Order Code IB10020
Issue Brief for Congress
Received through the CRS Web
Energy Efficiency:
Budget, Oil Conservation, and
Electricity Conservation Issues
Updated June 3, 2002
Fred Sissine
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Energy Efficiency Concept
History
DOE’s Strategic and Performance Goals
Energy Efficiency Provisions in Omnibus Energy Bills
Air Conditioner Efficiency Standard
Efficiency Goals for Federal Buildings
Tax Incentives
FY2003 DOE Budget
EPA Budget, FY2003
Energy Security
Oil Conservation
Climate Change: Energy Efficiency’s Role
Electric Industry Restructuring and Conservation
LEGISLATION
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
FOR ADDITIONAL READING

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Energy Efficiency: Budget, Climate Change, and
Electricity Restructuring Issues
SUMMARY
Energy security, a major driver of federal
grams, Research and Standards would drop by
energy efficiency programs in the past, came
$9.8 million and State Energy Grants would
back into play as oil and gas prices rose late in
be cut by $6.2 million.
the year 2000. Also, the 2001 electricity
shortages in California brought a renewed
The House version of H.R. 4 (Securing
emphasis on energy efficiency and energy
America’s Future Energy Act) passed the
conservation to dampen electricity demand.
House August 2, 2001. It contains many
energy efficiency provisions from the Adminis-
Also, worldwide emphasis on environ-
tration’s National Energy Policy report. It
mental problems of air and water pollution
includes funding authorizations, grants; tax
and global climate change, and the related
incentives for appliances, home improve-
development of clean energy technologies in
ments, energy-efficient buildings, and certain
western Europe and Japan may remain
vehicles; programs for federal facilities; and
important influences on energy efficiency
an increased fuel economy standard for light
policymaking. Concern about technology
trucks.
competitiveness may also remain a factor in
debate.
In response, the Senate version of H.R. 4
(Energy Policy Act, S.Amdt. 2917 to S. 517)
In the 107th Congress, debate over energy
passed the Senate as a substitute for S. 1766.
efficiency programs has focused on budget, oil
It also has provisions such as R&D funding,
and electricity conservation, and provisions in
grants funding, and fuel economy. However,
the omnibus energy policy bill, H.R. 4..
it also differs by including – for example – a
higher standard for central air conditioners,
The Administration’s FY2003 budget
different provisions for efficiency in housing,
request for DOE’s Energy Efficiency Program
and programs for exports and international
seeks $904.3 million, an $11.2 million (1%)
technology deployment.
overall decrease relative to the FY2002 appro-
priation. Proposed increases include $47.1
The Job Creation and Worker Assistance
million for Weatherization, $8.1 million for
Act of 2002 (P.L. 107-147, H.R. 3090) was
Fuel Cell Vehicles, $4.6 million for the Fed-
enacted on March 9, 2002. Section 602 ex-
eral Energy Management Program, and $3.2
tends a tax credit for electric vehicles and
million for Energy Star. However,
Section 606 extends a tax deduction for clean
Transportation programs would be cut by
fuel vehicle property.
$30.1 million and Industry programs would
fall by $10.6 million. Under Buildings pro-
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On May 1, 2002, the Senate appointed conferees for the omnibus energy bill, H.R. 4.
On April 25, 2002, the Senate incorporated S. 517 (S.Amdt. 2917) into H.R. 4 (Energy Policy
Act of 2002) as an amendment in the nature of a substitute. The Senate version of H.R. 4
responds to the omnibus House energy bill (H.R. 4, Securing America’s Future Energy Act),
which passed the House on August 2, 2001. Both bills have provisions for R&D funding and
grant programs, but have major differences in their coverage of these and some other energy
efficiency policy areas. (A side-by-side comparison of provision in the two versions of H.R.
4 appear in CRS Report RL31427, Omnibus Energy Legislation.)
On May 1, 2002, Assistant Secretary David Garman began a major re-organization of
the DOE Office of Energy Efficiency and Renewable Energy that will be completed by
October 2002. The number of deputy assistant secretaries is reduced from five to two, the
number of offices shrinks from 19 to 14 (11 program and 3 business) and includes new
offices for FreedomCAR and Vehicle Technologies and Hydrogen and Infrastructure, and
the number of programs is reduced from 31 to 11.
On March 9, 2002, the Job Creation and Worker Assistance Act of 2002 (P.L. 107-147,
H.R. 3090) was enacted. Section 602 extends a tax credit for electric vehicles and Section
606 extends a tax deduction for clean fuel vehicle property.
On February 28, the House Appropriations Committee’s Subcommittee on Interior
Appropriations held a hearing on the FY2003 budget request for the DOE Energy Efficiency
Program. On February 4, the Administration issued its budget request for FY2003. For
DOE’s Energy Efficiency Program, the Administration seeks $904.3 million, an $11.2
million (1%) overall decrease relative to the FY2002 appropriation. Proposed increases
include $47.1 million for Weatherization, $8.1 million for Fuel Cell Vehicles, $4.6 million
for the Federal Energy Management Program (FEMP), and $3.2 million for Energy Star.
However, Transportation programs would be cut by $30.1 million and Industry programs
would fall by $10.6 million. Under Buildings programs, Research and Standards would
drop by $9.8 million and State Energy Grants would be cut by $6.2 million.
(The DOE FY2003 Budget Request is available on the DOE web site
[http://www.mbe.doe.gov/budget/03budget/]; The EPA FY2003 Annual Performance Plan
and Congressional Justification is available on the EPA web site
[http://www.epa.gov/ocfo/budget/2003/g06final.pdf].)
BACKGROUND AND ANALYSIS
Energy Efficiency Concept
Energy efficiency is increased when an energy conversion device, such as a household
appliance, automobile engine, or steam turbine, undergoes a technical change that enables
it to provide the same service (lighting, heating, motor drive) while using less energy. The
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energy-saving result of the efficiency improvement is often called “energy conservation.”
