The Department of Energy (DOE) is proposing to increase energy efficiency standards for metal halide lamp fixtures.1 It is doing so under the authority granted it by the Energy Policy and Conservation Act of 19752 and the Energy Independence and Security Act of 2007.3 Under the more recent law, the DOE must review its existing energy efficiency standards for halide lamp fixtures by January 1, 2019. However, the DOE is under no obligation to amend its existing standards.
The proposed rule has several problems that should cause the DOE to reconsider it. First, the preponderance of the claimed benefits (known as “operating cost savings”) from the regulation are not benefits at all. They are estimated by assuming consumers behave irrationally and that regulators at the DOE know consumers’ own preferences better than consumers know themselves. But the DOE offers meager evidence that consumer preferences, as shown by their own purchasing decisions, are in fact irrational. Consumers may be interested in multiple attributes of lighting, initial cost, illumination, type of illumination, and finally, energy efficiency. By restricting consumer choice based on the interest of the DOE and depriving individuals of the ability to purchase less energy efficient products, the DOE is imposing a cost on consumers, not a benefit.
Second, somewhere between 77 and 93 percent of the benefits from reductions in CO2 emissions resulting from this regulation will be captured by foreigners, not by Americans. These numbers are derived from the interagency working group report that generated the original estimate for the social cost of carbon (SCC) in 2010.4 While global benefits are useful general information, they should be excluded from the calculation of net benefits from the rule because these are not benefits to American taxpayers, whom the DOE is tasked to serve. The costs of this regulation vastly outweigh its benefits upon excluding “operating cost savings” and the benefits to foreigners.
Next, the DOE should refrain from using the most recent estimate of the social cost of carbon (SCC) until such time as the public has had a chance to comment on the technical support document that generated this new number. Evidence suggests that the interagency working group that arrived at this number left out important evidence from recent academic literature.5 Additionally, the DOE should begin to use an estimate of the SCC that is calculated using a seven percent discount rate in order to provide a more consistent and informative comparison of costs and benefits of its energy efficiency regulations. This is not done in the DOE’s current analysis.
Finally, the DOE’s analysis fails to adequately consider the impact of its proposed rule on employment and on human dignity. The DOE’s employment analysis is limited to the effect on jobs created or destroyed, not on longer-term effects of employment loss like lost earnings or effects on health from losing employer-provided health insurance.6 As mentioned previously, the DOE also fails to consider that, by restricting choices of consumers by banning less expensive, less energy efficient products, the DOE is essentially choosing for consumers what products they should and should not be allowed to purchase. The ability to make decisions about one’s own life, including basic decisions about what products will best fit one’s budget and needs, is a fundamental element of human dignity that is ignored in the DOE’s analysis.
As the DOE is not required to act at this time, the agency would be well advised to wait until the regulation can be conducted in an economically justifiable manner.