Order Code IB10020
CRS Issue Brief for Congress
Received through the CRS Web
Energy Efficiency:
Budget, Oil Conservation, and
Electricity Conservation Issues
Updated April 18, 2005
Fred Sissine
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

---

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Energy Efficiency Concept
History
DOE’s Strategic and Performance Goals
Energy Efficiency in the 109th 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
Energy Efficiency in 108th Congress Omnibus Energy Bills
DOE Budget, FY2006
EPA Budget, FY2006
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

---

IB10020
04-18-05
Energy Efficiency: Budget, Oil Conservation, and
Electricity Conservation Issues
SUMMARY
Energy security, a major driver of federal
Also, the House Committee on Resources
energy efficiency programs in the past, came
finished markup of the Domestic Energy
back into play as oil and gas prices rose late in
Security Act, a committee print with addi-
the year 2000. The terrorist attack in 2001
tional provisions that are expected to be incor-
and the Iraq war have led to heightened con-
porated into H.R. 6. Overall, many of the
cern for energy security and raised further
non-tax energy efficiency provisions are
concerns about the vulnerability of energy
similar to those of H.R. 6 in the 108th Con-
infrastructure and the need for alternative
gress. Further, the House Committee on Ways
fuels. Further, the 2001 power shortages in
and Means ordered reported H.R. 1541. It has
California, the 2003 northeast-midwest power
$8.1 billion in tax incentives, including $397
blackout, and continuing high natural gas
million in tax credits for energy efficiency.
prices have brought a renewed emphasis on
H.R. 1541 is also expected to be inserted into
energy efficiency and energy conservation to
H.R. 6.
dampen electricity, oil, and natural gas de-
mand.
Senate bills have been introduced to set
efficiency standards (S. 426, S. 726), establish
Also, worldwide emphasis on environ-
investment tax credits (S. 680, S. 727), pro-
mental problems of air and water pollution
mote fuel cells (S. 665, S. 727), support co-
and global climate change, the related devel-
generation (S. 388, S. 726), and create several
opment of clean energy technologies in west-
other tax and non-tax measures.
ern Europe and Japan, and technology com-
petitiveness may remain important influences
In the 108th Congress, the conference
on energy efficiency policymaking.
version of the omnibus energy bill (H.R. 6)
had significant tax and regulatory measures
The Bush Administration’s FY2006
for energy efficiency. It would have allowed
budget request for the Department of Energy’s
DOE to set an efficiency standard for “standby
(DOE’s) Energy Efficiency Program seeks
mode” energy use in battery chargers and
$846.8 million, $21.4 million less than
external power supplies; set equipment effi-
FY2005. This includes $575.8 million for
ciency standards by statute and rule; and set a
R&D and $271.0 million for grants.
higher goal for efficiency in federal facilities.
The bill did not pass, in part due to concerns
Thus far in the 109th Congress, the House
about cost and the controversial MTBE “safe
Committee on Energy and Commerce finished
harbor” provision.
markup of the Energy Policy Act of 2005, a
committee print of an omnibus energy bill
P.L. 108-357 provided tax-exempt bonds
(H.R. 6 is reserved as the bill number). It
for green buildings and reduced the tax deduc-
reauthorizes many programs, sets a new goal
tion for SUVs. P.L. 108-311 extended a tax
for reducing federal facilities energy use,
credit for electric vehicles and a tax deduction
extends ESPCs, establishes several standards
for clean fuel vehicles. Neither law contained
for products and equipment, and could termi-
any of the key energy efficiency tax provisions
nate cogeneration purchase requirements.
in H.R. 6, S. 2095, or S. 1637.

