Hearings and Business Meetings

SD-366 Energy Committee Hearing Room 10:00 AM

Daniel Lashof

Science Director, Climate Center, Natural Resources Defense Council

Testimony of Daniel A. Lashof
Science Director, Climate Center
Natural Resources Defense Council
Full Committee Hearing on
Enhanced Energy Security Act (S.2747)
Committee on
Energy and Natural Resources
United States Senate
June 22nd, 2006
Thank you for the opportunity to testify today on the subject of enhanced energy security. My name is Daniel A. Lashof. I am the Science Director of the Climate Center at the Natural Resources Defense Council (NRDC). NRDC is a national, nonprofit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has more than 1.2 million members and online activists nationwide, served from offices in New York, Washington, Los Angeles and San Francisco.
Today’s energy use patterns are responsible for two growing problems that require urgent action to keep them from spiraling out of control—oil dependence and global warming. Both are serious; both warrant a much more proactive policy action than has occurred to date. Fortunately, we have in our tool box energy resource options that can dramatically reduce both oil dependence and global warming emissions, and policy options, such as the Enhanced Energy Security Act (S.2747) and the Enhanced Energy Security Tax Incentives Act (S.2748), to mobilize these solutions into action.
The unsettling events of the past year -- devastating hurricanes, accelerated melting of glaciers and ice sheets, steep price spikes at the gas pump, and rising tensions with oil-rich regimes -- serve as a painful reminder that we are vulnerable and that security is now defined by factors much broader than simply our military defenses. Oil dependence poses a direct threat to our national security, our economy and our environment, and makes a substantial contribution to the urgent problem of global warming. As Secretary of State Condoleezza Rice noted in the recent Senate Foreign Relations hearing:
“We do have to do something about the energy problem. I can tell you that nothing has really taken me aback more as secretary of State than the way that the politics of energy is -- I will use the word warping -- diplomacy around the world… It is, of course, an energy supply that is still heavily dependent on hydrocarbons, which makes more difficult our desire to have growth, environmental protection and reliable energy supply all in a package”.1
The twin crises of oil dependence and global warming require an immediate and thoughtful response that will enable us to tackle both challenges together.
There is strong bipartisan consensus around many of the solutions, most notably the Vehicle and Fuel Choices for American Security Act (S.2025). Diverse coalitions that cross the political spectrum have come together in asking for aggressive action to break our oil addiction.2 A majority of the Senate has also endorsed the need to address global warming with a comprehensive and effective national program of mandatory market-based standards and incentives on emissions of greenhouse gases. In red and blue states alike we hear deep concern about oil and a call to action for Washington to seriously address the energy challenge ahead. Most importantly, Americans overwhelmingly support strong action to address the core of the problem -- our demand for oil -- and federal standards to enable consumers to use less oil.
The Enhanced Energy Security Act stands out by focusing on the efficient use of energy and clean, renewable alternatives, rather than measures that would prolong our addiction. While measures outside this committee’s jurisdiction, such as improving vehicle fuel economy performance and transit, are essential to successfully addressing our dependence on oil, this bill provides the right foundation for energy security legislation to move America toward a less risky and more reliable energy future. NRDC also strongly supports the renewable portfolio standard provision in the bill, which passed the Senate last year, and the energy efficiency provisions.
America’s Addiction to Oil Threatens our Security
The central challenge to America’s energy security is our dependence on oil and the web of geo-political and economic forces that now govern access to and control of this increasingly costly and strategic global commodity. As we describe in our 2005 report “Securing America: Solving Oil Dependence through Innovation” (attached for the record)3, our intense rate of oil consumption already poses a clear and direct threat to America’s national and economic security, as well as our environment. With only 3 percent of global oil reserves, America’s greatest leverage is reducing our demand for oil through innovation, efficiency gains and clean, renewable alternatives. To enhance our energy security we must stop enabling the addiction and begin to move America beyond oil.
