A challenge for integrating economic consumer replacement decision framework with environmental analysis: A case study of "eco-point" system in Japan

Consumer durables penetrate widely in our living and a variety of resources and energy are used for producing or using them. In this sense, they are one of the important factors for environmental concerns such as global... [ view full abstract ]

Consumer durables penetrate widely in our living and a variety of resources and energy are used for producing or using them. In this sense, they are one of the important factors for environmental concerns such as global warming, waste management, and resources policy. To discuss environmental burdens from consumer durables, product lifetime is a key factor and most proceeding studies about environmental burdens from consumer durables used average lifetime or lifetime distribution to describe it. These product lifetime models do not contain consumer behavior so those proceeding studies cannot evaluate the effects of economic policies such as subsidy and carbon tax on the　environmental burdens. On the other hand, the product replacement models based on maximum utility theory have been developed in economics and marketing fields. While these models include consumer behavior theory, these studies focused on only improving the accuracy and have not conducted practical analysis using the models. It is a beneficial attempt to apply the product replacement models developed in economics and marketing fields to practical analysis in environmental research. 

This study tried to apply the product replacement models developed in economics and marketing fields into environmental analysis and industrial ecology. As a case study, we analyzed the effects of the “home appliance eco-point” system in Japan on life-cycle CO₂ emissions of air conditioners. This system was implemented by Japanese government from May 2009 to March 2011 for penetrating high energy-efficient consumer durables.

We constructed a product replacement model of air conditioners based on Rust (1987). We firstly expressed utility flows when keeping owned products and replacing products by replacement cost and running cost. Using the utility flows, we obtained the value functions of both decisions following Bellman equation and Markov decision process. Finally, we applied the value functions to the logit model and estimated a replacement model of air conditioners by maximum likelihood estimation.

We also used this replacement decision model to analyze the effects of “home appliance eco-point” system in Japan on reducing life-cycle CO₂ emissions of air conditioners. As to air conditioners, eco-points equal to 10,000 Japanese yen were granted when consumers replaced their air conditioners to high energy-efficient ones through the system. We expressed this system by subtracting 10,000 Japanese yen from the replacement cost and analyzed the changes in consumer replacement behavior and life-cycle CO₂ emission of air conditioners for discussing the reduction effects of the system on life-cycle CO₂ emissions of air conditioners. This study can quantitatively show the impacts of economic policies for reducing environmental burden such as subsidy and carbon tax, which the proceeding studies could have not analyze, and enable us to evaluate policies more practically. Moreover, this study used product lifetime model which have been developed in economic and marketing fields and include consumer theory, so this study can consider the consumer’s dynamism. The proposed model in this study can be beneficial for not only environmental analysis, but also industrial ecology, product design, and environmental economics.