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

Author

Listed:
  • Anna Alberini

    (AREC, University of Maryand, USA College Park, Fondazione Eni Enrico Mattei (FEEM), Italy and Centre for Energy Policy and Economics (CEPE) at ETH-Zürich, Switzerland)

  • Will Gans

    (Consultant with NERA, USA)

  • Charles Towe

    (AREC, University of Maryand, College Park, USA)

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.

Suggested Citation

  • Anna Alberini & Will Gans & Charles Towe, 2013. "Free Riding, Upsizing, and Energy Efficiency Incentives in Maryland Homes," Working Papers 2013.82, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2013.82
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    References listed on IDEAS

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    6. Carroll, P. & Chesser, M. & Lyons, P., 2020. "Air Source Heat Pumps field studies: A systematic literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 134(C).
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    8. Fajardy, M. & Reiner, D M., 2020. "An overview of the electrification of residential and commercial heating and cooling and prospects for decarbonisation," Cambridge Working Papers in Economics 20120, Faculty of Economics, University of Cambridge.
    9. Fontecha, John E. & Nikolaev, Alexander & Walteros, Jose L. & Zhu, Zhenduo, 2022. "Scientists wanted? A literature review on incentive programs that promote pro-environmental consumer behavior: Energy, waste, and water," Socio-Economic Planning Sciences, Elsevier, vol. 82(PA).
    10. Omar Isaac Asensio & Olga Churkina & Becky D. Rafter & Kira E. O’Hare, 2024. "Housing policies and energy efficiency spillovers in low and moderate income communities," Nature Sustainability, Nature, vol. 7(5), pages 590-601, May.
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    12. Miriam Berretta & Joshua Furgeson & Yue (Nicole) Wu & Collins Zamawe & Ian Hamilton & John Eyers, 2021. "Residential energy efficiency interventions: A meta‐analysis of effectiveness studies," Campbell Systematic Reviews, John Wiley & Sons, vol. 17(4), December.
    13. Hammerle, Mara & Burke, Paul J., 2022. "From natural gas to electric appliances: Energy use and emissions implications in Australian homes," Energy Economics, Elsevier, vol. 110(C).
    14. Alexander Leodolter & Savina Princen & Aleksander Rutkowski, 2022. "Immovable Property Taxation for Sustainable and Inclusive Growth," European Economy - Discussion Papers 156, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    18. Galina Besstremyannaya & Sergei Golovan, 2019. "Reconsideration of a simple approach to quantile regression for panel data: a comment on the Canay (2011) fixed effects estimator," Working Papers w0249, Center for Economic and Financial Research (CEFIR).
    19. Spandagos, Constantine & Baark, Erik & Ng, Tze Ling & Yarime, Masaru, 2021. "Social influence and economic intervention policies to save energy at home: Critical questions for the new decade and evidence from air-condition use," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    20. Galina Besstremyannaya & Sergei Golovan, 2019. "Reconsideration of a simple approach to quantile regression for panel data: a comment on the Canay (2011) fixed effects estimator," Working Papers w0249, New Economic School (NES).

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    More about this item

    Keywords

    Energy Efficiency; Household Behavior; Energy Efficiency Incentives; Electricity Usage; Rebound Effect; Free Rider;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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