The Effects of Incentives on Environment-Friendly Behaviors: a Case Study

ABSTRACT - The use of incentives to encourage social change behaviors has received a good deal of attention in past years, primarily from a conservation perspective. This paper reports the results of a financial incentive program to reduce air pollution. Almost 9% of the 6500 employees of a large public utility participated in the program by changing their commute mode from driving alone to carpooling, vanpooling, or taking a bus.

Citation:

R. Bruce Hutton and Frank Markley (1991) ,"The Effects of Incentives on Environment-Friendly Behaviors: a Case Study", in NA - Advances in Consumer Research Volume 18, eds. Rebecca H. Holman and Michael R. Solomon, Provo, UT : Association for Consumer Research, Pages: 697-702.

Advances in Consumer Research Volume 18, 1991      Pages 697-702

THE EFFECTS OF INCENTIVES ON ENVIRONMENT-FRIENDLY BEHAVIORS: A CASE STUDY

R. Bruce Hutton, University of Denver

Frank Markley, University of Denver

ABSTRACT -

The use of incentives to encourage social change behaviors has received a good deal of attention in past years, primarily from a conservation perspective. This paper reports the results of a financial incentive program to reduce air pollution. Almost 9% of the 6500 employees of a large public utility participated in the program by changing their commute mode from driving alone to carpooling, vanpooling, or taking a bus.

INTRODUCTION

The year 1990 has become a pivotal year for assessing society's response to the host of environmental issues that have arisen in the past two decades.- In 1970, environmental concerns were focused by the first grass roots organized Earth Day and the passage of the National Environmental Policy Act. Concerns about the state of the environment were further expanded by the 1973 Arab oil embargo which introduced the importance of political and economic factors in developing environmental policy.

Today, concern for the environment may be at an all time high. Over the past twenty years, recurring problems and serious incidents - Love Canal, Times Beach, PCBs, dioxin, vinyl chloride, contaminated groundwater, air pollution, acid rain, asbestos, radon gas, nuclear waste, Exxon Valdez, global warming, rainforest destruction, Bhopal have continued to keep the environment at the front of the public consciousness, prominent in the media, and magnified by worldwide environmental groups. And, the current Middle East crisis vividly points out the continued importance of environmental resources in shaping political and economic policies around the world.

Over the past twenty years government policies have emerged (e.g., Clean Air Act, 1970; Environmental Education Act, 1970; Energy Policy and Conservation Act, 1975) and technological solutions developed (e.g., nuclear power, solar power, fuel efficiency standards). In both cases and with varying degrees of success, strategies and programs designed to encourage public acceptance of these policies and technologies have also been introduced. While the values expressed by society strongly support protecting the environment, many behaviors simply do not. For example, in 1989, 80% of the sample in a national poll agreed with the statement, "Protecting the environment is so important that requirements and standards cannot be too high, and continuing environmental improvements must be made regardless of cost" (Ruckelshaus 1989). And yet, in the past twenty years, public transportation use has plummeted 50% and net energy demand in the United States is on the rise (Udall 1989). The struggle to establish what Robert Cahn (1988) refers to as an "environmental ethic" or the Science Council of Canada (1976) describes as a "conserver society" may have been explained best by Benjamin Franklin in 1781:

"To get the bad customs of country changed and new ones thought to be better introduced, it is necessary first to remove the prejudices of the people, enlighten their ignorance, and convince them that their interests will be promoted by the proposed changes; and this is not the work of a day."

One of the ways that has shown some promise in encouraging behavior change is the use of incentives. This article describes the results of a pilot program to encourage-employees of a large public utility to change their commute mode in order to reduce air pollution. The program was voluntary, and it used a financial incentive to motivate commuters to change from commuting in single occupied vehicles to an alternative form of transportation that would result in less air pollution (e.g., carpool, bus, vanpool, bicycle, walk).

THE VALUE OF INCENTIVES IN SOCIAL CHANGE PROGRAMS

The concept of incentives has long been used by both the public and private sectors to encourage behavior change among targeted audiences. The typical goals for incentive programs are to generate repeat purchase, influence sampling, and motivate consumers to read product or program advertising (Advertising Age 1978).

Winett and Kagel (1984) note that it is an accepted practice to categorize behavioral procedures as antecedent and consequence strategies. Antecedents are defined as stimuli that precede a desired behavior and are designed to elicit or modify the behavior (e.g., advertising, educational materials). Consequence strategies, on the other hand, are stimuli that follow the presence or absence of a behavior and are designed to increase or decrease the frequency of the behavior (e.g., feedback, tax credits, rebates). Incentives are usually classified as a consequence strategy.

