Policy options for the split incentive: Increasing energy efficiency for low-income renters

Abstract

The split incentive problem concerns the lack of appropriate incentives to implement energy efficiency measures. In particular, low income tenants face a phenomenon of energy poverty in which they allocate significantly more of their household income to energy expenditures than other renters. This problem is substantial, affecting 1.89% of all United States' energy use. If effectively addressed, it would create a range of savings between 4 and 11 billion dollars per year for many of the nation's poorest residents. We argue that a carefully designed program of incentives for participants (including landlords) in conjunction with a unique type of utility-managed on-bill financing mechanism has significant potential to solve many of the complications. We focus on three kinds of split incentives, five concerns inherent to addressing split incentive problems (scale, endurance, incentives, savings, political disfavor), and provide a detailed policy proposal designed to surpass those problems, with a particular focus on low-income tenants in a U.S. context.

Barriers to energy efficiency in shipping: A triangulated approach to investigate the principal agent problem

“…Most studies (e.g. Murtishaw and Sathaye, 2006;IEA, 2007;Vernon and Meier, 2012;Bird and Hernandez, 2012;Pelenur and Cruickshank, 2012) focus on technical energy efficiency and show that the principal agent efficiency problem exists, since the technical efficiency levels of different principal agent cases differ significantly. However, to date only a handful of studies have empirically investigated how implementation of operational measures is affected by the principal agent problem (Levinson and Neimann, 2003;Young and Maruejols, 2010;Gillingham et al, 2011;Maruejols and Young, 2011).…”

Linking energy efficiency legislation and the agricultural sector in South Africa

“…Although I concur with the energy intensity differentials by sectors, I am of the view that there is inefficiency in the consumption of energy in the agricultural sector and South Africa as a whole. The slow replacement of non-energy-efficient technologies, the prioritisation of profit by industries over investment in energy-efficient technologies as well as traditionally low prices charged for electricity (far below the real market price for energy) are some of the major causes of energy crisis in the country (Bird & Hernandez 2012). This is because traditional building regulations paid little or no attention to energy-efficient designs.…”

Leveraging energy efficiency to finance public-private social housing projects

“…Searching for ways out of the split incentive issue dealing with low-income households, Bird and Hernández (2012) suggest that policy solutions should meet a number of requirements: to occur on a large scale so to produce remarkable outcomes; to endure in time; to be self-sufficient; to result in a win-win game for landlords as well as tenants. From this perspective, various tools both contractual (voluntary) and regulatory (mandatory) are eligible, although the former might prevail on the latter.…”