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Research at Vanderbilt

New federal energy regulations flawed: Vanderbilt researcher

by | Posted on Tuesday, Jul. 17, 2012 — 11:39 AM

(image by Anthony Storo)

(image by Anthony Storo)

NASHVILLE, Tenn. – New and proposed federal energy-efficient standards for automobiles, clothes dryers, air conditioners and light bulbs won’t be effective, researchers from Vanderbilt University and the Brookings Institution concluded.

W. Kip Viscusi (Vanderbilt University)

W. Kip Viscusi (Vanderbilt University)

“Recent regulatory analyses demonstrate that the current energy-efficiency initiatives do very little to address climate change,” said Brookings Senior Fellow Ted Gayer and W. Kip Viscusi, University Distinguished Professor of Law, Economics and Management at Vanderbilt Law School. “Rather than squander society resources on more ineffective policy efforts, a more productive approach would be to search for policy options that offer greater potential for making a serious dent in greenhouse-gas emissions.”

The new standards are based on the assumption that “consumers and, in some cases, firms are incapable of making rational decisions and that regulatory policy should be governed by the myopic objective of energy efficiency to the exclusion of other product attributes,” according to the report.

The report, “Overriding Consumer Preferences with Energy Regulations,” was published by the Mercatus Center at George Mason University. It examines the economic reasoning for recent federal energy regulations proposed or enacted by the Department of Energy, the Department of Transportation and the Environmental Protection Agency.

Agency claims that these policies serve as greenhouse gas policies misrepresent what the regulations will accomplish, Gayer and Viscusi found.

“Energy-efficiency standards provide a valuable case study of how agencies can be blinded by parochial interests to assume not only that their mandate trumps all other concerns but also that economic actors outside of the agency are completely incapable of making sound decisions,” Gayer and Viscusi said in the report. “The assumption that the world outside the agency is irrational is a direct consequence of the agencies’ view that energy efficiency is always the paramount product attribute and that choices made on any other basis must be fundamentally flawed.”

Uniform regulations fail to take into account the different needs of different consumers, such as people shopping for cars, according to the report.

“In recognition of these differences, the market often generates highly differentiated products, such as very basic automobiles, which serve as a functional form of transportation, to luxury cars,” the report said.

“Homogenizing these choices through … regulations has the effect of imposing costs on those at the low-quality end of the spectrum and depriving those at the high end of product attributes they value.”

Federal officials could better spend their time on informational campaigns and more limited policy intervention, believe Viscusi and Gayer.

Contact:
Jim Patterson, (615) 322-NEWS
jim.patterson@vanderbilt.edu