Monday, March 14, 2011

End Daylight Savings Time because it harms the environment. Wait, I thought it supposed to be good for the environment? Economics is so confusing...

You are welcome to read the whole research paper HERE, but I excerpted  the conclusion below with the relevant parts highlighted.  This is an excellent example of how studying the microeconomic effect of a policy, that is generally accepted by the public as a good thing, may indeed produce the opposite effect in practice. Is it time to do away with Daylight Savings Time (DST)? 


The history of DST has been long and controversial. Throughout its implementation during
World Wars I and II, the oil embargo of the 1970s, more consistent practice today, and recent extensions, the primary rationale for DST has always been the promotion of energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. This paper takes advantage of a unique natural experiment in the state of Indiana to provide the first empirical estimates of DST effects on electricity consumption in the United States since the mid-1970s. The results are also the first-ever empirical estimates of DST’s overall effect.

Our main finding is that—contrary to the policy’s intent—DST results is an overall increase in residential electricity demand. Estimates of the overall increase in consumption are approximately 1 percent and highly statistically significant. We also find that the effect is not constant throughout the DST period: there is some evidence for an increase in electricity demand at the spring transition into DST, but the real increases come in the fall when DST appears to increase consumption between 2 and 4 percent.

These findings are generally consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. According to the dates of DST practice prior to 2007, we estimate a cost to Indiana households of $9 million per year in increased electricity bills. Estimates of the social costs due to increased pollution emissions range from $1.7 to $5.5 million per year.

In conclusion,we find that the longstanding rationale for DST is questionable, and if anything, the policy seems to have the opposite of its intended effect. Nevertheless, there are other arguments made in favor of DST. These range from increased opportunities for leisure, enhanced public health and safety, and economic growth.

In the end, a full evaluation of DST should account for these multiple dimensions, but the evidence here suggests that continued reliance on Benjamin Franklin’s old argument alone is now misleading

HT: Economists do it with Models
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