investing in energy conservation are homeowners passing up high yields abstract energy conservation is examined as an investment option for homeowners conservation technologies produce monetary benefits through reduced fuel costs calculations suggest that many conservation measures have rates of return significantly higher than alternative investments in stocks bonds and real estate yet the level of conservation activity is inconsistent with these high yields several barriers exist which inhibit investments in conservation it is perceived as risky and the cost of obtaining reliable information is high public policies to encourage conservation should focus on reducing the risk of purchasing energy saving devices by improving the accuracy of energy savings estimates

energy security in bangladesh perspective an assessment and implication energy is a key indicator of the nation s overall economic as well as social development looking at the present energy demand scenario in bangladesh electricity demand has significantly increased over the past years most of the bangladesh s power plants are heavily dependent on expensive imported fossil fuel energy resources thus the power failure has become an acute problem for the country and adversely affects the socio economic development of the country consequently the shortage and constraint in availability of fossil fuels appeal to boost up the renewable energy sector in bangladesh in order to bring down the gap between demand and supply hence decisive steps to reform the power sector with a mandate to oversee these sectors urgently need to overcome current energy crisis facing in the country in this paper efforts have been made to summarize the availability current status strategies perspectives promotion policies major achievements and future potential of energy options in bangladesh

exploring the potential for energy conservation in french households through hybrid modeling although the building sector is recognized as having major potential for energy conservation and carbon dioxide emissions mitigation conventional bottom up and top down models are limited in their ability to capture the complex economic and technological dynamics of the sector this paper introduces a hybrid framework developed to assess future household energy demand in france res irf a bottom up module of energy consumption for space heating has several distinctive features i a clear separation between energy efficiency i e investment in energy efficient technologies and sufficiency i e changes in the utilization of energy consuming durables which allows the rebound effect to be assessed ii the inclusion of barriers to energy efficiency in the form of intangible costs consumer heterogeneity parameters and the learning by doing process iii an endogenous determination of retrofitting which represents trade offs between retrofit quantity and quality subsequently res irf is linked to the imaclim r computable general equilibrium model this exercise shows that compared to a 37 reduction in final energy demand achievable in business as usual in existing dwellings an additional reduction of 14 could be achieved if relevant barriers to efficiency and sufficiency were overcome

barriers to energy efficiency a comparison across the german commercial and services sector abstract based on a large sample for the german commercial and services sector this paper econometrically assesses the relevance of various types of barriers to energy efficiency at the sectoral level and across fifteen sub sectors the results at the level of entire sectors suggest that the lack of information about energy consumption patterns and about energy efficiency measures lack of staff time priority setting within organizations and in particular the investor user dilemma are all relevant barriers allowing for sector specific differences in the relevance of these individual barriers yields a more heterogeneous picture the numbers and types of relevant barriers vary across sub sectors and the majority of sub sectors are subject to relatively few barriers the statistically most significant barriers are found for the sub sector of public administrations these findings are robust independent of whether the definition of an organization s energy efficiency performance includes only measures that have actually been realized or also those that are being planned for planned projects however organizations appear to underestimate internal priority setting as a barrier to energy efficiency

survey evidence on the willingness of u s consumers to pay for automotive fuel economy abstract prospect theory holds that human beings faced with a risky bet will tend to value potential losses about twice as much as potential gains previous research has demonstrated that prospect theory could be sufficient to explain an energy paradox in the market for automotive fuel economy this paper analyzes data from questions added to four commercial multi client surveys of 1000 u s households each in 2004 2011 2012 and 2013 households were asked about willingness to pay for future fuel savings as well as the annual fuel savings necessary to justify a given upfront payment payback periods inferred from household responses are generally consistent over time and across different formulations of questions mean calculated payback periods are about 3 years but there is substantial dispersion among individual responses the calculated payback periods do not appear to be correlated with the attributes of respondents respondents were able to quantitatively describe their uncertainty about both vehicle fuel economy and future fuel prices simulation of loss averse behavior based on respondents stated uncertainty illustrates how loss aversion could lead consumers to substantially undervalue future fuel savings relative to their expected value

does the energy efficiency paradox exist technological progress and uncertainty we explain why firms may choose not to undertake investments inenergy saving technologies that appear profitable from a net presentvalue perspective as future technological advances are inherentlyuncertain and investments in new technology are at least partly irreversible it may pay to postpone investments in energy savingand wait for the arrival of improved varieties this insight casts doubton the existence of so called low hanging fruits in energy saving although we do not wish to deny that organisational failures may alsobe important failure to appreciate the underlying stochasticity oftechnological progress may obscure the insight that there is value inwaiting and costs involved in terminating the option to invest theappetite for low hanging fruits will be less when these costs areincorporated in the analysis we demonstrate that the effect of thearrival rate of new technologies on the adoption lag for a rational firmis ambiguous the same holds for the effect of the expected jump inefficiency of new technologies government policies aimed at enhancingthe adoption of new technologies through stimulation of r d maytherefore be counterproductive

the experience curve option value and the energy paradox abstract this paper develops a model to explain the energy paradox the inclination of households and firms to require very high internal rates of return in order to make energy saving investments the model abstracts from many features of such investments to focus on their irreversibility the uncertainty of their future payoff streams and the investor s anticipation of future technological advance in this setting the decision to invest in energy saving technology can be delayed providing option value in addition delay allows the potential investor to cash in on future experience curve effects with the passage of time firms gain practical knowledge in producing and installing the energy saving technology enabling them to reduce the technology s up front cost per unit of energy saved we incorporate these fundamentals into a stochastic model where the investment s discounted benefits follow geometric brownian motion to demonstrate the model s capabilities we generate simulation results for photovoltaic systems that highlight the experience curve effect as a fundamental reason why households and firms delay making energy saving investments until internal rates of return exceed values of 50 and higher consistent with observations in the economics literature we also explore altruistic motivations for energy conservation and the model s implications for both additionality and the design of energy conservation policy

technology adoption under uncertainty take up and subsequent investment in zambia technology adoption often requires multiple stages of investment as new information emerges agents may abandon a technology that was profitable in expectation we use a field experiment to vary t

the structure of energy efficiency investment in the uk households and its average monetary and environmental savings abstract socioeconomic and behavioural variables that influence the household s adoption of energy efficiency measures such as cavity and loft insulation and upgrades to the boiler are identified contrary to previous literature by extending brechling and smith s 1994 and hassett and metcalf s 1995 models it is shown that the application of the energy act 2011 which contains provisions on the green deal the new energy company obligation eco and the private rented sector needs to follow a tailored strategy to reach the low adoption households identified by my model moreover for the current adopters of the analysed measures average monetary and environmental adoption benefits are estimated based on parti and parti s 1980 demand model these estimates are smaller than their expected values showing an important energy efficiency gap in the sector particularly low cost measures can bring important savings that can help to meet the pay as you save rule i e the golden rule of the new regulation my model also shows that a poor state of dwelling repair can reduce the adoption benefits increasing the need of subsidies that will be financed through consumer s energy bills however this can increase the number of households in fuel poverty

