EUROPEAN COMMISSION Brussels, 15.7.2015 SWD(2015) 139 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council setting a framework for energy efficiency labelling and repealing Directive 2010/30/EU

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TABLE OF CONTENTS Contents 1.Executive Summary Sheet 2.Introduction 3.Procedural issues and consultation of interested parties 3.1.Impact Assessment Steering Group 3.2.Impact Assessment Board 3.3.Use of Expertise and Consultation of interested parties 3.3.1.External expertise 3.3.2.Consultation of interested parties 4.Review of the current policy and problem definition 4.1.The problem 4.1.1.The basic problem 4.1.2.The current problem 4.1.3.Relationship with other energy efficiency and climate policies 4.2.Evaluation of the current policy framework 4.2.1.Scope of the evaluation 4.2.2.Achievements of the legislative framework

4.2.3.Problems with the current legislation and implementation 4.3.The baseline: How will the problem evolve? 4.4.Who is affected and how? 4.5.Justification of EU action 5.Objectives 6.Policy options 6.1.Measures to address the problems 6.1.1.Measures to address problems related to Energy Labelling 6.1.2.Measures to address problems related to both Energy Labelling and Ecodesign 6.1.3.Measures to address problems related to (predominantly) Ecodesign 6.2.Policy options 6.2.1.Option 0: no changes, baseline 6.2.2.Option 1: Improvements within the existing regulatory framework 6.2.3.Option 1+: Option 1 combined with some improvements in the legal framework, notably for energy labelling 6.2.4.Option 2: Significant reform of both ecodesign and energy labelling 6.2.5.Option 3: Comprehensive reform of ecodesign and energy labelling extending the scope to non-energy related products and to centralise market surveillance 6.2.6.Suboption to Options 1+, 2 and 3: merge ecodesign and energy labelling into one legal instrument 7.Analysis of impacts 7.1.Approach 7.2.Impacts of options

7.2.1.Environmental impact 7.2.2.Economic impact 7.2.3.Social impact 7.2.4.Impacts of merging ecodesign and energy labelling 8.Comparing the options 9.Monitoring and evaluation Annex 1 – Use of expertise and consultation of interested parties Annex 2 – Detailed presentation of the Ecodesign and Energy Labelling Directive and their implementation Annex 3 – Analysis of market surveillance by member states Annex 4 – The 2012 review of the Ecodesign Directive Annex 5 – Description of the model and modelling assumptions Annex 6 – The baseline – product sectors and consumer expenditure Annex 7 – Product registration database: practical details Annex 8 – Transition between different labels – practical details Annex 9 – Administrative burden calculation Annex 10 – Ambition level of measures 1.Executive Summary Sheet Impact assessment on Review of the Energy Labelling Directive and the Ecodesign Directive A. Need for action Why? What is the problem being addressed? Maximum 11 lines The basic problem that products can have a negative impact on the environment depending on how they are made, used and disposed is addressed by the Ecodesign and Energy Labelling Directives. However, problems have arisen in the implementation of the Directives. Most products are now in the top classes of the energy label making it more difficult for consumers to distinguish between models. Moreover, the "A+", "A++" and "A+++" classes introduced during the previous revision of the Energy Labelling Directive have shown to be less effective in persuading consumers to buy more efficient products than the A to G scale. Further, there is non-compliance with ecodesign and labelling requirements leading to a loss of about 10% of envisaged energy savings, in part related to weak enforcement by national market surveillance authorities. Evaluation also revealed further problems with the current policy framework and implementation. These problems do not only affects the potential energy and environmental savings targeted by the policy, but also affect consumers as their energy bills are not reduced by as much as is envisaged. What is this initiative expected to achieve? Maximum 8 lines The main objective is to reduce energy consumption (and associated energy bills) and other significant environmental impacts of products by ensuring consumers are informed in a relevant and easy-to-understand way and allowing industry to transform environmental challenges into economic opportunities. In terms of energy savings the current 10% loss of savings due to non-compliance is a specific target, but also potential further savings through other improvements are to be explored. In addition, a main objective is to provide a simplified policy framework that is apt for purpose and robust to future developments. What is the value added of action at the EU level? Maximum 7 lines The objective of reducing negative environmental impacts of products, in particular energy use, cannot be sufficiently achieved by the Member States, because this would lead to divergent national provisions and procedures (while having similar objectives) that would generate undue costs for industry (and eventually consumers) and constitute obstacles to the free movement of goods within the EU. Acting at the EU level is the only way to ensure that requirements and labels for products placed on the market are equal in all Member States, thereby ensuring the functioning of the Internal Market underpinned by Article 26 of the Treaty on the Functioning of the European Union. B. Solutions What legislative and non-legislative policy options have been considered? Is there a preferred choice or not? Why? Maximum 14 lines One non-legislative option and three legislative options representing varying degrees of the extent of reform of the Directives have been formulated. The non-legislative option ("1") includes improvements within the existing regulatory framework. The first legislative option ("1+") combines the non-legislative measures with changes to the Energy Labelling Directive to address the layout of the label and requiring registration prior to placing labels on the market. The second legislative option ("2") adds to the first one also registration of products covered by ecodesign and requires product to be third-party tested (instead of in-house). The third legislative option ("3") is a complete overhaul of the framework extending the scope of the Directive to all products, not just energy-related products; in order to better address non-energy environmental impacts. For the legislative options separate sub-options are defined concerning the layout of the label, with energy efficiency scale ratings of respectively A+++ to D (baseline), A-G, 0-100 and 9-3. The preferred option is option 1+ combined with the sub-option of the A-G scale for the label. This option achieves significantly better impacts than Options 0 and 1. While options 2 and 3 achieve even better results, they are questionable with regard to international obligations and for option 3 also for the principle of proportionality. The A-G label, shows the best results and its additional administrative costs are more than offset by its superior effect on consumers related monetary benefits. Who supports which option? Maximum 7 lines Option 1 has little support from stakeholders, while Option 1+ has significant support from stakeholders: the vast majority is of the view that the Energy Labelling Directive needs to be changed to achieve energy savings closer to the full economic technical potential. Option 2, revising also the Ecodesign Directive, is supported by a smaller share of stakeholders. In particular industry interest groups are not convinced about the need for change of the Ecodesign Directive. Green NGOs support option 3. The A+++ to D and the 9-3 label do not have much support from stakeholders. The vast majority supports an A-G label, though not all manufacturers and retailers do. The 0-100 label is supported by some industry interest groups. C. Impacts of the preferred option What are the benefits of the preferred option (if any, otherwise main ones)? Maximum 12 lines Approximate yearly impact, 2030: Energy savings: 552 TWh primary energy Consumer savings € 10-30 billion Additional commercial revenue € 34 billion What are the costs of the preferred option (if any, otherwise main ones)? Maximum 12 lines Administrative and compliance costs are approximately: € 7-12 million per year for manufacturers € 3-4 million per year for dealers € 3 million per year for the Commission Given that compliance is mandatory, manufacturers and dealers should be able to pass these costs on to consumers, for whom they would be more than offset against their monetary benefits. There are no other negative impacts. How will businesses, SMEs and micro-enterprises be affected? Maximum 8 lines The positive impact on revenues affects larger businesses and SMEs and micro sized enterprises in the same way. A different regime for micros/SMEs cannot be justified. All retailers should be subject to the same rules as energy labels are only useful for consumers if all products are labelled in all retail outlets. There are few SMEs manufacturers and no micros. The same rules should apply to all to ensure fair competition in the single market. Will there be significant impacts on national budgets and administrations? Maximum 4 lines There are no additional impacts on national budgets/administrations. Will there be other significant impacts? Max 6 lines In case of revision of Energy Labelling and/or Ecodesign, a revision from Directive to Regulation and removing overlap with the Market Surveillance Regulation would lead to simplification. D. Follow up When will the policy be reviewed? Maximum 4 lines A review clause 5-10 years after adoption would be included. 2.Introduction The Energy Labelling Directive requires the Commission to review the effectiveness of the Directive and its delegated acts by 31 December 2014.

