Order Code IB10020
CRS Issue Brief for Congress
Received through the CRS Web
Energy Efficiency:
Budget, Oil Conservation, and
Electricity Conservation Issues
Updated May 19, 2003
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 in Omnibus Energy Bills, 108th Congress
Efficiency Standards for Consumer and Commercial Products
Efficiency Goals for Federal Buildings
Tax Incentives for Efficiency and Conservation
Energy Efficiency Tax Revenue Effect
Housing, Funding Authorizations, and Other Provisions
DOE Budget, FY2004
DOE Budget, FY2003
EPA Budget, FY2004
Energy Security
Electricity Demand-Side Management (DSM) and Distributed Power
Vehicle Fuel Efficiency and 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
to FY2002, the FY2003 level cuts $4.7 mil-
energy efficiency programs in the past, came
lion.
back into play as oil and gas prices rose late in
the year 2000. The terrorist attack of Septem-
The Bush Administration’s FY2004
ber 11, 2001, and the Iraq war of 2003 height-
budget request for the Department of Energy’s
ened concern for energy security and raised
(DOE’s) Energy Efficiency Program seeks
further concerns about the vulnerability of
$875.8 million, an $16.0 million (2%) overall
energy infrastructure and the need for alterna-
decrease relative to the FY2003 appropriation.
tive fuels. Further, the 2001 electricity short-
The main proposed increases are $64.7 mil-
ages in California brought a renewed empha-
lion for Weatherization grants and $22.4
sis on energy efficiency and energy conserva-
million for Fuel Cell Vehicles. The request
tion to dampen electricity demand.
reduces R&D by $74.7 million, with proposed
cuts that include $34.1 million for Industrial
Also, worldwide emphasis on environ-
Technologies, $19.7 million for Vehicle
mental problems of air and water pollution
Technologies, $15.8 million for Biomass and
and global climate change, and the related
Biorefinery R&D, and $9.4 million for Dis-
development of clean energy technologies in
tributed Energy Resources.
western Europe and Japan, may remain
important influences on energy efficiency
The House-passed omnibus energy bill
policymaking. Concern about technology
(H.R. 6) has efficiency standards for consumer
competitiveness may also remain a factor in
and commercial products, efficiency goals for
the debate.
federal buildings, tax incentives for efficiency
and conservation, and several other energy
In the 108th Congress, debate over energy
efficiency provisions. Also, three energy
efficiency programs is focusing on the budget,
efficiency-related floor amendments were
oil and electricity issues, and provisions in the
adopted, involving reduced oil dependence,
omnibus energy policy bill, H.R. 6.
federal telecommuting, and bicycling to
conserve fuels. The Senate has begun consid-
The Bush Administration’s FY2003
eration of its bill, S. 14, which is expected to
budget request for the Department of Energy’s
incorporate the energy tax bill, S. 597. S. 14
(DOE’s) Energy Efficiency Program sought
also has standards, goals, tax incentives (S.
$901.6 million. The Consolidated Appropria-
597), and other energy efficiency provisions,
tions Resolution for FY2003 (P.L. 108-7,
but with some significant differences from the
H.J.Res. 2) contains $891.8 million for the
House bill. Some floor amendments on en-
DOE Energy Efficiency Program, which is
ergy efficiency are likely.
$19.9 million less than the request. Compared
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MOST RECENT DEVELOPMENTS
On May 6, 2003, the Senate began consideration of the omnibus energy bill, S. 14. It
has efficiency standards for consumer and commercial products, efficiency goals for federal
buildings, tax incentives for efficiency and conservation, housing efficiency measures, and
other energy efficiency provisions. An amendment to address automobile fuel economy
standards was defeated in Committee, but may come up again on the floor. On April 10,
2003, the House passed the omnibus energy bill (H.R. 6). It also has standards, goals, tax
incentives, and other energy efficiency provisions, but with some differences from the Senate
bill. Further, the House adopted three energy efficiency-related floor amendments. One
(H.Amdt. 70) expresses a “sense of the Congress” to reduce oil imports from 58% to 45%.
The second (H.Amdt. 71) requires a study of the energy conservation benefits of
telecommuting by federal employees. The third (H.Amdt. 78) establishes a “Conserve by
Bicycling” pilot program at the Department of Transportation. (For a comparison of the
House and Senate provisions, see "Energy Efficiency in Omnibus Energy Bills, 108th
Congress" hereafter.)