The energy efficiency of buildings can be improved through the use of certain materials such
as attic insulation, components such as insulated windows, and design aspects such as solar
orientation and shade tree landscaping. Further, the energy efficiency of communities and
cities can be improved through architectural design, transportation system design, and land
use planning. Thus, energy efficiency involves all aspects of energy production, distribution,
and end-use.
These ideas of “efficiency” and “conservation” contrast with energy curtailment, which
involves a decrease in output (e.g., turning down the thermostat) or services (e.g., driving
less) to curb energy use. That is, energy curtailment occurs when saving energy causes a
reduction in services or sacrifice of comfort. Curtailment is often employed as an emergency
measure.
Energy efficiency is often viewed as a resource option like coal, oil or natural gas. In
contrast to supply options, however, energy efficiency puts downward pressure on energy
prices by curbing demand instead of by increasing supply. As a result, energy efficiency can
reduce resource use and effects on the environment.
History
From 1974 through 1992, Congress established several complementary programs,
primarily at the Department of Energy (DOE), to implement energy saving measures in
virtually every sector of societal activity. These energy efficiency and energy conservation
programs were created originally in response to national oil import security and economic
stability concerns. In the early 1980s, states and utilities took an active role in promoting
energy efficiency as a cost-saving “demand-side management” tool for avoiding expensive
powerplant construction. Since 1988, national interest in energy efficiency has focused
increasingly on energy efficiency as a tool for mitigating environmental problems such as air
pollution and global climate change. This aspect spawned new programs at DOE and at
several other agencies including the EPA, the Agency for International Development (AID),
and the World Bank’s Global Environment Facility (GEF). Energy efficiency is increasingly
viewed as a critical element of sustainable development and economic growth.
The DOE energy efficiency program includes R&D funding, grants to state and local
governments, and a regulatory framework of appliance efficiency standards and voluntary
guidelines for energy-efficient design in buildings. In addition, its budget supports
regulatory programs for energy efficiency goals in federal agencies and standards for
consumer products. (Detailed descriptions of DOE programs appear in DOE’s FY2001
Congressional Budget Request, DOE/ME-0007, v. 5, February 2002; which appears at
[http://www.cfo.doe.gov/budget/03budget/index.htm])
From FY1973 through FY1998, DOE spent about $8.5 billion in 2002 constant dollars
for energy efficiency R&D, which amounts to about 10% of the total federal spending for
energy supply R&D during that period. In 2002 constant dollars, energy efficiency R&D
funding declined from $795 million in FY1979 to $227 million in FY1988 and then climbed
to $556 million in FY1994. For FY2001, $633 million was appropriated, which is $77
million, or 14%, above the FY1994 mark in 2002 constant (real) dollars. Also, in 2002
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constant dollars, since FY1973, DOE has spent about $7.4 billion on grants for state and
local conservation programs.
This spending history can be viewed within the context of DOE spending for the three
major energy supply R&D programs: nuclear, fossil, and renewable energy R&D. From
FY1948 through FY1972, in 2002 constant dollars, the federal government spent about $23.9
billion for nuclear (fission and fusion) energy R&D and about $5.4 billion for fossil energy
R&D. From FY1973 through FY1998, the federal government spent $46.1 billion for
nuclear (fission and fusion), $22.5 billion for fossil, $12.5 billion for renewables, and $8.5
billion for energy efficiency. Total energy R&D spending from FY1948-FY1998, in 2002
constant dollars, reached $119.0 billion, including $70.4 billion, or 59%, for nuclear, $27.7
billion, or 23%, for fossil, $12.8 billion, or 11%, for renewables, and $8.5 billion, or 7%, for
energy efficiency.
Since 1985, national energy use has climbed about 20 Q (quads — quadrillion Btus,
British thermal units), reaching a record high of 99 Q in 2000. DOE’s 1995 report Energy
Conservation Trends finds that energy efficiency and conservation activities from 1973
through 1991 curbed the pre-1973 growth trend in primary energy use by about 18 Q, an 18%
reduction. In 1992, this was saving the economy about $150 billion annually in total U.S.
energy expenditures, a one-fourth reduction from the previous trend. Further, assuming
fossil and other fuels were displaced in proportion to their actual use in 1992, then energy
efficiency and conservation were providing about 300 million metric tons of carbon (MMTC)
emission reductions that year.
DOE’s Strategic and Performance Goals
In May 2002, the Office of Energy Efficiency and Renewable Energy began a major re-
organization that reduces the number of deputy assistant secretaries, offices, and programs
and restructures their relationships. It is due to be completed by October 2002. The new
management strategy is put forth by Assistant Secretary David Garman in Focused on
R e s u l t s : A N e w G o v e r n m e n t B u s i n e s s M o d e l , a v a i l a b l e a t
[http://www.eren.doe.gov/eere/pdfs/eere_reorg.pdf] The reorganization is based on the 2001
report, EERE Program Management Initiative. ([http://www.eren.doe.gov/pmi/about.html])
A National Research Council report, Energy Research at DOE: Was it Worth It?, found
that from 1978 to 2000 an investment of about $8 billion in DOE’s Energy Efficiency
Programs produced an economic return of at least $30 billion. Areas found short of expected
benefits lacked incentives needed for private sector adoption.
The President’s Management Agenda set out the Bush Administration’s framework for
performance management based on human capital, competitive sourcing, financial
performance, electronic government, and integration of budget with performance. The
Government Performance and Results Act (GPRA, P.L. 103-62) requires each federal agency
to produce and update a strategic plan linked to annual performance plans.
