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Tagging and Targeting of Energy Efficiency Subsidies

Author

Listed:
  • Hunt Allcott
  • Christopher Knittel
  • Dmitry Taubinsky

Abstract

A corrective tax or subsidy is "well-targeted" if it primarily affects choices that are more distorted by market failures. Energy efficiency subsidies are designed to correct multiple distortions: externalities, credit constraints, "landlord-tenant" information asymmetries, imperfect information, and inattention. We show that three important energy efficiency subsidies are primarily taken up by consumers who are wealthier, own their own homes, and are more informed about and attentive to energy costs. This suggests that these subsidies are poorly targeted at the market failures they were designed to address. However, we show that "tagging" can lead to large efficiency gains.

Suggested Citation

  • Hunt Allcott & Christopher Knittel & Dmitry Taubinsky, 2015. "Tagging and Targeting of Energy Efficiency Subsidies," American Economic Review, American Economic Association, vol. 105(5), pages 187-191, May.
    • Handle: RePEc:aea:aecrev:v:105:y:2015:i:5:p:187-91
    Note: DOI: 10.1257/aer.p20151008
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    References listed on IDEAS

    as
    1. Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 3-28, Winter.
    2. Hunt Allcott, 2013. "The Welfare Effects of Misperceived Product Costs: Data and Calibrations from the Automobile Market," American Economic Journal: Economic Policy, American Economic Association, vol. 5(3), pages 30-66, August.
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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