Moral Hazard and the Energy Efficiency Gap: Theory and Evidence
Sébastien Houde and
Journal of the Association of Environmental and Resource Economists, 2018, vol. 5, issue 4, 755 - 790
We investigate how moral hazard problems can cause suboptimal investment in energy efficiency, a phenomenon known as the energy efficiency gap. We focus on contexts where the quality offered by the energy efficiency provider is imperfectly observable. We formalize underprovision of quality and compare two policy solutions: energy-savings insurance and minimum quality standards. We then provide empirical evidence of moral hazard in home energy retrofits in Florida. We find that for those measures, the quality of which is deemed hard to observe, realized energy savings are subject to day-of-the-week effects. Specifically, energy savings are significantly lower when those measures were installed on a Friday—a day particularly prone to negative shocks on workers’ productivity—than on any other weekday. We finally specify a model to simulate the Floridian market and find that the deadweight loss from moral hazard is about twice as large as that due to associated carbon dioxide externalities.
References: Add references at CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed
Downloads: (external link)
Access to the online full text or PDF requires a subscription.
Working Paper: Moral Hazard and the Energy Efficiency Gap: Theory and Evidence (2018)
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:ucp:jaerec:doi:10.1086/698446
Access Statistics for this article
More articles in Journal of the Association of Environmental and Resource Economists from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().