CS40: Social Dimensions of Energy Transition

The energy transition and the urgency of climate change demand efforts to promote energy conservation. When electricity grids are connected to renewable sources such as wind and solar, volatility and intermittency can create instability in the system. Encouraging electricity conservation can help maintain grid stability. In developing countries, two key concerns arises when promoting electricity conservation. The first is whether conservation programs will harm poor households. The second is whether households will respond to standard price based instruments such as carbon taxes. We implemented a randomized field experiment in which randomly selected households received monetary rewards for conserving electricity. In the short run, households reduced their electricity use by about 15 kWh. However, this reduction had no negative impact on household outcomes. To examine household response to electricity price increase under politically feasible tax tax rate, we developed and estimated an economic model of household electricity demand. The model shows that significant reductions in electricity use are likely to come mainly from middle-income households. Under politically feasible electricity tax rates, the overall reductions in consumption remain modest.

Broad household participation is essential for achieving climate targets in the building sector. While financial subsidies are widely used to stimulate residential energy retrofits, participation remains uneven. Beyond the level of financial support, the institutional design of subsidy schemes may influence who is able and willing to participate. Administrative requirements, documentation procedures, and application complexity introduce transaction costs that can act as practical barriers to accessing public support.
This paper examines how institutional features of energy efficiency policy affect participation in residential retrofit programs in the Netherlands. The analysis draws on a discrete choice experiment conducted among 796 Dutch homeowners. Mixed logit models are used to estimate preferences for investment costs, projected energy savings, subsidy levels, timing of financial support, and application assistance. The focus is on how procedural design and the transaction costs embedded in it affect adoption probabilities.
The results indicate that administrative simplification and application support significantly increase the likelihood of retrofit adoption, while changes in incentive timing alone have more limited effects. Households differ in how they respond to financial and procedural features, suggesting that transaction costs embedded in policy design influence not only overall uptake but also practical accessibility. Subsidy schemes that involve complex procedures may therefore limit participation even when financial incentives are available.
These findings highlight the social dimension of energy efficiency policy: effectiveness depends not only on financial generosity but also on institutional accessibility. Reducing administrative barriers and associated transaction costs can broaden participation without necessarily expanding fiscal expenditure, strengthening the inclusiveness of the energy transition.

This paper analyzes the effects on the Mexican labor market of deepening existing environmental regulations by increasing the carbon tax to achieve Mexico's nationally determined contributions (NDCs) emissions reductions. A defining feature of Mexico's labor market is its high level of informality, where informal workers can operate either in the informal sector or within formal firms under informal employment contracts. Understanding how environmental regulation and informality interact is crucial for three reasons: the scale of Mexican informality, the country's carbon intensity, and the existence of labor market mechanisms that differ fundamentally from those in countries without this feature. To capture these dynamics, we develop a multi-sector general equilibrium search model that incorporates both dimensions of informal labor - the informal sector and informal contracts within the formal sector. This framework allows us to examine how a carbon tax affects employment, wages, and sectoral composition across formal and informal labor markets, accounting for the general equilibrium interactions that reduced-form approaches cannot capture. We find that the effects of a carbon tax depend significantly on the interaction between environmental policy and labor market informality. The presence of a large informal sector creates adjustment channels that are absent in standard models of environmental regulation. Notably, we analyze alternative uses of government revenue from the carbon tax and find that rebating the revenue to decrease the formal tax burden can incentivize formal employment, potentially turning environmental policy into an instrument for labor market formalization. Our findings have important implications for developing countries with significant informal labor markets that are designing carbon pricing policies, highlighting the need to consider labor market structure when assessing both the costs and opportunities of environmental regulation. 

This paper investigates the intersection of deteriorating energy access, escalating costs, and climate-driven vulnerability in Colombia. Integrating multidimensional poverty indices with regional electricity access and reliability metrics (SAIDI/SAIFI), this study identifies a "climate-poverty trap". In tropical regions like the Caribbean coast, extreme thermal conditions necessitate higher subsistence consumption for cooling, yet these areas suffer from the nation's highest tariffs and lowest reliability.
The study's core methodology involves gathering detailed data describing the cost of electricity supply (public data published by the electricity sector authorities and by distribution companies) as well as family income and cost of living (national surveys from the Colombian National Administrative Department of Statistics, DANE) in order to draw national and regional trends. Over this period, there was an 180% increase in the unit cost of service (CU) in real terms, which outpaced inflation and hindered the sustainable electrification of the country. By comparing the Colombian tariff structure and cross-subsidy schemes with neighboring Brazil, it is possible to extract actionable policy recommendations.
The research demonstrates that the current stratified cross-subsidy system fails to account for the thermal requirements of the poor, turning electricity from a tool for development into a source of economic precariousness. We conclude that achieving SDG 7 in the Global South requires moving beyond "wire-centric" policies toward climate-adjusted tariff designs and energy efficiency policies that prevent service retreat and ensure energy remains economically viable in a warming world.

Reliable expenditure-based measures of energy poverty require an estimate of what households need to spend on energy to meet energy requirements for cooking, lighting, and thermal comfort; importantly, need is almost never the same as actual expenditure. Very few studies quantify minimum required energy consumption for individuals or households. One such study is Ye et al. (2022), which proposed estimates of equivalence to underscore the determination of household required energy consumption using publicly available household budget data from South Africa. However, energy prices are not incorporated in their estimates, due to data limitations. Instead, they assumed all households faced the same prices, despite the fact that prices differ across the country, and their modelling structure allowing for price responsiveness (Pendakur, 1999; Yatchew et al., 2003). 
In this study we extend the expenditure-based equivalence scale framework by incorporating household-level electricity prices. We estimate a semiparametric Engel curve, in which the household energy budget share is an unknown smooth function of an index that includes total expenditure and a set of household characteristics capturing energy needs. We include average electricity prices; thus, extending previous research, to quantify the relationship between local tariff conditions and energy shares, conditional on resources and needs-related observables. 
Preliminary results indicate a negative price effect on the energy budget share: higher average prices are associated with lower energy shares (−0.007). Since the average prices are a function of actual usage, therefore they are expected to be correlated with unobservable household behaviours related to electricity consumption. Thus, we will also address endogeneity in the analysis.
Incorporating prices enables required energy consumption to capture not only differences in household needs (e.g., composition, dwelling characteristics, appliance ownership) but also the local cost of attaining those needs, strengthening the framework's policy relevance for energy poverty analysis.