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Dora L. Costa
Matthew E. Kahn
University of California, Los Angeles
University of California, Los Angeles
Abstract
“Nudges” are being widely promoted to encourage energy conservation. We show that the popular
electricity conservation “nudge” of providing feedback to households on own and peers’ home
electricity usage in a home electricity report is two to four times more effective with political
liberals than with conservatives. Political conservatives are more likely than liberals to opt out of
receiving the home electricity report and to report disliking the report. Our results suggest that energy
conservation nudges need to be targeted to be most effective. (JEL: Q41, D03, D72)
1. Introduction
Europe, especially Scandinavia, has high taxes on electricity and gasoline to encourage
conservation and counter global warming. Taxes in Denmark represent more than half
of the cost of electricity to consumers.1 In contrast, the United States has low taxes
and little political will to sacrifice for the sake of conservation. Congressional voting
patterns highlight that conservative Representatives are highly unlikely to vote for
carbon mitigation legislation (Cragg et al. 2013).
Facing political gridlock in the Congress and concerned about the challenge of
climate change, an ongoing policy agenda is seeking out alternative strategies for
encouraging conservation. Recent psychology research suggests an alternative tool
for changing household behavior is to focus on well crafted messages offering peer
comparisons (see Griskevicius, Cialdini, and Goldstein 2008). Robert Cialdini and his
coauthors have conducted a series of field experiments that have demonstrated that lowcost persuasion strategies or “nudges” can change an individual’s behavior by making
The editor in charge of this paper was Stefano DellaVigna.
Acknowledgments: We thank Maximilian Auffhammer, the participants at the 2010 POWER Conference,
and seminar participants at Princeton and the University of Illinois for comments. We thank the UCLA
Ziman Real Estate Center for funding. We thank the editor and five reviewers for their comments. Costa
and Kahn are Research Associates at NBER.
E-mail: [email protected] (Costa); [email protected] (Kahn)
1. See Eurostat News Release, 75/2010, 28 May 2010. http://epp.eurostat.ec.europa.eu/cache/ITY_
PUBLIC/8-28052010-AP/EN/8-28052010-AP-EN.PDF
Journal of the European Economic Association June 2013
c 2013 by the European Economic Association
11(3):680–702
DOI: 10.1111/jeea.12011
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ENERGY CONSERVATION “NUDGES” AND
ENVIRONMENTALIST IDEOLOGY: EVIDENCE
FROM A RANDOMIZED RESIDENTIAL
ELECTRICITY FIELD EXPERIMENT
Costa and Kahn Energy Conservation “Nudges” and Environmentalist Ideology
681
2. In the United Kingdom, where electricity taxes are low, David Cameron has touted the behavioral transformations of putting “the typical electricity bill for a house like theirs in a neighborhood like theirs” in front
of households. Speech of 13 June, 2008. http://www.aletmanski.com/files/davidcameron-powerofsocialinnovation.doc
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him aware of the actions of others who have been in a similar situation (Goldstein et al.
2008; Schultz et al. 2007). Nudges may be a low cost strategy for encouraging energy
conservation (Allcott and Mullainathan 2010; Thaler and Sunstein 2008).2
We posit that liberal/environmentalists are more likely to respond to energy
conservation nudges. A series of recent empirical papers has documented that
environmentalists are more likely to engage in “voluntary restraint” than the average
person (Kotchen and Moore 2008). Those who vote in favor of “green policies” and
register for liberal/environmentalist political parties are more likely to have a smaller
carbon footprint and to purchase green products such as the Toyota Prius (Kahn 2007,
Kahn and Morris 2009). Such environmentalists consciously avoid free riding and
voluntarily restrain their consumption of goods and services that generate a negative
externality.
Our evidence on the role of ideology in energy conservation “nudges” comes from
a randomized field experiment carried out by a western utility district in which we can
observe a household’s ideology (an unobservable in prior studies), its socioeconomic
and demographic characteristics, and its behavioral responses. Starting in Spring 2008,
this utility has been sending households in the treatment group a Home Energy Report
(HER). The report provides household specific information on own monthly electricity
usage over time and relative to neighbors’ 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 have collected data on the customer’s political party of registration,
household donations to environmental organizations and household participation in
renewable energy programs, and 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 energy from renewable resources and donate
to environmental causes are arguably environmentalists. Our focus on ideology, an
unobservable in previous studies, distinguishes our work from other research (e.g.
Allcott 2011; Ayres, Raseman, and Shih 2009).
