Annex 4 analytical methods

model description

general description

acronym: VM model

name: VM stock and policy scenario model

main purpose: To model environmental and socio-economic impacts of environmental product policy options, as part of preparatory and impact assessment studies for ecodesign and energy labelling and similar end-use instruments.

homepage: —

Developer and its nature

ownership: Third-party ownership (commercial companies, Member States, other organisations, …)

ownership additional info: The model has been developed by Viegand Maagøe A/S (‘VM’) for the European Commission. The European Commission can use all the results from the model.

is the model code open-source?: NO

Model structure and approach with any key assumptions, limitations and simplifications

details on model structure and approach

The VM stock and policy scenario model models the technical potential and associated socio-economic impacts for a variety of EU policy options including a baseline (no action) regarding resource efficiency improvement and emission abatement (including for greenhouse gases) for consumer and professional products. The resulting EU level scenarios typically cover a 1990 to 2050 time horizon.

The main modules in the model are:

Stock model: It contains the established base cases and sales data and average lifetimes from sources and/or estimates. The sales data will be extrapolated to cover historical years (typically from 1990, but may be earlier) and future years (typically to 2050). From the sales data and the average lifetimes, the stock for all base cases is calculated using a normal distribution of product lifetimes.
Scenario options and assumptions: It contains the scenario options with the requirements to be analysed and compared with the baseline scenario (no action i.e. Business As Usual (BAU))
Scenario development: It contains the modelling of each scenario regarding impact on sales, energy, environment, economy and employment. The scenario requirements are in most cases very specific to the products assessed and this module therefore needs to be adapted to these requirements. For each scenario, penetration rates for products placed on the market in the various energy and environmental performance classes are established the impact assessed in the model.
EcoReport Tool: The EcoReport Tool made available by the European Commission calculates the lifecycle impact (production, distribution, use and end of life) on material use and environmental impact based on the bill of materials (BOM) for one product unit and the total sales. The EcoReport Tool is used for each scenario and the net impact can be calculated as the difference between a policy scenario and the baseline scenario.

The model follows the Methodology for Ecodesign of Energy-related Products (MEErP) for preparatory and review studies in Ecodesign, which includes the data structure from the EcoReport Tool (https://ec.europa.eu/growth/industry/sustainability/ecodesign_en) as well as calculation procedures for the assessment of environmental and socio-economic impacts etc. It takes into account the relevant requirements of the European Commission’s Better Regulation impact assessment guidelines [1]. Generic (default) input parameters on historical and future rates are periodically updated and taken as much as possible from EU-related sources: (a) Eurostat for historical energy rates, conventions on calorific values per fuel, etc. (b) EEA (https://www.eea.europa.eu/ ) for air pollution conversion factors (NOx, SO2, PM, etc.), GWP-100 factors for electricity production (reworked), conversions following UNFCC (c) Using latest PRIMES reference scenario for energy price projections, (d) Energy Efficiency Directive amendment (EU)2018/2002. OJ L 328, 21.12.2018 used for primary energy factor (2.1 instead of 2.5 at transition).

Product-specific inputs are taken typically from ecodesign and energy labelling preparatory and review studies. The model is periodically updated following the results of new preparatory, review and IA studies.

For some product groups, model variants exist to handle product-specific analysis needs. Typically these variants contain additions to derive the input required by the main methodology, i.e. to derive average loads or efficiencies from detailed distributions, to correctly manage the shift in sales from less to more efficient base cases, to relate product sales to the stock of buildings and dwellings, to include more complex lifetime-distributions in the stock calculations, to simulate more detailed price-efficiency relationships, to add energy effects of related products, etc.

[1] https://ec.europa.eu/info/sites/info/files/better-regulation-guidelines-impact-assessment.pdf and https://ec.europa.eu/info/sites/info/files/better-regulation-guidelines-evaluation-fitness-checks.pdf

model inputs

Generic input parameters include:

Historical energy prices, typically from Eurostat
Future energy prices diversified per usage sector (residential, tertiary, industry, other) and type of energy, provided by the Commission
Electricity to primary energy conversion coefficient (CC=1/PEF)
Global warming potential for energy sources (GWP-100)
Rates (EUR/unit) for consumables (water, paper/filters/ detergents/toner/electrodes/etc. as appropriate)
Average maintenance/repair costs (EUR/year)
Business-sector-specific parameters: typical revenue-split OEM/industry/ wholesale/ retail/ installer/ VAT, average revenue per direct job.