On February 3, 2003, the Bush Administration issued its FY2004 budget request. For
DOE’s Energy Efficiency Program, it seeks $875.8 million, which is $21.8 million, or 2%,
less than the FY2003 appropriation, not including inflation. It contains $57.0 million more
for Grants and $79.7 million less for R&D. It also includes $29.5 million more for Fuel Cell
Vehicles for the first year of the President’s five-year Hydrogen Initiative and $9.5 million
for a new National Climate Change Technology Initiative. The request presents a new
budget structure.
(The DOE FY2004 Budget Request is available on the DOE web site
[http://www.cfo.doe.gov/budget/04budget/index.htm/]; and the EPA FY2004 Annual
Performance Plan and Congressional Justification is available on the EPA web site
[http://www.epa.gov/ocfo/budget/2004/2004cj.htm] .)
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
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.
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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. (See CRS Report RL31188, Energy
Efficiency and the Rebound Effect.)
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 Environmental Protection Agency (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 FY2003
Congressional Budget Request, DOE/ME-0007, v. 5, February 2002; it appears at
[http://www.cfo.doe.gov/budget/03budget/index.htm]
From FY1973 through FY2002, DOE spent about $11.1 billion in 2002 constant dollars
for energy efficiency R&D, which amounts to about 9% of the total federal spending for
energy supply R&D during that period. In 2002 constant (real) 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 FY2002, $638 million was appropriated, which is
$82 million, or 15%, above the FY1994 mark in 2002 constant dollars. Also, in 2002
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 $24.3
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billion for nuclear (fission and fusion) energy R&D and about $5.5 billion for fossil energy
R&D. From FY1973 through FY2002, the federal government spent $49.1 billion for
nuclear (fission and fusion), $24.8 billion for fossil, $14.2 billion for renewables, and $11.1
billion for energy efficiency. Total energy R&D spending from FY1948-FY1998, in 2002
constant dollars, reached $128.9 billion, including $73.4 billion, or 57%, for nuclear, $30.2
billion, or 23%, for fossil, $14.2 billion, or 11%, for renewables, and $11.1 billion, or 9%,
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 annual 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 2002, the Office of Energy Efficiency and Renewable Energy (EERE) completed a
major re-organization. The number of deputy assistant secretaries was reduced from five to
two; the number of offices shrank from 19 to 14 (11 program and 3 business) and included
new offices for FreedomCAR & Vehicle Technologies and for Hydrogen, Fuel Cells and
Infrastructure; and the number of programs was reduced from 31 to 11. 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]. More information about EERE is
available on the DOE web site [http://www.eren.doe.gov/eere/organization.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
(APP) for FY2004, energy efficiency is addressed under the revised strategic goal #2,
“Energy Conservation and the Environment,” which states “Energy use and greenhouse gas
emissions versus the gross domestic product (GDP) are reduced by 40% by 2025 compared
to 2000 and the growth versus the U.S. population stops by 2025.” In support of Goal 2, the
APP lists five strategic performance goals. ER1-1 says that relative to the 1985 baseline,
FEMP will support federal agency efforts to reduce energy intensity by 30% in 2005 and
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35% by 2010. ER 1-2 says that from 1991 to 2010, the Industries Program will reduce
energy intensity by 20-25%. ER 1-3 says the FreedomCAR and Vehicle Technologies
Program will achieve several specific vehicle technical and cost goals through 2010. ER 1-4
says that the Buildings Program will achieve several specific goals to improve building
efficiency through 2009. ER 3-1 puts forth specific output goals through 2010 for
weatherization grants, state grants, Rebuild America, Energy Star, Clean Cities, and for other
programs.
Energy Efficiency in Omnibus Energy Bills, 108th
Congress
In the 108th Congress, most legislative action on energy efficiency has focused on the
omnibus energy policy bills, H.R. 6, S. 14, and the Senate energy tax bill (S. 597), which is
expected to be incorporated into S. 14. Key energy efficiency and energy conservation
provisions include efficiency standards for consumer and commercial products, efficiency
goals for federal buildings, and several tax incentives. Other provisions cover public
housing, funding authorizations, and certain other energy efficiency and energy conservation
programs. (For information on H.R. 4, the omnibus energy bill in the 107th Congress, see
CRS Report RL31427.)
Efficiency Standards for Consumer and Commercial Products
DOE currently sets minimum energy efficiency standards for several consumer and
commercial products, including household appliances such as clothes washers and
refrigerators. The omnibus energy bills would expand standards to other equipment. H.R.
