IDEAS home Printed from https://ideas.repec.org/p/ris/fcnwpa/2021_008.html
   My bibliography  Save this paper

Preferences for Energy Retrofit Investments Among Low-income Renters

Author

Listed:
  • Schmitz, Hendrik

    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Madlener, Reinhard

    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

Abstract

Energy poverty research has received increased attention in the energy economics literature in recent years. We analyze the preferences of low-income renters in the city of Graz, Austria, for different energy retrofitting options. Using data collected from a Discrete Choice Experiment, we find that households are willing to forego significant future energy cost savings in order to avoid investment costs in the present. This can be caused by several factors, including liquidity constraints, a short investment horizon, and myopia among the participants. Furthermore, participants show a significant Willingness to Pay for the reduction of CO2 emissions. We also present simulations for different forms of subsidies for retrofitting and their effects on market shares and emissions. The results have important policy implications regarding the optimal subsidy policies, in particular for low-income households. Specifically, policy makers should focus on reducing the investment burden for liquidity-constrained renters and inducing a longer investment horizon.

Suggested Citation

  • Schmitz, Hendrik & Madlener, Reinhard, 2021. "Preferences for Energy Retrofit Investments Among Low-income Renters," FCN Working Papers 8/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    • Handle: RePEc:ris:fcnwpa:2021_008
    as

