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Investment in Energy Efficiency, Adoption of Renewable Energy and Household Behaviour: Evidence from OECD countries

Author

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  • Prudence Dato

    (IREGE-Université Savoie Mont Blanc)

Abstract
There are possible synergies between the decision to invest in energy efficiency measures and to adopt renewable energy, in the sense that the former reduces energy demand so that the latter can further cut future greenhouse gas (GHG) emissions, and which has great potential in the residential sector. Much work has been done in the residential sector on demand for clean energy and on investment in energy efficiency, but to our knowledge there is no specific study that investigates the interaction between the two. This paper fills a gap in the literature, and first shows theoretically that there are interactions between the two decisions depending on the threshold of the cross effect related to the environmental motivation of the consumer. Second, the paper empirically shows that the two decisions are positively interrelated and cannot be estimated independently. As a result, univariate methods that estimate the decision to adopt renewable energy and investment in energy efficiency separately may produce biased results, because there may be unobserved characteristics that determine both decisions. Third, the paper investigates household characteristics that significantly affect the interaction between the two decisions using a generalised ordered logit model. Specifically, the paper provides evidence of factors that affect the joint probability of adopting renewable energy and investing in energy efficiency, and the probability of doing nothing. This contribution can serve to define incentive policies to advance the energy transition.

Suggested Citation

  • Prudence Dato, 2017. "Investment in Energy Efficiency, Adoption of Renewable Energy and Household Behaviour: Evidence from OECD countries," Working Papers 2017.05, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2017.05
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    References listed on IDEAS

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    3. Best, Rohan & Burke, Paul J. & Nishitateno, Shuhei, 2019. "Understanding the determinants of rooftop solar installation: evidence from household surveys in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(4), July.
    4. Le Thanh Tiep & Ngo Quang Huan & Tran Thi Thuy Hong, 2021. "Energy Efficiency: Determinants and Roles on Sustainable Development in Emerging Country," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 7-22.
    5. Enrica De Cian & Filippo Pavanello & Teresa Randazzo & Malcolm Mistry & Marinella Davide, 2019. "Does climate influence households' thermal comfort decisions?," Working Papers 2019:02, Department of Economics, University of Venice "Ca' Foscari".
    6. Domenig, Christoph & Scheller, Fabian & Gunkel, Phillipp Andreas & Hermann, Julian & Bergaentzlé, Claire-Marie & Lopes, Marta A.R. & Barnes, Jake & McKenna, Russell, 2024. "Overcoming the landlord–tenant dilemma: A techno-economic assessment of collective self-consumption for European multi-family buildings," Energy Policy, Elsevier, vol. 189(C).
    7. Outcault, Sarah & Sanguinetti, Angela & Nelson, Leslie, 2022. "Technology characteristics that influence adoption of residential distributed energy resources: Adapting Rogers’ framework," Energy Policy, Elsevier, vol. 168(C).
    8. Henningsen, Geraldine & Wiese, Catharina, 2019. "Do Household Characteristics Really Matter? A Meta-Analysis on the Determinants of Households’ Energy-Efficiency Investments," MPRA Paper 101701, University Library of Munich, Germany.
    9. Dong Wang & Amin Mugera & Ben White, 2019. "Directed Technical Change, Capital Intensity Increase and Energy Transition: Evidence from China," The Energy Journal, , vol. 40(1_suppl), pages 277-296, June.
    10. Xu, Deyi & Sheraz, Muhammad & Hassan, Arshad & Sinha, Avik & Ullah, Saif, 2022. "Financial development, renewable energy and CO2 emission in G7 countries: New evidence from non-linear and asymmetric analysis," Energy Economics, Elsevier, vol. 109(C).
    11. Jacek Batóg & Przemysław Pluskota, 2023. "Renewable Energy and Energy Efficiency: European Regional Policy and the Role of Financial Instruments," Energies, MDPI, vol. 16(24), pages 1-19, December.
    12. Juan Pablo Castaño Serna & Ainhoa Rubio-Clemente & Edwin Chica, 2024. "Design of a Wave Generation System Using an Oscillating Paddle-Type Device Anchored to Fixed Structures on the Coast," Energies, MDPI, vol. 17(13), pages 1-24, June.
    13. Elfarra, Barakat & Yasmeen, Rizwana & Shah, Wasi Ul Hassan, 2024. "The impact of energy security, energy mix, technological advancement, trade openness, and political stability on energy efficiency: Evidence from Arab countries," Energy, Elsevier, vol. 295(C).
    14. Bilal Khalid & Mariusz Urbański & Monika Kowalska-Sudyka & Elżbieta Wysłocka & Barbara Piontek, 2021. "Evaluating Consumers’ Adoption of Renewable Energy," Energies, MDPI, vol. 14(21), pages 1-15, November.
    15. Frantál, Bohumil & Dvořák, Petr, 2022. "Reducing energy poverty in deprived regions or supporting new developments in metropolitan suburbs? Regional differences in the use of subsidies for home energy efficiency renovations," Energy Policy, Elsevier, vol. 171(C).
    16. Joanna Rosak-Szyrocka & Justyna Żywiołek, 2022. "Qualitative Analysis of Household Energy Awareness in Poland," Energies, MDPI, vol. 15(6), pages 1-16, March.
    17. 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.

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    More about this item

    Keywords

    Energy efficiency; Renewable energy; Bivariate probit; Generalised ordered logit;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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