New Study Finds that Financial Incentives Reduce Household Energy Consumption

New Study Finds that Financial Incentives Reduce Household Energy Consumption

In a new study, Dr. Giovanni Baiocchi of the Department of Geographical Sciences and an international team of researchers analyzed the efficacy of various methods of promoting eco-conscious energy use in private residences. They found that monetary incentives—such as critical peak pricing—are a more effective way to encourage reduced household energy use than non-financial interventions, such as providing feedback on consumption or facilitating social comparison. However, the largest savings are obtained when used jointly as a package.

Published in Nature Energy, the study encompasses findings from more than 120 research papers, and data from 25 countries, using machine learning methods. This study of the first of its kind.

GiovanniDr. Giovanni Baiocchi 

“A comprehensive analysis of household-scale interventions and their emissions reduction potential was missing from the overall examination of ways to reduce carbon emissions at a global scale,” Baiocchi said. “We focused on interventions in reducing the energy demand of residential buildings, which will be a key step to promoting energy efficiency and reducing harmful emissions.”

The researchers addressed this gap for interventions aimed at changing individual households’ use of existing equipment, such as monetary incentives or feedback.

“The method of critical peak pricing works because consumers are reducing consumption to avoid to pay higher prices during peak times. They end up using less energy to avoid higher costs and make the grid more efficient,” Baiocchi said. “This flexible pricing allows more intermittent renewable sources to be used effectively.”

The study confirms that both monetary and non-monetary interventions reduce the energy consumption of households, and reveals that monetary incentives tend to show on average a more pronounced effect.

“While it might seem to be conventional wisdom that financial motives yield effective results, our study is an important first step in proving that theory—making it clear to policymakers that financial incentives are a step in the right direction to encourage personal responsibility and eco-awareness,” Baiocchi said.

Financial incentives are only one effective route to reducing household emissions. The researchers found that deploying the right combinations of interventions increases the overall effectiveness of energy-conscious behavior.

The team estimated a global carbon emissions reduction potential of 0.35 GtCO2 yr−1, for all the measures included in the study, about 5 percent of the annual emissions from residential buildings. The researchers believe that deploying the most effective packages of interventions could result in greater reduction.

“While modest, this potential should be viewed in conjunction with the need for reducing the risks from relaying solely on more complex technical solution to the climate problem such as carbon capture that might fail to materialize in practice at the scale needed,” Baiocchi said. “Household behavior is one important step—one piece of a larger puzzle to stabilize our environment.”

September 1, 2021

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