Should Energy Efficiency Be Traded Off for Other Product Attributes? An Analysis of Air-Conditioner Regulation in Japan

Discussion Papers


by Kensuke KUBO , Mariko WATANABE and Michikazu KOJIMA

June 2016


This paper examines the functioning of energy efficiency standards and labeling policies for air conditioners in Japan. The results of our empirical analysis suggest that consumers respond more to label information, which benchmarks the energy efficiency performance of each product to a pre-specified target, than to direct performance measures. This finding provides justification for the setting, and regular updating, of target standards as well as their use in calculating relative performance measures.
We also find, through graphical analysis, that air conditioner manufacturers face a tradeoff between energy efficiency and product compactness when they develop their products. This tradeoff, combined with the semi-regular upward revision of minimum energy efficiency standards, has led to the growth in indoor unit size of air conditioners in recent years. In the face of this phenomenon, regulatory rules were revised so that manufacturers could adhere to less stringent standards if the indoor unit size of their product remains below a certain size.
Our demand estimates provide no evidence that larger indoor unit size causes disutility to consumers. It is therefore possible that the regulatory change was not warranted from a consumer welfare point of view.

Keywords: energy efficiency standard and labeling, promotion policies
JEL classification: F15, O14, O30

PDF (631KB)

Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.