Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence
Kenneth Gillingham () and
Review of Environmental Economics and Policy, 2014, vol. 8, issue 1, 18-38
Despite several decades of government policies to promote energy efficiency, estimates of the costs and benefits of such policies remain controversial. At the heart of the controversy is whether there is an "energy efficiency gap," whereby consumers and firms fail to make seemingly positive net present value energy saving investments. High implicit discount rates, undervaluation of future fuel savings, and negative cost energy efficiency measures have all been discussed as evidence of the existence of a gap. We review explanations for an energy efficiency gap including reasons why the size of the gap may be overstated, neoclassical explanations for a gap, and recent evidence from behavioral economics that has potential to help us understand why a gap could exist. Our review raises fundamental questions about traditional welfare analysis, but we find the alternatives offered in the literature to be far from ready for use in policy analysis. Nevertheless, we offer several suggestions for policymakers and for future economic research. (JEL: Q38, Q41) Copyright 2014, Oxford University Press.
References: Add references at CitEc
Citations: View citations in EconPapers (131) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
Working Paper: Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:oup:renvpo:v:8:y:2014:i:1:p:18-38
Ordering information: This journal article can be ordered from
Access Statistics for this article
Review of Environmental Economics and Policy is currently edited by Robert Stavins
More articles in Review of Environmental Economics and Policy from Association of Environmental and Resource Economists Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().