Lucas Davis “The Economic Determinants of Heat Pump Adoption” (Revised July 2023) (Published in NBER Environmental and Energy Policy and the Economy, University of Chicago Press, 5, 162-199, 2024) | WP-337R | Blog Post

One concern with subsidies for low-carbon technologies is that they tend to go predominantly to high-income households. Previous research has shown, for example, that the top income quintile receives 60% of subsidies for rooftop solar and 90% of subsidies for electric vehicles. This paper finds that heat pumps are an important exception. Using newly available U.S. nationally representative data, the paper finds that there is remarkably little correlation between heat pump adoption and household income. Nationwide, 14% of U.S. households have a heat pump as their primary heating equipment, and adoption levels are essentially identical for all income levels ranging from the bottom of the income distribution (<$30,000 annually) to the top ($150,000+). Instead, the paper shows that heat pump adoption is strongly correlated with geography, climate, and electricity prices.