Is command and control the most effective way to reduce GHG emissions?

From dictionary.com:

Dumbfounded: as if struck dumb with astonishment and surprise.

That pretty much sums up my reaction when I read this from the United Nations Environment Program (UNEP):

Regulation is the most effective means to achieve greenhouse gas emission reductions from buildings, a sector which accounts for some 30-40 % of global energy use.

Regulatory and control instruments such as building codes and appliance standards are the most effective way to increase energy efficiency, and so mitigate the industry's impact on global warming.

The findings are contained in a new study entitled, "Assessment of policy instruments for reducing greenhouse gas emissions from buildings," which is being released today at the "Sustainable Buildings 07" conference in Prague, Hungary.

Produced by the United Nations Environment Programme (UNEP) Sustainable Buildings and Construction Initiative (SBCI), the study analysed 20 different types of policy tools in the areas of legislation, information, economic incentives and fiscal measures that were targeting energy efficiency in buildings.

It looked at some 80 case studies from 52 countries and evaluated the different policy tools based on their effectiveness in terms of reduction of CO2 emissions, their cost effectiveness and associated success factors.

"According to the latest assessments of the Intergovernmental Panel on Climate Change, around 30 per cent of greenhouse gas emissions could be reduced by 2020 by measures such as improved energy efficiency in residential and commercial buildings. Importantly, this could lead to gains in global GDP-not costs," said Achim Steiner, UN Under-Secretary General and UNEP Executive Director

"The new UNEP SBCI study demonstrates the critical roles that governments need to take in establishing, implementing, and enforcing regulatory policies so as to realize these emission reductions and these environmental, social and economics gains," he said.

Yep, dumbfounded.

Comments

[odograph]

Just curious Tim, how old are "building codes" as a human concept?

I'd guess roots might go back millennia.

Given the raging success of mixed economies, such as ours, I'd be suspicious of any "boggle" that a mixed solution of market and regulation might be the best answer.

I mean, they didn't say "in order to combat global warming it is imperative that we all adopt global socialism." If I understood them correctly, they endorsed what Americans have had for a couple hundred years ... a regulated market economy.

(Now, I expect building codes could use some review, to shake out the rent seekers and etc., but that's normal maintenance in a mixed economy.)

[Ben Ho]

So of course normally I'd agree with Tim and disagree with Odograph. There are better ways to regulate than command and control. You could tax for example.

But on this issue, this is one issue where I didn't battle government bureaucracy on this point when I was at the CEA.

Because if you believe the estimates, it does look like people don't respond to prices when it comes to efficiency.

That even without taxes, people pass up efficiency improvements in dryers, dishwashers, buildings, cars, that would net save them money, at any reasonable discount rates.

The gut reaction of an economist is that they must be measuring this wrong. People are not paying for the efficiency improvement because there are unobservable characteristics (e.g. fuel efficient cars are less fun). However, there have been so many studies that consistently find this, that after a while, you have to think, maybe the measurement is ok.

So economic theory could back command and control in this case if you believe that either hyperbolic discounting causes consumers to be short sighted and ignore future gains, or information costs are high and consumers can't compute the savings, or principal-agent issues, particularly relevant in buildings comes up. The people who buy the buildings, are not the people who pay the utility bills.