EU Energy Label

In 1992, there were widely differing energy efficiency levels for household appliances in the then 12 Member States. Also, energy efficiency of appliances was not easily comparable for consumers. For example: in Germany, the law required manufacturers to provide information in the user manual, but it was given in kWh/24 hrs or kWh/washing cycle, not in kWh/yr.
The current political framework for the Energy Labelling Directive is the European (Action) Plan for Energy Efficiency (2006/11), which mainly influences the political surroundings. The major scope of the action plan is to intensify the process of realising more than the 20% estimated savings potential in EU annual primary energy consumption by 2020. This will contribute to the EU’s wider objectives of increasing the competitiveness of the EU economy, improving energy security and reducing harmful emissions in line with the EU’s Kyoto commitments.
The energy label is also influenced by the Ecodesign Directive. For some product groups, requirements were set in accordance with the minimum energy performance standards (MEPS).
Besides the political surroundings, the market (stock data, sales, market developments, technology possibilities) of every product group differs and therefore every product group has its own individual situation at the outset. In general, the product groups are characterized by a few market-dominating manufacturers.

The purpose of the EU Energy Label is two-fold. It informs potential purchasers of the energy consumption (and other emissions e.g. noise) of the appliances on offer, so consumers can take account of this and of the resultant running costs before making purchase decisions. The demand pull created in this way, by the directive, also incites manufacturers to produce more energy efficient appliances.

The EU energy label is a supra-national P&M and covers all 27 Member States of the European Union.

Relevant sectors

• Residential: The Labelling scheme covers household appliances.

The P&M covers appliances (in detail: dishwashers, washing machines, televisions, refrigerators and freezers, dryers, ovens, air conditioners) and household lamps.

In addition to the MEPS, which eliminate the most energy-consuming appliances, the labelling Directive has had and still has a major role in pulling the market towards more energy-efficient products. The Directive 92/75/EC, revised in 2010 to the Directive 2010/30/EU, and its delegated regulations provide consumers with the means to identify the most energy-efficient appliances i.e. A+++ or A++ in the ranking of a scale of A+++ to D or respectively to A in the ranking of a scale from A to G.
Different calculation methods for the energy label were defined for every product group. Usually the EEI – the energy efficiency index - is used to calculate the efficiency classes. The calculation of the EEI for refrigerators is exemplarily illustrated below. The definitions of the calculation methods can be found in the product-specific regulations.

For the calculation of the Energy Efficiency Index (EEI) of a household refrigeration appliance model, the annual energy consumption of the household refrigeration appliance is compared to its standard annual energy consumption.
The EEI is calculated and rounded to the first decimal place as:
EEI = AE_c/SAE_c x100 where
AE_c = annual energy consumption of the household refrigeration appliance
SAE_c = standard annual energy consumption of the household refrigeration appliance (usually derived from the average energy consumption levels of appliances sold in the market before introduction of the energy label)

Relevant target groups

• User The primary target groups are end-users (who receive information)
• Manufacturer Another target groups are manufacturers (who must provide the label with each appliance).
• Retail company In addition, the appliance retailers must display the label on each appliance in the showroom and show the label class in their advertisements.

Direct beneficiaries

• User

  End-users directly benefit from the P&M. The label allows consumers to more easily calculate running costs of products and to compare the energy consumption.

Indirect beneficiaries

• Manufacturer

  Manufacturers, retailers and wholesalers indirectly benefit from the P&M. The labelling scheme provides a level playing field for manufacturers to position their products in terms of energy efficiency in their marketing and design activities in a predictable way. For retailers, a well functioning energy labelling scheme can be a powerful marketing tool for products that often provide higher profit for the retailer and lower life-cycle costs for consumers.

• Retail company

• Wholesale company

• Governmental actor

  Furthermore, public authorities and energy companies can lean on the harmonised EU level scheme when setting up information, financial incentives, or rebate schemes for the most energy-efficient appliances while respecting fair competition.

