Article

How Effective Are Energy-Efficiency Incentive Programs? Evidence from Italian Homeowners

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Abstract

We evaluate incentives for residential energy upgrades in Italy using data from an original survey of Italian homeowners. In this paper, attention is restricted to heating system replacements, and to the effect of monetary and non-monetary incentives on the propensity to replace the heating equipment with a more efficient one. To get around adverse selection and free riding issues, we ask stated preference questions to those who weren’t planning energy efficiency upgrades any time soon. We argue that these persons are not affected by these behaviors. We use their responses to fit an energy-efficiency renovations curve that predicts the share of the population that will undertake these improvements for any given incentive level. This curve is used to estimate the CO2 emissions saved and their cost-effectiveness. Respondents are more likely to agree to a replacement when the savings on the energy bills are larger and experienced over a longer horizon, and when rebates are offered to them. Reminding about CO2 (our non-monetary incentive) had little effect. Even under optimistic assumptions, the cost-effectiveness of incentives of size comparable to that in the Italian tax credit program is generally not favorable

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... The structure of our choice experiment questions is outlined in Figure 1. We adapted the choice experiment design from Alberini and Bigano (2015), who employ a similar experiment to evaluate the effectiveness of subsidies for the replacement of heating systems in Italy. The choice experiment proposed a hypothetical heating system replacement with a fixed replacement cost, and a fixed amount of savings on energy costs that would accumulate over a given number of years. ...
... The replacement cost was fixed at 2000 euros (equal to Alberini and Bigano 2015). The level of savings varied randomly between 200, 400, 600, and 800 euros. ...
... This enables to compare our results with previous studies that used similar attribute levels (i.e. Alberini and Bigano 2015). The 2000euro replacement cost is at the lower end of the cost spectrum but remains realistic (e.g. ...
Conference Paper
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The cost effectiveness of programs designed to upgrade energy technologies can be significantly affected by free riding. This paper assesses ex ante the effects of free riding on the cost effectiveness of a rebate program promoting the adoption of energy-efficient heating systems, relying on contingent valuation choice experiments carried out through identical representative surveys in eight EU Members States. The analysis distinguishes between strong and weak free riders: strong free riders plan to adopt a new heating system in the next five years anyway; weak free riders decide to purchase once made aware of an attractive technology package (and therefore would not need a rebate to adopt). The mean minimum rebate households require to adopt differs substantially across countries and, on average, amounts to slightly more than half of the heating system’s purchasing price, suggesting generally high opportunity costs for premature upgrading of heating systems. The minimum acceptable rebate and weak free ridership vary with income, environmental identity, and with risk and time preferences. At a rebate level that corresponds to half the purchase price of the offered heating system, the share of free riders was estimated at 50 percent for most countries, with the share of weak free riders typically higher than that of strong free riders. Public spending costs per reduced ton of CO2 differ considerably across countries and only compare to high social costs of carbon.
... The structure of our choice experiment questions is outlined in Fig. 1. We adapted the choice experiment design from Alberini and Bigano (2015), who employ a similar experiment to evaluate the effectiveness of subsidies for the replacement of heating systems in Italy. The choice experiment proposed a hypothetical heating system replacement with a fixed replacement cost, and a fixed amount of savings on energy costs that would accumulate over a given number of years. ...
... The replacement cost was fixed at 2000 euros (equal to Alberini and Bigano, 2015). The level of savings varied randomly between 200, 400, 600, and 800 euros. ...
... This enables to compare our results with previous studies that used similar attribute levels (i.e. Alberini and Bigano, 2015). The 2000-euro replacement cost is at the lower end of the cost spectrum but remains realistic (e.g. ...
Article
The cost-effectiveness of energy technology upgrade programs critically depends on free riding. This paper assesses ex ante the effects of free riding on the cost-effectiveness of a rebate program that promotes the adoption of energy-efficient heating systems, relying on contingent valuation choice experiments carried out through identical representative surveys in eight EU Members States. The analysis distinguishes between strong and weak free riders: strong free riders already plan to adopt a new heating system in the next five years; weak free riders decide to purchase once propositioned with an attractive technology package (and therefore do not require a rebate to adopt). The reservation rebates for incentivized adopters (those who decide to adopt because of a rebate) differ substantially across countries. On average, they amount to approximately 40% of the heating system's purchasing price, suggesting generally high opportunity costs for premature upgrades. The reservation rebate and weak free-ridership vary with income, risk and time preferences, and environmental identity. At a rebate level that corresponds to half the purchase price of the offered heating system, the estimated share of free riders exceeded 50% for most countries, with a typically higher share of weak free riders than strong free riders. Specific rebate cost estimates (in €/tCO2) differ considerably across countries, suggesting that cooperation can yield budgetary benefits.
... The upper and lower levels for purchase price were chosen based on a screening of market prices for heating systems in the three countries. For the purchase price we rely on the ranges provided by Ruokamo (Ruokamo 2016), Rouvinen and Matero (2013), Alberini and Bigano (2015) and Fleiter et al. (2016) which includes detailed technology assessment of residential heating systems for the EU distinguished by technology, size and country. The subsidy levels correspond to those typically observed in government or utility-sponsored subsidy programs and are similar to those employed by Alberini and Bigano (2015) or Olsthoorn et al. (2017). ...
... For the purchase price we rely on the ranges provided by Ruokamo (Ruokamo 2016), Rouvinen and Matero (2013), Alberini and Bigano (2015) and Fleiter et al. (2016) which includes detailed technology assessment of residential heating systems for the EU distinguished by technology, size and country. The subsidy levels correspond to those typically observed in government or utility-sponsored subsidy programs and are similar to those employed by Alberini and Bigano (2015) or Olsthoorn et al. (2017). Values for installation were provided by technology and sector experts of Fraunhofer Institute for Systems and Innovation Research and the Technical University of Vienna. ...
