Wouldn’t one expect either to find no correlation between the profitability / wealth of firms and their propensity to invest in green projects, or perhaps even a negative correlation? In other words, if “greener” is richer, then it makes lots of sense for those who need to pinch every penny to go green. Do we see evidence of this among consumers? Do poorer Americans buy “greener” cars at a greater clip than non-poor Americans (i.e. conditional on preferences, are a larger share of their car purchases greener than rich folks)? Do poorer Americans insulate their homes more frequently than their richer counterparts? Are poorer Americans more likely to install solar panels?
You might reasonably argue that the poor are credit constrained, which is why you are unlikely to see that in the data. And this may be true, particularly given the fact that many of the green subsidies that run through the tax code are not refundable credits (i.e. a refundable credit would mean that if you earn the credit and you have no net tax liability, the government will nonetheless send you a check). But lack of credit doesn’t seem to prevent lower income households from buying cars in the first place, or houses (remember the mortgage crisis) or any number of things (cell phone contracts that cost $1,200 per year or more). So it seems odd that such sure “good deals” are not a regular occurrence.
But what do we know more broadly about who adopts green technologies? A recent paper by economist Sarah Stafford asks the question: what factors lead universities to engage in “sustainability” initiatives? And what does she find?
Larger and wealthier institutions are more likely to adopt sustainability than smaller, less well-endowed institutions
She also finds that the “agency” problem in higher education reveals itself yet again, meaning that a convergence of interests from disparate stakeholders seems to be causing the investments, which explains why there is pressure to do these sorts of things. We’ve just conducted research here at the U of R to ask whether these investments nonetheless result in measurable “good” outcomes for colleges and universities. We will report the results shortly.
I look forward to the forthcoming U of R study. The point made here is a good one: solar panels, the Prius, etc. seem to be luxury goods to me. In my town solar panels are popping out in several neighborhoods, but mostly very large, Mcmansion type dwellings. Which leads me to think that all of these (non refundable) tax credits are largely benefitting the “rich” (or dare I say, the “2%”). It sounds kind of like an extremely negative regressive tax situation to me (or perhaps just a direct transfer of wealth to the weatlthy). Any data (or thoughts) on this?
From freakonomics.com: ‘ “Conspicuous Conservation: The Prius Effect and WTP [Willingness to Pay] for Environmental Bona Fides.” When you drive a Prius, the Sextons argue, there’s a “green halo” around you. You make new friends; you get new business opportunities. In an especially “green” place like Boulder, Colo., the effect could be worth as much as $7,000.’
My friends who are buying e-cars, solar panels, etc. certainly have a desire to show off their greenness. And I’m sure all are in the 100k+ per year salary.