Fragmented EU Car Labels: How To Achieve Consumer-Friendly Standardisation and Transparency?

Abstract

We examine the EU car labelling regime for CO2 emissions and fuel efficiency under Directive 1999/94/EC and document strongly diverging national labelling methodologies. Findings from behavioural economics show that labels help consumers make informed decisions if they are well-designed, comprehensible, and informative about hidden costs. However, when comparing the national car labelling methodologies, we find stark inconsistencies, which undermines the EU’s effort to decarbonise the car sector. Using new vehicle registration data across the EU, we document heterogeneous distributions of the car labels if the national labelling methodologies were applied to the cars registered in the individual countries and in the entire EU. To solve these discrepancies, we assess the EU energy efficiency labelling regime for electric appliances under Regulation (EU) 2017/1369 as a labelling role model and discuss proposals for standardising the EU car labels. We conclude that the future car label would preferably include two distinct coloured scales with absolute labelling thresholds for both CO2 emissions and fuel efficiency.

Keywords: Car Labels, CO2 Emissions, Energy Efficiency, Fuel Economy, Directive 1999/94/EC, Sustainable Transport

JEL Classification: R40, K30, K32, L92, L98, Q48, Q58