The Impact and Persistence of Ambitious Energy Conservation Programs : Evidence from the 2001 Brazilian Electricity Crisis

There is little evidence on the impacts of ambitious energy conservation programs, which aim at large reductions in energy use. Ambitious programs are more likely to trigger lumpy adjustments inherent in the use of energy (e.g., appliance stock or habits). In this paper, I estimate the impacts on residential consumption of the most ambitious electricity conservation program to date. This was an innovative program of economic (e.g., fines) and social (e.g., conservation appeals) incentives implemented by the Brazilian government in 2001 in areas facing supply shortages of over 20%. I find that the program reduced average electricity consumption per customer by 28% during the nine months of its implementation, and by 13% until ten years later. Using individual billing data for three million customers, I show that average effects came from widespread reductions among customers. I also provide evidence that long-term impacts came mostly from lumpy adjustments in consumption behaviors (new habits). Finally, I structurally estimate a simple model to quantify the role of social incentives and lumpy adjustments. Social incentives played a major role and may be particularly powerful in times of crisis. Importantly, a permanent 80% tariff increase would have been necessary to achieve similar impacts without lumpy adjustments. The possibility of triggering lumpy adjustments may thus substantially reduce the incentives necessary to achieve large changes in energy use