Can’t overcome lack of individual demand

While the concern that businesses’ demand for green technologies underrepresents social value has been noted in innovation literature, it is important to acknowledge that a similar effect characterizes individual consumers as well. For a variety of reasons, it appears that consumers cannot be trusted to sufficiently account for the environment while making market choices. This may have an enormous impact on the ability of the patent system to incentivize green innovation, both at the level of consumer end-goods and at more upstream levels.140

The link between consumption patterns and the ability of the patent system to incentivize green innovation has not been sufficiently explored. This dearth of discussion is unsurprising, considering that the prevalent approach to innovation law perceives the state’s role in setting the direction of innovation as rather limited, whereas the market’s invisible hand is generally trusted to direct R&D resources in an efficient manner.141 Such perception relies, to a large extent, on a general tendency to attribute much weight to consumer preferences, without questioning their merit.142 On top of this, up until recently—in proposing and implementing various measures designed to mitigate the environmental impacts of industrialized society, environmental scholars and policy makers have focused almost entirely on industrial targets.143 Environmental policy has generally accepted consumer attitudes as a given,144 and very little attention has been paid to the possibility of addressing environmental harms through a consumption-oriented approach.145 This is starting to change in recent years,146 but the link between consumption patterns and incentives to develop green technologies has yet to be explored.

Before delving into the attributes of consumer preferences, it is important to stress out consumption’s vast impact on the state of the environment in general, and on climate change in particular. Greenhouse gases are released into the atmosphere at every stage of a product’s life cycle, “from drilling for oil to running factories to shipping our Stuff all over the planet.”147 Therefore, many agree today that reducing consumption of material goods is a key factor in the struggle to halt the environmental crisis.148 At the very least, consumption should be channeled towards products that use less energy and other consumables during their lifecycle, are made to last longer or serve multiple uses, or—for other reasons—have a lower environmental footprint.149 Unfortunately, consumers cannot be expected to fully internalize and implement these notions, and hence, in this context as well, there is a significant gap between market value and social value.

To start with, public awareness of environmental issues may be growing in recent decades but is still insufficient. While “the great majority of climate scientists have concluded that global warming is happening, mostly human caused and, if left unchecked, will have serious consequences for human societies and the natural world”—surveys show that many Americans think climate change is still a topic of significant scientific disagreement.150 This may be attributed, in part, to the public’s limited ability to comprehend scientific evidence,151 but may also be the result of other factors, including the unconscious tendency of people to fit evidence of risk to positions that predominate in groups to which they belong.152 People’s opinions on climate change are also undoubtedly affected by politicians, fossil fuel companies, and other organizations who actively promote climate change denial.153 Notably, even people that have a great deal of information regarding climate change may underestimate the severity of the problem due to cognitive biases and the human tendency to rely on heuristics to assess risk.154 For instance, people often display unrealistic optimism—thus, even if they know the facts, they may still fail to be alarmed by the current ecological situation.155 Similarly, people’s tendency to weigh immediate outcomes more heavily than distant ones may cause them to underestimate the probability and severity of the ecological threat, which is relatively remote and abstract compared to a host of other risks.156

Even people who are generally mindful of, and alarmed by, climate change may fail to make the connection between their own actions and the environment.157 The harm that an individual may inflict on the environment through consumption is indirect, distant in time and space from such individual’s acts, and only occurring “after aggregation with the contributions of many others.”158 In these circumstances, people may find it difficult to appreciate the potential impact of their choices on the environment. In addition, as explained above, environmental policy has focused for many years primarily on industrial targets, conveying a message that “industrial polluters are the source of environmental problems, and individual citizens are enforcers allied with the government to stop them.”159 This may further hinder individuals’ ability to acknowledge the link between their personal behavior and climate change.

Even when fully aware of the link between consumption and climate change, an individual consumer may fail to make choices that sufficiently account for environmental concerns. This is mainly the result of the human propensity for self-interest, as narrow self-interests often prevail against the interest of others and the common good.160 For anyone whose preferences are designed primarily to promote what they believe would advance their own well-being, the private costs associated with reducing consumption or channeling to greener products may simply exceed the personal benefits that they may derive from such a choice.

On the costs side, reducing overall consumption may certainly be perceived as a sacrifice by many individuals. This is especially true considering the prevailing ideology in Western society that still views material advancement, to a large extent, as the key to a good and happy life.161 This worldview is bolstered by advertising, a significant contributor to high consumption levels in the United States and elsewhere.162 Regarding a switch to greener products—notably, such products are often more expensive than their non-green equivalents.163 Replacing an existing product with a greener substitute may also involve significant switching costs.164 In addition, the shift to eco-friendly products frequently involves changing habits, which may have a deterring effect on potential consumers.165 This may be exacerbated in light of people’s tendency to “irrationally overvalue benefits they currently possess relative to those they don’t.”166 This tendency is a manifestation of loss aversion, an element of Kahneman and Tversky’s Prospect Theory,167 according to which “losses are weighted substantiallymore than objectively commensurate gains in the evaluation of prospects and trades.”168 Hence, for example, for a person who has driven a gasolinepowered car for many years, the losses associated with switching to an electric car (e.g., in terms of refueling time) may have a far greater impact than any associated gains.169

As to the gains side, the personal benefits associated with reducing consumption or channeling to eco-products (e.g., generating a savings in energy costs associated with the use of energy-efficient products) are often not significant. Moreover, different products compete along various dimensions, of which energy efficiency (or similar benefits associated with eco-friendly products) is only one, and it may certainly be the case that other parameters weigh more in a consumer’s decision-making process.170 In addition, individual preferences are not formed in a vacuum, and consumers are known to exert much influence on each other.171 Thus, to be convinced that the switch to a new technological product is indeed beneficial, a potential user would often wait to see that others have adopted it and become convinced in its superiority.172 Consequently, as long as the use of a green technology is not widespread, some consumers would not even give it a serious consideration. Therefore, even if shifting to a green technology carries significant potential benefits for consumers, demand may be lacking when the relevant technology is still in early stages of diffusion.

In regard to the positive impact on the state of the environment entailed by “green” consumerism—unfortunately, the environmental impact of one consumer’s behavior is typically negligible,173 may take a while to materialize,174 and cannot be experienced by such individual on a personal level—and therefore, is not likely to be treated as a personal gain by him or her. While an environmentally responsible behavior may ultimately benefit the common good, such benefit constitutes a positive externality and is not likely to be accorded much weight by an individual whose preferences are mostly self-interested.175 Sure enough, if one could trust other individual consumers to make similar environmentally responsible choices, than the prospect of achieving a significant improvement in the state of the environment might be sufficient to motivate him or her. Yet, absent such assurance, many individuals would refrain from acting for the common good. In the face of this collective action problem,176 it is easy to understand why even an individual with a strong commitment to environmental values, when acting as a consumer, might find himself or herself making nonenvironmental choices, while setting aside his or her environmental “citizen” preferences in favor of other more self-regarding preferences.