8
Climate Change
Problems associated with global climate change are largely the result of human behavior that is intricately embedded in people’s daily lives and entwined with societal and cultural norms (Constantino et al., 2022). Thus, mitigating and adapting to climate change requires changing human behavior and practices and sustaining those changes. Changes at the societal level, such as in infrastructure, manufacturing, and technological improvements, have an obvious role, and recent work suggests that behavioral interventions may be effective in increasing commitment to large-scale structural upgrades. However, this work is new and such approaches have not yet been deployed in practice (Forster, Kunreuther, & Weber, 2021). But changes at the individual, household, and business levels that are less expensive and can be implemented more quickly and easily also have a significant role to play. The 2022 report of the Intergovernmental Panel on Climate Change (International Panel on Climate Change, 2022) indicates that changes in food consumption, shifts to more sustainable use of consumer goods, reduced energy consumption, and other behavioral and lifestyle changes could play an important role in reducing emissions that contribute to climate change. Government regulators might affect those decisions through such actions as, for example, requiring changes in the pricing of products and services and how this pricing information is communicated to customers.
The changes that could be made at the individual and household levels that have the greatest potential impact on climate health include consuming less energy at the household level (heating, cooling, appliance use) and consuming less energy for transportation (airplane, automobile, and
truck consumption).1 Residential energy consumption accounts for approximately 20 percent of greenhouse gas emissions in the United States, and transportation (including transportation of goods) accounts for 25 percent of global greenhouse gas emissions (Goldstein, Gounaridis, & Newell, 2020; Ritchie, 2020).
Behavioral economists have studied decisions and behaviors related to activities with an impact on global climate change in a variety of contexts. The committee explored the challenges of influencing individual decision making related to climate in general and reviewed research in three sectors that account for substantial greenhouse gas emissions: energy use and efficiency, transportation, and land use. We also considered what this research suggests about how behavioral principles operate in these contexts. Before considering those sectors we first discuss the general issue of behavioral economic concepts in the domain of climate change.
DIFFICULTIES IN APPLYING BEHAVIORAL PRINCIPLES TO CLIMATE GOALS
There are numerous challenges in using behavioral economic concepts to address climate change. Some of the challenges that apply in many contexts are externalities—that is, the consequences or benefits that accrue to parties not directly involved—that are factored into traditional economic models, as well as anomalies that lead to behavior that is inconsistent with the traditional models. For example, there is a large temporal distance between the actions that might benefit the climate and their consequences, so decision makers may not easily perceive the effects of their actions. This distance can reinforce people’s doubts about the scientific information and arguments they hear. The negative effects of climate change are also felt more acutely in some locations and by some groups of people than others. For instance, people living along coasts, in drought-prone areas, and those with fewer financial resources or members of groups that have been historically disadvantaged are generally most vulnerable to risks associated with climate change, such as polluted air.2
It is also true that there is significant uncertainty about the precise effects climate change will have by region and especially over longer time frames. Such uncertainty is inherent in the modeling on which climate scientists rely,
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1 The committee benefited from a workshop presentation on applications of behavioral economics to climate change by Åsa Löfgren (https://www.nationalacademies.org/event/07-18-2022/workshop-on-behavioral-economics-exploring-applications-and-research-methods) and a paper the committee commissioned on this subject (Messer, Ganguly, & Xie, 2022).
2 See Reports & Resources, Global Change Research Program (https://www.globalchange.gov/browse).
but it is not easy for nonspecialists to assess the probabilities—particularly to understand the lower-probability but most disastrous possible outcomes. Making an individual or household decision based on complex probabilities is a difficult task. There is also significant ambiguity about the potential benefits of proposed adaptation and mitigation strategies. In general, the costs of changing behavior to reduce the risks of climate change are borne in the short term while the benefits are accrued in the medium and long terms. Neither people considering their own circumstances nor policy makers weighing competing political interests are likely to focus on long-term consequences. Furthermore, many of the benefits of preventing and mitigating climate change do not accrue to the people making the changes.
