Overriding consumer preferences with energy regulations
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The recent wave of enacted and proposed U.S. energy regulations imposes energy efficiency standards on light bulbs, appliances, and motor vehicles based on the unsupported assumption that consumers and firms are irrational and that energy efficiency should be the paramount concern. The regulatory analyses do not document these purported failures in consumer choices or firms’ energy utilization decisions with any empirical evidence. The preponderance of the benefits that agencies claim for the regulations is derived from private benefits to consumers and firms attributable to lower energy costs. Without these benefits, the regulatory costs would greatly exceed the benefits. The regulatory analyses consider only mandates as a means of achieving energy-efficiency improvements and ignore other policy options.
KeywordsEnergy regulations Cost–benefit analysis Consumer choice Climate policy Energy efficiency standards
JEL ClassificationQ48 K23 K32 L68 L62
The authors would like to thank Caroline Cecot, Kasey Higgins, Jinghui Lim, and Sam Miller for assistance in developing the case studies for this paper, the Mercatus Center for partial financial support, and two referees for valuable expositional suggestions.
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