Explainer Episode 57 – Natural Gas Bans, Appliance Efficiency Standards, and Consumer Choice

[Music and Narration]

 

Introduction:  Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.

 

Sarah Bengtsson:  Hello, and welcome to the Regulatory Transparency Project’s Fourth Branch podcast. My name is Sarah Bengtsson, and I am Associate Director of RTP here at The Federalist Society. Today, we are delighted to host Ben Lieberman and Professor James Coleman for a discussion on federal and state efforts to scale back the use of natural gas by consumers. Thank you both so much for joining us today.

 

For our audience, Ben Lieberman is a Senior Fellow who specializes in environmental policy at the Competitive Enterprise Institute. Prior to this role, Mr. Lieberman served for seven years as a Senior Counsel on the U.S. House Committee on Energy and Commerce.

 

Also joining us today as our guest host for the podcast is Professor James Coleman, who teaches at Southern Methodist University Dedman School of Law. Professor Coleman’s scholarship focuses on energy policy, including energy commodity transport and trade and market regulation. 

 

In the interest of time, I’ll stop there, but you can read their full and impressive bios at regproject.org. With that, I will hand it over to our host. Professor Coleman, the mic is yours.

 

James Coleman:  Thank you so much. It’s wonderful to be here today. Looking forward to talking with you. So let’s start by considering what are the basic kinds of regulations that are starting to be used to limit natural gas use by consumers? I think, maybe, starting on the federal side and then, maybe, suggesting what are some of the other initiatives that we’re seeing on the state side?

 

Ben Lieberman:  Well, at the federal level, there still isn’t any explicit authority to regulate on the basis of climate change, so what we’re seeing is 50-year-old statutes/40-year-old statutes being used—or I would argue, misused—for that purpose. And we have been certainly seeing a lot of that with the National Environmental Policy Act, Clean Water Act, Clean Air Act, mostly upstream, to go after oil and gas production, or midstream, to target permit approvals for pipelines, etc. Now we’re seeing that agenda going towards the end of the pipe and dictating choices for end users and particularly consumers and especially this effort to try to ween the American homeowner away from natural gas and towards the electrification of everything. 

 

And among the efforts at the federal level to do this, we’ve seen appliance efficiency standards being used, as the climate considerations are now a finger on the scale in favor of new rounds of efficiency regulations for home appliances and especially appliances like stoves and water heaters and furnaces that come in natural gas and electric versions. These regulations—or these proposed regulations—are very much steered towards disfavoring the natural gas version of these appliances and favoring the electric version instead. 

 

And then, at the same time we have these regulations going on, we also have, for example, provisions in the inflation reduction act that provide $840 in incentives for the purchase of a new electric stove, zero for the purchase of natural gas stoves, other incentives for electrification, as well, for other appliances. And it all adds up to tilting the balance against the use of natural gas. That’s what’s going on at the federal level. At the state and local level, you start to see these restrictions on new natural gas hookups.

 

James Coleman:  That’s right. And so, I wonder if we’re thinking about — clearly, these kinds of standards — if they’re taking certain appliances off the market or favoring, substantially, one kind of appliance over another, in some ways, that goes against what you’d think about normally as consumer choice. There’s obviously a number of differences between having a natural gas stove and having an electric stove or having natural gas appliances and having electric appliances, and mandating one kind or limiting sales of one kind certainly goes against consumer choice. But there’s obviously some justifications that the administration is using. 

 

Now, one you mentioned, which is carbon dioxide. I guess the theory is that, of course, it takes carbon emissions to produce electricity that go and run your appliances, just like when you burn natural gas, there’s carbon emissions from that. But the idea is, “Well, maybe electricity will get cleaner over time. We’ll have more solar and wind power, and so there’ll be less carbon emissions associated with that electricity that goes to your house than the natural gas.” So that’s kind of the carbon argument.  

 

You’ve also heard arguments based on health—that there is some danger to burning natural gas within the house. And then you’ve heard arguments about prices—that there is some — that maybe these new appliances will be more efficient over time and save consumers money. So I’m just curious if we could take those one by one? Maybe, let’s start with carbon. Then we’ll talk about the health issue that’s been raised, and then we can think about how this impacts prices.

