Discussion Paper Series
2014-02
Do households misperceive the benefits of energy-saving
actions?
Evidence from a Japanese household survey
Kazuyuki Iwata, Hajime Katayama and Toshi H. Arimura
April 30, 2014

Discussion Papers can be downloaded:
http://www1.tcue.ac.jp/home1/c-gakkai/dp/dp14-02

Do households misperceive the benefits ofenergy-saving actions?
Evidence from a Japanese household survey

Kazuyuki Iwata 1, Takasaki City University of Economics
Hajime Katayama, Waseda University
Toshi H. Arimura, Waseda University

Abstract

Using a household survey conducted in a suburb of Tokyo, we examine whether
individuals properly perceive the benefits of energy-saving actions. A bivariate
regression shows that on average, individuals overestimate the benefits. The tendency
for overestimation is robust to controlling for individual characteristics as well as homecharacteristics. Our results are the opposite to those of Attari et al. (2011), in which
individuals in the U.S. were found to underestimate the benefits. This suggests that theprovision of information about the benefits of energy saving may be an effective policy
against global warming issues in one country but not necessarily in all countries.

1

Corresponding author. Address: Faculty of Regional Policy, Takasaki City Universityof Economics. Kaminamie-cho 1300, Takasaki, Gunma, 370-0801, Japan. Email:iwata.kazuyu@gmail.com
11. Introduction

To mitigate global warming and climate change problems, a number of governments
have introduced various policies such as subsidies for low-carbon products, carbon
taxes and emission trading systems. These policies are expected to help reducegreenhouse gas (GHG) emissions from the most important target, namely, the industrial
sector. However, households are also an important target, as they are responsible for
15-20% of the total energy requirements in OECD countries (OECD, 2001).
A sizable contribution to GHG emissions may be achieved by energy-saving actions
among households without significant economic sacrifices or losing a sense ofwell-being. Studies in the United States estimated that energy consumption could be
reduced 20-30 percent by changing the selection and use of household and motor
vehicle technologies (Dietz et al., 2009; Gardner and Stern, 2008). Although thismagnitude may not directly apply to households in other developed countries, it isreasonable to expect that the amount of reduction may be non-negligible, as lifestyles inother countries are more or less similar to those of households in the U.S.
The fact that the potential for reduction remains unfilled has motivated researchers
to examine the determinants of energy-saving actions and investments. Among recent
studies, Urban and Scasny (2012) found that individuals with higher environmental
concerns are more likely to perform energy-saving curtailments and investments.
Truelove and Parks (2012) and Sutterlin et al. (2011) argued that personal factors suchas knowledge, adherence to animism and beliefs about global warming issues play animportant role in shaping individuals’ energy-saving behaviors.
Another important determinant may be knowledge about the monetary benefits ofenergy-saving actions and investments. Put differently, individuals may not opt forenergy-saving actions and investments because they are unaware of how much theseactions and investments can save. In this regard, Attari et al. (2011) used data from an2online survey in the United States and found that individuals underestimate energy use
and savings on average. Yohanis (2012) provided evidence that 84 percent of thehouseholds surveyed in Northern Ireland have no idea about the energy performance of
their household appliances. Using survey data in the U.S., Allcott (2011) also revealed
that 89 percent of the households calculated fuel costs less carefully than usual when
they purchased vehicles.
This study aims to provide additional evidence on whether individuals properly
perceive the monetary benefits of energy-saving actions. Using data from a survey
conducted in Soka city, a suburb of Tokyo, we examine simple energy-saving actions
recommended by the Energy Conservation Center Japan (2010), such as “setting air
conditioner temperatures to 28 degrees Celsius in summer,” “setting air conditioner(gas/oil heater) temperatures to 20 degrees Celsius in winter,” and “turning off a gas/oil
heater when unnecessary.”
A bivariate regression shows that on average, individuals overestimate the benefitsof energy-saving actions. The tendency for overestimation is robust to controlling forindividual characteristics as well as home characteristics, and it is more pronounced
when the potential nonlinearity between actual and perceived benefits is accounted for.
These results are in sharp contrast to those of Attari et al. (2011), suggesting theexistence of country heterogeneity in how individuals misperceive the monetary
benefits of energy-saving actions.