In DOE’s Strategic Plan of September 2000, energy efficiency objectives and strategies
appear under strategic goal #1, “Energy Resources.” In the DOE Annual Performance Plan
for FY2003, energy efficiency is addressed under the Energy Resources goal by three
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strategic objectives: ER1, Management of Energy Intensity; ER3, Weatherization of Low
Income Homes; and ER4 Energy Efficiency. From 2000 to 2020, ER1 seeks to reduce the
oil intensity of the U.S. economy by 2% over a baseline of 23%, reduce energy intensity by
4% over a baseline of 28%; and reduce the need for new electricity generating capacity by
10% from the baseline projection. From 2003 through 2005, ER3 seeks to weatherize at
least 123,000 households per year. ER4 aims to achieve zero emission power plants by 2015
and reach 60% efficiency in coal power plants and 75% in natural gas power plants.
Energy Efficiency Provisions in Omnibus Energy Bills
Much of the legislative action on energy efficiency is focused on the House and Senate
versions of the omnibus energy policy bill, H.R. 4. The House version (Securing America’s
Future Energy Act) includes energy efficiency provisions that are derived primarily from
H.R. 2436, H.R. 2460, H.R. 24511, and H.R. 2587 and contain many recommendations from
the Administration’s National Energy Policy report. The Senate version of H.R. 4 (Energy
Policy Act) incorporates S.Amdt. 2917 to S. 517 which, in turn, replaces S. 1766. As with
the House version, many energy efficiency provision of the Senate version are derived
primarily from S. 388, S. 389, S. 596, and S. 597. Both versions of H.R. 4 have provisions
that authorize funding for energy efficiency R&D and grant programs, create a lighting
technology initiative, propose efficiency measures for standby power in appliances, and set
goals for efficiency in federal buildings. However, there are major differences. For example,
the House version would allow federal agencies to form energy saving performance contracts
with utilities and provide statutory authority for a DOE distributed power hybrid systems
program; while the Senate version would set a higher standard for efficiency in central air
conditioners, propose greater incentives for housing programs, and authorize new export and
international deployment programs.. (A side-by-side comparison of provision in the two
versions of H.R. 4 appear in CRS Report RL31427, Omnibus Energy Legislation.)
(Provisions of the House version of H.R. 4 are described in CRS Report RL31153.
Provisions of S. 1766 are described in CRS Report RL31276. A comprehensive list of bills
appears in CRS Report RL31127, Energy Efficiency and Energy Conservation Legislation
in the 107th Congress.)
Air Conditioner Efficiency Standard
The House version of H.R. 4 (§124) and the Senate version (§927) differ over a new
efficiency standard for central air conditioners and heat pumps. The efficiency of this
equipment is measured in terms of the Seasonal Energy Efficiency Ratio or “SEER.” A
higher SEER value indicates higher efficiency. A SEER value of 10 took effect in 1992.
The House would raise it to 12, while the Senate would set it at 13.
The Bush Administration stopped a DOE rule by the Clinton Administration, that would
have raised the SEER from 10 to 13, by the year 2005. In July 2001, the Bush
Administration proposed a new rule with a SEER of 12. On May 23, 2002, DOE published
a final rule for the SEER of 12 that would take effect in January 2006. A group of five states
(California, Connecticut, Maine, New York, and Vermont) and several environmental and
low-income advocacy groups have challenged DOE’s proposed SEER 12 in federal court.
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DOE estimates that SEER 12 would save 3 Q over 25 years [2206-2030]. This would
displace 30 powerplants at 400 megawatts each, reduce CO2 emissions by 24 million metric
tons of carbon, and save $2 billion dollars. For a consumer, SEER 12 would add $213
dollars to the initial price of equipment that would cost $2,000 to $5,000 dollars. In contrast,
DOE says SEER 13 would increase energy and emission savings by an additional 40 percent
over that for SEER 12. Also, it would add $122 dollars more (for a total of $335) to the
initial price of equipment in the $2,000 to $5,000 dollar cost range.
On one hand, the Administration and supporters of SEER 12 in the House version say
the added $122 dollars for the initial price with a SEER 13 creates a burden for consumers,
especially for low-income persons. Also, they note that the payback would grow from 10
years to 11. On the other hand, at the October 2001 DOE hearing on the new rule, the
Consumer Federation of America and environmental groups counter-argued that a SEER 13
is unlikely to burden low income households. Instead, the National Consumer Law Center
noted that most low income persons “do not make [central air conditioner] purchases, but
they do benefit from savings on their energy bills.”
Efficiency Goals for Federal Buildings
The purpose of federal efficiency goals is to lead-by-example in saving energy, reducing
costs, and helping transform markets for new equipment. The House version (§121) and
Senate version (§911) differ over federal building goals, measured in energy use per square
foot (sf). The past goal called for a 20% reduction from 1985 to 2000. Relative to 1985,
Executive Order 13123 directs agencies to achieve another 15% reduction (to 35%) by 2010.
Relative to 2000, EO13123's 35% reduction goal equates to a reduction of 18.8% by 2010.
The House version adopts this goal for 2010 and directs a further 10% drop (from 35% to
45%) relative to the 1985 baseline for 2020. The Senate version would make 2000 the new
baseline year, and calls for an 18% reduction by 2010 (equivalent to 33.6% relative to 1985)
and a 20% reduction by 2011 (or 37.3% relative to 1985). DOE says that moving the
baseline year from 1985 to 2000 offers analytical and administrative advantages, because
agencies are more electricity intensive and the composition of buildings has changed due to
certain agency and military base closings. P.L. 100-615 had updated the baseline year from
1975 to 1985.
Also, the House version (§128) and Senate version (§919) have provisions for
congressional buildings, which the record shows have had less focus on energy goals than
those in the executive branch. The House version calls for a study of the potential for energy
efficiency and renewables to increase reliability during a power outage. The Senate version
calls for implementation of a plan for congressional buildings to meet the goals for federal
agencies noted above. It also calls for use of efficiency and renewables in the new Capitol
Visitor Center.
