Subsidies for Energy Efficient Appliances

The paper presented in this seminar provides empirical evidence on the effects of subsidies for appliances with low energy consumption on sales and prices of subsidized products and their non-subsidized substitutes. It explores a number of subsidy programs implemented by EU member states in recent years. The empirical identification strategy exploits the trading of individual products within the EU common market. Counterfactuals for the sales and prices of a product before, during and after programs are constructed from the contemporaneous observations for exactly the same product in other EU countries, where purchases are not subsidized. The findings suggest that replacement programs with subsidies for energy effcient products exert strong positive sales effects, which are mainly driven by intertemporal substitution with consumers bringing forward purchases from the following months. Little price effects are found, indicating that subsidies are mostly passed through to the consumers. The results indicate that repeated programs tend to be less effective in stimulating purchases and may even exert adverse intertemporal substitution effects in the sense that consumers postpone purchases of subsidized products to take advantage of the subsidy. The results do not indicate significant adverse effects on non-subsidized products.