Guiding the Invisible Hand: Policies to Address Market Barriers to Energy Efficiency

Background to the Report

The strong anti-government feeling in Congress and in many of the states has affected not only climate policy but also energy policy—there is strong opposition to government spending and to government mandates. While influencing energy use without money or requirements may seem implausible, efficiency analysts and advocates have long claimed that large energy savings are cost-effective on their own without any government intervention.

Reviewing Barriers to Energy Efficiency

The necessary efficiency measures are not taken because of well-known market barriers such as:

  • Lack of information and other transactional costs,
  • Split incentives in which the entity that controls energy use does not pay the energy bill, and
  • Specific government rules that prevent efficiency measures.

Yet while efficiency advocates have long cited these barriers, their policy proposals have mostly focused on standards and incentives that have no direct tie to specific barriers.

Exploring Policy Solutions

After briefly reviewing those barriers, this paper will explore a range of government policies that can directly reduce those barriers without significant new spending (or taxes) or mandates on individuals.

For example:

  • Building labeling and benchmarking approaches would provide more information on energy efficiency to markets.
  • Green leases can help align the interests of landlords and tenants.
  • The “SAVE Act” would reform government mortgage underwriting rules that do not value energy efficiency. Such policies may have a significant impact on energy efficiency in buildings in a way that could attract bipartisan support.

Access Paper

To access a copy of the paper, please click on the link at the top of the page. This paper was written as part of the American Council for an Energy-Efficient Economy (ACEEE)'s 2012 Summer Study on Energy Efficiency in Buildings.