What’s Wrong With the Government’s Mandating of Energy Efficiency
Katie Tubb / Nicolas Loris / Paul J. Larkin Jr. /
The Obama administration’s Department of Energy has churned out a list of energy efficiency regulations before the next administration. Just since June, the DOE has set or initiated standards for dehumidifiers, ceiling fans, battery chargers, and wine coolers.
At issue isn’t health or safety, or even unfair business practices. Through the DOE, the federal government is busying itself regulating how much energy the appliances Americans buy are allowed to use. Our recent backgrounder, “The Energy Efficiency Free Market Act: A Step Toward Real Energy Efficiency,” goes into more detail.
Take a look around your kitchen. Many of the appliances are also regulated by the federal government, from the oven and refrigerator, down to the standby light on the microwave. Step outside to other rooms and even outdoors. TVs, showers, air conditioners and heaters, washers and dryers, backyard swimming pools, toilets—these are just some of the other things regulated by the federal government.
Energy efficiency isn’t a bad thing. In fact, it’s an important factor in many Americans’ purchasing decisions. But there are a number of reasons why the federal government should not be mandating it:
- Energy efficiency regulations reduce choices. Regulations prioritize efficiency over other preferences like safety, size, performance, durability, and cost. Americans weren’t without energy-efficient appliances before. The Department of Energy is essentially trying to make “better” decisions for people by limiting their options to “acceptable,” energy-efficient ones.
- Regulations have very little impact on greenhouse gas emissions. Regardless of one’s opinion on global warming, these regulations have almost no impact. The DOE’s projected benefits from reducing greenhouse gas emissions total a paltry 1 percent.
- Savings benefit the rich, often at the expense of the poor. According to Sofie Miller at the George Washington University Regulatory Studies Center, DOE cost-benefit calculations best describe households making $160,844 or more. In reality, energy-efficiency costs and benefits vary widely depending on income, education, and race. Higher energy costs impact poor families the most.
- Mandates hinder innovation. Announcing the Energy Efficiency Free Market Act, Rep. Michael Burgess, R-Texas, explained that “when the government sets the efficiency standard for a product, that often becomes the ceiling … when the market drives the standard, there’s no limit to how fast and how aggressive manufacturers will be when consumers demand more efficient and better made products.”
- Savings promised by standards are misleading. Considering the costs and benefits, Americans are essentially paying to have their choices restricted. There have also been problems with how the DOE estimates upfront costs, payback horizons, overstated energy savings, and future energy prices. For example, the DOE assumed in a washing machine proposed rule that households used washers 392 times per year—more than seven times per week—meaning most families would never reap the benefits of more efficient, but more expensive, washers.
- Standards easily play into corporate welfare. Companies lobby for regulations and subsidies that most benefit them, in an attempt to squeeze out competition from smaller companies. If these products save customers as much as advertised, they should not be subsidized by the taxpayer.
But if the government didn’t set mandates, wouldn’t companies stop producing energy-efficient products? Refrigerators, which the DOE points to as a success story, are just one example of why there’s no reason to worry:
The Standards Program has driven remarkable gains in the energy efficiency of household appliances and equipment, resulting in large energy bill savings. For example, today, the typical new refrigerator uses one-quarter the energy than in 1973—despite offering 20 percent more storage capacity and being available at half the retail cost.
One problem: The first federal efficiency standards for refrigerators did not go into effect until 1990. Refrigerator manufacturers were improving energy use and design for nearly two decades before the government got involved.
As customers, Americans put importance on energy efficiency without the government nudging. And the free market is only too willing to supply.
Over the years, the DOE—empowered by Congress through the Energy Policy Conservation Act of 1975—has quietly expanded the list of products it regulates for energy efficiency. Congress should eliminate all mandatory efficiency regulations and leave these decisions to state governments and American consumers.