THE ADOPTION & WELFARE EFFECTS OF LOW-INCOME HEAT PUMP INCENTIVES

Abstract

This research estimates the impact of means-tested incentives on heat pump adoption rates. We exploit the differences in subsidies between two utility service territories in Benton County, Washington to identify the adoption impacts of new incentives using spatial discontinuity and within-household panel analysis. Additionally, a series of analytical tests are then used to identify opportunities for policy improvement. We find that targeted incentives may drive some additional heat pump adoption among eligible households, but these effects are very small, and unlikely to overcome countervailing market forces. Additionally, consistent with theory, we find that newer incentives are more likely to drive additional technology adoptions than older, existing policies. We further also assess the calibration of the targeted incentives in terms of rebate levels for each group, and eligibility thresholds. Here, we find that cost-neutral progressive shifts may produce higher adoption but only at the extremes. Finally, we discuss the ramifications of our findings on future targeted incentive policies for heat pumps and other technologies. This research lays the groundwork for more detailed assessments to compare the emissions impact and cost of abatement of targeted and non-targeted policy programs.