Energy & Environmental Economics & Policy
Today, more than any other time in history, significant attention is given to the environmental impacts of our energy policy, both upstream and downstream. At the same time, energy markets are being liberalized and opened to market-based competition. These 'deregulated' energy markets prioritize the lowest cost energy sources and sources that provide for the greatest reliability of the energy system, rather than those sources that provide for the least environmental degradation. The design of economically-efficient energy markets that also prioritize environmental protection requires advanced market designs and auction mechanisms that can effectively balance these competing criteria.
Coincidentally, these markets can suffer from the problem of imperfect competition (i.e., market power), in which a few dominant firms maintain the ability to influence prices. This imperfect competition not only results in market inefficiencies, but also inhibits these markets from effectively balancing the competing criteria of low costs, system reliability and environmental stewardship.