Energy efficiency and heating technology investments: Manipulating financial information in a discrete choice experiment

https://doi.org/10.1016/j.reseneeco.2021.101231Get rights and content
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Highlights

  • Homeowners value energy efficiency beyond expected heating cost savings.

  • They have strongly heterogeneous preferences for different heating technologies.

  • Fossil fuel users are not willing to pay required premiums for low-carbon options.

  • Targeted subsidies combined with information can help phasing out fossil fuels.

Abstract

We elicit homeowners’ willingness to pay (WTP) for energy efficiency and low-carbon technologies in the context of heating appliance replacement. We employ a within-between subject design that involves manipulating information in a two-stage discrete choice experiment (DCE) and use WTP space estimation to identify the role of financial information in reducing fossil fuel use. We find that homeowners’ average valuation of energy efficiency exceeds associated heating cost savings, suggesting that they also consider non-monetary benefits when evaluating this type of investment, whereas information about private and pro-social benefits of investments only has a limited impact on WTP. Evidence also suggests that homeowners have a strong preference for the existing technology. Consequently, fossil fuel users’ WTP for switching to low-carbon technologies does not cover respective investment cost differentials, and we derive evidence on how combined subsidies and information can induce these users to opt out of fossil technologies.

JEL classification

D1
D8
H23
Q4
Q5
R31

Keywords

Energy efficiency
Low-carbon technologies
Informational interventions
Product familiarity
Discrete choice experiments
Mixed logit models
WTP space estimation

Cited by (0)

We would like to thank the editor, three anonymous referees, Dorothée Charlier, Meredith Fowlie, Paul Burger, and Philippe Thalmann for useful comments and discussions. We also thank participants of the 2020 EAERE conference, the 2017 SHEDS workshop, and 2017 SAEE meeting for questions and comments. This research is part of the activities of SCCER CREST (Swiss Competence Center for Energy Research), which is financially supported by Innosuisse. Any remaining errors are ours.