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Voluntary energy efficiency endorsement or eco-labels highlight the ‘best in class’ products. Energy efficiency endorsement labels can be useful for types of appliances, for which a mandatory comparative energy label is not appropriate or not yet implemented. Eco-labels can highlight other environmental features in addition to energy efficiency but should not contradict a comparative energy label.
Other than comparative energy labelling programmes, the endorsement schemes only identify the best performing i.e. most energy-efficient product in the marketplace. They often include more environmental features than energy efficiency and in that case become eco-labels. They are usually voluntary, so manufacturers have the choice of whether to apply for the energy efficiency endorsement or eco-label or not. Voluntary eco-labelling has expanded to more and more products - far beyond just appliances - and countries. It is thus one of the most commonly used instruments around the world for influencing sustainable consumer choices. Energy efficiency endorsement labels, however, are less numerous.
The most viable energy efficiency endorsement and eco-labels are those, for which energy efficiency and/or environmental claims are verified by a third party, including governments and non-governmental organisations. There can be multicriteria labels, which compare products with others in the same category on a number of impacts throughout their lifecycle, or single issues, which refer to a specific environmental or social characteristic of a product, such as energy efficiency. Some eco-labelling programmes include energy efficiency as one component in the label rating scheme, but it is rarely the primary factor in the rating.
These labels aim at persuading consumers, but also manufacturers, to change their purchases or production and at increasing their knowledge about energy efficiency and other environmental criteria. Without a credible energy or eco-label, a consumer looking at an appliance can tell little or nothing about the environmental performance of a product (Wiel 2001). Labelling programmes are designed to modify the selection criteria of consumers by drawing their attention to the labeled product in order to encourage consumers to purchase it (WEC & Ademe 2004). Manufacturers may also be motivated to enhance the energy efficiency of their products and provide the means to inform consumers of the product’s performance (IPCC 2007). Energy efficiency endorsement labels indicate that a product is among the most energy-efficient on the market. They confirm that a product meets certain specified criteria, without offering much more information (Attali et al. 2009). The best-known and most influential energy efficiency endorsement label is the US Energy Star (introduced in 1992). Furthermore general environmental labeling has become a popular tool to promote environmentally preferable consumption and production patterns. Different types of environmental labels exist worldwide. The best-known eco-labels, in terms of high levels of consumer recognition and effects on producers, are the German Blue Angel (introduced in 1977) and the Nordic Swan (introduced in 1989). These labels have a consumer recognition of up to 90% (OECD 2008).
The effect of labels on purchasing patterns is more market relevant in some countries than others. Environmental labelling has become a popular tool to promote environmentally preferable consumption and production patterns. Different types of environmental labels exist which operate in different ways and whose effects may be quite different. The fear of losing market share to endorsement/eco-labelled competing products, rather than the drive to increase market share, has often motivated producers to obtain an endorsement/eco-label for their products.
In some instances, the development of endorsement/eco-labels has had an impact on the behaviour of manufacturers, strongly encouraging them to modify their products in order to qualify for a label so as to maintain their products in retail chains, for example. (Wiel 2001).
To increase the effectiveness of labelling programmes, the label should:
Voluntary labelling schemes aim to show the best available products on the market and therefore to increase the energy efficiency of products. They inform consumers about the environmental performances and especially energy efficiency of products on offer, so consumers can take account of this before making purchase decisions. Labelling schemes also incite manufacturers to produce more energy efficient appliances. Therefore, labels stimulate both the demand and the supply side of the market. An energy label will create awareness and influence the buying behaviour of costumers. Manufacturers can distinguish themselves through innovation and improvement of their image.
Many countries introduced voluntary labelling schemes to increase the energy efficiency of appliances. Labels are very widespread in industrialised but also emerging and some developing countries. A selection of different labels can be found below.
In most cases, voluntary labelling schemes were introduced at national level. In some cases, the same label was implemented in a group of several countries at the same time (e.g. the European Union includes 27 countries) or the label is accepted in several countries worldwide (inter alia the Energy Star. Regional labels were also introduced in numerous regions worldwide.
The range of products is unlimited in principle. As a general rule, labelling works best for products that are present in most households and with numerous different products and product characteristics. However, it must be possible to create a test structure for all environmental characteristics.
