Memorandum submitted by Low Carbon Vehicle
Partnership
EXECUTIVE SUMMARY
The introduction of car labelling in the UK
is based upon the EU Directive 99/94/EC, relating to "Consumer
information on fuel economy and CO2 emissions in respect of the
marketing of new passenger cars" which was introduced in
2001. The UK initially introduced a labelling scheme which met
the minimum requirements of the Directive and was focused on the
provision of data. In 2004, a Government review of the labelling
scheme highlighted poor consumer understanding and use of the
numerical data which lead to the redesign and launch of a voluntary
new "colour-coded" car fuel efficiency label, the introduction
of which was brokered by the LowCVP, in 2005.
The key aspect of the label is that it is based
upon an absolute measure of CO2 of the vehicle relative to the
whole market rather than within a class of vehicles. The label
adopts features of the previously existing energy efficiency label
for white goods, which aided recognition and understanding by
consumers. Bands are linked to those for vehicle excise duty.
Fuel efficiency and running costs are reported to be more important
issues for car buyers and so the label gives significant weight
to this data along with CO2 emissions.
The scheme is voluntary and uptake is still
rising having been adopted by 86% of new car dealerships in a
recent survey. It is questionable whether there would be a greater
level of compliance if the label was mandated.
Awareness of the label by car buyers is growing:
in 2007, 44% of those who had either purchased a new car in the
last year or who were intending to purchase one in the coming
year were aware of the label. This is up 4% from 2006.
There is also evidence that car buyers would
find more comparative data useful in making new car purchasing
decisions—information now provided by a range of web-tools
including the DfT Act on CO2 site.
INTRODUCTION
This submission has been prepared by the Low
Carbon Vehicle Partnership (LowCVP) in response to the Environmental
Audit Committee's request for evidence regarding the proliferation
of environmental labels and whether this might lead to consumer
confusion, and undermine confidence in environmental labelling
in general.
The submission is based upon the LowCVP's experience
in brokering the UK's recently introduced new car fuel economy
label with the motor industry and our experience of monitoring
the label's roll-out and its impact on car buyers' awareness of
the label and environmental issues more generally.
The Low Carbon Vehicle Partnership
The LowCVP was established in 2003, as an outcome
of the Powering Future Vehicles Strategy, to help accelerate the
shift to low carbon vehicles and fuels in the UK. It aims to help
deliver carbon reduction targets and give commercial advantage
to UK business. The Partnership is a multi-stakeholder forum with
265 members including many leading car manufacturers and fuel
suppliers, major fleet operators, environmental and consumer groups,
academics and government departments.
The Partnership undertakes activities to both
encourage the supply and raise demand for low carbon vehicles
and fuels. This includes providing guidance on the priorities
to stimulate market development. Some of our recent key achievements
and principal current activities include:
— Brokering a voluntary agreement with
the UK motor industry to introduce colour-coded fuel economy labels
in all new car showrooms. On-going studies are evaluating the
effectiveness of the label through research into dealer and consumer
attitudes and implementation rates.
— Input to the development of the Renewable
Transport Fuels Obligation—focussed on the development of
sustainability assurance and carbon certification.
— Oversight of the establishment of
Cenex, a public-private centre of excellence for low carbon and
fuel cell technologies. The LowCVP is represented on the Board
of the company.
— The LowCVP Road Transport Challenge,
a process initiated by the Partnership to bring forward innovative
proposals for delivering carbon reductions from the road transport
sector. The best entries were presented at a conference in June
2006.
An important role of the LowCVP is to review
and advise in an independent and constructive way on the various
programmes and schemes run by Government to highlight policy gaps
and help ensure a coherent suite of interventions to achieve market
transformation.
History
In the UK, it has been a legal requirement for
fuel consumption information to be displayed on new cars in car
showrooms since 1983. In addition comparative data on other makes
and models is made available to potential car buyers based upon
the models listed in the official guide produced by the Vehicle
Certification Agency (VCA).
In December 1999, the European Commission approved
Directive 99/94/EC, relating to "Consumer information
on fuel economy and CO2 emissions in respect of the marketing
of new passenger cars" and this came into force on 18 January
2001. This Directive was part of a trio of policy approaches,
which includes fiscal measures, and an agreement by the motor
manufacturers in Europe, to reduce emissions of carbon dioxide
by technical improvements to new cars. The Directive 99/94/EC
allows each Member State to introduce its own schemes to provide
consumer information which can include labels, guides and posters.
The Directive specifies a minimum amount of information that is
required to be displayed based on test cycle information.
As part of the UK Government's response to the
Directive it commissioned MORI to examine car buyers' response
to both the existing UK label and possible alternative labels.
The MORI research considered the effectiveness of the original
new car fuel efficiency label, the extent to which purchasing
decisions were affected by information on CO2 emissions and by
other considerations such as fuel efficiency, and possible alternative
formats for the label, including an "A-F" style colour-coded
label. The main findings from the study were that:
— Although awareness is growing, environmental
factors are not yet high in most car buyers' list of priorities.
— Fuel efficiency is much more important
to most car buyers than any consideration about emissions, reflecting
the financial impact driving has on households. However, car owners'
focus on fuel efficiency can be used to help achieve the environmental
objective because of the direct link between fuel efficiency and
carbon dioxide emissions.
— In design of any possible labelling
scheme significant emphasis should be given to fuel economy and
running costs.
— That there was a desire for comparative
data to allow car buyers to identify more fuel efficient and lower-carbon
cars easily.
