Economists find that many air travelers more readily choose faster, but more expensive carbon offsetting options online if selecting a slower option requires action. However, the readiness to do so decreases as the gap between the most and the least expensive option increases.
The defaults on a carbon offsetting website can cause a large percentage of customers to select faster CO2 compensation, even if this entails higher costs. In cooperation with a web portal offering carbon offsetting, a research team at the University of Bern with the participation of Professor Dr. Axel Ockenfels at the University of Cologne explored the question of the costs at which people are still willing to accept so-called defaults. Defaults are options that kick in automatically if we do not explicitly reject them. The study has been published in Nature Human Behaviour.
Nudging is one popular tool in behavioural economics. Defaults are widely used, for example in the case of automatically being registered as an organ donor in certain countries if one does not actively object, on in the case of power supply contracts. A default regulates what happens if one does nothing. This effect is also employed in climate protection. In Switzerland, for example, many customers automatically receive green energy in a power supply contract if they do not explicitly object.
Questions of ethics, social welfare, and distribution need to be explored further and more systematically before it is acceptable to nudge people towards certain behaviours – even if these behavioural changes are collectively desirable, for example in mitigating climate change and pandemics. This is especially true when behavioural changes are brought about by decision-making architectures designed by profit-maximising corporations.
Axel Ockenfels
Previous research has shown that defaults can effectively influence human behaviour. However, it has not been well understood how effective such defaults are at higher costs. A team led by Sebastian Berger, Assistant Professor of Sustainable Social Development at the University of Bern, made use of detail in the carbon offsetting process offered by a large European airline to offer an empirical answer to this question.
Air travellers who want to offset the emissions from their flight can do so on the website by deciding how quickly they want to compensate for the carbon dioxide generated by their flight. Faster offsetting is possible by investing in synthetic jet fuel. This is very expensive, but prevents carbon from being emitted in the first place. Slower offsetting is possible by investing in reforestation projects. This method compensates for the CO2 within a period of twenty years.
On the platform, passengers can choose the time period themselves (0 years to 20 years, in two-month steps). However, the ensuing costs differ. The platform uses different presettings – defaults – that allow the effectiveness of options to be analysed depending on the costs.
Many passengers accepted the default independent of the preset option despite potentially high individual costs. ‘This results show that people are willing to accept defaults even if they entail potentially high costs,’ Sebastian Berger summed up. However, the more expensive the default was compared to the cheapest option, the less effective it became. ‘Very expensive defaults were no longer accepted,’ he continued. ‘Hence, people cannot be “nudged” at will, they are price-sensitive when it comes to high costs.’
‘The results help us to understand the role the costs of defaults play if we want to predict their effectiveness,’ Sebastian Berger explained. According to the authors, nudging could in principle complement traditional economic incentives for energy conservation and reduce European fossil fuel demand.
At the same time, Axel Ockenfels cautions that many effects of nudging are not yet sufficiently understood: ‘Questions of ethics, social welfare, and distribution need to be explored further and more systematically before it is acceptable to nudge people towards certain behaviours – even if these behavioural changes are collectively desirable, for example in mitigating climate change and pandemics. This is especially true when behavioural changes are brought about by decision-making architectures designed by profit-maximising corporations.’
