Household energy use, energy efficiency, emissions, and behaviors

Abstract

Energy and greenhouse gas (GHG) emissions generally aim to (i) reduce energy use and hence emissions, (ii) steer consumers away from fossil fuels and/or electricity generated from fossil fuels, and (iii) align demand and supply, making sure that the existing infrastructure can handle times of high demand. Policies thus include a variety of pricing schemes, taxes on energy inputs, energy efficiency standards and incentives, and renewables standards and incentives. Ex ante and ex post analyses of their effectiveness thus rely crucially on understanding how consumers respond to pricing schemes, taxes, and other policies. This paper presents an overview of the challenges faced when empirically estimating household energy demand. It describes the difficulties associated with estimating the price elasticity of demand, discussing behavioral responses that may make consumers relatively insensitive to price changes or taxes. It also surveys empirical evidence about non-price policies, such as clearer information or real-time feedback about energy use, and appeal to norms. The paper concludes discussing evidence about the rebound effect, the energy efficiency gap, and how suppliers respond to a variety of policies.