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Energy Efficiency Investments in the Home: Swiss Homeowners and Expectations about Future Energy Prices

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  • Anna Alberini

    ()
    (Department of Agricultural Economics, university of Maryland, US and Centre for Energy Policy and Economics (CEPE), ETH Zurich, Switzerland)

  • Silvia Banfi

    ()
    (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich)

  • Celine Ramseier

    ()
    (Centre for Energy Policy and Economics (CEPE), Department of Management, Technology and Economics, ETH Zurich)

Abstract

In May 2010, we surveyed 473 Swiss homeowners about their preferences for energy efficiency renovations in their homes. We used conjoint choice experiments that asked respondents to choose among hypothetical energy efficiency renovation projects. We find that homeowners are responsive to the upfront costs of the renovation projects, the savings in energy expenses, the time horizon over which such savings would be realized, and the thermal comfort improvement afforded by such renovations. Even more important, the likelihood of undertaking energy-efficiency renovations increases with the size of the subsidy offered by the Swiss federal government. At least for an average-sized project, we find that the impact of a rebate is comparable to that of an improvement in the thermal comfort of the home. The savings in the annual energy bills and the duration of the investment are less important. The discount rate implicit in the responses to the conjoint choice experiments is low. Depending on the specification of the random utility model, the discount rate ranges from 1.5 to about 3%. This is consistent with the point in Hassett and Metcalf (1993) and Metcalf and Rosenthal (1995), and with the fact that our scenarios contain no uncertainty. Respondents who feel completely uncertain about future energy prices are more likely to select the status quo (no renovations) in any given choice task and weight the cost of the investments more heavily than those respondents who expect energy prices to increase in the future. The hypothetical renovations are more likely to take place when respondents believe that climate change considerations should be an important determinant of home renovations.

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Bibliographic Info

Paper provided by CEPE Center for Energy Policy and Economics, ETH Zurich in its series CEPE Working paper series with number 11-80.

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Length: 46 pages
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:cee:wpcepe:11-80

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Keywords: energy efficiency; energy savings; choice experiments; discount rates; residential energy use;

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References

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  1. Cutter, W. Bowman & Neidell, Matthew, 2009. "Voluntary information programs and environmental regulation: Evidence from 'Spare the Air'," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 253-265, November.
  2. Scarpa, Riccardo & Willis, Ken, 2010. "Willingness-to-pay for renewable energy: Primary and discretionary choice of British households' for micro-generation technologies," Energy Economics, Elsevier, vol. 32(1), pages 129-136, January.
  3. Levinson, Arik & Niemann, Scott, 2004. "Energy use by apartment tenants when landlords pay for utilities," Resource and Energy Economics, Elsevier, vol. 26(1), pages 51-75, March.
  4. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  5. Banfi, Silvia & Farsi, Mehdi & Filippini, Massimo & Jakob, Martin, 2008. "Willingness to pay for energy-saving measures in residential buildings," Energy Economics, Elsevier, vol. 30(2), pages 503-516, March.
  6. Greene, David L., 2011. "Uncertainty, loss aversion, and markets for energy efficiency," Energy Economics, Elsevier, vol. 33(4), pages 608-616, July.
  7. Ronald Cummings & Mary Beth Walker, 2000. "Measuring the effectiveness of voluntary emission reduction programmes," Applied Economics, Taylor & Francis Journals, vol. 32(13), pages 1719-1726.
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Cited by:
  1. Achtnicht, Martin & Madlener, Reinhard, 2012. "Factors Influencing German House Owners' Preferences on Energy Retrofits," FCN Working Papers 4/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  2. Wasi, Nada & Carson, Richard T., 2011. "The Influence of Rebate Programs on the Demand for Water Heaters: The Case of New South Wales," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100731, Australian Agricultural and Resource Economics Society.

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