Order Code IB10020
CRS Issue Brief for Congress
Received through the CRS Web
Energy Efficiency:
Budget, Oil Conservation, and
Electricity Conservation Issues
Updated September 26, 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
EPA Budget, FY2004
Energy Security
Electricity Demand-Side Management (DSM) and Distributed Power
Energy Conservation to Curb Natural Gas Demand
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, Oil Conservation, and
Electricity Conservation Issues
SUMMARY
Energy security, a major driver of federal
$879.5 million is $3.7 million, or 0.4%, higher
energy efficiency programs in the past, came
than the Administration’s request. Compared
back into play as oil and gas prices rose late in
to the FY2003 appropriation, this is a decrease
the year 2000. The terrorist attack of Septem-
of $12.3 million, or 1%, not accounting for
ber 11, 2001, and the Iraq war of 2003 height-
inflation. The House-passed amount would
ened concern for energy security and raised
eliminate Biorefinery R&D, Industrial Com-
further concerns about the vulnerability of
petitiveness (NICE-3), Technology Valida-
energy infrastructure and the need for alterna-
tion, and International Market Development.
tive fuels. Further, the 2003 northeast-mid-
west power blackout, the 2001 power short-
The Senate approved $861.6 million,
ages in California and the high natural gas
which is $17.8 million, or 2%, less than the
prices in 2003 brought a renewed emphasis on
House approved and $30.1 million, or 3%,
energy efficiency and energy conservation to
less than the FY2003 appropriation, not ac-
dampen electricity (and natural gas) demand.
counting for inflation.
Also, worldwide emphasis on environ-
The conference committee on the omni-
mental problems of air and water pollution
bus energy bill (H.R. 6) has issued a discus-
and global climate change, and the related
sion draft of the “tier 2" energy efficiency
development of clean energy technologies in
provisions. Both House and Senate versions
western Europe and Japan, may remain
of H.R. 6 have provisions that call for a DOE
important influences on energy efficiency
rule to set an efficiency standard for “standby
policymaking. Concern about technology
mode” energy use in battery chargers and
competitiveness may also remain a factor in
external power supplies; legislate standards
the debate.
for certain equipment and direct DOE to set a
standard by rule for other types of equipment;
In the 108th Congress, debate over energy
and set goals for efficiency in federal build-
efficiency programs is focusing on the budget,
ings. Also expected to come up in conference
oil, natural gas, and electricity issues, and
are provisions of the energy tax bill (S. 1149)
provisions in the omnibus energy policy bill,
that would create tax incentives for energy
H.R. 6 and S. 14.
efficiency measures in home construction,
home renovation, appliances, residential
The Bush Administration’s FY2004
equipment, commercial buildings, and com-
budget request for the Department of Energy’s
bined heat and power equipment, and for
(DOE’s) Energy Efficiency Program seeks
alternative fuels.
$875.8 million. The House-passed Interior
appropriations bill recommends $879.5 mil-
A DOE-initiated report prepared by the
lion for DOE energy conservation funding in
National Petroleum Council examines the
FY2004. A floor amendment (H.Amdt. 255)
problem of high natural gas prices and con-
added $15.0 million for Weatherization grants
cludes that energy conservation and greater
with an offsetting, but unspecified, $15.0
energy efficiency have a key role to play in
million cut for energy conservation. The
holding down prices.

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09-26-03
MOST RECENT DEVELOPMENTS
On September 25, 2003, the National Petroleum Council issued a draft report,
Balancing Natural Gas Policy, on the problem of high natural gas prices. It concludes that
energy conservation and greater energy efficiency have the most immediate potential to hold
down gas prices. (For more on this topic, see “Energy Conservation to Curb Natural Gas
Demand,” below.)
On September 23, 2003, the Senate passed the Interior Appropriations bill (H.R. 2691,
S.Rept. 108-89), which includes $861.6 million for DOE energy conservation funding in
FY2004. Compared to the Administration’s request, this is a decrease of $14.2 million, or
1.6%, excluding inflation. However, compared to the FY2003 appropriation, this is a
decrease of $30.2 million, or 3.3%, excluding inflation. This difference includes a cut of
$35.9 million for R&D and an increase of $5.8 million for grants. (For more on this topic,
see “DOE Budget, FY2004,” below.)
On September 15, the conference committee on the omnibus energy bill (H.R. 6)
released a discussion draft of the less controversial “tier 2" energy efficiency provisions.