We find that the effectiveness of energy conservation “nudges” depends on an
individual’s ideology. In the United States, Democrat, Peace and Freedom, and
Green party members (liberals in the US terminology) are more likely to vote
for environmentalist causes than Republican, American Party, or Libertarian party
members (conservatives in the US terminology). We measure ideology not just with
registered political party, but also with indicators of living in a liberal or conservative
community and willingness to pay for energy generated from renewable resources and
to donate to environmental organizations. Although liberals and environmentalists are
more energy efficient than conservatives (Costa and Kahn 2010), thus making it harder
682
Journal of the European Economic Association
2. The Energy Conservation “Nudge”
The “nudge” that the electric utility company sends to treatment households in an ongoing randomized experiment to encourage reductions in electricity consumption is a
two-page HER (see the Appendix for a sample). Similar reports have been used by other
utilities in the United States. The front page compares the electricity consumption of the
household with all neighbors with similar size homes and heat type and with neighbors
who are in the bottom 20th percentile of electricity usage. The back page compares
the household’s electricity usage in the current month relative to the same time month
in the prior year and awards green stars in every month the household consumed less
relative to the same month in the past year (panel not shown in the Appendix because it
is not publicly available). It also provides three tips for saving energy, such as turning
down the thermostat when using an electric blanket or purchasing an Energy Star
durable, and indicates the dollar amount in energy savings per year (shown in the
Appendix).
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for them to reduce consumption further, we find that liberals and environmentalists are
more responsive to these nudges than conservatives.
We find that among political liberals who purchase electricity from renewable
resources, who donate to environmental causes, and who live in a census block group
where the share of liberals is in the top 75th percentile, receiving a HER led to
reductions in electricity usage of 3.6%. In contrast, among political conservatives who
do not pay for renewable electricity, who do not donate to environmental groups, and
who live in a census block group where the share of liberals is in the bottom 25th
percentile, receiving a HER led to reductions in electricity usage of 1.1%. Liberals are
more likely to turn down the air-conditioning in the summer in response to the HER
report. Political liberals were 15% less likely to opt out of receiving the report and, in a
survey, political liberals are also less likely than conservatives to state that the reports
were useless and to report disliking them.
By documenting the role that ideology plays in determining the effectiveness of a
specific “nudge”, this paper contributes to the growing literature on the consequences
of political ideology. Much of this work has focused on the role of political ideology
in shaping preferences for redistribution (e.g. Piketty 1995). Our work focuses on the
role of political ideology in shaping responses to non-market mechanisms designed
to reduce consumption. Recent work on the determinants of political ideology has
examined the causal role of the media (DellaVigna and Kaplan 2007), property rights
(Di Tella, Galiani, and Schargrodsky 2007), and historical circumstances (Alesina
and Fuchs-Schundeln 2007; Giuliano and Spilimbergo 2009) in shaping a person’s
ideological outlook. Both social psychologists and economists have argued that beliefs
on how society and the economy work predominately are formed at ages 18–25 (see
Giuliano and Spilimbergo 2009). In this study, we will take as given that a household
either is or is not a liberal/environmentalist and we will study how these political and
social views influence household response to the same randomized treatment.
Costa and Kahn Energy Conservation “Nudges” and Environmentalist Ideology
683
2.1. The HER Experiment
Between March 14 and May 9 2008, the electric utility sent the first Home Electricity
Reports to a treatment group of approximately 35,000 households. By April 1, 43%
of all treatment households had received the report and by April 15 the figure was
62%. Households are still receiving the report, either on a quarterly or monthly basis.
A control group of roughly 49,000 households have never received a HER.
The HER experiment selected households from 85 census tracts with a high
density of single-family homes (see ADM Associates 2009). Both treatment and
control households had to have a current account with the electric utility that had
been active for at least one year, could not be living in apartment buildings, and had to
be living in a house with square footage between 250 and 99,998 square feet. Groups
of contiguous census blocks were randomly assigned to either the treatment or control
group. A “block batch” of five contiguous census blocks was randomly assigned to the
treatment group and then a contiguous census block batch was assigned to the control
group. The process continued until roughly 35,000 households were assigned to both
the treatment and control groups. The remaining census blocks (about 14,000 homes)
were assigned to the control group. Contiguous block groups were used because the
implementation contractor, Positive Energy (now OPOWER), believed that increased
communication among people receiving the HERs in the same community would lead
to greater energy savings.4
Allcott (2011), Ayers, Raseman, and Shih (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, Raseman, and Shih 2009). Additional evidence that social incentives can make
a difference comes from California’s 2001 media campaign to promote voluntary
conservation after rolling blackouts in 2000 and early 2001. Consumption in San Diego
3. We thank a reviewer for suggesting this research strategy.
4. In a 2009 Home Energy Use Survey conducted by the electric utility, households in the control group
were more likely to report talking to friends and neighbors about their electricity bill than households in
the treatment group, suggesting that receiving the HER did not inspire discussion and that any positive
peer effects operate through implicit social pressure.
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Each report contains two pieces of information: the household’s absolute level
of consumption and how its consumption compares with that of 100 neighbors living
in similar-sized homes. We also know whether a household in the treatment group
received a message of “great”, “good”, or “room for improvement” in the first report.
