This book examines the energy efficiency gap and explores why many energy-saving investments that appear cost-effective are not adopted in practice. It brings together economic theory, behavioral insights, and policy analysis to provide a coherent framework for understanding decision-making in energy use across households, firms, and public institutions.

The book highlights the roles of market failure, behavioral frictions, and institutional contexts in energy efficiency investment. It develops a set of intuitive conceptual models to clarify how these factors shape investment choices, and complements them with empirical evidence and real-world examples drawn from energy use, appliance adoption, and environmental policy.

The book is intended for researchers, graduate students, and policymakers working in energy economics, environmental policy, and applied microeconomics. It offers readers a structured way to interpret observed behavior and to evaluate the design and effectiveness of policy interventions, including pricing, standards, and informational programs. By connecting theory with practical policy questions, the book provides a clear account of when and why the energy efficiency gap arises, and what can be done to address it in a realistic institutional setting.

Xiao-Bing Zhang is an Associate Professor of Applied Economics at the Department of Technology, Management and Economics, Technical University of Denmark. His research focuses on the intersection of energy economics, industrial organization, and behavioral responses to climate and energy policies.

Ying Zheng is an Assistant Professor of Economics at the School of Applied Economics, Renmin University of China. His research centers on the industrial organization of energy markets, focusing on micro-level energy consumption and production behaviors.

Chang Su is a graduate student at the Department of Economics, Colorado State University. Her research focuses on energy and environmental economics, using both reduced-form and structural methods.