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Investment in Energy Efficiency, Adoption of Renewable Energy and Household Behaviour: Evidence from OECD countries

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  • Prudence Dato

    (IREGE-Université Savoie Mont Blanc)

Abstract

There are possible synergies between the decision to invest in energy efficiency measures and to adopt renewable energy, in the sense that the former reduces energy demand so that the latter can further cut future greenhouse gas (GHG) emissions, and which has great potential in the residential sector. Much work has been done in the residential sector on demand for clean energy and on investment in energy efficiency, but to our knowledge there is no specific study that investigates the interaction between the two. This paper fills a gap in the literature, and first shows theoretically that there are interactions between the two decisions depending on the threshold of the cross effect related to the environmental motivation of the consumer. Second, the paper empirically shows that the two decisions are positively interrelated and cannot be estimated independently. As a result, univariate methods that estimate the decision to adopt renewable energy and investment in energy efficiency separately may produce biased results, because there may be unobserved characteristics that determine both decisions. Third, the paper investigates household characteristics that significantly affect the interaction between the two decisions using a generalised ordered logit model. Specifically, the paper provides evidence of factors that affect the joint probability of adopting renewable energy and investing in energy efficiency, and the probability of doing nothing. This contribution can serve to define incentive policies to advance the energy transition.

Suggested Citation

  • Prudence Dato, 2017. "Investment in Energy Efficiency, Adoption of Renewable Energy and Household Behaviour: Evidence from OECD countries," Working Papers 2017.05, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2017.05
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    References listed on IDEAS

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    2. Enrica De Cian & Filippo Pavanello & Teresa Randazzo & Malcolm Mistry & Marinella Davide, 2019. "Does climate influence households' thermal comfort decisions?," Working Papers 2019:02, Department of Economics, University of Venice "Ca' Foscari".

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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