September 21, 2016

September 21, 2016 | Commentary on

Getting sucker punched by energy efficiency regulations

You have houseguests and you may not even know it. Indeed, they can be found in virtually every room of your home.

We’re referring to federal regulators. They’re determined to reduce your energy use, no matter how much it costs you or takes decisions out of your hands.

Take a look around your kitchen. Many appliances are regulated by the federal government, from the oven and refrigerator, down to the standby light on the microwave.

Step into other rooms, and even outdoors. TVs, showers, air conditioners and heaters, washers and dryers, swimming pools, toilets — these are just some of the other things the federal government regulates.

And it’s getting worse. The Department of Energy recently churned through a list of energy efficiency regulations. 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.

Now, energy efficiency isn’t a bad thing. In fact, it’s an important factor in many Americans’ purchasing decisions — because let’s face it, people love to save money. But there are several reasons why the federal government shouldn’t be mandating it:

Energy efficiency regulations reduce choices. Regulations prioritize efficiency over other preferences such as safety, size, performance, durability and cost. Americans weren’t without energy-efficient appliances before federal mandates. The DOE is essentially trying to make “better” decisions for people by limiting their options to “acceptable” 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 hit poor families the hardest.

Mandates hinder innovation. Government-created energy standards set an artificial target for manufacturers, rather than allowing the market to drive economic efficiency and what consumers want. Efficiency standards effectively take investment decisions away from the company, which stifles innovation that would yield better economic and environmental results.

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 shouldn’t be subsidized by the taxpayer or mandated by regulators.

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.

Americans also respond well to prices. When energy prices increase, whether at the meter or at the pump, families will conserve energy, either by buying more energy-efficient appliances or a more fuel efficient car.

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 consumers.

About the Author

Nicolas Loris Herbert and Joyce Morgan Fellow in Energy and Environmental Policy
Thomas A. Roe Institute for Economic Policy Studies

Katie Tubb Policy Analyst
Thomas A. Roe Institute for Economic Policy Studies

Originally distributed by the Tribune Content Agency.