IEEE Power & Energy Magazine - January/February 2018 - 44

Monetary Benefits May Lead to Rebound Effects

consuming behaviors. For example, when purchasing new
energy-efficient equipment (e.g., energy-efficient lightbulbs or
a fuel-efficient car) leads to saving money (i.e., on electricity or
fuel), households may use that extra money to pay for increased
use of their new equipment (e.g., turn on more lights or drive
more) or other goods or services (e.g., holiday air travel). effective curtailment behaviors may also lead to monetary savings
that can be spent elsewhere. if so, this will lead to an increase
in energy consumption, a rebound effect, that may swallow
up some of the initial reduction in energy consumption-and
related carbon dioxide (co2) emissions (see Figure 2).
For example, providing free home insulation and energyefficient air-conditioning did not reduce energy use. a Florida Power and light study of the effectiveness of providing
free home insulation and energy-efficient air-conditioning
found no differences in energy savings among three treatment groups receiving various combinations of free conservation technology and a control group. households that used
electric heating and cooling were randomly assigned to one
of these four groups. energy savings for home cooling in the
treatment groups in nonsummer months were 13% below the
potential savings estimate. in summer months, energy savings were 1-2% lower than the potential savings estimate.
For home heating, the savings were 8-12% lower than the
estimate. Savings were lower because participants increased
the temperature in their home during winter months and
decreased the temperature in their home in summer months
following the installation of energy-efficient technologies,
The energy-efficient technologies saved participants money,
which they then spent on greater comfort by increasing their
use of heating and cooling equipment.
although the rebound effect has not been studied for all
energy-saving behaviors, energy savings do inherently lead to
monetary savings, and any reward or monetary subsidy adds
to the means that households have available for additional consumption, including additional energy consumption. Therefore,
monetary incentives likely produce a bigger rebound effect than
nonmonetary measures with the same behavioral effect.

one limitation of providing monetary rewards for energy savings is that the saved money may be spent on other energy-

The Incentive Is Not Worth the Effort

figure 2. The rebound effect. Money saved by using
an energy-efficient lightbulb may be used on increased
use of the lightbulb or spent on other energy-consuming
activities. (FreeImages.com/Chris Cummings.)

monetary incentives for energy savings may activate a costbenefit mind-set, which makes consumers focus more on the
private costs and benefits. That is, they weigh the investment
it takes in terms of money, effort, and discomfort against the
money that can be saved. When the monetary savings are
small, they may not outweigh the private costs. if people focus
exclusively on the private costs versus benefits, they may not
be likely to engage in the behavior.
many behaviors that reduce household fossil-energy
consumption may seem to have higher costs than benefits.
efficiency behaviors often take large investments, which are
recouped from energy savings after a relatively long period
of time. For example, the pay-back period for solar panels may be eight years or more. research shows that most
people have a strong preference for receiving money now,

9
8
7
6
5
4
3
2
1
0

Percentage of Energy Saved

Monetary
Incentive

Monetary Incentive
+
Social Comparison

Control
Group

figure 1. The percentage of energy saved by a study
group receiving a monetary incentive, a group receiving a
monetary incentive along with social comparison, and the
control group. (Adapted from K. Mizobuchi and K. Takeuchi, "The influences of financial and non-financial factors
on energy-saving behavior: A field experiment in Japan,"
Energy Policy, vol. 63, pp. 775-787, 2013.)

with the removal of technical barriers to solar panel installment. in the second example, monetary incentives were most
effective when provided in combination with social comparison feedback that showed how one's energy use compared to
that of neighbors. When controlling for such supplementary
strategies, monetary incentives in and of themselves often
appear to have much smaller effects or even none at all.
here, we discuss three issues that have been found to
undermine the effectiveness of monetary incentives in
reducing household fossil-energy use. We conclude with a
discussion of how incentives can be designed to effectively
promote household fossil-energy saving. We believe that this
advice will be helpful to the designers of energy markets,
efficiency schemes, and other behavior change interventions.

