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Free-Riding on Energy Efficiency Subsidies: the Case of Natural Gas Furnaces in Canada

Nicholas Rivers and Leslie Shiell

Year: 2016
Volume: Volume 37
Number: Number 4
DOI: 10.5547/01956574.37.4.nriv
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Abstract:
We assess the extent to which subsidies for home energy efficiency improvements in Canada have been paid to households that would have undertaken the improvements anyway - the so-called free rider rate. We focus on forced-air natural gas furnaces, replaced between April 1, 2007 and March 31, 2011, under both federal and provincial subsidy programs as well as the 2009 federal Home Renovation Tax Credit. Our results indicate that around 50 percent of expenditures under the Canadian subsidy and tax credit programs represented free riding. In the long run, our estimates suggest that over 80 percent of grant recipients would have chosen an identical furnace at the time of replacement. We estimate that the cost effectiveness of the programs in terms of greenhouse gas reduced was between $70 and $110/t CO2, depending on the assumptions made. Further, we find that a substantial majority of the grants were received by middle-and high-income households, such that the grant had a regressive effect on the distribution of income. We conclude that such grants are not an optimal way to improve residential energy efficiency. Keywords: Energy efficiency, Home retrofit subsidies



Stretching the Duck: How Rising Temperatures will Change the Level and Shape of Future Electricity Consumption

Nicholas Rivers and Blake Shaffer

Year: 2020
Volume: Volume 41
Number: Number 5
DOI: 10.5547/01956574.41.5.nriv
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Abstract:
This paper examines how rising temperatures due to climate change will affect electricity consumption patterns through mid- and end-century. We extend recent literature in two important ways. First, we directly incorporate adaptation in the form of increased air conditioner penetration, resulting in heightened responsiveness to hot temperatures. Second, we go beyond average effects to consider how higher temperatures will change the intraday and seasonal shape of consumption. This is found to be of greater importance in colder countries, where the average effect is dampened by reductions in heating demand from warmer winters. Seasonal peaks are projected to shift from winter to summer and the diurnal range of hourly consumption expands, exacerbating an increasing need for flexibility coming from the supply side due to a growing share of renewable energy.





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