Discount rates in consumers' energy-related decisions: A review of the literature

Taking a long-run historical perspective, we analyze how debates about energy efficiency have evolved in the economic literature since the mid-19th century. We distinguish three periods: the classical age, focused on the rebound effect, from Jevons in the 1860s to American institutionalism in the mid-20th century; the modern age, marked by the rise of the energy efficiency gap concept, from the 1970s to the 1990s; the contemporary age, from the early 2000s onwards, focused on the concept of energy performance gap. We find that reflections on energy efficiency have embraced more general developments in the economics discipline: emergence of institutionalism in the classical age, primarily concerned with policy; public economics in the modern age, emphasizing the concept of market failure; behavioral economics and the so-called credibility revolution in empirical economics in the contemporary age, which made energy efficiency a much-favored context for conducting experiments, questioning rationality and implementing nudges. The transitions between phases closely paralleled changes in societal concerns, from resource depletion in the classical age to energy security in the modern age to climate change in the contemporary age. Throughout this long history, we have detected a change in focus from macro- to micro-perspectives. Despite increasing sophistication and constant reinterpretation, energy efficiency remains a subject of controversy, such that no consensus has yet been reached on its potential and effective benefits. In closing, we propose to update Jaffe, Newell and Stavins' landmark energy efficiency gap framework to account for the most recent developments and trace avenues for future research.

Many goods and services have accompanying costs that are not salient at the moment of purchase. Existing research suggests that consumers are inattentive to such costs when making small purchases. There is less evidence about attention to costs associated with large purchases. This paper examines residential real estate transactions and studies the extent to which sale prices adjust to ownership costs. The results are inconclusive, neither ruling out full price adjustment nor lack of price adjustment. Despite the inconclusive result, the inability to decisively rule out incomplete price adjustment to predictable ownership costs (which is suggestive of inattention) is noteworthy, given the high financial stakes of buying a home.

This paper examines the relationships between energy efficient (EE) capital technology and household energy insecurity in the United States. The theoretical model of these relationships employs household production theory to capture the demand for and production of household energy services, and a stochastic production frontier approach to describe how having access to and the usage intensity of EE capital technology could help alleviate inefficiency in the production of household energy services. A working hypothesis formulated from the theoretical model posits that having EE capital technology in the home will reduce the level of household energy insecurity experienced. The extent of energy insecurity experienced is inferred from an energy insecurity index value assigned to each household, generated via the application of a dichotomous Rasch model to questions contained in the 2015 Residential Energy Consumption Survey. Noting the potential simultaneous relationship that exists between a household having access to and the usage intensity of EE capital technology and the experience of being energy insecure, an instrumental variables approach was employed to estimate a series of ordered logit models. Results suggest access to EE capital technology in the form of Energy Star® appliances, Energy Star® windows, or a SMART thermostat does not reduce the probability of experiencing a greater level of energy insecurity. Nor does the usage intensity of EE capital. Thus, policy instruments designed to alleviate household energy insecurity may need to go beyond simply helping households obtain EE capital technology.

Higher spatial resolution is becoming a key component of energy system analysis. Existing multi-regional national scale energy systems optimisation models (ESOMs) facilitate an improved understanding of spatial dynamics. Yet, region-specific characteristics of transport technologies and infrastructures along with consumer heterogeneity have remained under-investigated. The current paper addresses this gap by developing a multi-regional transport sector within the system-wide TIMES-Ireland Model (TIM). The transport sector is divided into 26 sub-regions, and each region is characterised by the existing vehicle fleet, public transport availability, scrappage rate, annual mileage, vehicle fuel economy and the corresponding passenger and freight mobility demand. The consumers (car buyers) are disaggregated based on their income level to incorporate a more realistic representation of their behaviour in vehicle purchasing decisions. While TIM ensures carbon neutrality across the whole energy system by mid-century, this study mainly explores the decarbonisation of passenger Light-Duty Vehicles (LDVs). It shows to what extent different measures (i.e, LDV improvements, monetary incentives, modal shift, biofuel obligation, carbon tax and occupancy rate) can contribute to meeting ambitious mitigation targets by 2030. Spatially resolved analysis as the main novelty of this research presents valuable insights into regional electric vehicles (EVs) diffusion and their electricity consumption. The proposed method can be used to address the uncertainty that arises from consumer heterogeneity in the policymaking process. The findings also suggest keeping financial EV incentives until the mid-2020s to meet the ambitious goals. Finally, decarbonisation without demand-side strategies (i.e., controlling the level of private-car-based mobility) seems to be unachievable.

The building sector is responsible for 51% of the electricity consumed in Brazil, and about 10% of the total greenhouse gas emissions. These numbers continue to grow, despite significant efforts made by the government to promote the adoption of building energy efficiency (BEE) technologies, which have not been widely adopted due to barriers. A systematic literature review revealed 27 barriers, classified into six categories, as being responsible for hindering the adoption of energy-efficient technologies. This article aims to verify whether such barriers make sense in the Brazilian context. In order to accomplish this goal, a survey among one thousand Brazilian professionals was carried out. The results are analysed by two multivariate techniques, cluster and factor analysis, validating these barriers as well as the proposed taxonomy for Brazil. The results also show that the two most important categories of barriers are Governmental/Political/Regulatory and Financial/Economic, showing that Brazilian society has high expectations that the government will be more active in this matter. In addition, the survey respondents gave insights into important points concerning technology, education, etc. that should be verified in a timely manner. These findings can assist government agencies, researchers, and experts to develop guidelines/strategies to overcome such barriers.

Most environmental decisions involve intertemporal trade-offs, in that they require foregoing immediate gratification for the sake of future environmental quality. One such example is investing in energy efficiency, which entails an initial upfront cost in exchange for a future stream of energy and economic savings. Our experiment explores the role of individual temporal preferences in the decision to invest in energy conservation. We report results from a study on a nationally-representative sample of 2010 United States adults. Participants chose between appliances that differed solely in price and operating costs. We manipulated the salience of energy costs and primed participants with future-oriented messages. Our treatments increased energy-efficient choices by 24 percentage points compared with the status-quo scenario. Present-oriented individuals are less likely to purchase energy-efficient appliances but loss-framed messages that highlight the opportunity cost of inefficient appliances diminish the effect of impatience on refrigerators choice.