Measuring the Energy Savings from Home Improvement Investments: Evidence from Monthly Billing Data

41 Pages Posted: 26 Feb 1998 Last revised: 6 Oct 2010

See all articles by Gilbert E. Metcalf

Gilbert E. Metcalf

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

Kevin A. Hassett

American Enterprise Institute (AEI)

Date Written: June 1997

Abstract

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

Metcalf, Gilbert E. and Hassett, Kevin A., Measuring the Energy Savings from Home Improvement Investments: Evidence from Monthly Billing Data (June 1997). NBER Working Paper No. w6074. Available at SSRN: https://ssrn.com/abstract=38742

Gilbert E. Metcalf (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-3685 (Phone)
617-627-3917 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kevin A. Hassett

American Enterprise Institute (AEI) ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
202.862.7157 (Phone)
202.862.7177 (Fax)

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