wind turbines and my solar water heater can be far down the road, and even further if (a) cost savings are discounted at 7% instead of 2% and (b) government subsidies are treated as a cost. The upfront costs are substantial.
Ryan Avent takes on Ted Gayer so I don’t have to. Mr. Gayer tries to dismiss some of what I’ve said about the cost of climate-change policy by mocking a McKinsey study showing that a substantial amount of conservation would actually save money, that is, have a negative cost.
But Ryan is actually too kind. Gayer doesn’t just have a logical problem; he appears to be unaware that there is a large economics literature on the subject of the energy-efficiency gap: the apparent failure of consumers and firms to take energy-saving measures that would actually save them money. The point is that it’s not just McKinsey that finds this result: lots of people do.
Now, there are some questions about how to interpret the whole thing. But I think it’s fair to say that there’s a lot of evidence for cheap conservation, at least in the early stages.