Energy efficiency: behaviour, rationality, economics and politics

I had the pleasure of joining some 300 researchers and academics from around the world a couple of weeks ago to discuss the latest thinking on persuading consumers to use less energy.  The BEHAVE2014 conference took place in Oxford at a time when it is increasingly appreciated, by businesses, governments and civic society, that any sustainable energy system must involve a serious commitment to energy efficiency.

Multiple components will, of course, be involved in fulfilling such a commitment in the UK: everything from the retro-fitting of the housing stock, through reform of transport infrastructure, to the development of more efficient factories, offices and shops.  The focus of BEHAVE2014, however, was very much on the consumer or household side of the equation; and, furthermore, on the potential of the behavioural sciences – behavioural economics, social psychology and so on – to enable and encourage individuals and householders to play their part in meeting the overall challenge.

A wide diversity of issues and possibilities was considered – but, for this delegate (and speaker) at least, the findings presented during the conference confirmed a sobering conclusion: that most citizens, most of the time, are profoundly disengaged from thinking about energy; and that the various mechanisms that might prompt their engagement are either too complicated, too fleeting or too dull:

  • Christian Kind, from the Adelphi think-tank in Berlin, reported on an experiment, conducted in both Germany and the UK, in which potential purchasers of freezers and refrigerators were provided with information on the likely running costs of the item alongside the purchase cost.  The information made virtually no difference to consumer choices: the immediate purchase cost simply swamped the significance of annual running costs.
  • Ben Bedwell, of the University of Nottingham, explained that he and his colleagues had monitored the energy consumption of individual products in 75 homes over the course of a year.  For most items, the potential savings from changing to a lower-consumption version of the item were so small that it would have made no sense for householders to switch.  Only for very old items, likely to be replaced anyway, would the switch make economic sense.
  • Suzanne Brunsting, from Dutch researchers ECN, showed that even the notion of ‘economic sense’ made little sense! In attempting to model consumer behaviour, she is tackling the fact that consumers are non-rational, are beholden to their habits and are significantly influenced not by ‘payback periods’ or ‘cost per kilowatt hour’ but by the views and behaviours of their friends.

There were, and are, innumerable other complications – the rebound effect, in which energy savings from efficiency are reduced through absolute increases in consumption; or the challenges of developing ‘community energy’ in situations where individualism is so well developed – and it may be that I have simply become cynical.  (Some who heard the presentation I gave on the basis of my own paper – in which I suggest that ‘gamification’ and the use of social media to promote energy efficiency represent a triumph of hype over impact – might well think so.)

I prefer, however, to think I am being sceptical rather than cynical.  I am completely persuaded that we need to achieve dramatic improvements in energy efficiency; and I am persuaded, too, that citizens, as well as businesses and governments, have an important role to play.  But we surely have to acknowledge that, if ordinary people have peculiar ‘discount rates’ or quickly become bored by the flashing lights on their new in-home display, that doesn’t make them wrong, it just makes them human.

The recovering economist in me still wonders, needless to say, whether we shouldn’t just rely on the good old fashioned price mechanism.  And it was in part because of this that Brook Lyndhurst asked in a recent survey whether people thought it would be fair to increase the rate of VAT on ‘ordinary’ products and decrease the rate on energy efficient products.

The results show that, by and large, the general public do indeed think this sort of thing would be fair.  Whether such an intervention would actually work, or whether it would be either economically feasible or politically palatable – well, the survey didn’t ask those questions.

In principle, there must surely be a price differential and a way of selecting which products should rise or fall in price to have an effect on consumer choice and to protect Treasury income.  But, in the current climate at least, the political barriers would seem insurmountable: governments are simply unwilling to interfere on the demand side, on the grounds that it would be ‘inefficient’ or ‘uncompetitive’.

Interestingly, the BEHAVE2014 conference also confronted the politics of energy (in)efficiency.  Speakers such as Harold Wilhite and Adam Corner suggested that piecemeal attempts to tackle energy efficiency were doomed to failure, and that success could only come with a much broader re-think of our lifestyles and our economy.  If they’re right – and I suspect they are – then our task is even bigger than some may have thought.

