Salience, Attentiveness, and the Decision to Have a Home Energy Audit

This is the third and final post in a blog series on our survey of homeowners as part of RFF’s Energy Efficiency Information Initiative.

fig1-audit-uptake-salience-awarenessIn two earlier blog posts, we summarized some findings from our recent survey on home energy audits. In the first post, we described what we learned about the features of audits and what they cost. In the second, we reported the extent of follow-up on audit recommendations. In this post, we explore some factors that seem to be associated with audit uptake.

As economists, we like to think that, by and large, people make decisions based on a rational accounting of costs and benefits. In the case of home energy audits, homeowners are paying for information that should allow them to make better energy investment decisions.  And so if the benefits of that information outweigh the costs of acquiring it, we would expect them to spend the money for an audit. But recent research on behavior and energy efficiency suggests that many other factors come into play in people’s decisions about energy use and related investments in appliances, equipment, and buildings. The salience of energy costs and attentiveness to energy usage are two important factors identified by many researchers. In a recent paper, Katrina Jessoe and Dave Rapson show that simple information feedback to households can dramatically increase the price elasticity of demand for electricity. In an experiment the authors conducted, using information along with price increases was much more effective than prices alone. Studies have shown evidence of salience and attentiveness affecting other consumer choices as well. Examples include how sales taxes affect purchase behavior, the effects of repeated information on bank overdraft fees in reducing overdrafts, and the impacts of reminders on gym usage.

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This Week in the RFF Library Blog

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.

Regulatory Impact Analysis: Development of Social Cost of Carbon Estimates
To develop the 2010 and 2013 social cost of carbon estimates, the Office of Management and Budget (OMB) and Council of Economic Advisers convened and led an informal interagency working group in which four other offices from the Executive Office of the President (EOP) and six federal agencies participated. Participating agencies were the Environmental Protection Agency (EPA) and the Departments of Agriculture, Commerce, Energy, Transportation (DOT), and the Treasury… – via US Government Accountability Office

Up in Flames: U.S. Shale Oil Boom Comes at Expense of Wasted Natural Gas, Increased Carbon Dioxide
In a new investigation of flaring of natural gas in the nation’s two most prolific shale oil formations, North Dakota’s Bakken Shale and Texas’ Eagle Ford Shale, Earthworks found that North Dakota oil companies have flared more than $854 million of natural gas since 2010, and state officials do not track how much money companies owe in taxes for the gas. The report found that Texas does not tax flared gas at all, pointing to the need for more stringent measures to reduce flaring in both formations and raising questions about whether North Dakota officials will enforce recently issued regulations to control flaring… – via Earthworks 

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Terminating Links between Emissions Trading Programs

CoverIn the absence of a coordinated global emissions market, a number of self-contained regional carbon-trading programs have formed that independently establish, track, and cancel their own compliance permits. In order to increase the cost-effectiveness, liquidity, and stability of these markets, the entities that control them may choose to link programs together in a framework that allows permits to be unilaterally or bilaterally accepted across joined systems.

Conversely, these programs can also be severed from one another and dismantled. New Jersey delinked from RGGI and ended its state carbon compliance in 2011, and Australia’s new government recently abolished its carbon pricing program even before it could be linked with the EU’s Emissions Trading System. The termination of links between regional carbon markets—as well as the possibility that a program will be delinked in the future—can have significant impacts on their performance, especially when permits from these programs are banked for use toward future compliance obligations. Read More

RFF on the Issues: High-speed rail development; Arctic drilling standards

High-Speed Rail Development

A recent New York Times op-ed called for increased federal investment in US high-speed rail (HSR) service for its potential to reduce both congestion and pollution. Yet, aside from some disbursements from the administration’s 2009 stimulus package, Congress has so far failed to support any HSR initiatives, several of which are in the discussion or planning stage around the country.

In a letter to the editor of the Times, RFF’s Joel Darmstadter notes that there are many factors that need to be overcome for HSR projects to be successful, including the rail sector’s “inescapable need for federal financial support”—a point he elaborated on in a recent article for Resources.

Arctic Drilling Standards

Last week, the Department of the Interior put forth proposed drilling safety standards that would apply to operators in northern Alaska. The standards are intended to “promote safe, responsible, and effective drilling activities” while protecting the environment and communities around the Beaufort and Chukchi seas—two areas at the center of the ongoing debate over the risks and rewards of drilling in the Arctic.

