Science Fair Project Encyclopedia
Energy economics is a subfield of economics that focuses on energy relationships as the foundation of all other relationships. It is a subfield of ecological economics in that it assumes that food chains in ecology are directly analogous to energy supply chains in human industries.
Some theories go much further in assuming that these relationships are decisive, much as Marxist economics assumes that capital (economics) ownership relationships are decisive, in determining human actions on the largest scales.
The earliest energy economics was considered by some an offshoot of deep ecology movements - sharing the view that human beings can suffer population dieoff when an energy supply is exhausted. This is considered inescapable. Accordingly, a prime motive of energy economics is energy conservation.
According to Brian Czech , "Most modern economics has defined "efficiency" in terms of output per personhour instead of output per unit of energy input. Using the former calculation, the American farmer is the most productive in the world. Using the latter, he is the least. (Not only is he subsidized through the use of non-renewable fossil fuels, but he also receives financial subsidies from the government, which are paid for by economic activity that is also based on non-renewable fossil fuels.)
"The "invisible hand" of the modern marketplace has dramatically raised the output of primary and secondary producers to the point where a small percentage of the population involved in these activities are able to support the majority who work in the service sector." 
One way to view this increase in productive capacity per person that supports others is as "surplus value", of which modern technology has freed up enormous amounts, letting the service economy "balloon to levels far beyond the wildest dreams of the aristocrats of old." This wealth is quite unevenly distributed, but aside from that, it is only accumulated at great loss to everyone else. Those who take this view are at the convergence of Marxist economics and green economics.
Regardless of political stripe, energy economists are often involved in redefining political economy along the lines of ecology and thermodynamics and usually seek monetary reform to reflect the realities of energy inefficiency and waste in industrialized activities. The idea of industrial ecology has emerged in part from these efforts. See Natural Capitalism for a popular framework incorporating these principles.
Environment vs. Economy
"The problem with environmentally friendly alternatives to existing practices is that they invariably reduce the output/person/hour, which means that less "surplus value" is being created to support the service sector. To a large degree this is simply because environmental sustainability simply involves redefining "efficiency" to emphasize sustainability instead of output per person. If you set out to do one particular thing, it is a lot easier to do it than if you set out to do another thing first and hope to have something else come about "on the side". And the fact of the matter is that it really does take more people to raise organic carrots than if you use pesticides. This is why organic food costs more. It is simply because we are substituting human labour for environmentally-destructive inputs like pesticides, long-haul trucking, chemical fertilizers and so forth." 
While green economics may hold that the economy has "grown even if the new job comes from hoeing carrots instead of teaching the violin," there is a "multiplier effect" to the decline of surplus value: "Every time you add a new producer to a lower trophic level you are also adding a new consumer to the lower level. (This is where the analogy with wildlife biology breaks down---contrary to Swift's Modest Proposal, people on upper trophic levels do not directly eat the people beneath them.) The thwarted violin teacher who ends up hoeing carrots has to eat carrots herself, which means there will be one less unit of surplus value to support the creation of a new violin-teaching job for someone else. So, in effect, she not only doesn't create a new job teaching violin, she is going to take away the food that was needed to support another violin teacher! It is this "multiplier effect" that shrinks the economy." This shrinkage is inevitable even if the number of jobs is steady:
"Employment will open up in the primary and secondary sectors of the economy as people develop more environmentally- sustainable and labour-intensive technology. There will be jobs for people raising organic carrots and building straw-bale homes. But the economy will decline because there will be less "surplus wealth " to purchase goods and services. People will live in strawbale homes and eat organic carrots but they will not be able to hire people to teach them violin---they'll have to teach themselves in their spare time." 
So the acceptance of the combination of surplus value and energy-centric views, requires one also to accept the decline of service economy and a role at a lower trophic level (as a low-tech gardener, farmer, fisher ) for at least some of the time, for all people.
This is of course the opposite of current trends to urbanization. In China alone 900 million people are expected to move to the cities in the coming generation. Joseph Tainter has studied about two dozen collapsed civilizations, and in no case was any able to avoid the collapse due to the increasingly top-heavy pyramid of value that stressed the environmental carrying capacity to the point where it could not sustain population - ecology calls this a dieoff . Humans would see it as increasing chaos, conflict, and warfare.
"The fact that problem-solving systems seem to evolve to greater complexity, higher costs, and diminishing returns has significant implications for sustainability. In time, systems that develop in this way are either cut off from further finances, fail to solve problems, collapse, or come to require large energy subsidies. This has been the pattern historically in such cases as the Roman Empire, the Lowland Classic Maya , Chacoan Society of the American Southwest, warfare in Medieval and Renaissance Europe , and some aspects of contemporary problem solving (that is, in every case that I have investigated in detail) (Tainter 1988, 1992, 1994b, 1995a)."
