Why is Energy Star on the cutting block?

When the Trump administration released its proposed budget for 2018, one of the most surprising line items on the cutting room floor was the EPA’s Energy Star program.

Unlike many of the 37 other programs that the administration wants cut for a total reduction to the agency’s budget of 24 percent, Energy Star does not represent a mandatory regulation or result in even a perceived loss of jobs in the American workforce. In fact, as a voluntary program that makes use of market recognition as a carrot, it works to help participating businesses do better business.

The Energy Star program has about 16,000 partners and claims to have saved consumers approximately $430 billion on utility bills since its 1992 creation. This adds up to roughly 2.7 billion tons of avoided greenhouse gas emissions. The administrative costs for the program are about $57 million annually. Assuming that this figure has remained roughly steady since 1992 and that the agency’s estimates for utility bill savings are correct, that means that Americans save about $314 for every dollar spent on the program. (Note: These “back-of-the-envelope” calculations likely miss the cost of private investments in efficiency that result in these savings.)

Considering that the Energy Star program is a vanishingly small part of the federal budget, that it is not coercive, that it results in significant savings and pollution reductions, and that it is extremely popular in the private sector and among consumers, it is perplexing that the Trump administration would move to cut it.


How does a voluntary program work?

Those outside of affected industries are often surprised to learn that the Energy Star program has found such success with voluntary standards. The program was pioneered in response to criticisms that strict environmental programs were negatively impacting American companies’ ability to compete in the global marketplace. While the voluntary approach wouldn’t work for every regulatory objective, the Energy Star program has found significant success by replacing the stick with the carrot.

The Energy Star logo is extremely well recognized among consumers and business decision-makers. In the commercial real estate sector, it’s possible to see the impact of Energy Star certification through rental rates, sale prices, and occupancy rates. In several studies cited by the regulator, all three categories see significant premiums. The Consortium for Energy Efficiency estimates consumers’ recognition of the Energy Star logo at 83 percent.

The program makes use of its reputation among consumers and decision-makers to reward companies that choose to comply with its voluntary standards. Partnering with Energy Star helps businesses to signal their commitment to environmentalism – a powerful driver of sales in modern America. A 2014 Nielson study found that over half of consumers across 60 countries were willing to pay more for goods and services from socially and environmentally responsible companies, and that number has likely increased since then.


Who’s fighting for Energy Star?

It isn’t just environmental activists working to keep the program from being cut. Speaking at the American Council for an Energy-Efficient Economy’s National Symposium on Market Transformation, Johnson Controls Inc. VP of government relations Mark Wagner called for businesses to lobby legislators to save the program, E&E News reported.

“Ask yourself, what is your organization doing? Ask what you are doing. Who is your member of Congress? Have you asked them to talk to appropriators?” Wagner told the audience. “Energy Star is one of the most recognized brands around. I think that credibility, that confidence, that avoiding controversy are really key to maintaining that public-private partnership.”

Wagner went on to say that he did not feel a privatized version of Energy Star would be able to accomplish the same goals or hold the same gravitas as it does under the EPA. He went on to compare that scenario to the fractured and confusing system under which food expiry dates are labeled.

President Trump’s proposed budget is just that: a proposal. The House and Senate have the true authority over the federal budget. It is likely that the proposal to cut Energy Star will face increasing resistance from lawmakers, perhaps even from some among the president’s own party. Even if it is cut, it is possible that it would find success as a private program, Wagner’s comments notwithstanding. Either way, it will be some time before we have a conclusive answer about the ultimate fate of the program.

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