Free-Riding on Energy Efficiency Subsidies: the Case of Natural Gas Furnaces in Canada

Nicholas Rivers and Leslie Shiell

No E1404E, Working Papers from University of Ottawa, Department of Economics

Abstract: We assess the extent to which subsidies for home energy efficiency improvements in Canada have been paid to households that would have undertaken the improvements anyway – the so-called free rider rate. We focus on forced-air natural gas furnaces, replaced between April 1, 2007 and March 31, 2011, under both federal and provincial subsidy programs as well as the 2009 federal Home Renovation Tax Credit. Our results indicate that around 70 percent of expenditures under the Canadian subsidy and tax credit programs represented free riding. We estimate that the cost effectiveness of the programs in terms of greenhouse gas reduced was at least $100/t CO2, and potentially as high as $800/t CO2, depending on the assumptions made. Further, we find that a substantial majority of the grants were received by middle- and high-income households, such that the grant had a regressive effect on the distribution of income. We conclude that such grants are not an optimal way to improve residential energy efficiency.

Keywords: household energy efficiency; subsidies (search for similar items in EconPapers)
JEL-codes: H2 Q4 Q5 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Free-Riding on Energy Efficiency Subsidies: the Case of Natural Gas Furnaces in Canada (2016)
Journal Article: Free Riding on Energy Efficiency Subsidies: The Case of Natural Gas Furnaces in Canada (2016)
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