Back to top

People’s decisions matter: understanding and addressing Energy Poverty with Behavioral Economics

Description

Insufficient access to affordable, safe and reliable energy services deprives individuals of the essential means to live a good, satisfactory and just life. This problem is becoming more and more urgent in urban areas, in particular in low-income neighborhoods, in which the inability to meet energy costs reflects social segregation and distributional inequalities. Making cleaner technologies available for all homes and providing financial aid are strategies that would combat energy poverty. However, understanding people’s everyday decisions that affect their energy use is also crucial. A careful examination of the underlying mechanisms that drive decisions is required, above all in contexts characterized by conditions of scarcity. Living in a context of scarcity depletes people’s available cognitive resources, thus rendering their decisions more susceptible to cognitive biases. As an example, contexts of scarcity trigger a tendency to prefer immediate smaller rewards to delayed larger ones. However, studies demonstrate that this can be mitigated by allowing individuals to build community trust. This study taps into recent findings from behavioral sciences regarding the role that scarcity conditions have on decision-making, with the aim to i) review certain cognitive biases that might arise in energy poverty contexts, and ii) devise strategies to unlock individuals’ potential to make decisions that result in better outcomes for themselves and their surroundings.