After Energy Price Decontrol

The Role of Government Conservation Programs

by Stanley Besen, Leland Johnson

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This study examines issues in formulating national policies for energy consumption and conservation. The central question is: What rationale remains for government conservation programs if we assume that the movement toward price decontrol continues? The Note explores the validity of two rationales for intervention: (1) energy prices will remain faulty indicators of the social value of energy resources even after price decontrol, and (2) consumer response to energy prices is inadequate. Focusing on the first rationale, Sec. II discusses major price distortions that will remain even after natural gas prices are decontrolled. Section III addresses the role of government action to promote conservation in light of these distortions. Focusing on the second rationale, Sec. IV describes the more limited government role that might remain if these distortions are eliminated. Section V concludes by emphasizing that complacency caused by the current softness in world oil markets may hamper government actions to promote efficient energy use.

This report is part of the RAND Corporation Note series. The note was a product of the RAND Corporation from 1979 to 1993 that reported other outputs of sponsored research for general distribution.

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