NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measuring the Energy Savings from Home Improvement Investments: Evidence from Monthly Billing Data

Gilbert E. Metcalf, Kevin A. Hassett

NBER Working Paper No. 6074
Issued in June 1997
NBER Program(s):   PE   EEE

An important factor driving energy policy over the past two decades has been the Energy Paradox,' the perception that consumers apply unreasonably high hurdle rates to energy saving investments. We explore one possible explanation for this apparent puzzle: that realized returns fall short of the returns promised by engineers and product manufacturers. Using a unique data set, we find that the realized return to attic insulation is statistically significant, but the median estimate (12.3 percent) is close to a discount rate for this investment implied by a CAPM analysis. We conclude that the case for the Energy Paradox is weaker than has previously been believed.

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Document Object Identifier (DOI): 10.3386/w6074

Published: Review of Economics and Statistics, Vol. 81, no. 3 (1999): 516-528.

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