 

Ben Lieberman:  Well, I think there’s a lot of problems with the argument that carbon emissions will be reduced through electrification. As you mentioned, electricity also requires — right now, 60 percent of it is generated through coal and natural gas, which also has greenhouse gas emissions. And there’s a lot to be said for the direct use of natural gas in the home. For example, you think of the line losses that occur from the electric power station to your home. There’s no problem with that if you’re burning the energy on site. So, yeah, I think you have to engage in a long chain of assumptions—and especially assumption of a wholesale switch away from natural gas and coal towards an almost completely renewables-dominated grid—before you can realistically even suggest that carbon dioxide emissions will be reduced by this electrification agenda. 

 

And one wonders, “Why all the expense to consumers of forcing this electrification agenda so quickly?” But I think, in any event, consumers should be the ones to make the ultimate decision here. And again, the American people, through their elected representatives, have not decided to regulate greenhouse gasses. So doing so—surreptitiously, through these regulations that do restrict consumer choice—I think, is very problematic. These appliance efficiency standards are simply not climate change statutes. They’re actually designed to benefit the consumer, and that’s clearly, in my view, not happening with these efforts to push a very aggressive efficiency agenda. 

 

Yeah, there are theoretical savings here, but these regulations boost the upfront costs of these appliances, sometimes more than is likely to be earned back in the form of energy savings. And that’s been true of past standards—for air conditioners, for example. Other standards greatly compromise product performance. I don’t think very many dishwasher owners are too thrilled about the couple dollars a year they save in energy when they’re waiting two hours for a load of dishes to be completed where it used to be one hour before these standards took effect. So this is not a good deal for consumers, and it doesn’t really reduce greenhouse gas emissions.   

 

Now, in terms of the health and safety arguments, again, I think those are — that’s the ostensible reason, for example, for the Consumer Product Safety Commission to be involved in that because, again, they don’t have explicit climate authority, so they have to say it’s for safety reasons. But I think it stands to reason that the safety of natural gas stoves, for example, has been proven. They’ve been around for a very long time. I grew up around one. You probably grew up around one. The idea that there were these hidden dangers that nobody really noticed until lately strikes me as pretty far-fetched. 

 

And you look at the studies that do claim this link between indoor air quality problems and asthmatic children from gas stoves — they’re studies that are closely associated with environmental groups—groups that have explicitly said that they consider climate change an existential threat and want to stop the use of natural gas. These studies are not independent. But you do look at other independent studies; they point away from there being a clear link between gas stove usage and increased incidents of asthma. So I think there’s a number of problems there. But, again, because there is no explicit climate rationale, climate authority, agencies have to make these kinds of arguments.

 

James Coleman:  Okay. So there’s actually been three very complex questions I think are worth exploring here that we’ve talked about. The first is the question of whether there is statutory authority to reduce greenhouse gases. And so, the Supreme Court has ruled—and this has not been overturned—that greenhouse gases are a pollutant under the Clean Air Act. And so, there are regulations that are focused on greenhouse gases under the Clean Air Act. 

 

When you say that these — the statutes don’t focus on greenhouse gases, you’re talking about the efficiency statutes that are being used to regulate the appliances. So I think that’s an important one. People read about — that the Clean Air Act standard that’s designed to reduce emissions from power plants — there’s going to be whole debate about whether that’s authorized under the Clean Air Act. But under current law, the — it is true—greenhouse gases are a pollutant under the Clean Air Act. When we’re talking about these efficiency standards, it’s a different issue because there, the government is supposed to be addressing energy efficiency. 

 

And so, the argument here that Ben’s making is that you shouldn’t be using that to really go after carbon emissions. So that’s a whole separate debate in regulatory policy where we say, “Should you be using a regulation to go after what the regulation is designed to address, or should you be using it to provide all these incidental benefits that you say come from reducing some other pollutant?” So I think that’s the statutory authority question. It’s interesting and important to talk about that. 

 

Second question—and this is widely debated—how much does moving to electricity reduce carbon emissions overall? Because we know, as Ben says, 60 percent of that electricity comes from fossil fuels—about 20 percent from coal, 40 percent from natural gas. And so, you’re using that electricity; does that emit just as much carbon? And that really depends on the efficiency of the electric appliance that you’re using. 

 

So if you have a basic appliance that’s just either turning electricity into heat or turning natural gas into heat, typically, it’s going to be more efficient to just have a natural gas appliance because, basically, you’re just sending that natural gas all the way to the home, burning it for heat. 

