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Title: Uncertainty, loss aversion, and markets for energy efficiency

Abstract

Increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil-fuel combustion, reducing oil dependence, and achieving a sustainable global energy system. The tendency of markets to neglect apparently cost-effective energy efficiency options has been called the efficiency gap or energy paradox. The market for energy efficiency in new, energy-using durable goods, however, appears to have a bias that leads to undervaluation of future energy savings relative to their expected value. This paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers. This framework relies on the theory of contextdependent preferences. The uncertainty-loss aversion bias against energy efficiency is quantifiable, making it potentially correctible by policy measures. The welfare economics of such policies remains unresolved. Data on the costs of increased fuel economy of new passenger cars, taken from a National Research Council study, illustrate how an apparently cost-effective increase in energy efficiency would be uninteresting to lossaverse consumers.

Authors:
 [1]
  1. ORNL
Publication Date:
Research Org.:
Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States)
Sponsoring Org.:
USDOE Office of Energy Efficiency and Renewable Energy (EERE)
OSTI Identifier:
1024299
DOE Contract Number:
DE-AC05-00OR22725
Resource Type:
Journal Article
Resource Relation:
Journal Name: Energy Economics; Journal Volume: 33
Country of Publication:
United States
Language:
English
Subject:
54 ENVIRONMENTAL SCIENCES; AUTOMOBILES; COMBUSTION; ECONOMICS; EFFICIENCY; ENERGY EFFICIENCY; ENERGY SYSTEMS; FUEL CONSUMPTION; GREENHOUSE GASES; MARKET; OCCUPANTS

Citation Formats

Greene, David L. Uncertainty, loss aversion, and markets for energy efficiency. United States: N. p., 2010. Web.
Greene, David L. Uncertainty, loss aversion, and markets for energy efficiency. United States.
Greene, David L. 2010. "Uncertainty, loss aversion, and markets for energy efficiency". United States. doi:.
@article{osti_1024299,
title = {Uncertainty, loss aversion, and markets for energy efficiency},
author = {Greene, David L},
abstractNote = {Increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil-fuel combustion, reducing oil dependence, and achieving a sustainable global energy system. The tendency of markets to neglect apparently cost-effective energy efficiency options has been called the efficiency gap or energy paradox. The market for energy efficiency in new, energy-using durable goods, however, appears to have a bias that leads to undervaluation of future energy savings relative to their expected value. This paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers. This framework relies on the theory of contextdependent preferences. The uncertainty-loss aversion bias against energy efficiency is quantifiable, making it potentially correctible by policy measures. The welfare economics of such policies remains unresolved. Data on the costs of increased fuel economy of new passenger cars, taken from a National Research Council study, illustrate how an apparently cost-effective increase in energy efficiency would be uninteresting to lossaverse consumers.},
doi = {},
journal = {Energy Economics},
number = ,
volume = 33,
place = {United States},
year = 2010,
month = 1
}
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  • By means of two different parametrizations of quark energy loss and the nuclear parton distributions determined only with lepton-nuclear deep inelastic scattering experimental data, a leading order phenomenological analysis is performed on the nuclear Drell-Yan differential cross section ratios for E772 experimental data. Uncertainty due to the quark energy loss effect is quantified in determining the nuclear sea quark distribution by using nuclear Drell-Yan data. It is found that the quark energy loss effect on nuclear Drell-Yan cross section ratios becomes greater with the increase of quark momentum fraction in the target nuclei. The uncertainty from the quark energy lossmore » becomes bigger as the nucleus A becomes heavier. The Drell-Yan data on proton incident middle and heavy nuclei versus deuterium would result in an overestimate for nuclear modification in the sea quark distribution with neglecting the quark energy loss.« less
  • New phase space mapping and uncertainty analysis of energetic ion loss data in the DIII-D tokamak provides experimental results that serve as valuable constraints in first-principles simulations of energetic ion transport. Beam ion losses are measured by the fast ion loss detector (FILD) diagnostic system consisting of two magnetic spectrometers placed independently along the outer wall. Monte Carlo simulations of mono-energetic and single-pitch ions reaching the FILDs are used to determine the expected uncertainty in the measurements. Modeling shows that the variation in gyrophase of 80 keV beam ions at the FILD aperture can produce an apparent measured energy signaturemore » spanning across 50-140 keV. These calculations compare favorably with experiments in which neutral beam prompt loss provides a well known energy and pitch distribution.« less