Geert Goeyvaerts : « Split incentives, asymmetric information and energy efficiency subsidies »
When : march 11 (11.00 – 12.00)
Room : Salle des examens

We examine how agency issues due to asymmetric information affect the cost-effectiveness of subsidy programs for energy efficiency investments. In 2009, the Flemish government introduced a reduction in the property tax of 20% to 40% for newly developed or thoroughly renovated dwellings. Using the universe of ‘energy performance and indoor climate’ declarations, we exploit this notch to credibly identify the change in the energy efficiency due to the subsidy. The results show that the program reduced expected energy use at a cost of 0.46 euro per kWh. However, the cost per kWh saved is almost seven times larger for housing units built by developers than for housing units that were build by the future owners. The difference in the cost-effectiveness is mainly driven by a much higher share of developer built housing units that would have reached the required efficiency level even without the tax reduction (97% vs. 87%). The program’s cost per kWh saved would drop to 0.22 euro if the response by developers would have been as large as the response in the owner built sample.