Elective sufficiency and individual behavioral changes: insights from economics
Abstract
Sufficiency can be defined as a reduction in energy demand that is not a result of energy efficiency gains. It may result from individual choices, collective norms, or public organizational principles. Whatever the chosen lever, sufficiency is rarely spontaneous. Instead, it results from varying degrees of public encouragement (awareness campaigns and nudges as well as traditional policy tools such as taxes, subsidies and regulations). From the theoretical standpoint, elective (rather than imposed) sufficiency requires a change in people’s true preferences, or the correction of behavioral bias that helps distort choices. Economics makes it possible to improve understanding of the origins of elective sufficiency, drawing on preference-based analysis which must not ignore the collective, social, organizational and institutional mechanisms that help to shape individual behaviors.
Outline
Top of pageAuthor’s notes
This article is largely based on the Pisani-Ferry-Mahfouz commission’s special report on sufficiency published in May 2023 and coordinated by Aude Pommeret with contributions from Miquel Oliu-Barton, Alice Robinet, Katheline Schubert (PSE) and Mathilde Viennot. It forms part of the mission to assess the macro-economic impacts of climate transition entrusted to Jean Pisany-Ferry by the prime minister on September 12, 2022. Twelve special reports were published separately and are available via the France Stratégie website.
Full text
Introduction
- 3 “No air conditioning below 26°C”: a law that Agnès Pannier-Runacher wants to “at last apply” in off (...)
1In June 2023, the French government launched the second phase of the energy sufficiency plan rolled out in the winter of 2022. Faced with the threat of a lingering energy crisis and the need to cut CO2 emissions, energy transition minister Agnès Pannier-Runacher declared in an interview with the Parisien newspaper that “sufficiency is year-round, including the summer.”3 During his visit to the Paris Air Show on June 19, 2023, President Emmanuel Macron said that: “Correctly organized sufficiency, which I call non-punitive, understood by everybody, shared by everybody, reasonable, where everybody plays their part, that avoids what is of no use and makes it possible to cut emissions, is a good thing.” In early 2024, the energy sufficiency plan was still in force, mostly in the form of 15 recommendations and high-profile measures designed to accelerate sufficiency in various sectors and organizations (mobility, buildings, businesses, local authorities, etc.).
2Sufficiency is thus emerging in the public sphere at the interface of these various exhortations, insisting both on the importance of people’s “voluntary” and “spontaneous” engagement and the role of public policymaking. In this context, understanding the origins of sufficiency requires a more in-depth examination of the factors surrounding its emergence: basically, is sufficiency primarily imposed or elective?
- 4 For the period from August 1, 2022 to March 12, 2023 compared to the same winter period in 2018-201 (...)
- 5 Calculated for Q4 2022 compared to historical averages; see RTE (2023) Bilan électrique 2022: un sy (...)
- 6 See IPSOS-RTE (2023), Etude sur les mécanismes de décision des Français en matière de consommation (...)
- 7 RTE's 2023 annual eletricity review.
- 8 Dashboard for monitoring gas consumption in France.
3Energy use data gathered during winter 2022-2023 provides some preliminary answers. This period saw a 13% fall in non-climate-related gas consumption4 (GRTgaz, 2023), and a 9% fall across the electricity network5 (RTE, 2023). How to explain this reduction? The May 2023 survey by IPSOS-RTE polled over 11,000 people and showed that the effect of price rises (real or anticipated) was largely responsible for reductions in energy use during winter 2022-2023, and that this therefore corresponded to imposed sufficiency.6 However, RTE’s Perspectives pour l’hiver 2024 [Outlook for Winter 2024] shows that until November 2023 (date of the most recently published observations), climate-adjusted electricity consumption remained markedly below the historical average7 despite prices returning to more usual levels. GRTgaz made similar observations.8 Although these figures are too recent for objective analysis, they suggest that imposed sufficiency can transform itself into elective sufficiency, with agents initially altering their behavior because of price-related constraints then continuing to use less energy once the price constraint no longer applies.
