Reframing Energy for the 21st Century

The Environmental and Energy Study Institute (EESI) held a facilitated discussion on how we can make our economy much more energy-efficient, to generate wealth and combat climate change. In 2018, the 329 million residents of the United States spent more than $1.1 trillion to meet their many energy needs. Current projections suggest those expenditures—whether to light and cool homes, power business enterprises, or enable daily commutes—may triple to $3.4 trillion (in nominal dollars) by the year 2050. Shockingly, a huge share of that spending is wasted. As detailed in a variety of recent studies, the U.S. economy may only be 16 percent energy-efficient. In other words, an estimated 84 percent of the energy resources consumed within American communities are wasted.

 

Skip Laitner, Energy and Resource Economist, Economic and Human Dimensions Research Associates; Past-President, Association for Environmental Studies and Sciences (AESS)

• The issue of energy productivity in the 21st Century is critical enough that we need to step back and think about how to reposition our understanding of energy as it might relate to the economy. There is a socio-economic imperative for us to build greater energy and resource productivity.
• We need to step out of our silos (whether those silos be physical, sentimental, social, economic, etc.) and create a more collaborative environment.
• New metrics other than Gross Domestic Product (GDP) are needed to more accurately understand our social, economic, and environmental well-being.
• We’ve missed out on more than $4 trillion in energy savings since the 1992 Rio Summit by not adopting smart energy policies.
• Six pathways to achieving robust and sustainable social/economic well-being are:
  • Breaking out of silos with renewed trust and vision
  • Negative emissions capacity
  • Greater resource and energy productivity
  • Renewable energy systems and technologies
  • Storage of information, energy, and resources
  • Information platform to manage resources and optimize their possible outcomes
• The per capita GDP growth rate has steadily eroded since the 1950s. This is not unique to the United States, a similar pattern exists within the OECD and developing nations.
• Real GDP per capita has steadily increased since the 1950s, but had we achieved the same growth rates of earlier eras, current GDP levels would be significantly higher.
• The cumulative resource impact of the U.S. economy from 1950-2019 was equivalent to 266 times the size of the U.S. economy in 1950.
  • Much of those resources were wasted.
  • By 2050, the cumulative impact will be about 632 times the size of the 1950 U.S. economy
• If we combine municipal solid waste, soil erosion, air pollution, CO2 emissions, and fecal matter from humans and livestock, the total waste per person per day comes to about 280 pounds (127kg).
• Key ways to improve overall energy productivity include:
  • Energy efficiency improvements
  • Clean energy production
  • Shrink non-productive uses of capital, materials, water, food, and other resources to lessen demand
• We could imagine a much shallower use of energy if we implement the right policies and perspectives. Smart programs could drive global savings.
• “The difficulty lies not with the new ideas, but in escaping the old ones” (John Maynard Keynes).

 

Dr. Terry Dinan, Senior Advisor, Congressional Budget Office

• Reacting to Laitner's presentation, Dr. Dinan focused on energy efficiency, and began with three questions:
  • Why do we care about it?
  • How do we determine what the right amount of energy efficiency is?
  • What types of policies should we be thinking about?
• What we really care about is energy services, and we need to balance the value that we obtain from those services against the cost of those services. Energy efficiency can be expensive.
• The ideal level of energy efficiency is in-between the maximum amount of efficiency possible and no efficiency, while allowing for consumers to be comfortable with any changes involved.
• We can’t just rely on the private market to improve energy efficiency. We need to encourage research on ways to improve efficiency. That includes basic research in materials science.
• The prices of our energy resources must reflect their scarcity and environmental harm. That makes carbon pricing an essential tool.

 

Dr. James Barrett, Visiting Fellow, American Council for an Energy-Efficient Economy (ACEEE); formerly Executive Director, Redefining Progress

• Dr. Barrett also focused his comments on energy efficiency, but first noted that the underlying issue is how to align narrowly defined economic interests with broadly defined economic well-being. This is a problem not just of economics, but also of politics and communication.
• Narrowly, the objective of power companies is to get the “biggest slice of the pie” possible. Electricity utilities can deliver energy efficiency at a lower cost, in many cases, than they can deliver electricity, but they are focused on profit.
• Putting a price on carbon in some way is probably the single most important thing we can do. Though, doing just that and walking away would be irresponsible and insufficient.
• We have been doing the opposite of a carbon tax: essentially, we are subsidizing carbon emissions.
• We need to reframe waste disposal. On average, driving a car 1 mile emits 1 pound of carbon dioxide. Imagine if drivers were responsible for the disposal of pounds of carbon waste after each drive. They’d think about driving very differently.
• Since 1980, our advances in energy efficiency have probably saved the economy something along the lines of the cost of the Great Depression.
  • There are still more opportunities out there.
  • We need to find ways to exploit these opportunities institutionally.

 

The inefficient use of energy creates an array of costs and constraints that burden our social and economic well-being. Inefficiency needlessly contributes to the growth of greenhouse gas emissions, adds to the growing burden of air pollution costs, reduces industrial productivity, and complicates our energy security and economic resilience. The inefficient use of energy also erodes the nation’s economic growth, contributing to lower growth in GDP per capita (long-term projections suggest that growth in per capita GDP is falling, from perhaps 2 percent or more from the 1950s to the 1990s, to a projected growth rate of less than 1.5 percent per year over the following three decades).

While there are huge opportunities to promote the more efficient use of energy and other resources, it will take purposeful effort, guided by smart policies and programs, to drive the activities and investments necessary to achieve optimal, large-scale benefits for households and businesses. How can we accelerate the more productive use of energy resources—at sufficient scale—over the next three decades or so? Following an overview of the economic imperative of greater levels of energy productivity, the discussants also examined the magnitude of the policies, program funding and productive investments that will be essential to elevate the performance of the American economy over the long-term.