Energy Efficiency Policy

July 3, 2013

The rising demand for more electronics, appliances, bigger vehicles and homes is creating more pressure on the available energy resources.  By improving energy efficiency, both the increased pressure on the energy supply industry and fossil fuel use will be reduced, says Catrina Rorke, director of energy policy for the American Action Forum.

Consider recent trends:

  • Gasoline consumption fell more than 10 percent over the last decade.
  • Electricity use has stabilized in recent years and has a downward trend in 15 states.
  • Connecticut alone has seen per-capita electricity demand drop by 8 percent since 2005.

While changes in consumer behavior in the face of higher fuel costs and in response to the recession are undoubtedly responsible for a portion of this trend, public and private initiatives to promote efficiency also played a significant role.

Private sector action:

  • The private sector can lower costs through energy efficiency improvements.
  • These improvements include: demand-side management techniques, leveraging smart metering technology, innovative financing, informational software.
  • Organizations can improve their energy efficiency in their internal processes to reduce operating costs.
  • Electric utilities can encourage consumers to use energy more efficiently to reduce pressure on the electric grid.
  • Increased interest from both corporate and individual markets in minimizing costs is encouraging new efficiency business ventures.

Government action:

  • Government interventions have a limited ability to improve energy efficiency that will improve economic efficiency.
  • Labeling programs that provide information on lifetime energy costs lower the burden on gathering or processing energy use information and leverage the presumption of consumer rationality to increase investments in energy.
  • Government subsidies promote the consumption of more efficient energy.
  • Command and control mandates restrict the availability of items that do not meet government standards. The benefits of these standards are much lower than the cost imposed on the market.

Source: Catrina Rorke, "Efficiency Policy," American Action Forum, June 2013.

 

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