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Financing energy efficiency retrofits in Chilean households: The role of financial instruments, savings and uncertainty in energy transition

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  • Schueftan, Alejandra
  • Aravena, Claudia
  • Reyes, René

Abstract

High firewood consumption for heating produces high levels of pollution in cities in central and southern Chile, with serious consequences for health and quality of life. Energy efficiency measures (EEMs) have been identified as the best strategy to reduce air pollution and maximize social benefits. However, their adoption has been slow. The objective of this article is to investigate household preferences for financial incentives needed to promote private investments in EEMs in Central-Southern Chilean households and study the role of energy savings and the uncertainty about potential savings in the investment decision, with the aim of finding solutions to increase the adoption of these technologies. We use a choice experiment to explore the trade-off between the investment costs, financial instruments, energy savings, and the uncertainty about achieving the theoretical savings provided by engineering and architectural models. The results show that financial instruments play the most important role in this decision, followed by the savings achieved by the retrofit. Householders prefer to finance their investments with a mix of their personal resources and medium-term credits, trying to avoid long-term commitments. Although uncertainty was found to be a significant variable, it seems to play a small role in the investment decision.

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  • Schueftan, Alejandra & Aravena, Claudia & Reyes, René, 2021. "Financing energy efficiency retrofits in Chilean households: The role of financial instruments, savings and uncertainty in energy transition," Resource and Energy Economics, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:resene:v:66:y:2021:i:c:s0928765521000506
    DOI: 10.1016/j.reseneeco.2021.101265
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    More about this item

    Keywords

    Chile; Choice experiments; Energy efficiency; Energy savings; Financial instruments; Retrofits; Uncertainty;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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