Wealth, consumption, and energy-efficiency investments

Anthony Britto, Joris Dehler-Holland and Wolf Fichtner

No 67, Working Paper Series in Production and Energy from Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP)

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.

Keywords: energy-efficiency gap; energetic building retrofits; wealth dynamics (search for similar items in EconPapers)
JEL-codes: D15 D31 D81 H23 O33 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ene
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitiip:67

DOI: 10.5445/IR/1000152410

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