Kerry and Lieberman Proposal Scales Back Energy Efficiency Provisions, Raising Costs to Consumers

May 12, 2010

Washington, D.C. — The compromise Kerry-Lieberman proposal released today misses out on a key opportunity to address the cost of curbing climate change by including little on energy efficiency — the first, best, and least-cost carbon-reduction opportunity. The Kerry-Lieberman proposal does much less for energy efficiency than previous major climate change bills. Relative to the climate bills passed by the House and reported out by the Senate Environment and Public Works Committee, two major energy efficiency provisions have been dramatically reduced. These are provisions that provide emissions allowances to fund a variety of state energy efficiency programs and a requirement that gas utilities use a portion of their free emissions allowances to operate energy efficiency programs. On state programs, Kerry and Lieberman provide less than a quarter of the allowances provided in the House-passed energy and climate bill. On natural gas programs, Kerry-Lieberman have reduced the minimum share of allowances to energy efficiency from one-third to one-fifth. On the other hand, the Kerry-Lieberman proposal does include several useful transportation provisions and also a small short-term program for industrial efficiency.

“Our analysis of the House-passed climate bill found that consumer bill savings from energy efficiency offset the costs to consumers of greenhouse gas emissions limits, making the overall package affordable to consumers,” stated Steven Nadel, Executive Director for the American Council for an Energy-Efficient Economy (ACEEE). “The Kerry-Lieberman proposal will result in only limited energy savings, and without these savings, costs to consumers will be higher.”

In addition to concerns about cuts to energy efficiency provisions, ACEEE also noted that by providing rebates to consumers through their energy bills, the Kerry-Lieberman proposal would also reduce the incentive for consumers to conserve energy on their own. “For the market for energy efficiency to work, consumers need to see the costs of inefficiency on their energy bills. While we support consumer rebates to offset costs, these rebates should be provided in other ways, rather than directly on energy bills,” noted Nadel.

In remarks leading up to today’s introduction, Senators Kerry and Lieberman have acknowledged the positive role energy efficiency can play, and have referred to the energy efficiency provisions in an energy bill reported out by the Senate Energy Committee. However, according to a previous analysis by ACEEE, the majority of energy savings in the Senate Energy Committee bill requires funding that was expected to come from a climate bill, but such funding is missing from the Kerry-Lieberman bill.

“The bill does take important steps towards lowering transportation-sector emissions by requiring national goals for transportation reductions, as well as state and metro area targets. More federal dollars are available to help reach those targets than in previous bills, though acceptable uses for those funds could be better defined. In addition, the bill offers substantial assistance to auto manufacturers and suppliers for clean vehicle production, including plug-ins; unfortunately, vehicle efficiency performance requirements for this program are quite weak," stated ACEEE Transportation Program Director Therese Langer.

The previous ACEEE analysis on the House-passed energy and climate bill concluded that the energy efficiency provisions in the bill would save the average American household about $200 annually by 2020. These consumer savings would exceed the non-efficiency costs per household of the legislation, which the Congressional Budget Office estimated to be $175 in 2020. ACEEE also estimated the energy savings of the energy bill reported out by the Senate Energy Committee and found that this bill would save less than half the energy of the House-passed bill. Of the savings in the Senate Energy Committee bill, more than 60% of the savings are dependent on Congress providing funding for the provisions. Without this funding, savings from the Senate Energy Committee bill will be about one-quarter of the savings from the House-passed bill.

“We support the intent and efforts of Senators Kerry and Lieberman. However, in order to enact their proposal, they will need to make the case that it will not have adverse effects on consumers. Unfortunately, by gutting the energy efficiency provisions in their bill, they have created a huge impediment to make this case. They have pulled the plug on the most effective carbon-reduction strategy,” concluded Nadel. “We urge the Senate to build upon the meager energy efficiency provisions in the Kerry-Lieberman bill in order to reduce the costs to consumers of addressing climate change.”