---

IB10020
04-18-05
MOST RECENT DEVELOPMENTS
On April 13, 2005, the House Committee on Energy and Commerce finished markup
of the Energy Policy Act of 2005, a committee print of an omnibus energy bill (H.R. 6 is
reserved as the bill number). Also, the House Committee on Resources finished markup of
the Domestic Energy Security Act, a committee print with additional provisions that are
expected to be incorporated into H.R. 6. The Energy and Commerce committee print
contains many non-tax renewable energy provisions similar to those of H.R. 6 in the 108th
Congress. Further, the House Committee on Ways and Means ordered reported H.R. 1541,
which is expected to be incorporated into H.R. 6. It has an estimated $397 million in tax
credits for energy efficiency measures. (For a summary of provisions in the committee prints
and in other renewable energy bills introduced in the 109th Congress, see “Energy Efficiency
in the 109th Congress,” below; for a summary of provisions in H.R. 6 and S. 2095 from the
108th Congress, see “Energy Efficiency in 108th Congress Omnibus Energy Bills,” below.)
On February 9, 2005, the House Science Committee held a hearing on fuel efficiency
for cars and trucks.
On February 7, 2005, President Bush issued the Administration’s budget request for
FY2006. The Department of Energy (DOE) request seeks $846.8 million for energy
efficiency, which is $21.4 million, or 2%, less than the FY2005 appropriation (excluding
inflation). The main increases are for Biofuels/Biorefinery ($14.5 million) and Fuel Cells
($8.7 million). The main cuts are for Industrial programs (-$18.3 million), Advanced
Combustion Vehicles (-$8.7 million), Buildings (-$7.5 million), Clean Cities (-$4.1 million),
and State Energy Program (-$3.2 million). (For more details, see “DOE Budget, FY2006,”
and Table 3.) The FY2006 request for EPA’s Climate Protection (Energy Efficiency)
Programs is $113.3 million, which is $3.8 million higher than the FY2005 request. (For more
details, see “EPA Budget, FY2006,” and Table 2.)
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.
These ideas of “efficiency” and “conservation” contrast with “curtailment,” which
decreases output (e.g., turning down the thermostat) or services (e.g., driving less) to curb
CRS-1

---

IB10020
04-18-05
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, the downward pressure on energy prices created by
energy efficiency comes from demand reductions instead of increased supply. As a result,
energy efficiency can reduce resource use and environmental impacts. (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 FY2006
Congressional Budget Request, DOE/ME-0052, vol. 7, February 2005, available at
[http://www.cfo.doe.gov/budget/06budget/Start.htm].)
From FY1973 through FY2002, DOE spent about $11.7 billion in 2003 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 2003 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 FY2003, $612 million was appropriated, which was
$56 million, or 9%, above the FY1994 mark in 2003 constant dollars. Also, in 2003 constant
dollars, since FY1973, DOE has spent about $7.7 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 2003 constant dollars, the federal government spent about $24.3
billion for nuclear (fission and fusion) R&D and about $5.5 billion for fossil energy R&D.
From FY1973 through FY2003, the federal government spent $49.1 billion for nuclear
(fission and fusion), $24.8 billion for fossil, $14.6 billion for renewables, and $11.7 billion
for energy efficiency. Total energy R&D spending from FY1948 to FY1998, in 2003
CRS-2

---

IB10020
04-18-05
constant dollars, reached $131.2 billion, including $74.0 billion, or 56%, for nuclear, $30.9
billion, or 24%, for fossil, $14.6 billion, or 11%, for renewables, and $11.7 billion, or 9%,
for energy efficiency.
DOE’s FY2004 energy efficiency R&D funding totaled $559.7 million, or about 24%
of DOE’s energy R&D appropriation. Renewable energy R&D received $439.4 million
(19%), fossil energy received $672.8 million (29%), and fission and fusion were appropriated
$667.4 million (29%).
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 found 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.
DOE’s Strategic and Performance Goals
In 2004, a National Academy of Public Administration (NAPA) study found dramatic
improvement in the Office of Energy Efficiency and Renewable Energy (EERE) after a
major reorganization that included new offices for FreedomCAR and 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 website at [http://www.
eere.energy.gov/office_eere/]. The study is available on the NAPA website at [http://www.
napawash.org/Pubs/EERE%20NAPA%20Rpt%20Sept%2004.htm].
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.
A 2004 Resources for the Future (RFF) report, The Effectiveness and Cost of Energy
Efficiency Programs, reviews a broad range of studies about DOE and EPA programs. The
report estimates that a selected range of non-transportation programs saves four Q of energy
per year and estimates carbon and air pollution emission savings. The full report is available
on the RFF website at [http://www.rff.org/Documents/RFF-DP-04-19REV.pdf].
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
CRS-3

