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April 2006

Collaborative Labeling and Appliance Standards Program (CLASP)

The Rationale for Energy Efficiency Standards

and Labels

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What is S&L?What is S&L?

• Energy Efficiency Standards: are regulations that prescribe the energy

performance of manufactured products, often prohibiting the sale of products less energy-efficient than the minimum standard.

• Energy Efficiency Labels: are informative labels affixed to

manufactured products that indicate a product’s energy performance and provide purchasers with the information necessary to make an informed purchase-decision.

S&L = Energy Efficiency Standards and Labels

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The Rationale for Promoting S&LThe Rationale for Promoting S&L

• An effective energy efficiency policy must:1) Focus on a predominance of energy use

2) Have high, cost-effective impact

3) Sustainably transform markets

• S&L is the most effective energy efficiency policy

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Energy Efficiency Standards Shift Markets Energy Efficiency Standards Shift Markets

0%

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0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5

1990

1997

Clothes Washer Energy Factors in the U.S.before and after the 1994 standard

1994 Standard

Energy Factor (ft3/kWh)

Percentage of Models

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Energy Labels Inform ConsumersEnergy Labels Inform Consumers

Australia Europe U.S.

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… … and Recommend Productsand Recommend Products

U.S. Energy Star Label China Energy Conservation Certification

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Most Products that Will Use Energy in Buildings Most Products that Will Use Energy in Buildings in 2020 Have Not Yet Been Madein 2020 Have Not Yet Been Made

End Use Energy Consumption in 2020

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United States China

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erg

y C

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New stock

Stock pre-2000

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Standards Can Improve Standards Can Improve Energy Efficiency DramaticallyEnergy Efficiency DramaticallyQuickTime™ and aTIFF (LZW) decompressorare needed to see this picture.Average Energy Consumption of New Refrigerators in the U.S.Average Energy Consumption of New Refrigerators in the U.S.

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Labels Overcome Market BarriersLabels Overcome Market Barriers

How people choose without energy labels

Model A Model B

PurchasePrice $81 $137

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Labels Overcome Market BarriersLabels Overcome Market Barriers

How people choose without energy labels

Model A Model B

PurchasePrice $81 $137

An informed choice with an energy label

Model A Model B

PurchasePrice $81 $137

Energy Cost $1064 $561

TotalPrice $1145 $698

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Standards Focus Upstream in the Product Standards Focus Upstream in the Product Distribution Chain; Labels Focus DownstreamDistribution Chain; Labels Focus Downstream

Consumers

Millions to billions

Distributors & Retailers

Hundreds to thousands

Manufacturers

A few large and many small Energy Suppliers

Many

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Investment in S&L Is Better Than InvestmentInvestment in S&L Is Better Than Investmentin Power Productionin Power Production

Cost of Electricity from Various New Sources

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Gas C

ombi

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ycle

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Coal

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tion T

urbin

e

Geoth

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alW

ind

Stand

ards &

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An

nu

aliz

ed C

ose

in

199

9(c

ents

per

KW

h)

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S&L is Highly Cost-Effective and is S&L is Highly Cost-Effective and is Greatly Benefiting the U.S. EconomyGreatly Benefiting the U.S. Economy

• Federal spending = $2 per household Efficiency investments stimulated = $900 per household Energy bill savings = $2400 per household Net savings to the US economy = $1500 per household

• Average benefit/cost ratio = 2.8:1

• Primary energy savings = 8% of 2020 residential energy use

• Peak power savings = 20% of 2001-2020 growth

• Cumulative net dollar savings = $150 billion

• Annual carbon reductions = 37 million metric tons of carbon (in 2020), 9% reduction

Lifetime Benefits from Lifetime Benefits from 1987-2001 Standards for 9 Residential Products1987-2001 Standards for 9 Residential Products

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Who Benefits from S&L?Who Benefits from S&L?

• Manufacturers— Removes/avoids non-tariff trade barriers

— Shares risks of innovation

• Environment— Reduces urban pollutants & greenhouse gases

• Government officials— Improves economic efficiency— Helps meet carbon targets

• Consumers— Reduces life cycle costs

Everyone!Everyone!

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More and More Countries are Recognizing More and More Countries are Recognizing the Value of S&L the Value of S&L

Year

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tori

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wit

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t Le

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tandard

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Label

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1970 1980 1990 2000 2010

542 regulations

1818 regulations