Article
This paper employs demographically representative discrete choice experiments (DCEs) with owner occupiers in Poland, Sweden, and the United Kingdom (UK) to estimate the effects of subsidies, heating cost savings, installation time (reflecting 'hassle costs') and warranty length on owner occupiers' propensity to invest in a new heating system. In particular, the paper explores whether owner occupiers value subsidies received from public funding sources differently than subsidies received from private funding sources. The results from estimating mixed logit models suggest that respondents not only value subsidies for new heating systems because they decrease the net price, but they also value receiving a subsidy per se. For participants from Sweden (but not from Poland and the UK), this non-monetary value was found to be higher for subsidies offered by a public than by a private funding source. The results for heating cost savings in the three countries imply implicit discount rates between about 11 and 13%. We further find that respondents in Poland dislike longer installation times, and that respondents in all three countries value longer warranty times.
... This section reviews previous studies on energy efficiency policies in the housing sector. Past studies revealed that different policies had been implemented to increase energy efficiency (e.g., Alberini and Bigano [34], Aydin and Brounen [35], Charlier [36], Dubois and Allacker [37], Filippini et al. [27], Lopes et al. [38], and Ramos et al. [6]). These policies include, for example, energy performance standards; required labels of energy efficiency for appliances and building standards; fiscal, regulatory, and information policies; tax credits; energy certificates; energy feedback programs; subsidies for renovation; and subsidies for building new houses. ...
... Contrasted to the no-policy scenario, having energy codes for commercial and residential buildings can save 10% electricity consumption. Alberini and Bigano [34] examined the motivations for promoting residential energy in Italy. The study used data collected from 3000 Italian landlords between May and June 2013. ...
Article
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The effect of energy policies on the energy performance of residential properties/houses in nineteen Portuguese districts from 2014 to 2021 was investigated. A linear random-effects model regression was used as the method in this empirical investigation. The empirical results indicated that the income per capita has a negative effect on residential properties with high energy efficiency certificates (e.g., A+, A, and B) and a positive impact on residential properties with low energy efficiency certificates (e.g., C, D, E, and F); the codes and standards energy policies for energy efficiency have a positive effect on residential properties with high energy efficiency certificates (e.g., A, B, and B−) and residential properties with low energy efficiency certificates (e.g., C, D, E, and F); the fiscal and financial incentive policies for energy efficiency have a positive effect on residential properties with high energy efficiency certificates (e.g., A+, A, and B) and a negative effect on residential properties with B− energy certificate, and also a negative effect on residential properties with low energy efficiency certificates (e.g., C and D) and a positive effect on residential properties with an F energy certificate; the information and education policies of energy efficiency have a positive effect on residential properties with high energy efficiency certificates (e.g., A+, A, and B) and residential properties with low energy efficiency certificates (e.g., C, D, and E); and, finally, the consumer credit per capita has a positive effect on residential properties with high energy efficiency certificates (e.g., A+, A, and B) and a negative effect on residential properties with low energy efficiency certificates (e.g., C, D, and F), as well as a positive effect on residential properties with an F energy certificate.
... This result comes as no surprise if not considered collectively [46,97]. Besides, subsidies efficiency has been studied before, proving that individuals are more likely to proceed with upgrading their residence energy efficiency using microgeneration systems when rebates are offered, as reported for the cases of Sweden [98], Italy [99], and the United States [100]. Thus, the government should consider, after providing more information to the public about the domestic microgeneration systems, further increasing the subsidiaries budget [101]. ...
... To them, financial incentives nudge them to make more aggressive choice. Numerous evidences indicate that economic incentives raises the homeowners' likelihood of purchasing energy efficient household appliances in Denmark [86], replacing heating system in Italy families [87], and adoption of renewable energy products in US home [85]. ...
Article
Buildings play a dominant role in global efforts towards energy consumption reduction, greenhouse gas (GHG) emission mitigation, as well as global clean energy transition. Building Energy Policies (BEP) improved globally and quickly with a growing number of building codes implemented over the past decade. Occupant Behavior (OB) has significant impacts on building energy performance and occupant comfort, despite often being not well understood and oversimplified in BEPs. This paper highlighted the research needs of properly integrating OB in building energy polices by presenting a literature review to identify the key questions and challenges related to building technical standards and regulations, building information policies, building energy incentives, and policy evaluations and way forward. Challenges and opportunities of OB in BEP are also discussed with respect to technical innovation and digitalization, as well as concerns related to energy efficiency and fairness. There has been growing interests, research and applications in this field, but significant challenges and opportunities still lie ahead.
... Увеличение доли малоэтажной жилой застройки в общем объеме жилищного строительства определяет необходимость в проведении сравнительной оценки расхода топливно-энергетических ресурсов (ТЭР) на этапе возведения зданий. Обзор и анализ российских публикаций [10][11][12], а также зарубежных исследований по оценке развития [13][14][15] и эффективности [16][17][18] применения программ по сокращению расходования энергоресурсов показали, что вопросы энергосбережения в период строительства зданий изучены недостаточно. Кроме этого, принятый Федеральный закон № 261-ФЗ от 23.11.2009 «Об энергосбережении и о повышении энергетической эффективности и о внесении изменений в отдельные законодательные акты Российской Федерации» устанавливает требования по обеспечению эффективного использования энергетических ресурсов, что подтверждает необходимость повышения энергетической эффек-тивности, в том числе и в малоэтажном жилищном строительстве. ...
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Introduction. Low-rise housing construction is an area that has extensive potential in Russia. One of the top-priority objectives, pursued by public politicians in the Russian Federation, is to improve the energy efficiency of versatile branches of the national economy. Given the fact that the building construction, representing a comparatively short stage in the building’s life cycle, is energy consuming, energy saving in the process of construction turns particularly relevant. Prevailing manual labour and low-capacity construction machinery substantially reduce power consumption at the stage of low-rise housing construction. Widely spread low-rise construction technologies and consequent discrepancies in structural and technological solutions determine the mode of operation, numbers and the engineering performance of construction machines. Hence, energy resources, to be consumed in the process of mechanized work performance on a construction site, is projected, and these projections may differ. As for the rational expenditure of resources, consumption of fuel and energy can be expediently planned at the stage of construction project scheduling. Materials and methods. The co-authors have analyzed scientific publications focused on the subject of research, applied organizational and construction process patterns developed in the form of work performance schedules needed to regulate fuel consumption in the process of mechanized work performance, whenever low-rise construction technologies are used. Results. The co-authors offer a set of instruments, designated for the calculation of fuel consumption in the process of mechanized work performance, whenever low-rise construction technologies are used. Conclusions. At the project planning stage, the fuel consumption rate analysis, applicable to construction machines and mechanisms, enables to (1) project the amount of fuel consumed in the course of specific construction works performed within the framework of the whole process of construction, (2) to identify technologies and mechanized units which are most rational in terms of power consumption.