(The only energy efficiency topic treated as a more controversial “tier 1" issue is corporate
average fuel economy (CAFE); see “Vehicle Fuel Efficiency and Oil Conservation.”) (For
a comparison of the House and Senate versions of H.R. 6, see “Energy Efficiency in
Omnibus Energy Bills, 108th Congress,” below; and see CRS Report RL32033, Omnibus
Energy Legislation (H.R. 6): Side-by-Side Comparison of Non-tax Provisions.)
(The DOE FY2004 Budget Request is available on the DOE web site at
[http://www.cfo.doe.gov/budget/04budget/]; and the EPA FY2004 Annual Performance Plan
and Congressional Justification is available on the EPA web site at
[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 FY2004
Congressional Budget Request, DOE/ME-0022, v. 7, February 2003; it appears at
[http://www.cfo.doe.gov/budget/04budget/].)
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 reorganization that included new offices for FreedomCAR & Vehicle Technologies
and for Hydrogen, Fuel Cells and Infrastructure. Information about the new management
structure and other aspects of EERE are available on the DOE web site at
[http://www.eere.energy.gov/office_eere/].
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
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
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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. 1149), which
expected to be considered in conference committee action. Both the House and Senate
versions of H.R. 6 have provisions that call for a DOE rulemaking to set an efficiency
standard for “standby mode” energy use in battery chargers and external power supplies;
legislate standards for certain equipment and direct DOE to set a standard by rule for other
types of equipment; and set goals for efficiency in federal buildings. Also, energy tax bill
(S. 1149) provisions would create incentives for energy efficiency measures in home
construction, home renovation, appliances, residential equipment, commercial buildings, and
combined heat and power equipment, and for alternative fuels. 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 tier 1 issues (CAFE), see CRS Report RL32078, which compares
House and Senate versions of H.R. 6 with S. 14. For side-by-side comparisons of provisions
in H.R. 6, see CRS Report RL32033 (non-tax provisions), CRS Report RL32042 (tax
provisions), and CRS Report RL32041 (electricity provisions).)
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. Both the House- and Senate-passed versions of H.R. 6 would expand standards
to other equipment. The House version (§11045) and the Senate version (§928) have nearly
identical provisions that direct DOE to set efficiency standards within three years for
“standby mode” energy use by battery chargers and external power supplies. Further, these
provisions legislate efficiency standards for exit signs, torchieres, traffic signals, and
distribution transformers and call for DOE to set standards by rule for suspended ceiling fans,
vending machines, unit heaters, and commercial refrigerators and freezers. S. 14 (§621)
includes all of these provisions but also would legislate a standard for medium base compact
flourescent lamps (CFLs). 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 efficiency provisions in H.R. 6. 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.
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Standard set:
H.R. 6 (House & Senate versions)
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
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. The House (§11002) and
Senate (§911) versions of H.R. 6 would set goals for further energy efficiency in federal
buildings. Although the baseline years and associated coverage periods have different dates,
the provisions are nearly identical, setting progressive annual 2% reductions over a 10-year
period that end with a 20% reduction from baseline. Also, both bills would also call for
DOE to review results by the end of the 10-year period and recommend further goals for
building energy savings for an additional decade. S. 14 (§601) had closely similar
provisions. 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, the House version of
H.R. 6 (§11001) and the Senate version (§919) have similar provisions that call for the
implementation of a plan for congressional buildings to meet the energy efficiency goals for
federal agencies noted above. The House version also calls for a study of the potential for
energy efficiency and renewables to increase reliability during a power outage and authorizes
up to $2 million. In contrast, the Senate version calls for state-of-the-art energy efficiency
and renewable energy technologies to be used in the Capitol Visitor Center. S. 14 (§606) had
provisions identical to those in the House version.
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. 1149) had four energy efficiency tax provisions that are
not in the House version of H.R. 6. These provisions may come up in conference. 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
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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. S. 14
had provisions identical to those shown below for the Senate version of H.R. 6.
New Homes
Existing Homes
House
Senate
House
Senate
(§41005)
(§2101)
(§41004)
(§2109)
Energy Reduction
30%
50%
IECC*
30%
Credit Cap
$2,000
$2,000
$2,000
$300
Period (years)
5
5
3
4
Note: IECC represents year 2000 standards in the International Energy Conservation Code.