 

If, instead, you’re using electricity, you’re sending that natural gas to a power plant where it’s burned for heat. That heat is turned into electricity. That electricity is sent to the home and turned back into heat. So typically, that uses at least twice as much natural gas, and so that can be a very inefficient process, especially during — especially because given periods of stress—when we most need home heating—typically, the grid is mostly running on natural gas or even dirtier sources like fuel oil. So certainly, it’s up for grabs on those less efficient appliances. 

 

Now, you’ll often hear the argument that, “We’re not arguing for those inefficient electric appliances. We want consumers to bring the very newest cutting-edge energy and electricity-efficient appliances. And so, those will mean that we don’t use as much energy, and so we reduce greenhouse gas emissions.” Now, the challenge with that is that often it’s hard for consumers to actually find these because, again, these are sort of cutting-edge sources that not everybody has access to. 

 

So if you go and talk to your HVAC person, depending on where you are in the country, maybe they’ll be happy to install a heat pump for you. I have one in my house. It works okay, but sometimes there’s problems with those because it’s kind of a cutting-edge technology. And if you have — in some places, they may not be willing to do that because it doesn’t really operate at the temperatures that you needed to operate it. 

 

So that’s a really complex question, and as you said, it kind of gets to all these questions of, “Should consumers have the choice between these different technologies that may work in certain circumstances but not in others? Or should we mandate some of these more cutting-edge technologies or subsidize them so that people choose one source rather than the other because that is more likely to reduce carbon emissions?” 

 

Okay. Third thing. These health studies. Yes, they’re very complicated. This is an area that’s still being studied. So there was a — sometimes people will point to — and the question here is, “Does using a natural gas stove in your house lead to some kind of air quality — indoor air quality problems?” And one thing that people should be clear about is anytime you cook anything in your house, that does lead to some emissions. And the vast majority of emissions that happen in your house are going to be because of what you’re cooking, not because of what you’re cooking it with. So even if you’re — I mean, even if you’re a better — I burn plenty of stuff, but even if you’re a better cook than me, most of the emissions are going to come from the thing you’re cooking, not from the natural gas or the electricity. But the argument is maybe there’s a marginal contribution to indoor air quality problems from that stove burning, and there are studies on both sides of this issue. 

 

So there’s been some meta-studies that look at lots of studies and says, “Oh, there does seem to be some association,” but they can’t really control for all the things that might be responsible for that association. Some of the best studies say, “No, we don’t see any connection between these issues.” But that’s the debate. Is there, potentially, a health impact for people living in the house from those stoves? And we’re — that is something that is an active — that is actively being studied. 

 

But I think it’s important for people to understand if you’re concerned about indoor air quality, the main thing you want is ventilation because there’s always going to be emissions from the thing that you’re cooking. And so, you need to make sure that you have a well-operating hood and ventilation system on your stove so that you limit your exposure to those pollutants. And that’s true whether you have an electric stove or a natural gas stove.    

 

Okay. And so, then the third thing I wanted to talk about is what’s the price impact? A lot of times, these efficiency arguments are based on the idea, “Well, maybe this new appliance will cost you more money, but it’s going to save you money over time.” What do we know about the impact of some of these gas hookup bans or gas — or some of these proposed gas stove bans or some of these ideas of some of the incentives that we have for electric appliances and how they might impact consumers in terms of prices?

 

Ben Lieberman:  Well, starting with the Department of Energy—ironically, the same agency that’s in some ways targeting natural gas appliances disproportionately—the Department of Energy finds that natural gas is about three and a half times cheaper than electricity on a per-unit energy basis. So there is very good reason why a lot of people prefer natural gas heating, natural gas water heating—I mentioned water heating. That’s the latest of a long list of home appliances that are subject to a new round of efficiency standards. And I think the problem with these standards is that one size does not fit all. No two homes are alike. No two homeowners are alike. And we all know our own, individualized circumstances and preferences better than us experts here in Washington, D.C. So I think it’s almost always problematic when the federal government steps in and sets these standards.

 

Keep in mind, whatever the environmentally friendly, more efficient, or electric version is, that’s going to be available for those who want it. The only thing that standards do is force that choice on everyone, whether it makes sense for them or not. So, with very rare exceptions, I’m always in favor of more consumer choice. 

