Pass offsets onto consumers? It works for Amazon, Netflix and Uber
A new study shows that online consumers want environmentally friendly options.
This story was first featured on Ensia.
Reducing the carbon footprint of what we buy isn’t easy, but the opportunity for impact is substantial: In the United States, producing and delivering consumer purchases releases twice as much carbon into the atmosphere as home energy use and personal travel. By gathering and sharing information on carbon emissions associated with their products, companies can make environmentally friendly choices easier for consumers and boost their own reputations as planet-friendly businesses.
Advances in online technology provide effective and inexpensive opportunities to do this, according to a recent study (PDF) conducted by the U.S. Department of Energy’s National Renewable Energy Laboratory.
To explore strategies for sharing carbon footprint information and evaluate the impact of offering consumers carbon offset options, NREL researchers designed a series of experiments focused on four industries — online retailing, ride sharing, video streaming and short-term lodging.
Using crowdsourced online survey services, they reproduced the online interfaces of actual companies to track the decision process of participants offered green choices. Follow-up questions explored participants’ reactions to these options. Their findings demonstrate that providing green choices can lower their overall carbon footprints and improve customer satisfaction.
Researchers reproduced the online interface of a major U.S. online retailer, Amazon, to test carbon-reducing strategies in online retailing. Amazon Prime members receive free two-day shipping, but can also select free no-rush shipping and earn a $1 credit.
In one experiment, the researchers asked participants how they would respond if they were given a chance to accept carbon offsets instead of the credit, and how their opinion of Amazon would change if the company offered carbon-neutral no-rush shipping. Researchers found that green shipping was as popular as the credit and improved Amazon’s environmental image. In addition, since the carbon offsets generally were less expensive than the $1 credit, offering this service to customers could save the company money.
A second experiment gave customers the option to add carbon offsets for shipping to their bills, with the cost of this offset varying with the product and the shipping option selected. When adding the carbon credit was the default, 88.2 percent of customers chose to do so. When the carbon credit was not the default option, 40 percent of customers still chose to add it.
The researchers used Uber as a model system for exploring the potential for carbon offsets in the ride-share industry.
The experiment was similar to that conducted using the Amazon interface, providing customers an option to add the cost of carbon offsets to their bill. The cost of the offset was varied between 2 cents and 20 cents per trip based on estimated costs of carbon of $6 per 1.1 tons and $50 per 1.1 tons and assuming a 10-mile trip and the 2012 U.S. average fuel economy for light-duty vehicles.
Given the scenario of a 10-mile trip every weekday for a year, participants then were asked if they would be willing to add the cost of carbon offsets to their bill for every ride. Depending on the carbon price, this would increase the total cost by either $5.95 or $49.58. Results showed close to three-quarters of customers were willing to add the offset for a single trip at either carbon price and to offset emissions associated with all of their Uber trips when the total yearly cost was $5.95. Even when the cost for all future trips was high, half of all participants remained willing to purchase offsets.
Their results support two basic "design principles" for initiatives aimed at helping consumers reduce their carbon emissions.
For video streaming, the research team used the model of Netflix. Content can be streamed in standard, high or ultrahigh definition — with the carbon footprint increasing with increased definition. Subscribers may not realize that higher definition streaming isn’t necessary for all content. The researchers provided information on the carbon footprints of the three streaming options to the Netflix user and found that participants tended to choose a lower resolution stream.
Not only that, but 42 percent of participants said they would allow Netflix to automatically provide the least carbon-intensive streaming resolution, adjusting the definition level to the needs of the type of video being streamed. "This response could represent an opportunity for Netflix to reduce operating costs, lower its corporate environmental footprint and improve customer satisfaction with one simple innovation," the researchers noted.
In the realm of short-term lodging, the researchers used the example of Airbnb, a company that connects customers with hosts who offer space in their homes as an alternative to hotels. The researchers found that, on average, potential Airbnb hosts could expect to receive just under $7 more per booking if they qualify as providing an energy-efficient rental. However, when participants were given the option to add between 50 cents and $3 to their bills to make their stays carbon neutral, less than 13 percent indicated that they would be willing to purchase these carbon offsets.
The researchers noted that their results support two basic "design principles" for initiatives aimed at helping consumers reduce their carbon emissions: provide credible information at the point of decision and keep things simple.
"These experiments indicate significant untapped potential for firms to reduce the climate impact of their product chains and improve customer satisfaction at very low or even negative cost," the researchers concluded. "Such opportunities certainly exist in other industries as well."