“America is addicted to oil” the President said in his State of the Union. He was right. We consume nearly 21 million barrels of oil per day – a quarter of the world’s oil production and more than China, India, Japan and all of South and Central America use combined – and rely on foreign suppliers for 60 percent of our daily oil needs. The U.S. also has by far the highest per capita oil consumption of all major countries.4 If we continue with business as usual, by 2025 we will import over 70 percent of the oil we need to power our economy.5 With limited domestic supply, the country that leaves itself most vulnerable is the one that is most dependent on the volatile global market for its basic energy needs – and that country is the U.S.
First, our appetite for oil is unsustainable and it is shifting the balance of power toward oil rich suppliers (see figure above). The U.S. has just 3 percent of the global oil reserves, while the Middle East is home to two thirds of the world’s oil.6 Today we have the luxury of importing large amounts of oil from friendlier nations such as Mexico and Canada but this luxury is fleeting. At current consumption rates, non-Organization of the Petroleum-Exporting Countries (non-OPEC) production is expected to peak and begin declining as early as 2015,7 which means that oil rich nations, especially those in the Middle East, will take even tighter control of the reins of the global oil market.
Second, there is growing evidence that higher oil prices are here to stay. Most analysts agree that market fundamentals of high demand and limited supply, and not speculation or market hysteria, are the primary reason for today’s high oil prices. These prices can be explained, in part, by continued growth in oil demand in the United States and explosive growth in Asia, especially China. Oil demand has grown a robust 5 percent since 2003, despite a doubling of oil prices during that period. It appears likely that global oil demand and tight global oil supplies will keep fuel prices high for the foreseeable future.
There is also little spare oil production capacity to cushion a sudden loss in supply and the mix of easily extractable crude oil is moving away from “light, sweet” toward more “sour” grades that fewer refineries can handle. Considering these factors, oil prices may abruptly jump even higher, as happened during the first two oil crises of 1973–75 and 1979–81. Oil prices could also decline for short periods, but unlike during the last two oil crises, important oil market fundamentals now favor higher prices lasting for much longer—and perhaps becoming a permanent feature of the market.
Moreover, oil suppliers are also less able to adequately cushion the market in the face of rising demand. Historically, producers were accused of holding back supplies when prices rose. But most industry experts agree that OPEC and other suppliers are now pumping at or near the upper limits of their capability. Indeed, there are concerns that rapid exploitation degrades the long term viability of some oil fields.8 Spare capacity, often used to cushion oil price spikes, is essentially gone.
Another reason to worry is that America’s economy is already feeling the pinch of persistently higher oil prices. The run-up in oil prices, including the cost of the new “fear premium”, exerts an inflationary impact on everyday goods and services, consumers are left with less disposable income after their trips to the pump, and businesses of all sizes (except the oil companies) are seeing shrinking profits in the face of pricier fuel. Oil imports now account for a quarter of the ballooning trade deficit.9 At an average cost of $70 per barrel, we spend nearly $1.5 billion every day on oil and over $300 billion annually just for oil imports. Former Federal Reserve Chairman Alan Greenspan has called the cost of oil a “hidden tax” on consumers and despite the economy’s resilience to rising energy costs, the economy remains extremely vulnerable to supply disruptions and oil prices shocks in the global market, as we experienced in the aftermath of Hurricane Katrina.10
Finally, above and beyond the direct cost of oil dependence, we invest billions of dollars annually to acquire and protect access to oil resources. According to recent estimates by the National Defense Council Foundation, the hidden military and economic cost of oil dependence is in the range of $800 billion annually and oil supply disruptions like those we experienced in the 1970’s could cost the economy as much as $8 trillion.11 Moreover, our oil dependence has enormous environmental costs, including emissions of the greenhouse gases that cause global warming, air and water pollution, and the despoiling of pristine public lands.
