A Comparative Analysis of Energy Policy: Europe vs. the US

Abstract

This paper argues that the elasticity of demand for energy in the US and Europe is the main driver of their energy related policy. First, elasticity of demand for energy, which is a measure of how responsive people’s consumption of energy is to changes in energy prices and people’s income, is broken down into its main components: Population distribution, existing infrastructure, and historical economic drivers. Next, each subsection of these components are investigated to show how they affect the elasticity of demand for energy. Finally, the socio- political climates of both the US and Europe are analyzed to show the manifestation of policy driven by the elasticity of demand for energy. Due to the high elasticity of demand for energy in Europe, there exist policies that reflect the population’s ability to substitute for energy saving alternatives. Likewise, in the United States, there is a relative lack of policies that incentivize consumers to change their behavior due to the lower elasticity of demand for energy.