How Many Ministers to Change a Light Bulb?

In February 2007, Australia became the first country in the world to announce that it was phasing out incandescent light bulbs in favour of compact fluorescent bulbs (CFLs). The Environment Minister, Malcolm Turnbull, said in a statement, “The climate change challenge is a global one. I encourage other countries to follow Australia’s lead and make the switch to more energy efficient products like compact fluorescent light bulbs.” (There is no indication that Turnbull intended a pun with his reference to a “global challenge”.)

CFLs use 70 per cent less electricity than traditional bulbs and were claimed to last ten times longer. Australia’s bulb ban was good news for General Electric (GE), Philips, Honeywell and other compact fluorescent lightbulb manufacturers, as well as retailers.

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Turnbull was praised for demonstrating his “environmental prowess”, for “recycling” an idea that Jon Dee from the group Planet Ark had been working on with Philips and with Turnbull’s predecessor, Ian Campbell. This coalition was about to launch a “Ban the Bulb” campaign, but Turnbull acted first. Planet Ark’s enthusiasm was understandable, but what was the motivation of Philips?

While we are used to corporations today signalling their wokeness, it was less of a factor then, and Philips’s main motivation was arguably financial. CFLs had been around since about 1980, but people did not buy them in great numbers—because of price, aesthetics and health reasons. Philips had introduced the first commercial CFL, after GE developed the technology in 1976 but decided against commercial development. While others had subsequently developed CFLs, the bulb ban effectively removed from the market not just a competing product, but one that the market preferred overwhelmingly.

While Australia was the first to adopt the ban, thanks to Turnbull’s enthusiasm, other jurisdictions followed, and in most cases this came after lobbying campaigns by Philips. Its approach in Australia in partnering with Planet Ark was duplicated in the Netherlands, and possibly elsewhere (although there is no evidence of this). In the Netherlands (the home of Philips) an investigative journalist revealed that the adoption of the ban by a parliamentary majority in The Hague came after combined lobbying pressure by Philips and Greenpeace. The parliament also instructed the Dutch Environment Minister to push for an (ultimately successful) extension of the ban to the European Union.

The Dutch and Australian campaigns were perfect examples of what Bruce Yandle termed “Bootlegger and Baptist” coalitions: the normative actors run a virtuous argument and provide a moral cloak that masks the interest-based activities of the “bootleggers”. (Yandle grew up in Georgia, where the Baptists thought the sale of liquor on Sunday was sinful, and the bootleggers could not make money without a ban.) Thus, Turnbull’s ban was not introduced in order to advantage Philips and other CFL manufacturers, but to “save the planet”.

Even then, there were obstacles to the adoption of CFLs. Reporting on a study of the phased ban on incandescent bulbs in Germany in the journal Energy Policy in 2015, Nicholas A. Howarth and Jan Rosenow noted that people sought to thwart the intentions of the government, demonstrating what they called “social lock-in”. One manifestation of this was that, while CFL sales steadily rose over the period following the ban, sales of incandescent bulbs temporarily picked up in the lead-up to the ban’s implementation—what they termed hoarding behaviour by “Glühbirnen hamstern” or “lightbulb hamsters”.

They noted there were several barriers to adoption: CFLs were typically five to ten times the price of an incandescent lamp; CFLs took a while to warm up to produce full luminescence, which gradually faded by up to 30 per cent over their lifespan; any new product requires the acquisition of costly new information; there was a limited range available in stores, so there were not always CFLs available for all sockets and aesthetic preferences; some people thought CFLs were unattractive and did not like the “colder” light of standard CFL bulbs; some found that they blew regularly and were expensive to replace; finally, there were health concerns.

The initial health concerns were two-fold. First were concerns due to the mercury content, which meant that a broken CFL effectively turned one’s home into a toxic waste site, and CFLs thus required special disposal and recycling. Second, the flickering of CFLs could adversely affect epileptics. Then a 2012 study reported statistically significant cell damage in cell cultures exposed to CFL light from UVA and UVC radiation, thought to be attributable to damage in the bulbs’ internal phosphor coatings. This resulted in the manufacture of “double-walled” bulbs with an additional glass covering surrounding the phosphor-coated layer.

