Demand-Side Technology Standards Under Inefficient Pricing Regimes
When price-setting regulators haveobjectives other than maximizing socialsurplus, the conservation potential ofdemand-side technology standards can besignificantly diminished. This paperdemonstrates this by empirically recovering thesocially sub-optimal preferences of a group ofwater managers in a groundwater-dependentregion of California and simulating theirinefficient price response to the mandatedadoption of low-flow appliances by homeowners. The resulting reduction in the conservationpotential of these appliances is quantified,and a modest tax is shown to be a relativelycost-effective policy tool for conservation. If non-price conservation policies arepreferred according to equity criteria, thepaper suggests that, in order to preserve theirconservation potential, policy-makers should berequired to continue to set prices as if notechnology standards had been introduced. Copyright Kluwer Academic Publishers 2003
Volume (Year): 26 (2003)
Issue (Month): 1 (September)
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