QUALITATIVE CHOICE MODELING OF ENERGY CONSERVATION DECISIONS: A MICROECONOMIC ANALYSIS OF THE DETERMINANTS OF RESIDENTIAL SPACE-HEATING ENERGY DEMAN

To what extent can purely economic factors bring about lasting changes in the energy intensiveness of the existing stock of housing in the U.S.? This study develops an economic model of household decisions to install major conservation measures such as storm windows, attic insulation and wall insulation. The structural core of the model is the neoclassical economic paradigm of constrained discounted expected utility maximization. Household choices are modeled as being determined by household preferences across space-heating comfort levels and a composite of all other goods and services. These preferences interact with alternative household budget constraints which are determined by the household's conservation decisions.;Nested Logit estimation techniques, using the observed discrete choices of a representative sample of households (in owner-occupied, single-family dwellings), are shown to be superior to simple Multinomial Logit estimation. This superiority arises from the importance of correlation among the error terms associated with indirect utility derived from certain subsets of available conservation alternatives.;The Nested Logit models are calibrated using data from the National Interim Energy Consumption Survey. A Transcendental Logarithmic specification for household indirect utility provides a better fit than either Generalized Leontief or Quadratic forms. Tests at each observation also show high conformance of the Translog model with the monotonicity and quasi-convexity conditions for an indirect utility function. (This indicates an opportunity to use Roy's Identity to determine optimized fuel consumption subsequent to the installation of conservation measures.).;The parameter estimates for the Translog model are used to simulate the effects of a variety of policy changes. The implied arc elasticities of demand for individual conservation measures suggest that demands for all major conservation measures are elastic with respect to heating fuel prices, quite inelastic with respect to decreases in real income, and more responsive (although still inelastic) with respect to decreases in the relative prices of installed conservation materials.;As alternate measures of responsiveness, assessments are offered of the actual fuel savings to be expected solely from conservation efforts induced by a selection of hypothetical policy measures: relative fuel price changes (deregulation), generalized "inflation", subsidies on conservation materials, and a stylized tax credit scheme.