... This result comes as no surprise if not considered collectively [46,97]. Besides, subsidies efficiency has been studied before, proving that individuals are more likely to proceed with upgrading their residence energy efficiency using microgeneration systems when rebates are offered, as reported for the cases of Sweden [98], Italy [99], and the United States [100]. Thus, the government should consider, after providing more information to the public about the domestic microgeneration systems, further increasing the subsidiaries budget [101]. ...
Article
Full-text available
On a global scale, the residential sector is responsible for a significant part of consumed energy, of which the major part is dependent upon fossil fuels. A solution for the reduction of fossil fuel use is the application of residential microgeneration technologies. The present study examines the market acceptance factors of such systems in Greece, as well as how these factors change over time, based on real decisions made by consumers. In this context, two surveys applying a common questionnaire were performed in 2012 and 2019 in order to examine the effects of (a) socioeconomic, residence, and spatial characteristics, (b) environmental awareness and behavior, and (c) factors related to consumer behavior, attitudes, and system attribute preferences. Factors affecting the installation of a microgeneration system are gender, age, income, residence type, ownership and size, environmental behavior, use of a subsidy program, as well as views on costs and market-related issues. When evaluating the effect of these factors over time, socioeconomic and residence characteristics, as well as environmental behavior, seem to have a fixed effect to the installation of residential microgeneration systems, with market acceptance fluctuations being related mainly to market conditions, including existing subsidy programs, expectations on fuel prices, and legislation.
... The system features nine different tariff levels based on installation size, the highest being reserved for small rooftop systems (€ 0.27/kWh), but is due to expire in December 2016. Subsidies for energy-efficiency upgrades in the home are structured in the form of tax credits, which were first established in 2007 (see Alberini et al., 2014, and Bigano, 2015). ...
... The replacements made when the equipment can no longer be repaired were included in our model's forced replacements outflow. Forced replacements are considered free-riding behavior, along with purchases made by consumers that would have bought an efficient appliance without an incentive (Alberini et al. 2014;Alberini and Bigano 2015). As we have no information about consumers' willingness to pay for EE, results overestimate the effect of rebate and coupon programs. ...
Article
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A dynamic model for refrigerators’ stock and replacement is proposed to analyze the evolution of refrigerators’ stock efficiency in Colombia. The model simulates changes on energy consumption of refrigerators’ stock as inefficient refrigerators are replaced at their end of life, and also voluntarily, as a result of energy efficiency strategies. Replacement rates are estimated using a diffusion model, while a discrete choice model that considers upfront and use costs is used to represent impact of energy efficiency on consumers’ decisions. The proposed model is useful for ex-ante policy analysis and design. Results from the base case scenario indicate that the current energy efficiency policy achieves a 75% penetration of high-efficiency refrigerators by 2032. The replacement of inefficient refrigerators can be accelerated by increasing access to credit to consumers; a 25% increase in households with access to credit increases voluntary replacements by 16%. Other financial incentives, such as price discounts and lower financial rates, also increase voluntary replacements, although at lower rates. To maximize the energy efficiency gains of refrigerators’ substitution, higher energy standards and removal and scrapping of old refrigerators are needed.
... At present, many countries and regions in the world have implemented the policy of "peak and valley electricity price" [44][45][46][47]; that is, the price ladders are set at different time periods to reduce the peak electricity consumption of residents and ease the pressure on power supply. Meanwhile, more and more studies and practices have proven that the use of energy-saving incentives can also greatly encourage active energy-saving behaviors [48][49][50][51][52][53]. ...
Article
Accurate simulation and prediction of occupants’ energy use behavior are crucial in building energy consumption research. However, few studies have focused on household energy use behavior in severely cold regions that have unique energy use patterns because of the low demand of cooling in summer and the use of central heating system in winter. Thus, we developed an agent-based model to simulate the household electricity use behavior in severely cold regions, according to data for Harbin, China. The model regards apartments, residents, household appliances, and energy-management departments as agents and generates the household electricity consumption with respect to time, temperature, and energy-saving events. The simulation parameters include basic information of the residents, their energy-saving awareness, their appliance use behaviors, and the impact of energy-saving management. Electricity use patterns are described by decision-making mechanisms and probabilities obtained through a questionnaire survey. In the end, the energy-saving effects of different management strategies are evaluated. The results indicate that the model can visually present and accurately predict the dynamic energy use behavior of residents. The energy-saving potential of household electricity use in severely cold regions is mainly concentrated in lighting and standby waste, rather than cooling and heating, since the cooling demand in summer is low and the heating in winter mainly relies on central heating system of the city, not on household electricity appliances. Energy-saving promotion can significantly reduce the amount of energy waste (41.89% of lighting and 97.79% of standby energy consumption), and the best frequency of promotional events is once every four months. Residents prefer incentive policies, in which energy-saving effect is 57.7% larger than that of increasing electricity prices. This study realized the re-presentation of the changes of energy consumption in a large number of households and highlighted the particularity of household energy-saving potential in severely cold regions. The proposed model has a simple structure and high output accuracy; it can help cities in severely cold regions formulate energy-saving management policies and evaluate their effects.
... This suggests to us that an income elasticity of one might be a reasonable choice in many benefit transfer and integrated assessment modeling applications. Finally, and perhaps even more important, Alberini and Bigano (2015) find that, based on a survey sample that largely overlaps with the sample of Italian respondents in this paper, the cost-effectiveness of residential energy efficiency policies is of the order of 279 Euro per ton of CO 2 emissions reduced. The existing residential energy efficiency program in Italy attains CO 2 emissions reductions at a cost per ton that is similar, or even higher (ENEA, 2009ENEA, , 2015suggesting that the current policy is much more expensive than what Italian households would be prepared to pay. ...
