No profit? Technologies with efficient input power may not be so efficient after all

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Research context and design. Left panel: Study site in Guanacaste (light gray) and Puntarenas (dark gray) provinces with study communities indicated by dots. Middle panel: Less efficient, status quo technologies (top) are replaced by more efficient, new technologies (bottom), sometimes requiring additional plumbing pieces to complete the installation. Right panel: Experimental design; hh = household. Bottom panel: Research timeline. credit: Journal of the Association of Environmental and Resource Economists (2023). DOI: 10.1086/725700

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Research context and design. Left panel: Study site in Guanacaste (light gray) and Puntarenas (dark gray) provinces with study communities indicated by dots. Middle panel: Less efficient, status quo technologies (top) are replaced by more efficient, new technologies (bottom), sometimes requiring additional plumbing pieces to complete the installation. Right panel: Experimental design; hh = household. Bottom panel: Research timeline. credit: Journal of the Association of Environmental and Resource Economists (2023). DOI: 10.1086/725700

To address the scarcity of natural resources, pollution and other harmful effects of climate change, some scientists and politicians are emphasizing the adoption of efficient technologies such as water-saving devices and fuel-saving stoves. Proponents often call these input-efficient technologies “win-wins” for their consumer and environmental benefits, and lament their low levels of consumer adoption in what they call the “efficiency paradox.”

Article published in Journal of the Association of Environmental and Resource Economists addresses this paradox and finds that the consumer benefits of adopting input efficiency are, on average, negative.

In “Input Efficiency as a Solution to Externalities and Resource Scarcity: A Randomized Controlled Trial,” authors Francisco Alpizar, Maria Bernedo Del Carpio, and Paul J. Ferraro concludes that for the input-efficient technologies they study, no efficiency paradox exists.

Much of the data on the efficiency paradox is taken from the context of energy efficiency. In Input Efficiency, the authors report instead on a randomized controlled trial (RCT) of water efficiency technology adoption. The trial took place in Costa Rica, where overexploitation of public aquifers is a pressing concern.

Nearly 900 households, from a pool of over 1,300 households, were randomly selected to receive water-efficient showers and faucet aerators. Engineering methods predict an average reduction in water consumption of about 30%, while the actual reduction in experience is only about 9%.

According to the authors, this gap between prediction and reality stems from a set of faulty engineering and behavioral assumptions. For example, engineers assume that households do not change their behavior after adopting the technology, while survey data show that households often leave water running longer to compensate for the lower flow rate of efficient devices.

When the authors assess how participating households value water savings that are both uncertain and realized over many years, and compare this value to the upfront costs of purchasing the technologies, they conclude that for the average consumer, the net benefits of these input-efficient technologies are negative.

The lack of a water efficiency paradox—in other words, the lack of a win-win for the environment and people—means that simply better informing consumers of the benefits of efficient input devices will not be an effective strategy for mitigating water shortages. resources or adaptation to climate change. As the authors of “Entry Efficiency” note, their results suggest that “user misinformation may not be the primary driver of low adoption rates” of efficient technologies.

Instead, the main driver is simply the modest savings from the technology, coupled with the uncertainty and delayed nature of those savings. “In summary,” they note, “claims of a ‘win-win’ outcome associated with the adoption of input-efficient technologies in the context of our study are not supported by the data.” To address water scarcity and mitigate the effects of changing climate in their study area, other solutions will be needed.

More info:
Francisco Alpizar et al, The effectiveness of input resources as a solution to externalities and resource scarcity: a randomized controlled trial, Journal of the Association of Environmental and Resource Economists (2023). DOI: 10.1086/725700

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