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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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6074.

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Date of creation: Jun 1997
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Handle: RePEc:nbr:nberwo:6074

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Find related papers by JEL classification:

• E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
• Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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1. Eric Hirst & Richard Goeltz, 1984. "The Economics of Utility Residential Energy Conservation Programs: A Pacific Northwest Example," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 159-170.
2. Hartman, Raymond S. & Doane, Michael J., 1987. "Taking the con out of conservation program evaluation," Resources and Energy, Elsevier, vol. 9(2), pages 187-207, August.
3. Narayana R. Kocherlakota, 1996. "The Equity Premium: It's Still a Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 42-71, March.
   
   • Narayana R. Kocherlakota, 1995. "The equity premium: it's still a puzzle," Discussion Paper / Institute for Empirical Macroeconomics 102, Federal Reserve Bank of Minneapolis.
   • Kocherlakota, N., 1995. "The Equity Premium: It's Still a Puzzle," Working Papers 95-05, University of Iowa, Department of Economics.
4. Shin, Jeong-Shik, 1985. "Perception of Price When Price Information Is Costly: Evidence from Residential Electricity Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 591-98, November.
5. E. Raphael Branch, 1993. "Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 111-122.
6. Frederick D. Sebold & Eric W. Fox, 1985. "Realized Savings from Residential Conservation Activity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-88.

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1. Energy Efficiency in the South and the Need for Micro Data
   by Matthew E. Kahn in Environmental and Urban Economics on 2010-04-13 14:28:00

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