Behavioral Facilitation of a Transition to Energy Efficient and Low-Carbon Residential Buildings
- Building (energy) policy initiatives ultimately depend on their fulfillment and effective deployment on behavior change by property sector stakeholders;
- BE theory offers a rich body of evidence-based analysis that could be employed to enhance delivery mechanisms for these policy initiatives.
2. Study Methodology
3. Linking Climate Policy with Building Energy Policy
- Economic and financial interventions;
- Regulatory approaches, including codes and standards;
- Information provision, consumer engagement, and industry capacity building.
- Taxes, charges, and subsidies
- Direct regulation
- Information provision
- Provision of infrastructure (by governments).
4. Foundations of Behavioral Economics
4.1. Understanding Human Behaviour
4.2. BE Principles: The Crucial Central Role of Heuristics
5. Options for Market Intervention by Policy Makers
5.1. Policy Lessons from BE Theory
5.2. Building Codes, Regulations & Standards
Case Study: Australia’s Building Code
- The commercial sector—responsible for major developments comprising a relatively small proportion of aggregate market activity—has a positive response to energy-efficiency requirements, frequently exceeding the minimum compliance levels
- The residential volume builder sector—responsible for around half of new home building—design response typically includes a combination of design changes and re-specification, with the minimization of incremental cost as a key criterion
- Small residential builders—responsible for around 50% of local home building—typically respond with re-specification, an expensive compliance pathway for consumers. This conclusion is consistent with the degree of cultural conservatism and change aversion evident in this sector .
5.3. Financial Instruments Utilized for Energy and Climate Policy Operation
- Direct taxation of CO2 emissions
- Emissions trading schemes (ETS)
- Taxes on process inputs or outputs (fuel or vehicle taxes)
- Subsidies for emission reductions.
Case Study: ETS and Residential Buildings
5.4. Stakeholder Information Provision
- Public information campaigns
- Education and training, including industry capacity building
- Product certification and labeling
- Award programs.
5.4.1. Case Study: European Union Building Certification Program
5.4.2. Choice Overload: A Daunting Challenge Facing Homebuyers and Renovators
- The decision to buy a house normally entails substantial information seeking and processing;
- A house is a product that is used and understood by almost everybody;
- It is a complex product that is evaluated in terms of many salient attributes.
- Consumers struggle to make detailed comparisons of more than ten alternative choices, without experiencing cognitive dysfunctionality;
- Under decision overload conditions, consumers fail to make detailed comparisons of all alternatives, but adopt simplifying strategies (heuristics) to cope with the task of ranking options.
5.5. Quantification of the Benefits of Residential Sector Intervention
- Why compliance with energy efficiency requirements mandated in building regulations may be fatally compromised as a result of indifference by both building project developers and consumers;
- Why price-based interventions in the property market (such as through an ETS) will not necessarily prompt a rational response from consumers;
- Why consumer information campaigns such as the EU EPC initiative fail to achieve a significant market impact, or a price premium for superior certified performance, because of weak and irrational consumer responses.
- Strong complementarity exists between the key tenets of BE—as represented by cognitive heuristics—and the mechanics of building energy policy
- Understanding the impact of cognitive heuristics on industry stakeholders’ behavior can provide important contributions to the improved design of market intervention policies
- Policy implementation vehicles such as building energy codes, carbon pricing, and consumer information campaigns suffer from significant delivery failures, whose underlying causes could be better diagnosed and corrected through the application of BE principles (via heuristics)
- The economic and environmental argument for market intervention using building energy codes rests on assumptions of operational effectiveness, and high levels of regulatory compliance; without compliance, such projected benefits are illusory
- Behavioral insights not only hold out a promise of improved effectiveness for building policy delivery, but also the threat of compromised program outcomes, should the BE lessons fail to be learned
- Governments worldwide are calling on BE theory to improve the effectiveness of policy delivery in diverse areas such as consumer protection, education, public service delivery, and labor market reform; these nascent initiatives are typically managed by specialized BITs
- Application of BE theory to (building energy) policy by government BITs has tended to focus on consumer engagement with energy markets; the equally important issue of building project delivery, from conception through, design and construction, to operation, has yet to be well examined from a BE perspective
- Clearly, the next step for governments is to broaden the remit of their BITs in order to address building energy policy from a rigorous and broad-based BE perspective.
