Blog Sustainability, fast and slow

The Intergovernmental Panel on Climate Change (IPCC) recently estimated that “comprehensive demand-side policies” could reduce global greenhouse gases (GHGs) by 40–70% by 2050—highlighting how changing our habits will make or break the Paris Agreement’s stated ambitions.¹

While changing behaviors is clearly a lucrative source of emissions savings, humans are poorly equipped to mobilize behind addressing climate change. As the late Nobel Laureate Daniel Kahneman explained, climate change is a long-term, abstract, invisible, and contested issue in the sense it focuses on a Global Commons that no individual owns, and therefore no one takes proper responsibility for.² This makes it challenging for individuals, businesses, and governments to not only alter fundamental behaviors, but also to sustain them in pursuit of decarbonization goals.

Together with Amos Tversky, Kahneman explained human thought by dividing it into two systems. System 1 guides most of our behavior, characterized by near-instantaneous and automatic thinking governed by a range of behavioral biases and, as a result, leads to potentially ill-fated conclusions. A classic example is the bat and ball problem: A bat and a baseball cost USD 1.10, but if the bat costs USD 1 more than the ball, how much does the baseball cost? Most jump to 10 cents through System 1 thinking, but the correct answer is 5 cents.³ System 2 is a more deliberative, “slower” way of thinking, considering multiple angles and trade-offs before acting. Climate change fundamentally requires System 2 thinking, but more often than not, humans inherently default to System 1.

Interventions aimed at encouraging lower-carbon choices should put our behavioral biases at the center of their design. Looking at the biases that characterize System 1 thinking in the context of common climate solutions makes this more tangible.

The buildings sector is responsible for roughly a third of global annual emissions.⁴ Retrofitting buildings to improve their energy efficiency will reduce this figure, but convincing building owners to undertake retrofits is difficult for a host of reasons.⁵

“Present bias” refers to people’s tendency to overweight short-term costs and benefits over long-term costs and benefits.⁶ It injects irrationality into decision making, because people make choices in the present guided by a disproportionate focus on upfront costs and benefits, rather than the net benefits of a choice over the longer term. This means building owners tend to place more weight on the short-term inconveniences of retrofitting—high upfront costs, and the disruption it causes to actively used buildings—over its long-term benefits of lower running costs, better health outcomes, and more.⁷

Effective behavioral interventions would tackle present bias by looking at the root causes of the inconveniences. One example is “one-stop-shops” for retrofitting in Ireland, the Netherlands, and elsewhere, which bundle related services for retrofitting, such as surveys and acquiring public subsidies, into a single product. The idea is to reduce the perceived short-term inconveniences of retrofitting—such as aggregating public disparate subsidies in one place or recommending trusted installers to reduce search costs—thereby focusing minds on the long-term benefits.

Transport accounts for roughly a fifth of global emissions. Road passenger vehicles account for about half of that.⁸ Transport’s overall emissions need to fall 3% a year to 2030 to align with a “Net Zero by 2050” scenario, but its average growth of 1.7% between 1990 and 2022⁹ does not inspire confidence.  

A core barrier to electric vehicle (EV) uptake is the “status quo” bias. It is human tendency to “go with the flow” of an existing habit. EVs challenge the habits of many commuters by requiring them to charge up a battery, rather than fill a tank with gasoline. Perceived low coverage and questions about the reliability of charging points in many countries feed consumer anxiety regarding buying EVs, and maintains a preference among many for the status quo, despite its high emissions.¹⁰

Behavioral interventions might take the form of an informational campaign that highlight facts around EV ownership, thereby encouraging slower, System 2 thinking. For instance, 99% of car journeys in the UK are under 100 miles and the average range for new EVs is about 300 miles, showing that range anxiety is likely to be a small issue for most UK drivers.¹¹ Similarly, the average distance between public charging points in England is under 10 miles, and far lower in most urban areas, implying that concerns regarding unavailability of chargers is also a low risk for many.¹² Transport habits are particularly sticky though; the UK government’s Behavioral Insight Team suggests that interventions are most effective if they can strike when habits have been disrupted and are, therefore, most prone to change, such as after someone has moved to a new area, or during significant disruptions to transport habits like those seen during the COVID pandemic.¹³

Offering subsidized smart meters to households is a common climate policy in many countries. Recent evidence suggests they lead to energy savings of roughly 3% in UK households.¹⁴ The more energy they encourage households to save, the higher their climate benefits.

Human biases can be leveraged through incentives or smart meter design to increase this effect. A particularly interesting finding of several studies is the efficacy of the herding effect—the tendency of people to follow the herd. A paper in Nature found that households whose smart meter framed their energy savings relative to all houses in their street sustained lower electricity consumption for longer. Greater reductions were also observed for people who strongly identified with a normative reference group.¹⁵ Programs to roll out smart meters could leverage these effects through the design of the smart meters they procure, such as through integrating street-by-street energy saving comparisons as standard in publicly procured smart meters.

Whether it’s deciding to take the plunge on an electric vehicle, eat less junk food, or recycle more, environmental issues tend to start with individuals’ behaviors. Behavioral economics and psychology highlight the importance of designing interventions around human biases. This makes them more likely to change deep-set behaviors and encourage people to sustain these changes over time. This applies to individuals thinking about how to live more sustainably, as well as to the sustainability strategies of businesses and governments.¹⁶

1. Creutzif, F. et al., (2022), Demand, Services, and Social Aspects of Mitigation in IPCC; Climate Change 2022; Mitigation of Climate Change: Contribution of Working Group III to the Sixth Assessment Report of the IPCC.
2. See Daniel Kahneman’s interview with Ekimetrics, available on YouTube, see https://www.youtube.com/watch?v=NM_dvVyoJwI
3. This oft-quoted example is discussed in more detail in Kahneman, D., (2002), Maps of Bounded Rationality: A Perspective on Intuitive Judgement and Choice.
4. UBS Sustainability and Impact Institute, (2023), Rethink, Rebuild, Reimagine: Laying the Foundation for Better Buildings.
5. UBS Sustainability and Impact Institute, (2023), Retrofit Revolution.
6. Kahneman, D. and Tversky, A., (2000), Choice, Values, and Frames, Cambridge University Press.
7. Ebrahimigharehbaghi, S. et al., (2022), Application of Cumulative Prospect Theory in Understanding Energy Retrofit Decision: A Study of Homeowners in the Netherlands, Energy and Buildings. 
8. Ritchie, H., (2020), Cars, Planes, Trains: Where do CO₂ Emissions from Transport Come from? Our World in Data.
9. International Energy Agency, (2023), Tracking Transport.
10. S&P Global, (2023), Affordability Tops Charging and Range Concerns in Slowing EV Demand.
11. Office for Zero Emission Vehicles, (2024), Electric Vehicles: Costs, Charging, and Infrastructure.
12. County Councils Network, (2023), New Data Reveals that there Is Just One Electric Vehicle Charger for Every Ten Miles in England’s Country and Rural Areas.
13. Behavioral Insights Team, (2021), Applying Behavioral Insights to Reduce Commuting Emissions.
14. Behavioral Insights Team, (2023), Do Smart Meters Reduce Households’ Energy Consumption?
15. De Dominicis, S. et al., (2019), Making the Smart Meter Social Promotes Long-Term Energy Conservation, Springer Nature, Palgrave Communications.
16. Behavioral Insights Team (2019), Behavior change for nature: A behavior science toolkit for practitioners, Page 15. 

The author thanks the following for their input: Jackie Bauer, Paul Donnovan, Christian Leitz, Richard Mylles, Mike Ryan.

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