2025/01/20 by Matthias Rodemeier, Andreas Löschel · 1 voice
Economics, Econometrics and Finance · Energy · #Energy Efficiency and Management #Energy, Environment, Economic Growth #Energy, Environment, and Transportation Policies
paper · pdf · doi:10.1093/jeea/jvae058
openalex publication_date 2025/01/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/23
Abstract How can information substitute or complement financial incentives such as Pigouvian subsidies? We answer this question in a large-scale field experiment that cross-randomizes energy efficiency subsidies with information about the financial savings of LED lighting. Information has two effects: It shifts and rotates demand curves. The direction of the shift is ambiguous and highly dependent on the information design. Informing consumers that an LED saves 90% in annual energy costs increases LED demand, but showing them that 90% corresponds to an average of €11 raises demand for less efficient technologies. The rotation of the demand curve is unambiguous: Information dramatically reduces both own-price and cross-price elasticities, which makes subsidies less effective. The uniform decrease in price elasticities suggests that consumers pay less attention to subsidies when information is provided. We structurally estimate that welfare-maximizing subsidies can be 200% larger than the Pigouvian benchmark when combined with information.