Green Transition For Vulnerable Households? Insights From Behavioral Science On What Works (And What Doesn’t)

Green Transition For Vulnerable Households?
Insights From Behavioral Science On What Works (And What Doesn’t)

Melina Moleskis*
Pantelis Solomou*
Theodoros Zachariadis**
Meltem Ikinci***

* Post-Doctoral Fellows in Behavioral Analysis at the Cyprus Institute
** Professor at the Cyprus Institute
*** Consultant at the World Bank

KEY POINTS

Energy poverty is a pressing issue across Europe, particularly as the EU prepares to launch the Social Climate Fund in 2026. Getting citizens to apply for financial aid has proven difficult, with participation rates well below 50%.
Behavioral science can help. Using Cyprus’s latest grant scheme for energy investments in households as a case study, we provide practical guidance for designing and implementing grant schemes that manage to reach vulnerable households.
These insights highlight a crucial, yet overlooked, aspect of energy poverty: the behavioral barriers that keep people from accessing help. For policymakers, this means that fighting energy poverty requires more effort - and less money. It’s about policies like simplifying processes, reducing hassle, and providing clear, timely information to ensure vulnerable households aren’t left behind in the green transition.

The Challenge of Energy Poverty
As most governments worldwide accelerate their efforts to implement climate policies, economic repercussions are increasingly felt at the household level, particularly among vulnerable communities. One pressing issue is energy poverty — the inability of low-income households to afford basic energy needs.

Why is this happening? Evidence shows that households with lower incomes often face disproportionately higher energy costs, not due to excessive usage but because of the inefficiency of their homes and vehicles. Many reside in older buildings with outdated insulation or appliances and rely on cars with poor fuel efficiency. As a result, those who can least afford it end up paying the most for energy.

Barriers to Utilizing Available Financial Aid
Governments have developed numerous tools to combat energy poverty, ranging from immediate support like unconditional cash transfers to long-term solutions such as grants for home retrofits or renewable energy installations. In the European Union, these efforts will receive a significant boost with the launch of the Social Climate Fund in 2026.

However, a persistent gap exists between the availability of financial aid and its utilization. Many households fail to apply for assistance despite their eligibility, exacerbating energy poverty.

The Role of Cognitive Scarcity
The reasons behind this gap extend beyond financial and logistical barriers, including behavioral challenges. Cognitive scarcity, a concept introduced by behavioral economists Mullainathan and Shafir, highlights how resource deprivation, like financial insecurity, reduces mental bandwidth for long-term decision-making. This helps explain why low-income households often fail to apply despite being eligible for financial aid.

Essentially, when struggling with immediate financial pressures (e.g., paying rent or buying groceries), households prioritize short-term survival over long-term benefits like energy-efficient upgrades. This reasonable reaction to resource deprivation is known as tunneling. And, though reasonable, it makes people more present-oriented, prioritizing immediate concerns over long-term planning.

In addition, financial stress also increases cognitive load. Worrying about money makes it harder to focus, stay organized, and follow through on plans. As a result, seemingly minor hurdles, such as unclear application processes or long wait times, feel insurmountable. These hassle factors are enough to push many people into procrastination, or even complete inaction, more so when there’s uncertainty about whether the effort will pay off. Studies show that the mental strain caused by cognitive scarcity can reduce decision-making capacity as much as losing an entire night of sleep.

Case Study: Cyprus
Our research[1] at the Cyprus Institute has examined the country’s energy poverty landscape. With 15% of the population estimated as vulnerable, energy poverty is a critical issue. Low participation rates in past energy assistance schemes (≤45% uptake) underscore the limitations of traditional approaches. To help overcome this challenge, we applied behavioral science methodology by mapping the behavioral journey of a vulnerable household through the process of engaging with financial aid based on the latest grant scheme for residential energy renovations – see the figure below.

We identify four stages in the journey:

Awareness: Discovering the existence of the scheme.
Consideration: Finding the scheme relevant and allocating resources to learn more.
Decision: Weighing benefits against perceived hassle and deciding to apply.
Action: Completing the application process within the deadline.

