energy efficiency labels really encourage reducing energy consumption – but there is a better way to use them

Reducing our energy consumption has rarely been more urgent. And one way to do that is to choose the most energy-efficient option when it’s time to buy new appliances or move house.

A label with seven gradient lines from dark green to red
The EU energy label, used to designate energy efficiency.
Andrew Dunn/Wikimedia Commons

In most European countries, this standard energy efficiency label provides information on the energy consumption of a house or an appliance by classifying it among seven possible standards. Best of all, it does it intuitively: if there’s one thing we learned in school, it’s that an A is better than an F.

Many of us have been touched by this label without being aware of it. This is because many companies have redesigned their products so that they achieve a higher rating on the label, assuming that customers will be more likely to purchase a more effective product. This means that if you’re in the EU or UK, the device you most recently purchased is likely to be more energy efficient than if this label hadn’t been introduced.

Of course, tweaking a toaster won’t save the planet. But our behavioral science research found that this label can have wider effects, including inspiring a small number of people selling their properties to act like these companies by actually redesigning their homes.

Imagine someone sells their house. They have it audited for energy efficiency, as currently required by UK and EU law, and given an energy rating that puts it at the very top of a rating. About 4% of sellers in this situation will then make strategic investments that will propel their property to a higher level.

For example, they can upgrade less efficient light bulbs or put insulation in their attic. Then they get a second energy audit, move up a level and can now advertise that their property is demonstrably more efficient.

A bridge over a river at dusk with lighted buildings in the background
Shakespeare’s House, Stratford-upon-Avon.
Shutterstock

These strategic investments are profitable. Using data on house sales in England, we estimate that a house at the bottom of the D rating, for example, will sell for thousands of pounds more than a house at the top of the E rating.

They’re also good for the planet: our estimates suggest that investments that take English homes from a high E to a low D have resulted in reductions in energy consumption equivalent to the total annual electricity consumption of all households in Shakespeare’s birthplace, Stratford-upon-Avon. .

Label update

Moreover, these environmental benefits could be much greater by simply changing the label. As it stands, the thresholds from grade to grade are set at some arbitrary levels of energy efficiency. This means that strategic investments are only viable for a small proportion of properties: those that fall just below a threshold.

Consider what would happen if AG categories were indicators of relative energy efficiency, for example if A properties were in the UK’s seventh highest energy efficiency, B properties were in the second seventh, and and so on.

As buildings become more efficient, these categories will change. Over time, properties that are currently away from a threshold could be on the verge of going up a level – or, more importantly, down a level. This would motivate more households to invest in energy efficiency.

An aerial view of residential homes and gardens
People selling their homes will be motivated to make them more energy efficient.
Shutterstock

Long term

Over time, however, it would be unwise to rely on labels to save us from the climate crisis. A carbon tax would be a broader, long-term way to increase energy efficiency.

The energy label has been successful because it has made people value energy efficiency enough to make purchasing decisions based on it. A carbon tax would accomplish this goal much more powerfully by signaling a lower price for an energy-efficient product – and making energy-intensive products more expensive.

But the difficulty of getting the public to support a carbon tax is illustrated by the case of congestion pricing. In a city where you have to pay to drive your car, only those who really enjoy using their car will. This means fewer cars on the road, less congestion and pollution, and more parking for those who need it like delivery drivers or people with reduced mobility.

Yet, in part because of its immediate cost, very few cities around the world use congestion pricing. Even though those who show it tend to gain support over time, residents see its benefits.

A cheaper and healthier future requires finding ways to persuade households that it makes financial sense to reduce their energy consumption. Labels provide a good starting point for broader social change.

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