Innovation and diffusion through environmental regulation: the case of Danish refrigerators

Abstract

This study begins by looking at the retail success of class A, B and C energy- saving refrigerators in Denmark between 1994 and 1997, where their market share rose from 42% to around 90%. It also examines analogous innovation by the leading Danish manufacturer of refrigeration units, Gram, which has developed, among other things, equipment whose energy consumption is a further 40% lower. The innovation described here could, over ten years, reduce energy consumption by refrigerators without freezer compartment by a factor of ten. The hypothesis which immediately suggested itself was that both processes - diffusion and innovation - could be traced back to the rise in energy tax which made itself felt with the comprehensive environmentalist revision of taxation in 1994, and further gradual increases until 1998. The results of this study, however, show that any explanation requires a broader approach. At the very least, the explanation must include a mix of different instruments. The necessary condition for retail success of the best appliances was certainly the energy tax - which is levied according to CO2 emissions. Nevertheless, without the further instrument of labelling the energy consumption of appliances (1989, also issued as an EU guideline in 1994, coming into force for refrigerators in 1995), the effect would scarcely have been to be expected. In addition to this came training connected with the labelling for sales staff by the Energy Agency (1994). An instrument which also explains this retail success was the national and regional energy saving campaigns, in which the energy supply companies participated (1994 and 1995). Finally, the campaign also included an upgrade incentive of 200 DK for replacing an old appliance with one of the best models (1994). The Danish public’s widespread awareness of environmental and climate change issues must also be considered as a background variable. For the innovations at the Danish manufacturer Gram, state R&D; funding played a considerable part, implying the formation of innovation networks. Here also, the energy/ CO2 tax is a significant background condition, although the company itself did not consider it decisive. The EU’s Maximum Consumption Guideline, which will come into effect in Denmark in 1999, making existing energy-saving models standard, is also considered especially important. New markets were thus only accessible through further improvements, and retailers also had to ensure that inefficient appliances were removed early on from their product ranges and warehouses. The project has also borne methodological fruit. With respect to the broad spectrum of instruments which have come into effect, the significance and configuration of the participating actors and the cooperative, forward-looking policy style of the regulating authorities, the extended concept of a “regulatory framework” proves to be heuristically useful. The same applies for the bottom-up approach to policy evaluation, which affords the necessary openness for the breadth and dynamics of the influential factors. In the Danish case studied here, innovation follows diffusion. Both were brought about by an essentially strategic approach to environmental and climate protection policy, notable for its committed, but negotiated, development of aims (CO2 reduction, energy saving), its good technological policy infrastructure and the close networking between public and private sector actors. Of particular note was the breadth and flexibility in applying instruments, from indicative long-term planning, through energy taxation, subsidies and informal instruments, to efficiency standards.