Effectiveness of Subsidizing Energy Saving Technologies: Evidence from Dutch panel data

Using panel data on investment of firms in energy saving technology, we measure the impact of the payback period of the technology on the probability to adopt the technology in the absence of tax and subsidy incentives. We find that the decision rules to adopt energy saving technology differs substantially between different types of firms, i.e. for-profit/notfor-profit as the decision to adopt energy saving technologies by notfor-profit firms does not depend in a systematic way on the payback period of the technology. Moreover, firms using an explicit investment criterion are less likely to adopt energy saving technology compared to firms not using an explicit investment criterion. Based on our preferred model, on average 45.5% would also have bought the technology without the subsidy or tax credit. This percentage differs markedly between different types of firms. Of all not-for-profit firms using an explicit investment criterion only 34.6% would have bought the technology, whereas of all not-forprofit firms not using an explicit investment criterion 66.1% would have bought the technology. Finally, the increase in the return on investment that is achieved by subsidies and tax credits only explains in 44 out of a total of 466 cases why firms have changed their decision and bought the energy saving technology. JEL classifications: D21; H25; H32; O33; Q48