Maybe tomorrow: How burdens and biases impede energy-efficiency investments

Citation

Lades L, Clinch JP & Kelly JA (2021) Maybe tomorrow: How burdens and biases impede energy-efficiency investments. Energy Research & Social Science, 78, Art. No.: 102154. https://doi.org/10.1016/j.erss.2021.102154

Abstract
Investments in energy-efficient technologies can save money over time and reduce environmental impacts. Accordingly, governments worldwide provide grants to encourage household investments in clean, energy-efficient technologies at scale. Although many households state intentions to avail of these grants and to invest in energy-efficient technologies, uptake of the grants is low. This perspective suggests that administrative burden is one major reason for the low levels of economically beneficial investments. Using a theoretical model, and a simulation with building energy data, we illustrate that administrative burden can strongly reduce investments in energy-efficient technologies if present-biased preferences lead people to procrastinate over completing the administrative tasks. We discuss the implications of these findings for the design of governments grants and recommend the reallocation of resources from grants to measures that explicitly reduce administrative burden to increase the effectiveness of these government policies.

Keywords
Administrative burden; Sludge; Transaction costs; Energy-efficiency; Present bias; Behavioural economics

Journal
Energy Research & Social Science: Volume 78

People

Professor Leonhard Lades

Professor in Economics, Economics