Results of “Cash for Appliances”

Under the American Recovery and Reinvestment Act of 2009 (commonly called "the stimulus"), a $300 million program to subsidize consumer purchases of energy-efficient appliances called the State Energy Efficient Appliance Rebate Program was established. A recent working paper from the National Bureau of Economic Research analyzes the results of the "Cash for Appliances" subsidy scheme. It turns out that "Cash for Appliances" was an incredibly inefficient energy-efficiency program. From the conclusion:

We estimate freeriding rates of 73% to 92% across our three appliance categories. As a result, our measures of cost-effectiveness, ranging from $0.44 to $1.46 per kWh saved, are an order of magnitude greater than the $0.06 per kWh average cost-effectiveness estimated for utility-sponsored energy efficiency programs. Even after generous assumptions about accelerated replacement, the cost per kWh saved of C4A remains 4 to 16 times greater than this average in the literature.

While our empirical analysis focused on the implementation of a 2009 Recovery Act program, it has implications for energy efficiency policies in an array of contexts. First, energy-efficient appliance rebate programs are a common element of state, local, and utility energy programs and an emerging element of U.S. climate change policy. The Northeast and Mid-Atlantic states that operate the Regional Greenhouse Gas Initiative, a utility-sector carbon dioxide cap-and-trade program, direct some of the revenues generated through the quarterly auctions of emission allowances to energy-efficient appliance rebate programs. As noted above, the Environmental Protection Agency has also identified energy-efficient appliance rebate programs as one policy option in implementing power sector greenhouse gas emission performance standards. Second, the energy policy space is characterized by a mix of overlapping policy instruments. This analysis illustrates the potential for the presence of multiple pre-existing instruments to undermine the cost-effectiveness of a new (marginal) policy instrument. Instrument design that fails to account for this complicated policy space may risk higher costs and/or lower efficacy.