Magnetic Fluorescent Ballasts: Market Data, Market Imperfections, and Policy Success

Many economists have strongly questioned engineering-economic studies aimed at demonstrating anomalously slow diffusion of energy-efficient technology and the benefits of regulations to promote such technology. One argument against such studies is that standard techniques of engineering-economics are either inappropriate for or are routinely misapplied in assessing the performance of the market for energy efficiency. This paper presents engineering-economic evidence on the diffusion of energy efficiency improvements that takes account of such critiques. We examine the engineering and economic characteristics of standard and energy-efficient magnetic ballasts for fluorescent lighting. Efficient magnetic ballasts represented an excellent investment for 99 percent of the commercial building floor stock, and a moderately good investment for 0.7 percent of the commercial floor stock. Still, these ballasts were only being adopted in the 1980s at a rate commensurate with the enactment of appliance efficiency standards in various states. In this case, there is solid empirical evidence for skepticism about the effectiveness of the market mechanism in promoting cost-effective energy efficiency improvements as well as evidence of the benefits of regulation to counteract this shortcoming.