In a newly released working paper, Katrina Jessoe (UC Davis), Maya Papineau (Carleton University) and David Rapson (UC Davis) focus on the split incentive problems created when energy bills are bundled into the monthly rental commercial contract by comparing electricity usage across tenant-paid versus owner-paid contracts. The authors found that among the top ten percent highest commercial energy users, customers on tenant-paid contracts use 6-14% less electricity in summer months. Jessoe et al. conclude that a targeted policy of submetering and tenant-paid contract promotion would be an effective conservation strategy for policymakers, particularly due to the high concentration of electricity use among the largest commercial customers. This switch has a private payback period of less than one year. Remarkably, fixing the split incentives problem for large commercial firms nationwide would save more energy than doing so for the entire residential electricity sector. The environmental benefits are also large relative to other popular conservation strategies. Aligning incentives at the largest firms will produce greenhouse gas savings of between 615-1200 thousand tons of CO2 per year, or roughly 3.3 to 6.6 times the average annual savings achieved from a year of Weatherization Assistance Program retrofits. (This abstract is pulled from the working paper website)

Click here to read the working paper.