Work

Energy labels in the European Union: Consumer inattention and producer responses

Year: 2025

Type: article

Abstract: This paper studies the effect of mandatory eco-labels for durable goods using a bunching design. I exploit discontinuities in the European energy label for washing machines to document consumer inattention in response to the salient quality signal given by the label. The policy effect is driven by adjustments in both supply and demand, which leads to a sales distribution that is strongly concentrated around the label thresholds. Market transformation occurs not only through a local shift in existing segments of the product space, but also through the build-up of a new market segment at the highest label threshold. Regarding price effects, I find no evidence of green premia and argue that competition is effective in preventing this for the case of the European Union. • European Energy Label induces adjustment by both consumers and producers. • Bunching at label thresholds strongly driven by strategic producer responses. • Competition in premium labels leads to falling prices as entry increases. • New market segment at highest label threshold indicates induced innovation. • Policy implications for markets with both inattention and imperfect competition.

Source: Energy Economics

DOI: 10.1016/j.eneco.2025.108275

Author: Anne Kesselring

Institutions: Friedrich-Alexander-Universität Erlangen-Nürnberg, Fraunhofer Institute for Systems and Innovation Research

Language: English

Topic: Consumer Market Behavior and Pricing

Subfield: Marketing

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Responsible consumption and production

Open Access status: hybrid

Estimated APC paid: $4,280