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Efficiency investment and curtailment action: complements or substitutes

Shigeru Matsumoto and Hajime Sugeta ()

No e137, Working Papers from Tokyo Center for Economic Research

Abstract: Households. energy-saving activities are often categorized into efficiency investment and curtailment action. Although households use these two activities simultaneously, previous studies have analyzed these two activities separately. In this study, we develop an energy-saving model based on a household production framework to show how these two activities are related. We assume that a household allocates time among market work, leisure, and curtailment action. We further assume that the household spends income on purchasing market goods, energy efficiency investment, and energy service. The household receives utility from entertainment activity and energy service but both market goods and leisure time are necessary for entertainment activity. If the household spends time on curtailment action, then leisure time form entertainment activity will be reduced. In contrast, if the household spend money for efficiency investment, then market goods available for entertainment activity will be reduced. With this household production framework, we show that a household can use energy efficiency investment and curtailment action jointly; namely, a household who invest heavily in energy efficiency will spend more time on curtailment action. In the empirical section, we use microlevel data from the Survey on Carbon Dioxide Emission from Households (SCDEH) to examine the validity of this prediction in a real world setting. SCDDH contains a wide variety of information related to household's energy usage, and both curtailment actions of households and vintage of appliances that households own were surveyed. Using this information, we examine whether the intensity of curtailment action varies between households owning new and old appliances. We show that households using an old television (TV) turn off the main switch of TV more frequently but those using a new refrigerator (REF) adjust the temperature according to the season and avoid overstuffing to maintain cooling efficiency. Furthermore, we show that households installing light emitting diode (LED) lamps control brightness of rooms and those using a new air conditioner (AC) set room temperature higher. Therefore, we observe that respondents jointly use efficiency investment and curtailment action, except in the case of a TV switch-off. This result predicts that the promotion of energy saving products will not hinder the households' voluntary energy saving practice.

Pages: 29 pages
Date: 2019-08
New Economics Papers: this item is included in nep-ene and nep-reg
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