Defaults in Green Electricity Markets: Preference Match Not Guaranteed

Green electricity defaults should steer individual choices to environmentally friendly alternatives and provide a match with individuals’ preferences for an electricity mix. It is debatable whether green electricity defaults conform to this latter intention. Using two design elements from existing electricity markets, costly opt-out of contracts and green electricity certificates, preferences for an electricity mix are elicited in an incentivized laboratory experiment. This study then assesses whether preferences in the absence of default options match with preferences in the presence of default options. It turns out that the alignment of default intentions and preferences depends on the relative price for green electricity. Green electricity defaults at low price premia, as currently applied in several electricity markets, do not match subjects’ preferences. The findings are relevant for the design of green electricity defaults. (author's abstract)