ENERGY‐EFFICIENT LIGHTING: MARKET DATA, MARKET IMPERFECTIONS, AND POLICY SUCCESS

Abstract

Many economists question engineering‐economic studies aimed at demonstrating anomalously slow diffusion of energy‐efficient technology and the benefits of regulations to promote such technology. One argument against such studies is that standard techniques of engineering economics are either inappropriate or are routinely misapplied in assessing the performance of the market for energy efficiency. This paper takes account of such critiques in presenting engineering‐economic evidence on the diffusion of energy efficiency improvements. It examines the engineering and economic characteristics of standard and energy‐efficient magnetic ballasts for fluorescent lighting. Efficient magnetic ballasts represent an excellent investment for 99 percent of the commercial building floor stock and a moderately good investment for 0.7 percent of the commercial floor stock. Still, in the 1980s these ballasts were being adopted only at a rate commensurate with the enactment of appliance efficiency standards in various states. In this case, solid empirical evidence supports skepticism about the effectiveness of the market mechanism in promoting cost‐effective energy efficiency improvements and about the benefits of regulation to counteract this shortcoming.