Regulation Failure: Gov’t Energy Mandates DON’T WORK
Energy efficiency is a great way to help the environment and save money, but government mandates have largely failed to produce any results, according to a study by a former economic adviser to President Obama.
Georgetown economist Arik Levinson, who served on the White House Council of Economic Advisors in 2010, wanted to find out if energy efficiency mandates actually worked the way they were sold. So, he looked at California’s 1970s era law to reduce home energy use by 80 percent, but what he found was that the law didn’t deliver on its promise.
“There is no evidence that homes constructed since California instituted its building energy codes use less electricity today than homes built before the codes came into effect.,” Levinson wrote in a working paper published by the National Bureau of Economic Research.
California’s landmark 1974 energy efficiency law allowed bureaucrats to impose energy efficiency mandates for insulation, climate control systems and building designs in order to reduce the amount of energy people used in their homes. This law has inspired other states, but most importantly, the federal government.
Levinson said that a big portion of his time at the White House was devoted to analyzing energy efficiency and fuel economy laws put into place by federal agencies. He added that the EPA’s proposed rule to regulate emissions from existing power plants relies heavily on energy efficiency mandates to reduce energy use and generate savings.
““[T]he Environmental Protection Agency gets about half of its future carbon reductions from things like energy efficiency and reductions in consumer energy consumption,” Levinson told the Freakonomics blog. “But it’s silent about how we would go about measuring those savings. And the savings are really hard, really difficult to measure.”
“We can’t take the engineers’ estimates as gospel because there’s mounting evidence that engineering forecasts of how much will be saved as a consequence of energy-efficiency mandates are way overstated,” he added.
Most of the discussion around U.S. environmental policy has revolved around issues like power plant emissions and oil drilling, but the federal government has put out lots of rules aimed at making appliances and buildings more energy efficient.
The Energy Department recently tightened energy standards for commercial ice machines and gas-fired hearths — aka fake fireplaces — to reduce carbon dioxide emissions and tackle global warming. In 2014 alone the DOE issued 10 energy efficiency rules for equipment, appliances and buildings.
“As part of President Obama’s climate action plan, the Energy Department set an ambitious goal of finalizing 10 energy efficiency standards this year, and with the new efficiency standards for general service fluorescent lamps and automatic commercial ice makers, we have reached that goal,” said Energy Secretary Ernest Moniz.
DOE says that tightened standards for ice makers will save Americans $600 million in the next 30 years and reduce carbon dioxide emissions by 4 million metric tons. Add in tightened fluorescent lamp standards,and energy efficiency rules are projected to save Americans $78 billion through 2080 and reduce carbon dioxide emissions by 435 million metric tons.
“The Energy Department is committed to building on this progress, and will continue to develop standards that move the U.S. closer to a low-carbon future,” Moniz said.
Levinson said he supports energy efficiency laws and building codes, but questions the savings they will actually generate. He says that taxing the source of the pollution is a much more effective method of reducing it.
“The problem with energy efficiency for cars or for homes or for air conditioners is that energy efficiency makes doing the activities that cause the problems in the first place cheaper,” he told Freakonomics. “So if we put a tax on gasoline, or a tax on electricity that made emitting carbon more costly, people might respond in a couple of ways. They might drive less, they might invest in more energy-efficient vehicles, engineers might innovate to develop more energy-efficient technologies.”
“And that would be energy efficiency responding to the- what is the true price of driving and what is the true price of using air conditioning,” he said. “But if you try to short-circuit that mechanism, and mandate the energy efficiency directly, without the rise in price, then all you’ve done is make it less expensive for people to drive and make it less expensive for people to use their air conditioners and it makes sense that people do more of both.”
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