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Aiding Decision-Making to Reduce the Impacts of Climate Change

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  • Howard Kunreuther
  • Elke U. Weber

Abstract

Utilizing theory and empirical insights from psychology and behavioral economics, this paper examines individuals' cognitive and motivational barriers to adopting climate change adaptation and mitigation measures that increase consumer welfare. We explore various strategies that take into account the simplified decision-making processes used by individuals and resulting biases. We make these points by working through two examples: (1) investments in energy efficiency products and new technology and (2) adaptation measures to reduce property damage from future floods and hurricanes. In both cases there is a reluctance to undertake these measures due to high and certain upfront costs, delayed and probabilistic benefits and behavioral biases related to this asymmetry. The use of choice architecture through framing and the use of default options coupled with short-term incentives and long-term contracts can encourage greater investment in these measures.

Suggested Citation

  • Howard Kunreuther & Elke U. Weber, 2014. "Aiding Decision-Making to Reduce the Impacts of Climate Change," NBER Working Papers 19776, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19776
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    Cited by:

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    2. Sylwia Słupik & Joanna Kos-Łabędowicz & Joanna Trzęsiok, 2021. "How to Encourage Energy Savings Behaviours? The Most Effective Incentives from the Perspective of European Consumers," Energies, MDPI, vol. 14(23), pages 1-25, November.
    3. Cardella, Eric & Ewing, Brad & Williams, Ryan Blake, 2018. "Green is Good – The Impact of Information Nudges on the Adoption of Voluntary Green Power Plans," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266583, Southern Agricultural Economics Association.
    4. W. J. Wouter Botzen & Erwann Michel-Kerjan & Howard Kunreuther & Hans Moel & Jeroen C. J. H. Aerts, 2016. "Political affiliation affects adaptation to climate risks: Evidence from New York City," Climatic Change, Springer, vol. 138(1), pages 353-360, September.
    5. Jae Young Lim & Kuk-Kyoung Moon, 2020. "Perceived Environmental Threats and Pro-Environmental Behaviors: Investigating the Role of Political Participation Using a South Korean Survey," IJERPH, MDPI, vol. 17(9), pages 1-16, May.
    6. Gary D. Libecap, 2014. "Addressing Global Environmental Externalities: Transaction Costs Considerations," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 424-479, June.
    7. Spandagos, Constantine & Yarime, Masaru & Baark, Erik & Ng, Tze Ling, 2020. "“Triple Target” policy framework to influence household energy behavior: Satisfy, strengthen, include," Applied Energy, Elsevier, vol. 269(C).
    8. Edomah, Norbert & Foulds, Chris & Jones, Aled, 2017. "Policy making and energy infrastructure change: A Nigerian case study of energy governance in the electricity sector," Energy Policy, Elsevier, vol. 102(C), pages 476-485.
    9. Delgado, Laura & Shealy, Tripp, 2018. "Opportunities for greater energy efficiency in government facilities by aligning decision structures with advances in behavioral science," Renewable and Sustainable Energy Reviews, Elsevier, vol. 82(P3), pages 3952-3961.
    10. Zhuangai Li & Xia Cao, 2021. "Effectiveness of China’s Labeling and Incentive Programs for Household Energy Conservation and Policy Implications," Sustainability, MDPI, vol. 13(4), pages 1-17, February.

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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