Energy efficiency standard and labeling program and consumer welfare: a case of the air conditioner market in China

Mariko Watanabe and Kojima Michikazu

No 602, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Improving energy efficiency is an unarguable emergent issue in developing economies and an energy efficiency standard and labeling program is an ideal mechanism to achieve this target. However, there is concern regarding whether the consumers will choose the highly energy efficient appliances because of its high price in consequence of the high cost. This paper estimates how the consumer responds to introduction of the energy efficiency standard and labeling program in China. To quantify evaluation by consumers, we estimated their consumer surplus and the benefits of products based on the estimated parameters of demand function. We found the following points. First, evaluation of energy efficiency labeling by the consumer is not monotonically correlated with the number of grades. The highest efficiency label (Label 1) is not evaluated to be no less higher than labels 2 and 3, and is sometimes lower than the least energy efficient label (Label UI). This goes against the design of policy intervention. Second, several governmental policies affects in mixed directions: the subsidies for energy saving policies to the highest degree of the labels contribute to expanding consumer welfare as the program was designed. However, the replacement for new appliances policies decreased the welfare.

Keywords: Energy; Consumers; Consumer surplus; Energy efficiency standard and labeling; Promotion policies (search for similar items in EconPapers)
JEL-codes: F15 O14 O30 (search for similar items in EconPapers)
Date: 2016-05-01
New Economics Papers: this item is included in nep-cna, nep-ene and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 602. 2016-05-01

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