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Past Issue • Jul-Sep 2014

Going Beyond the Price Signal: Managing Energy Demand through Behavioral Instruments

Governments, regulators and electricity utilities around the world are today seriously engaged in efforts to manage consumer electricity consumption. The need to achieve energy efficiency among various other reasons is leading to such initiatives that attempt to change consumer energy behaviours. Anant Sudarshan offers an analysis based on research in the United States and India related to the potential of behavioural interventions with respect to consumption of electricity and some of the limitations of this approach. Framing policy to tackle environmental challenges frequently involves dealing with the difficult problem of changing consumer behaviors. To change behavior – assuming there is a good reason to do so – requires figuring out how people respond to different incentives and policy instruments. When it comes to modifying consumption behaviors, by far the most commonly used tool is to change the prices people pay. Yet while straightforward in theory, changing prices is often neither politically nor administratively easy to implement. And where subsidies are involved, it may also become a very high cost policy tool.

ABOUT THE AUTHORS

  • AnantSudarshan

    Anant Sudarshan

    Anant Sudarshan is a Giorgio Ruffolo Post-doctoral Fellow in the Sustainability Science Program at the John F. Kennedy School of Government at Harvard University. He works at the intersection of energy policy, behavioural science, environmental economics and engineering.
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