4How can we account for this shift in behavior? Economic theory, which we will draw on here, provides a powerful analytical framework for better understanding the origins of elective sufficiency, its theoretical underpinnings as well as the practical conditions for putting it into practice, by identifying the role of public incentives. However, although the mechanisms to explain how elective sufficiency can emerge do exist, they cannot be used to predict the extent of the expected effects. Elective sufficiency cannot solve the problem but it can be part of a solution, thereby reducing the need for restrictive policies.
Individual sufficiency: definition and scope
5Sufficiency can, indirectly, be defined as a reduction in energy demand that is not a consequence of improved energy efficiency, which corresponds to a reduction in energy consumption that leaves the service provided unaltered. In contrast, traveling by bike can replace traveling by car, but the service provided is not the same, if only in terms of health or time: this is clearly an example of sufficiency.
6This reduction in demand for energy can equally result from individual choices, such as turning down heating in the home, collective norms, such as flying less frequently, and/or public organizational principles, such as better urban planning and public transport. Sufficiency offers significant potential for cutting emissions by 2050: 30% of emissions generated by end users worldwide compared to the underlying trend according to the IPCC, and 15% of final energy use in France compared to today according to négaWatt.
Potential reduction in worldwide emissions caused by end user demand by 2050 according to the IPCC
Explanation: the potential reduction in worldwide greenhouse gas emissions by 2050 as a result of sufficiency is 15% in the food industry.
NB: the preponderance of food in total emissions results from the integration of AFOLU (Agriculture, Forestry, and Other Land Use).
Source: France Stratégie, report on sufficiency, based on the IPCC (2022), Climate Change 2022: Mitigation of Climate Change, Chapter 5: Demand, services and social aspects of mitigation, figure 5.7, page 530 and Supplementary Material II, table 5.SM.2, page 42.
- 9 See Table 1 in the special report on sufficiency by the Pisani-Ferry-Mahfouz commission.
7Sufficiency could be of particular importance in sectors such as food and aviation. For each of these sectors, this lever would represent close to 90 and 75% of the median demand-led decarbonization effort9 via adoption of the following behaviors: reduction in wastage and transition to a healthier and less carbon-intensive diet on the one hand, and the abandonment of long-haul flights and a modal shift to rail on the other hand.
- 10 In microeconomics, the theory of ordinal utility analyzes decisions made by individuals as resultin (...)
8Given this, we will focus here on examining elective sufficiency on the part of individuals. In other words, from the economic perspective, looking at the sufficiency that results from changes in behaviors without any imposed constraints, meaning that people cut their energy use even though their range of possibilities is unrestricted.10 For a long time, this complex question was ignored under the pretext of the permanence of personal preferences on the one hand, and the absence of behavioral bias on the other. These misguided positions obstruct the adoption of suitable public policies. Understanding the reasons that can lead individuals to alter their preferences or make mistakes is vital to implementing appropriate policies and quantifying their cost. The assumption that preferences are immutable equates to over-estimating the cost of transition. On the other hand, assuming that preferences can change instantly and at no cost amounts to under-estimating the cost.
9From the point of view of the economic theory of individual decision-making, elective sufficiency can therefore be analyzed in two ways:
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first, it can come from changes in true preferences (such as wanting to eat less red meat, lower the heating in the home, or live in the countryside) that can lead to incorporating climate concerns into individuals’ utility function;
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- 11 See below.
but it can also come from correcting behavioral bias. Agents’ demands do not always result directly from their true preferences: demand can also include behavioral bias that, for example, pushes people to consume excessively (poor information about wastage or the existence of co-benefits).11 This being the case, acting on these biases may reinforce elective sufficiency.
A first approach: changing true preferences
10Here we highlight various factors liable to provoke a change in preferences.
- 12 Rivers N. and Schaufele B. (2015), Salience of carbon taxes in the gasoline market, Journal of Envi (...)