Leaving aside questions of environmental and health risks and the higher up-front costs, the inefficiency of incandescent bulbs arises because less of the energy they consume is converted into light than is the case with CFLs. Those with a keener understanding of the Laws of Thermodynamics, knowing that energy can be neither created nor destroyed, will immediately ask, “What becomes of the remainder?” The answer, of course, is that it is given off as heat.

Now heat can be regarded as waste if we are focused only on illumination, but there are places and times where heat given off by a light bulb is a useful addition to ambient temperature. Living as I do in Tasmania, I am acutely aware that heating a house is a desirable and expensive undertaking. Heat given off by a light bulb means that less heat has to be provided for the same level of thermal comfort, with less needed from the heat pump or other source.

There are times, of course, when heat from any source is not desirable. The emitted heat is not welcome on summer evenings—but we have less use for lighting then. Even in Point Piper there is a considerable overlap between the times when illumination is desired and when a little thermal energy is welcome.

Canadian researchers Ivanco, Karney and Waher showed that, where electricity was supplied mostly by hydro or nuclear, and much space heating came from natural gas, a mandated switch to CFLs actually increased greenhouse gas emissions—in Quebec, by the equivalent of 40,000 additional cars on the road.

The reductionist thinking behind the bulb ban is similar to that behind the disastrous “Pink Batts” policy of the Rudd era, which killed a handful of installers and caused quite a few house fires. There, the genius policy advisers failed to question whether there were enough trained installers to keep up with demand, but there was the additional problem that we also see with the bulb ban: people don’t always behave as the policy analysts expect. There were immediately suggestions that people did not respond to better insulation by reducing energy consumption, but decided instead to enjoy increased thermal comfort.

People can be inconvenient like that! The Rudd era was full of such examples, like the alcopops tax. If young people were binge drinking because pre-mixed alcohol was too cheap, the obvious reductionist response was to make so-called alcopops more expensive. A behavioural response emerged that would thwart the intentions of the policy analysts: young people bought neat spirits and mixed their own, with less control over how much they were consuming, and it was not long before concerned public health officials were reporting exactly that.

That’s the thing about “unanticipated consequences”—they can often be anticipated, if enough thought is given to thinking of possible human responses.

The bulb ban would, it was claimed, save 800,000 tonnes of carbon dioxide emissions each year (although that figure almost certainly did not take into account my increased gas heating use here in predominantly hydroelectric Tasmania—nor my hoarding of incandescent bulbs, as I quickly became one of the Glühbirnen hamstern). As Roger Franklin pointed out in Quadrant in 2016, if achieved, this amounted to a less than impressive 0.14 per cent reduction in greenhouse gas emissions. One seventh of one per cent!

The benefits to bulb manufacturers were less uncertain. By the early 2000s, bulbs using Light Emitting Diodes (LEDs) were under development, with the remaining challenge being to perfect white light, so a ban on incandescents would give CFLs a nice boost until LEDs came on stream. The profit margin on CFLs was also substantially higher than that on incandescent bulbs, with the rapid expansion of the industry in China driving down prices and squeezing further the profit margin on incandescent bulbs from factories in Europe. With LEDs established, GE ceased production of CFLs in 2016.

Philips were no strangers to market manipulation. In December 1924 they formed a cartel of Osram from Germany, Philips from Holland, GEC from the UK, the Compagnie des Lampes from France, Kremenezky from Austria, Tungsram from Hungary, the Società Edison Clerici from Italy and companies from Spain, Sweden and Switzerland: the Phoebus cartel, which fixed prices and practically invented planned obsolescence.

Thomas Edison had developed the first practical light bulb in 1879 and Edison General Electric Co, succeeded by GE, has been the industry leader since, developing what became standard elements of all gas-filled frosted incandescent bulbs—except for tungsten filaments. In 1906 the new tungsten lamp was demonstrated by Deutsche Gasglühlicht-Aktiengesellschaft (DGA) subsidiary Auergesellschaft, the German predecessor to Osram, to a delegation from General Electric. DGA and GE then signed a patent licence agreement for tungsten filament lamps and a technology exchange agreement for lamps with extruded metal filaments, giving GE the exclusive patent rights for America, helping GE to establish a US tungsten lamp factory. GE then gave DGA the rights to use their drawing process and associated patents and a patent exchange agreement was signed, and then extended to cover the whole incandescent lamp sector.

