The Determinants of Energy Efficiency Investments in the U.S.

The paper analyses 60,463 electricity-related energy efficiency recommendations for U.S. manufacturing SMEs, finding that payback time and investment costs are the primary drivers of implementation. It identifies an 'energy efficiency paradox' where firms are more sensitive to upfront costs than long-term savings, and notes that implementation rates are higher in states with higher greenhouse gas emissions and lower industrial GDP.

• The overall implementation rate for energy efficiency recommendations is 53.17%, indicating that nearly half of the proposed investments are not adopted despite their potential for energy savings.
• Payback time is a critical determinant of investment decisions; shorter payback periods significantly increase the likelihood of a firm implementing an energy efficiency measure.
• Investment costs have a more substantial influence on the decision to invest than the potential medium and long-term benefits, a phenomenon described as the 'energy efficiency paradox'.
• Geographic and economic factors influence adoption rates: firms in U.S. states with higher greenhouse gas emissions are more likely to invest in energy efficiency, while those in states with higher manufacturing GDP are less likely to do so.
• There is a 'depletion effect' over time, where the most cost-effective and easiest energy efficiency opportunities are implemented first, leaving more complex and less attractive measures for later years.
• Even under the most favourable conditions of low investment cost and high annual savings, the probability of a recommendation being accepted does not exceed 70%.

APA

Abadie, L. M., Ortiz, R. A., & Galarraga, I. (2010). The Determinants of Energy Efficiency Investments in the U.S. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20101108010159601346855.pdf

Chicago

Abadie, Luis Mari, Ramon Arigoni Ortiz, and Ibon Galarraga. The Determinants of Energy Efficiency Investments in the U.S. Basque Centre for Climate Change, 2010. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20101108010159601346855.pdf.

Wikipedia

{{cite report |last1=Abadie |first1=Luis Mari |last2=Ortiz |first2=Ramon Arigoni |last3=Galarraga |first3=Ibon |title=The Determinants of Energy Efficiency Investments in the U.S. |publisher=Basque Centre for Climate Change |date=October 2010 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20101108010159601346855.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{abadie2010determinants, author = {Abadie, Luis Mari and Ortiz, Ramon Arigoni and Galarraga, Ibon}, title = {{The Determinants of Energy Efficiency Investments in the U.S.}}, institution = {Basque Centre for Climate Change}, year = {2010}, month = oct, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20101108010159601346855.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }