Can a mandate be justified by unrealized gains? Evidence from a heating energy transition program in China

Mandatory policies are usually motivated by the desire to correct consumer bias caused by imperfect information or inattention to benefits or costs. However, for consumers whose choices already reflect their true preferences, such policies can lead to a utility loss. Therefore, the policy effects deserve closer scrutiny. Using a large-scale household survey and a choice experiment, this study estimates the welfare effects of a mandatory energy transition program in northern China. Through a discrete choice model, we identify the effect of the mandate on household participation in the transition and simulate the welfare change caused by the mandate. We find that the mandate was not always justified by the unrealized health gains; it may have improved social welfare but at the expense of utility loss for some households, especially for lower-income ones and those in areas with higher transition costs and stricter mandates. These findings shed light on ways to improve the distributional welfare effect when a mandate is adopted, for example, by differentiating policy implementation across income groups and considering both efficiency and equity issues in the long run.