Incentives & Bulk Procurement
Accelerating market saturation of high-quality, high-efficiency products & reducing market risk
Innovative, high-efficiency and high-quality products often face barriers to market entry, from price to lack of product recognition. Market transformation tools like incentives and bulk procurement help bring these products to market at an accelerated pace.
Development organizations, policymakers, and others want to provide a clear path to market for manufacturers of more sustainable products, thereby reducing manufacturer risk. Other market stakeholders – from governments to consumers – enjoy lower energy costs, higher levels of energy service, and quality of life and environmental benefits.
CLASP designs financial incentives to buyers up and down the supply chain, bulk procurement programs and advanced commitments for public and private stakeholders alike, in both developing and advanced product markets. Individual program design depends on economy size, market readiness, infrastructure and capacity, and participating partners. These programs are generally designed as specific interventions for a limited time period, with the goal of shifting the market towards better products.
Advancing Markets with Incentives
Financial incentives reduce the cost burden of high-efficiency and high-quality products. They can be targeted at many different market stakeholders – distributors, retailers, consumers, or even manufacturers – depending on the issues identified in the market and the goals of the program.
The most common government incentives are consumer rebates or tax credits. Standards, labels, and awards programs are an important foundation for incentive programs because they provide a verified baseline for judging enhanced performance and establishing appropriate incentives. Incentive programs can use product listings available from the standard, labeling, or awards program to establish which products meet higher efficiency and quality levels and to identify the models qualified to receive incentives.
Sometimes incentives are provided to manufacturers or builders to encourage them to supply better products with the assumption (or requirement) that at least some of the incentive will be reflected in a lower price to the final buyer.
Additionally, some countries reduce import duties or sales taxes on energy-efficient equipment or parts, sometimes distinguishing between locally produced or assembled products vs imported ones. Again, the performance testing and rating information developed for standards, labels, or awards programs can provide the basis for differential tax policies.
Saturating Markets with Bulk Procurement
Bulk procurement programs encourage governments, private businesses, and other large organizations to buy large quantities of products at a lower price, often replacing older, carbon-intensive technologies with newer, energy-efficient and higher quality models. Buying directly on a mass scale reduces risk for manufacturers, especially when advanced commitments are made. Buyers clubs, where groups of buyers with similar objectives (e.g. aid agencies, governments, or businesses) all commit to bulk quantities, also have the effect of reducing market risk. Bulk purchases ensure higher rates of market penetration for high quality products, so deliver benefits more quickly.