Relevant barriers

• Knowledge and information barriers: The main barriers addressed by a comparison label are information asymmetries that result from high transaction costs for consumers to obtain relevant information on product characteristics. Without a label, consumers can often not tell whether a product is more energy- and water-efficient during its use phase than another one, thus consumers are buying products that are cheaper at the time of purchase but more expensive over the life cycle. The label is easily recognisable and, thus, provides investors directly with important information, i.e. which product is superior in terms of energy efficiency compared to other products.
• Lack of interest and motivation in energy efficiency-improvement: There is a tendency that companies, organisations and households focus on their core activities only. The EU Energy label can have a significant influence on the consumer. Is he or she willing to invest in A-labelled products this market power could be a motivation for manufacturers to invest in energy efficiency improvements.

Relevant incentives

• Saved energy costs: After a period of time, the upfront costs, which are normally higher for energy-efficient products compared to their less-efficient counterparts, are amortised due to lower running costs. For a typical consumer, it is very difficult to calculate the running cost for appliances. In contrast, it is very easy and convenient to compare the efficiency levels between different products shown in an A-G efficiency scale. The provision of information for consumers is therefore a main goal to overcome the existing barriers
• Unique selling proposition for suppliers: The unique selling proposition is a strategic benefit. It can lead to competitive advantages or even market leadership and ultimately contributes to increased profits, too. The EU Energy Label must be displayed visibly on a product’s surface so that consumers can easily give preference to energy-efficient products over less efficient ones. If consumers started comparing individual products with each other, they would need a lot of time.
• Improved reputation: End-users and the environment benefit from energy-efficient solutions. Offering such solution (e.g. by using the label to highlight A or A+ labelled products) underpins a company’s CSR (Corporate Social Responsibility) goals. This may lead to competitive advantages.

An important aspect for the functioning of an energy labelling scheme is the synergy complementarities and possible overlap with other instruments. The next two figures illustrate the complementarities and synergies between ecodesign, ecolabel and energy labelling. While ecodesign cuts the less efficient products from the market, the voluntary ecolabel grants a “best in class” label for the upper end products (corresponding normally to an ‘A’ class in the energy labelling classification). Energy labelling complements the picture in providing compulsory comparative information on energy performance between these two extremes. It also pushes manufacturers to invest in more efficient products in order to shorten the path from R&D to mature products for markets.
Furthermore, the European energy labelling scheme has helped, for example as in the Netherlands and Italy, to develop financial incentive schemes. The label classes make it easy for programme developers to define the most energy-efficient appliances that are promoted via the incentives, and for retailers and consumers to identify the products eligible for the incentive. For example the Dutch Energiepremieregeling (Energy Premium Scheme) has been successful in transforming the market for energy-efficient household appliances in the Netherlands with the help of the EU energy label.

The P&M includes innovative elements by including the interests of consumers explicitly into the development of the instrument (e.g. a consumer survey was run during the preparatory study of the EU energy label and the ecodesign directive). The label is also part of an innovative package.

The interaction of the energy label with financial incentive schemes (e.g. the Netherlands, Italy, the UK) and with the European ecodesign directive (same preparatory study and impact assessments) is well founded and innovative.

There are possible actions to optimise the P&M itself.
The instrument could be improved with tighter tolerances in test standards and reinforced market surveillance.
Currently the EU label does not allow the provision of product information such as an estimate of the annual running cost in monetary terms (as for example: in the USA) or carbon footprint. Opening this possibility could significantly improve the energy label’s impact.
Furthermore the market share of A labelled appliances (for types of appliances where A is the most energy-efficient class) is already very high for some product groups. A co-ordinated dynamic revision of the regulation in co-ordination with the market and sales is needed.

The policy package can be optimised, too.
The EU Energy Label is in accordance with the Ecodesign Directive and voluntary endorsement labelling schemes. Furthermore the instrument could ideally interact with incentives (as already occurred in The Netherlands for example), information, and public procurement programmes. Some efforts to use the information of the label and the energy efficiency classes for other such measures already exist, but they could be extended much further (e.g. by co-ordinated financial incentive programmes in all or many EU Member States).

Structural pre-conditions are a test procedure, an agency and a funding scheme.

Agencies or other actors responsible for implementation
An agency or similar organisation is necessary to guarantee market surveillance and monitoring and to ensure compliance with the manufacturer obligations to correctly declare the energy consumption and the retailer’s obligations to correctly display the energy label.

Funding
There is no large funding scheme necessary, except for the development and update of the scheme and for the compliance monitoring.

