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Summary: Intervention & Options
Department /Agency: Title:
Impact Assessment of EuP Implementing Measures for
washing machines
Stage: Draft EU Legislation vote
at Regulatory Committee
Version: 1.3 Date: 19 March 2009
Related Publications:
Available to view or download at:
http://www.
Contact for enquiries: Martyn Webb Telephone: 0207 238 4628
What is the problem under consideration? Why is government intervention necessary?
The level of carbon emissions and energy usage in the UK and globally remain a concern to the UK
as a result of global warming, the emissions reduction targets the UK has set itself and the threat to
the country's energy security. Climate change means that the UK must reduce emissions quickly
and the carbon emission caps established with the EU Emissions Trading Scheme need to be
met in the most cost effective manner. Domestic washing machines ("washing machines")
account for a significant proportion (5%) 1 of energy use and carbon emissions associated with
domestic appliance products. The continuing availability and sales of less efficient washing
machines has meant that whilst there has been progress in terms of the market for efficient domestic
washing machines, the level of installation and use of more energy efficient products has not been
as great as desired. Technical solutions are available to produce energy efficient appliances which
are in demand by consumers and which could use significantly less power during operation whilst
providing the same level of cleaning performance. The market itself has not moved sufficiently
quickly towards sufficiently low levels of power consumption. As a result, it is felt that Government
intervention (at EU level, due to the Single Market) in the form of regulation to set minimum energy
performance standards (MEPS) along with revising existing energy labelling requirements for
washing machines should be introduced to achieve the desired cost effective abatement.
This IA considers two alternative proposals for standards for washing machines (the European
Commission Proposed Implementing Measures and the UK’s preferred proposals). The former
considers MEPS both separately and combined with the European Commission's new proposed
labelling scheme. It is deemed essential to assess the interaction between the two policies as their
design and intended effects on the market as well as scenarios’ implications are intrinsically linked.
Due to time constraints, the UK preferred position only considers the MEPS implementing scenario
(without taking the labelling scheme into consideration). The latter scenario is nonetheless useful in
informing the UK’s negotiating and voting position.
1
Amount of energy used by washing machines:
http://whatif.mtprog.com/Level3/SummaryData.aspx?ScenarioID=0&SchemeID=1&FilterInfo=P12; As a proportion of
household energy used in the following products: refrigerating appliances, washing machines, dishwashers, tumble driers,
lighting, consumer electronics, ICT, cooking (gas and electric) 0
www.mtprog.com/spm/files/download/byname/file/10_07_08%20PA&P%2008%20v1.pdf .
1What are the policy objectives and the intended effects?
The Energy White Paper, issued on the 23 May 2007 announced a renewed commitment from the
government to improve the performance of energy using products over the next 10–20 years, including
proposals for product standards and targets to phase out the least efficient products. The objective of
implementing restrictions for washing machines is to contribute to realising CO2 savings required to
achieve the EU ETS cap in the most cost effective way, by mitigating for the effects resulting from
barriers to behaviour change. Product policy is considered as a necessary complement to the EU ETS
for the overall ambition to reduce CO2 in the most cost effective manner possible. Lower energy usage
as a result of the lower power consumption (and therefore lower energy demand) will also contribute to
energy security of the UK.
What policy options have been considered? Please justify any preferred option.
The UK, as a Member of the European Union, has implemented Framework Directive 2005/32/EC of
6 July 2005 establishing a framework for the setting of Ecodesign requirements for energy using
products (EuP). Implementing Measures (IM) have been issued by the Commission setting out
requirements for washing machines. These come in the form of two separate pieces of draft
legislation: one setting minimum energy efficiency requirements for washing machines and the other
labelling and information provision requirements. This impact assessment (IA) sets out the
potential costs and benefits of implementing the washing machines measures according to
currently drafted requirements. As explained above, these IMs relate to two separate pieces of
draft legislation: one setting minimum energy efficiency requirements and the other revising existing
energy labelling requirements. Accordingly, this IA distinguishes between the cost and benefits
broadly attributable to these separate but related measures by assessing first those attributable to the
proposed EC MEPS alone and then considering them in conjunction with the effects of the proposed
revised labelling measures which are likely to be adopted in parallel.
This IA considers two alternative proposals for standards for washing machines (the European
Commission Proposed Implementing Measures and Defra's more ambitious proposals). As
mentioned above, the former considers MEPS both separately and combined with the European
Commission's proposed revision of the labelling scheme. Due to time constraints, the UK preferred
position only considers the MEPS implementing scenario (without taking the labelling scheme into
consideration). The latter scenario is nonetheless useful in informing the UK’s negotiating and voting
position. The costs and benefits presented here are considered against the counterfactual of
no implementation of the measure, and indeed for the EC and UK proposals where only MEPS are
modelled, it has only been possible to net off the effect of currently implemented labelling using an
end of model adjustment due to the time available.
When will the policy be reviewed to establish the actual costs and benefits and the achievement of the
desired effects?
The IM will be subject to review not later than 5 years after it enters into force. This planned review
will, however, not apply to the labelling requirements.
Ministerial Sign5off For SELECT STAGE Impact Assessments:
I have read the Impact Assessment and I am satisfied that, given the available
evidence, it represents a reasonable view of the likely costs, benefits and impact of
the leading options.
Signed by the responsible Minister:
.......................................................................................................... Date:
2Summary: Analysis & Evidence
Description: Setting of minimum standards and labelling for washing
machines through European Commission Regulation and Directive
implementing Directive 2005/32/EC
ANNUAL COSTS Description and scale of key monetised costs by ‘main
affected groups’
One5off (Transition) Yrs EC Proposals – MEPS & Labelling:
£ n/a
Costs to consumers of appliance purchases = £ 81,666,000
45,366,493
Increased CO2 emissions from HRE = £ 514,000
TOTAL COSTS: £82,180,220
[The costs projected to arise as a result of the minimum standards
element of this policy which represent 86% of changes in carbon
emissions are around £31.6m adjusted to reflect the effects of the
COSTS
current labelling scheme also included in the reference scenario (and
£12.7m as originally modelled, without).
