Economic implications of mandated efficiency standards for household appliances: comment

by Stanley Besen, Leland Johnson

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In a recent article, J. Daniel Khazzoom has argued that a mandated appliance energy efficiency standard may raise energy consumption if increased intensity of utilization offsets the appliance's increased efficiency. However, since the level of services demanded from the use of an appliance will be reduced by a mandated standard (because its effect must be to raise the combined cost of investment and operation) and since the amount of energy consumed at every level of services demanded will decline (because of the mandated standard), energy consumption is necessarily reduced. Khazzoom's result may occur, however, when the standard is imposed on only some appliances, if consumers substitute the use of other less efficient ones. One implication is that assessment of a mandated standard must consider appliances other than those that are subject to it.

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