TV Lunacy: the California Energy Commission

By Kevin Burke | October 20, 2009 at 8:00 am | Opinion | 9 comments | |

 

large_screen_tvs

The California Energy Commission is set to impose harsh standards on large televisions that use heaps of energy after holding a vote on November 4. To frame this as a conservative issue, people have been demonstrating that they’ll buy big TVs and are willing to pay for the electricity required to run them.  TV manufacturers have been selling them TVs that suit their demands, but the government believes that this arrangement is unacceptable. To frame this as a liberal issue, rich people have been wasting money on giant TV screens which waste energy and contribute to global warming.  To solve the problem, the CEC is proposing a sensible law to ban giant, energy-guzzling TVs.
Commissioner Julia Levin said, “We would not propose TV efficiency standards if we thought there was any evidence in the record that they will hurt the economy. This will actually save consumers money and help the California economy grow and create new clean, sustainable jobs.”
What she’s missing is a basic grasp of reality. Where to begin?
  1. “We would not propose TV efficiency standards if we thought there was any evidence that they would hurt the economy.” If the standards force people to buy smaller, cheaper TVs, or make them less likely to buy a TV, then yes, these standards damage the economy, and reduce California’s sales tax revenue. If they force TV manufacturers to charge more for TVs, people will buy fewer TVs, which also hurts California’s economy and sales tax revenue. If TV manufacturers could cut the amount of energy that their TVs use and keep the products at the same quality and price, they would because that would make people more likely to buy their TV. Furthermore, TV manufacturers have been cutting the amount of energy that their TVs use, with little prodding from the government. We don’t need government regulation to foist energy efficiency upon them.  The only way this regulation could avoid disrupting the economy is if the standards were so lax that every TV sold today passes, which would defeat the entire point of having the standard.
  2. “This will actually save consumers money.” This is a classic paternalistic argument: we’re passing this law to save you, the consumer, money. Well, diamond rings and trips to Italy are expensive–should we ban those to save the consumer money? People buy TVs because they value the TV more than they value the cash in their pocket. That’s how the economy works.
  3. “This will create new clean, sustainable jobs.” In Asia, where nearly every TV is manufactured.
  4. Giant screens are awesome. I do nearly all my coursework down in the Pomona computer science lab, because they have huge Apple displays and I can link three of them together if I want. You might call it overkill, but then again, you’ve never had twelve different windows open at one time. Watching a football game on a big screen in HD makes me want to hug the guy in glasses who figured out how to fit more pixels into the tiny frame. When I watch movies on a big TV, I get more pleasure than watching them on a small TV. Sure, this costs me more money than buying a small TV, and more in electricity bills but I think it’s worth it; I bought it.
There is one good argument for this legislation– that when you buy a giant TV from Sony, it hurts me because the energy pollutes the environment, which we all share. But the fix for this problem isn’t a ham-handed ban on one consumer good that makes up a fraction of a percent of total world energy use, it’s to raise the price of electricity so people take my environmental pain (an externality, in economics) into account when they are buying products.
California is in fiscal trouble in part because of shortsighted, economically backward regulatory bodies like the CEC. If big TVs are using too much energy, the problem is that electricity is too cheap, not that the TVs are too big.
(Hat tip to Megan McArdle at the Atlantic.)
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Kevin Burke

Kevin once inadvertently left Waiting for Godot during the intermission. He runs a link blog and a daily CMC newsletter.

 
 
 
 
  • Hmmmm…

    Regarding point 1:

    “Panasonic, which is a large seller of plasma flat-screen televisions, said it has been able to improve efficiency by 30 percent every year. Meeting the EnergyStar 4.0 standard, which goes into effect next May, is more challenging but Panasonic is adopting a number of techniques in an effort to attain the EnergyStar 4.0 and 5.0 certifications, executives said.” – http://news.cnet.com/8301-11128_3-10374133-54.html

    If the technology is there, why not use it? Panasonic has been doing this for years, and obviously it has not hurt sales…in fact, they are looking for further improvements. There is no data saying that the price of TVs would go dramatically up. Vizio Inc. even states this in the LATimes article.

    Point 2: It will save consumers money because their energy bill will be significantly lower. TV quality will not decline, so a consumer’s valuing of a TV will not decline.

    Point 3: The energy from the TV sets is being consumed in California once it is purchased, not in Asia. If the demand for energy is lower in the state, the demand for a coal-fired power plant is lower. Coal plants are cheaper and easier to construct and will meet energy demand faster than renewables. California can then focus on building solar or wind farms.

