Saving money vs investing money: Do energy ratings influence consumer demand for energy efficient goods?

The article analyses economic barriers leading to the energy efficiency gap in the market for energy-using products by observing several million transactions in the UK over two years. The empirical exercise estimates AIDS models for refrigerators, washing machines, TVs, and light bulbs. Results indicate that market barriers are crucial in the demand for energy efficient options, and consumer response to changes in appliance prices, total expenditures, and energy prices depends on the possibility of behavioural adjustments in consumption. In contrast with the induced innovation hypothesis, current electricity prices can fail to induce innovation because of their short-term impact on disposable income, while consumers invest in energy efficiency when expecting electricity prices to rise in the future.