Supporting policies based on empirical investment behaviour
BRISKEE – Behavioural Response to Investment Risks in Energy Efficiency – is a Horizon 2020 project which ran from 2015 to 2017. BRISKEE provides evidence-based input to the design and evaluation of energy efficiency policy in the EU residential sector.
With the residential sector representing about 27% of the EU final energy demand, households' investment in energy efficiency is a key issue for meeting energy and climate policy targets. When assessing the costs and benefits of insulating their homes, or purchasing energy-saving appliances, households wonder what will be the value of these investments. This evaluation may be captured by implicit discount rates (IDR), which generally reflect individual preferences (e.g. over time and risk), predictable (ir)rational behaviour (e.g. present bias or loss aversion) or external barriers to energy efficiency (e.g. lack of time or capital). The relevance of these factors may differ across households. For example, households' willingness to wait or to take risks varies, these discount rates differ across households.
Owing to constraints on time, attention, and individuals’ ability to process information, the evaluation of investments may lead to biased choices. For example, individuals tend to value immediate rewards much more than they value future rewards. Likewise, individuals value losses larger than gains of equal amounts. As a consequence, individuals may fail to invest in energy efficiency measures which involve higher costs today, but save money on energy bills over many years. Moreover, the implicit discount rates observed from actual investments also reflect other “barriers to energy efficiency” such as poor information about the energy performance of appliances and homes, or limited ability to borrow money from banks.
Since they drive investment behaviour, implicit discount rates are key parameters in energy-economic models used by policy makers in designing and evaluating energy efficiency policies.
BRISKEE addresses household decision-making and its implications at three levels: The micro, meso and macro level. At the micro level, factors influencing individual decision-making are elicited in a representative survey. At the meso level, the impact of policies addressing decision-making on long term energy demand is investigated using the energy demand models FORECAST and Invert/EE-Lab. At the macro-level, BRISKEE assesses the effects of energy efficiency improvements on the economy using the macroeconomic model ASTRA.
- The role of time and risk preferences (including also present bias and loss aversion) for household adoption of low-cost, medium-cost and high-cost energy efficient technology adoption in households.
- The impact of policies influencing micro-economic investment decision-making and technology diffusion on residential energy demand until 2030.
- The effects of technology diffusion and energy efficiency policy on European Union gross domestic product (GDP), employment and exports in 2030.