Investment inefficiency and the adoption of eco-innovations: The case of household energy efficiency technologies

This paper examines the factors determining household adoption of energy efficiency eco-innovations. We do so by testing hypotheses grounded in diffusion and finance theory and the literature on the barriers to energy efficiency. Using two large surveys of UK households, we explore the adoption of nine technologies. Our results indicate ‘investment inefficiency’ amongst household adopters occurs for two reasons. First, contrary to notions of rational choice, we find a negative relationship between the investment return of technologies and their level of diffusion. Second, we show adopters of these technologies display characteristics broadly consistent with diffusion theory, contradicting the prediction of finance theory that investment return, not individual characteristics, should drive adoption. We also find that policy has played a role in inducing the diffusion of these technologies and that tenure and spill-over effects are important in adoption. Finally, adoption is motivated more by a desire to save money than by environmental concern. We conclude by giving examples of how our research can lead to better policy timing and targeting. •We explore the factors driving household adoption of energy efficiency technologies.•We employ two high quality nationally representative cross sectional surveys.•There is a negative relationship between investment return and level of diffusion.•Adopters display characteristics broadly consistent with diffusion theory.•Policy interventions, tenure effects and spill-over effects also influence adoption.