Split Incentives in Residential Energy Consumption

By Kenneth T. Gillingham, Matthew Harding, D. Rapson. 2012

328 citations recorded by the source corpus.

Abstract We explore two split incentive issues between owners and occupants of residential dwellings: heating or cooling incentives are suboptimal when the occupant does not pay for energy use, and insulation incentives are suboptimal when the occupant cannot perfectly observe the owner’s insulation choice. We empirically quantify the effect of these two market failures and how they affect behavior in California. We find that those who pay are 16 percent more likely to change the heating setting at night and owner-occupied dwellings are 20 percent more likely to be insulated in the attic or ceiling. However, in contrast to common conception, we find that only small overall energy savings may be possible from policy interventions aimed at correcting the split incentive issues.

Subfields: Building and Construction, Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/29a38845132be5b07b8eaa020291479040c48124

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Citations in the corpus

Demand-side solutions for climate mitigation: Bottom-up drivers of household energy behavior change in the Netherlands and Spain (2020, background): “In particular, owners are more likely to invest in insulation and energy-efficient appliances than renters [19,33,34].”
Achieving California's 80% greenhouse gas reduction target in 2050: Technology, policy and scenario analysis using CA-TIMES energy economic systems model (2015, background): “…scenarios do not include new nuclear and CCS technologies (see Supporting information), given the significant uncertainty about their technical and political viability for large-scale deployment in California during the modeling period (CCSRP, 2010; Greenblatt et al., 2012; Richter et al., 2011).”
The role of information for energy efficiency in the residential sector (2015, positive): “More recently, Gillingham et al. (2012), using a large sample of households from the California Statewide Residential Appliance Saturation Study, showed that households occupied by owners had a 20% higher probability of featuring insulation in roofs and attics, while households whose tenants…”
Determinants of households’ investment in energy efficiency and renewables: evidence from the OECD survey on household environmental behaviour and attitudes (2015, background): “…is provided by Davis (2010) who shows that renters are significantly less likely to have energy-efficient refrigerators, clothes washers or dishwashers than owners, while Gillingham et al (2012) demonstrate that owner-occupied dwellings are more likely to be insulated than renteroccupied dwellings.”
Prospect theory and energy efficiency (2019, background): “1 Gillingham et al. (2009) consider how various behavioral economic findings may affect energy-consumption decisions by individuals.”
Pro-environmental Households and Energy Efficiency in Spain (2015, positive): “We follow Gillingham et al. (2012) and restrict the sample to households that have Table 2 Summary statistics of the main variables Variable Measurement Total Obs.”
Nudging Energy Efficiency Behavior: The Role of Information Labels (2014, neutral): “Similarly, Gillingham, Harding, and Rapson (2012) find that owner-occupied houses in California are 12%–20% more likely to have insulation than rental units.”
Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence (2014, positive): “…is empirical evidence suggesting that such situations may lead to increased energy use or reduced energy efficiency in the residential setting (Davis 2012; Gillingham, Harding, and Rapson 2012), although the estimated magnitude of the energy losses from such split incentives is relatively small.”
The Distributional Effects of US Clean Energy Tax Credits (2015, background): “Principal- agent problems cause landlords to underinvest in energy efficiency when their tenants pay the utility bill (Davis 2012; Gillingham et al. 2012; Myers 2013).”
Chapter 5 – Is There an Energy Efficiency Gap? (2012, positive): “As both Davis (2010) and Gillingham, Harding, and Rapson (2012) note, conditional differences in appliance ownership between owners and renters are not ironclad evidence of a market failure, because preferences or housing stock could vary in unobservable ways.”
Durable goods and long-run electricity demand: : Evidence from air conditioner purchase behavior (2014, background): “Table (10) displays statistics that emerge from each of these models.”
Making the implicit explicit: A look inside the implicit discount rate (2016, background): “Empirical findings confirm that owner-occupied homes are more likely to adopt insulation measures (e.g. Ameli and Brandt, 2015; Gillingham et al., 2012; Krishnamurthy and Kriström, 2015; Scott, 1997) and energy-efficient appliances (Ameli and Brandt, 2015; Davis, 2011; Krishnamurthy and Kriström, 20”
Understanding the spectrum of residential energy-saving behaviours: French evidence using disaggregated data (2016, neutral): “It has been in the scope of several studies such as Labandeira et al. (2005) regarding prices; Cayla et al.”