Energy Conservation Investments A rational decision?

Technological analyses show that large potentials for energy conservation exist at the sectoral level. Moreover, a great part of these potentials seems economically attractive, but are not undertaken by industry. This paper provides a theoretical framework in which the energy conservation decision on the firm level plays a central role. It is argued that from an entrepreneurs point of view many theoretical barriers for energy conservation may exist, and that it is therefore rational (from their point of view) not to invest in seemingly profitable energy conservation technologies. Among the theoretical barriers are: high cost of information collection, budget problems, low expected profit due to low energy bill, uncertainty about future energy prices, and being caught in a technological paradigm.