Measuring the Energy Savings from Home Improvement Investments: Evidence from Monthly Billing Data
41 Pages Posted: 26 Feb 1998 Last revised: 6 Oct 2010
Date Written: June 1997
An important factor driving energy policy over the past two decades has been the Energy Paradox,' the perception that consumers apply unreasonably high hurdle rates to energy saving investments. We explore one possible explanation for this apparent puzzle: that realized returns fall short of the returns promised by engineers and product manufacturers. Using a unique data set, we find that the realized return to attic insulation is statistically significant, but the median estimate (12.3 percent) is close to a discount rate for this investment implied by a CAPM analysis. We conclude that the case for the Energy Paradox is weaker than has previously been believed.
Suggested Citation: Suggested Citation