Identifying Free-Riding in Energy-Conservation Programs Using Revealed Preference Data
25 Pages Posted: 9 Apr 2009
Date Written: March 1, 2009
Identifying the incidence of free-ridership is significant to a range of issues relevant to program evaluation, including the calculation of net program benefits and more general assessments of political acceptability. Estimates of free-ridership in the area of energy policy frequently rely on ex-post surveys that ask program participants whether they would have behaved differently in the absence of program support. The present paper proposes an ex-ante approach to the calculation of the free-rider share using revealed preference data on home renovations from Germany's residential sector. We employ a discrete-choice model to simulate the effect of grants on renovation choices, the output from which is used to assess the extent of free-ridership under a contemporary subsidy program. Aside from its simplicity, a key advantage of the approach is that it bestows policymakers with an estimate of free-ridership prior to program implementation.
Keywords: Energy efficiency, residential sector, random utility model, discrete choice simulation
JEL Classification: C25, D12, Q4
Suggested Citation: Suggested Citation