ACEEE's Laitner Testifies At House Science Subcommittee Hearing: Too Many Economic Models Get Energy/Climate Policy Wrong

Washington, D.C. — Testifying today at the U.S. House Science Subcommittee on Research and Science Education today, ACEEE Senior Economist for Technology Policy John A. "Skip" Laitner said that "most current economic policy models substantially overestimate the costs of energy and climate policies, because they consistently overlook the economic benefits of energy savings from accelerated adoption of energy-efficient technologies, changing social preferences, and more energy-aware behaviors."

Laitner's testimony indicated two principal problems with the current generation of economic models. The first is that most economic policy models have underestimated the potential for energy productivity gains from policy initiatives, which save consumers and businesses money, thus creating an economic stimulus. The second is that they overestimate the costs of achieving increased levels of energy efficiency, which creates an exaggerated portrayal of economic impacts of many policies. The result, he stated, is "an inaccurately diminished picture of the energy efficiency resource. These fundamental modeling problems have large and important implications for both energy policy and climate change mitigation policy."

Laitner acknowledged that "the good news is that while there is clear room for improvement in modeling methodology, we already know how to make these corrections." Still, he cautioned, "Congress needs better energy policy evaluations, and soon; this means there is serious work ahead in improving policy modeling methods."

Laitner urged the subcommittee to take three important steps to correct the misimpressions provided by many of the current economic policy models:

1. He recommended that the subcommittee issue findings on this issue that send a positive signal to the economics and social science communities, acknowledging the need for improvement.
2. He called for the development and funding of a National Energy Efficiency Data Center (NEEDC), a national nonprofit organization whose purpose will be to collect, organize, disseminate, and archive energy efficiency cost and performance data and social science statistics, particularly those related to public policies and programs. This effort would go well beyond the data now collected by the U.S. Department of Energy's Energy Information Administration.
3. Laitner concluded by calling for greater research funding in the economic and social sciences, in ways that specifically "expand our knowledge and understanding of how human behavior and choice can increase energy efficiency, reduce our energy dependency, and reduce our impact on the global climate while still maintaining a robust economy."

The testimony is available at http://www.aceee.org/tstimony/0709HouseScience_Laitner.pdf.