Too Much of a Good Thing? Using a Natural Field Experiment To Evaluate the Impact of Low-Income Energy Subsidies

I study the California Alternate Rates for Energy program (CARE), which provides a price reduction for natural gas and electricity for low-income customers. Using approximately one million monthly observations from 70,000 households, I provide the first demand elasticity estimate for natural gas using a natural field experiment (around -0.38). I also provide the first benefitcost analysis of CARE, which shows that the benefits to CARE customers are about one billion dollars, but that overall costs likely exceed benefits. Finally, I estimate that the increase in carbon dioxide emissions from CARE subsidies exceeds the amount by which California’s energy efficiency programs reduce emissions.