A behavioural rebound effect

Abstract

Behavioral nudges have received significant attention as a potentially cost-effective method to increase energy conservation. Indeed, energy savings from technological improvements can be costly, and are partially offset by the direct rebound effect, whereby a consumer rationally responds to an increase in energy efficiency by consuming more of the energy good. This paper investigates whether technological improvement might also reduce behaviorally motivated energy conservation. A behavioral rebound effect operates through two channels. First, pro-environmental effort is reduced after an increase in energy efficiency. Second, moral licensing reduces pro-environmental effort further when technological change is endogenous. I develop a novel laboratory experiment to exogenously identify these behaviors. I estimate a behavioral rebound effect of 32%. I also find evidence of moral licensing, which is strongest among subjects with a higher degree of pro-environmental attitudes and beliefs. Subjects’ baseline level of pro-environmental effort is driven by beliefs about social norms.