if investment inefficiencies consumers and firms do not undertake privately profitable investments in energy efficiency are the only market failure the firstbest policy is to address the inefficiency directly for example by providing information to imperfectly informed consumers if there are both investment inefficiencies and energyuse externalities then taxes should be used in combination with some welfareimproving energy efficiency policy allcott and greenstone gillingham and palmer a clear predictable carbon price is likely to be an important driver of change