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Energy Efficient Policies Could Save Nearly $1 Trillion

Bill DiBenedetto headshotWords by Bill DiBenedetto
Investment & Markets

While Congress wrestles with budget decisions, sequesters and the pros and cons of austerity, there is a fairly easy way to save the U.S. economy a cool $1 trillion.

That’s by getting serious about energy efficiency.

Wait—before your eyes start rolling, or they glaze over entirely, pay a little attention to what the American Council for an Energy Efficient Economy (ACEEE) says.

In a report this month, ACEEE identifies policies that would remove market barriers across the economy to investments in energy efficiency. Overcoming Market Barriers and Using Market Forces to Advance Energy Efficiency, “provides Congress and state policymakers with a road map to address national energy consumption through policies that could save the country approximately $1 trillion in energy bills and 19 quads in energy consumption,” the council says.

While the United States has made good progress in energy efficiency over the last few decades, there are still “large, cost-effective opportunities available to advance efficiency even further, while improving the economy at the same time,” the report says.

For example, in 1970 the nation used 68 quadrillion British Thermal Units of energy ("quads"), for an economy-wide intensity of 15.9 thousand Btu per dollar of GDP. By 2011, the report continues, consumption increased to 97 quads, but real GDP had more than tripled, meaning that the U.S. used only 7.3 thousand Btu per dollar. Thus, energy use per unit of GDP had declined 54 percent over that period.

That’s good, but the ACEEE argues we can do even better, because “a variety of market failures and market barriers contribute to keeping us from fully realizing our energy efficiency potential.”

Steven Nadel, ACEEE executive director, says, “Eliminating barriers that keep us from reducing waste is an approach both sides of the aisle can support. By removing these barriers, Congress and state policymakers have an opportunity to let smart investments help strengthen the economy while saving the nation billions.”

The report targets several policies that leverage market mechanisms and address specific market failures to energy efficiency, without requiring substantial spending or government mandates.

For example, the development of a comprehensive building labeling and benchmarking program could save approximately 1.6 quads of energy and $60 billion between 2014 and 2030.

Also impressive, according to ACEEE, are the benefits gained from adjusting corporate tax legislation to encourage the replacement of inefficient equipment and from removing regulatory barriers to combined heat and power (CHP) projects. These two policies alone could reduce national energy consumption by 7 quads and save the economy close to $300 billion.

In addition to improving information and removing existing regulatory and legal barriers, ACEEE identified other policy areas that will contribute to greater energy efficiency, such as:

  • Addressing externalities—market costs and benefits incurred by those not directly involved in a given market transaction. Emissions fees and mileage charges, for example, charge those who pollute and drivers that use roadway systems.

  • Reducing energy waste in government at the federal, state and local levels. For instance, the U.S. government is the largest single consumer of energy in the world.

  • Removing finance-related market barriers by capitalizing energy efficiency investment. Why not incorporate energy costs into mortgage underwriting?

ACEEE has identified sensible and doable market-related items that would save the economy a lot of money—the question is whether anyone on Capitol Hill is sensible or able to do anything.

[Image: b-gear-bulb from the ACEEE blog]

Bill DiBenedetto headshotBill DiBenedetto

Writer, editor, reader and generally good (okay mostly good, well sometimes good) guy trying to get by.

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