The Ecodesign Directive required the Commission to review the effectiveness of the Directive and its implementing measures by 2012. That review concluded that no immediate revision was necessary, but that the Directive could be reviewed again along with the review of the Energy Labelling Directive, since the effects of ecodesign implementing regulations and energy labelling delegated regulations applicable to the same energy-related products are often linked and complementary. This impact assessment comprises the outcome of the review of the Energy Labelling Directive and the Ecodesign Directive. It focusses on the framework Directives and not on the individual implementing regulations or any new energy-related products that may in future be addressed under this framework through the Ecodesign Working Plan. Chapter 3 summarises the procedural issues and the consultation of interested parties. Chapter 4 sets out the problem definition, the conclusions of the evaluation of existing policy, and the outstanding problems and their underlying drivers. Chapter 5 describes the policy objectives. Chapters 6, 7 and 8 present the options, impact analysis, and comparison of options, respectively. Monitoring and evaluation issues are considered in Chapter 9. This impact assessment supports a new legislative proposal on Energy Labelling. It does not support a revision of the Ecodesign Directive. 3.Procedural issues and consultation of interested parties 3.1.Impact Assessment Steering Group Lead DGs: DG Energy, DG Enterprise and Industry Agenda planning /WP reference: 2013/ENER+/036 Impact assessment steering group (IASG): The impact assessment work was followed by the Inter-Service Steering Group (ISG) on energy efficiency which met 3 times in February -November 2014. The Steering Group consisted of: DG Agriculture, DG Budget, DG Climate Action, DG Competition, DG Connect, DG Economic and Financial Affairs, DG Employment, Social Affairs and Inclusion, DG Environment, Eurostat, the Executive Agency for Small and Medium-sized Enterprises, DG Health and Consumers, Infrastructure and logistics in Brussels, DG Internal Market and Services, the Joint Research Centre, DG Justice, the Legal Service, DG Mobility and Transport, DG Regional Policy, DG Research and Innovation, the Secretariat General, DG Taxation and Customs Union, and DG Trade. 3.2.Impact Assessment Board The Impact Assessment Board of the European Commission assessed a draft version of the present impact assessment report and issued its opinions on 5 and 16 June 2015. The Impact Assessment Board made several recommendations and, in the light of the latter, the final impact assessment report inter alia: −clarifies the scope of the review and this impact assessment; −explains the relationship with the Energy Efficiency Directive, the Emission Trading System and the Effort Sharing in the non-ETS sectors; −provides information on expected energy savings and their cost-effectiveness for existing product-specific measures and for potential additional product groups; −explains where there are differences for different products groups with regard to the effect of the legislation; −clarifies that the lifetime of products that is used in the analysis is the economic lifetime, which takes into account consumer behaviour on discarding certain products before the end of their technical lifetime; −elaborates on the role of the market surveillance regulation and why it is not expected that the proposal for a new market surveillance regulation will lead to much additional market surveillance effort on ecodesign and energy labelling; −highlights the difficulty in establishing performance benchmarks for market surveillance, even for long-established sectors such as consumer product safety; −elaborates on the effectiveness and practical operation of the product registration database;

−analyses the option of merging the energy labelling and ecodesign frameworks; −provides more (qualitative) explanation of the modelling results and corrects an error in the impacts in terms of jobs for the different label layouts; −elaborates in more detail the monitoring arrangements for future evaluation. 3.3.Use of Expertise and Consultation of interested parties 3.3.1.External expertise Two studies were specifically commissioned to prepare the review, one general evaluation study (further referred to as the 'evaluation study') and one specific study focussing on consumer understanding and behaviour related to different types of energy labels (further referred to as the 'consumer behaviour study'). In addition, an impact assessment study provided specific analysis for the options set out in this impact assessment. Further studies requested by the Commission during 2011-2014 also provided relevant input. Details are provided in Annex 1. 3.3.2.Consultation of interested parties Stakeholders were consulted through the following means: Three stakeholder meetings organised by the contractor of the evaluation study. A public consultation on the ‘Your voice in Europe’ web page. A stakeholder meeting on selecting the energy label designs to be tested in the second phase of the 'consumer behaviour study'. An international conference on products policy. An Ecodesign Consultation Forum meeting. Further detail on stakeholder consultation can be found in Annex 1. 4.Review of the current policy and problem definition 4.1.The problem Since this impact assessment concerns a review of existing Directives, the problem is described in two steps in the following sections: firstly the basic problem that created the need for the Directives, and secondly the problems that have arisen in the course of the application and implementation of the Directives. 4.1.1.The basic problem The basic problem is that products can have a negative impact on the environment depending on how they are made, used and disposed. As set out in previous impact assessments on sustainable product policy the most important market failures and imperfections that prevent the achievement of greater energy and environmental efficiency are: Prices that do not reflect the negative environmental impacts of the production or consumption of products;

Difficulties for consumers to tell whether one product is more resource efficient during its use phase than another; Higher upfront costs when buying a more performing product, while the benefits accrue over a longer period of time (i.e. during its use-phase). Consumers may not take into account the use cost of a product but focus on the initial purchase price only; Measures on efficiency of products taken by Member States create barriers to the free movement of goods in the EU and unnecessary burden for industry to comply with different sets of rules in each Member State. 4.1.2.The current problem The above problems have been addressed by the current policy framework through a two-pronged approach: Banning the least energy and environmentally efficient products from the EU market through ecodesign requirements for manufacturers, which are EU-harmonised (thus, Member States cannot set different requirements) ensuring the free movement of energy-related products and eliminating unnecessary regulatory burden for companies. The aim of the Ecodesign Directive is to address both energy consumption and other significant environmental impacts of production, use and end-of-life treatment of energy-related products; Encouraging consumers to buy more energy efficient products by informing them about the energy use of products through a mandatory harmonised EU energy label (see figure 1) provided by manufacturers and displayed by dealers. The aim of the Energy Labelling Directive is to address specifically energy consumption during the use phase and, where relevant, other consumption of resources during use of energy-related products. The two approaches are complementary, with ecodesign 'pushing' the market and energy labels 'pulling' it, as illustrated in figure 2. Energy labels are only introduced for products where an information failure for the user exists, which is not always the case for professional products. A detailed presentation of the Ecodesign and Energy Labelling Directive and their implementation is provided in Annex 2. Problems have arisen, in particular: Energy labels have proved successful in encouraging consumers to buy more energy efficient models and manufacturers have responded by producing ever more energy efficient products. As a result most products are now in the top classes, which have become overpopulated, making it more difficult to distinguish between models. Thus, rescaling may be necessary, in which the required efficiency for each label class is redefined and a product model that now is in class A++ will be 'rescaled' to e.g. class B. This has not yet been undertaken for specific products; when this was proposed to stakeholders for televisions in 2012, this was considered premature without clear provisions for this in the Energy Labelling Directive. Moreover, the "A+", "A++" and "A+++" classes introduced during the previous revision of the labelling Directive have shown to be less effective in persuading consumers to buy more efficient products than the A to G scale. Non-compliance with ecodesign and labelling requirements, in part related to weak enforcement by national market surveillance authorities. Evaluation also revealed further problems, described in section 4.2.3, with the current policy framework and implementation. 4.1.3.Relationship with other energy efficiency and climate policies The Energy Labelling Directive and the Ecodesign Directive contribute to the Energy Efficiency Directive's target (Article 3) to ensure that the Union's 2020 energy consumption is not more than 1483 mtoe of primary energy or not more than 1086 mtoe of final energy consumption. The Energy Labelling Directive and the Ecodesign Directive are complementary to the measures Member States are required to take by the Energy Efficiency Directive. In order to prevent double counting, it is specified in the Energy Efficiency Directive that for energy savings obligations of Member States (Article 7), only savings exceeding those achieved by ecodesign can be counted towards those obligations. There is no direct relation between the Energy Labelling and the Ecodesign Directives and the EU's main policy instruments to reduce greenhouse gas emissions, i.e. the Emission Trading System (ETS) and the Effort Sharing by Member States in the non-ETS sectors. Energy efficiency policy is a policy in its own right for the objectives of competitiveness, security of supply and sustainability. Energy efficiency measures are complementary to ETS because they address non-price barriers such as lack of information, bounded rationality and high behavioural discount rates. In the case of products, the incentive generated by the ETS could in theory prompt companies exposed to the ETS price to pressure appliance manufacturers to reduce this consumption, but in practice this incentive is too indirect, diffuse and economically insignificant to make a real difference. By contrast, energy labelling provides consumers with information so that they can make more informed decisions precisely in the situations where it is relevant, namely when new products are purchased. Ecodesign removes all products from the market that would be more costly than the product that would have the least cost during its lifetime (purchase costs plus operating costs), because not all consumers make "rational" decisions and they discount future cost savings more than what is rational (and certainly more than what is socio-economically optimal). By reducing electricity consumption of products, ecodesign and energy labelling have a direct effect on the demand for electricity, which is part of the ETS sector. Because ecodesign and energy labelling reduce the demand for electricity, less effort is needed under the ETS. As a result, the price of allowances is lower than it would otherwise be. However, so far Commission assessments have not found evidence of this in the current framework, as the decrease in the prices of allowances was primarily driven by lower economic activity and other factors. In the future this might change, although the proposed Market Stability Reserve, by reducing the surplus, would counteract this effect and stabilise the level of emission allowance prices. In the sectors not covered by ETS, EU action on ecodesign and energy labelling brings down the cost of national action to achieve greenhouse gas emission saving targets. Reducing energy use of products cannot be sufficiently achieved by the Member States, because this would lead to divergent national provisions and procedures (while having similar objectives) that would generate undue costs for industry (and eventually consumers) and constitute obstacles to the free movement of goods within the EU. 4.2.Evaluation of the current policy framework