... Linares and Labandeira, 2010). Within this journal issue and with the above-mentioned objectives Alberini and Bigano (2015) analyze the role of both monetary and non-monetary incentives in encouraging households to replace their heating systems with a more energy efficient system. Using a survey of homeowners elaborated by the own authors , the analysis focuses on Italian households. ...
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Energy efficiency has become an essential instrument to obtain effective greenhouse gas mitigation and reduced energy dependence. This introductory article contextualizes the contributions of the supplemental issue by showing the new setting for energy efficiency economics and policy; discussing the role of price instruments to promote energy savings; presenting new approaches for energy efficiency policies; and placing energy efficiency within a wider energy and environmental framework.
... Finally, apart from pure technical issues, energy price, and or carbon taxes usually play an important role for GHGs emissions mitigation strategies [46][47][48]. Especially for China, which is emerging economy (means significant rebound effect exists) as well as with significant regional disparity. ...
... Malaysia could implement the ideas that have been applied in other countries in order to vigorously stimulate its energy conservation and energy efficiency measures among the public. For instance, allowing income tax deduction for the expenses incurred to implement certain types of energy efficiency renovations or use of RE in existing homes (see [79]). In terms of government consumption, there are various ways in which the government also could contribute to energy conservation and energy efficiency. ...
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... The existence of adverse selection is because, as demonstrated by Hewett [28], goods whose quality cannot be assessed before purchase, including most energy-efficient products, technologies, and services, are vulnerable to adverse selection. In this case, the buyer or investor's choice is based on visible aspects (e.g., price), and buyers can refuse more practical solutions [61,62]. ...
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... (2) direct comparison between transaction prices method; and (3) a stated preference approach, such as a contingent valuation or choice experiment survey for evaluating willingness to pay (Alberini and Bigano 2015;Popescu et al. 2012). ...
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Chapter
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Fiscal incentives have been introduced to encourage households in many countries to undertake energy-saving renovations. This paper assesses the impact of an energy tax credit on (i) renovation rate and (ii) renovation expenditures using French data. We exploit a sharp discontinuity corresponding to the introduction of the French tax credit in 2005 to identify the policy's effects. Results indicate that the tax credit has little effect on the decision to renovate, increasing renovations by 1.09%, ceteris paribus. We find that the presence of free riding reduces the actual effect of fiscal measures. However, this fiscal policy does lead to an increase in renovation expenditures by 21.76%, all things being equal. This suggests that the energy tax credit induces households who are already determined to renovate to perform more substantial energy-saving renovations. We conduct a robustness check using the matching method, which confirms our results.
Chapter
Conventional household energy saving strategies, such as energy efficient investments, monetary rewards and social media campaigns, are usually costly and time-consuming, which imposes huge fiscal burden for government to implement these strategies. Hence, a more cost-efficient incentive on building energy conservation is critical to release these burdens while achieving energy saving goals. In the review of prior literature on different kinds of building energy incentives, this study proposed a hybrid intervention—Household Energy Saving Option (HESO) aiming to encourage households reduce energy usage with minimum cost and satisfying effects. A sample size of 189 households across different regions in Singapore were recruited and among them, 45 were assigned to experiment group, in which participants were offered an option that either wining rewards by achieving home energy saving goals or losing their initial joining fees as punishment. After two rounds of experiment with various energy saving goals, results showed that in the first round, treatment group achieved average energy reduction of 11.2% when setting energy saving target of 5%; and achieved 14.1% in second round when setting a higher energy saving goal of 10%; while control group did not show any changes in energy consumption. However, the effect of HESO on home energy saving decayed along time after the intervention, which indicates that this intervention is better to be conducted in a series form. Taken together, these results demonstrate that HESO can produce significant reduction in home energy consumption. The contribution of this study is to develop an innovative and cost-efficient incentive for home energy conservation and to exam the interaction between household energy reduction and households’ demographics.
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We elicit homeowners’ willingness to pay (WTP) for energy efficiency and low-carbon technologies in the context of heating appliance replacement. We employ a within-between subject design that involves manipulating information in a two-stage discrete choice experiment (DCE) and use WTP space estimation to identify the role of financial information in reducing fossil fuel use. We find that homeowners’ average valuation of energy efficiency exceeds associated heating cost savings, suggesting that they also consider non-monetary benefits when evaluating this type of investment, whereas information about private and pro-social benefits of investments only has a limited impact on WTP. Evidence also suggests that homeowners have a strong preference for the pre-existing technology. Consequently, fossil fuel users’ WTP for switching to low-carbon technologies does not cover respective investment cost differentials, and we derive evidence on how combined subsidies and information can incentivize these users to opt out of fossil technologies.
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Smart thermostats may provide up to 10% savings in residential thermal energy use without loss of comfort, yet their diffusion has typically been slow. To better understand adoption of these devices, we conducted an online survey with approximately 5,500 respondents from eight European countries that included both a discrete choice experiment (DCE) and stated past adoption of smart thermostats. The results we obtained by estimating mixed logit models suggest that households value heating cost savings, remote temperature control, the display of changes in energy consumption, and recommendations by experts, albeit with substantial heterogeneity across countries; in comparison, subsidies are positively valued in all countries except for Germany and Spain, and recommendations by energy providers in all countries except Poland where they are negatively valued. Further, the findings provide evidence that consumer innovativeness reinforces the acceptance of technical attributes (heating cost savings, feedback functionalities, and remote temperature control), that privacy concerns reduce the acceptance of remote functionalities, and that stronger environmental identity reinforces the acceptance of environmentally related attributes (heating cost savings and feedback functionalities). The results we obtained from estimating binary response models of stated past adoption of smart thermostats are generally consistent with those of the DCE.
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The conducted research was devoted to the development and validation of criteria for low-rise housing construction in small towns and rural areas remote from major cities. The purpose of the research is to develop fundamental criteria that allow achieving a synergistic effect based on integrated development of a territory, together with improvement of standard of living and creation of comfortable conditions for the population. This research can be applied in design of programs for development of construction industry, including low-rise construction. Scientific merit of the article lies in the fact that the developed criteria make it possible to identify the main features of efficient low-rise housing construction: comfort, safety, energy efficiency, modernity of engineering equipment. These features are able to ensure construction of such energy-efficient low-rise comfortable and affordable housing, which will contribute to sustainable development of a region and make small towns and villages attractive for young professionals and young families.
