Environmental awareness and energy efficiency: The informational role of energy labels

This paper investigates, both theoretically and empirically, how building energy labels promote energy efficiency by enhancing environmental awareness.We first develop a microeconomic model predicting that information on energy performance increases households' environmental awareness and, in turn, induces them to reduce energy consumption and invest in more energy-efficient technologies, with responses varying by income level. Second, we conduct a two-stage econometric analysis to test our theoretical predictions. We first construct a latent measure of environmental awareness using a Latent Variable Model (LVM), where awareness is inferred from observable indicators such as building and appliance energy labels and retrofitting behavior. We then examine the causal relationship between awareness and energy consumption using a Propensity Score Matching (PSM) approach that compares households with high versus low levels of latent environmental awareness.The results show that households living in higher energy-rated dwellings exhibit significantly lower energy expenditures relative to income, whereas no significant behavioral response is observed among households residing in poorly rated dwellings.These findings suggest that while energy labels can enhance awareness and influence behavior, their effectiveness is constrained by structural factors such as financial capacity. Thus, informational policies must be complemented by structural and financial measures in order to unlock the full potential of energy efficiency strategies.