Users of energy consuming equipment seek to maximise return on investments and
buy their equipment without considering the environmental externalities from carbon
emissions. This is an undesirable outcome for the environment, and in conflict
with the government’s environmental objectives. The EIA is an attempt, although
not primarily, to address this market failure. Secondly, also incomplete information
might play a role here, and could affect the underinvestment in energy efficiency.
End-users sometimes lack the ability or time to process and evaluate the information
they have (Golove and Eto, 1996). For example, calculating the pay back time
for a more energy efficient appliance is sometimes hard for people. Furthermore,
end-users of the equipment may know the first (investment) costs of the equipment,
but are unable to verify the potential savings. Also, the transaction costs for endusers
to obtain information about energy efficient equipment could have impeded
the adoption of those devices.