Individual Time Preferences and Energy Efficiency

22 Pages Posted: 2 Mar 2015 Last revised: 18 Apr 2022

See all articles by Richard G. Newell

Richard G. Newell

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

Juha Siikamäki

International Union for Conservation of Nature

Date Written: February 2015

Abstract

We examine the role of individual discount rates in energy efficiency decisions using evidence from an extensive survey of U.S. homeowners to elicit preferences for energy efficiency and cash flows over time. We find considerable heterogeneity in individual discount rates. We also find that individual time preferences systematically influence willingness to invest in energy efficiency, as measured through product choices, required payback periods, and energy efficiency tax credit claims. Individual discount rate heterogeneity is in turn significantly related to characteristics of the individual and their household, including their financial situation. Individuals with less education, larger households, low income, and low credit scores had systematically higher discount rates, as did black, non-Hispanic respondents. Our findings highlight the importance of individual discount rates to understanding energy efficiency investments, the energy-efficiency gap, and policy evaluation.

Suggested Citation

Newell, Richard G. and Siikamäki, Juha, Individual Time Preferences and Energy Efficiency (February 2015). NBER Working Paper No. w20969, Available at SSRN: https://ssrn.com/abstract=2572107

Richard G. Newell (Contact Author)

Duke University - Nicholas School of Environment ( email )

Box 90228
Durham, NC 27708-0328
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National Bureau of Economic Research (NBER) ( email )

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Resources for the Future ( email )

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Juha Siikamäki

International Union for Conservation of Nature ( email )

Washington, DC 20036
United States

HOME PAGE: http://www.iunc.org

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