ADOPTION OF ENERGY-EFFICIENT AIR CONDITIONERS AND THE PRINCIPAL-AGENT PROBLEM: EVIDENCE FROM CHINA

Abstract

As an important measure for households’ adaptation to climate change, air conditioning is becoming more and more prevailing in developing countries, which implies a larger demand for electricity and highlights the role of energy-efficient air conditioners (ACs) in energy saving. Using household-level data from China, this paper investigates the determinants of households’ adoption of energy-efficient ACs, with a focus on the role of the split-incentive (principal-agent) problem between homeowners and renters in the adoption of energy-efficient ACs. The results show that the principal-agent (PA) problem does exist in the adoption of energy-efficient ACs in Chinese households, with renter-occupied dwellings being about 10.2% more likely to have low energy-efficient ACs installed in dwellings, compared to homeowner-occupied dwellings. Moreover, the increased energy consumption and carbon emissions due to the PA problem in AC investment are calculated based on the estimated agency effect.