Market Transformation Programme (MTP)

Between 1970 and 1997, the total annual energy consumption in the UK residential sector rose from 36.9 mtoe to 44.8 mtoe, i.e. 18%. In particular, the energy use for lighting and appliances doubled in that period (1970: 2.7 mtoe; 1997: 5.9 mtoe). (The Guardian 2011). One reason is the increasing ownership level of nearly all kinds of domestic appliances (For an overview of the current appliance stock, one can refer to DEFRA 2009 a). Furthermore several products of these product categories sold in the UK were less energy-efficient than those sold in other European countries around 1994 (DEFRA 2009a, p. 218).
Another aspect has also to be kept in mind. The British government favours economic instruments over market intervention by regulators. Thus, only where “market failure is obvious and economic instruments are stretched to their limits”, does the state intervene (Rubik & Scheer 2005, p. 58). That is why the UK government created the MTP in 1998, which can be regarded as a highly scientific market-analysing instrument.
Moreover, product policy has traditionally been relevant in the United Kingdom. However, the 1970s and the 1980s were shaped by policies putting labour and health concerns in the very forefront of such policies. Since the 1990s, environmental components have been integrated into the product policy (Rubik & Scheer 2005, p. 50).
In other words, the UK wanted to a) decelerate ever-increasing energy-consumption and b) change its role as a backbencher (Rubik & Scheer 2005, p. 61) in environmental policy as compared to more progressive countries at that time. This led to the formation of the MTP, a scientific instrument gathering objective information in order to intervene in the market where and when necessary.

The Market Transformation Programme is designed to sustainably improve the “energy performance of products over time” (House of Lords 2005). Thus, this tailor-made programme combines two principles: Firstly, market transformation lowers the energy consumption of appliances and secondly, by encouraging the business sector to manufacture and sell energy-efficient products, the UK government promotes innovation in terms of eco-friendly technology promotion.
A broad range of tools or supplementary goals are set out to reach the core goal (DEFRA NA):

• Developing and maintaining a robust evidence base on impacts and trends arising from products across their life-cycles.
• Ensuring reliable product information is available and is used to inform policy decisions, consumer choices and instruments like public procurement.
• Working with stakeholders to harness their expertise in developing a robust evidence base for effective standards across product life-cycles and outcomes which stimulate innovation and ecodesign.

In other words, MTP constantly collects information and conducts its own research on various energy-using appliances. This information is necessary for the government to have reliable information on which future policies are based. Moreover, consumers benefit via information and policies, e.g. if product labels are introduced. Last but not least, MTP uses its research to promote effective minimum energy performance standards at EU level to phase out least efficient products.

It is a national policy, but with close links to the Ecodesign process at the supranational EU level.

Relevant sectors

• Residential: As the MTP primarily addresses domestic appliances, the residential sector can be regarded as the main target sector. However, other sectors can also benefit from the MTP, most likely the public and commercial services sector, for example.

The technological focus is appliances and it covers all products that fall under the EU’s Ecodesign Directive. According to DEFRA (NA), the following six areas are covered by the MTP:

• Heating, Ventilation and Air Conditioning (HVAC)
• Domestic Appliances (includes products such as tumble dryers, ovens and freezers)
• Lighting
• Motors
• Transformers and Machine Tools 

Consumer Electronics and Information and Communication Technologies (CE/ICT) (includes products such as computers, imaging equipment (for example printers) and televisions)

The core goal of the MTP is, as its name states, to transform the appliance market. In order to reach this goal, MTP has one core task: research. Based on this research, which in general is fine-tuned with business stakeholders, MTP gives policy recommendations. Policy-makers rely on “evidence on impacts and trends arising from products across their life cycles” (MURE & AEA 2011, 1). MTP develops Product Strategy Guides and Policy Briefs, “which set out the measures required to reduce the energy consumption of appliances” (IEA NAa). Available are so-called Government Standards Briefing Notes (GSBNs). They are designed for almost all appliance categories and, thus, form the basis for Product Strategy Guides and Policy Briefs (GSBNs are available at www.bigee.net/s/u12c67). In general, those notes comprise background information (instead of policy recommendations) about the number of households owning the appliance (“Ownership & Stock”), sales figures (“Sales”) and consumption habits over its life-cycle (“Usage & Lifespan”). These data sheets also give stock and sales projections until 2030. The document “Saving Energy Through Better Products and Appliances” summarises MTP’s findings and discusses goals to be reached by 2030 (DEFRA 2009). 

