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Measuring the Energy Savings from Home Improvements Investments: Evidence from Monthly Billing Data

  • Kevin A. Hassett
  • Gilbert E. Metcalf

    ()

An important factor driving energy policy over the past two decades has been the ''energy paradox,'' the perception that consumers apply unreasonably high hurdle rates to energy-saving investments. We explore one possible explanation for this apparent puzzle: that realized returns fall short of the returns promised by engineers and product manufacturers. Using a unique data set, we find that the realized return to attic insulation is statistically significant, but the median estimate (9.7%) is almost identical to a discount rate for this investment implied by a CAPM analysis. We conclude that the case for the energy paradox is weaker than has previously been believed. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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File URL: http://ase.tufts.edu/econ/papers/9701.pdf
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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 9701.

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Date of creation: 1997
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Handle: RePEc:tuf:tuftec:9701
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  1. Narayana R. Kocherlakota, 1995. "The equity premium: it's still a puzzle," Discussion Paper / Institute for Empirical Macroeconomics 102, Federal Reserve Bank of Minneapolis.
  2. Hirst, Eric, 1986. "Actual energy savings after retrofit: Electrically heated homes in the Pacific Northwest," Energy, Elsevier, vol. 11(3), pages 299-308.
  3. Frederick D. Sebold & Eric W. Fox, 1985. "Realized Savings from Residential Conservation Activity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 73-88.
  4. E. Raphael Branch, 1993. "Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 111-122.
  5. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  6. Hartman, Raymond S. & Doane, Michael J., 1987. "Taking the con out of conservation program evaluation," Resources and Energy, Elsevier, vol. 9(2), pages 187-207, August.
  7. Shin, Jeong-Shik, 1985. "Perception of Price When Price Information Is Costly: Evidence from Residential Electricity Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 591-98, November.
  8. Eric Hirst & Richard Goeltz, 1984. "The Economics of Utility Residential Energy Conservation Programs: A Pacific Northwest Example," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 159-170.
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