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Energy-efficiency promotes energy use

Mandating energy-efficiency standards is all the rage in government circles, as economics professor Robert J. Michaels pointed out in a recent column in the Wall Street Journal.

The European Union passed a new requirement for 15 percent energy savings. The U.S. Senate proposed the Clean Energy Standard Act of 2012.

It is simply taken on faith that this will produce lower energy bills and reduce the environmental costs of energy development and consumption.

Alas, those who would guide individual behavior fail to take human nature into account.

"Basic economics says that the best way to promote some activity is to reduce its price," Michaels writes. "That often means efficiency requirements end up having the opposite effect than the one intended."

Mexico, for example, subsidized the purchase of efficient refrigerators and air conditioners. An engineering study by the World Bank contended that the new fridges would consume almost 30 percent less energy.

Consumers responded by upgrading, buying bigger refrigerators with features like ice-makers in the doors. The California Energy Institute estimated the actual savings at only 7 percent.

As for air conditioners, "Newer air conditioners actually consumed more electricity because they cut the cost of attaining previously unaffordable comfort levels in summer months," Michaels wrote.

"Higher efficiency reduces the cost of cooling. A family that once had only a single air-conditioned bedroom may now choose to install a central unit, and one that suffered in the heat may purchase its first one."

Michaels has terms for these phenomena.

He calls overestimating the effect of more energy-efficient stuff "rebound."

"Technology that improves energy efficiency and reduces its cost means people can consume more good and services that use energy - home electronics, appliances and the like," he said. "And of course, businesses will use additional energy making them."

Which brings to mind the fancy term for increased consumption in response to greater energy efficiency.

You guessed it.



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