attitudes toward risk and compliance in emission permit markets we investigate the effects of uncertainty and concomitant risk aversion as they impact the incentive structure and subsequent operation of an emissions permit market modeled after the u s s02 market our theoretical results suggest that uncertainty dulls incentives to achieve cost savings through permit trading and inhibits efficient allocation of abatement efforts by firms we test hypotheses in an experimental laboratory setting and find that the irreversibility of investment in abatement technology may present countervailing incentives for potential sellers of permits resulting in a wait and see attitude toward adoption of efficient levels of abatement technology

distributional and revenue raising arguments for tariffs this paper presents and analyses distributional and revenue raising arguments in favor of tariffs and other trade taxes it shows that such an argument depends crucially on the domestic tax powers that are available to the government conditions that must be satisfied by optimal tariffs are obtained and interpreted these conditions are then applied to a simplified model in order to gain greater insight into the determinants of the optimal tariffs finally the arguments are illustrated by some numerical examples which show that these tariffs can be far from negligible and demonstrate their sensitivity to various parameter changes

the energy efficiency paradox revisited through a partial observability approach the present paper examines the energy efficiency paradox demonstrated in greek manufacturing firms through a partial observability approach the data set used has resulted from a survey carried out among 161 energy saving technology firm adopters maximum likelihood estimates that arise from an incidental truncation model reveal that the adoption of the energy saving technologies is indeed strongly correlated to the returns of assets that are required in order to undertake the corresponding investments the source of the energy efficiency paradox lies within a wide range of factors policy schemes that aim to increase the adoption rate of energy saving technologies within the field of manufacturing are significantly affected by differences in the size of firms finally mixed policies seem to be more effective than policies that are only capital subsidy or regulation oriented

market barriers to energy efficiency abstract discussions of energy policy in an environmentally constrained world often focus on the use of tax instruments to internalize the external effects of energy utilization or achieve specified reductions in energy use in the most cost effective manner a substantial literature suggests however that significant opportunities exist to reduce energy utilization by implementing technologies that are cost effective under prevailing economic conditions but that are not fully implemented by existing market institutions this paper examines the theory of the market for energy using equipment showing that problems of imperfect information and transaction costs may bias rational consumers to purchase devices that use more energy than those that would be selected by a well informed social planner guided by the criterion of economic efficiency consumers must base their purchase decisions on observed prices and expectations of post purchase equipment performance if it is difficult or costly for individuals to form accurate and precise expectations the level of energy efficiency achieved by competitive markets will vary from the socially efficient outcome such market barriers suggest a role for regulatory intervention to improve market performance at prevailing energy prices

is there an energy efficiency gap many analysts have argued that energy efficiency investments offer an enormous win win opportunity to both reduce negative externalities and save money this overview paper presents a simple model of investment in energy using capital stock with two types of market failures first uninternalized externalities from energy consumption and second forces such as imperfect information that cause consumers and firms not to exploit privately profitable energy efficiency investments the model clarifies that only if the second type of market failure cannot be addressed directly through mechanisms such as information provision energy efficiency subsidies and standards may be merited this chapter therefore reviews the empirical work on the magnitude of profitable unexploited energy efficiency investments a literature which frequently does not meet modern standards for credibly estimating the net present value of energy cost savings and often leaves other benefits and costs unmeasured these problems notwithstanding recent empirical work in a variety of contexts implies that on average the magnitude of profitable unexploited investment opportunities is much smaller than engineering accounting studies suggest finally there is tremendous opportunity and need for policy relevant research that utilizes randomized controlled trials and quasi experimental techniques to estimate the returns to energy efficiency investments and the welfare effects of energy efficiency programs

beyond case studies barriers to energy efficiency in commerce and the services sector to assess the empirical relevance of various barriers to the diffusion of energy efficient measures we conduct econometric analyses for 19 sub sectors in the german commercial and services sectors results from estimating a separate logit model for each sub sector suggest that the most important barriers are the investor user dilemma and the lack of information about energy consumption patterns typically multiple types of barriers are found to be statistically significant but they vary considerably across sub sectors finally we discuss policy implications for the most relevant barriers

factors impacting investments in energy efficiency and clean technologies empirical evidence from slovenian manufacturing firms abstract promoting energy efficiency is one of the top priorities of the eu energy strategy manufacturing is identified there as one of the sectors holding the potential for substantial energy efficiency improvements this paper therefore examines factors impacting firms decisions to invest in energy efficiency and clean technologies drawing on the energy efficiency gap literature the impact of three groups of factors is analysed namely economic firm specific characteristics and market drivers organisational and regulatory employing probit and bivariate probit models on a panel data set for 848 slovenian manufacturing firms over 7 years 2005 2011 the paper finds that decisions to invest in energy efficiency and in clean technologies are impacted by similar yet not identical factors the following factors significantly increase the likelihood of both energy efficiency and clean technology investments share of energy costs market share and export orientation importantly other types of investments except for investments in the expansion of existing capacities do not crowd out energy efficiency or clean technology investments on the other hand foreign ownership and managers expectations of future demand only impact energy efficiency investments while clean technology investments are influenced by managers expectations of the future business condition of the firm further the economic and financial crisis reduces the likelihood of clean technology investments but not energy efficiency investments this is explained by the fact that investments in energy efficiency represent a cost effective solution for the firm the same argumentation can be used to explain why high energy costs also play an important role for investments in clean technology in addition the likelihood to invest is found to be importantly influenced by industry specific characteristics which captures the effect of industry differences in environmental regulation and other conditions the paper adds to the existing literature in three important ways it employs data on actual rather than intended investments it examines investment decisions over a number of years thereby allowing for an analysis of the impact of the recession on firms decisions and it examines relationships among different types of investments accounting for a potential crowding out effect based on the paper s findings it can be concluded that the energy efficiency gap is less likely to exist in large and well performing firms implying that policy measures should primarily target less energy intensive small and medium sized enterprises

the misuse of net present value in energy efficiency standards abstract consumers are often blamed for not making necessary investments in energy efficient durables despite that these investments have positive net present value npv several papers have argued that when investments have option like characteristics e g irreversibility uncertainty flexible timing and lumpiness the aphorism invest if the net present value of investing exceeds zero isn t the best advice yet curiously the department of energy doe in the united states proposes new regulations mandating higher energy efficiency standards for consumer durables on the basis of non negative npv over an investment s lifetime in this paper we provide a step by step deconstruction of doe s npv methodology and show that doe s method purges volatility volatility persistence and nonstationarity that are otherwise present in energy prices as a result doe s projections of future energy prices are artificially smooth and statistically biased casting serious doubt on the reliability of the magnitude of energy savings from energy efficient durables

