Subsidies Boost Motivation for Eco-Friendly Behaviour
Research600 Citizens of Mannheim Participate in ZEW Field Experiment on Energy Efficiency
In a field experiment carried out by ZEW Mannheim, around 600 residents of Mannheim were given the choice between purchasing a regular or low-flow showerhead at different prices. As expected, when the price of the low-flow showerhead is lowered, demand for it increases. However, the authors find differences in demand responses depending on how the price decrease is communicated. Demand rises significantly more when the price reduction is attributed to a subsidy, compared to an unexplained price decrease of the same amount.
“We suspect that the announcement of the subsidy sends a signal that appeals to participants’ intrinsic motivation to engage in eco-friendly behaviour,” explains Dr. Madeline Werthschulte, a researcher in ZEW’s “Environmental and Climate Economics” Unit and one of the study authors.
Two rounds, two choices
For the field experiment, the researchers randomly divided the citizens of Mannheim into two groups, ensuring comparability in terms of important demographic and socio-economic factors due to the random assignment. By taking part in the experiment, the 595 participants from both groups had the chance to win a low-flow showerhead. They were given a budget of 35 euros and had to choose between a regular showerhead priced at 19 euros and a low-flow showerhead priced at 34 euros in the first round. In the second round, the same choice was presented, but the price of the low-flow showerhead was lowered to 29 euros, a reduction of approximately 15 per cent. The first group was informed solely about the price decrease, resulting in a 3.4 per cent increase in demand for the low-flow showerhead. “In addition to the price reduction information, the second group was informed that the low-flow showerhead was subsidised as it contributes to the energy and climate protection goals of the federal government. In this group, the demand for the low-flow showerhead increased by 8.8 per cent,” explains Lara Bartels, a fellow ZEW researcher and co-author of the study.
Eco-friendly behaviour not limited to showering
The results of a subsequent survey of the participants reveals that the subsidy has no impact on how individuals perceive the money or water savings achieved through using the low-flow showerhead. Similarly, the subsidy does not alter their perception of the purchase as a social norm. However, the results indicate that the subsidy prompts eco-friendly behaviour that is not only limited to showering. Participants in the subsidised group exhibit a greater willingness to take shorter showers, support other eco-friendly subsidies, and participate in environmentally conscious activities. “These findings suggest that the subsidy enhances intrinsic motivation for adopting eco-friendly behaviour,” explains Werthschulte.
