Cutting Government Programs to Save Energy Overlooks Benefits

While Congress moves this summer to cut or eliminate a host of government energy efficiency programs, little thought is being given to the billions of dollars of energy savings that will be forfeited by American homes and businesses.

As oil imports eclipse levels preceding the first energy crisis; as scientists discover yet more evidence of global climate change; as energy bills become a higher percentage of income for the poor, and as our competitor countries expand their energy R&D; spending, we should look before we leap into slashing programs in the name of “efficiency.”

Energy efficiency was our economy’s single most cost-effective response to the energy crises of the 1970s. Price- and policy-induced gains averaging 25% in all sectors are today saving energy users a staggering $150 billion each year. Low-income households benefit; so do high-tech industries. Yet there remains a huge, untapped potential to curb our ravenous $500-billion annual energy appetite ($2,000 for each American). The hard truth is that we are consistently less efficient than our global competitors, the rate of efficiency improvement has stalled, and energy demand--for the first time since OPEC became a household word--is rising.

The U.S. Department of Energy spearheads the nation’s efficiency efforts. Its world-class R&D; infrastructure and unique technical resources are deployed to improve energy efficiency and indoor environmental quality in U.S. buildings, to make our transportation systems less dependent on imported oil, and to enhance energy productivity in industry.

The DOE strategy combines technology push and market pull, in partnership with providers of energy-efficient goods and services. It focuses on developing basic materials and software, solving engineering problems, helping industry and policy-makers understand the market’s functioning, supporting utility demand-side management programs, and crafting standards to achieve efficiency improvements where other measures fail.

Past DOE efforts have already paid for themselves many times over, creating multibillion-dollar markets for new products and services. For example, consumers save $1,000 for every dollar spent by DOE on its appliance standards program. And delivering energy efficiency creates more jobs than producing energy.

The market has by and large welcomed DOE’s involvement. Building and appliance standards (the latter of which were signed into law by President Ronald Reagan) were the result of a remarkable consensus of manufacturers and trade organizations. Computerized design tools are embraced by architects and engineers who lack the ability to develop their own. The heating, ventilating and air-conditioning industry has expressed strong support for continued federal research on indoor air quality. Under the Partnership for a New Generation of Vehicles (PNGV), the Big Three auto makers will make Japanese cars look like gas guzzlers.

DOE’s programs do not interfere with the functioning of markets; they make these markets more vibrant.

The work is far from done. Promising projects now on the lab bench include better, chlorofluorocarbon-free insulation; advanced gas heating pumps; the super-efficient S-lamp; “smart” windows whose properties will adjust with changes in light and thermal conditions; a new generation of standards that harvest savings made possible by emerging technologies, and multimedia design tools to vastly expand the market’s ability to apply new technologies. Other efforts focus on improving efficiency in basic industries such as steel and paper. PNGV is a bold effort to produce a mid-size car three times as efficient as those sold today, with no sacrifice in cost, performance or safety.

The building industry also looks to DOE for cost-effective and energy-efficient solutions to ventilation and indoor air quality problems. DOE has responded with new technologies for better duct systems, inexpensive pollutant monitoring devices, and designs for “energy-efficient, radon-resistant” homes. While saving money, we could simultaneously address the hidden costs associated with the infamous “Sick Building Syndrome,” respiratory illnesses, lung cancer, asthma, many allergies, carbon monoxide poisonings, and other health problems.

These are worthy goals. Indoor air quality problems are one of the most common causes of litigation in the buildings industry today. Around 20,000 deaths in the United States each year, and 10 times as many illnesses, are attributed to indoor air pollution.

Many of DOE’s promising research programs could be eliminated or substantially reduced by a Congress that hastily dubs them “corporate welfare.” In addition, several programs that promote the market deployment of energy-efficient technologies may be significantly downsized--among them the Weatherization Assistance Program for low-income households.

Why is government involvement necessary? There are clear market failures that make industry reluctant to embark on certain kinds of R&D.; Although private companies are often the source of innovation, they have short time horizons and shrinking research budgets.

DOE’s programs leverage substantial private R&D; investment. More important, industry eventually makes vastly greater investments in manufacturing and marketing the new technologies.

DOE also helps the government put its own house in order. In keeping with the theme of reducing the cost of government, federal managers are leading by example and using the products of their own R&D; to trim the government’s $11-billion annual energy bill. This not only saves taxpayers money, but creates considerable demand for energy-efficient goods and services provided by private companies. Take, for example, the energy management program in DOE’s own 14,000 buildings around the country. Eliminating this program--as proposed by some members of both the House and Senate--will only cost taxpayers $5 for each $1 “saved” through budget cuts.

Today, funding for DOE’s efficiency programs represents a mere tenth of 1% of the U.S. energy bill (only $3 per capita). By trimming these programs further, government would divest itself of a proven tool for meeting its responsibility to ensure energy security, a livable environment, jobs, economic competitiveness and prosperity for its citizens.