Green Energy Labelling - Green Energy and Efficiency: An Economic Perspective - page 132

them to decide not to invest in energy ef ciency if they are not sure about the

savings gained by it; second there is anchoring, because people tend to establish one
random point of reference which is very dif

cult to change and then use it to make
comparisons; there is also status quo bias, because deciding to make a change or
investment in a new product may require such a big effort that people delay the
decision and continue with the situation or product that they already have; then
there is the use of heuristics, that allow people to make decisions rapidly, without
having to spend a lot of time and energy thinking, but which can result in errors or
biases [ 29 ]; and nally there is bounded rationality, because people do not tend to

act as rationally as they are usually considered to do [ 23 ]. All of these behavioural
problems are also related to information and the way in which consumers process it.
There are various policy tools that can be implemented individually or in
combination to overcome these barriers. The most common are information pro-
grammes, taxes and subsidies, Minimum Energy Performance Standards (MEPS)
and cap-and-trade programmes. Information programmes are motivated by the
existence of informational and behavioural barriers, and they seek to promote
energy ef ciency investments by providing information about the savings that will

result from such investments. Under this approach it is considered that if enough
information is given to consumers they will be able to adopt the best choice.
However, some studies also show that consumers do not behave rationally in line
with the information that they receive, which suggests that there is a gap between
information and action, and that family opinion and social pressure are relevant
factors in managing information [ 2 ].
One information-related policy that has attracted a lot of attention is energy

ef ciency labelling. Energy labels are informative labels that are af xed to manu-

factured products and describe a product s energy performance, to provide con-

sumers with the data that they need to make informed purchases [ 30 ]. Labels inform
consumers about the energy use and costs of appliances and equipment, and enable
energy use and ef

'

ciency to be compared directly between different models [ 16 ,
23 ]. This reduces the problem that many people face at the time of purchasing,
when they are not able to distinguish between energy-ef

cient products and the rest.
Cason and Gangadharan [ 4 ] demonstrate in an experiment that reputation and mere
talk are not enough to generate ef cient outcomes, but that public or private third-

party certi cation can help solve the information problem that consumers have.

The label is a hybrid instrument, as the existence of a label in a particular market
encourages producers to improve the quality and the energy performance of their
products. This enables the overall energy ef

ciency of the market to be increased,

given that the least ef cient goods will be left out of the market.

Moreover, labelling schemes can be combined with policies of other sorts such
as MEPs and subsidies and taxes. In fact, some labels are based on categories of
performance that enable governments to subsidise the most energy-ef

cient classes

' '

of products. An example of this policy is the Plan Renove for domestic appliances

in Spain. This plan is studied in-depth in [ 14 , 17 ].
Wiel and Mcmahon [ 30 ] distinguishes between three sorts of energy label:
endorsement labels, comparative labels and information-only labels. Endorsement