Can We Regulate Our Way to Energy Efficiency? Product Standards as Climate Policy

Article excerpt

INTRODUCTION .......... 1632

I. A REGULATORY STRATEGY FOR THE CLIMATE .......... 1636

A. Product Standards - Objectives and Regulatory Design ..........1637

B. Standards in Practice: The United States and the European Union ..........1642

1. Efficiency Regulation in the United States ..........1642

2. Efficiency Regulation in the European Union ..........1646

II. COMPARING PRODUCT REGULATION TO ALTERNATIVE CLIMATE POLICIES ..........1650

A. Energy Market Failures and Barriers ..........1650

B. Standards Versus a Labeling-Only Strategy for Efficiency ..........1654

C. Standards Versus an Energy -Pricing Strategy for Efficie ncy ..........1656

D. Avoiding the Pitfalls of Regulation ..........1660

III. THE TASK AHEAD ..........1667

A. The Future Technical Potential for Product Standards ..........1667

B. The Political Viability of Product Standards ..........1670

CONCLUSION ..........1677

INTRODUCTION

Alternative energy supplies get most of the attention in the climate change debate, but reducing energy demand should be the dominant strategy for cutting global greenhouse gas emissions. Dozens of technical studies have concluded that improving the efficiency of automobiles, furnaces, motors, consumer electronics, lighting, air conditioners, and other energy-using products is the cheapest and fastest way to achieve dramatic reductions in greenhouse gas emissions.1 In fact, avoiding catastrophic global heating largely depends on how fast energy efficient technology can be deployed over the next few decades.2

Energy efficiency can be promoted through multiple policies, such as energy taxes, a cap-and-trade system, tax credits for efficient appliances, product labeling, increased government research and development ("R&D"), or direct regulatory limits on the energy consumption of products.

Of these policies, the regulatory option seems most intrusive, as it limits consumer choice and requires complex governmental mandates that affect product design. While the other policies nudge consumers in the direction of efficiency, regulation commands energy efficient choices by forcing inefficient products off the market.

In this Article, I demonstrate that the regulatory strategy for energy efficiency is working. Although information disclosure, financial incentives, and other softer alternatives to regulation play a vital role in reducing energy demand, these should be viewed as complements to efficiency regulation, rather than replacements. The regulatory approach has led to substantial cost and energy savings in the past, it has enjoyed bipartisan political support, and it targets products and behaviors that are difficult to address through other policy tools. Given the politics of climate change in the United States, which make federal carbon taxes or a cap-and-trade system infeasible, the regulatory option should be expanded, not abandoned.

The regulatory strategy I focus on in this Article is minimum energy performance standards ("MEPS") for products3 - efficiency benchmarks that manufacturers must meet to sell products in a jurisdiction. I do not discuss automobile fuel efficiency standards in this Article, as that topic has been amply covered elsewhere.4 Most Americans are familiar with MEPS for products other than automobiles because of refrigerator and air conditioner efficiency standards enacted in the 1980s.

In recent years, governments have dramatically expanded their reliance on MEPS. Beyond refrigeration and air conditioning, governments are now implementing MEPS for dozens of product categories, including residential and commercial appliances, consumer electronics, lighting, motors, and other energy -using equipment - all of which have become major contributors to global greenhouse gas emissions. As a result, households are being enlisted as participants in national climate policy.

The international surge in product regulation is a response to rising energy consumption in consumer products and commercial equipment. …