Nudging Energy Efficiency Behavior: The Role of Information Labels

43 Pages Posted: 12 Jul 2013 Last revised: 13 Jul 2022

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

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Date Written: July 2013

Abstract

We evaluate the effectiveness of energy efficiency labeling in guiding household decisions. Using a carefully designed choice experiment with alternative labels, 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 energy efficiency, with information on physical energy use and carbon 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. 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 discount rate--which was much lower than the average elicited rate--the EnergyGuide label led to choices that result in a one-third undervaluation of energy efficiency. We find that labels that also endorsed a model (with Energy Star) or gave a suggestive grade to a model (EU-style label), encouraged substantially 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 policy.

Suggested Citation

Newell, Richard G. and Siikamäki, Juha, Nudging Energy Efficiency Behavior: The Role of Information Labels (July 2013). NBER Working Paper No. w19224, Available at SSRN: https://ssrn.com/abstract=2292844

Richard G. Newell (Contact Author)

Duke University - Nicholas School of Environment ( email )

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Resources for the Future ( email )

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Juha Siikamäki

International Union for Conservation of Nature ( email )

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