Test procedure
A test procedure is necessary to calculate the standard energy consumption and to define energy efficiency classes. The EU’s test procedures are based on IEC standards. Energy efficiency levels are calculated for each appliance according to its consumption and its product characteristics (volume, size etc.)

Before the European Commission prepares a delegated regulation (previously: implementing directive) for one type of appliance, it conducts a technical economic study, which looks into the range of energy and service performances available among products on the market offering similar functionalities, the potential for improvement, and the related costs. This phase is co-ordinated with the MEPS process under the Ecodesign Directive. Extensive stakeholder consultation with manufacturers, retail trade, environmental and consumer NGOs and others, took place during the preparatory study in form of bilateral meetings, complemented with public stakeholder consultation through the internet and a dedicated stakeholder workshop. The Commission is involved in formal regulatory dialogue with its main trading partners and with international organisations on issues such as the harmonization of measurement methods/standards, benchmarking and other elements directly linked to the setting of delegated regulations. After impact assessment and inter-service consultation, the Commission gathers the opinion of the energy label directive committee (made up of representatives from the Member States) operating under the regulatory procedure with scrutiny by the European Parliament, and the Commission then adopts the delegated regulation following the normal procedures. The delegated regulations are directly applicable in all Member States (European Commission 2008). In 2003 and 2010, according to the rapidly rising market shares of some product groups, the additional energy efficiency classes A+, A++ and A+++ were introduced. Some smaller changes were made as well, to take into consideration internet and e-commerce.

Quantified target
The P&M, as such, has no quantified target. It contributes to the EU’s overall target of saving 20 % of primary energy between 2005 and 2020 compared to the projected 2020 energy consumption.

Co-operation of countries
The EU Energy Label was introduced in all 27 Member States. According to Article 1: “The Directive establishes a framework for the harmonisation of national measures on end-user information”
There are different co-operations with other countries, which already introduced a similar energy label or plan to implement a similar label.

Actors responsible for design
The European Commission, with the final decision by the European Parliament and the European Council (i.e., Member State governments)

Actors responsible for implementation
The Member States’ authorities are responsible for the implementation of the regulation, including both transposition into national legislation and market surveillance.
Retailers/dealers are responsible for the affixing of the label at the point of sales onto the regulated appliances and for the provision of correct information to the consumers in advertisements.
Manufacturers/Suppliers are responsible for measuring and declaring the performance of their models, for holding the technical documentation and for providing the labels to retailers/dealers.

Monitoring
The main monitoring efforts are the random tests carried out to verify correct labelling. Monitoring of the impacts is done by market surveillance carried out by Member State authorities ensuring that the rating on the label is truthful (SEC (2009) 1020 final).
Furthermore, the action can be monitored quite well when counting the sales figures per energy label category. This is left to commercial organisations in the EU.

Evaluation
There have been a number of studies on the impact of the labelling scheme (e.g. Berg, Lisbeth et al. (2009), European Commission (2009), Europe Economics et al. (2007), Lebot, Benôit et al. (2000), Schlomann, Barbara et al (2001), Swedish Energy Agency (2006), Winward et al. (1998)).
Economic benefits and costs were/will be assessed ex ante in accordance with the Ecodesign Directive 2009/125/EC.

• Dynamic market transformation and/or innovation: In principle, the EU Energy labelling scheme will stimulate innovation within the appliance industry. However, if not enough incentives are provided for a fast market transformation, manufacturers cannot recover their R&D- investments timely enough to invest in still more efficient devices (CECED 2006). Therefore, market transformation can be accelerated by combining the energy label with technology procurement, financial incentives, training of retail sales staff, and by educating consumers. Policy must then follow this dynamic by regularly updating the label classes and MEPS.
• Avoiding lost opportunities: By promoting the most energy-efficient appliances, but also showing the appliances with a high energy consumption, the programme tries to avoid that consumers buy energy-wasting appliances (which would be a lost opportunity for saving energy).
• Minimising rebound effects: The EU Energy label is not explicitly designed to minimise rebound effects but went along with information campaigns. However, the definition of the energy efficiency index does not limit cold appliance volume and absolute energy consumption for example, and therefore does not control the trend towards bigger volumes. Also there is a 10 % energy consumption reward for the ‘frost-free’ feature and for ‘built-in’ appliances.
• Minimising snap-back effects: An end of the energy label is not planned and with a dynamic approach the instrument is designed to minimise snap-back effects.
• Minimising free-rider effects: The EU energy label is an instrument to provide information. Free-rider effects are likely to be small (some consumers would buy energy-efficient appliances also without the energy label, but the most efficient A++ or A+++ products would probably not have become available to buyers at all without the energy label).