altruistic versus egoistic behavior in a public good game this paper analyzes an evolutionary version of the public good game in which boundedly rational agents can use imitation and best reply decision rules several possibilities for both decision rules to be present in the population are considered i show that altruistic behavior might survive if switching between the decision rules occurs less often than the probabilities of errors in choosing a strategy and if local neighborhoods are not too small or too large

energy burden alleviation and greenhouse gas emissions reduction can we reach two objectives with one policy in this article we assess french current public policies designed to reduce greenhouse gas ghg emissions and abate household energy burden through a simulation of changes in residential sector characteristics over the long run we build on an existing partial equilibrium model to take into consideration key determinants of excessive energy burden among vulnerable households this analysis reveals that current public policies are not sufficient to reach the ambitious objectives for reducing energy consumption and ghg emissions in france moreover the decreases that might occur mask significant social disparities across households the joint implementation of multiple instruments leads to interactions that diminish overall policy outcomes overall current public policies produce estimated free riding rates of 75 energy efficiency measures are thus insufficient in themselves the government should focus more on monetary poverty as a cause of low home improvement rates and consider subsidizing renovation costs as a potential solution

energy conservation investment do consumers discount the future correctly we argue that the apparently high discount rates attributed to investors making energy conservation investments are not irrational or the result of some market failure rather they may result from an investor recognizing that many conservation investments entail substantial sunk costs in the presence of these costs and uncertainty over future conservation savings consumers should use a higher hurdle rate for investment than if there were no uncertainty simulations suggest that the hurdle rate should be about four times greater than the standard rate an implication of our model is that tax subsidies for the purchase of conservation capital are likely to be ineffective we discuss alternative policy approaches which are more likely to increase energy efficient investment namely mandatory efficiency standards and energy taxes

subjective discount rates in the general population and their predictive power for energy saving behavior why do people sometimes refrain from saving energy even if it would pay off in monetary terms subjective discount rates present one possible explanation for this lack of foresight but little is known about their level and reliability in the general population with regard to behavior persons with lower discount rates are expected to accept additional costs upfront more readily than those with higher discount rates based on a representative nation wide study the swiss environmental survey 2007 and a follow up survey our analyses reveal that on average subjective discount rates are well above market interest rates and moderately stable over a time interval of four years income and education are negatively correlated with discount rates contrary to expectations we did not find convincing support for an impact of discount rates on energy saving behavior

restricted redistributive taxation shadow prices and trade policy abstract this paper reports on the use of an algorithm to compute optimal policies in the areas of commodity taxation international trade and public shadow pricing for a government which is interested in redistributing income but has limited powers of taxation the algorithm is applied to selected ldc data using a highly simplified general equilibrium model some insight into the relationships between constraints on taxation and other areas of government policy is provided by analyzing models where domestic tax restrictions can make inefficient public production or tariffs on international trade desirable

the efficiency paradox bureaucratic and organizational barriers to profitable energy saving investments abstract the paradox of why profitable energy saving investments are not undertaken continues to provoke debate the underlying phenomenon might be called the efficiency paradox because it represents a case in which business firms which are often presumed or taken axiomatically to be economically efficient make decisions that do not maximize profits new data from one of the us environmental protection agency s voluntary pollution prevention programs enables this paradox to be explored statistically the data show that both the level and variation in returns to lighting upgrade investments cannot be explained by standard economic models substantial gains in energy efficiency can be achieved without sacrificing profitability both economic and organizational factors account for some of the variation in observed returns to these investments but the results suggest a need for improved and more comprehensive theories of the investment behavior of firms and other organizations

making enduring choices uncertainty and public policy abstract this paper provides an experimental test of the theory of investment under uncertainty and applies the theory to a group of policy decisions investment under uncertainty describes a class of problems characterized by uncertainty that resolves itself over time sunk costs that cannot be fully recovered and the ability of the decision maker to wait without loss of strategic advantage it also implies a bad news principle under which decision makers are motivated by expected costs but not expected benefits the theory is illustrated as a two period model for which the decision maker can either invest in the first period and receive a known current return plus an uncertain future return or defer until the second period when uncertainty is resolved by foregoing current period benefits a cost that is sometimes referred to as an option value is incurred parameter values are specified and an experimental test the results of which closely track the predictions of the theory is described three cases the structuring of contingent valuation questionnaires the operalization of the precautionary principle in risk analysis and the development of public policy to stimulate private investments as for energy saving products are used to illustrate potential public policy applications

research on the energy saving and revenue sharing strategy of escos under the uncertainty of the value of energy performance contracting projects abstract under the uncertainty of the value of energy performance contracting projects epcps this paper develops a revenue sharing bargaining model between an energy service company esco and an energy using organization eu based on the model the paper analyzes the impacts of energy prices risk adjusted discount rates and accidents on the esco s bargaining strategies the research shows that the greater the probability of adverse circumstances is the higher is the revenue share of the eu and the more disadvantageous is the esco s position in the game furthermore we design a forecast commitment contract between an esco and an eu and analyze the optimal product s energy savings commitment strategy of the esco to cope with uncertain energy savings and contract risk the research illustrates that by introducing penalties and commitments the contract can eliminate the impact of the uncertain energy savings on the contract execution to a certain extent when the eu takes a greater commitment risk the esco is willing to provide a higher commitment thus enhancing the strategy value of the bilateral relationship and reducing the contract risk finally the policy recommendations about improving shared savings contract standard third party energy savings measurement and verification mechanism and arbitration mechanism of epcs are provided

differences in perception how the experts look at energy efficiency findings from a finnish survey abstract using energy efficiently is generally considered to be essential for a continuing prosperous future as a result improving efficiency has become a focus of attention and recently a lot of time and effort has been expended to develop new energy efficiency methodologies and technologies considering the amount of focused attention the rate of improvement has not been encouraging human behaviour is an important factor of the energy efficiency challenge and research has revealed several consumer profiles with significantly different perceptions on energy issues in this study the focus is not on consumers but on energy efficiency professionals a number of finnish energy efficiency professionals from both the private and public sectors were surveyed revealing that experts have decidedly different perceptions regarding energy efficiency our analysis of survey results suggests that energy efficiency expertise comes from a variety of educational and professional backgrounds and that instead of working on common ground experts with differing perspectives are endeavouring to make progress in a complex and multifaceted arena focusing on specific areas in which players need to share a common understanding of terminology and where common and clearly stated goals can be established should result in an acceleration of efficiency improvement results