On a global stage of energy winners and losers, America’s over-dependence on oil is now a liability that comes with costly consequences. One that is particularly dangerous is the connection between oil and terror. As we describe in the joint report with the Institute for the Analysis of Global Security (see attached), terror networks have clearly identified oil as the Achilles’ heel of our economy and continue to carry out numerous attacks on oil infrastructure around the globe. 12 The billions of dollars we export every year facilitates a massive transfer of wealth to oil suppliers that help finance terrorism and support the spread of hostile ideology.13 According to defense and national security experts, because of our oil dollars, America helps “fund both sides of the war on terror”. Oil has become a strategic commodity that can easily be used against us.
To answer this multifaceted challenge of energy security we must pursue solutions that will tackle the core of the problem – our demand for oil – and make new policy commitments, such as the Enhanced Energy Security Act (S.2747), that will offer lasting relief to consumers and clean, renewable energy alternatives. Scaling back our appetite for oil is essential to safeguarding our national security, economy and environment.
Transportation Drives our Oil Addiction
We are singularly dependent on oil to fuel our economy and the transportation sector drives our addiction. Today transportation is responsible for more than two-thirds of total U.S. oil demand; our passenger vehicles account for forty percent of total demand. 14
Moreover, our transportation system is 97 percent reliant on oil and will account for 80 percent of our projected oil demand growth over the next two decades. There are several reasons:
o First, we are taking more trips. More Americans rode trains and buses 80 years ago, and transit use spiked during World War II. Then it plummeted, leveling off at less than half of its peak level. Meanwhile vehicle miles traveled (VMT) climbed steadily and is now three trillion miles per year.15 Increasing travel by private vehicles is exacerbated by sprawl and poorly designed communities that makes commutes longer and traffic worse.
o Second, the fuel economy of our light duty vehicle fleet is stagnant. Thanks largely to the proliferation of inefficient SUVs, improvements in fuel economy stalled in 1988 (see figure below). The largest recent jump in performance happened in the late 1970’s, driven by policy and consumer choices in reaction to embargoes and price run ups.16 Despite significant technology innovation over the last two decades, in the absence of higher standards fuel economy performance has not advanced.
o Third, petroleum continues to dominate the transportation fuel market. The popularity of biofuels is an extremely recent phenomenon and despite booming growth in the industry, biofuels account for just a few percent of the nation’s total fuel use. Of the 170,000 gas stations around the country, only 700 dispense E85 fuel, and consumer awareness about alternative fuels is still low, even among owners of flexible fuel vehicles (FFVs).17 Today there are 5.7 million FFVs on the road, less than 2.6 percent of total vehicles, but even this small number run on alternative fuels just 1 percent of the time. In fact, FFVs currently increase our oil use, since automakers receive excessive credits against their fuel economy standards for producing these vehicles, regardless of how much alternative fuel they actually use.18
The non-passenger vehicle fleet also contributes to the problem. Heavier vehicles ranging from 8,500 pounds to more than 33,000 pounds consume more than 2.8 million barrels of oil each day – more than we import from the Persian Gulf.19 The heaviest trucks, such as tractor-trailers weighing more than 33,000 pounds, consume two-thirds of this energy, while lighter, shorter-range trucks use the remaining third. These vehicles could be 70 percent more efficient.20
Oil Demand and Global Warming Pollution Must be Reduced Simultaneously
Oil dependence is a critical link between national security and global warming. The oil we burn in our cars and trucks is responsible for a third of U.S. global warming pollution. Passenger vehicles alone contribute 1.6 billion tons of carbon dioxide and 13 million tons of smog-forming emissions from tailpipes every year. The recent alarming trends of arctic melting, extended drought, and severe storms suggest that the effects of global warming are being felt more rapidly than expected.21 Global warming itself threatens the security of the United States not only by supercharging hurricanes, but also because it has the potential to destabilize regimes by creating
millions of environmental refugees and intensifying conflicts over water resources in semi-arid regions.
