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Main Title: Making the implicit explicit: A look inside the implicit discount rate
Author(s): Schleich, Joachim
Gassmann, Xavier
Faure, Corinne
Meissner, Thomas
Type: Article
Language Code: en
Abstract: Implicit discount rates (IDRs) are employed in energy models to capture household investment decisions, yet the factors behind the IDR and their respective implications for policy-making usually remain blurred and fractional. The proposed comprehensive framework distinguishes three broad categories of factors underlying the IDR for household adoption of energy-efficient technologies (EETs): preferences (notably over time, risk, loss, debt, and the environment), predictable (ir)rational behavior (bounded rationality, rational inattention, behavioral biases), and external barriers to energy efficiency. Existing empirical findings suggest that the factors underlying the IDRs that differ across household characteristics and technologies should be accounted for in energy models. Furthermore, the framework allows for a fresh look at the interplay of IDRs and policies. We argue that a simple observation of high IDRs (or observing correlations between IDRs and socio-economic characteristics) does not provide guidance for policy-making since the underlying sources cannot be identified. Instead, we propose that some of the factors underlying the IDR - notably external barriers - can be changed (through directed policy interventions) whereas other factors - notably preferences and predictable (ir)rational behavior - are innate and can only be taken into account (through reactive policy interventions).
Issue Date: 30-Jul-2016
Date Available: 14-Nov-2019
DDC Class: 620 Ingenieurwissenschaften und zugeordnete Tätigkeiten
Subject(s): energy efficiency
energy modeling
implicit discount rate
energy policy
behavioral economics
Journal Title: Energy Policy
Publisher: Elsevier
Publisher Place: Amsterdam
Volume: 97
Publisher DOI: 10.1016/j.enpol.2016.07.044
Page Start: 321
Page End: 331
EISSN: 1873-6777
ISSN: 0301-4215
Appears in Collections:FG Makroökonomik » Publications

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