Equity and Electricity: Race Gap in Household Energy Use, with Eva Lyubich

Notable Quotes

• A clean energy transition must account for inequity: “Energy efficiency improvements are seen as low-hanging fruit for reducing excess energy consumption. Joe Biden's most recent climate plan reflects this. He includes a transition to 100 percent clean electricity by 2035 and investment into the weatherization of 2 million homes. These transitions can be designed in ways that either mitigate or exacerbate existing inequalities … Understanding what those inequalities are is a crucial first step to designing transitions well.” (4:52)
• Black renters and homeowners generally face higher energy costs: “What I find is that … black renters spend $273 more a year than white renters, and black homeowners spend $408 a year more than white homeowners. This ends up being a gap of about 15 percent over annual average expenditures for both renters and homeowners.” (9:28)
• A history of racial discrimination impacts energy efficiency today: “It's so important to [understand] these results in the context of history … Given that energy efficiency depends on capital stock, which requires high up-front costs to invest in, historical policies that excluded black people from home ownership or wealth accumulation or accessing credit could all have been important to contributing to these large differences [in energy expenditures between white and black households].” (13:42)

Top of the Stack

• "The Race Gap in Residential Energy Expenditures" by Eva Lyubich
• Drilled podcast
• Merchants of Doubt by Naomi Oreskes and Erik M. Conway
• There’s Something in the Water by Ingrid Waldron
• There’s Something in the Water documentary
• "The Case for Reparations" by Ta-Nehisi Coates
• "What Drives Racial and Ethnic Differences in High Cost Mortgages? The Role of High Risk Lenders" by Patrick Bayer, Fernando Ferreira, and Stephen L. Ross
• "Housing Discrimination and the Toxics Exposure Gap in the United States: Evidence from the Rental Market" by Peter Christensen, Ignacio Sarmiento-Barbieri, and Christopher Timmins
• "A community-based approach to low-income residential energy efficiency participation barriers" by Tony Gerard Reames
• "Targeting energy justice: Exploring spatial, racial/ethnic and socioeconomic disparities in urban residential heating energy efficiency" by Tony Gerard Reames
• “The Economics of Environmental Justice, with Samuel Stolper and Catherine Hausman" by Resources Radio
  

The Full Transcript

Daniel Raimi: Hello and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. This week, we talk with Eva Lyubich, a graduate student in the Economics Department at the University of California, Berkeley and at the Energy Institute at Haas. Eva recently released a fascinating working paper on the gap in household energy spending between white and black households. I'll ask her how big that gap is, whether it's changed over time, and what might be causing it. It's a fascinating conversation, one that includes not just energy but also the history of discriminatory housing policies in the United States. Stay with us.

Okay, Eva Lyubich from UC Berkeley and the Energy Institute at Haas, thank you so much for joining us today on Resources Radio.

Eva Lyubich: Thanks so much for having me. I'm excited to be here.

Daniel Raimi: Yeah, we're excited to have you. We're going to talk about a really fascinating working paper that you published recently in June. But before we get into that paper, we always like to ask our guests how they got interested in working on energy and environmental issues. How did you get into this field?

Eva Lyubich: I fell in love with snowboarding when I was in high school. And so when I went to college the first thing I did was join the outdoor club, and eventually I also joined an outdoor leadership training program. And as a result many of my formative experiences and relationships that I had in that period of my life were either built in the mountains or in some way connected to the outdoors. And so, initially I was drawn to energy and environmental issues because I wanted to preserve those outdoor spaces that had been so meaningful to me and because I was worried about the snow melting and losing my favorite hobby. But at the same time, in the fall of my junior year, the Divest Coal campaign was really ramping up on campus.

Divest Coal was a grassroots movement of students organizing with 350.org that was calling on university administrations to divest their fossil fuel assets. And that campaign really drew my attention to the power of the fossil fuel industry and made me appreciate the importance of aligning financial incentives with societal goals. I was a physics major, so I had initially thought that I would work on climate problems as an atmospheric physicist or something in the scientific space, but between the grassroots activism of Divest Coal and a couple of really engaging environmental policy and economics classes that I took in my senior year, I decided to switch and try to approach the problem from an economics perspective instead.

