Getting Green with Solar Subsidies: Evidence from the California Solar Initiative

Subsidies to promote energy efficiency and renewable energy have been widely adopted. We study the California Solar Initiative and find upfront rebates have a large effect on residential solar installations. We exploit variation in rebate rates across electric utilities over time and control for time-varying factors that affect solar adoption. Our preferred estimates suggest increasing rebates from 5, 600 to 6, 070 would increase installations by 10%. Overall, we predict 53% fewer installations would have occurred without subsidies. Over 20 years, these additional installations reduce carbon dioxide emissions between 2. 3 and 3. 4 million metric tons and local air pollutants (NOx) by 1, 100 to 1, 700 metric tons. Of the 440 million in rebates awarded, 121 million were rents to installations that would have occurred absent rebates. We estimate program costs of 0. 06 per kilowatt hour and between 130 and 196 per metric ton of carbon dioxide.