The Effect of U.s. Electricity Prices on the Purchase of Energy-efficient Appliances and Implications for the Effects of Carbon Pricing

This paper provides an empirical analysis of the long-run market shares of four ENERGY STAR (ES) appliances in the United States: refrigerators, dishwashers, clothes washers, and room air conditioners. We relate state-level market shares to electricity prices, demographics, and energy efficiency. We then use the results to estimate how a carbon pricing mechanism might influence the market share of ES appliances and, in turn, impact carbon emissions. The empirical evidence suggests that the elasticity of ES market shares to electricity prices is 0.34 or less. A carbon price expected to add at most $0.04/kWh to electricity prices would have only a modest effect on the market share of energy efficiency appliances and in turn, carbon emissions. The carbon price would reduce carbon emissions by 100,000 mWh per year, equivalent to removing 10,000 cars