Working Paper: NBER ID: w21331
Authors: Meredith Fowlie; Michael Greenstone; Catherine Wolfram
Abstract: Conventional wisdom suggests that energy efficiency (EE) policies are beneficial because they induce investments that pay for themselves and lead to emissions reductions. However, this belief is primarily based on projections from engineering models. This paper reports on the results of an experimental evaluation of the nation’s largest residential EE program conducted on a sample of more than 30,000 households. The findings suggest that the upfront investment costs are about twice the actual energy savings. Further, the model-projected savings are roughly 2.5 times the actual savings. While this might be attributed to the “rebound” effect – when demand for energy end uses increases as a result of greater efficiency – the paper fails to find evidence of significantly higher indoor temperatures at weatherized homes. Even when accounting for the broader societal benefits of energy efficiency investments, the costs still substantially outweigh the benefits; the average rate of return is approximately -9.5% annually.
Keywords: Energy Efficiency; Weatherization Assistance Program; Energy Savings; Causal Evaluation
JEL Codes: Q4; Q48; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| overestimation of energy savings in engineering models (Q47) | discrepancy in realized energy savings (Q41) |
| WAP participation (I24) | potential rebound effect (E32) |
| WAP participation (I24) | realized energy savings (Q41) |
| WAP participation (I24) | reduction in monthly energy consumption (Q41) |