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Wealth, consumption, and energy-efficiency investments

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  • Britto, Anthony
  • Dehler-Holland, Joris
  • Fichtner, Wolf

Abstract

We revisit optimal investment in energy-efficiency, presenting a decision framework built around the agent's wealth and wealth dynamic. An investment rule in the form of a trigger is derived such that the agent invests the first time the energy-carrier price crosses this threshold from below. Wealthier consumers, and those whose wealth grows faster, are seen to have less incentive to invest in energy-efficiency and alternative technologies. We investigate the market for heat pump upgrades in Germany and find scant evidence of an energy-efficiency gap. Modest carbon taxes coupled with subsidies suffice to generate stated policy goals in the short term.

Suggested Citation

  • Britto, Anthony & Dehler-Holland, Joris & Fichtner, Wolf, 2022. "Wealth, consumption, and energy-efficiency investments," Working Paper Series in Production and Energy 67, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    • Handle: RePEc:zbw:kitiip:67
    DOI: 10.5445/IR/1000152410
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    energy-efficiency gap; energetic building retrofits; wealth dynamics;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other

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