4.2.1.Scope of the evaluation The scope of the evaluation concerns energy-related products and it does not go into the question of whether energy savings are more or less cost-effectively achieved in other sectors. The PRIMES reference and policy scenario 2013 show that in order to achieve our decarbonisation and energy targets, all policy measures are necessary for delivering energy savings. Further, given that the Ecodesign Directive applies the principle of setting requirements at the least life cycle cost level (explained further on in this impact assessment) and given that the Energy Labelling Directive requires that each step on the label corresponds to significant cost savings to the user, the costs to achieve the energy savings through these Directives are equal to or less than zero (further detail at the end of section 4.2.2). The Energy Labelling and Ecodesign Directives are both framework Directives that lay down the conditions under which requirements can be set for specific energy-related products (such as washing machines or electric motors) through delegated acts (for energy labelling) and implementing acts (for ecodesign). The evaluation and this impact assessment focus on the framework Directives and not on the individual implementing regulations, which are subject to their own consultation and impact assessment process (see also process chart in Annex 2). Therefore, the evaluation examined the implementation of the Directives for the product groups covered by the first Ecodesign Directive (article 16, which contained a list of priority products) and the two subsequent working plans. Any new products that may in future be addressed under this framework will be identified in the 2015-2017 Working Plan, which the Commission plans to adopt as part of the Circular Economy package later in 2015. Any identified product groups would be subject to preparatory studies that investigate in more detail the potential for environmental improvement and provide the elements for the identification of policy options in the subsequent impact assessments. There are potentially other policy measures than Energy Labelling and Ecodesign that could increase the efficiency of energy-related products, such as fiscal measures, incentive schemes, voluntary schemes etc. However, this evaluation focusses on the specific problems that have arisen in the implementation of the Energy Labelling and Ecodesign, such as effectiveness of energy labels and enforcement. In wider context, energy labelling and ecodesign policies have shown to work well across the world. The Energy Labelling and Ecodesign policies have been an example for other jurisdictions outside the EU, thus driving significantly more energy savings, contributing to a more uniform global playing field and creating opportunities for European business abroad. The setting of minimum efficiency and labelling requirements is recognised globally as one of the most effective policy tools in the area of energy efficiency. A recent study for the Commission shows that out of 59 non-EU countries that have adopted equipment energy labelling schemes, half of them (53%) have adopted designs that have fully or partially emulated the EU energy label (including major economies such as Brazil, China, Korea, Russia and South Africa). At least 45 countries outside the European Union have adopted minimum energy efficiency requirements for products, some of them in fact implementing ecodesign regulations in the context of association agreements or EU membership negotiations. The EU and the US are the world leaders in the development of minimum energy efficiency requirements and energy labelling. 4.2.2.Achievements of the legislative framework To date 24 ecodesign implementing regulations have been put in place, some of which have been subsequently updated through amendment, and two ecodesign voluntary agreements are in place. Products covered range from household products, such as fridges, lamps and boilers, to professional and industrial products, such as electric motors and fans. In addition, 12 delegated regulations on energy labelling now ensure that a range of products must be sold with an EU energy label attached. The effectiveness of the policy is illustrated by the transformation of the market for fridges and washing machines shown in figure 3a and 3b. It is possible that the energy efficiency improvement is in part due to other factors such as ongoing market trends independently of the policy. No ex-post counterfactual data is available to assess this, because it is difficult to quantitatively assess what would have happened in the absence of the policy. In any case, energy efficiency improvements do not necessarily occur spontaneously. On the contrary, for example in the case of vacuum cleaners, a product that was until recently not regulated by ecodesign or energy labelling, energy use per product was, in absence of regulation, increasing rather than decreasing, with no parallel improvement in functionality. By contrast, the various consumer studies show a high impact of the energy label on consumer choice. In addition, the sheer existence of the energy label for a product group triggers a competition towards more energy efficiency among the manufacturers. Therefore, at least a significant part of the observed energy efficiency improvement can be attributed to the Directives. Based on modelling, in which energy use developments in the different sectors affected by ecodesign and energy labelling until 2010 were corroborated with Eurostat data, the ecodesign and energy labelling measures in place to date (see Annex 2 for a full list) are estimated to save 175 mtoe primary energy per year in 2020. This estimate takes into accounts 'rebound' effects, i.e. behavioural responses to the use of more efficient products (e.g. using them more than was previously the case for the less efficient product) and the trend towards ever more and bigger appliances (computers, displays, etc.) per household. The estimate does not take into account any non-compliance with the legislation, of which section 4.2.3 indicates currently to be about 10% of expected energy savings. Taking this into account means that ecodesign and energy labelling measures contribute to about two fifths of the EU 2020 target of 20% energy savings by 2020.Energy savings from considering new product groups within the scope of the Directives show a significantly lower cost-effective energy savings potential of around 6 mtoe per year in 2030. Consumers trust the energy label and usually take it into account when they buy appliances. The label achieves its intended effect in slightly different ways for different types of products. For appliances such as fridges and washing machines, for which many consumers are aware that these can significantly affect their household bills, the label provides easily accessible and standardised information to help consumers take this into account in their choice. For other types of appliances where many consumers are less aware of the significance on their household energy bills, such as televisions, the label first of all raises their awareness on this and then secondly serves in a similar way as for fridges and washing machines. This is evidenced by the results of the consumer behaviour study which found that the choice between one and another label design has a greater difference in impact on behaviour when consumers rank energy efficiency of low importance in their purchasing decision. This observation was particularly strong in the case of televisions. The Directives have helped consumers to lower their utility bills, as the least efficient products are taken off the market through ecodesign and the choice of more efficient products is facilitated through energy labelling. For example, for fridges the average difference in energy consumption between A+++ and class B appliances is around 160 kWh per year representing about €600 over the appliance's lifetime. In total, the ecodesign and energy labelling measures in place to date are estimated to save end-users of products (household, commercial and industry) 110 billion euro net (higher acquisition costs counterbalanced by lower running costs) per year: composed of ca. € 170 billion saving on energy bills and € 60 billion extra acquisition costs. The net savings are€ 100 billion when taking into account current non-compliance levels. This is equivalent to 465 euros per household per year. By 2030, the net savings achieved by ecodesign and energy labelling measures in the different sectors will have grown to almost € 300 billion, saving the EU consumers almost 17% on total costs versus the situation without measures (see Figure 3c). For environmental aspects other than energy consumption there has been less impact so far, because most of such ecodesign requirements were introduced more recently and do not yet apply. The exception is water consumption, which has been addressed by the energy label for washing machines since 1996, by the energy label for dishwashers since 1999, and by ecodesign requirement for washing machines since 2011. For both washing machines and dishwashers the water consumption per cycle more than halved over the last ten years. These regulations have thus also contributed to the strategy for a resource-efficient Europe. Apart from environmental and monetary benefits to end-users, the setting of requirements at EU level also benefits industry. A common and predictable regulatory framework brings down costs for manufacturers, because rules are harmonised across the EU. It reduces the commercial and financial risks of innovation and allows European industry to compete with lower cost countries on higher value added products. The increase in acquisition costs for the consumers translates into higher business revenue for all market actors (plus taxes). For measures existing and in the pipeline today, it is calculated that by 2020, the extra revenue will be € 55 bln, growing to € 75 bln by 2030, compared to a situation without measures. Some 43% will go to industry, 11-12% to wholesale and 45% to retail, subdivided into 13-16% to retail and (because there is a large share of installed products) 30-33% to installers. While there is some administrative burden involved for business with the redesign and testing of the products, as well as the provision of technical documentation and of the energy label, these costs are orders of magnitude lower than the additional revenue generated by the higher acquisition costs of the products. All in all, it can be stated with confidence that the existing measures under the two framework directives achieve energy savings at financial costs which are negative for all actors involved (they are gains), or, at most, are zero. The net consumer cost savings of the measures in the different sectors are illustrated in Figure 3c above. The reason for this is that the Ecodesign Directive requires the minimum requirements on product energy efficiency to be established at the level of Least Life Cycle Cost (LLCC) from the point of view of the end-user, meaning the level at which the combined purchase and running costs (energy, maintenance, disposal etc.) of a product are the lowest. Less efficient products would be cheaper to buy, but that advantage would be outweighed by the higher running costs. More efficient products would have lower running costs, but the advantage would be outweighed by the higher purchase cost. Thus the LLCC level achieves the highest cost savings compared to the base case, meaning the ecodesign measures are cost-savers by definition. The Energy Labelling Directive requires that each step in the label corresponds to significant cost savings to the user. As a result, all the classes in the label have to include products whose combined running and purchase costs are lower than that of the base-case non-efficient product (below the "break-even point" in Figure 3d), ensuring that energy labelling promotes, also by definition, products that bring absolute cost savings over the life cycle. Figure 3d. Typical Life Cycle Cost curve. I = Basecase, II = Least Life Cycle Cost, III = No financial loss (break even point), IV = Best Available Technology

