Gas Furnaces: Big Brother Says No

By Robert Bradley Jr. -- October 11, 2022

“[The DOE exercise] is egregiously biased due to its reliance on overheated climate models, inflated emission scenarios, and pessimistic adaptation assumptions. Using biased [social cost of carbon] SC-GHG estimates to estimate net benefits is arbitrary and capricious..”

“Reasonable alternative assumptions about climate sensitivity and CO2 fertilization substantially drive down SC-GHG estimates, even pushing social cost values into negative territory.”

The climate road to serfdom is one step at a time on different paths. One path is decarbonization, one step is government policy prohibiting or discouraging homeowners from using gas furnaces of their liking. The simple answer, which Milton Friedman popularized a half-century ago, is: free to choose.

An activist U.S. Department of Energy seeks to regulate/prohibit gas furnaces on a pure physical efficiency standard, demoting up-front cost considerations, as well as back-end reliability issues (such as when the power goes out). A fair-field, no-favor competitive market for home and business heating—a let the market decide policy—is the obvious choice in place of one-size government policy from Washington, DC.

At stake is a proposed DOE rulemaking.

Department of Energy: Energy Conservation Standards Program: Energy Conservation Standards for Consumer Furnaces, Notice of Proposed Rulemaking and Request for Comment Docket Number EERE-2014-BT-STD-0031 87 FR 40,590 (July 7, 2022).

The following free market, classical liberal groups submitted a comment on the Notice of Proposed Rulemaking:

Competitive Enterprise Institute, Consumers’ Research, Center for the American Experiment, JunkScience.com, Project 21, Caesar Rodney Institute, Rio Grande Foundation, Committee for a Constructive Tomorrow, FreedomWorks Foundation, Heartland Institute, Thomas Jefferson Institute, Independent Women’s Forum, Independent Women’s Voice, and Institute for Energy Research

The excerpts below focus on economics and energy freedom. But the legal case is made that “DOE is required to balance the potential energy savings over the life of the appliance against any additional costs in the form of a higher purchase price and/or increased maintenance expenses.”

INTRODUCTION

The undersigned free market and consumer organizations have a longstanding interest in bringing to light the deleterious consequences of federal regulations, which are often neglected by agencies in their attempts to adopt a regulatory agenda. For over 20 years, we have participated in rulemakings conducted by the Department of Energy (DOE) as well as litigation regarding energy and water conservation standards for home appliances.

This includes agency actions impacting dishwashers, air conditioners, clothes washers and dryers, showerheads, and light bulbs. Our particular focus has been on ensuring that the consumer protections built into the law are given full weight in the rulemaking process.

In our view, these protections have often been downplayed or ignored by the agency when setting excessively stringent efficiency standards that raise overall costs and/or reduce product quality and choice.…

OVERVIEW OF ARGUMENTS

• “The primary difference between a [gas-fired] non-condensing and condensing furnace is that a noncondensing furnace has only one heat exchanger while [an electric] condensing furnace has two. The second heat exchanger allows more heat to be taken out of the exhaust and utilized, which is why condensing furnaces can achieve higher levels of efficiency. However, it adds to the up-front cost of the furnace and makes venting considerably more challenging.
• “These costs can increase sharply with the stringency of the standard, and a point may be reached where the level is set so stringently that it costs consumers more than it saves them. EPCA seeks to avoid such a result.
• “[There is a need] to protect consumers from natural gas furnace standards so stringent so as to effectively force non-condensing versions off the market in favor of condensing furnaces with very different characteristics that make them incompatible with some homes.
• “… DOE should not use the Interagency Working Group’s (IWG) social cost of greenhouse gases (SC-GHGs) analysis to calculate net regulatory benefits. The SC-GHG—an estimate of the present value of the cumulative climate damages of an incremental ton of carbon dioxide equivalent (CO2e) greenhouse gas (GHG) emissions out to the year 2300—is too speculative and subjective, and too easily manipulated for political purposes, to be weighed in the same scales with the near-term consumer costs of the proposed standards.
• “[The] IWG exercise is egregiously biased due to its reliance on overheated climate models, inflated emission scenarios, and pessimistic adaptation assumptions. Using biased SC-GHG estimates to estimate net benefits is arbitrary and capricious. DOE’s net-benefits calculation also overlooks the obvious problem that, however estimated, the climate benefits of the proposed standards are too small to be detected or verified; “benefits” no one can experience are so in name only.

