STEP UP THE HEAT: A REGRESSION DISCONTINUITY ANALYSIS OF THE EFFECT OF HOME HEATING SUBSIDY ON ENERGY EXPENDITURE
DOI:
https://doi.org/10.33736/ijbs.514.2016Abstract
Using a recent housing survey micro level dataset, this paper estimates the causal effects of receiving a home heating subsidy on different types of energy expenditure. Applying a regression discontinuity design quasi-experimental framework, identification for the causal treatment effect of energy subsidy is achieved by exploiting exogenous variations generated from the subsidy eligibility rule. Results are obtained from three model estimations: first-stage, reduced-form, and second stage estimations. The main finding from each of these estimations are: (i) energy subsidy eligibility increases the probability of receiving the subsidy, (ii) subsidy eligibility decreases energy expenditure, and (iii) subsidy receipt decreases energy expenditure. For an eligible household, its probability of receiving the subsidy increases between 2 to 8 percentage points at the threshold. Just by virtue of being eligible, such households see an approximate 8% to 25% decrease in their total energy expenditure at the threshold. Households that receive energy subsidies decrease their total energy expenditure by about half to three-quarters at the threshold.
Keywords: Energy Subsidy; HEAP; Energy Expenditure; Home Space Heating; Regression Discontinuity.
References
Allcott, H., & Greenstone, M. (2012). Is there an energy efficiency gap? Journal of Economic Perspectives, 26(1), 3-28.
https://doi.org/10.1257/jep.26.1.3
Angrist, J. D., & Lavy, V. (1999). Using Maimonides' rule to estimate the effect of class size on scholastic achievement. Quarterly Journal of Economics, 114(2), 533-575.
https://doi.org/10.1162/003355399556061
Belloumi, M. (2009). Energy consumption and GDP in Tunisia: Cointegration and causality analysis. Energy Policy, 37(7), 2745-2753.
https://doi.org/10.1016/j.enpol.2009.03.027
Besant-Jones, J. E. (2006). Reforming power markets in developing countries: What have we learned? Energy and Mining Sector Board Discussion Paper No. 19.
De La Mata, D. (2012). The effect of Medicaid eligibility on coverage, utilization, and children's health. Health Economics, 21(9), 1061-1079.
https://doi.org/10.1002/hec.2857
Dieckhoner, C. (2012). Does subsidizing investments in energy efficiency reduce energy consumption? Evidence from Germany. Institute of Energy Economics Working Paper No. 12/17.
Dube, I. (2003). Impact of energy subsidies on energy consumption and supply in Zimbabwe. Do the urban poor really benefit? Energy Policy, 31(15), 1635-1645.
https://doi.org/10.1016/S0301-4215(02)00229-X
Freund, C., & Wallich, C. (1997). Public-sector price reforms in transition economies: Who gains? Who loses? The case of household energy prices in Poland. Economic Development and Cultural Change, 46(1), 35-59.
https://doi.org/10.1086/452320
Galvin, R. (2010). Thermal upgrades of existing homes in Germany: The building code, subsidies, and economic efficiency. Energy and Buildings, 42(6), 834-844.
https://doi.org/10.1016/j.enbuild.2009.12.004
Gangopadhyay, S., Ramaswami, B., & Wadhwa, W. (2005). Reducing subsidies on household fuels in India: how will it affect the poor? Energy Policy, 33(18), 2326-2336.
https://doi.org/10.1016/j.enpol.2004.04.024
Hahn, J., Todd, P., & van der Klaauw, W. (2001). Identification and estimation of treatment effects with a regression-discontinuity design. Econometrica, 69(1), 201-209.
https://doi.org/10.1111/1468-0262.00183
Halicioglu, F. (2007). Home electricity demand dynamics in Turkey. Energy Economics, 29(2), 199-210.
https://doi.org/10.1016/j.eneco.2006.11.007
Heltberg, R. (2003). Household fuel and energy use in developing countries - A multicountry study. Oil and Gas Policy Division Report. Washington DC: The World Bank.
