EME 444
Global Energy Enterprise

Introduction to Nonmarket Analysis

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Nonmarket environments refers to the domain of concerns that cannot be controlled or managed exclusively through an individual’s or organization’s market-based interactions. For example, many of us are concerned with climate change, environmental damage from energy resource extraction, electric power reliability, worker safety and fair wages, and energy affordability, to name a few! These are concerns we cannot always effectively address with conventional transactions or contracts.

Our non-market concerns are associated with a set of issues which can be resolved in a number of ways. Based upon our beliefs, we develop expectations about how our nonmarket concerns are affected by these alternative resolutions. And based on our individual and/or organizational objectives, we have preferences over the set of possible outcomes for each issue. For example, a particular carbon cap-and-trade proposal is an issue associated with at least two nonmarket concerns: climate change and energy affordability. Any individual or organization concerned with climate change or energy affordability will likely have preferences for or against a particular carbon cap-and-trade proposal.

Take a Look!

For those of you have taken EGEE 401, this may look familiar (it should!). Either way, spend four minutes to take a look. This is an entertaining and very good explanation of the principles of cap and trade.

Any issue will involve a set of stakeholders' concerns that are sufficient to justify expending resources to influence the ultimate outcome. In the case of carbon cap-and-trade, stakeholders primarily concerned with energy affordability and believing that such a policy would increase energy costs will likely prefer that a cap-and-trade scheme not be implemented. In contrast, stakeholders primarily concerned with climate change, and who believe that such a policy will mitigate climate change will likely prefer that the cap-and-trade scheme succeed.  Keep in mind that it is usually not so cut-and-dry.  As you will see moving forward, most stakeholders have a range of nonmarket concerns with varying degrees of intensity and priority, and so deciding which side of an issue one is on can be complicated. You didn't think this would be easy, did you?

Non-market analysis summarizes the set of stakeholders in a way that facilitates evaluating the range of potential outcomes for each issue.