Cash for Coolers: Evaluating a Large-Scale Appliance Replacement Program in Mexico

Davis, Lucas W.; Fuchs, Alan; Gertler, Paul

doi:10.1257/pol.6.4.207

Cited by 201 publications

(154 citation statements)

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“…Engineering-economic analyses typically estimate energy savings that exceed savings observed in ex post energy consumption data (Davis, Fuchs, and Gertler 2014). Ignoring heterogeneity can bias energy savings estimates upward: systematic differences between past and future adopters can drive a wedge between observed and potential returns for a given investment.…”

Section: Arementioning

confidence: 99%

Deconstructing the Energy-Efficiency Gap: Conceptual Frameworks and Evidence

Gerarden¹,

Newell²,

Stavins³

2015

American Economic Review

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). This paper draws in part on a workshop held at Harvard, as well as on Gerarden, Newell, and Stavins (2015). We thank the workshop participants and gratefully acknowledge financial support from the Alfred P. Sloan Foundation.† Go to http://dx.doi.org/10.1257/aer.p20151012 to visit the article page for additional materials and author disclosure statement(s).Energy-efficient (EE) technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use, but these technologies appear not to be adopted to the degree that appears justified, even on a purely private basis.We present two complementary frameworks for understanding the energy-efficiency gap. First, we build upon previous literature (Jaffe and Stavins 1994; Gillingham, Newell, and Palmer 2009) by dividing potential explanations for the gap into three categories: market failures, behavioral explanations, and model and measurement errors. Second, we examine the elements of cost-minimizing EE decisions, the typical benchmark used in assessing the gap's magnitude. I. Potential ExplanationsFirst, potential market-failure explanations for the EE gap include information asymmetries and imperfections in markets for energy, capital, and innovation.Second, potential behavioral explanations include myopia, cognitive limitations, inattentiveness, loss aversion and reference dependence, and systematically biased beliefs.Third, there are potential model and measurement explanations. These feature reasons why the adoption rate of EE technology may not be as paradoxical as it first appears. Potential sources of model and measurement error include unobserved costs or overstated energy savings from adoption, ignored product attributes, heterogeneity across potential adopters, use of inappropriate discount rates, and uncertainty.Determining the validity of candidate explanations and the degree to which each contributes to the EE gap are crucial for crafting sensible public policy responses. II. Elements of Cost-Minimizing DecisionsTo provide structure to the diverse set of economic elements that enter into adoption decisions related to energy efficiency, it is useful to examine the elements of cost-minimizing technology adoption decisions:where equipment purchase cost K(E) is a function of annual energy use E; discounted operating costs are equal to annual operating cost O(E, P E ) multiplied by a discount factor D(r, T); O is a function of energy use E and the price of energy P E ; D is a function of the discount rate r and the relevant time horizon T; and C is other costs. This formula is deliberately simple, and does not explicitly account for all relevant factors, such as uncertainty. Nonetheless, the decomposition suggests four questions around which to organize assessment of the EE gap.

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Section: Arementioning

confidence: 99%

Deconstructing the Energy-Efficiency Gap: Conceptual Frameworks and Evidence

Gerarden¹,

Newell²,

Stavins³

2015

American Economic Review

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“…Just as in developed countries, many developing countries implement policies in seemingly arbitrary ways or use discrete rules to determine eligibility, which facilitates credible policy evaluation. Examples include China's Huai River policy, which provided free coal for winter heating to the north of the river but forbade winter heating with coal in the south , and Mexico's appliance buy-back program, which set subsidy levels based on past energy consumption thresholds (Davis et al 2012). In addition, there has been a near explosion of studies in developing countries that demonstrate the power of randomized control trials or field experiments to identify key parameters or relationships (e.g., Berry et al (2011);Duflo et al (2012Duflo et al ( , 2013; Jack (2013); Kremer et al (2011);Miller and Mobarak (2011);Bennear et al (2012), and others still in progress).…”