Tax Incentives
The Senate version, which incorporated S. 1979 (Energy Tax Incentives Act, Title III;
S. Rept. 107-140), has more than $2 billion in energy efficiency and conservation tax
incentives for the residential and commercial sectors. The House version (Division C, Title
I) has a similar structure of incentives. The bills have somewhat different provisions for new
homes, existing homes, appliances, and energy management devices. The bills have
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identical, or nearly identical provisions for residential solar equipment, business fuel cells,
and CHP. Also, both bills have tax incentives for alternative fuel vehicles and equipment.
FY2003 DOE Budget
On February 28, 2002, the House Appropriations Committee’s Subcommittee on
Interior Appropriations held a hearing on the FY2003 request for the DOE Energy Efficiency
Program. Most questions focused on funding for transportation programs and the need to
reduce national oil dependence. For example, DOE explained that the new Freedom Car
Program builds on results from the Partnership for a New Generation of Vehicles (PNGV)
and has a goal to accelerate the development of fuel cell technology, expecting that it would
lead to commercial vehicles during the period from 2010 to 2020. A concern was raised that
this time frame would not help reduce oil use in the shorter term. Also, a concern was
expressed about the Administration’s proposed spending cuts for the Hybrid Vehicle and
Electric Vehicle programs. DOE said it expects that hybrid cars will enter the commercial
market in 2003 and, thus, that the need for support is shifting away from research and
development and toward tax credits and market incentives.
The FY2003 request for DOE’s Energy Efficiency Program notes that “energy
efficiency programs produce substantial benefits for the Nation,” according to the Budget
Appendix to the U.S. Government’s FY2002 Budget (p. 403). However, the Administration
also stresses that the FY2003 budget proposes shifts that reflect findings of the National
Energy Policy Report and the President’s Management Agenda. Specifically, the request
states that the “Energy Efficiency [Office] will terminate projects that provide insufficient
public benefit, redirect activities to better provide public benefits, place certain activities on
a watch list to ensure they advance effectively, and expand several programs that could
achieve significantly increased benefits with additional funding,” according to the Budget
Highlights of the DOE request (p. 103).
Thus, DOE proposes to decrease funding under DOE’s Office of Energy Efficiency and
Renewable Energy (EERE) from $915.4 million in FY2002 to $904.3 million in FY2003,
a reduction of $11.2 million (1%) below the FY2002 level. This nearly flat total budget
request includes some significant program funding changes. While grants would increase
by $40.9 million, R&D would fall by $52.1 million.
The largest proposed increases include $47.1 million for Weatherization grants, $8.1
million for Fuel Cell vehicles, $4.6 million for FEMP, and $3.2 million for Energy Star.
However, Transportation would be cut by $30 million, including decreases of $10.5 million
for Materials, $8.4 million for Combustion Engines, $7.4 million for Fuels Utilization, $4.0
million for Hybrid Vehicles, and $3.5 million for Electric Vehicles. Industry funding would
fall $10.6 million, including cuts of $2.8 million for Petroleum Industry, $2.8 million for
Combustion Technology, and $2.0 million for Inventions. Under Buildings, cuts include
$9.8 million for Research and Standards and $6.2 million for State Energy Grants.
For further information on the Energy Conservation Budget, see the web site at
[http://www.mbe.doe.gov/budget/03budget/]. For further information on Energy
Conservation Programs, see the Web site at [http://www.eren.doe.gov/].
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EPA Budget, FY2003
The Administration proposes to decrease funding for EPA’s Climate Protection Energy
Efficiency Programs (CPP) from $115.5 million in FY2002 to $108.1 million in FY2003,
a reduction of $7.4 million (6%) below the FY2002 level. For specific programs, the request
includes $9.3 million less for Transportation, $0.3 million less for Industry, and $1.2 million
more for Buildings and $0.1 million more for International Capacity Building.
Table 1. EPA Funding for Climate Protection Energy Efficiency
Programs
($ millions current)
FY1999
FY2000
FY2001
FY2002
FY2003
FY2003
Apprn.
Apprn.
Apprn.
Apprn.
Request
-FY2002
CPP Buildings
38.8
42.6
52.5
48.6
49.8
1.2
CPP Transportation
31.8
29.6
29.4
30.8
21.6
-9.3
CPP Industry
22.1
22.0
31.9
25.4
25.7
-0.3
CPP Carbon Removal
0.0
1.0
1.0
1.5
1.6
0.0
CPP State & Local
5.0
2.5
2.5
2.2
2.3
0.0
CPP International Capacity
5.6
5.6
5.5
7.0
7.1
0.1
CPP Int’l Partnerships
0.4
0.4
0.0
0.0
0.0
0.0
CPP Int’l Tech. Cooperation
0.0
0.0
0.8
0.0
0.0
0.0
CPP, SUBTOTAL
103.7
103.7
123.6
115.5
108.1
-7.4
Climate Change Research
16.0
20.6
22.6
21.4
21.7
0.3
CPP Research
10.0
0.0
0.0
0.0
0.0
0.0
TOTAL
129.7
124.3
146.2
136.9
129.8
-7.1
Source: EPA FY2003 Congressional Justification, p. VI-21 and VI-2 to VI-8.
EPA conducts its CPP programs under the Office of Environmental Programs and
Management (EPM) and the Office of Science and Technology (S&T). EPA’s CPP
programs are focused primarily on deploying energy-efficient technologies. These programs
include Green Lights, Energy Star Buildings, Energy Star Products, Climate Wise, and
Transportation Partners. They involve public-private partnerships that promote
energy-efficient lighting, buildings, and office equipment. Efforts also include information
dissemination and other activities to overcome market barriers.
