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The Role of Behavioural Economics in Energy and Climate Policy

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  • Pollitt, M. G.
  • Shaorshadze, I.

Abstract

This article explores how behavioural economics can be applied to energy and climate policy. We present an overview of main concepts of behavioural economics and discuss how they differ from the assumptions of neoclassical economics. Next, we discuss how behavioural economics applies to three areas of energy policy: (1) consumption and habits, (2) investment in energy efficiency, and (3) provision of public goods and support for pro-environmental behaviour. We conclude that behavioural economics seems unlikely to provide the magic bullet to reduce energy consumption by the magnitude required by the International Energy Agency's “450” climate policy scenario. However it offers new suggestions as to where to start looking for potentially sustainable changes in energy consumption. We believe that the most useful role within climate policy is in addressing issues of public perception of the affordability of climate policy and in facilitating the creation of a more responsive energy demand, better capable of responding to weather-induced changes in renewable electricity supply.

Suggested Citation

  • Pollitt, M. G. & Shaorshadze, I., 2011. "The Role of Behavioural Economics in Energy and Climate Policy," Cambridge Working Papers in Economics 1165, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1165
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    Cited by:

    1. Hobman, Elizabeth V. & Frederiks, Elisha R. & Stenner, Karen & Meikle, Sarah, 2016. "Uptake and usage of cost-reflective electricity pricing: Insights from psychology and behavioural economics," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 455-467.
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    3. Alessio D'Amato & Susanna Mancinelli & Mariangela Zoli, 2014. "Two Shades of (Warm) Glow: multidimensional intrinsic motivation, waste reduction and recycling," SEEDS Working Papers 2114, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Aug 2014.
    4. Sorrell, Steve, 2015. "Reducing energy demand: A review of issues, challenges and approaches," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 74-82.
    5. El Hage, Fabio S. & Rufín, Carlos, 2016. "Context analysis for a new regulatory model for electric utilities in Brazil," Energy Policy, Elsevier, vol. 97(C), pages 145-154.
    6. Tilmann Rave & Ursula Triebswetter & Johann Wackerbauer, 2013. "Koordination von Innovations-, Energie- und Umweltpolitik," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 61, October.
    7. Elisha R. Frederiks & Karen Stenner & Elizabeth V. Hobman, 2015. "The Socio-Demographic and Psychological Predictors of Residential Energy Consumption: A Comprehensive Review," Energies, MDPI, Open Access Journal, vol. 8(1), pages 1-37, January.
    8. repec:gam:jsusta:v:9:y:2017:i:7:p:1207-:d:104215 is not listed on IDEAS
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    11. repec:gam:jeners:v:10:y:2017:i:6:p:768-:d:100259 is not listed on IDEAS
    12. Frederiks, Elisha R. & Stenner, Karen & Hobman, Elizabeth V., 2015. "Household energy use: Applying behavioural economics to understand consumer decision-making and behaviour," Renewable and Sustainable Energy Reviews, Elsevier, vol. 41(C), pages 1385-1394.
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    15. repec:eee:renene:v:114:y:2017:i:pb:p:1062-1068 is not listed on IDEAS
    16. Ma, Guo & Andrews-Speed, Philip & Zhang, Jiandong, 2013. "Chinese consumer attitudes towards energy saving: The case of household electrical appliances in Chongqing," Energy Policy, Elsevier, vol. 56(C), pages 591-602.
    17. Wolfgang Buchholz & Jonas Frank & Hans-Dieter Karl & Johannes Pfeiffer & Karen Pittel & Ursula Triebswetter & Jochen Habermann & Wolfgang Mauch & Thomas Staudacher, 2012. "Die Zukunft der Energiemärkte: Ökonomische Analyse und Bewertung von Potenzialen und Handlungsmöglichkeiten," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 57, October.
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    20. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2013. "Research, innovation and technological performance in Germany - EFI Report 2013," Research, Innovation and Technological Performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin, volume 127, number 2013e.
    21. Alló, Maria & Loureiro, Maria L., 2014. "The role of social norms on preferences towards climate change policies: A meta-analysis," Energy Policy, Elsevier, vol. 73(C), pages 563-574.
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    More about this item

    Keywords

    behavioural economics; energy economics; energy demand; energy efficiency; private provision of public goods;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D10 - Microeconomics - - Household Behavior - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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