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Governments love to regulate. They do so because politicians need to justify their jobs, however useless they may be. As such, they must continuously scour the world in search for new "issues" that need "regulating" for "your own good". Yet, this search is not easy. On one hand, it must be clearly visible so that politicians may benefit from the "propaganda value" of such "initiatives". On the other hand, it must appear not to have any costs to the people (read voters), yet, it must appear to provide a significant amount of benefits. Lastly, it must be a topic that seems incontrovertible and one that most people (again, read voters) will happily approve.

In other words, it must:

  • Be free (i.e. no cost)
  • Provide large benefits
  • Be popular

In economic terms, it must be a free lunch!

Fat chance! In economic terms there is never a free lunch. A cost must always be paid. Eventually, somebody must pay.

One such topic are the so-called "Energy Efficient" or "Bajo Consumo Energetico" or "Energieeffizienz" or "ЭНЕРГОЭФФЕКТИВНАЯ" or whatever governments wish to call it.

This topic looks great because it fulfills the three needs outlined above. Let's review:

  • Energy efficiency is "free" because it costs "nothing" to the consumer; costs are all on the manufacturers' side.
  • Energy efficiency provides large benefits, primarily by decreasing the use of natural gas, electricity and water. These are all savings a consumer can relate to.
  • Energy efficiency is popular because we all want a cleaner environment.

What is there no to like!?

Well… as it turns out, plenty!

It goes more or less like this. Governments enact legislation forcing manufacturers to make appliances more expensive to meet new "environmental" standards. Manufacturers then pass these extra expenses to the consumer in the form or higher prices.

Furthermore, low-end appliances are the ones that usually increase in price the most, making them further less available to low income people.

This process decrease the profit margin of manufacturers, which are then forced to raise prices even more. But they can only do so to a degree. At the new (higher) prices, their market has already shrunk because "affordability" has decreased. They cannot further increase prices. So, what do they do then?

They design for programmed obsolescence and non-reparability. In other words, they make the appliances cheaper (and more fragile) by decreasing their MTBF (Mean Time Between Failures). They also make the appliances almost impossible to repair thus ensuring that when an appliance finally breaks down, there are only three options:

  1. Call a professional to fix it
  2. Fix it yourself
  3. Buy a new one

Let's analyze the options:

  1. As more and more appliances are not designed to be fixed, there are less professionals available, which drives their service prices through the roof. Furthermore, there are less and less parts available, which also drive their prices through the roof. Consequently, it has reached a point where repairing an appliance has become more expensive than buy a new one! This is not a real option.
  2. Assuming that part could be find (a big assumption), repairing appliances it a technical job that most people (however handy they may be) are not really educated to do. Most such education comes from the Internet, but it is second-grade at best and vastly incomplete. And so, the outcome of this option is a guess. Assuming that one has the time, and assuming that we can diagnose the problem, and assuming that we can find the part and assuming that the part is not too expensive and assuming that we somehow learn the necessary technical skills, and assuming that we can execute the job without getting electrocuted or dying in a natural gas explosion, then yes. This option would work. However, it has a few too many assumptions than we are willing to accept.
  3. This is the last and only real option: Buy a new appliance. Which also is (strange coincidence) what manufacturers want!

And so, when an "Energy Efficient" appliance breaks down, we purchase a new one. This is very expensive indeed and negates a large portion of the claimed "energy savings".

Furthermore, many of the "energy savings" are just not there. Many appliances (but not all) that claim to be "Energy Efficient" are so only marginally. The savings are nothing more than perceived savings, not real savings. When one takes this into consideration, forcing us to buy new appliances becomes more expensive than just using the old and "Energy In-Efficient" ones!

Then, we also need to consider the environment. Let's assume that somehow (miraculously), appliances are all meaningfully "Energy Efficient". But this efficiency does not take into consideration the so-called "ecological footprint" that manufacturing new appliances produces. With the old appliances, although there were less "Energy Efficient", less of them were produced. This meant that far less ecologic damage was generated in their manufacturing. This reduced ecologic damage is now offset by the manufacturing of "Energy Efficient" appliances because more of them must be built!

