by W. Kip Viscusi, Ted Gayer
August 07, 2012
In the recent Mercatus Center study, “Overriding Consumer Preferences with Energy Regulation,” Ted Gayer and W. Kip Viscusi examined the economic justification for recent U.S. energy regulations proposed by the U.S. Department of Energy, the U.S. Department of Transportation, and the U.S. Environmental Protection Agency (EPA). The study found that the energy-efficiency standards have a relatively minor effect on greenhouse-gas emissions, and—per the regulating agencies’ own estimates—cannot pass cost-benefit analyses based on their environmental benefits alone. To justify these regulations, the agencies relied on estimated benefits derived from correcting consumer “irrationality.” This research summary addresses several misconceptions about the study’s findings.