Estimating the implicit discount rate for new technology adoption of wood-burning stoves
Date
2021
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Article
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Abstract
In the last decade, there have been several initiatives to incentivize Efficient Energy Technologies (EET) to reduce air pollution caused by wood-burning in developing countries. More efficient woodstoves can improve health, reduce family expenditures, CO2 emissions, and forest degradation. Despite these benefits, there is low
level of adoption of EETs. This paper contributed to the literature in three ways. First, it estimates the implicit discount rate (IDR) used by individuals to decide whether to adopt EET using exponential and hyperbolic specifications. Second, it includes sociodemographic characteristics in the definition of the IDR. Third, it evaluates
how the adoption curve changes by different policy designs. Since the interest rate is part of the policy design, comparing the interest rate and the IDR is relevant to increasing adoption. Our monthly estimated IDR is between 1.7% and 5.4% with a significant overlap with market interest rate. The IDR is affected by the perception of the future economic situation, trust in environmental authorities, happiness, and gender. We found
that using an interest rate lower than the IDR increases the probability of adoption significantly. An understanding of the effects of copayments, payment frequencies, and difference between interest rates and IDR is needed to maximize adoption.
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Citation
Carrasco-Garcés, Moisés; Vásquez-Lavín, Felipe; Ponce Oliva, Roberto; Díaz Pincheira, Francisco; Barrientos, Manuel(2021). Estimating the implicit discount rate for new technology adoption of wood-burning stoves. Energy Policy 156 (2021) 112407; https://doi.org/10.1016/j.enpol.2021.112407
Keywords
Efficient energy technologies, Implicit discount rate, Stated preferences, Intertemporal choice, Energy regulation