8. Further Research
- Understanding the drivers and influencers of consumer choice and rationality—the role and true potency of building performance disclosure
- Facilitating and accelerating industry learning processes to entrench effective change management, particularly in the residential building sector
- Identifying international best practice approaches to building regulation in the context of behavioral factors and influences
- Understanding industry culture and the operation of peak industry bodies, as these relate to policy support and delivery
Conflicts of Interest
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|EU Classification ||Analytical Classification|
|Finance schemes and fiscal incentives (grants and loans)||Economic/financial|
|Regulations or voluntary agreements||Regulatory|
|Energy labeling schemes||Informational|
|Standards and norms||Regulatory|
|Training and education programs||Informational|
|Heuristic||Description||Property Market Example|
|Anchoring||Initial exposure to a value serves as a reference point for subsequent decisions and choices||Setting pricing points for new consumer goods and capital investments, such as new homes|
|Availability||People make judgments about the likelihood of an event based on how easily an example comes to mind||Consumers rely on anecdotal advice from friends, family, and other non-expert sources for investment decisions|
|Bounded rationality||Bounded rationality challenges attributes of homo economicus; limited thinking capacity creates bounds ||Self-limited decision making by residential building purchasers (see also choice overload)|
|Choice overload||This phenomenon is a consequence of the excessive choices available to consumers||Excessive decisions facing home buyers for building features, appliances, and fit-out |
|Cognitive bias||Systematic thinking errors and deviation from desirable and accepted norms||Also termed keeping up with the neighbors for major consumer purchases|
|Confirmation bias||People seek out or evaluate information in a way that fits with prior beliefs||Industry stakeholders are change averse, preferring traditional choices (also known as herd behavior)|
|Framing effect||Choices expressed to highlight positive (or negative) aspects of a decision, leading to changes in relative attractiveness||The marketing of consumer goods is carefully managed so as to promote positive features and gloss over negatives|
|Herd behaviour||People emulate others’ decisions and do not make independent decisions; the collective irrationality of financial investors creates stock market bubbles||Conformity in product design and selection becomes a fashion statement, rather than objective decision-making|
|Present bias||People give stronger weight to payoffs closer to the present time; distant rewards have a relatively low perceived value||Investment in energy efficiency is simplistically based on upfront rather than lifecycle costs|
|Social norm||Signal appropriate behavior according to social group norms or expectations; social norms may differ from market exchange norms||Keeping up with the neighbors is an expression of such behavior; links to herd behavior and cognitive bias|
|Status quo bias||Preference for stasis through inaction or adherence to prior decisions; occurs for low transition costs but high-decision importance||Owners can be reluctant to upgrade poorly performing assets despite compelling economic evidence|
|Sectoral Manifestation||Influenced Stakeholder Groups|
|Anchoring||Designers set energy performance levels at a regulatory minimum, thereby failing to explore alternatives with increased consumer benefits||Building designers and architects [42,43]|
|Availability||Consumer choices influenced by well-marketed project home designs that may lack innovation, together with informal word of mouth information||Consumers (also meaning homebuyers) |
|Bounded rationality||Homebuyers face complex choices and multi-faceted decisions, and energy efficiency is a low priority in this context||Consumers and industry professionals [34,45,46]|
|Choice overload (decision fatigue)||Complexity of decisions facing consumers seems overwhelming, leading to status quo defaults||Consumers and service providers [15,37,38]|
|Social norm||The McMansion syndrome (1) emphasizes cosmetic building features over performance characteristics, using comparison with neighbors as an indicator of social or material success||Developers, consumers, and builders [18,19,47]|
|Status quo bias||Owners of existing buildings resist investment in building upgrades||Investors, consumers, and homeowners [43,46,47]|
|Temporal discounting||Payback benefits of investments in energy efficiency widely overlooked or ignored, with buyers focused largely on upfront capital costs rather than lifetime operating costs||Developers, investors, consumers, and builders [18,21,46,48]|
|Confirmation bias||Energy efficiency features discounted to consumers as excessively expensive by building practitioners on the basis of pre-conceived notions of value||Developers, consumers, builders, and service providers |
|Framing effect||Product information is focused on superficial, tangible aesthetic elements rather than subtle factors, such as the benefits of high-performance dwellings||Developers and consumers [47,48,49,50]|
|Building Energy Policy Measure||Intended Success Measures||Substantive Outcomes (See Case Studies)||Behavioral Insights: Consideration of Applicable Heuristics and Corrective Interventions||Pertinent References|
|Carbon pricing—emissions trading schemes||Reductions in domestic energy consumption; market preference and higher valuation for low carbon, energy efficient buildings||Limited success in operation; ineffective in the property market ||Influence of social norms—try nudging|
Status quo bias correction needed
Bounded rationality impedes policy delivery
|Allcott 2010 ; Allcott 2011 ; Allcott 2014 ; Fredericks 2015 ;|
Baddeley 2011 ; Baddeley 2016 ; Blasch 2017 ; Lunn 2014 ; Yoeli 2017 
|Regulation through building energy codes||Code compliance; aspirational design objectives beyond code minima (performance-based code design)||Widespread non-compliance [57,67]; performance levels cluster tightly around code set point minima [56,65]||Anchoring around regulatory minimum performance standards|
Use social norms with performance transparency to encourage compliance
Loss aversion influential if coupled with improved regulatory enforcement
|Klotz 2010 ; Klotz 2011 ; Fredericks 2015 ; Moore et al. 2019 |
|Energy performance certification||Market preference for higher rated buildings—reflected in their market value||Consumer indifference gives rise to ongoing market failure: energy efficiency gap persists||Anchoring, availability, and choice overload|
Bounded rationality and choice overload may be addressed through timely nudges
Unhelpful framing needs correction: disclosure of operating costs not ratings
Temporal discounting is a major impediment
|Baddeley 2016 ; Baddeley 2011 ; McNamara 2011 ; Lunn 2014 ; Yoeli 2017 ; Blasch 2017 ; Shealy 2016 ; Allcott 2010 ; Fredericks 2015 |
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Enker, R.A.; Morrison, G.M. Behavioral Facilitation of a Transition to Energy Efficient and Low-Carbon Residential Buildings. Buildings 2019, 9, 226. https://doi.org/10.3390/buildings9110226
Enker RA, Morrison GM. Behavioral Facilitation of a Transition to Energy Efficient and Low-Carbon Residential Buildings. Buildings. 2019; 9(11):226. https://doi.org/10.3390/buildings9110226Chicago/Turabian Style
Enker, Robert A., and Gregory M. Morrison. 2019. "Behavioral Facilitation of a Transition to Energy Efficient and Low-Carbon Residential Buildings" Buildings 9, no. 11: 226. https://doi.org/10.3390/buildings9110226