In addition, calculations about the climate effects of many behaviors and choices change as new information is accumulated and factored into modeling, and most people are well aware that there are many things scientists do not know. In the face of such uncertainty, people tend to envision changes in climate that more closely resemble their lived experience (a status quo bias) rather than envisioning a radically different climate. Finally, many of the behaviors in question are deeply embedded in people’s livelihoods, their current homes and possessions, and long-standing habits and beliefs. With all of these pressures, it is not surprising that changing behaviors related to climate is difficult.
The committee commissioned a paper that explored the research on policy interventions to change behaviors in several sectors that emit large amounts of greenhouse gases.3 The authors focused on the ratio of cost to benefit, the credibility of the evidence for interventions, and the durability of the effects. Drawing on this paper and the committee’s review of other sources, this chapter discusses three domains for which the results appear to offer the most valuable information about the committee’s core behavioral principles (see Chapter 3): energy use and efficiency, transportation, and land use decisions.
ENERGY USE AND EFFICIENCY
Most of the energy-related carbon dioxide emissions in the United States come from the transportation and electric power sectors, and as noted above, residential energy use contributes about 20 percent of overall carbon emissions (Goldstein, Gounaridis, & Newell, 2020). Changing individual behavior has the potential to be a faster and less expensive approach to reducing emissions than development of energy-efficient
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3 For a discussion of other areas and a detailed description of their search methods and selection criteria, see Messer, Ganguly, & Xie (2022).
technologies or policy approaches, such as cap-and-trade systems or a carbon tax (Vandenbergh, Barkenbus, & Gilligan, 2007; Dietz et al., 2009).
Energy efficiency can be increased by means of relatively costly, but comparatively long-lasting, one-shot decisions, such as replacing old appliances and other durable goods with new, energy-efficient ones and purchasing renewable energy. People can also reduce their consumption through frequently made decisions (using less energy at home). Policies that incorporate market-based solutions (such as subsidies and price increases) that specifically target behavioral interventions can create incentives for both kinds of decisions.4 We consider several of the committee’s core principles in this domain: limited attention and cognition, social preferences and norms, and present bias and reference dependence.
Limited Attention and Cognition
Messer, Ganguly, & Xie (2022) found a number of studies of interventions that primarily target users’ limited attention and cognition (Allcott, 2011a; Shawhan et al., 2011; Gilbert & Graff Zivin, 2014; Ito, 2014; Jessoe & Rapson, 2014, 2015; Harding & Lamarche, 2016; Martin & Rivers, 2018; Burkhardt, Gillingham, & Kopalle, 2019; Carlsson, Jaime, & Villegas, 2021; Jessoe et al., 2021).5 The wholesale cost of electricity is in constant flux as prices respond to varying patterns of usage. However, consumers generally pay flat or tiered rates that do not reflect wholesale prices at the time of consumption. Dynamic pricing structures (also called peak-load pricing and real-time pricing), rewards, and provision of information can all give customers incentives to use less energy at peak times. Messer, Ganguly, & Xie (2022) reviewed studies of the effects of these approaches on residential electricity use. The studies, which included large-scale field experiments, quasi-experiments, and natural experiments to identify causal effects, involved large sample sizes (mostly above 10,000 households).
The evidence regarding dynamic pricing structures is mixed. There was some evidence that real-time and peak-load pricing encouraged energy conservation during peak periods and that reductions continued after peak hours ended. Other studies, however, showed that customers responded only to price decreases, paid infrequent attention to pricing changes, and were more responsive to changes in average prices than marginal changes. Researchers noted the heavy cognitive burden of understanding utility pricing and how to track it; some studies focused on ways to provide
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4 For an extensive review of the empirical literature on behavioral interventions that target household energy demand, see Composto & Weber (2022).
