NCPA - National Center for Policy Analysis

What Price Energy Efficiency?

June 5, 2001

Energy conservation is a hot topic these days. One school of thought preaches that America can conserve its way out of energy shortages by developing and utilizing more energy-efficient appliances and automobiles.

A widely cited report released last year by the Energy Department says that by adopting a host of energy-efficiency measures, U.S. energy use could be about 20 percent lower than projected in 2020 -- and consumers would save about $30 billion a year on their power bills. The report says the savings would more than pay for the cost of adopting the new standards.

But some economists point out that pushing people to conserve more energy could waste money and resources.

  • The Competitive Enterprise Institute's Fred L. Smith gives as an example technological advances which now allow us to build buildings which are much more energy efficient than those constructed just a few years ago -- but that, he says, "doesn't mean we should tear down those buildings and put up new ones," which would waste resources.
  • Steve Rosenstock, of the Edison Electric Institute, cites a study in which most consumers said they would not spend an extra $100 on a more energy efficient refrigerator, even if they could save $50 a year on their power bills -- which suggests that cost is a major deterrent to adopting new energy-efficiency technologies.
  • The Department of Energy study admits that some of the technology it counts on may not be economically viable yet.
  • Costs aside, consumers also demand performance and could very well pass up energy-efficient products that fail to perform to the standards they have come to expect.

While not dismissing the undoubted benefits of greater efficiency and conservation, energy experts make the point that greater energy production is necessary to satisfy steadily growing demand.

Source: Charles Oliver, "Energy Conservation Has Appeal, But Will It Deliver Bang for Buck?" Investor's Business Daily, June 5, 2001.


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