Energy efficiency measures have been proven by many analyses to be the most cost-effective and fast-track way to address global climate change while reducing energy usage and more affordably expanding the use of renewable energy sources. In the race to implement sound policies to reduce carbon dioxide emissions, energy efficiency should be the “first fuel” by mitigating the costs of addressing climate change while providing environmental, energy, and consumer benefits.
The inclusion of specific energy efficiency policies in climate legislation is essential to realizing efficiency’s potential to reduce carbon emissions. Utility energy efficiency targets, appliance and vehicle standards, building energy codes, and land use planning inducements should all be among the basic elements of any federal climate bill today.
A cap-and-trade program alone cannot substitute for these efficiency policies. Given the low price elasticity of the demand for energy, price increases resulting from a carbon cap will have very little effect on energy consumption. Persistent market barriers, including principle-agent problems, up-front costs, and lack of information account for this inelasticity of demand. A cap-and-trade program can, however, be designed to yield substantial efficiency improvements through strategic allocation of carbon allowances or auction revenues toward targeted programs to overcome market barriers to efficiency or using allowances to incentivize state or municipal adoption of codes and standards.
⇒ FInd out which states have climate change policies in place with ACEEE's State Energy Efficiency Policy Database.