Environmental and Energy Study Institute

Low-Hanging Fruit: The Economics of Energy Efficiency

On February 5, the Environmental and Energy Study Institute (EESI) held a briefing to discuss the enormous economic benefits that can be gained by increasing our nation’s energy efficiency. Investing in efficiency measures is the most immediate and effective way to lower energy demand, reduce carbon emissions, and save households and businesses money. Some experts say the potential for savings throughout all sectors of the US economy is estimated to be on the order of 45-50 billion barrels of oil-equivalent between now and 2030, or about 2.5 times more than some estimates of what would be available from off-shore drilling. They also submit that current federal policy does not take full advantage of savings offered by promoting energy efficiency in transportation, buildings, and other sectors. Indeed, efficiency should be viewed as a hidden energy reserve as well as an economic opportunity.

This briefing focused on recent analyses that detail the economic benefits that energy efficiency measures can offer through the transportation and building sectors. Skip Laitner of the American Council for an Energy-Efficient Economy (ACEEE) provided an assessment of how energy efficiency can make a significantly large contribution toward stabilizing energy prices and strengthening the robustness of the US economy. Michael Lubell from the American Physical Society (APS) discussed the recent APS report on short-term, medium-term and long-term opportunities for improving energy efficiency, and the actions required to achieve the economic benefits that are readily available.

Speakers for this event included:

• John A. “Skip” Laitner, Director of Economic and Social Analysis, American Council for an Energy-Efficient Economy (ACEEE)
  Presentation (pdf)
• Michael Lubell, Director of Public Affairs, American Physical Society (APS) and Professor of Physics at City University of New York (CUNY)
  Presentation (pdf)

Click here to download the APS report Energy Future: Think Efficiency

Audio Recording of the Briefing and Q&A (mp3)

Briefing Highlights

• The United States saved 107 quads of energy through efficiency from 1970 to 2008, translating to $1 trillion in cost savings. Investments in energy efficiency saved an estimated $19.4 billion in energy costs for the year 2004 alone.
• Energy efficiency-related investments employed nearly twice as many people as energy supply investments in 2004.
• As an investment, energy efficiency has on average about a 25 percent annual return (compared to U.S. Treasury bills and long-term corporate bonds at less than 10 percent) and a risk index level below 10 percent (slightly higher than T-bills and slightly lower than bonds).
• Closing the “efficiency gap” requires policies and investments that develop economic, technological, and behavioral mechanisms to incentivize energy efficiency, as well as catalyze innovation.
• California energy efficiency efforts have paralleled a steady per capita electricity usage rate with a rapid increase in GDP since 1975. Concurrently, the rest of the country’s per capita use of electricity has increased substantially, and its GDP has not experienced as high a rate of increase.
• In California, electricity savings have been gained through utility demand side management programs (DSM), building energy standards, and appliance standards.
• Education on energy efficiency is needed at all levels, from Congress to community groups and businesses to individual consumers.
• Behavior accounts for significant potential in energy savings. Household energy consumption could be reduced by about 22 percent (8 quads) by behavioral improvements such as keeping tires properly inflated and placing refrigerators a few inches away from the wall.
• Behavioral research and consumer education needs public policy support, possibly with the help of an Energy Efficiency Resources Standard (EERS), which would consist of energy savings targets for utilities.