Environmental Engineering Reference
In-Depth Information
Other factors that can explain the apparent lack of even limitedly optimal self-
interest behavior at the individual level include: (a) lack of knowledge about energy
saving measures (b) capital constraints, which make it dif
cult to acquire equipment
cient
1
(c) time preference (d) the principal-agent problem
and (e) uncertainty about the effectiveness of the measures.
2
These points have been
discussed a lot in the literature, going back to the Jaffe and Stavins [
48
] paper and
need not be repeated again in detail. Perhaps a few words may be said about some
of the less well-known ones. Some studies have focused recently on estimating the
existence and the magnitude of the principal-agent problem [
13
]. This situation
happens, for example, in the case where renter decisions about energy use are taken
by her and she pays the bills but the decisions about the equipment installed are
taken by the owner, who goes for the cheapest alternative. Thus, in this case the
most cost ef
that is more energy ef
cient combination may not be chosen [
43
].
In terms of policy the implications from this literature are clear at least in terms
of what we need to change. Better information, possible access to up-front capital,
loans at subsidized rates and regulations that specify ef
ciency standards in certain
cases emerge as possible measures. These have been tried to various degrees and
we discuss them in the later sections. Another line of reasoning that has been
followed is to change some less rational behavior through
“
”
and other
measures where we appeal to other factors. These can include the following:
nudges
Smart meters: provide more information on use and allow you to program use
accordingly.
Comparison with neighbors about use rates (how you compare with the average
and with the most ef
cient).
DIY meter that glows if you are using more energy than normal (UK).
Power aware cords for appliances. They glow if a light has been left on for long.
There is limited anecdotal evidence but no full review of how effective such
measures are (except work on smart meters which questions their cost effectiveness,
see e.g. [
15
]). Indeed given the limited evidence on the effectiveness of such
measures their popularity in some public debates about the way forward may be, in
our view, misplaced.
1
Surveys carried out by the OECD and others indicate that economic considerations such as the
full price (i.e. levelised costs including capital plus operating costs) are not as important as capital
costs and labelling of products when making energy appliance choices [
68
].
2
There is also a literature which notes that measures of the energy paradox are exaggerated
because the methods used do not
take account of the fact
that consumers have different
preferences. See for example, [
7
].
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