---

IB10020
04-18-05
APP lists five strategic performance goals. ER1-1 says that relative to the 1985 baseline,
DOE’s Federal Energy Management Program (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 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 the 109th Congress
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. H.R. 6 (Energy and Commerce committee print, §133) would authorize the
DOE Secretary to expand efficiency standards within three years to cover “standby mode”
energy use by battery chargers and external power supplies. It would also legislate efficiency
standards for exit signs, torchieres, traffic signals, and distribution transformers and it calls
for DOE to set standards by rule for suspended ceiling fans, vending machines, unit heaters,
and commercial refrigerators and freezers. H.R. 6 in the 108th Congress had identical
provisions for these standards. In testimony (March 2003) on H.R. 6 in the 108th Congress,
the American Council for an Energy-Efficient Economy estimated that these new standards
would save more energy than any other efficiency provisions in the bill. The table below
indicates which standards would be set by law and which would be set by DOE rulemaking.
Standard set:
H.R. 6 (Energy and Commerce committee print)
By law
exit signs, traffic signals, torchieres, distribution transformers,
unit heaters, medium base compact fluorescent lamps
By rule
ceiling fans, vending machines, commercial refrigerators and
freezers and refrigerator-freezers, residential furnace fans
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), from
1985 to 2000. This goal was exceeded, slightly. H.R. 6 (Energy and Commerce committee
print, §102) would set a goal for further energy efficiency in federal facilities. Compared to
the baseline year energy use in 2003, the goal is a 20% energy reduction over a 10-year
period from 2006 to 2015. Also, DOE is required to review results by the end of the 10-year
period and recommend further goals for an additional decade. Most of the other provisions
for federal programs are administrative measures that would help agencies achieve the
above-described goal.
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 (§101) calls for
CRS-4

---

IB10020
04-18-05
the implementation of a plan for congressional buildings to meet the energy efficiency goal
for federal agencies noted above. It also calls for a study of the potential for energy
efficiency and renewables to increase reliability during a power outage and authorizes up to
$2 million annually, over five years.
Tax Incentives for Efficiency and Conservation
Since the late 1970s, there have been some tax incentives to promote fuel switching and
alternative fuels as a way to conserve gasoline and reduce oil import dependence. In
contrast, tax incentives for energy efficiency and for electricity conservation have been rare,
and generally short-lived. H.R. 6 (Energy and Commerce committee print) proposes two
modest new tax credits for energy efficiency. One encourages business use of fuel cells and
the other aims to improve efficiency in existing homes.
Energy Efficiency Tax Revenue Effect. Table 1, below, compares the estimated
10-year revenue effect of energy efficiency and conservation tax provisions in H.R. 1541.
Table 1. H.R. 1541, Tax Revenue Effect
($ billions)
H.R. 1541
Energy Efficiency and Conservation Measures
$0.397
(Excludes diesel fuels, alternative fuels, and solar credit)
Net Total, All Tax Provisions
$8.090
Energy Efficiency and Conservation Share of Total
4.9%
Source: Joint Committee on Taxation (JCX), Estimated Revenue Effects of the Chairman’s Amendment in the
Nature of a Substitute to H.R. 1541, Scheduled for Markup by the Committee on Ways and Means, April 13,
2005 (JCX-17-05).
Housing, Funding Authorizations, and Other Provisions
H.R. 6 (Energy and Commerce committee print) has several provisions (§ 141-149) for
energy efficiency in public housing. Also, Section 121 authorizes funding for energy
assistance (e.g., Low-Income Home Energy Assistance Program, LIHEAP), and Sections 122
and 123 authorizes grant programs (e.g., DOE Weatherization Program and State Energy
Program). Several other energy efficiency programs are authorized in Title I and Title IX.
Energy Efficiency in 108th Congress
Omnibus Energy Bills
In the 108th Congress, most legislative action on energy efficiency focused on omnibus
energy policy bills, S. 1637, S. 2095, H.R. 6, and S. 14/S. 1149. Late in 2003, a cloture
motion to stop a Senate filibuster on the conference report (H.Rept. 108-375) for H.R. 6
failed (57-40). Key objections cited in Senate debate included budget concerns and the Title
XV “safe harbor” from product liability lawsuits for producers of MTBE (methyl tertiary-
butyl ether), ethanol, and other renewable fuels.
Several significant energy efficiency provisions were included in S. 1637, S. 2095, and
H.R. 6. Key provisions included proposals that would have required a DOE rulemaking to
CRS-5

