The economics of energy efficiency: Barriers to profitable investments

Improving energy efficiency is seen as a core strategy for a sustainable energy system, because it may contribute to cost savings for companies and private households, cost-effectively reduces greenhouse gas emissions and other pollutants, increases security of supply for required energy services. The thrust of engineering-economic analyses suggests that there is a large potential for energy efficiency measures that are also profitable, but - because of barriers to energy efficiency - are not being adopted. This paper presents a taxonomy of these barriers, distinguishing between barriers that would warrant policy intervention and those that do not. As a case study, barriers to energy efficiency in the German higher education sector and measures to overcome those barriers are discussed.