Energy Economics Overview
Reliable and affordable energy supplies are important to every modern economy. The field of energy economics studies the balance between supply and demand for energy and electric power, as well as the regulations and market institutions that influence energy availability, prices and environmental impact. Efforts of energy economists have recently focused on two social challenges. The first is the mix of market and regulatory institutions that best serves society's energy demands. Historically, many governments have strictly regulated prices and quantities of energy commodities, as well as the firms supplying energy. Over the last thirty years, however, market forces have played an increasing role in supplying energy to society. The second challenge arises from the fact that all energy utilization involves some form of adverse environmental impact, including air and water pollution as well as ecosystem impacts. Many energy economists are focused on assessing the consequences of these environmental externalities and determining the best ways for society to manage the potential environmental harms that energy utilization can cause.