Econonomics of Energy and Environmental Policy

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The Impact of Behavioral Science Experiments on Energy Policy

Abstract:
One of the most exciting areas of research today is the use of experiments informed by behavioral science to understand how to change energy consumption decisions of consumers. This article provides a survey and synthesis of experiments and focuses on general principles that can be gleaned from these experiments to date. We identify four general insights from the literature. First, the "law of demand" is typically satisfied in experimental settings, but responsiveness to energy price changes can vary dramatically in different contexts. Second, information provision can help promote reductions in energy use, but it does not always work. Third, the use of social norms can change energy use. Finally, the economic welfare impacts of behavioral interventions aimed at promoting either energy conservation or energy efficiency are not well understood, but initial research suggests that some people want nudges and some do not. The essay also identifies a number of areas for future research.
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JEL Codes:D12: Consumer Economics: Empirical Analysis, H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies, Q41: Energy: Demand and Supply; Prices


Keywords: energy policy, behavioral science, energy consumption

DOI: 10.5547/2160-5890.5.2.rhah


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Published in Volume 5, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.


 

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