6 (§11045) and S. 14 (§621) have identical provisions that direct DOE to set efficiency
standards within three years for “standby mode” energy use by battery chargers and external
power supplies. The two bills also have identical provisions that call for standards to be
developed for suspended ceiling fans, vending machines, unit heaters, commercial
refrigerators, freezers, refrigerator-freezers, illuminated exit signs, torchieres, distribution
transformers, and traffic signal modules. S. 14 differs by including medium base compact
flourescent lamps (CFLs) and commercial clothes washers. Many of the above items were
approved by the conference committee on H.R. 4 in the 107th Congress. In March 2003
testimony on a draft version of H.R. 6, the American Council for an Energy-Efficient
Economy estimated that these new standards would save more energy than any other
provisions in the bill. Most of the other provisions in the House and Senate titles on
consumer product efficiency programs are similar. The table below indicates which
standards would be set by law and which would be set by DOE rulemaking.
Standard set:
H.R. 6
S. 14
By law
exit signs, traffic signals,
all items in H.R. 6 plus unit heaters
torchieres, distribution
and compact flourescent light bulbs
transformers
By rule
ceiling fans, vending machines,
all items in H.R. 6 except unit heaters
commercial refrigerators and
freezers, unit heaters
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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 past goal had called for a 20%
reduction in federal buildings’ energy use, measured in energy use per square foot (sf), over
the period from 1985 to 2000. This goal was exceeded, slightly. H.R. 6 (§11002) and S. 14
(§601) set goals for further energy efficiency in federal buildings. The baseline years differ
slightly: the House bill specifies FY2001 while the Senate bill specifies FY2000. Otherwise
the provisions are nearly identical, with both setting progressive annual reductions that end
with a 20% reduction from baseline by FY2014. However, the Senate bill (§601[c]) also
calls for DOE to review results by the end of 2011 and recommend further goals for building
energy savings for the period 2014 through 2022. Most of the other provisions in the House
and Senate titles on federal programs are administrative measures that would help agencies
achieve the above-described goals.
The historical record shows that congressional buildings have had less focus on energy
efficiency goals than those in the executive branch. To address this, H.R. 6 (§11001) and S.
14 (§606) have identical provisions that call for a study of the potential for energy efficiency
and renewables to increase reliability during a power outage and for the implementation of
a plan for congressional buildings to meet the energy efficiency goals for federal agencies
noted above.
Tax Incentives for Efficiency and Conservation
Since the late 1970s, there have been some tax incentives to promote fuel switching and
alternative fuels as a way to conserve gasoline and reduce oil import dependence. In
contrast, tax incentives for energy efficiency and for electricity conservation have been rare,
and generally short-lived. The omnibus energy bills propose some modest new tax
incentives for energy efficiency.
The Senate energy tax bill (S. 597) has four tax provisions that are not in H.R. 6. One
(§302) creates a tax credit for manufacturers of certain appliances (clothes washers and
refrigerators) with energy efficiencies that exceed federal standards. The credit per appliance
ranges from $50 to $150, with a $60 million maximum for the total program through 2006.
A second provision (§305) creates a tax deduction for efficient commercial buildings. A
maximum of $2.25 per square foot (sf) is allowed through 2009 for new construction or
reconstruction where the total energy use is at least 50% below Standard 90.1-1999 of the
American Society of Heating, Refrigeration, and Air Conditioning Engineers (ASHRAE).
Two other provisions create a $30/unit tax deduction (§306) to utilities for investment in
energy management devices installed in residences or businesses and set a 3-year recovery
period (§307) for depreciation purposes. The table below shows the differences between the
House and Senate maximum tax incentives for efficiency in new and existing homes.
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New Homes
Existing Homes
H.R. 6
S. 14
H.R. 6
S. 14
(§41005)
(§301)
(§41004)
(§309)
Energy Reduction
30%
50%
IECC*
30%
Credit Cap
$2,000
$2,000
$2,000
$300

Period (years)
5
5
3
4
Note: IECC represents year 2000 standards in the International Energy Conservation Code.
Similar tax provisions for fuel cell power plants and combined heat and power (CHP)
appear in both bills. Also, both bills have tax incentives for alternative fuel vehicles and
equipment.
