NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Consumers Respond to Environmental Certification and the Value of Energy Information

Sébastien Houde

NBER Working Paper No. 20019
Issued in March 2014
NBER Program(s):   EEE   IO

The ENERGY STAR certification is a voluntary labeling that favors the adoption of energy efficient products. In the US appliance market, the label is a coarse summary of otherwise readily accessible information. Using micro-data of the US refrigerator market, I develop a structural demand model and find that consumers respond to certification in different ways. Some consumers have a large willingness to pay for the label, well beyond the energy savings associated with certified products; others appear to pay attention to electricity costs, but not to the certification, and still others appear to be insensitive to both electricity costs and ENERGY STAR. The findings suggest that the certification acts as a substitute for more accurate, but complex energy information. Using the structural model, I find that the opportunity cost of having imperfectly informed consumers in the refrigerator market ranges from $12 to $17 per refrigerator sold.

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A data appendix is available at http://www.nber.org/data-appendix/w20019

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20019

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