Economic consequences of the Home Appliance Eco-Point Program in Japan: a dynamic discrete choice approach

ABSTRACT

This study combined a dynamic discrete choice model for air conditioner replacement decisions with an inter-industry model in order to evaluate the economic impact of Japan’s Home Appliance Eco-Point Program, an appliance replacement program that was in effect from May 2009 to March 2011. Focusing on air conditioners produced from 1995 to 1999 and replaced during the period from 2005 to 2013, we found that the eco-point program increased replacement probabilities by 1.5% to 1.9% in 2009. Moreover, the program produced an additional output of 31,337 million yen and a total value added of 21,259 million yen. However, the benefit–cost ratio – determined by dividing the increase in value added by the monetary value of the points awarded for appliance replacement – was only 0.68. From a cost-benefit perspective, the program can be judged not to have been an effective policy measure.

KEYWORDS:

• Accelerating replacement program
• consumer durables
• cost-benefit analysis
• dynamic discrete choice model (DDCM)

JEL CLASSIFICATION:

• C67
• C61
• L68

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplementary Material

Supplemental data for this article can be accessed here.

Notes

¹ The penetration rate for air conditioners in Japan is approximately 90%, indicating that roughly 90% of Japanese homes have air conditioners (Cabinet Office of Japan, 2018). Sakamoto et al. (2014) reported that 12% of the households in the Hokkaido region use air conditioners for cooling and that more than 60% of the households in other regions of Japan use air conditioners for cooling. It should be noted that between 1981 and 2010, the average temperature in Hokkaido was approximately 22°C during the hottest month (August) and that the Hokkaido region was colder than all the other regions of Japan (Japan Meteorological Agency). Sakamoto et al. (2014) also reported that households in nearly all regions of Japan, with the exception of the Hokkaido and Tohoku regions, use air conditioners for heating more than any other type of heating equipment. According to the Agency for Natural Resources and Energy, Japan (2010), air conditioners were the fourth largest source of electricity consumption in the household sector and accounted for 7.4% of annual household electricity use in 2009. Air conditioners – the target in this study – are thus an important durable product in Japan.

² The price of electricity in Japan varies according to time of use and the conditions of the contract. For the Tokyo Electric Power Company, which supplies electricity to the Kanto region and a part of the Chubu region, there are three main types of price regimes. In the first regime, the electricity price in yen per kWh increases as the total amount of electricity use increases; in the second, the total electricity cost remains constant unless the total amount of monthly electricity use exceeds a certain volume; in the third price regime, the electricity price at night is cheaper than that during the day. In this study, our focus was primarily on capturing the macro effects of the Home Appliance Eco-Point Program on the economy of Japan. We, therefore, used the average electricity price. If we consider the above differences in electricity price regimes, we would need more detailed microdata regarding electricity use conditions. Although we were unable to collect such detailed data for this study, we hope to include differences in electricity use cost under these various price regimes in the near future.

Additional information

Funding

This research was funded by a research grant from the Kyushu University Platform of Inter/Transdisciplinary Energy Research (Q-PIT), Grant-in-Aid for Scientific Research (A) [26241031]; and Grant-in-Aid for Scientific Research (B) [26281056] from the Ministry of Education, Culture, Sports, Science and Technology of Japan.