Cognitive reflection and the valuation of energy efficiency

Andor, Mark; Gerster, Andreas; Sommer, Stephan

doi:10.1016/j.eneco.2019.104527

Cited by 15 publications

(16 citation statements)

References 31 publications

(43 reference statements)

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“…In addition, a few studies have analyzed moderating factors of the EU label effectiveness. For Germany, Andor et al (2019) find participants with low cognitive ability to be particularly responsive to the energy label. Also for Germany, Andor et al (2020) conclude that adding information about annual energy costs (in addition to kWh displayed) to the EU energy label increases the uptake of energy-efficient refrigerators.…”

Section: Introductionmentioning

confidence: 97%

Effects of rescaling the EU energy label on household preferences for top-rated appliances

2021

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The European Union has decided to replace its current A+++ to D labelling scheme for cold appliances with a rescaled A to G labelling scheme. Employing a demographically representative discrete choice experiment on refrigerator adoption using an online survey among more than 1000 households in Germany, this paper explores the effects of the rescaled scheme compared to the old scheme on the stated uptake of top-rated refrigerators. Since in practice both schemes will be shown for a transitory period, the paper also analyses the effects of displaying both labels simultaneously. The findings from estimating a mixed logit model suggest that showing the rescaled A to G label alone significantly increases valuation of top-rated refrigerators compared to showing the current A+++ to D label alone. In comparison, when the A+++ to D and the rescaled A to G schemes are shown simultaneously, no benefits of introducing the rescaled label are found. Thus, policymakers should strive to enforce the application of the rescaled label scheme as quickly as possible and to shorten transitory periods where both labels are shown simultaneously.

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Section: Introductionmentioning

confidence: 97%

Effects of rescaling the EU energy label on household preferences for top-rated appliances

2021

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“…Though efficiency classes on categorical-scale labels are intuitive for multiple reasons (Waide et al, 2004), this type of label can lead to decisionmaking heuristics in terms of overweighting energy class in purchases, and efforts can be devoted to improve these labels' transparency (d 'Adda et al, 2022). Particularly, consumers tend to value the efficiency class per se while ignoring the differences in actual energy use, which has been observed for household appliance purchases (Andor et al, 2019;Andor, Gerster & Sommer, 2020), in the housing market (Sejas-Portillo et al, 2020), as well as the supply side of vehicle market (Alberini et al, 2016). The phenomenon is referred to as the "class valuation effect" (Andor et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

“…Particularly, consumers tend to value the efficiency class per se while ignoring the differences in actual energy use, which has been observed for household appliance purchases (Andor et al, 2019;Andor, Gerster & Sommer, 2020), in the housing market (Sejas-Portillo et al, 2020), as well as the supply side of vehicle market (Alberini et al, 2016). The phenomenon is referred to as the "class valuation effect" (Andor et al, 2019). This holds in particular for individuals with a low level of cognitive reflection (Andor et al, 2019).…”

Section: Introductionmentioning

confidence: 99%

“…The phenomenon is referred to as the "class valuation effect" (Andor et al, 2019). This holds in particular for individuals with a low level of cognitive reflection (Andor et al, 2019). While labels with a categorical rating-scale allow consumers to compare across, but not within efficiency classes, continuous-scale labels enable consumers to make a direct comparison between appliances, even when the difference in efficiency levels is small (Schubert & Stadelmann, 2015).…”

Section: Introductionmentioning

confidence: 99%

“…Building on studies that have demonstrated the "class valuation effect" (Andor et al, 2019;Andor, Gerster & Sommer, 2020;Sejas-Portillo et al, 2020), this study, for the first time, examines the effectiveness of a continuousscale label in correcting the heuristics leading to the class valuation effect. To further examine the effectiveness of continuous-scale labels across countries, we take holistic cognitive tendency and energy literacy into account.…”

