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TDL Perspectives: Addressing The Climate Crisis

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Jul 27, 2020

Sekoul Krastev, a managing director at The Decision Lab, sat down with Jayden Rae, a senior consultant with expertise in environmental policy work, to discuss some of the following topics: 

  • The collective action issue that makes climate change so difficult to tackle
  • Hyperbolic discounting and our myopia towards the future
  • What environmental policies have worked in the past
  • The political feasibility of environmental policies
  • How framing can dramatically impact the effectiveness of interventions
  • Behavioral levers that are useful for tackling climate change
  • The financial incentives that corporations face when reducing their emissions
  • How behavioral science can drive climate action as we go forward
  • How the COVID-19 pandemic may act as a catalyst for future change 

Sekoul:  Today’s chat is going to discuss behavioral science in the context of climate change. Let’s start with why climate change is such an important issue to tackle.

Jayden:  Climate change is one of the defining environmental challenges of our time. We’ve known about climate change for a long time but it has created a lot of challenges in the behavioral and political space for reasons that are rooted in human behavior. Climate change is a result of collective action problems, where consumption at the national level is perpetuated by individual choices that favor carbon intensive goods and materials. Climate change is a particularly challenging behavioral problem because of challenges arising primarily from psychological distance.

The idea of hyperbolic discounting essentially suggests that we value things in the present more than we value things in the future. Applied to climate change, this means that it is hard to realize how consumption in the present, like taking a long-haul flight, will translate downstream into damaging environmental outcomes. 

This also applies to spatial as well as temporal distance. It is known that a lot of the most significant climate challenges like sea level rise, food shortages, water scarcity, are going to take place in regions of the world in which the people who are consuming the most today do not live. So for people, it’s much easier to see what’s in our immediate environment and a lot of these environmental and climatic challenges are not being felt in the present and in our immediate environment. 

Sekoul: Why do you think this is a challenging issue at a policy level?

Jayden: There are a few reasons for this. The first one is related to collective action problems. So at the national level, as carbon emissions accumulate, the nation or the country is not necessarily experiencing negative consequences. This is one of the reasons international climate regimes have been largely ineffective, is that there’s no real incentive for a single country to reduce their individual impacts on climate change. 

However, the impacts of climate change will be felt later on into the future. So that’s one of the main challenges, and then, of course, some incentives in the energy industry make it quite challenging to reduce emissions at the national level.

Sekoul: What are some of the more successful policies that have actually achieved results regarding the climate?

Jayden: Probably the most effective environmental policy has been the Montreal Protocol, which addressed chlorofluorocarbons (CFCs) in the 1980s. At that time, scientists discovered the ozone hole over the Antarctic. The main reason for this was CFCs, which are a chemical used in refrigerants and industrial goods. It was believed, at the time, to be the main source of the ozone hole. So in the 1980s, policymakers from around the world came together to address this and actually created a legally binding protocol that restricted the global production of CFCs.

Because of the strict nature of this policy, essentially the industry is no longer able to produce CFCs. This method definitely favors the stick over the carrot but it was extremely effective, and today the ozone hole has largely recovered as a result of this policy effort. 

This policy worked for a few reasons. One is that it was really specific, we knew the exact nature of the problem. The second is that it was legally binding, and there was a lot of leadership from some key nations. So the US, for example, was one of the leading countries in that effort, which set a precedent for a lot of smaller nations that were not as responsible for the pollutant source.

Sekoul: If these hard-line approaches to policy making have been successful in the past, why don’t governments enforce them and create such policies at a more individual level?

Jayden: One reason is that it’s politically unpopular. A good example of this would be carbon taxes. They have been historically politically unpopular because of an essentially individual aversion to taxes in general. Plastic bag taxes, for example, have been largely unpopular in some places when they’ve been advertised as being so. So I think there’s definitely a political disincentive to implement more stick-related approaches.

Sekoul: What are policies that have failed and why?

Jayden: I think one interesting example, going back to plastic bag taxes, has been efforts in some places to actually create reward programs. So one key principle in behavioral science is loss aversion. So plastic bag taxes have been effective in some settings because when people have to start paying for something that was previously free, they feel like they’ve experienced a loss. If you’ve never paid for a plastic bag before, and then you start paying 10 cents, you feel that loss. But in some settings, policymakers have tried a different approach by using a reward.

