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Regulation isn't cool

26 Aug 2020 | News Roundup

A recent article in the National Post described how people in Africa are flocking to buy “zombie appliances,” clapped out, highly inefficient fridges and air conditioners illegally brought from Europe that burn scarce energy and leak pollutants. Meanwhile MSN says that mandating more efficient AC could by itself save nearly half a trillion tonnes of GHGs over 40 years (as long as people don’t take advantage of the cheaper operating costs and run the AC more than before). The underlying issue is true of both cars and appliances: a lower up-front cost usually means more life-time energy use. The punchline is, of course, that newer, better appliances reduce energy use but only if people can afford them, so the last thing you should do for the environment is make appliances, and the electricity they run on, more expensive thereby not only sacrificing growth on the green altar, but green progress as well.

This trade in old appliances the Post describes does not show human beings at their best. Rich Europeans are ducking the costs of recycling by offloading their junk onto poor Africans. African middlepersons are eagerly cashing in on things that hurt the environment, often don’t work properly or at all and are fraudulently labeled. And Africans suffering chronic misgovernment are overloading their shaky power grids and leaking CFCs by flouting the law. But none of it is very surprising when governments, around the world, put badly designed policies in place.

As regular readers are aware, CDN is not persuaded that the world faces a crisis requiring an urgent scramble to reduce GHG emissions. But we are persuaded of the central law of economics, that incentives matter. And trying to get people to act massively against their best interest is futile no matter how much force governments are prepared to bring to bear or how many patronizing lectures they and their highly-paid consultants deliver. (Or how much they fiddle the statistics when their policies flop.)

In Africa, people will buy a bad fridge at a discount if they can’t afford a good one. So it’s urgent to remove tax and regulatory burdens, and obstacles like corruption, that keep them poor, and avoid pious well-meaning efforts to prevent them from developing a reliable power grid. In Europe, people will ship junk out the back door if recycling it is prohibitively expensive, and avoid buying the new “efficient” stuff if the cost is excessive.

Remember, people already don’t like wasting money. Another unrelated article says you’ll save money by running the AC intermittently because it’s more efficient going full blast. But really, if the whole problem can be solved by shutting down the AC for a few hours a day and planting trees on the sunny side of your house, it wasn’t that big a deal to begin with, now was it? And if it’s cheaper to turn it on and off, why aren’t people doing it? Maybe because it’s a theoretical solution not a practical one.

The irony here is that the optimum government policy for encouraging efficiency in AC units, fridges or anything else is no policy at all. Self-interest leads people to the economical solution. It’s when governments step in going “You’re all fools, do it our way” that things go wrong. As they have, tragically, in much of Africa for more than half a century now.

If more-efficient units are more efficient, that is, if they use less energy per degree of cooling delivered, you don’t have to order people to buy them any more than you have to force people to save money in any other area of their lives. But if they’re not more efficient, it won’t help to order or nag people to buy them. Instead, one predictable consequence of pushing up the price of newer units by requiring higher standards is that people will be slower to replace older units, yet another case of the law of unintended consequences.

So if you really want to help Africans and their environment, get out of the way.

2 comments on “Regulation isn't cool”

  1. It is almost always better for the environment to continue to drive that clapped out, inefficient gasoline car you currently own, until it dies, than it is to buy the most efficient new model every 5 years. The energy consumed in building the new car is almost always greater than that consumed by using your old car a few years longer. Pay heed to the first word in the green mantra, "Reduce Reuse Recycle."
    I wouldn't be at all surprised if the same were true of air conditioning units, fridges, and other smaller appliances.
    The leaking of hydroflourocarbons may be a real problem, but then we should be doing something about the massive leaks coming out of China before fretting about the pinhole leaks coming out of Africa.

  2. Yes, as Lord Lilley has commented, governments are not good at picking winners. Better leave it to the market. The UK government wants to ban internal combustion engine (ICE) & hybrid cars (by 2030-2035?) but it has been argued that in this time frame research can make ICE cars more fuel efficient & have a lower lifetime emission of CO2 than electric cars. Why not just leave it to the market & consumer choice, a much better idea than government dictate?

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