Here is a study I had a chance to co-author with Univerity of Guelph Professor of Economics Dr. Ross McKitrick. The study examines the value proposition behind the billions of dollars of public money that have been expended on energy conservation programs over the last more than 25 years in Ontario.
The paper is an effort to look at the real costs and benefits of conservation from the perspective of consumers and the environment.
Ontario’s energy conservation programs are so obviously phony junk, the ever-useful question presses — why?
I’ll throw out four observations and invite people to shoot them down:
Like the designers of casino games, conservation program marketers are looking for common exploitable misperceptions. Conservation programs play with people’s good intentions. Every sensible person favours conservation and efficiency. Conservation programs sound nice, especially for those not doing the math.
Another pernicious psychological element playing off people’s perception is that when you buy less of something, you normally pay less. Buy less electricity = saving. This seems self-evident. The reality is something different. Ontario’s total power system revenue requirement is rising. Whatever is causing demand to drop — demand elasticity or conservation programs — a rising total bill divided by a declining volume of equals rising rates.
Another driver for conservation program decisions appears to be the irresistible attraction to government and benefiting interest groups of unaudited accounts, particularly when these accounts are off the government’s general revenue books. Here is a look at some of the beneficiaries of conservation program spending, including WWF-Canada when headed by former McGuinty Chief of Staff Gerald Butts. Conservation programs are paid not through taxes, which are almost real dollars for government, but through rates, which is nothing but play money. Notice that even in the Auditor General’s otherwise excellent reports on energy in 2015, no effort is applied to investigate whether any officially claimed savings are real or not, nor was any effort made to consider the impacts of programs on a mark to market basis for claimed saved energy. I have previously argued that:
Ontario electricity consumers would be better off if the money now being spent on electricity conservation programs was incinerated rather than used to build bigger networks of interests groups feeding off programs whose real purpose is simply to raise rates.
Finally, governments desire conservation programs as happy talk to respond to concerns over rising rates. Some consumer complaining their rates have gone up by hundreds of dollars can be mollified with $5 coupons for LED bulbs. The customers grabbing the coupons are unlikely to ask how much the coupons really cost or who is paying. Looking at the ebb and flow of official enthusiasm for conservation subsidies since 1988, when governments are trying to sell unpopular rate increases, conservation programs become more fashionable.
Many thanks to the Fraser Institute for giving me another chance to work with Dr. McKitrick.