making the implicit explicit a look inside the implicit discount rate implicit discount rates idrs are employed in energy models to capture household investment decisions yet the factors behind the idr and their respective implications for policy making usually remain blurred and fractional the proposed comprehensive framework distinguishes three broad categories of factors underlying the idr for household adoption of energy efficient technologies eets preferences notably over time risk loss debt and the environment predictable ir rational behavior bounded rationality rational inattention behavioral biases and external barriers to energy efficiency existing empirical findings suggest that the factors underlying the idrs that differ across household characteristics and technologies should be accounted for in energy models furthermore the framework allows for a fresh look at the interplay of idrs and policies we argue that a simple observation of high idrs or observing correlations between idrs and socio economic characteristics does not provide guidance for policy making since the underlying sources cannot be identified instead we propose that some of the factors underlying the idr notably external barriers can be changed through directed policy interventions whereas other factors notably preferences and predictable ir rational behavior are innate and can only be taken into account through reactive policy interventions

imitators and optimizers in cournot oligopoly we analyze a symmetric n firm cournot oligopoly with a heterogeneous popu lation of optimizers and imitators imitators mimic the output decision of the most successful firms of the previous round a la vega redondo 1997 optimizers play a myopic best response to the opponents previous output firms are allowed to make mistakes and deviate from the decision rules with a small probability apply ing stochastic stability analysis we find that the long run distribution converges to a recurrent set of states in which imitators are better o than are optimizers this finding appears to be robust even when optimizers are more sophisticated it suggests that imitators drive optimizers out of the market contradicting a funda mental conjecture by friedman 1953

demand side management overcoming market barriers or obscuring real costs abstract this paper compares two approaches to estimating the net benefits of a demand side management program that subsidizes the purchase of efficient equipment the total resource cost trc test suggests net benefits of us 6 9 million estimates based on consumer s surplus yield an estimated net loss of us 6 3 million this gap is due to differences in estimates of participants net benefits market failures do not appear to be significant and thus cannot explain much of the gap the more plausible explanation is that the trc uses a lower discount rate than participants use for themselves and it omits some costs

implied discount rate and payback threshold of energy efficiency investment in the industrial sector the industrial sector is responsible for about a third of the energy usage in the united states and there is significant energy saving potential from the industrial sector however the phenomenon of energy efficiency gap the scenario in which cost effective energy efficient technologies enjoy only limited market success appears frequently in the industrial sector this article tries to explain this efficiency gap in the industrial sector by empirically estimating the implied discount rates and payback thresholds industrial firms use to evaluate their energy efficiency investments using the industrial assessment centers iac database from 2002 to 2011 with more than 30 000 energy efficiency recommendations this article builds structural models of firms evaluation of an energy efficiency project the model results show that the implied discount rates of medium to small industrial firms range from 40 to 45 and the average payback threshold is about 9 months

optimal taxation and public production in an open dual economy abstract this paper analyses the determinants of optimal tax policy trade policy and shadow prices for cost benefit analysis in a dual economy it breaks new ground by combining in one model the tax and public investment policies considered in the public economics literature with the notion of labor market imperfection central to contributions on the dual economy optimal policies are first derived analytically providing rules for organizing production setting taxes and off setting labor market distortions production efficiency is shown to obtain for the taxable part of the economy a generalized ramsey rule derived for producing cumconsuming households in the directly non taxable sector of the economy and new characterizations of optimal rural urban migration established in the presence of distortionary taxation a simple general equilibrium model is then numerically implemented on data for a particular developing country the optimal policies analytically derived before are computed in the model under alternative assumptions about government revenue requirements the degree to which different sectors of the economy are directly taxable the nature of property rights and technological substitution possibilities the results of these computations provide further insight into the theoretical results as well as clarifying their quantitative significance

three reasons to use annual payments in contingent valuation surveys convergent validity discount rates and mental accounting abstract we present three arguments for using ongoing annual payments in contingent valuation cv surveys that estimate the benefit of a long lasting environmental improvement first by matching the duration of the payments with the duration of the environmental benefits survey respondents are spared from performing complicated present value calculations second willingness to pay wtp estimates from cv surveys that include ongoing annual payments best match wtp estimates obtained using travel cost surveys third respondents are less likely to face binding mental budget constraints with ongoing annual payments than with a larger one time payment in addition respondents discount rates may be estimated by collecting non hypothetical individual time preference data as part of the valuation survey

factors influencing willingness to pay for the energy star label abstract in the united states nearly 17 of greenhouse gas emissions come from residential energy use increases in energy efficiency for the residential sector can generate significant energy savings and emissions reductions consumer labels such as the us environmental protection agency s energy star promote conservation by providing consumers with information on energy usage for household appliances this study examines how the energy star label affects consumer preferences for refrigerators the results of an online survey of a national sample of adults suggest that consumers are on average willing to pay an extra 249 82 349 30 for a refrigerator that has been awarded the energy star label furthermore the results provide evidence that respondent willingness to pay was motivated by both private energy cost savings and public environmental benefits

energy paradox and political intervention a stochastic model for the case of electrical equipments abstract this paper develops a model that explains the delay of decisions to adopt profitable energy saving investments this problem is known as the energy paradox the model rationalizes the profitability requirements raised by the irreversibility the uncertainty and the decrease of costs as a result of learning by doing in this context the wait gives investors more visibility and more lower investment costs which gives them an option value the representative agent has an interest to postpone its energy saving decision until future benefits increase and equalize its required option value formally we internalize these explanatory factors in a stochastic model where the updated energy saving benefits follows a geometric brownian motion to affirm the capacity of the model we generate simulation results for two equipments for electrical uses beyond that we extend the model to simulate the effects of energy policy instruments to promote adoption of such equipments simulations prove that the taxation of energy prices is likely to be more effective than the subsidy for energy saving equipments it is also found that the combination of these instruments amplifies the adoption of energy saving equipments and generates very favorable economic and environmental externalities

inducing investments and regulating externalities by command versus taxes a linear tax on an externality generating activity may not attain the first best social optimum the problem arises because a monopolist s gain from improving the characteristics of a product may differ from the social gain even when consumers are willing to pay for the change

clever agents in young s evolutionary bargaining model in the models of young 1993 econometrica61 57 84 1993 j econ theory59 145 168 boundedly rational individuals are recurrently matched to play a game and they play myopic best replies to the recent history of play it could therefore be an advantage to instead play a myopic best reply to the myopic best reply something boundedly rational players might conceivably also do we investigate this possibility in the context of young s j econ theory59 145 168 bargaining model it turns out that cleverness in this respect indeed does have an advantage in some cases however if all individuals are equally informed about past play in a statistical sense then the nash bargaining solution remains the unique long run outcome when the mutation rate goes to zero journal of economic literature classification numbers c70 c78

