Hurdles And Steps: Estimating Demand For Solar Photovoltaics

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Three Essays on Energy Efficiency and Climate Change

This dissertation is comprised of three essays which explore selected aspects of climate change mitigation and adaptation. The first two essays examine the energy-efficiency gap as barrier to the adoption of more efficient, greener technologies. The first essay presents a welfare analysis of energy policies within a behavioral framework of temptation and self-control. We find that, in the presence of temptation, Pigovian taxes alone are not first-best and may be dominated by energy efficiency standards, while a policy combining standards with a Pigovian tax can yield higher social welfare than a Pigovian tax alone, implying that the two instruments should be viewed as complements rather than substitutes. The second essay investigates empirically the role of temptation as potential factor behind the energy-efficiency gap by adapting the above framework of temptation and self-control to the U.S. refrigerator market. Using household-level data, we derive a distribution of household implicit discount rates ranging from 18% to 36%, suggesting excessive discounting in this market. Alternatively, under a reasonably low discount rate, observed consumer behavior in the data is found to be consistent with the model of temptation and self-control, which implies that temptation can be viewed as another potential cause for under-investment in energy-efficient products. We find that, if temptation is present, energy efficiency standards are on average welfare-improving in this market. The third essay shifts the focus towards adapting to some of the climate change-related impacts. Due to sea-level rise, the magnitude and frequency of coastal storms are expected to increase, which necessitates evaluating flood adaptation measures. We develop a dynamic benefit-cost framework, which allows us to determine the optimal timing of initiating flood protection in any coastal region, and apply this framework to a coastal area in Connecticut. Our results suggest that the optimal timing of protection may vary across census blocks within the study area. If negative environmental and aesthetic impacts of sea barriers are taken into account, delaying protection becomes more desirable, with the extent of delay being sensitive to the relative magnitude of one-time costs (loss of view and recreational opportunities) vs. continuous costs (shoreline erosion, loss of wetlands)

Re-Evaluating the Role of Energy Efficiency Standards: A Time-Consistent Behavioral Economics Approach

The economic models that prescribe Pigovian taxation as the first-best means of reducing energy-related externalities and argue that taxes are superior to energy efficiency standards are typically based on the neoclassical model of rational consumer choice. Yet, observed consumer behavior with regards to energy use and the purchase of energy-using durable goods is generally thought to be far from efficient, giving rise to the concept of the “energy-efficiency gap.” In this paper, we present a welfare analysis of Pigovian taxes and energy efficiency standards that is based on an alternative, time-consistent behavioral model. We adapt the model of temptation and self-control of Gul and Pesendorfer (2001, 2004) to the context of the purchase of energyusing durable goods. Our results suggest that (i) temptation or self-control might be a contributing factor in explaining the energy-efficiency gap, (ii) standards might be used as a commitment device to address inefficiencies in consumer choice that stem from temptation, and (iii) in the presence of temptation, a policy that combines standards with a Pigovian tax can yield higher social welfare than a Pigovian tax alone

The Economic Value of Delaying Adaptation to Sea-Level Rise: An Application to Coastal Properties in Connecticut

The magnitude and frequency of coastal storms are expected to increase with rising global sea levels, which necessitates evaluating coastal flood adaptation measures. This study examines an important issue in the context of coastal flood protection, namely, the decision when to adopt protection measures. For any given coastal region, our benefit-cost framework allows us to determine the optimal timing of initiating protection that maximizes expected net benefits. We present an application of this framework to a coastal area in Connecticut. Our results suggest that the optimal timing of adopting protection may vary across different census blocks within the study area. We find that using a relatively low discount rate in the benefit-cost analysis implies greater heterogeneity in the timing decisions and earlier overall adoption, whereas, with higher discount rates, the timing decisions are reduced to a choice between early protection and no protection at all. If possible negative environmental and aesthetic impacts of sea barriers are taken into account, delaying protection would become more desirable, with the extent of delay being sensitive to the relative magnitude of one-time costs (e.g., loss of ocean view and recreational opportunities) vs. continuous costs (e.g., shoreline erosion and loss of wetlands)