5 We summarize key findings from the detailed description of the research in each area provided by Messer, Ganguly, & Xie (2022); for more detailed information, see the full paper.
information and real-time feedback that could increase the salience of pricing for customers. Even monthly electric bills that provide specific information about patterns of usage have been shown to help households reduce consumption.
Technologies—such as smart meters, smart thermostats, in-home displays of usage, and apps that could report usage on smartphones—encourage consumers to respond to temporary price increases, though responses in the research appeared to vary with demographic characteristics and weather patterns (Jessoe & Rapson, 2014). In-home displays that provide updates about appliances’ energy consumption appeared to help people form energy-conserving habits (Martin & Rivers, 2018), but other researchers suggest that there is little evidence that use of smart thermostats reduces energy consumption (Brandon et al., 2022). Although the studies indicate that providing information is an important feature of dynamic pricing approaches, the research did not make clear how behavioral factors may limit their effectiveness or how to better target the information provided.
Social Preferences and Norms
Moral suasion (informing people of desirable behaviors) and appealing to social norms and social comparisons are among the most used and studied behaviorally based interventions to encourage energy conservation (Carlsson et al., 2021a). Messer, Ganguly, & Xie (2022) identified numerous studies that examined treatment and persistent effects of moral suasion on reductions in residential energy use (Allcott & Mullainathan, 2010; Allcott, 2011b; Bollinger & Gillingham, 2012; Allcott & Rogers, 2014; Delmas & Lessem, 2014; Fowlie, Greenstone, & Wolfram, 2015, 2018; Graziano & Gillingham, 2015; Toledo, 2016; Brandon et al., 2017; Sudarshan, 2017; Ito, Ida, & Tanaka, 2018; Kraft-Todd et al., 2018; Allcott & Kessler, 2019; Holladay et al., 2019; Bollinger, Gillingham, & Ovaere, 2020; Myers & Souza, 2020; Bonan et al., 2021; Carlsson, Jaime, & Villegas, 2021; Carlsson et al., 2021a; Jessoe et al., 2021; Bollinger et al., 2022); they discussed several that used field experiments to represent the state of findings in this domain.
One study, which the authors identified as seminal, showed that consumers who viewed comparisons of their own electricity use to that of a neighbor reduced their consumption of electricity—and that this social-comparison intervention was cost-effective, though the effect sizes were modest (Alcott, 2011b). Subsequent work confirmed these findings and showed that they tended to persist but pointed to the importance of followup nudging. In addition, effects varied by setting and population. Other work on social norms and moral suasion has shown that results vary by type of energy user. Approaches tested have included invoking injunctive
norms—appealing to perceived moral or social standards, for example, using smiling and frowning faces to show neighbor comparisons in energy use—providing real-time feedback on energy use by appliances, and making such information public. People whose energy use is close to the median in a particular context appear to be most responsive to such strategies.
Similarly, field experiments and quasi-experiments, as well as observational studies, have shown that peer effects and provision of information about social norms affect households’ adoption of solar panels. This work suggests that the effects are strongest when neighboring solar panels are visible from the street and when they are numerous. Other work has suggested that prosocial information about solar energy and appeals to self-interest can reinforce the effects of peer influence.
Looking across the work, it appears that moral and social interventions, such as providing real-time feedback, and social comparisons, such as providing information, particularly about what peers do, are effective in convincing households to reduce their energy use, at least modestly, and that the effects persist.
