Heavy-duty trucking and the energy efficiency paradox: Evidence from focus groups and interviews

•Companies are sophisticated consumers of information but conduct their own testing.•We do not find much evidence that liquidity constraints inhibit investment.•Split incentives and lack of infrastructure may affect the adoption of some technologies.•Companies assess tradeoffs and synergies between fuel economy and other technology attributes.•To guard against uncertainty companies demand faster paybacks, consistent with loss aversion.

Theory suggests that profit maximizing firms have an incentive to incorporate cost-effective technologies into their products. However, simple net present value calculations comparing upfront costs of fuel-saving technologies to future savings suggest this is not always the case. This puzzle is commonly referred to as the “energy efficiency paradox.” A growing number of empirical studies examine why households may under-invest in energy efficiency. Fewer studies examine similar undervaluation by businesses. We explore investment decisions within the heavy-duty trucking sector for fuel-saving technologies via focus groups and interviews to gain insight into what factors might explain apparent underinvestment in fuel-saving technologies. We find some evidence that market failures related to lack of information about technology performance and network externalities contribute to slow adoption of some technologies. However, information about new technologies for tractors seems to generate limited spillovers. There is also some evidence of split incentives between owners and drivers, though companies have invested in a variety of technologies and approaches in an attempt to address these effects. Other factors important in trucking investment decisions that are not classic market failures include tradeoffs between fuel economy and other valued truck attributes, as well as uncertainty and risk associated with new technologies if decision-makers are loss averse.