One of the most fertile areas in which the value of incentives has been explored is energy conservation. Of course, from a transportation perspective, the strategies to conserve fuel or reduce air pollution are very similar (i.e., reduce the number of miles driven). Ritchie and McDougall (1985) provide a broad overview of conservation strategies, including financial incentives. Nemetz and Hankey (1984) provide the most comprehensive review of economic incentives to encourage conservation. Hutton and McNeill (1981) provide an example of the impact of incentives that are not financial in nature.

Financial incentives are typically divided into positive and negative types (Nemetz and Hankey 1984):

INCENTIVES

Positive

Tax incentives (credits, deductions, rebates, exemptions)

Grants

Loans

Subsidies

Negative

Taxes

Fines

Special charges/rates

Price increases

Of the 71 energy conservation incentive programs compiled by Nemetz & Hankey (1984), 22 are transportation related. One category of programs focused on reducing energy use in the automobile sector by providing positive incentives for vanpooling or carpooling, providing tax deductions for fuel-conserving devices, and lowering automobile registration fees for energy efficient cars. Negative incentives within the automobile sector included taxing gasoline, parking spaces, highway access, and "gas guzzler" automobiles. Programs targeting urban transportation, commuting, and intercity passenger travel almost exclusively utilized employee or public subsidization and fare reductions for mass transportation programs.

Ritchie and McDougall (1984) reached the following conclusions regarding the use of financial incentives:

Cash incentives combined with feedback on electricity use reduced energy consumption, in some cases, only in the short-term.

The cost of previous incentive or rebate programs has far outweighed the resultant benefits

Consumers are more receptive to better public transportation services than to reduced fares.

Ritchie and McDougall (1984) also cite three major problems when considering incentives to encourage curtailment behaviors. These include:

Curtailment behaviors usually offer substantially lower energy savings than do efficiency behaviors.

Visualization of how a rebate program based on reduced energy use could be implemented on a large scale is difficult.

The long-term effects of incentives on curtailment behaviors are unknown and there may be a "wear-out" effect which occurs over time.

After examining hundreds of economic incentive programs, Nemetz and Hankey (1984) identify nine common elements essential to successful programs and four reasons for program failure:

FACTORS LEADING TO:

Success

Ease of participation

Significant monetary incentives

Extensive information diffusion

Consultation and participation of industry and community leaders

Ease of enforcement

High coverage and impact

Need for mandatory elements

Need for follow-up monitoring

Need for quality control

Failure

Inadequate monetary incentives

Inadequate prior consultation

Poor information dissemination

Poor targeting of program

PROGRAM BACKGROUND

In 1984, the combined problems of carbon monoxide and participate pollution had moved Denver, Colorado into a tie with Los Angeles, California as the two cities with the worst air pollution problems in the United States. The primary culprit was tail pipe emissions. Vehicle miles traveled in Denver had risen from 15 million per day in 1971 to 32 million in 1985. Further, it was projected that, by the turn of the century, travel would more than double to 65 miles million per day.

In response, the State Department of Health in conjunction with the Environmental Protection Agency implemented the Better Air Campaign, a voluntary driving reduction program targeted at individual drivers in the metro area during a three month "high pollution" season. It utilized a variety of antecedent type strategies anchored by a mass media advertising and public relations campaign.

Over a five year period, the program evolved to include not only voluntary driving reduction components but also mandatory use of oxygenated fuels and wood burning bans on extreme pollution days. Results of the program were mixed. Both mandatory components, wood burning bans and oxygenated fuels use, achieved policy stated goals. The voluntary driving reduction component produced positive results for early consumer response levels (e.g., awareness, attitudes, intentions) but statistically insignificant reductions in vehicle miles traveled. For a complete evaluation of the program, see Hutton and Ahtola (1990).

A number of important lessons were learned from the program. It was clear that mass media oriented programs targeting a total community cannot build significant behavior changes, even over time. It was recommended that future driving reduction programs be targeted to specific segments utilizing a more "grass roots" oriented strategy to produce needed behavior change.

In 1988, taking a more targeted approach, the governor created the Corporate Alliance for Better Air as a way to involve the business community directly in the air pollution battle. In response to recommendations from the Better Air Campaign evaluation, the State Department of Health and the Alliance developed the Clean Air Colorado program in 1989. The goals of the program were threefold:

Develop a series of individualized pilot programs for business, government, and education to reduce pollution and waste.

Implement the pilot programs during the 1989-90 high pollution season.

Disseminate the lessons learned from the case studies to other organizations and communities through personal consultation and an Air Quality Workbook which could be used as a guide for organizations wishing to start their own program.

In the first year of this new initiative, 13 pilot programs were designed and implemented. The following describes the results of one company's efforts to motivate its employees to change their commute mode buy offering financial incentives.

THE CLEAN AIR CAMPAIGN

Public Service Company of Colorado is the state's largest public utility, with over 6500 employees statewide. The primary purpose of the program was to encourage employees not to drive to work alone. A variety of antecedent and consequence strategies were utilized, including:

Cash Incentives. Each employee received one dollar for each day he or she did not drive alone to and from work between November 1. 1989 and January 31, 1990.