 

The real thing to do is not to trust the Department of Energy to know what’s best for you. It’s to hire a good contractor and talk to that contractor. Let that contractor know what you want. You can tell that contractor, “I’m an environmentalist. I want to do the right thing for the environment, and I’ve been convinced that electrification is the right thing,” or, “I’ve been convinced that these new induction stoves — this new kind of stove is the right thing to do.” Or whatever it is, talk to that contractor. Or you might want to tell that contractor, “Listen, I’m on a budget. I need something that’s very affordable right now,” or, “I’m going to be selling my house in few years, so it doesn’t make sense for me to buy the high-end models.” And I think it’s that range of circumstances that is hurt when we have these arbitrary federal standards. 

 

James Coleman:  I think it’s important to understand that point, which is, often, when these new standards are announced or proposed, you will see statements from the federal government—and actually, often, the media, as well—that these standards will save consumers some amount of money. They’ll save consumers millions of dollars or billions of dollars. It’s important to understand that’s a little bit misleading. So when people say, “It will save consumers money,” what they mean is, this is mandating more efficient options that will — over time, consumers will save money by using them. 

 

Now, what’s a little bit misleading about that is, of course, those models would be available for sale whether or not the government mandated them. So if, in fact, they would save consumers millions of dollars or billions of dollars, then consumers would choose those products unless they have some other problem that makes them not want to buy that product.  

 

You gave the example, sometimes more efficient dishwashers or laundry machines will take twice as long/three times as long as less efficient ones. So it’s a little bit misleading when they say they’ll save money for people because they wouldn’t save any money. Presumably, people would’ve purchased those more efficient models anyway if they were really better, considering the savings that they have. 

 

And there have been a number of studies of this. Almost all those studies say consumers do take into account the savings that they would receive from a more efficient appliance and, more or less accurately, consider how that reduces the cost of them of the appliance, over time. So this isn’t a case where consumer ignorance is really a justification for government regulation.   

 

Okay. There’s another — price impact, I think, is sometimes not focused on as much but, of course, is also important. So if we look at places that have had natural gas bans or, basically, very strong incentives to push people away from natural gas — it’s important to understand that both electricity and natural gas are often sold to consumers—usually sold to consumers—by utility. 

 

And the way utility rate regulation works is that the utility — generally—if they act prudently—they are going to be — there’s sometimes different standards, but as long as they act responsibly, they’re going to be able to recover the full cost of their investment in providing that service to all the consumers that they serve. And the impact of that is if you change something so that you cut in half the number of natural gas consumers that you are serving, the normal result would be that natural gas prices for all the other consumers would double because the utility would still have to get all of its money back. And so, you would charge them twice as much.  

 

So I think sometimes consumers think, “Okay. I already have my natural gas stove. If the government wants to ban new people from having natural gas stoves, no problem for me.” But I do think it’s important for consumers to understand that when the — if there’s something done to stop — to reduce the number of people using that natural gas utility, for people that remain, the prices will go up. And there’s ways that the government could try to address that by either bailing out the utilities or providing money, but, of course, those also all cost government money. So there’s that kind of complicated impact on utility prices that we may see, as well, to the extent that places are successful in pushing consumers away from natural gas. 

 

Okay. All right. Well, are there any other things that you think that consumers should keep in mind or any developments that we should be looking for in the next three to six months on this question of natural gas bans, incentives for electric appliances, and natural gas hookup bans?

 

Ben Lieberman:  Well, there’s been a couple of interesting cases lately. At the federal level, the American Public Gas Association v. Department of Energy, they challenge commercial boiler efficiency regulations. Now, the commercial standards are similar but not identical to the residential ones, but the American Public Gas Association won. The court vacated that Department of Energy regulation, saying that it wasn’t — it was arbitrary and capricious. Bottom line, the court didn’t defer to the agency’s analysis. They didn’t find the analysis particularly convincing, and that’s surprising because usually, the Department of Energy can come up with a big, complicated analysis and trusts that the court won’t second guess it. This time, they did. 

 

And, in fact, the court had shot down an earlier attempt by the agency to do so, and then the agency came back with, essentially, the same junky analysis with just a few tweaks, and they got shot down a second time. And so, what that tells me is that even apart from what may happen to Chevron deference that, at least, when it comes to these Department of Energy efficiency regulations, at least this one court was not buying the analysis that the agency was selling. 

