Does the Energy-Efficiency Paradox Exist? Technological Progress and Uncertainty
We explain why firms may choose not to undertake investments inenergy-saving technologies that appear profitable from a net presentvalue perspective. As future technological advances are inherentlyuncertain and investments in new technology are, at least partly,irreversible, it may ``pay'' to postpone investments in energy savingand wait for the arrival of improved varieties. This insight casts doubton the existence of so-called ``low hanging fruits in energy saving''(although we do not wish to deny that organisational failures may alsobe important). Failure to appreciate the underlying stochasticity oftechnological progress may obscure the insight that there is value inwaiting, and costs involved in terminating the option to invest. Theappetite for low-hanging fruits will be less when these costs areincorporated in the analysis. We demonstrate that the effect of thearrival rate of new technologies on the adoption lag for a rational firmis ambiguous. The same holds for the effect of the expected ``jump'' inefficiency of new technologies. Government policies aimed at enhancingthe adoption of new technologies through stimulation of R&D maytherefore be counterproductive. Copyright Kluwer Academic Publishers 2001
Volume (Year): 18 (2001)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:c/o EAERE Secretariat - Fondazione Eni Enrico Mattei - Isola di San Giorgio Maggiore 8, I-30124 Venice, Italy
Web page: http://www.eaere.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/environmental/journal/10640/PS2|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Farzin, Y. H. & Huisman, K. J. M. & Kort, P. M., 1998.
"Optimal timing of technology adoption,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 22(5), pages 779-799, May.
- Farzin, Y.H. & Huisman, K.J.M. & Kort, P.M., 1996. "Optimal Timing of Technology Adoption," Discussion Paper 1996-72, Tilburg University, Center for Economic Research.
- Farzin, Y.H. & Huisman, K.J.M. & Kort, P.M., 1998. "Optimal timing of technology adoption," Other publications TiSEM b1a028c3-4f0b-4e68-981f-a, Tilburg University, School of Economics and Management.
- de Almeida, Edmar Luiz Fagundes, 1998. "Energy efficiency and the limits of market forces: The example of the electric motor market in France," Energy Policy, Elsevier, vol. 26(8), pages 643-653, July.
- Gabel H. Landis & Sinclair-Desgagne Bernard, 1993. "Managerial Incentives and Environmental Compliance," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 229-240, May.
- Sanstad, Alan H & Blumstein, Carl & Stoft, Steven E, 1995. "How high are option values in energy-efficiency investments?," Energy Policy, Elsevier, vol. 23(9), pages 739-743, September.
- Sanstad, Alan H. & Howarth, Richard B., 1994. "`Normal' markets, market imperfections and energy efficiency," Energy Policy, Elsevier, vol. 22(10), pages 811-818, October.
- Metcalf, Gilbert E., 1994. "Economics and rational conservation policy," Energy Policy, Elsevier, vol. 22(10), pages 819-825, October.
- DeCanio, Stephen J, 1998. "The efficiency paradox: bureaucratic and organizational barriers to profitable energy-saving investments," Energy Policy, Elsevier, vol. 26(5), pages 441-454, April.
- Stephen Decanio, 1994. "Agency and Control Problems in US Corporations: The Case of Energy-efficient Investment Projects," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 105-124.
- Richard B. Howarth & Alan H. Sanstad, 1995. "Discount Rates And Energy Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 101-109, 07.
- Hassett, Kevin A. & Metcalf, Gilbert E., 1993. "Energy conservation investment : Do consumers discount the future correctly?," Energy Policy, Elsevier, vol. 21(6), pages 710-716, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:18:y:2001:i:1:p:101-112. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.