Greener by Default

• Author: Cass R Sunstein and Lucia A Reisch
• Position: Robert Walmsley University Professor, Harvard University and Harvard Law School/Professor, Copenhagen Business School, Department of Management, Society, and Communication
• Pages: 31-66

© 2018 Cass R Sunstein, Lucia Reisch, and Dublin University Law Society

GREENER BY DEFAULT

CASS R SUNSTEIN* AND LUCIA A REISCH**

Introduction

Careful attention to choice architecture promises to open up new

possibilities for reducing greenhouse gas emissions – possibilities that go

well beyond – and that may supplement or complement – the standard

tools of economic incentives, mandates, and bans. How, for example, do

consumers choose between climate-friendly products or services and

alternatives that are potentially damaging to the climate but less

expensive? The answer may well depend on the default rule. Indeed,

climate-friendly default rules may well be a more effective tool for altering

outcomes than large economic incentives. The underlying reasons include

the power of suggestion; inertia and procrastination; and loss aversion.

Climate-friendly defaults are likely to have large effects in reducing the

economic and environmental harms associated with various products and

activities. In deciding whether to establish climate-friendly defaults, public

officials (subject to legal constraints) should consider both consumer

welfare and a wide range of other costs and benefits. Sometimes that

assessment will argue strongly in favour of climate-friendly defaults,

particularly when both economic and environmental considerations point

in their direction. Notably, surveys in the United States and Europe show

that majorities in many nations are in favour of climate-friendly defaults.

I. Beyond Mandates and Incentives

Many people think that the problem of climate change is best handled

through two familiar tools: mandates and incentives. If the world needs to

reduce greenhouse gas emissions, perhaps regulatory mandates should be

* Robert Walmsley University Professor, Harvard University and Harvard Law School.

** Professor, Copenhagen Business School, Department of Management, Society, and

Communication. We are grateful for support from the Programme on Behavioral

Economics and Public Policy at Harvard Law School. This essay draws heavily on Cass R

Sunstein and Lucia Reisch, ‘Automatically Green: Behavioral Economics and Environmental

Protection’ (2014) 38 Harv Env L Rev 127. The treatment is, however, substantially revised,

redirected, and updated to focus on the climate change issue more directly.

32 Trinity College Law Review [Vol 21]

imposed on coal-fired power plants, (combustion engine) automobiles, and

other emissions sources, ensuring significant cuts in a short time. Or

perhaps it is best to proceed with some kind of carbon tax, or with a

national (or international) cap-and-trade programme.

1

We agree that both

regulatory mandates and incentives, both positive and negative, should

play a significant role in the world’s efforts to come to reduce the risks of

climate change. But it is increasingly clear that such efforts must also come

to terms with something that is potentially both a problem and an

opportunity: human behaviour.

2

Greenhouse gas emissions are driven, in large part, by voluntary

behaviour, produced by some mixture of perceived benefits, perceived

costs, and perceived social norms. Even apart from mandates and

incentives, changes in such behaviour, produced by new norms and

different kinds of choice architecture, could produce substantial emissions

reductions. Of course, those changes are unlikely to do everything that

must be done. But if a tonne of carbon emissions is valued at an

appropriate level – say, around $35, as the United States believed during

the presidency of Barack Obama – then even seemingly modest steps could

easily produce monetised benefits in the hundreds of millions, or even

billions, of dollars (or euros). And if any nation is adopting some kind of

‘Clean Power Plan’, designed to reduce greenhouse gas emissions, a

serious question remains: How will such a plan achieve its goals? At least

part of the answer lies in uses of behavioural science, including

behavioural economics – our main topic here.

For orientation, suppose that in a relevant community, there are two

sources of energy, denominated ‘green’ and ‘grey’. Suppose that consistent

with its name, ‘green’ is better than ‘grey’ on climate change grounds.

Those who use green energy emit lower levels of greenhouse gases and

also of conventional pollutants. Suppose that those who use grey energy

save money. Which will consumers choose?

The obvious response is that the answer will depend on the

magnitude of the relevant differences and the nature and the distribution

of preferences among consumers. Suppose that green energy is far better

than grey in terms of climate change and that grey energy costs only very

slightly less. If so, consumers will be more likely to choose green energy

than if it is only slightly better on environmental grounds and if it costs

1

For a superb discussion, see William Nordhaus, The Climate Casino (Yale 2013).

2

See Lee Ross and others, ‘The Climate Change Challenge and Barriers to the Exercise of

Foresight Intelligence’ BioScience (2016), available at

.

[2018] Greener by Default 33

far more. Individual preferences certainly matter. Across a reasonable

range of imaginable differences in magnitudes, we would expect to see a

great deal of heterogeneity across people, nations, and cultures. Some

people do not much care about greenhouse gas emissions, and the

monetary figures will drive their choices. For other people, reducing such

emissions is important, and such people may be willing to pay a great deal

to make the environmentally preferable choice. On standard assumptions,

people’s decisions will depend on the relationship between economic

incentives and underlying preferences.

The standard assumptions are not exactly wrong, but as behavioural

economists have shown, they disregard important variables that do not

involve strictly economic incentives.

3

Some kind of choice architecture lies

behind people’s decisions, and that architecture may have large effects on

what people choose.

4

One question involves prevailing social norms.

5

What

choices are other people making, and why? If choosers know that most

other choosers are selecting green energy, there will be an increase in the

likelihood that they will themselves choose green energy.

6

If, by contrast,

environmentalists lament the fact that few people are choosing green

energy, the result might well be to aggravate the very problem that

environmentalists are seeking to solve, by drawing attention to, and thus

reinforcing, a social norm that they hope to change.

7

And if there is a

widespread belief that reasonable and good people select climate-friendly

products, that norm will exert pressure in favour of green energy.

8

Social

3

For a valuable collection, see Eldar Shafir (ed), The Behavioral Foundations of Public Policy

(Princeton 2013).

4

See Richard H Thaler and Cass R Sunstein, Nudge: Improving Decisions about Health,

Wealth and Happiness (Yale 2008).

5

See Hunt Alcott, Social Norms and Energy Conservation, (2011) 95 J Pub Econ 1082; Hunt

Alcott and Todd Rogers, ‘The Short-Run and Long-Run Effects of Behavioral Interventions’

(National Bureau of Economics Research, Working Paper No 18492, 2012), available at

https://files.nyu.edu/ha32/public/research/Allcott%20and%20Rogers%202012%20NBER%20W

P%20-%20The%20Short-Run%20and%20Long-

Run%20Effects%20of%20Behavioral%20Interventions.pdf.

6

See ibid 1082–95.

7

Robert B Cialdini and others, ‘Managing Social Norms for Persuasive Impact’ [2006] 1 Soc

Influence 3, 10–12.

8

ibid 12. Note in particular the finding that drawing public attention to the existence or

pervasiveness of undesirable behaviour can actually increase such behaviour:

‘It is worthy of note that our most ineffective persuasive message simulated the sort of

negatively worded, descriptive norm message that . . . is regularly sent by public health and

community service officials regarding a wide variety of social problems. Our results

indicate that appeals of this type should be avoided by communicators in their persuasive

undertakings. Unfortunately, this is not always the case. . . . For instance, after we reported

the outcomes of the present study [showing the ineffectiveness of park signs containing