The costs projected to arise attributable to labelling (introduced
alongside the MEPS) are around £50.6m adjusted to reflect the effects of
Average Annual Cost the current labelling scheme included in the reference scenario (and
(excluding one off) £69.5m as originally modelled, without).].
12 Total Cost (PV) £82m
£9m
Other key non5monetised costs by ‘main affected groups’
Manufacturers will be required to make changes to product documentation and labelling in order to
accommodate information requirements included in the EU Implementing Measures. These costs,
however, are likely to be negligible.
3ANNUAL BENEFITS Description and scale of key monetised benefits by ‘main
affected groups’
One5off Yrs
EC Proposals – MEPS & Labelling:
£ n/a
Total Value Energy Savings (net) = £ 149,881,000
Total Value EU ETS allowance savings (from CO2 emissions
savings) £ 34,214,000
Total value air quality damages avoided = £ 3,199,000
Total value of absolute reduction in required delivery of renewable
energy £ 42,504,000
TOTAL BENEFITS: £229,800,000
[The benefits projected to arise as a result of the minimum standards
BENEFITS
element of this policy which represent 86% of changes in carbon
emissions are around £197.3m adjusted to reflect the effects of the
current labelling scheme also included in the reference scenario (and
£192.8m as originally modelled, without).
The benefits projected to arise attributable to labelling (introduced
alongside the MEPS) are around £32.5m adjusted to reflect the effects of
Average Annual Benefit the current labelling scheme included in the reference scenario. (and
(excluding one off) £37m as originally modelled, without)].
£ 24m 12 Total Benefit (PV) £230m
Other key non5monetised benefits by ‘main affected groups’
Key non monetised benefits fall under the following categories:
• Post 2030 effects
• Increased security of energy supply.
• Global positive externalities.
• Development of machines capable of even greater efficiency.
• Effects on future washer dryers implementing measure.
These are set out in further detail in section 4 below.
4Key Assumptions/Sensitivities/Risks
The Market Transformation Programme (MTP) model developed to generate costs and benefits from
the EuP Implementing Measures has accounted for the impacts from other policies/initiatives also
focusing on energy efficiency. The figures presented are therefore considered to be net of the impacts
of these other policies.
The Implementing Measures apply to washing machines. They do not include washer dryers: these are
intended to be covered by a subsequent Implementing Measure. A future washer dryers measure is
likely to follow the line taken in the washing machines IM for the washing part of the cycle. This has not
been taken into consideration in this impact assessment.
The UK preferred position has been modelled without the proposed change in the formula. This
significantly underestimates the differences between the proposed policy scenarios. It does not,
however, impact the EC proposals which the UK will be voting on.
Both the UK and EC MEPS only scenarios have been modelled without taking into consideration the
current energy label. Whilst neither of them are realistic scenarios (since, from a political perspective, it
is clear that the UK proposal will not be adopted and the EC MEPS are unlikely to be accepted without
an agreement on a new label in place), this does not allow a fair comparison with the reference
scenario which includes an assumption that the current effects of labelling continue in the future. In the
time available for completing this impact assessment, it has not been possible to fully remodel the
scenarios and present all the result in this document. However, headline calculations have been
undertaken to allow the impact of the proposed revision of the EC label to be better assessed and these
are separately presented in this impact assessment.
A key feature of product policy is that costs are incurred in the year of purchase whereas the benefits
are realised in later years (net of the running costs). Therefore, in order to present a balanced picture
of both the costs and benefits of the Measure, the MTP model calculates the impact on the market up to
2020, and includes the impact of the use of the products bought up to 2020 for a further ten years (until
2030). It omits the costs and benefits associated with products bought beyond 2020, and also any
impacts of the pre 2021 that occur beyond 2030.
Price Base Time Period Net Benefit Range (NPV) NET BENEFIT (NPV Best estimate)
Year 2008 Years 12 £148m £ 148m
[MEPS only:£1655180m]
What is the geographic coverage of the policy/option? UK(but same in EU)
On what date will the policy be implemented? 1 year after
publication in Official
Journal – expected
mid 2009
Which organisation(s) will enforce the policy? Under review but
currently UK Trading
Standards
What is the total annual cost of enforcement for these organisations? Unknown but share of
c. £1m. Note this
amount is indicative
for ALL products being
considered under EuP
Implementing
Measures
Does enforcement comply with Hampton principles? Yes
Will implementation go beyond minimum EU requirements? No
What is the value of the proposed offsetting measure per year? £ N/A
What is the value of changes in greenhouse gas emissions? £ 34m
Will the proposal have a significant impact on competition? No
5Annual cost (£ £) per organisation Micro Small Medium Large
(excluding one off) Unknown Unknown Unknown Unknown
Are any of these organisations exempt? No No No No
Impact on Admin Burdens Baseline (2005 Prices) (Increase Decrease)
Increase of £ Unknown Decrease of £ Unknown Net Impact £ Unknown
Key: Annual costs and benefits: (Net) Present
Constant Prices Value
6Summary: Analysis & Evidence
Description: Setting of minimum standards and labelling for washing
machines through European Commission Regulation and Directive
implementing Directive 2005/32/EC
8
ANNUAL COSTS Description and scale of key monetised costs by ‘main
affected groups’
One5off (Transition) Yrs UK preferred position – MEPS
£ n/a Costs to manufacturers = £negligible
Costs to consumers of appliances £17,935,000
45,366,493
Costs from increased CO2 emissions due to extra heating: £640,000
TOTAL COSTS: £18,574,640
[This policy scenario has been modelled without either the proposed revision
of the EC label or the current energy label. Whilst this is not a realistic
scenario (since, from a political perspective, it is clear that the UK proposal
will not be adopted), this does not allow a fair comparison with the reference
scenario which includes an assumption that the current effects of labelling
Average Annual Cost continue in the future. This scenario is nonetheless useful in informing the
(excluding one off) UK's negotiating and voting position.]
