Browsing by Author "Clarke, Selina"

Energy subsidies are increasingly used by governments to encourage individuals to improve the energy efficiency of their homes with energy renovations. However, the existing literature on these subsidy programmes has raised concerns that many of the subsidy recipients might have undertaken energy renovations even without the subsidy. If energy subsidies have no effect on the decision to undertake an energy renovation, or the scale or timing of the renovation, this raises serious questions about their cost-effectiveness. In this thesis, the effects of the Finnish energy subsidy programme, launched in 2020, on renovation choices were assessed using a bunching methodology. The subsidy paid to an individual is proportional to their renovation spending up to certain maximum thresholds. As a result of these thresholds, some individuals whose subsidised renovation spending would otherwise have just exceeded the maximum, now have an incentive to locate almost exactly at this maximum value. Using a bunching design to check for excess mass in the distribution of subsidised renovation spending around the thresholds, it was possible to evaluate whether individuals are responding to this incentive. Further analysis on bunching was done by evaluating the determinants of bunching with a probit model, and exploring how bunching relates to applicants’ survey responses using multiple correspondence analysis. The results from the bunching analysis demonstrate that there is significant excess mass in the distribution around subsidy thresholds, implying that some individuals are responding to the incentives created by the subsidy. Further analysis on bunching, however, highlights that the result is local and should not be generalised to applicants further from the maximum thresholds. Although the results suggest that those undertaking a more extensive renovation may have had a slightly larger behavioural response, further analysis was not able to distinguish the determinants of bunching. The behavioural response identified by bunching indicates that the subsidies are having an effect on some individuals’ choices concerning the scale and quality of their energy renovation. It should, however, be noted that this is not a causal effect and cannot be generalised to other energy subsidy programmes.