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The Incidence of Welfare Losses Due to Appliance Efficiency Standards

Abstract:
The effect of appliance efficiency standards upon household energy consumption has recently occupied the attention of energy economists: Khazzoom (1987), Bold (1987), Lovins (1988), and Henly et al. (1988). This paper is concerned with the equally important question of the effects of such standards upon household welfare. It is shown that the households most likely to prefer less efficient appliances, and therefore to suffer welfare losses when standards are imposed, are those with low levels of appliance usage- This in conjunction with the results of empirical studies of appliance electricity demand makes it possible to characterize the affected households. An important result developed here is that the direction of given effects upon the demand for appliance efficiency may be deduced from the direction of the corresponding effects upon appliance electricity consumption.

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Energy Specializations: Energy Efficiency

JEL Codes:
Q55 - Environmental Economics: Technological Innovation

Keywords: Appliances, Efficiency standards, Welfare losses

DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No1-9


Published in Volume 10, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.