Energy Efficiency

Slides

Lecture 1

Intro to energy efficiency

  • Basic economics of adoption of energy saving capital.
  • Review evidence and policy motivated by an apparent energy efficiency “gap”.
  • Discuss “rational” and behavioral explanations.

Pre-class

  • Read Allcott & Greenstone (JEP 2012).
  • Come to class prepared to discuss the following questions:
    1. What is the energy efficiency gap?
    2. What are some “rational” explanations?

Post-class

  • Work through the energy efficiency gap simulation here for a numerical demonstration of the EE gap model.

Lecture 2

Nudges and Libertarian Paternalism

  • Introduce the concept of nudges and libertarian paternalism.
  • Discuss different with mandates and subsidies.
  • Main method to evaluate their effectiveness is through RCTs.
  • Broaden the model to allow products to differ in non-energy attributes.

Pre-class

  • Watch this short video on nudges and libertarian paternalism.
  • Allcott & Taubinsky (AER 2015)
    • For this paper, do not worry about the theory section. Just read the intro, the experiments, and the results (ie skip section II).
    • Come prepared to discuss:
      • What questions is this paper trying to answer about the energy efficiency gap?
      • How do the different experimental groups vary?
      • What are the main results?
  • (Optional but recommended)Allcott & Sweeney (MS 2017)

Post-class

  • Read Allcott (2016) “Paternalism and Energy Efficiency: An Overview”
  • Do this practice problem exploring the welfare of energy efficiency subsidies and bans.
    • Solutions are here

Lecture 3

Measurement and the Weatherization Wars

  • In our simple model of energy efficient appliance adoption, we assume that we know how much energy each option uses. In reality, this is often not clear.
  • Recently, there was a very public debate of the benefits of weatherization. Some prominent economists conducted a study which called into question the wisdom of a popular energy efficiency program.

Pre-class

  • Read this summary of their critique here, and a blog post from one of the authors here
  • Then read the published article on the study here (Fowlie, Greenstone and Wolfram QJE 2018)
    • Read the intro, try to understand the experiment setup, and read the results.
  • (Optional) You can read a rebuttal in the New York Times here

Post-class

  • Do problems 1.1 through 1.5 of this problem set from last year. Data available to download here.
    • You can do this in Stata, R, Python, or even Excel if you prefer. I have solutions in Stata if you want to check your work.
    • This problem set gives you a numerical example of the issue of “selection” bias that we discussed in class. It uses a fake dataset where we know the “truth” to illustrate how selection bias can lead to incorrect estimates of energy savings when individuals opt in to energy policy.
    • The remaining problems 1.6 through 1.9 are more advanced, and were not covered in class this year. But the instructions are sufficiently detailed that you can try them on your own if you are interested.
  • Solutions: here are the slides I went over in class on this problem. It contains solutions as well as a broader discussion of the challenges in estimating policy impacts in the presence of selection bias.
    • Here is a Stata do file with solutions.