barriers to electricity load shift in companies a survey based exploration of the end user perspective abstract as countries move toward larger shares of renewable electricity the slow diffusion of active electricity load management should concern energy policy makers and users alike active load management can increase capacity factors and thereby reduce the need for new capacity improve reliability and lower electricity prices this paper conceptually and empirically explores barriers to load shift in industry from an end user perspective an online survey based on a taxonomy of barriers developed in the realm of energy efficiency was carried out among manufacturing sites in mostly southern germany findings suggest that the most important barriers are risk of disruption of operations impact on product quality and uncertainty about cost savings of little concern are access to capital lack of employee skills and data security statistical tests suggest that companies for which electricity has higher strategic value rate financial and regulatory risk higher than smaller ones companies with a continuous production process report lower barrier scores than companies using batch or just in time production a principal component analysis clusters the barriers and multivariate analysis with the factor scores confirms the prominence of technical risk as a barrier to load shift the results provide guidance for policy making and future empirical studies

investment in energy efficiency do the characteristics of firms matter the literature on energy efficiency provides numerous examples of apparently profitable technologies that are not universally adopted yet according to the standard neoclassical theory of investment profit maximizing firms should undertake all investments with a positive net present value the standard theory also holds that the discount rate for computing the present value of a project should be the return available on other projects in the same risk class and therefore should not depend on characteristics of the firm this model as applied to energy saving investments is tested by examining whether firms characteristics influence their decision to join the environmental protection agency s voluntary green lights program a discrete choice regression is estimated over a large sample of participating and nonparticipating firms missing values in the data matrix are replaced with multiple imputations from a distribution estimated using the expectation maximization algorithm the results show that 1 sub

the evolution of walrasian behavior consider an evolutionary context where a given number of quantity setting oligopolists tend to mimic successful behavior occasionally experimenting with some small probability in this context it is shown that the unique long run outcome of the process has all firms playing walrasian i e choosing an output that maximizes profits when taking the market clearing price as given

the role of income in energy consumption behaviour evidence from french households data the main purpose of this paper is to characterise quantitatively the impact of income on household energy consumption in the residential and transport sectors starting from the data collected in a paper survey we analyse the extent of the constraint experienced by households in terms of equipment purchasing behaviour and daily energy consumption this analysis shows that the least well off households are particularly constrained since the share of their budget represented by these energy services is very large 15 25 and this corresponds to a level of energy service well below that of the better off households the case of space heating shows a factor of 2 in terms of level of comfort achieved between the extreme 10 percentiles these households also face a strong capital constraint for equipment purchases this leads either to a large increase in the required rate of return or to a reduction in the proportion of households that are prepared to replace their equipment earlier the least well off households are thus doubly constrained since it is more difficult for them to invest in our opinion it is crucial to take into account this observation in the context of political measures aimed at reducing households co2 emissions

discount rates and shadow prices for public investment abstract this paper extends the harberger sandmo dreze model for public discount rates to a many good economy it derives a formula for discount rates which are specific to each public enterprise or agency and used by them to discount future outputs and inputs evaluated at market prices such an approach is shown to be more efficient than that of simply using a single rate for all public projects it is also more practical than asking each public firm to use second best shadow prices in their analyses of investment projects the general results are first provided then simple cases are considered and numerical examples presented to help interpret our formula and analyse its main determinants

commodity taxation with administered and free market prices theory and an application to china abstract this paper analyses commodity taxes in an economy where some production is centrally planned and subject to price controls and some is market determined it shows that backward shifting of taxes can lead to significant distributional effects and demonstrates how these lead to the modification of tax rules the implications of these modifications are analysed using a numerical model based on chinese data significant non uniformity of tax rates is shown to be desirable in a case where standard tax rules imply uniformity the sensitivity of optimal taxes to concern for inequality revenue requirements and food rations are also demonstrated

energy efficiency economics and policy energy efficiency and conservation are major factors in the reduction of the environmental impact of the energy sector particularly with regard to climate change energy efficiency also contributes to reducing external dependence and vulnerabilities in the energy domain in this paper we discuss the factors that influence energy efficiency and conservation decisions and the most appropriate policies for their promotion although not all public policies seem justified we argue that specific policies for promoting energy conservation may be required preferably based on economic instruments or on the provision of information to consumers

adoption of low cost energy efficiency measures in the tertiary sector an empirical analysis based on energy survey data this paper empirically explores factors driving the adoption of low cost energy efficiency measures in the tertiary sector which mainly consists of public and private services trade commerce and some small industries the measures considered include switching off installations or lighting managing energy use and routinely considering energy efficiency for new purchases our statistical analysis employs single and multivariate probit models relying on more than 1500 observations from a recent representative survey of the tertiary sector in germany the findings suggest that the landlord tenant dilemma holds for the adoption of all low cost energy efficiency measures considered they further imply that financial incentives such as higher energy prices accelerate the diffusion of low cost energy measures our findings also provide some evidence that knowledge transfer from the mother company to a subsidiary enhances the diffusion of low cost energy efficiency measures likewise public sector organizations are more likely to adopt energy management by and large though sectoral heterogeneity appears to have little impact on the adoption of low cost energy efficiency measures

regional income effects and renewable fuels increased usage of renewable energy sources in danish rural areas and its impact on regional incomes co2 emission is a worldwide problem and in the attempt to reduce these emissions renewable energy sources may be considered serious alternatives to the present usage of fossil fuels as part of a research programme financed by the danish energy agency data concerning the different heating technologies based on oil and wood fuels have been collected private and social costs are estimated and these economic data are used when analysing regional income effects of increased consumption of fuels e g wood locally produced the impacts on income and tax revenues are calculated from multiplier expressions constructed with rights to the measurement of local effects

how high are option values in energy efficiency investments high implicit discount rates in consumers energy efficiency investments have long been a source of controversy in several recent papers hassett and metcalf argue that the uncertainty and irreversibility attendant to such investments and the resulting option value account for this anomalously high implicit discounting using their model and data we show that to the contrary their analysis falls well short of providing an explanation of this pattern

