It is the function of vice to keep virture within reasonable bound.

Samuel Butler

Financial incentives can provide the motivation for individuals to perform an activity that they already engage in more effectively, such as recycling, or to begin an activity that they otherwise would not perform, such as carpooling. This chapter will provide evidence of the impact of incentives on a diverse array of sustainable behaviors and provide some general suggestions on their use.

While incentives have been used to foster a variety of sustainable behaviors, they have been applied most extensively to waste reduction. For example, a growing number of North American cities have implemented user-fee systems for garbage disposal. While significant differences exist in the methods used, reviews of user fee systems clearly indicate that they dramatically reduce the amount of waste going to landfill, and provide additional motivation for households to recycle, compost and, perhaps, source reduce.

Here are several examples:

  • When San Jose, California introduced a user-pay program in which residents were charged based upon the size of the container they placed at the curb, the impact was a 46% decrease in waste sent to the landfill, a 158% increase in recyclables captured, and a 38% increase in yard waste collected. There was no charge for curbside recycling and yard waste collection.1
  • When the Capital Regional District in British Columbia began to charge households for placing more than one bag or container at the curb there was a 21% reduction in waste going to the landfill and a 527% increase in recycling capture rates. Curbside recycling was a free service to residents and yard waste had to be taken to a depot.2
  • Worchester, Massachusets introduced a program in which residents purchased bags for their garbage. This program resulted in a 45% reduction in the waste stream, with recycling responsible for 37% of the waste stream diversion. Residents were not charged for recycling nor for dropping off yard waste at a collection center.3

Another form of incentive is bottle deposits, where consumers pay an additional charge for purchasing beverages and then receive a portion of the deposit back when they return the container. Several studies indicate that deposits on beverage containers have a substantial impact on reducing littering:

  • The introduction of bottle deposits has been associated with a 68% reduction in litter in Oregon, a 76% reduction in Vermont, and an 82% reduction in Michigan.4
  • When beverage container deposits were introduced in New York State, analysis of a highway exit and a section of a railway track in New York revealed that there was a 74% reduction in litter of stamped 5-cent deposit returnable bottles and cans along the highway exit, and a 99% reduction along the railway track.5

incentives and other sustainable behavors

While incentives have had a remarkable impact upon waste reduction, their use in promoting other sustainable behaviors has not been as extensive. Below are a variety of examples of their use:

  • Assuming that moving provided an opportunity to alter trans-portation choices, households that had moved recently were provided with a one-day free ride mass-transit ticket and person-alized information regarding transit schedules. Comparing transportation choices before the move and afterward, use of public transport increased from 18% of trips to 36% of trips and car use simultaneously declined, from 53% beforehand to 39% after the move.7
  • The state of California provides an incentive of $.16 a gallon for do-it-yourselfers (diys) to return used oil to certified used oil collection centers (cccs). In a review of the state’s environmental policies regarding used oil, anecdotal evidence suggests that those returning the used oil rarely asked for payment, and the cccs rarely offered it, limiting the impact that this incentive could have upon behavior. Interestingly, the authors suggest that since these centers are paid an equivalent amount to collect used oil to what they are to pay out for its return, they are only able to profit from its collection if they do not inform those returning the oil of the incentive’s existence.8
  • Unless specifically linked, there is a perceived inherent conflict between the financial performance of a company and its environmental performance. What occurs, however, if com-pensation for top management is linked to environmental performance of their company? In a review of the performance of various companies, only when there was explicit link between environmental performance and management compensation was there evidence of an increase in environmental performance. However, these effects were found to be limited in scope.9
  • The province of Ontario, Canada initiated an aggressive program to encourage the installation of solar photovoltaic systems. Under the Renewable Energy Standard Offer program, owners of systems under 10mw can sell power to the grid at the rate of $0.42 per kWh. To encourage investment in solar power, this rate is locked in for twenty years. While this is a sizable incentive, barriers to the implementation of solar photovoltaic systems have been found to limit uptake.10
  • In a review of residential energy conservation programs, rewarding the adoption of energy conservation behaviors was effective, but the impact was usually short-lived.11
  • A national study of the influence of eight major conservation incentive programs in the United States found that they had a substantial impact upon forest and habitat protection.12 Not surprisingly, landowners who have positive attitudes toward land management have been found to be most receptive to these programs.13
  • Households in the United Kingdom who are on a fixed tariff system, where they pay a flat rate independent of the amount of water they use, were found, not surprisingly, to use more water than those on a variable tariff in which charges were based on actual use.14
  • Cycling levels in the Netherlands, Denmark and Germany are substantially higher than those in the United Kingdom and the United States, where roughly only 1% of trips are made by bike. High levels of cycling in these three countries have been found to be related to the introduction of safe cycling laneways, traffic calming in residential areas, sufficient bike parking, and incorporation of cycling with public transport. However, cycling has also been spurred by making driving expensive through taxes on vehicle ownership, charging for driving (e.g., congestion charges), and increased parking rates.15

Creating Effective Incentives

Incentives can be an important component of a community-based social marketing strategy, particularly when motivation to engage in a behavior is low. The following guidelines are drawn from Gardner and Stern’s discussion of the use of incentives to foster sustainable behavior.16