12 Total Cost (PV) £19m
£2m
Other key non5monetised costs by ‘main affected groups’
Manufacturers will be required to make changes to product documentation and labelling in order to
accommodate information requirements included in the EU Implementing Measures. These costs,
however, are likely to be negligible.
Due to lack of available information and difficulty in modelling these in the time available, the costs arising as a
result of the UK's proposal to reduce tolerance levels may have been underestimated in this scenario.
7ANNUAL BENEFITS Description and scale of key monetised benefits by ‘main
affected groups’
One5off Yrs
UK preferred position – MEPS
£ n/a Total Value Energy Savings = £186,308,000
Total Value EU ETS allowance savings (from CO2 emissions
savings) £42,656,000
Total value air quality damages avoided = £3,981,000
Total value of absolute reduction in required delivery of renewable
energy £ 52,938,000
TOTAL BENEFITS: £285,883,896
[This policy scenario has been modelled without either the proposed
BENEFITS
revision of the EC label or the current energy label. Whilst this is not a
realistic scenario (since, from a political perspective, it is clear that the
UK proposal will not be adopted), this does not allow a fair comparison
with the reference scenario which includes an assumption that the
Average Annual Benefit current effects of labelling continue in the future. This scenario is
(excluding one off) nonetheless useful in informing the UK's negotiating and voting position.]
£30m 12 Total Benefit (PV) £286m
Other key non monetised benefits by ‘main affected groups’
Key non monetised benefits fall under the following categories:
• Post 2030 effects
• Increased security of energy supply.
• Global positive externalities.
• Development of machines capable of even greater efficiency.
• Effects on future washer dryers implementing measure.
These are set out in further detail in section 4 below.
8Key Assumptions/Sensitivities/Risks
The Market Transformation Programme (MTP) model developed to generate costs and benefits from
the EuP Implementing Measures has accounted for the impacts from other policies/initiatives also
focusing on energy efficiency. The figures presented are therefore considered to be net of the impacts
of these other policies, as presented in section 5 of this IA. However, since the market for washing
machines is currently saturated at A rated appliances, existing policies are not projected to have
significant impacts on the market.
The Implementing Measures apply to washing machines. They do not include washer dryers: these are
intended to be covered by a subsequent Implementing Measure. A future washer dryers measure is
likely to follow the line taken in the washing machines IM for the washing part of the cycle. This has not
been taken into consideration in this impact assessment.
The UK preferred position has been modelled without the proposed change in the formula. This
significantly underestimates the differences between the proposed policy scenarios. It does not,
however, impact the EC proposals which the UK will be voting on.
Both the UK and EC MEPS only scenarios have been modelled without taking into consideration the
current energy label. Whilst neither of them are realistic scenarios (since, from a political perspective, it
is clear that the UK proposal will not be adopted and the EC MEPS are unlikely to be accepted without
an agreement on a new label in place), this does not allow a fair comparison with the reference
scenario which includes an assumption that the current effects of labelling continue in the future. In the
time available for completing this impact assessment, it has not been possible to fully remodel the
scenarios and present all the result in this document. However, headline calculations have been
undertaken to allow the impact of the proposed revision of the EC label to be better assessed and these
are separately presented in this impact assessment.
A key feature of product policy is that costs are incurred in the year of purchase whereas the benefits
are realised in later years (net of the running costs). Therefore, in order to present a balanced picture
of both the costs and benefits of the Measure, the MTP model calculates the impact on the market up to
2020, and includes the impact of the use of the products bought up to 2020 for a further ten years (until
2030). It omits the costs and benefits associated with products bought beyond 2020, and also any
impacts of the pre 2021 that occur beyond 2030. Moreover, due to the difficulty in predicting the timing
and types of technological changes likely to occur, this IA does not take into consideration the long run
benefits due to possible technological innovation creating changes likely to produce more energy
efficient products at lower prices.
Price Base Time Period Net Benefit (NPV) NET BENEFIT (NPV Best estimate)
Year 2008 Years 12 £ 267m £ 267m
What is the geographic coverage of the policy/option? UK (but same in EU)
On what date will the policy be implemented? 1 year after
publication in Official
Journal – expected
mid 2009
Which organisation(s) will enforce the policy? Under review but
currently UK Trading
Standards
What is the total annual cost of enforcement for these organisations? Unknown but share of
c. £1m. Note this
amount is indicative
for ALL products being
considered under EuP
Implementing
Measures
Does enforcement comply with Hampton principles? Yes
Will implementation go beyond minimum EU requirements? No
What is the value of the proposed offsetting measure per year? £ N/A
9What is the value of changes in greenhouse gas emissions? £ 43m
Will the proposal have a significant impact on competition? No
Annual cost (£ £) per organisation Micro Small Medium Large
(excluding one off) Unknown Unknown Unknown Unknown
Are any of these organisations exempt? No No No No
Impact on Admin Burdens Baseline (2005 Prices) (Increase Decrease)
Increase of £ Unknown Decrease of £ Unknown Net Impact £ Unknown
Key: Annual costs and benefits: Constant Prices (Net) Present Value
10Evidence Base (for summary sheets)
1. Introduction/Purpose
The Framework Directive for the Eco design of Energy Using Products (EuP) was adopted in
July 2005 and implemented in the UK and other Member States (MS) in August 2007. EuP
establishes a framework by which the Commission and MS can bring forward measures to
establish minimum standards relating to the environmental impacts of products (e.g. their
energy consumption). The legal basis is Article 95 – Single Market.
The ability to establish minimum energy performance standards in this way is a key foundation
of the UK approach to reducing the carbon impacts of products in the UK. As a member of the
EU, the UK is bound to implement the Framework Directive and any Implementing Measures
made under it. Therefore, it can be argued that the UK has effectively ceded its legislative
competence in this policy area and so cannot take unilateral measures to take regulatory/
legislative action in this area.
