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Do Bill Shocks Induce Energy Efficiency Investments?

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Abstract

Inattention can lead to suboptimal investment in energy efficiency. We study whether electricity bill shocks draw attention to the benefits of home energy efficiency investments. Our novel identification strategy builds on the fact that prolonged extreme weather events (which raise electricity costs for many customers) fall within a single billing cycle for some customers but are split across cycles for others. We find that households exposed to average sized bill shocks are 22 percent more likely to invest in energy efficiency than households with normal bills. This result suggests that inattention is indeed a factor in residential energy decisions and utilities may be able to leverage bill shocks to promote efficiency investments.

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  • Corey Lang & Kevin Nakolan & David Rapson & Reid Taylor, 2024. "Do Bill Shocks Induce Energy Efficiency Investments?," Working Papers 2405, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:98834
    DOI: 10.24149/wp2405
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    References listed on IDEAS

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    1. Gilbert, Ben & Graff Zivin, Joshua, 2014. "Dynamic salience with intermittent billing: Evidence from smart electricity meters," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 176-190.
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    More about this item

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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