Pro-environmental choices and energy poverty: an experimental study on the combined effect of financial incentives and behavioral boosts.

Marco Faillo (University of Trento)
Nives Della Valle (JRC, European Commission)
Chiara D'Arcangelo (University of Chieti)

Abstract

Energy sufficiency and energy efficiency are two strategies that policy-makers can promote to limit the consequences of climate change. At the same, some individuals, like energy poors, cannot freely decide to engage in these strategies. In this context, financial interventions can offset capital costs of more beneficial energy options, but they could also lead to higher emissions due to income effects. These negative effects could be contained if individuals could choose beneficial options that are also energy efficient.
When individuals limit energy services or adopt energy efficiency options to reduce their carbon footprint in the absence of external incentives, they engage in a pro-environmental behaviour, i.e. they decide to cooperate in a social dilemma.
Nowadays policy-makers could encourage these behaviors through behavioral public policy interventions, like nudges, but possibly also through boosts.
This study introduces a modified public bad game to experimentally investigate the situation in which individuals have to choose through which option they can obtain energy services, while inevitably producing negative externalities. To account for the income inequality that underlines energy poverty, we study three different income groups, including a group that receives financial intervention. Finally, we introduce a practice-based boost and test its effect on the level of negative externality and pro-environmental choice.
Preliminary results suggest that when income inequality is addressed through a financial intervention, individuals who have experienced income scarcity pollute more than individuals who have never experienced income scarcity. However, when the practice-based boost is introduced, this negative effect is reduced. In particular, we find that when income inequality is addressed through a combination of financial intervention and a practice-based boost, in the case of individuals with experience of income scarcity, they pollute less than those who do not receive the practice-based boost. The opposite is observed in the sample of people without experience with scarcity, for whom we observe an increase in the externality when the boost is used.

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