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Nudging Energy Efficiency Behavior: The Role of Information Labels

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  • Richard G. Newell
  • Juha V. Siikamäki

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19224.

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Date of creation: Jul 2013
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Handle: RePEc:nbr:nberwo:19224

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Citations

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Cited by:
  1. Hunt Allcott & Richard Sweeney, 2014. "Information Disclosure through Agents: Evidence from a Field Experiment," NBER Working Papers 20048, National Bureau of Economic Research, Inc.
  2. Massimo Anna Alberini & Massimo Filippini & Markus Bareit, 2014. "Does the Swiss Car Market Reward Fuel Efficient Cars? Evidence from Hedonic Pricing Regressions, Matching and a Regression Discontinuity Design," CER-ETH Economics working paper series 14/190, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  3. John Lynham & Kohei Nitta & Tatsuyoshi Saijo & Nori Tarui, 2014. "Why does real-time information reduce energy consumption?," Working Papers 201419, University of Hawaii at Manoa, Department of Economics.
  4. Anna Alberini & Markus Bareit & Massimo Filippini, 2014. "Does the Swiss Car Market Reward Fuel Efficient Cars? Evidence from Hedonic Pricing Regressions, a Regression Discontinuity Design, and Matching," Working Papers 2014.16, Fondazione Eni Enrico Mattei.

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