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Determinants of energy efficiency investments in the US

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  • Abadie, Luis M.
  • Ortiz, Ramon A.
  • Galarraga, I.

Abstract

This paper analyses decisions on energy efficiency (EE) investments by small and medium manufacturing enterprises in the US, which have received assessment from the Department of Energy (DoE). The results confirm the importance of payback time and investment costs as the main determining factors in deciding whether to invest in energy efficiency. Such investment recommendations are frequently not implemented even though they apparently entail major advantages and give rise to considerable energy savings. The data show results which are compatible with a series of elementary valuation processes (limited to availability of information), far removed from other, more academically ambitious methods such as Net Present Value (NPV) and the Real Options (RO) method. The paper analyses the impact of the primary resource streams (Electricity, Natural Gas, Other Energy, Waste and Others), physical situation of firms in line with their geographical locations in different US states, and changes over time from 1984 to 2009. EE investment decisions are analysed here using Probit models whose parameters are calibrated on the basis of the information held in the Industrial Assessment Centres (IAC) database. The results suggest various ideas to improve policies for promoting investment in EE, specially the IAC programme.

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  • Abadie, Luis M. & Ortiz, Ramon A. & Galarraga, I., 2012. "Determinants of energy efficiency investments in the US," Energy Policy, Elsevier, vol. 45(C), pages 551-566.
    • Handle: RePEc:eee:enepol:v:45:y:2012:i:c:p:551-566
    DOI: 10.1016/j.enpol.2012.03.002
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    2. Stephen K. Dimnwobi & Ebele S. Nwokoye & Clement I. Igbanugo & Chukwunonso Ekesiobi & Simplice A. Asongu, 2022. "Assessment of Energy Efficiency Investment in Onitsha Business Cluster, Nigeria," Working Papers of the African Governance and Development Institute. 22/095, African Governance and Development Institute..
    3. Jose García-Quevedo & Xavier Massa-Camps, 2019. "Why firms invest (or not) in energy efficiency? A review of the econometric evidence," Working Papers 2019/07, Institut d'Economia de Barcelona (IEB).
    4. Bosco, Maria Giovanna & Valeriani, Elisa, 2023. "Energy retrofitting of firms after a natural disaster: A ‘build back better’ strategy," Energy Policy, Elsevier, vol. 179(C).
    5. Wang, Xi & Cai, Hua & Florig, H. Keith, 2016. "Energy-saving implications from supply chain improvement: An exploratory study on China's consumer goods retail system," Energy Policy, Elsevier, vol. 95(C), pages 411-420.
    6. Galarraga, Ibon & Abadie, Luis M. & Kallbekken, Steffen, 2016. "Designing incentive schemes for promoting energy-efficient appliances: A new methodology and a case study for Spain," Energy Policy, Elsevier, vol. 90(C), pages 24-36.
    7. Perroni, Marcos G. & Gouvea da Costa, Sergio E. & Pinheiro de Lima, Edson & Vieira da Silva, Wesley, 2017. "The relationship between enterprise efficiency in resource use and energy efficiency practices adoption," International Journal of Production Economics, Elsevier, vol. 190(C), pages 108-119.
    8. Otrachshenko, Vladimir & Hartwell, Christopher A. & Popova, Olga, 2023. "Energy efficiency, market competition, and quality certification: Lessons from Central Asia," Energy Policy, Elsevier, vol. 177(C).
    9. Kounetas, Konstantinos & Stergiou, Eirini, 2019. "Technology heterogeneity in European industries' energy efficiency performance. The role of climate, greenhouse gases, path dependence and energy mix," MPRA Paper 92314, University Library of Munich, Germany.
    10. Ludovico Alcorta & Morgan Bazilian & Giuseppe De Simone & Ascha Pedersen, 2012. "Return on Investment from Industrial Energy Efficiency: Evidence from Developing Countries," Working Papers 2012.35, Fondazione Eni Enrico Mattei.
    11. Safarzadeh, Soroush & Rasti-Barzoki, Morteza & Hejazi, Seyed Reza, 2020. "A review of optimal energy policy instruments on industrial energy efficiency programs, rebound effects, and government policies," Energy Policy, Elsevier, vol. 139(C).
    12. Ibon Galarraga & Luis M. Abadie, 2014. "The use of “Bonus-Malus†schemes for promoting energy-efficient household appliances: a case study for Spain," Working Papers 2014-06, BC3.
    13. Michele Preziosi & Alessandro Federici & Roberto Merli, 2022. "Evaluating the Impact of Public Information and Training Campaigns to Improve Energy Efficiency: Findings from the Italian Industry," Energies, MDPI, vol. 15(5), pages 1-14, March.
    14. Blass, Vered & Corbett, Charles J. & Delmas, Magali A. & Muthulingam, Suresh, 2014. "Top management and the adoption of energy efficiency practices: Evidence from small and medium-sized manufacturing firms in the US," Energy, Elsevier, vol. 65(C), pages 560-571.
    15. Nguyen, Jason, 2024. "Beyond policy impacts: Internal strategic capabilities as determinants of industrial energy efficiency implementation," Energy Policy, Elsevier, vol. 184(C).
    16. Solnørdal, Mette Talseth & Thyholdt, Sverre Braathen, 2019. "Absorptive capacity and energy efficiency in manufacturing firms – An empirical analysis in Norway," Energy Policy, Elsevier, vol. 132(C), pages 978-990.
    17. Prokop, Viktor & Gerstlberger, Wolfgang & Zapletal, David & Gyamfi, Solomon, 2023. "Do we need human capital heterogeneity for energy efficiency and innovativeness? Insights from European catching-up territories," Energy Policy, Elsevier, vol. 177(C).
    18. Deng, Qianli & Jiang, Xianglin & Zhang, Limao & Cui, Qingbin, 2015. "Making optimal investment decisions for energy service companies under uncertainty: A case study," Energy, Elsevier, vol. 88(C), pages 234-243.
    19. Adom, Philip Kofi & Adams, Samuel, 2018. "Energy savings in Nigeria. Is there a way of escape from energy inefficiency?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2421-2430.
    20. Ángeles Longarela-Ares & Anxo Calvo-Silvosa & José-Benito Pérez-López, 2020. "The Influence of Economic Barriers and Drivers on Energy Efficiency Investments in Maritime Shipping, from the Perspective of the Principal-Agent Problem," Sustainability, MDPI, vol. 12(19), pages 1-42, September.
    21. García-Quevedo, Jose & Jové-Llopis, Elisenda, 2021. "Environmental policies and energy efficiency investments. An industry-level analysis," Energy Policy, Elsevier, vol. 156(C).

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