Voluntary Programs to Encourage Diffusion: The Case of the Combined Heat-and-Power Partnership

In the last decade, voluntary environmental programs have increased considerably in scope. A novel use of these programs is to di¤use new technology in industry as means to improving their environmental outcomes. This paper tests whether the US Environmental Protection Agency’s Combined Heat-and-Power Partnership has encouraged the installation of CHP applications since its start in 2001. Two hypotheses are tested here, whether (i) the Partnership has encouraged the installation of CHP applications and (ii) if the partnership has encouraged utilization of CHP once installed. Using nearest neighbor matching on data for electricity plants in the US, results …nd weak evidence that the program has helped CHP system spread, controlling for the selection of …rms into the partnership. Keywords: Voluntary Environmental Measures; Combined Heat and Power; Fossil Fuels JEL Codes: Q58; Q48; L51; L94 Since the start of the …rst national voluntary programs in the early 1990s, governments have made increasingly more use of this type of policy tools to achieve abatement reductions, environmental awareness of …rms or information provision to the public. A majority of the programs call on participating …rms (known as partners) to commit to an action, such as a reduction in emissions. This trend has consequently led to a growing importance of measuring those programs’success (Brouhle et al. 2005, EPA 2007). A more rare use of voluntary programs has involved the acceleration of technology di¤usion to overcome problems like asymmetric information, principal-agent issues or to lower the threshold of network externalities. The U.S. Environmental Protection Agency’s (EPA) Combined-Heat-and-Power corresponding author, [email protected], +44 (0) 1786467276