One size fits all?

Posted by Don Fullerton on May 27, 2011

Filed Under (Environmental Policy, U.S. Fiscal Policy)

Lately, mandates seem to be an increasingly popular choice of policy by the Federal government.  Just the last few years have seen health care mandates, automobile fuel efficiency mandates, and now – coming January 1st, 2012 – light bulbs.  That’s right, those pear-shaped incandescent bulbs have lit American homes for the last 130 years, but they begin phasing out of stores in favor of Light Emitting Diodes (LED) and Compact Fluorescent Light (CFL) bulbs, thanks to a 2007 bi-partisan mandate signed into law by then-President George W. Bush.  As an economist, I cringe when I think of mandates, as they remove incentives for innovation, take choices away from consumers, and put the decision-making into the less-informed hands of the policy makers in Washington. 

The end-goal of the light bulb policy is to reduce polluting emissions.  News stories such as USA Today provide information regarding the extra efficiency of CFL and LED bulbs in comparison to incandescent bulbs.  When the law takes full effect in 2015, the U.S. Department of Energy estimates that “Families nationwide will save nearly $6 billion a year and will help eliminate 30 million metric tons of carbon dioxide emissions annually — the equivalent of taking about 8 million cars off the road each year.”  Other nations already have policies in effect that are more stringent than those here in the United States, including Canada, Russia, Australia, and the European Union.

Limiting families to purchase only these new light bulbs means paying a higher price up-front in order to cut emissions.  But the enacted “ban” applies to everybody, no matter whether the use of the old style bulb might be very important to some individuals.   To ban all incandescent light bulbs is not efficient, if certain individuals could use them with benefits that exceed the social cost.  The alternative is a price incentive, such as a price on greenhouse gas emissions in a cap-and-trade type system.  Then firms and individuals get to decide for themselves whether and how to reduce electricity use and cut emissions most cheaply and effectively.  When government policymakers issue a mandate, they are effectively saying they know what is best for us.  And with heterogeneity among firms and individuals, those policymakers can’t possibly know what single set of abatement methods is best for all different people simultaneously.

South Carolina has seen significant innovation on the part of policy makers in figuring out a way around this new light bulb law that could have ramifications for federal mandates of all sorts.  The Commerce Clause gives the Federal government the authority to regulate commerce between the states.  As Martin Hutchinson from Money Morning writes, “According to the Supreme Court’s 1935 decision in the case of Schechter Poultry vs. United States, the federal government does not have the power to regulate commerce that is entirely conducted within a state.”  In other words, if the state of South Carolina has a manufacturer that produces light bulbs in the state and for sale within the state, they could theoretically escape this mandate. 

The 2007 law doesn’t make incandescent bulbs illegal but instead sets requirements on their efficiency; these standards are proving to be quite difficult for the industry meet.  It is similar to the Corporate Average Fuel Efficiency (CAFE) standards established for the automobile industry, where producers are told to increase the miles per gallon (MPG) of cars produced, but the government does not attempt to dictate how this must be done.

In the long-run, this policy may save families money on their electric bill and reduce emissions.  But any one such law is not a comprehensive co-ordinated policy that chooses the cheapest forms of pollution abatement.  I’d rather see government address the problem in a comprehensive cost-effective way.

One Response to “One size fits all?”

  • lighthouse says:

    1. Consumers would not save money whatever happens:

    Utility companies are already being compensated (UK ,USA) for people
    (possibly) using less electricity, see below website
    = taxpayer ie citizen money.

    That is apart from any rise in electricity bills to compensate for a possible
    reduced electricity use

    2. LEDS have toxicity breakage etc problems too, like CFLs
    -from University of california Research

    3. The notion that “incandescents aren’t banned”
    does not hold for another reason too:
    All current incandescents, including Halogens etc, are to be banned by
    2020 (USA) and 2016 (EU)

    What is banned and when – and where are the counter-proposals?
    US, Canada, EU, Australia regulations
    Canada Government’s 2 year delay proposal (to 2014)
    Updates on US House/Senate, S. Carolina, Georgia, Texas, Minnesota and
    Arizona bills attempting to stop the ban