Lightbulbs, Again: The Big Bulb Manufacturers Lose Their Market Maker

I’m sure the saga isn’t over yet, but for the moment Congress has starved the EPA’s lightbulb efficiency efforts of the money they needed to carry out their planned program (I’ve written about it a number of times this year - start here for my thoughts). While most of the surrounding discussions have replayed the same arguments that have come from both sides over the last few years.

Roger Pielke, Jr (fellow Breakthrough Institute Sr. Fellow) has taken a different tack, saying that stopping this effort is “anti-innovation, anti-jobs and, ultimately, anti growth”.. While I usually find my self agreeing with Roger’s logic, this time I find myself on the exact opposite side: the “light bulb law” was anti-competitive, anti-innovation, and anti-growth, and hopefully someone will salvage the good parts EPA’s lighting efficiency programs and keep the bulb law dead for good.

First, its important to remember that this is only an issue because the government took the unprecedented step of making the 100W incandescent light bulb, a popular, widely used product, illegal for energy efficiency reasons. (I know, they didn’t directly make the bulb illegal, but they set the standard at a point where the common bulb is, in fact, illegal. And I know that there’s lots of great bulbs on the market and coming out, but Americans have not been happy with any of them yet, and if they had, this law would be irrelevant.) EPA has had lots of successful efficiency programs over the years, but so far none had taken this step.

Why did the bulb manufacturers go along with this? They not only went along with the law, but they encouraged it, which is the root of my issues with it.

Efficient light bulbs are a financial dream for the bulb industry. They can charge far more than their traditional product, but it takes even more money from the electricity producers. As a result, customers save money in the long term, and previously unavailable revenue and profits move from the electricity generation industry into the light bulb manufacturing industry. What could be better?

The problem was that the American public didn’t play along. Even with massive consumer rebates and taxpayer and ratepayer funded ad/education campaigns, adoption was minimal. Americans felt the more efficient bulbs were inferior in ways that mattered to them. On the other hand, there wasn’t broad outcry against the efforts either; Americans are generally supportive of traditional efficiency programs, and were willing to accept it here as long as they still had choice.

I’m sure the EPA was also frustrated by the lack of progress, and at some point they and the bulb industry found out how aligned their interests were. It was at this point that the EPA, with full industry support and praise, took the unusual step of forcing consumers to switch, whether they wanted to or not (with the elitist DC undertones that, actually, most consumers are too dumb to make the right choice).

Roger’s believes that this is anti-innovation, because the large companies were promised the profits that would come with innovating more efficient bulbs. I believe the opposite, for two reasons. First, instead of innovating products that consumers actually wanted, the government stepped in and forced consumers to adopt the products they didn’t want, letting the bulb manufacturers from doing the innovation the market was demanding of them. Second, the government gave tilted the market in favor of the big, entrenched manufacturers, and against the disruptive, innovative startups. The big guys had taken a bet innovated and built a product Americans didn’t want, but instead of taking a hit and doing battle with startups in a weakened state, the government bailed them out of their mistake and forcefully redefined the market to their liking and benefit. This is the best way I know to drive venture money away from an industry, killing the jobs and innovation that come with the associated startups.

As I’ve said before, I’m a huge fan of the EPA’s energy efficiency programs. But when the EPA colludes with big business to shape markets in their favor, I’m on the other side.