Can nudges boost energy efficiency?

On January 8th, Eurostat, the European Commission’s statistical agency, issued a report on energy transportation and the environment. Collected data show that household electricity consumption has gone up by 5% between 2008 and 2010, making the housing sector the second largest energy consumer in Europe behind transportation. Politicians and scientists are reflecting on ways to shape behaviours in order to curb energy use. More and more experts work on strategies to usher in a shift in individual habits that impact the environment. Nudges are one of them.

What are nudges?

The concept was made popular by American scholars Richard Thaler and Cass Sunstein in their book entitled Nudge: Improving Decisions about Health, Wealth, and Happiness (2009). They define nudges as non-binding, persuasive but non intrusive schemes to shape complex individual choices. This method coming from behavioural science aims at influencing habits and daily actions towards more collective well-being via a policy that pushes neither for more nor for less regulation (Marmion, 2010).

From homo economicus to homo ecologicus1

Nudge advocates’ underlying assumption is that homo economicus, the rational economic human as defined by neoclassical economics, does not actually exist. As the American economist Herbert Simon put it, individuals enjoy only “bounded rationality”. Their choices are determined both by the information they have access to and by hunches (Simon, 1983). Besides, as is mentioned in a note from the French Centre for strategic analysis, “ecological convictions do not always lead to more environment-friendly practices”.

Indeed, although most French people are aware of their impact on the environment (97% according to a CREDOC survey from January 2012), few of them change their daily routines. There is therefore a gap between knowledge an action, between having an opinion and doing something in accordance to it. This is where nudges come into play by shaping decision-making towards appropriate behaviour.

Nudges to boost energy efficiency

Nudges rely on several strategies to shape energy consumption. Firstly, they can turn virtuous behaviours into the norm. For instance, Rutgers University (United States) saved over 7 million paper sheets (i.e. 620 trees) in a semester, thanks to the PrintGreen initiative.

Besides, nudges can consist in raising awareness about simple day-to-day environment-friendly practices. In the UK, David Cameron’s Behavioural Insights Team (BIT or nudge unit) created user-friendly energy performance certificates1, describing energy savings as a free choice and enabling users to assess and improve their energy performance.

nudge, energye efficiency

Finally, nudges can be based on peer review so that virtuous behaviours become the social norm, i.e. what an individual perceives to be a socially acceptable behaviour within the group he belongs to1. Concretely, peer review is about informing users about their peers’ energy consumption. The American utility OPower displays comparative data on its bills, so that users have an idea of how much power neighbours use; households using a lot of energy then cut their consumption. On the contrary, thrifty households concluded that they were entitled to consuming more and increased their energy use. This side-effect was offset by the use of icons indicating social approval (see image below). As a result, this nudge made it possible to cut electricity consumption by an average 2.2%.

nudge, energye efficiency

Combining technical innovation and behavioural incentives

Although they bring convincing results as targeted actions, nudges are no miracle solution to environmental challenges. Researchers at the University of California stress that the efficiency of nudges is contingent on personal traits and values. Elizabeth Shove (University of Lancaster) questions the relevance a policy focusing on individual behaviours instead of addressing large-scale technological and cultural changes. Nevertheless, nudges remain relevant tools when combined with substantive measures or technical innovations.

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