The split incentive problem

Among the low-hanging fruit in addressing climate-related emissions is building efficiency. It’s relatively inexpensive to address and it pays for itself in reduced heating and cooling costs over time. But one problem that’s long been recognized is a “split incentive” problem when it comes to landlords and renters: It falls to a landlord to make building efficiency improvements but it’s the renters who benefit from lower heating and cooling costs (or just more comfortable spaces in general).

Today, I did some desk research on the split incentive problem, focusing on case studies of Vancouver and Boulder, as well as thinking through some other solutions that might apply to Somerville. This was for Somerville’s Commission on Energy Use and Climate Change; I volunteered for a sub-committee that would look at the problem. Spoiler alert: No magic bullets in program design have emerged yet.

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