Abstract
Home renovation is generally asserted to be a highly effective means for households to lower expenditures on energy. In this sense, home renovation can also be thought as a means to reduce GHG emissions. In this paper we consider a homeowner who makes an irreversible energy-efficiency investment in an uncertain environment. In a general equilibrium framework, we solve the program of a representative consumer who uses his wealth to invest in the energy-saving technology, to save or to consume energy goods and non-energy goods. Resolution is analytical in a zero discounting case and numerical for the general case, based on collocation and Chebychev polynomials. In particular, we show that the threshold triggering adoption depends not only on technological parameters but on preference parameters as well. Moreover, we show that uncertainty does not affect adoption in the same way as in a partial equilibrium framework.
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