To avoid catastrophic global climate change the U.S. and other nations will need to deploy energy resources that result in much lower releases of CO2 than today’s use of oil, gas and coal. To keep global temperatures from rising to levels not seen since before the dawn of human civilization, the best expert opinion is that we need to get on a pathway now to allow us to cut global warming emissions by 60-80% from today’s levels over the decades ahead. The technologies we choose to meet our future energy needs must have the potential to perform at these improved emissions levels.
Most serious climate scientists now warn that there is a very short window of time for beginning serious emission reductions if we are to avoid truly dangerous global warming without severe economic impact. Delay makes the job harder. The National Academy of Sciences recently stated: “Failure to implement significant reductions in net greenhouse gases will make the job much harder in the future – both in terms of stabilizing their atmospheric abundances and in terms of experiencing more significant impacts.”22 In short, a slow start means a crash finish – the longer emissions growth continues, the steeper and more disruptive the cuts required later.
The Enhanced Energy Security Act focuses appropriately on measures that would simultaneously reduce oil dependence and global warming pollution. The National Coal Council and others, by contrast, have proposed launching a massive program to replace oil with a synthetic liquid fuel produced from coal using a process known as Fischer-Tropsch. Such a step would have devastating environmental consequences: potentially doubling carbon dioxide emissions per gallon of gasoline replaced, and increasing the devastating effects of coal mining felt by communities and ecosystems stretching from Appalachia to the Rocky Mountains.23 Fortunately, we have better, less controversial options that can reduce our oil dependence more quickly, more cheaply, and more cleanly than coal-to-liquids
To assess the global warming implications of alternative fuels we need to examine the total life-cycle or “well-to-wheel” emissions. Coal is a carbon-intensive fuel, containing almost double the amount of carbon per unit of energy compared to natural gas and about 20 percent more than petroleum. When coal is converted to liquid fuels, two streams of CO2 are produced: one at the coal-to-liquids production plant and the second from the exhausts of the vehicles that burn the fuel. With the technology in hand today and on the horizon it is difficult to see how a large coal-to-liquids program can be compatible with the low-CO2-emitting transportation system we need to design to prevent global warming.
Well-to-Wheels CO2 Emissions from Alternative Fuels
FT (Coal)GasolineGasoline (Tar Sands)FT (Coal CCD)Ethanol (Corn Coal)Ethanol (Today)Ethanol (Corn NG)BiodieselEthanol (Corn Biomass)Ethanol (Cellulose)Ethanol (Corn Biomass CCD)Ethanol (Cellulose CCD)-1001020304050601lbs CO2/gal gasoline equivalentFT (Coal)Gasoline (Tar Sands)FT (Coal CCD)GasolineEthanol (Corn Coal)Ethanol (Today)Ethanol (Corn NG)BiodieselEthanol (Corn Biomass)Ethanol (Cellulose)Ethanol (Corn Biomass CCD)Ethanol (Cellulose CCD)
Today, our system of refining crude oil to produce gasoline, diesel, jet fuel and other transportation fuels, results in a total well-to-wheels emissions rate of about 27.5 pounds of CO2 per gallon of fuel. Based on available information about coal-to-liquids plants being proposed, the total well-to-wheels CO2 emissions from such plants would be about 49.5 pounds of CO2 per gallon -- twice as high as conventional petroleum based fuels.24
Even if the CO2 from coal-to-liquids plants is captured, well-to-wheels CO2 emissions would still be higher than emissions from today’s crude oil system. Capturing 90 percent of the emissions from coal-to-liquid plants would lower plant emissions to levels close to petroleum production and refining, while vehicle emissions would be equivalent to those from gasoline. However, even with CO2 capture, the well-to-wheels emissions would be 8 percent higher than from petroleum.