do consumers discount the future correctly a market based valuation of residential fuel switching abstract dsm and energy efficiency options are generally evaluated using engineering oriented discounted cash flow procedures which value all cost and benefit streams using a single arbitrary discount rate usually the firm s weighted average cost of capital wacc the wacc based approach ignores financial risk and hence leads to unreliable results in a recent paper in this journal hassett and metcalf depart from this tradition they reflect financial risk by simulating the total variability of returns from energy saving investments their findings indicate that dsm projects are potentially risky suggesting that the net benefits must be discounted at significantly higher rates thus lowering their present values this paper presents a market based evaluation of a particular dsm option residential fuel switching using the capital asset pricing model capm under the capm approach a risk adjusted market based discount rate is estimated for each cost stream fuel maintenance and avoided outlays for electricity the market based results which reflect the systematic risk of each cost stream suggest that fuel switching is probably not cost effective because it is considerably more risky than indicated by a wacc based analysis this supports hassett and metcalf s conclusion that consumers who reject dsm projects are not necessarily acting irrationally

economics and rational conservation policy energy analysts have long been concerned with the apparently low level of energy efficient investments and have suggested the presence of various market barriers and failures that hinder investment the concept of a barrier as defined here is some force that is working against investment in energy efficient technologies market failures on the other hand are failures of the competitive paradigm that lead to economically inefficient outcomes market barriers require no particular response on the part of government while market failures may call for some policy response

the role of risk and trust attitudes in explaining residential energy demand evidence from the united kingdom recent research into the determinants of household energy consumption has aimed to incorporate findings from economics sociology and psychology in order to obtain a more comprehensive understanding of the factors determining energy demand the current paper contributes to this nascent stream of literature by studying the relationship between risk attitudes trust propensity and energy consumption at the household level drawing on the british household panel survey a well known data set in the context of energy studies i show that trust is negatively correlated with household energy demand while higher risk tolerance leads to increases in residential energy use potential explanations for these findings are investigated suggesting that risk preferences may be related with overall appliance stock and the size of the rebound effect

when the carrot goes bad the effect of solar rebate uncertainty abstract although meant to encourage investment in solar photovoltaic pv systems some incentive policies may themselves become a barrier in instances where policy related uncertainty is present as potential solar adopters delay their investment until uncertainty is resolved this study utilizes a quasi experimental setting to quantify the effect of solar policy uncertainty focusing on the california solar initiative s residential rebate program i exploit the temporary exhaustion of funds within one of the utility territories as an exogenous source of increased uncertainty and estimate that it leads to a 67 drop in rebate applications in an average zip code week there is considerable heterogeneity in this effect depending on household income and pv system size among households that are least likely to invest in pv without a rebate incentive program participation drops by up to 69 this suggests potentially significant loss in program effectiveness due to lower pv adoption and underscores the importance of accounting for uncertainty in policy evaluations

clever agents in adaptive learning abstract saez marti and weibull j econom theory 86 1999 268 investigate the consequences of letting some agents play a myopic best reply to the myopic best reply in young s j econom theory 59 1993 145 bargaining model which is how they introduce cleverness of players i analyze such clever agents in general finite two player games and show young s individual strategy and social structure princeton university press princeton nj 1998 prediction to be robust adaptive learning with clever agents does select the same minimal curb set as in the absence of clever agents if their population share is less than one however the long run strategy distribution in such a curb set may vary with the share of clever agents

barriers to increasing energy efficiency evidence from small and medium sized enterprises in china abstract this paper analyzes financial informational and organizational barriers to energy efficiency investments for small and medium sized enterprises smes in china its findings are based on a survey of 480 smes in zhejiang province and complemented by semi structured interviews with enterprises contained in the survey sample responses reveal that only a minority of smes in china actively perform energy saving activities at a significant level the survey data suggest further that informational barriers are the core bottleneck inhibiting energy efficiency improvements in china s sme sector financial and organizational barriers also influence a company s energy saving activities with interview based evidence stronger than statistical evidence the interviews point out three additional barriers to energy saving activities the role of family ownership structures lax enforcement of government regulations and the absence of government support as well as a lack of skilled labor more than 40 of enterprises in the sample declared themselves unaware of energy saving equipment or practices in their respective business area indicating that there are high transaction costs for smes to gather assess and apply information about energy saving potentials and relevant technologies one policy implication of the study is that the chinese government could play a more active role in fostering the dissemination of energy efficiency related information in the sme sector

altruists egoists and hooligans in a local interaction model the authors study a population of agents each of whom can be an altruist or an egoist altruism is a strictly dominated strategy agents choose their actions by imitating others who earn high payoffs interactions between agents are local so that each agent affects and is affected by only his neighbors altruists can survive in such a world if they are grouped together so that the benefits of altruism are enjoyed primarily by other altruists who then earn relatively high payoffs and are imitated altruists continue to survive in the presence of mutations that continually introduce egoists into the population copyright 1998 by american economic association

adoption of residential solar power under uncertainty implications for renewable energy incentives abstract many incentives at the state and federal level exist for household adoption of renewable energy like solar photovoltaic pv panels despite generous financial incentives the adoption rate is low we use the option value framework which takes into account the benefit of delaying investment in response to uncertainty to examine the decision by households to invest in solar pv using a simulation model we determine optimal adoption times critical values of discounted benefits and adoption rates over time for solar pv investments using data from massachusetts we find that the option value multiplier is 1 6 which implies that the discounted value of benefits from solar pv needs to exceed installation cost by 60 for investment to occur without any policies median adoption time is eight years longer under the option value decision rule compared to the net present value decision rule where households equate discounted benefits to installation cost rebates and other financial incentives decrease adoption time but their effect is attenuated if households apply the option value decision rule to solar pv investments results suggest that policies that reduce the uncertainty in returns from solar pv investments would be most effective at incentivizing adoption

oil and energy price volatility it is commonly believed that since the 1973 oil crisis oil and energy prices have been more volatile than other commodity prices this study examines monthly producer prices for thousands of products over the period january 1945 through august 2005 the results show that crude oil refined petroleum and natural gas prices are more volatile than prices for about 95 of products sold by domestic producers relative to crude commodities however crude oil prices are currently more volatile than about 65 of other products and oil price volatility first exceeded the median for crude commodities following the 1986 drop in oil prices

driving forces of rapid co2 emissions growth a case of korea abstract this study aims to investigate korea s final demand structure and its impacts on co 2 emissions in order to reduce co 2 emissions and develop environmental policy directions based on the environmentally extended input output model this study adopts a two step approach 1 to estimate the embodied emissions and their intensities for 393 sectors induced by final demand and 2 to calculate the driving factors of emission growth between 2003 and 2011 and then evaluate the result by using structural decomposition analysis sda the findings of this study demonstrate that the impact of composition change in export with less embodied emission intensities tends to offset the increase in co 2 emission by the export scale growth the relatively low residential electricity price has resulted in the rapid growth of household electricity consumption and significantly contributed to emissions growth the result of sda indicates that korea s final demand behavior yielded high carbonization over the same period the findings suggest that korean government should promote exports in industries with less embedded co 2 in order to protect environments in addition emission information of each product and service should be provided for consumers to change their purchase patterns towards contributing to low carbon emissions as active players

