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

  • Sofie E. Miller
Keywords: energy efficiency, regulation, discount rate, consumer discount rate, regressive, furnace fan, Department of Energy, DOE

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.

Author Biography

Sofie E. Miller

Sofie E. Miller is a Master of Public Policy student at the George Washington University focusing on regulatory policy and quantitative policy analysis. She is also a Senior Policy Analyst at the George Washington University Regulatory Studies Center, where her research portfolio includes economic analysis of energy efficiency standards, analysis of regulatory benefits, use of benefit-cost analysis by agencies, retrospective review of existing rules, and the regressive effects of regulations. Sofie has submitted public comments to federal agencies on regulations spanning every issue from airline passenger protections to foodborne illnesses and everything in between. Upon completing her MPP, she intends to continue her work on regulatory analysis within academia and, eventually, the federal government.

The author thanks her faculty reviewer, Professor Susan Dudley, for her continued mentorship, encouragement, and guidance throughout this research project and many others. Sofie also thanks Editors-in-Chief Anne Kruse and Christine Mellen and Associate Editor Marisa Kanof, all of whose thoughtful insights and discernment vastly improved the quality of this paper. The author benefitted greatly from the attention to detail displayed by the entire editorial team, and commends them for their dedication and professionalism. Finally, the author thanks her parents for instilling in her the ability to think critically, and her husband, Chad M. Reese, for believing that she can accomplish anything she sets her mind to. (He isn’t wrong.)
Published
2015-05-04
Section
Articles