This article shows that a simple monetary incentive can dramatically reduce electric energy consumption (EEC) in the residential sector and simultaneously achieve a more desirable allocation of EEC costs. The analyses are based on data from a policy experiment conducted in 2011 and 2012 by a private housing company in about 1,800 apartments. Roughly 800 of the tenants (treatment group) were subject to a change from having unlimited EEC included in their rent to having to pay the market price for their own EEC. This change was achieved by installing EEC meters in each apartment. Tenants in the other 1,000 apartments (control group) experienced no policy change and were subject to apartment-level billing and metering during the entire study period. Using a quasiexperimental research design and daily data on EEC from 2007 to 2015, we estimate that apartmentlevel billing and metering permanently reduce EEC by about 25%. Moreover, we show that households reduce EEC immediately after being informed that they will be billed for EEC, the reduction is larger when the production cost is higher, and the reduction in EEC comes almost exclusively from households with very high EEC before the policy change. Finally, we show that apartment-level billing and metering are cost-effective, with a cost per reduced kilowatt hour of US$0.01, and for each invested dollar, the social value of reductions in air pollution, including CO 2 emissions, is $2.sub metering | environment | smart meters | energy conservation | quasiexperiment L imiting adverse effects on individuals and societies from climate change requires effective governance of the global environment (1). Because current private incentives to reduce energy consumption are weaker than the collective incentives to prevent global warming (and other negative side effects of energy consumption), the problem can be described as a tragedy of the commons (2). Societies throughout history have used different strategies to overcome the commons problem (3). Although it has proved easier to develop effective strategies for management of local public goods (commons) than global public goods, like the climate, ineffective management at the local level still contributes to massive overuse of energy.In this article, we evaluate the effectiveness of a well-defined strategy-apartment-level billing and metering-to handle this local commons problem. Tenants in many housing areas are allowed to consume unlimited electric energy without paying the costs of their own consumption. With this type of contract between the tenant and the landlord, the landlord typically pays the utility bills and adds a fixed share of the total costs to the rent of each tenant. When unlimited consumption of electric energy (or other resources; e.g., water or heating) is included in the rent for tenants, they have no monetary incentive to reduce consumption, because the cost of their consumption is typically shared among a large number of tenants.As shown below, solving this local problem can help us manage global probl...