Default green energy tariffs could save millions of tonnes in CO2 emissions

Researchers from Warwick University and ETH Zurich studied the Swiss energy market and found that both business and private customers largely accepted the default option, even if it was slightly more expensive, and the switch to green sources proved a lasting one.

The team analysed data from two Swiss energy suppliers who between them supplied around 234,000 households and 9,000 businesses in urban and rural areas.

Both companies restructured their products to offer a choice between conventional power, renewable power and “renewable plus”: one company in 2009 and the other in 2016.

Consumers were assigned the renewable package unless they opted out, a behavioural mechanism known to have success in a range of settings.

Supplier A saw a drop in private customers on the conventional tariff from 97 per cent to 15 per cent following introduction of the green default and by year six, 80 per cent of households were still on the green tariff. For SMEs, the fall was similar, albeit slightly smaller.

Supplier B saw similar results, with a change from 98.8 per cent of households using conventional energy to just 11 per cent after the introduction of the green default tariff.

Further analysis of customer data in the household sector showed that women were around 6 per cent more likely than men to accept the green default, while women business owners were 8 per cent more likely to stick with the renewable package.

It is sometimes argued that the introduction of green energy defaults leads to an increase in energy use: because the energy is considered ‘clean’, consumers may be relaxed about using more of it. However, analysis of six years' worth of energy consumption data showed no evidence of this.

Professor Liebe, one of the University of Warwick researchers, said: “Our study shows that ‘green defaults’ have an immediate, enduring impact and as such should be part of the toolkit for policymakers and utility companies seeking to increase renewable energy consumption, not only among household customers but also in the business sector.”

Large green default effects can considerably reduce CO2 emissions in countries with high fossil fuel share in their energy mix. Taking Germany as a case study, and assuming a default effect of 80 per cent in the household sector, the study calculated a CO2 reduction of approximately 45 million tonnes.

In the UK, energy price caps keep costs for consumers under a certain level and apply to all energy suppliers except in rare cases when an operator can demonstrate that it provides 100 per cent green energy and can trace this back to the source.