Question

Question: Suppose that you are advising the Department of Energy on the best way to reduce energy consumption through home insulation. It has offered individuals a tax credit based on the magnitude of the payments made to install additional insulation in the attic, but the tax credit program has had only limited success. It has been asked to consider subsidizing insulation companies for a portion of the cost of clearing attics of unwanted items. Using your understanding of behavioral economics and public policy, analyze the pros and cons of the attic clearing program.

Short answer

Subsidies to companies will reduce the cost of producing the attic insulations. It will increase the supply of attic insulation. Thus, it will reduce the toxins and decontaminants from the home, increase the home's energy efficiency, and minimize the maintenance cost of the home.

However, the reduction in costs does not ensure the quality of the attic insulation. A poorly insulated attic can cause health issues like skin problems, respiratory problems, and cancer.

Step-by-step solution

Pros of attic insulation

The companies can benefit from subsidies as the cost reduction will increase the supply. Both the households and companies will benefit from the attic clearing program due to the increased supply of attic insulation.

The attic clearing program has specific pros. It increases the energy efficiency of the home through insulation. The insulation does not allow the heat to pass through the roof. Hence, it keeps the area inside the attic cooler in summers and warmer in winters, and the temperature inside fluctuates less.

It removes toxins and decontaminates the home. It eliminates harmful gases like carbon monoxide, radon gas, smoke, and other contaminants and ensures a healthy environment for the family.

Attic cleaning also minimizes maintenance costs of the home. It is not easy for an unprofessional individual to identify the damages caused by the contaminants. However, regular insulation can protect the home from severe damages, becoming a big issue.

Cons of attic insulation

A tax credit did not increase the demand for attic clearing insulation. Thus, the government shifts from a tax credit to subsidies. A decline in production cost will increase the demand for attic insulation practices. However, an increase in quantity may reduce the quality of attic clearing insulation.

A cost reduction will only help companies but does not guarantee the quality of attic insulation. A poorly insulated attic can cause the health problems like respiratory issues, skin problems, and cancer.