Herd behaviour amongst sports fans

We had a conversation in the office the other day about herd behaviour and the difference between football and cricket crowds. Why is it that spectators at a football match can occasionally get aggressive and abusive, but spectators at a cricket match tend to act more like naughty schoolboys: boisterous but essentially good-natured? It’s a well-known fact that being part of a large group legitimises indulgence in behaviours that individuals would not contemplate carrying out when alone, but why is it that different herd behaviours come to the surface among the spectators at a sports match, depending on what sport is being played?

I decided to look into this, just for fun, and carried out mini-interviews with a small number (n=4) of people who have watched both cricket and football. (I should point out that, as well as being an extremely small sample, this was an opportunity sample consisting of players at an amateur cricket match I happened to be watching last weekend.  The sample is therefore entirely male – perhaps not too far off your average sports crowd there then – and strongly biased towards cricket spectators over football spectators, so the findings should be read with those biases in mind!)

Obviously my small opportunity sample and my short interviews cannot have identified nearly all of the factors that come into play (no pun intended) to influence the behaviour of fans at football and cricket matches, but nevertheless this exercise has revealed some interesting insights.

Intensity

Firstly, the fact that a football match takes 90 minutes while a cricket match can go on for days – and with pace and scores to match – seems to be an important factor influencing crowd behaviour. Football matches are relatively shorter, faster-moving and lower-scoring than cricket matches, and a lot of emotion is therefore squeezed into a shorter period of time.  Watching a cricket match is, in contrast, a less intense experience, and emotions don’t run as high.

“Cricket is a big long boozy day.” 

“In cricket you can get 300 runs in a day, so each run is watered down. In football there’s more excitement when someone scores a goal.” 

“Cricket is more relaxing to watch than football.”

Relative importance of winning

Winning at cricket seems to be less important to the supporters than winning at football. Whilst football fans attend matches primarily to show their support for their team and cheer them on, cricket fans appear to have a wider range of motivations for attending a match – socialising with friends being a key one. Spectators at a cricket match therefore often feel that, regardless of the result, they get something positive out of the day. In contrast, having a good day at a football match is more likely to be predicated on winning. The wrong result can therefore be devastating, frustrating or infuriating for a football fan in a way that it may not be for a cricket fan.

“Football is more about watching my team win. It’s much more important to win at football than at cricket, as a spectator, because you can have a nice day at cricket anyway.” 

 “We pack a serious picnic [for cricket]. It’s quite a drunken day, there’s a festive, fun atmosphere. People are chatting and having a laugh. It’s boozy and silly.” 

“Cricket can sometimes be the secondary entertainment, whereas football is always the primary entertainment.”

I would also speculate that a related factor here is the way that a football match will always end with a win, lose or draw, whereas a spectator can leave a test match or a county cricket match at the end of a day of play, when the result has not yet been decided.

Players’ behaviour

The behaviour of the crowd seems to reflect the behaviour of the players and even the very nature of the game itself. Whilst football involves close physical contact and injuries, whether accidental or intentionally caused, cricketers have a reputation for being more gentlemanly and adhering to certain codes of conduct when it comes to following the rules. My interviews failed to shed light on why this should affect the spectators’ behaviour, although I would conjecture it may be something to do with entering into the spirit of the game.

“Football is more physical and violent – and that is reflected in how the fans behave.”

Allegiance

One final influence, which I also think would benefit from unpicking further, is the degree of allegiance to a team. This seems to differ between cricket and football, with football fans more strongly wedded to their teams. Cricket fans will admire, and even go as far as to applaud, good cricket being played by the opposition. A football fan, in contrast, will watch the game firmly from the perspective of their own team, and their emotions will therefore be more acutely affected by the team’s fortunes.

“I’d happily go and watch a cricket match where I don’t have an interest in either team. I’m much less likely to do that with football, because I find football hard to get into unless I support a team.”

“[Football] is only about your team. … People bring their children up into it, and it becomes a cult and they don’t accept any other team.” 

