"More bang for the buck"? Evidence on the effectiveness of an energy efficiency subsidy

Arbeitspapier

With the aim of limiting global warming, environmental subsidies are a popular public finance instrument to reduce carbon emissions. However, there is little evidence on why subsidies are effective in increasing demand for the goods subsidized. We use a framed field experiment to disentangle and study the relative importance of the price and non-price effects implicit in a subsidy encouraging an energy-efficiency investment. In the experiment, participants decide on purchasing 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-percent when the price decreases and a significantly larger demand increase of about 9-percent when the subsidy is introduced. An analysis of the underlying channels rules out changes in beliefs and 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 23-022

Classification and Topics

• Classification: Wirtschaft ; Field Experiments ; Micro-Based Behavioral Economics: General‡ ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Energy: Other
• Subject: Behavioral public economics ; subsidies ; spillover ; energy efficiency ; field experiment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bartels, Lara ; Werthschulte, Madeline
• Event: Veröffentlichung
• (who): ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
• (where): Mannheim
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/273464
• Last update: 10.03.2025, 11:41 AM CET