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Additionality, Mistakes, and Energy Efficiency Investment

Author

Listed:
  • Ben Gilbert

    (Division of Economics and Business, Colorado School of Mines)

  • Jacob LaRiviere

    (Microsoft, University of Tennessee and University of Washington)

  • Kevin Novan

    (Department of Agricultural and Resource Economics, University of California, Davis)

Abstract
Investment subsidies, like those for energy efficiency upgrades, often suffer from poor additionality. Using a novel theoretical model, we show when benefits from investments are uncertain, subsidy policies can also lead to inefficient investment decisions that don't pass the full information benefit cost test. We use a unique household-level dataset of energy efficiency audits and investments to test model predictions. We find that households are significantly more likely to schedule audits and installs when first moving into an existing home when, ironically, information uncertainty is greatest. We then build on the theoretical model to inform better policy design.

Suggested Citation

  • Ben Gilbert & Jacob LaRiviere & Kevin Novan, 2019. "Additionality, Mistakes, and Energy Efficiency Investment," Working Papers 2019-01, Colorado School of Mines, Division of Economics and Business.
    • Handle: RePEc:mns:wpaper:wp201901
    as

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    File URL: http://econbus-papers.mines.edu/working-papers/wp201901.pdf
    File Function: First version, 2019
    Download Restriction: no
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Singhal, Puja & Pahle, Michael & Kalkuhl, Matthias & Levesque, Antoine & Sommer, Stephan & Berneiser, Jessica, 2022. "Beyond good faith: Why evidence-based policy is necessary to decarbonize buildings cost-effectively in Germany," Energy Policy, Elsevier, vol. 169(C).
    2. Evert Reins, 2021. "Seductive subsidies? An analysis of second-degree moral hazard in the context of photovoltaic solar systems," IRENE Working Papers 21-03, IRENE Institute of Economic Research.
    3. Ensieh Shojaeddini & Ben Gilbert, 2023. "Heterogeneity in the Rebound Effect: Evidence from Efficient Lighting Subsidies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(1), pages 173-217, January.

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    More about this item

    Keywords

    Durable Goods; Learning; Electricity; Second Best;
    All these keywords.

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • D - Microeconomics

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