are energy efficiency standards justified abstract this paper develops an analytical framework for comparing the welfare effects of energy efficiency standards and pricing policies for reducing gasoline electricity and nationwide carbon emissions the model is parameterized with us data and includes key externalities in the energy transportation sectors and possible underinvestment in energy efficiency due to misperceptions over energy savings even with large misperceptions the extra welfare gains from complementing efficient pricing policies with energy efficiency standards are zero for reducing gasoline and 5 percent for reducing electricity and when viewed as substitutes these standards forgo 60 percent or more of the potential welfare gains from corresponding pricing policies a combination of energy efficiency and emissions standards is more than three times as costly as carbon pricing when there is no misperception over energy savings and even with large misperceptions combining carbon pricing with gasoline electricity taxes is better than combining it with energy efficiency standards

optimal trade taxes on agriculture in developing countries subsistence foodcrops and incomes are hard to tax in developing countries it is easy and common to tax agricultural imports and exports if domestic transactions cannot be taxed how should agricultural trade taxes be set and how should indirect taxes on nonagricultural consumer goods be set this paper derives and quantifies formulas for the optimal export tax on a nonfood agricultural product ghanaian cocoa in which the country has market power and the level of indirect taxes on taxable consumer goods it asks whether starting from free trade on cereals there should be import tariffs or subsidies copyright 1990 by royal economic society

triggers and barriers to energy efficiency measures in the ceramic cement and lime sectors evaluating and understanding the interplay of barriers to the diffusion of energy efficiency measures is highly relevant because if policies are effective in overcoming these barriers co2 emissions can be decreased at low cost the study aims to understand how managers make decisions to invest in energy efficiency how perceived barriers affect these decisions and how policy can overcome these barriers we apply neo classical economic theory as well as insights from transaction cost economics and behavioural economics to understand why hurdle rates even when omitted costs and risk are taken into account are higher than the weighted average cost of capital we find that internal capital budgeting rules and the effort of studying technical feasibility and profitability are relevant to understanding the efficiency gap the results indicate that the voluntary agreement and the emission trading scheme are complementary addressing different barriers in different contexts

evaluating energy efficiency investments accounting for risk in the discounting process a prominent feature of the literature regarding the economics of energy conservation is the debate over the existence and nature of the so called efficiency gap a frequent subject of debate is whether consumers apply a reasonable discount rate when evaluating the future benefits of energy efficiency measures a key aspect of the discounting debate is the manner in which consumer attitudes toward risk are accounted for when discounting this paper suggests that an appropriate approach to incorporating risk into the evaluation of energy efficiency projects would yield higher net benefits to such projects than standard evaluation techniques we argue that analysing the purchase of fuel saving capital as though it were a standard investment in a physical asset obscures an important feature of the decision rather than deciding whether or not to invest in an asset with an uncertain future benefit stream the consumer is actually choosing between two future cost streams each of which is uncertain this seemingly minor change in perspective has important implications for how the risk associated with fuel saving capital should be brought into the discounting process an example based on lighting technologies is used to illustrate the principles discussed

endogenous fluctuations under evolutionary pressure in cournot competition abstract an evolutionary game theoretic model of cournot competition is investigated individuals choose from a finite set of different behavioral rules each rule specifies the quantity to be produced in the current period as a function of past quantities using more sophisticated rules may require extra information costs based upon realized payoffs the fractions of the population choosing a certain behavioral rule are updated according to the replicator equation with noise the long run behavior of the evolutionary system consisting of the population dynamics coupled with the quantity dynamics of the cournot game may be complicated and endogenous fluctuations may arise we consider a typical example where firms can choose between two rules the nash rule and the best reply rule we show that a homoclinic tangency between the stable and unstable manifold of the equilibrium occurs as evolutionary pressure increases implying bifurcation routes to complicated dynamics and strange attractors

imitators and optimizers in a changing environment abstract we analyze the repeated interaction between an imitating and a myopically optimizing player in an otherwise symmetric environment of changing marginal payoff focusing on finite irreducible environments and the case of strategic substitutes we unfold a trade off between the degree of interaction and the size of environmental shocks the optimizer outperforms the imitator if interaction is weak or shocks are large as to the case of duopoly this translates into small cross price elasticities or large shocks in marginal cost and or the maximum willingness to pay in these cases a changing environment creates selection pressure against imitative behavior

making the link climate policy and the reform of the uk construction industry this paper explores the barriers to energy efficiency in the construction of non domestic buildings in the uk the source of the barriers is argued to lie in the organisation of the construction industry including the linear design process the reliance on cost based competitive tendering and the incentives placed upon different actors the consequences include oversizing of equipment reduced quality neglect of whole life costs and lack of integrated design each of these problems can usefully be interpreted using concepts from the new institutional economics while the barriers are well known to construction industry specialists they are relatively neglected in the academic literature on energy policy furthermore conventional policy measures such as building regulations leave these barriers largely untouched the uk construction industry is currently undergoing a series of reforms which aim to change the relationship between different actors and to achieve improvements in product quality and productivity while these reforms have the potential to address many of the barriers the reform agenda makes practically no reference to sustainability this paper argues that climate policy objectives must be integrated into the reform agenda if the uk is to begin the transition to a low carbon built environment

the energy efficiency gap what does it mean abstract as renewed attention has been given by policy makers to energy conservation issues it has frequently been asserted that an energy efficiency gap exists between actual and optimal energy use the critical questions is how to define the optimal level of energy efficiency this paper seeks to disentangle some confusing strands of argument that are frequently brought to bear on this question by identifying the major conceptual issues that determine the set of feasible answers we identify five separate and distinct notions of optimality the economists economic potential the technologists economic potential hypothetical potential the narrow social optimum and the true social optimum each of these has associated with it a corresponding definition of the energy efficiency gap our analysis demonstrates that necessary preconditions for identifying the right measure of the energy efficiency gap include understanding and disentangling market failure and non market failure explanations for the gradual diffusion of energy efficient technologies

how altruism can prevail in an evolutionary environment abstract we study environments in which an individual gets a higher payoff from defecting than from cooperating and where copies of an individual are more likely to appear the higher is the individual s payoff we demonstrate that even in single shot prisoner s dilemma models where cooperation benefits one s opponent at a cost to oneself evolution can sustain cooperative behavior between relatives or neighbors in addition we show that selfish individuals who conciously choose their actions may find it in their interest to be altruistic when there is some probability that their practices will be imitated both genetic and cultural inheritance appear to be blunt instruments that do not operate on individuals in isolation those who inherit a genetic tendency to cooperate are more likely than others to enjoy the benefits of cooperative siblings similarly with culturel inheritance altruism can prevail when individuals are likely to interact with others who share the same role model