This comparison indicates that using coal to produce a significant amount of liquids for transportation fuel would not be compatible with the need to develop a low-CO2 emitting transportation sector. Liquid fuel from coal contains the same amount of carbon as gasoline or diesel made from crude, so the potential for achieving significant CO2 emission reductions compared to crude is inherently limited. Biofuels, especially cellulosic ethanol, offer much greater potential to reduce oil dependence and cut CO2 emissions. We already use ethanol in our fuel supply and significant investments are pouring into the biofuels industry to help it grow. Renewable biofuels are a cheaper, cleaner and more readily available alternative that could displace imported oil, help revitalize the rural economy, and lower CO2 emissions.
Transforming our transportation sector by mobilizing the use of efficient technologies, diversifying fuel choices at the pump to include clean, renewable fuels, and offering mass transit options for commuters, such as light rail, is essential to ensuring that our pursuit of energy security also enables us to tackle the urgent challenge of global warming.
Fortunately, technology is available today that can give us a robust and effective program to reduce oil dependence. To cut our dependence on oil we should follow a simple rule: start with the measures that will produce the quickest, cleanest and least expensive reductions in oil use; measures that will put us on track to achieve the reductions in global warming emissions we need to protect the climate. As we describe in the attached report, a combination of more efficient transportation, biofuels, “smart growth” policies and oil savings measures in other sectors, could reduce our oil demand by as much as 40 percent by 2025 (see “oil savings toolbox” below).
The Enhanced Energy Security Act (S.2747) creates a solid foundation for tackling the core challenge of growing oil demand, and the companion tax bill provides needed incentives to help consumers and industry play an active role in bringing innovative, efficient technologies and renewable energies to market sooner. Given the breadth of the legislation, the following discussion focuses largely on provisions of the bill related to oil dependence. NRDC looks forward to working with the committee to perfect and help enact the legislation.
Congress Should Set Clear Targets and Demand Accountability
Breaking our oil addiction requires mobilizing American ingenuity, factories and farms around a clear goal. The first step Congress must take is to make a binding national commitment to oil savings. If the past is any indicator of success for such a commitment, this savings goal is achievable. During World War II, American factories converted in just months from building cars to building tankers and bombers that became the arsenal of democracy. And after the first oil crisis in the early 1970s, America slashed its oil imports and saved billion of dollars in fuel costs to keep our economy strong. From biofuels to hybrid vehicles, we have the technology today to make significant reductions in our oil demand.
S.2747 would establish the critical foundation of oil savings, starting with a commitment to reduce oil consumption by 2.5 million barrels of oil per day in ten years, and provide a set of tools and incentives to help achieve these goals. Crucially, the bill also ensures that the oil savings target is not merely aspiration by establishing a rigorous process for ensuring that the nation gets on track—and stays on track—to meeting the requirement.
We recommend the following policy measures to achieve the oil savings commitments that would be established by S.2747. Although we recognize that not all of these measures are within the jurisdiction of the Energy Committee, we recommend that final oil savings legislation incorporate this complete toolbox in order to provide the greatest possible flexibility in the means for achieving the targets.
Accelerate Oil Savings in Transportation:
o Raise fuel economy performance standards for passenger cars and light trucks;
o Provide domestic automakers and suppliers with incentives to retool factories and produce more efficient, advanced technology vehicles, such as hybrids and advanced clean diesel, to regain competitiveness with foreign rivals and keep jobs and profits in the U.S.;
o Establish minimum efficiency standards for heavy trucks and replacement tires;
o Reduce vehicle miles traveled (VMT) through increased funding for transit and transit -oriented development; and
o Enable private fleet owners and consumers to use less fuel by offering incentives for fleet turnover and extending EPACT consumer tax incentives for hybrid vehicles.
Expand Fuel Choices though Clean, Renewable Biofuels:
o Increase EPACT production goals for cellulosic biofuels to 1 billion gallons by 2016;
o Require that areas with access to biofuels and registered flexible fuel vehicles (FFVs) require fuel stations to install E85 pumps and provide incentives to offset capital costs of new pumps;
o Make every new vehicle flexible fuel capable and phase out the federal fuel economy loophole for dual-fuel cars and trucks;
o Implement and fully fund cellulosic biofuels production incentives authorized by EPACT; and
o Ensure that alternative transportation fuels perform better than gasoline in reducing “well-to-wheels” emissions of carbon dioxide.
