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Cleaner Nudges? Policy Labels and Investment Decision-making

Abstract:
Recent evidence suggests that labeling of unconditional cash transfers leads recipients to spend more on the labeled good. In this paper we show that the Winter Fuel Payment, an unconditional cash transfer, has distortionary effects on the market for goods related to the labeled product, renewable technologies. Using a Regression Discontinuity Design this analysis finds a robust reduction in the probability to install renewable energy technologies of 1.2 percentage points. Falsification tests support the labeling hypothesis. As a result, households use too much energy from sources which generate pollution and too little from relatively cleaner technologies.

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Energy Specializations: Renewables – Policy and Regulation; Renewables – Other ; Energy and the Environment – Environmental Market Design

JEL Codes: Q42: Alternative Energy Sources, Q41: Energy: Demand and Supply; Prices, D12: Consumer Economics: Empirical Analysis, D11: Consumer Economics: Theory, Q52: Pollution Control Adoption and Costs; Distributional Effects; Employment Effects, Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

Keywords: Winter Fuel Payment, Regression Discontinuity, Renewable energy, Causal effect

DOI: 10.5547/01956574.39.6.ilan

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Published in Volume 39, Number 6 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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