‘More Bang for the Buck’? Experimental Evidence on the Mechanisms of an Energy Efficiency Subsidy

Lara Bartels () and Madeline Werthschulte ()
Additional contact information
Lara Bartels: Max Planck Institute for Research on Collective Goods
Madeline Werthschulte: Vrije Universiteit

Environmental & Resource Economics, 2025, vol. 88, issue 3, No 3, 654 pages

Abstract: Abstract Environmental subsidies are a popular public finance instrument used to reduce carbon emissions. However, there is little evidence on the mechanisms underlying the demand response to the introduction of a subsidy. We use a framed field experiment to disentangle the relative importance of the price and non-price effects implicit in a subsidy encouraging an energy-efficiency investment. In the experiment, participants decide whether or not to purchase a low-flow showerhead and are either confronted with the introduction of a subsidy or a same-sized price decrease. We find a demand increase of about 3 percentage points when the price decreases and a significantly larger demand increase of about 9 percentage points when the subsidy is introduced. An analysis of the underlying channels rules out changes in beliefs and social norm perceptions. Positive spill-over effects of the subsidy on other pro-environmental behaviors rather suggest that the non-price effect is explained by a crowding in of intrinsic motivation.

Keywords: Behavioral public economics; Energy efficiency; Field experiment; Subsidies (search for similar items in EconPapers)
JEL-codes: C93 D90 H23 Q49 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10640-024-00942-2 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:88:y:2025:i:3:d:10.1007_s10640-024-00942-2

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

DOI: 10.1007/s10640-024-00942-2

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().