2004
Volume 95, Issue 3
  • ISSN: 0025-9454
  • E-ISSN: 1876-2816

Abstract

Abstract

The energy transition requires large investments. The public debate in the Netherlands focuses on the associated costs, and the government uses traditional instruments such as subsidies. From the perspective of behavioral economics this approach has a few drawbacks. The goal of this article is to discuss behavioral-economic pitfalls which are important for two topics regarding the energy transition. First, households need to take measures themselves with regard to the switch to alternative energy sources. Several behavior-economic pitfalls influence households’ decisions. The most important ones are risk aversion, loss aversion, choice overload and motivation crowding out. A number of measures are discussed which the government might employ to facilitate this behavioral change by households. Second, large investments will be needed in the electricity network due to the energy transition. These costs might be mitigated by a behavioral change in energy use of households and firms: either by using less energy or by using energy at other times of the day. This might be achieved by introducing dynamic electricity tariffs. However, behavioral-economic pitfalls will affect the interest in such tariffs, most notably motivation crowding out and moral licensing. Their effects will be lessened if financial incentives are not emphasized.

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  • Article Type: Research Article
Keyword(s): behavioral change; behavioral economics; biases; dynamic tariffs; energy transition

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