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By Yves Zenou

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By Yves Zenou

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  1. Discussion on:Evaluating the Slow Adoption of Energy Efficient Investments:Are Renters Less Likely to Have Energy Efficient Appliances?Lucas W. Davis By Yves Zenou

  2. Aims and objectives • This study compares appliance ownership patterns between homeowners and renters. • Household-level data from a nationally-representative survey, the Residential Energy Consumption Survey (RECS). • Cross section: 2005

  3. Results Renters are significantly less likely to have energy efficient refrigerators, clothes washers and dishwashers than homeowners.

  4. Questions • Residential Energy Consumption Survey (RECS) is a nationally-representative in-home survey conducted approximately every five years by the Department of Energy. • Why not using the panel (or quasi-panel: 1997, 2001, 2005)? • Fixed effects.

  5. Questions • There is a clear simultaneity problem. • Here: Prob Having Energy Star Appliance = f (Dummy Renter) • What about the reverse? • Dummy Renter = f (Prob Having Energy Star Appliance)

  6. Questions • What about selection? • Apart from observables (income, etc.), homeowners have unobservables that are different than renters. • Maybe you are capturing the effects of these unobservables on the Prob Having Energy Star Appliance rather than that of homeownership. • Instruments?

  7. Mechanisms • Homeowners maximize long-term investments whereas renter don’t. • General consensus in the literature: homeowners are better at maintaining and improving their dwelling than renters (Dietz and Haurin, JUE 2003)

  8. Policy implications • Clear principal-agent problem. • Homeownership received a favorable treatment in tax laws (especially US). • What kind of incentives can we give to tenants or landlords to have energy efficient appliances? • More favorable treatments for landlords who rent but obligation of having energy efficient appliances?

  9. Discussion on:Market Mechanisms for Financing Green Real Estate Investmentsby Dwight Jaffee and Nancy Wallace

  10. Main Question • Private market failures are contributing to the underinvestment in U.S. building energy efficiency.

  11. Main Question(s) • Apart from taxing, what mechanisms can reduce U.S. energy consumption? • Three mechanisms • (1) Expanded building codes • (2) Disclosure certificates • (3) Direct subsidies to stimulate energy efficient investments by government agencies and public utilities.

  12. Main Question(s) • These three mechanisms are limited • This paper focuses on loan market frictions as a market failure that raises the cost and limits the availability of mortgage funding for energy-efficient investments. • Here, the authors propose mechanisms to eliminate the frictions that inhibit energy retrofits in existing structures.

  13. Solutions • Three steps that must occur if building owners are to invest voluntarily in energy saving equipment: • (1) Identification of worthwhile investments; • (2) Computation of the true non-negative net present value (NPV); • (3) Identification and removal of financial frictions.

  14. Questions • Difficult to evaluate since the Monte Carlo simulations are not provided. • What not writting an explicit search model with frictions and then estimate or simulate it?

  15. Frictions • What are the loan market frictions? • “Frictions in the lending market raise the discount rate and lower the NPV computations” • “Frictions that currently constrain both owner-lender mortgage contracts and owner-tenant lease contracts.”

  16. Frictions • Wasmer and Weil (AER 2004) • Credit market imperfections • Agents are imperfectly aware of economic opportunities. • Blanchflower and Oswald (JOLE 1998) report that raising capital constitutes the principal difficulty encountered by potential entrepreneurs. • For instance, 20 percent of the respondents of the 1987 U.K. National Survey of the Self-Employed report that where to get finance was the biggest obstacle to self-employment.