Endorsement labelling programmes cannot transform the market alone and, for this reason, are completed by minimum energy performance standards (MEPS) in the great majority of countries. Basically, labelling (be it endorsement or classification labelling) stimulates technological innovation and the market introduction of new more efficient products, while MEPS usually organise the gradual removal from the market of the least energy efficient appliances (WEC & Ademe 2004). A voluntary energy efficiency endorsement labelling scheme may be used as a preparatory stage before planning to introduce a mandatory comparative label and a minimum energy performance standard at a later stage. Furthermore, endorsement labels may be combined with financial incentives (for products bearing the label) (Attali et al. 2009). To implement a successful labelling scheme, consumer awareness campaigns are essential to inform the user about the label and the environmental criteria. Environmental NGOs, consumer groups and the media have contributed to increasing consumer awareness of environmentally preferable products through consumer awareness-building campaigns of various kinds (OECD 1997).
Sufficient resources are necessary to prepare, implement, monitor compliance with and enforce the label (knowledge, capacity, time, budget, priority) (European Commission 2008).
Structural pre-conditions are a standard test procedure and testing laboratories and an authority which is responsible for the implementation of the labelling scheme.
Agencies or other actors responsible for implementation
An agency or similar organisation is necessary to guarantee monitoring and to ensure compliance with the manufacturer commitment to correctly declare the energy consumption.
There is no large funding scheme necessary, except for the development and update of the scheme and for the compliance monitoring.
A standard test procedure and independent testing laboratories are necessary to test appliances and to decide whether they are eligible to use a label or not.
Another pre-condition is advertisement and educational measures to provide information about the label and the contents of the label.
The process starts with a (preparatory) study to analyse the technical potentials and country specific circumstances (stock, sales, consumer behaviour) and to define the best available products which should be labelled. Criteria are generally set so that only a small percentage of products in a product category (5 to 30 per cent) can obtain the endorsement label (OECD 1997). Life-cycle approaches have been recognised as valuable tools to understand the complex environmental effects of products (OECD 1997). Next in the process will be the definition of the standard test procedure for energy consumption or efficiency, unless it already exists. Ideally, the integration of all relevant stakeholders and dialogue with trading partners should follow.
The best way to design an effective label is to carry out consumer research to determine which label design can be most readily understood and which is most likely to influence consumers to purchase an energy-efficient product.
Next, the rules for the award of a label to a product must be set and the process organised. Issues here are the independence of the agency or other organisation awarding the label and the cost to the manufacturers of products: will they get it for free or will they have to pay a fee?
Demonstrating market impact is crucial for a voluntary label, in order to make it attractive for manufacturers to list their products. This will only be successful with an increasing consumer awareness. Therefore, consumer awareness-building campaigns of various kinds are essential to implement a successful labelling scheme. Most of the existing programmes publish information, through newsletters, official publications or newspapers on the status of developments (OECD 1997).
A monitoring and evaluation system is essential to control the effectiveness. Once a substantial share of the market is occupied by eco-labelled products, the criteria must be revised to be more stringent and to once again create an incentive for producers to improve the energy efficiency and other environmental aspects of their products.
To illustrate the process, a simplified chart identifies the main steps which characterise the general procedure for the development of eco-labels. The chart can be found in the in the next figure.
Endorsement labels can and should have quantified targets. Targets relate to the share of the endorsed ‘Best in class’ in the market (development of the market), the impact of innovations (market introduction of more energy-efficient or environmentally friendly products) and, if possible, the energy savings per year.
Co-operations of countries
Several countries worldwide have already introduced voluntary labelling schemes. Therefore, co-operations are helpful for countries, which plan the introduction of a labelling scheme. Advantages and disadvantages can be exchanged to make it easier to transfer the policy in accordance with national circumstances. The Energy Star label for office equipment is a well-known example of such international co-operation between the USA and many other countries, including the EU, Australia, Canada, Japan, New Zealand and Taiwan.
Energy agencies or research institutions can carry out monitoring of the label. The agency responsible for monitoring should be clearly created and adequately funded. Based on identified information, the impact of the instrument can be quantified and evaluated. It is essential to attempt calculating energy but also cost savings, and to evaluate barriers and incentives for future revisions of the label. However, there may – and should – be a package of instruments targeting energy efficiency of appliances (see above). Therefore, sales figures per energy label category will not be the only factor to reflect the impact of the labelling scheme. Whether it will be useful and possible to attribute shares of the overall impact to individual instruments such as an endorsement label, will need to be assessed. Key monitoring information to explain success or failure of the endorsement label are:
(Wuppertal Institute, based on Ecofys et al. 2006).
If a government or an organisation is to maintain an energy-efficiency label programme over the long run, it will have to evaluate the programme’s performance to gather guidance for adapting the programme to changing circumstances and to clearly demonstrate to funding agencies and the public that the expected benefits are actually being achieved (Wiel & McMahon 2001). To assess whether energy labels are effective, a policy maker can ask three main questions: Are consumers aware of the label? Do they understand it? Do consumers change their behaviour because of it?
