[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/aea/jecper/v26y2012i1p3-28.html
   My bibliography  Save this article

Is There an Energy Efficiency Gap?

Author

Listed:
  • Hunt Allcott
  • Michael Greenstone
Abstract
Many analysts of the energy industry have long believed that energy efficiency offers an enormous "win-win" opportunity: through aggressive energy conservation policies, we can both save money and reduce negative externalities associated with energy use. In 1979, Daniel Yergin and the Harvard Business School Energy Project estimated that the United States could consume 30 or 40 percent less energy without reducing welfare. The central economic question around energy efficiency is whether there are investment inefficiencies that a policy could correct. First, we examine choices made by consumers and firms, testing whether they fail to make investments in energy efficiency that would increase utility or profits. Second, we focus on specific types of investment inefficiencies, testing for evidence consistent with each. Three key conclusions arise: First, the evidence presented in the long literature on the subject frequently does not meet modern standards for credibility. Second, when one tallies up the available empirical evidence from different contexts, it is difficult to substantiate claims of a pervasive Energy Efficiency Gap. Third, it is crucial that policies be targeted. Welfare gains will be larger from a policy that preferentially affects the decisions of those consumers subject to investment inefficiencies.

Suggested Citation

  • Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 3-28, Winter.
    • Handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:3-28
    Note: DOI: 10.1257/jep.26.1.3
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.1.3
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. ARTHUR Rosenfeld & CELINA Atkinson & JONATHAN Koomey & ALAN Meier & ROBERT J. Mowris & LYNN PRICE, 1993. "Conserved Energy Supply Curves For U.S. Buildings," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 45-68, January.
    2. Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-2390, October.
    3. Toshi H. Arimura, Shanjun Li, Richard G. Newell, and Karen Palmer, 2012. "Cost-Effectiveness of Electricity Energy Efficiency Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    4. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters, in: Victor J. Tremblay & Elizabeth Schroeder & Carol Horton Tremblay (ed.), Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74, Edward Elgar Publishing.
    5. Kenneth Gillingham & Richard G. Newell & Karen Palmer, 2009. "Energy Efficiency Economics and Policy," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 597-620, September.
    6. Hossain Tanjim & Morgan John, 2006. "...Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(2), pages 1-30, January.
    7. Levinson, Arik & Niemann, Scott, 2004. "Energy use by apartment tenants when landlords pay for utilities," Resource and Energy Economics, Elsevier, vol. 26(1), pages 51-75, March.
    8. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-362, March.
    9. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    10. James M. Sallee, 2011. "The Taxation of Fuel Economy," Tax Policy and the Economy, University of Chicago Press, vol. 25(1), pages 1-38.
    11. Anderson, Soren T. & Newell, Richard G., 2004. "Information programs for technology adoption: the case of energy-efficiency audits," Resource and Energy Economics, Elsevier, vol. 26(1), pages 27-50, March.
    12. Stephen J. Decanio & William E. Watkins, 1998. "Investment In Energy Efficiency: Do The Characteristics Of Firms Matter?," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 95-107, February.
    13. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
    14. Nadel, Steven & Geller, Howard, 1996. "Utility DSM : What have we learned? Where are we going?," Energy Policy, Elsevier, vol. 24(4), pages 289-302, April.
    15. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    16. Gilbert E. Metcalf & Kevin A. Hassett, 1999. "Measuring The Energy Savings From Home Improvement Investments: Evidence From Monthly Billing Data," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 516-528, August.
    17. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
    18. Parry, Ian W.H. & Evans, David & Oates, Wallace E., 2014. "Are energy efficiency standards justified?," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 104-125.
    19. Bryan Bollinger & Phillip Leslie & Alan Sorensen, 2011. "Calorie Posting in Chain Restaurants," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 91-128, February.
    20. Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy paradox and the diffusion of conservation technology," Resource and Energy Economics, Elsevier, vol. 16(2), pages 91-122, May.
    21. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    22. Blumstein, Carl & Stoft, Steven E, 1995. "Technical efficiency, production functions and conservation supply curves," Energy Policy, Elsevier, vol. 23(9), pages 765-768, September.
    23. Heutel, Garth, 2010. "Optimal Policy Instruments for Externality-Producing Durable Goods under Time Inconsistency," UNCG Economics Working Papers 10-5, University of North Carolina at Greensboro, Department of Economics.
    24. Paul L. Joskow & Donald B. Marron, 1992. "What Does a Negawatt Really Cost? Evidence from Utility Conservation Programs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 41-74.
    25. James M. Sallee, 2014. "Rational Inattention and Energy Efficiency," Journal of Law and Economics, University of Chicago Press, vol. 57(3), pages 781-820.
    26. Lucas W. Davis & Erich Muehlegger, 2010. "Do Americans consume too little natural gas? An empirical test of marginal cost pricing," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 791-810, December.
