Senate Energy Bill Better Than House Version But Misses Vital Efficiency Provisions

June 2, 2003

WASHINGTON, D.C. — The Senate Energy Bill (S.14) now on the Senate floor, while it would save more energy than the House bill, requires major improvements if it is to meet the nation's pressing energy needs, summarized the American Council for an Energy-Efficient Economy (ACEEE). "The Senate bill contains worthwhile appliance standards and tax credits for advanced efficiency technologies, but it fails to make a real dent in our oil dependence or electricity use," said Steven Nadel, ACEEE's Executive Director.

ACEEE's analysis shows that the Senate bill would save about 24 Quads of energy use cumulatively through 2020 (a Quad is 10 to the 15th power Btus—the U.S. currently consumes just over 100 Quads annually). However, the analysis also shows that including significant provisions, such as a reduction of one million barrels per day in oil use as well as a public benefits fund for electricity efficiency, would boost savings to about 100 Quads. The U.S. Department of Energy projects that the U.S. will use 1,975 Quads through 2020, so the Senate bill would cut that projection by just over one percent. A more aggressive bill—saving 100 Quads—would cut the forecast by five percent.

The House version of the bill would save about 19 Quads to the Senate's 24, or about 25 percent less. The difference is largely due to the Senate's inclusion of additional products in its efficiency standards section, and its more extensive tax incentives for efficient technologies. If the House adopted the Senate provisions in these areas in conference, the House bill's energy savings would be comparable to the Senate's. ACEEE's analyses of these bills can be downloaded from (Estimate of Cumulative Savings from Energy-Efficiency Sections of House Energy Bill), (Estimate of Cumulative Savings from Energy-Efficiency Sections of Senate Energy Bill), and (Comparison of Energy Efficiency-Related Sections of House and Senate Energy Bills).

The House bill is superior to the Senate version on one provision that actually wastes energy. The Senate bill would extend the dual-fuel credit for vehicles, while the House bill is silent on this. For the last 15 years, automakers have gotten credit for fuel economy standards compliance by building vehicles capable of burning an ethanol-based fuel (E-85). This was intended to encourage alternative fuel use; however, very few vehicles on the road today are using E-85. This gives the automakers a "free ride," and effectively reduces average vehicle mileage by about one mile per gallon. If not fixed, this loophole will drive up our oil dependence by over 150,000 barrels per day.

ACEEE recommends that the dual-fuel loophole be fixed by tying it to actual ethanol fuel consumption. If the vehicles made to burn E-85 are actually doing so, their manufacturers should get the credit. But if not, there should be no credit. This would be a straightforward remedy to a small but growing "oil leak" in the fuel economy standards program.

The potential for achieving significant savings in oil and electricity use is well-documented. In terms of oil, research by ACEEE, the National Academy of Sciences, and others shows that automobile fuel efficiency can be improved by more than one-third, which would save a million barrels per day alone. However, oil savings can also come from improvements in home heating efficiency, industrial oil use, and air traffic management. For electricity savings, research by ACEEE, national laboratories, and others shows that power use can be cut by about 300 billion kWh of electricity annually and 80,000 megawatts of peak power demand over ten years, which is about 10 percent of current electricity use and capacity.

Both the Senate and the House energy bills fall far short of the energy efficiency policy measures needed to make a real difference for America's energy security, economic recovery, and environmental sustainability. Congress needs to take much bolder action to reduce America's oil dependence, and to make our electricity systems more reliable and more affordable.