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Nudging Energy Efficiency Behavior: The Role of Information Labels

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  • Richard G. Newell
  • Juha Siikamäki

Abstract

We use choice experiments and randomized information treatments to study the effectiveness of alternative energy efficiency labels in guiding households' energy efficiency decisions. We disentangle the relative importance of different types of information and distinguish it from intertemporal behavior. We find that insufficient information can lead to considerable undervaluation of energy efficiency. Simple information on the monetary value of energy savings was the most important element guiding cost-efficient energy efficiency investments, with information on physical energy use and carbon dioxide emissions having additional but lesser importance. The degree to which the current US EnergyGuide label guided cost-efficient decisions depends on the discount rate. Using elicited individual discount rates, the current EnergyGuide label came very close to guiding cost-efficient decisions. Using a uniform 5% discount rate, the current label led to one-third undervaluation of energy efficiency. Our results reinforce the centrality of discounting in understanding individual behavior and guiding policy.

Suggested Citation

  • Richard G. Newell & Juha Siikamäki, 2014. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(4), pages 555-598.
  • Handle: RePEc:ucp:jaerec:doi:10.1086/679281
    DOI: 10.1086/679281
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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