Similar tax provisions for fuel cell power plants and combined heat and power (CHP)
appear in both bills. Also, both bills have tax incentives for alternative fuel vehicles and
equipment.
Energy Efficiency Tax Revenue Effect. Table 1, below compares the estimated
10-year revenue effect of energy efficiency and conservation tax provisions in the House and
Senate versions of H.R. 6. It also shows the share of the total in each bill.
Table 1. H.R. 6, Tax Revenue Effect
($ billions)
House
Senate
Energy Efficiency and Conservation Measures
$ 1.35
$ 2.16
(Excludes diesel fuels, alternative fuels, and solar credit)
Total, All Tax Provisions
$18.62
$20.63
Energy Efficiency and Conservation Share of Total
7.3%
10.4%
Source: Joint Tax Committee. Estimated Revenue Effects of H.R. 1531, April 3, 2003, and Estimated Revenue
Effects of Senate amendment to H.R. 4, May 23, 2002.
Housing, Funding Authorizations, and Other Provisions
The House version (Division G, §70001-§70009) and Senate version (§931-§940)) have
identical provisions for energy efficiency in public housing, except that the Senate version
adds a provision for a capital fund (§937). They also have nearly identical provisions that
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authorize funding for energy assistance (e.g., Low-Income Home Energy Assistance
Program, LIHEAP) and grant programs (e.g., DOE Weatherization Program).
DOE Budget, FY2004
Senate floor action (S.Amdt. 1764) added a provision (§336) that would define electric
thermal storage technology as a weatherization measure. Also, floor action (S.Amdt. 1777)
added a provision (§340) that would incorporate “neighborhood electric vehicle” (one that
is both low-speed and has zero emissions) into the definition of alternative-fueled vehicles,
making it eligible for certain incentives.
The House approved $879.5 million for DOE energy conservation funding in FY2004.
Compared to the Administration’s request, this is an increase of $3.7 million, or 0.4%.
However, compared to the FY2003 appropriation, this is a decrease of $12.3 million, or 1%,
excluding inflation. In House floor action, H.Amdt. 255 (Sanders-Kind) added $15.0 million
for Weatherization grants with an unspecified $15.0 million offsetting cut in energy
conservation.
The Senate Appropriations Committee recommends (S. 1391, S.Rept. 108-89) $861.6
million, which is $17.8 million, or 2%, less than the House approved and $14.1 million less
than the request. Compared to the FY2003 appropriation, the Committee recommendation
would cut overall funding by $30.1 million, or 3%, not accounting for inflation. Grants
would increase by $5.8 million, but R&D would decline from $623.5 million to $587.6
million, a drop of $35.9 million, or 6%.
The FY2004 budget request stresses that the Administration’s energy efficiency
programs can improve economic growth, energy security, and the environment. The request
presents (and Table 3 shows) a new budget structure that reflects the recent reorganization
of DOE’s Office of Energy Efficiency and Renewable Energy (EERE). The Administration
proposes to decrease conservation funding under EERE from $891.8 million in FY2003 to
$875.8 million in FY2004. The main Administration initiatives are: (1) FreedomCAR and
Hydrogen Fuels, reflected in a $22.4 million, or 41%, increase for Fuel Cell Technologies
to help reduce foreign oil dependence, improve electric power infrastructure security and
reliability, and curb greenhouse gas emissions; (2) the National Climate Change Technology
Initiative (NCCTI), which would receive $9.5 million to promote competitive project
solicitations to reduce greenhouse gas emissions; and (3) the Weatherization grants program,
which would increase by $64.7 million, or 29%, to reduce energy bills and improve energy
affordability for low-income families. To offset these increases, the FY2004 request also
proposes several decreases. Compared to the FY2003 appropriation, the FY2004 request
would cut overall funding by $16.0 million, or 2%, not accounting for inflation. R&D
funding would decline from $623.5 million to $548.8 million, a drop of $74.7 million, or
12%.
For further information on the Energy Conservation Budget, see the web site at
[http://www.cfo.doe.gov/budget/04budget/]. For further information on Energy
Conservation Programs, see the Web site at [http://www.eere.energy.gov/].
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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
FY2004
FY2004
FY2004
Senate
Enacted
Enacted
Conf.
Request
House
Senate
-FY2003
CPP Buildings
52.5
48.6
49.8
48.3
50.3
50.3
0.5
CPP Transport.
