(Bloomberg) — Energy efficiency appeals to the Prius-driving climate campaigner as well as the coupon-clipping
suburban dad. Who wouldn’t appreciate saving money and the Earth
with better insulation, an upgraded furnace and caulk?
Well, it turns out that some economists don’t.
A study from the University of Chicago found that federal
investments in weatherization cost about twice as much as the
energy savings generated. The findings released Tuesday are a
blow to a program that’s been a mainstay of the Department of
Energy since 1976, and is a key component of President Barack Obama’s plan to combat global warming.
“For whatever reasons what the models show hasn’t been
borne out in reality,” said Michael Greenstone, a Chicago
economist and co-author of the research. “The realized savings
are smaller than what was projected.”
Greenstone, a former economic adviser to Obama, worked with
two University of California at Berkeley economists to study the
impact of the Department of Energy’s Weatherization Assistance
Program on 30,000 households in Michigan. Under that program,
households are provided with $5,000 in efficiency upgrades that
are estimated to provide a payoff in lower heating or electric
bills over the coming years.
The drop in energy use was less than 40 percent of that
projected by the Energy Department’s models, resulting in
estimated savings of only $2,400 over the lifetime of the
products, Greenstone said. The change wasn’t caused by the so-called rebound effect, in which consumers use more energy
because their bills have decreased, the study concluded.
Still, “potential energy efficiency investments need to be
rigorously tested in real-world conditions before relying too
heavily on them to solve climate change,” Catherine Wolfram, a
Berkeley business professor and another co-author, said in a
The researchers also studied the societal benefits of lower
greenhouse-gas emissions, and whether those general gains
justify the costs of the upgrades. Their conclusion? No.
Instead of subsidizing insulation, lawmakers in Washington
should install a cap-and-trade program or set a price on carbon
to let the market decide which climate actions are most cost-effective, they said.
“While some may argue that broader societal benefits — in
the form of reduced greenhouse-gas emissions — justify the
energy efficiency investments, the findings do not support this
claim,” the researchers concluded.
To contact the reporter on this story:
Mark Drajem in Washington at
To contact the editors responsible for this story:
Jon Morgan at