Missing the Mark: Five-Year Report Card on the Energy Efficiency Provisions of the Energy Policy Act
Report Number	E975
Author Info	The American Council for an Energy-Efficient Economy and the Alliance to Save Energy
Details	Executive Summary On October 24, 1992, President George Bush signed the Energy Policy Act of 1992 (known as EPAct) into law. The law devoted considerable attention to energy conservation and included a wide range of provisions aimed at increasing energy efficiency in buildings, appliances, industries, and transport. Expectations were high that significant energy savings would result. Today, five years later, as the United States and other countries are negotiating an international treaty to limit greenhouse gas emissions, the Alliance to Save Energy and the American Council for an Energy-Efficient Economy are taking a hard look at how effectively the energy efficiency provisions in EPAct were implemented. For each major energy efficiency provision, we reviewed the requirements, the actions taken to meet these requirements, and the overall degree of success. In addition, we assigned letter grades to implementation of each major title (or subtitle) as well as to each major actor involved in implementation of EPAct efficiency provisions.
Other Info	Implementation by Title In summary, we give a grade of "C" for overall EPAct implementation. There have been significant successes but on balance, implementation falls significantly short of the legal mandate, let alone short of the overall intent. Table ES-1 summarizes our review of the implementation of and overall grades for the major energy efficiency provisions in EPAct. This summary masks considerable variation within and between programs. Among the successes are the following: Fourteen states upgraded their building codes; in addition, technical assistance by DOE has helped many states with code adoption and implementation; Smoothly implemented commercial heating and cooling equipment and plumbing product standards and implemented lamp and motor standards (with some problems that have been worked out for the most part); Department of Housing and Urban Development's (HUD) adopted updated standards for manufactured housing; HUD and Agriculture departments adopted the 1992 Model Energy Code as a condition for receiving federally backed mortgages; The National Fenestration Rating Council established a well-designed labeling program to promote energy-efficient windows; labeling programs for lamps and lighting fixtures also were initiated; Facilitated energy savings within the federal government by establishing financial incentives for facility managers, a limited federal energy efficiency fund, demonstration projects, widespread training of federal energy managers, and the recent region-wide, multi-project energy-savings performance contracts; and Increased federal research and development on a wide range of promising technologies, resulting in significant progress on many fronts and commercialization of several products, including alternative refrigerants, a flame quality indicator for oil burners, new housing designs, new ceramic and metal allow materials, and industrial process improvements for manufacturing chemicals, glass, and steel. On the other hand, many EPAct energy efficiency provisions have not been successful. The less effective provisions include: Residential energy efficiency ratings where battles between electric and gas interests, battles between different program purveyors, and DOE reluctance to take a stand have paralyzed issuance of uniform national guidelines; Energy-efficient lighting and building centers, grants to states for utility integrated resource planning (IRP) activities, and the revolving loan fund for retrofit of state and local government buildings that were never funded; Provisions to encourage states, TVA, and WAPA customers to pursue least-cost planning, which were largely ignored once utility industry restructuring became the primary focus of utilities and utility regulators; Efforts to set transformer efficiency standards, which are now many years behind schedule despite a commitment in the Climate Change Action Plan to accelerate the process; and Federal energy agency management, which has suffered due to limited funding and attention to the issue outside of DOE, data reporting problems, and problems related to procurement of energy-efficient products and equipment. For many other programs, activities are now proceeding and success cannot yet be evaluated. Table ES-1 Summary of EPAct Intent and Implementation by Title IA Buildings B- Intent--Requires states to adopt up-to-date commercial energy codes and to consider new residential energy codes; encourages HUD to adopt new manufactured housing standards; establishes regional building energy efficiency centers; promotes energy-efficient mortgages. Implementation--30 states have updated their residential codes (up from 16 before EPAct) but only 28 states have implemented the commercial code requirement; HUD issued new energy standards for manufactured housing; Congress never funded the 10 regional centers for building energy efficiency; no home energy rating guidelines have been issued; however, an energy-efficient mortgage pilot program was launched. IB Utilities B- Intent--Encourages states, TVA, and WAPA to implement integrated resource planning and other policies to promote energy efficiency investments by utilities. Implementation--A few states adopted new policies; TVA and WAPA customers prepared plans; but due to "tidal wave" of utility industry restructuring, these sections received limited attention and had limited impact. IC Appliances C+ Intent--Adopts minimum efficiency standards for electric motors and lamps, commercial heating and cooling equipment and plumbing fixtures; requires DOE to consider standards for other products and develop labeling programs for additional products. Implementation--Standards written into the law are now in place and generally functioning well although implementation delayed in some cases; consideration of new standards way behind schedule; labeling programs in place. ID Industry C Intent--Promotes energy efficiency in industrial facilities, particularly process-oriented industries, on a voluntary basis; establishes voluntary audit and insulation guidelines. Implementation--Grants to smaller industrial associations were issued just last year; grants were also issued to states to promote process-oriented energy efficiency; voluntary audit and insulation guidelines were well conceived and implemented but with limited dissemination. IE State/Local D