Daniel Raimi: Yeah, that's really interesting. And your note about snowboarding just reminds me—I think one of our most common responses to this question has something to do with the mountains. Something about the mountains and the environment just gets people really inspired.

Eva Lyubich: Yeah. I think the opportunity to spend time in the mountains is such a great opportunity for reflection and growth and it can be very meditative. So that makes sense to me.

Daniel Raimi: Well, let's get in now to your recent working paper which we'll have a link to in the show notes. But in case people want to search for it online, the paper is called “The Race Gap in Residential Energy Expenditures.” It's a working paper from the Energy Institute at the Haas School of Business at UC Berkeley. And this is probably a really obvious question, but can you just help us understand why did you want to look at this issue and try to understand the differences in energy expenditures across races?

Eva Lyubich: Yeah, that's a great question. First of all we know that there are differences across race in so many other outcomes—from income and intergenerational mobility to air pollution exposure—and currently, we're seeing it with impacts of COVID-19 as well. And I just hadn't seen any broad systematic analysis of the differences in energy expenditure. And I thought it was important to look at that in itself because at least some of energy use is not discretionary—people need to heat their homes and keep on their lights—so I thought it was really important to understand how baseline energy expenditures differ across race, if they do. But there's also an additional layer here, which is that residential energy use has become a focal point of progressive climate policies, partially because of the joint promise of clean electricity generation and electrification.

And partially I think because energy efficiency improvements are seen as low-hanging fruit for reducing excess energy consumption. Joe Biden's most recent climate plan reflects this. He includes a transition to 100 percent clean electricity by 2035 and investment into the weatherization of 2 million homes. These transitions can be designed in ways that either mitigate or exacerbate existing inequalities. And I think that understanding what those inequalities are is a crucial first step to designing transitions well.

Daniel Raimi: Yeah, that's a great point. And there's great research that's been done in the economics field about the distributional effects of weatherization policies and other energy efficiency policies that we'll have to save for another podcast. But I'm glad you referenced them. So, one slightly technical question before we get into what some of your major findings are for our research listeners out there, I think it would be useful for them to understand what dataset you were using to try to understand this topic. Can you give us a sense of what data you used, what timeframe it covered, the parts of the country that it included, and any other important relevant data?

Eva Lyubich: Yeah, definitely. I primarily used data from the American Community Survey or the ACS. The ACS is an annual, nationally representative survey of about 1 percent of the US population, and respondents are asked a bunch of questions about a variety of different topics, which include basic demographics like age and race, socioeconomic characteristics like education and income, and—importantly for me—the ACS asks about energy expenditures. Namely, they ask about annual expenditures on electricity, natural gas, and other home heating fuel. I use those three variables to construct a measure of annual residential energy expenditure costs, which is the sum of the three different fuel types. And that's the main variable I use for my analysis. And in terms of other important sample restrictions and time periods, I restricted the sample to households that were either entirely white or entirely black because I wanted a very clear comparison across race.

I use households that live in one of the 50 states or in DC, and my data spans 2010 to 2017. One thing that's maybe a little bit in the weeds, but I think is important to mention, is that I deflate all of my money variables—basically, income and energy costs—to account for inflation, and so all of my estimates are actually expressed in 2012 dollars. Maybe in the next version of the paper, I should switch that to 2020 values to be a little bit more intuitive to the economic conditions we find ourselves in currently.

Daniel Raimi: Great. Got it. So if you say $100 today, then that's 2012 dollars, and so $100 in your paper is maybe something like $110 in today's dollars?

Eva Lyubich: Exactly.

Daniel Raimi: Great. When I was reading the paper, one of the really nice things that I appreciated is that you start off by telling us what the results look like if we just look at the raw data without controlling for factors like income or location. What do we see when we look at those raw data without controlling for any of the important variables?

Eva Lyubich: In the raw data, we don't see a statistically significant difference in annual residential energy costs. So I estimate that black families spend about $50 more a year than white families, but this is only 2 percent relative to the sample average of annual spending. And again, it's not statistically significant from zero, so basically there's no meaningful gap.

Daniel Raimi: Right. And then—we can start to get more interesting here—when you control for some of those other factors, how do the effects start to change?

