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

Stephie Fried, David Lagakos and Hannah Rhodenhiser

No 35945, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E0 E23 H23 Q43 Q50 Q54 (search for similar items in EconPapers)
Date: 2026-10
Note: EEE
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