11In this context, if education, information and communication policies were to endogenously steer agents’ preferences (all other things being equal, price in particular) toward less carbon-intensive consumption, then the cost of climate policies would be lower than forecast. Examples show that certain policies are capable of changing people’s behaviors to a greater extent than initially envisaged. In British Columbia, Canada, for instance, a study12 revealed that a carbon tax led to a far larger short-term fall in demand for gasoline than would have been expected from an equivalent rise in the price of gasoline.
- 13 Creutzig F. et al. (2022), Demand-side solutions to climate change mitigation consistent with high (...)
12The existence of co-benefits. Co-benefits, or positive externalities, are additional positive effects on wellbeing that were not initially taken into account in the model or forecast. For example, increasing the density of towns and cities not only cuts energy use, it also improves health by increasing people’s active mobility.13 The existence of co-benefits means that individuals’ have an increased preference for cutting their energy consumption, because it also helps improve their health.
- 14 Larcom S., Rauch F. and Willems T. (2017), The benefits of forced experimentation, The Quarterly Jo (...)
- 15 Houde S. (2018), How consumers respond to product certification and the value of energy information (...)
- 16 Aydin E., Brounen D. and Kok N. (2018), Information provision and energy consumption: Evidence from (...)
- 17 Allcott H. and Knittel C. (2019), Are consumers poorly informed about fuel economy? Evidence from t (...)
13Second lever, disseminating information. This point assumes the existence of a dysfunction in the market (inadequate information) that results in a sub-optimal situation (such as overconsumption) that would, therefore, be corrected. A study14 shows that a strike on the London underground network, forcing many users to experiment with new routes, resulted in lasting changes in behaviors as well as improving the network’s efficiency. The authors claim this proves users were not using their optimal route, as search costs alone are not enough to explain their behavior. There is, however, no consensus in the empirical literature concerning the effect that information has on energy consumption. It appears that labels can have a mixed effect on consumer choices (such as refrigerators15). To give another example, an experiment16 demonstrated that information campaigns resulted in a 20% cut in energy use in the home; campaigns surrounding transport had no observable impact on the energy efficiency of vehicles purchased.17
- 18 Grinblatt M., Keloharju M. and Ikäheimo S. (2008), Social influence and consumption: Evidence from (...)
- 19 Bollinger B., Burckhardt J. and Gillingham K. (2020), Peer effects in residential water conservatio (...)
- 20 Bollinger et al. (2020), op. cit.
- 21 Coulangeon P., Demoli Y., Ginsburger M. and Petev I. (2023), La Conversion écologique des Français (...)
14Third component: the impact of lobbying and peer behavior. Several studies stress the impact of peer behavior (peer effect) on individual choices (buying a car,18 installing solar panels19 or using water more sparingly20). Awareness-raising campaigns are capable of gradually altering how people behave, for example, by changing how they compare themselves to other social strata (by associating symbolic markers of material and social success with less carbon-emitting behaviors and goods). Supply-side sufficiency policies (changes in the supply of goods, services, their allocation or form of delivery) also have effects on individual preferences, notably over the long term, by modifying markers of social success in favor of more frugal lifestyles.21
A second approach: correcting behavioral bias, primarily via nudges
15Thinking about behavior-based approaches assumes that demand does not reflect agents’ preferences when in the presence of a behavioral bias. If this bias causes excessive energy consumption, reducing it may lead to sufficiency (and also increase wellbeing, itself defined as a function of preferences). Among the behavioral biases that are modelled by economics is one referred to as internality. This indicates that consumers systematically misperceive the benefits of a marginal unit of consumption. These errors can correspond, for instance, to possible co-benefits that consumers are unaware of, or more generally reflect the fact that they are poorly informed about the product or the consequences of its consumption (e.g. wastage).
- 22 Thaler, R. H., & Sunstein, C. R. (2008). Nudge Improving Decisions about Health, Wealth, and Happin (...)
16According to Thaler and Sunstein (2008)22, nudge-based behavioral strategies aim to “alter[s] people's behavior in a predictable way without forbidding any option or significantly changing economic incentives.” For an intervention to be considered a nudge it has, therefore, to be inexpensive and easy to avoid.
