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.

One Comment

  1. Posted October 1, 2014 at 9:28 am | Permalink

    Dear David, thanks for the great insights from the conference. I am glad that you attended my presentation on energy cost labels, some things in the summary of my talk have gotten a bit mixed up though, maybe due to the brevity of the post. Please allow me to clarify: there have been three experiments of this kind, one in Norway, one in the UK and one in Germany. In Norway, the average energy consumption of tumble dryers sold was reduced by 4.9% because of the introduction of the energy cost label (no effect for washing machines). In the UK there was a small but statistically significant reduction in the average energy consumption of washer dryers (0.7%; no effect for dryers nor for washing machines). The trial in Germany is actually still ongoing, so there are no results as of yet. However, of course, if you are interested, I will be happy to contact you again once the trial has finished and we have analysed the data (Feb2015). Best regards from Berlin,
    Christian

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