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The Determinants of Energy Efficiency Investments in the U.S

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  • Luis Mari Abadie
  • Ramon Arigoni Ortiz
  • 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 & 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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    References listed on IDEAS

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    1. Arik Levinson, 2001. "An Industry-Adjusted Index of State Environmental Compliance Costs," NBER Chapters,in: Behavioral and Distributional Effects of Environmental Policy, pages 131-158 National Bureau of Economic Research, Inc.
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    Keywords

    Energy efficiency; energy assessments; energy policies;

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