Is there a price premium for energy efficiency labels? Evidence from the Introduction of a Label in Korea*

- The study examines the price premium from Korea's Energy Efficiency Grade Label.
- Difference-in-difference and fixed-effects models are used to address potential unobserved heterogeneity and to capture the net effect of the label by controlling for time and product differences.
- The result suggests that any price premium does not result from the energy efficiency label itself; instead, energy-efficient products already have higher prices before the introduction of the energy efficiency label.
- The finding turns our attention to the importance of careful design of labeling programs.

This study examines the price premium from Korea's Energy Efficiency Grade Label. The Korean government recently began energy certification of televisions, providing a setting to analyze a possible price effect of the new label. Hedonic regression results seem to show that a price premium exists for products with the Energy Efficiency Grade Label. However, potential unobserved heterogeneity is a concern. Difference-in-difference and fixed-effects models are used to capture the net effect of the label by controlling for time and product differences. The results suggest that any price premium does not result from the energy efficiency label itself. Instead, energy-efficient products already had higher prices before the introduction of the energy efficiency label. The finding turns our attention to the importance of careful design of labeling programs.