The Behavioral Response to Voluntary Provision of an Environmental Public Good: Evidence from Residential Electricity Demand

33 Pages Posted: 18 Dec 2010 Last revised: 29 Dec 2010

See all articles by Grant Jacobsen

Grant Jacobsen

University of Oregon - School of Planning, Public Policy, and Management

Matthew J. Kotchen

Yale University; National Bureau of Economic Research (NBER)

Michael P. Vandenbergh

Vanderbilt University - Law School

Date Written: December 2010

Abstract

This paper develops a theory of voluntary provision of a public good in which a household's decision to engage in a form of environmentally friendly behavior is based on the desire to offset another behavior that is environmentally harmful. The model generates predictions about (1) participation in a green-electricity program at the extensive and intensive margins, and (2) changes in electricity consumption in response to participation. We test the theory using billing data for participants and nonparticipants in a green-electricity program in Memphis, Tennessee. High-consumption households are more likely to participate, and they participate at higher levels. In terms of a behavioral response, households participating above the minimum threshold level do not change electricity consumption, but those participating at the minimum threshold increase electricity consumption 2.5 percent after enrolling in the program. The result is based on identification strategies that exploit before-after differences between participants and nonparticipants, and differences in the timing of enrollment among participants only. Despite the increase in electricity demand upon the purchase of green electricity for the households with a "buy-in" mentality, the net effect for the buy-in households is a reduction in pollution emissions, as the behavioral response is not large enough to offset the environmental benefit of the green-electricity purchase.

Suggested Citation

Jacobsen, Grant and Kotchen, Matthew J. and Vandenbergh, Michael P., The Behavioral Response to Voluntary Provision of an Environmental Public Good: Evidence from Residential Electricity Demand (December 2010). NBER Working Paper No. w16608, Available at SSRN: https://ssrn.com/abstract=1727089

Grant Jacobsen (Contact Author)

University of Oregon - School of Planning, Public Policy, and Management ( email )

1280 University of Oregon
Eugene, OR 97403
United States

Matthew J. Kotchen

Yale University ( email )

New Haven, CT 06520
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael P. Vandenbergh

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

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