Allocating the Added Value of Energy Policies

• Published in: The Energy Journal
• Main Authors: Murphy, Frederic H., Rosenthal, Edward C.
• Format: Article in Journal/Newspaper
• Language: English
• Published: SAGE Publications 2006
• Subjects: General Energy; Economics and Econometrics; Arctic
• Online Access: http://dx.doi.org/10.5547/issn0195-6574-ej-vol27-no2-8; http://journals.sagepub.com/doi/pdf/10.5547/ISSN0195-6574-EJ-Vol27-No2-8

Developing an energy policy from a collection of programs is made more complicated because there is no single value that can be used as a best estimate of the contribution of a single policy, despite the ability to estimate the impact of the complete suite. In this paper we illustrate the problem and use cooperative game theory to show one way to estimate individual effects of a policy goal in the context of collective estimates. Using an economic equilibrium model, we illustrate the behavior of four policies, namely, a gasoline tax, CAFE standards, a carbon tax, and drilling the Arctic National Wildlife Reserve, through their Shapley value contributions in measuring the impact of each in the context of a suite of policies. We apply the Shapley value to measure the average marginal reduction in imports for each policy, and present a number of scenarios that illustrate how the Shapley value behaves as a measure of policy contribution.