July 29, 2013

Energy Efficiency Benefits from 2013 Microwave Oven Regulation

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The Department of Energy’s (DOE) primary justification for recent energy efficiency regulations is not environmental benefits. In a recent rule related to microwave ovens, DOE claimed nearly 80 percent of the regulation’s benefits are from the agency seeking to correct what it deemed irrational consumer behavior. Generally speaking, consumers choose to forgo lower energy bills in the future to pay a lower price for a microwave today. DOE views this as irrational and has therefore chosen to remove the less-energy-efficient products from the market. In so doing, DOE restricts consumer choice, a restriction that is clearly a cost and not a benefit. The modest environmental benefits expected from the rule are based on projected benefits to foreigners, with only a fraction of the benefits captured by US citizens. By far the largest claimed benefit of this rule is based on the agency's presumption that consumers make irrational decisions when purchasing microwave ovens.

Data note: Calculated using a 3 percent discount rate and a Social Cost of Carbon value of $41.1/t (2011$) in 2016. Assumes 15 percent of reductions in CO2 emissions are attributed to the United States. This is the midpoint between 7 percent and 23 percent, the range estimated by the Interagency Working Group on Social Cost of Carbon, “Technical Support Document, Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866,” February 2010.