Rather than paying 10 cents for a plastic bag, you would be reimbursed five cents, or you would save five cents off a purchase. Empirical studies have shown that the reward option of this policy has been completely ineffective — essentially, it doesn’t reduce consumption whatsoever. 

But if you have this exact same amount, but it’s a loss, you’re paying a tax on that, it can actually effectively reduce consumption. So it really shows how the intervention is framed to the consumer plays a really important role in whether it’s successful or not.

Sekoul: Can you talk a bit about the types of behavior levers that could be useful in creating effective policies that combat climate change?

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Jayden: So far, most environmental interventions have been applied to energy usage. One example that has been really effective in different settings is smart meters for regulating energy consumption. 

Essentially, smart meters show the consumer the quantity and price of the energy they are using in real-time. Some versions of this intervention can actually show the consumer what others are using in terms of energy, so they’re incentivized to use less energy than their neighbors. The smart meters have been really effective, and this really shows the value of making information salient to the consumer and linking it to their individual actions. 

Another effective intervention revolves around defaults in the environment. A lot of individual behavior and a lot of firm behavior is directly a product of the defaults in that setting. So if you think, for instance, to take a flight and you want to have a vegetarian option, you would have to opt into that. But you could also imagine a different reality where you have to opt-out of the vegetarian option.

Jayden: So if you want to change behavior, you have to make it extremely easy for people to exercise that behavior. A lot of our default settings are unsustainable options. From a policy perspective, it’s really helpful to change defaults to be more sustainable behaviors.

Sekoul: Since climate change is a game theory problem at an international level, what behavioral science approaches could a national leader use to lead the charge towards better policies?

Jayden: So there are a few. I think probably the most important one, which I briefly mentioned, is the simplification and framing of information. The more traditional approach to changing behavior is around regulation. In this case, simplifying information could be making environmental regulations or compliance really clear to firms to ultimately try to improve compliance. Then, of course, creating social norms around sustainable behavior; however, this usually takes a longer time to change.

Sekoul: Social norms ultimately become the biggest driver in any kind of collective behavior change. While it’s the more challenging approach, it’s probably the more sustainable one as well. How do you see social norms shifting? What drivers can shift social norms towards more sustainable behaviors?

Jayden: The first driver is probably around education and awareness. Any sort of social norm depends on an understanding of the underlying issues. In more recent years, environmental education has become a core part of school curriculums and that leads to more intergenerational change in norms. 

Unfortunately, given the pressing nature of environmental issues, this might be a bit too slow. Changing norms at the industry level is more challenging but decisions made at this level significantly perpetuate the crisis. 

Corporate social responsibility has become a norm in a lot of settings. In some ways, it’s exercised in meaningful, authentic ways, while other times it may not be. Even creating a culture at the firm level in which addressing the carbon footprint of the firm or having sustainability targets and initiatives as a part of core strategy is something that is new.

Sekoul: There has been a trend towards more corporate social responsibility programs in recent years, which could be a signal that companies see those programs as something that’s ultimately profitable, since companies are naturally focused on optimizing profits. What do you think drives that?

Jayden: It comes from the bottom but also from the top. With consumer behavior, a lot of consumers are now demanding more from the companies that they purchase from; furthermore, they have higher ethical standards for their goods. 

Then from the top are a lot of policy incentives. So, for example, in Canada, with the carbon tax system, it’s actually profitable for companies to cut down on their carbon emissions. So not only does it allow them to fulfill their social responsibility commitments, it’s also financially viable.

A lot of companies that are looking into the future can see that their investments or dependence on fossil fuels are not going to be sustainable and actually transitioning to more sustainable, lower energy intensive goods is going to be how they stay viable into the future.

Sekoul: Thinking about countries where some of these policies around climate change have been more successful and countries where they have been less successful, is there an inherent difference in either how they’ve been implemented or in the populations that they’re targeting?