---

IB10020
04-18-05
set an efficiency standard for “standby mode” energy use in battery chargers and external
power supplies; legislated standards for certain equipment and directed DOE to set a standard
by rule for other types of equipment; and set goals for efficiency in federal buildings. Other
provisions would have created incentives for energy efficiency measures in home
construction, home renovation, appliances, residential equipment, commercial buildings, fuel
cells, and combined heat and power equipment, and for alternative fuels. (For a detailed
summary of provisions in the conference version of H.R. 6, see CRS Report RL32204, and
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).
DOE Budget, FY2006
The FY2006 budget request (Appendix, p. 402) notes that the “Administration’s energy
efficiency programs have the potential to produce substantial benefits for the nation — both
now and in the future — in terms of economic growth, increased energy security and a
cleaner environment.” In particular, the request aims to “accelerate” the development of
hydrogen-powered fuel cell vehicles. The Hydrogen program aims to facilitate industry
commercialization of infrastructure for those vehicles by 2015. Goals for other energy end-
use and production technologies generally seek to improve energy efficiency and
performance while reducing costs. The request also proposes funding tax credits, including
an investment tax credit for combined heat and power (CHP) through the end of 2009, an
extension of the hybrid vehicle tax credit through the end of 2008, and a tax credit for fuel
cell vehicles purchased through the end of 2012.
For further information on the Energy Conservation Budget, see [http://www.cfo.doe.
gov/budget/06budget/Start.htm]. For further information on Energy Conservation Programs,
see [http://www.eere.energy.gov/].
EPA Budget, FY2006
The FY2006 request for EPA’s Climate Protection Programs (CPPs) is $113.3 million,
which is $3.8 million more than FY2005 request. This includes $3.6 million more under the
Office of Environmental Programs and Management (EPM) and $0.3 million more under the
Office of Science and Technology (S&T).
EPA conducts its CPP programs under the Office of Atmospheric Programs, with
funding from appropriation accounts for EPM and S&T. EPM programs cover the areas of
buildings, industry, state and local government, international, and sequestration. S&T
programs mainly cover transportation. CPP programs focus mainly on voluntary energy
efficiency activities. 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 labeling, information dissemination, and other activities to overcome market
barriers.
CRS-6

---

IB10020
04-18-05
Table 2. EPA Funding for Climate Protection
Energy Efficiency Programs (CPP)
($ millions current)
FY2004
FY2005
FY2006
FY2006
Percent
Enacted
Request
Request
-FY2005
Diff.
Environ. Programs & Management
88.5
92.0
95.5
3.6
4%
Science & Technology
21.8
17.5
17.7
0.3
2%
TOTAL
110.3
109.4
113.3
3.8
3%
Source: EPA FY2006 Congressional Justification of Appropriation Estimates (EPA-205/R-05-001), Feb. 2005,
[http://www.epa.gov/ocfo], pp. S&T-6, EPM-29, Appendix-75.
Energy Security
The September 11, 2001, terrorist attacks 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 DOE’s report Homeland Security: Safeguarding
America’s Future with Energy Efficiency and Renewable Energy Technologies and in U.S.
Energy Security Facts (available at [http://www.rmi.org/images/other/EnergySecurity/
S03-04_USESFtext.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 called
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 had provisions
for distributed energy. (For more on distributed energy, see the DOE website at [http://www.
eere.energy.gov/EE/power_distributed_generation.html] and at [http://www.eere.energy.gov/
distributedpower/].)
CRS-7

