But the failure is also political. When there are so many market failures, government should intervene to make markets work more efficiently. For example, Lovins suggests that the government set tough efficiency standards for buildings, charge fees to developers who don't meet the standards, and use those fees to pay rebates to those developers who exceed it. Government should first eliminate public policies that discourage efficiency and then encourage businesses and consumers to take advantage of efficient options. Electricity deregulation, for example, has wiped out very effective utility programs that promoted more efficient energy usage by customers as a way to forestall building more power plants.
Public policy can cure many market failures.
But Reagan froze the standards, and in the '90s congressional Republicans blocked new standards. Energy efficiency already has made a big difference. Since the 1973 oil crisis, increases in efficiency provided nearly three times more energy than was gained by expanding domestic energy supplies. And even with existing technologies, far more savings are possible. Federal subsidies for nuclear power or extractive technologies, like shale oil production, have been costly boondoggles.