In Complexity, Problem Solving, and Sustainable Societies, 1996, Tainter held that "Systems of problem solving develop greater complexity and higher costs over long periods. In time such systems either require increasing energy subsidies or they collapse. Diminishing returns to complexity in problem solving limited the abilities of earlier societies to respond sustainably to challenges, and will shape contemporary responses to global change. To confront this dilemma we must understand both the role of energy in sustaining problem solving, and our historical position in systems of increasing complexity." 
"One often-discussed path is cultural and economic simplicity and lower energy costs. This could come about through the "crash" that many fear-a genuine collapse over a period of one or two generations, with much violence, starvation, and loss of population. The alternative is the "soft landing" that many people hope for-a voluntary change to solar energy and green fuels, energy-conserving technologies , and less overall consumption. This...will come about only if severe, prolonged hardship in industrial nations makes it attractive, and if economic growth and consumerism can be removed from the realm of ideology."
"The more likely option is a future of greater investments in problem solving, increasing overall complexity, and greater use of energy. This option is driven by the material comforts it provides, by vested interests, by lack of alternatives, and by our conviction that it is good. If the trajectory of problem solving that humanity has followed for much of the last 12,000 years should continue, it is the path that we are likely to take in the near future."  This current default path leads to human extinction via what ecologists call Easter Island Syndrome.
Energy costs of problem solving
A central argument in energy economics is its relation to complexity. In nature, life is negentropic, meaning, it not only reverses the entropy which over time disorders any given system, but that it sheds disordering heat energy. Its internal organization must become ever more efficient, via evolution, to survive in more environments, on less food, and be less attractive to predators who are not seeking a lean bony meal but a plump one. Evolution can be seen as seeking more energy-efficient forms - as problem-solving. "To discover such innovations requires energy, which underscores the constraints in the energy-complexity relation ." 
The energy loss of this trial-and-error problem solving in nature is extreme - species emerge, blunder around, destroy entire ecosystems, die off, and are replaced - millions of years of this may lead to few or no improvements in the energy efficiency of a life form. Also, even very efficient forms may be evolved for a particular environment that itself changes, letting those forms that invest less in defense, say, push forward as predatory threats ease.
Tainter notes, however, that even the energy costs of finding and extracting energy itself, are not known at present.
This section will review some of economic ideas and techniques that relate directly to energy economics.
Peak Load Pricing
Main article: Peak load pricing
Peak load pricing refers to changing the price of a good or service with respect changes in demand over time. Since demand varies with time, and an increase in quantity demanded is usually associated with an increase in cost (for any marginal cost > 0 ) price must also vary with demand for efficient outcome.
For the energy sector, a peak in demand usually results in additional power plants coming online as well as running at full capacity during the peak period. The peak is characterized as a local highpoint on a demand vs. time graph. Two major peak periods for energy are usually in the morning when people are using applicances in the bathroom or in the kitchen to make breakfast and in the evening during supper.
-  Shovelling Fuel for a Runaway Train - Brian Czech
-  Complexity, Problem Solving, and Sustainable Societies, Joseph Tainter, published in , Island Press, 1996; ISBN 1-55963-503-7
- Tainter, J. A. 1988. The Collapse of Complex Societies. Cambridge: Cambridge University Press.
- Tainter, J. A. 1992. Evolutionary consequences of war. In Effects of War on Society, ed. G. Ausenda, pp. 103-130. San Marino: Center for Interdisciplinary Research on Social Stress.
- Tainter, J. A. 1994a. Southwestern contributions to the understanding of core-periphery relations. In Understanding Complexity in the Prehistoric Southwest, eds. G. J. Gumerman, and M. Gell-Mann, pp. 25-36. Santa Fe Institute, Studies in the Sciences of Complexity, Proceedings
Volume XVI. Reading: Addison-Wesley.
- Tainter, Joseph A. 1994b. La fine dell'amministrazione centrale: il collaso dell'Impero romano in
Occidente. In Storia d'Europa, Volume Secondo: Preistoria e Antichita, eds. Jean Guilaine and Salvatore Settis, pp. 1207-1255. Turin: Einaudi.
- Tainter, J. A. 1995a. Sustainability of complex societies. Futures 27: 397-407.
- Tainter, J. A. 1995b. Introduction: prehistoric societies as evolving complex systems. In: Evolving Complexity and Environmental Risk in the Prehistoric Southwest, eds. J. A. Tainter and B. B
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