Eva Lyubich: Yeah. So as I start controlling for factors that we would expect to be correlated with energy consumption, the energy expenditure gap becomes both economically and statistically significant. In my preferred specification, I control for household income, household size, and city of residence. And I estimate the residential energy expenditure gap separately for renters and for homeowners. And what I find is that in that specification, black renters spend $273 more a year than white renters and black homeowners spend $408 a year more than white homeowners. This ends up being a gap of about 15 percent over annual average expenditures for both renters and homeowners. I was actually a little bit surprised that it wasn't larger for renters, but it’s about 15 percent for both.

And then I also break the results down by income, so I split the sample into 10 income deciles and estimate the gap for each decile. And I find that the gap is pretty stable in levels across incomes, except that it closes at the very top of the income distribution for both renters and for homeowners. What that means is that in terms of energy burden—which is the share of income spent on energy expenditures—the energy burden gap is highest for low-income households, which we know already faced the highest energy burden at baseline.

Daniel Raimi: Great. That's so interesting. And there's so much interesting meat to unpack there, and we'll try to do that over the next 10 or 15 minutes. One clarification that I would make for our non-economist listeners is that when you use the term “preferred specification” that refers to doing a variety of statistical models to try to estimate the effects, and then your preferred specification is the model that you think is the most appropriate and accounts for the right range of factors. Is that a decent definition?

Eva Lyubich: Yes. Thank you for clarifying that.

Daniel Raimi: Let's take it a little deeper. One of the points that comes up often when you talk to people in the electricity industry and the issue of energy affordability is the notion that low-cost natural gas along with lower-cost renewables in recent years has helped lower prices of home heating and home electricity use across the country. So when you look over time at some of these effects and how they changed, what do you see?

Eva Lyubich: Yeah. When I look over time, I see that the residential energy gap looks like it's decreased by about $150 between 2010 and 2017. Although I should say that, statistically, I can't reject that the gap has stayed constant, but it certainly looks like it's trending downwards. And you make a great point about the rise of cheap natural gas. In this version of the paper, I don't do any causal inference and I haven't looked at how the decrease in the gap varies across regions with more or less natural gas. But I think that it would be really interesting to know what share of the decline can be attributed to that shift in fuel, and I'll definitely plan to look at that in future versions of the paper.

In terms of examining how much the gap has declined and what has caused it to do so, I think another really interesting direction is to try to understand how much was driven by investments undertaken under the American Recovery and Reinvestment Act, which, in 2009, directed $5 billion towards energy efficiency improvements. That's right before my sample period, so I think both of those are really interesting to dig into more.

Daniel Raimi: Yeah, interesting. One other interesting note in the paper is that you spend some time exploring what some of the reasons behind the energy gap might be and why it is that black households are spending more than white households on energy. Can you give us a little bit of a sense of the historical issues that might be contributing to that big difference? What are some hypotheses that are out there?

Eva Lyubich: Yeah, absolutely. I think it's so important to take these results in the context of history. One mechanism that I explore is differences in energy efficiency of the home. Given that energy efficiency depends on capital stock, which requires high up-front costs to invest in, historical policies that excluded black people from home ownership or wealth accumulation or accessing credit could all have been important to contributing to these large differences. So there were explicit laws in the books that excluded black Americans from homeownership and wealth generation well into the 20th century. For example, in the 1930s, the Home Owners' Loan Corporation began the practice of redlining, which basically identified nonwhite neighborhoods as unworthy of credit for mortgages.

This not only led to disinvestment and persistent poverty in those neighborhoods, which worsen the educational opportunities and worsen job opportunities and intergenerational mobility, but it also made it hard for black families to buy in those neighborhoods. But at the same time, they were also explicitly excluded from living in suburbs by deed covenants, which prohibited the sale of homes to black families. Together, these as well as other practices prevented black Americans from owning homes, which is one of the main forms of wealth generation in the United States, and this has had persistent effects. Today, estimates suggest that the median black household’s wealth is only 10 percent of the median white household’s wealth. That's on the home ownership and wealth side, and then at the same time, black households aren't able to make up for this gap with borrowing, because even though the Fair Housing Act banned racial discrimination and lending in 1968, there's evidence that credit continues to be more costly for black households.

