This week's reading on energy efficiency contained some good ideas and touches on other topics we've talked about in class. To wit:
*Making vending machine companies pay for the electricity their vending machines use: This one I like. Apparently in Japan, vending machine companies have to pay for the amount of energy the vending machines use. To me, this is a great idea to overcome the principle-agent problem and force the providers of a service to bear the full costs of providing that service. What other areas of life could this be extended to? What if we instituted a tax on the owners of apartment buildings and other rental properties if they did not install things like energy efficient appliances, CFL bulbs, etc.? I guess the ultimate internalization of an externality would be forcing automakers and oil companies to pay for the marginal environmental damage caused by their products. It does not look like we're going to be taking this step anytime soon, though.
*The lessons we've learned abOut community-based social marketing are woven throughout this selection. A couple of things I picked up on involve messaging, such as getting key early stakeholders involved in publicizing an energy efficiency campaign and using electricity bills to show customers how much energy their neighbors are using. As our community-based social marketing book shows, these types of actions (combined with others) can really help convince people to adopt more sustainable behaviors. It also shows how such actions can backfire, with the example of the Sacramento MUD customer who wrote in telling the utility to leave him alone as long as he pays his bill on time. I guess you can't please everyone.
*The article doesn't go into much detail, but I'm curious about the disincentives to builders to build efficient buildings. Is this just a matter of standards not being high enough? The article mentions that many buildings could obtain 40% energy efficiency by adopting some simple, off-the-shelf solutions, but is the problem just that they are not doing that because they don't have to, or is there something more to it? If it's just a matter of them doing only the bare minimum, then I would return the point made by one of the experts quoted in the article about mandating as much as possible. The way I see it, sometimes we do just need to mandate certain things. There are times that, because of economic incentives or other reasons, society just takes forever to do something that needs to be done, and maybe that's where government needs to step in. If mandating higher standards is what's going to change the situation, then maybe we should go ahead and do it. But at the same time, I wonder if there are other ways that higher standards could be incentivized. For instance, is there any incentive for LEED certification, beyond the certification itself? I'm thinking there isn't, but I might be wrong. Or perhaps there could be more extensive subsidies provided to defray the up-front costs of building a LEED-certified building. It's a thought.
But no matter if we think we're making the vending companies pay for their electricity use, it ultimately gets passed on to the people. Not that there is anything wrong with that; we can either subsidize consumables (from the future, as we do now), or pay the full cost now. It does seem as if we are enaging in a society-wide "moral hazard," in which someone engages in risky behavior because they don't directly pay the costs. It's more compelling to me to be be part of incentivizing change than taxing bad behavior, but it's unclear to me which is the best approach under what circumstances...
ReplyDeleteI agree with Amy, charging the vending machine companies would mean the consumers pay more for the product, but I think that is exactly what we need! If we actually charged people for the TRUE cost of whatever item it is they consume (i.e. taking into account the environmental and social implications/costs of production),whether it is food, gas, or other material goods, people might think twice about buying unneccessary things. An issue with this idea though is that the wealthy will still be able to consume as they please while the poor would be forced to take on the brunt of the readjustment in pricing.
ReplyDeleteI don’t necessarily agree that forcing vending machine companies to pay for electricity would result in price increases. Vending machine companies like Coca-Cola are sophisticated to the point where they’re not using cost-plus pricing. These companies understand exactly what price they need to charge to maximize profit and that number will not necessarily increase with added energy costs. Also, even if it did increase the price of vending machine items in the short run, it would definitely drive innovation for more efficient machines in the long run.
ReplyDeleteRegarding the installation of energy-efficient appliances within apartments, I’m not sure that qualifies as an externality. In the vending machines example, the vending company gets something for free. Landlords don’t benefit from the light that is emitted within one of their apartments, so I’m not sure it makes sense to slap a tax on them.
Lastly, I’m against the LEED building subsidy that was proposed. If LEED buildings are economical in the long run, then developers should not require taxpayers to help fund up-front costs. Why should taxpayers have to subsidize developers for what are already profitable projects? I need my money for beer, they can use their own money.
Andrew, I think the incentives for building LEED certified (beyond the certification) is that ability to have a good marketing message and the feeling that people have towards the company which will either make people want to work for them or buy their products. that may not always be the case, but I think one thing to remember is that rewards from incentives don't always have to be tangible.
ReplyDeleteAndrew, don't forget to spice up your blogs with some pictures and resouce links. It'll help round out the blog.
ReplyDeleteBuilders and developers, until quite recently, generally built the to code minimum, which is to say the worst buildings they could legally build (some didn't quite meet that). More recently, green buildings have demonstrated substantial returns on investment, and most commercial developers are willing to make the investment and reduce their exposure to risk of not building to industry standards. Developers don't to get stuck with brown buildings in a green market, nor do their bankers, insurers or stockholders. That said, there is still a lot of activity in improving building codes. Indiana, which until recently had the worst, oldest building code in the nation, recently moved into the 21st Century with a new building code. There's also a place for incentives for better buildings and better development that benefit not just the developer but all taxpayers in terms of less sprawl, pollution, infrastructure, stormwater, etc.
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