 

Another interesting case was the California Restaurant Association took on the City of Berkeley and its ban on natural gas hookups. They won, as well. The court held — the Ninth Circuit held that those kind of regulations are preempted by federal appliance regulations. And the City of Berkeley was saying, “Well, we’re not regulating appliances; we’re just regulating the hookups.” But the court, essentially, held, “Well, that’s the same thing. You can’t use a natural gas appliance if you don’t have the piping that brings the natural gas into this new building.” 

 

I’d also add that it was the California Restaurant Association — a lot of small businesses—including quite a few first-generation immigrant restaurants—a lot of cuisines depend very heavily on natural gas. You just can’t run a restaurant with electric stoves. And I think that’s an important victory, and it shows that there is some pushback to this agenda. 

 

And again, I point to the January backlash that the American people had to the notion that their gas stoves might be taken away from them. The American public does not buy the climate agenda—or, at least, to the extent that it feels that it’s justified to take away their energy choices. So I think there still is some battles left to be had on this, and I think the American people are not yet convinced that they should have their energy choices restricted for environmental reasons. 

 

James Coleman:  Yeah. And so, that’s great. So it’s important to understand most of the actual regulatory action has been from the Department of Energy so far. So just this month, you have the D.C. Circuit knocking down that natural gas boilers rule. But some of the most controversial initiatives that we heard about were when we heard folks from the Consumer Product Safety Commission saying that because of the health impacts of natural gas stoves, they might potentially consider banning those stoves. As it turns out, they quickly backed off of that. As you said, it proved — that kind of led to a firestorm and proved very controversial. Although the CPSB has [inaudible 26:31] —

 

Ben Lieberman:  But their investigation continues.

 

James Coleman:  Yeah. Because they [inaudible 26:34] information. Right?

 

Ben Lieberman:  No. They’re moving ahead with their investigation of the safety of gas stoves. The rhetoric that they backed off isn’t quite accurate.

 

James Coleman:  I’m sorry. You’re saying that they didn’t back off.

 

Ben Lieberman:  They did not back off. No.

 

James Coleman:  Or the rhetoric they backed off or that they didn’t back off?

 

Ben Lieberman: That the claims on the part of the Biden administration that it isn’t going after gas stoves is not accurate.

 

James Colemen:  Yeah. They issued a request — I mean, they issued a request for information, right — that in March —

 

Ben Lieberman:  Yeah. And —

 

[Crosstalk]

 

James Coleman:  — on the safety of gas stoves. So that’s the — so that’s the — so there’s this idea that, potentially, they’re going to go — that they would continue going forward with it, with looking at regulation. And we’re going to have to see where that [inaudible 27:18]. I don’t know. Do you have any sense of the timeline on that?

 

Ben Lieberman:  I’m not sure of the timeline on that. And it’s also worth noting that after the administration denied it was targeting gas stoves, that’s when the Department of Energy and a second agency initiated its efforts on the efficiency of gas stoves, which I’ve taken a look at and really hits gas stoves much harder than electric stoves.

 

James Coleman:  Yeah. So it’s important to follow those two tracks, I think, federally—both the Consumer Product Safety Commission, the CPSC, and the Department of Energy. Is there another — is there anybody else that you would look at, federally, in terms of other regulations, that we’re expecting or should watch for?

 

Ben Lieberman:  Well, the Environmental Protection Agency has been petitioned to also target natural gas home appliances. They haven’t responded to that petition yet. The other thing we’ll see is the rollout of the Inflation Reduction Act—tremendous amounts of subsidies for the electrification of homes, also money for things like the electrification of subsidized housing. And so, the natural gas agenda is — or the electrification agenda, I should say, is being pushed on a number of fronts.

 

James Coleman:  All right. Well, thank you so much, Ben. It’s been great discussing this with you, and look forward to watching how this area of the law, both in the federal, state, and local level, continues to develop.

 

Sarah Bengtsson:  All right. Well, we’ll wrap it there. Thank you both so much for sharing your time and expertise with us today. 

 

[Music]

 

Conclusion:  On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at www.regproject.org.

 

[Music]

 

This has been a FedSoc audio production.

View more