4.2.3.Problems with the current legislation and implementation The evaluation study identified the following problems with the current framework: Problems related to Energy Labelling (1)'Reduced effectiveness of labels following the introduction of A+ and up classes': In the recast of the Energy Labelling Directive in 2010 three classes (A+++, A++, A+) were added on top of the existing labelling A (best) - G (worst) scale of the EU energy label. These new classes have reduced the effect of the label on consumers to purchase more efficient products. While consumer research shows that the new label scale is understandable for consumers, it has reduced their willingness to pay more for more efficient products, because they are less motivated by a difference between A+ and A+++ than by a difference between C and A. The scale of this problem can be illustrated by the difference in energy consumption between A+++ and A+ washing machines (with 7 kg load) which is 50 kWh/year. At sales of more than 15 million washing machines a year, this difference means after a period of fifteen years more than 11 TWh/year electricity use (1 mtoe primary energy) for all washing machines bought in that period. Given that washing machines present only a fraction of the savings of all labelled products, the scale of this problem is significant. At the same time, the addition of A+ and up classes meant that the scale remains of a closed type. Thus, a rescaling of the label classes is necessary when a large share of the market reaches class A+++. Rescaling has not yet been undertaken, as no agreed method exists and the possibility to add + classes has so far undermined any compromise for such rescaling. For several product groups, products populate mainly the highest classes leaving the lowest classes unpopulated, which is not known to consumers. This is in part because of the success of the scheme, as manufacturers have responded to the challenge of producing more energy efficient products, but also because of incoherence between energy labelling and ecodesign regulations. For a number of product groups, the ecodesign and energy labelling regulations have in the course of time become incoherent, because further steps of staged bans by ecodesign were put into place while energy labels were unchanged. This means that a number of classes shown on the energy label are unpopulated because of ecodesign legislation having banned products of that efficiency. In the most extreme cases of washing machines, fridges and dishwashers, the energy label currently displays A+++ to D classes, but only A+++, A++ and A+ appliances can still be placed on the market. (2)'Increase in size of appliances': There is a trend towards larger products in particular product groups, i.e. refrigerators, washing machines and TV’s. For example, the average viewable surface area of TV's grew from 10 dm² (19 inches diagonal) in 1990 to 28 dm² (32 inches) in 2010 and is projected to rise to an average 71 dm² (51 inch) in 2030. As a result, overall efficiency improvements for these products may not result in absolute energy savings. It is unclear if this trend is solely in response to consumer demand or whether this is in part a development driven by the label since it is normally easier to make larger appliances more efficient and thus obtain higher label classes: the rating scale of the label rewards energy efficiency, i.e. energy use related to a function such as the screen size of a TV. Although the label provides consumers also with the absolute energy consumption, some consumers do not understand this and a significant share of consumers thinks the rating scale itself represents energy consumption, rather than efficiency. Problems related to both Energy Labelling and Ecodesign (3)'Long rulemaking processes, leading to outdated technical and preparatory work': While the entire process from the start of the preparatory study to the publication of the regulation should be possible within 41 months, until 2012 the average was 49 months. This leads to lost savings as measures enter into force later and are based on outdated market data. After the preparatory study, the process takes approximately 20 months (see for further detail Annex 2). Thus, even if the 41-month schedule could be followed, the market data from the preparatory study will be outdated by the time of the decision on the regulation. The lack of availability and access to recent market data is a problem for the preparatory study and for the regulatory process if there is a need to update such data. Another aspect related to the rule-making process is that the Energy Labelling Directive lacks a working plan and a formalised stakeholder forum such as the Consultation Forum under the Ecodesign Directive, although in practice ecodesign and energy labelling regulations have always been developed together using the Ecodesign Directive's working plan and stakeholder forum as a basis. So far only in one case was only an energy labelling regulation developed (for updating all energy labelling regulations with regard to the display of the label on the internet), for which the same consultation procedure was applied as for ecodesign. (4)'Too low level of ambition for a number of product regulations': The evaluation study found that while for some product groups ecodesign regulations and labels have shown the right ambition level, for many other product groups the level of ambition is too low compared to what is technically and economically feasible (see Annex 10 for details). The evaluation highlighted this is often related to the problem of limited and outdated data. In addition, also the requirement in the Ecodesign Directive of aiming to set requirements at the least life cycle cost poses problems. This criterion assumes that more efficient products have increased investment cost and decreased cost of operation (namely energy cost). On the basis of product-specific conditions (taking e.g. into consumer behaviour and durability of the product that determine its lifetime) the level of the requirement for the least life cycle cost should be established. However, for e.g. electronic products there is not always a clear relationship between purchase price and efficiency. In addition the evaluation study indicates that two existing voluntary agreements have an ambition level that is too low compared to what is technically and economically feasible. (5)Non-compliance due to 'weak enforcement': The expert estimate from the evaluation study is that yearly around 0.6% of the market is surveyed. The indication is that 10-25% of products on the market are non-compliant with ecodesign requirements. Some 20% of products are estimated to be offered for sale without the energy labels displayed and another 15% have the label displayed in an insufficient way (e.g. wrong placement, retailer made label, label hidden or covered). On the basis of these figures, the average level of non-compliance with ecodesign and energy labelling regulation is estimated at 20%. The share of non-compliance itself does not provide a clear indication of what the scale of the problem is with regard to loss of envisaged energy savings: some non-compliant products may be only a little less efficient than required or indicated on the label, while others may be much less efficient. Based on expert estimates, the evaluation study indicates that around 10% of envisaged energy savings are being lost due to non-compliance. In addition to the findings of the evaluation study, further analysis of market surveillance performance by Member States based on collection of data by the Commission is provided in Annex 3. There is a general agreement that the level of market surveillance is too low and should be increased as it is economically beneficial for society (current investments in enforcement are estimated to be 0.05% of the value of lost energy savings). Non-compliance also affects consumers, who may have bought an appliance with a different performance than what they were informed of, and the competitiveness of many manufacturers as it undermines a level playing field. There are a number of different drivers behind the weak enforcement: –80% of the respondents to the public consultation think that not enough resources are given to market surveillance authorities. –The evaluation also highlighted unclear provisions in the legal texts, notably an overlap of requirements between the Energy Labelling Directive and its delegated acts, which leads to questions of interpretation and makes analysis of suspected non-compliance cases more difficult. In addition, there is an overlap of provisions between the Directives and the market surveillance regulation. The market surveillance regulation sets out the general requirements and procedures for Members States to enforce EU-harmonised product legislation, while product-specific legislation such as the ecodesign and energy labelling include the requirements for economic operators that Member States need to enforce. However, the Ecodesign and Energy Labelling Directives currently also include a number of provisions on procedures for enforcement. This overlap is less likely to lead to interpretation questions, as the provisions in the Ecodesign and Energy labelling Directive should take precedence over those in the market surveillance regulation. Nevertheless, different procedures for market surveillance for Ecodesign and Energy Labelling than for safety legislation (even though the products concerned may be the same ones) sectors creates additional burden for Member States authorities, making market surveillance less efficient. –A specific obstacle for authorities concerns the timely access to technical documentation and the ability to contact foreign entities, including the identification of the manufacturer. More importantly, even in the common case where the manufacturer is known and contacted, obtaining the technical documentation for individual products often takes several weeks, even though the legislation requires that this should be made available within 10 days. Furthermore, manufacturers use the same energy label and/or ecodesign declarations for a range of “product family” models ("equivalent models") that have the same performance, but this information is only available once the technical information file is received and since it is not available in readily shareable electronic format market surveillance authorities are often not aware that other authorities may have already tested an equivalent model. As 10 market surveillance authorities (MSAs) indicate in the Ecopliant project "The different trademarks and different model identification for equivalent products is often a problem for MSAs controlling the national markets, and this is especially a barrier for increased coordination of market surveillance activities across the EU." –Cooperation between market surveillance authorities is considered limited and better coordination is a way in which the impact of market surveillance can be increased without significantly increasing the resources used for enforcement authorities at national level. Problem related to (predominantly) Ecodesign (6)'Other environmental impacts could receive more attention': the evaluation study found that regulations to date have mainly addressed the use-phase energy consumption, as this represents the most important contribution to the environmental impacts of the energy-related products. There is potential for reduction of other environmental impacts of energy-related products, e.g. through increased durability. The evaluation study indicates that for properly including non-energy aspects modifications to the MEErP methodology used for preparatory studies would be necessary. To address other environmental impacts of products more widely, an extension of the scope of the Directives to product groups other than energy-related products would be necessary, since for other types of products, environmental impacts other than use-phase energy usually dominate. However, the environmental impacts of products other than energy-related products is a wider problem than the Ecodesign Directive and there may be other ways to address it than to extend the scope of the Directive. Therefore, the assessment of measures related to the Ecodesign Directive to address this problem should take into account other policy instruments that can address the underlying problem for these products.

