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Do Energy Efficiency Standards Hurt Consumers? Evidence from Household Appliance Sales

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  • Arlan Brucal

    (Department of Economics, University of Hawaii)

  • Michael Roberts

    (Department of Economics, University of Hawaii)

Abstract

Since 1987, the Department of Energy has set minimum energy efficiency standards for household appliances. Although the review process considers engineering-based accounting of costs and benefits associated with standards, economists have questioned whether these policies hurt consumers by increasing prices and limiting the scope and nature of product attributes, thereby reducing consumers’ perceptions of product quality. To evaluate whether standard changes affect prices and quality, we develop a constant-quality price index using same-model price changes of appliances sold in the United States between 2001 and 2011, a period over which energy-efficiency standards changed three times for clothes washers and Energy Star thresholds were updated for refrigerators. We use this index to disentangle price changes from perceived quality changes, and develop a welfare index that accounts for both prices and quality changes over time. We then examine how price, quality and welfare changed as energy-efficiency standards became progressively more stringent. We find no indication that more stringent standards increased prices or reduced product quality. Instead, we find prices declined while quality and consumer welfare increased, especially around times when more stringent energy efficiency standards were enforced. Similar price and quality patterns emerge for refrigerators which had only Energy Star R policy changes. We conclude that standards have had at worst a negligible effect on consumer welfare, or at best lowered prices and improved quality for both washers and refrigerators, and perhaps other appliances. Further analysis suggests that standards induce innovation, but have little or no influence on inter-manufacturer competition.

Suggested Citation

  • Arlan Brucal & Michael Roberts, 2016. "Do Energy Efficiency Standards Hurt Consumers? Evidence from Household Appliance Sales," Working Papers 201625, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:201625
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    Cited by:

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    2. Sébastien Houde & Erica Myers, 2019. "Heterogeneous (Mis-) Perceptions of Energy Costs: Implications for Measurement and Policy Design," NBER Working Papers 25722, National Bureau of Economic Research, Inc.
    3. Sylwia Słupik & Joanna Kos-Łabędowicz & Joanna Trzęsiok, 2021. "How to Encourage Energy Savings Behaviours? The Most Effective Incentives from the Perspective of European Consumers," Energies, MDPI, vol. 14(23), pages 1-25, November.
    4. Soojin Jo & Lilia Karnizova, 2021. "Energy Efficiency and Fluctuations in CO2 Emissions," Staff Working Papers 21-47, Bank of Canada.
    5. Spurlock, C. Anna & Fujita, K. Sydny, 2022. "Equity implications of market structure and appliance energy efficiency regulation," Energy Policy, Elsevier, vol. 165(C).
    6. Chung Nguyen Hoang, 2021. "The Effects of Economic Integration on CO2 Emission: A View from Institutions in Emerging Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 374-383.
    7. Bu, Caiqi & Zhang, Kaixia & Shi, Daqian & Wang, Shuyu, 2022. "Does environmental information disclosure improve energy efficiency?," Energy Policy, Elsevier, vol. 164(C).
    8. Soojin Jo & Lilia Karnizova, 2021. "Energy Efficiency and Fluctuations in CO2 Emissions," Working Papers 2107E, University of Ottawa, Department of Economics.

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    More about this item

    Keywords

    Energy Efficiency Standards; Imperfect Competition; Price Indices;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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