? _ R40670 - Energy Efficiency in Buildings: Critical Barriers and Congressional Policy
24-Jun-2009; Paul W. Parfomak, Fred Sissine, Eric A. Fischer; 25 p.

Abstract: Federal policymakers are debating a range of potential initiatives to limit U.S. emissions of carbon dioxide (CO2). The American Clean Energy and Security Act of 2009 (H.R. 2454), for example, would set a target of reducing U.S. greenhouse gas emissions, including CO2 emissions, 17% below 2005 levels by 2020. In the electricity industry, increasing the energy efficiency of buildings is viewed by many as the measure with the greatest potential to reduce CO2 emissions quickly and at relatively low cost. In light of the efficiency initiatives the federal government has taken since the 1970s, questions arise as to what additional policies might be considered to achieve more ambitious efficiency goals under a national policy of carbon control.

In November 2007, a congressionally-mandated advisory committee released a report examining barriers to the deployment of greenhouse gas reducing technologies and practices, including energy efficiency. The report, Carbon Lock-In: Barriers To Deploying Climate Change Mitigation Technologies, identified the following six “critical” barriers to end-use efficiency in buildings: industry structure, incomplete/imperfect information, high (first) costs, technical risks, market risks, and unfavorable utility fiscal policies.

Looking back on key federal efficiency statutes in the context of the Carbon Lock-in report, it seems that congressional policies since 1975 have been focused persistently on the critical barriers of industry structure, imperfect information, and high first costs. Congress has a history of addressing technical risk, too, by encouraging technology demonstration, although this issue appears to have been a lower priority over the last few years. In successive statutes, Congress has attempted to “push the envelope” in these four areas through ever tighter efficiency standards, new financial incentives, and other measures. Congress has a more limited history of addressing unfavorable rate policies among utilities. Until 2009, this history could be characterized as a single significant, but largely ineffective, attempt to advance efficiency-oriented utility rates under the Energy Policy Act of 1992 (P.L. 102-486). However, new rate provisions in the American Recovery and Reinvestment Act (P.L. 111-5) are another significant attempt to lower utility rate policy barriers, although it will be years before Congress can gauge their effects.

Market risks, especially energy price risks, seem to have received relatively little policy attention from Congress to date. It stands to reason that uncertainty about the future price of energy would complicate decisions about building efficiency investments, and could deter conservative building owners from considering all but the most highly cost effective improvements. As it happens, recent U.S. energy price volatility is at historic highs. Market evidence suggests that energy price uncertainties may be having a greater negative impact on the nature and timing of building efficiency investments in the private sector than is commonly understood. In the context of building energy efficiency, there may be many policy options available to reduce energy price uncertainty, but there has been relatively little identification or consideration of them in the policy community. Neither the American Clean Energy and Security Act of 2009 (H.R. 2454), now under consideration, nor any other current legislative proposals contain these kinds of provisions.

Using the “critical” barriers from the congressionally mandated Lock-in report as a guide, it appears that significant policy gaps remain with respect to utility rate policies and market risks. To the extent that these barriers continue to impede private investment in building efficiency, they may reduce the likelihood of achieving federal targets for carbon control associated with efficiency. Therefore, policy makers may benefit from a complete and integrated understanding of the full set of barriers to building efficiency and the range of carbon outcomes they imply. [read report]

Topics: Energy, Legislative

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