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Effect of energy efficiency labels on household appliance choice in China: Sustainable consumption or irrational intertemporal choice?

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Abstract

Energy consumption has caused severe environmental problems, such as climate change and air pollution. The energy efficiency label is an environmental information policy that provides consumers with energy consumption information of products to change consumers’ choices and guide consumers to green consumption. Current evaluations mainly focus on consumers’ purchase intention toward energy efficiency labels through questionnaire survey and simulation experiment. Our study paper used the real purchase data on China's largest online sales platform to explore consumers’ energy-efficiency home appliance purchase behaviors. This paper found that the energy efficiency labeling policy does not promote consumers’ green consumption behavior, an increase of energy efficiency grade raises the sales of refrigerator by 24.47%, however, the price of the product can negatively regulate the relationship between the energy efficiency grade and the sales. The results of heterogeneity analysis show that when the product price is in the low-price range, consumers will choose high energy-consuming household appliances; only for consumers who purchase mid-to-high-priced products, energy efficiency labeling policies played a guiding role in green consumption. This will cause the energy-saving products more expensive, and consumers are less willing to buy energy-saving products resulting in an energy efficiency paradox. Through further analysis of questionnaire survey data, the results indicate that the energy efficiency paradox is not caused by rational factors, but irrational intertemporal choices. Therefore, accurate assessment of the effect of energy efficiency labels is crucial to promote consumers’ green consumption behavior and mitigate climate change.

Introduction

As an environmental information policy, the energy efficiency labeling policy provides consumers with information on the energy consumption of products, thereby changing consumer choices and guiding consumers to green consumption (Nair et al., 2010; Yu et al., 2019). Due to the large investment in research and production of energy-saving products, their prices are usually higher than ordinary products, while their cost of energy services over a circle life is lower (Gillingham et al., 2009). Therefore, consumers need to make a trade-off between paying higher prices today and saving energy costs in the future. However, consumers often focus on the current price of the product, and do not choose energy-saving products that are more economically cost-effective throughout the life cycle (Mahlia and Saidur, 2010; Waechter et al., 2015). There is a problem of insufficient actual energy efficiency investment, that is, the phenomenon of energy efficiency paradox caused by irrational intertemporal choices. In daily life, when facing small, immediate benefits and larger but delayed rewards, people may often choose the former (Li et al., 2019). This phenomenon is known as intertemporal choice, which may lead to the failure of energy efficiency labeling policy, due to the energy saving products are more expensive than ordinary products, although they can save people more electricity expenditure in the future.

Energy consumption and emission caused by residents’ consumption is getting increasingly serious, and residential carbon emissions exceed 30% of total emissions (Wang and Yang, 2016). With the development of China's economy and the improvement of people's living standards, household electricity consumption is growing rapidly (Shen et al., 2020). The total household electricity consumption has reached from 1.46 trillion kWh in 2001 to 6.12 trillion kWh in 2016, with an average annual growth rate of 10.03%. The energy consumption of household appliances accounts for a large proportion of residents' daily energy consumption. According to statistics, the average numbers of refrigerators, washing machines, and air conditioners per 100 households in China reached 96.4, 94.2, and 123.7 in 2016, respectively (Jiang and Yin, 2018). The total number of household appliances doubled in the past two decades. In fact, the use of household appliances has become a major factor in household energy consumption. Approximately 70% of household carbon dioxide emissions come from household appliances, of which air conditioners, refrigerators, and televisions account for 50% (Wang et al., 2019). However, the unreasonable consumption patterns and usage habits of home appliances have caused nearly 40% of the environmental degradation in China (Niu et al., 2014; Zhai et al., 2018). Many studies have found that residents' unreasonable use of and purchase habits related to household appliances have caused energy waste (Mirosa et al., 2013; Houde and Aldy, 2017). Therefore, it is crucial to change and guide consumers’ behavior from the demand side and reduce energy consumption.

In recent years, with the upgrading of China's consumption structure and the enhancement of environmental awareness, Chinese green consumers are beginning to emerge (Thøgersen and Zhou, 2012). Green consumers refer to those consumers who care about the ecological environment and have real purchase intentions and purchasing power for green products (Jansson et al., 2010). The consumption of green consumers has begun to shift from focusing on quantity satisfaction to pursuing quality improvement and from imitative consumption to personalized consumption (Barbarossa and Pelsmacker, 2016). Among them, the number of consumers who meet the characteristics of green consumption is also rising rapidly. In 2015, the number of green consumers on the Alibaba retail platform exceeded 65 million, accounting for 16% of the platform's active users, and a 14-fold increase over the past four years. In 2015, green consumer groups purchased enough energy-saving home appliances on an online platform to reduce carbon dioxide emissions by 30 million tons, equivalent to 556 acres of forest, which further demonstrated that Chinese consumers have great energy-saving potential. At this stage, conducting research on the sustainable consumption of household appliances in China around energy efficiency labels is of great significance for changing consumers' irrational consumption patterns and alleviating the environmental problems caused.

