Working Paper: NBER ID: w20969
Authors: Richard G. Newell; Juha V. Siikamaki
Abstract: We examine the role of individual discount rates in energy efficiency decisions using evidence from an extensive survey of U.S. homeowners to elicit preferences for energy efficiency and cash flows over time. We find considerable heterogeneity in individual discount rates. We also find that individual time preferences systematically influence willingness to invest in energy efficiency, as measured through product choices, required payback periods, and energy efficiency tax credit claims. Individual discount rate heterogeneity is in turn significantly related to characteristics of the individual and their household, including their financial situation. Individuals with less education, larger households, low income, and low credit scores had systematically higher discount rates, as did black, non-Hispanic respondents. Our findings highlight the importance of individual discount rates to understanding energy efficiency investments, the energy-efficiency gap, and policy evaluation.
Keywords: No keywords provided
JEL Codes: D9; H43; Q41; Q48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Individual discount rates (H43) | Willingness to pay (WTP) for energy efficiency (Q41) |
| Higher individual discount rates (D15) | Lower WTP for energy-efficient products (Q41) |
| Education level (I21) | Individual discount rates (H43) |
| Household size (D10) | Individual discount rates (H43) |
| Income (D31) | Individual discount rates (H43) |
| Credit scores (G51) | Individual discount rates (H43) |
| Lower individual discount rates (E43) | Higher likelihood of claiming energy efficiency tax credits (H32) |