— The UK's original new car fuel efficiency
label was not popular with car buyers, mainly because it only
provided numerical information, and emphasised the car's CO2 emissions
per kilometre which was seen as a technical measure and was poorly
understood by car buyers.
— The A-F format, now familiar to consumers
from other consumer goods, provided a better means of relaying
information on car economy than the numerical data in use.
In response to this study (and LowCVP commissioned
research into car buying attitudes and behaviour)[6]
the LowCVP proposed the introduction of an A-F colour-coded label
to be displayed on all new cars in showrooms. Following intense
negotiations, under the auspices of LowCVP, between vehicle manufacturers
(through the SMMT) and environmental, consumer groups and fleet
organisations a voluntary agreement was reached on the design
and deployment of a label.
Label design
In negotiating the design of the label there
were two broad options: an absolute display comparing the performance
of all cars or comparative display of vehicles within a class
or segment system. An absolute approach was preferred because
it:
— More appropriately complemented the
Voluntary Agreement car companies had adopted to reduce new car
CO2 emissions to 140g/km by 2008-09.
— Related most directly to the Community's
objective of reducing CO2 emissions from cars.
— Was simple and easy for dealers operate
and for consumers to understand.
— Avoided the arbitrary and contentious
issues of defining the categories for an "in class"
system and all the related issues.
— Provided the most direct link with,
and helped reinforce the messages from, fiscal measures which
are linked to CO2 emissions, such as those used in the UK.
— Avoids the situation where an efficient
car but with high fuel consumption could appear as "red"
in terms of the fiscal system (VED), but "green" on
an "in class" labelling system—a mixed message
being conveyed to car buyers.
It was recognised that most car buyers selected
a vehicle from within a group of cars of a particular size (market
segment) but that there was sufficient variation in CO2 emissions
within a class or segment for an absolute measure to provide useful
comparative information for the car buyer. The need for comparative
information has been addressed recently by the DfT Act on CO2
campaign and introduction of league tables for vehicle segments
amongst other web tools and consumer information.
The label was launched in Guildford in July
2005. The banding adopted by the label employed the Vehicle Excise
Duty (VED) bands to provide a clear link between (albeit limited)
fiscal incentives and consumer information. A revision of the
VED bands to include Band G (vehicles over 225 g/km) necessitated
a redesign of the label in 2006.
The label also provided information on the annual
cost of fuel (for 12,000 miles) and VED as these were known to
be more important factors influencing car buyer behaviour than
environmental performance.
The lower part of the label contained the statutory
information required by the Directive to enable the label to meet
both consumer and legislative needs.
Implementation of the label is voluntary by
an agreement that it should be displayed in all car showrooms
of franchised SMMT dealers ensures its use is widespread. An agreement
between LowCVP and SMMT has defined an acceptable level of performance
that 75% of new cars on display in a car showroom at any time
should have the correct label displayed on or next to the vehicle.
This takes account of vehicles entering and leaving the showroom.
This target is currently subject to review.
Deploying the label
Since the label's launch, LowCVP has conducted
annual surveys to determine the extent to which the label has
been rolled out and is displayed in car showrooms and the levels
of awareness of car buyers. Two annual surveys to monitor the
deployment of the label across the UK were undertaken in the Spring
of 2006 and of 2007, in each case 400 new car dealerships were
visited across the UK.
In 2007, 86% of new car dealerships had adopted
the voluntary label scheme, up from 74% in 2006. Of the car dealerships
which have adopted the labelling scheme 62% are meeting the target
for acceptable performance. Fourteen brands have car dealerships
which are, overall, achieving the acceptable measure of performance,
four of these have achieved this level of performance for two
consecutive years. A small, and declining, number of brands have
an "unacceptable" level of performance.
The survey also examined how the label was used
by the car dealer staff in discussions with potential car buyers.
In the last survey LowCVP found that the label was referred to
and used extensively in a sales pitch by 28% of sales staff once
it was revealed that fuel consumption was important to the potential
car buyer. With regard to the information displayed on the label
it was the financial and fuel economy information which was referred
to most commonly.
Impact on car buyer behaviour
In a separate survey of about 2,000 recent and
prospective car buyers, awareness of the label has increased to
44% in 2007, up 4% points from the previous year. Awareness is
greater amongst people who have purchased a car recently rather
than those who intend to purchase in the next 12 months. In addition
awareness amongst company car drivers is higher which reflects
the greater financial incentives, through company car taxation,
for company car drivers to select a low CO2 car.
When asked how important the car label was in
terms of helping car buyers to choose their car 70% of respondents
said it was important in helping them to choose the make and model
of their car, with 50% saying it was fairly important and 20%
very important. However 85% of respondents said that comparative
fuel economy information would be important in influencing their
decision.
Next steps
The results of annual surveys are widely disseminated
and detailed results fed back to car manufacturers through SMMT.
This process is proving an effective means to raise use of the
label and identify issues.
LowCVP will continue to monitor deployment and
awareness of the label on an annual basis. We are also examining,
with DfT and the Retail Motor Industry Federation, the potential
to extend the scheme to nearly new vehicles.
The scheme shows a voluntary approach can be
successful, but does take a few years to reach a high level of
deployment. Success is also dependent upon a strong trade body
to encourage its members to comply with the voluntary agreement.
October 2007
6 http://www.lowcvp.org.uk/assets/reports/LowCVP%20car-buyer%20report%20-%20final%20report%20(non%20confidential).pdf Back
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