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An Examination of How Energy Efficiency Incentives Are Distributed Across Income Groups

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Abstract:
Many policies lead to the provision of incentives, such as rebates or tax credits, to consumers for the purchase of products that have high energy efficiency. This paper investigates how these incentives are distributed across income groups for three types of subsidies (manufacturer or retailer rebates, utility rebates, and tax credits) and eight types of equipment. While incentives are always concentrated in higher-income households, there is substantial heterogeneity in the magnitude of the concentration depending on how incentives are structured. Tax credits are the type of subsidy that is most concentrated in higher-income households and utility rebates are the least. Incentives for appliances that are not universally-owned, including dishwashers and clotheswashers, are more concentrated than are incentives for other types of equipment. Differences across income groups in the rates of equipment presence and turnover, willingness to purchase Energy Star models, and rates of homeownership contribute to the concentration. After controlling for these factors, utility rebates are no longer concentrated in higher-income households, but manufacturer / retailer rebates and tax credits remain so.

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Keywords: Energy efficiency, Energy rebates, Energy tax credits, Energy subsidies, Distributional effects, Energy policy

DOI: 10.5547/01956574.40.6.gjac

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Published in Volume 40, Number 6 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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