Choosing energy efficiency – consumer response to operating costs at the point of sale

Fiona Brocklehurst, Ballarat Consulting

Consumers have a big effect on energy use through their choice of the appliances and cars that they buy.  But they may buy a product without thinking about energy costs –focussing instead on the initial cost and other features.  Alerting them to running costs may encourage them to buy more efficient products.

There has been a continuing interest in this area, with over twenty papers published since 2011, but no comprehensive meta-analysis of this body of work[1]. This paper reviews the literature of the last ten years or so to see if the evidence suggests that providing data on running costs helps persuade consumers to buy more efficient goods.

The picture is complicated and quite fragmented: studies have looked at diverse products, with different proportions of up front and operational costs, some of which are have reasonably consistent energy use (eg fridges) and some with wide variations in consumer usage (eg cars).  The study methods are also varied: choice experiments and surveys have been widely used, with the responses measured in different ways.  There have also been several ‘field studies’ which have measured the actual change in consumer purchases in a physical or online shops.  Moreover, researchers have presented consumers with information on operational costs in a variety of ways – for one, five or ten years, for a given usage (distance driven for cars) or over the product’s expected lifetime.  Finally, some authors have investigated how consumers’ reactions to the information are affected by their characteristics (eg risk aversion) or beliefs (eg concern about the environment).

This topic is of more than theoretical interest; energy labels are one of the most widespread policies to improve energy efficiency of lighting appliances and vehicles.  Most energy labels use energy efficiency as the basic information presented (for example mandatory categorical appliances labels in the EU, China and Australia); only a few use energy costs as the main means for classification (eg USA and Canada).

Changing a label design in a major economy or trade block is a major undertaking only to be undertaken when strictly necessary; as well as the disruption to manufacturers, retailers and compliance authorities, it has been shown that a major contribution to the impact of these labels is their familiarity to consumers.  However, the increasing availability of data online which can be accessed in a retail environment (via smart phones or tablets) means that additional information, such as running costs, should be relatively easy to add to that already displayed on a fixed format label.  So, with these new avenues of communicating to consumers opening up, should adding data on energy costs to labels be a priority?  And if so, exactly what information?

The paper will attempt to identify key findings from the recent literature that could be used by policy makers to help consumers make more energy efficient choices.

1] One review was published by ETH Zurich, Institute for Environmental Decisions in 2013, “Energy labels for household appliances and their disclosure format:  A literature review”, Rohling M, Schubert R