Energy Efficiency Tax Revenue Effect. Table1 compares the estimated 10-year
revenue effect of renewable energy and alternative fuel tax provisions in H.R. 6 (H.R. 1531)
and S. 14 (S. 597). It also shows the share of the total in each bill.
Table 1: Omnibus Energy Bills, Tax Revenue Effect
($ billions)
H.R. 6
S. 14
Energy Efficiency and Conservation Measures
$ 1.33
$ 2.43
(Excludes diesel fuels, alternative fuels, and solar credit)
Total, All Tax Provisions
$18.67
$15.47
Energy Efficiency and Conservation Share of Total
7.1%
15.7%
Source: Joint Tax Committee. Estimated Revenue Effects of H.R. 1531 and S. 597, April 2, 2003.
Housing, Funding Authorizations, and Other Provisions
H.R. 6 (Division G, §70001-§70009) and S. 14 (§631-§639)) have identical provisions
for energy efficiency in public housing. They also have nearly identical provisions that
authorize funding for energy assistance (e.g., Low-Income Home Energy Assistance
Program, LIHEAP) and grant programs (e.g., DOE Weatherization Program).
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DOE Budget, FY2004
The Budget Appendix to the U.S. Government’s FY2004 Budget (p. 378) notes that
“[t]he Administration’s energy efficiency programs have the potential to produce substantial
benefits for the Nation ... in terms of economic growth, increased energy security and a
cleaner environment.” Specifically, it says that “[t]he 2004 budget proposes a major new
initiative to accelerate the worldwide availability and affordability of hydrogen-powered fuel
cell vehicles.” Also, it says the proposed National Climate Change Technology Initiative “...
has as its primary goal the reduction of greenhouse gas emissions ... “ According to the
Budget Highlights of the DOE request (p. 100), the “request presents a new budget structure
that mirrors the new organizational structure. In addition, the budget shifts reflect
application of the R&D Investment Criteria and the Program Assessment Rating Tool
developed as part of the President’s Management Agenda.”
For further information on the Energy Conservation Budget, see the web site at
[http://www.cfo.doe.gov/budget/04budget/index.htm/]. For further information on Energy
Conservation Programs, see the Web site at [http://www.eere.energy.gov/].
DOE Budget, FY2003
On February 20, 2003, the Consolidated Appropriations Resolution (H.J.Res. 2) was
signed into law as P.L. 108-7 (H.Rept. 108-10). For DOE’s Energy Efficiency Program, it
appropriates $897.6 million (excluding the possible application of a 0.65% across-the-board
reduction), which is $15.2 million less than the FY2002 appropriation. This includes $5.0
million less for Grants and $18.2 million less for R&D.
Under the Foreign Operation, Export Financing, and Related Programs Appropriations
Bill (H.Rept. 108-10, Sec. 555, p. 192), P.L. 108-7 also contains $175 million for new
“Energy Conservation, Energy Efficiency, and Clean Energy Programs” to reduce greenhouse
gas emissions and other environmental problems in developing countries.
EPA Budget, FY2004
The FY2004 request for EPA’s CPP Programs is $116.6 million, which would be a $1.4
million increase over the FY2003 appropriation. For specific programs, the request includes
$1.5 million less for Buildings and $0.5 million less for International Capacity Building. It
also includes $1.4 million more for Transportation and $0.8 million more for Industry.
Table 2. EPA Funding for Climate Protection Energy Efficiency
Programs (CPP)
($ millions current)
FY2001
FY2002
FY2003
FY2003
FY2004
FY2004
Enacted
Enacted
Request
Conf.
Request
-FY2003
CPP Buildings
52.5
48.6
49.8
49.8
48.3
-1.5
CPP Transportation
29.4
30.8
21.6
21.6
22.9
1.4
CPP Industry
31.9
25.4
25.7
25.7
26.4
0.8
CPP Carbon Removal
1.0
1.5
1.6
1.6
1.7
0.2
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CPP State & Local
2.5
2.2
2.3
2.3
2.6
0.3
CPP Int’l Capacity
5.5
7.0
7.1
7.1
6.6
-0.5
CPP Int’l Partnerships
----
----
----
----
----
----
CPP Int’l Tech. Coop’n
0.8
----
----
----
----
----
CPP Other
-----
8.4
7.2
7.2
8.0
0.7
CPP, SUBTOTAL
123.6
123.9
108.1
115.2
116.6
1.4
Climate Change Rsch
22.6
21.4
21.7
21.7
21.5
-0.2
TOTAL
146.2
145.3
129.8
137.0
138.1
1.2
Source: EPA FY2004 Congressional Justification, p. VI-28; H.Rept. 108-10 (Cong. Rec. Feb. 12, 2003, p.