Moreover, the programme promotes voluntary industry agreements and government procurement (DEFRA 2005, p. 11).

Relevant target groups

• Manufacturer
• Governmental actor

Direct beneficiaries

Most of the activities done by the MTP include co-operation and information exchange with business stakeholders. Doing this, MTP can be regarded as a platform where business actors can bring in ideas, concerns and interests with respect to certain policies (DEFRA 2009, p.24).

• Governmental actor

  In order to pass the right policies, taking into account sustainability and business aspects, decision makers need reliable information. These are provided directly by the MTP. Thus, MTP eases the policy-making process.

Indirect beneficiaries

• Investor

  Consumers, procurement staff or even private businesses buying those appliances indirectly benefit from the programme. MTP’s research is used for introducing or tightening energy labels or minimum energy performance standards for appliances. This guarantees the provision of information and cost savings for end-users.

• User

Relevant barriers

• Knowledge and information barriers: The MTP collects information for policy-makers and gives policy recommendations basically easing the decision-making process. Research also comprises information about prospective market developments of respective appliances reducing uncertainties for those products. This knowledge is necessary to provide reliable information to governmental decision-makers. As consultancies are generally independent from the government, MTP is likely to be well-accepted among business stakeholders, which is a great overall advantage for the programme.
• Organisational barriers: Often it is difficult for policy makers to consider all relevant technological but also the environmental criteria of single product groups. Therefore, requirements are often not ambitious enough. From the perspective of politicians, MTP can be regarded as a tool easing the decision-making process. The MTP uses scientific and transparent analysis on which policy recommendations are based.

Relevant incentives

• Contribution to protection of the environment: The UK government is committed to reduce air pollution and to protect the environment. The establishment of the Market Transformation Programme helped policy makers to develop a roadmap towards very efficient appliances.

The MTP is an interface between various other policies. First of all, it supports the British government in translating different European eco-directives into UK regulation. The most important of these is the Ecodesign directive, passed in 2005 and revised in 2009. It is the basis for setting minimum energy performance standards and creating mandatory comparative labelling schemes for energy-related products in the EU. As another example, in 2000 the European Union agreed on introducing the Energy Star, a voluntary product label, into the European market. “MTP provides input into ENERGY STAR specification revision process” (DEFRA NA).
While MTP rather works in the background, the Energy Saving Trust (EST) provides information on energy-efficient appliances to consumers more actively. The EST provides useful energy saving advice and supports buying-decisions via a database with the most energy-efficient appliances available (the database can be accessed www.bigee.net/s/yjyxmt). 

Furthermore, electricity and gas suppliers in Great Britain have Energy saving obligations. As a part of the programmes to achieve their energy-savings targets, they have offered grants for the purchase of energy-efficient refrigerators. The information from the MTP was useful for the government when defining eligible appliances and the deemed amount of energy savings allowed for each appliance purchase supported by the schemes.
The MTP also supports the product procurement activities of the UK government. The central government, including its departments and their related agencies, must meet so called Government ‘Buying Standards’. These simplify the procurement process for over 50 different products by providing procurement staff with “straightforward” tender specifications and by “enabling more suppliers to develop products that meet the standards” (DEFRA NA b).

The policy includes innovative elements.
MTP publishes information material on various appliance categories. This information is necessary for regulators to make reliable decisions. It appears to be innovative that product “reports” give product sales projection and consumption patterns for the next decades. “The measurement of impact is based upon assumptions about sales and product, the degree of use of that product, its performance and the degree of ownership” (House of Lords 2005a). For some products MTP also co-operates with consumer testing organisations in order to find out about “how the device is used by the consumer rather than how the device performs under a test standard” (House of Lords 2005a.
MTP can be regarded as a perfect actor to consult policy-makers in such a way that market actors are not overburdened by future regulation. Probably, the nature of the contractors also attracts business stakeholders to co-operate closely within the MTP. It can be regarded as a forum in which market actors can and shall voice their opinion and share their expertise on certain product categories.

