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  • 17th Aug 2022

Getting the most out of the Inflation Reduction Act’s climate funding with behavioral insights

The US has just passed the Inflation Reduction Act, which aims to reduce carbon emissions by roughly 40% by 2030. Its $369 billion of provisions for climate programs will affect our planet—and our lives—for years to come. Therefore, it’s critical to get the design and rollout  of these initiatives right.

Our experience indicates that behavioral insights can help with this task. BIT has partnered with state and local governments on increasing program uptake for years, and has deep experience in advancing sustainability globally. Here are key lessons we’ve learned, organized by the types of investments governments will receive: 

Increasing energy efficiency

Key lesson: Make future benefits (i.e., environmental impact, cost savings, etc.) more salient and immediate.

To make households more energy-efficient and less reliant on fossil fuels, programs will have to encourage people to retrofit their homes and buy eco-friendly heaters and appliances. Though these purchases will save people money and help the environment long-term, their up-front prices can be a barrier. Plus, we typically outweigh immediate costs over future benefits.

The UK is implementing initiatives with similar challenges. BIT recently conducted an online trial measuring the willingness of homeowners to switch to heat pumps from gas boilers. We found that reducing upfront costs is the most impactful solution to promoting heat pump adoption. Pairing this approach with reduced running costs and delayed payments could make it even more effective.

Through a randomized controlled trial with a British appliance retailer, we also found that labeling washer dryers with their lifetime running cost, as opposed to per cycle cost, encouraged people to buy machines that used less energy.

Incentivizing electric vehicle purchases

Key lesson: Rebates are an important tool, but making the green option (e.g., electric vehicles, public transport) the most convenient option, will fuel widespread change.

The Act builds in more tax credits to drive consumers to buy electric vehicles (EVs) over gasoline-powered cars. But rebates alone may not be enough. 

In 2020, BIT identified many misperceptions preventing people from purchasing EVs: the cost, functionality, usability, etc. To address these myriad barriers and increase EV uptake, policymakers should take a holistic behavioral approach. Designing a system of interventions around rebates, including price labeling that clarifies long-term costs, making test drives easier to take, incentivizing roadside businesses to install charging stations, and more can help create broad adoption of EVs.

However, electric vehicles are just one part of the solution. More and better public transportation holds the potential to reduce emissions significantly. In a report for Environment and Climate Change Canada, we offer evidence-based recommendations for shifting commuting behavior, including practical ways to leverage public transport infrastructure.

Advancing environmental justice

Key lesson: There’s no single fix for the climate crisis—and we know that it disproportionately impacts certain groups. Understanding their experiences will lead to more effective, tailored solutions. 

Climate change affects all of us, but not equally. The Act includes funds to help rectify the disproportionate environmental harms that low-income communities of color have faced for generations. Applying a behavioral science lens can help maximize the benefits of these programs.

A recent project took us to the Pacific Northwest, where we explored how low-income customers experience energy burden. Our team conducted exploratory research, including reviewing local data and interviewing residents to understand their perspectives. Stigma around enrolling in certain energy programs and frictions (i.e., hassles) in the way of accessing benefits shone through.

It’s important to consider how different groups of people are affected by both climate change and by the interventions put in place to address these challenges. By applying behavioral insights holistically, we can gain that empathetic understanding—and then develop more tailored solutions for utilities to begin improving trust and engagement with consumers. A combination of interventions, such as using defaults to support customers and streamlining enrollment, may support energy burder and other environmental justice initiatives.

Promoting conservation & restoration

Key lesson: Where conventional regulation and incentives fall short, behavioral science and rigorous evaluation can create a clearer picture of what works.

Historically, conservation efforts have relied on regulation, market forces, incentives, and building awareness about the problem. While these approaches are vitally important, they aren’t always effective or easy to enforce. That may partly be because they neglect the reality that habitat destruction is, at its core, the result of human behavior. Plus, they’re usually not measured, so policymakers can’t build on successes or learn from setbacks.

As agencies win new grants to protect and restore habitats, we urge them to consider how behavioral insights can improve these initiatives. In 2019, we developed a report detailing how our biases, decision-making environments, and other factors affect conservation behaviors. Practitioners should use this expanded toolkit to shape conservation and restoration programs.

We need transformational change

Reducing US carbon emissions will require all of us to shift our behavior. But this is just half of the picture. Policymakers need to create transformational changes—at the institutional and systemic levels—to support the full transition to a net-zero carbon economy.

Interventions that address root causes of the issue can help create this ripple effect. For example, to improve public health, the UK government worked with BIT to introduce a tax on companies that produce drinks with a certain threshold of sugar. The announcement alone encouraged companies to cut sugar from their products. Since it has been instated, the tax has led to extensive reformulation

Now, consumers are making healthier choices without thinking about it. This upstream behavioral intervention created a new norm for institutions and individuals, and will improve health outcomes for years to come. Similar approaches will be critical to the success of climate progress.

How BIT can help

Funding from the Inflation Reduction Act will open new opportunities for government at all levels for transformational change. To ensure these investments are impactful, designing new programs and incentives with a realistic model of human behavior in mind will be key. 

BIT has deep expertise partnering with federal agencies and state and local governments to:

  • Understand behavioral challenges and opportunities to inform program design
  • Develop policies and programs to account for human behavior 
  • Rapidly pilot and evaluate programs and policies

Want to explore maximizing climate programs with behavioral insights?

Contact us here