Susanna Berkouwer Archives

Financial Incentives to Adopt Green Technologies

Regulators often seek to spur the adoption of green technologies (such as electric vehicles) using one of two financial subsidies: lowering the upfront cost of buying the technology (such as an electric vehicle subsidy) and lowering the marginal cost of using the technology (such as an electricity tariff subsidy). This project evaluates how the economic characteristics of a setting or technology determine which of these is more effective in terms of tons of CO2 abated per dollar of government expenditure. Between August—December 2025 we implemented a randomized study with 2,100 households in Nakuru County, Kenya to study this problem among induction stoves in Kenya, which abate approximately the same amount of CO2 per year as the switch from a gasoline vehicle to an electric vehicle. We randomly allocated loan access, fixed cost subsidies, and marginal cost subsidies to study the relative impacts on electric stove adoption. We collected more than 5 million measurements of induction stove usage (15-minute data, in Watts, for more than 600 induction stove buyers), more than 100 million temperature measurements to record charcoal cookstove usage (2-minute data, in Celsius, for more than 1,700 charcoal stove users), and more than 20,000 loan instalment payments. Over the next 12 months we will analyze these data to understand the impact of subsidy dollars on fuel…Read More

Green Subsidies with Demand Distortions

Standard Pigouvian theory predicts that externalities should be corrected at the margin. However, demand distortions such as credit constraints or behavioral biases create a wedge between marginal benefit and marginal cost. While these distortions can lower aggregate abatement, they can increase the efficiency of green subsidy spending. In theory, this happens through two channels: by shifting the marginal adopter toward higher private and social benefits and by increasing demand elasticity. We test these predictions by cross-randomizing fixed cost subsidies, marginal cost subsidies, and loan access for an induction stove among 2,134 charcoal users in Kenya. Marginal cost subsidies that lower electricity costs by up to 75% have a precise zero effect on both adoption and usage. Fixed cost subsidies abate at just US$13 per ton of CO2e, and demand distortions are responsible for making this cost low: reducing credit constraints raises abatement costs to US$22 per tCO2e. These efficiency gains operate through the two hypothesized channels: demand distortions increase the marginal positive externality by 19% and lower the subsidy cost per marginal abatement by 30%. We estimate the model to generate counterfactual simulations and find that, without any distortions, abatement costs would reach US$122 per tCO2e. The social welfare gain would be US$3.1 per subsidy dollar; demand distortions increase this to US$20. These results suggest that contexts with larger demand distortions, including many low- and middle-income economies, could generate some of the lowest-cost opportunities on the abatement cost curve.…Read More

How Do Financial Market Frictions Affect the Efficiency of Carbon Offset Markets?

High-income regions like North America and Europe currently generate most of the world’s emissions. However, most high-income countries have in recent years passed national or sub-national legislation to lower emissions, such as carbon taxes, emissions trading schemes, and clean subsidies. Add to this that Africa’s population is expected to triple, and the result is that by 2050 Africa is expected to emit twice as much CO2 per year as North America or Europe.…Read More

Using Blockchain to Insure Against Climate Risk

Climate change will increase extreme weather events such as floods, droughts, and storms. In addition to tragic direct consequences that include deaths and physical damage to homes and businesses, climate change threatens to suppress business investments and slow economic growth by increasing the risk associated with capital investment.…Read More