- 23 See section 3 for endogenous behavioral changes, possibly triggered by traditional environmental po (...)
- 24 Benartzi, S., Beshears, J., Milkman, K. L., Sunstein, C. R., Thaler, R. H., Shankar, M., Tucker-Ray (...)
- 25 Benartzi et al. (2017), op. cit.
17Nudges and the dissemination of information can correct behavioral bias (internalities) without imposing material costs, but by modifying the underlying choice architecture, for example, by altering the default option to leverage people’s tendency to passively accept default values. Furthermore, they contrast to traditional policymaking tools23 in the sense that they are seen as replacing rather than complementing, for example, a carbon tax policy. Many nudges take more or less the following format: they consist of making the advantages of changing behavior more accessible by simplifying the decision-making process,24 for example, with the use of labels. The impact-to-cost ratios of nudge-type interventions and traditional policymaking tools (tax incentives and other financial inducements) show that nudges are often more cost-effective than traditional interventions.25
Conclusion
18No matter the perspective examined, sufficiency, even if elective, cannot come about spontaneously. At the very least, provoking changes in preferences requires creating the conditions needed for elective sufficiency by developing the infrastructures required for choices to be enacted (for example, by providing additional cycle routes, internet connections to make home-working possible, and recharging stations for electric vehicles). Reducing behavioral bias is another interesting lever, particularly via information on the co-benefits of energy sufficiency. Red meat is a particularly eye-catching example. Information about the negative health consequences of eating excessive amounts of red meat can guide rather than impose choices and lead people to reduce their intake. However, green nudges can also lead to a form of gentle manipulation that can be ethically questionable, with the possible repercussion of reducing the acceptability of environmental policies.
- 26 Sen A. (1985), Commodities and Capabilities, Amsterdam, North-Holland.
- 27 See Sen (1985), op. cit., or Sen A. (2001), Development as Freedom, Oxford University Press.
19Beyond questions of implementation, an examination of how to alter preferences also raises dilemmas in terms of evaluating public policies: if individual preferences are modified, what is the benchmark to use when assessing the efficiency of policies? A first approach is to start from people’s fundamental preferences, almost in the anthropological meaning of the term, in order to satisfy them. A second approach, highlighted by Amartya Sen,26 is to think in terms of people’s “capabilities”, which are defined as their aptitude or freedom to access “functionings”. The challenge lies in maximizing people’s capabilities. Assessing wellbeing then becomes a matter of measuring the capabilities that make it possible to determine all possible combinations of functionings an individual can achieve in terms of mobility, health, etc.27 However, in practice the use of capabilities for evaluating public policies remains limited owing to the difficulty in establishing uniform indicators for them. Nonetheless, such an approach does provide useful pointers for understanding and ultimately improving the efficiency of public policies designed to foster sufficiency.
Notes
3 “No air conditioning below 26°C”: a law that Agnès Pannier-Runacher wants to “at last apply” in offices, Le Parisien, June 19, 2023.
4 For the period from August 1, 2022 to March 12, 2023 compared to the same winter period in 2018-2019; see GRTgaz (2023), Dashboard for monitoring gas consumption in France winter 2022-2023.
5 Calculated for Q4 2022 compared to historical averages; see RTE (2023) Bilan électrique 2022: un système électrique français résilient face à la crise énergétique [Electricity Report 2022: resilience of France’s electricity system in the face of the crisis], summary.
6 See IPSOS-RTE (2023), Etude sur les mécanismes de décision des Français en matière de consommation d’énergie [Study of French People’s Decision-Making Mechanisms for Energy Use], p.150.
7 RTE's 2023 annual eletricity review.
8 Dashboard for monitoring gas consumption in France.
9 See Table 1 in the special report on sufficiency by the Pisani-Ferry-Mahfouz commission.
10 In microeconomics, the theory of ordinal utility analyzes decisions made by individuals as resulting from the maximization of utility. Choices are classified by order of preference according to the utility they procure.
11 See below.
12 Rivers N. and Schaufele B. (2015), Salience of carbon taxes in the gasoline market, Journal of Environmental Economics and Management, vol. 74, p. 23-36.