Clean Air Day. This day was designed to thank employees for participating. There was a breakfast for employees at various locations statewide.

Expanded Van Pool Program. Additional commuter vans and routes were added.

Discount Appliance Booklets. The booklet contained coupons for discounts on natural gas products to encourage conversion of wood-burning fireplaces.

Information Campaign. Displays and other information were made available to employees stressing the importance of clean air and how to participate.

METHODOLOGY

The most visible and innovative component of the program was the cash incentive. A dollar a day incentive was offered to each employee who commuted to and from work in some way other than driving alone. Alternative methods to driving alone had to be used at least five days a month to qualify. To keep track of participation, each employee was provided a calendar to record the day, mode of transportation used, mileage to and from work, commute time, and other employee information. The calendar was turned in at the end of each month, and the money earned was recorded and applied to the following month's paycheck.

In order to determine program acceptance a telephone survey was conducted of both participants (defined as any person who turned in at least one calendar) and non-participants (employees who did not turn in a calendar). A random sample of 250 employees from each category was taken.

RESULTS

Three groups of employees are relevant for discussion: (1) participants who normally drive alone to work; (2) participants who normally commute in some way other than driving alone; and (3) non-participants.

Table 1 shows that regardless of whether employees participated, they viewed the incentive program favorably. Even among non-participants (primarily drive alone commuters) 45% indicated some likelihood of participating next year.

There was strong indication that the multidimensional nature of the program did not come through. Less than 50% of any group cited awareness of the other program components. Further indication that the program may have suffered from a lack of cohesive presentation is found in the 2-5% of respondents who indicated the program was disorganized.

Interestingly, the educational value of the program was the second most mentioned positive program perception. This is consistent with other research that has shown an incentive alone is not likely to drive significant behavior change among certain groups.

Table 2 provides participation figures. Percentages have been weighted proportional to the total employee base. Overall, 22.2% of employees turned in at least one calendar. Of those, 3.3% were normally drive alone commuters and 18.9% were already commuting in some way other than driving alone. Interestingly, 5.5% of the nonparticipants (i.e., drive alones who did not turn in a calendar) reported changing their commute mode enough to qualify for the incentive, but they did not turn in a calendar. Primary reasons cited for not turning in a calendar were: (1) too much trouble (46%) or (2) forgot (10%). Consequently, the incremental gain from the program was 8.8%. Table 2 also shows the differences between the normal drive alones and those who normally commute by some means other than driving alone. Only 37% of drive alones participated all three months compared to 84% of the other group. Additionally, 98% of the other group has continued their ride-sharing mode compared to 26% of the normal drive-alones.

TABLE 1

ATTITUDES AND PERCEPTIONS TOWARD THE PROGRAM

TABLE 2

PARTICIPATION

When non-participants were asked why they were unable to participate, primary reasons given were:

No one to carpool with 41%

Variable work hours 28%

No bus in area 19%

Need car in job 15%

These responses indicate the primary barriers to participation to be either job related (e.g., work hours) or a perceived lack of alternatives (e.g., no bus).

In an open-ended question, all respondents were asked how they would improve next year's program. The most frequently mentioned recommendations were:

Increase incentive 20%

More information/better communication 14%

Increased vanpool routes 8%

Discount bus passes 5%

Flextime/4 day weeks 5%

Finally, in order to better understand differences, participants and non-participants were examined along several classification questions. Participants were more likely to hold a nonmanagement position. While over 50% of support and operations respondents surveyed turned in at least one calendar, only 42% of managers did so. Further, managers were much more likely to report driving alone to work (65% vs. 56%). Not surprisingly participants were also more likely to be younger and to have worked for the company fewer years.

CONCLUSIONS AND RECOMMENDATIONS

In its first year as a pilot program, Public Service Company's Clean Air Campaign achieved modest success. Almost 9% of the employee workforce who normally drive alone to work participated in the incentive program. Overall, 18.9% of participants reported not driving alone to work as their normal commute pattern. For this group the average number of days they did not drive alone during the three month period was 16.2. The average number of trip miles saved per day was 507. The number of days and trip miles saved per day by the employees who changed because of the program was 11.9 and 291 respectively. Consequently, the incentive program reduced miles driven by 43% from normal.

An examination of the program in the context of Nemetz and Hankey's elements of success for incentive programs provides valuable insight into what was right about the program and what could be improved to ensure greater success in the next phase.

Ease of participation. The pilot program received mixed reviews in this area. Providing each employee with a calendar that could be filled out and turned in to the payroll department appeared to be an easy way for employees to document their participation. In fact, it was viewed by many as cumbersome and too much trouble to fill out. Even a percentage of those who were already doing the "right" commute modes to qualify chose not to fill out the calendars in some cases. It appears the program would benefit from a more streamlined self-report instrument in the future.