2. Data
2.1 Survey Description

To examine the relationship between the actual and perceived benefits of energy-saving
actions, we conducted a household survey in Soka City, a suburb of Tokyo (25kilometers away from Tokyo). The population of the city is approximately 240 thousand,3

with a population density of 8.9 thousand persons per square kilometer. Although the
population is not large, the density is relatively high in comparison to the average inJapan, which is approximately 0.3 thousand persons per square kilometer.
The survey was implemented in the following procedure. From all households inSoka City, 1,200 households were randomly selected. Data collectors visited thehouseholds from January 7 to February 7, 2011 and provided a questionnaire to amember of each household with an explanation that they would receive a coupon book
worth 500 yen (about 5 US dollar) for participating in the survey. At a later date, thedata collectors revisited the households to collect the questionnaires. Most likely
because we used a door-to-door survey method, the response rate is high (59.5 percent),
corresponding to replies from 714 households. Because 464 of the respondents did not
answer all of the questions required for analysis, they were discarded from the sample.
As a result, our analysis is based on 250 respondents.
For this paper, we consider the 18 energy-saving actions presented in Table 1.
These actions are recommended by the Energy Conservation Center of Japan (2010) as“simple actions for energy savings.” The Center also provides information on actual
annual savings from each action, which we hereafter refer to as “actual benefit.” In thesurvey, the respondents are asked for each action how much energy (s)he thinks theaction saves per year. The answer will be hereafter referred to as his/her “perceived
benefit.”

2.2 Perceived and Actual Benefits

For respondent i and energy-saving action j, we have a pair of actual and perceived
benefits (abj, pbij), where abj is the actual benefit from action j and pbij is the benefit

4respondent i perceives for action j. 2 It should be mentioned that we did not ask the
respondent to report pb for action j if it is irrelevant to him/her. For example, if the
respondent does not have a plasma TV, (s)he was not asked to answer pb for “turning it
off when unnecessary.” As a result, the number of observations analyzed is 2,496,
representing approximately 10 actions per respondent.
To examine how the actual and perceived benefits are related, we plot (abj, pbij), i =1,…,250 and j = 1,…,18, in Figure 1, where the horizontal and vertical axes represent
actual and perceived benefits (measured in yen), respectively. In the figure, we alsopresent the fitted linear regression line, pb = 4473.3 + 0.437ab, obtained by regressing
pbij on abj. The 45-degree dashed line is also added to the figure. If respondent icorrectly recognizes the monetary benefits of action j (i.e., pbij = abj), then the point will
be exactly on the line.
As is evident from the figure, the respondents overestimate the monetary benefits ofthe energy-saving actions, on average. The intercept greater than zero (i.e., 4,473.7) andthe slope greater than zero and smaller than 1 (i.e., 0.437) imply that the extent ofoverestimation is more pronounced when the amount of actual savings is smaller for an
action. In addition, the regression line intersects with the 45-degree line at
approximately 8,500 yen per year. This indicates that respondents underestimate actions
that result in a large benefit, but no energy-saving action is listed in the Table 1.

3. Factors accounting for perceived benefits
3.1 Variable description

2

It is expected that actual benefits from energy-saving actions depend on households’
characteristics such as performance of a home electrical appliance and structure of ahouse. However, only one estimated actual benefit as benchmark is reported in the
Energy Conservation Center of Japan (2010). Therefore, in this paper, one actual benefit
is regarded to be irrelevant to households’ characteristics.
5

As illustrated in Figure 1, there is much variability around the regression line. To
examine what factors account for the variability of the perceived benefits among the
respondents, we extend the bivariate regression model by including individual as well ashome characteristics.
As individual characteristics, we consider age, gender (= 1 if the respondent ismale), education (= 1 if the respondent has a bachelor’s or higher degree), marital status(= 1 if the respondent is married), the number of family members in a household, as
well as comfortable temperatures measured in degrees Celsius in summer and winter.
Income is also considered as a potential factor, for which we construct a scale variable;
it takes a value of 1 if the income is under 2 million yen, 2 if it is between 2 and 3
million yen, 3 if between 3 and 4 million yen, 4 if between 4 and 5 million yen, 5 if
between 5 and 7 million yen, if between 7 and 10 million yen, 7 if between 10 and 15
million yen, and 8 if more than 15 million yen.
To examine whether environmental concerns are associated with perceived benefits,
we construct a dummy variable that takes a value of 1 if a respondent answers “veryhigh” to the question, “to what extent are you concerned with global warming issues?
(1: very high, 2: high, 3: low, 4: very low).”
We also construct a variable that captures how the respondent thinks of energy
expenses in relation to other expenses. The respondents were asked: “Suppose you wantto save money and cut your expenses from the following expense categories: energy,
food, water, transportation and communication, housing, health care, entertainment,
cultural-amusement and education. Please rank energy expenses as follows: 1 if you
would cut them first among other expenses, 2 if they are your number two priority, 3 ifyour number three priority, and the like.”
As for home characteristics, we include home age and size, as well as a dummy
variable that takes a value of 1 if the respondent owns his/her home. We also include adummy variable that takes a value of 1 if the respondent’s household uses an electric
6

water heating system. Similarly, we include a dummy variable for the use of a gas water
heating system. We further include how many pieces of electrical equipment are present
in the respondent’s household.

