Behavior, Energy, and Climate Change:
An Emerging Field of Action-OrientedScholarship
Dr. Margaret Taylor
Stanford University
Precourt Energy Efficiency Center
BECC Japan
September 16, 2014

Today’s Talk
• Linking Action to Scholarship, in Energy• Selected Insights and New Research Avenues• Extensions to Climate Change• BECC: an Emerging Field of Action-Oriented ScholarshipLinking Action to Scholarship,in Energy

Action Orientation: The Energy Efficiency Gap• EE Gap exists if consumers and businesses use more energy than is
optimal in their own self interest– Another way to look at it: “negative abatement technologies” are notuniversally adopted, let alone used
– This matters for the three policy goals of: Economy, Environment, Security•••

Questions re: the Japanese Context:
What is the technical potential to reduceenergy use in a way that appropriatelybalances economy, environment, security?
How far is Japan from that potential, and inwhich sectors?
How costly might it be to reduce energy use?

Behavior and the EE Gap
Explanation?

Description

Imperfect
information

Potential adopters may be unaware of the energy attributes of goods &services

Splitincentives

Potential adopters may not be able to appropriate the benefits of EE
investments directly

Boundedrationality

Potential adopters may have constraints (e.g., time, attention, competing
priorities, etc.) that limit their ability to optimize economic self-interest
when making EE investments; instead, they “satisfice”

Hidden costs

Potential adopters may be aware (or perceive) of additional costs to EE
investments (e.g., disruptions to business as usual, increased search costs,etc.), that analysts don’t understand

Risk

Potential adopters may find (or perceive) EE investments to be risky

Access tocapital

Potential adopters may find (or expect) EE investments to require highupfront costs for which they may have insufficient internal funds and/ordifficulty raising external funds

Others?

The producers and intermediaries that bring energy-using goods andservices to market may deter optimal EE take-up
Inspired by Sorrell et al 2004

Specific Kinds of Behavior

Finance

Fuel
Technology

Electric Power
SectorPower
Generation

Transmission& Distribution

EndEndUseUseSystem
Integration

Inspired by Taylor and Schmidt (2013)

Specific Kinds of Behavior

Finance

FuelTechnology

Electric Power
SectorPower
Generation

Transmission& Distribution

End
EndUseUse

SystemIntegration

Inspired by Taylor and Schmidt (2013)

Specific Kinds of Behavior

Finance

FuelTechnology

Electric Power
SectorPower
Generation

Transmission& Distribution

End
EndUseUse

SystemIntegration

Inspired by Taylor and Schmidt (2013)

Specific Kinds of Behavior

Finance

Fuel
Technology

Electric Power
SectorPower
Generation

SystemIntegration

Transmission& Distribution

Consumers ofGoods andServices
that UseEnd UseEnergyPurchase
Use
CreateTell friends…

Inspired by Taylor and Schmidt (2013)

Specific Kinds of Behavior

Finance

FuelTechnology

PowerGenerationSystem
Integration

Intermediaries

Electric Power
SectorFinance

Transmission& Distribution

Finance

Consumers ofGoods andServices
that UseEnd UseEnergyConstruction

Architects

Distribution
Channels

Mnfrs

Producers of Goods andServices that Use Energy

Intermediaries

Research
DesignManufacture
Set Prices
MarketInvest…

Inspired by Taylor and Schmidt (2013)

Problem-Solving focus on Behavior
Regarding goods and services that use energy, actors are:– Consumers– Producers– Intermediaries

The link to scholarship
Sources of:– Theory development that guides research and practice– Empirical observation, built on research design– Perspectives on practical application (i.e. problem-solving)Problem-Solving focus on Behavior
Regarding goods and services that use energy, actors are:– Consumers– Producers– Intermediaries

The link to scholarship
Sources of:– Theory development that guides research and practice– Empirical observation, built on research design– Perspectives on practical application (i.e. problem-solving)Linking Action to Scholarship
Psychology

Organizational Behavior

Economics

Anthropology

PoliticalScience

Unit of Analysis

Role re: Energy-using Goods and Services
Producer

Consumer

Individuals

1
Ex: Entrepreneurs

2
Ex: Homeowners

Groups/Organizations

3
Ex: Manufacturers

4
Ex: Gov’t procurement

Associated Intermediaries

Sociology
Interdisciplinary ResearchSocial Psychology
Cognitive Neuroscience
Public HealthMarketing
Bridging to the Humanities as well!

Selected Insights and New
Research Avenues
Box 1: Individual Actors, Producers
Ex: EntrepreneursBehavior and the EE Gap
Explanation?

Description

Imperfect
information

Potential adopters may be unaware of the energy attributes of goods &services

Splitincentives

Potential adopters may not be able to appropriate the benefits of EE
investments directly

Boundedrationality

Potential adopters may have constraints (e.g., time, attention, competingpriorities, etc.) that limit their ability to optimize economic self-interest
when making EE investments; instead, they “satisfice”

Hidden costs

Potential adopters may be aware (or perceive) of additional costs to EE
investments (e.g., disruptions to business as usual, increased search costs,etc.), that analysts don’t understand

Risk

Potential adopters may find (or perceive) EE investments to be riskyAccess tocapital

Potential adopters may find (or expect) EE investments to require highupfront costs for which they may have insufficient internal funds and/ordifficulty raising external funds

Others?

