Do Energy-Efficient Appliances Encourage Individuals to Consume More Energy?
A blogger, commenting on my recent editorial about the wasteful nature of Missouri’s green tax rebate program, recently expressed skepticism that promoting the purchase of energy-efficient appliances may also encourage individuals to consume more energy.
In the second part of his post, he links to an article on Slate that cites a study analyzing electricity consumption patterns in the wake of government policy intended to “nudge” consumers into using less energy. First and foremost, this study is not relevant to my argument. In the case of Missouri’s green rebate program, which is what I discussed in my commentary, individuals receive a cash rebate when they buy energy-efficient appliances. The study cited in the Slate article looks at a case in which the electricity company simply sent its customers a home energy report that included charts and a list of tips on how to improve energy efficiency. The program considered by this study included neither a financial incentive, nor an upgraded appliance. The only conclusion that I would feel comfortable making from the study is that pamphlets do little to influence individual behavior. The study suffers from additional shortcomings, as well. For example, I disagree that a change of 1 percent or 3 percent is significant. This variation could be attributable to multiple other variables, such as a change in the price of energy or a seasonal change in the weather. The study also did not prove that the customers it identified as “liberals” reduced their energy consumption as a result of the home energy reports. Again, this reduction could have stemmed from any variety of other factors. Furthermore, because the percentage change and the sample size are both so small, a completely different result could conceivably be selected from the raw data.
According to a report published by Peter Huber and Mark Mills at the Manhattan Institute, the claim that we can meet future energy demand through conservation and efficiency is a myth. They provide evidence that, despite dramatic gains in energy-efficiency, aggregate energy consumption has increased over history:
The American economy has experienced massive efficiency gains: for each unit of energy, we produce more than twice as much GDP today than we did in 1950. Yet during that period of time, our national total energy consumption has tripled. Paradoxically, when it comes to energy, the more we save, the more we consume. […]
“Efficiency fails to curb demand because it lets more people do more, and do it faster—and more/more/faster invariably swamps all the efficiency gains,” Peter Huber and Mark Mills state in The Bottomless Well. Or, as Huber characterized this “efficiency paradox” in a 2001 Forbes column: “More efficient jet engines … cheaper tickets … more passengers … more jets in the air.” The same holds true for cars, lightbulbs, power plants, and everything else that uses energy.
Furthermore, an economic moral hazard problem is often associated with buying green products. Energy-efficient appliances make doing dishes and laundry cheaper, which subsequently encourages individuals to use these appliances more frequently than they had before. Increases in energy efficiency mean that there is a decreased need for the existing energy supply, which leads to a reduction in the cost of energy, consequently shifting the demand curve for energy to the right. Similarly, there is evidence that owning a fuel-efficient car encourages people to drive more. A person could become less inclined to turn off light bulbs when they are more efficient, just as a person could be more inclined to run his washing machine or his dishwasher when it is not full.