TUM Management Insights

Incentives for energy-efficient behavior at work: The importance of non-monetary elements

In the wake of the UN Paris climate summit (COP21) in December 2015, the need to quickly reduce greenhouse gas emissions is more obvious than ever. As one of the main sources of the world’s energy-related CO2 emissions, the road transport sector is an essential domain for analyzing potential reduction measures. Convincing people to drive more fuel-efficiently (“eco-driving”) can contribute substantially to both climate policy goals and to the transport industry’s efforts to cut fuel costs and increase corporate sustainability. While many companies are interested in implementing an eco-driving incentive system, studies show that few have actually implemented such a bonus scheme to date. One reason might be a lack of knowledge about effective incentive design.

Dominik Schall and Prof. Dr. Alwine Mohnen (TUM) address this gap through a natural field experiment conducted with different branches of a German logistics company. It is thus one of very few approaches within energy and transport research to employ a controlled natural field experiment, a field experiment where the subjects do not know that they are part of an experiment, to demonstrate causal relations. Drivers were rewarded for eco-driving, i.e., for average fuel consumption below a specific reference value. This reference value was calculated individually by the company for every driver taking into account the drivers’ different situations. A non-monetary reward (vouchers for pleasurable activities such as dinner at a restaurant or a visit to a wellness center) and an equivalent monetary reward for eco-driving were introduced to a subset of drivers and a control group was maintained to test the incentives’ efficacy over a six-month period. The monetary value of the rewards was variable, set to 50% of saved fuel costs, and calculated in the same way for both reward types.

The results showed that individual incentives for drivers can increase fuel-efficiency by up to 5% and, contrary to rational economic theory, non-monetary incentives can have a larger effect on drivers’ fuel consumption than equivalent monetary incentives. On average there was a significant 5% reduction in fuel consumption due to the tangible non-monetary incentive and a 3.5% average reduction in the equivalent monetary incentive treatment, though this result was not significant. The study indicates that greater emphasis on the enjoyable aspects of achieving higher fuel efficiency, a more emotional response to non-monetary incentives, and more frequent consideration of and discussions about non-monetary incentives, might help drive the stronger effect of non-monetary incentives in comparison to an equivalent monetary incentive.

The study extends the knowledge of how to formulate effective policies for eco-driving that can help to modify habitual car use and facilitate a deliberate choice for more eco-friendly driving. The results should be used to inform private actors, such as companies with a vehicle fleet, e.g. in the road freight transport sector, about the effectiveness of various economic incentives for eco-driving and the power of non-monetary rewards.

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