On the Perils of Environmentally Friendly Alternatives

Environmentally friendly alternatives are touted as a key component of a transition towards lowering the impact of human activity on the environment. The environmental costs of these technologies are seldom null; they are simply less environmentally damaging than existing options. In this paper, we investigate consumer behavior when an environmentally friendly alternative is introduced under different decision contexts. Using a carefully constructed field experimental design, we look at the use of plastic bags vis-a-vis biodegradable (bio) bags, when the latter are offered for free versus at a price. Moreover, we explore offering costly biodegradable bags as part of the default choice. We find that giving away the bio bags for free results in a large behavioral rebound effect, resulting in a large increase in the total number of bags. Setting a small, rather symbolic price offsets this rebound effect completely. Interestingly, when the bio bag is offered as a default, the behavioral rebound remains. The large behavioral rebound effect leads us to conclude against providing these environmentally friendly alternatives for free, and to caution against the use of subsidies to promote their uptake.