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The Determinants of Energy Efficiency Investments in the U.S

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  • Luis Mari Abadie
  • Ramon Arigoni*Ortiz and Ibon*Galarraga

Abstract

This paper analyses decisions on energy efficiency (EE) investments by small and medium manufacturing enterprises in the U.S. which have received assessment from the Department of Energy (DoE). The results confirm the importance of payback time and investment costs as the main determining factors in deciding whether to invest in energy efficiency. This behaviour is mantained over time. Such investment recommendations are frequently not implemented even though they apparently entail major advantages and give rise to considerable energy savings. The data show results which are compatible with a series of elementary valuation processes (limited by the availability of information), far removed from other, more academically ambitious methods such as Net Present Value (NPV) and the Real Options (RO) method. The paper analyses the impact of the physical situation of firms in line with their geographical locations in different US states, and changes over time from 1984 to 2008, i.e. 25 years of information. Finally, the paper examines the different levels of effectiveness of participating centres in getting firms to decide to make the investments proposed. EE investment decisions are analysed here using Logit models whose parameters are calibrated on the basis of the information held in the Industrial Assessment Centres (IAC) database. The results shed some light on impact assessment and suggest various policies for promoting investment in EE.

Suggested Citation

  • Luis Mari Abadie & Ramon Arigoni*Ortiz and Ibon*Galarraga, 2010. "The Determinants of Energy Efficiency Investments in the U.S," Working Papers 2010-17, BC3.
    • Handle: RePEc:bcc:wpaper:2010-17
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    10. Wang, Xi & Cai, Hua & Florig, H. Keith, 2016. "Energy-saving implications from supply chain improvement: An exploratory study on China's consumer goods retail system," Energy Policy, Elsevier, vol. 95(C), pages 411-420.
    11. Adom, Philip Kofi & Adams, Samuel, 2018. "Energy savings in Nigeria. Is there a way of escape from energy inefficiency?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2421-2430.
    12. Bosco, Maria Giovanna & Valeriani, Elisa, 2023. "Energy retrofitting of firms after a natural disaster: A ‘build back better’ strategy," Energy Policy, Elsevier, vol. 179(C).
    13. Deng, Qianli & Jiang, Xianglin & Zhang, Limao & Cui, Qingbin, 2015. "Making optimal investment decisions for energy service companies under uncertainty: A case study," Energy, Elsevier, vol. 88(C), pages 234-243.
    14. Solnørdal, Mette Talseth & Thyholdt, Sverre Braathen, 2019. "Absorptive capacity and energy efficiency in manufacturing firms – An empirical analysis in Norway," Energy Policy, Elsevier, vol. 132(C), pages 978-990.
    15. Perroni, Marcos G. & Gouvea da Costa, Sergio E. & Pinheiro de Lima, Edson & Vieira da Silva, Wesley, 2017. "The relationship between enterprise efficiency in resource use and energy efficiency practices adoption," International Journal of Production Economics, Elsevier, vol. 190(C), pages 108-119.
    16. Galarraga, Ibon & Abadie, Luis M. & Kallbekken, Steffen, 2016. "Designing incentive schemes for promoting energy-efficient appliances: A new methodology and a case study for Spain," Energy Policy, Elsevier, vol. 90(C), pages 24-36.
    17. Stephen K. Dimnwobi & Ebele S. Nwokoye & Clement I. Igbanugo & Chukwunonso Ekesiobi & Simplice A. Asongu, 2022. "Assessment of Energy Efficiency Investment in Onitsha Business Cluster, Nigeria," Working Papers of the African Governance and Development Institute. 22/095, African Governance and Development Institute..
    18. Ibon Galarraga & Luis M. Abadie, 2014. "The use of “Bonus-Malus†schemes for promoting energy-efficient household appliances: a case study for Spain," Working Papers 2014-06, BC3.
    19. Prokop, Viktor & Gerstlberger, Wolfgang & Zapletal, David & Gyamfi, Solomon, 2023. "Do we need human capital heterogeneity for energy efficiency and innovativeness? Insights from European catching-up territories," Energy Policy, Elsevier, vol. 177(C).
    20. Jose García-Quevedo & Xavier Massa-Camps, 2019. "Why firms invest (or not) in energy efficiency? A review of the econometric evidence," Working Papers 2019/07, Institut d'Economia de Barcelona (IEB).
    21. Otrachshenko, Vladimir & Hartwell, Christopher A. & Popova, Olga, 2023. "Energy efficiency, market competition, and quality certification: Lessons from Central Asia," Energy Policy, Elsevier, vol. 177(C).
    22. Ludovico Alcorta & Morgan Bazilian & Giuseppe De Simone & Ascha Pedersen, 2012. "Return on Investment from Industrial Energy Efficiency: Evidence from Developing Countries," Working Papers 2012.35, Fondazione Eni Enrico Mattei.
    23. Ángeles Longarela-Ares & Anxo Calvo-Silvosa & José-Benito Pérez-López, 2020. "The Influence of Economic Barriers and Drivers on Energy Efficiency Investments in Maritime Shipping, from the Perspective of the Principal-Agent Problem," Sustainability, MDPI, vol. 12(19), pages 1-42, September.
    24. Blass, Vered & Corbett, Charles J. & Delmas, Magali A. & Muthulingam, Suresh, 2014. "Top management and the adoption of energy efficiency practices: Evidence from small and medium-sized manufacturing firms in the US," Energy, Elsevier, vol. 65(C), pages 560-571.

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