Why do subsidies work? Evidence from subsidizing energy efficiency

Last registered on August 22, 2023


Trial Information

General Information

Why do subsidies work? Evidence from subsidizing energy efficiency
Initial registration date
November 12, 2021

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
November 15, 2021, 11:46 AM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
August 22, 2023, 11:07 AM EDT

Last updated is the most recent time when changes to the trial's registration were published.



Primary Investigator

ZEW Mannheim

Other Primary Investigator(s)

PI Affiliation
ZEW Mannheim

Additional Trial Information

Start date
End date
Secondary IDs
Prior work
This trial does not extend or rely on any prior RCTs.
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

Bartels, Lara and Madeline Werthschulte. 2023. "Why do subsidies work? Evidence from subsidizing energy efficiency." AEA RCT Registry. August 22. https://doi.org/10.1257/rct.8493-2.0
Experimental Details


Intervention Start Date
Intervention End Date

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
Randomization Method
Randomization done by survey software.
Randomization Unit
Was the treatment clustered?

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)

Institutional Review Boards (IRBs)

IRB Name
German Association for Experimental Economic Research e.V.
IRB Approval Date
IRB Approval Number


Post Trial Information

Study Withdrawal

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Is the intervention completed?
Data Collection Complete
Data Collection Completion Date
Final Sample Size: Number of Clusters (Unit of Randomization)
Was attrition correlated with treatment status?
Final Sample Size: Total Number of Observations
Final Sample Size (or Number of Clusters) by Treatment Arms
Data Publication

Data Publication

Is public data available?

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

With the aim of limiting global warming, environmental subsidies are a popular public finance instrument to reduce carbon emissions. However, there is little evidence on why subsidies are effective in increasing demand for the goods subsidized. We use a framed field experiment to disentangle and study the relative importance of the price and non-price effects implicit in a subsidy encouraging an energy-efficiency investment. In the experiment, participants decide on purchasing a low-flow showerhead and are either confronted with the introduction of a subsidy or a same-sized price decrease. We find a demand increase of about 3-percent when the price decreases and a significantly larger demand increase of about 9-percent when the subsidy is introduced. An analysis of the underlying channels rules out changes in beliefs and norm perceptions. Positive spill-over effects of the subsidy on other pro-environmental behaviors rather suggest that the non-price effect is explained by a crowding in of intrinsic motivation.
Bartels, Lara and Werthschulte, Madeline, ‘More Bang for the Buck’? Evidence on the Effectiveness of an Energy Efficiency Subsidy ( 2023). ZEW - Centre for European Economic Research Discussion Paper No. 23-022

Reports & Other Materials