Economic viability of building energy efficiency measures: a review on the discount rate

Abstract

How does the issue of the discount rate intersect the research on building energy efficiency and the topics into which it has branched? This contribution tries to answer the previous question through a comprehensive review of related studies. Those studies usually rely on two alternative assumptions. The first refers, explicitly or implicitly, to the notion of cost of capital and, hence, to the position of private stakeholders involved in the decision processes focusing on the adoption of energy-efficient measures in buildings. The second assumption relates to the notion of the social discount rate, which is meant to pursue intergenerational equity and environmental sustainability. As far as the results are concerned, the literature agrees that the discount rate is among the key parameters—possibly the most prominent—affecting the evaluation. However, despite the crucial role it plays, its calculation seldom relies on acknowledged methods and models. Furthermore, data sources sometimes lack consistency and accuracy. Some guidance and suggestions are provided as to the improvement of the discount rate estimation.