---

IB10020
04-18-05
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 report, Balancing
Natural Gas Policy, says gas prices could average from $5 to $7 per thousand 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 and the American Council for an Energy-Efficient Economy (ACEEE)
applaud the NPC recommendations but stress that many other measures — including tax
incentives, utility performance standards, federal buildings improvements, and regulations
to make energy conservation profitable for utilities — were not in the report and should be
considered. Also, a report by ACEEE, Natural Gas Price Effects of Energy Efficiency and
Renewable Energy Practices and Policies, says that in one year, a massive energy efficiency
effort could be put in place that would reduce gas use by 1.9% and cut prices by 20%. (The
NPC report is at [http://www.npc.org/] and the ACEEE report is at [http://www.aceee.org/
energy/efnatgas-study.htm].)
On January 24, 2005, the Senate Energy and Natural Resources Committee held a
natural gas conference. Some participants described the potential for energy efficiency to
reduce gas demand and prices. See [http://energy.senate.gov/conference/conference.cfm].
Some statements refer to a recent DOE study, Easing the Natural Gas Crisis: Reducing
Natural Gas Prices through Increased Deployment of Renewable Energy and Energy
Efficiency, available at [http://eetd.lbl.gov/ea/ems/reports/56756.pdf].
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,
CRS-8

---

IB10020
04-18-05
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?)
A December 2003 report by the Congressional Budget Office (CBO), The Economic
Costs of Fuel Economy Standards Versus a Gasoline Tax, found that a 46-cent-per-gallon
gasoline tax increase would achieve a 10% reduction in fuel use at a cost that is 3% less than
the cost of creating a higher CAFE standard with or without credit trading.
In his 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 Administration’s Freedom Cooperative Automobile Research
(FreedomCAR) Program. 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 26% (2000) of the world’s oil consumption and about
40% (2002) of total U.S. energy use. The nation uses (2002) about 19.6 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
The FY2004 Foreign Operations, Export Financing, and Related Programs
Appropriations Act (P.L. 108-199, Division D, Section 555) provided $180 million for
“energy conservation, energy efficiency, and clean energy” to reduce greenhouse gas
emissions in developing countries.
CRS-9

---

IB10020
04-18-05
DOE’s November 2003 report U.S. Climate Change Technology Program —
Technology Options for the Near and Long Term compiles information from multiple federal
agencies on more than 80 technologies. For these end-use and supply technologies, the
report describes President Bush’s initiatives and R&D goals for advancing technology
development, but it does not estimate emissions saving potentials, as some previous DOE
reports on the topic had presented.
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), 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-
9 in 2003, the parties resolved to prepare for the Protocol’s enactment, implement measures
such as energy efficiency to help decouple economic growth and emissions growth, and the
European Union and several nations pledged $410 million annually for two funds focused
on mitigation measures for developing nations.
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.)
CRS-10

---

IB10020
04-18-05
On September 24, 2004, the California Air Resources Board approved a plan that would
require automobile manufacturers to cut carbon dioxide and other GHG emissions 22% by
2012. This could force automakers to increase fuel efficiency sharply. An industry court
challenge is possible. Seven northeastern states have adopted other auto emission regulations
by California. Also, as part of its effort to meet Kyoto goals, Canada may consider fuel
economy standards as a strategy to reduce GHG.
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 megawatts (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 “public goods” 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 Report RL32728,
Electric Utility Regulatory Reform: Issues for the 109th Congress.)
LEGISLATION
109th Congress
H.R. 6 (reserved)
Energy Policy Act of 2005. Section 102 sets a goal for 20% energy reduction in federal
facilities by 2015. Section 104 requires federal agency purchases of EPA Energy Star and
FEMP-designated products. Section 105 permanently extends ESPCs and sets $500 million
CRS-11