The label indicates energy use in (kWh/year) but also other performances, such as noise (in dB(A)) and cooling characteristics for refrigerators and freezers, the water consumption by dishwashers and washing machines or the availability of an on/off button for televisions.
Employment impacts were calculated for different scenarios in combination with MEPS. For household refrigeration appliances the policy scenarios (more ambitious requirements) all give an employment increase of around 10%, creating between 4 000 and 16 000 new jobs more than a ‘business as usual’ scenario (SEC(2009) 1020). According to another source, with the single label, production and the selling of more energy-efficient appliances does not create extra jobs. The extra personnel needed for innovation is marginal on total employment (Atkins 2006).

Several stakeholders have reported insufficient surveillance and enforcement by Member State authorities, both in respect to manufacturers meeting the set requirements and retailers displaying correct information.
A study by ANEC reported compliance problems in some member states regarding label display in the shops and the testing of appliances (ANEC 2007).
The distribution of some A labelled appliances is very high. The dynamic revision of the regulation is not dynamic in co-ordination with the market and the sales.
The added A+ and A++ classes are reported to be confusing by all the consumer organizations (ANEC 2007).
Until now, no great efforts were made to overcome the barriers. The ANEC (2007) study illustrates various options for reducing the barriers.

Considering that the energy label can contribute to making the “right” purchasing decision but is not the only element guiding consumer decision to buy a particular product, it is difficult to assess the impact of a labelling information scheme on the energy efficiency of appliances.
In 2008 it was estimated that with all current policies already in place, a total of 65 TWh to 75 TWh per year could be saved by 2010. It has been estimated that energy labelling schemes and consumer education about them with all covered products could account for about half of the increased take up of more energy efficient appliances, contributing in total to some 35 TWh of energy savings per year (2010) and corresponding to some 3 MTOE of primary energy and some 14 Mt of CO₂ by 2020 (European Commission, 2008). The rest of the saving is composed mainly of technological development and MEPS.
Furthermore, for single product groups the potential savings were calculated. For example: for the new label on televisions, it is estimated that a total energy savings potential of 46 TWh by 2020 could be realised. Out of this total potential, it is further estimated that energy labelling could catch about 12 TWh (about 1 MTOE) by 2020, corresponding to emission reductions of 4,8 Mt of CO₂. As to lighting, the Ecodesign preparatory studies indicate that general lighting appliances would provide some 75 TWh of savings potential, of which energy labelling could catch some 16 TWh (about 1,5 MTOE) by 2020, corresponding to reduced emissions of 6,4 Mt of CO₂ (European Commission 2008).
It is estimated that with an extended product range, the energy label could lead to savings of some 22 MTOE per year by 2020, corresponding to annual emission reductions of about 65 Mt of CO₂. More than half of these savings would come from the heating and water heating appliance alone, which have not yet been addressed by the labelling directive. The rest of the savings would come from the upgrading of the existing eight measures and from a new measure on televisions (European Commission 2008).
With full implementation of the current labelling scope plus coverage of all energy-related products, the directive could lead to additional savings of some 27 MTOE by 2020, i.e. 5 MTOE additional savings by broadening the scope to include windows, commercial refrigeration and heating appliances.

