Scott Institute seed grant spotlight: Access to credit and energy transitions

To support the goal of achieving net-zero carbon emissions in the United States by 2050 — a crucial step toward mitigating the effects of climate change — it is vital to establish clean energy alternatives to power the nation. 

However, finding the clean technology that supports a net-zero future is only one part of the decarbonization equation. Another factor is establishing how quickly such technology will pop up in people’s homes — a question that’s best approached holistically, with particular consideration for economic factors. 

“New technologies are high in upfront costs,” said Edson Severnini, an associate professor of economics and public policy at Carnegie Mellon’s Heinz College. This includes purchasing “greener” home appliances, buying a car that’s less pollutive, or upgrading to an HVAC system that’s more environmentally friendly. 

With this in mind, Severnini and Karen Clay, the Teresa and H. John Heinz III Professor of Economics and Public Policy, are investigating the socio-economic, environmental, and technological dimensions of past energy transitions that might shed some light on how policies could accelerate the current net-zero push. Their ongoing project, “Access to Credit and Energy Transitions: Insights from the Shift in Home Heating from Coal to Natural Gas and Electricity,” is supported by a Scott Institute Seed Grant. 

“If everybody had access to technology, then why bother thinking about policies? Since we don’t see that happening, what are the barriers?” said Severnini. 

As one example of an incentive-based policy, individuals can currently claim tax credits under the Inflation Reduction Act for purchasing certain electric vehicles. Severnini and Clay are also analyzing the mid-twentieth century shift from coal to natural gas and electricity. To paint a picture, the researchers will digitize census data from the 1940s and 1950s that includes information about home heating sources. Data from 1960 forward that has already been digitized will also shape the analysis. 

Another key resource is a series of maps from the Home Owners Loan Corporation, a now-defunct federal agency that used its City Survey Program to rate the neighborhoods in more than 200 cities based on lending risks. It’s important to note that “redlining,” a discriminatory 1930s lending practice, could have influenced how neighborhoods were ranked. While housing age and price were supposed to be the attributes that determined credit access, “redlining” denied credit to areas based on neighborhood demographics, often affecting areas with predominantly African American residents. 

“Our quasi-experimental analysis must address confounding factors to ensure valid inference, particularly concerning whether the maps merely reflected existing neighborhood differences or caused changes in credit access,” Severnini and Clay said in their project proposal. 

They hope observations from previous energy transitions will inform policies that are meant to accelerate the current net-zero push. 

“I think credit is really fundamental if you want people to move quickly towards a low-carbon future.”

“The past is not very encouraging in terms of thinking about what can happen, because I think there has been some adoption by some people who are generally very high-income. But we need everyone to adopt it,” said Clay. “I think credit is really fundamental if you want people to move quickly towards a low-carbon future.”