On the perils of environmentally friendly alternatives

Abstract

Environmentally friendly alternatives (EFA) are touted as a key component of a transition towards lowering the impact of human activity on the environment. Still, the environmental costs of these technologies are seldom null; they are simply less environmentally damaging than existing options. In this paper, we investigate consumer behavior when an EFA is introduced. Using a carefully constructed field experimental design, we look at plastic bags vis-a-vis biodegradable (bio) bags, when the latter are offered for free versus at a price. Moreover, we explore offering costly biodegradable bags as part of the default choice. We find that giving away the bio bags for free results in a large behavioral rebound effect, resulting in a substantial increase in the total number of bags. Setting a small, rather symbolic price offsets this rebound effect completely. Interestingly, when the bio bag is offered as a default, the behavioral rebound remains. Our results lead us to conclude against providing these EFA for free and to caution against the use of subsidies to promote their uptake.