Free Riding, Upsizing, and Energy Efficiency Incentives in Maryland Homes

58 Pages Posted: 6 Oct 2013

See all articles by Anna Alberini

Anna Alberini

University of Maryland - Department of Agricultural & Resource Economics

Will Gans

NERA Economic Consulting

Charles Towe

University of Connecticut - Department of Agricultural and Resource Economics and the National Center for Smart Growth

Date Written: August 11, 2013

Abstract

We use a unique dataset that combines the responses from an original survey of households, information about the structural characteristics of their homes, utility-provided longitudinal electricity usage records, plus utility program participation information, to study the uptake of energy efficiency incentives and their effect on residential electricity consumption. Attention is restricted to homes where heating and cooling are provided exclusively by heat pumps, which are common in our study area — four counties in Maryland — and were covered by federal, state and utility incentives during our study period (2007-2012). We deploy a difference-in-difference study design. We find that replacing an existing heat pump with a new one does reduce electricity usage: the average treatment effect is an 8% reduction. However, the effect differs dramatically across households based upon whether they receive an incentive towards the purchase of a new heat pump. Among those that receive the purchase incentive, the effect is small or nil, and indeed, the larger the incentive, the smaller the reduction in electricity usage. Those that do not receive incentives reduce usage by about 16%. Our results appear to be driven by the numerous free riders in our sample and by persons who — inferred from their responses to survey questions — might be exploiting the subsidy to purchase a larger system and increase usage, with no emissions reductions benefits to society.

Keywords: Energy Efficiency, Household Behavior, Energy Efficiency Incentives, Electricity Usage, Rebound Effect, Free Rider

JEL Classification: Q41, D12, H3

Suggested Citation

Alberini, Anna and Gans, Will and Towe, Charles, Free Riding, Upsizing, and Energy Efficiency Incentives in Maryland Homes (August 11, 2013). FEEM Working Paper No. 82.2013, Available at SSRN: https://ssrn.com/abstract=2336044 or http://dx.doi.org/10.2139/ssrn.2336044

Anna Alberini (Contact Author)

University of Maryland - Department of Agricultural & Resource Economics ( email )

Symmons Hall, Rm 2200
University of Maryland
College Park, MD 20742-5535
United States
301-405-1267 (Phone)
301-314-9091 (Fax)

Will Gans

NERA Economic Consulting

50 Main Street, 14th Floor
White Plains, NY 10606
United States

Charles Towe

University of Connecticut - Department of Agricultural and Resource Economics and the National Center for Smart Growth ( email )

1376 Storrs Rd
University of Connecticut
Storrs, CT 20742
United States

HOME PAGE: http://www.are.uconn.edu/faculty_charlestowe.php

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