Are Energy Efficiency Policies as Cost-Effective as We Think?

A big new study looks at federal energy-efficiency efforts — and the results are grim

Vox, June 23, 2015. Image credit: PeteLinforth

That’s a question raised in a new working paper by Meredith Fowlie, Michael Greenstone, and Catherine Wolfram. The economists conducted a large randomized controlled trial of 30,000 homes in Michigan involving the federal Weatherization Assistance Program, which helps low-income families replace their furnaces, upgrade insulation, and seal up leaks along doors and windows. This experimental set-up allowed for a more rigorous evaluation of weatherization efforts.

The researchers found that the upfront cost of efficiency upgrades in the Michigan program came to about $5,000 per house, on average. But their central estimate of the benefits only amounted to about $2,400 per household, on average, over the lifetime of the upgrades.**

The program did help households save energy: after the upgrades, homes used 10 to 20 percent less energy for electricity and heating. But, notably, that was only about 39 percent of the savings that had been predicted beforehand.

One possibility is that households compensated for their reduced utility bills by increasing their energy consumption after the upgrades. But the economists didn’t find evidence of a “rebound effect” here — they went knocking door to door and found little sign that people were, say, cranking up their thermostats in the winter.

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