Just to give one example, a paper by Patrick Bayer, Fernando Ferreira, and Stephen L. Ross shows that even after conditioning for their credit score and income, black people continue to face higher-cost loans. So, there's a disparity in wealth and then there's a disparity and credit access, and then on top of that, although segregation is no longer legally enforceable or allowable, ongoing informal discrimination in housing markets continues to restrict housing choice sets for black households and drives up property taxes for the same home values. These are just a few of the ways in which systemic racism has led to lower wealth and lower levels of home ownership and simultaneously higher costs of home ownership and costs of credit. And I see all of these, especially when taken together, as potential barriers to living in higher quality or more energy efficient homes, or to making the upfront high cost investments that are necessary to get energy efficient capital.

Daniel Raimi: Yeah. That's a great explanation. And it's such a troubling history and troubling present in many ways, but it's really important to think about and be aware of. I think I first became aware of this issue in detail from Ta-Nehisi Coates's story in the Atlantic about five or six years ago—it was called “The Case for Reparations”—that I think has been widely read by a lot of people. It's not scholarly work, but it's an incredibly powerful piece that lays out a lot of these historical issues.

Eva Lyubich: Yeah, absolutely. That piece was also very formative for my thinking about race issues and how they connect to environmental justice and climate policy.

Daniel Raimi: When we think about the scholarly community and researchers and what they have looked at in this field, when you look across the energy justice literature and the environmental justice literature, how do your findings or your research approach connect with that body of work?

Eva Lyubich: There's a broad set of evidence that black Americans bear a disproportionate burden of the current energy system, and my findings contribute to that set of evidence. And when I talk about the burden or the cost of the current energy system, I have in mind two aspects. The first is the literal cost of buying energy, and that's the aspect that my paper speaks more to. The second is the cost of pollution that results from the mining and burning of fossil fuels that we've been using to generate energy. And a lot of the work in this space has focused on the latter—I think rightfully so—because pollution is incredibly costly in terms of health and in terms of productivity. There's been a lot of work on that disparity.

The environmental justice movement grew out of the Civil Rights Movement. It goes back to the 1960s and 1970s, and there's been research quantifying disproportionate exposure to pollution since at least 1983, when the Government Accountability Office published a report showing that black people were much more likely to live near polluting point sources. This descriptive fact unfortunately still holds true today, and as you mentioned, there's been a recent increase in work exploring underlying causes and consequences.

And so, there are two papers that I want to highlight which I see as related. One is a paper by Peter Christensen and coauthors. They use a correspondence study, which is a study in which they pretend to apply for apartments and they vary the characteristics of their pretend applicants. They show that disproportionate sorting of black families into neighborhoods that are near polluting point sources is at least in part due to ongoing discrimination that restricts housing choice sets. Basically, they find that when they claim that an applicant is black, they get higher response rates in neighborhoods that are closer to polluting point sources. And another great paper—you just had a conversation recently with Catie Hausman and Sam Stolper about their work which highlights how hidden information and uncertainty about the cost of pollution—even when it's constant across race groups—can lead to additional disparities and exposure. There's a ton of great work in this space, but those are two papers that I was thinking about a lot when I was writing my paper.

On the other side, the literal cost of buying energy is the work that my paper contributes to more directly. And there's been a lot of great recent work studying disparate energy burden. For example, Tony Reames has a couple of papers that have come out in the past few years showing that energy burden or the share of income spent on energy expenditures is higher in minority neighborhoods. And there was another paper that came out looking across households in just the 2011 ACS. So, my contribution to that literature is to look at differences conditional on income and parse out the components of these differences that are driven by income versus race, and to do that at the individual level and a national, longer time sample.

Daniel Raimi: Great. That makes a lot of sense. And yeah, there is so much interesting work in this space. As you mentioned, we had Catie and Sam on the show six months ago or so. And Tony Reames is a Michigan professor and a friend of mine who I've been meaning to invite on the show for a while now, and we'll certainly get around to it sometime soon. So, what's next for you? You mentioned a couple of potential avenues for furthering this line of research. Are you planning on continuing to look into this issue of racial disparities in energy, or are you looking to expand and do related or even unrelated new work?

