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Energy Efficiency: A Compendium
The energy crises of the 1970s spurred the federal government, and some state governments, to mount a variety of energy policies to address concerns about oil import dependence, high energy prices, and overall energy security. Since then, additional economic and environmental concerns—especially international competitiveness, air pollution, and climate change—have also driven policy proposals to support efficiency.
As the nation seeks to reduce imported energy and to increase production from “clean” domestic sources, there may continue to be interest in additional federal spending, tax incentives, and regulatory measures to further help overcome market barriers to efficiency measures. Also, any future efforts to create a cap and trade program for greenhouse gas emissions could include auctions of emission credits to generate revenue that could, in part, be used to fund energy efficiency initiatives.
Although energy efficiency measures may often be less costly than new supply, market barriers often prevent measures from being implemented. For example, because home builders do not expect to pay the energy bills, they tend to design building shell features and choose energy-using equipment based on “first cost” rather than “life cycle” cost. As a result, new homes may lack operationally cost effective end-use energy efficiency measures (e.g. thermal windows and a high efficiency furnace). Also, electric utility companies were designed to make profits by selling ever-greater amounts of electricity, instead of providing incentives to customers to reduce demand by improving energy efficiency. To address such barriers, an array of funding, tax incentives, and regulations (primarily equipment efficiency standards) have been enacted to encourage energy efficiency improvements.
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