All Commentary
Tuesday, July 1, 2003

Washington’s Centrally Planned Heating and Cooling

Why Does Government Outlaw Consumers' Preferred Products?

While the Clinton administration had eight years to “save the environment,” it waited until the final days to push through a flurry of questionable environmental regulations. Among these was the regulation that would require increasing the efficiency of central air conditioners and heat pumps by 30 percent. In the arcane language of the energy business, the SEER (Seasonal Energy Efficiency Ratio) would go from 10 to 13.

According to Deborah Miller of the Air Conditioning and Refrigeration Institute (ARI), “the DOE, in its own words, ‘rushed’ to publish a proposed new rule. It cut short the comment period; new analyses were injected into the record with only nine days left in this abbreviated period; it ignored its statutory mandate to balance economic interests in the rulemaking; failed to consult the Department of Justice on the impact 13 SEER would have on competition; and published a new rule of 13 SEER ‘literally in the final minutes of the last administration.’”1

On January 22, 2001, the last day on which Clinton administration regulations could be published, the final rule mandating a 30-percent increase in the heating and cooling standards appeared in the Federal Register.2 From a political standpoint, this administrative legerdemain was pure genius. By throwing these restrictive regulations over the fence, the outgoing administration’s legacy of being “for the environment” was preserved without any of the negative green baggage that so often evokes the wrath of consumers. Nevertheless, under the new, more-stringent environmental standards, the cost of air conditioners and heat pumps will go up $274 to $687.3

The incoming Bush administration had three options (all unsatisfactory) in dealing with the left-behind hot potato.

Option 1:

Just say no and repeal the regulation. Benefit: Momentarily keeps one onerous regulation at bay. Downside: High risk (99.99 percent) of being branded “anti-environment” by the media, environmentalists, and the Earth-first politicians. (Remember what happened with the arsenic-in-water standard?)

Option 2:

Hold your nose and simply accept it as written. Benefit: An absence of negative media coverage. Downside: Consumers are saddled with still more restrictive environmental regulations of dubious value. Ironically, the label “pro-environment” does not come with this option. The best that can happen is that the phrase “anti-environment” will not be used as frequently.

Option 3:

Propose a watered-down or “lite” alternative. Benefit: Although still bad, this is not so bad as the regulation proposed. Downside: High risk (99.98 percent) of still being branded “anti-environment” by the media and environmentalists. It is interesting that the vitriolic response accompanying this option is exactly the same as if the regulation had been withdrawn. Since there is never any distinction made between the out-and-out repeal and the watering down of a bad environmental regulation, why ever settle for half measures?

As it turns out, Option 3 was the path that the Bush administration chose. On April 13, 2001, the Department of Energy (DOE) announced its intention to raise the existing standards by 20 percent instead of the proposed 30 percent. The SEER value would be raised from 10 to 12 (instead of 13). The higher standards would take effect January 2006.

How was this 20 percent increase in the SEER value received? The Natural Resources Defense Council was typical: “This latest rollback . . . hurts the consumer and the environment.”4 Only in Washington is a 20 percent increase called a rollback.

What seems to be lost in the debate over heating and cooling standards is the consumer. There are two possible questions that could be asked. The appropriate question is: What does the consumer want? The inappropriate and elitist question is: What is best for the consumer?

The answer to the first question is always the same, no matter what the product. Consumers want choices. They want a number of options so that each buyer can pick the most suitable product. When it comes to purchasing an air conditioner or a heat pump, these options relate to the upfront cost, annual operating cost, aesthetics and special features, size of the unit, reliability, and performance. Other factors that influence a consumer’s choice include his or her age, family size, financial status, and location.

Consumer Forgotten

Unfortunately the federal government never asks, nor does it want to hear, what the consumer really wants. Since it is predisposed to solutions based on central planning, should it come as any surprise that officials turn only to like-minded advocates of central planning for advice, guidance, and direction? The government’s summary dismissal of the true interests of consumers is legitimized by a self-appointed coalition that thinks it knows best: the “consumer advocates” and environmentalists.

According to Andrew deLaski of the Appliance Standards Awareness Project, more than a hundred organizations support the SEER 13 standard.5 It would be interesting to know how many of these consumer-advocate groups even bothered to survey people on what they really want. Maybe the public is not interested in what these “consumer advocates” are advocating: fewer choices and higher prices. As Thomas Sowell put it, “Indeed, there are no requirements for any knowledge whatsoever to become an environmentalist or a consumer advocate. There are more qualifications required to become a taxi driver or a meter maid than to engage in any of a number of busybody occupations that are taken seriously in the media, as if they represented expertise on something.”6

When viewed in total, the evolution of government-mandated products, whether the toilet, the washing machine, or the air conditioner and heat pump, displays several disturbing principles7:

First, the right to choose is anathema to proponents of central planning. The elimination of the consumer choice is based on the attitude that people are not bright enough or informed enough to make the “correct” decision when left to their own devices.

There is nothing high-tech or mysterious about either the 20 percent increase or the 30 percent increase in efficiency standards. According to the Appliance Standards Awareness Project (one of the standard’s advocates), “manufacturers have successfully marketed SEER 13 air conditioners, now considered “mid-efficiency” units, for more than a decade. The most efficient units available reach SEER 16 or higher.”8 (Apparently the free market works just fine without government mandates.) The real problem is that consumers have chosen to ignore the government and environmentalist endorsement of the more-expensive systems for the reasons mentioned. The consumers’ rejection helps explain why government products are mandated while preferred, free-market products are outlawed.

Second, central planning, by definition and in practice, undermines competition and innovation. The Department of Justice concluded that the SEER 13 mandate would have “a disproportionate impact on smaller manufacturers. Currently less than 20 percent of the total product lines meet the proposed government standards.

  • Michael Heberling is the Chair of Leadership Studies in the Baker College MBA program in Flint, Michigan. Prior to this, he was President of Baker's Center for Graduate Studies for 16 years. Before Baker, Dr. Heberling was a Senior Policy & Business Analyst with the Anteon Corporation. He also had a career in the Air Force retiring as a Lieutenant Colonel. Dr. Heberling has over 75 business and public policy publications. His research interests focus on leadership, military history and the impact of public policy on the business community. He is a member of the FEE Faculty Network.