Three Downsides of Monetary Incentives

44

ieee power & energy magazine

january/february 2018


http://www.FreeImages.com/Chris

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - January/February 2018

Contents
IEEE Power & Energy Magazine - January/February 2018 - Intro
IEEE Power & Energy Magazine - January/February 2018 - Cover1
IEEE Power & Energy Magazine - January/February 2018 - Cover2
IEEE Power & Energy Magazine - January/February 2018 - Contents
IEEE Power & Energy Magazine - January/February 2018 - 2
IEEE Power & Energy Magazine - January/February 2018 - 3
IEEE Power & Energy Magazine - January/February 2018 - 4
IEEE Power & Energy Magazine - January/February 2018 - 5
IEEE Power & Energy Magazine - January/February 2018 - 6
IEEE Power & Energy Magazine - January/February 2018 - 7
IEEE Power & Energy Magazine - January/February 2018 - 8
IEEE Power & Energy Magazine - January/February 2018 - 9
IEEE Power & Energy Magazine - January/February 2018 - 10
IEEE Power & Energy Magazine - January/February 2018 - 11
IEEE Power & Energy Magazine - January/February 2018 - 12
IEEE Power & Energy Magazine - January/February 2018 - 13
IEEE Power & Energy Magazine - January/February 2018 - 14
IEEE Power & Energy Magazine - January/February 2018 - 15
IEEE Power & Energy Magazine - January/February 2018 - 16
IEEE Power & Energy Magazine - January/February 2018 - 17
IEEE Power & Energy Magazine - January/February 2018 - 18
IEEE Power & Energy Magazine - January/February 2018 - 19
IEEE Power & Energy Magazine - January/February 2018 - 20
IEEE Power & Energy Magazine - January/February 2018 - 21
IEEE Power & Energy Magazine - January/February 2018 - 22
IEEE Power & Energy Magazine - January/February 2018 - 23
IEEE Power & Energy Magazine - January/February 2018 - 24
IEEE Power & Energy Magazine - January/February 2018 - 25
IEEE Power & Energy Magazine - January/February 2018 - 26
IEEE Power & Energy Magazine - January/February 2018 - 27
IEEE Power & Energy Magazine - January/February 2018 - 28
IEEE Power & Energy Magazine - January/February 2018 - 29
IEEE Power & Energy Magazine - January/February 2018 - 30
IEEE Power & Energy Magazine - January/February 2018 - 31
IEEE Power & Energy Magazine - January/February 2018 - 32
IEEE Power & Energy Magazine - January/February 2018 - 33
IEEE Power & Energy Magazine - January/February 2018 - 34
IEEE Power & Energy Magazine - January/February 2018 - 35
IEEE Power & Energy Magazine - January/February 2018 - 36
IEEE Power & Energy Magazine - January/February 2018 - 37
IEEE Power & Energy Magazine - January/February 2018 - 38
IEEE Power & Energy Magazine - January/February 2018 - 39
IEEE Power & Energy Magazine - January/February 2018 - 40
IEEE Power & Energy Magazine - January/February 2018 - 41
IEEE Power & Energy Magazine - January/February 2018 - 42
IEEE Power & Energy Magazine - January/February 2018 - 43
IEEE Power & Energy Magazine - January/February 2018 - 44
IEEE Power & Energy Magazine - January/February 2018 - 45
IEEE Power & Energy Magazine - January/February 2018 - 46
IEEE Power & Energy Magazine - January/February 2018 - 47
IEEE Power & Energy Magazine - January/February 2018 - 48
IEEE Power & Energy Magazine - January/February 2018 - 49
IEEE Power & Energy Magazine - January/February 2018 - 50
IEEE Power & Energy Magazine - January/February 2018 - 51
IEEE Power & Energy Magazine - January/February 2018 - 52
IEEE Power & Energy Magazine - January/February 2018 - 53
IEEE Power & Energy Magazine - January/February 2018 - 54
IEEE Power & Energy Magazine - January/February 2018 - 55
IEEE Power & Energy Magazine - January/February 2018 - 56
IEEE Power & Energy Magazine - January/February 2018 - 57
IEEE Power & Energy Magazine - January/February 2018 - 58
IEEE Power & Energy Magazine - January/February 2018 - 59
IEEE Power & Energy Magazine - January/February 2018 - 60
IEEE Power & Energy Magazine - January/February 2018 - 61
IEEE Power & Energy Magazine - January/February 2018 - 62
IEEE Power & Energy Magazine - January/February 2018 - 63
IEEE Power & Energy Magazine - January/February 2018 - 64
IEEE Power & Energy Magazine - January/February 2018 - 65
IEEE Power & Energy Magazine - January/February 2018 - 66
IEEE Power & Energy Magazine - January/February 2018 - 67
IEEE Power & Energy Magazine - January/February 2018 - 68
IEEE Power & Energy Magazine - January/February 2018 - 69
IEEE Power & Energy Magazine - January/February 2018 - 70
IEEE Power & Energy Magazine - January/February 2018 - 71
IEEE Power & Energy Magazine - January/February 2018 - 72
IEEE Power & Energy Magazine - January/February 2018 - 73
IEEE Power & Energy Magazine - January/February 2018 - 74
IEEE Power & Energy Magazine - January/February 2018 - 75
IEEE Power & Energy Magazine - January/February 2018 - 76
IEEE Power & Energy Magazine - January/February 2018 - Cover3
IEEE Power & Energy Magazine - January/February 2018 - Cover4
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091020
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070820
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050620
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030420
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010220
https://www.nxtbook.com/nxtbooks/pes/powerenergy_111219
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091019
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070819
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050619
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030419
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010219
https://www.nxtbook.com/nxtbooks/pes/powerenergy_111218
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091018
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070818
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050618
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030418
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010218
https://www.nxtbook.com/nxtbooks/pes/powerenergy_111217
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091017
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070817
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050617
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030417
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010217
https://www.nxtbook.com/nxtbooks/pes/powerenergy_111216
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091016
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070816
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050616
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030416
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010216
https://www.nxtbook.com/nxtbooks/ieee/powerenergy_010216
https://www.nxtbook.com/nxtbooks/pes/powerenergy_111215
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091015
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070815
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050615
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030415
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010215
https://www.nxtbook.com/nxtbooks/pes/powerenergy_111214
https://www.nxtbook.com/nxtbooks/pes/powerenergy_091014
https://www.nxtbook.com/nxtbooks/pes/powerenergy_070814
https://www.nxtbook.com/nxtbooks/pes/powerenergy_050614
https://www.nxtbook.com/nxtbooks/pes/powerenergy_030414
https://www.nxtbook.com/nxtbooks/pes/powerenergy_010214
https://www.nxtbookmedia.com