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Nudging Energy Efficiency Behavior: The Role of Information Labels

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  • Newell, Richard G.
  • Siikamäki, Juha

    ()
    (Resources for the Future)

Abstract

We evaluate the effectiveness of energy efficiency labeling in guiding household appliance choice decisions. Using a carefully designed choice experiment with several alternative labeling treatments, 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 appliance energy efficiency, with information on physical energy use and carbon dioxide 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 appropriate for the analysis. 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 rate for discounting—which was much lower than the average individual elicited rate—the EnergyGuide label led to choices that result in a one-third undervaluation of energy efficiency. We find that labels that not only nudged people with dispassionate monetary or physical information, but also endorsed a model (with Energy Star) or gave a suggestive grade to a model (as with the EU-style label), had a substantial impact in encouraging the choice of appliances with 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 public policy decisions.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-13-17.

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Date of creation: 03 Jul 2013
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Handle: RePEc:rff:dpaper:dp-13-17

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Keywords: energy efficiency behavior; gap; information label; discounting; time preference gap; choice experiment; mixed logit;

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Cited by:
  1. 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.
  2. Hunt Allcott & Richard Sweeney, 2014. "Information Disclosure through Agents: Evidence from a Field Experiment," NBER Working Papers 20048, National Bureau of Economic Research, Inc.
  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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