---

IB10020
04-18-05
cap. Section 124 authorizes funding to states for rebates to support the cost premium for
residential purchases of Energy Star products. Section 133 establishes energy efficiency
standards for a variety of consumer products and commercial equipment. Title I also sets out
several energy efficiency provisions for public housing. Title VII has provisions for hybrid,
fuel cell, and electric vehicles; and revises and extends some aspects of fuel economy
standards. Title IX reauthorizes DOE energy efficiency R&D programs. Section 1253
would, under certain conditions, terminate PURPA cogeneration requirements. Committee
on Energy and Commerce ordered committee print reported, as amended, April 13.
H.R. 6 (reserved)
Domestic Energy Security Act. Has additional provisions that are expected to be
incorporated into H.R. 6. Committee on Resources ordered committee print reported, as
amended, April 13.
H.R. 1541 (Thomas)
Section 202 provides a 15% business investment tax credit to support installation of fuel
cell equipment. The Joint Committee on Taxation scores this provision at $6 million over
10 years. Section 207 provides a 20% investment tax credit ($2,000 maximum) to home
owners for energy efficiency improvements. The Joint Committee on Taxation scores this
provision at $391 million over 10 years. Committee on Ways and Means ordered bill
reported, April 13. Expected to be incorporated into H.R. 6.
S. 726 (Alexander)
Natural Gas Price Reduction Act of 2005. Section 101 authorizes funding for an energy
conservation public education initiative. Section 102 sets efficiency standards, test
procedures, and labeling requirements for several types of residential and commercial
equipment. Section 103 authorizes funding for distributed generation. Section 104
authorizes funding to accelerate hydrogen and fuel cell development. Section 105 would,
under certain conditions, repeal PURPA Section 210 requirements for cogeneration and
small power facilities. Section 106 calls for a study of cogeneration and small power.
Introduced April 6, 2005; referred to Committee on Energy and Natural Resources.
S. 727 (Alexander)
Tax Incentives for the Natural Gas Price Reduction Act of 2005. Section 2 makes a
10% investment tax credit available over four years to combined heat and power (CHP or
cogeneration) systems smaller than 50 megawatts (MW) that satisfy certain efficiency
standards. Section 4 has an investment tax credit (20%) for residential fuel cell equipment.
It also creates a 20% investment tax credit ($2,000 maximum) to homeowners for retrofits
to existing residential housing with energy efficient envelope components (insulation,
windows, roofs, heating equipment); and an equipment tax credit (maximum $2,000) to
home builders for envelope components that reduce home energy use by 30%. Section 4 also
provides a tax credit to manufacturers ($60 million maximum) for energy-efficient clothes
washers ($100 each) and refrigerators ($150 each). Further, Section 4 creates a tax deduction
($1.50 per square foot maximum) for energy efficient equipment in commercial buildings
that reduces energy use by 50%. Introduced April 6, 2005; referred to Committee on
Finance.
(A more extensive list of more than 50 bills appears in CRS Report RL32860, Energy
Efficiency and Renewable Energy Legislation in the 109th Congress.)
CRS-12

