Edison’s Dimming Bulbs
Fluorescents still cost more upfront. But Wal-Mart's attention and the policies of many governments are pushing incandescents toward extinction.
Compact fluorescent bulbs (CFLs) cost more than regular incandescent bulbs. But according to the U.S. Department of Energy, they last up to 10 times longer, use about one fourth the energy, and produce 90 percent less heat. Over its life span of four and a half years, a CFL more than repays its higher cost in energy savings: $62.95 per light bulb. Oh, and they're good for the planet, since they produce fewer emissions. But while they've grown in popularity, CFLs have yet to emerge as a household staple, in part because consumers can't see beyond the shock of the sticker price to the long-term savings. "When you buy a compact fluorescent bulb at the cash register, you experience the higher cost vividly and all at once," says Robert Frank, the Cornell economist and author of "The Economic Naturalist." "But when your electric bill goes down as a result, the savings are not as evident." Consumers routinely make such short-term economically irrational decisions.
As it aims to vanquish Thomas Edison's filament bulb—and save the earth—the CFL is running into the brick wall of human nature. But the CFL is getting a lift from two of the globe's most powerful forces: image-conscious Western governments—and Wal-Mart.
With its $346 billion in annual sales and 100 million customers, Wal-Mart is the carrot. In 2006, eager to improve its image as a low-wage emporium of Chinese imports, Wal-Mart pledged to sell 100 million CFLs this year. The mega-retailer stacked CFLs front and center, hammered out deals with suppliers like General Electric, and enticed customers the only way it knew how: by appealing to their desire to save money. According to a calculator on Wal-Mart's Web site, replacing 30 incandescent bulbs with CFLs can save more than $1,000 over the life of the bulbs—real money for a Wal-Mart shopper. At Wal-Mart, CFLs are cheap: a six-pack of 26-watt GE CFL bulbs goes for $15.16. And they're getting cheaper. In September, Wal-Mart introduced a cheaper private-label CFL that undercuts name brands.
The stick has been the specter of government regulation. Around the globe, environmentalism and global warming are hot topics among politicians. "People are in a bidding war to see who can fight climate change the most," said Dr. Matt Prescott, director of Ban the Bulb, an Oxford, England-based organization. Earlier this year, Australia announced that it intends to phase out incandescent bulbs by 2010. The 27-nation European Union, whose 493 million citizens make it a powerful consumer juggernaut, piously followed. Sort of. In March, a summit of European leaders asked the European Commission to develop tough new requirements applying to incandescent bulbs and household lighting by 2009. But German Chancellor Angela Merkel stepped on her lines. "Most of the light bulbs in my flat are energy-saving bulbs," she said. "They're not yet quite bright enough. When I'm looking for something I've dropped on the carpet, I have a bit of a problem." In August, the EC decided to maintain tariffs on Chinese-made CFLs.
Business-friendly England is seeking a middle ground. Last month Secretary of State for the Environment Hillary Benn announced a deal struck with retailers and utilities calling for a voluntary phase-out on the incandescent bulb by 2011. And now both houses of the U.S. Congress are considering laws that would create new standards for light bulbs that would effectively consign Edison's invention to time capsules starting in 2012.
While no incandescent-bulb death-penalty law has been passed, the legacy light seems on the way to its extinction. "It's time for the technology to die," said Lowell Ungar, director of policy at the Washington-based Alliance to Save Energy, striking a Schwarzeneggerian tone. (Schwarzenegger's current domain, California, is considering a ban on sales.)
CFLs appear destined to become a consumer staple, either because hordes of people realize they're cheaper, or because the alternative will be prohibited. My money's on the carrot. Thus far, green goods have been pitched to the top: expensive Priuses for guilty yuppies, solar installations for rich techies. But to have real impact, energy-efficiency products need to make economic sense to those who congregate on the lower rungs of the economic ladder. Wal-Mart's sales of CFLs proves that energy-efficient goods don't have to be luxury items.
Earth lovers fret that even if the United States and Europe get their greenhouses in order, the large populations in China, India and Africa will ultimately overwhelm any emissions savings as they plug in. But if CFLs became a staple at Wal-Mart and other low-end retailers, and if manufacturers respond to new regulations by producing massive quantities of CFLs at low prices, the first bulbs to illuminate Indian villages may be low-emission fluorescents. It takes more than one market force to change a light bulb.
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Daniel Gross is one of the most widely read financial and economic writers working today. He is a senior editor at Newsweek, where he writes the "Contrary Indicator" column. He writes the twice-weekly "Moneybox" column for Slate, which also appears on Newsweek.com.
Before joining Newsweek in the spring of 2007, Mr. Gross wrote the "Economic View" column in the New York Times, was a contributing writer to New York, and contributed regularly to magazines such as Fortune and Wired. From 1998-2007, Gross served as the editor of STERNBusiness, a semi-annual academic magazine on economics and management published by the New York University Stern School of Business.
A native of East Lansing, Michigan, Mr. Gross graduated from Cornell University in 1989, with degrees in government and history, and holds an A.M. in American history from Harvard University (1991). He worked as a reporter at The New Republic and Bloomberg News, and has contributed hundreds of features, news articles, book reviews and opinion pieces to over 60 magazines and newspapers. Areas of expertise include: economic and tax policy, the links between business and politics, the rise of the investor class, the culture of Wall Street, and business history.
He is the author of four books: "Forbes Greatest Business Stories of All Time" (Wiley, 1996), which was a New York Times Business bestseller and a finalist for the Financial Times "Lex" award, given to the best business history book of 1996. Translations have been published in Spanish, German, Czech, Polish, Portuguese, Bulgarian, Chinese, Turkish, and Japanese; "Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance" (PublicAffairs, 2000); "The Generations of Corning: The Life and Times of an American Company," co-authored with Davis Dyer, (Oxford University Press, 20010; and "Pop! Why Bubbles Are Great for the Economy," (HarperCollins, May 2007).
Mr. Gross appears frequently in the media. A regular guest on CNBC, MSNBC, and National Public Radio, he has also appeared on CNN, Fox News Channel, The Newshour with Jim Lehrer, Bloomberg Television, C-SPAN, BBC, and Reuters TV, and on more than 50 radio programs and talk shows.
Mr. Gross lives in Westport, Conn., with his wife and two children.
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