Freakonomics Takes a Look at the Efficacy of Energy Efficiency Policies

Freakonomics Takes a Look at the Efficacy of Energy Efficiency Policies

Gita Subramony for Zondits, February 9, 2015

This week, the Freakonomics Podcast discussed energy efficiency policies with Arik Levinson, an environmental economist at Georgetown University. Zondits had previously reported on Levinson’s paper, “How Much Energy Do Building Energy Codes Really Save? Evidence from California,” which concludes that building energy codes in California do not actually achieve energy savings. Freakonomics host Stephen Dubner focused his discussion with Levinson on the paper’s findings and reasons why Levinson believes that energy efficiency policies and regulations do not achieve energy savings.

Levinson uses the rebound effect to provide a reason why energy efficiency policies look great on paper but might not actually achieve savings. In the Freakonomics interview he states, “The problem with energy efficiency for cars or for homes or for air conditioners is that energy efficiency makes doing the activities that cause the problems in the first place cheaper.” As a result, consumers might drive more or run energy-using equipment more. In other words, the rebound effect is causing us to use more energy instead of saving energy. However, while rebound might account for some lost savings, it is highly unlikely that the phenomenon is responsible  for eliminating all savings. There is a limit to how behavior changes in response to how much something costs, as Zondits has discussed previously. Though it is exciting to hear about energy efficiency policy on a popular podcast, it is disappointing to have the rebound effect as the star of the show casting energy efficiency regulations as the villain.

Levinson does make an interesting point on why energy efficiency regulations have been such a prevalent part of the Obama Administration’s climate change initiatives. With Congress unable or unwilling to pass legislation on energy efficiency, executive agencies have taken the lead on issuing regulations in order to bypass our dysfunctional law-making body. Agencies like the DOT, EPA, and DOE have been able to create rules and regulations affecting efficiency, most notably 2014’s Clean Power Plan issued by the EPA.

Though Levinson does not believe that these regulations should be eliminated, his reliance on rebound as an explanation for their failure puts his analysis into serious question. Listen to the episode here.