Improving Energy Demand Analysis (1984) / Chapter Skim
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4 The Effects of Information on Energy-Efficient Investment
4 The Effects of Information on Energy-Efficient Investment
Pages 61-74
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From page 61... ...
To help consumers make choices in their own interest, government has developed and disseminated huge amounts of information about the effects of actions on energy use. It has calculated the fuel economy of automobiles and distributed millions of copies of the ratings to prospective automobile purchasers; it has sponsored programs involving energy audits of homes and nonresidential buildings; it has supported research on the effects of new energy-saving technologies on energy use; and it has published reports of the findings of such research.
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From page 62... ...
. Because information is necessary for an economically rational response to energy price signals, because government has relied heavily on information to promote energy efficiency, and because information can be an effective policy tool, energy demand analysis that cannot assess the effects of information is seriously incomplete.
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From page 63... ...
. And studies of residential energy conservation programs that act largely by offering information show that under some conditions participants invest twice as much in energy efficiency as nonparticipants during the same period (Stern, Black, and Elworth, 1982a)
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From page 64... ...
Improvements in information or in consumers' use of it would then appear to change the discount rate in models that estimate that variable. Knowledge About Information From Problem-Oriented Research Surveys of energy users' beliefs and knowledge, smallscale experimental studies involving energy information, and formal evaluation studies of information-based energy programs offer some insights about what information consumers have and how informational policies and programs can change what energy users know and what they do.
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From page 65... ...
Using simple econometric models to estimate the effect on national energy consumption of expenditures by the U.S. Department of Energy on conservation programs, a group at Oak Ridge National Laboratory found that federal expenditures were significantly related to energy use only in interaction with energy price (Greene, Hirst, Soderstrom, and Trimble, 1982)
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From page 66... ...
These savings did not involve any investments in improved energy efficiency. In energy audit programs, which use information to promote energy-efficient investments, the evidence suggests that a program's effectiveness depends on such qualitative variables as the program's promotional efforts, convenience and consumer protection features, and ability to gain trust (as discussed in Chapter 3)
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From page 67... ...
. If these estimates are accurate, the high energy prices of the late 1970s had motivated homeowners to make about one-quarter of the economically justifiable investments in energy efficiency by mid-1980, while people who requested audits from the conservation program were making, on the average, more than half of the economically justifiable investments.2 The results of this study suggest that a wellconstructed informational effort aimed at energy-efficient investments can go a long way toward bringing about the investment that full information would induce in rational actors.
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From page 68... ...
There are at least two possible descriptions of the process, each with its own implications for what knowledge is needed: that people act rationally on the basis of whatever information they possess; or that information diffuses through informal networks with people acting by example or on trust, rather than as a result of rational choice. Rational Action Based on Imperfect Information As a first approximation of the role of information, formal demand analyses might suppose that consumers act rationally on the basis of the information that is in their awareness, as they understand, interpret, and trust it.
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From page 69... ...
Energy information may have static and dynamic components; consequently, the rate and final penetration of accurate energy information set limits on the rate and final penetration of economically rational responses to conditions in energy markets. To understand the effects of informational policies and programs, an analyst must determine how much and how quickly policies and programs, operating in the existing informational context, change effective information for energy users.
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From page 70... ...
Surveys to assess effective information would be useful, but they do not address the key analytical question of how available information gets transformed into energy users' beliefs (effective information) or the key policy question of how to improve effective information.
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From page 71... ...
While it is possible to study the features of information and information delivery that affect people's beliefs and action, it would be difficult to incorporate these features into formal energy demand models. First of all, the most effective informational efforts involve a combination of elements that probably act synergistically.
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From page 72... ...
In contrast to the effective information model, the diffusion model does not hold that it is necessary for every consumer to know all the facts needed for rational action before an energy-efficient innovation will be adopted or that tangible personal benefits are the only motives for improving energy efficiency. It may be enough to get relatively full information to sources that consumers trust.
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From page 73... ...
In particular, it would be useful to know more about which sources are trusted by different types of consumers; which networks spread information about energy technologies among individuals, firms, professional groups, and public agencies; how energy information spreads through these social networks; and what kinds of communication most convincingly demonstrate to consumers the relative advantage of energy-efficient innovations. For this analysis, it makes sense to use a market segmentation approach: an approach aimed at identifying groups of people who think in the same way about a possible innovation or who trust common sources of information.
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From page 74... ...
It calls for research to assess what consumers believe~about the costs and effects of investments in energy efficiency and on the ways these beliefs change. Surveys can determine what people believe, but the effective information perspective offers no guidance for understanding the conditions under which information changes beliefs.
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