In a new blog post, RFF’s Molly Macauley (working with RFF’s Katrina McLaughlin) notes the importance of accounting for changing ice characteristics in Arctic drilling standards. She writes: “Risk assessment in the Arctic … must be forward looking and adaptive to the latest scientific information … new operating parameters will necessitate large investments from both industry and government—including in polar-class ice breakers, ice-capable drilling rigs, and expanded transportation, communication, and monitoring networks.” To watch an RFF-hosted discussion of drilling risks in the Arctic and the Gulf, click here.

What Did the 2010 Deepwater Horizon Oil Spill and Offshore Drilling Moratorium Mean for the Workforce?

The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Oil Drilling MoratoriumOn April 20, 2010, the Transocean Deepwater Horizon suffered a catastrophic blowout while drilling in a BP lease in the Gulf of Mexico’s Macondo Prospect. This accident resulted in the largest oil spill in US history and an unprecedented spill response effort. Due to the ongoing spill and concerns about the safety of offshore oil drilling, the US Department of the Interior suspended offshore deep water oil and gas drilling operations on May 27, 2010, in what became known as the offshore drilling moratorium. The media portrayed the impacts of these events on local employment, with images of closed fisheries, idle rigs, as well as boats skimming oil and workers cleaning oiled beaches.

In a new RFF discussion paper, “The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Drilling Moratorium,” I estimate and examine the net impact of the oil spill, the drilling moratorium, and spill response on employment and wages in the Gulf Coast. The spill and moratorium represented unexpected events in the region, and the resulting economic impacts varied within and among the Gulf states. Coastal counties and parishes were expected to bear the vast majority of the burden of these two events, while inland areas were expected to be largely unaffected. The moratorium was expected to affect Louisiana—with significant support of the offshore drilling industry—but not, for example, Florida, which had no active drilling off of its coastline. Beyond the economic impacts, the timing and magnitude of the spill response varied across the states over the course of the spill as well.

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This Week in the RFF Library Blog

Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy.

McKinsey on Sustainability & Resource Productivity — Issue 2, Summer 2014
In this second issue of McKinsey on Sustainability & Resource Productivity, we seek to establish the value of sustainability and to demonstrate how these opportunities can (and are) being captured in a range of industries… – via McKinsey & Company

Scorecard: Conserving the Greater Sage Grouse
[From Press Release] Six conservation organizations today released a detailed scorecard for grading the Obama administration on following federal scientists’ recommendations for conserving greater sage grouse across more than 60 million acres of public land in the American West. The groups also sent a letter to Interior Secretary Sally Jewell and Agriculture Secretary Tom Vilsack urging them to follow specific measures for protecting these imperiled birds as they approve a series of upcoming federal land “management plans” from the Bureau of Land Management and USDA Forest Service… – via Center for Biological Diversity

Draft Addendum to Environmental Review Documents Concerning Exports of Natural Gas from the United States
[Website] The purpose of the Addendum is to provide additional information to the public regarding the potential environmental impacts of unconventional natural gas exploration and production activities. DOE has received many comments related to concerns about the potential impacts from increased development of unconventional natural gas resources in the United States, particularly production that involves hydraulic fracturing. While not required by the National Environmental Policy Act (NEPA), DOE has prepared this Addendum in an effort to be responsive to the public and provide the most current information available… – via US Dept. of Energy

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On Proposed Regulations for Arctic Offshore Oil Drilling

This entry previously appeared as a comment on the National Journal’s Energy Insiders forum “Can Arctic Drilling Be Done Safely?”.

Kulluk Drilling Rig

Kulluk Drilling Rig (credit: U.S. Pacific Command / flickr)

On August 15, the Obama administration took a long awaited step forward in the development of safety standards for Arctic offshore drilling operations. The submission of proposed regulations by the Department of the Interior (DOI) to the Office of Management and Budget provides a key juncture to assess the outstanding questions and considerations needed for “safe, responsible, and effective drilling activities on the Arctic Outer Continental Shelf.” My colleague, Katrina McLaughlin, reminds us of a few preliminary points worth making.

Arctic drilling has been occurring for decades and other countries will continue to evolve their energy industry in this region. But the Arctic is undergoing profound change that affects the operating environment. Risk assessment in the Arctic cannot be only retrospective and based on past experience. It must also be forward looking and adaptive to the latest scientific information. The new ice regime is more mobile and unpredictable, wave heights are unprecedented, and coastal erosion and permafrost degradation threaten infrastructure.These new operating parameters will also necessitate large investments from both industry and government—including in polar-class ice breakers, ice-capable drilling rigs, and expanded transportation, communication, and monitoring networks.

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Taking Advice: Do Homeowners Follow Up on Home Energy Audits?