“You enjoy the game [cricket] first, and then the team.”

This would be a fascinating topic to research further. More in-depth qualitative interviews with a wider range of sports fans would, I’m sure, reveal further factors of interest and give better clarity on those tentatively identified here. While I wait for someone to commission a project on this, I’d love to hear your thoughts on the topic. What else influences herd behaviour at sporting events?

Just can’t get enough? (BEHAVE 2014 Blog Series, 4/4)

Ten years ago, Brook Lyndhurst commissioned MORI to survey a representative sample of 1,000 adults.  One of the things we asked back then was:

“To what extent do you think it would fair or unfair for the government to charge a lower rate of VAT on energy efficient products and a higher rate of VAT on normal products?”

Basic economics suggests that, if the price of a product comes down relative to an alternative, demand for that product will rise. That is, if we wanted to increase consumer demand for environmentally friendly products, we should simply make them cheaper compared to the alternatives.

One relatively easy way for policy-makers to do this might be through VAT, we reasoned.  There would be a cost to government, of course, through the cut in VAT for environmentally friendly products – but this would be offset by an increase in income from the rise in VAT on other products.  This environmentally progressive move could thus be ‘fiscally neutral’ – the net effect on the taxpayer would be zero.

But how would consumers react?  We’re led to believe they’re suspicious of government and hostile to tax.  Here’s what they said:

2004: “To what extent do you think it would fair or unfair for the government to charge a lower rate of VAT on energy efficient lightbulbs and a higher rate of VAT on normal lightbulbs?”

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Strikingly, more than a third of our respondents thought that it would be ‘very fair’ to change VAT in this way; and nearly three quarters, in total, thought the idea was a fair one.  Back in 2004, looking at this result in ‘Bad Habits, Hard Choices’, we felt that this strongly indicated that consumers were giving government ‘permission’ to act on the environment.

But what about now?

Well, we weren’t able to ask exactly the same question in our most recent survey, not least because some energy efficient lightbulbs have been banned.  (Government – or, at least, European government – seems to prefer ‘choice editing’ to ‘price signals’.) But we were able to ask a very similar question of a representative sample of 1,000 British adults, and we got this:

2013: “To what extent do you think it would fair or unfair for the government to charge a lower rate of VAT on energy efficient products and a higher rate of VAT on normal products?”

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And here we can put our pessimistic hats on and say (whilst putting to one side the change in question wording and methodology) something like: there has been a marked fall in the proportion of people thinking that it would be very fair to shift VAT rates in favour of environmentally friendly products.

With our optimistic hats on, however, we could say that, despite the cumulative effects of prolonged recession and/or low growth, and despite environmental issues having a conspicuously low profile in recent years, 70% of the respondents think that it would be fair to increase the cost of normal products whilst reducing the cost of environmentally friendly products.

Most governments would be absolutely delighted to have that sort of approval rating for a policy. What’s not to like?

Extending product lifetimes (BEHAVE 2014 Blog Series, 3/4)

More sustainable consumption is likely to mean ‘buying less stuff’ – or, more specifically, acquiring fewer products that deplete finite material resources. If people are to maintain their lifestyles, this will mean changes such as renting goods rather than buying them, and buying second-hand or reconditioned goods rather than new ones.

Our recent survey* results present sobering reading for those attempting to meet this challenge. Invited to consider the prospect that, “in the future it will be a lot easier than it is now to buy reconditioned or second-hand products”, around a third of respondents indicated that they either ‘don’t care much’ or ‘really don’t care’ about this:

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Furthermore, some two-fifths of respondents believe that buying reconditioned or second-hand products will either make ‘not much’ difference or ‘no difference at all’ to the environment:

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Unsurprisingly then, close to two thirds of respondents report either never, or hardly ever, actually buying second-hand or reconditioned electrical goods:

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There are undoubted opportunities for people to be encouraged to change these attitudes, such as by providing guarantees and standards for reconditioned products, but it would appear that citizens are some way from adopting the purchase of second-hand and recondition products as a norm.

