Measuring the energy savings from home improvement investments: Evidence from monthly billing data

An important factor driving energy policy over the past two decades has bee n the "energy paradox," the perception that consumers apply unreasonably hi gh hurdle rates to energy-saving investments. We explore one possible expla nation for this apparent puzzle: that realized returns fall short of the re turns promised by engineers and product manufacturers. Using a unique data set, we find that the realized return to attic insulation is statistically significant, but the median estimate (9.7%) is almost identical to a discou nt rate for this investment implied by a CAPM analysis. We conclude that th e case for the energy paradox is weaker than has previously been believed.