Energy Economics: Concepts, Issues, Markets and Governance.

• Author: Cohen, Gail

Energy Economics: Concepts, Issues, Markets and Governance by SUBHES C. BHATTA-CHARYYA. (Springer-Verlag London Limited, 2011) 721 pages. Hardback ISBN 978-0-85729-267-4.

Energy economics is an established field without an established textbook. Bhattacharyya's book is a valiant attempt to fill this gap. The strengths and weaknesses of the book stem from the same source: its vast scope. The book provides a discussion of energy demand and supply, the characteristics of energy markets and issues facing the energy sector, energy and the environment, and regulation and governance of the energy sector. Each of these could be the subject of a fairly long book. The inclusion of all of them here means not only that "the size of the book has gone up," as the author states, but that the quality of the chapters is uneven. The book does a good job at introducing basic concepts, which may be helpful to its intended audience of students. However, only cursory attention is paid to the important topics of environmental economics and regulation, as well as the financialization of the energy sector.

THE BASICS: DEMAND & SUPPLY

After a brisk introduction to the main players in the field of energy economics and the interactions among them, Part I is devoted to energy demand analysis and forecasting. Chapter 2 introduces basic concepts that will be helpful for those who have drifted into energy economics from other sub-fields of economics. One example is the discussion of the energy accounting framework that shows how to avoid double counting in the process of tracking energy flows from original supply sources through the conversion process to end-use demands.

The following three chapters analyze energy demand at the aggregate and sectoral levels and how to forecast energy demand. These chapters provide an explanation of basic concepts of energy demand analysis, e.g., why an analysis of energy demand requires modeling the joint decisions of appliance purchase and capacity utilization. The discussion of sectoral demand analysis is quite detailed. There is also a useful introduction to concepts of energy efficiency, methods of demand side management and standard models such as the National Energy Modeling System (NEMS) used by the U.S. Department of Energy in preparing its Annual Energy Outlook).

In contrast, the discussion of econometric methods of energy demand forecasting is a disappointment. There is an overly long discussion of some very basic techniques like fitting a linear trend, while the discussion of other econometric methods for estimating and forecasting energy demand is rudimentary and not up-to-date. In general, econometrics does not seem to be author's forte; for example, co-integration is barely mentioned and there are hardly any references to econometric work over the last decade. Hence, for those who intend to teach energy economics but with a lot of emphasis on econometric estimation, the book would have to be quite heavily supplemented with additional material.

Part II contains five chapters on energy supply. Chapter 7 applies basic cost-benefit...