A government subsidy to help people pay for electricity actually backfired and made them use way less power.
SSRN · March 13, 2026 · 6306923
Why it matters
While economics usually predicts that lowering the price of a resource increases its use, Norwegian households cut consumption by 7-9% when subsidies kicked in. They interpreted the subsidy as a 'crisis signal' that the situation was dire, prompting them to save energy more aggressively than if the government had done nothing.
From the abstract
We examine consumer responses to the 2022 European Energy Crisis, using Norway's zonal electricity market and the start of a subsidy policy as a natural experiment. Employing administrative consumption records from over 1.5 million households and a differences-indifferences approach, we show that zones more interconnected with Europe experienced a 7-9% reduction in household electricity consumption relative to zones less interconnected, with effects persisting for several months. Using a tripled