Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

Q48: Energy: Government Policy

Measuring the Welfare Effects of Residential Energy Efficiency Programs

Hunt Allcott, Michael Greenstone

 This paper sets out a framework to evaluate the welfare impacts of residential energy efficiency programs in the presence of imperfect information, behavioral biases, and externalities, then estimates key parameters using a 100,000-household field experiment. Several results run counter to conventional wisdom: we find no evidence of informational or behavioral failures thought to reduce program participation, there are large unobserved benefits and costs that traditional evaluations miss, and realized energy savings are only 58 percent of predictions.

Measuring the Welfare Effects of Residential Energy Efficiency Programs with Self-Selection into Program Participation

Hunt Allcott, Michael Greenstone

We introduce a framework to evaluate the welfare effects of residential energy efficiency programs and estimate key parameters using a 100,000-household field experiment. Results generally contradict conventional wisdom: there is no evidence of informational or behavioral market failures, efficiency investments entail large non-monetary costs and benefits, and realized energy savings are just 58% of engineering predictions.