Thus, the following six problems are identified, along with their underlying drivers: (1)Reduced effectiveness of labels following the introduction of A+ and up classes –Label layout laid down in recast Energy Labelling Directive (2)Increase in size of appliances –Consumer demand for bigger products –A share of consumers interpret the label rating as absolute consumption –Easier for larger appliances to be made more efficient and achieve higher label classes

(3)Long rulemaking processes –Proper consultation, consideration and assessment requires time –Limited and outdated data (4)Too low level of ambition for a number of product measures –Limited and outdated data –Least life cycle cost criterion is poor guidance –The criteria for requirements of self-regulation are not sufficiently detailed (5)Weak enforcement –Insufficient national resources made available –Overlap of legal provisions –Difficult access to technical documentation –Insufficient cross-border cooperation (6)Little reduction of non-energy environmental impacts

–MEErP does not sufficiently capture some impacts –Scope of the Directives excludes non-energy related products These six problems diminish the ability of the legislation to reduce negative impacts of products on the environment. They lead to a loss of potential energy savings, unnecessary extra cost for consumers, not satisfactorily informing them, and low savings impact on environmental issues other than energy. The problems identified include the problems that were not fully addressed by the non-legislative actions initiated after the 2012 review of the Ecodesign Directive. 4.3.The baseline: How will the problem evolve? The purpose of the baseline is to identify what would happen in the absence of new policy. The baseline is quantified so that the analysis of the policy options formulated and analysed in the next chapters can be compared to it. The quantification of the baseline is done on the basis of the 'ecodesign impact accounting' model, of which further detail is provided in Annex 5. In the absence of any changes to the Ecodesign and Energy Labelling Directives and any changes to the way they are implemented, there will continue to be further energy and other environmental savings. First and foremost because the existing ecodesign and energy labelling product regulations will continue to have effect: more stringent requirements already laid down in the ecodesign regulations will start apply at their scheduled dates and the product labels for categories of products that are not yet populating the highest label classes will drive industry to make more efficient products. Secondly, since the Directives would stay in place as they are, also new ecodesign and energy labelling product regulations for new product categories would still be developed (if product categories could deliver significant savings) and existing product ecodesign and energy labelling product regulations would be reviewed and updated if there are significant potential further savings in energy and other environmental impacts. However, in absence of any changes non-compliance will remain a problem and is expected to remain at the same level (see Annex 3). The new regulation on market surveillance proposed by the Commission is likely to improve the framework for market surveillance. A key aspect of the proposal is that it removes overlaps of enforcement provisions between the market surveillance regulation, the general product safety legislation and the sector-specific product legislation. However, it does not remove the overlap for ecodesign and energy labelling, because the general product safety legislation is not applicable to ecodesign and energy labelling and it was considered not appropriate at the time of the market surveillance regulation proposal to amend the Ecodesign and Energy Labelling, since they were undergoing their own review and stakeholder consultation. Therefore, by itself the new regulation on market surveillance is unlikely to lead to additional market surveillance effort on ecodesign and energy labelling by Member States, and it is assumed in the baseline that there is no improvement with regard to energy savings being lost due to non-compliance. This non-compliance not only affects the potential energy and environmental savings targeted by the policy, but, at least where it concerns labelled products, would also undermine consumer confidence in the energy label: the more reports are published on non-compliance, the less consumers will trust the EU energy label. Further, the energy label will be running into its limits: the labelling scheme will lose its impact once all or most models correspond to the A+++ rating. The current approach of introducing an A-G label for a newly regulated appliance and then adding A+ and up classes to allow for technological progress would continue to apply. However, once the A+++ to D label would be in place for a specific product no further revision of the delegated act would be undertaken, because this requires rescaling, which has been rejected for the A+++ to D label when this was proposed for televisions. Thus, the energy labels were a large share of models would be in the highest classes would lose their meaning and effect on consumers. There may also be other missed potential in the absence of any changes to the Ecodesign and Energy Labelling Directives or the way they are implemented. As pointed out, the evaluation study indicated that higher ambition levels on energy efficiency are possible, which are not achieved in the current implementation. The same applies to non-energy environmental impacts of energy-related products. Further, other types of products will remain outside the scope of the Ecodesign and Energy Labelling Directives. Figure 4 shows the resulting baseline trend in energy consumption of energy-related products in absence of any changes in the policy or its implementation, taking into account non-compliances and the limitations of the energy label. Detail on the development for specific product sectors as well as on consumer expenditure trends is provided in Annex 6. Figure 4 also provides a comparison with what would have happened in absence of energy efficiency legislation for products. This is to illustrate the significant energy savings gained from regulating energy efficiency of products, even if there is also an autonomous trend to improve energy efficiency for most types of energy-related products in absence of policy (not depicted, but taken into account in the 'ecodesign impact accounting' model). 4.4.Who is affected and how? Consumers are affected, because the policies should lower their utility bills and the overall life cycle cost of buying and using appliances. The energy label provides them with objective information on use of energy and other resources. Retailers are affected, because they have to ensure proper display of the label. In addition, the shift towards more efficient appliances which usually have higher costs means higher turn-over and likely also higher profits. The affected retailers include micro-enterprises, which should be subject to the same rules as energy labels are only useful for consumers if all products are labelled in all retail outlets. Manufacturers, both in the EU and those exporting to the EU are affected, because they have to take the requirements of the regulations into account when designing new products. Further, the label presents them with opportunity to compete on a second objective factor, energy efficiency, in addition to price. The affected manufacturers would include any micro-enterprises for the same reason as given for retailers and to ensure fair competition in the single market where it concerns ecodesign requirements. The sectors concerned include few or no micro-enterprises manufacturers. Society at large is affected, because of the environmental benefits of the policy. Member States are affected, because they have to ensure compliance through market surveillance and inform consumers about the label. Third countries are affected, because the A-G energy labelling scheme has been followed as a model in many different countries around the world and some countries have also implemented EU ecodesign regulations. They are also affected through the Agreement on Technical Barriers to Trade which is to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles, while also providing the right to implement measures to achieve legitimate policy objectives.

Standardisation organisations are affected, because they need to develop the detailed testing and measurement methods. 4.5.Justification of EU action The Energy Labelling Directive is based on Article 194(2) of the Treaty on the Functioning of the European Union, which provides a legal base for measures to promote energy efficiency. The Ecodesign Directive is based on Article 114 of the Treaty on the Functioning of the European Union, the legal base for measures for the functioning of the internal market. The objective of reducing negative environmental impacts of products, in particular energy use, cannot be sufficiently achieved by the Member States, because this would lead to divergent national provisions and procedures (while having similar objectives) that would generate undue costs for industry (and eventually consumers) and constitute obstacles to the free movement of goods within the EU. Only through harmonised EU rules on energy labelling and underlying measurements and testing can it be ensured that the same model of a product has the same published energy class throughout the EU. In the absence of EU legislation, it is likely that all Member States would introduce energy efficiency legislation for some product groups, because of consumer protection and because it is difficult to achieve the target of the Energy Efficiency Directive without addressing the energy use of products. Acting at the EU level is the only way to ensure that requirements and labels for products placed on the market are equal in all Member States, thereby ensuring the functioning of the Internal Market underpinned by Article 26 of the Treaty on the Functioning of the European Union. The principle of proportionality is examined in section 8. 5.Objectives The general objective of the Treaty that the policy aims of the Energy Labelling and Ecodesign Directives contribute to is to ensure the functioning of the internal market through the free movement of goods that ensure a high level of environmental and consumer protection. The specific objective of the Energy Labelling and Ecodesign Directives is to reduce energy consumption and other significant environmental impacts of products by ensuring consumers are informed in a relevant and easy-to-understand way and allowing industry to transform environmental challenges into economic opportunities. The evaluation found that the objectives remain relevant and that increasing energy efficiency has in fact gained in relevance. Therefore, the operational objectives for the present review of Energy Labelling and Ecodesign Directives are directly derived from the above objectives and are to update the policy framework so that it continues to ensure the functioning of the internal market, a high reduction of energy consumption and other environmental impacts of products. In addition, in light of the problems identified further specifically objectives of this review are to ensure that an update of the policy framework is relevant, useful and easy-to-understand for consumers and can be enforced easily and appropriately. Further specific objectives reinforced by the Commission's drive for better regulation are to ensure that the policy is simple, apt for purpose and robust to future developments and cost-effective. Finally, in addition to the specific objectives a criterion for the assessment should be that the policy framework should remain in line with international obligations. The extent of achievement of reduction of energy consumption will be measured quantitatively, while other objectives can be assessed only qualitatively. 6.Policy options 6.1.Measures to address the problems Reaching the objectives identified in Chapter 5 necessitates solutions to the outstanding problems and underlying drivers defined in section 4.2. On the basis of the evaluation study and consultation, a number of actions was identified which are referred to as measures. These measures are described below and in section 6.2 they are bundled in different ways to form policy options. These measures work equally well for all product groups, except where explicitly stated differently (provision of monetary information). Product-specific features (e.g. economic lifetime) are not different between the baseline and the measures with a few exceptions as described in Annex 5. 6.1.1.Measures to address problems related to Energy Labelling For the problem of 'reduced effectiveness of labels following the introduction of A+ and up classes' the measure identified is to change the label scale layout. There are alternative layouts possible. A specific study tested the consumer understanding and the effect on their purchase decisions of a number of potential basic frames that could be used for a new energy label. On the basis of the results of this first phase of the study, potential future label scale designs were drawn up for further analysis. Stakeholders were consulted on the draft label designs and rejected the label design adding further + classes (for example A++++), requesting that it should not be among the label designs among to be tested on consumers in the second phase of the study. Further information on the study and stakeholder consultation is in Annex 1. Measure 1A: Alphabetic A-G label The Energy Labelling Directive would be amended so that an A-G label would be applied for products without ever adding any + classes. In order to keep promoting further efficiency improvements, this requires periodic rescaling in which the class-requirements would be made more stringent and a product model that is in class B will be 'rescaled' to e.g. class E. A vast majority of respondents supported this option. However, manufacturers and retailers (both interest groups and individual companies) did not hold a uniform view on the issue, their answers ranging from ‘strongly agree’ to ‘strongly disagree’. The periodic rescaling means that there may be a transition period in which old (from before the scaling) and new labels (rescaled) would be present. Having an overlap in the market between old ‘A’ and new ‘A’ was seen as undesirable by respondents to the public consultation, in particular by industry and consumer interest groups. An overlap is likely to confuse consumers and lead to sales of less efficient appliances than otherwise, although it is impossible to quantify by how much. The solution is to shorten any overlap period, but that means a different approach in supplying and affixing labels is needed than the present one (at present from a certain date manufactures put a label in the box they ship to dealers; dealers affix the label supplied by manufactures; the label remains on the shop floor as long the specific appliance to which it is attached is not sold). Further detail on the transition period is provided in Annex 8. Periodic rescaling would take place every 5-10 years. Measure 1B: Numeric label

