While Washington’s political elites use popular buzzwords like government “efficiency” standards, these are only an attempt to place a positive spin on expensive regulations. In their recent plan, the Obama White House proposed even higher efficiency standards. While increasing the Department of Energy (DOE) and Environmental Protection Agency (EPA) appliance efficiency standards sound promising, the policy is riddled with problems. Three myths of appliance efficiency Standards have been propagated but do not withstand rigorous scrutiny. By exposing these myths, it will become clear why the president and Congress should eliminate these appliance standards entirely and allow for improved technology and consumer demand to drive the market production of appliances.
Myth 1: Appliance Standards Encourages Technological Progress
The DOE appliance efficiency standards and the EPA’s Energy Star program have claimed to promote better and cleaner technology but the resulting technologies falls far short of their promises.
The washing machine is a prime example of how government regulation eliminated a cheap and efficient technology from the market for consumers. In 1996, top-loader washing machine was a staple of clothes washing in American homes with high ratings across the board from Consumer Reports. Government efficiency standards, however, were the beginning of the end of a stellar American brand as front-loaders met federal standards better than top-loaders.
Yet, when the standard was implemented, Americans quickly discovered issues with front-loaders. According to numerous consumer complaints in the years after the regulation took effect (2007), front loaders tended to be expensive, often have mold problems, and are difficult to add laundry too after you start washing. Consumer Reports concluded in 2007, “For the first time in years, we can’t call any washer a Best Buy.” Government regulations effectively eliminated good technology from the market and artificially imposed other types of technology through the standards.
Myth 2: Increase Good Consumer Choices
Government bureaucrats have reduced consumer choice by targeting the most unlikely appliances, creating a running joke in Washington. For almost twenty years, toilets have been required to reduce of water per flush (gpf) in the name of water conservation. The low flush toilets have a much higher cost but also fail to get the job done. These toilets clog more often and require increased cleaning. Some machine models create noise and excessive vibration. A number of consumers even complain the toilets require multiple flushes, defeating the entire purpose of water conservation. Yet, Washington claims its standards provide better options for consumers.
Senator Rand Paul (R-KY) explained how the DOE doesn’t support choices for consumers saying, “There is hypocrisy that goes on people who claim to believe in some choices but don’t want to let the consumer decide what they can buy and install in their houses.” Government bureaucrats restrict consumer choices without fully understanding the repercussions.
Myth 3: The Standards will Save Money
According the Department of Energy, these standards saved about $40 billion on their utility bills in 2010. Additionally, the DOE has increase annual savings by more than 50 percent over the next decade for energy usage of appliances. However, these statistics tend to be misleading because they are addressing the overall projected reduction in energy use rather than the net cost. The DOE fails to take into account of the upfront expense of regulations and the cost of limiting market competition upon costs.
Despite the claims of the Department of Energy saving money, the data seems to indicate the new appliance standards provide high cost to consumers directly and indirectly. For example, the DOE estimates its new requirement of dishwasher manufacturers will cost $84.6 million or 13.3 percent of their industries net value in 2012. The total cost of the standards is estimated between $522 million and $881 million dollars by the DOE. For consumers, the efficiency standards are expected to raise prices of dishwashers by around $44 per unit. The technology standard creates more expensive products which tend to wear out faster.
Ben Lieberman, an environmental expert at the Competitive Enterprise Institute explained that historically the regulations of the DOE and EPA “will raise the purchase price of appliances – in some cases more than is ever likely to be earned back in the form of energy savings.” Sofie Miller, Policy Analyst at The George Washington University Regulatory Studies Center, explained that appliance standards fait to “justify the higher upfront appliance costs that will be borne by most consumers.”
In conclusion, the Obama administration intensification of efficiency standards will further undermine technology and consumers choice. Government efficiency standards limit consumers choice while increasing cost and slowing the growth of competition. Rather than determining winners and losers through regulations, let the consumer decide. Government must rethink appliance efficiency standards and let the market decide.