Valeriya Azarova, an expert in energy and climate economics, discusses strategies for increasing public and business confidence in decarbonization initiatives.
Decarbonization measures are increasingly proving to be smart investments as the impacts of climate change become more visible around us. This reality has sparked growing interest in climate solutions from both businesses and individuals who are actively seeking sustainable alternatives. Economists are playing a crucial role in this transition—they are not just making the case for change but actually developing practical, cost-effective models to cut emissions while maintaining economic growth.
Valeriya Azarova is a Senior Associate at the Rocky Mountain Institute and a recognized expert in energy and climate economics. She has previously conducted research at the Energy Institute at the Johannes Kepler University in Linz, coordinated projects at the ifo Institute at the University of Munich, served as a visiting researcher at UC Berkeley, and helped startup NRGsurf Mobility in develop innovative productsIn this interview, she discussed how to motivate people to reduce energy consumption effectively, explored the connection between climate change and mental health, and assessed the future prospects for the green economy.
How did you get started in climate economics and energy research, and how long have you been involved in the field?
I've been working in this field for nearly 9 years, and it wasn't by chance. I grew up in a city with a large gas production facility, so from an early age, I was aware of the environmental impacts of gas and oil processing but also of the economic benefits, including jobs that depend on these industries in some regions. While studying at the University of Linz, I discovered my passion for working with real-world data—not just abstract calculations and planning but research aimed at improving lives. Over time, these two elements came together, and I started working on projects that help preserve the environment for future generations while being financially profitable.
My active research career in this field began at the Energy Institute at Johannes Kepler University, where I received my PhD. There, we focused on large-scale R&D projects addressing key issues in energy transition and climate change mitigation, primarily funded by grants from the European Commission.
Can you give examples of some of those projects?
One of the most notable projects was PEAKapp, where we conducted a 3 year-long study across four countries—Austria, Estonia, Latvia, and Sweden. This project helped us identify and test tools designed to motivate people to save energy.
In addition to the Energy Institute, tech startups and utility companies were part of the consortium that worked on this project. Based on our research hypothesis, programmers developed a mobile app that allowed users to track energy consumption from various household devices and provided tips on how to reduce their electricity bills.
The study involved 6,000 participants, divided into two treatment and one control group. The first treatment group used the mobile app to monitor energy consumption at home and participated in an educational game. The second group also received various behavioral nudges aimed to increase consumption of electricity produced from renewable sources (wind and solar). As part of this large-scale experiment, we also conducted several additional experiments to explore other behavioral aspects of sustainable energy consumption, such as what levers can be used to reduce energy consumption during peak times.
After 69 weeks of a field test of the mobile app, 40% of participants reported becoming more mindful of their energy usage at home, while 22% said they had changed their cooking or laundry habits. Active users were able to reduce their daily energy use by 7% on average.
In terms of further impact, our project increased awareness of Austrian consumers about their real-time energy consumption and related costs, as well as impacts of their everyday behaviors on their electricity bills. This work also supported the European Commission's effort in increasing the frequency of billing and information provision for residential customers as reflected in the Energy Efficiency Directive updates in 2018.
Our research has triggered economic impacts beyond the duration of the project; the startup company that developed the app later launched it as a B2B solution for energy providers. The app allows consumers to optimize their electricity consumption, while utilities use this app as an effective tool for engaging with their clients and managing peak demand.
The PEAKapp project received high praise from the European Commission and won the Mission Innovation Austria Award for its innovative approach. What was the key innovation behind it?
We were the first to integrate information about electricity consumption and costs with "behavioral nudges"—prompts designed to encourage specific actions—into a mobile app for energy consumption management. Notifications on users' devices, such as, "The sun is shining now, so electricity is cheaper. Turn on your washing machine to benefit from lower prices and greener electricity," provided real-time guidance. To further motivate users to optimize their consumption, we employed a "social comparison" approach, allowing them to compare their energy consumption with the consumption of homes of similar sizes, number of residents, and appliances, including electric cars, dryers, and washing machines. Energy consumption data was also paired with intrinsic norms delivered in the form of smiley faces—either sad or happy—depending on whether consumption had been higher or lower compared to similar households.
The incentives we tested in the PEAKapp project have also been used in other international projects. For example, they are featured in the Enchant and Climate Campaigners projects, which aim to combat climate change by promoting lifestyle changes, and in the eCrew project, which helps optimize energy efficiency and reduce household spending. The Enchant project involved over 2,500 participants in six counties and helped reduce energy consumption in some of them by up to 20%. The eCrew project currently involves 240,000 households across three countries.
Are there other applied projects in your portfolio that have been developed in collaboration with startup teams? How do these teams approach research and product development to address climate challenges?
I am currently collaborating with NRGsurf Mobility, a company that develops software for transportation, energy, and research. Through its software platform, NRGsurf contributes to a consortium of companies managing over 100 energy communities in Austria, each consisting of an average of more than 100 households. The energy community is an emerging and fast-growing trend: every month, the consortium adds over 500 households and enterprises.
Energy communities are associations of residents and businesses that collectively produce, consume, and manage renewable energy. Currently, in collaboration with representatives from these communities, I am leading a complex experiment aimed at understanding how to motivate people to optimally utilize community-owned charging stations for electric vehicles.
Based on the results of the study, an innovative product is being developed: software for managing the energy demand at EV charging stations and, therefore, improving the economical utility of energy communities. This idea has the potential to drive radical changes in the energy market in Austria and internationally.
While at UC Berkeley, you researched an unconventional aspect of climate economics—the impact of climate change on mental health. This project was certainly innovative. Can you share the key findings and patterns you identified?