Increase Energy Savings in Industry, Aviation and the Residential Building Sector:
o Expand industrial efficiency programs to focus on oil use reduction and adopt standards for petroleum heating;
o Replace chemical feedstocks with bioproducts through research and development and government procurement of bioproducts;
o Upgrade air traffic management systems so aircraft follow the most-efficient routes; and
o Promote residential energy savings with a focus on oil-heat.
Many of the necessary reforms are already included in the broadly supported Vehicle and Fuel Choices for American Security Act (S.2025), as well as the bill before this committee.
Most importantly, the Enhanced Energy Security Act includes a meaningful framework for oil savings. The bill provides helpful new programs to develop new vehicle technology, such as plug-in hybrids and lightweight materials, and accelerate the turnover of inefficient cars and trucks. The bill provides needed incentives for oil saving technologies, as well, such as cellulosic biofuels and advanced technology vehicles, and increased funding authorization for cellulosic biofuels. The companion tax legislation would help domestic automakers retool and produce more fuel efficient vehicles, assist private fleet owners in purchasing these cars and trucks, and help truckers install idling reduction equipment to reduce fuel use.
However, the Enhanced Energy Security Act and the companion tax legislation contain several omissions that should be addressed. Specifically, the retooling incentives for auto manufactures and suppliers should be consistent between the authorizing and tax legislation (Section 208 of S.2747 and Section 202 of S. 2748) in requiring sustained improvements in fleetwide fuel economy for automakers that take advantage of the production incentives, and Tier II, Bin 5 emissions compliance for all qualifying vehicles. This would help ensure adequate air quality protection and actual fuel savings in return for public dollars.
The bill could also better address the problem of oil dependence by incorporating additional measures for transportation efficiency and biofuels infrastructure, which are essential to reducing oil dependence. Unlike S.2025, the oil savings toolbox in this bill is not complete, and although some of these provisions fall outside this committee’s jurisdiction, the following measures should be included to provide the tools necessary to achieve oil savings. We look forward to working with the committees to adopt these and other improvements to the bill.
Increased Fuel Economy Performance for Light Duty Vehicles
A key solution to oil dependence is raising the efficiency of cars and trucks. When Congress first enacted fuel economy standards in 1975 in response to rising gas prices and the OPEC oil embargo, Corporate Average Fuel Economy standards (CAFE) succeeded in doubling the fuel economy of American vehicles in just ten years. This helped drive the oil intensity of our economy down by about one-third, providing better insulation from today’s high prices.
The program also resulted in a substantial reduction in the nation’s oil dependence. According to the National Research Council, had we continued to use oil at the same rate, today we would be consuming 40 percent more gasoline and 3.8 million barrels or nearly 20 percent more oil. 25
In the context of higher prices, fuel savings technologies are vital to the future of domestic automakers and suppliers. As we noted in our “In the Tank” report in 2005, automakers stand to lose substantial market share, profit and jobs if they do not make fuel economy a top priority.26
NRDC strongly supports the recently introduced “Ten-in-Ten Fuel Economy Act” as a critical part of our nation’s strategy for addressing the urgent challenges of oil dependence and global warming. The bill would guarantee that we save 2.5 million barrels of oil per day by 2025 and reduce tailpipe emission of carbon dioxide by 420 million metric tons.
Efficiency Standards for Tires and Heavy Trucks
Tires may look similar, but some models are more fuel-efficient than others, while having comparable or superior braking, tread life (longevity), and other important performance attributes. The small incremental cost of fuel-efficient replacement tires compared with average tires sold in the replacement market quickly pay for themselves, and could easily save consumers at least $36 a year by boosting the fuel economy performance of their vehicle by 2 to 4% -- a potential annual savings of $6 billion nationally. Despite the clear benefits, only new cars are routinely equipped with these tires and they are not widely available in the replacement market. Congress should grant authority to set minimum tire efficiency standards. Replacement tires should not only be labeled, but also optimized for fuel efficiency so consumers can take advantage of an easy way to save fuel.
