Policy Research

Can Behavioral Economics Be Used to Encourage Consumers to Switch to Green Energy Tariffs?

Moira Nicolson, Gesche Huebner, David Shipworth

Summary

One mechanism for decreasing peak energy consumption is to switch consumers to a tiered payment system, consisting of higher prices during peak times to discourage use. This randomized experiment tested to find the most productive method to entice consumers to switch to such a rate plan. The test consisted of four treatment groups; two were framed in a positive voice, and two in a negative. The first treatment received an advertisement claiming that switching to the three-tier system would “save you money on your bills.” The second treatment claimed that a switch would “save you money on your bills and help the environment.” The third group received a letter stating “Not switching could cost you money on your bills,” while the fourth group’s letter argued “Not switching could cost you money on your bills and harm the environment.” The results show virtually no differences between any groups; the willingness to switch to a three-tiered system was in no way affected by the type of advertisement you received.

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Policy Implications

The results show that the frame of a message, at least in the context of energy programs, has no effect on uptake. Efforts to convince consumers to take part in a program through positive talk of potential gains, or negative talk of potential losses do not differ from each other in effectiveness. Programs looking to increase participation should look at other possibilities for doing so.