The Implementing Measures addressed here apply to washing machines. Two linked measures
(ecodesign and labelling) are considered here. They set out:
• minimum washing machine appliances energy performance standards at different
implementation stages from 2010 to 2013 (Annex I, Ecodesign measures); and
• revised labelling requirements (Annex A1 to this document, extracted from Labelling
measures).
This Impact Assessment will enable the UK to assess the costs and benefits to the UK of the
measure as proposed by the European Commission and help inform our negotiating and voting
position during the forthcoming Regulatory Committee meeting and at any subsequent meetings.
The UK has fully participated in all EU discussions on this measure to date, using evidence
developed by the UK Market Transformation Programme (MTP) to inform discussions and to
influence the development of the proposal. The Commission proposal has now been formally
tabled for a vote of the relevant EU Regulatory Committee expected on 30/31 March 2009,
where the UK will need to be in a position to either support or oppose the measures.
Voting at the Committee is under the Qualified Majority Voting Procedure. If approved the
measures will go to the European Parliament for Scrutiny; if not approved they will then be
passed to the Council to resolve. If approved these measures will be subject to review no later
than [5] years after entry into force (around 2010).
2. Rationale for Intervention
According to the results of the EU Preparatory Study on washing machines, the primary
environmental impact of washing machines is related to energy consumption in the use phase.
The average annual energy consumption of washing machines has improved over the last
decade. The Preparatory Study, however, suggests that additional improvements are unlikely
without new policy measures. The continued use and sale of inefficient and high energy using
washing machines represents a market failure in the sense that whilst negative externalities
such as carbon emissions may be compensated for in market transactions, via the EU ETS, this
mechanism does not correct for all market failures e.g. where barriers to behaviour change still
persist (for example, those due to a lack of, or inequality in, information).
The analysis is consistent with the “third leg” of the Stern Report (the need to develop policies to
remove barriers to behaviour change such as a lack of reliable information, transaction costs,
and organisational and individual inertia) and provides the rationale for the Implementing
Measures which complements the EU ETS as described above.
11Moreover, the Energy White Paper, issued on the 23 May 2007 announced a renewed
commitment from the government to improve the performance of energy using products over
the next 10–20 years, with this including proposals for product standards and targets to phase
out the least efficient products.
3. Content of the proposed Implementing Measures
3.1 Efficacy and Functionality Requirements
The Implementing Measures addressed here apply to washing machines. They do not include
washer dryers: these are intended to be covered by a subsequent Implementing Measure.
Moreover, they are restricted to washing machines used for domestic use and do not apply to
industrial washing machines.
The minimum standards/ecodesign measure sets out in its Annex I (ecodesign requirements),
minimum washing machine performance standards at different implementation stages from
2010 to 2013 (expected to be promulgated as an EU Regulation directly applicable to all market
parties). These are accompanied by revised labelling requirements contained in a separate
implementing measure and reproduced in Annex 1 of this IA (expected to be promulgated as an
EU Directive requiring transposition into UK legislation).
In practice, the implications of the minimum standard requirements are that some lower
efficiency washing machines will be phased out by the regulations at different stages and some
models will be modified in order to comply whilst others will be allowed to remain on the market.
The revised labelling requirements provide information to consumers and incentives to
manufacturers to produce appliances with better energy efficiency than required by the
minimum standards. Competition on energy efficiency provides consumers with corresponding
increased choice. The potential impacts from the phase out and/or remodelling of some of these
products are described in section 4.
The Ecodesign Implementing Measure under the EuP Framework Directive sets out minimum
performance standards for washing machines, summarised in Table 3.1, alongside the
alternative ‘UK preferred position’. Both scenarios have been modelled for this Impact
Assessment. The implication of the requirements of the Implementing Measures for washing
machines are set out in Table 3.2 below. Table 3.2 demonstrates the proportion of products
assumed to be removed from the market by the minimum standards (ecodesign).
Washing machine efficiency is defined using the Energy Efficiency Index (EEI) which allows a
comparison of different appliances whilst taking into account machine capacity: the more
efficient the technology, the closer the value of EEI is to zero.
Table 3.1: Requirements of the Implementing Measures (IM)
2010 2012 2013 Formula and
(1 yr after IM) (3 yrs after IM) (4 yrs after IM) Tolerances
EC proposal Removal of all washing Removal of all washing The formula will be
position machines higher than EEI machines higher than changed into an annual
68 (current A class) EEI 59 (equivalent to energy performance
unofficial A+ 0.17 requirement and energy
New labelling scheme kWh/kg) efficiency verification
introduced tolerances lowered from
15% to 10%.
UK preferred Removal of all washing Removal of all washing The formula will be
position machines higher than EEI machines higher than EEI changed into an annual
68 (current A class) 59 (equivalent to unofficial energy performance
A+ 0.17 kWh/kg) requirement with a
New labelling scheme different mix of wash
introduced cycles and energy
efficiency verification
lowered to 5%.
12Table 3.2: Implications of requirements of the Implementing Measure (IM)
Proportion removed from the market Proportion removed from the market compared
compared to Ref scenario 2010 to Ref scenario 2013
1 year after IM 2010 4 years after IM 2013
1.64% 47.5%
The intention of the measure is to phase out less efficient washing machines in favour of
products with greater energy efficiency. A summary of the requirement levels in the
implementing measure and UK preferred position is set out in Table 3.3 below.
Table 3.3: EEI labelling requirement levels in the Implementing Measure (IM)
2008 – 2010 2010 onwards EEI
A3The remainder of the document is structured as follows:
Section 4 assesses the environmental, economic and social impacts at the three life cycle
phases of a product and presents the associated costs and benefits.
Section 5 considers the other policies and measures for the product area (which have been
included in the reference scenario).
Section 6 summarises the overall costs and benefits under both scenarios.
Finally, section 7 presents the Climate Change Policy Cost Effectiveness Indicator.
