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  3. American Economic Review
  4. May 2015
  5. Individual Time Preferences and Energy Efficiency

Individual Time Preferences and Energy Efficiency

  • Richard G. Newell
  • Juha Siikamäki
American Economic Review
vol. 105, no. 5, May 2015
(pp. 196-200)
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Abstract

We examine the role of individual discount rates in energy efficiency decisions using evidence from an extensive survey of US homeowners to elicit preferences for energy efficiency and cash flows over time. We find considerable heterogeneity in individual discount rates. We also find that individual time preferences systematically influence willingness to invest in energy efficiency, as measured through product choices, required payback periods, and energy efficiency tax credit claims. Education is a key driver of individual discount rates. Our findings highlight the importance of individual discount rates to understanding energy efficiency investments, the energy-efficiency gap, and policy evaluation.

Citation

Newell, Richard G., and Juha Siikamäki. 2015. "Individual Time Preferences and Energy Efficiency." American Economic Review, 105 (5): 196-200. DOI: 10.1257/aer.p20151010

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D15 Intertemporal Household Choice; Life Cycle Models and Saving
  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • Q41 Energy: Demand and Supply; Prices
  • Q48 Energy: Government Policy