Present Bias and Reference Dependence
Because energy is not paid for at the time it is consumed, consumers often fail to track the relationship between immediate energy consumption and delayed payments: in placing more weight on a present desire to use energy than the cost they will eventually pay, consumers demonstrate present bias. The studies identified by Messer, Ganguly, & Xie (2022) that examined interventions that address present bias suggest that electricity use can be inexpensively addressed using such interventions as making dynamic electricity pricing a default choice, albeit with modest effect sizes (Harding & Hsaiw, 2014; Allcott & Taubinsky, 2015; Palmer & Walls, 2015; Allcott & Greenstone, 2017; Gillingham, Keyes, & Palmer, 2018; De Groote & Verboven, 2019; Holladay et al., 2019; Tsvetanov, 2019; Liao, 2020; Wang, Ida, & Shimada, 2020; Fowlie et al., 2021; Werthschulte & Löschel, 2021; Boogen et al., 2022; Fraser, 2022; Giandomenico, Papineau, & Rivers, 2022). Other work suggests that consumers seesaw between conservation and overconsumption month after month in response to the billing cycle, a phenomenon that is not easily addressed with changes in billing methods (Gilbert & Graff Zivin, 2014).
Researchers have measured the effects of present bias on energy use using surveys and experiments to test such approaches as goal setting to increase awareness of, and counteract, overconsumption. Among the findings were that consumers may be more responsive to awareness of their own successes and failures in achieving their goals than to financial incentives. Other work examined default options in a program involving time-based
dynamic electricity pricing and showed that when the default for participation was to opt in, most consumers did not opt out and did reduce their electricity use in response to higher prices during peak times.
TRANSPORTATION
Greenhouse gas emissions could be reduced by 40–70 percent if people in developed countries reduced their air travel; made “green” lifestyle choices; and chose to walk, cycle, and use electric transportation, according to estimates by the International Panel on Climate Change (2022). Behavioral interventions can address the effects on decision making about big purchases, such as buying hybrid and electric vehicles, as well as habits, such as opting for public transportation, replacing individual car trips with carpooling, and planning trips more efficiently. This section considers four of the committee’s core principles in this domain: limited attention and cognition and present bias, reference dependence, and social preferences and norms.
Limited Attention and Cognition and Present Bias
Limited attention and cognition are especially relevant in decisions about vehicle purchases. Traditional economic models are based on the assumption that consumers correctly value future operating costs when assessing the tradeoffs between the cost of a vehicle and the expected costs. However, behavioral economists have shown that consumers frequently underestimate the savings they would realize with an energy-efficient vehicle when choosing between that option and a less fuel-efficient one and that car buyers typically calculate fuel savings without considering the present discounted value of future fuel costs (Gillingham & Palmer, 2014).
The studies identified in the paper commissioned for the committee provide mixed evidence about the factors that influence consumers’ thinking about this tradeoff (Turrentine & Kurani, 2007; Gillingham & Palmer, 2014; Matthews et al., 2017; Alcott & Knittel, 2019; DellaValle & Zubaryeva, 2019; Gillingham, Houde, & van Benthem, 2021; Huse & Koptyug, 2022). Some work has shown that drawing consumers’ attention to future operating costs, including for both fuel and taxes—increasing their salience—does affect their valuation and decisions. However, experimental evidence has not shown effects from providing individually tailored fuel cost information to consumers. Researchers have suggested that the way interventions are provided (e.g., timing) and the presence (or lack) of associated behavioral interventions may account for variation in results. For example, one study showed that making future cost savings salient for consumers significantly changed their choices only for people who strongly valued future benefits, preferred large vehicles, and self-identified
as proenvironmental. The reviewed studies also showed that point-of-purchase interventions are important when promoting sales of electric vehicles.
Reference Dependence
Consumers can directly reduce their carbon footprints by opting to use public transportation for daily commutes and other long-distance trips, carpooling, or planning trips more efficiently. Established habits are a key barrier to such decisions, and strategies for addressing this include asking people to make visible personal commitments and personalized trip plans (Chen & Chao, 2011; Verplanken & Roy, 2016). Providing monetary incentives, such as free try-out periods for particular modes of public transportation, can also be an effective intervention (Matthies, Klöckner, & Preißner, 2006). Targeting commuters who are moving to a different home or town by providing information about the bus system, suggesting personalized travel plans for shopping, and providing free one-day bus tickets may also be effective (Bamberg, 2006; Fujii & Taniguchi, 2006). However, in contrast to the findings on electricity use, one study showed that social norm–based nudges were not effective at changing people’s use of public transit to save on transportation costs (Gravert & Collentine, 2021).
