Energy Efficiency Makes Regional Climate Pact an Economic Winner

Washington, D.C. — The U.S. Senate Energy and Natural Resources Committee today focused on energy efficiency by hosting a hearing on a bill—introduced by Senator Jeff Bingaman (D-NM) and a bipartisan group of ten other Senators—called the Enhanced Energy Security Act (S. 2747).  One of the witnesses, ACEEE Executive Director Steven Nadel, testified that in the energy legislation passed in 1992 and 2005, most of the energy savings came from a few major provisions and that many provisions had little impact.  Based on this experience, he urged Congress to “concentrate on a few provisions with significant energy savings and not spend a lot of time on provisions that may sound good on paper but are unlikely to actually save much energy in practice.” 

Nadel urged the committee to emphasize four provisions with the opportunity for large energy savings: (1) oil saving targets and associated policies; (2) energy efficiency resource standards (energy-saving targets for utilities); (3) equipment efficiency standards; and (4) extensions and refinements to efficiency tax incentives enacted in 2005. ACEEE analysis of energy savings from these provisions projects that they could reduce U.S. energy use by about 12% in 2020, compared to less than 2% for the 2005 energy bill.  “These four policies would save more than seven times as much energy as the entire 2005 bill,” he said.

In reviewing implementation of both the Energy Policy Acts of 1992 and 2005, Nadel found that most of the energy savings from these bills were due to equipment efficiency standards in the 1992 and 2005 laws, and efficiency tax incentives in the 2005 bill.  “Many of the other provisions were well meaning, but did not have much impact as Congress never provided the funding needed, provisions were voluntary, or federal and state officials treated implementation of these provisions as a low priority,” he noted.

Further details on the four priority policies include:

• Oil-savings targets are included in S. 2747 and would direct the Office of Management and Budget and other federal agencies to develop and implement a plan to reduce U.S. oil use by 2.5 million barrels per day in 2016 and 10 million barrels per day in 2031 (these targets are 10% and 35%, respectively, of projected oil use in those years). 
• Energy efficiency resource standards would require electric and gas utilities to operate energy efficiency programs that would have moderate savings goals at first but the savings would steadily grow over time.  The proposal also allows trading of energy savings credits and a buyout option so that costs will be kept at levels that are clearly cost-effective to consumers. 
• Equipment efficiency standards have been a cornerstone of past energy bills and Nadel noted eight products that could be added to federal law.  He noted that his organization is in discussions with manufacturers to see if they can reach consensus on these standards. 
• Energy efficiency tax incentives were included in the 2005 law, but many of these credits expire at the end of 2007.  Nadel supported proposals to extend these credits to 2010 and to fine-tune several details.

Nadel concluded, “We need these key efficiency policies to help American consumers and businesses cope with high energy bills, to bring down energy prices, to decrease America’s ‘addiction to oil,’ to rejuvenate our economy, and to reduce the risks of global warming.”