It Pays to Reduce Your Carbon Footprint: Business and Policy Leaders Take Note

Framing corporate engagement with carbon pricing policy as either proactive or compliant plays a significant role in determining consumer attitudes and behaviors towards both companies and carbon pricing policy.

You might be willing to pay more in a cafe for fair-trade coffee and you might be persuaded to purchase a reusable bag for a higher fee when grocery shopping. As consumers, there are factors besides price that weigh in on our decision-making about what types of goods to buy and where to buy them from. Organizations and governmental agencies promoting environmental policy must understand what drives consumer behavior regarding socially and environmentally responsible companies.

Our latest research at The Decision Lab is shedding light on how corporate action on climate change —  especially in response to carbon pricing policies—influences consumer attitudes towards the company and how interested they are in being their customer. The findings also offer important insight into the framing effects associated with Canada’s carbon pricing policies.

Assessing Consumer Response to Carbon Pricing

The goal of this research was to assess how Canadian consumers respond to framing around industry involvement with carbon pricing policy – a goal inspired by the Federal government’s recent carbon pricing initiatives [4]. Frames can be considered as subtle alterations in the statement or presentation of judgement and choice problems [2]. Framing triggers individual’s unconscious perception of information by the way in which information is provided—in this instance, information about policy compliance.

When designing the study we had two key questions. First, how does a company’s participation with carbon pricing affect consumer evaluations of individual companies? Second, how does a company’s participation influence public support for carbon pricing more generally?

To answer these questions we recruited 118 Canadians online.  The participants were randomly assigned to one of two hypothetical scenarios about company engagement with a carbon tax.  Participants read the following statement: “Suppose that national carbon pricing legislation gives businesses a choice in how they contribute to reducing carbon emissions.” The participant was then given potential scenarios regarding whether a company (called Standard Inc.)  decides to either pay a fee proportional to their carbon-use or to invest the amount in carbon-reducing practices. We called the companies that invest in carbon-reducing activities ‘Proactive’ companies and the companies that simply comply and pay the fee-per carbon use ‘Compliant Companies’.  Participants then rated how much they agreed with a series of statements about their evaluation of the company’s behavior and the tax policy itself.

What did we find?

Our first key finding was that consumers are more likely to describe the proactive company that invested in carbon-reducing activities as helping the environment, not hurting the environment, morally good, and engaging in acceptable business practices in comparison to the compliant companies that simply paid the tax. Additionally, consumers expressed a higher willingness to engage in business with the proactive companies.

Our second finding has wider political implications which supports research showing that differently framed messages can influence the opinions and attitudes of the public[2]. If the framing involved the proactive company investing in emissions-reducing activities, participants were more likely to rate the carbon pricing policy as fair, support the political party that implemented it, rate the policy as helping the environment, rate it as helping Canada’s image and reflecting Canadian values, and helping the economy. The opposite was true for the compliant company frame.

What can we learn from these findings?

We offer a few key explanations and takeaways of our results for industry leaders and policymakers. From a business perspective, consumers responded positively to the actions of proactively engaging companies. There are tangible benefits for companies to actively reduce their greenhouse gas emissions, though these results will only be realized if the private sector can communicate their actions to the public. Other research on environmental compliance has found that it can be costly for corporations that do not keep their actions aligned with the current ethical landscape [7]. Additionally, according to green consumer theory, firms may respond proactively to policy that appeal to environmentally conscious consumers, who are willing to pay more for green products or redirect their demand toward environmentally friendly firms [1, 5].

From a policy standpoint, when industry action reflects the spirit of a policy’s goal (i.e addressing climate change) it legitimizes the value of the policy in the eyes of the public. Other research shows that when the public has trust in the specific actors engaged in environmental policy there is increased public support for the policy. For example in the domain of forestry management, a high confidence in forestry agencies, experts and industry has been positively associated with acceptance of forest management policies and their implied risks [6].This research demonstrates that trust in responsible agencies is essential when the public lacks familiarity with, but values the outcomes, of environmental practices.

These results are particularly relevant to the complex issue of climate change. Members of the public are not necessarily informed on the science behind climate change or the mechanisms to reduce emissions, but are nonetheless concerned about addressing it [3]. Our findings illustrate that if members of the public develop trust in proactive companies, they will increase their overall support for the climate pricing policy. This relationship is of concern to policymakers who are framing and articulating policy aimed at industry-level behavioral and attitudinal change.

Final Thoughts

Our research offers insight into how public support can be fostered for carbon pricing policies during a time when climate change policy is one of the most salient and divisive political topics in Canada.  Our results clearly illustrate that Canadians react positively to carbon pricing policy which directly incentivizes companies to reduce greenhouse gas emissions as opposed to merely promoting compliance with carbon taxes. Consumers take signals from industry in their overall assessments on the legitimacy of a given policy.