CONSUMER ISSUES

• “No two homes are exactly alike, nor are any two homeowners. The above-mentioned features provision acknowledges individualized circumstances and preferences and preserves them by ensuring that DOE standards are not set so high as to create one-size-fits-all limitations. Even if only a few homeowners need non-condensing furnaces, the law would protect them, but in truth quite a few do.
• “… a natural gas furnace must be compatible with a home’s venting system, and condensing furnaces are frequently not. Further, it is not merely a matter of spending money to modify the existing venting system to be compatible with a condensing furnace. Depending on the home’s configuration, it may not be practical or even possible to do so. In other cases, it could be done but with very real disadvantages such as compromised safety or the need for ducts traversing rooms or components that take up additional space.
• “The problems are particularly acute in homes where a non-condensing furnace shares the venting system with other appliances such as a water heater, and continued operation of these other appliances may be jeopardized by a switch to a condensing furnace. A forced shift towards condensing furnaces would disproportionately burden lower income homeowners who tend to have older and more space-constrained houses – the kinds most likely to need a non-condensing furnace.
• “[Government intervention] may have adverse environmental justice implications not acknowledged by the agency. The circumstances are as varied as the nation’s housing stock, and condensing furnaces cannot suit every need. In fact, the elimination of non-condensing furnaces would likely force some homeowners to make a switch, not to a condensing natural gas furnace but to an electric furnace, with higher operating costs as well as other potential disadvantages.
• “From a consumer choice perspective, it is important to emphasize that … any homeowner who wants a condensing furnace (or an electric one for that matter) will always be free to select one.
• “[An] efficiency-obsessed [regulatory] approach … jeopardizes the interests of homeowners.

CLIMATE MODEL MISDIRECTION

• “Climate change is nowhere mentioned … on how to set and amend appliance efficiency standards. [U.S. DOE] has elsewhere proclaimed that “[a]ddressing the effects of climate change is a top priority” …[with a] new agency-wide agenda … “to dramatically increase the efficiency of appliances….”
• “[U.S. DOE] references Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” (January 25, 2021), the United States re-entering the Paris Agreement, and “the need to confront the global climate crisis” as justification for strengthening furnace standards.
• “The economic analysis … incorporates the social cost of greenhouse gas emissions and thus the benefits of avoiding these emissions. It quantifies projected climate benefits exceeding $1 billion dollars annually and $16.2 billion dollars in total.
• “… the agency’s attempt at quantifying these impacts is highly problematic.
• “The social cost of greenhouse gases (SC-GHG) is an estimate in dollars of the “present value” of the cumulative climate change damages caused by an additional (“marginal”) ton of carbon dioxide-equivalent (CO2e) greenhouse gases emitted in a given year. It is also an estimate of the benefit of avoiding or reducing one ton of emissions in that year.
• “Although DOE claims its climate-benefits estimate did not inform its selection of regulatory standards, discussion of the SC-GHG is warranted for three reasons. First, the concept of GHGs as a social cost (negative externality) is a factor in DOE’s selection of the standards, as it must be in any GHG emission-reduction policy. Second, DOE claims the IWG used the “best available science” to quantify GHGs’ social cost. Third, the standards’ purported climate benefits comprise a substantial portion of the NOPR’s total benefits.
• “Specifically, if discounted at 3%, IWG-based climate benefits ($16.2 billion) constitute approximately one-quarter of total benefits ($65.2 billion). If discounted at 7%, climate benefits ($16.2 billion) constitute more than half of total benefits ($32.2 billion).
• “Touting $16.2 billion in climate benefits … reflect[s] significant methodological biases and even scientific malpractice.
• “SC-GHG estimates are highly sensitive to the modeler’s choice of inputs and assumptions. For example, when the FUND model is updated with empirical information regarding climate sensitivity and carbon dioxide fertilization, the SCC drops to very low numbers with substantial probabilities of being negative through 2050.
• “A negative SCC is another way of saying a net benefit.
• “Climate sensitivity is typically defined as the amount of global warming that occurs after the climate system has fully adjusted to a doubling of atmospheric CO2 concentration. Rising CO2 concentration enhances the growth of most food crops and other plant life by increasing their internal water use efficiency and photosynthetic activity.
• “SC-GHG estimates are highly sensitive to:
• The discount rates chosen to calculate the present value of future emissions and reductions.

