Changing Climate Action through Behavioural Economics

Changing Climate Action through Behavioural Economics

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Mary Sabina Peters

Behavioural economics has emerged as a significant new subfield in the discipline of economics. To promote policy goals, behavioural economics is being used as an enabler for policymakers. The focus shifts on understanding how these tools can be further used to improve the climate change scenario, and how such a field can affect climate change policy-making decisions. Until now, policies were being made keeping in mind the theory of rational choice. To understand the rationale behind the decision making of an individual and what influences their decision-making abilities, different theories and tools under the purview of behavioural economics may play a significant role. The theory of bounded rationality by Herbert Simon questions the limits to the rationality of an economic person. This theory focuses on the principle of satisficing rather than optimising. In an extension of this theory is the heuristics and biases program. The simple heuristics program which uses information processing to explain how people make estimates or choices can be used to understand and encourage climate-friendly consumer choices, thereby enabling faster climate action.

The policymakers of various states have understood the importance to address the burning issue of climate change. At the Rio Earth Summit in 1992, the United Nations Framework Convention on Climate Change (UNFCCC) came into picture to “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system". Since then, many international treaties and agreements have focused on the climate change issue. To prevent this ‘dangerous anthropogenic interference’, informed climate action at all levels - from policymakers to individuals – has to be made. The theories of behavioural economies give way to two main strategies namely, the nudge strategy and the boost strategy, that can help addressing these dire anthropogenic preferences.

The nudge strategy is based on the idea of manipulating an individual’s cognitive deficits and enabling them to make better decisions. For example, policymakers may create awareness campaigns for citizens about healthy lifestyles, for which they use flyers and pamphlets presenting statistics and evidence-based alternatives to adopt a healthier lifestyle. It is assumed that nudge strategies are used to create an “automatic system”. Hence, this strategy can be introduced as an intervention or a ‘choice architect’ which automatically diverts them to favourable outcomes. Social influences such as peer pressure also play a critical role in the interventions of the nudge strategy. Some of the major factors that facilitate nudge interventions include: 1) The direction in which the choosers’ cognitive behaviour is aligned automatically suits their preference 2) The individual’s knowledge about the disincentives of previously preferred choices, so that they accept the deviation of their decision towards a chosen set of preferences. 3) The implicit preferences that are affected by nudging interventions. 4) The alterable nature of behavioural variations that occur due to the nudge.

The boost strategy is based on the idea of empowerment of individuals by increasing their capabilities to help them reach their desired objectives. The main target is to enhance an individual’s knowledge, skills, decision-making tools. The focus is on a decision-making individual whose capabilities can be improved by boosting their set of skills, and changing the prevailing environment. The boost strategy can further be distinguished into three sections: 1) change in the environment of decision-making. 2) Expanding the set of skills, knowledge, and decision-making tools. 3) Combination of both change in the environment and expansion of the knowledge, skills, etc. The boost strategy involves various methods to attain a significant return in areas where the individual usually makes choices. Simply put, the strategy holds that those cognitive deficits behind imperfect decisions can be taken care of by providing proper training and education.

Globally, a series of erratic climatic events ranging from fires and floods to droughts and heatwaves has been observed. Anthropogenic activities are the major cause for the rising greenhouse gas emission rates and increasing temperatures. Over the world, the major source of anthropogenic carbon dioxide emissions come from the combustion of fossil fuels, principally coal, oil, and natural gas, apart from emissions from transport, industrial activity, deforestation, changes in land use, agriculture (including livestock), and waste management. Other short-lived climate pollutants include black carbon, methane, and ground-level ozone which along with other air pollutants and particulate matter combine to affect the air quality. Reducing carbon emissions therefore becomes critical.

As we know, the growing population along with the changing rate of consumption is affecting the way humans respond to the natural resources available at hand. Hence, to address these problems, improved human behaviour and decision-making can act as the drivers of sustainable consumption and production. Behavioural economic tools like nudge and boost come into play, directing individuals towards a choice architecture resulting in better outcomes.

Mary Sabina Peters is a faculty at the School of Sustainability, Xavier University, Odisha