    Download full text from publisher

    File URL: https://www.fcn.eonerc.rwth-aachen.de/global/show_document.asp?id=aaaaaaaabnknipt
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Carroll, James & Aravena, Claudia & Denny, Eleanor, 2016. "Low energy efficiency in rental properties: Asymmetric information or low willingness-to-pay?," Energy Policy, Elsevier, vol. 96(C), pages 617-629.
    2. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    3. Hensher, David A., 2010. "Hypothetical bias, choice experiments and willingness to pay," Transportation Research Part B: Methodological, Elsevier, vol. 44(6), pages 735-752, July.
    4. Klie, Leo & Madlener, Reinhard, 2022. "Optimal configuration and diversification of wind turbines: A hybrid approach to improve the penetration of wind power," Energy Economics, Elsevier, vol. 105(C).
    5. Richard G. Newell & Juha Siikamäki, 2015. "Individual Time Preferences and Energy Efficiency," American Economic Review, American Economic Association, vol. 105(5), pages 196-200, May.
    6. DeShazo, J. R. & Fermo, German, 2002. "Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 123-143, July.
    7. Ástmarsson, Björn & Jensen, Per Anker & Maslesa, Esmir, 2013. "Sustainable renovation of residential buildings and the landlord/tenant dilemma," Energy Policy, Elsevier, vol. 63(C), pages 355-362.
    8. Groh, Elke D. & Ziegler, Andreas, 2018. "On self-interested preferences for burden sharing rules: An econometric analysis for the costs of energy policy measures," Energy Economics, Elsevier, vol. 74(C), pages 417-426.
    9. Achtnicht, Martin, 2011. "Do environmental benefits matter? Evidence from a choice experiment among house owners in Germany," Ecological Economics, Elsevier, vol. 70(11), pages 2191-2200, September.
    10. Madlener, Reinhard & Sheykhha, Siamak & Briglauer, Wolfgang, 2022. "The electricity- and CO2-saving potentials offered by regulation of European video-streaming services," Energy Policy, Elsevier, vol. 161(C).
    11. Karami, Mahdi & Madlener, Reinhard, 2022. "Business models for peer-to-peer energy trading in Germany based on households’ beliefs and preferences," Applied Energy, Elsevier, vol. 306(PB).
    12. Fisher, Robert J, 1993. "Social Desirability Bias and the Validity of Indirect Questioning," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(2), pages 303-315, September.
    13. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
    14. Liu, Xueying & Madlener, Reinhard, 2021. "Economic Benefits of Direct Current Technology for Private Households and Peer-to-Peer Trading in Germany," FCN Working Papers 7/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    15. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, January.
    16. Kwak, So-Yoon & Yoo, Seung-Hoon & Kwak, Seung-Jun, 2010. "Valuing energy-saving measures in residential buildings: A choice experiment study," Energy Policy, Elsevier, vol. 38(1), pages 673-677, January.
    17. Levinson, Arik & Niemann, Scott, 2004. "Energy use by apartment tenants when landlords pay for utilities," Resource and Energy Economics, Elsevier, vol. 26(1), pages 51-75, March.
    18. Stefan Drews & Jeroen C.J.M. van den Bergh, 2016. "What explains public support for climate policies? A review of empirical and experimental studies," Climate Policy, Taylor & Francis Journals, vol. 16(7), pages 855-876, October.
    19. Melvin, Jesse, 2018. "The split incentives energy efficiency problem: Evidence of underinvestment by landlords," Energy Policy, Elsevier, vol. 115(C), pages 342-352.
    20. Trotta, Gianluca, 2018. "The determinants of energy efficient retrofit investments in the English residential sector," Energy Policy, Elsevier, vol. 120(C), pages 175-182.
    21. Atasoy, Ayse Tugba & Madlener, Reinhard, 2020. "Default vs. Active Choices: An Experiment on Electricity Tariff Switching," FCN Working Papers 7/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    22. Wolff, Stefanie & Madlener, Reinhard, 2020. "Willing to Pay? Spatial Heterogeneity of e-Vehicle Charging Preferences in Germany," FCN Working Papers 9/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    23. Kenneth Gillingham, Matthew Harding, and David Rapson, 2012. "Split Incentives in Residential Energy Consumption," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    24. Jeff Brazell & Christopher Diener & Ekaterina Karniouchina & William Moore & Válerie Séverin & Pierre-Francois Uldry, 2006. "The no-choice option and dual response choice designs," Marketing Letters, Springer, vol. 17(4), pages 255-268, December.
    25. Rasool, Muhammad & Khalilpour, Kaveh & Rafiee, Ahmad & Karimi, Iftekhar & Madlener, Reinhard, 2021. "Evaluation of Alternative Power-to-Chemical Pathways for Renewable Energy Exports," FCN Working Papers 4/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Apr 2023.
    26. Fabianek, Paul & Madlener, Reinhard, 2021. "Techno-Economic Analysis and Optimal Sizing of Hybrid PV-Wind Systems for Hydrogen Production by PEM Electrolysis in California and Germany," FCN Working Papers 2/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    27. Wimmers, Alexander & Madlener, Reinhard, 2020. "The European Market for Guarantees of Origin for Green Electricity: A Scenario-Based Evaluation of Trading under Uncertainty," FCN Working Papers 17/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised 01 Jun 2023.
    28. Alberini, Anna & Bigano, Andrea & Ščasný, Milan & Zvěřinová, Iva, 2018. "Preferences for Energy Efficiency vs. Renewables: What Is the Willingness to Pay to Reduce CO2 Emissions?," Ecological Economics, Elsevier, vol. 144(C), pages 171-185.
