Aren’t Energy Consumers Selfish Enough Already?

COMMENTARY Environment

Aren’t Energy Consumers Selfish Enough Already?

Mar 27, 2012 2 min read

Former Senior Research Fellow, Labor Markets and Trade

David Kreutzer researched and wrote about labor markets and trade.

While the folks in flyover country often view Washington as a power-crazed den of self-serving money grubbers, the view from Washington is quite different. Here, our leaders worry that the folks in the hinterlands aren’t nearly venal and self-serving enough.

Not to worry. Lawmakers and bureaucrats have a ready solution to this perceived problem: simply adopt policies that force consumers to save. This is particularly true in energy policy.

Take the Corporate Average Fuel Economy (CAFE) Standard, for example. It requires manufacturers to sell (thereby forcing consumers to buy) a mix of vehicles whose weighted average economy meets a minimum miles-per-gallon standard. Invariably, it’s promoted as a benefit to consumers because it will reduce their fuel expenses.

Here, Washington assumes the smaller, less safe and frequently more expensive cars are just what you would want if only you thought about it. After all, doesn’t everyone know it’s more important to save gas money than to haul the kids and their friends to soccer games and Scout trips? Say, “Thank you, Congress.”

Washington’s desire to make us line our pockets reaches into our kitchens and laundry rooms, too. Here, appliance efficiency standards cut our energy bills. It’s also why your old $300 dishwasher that cleaned in 75 minutes is replaced by one that costs $500 and takes two to three hours.

But think of the savings! Without the efficiency mandates, you’d spend an additional 8 cents on hot water for each load. What a great trade-off that is: Hundreds of dollars upfront, additional repair bills, waiting an extra hour or more for every load - and you save 8 cents. Get with the program, Homer; those pennies add up.

Reps. David B. McKinley, West Virginia Republican, and Peter Welch, Vermont Democrat, recently proposed legislation that falls into a slightly different category. Their bill would provide a tax credit to people who save money on their home energy bills. The apparent logic is that people aren’t willing to lower their bills unless the government pays them to do so.

It is at about this point in the discussion when, exasperated by objections from free-market types like myself, the Washington Problem Solvers say, “OK, Mr. No, what’s your policy prescription for promoting energy efficiency?”

A free-market solution assumes that consumers - not bureaucrats - are best situated to choose the technologies that make the most sense for them. In short, that they are just as clever - and maybe even as self-serving - as the people they send to Washington.

But there’s a certain protocol you must follow in proposing policy in Washington. Its name needs to have an appealing acronym based on poorly fitted words or cringe-inducing syntax.

So here, in its entirety, is our energy-efficiency bill:

The Momentous Act to Reduce Konsumers’ Energy Tabs (MARKET) Act.

Preamble: Federal energy-efficiency programs typically tie the rebate/subsidy to the amount spent on efficiency or to meeting certain efficiency thresholds. They do not tie the reward to actual dollars saved. To remedy this weakness, The MARKET Act provides dollar-for-dollar benefits tied directly to actual savings.

Section 1. Rebate for equipment upgrades, weatherization projects, thermostat adjustments and any other purchase or behavioral change.

Any equipment upgrade, weatherization project, thermostat adjustment, hybrid-car purchase or other purchase or behavioral change that demonstrates actual savings will be rewarded under the MARKET.

(a) For every dollar a household or business saves on any of its energy bills (including, but not limited to, transportation fuel and electricity) it will save a dollar on that energy bill.

i. For example, if a homeowner puts a timer on the shower and gets the family to take shorter showers and reduce the monthly hot-water bill by $20, the family will save $20 on its monthly hot-water bill. There will be no paperwork to fill out; homeowners will receive the savings directly and immediately from their energy suppliers in the form of a lower bill.

The end.

David Kreutzer is a Research Fellow in Energy Economics and Climate Change at the Heritage Foundation.

First appeared in The Washington Times