Section: Introductionmentioning

confidence: 99%

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Energy conservation at home

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The residential sector is the third largest energy consumer among all sectors. Unlike in industrial sectors, energy conservation in the residential sector largely relies on decentralised individual decision-making. Generally speaking, two approaches can enable households to retain a certain level of energy service consumption with less energy input or waste - improving energy efficiency and curtailing energy use. The former approach usually requires an investment in energy-efficiency such as energy-efficient appliances and insulation. However, households may be reluctant to make such investments due to factors such as the high upfront cost, uncertainty regarding the actual benefit, or simply lack of attention to energy efficiency. In terms of the latter approach, although curtailing energy use entail minimal financial costs, it requires considerable effort to acquire knowledge about energy savings, pay adequate attention to domestic energy use, and make persistent habit changes. Therefore, appropriate policy interventions are necessary to encourage household energy conservation. Efforts in designing policy interventions that target home energy conservation have been made over decades. Among other policy instruments, this thesis focuses on the intersection between information-based instruments and behavioural policy interventions, i.e., novel information-based policy instruments that apply behavioural economic insights. Information-based behavioural policy interventions have gained momentum due to their relatively low implementation costs and the ability to target multifarious non-financial motivations and barriers related to energy conservation. Despite the merits of information-based behavioural policy interventions, the effectiveness of this type of policy remains inconclusive. Moreover, previous research into behavioural policy interventions has been criticised for neglecting their heterogeneous effects. Evidence on the treatment effects heterogeneity related to socio-cultural contexts is especially scarce, which may be due to both the complexity of disentangling factors underpinning human behaviours and the costs of conducting large-scale, cross-context RCTs. The overarching goal of this thesis is to better understand the effectiveness of information-based behavioural policy interventions on household energy behaviour. Two specific aims were embodied throughout this thesis. First, this thesis aims to test whether altering specific elements of an intervention can improve its effectiveness by appealing to certain psychological mechanisms. Second, this thesis aims to understand the heterogeneity in intervention effects with respect to contextual factors and culturally-influenced personal traits. To materialise the information-based behavioural policy interventions, two particular interventions were chosen as research objects, i.e., energy labelling and social comparison feedback. Our empirical findings shed light on the effective strategies for communicating energy-related information with consumers, the importance of considering contextual factors and context-determined psychological traits when designing and implementing behavioural interventions, and potential pitfalls in intervention design. This thesis closes with an advocatory note about tailoring the design of behavioural interventions to socio-cultural contexts and consumers with specific psychological antecedents. Given the growing availability of big data and advancements in computational algorithms, the potential of information-based behavioural policy interventions can be further unleashed through customisation, which can ultimately facilitate the energy transition and help achieve global targets to mitigate climate change.

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Long-term Energy Cost Labelling for Appliances: Evidence from a Randomised Controlled Trial in Ireland

Denny

2022

J Consum Policy

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Given the longevity of investments in energy-consuming products (such as household appliances, vehicles, and properties), underinvestment in energy efficiency can have long-lasting negative economic and environmental consequences. Previous research has indicated that underinvestment may be due to imperfect information in relation to the long-term benefits of investing in energy efficiency. This paper presents the results of a cluster randomised controlled trial examining an intervention which aims to overcome this information deficit by providing long-term energy cost information on appliances in an electrical retail chain in Ireland. Two treatments are considered: a label showing 10-year energy cost information based on typical usage for four appliance categories (fridge freezers, dishwashers, washing machines, and tumble dryers); and a second treatment which supplements this label with a QR code where consumers can gain personalised cost estimates based on their expected appliance usage. Results indicate that neither of the treatments resulted in an increase in the average energy efficiency of appliances sold. Also, engagement of customers with the QR code was extremely low. Given that the newly designed EU energy labels incorporate QR codes for personalisation, this low usage suggests that this element of the new labels may be ineffective in increasing the uptake of energy efficiency. Finally, a customer survey suggests that while the treatment increased the stated importance of energy efficiency in decision-making, this did not translate into an increase in efficiency of products purchased, i.e., stated preferences for energy efficiency did not translate into revealed purchasing preferences.

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Cognitive reflection and the valuation of energy efficiency

Cited by 15 publications

References 31 publications

Effects of rescaling the EU energy label on household preferences for top-rated appliances

Effects of rescaling the EU energy label on household preferences for top-rated appliances

Energy conservation at home

Long-term Energy Cost Labelling for Appliances: Evidence from a Randomised Controlled Trial in Ireland

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