Before LEDs became a popular replacement for incandescent light bulbs, compact fluorescent lamps (CFLs) were hailed as

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Before LEDs became a popular replacement for incandescent light bulbs, compact fluorescent lamps (CFLs) were hailed as the new generation of lighting. However, CFLs had even more wrinkles. In no particular order:

1. Incandescent bulbs generate a lot more heat than CFLs.

2. CFL prices will probably decline relative to incandescent bulbs.

3. CFLs unavoidably contain small amounts of mercury, a significant environmental hazard, and special precautions must be taken in disposing of burned-out units (and also in cleaning up a broken lamp). Currently, there is no agreed-upon way to recycle a CFL. Incandescent bulbs pose no disposal∕breakage hazards.

4. Depending on a light’s location (or the number of lights), there can be a nontrivial cost to change bulbs (i.e., labor cost in a business).

5. Coal-fired power generation accounts for a substantial portion of the mercury emissions in the United States, though the emissions will drop sharply in the relatively near future.

6. Power generation accounts for a substantial portion of CO2 emissions in the United States.

7. CFLs are more energy and material intensive to manufacture. On-site mercury contamination and worker safety are issues.

8. If you install a CFL in a permanent lighting fixture in a building, you will probably move long before the CFL burns out.

9. Even as CFLs began to replace incandescent light bulbs, LEDs were in the latter stages of development. At the time, LEDs were much more expensive than CFLs, but costs were coming down. LEDs last much longer than CFLs and use even less power. Plus, LEDs don’t contain mercury.

Qualitatively, how would these issues affect your position in the CFL versus incandescent light bulb debate? Some countries banned incandescent bulbs. Does your analysis suggest such a move was wise? Are there other regulations short of an outright ban that make sense to you?

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Fundamentals Of Corporate Finance

ISBN: 9781265553609

13th Edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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