H1087.
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
Since September 11, 2001, terrorist attacks have focused national attention on
developing a strategy to address the vulnerabilities of energy systems and other essential
services. The Department of Homeland Security (DHS, P.L. 107-296) includes offices and
programs (Infrastructure Protection, Energy Security and Assurance) responsible for
measures to protect energy infrastructure, including 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 may contribute
to energy security by slowing growth in the number of energy facilities and amount of other
energy infrastructure. It can also reduce the risk of oil shortages, energy price shocks, and
attendant impacts on the national economy. Some of the possible ways that energy efficiency
can improve energy security are described in U.S. Energy Security Facts (available at
[http://www.rmi.org/images/other/S-USEnergySecurityFacts.pdf].)
Electricity Demand-Side Management (DSM) and Distributed
Power
The use of energy-efficient appliances and other end-use equipment can reduce
electricity demand, which drives the need for new power plants. 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 in the President’s DHS proposal calls for it to “... ensure rapid restoration of
transportation systems, energy production, transmission, and distribution systems. ...” The
deployment of smaller, highly mobile distributed energy equipment may help address this
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aspect of energy security. H.R. 6 and S. 14 have provisions for distributed energy. (For more
o n d i s t r i b u t e d e n e r g y s e e t h e D O E w e b s i t e a t
[http://www.eren.doe.gov/EE/power_distributed_generation.html] and at
[http://www.eren.doe.gov/distributedpower/].)
Vehicle Fuel Efficiency and Oil Conservation
Energy efficiency measures to curb oil demand, and other oil conservation measures,
may help address energy security, 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, although the
two options are not mutually exclusive. 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).
CAFE is a key federal regulatory policy that had instituted a gradual ramp-up of fuel
efficiency for newly manufactured cars and light trucks. The present CAFE standard for new
cars is 27.5 mpg. The national fleet fuel economy for cars peaked at 21.1 mpg in 1991,
declined slightly, and then climbed to 22.1 mpg in 2001. Similarly, light trucks peaked at
16.9 mpg in 1991, declined slightly, and then reached 17.6 in 2001. A floor amendment to
S. 14 on fuel economy is expected. (For more on CAFE standards, see CRS Issue Brief
IB90122, Automobile and Light Truck Fuel Economy: Is CAFE up to Standards?)
In the January 2003 State of the Union Speech, President Bush announced $720 million
in new funding for a hydrogen fuel initiative to accelerate the use of fuel cells for
transportation and power generation. Fuel cells can reduce gasoline (hence oil) use due to
the ability to employ hydrogen-rich fuels, such as natural gas and alcohol fuels. The
initiative builds on the Freedom Cooperative Automobile Research (FreedomCAR) Program
launched in early 2002 by the Bush Administration to replace the Clinton Administration’s
Partnership for a New Generation of Vehicles. FreedomCAR creates a partnership with the
auto industry to develop a fuel-cell-powered vehicle that would attain commercial use
during 2010 to 2020. This program is funded primarily by DOE’s Fuel Cell Technologies
Program (see Table 2), but includes some funding from other agencies. (For more details on
FreedomCAR see CRS Report RS21442, Hydrogen and Fuel Cell Vehicle R&D:
FreedomCAR and the President's Hydrogen Fuel Initiative.)
Oil use for gasoline, home heating, and other applications makes it important to the
transportation and production sectors of the nation’s 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
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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 24% (2001) of the world’s oil consumption and about
40% (2002) of total U.S. energy use. The nation uses (2000) about 19.7 million barrels of
oil per day (mb/d), of which about 13.8 mb/d is used for transportation, including 4.7 mb/d
for cars and 3.4 mb/d for light trucks (includes 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
Under the FY2003 Foreign Operations, Export Financing, and Related Programs
Appropriations Bill in the 107th Congress, the Senate Appropriations Committee
recommended (S.Rept. 107-219) $175 million under Development Assistance in a new fund
for “energy conservation, energy efficiency, and clean energy” in developing countries. In
contrast, the House Appropriations Committee recommended (H.Rept. 107-663) $3 million
for this clean energy fund.