GE also developed manufacturing and distribution systems that reduced costs. GE thus held most of the bulb patents, and licensed other makers to produce only what GE wanted to be produced. GE had to co-operate with Osram, which held the patent on tungsten filaments.

In 1923 GE held 61 per cent of market share, Westinghouse was allocated 16 per cent and six licensees together were allocated 9 per cent of the market. Licensees could exceed quotas, but licence fees on the excess rose dramatically. While GE did not set prices, it could revoke licences and licensees were thus controlled. This arrangement was extremely profitable. In the mid-1930s, it was estimated that bulbs comprised about one-sixth of GE’s sales, but about two-thirds of its profits.

Then on December 23, 1924, representatives from all the major lightbulb manufacturers founded the Phoebus cartel, a company incorporated in Switzerland, which carved up the global incandescent globe market, with each national and regional zone assigned its own manufacturers and production quotas—the first such global cartel.

Osram’s chairman, Dr William Meinhardt, set out to unite the German lightbulb industry and secure international co-operation among similar companies, leading to the conclusion of the “General Patent and Development Agreement”. Phoebus SA was founded under Swiss law governed by a general assembly and a supervisory administrative board under Dr Meinhardt. The formation of the cartel had much to do with the fact that the tungsten patent would expire in 1927, which posed a threat to market dominance.

The Phoebus cartel not only carved up the market, but maintained prices, even though the costs of production were falling. Perhaps worse, it resulted in a reduction in lightbulb quality. At the time it was formed, a bulb that lasted 2500 hours was being made, with an average of 1800 hours across all manufacturers reported in 1926. But the Phoebus cartel conspired to reduce the life of bulbs, with a standard set of only 1000 hours (which stood as the minimum standard until the ban).

The cartel operated a testing laboratory in Switzerland to ensure the standard was being complied with. This conspiracy against the consumer—including the invention of planned obsolescence—succeeded in driving the average life of the standard reference light bulb produced in Phoebus members’ factories down to just 1205 hours in 1933-34, with no factory producing bulbs lasting more than 1500 hours. (The Merkur Extra bulb was later to hit 5000 hours.) This anti-competitive conduct succeeded in increasing worldwide sales by the cartel from 335.7 million in 1926-27 to 420.8 million in 1930-31, assisted by import restrictions in the US keeping cheaper Japanese bulbs out.

The cartel agreement was set to expire in 1955, but it was killed by the Second World War, which rendered close co-operation impossible. It had been weakened somewhat by the expiration of GE’s basic lightbulb patents in 1929, 1930 and 1933, and there were occasional conflicts among its members, but the 1000-hour standard persisted. It was somewhat rich, therefore, for the manufacturers to point to the greater longevity of CFLs in arguing for the bulb ban.

Fredéric Bastiat is well known for his parable of the broken windows: the misplaced idea that breaking windows is desirable, because it generates economic activity, employment for glaziers, and so on. Of perhaps more relevance here, Bastiat also told in his Economic Sophisms a satirical parable known as the candlemakers’ petition, where candlemakers and tallow producers lobby the Chamber of Deputies to block out the sun to prevent its unfair competition with their products. (Another sought a law forbidding the usage of everyone’s right hand, a response to some of his contemporaries’ belief that more difficulty meant more work and more work meant more wealth.)

The successful lobbying for the bulb ban was only slightly less outrageous than the candlemakers’ petition, and climate change provided the supposed excuse for actually adopting it. That Malcolm Turnbull as Environment Minister was the first government representative in the world to fall for this ploy is perhaps telling—and should have signalled to his colleagues in the Liberal Party where his instincts lay.

Regulations and standards of this kind always work to someone’s advantage. Any student of the European Union could attest to the (now repealed) Cucumber Directive that advantaged Dutch horticulturists at the expense of consumers who preferred Lebanese cucumbers. Or regulatory standards that ruled out Cavendish bananas (handled by US subsidiaries) but allowed those varieties that tended to be grown by former European colonies, where trade was undertaken by European trading houses. My personal favourite is perhaps the differential tariff applied to processed vegetables and sauces. As salsas became more popular, it became necessary to specify the size of the sieve a salsa must pass through to sneak in as a sauce.

