Behavioral Economics and Energy-efficiency Regulation

Abstract

In the US and around the world, ‘energy-efficiency’ is playing an ever greater role in debates regarding how to regulate energy use, particularly electricity use. The US Congress in recent years passed a law to ban the use of incandescent light bulbs, requiring people to turn to compact fluorescent lights (CFLs) and light-emitting diode (LED) bulbs. Their purchase has been subsidised in many locations through ratepayer-funded utility-managed programs. The US Environmental Protection Agency (EPA) has long had an ‘Energy Star’ program to certify devices that meet its energy-efficiency standards and provides an appliance labelling program with estimates of typical annual energy cost savings, so consumers can factor that information into their purchasing decisions.