  1. Consider the Size of the Incentive. Incentives need to be large enough to be taken seriously. However, past a certain point, diminishing returns occur from increasing the size of the incentive. Study the impact that incentives of different sizes have had in other communities in arriving at the size of incentive for your program.
  2. Closely Pair the Incentive and the Behavior. Incentives are usually most effective when they are presented at the time the behavior is to occur. For example, charging for the use of plastic shopping bags at the checkout brings attention to the cost of using disposable bags and increases motivation to bring reusable bags. For example, at the supermarket at which I shop, the introduction of a 5-cent charge per plastic bag has resulted in approximately 60% of shoppers using reusable bags or containers for their groceries.
  3. Make the Incentive Visible. When implementing an incentive carefully consider how you can draw attention to it. Remember that an incentive will have little or no impact if people are unaware of its existence.
  4. Use Incentives to Reward Positive Behavior. Research in behavior modification underscores the importance of using incentives to reward behavior we would like people to engage in. When sustainable behaviors, such as recycling, are rewarded with lower garbage disposal costs, the likelihood that people will recycle in the future increases. In contrast, disincentives are often less predictable, since the punishment suppresses an unwanted behavior but does not directly encourage a positive alternative. A concrete example of the relative effectiveness of incentives versus disincentives is provided by research in littering, which has shown that bottle deposits that reward people for not littering are far more effective than fines that punish people for littering.
  5. Be Cautious about Removing Incentives. The following story illustrates the importance of keeping incentives in place once they have been introduced.

    A grocer was having difficulty with a group of teenage boys who visited his store each day after school.17 Shortly after the boys arrived, they would stand outside and verbally abuse the store owner and those who shopped at the store. Indeed, their behavior was so upsetting to some customers that they began to shop elsewhere. Realizing that his business was in jeopardy, the store owner came up with an ingenious plan. The next time the boys arrived, he waited for a few minutes after they began their verbal assault. He then said something that the boys, undoubtedly, thought was remarkable. Rather than criticizing them for their behavior, instead he applauded it. He told the boys that in fact they were so good at yelling obscenities at himself and his customers, he was going to give each of them five dollars. The boys, who likely were beginning to question the sanity of the shop owner, took the money and left shortly thereafter. When they returned the following day, the owner waited once again until they had hurled insults for a few minutes and then went out and congratulated them on their efforts. He added, however, that the store had not done quite as well as it had yesterday and that all he could afford to give each of them was a dollar. The boys grumbled a little bit, but nonetheless took the money. When they returned the following day, the same events took place, but with the man explaining that he could only afford to give them a quarter each. They grumbled even more, but once again took the money. On the fourth day, he let the boys yell and shout for quite some time before he went out. When he did, he explained that the store had done particularly poorly that day and that he could not afford to pay them anything. Without hesitation the teenagers replied that there was absolutely no way that they were going to yell obscenties each day after school if they were not going to get paid, and left.

    This story illustrates the danger of introducing incentives to foster a sustainable behavior and then removing them. Many individuals engage in sustainable activities, such as recycling, because it makes them feel that they are making a positive contribution. Similarly, the teenage boys originally showed up at the grocer’s store each day after school because they enjoyed being obnoxious. When intrinsic motivations are replaced with incentives, or external motivations, internal motivations can be undermined. Just as the boys’ intrinsic motivations were jeopardized by the store owner paying them, so can the motivation to recycle be undermined if an incentive is introduced and then removed. In short, think carefully about introducing an incentive, such as user fees, if you believe that the incentive may be removed at some later time.

  6. Prepare for People’s Attempts to Avoid the Incentive. When preparing to use incentives keep in mind that people can be very creative in attempting to avoid them. In Victoria, British Columbia, for example, when user fees were introduced for residential garbage collection, some residents would carry their trash downtown and dump it in one of the city street waste baskets. The City of Victoria dealt with this problem by taking out classified ads in the newspaper naming these people and them to come down to City Hall to pick up their illegally dumped trash (illegal dumpers frequently left identifying information in their garbage). After running the classified ads for a short time, the practice of carrying garbage to work largely stopped.

Below are a variety of examples of how incentives can be used to foster sustainable behavior.

Examples: Using Incentives to Foster Sustainable Behavior
Agriculture & Conservation
  • Provide incentives to rural landowners to create wildlife corridors.
  • Introduce electricity rates that increase with use.
  • It is expensive for homeowners to upgrade insulation or install energy-efficient windows or heating/cooling systems. However, allowing for renovations to be paid through savings in energy use can make home energy retrofits far more appealing.
  • Charge variable rates based upon time of electricity use.
  • Provide loans, grants or rebates for home energy retrofits.
  • Provide incentives for multiple-occupant cars and mass transit by providing exclusive lanes that allow for faster travel times compared to single-occupant cars.
  • Provide preferential parking for multiple-occupant cars.
Waste & Pollution
  • Place an additional charge on beverage containers that is partially refunded when the container is returned.
  • Charge for the use of items such as plastic shopping bags and sytrofoam cups.
  • Use user fees to increase motivation to recycle, compost and source reduce.
  • Attach a sizable deposit on HHW to provide the motivation necessary for individuals to take leftover products to a depot for proper disposal.
  • For many homes it is too expensive to install a low-flow toilet. Allowing the cost of the toilet and installation to be paid for through savings in the water bill removes this barrier.

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