Energy conservation “nudges” and environmentalist ideology: Evidence from a randomized residential electricity field experiment

Dora Costa, Matthew Kahn

How should households be encouraged to reduce electricity consumption? This column presents evidence from the US of a randomised “nudging” strategy – providing energy saving tips as well as information on electricity usage relative to neighbours. It finds that while energy conservation nudges work with liberals, they backfire with conservatives. Certain pockets of Republican registered voters actually increased their electricity consumption in reaction to the nudge.

Residential electricity consumption represents roughly 35% of California's total electricity demand. Conservation by consumers would both reduce greenhouse gas emissions and economise on the construction of costly new power plants. But how can we encourage conservation?

Behavioural economists have promoted the use of “nudges” to encourage energy conservation (Allcott and Mullainathan 2010 and Thaler and Sunstein 2008). “Nudges” offer a politically palatable alternative to stricter building codes and price increases. Research by Allcott (2009), Ayers et al. (2009), and Schultz et al. (2007) found that providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons decreased consumption by 1% to 2%, potentially saving 110 million kWh per year if feedback were provided to all of the utility’s customers (Ayers et al. 2009).

Conservatives and conservation

In recent research, we present evidence that behavioural economists have underestimated the role that ideological heterogeneity plays in determining the effectiveness of energy conservation nudges.

We find that the effectiveness of energy conservation nudges depend on an individual’s political views. Although liberals and environmentalists are more energy efficient than conservatives (Costa and Kahn 2010b) – thus making it harder for them to reduce consumption further – we find that liberals and environmentalists are more responsive to these nudges than the average person. In contrast, for certain subsets of Republican registered voters, we find that the specific “treatment nudge” that we evaluate has the unintended consequence of increasing electricity consumption.

People who refuse the “treatment” of a feedback nudge or do the opposite of what the nudge is meant to encourage are known in the literature as “defiers” (Freedman 2006). But there are few specific examples of what motivates the defiers. We argue that political ideology may provide one explanation; an energy-conservation nudge may be ignored by conservative Republicans. Some may increase their consumption as they learn that their past consumption was “low” relative to others. Such a boomerang effect could be caused by the realisation that electricity is cheaper than they expected and that it is “normal” to consume more. Others may feel active anger at receiving the nudge.

Political polarisation in the US

Rising polarisation between Democrats and Republicans has been well documented and environmental issues are a leading case.1 Dunlap and McCright (2008) report that in 2008 there was a 34 percentage point gap between Democrats and Republicans in their agreement with a statement that the effects of global warming have already begun, up from a 4 percentage point gap in 1997. The 2008 National Environmental Scorecard of the League of Conservation Voters gives the House Democratic leadership a score of 95 (out of a best score of 100) and the Republican leadership a score of 3 (see League of Conservation voters 2008).

New data from the US

Our evidence on the role of ideology in energy conservation nudges comes from a randomised field experiment carried out by a large California utility district.

Starting in Spring 2008, it has been sending households in the treatment group a Home Energy Report. 2 The report provides household specific information on own monthly electricity usage over time and relative to neighbours’ usage over the same time period. The report provides energy saving tips.

The report provides household specific information on own monthly electricity usage over time and relative to neighbours’ usage over the same time period. The report provides energy saving tips. To examine the role that political ideology and environmentalism play in determining how randomly selected households respond to these reports, we collected data on individual political party of registration, household donations to environmental organisations and household participation in “green power” programmes as well as data on the characteristics of the local residential communities where the households live.

Households who are registered in liberal political parties and who live in residential communities with a large liberal share and who have previously signed up for “green power” and donate to environmental causes are arguably environmentalists. This observable variation is crucial in distinguishing our estimation strategy from previous studies that have focused on estimating average treatment effects.

Our regression estimates predict that:

A Democratic household that pays for electricity from renewable sources, that donates to environmental groups, and that lives in a liberal neighbourhood reduces its consumption by 3% in response to this nudge.

A Democratic household that is also a high user reduces its consumption by 6%.

A Republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1%.

If the same message “turns on” greens but “turns off” more conservative individuals, then to reach out to all members of a diverse population requires a mixed-messages strategy.

Conclusion

Nudge-based policy prescriptions seek to make us healthier, richer in our retirement (through opt-out defaults), and better environmental citizens. To design nudges effectively, a “nudger” must anticipate how diverse subjects will respond. We have shown that while energy conservation nudges work with liberals, they backfire with conservatives. Greens may reduce their consumption in response to the receipt of a Home Energy Report because both private and social effects work in the same direction. They want to be good global citizens and suffer when they are made aware that they are "part of the problem."

The obvious lesson for field experiments is that on polarised issues even seemingly innocuous messages may trigger perverse effects. What works on average in this California county may not work on average in Lubbock, Texas if the proportion of greens is less.

References

Allcott, Hunt (2009), “Social Norms and Energy Conservation”, MIT Centre for Energy and Environmental Policy Working Paper No.09-014, October.

Allcott, Hunt and Sendhil Mullainathan (2010) “Behaviour and Energy Policy”. Science. 327(5970):1204 -1205

Ayers, Ian, Sophie Raseman, and Alice Shih (2009), “Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage”, NBER Working Paper 15386.

Costa, Dora L and Matthew E Kahn (2010a), “Energy Conservation "Nudges" and Environmentalist Ideology: Evidence from a Randomized Residential Electricity Field Experiment”, NBER Working Paper 15939.

Costa, Dora L and Matthew E Kahn (2010b), ”Why Has California’s Residential Electricity Consumption Been so Flat Since the 1980s? A Microeconometric Approach”, NBER Working Paper 15978.

Dunlap, Riley E and Aaron M McCright (2008), “A widening gap: Republican and Democratic views on climate change”, Environment, 50(5):26-35.

Dunlap, Riley E, Chenyang Xiao, and Aaron M McCright (2001), “Politics and Environment in America: Partisan and Ideological Cleavages in Public Support for Environmentalism”, Environmental Politics, 10(4):23-48.

Freedman, David A (2006), “Statistical Models for Causation: What Inferential Leverage Do They Provide?”, Evaluation Review, 30(6):691-713.

Gentzkow, Matthew and Jesse M Shapiro (2006), “Media Bias and Reputation”, Journal of Political Economy, 114(2):280-316.

Gentzkow, Matthew and Jesse M Shapiro (2010), “What Drives Media Slant? Evidence from U.S. Daily Newspapers”, Econometrica, 78(1):35-71.

Heckman, James J, Sergio Urzua, and Edward Vytlacil (2006), “Understanding Instrumental Variables in Models With Essential Heterogeneity”, Review of Economics and Statistics, 88(3):389-432.

League of Conservation Voters (2008), “Second Session 110th Congress National Environmental Scorecard 2008”, lcv.org.

Limbaugh, Rush (2009), “Turn on Your Lights Before the State Smart Meter Turns Them Off”, Transcript from rushlimbaugh.com, 26 March.

Thaler, Richard H and Cass R Sunstein (2008), Nudge: Improving Decisions about Health, Wealth, and Happiness, New Haven, CT: Yale University Press.

See Keith Poole’s web site, www.voteview.com.

2 For an example of the report see the Appendix of http://www.nber.org/papers/w15939.pdf.