FUNDS FOR FRIDGES / THE FINANCIAL TIMES LEX

Funds for fridges

Published: September 7 2009 15:00

After cash for clunkers, dollars for dishwashers. A $300m US energy department rebate scheme on energy-efficient appliances could be operating by Christmas. The UK’s main retail trade body meanwhile wants the government to drop value-added tax on eco-friendly white goods, with a temporary car industry-style scrappage scheme to kickstart demand.

Clunkers schemes have certainly blown away expectations in the US and elsewhere; Germany’s helped pull the country out of recession this spring, and boosted car-making countries in central Europe. Even the UK’s more stingy scheme stimulated sales. So why not try it with fridges? Like cars, sales of big-ticket white goods are suffering badly; US sales fell 15 per cent in the seven months to July. And even offsetting the energy cost of destroying older products and building new ones, there are long-term benefits to the environment and consumers’ pockets. The US appliance industry body says replacing an eight-year-old washing machine with a new one cuts $78 off average annual electricity bills.

But funds for fridges could still fizzle. Clunkers schemes may already have sucked up consumers’ spare cash. White goods are also less discretionary: consumers mostly replace them when existing ones wear out. There are also specific snags with the US plan. Unlike cash for clunkers, individual states are responsible for determining how it will operate. That complicates planning for the industry, especially as consumers are delaying purchases until rebates start.

The argument against all such incentive schemes, moreover, is that they simply divert spending from elsewhere or pull forward demand, meaning more pain later. Still, Germany’s clunkers scheme seems to have unlocked at least some new spending. And there are “tide-over” effects, preserving manufacturing jobs until a broader recovery kicks in. Exceptional times mean that even exceptional measures such as these sometimes make it through the wash.