• The calculated climate sensitivities chosen to estimate the warming impact of projected increases in atmospheric GHG concentration.

• The timespan chosen to estimate cumulative damages from rising GHG concentration.

• The extent to which the SC-GHG reflects empirical information about the agricultural and ecological benefits of CO2 fertilization.

• The assumptions chosen regarding the potential for adaptation to decrease the cost of future climate change impacts.

• The choice of socioeconomic pathways used to project future GHG emissions and concentrations.

• “… if SCC analysts intend to make climate change look economically catastrophic and build a case for aggressive regulation, they:

• Run the IAMs with discount rates with below-market discount rates, which inflates the perceived present value of future climate damages and emission reductions.

• Use IAMs with climate sensitivity derived from general circulation models that, on average, project twice as much warming in the tropical troposphere as has been observed over the past 42 years.

• Calculate cumulative damages over a 300-year period—i.e., well beyond the limits of informed speculation about future economic vulnerabilities and adaptive technologies.

• Minimize the agricultural benefits of atmospheric CO2 fertilization by, for example, averaging the results of three IAMs, two of which (DICE and PAGE) effectively assign a dollar value of zero to carbon dioxide’s positive externalities.

• Include at least one IAM (e.g., PAGE) that unrealistically assumes adaptation cannot mitigate the cost of climate change impacts once 21st century warming and sea-level rise exceed 1°C and 10 inches, respectively.

• Run the models with implausible emission scenarios that assume the world repeatedly burns through all economically-recoverable fossil fuel reserves.

• Inflate the net benefits of climate policy for U.S. citizens and residents by comparing domestic costs (apples) to global benefits (oranges).

• Conceal those malpractices by ignoring any peer-reviewed studies that identify and challenge the aforementioned biases.

• “DOE defends the Obama and Biden administrations’ practice of comparing domestic regulatory costs to global climate benefits, noting, for example, that international trade, investment, and tourism create “spillover pathways” that make other nations’ problems our problems as well. Whatever the merits of that argument, it does not rebut the fact that Americans bear most of the costs of domestic climate regulations and non-Americans reap most of the purported benefits of U.S. emission reductions.
• “There is no scientific or ethical justification for hiding the comparatively smaller domestic benefits of U.S. climate regulations. In short, the SC-GHG depends on so many questionable and biased methodological choices there is no good reason to believe [U.S. DOE] projected emission reductions have any actual monetary value.
• “Reasonable alternative assumptions about climate sensitivity and CO2 fertilization substantially drive down SC-GHG estimates, even pushing social cost values into negative territory.
• “However small (or negative) the global SCC would be after all reasonable adjustments are made to assumptions regarding discount rates, time horizons, climate sensitivity, CO2 fertilization, adaptive capabilities, and baseline emission trajectories, the SCC would be smaller still (or increasingly negative) if calculated on a domestic (U.S.-only) basis.
• “Logically, an agency’s reliance on unrealistic emission scenarios or adaptation assumptions is also arbitrary and capricious. Because DOE’s benefit-cost analysis incorporates SC-GHG estimates that rely on unrealistic models, emission scenarios, and adaptation assumptions, it is vulnerable to challenge as arbitrary and capricious.
• “[The alleged] climate change mitigation would be far too small for scientists to detect. It would make no discernible difference to weather patterns, crop yields, polar bear populations, or any other environmental condition people care about. Benefits no one can experience are “benefits” in name only. Such benefits are not real enough to be netted against $4.0 billion to $8.2 billion in higher product costs DOE estimates the standards would impose on consumers.

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Further Reading

The decarbonization crusade by Big Brother to expel natural gas from the home has been ably criticized by Mark Krebs, as well as Thomas Tanton. A four-part interview ran in January, “Mark Krebs on Energy Efficiency under Biden’s DOE”:

Part I: “Deep Decarbonization” Reigns

Part II: EERE Modeling

Part III: Biden’s Bias

Part IV: More Issues

Also see:

DOE Revisits Forced Electrification (Decarbonization) Rules re Non-condensing Furnaces, Water Heaters (August 2019)

Costing the Green New Deal and “Deep Decarbonization”: Some Clarifications (July 2019)

Dear EERE: Past Time to Debate “Deep Decarbonization” (Obama program inconsistent with America First energy policy) (February 2019)