The Energy Labelling Directive would be amended so that a numeric label (see figure 5) would be applied for all products. The classes in the initial label would be indicated by numbers ranging from zero on top to e.g. 100 at the bottom, the lower number the better the energy efficiency. At the introduction of the label the top classes would be indicated in grey and be unused so that the label allows room for technological improvement. The level of the zero class should be at or close to the theoretical best possible efficiency. In the case of technological improvement some or all of the grey classes would be made available and a number of classes at the bottom of the label would be removed; the colour scale would thus move up in the label. The normal transition phase after such an update of the label would be less confusing for consumers as each product remains in its existing class (although the assigned colour and the class position in the colour scale do change). Thus, no special transition period as in measure 1A is necessary. Stakeholders from industry and environmental NGOs suggested further exploring this option. In the public consultation stakeholders tended to disagree with moving to an open ended scale on the label such as in this option, except for respondents from industry interest groups who were more positive about it. Measure 1C: Reverse numeric label The Energy Labelling Directive would be amended so that a reverse numeric label (see figure 5) would be applied for all products. The classes in the label would be indicated by numbers ranging initially from seven on top to one at the bottom, the higher number the better the energy efficiency. In the case of technological improvement additional classes 8, 9, etc. would be added on top and an equivalent number of classes at the bottom of the label would be removed; the colour scale would remain to show its seven colours, with dark green for the (new) best class. The normal transition phase after such update of the label would be less confusing for consumers as each product remains in its existing class (although the assigned colour and the class position in the colour scale do change). Thus, no special transition period as in measure 1A is necessary. In the public consultation, most respondents across all groups disagreed to some extent with this option. However, in the consultation meeting of 19 February 2014 several stakeholders indicated this was an interesting option to explore further. For the problem of 'Increase in size of appliances' three possible measures are identified on the basis of the evaluation study. Measures 2 and 3 presented below are alternatives, both addressing the feedback from the majority of respondents to the public consultation who would prefer to focus on both energy efficiency and energy consumption, but with a stronger focus on energy consumption than at present. Measure 2 attempts to improve the way absolute energy consumption of appliances is communicated through the label; measure 3 is more ambitious and uses the current strength of the label design and changes the mechanics behind it, i.e. which products are assigned to which classes. Measure 4 addresses the problem by providing extra information in addition to the label and is only useful in combination with one of the other measures since it has been found to work only for some products types and not for others, as explained below. Measure 2: More emphasis on absolute energy consumption on the label The label layout would be changed in order to put more emphasis on the indication of the absolute energy consumption, currently indicated in a box with the indication "XYZ kWh/annum" (see figure 1 or figure 5). Because of the limited space on the label this measure would at the same time limit the amount of non-energy information on the label. Measure 3: Require for larger appliances a higher efficiency to reach a certain label class The Energy Labelling Directive would specify that in the preparation of delegated acts it should be considered on a product by product basis whether for larger appliances a higher efficiency (energy use per amount of service, such as the screen size of a TV or the load capacity of a washing machine) is required to reach certain classes on the label. Although this approach could already be applied in the current implementation of the Directive, in the absence of a provision in the Energy Labelling Directive specifically addressing this, only for one product group has it been possible to agree on such approach. Measure 4: Provide monetary information Dealers would be required to display the cumulative annual running cost of the appliance due to energy and any other resource consumption either alongside the purchase cost or as part of the overall life cycle cost for consumers (purchase cost plus cumulative annual running cost). A standardised methodology to calculate the cumulative annual running cost would be defined at European level, while the input values for the specific parameters used in it would be different per Member State. The Commission would arrange a webtool, in which dealers can enter their geographic location and the specific energy consumption indicated on the label of the product. The webtool would then provide the dealer with the cumulative annual running cost. National parameters such electricity prices are available to the Commission and can be regularly updated. Consumer and environmental interest groups support this measure, while most manufacturers do not. Trials were done in Norway and the UK. They indicated that this measure only had effect for appliances with high energy consumption such as washer-driers and tumble driers. Therefore, this measure would apply only to product groups with high energy consumption. 6.1.2.Measures to address problems related to both Energy Labelling and Ecodesign For the problems of 'Too low level of ambition for a number of product measures', 'Long rulemaking processes' and 'Weak enforcement' two measures have been identified that can address more than one of these problems at once. The evaluation study recommended establishing a mandatory product registration database, presented below as measure 5, of which the data can be used to address all three problems. An alternative is measure 6 which does not require changes in legislation and also provides data, but it addresses the problems to a lesser extent and cannot provide the type of data needed to address the problem of weak enforcement. Measure 5: Mandatory product registration database A database would be established at EU level, under the management of the Commission, in which manufacturers would have to register their models before placing them on the market. They would need to provide the technical documentation and indicate all equivalent models; the detail of what should be registered in the database is provided in Annex 7. This measure would not involve any additional generation by manufacturers of information or documentation, but only registering in the database information that they are already required to generate (and provide on request). The Commission and the national market surveillance authorities would have access to this database. This would allow the national market surveillance authorities quick access to the technical information necessary for their inspections. Thus, they could save the time that they are currently spending on contacting manufacturers for this information, and use it on core enforcement actions, including checking compliance of dealers with energy labelling. In the context of the revision of the Directive on harmonisation of requirements for radio equipment, which falls under the same market surveillance regime as ecodesign and energy labelling, it was estimated that a registration database could result in an estimated overall gain of up to 10-15% in time/resources for market surveillance authorities. Based on the experience of such a database in Australia, which has higher compliance rates for an otherwise similar policy, this measure is expected to improve compliance rates by 6%-point and reduce energy savings losses as a result of non-compliance by 3%-point (see Annex 5). The costs are estimated to be approximately € 3 million investment to establish the database, € 300.000 annual maintenance costs for the EU budget, and € 3 million per year for manufacturers for the clerical task of entering the information in the database (they already have the information, see further Annex 9). Although the database is established at EU level, this measure does not lead to any changes in the competence of national authorities with regard to market surveillance. The Commission merely facilitates the establishment and maintenance of the database. If a market surveillance authority finds a product in a shop that is not registered in the database, that authority can immediately start a non-compliance case or take the product off the market in case the manufacturer cannot be contacted. This measure is expected to work well especially in combination with measure 9 on joint enforcement actions, as the latter is expected to increase the budget and level of enforcement activities and would allow to undertake joint action to address a potential situation in which a significant share of product models is not registered in the database. This measure can also be enhanced by developing a digital application for consumers to check the product registration database and report any absence of a product to the market surveillance authorities. At the same time the product registration database provides the Commission with up to date information on the energy efficiency and other significant environmental impacts of new products, which can be used in the rulemaking process to establish the appropriate ambition level of requirements. Although the database does not include data on sales that preparatory studies usually include, the most important is the data on the efficiency levels that are economically feasible and already available for the products on the market. Such data is particularly important for energy labelling, where in the absence of such data the risk is that the level of ambition for the top classes is set at a too low level, and as a result energy labels will have to be revised early and thus frequently. The availability of up to date information prevents delays in the rulemaking process that are due to a need to procure third party data to update outdated data. A little more than half of the respondents to the public consultation supported this measure, consisting mainly of government and surveillance bodies, environmental interest groups and one quarter of industry interest groups that responded on this topic. Similar databases exist in other EU harmonisation legislation (cosmetics, noise and radio equipment; for other sectors the Commission is also looking into this as part of its e-Compliance initiative) and in other jurisdictions. Measure 6: Expand the database study The existing project in which a contractor, for six product groups, establishes and manages an energy-related product database with energy and significant other environmental data on models available on the EU market would be replicated for all products covered by ecodesign and energy labelling regulations, at present more than 20. Since such data would be collected from publicly available sources, rather than through systematic information from manufacturers, it would not be comprehensive and less up to date than the data collected through a product registration database, but nevertheless of use to address the problem of ambition levels of measures. Since such study cannot collect the technical information necessary for inspections (notably test reports that are held by manufacturers), this measure cannot support market surveillance authorities in improving enforcement. On the basis of the evaluation study, additional measures have been identified that specifically address the problem of 'Too low level of ambition for a number of product measures' The Ecodesign Directive contains a provision that specifies the level at which requirements should be set. The application of this provision could be refined or, more ambitiously addressing the problem, the provision could be changed. These are two alternative measures further described below.