    29. Fabianek, Paul & Glensk, Barbara & Madlener, Reinhard, 2021. "A Sequential Real Options Analysis for Renewable Power-to-Hydrogen Plants in Germany and California," FCN Working Papers 1/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    30. Hellwig, Robert & Atasoy, Ayse Tugba & Madlener, Reinhard, 2020. "The Impact of Social Preferences and Information on the Willingness to Pay for Fairtrade Products," FCN Working Papers 6/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    31. Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy-efficiency gap What does it mean?," Energy Policy, Elsevier, vol. 22(10), pages 804-810, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Schöpper, Yannick & Digmayer, Claas & Bartusch, Raphaela & Ebrahim, Ola & Hermens, Sarah & Nejabat, Razieh & Steireif, Niklas & Wendorff, Jannik & Jakobs, Eva-Maria & Lohrberg, Frank & Madlener, Reinh, 2023. "Developing a Niche Readiness Level Model to Assess Socio-Economic Maturity: The Case of DC Technologies in the Transition to Flexible Electrical Networks," FCN Working Papers 11/2023, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Liu, Xueying & Madlener, Reinhard, 2021. "Economic Benefits of Direct Current Technology for Private Households and Peer-to-Peer Trading in Germany," FCN Working Papers 7/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    2. Fischbacher, Urs & Schudy, Simeon & Teyssier, Sabrina, 2021. "Heterogeneous preferences and investments in energy saving measures," Resource and Energy Economics, Elsevier, vol. 63(C).
    3. Petrov, Ivan & Ryan, Lisa, 2021. "The landlord-tenant problem and energy efficiency in the residential rental market," Energy Policy, Elsevier, vol. 157(C).
    4. Fabianek, Paul & Glensk, Barbara & Madlener, Reinhard, 2021. "A Sequential Real Options Analysis for Renewable Power-to-Hydrogen Plants in Germany and California," FCN Working Papers 1/2021, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    5. Singhal, Puja & Sommer, Stephan & Kaestner, Kathrin & Pahle, Michael, 2023. "Split-incentives in energy efficiency investments? Evidence from rental housing," Ruhr Economic Papers 992, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Madlener, Reinhard & Sheykhha, Siamak & Briglauer, Wolfgang, 2022. "The electricity- and CO2-saving potentials offered by regulation of European video-streaming services," Energy Policy, Elsevier, vol. 161(C).
    7. Giraudet, Louis-Gaëtan, 2020. "Energy efficiency as a credence good: A review of informational barriers to energy savings in the building sector," Energy Economics, Elsevier, vol. 87(C).
    8. Schöpper, Yannick & Digmayer, Claas & Bartusch, Raphaela & Ebrahim, Ola & Hermens, Sarah & Nejabat, Razieh & Steireif, Niklas & Wendorff, Jannik & Jakobs, Eva-Maria & Lohrberg, Frank & Madlener, Reinh, 2023. "Developing a Niche Readiness Level Model to Assess Socio-Economic Maturity: The Case of DC Technologies in the Transition to Flexible Electrical Networks," FCN Working Papers 11/2023, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    9. Ramos, A. & Gago, A. & Labandeira, X. & Linares, P., 2015. "The role of information for energy efficiency in the residential sector," Energy Economics, Elsevier, vol. 52(S1), pages 17-29.
    10. Walter, Antonia & Held, Maximilian & Pareschi, Giacomo & Pengg, Hermann & Madlener, Reinhard, 2020. "Decarbonizing the European Automobile Fleet: Impacts of 1.5 °C-compliant Climate Policies in Germany and Norway," FCN Working Papers 18/2020, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    11. Louis-Gaëtan Giraudet, 2018. "Energy efficiency as a credence good: A review of informational barriers to building energy savings," Working Papers 2018.07, FAERE - French Association of Environmental and Resource Economists.
    12. Fanghella, Valeria & Guetlein, Marie-Charlotte & Schleich, Joachim & Sebi, Carine, 2023. "Preferences on financing mechanisms for thermal retrofit measures in multi-owner buildings: A discrete choice experiment with landlords and owner-occupiers in France," Resource and Energy Economics, Elsevier, vol. 74(C).
    13. Rockstuhl, Sebastian & Wenninger, Simon & Wiethe, Christian & Ahlrichs, Jakob, 2022. "The influence of risk perception on energy efficiency investments: Evidence from a German survey," Energy Policy, Elsevier, vol. 167(C).
    14. Ju-Hee Kim & Younggew Kim & Seung-Hoon Yoo, 2021. "Using a choice experiment to explore the public willingness to pay for the impacts of improving energy efficiency of an apartment," Quality & Quantity: International Journal of Methodology, Springer, vol. 55(5), pages 1775-1793, October.
    15. Christian A. Oberst & Reinhard Madlener, 2015. "Prosumer Preferences Regarding the Adoption of Micro†Generation Technologies: Empirical Evidence for German Homeowners," Working Papers 2015.07, International Network for Economic Research - INFER.
    16. Huh, Sung-Yoon & Jo, Manseok & Shin, Jungwoo & Yoo, Seung-Hoon, 2019. "Impact of rebate program for energy-efficient household appliances on consumer purchasing decisions: The case of electric rice cookers in South Korea," Energy Policy, Elsevier, vol. 129(C), pages 1394-1403.
    17. Laura Abrardi, 2019. "Behavioral barriers and the energy efficiency gap: a survey of the literature," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 25-43, March.
    18. Fanghella, Valeria & Faure, Corinne & Guetlein, Marie-Charlotte & Schleich, Joachim, 2022. "Discriminatory subsidies for energy-efficient technologies and the role of envy," Resource and Energy Economics, Elsevier, vol. 68(C).
    19. Dalia Streimikiene & Tomas Balezentis & Irena Alebaite, 2020. "Climate Change Mitigation in Households between Market Failures and Psychological Barriers," Energies, MDPI, vol. 13(11), pages 1-21, June.
    20. Knuutila, Mirika & Vuorio, Anna, 2023. "Temporal-orientation in organizational decision-making: Factors affecting willingness to execute energy efficiency investments in business premises," Energy, Elsevier, vol. 271(C).

    More about this item

    Keywords

    Energy Poverty; Discrete Choice Modeling; Residential Energy Consumption; Landlord-Tenant Problem;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:fcnwpa:2021_008. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hendrik Schmitz (email available below). General contact details of provider: https://edirc.repec.org/data/fceonde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.