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Financial Incentives (FIs) for green buildings are a major component of energy policy planning and play a vital role in the promotion of sustainable development and carbon mitigation strategies. Despite the presence of numerous FIs in Canada, there is still a lack of understanding on their distribution and effectiveness. This review first investigates the FIs available for residential and commercial buildings in Canada, and then performs a comprehensive review of studies related to FIs’ effectiveness evaluation. It is found that FIs for buildings in Canada can be distributed into four categories: tax, loans, grants, and rebates. Among these, rebates from utility providers are the most common and are administered in all provinces. In addition to these, special incentives are available for three end-users (low-income, aboriginal people, landlords and tenants) and for three types of buildings (heritage, non-profit and energy rated). A clear contrast is observed on FIs offered in three regulatory regimes (Federal, provincial and municipal). Four provinces (Alberta, British Columbia, Ontario and Quebec) are leading in green building efforts. The in-depth literature review was also used to develop an understanding on the criteria used in effectiveness evaluation and the factors impacting effectiveness. Based on the findings of different studies on FIs effectiveness, a generic approach for evaluation of FIs is proposed that can help in deploying successful FIs programs. The results of this review are of importance to the policymakers, government authorities, and utilities engaged in designing and improving FIs for energy efficient buildings.
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The purpose of this paper is to analyze the effects of electricity price changes and energy efficiency subsidy on household energy efficiency purchase and/or behavioural adjustment decisions. The analysis adds energy efficiency investment to a methodology that merges the physics of energy with microeconomic principles. The physical side informs the amount of electricity used to satisfy services that people desire, while the microeconomic side imposes a utility function that represents a household's welfare. Several electricity pricing schemes and energy efficiency options are examined, with costs and benefits of each option explicitly modeled in the physical representation. Several insights are derived from performing an analysis for archetypical villas across Saudi Arabia. One, energy efficiency purchases lower the need for energy conservation. Households also lessen the extent to which they practice conservation as energy efficiency subsidies are raised. Additionally, as energy efficiency subsidies and electricity prices rise, the difference in household spending on other goods and services widens between the highest efficiency case and no added efficiency. This indirect rebound causes a situation where firms would increase their production, and thus energy use, to meet the additional demand by households for their goods. ARTICLE HISTORY
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The rise of wealth inequalities between and within nations is sustaining the request of reforming personal income taxes in many countries. A complete evaluation of the redistributive effects of tax instruments, however, implies investigating both vertical and horizontal equity aspects. I propose an augmented decomposition of the Reynolds-Smolensky index, where the reranking term is decomposed using geometric partition techniques, in order to measure how personal income tax instruments influence vertical and horizontal equity, as well. The application of the new method to novel Italian tax files suggests that the assessment of specific tax measures and/or tax reforms depends on which criterion of equity, vertical or horizontal, is adopted. The joint consideration of vertical and horizontal equity effects is also important when evaluating selected personal income tax instruments benefiting top income individuals and the tax measures adopted during the crisis. A specific focus on the regional redistributive effects of personal income tax is an additional key feature of this paper.
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The residential building sector is a major driver of current and future energy consumption and associated CO2 emissions. The main use of energy by households is for heating. Consumers’ heating behaviour results from the interactions of internal and external drivers, which makes it a complex system. We used Fuzzy Cognitive Mapping method to represent key drivers and interactions in that system. Maps were drawn up at three focus groups representing different social groups from Spain – academics, citizens and energy experts – in order to capture heterogeneity of behaviours. Maps seek to identify and set out the factors that influence heating costs as well as private and public adaptation measures to minimise them. The core common concepts of the maps deal with consumer behaviour regarding investment in energy efficiency technologies such insulation or thermostat, attitudes regarding the environment or the thermal comfort temperature, economic factors such as price and income and regulatory interventions. The most significant differences between the groups were that the academics and energy experts considered that taxes could improve energy savings. The results shown in this paper may be helpful in designing effective policies on heating consumption.
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Demand-side load management is considered a cost-efficient solution for accommodating growing shares of intermittent renewable electricity production. We employ a double-bounded dichotomous choice contingent valuation (CV) experiment with 275 companies in the German commerce and services sector to estimate the effectiveness of a subsidy to make their ventilation, air conditioning, refrigeration and freezing systems available for automated load management. Our estimates suggest that a given subsidy would unlock more flexible load at lower per MWh subsidy costs from air conditioning compared to ventilation. We find no effect of subsectors and the proposed frequency and duration of the load curtailments on the subsidy level. Subsidy levels in the center of the distribution yield specific subsidy costs that suggest that load management in the commerce and services sector may become a competitive option on the balancing market.
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This paper presents a systematic review of the research literature that applies quantitative techniques to inform incentive programs and policies promoting pro-environmental behavior and technology adoption among individual consumers. The paper points out that, while the number of active incentive programs is large, there is a dire need for scientific advances that could increase their impact in calculated ways. The expertise of the operations research and management science community, as well as industrial, systems, civil, and environmental engineering experience, appears to be particularly well suited to support such effort. The review covers the research work performed in three areas of practical importance: efficient energy consumption, waste management, and stormwater management. The types of analytical models and data analysis techniques developed to support policy-making in each area are summarized, highlighting the imbalance between the descriptive versus prescriptive contributions made to date.
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Actualmente, la implementación de medidas de eficiencia energética (EE) y energías renovables (ER) se encuentra en la agenda política de numerosos países; sin embargo, el avance concreto y la implementación efectiva de dichas estrategias es aún muy dispar. Si bien existen países donde dichas tecnologías han recalado efectivamente en sus regímenes socio-técnicos; una gran mayoría aún no comenzó a enfrentar dicha transición de manera sistémica y, por consiguiente, deberán afrontar numerosos desafíos. En tal sentido, este trabajo presenta un análisis de la transición energética que se está desarrollando de forma sostenida en el sector residencial italiano desde mediados de la década del 2000 (2006-2016) a los efectos de identificar, sistematizar y extraer factores clave del caso de estudio. A partir de éstos es posible discutir acerca de la implementación de políticas energéticas y generar insumos para otros casos de estudio que pretendan impulsar medidas estatales de mejoramiento energético.