Also, while some attempts were made to expand the options for employees (e.g., increased vanpools), little, if anything, was done to help organize the options for employees. One recommendation in this area is to organize a within company carpool/vanpool matching service. Also, providing options for four day work weeks and flextime scheduling were employee recommendations.

These recommendations are consistent with reasons given by non-participants for not taking advantage of the program. Essentially, their reasons fall into two categories: (1) work related barriers such as variable work hours which prohibit carpooling and busing and-(2) lack of available options such as not having a bus in their area or no one to share driving with.

Significant monetary incentives. In this case, the cost/benefit trade-off is difficult. The company spent approximately $50,000 in incentives plus time. The reward was an incremental 9% participation rate and an average of 798 miles saved per work day. The real value of the investment depends on the goals of the program and the follow-up impact in the second year's efforts. In some respects the money can be viewed as an investment in future returns.

From the employees standpoint, a dollar a day is not too significant. However, the value of the incentive should riot only be measured in terms of absolute monetary value. The incentive also provides a positive message to employees from top management that speaks to the company's commitment to clean air and the importance of reducing pollution.

Extensive information diffusion. Based on employee feedback and the overall lack of awareness of program components, it is clear that campaign communications should be improved. First, a more coordinated effort to tie all components together should increase interest and visibility. Second, more information besides the incentive program should have been emphasized. Employees report valuing the educational component of the program. This could be expanded. For example, multiple benefits could be stressed. It was reported that the primary reason current ridesharers commute the way they do is convenience, economics or to avoid stress. These attributes could be highlighted along with the environmental benefits.

Consultation. Company officials did work with health department officials in program design and evaluation. However, the program started too late for any substantial changes to be made.

Enforcement. The program was voluntary in nature. Therefore, enforcement had only to do with the accounting and payroll procedures used to audit days participated and to pay accordingly.

Coverage and impact. There was little feedback given during the program in terms of impact. This lack of feedback is likely to have dampened the initial enthusiasm of some new participants as well as failed to encourage later adoptors.

Mandatory elements. The only mandatory element present was in the rules of the program. That is, an employee had to participate five days a month and change the commute both ways before he or she was eligible. Participation was strictly voluntary.

Follow-up monitoring. Some self-report data was available regarding continued ridesharing following the program. But it has not been extensive. Evaluation in the second year will provide additional information.

Quality control. Policing was done in two ways. Random samples were taken over the course of the campaign to determine if reported ridesharing was ,in fact, occurring. And, on every calendar another person had to be given as a reference (e.g., vanpool driver). Also, each calendar was checked for inconsistencies.

In summary, this first year pilot program did have some success, but much was learned about how to improve performance to gain additional participation in following years. The value of the financial incentive is still open to question. One key to the next iteration may well be to target the program to more specifically meet the needs of the current drive alone segment. For example, providing an at work carpool for managers who need a car in their job would alleviate the need to commute in a single occupied vehicle. After all, the purpose of a grass roots campaign is to tailor the program to those specific smaller constituencies.

REFERENCES

Advertising Age (1978), "Premiums and Incentives," Special Report.

Cahn, Robert (1988), "What is an Environmental Ethic?," EPA Journal, (July/August), 24.

Clean Air Act (1970), Public Law 91-604.

Energy Policy and Conservation Act (1975), Public Law 94-163.

Environmental Education Act (1970), Public Law 91 -516.

Hutton, R. Bruce and Olli T. Ahtola (1990), "Consumer Response to a Five Year Campaign to Combat Air Pollution," Working Paper, University of Denver, Denver, Colorado.

Hutton, R. Bruce and Dennis L. McNeill (1981), "The Value of Incentives in Stimulating Energy Conservation," Journal of Consumer Research, 8 (December), 291-298.

National Environmental Policy Act (1970), Public Law 91-190.

Nemetz, Peter N. and Marilyn Hankey (1984), Economic Incentives For Energy Conservation, New York, NY: John Wiley & Sons.

Ritchie, J.R. Brent and Gordon H.G. McDougall (1985), "Designing and Marketing Consumer Energy Conservation Policies and Programs: Implications From a Decade of Research," Journal of Public Policy & Marketing, 4, 14-32.

Ruchelshaus, William D. (1989), "Toward a Sustainable World," Scientific American, (September), 166-174.

The Conserver Society (1979), American Marketing Association, Proceedings Series, Karl E. Henion and Thomas C. Kinnear (eds), Chicago, Illinois.

Udall, James R (1989), "Turning Down the Heat," Sierra, (July/August) 26-39.

Winett, Richard A. and John H. Kagel (1984), "Effects of Information Presentation Format on Resource Use in Field Settings," Journal of Consumer Research, 2 (December), 655-667.

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