BEHAVIORAL ECONOMICS IN ENERGY AND Natural RESOURCEs
The efficient operation of energy and resource systems relies on a vast number of different agents’ decisions.
Understanding human behavior can help these systems function as effectively as possible
Busara capitalizes on the proven success of behavioral interventions in the energy and resource management space to develop a wide range of innovations:
• Promoting energy efficient behavior
• Encouraging use of energy-efficient products
• Increasing access to electricity
• Encouraging uptake of renewable energy sources
• Improving access to water and sanitation services
WHY ENERGY & Natural RESOURCES MATTER TO US
Energy and water conservation is becoming increasingly important not just for environmental reasons, but also to reduce use of scarce and expensive resources. Yet, people are often slow to respond to conservation initiatives – even when they are clearly in their own financial best interests.
Encouraging uptake of new technologies can be difficult – whether this be access to the grid or to clean water, or upgrades of existing energy and resource products and services. At the same time, preventing the frequent theft of electricity and water – which undermines the sustainability of national systems – is a challenge the world over.
Behavioral economics can help understand why these behaviors persist and how to change them. Whether supplementing conventional information campaigns and price incentives, or as new stand-alone initiatives, behavioral interventions have proven to be invaluable in enabling individuals to make better decisions around energy and natural resources.
HOW BEHAVIORAL ECONOMICS CAN HELP
Organizations and governments around the world have benefited from the power of behavioral interventions to solve problems in the energy and natural resources sectors.
PRESENT BIAS: INCREASING UPTAKE OF COOKSTOVES IN UGANDA
Despite the large cost savings incurred by the average household over the life of an energy-efficient cookstove, uptake tends to be far lower than expected. With the offer of a new contract designed to overcome present bias and liquidity constraints, uptake of the stove increased from 4% to 46% in Kampala and from 5% to 57% in Mbarara.
TRUST AND NETWORKS: ENERGY SERVICE COMPANIES IN CHINA
Traditional economics places little weight on personal relationships. Yet, behavioral research conducted in China demonstrates that trust-based relationships where service companies are embedded in local business, social or political networks are essential to the implementation of energy efficiency projects
SOCIAL NORMS: ENERGY USE INFORMATION IN THE US
Informing households of how their energy use compares to their neighbors’ energy use reduces overall energy use by 2% – and when smiley faces were used to mark approval for those who were particularly energy efficient, total energy use fell further. These effects tend to persist over the longer term even if notifications are discontinued.
Contact us to learn more about Busara’s work in energy.