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In my ideal world, we would pay up front to address pollution. The cost of things we buy would include the cost to cleanly operate, repair, recycle, and dispose of the items. Repair, recycle, and other services would be free to encourage us to take care of our things properly. (1)
Prices would then be aligned with the behavior we want to see. Higher up front costs would make us more inclined to use things for a long time and to buy carefully to begin with. Producers would have built-in incentives to be more sustainable in order to lower the costs of their products. Dirtier products would cost more because cleaning up after them would cost more.
In practice, the United States is nowhere close to eliminating unpriced externalities like pollution. We have made modest attempts with mattresses, tires, refrigerants. But generally companies freely pollute the public space, then can sell other products to clean it up. Our go-to policy is not “Polluters Pay”. Instead it is “Pay More to Not Pollute”. That is nuts.
Since we don’t account for sustainability costs up front, our default state is one of pollution. We have huge piles of plastic waste, unsustainable consumption, throwaway products, and a warming planet. It is neither free nor easy to keep things clean. Instead, pollution is the cheap and easy default. Because it is expensive and inconvenient to choose the “clean” option, we’ll dump our recliner on the curb or our styrofoam “optimistically” in the recycling bin. And we’ll buy gas appliances. Of course we do, that is what the market tells us and how our culture has evolved.
People don’t love pollution, but we have limited amounts of time and money. So we pollute because the market doesn’t tell us otherwise. In response, our government creates mandates to force the less polluting options. (“No dumping”, “No gas water heaters”). But we still have limited time and budgets, so we resent the regulations and do what we can to bypass them.
This is unfortunately where we are with water heaters. The default technology — gas-fueled appliances — is polluting our air with unhealthy nitrogen oxides and our climate with warming greenhouse gases. Rather than charge appropriately for the damage these are doing to our environment, our go-to policy is instead to charge more (a lot more!) for a cleaner option — the “green premium“.
Heat pump water heaters are estimated to cost $3500 (!) more than gas-fueled alternatives, not including local and state incentives, and they take longer to install. The only way to get people to use these instead of the cheaper polluting heaters is to craft some kind of mandate. But that mandate would be unaffordable for many homes, so we exempt low-income households, which in turn means that nitrogen oxides will continue to build up in disadvantaged neighborhoods. We will see some adoption of cleaner appliances in wealthier neighborhoods, but with less dense homes the appliances do less harm there.
It’s hard to get excited about such an expensive and inefficient approach to reducing pollution. But we aren’t willing to price pollution up front and this is the consequence. We rely on expensive mandates riddled with holes to drive the green premium down and better align prices with costs. (2)
The Bay Area Air Quality Management District (BAAQMD) has weakened the zero-NOx water heater mandate in every possible way while deliberately doing little to deter cheating. I think that is smart. We will get good information from the behavior of consumers and contractors while supporting the market for electric appliances. Homeowners should use the exemptions freely and liberally as needed.
Several BAAQMD Directors have promised to roll this back early next year. I think that is a mistake. This regulation allows for plenty of leeway, and manufacturers need market stability in order to fund innovation. Let’s give it some time and learn from it while being flexible with exemptions. In the meantime, BAAQMD has an even tougher challenge coming up, a mandate of zero-NOx (electric) furnaces set to go into effect in 2029. In that case the green premium is a sky-high $10,800, and it will take some work to figure out how best to reduce our reliance on cheaper and dirtier gas furnaces. (3)
Notes
1. Consider Patagonia, for example. They offer free repair services as well as DIY help. They have a robust re-use business and will take your worn out items free to recycle them. The company also makes significant efforts to clean up its supply chain. Read more here. But their items cost more than wasteful companies that don’t do these things because we don’t price the pollution that results.
2. Pricing up front would not be easy, and would often be wrong. But a market with prices that better reflect costs would help to select efficient clean solutions. What we are doing now is mandating a price that is far too high in the hope that the market will eventually find more efficient options.
3. The green premium is much less ($2,400) for consumers who want air conditioning, which comes free with zero-NOX heaters (heat pumps). That means we could begin rolling this out to places where air conditioning is needed and where electricity prices are reasonable. See the recent TECH Clean report.
Current Climate Data
Global impacts (September 2026), US impacts (September 2026), CO2 metric, Climate dashboard
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