Decomposing price differentials due to ENERGY STAR® labels and energy efficiency features in appliances: proxy for market share tracking?

John Gardner and Lisa A. Skumatz, Skumatz Economic Research Associates

Keywords

price, ENERGY STAR®, appliances, decomposition, hedonic, incremental cost, evaluation, rebates, tracking, indicators

Abstract

This paper summarizes recent work using statistical methods to examine the portions of the apparent price differences for a variety of appliances that are attributable to efficiency labels or components of efficient measures. The work stems from research examining progress in market transformation. The goal was to monitor market progress in the premium associated with efficient equipment compared to standard equipment – and potentially track these changes (hopefully, according to logic, declining) over time. However, the incremental cost metric is always confounded by the fact that the "feature bundle" on appliances and lighting is not consistent (i.e., many efficient products are loaded up with other, high-end features). Based on work conducted by the authors some years ago, we adapted statistical models to decompose the price differentials for efficient and standard refrigerators, clothes washers, and dish washers. The authors used site visits and web searches to gather data on appliance prices and features for a set of efficient and standard models. The authors first examined apparent (raw) price differentials between efficient and standard models. Then, using regression techniques to control for differences in features on the measures, the differences attributable to various features – and in particular to energy efficient features and logos – were estimated.

The results showed that while the apparent (gross) price differences for efficient measures are high, the percentage and dollar differences decrease dramatically when the price differences statistically attributable to other features of the measure are accounted for. The work illustrates a promising approach for three important applications in program planning and evaluation:

tracking market progress within and between states or service territories, using a proxy variable that is less expensive and complicated to measure than direct indicators of sales or market share,
identifying appropriate levels for appliance rebates to encourage purchase of efficient models, and
identifying if markets are mature and program exit strategies may be justified.