Abstract
It is an ongoing debate how to increase the adoption of energy-efficient light bulbs and household appliances in the presence of the so-called ‘energy efficiency gap’. One measure to support consumers’ decision-making towards the purchase of more efficient appliances is the display of energy-related information in the form of energy-efficiency labels on electric consumer products. Another measure is to educate consumers in order to increase their level of energy and investment literacy. Thus, two questions arise when it comes to the display of energy-related information on appliances: (1) What kind of information should be displayed to enable consumers to make rational and efficient choices? (2) What abilities and prior knowledge do consumers need to possess to be able to process this information? In this paper, using a series of (recursive) bivariate probit models and three samples of 583, 877 and 1375 households from three major Swiss urban areas, we show how displaying information on the future energy consumption of electrical appliances in monetary terms (CHF), rather than in physical units (kWh), increases the probability that an individual makes a calculation and identifies the appliance with the lowest lifetime cost. In addition, our econometric results suggest that individuals with a higher level of energy and, in particular, investment literacy are more likely to perform an optimization rather than relying on a decision-making heuristic. These individuals are also more likely to identify the most (cost-)efficient appliance.
Highlights
In 2014, the residential sector consumed nearly 30% of the total final energy consumption in Switzerland and about 58% of the energy end-use consumption of households was based on fossil fuels (BFE 2015)
In order to examine the role of information display, energy and investment literacy on the choice of electrical appliances of boundedly rational consumers, we have organized a household survey and conducted two online randomized controlled choice experiments
In order to examine the role of information display, energy and investment literacy on the choice of electrical appliances of consumers, we have organized a household survey and conducted two online randomized control experiments among Swiss households from three major Swiss urban areas
Summary
In 2014, the residential sector consumed nearly 30% of the total final energy consumption in Switzerland and about 58% of the energy end-use consumption of households was based on fossil fuels (BFE 2015). Improving the energy efficiency in the residential sector is one of the strategies to reduce total fossil energy consumption and related CO2-emissions in Switzerland. While a major effort needs to be done to enhance energy efficiency of buildings to reduce the consumption of heating fuels, there is a potential for enhanced energy efficiency in the electricity consumption of Swiss households. One important strategy to reduce electricity consumption of Swiss households is to foster the adoption of energy-efficient lighting and household appliances. We abstract away from subjective discounting and other market and behavioral failures to focus on those market and behavioral failures that are related to the provision and processing of energy-related information
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