Improving the fuel economy of heavy-duty trucks offers a major opportunity for oil savings. All truck classes can benefit from fuel-efficiency gains from current and emerging technology. Technology assessments by the American Council for an Energy-Efficient Economy (ACEEE) found that truck fuel-efficiency advances up to 70 percent are cost-effective. In addition to tax incentives for purchases of idling reduction equipment, Congress should grant authority to set minimum efficiency standards for medium and heavy duty trucks.27
Oil dependence is one more reason to pursue smart-growth as an alternative to suburban sprawl and to expand Americans’ transportation options. The potential for smart growth oil savings is immense. If all new construction were built in a similar fashion to existing smart growth developments, the nation would save over half a million barrels of oil per day after 10 years of construction. The attached report identifies ways for Congress to support local smart growth policies to reduce VMT and achieve oil savings.
Renewable Energy and Energy Efficiency is Essential to Overall Energy Security
NRDC strongly supports the renewable portfolio standard provision of the Enhanced Energy Security Act. This provision, which passed in the Senate’s version of the Energy Policy Act of 2005, would be a major step forward in promoting clean renewable energy in the United States.
NRDC also supports the energy efficiency provisions. The financial incentives program for high-efficiency products is an excellent idea, which is similar to the Golden Carrot program NRDC developed in collaboration with utilities, state energy offices and EPA to promote the design and manufacture of a high-efficiency refrigerator. We recommend that the high-efficiency products provision be strengthened by 1) giving EPA the authority to make the awards, since EPA has more experience than DOE in this area, 2) authorizing a specific dollar amount for the program, 3) requiring that the products actually be in production before giving the money to the manufacturers, and 4) requiring that the award be for products that achieve a certain minimum percentage of energy savings. This last requirement is necessary to exclude bids for very modest, but cheap, energy savings, which can be acquired more easily through other programs. This program should be limited to technologies that advance the state of the art.
NRDC also supports a federal energy efficiency resource program, which would require that electric utilities save a certain percentage of their consumption through energy efficiency programs. The energy efficiency resource program provisions in the Enhanced Energy Security Act should be strengthened by placing the requirement on the utilities instead of leaving the decision of whether to establish such a requirement to state public utility commissions.
Energy Efficiency Provisions of the Enhanced Energy Security Tax Incentives Act
Some 1.5 million barrels of oil per day are consumed in buildings where savings of 30%-50% and more are cost-effective and can be facilitated by tax incentives. NRDC strongly supports extending energy efficiency tax incentives extensions, as is done in the Enhanced Energy Security Tax Incentives Act. However, there are now better alternatives for some of these incentives that are more meaningful and more cost effective. The original EPAct incentives for retrofitting homes and for solar energy are based on the cost of the measures rather than their performance. This structure was tried in the 1970’s for both efficiency and solar, and it was an expensive failure. NRDC has concerns about adding the tax credit for 30% energy savings in new homes. Almost all of the 200,000 homes constructed in California annually already save about 28% on average, so this provision could be costly. NRDC supports the existing homes and solar energy incentives language that will soon be introduced by Senators Snowe and Feinstein. The Snowe-Feinstein bill would create new performance-based incentives for retrofit of both owner-occupied homes and rentals, while also extending the EPACT incentives for 2 years.
NRDC is pleased to endorse S.2747 and S.2748, which provide an excellent foundation for breaking America’s addiction to oil, reducing natural gas demand, and curbing global warming. By establishing an enforceable national commitment to oil savings and providing flexible tools for achieving it, these proposals point the way to breaking the energy policy gridlock that we are stuck in today. Congress should seize this opportunity to increase our security, strengthen our economy, and protect our environment.