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This paper studies the effect of electricity prices on state commitment to energy efficiency in the USA. Using panel data we find that electricity prices have a significant positive effect on state energy efficiency expenditures. Moreover, we find that this effect is particularly pronounced beyond a certain threshold level of prices. The rationale for these findings is that higher prices increase the costeffectiveness of energy efficiency programs. These findings have important implications for state expenditures on energy efficiency if electricity prices rise in response to carbon and other stringent environmental regulations.

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