29.4
30.8
21.6
22.9
22.9
22.9
1.4
CPP Industry
31.9
25.4
25.7
26.4
26.4
26.4
0.8
CPP Carbon Rem.
1.0
1.5
1.6
1.7
1.7
1.7
0.2
CPP State / Local
2.5
2.2
2.3
2.6
2.6
2.6
0.3
CPP Int’l Cap.
5.5
7.0
7.1
6.6
6.6
6.6
-0.5
CPP Int’l Partner.
——
——
——
——
——
——
——
CPP Int’l Coop’n
0.8
——
——
——
——
——
——
CPP Other
——
8.4
7.2
8.0
8.0
8.0
0.7
CPP,
123.6
123.9
115.2
116.6
118.6
118.6
3.3
SUBTOTAL
Climate Chg Rsch
22.6
21.4
21.7
21.5
21.5
21.5
-0.2
TOTAL
146.2
145.3
137.0
138.1
140.1
140.1
3.1
Source: S.Rept. 108-143; H.Rept. 108-235; EPA FY2004 Congressional Justification, p. VI-28; H.Rept. 108-
10 (Cong. Rec. Feb. 12, 2003, p. H1087.
Late in FY2003, after concerns were raised that the Energy Star Buildings program’s
spend out had been cut $12.5 million, or 25%, the Administration directed that $7.0 million
be put back. 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
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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 August 2003 electric power blackout that affected several states and Canadian
provinces rekindled interest in energy efficiency, energy conservation / demand response
measures, and distributed power generation. 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 aspect of energy security. H.R. 6 and S.
14 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/].)
Energy Conservation to Curb Natural Gas Demand
The Secretary of Energy requested that the National Petroleum Council (NPC) report
on policy options to address the problem of high natural gas prices. The draft report,
Balancing Natural Gas Policy, says gas prices could average from $5 to $7 per 1,000 cubic
feet for years to come, and it concludes, among other options, that energy conservation and
greater energy efficiency have the biggest immediate potential to hold down prices. The
report recommends updating building codes and equipment standards, promoting Energy Star
equipment, using the most efficient power plants, deploying distributed energy, installing
smart controls, and employing best practices for low-income weatherization. The Alliance
to Save Energy applauds these policy suggestions, but raises a concern that other policy
measures it had recommended – including tax incentives, utility performance standards,
federal buildings improvements, and regulations to make energy conservation profitable for
utilities – were not included among the report’s suggestions. Also, a report by the American
Council for an Energy-Efficient Economy (ACEEE), Impacts of Energy Efficiency and
Renewable Energy on Natural Gas Markets, says the above-noted measures could be
expanded to include increased R&D funding and stronger provisions for gas- and electricty-
savings in H.R. 6. (The NPC report is at [http://www.npc.org/] and the ACEEE report is at
[http://www.aceee.org/energy/efnatgas-study.htm].)
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
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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 failed to pass. (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 3) 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
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).

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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.
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
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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
The debate over the federal role in restructuring includes questions about energy
efficiency. The 2001 electricity problems in California 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.
Many states and electric utilities 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
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.)
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LEGISLATION
H.R. 6, House Version (Tauzin)/H.R. 6, Senate Version (Domenici)
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. Senate version incorporates text of omnibus
energy bill (H.R. 4) that the Senate adopted in the 107th Congress. Passed Senate July 31,
in lieu of S. 14.
H.R. 2691 (Taylor) / S. 1391 (Burns)
Department of Interior and Related Agencies Appropriations bill, 2004. Makes
appropriations for DOE Energy Efficiency Program. House bill reported (H.Rept. 108-195)
July 10, 2004. Passed House, amended, July 17. Senate bill reported (S.Rept. 108-89) July
10. Senate inserted text of S.Amdt. 1724 (S. 1391) into H.R. 2691, and passed it, amended
on September 23.
H.R. 2800 (Kolbe) / S. 1426 (McConnell)
Foreign Operations, Export Financing, and Related Programs Appropriations bill, 2004.
House bill reported (H.Rept. 108-222) July 21, 2004. Senate bill reported (S.Rept. 108-106)
July 17. Under Environment Programs, Senate bill (§654) appropriates $185 million for
“energy conservation, energy efficiency, and clean energy” in developing countries to reduce
greenhouse gases.
