Tagging and Targeting of Energy Efficiency Subsidies
Author(s)
Allcott, Hunt; Taubinsky, Dmitry; Knittel, Christopher Roland
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A corrective tax or subsidy is "well-targeted" if it primarily affects choices that are more distorted by market failures. Energy efficiency subsidies are designed to correct multiple distortions: externalities, credit constraints, "landlord-tenant" information asymmetries, imperfect information, and inattention. We show that three important energy efficiency subsidies are primarily taken up by consumers who are wealthier, own their own homes, and are more informed about and attentive to energy costs. This suggests that these subsidies are poorly targeted at the market failures they were designed to address. However, we show that "tagging" can lead to large efficiency gains.
Date issued
2015-05Department
Sloan School of ManagementJournal
American Economic Review
Publisher
American Economic Association
Citation
Allcott, Hunt, Christopher Knittel, and Dmitry Taubinsky. “Tagging and Targeting of Energy Efficiency Subsidies.” American Economic Review 105, no. 5 (May 2015): 187–91. © 2015 American Economic Association
Version: Final published version
ISSN
0002-8282
1944-7981