    Point 4: We can still have our beautiful, vibrant, 72-inch screens, just pay significantly less at the end of each month for however many years the TV lasts. No one is coming out and saying that this will affect TV quality or size.

    I’d be curious to know if you support CAFE standards. It is clear that government regulation in the auto industry spurs the innovation of electric / more fuel-efficient vehicles. That is what this is all about: technology innovation. General Motors CAN produce fuel-efficient vehicles, but would they if we had lax CAFE standards?

    Increasing the price of electricity would affect ALL Californians. These standards would only affect those consumers that go out and buy massive “energy-guzzling” TVs. Plus, hikes in energy prices are very hard to go through with…very political for numerous reasons. This is a much easier fix to address energy efficiency, energy demand, and global warming.

  • Hmmmm…

    Regarding point 1:

    “Panasonic, which is a large seller of plasma flat-screen televisions, said it has been able to improve efficiency by 30 percent every year. Meeting the EnergyStar 4.0 standard, which goes into effect next May, is more challenging but Panasonic is adopting a number of techniques in an effort to attain the EnergyStar 4.0 and 5.0 certifications, executives said.” – http://news.cnet.com/8301-11128_3-10374133-54.html

    If the technology is there, why not use it? Panasonic has been doing this for years, and obviously it has not hurt sales…in fact, they are looking for further improvements. There is no data saying that the price of TVs would go dramatically up. Vizio Inc. even states this in the LATimes article.

    Point 2: It will save consumers money because their energy bill will be significantly lower. TV quality will not decline, so a consumer’s valuing of a TV will not decline.

    Point 3: The energy from the TV sets is being consumed in California once it is purchased, not in Asia. If the demand for energy is lower in the state, the demand for a coal-fired power plant is lower. Coal plants are cheaper and easier to construct and will meet energy demand faster than renewables. California can then focus on building solar or wind farms.

    Point 4: We can still have our beautiful, vibrant, 72-inch screens, just pay significantly less at the end of each month for however many years the TV lasts. No one is coming out and saying that this will affect TV quality or size.

    I’d be curious to know if you support CAFE standards. It is clear that government regulation in the auto industry spurs the innovation of electric / more fuel-efficient vehicles. That is what this is all about: technology innovation. General Motors CAN produce fuel-efficient vehicles, but would they if we had lax CAFE standards?

    Increasing the price of electricity would affect ALL Californians. These standards would only affect those consumers that go out and buy massive “energy-guzzling” TVs. Plus, hikes in energy prices are very hard to go through with…very political for numerous reasons. This is a much easier fix to address energy efficiency, energy demand, and global warming.

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  • Kevin Burke

    Dear Hmmm…
    Thank you for your thoughtful comments. I was probably not clear enough when writing my initial post.

    A few points:

    -There is no such thing as a free lunch. If TV producers could cut their energy emissions without sacrificing on either price or quality, they definitely would. Forcing a company to meet environmental standards comes with tradeoffs, usually in a product’s price or its quality.

    - The creeping influence of government. All in all, this specific legislation probably won’t have that big of an effect. What does have a big effect is the mindset that our day-to-day lives require regulation. Government should follow the do-no-harm principle.
    The fact that Panasonic has been able to improve by thirty percent per year without the presence of government regulation is testament to the power of market incentives. And if TV makers are increasing energy efficiency so much that all of their TV’s will pass the standards, then why are we regulating them? I don’t see a problem here that the market isn’t solving.

    - Most government environmental regulation forces producers to make goods that are either more expensive, lower quality, or ones that consumers don’t want. High-efficiency washers use less water, but they are not very good at getting your clothes clean. Inhalers that use CFC were recently banned because they contain a harmful environmental chemical. The new inhalers are more expensive, and don’t work. Furthermore, government regulation gives producers a bunch of perverse incentives – rather than focus on helping the environment, producers work on finding loopholes in the legislation. What if TV makers switch from using one harmful energy component to another, which is less regulated?

    - I do not support CAFE standards. To repeat the last line of my post, if big cars are using too much gas, the problem isn’t that the cars are too inefficient, it’s that gas is too cheap. A handful of studies have shown that consumers value cost, power steering, air conditioning, horsepower, and size more than they value a car’s gas mileage. Other studies have shown, for example, that for a Prius to be “worth it” gas would have to rise to $8 a gallon. Most people that buy Priuses are more concerned with looking like they care about the environment than actually caring, and most politicians that support CAFE feel the same way.

