It makes a big difference which home appliances U.S. consumers buy. Residential electricity consumption — much of it from major home appliances — accounts for about one fifth of U.S. energy-related greenhouse gas emissions. New energy-efficient appliance models that use as little as half of the energy as their predecessors are available on the market.

Yet previous studies have shown little consumer response to the marketing of energy-efficient appliances. Although consumers stand to save money over time from smart appliance choices, energy-efficient products and programs to encourage their use have had limited success in the marketplace. This report prepared by Everett Shorey of Shorey Consulting, Inc. and Tom Eckman of the Northwest Power Planning Council takes a look at how consumers decide which major home appliances to buy, and suggests ways in which policy makers could encourage the use of energy-efficient products.

The authors draw upon previous experience from government and utility-run programs aimed at influencing consumers to purchase energy-efficient products. In doing so, they highlight the strengths and weaknesses of various approaches and analyze the economic and environmental ramifications of consumer purchases of appliances such as washers, refrigerators, and air conditioners. The authors find that a program’s effect depends upon the particular consumer choice in question. The consumer may be considering an upgrade, early replacement, or retirement of an appliance. Each of these involves different economic tradeoffs, and thus different opportunities for policy intervention. The efficacy of a policy also depends upon where the consumer is in the process of purchasing an appliance. Different kinds of programs are required to get the attention of a consumer who is not even thinking about buying an appliance, as opposed to one who is doing research in Consumer Reports, or already out shopping in appliance stores. The authors find that future public policy and incentive programs will be most effective if they avoid a “one size fits all” approach, and instead adopt messages and communications mechanisms targeted at different categories of consumers, and different kinds of decisions.

This report is the second in a series aimed at identifying practical solutions to address climate change. The Solutions series provides individuals and organizations with tools to evaluate and reduce their contributions to climate change.

The authors and the Center would like to thank the members of the Center’s Business Environmental Leadership Council and David Goldstein of the Natural Resources Defense Council for their review and advice on previous drafts of this report. In addition, we acknowledge the input from appliance manufacturers, retailers, utilities, and government programs that contributed information and insights to this study.

Executive Summary

Consumer purchases of major home appliances are an important aspect of the discussion about greenhouse gas reduction and global climate change for two reasons. First, major home appliances account for approximately one third of residential electricity consumption, a principal source of greenhouse gases. Second, appliance purchases give consumers a direct opportunity to affect greenhouse gas emissions. Absent other intervening factors, most consumers would probably wish to purchase appliances which save energy and money, and which are environmentally friendly. The questions for policy-makers revolve around what choices are available to consumers now, how consumers make their current choices, and how might it be practical to influence consumer choice.

This paper frames the policy issues by first focusing attention on the appliance categories that are purchased directly by consumers and that are significant consumers of electricity. Second, it analyzes the economic ramifications for consumers of their appliance purchase options. Finally, it reviews past attempts to influence consumer choice through public policy initiatives and suggests how new initiatives could be targeted more effectively. Further research is necessary in order to project how much energy would be conserved through any specific policy initiative.

The three areas of consumer choice that are potentially addressed through policy initiatives are upgrades to more efficient models of appliances when a consumer has already decided to make an appliance purchase; retirements of duplicate appliances; and early replacements of functioning appliances by newer and therefore more efficient ones. The first two of these consumer choices generally leave consumers economically better off if they purchase more efficient models. The economic and societal energy saving benefits of earlier than normal appliance replacements are generally positive as long as the consumer purchases an Energy Star® or higher-efficiency appliance or one meeting energy efficiency standards that are coming into effect in the next two or three years.

In the process of making any appliance purchase, individual consumers use different sources of information and have different interests, depending upon where they are in the purchasing process. Some consumers are actively engaged in researching and assessing appliances and intend to make an immediate purchase (Buyers), others may be researching appliances but are hesitating over when to purchase (Considerers), and still others are not interested in or receptive to information about appliances (Satisfieds). The differences between these groups both create opportunities and present challenges to policy-makers and program designers who are attempting to alter consumer appliance purchasing behavior.

Past public policy and incentive programs have not differentiated their approaches and messages by where consumers are in the appliance purchase process. Future programs will be more effective if they adopt more targeted messages and communications mechanisms. Experience from these past programs has demonstrated several key issues:

• Well crafted programs including rebates, publicity, and assistance in disposing of old appliances appear to cause consumers to replace refrigerators before the end of the expected life of the appliance. It is likely that the refrigerator experience can be generalized to other appliances.
• There is little or no evidence that consumer tax credits are effective in influencing a significant number of consumers to change their purchasing behavior.
• Consumers seek information on appliances from many sources before they make a purchase and Consumer Reports is the most trusted source of information.
• Energy labels and the Energy Star® logo are, in themselves, insufficient to cause substantial change in consumer purchasing practices.

Recent programs in the Pacific Northwest and in the Northeast to promote the use of high-efficiency washing machines are providing an interesting model of success in influencing consumer behavior. These recent programs demonstrate several factors that should drive the development of any new consumer-oriented initiatives:

• It remains substantially easier to influence consumers who are actively engaged in appliance purchases (Buyers and some Considerers) than to influence the general public (Satisfieds).
• Retail appliance sales representatives have substantial influence on consumer choice. Incentives oriented to the retail sales representative coupled with simple sales tools can cause the sales representatives to influence consumer product selections.
• Direct financial incentives for consumers may not be necessary, especially when the consumer is already intending to purchase an appliance and the goal is to get the consumer to upgrade by purchasing a more efficient model.

Policy-makers must also craft any incentive programs in congruence with other public policy initiatives, especially minimum appliance energy efficiency standards. First, the minimum energy efficiency standard programs are the major public policy influence on manufacturers to raise the level of energy efficiency for their products. Without consideration of manufacturer intentions, it is possible that there will be no supply of more efficient products to meet any changes in demand caused by consumer-oriented public policy programs. Secondly, accelerating consumer purchases immediately in advance of a change in minimum standards could have the unintended effect of raising rather than lowering total societal energy consumption.

Based on these considerations, public policy programs could target each major appliance purchase decision using approaches and methods that have been successful in the past: