FTC Appliance Labeling Project

In 1980, the U.S. launched the EnergyGuide labeling program for certain home appliances and energy-using equipment. The program was designed to address two legislated goals: to improve energy efficiency and to assist consumers in making purchase decisions. Over its first twenty years, the labeling program and the label design were not subject to any systematic evaluation. However, through small-scale studies and anecdotal evidence, prior researchers have found that the U.S. label has not lived up to its legislative mandate. In addition, over the last five years, alternative approaches to appliance labeling have been developed and implemented elsewhere in the world with impressive results in terms of consumer awareness, market impacts, and energy savings.

In 2002, ACEEE, with input from other organizations, completed a multi-method consumer study to evaluate the efficacy of the EnergyGuide label and to determine the best label format and graphical element for U.S. consumers.

The goal of this research was to develop an EnergyGuide label that:

  1. Is easy to understand by the vast majority of consumers;
  2. Provides motivating and comprehensible information on appliance efficiency;
  3. Works synergistically with the Energy Star logo
  4. Positively impacts the energy efficiency of consumer appliance purchase decisions.

Design
The study consisted of consumer research and a review of previous literature on appliance energy labels in the U.S. and other countries. Primary research with consumers sought to determine the best label format and informational elements for U.S. consumers. In addition, supply-side actors (e.g., manufacturers, contractors, and retail sales staff) were interviewed to uncover opinions regarding program efficacy and the optimal label format. A multi-method, sequential research design was constructed to elicit consumer feedback. An initial round of consumer focus groups was conducted to gather "broad-brush" and directional feedback on the current label in side-by-side comparison with alternate displays. Overall, label preferences and opinions of various informational elements were emphasized. The groups led to improved graphical designs that were then tested in semi-structured interviews, which focused on testing comprehension and interpretation of the various labels and specific informational elements along with the reasons behind reported preferences. Various interpretive enhancements to the labels emerged from the interviews and were incorporated in the label designs used in a second round of focus group testing. Additional rating concepts were evaluated in a third set of focus groups; the interaction of the Energy Star® label with various categorical rating schemes was also explored. This final round of focus groups was intended to select the optimal designs of labels for testing in a consumer survey.

The quantitative consumer survey was used to determine, with statistical precision, which of the lead label concepts had the highest rate of comprehension and motivating ability. Finally, the most promising design of each label type–categorical and continuous–were tested with consumers in a simulated shopping environment to evaluate the impact of each design on consumer purchase decisions, determine whether either design had an impact on consumer perceptions of appliance quality and value, and observe how the labels performed in a real-world shopping environment.

The project addressed products currently covered by the Federal Trade Commission (FTC) EnergyGuide label program, including white goods, heating and cooling equipment, and water heaters. The primary emphasis was on products sold through retail outlets.

Results
The study showed strong evidence that improvements to the current EnergyGuide label are possible. In particular, a categorical system based upon stars is most promising. The stars label would build on the familiar yellow EnergyGuide format, incorporating the well-recognized stars-based rating system, enhanced presentation of key informational elements, preferred Energy Star placement, and an optimized level of explanatory text. In January, 2006, ACEEE submitted formal comments to the FTC in response to a request for public input. This request came after a provision in the The Energy Policy Act of 2005 directed the agency to pursue an assessment of the EnergyGuide program.

Impact
As an indication of the importance of appliance energy labels, a rough "order of magnitude" estimate of potential energy savings can be made. According to the Energy Information Administration, in 2004, home appliances covered by the FTC labeling program consumed 13 quads of energy (primary basis). If, based on the limited research that has been conducted, we estimate that a revised label affects purchase decisions by 20% of consumers, and each affected consumer saves 10%, then nationwide energy savings would amount to roughly 0.25 quads annually, once the existing appliance stock had turned over. Carbon savings would be approximately 13 MMT.

Whatever the response of the FTC, an education campaign should be developed and implemented to improve consumer awareness of the label and the information it provides and to assist consumers in using the label when making appliance purchases.