Despite the fact that energy-saving technologies are considered profitable using standard net-present-value calculations, their adoption rates have been low, particularly in small firms. This study reviews the theoretical and empirical literature that explains this phenomenon, generally known as the energy-efficiency paradox. Issues such as hidden costs of investment and uncertainty, organisational barriers, and lack of information and capital appear to be important factors to explain the slow diffusion of energy-saving technologies in small firms.

JEL Classification: D21, D80, O33, Q40