the impact of electricity demand reduction policies on the eu ets modelling electricity and carbon prices and the effect on industrial competitiveness the european electricity market is linked to a carbon market with a fixed cap that limits greenhouse gas emissions at the same time a number of energy efficiency policy instruments in the eu aim at reducing the electricity consumption this article explores the interactions between the eu s carbon market on the one hand and instruments specifically targeted towards energy end use efficiency on the other hand our theoretical analysis shows how electricity demand reduction triggered by energy efficiency policy instruments affects the emission trading scheme without adjustments of the fixed cap decreasing electricity demand relative to business as usual reduces the carbon price without reducing total emissions with lower carbon prices costly low emission processes will be substituted by cheaper high emitting processes possible electricity and carbon price effects of electricity demand reduction scenarios under various carbon caps are quantified with a long term electricity market simulation model the results show that electricity efficiency policies allow for a significant reduction of the carbon cap compared to the 2005 emission level 30 emission reductions can be achieved by 2020 within the emission trading scheme with similar or even lower costs for the industrial sector than were expected when the cap was initially set for a 21 emission reduction

the evolution of rationality and the red queen abstract strategic rationality is subjected here to natural selection in a zero sum repeated game of incomplete information one long run individual is informed of the state of the world and plays against a sequence of short run opponents who are not strategies are noisy and have bounded recall an equilibrium in these is shown to exist relative to any such equilibrium sufficiently greater recall enjoys an advantage that is not decreasing in the original level of recall thus capturing the red queen effect the selection pressure to reduce a small amount of noise is less than that to increase recall

returns on investments in energy saving technologies under energy price uncertainty in dutch greenhouse horticulture conventional net presentvalue calculations evaluating the profitabilityof investments in energy saving technologies indutch horticultural outlays predict a muchhigher rate of adoption of these technologiesthan is actually observed this paper tries toexplain this gap by applying a real optionsframework hurdle rates for investments in twotypes of energy saving technology are estimatedusing simulated future revenue streams givenuncertainty regarding energy prices and energytax policies hurdle rates found in this wayare on average about 1 76 times the hurdlerates that result from net present valuecalculations furthermore this paper tests thepredictive value of the theory by estimating alogit model this model relates the incidenceof having invested in an energy savingtechnology to the difference between the returnon investment and the hurdle rate thepredictive power turns out to be encouraging as the statistical tests indicate that higherhurdle rates tend to reduce rates of technologyadoption

barriers to energy efficiency in industrial bottom up energy demand models a review the goal of this paper is to review bottom up models for industrial energy demand with a particular focus on their capability to model barriers to the adoption of energy efficient technologies the integration of barriers into the models is an important prerequisite for a more detailed and realistic modeling of policies for energy efficiency particularly with the emergence of more and more varying policy instruments it also becomes crucial for the models to take account of these policies as well as the barriers they address in a more realistic way our review revealed that despite the broadly evident existence of market failures and barriers for energy efficient technologies they are only partly and in a rather aggregated form considered in today s bottom up models the state of the art bottom up model is based on an explicit representation of the technology stock and considers the costs of energy efficiency options in detail but with regard to barriers most models only make use of an aggregated approach like an adjusted discount rate while some models do not even consider technology costs and energy prices but instead use exogenous technology diffusion rates other more advanced models took first steps towards considering barriers in more detail the latter allows differentiation between multiple parameters that influence technology adoption still even in the most advanced models only a few of the observed barriers are explicitly considered at the same time new approaches to considering barriers like uncertainty or the slow spread of information are being developed in other disciplines we conclude the paper by summarizing promising ways to improve representation of barriers in bottom up models

diffusion of renewable heating technologies in households experiences from the norwegian household subsidy programme abstract a sample of 896 norwegian households participating in a subsidy programme was surveyed in order to evaluate the success of the programme the programme subsidised investments in new heating technologies including heat pumps and pellet stoves the success of the programme was measured by the degree of overall satisfaction with the investment by the sampled households theories on diffusion of innovations and planned behaviour motivate the empirical modelling of the investment satisfaction the economic return on the investment varied substantially both within and between the two heating technologies with heat pumps outperforming pellet stoves in this respect still the economic return showed no explanatory power toward the investment satisfaction of the household among the economic variables only the electricity price had any influence on investment satisfaction technical quality indoor climate and heat comfort and the availability of the supplier of the heating equipment were the most important explanatory variables

uncertainty loss aversion and markets for energy efficiency increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil fuel combustion reducing oil dependence and achieving a sustainable global energy system the tendency of markets to neglect apparently cost effective energy efficiency options has been called the efficiency gap or energy paradox the market for energy efficiency in new energy using durable goods however appears to have a bias that leads to undervaluation of future energy savings relative to their expected value this paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers this framework relies on the theory of context dependent preferences the uncertainty loss aversion bias against energy efficiency is quantifiable making it potentially correctible by policy measures the welfare economics of such policies remains unresolved data on the costs of increased fuel economy of new passenger cars taken from a national research council study illustrate how an apparently cost effective increase in energy efficiency would be uninteresting to loss averse consumers

rule evolution and equilibrium selection abstract this paper studies rule evolution and its effect on selection between strict equilibria two rules are investigated the myopic best response and naive imitation if agents cannot change rules equilibrium selection is determined by the relative frequency of agents using the two rules when agents can only change rules through mutation the efficient equilibrium weakly dominates the risk dominant one if agents can change rules by updating then the efficient equilibrium strictly dominates the risk dominant one journal of economic literature classification numbers c72 c73 d81

explaining the energy efficiency gap expected utility theory versus cumulative prospect theory abstract energy efficiency is one of the key factors in mitigating the impact of climate change and preserving non renewable resources although environmental and economic justifications for energy efficiency investments are compelling there is a gap between the observable and some notion of optimized energy consumption the so called energy efficiency gap behavioral biases in individual decision making have been resonated by environmental research to explain this gap to analyze the influence of behavioral biases on decisions upon energy efficiency investments quantitatively we compare expected utility theory with cumulative prospect theory on basis of a real world example we illustrate how the extent of the gap is influenced by behavioral biases such as loss aversion probability weighting and framing our findings indicate that cumulative prospect theory offers possible explanations for many barriers discussed in literature for example the size of the gap rises with increased risk and investment costs because behavioral biases are systematic and pervasive our insights constitute a valuable quantitative basis for environmental policy measures such as customer focused and quantitatively backed public awareness campaigns financial incentives or energy savings insurances in this vein this paper may contribute to an accelerated adaption of energy efficiency measures by the broader public