The European Union’s mandatory labelling of electric appliances has been an attempt at changing behaviour of consumers as well as of producers/importers, and it has been a definite success in the European consumer market. It is estimated that energy labelling has contributed to annual energy savings in order of 3 MTOE corresponding to emission reductions of some 14 Mt of CO₂ over the period 1996-2004 (European Commission 2008).
Furthermore the combined effect of the labelling scheme and the minimum energy efficiency requirements have already led to significant energy savings for single product groups. For example in 1995, refrigerators consumed on average 425 kWh/year. In 2005, they consumed approximately 292 kWh/year, which represents a reduction of about 30% (Ecodesign Preparatory Study Task 2).
There have been a number of studies of the impact of the labelling directive. These track the increased take up of higher efficiency appliances over the past decade. Of all the appliances covered by implementation directives, the impact has been greatest for white goods, particularly refrigerators, freezers and washing machines. The majority of these products sold today carry an A or B rated label or better (i.e. A+ or A++) compared with the majority of products sold in 1994 carrying a D rated label or worse. Recent market data on the share of energy efficient appliances suggests that the EU market for refrigerators is moving towards a higher share of most efficient classes of appliances. The next figure gives an overview of the market development.
The success of the labelling scheme is also demonstrated in the high number of third countries that have adopted a similar label or sometimes an exact copy of the EU energy label.

It is unknown, which share of the overall technical and economic potential has been achieved by energy labelling. However, the European Commission (2008) has estimated that energy labelling schemes and consumer education about them with all covered products could account for about half of the increased take up of more energy efficient appliances due to policy.

The form of the legislation is a regulation which is directly applicable in all Member States. This ensures no high costs for national and community administrations in transposing the implementing legislation into national legislation and ensures timely and harmonised entry into force within the internal market.
The management of the label, by the public authorities, requires some personnel and budget, but can be neglected (as the compliance regime is not quite so strong in most Member States). However, national governments sometimes stimulate the market with subsidies for A-labels, but this cannot be assumed in advance (Atkins 2006).
A background study estimates that the administrative and transposition cost together is €5 million for the development of new delegated regulations (€1 million in administrative cost for the new revision and €4 million for the transposition by MS). The cost for upgrading the existing ones is estimated at €4.72 million per directive (€720,000 for the development/revision of the implemented directive and €4 million for transposition by MS (€150,000 for each MS)). The figures do not include overhead costs. The main activities causing the administrative costs are:

• Definition of the labelling delegated regulations, preparatory studies and product-specific Impact Assessments
• The extension of the product scope of the labelling directive would broaden the choice of product groups for which delegated regulations could be adopted. If this happened, the administrative expenditure would be covered by the usual annual budgetary allocation
• Costs for the comitology procedure (European Commission 2008)

For manufacturers, administrative burden is limited to printing of the label and the strip. The printing costs of several hundred euros in relation to an appliance model (with thousands of units sold) and the related information documentation and manuals and packaging seems negligible (European Commission 2008).
Estimates of the cost to manufacturers for the development of labelling for products covered by Directive 92/75 cover a wide range. In a Position Paper in 2003, on the development of the Ecodesign Directive by CECED, representing domestic appliance manufacturers, stated that: “Establishing the energy label alone cost our industry more than €250 million. If we take into account the running costs to keep the system updated, we would double this figure over the last ten years. This represents some 5-8 % of the investments of the whole sector.” (Position Paper on the Proposal for a Framework Directive on eco-design requirements of Energy-using-Products (CECED 2003))
Still, sales prices in real terms have decreased for many types of appliances, including refrigerators and freezers appliances.
Also, incremental costs of energy-efficient appliances have decreased over time.

Although energy labelling and technology development have made further energy savings more challenging in the case of the product groups already labelled, considerable savings can still be reached. Estimated savings of some €3 billion by 2020?? can be reached.
Furthermore, it is estimated that the current directive, including the upgrading and the development of new labelling schemes for new product groups, would help to reach cost savings of €22 billion.
For single product groups, the saving potentials were calculated as well. For the new label on televisions it is estimated that energy labelling could catch about €1,6 billion pa (per annum??) by 2020. For lighting, labelling could catch some €2,2 billion. (European Commission 2008).

No assessment studies on this issue are known to us.
However, the impact assessment performed for each product group under the Ecodesign procedure proves that the level of energy efficiency required for the MEPS is cost-effective for the consumers. In contrast, appliances in the most energy-efficient classes of the energy label may not be cost-effective for all EU citizens.
It can, however, be said that the additional policy cost for the EU energy labelling scheme is small (see above).