4. Identification of Potential Impacts
The Implementing Measures, in setting the requirements identified in section 3.1 above, seek to
improve the environmental performance of washing machines. Environmental performance of
products must be considered throughout their life cycle, at the component/product
manufacturing, usage and end of life phases. Table 4.1 below sets out the potential
environmental, economic and social impacts at each of the life cycle phases examined in
subsequent sections.
As explained above, these IMs come in the form of two separate pieces of draft legislation: one
setting minimum energy efficiency requirements for washing machines and the other revised
labelling and information provision requirements. Accordingly, for the proposed EC measures,
this IA distinguishes between the cost and benefits broadly attributable to these separate but
related measures by assessing first those attributable to the MEPS alone and then considering
them in conjunction with the effects of the Labelling measures which accompany them.
Moreover, MEPS are mandatory whereas the energy saving effects attributable to labelling will
depend on the actions of manufacturers and consumers in designing and purchasing products
that are more efficient than the mandatory minimum standards set out in the MEPS measure
improvements.
The main implication of the Ecodesign Implementing Measure will be to phase out some
lower efficiency washing machines and modify others to ensure that they comply with the new
requirements. Mandatory labelling requirements encourage manufacturers to produce
appliances which go beyond the minimum standards prescribed by the Ecodesign requirements.
They also provide consumers with additional information enabling them to take energy
consumption into consideration when purchasing a washing machine. Taken together, these
factors will result in a shift in the market towards energy efficient products above the minimum
standards/MEPS. Without revised labelling provisions, manufacturers have little incentive to
produce appliances with energy efficiencies which go beyond the required minimum standards.
Accordingly, energy savings which go beyond Ecodesign MEPS can be attributed to
labelling. It is, however, important to note that the two pieces of legislation are intrinsically
linked: without the MEPS, the labelling on its own would have different effects than those
it has when introduced alongside them.
The MEPS required by the Implementing Measures (Ecodesign requirements) will be
mandatory. The extent of their impact will depend on whether manufacturers of appliances
failing to meet the threshold choose to improve the energy efficiency of the products they sell or
are removed from the market. 2 As mentioned above, beyond providing information to
consumers, labelling requirements encourage manufacturers to produce appliances with energy
efficiencies above the minimum standard required. Whilst displaying the revised label on
products will be mandatory, improvements in energy efficiency beyond those prescribed
by the MEPS are voluntary. The effects of such improvements are attributed, in this impact
assessment, to the labelling requirements: they are not, however, mandatory effects since the
2
A third option of manufacturers illegally placing on the market appliances which do not meet the minimum
standards is possible but not considered in this Impact Assessment. This scenario of no attempt at compliance is
not considered to be likely.
14manufacturer has a choice as to whether or not to improve the energy efficiency of the
appliances.
Table 4.1: Areas of potential impacts
Impact Category
Life cycle stage
Environmental Economic Social
Material and energy use Costs of production for manufacturers. None foreseen.
requirements during Unlikely possibility of producers of non
manufacturing process compliant washing machines going out
anticipated to be minimal of business as current suppliers are
increase due to the measure. capable of meeting measures.
Availability of technology and limited
need for R&D – most technology
Component/Product required has already been
Manufacture demonstrated.
Other compliance issues e.g. labelling,
supply chain management, competitive
position.
Market surveillance and compliance
systems and processes.
Purchase cost of washing machines to
consumers.
Changes in CO2 emissions Changes in electricity consumption None foreseen
across UK. across UK due to less power
Changes in air quality as consumed.
result of less electricity being Changes in energy costs for washing
generated. machine users (consumers) resulting
Usage
from any changes in electricity
consumption.
Changes in the required delivery of
renewable energy as a result of
changes in electricity demands.
None foreseen None foreseen. Costs of disposal as None foreseen
End of life previously and take back system costs
attributed to WEEE Directive.
Certain benefits have not been taken into account in this impact assessment. The key non
monetised fall under the following categories:
• Post52030 effects – The MTP model accounts for all impacts from the use of washing machines
from the implementation of the measure up until 2030. In so doing, it models the impact on the
market up to 2020 and includes the impact of the use of these products up until 2030. Given that
the lifespan of washing machines ranges from approximately 10 to 14 years, this represents a
significant underestimation of the benefits.
• Increased security of supply – The UK requires less energy than it otherwise would as a result of
lower washing machine energy use.
• Global positive externalities – The regulation may also produce potentially wider benefits on a
global scale: (1) in particular in areas where there are no “caps” on carbon emissions. Washing
machines produced in or for the EU and sold in these areas, as well as those produced locally to
EU standards for the UK and EU markets and also used locally, will use less energy and produce
lower carbon emissions than would have otherwise been the case. (2) Adopting the IM will also
assist in enabling a longer run agenda shift towards tighter emission “caps” in the future.
• Development of machines capable of even greater energy efficiency – The combination of
labelling schemes and higher minimum standards is intended, among other, to produce
technological changes in the form of increased innovation and product development. The
Implementing Measure may promote technology developments including, for example the
development of load sensitive machines creating the possibility of further energy saving technology
in the future.
15• Effects on future washer5dryers implementing measure – washer dryers are intended to be
covered by a subsequent Implementing Measure. A future washer dryers measure is likely to
follow the line taken in the washing machines IM for the washing part of the cycle. (This benefit,
will, however, be monetised and attributed to the washer dryer implementing measure when such
measure is considered. Accordingly, it would not be appropriate since it would involve double
counting its impact, to attribute it directly to this measure).
The extent of impact under each of the policy options described below will be strongly
influenced by the decisions taken by consumers and manufacturers when choosing which
efficiency of washing machines they will purchase/produce. Shifts between the lower energy
classes (e.g. C to B) are more cost effective than those between the higher energy classes (e.g.
A to A1). A set of assumptions has been made to predict behaviour with regards to the level of
efficiency they will purchase. These assumptions are set out in Tables 4.2 for the following
policy options:
Reference scenario
All costs and benefits of the two scenarios below are measured relative to a reference scenario.
