One of the foundations of our energy efficiency policies in all OECD countries is our approach to minimum energy performance standards for appliances. One bill in Congress wants to eliminate all energy efficiency standards for appliances. Jay Hakes, an energy historian who has worked for three presidents on energy issues, writes on the Real Clear Energy website on these worrying developments.
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As we approach November 8, a bill to abolish the appliance efficiency programs at the U.S. Department of Energy illustrates that congressional candidates, including their party leaderships, need close scrutiny during this election season. It’s not just presidents who make energy policy.
The bill this year from Congressman Michael Bridges, Republican of Texas, would eliminates efficiency standards for appliances ranging from refrigerators to light bulbs and goes even further to end similar efforts at the state-level.
California first adopted efficiency standards in 1974. The early legislative roots of national standards go back to the Energy Policy and Conservation of 1975 following the Arab oil embargo. None were actually finalized by the Department of Energy, however, until passage of the National Appliance Conservation Act of 1987 led to rules the following year for dishwashers, clothes washers and clothes driers.
The Energy Independence and Security Act of 2007 provided the most recent broad-based congressional support for appliance standards, and DOE has now published regulations for more than 50 types of appliances and equipment.
Higher standards can be expected as new technologies are developed and reach prices that, though typically higher than for less efficient models, offer good paybacks with reduced energy costs. Innovations in direct drive motors, for example, will encourage updates for dishwashers, cloths driers, and ceiling fans. With less friction, these motors offer greatly improved energy efficiency, quieter performance, and longer durability.
The Bridges bill was scheduled for a hearing with the Energy and Power subcommittee in June and recently received a strong endorsement from the Heritage Foundation, a think tank with considerable clout in the House.
Heritage argues that efficiency standards unduly limit the choices of consumers and don’t do much good in any case because “the market” provides needed efficiency gains without government regulation.
There are occasional trade-offs for purchasers of new appliances, but, due to advances in technology and reductions in utility bills from upfront investments, these trade offs are relatively minor. Moreover, careful studies, such as those done by the policy-neutral U.S. Energy Information Administration, have consistently shown big impacts from federal and state mandates for appliance efficiency covering high-usage items like refrigerators and air conditioners, and cumulatively from rules that are now covering less energy-intensive equipment.
It would be hard to find experts who study the subject seriously who don’t agree that federal regulations have brought about major changes in refrigerator, lighting and other markets and that they have proved, on the whole, to be cost effective.
The Heritage study comes with the patina of economic analysis, but provides only a truncated view of how markets do and should operate. Markets work efficiently when prices reflect the true costs of services and goods being offered for sale. My garbage collection company could offer a lower price if it could just dump the refuse into the nearest river with no questions asked. But its price wouldn’t reflect the true cost of the service because it wouldn’t take into account the damage to the river. This is why classic market economics deals with “external costs” – which include impacts in areas such as the environment and national security (particularly in the case of imported oil).
Heritage – like many anti-government think tanks and contrary to good economics – proceeds as if there are no external costs to energy consumption, or (in the lingo of law professors) that “the commons” doesn’t matter. With this analytic neglect, it is possible to deem useless just about any government measure that protects the natural environment.
Climate skeptics have another analytic trick to dismiss the value of any government action that lowers emissions of greenhouse gases. They estimate the value of one particular measure in the United States against direct reductions in long-term global temperature rise. They ignore that multiple measures will be needed to have significant impacts, that standards such as those for appliances are periodically updated, and that actions by the United States encourages similar actions elsewhere. The American lifestyle often serves as a model for countries with rising incomes, and American efforts on climate provide leverage for international agreements.
The Heritage view of markets is also sorely limited by its assumption that consumers have perfect information. In the real world, people who buy new appliances are unlikely to understand the technologies involved, how to calculate long-term savings, or the broader implications of their choices. In my experience, sales personnel cannot answer these questions, so why should we expect a person who buys a refrigerator once a decade or a landlord whose tenants stay just a couple of years to opt for energy efficient models?
A serious attack on appliance standards would most likely come from a Paul Ryan-led House of Representatives. When Newt Gingrich held House leadership in the 1990s, his forces pushed through moratoria on the administration’s authority to write any new efficiency standards for automobiles and for appliances. These little remembered budget moves damaged American efforts to reduce oil imports and cut emissions of greenhouse gases – part of the reason the decade was such a failure on both measures.
Speaker Ryan’s current plan called “A Better Way” stresses the need to review and possibly eliminate existing regulations – hard to disagree with in its mostly generic form. The Republican Party platform of 2016 is more strident. It claims, “Over the last eight years, the Administration has triggered an avalanche of regulation that wreaks havoc across our economy and yields minimal environmental benefits.”
These clues to future intent are important because new legislation would not be needed to abolish efficiency standards if the Republicans control the House of Representatives but lose the White House. The Gingrich-era demonstrated that appropriations riders can be effective tools for stopping new efficiency regulations, even with a president of the other party.
With the Burgess bill in play, the Heritage Foundation offering strong support and a Republican platform leading the charge against environmental regulation, the Speaker of the House needs to be asked a bit less about his reactions to the latest comments of his party’s presidential nominee and more about what he want Congress to do in areas like appliance efficiency standards.