Energy efficiency and electricity expenditure: An analysis of risk and time preferences on light bulb use in Ghana

Abstract

Despite the numerous benefits of using energy efficient technologies (EETs), their adoption has been low and quite lethargic, particularly in countries within the sub-Saharan Africa (SSA) region. Behavioral factors are among the list of factors that have been identified to explain the slow adoption of EETs, particularly in SSA countries. Using Ghana as a case study and taking advantage of the most recent nationwide representative household dataset (the seventh round of the Ghana Living Standards Survey), this study sought to examine the role of behavioral factors in promoting energy efficiency in Ghana. We achieve this objective by first examining the time and risk preference effect on the adoption of energy efficient light bulbs among Ghanaian households. Second, we examine the impact of choosing energy efficient light bulbs exclusively on household electricity expenditure. Probit and endogenous treatment regression models are estimated to achieve our objectives. The following results were uncovered: First, the survey data shows that while there is an equal distribution with regards to time preference, 82% of individuals are risk averse. Second, our results show that behavioral traits (risk and time preferences) can lead to energy efficiency and resource conservation. Third, socioeconomic factors such as poverty levels and to a limited extent education also play a significant role in the adoption of energy efficient light bulbs in Ghana. Fourth, the adoption of energy efficient light bulbs significantly reduces household electricity expenditure. It is recommended that behavioral traits of households are factored into energy efficiency policies in Ghana.