The reference scenario takes account of underlying trends in markets and technologies, and
accounts for the estimated impacts of historical and current policy measures. It indicates what
would happen in the market – e.g. predictions of changing consumer purchasing preferences if
no further measures were to come into place. It thereby provides a baseline from which to
measure the expected impacts of the IM. The reference scenario includes an assumption that
the current effects of labelling continue in the future.
EC proposed IM
This is considered to be the most likely policy scenario. It is based on the EC proposed IM as
set out in the latest version of the working documents and the consequential impacts of the IM
on manufacturer production/consumer purchasing behaviour (across appliances of all energy
efficiencies which will be available).
The EC proposed IM has been modelled both with and without the proposed revision of the EC
label. In the scenario modelled without the energy label (EC proposal – MEPS), the current
energy label has not been taken into consideration. Whilst this is not a realistic scenario (since,
from a political perspective, the EC MEPS will not be accepted without an agreement on a new
label in place), this does not allow a fair comparison with the reference scenario which includes
an assumption that the current effects of labelling continue in the future. In the time available for
completing this impact assessment, it has not been possible to fully remodel the scenario and
present all the result in this document. However, headline calculations have been undertaken
to allow the impact of the proposed revision of the EC label to be better assessed and these are
separately presented in this impact assessment.
UK preferred position
This presents a more ambitious proposal with minimum standards being introduced a year
earlier than proposed by the European Commission and a smaller allowance for uncertainty in
measurement (5%, as opposed to 10%). Consumers are still expected to purchase appliances
across the range of available efficiencies remaining on the market. The effects of the ecodesign
measures are considered alongside those of the European Commission's new proposed
labelling scheme. The UK has proposed a more ambitious and representative formula for the
calculation of the energy efficiency of appliances. This has, however, not been taken into
account in the model due to the complexity involved in modelling it.
The UK preferred position (UK preferred position – MEPS) has been modelled without either the
proposed revision of the EC label or the current energy label. Whilst this is not a realistic
scenario (since, from a political perspective, it is clear that the UK proposal will not be adopted),
this does not allow a fair comparison with the reference scenario which includes an assumption
16that the current effects of labelling continue in the future. In the time available for completing this
impact assessment, it has not been possible to fully remodel the scenario and present all the
result in this document. No headline results have been calculated or presented to compensate
for this due to the lesser importance of this scenario. This scenario is nonetheless useful in
informing the UK's negotiating and voting position.
Table 4.2: Summary of two IM scenarios modelled
Requirement EC IM UK preferred position
Effect of MEPS proposed in table 3.1. Effect of MEPS proposed in table 3.1.
(with second stage 4 years after IM). (with second stage 3 years after IM).
Minimum This would result in a reduction in supply This would result in a reduction in
standards and sales of less efficient models. supply and sales of less efficient
models.
The effect of a revised label in 2010 and The effect of a revised label in 2010
reclassification of the energy efficiency and reclassification of the energy
classes showing an uplift and definition efficiency classes showing an uplift
Labelling of better than A classes/ classes above and definition of better than A
the relevant MEPS at any given time. classes/ classes above the relevant
MEPS at any given time.
A correction has been made for the A correction has been made for a
reduction in the measurement allowance reduction in the measurement
Measurements from 15% to 10% for energy allowance from 15% to 5% for energy
measurements measurements to demonstrate
greater saving potential
Key modelling assumptions are as follows:
• There will be no change in consumer preferences for washing machine sizes or features;
• Manufacturers will respond to the measure by improving their machines to perform just
better than the new requirements and the new label class thresholds;
• Machine prices will continue to decrease, as before (1% p.a.) for energy performance
classes that already have a significant share on the UK market, and faster than that (2.5%
p.a.) for newly introduced products; and
• Under the influence of energy labelling, manufacturers will gradually increase the
production of machines in and better than the current A class.
It is also assumed that the Implementing Measure has a small effect on the market in 2009,
before it comes into force, since manufacturers have begun to adapt their products in
anticipation of the Implementing Measure coming into force.
Overview of the UK Market for Washing Machines
The UK washing machine market consists almost entirely of automatic front loading washing
machines (99.7%).3 Three main players manufacture 60% of washing machines on the UK
market under different brand names. These are:
• Indesit accounts for around 34% (under brands Hotpoint (22.5%) and Indesit (11.5%));
• BSH group (Bosch, Siemens and Neff brands) with market share of approximately 12.7%;
• Electrolux group (Electrolux, Zanussi, Tricity Bendix, AEG) with approximately 10%.
A number of smaller brands that make up the remaining 40% with the leading player, Indesit,
accounting for a significant share of the 20% of the the market which is made up of retailer
3
The exceptions are a few US style large capacity automatic top loaders some slim0line automatic top loaders (top loaders in
total are 0.3%) and a very few semi0automatic top loaders(exclusive models and own label products.
Two other brands each hold over 5% of the UK market, Beko and Hoover. The remaining 15%
of the UK market is made up of smaller brands including Whirlpool, Servis, Miele, Samsung, LG
etc.
By the time the IMs come into force, there will be no manufacturers of washing machines in the
UK. Manufacturing of these appliances has, over time, moved to lower cost manufacturing
countries. The two remaining washing machine production facilities in the UK (Indesit/Hotpoint
and Hoover) will close in the near future: Hotpoint announced closure on 3 March 20094 and
Hoover plans to close on 14 March 20095.
The majority of the washing machines supplied to the UK are manufactured in the rest of
Europe, particularly Italy and the lower cost manufacturing countries such as Poland and
Turkey. Some of the smaller brands of washing machine are not produced by the brand owner,
but bought from third party manufacturers who do not retail under their own brands. A small
number of machines come from Korea and China.
Washing machines in the UK are very similar to those found in other EU member state. The UK
exhibits a preference for appliances with slightly larger load sizes and higher spin speeds than
those found elsewhere. Note that approximately 15% of sales and ownership of washing
machines in the UK are washer driers, a product which is not covered by this EuP implementing
measure.
