least half the energy used in U.S. buildings is probably used in buildings or by space and water heating equipment originally purchased by intermediaries. In the transportation sector, a significant though probably much smaller proportion of cars and trucks was originally purchased by rental agencies or fleet operators. Thus, much of the nation’s stock of energy-using equipment was purchased by intermediaries. Consequently, much of the market pressure on manufacturers of energy-using equipment comes not from ultimate energy users but from the intermediaries who purchase their products with no expectation of paying for the energy those products use.

While the interests of ultimate energy users are consistently related to minimizing long-term energy costs, the interests of intermediaries are more variable and complex. Ultimately, intermediaries who build structures or purchase energy-using equipment for resale or rental are interested in making their products attractive to customers, in maintaining their reputations, and in minimizing the costs associated with repairs and with underutilized equipment. Energy efficiency becomes a priority to the extent that the buyers or renters of their buildings and equipment consider it in their decisions. But because energy is only one of many aspects of any product and because energy efficiency, especially for buildings, is often hard to determine in advance, purchasers or renters who want energy efficiency may not show it in their choice of products.

Thus, a car rental agency may buy more large-size cars than it needs because it is less likely to lose business by giving a customer a larger-than-requested car than by offering a smaller-than-requested model. For the customer, availability of the car is more important at the time of rental than energy use. For these reasons, gasoline consumption of rental cars is higher than would be desired by the individuals or organizations that pay for the fuel. A home-building firm may spend extra money on brand-name kitchen appliances because prospective buyers will take this as an index of the quality of the home (Quelch and Thirkell, 1978). When purchasing a furnace—which most home purchasers do not examine—the same home builder will be more concerned with low price and quick delivery than with quality. Energy efficiency will not be a major criterion in either choice unless home buyers begin to demand it. For such demand to develop, home buyers must be well informed about energy efficiency in appliances. But they may be unlikely to gather such information at a time when they must also pay attention to issues of overall cost, design, and durability of their prospective homes. As a result, energy efficiency will often tend to be undervalued, and it almost certainly will not be accurately judged.

Moreover, energy-efficient innovations are risky for intermediaries. For example, in the construction industry, builders assume large risks by adopting innovations in solar design or other energy-efficient practices. They must change their procedures, by hiring design professionals or new sub-



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