Split incentives in residential energy consumption

Journal Article

We explore two split incentive issues between owners and occupants of residential dwellings: heating or cooling incentives are suboptimal when the occupant does not pay for energy use, and insulation incentives are suboptimal when the occupant cannot perfectly observe the owner's insulation choice. We empirically quantify the effect of these two market failures and how they affect behavior in California. We find that those who pay are 16 percent more likely to change the heating setting at night and owner-occupied dwellings are 20 percent more likely to be insulated in the attic or ceiling. However, in contrast to common conception, we find that only small overall energy savings may be possible from policy interventions aimed at correcting the split incentive issues. Copyright © 2012 by the IAEE. All rights reserved.

Full Text

Cited Authors

  • Gillingham, K; Harding, M; Rapson, D

Published Date

  • 2012

Published In

Volume / Issue

  • 33 / 2

Start / End Page

  • 37 - 62

International Standard Serial Number (ISSN)

  • 0195-6574

Digital Object Identifier (DOI)

  • 10.5547/01956574.33.2.3