# Presentation: 017126

## Dollars or Sense:

**Economic versus Social Rationality in Residential Energy Consumption **
**Karen Ehrhardt-Martinez, Ph.D.***

- Energy Collaborative Analysis Initiative, Web Forum, August 28, 2008
- Based on an earlier report by Ehrhardt-Martinez et al. 2008.

## Dollars or Sense: Core Points 	

- The accuracy and adequacy of our conceptual framework is in serious question.
- The implications of working with a flawed model are serious.
- Time to consider alternative models and approaches that can help accelerate energy efficiency investments and behavior to generate needed energy savings.

## Residential Energy Consumption and Population Growth, 1949-2006

## Residential Energy Consumption

- Increased Energy Efficiency

- More Households
- Bigger Houses
- New Behaviors
-    and Lifestyles

## Potential Short-Term Residential Energy Savings

| Action | Energy Savings |
| --- | --- |
| Low cost/ no cost | 8.6% |
| Low – Med Cost | 9.5% |
| Efficiency Investments | 8.5% |
| Total | 25-30% |

- Source: Gardner and Stern (2008). Forthcoming.

## Techno-Economic Approach 	

***Desired***
***Energy Consumption***

***Appropriate Attitudes and Technology***

- Economic Environment

- + Information

## Attitudes 	

- People are concerned about the availability and affordability of energy... 77%
- People believe that an emphasis on conservation is better than an emphasis on energy production... 64%
- People believe that the effects of global warming have already begun to happen... 61%
- Americans reporting that energy prices are the most important financial problem facing their families today...30%
- Energy costs ranked above all other categories of financial problems.
- People want to reduce their impact.
- How well are attitudes translating into behaviors?

## Human Dimensions 	

- Gaps:
- 	Cost-effective energy savings and actual energy savings
- 	Attitudes and behaviors

**Economic Dimensions**** ****	**

- >>

## Invisibility of Energy and Efficiency 	

- Historically, we have moved from:
- Visible to invisible forms of energy
- Limited use to ubiquitous demand for energy services.
- Paradox: energy is both more **integral** to our **lives** and our **lifestyles**, while it’s **less** and **less** **visible.**

**Notes:**
Since the turn of the 20th century, we have completely altered our dependence on energy services as well as the means by which we meet our energy service demands.  In terms of heating our homes, we’ve gone from chopping wood, to shoveling coal, to purchasing fuel oil, to the almost effortless use of natural gas and electric furnaces.  

In the process of this transition, our active involvement in the process of heating our homes and our visual appreciation of the volume of our fuel consumption have been reduced to the point that energy consumption has largely become invisible.  The only thing that we’re left with is the monthly utility bill.  And to the degree that we can have that automatically debited from our checking account – we don’t even have that.   

Of course, at the same time, there has been tremendous growth in the energy services on which we rely, including what we use for air conditioning, computing, television, and the whole assortment of new electronic gadgets that we all rely on.  

So the paradox that we’re left with is this: energy is both more integral to our lives and our lifestyles, while it’s less and less visible.

## Other Problems with the Standard Model: Rationality and Irrationality

- People operate within conditions of *bounded* rationality,
- People behave *irrationally* in predictable ways,
- Behaviors that may not be *economically* rational in fact may still be entirely rational from other vantage points.

## Implications: Needed steps toward a more satisfying framework

- A critical need to move away from the “*If we build it, they will come*” mentality
- Move from a purely techno-economic focus to a broader social/human model
- Recognize that if we aim for the average person, we’ll miss the vast majority of behaviors

## Conclusions

- More/better information,
- New (social/human) model,
- Public health approach
- empowers people
- recognizes diversity of patterns in human behavior
- recognizes diversity of behavioral drivers

## Behavior, Energy and Climate Change Conference (BECC)

- November 16-19, 2008
- Sacramento, California
- _[www.BECCconference.org](http://www.beccconference.org/)_
- Co-convened by:
-  American Council for an Energy-Efficient Economy (ACEEE)
-  Precourt Institute for Energy Efficiency
- 	  (Stanford University) and
-  California Institute for Energy and Environment
- 	  (University of California)

## Selected Bibliography

- Ehrhardt-Martinez, Karen.  2008.  “Behavior, Energy and Climate Change: Policy Directions, Program Innovations and Research Paths.” Washington, DC: ACEEE. (forthcoming).
- Ehrhardt-Martinez, Karen; Laitner, Skip and Wendy Reed.  2008.  “Dollars or Sense: Economic versus Social Rationality in Residential Energy Consumption.”  ACEEE Summer Study on Energy Efficiency in Buildings. Asilomar, CA.  August 2008.
- Gardner, Gerald I. and Paul C. Stern.  2008.  “The Short List: The Most Effective Actions US Households can Take to Curb Climate Change.” *Environment* 50:5.
- Laitner, John A. “Skip”; Decanio, Steve J.; and I. Peters. 2001. “Incorporating Behavior, Social and Organizational Phenomena in the Assessment of Climate Change Mitigation Options.”  In *Society, Behavior and Climate Change Mitigation.* E. Jochem, J.A. Sathaye and D. Boulle eds.  Netherlands: Kluwer Academic Publishers.
- Lutzenhiser, Loren and Sylvia Bender.  2008. “The Average American Unmasked: Social Structure and Difference in Household Energy Use and Carbon Emissions.”  ACEEE Summer Study on Energy Efficiency in Buildings. Asilomar, CA. August 2008.
- Wilson, Charlie and Hadi Dowlatabadi. 2007. “Models of Decision Making and Residential Energy Use.” *Annual Review of Environment and Resources*. Volume 32:2.1–2.35.

## For Further Information Contact:

- Karen Ehrhardt-Martinez, PhD
- American Council for an Energy-Efficient Economy (ACEEE)
- Washington, DC
- o: (202) 507-4016
- email: kehrhardt@aceee.org
- or visit
- http://www.aceee.org