Energy Security
The terrorist attacks of September 11, 2001, have focused national attention on
developing a strategy to address the vulnerabilities of energy systems and other essential
services. An Executive Order on The Office of Homeland Security (OHS) and the Homeland
Security Council outlines a strategy with six elements. The “protection” element calls on
OHS to “... strengthen measures for protecting energy production, transmission, and
distribution services and critical facilities ...” This may include power plants, transmission
lines, oil refineries, oil storage tanks, oil and natural gas pipelines, and other energy
infrastructure. By reducing the demand for fuels and electricity, energy efficiency measures
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may contribute to energy security by slowing growth in the number of energy facilities and
amount of other energy infrastructure.
Further, the development of small, modular “distributed energy” systems (also referred
to as distributed generation and distributed power) under DOE’s program may help reduce
the security risk by decentralizing energy facilities and establishing some facilities off-grid.
Also, the “response and recovery” element calls on OHS to “... ensure rapid restoration of
transportation systems, energy production, transmission, and distribution systems. ...” The
deployment of smaller, highly mobile distributed energy equipment may be able to help
address this aspect of energy security. Several bills, including H.R. 4 and S. 1766, have
provisions for distributed energy. (For more on distributed energy see the DOE web site at
[http://www.eren.doe.gov/EE/power_distributed_generation.html] and at
[http://www.eren.doe.gov/distributedpower/])
Oil Conservation
Energy efficiency measures to curb oil demand, and other oil conservation measures,
may help address economic issues such as high gasoline prices and oil import dependence
and environmental issues such as air pollution, climate change, and the proposal to develop
oil in the Arctic National Wildlife Refuge (ANWR).
For the ANWR issue, technology-driven improvements to the fuel economy of cars and
light trucks – without any change to the Corporate Average Fuel Economy (CAFE) standard
– might save more fuel than would likely be produced by oil drilling in ANWR. The Energy
Information Administration (EIA) says that a technology-driven projection for cars and light
trucks could increase fuel economy by 3.6 mpg by 2020. Through the first 20 years, this
increase would generate oil savings equivalent to four times the low case and three-fourths
of the high case projected for ANWR oil production. Extended through 50 years, the fuel
economy savings would range from 10 times the low case to more than double the high case
for ANWR. (For more information on this issue, see CRS Report RL31033, Energy
Efficiency and Renewable Energy Fuel Equivalents to Potential Oil Production from the
Arctic National Wildlife Refuge).
A debate has emerged over a provision in H.R. 4 (Division A, Section 201) that
proposes to increase CAFE for new light trucks by an amount necessary to save five billion
gallons of gasoline by 2010. This fuel-saving goal would likely require fuel economy to rise
from the current standard of 20.5 miles per gallon (mpg) to at least 23.5 mpg, an increase of
at least three mpg. CAFE is a key federal regulatory policy aimed at a gradual ramp-up of
fuel efficiency for newly manufactured cars and light trucks. The national fleet fuel economy
for cars declined from 21.6 mpg in 1998 to 21.4 mpg in 1999 and that for light trucks
declined from 17.4 in 1993 to 17.1 in 1999. The present CAFE standard for new cars is 27.5
mpg. (For more on CAFE standards, see CRS Issue Brief IB90122, Automobile and Light
Truck Fuel Economy: Is CAFE up to Standards?)
In early 2002, the Bush Administration launched the Freedom Cooperative Automobile
Research (CAR) Program, to replace the Clinton Administration’s Partnership for a New
Generation of Vehicles (PNGV). Freedom CAR creates a partnership with the auto industry
to develop a fuel-cell-powered vehicle that would attain commercial use during 2010 to
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2020. This program is funded primarily by DOE’s Energy Efficiency Program for
Transportation (see Table 4), but includes some funding from several other agencies. (For
more details on PNGV see CRS Report RS20852, The Partnership for a New Generation
of Vehicles: Status and Issues).
Oil use for gasoline, home heating, and other applications makes it important to the
nation’s transportation and production sectors of the economy. Thus, fluctuating oil prices
and dependence on imported sources can create economic vulnerabilities. Also, oil use has
important environmental impacts. Its extraction and transport can lead to spills that pollute
land and water. Further, oil-based fuels, such as gasoline, generate sulphur dioxide and other
air pollutants as well as large amounts of carbon dioxide that contribute to climate change.
U.S. oil use accounts for about 23% (1998) of the world’s oil consumption and about
39% (2000) of total U.S. energy use. The nation uses about 17.2 million barrels of oil per
day (mb/d), of which about 11.5 mb/d is used for transportation, including 3.8 mb/d for cars
and 2.5 mb/d for light trucks (which include pickups, minivans, and sport utility vehicles).
Oil use in transportation can also be reduced through short-term conservation measures
such as increased use of public transit, carpooling and ridesharing, and telecommuting; and
through curtailment (e.g. driving less) and substitution of alternative fuels. Other measures
can help reduce non-transportation oil uses. For example, home improvement measures such
as insulation, energy-efficient windows, and weatherization measures can reduce the use of
home heating oil.
Climate Change: Energy Efficiency’s Role
Energy efficiency is seen as a key means to reduce fossil fuel-induced carbon dioxide
(CO2) emissions that contribute to global climate change. Thus, the current debate over the
U.S. role in the Kyoto Protocol and related international negotiations to curb global
emissions of greenhouse gases tends to be reflected in deliberations over federal funding and
incentives for energy efficiency.
In early 2002, the Bush Administration issued a climate policy that aims to reduce
energy intensity 18% over 10 years and seeks voluntary emission reductions to control
greenhouse gas emissions. This is consistent with the Administration’s policy that it would
not support the Kyoto Protocol, citing concerns that U.S. participation could raise energy
prices and slow economic growth. Further, the policy states the Administration’s intent to
support funding for energy efficiency and renewable energy programs at DOE and at the
Global Environment Facility.
