Green nudges: can smileys on your utility bill reduce global emissions?

April 25, 2014 by  
Filed under Solar Energy Tips

Unless we undertake additional measures to reduce emissions, we are heading for a temperature increase of around 4C by 2100 as compared to pre-industrial levels, according to the Intergovernmental Panel on Climate Change (IPCC) report this month. To have a likely chance of limiting the temperature increase to the globally agreed target of 2C, emissions must reduce at least 40-70% by 2050 compared to 2010 emissions (and it is even optimistic to assume that these reductions will be sufficient).

This latest report gives behavioural change a much more central role than in 2007. Although it’s acknowledged that “only major institutional and technological change will give a better than even chance” of not exceeding emissions, the report asserts that behavioural change can play a key role in achieving emission reductions.

The report states for example that “behaviours informed by awareness of energy and climate issues” can reduce energy demand in buildings by up to 20% in the short run, and by 50% by 2050. One illustration being (pdf) that a typical office building in Zurich could reduce annual energy use for air-conditioning by a factor of more than three by adjusting their thermostat from 24C to 28C during the summer months.

Behavioural change can be facilitated through a wide range of policies and measures, monetary and non-monetary incentives. Taxing emissions has long been the preferred choice in the economist’s toolbox. However, they’re usually unpopular, they raise fairness concerns, and they are not always very effective. Taxes and other conventional policy tools have been around for decades, and it would be difficult to claim that governments around the world have had great success in reducing emissions in this time.

More recently a new policy tool has attracted attention: nudges.

Nudges are defined as changes to the decision context that alter behaviour without forbidding any options, and without substantially changing prices. They can and have been applied across fitness and nutrition, from smoking to education, and several studies show that they can be very cost-effective climate policy tools:

• Food waste: Food consumption is responsible for around a fifth of global greenhouse gas emissions, yet receives comparatively little focus compared to transport or deforestation. One study showed that by reducing the plate size by around an inch, restaurants can cut food waste by 20% – by nudging guests to leave less food. At GreenNudge we estimated the net benefit of introducing this to be around £2,600 per ton of CO2 saved.

• Home energy: If we are informed that we use more energy than our neighbours, it seems we start thinking about how we are wasting energy, and start looking for ways to save energy. An MIT and Harvard University study found that adding smileys on utility bills, indicating performance compared to the average household in the same neighbourhood, and adding energy tips, improved energy-saving behaviour. They estimate this could, if scaled nationally, cut US emissions by 3m tons of CO2 per year at a net benefit of around $165 (£98) per ton. As the study concluded: “This compares very favourably with other, more traditional strategies to reduce carbon emissions; wind power, carbon capture, and storage added to new coal power plants, and plug-in hybrid vehicles are estimated to cost $20, $44, and $15 per metric ton of CO2 abated.”

While nudges have proven to be of interest to many, and effective in places, critics have argued that many of these measures, especially measures targeting energy efficiency, are unlikely to be very effective because of so-called rebound effects. A classic example being that if you get people to buy more fuel-efficient cars, it will be cheaper to drive, and hence people will drive more. Careful studies of rebound effects (pdf) find, however, that while they can reduce the impact of a measure, rebounds do not offset the effect fully, typically reducing effectiveness by 10-30%.

There is still much more to explore and learn about the potential contribution of nudges to climate policy, but a few things already seem clear:

Nudges can in some instances be very effective policy tools. They can be cost effective, and target behaviours that other tools are not well suited for. What tax scheme would you use to get restaurant guests to leave less food waste behind?

Nudges can be a useful supplement to other tools. If energy taxes are in place, nudges can be used to make the operating costs of appliances more salient (and thanks to the taxes they will be higher), and help consumers choose more energy-efficient products.

Not all behaviours can be nudged successfully. It takes more than a nudge to get a utility company to invest in wind and solar power instead of coal or gas-fired power. Nudges should be seen as an addition to the climate policy toolbox, not as a replacement for the old tools.

With this new IPCC emphasis, and as governments struggle to meet ambitious (yet still insufficient) climate targets, it is useful to take a serious look at nudges and other behavioural interventions as potentially useful supplements to the climate policy toolbox.

Steffen Kallbekken is senior research fellow at CICERO Center for International Climate and Environmental Research – Oslo and co-founder of GreeNudge.

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