Nudging Energy Efficiency Behavior: The Role of Information Labels

Resources for the Future Discussion Paper No. 13-17

44 Pages Posted: 10 Jul 2013

See all articles by Richard G. Newell

Richard G. Newell

Duke University - Nicholas School of Environment; National Bureau of Economic Research (NBER); Resources for the Future

Juha Siikamäki

International Union for Conservation of Nature

Multiple version iconThere are 2 versions of this paper

Date Written: July 3, 2013

Abstract

We evaluate the effectiveness of energy efficiency labeling in guiding household appliance choice decisions. Using a carefully designed choice experiment with several alternative labeling treatments, we disentangle the relative importance of different types of information and intertemporal behavior (i.e., discounting) in guiding energy efficiency behavior. We find that simple information on the economic value of saving energy was the most important element guiding more cost-efficient investments in appliance energy efficiency, with information on physical energy use and carbon dioxide emissions having additional but lesser importance. The degree to which the current EnergyGuide label guided cost-efficient decisions depends importantly on the discount rate assumed appropriate for the analysis. Using individual discount rates separately elicited in our study, we find that the current EnergyGuide label came very close to guiding cost-efficient decisions, on average. However, using a uniform five percent rate for discounting — which was much lower than the average individual elicited rate — the EnergyGuide label led to choices that result in a one-third undervaluation of energy efficiency. We find that labels that not only nudged people with dispassionate monetary or physical information, but also endorsed a model (with Energy Star) or gave a suggestive grade to a model (as with the EU-style label), had a substantial impact in encouraging the choice of appliances with higher energy efficiency. Our results reinforce the centrality of views on intertemporal choice and discounting, both in terms of understanding individual behavior and in guiding public policy decisions.

Keywords: energy efficiency behavior, gap, information label, discounting, time preference gap, choice experiment, mixed logit

JEL Classification: C91, D12, D91, D83, H43, Q41, Q48

Suggested Citation

Newell, Richard G. and Siikamäki, Juha, Nudging Energy Efficiency Behavior: The Role of Information Labels (July 3, 2013). Resources for the Future Discussion Paper No. 13-17, Available at SSRN: https://ssrn.com/abstract=2292023 or http://dx.doi.org/10.2139/ssrn.2292023

Richard G. Newell

Duke University - Nicholas School of Environment ( email )

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National Bureau of Economic Research (NBER) ( email )

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Resources for the Future ( email )

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Juha Siikamäki (Contact Author)

International Union for Conservation of Nature ( email )

Washington, DC 20036
United States

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