4.3 The shift towards energy efficient lighting in Germany
Comprising around 12% of household electricity consumption, lighting generally represents the third most significant use of electricity in the home after heating and cooling in EU countries. The four main classes of household lamp technologies include: incandescent lamps, halogen lamps, CFLs, and linear (tubular) florescent lamps (LFLs). A conventional halogen light represents energy efficiency savings of up to around 25% compared to an incandescent light and a CFL up to 80%. LFLs are also extremely efficient, lasting longer than most CFLs, and have been widely in use for some time, especially in areas demanding long operating hours such as in kitchens and industrial and public spaces.
As one of the largest and most energy efficient countries in Europe, Germany presents an important case study for the diffusion of energy efficient lighting. Germany is also characterised as an early-adopter of CFL technology, with market penetration in 2007 of 70% of households compared with 50% in the United Kingdom, 52% in France, 60% in Italy and an EU average of around 50%. In these houses the average number of CFLs in use was seven in Germany, two in the United Kingdom, two in France and one in Italy. Not surprisingly, Germany had one of the lowest lighting-consumption as-a-share-of-total-household-electricity in 2007 at 8.13%, compared with 6.43% in France, 16% in the United Kingdom and 35% in Romania (Bertoldi and Atanasiu, 2007).
Palmer and Boardman (1998) provides a separate stocktake for some of these values in 1997 showing how far each country has come over this ten year period. In 1997, the proportion of households with a CFL was 51% in Germany, 23% in the United Kingdom, 55% in Italy (with no data 231 available for France) with the average household owning two, one and one CFL respectively. More recently the survey used in this paper estimated that German CFL market penetration late in 2009 was at 84% of households (Grass Roots, 2009). Figure
4.1 Diffusion of major electric lamp types in Germany
A major early policy development was the Energy Labelling Directive (92/75/EEC) which, since 1998, has required manufacturers to indicate light bulb efficiency on packaging. Over this time CFL diffusion was also supported by a range of demandside programs (for a review of German programs see Fraunhofer ISI, 2006). For example, in Germany initiatives included: the Bright North Rhine Westphalia project where 80 utilities participated in a programme distributing 500,000 CFLs directly to customers who were then encouraged to buy more via a voucher programme; and a programme carried out by Stadwerke Hannover where consumers were given a 5.11 euro rebate for each CFL purchased.
However, despite these efforts the European Commission stated in explanation of the decision to implement a phased ban that “consumers failed to significantly move towards the more efficient choice”. It was noted that, “the higher up-front purchase price constituted a psychological barrier, even though this initial investment paid off within a year and brought even more benefits over the complete life-cycle of the CFL” (EUROPA, 2009). In Germany, this can be seen by the decade of stagnant CFL sales up to 2005-06 in Figure 4.1.
A turning point in Figure 4.1 seems to occur in early 2007 with sales of CFLs increasing from around 100 million units to 150 million units and sales of incandescent lamps dropping from around 300 million to 200 million over the same period. A major event which could help understand this was the increased media and public attention on CFLs following the announcement in February 2007 by the Australian Minister for the Environment, Malcolm Turnbull, to ban the incandescent light bulb in Australia by 2010. For example, in an article in Der Spiegel on 20 February, 2007 Björn Hengst writes how Australia, the country that rejects the Kyoto Protocol and is the largest exporter of coal in the world has suddenly moved to ban inefficient light-bulbs in 2010, reducing emissions by four million tonnes:
Now, Australia wants to be world leader in banning conventional, inefficient light bulbs – the modern energy saving lamps are not only durable but are also four to six times more efficient. Even a small step can have a big effect, Turnbull stated: “If the rest of the world follows our lead, this will mean significant energy savings.”
While the German media carried a degree of indignation at being lectured on green policies by a perceived climate policy laggard, Turnbull’s announcement sparked significant debate in Europe which a year later adopted a similar ban at the EU-level.
