An Assessment of the Energy-Efficiency Gap and Its Implications for Climate-Change Policy

36 Pages Posted: 25 Jan 2015

See all articles by Todd Gerarden

Todd Gerarden

Cornell University - Dyson School of Applied Economics and Management

Richard G. Newell

Duke University - Nicholas School of Environment; National Bureau of Economic Research (NBER); Resources for the Future

Robert N. Stavins

Harvard University - Harvard Kennedy School (HKS); Resources for the Future; National Bureau of Economic Research (NBER)

Robert Stowe

Harvard Kennedy School

Multiple version iconThere are 3 versions of this paper

Date Written: November 1, 2014

Abstract

Improving end-use energy efficiency — that is, the energy-efficiency of individuals, households, and firms as they consume energy — is often cited as an important element in efforts to reduce greenhouse-gas (GHG) emissions. Arguments for improving energy efficiency usually rely on the idea that energy-efficient technologies will save end users money over time and thereby provide low-cost or no-cost options for reducing GHG emissions. However, some research suggests that energy-efficient technologies appear not to be adopted by consumers and businesses to the degree that would seem justified, even on a purely financial basis. We review in this paper the evidence for a range of explanations for this apparent “energy-efficiency gap.” We find most explanations are grounded in sound economic theory, but the strength of empirical support for these explanations varies widely. Retrospective program evaluations suggest the cost of GHG abatement varies considerably across different energy-efficiency investments and can diverge substantially from the predictions of prospective models. Findings from research on the energy-efficiency gap could help policy makers generate social and private benefits from accelerating the diffusion of energy-efficient technologies — including reduction of GHG emissions.

Keywords: global climate change, energy efficiency, energy paradox

JEL Classification: Q4, Q48

Suggested Citation

Gerarden, Todd and Newell, Richard G. and Stavins, Robert N. and Stowe, Robert, An Assessment of the Energy-Efficiency Gap and Its Implications for Climate-Change Policy (November 1, 2014). Available at SSRN: https://ssrn.com/abstract=2554736 or http://dx.doi.org/10.2139/ssrn.2554736

Todd Gerarden

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

Richard G. Newell

Duke University - Nicholas School of Environment ( email )

Box 90228
Durham, NC 27708-0328
United States
919-681-8865 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
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Robert N. Stavins (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1820 (Phone)
617-496-3783 (Fax)

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert Stowe

Harvard Kennedy School ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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