13 Creutzig F. et al. (2022), Demand-side solutions to climate change mitigation consistent with high levels of well-being, Nature Climate Change, vol. 12, p. 36-46, January.
14 Larcom S., Rauch F. and Willems T. (2017), The benefits of forced experimentation, The Quarterly Journal of Economics, vol. 132, no. 4, p. 2019-2055, November.
15 Houde S. (2018), How consumers respond to product certification and the value of energy information, The RAND Journal of Economics, vol. 49(2), p. 453-477.
16 Aydin E., Brounen D. and Kok N. (2018), Information provision and energy consumption: Evidence from a field experiment, Energy Economics, vol. 71, vol. 403-410.
17 Allcott H. and Knittel C. (2019), Are consumers poorly informed about fuel economy? Evidence from two experiments, American Economic Journal: Economic Policy, vol. 11(1), p. 1-37.
18 Grinblatt M., Keloharju M. and Ikäheimo S. (2008), Social influence and consumption: Evidence from the automobile purchases of neighbors, The Review of Economics and Statistics, vol. 90(4), p. 735-753.
19 Bollinger B., Burckhardt J. and Gillingham K. (2020), Peer effects in residential water conservation: Evidence from migration, American Economic Journal: Economic Policy, vol. 12(3), p. 107-133; Gillingham K. and Bollinger B. (2021), Social learning and solar photovoltaic adoption, Management Science, vol. 67(11), p. 7091-7112; Baranzini A., Carattini S., and Peclat M. (2017), What drives social contagion in the adoption of solar photovoltaic technology, GRI Working Papers, no. 270, Grantham Research Institute on Climate Change and the Environment.
20 Bollinger et al. (2020), op. cit.
21 Coulangeon P., Demoli Y., Ginsburger M. and Petev I. (2023), La Conversion écologique des Français – Contradictions et clivages, [The ecological conversion of the French - Contradictions and divisions], PUF.
22 Thaler, R. H., & Sunstein, C. R. (2008). Nudge Improving Decisions about Health, Wealth, and Happiness. New Haven, CT, Yale University Press.
23 See section 3 for endogenous behavioral changes, possibly triggered by traditional environmental policies.
24 Benartzi, S., Beshears, J., Milkman, K. L., Sunstein, C. R., Thaler, R. H., Shankar, M., Tucker-Ray, W., Congdon, W. J., & Galing, S. (2017). Should Governments Invest More in Nudging? Psychological Science, 28(8), 1041-1055.
25 Benartzi et al. (2017), op. cit.
26 Sen A. (1985), Commodities and Capabilities, Amsterdam, North-Holland.
27 See Sen (1985), op. cit., or Sen A. (2001), Development as Freedom, Oxford University Press.
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File | image/jpeg, 132k |
Title | Potential reduction in worldwide emissions caused by end user demand by 2050 according to the IPCC |
Caption | Explanation: the potential reduction in worldwide greenhouse gas emissions by 2050 as a result of sufficiency is 15% in the food industry. NB: the preponderance of food in total emissions results from the integration of AFOLU (Agriculture, Forestry, and Other Land Use). |
Credits | Source: France Stratégie, report on sufficiency, based on the IPCC (2022), Climate Change 2022: Mitigation of Climate Change, Chapter 5: Demand, services and social aspects of mitigation, figure 5.7, page 530 and Supplementary Material II, table 5.SM.2, page 42. |
URL | http://journals.openedition.org/factsreports/docannexe/image/7417/img-2.png |
File | image/png, 20k |
References
Bibliographical reference
Aude Pommeret, “Elective sufficiency and individual behavioral changes: insights from economics”, Field Actions Science Reports, Special Issue 26 | 2024, 24-27.
Electronic reference
Aude Pommeret, “Elective sufficiency and individual behavioral changes: insights from economics”, Field Actions Science Reports [Online], Special Issue 26 | 2024, Online since 10 August 2024, connection on 12 November 2024. URL: http://journals.openedition.org/factsreports/7417
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