Energy efficiency is seen as a key means to reduce fossil fuel-induced carbon dioxide
(CO2) emissions that may contribute to global climate change. Thus, recent debates over the
U.S. role in the Kyoto Protocol and related international negotiations to curb global
emissions of greenhouse gases tend to be reflected in deliberations over federal funding and
incentives for energy efficiency.
In fulfilling requirements under the United Nations Framework Convention on Climate
Change (UNFCCC), in June 2002, EPA issued the third U.S. climate report to the United
Nations entitled Climate Action Report 2002. In it, the Bush Administration commits to
reducing greenhouse gas intensity (emissions per unit of GDP) by 18% (4% more than under
existing policies) over 10 years through a combination of voluntary, incentive-based, and
existing mandatory measures focused on energy efficiency and other measures. This is
projected to attain a 4.5% reduction from forecast emissions in 2012. The Administration
has proposed this policy in place of the Kyoto Protocol, which it opposes due to concerns
that it could raise energy prices and slow economic growth. Further, the Administration has
stated its 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 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
(GHG) emissions.
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The Kyoto Protocol had called for the United States to cut GHG emissions to 7% below
the 1990 level during the period from 2008 to 2012. At the Seventh Conference of Parties
(COP-7) in 2001, 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. At COP-
8 in 2002, the parties resolved to continue efforts to ratify the Protocol and meet its goals.
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 January 2003 Annual
Energy Outlook 2003 projects 2010 emissions will be 1,800 MMTC, 32% more 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. (For 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
There is a debate over the federal role in restructuring generally and in creating
incentives to ensure a continuing role for energy efficiency specifically. The recent
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. A June 2002
report (#49733) by the Lawrence Berkeley National Laboratory, California Consumers Kept
Lights on During Electricity Crisis by Conserving and Investing in Efficient Equipment,
found that conservation and efficiency measures reduced summer 2001 peak demand by
10%, increased system reliability, avoided some wholesale power purchases, and avoided $2
billion to $20 billion in potential losses from rolling blackouts. Energy Efficiency
Leadership in California, an April 2003 report by the Natural Resources Defense Council
and Silicon Valley Manufacturing Group, uses California Energy Commission data to project
that additional efficiency measures could reduce electric demand by 5,900 MW and save $12
billion over the next 10 years. Some provisions in H.R. 6 and S. 14 would increase the
energy efficiency of buildings, appliances, or other equipment that would reduce electric
power demand or otherwise conserve electricity.
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
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 provided $872
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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. 108-7, Division E (H.J. Res. 2)
Consolidated Appropriations Resolution for FY2003. Foreign Operations, Export
Financing, and Related Programs Appropriations, 2003, appears as Division E of the
Resolution. 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 Corporation (OPIC), and other bilateral
and multilateral programs. Under Development Assistance, Section 555 appropriates $175
million in a new account to create a fund for “energy conservation, energy efficiency, and
clean energy” in developing countries. House passed as a continuing resolution, January 8,
2003. Senate inserted its amendment (S.Amdt 1) and issued an unnumbered committee print
(Congressional Record, p. S492) January 15, 2003. Passed Senate, amended, January 23,
2003. Conference reported (H.Rept. 108-10) February 13. Passed House and Senate
February 13. Signed into law February 20, 2003.
P.L. 108-7, Division F (H.J. Res. 2)
Consolidated Appropriations Resolution for FY2003. Interior and Related Agencies
Appropriations, 2003, appears as Division F of the Resolution and makes appropriations for
DOE’s Energy Efficiency program. Signed into law February 20, 2003.
P.L. 108-7, Division F (H.J. Res. 2)
Consolidated Appropriations Resolution for FY2003. Veterans Affairs and Housing
and Urban Development, and Independent Agencies Appropriations, 2003, appears as
Division F of the Resolution. It includes appropriations for EPA’s Climate Protection
Energy Efficiency Programs. Signed into law February 20, 2003.
H.R. 6 (Tauzin)
Omnibus Energy Bill. In Division A, Title I has provisions for energy efficiency and
energy conservation, Titles V and VII treat alternative fuels, Title VI has a PURPA
cogeneration provision, and Title VIII addresses automobile efficiency. In Division B, Title
I contains R&D authorizations. In Division D, Title I has tax incentives for efficiency and
conservation. The bill incorporates provisions of H.R. 39, H.R. 238, and H.R. 1531.
Introduced April 7, 2003; referred to Committee on Energy and Commerce and several other
committees. Passed House, amended, April 10.