Over the past two decades, governments around the world have issued a variety of policies, hoping to change consumers' unreasonable consumption patterns and habits and guide green consumption (Gillingham et al., 2009; Nair et al., 2010). However, this kind of change cannot be implemented through forced methods and can only lead consumers to voluntarily change their behavior through guidance, such as the eco-label policy (Yu et al., 2019). If the energy-saving characteristics and advantages of environment-friendly products cannot be well reflected in the products, it may lead to poor cognition and understanding of energy-saving products by consumers (Park, 2017; Bjerregaard and Møller, 2019). Therefore, the best form of environmental information policy is to provide consumers with energy-saving information about the products and give third-party certification marks to increase credibility of the information (Wang et al., 2018). Such information labels can reduce the information asymmetry between consumers and manufacturers and allow consumers to better distinguish between energy-saving products and non-energy-saving products. China's energy efficiency labeling policy is a kind of environmental information policy to guide consumers to generate green consumption behavior (Yu et al., 2019).

The forms of energy efficiency labeling policies vary from region to region. According to the content form of the information label, the energy efficiency label can be divided into approval mark and comparison mark (Mahlia and Saidur, 2010). The approval mark only discloses whether the product conforms to an environmental standard and has been certified by a third party, but does not show energy efficiency rating of products in the same industry. The information disclosed by the comparative mark is more comprehensive, including the physical information related to the energy consumption of the product and the energy efficiency ranking in similar products. Therefore, the comparative marks often use numbers or letters to indicate the energy efficiency level of the products. According to the implementation method of the information labeling policy, it can be divided into two forms: mandatory enforcement and voluntary participation of enterprises. The mandatory enforcement policy requires that products must meet market access standards, and relevant marks must be printed on the products before entering the market. China's energy efficiency labeling policy is a compulsory comparative label, while the European Union's eco-labeling policy and the America's Energy Star policy are voluntary energy efficiency-labeling programs (Bjerregaard and Møller, 2019).

Studies on energy efficiency labels have attracted wide attention from researchers in the fields of economics and psychology. From a macro perspective, many researchers used the methods of laboratory analysis and field measurement to evaluate the potential energy saving effect of energy efficiency labels. Marla et al. (2008) analyzed the energy saving effect of the United States Energy Efficiency Star policy and projected that Energy Star labeled products will save 12.8 EJ and avoid 203 Tg C equivalent over the period 2007–2015. The energy-saving effect of China's energy efficiency labeling program is also obvious. The reason why Chinese government initially implemented energy-saving policy is to achieve a 20% reduction in energy intensity from 2006 to 2010 (Wang et al., 2017). Many domestic researchers have studied the energy saving and emission reduction effect after the implementation of energy efficiency labels. Price et al. (2011) estimated that the energy efficiency labeling policy for home appliances alone was expected to save 79 million tons of standard coal. Lu (2007) predicted the energy-saving effect of the energy efficiency labeling system from different levels of energy efficiency standards. While maintaining the existing domestic appliance standards, China will save 1143 TWh of electrical energy by 2020.

A few researchers focus on the impact of energy efficiency labeling policies on individual consumer behavior and willingness to pay from a micro perspective. Studies on willingness to pay generally uses questionnaires to obtain the status preference data, but simply using the contingent valuation method (CVM) will result in deviations due to ambiguity in the interviewee's statement or setting issues. To solve this problem, lots of the current researches on selection intention generally use the method of combining CVM and choice experiment mode method (CE). For example, Shen and Saijo (2009) used the stated preference data and conducted a selective experiment to study the impact of energy efficiency labeling policies on consumer choice through multinomial logit model, mixed logit model, and latent class model in Shanghai, China. However, the effect of eco-labels is controversial (Waechter et al., 2015). Most researchers believe that information labels can guide consumers’ consumption behavior (Sammer and Wüstenhagen 2006; Ward et al., 2011). Sammer and Wüstenhagen (2006) found that Swiss consumers believe that energy-saving products have better performance in all aspects than ordinary products. They are willing to pay a premium of 347 Swiss Francs for a washing machine with an energy efficiency level of A in comparison to a washing machine with a B rating. Ward et al. (2011) studied consumers’ willingness to pay (WTP) for refrigerators under the US Star Policy. The additional WTP for an Energy Star-labeled refrigerator ranged from 249.8 dollar to 349.3 dollar per product.