    Attempts to solve the global warming problem through a hodgepodge of legislation like CAFE and these TV regulations will just leave the economy with a bunch of distorted incentives. Any solution that will help solve the problem will probably require the consumer to suffer. The worst case is when we get this harmful legislation that doesn’t do anything to solve the problem and makes consumers worse off, to boot.

  • Kevin Burke

    Dear Hmmm…
    Thank you for your thoughtful comments. I was probably not clear enough when writing my initial post.

    A few points:

    -There is no such thing as a free lunch. If TV producers could cut their energy emissions without sacrificing on either price or quality, they definitely would. Forcing a company to meet environmental standards comes with tradeoffs, usually in a product’s price or its quality.

    - The creeping influence of government. All in all, this specific legislation probably won’t have that big of an effect. What does have a big effect is the mindset that our day-to-day lives require regulation. Government should follow the do-no-harm principle.
    The fact that Panasonic has been able to improve by thirty percent per year without the presence of government regulation is testament to the power of market incentives. And if TV makers are increasing energy efficiency so much that all of their TV’s will pass the standards, then why are we regulating them? I don’t see a problem here that the market isn’t solving.

    - Most government environmental regulation forces producers to make goods that are either more expensive, lower quality, or ones that consumers don’t want. High-efficiency washers use less water, but they are not very good at getting your clothes clean. Inhalers that use CFC were recently banned because they contain a harmful environmental chemical. The new inhalers are more expensive, and don’t work. Furthermore, government regulation gives producers a bunch of perverse incentives – rather than focus on helping the environment, producers work on finding loopholes in the legislation. What if TV makers switch from using one harmful energy component to another, which is less regulated?

    - I do not support CAFE standards. To repeat the last line of my post, if big cars are using too much gas, the problem isn’t that the cars are too inefficient, it’s that gas is too cheap. A handful of studies have shown that consumers value cost, power steering, air conditioning, horsepower, and size more than they value a car’s gas mileage. Other studies have shown, for example, that for a Prius to be “worth it” gas would have to rise to $8 a gallon. Most people that buy Priuses are more concerned with looking like they care about the environment than actually caring, and most politicians that support CAFE feel the same way.

    Attempts to solve the global warming problem through a hodgepodge of legislation like CAFE and these TV regulations will just leave the economy with a bunch of distorted incentives. Any solution that will help solve the problem will probably require the consumer to suffer. The worst case is when we get this harmful legislation that doesn’t do anything to solve the problem and makes consumers worse off, to boot.

  • Great Job

    Sensible writing on policy that doesn’t even approach dogmatic. Charlii, take note.

    I appreciate the work, Kevin.

    To Hmmm…if the consumer doesn’t notice any changes in quality or price it’s probably because the manufacturer is eating the cost of the tax. That’s going to lower their profit and disincentive R&D spending. In the long run that will likely slow improvements in TVs’ energy efficiency, which of course is the very problem the tax is trying to solve.

    I also don’t think the (US) auto industry should be used as an example. My guess is they haven’t earned their cost of capital in our lifetime and should probably be left for dead. If they were actually creating value (e.g. Honda and Toyota) they would have the resources to produce more efficient cars. Even German luxury cars with much better performance specs can beat a Chevy or GM vehicle on mileage because they can oftentimes throw a diesel engine in it.

  • Great Job

    Sensible writing on policy that doesn’t even approach dogmatic. Charlii, take note.

    I appreciate the work, Kevin.

    To Hmmm…if the consumer doesn’t notice any changes in quality or price it’s probably because the manufacturer is eating the cost of the tax. That’s going to lower their profit and disincentive R&D spending. In the long run that will likely slow improvements in TVs’ energy efficiency, which of course is the very problem the tax is trying to solve.

    I also don’t think the (US) auto industry should be used as an example. My guess is they haven’t earned their cost of capital in our lifetime and should probably be left for dead. If they were actually creating value (e.g. Honda and Toyota) they would have the resources to produce more efficient cars. Even German luxury cars with much better performance specs can beat a Chevy or GM vehicle on mileage because they can oftentimes throw a diesel engine in it.

  • http://kburke.org Kevin Burke

    The CEC passed the law banning energy-guzzling TV’s today. Here’s the summary in the NYT.

  • http://kburke.org Kevin Burke

    The CEC passed the law banning energy-guzzling TV’s today. Here’s the summary in the NYT.