There are possible actions for optimising the policy. In 2005, the network of MTP experts was insufficiently funded. Regular meetings were not possible. Face-to-face meetings were only held “when it is important to have that meeting” (House of Lords 2005). Even the infrastructure for MTP lay within the contracting organisations. In order to improve working conditions and, thus, facilitating the work of the programme, it seems necessary to provide some additional funding to the programme.
MTP does not have a website clarifying its organisation, its host organisations, its workflow or its goals.

The following pre-conditions are necessary to implement the UK Market Transformation Programme

Agencies or other actors responsible for implementation
The MTP is managed by the Department for Environment, Food and Agriculture (DEFRA) and has funded various contractors so that these provide staff with valuable expertise in appliance technology and of the appliance market to the MTP. The lead contractor is AEA, working alongside with Consumer Research Associates (MURE 2011).

Funding
MTP is a subordinate to DEFRA, which has a budget of around £2.3 billion annually. In 2010, its budget was cut by £700 million (The Guardian 2010). According to a specialist consultant of AEA Technology, the MTP Programme has a budget of about £500,000 (€620,000) (Drummond NA).

Both, the global rise in energy prices and increasing consumption of British households (18% between 1970 and 1997; The Guardian 2011) were key factors to decelerate this consumption pattern.
In 1998, DEFRA implemented and funded the MTP, evolved from the Energy Efficiency Best Practice Programme with the aim of supporting the development and implementation of policies and measures on sustainable products. The MTP works with a consortium of impartial, external (non-governmental) experts to reduce environmental impacts through better product design (MURE 2011). The following activities were undertaken:
methodologies were established to rank the performance of energy-using products
energy labels were introduced and information provided
efficiency standards for public procurement were introduced and introduction of Minimum Energy Performance Standards (MEPS) by the EU was supported with UK data
route maps were set for market transformation
In recent years these activities were expanded and include: life cycle assessments, information about consumer choices, and public procurement and working with stakeholders to harness their expertise (MURE 2011).
While the MTP appears to be an integral part of Britain’s product policy, its policy recommendations e.g. regarding labels and standards do not have to be implemented automatically. Policy-makers have the last word in that process. However, MTP can also facilitate voluntary agreements between manufacturers; it goes without saying that such initiatives do not require government consent.

Quantified target
The policy has a quantified target. As stated in UK’s National Energy Efficiency Action Plan, Britain’s product policy (which is much more than the MTP) is supposed to save:
In the residential sector:
2010: 1.4 TWh/yr
2016 8.5 TWh/yr
2020: 18.8 TWh/yr
In the commercial, industrial, and public sectors:
2010: 1.6 TWh/yr
2016: 6.0 TWh/yr
2020: 10.3 TWh/yr

International co-operations
The MTP co-operates with the European Commission. Not only because the department that funds MTP i.e. DEFRA, is responsible “to inform and respond to policy developments at European Commission level” (House of Lords 2005) but also because in the EU, MEPS and mandatory comparative energy labels are created at the EU level and not by an EU Member State alone.
The programme contributes to other initiatives such as the Energy Star label, a voluntary product label originally from the United States, which was introduced in Europe in 2000.
Between 2006 and 2007, DEFRA joined with China’s National Development and Reform Commission (NDRC) “to harmonise and converge product performance specifications at a global level, fostering the development of efficient products at a lower cost.” As China has been the “manufacturing base in the world”, the UK tries to support the Chinese government to make electrical appliances produced in China more energy-efficient (IEA NA).

Actors responsible for design
Department for Environment, Food and Rural Affairs (DEFRA)

Actors responsible for implementation
Responsible for the implementation of the programme is a consortium of contractors. The following consultancies are in the lead (DEFRA NA):

• AEA Technology
• Consumer Research Associates
• Building Research Establishment
• Intertek Research and Testing Centre 

However, policies to which MTP contributes background information (e.g. GSBN) are implemented by other governmental actors. For instance, the NMO, the National Measurement Office, “is responsible for enforcement of Eco-Design of Energy Using Products and European Energy Labels requirements” (DEFRA NAa).

Evaluation
Every two years an assessment is made on progress over the previous target period. The energy savings are calculated in accordance with Green Book policy appraisal guidelines (MURE 2011).

