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

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  • Kevin A. Hassett
  • Gilbert E. Metcalf

Abstract

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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Suggested Citation

  • Kevin A. Hassett & Gilbert E. Metcalf, 1997. "Measuring the Energy Savings from Home Improvements Investments: Evidence from Monthly Billing Data," Discussion Papers Series, Department of Economics, Tufts University 9701, Department of Economics, Tufts University.
  • Handle: RePEc:tuf:tuftec:9701
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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