Abstract
This paper investigates the effects of energy efficiency and environmental labels on households’ choice of appliances, using a discrete choice experiment approach. Labeling programs currently operated by the South Korean government are considered in the empirical study, and the effects of such labels on appliance choice. This paper found that households showed a positive preference for labeled appliances, and an intention to pay more to purchase appliances with energy efficiency, and/or other environmental labels, with more value placed on energy efficiency labels than other environmental labels. The results of this study offer implications for both the government and manufacturers. For promotion of “green” appliances, it is recommended that the South Korean government expand the list of items mandatorily included in its labeling programs. For manufacturers, it is worth noting that consumers properly identify the information regarding energy efficiency, and environmental friendliness with reasonable monetary value. Thus, appliance manufacturers would be wise to concentrate on improving energy efficiency grades, and acquiring environmental labels.
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Notes
Refrigerators, freezers, kimchi refrigerators, air conditioners, washing machines, horizontal drum washing machines, dishwashers, dish driers, water coolers, rice cookers, vacuum cleaners, electric fans, air cleaners, incandescent bulbs, fluorescent lamps, fluorescent lamp ballasts, associated ballasts, three-phase induction motors, household gas boilers, adapters/chargers, electric heat pumps, commercial refrigerators, gas water heaters, transformers, window sets, televisions, electric fan heaters, electric stoves, multi-heat pump systems, dehumidifiers, electric pads, electrically heated water mats, electrical heating boards, electric beds, and electric radiators
Computers, monitors, printers, fax machines, copiers, scanners, multi-function devices, energy saving & controlling devices, televisions, video cassette recorders, home audio products, DVD players, radios, microwave ovens, set-top boxes, door phones, cord/cordless phones, bidets, modems, home gates, hand dryers, and servers
This limits the comparison between the brand effect and the label effect, and the price range may depend highly on the chosen five attributes.
One of the well-known problems with regard to using stated preference data is hypothetical bias problem. This problem happens since respondents who are put in a virtual situation always indicate higher willingness to pay than those in a real market situation. Cheap talk may reduce the bias by providing nonbinding information or communication. Although the effects of cheap talk are not certain, it is important to eliminate the hypothetical bias. Cheap talk has not been introduced in our survey; however, we tried to remove the hypothetical bias by reminding the respondents that they should consider their income level before they answer as they would in the real world. Moreover, they were reminded that they could not buy certain goods, if they spend their income for other goods.
There are differences between the profiles of the South Korean population and the profiles of the survey respondents, because the survey was conducted for 500 respondents who own refrigerators and laptops. This ownership limitation for the respondents should be introduced to assume that all the respondents are potential consumers in the market.
We test whether the marginal effects of a change in efficiency grade are the same across the levels, similar to the approach of Shen and Saijo’s (2009). The results show that the marginal effects of change among each discrete rank are not identical. Thus, it is appropriate to introduce the Energy Efficiency Grade Label as a set of dummy variables rather than continuous variables.
Bech et al. (2011) report that there is no agreement about the appropriate number of choice sets; in general, eight or more choice sets are suggested in the conjoint experiments. However, we suggested only four choice sets per respondent to reduce the cognitive burden.
The IIA assumption was examined by following Hausman and McFadden (1984), and the result implies that estimating the multinomial logit model may not be appropriate.
Korean Statistical Information Service, KOSIS. Available from http://kosis.kr/eng/, last accessed 09.03.14.
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Appendices
Appendix 1. Example of choice set used in the survey
Appendix 2. Labels by the Ministry of Knowledge Economy and the Korea Energy Management Corporation (KEMCO)
Name | Display | Description |
Energy Efficiency Grade Label |
| The Energy Efficiency Grade Label enables consumers to identify energy efficient products easily by mandatory indication of energy efficiency grade from 1st to 5th grade, and mandatory reporting and application of MEPS (Minimum Energy Performance Standard). |
Energy Frontier Label |
| The Energy Frontier Label is attached to the product that hasa higher energy efficiency than 1st grade Energy Efficiency products. |
“Energy Boy” Label |
| The program encourages the adoption of energy saving modes while the appliances are idle, and the minimization of standby power. The Energy Boy label is voluntarily attached to those products that meet the standards for standby power. |
Standby Warning Label |
| The Standby Warning Label is mandatorily attached to those products that do not meet the specified standby power standards. It is the core program to reduce standby power below 1W. |
Appendix 3. Labels by the Ministry of Environment and the Korea Environmental Industry and Technology Institute (KEITI)
Name | Display | Description |
|---|---|---|
Eco-Label |
| The Eco-Labeling Program aims at providing accurate environmental information to consumers and to induce firms to develop and produce environment-friendly products in line with consumers’ preferences by affixing the Eco-Label on products causing relatively less pollution, or using less resources in the production and consumption processes, among products with similar functions |
Carbon Footprint Label |
| The Carbon Footprint Label shows the total amount of greenhouse gas emissions generated throughout the life cycle of a product, such as raw material used during production, transportation, distribution, use, and disposal. The total amount of greenhouse gas emissions is converted into its CO2 equivalent and is attached to the product as a label |
Source: The “Eco-Label Program” homepage (http://el.keiti.re.kr), the “Carbon Footprint Label Program” homepage (http://www.edp.or.kr)
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Jeong, G., Kim, Y. The effects of energy efficiency and environmental labels on appliance choice in South Korea. Energy Efficiency 8, 559–576 (2015). https://doi.org/10.1007/s12053-014-9307-1
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DOI: https://doi.org/10.1007/s12053-014-9307-1