Using behavioral science to make smarter energy policy

Grist logo David Roberts emphasizes changing the public's energy behaviors is as important as finding technology solutions. Despite the significance of behavioral change, the amount of money being invested in creating behavioral change is nothing compared to the investment in energy technology. Roberts cites a paper, Behavior and Energy Policy, which suggests that behavioral science programs can be successful and profitable if there are supported by policy and business leaders and scaled up.

Posted March 8, 2010
By David Roberts, Grist

On Friday, journalist John Fleck made a great point, comparing coverage of two new pieces in Science. One is about the latest potential climate disaster: methane venting from the seafloor in the Arctic. The second is about a promising new climate solution: using behavioral science to influence energy use.
Not surprisingly, the disaster got tons of coverage. The solution got
none. This is entirely typical. As Fleck says, "The problem space gets
more attention than the solution space."

So let's do something about that! Let's take a look at this under-covered solutions piece.

I've been saying over and over lately that changing behavior is as important as changing technology.
Yet behavioral science is neglected relative to technology R&D.
Everyone understands the importance of scaling up wind, solar, and
geothermal power, but when was the last time you heard a policymaker or
pundit talk about scaling up the practical application of knowledge
about how human beings think, interact, and make decisions?

In their paper, "Behavior and Energy Policy," Hunt Allcott of MIT and Sendhil Mullainathan of Harvard argue for taking such knowledge seriously:

Just as we use R&D to develop "hard science" into useful
technological solutions, a similar process can be used to develop basic
behavioral science into large-scale business and policy innovations.
… What has been missing is a concerted effort by researchers,
policy-makers, and businesses to do the "engineering" work of
translating behavioral science insights into scaled interventions,
moving continuously from the laboratory to the field to practice. It
appears that such an effort would have high economic returns.

That last sentence is a bit modest given the numbers Allcott and
Mullainathan marshal. They've taken a close look at the results so far
from behavioral programs in the field and the results are fairly
astonishing.

Start with the most basic test: how much does it cost for a given
climate solution to eliminate (abate) a metric ton of CO2 emissions?
With plug-in hybrid vehicles, that ton costs around $12. With wind
power, it's $20. With carbon capture and storage at coal-fired power
plants, it's $44.

How much does that same ton of CO2 abatement cost using these
behavioral programs? -$165. No, that's not a typo. It's a negative
sign. As in: $165 worth of profit per ton of carbon pollution reduced.
If similar programs were expanded nationwide, Allcott and Mullainathan
estimate a net value — savings minus costs — of $2,220,000,000 a
year. Of course much research and testing remains to be done before
it's clear whether these programs perform equally well at scale, but as
a first approximation, that's not too shabby.

Incidentally, some of the data comes from programs run by Opower, a Virginia-based company that works with utilities to apply behavioral science in a way that delivers energy efficiency. I've mentioned them before, and as it happens, President Obama visited them on Friday. "You can see the future in this company," he said. (Why isn't that a bigger story?)

Here's Opower's solution to reducing energy use:

Opower photo

High-tech, huh? Put a chart like that on utility bills and you get
about a 2 percent average drop in energy use. And it hardly costs the
utilities anything! They already have the data. It's just a different
way of presenting information, informed by good social science. As
social psychologist (and Opower adviser) Robert Cialdini said
when I talked with him, there's more than 50 years of scientific
research on this stuff. It just hasn't been communicated broadly or
translated into policy.

Time to start translating! Allcott and Mullainathan offer three policy recommendations.

First, governments can provide funding for potentially
high-impact behavioral programs as part of their broader support for
energy innovation
. A bill under consideration in the U.S.
House of Representatives, HR 3247, would establish a program at the
Department of Energy to understand behavioral factors that influence
energy conservation and speed the adoption of promising initiatives.

Side note: that bill, HR 3247,
was sponsored by Washington's own Rep. Brian Baird (D). He got it
passed out of House Science and Technology Committee but right-wingers,
led by Glenn Beck, pitched a fit,
saying it was government mind control. The teabaggers created such a
distraction that the bill was subsequently withdrawn. I'm going to chat
with Baird about the episode later this week.

Moving on:

Second, through market incentives, policy-makers can
encourage — or fail to encourage — private-sector firms to generate
and utilize behavioral innovations that "nudge" consumers to make
better choices
. Historically, economists and policy-makers have focused on how regulation affects relative prices … In practice, however, firms interact with consumers in many ways in addition to pricing.

And finally:

Third, government agencies often provide independent information
disclosure, such as vehicle and appliance energy-efficiency ratings.
This helps catalyze private-sector innovation by allowing firms to
credibly convey the financial value of energy efficiency to consumers.
The effect of information on choices, however, depends critically on
how the information is conveyed, and government agencies should carefully consider behavioral factors in the disclosures they control.

For example: the EPA rates fuel efficiency according to miles per
gallon (MPG), which turns out to be misleading in all sorts of ways.
(See: "The MPG Illusion.")
If it instead reported based on gallons per mile (GPM), it would better
inform consumers about the real value of efficiency and thereby lead to
better choices. Most importantly, it would cost EPA virtually nothing.
It's just a matter of applying knowledge about how people tick.

——

Nerdy addendum

When considering interventions, policy-makers usually focus on
price, or information about prices. As Allcott and Mullainathan note,
this focus derives from the the rational choice theory of traditional economics. (I've harped on that lately too — here, here, here, and here.)

Problem is, behavioral psychology and neuroscience have demonstrated
that the rational-choice ideal no longer holds water. John M. Gowdy of
the Rensselaer Polytechnic Institute, in "Behavioral Economics and Climate Change Policy," puts it this way:

The axioms of consumer choice — the starting point of traditional
economic theory — have been re-cast as testable hypotheses and these
assumptions have come up short as defendable scientific
characterizations of human behavior. It is no longer tenable
for economists to claim that the self-regarding, rational actor model
offers a satisfactory description of human decision making.
Nor do humans consistently act "as if" they obey the laws of rational choice theory …

… Ironically, the rational actor model seems to be most
appropriate for animals with limited cognitive ability and perhaps
humans making the simplest kinds of choices. For the most
important decisions humans make, culture, institutions, and
give-and-take interactions are critical and should be central to any
behavioral model.

Much of behavioral economics has been devoted to debunking rational
choice theory, but a positive alternative is just beginning to emerge,
a kind of unified theory of human behavior that harmonizes research
from economics, sociology, anthropology, and psychology. Read Gowdy's
fascinating paper for more on that.

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