The Effectiveness of Incentives for Residential Energy Conservation

Studies evaluating incentive programs for residential energy efficiency are examined to assess the roles of the size and type of incentive and of nonfinancial aspects of the programs and to infer lessons for policy. Larger incentives are found to increase participation, but marketing and implementation may be more important than incentive size: participation varies tenfold between programs offering identical financial incentives, with more participation in programs operated by trusted organizations and aggressively marketed by word of mouth and other attention-getting methods. Preference for grants versus loans varies with income and other household characteristics. Low-income households can be reached by strong incentives if marketing and implementation are designed carefully.