As we discuss in the Online Appendix, we use this information to implement a
regression discontinuity design to test whether the change in electricity consumption
for the treatment group differs depending on the normative message that the household
receives in the first report.3
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Journal of the European Economic Association
declined by 7% during the initial two phases of the campaign, before rebounding (Reiss
and White 2008).
Within a household production framework, a household values electricity as an input
in producing comfort (e.g. indoor temperature) and leisure and household production
activities. Total household electricity consumption in any given period is the sum of
electricity used in each of these activities. A household’s total electricity consumption
depends on choices over (1) the attributes of the house, such as size; (2) the attributes of
appliances; and (3) the intensity of utilization of appliances for leisure and household
activities, indoor temperature control and illumination. These choices, in turn, depend
on climate, prices and personal attributes, including ideology.
We view environmental ideology as a set of prior beliefs including those about
the importance of energy conservation The ideological divide on environmental issues
between Democrats and Republicans could affect how a household responds to an
energy conservation “nudge”. In the United States, conservatives consistently oppose
environmental regulation and energy policies intended to further environmental aims,
as seen in polling data on the belief in climate change (Dunlap and McCright 2008) and
Congressional voting patterns (Cragg et al. 2013). Dunlap and McCright (2008) report
that in 2008 there was 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 four 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 3.5
A 2009 Pew survey found a 23 percentage gap between Democrat and Republican
agreement with the statement that people should be willing to pay higher prices to
protect the environment. Republicans and Democrats respond differently to “carbon
offsets” versus “carbon tax” (Hardistry, Johnson, and Weber 2010), suggesting that
ideology moderates how individuals think of key words.
European studies have highlighted the role that environmental ideology plays
in determining the willingness to take voluntary actions to mitigate one’s carbon
externality and the willingness to pay to purchase a “green product”. Thalmann (2004)
and Halbheer, Niggli, and Schmutzler (2006) document that voters who are left-ofcenter or who are environmentalists were more likely to vote for Swiss environmental
referenda. Brounen and Kok (2011) found that the price premium for residential homes
that are certified as highly energy efficient in Holland is higher in “green” communities,
that is communities where the Green Party and the Party for the Animals had received
a larger fraction of the vote.
Given this background, there are two main hypotheses that can be tested. Many
households will read the report and respond to it for non-ideological reasons, such
5.
See http://www.people-press.org/2009/05/21/section-9-the-environment-and-the-economy/
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3. Why Could Ideology Mediate the Response to this Nudge?
Costa and Kahn Energy Conservation “Nudges” and Environmentalist Ideology
685
4. Data
Our primary data set consists of residential billing data from January 2007 to October
2009. These data provide us with information on kilowatt hours purchased per billing
cycle, the length of the billing cycle (measured in days), whether the house uses electric
heat, and whether the household is enrolled in the electric utility’s program to purchase
energy from renewable sources. We link each billing cycle to the mean temperature in
that billing cycle.6
We link the billing data to the treatment and control data which contain information
on when the household began to receive the HERs, as well as information on square
footage of the house, information on whether the home heats with electricity or natural
gas, and the age of the house. We cannot match 1,976 observations in the pilot and
control data to the residential billing data. In our final data set, the treatment and control
data therefore contain 81,722, with 48,058 households in the control group. Among
the households in the treatment group, 24,028 received a monthly report and 9,636
received a quarterly report.
We merge individual voter registration and marketing data for March 2009 to our
data set.7 For registered voters we know party affiliation, and whether the individual
donates to environmental organizations. We were able to link half of our sample to
the voter registration data. We linked either the person whose name was on the utility
bill or the first person on the utility bill.8 The individuals we could not link were
living in smaller households and in census block groups with a low proportion of the
college-educated, were more likely to receive a subsidy for electricity because of their
6. Two different households in the same calendar year and same month who are on different billing
cycles will face different climate conditions.
7. We purchased the data from www.aristotle.com.
8. Only 5% of households were “mixed” between conservatives and liberals.
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as wanting to lower their bill. These households, regardless of ideology, may reduce
their consumption. The response of liberals is ambiguous. Liberals may reduce their
consumption by more than conservatives because of their ideology and have been
observed to consume less electricity (Kotchen and Moore 2008; Costa and Kahn 2010).
However, because they have already invested more time and effort in monitoring their
electricity bills and in engaging in voluntary restraint (i.e. lowering the air-conditioner
in the summer), their response could be lower than that of conservatives. Secondly,
and more controversially, it is possible that anti-environmentalist conservatives who
receive a green looking report and learn that they consume more than their peers may
refuse to decrease their consumption or even increase their consumption in an act
of defiance. People find information more reliable when it conforms to their strong
prior beliefs (e.g. Lord, Ross, and Leper 1979; Mil …
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