An alternative way we might ‘buy less stuff’ is if we keep hold of new products for longer. In recent research for WRAP, we found that, while product ‘lifetimes’ are not a front-of-mind consideration for most people when buying electrical products, they are still held to be important. Often product lifetimes are not explicitly considered in purchasing decisions, but are inferred through other, more salient terms such as quality, reliability and durability. This is particularly applicable to ‘workhorse’ products such as fridges, washing machines and vacuum cleaners. (Our 2011 research for Defra found that mobile phones were usually kept for no more than two years, and computers were expected to last an average of four years).

Importantly, interest in ‘workhorse’ products that can be used at home for longer is not a minority issue confined to a small subset of consumers. Around a half of all consumers in the study for WRAP indicated that they would be willing to pay extra for products that are advertised to last longer. Longer standard guarantees or warranties (such as Kia’s 7 year warranty) and explicit testing of products’ durability (e.g. IKEA’s durability testing procedures [video]) can also build consumer confidence and make the purchase of more durable products more appealing.

[*Fieldwork was conducted on-line in September 2013 with a representative sample of 1,000 GB adults by GfK]

Hard choices (BEHAVE 2014 Blog Series, 2/4)

This blog is the second in our series of blogs in the lead up to the 2014 BEHAVE conference. Like the first blog, we’re delving into some of the results of a survey we ran a few months ago that gauged consumer attitudes towards a range of environmental and lifestyle issues.

In our survey we asked:

‘How often do you personally buy the most environmentally friendly option when you go shopping?’

The choice of words in the question was quite deliberate. In research we conducted a few years ago for Defra we established that, in terms of making a justifiable claim about a product, businesses should avoid the phrase ‘environmentally friendly’: it has no precise meaning, so it is difficult to verify. In the same research, however, we discovered that it is a phrase that the general public – perplexed by the technicalities of ‘low carbon’ and ‘zero waste’ and ‘bio-diversity’ – like very much.

It is easy for people answering surveys to ‘overclaim’ in responses to such questions, yet only one in twenty respondents in our survey claimed to make such a choice all of the time. In fact, just over half admitted that they only occasionally or hardly ever buy the most environmentally friendly option when shopping.

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It is well known, and obvious, that factors such as price, quality and convenience invariably loom largest in the minds of citizens when they make their consumption choices. The ‘environment’ is often a peripheral factor, something that – as we suggested in recent work for the Fairtrade Foundation – enables the typical consumer, as their make their occasionally or hardly ever choice, to get a reassuring ethical glow.

Nevertheless, most people know or believe the environment to be important. So, are there other reasons why shopping choices are so rarely influenced by environmental concerns?

One possible influence on people’s choices is whether or not they think it makes any difference to the environment. Our survey results point to a complex picture:

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Recycling is considered by close to 90% of respondents to make some or a lot of difference to the environment; and there would seem to be a neat fit with the high proportion of people claiming to recycle. People would probably be less willing to make the effort to recycle if they thought it was a waste of time, after all. Recycling rates across the UK have increased dramatically over the last couple of decades. Not only is it now much easier to recycle, with widespread kerbside recycling infrastructure, but people’s awareness and norms have also been successfully influenced.

Making environmentally friendly choices when shopping is some way below recycling in terms of perceived impact, with only two-thirds of respondents considering this to make some or a lot of difference to the environment. Clearly, if more people were choosing environmentally products regularly it would have a profound impact on the environment, but this appears to be less well recognised.

Communicating the benefits of shopping choices is perhaps more tricky than communicating the benefits of recycling. Supply chains are often complex and opaque, and even ‘deep greens’ can be unsure of the relative merits of organic, seasonal, local, Fairtrade…

Shopping choices therefore remain hard choices. Citizens already have to balance economic, convenience and nutrition issues. A complex and poorly understood environmental dimension is understandably a lower priority. The survey results suggest that if the impacts of these purchasing decisions were better communicated and understood, consumers might be more inclined to give further consideration to these choices.

[Fieldwork was conducted on-line in September 2013 with a representative sample of 1,000 GB adults by GfK]