The 2001 White House Initial Review on Climate Change cites an existing array of
energy efficiency and other programs that support goals of the United Nations Framework
Convention on Climate Change (UNFCCC) and refers to the National Energy Policy (NEP)
report’s provisions for CHP, CAFE, Energy Star, and other energy efficiency policies as part
of the foundation for its strategy to curb greenhouse gas emissions. (For more about the NEP,
see the above section on “National Energy Policy Legislation.”)
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The Kyoto Protocol had called for the United States to cut greenhouse gas (GHG)
emissions to 7% below the 1990 level during the period from 2008 to 2012. At COP-6 in
2000, the United States was accused of avoiding real efforts to reduce emissions, through
energy efficiency and other means, in order to address the Kyoto Protocol.
DOE’s 2000 report Scenarios for a Clean Energy Future, shows the potential for
advanced energy efficiency and other measures to cut two-thirds of the projected U.S. carbon
emissions growth by 2010 and to cut emissions to the 1990 level by 2020. Assuming no
major future policy actions, the reference case scenario in the EIA’s December 2000 Annual
Energy Outlook 2001 projects 2010 emissions will be 34% higher than that for 1990.
DOE’s 1995 report, Energy Conservation Trends, shows that energy efficiency has
reduced long-term rates of fossil energy use and thereby curbed emissions of CO2
significantly. A 1997 DOE report by five national laboratories entitled Scenarios of U.S.
Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond, also
known as the Five-Lab Study, projected that emissions would grow by 29% in 2010 and that
energy efficiency would be the single largest contributor, accounting for 50% to 90% of the
projected emissions reduction. However, in a 1998 report, Impacts of the Kyoto Protocol on
U.S. Energy Markets and Economic Activity, EIA found problems with some key
assumptions in the Five-Lab Study about the use of new energy-efficient technologies.
(For more details about the potential for energy efficiency to reduce CO2 emissions, see
CRS Report RL30414, Global Climate Change: The Role for Energy Efficiency.)
Electric Industry Restructuring and Conservation
The electricity problems in California, combined with the prospect of similar problems
in other western states and the northeast, raised the issue of whether a federal role is needed
to encourage demand-side energy efficiency and load management measures. Some bills in
the 107th Congress would increase the energy efficiency of buildings, appliances, or other
equipment that would reduce electric power demand or otherwise conserve electricity.
In the 106th Congress, debate focused on whether there should be a federal role in
restructuring generally and in creating incentives to ensure a continuing role for energy
efficiency specifically. To address energy efficiency, some bills included a public benefits
fund (PBF), incentives for home energy efficiency, and/or an information disclosure
requirement that identified the sources of power for consumers.

In the 1980s, many states and electric utility companies created demand-side
management (DSM) programs to promote energy efficiency and other activities as a less
costly alternative to new supply. DSM became a significant part of the nation’s energy
efficiency effort. Utility DSM spending peaked in 1994 at $2.7 billion and DSM energy
savings peaked in 1996 at 61 billion kilowatt-hours (which is equivalent to the output from
12 one-gigawatt powerplants).
After California issued its 1994 proposal for electric industry restructuring, many states
and utilities reduced DSM efforts. By 1998, utility DSM spending had fallen to about $1.4
billion. In response, some states, such as California, include provisions for energy efficiency
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and conservation in their restructuring legislation. For example, California’s law (A.B. 1890,
Article 7) placed a charge on all electricity bills from 1998 through 2001 that provides $872
million for “cost effective” energy efficiency and conservation programs. Other states, such
as Pennsylvania, have few if any provisions for energy efficiency.
(For a discussion of broader electricity restructuring issues, see CRS Electronic Briefing
Book on Electricity Restructuring at [http://www.congress.gov/brbk/html/ebele1.html] and
CRS Issue Brief IB10006, Electricity: The Road Toward Restructuring.)
LEGISLATION
P.L. 107-63, H.R. 2217
Department of the Interior and Related Agencies Appropriations Bill, 2002. Makes
appropriations for DOE Energy Efficiency Program. Reported (H.Rept. 107-103) June 19,
2001. Passed House, June 21. In Senate, reported (S.Rept. 107-36) June 29. Passed Senate,
July 12. Conference Committee reported (H.Rept. 107-234) October 11. Signed into law
November 5, 2001.
P.L. 107-73, H.R. 2620/S. 1216
Department of Veterans, Department of Housing and Urban Development, and Related
Agencies Appropriations Bill, 2002. Makes $123.0 in appropriations for EPA’s Climate
Protection Energy Efficiency Programs. House bill reported (H.Rept. 107-159) July 17,
2001. Passed House, July 30. Senate bill reported (S.Rept. 107-43) July 20. Passed Senate
August 2. Conference reported (H.Rept. 107-272) November 6. Signed into law November
26, 2001.
P.L. 107-115, H.R. 2506
Foreign Operations, Export Financing, and Related Programs Appropriations Bill,
FY2002. Appropriates funding for renewable energy and energy efficiency under programs
of the Global Environment Facility (GEF), U.S. Agency for International Development
(AID), Overseas Private Investment Council (OPIC), and other bilateral and multilateral
programs. House Appropriations Committee reported (H. Rept. 107-142) July 17, 2001.
Passed House July 24. Senate Appropriations Committee reported (S. Rept. 107-58)
September 4, 2001. Conference held November 14. Conference reported (H. Rept. 107-345)
December 19, 2001. Signed into law January 10, 2002.