    27. Lucas W. Davis, 2011. "Evaluating the Slow Adoption of Energy Efficient Investments: Are Renters Less Likely to Have Energy Efficient Appliances?," NBER Chapters, in: The Design and Implementation of US Climate Policy, pages 301-316, National Bureau of Economic Research, Inc.
    28. Bovenberg, A.L. & Goulder, L.H., 1996. "Optimal environmental taxation in the presence of other taxes : General equilibrium analyses," Other publications TiSEM 5d4b7517-c5c8-4ef6-ab76-3, Tilburg University, School of Economics and Management.
    29. Hunt Allcott & Nathan Wozny, 2014. "Gasoline Prices, Fuel Economy, and the Energy Paradox," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 779-795, December.
    30. Michael Greenstone & Elizabeth Kopits & Ann Wolverton, 2011. "Estimating the Social Cost of Carbon for Use in U.S. Federal Rulemakings: A Summary and Interpretation," NBER Working Papers 16913, National Bureau of Economic Research, Inc.
    31. Jeffrey A. Dubin & Allen K. Miedema & Ram V. Chandran, 1986. "Price Effects of Energy-Efficient Technologies: A Study of Residential Demand for Heating and Cooling," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 310-325, Autumn.
    32. Meier, Alan K. & Whittier, Jack, 1983. "Consumer discount rates implied by purchases of energy-efficient refrigerators," Energy, Elsevier, vol. 8(12), pages 957-962.
    33. Ian Ayres & Sophie Raseman & Alice Shih, 2009. "Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage," NBER Working Papers 15386, National Bureau of Economic Research, Inc.
    34. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
    35. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 941-975.
    36. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    37. Brad M. Barber & Terrance Odean & Lu Zheng, 2005. "Out of Sight, Out of Mind: The Effects of Expenses on Mutual Fund Flows," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2095-2120, November.
    38. Hassett, Kevin A. & Metcalf, Gilbert E., 1993. "Energy conservation investment : Do consumers discount the future correctly?," Energy Policy, Elsevier, vol. 21(6), pages 710-716, June.
    39. Lucas W. Davis, 2008. "Durable goods and residential demand for energy and water: evidence from a field trial," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 530-546, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    2. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    3. Allcott, Hunt & Mullainathan, Sendhil & Taubinsky, Dmitry, 2014. "Energy policy with externalities and internalities," Journal of Public Economics, Elsevier, vol. 112(C), pages 72-88.
    4. Schleich, Joachim & Gassmann, Xavier & Faure, Corinne & Meissner, Thomas, 2016. "Making the implicit explicit: A look inside the implicit discount rate," Energy Policy, Elsevier, vol. 97(C), pages 321-331.
    5. Richard G. Newell & Juha Siikamäki, 2014. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(4), pages 555-598.
    6. Lucas W. Davis & Gilbert E. Metcalf, 2016. "Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 589-625.
    7. Häckel, Björn & Pfosser, Stefan & Tränkler, Timm, 2017. "Explaining the energy efficiency gap - Expected Utility Theory versus Cumulative Prospect Theory," Energy Policy, Elsevier, vol. 111(C), pages 414-426.
    8. Hunt Allcott & Nathan Wozny, 2014. "Gasoline Prices, Fuel Economy, and the Energy Paradox," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 779-795, December.
    9. Lucas W. Davis & Alan Fuchs & Paul J. Gertler, 2012. "Cash for Coolers," NBER Working Papers 18044, National Bureau of Economic Research, Inc.
    10. Houde, Sébastien & Myers, Erica, 2021. "Are consumers attentive to local energy costs? Evidence from the appliance market," Journal of Public Economics, Elsevier, vol. 201(C).
    11. Heather Klemick & Elizabeth Kopits & Keith Sargent & Ann Wolverton, 2014. "Heavy-Duty Trucks and the Energy Efficiency Paradox," NCEE Working Paper Series 201402, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jan 2014.
    12. Gerarden, Todd D. & Newell, Richard G. & Stavins, Robert N. & Stowe, Robert C., 2015. "An Assessment of the Energy-Efficiency Gap and Its Implications for Climate Change Policy," Climate Change and Sustainable Development 202116, Fondazione Eni Enrico Mattei (FEEM).
    13. Burlinson, Andrew & Giulietti, Monica & Battisti, Giuliana, 2018. "Technology adoption, consumer inattention and heuristic decision-making: Evidence from a UK district heating scheme," Research Policy, Elsevier, vol. 47(10), pages 1873-1886.
    14. Li, Jia & Just, Richard E., 2018. "Modeling household energy consumption and adoption of energy efficient technology," Energy Economics, Elsevier, vol. 72(C), pages 404-415.
    15. Suter, Jordan F. & Shammin, Md Rumi, 2013. "Returns to residential energy efficiency and conservation measures: A field experiment," Energy Policy, Elsevier, vol. 59(C), pages 551-561.
    16. Giraudet, Louis-Gaëtan, 2020. "Energy efficiency as a credence good: A review of informational barriers to energy savings in the building sector," Energy Economics, Elsevier, vol. 87(C).
    17. Richard S.J. Tol, 2018. "Energy and Climate," Working Paper Series 1618, Department of Economics, University of Sussex Business School.
    18. Hunt Allcott, 2014. "Paternalism and Energy Efficiency: An Overview," NBER Working Papers 20363, National Bureau of Economic Research, Inc.
    19. Panzone, Luca A., 2013. "Saving money vs investing money: Do energy ratings influence consumer demand for energy efficient goods?," Energy Economics, Elsevier, vol. 38(C), pages 51-63.
    20. Aydin, Erdal, 2016. "Energy conservation in the residential sector : The role of policy and market forces," Other publications TiSEM b9cedba8-1310-4097-90fb-b, Tilburg University, School of Economics and Management.

    More about this item

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:3-28. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.