For March/April 2007 the sales growth rate soared to 143% (compared to March/April the year before) and over the course of 2007, total sales value and volume climbed 91% and 73% respectively. These events have led some analysts to connect the two events (see Bross and Pirgov, 2010) and seem supported by data from Googletrends (Figure 4.2), which show spikes of public interest in energy efficient lighting corresponding to the announcement and implementation of the Australian and European bans. While some seasonal variation with peaks in December/January might be expected in this data due to the longer operating hours of electric lamps in Germany over the northern European winter and thus higher interest in lamp replacement and substitution, this background effect is unlikely to explain the large spikes in public interest evidenced by Googletrends for the months of February/March 2007, and September 2009/2010.
Figure 4.2 Public interest in energy efficient lighting
In June 2008, the European Commission announced its own intentions to incrementally phase out incandescent lamps (Table 4.3). This announcement corresponded with an increased demand for CFLs in the months of July/August 2008 of 15% (compared to the same period in 2007); of 31% in September/October; and 13% in November/December (Bross and Pirgov, 2010). It is noteworthy to observe that spikes in CFL purchasing correspond to the increased media attention and public interest that key points in the regulatory process generate such as in the month of September.
One interesting departure from this narrative of technological transformation in the light bulb market is that while CFL sales continued to rise as the implementation of the phased ban was brought into effect, sales of incandescent lamps also experienced a spike. Over the first six months of 2009 leading up to the bad GfK, a market research firm, observed that sales of incandescent lamps leapt up by 34% (Financial Times, 2009). This seems particularly significant given the declines in both halogen and LFLs over the same period and suggests that some consumers were reacting against the implementation of the ban by stockpiling the available incandescent bulbs which were about to be taken off the market.
Table 4.3 Simplified table for European incandescent lamp phase out
4.4 Public Awareness and the incentives and barriers to CFL adoption
In September 2009, corresponding with the first phase of the staged ban on incandescent bulbs, the international market research firm Grass Roots undertook a survey to evaluate public perceptions and the incentives and barriers to CFL adoption in Germany. Out of 9,500 people sent the survey via e-mail, 1,711 individuals responded. Participants were drawn from the firm’s network across Germany and weighted to be representative of gender and age. While fairly representative, one limitation of the survey is that it was limited to participants with access e-mail – likely to be a more technologically aware and flexible group.
Overall, 96% of those asked were aware of the phased ban, 87% were aware of the long life expectancy of CFLs and 65% were aware of the higher environmental costs of recycling CFLs due to their mercury content. This last point in particular implies a relatively high level of refinement in public awareness of the advantages and disadvantages of using CFLs – supporting the notion of consumer lock-in with old technologies.
Table 4.4 summarises the key results from the Grass Roots survey. Several points are worth highlighting. First, is the observation that although 87% of respondents were aware of the higher life expectancy of CFLs and 60% understood the payback period to be less than 12 months, with 73% aware of incandescent lamps’ lower life expectancy, 90% of respondents saw the ‘high price’ of CFLs as a barrier to them purchasing them and correspondingly, 89% saw the low price of incandescent lamps as an advantage.
These observations seem consistent with other studies mentioned earlier suggesting that consumers place significant attachment to the higher upfront cost of the lamp despite often being aware of the lower life-cycle costs of CFLs.
Table 4.4 Survey results: CFL advantages and disadvantages
This divergence between purchase and operating costs can also give rise to the problem of split incentives. Two examples are worth noting. Electricity companies may well be in the best position to advise consumers on the most energy efficient products and also create sockets and other fittings compatible with new technologies such as CFLs. However, because they profit from selling more electricity, not less, it is not necessarily in their interests to promote these products, indeed it may be in their interests to hinder their adoption. This may go some way to explain why demand side management programmes implemented by utilities in a liberalised electricity market have had such limited success, despite the strong case for significant cost savings at the user level.
