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CONSumer Energy Efficiency Decision Making

Periodic Reporting for period 2 - CONSEED (CONSumer Energy Efficiency Decision Making)

Reporting period: 2018-06-01 to 2019-11-30

CONSEED – Consumer Energy Efficiency Decision Making – directly investigates how consumers make decisions which involve an energy component, and how to promote more energy efficient behaviour through future energy efficiency policy.

The European Union set itself a 20% energy savings target by 2020, and at least 27% by 2030. Successfully reaching this goal can help reduce climate change, and help con¬sumers lower their energy bills. However, due to a range of market and non-market based failures, consumers do not always choose cost-minimising products, i.e. those which have the lowest combined investment and energy cost. This is called the “energy efficiency gap”.

The key aim of CONSEED was to understand consumer energy-related decision-making and investigate how to make (energy) energy efficiency more salient to consumers at the point of purchase to increase the demand for more efficient products. To achieve this, CONSEED collected empirical data on consumer behaviour through a range of different methods across five European countries: Greece, Ireland, Norway, Slovenia and Spain.

Main conclusions of the action:
CONSEED offers three main policy recommendations to increase the adoption of energy efficiency. The first and second relates to amendments to existing energy efficiency labelling directives, while the third relates to a new regulation on lending terms for energy efficiency investment within the banking sector:

1. Add energy cost forecasts at the point of sale
2. Labelling should account for differences across countries and households
3. Align loan terms with energy efficiency payback periods

However, there are a three caveats which policymakers should consider:

1. Energy cost information has heterogeneous effects across the product groups explored in CONSEED, with small or insignificant effects for appliances (Spain and Greece), and large and significant effects for both cars (Norway) and properties (Ireland and Slovenia).
2. Policy recommendations one and two are applicable to households only – while not tested formally using trial or experiments, business surveys suggest that there is not a similar appetite in this sector for monetary information (farmers, services SMEs and industrial firms)
3. Our energy cost labels did not account for potential biases in existing energy efficiency labels known as “prebound” or “rebound” effects. While such factors could impact the reputation of existing EU labels also, public trust may be impacted to a greater degree when estimated energy savings are framed in monetary terms.

We recommend the use online/in-store energy cost calculators to overcome geographical implementation issues. Furthermore, such calculators could also incorporate household-specific factors and expectations, such as, for example, existing energy efficiency levels, family size and long-run energy price expectations.
CONSEED comprised an extensive literature review on factors influencing consumer decision-making, focus groups and in-depth interviews, across consumer groups (households, services, agriculture and industry), product sectors (appliances, buildings and transport) and geographical locations (Greece, Ireland, Norway, Slovenia, Spain). The results of these interactions informed the design of the surveys which were conducted across the same five countries. CONSEED conducted three field trials and three discrete choice experiments. We then combined the results of all the data collection to validate, refine and develop further the consumer decision making models and estimate implicit discount rates. Finally, we evaluated relevant existing EU energy efficiency policies, and made concrete recommendations for alterations. Results fed into a large number of publications from the project which are available on the project website, including reports/deliverables, policy recommendations, policy briefs, factsheets, posters, industry bulletins, key presentations, abstracts, videos and links to scientific publications.

In WP5, we combined the results of WPs 1-4 to validate, refine and develop further the consumer decision making models and estimate implicit discount rates. Finally, WP6 evaluated relevant existing EU energy efficiency policies, and made concrete recommendations for alterations. Results fed into a large number of publications from the project which are available on the project website, including reports/deliverables, policy recommendations, policy briefs, factsheets, posters, industry bulletins, key presentations, abstracts, videos and links to scientific publications.

Our Findings
Policy-relevant findings from CONSEED derive primarily from surveys, field trials and experiments.

While survey results vary considerably by country, sector and technology, there are a number of broad general findings:

1. Many households and firms are unsure of existing consumption levels and of the financial benefits of upgrading to higher efficiency levels
2. Underinvestment in energy efficiency is partially due to internal financial constraints (lack of internal financial reserves) and external credit limitations (loan access)
3. Existing labelling is considered helpful, influential, trustworthy and clear. However, contrary to this, many believe labelling is potentially manipulated by suppliers
4. Our findings suggest that the addition of monetary information, e.g. in the form of likely energy costs over a year, to existing energy efficiency labels would increase the demand for more efficient household goods.

Results from household field trials (property and appliances) and hypothetical DCEs (appliances and cars) also vary by country and technology but can be summarised under:

1. Regression results from control group samples suggest that energy efficiency is already an important attribute in energy efficiency investment decisions
2. Treatment effects (the framing of energy efficiency in monetary terms) further increases the demand for energy efficiency (Note: for appliances, the effects are considerably smaller in the Spanish field trial and statistically insignificant in Greece)
The CONSEED field trials delivered some energy efficiency improvements during the duration of the project. Significantly greater longer-term improvements in energy efficiency will be realised if our trials and experiments lead to implementable policy recommendations.
CONSEED engaged with a broad range stakeholders, from national policy makers, consumer interest groups and consumer watchdogs, to sectoral representative groups, retailers, as well as general public consumers. With targeted strategies for engaging and communicating with these groups, CONSEED aimed to increase both energy efficiency policy awareness and its relevance in decision making, and to generate more effective, and informed, energy efficiency decisions and policy.
CONSEED’s main contributions to the energy efficiency literature are as follows:
• First experiments in property and car markets to test the effect of framing energy efficiency in monetary terms
• First to show heterogeneous treatment effects using comparable controlled methodologies across three different products in five countries
• Broadest cross-country energy efficiency survey to explore investment costs, benefits and barriers date in the EU to date
• One of the broadest explorations of cross-country discount rate heterogeneity to date
CONSEED results image
CONSEED logo with subtitle