There had been previous attempts to regulate lightbulb standards, but they proved less than successful. California regulators imposed rules mandating a 5 per cent reduction in the wattage levels for incandescent bulbs, which resulted in 40, 60, 75 and 100 watt bulbs being replaced with ones that used 38, 57, 71 and 95 watts respectively, but these bulbs saved energy simply by being dimmer. GE also introduced “Energy Choice” 90-watt bulbs as an energy-saving replacement for 100-watt bulbs, but they were also 10 per cent dimmer, and GE had to settle with the Federal Trade Commission and thirty-two states over charges that its light bulbs misled consumers.

In the European Union, work on the bulb ban was undertaken by Andris Piebalgs, the European Commissioner for Energy. Piebalgs, a Latvian, had joined the Communist Party of the Soviet Union in 1979 when Latvia was still a member of the USSR. Rather embarrassingly, the Daily Mail reported in March 2011 that, while shuffling between Strasbourg and Brussels, “EU’s Mr Lightbulb does his bit to save energy by leaving on the lamps outside his luxury home day and night for weeks on end.”

The German Chancellor, Angela Merkel, chaired the European Council in 2007 when it formally instructed the Commission to draw up the proposals to ban incandescents. Laughably, she was quoted as saying, “Most of the bulbs in my flat are energy-saving bulbs [but] they’re not quite bright enough so sometimes when I’m looking for something that’s dropped on the carpet I have a bit of a problem.” 

Dr Merkel’s difficulties were nothing in the face of a concerted lobbying campaign by the European Lamp Companies Federation in all member countries, the European Commission and the media. Susanne Hammarström, head of the Brussels-based PR agency Diplomat-PR which conducted the lobbying, told the newspaper Dagens Industri that “a voluntary switchover to energy saving lamps would have been the preferred policy, without the systematic lobbying work”.

Reports on the global lighting industry by McKinsey & Company in 2011 (commissioned by Osram) and 2012 estimated the global market for general lighting bulbs at €55 billion in 2011. General lighting incandescent bulbs sales in 2011 were €6.6 billion (12 per cent) by value for 52 per cent of sales by volume. CFLs accounted for 31 per cent of global market value (€17.05 billion) and for 17 per cent of volume; LEDs were €7.7 billion (14 per cent of sales by value) for 1 per cent of sales by volume. McKinsey forecast that the general lighting market would expand to €83 billion by 2020, and it easy to see why, with much of the extra €28 billion going to the LED market, which was predicted to increase its share to 60 per cent.

These figures reveal something of the cost of the bulb bans, because they show each 1 per cent of the market involves €127 million in sales of incandescents. The share of the market occupied by CFLs could have been met with incandescent bulbs for €2.16 billion, and the 1 per cent LED share for €127 million.

The bulb ban has therefore been costing consumers at least €20.42 billion annually (€14.89 billion for CFLs plus €5.54 billion for LEDs). This analysis does not include either energy savings from CFLs and LEDs or increased energy consumption from increased space heating to compensate for the loss of “inefficient” conversion of electricity into lumens. But, of course, much of the €28 billion McKinsey predicted the world would have added by 2020 would have been consumed by the phase-out of incandescent bulbs, although with population and demand growing LEDs have become substantially cheaper.

You get the picture. Lightbulb bans have been extremely profitable for manufacturers, and of dubious benefit in terms of reduced costs for consumers and reductions in greenhouse gas emissions. The timing of the ban in Australia and other early adopters allowed the manufacturers to boost their return from CFLs before LEDs took over, forecast to hit about 60 per cent of the global market by now.

McKinsey stated that the lighting market was responsible for about 20 per cent of global electricity use and the introduction of LEDs could allow the phase-out of existing nuclear plants and the avoidance of future construction, rather than combat climate change. (This was the year of the Fukushima disaster.)

Many countries adopted a bulb ban, but the US Department of Energy under Trump scrapped a ban that was due to commence at the beginning of 2020. George W. Bush had signed the Energy Independence and Security Act (EISA) in 2007 and some initial standards were introduced between 2012 and 2014 and they phased out 60-watt incandescent bulbs. Manufacturers responded to meet the EISA standards, and current incandescent bulbs average double the efficiency of those when EISA was adopted.