Measure 7: Use learning curves for least life cycle cost Annex II of the Ecodesign Directive contains a requirement to aim at setting the level of ecodesign requirements for energy efficiency at the life cost minimum for end-users. It requires adapting such level as a result of sensitivity analysis covering relevant factors. Under this measure in such sensitivity analysis the application of “learning curves”, i.e. the consideration of decreasing production costs over time, would be included. A majority of respondents to the public consultation supported this measure, though manufacturers and their interest groups were divided on it. Measure 8: Change least life cycle cost requirement The requirement in Annex II of the Ecodesign Directive to aim setting the ecodesign requirements for energy efficiency at the life cost minimum for end-users would be changed into setting the requirements at the break-even point, i.e. the point where the life-cycle costs of a more efficient product are equal to the life cycle costs of the least efficient product (see section 4.2.2 for more detail on life cycle cost). Respondents to the public consultation were divided: government bodies and environmental interest groups supported this measure; manufacturers are not in favour. Further, five additional measures have been identified that specifically address the problem of 'Weak enforcement'. These measures can complement each other, except that measure 13, establishing an EU market surveillance authority changes the way market surveillance is organised for ecodesign and energy labelling to such extent that measures 9 and 10 are not applicable in such case. The potential measure for the Commission to enact infringement procedures against Member States that do not carry out sufficient market surveillance activity is not included. This is because this potential is limited, as it is not obvious how to establish a benchmark for a sufficient level of market surveillance. The Commission proposed as one of its 20 actions in its market surveillance action plan to develop key performance benchmarks for market surveillance, but even for the consumer products safety area where there is more experience in collecting data on market surveillance it is proving difficult to identify and agree with Member States relevant enforcement indicators, let alone benchmarks. More than two years after the adoption of the action plan the action is still on-going without a foreseeable indication of the outcome. Market surveillance is an area where Member States are keen to decide themselves how, where and how much effort to invest. Measure 9: Support joint actions Joint surveillance and enforcement actions by market surveillance authorities from across the EU would be supported under the Horizon2020 programme in which the national authorities would cooperate in joint testing and other cross-border activities. A little more than half of the respondents to the public consultation consider that the current mechanisms for cooperation in market surveillance between administrations are not effective and support further cooperation beyond the Administrative Cooperation (ADCO) meetings and the Intelligent Energy Europe Ecopliant project. These joint actions could address both non-compliance by suppliers and by dealers, although because of the cross-border dimension they are more likely to address supplier obligations. Measure 10: Align with market surveillance regulation The Directives would be aligned with the proposal for a new market surveillance regulation, which aims, inter alia, at eliminating overlaps between general legislation on market surveillance and sector-specific legislation. Article 3(2)-(4) and Article 7 of the Ecodesign Directive and Article 3(2)-(4) of the Energy Labelling Directive would be deleted and a specific article on enforcement would be inserted in both Directives stating that Member States shall ensure that the authorities responsible for market surveillance verify compliance according to the market surveillance regulation. Since the present overlaps concern enforcement of supplier and dealer obligations, such a measure could address non-compliance by both actors. Respondents to the public consultation indicated that it is necessary that the market surveillance regulation applies fully to ecodesign and energy labelling and double requirements should be avoided. Measure 11: Streamline legal provisions The requirements for suppliers and dealers in the Energy Labelling Directive would be less detailed in order to avoid overlap and/or contradiction with the delegated acts and the requirements for drafting delegated acts would explicitly specify that the necessary details have to be included in delegated regulations. In addition, the Directive would be changed to a Regulation, because transposition creates still a risk for further overlap and/or contradiction between the general framework and its delegated regulations. Removing and preventing such overlaps and contradictions improves enforcement, because it allows to pursue certain non-compliance cases that otherwise would not be considered worth pursuing due to legal uncertainty. The present overlaps in energy labelling provisions concern requirements for both suppliers and dealers and therefore this measure can address non-compliances by both actors. The instrument of a regulation seems in any case the better instrument since the main element of the policy that requires detailed implementation by Member States is enforcement of the delegated acts, for which requirements are detailed in those delegated acts and in the market surveillance regulation. In options that require revision of the Ecodesign Directive, also that Directive would be revised into a Regulation for the same reasons. Stakeholders pointed out unclear formulations in legal texts, notably the format of information to be provided to consumers and authorities. Measure 12: Third party certification The Energy Labelling and Ecodesign Directives would be amended so that for all products covered, a third party has to certify the compliance before a model is placed on the market (at present self-certification applies and third party certification is only an option in the Ecodesign Directive for products where it is duly justified and proportionate to the risk). This would only address non-compliance of suppliers, not for dealers. Not many stakeholders supported this option in the public consultation. In particular the heating industry supported it. Measure 13: EU market surveillance authority Instead of market surveillance by the Member States, it would be undertaken by an EU authority, to be newly set up. This measure was already analysed in the impact assessment for the product safety and market surveillance package, but not selected, because would entail significant costs due to the need for the establishment of coordination infrastructures and capacity, which currently do not exist at EU level. Moreover, in the current impact assessment this option includes expanding the scope of the Directives to all products (measure 14), which would likely lead to product-specific requirements that cannot be tested on the product in a laboratory, but instead requires paper trail evidence throughout the life-cycle of the product. This requires in any case new capacities to be developed. Therefore, the consideration to do this through an EU authority merits specific consideration in this context. A little more than half of the respondents to the public consultation across interest groups supported this measure specifically for ecodesign and energy labelling. 6.1.3.Measures to address problems related to (predominantly) Ecodesign For the problem of 'Little reduction of non-energy environmental impacts' two alternative measures are identified. Measure 14 was recommended by the evaluation study, whereas the alternative, measure 15, is much more ambitious and also explored by the evaluation study. Measure 14: The impact categories, the characterisation factors, the inventory database and the assumptions in the modelling of the Methodology for the Ecodesign of Energy-related Products (MEErP) and its Ecoreport tool would be reviewed and were necessary updated to better fit the analysis of material impacts. Measure 15: The scope of both Directives would be extended to include further products beyond energy-related products. About one fifth of respondents to the public consultation supported this measure for Energy Labelling, while about two-thirds opposed it. For the Ecodesign Directive there was somewhat more support: one third of respondents supported it, while a little over half opposed it. The European Parliament has called on the Commission to propose such a scope extension for the Ecodesign Directive. In addition, the scope of the Energy Labelling Directive would be extended beyond the use phase to display life-cycle impacts on the label since the use phase of non-energy related products is usually the least important in terms of energy consumption. In the public consultation, government bodies and environmental interest groups favoured such additional information. Manufacturers, retailers and consumer interest groups did not support this. Rather than extending the scope of the Directives, there may be other policy instruments than Ecodesign and Energy Labelling that can address the underlying problem for these products. This will be taken into account in the assessment of the impacts.

The graph below provides an overview of how each of the measures described above links to the problem drivers.

