The PJM capacity market evolved from a mechanism to support fair and efficient retail competition, to a core market design component implemented to provide adequate revenue to attract sufficient supply and demand side resources to meet PJM’s administrative reliability criteria. The lessons learned in the evolution of the PJM capacity market illustrate issues that are…
Month: February 2026
Capacity Market Fundamentals
Electricity capacity markets work in tandem with electricity energy markets to ensure that investors build adequate capacity in line with consumer preferences for reliability. The need for a capacity market stems from several market failures. One particularly notorious problem of electricity markets is low demand flexibility. Most customers are unaware of the real time prices…
Capacity Markets – Lessons Learned from the First Decade
Capacity markets were introduced in the U.S. in the late 1990s as a means to ensure “resource adequacy” in liberalized electricity markets where generation must be built by merchant investors rather than regulated entities. This paper provides a general introduction to these markets: why they exist, how they function, how well they have performed in…
Editorial
Book Reviews
Climate Policy with the Chequebook – An Economic Analysis of Climate Investment Support
Across the globe, climate policy is increasingly using investment support instruments, such as grants, concessional loans, and guarantees – whereas carbon prices are losing importance. This development substantially increases the risk of inefficient public spending. In this paper, we examine the ability of finance instruments to effectively and efficiently address market failures related to clean…
Symposium on Energy Efficiency
The Impact of Behavioral Science Experiments on Energy Policy
One of the most exciting areas of research today is the use of experiments informed by behavioral science to understand how to change energy consumption decisions of consumers. This article provides a survey and synthesis of experiments and focuses on general principles that can be gleaned from these experiments to date. We identify four general…
Linking Emission Trading Schemes: A Short Note
In principle, linking emission trading schemes would favour the depletion of low-cost abatement opportunities that are geographically spread over the globe. However, this would only be possible if the price of the emission permits in the different schemes converge to one price. Using a simple model-free structure, the paper first assesses how a unilateral link…
Development and Application of Greenhouse Gas Performance Benchmarks in the European Union Emissions Trading Scheme
In the European Union Emissions Trading Scheme’s third trading period (2013-2020), the free allocation of emission allowances will be based on greenhouse gas performance benchmarks. This policy note describes how the revised rules were developed, how they will be applied in practice, and what they imply for operators of installations subject to the system. It…