Hunt Allcott

Behavior and Energy Policy

Investment in scalable, non–price-based behavioral interventions and research may prove valuable in improving energy efficiency. Many countries devote substantial public resources to research and development (R&D) for energy-efficient technologies. Energy efficiency, however, depends on both these technologies and the choices of the user. Policies to affect these choices focus on price changes (e.g., subsidies for energy-efficient goods) and information disclosure (e.g., mandated energy-use labels on appliances and autos). We argue that a broader approach is merited, one that draws on insights from the behavioral sciences. Just as we use R&D to develop “hard science” into useful technological solutions, a similar process can be used to develop basic behavioral science into large-scale business and policy innovations. Cost-effectiveness can be rigorously measured using scientific field-testing. Recent examples of scaling behaviorally informed R&D into large energy conservation programs suggest that this could have very high returns.

Gasoline Prices, Fuel Economy, and the Energy Paradox

Policymakers often assert that consumers undervalue future gasoline costs when they buy automobiles. We test this by measuring whether relative prices of vehicles with different fuel economy ratings fully adjust to variation in gasoline prices. Vehicle prices move as if consumers are indifferent between

How Do Electricity Shortages Affect Industry? Evidence from India

1.00 in discounted future gas cost and

Opportunities for advances in climate change economics

0.76 in vehicle purchase price. We show how corrections for endogenous market shares and utilization, measurement error, and different gasoline price forecasts affect the results. We also provide unique evidence of sticky information: vehicle markets respond to changes in gasoline prices with up to a six-month delay.

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

We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India’s average reported level of shortages reduces the average plant’s revenues and producer surplus by five to ten percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impact of shortages.

CLIMATE ECONOMICS. Opportunities for advances in climate change economics.

Target carbons costs, policy designs, and developing countries There have been dramatic advances in understanding the physical science of climate change, facilitated by substantial and reliable research support. The social value of these advances depends on understanding their implications for society, an arena where research support has been more modest and research progress slower. Some advances have been made in understanding and formalizing climate-economy linkages, but knowledge gaps remain [e.g., as discussed in (1, 2)]. We outline three areas where we believe research progress on climate economics is both sorely needed, in light of policy relevance, and possible within the next few years given appropriate funding: (i) refining the social cost of carbon (SCC), (ii) improving understanding of the consequences of particular policies, and (iii) better understanding of the economic impacts and policy choices in developing economies.

Social norms and energy conservation

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. The programs we study reduce social welfare by

Is There an Energy Efficiency Gap

0.18 per subsidy dollar, because investment subsidies are poorly targeted to externality damages and marginal program participants are unlikely to make externality-reducing investments. Such self-selection may undermine socially desirable program expansion in this and other domains.

The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation †

Target carbons costs, policy designs, and developing countries There have been dramatic advances in understanding the physical science of climate change, facilitated by substantial and reliable research support. The social value of these advances depends on understanding their implications for society, an arena where research support has been more modest and research progress slower. Some advances have been made in understanding and formalizing climate-economy linkages, but knowledge gaps remain [e.g., as discussed in (1, 2)]. We outline three areas where we believe research progress on climate economics is both sorely needed, in light of policy relevance, and possible within the next few years given appropriate funding: (i) refining the social cost of carbon (SCC), (ii) improving understanding of the consequences of particular policies, and (iii) better understanding of the economic impacts and policy choices in developing economies.