The survey also highlights how CFL purchasing behaviour is not a simple calculus about the most cost effective means to light a home. A significant number of respondents viewed the aesthetics of CFLs unappealing with 68% and 66% of people citing ‘optics’ and ‘an unpleasant light colour’ as disadvantages to adoption. Considerations such as ‘the shape of the bulb’ or ‘the colour of the light’ are thus also major influences on the adoption of CFL technology. CFLs also take several seconds to reach full luminescence and fade by up to 30% in light intensity over their useful life. While early CFL design seems to have prioritised function over form, solutions to these aesthetic problems are increasingly available. For example, new bulb shapes with frosted glass and light fittings which obscure the shape of the CFL bulb and filter its light to a more aesthetically appealing hue are becoming increasingly available although these solutions still suffer from their own path dependent problems with many long-lived light fitting investments not easily suited to the new technology.
Another significant impediment to greater CFL adoption was concern over the need to specially recycle them due to their mercury content, with 65% referring to the higher environmental impact of recycling as a disadvantage. A typical CFL may contain up to 5mg of mercury per bulb as a vapour inside the bulb with the most ‘ecofriendly’ ones around 1mg. While this is not a risk at the individual level if released, when accumulated in landfill or combusted in waste disposal systems it can lead to local health concerns. Mercury poisoning has also emerged as an issue of concern for workers enaged in the production of CFLs in some lightly regulated Chinese factories.
Many people do not know what to do with their used CFLs and some are not aware of the need to specially recycle them. Under the industry’s Lightcycle programme involving Germany’s nine lamp producers (Osram, Philips, Havells Sylvania, GE, Radium, Auralight, Navra, BLV and Heraeus) 90% of all fluorescent lamps are reported to be recycled at the industrial level but only 10% at the household level. This is likely to remain an issue of concern due to the low payoff for collecting used bulbs, positioned alongside the overall tiny proportion of mercury releases into the biosphere when put alongside other sources, such as coal power generation. However, it is likely to remain a concern for many consumers.
These non-price factors warn against reducing the decision to buy a CFL down to matters of price alone and explaining away consumers’ choice to buy the more expensive option as simply ‘irrational’. As mentioned earlier, individuals pursue a plurality of values which repeatedly can come into conflict and which may not be easily expressed in a common value – such as price. A consumer will weigh up matters relating to their personal aesthetic taste, motivation to address environmental issues as well as the function of light and unit cost when deciding to adopt CFLs. Suchnon-price dimensions of purchasing behaviour go some way to explain the behaviour of light-bulb ‘hamsters’ and understanding aesthetic rather than simply the functional or monetary dimensions of decision-making may help inform policy makers in the setting of new lamp technical standards to help reduce consumer lock-in.
4.5 Conclusion: beyond freedom versus the state
As discussed in the first part of this paper, the role of non-market-based instruments has been neglected in the mainstream standard welfare analysis of energy and climate policy, where the focus of research has concentrated on issues of ‘optimality’, ‘least-cost mitigation’ and mechanisms for carbon pricing. Regulation has been given a bad name, generally labelled as a ‘blunt’ instrument, lacking dynamic incentives. This paper seeks to challenge this perspective by urging policy makers to consider looking beyond the blinkers of equilibrium analysis to a more evolutionary approach which brings into focus the normative political formation of market institutions themselves, as opposed to taking such institutions for granted.
In this area, research on behavioural anomalies has been influential focusing on those issues especially important when people make decisions under risk and uncertainty. This research program has gained momentum because of the implications it may have for understanding the nature and scope of individual rights and responsibilities in liberal democracies. The premise is that this deeper understanding into our behavioural biases may help policy makers design more effective solutions to societal problems and move beyond idealistic notions of ‘freedom-versus-the-state’.
This paper has sought to explore these issues through the contested issues around the diffusion of energy efficient lighting. CFL diffusion was selected owing to the relative accessibility and transparency of the decision-making process and institutional forces at play. It is also a widely understood issue that brings the role of government in framing individual decision-making around energy and climate change into the everyday lives of people.