This is the second post in a new blog series on our survey of homeowners as part of RFF’s Energy Efficiency Information Initiative. The first post focuses on what’s included in an audit and how much it costs homeowners. In this post, we’ll reveal if people followed their auditors’ recommendations. In the third post, we’ll focus on some differences among homeowners who had an audit versus those who hadn’t.

Consulting an expert can be helpful when faced with certain decisions that require technical expertise. When it comes to assessing and reducing home energy use, professional home energy auditors can be a good source of advice. The most common recommendations from home energy audits are to 1) seal air gaps and, 2) add insulation. Air gaps can be around windows and doors, in attics, and in many nooks and crannies of the home and are often identified during an audit by using a blower door test. The most common area for insulation is the attic but, ideally crawlspaces, walls, and pipes are also insulated. In our 2011 survey of home energy auditors, more than 90 percent said they recommend air sealing and insulation improvements fairly often or always.

In our recent homeowner survey, 67 percent said that their auditor recommended air sealing. Air sealing is the lowest hanging fruit for efficiency improvements in homes. It is usually inexpensive and relatively easy. Moreover, an audit is usually especially helpful for identifying where and how to seal. However, only 41 percent of homeowners in our survey did all the air sealing that was recommended in their audit, 38 percent said they did some, and 21 percent said they had not undertaken any air sealing.

Figure 1. Extent of Follow-up on Air Sealing Recommendations by  Whether Audit Included Particular Features

Auditors recommended attic and crawlspace insulation somewhat less frequently; in our case, only 56 percent of homeowners reported receiving such a recommendation from their audits. Of these, about 41 percent said they did all the insulation improvements that were recommended—the same percentage as air sealing. Only 23 percent reported doing some, and 36 percent said they did none of the recommended insulation. New heating, cooling, or water heating equipment was recommended to only 30 percent of the homeowners in our survey who had audits. Interestingly, however, 62 percent of these folks followed up and purchased new equipment.

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RFF on the Issues: Carbon tax rebates; China’s shale challenges

Carbon Tax Rebates

A recent poll conducted by USA Today found that taxpayer support for a carbon tax rises “if the money is returned to them.” Only 34 percent of respondents initially said they would back a tax on fossil fuel emissions, but this number rose to 56 percent when polled about carbon tax programs that returned revenue to households in lump sum rebate checks.

New research by RFF’s Rob Williams, Hal Gordon, Dallas Burtraw, Richard Morgenstern, and Jared Carbone from the University of Calgary notes that the cost to the overall economy is higher when carbon tax revenues are returned as lump-sum rebates rather than via tax cuts (an option the poll didn’t include). Nonetheless, the study, which looks at the short-term effects of a carbon tax across income groups, shows that a carbon tax with lump-sum rebates is progressive, and that a majority of households would come out ahead under such a policy (even when ignoring any environmental benefits).

China’s Shale Challenges

China has sharply downgraded its expectations for future shale gas production from between 60  to 80 billion cubic meters (bcm) per year to 30 bcm per year by 2020. The country has the largest estimated proven shale reserves in the world, but “early exploration efforts to unlock the unconventional fuel [have proven] challenging” due to issues involving geology and production costs.

In a new discussion paper, RFF’s Zhongmin Wang and Alan Krupnick and their colleagues from the Energy Research Institute in Beijing suggest that the key to overcoming the innovation barriers for Chinese shale development may lie with the country’s national oil companies (NOCs). They write: “China’s NOCs enjoy overwhelming advantages over new entrants in terms of technology, experience, financial resources, and policy. The question is how to motivate the NOCs to invest in shale gas drilling.” In a blog post, they note that “Much like the US experience, China will need to first lower costs through investments in drilling and other innovations in order to become profitable enough to encourage further capital investment.”

Taking Steps toward Green Growth in China

Green Growth (for China): A Literature ReviewFor decades, China’s government has focused on economic growth and has paid less attention to the associated environmental consequences. But today, the need for environmental regulation is more widely recognized as a critical ingredient for continued, sustainable growth in the world’s most populous country. In a new RFF discussion paper, Green Growth (for China): A Literature Review, we examine the concept of green growth in general and take a look at what it means for China to pursue such a path going forward.

The concept of green growth, as advanced by various international development organizations and governments, emphasizes environmentally sustainable economic growth. If growth is allowed to proceed with no consideration for the impacts on air and water quality, ecosystem degradation, and biodiversity, for example, the economy will eventually no longer be able to advance without harm to public health or the loss of precious natural resources. The concern over public health impacts in China is very real, with troubling levels of air and water pollution. Only 3 out of 74 large cities in China met official air quality standards in 2013, according to the Ministry of Environmental Protection. Read More