Jayden: Often, countries that are most successful at addressing climate change have already gone through their phase of fossil fuel permanence and have industrialized earlier. So you have a lot of countries, like in Scandinavia, who have cut down their emissions. They are much more reliant on renewable energies today, but they had their period of economic growth and are now on the other side of the transition. 

The countries that are currently most dependent on fossil fuels are industrializing, developing countries. They are at a different point in the stages of growth. They are focused on economic development and human development. A lot of these richer countries, like Norway or Iceland, that are almost carbon neutral, have already passed through those stages of development and can focus their energy on being “green”. 

So there’s definitely some level of economic prosperity that can predict whether a country can or cannot actually implement sustainable policies directly. There’s also a geographical element as well. For some countries, it’s harder to make a transition to renewables given the natural resources that they can use to generate renewable energies, whether that’s hydro or wind power.

Sekoul: Where can behavioral science go from here? Are there ways behavioral science can be applied to environmental protection that aren’t prevalent enough?

Jayden: Yeah. A lot of past behavioral interventions have been focused on energy consumption. However, energy consumption is only responsible  for 24% of global emissions. A lot of work needs to be done creating and testing interventions that relate to other sources of emissions like agriculture, shifting global transportation, creating more local sources of some consumer goods.

The second key challenge, which is a challenge of all behavioral interventions, is scale. So a lot of these interventions have been tried in small scale settings, but it’s unknown how generalizable they are to other settings. So there needs to be more rigorous testing and evidence collected on these interventions can be implemented at scale and effectively implemented into policy and how these also relate to international environmental commitments.

The third challenge is around the effectiveness of some of these behavioral interventions over time. With carbon taxes, for example, some evidence has suggested that once consumers become sensitized to paying a tax, they will actually shift back to prior behavior. There has to be some long-term thinking about whether the behavioral intervention is actually going to create a sustainable change, or whether defaults are going to be sustained. It takes time to ensure that there are no unintended consequences of that intervention. 

Given the pressing nature of current environmental issues, we have seen that a lot of the traditional approaches to addressing them can be ineffective. Behavioral science relates to environmental challenges as our actions have direct consequences on the environment. 

Sekoul: One last question. We are currently confronted with the kind of large scale global event that becomes a common experience for pretty much everyone in the world with the coronavirus pandemic. Do you think that kind of collective experience and struggle and an alignment between what countries are doing to some extent is potentially a precedent or something that will facilitate climate change policy unions or alignments as well?

Jayden: I think there are two potential outcomes. One is pessimistic and one is optimistic. The pessimistic answer is that the economic stress that this particular global pandemic has created will incentivize national leaders to revert to the status quo and essentially have an emergency response to the current situation, which is possible. There’s a lot of pressure from citizens to essentially have a quick response that may just result in, for example, bailing out industries that are harmful to the environment.

The second, more optimistic answer is that the world has been completely destabilized, so we can take this kind of crisis to create new norms. Of course, the shared experience of going through this has created a sense of global solidarity, which has been missing in the climate change conversation and would be really critical to creating some of this international cooperation that is really necessary to overcome the collective action problem which is climate change.

There are reasons to be hopeful that this destabilizing situation has created the conditions to imagine new realities. The world that we have lived in is not just or healthy and it will not sustain us in the future. In that way, it opened up imaginations to what a new future could look like.

About the Authors

Jayden Rae portrait

Jayden Rae

Jayden has a particular interest in studying how public policy can be used as a tool to help individuals and organizations make decisions to protect the environment. She has previously worked in the domain of environmental policy at the Ontario Ministry of the Environment. She is a founding director of the environmental non-profit Climatable, which focuses on engaging Canadians in climate change action. Jayden received her bachelor’s degree from McGill University in environment and political science.

Sekoul Krastev's portrait

Sekoul Krastev

Sekoul is a Co-Founder and Managing Director at The Decision Lab. A decision scientist with an MSc in Decision Neuroscience from McGill University, Sekoul’s work has been featured in peer-reviewed journals and has been presented at conferences around the world. Sekoul previously advised management on innovation and engagement strategy at The Boston Consulting Group as well as on online media strategy at Google. He has a deep interest in the applications of behavioral science to new technology and has published on these topics in places such as the Huffington Post and Strategy & Business.

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