As the effects of climate change become increasingly evident and public support more imperative, our research suggests that simple framing has an important role to play. Governments should focus on communicating the positive returns of proactive engagement to industry to encourage emissions reduction. We suggest that future research on this topic should examine the relationship between framing effects and the type of emitting company in order to determine if industry type factors into consumer evaluations of policy.

Durham’s Plan to ‘Nudge’ Drivers Out of Cars

Behavioral science strategies like offering prizes are getting people into public transit.

There are 19,000 parking spots in downtown Durham, North Carolina, and an estimated 3,700 more on the way to satisfy driver demand. But if the city can help it, drivers could be “nudged” out of taking a car solo to the urban core.

Durham was one of nine American cities that won $1 million from the Bloomberg Philanthropies’ U.S. Mayors’ Challenge, announced on Monday at CityLab Detroit. Over the next three years, the city will use the money to try to shift downtown commuters out of their cars, with a touch of behavioral science.

Partnering with several large employers, Durham tested two such strategies on more than 1,500 downtown workers over a period of six months earlier this year. The goal was fairly modest: to cut down single-person vehicle trips into the city’s core by 5 percent. With one program, the city emailed personalized route maps from individuals’ home to work addresses (which participants provided by opting in) that showed routes by bike, a GoDurham bus, and walking, compared to driving. The emails also included trip time comparisons and listed the potential benefits of alternatives to solo driving, including the weight loss potential, the savings in gas money, and the time commuters could reclaim from the city’s infamous traffic. “Driving downtown is so 2017,” the maps said.

A portion of a sample personalized route map. (City of Durham)

The second strategy was more classic economics: The city hosted a bus lottery for a group of its own employees, in which riding the bus to work made them eligible for a $163 weekly cash prize. Both approaches borrowed from the “nudge” theory of behavioral science—the notion that providing positive reinforcement and indirect hints can get people to shift decisions in a more desirable direction.

Behavioral science researchers from Duke University worked with city leaders to inform the types of “carrots” that commuters were offered. People generally intend to behave in ways that they know are good for society, but old habits get in the way, explained Joseph Sherlock, an applied behavioral researcher at the university’s Center for Advanced Hindsight who worked with city officials to shape the programs. “The personalized routes help reduce the barrier between intention and behavior, and makes it easier for us to follow through on behavior we want to do,” Sherlock said. And with the lottery, “humans have an amazing ability to think we have a bigger chance than we do. So we just took that insight and applied that to trying to encourage a pro-social behavior.”

According to Mayor Steve Schewel, the results exceeded the original goal. The share of commuters who reported driving to work alone was 12 percent lower among those who received the alternate commute maps than those who didn’t, according to post-mortem participant surveys. And the solo-driving share dropped by 16 percent among those who received the maps and took transit for prizes. Overall, the incentives cut back single-driver vehicle trips among the participants by more than five percent.

With the new $1 million prize, Durham will try to scale up these or other behavioral strategies to reduce downtown solo driving by five percent across the entire city population. Schewel believes this should be getting easier and easier to do. “We’re hopeful about building light rail soon, we’re improving our bus system a lot, and there’s all these other players, like the scooters, that are coming in,” he said.

Why cut back on driving? First, there’s an economic rationale: It’s expensive to keep building more parking. As of 2012, the average construction cost of an above-ground parking spot in major American cities was $24,000. Durham would like to avoid pouring more money into those, Schewel explained, especially as the population booms, and since autonomous vehicles may eventually eliminate the need for parking entirely. “Our employers still want a lot more parking than there is,” he said. “So while we’re in this interesting period of transition in terms of transportation, we have to do the best we can to avoid these parking decks that will eventually be white elephants anyways.”

Then there are the arguably far more important reasons: Reducing driving means reducing emissions, as part of the city’s climate goals. And it’s a matter of quality of life, the mayor added: No one likes to sit in congestion.

Other cities have benefited from incentive-based programs to drive commuters out of their cars. Single-occupancy vehicle commutes into downtown Seattle have dropped by 10 percent since 2010, even as the city’s population has boomed in that period. That’s been largely thanks to big employers providing free transit passes and car-sharing memberships, running commuter shuttle services, and ramping up monthly parking prices, as part of a robust commute trip reduction program across Washington state. Seattle and King County have also beefed up transit provisions in recent years, which Durham is now also trying to do.

The idea of “nudging” as public policy doesn’t sit well with everybody; critics have pointed out that it creates the potential for governments to manipulate citizens, and deprive them of their capacity to make their own decisions. But Schewel is confident that his city’s transportation experiments steer clear of any such nannying—after all, the city is not requiring anyone to do anything in particular. “This is simply giving you the opportunity to make a different choice,” he said. “Feel free to make any choice you want.”

This article originally appeared in [https://www.citylab.com/transportation/2018/10/durhams-plan-to-nudge-drivers-out-of-cars/574264/] and belongs to the creators.

