Abstract This paper focuses on the empirical basis for skepticism about the effectiveness of the market mechanism in promoting cost-effective energy-efficiency improvements. We present a framework for evaluating engineering economic evidence on the diffusion of energy-efficiency improvements, and then present a series of examples within this framework that provide evidence for the existence of market imperfections related to energy efficiency. We conclude with a challenge to economists, policy analysts, and technologists to take this empirical evidence seriously and sponsor further collaborative research in this area.