Eva Lyubich: The answer is yes to both. I am definitely planning to dig into this project more, as we talked about. This current version is really descriptive, which I think is great and important, but I would love to be able to say more about what has caused the gap and what's driven its decline in recent years. And so I'm definitely going to dig into that in future versions. I do also have a couple of other early to mid-stage projects that I'm working on. Broadly speaking, I'm really interested in the relationships between inequality, capital and public goods investment, energy use, and understanding what those relationships mean for optimal climate policy. I see this work as fitting under that umbrella, and I'm also asking a few other questions related to built environment and energy use and investment into public goods and energy use to try to get at this topic from different angles.

Daniel Raimi: Yeah, that sounds great. I mean, there obviously are an infinite number of interesting things to explore, and I really look forward to seeing what you produce in the next couple of years and even further on these topics.

Eva Lyubich: Thanks.

Daniel Raimi: Alright. Well, Eva Lyubich from University of California, Berkeley. Thank you again so much for joining us and let's close it out with the same question that we ask all of our guests, which is: what's at the top of your literal or metaphorical reading stack that you would recommend to our listeners? And I'll start off with a book that actually is literally on the top of my stack. I'm about halfway through it, and it's really interesting. It's very much related to what we've been talking about. It's a book called There's Something in the Water: Environmental Racism in Indigenous and Black Communities. It's by a scholar named Ingrid R.G. Waldron who's based in Canada.

There's also a documentary of the same name featuring Ellen Page, who's an excellent actress, but it's a documentary of Ellen Page going around talking to people in some of these communities who are experiencing these negative impacts. So I'm reading the book and learning a lot from it, and we may invite Dr. Waldron on the show to talk about it if we can get her. But it's another illuminating example of historical injustice and the way that it's playing out in our society. So, I'd recommend people check it out if they're interested in exploring more of this topic. But how about you, Eva? What's on the top of your stack?

Eva Lyubich: First of all, I'm definitely going to add that to the top of my stack as well. I've been finding that my stack has been growing faster than I can keep up with it in recent months.

Daniel Raimi: That's the nature of the stack. It just grows. It never shrinks.

Eva Lyubich: But maybe this is cheating, but I have a dual recommendation. So, I just listened to the third season of Drilled, which is a podcast by Amy Westervelt, and she digs into the history of the oil industry's influence over energy and climate policy, and it is eye-opening and excellent. It also inspired me to reread the book Merchants of Doubt, which came out in 2010, it's a book by Naomi Oreskes and Eric Conway. They explore the links between the tobacco industry and the oil industry, and they lay out the ways in which science denial across both of those industries was constructed following the same strategies and sometimes constructed by even the same people. And it has been really formative in how I've thought about climate policy in recent years.

One of the things that was especially striking to me, especially as I'm thinking about it right now, is the repeated pattern of industry successfully framing attempts to protect the collective good as affronts to individual freedom and, in turn, American values. We’re seeing that conflict play out in real time now with the way that COVID is being handled. And so I just think it's an incredibly important dynamic to be aware of when trying to think about or make policy that deals with externalities. Yeah, if you don't feel like you have enough to be mad about already, Merchants of Doubt and Drilled are both must-listens and reads in my view.

Daniel Raimi: Yes, I have read Merchants of Doubt and I've listened to parts of Drilled but not the whole thing. And yeah, both are definitely really interesting—provocative in some ways, but useful perspectives for sure.

Eva Lyubich: Yeah.

Daniel Raimi: Great. So, Eva Lyubich, once again, thank you so much for joining us on Resources Radio and sharing. Your work is really fascinating and I learned a ton. Thank you so much.

Eva Lyubich: Thanks so much for having me. It was great.

Daniel Raimi: Resources Radio is a podcast from Resources for the Future. RFF is an independent nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy and natural resource decisions through impartial economic research and policy engagement. Learn more about us at rff.org.

The views expressed on this podcast are solely those of the participants. They do not necessarily represent the views of Resources for the Future, which does not take institutional positions on public policies.

Resources Radio is produced by Elizabeth Wason, with music by me, Daniel Raimi. Join us next week for another episode.