Goal Setting and Energy Efficiency

This paper shows that goal setting can act as an effective mechanism to induce energy efficiency and conservation actions in the residential sector. We evaluate a large-scale implementation of an energy efficiency program in Northern Illinois and conclude that, on average, households saved approximately 3%. However, savings are heterogeneous, and consumers choosing realistic goals save substantially more than those choosing very low goals or unrealistic goals. We develop a theoretical model of present-biased consumers with reference-dependent preferences that identifies the behavioral mechanism through which goals impact consumption in the data.