Arnold Kling  

Energy Conservation

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The McKinsey Global Institute likes to beat that drum.

They argue that in the U.S. and other developed economies, there is a big opportunity to save energy in lighting. In China and developing regions, the opportunity is more efficient heating and cooling.

My guess is that if developing countries were to adopt more efficient heating and cooling, their demand for heating and cooling would rise, offsetting some of the efficiency savings. Not that this would be a bad thing.

They suggest that there are market failures: fuel subsidies; lack of consumer information; and high turnover in the commercial sector. The latter problem is supposedly that the builder of an office building cannot necessarily get enough higher rent in exchange for energy efficiency.

These market failures seem like pretty small beans to me, when contrasted with the hard mandates that McKinsey is proposing.


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COMMENTS (7 to date)
mgroves writes:

How is it a market failure that they can't get higher rents?

Buzzcut writes:

Fascists!

Okay, can you tell that I'm reading "Liberal Fascism"?

I am a big believer in CFL, but my wife absolutely hates them. It's quite a large marriage issue, believe it or not. Luckily, as the bulbs get better over time, the things that she hates about them (long startup time, harsh lighting) are being addresed.

And you can't argue with the power savings. It's noticable.

Jeff writes:

I agree with mgroves. Come on, Dr. Kling, don't start calling fuel subsidies or high turnover a "market failure."

Pretty soon "market failure" will come to be defined as anything somebody finds disagreeable about markets.

mgroves writes:

My question was only partially rhetorical...

920143399 writes:

Is being energy efficient insufficient?

When I first heard the words energy efficient, thoughts of a better environment flooded my head. Using less energy, saving money and the environment, and getting tax breaks - what else could be better? I had no clue.

I just moved into a new apartment complex, which is fully furnished with all appliances. Most of these appliances are "energy efficient". Great right? However, after washing my clothes I noticed that it took over three times the normal amount of time to dry my clothes. Is that still considered to be energy efficient? Another thing I have noticed is that my light bulbs take longer to light up my room, causing me to turn on the light, leave the room and come back when it heats up. To me energy efficient causes me to be more careless with my energy consumption - not because I want to be, but because I have to be.

I do understand that we, as a whole society, need to be conservative with our energy use, but my view is that we need to make energy efficiency more convenient and, well, efficient. Maybe with future improvements in technology, these kinks can be worked out, but until then I am not entirely happy with my energy efficient appliances.

Jimmy Collins writes:

I agree with being energy efficient even though there are some setbacks such as paying more money for a CFL that takes longer to light up my room. One cannot deny the positive aspects of saving energy and more people need to be leaning toward a “greener” way of life. Companies are even trying to make changes, for example, eliminating paper paychecks.
Market failures probably do exist especially when discussing the lack of consumer information. If a person is not specifically searching for energy efficient products they probably will not buy an energy efficient product. Cost is most definitely a deterrent.
Incentives are definitely a great way to get people to buy energy efficient products, but offering the right incentive is important. To address whether being energy efficient is actually efficient is pretty hard to answer. Only time will tell, but it can be safe to say that energy efficient products are only getting more consumer friendly and soon all the kinks and downfalls will be eliminated.
I do have a question about your comment stating “that if developing countries were to adopt more efficient heating and cooling, their demand for heating and cooling would rise, offsetting some of the efficiency savings.” I do see how this would happen, but why do you say that it would not necessarily be a bad thing? Isn’t offsetting some of the efficiency savings counteracting against the intended purpose?
Also, why do you think China would be better off adopting more efficient heating and cooling instead of lighting? Cities, such as Shanghai, are saturated with lighting. Why is there not a benefit to efficient lighting in this case?

WCU writes:

It does not take a rocket scientist to see that yes, energy efficient lighting and heating does save energy. When I looked at my father’s electricity bill the month after he installed a new energy efficient air conditioner and around thirty new light bulbs throughout the house, I could see the difference that it made. The problem was the cost he had to pay for all these new-fangled gadgets that had just come onto the market.
• The cost for the energy efficient air conditioner : $2500
• The cost per light bulb (the swirly energy saving ones) : $4 per bulb, $80 total
• The reduction in his bill : $10
In the case of my father, the air conditioner did not have to be replaced, the light bulbs were still good, but he gave up a total of $2580 to save $10 per month. In the United States, this is acceptable, but in China, it is not economically viable to have these people spend all that money to save $10. The costs must go down before the opportunity cost of this could be tempting to those in developing worlds without government subsidies.
My personal opinion is that it is money spent for energy sustainability, though, especially in areas such as China where increasing populations will and have put strains on energy capabilities. The problem with China is the cost, and that is the most difficult thing to overcome for developing nations as a whole.

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