Heavy-Duty Trucks and the Energy Efficiency Paradox

Heather Klemick, Elizabeth Kopits, Keith Sargent and Ann Wolverton

No 201402, NCEE Working Paper Series from National Center for Environmental Economics, U.S. Environmental Protection Agency

Abstract: Economic theory suggests that profit maximizing firms should have an incentive to incorporate technologies into their products that are cost-effective, absent consideration of externalities. Even in the presence of uncertainty and imperfect information – conditions that hold to some degree in every market – firms are expected to make decisions that are in the best interest of the company owners and/or shareholders. However, simple net present value calculations comparing upfront costs of fuel-saving technologies to future savings suggest this is not always the case. This puzzle has been observed in a variety of contexts and is commonly referred to as the “energy efficiency paradox.” A growing number of empirical studies in the peer-reviewed literature examine why households may under-invest in energy efficiency. To our knowledge, far fewer studies examine whether similar undervaluation occurs on the part of businesses. While a variety of hypotheses could explain this behavior, lack of empirical evidence on why businesses do not always invest in seemingly cost-effective energy saving technologies limits our ability to judge whether and when a given hypothesis is likely to be valid. In this paper, we explore capital investment decisions within the heavy duty trucking sector for fuel-saving technologies. Given the lack of readily available data sources to study this industry, we collect information via a combination of focus groups and interviews. While the sample is not representative, we gain insight into what factors might explain apparent underinvestment in emission reducing technologies absent government regulation.

Keywords: energy efficiency paradox; technology investment decisions; heavy duty trucking (search for similar items in EconPapers)
JEL-codes: Q48 Q52 Q58 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2014-01, Revised 2014-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
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