• Dynamic market transformation and/or innovation: As stated in its name, MTP’s core goal is to transform the market of several energy-using products towards higher energy efficiency. The programme is also suited to contribute to gradual tightening of labels and standards as it is involved in both activities. In order to reach this goal, MTP has one core task: research. Based on this research, which in general is fine-tuned with business stakeholders, MTP gives policy recommendations. Policy-makers rely on “evidence on impacts and trends arising from products across their life cycles” (MURE & AEA 2011, p.1).
• Avoiding lost opportunities: As MTP supports UK’s product policy by conducting or being involved in a broad range of tasks (labelling, MEPS, policy consultation, etc.) it has the potential to reduce the risk of lost opportunities. In general terms, however, avoiding lost opportunities depends on the policy recommendation given by MTP and on the actual implementation of the policy done by policy-makers.
• Minimising rebound effects: As experts are very familiar with such challenges, it is likely that rebound effects are considered when recommendations are given.
• Minimising snap-back effects: Minimising snap-back depends on policy recommendation given by MTP and policy implementation by legislation. For example, dynamic MEPS with regular tightening of energy efficiency requirements every few years will prevent snap-back effects. As experts are very familiar with such challenges, it is likely that negative side effects are considered when recommendations are given.
• Creating Spill-over effects: Spill-over is actually a main aim of market transformation policies. When markets have been transformed and keep high levels of energy efficiency without further policy intervention, this will result in additional energy savings, which are spill-over effects

Design for sustainability aspects
The MTP aims to develop products using less energy but also less water, and other resources. In recent years the programme developed evidence “on impacts and trends arising from products across their life cycle (Life Cycle Assessments)” (MURE 2011).

The following barriers have been experienced during the implementation of the policy
Based on a hearing of MTP experts, the House of Lords Select Committee on Science and Technology felt that “MTP has a low profile in wider manufacturing industry” (House of Lords 2005b).
Due to limited funding, MTP does not have its own infrastructure (e.g. secretariat or a similar central planning body). Higher levels of funding would be an obvious solution to this problem.

The target years are 2010, 2016 and 2020.
Concrete figures in energy savings/year
From the 2011 update to the UK’s 2007 National Energy Efficiency Action Plan estimated annual energy savings as a result of the British Product Policy were calculated (DECC 2011, p. 4):
In the residential sector:
2010: 1.4 TWh/yr
2016 8.5 TWh/yr
2020: 18.8 TWh/yr
In the commercial, industrial, and public sectors:
2010: 1.6 TWh/yr
2016: 6.0 TWh/yr
2020: 10.3 TWh/yr
See the next tables, in order to find estimations on energy-consumption projections for some appliance types covered by MTP.

Current and projected data for some appliances covered by MTP

	2009 Current (GWh)	2020 LCTP/Reference Scenario (GWh)	2020 Policy scenario (GWh)	2009 CO2 emissions (MTCO2)	Annual CO2 emission savings at 2020 (MTCO2)
Television	8,350	7,320	5,390	4.18	0.73
Power Supply Units	5,010	7,580	7,130	2.50	0.17
Set top boxes	3,690	4,580	1,930	1.85	1.00
Video recorder	3,100	780	530	1.55	0.10
Game consoles	630	1,630	1,630	0.32	0.00
TOTAL	20,800	21,900	16,600	10.39	1.99

LCTP: Low-carbon transition plan

Source: DEFRA 2009, p. 37

Current and projected data for domestic appliances

	2009 Current (GWh)	2020 LCTP/Reference Scenario (GWh)	2020 Policy Scenario (MtCO2)	2009 CO2 emissions (MTCO2)	Annual CO2 emission savings at 2020 (MtCO2)
Cold	14,500	10,500	9,630	7.24	0.31
Laundry	11,030	12,200	11,400	5.51	0.32
Dishwashers	3,220	3,450	3,150	1.61	0.12
TOTAL	28,700	26,100	24,200	14.37	0.75

LCTP: Low-carbon transition plan

Source: DEFRA 2009, p. 46

Information rather revolves around the UK’s broader product policy instead of MTP. The costs are estimated to be at around £15 million (€ 18.6 million) by 2030 (DEFRA 2009).

DEFRA (2009) estimates its product policy to achieve cost savings of £41 million (€50.9 million) and, hence, net benefits of £26 million (€32.3 million) between 2009 and 2030.

Between 2009 and 2030, DEFRA (2009) assumes investment of £15 million (€18.6 million) and achieving cost savings of £41 million (€50.9 million). Consequently, the cost:benefit ratio is 1:3 for Britain’s overall product policy.