The producers and intermediaries that bring energy-using goods andservices to market may deter optimal EE take-up
Inspired by Sorrell et al 2004

Entrepreneurs
Questions to ask when designing EE programs:• Who are the EE entrepreneurs? Why do they engage in entrepreneurship?
• How do we support more of them?

• Economically irrational entry and persistence in entrepreneurship,in general, with inconclusive evidence for competing explanations– Heightened comfort with risk?
– Over-confidence bias?
– Non-pecuniary benefits? Perhaps most promising• Most research on values associated with self-employment• Little research in entrepreneurship in EE, but potentially important– More than 90% of the benefits of breakthrough innovation go tosociety as a whole rather than to entrepreneurs– Perhaps “making the world a better place” is a relevant nonpecuniary incentive to study and influence?
• Such claims are so pervasive in Silicon Valley, it’s a source of humor!
Draws from Astebro, Herz, Nanda, and Weber(2014) in the Journal of Economic Perspectives

Selected Insights and New
Research Avenues
Box 2: Individual Actors, Consumers
Ex: Homeowners

Behavior and the EE Gap
Explanation?

Description

Imperfect
information

Potential adopters may be unaware of the energy attributes of goods &services

Split
incentives

Potential adopters may not be able to appropriate the benefits of EE
investments directly

Boundedrationality

Potential adopters may have constraints (e.g., time, attention, competing
priorities, etc.) that limit their ability to optimize economic self-interest
when making EE investments; instead, they “satisfice”

Hidden costs

Potential adopters may be aware (or perceive) of additional costs to EE
investments (e.g., disruptions to business as usual, increased search costs,etc.), that analysts don’t understand

Risk

Potential adopters may find (or perceive) EE investments to be risky

Access tocapital

Potential adopters may find (or expect) EE investments to require highupfront costs for which they may have insufficient internal funds and/ordifficulty raising external funds

Others?

The producers and intermediaries that bring energy-using goods andservices to market may deter optimal EE take-up
Inspired by Sorrell et al 2004

Homeowners 1: Imperfect Information
Questions to ask when thinking about EE information and people:• Does EE information exist? What type?
• How comprehensible is it? To whom? Why?

• Information-based interventions show average electricity reduction of 7.4%
in meta-analysis– Individualized audits & consulting more effective than historical, peercomparison feedback• Peer comparisons can have impact, but persistence is an issue– Pecuniary feedback & incentives led to relative increase in energy usage– Conservation effect diminished with the rigor of the study• Engineering design can breed confusion– For example, for graduate student families at UCLA, refrigerator energy usage
increased for families who used both less and more energy overall• Homeowners more/less “sophisticated” in absorbing information– Consider market segmentation
This slide and next draw from: Gillingham et al. (2012); Chai working
paper, ISS (2014); Moreau et al. (2001); Delmas et al. (2013); Davis(2009); Delmas, Fischlein, Asensio 2013; Alcott and Rogers forthcomingHomeowners 2: Split Incentives
Questions to ask when designing a program:• Who pays for the energy-using goods and services?
• Who pays for the energy?

In the U.S., when homeowners pay for heat,
it affects the:• Frequency of changing the heating
setting on thermostats;• Level of the settings for heating andcooling;• Likelihood of better insulation
In the U.S., real estate developers andlandlords buy appliances for many units• Landlords who don’t pay electricity bills
less likely to purchase appliances with
“top performer” labels
This slide and previous draw from: Gillingham et al (2012); Chai working
paper, ISS (2014); Moreau et al. (2001); Delmas et al. (2013); Davis(2009); Delmas, Fischlein, Asensio 2013; Alcott and Rogers forthcomingSelected Insights and New
Research Avenues
Box 3: Group Actors, Producers
Ex: Manufacturers

Behavior and the EE Gap
Explanation?

Description

Imperfect
information

Potential adopters may be unaware of the energy attributes of goods &services

Split
incentivesPotential adopters may not be able to appropriate the benefits of EE
investments directly

Boundedrationality

Potential adopters may have constraints (e.g., time, attention, competing
priorities, etc.) that limit their ability to optimize economic self-interest
when making EE investments; instead, they “satisfice”

Hidden costs

Potential adopters may be aware (or perceive) of additional costs to EE
investments (e.g., disruptions to business as usual, increased search costs,etc.), that analysts don’t understand

Risk

Potential adopters may find (or perceive) EE investments to be risky

Access tocapital

Potential adopters may find (or expect) EE investments to require highupfront costs for which they may have insufficient internal funds and/ordifficulty raising external funds

Others?

The producers and intermediaries that bring energy-using goods andservices to market may deter optimal EE take-up
Inspired by Sorrell et al 2004

Manufacturers
Questions to ask when designing EE programs:• How will manufacturers behave if government:‒ Labels the best energy performers in a product category?
‒ Requires a minimum level of energy performance of products in a category?
• Will consumers pay more? Will they lose features they value?

