House of Commons - Environmental Audit Committee

Environmental Labelling - Environmental Audit Committee Contents

Memorandum by the Society of Motor Manufacturers and Traders (SMMT) Ltd

INTRODUCTION

The Society of Motor Manufacturers and Traders (SMMT) is the leading trade association for the UK automotive industry, providing expert advice and information to its members as well as to external organisations. It represents more than 500 member companies ranging from vehicle manufacturers, component and material suppliers to power train providers and design engineers. The motor industry is a crucial sector of the UK economy, generating a manufacturing turnover of £47 billion, contributing well over 10% of the UK's total exports and supporting around 800,000 jobs.

The SMMT welcomes the opportunity to contribute to the EAC inquiry on Environmental labelling. The automotive industry acknowledges the importance of environmental protection in relation to the manufacture and use of its products and recognises the need to balance economic progress with environmental care and social responsibility. More particularly, vehicle manufacturers are committed to the provision of simple, clear environmental information to assist the consumer in making an informed choice.

COMMENTS

Products requiring labelling

1. As early as 1 December 1999, the SMMT launched an industry-wide environmental label for new cars, thus underpinning the strategy of the industry in gaining full commitment to its targets to reducing carbon dioxide (CO2) levels of new passenger cars. Under this voluntary initiative environmental labels were on display at franchised dealerships throughout the UK to provide better and more consistent information for customers on the environmental performance of new cars.

2. In January 2000 the European Commission adopted Directive 1999/94/EC relating to the availability of consumer information on fuel economy and CO2 emissions in respect of the marketing of new passenger cars to implement these plans through regulations on environmental labelling of vehicles. The SMMT participated in the development of UK regulations implementing EU Directive 1999/94/EC.

3. A new colour-coded environment label for all new cars began appearing in UK car showrooms from July 2005, with most vehicle manufacturers having adopted the new label from 1 September 2005. The colour coded banding system for the label took into consideration the 6 Vehicle Excise Duty (VED) bandings, from "A to F". A new band "G" was introduced last year to reflect the 2006 Budget tax changes to VED.

What should be shown under a labelling scheme

4. Each category of product will require a label that contains information that enables consumers to make comparisons between similar products.

5. The success of the car label owes to a very careful consideration of the information provided, on the one hand, and to intuitive and user-friendly design on the other. The UK automotive industry has gone beyond the labelling requirements set at European level by Directive 1999/94/EC relating to the availability of consumer information on fuel economy and CO2 emissions in respect of the marketing of new passenger cars. Whereas the directive only requires the fuel economy label to contain consumer information regarding the official fuel consumption and the official specific emissions of CO2 of the car to which the label is attached, the UK label lists the environmental data for new cars including CO2 emissions and noise levels, regulated emissions standards, fuel consumption figures and annual road tax costs. The automotive industry believes that information on those elements is essential for potential car-buyers.

6. Clarity regarding the information displayed in the VED section was a concern for the industry since the inception of the environmental labelling scheme. When studying the different format options for the label back in 2004, the VED system had six bands, whereas the consumer "white goods" label, in which we based our initial design, had seven bands and popularly known as the "A to G" label. SMMT discussed then the advantages of adding an additional band to the VED system to make a seventh band, to follow the lines of the an already familiar energy efficiency label, vis-a"-vis keeping the "A" to "F" in line with the then existing 6-band VED system.

7. Finally the changes in the VED introduced in the 2006 Budget, improved the consistency of the labelling scheme by allowing the direct alignment of the VED bands with the equivalent bands of the A-G model. The gradations on the label are consistent with the CO2 bandings used for the VED hence, increasing its significance to consumers. This, at the same time, has reinforced the message given through the tax regime: lower carbon emissions = lower road tax.

8. The car label provides a guide to the relative fuel economy of the car in different driving conditions (Urban/Extra-urban/Combined cycle) and an estimated annual fuel costs based on the fuel consumption for the combined cycle driving conditions and an average fuel cost per litre. Details on how the estimated figure is obtained can be found immediately below in the label itself. Finally, the vehicle's engine capacity (cc) and transmission type are also shown because of its ability to affect its CO2 output. Most models offer a range of engines that vary in fuel efficiency and CO2 emissions.

Rationalising of labels

9. From our experience with the car environmental label, we believe a number of overarching conclusions can be drawn. The car label mirrors labels available for white goods, with which consumers are already familiar. The use of a standard label format ensures that the information is easy to understand and that comparisons between models/products are simple and accurate.

10. The colour scheme—from green to red through yellow/orange—incorporated with the traditional bar chart has proven to be immediately recognisable to customers. It provides clear and easy to understand information about the relative performance of the product.

11. As stated in the previous section, flexibility for the inclusion of additional environmental information might be desirable providing that it is not confusing for the consumer. However, it is questionable whether consumers can actually absorb a wealth of information, even when this is not confusing.

12. A labelling scheme agreed between Government and industry on a voluntary basis will ensure that products are labelled in a consistent manner, preventing a profusion of labels that might lead to contradictions and ultimately to consumer confusion.

13. Developments taking place at a European level might, ultimately, pave the way to regulations reflect the format of the existing label, as familiarisation with a standardised approach is important in developing consumer understanding.

Impact of environmental labelling on consumer behaviour

14. The car label is a very important part of the drive to better consumer education. Recent market surveys have ascertained its role as a valuable source of information and awareness rising of CO2 emissions in car buying habits. According to market surveys carried out on behalf of the LowCVP between March and April 2006, 83% of those surveyed said that they considered the label an important source of information and nearly two-thirds (65%) said it was important to them in helping them decide which make and model of car to buy. The survey showed that consumer awareness of the new label was highest amongst those who have recently bought a new car (42%) and slightly lower amongst those intending to buy a new car soon (38%).

15. Current and future regulatory developments in the field of green taxation are likely to have a significant effect on motoring costs. Therefore, information about emissions and VED/tax band payments can be expected to be high up in car buyers' priorities when thinking about which make and model of car to buy. In sum, environmental labels will become even more useful in the years to come.

16. Meanwhile, it is clear that the training and awareness of showroom sales staff is necessary to facilitate consumer assimilation of the labelling system and ultimately help them to make an informed decision when purchasing a vehicle. Display materials and leaflets have also proven to be effective to promote the label and draw attention to its merits. The SMMT in co-operation with the Low Carbon Vehicle Partnership, the VCA and the DfT has produced a simple and visual leaflet designed to support and inform on the introduction of the fuel economy label. Initiatives such as the one undertaken by Defra, A Shopper's Guide to Green Labels (a guide that explains the logos and labels commonly found on UK products an effort to help consumers understand what various green labels mean) serve this purpose, whilst it can also prove useful as a starting point towards the rationalisation of the labelling system.

Annex

Figure 1

ENERGY LABEL FOR WHITE GOODS