Sunday, November 20, 2011

To save the earth, know human nature

Two years ago, the National Environment Agency (NEA) did a study of anti-littering measures to find out what really worked.
By Grace Chua

It turned out that banners reminding people not to litter - an old campaign standby - were ineffective. Now, the NEA has developed new tactics based on the study, such as using gentle social pressure in the form of Litter-Free Ambassadors, and adding bins for the convenience of people.

In environmental policy here, there is a growing recognition that understanding people's behaviour is more important than sticking dogmatically to campaigns.

And it can be just as important as new, high-tech fixes in getting people to use less fossil fuel.

At the Singapore International Energy Week held at the beginning of this month there was, for the first time, a discussion of the role of behavioural economics in energy use. It was organised by the National University of Singapore's Energy Studies Institute (ESI).

Behavioural economics is a young branch of economics that uses insights from psychology to understand why people sometimes act in seemingly irrational ways.

For instance, researchers once found people bought more cans of soup at a supermarket if the display bore the sign 'Limit: 12 per customer'.

Discussion moderator Tilak Doshi, chief economist and principal fellow at the institute, commented that renewable energy makes up such a minuscule fraction of energy mix that it will not go far towards lowering the nation's carbon footprint.

Getting individuals and businesses to be more energy efficient instead offers a 'bigger bang for the buck' in that arena.

But Singapore has long eschewed energy subsidies, saying the 'true' market cost of electricity encourages people to use less electricity. Has it reached the point where cost alone is not enough to get people to save energy?

'We've always had market pricing, but not to the point where we price externalities,' said Dr Doshi, referring to putting a price tag on carbon emissions from energy use.

'If you do that and other countries don't, then you become less competitive,' he said. That is why few countries have stepped forward to tax or price carbon emissions.

So there is a limit to the usefulness of price alone.

Stanford energy economist James Sweeney, speaking at the Energy Week discussion, outlined several ways to increase energy efficiency that rely on behavioural change.

What would save most energy, said Professor Sweeney, is getting people to buy more energy-efficient appliances in the first place.

For instance, in the United States, most people with programmable thermostats never change the default programming. So thermostats could be sold pre-set to a comfortable temperature when one is at home, and to use less or no heating at night when one is asleep and tucked under the blanket.

Then, it is getting people to use those gadgets more efficiently.

If energy usage, Prof Sweeney explained, was front and centre at the 'point of purchase' of electricity - when viewers turn on the television, for example, they might think twice about turning it on. But the electricity bill comes only at the end of the month, long after people have consumed the electricity.

There is also a social aspect to behaviour change. Yale economist Kenneth Gillingham, also part of the Energy Week panel, found that people in one California neighbourhood were more likely to install solar panels on their roofs if their neighbours also had them.

Singapore already does this - by printing on utility bills the average electricity consumption by one's housing type - but Dr Doshi suggested narrowing it down by neighbourhood or by suburb, which could spur friendly competition between direct neighbours. And the NEA is banking on such social pressure by introducing its 'Litter-Free Ambassadors' - volunteers who run personal campaigns to get friends and family not to litter.

Behavioural solutions, however, are not a magic bullet. They should be thought of as complements to traditional approaches, pointed out Dr Gillingham. One obstacle is the need to understand context. For example, in California, utility bills in some areas showed average consumption in the neighbourhood as well as the energy consumption by one's most efficient neighbours. But only liberal Democrats cut back their energy use in response - Republicans did not budge.

One explanation was that when conservatives learn that they are better than average, they become less vigilant about turning the lights off - in other words, they move closer to the norm. Some groups respond to nudges in unexpected ways, something proponents of behavioural solutions should keep in mind.

Yet such solutions need not mean more regulation, explained Copenhagen Business School researcher Lucia Reisch, if they do away with the need to legislate certain behaviour or energy standards. And they can pay for themselves in energy saved. Professor Reisch, who also studies cross-cultural communication, said these are also applicable to Asia as human nature, ways of thought and biases are similar everywhere.

But social norms can vary, she said. For example, people in the US are more likely to say that someone driving badly is a bad driver, and those in India are more likely to believe he or she is having a bad day.

Dr Doshi said Singapore has been 'nudging' its citizens into good choices for decades - one example is automatic payroll donations to self-help groups Sinda, Mendaki and the CDAC (Chinese Development Assistance Council).

So behavioural economics is worth paying attention to when it comes to encouraging people to adopt green efforts. In terms of the cost of cutting carbon emissions, it has the potential to be as effective as pouring money into the most advanced solar-energy research, which is necessary for progress but insufficient on its own.

More fine-tuned 'nudges' should be introduced and the private sector could seek to capitalise on human behaviour - for example, by selling smart meters that measure energy use up front. Also, more research should be done here and throughout Asia to find out which aspects of so-called human nature are truly universal, and which are peculiar to the US university undergraduates involved in so many such studies.

As one civil servant asked during the Energy Week panel discussion: How to convince decision-makers that these measures work? Run more tests and collect more empirical data, came the reply.

If human nature is irrational anyway, said Prof Sweeney, 'why don't we use that irrationality as a nudge to get people to accomplish things we want to accomplish'.