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Heavy-Duty Trucks and the Energy Efficiency Paradox

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Paper Number: 2014-02

Document Date: 01/23/2014

Authors: Heather Klemick Elizabeth Kopits Keith Sargent Ann Wolverton

Subject Areas: Air Pollution; Motor Fuels; Benefit-Cost Analysis

Keywords: energy efficiency paradox; technology investment decisions; heavy duty trucking

Abstract: Economic theory suggests that profit maximizing firms should have an incentive to incorporate technologies into their products that are cost-effective, absent consideration of externalities. Even in the presence of uncertainty and imperfect information – conditions that hold to some degree in every market – firms are expected to make decisions that are in the best interest of the company owners and/or shareholders. However, simple net present value calculations comparing upfront costs of fuel-saving technologies to future savings suggest this is not always the case. This puzzle has been observed in a variety of contexts and is commonly referred to as the “energy efficiency paradox.” A growing number of empirical studies in the peer-reviewed literature examine why households may under-invest in energy efficiency. To our knowledge, far fewer studies examine whether similar undervaluation occurs on the part of businesses. While a variety of hypotheses could explain this behavior, lack of empirical evidence on why businesses do not always invest in seemingly cost-effective energy saving technologies limits our ability to judge whether and when a given hypothesis is likely to be valid. In this paper, we explore capital investment decisions within the heavy duty trucking sector for fuel-saving technologies. Given the lack of readily available data sources to study this industry, we collect information via a combination of focus groups and interviews. While the sample is not representative, we gain insight into what factors might explain apparent underinvestment in emission reducing technologies absent government regulation.

Attachment: 2014-02.pdf2014-02.pdf (728K, About PDF)

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