Social Preferences and Norms
Many people associate driving with autonomy, which means that carpooling is not a natural preference for them. Moreover, both personal identities and cultures are associated with car travel, and age and gender affect willingness to use carpools. For example, some older people may prefer the convenience of being picked up by a private car but place a high value on the condition of carpool vehicles, while women may be more likely to avoid carpools because of safety concerns. Thus, in addition to addressing habits, interventions to encourage the use of public transportation and carpools have also addressed consumer heterogeneity and linked social identities (Root & Schintler, 2003; Matthies, Klöckner, & Preißner, 2006; Beale & Bonsall, 2007; Eriksson, Garvill, & Nordlund, 2008; Hörlén et al., 2008; Bolderdijk et al., 2013; Yeomans & Herberich, 2014; Kormos, Gifford, & Brown, 2015; Kristal & Whillans, 2020). However, as noted above, another study found that social norm–based nudges were not effective at changing people’s usage of public transit (Gravert & Collentine, 2021). Mixed or null results for such interventions as letters, emails, noncash incentives, and personalized travel plans point to the difficulty of changing commuter behavior and the need to consider other factors.
Emphasizing social norms appears to be most effective if they are targeted to particular groups, such as people who are already intending to
reduce their car use. For example, a campaign by municipal officials in Sweden that used the slogan “No ridiculous car trips” asked residents to submit written accounts of times they had driven unnecessarily, and gave small gifts to people who bicycled. In another study, marketing nudges motivated people to take the bus by removing misconceptions about the bus system, but only for certain groups of people. Marketing nudges are messages designed to encourage people to engage in certain behaviors by extolling the features of that activity, such as, in this case, by pointing out the appealing aspects of traveling by bus, as opposed to encouraging people to take the bus to benefit the planet. Combining that approach with a separate message that conceded that cars are convenient for some trips while buses should be the preferred alternative for others broadened the impact of the marketing. Similarly, targeting both the relatively short trips related to work more typical for men separately from the “trip chains” required for caretaking that involve several stops, often taken by women, is another example.
LAND USE DECISIONS
Climate change poses a severe threat to agricultural productivity, which is affected by variability in weather, rising temperatures, flooding and other natural disasters, and invasive pests. At the same time, agriculture contributes 19–20 percent of total greenhouse gas emissions worldwide (World Bank, 2021). Behavioral economists have explored decision making about land by both individual farmers and agricultural cooperatives. We discuss two of the committee’s core principles for this domain: limited attention and cognition and social preferences and norms.
Limited Attention and Cognition
Agricultural conservation programs that encourage landowners to prevent soil erosion, protect drinking water, or preserve and restore forestland have been plagued by low adoption rates in part because of complexity associated with completing paperwork and navigating the enrollment requirements of federal programs.6 Thus, making programs salient and simple is a logical intervention target. Researchers have found that even simple interventions such as changing default enrollment and sending reminders about available programs to farmers have increased their participation (Higgins et al., 2017; Palm-Forster & Messer, 2021). However, another study of reminder letters has shown that they are effective only for well-informed
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6 For information about such programs, see https://www.fsa.usda.gov/programs-and-services/conservation-programs/index
groups and for farmers whose contracts were expiring (Wallander et al., 2018).