The supply chain for laundry appliances (washing machines and dryers) is dominated by the
electrical multiple stores which in 2007 took 48% of sales. These are followed by independent
retailers (17%), department stores (11%), internet (9%) and others including grocery retailers,
catalogue show rooms and kitchen specialists (15%). The situation may have changed slightly
since 2007, with a number of internet only electrical retailers (i.e Empiredirect, Miller Bros)
entering administration during 2008 (although their websites have since been bought by new or
existing incumbents), and the electrical multiple stores facing more competition from department
stores and grocery retailers.
The remaining sub sections in this section set out the potential costs and benefits to each
stakeholder group as they relate to the potential impacts identified in Table 4.1 above.
4.1 Component/Product Manufacture
4.1.1 Component/Product Manufacture – Environmental
The main implication of the Implementing Measure will be to phase out some lower efficiency
washing machines and modify others to ensure that they comply with the new requirements. In
order to adapt and meet the new standards some washing machines will require different
components. Changes may include increasing the drum size, decreasing the distance between
the inner and outer drum, optimising the control systems, improving insulation, the motor, the
water distribution system and/or the mechanical action of the appliance. Overall, the changes in
the material composition itself are, however, likely to be negligible.
4.1.2 Component/Product Manufacture – Economic
4.1.2.1 Making Products Compliant
The intention of the Implementing Measure is to make washing machines more energy efficient
and to phase out less energy efficient products moving towards products already in existence.
The main changes likely to occur are as described in section 4.1.1 above.
4
BBC. 4 March 2009, http://news.bbc.co.uk/1/hi/wales/7922445.stm
5
BBC, 6 March 2009, http://news.bbc.co.uk/1/hi/wales/south_east/7929423.stm
18In the time available for completing this Impact Assessment, it has been very difficult to obtain
any clear information on the potential costs to manufacturers of implementing the requirements
of the Implementing Measure. Technical experts contracted under the Market Transformation
Programme (MTP) have been unable to obtain information from industry.
The general impression is that there will be negligible effects on manufacturers’ profitability due
to the costs being passed onto consumers through higher prices paid for compliant products,
economies of scale and the fact that the market has already begun transition to producing
compliant products. A brief analysis of this is provided below.
Costs to Manufacturers
The availability of the more energy efficient washing machines means that the technological
solutions for manufacturers to comply with the measure are already available. Further
improvements in efficiency and ensuring compliance with the regulation requires some
technological changes, mainly as described in section 4.1.1 above, and there may be minimal
research and development (R&D) costs.
Lead times enable the market to minimise any cost implications from increased efficiency
regulations by integrating design and manufacturing changes into normal industrial cycles.
Future developments should be incorporated into the manufacturers usual 3 to 5 year design
platform for new ranges and are therefore not expected present an additional cost over normal
product improvement practices.
Past experience from similar regulation has shown 6 that leading white goods manufacturers
have been able to meet energy performance requirements at little or no additional cost. This is
due to the following reasons:
• There has been sufficient advanced notice to meet the requirements through normal re
design processes.
• Manufacturers have been innovative in the ways in which energy performance has been
improved.
• The costs of some components have fallen considerably. For example, electronic
controls have become very much more available and cheaper.
These reasons are considered to be equally applicable to the current proposals.
Over time the economies of scale are expected to drive down the cost of new components. Any
marginal costs incurred by manufacturers in the short term are expected to be passed on to the
consumers in the short term, but again past examples of similar regulations have not
demonstrated significant price increases to consumers.
Costs to Consumers
The main costs to consumers associated with the Implementing Measure will be related to the
difference in purchase costs of those washing machines which are to be phased out and those
that they select to replace them.
Generally it is assumed that manufacturers' costs for producing more efficient models will be
passed on to consumers, so any changes in the manufacturing cost as a result of the measure
will be reflected in the market price.
6
Do energy efficient appliance cost more? ECEEE report 2007 Mark Ellis International Energy Agency, France
19Currently the more efficient models tend to be offered at a premium price due to the brand
position or additional features that generally higher specification models demand. It is assumed
that as these more efficient models become more readily available the price differential between
current non compliant models will reduce as the compliant models take up more of the volume
sales and are also available in more standard formats with basic features.
In the 3rd quarter of 1999 MEPS were introduced in the UK. The energy consumption of
refrigerators and freezers fell markedly around this date. Taking into account the relevant
counterfactuals, the real average price of these types of equipment also declined substantially,
apparently unaffected by the introduction of MEPS7. In 1997, a voluntary agreement between
manufacturers and the European Commission resulted in a commitment to reduce energy
efficiency of washing machines. There is no information to suggest that this had an impact on
prices.
Table 4.3 a) sets out the assumed percentage sales, by energy label class, under the EC
proposal. Tables 4.3 b) below set out the prices used to predict the effects on purchase costs
for consumers. Cost and market share projections are based on GfK data, studies (including
the Preparatory Study and research by the Lawrence Berkley National Laboratory which
provides evidence to the US government on US standards setting), market information and
expert opinion. Due to the difficulty in predicting developments in future technologies, it is
difficult to accurately predict future costs and market shares. The estimates are, however,
based on expert interpretation of the best information available. Since costs are difficult to
predict, our experts have erred on the side of caution in their cost projections.
Table 4.3a) Percentage sales assumed for washing machines under the EC proposal (MEPS &
Labelling)
Proposed
classes A2 A1 A B C D
Current classes A+ A B C
2009 0 1 45 54 0 0
2010 0 2 53 45 0 0
2013 0 5 90 5 0 0
2020 3 12 85 0 0 0
Table 4.3b) Washing machine costs used in impact modelling for the IA
Current Energy Cost Cost Cost Cost
energy class excl excl excl excl
class 2010 VAT VAT VAT VAT
2009 2010 2013 2020
(£) (£) (£) (£)
A2 293
A1 278 275 267 249
A+ A 226 224 217 203
(unofficial)
A B 218 216 209 195
Table 4.4 sets out predictions for net costs to consumers (as generated by the impact modelling
underpinning this IA) resulting from the Implementing Measure under the two different scenarios.
