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How large is the Owner-Renter Divide in Energy Efficient Technology? Evidence from an OECD cross-section

Chandra Kiran B. Krishnamurthy and Bengt Kriström

Year: 2015
Volume: Volume 36
Number: Number 4
DOI: 10.5547/01956574.36.4.ckri
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Abstract:
When the agent making an investment decision is different from the one bearing the costs of the decision, the outcome (energy usage, here) is socially sub-optimal, a scenario known in the energy efficient technology case as "split incentive" effect. Using a sample of households (from a survey conducted in 2011) from 11 OECD countries, this paper investigates the magnitude of the "split incentive" effect between home occupants who are owners and those who are renters. A wide variety of energy-related "technologies" are considered: appliances, energy efficient bulbs, insulation, heat thermostat, solar panels, ground source heat pumps and wind turbines. Mean difference in patterns of access to these technologies are consistent with the "split incentives" hypothesis. Regression results suggest that, even after controlling for the sizeable differences in observed characteristics, owners are substantially more likely to have access to energy efficient appliances and to better insulation as well as to heat thermostats. For relatively immobile investments such as wind turbines and ground source heat pumps, we find no differences between owners and renters.



Utilities Included: Split Incentives in Commercial Electricity Contracts

Katrina Jessoe, Maya Papineau, and David Rapson

Year: 2020
Volume: Volume 41
Number: Number 5
DOI: 10.5547/01956574.41.5.kjes
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Abstract:
This paper quantifies a tenant-side �split incentives� problem that exists when the largest commercial sector customers are on electricity-included property lease contracts, causing them to face a marginal electricity price of zero. We use exogenous variation in weather shocks to show that the largest firms on tenant-paid contracts use up to 14 percent less electricity in response to summer temperature fluctuations. The result is retrieved under weaker identifying assumptions than previous split incentives papers, and is robust when exposed to several opportunities to fail. The electricity reduction in response to temperature increases is likely to be a lower bound when generalized nationwide and suggests that policymakers should consider a sub-metering policy to expose the largest commercial tenants to the prevailing retail electricity price.



Are Energy Executives Rewarded for Luck?

Lucas W. Davis and Catherine Hausman

Year: 2020
Volume: Volume 41
Number: Number 6
DOI: 10.5547/01956574.41.6.ldav
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Abstract:
In this paper, we examine executive compensation data from 78 major U.S. oil and gas companies over a 24-year period. Perhaps in no other industry are the fortunes of so many executives so dependent on a single global commodity price. We find that a 10% increase in oil prices is associated with a 2% increase in executive compensation. This oil price effect holds for both CEOs and non-CEOs and separately for several different individual components of compensation, including bonuses. We find that the oil price effect is larger in companies with more insiders on the board, and asymmetric, with executive compensation rising with increasing oil prices more than it falls with decreasing oil prices. We then discuss potential mechanisms drawn from the broader existing literature on executive compensation.





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