Sunday, March 24, 2013

What Changes Energy Consumption, and for How Long? New Evidence from the 2001 Brazilian Electricity Crisis

There is little evidence from impact evaluation studies of ambitious residential energy conservation programs, especially in developing countries. In this paper, I investigate the short- and long-term impacts of the most ambitious electricity conservation program to date. This was an innovative program of private incentives and conservation appeals implemented by the Brazilian government in 2001-2002 in response to supply shortages of over 20%. I find that the program reduced average electricity consumption per customer by 25% over a nine-month period in affected areas. Importantly, the program reduced consumption by 12% in the long run [which corresponds to a reduction of $1.2 billion in electricity bills in 2011 or to a spared capacity of 850 MW, the capacity of an average nuclear reactor]. Such persistent effects, which arose mostly from behavioral adjustments, may substantially improve the cost-effectiveness of ambitious conservation programs. Finally, I show that a price elasticity estimated out-of-crisis would have to be increased fivefold to rationalize conservation efforts by the private incentives alone. Appeals to social preferences likely amplify consumers' responsiveness in times of crisis.
by Francois Gerard
Resources For the Future (RFF)
RFF Discussion Paper 13-06; March, 2013
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