potential long-term demand effect and explicitly address possible endogeneity in spending. We find that current period EE DSM expenditures reduce electricity demand and that this effect persists for a number of years. Our findings suggest that ratepayer funded DSM expenditures between 1992 and 2006 produced a central estimate of 0.9 percent savings in electricity consumption over that time period and a 1.8 percent savings over all...

Energy efficiency and conservation are considered key means for reducing greenhouse gas emissions and achieving other energy policy goals, but associated market behavior and policy responses have engendered debates in the economic literature. We review economic concepts underlying consumer decision making in energy efficiency and conservation and examine related empirical literature. In particular, we provide an economic perspective on the range of market barriers, market failures, and behavioral failures that have been cited in the energy efficiency context. We assess the extent to which these conditions provide a motivation for policy intervention in energy-using product markets, including an examination of the evidence on policy effectiveness and cost. Although theory and empirical evid...

In a 1991 essay in Scientific American, Michael Porter suggested that environmental regulation may have a positive effect on the performance of domestic firms relative to their foreign competitors, by stimulating domestic innovation. We examine the stylized facts regarding environmental expenditures and innovation in a panel of manufacturing industries. We find that lagged environmental compliance expenditures have significant positive effect on R&D expenditures when we control for unobserved industry-specific effects. We find little evidence, however, that industries' inventive output (as measured by patent applications) is related to compliance costs).