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We evaluate incentives for residential energy upgrades in Italy using data from an original survey of Italian homeowners. In this paper, attention is restricted to heating system replacements, and to the effect of monetary and non-monetary incentives on the propensity to replace the heating equipment with a more efficient one. To get around adverse selection and free riding issues, we ask stated preference questions to those who weren’t planning energy efficiency upgrades any time soon. We argue that these persons are not affected by these behaviors. We use their responses to fit an energy-efficiency renovations curve that predicts the share of the population that will undertake these improvements for any given incentive level. This curve is used to estimate the CO2 emissions saved and their cost-effectiveness. Respondents are more likely to agree to a replacement when the savings on the energy bills are larger and experienced over a longer horizon, and when rebates are offered to them. Reminding about CO2 (our non-monetary incentive) had little effect. Even under optimistic assumptions, the cost-effectiveness of incentives of size comparable to that in the Italian tax credit program is generally not favorable
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Between 1989 and 1999, U.S. electric utilities spent $14.7 billion on demand-side management (DSM) programs aimed at encouraging their customers to make investments in energy efficiency. This study relies on panel data on 324 utilities spanning 11 years to estimate the effect of DSM expenditures on retail electricity sales. Our estimates imply that DSM had a much smaller effect on retail electricity sales than do estimates reported by utilities themselves over the same study period.
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We use information reported by ten utilities about their electricity conservation programs to calculate the life-cycle cost per kWh saved - the cost of a "negawatt " -- associated with these programs. These computations indicate that the cost associated with utilities "purchasing" negawatthours is substantially higher than implied by standard sources such as Amory Lovins (Rocky Mountain Institute) and EPRI. The costs calculated for residential programs, in particular, are much higher than conservation advocates have suggested. However, 80% of the expected savings from these programs are attributed to commercial and industrial customers rather than residential customers. We find substantial variation in costs between utilities for similar programs as well as significant intra-utility variation in the cost associated with various sub-programs. We proceed to examine whether or not there are any systematic biases in the reporting of costs and energy savings by the utilities in our sample. In many cases, utilities fail to report all relevant costs, rely on engineering projections of savings rather than applying methods to measure savings based on actual experience, and fail to make appropriate adjustments for free riders. Further biases may result firorn adopting measure lives that are too long. As a result, on average the cost of a negawatthour computed from utility reports significantly underestimates the true societal cost of conservation achieved this way. Mile it is difficult to compute the underestimate with any precision, the evidence that we have suggests that computations based on utility expectations could be underestimating the actual societal cost by a factor of two or more on average. Better utility cost accounting procedures and the application of more sophisticated methods to estimate actual energy savings achieved are clearly necessary before large sums of money can be expended wisely on these programs.
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A literature search provides 83 studies from which 616 comparisons of contingent valuation (CV) to revealed preference (RP) estimates are made. Summary statistics of the CV/RP ratios are provided for the complete dataset, a 5 percent trimmed dataset, and a weighted dataset that gives equal weight to each study rather than each CV/RP comparison. For the complete dataset, the sample mean CV/RP ratio is 0.89 with a 95 percent confidence interval [0.81-0.96] and a median of 0.75. For the trimmed and weighted datasets, these summary statistics are (0.77; [0.74-0.81]; 0.75) and (0.92; [0.81-1.03]; 0.94), respectively. The Spearman rank correlation coefficients between the CV and RP estimates for the three datasets are 0.78, 0.88, and 0.92.
Article
A literature search provides 83 studies from which 616 comparisons of contingent valuation (CV) to revealed preference (RP) estimates are made. Summary statistics of the CV/RP ratios are provided for the complete dataset, a 5 percent trimmed dataset, and a weighted dataset that gives equal weight to each study rather than each CV/RP comparison. For the complete dataset, the sample mean CV/RP ratio is 0.89 with a 95 percent confidence interval [0.81-0.96] and a median of 0.75. For the trimmed and weighted datasets, these summary statistics are (0.77; [0.74-0.81]; 0.75) and (0.92; [0.81-1.03]; 0.94), respectively. The Spearman rank correlation coefficients between the CV and RP estimates for the three datasets are 0.78, 0.88, and 0.92. (JEL Q21).
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Vehicle retirement programs have become popular tools of public policy for reducing pollution. The efficacy of these programs is difficult to measure, as it is difficult to tell how much a vehicle would have polluted otherwise. I estimate that counterfactual using data from a long-running local program in California. I utilize the universe of emissions inspections from the California Smog Check Program to construct vehicle usage histories of retired cars and similar vehicles which did not retire early. I find that the program's cost-effectiveness steadily declined over time because of the depreciation of the vehicle fleet, while adverse selection remained a problem throughout. (JEL D82, Q53, Q58, R48).
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The debate over the costs of climate protection policies still focuses on the question of whether strategies to significantly reduce greenhouse gas emissions at zero or negative net cost (‘no regrets’ strategies) can be found. This article describes a carbon dioxide (CO2) reduction strategy for space and water heating in Austria relying on net present value analyses of 43 climate protection measures. The cost-benefit analyses include investment costs, the savings from energy conservation, the administrative costs of policy instruments and estimates of the external costs. An efficient CO2 reduction strategy was developed on the basis of energy supply curves which were adapted so that interactions between the CO2 reduction technologies could be considered. A cost-efficient CO2 reduction strategy could lower the CO2 emissions for the provision of space and water heating in Austria by up to 2.7% per year relative to the official ‘business as usual’ scenario.
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We examine the effect of energy efficiency incentives on household energy efficiency home improvements. Starting in February 2007, Italian homeowners have been able to avail themselves of tax credits on the purchase and installation costs of certain types of energy efficiency renovations. We examine two such renovations—door/window replacements and heating system replacements—using multi-year cross-section data from the Italian Consumer Expenditure Survey and focusing on a narrow period around the introduction of the tax credits. Our regressions control for dwelling and household characteristics and economy-wide factors likely to influence the replacement rates. The effects of the policy are different for the two types of renovations. With window replacements, the policy is generally associated with a 30 % or stronger increase in the renovation rates and number of renovations. In the simplest econometric models, the effect is not statistically significant, but the results get stronger when we allow for heterogeneous effects across the country. With heating system replacements, simpler models suggest that the tax credits policy had no effect whatsoever or that free riding was rampant, i.e., people are now accepting subsidies for replacements that they would have done anyway. Further examination suggests a strong degree of heterogeneity in the effects across warmer and colder parts of the country, and effects in the colder areas that are even more pronounced than those for window replacements. These results should, however, be interpreted with caution due to the low rates of renovations, which imply that the effects are estimated relatively imprecisely.