P.L. 107-147, H.R. 3090
Job Creation and Worker Assistance Act of 2002. Section 602 extends a credit for
electric vehicles and Section 606 extends a deduction for clean fuel vehicle property. House
Committee on Ways and Means reported (H.Rept. 107-251) bill on October 17, 2001, with
two-year extension of renewables production tax credit. Passed House October 24. Senate
Finance Committee reported (Committee Print 107-49) an amendment in the nature of a
substitute with an amendment to the title on November 9. Section 404 of the Senate version
proposed one-year extension of renewables production tax credit. Brought to the floor
November 13. Amended in Senate (S.Amdt. 2896) and passed Senate Feb.14, 2002. House
approved agreement with Senate Amendment March 7, 2002. Signed into law March 9,
2002.
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H.R. 4 (House Version)
Securing America’s Future Energy (SAFE) Act of 2001. The provisions for energy
efficiency include funding authorizations, goals, tax incentives, grants, and programs that
cover federal facilities, equipment (consumer products, distributed power, lighting), and
buildings. The bill incorporates H.R. 2436, Energy Security Act; H.R. 2460, Comprehensive
Energy Research and Technology Act; H. R. 2511, Energy Tax Policy Act; and H.R. 2587,
Energy Advancement and Conservation Act. Introduced July 27, 2001; referred to
Committee on Energy and Commerce, and to the Committees on Science, Ways and Means,
Resources, Education and the Workforce, Transportation and Infrastructure, the Budget, and
Financial Services. Passed House, amended, August 2.
H.R. 4 (Senate Version)
Energy Policy Act of 2002. There are several energy efficiency provisions in this bill.
S. 1766 was replaced by S. 517 which, in turn, was incorporated into the Senate version of
H.R. 4 as an amendment in the nature of a substitute and passed the Senate April 25, 2002
H.R. 2436 (Hansen)
Energy Security Act. Section 701 directs the Department of Interior to implement
energy conservation measures at its facilities. Introduced July 10; referred to Committee on
Committee on Resources and to the Committee on Energy and Commerce. Committee on
Resources reported (H.Rept. 107-160, Part I) July 25. Incorporated in H.R. 4.
H.R. 2460 (Boehlert)
Comprehensive Energy Research and Technology Act of 2001. Title I authorizes
appropriations for energy efficiency R&D, energy conservation grants, and distributed energy
resources programs. Introduced July 11; referred to Committee on Science. Reported,
amended (H.Rept. 107-177) July 31. Incorporated into H.R. 4.
H.R. 2511 (McCrery)
Energy Tax Policy Act of 2001. Amends IRS tax code to create tax incentives. Title
I creates tax incentives for fuel cells, home improvements, appliances, and energy-efficient
buildings. Introduced July 17, 2001; referred to Committee on Ways and Means. Reported
(H.Rept. 107-157) July 24. Incorporated into H.R. 4.
H.R. 2587 (Tauzin)
Energy Advancement and Conservation Act. Creates energy conservation and other
energy policy measures. Title I includes provisions to reauthorize funding for energy
efficiency programs at federal facilities and energy conservation grant programs. It also
creates energy efficiency programs for consumer products and vehicles. Title II increases
fuel economy standards for certain highway vehicles. Introduced July 23, 2001; referred to
Committee on Energy and Commerce and many other committees. Reported (H.Rept. 107-
162, Part I) July 25. Incorporated into H.R. 4.
S. 1766 (Daschle-Bingaman)
Energy Policy Act of 2002. There are many provisions for energy efficiency throughout
the bill. The provisions of S. 1766 were incorporated in S. Amdt. 2917, as proposed for
consideration in the Senate. S. Amdt. 2917 was amended on the floor and agreed to as a
substitute amendment to S. 517, formerly the National Laboratories Partnership Improvement
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Act. S. 517, the Energy Policy Act, as amended, was subsequently incorporated in H.R. 4 and
H.R. 4 passed the Senate in lieu of S. 517.
S. 1979 (Baucus)
Energy Tax Incentives Act of 2001. Creates several energy efficiency tax credits and
incentives. Reported (S. Rept. 107-140) March 1, 2002. S. Amdt 3286 incorporated this bill
into S. 517 (S. Amdt 2917) April 23, 2002.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. House. Committee on Energy and Commerce. Subcommittee on Energy
and Air Quality. National Energy Policy: Conservation and Energy Efficiency. Hearing
held June 22, 2001.
U.S. Congress. House. Committee on Science. The Nation’s Energy Future: Role of
Renewable Energy and Energy Efficiency. Hearing held February 28, 2001.
(An extensive list of hearings on energy efficiency in the 107th Congress appear on a DOE
web site at [http://www.eren.doe.gov/eere/testimony.html])
FOR ADDITIONAL READING
American Council for an Energy-Efficient Economy. Proceedings from the ACEEE 2000
Summer Study on Energy Efficiency in Buildings. Washington, August 2000. (10 v.)
—— Green Guide to Cars and Trucks: Model Year 2002. 2001. 120 p.
Electric Power Research Institute (EPRI). Selling Customers on Energy Efficiency. EPRI
Journal, v. 23, November/December 1998. p. 8-17.
General Accounting Office (GAO). Cooperative Research: Results of U.S. - Industry
Partnership to Develop a New Generation of Vehicles. (GAO/RCED -00-81) March
2000. 50 p.
International Energy Program Evaluation Conference. Evaluation: Providing Answers to
Tough Questions. Conference Proceedings. August 2001. 748 p.
National Research Council. Energy Research at DOE: Was It Worth It? [Energy Efficiency
and Fossil Energy Research 1978 to 2000] Prepub. Manuscript. July 2001. 401 p.
[http://www.nap.edu/books/0309074487/html/]
------- Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards.
Prepublication Unedited Proof. July 2001.
U.S. Department of Energy. Interlaboratory Working Group. Scenarios for a Clean Energy
Future. (ORNL/CON-476) November 2000. 350 p.
[http://www.ornl.gov/ORNL/Energy_Eff/CEF.htm]
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—— Energy Information Administration. Measuring Energy Efficiency in the United
States’ Economy: A Beginning. (DOE/EIA-0555[95]/2) October 1995. 91 p.