S. 14 (Domenici)
Omnibus Energy Bill. Energy efficiency appears as Title VI. Also, Title VII A covers
alternative fuels, Title VIII covers hydrogen, Title IX covers R&D authorizations, and Title
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XI on Electricity includes a provisions on PURPA and cogeneration. Energy efficiency
markup held April 8. S. 597 (energy tax bill) is expected to be incorporated into S. 14.
Introduced April 30, 2003. Floor action began May 6.
S. 139 (Lieberman)
Climate Stewardship Act of 2003. Accelerates the reduction of greenhouse gas
emissions in the United States by establishing a market-driven system of greenhouse gas
tradeable allowances that could be used interchangeably with passenger vehicle fuel
economy standard credits, to limit greenhouse gas emissions in the United States and reduce
dependence upon foreign oil. Introduced January 9, 2003; referred to Committee on
Environment and Public Works.
S. 189 (Wyden)
21st Century Nanotechnology Research and Development Act. Authorizes FY2004
DOE appropriation of $160 million for nanotechnology R,D&D that addresses a variety of
goals, including improved energy conservation. Introduced January 15, 2003; referred to
Committee on Energy and Natural Resources.
S. 194 (Corzine)
National Greenhouse Gas Emissions Inventory and Registry Act of 2003. Establishes
an inventory, registry, and information system of United States greenhouse gas emissions to
inform the public and private sector concerning, and encourage voluntary reductions in,
greenhouse gas emissions. Includes emissions reductions from energy efficiency activities.
Introduced January 15, 2003; referred to Committee on Environment and Public Works
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. House. Committee on Science. President’s Hydrogen Initiative. Hearing
held March 5, 2003.
U.S. Congress. House. Committee on Energy and Commerce. Subcommittee on Energy
and Air Quality. Comprehensive National Energy Policy: Hearing held March 5, 2003.
(An extensive list of hearings on energy efficiency in the 107th Congress appears on a DOE
web site at [http://www.eere.energy.gov/office_eere/congressional_test.html].)
FOR ADDITIONAL READING
American Council for an Energy-Efficient Economy. Proceedings from the ACEEE 2002
Summer Study on Energy Efficiency in Buildings. Washington, 2002. (10 v.)
—— ACEEE’s Green Book: The Environmental Guide to Cars and Trucks: Model Year
2003. 2003. 120 p.
[http://www.greenercars.com/indexplus.html]
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—— Proceedings from the ACEEE 2001 Summer Study on Energy Efficiency in Industry.
2001. (2 v.) 1127 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). Research and Development: Lessons Learned from
Research Could Benefit FreedomCAR Initiative. (GAO -02-8101) 2002. 50 p.
National Research Council. Energy Research at DOE: Was It Worth It? [Energy Efficiency
and Fossil Energy Research 1978 to 2000]. 2001. 224 p.
[http://www.nap.edu/books/0309074487/html/]
—— Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards.
2001. 184 p.
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]
—— 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. In Electric Power Annual 2000,
Volume II. (DOE/EIA-0348[2000]/2) November 2002. p. 77-84.
[http://www.eia.doe.gov/cneaf/electricity/epav2/epav2.pdf]
U.S. Environmental Protection Agency. U.S. Climate Action Report 2002. 2002. 260 p.
[http://www.epa.gov/globalwarming/publications/car/index.html]
—— Partnerships Changing the World: Energy Star and Other Voluntary Programs 2001
Annual Report. (430-R-02-010) August 2002. 52 p.
[http://www.epa.gov/appdstar/pdf/cpdann01.pdf]
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.
Vine, Edward et al. Public Policy Analysis of Energy Efficiency and Load Management in
Changing Electricity Businesses. Energy Policy, v. 31, 2003. p. 405-430.
CRS Reports
CRS Report RL31427. Omnibus Energy Legislation: H.R. 4 Side-by-side Comparison, by
Mark Holt and Carol Glover.
CRS Report RL30452. Climate Change: Federal Research, Technology, and Related
Programs, by Michael M. Simpson.
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CRS Report RL30414. Global Climate Change: The Role for Energy Efficiency, by Fred
Sissine.
CRS Report RS20298. Sport Utility Vehicles, Mini-Vans, and Light Trucks: An Overview
of Fuel Economy and Emissions Standards, by Brent Yacobucci.
CRS Report RL31188, Energy Efficiency and the Rebound Effect, by Frank Gottron.
