The Impact of Incentives on the Energy Paradox: Evidence from Micro Data

Cristian Huse () and Claudio Lucinda

No 2019_39, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: We examine the effects on the valuation of energy efficiency of PERCEE, the largest temporary electricity savings program worldwide. Using data from a representative sample of Brazilian households, we estimate a structural model of appliance choice accounting for heterogeneity in prices and operating costs. We document that it is only through incentives introduced by the PERCEE program that one cannot reject the null of correct valuation of energy costs against the two-sided alternative. Moreover, once PERCEE ends, households essentially revert to pre-program valuations, suggesting the lack of long-run effects of the program. Despite increases in the valuation of energy costs, the heterogeneous responses imply that monetary savings and the social benefit of carbon savings are concentrated among few consumers. Finally, we exploit PERCEE's design to decompose the energy efficiency gap into incentives and information components to find that the former is about twice as large as the latter.

Keywords: energy efficiency; energy paradox; energy efficiency gap; information label; electricity demand; energy demand; mixed logit; household appliance (search for similar items in EconPapers)
JEL-codes: D12 D83 L15 L68 Q48 (search for similar items in EconPapers)
Date: 2019-10-08, Revised 2019-10-16
New Economics Papers: this item is included in nep-com, nep-ene and nep-reg
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