Intent--Establishes revolving loan fund for retrofitting state and local government buildings; requires training of building designers and contractors; promotes left-turn on red. Implementation--DOE never requested funding for the loan fund; training for building designers and contractors did take place but very slowly; and left-turn-on red requirements were added to the state energy conservation plan but neither DOE or NHTSA ever conducted the specified study. IF Federal Energy Management C+ Intent--Sets goals and calls for a wide range of activities aimed at increasing energy efficiency in federal facilities. Implementation--While many good demonstration and incentive programs have resulted from EPAct, loopholes, limited financing, poor data collection practices, and lack of accountability have limited actual energy savings in federal facilities. IG Misc. B Intent--Collects additional energy efficiency information and study district heating and cooling opportunities. Implementation--EIA has collected information and published annual reports on utility DSM efforts as well as renewable energy production; DOE completed a report on district heating and cooling saving opportunities but did not make this report available to the public. XII Renewable Energy C (energy efficiency provisions) Intent--Improves federal actions and programs that promote export of energy-efficient products and services; further demonstrate commercially available energy efficiency technologies. Implementation--DOE has done a relatively good job in implementing export promotion through COEECT, however, lack of funding hindered implementation; joint ventures program and analysis of energy technology requirements were never implemented. XX-XXII Energy/Environment RD&D B Intent--Authorizes continued RD&D on energy-efficient technologies that serve the buildings, industry, and transportation sectors. Implementation--RD&D on-going; several new technologies have been commercialized and many others were advanced and appear promising. Implementation by Actor As noted previously, we give a grade of "C" for overall EPAct implementation. Our grades for each of the major players are shown in Table ES-2. DOE has made a good faith effort to implement most of the EPAct provisions, with a few notable exceptions such as the Home Energy Rating Systems (HERS) guidelines, the revolving loan fund for state and local building retrofits, and the transformer efficiency standards. Also, DOE's efforts have been flawed in a number of important areas (e.g., implementation of the commercial building code requirements, motor and lighting standards, and funding for federal energy management). In some cases, DOE was delayed or limited by lack of funding or other restrictions imposed by the Congress. For these reasons, we give DOE an overall grade of "C+." HUD successfully implemented a number of provisions such as adopting efficiency standards for manufactured housing and for homes receiving federally backed mortgages as well as the energy-efficient mortgage pilot program. But HUD ignored the Section 105 mortgage provision, which called for a study and determination. For these reasons, we give HUD an overall grade of "B-." Other federal agencies have generally paid limited attention to EPAct. Examples include the poor efforts by TVA and WAPA to implement utility integrated resource planning, as well as the lack of aggressiveness on the part of agencies to obtain funding for federal energy management. Therefore, we give "other agencies" an overall grade of "D+." Congress consistently provided less funding than was requested by DOE for EPAct implementation as well as for other important energy efficiency programs in the FY94-98 time period. Furthermore, the deep funding cut and legislative riders in the FY96 Appropriations bill particularly hampered DOE's efforts. However, Congress did provide some additional funding for implementing most EPAct energy efficiency provisions during the early years of this time period. For these reasons, we give Congress an overall grade of "D+." Some states complied with EPAct's building code and utility policy review requirements, but many did not (especially in the area of commercial building codes). Also, states did not support implementation of the Section 141 revolving loan fund. For these reasons, we give states an overall grade of "C." Regarding the private sector, many companies have co-funded and participated in RD&D projects with DOE. Private companies have actively supported other initiatives such as the use of performance contracting for federal buildings retrofits. Also, most equipment manufacturers affected by the EPAct efficiency standards supported timely and meaningful implementation of these provisions. However, a few companies attempted to create and exploit loopholes in the lamp standards as well as frustrate effective implementation of the office equipment labeling provisions. For these reasons, we give the private sector an overall grade of "B-." Our overall grade of "C" is based on combining the grades for each of the key actors, with weightings based on our perception of the relative importance of each. Specifically, we used the following weightings: DOE--35%, HUD--5%, other agencies--5%, Congress--30%, states--10%, and the private sector--15%. Table ES-2-- Grades for Key Actors Organization Overall Grade Department of Energy C+ Dept. of Housing & Urban Development B- Other Agencies D+ Congress D+ States C Private Sector B- OVERALL C Energy Savings Impact Unfortunately, EPAct's energy efficiency provisions have not fully achieved their original objectives. Energy use increased approximately 10% from 1992-1996, an average of 2.4% annually, up from the 1.8% average annual increase in the prior decade. While the relative increase in energy use in recent years is partly explained by high economic growth, the underlying pattern is that efficiency improvements have slowed. During 1992-1996, the energy intensity (primary energy use per unit of gross domestic product) fell only 0.8%, an average of 0.2% per year. During the prior decade, energy intensity declined an average of 1.1% annually. Still, without EPAct, these trends would have been worse. Based on detailed energy saving estimates made when EPAct was passed, and adjusting for actions and changes over the past five years, we estimate that EPAct will reduce U.S. energy use in 2000 by approximately 1.0 quadrillion Btu, a savings of 1% relative to projected energy use that year. These savings will increase after 2000 as more efficient equipment and buildings fostered by EPAct make up an increasing share of the overall