Web Sites
American Council for an Energy-Efficient Economy (ACEEE). Extensive listing of web
sites on energy efficiency.
[http://www.aceee.org/]
CRS electronic briefing book on Electricity Restructuring.
[http://www.congress.gov/brbk/html/ebele1.html]
CRS electronic briefing book on Global Climate Change.
[http://www.congress.gov/brbk/html/ebgcc1.html]
National Association of State Energy Offices.
[http://www.naseo.org/]
U.S. Council for Automotive Research (USCAR). FreedomCAR.
[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. FY2004 Congressional Budget Request.
[http://www.cfo.doe.gov/budget/04budget/index.htm/]
U.S. Lawrence Berkeley Laboratory. Center for Building Science.
[http://eetd.lbl.gov/]
U.S. Environmental Protection Agency. FY2004 Budget Justification (Goal 6, Climate
Change, p. VI-28).
[http://www.epa.gov/ocfo/budget/2004/2004cj.htm]
U.S. Environmental Protection Agency. Energy Star Programs.
[http://www.energystar.gov/]
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Table 3. DOE Energy Efficiency Budget for FY2001-FY2004
(selected programs, $ millions)
FY2002
FY2003
FY2004
FY2004 -
Pct.
Appn.
Appn.
Request
FY2003
Diff.
VEHICLE TECH.
181.4
177.3
157.6
-19.7
-11%
Hybrid and Electric
47.1
42.7
49.6
6.9
16%
Advanced Combustion
47.2
56.3
37.1
-19.2
-34%
Materials Technology
39.2
36.8
39.6
2.9
8%
Fuels Technology
24.7
19.6
6.8
-12.8
-65%
Technology Introduction
3.5
4.6
5.9
1.3
29%
FUEL CELL TECH.
46.7
55.1
77.5
22.4
41%
Transportation Systems
7.5
6.2
7.6
1.4
23%
Distributed Energy Systems
5.5
7.5
7.5
0.0
1%
INTERGOVERNMENTAL
324.2
314.4
357.0
42.5
14%
Weatherization Program
230.0
223.5
288.0
64.7
29%
State Energy Program
45.0
44.7
38.8
-5.9
-13%
Other State Energy
8.2
5.3
2.4
-3.0
-56%
Gateway Deployment
41.0
40.9
27.6
-13.3
-32%
Rebuild America
11.9
11.0
8.6
-2.4
-22%
Clean Cities
11.0
11.0
6.6
-4.4
-40%
Energy Star
3.0
4.2
3.7
-0.5
-11%
Ind. Competitiveness
2.7
2.7
0.0
-2.7
-100%
Inventions
4.3
3.8
2.4
-1.5
-38%
International Market Dev.
0.7
0.6
0.0
-0.6
-100%
DISTRIB. ENERGY RES.
55.1
61.1
51.8
-9.4
-15%
BUILDING TECH.
63.1
59.4
52.6
-6.8
-11%
Res. & Commercial Bldgs
16.6
16.8
20.2
3.4
20%
Emerging Technologies
35.0
31.3
21.8
-9.5
-30%
INDUSTRIAL TECH.
100.9
98.6
64.4
-34.1
-35%
Ind. of the Future, Specific
61.8
60.4
24.0
-36.4
-60%
Ind. of the Future, Cross.
33.6
34.2
34.4
0.2
1%
BIOMASS/ BIOREFINERY
24.8
24.6
8.8
-15.8
-64%
Advanced Biomass Tech.
7.1
9.2
8.4
-0.8
-9%
Systems Integ. & Production
17.1
14.6
0.0
-14.6
100%
FED. ENERGY MGMT
18.9
19.3
20.0
0.7
3%
PROGRAM MGMT
81.4
77.0
76.7
-0.3
0%
Energy Eff. Science Init.
-----
5.0
0.0
-5.0
-----
National Climate Initiative
-----
0.0
9.5
9.5
-----
R&D SUBTOTAL
621.5
623.5
548.8
-74.7
-12%
GRANTS SUBTOTAL
275.0
268.2
327.0
58.8
22%
TOTAL
896.5
891.8
875.8
-16.0
-2%
Sources: EERE Pocket Card, Apr. 30, 2003: DOE FY2004 Cong. Bud. Request, v. 7, February 2003; H.Rept.
108-10 (Cong. Rec. Feb. 12, 2003, p. H1087-88).
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