Holtedahl, P., & Joutz, F. L. (2004). Home electricity demand in Taiwan. Energy Economics, 26, 201-224.
https://doi.org/10.1016/j.eneco.2003.11.001
Imbens, G. W., & Wooldridge, J. M. (2009). Recent developments in the econometrics of program evaluation. Journal of Economic Literature, 47(1), 5-86.
https://doi.org/10.1257/jel.47.1.5
Kalkuhl, M., Edenhofer, O., Lessmann, K. (2013). Renewable energy subsidies: Second-best policy or fatal aberration for mitigation? Resource and Energy Economics, 35(3), 217-234.
https://doi.org/10.1016/j.reseneeco.2013.01.002
Kebede, B. (2006). Energy subsidies and costs in urban Ethiopia: The cases of kerosene and electricity. Renewable Energy, 31(13), 2140-2151.
https://doi.org/10.1016/j.renene.2005.10.005
Laicane, I., Blumberga, A., Rosa, M., & Blumberga, D. (2014). Determinants of household electricity consumption savings: A Latvian case study. Agronomy Research, 12(2), 527-542.
Lawal, Y. O. (2011). Kerosene adulteration in Nigeria: Causes and effects. American Journal of Social and Management Sciences, 2(4), 371-376.
https://doi.org/10.5251/ajsms.2011.2.4.371.376
Lee, D. S., & Lemieux, T. (2010). Regression discontinuity designs in economics. Journal of Economic Literature, 48(2), 281-355.
https://doi.org/10.1257/jel.48.2.281
Lewis, J. I. (2010). The evolving role of carbon finance in promoting renewable energy development in China. Energy Policy, 38(6), 2875-2886.
https://doi.org/10.1016/j.enpol.2010.01.020
Li, F., Song, Z., & Liu, W. (2014). China's energy consumption under the global economic crisis: Decomposition and sectoral analysis. Energy Policy, 64(1), 193-202.
https://doi.org/10.1016/j.enpol.2013.09.014
Lin, B., & Jiang, Z. (2011). Estimates of energy subsidies in China and impact of energy subsidy reform. Energy Economics, 33(2), 273-283.
https://doi.org/10.1016/j.eneco.2010.07.005
Lin, B., & Li, A. (2012). Impacts of removing fossil fuel subsidies on China: How large and how to mitigate? Energy, 44(1), 741-749.
https://doi.org/10.1016/j.energy.2012.05.018
Linares, P., & Labandeira, X. (2010). Energy efficiency: Economics and policy. Journal of Economic Surveys, 24(3), 573-592.
https://doi.org/10.1111/j.1467-6419.2009.00609.x
McCrary, J. (2008). Manipulation of the running variable in the regression discontinuity design: A density test. Journal of Econometrics, 142(2), 698-714.
https://doi.org/10.1016/j.jeconom.2007.05.005
Mozumder, P., & Marathe, A. (2007). Causality relationship between electricity consumption and GDP in Bangladesh. Energy Policy, 35(1), 395-402.
https://doi.org/10.1016/j.enpol.2005.11.033
Mutua, J., & Kimuyu, P. (2015). Household energy conservation in Kenya: Estimating the drivers and possible savings. Environment for Development Discussion Paper Series EfD DP 15-04.
Olivia, S., & Gibson, J. (2008). Household energy demand and the equity and efficiency aspects of subsidy reform in Indonesia. The Energy Journal, 29(1), 21-39.
https://doi.org/10.5547/ISSN0195-6574-EJ-Vol29-No1-2
Rao, N. D. (2012). Kerosene subsidies in India: When energy policy fails as social policy. Energy for Sustainable Development, 16(1), 35-43.
https://doi.org/10.1016/j.esd.2011.12.007
Saboohi, Y. (2001). An evaluation of the impact of reducing energy subsidies on living expenses of households. Energy Policy, 29(3), 245-252.
https://doi.org/10.1016/S0301-4215(00)00116-6
Shenoy, B. V. (2010). Lessons learned from attempts to reform India's kerosene subsidy. Geneva, Switzerland: International Institute for Sustainable Development (IISD).
https://doi.org/10.2139/ssrn.1573587
U.S. Energy Information Administration (EIA). (2011). Direct federal financial interventions and subsidies in energy in fiscal year 2010. Washington DC: U.S. Department of Energy.
Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data, 2nd ed. Massachusetts: MIT Press.
Yuan, C., Liu, S., & Wu, J. (2010). The relationship among energy prices and energy consumption in China. Energy Policy, 38(1), 197-207.
Downloads
Published
How to Cite
Issue
Section
License
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
