Behavior economics suggests that some behavioral interventions have promising results in achieving socially desirable goals. According to Congdon et al., we do care about others to some extent, and we are also concerned about what others think of us and our choices. Thus, we are attempting to adhere to social norms. It has been proven that a general practitioner (GP) may feel a little bit pressured to re-evaluate his/her prescription habits and decrease the amount of antibiotics being prescribed if the supervising authority sends a letter stating that he/she prescribes more antibiotics than other GPs in the area. In general, it is a beneficial way to prevent the development of antibiotic-resistant bacteria, since less antibiotics are prescribed for diseases that are curable through other means. A number of cognitive biases have been found to influence a doctor's prescription of antibiotics. These biases include pressure from the patient, commission bias, and optimism bias, which is a fascinating area of psychology.
However, let's return to our main subject, energy consumption. When it comes to the use of electricity and heat in our homes, we are sometimes prone to paying less attention to our habits. In spite of this, it should be acknowledged that in the recent economic climate, where energy prices are skyrocketing, we should all be more cautious about the amount of energy we consume.
Although some households (not limited to Hungary) may already be paying more attention to their energy consumption as a result of the sharp increase in prices, there is probably still room for improvement in this area. It is not a secret that there are a number of households that will certainly feel the impact of the price increase but will still be able to pay their bills in spite of it. As a result, this group may be willing to reduce their energy consumption not only due to the higher costs, but also because of environmental concerns, so they may set aside some of their revenues to invest in greener energy sources.
The question is: does nudging help Hungarian households reduce their energy consumption? We define nudging as providing information about the energy consumption of households in comparison to other, similar households in the neighborhood (and to their own consumption data from the past), such as the data provided in this report. A better understanding of one's energy use and the ability to compare it to others can lead to more conscious decisions. It might be helpful for someone to know on their monthly bill that they consume 10% more electricity than other households in the neighborhood. This allows over-consumptive households to decrease their consumption and save energy and money.
This intervention requires electricity and gas suppliers to analyze data and include the results in the monthly bills that are sent to consumers. Due to the fact that monthly bills are already packed with information (which, according to one theory of behavior economics, may be counterproductive), comparisons of consumption must be eye catching, thus colorful or highlighted in some other manner. The following examples are taken from the above-mentioned report:
Home Energy Report, Front
Source: Allcott, Hunt, and Todd Rogers. 2014. "The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation." American Economic Review, 104 (10): 3003-37. DOI: 10.1257/aer.104.10.3003
Home Energy Report, Back
Source: Allcott, Hunt, and Todd Rogers. 2014. "The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation." American Economic Review, 104 (10): 3003-37. DOI: 10.1257/aer.104.10.3003
After a few months, the results of this trial should be evaluated. Energy suppliers will determine whether or not the information regarding households' consumption compared to others has had an impact after a few weeks or months. Studies conducted in other countries (Opower report, Meta-Analysis) indicate that this mechanism worked, and household energy consumption decreased.
In addition to helping the people, this initiative would have a significant impact on the national budget as well, since there would be fewer subsidies needed if consumption was decreased (this money could then be used for research or the green transition). In addition, it would decrease the pressure on the country to purchase fossil fuels from Russia which have become more unpredictable and more expensive due to the ongoing conflict in Ukraine.