For each new product analysed, the inputs are given for the EU (currently the EU27-2020) and the period 1990-2050 and adapted to the specific product and policy option analysed:

Definition of product and product-subtypes (‘Base Cases’)
Unit sales per base case, EU 1990-2050
Acquisition costs (in fixed euros, i.e. inflation-corrected for the reference year)
Service life of the product (average lifetime or lifetime array where needed)
Unit load, average user demand for product output
Unit environmental impact (energy efficiency, GHG, NOx, CO, PM emissions) of average new products sold per year over the 1990-2050 period
Annual unit consumable consumption (e.g. water, paper) and maintenance costs
Improvement environmental impact and associated costs, given as arrays of values for inter- and extrapolation, at least for baseline, Least Life Cycle Cost (LLCC) and Best Available Technology (BAT) products for the base cases assessed
Learning curve effect (percentage acquisition cost reduction per year after implementing policy option, up to previous level)
Penetration rates of environmentally optimised products for each year assessed

model outputs

Scenarios: the BAU (‘Business-As-Usual’) and a number of ECO scenarios
Derived variables and constants: Stock (volume installed), environmental impacts of stock (energy, emissions), installation, maintenance, auxiliary inputs and end-of-life unit costs
Consumer expenditure: Total acquisition and running costs and LCC (life cycle costs)
Business revenue: Total turnover for industry, wholesale, retail, and installation sectors
Social parameters: Direct employment (number of jobs)

Intended field of application

policy role

The model is designed for use in policy formulation, specifically for economic and technical characterisation of policy options, and for impact assessments. The model can also be used (after a review study) for post evaluation of the impacts of policies.

Impact types that can be assessed with the models include:

Environmental impacts

Energy efficiency (energy use per unit of performance)
Energy consumption
GHG emissions
Other air pollution (NOx)

Economic impacts

Sales (units, price)
Stock (units)
Acquisition costs
Running costs
Consumer expenditure
Revenues market actors

Social impacts

Employment (jobs)

policy areas

Energy
Environment
Consumers
Business and industry

Model transparency and quality assurance

Are uncertainties accounted for in your simulations?: YES - To a limited extent. Most uncertainty is typically not in the model but in the input data. At the low aggregation level of commercial, economic and environmental data for consumer and professional products the uncertainty is often high and the model is typically used to reach consensus amongst stakeholders of what are acceptable data.

Has the model undergone sensitivity analysis?: YES - As mentioned, sensitivity analyses with the model are used in preparatory studies and impact assessments to reach consensus. In the final reporting, sensitivity analysis may also be presented to give policy makers an impression of the uncertainty.

Has the model been published in peer review articles?: NO

Has the model formally undergone scientific review by a panel of international experts?: NO

Has model validation been done? Have model predictions been confronted with observed data (ex-post)?: YES - The model has undergone internal review by Viegand Maagøe staff where validations with other sources has been done as much as possible including by industry, experts, stakeholders etc.

To what extent do input data come from publicly available sources?: Entirely based on publicly available sources

Is the full model database as such available to external users?: NO - Data are directly visible in the model and published in the preparatory and review studies usually with their own public project website, where intermediate and final results (data inputs in the model) are given. The final reports of these studies stay available on the Commission website for the general public.

Have model results been presented in publicly available reports?: NO

Have output datasets been made publicly available?: NO - Follows the same availability rules as IAs from the Commission.

Is there any user friendly interface presenting model results that is accessible to the public?: NO

Has the model been documented in a publicly available dedicated report or a manual?: NO - Data and calculations are directly visible in the model

Intellectual property rights

Licence type: Non-Free Software licence

application to the impact assessment

Please note that in the annex 4 of the impact assessment report, the general description of the model (available in MIDAS) has to be complemented with the specific information on how the model has been applied in the impact assessment.

See Better Regulation Toolbox, tool #11 Format of the impact assessment report).