Using Incentives and Social Information to Promote Energy Conservation Behavior

Improving the efficiency in the domestic energy consumption has become a showpiece of how behavioral economics can be applied to the field of environmental economics. This study builds upon the literature by providing subjects with individual and social energy performance information at group level in a controlled field experiment setting. We aim to test whether extrinsic incentives accentuate or crowd out the intrinsic motivation to save energy and how heterogeneity in environmental attitudes also impacts on electricity conservation. Besides, we test for the persistence of energy-saving habits after the information is removed. Results suggest that the provision of individual feedback and social information increase energy conserving behavior, with this being most effective among those who signaled in a previous stage preferences for pro-environmental and sustainable living. However, treatment variations indicate that subjects overall fail to maintain “good habits” once the intervention stops, with exception of pro-environmental subjects who continue to consume less electricity in the post-intervention phase. Furthermore, our findings indicate that rewarding groups in a competitive environment may create perverse long-run effects. While providing individual and social information could improve both consumer welfare and energy demand forecasting, the timescale, frequency, and mechanism undertaken require careful scrutiny and planning if these potential benefits are to be maximized and undesirable side effects prevented