Why ecodesign makes economic sense

This post is by Tom Turnbull, Green Alliance policy adviser, who has been focusing on ecodesign and our work with the European Coolproducts campaign.

I’ve just returned from Brussels, where amongst the string of events that make up EU Sustainable Energy Week, which was admittedly somewhat eclipsed by Rio, I joined a group of campaigners putting forward the case for the ‘forgotten’ EU energy directive. The forgotten directive is 2009/125/EC, aka the ecodesign directive. Its principle aim is to remove the worst performing products from the market and it has been beset with delays, controversy, and a general lack of a perceived cool factor.

As a member of the Coolproducts campaign, Green Alliance has been working with European NGOs to change this. We are working to raise the profile of the directive, and make policy makers, businesses, and consumers aware of the power that well-designed product policy has to drive the market for innovative low energy using products. These offer the combined benefits of lower energy bills and considerable carbon savings.

The Coolproducts campaign gathered last week to launch a report by Ecofys outlining these benefits. Ecofys, a Dutch consultancy, has carried out research which suggests that, by 2020, ecodesign could lead to a €90 billion saving on the EU’s energy bill as products would use less energy, the money saved could be spent in other sectors of the economy, such as services and retail, areas with higher labour intensities. So, a fall in demand for energy could potentially have a positive impact on employment within the EU. In fact, basing their work on a comparable US model, Ecofys suggest that this spending shift could result in an extra million jobs by 2020.

Alongside this, ecodesign could create a more resilient EU energy system, as lower energy demand would lead to less demand for non-EU energy imports. Ecofys predicts that the expected reduction in demand could lead to a 23 per cent reduction in demand for solid fuel, and a 37 per cent fall in demand for gas.

A boost to business and consumer savings
Another benefit is that higher product standards are a boost to businesses. A number of the EU’s largest electronics manufacturers, including Electrolux, Philips, and Bosch-Siemens joined Coolproducts in issuing a joint statement last week which stated their support for ambitious, timely, and continued implementation of ecodesign standards across the EU.

Without product standards manufacturers can continue to make low quality, short lifetime, energy-hungry products, which pass on the costs they save through low standards to consumer’s energy bills. By creating a benchmark, ecodesign protects consumers against products which may seem cost effective in the short term, but in the course of the products’ life may end up costing them considerably more. With ecodesign regulations in place, progressive manufacturers reap the benefits of their R&D investment and companies that free-ride are forced into improving their products.

This research is calibrated to accommodate the spectre of the rebound effect, the macro and micro economic behavioural changes that occur in response to efficiency increases; meaning that more efficient devices may be used for longer, or that a household’s financial savings may be spent on patio-heaters, rather than cycling holidays. Ecofys accommodate this by basing their total energy savings on the Wuppertal Institute’s earlier data which applies a 10-30 per cent reduction in the total saving as a result of a variety of possible forms of direct and indirect rebound.

Why hasn’t it been done already?
If it all seems like a classic win-win situation that is because, in many ways, it is. But of course it is not that simple. As the economists’ old adage goes, if all these euros are lying around waiting to be picked up why hasn’t someone done it already? Or, if we mix metaphors, and refer to the cartoon above, why aren’t the low hanging fruit being picked? The truth is, as recent events attest to, businesses don’t always act as rational profit maximisers, and the economy as a whole is composed of a range of actors acting within a variety of spheres of bounded rationality. Picking fruit isn’t rational for all.

So our task now, with the Coolproducts campaign, is to consider which policies will ensure that this fruit is picked, overcoming institutional and behavioural barriers, and realistically assessing the costs involved in transferring to more efficient products.

Given the UK governments’ forthcoming energy efficiency bill, and the proposed revision of the ecodesign directive, this is an important year to make the case for an ambitious and sophisticated approach to the implementation of product efficiency standards and to remind decision-makers that ecodesign is not an obscure engineer’s policy, but a vital way to drive the green economy forward.

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