Incremental distribution chain costs and markups for energy efficient consumer products

Panel: Panel 1: Assessment of Energy Efficiency Policy

Authors:
Chloé Malié, Institut National des Sciences Appliquées de Lyon
Robert Van Buskirk, Lawrence Berkeley National Laboratory

Abstract

Incremental distribution chain costs and markups for energy efficient consumer products. In analysing demand-side energy efficiency policy it is often necessary to evaluate the cost of incremental energy efficiency improvements for the consumer. In an engineering approach this is done by first estimating the increased production cost of higher efficiency products and then using the production cost to estimate retail cost.

Approximately one half of the cost of consumer products and appliances arises from the cost of sales and distribution rather than the cost of production. Therefore an analysis of the incremental costs of efficiency improvements in consumer products requires an accurate evaluation of the incremental costs of distribution and sales.

We perform both statistical and financial analyses of the retail and wholesale industry to improve the accuracy of incremental distribution chain cost estimates. Our results show that a simple-minded approach of applying a fixed markup to incremental production costs to obtain the costs to the consumer over-estimates the incremental cost of efficient products by as much as 45%. This study shows that incremental distribution chain costs for appliances are significantly lower than the average distribution costs.