Community-Based Incentives for Environmental Protection : The Case of Green Electricity

This paper examines the effectiveness of using community-level rewards to subsidize environmental protection. Specifically, we study the Connecticut Clean Energy Communities (CCEC) program that provides mostly symbolic rewards in the form of municipal photovoltaic installations in proportion to the number of households that voluntarily purchase green electricity. We find that the program causes a 22-percent increase in the number of households purchasing green electricity in CCEC municipalities. The pattern of results suggests that the CCEC leads to the mobilization of community-based recruitment campaigns that increase signup rates by up to 700 percent around the period of initial qualification. We also find that a change in the marginal incentive created by the program has little consequence on signup behavior. The implication for policy is that community-based incentives can be effective, but the size of the subsidy itself appears less important. Finally, simple calculations based on CCEC up-front costs reveal upper-bound, cost-effectiveness measures of $570 per household signup, 6.7¢ per kilowatt-hour of annual green-electricity demand, and $113 per ton of annual carbon-dioxide emission reductions