Consumer valuations of energy efficiency investments: The case of Vietnam's Air Conditioner market

Typical consumers underestimate the benefits of future energy savings and underinvest in energy efficiency relative to the socially optimal level of energy efficiency. This phenomenon is called the energy-efficiency gap and has been widely studied in many developed countries. However, research on the energy-efficiency gap in developing countries remains very scant. In this study, we use sales data of air conditioners (ACs) in the Vietnamese market and conduct hedonic price analysis to examine how consumers in Vietnam value the energy efficiency of ACs. We find that the implicit discount rate in Vietnam's AC market exceeds 11.7%. This high implicit discount rate suggests that consumers in developing countries place much lower value on energy efficiency than consumers in developed countries, despite the fact that purchasing energy-efficient appliances offers the opportunity to save substantial amounts. Financial and technical support from developed countries are necessary to promote energy-efficient appliances in developing countries.