Journal of Regulatory Economics

, Volume 43, Issue 3, pp 229–247

Motivating energy suppliers to promote energy conservation

Original Article

DOI: 10.1007/s11149-013-9215-x

Cite this article as:
Chu, L.Y. & Sappington, D.E.M. J Regul Econ (2013) 43: 229. doi:10.1007/s11149-013-9215-x


We examine the design of regulatory policy to induce electric utilities to deliver the surplus-maximizing level of energy efficiency services, \(e^{*}\). The rebound effect (whereby increased energy efficiency stimulates the demand for energy) typically renders revenue decoupling insufficient in this regard. The additional financial incentive required to induce \(e^{*}\) is shown to vary with such factors as the prevailing price of energy, the magnitude of the rebound effect, the extent of observable energy efficiency investments, and the utility’s objective.


Energy efficiencyEnergy conservationIncentive regulation

JEL Classification


Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Marshall School of BusinessUniversity of Southern CaliforniaLos AngelesUSA
  2. 2.Department of Economics, Warrington College of BusinessUniversity of FloridaGainesvilleUSA