For over a decade in Germany up until 2005 the level of CFL diffusion was stable and low. This was despite CFLs possessing significant advantages over incandescent lighting and the presence of numerous information and incentive-based initiatives. The major turning point in the diffusion of CFLs and the collapse of sales of incandescent lamps corresponds with a surge in public interest in CFLs off the back of the announcement and expectation of regulatory ban on incandescent lamps.
Providing a regulatory lead period is likely to have helped reduce the costs of switching to the new system of technology and behaviour by allowing supply chains to develop and by providing a clear signal to the market of the direction of technological change. While there were some demand side management schemes in place, It should be noted that this diffusion was achieved without artificially increasing the price of traditional lamps relative to CFLs or by taxing traditional bulbs which would be the usual a priori prescription of the standard welfare approach to encourage diffusion. If the European Commission’s estimate that it would take a ten-fold increase in the price of traditional lamps is taken as a reference, the avoidance of these costs is substantial.
This study contributes to a broader research agenda reviewed by Clark and Urwin (2009) in economic geography generally and by Tietenberg (2010) in the energy efficiency and climate change literature to draw more strongly on behavioural insights in the policy process, for example as articulated by Kruger and Funder (2004). There is a rich vein of potential research in this area investigating comparative cases of electric lamp diffusion where countries have adopted regulatory bans, and where they have not as we move through this period of technological transition in the lighting market. It would be particularly interesting to evaluated the comparative effects of active government decision-making in this area (for example at the EU level) with non-decision making (although the number of countries without a ban in place is rapidly diminishing).
The implications of behavioural studies which empirically reveal the lack of take up of cost effective energy efficiency investments sit awkwardly with the notion of individual self-mastery which underpins much of the approach to economic and social regulation in liberal democratic states. These studies have provided a strong case for more structured or authoritarian government policy – and have set the scene for the debate between ‘liberty-versus-the-state’ which characterises so much of environmental policy making.
One solution to this dualism is to reframe this debate by re-injecting a sense of the evolution of political institutions that make up the market. If regulation is seen as a learning process, played out as part of the democratic process, with open and transparent collective decision making processes, then it is argued that regulation need not be viewed as a compromise to individual freedom, but rather a recognition that as human we have evolved a range of institutions to support collective action to achieve social goals – in this case reducing greenhouse gas emissions. Public policy is replete with instances where individuals have chosen increased structure over laissez-faire in recognition of the broader social benefits of collective action – support for the welfare state, public health care and public infrastructure being the most obvious cases in point – not to mention the regulation of consumer ‘public bads’ such as smoking, alcohol or sexual exploitation. These regulations are aimed at supporting public goods which are, in essence, the building blocks of a cohesive and productive society.
In our example, if people have decided to try to reduce greenhouse gas emissions and voted for politicians with a mandate “to take action on climate change” then there seems to be a fairly clear role for the state to provide greater structure around the decision to buy light bulbs, which offer such obvious economic and environmental benefits. This should still hold despite observing the seemingly paradoxical actions of consumers who still want to purchase incandescent bulbs or even complain about the inferior light quality of CFLs. What is important in this case is the presence and strength of the political and social norm around climate change and the need to improve energy efficiency which legitimises the collective decisionmaking process. To counter Rousseau’s critique, this is not so much “forcing man to be free”, but recognising that individuals over time have evolved collective decisionmaking institutions to reconcile situations involving conflicting individual values and where our desired or stated intentions may differ from our behaviour and actions.
This paper has also sought to show is that the political process itself is an important way in which society learns about and adapts its institutional structure. For example, public deliberation in Europe following the announcement of a ban on CFLs in Australia can be seen as having had a significant impact on diffusion in advance of the announcement and implementation of the EU’s own ban. Support for the formation of such social learning is vital because if the shift to a low carbon economy is to truly take place, it will not be because of the implementation of an emissions trading scheme, or even regulatory bans on specific technologies, but because the foundation of social norms on the issue have shifted – people’s attitudes towards the environment and their sense of responsibility regarding greenhouse gas pollution.
Next Page – Ch 5: The Making of a Market