Hitting Consumers

06.25.13

The Best Green Idea in Obama’s Climate-Change Speech

Buried in the president’s climate-change address was a call to set higher standards for consumer products. From lightbulbs to cars, Daniel Gross on why the proposal could have a powerful impact.

The biggest headlines coming out of President Obama’s big climate-change speech will likely be his call to limit omissions from power plants and his proclamation of a small-scale war against coal. He also called for more green energy and for the government to become a bigger consumer of green power.

Buried in there was a call for new efficiency standards for appliances. And to me, this idea—the notion of improving environmental performance by imposing higher standards on consumer products—is the most powerful and doable of the bunch. The U.S. is a consumer-driven economy. We won’t make a serious dent in energy consumption until Americans become much more careful with their use of energy. But appealing to a desire for savings is a nonstarter. I, like most Americans, prefer the comfort of air conditioning to lower electricity bills. Only a small minority of us are willing to change our behavior for the sake of the planet’s future.

But you can get to consumers through those who make money serving them. In other words, if the government sets higher standards on the people who produce the big-ticket items they sell to American consumers, that can have a big impact. And in recent years, both the Bush and Obama administrations have been clear with companies: if you want to participate in the world’s largest and most wealthy consumer market, you’ve got to up your energy-efficiency game. While lobbyists and right-wingers have generally screamed bloody murder, the higher standards have been good for business, good for consumers, and good for the planet. That’s because, time and again, engineers have proved brilliant at developing low-cost, scalable improvements in efficiency that don’t affect performance. Government incentives can help reduce the cost of innovations. And when American consumers, in their millions, embrace the new products, the cost comes down even more.

Take lightbulbs. The drive to eliminate old-fashioned, noninnovative, inefficient incandescent light bulbs started when George W. Bush signed 2007 legislation stipulating that, come 2012, bulbs sold in the U.S. would have to be about 25 percent more efficient. Specifically, the law said a bulb should provide 100 watts of brightness while using 72 watts or less. The obvious way to get there was by stopping the production of incandescent bulbs and focusing instead on compact fluorescents and LEDs, both of which were more expensive. But a funny thing happened. Despite the lunatic arguments from the lunatic fringe about violations of liberty, incandescent bulbs didn’t disappear on Jan. 1, 2012. Instead, the companies that had been making them for decades began making better versions. Consumers now can choose from a growing array of incandescents, CFLs, and LEDs. Oh, and by the way, sales of the types of incandescent bulbs that were exempt from the higher standard have plummeted in the last 18 months. It turns out people like products that save them money. Yes, the bulbs may cost more up front. But you have to think about bulbs like cars—they have a purchasing price and an operating price (gas, maintenance). While the purchasing price has risen, operating costs of lightbulbs have fallen. The government projects that U.S. consumers will save $6 billion annually by 2015 thanks to the higher standards.

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During today's climate change speech, President Obama said that we need to act before it's too late.

Contrary to the arguments of the pessimists, companies generally manage to meet higher energy-efficiency standards while improving the consumer experience.

Speaking of cars, higher standards have had a similar positive impact on the automobile industry. The Obama administration, much to the chagrin of Republicans, pushed through new mileage standards that stipulated that the typical car sold in the U.S. in 2025 would have to get 54.5 miles per gallon. Cue the outrage over a war on SUVs and pickup trucks. But the higher standards just pushed automakers and their engineers to do what consumers had been asking them to do already: upgrade the efficiency of the U.S. auto fleet. The government also provided a raft of incentives—tax credits for hybrids and electrics and research aid for new batteries—to hasten the process. And as we’ve written, the progress has been remarkable.

In May, the typical vehicle sold in the U.S. got a record 24.8 miles per gallon, up 25 percent from 20.1 in October 2007. A raftload of models now get mileage well above 40. The 2014 Jeep Cherokee gets 30 miles per gallon, a 45 percent increase from last year’s model. And it’s not like consumers are sacrificing performance or paying a lot more for these money-saving models. Automotive engineers have known all along how to get better mileage. They just needed the nudge of higher standards to get their bosses on board. Of course, we’re still a long way from 54.5 miles per gallon. But after the innovations in recent years, it no longer seems quite so absurd.

Indeed, contrary to the arguments of the pessimists, companies generally manage to meet higher energy-efficiency standards while improving the consumer experience. The government has been regulating the performance of air conditioners and refrigerators for decades. And it’s rare to hear anybody complain that cheap, high-peforming air conditioners and refrigerators are not available in the marketplace.

Obama hit these themes in his speech. “When we restricted cancer-causing chemicals in plastics and leaded fuel in our cars, it didn’t end the plastics industry or oil industry. American chemists came up with better substitutes,” he said. “When we phased out CFCs, the gases that were depleting the ozone layer, it didn’t kill off refrigerators or air conditioners or deodorant. American workers and businesses figured out how to do it better without harming the environment as much.”

That’s not to say meeting higher standards is easy, or inevitable, or affordable for every business, and in every instance. Companies that operate coal-fired electricity plants may find that they can’t compete with other sources if they have to invest a lot of money to clean up their operations. But standards for consumer products create a level playing field.