Energy agencies or research institutions can carry out an evaluation of the labelling scheme.
Key information to include is similar to the information needed for an effective monitoring:
the number of products that carry the label
the consumer awareness (share of consumers who recognise and understand the label)
changes in the product range of suppliers (and the resulting development of the market)
the number of sales of highly efficient products (and the part attributable to the labelling scheme)
the costs of the labelling scheme for all market actors and for the government.
Review cycles in countries typically range from three to 12 years, depending on the product and national priorities.
Other sustainability aspects and environmental impacts can (and should) be a part of an endorsement labelling scheme such as; health aspects or other resources (e.g. refrigerants, mercury). In this way, they develop from an energy efficiency endorsement label to a wider eco-label. That is why a preparatory study with a life cycle analysis is essential to cover all relevant aspects and to enlarge the focus (not only energy efficiency).
The following barriers are possible during the implementation of the policy:
Barriers for the implementation of voluntary labels are their general potential weaknesses, including low levels of consumer awareness, criteria differences across products, market competition between various schemes and possible technological lock-ins for business - thus limiting innovation.
Energy efficiency endorsement or eco-label criteria are generally set so that only a small percentage of products in a product category (5 to 30 per cent) can obtain the eco-label. In practice, eco-labelled products often cover more than 30 per cent of the market share in a product category. Eco-labels then no longer selectively identify a sub-set of products which are environmentally preferable to other products in the same product category, but tend to become a de facto voluntary standard (OECD 1997).
The following measures can be undertaken to overcome the barriers:
Factors which make some schemes more successful than others are media involvement, awareness building campaigns, institutional procurement etc. (OECD 1997). An effective monitoring and evaluation is necessary to observe the market and to update the labelling scheme.
The energy savings and environmental benefit of endorsement labelled products is difficult to differentiate from the energy savings and environmental benefit achieved through other energy efficiency measures. It is difficult to determine whether the label was really the source of the energy efficiency improvement of a product or the change in purchasing decision. Generally speaking, experience has shown that energy labelling programmes are effective instruments, which enable authorities to benefit from low-cost energy savings, consumers to spend less on electricity, and manufacturers to improve their products and become more competitive against imported, less efficient products (WEC & Ademe 2004). In this respect, however, mandatory comparative energy labelling should be preferred where it is feasible. In some instances, the development of eco- labels has had an impact on the behaviour of manufacturers, strongly encouraging them to modify their products in order to qualify for an eco-label so as to maintain their products in retail chains, for example. Surveys have indicated that eco-labels are better known to women than men and to younger people rather than older people. (OECD 1997). Labels can play a part in market transformation.
For example, in a country with a high level of environmental awareness, such as Sweden, the level of consumer awareness to eco-labels is significant and there is a demand for eco-labelled products. The market presence, and therefore the visibility, of eco-labelled products have contributed to the awareness of consumers. Eco-labels have also had an impact on the behaviour of manufacturers in specific product categories (OECD 1997).
Nevertheless, it is difficult to isolate and measure the environmental benefits of eco-labelling as distinct from benefits achieved via other environmental meausres. Environmental effectiveness has been evaluated indirectly on the basis of consumer awareness and consumer demand for eco-labelled products. Public awareness and attitudes to eco-labelled products vary significantly depending on the country (OECD 1997).
In many cases, there is an increase in manufacturing cost to manufacturers for appliances with enhanced energy efficiency, which can be passed on to the users or can be compensated by productivity gains.
This means that at any given time, there is likely to be a price premium of energy-efficient models over less efficient ones for consumers. However, studies found purchase prices for energy-efficient appliances have decreased over time (e.g. LBNL 2001; Lane 2011).
Other studies show that labels for promoting energy-efficient appliances have not increased consumer prices significantly (IEA 2007).
The endorsement labelling scheme itself will also entail some costs to governments (if they run the scheme and particularly if they award the label for free), for manufacturers (especially, if they have to pay a fee to register an appliance for a label) and possibly for retailers. However, they are usually small in comparison to the incremental manufacturing costs.
According to Bertoldi & Atanasiu (2007) most of the energy measures like energy labelling schemes are cost effective. This means that they will result in net money savings for the users, as the reduced electricity costs over the life time of the appliance will be bigger than any additional purchasing cost for the more efficient model. In many cases there is an increase in manufacturing cost to manufacturers, which can be passed on to users or can be compensated by productivity gains.
Type: Voluntary endorsement labelling scheme