Economists Find Weatherization Spending Doesn’t Pay Off

(Bloomberg) — Energy efficiency appeals to the Prius-driving climate campaigner as well as the coupon-clipping

suburban dad. Who wouldn’t appreciate saving money and the Earth

with better insulation, an upgraded furnace and caulk?

Well, it turns out that some economists don’t.

A study from the University of Chicago found that federal

investments in weatherization cost about twice as much as the

energy savings generated. The findings released Tuesday are a

blow to a program that’s been a mainstay of the Department of

Energy since 1976, and is a key component of President Barack Obama’s plan to combat global warming.

“For whatever reasons what the models show hasn’t been

borne out in reality,” said Michael Greenstone, a Chicago

economist and co-author of the research. “The realized savings

are smaller than what was projected.”

Greenstone, a former economic adviser to Obama, worked with

two University of California at Berkeley economists to study the

impact of the Department of Energy’s Weatherization Assistance

Program on 30,000 households in Michigan. Under that program,

households are provided with $5,000 in efficiency upgrades that

are estimated to provide a payoff in lower heating or electric

bills over the coming years.

The drop in energy use was less than 40 percent of that

projected by the Energy Department’s models, resulting in

estimated savings of only $2,400 over the lifetime of the

products, Greenstone said. The change wasn’t caused by the so-called rebound effect, in which consumers use more energy

because their bills have decreased, the study concluded.

‘Rigorously Tested’

Still, “potential energy efficiency investments need to be

rigorously tested in real-world conditions before relying too

heavily on them to solve climate change,” Catherine Wolfram, a

Berkeley business professor and another co-author, said in a


The researchers also studied the societal benefits of lower

greenhouse-gas emissions, and whether those general gains

justify the costs of the upgrades. Their conclusion? No.

Instead of subsidizing insulation, lawmakers in Washington

should install a cap-and-trade program or set a price on carbon

to let the market decide which climate actions are most cost-effective, they said.

“While some may argue that broader societal benefits — in

the form of reduced greenhouse-gas emissions — justify the

energy efficiency investments, the findings do not support this

claim,” the researchers concluded.

To contact the reporter on this story:

Mark Drajem in Washington at

To contact the editors responsible for this story:

Jon Morgan at

Steve Geimann

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