Conference Agenda

How can a sustainable transition to a green economy reduce residential energy consumption while addressing equity concerns? This paper examines how energy-related subsidies embedded in Germany’s basic security system affect household energy consumption, expenditures, and energy services. We develop a theoretical framework to study the incentives created by lump-sum transfers and full cost-coverage subsidies, accounting for the roles of energy efficiency and prices. We then empirically test its implications using data from the German Socio-Economic Panel and the Energy Saving Check. We document a novel empirical fact: subsidy recipients exhibit higher energy consumption and higher expenditures than comparable households. Yet, they do not enjoy better energy services, measured by indicators such as adequate indoor warmth. Mechanism analysis shows that these households face higher electricity prices and lag behind comparable households in terms of energy efficiency. These findings suggest that policies aimed at improving energy efficiency in low-income households are key to simultaneously achieving climate objectives and alleviating energy poverty by increasing energy services without raising energy consumption.

Electricity price volatility poses a central policy dilemma: how can governments shield households from high electricity prices while preserving incentives for the energy transition? Exploiting spatial variation in electricity price increases across Norway’s bidding zones during the energy price crisis, we estimate price elasticities of residential electricity demand using household-level panel data from automatic meters covering more than 1.5 million households. Our preliminary findings show that electricity demand is relatively inelastic, with an average price elasticity of -0.10, with some heterogeneity across income quintiles. Within each income quintile, households with low electricity use are less price responsive than high-consumption households. We use these estimates to simulate welfare and electricity consumption outcomes under the full price increase (no support), the implemented price subsidy, a fiscally equivalent uniform cash transfer, and a recently introduced fixed price scheme. The results reveal considerable heterogeneity in the welfare impacts of the schemes across and within income groups. A lump sum scheme that maintains price signals does not prevent large welfare losses for low-income, high-consumption households, which are predominantly single-person households. However, this scheme performs better when comparing policy costs, total prevented welfare loss, and efficiency costs, revealing a trade-off between targeting and efficiency. Future work includes analyzing targeted transfers and subsidies, exploring policy design given the policy dilemmas at hand, and assessing distributional impacts when considering energy consumption in secondary homes.

The energy crisis following Russia’s invasion of Ukraine exposed the heightened vulnerability of low-income households to rising heating costs, particularly those in energy-inefficient buildings. Using data from the German Socio-Economic Panel (SOEP), this study examines the distributional impact of heating costs across income deciles and evaluates the effectiveness of policy interventions. We find that low-income tenants are the most vulnerable segment of the population, with elevated risks of energy poverty. While carbon pricing with tenant-landlord cost-splitting shields low-income households from carbon costs, it fails to offset overall energy price increases. In contrast, a "Worst-First" retrofit strategy, prioritizing upgrades in the least efficient buildings, substantially reduces heating costs and mitigates energy poverty. Our findings highlight the need for targeted retrofit policies to ensure both equitable decarbonization and economic relief for vulnerable households.

This paper investigates social spillovers in the adoption of residential solar photo-

voltaic systems across three social networks: family, neighbors and colleagues. Using administrative data for all Dutch owner-occupied homes from 2007 to 2021, combined with detailed social network linkages, we study whether subsidized solar PV adoption amongst peers increases household uptake. To causally identify social spillovers, we exploit exogenous the variation from a national, production-based solar PV subsidy allocated through a lottery between 2008 and 2010 and implement an instrumental variable strategy. Our IV estimates reveal significant subsidy-induced spillovers of 0.80 percentage points by family members, which are significant and economically stronger relative to the social spillovers from neighbors. Regarding colleagues, we do not find evidence of subsidy-induced social spillovers. These findings imply that solar adoption is not only influenced by neighborhoods, but also by social transmission through family networks, and that financial incentives seem to trigger broader social diffusion, especially among family members. Applying diffusion models to the first twelve post-subsidy years,

we find that the subsidy triggered 4.3 to 7.7 percent of additional solar adoption.