Environment

A nudge in the right direction

11/07/2014

Influencing the way people behave, so as to lessen their impact on the environment, is a complicated business. Money matters, but is not the only incentive.

In the Green Week session on 'Changing behaviour; people's green choices', Ysé Serret from the Organisation for Economic Cooperation and Development in Paris presented the OECD's latest survey of 12 000 homes, in 11 countries, on Greening Household Behaviour. It confirmed that environmental attitudes play an important but subtle role alongside financial incentives and how easy it is to change.

"Stimulating desirable behavioural changes ultimately requires a mix of policy instruments."

When it comes to buying a car for example, safety, price and reliability are the main considerations. A significant number of people would be willing buy an electric vehicle, even if it was more expensive, but this willingness varies across Europe – from 38% of respondents in the Netherlands to just 13% in France. Lack of recharging infrastructure was the main disincentive. "So it is important for governments to work on the supply side," said Ms Serret.  "Stimulating desirable behavioural changes ultimately requires a mix of policy instruments."

The appeal of rational choices

'Nudge theory' is about changing behaviour through incentives rather than closing down options. While economists assume that informed individuals will make rational choices, "the real world is more complex," said Stephen White from DG Environment. People are influenced as much by habits and routines, time and convenience, "so very small adjustments in information or legislation can make a difference," he said.

Psychologists study 'nudge tactics', and the UK government even has a dedicated 'nudge unit'. Experts are looking for innovative ways to influence both households and businesses. "Where do we go from here?" Stephen White challenged his audience. Is nudging easier at EU or local level? And how can it be linked to price incentives?

Pricing strategies

 

Dominic Hogg, from Eunomia Research & Consulting, focused on the range of economic instruments available to environment policy-makers, including taxes, procurement, non-compliance fees, deposit refunds, subsidies and charges.

Major corporations have been showing a growing interest in the circular economy since commodity prices started to rise around 2000. Yet costs were even higher 100 years ago, and could fall again. "Future strategy should not be based on the assumption that commodity prices will continue to rise," warned Dr Hogg.

Despite the fact that environmental taxes are less damaging to economies than levies on labour and income, they make up just 6% of all taxes across the EU, equivalent to only 2.8% of GDP.  Few countries impose levies on primary materials, yet such measures in the UK have successfully cut the use of primary aggregates used in construction, for example. Britain now uses the highest proportion of recycled aggregates (29%) in the EU.

In other words, "prices matter", Hogg concluded, raising the question of whether pricing strategies should be more ambitious and better coordinated across the EU.

 

Economics, strategy and information
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