Maybe tomorrow: How burdens and biases impede energy-efficiency investments

Abstract

Investments in energy-efficient technologies can save money over time and reduce environmental impacts. Accordingly, governments worldwide provide grants to encourage household investments in clean, energy-efficient technologies at scale. Although many households state intentions to avail of these grants and to invest in energy-efficient technologies, uptake of the grants is low. This perspective suggests that administrative burden is one major reason for the low levels of economically beneficial investments. Using a theoretical model, and a simulation with building energy data, we illustrate that administrative burden can strongly reduce investments in energy-efficient technologies if present-biased preferences lead people to procrastinate over completing the administrative tasks. We discuss the implications of these findings for the design of governments grants and recommend the reallocation of resources from grants to measures that explicitly reduce administrative burden to increase the effectiveness of these government policies.