 How Effective are Energy Labels? Evidence from the 2021 EU ReformToker Doganoglu (),
Lukasz Grzybowski and
Frank Verboven
No 2025-26, Working Papers from Faculty of Economic Sciences, University of Warsaw Abstract: Energy labels are often used to promote the adoption of more energy-efficient domestic appliances. This paper provides evidence on the impact of the 2021 revision of the EU energy labeling regulation using product-level sales data on refrigerators in four European countries (Belgium, France, Germany, and Poland). We first document substantial cross-country differences in sales-weighted energy consumption, reflecting differences in product portfolios and consumer preferences. Controlling for product characteristics, average energy consumption declines by between 3.3% in France and 4.2% in Belgium following the reform. We subsequently estimate a product-level demand model that incorporates energy labels in utility either directly or through their associated 15-year electricity costs. The results indicate that consumers undervalue future energy costs under both labeling regimes, although the degree of undervaluation declines under the new labels. Counterfactual simulations suggest that the labeling reform generated only modest energy efficiency gains. Larger gains could be achieved through alternative policies: stricter minimum standards (banning the least efficient appliances) or fiscal incentives (a feebate scheme subsidizing efficient appliances while taxing inefficient ones)., France, Germany, and Poland between 2019 and 2022. We analyze detailed product-level sales data to assess whether the introduction of the new labeling system (the New EU Energy Label 2021) improved the energy performance of products available on the market. The results reveal substantial cross-country differences in sales-weighted energy consumption: Germany and Belgium exhibit significantly lower average energy use, reflecting differences in product portfolios and consumer preferences, while consumers in France and Poland tend to purchase less efficient models. After controlling for refrigerator characteristics, average energy consumption declined by 2.8% in France, 3.4% in Belgium, and 3.5% in both Germany and Poland between March 2021 and December 2022. We further estimate a nested logit demand model incorporating both energy labels and the discounted ten-year cost of electricity consumption. The results indicate that, except in Poland, consumers tend to undervalue future energy costs under both the old and new labeling regimes. The estimated willingness to pay (WTP) for labels varies across countries, with some evidence of overvaluation for specific efficiency classes. Using the model, we conduct counterfactual simulations to assess the effects of alternative policy scenarios. The simulations suggest that the 2021 reform led to measurable improvements in the average energy efficiency of refrigerators sold in the EU market. Keywords: Energy Efficiency; EU Energy Label; Nested Logit (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2025-26 Access Statistics for this paper More papers in Working Papers from Faculty of Economic Sciences, University of Warsaw Contact information at EDIRC. |
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