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Split Incentives in Residential Energy Consumption

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  • Kenneth Gillingham, Matthew Harding, and David Rapson

Abstract

We explore two split incentive issues between owners and occupants of residential dwellings: heating or cooling incentives are suboptimal when the occupant does not pay for energy use, and insulation incentives are suboptimal when the occupant cannot perfectly observe the owner's insulation choice. We empirically quantify the effect of these two market failures and how they affect behavior in California. We find that those who pay are 16 percent more likely to change the heating setting at night and owner-occupied dwellings are 20 percent more likely to be insulated in the attic or ceiling. However, in contrast to common conception, we find that only small overall energy savings may be possible from policy interventions aimed at correcting the split incentive issues.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 33 (2012)
Issue (Month): Number 2 ()
Pages:

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Handle: RePEc:aen:journl:33-2-03

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Eficiencia y equidad y las medidas de mejora energética de las edificaciones
    by Ana Ramos in Economics for Energy on 2012-03-16 09:29:00
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Cited by:
  1. Mills, Bradford & Schleich, Joachim, 2013. "Household transitions to energy efficient lighting," Working Papers "Sustainability and Innovation" S5/2013, Fraunhofer Institute for Systems and Innovation Research (ISI).
  2. Wilkerson, Jordan T. & Cullenward, Danny & Davidian, Danielle & Weyant, John P., 2013. "End use technology choice in the National Energy Modeling System (NEMS): An analysis of the residential and commercial building sectors," Energy Economics, Elsevier, vol. 40(C), pages 773-784.
  3. Kiran Krishnamurthy, Chandra & Kriström, Bengt, 2013. "How large is the Owner-Renter Divide? Evidence from an OECD cross-section," CERE Working Papers 2013:8, CERE - the Center for Environmental and Resource Economics.
  4. Gillingham, Kenneth & Palmer, Karen, 2013. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Discussion Papers dp-13-02-rev, Resources For the Future.
  5. Suter, Jordan F. & Shammin, Md Rumi, 2013. "Returns to residential energy efficiency and conservation measures: A field experiment," Energy Policy, Elsevier, vol. 59(C), pages 551-561.
  6. Newell, Richard G. & Siikamäki, Juha, 2013. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Discussion Papers dp-13-17, Resources For the Future.
  7. Peter Newton & Peter Newman, 2013. "The Geography of Solar Photovoltaics (PV) and a New Low Carbon Urban Transition Theory," Sustainability, MDPI, Open Access Journal, vol. 5(6), pages 2537-2556, June.
  8. Xavier Labandeira & Ana Ramos, 2012. "Household Environmental Attitudes and Energy Efficiency in Buildings: Evidence from Spanish Data," Working Papers fa08-2012, Economics for Energy.
  9. repec:hhs:slucer:2014_008 is not listed on IDEAS

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