How many people actually see the price signal? Quantifying marketfailures in the end use of energy

"Getting the price right" is a goal of many market-orientedenergy policies. However, there are situations where the consumer payingfor the energy is separate from the owner of the energy-using device.Economists call this a "principal agent problem". A team organised by theInternational Energy Agency examined seven end uses and one sector whereprincipal agent problems existed: refrigerators, water heating, spaceheating, vending machines, commercial HVAC, company cars, lighting, andfirms. These investigations took place in Australia, Japan, theNetherlands, Norway, and the United States. About 2 100 percent of theenergy consumed in the end uses examined was affected by principal agentproblems. The size (and sometimes even the existence) varied greatly fromone country to another but all countries had significant amounts ofenergy affected by principal agent problems. The presence of a marketfailure does not mean that energy use would fall substantially if thefailure were eliminated; however it does suggest that raising energyprices such as in the form of carbon taxes will not necessarily increaseefficiency investments.