Building Energy Codes: A Case Study in Regulation and Cost-Benefit Analysis

from the book Regulation and Economic Opportunity: Blueprints for Reform

Executive Summary

Cities and states adopt energy standards into building codes to reduce energy consumption. The intention was to improve energy independence as well as prevent environmental damages. In this chapter, economist Matthew J. Holian evaluates the costs and benefits of these policies by examining energy codes from Florida. The analysis is meant to provide an example of the main steps of regulatory cost-benefit analysis for policymakers to apply in their own considerations of energy codes and other regulations. Holian’s major recommendations are:

  • Policymakers should always apply cost-benefit analysis with a wide lens towards unintended and intended consequences. 
  • Many policies have rebound effects that reduce or sometimes negate the environmental benefits. For example, more fuel efficient vehicles may encourage increased driving or more efficient air conditioning might increase the use of air conditioners.
  • The findings of cost-benefit analyses are largely dependent on assumptions used in the analysis. Regulators should prod those who provide regulatory analyses on what those assumptions are and how they alter the analysis in addition to taking the recommendations offered by the author of the analysis.
  • Regulatory approaches like energy codes could be better replaced with simple carbon taxes or other taxes directly on pollutants.
CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.