The Economics of Household Energy Efficiency: Evidence from Mexico' Cash for Coolers Program

Economics Department Seminar

This paper applies an economic framework for evaluating household energy efficiency to a large-scale appliance replacement program in Mexico that has helped 1.5 million households replace their old refrigerators and air-conditioners with energy-efficient models. Using
household-level electric billing records from the universe of 25+ million Mexican residential customers we find that refrigerator replacement reduces electricity consumption by 7%, about one-quarter of the ex ante engineering estimates.

Moreover, we find that air conditioning replacement actually increases electricity consumption. Our framework and results highlight a number of important behavioral responses that are often overlooked in designing household energy efficiency programs. Overall, the evidence suggests that this type of program is an expensive way to reduce externalities from energy use.