H.R. 2861 (Walsh)/S. 1584(Bond)
Veterans Affairs and Housing and Urban Development, and Independent Agencies
Appropriations bill, 2004. Makes appropriations for EPA’s Climate Protection Energy
Efficiency Programs. House bill reported (H.Rept. 108-235) July 21, 2003. Passed House
July 25. Senate bill reported (S.Rept. 108-143) September 4.
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
XI on Electricity includes a provisions on PURPA and cogeneration. Energy efficiency
markup held April 8. S. 1149 (energy tax bill) is expected to be incorporated into S. 14.
Introduced April 30, 2003. Floor action began May 6.
S. 1149 (Grassley)
Energy Tax Incentives Act of 2003. Supersedes S. 597. Contains provisions for energy
efficiency tax incentives (Title III, Section 101) and alternative fuels incentives (Title II).
Committee on Finance reported (S.Rept. 108-54) May 23, 2003. Expected to be incorporated
into S. 14 as a floor amendment.
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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]
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]
——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]
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.
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CRS Reports
CRS Report RL32033. Omnibus Energy Legislation (H.R. 6): Side-by-side Comparison of
Non-tax Provisions, by Mark Holt and Carol Glover.
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/freedomcar/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/]
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 FY2003-FY2004
(selected programs, $ millions)
FY2003
FY2004
FY2004
FY2004
Senate-
Appn.
Request
House
Senate
FY2003
VEHICLE TECH.
177.3
157.6
184.4
174.2
-3.1
Hybrid and Electric
42.7
49.6
44.6
44.6
1.9
Advanced Combustion
56.3
37.1
55.6
55.6
-0.7
Materials Technology
36.8
39.6
41.2
40.2
3.5
Fuels Technology
19.6
6.8
20.3
9.3
-10.3
Technology Introduction
4.6
5.9
4.5
5.4
0.8
FUEL CELL TECH.
55.1
77.5
56.5
68.5
13.4
Transportation Systems
6.2
7.6
6.6
7.6
1.4
Distributed Energy Systems
7.5
7.5
7.5
7.5
0.0
INTERGOVERNMENTAL
314.4
357.0
322.5
311.5
-3.0
Weatherization Program
223.5
288.0
240.0
230.0
6.5
State Energy Program
44.7
38.8
45.0
44.0
-0.7
Other State Energy
5.3
2.4
2.4
2.4
-3.0
Gateway Deployment
40.9
27.6
35.1
35.1
-5.8
Rebuild America
11.0
8.6
10.6
8.6
-2.4
Clean Cities
11.0
6.6
10.6
11.6
0.6
Energy Star
4.2
3.7
3.7
3.7
-0.5
Ind. Competitiveness
2.7
0.0
0.0
0.0
-2.7
Inventions
3.8
2.4
3.9
4.9
1.0
International Market Dev.
0.6
0.0
0.0
0.0
-0.6
DISTRIB. ENERGY RES.
61.1
51.8
64.3
57.5
-3.6
BUILDING TECH.
59.4
52.6
59.0
62.1
2.7
Res. & Commercial Bldgs
16.8
20.2
17.7
20.2
3.4
Emerging Technologies
31.3
21.8
29.7
29.8
-1.5
INDUSTRIAL TECH.
98.6
64.4
97.7
76.4
-22.1
Ind. of the Future, Specific
60.4
24.0
47.8
32.0
-28.4
Ind. of the Future, Cross.
34.2
34.4
43.9
38.4
4.2
BIOMASS/ BIOREFINERY
24.6
8.8
0.0
10.8
-13.8
Advanced Biomass Tech.
9.2
8.4
0.0
10.4
1.2
Systems Integ. & Production
14.6
0.0
0.0
0.0
-14.6
FED. ENERGY MGMT
19.3
20.0
20.0
20.0
0.7
PROGRAM MGMT
77.0
76.7
90.2
80.7
3.7
Energy Eff. Science Init.
5.0
0.0
5.0
0.0
-5.0
National Climate Initiative
0.0
9.5
0.0
0.0
0.0
R&D SUBTOTAL
623.5
548.8
594.5
587.6
-35.9
GRANTS SUBTOTAL
268.2
327.0
285.0
274.0
5.8
TOTAL
891.8
875.8
879.5
861.6
-30.1
Sources: S.Rept. 108-89; H.Rept. 108-195; EERE Pocket Card, Apr. 30, 2003: DOE FY2004 Bud. Rst, v. 7,
Feb. 2003; H.Rept. 108-10 (Cong. Rec. Feb. 12, 2003, p. H1087-88).
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