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Microwave Ovens and Monopoly Money

It's as if they were selling Obamacare with promises to cut your aspirin bill in half.

microwave-oven

A recent press release from the Department of Energy typifies the regulatory legerdemain we have come to know and love from the Most Transparent Administration in History®. Other blogs and news outlets covered the story this week: the obvious angle is that the Obama Administration pulled a fast one by burying a controversial regulatory change inside an apparently innocuous press release, hoping to slip it by a sleepy constituency and scientifically illiterate journalists.

But in researching the story for this blog, I came to see the story in deeper terms that reveal what’s really going on with the maladministration that afflicts this country. It’s as if they were selling Obamacare with promises to cut your aspirin bill in half. Some folks call it “straining at a gnat to swallow a camel”, typical of how the “blind guides” in this Administration run their business.

If you really want to, you can read the actual text of the press release here:

New Energy Efficiency Standards for Microwave Ovens to Save Consumers on Energy Bills

… but in the interest of time and comprehension, allow me to paraphrase:

Regulations requiring a dimmer light on your microwave’s clock will save you a few pennies a month*, if you buy a new microwave after 2016, and if electricity costs don’t increase. Kudos to your Department of Energy.

[Three paragraphs about the President's commitment to commonsense regulation ... blah, blah, blah ... cutting greenhouse gases ... yada, yada, yada ... an "all-of-the-above approach", &etc.]

And oh, by the way, we just cooked the books to make it easier for us & the EPA to regulate things like coal fired generating plants and the Keystone XL Pipeline. The increase in your overall energy cost will make the few pennies that you’ll save by having a dimmer microwave light seem like chump change. Sucker.

They did this by increasing the “social cost of carbon”, an imaginary number that’s supposed to aggregate all of the negative impact of CO2 on the economy, by a massive 60% overnight. Bloomberg explains:

Obama Quietly Raises ‘Carbon Price’ as Costs to Climate Increase

The increase of the so-called social cost of carbon, to $38 a metric ton in 2015 from $23.80, adjusts the calculation the government uses to weigh costs and benefits of proposed regulations. The figure is meant to approximate losses from global warming such as flood damage and diminished crops.

Umm, increased carbon dioxide enhances crop yields. But let’s not allow mere science to stand in the way of the important fight of our beneficent Government against Climate Change.

Even some environmental activists and supporters of the change were taken aback by how it was announced:

“This is a very strange way to make policy about something this important,” Frank Ackerman, an economist at Tufts University who published a book about the economics of global warming, said in an interview. The Obama administration “hasn’t always leveled with us about what is happening behind closed doors.”

No kidding.

Before you say, “Who cares? This is just funny money anyway,” consider the following example of how cost-benefit analysis using social cost made a significant new regulation appear justified when more tangible benefits were insufficient:

For example, the administration’s vehicle fuel-efficiency standards would cost industry $350 billion over the next 40 years, while benefits in energy security, less congestion and lower pollution totaled $278 billion, according to a regulatory analysis using the prior carbon cost estimates cited in a paper by administration economists. It’s only by including the $177 billion in benefits from less carbon dioxide that the rules provide a net benefit to the country…

That’s worth a recap: We have a program which costs industry (read: consumers) $350 billion of real money. The tangible benefit is purported to be $278 billion of real money. To a capitalist, that’s a $77 billion money loser: 22% of the “investment” (at least) is down the drain. But when you throw in $177 billion in climate absolution, a totally made-up number paid in Monopoly™ money, President Obama, socialist bureaucrats and our esteemed representatives in Congress get to pretend they’ve created a “profit” of $100 billion! [Corrected per OhioHistorian. - Ed.]

The higher social cost thus makes it easier to sell new regulatory schemes to Congress. Every Obama Administration initiative works in the direction of making every form of energy, not just electricity, more expensive.

The government-wide assessment should be used by Obama in deciding whether to approve TransCanada (TRP)’s Keystone pipeline from the oil sands of Alberta to refiners along the Gulf of Mexico or by Interior Department in deciding leases for coal mining on public lands, according to environmental activists. … And if Obama approves the [Keystone] pipeline, the higher carbon-cost estimate could to be a part of any lawsuit challenging the decision… .

* The DoE is working on standards that don’t address the efficiency of your appliances when they’re working. Since appliances are not in use 99% of the time, the research is focused on energy consumption in “standby mode”. Today’s microwave ovens consume about 4 watts of electricity when not in use. The standards cut standby use to 1 to 2.2 watts, depending on whether you have a countertop or a built-in model. A decrease in energy load of 2 watts saves about 1.5 kilowatt-hours per month, reducing the typical monthly energy bill electricity bill by about 18 cents. Add about seven cents worth of Climate Change Absolution, if that makes you feel better, so for DoE’s purposes the “net benefit” is about two bits.

I learned another interesting fact while researching this article (H/T www.bing.com): The new microwave oven standards are the first of the new appliance “stand-by” standards that will also cover electric motors, power supplies and commercial refrigeration. The microwave rule was 24 months overdue (pdf link), and all of the others are running 8 to 24 months late. Several of them are hung up in review by the Office of Management and Budget; reading between the lines, I’d guess that OMB needs help justifying the economics of these rules: the new higher “social cost” numbers are just what the doctor ordered. Expect to see a spate of new appliance rules in the near future.

If this is the kind of stuff the DoE is working on, here’s an idea for you (albeit not an original one) that could save taxpayers about $30 billion a year: eliminate the Department of Energy.

Cross-posted.

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