Energy efficiency standards set minimum levels of energy efficiency that must be met by new products. Depending on the dynamics of the market and the level of the standard, the effect on the market for a given product may be small, moderate, or large. Energy efficiency standards address a number of market failures that exist in the buildings sector. Decisions about efficiency levels often are made by people who will not be responsible for the energy bill, such as landlords or developers of commercial buildings. Many buildings are occupied for their entire lives by very temporary owners or renters, each unwilling to make long-term investments that would mostly reward subsequent users. And sometimes what looks like apathy about efficiency merely reflects inadequate information or time invested to evaluate it. In addition to these sector-specific market failures, energy efficiency standards address the endemic failure of energy prices to incorporate externalities. In the U.S., energy efficiency standards for consumer products were first implemented in California in 1977. National standards became effective starting in 1988. By the end of 2001, national standards were in effect for over a dozen residential appliances, as well as for a number of commercial sector products.
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