This paper develops a two-step approach to investigate the effect of energy efficiency improvements on CO 2 emissions at the macro level. We use the index decomposition analysis to derive the true energy efficiency by separating out the impact of structural shifts in economic activity on energy intensity. We then employ both STSM and LSDVC models to examine and quantify the impact of the energy efficiency on CO 2 emissions accounting for non-economic factors such as consumers' lifestyle, attitudes and environmental awareness. The application for 30 OECD countries shows that at the group level, the decline in energy intensity predominately occurred due to improvements in energy efficiency while at the country level, there are mixed contributions from improvement in energy efficiency and structural shift to the decline in energy intensity. The econometric results show that income has the most significant positive impact on CO 2 emissions but improving energy efficiency makes the biggest contribution to driving down CO 2 emissions. The method further enables the separate assessment of non-economic behavioural effects, which are found to exert a non-trivial influence on CO 2 emissions in parallel with changes in energy efficiency. We conclude that energy efficiency remains a key option but that there is also a need for additional policies aiming for behavioural and other non-economic changes.

Behavioral economics can gain more in-roads into environmental economics if we better understand why exchange institutions fail, more effectively reduce health risks and environmental conflicts, encourage more coordination and cooperation, design better incentive systems, more accurately estimate economic measures of value, and promote more protection at less cost. Behavioral economics deserves two cheers for advancing ideas of context-dependence and social preferences, which we illustrate with two examples of recent research.

We examine how social preferences affect the workings of voluntary green payment schemes and show that a regulator could use facilitation services along with a social reward to generate better ecological outcome at less cost by exploiting a farmer’s social preferences to gain a green social-image/reputation. To motivate our model, we first present the results of an incentivized elicitation survey in Scotland which shows that there is a social norm of biodiversity protection on private land among farmers. Moreover, the results of a discrete choice experiment reveal that farmers are willing to give up economic rents for more publicity of their conservation activities; this confirms the relevance of reputational gain in the context of green payment schemes. Our model assumes two types of farmers, green and brown, with a green farmer taking more biodiversity protection actions than a brown farmer. We design a menu of contracts that offers both monetary incentives and non-monetary incentives (a facilitation service with social reward) to induce both type of farmers to join the scheme and to exert first-best levels (i.e., symmetric information levels) of action. Results show that under asymmetric information the regulator can implement the symmetric information equilibrium levels of biodiversity protection actions with only non-monetary incentives for the green farmer and only monetary incentives for the brown farmer. This implies that a regulator can ensure better environmental outcomes, at a lower cost, by exploiting farmers’ social preferences and by offering non-monetary incentives.

No abstract

No abstract