Nudging Energy Efficiency Behavior: The Role of Information Labels

Richard Newell and Juha Siikamäki

No 19224, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We evaluate the effectiveness of energy efficiency labeling in guiding household decisions. Using a carefully designed choice experiment with alternative labels, 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 energy efficiency, with information on physical energy use and carbon 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. 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 discount rate--which was much lower than the average elicited rate--the EnergyGuide label led to choices that result in a one-third undervaluation of energy efficiency. We find that labels that also endorsed a model (with Energy Star) or gave a suggestive grade to a model (EU-style label), encouraged substantially 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 policy.

JEL-codes: C91 D12 D83 D91 H43 Q41 Q48 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-cbe, nep-ene, nep-exp and nep-reg
Note: EEE PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Published as Richard G. Newell & Juha Siikam�ki, 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.

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