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Homework in Climate Economics: Household Production, Environmental Preferences, and Climate Policy

Author

Listed:
  • Stephie Fried
  • David Lagakos
  • Hannah Rhodenhiser

Abstract

Household energy use accounts for approximately one third of U.S. emissions. Guided by a new survey, we develop a quantitative model in which households differ in income and their desire to reduce their emissions. Our analysis of cost-minimizing subsidies for clean equipment, such as electric vehicles and heat pumps, and residential solar yields three insights. First, solar receives the highest subsidy rate and accounts for over one third of abatement, reflecting its complementarities with clean equipment. Second, restricting subsidy eligibility to lower-income households generates only small cost savings. Third, without environmental preferences, household emissions would be over 15 percent higher.

Suggested Citation

  • Stephie Fried & David Lagakos & Hannah Rhodenhiser, 2026. "Homework in Climate Economics: Household Production, Environmental Preferences, and Climate Policy," NBER Working Papers 35945, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35945
    Note: EEE
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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