Effects of product replacement programs on climate change

Product replacement programs promote the replacement of durable goods such as automobiles, home appliances and houses with new energy-efficient products using financial incentives such as subsidies. Many countries have implemented such programs to reduce environmental loads. These programs affect the point in time at which the decision to replace a product is made (and acted on) by consumers, which, in turn, influences the overall effectiveness of the program. Thus, in order to improve the policy design of these replacement programs, it is necessary to consider the mechanism of the consumer product replacement decision. This study examines the effects of the Japanese Home Appliance Eco-Point Program on the timing of household air conditioner replacements and the resulting GHG emission reduction effects and assesses the program's cost-effectiveness using a dynamic discrete choice model and an input–output model. We found that the program increased the air conditioner replacement rate by 1.5%–1.9% and reduced GHG emissions by 28,516 tCO ₂ eq. However, the cost per ton of CO ₂ eq reduced was approximately 978 US dollars, which is quite high compared to the GHG emission reduction costs of other programs. We conclude that the Home Appliance Eco-Point Program as constituted in 2009–2010 was not a cost-effective means to reduce GHG emissions and that appropriate policy coordination needs to be conducted in order to improve the cost-effectiveness of such programs in the future.