Geoscience Reference
In-Depth Information
Since rooms are not individually metered, students have weak incen-
tives to turn the lights off or the heat down.
On top of these, one of the most important and puzzling phenomena
is “energy-cost myopia.” This refers to the syndrome in which people
invest too little in energy effi ciency because they underweigh (or over-
discount) future fuel savings. If we could resolve this puzzle, the role of
regulation would be much clearer.
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Here is a little fable. Suppose I go to the Volkswagen dealer looking
for a new car. The salesperson shows me two models, one with a gaso-
line engine and one with a diesel engine. The gasoline gets 31 miles per
gallon, while the diesel gets 42 miles per gallon. But the diesel version
costs $2,000 more.
If I am like most people, I will choose the gasoline model. After all,
if I am having trouble keeping on top of my credit card debt or am fac-
ing steep college tuitions for the children or had to postpone our family
vacation, then $2,000 is not a welcome extra expense. And so I choose
the gasoline car.
But suppose the salesperson explains the life cycle costs of the car. I
tell him we drive 12,000 miles a year. He gets out his little life cycle
calculator and fi nds that the gasoline version will use 100 more gallons
of fuel per year than the diesel version. At $4 a gallon, this totals $400
per year of higher running costs for a gasoline engine. Over a 10-year
lifetime and without discounting, we will spend $4,000 more in fuel
costs to save $2,000 of up-front costs. Even with proper discounting,
the fuel savings are more than the up-front costs.
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So enlightened by the facts, what do we do? Evidence from studies
in many areas indicates that most of us will still buy the car with the
lower up-front cost. For comparable models, gasoline engines outsell
ally, evidence suggests that when people make purchases—from cars to
appliances to home insulation—they systematically underinvest in en-
ergy effi ciency. Some studies indicate that we could save a substantial
fraction of energy use (between 10 and 40 percent depending upon the
study) with zero net costs. The savings are lost in part because we suffer