---

IB10020
04-18-05
108th Congress
P.L. 108-311 (H.R. 1308)
Working Families Tax Relief Act of 2004. Section 318 extends a credit for electric
vehicles and Section 319 extends a deduction for clean fuel vehicles. The Joint Tax
Committee scored §318 at $5 million, and §319 at $72 million, over 10 years. House and
Senate approved the conference report (H.Rept. 108-696) September 23, 2004. Signed into
law October 4, 2004.
P.L. 108-357 (H.R. 4520)
American Jobs Creation Act. Section 701 creates a $2 billion tax exempt bond program
for green building demonstrations at brownfields. Section 910 reduces the tax deduction for
Sport Utility Vehicles (SUVs). Introduced in House June 4, 2004. Reported (H.Rept. 108-
548, Part 1) June 16. Passed House June 17. In Senate, S. 1637 reported (S.Rept. 108-192)
November 3, 2003. S.Amdt. 3562 incorporated S. 1637 into H.R. 4520 and passed Senate
July 15, 2004. Conference report (H.Rept. 108-755) approved in House October 7 and in
Senate October 11. President signed October 22, 2004.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. House. Committee on Energy and Commerce. Committee Print of the
Energy Policy Act of 2005. Posted April 5, 2005.
[http://energycommerce.house.gov/108/energy_pdfs_2.htm]
U.S. Congress. House. Committee on Science. Improving the Nation’s Energy Security:
Can Cars and Trucks Be Made More Fuel Efficient? Hearing held February 9, 2005.
[http://www.house.gov/science/hearings/full05/feb9/February92005.htm]
(A more extensive list appears in CRS Report RL32860, Energy Efficiency and Renewable
Energy Legislation in the 109th Congress.)
(Many hearings on Energy Efficiency and Renewable Energy held in the 108th Congress are
listed on the DOE Office of Energy Efficiency and Renewable Energy website 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 2004
Summer Study on Energy Efficiency in Buildings. Washington, 2004. (10 v.)
——ACEEE’s Green Book: The Environmental Guide to Cars and Trucks: Model Year
2005. 2005. 120 p. Summary at [http://aceee.org/press/0502greencar.htm].
Cato Institute. The High Costs of Federal Energy Efficiency Standards for Residential
Appliances. (Policy Analysis No. 504) 2003. 15 p.
CRS-13

---

IB10020
04-18-05
Government Accountability Office (GAO). Research and Development: Lessons Learned
from Research Could Benefit FreedomCAR Initiative. (GAO -02-8101) 2002. 50 p.
National Association of Regulatory Utility Commissioners (NARUC). AGA and NRDC
Release Energy Efficiency (Conservation Tariff) Joint Statement. August 2004. 4 p.
[http://www.naruc.org/displayindustryarticle.cfm?articlenbr=21073&startrec=1]
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.
Rocky Mountain Institute. Winning the Oil Endgame: Innovation for Profits, Jobs, and
Security. 2004. 306 p.
[https://www.rmi.org/store/p12details4772.php]
U.S. Department of Energy. U.S. Electric Utility Demand-side Management. In Electric
Power Annual 2002, Chapter 9. (DOE/EIA-0348[2002]) December 2003. p. 51-54.
[http://www.eia.doe.gov/cneaf/electricity/epa/chapter9.html]
——Interlaboratory Working Group. Scenarios for a Clean Energy Future. (ORNL/CON-
476) November 2000. 350 p.
[http://www.ornl.gov/sci/eere/cef/]
——State Energy Advisory Board. Homeland Security: Safeguarding America’s Future
with Energy Efficiency and Renewable Energy. (DOE/EE-0272) August 2000. 26 p.
[http://www.steab.org/]
U.S. Environmental Protection Agency. U.S. Climate Action Report 2002. 2002. 260 p.
[http://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublications
USClimateActionReport.html].
——Change for the Better: Energy Star and Other Voluntary Programs 2002 Annual
Report. (430-R-03-009) September 2003. 46 p.
[http://www.energystar.gov/ia/partners/cpdann02.pdf]
U.S. Government Accountability Office (GAO). Electricity Markets: Consumers Could
Benefit from Demand Programs, But Challenges Remain (GAO-04-844) August 2004.
68 p. [http://www.gao.gov/new.items/d04844.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.
CRS Reports
CRS Report RL32860. Energy Efficiency and Renewable Energy Legislation in the 109th
Congress, by Fred Sissine.
CRS-14