3.2 Estimation results

Column (1) in Table 3 presents the results obtained by ordinary least squares. The
coefficient on actual benefits is found to be positive and significant at the 1% level. The
size of the coefficient is 0.52, similar to that in the bivariate regression. We test the null
hypothesis that the coefficient is equal to 1. This hypothesis is rejected at the 1% level,
suggesting that on average, the respondents misperceive the monetary benefits ofenergy-saving actions.
Attari et al. (2011) argued that the relationship between actual and perceived
benefits may be non-linear rather than linear. To account for potential non-linearity, we
extend the model by including a quadratic term of actual benefits (i.e., ab2). The results
are presented in Column (2). The coefficients on actual benefits and the square of actual
benefits are both found to be significant at the 1% level. In terms of sign, the former isnegative and the latter positive, implying that the relationship between actual andperceived benefits is U-shaped.
Figure 2 illustrates how the actual and perceived benefits are related across themodels. The 45-degree dashed line represents no gap between actual and perceived
benefits. “Simple OLS” is the fitted line obtained by regressing the actual perceived
benefits on actual benefits only. “Model 1” and “Model 2” correspond to the fitted lines
for the models in Columns (1) and (2) of Table 3, respectively. These lines are drawn by
setting the variables (except actual benefits) to their sample means.
“Model 1” is very close to “simple OLS,” suggesting that the results presented in
the previous section are robust to controlling for individual as well as home7

characteristics. “Model 2” is always located above the 45-degree line. That is, when we
account for potential nonlinearity between the actual and perceived benefits, thetendency for overestimation becomes even more pronounced. Overall, these results
suggest that individuals, on average, overestimate the benefits of energy-saving actions.
With regard to the other variables, we found that age, gender, marital status, numberof family members in the household, comfortable temperature for summer, homeownership, and the relative importance of energy expenses when required to savemoney explain the variability of the respondents’ perceived benefits. In particular, theresults indicate that the extent of overestimation will be the largest for single young
males, whereas the benefits perceived by married older females are the smallest.

4. Concluding remarks

Based on a survey conducted in a suburb of Tokyo, this study examined whether
individuals properly perceive the monetary benefits of energy-saving actions. Our
results suggest a particular pattern with regard to individuals’ perceptions about thebenefits. That is, their estimates tend to be larger than the actual benefits, which is the
opposite of the pattern found by Attari et al. (2011) for individuals in the United States.
We also found that individual and home characteristics explain the perceived benefits tosome extent.
Our results have several policy implications. First, the provision of information
about the benefits of energy-saving actions may be an effective policy in one country
but not necessarily in another country. This is because individuals in one country may
underestimate the benefits of energy-saving actions, while those in another country may
not, as suggested by the contrast found between our results and those of Attari et al.
(2011). Second, the provision of information may be effective even in a country such as
Japan where individuals overestimate the benefits on average. Our results showed that8the respondents who are married and older females tend to underestimate the benefits
the most. Therefore, informing this group of the actual benefits of energy-saving actions
may help reduce their energy consumption.

Acknowledgements

This study was supported by the Japan Foundation Center for Global Partnership, theJapanese Ministry of the Environment and the Japan Society for the Promotion of
Science (Grant-in-Aid for Scientific Research (C: 24530267)).

References

Allcott, H. (2011). Consumers’ Perceptions and Misperceptions of Energy Costs.

American Economic Review, 101(3), 98-107.

Attari, S. Z., DeKay, M. L., Davidson, C. I., and de Bruin, W. B (2011). Public
perceptions of energy consumption and savings. Proceedings of National Academy of

Sciences of the United States of America (PNAS), 107(37), 16054-16059.

Dietz, T., Gardner, G. T., Gilligan, J., Stern, P. C. and Vandernbergh, M. P., (2009).
Household actions can provide a behavioral wedge to rapidly reduce US carbon
emissions. PNAS, 106(44), 18452-18456.

Gardner, G. and Stern, P. (2008). The short list: The most effective actions U.S.
households can take to curb climate change. Environment Magazine, 50, 12-24.

9

OECD (2001). Environmental Outlook. Organization for Economic Cooperation andDevelopment, Paris.

Sutterlin, B., Brunner, T. A. and Siegrist, M. (2011). Who puts the most energy into
energy conservation? A segmentation of energy consumers based on energy-related
behavioral characteristics. Energy Policy, 39(12), 8137-8152.

The Energy Conservation Center Japan (2010). Household Energy Saving Dictionary,Tokyo. (in Japanese)

Truelove, H. B. and Parks, C. (2012). Perceptions of behaviors that cause andmitigate global warming and intentions to perform these behaviors. Journalof Environmental Psychology, 32(3), 246-259.