Most of the energy efficiency measures 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 appliances will be bigger than any additional purchasing cost for the more efficient model. Over recent years, the EU white goods appliances cost less and their efficiency has improved, while keeping the industry sector healthy (though with limited margin) and despite fears by manufacturers that the policy action introduced in the 90’s could have had a negative impact. Instead the "white goods" industry sector acknowledges the added value of the label as a means to differentiate products on the market (European Commission 2008).
In many cases there is a higher manufacturing cost for energy-efficient appliances to manufacturers, which can be passed on to the users or can be compensated by productivity gains. Over the last ten years, the EU white goods manufacturers have become more profitable, appliances cost less, and the efficiency has improved. Overall it can be concluded that energy efficiency measures, and in particular labels, are cost effective for society and reduce CO₂ emissions at a negative cost (Bertoldi/Atanasiu 2007).

Considering that the energy label can contribute to making the “right” purchasing decision but is not the only element guiding consumer decision to buy a particular product, it is difficult to assess the impact of a labelling information scheme on the energy efficiency of appliances.
In 2008 it was estimated that with all current policies already in place, a total of 65 TWh to 75 TWh per year could be saved by 2010. It has been estimated that energy labelling schemes and consumer education about them with all covered products could account for about half of the increased take up of more energy efficient appliances, contributing in total to some 35 TWh of energy savings per year (2010) and corresponding to some 3 MTOE of primary energy and some 14 Mt of CO₂ by 2020 (European Commission 2008). The rest of the saving is composed mainly of technological development and MEPS.
Furthermore, for single product groups the potential savings were calculated. For example: for the new label on televisions, it is estimated that a total energy savings potential of 46 TWh by 2020 could be realised. Out of this total potential, it is further estimated that energy labelling could catch about 12 TWh (about 1 MTOE) by 2020, corresponding to emission reductions of 4,8 Mt of CO₂. As to lighting, the Ecodesign preparatory studies indicate that general lighting appliances would provide some 75 TWh of savings potential, of which energy labelling could catch some 16 TWh (about 1,5 MTOE) by 2020, corresponding to reduced emissions of 6,4 Mt of CO₂ (European Commission 2008).
It is estimated that with an extended product range, the energy label could lead to savings of some 22 MTOE per year by 2020, corresponding to annual emission reductions of about 65 Mt of CO₂. More than half of these savings would come from the heating and water heating appliance alone, which have not yet been addressed by the labelling directive. The rest of the savings would come from the upgrading of the existing eight measures and from a new measure on televisions (European Commission 2008).
With full implementation of the current labelling scope plus coverage of all energy-related products, the directive could lead to additional savings of some 27 MTOE by 2020, i.e. 5 MTOE additional savings by broadening the scope to include windows, commercial refrigeration and heating appliances.

The European Union’s mandatory labelling of electric appliances has been an attempt at changing behaviour of consumers as well as of producers/importers, and it has been a definite success in the European consumer market. It is estimated that energy labelling has contributed to annual energy savings in order of 3 MTOE corresponding to emission reductions of some 14 Mt of CO₂ over the period 1996-2004 (European Commission 2008).
Furthermore the combined effect of the labelling scheme and the minimum energy efficiency requirements have already led to significant energy savings for single product groups. For example in 1995, refrigerators consumed on average 425 kWh/year. In 2005, they consumed approximately 292 kWh/year, which represents a reduction of about 30% (Ecodesign Preparatory Study Task 2).
There have been a number of studies of the impact of the labelling directive. These track the increased take up of higher efficiency appliances over the past decade. Of all the appliances covered by implementation directives, the impact has been greatest for white goods, particularly refrigerators, freezers and washing machines. The majority of these products sold today carry an A or B rated label or better (i.e. A+ or A++) compared with the majority of products sold in 1994 carrying a D rated label or worse. Recent market data on the share of energy efficient appliances suggests that the EU market for refrigerators is moving towards a higher share of most efficient classes of appliances. The next figure gives an overview of the market development.
The success of the labelling scheme is also demonstrated in the high number of third countries that have adopted a similar label or sometimes an exact copy of the EU energy label.

It is unknown, which share of the overall technical and economic potential has been achieved by energy labelling. However, the European Commission (2008) has estimated that energy labelling schemes and consumer education about them with all covered products could account for about half of the increased take up of more energy efficient appliances due to policy.