By Elizabeth Harball

A 2005 subsidy to encourage more efficient energy use in sunny California worked remarkably well to reduce energy usage in lower-income communities, a new study determined. But the program had little effect on people’s behavior in cooler and wealthier coastal residences, so the study raises questions about the program’s overall cost-effectiveness.

Because substantial rebates were paid to the richer, coast-dwelling participants in the program, which is no longer in effect, the study’s author concludes that it was not as cost-efficient at reducing carbon emissions as it may have been.

The paper was produced by the Energy Policy Institute at Chicago, the research group that was behind another recent, controversial study questioning the cost-effectiveness of energy efficiency to cut carbon emissions. Released at a time when the Obama administration is placing big bets on energy efficiency to help meet its climate goals, the new study also drew criticism from energy efficiency advocates, who said the program it analyzed was not designed to provide climate benefits.

Study author Koichiro Ito, an assistant professor at the University of Chicago’s Harris School of Public Policy, said his findings show that even though energy efficiency subsidies may be more politically popular than a carbon tax, they aren’t necessarily cheaper.

“If you change the price of electricity or price of energy, that’s going to give a right incentive for everyone to conserve electricity, so that’s very efficient policy,” Ito said.

Although efficiency programs may be more politically favored than a carbon tax, for example, Ito said, “whenever you do the subsidy program, you have to remember the money is going to be paid by someone, and typically that someone is going to be a customer or an individual household…”

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Areas of Focus: Energy Markets
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Energy Markets
Well-functioning markets are essential for providing access to reliable, affordable energy. EPIC research is uncovering the policies, prices and information needed to help energy markets work efficiently.
Electric Power
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Energy Efficiency
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Energy Efficiency
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