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Are Federal Energy Tax Credits Effective? A Western United States Survey

Abstract:
The residential energy credit provided by the federal Energy Tax Act (1977) cannot be carried beyond December 31, 1987, and the Reagan administration has indicated a disinclination to support an extension of its provisions, in either its current or an altered form. Its likely demise indicates nothing about the Act's effectiveness in getting homeowners to invest in energy conservation or solar devices. Rather, it is a reflection of the Reagan philosophy of letting market conditions determine energy conservation decisions. Since the administration is not explicitly passing judgment on the success or failure of residential tax credits, important questions regarding their efficacy remain to be answered. This paper will attempt to shed light on this question. It will examine data derived from a random sample of Western United States homeowners to determine awareness and use of the federal energy tax credit; the role of climate and dwelling type; and the influence of selected socioeconomic factors on the use of energy tax credits. Most important, it will seek to determine the extent to which conservation decisions were contingent on the availability of the tax credits, i, e., what proportion of investments were made wholly or predominantly because of their special tax inducements and what proportion would have been made in any case.

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Energy Specializations: Energy Modeling – Other; Energy Access – Energy Poverty and Equity

JEL Codes: Q41: Energy: Demand and Supply; Prices, Q54: Climate; Natural Disasters and Their Management; Global Warming, Q28: Renewable Resources and Conservation: Government Policy, Q48: Energy: Government Policy, Q21: Renewable Resources and Conservation: Demand and Supply; Prices, Q52: Pollution Control Adoption and Costs; Distributional Effects; Employment Effects, Q38: Nonrenewable Resources and Conservation: Government Policy

Keywords: Energy tax credits, Residential sector, Western US, Energy conservation

DOI: 10.5547/ISSN0195-6574-EJ-Vol5-No2-10


Published in Volume 5, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.