Identifying Free-Riding in Energy-Conservation Programs Using Revealed Preference Data

Abstract

Identifying the incidence of free-ridership is significant to a range of issues relevant to program evaluation, including the calculation of net program benefits and more general assessments of political acceptability. Estimates of freeridership in the area of energy policy frequently rely on ex-post surveys that ask program participants whether they would have behaved differently in the absence of program support.The present paper proposes an ex-ante approach to the calculation of the free-rider share using revealed preference data on home renovations from Germany’s residential sector.We employ a discretechoice model to simulate the effect of grants on renovation choices, the output from which is used to assess the extent of free-ridership under a contemporary subsidy program. Aside from its simplicity, a key advantage of the approach is that it bestows policymakers with an estimate of free-ridership prior to program implementation.Energy efficiency, residential sector,random utility model, discrete choice simulation