Using Contests to Deliver Cost-Effective Energy Conservation in Vietnam

The energy sector in low- and middle-income countries is characterized by two stylized facts: first, high rates of particulate and carbon emissions per unit electricity generated, and second low electricity reliability. To reduce air pollution levels and increase reliability, utilities have been, amongst other programs, encouraging urban households to conserve energy and reduce electricity use. Unlike their counterparts in other countries, however, utilities in Vietnam are employing contests amongst households as opposed to one-on-one contracts to encourage energy conservation. Contests, by employing relative rather than absolute standards, could in theory achieve larger aggregate energy conservation. This project addresses three questions. First, what is the cost-effectiveness of contests relative to contracts in reducing energy conservation when contracts are incomplete because households' abatement efforts and costs are unobservable to the utility. Second, do longer contests paired with feedback about the household’s relative performance change energy conservation behavior and adoption of energy-efficient appliances? And third, how can these programs be scaled in a cost-effective and fiscally feasible manner in low- and middle-income countries? Our project will not only inform the design of energy conservation policies in Vietnam and the efficiency in incentivizing behavior to manage demand but also provide us with the cost-effectiveness of various energy conservation programs and, consequently, a menu of costs per metric ton of CO2 abated.