April 6, 2015

Energy Conservation Program for Consumer Products: Energy Conservation Standards for Hearth Products

  • Feler Bose

    Associate Professor of Economics, Anderson University
Key materials
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The ideas presented in this document do not represent official positions of the Mercatus Center or George Mason University.

The Department of Energy (DOE) proposes, for the first time, to eliminate continuously burning pilot lights from hearth products and replace them with electronic ignition. The authority for this action comes from the Energy Policy and Conservation Act of 1975.  

In a public interest comment published by the Mercatus Center at George Mason University, economist Feler Bose determines that the DOE fails to consider alternative approaches to its regulation by requiring the use of electronic ignition instead of implementing a performance standard for standby mode. The comment recommends several ways the DOE can improve its economic analysis and proposal.

Key Findings 

The DOE fails to take into account the costs incurred due to power failures.  

  • During power failures, a hearth with a standing pilot can still turn on and keep people and their home warm, but an electronic ignition system cannot.  
  • The DOE needs to look at added costs that might occur to provide for a manual override or a backup system to deal with extended power outages.

The DOE exaggerates the benefits of the proposed rule.  

  • The social cost of carbon is calculated at the global level and not the national level. Further, the regulation fails to calculate the social cost of carbon at the 7 percent discount rate, which will not inflate the benefit numbers.
  • The regulation ignores costs to society from job loss in the industry.  
  • The DOE ignores the fact that the market is already moving toward electronic ignition.

Large firms will benefit the most at the expense of small firms and consumers. 

  • The regulation is expected to benefit large manufactures at the expense of small manufacturers, creating an industry dominated by large firms.

Recommendations

  • The DOE should correct for the added cost of power failures or should add the cost of backup ignition.
  • The DOE should use a more realistic baseline to calculate the additional benefits as the market is already moving towards electronic ignition systems.  
  • The DOE should calculate social welfare losses as numerous workers in the industry are expected to lose their jobs.
  • The social cost of carbon should be calculated at the national level and at the 7 percent discount rate.

 Read Public Interest Comment