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The failure of consumers to make seemingly cost-effective investments in energy efficiency is commonly referred to as the energy efficiency gap. We review the most recent literature relevant to the energy efficiency gap and in particular discuss what the latest insights from behavioral economics might mean for the gap. We find that engineering studies may overestimate the size of the gap by failing to account for all costs and neglecting particular types of economic behavior. Nonetheless, empirical evidence suggests that market failures such as asymmetric information and agency problems affect efficiency decisions and contribute to the gap. Behavioral anomalies have been shown to affect economic decisionmaking in a variety of other contexts and are being increasingly cited as an explanation for the gap. The relative contributions of the various explanations for the gap differ across energy users and energy uses. This heterogeneity poses challenges for policymakers, but also could help elucidate when different policy interventions will most likely be cost-effective. If behavioral anomalies can be more cleanly linked to energy efficiency investments, then policymakers will face new challenges in performing welfare analysis of energy efficiency policies.
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In May 2010, we surveyed 473 Swiss homeowners about their preferences for energy efficiency renovations in their homes. We used conjoint choice experiments that asked respondents to choose among hypothetical energy efficiency renovation projects. We find that homeowners are responsive to the upfront costs of the renovation projects, the savings in energy expenses, the time horizon over which such savings would be realized, and the thermal comfort improvement afforded by such renovations. Even more important, the likelihood of undertaking energy-efficiency renovations increases with the size of the subsidy offered by the Swiss federal government. At least for an average-sized project, we find that the impact of a rebate is comparable to that of an improvement in the thermal comfort of the home. The savings in the annual energy bills and the duration of the investment are less important. The discount rate implicit in the responses to the conjoint choice experiments is low. Depending on the specification of the random utility model, the discount rate ranges from 1.5 to about 3%. This is consistent with the point in Hassett and Metcalf (1993) and Metcalf and Rosenthal (1995), and with the fact that our scenarios contain no uncertainty. Respondents who feel completely uncertain about future energy prices are more likely to select the status quo (no renovations) in any given choice task and weight the cost of the investments more heavily than those respondents who expect energy prices to increase in the future. The hypothetical renovations are more likely to take place when respondents believe that climate change considerations should be an important determinant of home renovations.
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This article examines voluntary provision of a public good that is motivated, in part, to compensate for activities that diminish the public good. Markets for environmental offsets, such as those that promote carbon neutrality, provide an increasingly salient example. An important result is that mean donations do not converge to zero as the economy grows large. The equilibrium is solved to show how direct donations and net contributions depend on wealth and heterogeneous preferences. Comparative static analysis demonstrates how public good provision and social welfare depend on the technology, individual wealth and an initial level of the public good.
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This report reviews current perspectives on market barriers to energy efficiency. Ratepayer-funded utility energy-efficiency programs are likely to change in scope, size, and nature as the deregulation process proceeds; the authors research focuses on understanding to what extent some form of future intervention may be warranted and how they might judge the success of particular interventions, especially those funded by ratepayers. They find that challenges to the existence of market barriers have, for the most part, failed to provide a testable alternative explanation for evidence suggesting that there is a substantial ``efficiency gap`` between a consumer`s actual investments in energy efficiency and those that appear to be in the consumer`s own interest. They then suggest that differences of opinion about the appropriateness of public policies stem not from disputes about whether market barriers exist, but from different perceptions of the magnitude of the barriers, and the efficacy and (possibly unintended) consequences of policies designed to overcome them. They conclude that there are compelling justifications for future energy-efficiency policies. Nevertheless, in order to succeed, they must be based on a sound understanding of the market problems they seek to correct and a realistic assessment of their likely efficacy. This understanding can only emerge from detailed investigations of the current operation of individual markets.
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This paper develops a theory of voluntary provision of a public good in which a household’s decision to engage in a form of environmentally friendly behavior is based on the desire to offset another behavior that is environmentally harmful. The model generates predictions about (1) participation in a green-electricity program at the extensive and intensive margins, and (2) changes in electricity consumption in response to participation. We test the theory using billing data for participants and nonparticipants in a green-electricity program in Memphis, Tennessee. High-consumption households are more likely to participate, and they participate at higher levels. In terms of a behavioral response, households participating above the minimum threshold level do not change electricity consumption, but those participating at the minimum threshold increase electricity consumption 2.5 percent after enrolling in the program. The result is based on identification strategies that exploit before-after differences between participants and nonparticipants, and differences in the timing of enrollment among participants only. Despite the increase in electricity demand upon the purchase of green electricity for the households with a “buy-in” mentality, the net effect for the buy-in households is a reduction in pollution emissions, as the behavioral response is not large enough to offset the environmental benefit of the green-electricity purchase.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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This paper addresses the nexus between evaluation of energy-efficiency programs and incentive payments based on performance for program administrators in California. The paper describes the problems that arise when evaluators are asked to measure program performance by answering the counterfactual question--what would have happened in the absence of the program? Then the paper examines some ways of addressing these problems. Key conclusions are (1) program evaluation cannot precisely and accurately determine the counterfactual, there will always be substantial uncertainty, (2) given the current state of knowledge, the decision to tie all incentives to program outcomes is misguided, and (3) incentive programs should be regularly reviewed and revised so that they can be adapted to new conditions.
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Using panel data on individual tax returns and variation in state tax policy, we measure the impact of government tax policies to encourage residential conservation investment on the probability of making these investments. Unlike previous work, we account for unobserved heterogeneity in tastes for energy-saving activities and its possible correlation with tax policy at the state level. We find that controlling for unobserved heterogeneity is very important. Based on our preferred point estimate of the tax price coefficient, a 10 percentage point change in the tax price for energy investment would lead to a 24 percent increase in the probability of making an investment.
