Energy productivity investments under differing economic conditions and tax structures

Thomas Sheahen and Eric Bazques

Energy, 1984, vol. 9, issue 7, 605-616

Abstract: In this paper, the effect of uncertainty in internal rate of return calculations caused by imperfect predictions of prices, costs, and business conditions are modeled. Comparing the calculated results shows that the effects of uncontrollable parameters such as recession, price competition, and unexpected repair costs have a greater influence on return on investment than tax credits or depreciation rates. In addition, even if a project overcomes some designated hurdle rate, it must then compete with other highly-rated projects, energy-saving or not, on the basis of intangible factors that comprise the art known as business judgment. Thus tax credits and accelerated depreciation will often not have as large an effect on promoting energy efficiency investments as anticipated.

Date: 1984
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:9:y:1984:i:7:p:605-616

DOI: 10.1016/0360-5442(84)90067-7

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