5.3.5.1 Demand Side of the Market
The diffusion of GHG-efficient technology may be limited by “irrational”
or less-than-rational behaviour of households and firms. Such behaviour may
be observed because of the way individuals process and act on whatever information
they may have. The behaviour of an individual during the decision-making process
may seem inconsistent with their goals. More or better information alone may
be insufficient to change behaviour, which is strongly influenced by habit or
custom (Brown and Macey, 1983).
Within organizations, various factors discourage or inhibit cost-effective
decisions regarding new technology. For businesses, the priority of other investment
opportunities (e.g., to maintain or expand market share and production capacity)
may cause the firm to reject cost-effective GHG-efficiency investment opportunities.
Where energy costs are a small component of total production costs, management
may not provide sufficient support for energy efficiency investments. In addition,
within a firm, no single party or department may have clear and explicit responsibility
for managing energy costs.
Another facet of behaviour that is often cited as a barrier to energy efficiency
investments is the demand for a rapid payback that may be either explicit or
implicit in behaviour. To some degree, the so-called high discount rate applied
by consumers could be seen as an aspect of “irrational” behaviour.
However, the demand for a rapid payback is also related to particular features
of energy-efficient products or services (such as uncertain performance), specific
circumstances related to home and appliance ownership, the context in which
these products are placed, or to macro-economic conditions, such as high inflation
or uncertain future energy prices.
5.3.5.2 Supply Side of the Market
Limited Availability of Products or Services
This may result from decisions and practices of manufacturers and/or distributors.
Firms that provide services related to energy efficiency may be few in number.
Availability is typically lower (and prices are higher) in rural areas than
in large cities. To some extent, limited availability of products and services
is a “chicken and egg” problem, which tends to be most problematic
in the early stages of market development for a more efficient product or service.
Weakness of Suppliers in Market Research
Firms may lack the resources or capability to do adequate market research, thereby
inhibiting the development of new products or services for which there might
be a demand.
Weakness of Suppliers in Product Development
Firms may be lacking in skills required for the development of new products,
or in capital for investment in new production capacity. Gaining access to advanced
designs and/or manufacturing techniques may also be a problem (related to international
technology flows).
Weak Marketing Capabilities of Suppliers
Firms may lack the skills for adequate marketing of more efficient products
or services.
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