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Green-electricity programs provide an opportunity to study private provision of an environmental public good in a field setting. The first part of this paper develops a theoretical framework to analyze household decisions about voluntary participation in green-electricity programs. We consider different participation mechanisms and show how they relate to existing theory on either pure or impure public goods. The models are used to examine the implications of participation mechanisms for the level of public-good provision. The second part of the paper provides an empirical investigation of actual participation decisions in two green-electricity programs—one based on a pure public good and the other based on an impure public good. The data come from original household surveys of participants and nonparticipants in both programs, along with utility data on household electricity consumption. The econometric results are interpreted in the context of the theoretical models and are compared to other studies of privately provided public goods.
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Energy-efficiency labels and standards for appliances, equipment and lighting are being implemented in many countries around the world as a cornerstone of energy policy portfolios. They have a potential for very large energy savings and are very cost effective. Once appliance labeling and standards programs have been implemented, it is necessary to evaluate their effectiveness. In this paper, we describe the types of activities that need to occur in the evaluation of appliance labeling and standards programs.
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Most estimates of the free rider fraction are based on ex-post surveys of program participants. Program participants who indicate that they would have made the supported changes without the program are labeled as "free riders." This paper provides an estimate of the free rider fraction based on consumer actions. A set of energy-use clusters acts as a base against which the likely behavior of consumers in the absence of an efficiency program can be assessed. The clusters can also be used target spending at customers who are least likely to invest in efficiency on their own. The Actions-Based estimate does not suffer from the biases implicit in the standard ex-post survey estimates.
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Understanding the determinants of home-efficiency improvements is significant to a range of energy policy issues, including the reduction of fossil fuel use and environmental protection.This paper analyzes retrofit choices by assembling a unique data set merging a nationwide household survey from Germany with regional data on wages and construction costs. To explore the influence of both heterogeneous preferences and correlation among the utility of alternatives, conditional-, random parameters-, and error components logit models are estimated that parameterize the influence of costs, energy savings,and household-level socioeconomic attributes on the likelihood of undertaking one of 16 renovation options.We use the model coefficients to derive household-specific marginal willingness-to-pay estimates, and with these assess the extent to which free-ridership may undermine the effectiveness of recently implemented programs that subsidize the costs of retrofits.
Article
While voluntary energy conservation programs have been extensively promoted by electric utilities and public utility commissions, their effectiveness has been insufficiently critiqued. This paper contributes to the growing evaluation of such programs by measuring the net energy savings directly attributable to an actual set of programs. The analysis explicitly "corrects" for the "self-selection bias" that can arise in program evaluation. The correction is found to be important; traditional evaluation methods are subject to considerable bias. Correcting for this bias, the amount of program-induced energy savings is found to be considerably less than traditionally believed. Copyright 1988 by MIT Press.
Article
Most estimates of the free rider fraction are based on ex-post surveys of program participants. Program participants who indicate that they would have made the supported changes without the program are labeled as "free riders." This paper provides an estimate of the free rider fraction based on consumer actions. A set of energy-use clusters acts as a base against which the likely behavior of consumers in the absence of an efficiency program can be assessed. The clusters can also be used target spending at customers who are least likely to invest in efficiency on their own. The Actions-Based estimate does not suffer from the biases implicit in the standard ex-post survey estimates.
US Energy Subsidies: Effects on Energy markets and Carbon Emission
  • Maura Allaire
  • Stephen Brown
Allaire, Maura and Stephen Brown (2012), "US Energy Subsidies: Effects on Energy markets and Carbon Emission," prepared for the Pew Charitable Trusts, http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Fiscal_and_Budget_ Policy/EnergySubsidiesFINAL.pdf
Bridging the Energy Efficiency Gap Resources for the Future discussion paper 13-02
  • Kenneth Gillingham
  • Karen Palmer
Gillingham, Kenneth and Karen Palmer (2013), " Bridging the Energy Efficiency Gap, " Resources for the Future discussion paper 13-02, Washington, DC, January.
Le detrazioni fiscali del 55% per la riqualificazione energetica del patrimonio edilizio esistente nel
ENEA (2008), Le detrazioni fiscali del 55% per la riqualificazione energetica del patrimonio edilizio esistente nel 2007, Rome, Italy. http://efficienzaenergetica.acs.enea.it/doc/rapporto_2007.pdf
Essays in Energy Economics and Policy. An Empirical Analysis of the Determinants of Energy Efficiency Investment Decisions
  • Celine Ramseier
Ramseier, Celine (2013), "Essays in Energy Economics and Policy. An Empirical Analysis of the Determinants of Energy Efficiency Investment Decisions," PhD dissertation, Centre for Energy Policy and Economics, Swiss Federal Institute of Technology, Zurich, Switzerland.
Free Riders and the High Cost of Energyefficiency Subsidies
  • Judson Boomhower
  • Lucas W Davis
Boomhower, Judson and Lucas W. Davis (2013), "Free Riders and the High Cost of Energyefficiency Subsidies," draft manuscript, University of California, Berkeley, March.
Unlocking Energy Efficiency in the U.S. Economy, McKinsey Global Energy and Materials, available at http://www.mckinsey.com/en
  • Choi Granade
Choi Granade, H. et al. (2009), Unlocking Energy Efficiency in the U.S. Economy, McKinsey Global Energy and Materials, available at http://www.mckinsey.com/en/Client_Service/Electric_Power_and_Natural_Gas/Latest_th inking/Unlocking_energy_efficiency_in_the_US_economy.aspx (last accessed 17 August 2011).
Unlocking Energy Efficiency in the U
  • H Choi Granade
Choi Granade, H. et al. (2009), Unlocking Energy Efficiency in the U.S. Economy, McKinsey Global Energy and Materials, available at http://www.mckinsey.com/en/Client_Service/Electric_Power_and_Natural_Gas/Latest_th inking/Unlocking_energy_efficiency_in_the_US_economy.aspx (last accessed 17 August 2011).
Le detrazioni fiscali del 55% per la riqualificazione energetica
ENEA (2009), Le detrazioni fiscali del 55% per la riqualificazione energetica del patrimonio edilizio esistente nel 2009, Rome, Italy. http://efficienzaenergetica.acs.enea.it/doc/rapporto_2009.pdf