Description:
This study investigates the energy efficiency (EE) gap, referring to private agents who are not making seemingly profitable investments to reduce energy use. We deploy a questionnaire among firms in the Netherlands in which we ask them about investment behavior and barriers to investing in EE. A set of 16 barriers is constructed based on the literature. We find that most firms (70%) have made EE investments in the past five years, and that the median firm has saved 10% of its energy use. The remaining profitable EE investment opportunities still leave room for another 15% of energy savings at the median firm. We find that uncertainty about future policies ranks as the leading barrier to EE investments, followed by lock-ins in current equipment, and energy price uncertainty. Especially energy-intensive firms indicate the importance of policy uncertainty. Past policies have not been successful in addressing these barriers. Additionally, we find that a firm's network can be an important channel for obtaining EE investment knowledge.