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Inefficiencies in Residential Use of Energy — A Critical Overview of Literature and Energy Efficiency Policies in the EU

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  • Broberg, Thomas
  • Kazukauskas, Andrius

Abstract

A rather large literature argues that firms and households do not always improve energy efficiency by investing in new technology even if it would be cost-effective to do so. In this paper, we review the theoretical and empirical literature on the so-called energy efficiency gap and provide a rationale for policymakers to act to improve energy efficiency. By eliminating market failures, welfare can be improved in a broad sense, including both environmental quality and material welfare. We also discuss social 'nudges' as examples of policy instruments that do not directly target any market failure in energy markets but that still may have a significant impact on energy use. Although we acknowledge the existence of the energy efficiency gap, we argue that the gap in general is overestimated as parts of it can be explained by heterogeneity in preferences and thus explained by rational choices.

Suggested Citation

  • Broberg, Thomas & Kazukauskas, Andrius, 2015. "Inefficiencies in Residential Use of Energy — A Critical Overview of Literature and Energy Efficiency Policies in the EU," International Review of Environmental and Resource Economics, now publishers, vol. 8(2), pages 225-279, July.
  • Handle: RePEc:now:jirere:101.00000070
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    File URL: http://dx.doi.org/10.1561/101.00000070
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    Citations

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    Cited by:

    1. repec:eee:eneeco:v:68:y:2017:i:s1:p:89-102 is not listed on IDEAS
    2. Julia Blasch & Nilkanth Kumar & Massimo Filippini, 2016. "Boundedly rational consumers, energy and investment literacy, and the display of information on household appliances," CER-ETH Economics working paper series 16/249, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    3. repec:eee:eneeco:v:72:y:2018:i:c:p:108-119 is not listed on IDEAS
    4. Broberg, Thomas & Persson, Lars, 2016. "Is our everyday comfort for sale? Preferences for demand management on the electricity market," Energy Economics, Elsevier, vol. 54(C), pages 24-32.

    More about this item

    Keywords

    Energy efficiency gap; Market failures; Behavioural failures; EU policies;

    JEL classification:

    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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