Green Spills: Peer Effects in Pro-environmental Behaviors

Abstract

This paper studies causal peer effects in pro-environmental behavior using geocoded panel data of 260,000 Swiss households (2008-2019) and instrumental variables methods. Peer behavior has a simultaneous impact on a broad spectrum of energy practices, and manifests itself in different ways contingent upon households' constraints. For instance, we find that solar PV adoption increases neighbors' electricity conservation efforts. This has important implications for renewable energy subsidy evaluation. Back-of-the-envelope calculation suggests that accounting for peer effects decreases carbon abatement costs of solar PV subsidies by 20 percent.

Keywords: Peer influence, social norm, energy conservation, climate change mitigation, abatement costs

JEL Classification: D90; H23; Q40; R22