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Investment in energy-efficient houses: An estimate of discount rates implicit in new home construction practices

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  • Corum, Kenton R.
  • O'Neal, Dennis L.

Abstract

Data on residential construction practices in 1975–1976, together with climatic data, construction costs and fuel costs, are used to calculate discount rates implicit in homeowner's decisions to invest in energy-saving measures in new homes. This process is repeated for ten cities for three heating fuels in each city. The resulting discount rates are significantly higher than market rates of interest, suggesting market imperfections which reduce the level of investment in energy efficiency below the socially optimal level.

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  • Corum, Kenton R. & O'Neal, Dennis L., 1982. "Investment in energy-efficient houses: An estimate of discount rates implicit in new home construction practices," Energy, Elsevier, vol. 7(4), pages 389-400.
    • Handle: RePEc:eee:energy:v:7:y:1982:i:4:p:389-400
    DOI: 10.1016/0360-5442(82)90098-6
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    Cited by:

    1. Morrissey, J. & Meyrick, B. & Sivaraman, D. & Horne, R.E. & Berry, M., 2013. "Cost-benefit assessment of energy efficiency investments: Accounting for future resources, savings and risks in the Australian residential sector," Energy Policy, Elsevier, vol. 54(C), pages 148-159.
    2. VINAYAK Bhattacharjee & CHARLES J. Cicchetti & WILLIAM F. Rankin, 1993. "Energy Utilities, Conservation, And Economic Efficiency," Contemporary Economic Policy, Western Economic Association International, vol. 11(1), pages 69-75, January.
    3. Pine, Gerald D. & Olszewski, Mitchell, 1985. "The potential economic benefits of energy conservation research," Energy, Elsevier, vol. 10(7), pages 843-849.
    4. Schleich, Joachim & Gassmann, Xavier & Faure, Corinne & Meissner, Thomas, 2016. "Making the implicit explicit: A look inside the implicit discount rate," Energy Policy, Elsevier, vol. 97(C), pages 321-331.
    5. Andrade, Cássio Tersandro de Castro & Pontes, Ricardo Silva Thé, 2017. "Economic analysis of Brazilian policies for energy efficient electric motors," Energy Policy, Elsevier, vol. 106(C), pages 315-325.
    6. Andersen, Kristoffer Steen & Wiese, Catharina & Petrovic, Stefan & McKenna, Russell, 2020. "Exploring the role of households’ hurdle rates and demand elasticities in meeting Danish energy-savings target," Energy Policy, Elsevier, vol. 146(C).
    7. Shigeru Matsumoto, 2018. "Consumer valuation of energy-saving features of residential air conditioners with hedonic and choice models," Empirical Economics, Springer, vol. 55(4), pages 1779-1806, December.
    8. MATSUMOTO Shigeru & OMATA Yukiko, 2015. "Consumer Valuations of Energy Efficiency Investments: The case of Vietnam's air conditioner market," Discussion papers 15063, Research Institute of Economy, Trade and Industry (RIETI).

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