Structural Barriers

If energy efficiency makes economic sense, then why have companies not already made these rational investments? There are a host of structural and organizational barriers impeding investment.

  • Split incentives occur when benefits from an investment made by tenants accrue to the landlord or vice versa. For example, if the tenants’ electricity is included in the rent, they have little incentive to reduce their electricity use. If the tenants are sub-metered or pay for electricity directly, however, the incentive to make changes is strong.
  • Short or imminent lease schedules also impose financial constraints. Few tenants would invest in projects with a five-year payback if they may depart within three years.
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