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Assessing the Energy-Efficiency Gap

Todd Gerarden¹; Richard G. Newell²; Robert N. Stavins³

¹ PhD candidate in public policy at Harvard University. · ² President and CEO of Resources for the Future, Duke University, and NBER. · ³ A. J. Meyer Professor of Energy and Economic Development at the Harvard Kennedy School, NBER, and Resources for the Future.

Energy-efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use, but it has long been observed that these technologies may not be adopted by individuals and firms to the degree that might be justified, even on a purely financial basis. We survey the relevant literature on this “energy-efficiency gap” by presenting two complementary frameworks. First, we divide potential explanations for the energy-efficiency gap into three categories: market failures, behavioral explanations, and model and measurement errors. Second, we organize previous research in terms of the fundamental elements of cost-minimizing energy-efficiency decisions. This provides a decomposition that organizes thinking around four questions. First, are product offerings and pricing economically efficient? Second, are energy operating costs inefficiently priced and/or understood? Third, are product choices cost minimizing in present value terms? Fourth, do other costs inhibit more energy-efficient decisions? We synthesize academic research on these questions, with an emphasis on recent empirical findings, and offer suggestions for future research. (JEL D24, D82, L94, L98, O33, Q41, Q48)

DOI

10.1257/jel.20161360

Volume

55 (4)

Pages

1486-1525

Language

en

Export

BibTeX

Sources

crossref openalex