Another round of restrictions was to go into effect on January 1, 2020, requiring everyday light bulbs to use 65 per cent less energy than incandescent light bulbs, but still deliver the same amount of light, but the Department of Energy decided to revert to previous standards. This prompted lawsuits from several states, cities and districts against the Department of Energy, and California, Nevada and Washington decided to ban some general service lamps. (Nice to know that the glitz of Las Vegas will be illuminated more sustainably.)

How long this reconsideration at federal level will last is yet to be seen, as even before the Biden inauguration, the Department of Energy was working on another round of standards, likely to be more restrictive, that could have effect by 2025.

With the shift away from CFLs under way and the cost of LEDs coming down, we might dismiss the incandescent bulb ban as a past mistake—spilt milk over which we should not cry. But the pain is not yet over. Halogen bulbs, which offer a significant 30 per cent energy reduction on incandescents, are banned in Australia from September this year, in line with the EU and Britain, having originally been scheduled for September 2020.

This is not widely known and, even as one of the Glühbirnen hamstern, I was unaware of it until researching this article. I immediately visited Bunnings to stock up, knowing that our twenty-odd downlights that are dimmable could not economically be replaced with LEDs, because there were no comparably priced LEDs. There I found that there is now a dimmable LED that will replace the halogens available, produced by Signify, as Philips now calls itself (still in partnership with Planet Ark).

The problem is cost: about $20 for the dimmable LED, compared with the halogens at ten for $10.50. I stocked up on the halogens, and will enjoy them until the price of dimmable LEDs descends from the stratosphere.

In the United Kingdom it has been suggested that the bulb ban there not only gave the CFL makers a boost before LEDs, but actually hindered the introduction of LEDs. But the bulb ban has certainly worked to the advantage of manufacturers world-wide, and the question arises as to why Turnbull and ministers in other governments that followed his lead did not see the ban for the boondoggle it was and simply allow consumers to choose the newer, improved technology as it came on the market.

As someone with a career as a merchant banker, Turnbull should have been wise to the profits to be gained from regulatory interventions. After all, he had first-hand experience of profiting from regulatory policy.

Turnbull was apparently unaware of the bribing of Russian bureaucrats that eased the way for a Siberian gold mine in the 1990s by Star Mining, described in detail in her autobiography by Ludmila Melnikoff who put the deal together, and disclosed with the leak of the so-called Panama Papers in 2016. Turnbull’s merchant bank Turnbull & Partners was reported to have received an estimated $3 million in 1995 and 1996 from the sales of shares held through offshore companies administered by a Panama law firm, Mossack Fonseca. Turnbull & Partners reportedly earned up to $7 million from share sales and advisory fees from Mr Turnbull’s time serving as a director of Star Mining, although Turnbull denied knowledge of the manner in which approval was secured, and denied that he made a profit from the venture.

So perhaps Turnbull was unaware of the handsome profits to be made from regulatory policies. His son Alex was probably just a wise investor when his Singapore hedge fund bought into Infigen Energy before the policy decisions of his father’s government gave greater certainty to the Renewable Energy Certificate scheme. Infigen’s stock rose from around 20 cents to 93 cents when it was taken over by Spanish utility Oberdrola in October 2020.

Little wonder, then, that Alex’s expertise was sought to assist with the development of energy policy. The Sunday Telegraph reported that Alex Turnbull was invited to join a private WhatsApp text message group on energy policy shortly after the 2016 election. Perhaps Turnbull senior thought young Alex’s knowledge of energy policy filled a gap in the expertise available in the public service. One former staffer was quoted by the Herald Sun as stating, “For him [Alex], energy is obviously a personal interest. But we just thought, great, now we have to deal with Alex too.” They added: “Where does the ripple of opinion stop? Surely there is enough experts, department advisers, political advisers and ministers involved …”

Young Turnbull’s expertise was therefore simply a welcome corrective for his father’s lack of knowledge, and Turnbull senior was probably not aware that in banning incandescent bulbs he was granting a huge advantage to manufacturers, for questionable public benefit, helping them maximise profits from their outmoded CFL technology before LEDs came along—just as he was unaware of logging practices in the Solomon Islands or gold mine approvals in Russia.

The answer to the question posed in the title is therefore: one, but the minister has to be blissfully unaware of the effect of regulatory policies and the history of the lightbulb industry in securing market restrictions to their advantage.

Aynsley Kellow is Professor Emeritus of Government at the University of Tasmania