What Impedes Household Investment in Energy Efficiency and Renewable Energy?

Energy efficiency and renewable energy technologies provide important opportunities to reduce greenhouse gas emissions. However, households fail to take up many clean energy investments that are cost-effective. This article reviews different explanations for apparent underinvestment in energy efficiency that have been put forward in the literature. While investments in renewable energy technologies are typically not (yet) profitable, many of its drivers are similar to those that determine energy efficiency investments, and the two types of investment are therefore assessed jointly. The article also provides new evidence regarding barriers to investment in energy efficiency based on the OECD Survey on Household Environmental Behaviour and Attitudes. Finally, policy solutions that would help overcome some of these barriers are also presented.