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Income targeting in consumer energy efficiency programs

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  • Chan, Nathan W.
  • Globus-Harris, Isla

Abstract

Consumer energy efficiency programs are common around the world, and they frequently include some form of income-based targeting, whether intentional or not. In this paper, we ask: What are the environmental and welfare impacts of income-based targeting in consumer energy efficiency programs? To that end, we present a model with high- and low-income consumers, and we analyze how income targeting affects consumer welfare, distribution, and input (fuel) externalities. We derive a number of policy-relevant expressions that illuminate how initial appliance stocks, energy service demand levels, and demand responsiveness underpin these welfare impacts, and we analyze how these expressions differ across various real-world applications. We furthermore illustrate core trade-offs using two simulations. We offer actionable and easy-to-implement guidance to policymakers and program managers considering income targeting provisions.

Suggested Citation

  • Chan, Nathan W. & Globus-Harris, Isla, 2025. "Income targeting in consumer energy efficiency programs," Energy Economics, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:eneeco:v:143:y:2025:i:c:s0140988325000726
    DOI: 10.1016/j.eneco.2025.108249
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    Keywords

    Energy efficiency; Targeting; Energy policy; Externalities; Distribution; Demand-side management;
    All these keywords.

    JEL classification:

    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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