MIT Sloan Executive Education innovation@work Blog

Are consumers or lawmakers better at regulating energy efficiency standards?

A recent energy goal set by President Obama has MIT Sloan Professor Christopher Knittel and some colleagues questioning how best to track and control the public’s use of energy efficiency programs to make that goal a reality. The President’s goal aims to cut in half the energy wasted by our homes and businesses over the next 20 years.

However, Knittel, who is the William Barton Rogers Professor of Energy Economics at MIT Sloan and Co-Director of the Center for Energy and Environmental Policy Research (CEEPR) at MIT, says before we buy into more stringent energy efficiency goals, we need to analyze the current situation more rigorously.

Do Americans need “Big Brother” to set energy standards or are we able to do it on our own? In many cases, government-mandated programs do help us save energy; however, in other cases consumers make sensible choices on their own and might achieve better results if they regulate themselves. The bottom line, says Knittel, is we often don’t have enough information to know the difference.

E2e Project Seeks to Inform Energy Decisions

Thanks to the E2e Project—a new partnership between MIT and the University of California at Berkeley—that information could be close at hand. Through in-depth research and the use of big data and cutting-edge analytics, the E2e Project will help inform energy decisions by consumers, as well as those who create the laws. A first step is to determine what government programs work and why.

Many energy decisions can be complicated because consumers often make purchases without realizing their energy impact on the world around us. Take, for example, the purchase of large-scale appliances or automobiles. Today, government-mandated energy-efficiency labels help, but more information is needed. In addition, some government-mandated energy efficiency measures can be difficult to evaluate.

A more detailed analysis will help consumers identify whether they or the lawmakers are systematically making mistakes when it comes to saving energy. However, no matter who is at fault, it will benefit everyone if we can determine which energy efficiency steps work and which ones ultimately give us the best return on our investments—monetarily and environmentally.

Knittel and his colleagues are confident that their research will provide the American public with a more accurate picture of what we need to do to reach that 20% goal set by President Obama—and positively affect the world we live in today, as well as tomorrow.

Knittel's research focuses on industrial organization, environmental economics, and applied econometrics. His research has appeared in The American Economic Review, The Review of Economics and Statistics, The Journal of Industrial Economics, The Energy Journal, and other academic journals. He also is a Research Associate at the National Bureau of Economic Research in the Productivity, Industrial Organization, and Energy and Environmental Economics groups.