One Discount Rate Fits All? The Regressive Effects of DOE’s Energy Efficiency Rule

Sofie E. Miller

Abstract


This paper examines the Department of Energy’s (DOE) reliance on low discount rates to estimate the benefits of its energy efficiency standards and uses existing literature on implicit consumer discount rates to calculate a range of benefits for DOE’s furnace fan rule. While DOE calculates large net benefits from its energy efficiency rule, using discount rates that better represent average consumer time preferences shows that this standard results in net costs. Furthermore, given the variation in consumer discount rates by income, this standard is effectively a transfer payment from low- and median-income households to high-income households.

Keywords


energy efficiency; regulation; discount rate; consumer discount rate; regressive; furnace fan; Department of Energy; DOE

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DOI: http://dx.doi.org/10.4079/pp.v22i0.15110