Urban, J. and Scasny, M. (2012). Exploring domestic energy-saving: The role ofenvironmental concern and background variables. Energy Policy, 47,69-80.

Yohanis, Y. G. (2012). Domestic energy use and householders’ energy behaviour, Energy

Policy, 41, 654-665.

10

Tables and Figures

Table 1. Energy-saving actions

Equipment
1 Air conditioner
2 Air conditioner
3 Air conditioner
4 Air conditioner
5 Gas heater
6 Oil heater
7 Gas heater
8 Oil heater
9 Electric carpet
10 CRT TV
11 Plasma TV
12 Liquid crystal TV
13 Refrigerator
14 Refrigerator
15 Electric pot
16 Water heater
17 Water heater
18 Water heater

Energy-saving action
Set to 28 degrees in summer
Set to 20 degrees in winterTurn off when unnecessary
Clean filters
Set to 20 degrees in winterSet to 20 degrees in winterTurn off when unnecessary
Turn off when unnecessary
Frequent temperature control
Turn off when unnecessary
Turn off when unnecessary
Turn off when unnecessary
Temperature control
Fixed away from wall
Unplug when unnecessary
Set water temperature low
Refrain from reheating water
Turn shower off when unnecessary

11Table 2. Descriptive statistics
Variables
Perceived benefits (yen)Actual benefits (yen)Income (scale variable)
Age
Male
Education (Bachelor’s degree or higher)
Environmental concerns
Importance of energy expenses when saving
MarriedNumber of family members
Own house
House size
House age
Number of electrical equipment
Comfortable temperature in summer
Comfortable temperature in winterElectric water heating
Oil water heating

12

Mean
S.D.
Min Max
5,339.80 7,678.40
0 72,000
1,829.60 1,498.30 330 5,920
4.58
1.82
1
8
53.56
13.64 22
84
0.3
0.46
0
1
0.25
0.43
0
1
0.27
0.44
0
1
2.77
1.67
1
9
0.92
0.27
0
1
3.48
1.3
1
7
0.85
0.36
0
1
5.08
1.43
1
10
17.83
11.02
1
50
1.72
1.12
0
9
25.71
2.01 1830
23.49
2.5 15
30
0.16
0.37
0
1
0.04
0.2
0
1

Table 3: Estimation results
Variables
Actual benefits
Square of actual benefits
IncomeAge
Male
Education
Environmental concerns
Importance of energy expenses when saving
MarriedNumber of family members
Own house
House size
House age
Number of electrical equipment
Comfortable temperature in summer
Comfortable temperature in winterElectric water heating
Gas water heating
Constant
Adjusted R-squared
F value (P value)(1)
Coefficient.
0.52 (0.12)-9.7 (94.7)-54.9 (15.7)
1324.8 (408.3)
325.0 (407.5)
82.2 (369.4)
259.1 (115.8)-1639.5 (811.4)-477.1 (132.7)
1239.8 (486.5)-106.5 (148.6)
4.6 (17.1)
227.3 (167.6)-184.5 (74.3)
58.3 (59.2)
50.6 (473.0)-115.4 (783.6)
11737.7 (2813.2)
0.03
4.91***

***

***
***

**
**
***
**

**

***

(2)
Coefficient.
-1.13 (0.43)
0.0003 (0.00007)
3.3 (94.6)-52.6 (15.6)
1324.3 (406.9)
336.9 (405.6)
111.3 (367.4)
264.6 (115.4)-1641.6 (808.8)-463.4 (132.4)
1234.9 (486.1)-79.8 (148.3)
2.6 (17.0)
58.1 (174.6)-180.6 (74.3)
63.0 (59.1)
38.7 (472.2)-122.6 (778.0)
13031.3 (2826.7)
0.04
4.97***

***
***
***
***

**
**
***
**

**

***

Note: The number of observations is 2,496. ***, ** and * denote significance at the 1
percent, 5 percent and 10 percent levels, respectively. Robust standard errors are inparentheses. Though included in both models (i.e., Column (1) and Column (2)), theinteraction term of “Comfortable temperature in summer (winter)” and a dummy
variable for the action regarding air conditioners is found to be insignificant and hence
not reported here.

1310000
6000
4000

misunderstanding

0

2000

Perceived Benefit

8000

y = 0.4734x + 4473.7

0

2000

6000

4000

8000

10000

Actual Benefit

Figure 1. Actual (X-axis) and perceived (Y-axis) benefits
Note: the observations which values are more than 10,000 are omitted in the figure inorder to easily view the relationship.

14

10000Model 2

4000

6000

Model 1

misunderstanding

0

2000

Perceived Benefit

8000

simple OLS

0

2000

4000

6000

8000

Actual Benefit

Figure 2. Relationship between the actual and perceived benefits across models

15

10000

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