7
Do energy efficient appliance cost more? ECEEE report 2007 Mark Ellis International Energy Agency, France
Schiellerup, 2001
20Under the EC proposal, the impact of the MEPS and MEPS & label have been set out
separately.
Table 4.4: Costs to Consumers (excl. VAT) from washing machine purchases resulting from
the IM (£2008)
EC proposal – MEPS & label UK preferred position 5
EC proposal 5 MEPS
MEPS
£ £ £
Year (Discounted @3.5%) (Discounted @3.5%) (Discounted @3.5%)
2009 70,100 1,217,600 70,100
2010 –
Stage 1 203,500 2,424,000 203,500
2011 41,800 3,681,900 41,800
2012 110,300 4,882,000 2,444,000
2013 –
Stage 2 1,599,900 7,213,400 4,687,400
2014 3,793,300 7,591,800 3,793,300
2015 2,952,800 8,215,900 2,952,800
2016 2,164,100 8,716,600 2,164,100
2017 1,415,800 9,046,500 1,415,800
2018 728,600 9,331,700 728,600
2019 86,400 9,527,500 86,400
2020 513,000 9,817,000 513,000
Total 12,293,000 81,666,000 17,935,000
TOTAL 12m 82m 18m
4.1.2.2 Revised Energy Labelling Requirements
The Implementing Measure sets out specific requirements regarding information on efficiency
performance, among other, that manufacturers will be obliged to supply. These are set out in
detail in the Annex A1 of this Impact Assessment. Information requirements are the same for all
scenarios. Some information is to be provided on the product itself, with other information to be
made available from manufacturer’s information (brochures) and on public access websites.
Manufacturers already provide certain information on products and websites, and will only incur
costs in re designing labelling and product information leaflets, as well as web re design costs.
These are not deemed to be significant costs in comparison with the volume of sales and costs
of the appliances.
4.1.2.3 Supply Chain Management and Competitive Position
It has not been possible to quantify what this effect will be on manufacturers of non compliant
products following the measures. However, it is expected that the effect will be consistent
across the industry since manufacturing is undertaken by a few key players who supply a
variety of appliances under different brand names and also exclusive brands/models to retailers.
The potential solutions for ensuring compliance with the Implementing Measure requirements
are likely to involve a range of the supply chain situations along the lines of those described in
section 4.1.1 above which provides more detail on supply chain issues associated with the
Implementing Measure. Expert opinion from the Market Transformation Programme suggests
that there is widespread availability of suppliers of the components required to ensure
compliance with the Implementing Measure, and in a competitive market, suggesting that there
is unlikely to be a shortage of required parts and that individual suppliers will not be able to
impose significantly higher prices due to higher demand. There are therefore unlikely to be any
significant competition issues associated with adoption of the Implementing Measure.
21The range of supply solutions and the number of companies able to provide the required
solutions also suggest that it will be relatively straightforward for manufacturers to adapt their
supply chains to the requirements of the Implementing Measure at minimal cost.
Competition Assessment
The proposal as it stands does not directly limit the number or range of suppliers to the UK
washing machines market. Companies would be free to enter and exit the market as previously,
with the only restriction being that those placing products on the market ensure that they are
compliant with the regulations.
It is unlikely that the Implementing Measures will significantly indirectly limit the number of
suppliers due to an increase in the costs of production, thereby discouraging companies from
entering or expanding into the market. The initial fixed costs of setting up a business (and
marginal costs of producing washing machines resulting in higher product prices) may be
marginally higher after the Implementing Measures comes into force. This is, however, unlikely
to have a significant impact on competition.
There are currently only around 5 major manufacturers 8 of washing machines remaining in
Europe, after much consolidation in the industry in the 1990s. New entrants from outside the EU
are developing a position in the market, however, competing on price and on quality and energy
performance, This suggests that the requirements may increase competition rather than
decrease it. It has not been possible, with the data available to quantify the overall effect in this
Impact Assessment.
It is not expected that the measure will affect the range of models on the market in terms of size
and value as the main manufacturers currently produce top and lower end specification models.
The measure will apply across the European Union in an equal manner and it is therefore
unlikely that UK firms will be affected any more than their competitors in other Member States.
The UK divisions of the main manufacturers tend to service the marketing and supply elements
of the business rather than R&D or manufacturing. The UK currently has a small washing
machine manufacturing presence with Indesit/Hotpoint and Hoover having small facilities in
Wales. These will soon close as companies seek to reduce output and costs in a period of
economic decline: Hotpoint announced closure on 3 March 20099 and Hoover plans to close on
14 March 200910. Firms operating within the market would still be likely to compete since there
is no indication that the measure will encourage firms to collude or share information regarding
pricing.
4.1.2.5 Market Surveillance and Compliance Systems and Processes
Under the Implementing Measure, manufacturers are obliged to carry out a conformity
assessment of any product which they place on the market in accordance with Article 8 of
Directive/2005/32/EC. They can choose between the internal design and control system or the
management system set out in Annexes IV and V of Directive 2005/32/EC in order to comply
with this requirement.
The internal design and control system requires that a technical documentation file is compiled
which contains specific information relating to the design and performance of the product
against the standards set down in the Implementing Measure. The latter system involves
generating and maintaining similar information and also establishing and documenting the
management control and design process.
8
BSH (Bosch, Siemens, Neff); Indesit (Hotpoint); Electrolux (Electrolux, Zanussi, AEG); Miele; Merloni. LG, and Arcelik
(Beko) are non0 EU based suppliers.
9
BBC. 4 March 2009, http://news.bbc.co.uk/1/hi/wales/7922445.stm
10
BBC, 6 March 2009, http://news.bbc.co.uk/1/hi/wales/south_east/7929423.stm
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