[http://www.eia.doe.gov/emeu/efficiency/contents.html]
—— U.S. Electric Utility Demand-side Management 1996. (DOE/EIA-0589[96])
December 1997. 102 p. More recent data for 1997 and 1998 available at
[http://www.eia.doe.gov/cneaf/electricity/dsm/dsm_sum.html]
U.S. Environmental Protection Agency. Energy Star and Related Programs 1997 Annual
Report. March 1998. (430-R-98-002) 37 p.
U.S. Executive Office of the President. President’s Committee of Advisors on Science and
Technology. Powerful Partnerships: The Federal Role in International Cooperation
on Energy Innovation. June 1999.
CRS Reports
CRS Report RL31427. Omnibus Energy Legislation: H.R. 4 Side-by- side Comparison, by
Mark Holt and Carol Glover.
CRS Report RL31127. Energy Efficiency and Energy Conservation Legislation of the 107th
Congress, by Fred Sissine.
CRS Report RL31153. Securing America’s Future Energy Act of 2001: Summary of H.R. 4
as Passed by the House, by Mark Holt and Carol Glover.
CRS Report RL31096. Bush Energy Policy: Overview of Major Proposals and Legislative
Action, by Robert L. Bamberger and Mark E. Holt.
CRS Report RL30452. Climate Change: Federal Research, Technology, and Related
Programs, by Michael M. Simpson.
CRS Report RL30414. Global Climate Change: The Role for Energy Efficiency, by Fred
Sissine.
CRS Report RS20852. The Partnership for a New Generation of Vehicles (PNGV): Status
and Issues, by Brent Yacobucci.
Web Sites
American Council for an Energy-Efficient Economy (ACEEE). Extensive listing of web
sites on energy efficiency. [http://www.aceee.org/]
C R S e l e c t r o n i c b r i e f i n g b o o k o n E l e c t r i c i t y R e s t r u c t u r i n g .
[http://www.congress.gov/brbk/html/ebele1.html]
C R S e l e c t r o n i c b r i e f i n g b o o k o n G l o b a l C l i m a t e C h a n g e .
[http://www.congress.gov/brbk/html/ebgcc1.html]
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National Association of State Energy Offices. [http://www.naseo.org/]
U.S. Council for Automotive Research (USCAR). Partnership for a New Generation of
Vehicles. [http://www.uscar.org/pngv/index.htm]
U.S. Department of Energy. Energy Efficiency and Renewable Energy Network.
[http://www.eren.doe.gov/]
U.S. Department of Energy. FY2003 Congressional Budget Request.
[http://www.mbe.doe.gov/budget/03budget/]
U.S. Lawrence Berkeley Laboratory. Center for Building Science.
[http://eetd.lbl.gov/]
U.S. Environmental Protection Agency. FY2003 Budget Justification (Goal 6, Climate
Change, p. VI-21). [http://www.epa.gov/ocfo/budget/2003/g06final.pdf]
U.S. Environmental Protection Agency. Energy Star Programs.[http://www.energystar.gov/]
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Table 4. DOE Energy Efficiency Budget for FY2001-FY2003
(selected programs, $ millions)
FY2001
FY2002
FY2003
Request -
Pct.
Apprn.
Apprn.
Request
FY2002
Diff.
BUILDINGS
293.3
380.3
408.8
28.5
8%
Research & Stnds
62.9
62.4
52.6
-9.8
-16%
Equipment
39.7
38.5
31.7
-6.8
-18%
Weatherization
152.7
230.0
277.1
47.1
20%
State Energy Grant
37.9
45.0
38.8
-6.2
-14%
Mgt & Planning
14.1
15.1
14.1
-1.0
-7%
FED. ENG. MGMT.
25.7
23.3
27.9
4.6
20%
INDUSTRY
146.0
148.9
138.3
-10.6
-7%
Forest & Paper
11.8
11.8
11.8
0.0
0%
Aluminum
10.9
8.1
8.1
0.0
0%
Chemicals
12.1
14.5
14.5
0.0
0%
Petroleum
2.6
2.8
0.0
-2.8
-100%
Crosscutting
59.7
60.9
57.1
-3.8
-6%
Industrial Materials
11.7
13.7
12.7
-1.0
-7%
Combustion
14.4
18.4
15.6
-2.8
-15%
Inventions
4.8
4.4
2.4
-2.0
-46%
Ind. Tech. Assistance
15.0
14.9
15.9
1.0
7%
POWER TECH.
47.3
63.8
63.9
0.1
0%
TRANSPORTATION
251.5
252.7
222.7
-30.1
-12%
Vehicle Tech.
157.1
155.1
149.3
-5.8
-4%
Hybrid Systems
49.0
46.6
42.6
-4.0
-9%
Fuel Cell
40.7
41.9
50.0
8.1
19%
Adv. Com. Engine
52.2
49.1
40.7
-8.4
-17%
Electric Vehicle
8.8
7.0
3.5
-3.5
-50%
Fuels Utilization
23.1
25.9
18.5
-7.4
-29%
Materials Tech.
41.5
40.3
29.8
-10.5
-26%
Tech. Deployment
14.8
15.2
15.0
-0.2
-1%
Mgt & Planning
9.2
10.2
10.1
-0.1
-1%
POLICY & MGMT.
46.0
46.4
42.7
-3.7
-8%
R&D SUBTOTAL
619.3
640.4
588.4
-52.1
-8%
GRANTS
190.6
275.0
315.9
40.9
15%
SUBTOTAL
GROSS TOTAL
809.8
915.4
904.3
-11.2
-1%
Biomass Dev. Fund
-2.0
-----
-----
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ADJUSTED TOTAL
807.8
915.4
904.3
-11.2
-1%
Sources: DOE FY2003 Cong. Bud. Request, v. 7, February 2002.
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