equipment and building stock. Our current estimate of energy savings due to the EPAct energy efficiency provisions is approximately 50% lower than the energy savings expected when EPAct was adopted. This shortfall is due to: (1) underfunding of EPAct programs; (2) lack of follow-through on the part of implementing agencies in some cases; (3) the voluntary nature of many EPAct provisions that turned out to be of limited practical value; and (4) changing external conditions such as utility industry restructuring. Lessons Learned In many ways, the energy efficiency provisions of EPAct were a "laundry list" of good intentions. However, Congress did not provide adequate funding to implement many of the provisions. And other provisions were ultimately voluntary in that they only required consideration of specific actions or, even where actions were required, federal agencies and states could ignore them without fear of penalty. As a result, those provisions had very limited impact. In retrospect, EPAct probably had too many weak provisions that diluted implementation efforts. Finally, our review clearly indicates that adopting legislation does not guarantee results. The legislation provides the blueprint, but without good program design and implementation, not to mention funding, the vision contained in the blueprint will not be realized. In particular, the Administration needs to request and Congress needs to provide adequate funding to implement the new legislation. Likewise, agencies should not ignore legislated time schedules for developing new programs and implementing regulations, and Congress should exert adequate oversight to help keep agencies on track. Next Steps EPAct has achieved some significant energy efficiency gains, particularly in improving the efficiency of new commercial buildings and new energy-consuming equipment such as lamps, electric motors, commercial heating and cooling equipment, plumbing equipment, windows, and office equipment. But much remains to be done. First, there are a number of EPAct provisions that we recommend be given high priority as implementation continues. Focusing on the following areas could increase significantly the overall energy savings ultimately provided by EPAct. Issue and enforce equipment efficiency standards, particularly completion of the distribution transformer rulemaking which is many years behind schedule; Work on upgrading building energy standards in the roughly 20 states that have out-dated standards, perhaps with DOE withholding building code-related grants from states who are not moving toward compliance with this portion of the law; Develop new, state-of-the-art model building standards, particularly new commercial building standards as the current model standards are nearly a decade old; Expand RD&D initiatives for key energy end-use areas, particularly in the buildings sector; Cut federal energy waste, including wide use of ESPCs, a line item for energy efficiency projects in Agency budgets, re-establishing the energy efficiency fund, increasing procurement of efficient products, and improving tracking and reporting. Strengthen efforts to work with the private sector in the development and implementation of energy-related policies and programs. Second, EPAct devoted relatively little emphasis to one of the largest areas of energy use--the transportation sector. Dramatic improvements in the efficiency of cars, trucks, and planes were achieved in the 1970s and early 1980s but in recent years efficiency has largely stagnated (airplanes being an exception). While the Partnership for a New Generation of Vehicles (PNGV) holds some promise, complementary efforts are needed to promote efficiency improvements in the nearer term and to develop programs and policies that will encourage consumers to purchase PNGV cars in the long-term. Likewise, stronger efforts are needed to improve energy efficiency and reduce oil use in light trucks and freight transport, as well as to moderate growth in driving (i.e., reduce vehicle-miles of travel). Third, energy issues are again coming onto the Congressional agenda, including utility industry restructuring legislation and the possibility of a new climate change treaty that in turn is leading to new policy initiatives to reduce U.S. greenhouse gas emissions. As we move into these debates, it is useful to keep EPAct's lessons in mind. In particular, policy makers should concentrate on a limited number of substantial and workable provisions rather than a "laundry list" of limited and/or difficult to implement provisions. With respect to utility restructuring legislation, bills introduced by Senator Jeffords and Representative DeFazio contain provisions that would continue utility ratepayer funding for energy efficiency and other public benefit programs. These policies could achieve substantial energy savings. Other proposals floated, such as new requirements for states to consider specific policies, are reminiscent of some of the weaker EPAct provisions and are likely to have limited impact. With respect to climate change mitigation, development and widespread implementation of energy saving technologies is essential for achieving long-term reductions in greenhouse gas emissions (particularly carbon dioxide). Such technologies can be advanced through increased RD&D, targeted tax credits, and other policies that address barriers inhibiting widespread adoption in the marketplace. In addition, broad policies aimed at reducing greenhouse gas emissions, such as a revenue-neutral carbon tax plus offsetting investment tax credits and/or payroll tax reductions or carbon emissions caps along with tradable carbon emissions allowances, would indirectly boost energy efficiency efforts. Recent studies by DOE (Scenarios of U.S. Carbon Reductions) and by the Alliance, ACEEE, and other groups (Energy Innovations) conclude that U.S. energy and carbon dioxide emissions can be cost-effectively reduced by 20-25% in 2010 relative to a "business-as-usual" scenario. These studies also conclude that achieving such savings can result in significant economic as well as environmental benefits. However, achieving such savings will require substantial action and strong policies, given recent trends of growing energy use and stagnating national energy intensity. EPAct provides the basis for some of these efforts but much more needs to be done. Now is the time to build upon EPAct and enact additional policies that will advance cost-effective, pollution-cutting, and job-creating energy efficiency measures. 101 pps., 1997, $20.00, E975
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