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Stopping Climate Change: What We Can Learn From Refrigerators

By Philip Duffy

Since the Bella Center, site of the COP-15 climate negotiations in Copenhagen, was closed on Sunday, the hub of activity moved to the Forum building downtown. Here 165 of “the brightest and greenest companies” gathered to demonstrate how taking care of climate can also lead to the creation of jobs and new business opportunities. A highlight was an appearance by Steve Chu, the Nobel-prize winning physicist who now leads the U.S. Department of Energy.

Dr. Chu’s first slide taught an important lesson, which makes me optimistic that the steps required to stop climate change can also improve our lives, save money, and create new business opportunities. Sound too good to be true? Consider the history of refrigerators. Until the mid-1970s, the size and price of refrigerators increased steadily, along with their demand for energy. After the mid-70s, refrigerators continued to get larger, but their cost and energy use started to decrease. By 2008, the energy used by the average refrigerator had decreased by 75% (that’s right, it is four times less now) even though today’s refrigerators are much larger and cost less (in real terms) than they used to.

So what happened to reverse the upward trends of refrigerator cost and energy use? Government regulation: regulation of refrigerator energy use by the State of California.

Government regulation? We all know that government regulation increases cost., and if it were possible to make larger, cheaper, more energy-efficient refrigerators, the free market would make that happen. Except it didn’t! Why not? Making refrigerators the old-fashioned way was profitable, so there was no reason to innovate. Once the appliance industry stopped objecting to implementation of regulations, they discovered that new technologies and better ideas could not only exceed the regulatory requirements, but save money at the same time. What happened, in essence, is that regulation spurred innovation.

"How many University of Chicago economists does it take to change a light bulb?" Chu is fond of asking. "None," he replies. "If the light bulb needed changing, the free market would have done it."

What’s important in this tale is that what happened for refrigerators is bound to happen for other products as well. Climate change will force the world to look anew at energy use and generation, food production, transportation, virtually every aspect of life. The lesson from refrigerators is that addressing climate change will stimulate innovation that will produce better solutions.

Climate change will force the world to look anew at how it uses and generates energy, produces food, transports goods and people—virtually every aspect of life. The lesson from refrigerators is that addressing climate change will stimulate innovation and produce better solutions.

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