Green gear is often heavy, expensive, and favored by the well-to-do. Often loved by liberals and distained by conservatives. Sometimes virtue signaling.
The average electric vehicle sold in the U.S. in 2022 cost $66,000, according to Kelley Blue Book. GM says it can’t turn a profit on EVs with a price under $40,000. For a classic, dyspeptic George Will rant on EVs and government subsidies, see the June 2 Washington Post. The Biden Inflation Reduction Act has tax credits of up to $7,500 for purchase of new EVs.
The average cost of a solar photovoltaic rooftop system nationally in 2022 was almost $50,000, according to the LawnStarter web site. While subsidies are routinely available, rooftop solar is still pricy in the EV range.
Most induction stove tops will set the consumer back around $2,000, according to the Family Handyman web site. There may be a needed extra cost to upgrade the electric supply. New cookware may be needed, and the stove may cost more to operate, as natural gas is cheaper in many places. The Inflation Reduction Act has a subsidy of up to $840 for electric (including) induction stoves, starting this year, according to the New York Times.
Highly favored over gas heating (and providing cooling, to boot) by environmentalists (and Congress), heat pumps cost about $7,000 for an air-source version , according to the Energy Information Administration, while a ground-source heat pump will run over $20,000. Several federal and state subsidies – rebates and direct subsidies — are available, according to Consumer Reports, that could provide up to around half the costs of a $10,000 heat pump (including heat pump water heater) installation.
It isn’t surprising that much of this green heavy metal appeals to folks with high incomes. “One concern with subsidies for low-carbon technologies is that they tend to go predominantly to high-income households,” notes a new blog posting from the Energy Institute at Haas, part of the University of California, Berkeley. “Previous research has shown, for example, that the 20% of households with the highest income receive 60% of U.S. federal tax credits for rooftop solar and 90% of U.S. federal tax credits for electric vehicles.”
In short, most of the subsidies for green hardware are “regressive,” favoring the rich rather than the poor.
Not so for heat pumps, says blog author Lucas Davis, a Berkeley business professor affiliated with the Energy Institute. His latest research — The Economic Determinants of Heat Pump Adoption – finds little relationship between household income and heat pump installations. In his post, “Are Heat Pump Subsidies Regressive?” he writes, “Using newly available U.S. nationally representative data, the paper shows that there is remarkably little correlation between heat pump adoption and household income.
“This lack of correlation has important implications for a growing number of federal, state, and local subsidies aimed at heat pumps, including the new $2,000 federal tax credit. Most importantly, the results suggest that the distributional impacts of heat pump subsidies are likely to be quite different from previous low-carbon technology subsidies.”
His data comes from the latest Residential Energy Consumption Survey (RECS). “Conducted approximately every five years by the U.S. Department of Energy, RECS collects rich data about household energy-related durable goods and behaviors. The total sample for the 2020 RECS is 18,496 households, including more than 2,600 households with heat pumps.”
Davis asks and answers, “Is this surprising? Yes! I informally polled a number of my colleagues prior to sharing this figure and all expected there to be a positive correlation between heat pump adoption and income. High-income households tend to have more of almost everything, and a new heat pump can cost more than $8,000, so I definitely was not expecting this.”
He adds, “Previous research (here and here) has argued that signaling to others is a key driver of these types of decisions, but these results suggest that ‘conspicuous conservation’ is not the only factor. Notably you see this positive correlation for technologies that are highly visible to other households (e.g. EVs), as well as for less visible technologies like clothes washers.”
There are also a geographic, climate, and price components of heat pump adoption, according to Davis. “Heat pumps are most common in southern states,” he writes. “South Carolina (47%), North Carolina (43%), Alabama (42%), Tennessee (40%), Mississippi (33%), Florida (33%), Virginia (32%), and Georgia (30%), all have adoption rates twice the national average. Heat pumps are relatively rare throughout most of the rest of the country.”
While there is “very little correlation between heat pump adoption and household income,” says Davis, “the results suggest that heat pump subsidies have the potential to be much less regressive than previous experiences with solar panels, electric vehicles, and other low-carbon technology subsidies which have tended overwhelmingly to go to households at the top of the income distribution.”
–Kennedy Maize
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