Appliance Efficiency Standards: The Right Choice

Energy efficiency used to be a bipartisan cause, supported even by Ronald Reagan, who signed into law the first state energy efficiency standards as governor of California (1974), and later, as president, signed the National Appliance Energy Conservation Act of 1987.

No longer. On Tuesday, five conservative members of the Senate Energy and Natural Resources Committee voted (unsuccessfully) to kill new energy standards, saying they were inconsistent with the goals of a free society. “We are having our choices taken away,” complained Rep. Rand Paul, R-Ky., who cited the writings of his namesake, libertarian novelist Ayn Rand.

But a study last year by Lucas Davis, an assistant professor at U.C. Berkeley’s Haas School of Business, suggests to the contrary that appliance standards are a valuable corrective to a lack of consumer choice faced by a large class of Americans: renters.

Most apartments come with kitchen appliances, lighting, heating and air conditioning already provided. Few tenants are inclined to junk a working stove or dishwasher just to buy a more efficient model if they know they might be moving again in a couple of years.

Their choice of appliances is theoretical only, not real.

Landlords, for their part, have little incentive to spend extra on the most efficient appliances. After all, they generally don’t pay the utility bills.

Economists say that common split—between those who make the decisions and those who pay the bills—explains why, in the real world, people don’t always make apparently rational investments in long-term energy savings.

Davis found strong empirical evidence for this “landlord-tenant problem.” In nearly every category of appliances, homeowners—who don’t face such split incentives—buy more efficient products than tenants get stuck with, controlling for other household characteristics such as income.

Almost a quarter of homeowners use EnergyStar-rated refrigerators, for example, compared to just one-sixth of renters. Eighteen percent of homeowners use efficient dishwashers, compared to only 7 percent of renters. For clothes washers, the figures are 23 and 12 percent, respectively. For lighting, more than four of every 10 homeowners use efficient bulbs compared to one-third of tenants.

Nationwide, if renters had the same mix of energy-efficient appliances as homeowners, they would save nearly $100 million a year on energy and reduce annual carbon emissions by 166,000 tons, Davis reported.

Other experts estimate that national appliance efficiency standards cut total U.S. electricity consumption by 7 percent in 2010, saving billions of dollars in costs and untold environmental harm. New standards proposed by the Obama administration in 2009 could save another 4 percent of electricity consumption by 2030, and achieve dramatic reductions in natural gas consumption as well.

If you’re a homeowner, landlord or tenant, be sure to check out rebates from PG&E on energy-efficient appliances so you can save money and do your part for the environment.

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