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The behavioral response to voluntary provision of an environmental public good: Evidence from residential electricity demand

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Author Info

  • Jacobsen, Grant D.
  • Kotchen, Matthew J.
  • Vandenbergh, Michael P.

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.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 5 ()
Pages: 946-960

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:5:p:946-960

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Green electricity; Voluntary environmental protection; Carbon offset; Renewable energy; Moral licensing; Residential electricity demand;

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References

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  1. Stefano DellaVigna & John List & Ulrike Malmendier, 2012. "Testing for altruism and social pressure in charitable giving," Natural Field Experiments 00137, The Field Experiments Website.
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  7. Matthew Kotchen & Michael Moore, 2007. "Conservation: From Voluntary Restraint to a Voluntary Price Premium," NBER Working Papers 13678, National Bureau of Economic Research, Inc.
  8. Andreoni, James, 1988. "Privately provided public goods in a large economy: The limits of altruism," Journal of Public Economics, Elsevier, Elsevier, vol. 35(1), pages 57-73, February.
  9. Jacobsen, Grant D., 2011. "The Al Gore effect: An Inconvenient Truth and voluntary carbon offsets," Journal of Environmental Economics and Management, Elsevier, vol. 61(1), pages 67-78, January.
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  11. Rose-Ackerman, Susan, 1982. "Charitable Giving and "Excessive" Fundraising," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(2), pages 193-212, May.
  12. Matthew J. Kotchen, 2006. "Green Markets and Private Provision of Public Goods," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(4), pages 816-845, August.
  13. Harbaugh, William T, 1998. "The Prestige Motive for Making Charitable Transfers," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 277-82, May.
  14. Matthew J. Kotchen, 2007. "Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets," NBER Working Papers 13643, National Bureau of Economic Research, Inc.
  15. Rose, Steven K. & Clark, Jeremy & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D., 1999. "The Private Provision of Public Goods: Tests of a Provision Point Mechanism for Funding Green Power Programs," Working Papers, Cornell University, Department of Applied Economics and Management 127699, Cornell University, Department of Applied Economics and Management.
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Citations

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Cited by:
  1. repec:hhs:slucer:2014_007 is not listed on IDEAS
  2. Bluemling, Bettina & de Visser, Ina, 2013. "Overcoming the “club dilemma” of village-scale bioenergy projects—The case of India," Energy Policy, Elsevier, Elsevier, vol. 63(C), pages 18-25.
  3. Paul Dolan & Matteo M. Galizzi, 2014. "Because I'm Worth It: A Lab-Field Experiment on the Spillover Effects of Incentives in Health," CEP Discussion Papers dp1286, Centre for Economic Performance, LSE.
  4. Katrina Jessoe & David Rapson, 2014. "Knowledge Is (Less) Power: Experimental Evidence from Residential Energy Use," American Economic Review, American Economic Association, American Economic Association, vol. 104(4), pages 1417-38, April.
  5. Grant Jacobsen & Matthew Kotchen & Greg Clendenning, 2013. "Community-based incentives for environmental protection: the case of green electricity," Journal of Regulatory Economics, Springer, Springer, vol. 44(1), pages 30-52, August.
  6. Kiran Krishnamurthy, Chandra & Kriström, Bengt, 2013. "Determinants of the price-premium for Green Energy: Evidence from an OECD cross-section," CERE Working Papers 2013:7, CERE - the Center for Environmental and Resource Economics, revised 30 Jun 2014.

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