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Working Paper: Heavy-Duty Trucking and the Energy Efficiency Paradox

Paper Number: 2014-02

Document Date: 01/2014

Author(s): Heather Klemick, Elizabeth Kopits, Keith Sargent, and Ann Wolverton

Subject Area(s): Pollution Control Adoption and Costs; Government Policy

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.

Published: Klemick, Heather, Elizabeth Kopits, Ann Wolverton, and Keith Sargent. 2015. "Heavy-duty trucking and the energy efficiency paradox: Evidence from focus groups and interviews," Transportation Research Part A: Policy and Practice 77: 154–166.

This paper is part of the Environmental Economics Working Paper Series.

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