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Are More Government Regulations Really Necessary?

Are More Government Regulations Really Necessary?

Third blog in our series on the Colorado Green New Deal

After reading House Bill 1231, one cannot help but wonder, do the members of our state Legislature really have enough time to micromanage businesses and individuals?

The stated intent of 1231 is to “protect consumers and businesses against manufacturers who would otherwise sell, in Colorado, less efficient appliances that they cannot sell in states that have higher standards.” In other words, if one of the listed products in the bill doesn’t meet the standard ascribed to it, then it can’t be sold here.

Writing for the Cato Institute, Kenneth W. Costello identified a key assumption behind these types of energy efficient mandates. Costello explained that policymakers often fault consumers for the slow adoption of energy efficient appliances, assuming that when people fail to purchase a product that should save money, then “consumers are incapable of making the correct calculations or else make decisions contrary to their self-interest.” It’s a consumer behavioral problem.

1231 assumes this culpability. It’s the Democrats and two Republicans’ attempt to “right” the market and steer people toward their preferred energy-efficient products, which are supposed to save money while remaining equivalent to or better that their older counterparts.

Both the Senate and House passed 1231, and once it is signed into law, the new requirements will be applied to a variety of products in three phases. However, while all three will impact consumer choice, because of available data and research, we’re choosing to focus on the first and second phase to illustrate how assuming a consumer behavioral problem is flawed.

Phase 1
The first phase will begin after January 1, 2020, when lamps (light bulbs) that do not meet an efficiency standard of 45 lumens per watt will be outlawed. To put this in perspective, a traditional 100-watt incandescent light bulb does not meet the standard because it has an efficiency rating of around 16 lumens per watt.

Writing in 2018, the Association of Energy Service Professionals published an article stating there is neither a halogen nor incandescent light bulb on the market that meets the 45 lumen per watt standard. Thus, after January 1, 2020, the government will effectively force consumers to purchase LED bulbs, which have a longer life but are also more expensive.

Lighting companies, such as General Electric and Phillips still produce and sell traditional incandescent light bulbs, and the more efficient halogen incandescent bulb still accounts for 27.4 percent of the market.

Statistics indicate, however, that LED bulbs are growing in popularity, which lighting companies attribute to growing consumer demand for them. They have pushed back against increasing or introducing new efficiency mandates, but unsurprisingly, this is a belief not shared by everyone. Like the Colorado General Assembly, the American Council for an Energy-Efficient Economy (ACEEE) want to see LED bulbs as the default choice and believes the government, not the market, should ensure this happens.

Phase 2
1231’s second phase prohibits the sale of, leasing of, or renting of a product on the four-page list that fails to meet the standard ascribed to it.

Beginning in 2021, commercial dishwashers, fryers, food holding cabinets, and steam cookers that are not compliant with the Federal Energy Star Program cannot be sold in Colorado.

Because of the types of appliances listed in phase two, it seems Democrats are concerned commercial entities are incapable, or unwilling to make energy related, cost-saving decisions.

However, even in 2013, Senator Jeanne Shaheen, a Democrat from New Hampshire, cited evidence to the contrary, stating:

High Liner Foods in Portsmouth is an energy-intensive seafood processing plant that requires a substantial amount of energy to operate successfully. At one point, the 180,000 square foot facility consumed roughly 2 megawatts of power at any given time during normal operations. By installing efficient lighting, new boilers and various demand response techniques, the company is making great strides in reducing energy consumption, which allows them to expand their business footprint in the state.

A Colorado example is Evraz Rocky Mountain Steel. Evraz decided to remain and expand its operations in Colorado only because it and Xcel Energy agreed to a long-term electricity contract with “mutually acceptable rates.”

There are other examples, but these two show companies are at least capable of analyzing and making decisions based on the costs associated with their energy consumption. If they weren’t, Evraz would not have negotiated a power purchase agreement with Xcel, and High Liner Foods would not have installed efficient lighting as well as implemented new techniques to reduce its energy demand.

In attempting to negate the assumption that consumer behavioral problems require the government to implement and enforce efficiency standards, we have discussed that LED light bulbs are growing in popularity naturally, and that businesses actually do make decisions based on their energy consumption and the related costs.

But additional concerns have to be addressed. For instance, could the low adoption of energy efficient appliances be attributable to their poor performance? Customers do routinely complain about them taking longer, and it’s been reported that they don’t always get the job done.

Or maybe, people are concerned that spending 30 dollars on a LED light bulb won’t pay off. After all, life ratings are established in a lab, which is a considerably different setting than a living room, and it’s certainly plausible that the bulb will fall and break or overheat and stop working.

It’s paramount, therefore, to at least consider that the low adoption of energy efficient products and appliances may be attributable to something other than naïve consumers.

Nevertheless, some members of the General Assembly disagree, adhering to the assumption that people routinely act against their self-interest when they choose not to purchase energy efficient products. They believe it’s their role as legislators to intervene and correct this behavior.

Seldom considered is that this is a faulty assumption – negated by consumers choosing these products without government mandates and that there are other, more reasonable explanations for their low market penetration.

Yes, the legislative session is over, but stay tuned, because there’s more to the Colorado Green New Deal.


Colorado Green New Deal blog series:
Introduction (Blog Post 1), Blog Post 2,Blog Post 4, Blog Post 5, Blog Post 6, Conclusion