Why do subsidies work? Evidence from subsidizing energy efficiency

Last registered on November 15, 2021

Pre-Trial

Trial Information

General Information

Title
Why do subsidies work? Evidence from subsidizing energy efficiency
RCT ID
AEARCTR-0008493
Initial registration date
November 12, 2021
Last updated
November 15, 2021, 11:46 AM EST

Locations

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Primary Investigator

Affiliation
ZEW Mannheim

Other Primary Investigator(s)

PI Affiliation
ZEW Mannheim

Additional Trial Information

Status
In development
Start date
2021-11-15
End date
2022-12-31
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
Abstract
With the aim of reducing energy consumption due to the associated externalities, a number of recently introduced governmental policies concentrate around subsidizing household energy efficiency investments. Yet, it is not well understood why subsidies are effective in increasing the demand for energy efficiency. In addition to decreasing the price, a subsidy expresses policy-makers intention of increasing product demand and socially desirable behavior. Thus, a subsidy may not only affect demand by shifting the budget constraint but also by directly influencing utility. This study uses a framed field experiment with citizens of Mannheim to understand whether there is an additional impact of a subsidy on energy efficiency investments beyond a pure price effect. Results have implications for the cost-effectiveness of energy-saving subsidies. Due to demand response realized from potential non-monetary effects, a subsidy might give more value than the money spent.
External Link(s)

Registration Citation

Citation
Bartels, Lara and Madeline Werthschulte. 2021. "Why do subsidies work? Evidence from subsidizing energy efficiency." AEA RCT Registry. November 15. https://doi.org/10.1257/rct.8493-1.0
Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2021-11-15
Intervention End Date
2021-12-15

Primary Outcomes

Primary Outcomes (end points)
Selection of water-saving shower head (yes/no).
Change in shower head choice (yes/no) from purchase decision (1) to decision (2).
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Beliefs about water, euro and carbon emission savings from the water-saving shower head.
Norm perception to purchase the water-saving shower head.
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
This study uses a framed field experiment to investigate whether a subsidy is more than just a pure price decrease. Participants will be recruited from the ZEW Mannheim citizen panel. Registered citizens are invited to participate in an online survey. Additionally, new participants are recruited using random direct mails in the Mannheim area.
As part of this survey, participants are given a shopping budget and asked to either purchase a standard shower head or a water-saving shower head from that budget. Purchase decisions are incentivized in that we will implement the choice of a randomly selected subgroup. Each participant makes two of these purchase decisions: (1) at baseline prices and (2) at a reduced price for the water-saving head.
For the reduced-price decision two treatments are introduced. In the Price Decrease Treatment, participants are just presented a different price set without information of why the price for the efficient head decreased. In the Subsidy Treatment, participants receive the additional information that the price decrease stems from a subsidy.
The survey ends with incentivized questions to elicit beliefs about the water, money and carbon emission savings from the water-saving shower head, as well as the perceived norm on selecting the water-saving option. In addition, we elicit general attitudes on climate change and policy interventions.
Experimental Design Details
Not available
Randomization Method
Randomization done by survey software.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
600 individuals.
Sample size: planned number of observations
600 individuals.
Sample size (or number of clusters) by treatment arms
300 individuals in the Price Decrease Treatment, 300 individuals in the Subsidy Treatment.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
German Association for Experimental Economic Research e.V.
IRB Approval Date
2021-10-21
IRB Approval Number
W66WxnE1