Energy Economics: Theory and Applications.

AuthorChermak, Janie M.

Energy Economics: Theory and Applications, by Peter Zweifel, Aaron Praktiknjo, and Georg Erdmann (Springer 2017) 324 pages, ISBN 2192-4333. Hardback

This book provides a broad approach to energy economics that, while theoretically based, focuses on empirical results. The first seven chapters of the book focus on background and basic models and theory, while the rest of the book focuses on specific energy markets. The approach was one that intrigued me as a potential text for graduate level energy economics courses.

The background section of the book begins with a philosophical and historical perspective of energy, including a brief overview of the evolving relationship between civilization, the use of energy, as well as the more recent considerations of ethics and social justice associated with energy consumption. This provides the cornerstone for the study of energy from an economic perspective and a brief introduction into the concept of energy markets, price formation, market failure and intervening policies.

Chapter 2 provides an introduction to energy from the natural sciences perspective, including a presentation of useful conversions and energy units, and linkages to energy markets. Chapter 3 focuses on the time value of money, capital investment, risk, capital asset pricing, and real options. The authors also provide examples from energy markets.

Chapters 4 and 5 provide an overview of bottom-up and top-down energy demand modeling, contrasting the macro and the micro approaches to energy demand modeling. Both chapters provide an overview of the basic formulas that are used to develop the modeling. For example, in the micro, bottom-up approach, a model for appliance stocks is developed and discussed in detail. This is one of the first chapters where the authors attempt to provide both the theoretical background and empirical examples from the literature.

The background and basic models part of the book conclude with chapters 6 and 7 focusing on energy reserves, sustainability, and externalities associated with energy production and consumption. While the chapters provide basic background, with brief presentations of key theories and models appropriate for the topics presented, the...

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