Social Preferences and Norms
Messer, Ganguly, & Xie (2022) identified numerous studies showing that messaging related to social norms and preferences has been instrumental in nudging producers to adopt climate-smart practices (Wossen et al., 2013; Kwayu, Sallu, & Paavola, 2014; Czap et al., 2015, 2019; Kuhfuss et al., 2016; Lynne et al., 2016; Wallander et al., 2018; Dessart, Barreiro-Hurlé, & van Bavel, 2019; Bujold, Williamson, & Thulin, 2020; Butler et al., 2020; Le Coent, Préget, & Thoyer, 2021; Palm-Forster & Messer, 2021; Wu, Palm-Forster, & Messer, 2021; Banerjee, 2022; Palm-Forster et al., 2022; Rommel et al., 2022). For example, ego nudges—messages that appeal to individuals’ desire for public engagement or recognition—in road signs that identified participants in conservation programs were effective in motivating farmers and other agricultural producers to follow through with practices they agreed to adopt because they viewed their decisions as consistent with their self-images and identities. Similarly, empathy nudges are effective in promoting proenvironmental decisions.7
Among the evidence from this work is the finding that producers are particularly responsive to nudges informing them about other farmers who have already adopted climate-smart practices and programs in which participation is already high. However, social norm strategies can backfire when only a small number of farmers have already adopted desired practices. There is also evidence that the messenger who delivers a norm-based nudge matters: producers were more likely to act when they received positive information from individuals they viewed as similar to themselves. Social networks can be used to send credible signals about proenvironmental stewardship actions producers are taking (e.g., certification and verification programs).
FINDINGS
The work in the domains of energy use and efficiency, transportation, and land use demonstrates the importance of addressing behavioral factors that influence decision making. Studies in all three domains have addressed limited attention and cognition and appeals to social norms; present bias and reference dependence have also been considered in the domains of
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7 Empathy nudges are designed to appeal to specific behavioral factors, such as one’s sense of self (ego) or the potential to feel empathy.
energy use and transportation. This work demonstrates several important key points:
- Providing customers with information that is carefully targeted to their concerns can address present bias and limited attention and cognition to encourage energy conservation, climate-friendly transportation decisions, and engagement in land conservation programs.
- Nudges related to social norms and preferences—if carefully targeted to specific populations—showed modest effects for encouraging energy conservation, climate-friendly transportation choices, and land use decisions. Since these are low-cost interventions, they still often have a high return (despite modest effect sizes).
Studies across contexts of interventions that address different behavioral obstacles (based on different key principles) highlight the degree to which effects vary by context, population, and goal: they point to the importance of targeting interventions to specific populations and to specific points of decision making. For low-cost interventions, this careful focus may be less important since achieving results for some portion of those who experience the intervention may be a reasonable outcome. Moreover, in many cases, such as the messaging about use of public transportation, there would be little downside to incorporating multiple tailored messages into a nudge program. The results of a meta-analysis supported the value of studying packages of interventions rather than single ones in isolation (Khanna et al., 2021).
Most of the behavioral economic research that the committee found in its search (including the commissioned paper, workshop presentation, and our own investigations) showed comparatively small effect sizes. Meta-analyses of effects of behavioral interventions showed varied results and a lack of evidence of long-run effects (Nisa et al., 2019; Carlsson et al., 2021b; Khanna et al., 2021). We note, however, that these results look modest in part because of the magnitude of the overall problem. It would be necessary to reduce emissions by more than 50 percent, for example, just to reach a target of limiting global warming to an increase of 1.5 degrees. However, the behavioral interventions that have been studied are generally low in cost and easy to implement. Individual-level decisions related to energy consumption, transportation, and land use may seem minor in the face of so vast and complex a challenge as global climate change, but interventions can be targeted to specific populations and to specific points of decision making, and thus address significant behavioral obstacles that affect individual decision making.
Addressing the problem of climate change fundamentally requires policies to address externalities and coordinate across multiple actors. While these tools fit squarely in the traditional economics toolkit, they require significant changes in the behavior of a range of actors. Those behavioral changes and the policies designed to induce them will be shaped by the core behavioral principles discussed in this report. Taken together, an array of comparatively low-cost, low-effort measures could make a very important contribution to the problem of climate change if applied in a sustained way across multiple sectors.
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