Buying down our carbon footprint: An econometric analysis of the impact of green pricing programs on electricity consumption in the US residential sector

Abstract

Rising global temperatures caused by carbon dioxide emissions have created environmental and health risks worldwide. Many state governments have rallied around green pricing programs to incentivize energy conservation and reduce CO2 emissions by requiring utilities to make these programs available to their customers. By buying green power, customers increase demand, and in turn supply, for renewable energy production; thereby shifting electricity consumption and generation from carbon to non-carbon energy sources. Green pricing programs show promise particularly in urban areas, where high population density increases energy demand. This study examines whether these programs have the potential to reduce electricity consumption in the residential sector, which accounts for approximately 21% of the total energy consumption in the United States. Employing state- and time-fixed effects regression, the results of this analysis show that participation in GPPs has a statistically significant negative correlation with residential electricity consumption rates; indicating that green pricing programs may reduce electricity consumption, thereby mitigating environmental impacts associated with generating electricity. However, results also show that GPP participation rates would need to increase by over 300% to achieve even relatively small reductions in electricity consumption. Further research and analysis can identify program features to improve participation rates, as well as find ways to strengthen program efficacy in delivering greater energy savings.