• Such questions are politically very important• They can be resolved through a better understanding of thecompetitive environment within the product category• For example: market concentration is an important feature of manyenergy-using product markets (e.g., appliances)– Economic theory regarding price discrimination makes strong, relevant
predictions– Empirical results appear to be consistent with theory• In case of minimum performance standards, prices drop and valuable featuresappear to increase just after a standard is implemented!

This slide draws from: Fischer (2005), Houde (2012), Spurlock (2013)

Selected Insights and New
Research Avenues
Box 4: Group Actors, Consumers
Ex: Government procurement

Behavior and the EE Gap
Explanation?

Description

Imperfect
information

Potential adopters may be unaware of the energy attributes of goods &services

Split
incentives

Potential adopters may not be able to appropriate the benefits of EE
investments directly

Boundedrationality

Potential adopters may have constraints (e.g., time, attention, competingpriorities, etc.) that limit their ability to optimize economic self-interest
when making EE investments; instead, they “satisfice”

Hidden costs

Potential adopters may be aware (or perceive) of additional costs to EE
investments (e.g., disruptions to business as usual, increased search costs,etc.), that analysts don’t understand

Risk

Potential adopters may find (or perceive) EE investments to be risky

Access tocapital

Potential adopters may find (or expect) EE investments to require highupfront costs for which they may have insufficient internal funds and/ordifficulty raising external funds

Others?

The producers and intermediaries that bring energy-using goods andservices to market may deter optimal EE take-up
Inspired by Sorrell et al 2004

Government Procurement
Questions to ask when designing an EE program:• Who buys what in a large organization?
• How do buyers make purchasing decisions?
‒ Role of institutions, norms, informal rules…

• Great potential energy savings if can harness this buying power– The U.S. federal government is responsible for ~ 2.2% of U.S. energy
consumption• Important to consider the buyer decision-making context as
well as the energy-saving potential of relevant products– In assessing a major U.S. energy procurement program, found that theprogram’s communications were targeting actors who did not buy theproducts responsible for 42-58% of the potential energy savings

This slide and next 2 draw from: Taylor and Fujita (2012)a and (2012)b

Many, diffusebuyers withminimaltraining

Purchase Card
Verbal/Elec.
Order (BPA)

Half theprogram’s
productspurchased by
end-users!
Technical Dept.
•Legal, EH&S

Products•Includes e-retailServices•Includes A&E,ESCOs, Super ESPC

Purchase Card
Purchase Order
Supply & Service
Contract
Construction
Contract
Agreements- Local authorized buyer- Local specifier

Budget Official

EndUser

Vendor

Procurement
Official* Sometimes another agency is a vendor

Procurement Pathways

Manufacturer

Few buyers, high training,
often share military
background, subject tothousands of (sometimesconflicting) rules, laws,orders, etc.

This slide, previous slide, next slide draw from: Taylor and Fujita (2012)a and (2012)bInsights from Interviews with
Sophisticated Buyers• Bounded rationality an important factor– Many competing demands on these buyers– Hidden costs are relevant• Imperfect information about policies– Some not familiar with the energy-saving procurement program– Some didn’t understand the top-performer energy labelingprogram• Resolving split incentives regarding the organizational
rewards of energy savings would help with internal
negotiations on major energy-saving investments– Would provide an upside to some risk calculations– Would make it more likely to free up internal capitalInter-Agency Cooperation Problematic• Government e-retail intermediary could act as a control:– In the short-term, by blocking the actions of both unsophisticated andsophisticated buyers– In the long-term, by providing refined, comprehensive data for program
evaluation• In both areas, it fell short. Political economy matters…
Screenshot of Ineffective Control on a Non-Compliant PurchaseExtensions to Climate Change

Action Orientation: Climate Change• Whose Behavior:– Producers, consumers, and intermediaries in the relevant value chainsoriented around things such as:• Mitigation–––––

Non-CO2 gases
CementTransportation
Industry
Food• Adaptation––––

Flood control
Water supply and quality
Infectious disease
Food• What unit of analysis provides the most helpful insights?
– Individuals or groups?
– Production side or consumption orientation?

• What disciplines have relevant theories, empirical approaches, insights
into applied (problem-solving) context?

BECC as an Emerging Field ofAction-Oriented Scholarship

BECC as a Field of Study Not yet mature and established re: whatshould be studied and how

 “Scholarship”:
 High quality engagement with a field “Action-orientation”:
 Focus is on problem-solving (through socialscience insights)

2012

2011

2010

Academics + Practitioners
in Attendance2009

 “Emerging”:

800
600
40020002008

 A branch of knowledge, to be built uponthrough research contributions and teaching Defined, organized, and recognized throughinstitutions and structured discourse Contains sub-fields

8th U.S. BECC Conference

2007

 “Field of study”:

1st BECC Japan
3rd European
BEHAVE Conference
Maybe: BECC Brazil?
BECC Singapore?

Discussion