Section: A Promising Confluence Of Trendsmentioning

confidence: 99%

“…Poor targeting also increases the marginal cost of environmental quality improvements. Another program in Mexico that subsidized the purchase of energy efficient appliances performed very poorly, actually increasing energy consumption for some appliances, while ex ante engineering estimates indicated that the program would pay for itself in energy savings (Davis et al 2012). The extreme overestimate of the program's effectiveness was due to a combination of changes in the types of appliances purchase, usage patterns and the inclusion of many inframarginal households (Boomhower and Davis 2013;Davis et al 2012).…”

Section: Explanation 2: High Marginal Costsmentioning

confidence: 99%

Envirodevonomics: A Research Agenda for a Young Field

Greenstone

Jack

2013

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Environmental quality in many developing countries is poor and generates substantial health and productivity costs. However, existing measures of willingness to pay for environmental quality improvements indicate low valuations by affected households. This paper argues that this seeming paradox is the central puzzle at the intersection of environmental and development economics: Given poor environmental quality and high health burdens in developing countries, why is WTP so low? We develop a conceptual framework for understanding this puzzle and propose four potential explanations: (1) due to low income levels, individuals value increases in income more than marginal improvements in environmental quality, (2) the marginal costs of environmental quality improvements are high, (3) political economy factors undermine efficient policy-making, and (4) market failures such as weak property rights and missing capital markets drive a wedge between true and revealed willingness to pay for environmental quality. We review the available literature on each explanation and discuss how the framework also applies to climate change, which is perhaps the most important issue at the intersection of environment and development economics. The paper concludes with a list of promising and unanswered research questions for the emerging sub-field of "envirodevonomics."

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“…The Federal Electricity Commission (CFE) has been reformed with the objective of forming and regulating a competitive electricity market with incentives for private investment (IEA 2017). In the residential electricity market, large seasonal subsidies continue to exist in warmer regions of Mexico to cover higher demand for air conditioning (IEA Subsidies Report 2017; Davis et al 2014;Komives et al 2009). …”

Section: Introductionmentioning

confidence: 99%

Household welfare and CO2 emission impacts of energy and carbon taxes in Mexico

2018

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Household Welfare and CO2 Emission Impacts of Energy and Carbon Taxes in Mexico AbstractWe analyse the effects of environmental taxes on welfare and carbon emissions at the household level for the case of Mexico. The integrated welfare-environmental analysis, which is based on a censored energy consumer demand system, extends previous work in two ways. First, the estimation of a full matrix of substitution elasticities allows us to test the necessity of incorporating second-order effects into the welfare analysis. Second, the substitution elasticities derived from the demand system are used to estimate the shortrun CO2 emission-reduction potential. We find that first-order approximations of welfare effects provide reasonable estimates, particularly for carbon taxes. Analog to evidence in other low-and middle-income countries, the taxation of all energy items is found to be regressive, with the exception of motor fuels. The inclusion of CH4 and N2O in a carbon tax regime comes with particularly regressive impacts because of its strong effects on food prices. The analysis of the emission implications of different tax scenarios indicates that short-run emission reductions at the household level can be substantial -though the effects depend on how revenue is recycled. This effectiveness combined with moderate and manageable adverse distributional impacts renders the carbon tax a preferred mitigation instrument. Considering the large effect of food price increases on poverty and the limited additional emission-saving potential, the inclusion of CH4 and N2O in a carbon tax regime is not advisable.

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Cash for Coolers: Evaluating a Large-Scale Appliance Replacement Program in Mexico

Cited by 201 publications

References 30 publications

Deconstructing the Energy-Efficiency Gap: Conceptual Frameworks and Evidence

Deconstructing the Energy-Efficiency Gap: Conceptual Frameworks and Evidence

Envirodevonomics: A Research Agenda for a Young Field

Household welfare and CO2 emission impacts of energy and carbon taxes in Mexico

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