In general, studies focused on the analysis of the energy-saving effect at the macro level mainly based on the qualitative approach, neglecting the importance of consumers’ consumption behavior at the micro level. Studies on micro behavior mostly uses questionnaire survey and simulation experiment to investigate the behavior intention of consumers, emphasizing social psychological factors. On the one hand, the effect of product attributes such as brand on energy-efficiency product purchasing cannot be controlled. On the other hand, the intention of consumers is not completely consistent with their real behaviors. Therefore, this paper adopts the combination of individual specific purchase data and questionnaire data to measure their purchase behavior. In this way, the weakness of subjective measurement can be remedied by using the real purchase data.

The energy efficiency label has been implemented for more than ten years in China. Due to its mandatory characteristics, it plays a significant role in the production end, which effectively changes the distribution of household appliances with different energy consumption in the current Chinese market. However, whether it can effectively guide consumers to green consumption is still controversial. Therefore, this paper focuses on three the following aspects:

  • (1)

    Can the energy efficiency labeling policy guide the sustainable consumption of the home appliance market and guide the residents’ purchasing choices on the consumer side?

  • (2)

    Residents usually make a trade-off between current prices and future energy consumption when choosing home appliances. Therefore, will the price of energy-saving home appliances lead to irrational intertemporal selection behaviors and thus affect the guidance role of energy efficiency labeling policies?

  • (3)

    The characteristics of different consumers are different. For different products in different price ranges, will there be differences in the magnitude effect of consumer choice behavior?

The main contributions of this study are as follows: First, based on the real purchase data, we constructed an econometric model to evaluate the effectiveness of China's energy efficiency label policy by empirical analysis. Second, through the heterogeneity analysis of different prices, we explored whether there is an energy efficiency paradox problem when consumers purchasing home appliances. Third, based on the data of questionnaire survey, our results indicate the energy efficiency paradox is not caused by rational factors, but irrational intertemporal choices.

The remainder of this paper is organized as follows. Section 2 proposes three related hypotheses, based on the intertemporal choice theory, the energy efficiency paradox hypothesis and the magnitude effect hypothesis are proposed. Section 3 is the model and data, and Section 4 is the empirical analysis, and the last section is the conclusion and suggestions.

Section snippets

Research hypothesis

In the field of home appliances, because energy-saving products require more research and development costs, the price is usually higher than that of non-energy-saving products. However, from the perspective of the entire life cycle, products that are affordable at the moment but consume a lot of energy in the process of usage are often not the optimal option. For example, a 1.5-horsepower air conditioner, the most energy-efficient level 1 product is about 700 yuan more expensive than the least

Data sources

With the popularity of e-commerce networks, the amount of online shopping has increased dramatically, and the online sales of home appliances have won the favor of young people due to good service and large discounts. JD.com is growing rapidly at an annual growth rate of 200% since it formally entered the field of e-commerce in 2004. The current Android versions supporting the application functions of JD.com have been installed more than 2.2 billion times. JD.com has built its own warehousing

Test for energy efficiency paradox and intertemporal choice

The price of products with low energy efficiency grade and large capacity is relatively high, which means that there may be a strong correlation between price and other independent variables. This may lead to invalid regression results. Therefore, we conducted multicollinearity test before regression. The results show that the variance inflation factor (VIF) of independent variables are all less than 10, thus regression analysis can be carried out. Table 3 shows the regression results of model

Conclusion and policy implications

With the improvement of living standards and the advancement of technology, the types of home appliances on the market are enriched, and the overall energy consumption grade of home appliances is continuously decreased. Since the main electricity consumption of residents is through household appliances, purchasing energy-saving appliances can greatly reduce electricity consumption. However, energy-saving appliances are not widely favored by consumers. Many studies show that residents do not

CRediT author statement

Bo Wang: Conceptualization, Methodology.

Nana Deng: Writing- Original draft.

Xiangxiang Liu: Research questionnaire design and data collection.

Qingyu Sun: Visualization.

Zhaohua Wang: Writing-Reviewing and editing.

Declaration of Competing Interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgments

This study is supported by Yunnan Provincial Major Science and Technology Special Plan Projects (Reference No. 202002AD080001), National Science Fund for Distinguished Young Scholars (Reference No.71625003), National Key Research and Development Program of China (Reference No.2016YFA0602504), National Natural Science Foundation of China (Reference No. 72074026, 71804010, 91746208), Science and Technology Project of State Grid Jiangxi Electric Power Co., LTD. (Reference No.521852200068).

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