Policy Analysis No. 189

Energy Conservation and Efficiency: The Case Against Coercion

By Jerry Taylor
March 9, 1993

Executive Summary

Energy conservation is becoming the political tonic of the 1990s. President Clinton promised in his campaign to make efficiency the keystone of his energy policy in order to increase the competitiveness of American business and conserve natural resources. Energy Secretary Hazel O’Leary has long been an outspoken advocate of subsidized energy-conservation measures. And Clinton’s energy tax has been justified largely as a measure to increase energy efficiency, decrease America’s reliance on foreign oil, and reduce pollution. State public utility commissions are relying on energy-conservation programs to meet 75 percent of America’s anticipated energy needs by the year 2000.

Yet careful analysis reveals that, contrary to popular belief, energy is more abundant today than ever before; there is no wrenching scarcity on the horizon. And America is one of the most energy-efficient nations on earth, not the energy glutton of the media caricatures. Nor do free markets fail to provide for efficient energy use; the so-called market failures of the energy economy either do not exist or are more appropriately labeled “government failures.” Finally, programs that subsidize energy-efficiency measures for consumers, known as demand-side management programs, impose unnecessary costs on consumers while wasting, not conserving, energy.

Experience has shown that the invisible hand of the marketplace is far superior in providing for efficient energy use and conservation than is the dead hand of government planners, even if they belong to the Clinton administration or state public utility commissions.

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Jerry Taylor is director of natural resource studies at the Cato Institute.