Nudging Energy Efficiency Behavior: The Role of Information Labels.

Newell & Siikamäki (2013)
Summary by 
Mark Egan

This paper looks at the efficacy of many different kinds of energy efficiency labelling (3 examples included) on preferences for household appliances. Using a choice experiment with many labeling treatments, the authors find that simple information on the economic value of saving energy was the most important element guiding more cost-efficient investments in appliance energy efficiency, with information on physical energy use and carbon dioxide emissions having additional but lesser importance.The authors note that the degree to which the current EnergyGuide label guided cost efficient decisions depends importantly on the discount rate assumed appropriate for the analysis. Using individual discount rates elicited in their study, they find that the current EnergyGuide label came very close to guiding cost-efficient decisions, on average. However, using a uniform five percent rate for discounting—which was much lower than the average individual elicited rate—the EnergyGuide label led to choices that result in a one-third undervaluation of energy efficiency.Labels that not only nudged people with dispassionate monetary or physical information, but also endorsed a model (Energy Star) or gave a suggestive grade to a model (A-G), had a substantial impact in encouraging the choice of appliances with higher energy efficiency.