THREE ESSAYS ON THE INCENTIVE STRUCTURE OF ENERGY CONSERVATION PROGRAMS

This dissertation is comprised of three related essays examining the potential effectiveness of government energy efficiency programs from both the producer and consumer perspectives. The first chapter is based on a paper I coauthored with Corey Lang. In this manuscript, I address the question of whether strategic behavior by consumers could result in the erosion of energy savings in a demand response program. Understanding how the strategic behavior of consumers affects the net benefits from a demand response program has policy implications because of the increasing importance that demand response has come to play in utility load and reliability management during peak times. Using data from a large field experiment in California in 2007, we test the hypothesis that under a technology program, consumers\u27 strategic behavior results in outcomes that are opposite what is obtainable under a program with price incentive or based of behavior. Chapter II is also an empirical study which explores how the preferences of consumers for large and heavy vehicles imposes costs on society in the form of external costs of accident. This chapter looks at how fleet changes in weight distribution due to corporate average fuel economy and consumer demand for heavier vehicles results in fatalities. It is important to understand how consumer behavior affects the accident rates so that one can obtain unbiased estimates of accident costs that go into benefit-cost analysis of the impact of regulations in automobiles. Chapter three addresses how unobserved heterogeneity and sorting affect the estimates of the consumer willingness to pay for reduction in future gasoline costs. This tradeoff is important to policy makers and manufactures because it could help explain why manufacturers fail to adopt technologies for which the fuel savings far outweigh the costs