Two years ago, when I was seeking funding for this study, I had to spend a considerable amount of time explaining why mental health is such a relevant topic from an economic perspective. Even then, according to WHO data, the total global cost of depression and anxiety disorders was estimated at $1 trillion yearly, mostly due to a loss in productivity. So, the economic impacts of mental health disorders are substantial, and if climate change exacerbates these costs, this should be accounted for both in healthcare policies as well as economic models.
To test this hypothesis, I examined the effects of heat on mental health using detailed mental health-care utilization data for 1.1 million Austrians from 2005 to 2019. We find a robust and economically significant positive effect of heat on prescriptions for antidepressants and utilization of inpatient and outpatient treatment. Specifically, one additional day with a heat index above 30◦C increases monthly expenditures for these mental health outcomes by about one to two percent. Considering projections for average temperature increases between now and 2090, the additional cumulative costs of mental health care in Austria could range from $8.8 billion to $31.8 billion.
This project got me thinking: Why, when promoting decarbonization and green technologies such as electric cars or sustainable aviation fuel (which are still more expensive than conventional technologies), do we often overlook such an important factor as the impacts of emissions/emission reduction on human health and mental health specifically?
I am continuing to work on this issue and have already presented my research at several conferences. Together with colleagues from Stanford University, we conducted a similar study on the impact of climate change on the health of American citizens. Currently, I am preparing a scientific article and exploring opportunities for further research and projects on this topic, as well as broader planetary health concerns.
At the Rocky Mountain Institute, we are also developing a tool that will allow Texans and Californians to visualize how decarbonization projects affect public health and other social indicators. For example, in a city with a high number of residents suffering from asthma or cardiovascular diseases, the tool could show how industrial decarbonization projects contribute to reductions in harmful PM2.5 particles, thereby improving air quality and health outcomes.
Having worked in both Europe and the United States, how do you perceive the differences in societal and governmental attitudes towards decarbonization in these regions?
In Europe, society tends to be more resource-conscious and proactive in reducing its carbon footprint. I think this is largely because many Europeans have a heightened awareness of the threat posed by climate change, which leads them to prioritize "green" measures. In the United States, while climate initiatives are also being implemented, the issue is still more polarized. From my observations, the younger generation is the most active and "loud" in supporting green initiatives here.
This is why I believe the work of economists in this area is crucial—we show that investments in green technologies can be profitable. It helps people understand that, for example, solar panels not only reduce emissions but can also significantly lower energy costs and create additional jobs. Once these benefits are clear, even climate skeptics start to support green technologies.
It's important to recognize that the situation varies from one European country to another, just as it does from state to state in the U.S. For example, California has introduced ambitious targets and policies to reduce emissions, and the governor aligns closely with European leaders in terms of climate goals. Other proactive states include New York and Washington. However, in many states, progress is less dynamic.
That said, there are decarbonization initiatives in almost every state, including Texas, which is considered the gas and oil hub of the U.S. As a representative of the scientific community, I've observed that states are increasingly interested in reducing CO2 emissions, seeking expert help, and looking for optimal models for their specific circumstances.
Have you had the opportunity to work with state-initiated projects?
Now, as an employee of the Rocky Mountain Institute, I am working on a project for Washington State. The Department of Ecology has tasked us with calculating decarbonization pathways for major industrial sectors that consume large amounts of energy and emit significant greenhouse gases.
There are around 40 of these facilities in Washington, and they vary greatly, so their CO2 reduction strategies will differ widely. For instance, a small potato processing factory can reduce emissions by reusing the heat generated during frying. In contrast, a large oil refinery would require the introduction of more advanced technologies, such as switching to hydrogen for refining petroleum products.
So far, we have formulated recommendations for five sectors and presented them to the state Department of Ecology in a webinar format. The feedback was insightful—some participants praised the solutions, while others raised concerns, noting the challenges in applying these technologies. In the next phase, we will meet with companies on a one-on-one basis to discuss the specific barriers they may face and how we can help.
Hydrogen has long been regarded as a promising alternative to gasoline, kerosene, and other traditional fuels, not only for land transport but also for aviation. Do you think a transition to hydrogen-powered transport is feasible in the near future?
We've observed growing interest in SAF (Sustainable Aviation Fuel), which is produced using hydrogen. Compared to conventional jet fuel, SAF generates less harmful emissions but is currently more expensive.
At RMI, we researched this market and conducted a small experiment, which showed that airlines are willing to pay for cleaner fuel. This is a positive signal for SAF producers, including refineries, especially smaller ones, as they have the flexibility to adapt their production processes and start manufacturing SAF quickly.
In January, the inauguration of U.S. President Donald Trump will take place. In 2017, at the start of his previous term, he decided to withdraw the U.S. from the Paris climate agreement, arguing that adhering to its provisions could cost the country many jobs. Does the scientific community have concerns that decarbonization projects in the U.S. may come to a halt?
I'm an economist by training, and I focus on finding efficient technologies, business models, and projects that can really benefit society. My work is about improving our socio-economic situation—creating more and better jobs, making existing processes work better, and ensuring we can sustain our environment for the long term. While I can't comment on what's happening with the new administration right now, I truly believe climate issues should be above politics. After all, this is fundamentally about people's health and survival.
Green solutions aren't just good for the planet anymore—they're actually becoming better investments than traditional options. When we implement these solutions, we're not only helping the environment, but we're also cutting costs and creating real benefits for the economy and people's everyday lives. Personally, I want to keep working on projects that create jobs, cut emissions, and make communities healthier. Politics aside, this is the kind of meaningful impact I want to make with my work.