Problems Drivers for which measures are identified Measures Reduced effectiveness of labels following the introduction of A+ and up classes Label layout laid down in recast Energy Labelling Directive 1. Change the label scale layout Increase in size of appliances A share of consumers interpret the label rating as absolute consumption 2. More emphasis on absolute energy consumption on the label 3. Require for larger appliances a higher efficiency to reach a certain label class Easier for larger appliances to be made more efficient and achieve higher label classes 4. Provide monetary information Long rulemaking processes Limited and outdated data 5. Mandatory product registration database Too low level of ambition for a number of product measures 6. Expand the database study Least life cycle cost criterion is poor guidance 7. Use learning curves for least life cycle cost 8. Change least life cycle cost requirement Weak enforcement Insufficient national resources made available 9. Support joint actions Overlap of legal provisions 10. Align with market surveillance regulation Difficult access to technical documentation 11. Streamline legal provisions Insufficient cross-border cooperation 12. Third party certification 13. EU market surveillance authority Little reduction of non-energy environmental impacts MEErP does not sufficiently capture some impacts 14. Review MEErP Scope of the Directives excludes non-energy-related products 15. Extension of the scope to product groups other than energy-related products 6.2.Policy options Policy options were constructed combining different sets of measures. The policy options represent different degrees of change to the existing policy framework and ambition levels to address the problems. One option would not require changes to the existing legal framework and three others requiring changes to the legal framework in different degrees. In addition, the options changing the legal framework contain a suboption of merging the two legal frameworks into one instrument, which could address identified incoherencies between ecodesign and energy labelling. Box 1 gives an overview of the options, which are described in detail further below. Box 1: Overview of the policy options Option 0: No change ("baseline option") Option 1: Improvements within the existing regulatory framework Option 1+: Option 1 combined with some improvements in the legal framework, notably for energy labelling Option 2: Significant reform of both ecodesign and energy labelling Option 3: Comprehensive reform of ecodesign and energy labelling extending the scope to non-energy related products and to centralise market surveillance Suboption to option 1+, 2 and 3: merge ecodesign and energy labelling into one legal instrument The possibility to repeal one or both Directives and their implementing/delegated acts was discarded, because it would not solve the basic problem. In addition it would not be consistent with policy objectives and the target of the Energy Efficiency Directive, which is unlikely to be achievable without legislation on energy efficiency of products. In the absence of EU legislation, Member States would regulate leading to divergent national provisions and procedures, and thus undue costs for industry (and consumers) and obstacles to the free movement of goods within the EU. The vast majority of respondents to the public consultation, in particular consumers, agreed that minimum energy performance standards for products are necessary. An overwhelming majority of respondents to the public consultation across all groups strongly disagreed with the option of abolishing the label. Member States rejected the possibility to stop working on ecodesign and energy labelling when in the Energy Council in June 2014 the Commission raised this question in light of the criticism during the European Parliament election campaign. 6.2.1.Option 0: no changes, baseline This option does not address the problems, but represents the baseline, as set out in section 4.3, with which other options can be compared. There is not much support from stakeholders for this option: the vast majority of stakeholders think that the Energy Labelling Directive needs to be changed and a large majority of respondents to the public consultation across all types of respondents agreed that A+++-D class is more difficult to understand than the previously used A-G scale. 6.2.2.Option 1: Improvements within the existing regulatory framework Since for almost all problems there is one measure identified that could address the problem, at least in part, without making changes to the existing legal framework, this option was identified and constructed of those measures that require no changes to the Energy Labelling Directive or the Ecodesign Directive. The only problem this option cannot address is the one of reduced effectiveness of labels, which requires changes to the Energy Labelling Directive. Problem category Measure(s) addressing it Reduced effectiveness of labels none Increase in size of appliances 2. More emphasis on absolute energy consumption on the label Long rulemaking processes 6. Expand the database study (ecodesign and energy labelling) Too low level of ambition of measures 6. Expand the database study (ecodesign and energy labelling) 7. Use learning curves for least life cycle cost Weak enforcement 9. Support joint actions Non-energy environmental impacts 14. Review MEErP 6.2.3.Option 1+: Option 1 combined with some improvements in the legal framework, notably for energy labelling This option was identified to address the problem of reduced effectiveness of labels, the only one that cannot be addressed by option 1. Since the measure addressing this problem requires changes to the Energy Labelling Directives, a number of other measures that require changes to the Energy Labelling Directive and that are expected to further or better address the problems compared to the measures in option 1 were also included in this option. For the problem of 'increase in size of appliances' the non-legal measure of putting more emphasis on absolute energy consumption on the label was left out as the alternative measure of requiring for larger appliances a higher efficiency to reach a certain label class is expected to address this problem better, because it uses the strength of the label (the green-to-red colour scale) to address the problem. The additional emphasis on absolute energy consumption on the label has a risk of diluting the effect of that very strength.

In this option the product registration database would only apply to products covered by energy labelling. For these products, the problem of weak enforcement that the registration database addresses is more prevalent. Energy labels cover consumer products for which the number of equivalent models is larger: in the consumer products sector there are "no-brand" manufacturers producing for third companies, which then put their own brand on the product and are responsible for placing it on the market. The "no-brand" manufacturer can supply the same ("equivalent") product to different suppliers who market it under their own brand. Further, models of different colours are usually also equivalent and more common for domestic appliances. Since the product registration database is included for labelled products in this option, the alternative measure (no 6) would only apply to products covered only by ecodesign. This option includes one change to the Ecodesign Directive, i.e. aligning it with the proposal for the market surveillance regulation, which implies deleting several clauses from the Ecodesign Directive as they are already addressed by the proposal for the market surveillance regulation. Aligning only energy labelling and not ecodesign is not desirable, since market surveillance activities often address both at the same time. Problem category Measure(s) addressing it Reduced effectiveness of labels 1. Change the label scale layout to A) Alphabetic A-G label; B) Numeric label; or C) Reverse numeric label Increase in size of appliances 3. Require for larger appliances a higher efficiency to reach a certain label class 4. Provide monetary information Long rulemaking processes 5. Mandatory product registration database (labelling only) 6. Expand the database study (ecodesign only) Too low level of ambition of measures 5. Mandatory product registration database (labelling only) 7. Use learning curves for least life cycle cost Weak enforcement 5. Mandatory product registration database (labelling only) 9. Support joint actions 10. Align with market surveillance regulation 11. Streamline legal provisions Non-energy environmental impacts 14. Review MEErP 6.2.4.Option 2: Significant reform of both ecodesign and energy labelling This option was identified aiming to address all problems in an ambitious way without a complete overhaul of the legislative framework such as would be caused e.g. by changes to the scope of the Directives or to the competences on market surveillance. Thus, this option includes the most ambitious measures, except for measures 8 (change least life cycle cost requirement), 13 (EU market surveillance authority) and 15 (extension of scope to non-energy related products). Measure 8 of changing the least life cycle cost requirement to a break-even point requirement is not included in this option, because it is a radical change, as it will remove from the market products that are the least cost options with expected negative effects for in particular vulnerable consumers. It will also likely raises the ambition level for ecodesign to such extent that energy labels may not be useful anymore: if the requirement banning products from the market is set a high level, the differentiation in energy efficiency of the remaining products on the market is likely too small, which, given margins of error in testing products, does not allow to distinguish that differentiation through a label with classes (see section 4.2.2. for more details on life cycle cost). In this option the product registration database would apply both to products covered by energy labelling and those covered only by ecodesign. Problem category Measure(s) addressing it Reduced effectiveness of labels 1. Change the label scale layout to A) Alphabetic A-G label; B) Numeric label; or C) Reverse numeric label Increase in size of appliances 3. Require for larger appliances a higher efficiency to reach a certain label class 4. Provide monetary information Long rulemaking processes 5. Mandatory product registration database Too low level of ambition of measures 5. Mandatory product registration database 7. Use learning curves for least life cycle cost Weak enforcement 5. Mandatory product registration database 9. Support joint actions 10. Align with market surveillance regulation 11. Streamline legal provisions 12. Third party certification Non-energy environmental impacts 14. Review MEErP 6.2.5.Option 3: Comprehensive reform of ecodesign and energy labelling extending the scope to non-energy related products and to centralise market surveillance This option was identified aiming to address other environmental impacts than energy use in a comprehensive way. Under this option the framework Directives (which would be changed to Regulations) would be revised to extend their scope to product groups other than energy-related products, and for Energy Labelling (as already is the case for Ecodesign) to all life cycle phases and all environmental impacts. The product-specific requirements that would follow from such scope extension would be such that, for certain products and certain environmental impacts, they cannot be tested on the product in a laboratory, but instead require chain of custody evidence throughout the life-cycle. This requires a different approach to market surveillance than currently undertaken by the Member States under EU product harmonisation legislation. Therefore, this option includes centralising market surveillance at the EU level.



Problem category Measure(s) addressing it Reduced effectiveness of labels 1. Change the label scale layout to A) Alphabetic A-G label; B) Numeric label; or C) Reverse numeric label Increase in size of appliances 3. Require for larger appliances a higher efficiency to reach a certain label class 4. Provide monetary information Long rulemaking processes 5. Mandatory product registration database Too low level of ambition of measures 5. Mandatory product registration database 8. Change least life cycle cost requirement Weak enforcement 5. Mandatory product registration database 11. Streamline legal provisions 12. Third party certification 13. EU market surveillance authority Non-energy environmental impacts 15. Extension of the scope to product groups other than energy-related products 6.2.6.Suboption to Options 1+, 2 and 3: merge ecodesign and energy labelling into one legal instrument This option was identified aiming to simplify the legal framework and to address the incoherencies between ecodesign and energy labelling referred to in section 4.2.3: the empty classes on some energy labels due to ecodesign requirements and the lack of a working plan and a formalised stakeholder forum for Energy Labelling, while they exist under the Ecodesign Directive. Under this option, the framework Directives would be merged and revised into one Regulation. For product groups where there are currently both an implementing measure for ecodesign and for energy labelling, these would be merged into one implementing measure, thus reducing the number of implementing measures. 7.Analysis of impacts 7.1.Approach The analysis of impacts was supported by modelling. The model used for the impact analysis study is the ecodesign impact accounting model developed by Van Holsteijn en Kemna B.V. (VHK), which incorporates the data from all preparatory studies and impact assessments done for ecodesign and energy labelling. The description of the model and how the measures are incorporate in the model is provided in Annex 5. The main model parameters identified to influence the results were the energy prices for which sensitivity analysis was applied by modelling and presenting results of two different assumptions as detailed in section 7.2.2. All cost and benefits are inflation-corrected and expressed in 'Euro 2010'.

A specific study tested the consumer understanding and the effect on the