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Climate Economics Seminar: Modeling Household Energy Consumption and Adoption of Energy-efficient Technology Using Recent Micro-data

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Date(s): June 27, 2012, 2-3:30 PM

Location: Room 4150, EPA West Building, 1301 Constitution Ave., NW, Washington, DC

Contact: Carl Pasurka, 202-566-2275

Presenter: Jia Li, Climate Economics Branch, U.S. Environmental Protection Agency

Description: This paper presents a unified technology choice and energy consumption model (a “discrete/continuous model”) that can be applied to study household energy use behavior. The model, stemming from consumer theory, ensures modeling of consumer short-run energy demand and long-run capital investment decisions in a mutually consistent manner. The model adopts a second-order translog flexible functional form that allows considerable structural flexibility in exploring consumer preferences and interplays among energy uses and between short-run and long-run choices. Using a unique California household dataset, the model is applied to examine the roles of household characteristics, energy prices, and energy and environmental policy in household energy use behavior. Estimation results demonstrate the modeling framework is robust and appropriate in studying household energy use behavior.

This study confirms two important market failures with respect to household energy technology choice behavior: the principal/agent problem and information imperfection. The empirical analysis finds strong evidence that information-based Energy Star program influences the adoption of energy-efficient appliances. Surprisingly, financial incentives aimed to lower the initial costs of energy-efficient appliances, such as the popular rebate programs, are far less effective. Furthermore, at the household level the incentive for new technology adoption appears to be greater under regulation than under market-based instruments.


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