---

IB10020
04-18-05
CRS Report RL32543. Energy Saving Performance Contracts: Reauthorization Issues, by
Anthony Andrews.
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.
Websites
American Council for an Energy-Efficient Economy (ACEEE). Extensive listing of websites
on energy efficiency.
[http://www.aceee.org/]
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.eere.energy.gov/]
U.S. Department of Energy. FY2005 Congressional Budget Request.
[http://www.mbe.doe.gov/budget/05budget/]
U.S. Department of Energy and U.S. Environmental Protection Agency. Fuel Economy.
[http://www.fueleconomy.gov/]
U.S. Lawrence Berkeley Laboratory. Center for Building Science.
[http://eetd.lbl.gov/]
U.S. Environmental Protection Agency. FY2005 Budget Justification (Goal 1, Clean Air and
Global Climate Change, p. I-111 to I-133 and Special Analysis, p. SA-42).
[http://www.epa.gov/ocfo/budget/2005/2005cj.htm]
U.S. Environmental Protection Agency. Energy Star Programs.
[http://www.energystar.gov/]
CRS-15

---

IB10020
04-18-05
Table 3. DOE Energy Efficiency Budget for FY2004-FY2006
(selected programs, $ millions)
FY2004
FY2005
FY2006
FY2006-
Percent
Appn.
Appn.
Request
FY2005
Change
VEHICLE TECH.
172.4
165.4
165.9
0.5
0%
Hybrid and Electric
43.4
45.2
48.8
3.6
8%
Advanced Combustion
52.7
49.8
41.1
-8.7
-17%
Materials Technology
38.6
37.0
38.2
1.2
3%
Fuels Technology
15.9
12.8
13.6
0.8
6%
Technology Introduction
4.8
4.9
6.3
1.4
29%
FUEL CELL TECH.
63.8
74.9
83.6
8.7
12%
Fuel Processor
14.4
9.7
9.9
0.2
2%
Stack Component
24.5
32.5
34.0
1.5
5%
INTERGOVERNMENTAL
308.6
309.0
298.2
-10.8
-3%
Weatherization Program
227.2
228.2
230.0
1.8
1%
State Energy Program
44.0
44.2
41.0
-3.2
-7%
Other State Energy
2.3
2.4
0.5
-1.9
-79%
Gateway Deployment
35.2
29.7
37.2
7.5
25%
Rebuild America
9.8
8.6
6.6
2.0
-23%
Clean Cities
10.9
10.6
6.5
-4.1
-39%
Energy Star
3.7
4.1
5.8
1.7
41%
Inventions
4.3
3.9
2.4
-1.5
-38%
DISTRIB. ENERGY RES.
59.7
60.4
56.6
-3.8
-6%
BUILDING TECH.
57.8
65.5
58.0
-7.5
-11%
Res. & Commercial Bldgs
17.4
21.9
22.9
1.0
5%
Emerging Technologies
28.3
31.4
25.4
-6.0
-19%
INDUSTRIAL TECH.
90.5
74.8
56.5
-18.3
-24%
Ind. of the Future, Specific
45.7
38.2
22.1
-16.1
-42%
Ind. of the Future, Cross.
38.9
32.9
30.6
-2.3
-7%
BIOFUELS / BIOREF’Y
7.0
7.3
21.8
14.5
197%
FED. ENERGY MGMT
19.4
17.9
17.1
-0.8
-4%
PROGRAM MGMT
92.4
93.0
89.0
-4.0
-4%
R&D SUBTOTAL
599.7
595.8
575.8
-20.0
-3%
GRANTS SUBTOTAL
271.1
272.4
271.0
-1.4
1%
PRIOR YEAR BALANCES
-2.8
0.0
——-
——-
——-
TOTAL
868.0
868.2
846.8
-21.4
-2%
Sources: DOE FY2006 Budget Request, v. 7, Feb. 2005, p 208-214.
CRS-16

---