On the importance of the supply side in demand-side management

We discuss how the structure of market supply affects the evaluation of policies to promote energy efficiency in household appliances. If competitive markets offer the levels that consumers demand, product standards inefficiently restrict choice. If suppliers price discriminate, minimum standards can restrict the inefficient use of energy intensity to segment consumers. We also compare the effects of average intensity standards, energy prices and innovation, and consider what the different behavioral predictions imply for empirical studies of energy efficiency. Good policymaking requires knowing not only how consumers value energy efficiency in their decision-making, but also how producers respond to those values.