Furthermore, there was a thriving repair market with old appliances. This meant that the manufacturing footprint was further reduced, since manufacturing partially shifted to making spare parts which have lower "ecological footprint" than manufacturing entirely new appliances!

In addition, the thriving repair market created jobs and saved money to people because repair services and parts were affordable.

In other words, when all the "ecological footprints" and "ecological savings" are taken into consideration, there really is no proof that the environment is better off. We strongly suspect that it isn’t. That the environment is far worse than before.

But what is known, is that all this "Energy Efficient" regulation of appliances have a much more negative effect on your wallet. This much we do know.

Also consider this.

Energy efficiency has been pushed by governments on car manufacturers relentlessly over many decades. Result? Some improvements on gasoline or diesel consumption, but nothing revolutionary.

However, more and more countries are now demanding or pushing for hybrid or electric vehicles. These vehicles not only have a gigantic "ecologic footprint" during manufacturing, they are also full of toxic chemicals (in their batteries), they are heavy (they actually consume more energy when driving) and they are more expensive. So, they are not ecologically friendly and are more expensive to buy and operate. All this thanks to governments!

Further consider this.

The best conversion efficiency from oil to mechanical energy is about 60% (gas turbines). This means, that 40% of the energy in oil is lost as heat. Then we have 95% efficiency in conversion from mechanical to electrical (electrical generators), which leaves us with 57%. Then, we have transmission losses of about 7%, which brings down the conversion to 53%. Then, we have battery charging/discharging in-efficiency of about 85% (twice) which leaves us with 51% conversion efficiency. In addition, we need to add the conversion from electricity to mechanical force of about 85% efficiency, which leaves us a with a grand total of about 35 % conversion efficiency.

In other words, a purely electric car is only 35% efficient in terms of energy use.

A hybrid is about 32.5% efficient.

A normal car energy efficiency is about 30% (i.e. chemical energy to mechanical).

There really isn't that much of a difference, only 5% in the best case scenario.

It is true that part of the electricity may come from renewable resources, but for the vast majority of the world, this is not so and it won't be so for the foreseeable future. Which means that the vast majority of the electricity comes from either fossil fuel (oil or coal!) or nuclear sources, both heavily polluting.

Electric cars or hybrids simply shift pollution from roads to electrical generation stations which have the same world-wide impact. The total pollution remains the same. So, there are no improvements here either.

And so, we are forced to buy more expensive cars that pollute the same and are less energy efficient per kilometer and produce higher ecological damage during manufacturing!

Does this sound like something you can agree with?

On the other hand, we have effective and efficient fuel cells that convert natural gas (and soon gasoline and diesel) directly into electricity with an efficiency of about 60% inside the car itself. They have a total energy conversion efficiency of about 50%!! Compare this with electrical (35%), hybrid (32.5%) and normal (30%). Yet, we can't use them because they are "polluting". Yes, they generate CO2 but they are lighter, cheaper, providing at least twice the energy efficiency per kilometer and are far less complicated mechanically speaking. Their "ecological footprint" is also ridiculously small when compared to any other car. Yet, we cannot use them (or are "discouraged" from using them) because they "pollute". Does this make any sense to you?

On the other hand, governments are pushing Hydrogen fuel cell technology which has a much higher ecological footprint and pollution levels than any other solution (including gasoline, diesel and natural gas) simply because of the technological requirements of generating, transporting and storing Hydrogen. Yet another uber-expensive dead-end technology brought to you by your government,under the false excuse that it does not pollute! No common sense here either!

CONCLUSION

The real price of government regulations is difficult to see because it is scattered among many fields; from pricing to ecology, from labor markets to inflation and many others. Government regulation does not, in any shape or form, improve our lives. It is expensive, unnecessary and burdensome.

Next time you have the opportunity to review a government regulation, look for all the unintended consequences and the many prices we will all have to pay because of them. Then remember that their only purpose is to serve as job security for politicians and bureaucrats. Or not. Your choice.

Note: please see the Glossary if you are unfamiliar with certain words.

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