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Current research on energy economics is focused on three broad areas:
A key tool in the research on energy has been the development and exploitation of a range of suitable models, particularly IDEM. The markets for electricity and gas are now undergoing significant structural change and the need to tackle the environmental consequences of the consumption of fossil fuels is of growing importance.
Energy research, organised in the Energy Policy Research Centre funded by a consortium of industry stakeholders and the Department of Communications, Energy and Natural Resources, focused on the supply of electricity in Ireland. New estimates suggest that the regulator has underestimated the value of electricity to households, and has thus set the capacity requirements too low (Tol, SEI, 2007). However, capacity will remain tight for several years even for the current standards (Malaguzzi Valeri & Tol, QEC, 2006). While the dominant position of the ESB and the high penetration of wind energy are contributing factors, the main reason for the lack of investment in peak power is the regulatory uncertainty due to the creation of the Single Electricity Market and the frequent changes in government policy (Lyons et al., QEC, 2007).
Climate change has been the other main focus of research, partly funded through the Energy Policy Research Centre and partly through the Environmental Protection Agency. Previous research identified energy-intensive sectors as being most vulnerable to climate policy. This has to be modulated, however, by the ability of companies to pass on costs to their customers. In this light, the cement industry is less exposed to climate policy than previously thought, while the aluminium industry is more exposed (Fitz Gerald, Scott & Keeney, ESRI, 2007). More recent research has found that climate change is a real problem, but perhaps not as big as often assumed (Tol, EP, 2005). Consequently, European climate policy could be moderated (Tol, EP, 2007) and the same is true for Irish climate policy (Tol, QEC, 2007; McCarthy & Scott, ESRI, 2008). An impact assessment of the introduction of a carbon tax shows positive effects on economic growth, provided that the tax revenue is used to lower labour costs. Although a carbon tax is regressive, the negative implications for the income distribution can be compensated with a minor increase in social benefits and a slight decrease of income taxes (Tol et al., ESRI, 2008).
Research on household energy use, funded by the Environmental Protection Agency, revealed that energy-saving measures are typically used to offset increased energy use, rather than to reduce energy use (O'Doherty, Lyons & Tol, AE, 2008). New research on fuel poverty, funded through the Energy Policy Research Centre, shows that perhaps one-fifth of Irish household is vulnerable to fuel poverty while one-tenth experiences inadequate heating; government policy on fuel poverty is focussed on alleviating the symptoms rather than removing the causes (Scott et al., ESRI, 2008).
Future research will focus on:
This work will be facilitated by the development of a new long-term structural model of the energy and power sector.
Energy research has a long tradition at the ESRI, starting with Booth (1966a, 1966b, 1966c, 1967). The first energy model was constructed by Henry and Scott (1977), the first projections of energy use were published by Scott (1980), and the first impact assessment by O'Connor, Crutchfield and Whelan (1981). An overview of energy research at the ESRI is provided by Fitz Gerald et al. (2005). Programme Coordinator: John Fitz Gerald. Others who work in this area include: David Anthoff, Paul K Gorecki, Hugh Hennessy, Eimear Leahy, Sean Lyons, Laura Malaguzzi Valeri, and Richard Tol together with Research Affiliate Sue Scott ESRI research in energy is closely linked to research in competition and regulation, environment and natural resources, macroeconomics, and transport and infrastructure.
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