Taken together, these four steps depict the journey of a vulnerable household from before knowing about the Scheme to applying to it. But, as expected, within each step, there are various potential obstacles, both structural and behavioral. For instance, for the second step, Consideration, the decision-maker is up against barriers such as:

Tunneling can cause potential applicants to focus on immediate concerns, thus neglecting needs that are further away in the future.
The presence of hassle factors, like public servants not answering phone lines and website links leading to generic homepages, signal an unsupportive environment, discouraging citizens from choosing to seek more information.
Information overload in bundling together instructions for all households (whether vulnerable or not), and the inclusion of EU regulations and national targets.
Messenger effect, whereby the credibility, trustworthiness, and overall perception of a message are significantly influenced by the characteristics of the person delivering it, such as their expertise, authority, attractiveness, and relatability.
Presence of unnecessary complexity, for example, in the use of difficult and unclear language and terminology, that resembles the way EU regulations are written.
Ambiguity in that the benefits are not clear and no examples, case studies, or statistics are provided. The eligibility criteria are not straightforward. Those who are potentially interested need to find out and understand two types of information on eligibility criteria: a) socio-economic criteria set by the Ministry of Energy, Commerce, and Industry, and b) technical information to identify which category they can be eligible for (e.g., total electricity consumption in the past year, the time that the building permit is issued).

Recommendations for Policy-Makers
Some practical recommendations that emerge from behavioral science studies can help overcome these barriers. For instance, replacing monologue-style presentations with discussion sessions within relatively small, newly created groups among the targeted population, has been shown to help reshape social norms and alleviate the stigma associated with participating in such schemes, thereby increasing positive word-of-mouth.

To help with tunneling and capturing people’s attention, policy-makers can try tapping into loss aversion by framing the cost of not participating in the Scheme with clear examples of future savings. For example, ‘If you live in a 100 sq.m. residence, every month you go without solar panels costs you X money’. This is likely to be much more effective than its mirror message ‘If you live in a 100 sq.m. residence, you can save X money every month with solar panels.’ Another good strategy is tapping into the power of social proof and in-group identity, by communicating examples of people who have already applied to the Scheme, carefully selecting those who bear similarities to the targeted population, such as the problems they face and the city or village they live in.

While hassle factors cannot be fully eliminated, where possible, it’s worth making seemingly minor changes that make it easier and less uncertain for an individual to apply. A practical, low-cost solution that has worked in alleviating information overload is a “passport page” that provides an executive summary with the key points that would interest the intended audience. Moreover, assisting vulnerable households with the initial steps of the application process (e.g., by pre-filling or pre-populating some information) has also proven to go a long way in helping people fill out application forms.

Conclusions
Tackling energy poverty requires more than financial resources; it demands a nuanced understanding of the behavioral barriers faced by vulnerable populations. Small, cost-effective adjustments—such as simplifying application processes and leveraging behavioral insights—can significantly enhance participation in financial aid programs. By addressing these challenges, policy-makers can ensure that vulnerable households are not left behind in the green transition, paving the way for a more equitable and sustainable future.

This Policy Brief is based on a study that has been financially supported by the government of Cyprus and the European Structural and Investment Funds, and by the Hellenic Observatory of the London School of Economics and Political Science in the frame of the Research Innovation Programme on Cyprus funded by the A.G. Leventis Foundation. Views expressed in this paper are those of the authors alone and do not necessarily reflect those of the funding organizations, nor the World Bank or any of its affiliated organizations. All errors and omissions are of the authors.

[1] Moleskis M., Solomou P., Ikinci M. and Zachariadis T., Green Transition for Vulnerable Households? Insights From Behavioral Science on What Works (And What Doesn't). Frontiers in Sustainable Energy Policy, Section Energy and Society, Volume 4, 2025. DOI: 10.3389/fsuep.2025.1464660.

The Cyprus Institute