How Behavioral Science Can Boost Household Energy Efficiency

Persuading people to use energy more efficiently has long been heralded as a simple, effective way to help tackle climate change. The problem lies in the persuasion.

Historically, policies and programs to encourage people to save energy have relied largely on technological interventions and decision-making driven by economics: consumers will save energy to save money. However, a growing volume of research shows that energy-consumption behavior is not always rational and can benefit from nudges designed to encourage households to be more energy-efficient.

The UN Intergovernmental Panel on Climate Change and the European Union recognize that lifestyle changes – such as setting thermostats higher in summer and lower in winter – can reduce energy use and therefore mitigate climate-warming greenhouse gas (GHG) emissions. Adding weight to this idea, Richard Thaler’s 2017 Nobel Prize for economics explored the role of nudges in shaping public policy, noting that nudging can prompt people to make better choices if their motivations and biases are understood.

Households display three types of behavior to reduce energy use:

  • Curtailment — repetitive efforts like switching off lights, fans and other appliances;
  • Maintenance — practices to ensure appliances and equipment are in good running condition, and
  • Buying more efficiently — one-shot purchases of energy efficient products and services.

Curtailment behaviors are most common, but savings derived from them are often grossly overestimated, while savings from buying more expensive but more energy-efficient appliances are frequently underestimated the role of behavior and technology are both crucial to delivering the savings consumers want.

Focusing on Behavior

Recognizing this role in the use of energy-related technologies and services, utilities in the U.S. and EU implemented behavior-focused programs in the residential sector. These  have been found to be as cost-effective and in most cases cheaper than technology-oriented Demand Side Management (DSM) measures. Broader understanding of consumer behavior can help utilities and planning agencies align public policies that are suited to consumer needs and also complement energy-saving technologies and practices. To realize maximum energy savings, technological interventions must be combined with behavior-changing approaches in a utility’s DSM program.

Behavior-based energy efficiency programs can be classified into two broad categories: (1) education and outreach that give consumers information on energy efficiency and tips to save energy and (2) feedback programs that give direct or indirect feedback to consumers through use of smart meters, home energy reports or comparisons with community, peers or similar households.

Direct feedback offered through devices like smart or prepaid meters that give consumers real-time information have reportedly brought savings of 5 to 20 percent. In India, smart metering initiatives by Tata Power Delhi Distribution Limited (TPDDL), Energy Efficiency Services Limited (EESL) and other utilities have been mainly driven by managing inefficiencies and tracking usage of appliances in individual homes. Smart meters with real-time displays would keep consumers informed and could influence long-term changes in their behavior. Communication with consumers about the benefits of these new smart meters is essential during the switch from traditional electricity meters.

To a lesser extent than direct feedback, indirect feedback offered through enhanced electricity bills or home energy reports have contributed to changes in consumer habits. Informative electricity bills containing charts that show households’ electricity use trends, comparisons from previous years or with neighbors or community averages have resulted in savings of 5 to 10 percent.

The extent to which feedback can lead to long-term behavior changes is complex. A review of 38 natural field experiments on nudges leading to lasting energy-saving habits found that 35-55 percent of the decrease in energy use persisted even after nudges were discontinued.

Rebound Effect?

In the developed world, critics of energy efficiency programs say the rebound effect – in which consumers use more of the energy efficient technology, offsetting any cost savings envisaged from investment in energy efficiency – makes these technologies a bad investment. This effect has little applicability at present in India, where millions lack access to electricity and many others, even in large cities, lack reliable access. The impact of energy efficiency interventions must be examined in the larger context of multiple societal, environmental and economic benefits it offers.

In an experiment with a small sample of households in Delhi, nudges in the form of comparison of electricity use with neighbors resulted in 7 percent energy savings. The same study reported an increase in electricity use in households given the same nudge but additional financial rewards. In Vidyut Rakshaka (VR), a joint initiative of WRI India and TIDE in Bangalore and Chennai, launched in 2015, consumers are given customized energy saving reports based on the electricity use information they share voluntarily. VR is an indirect feedback program and reports also show a comparison of the household’s electricity use against neighborhoods’. Each household is given an energy savings goal corresponding to their current and historical consumption patterns and comparison with similar households. Reports contain recommendations to encourage curtailment (for example, switching off appliances when not needed), maintenance (such as regular checks of refrigeration and air conditioners) and efficiency (replacing incandescent bulbs with LEDs, for instance) behaviors for achieving the savings goal. Participants are sent regular feedback on their performance against the goals.

Preliminary findings from VR’s impact evaluation have indicated a total of 17 percent electricity savings from 45 percent of the participants. Going forward, data from VR participants will be analyzed to study the impact of indirect feedback and goal setting on changing behavior.

This article originally appeared in [https://www.wri.org/blog/2018/06/how-behavioral-science-can-boost-household-energy-efficiency] and belongs to the creators.