Energy Efficiencys Role in Greenhouse Gas Policies

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Energy Efficiencys Role in Greenhouse Gas
Policies
Kathleen Hogan Director Climate Protection
Partnerships Division U.S. Environmental
Protection Agency National Association of
Regulatory Utility Commissioners February 19,
2008 Washington, DC
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Overview

• Many states focused on GHG reductions/policies
• EE consistently identified as a key low-cost GHG
  reduction strategy at state and national levels
• Reduce GHG emissions at lower overall cost
• Specific EE policies are necessary to capture low
  cost EE
• Price signals from GHG policies are not
  sufficient to realize cost-effective EE potential
• E.g., price increases under proposed cap and
  trade or carbon tax approaches would only begin
  to tap this potential.
• Known market barriers remain and must be
  addressed to realize this potential.
• National Action Plan for Energy Efficiency
• Role in addressing barriers
• Key New/Ongoing Efforts

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Greenhouse Gas Reduction Efforts at State Level

• 25 states with broad-based Climate Action Plans
• 22 states committed to GHG reductions thru cap
  and trade or other market-based approaches
• 17 states have announced GHG reduction targets

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25 States with Completed Climate Action Plans
Source Pew Center
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22 States Committed to Regional Carbon Markets
(w/ an additional 8 observing)
Source Pew Center
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Regional Carbon Markets

• Regional Greenhouse Gas Initiative (RGGI)
• Created December 2005
• Cap and trade on CO2 from power plants
  beginning in 2009
• Western Climate Initiative
• Initiated February 2007
• by August 2008, a market-based system such as
  a cap-and-trade program covering multiple
  economic sectors to aid in meeting GHG
  reduction targets.
• Midwestern GHG Reduction Accord
• Committed to develop a market-based and
  multi-sector cap-and-trade mechanism to achieve
  GHG reductions
• Full implementation within 30 months of November
  2007 signing

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17 States with GHG Reduction Targets
Source Pew Center
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EE is a Key Low-cost GHG Reduction Strategy

• U.S./International Scale Analysis
• McKinsey
• EPRI PRISM
• IPCC
• State Examples
• 13 states with EE Resource Standards
• Most tied to GHG reduction strategies
• Variety of EE strategies play leading role in
  each of the 25 Climate Action Plans including
• Lead by Example approaches for government
  facilities
• Utility programs and policies
• EE program funding
• RGGI
• 25 minimum Public Benefits Allowance
  Allocation
• Most states have chosen to exceed

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McKinsey, December 2007U.S. GHG Abatement
Mapping Initiative
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McKinsey, December 2007 (contd)

• U.S. could reduce GHG emissons in 2030 by 3.0 to
  4.5 gigatons of CO2e using tested approaches and
  emerging technologies.
• Executive Summary
• These reductions would involve pursuing a wide
  array of abatement options available at marginal
  costs less than 50 per ton, with average net
  cost to the economy being far lower if the nation
  can capture sizable gains from energy
  efficiency.
• Unlocking negative cost options would require
  overcoming persistent barriers to market
  efficiency, such as mismatches between who pays
  the cost of an option and who gains the benefit
  (e.g., the homebuilder versus homeowner), lack of
  information about the impact of individual
  decisions, and the consumer desire for rapid
  payback

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EPRIs PRISM Analysis
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Intergovernmental Panel on Climate Change (IPCC),
4th Assessment Report (AR)

• There is a significant economic potential for the
  mitigation of greenhouse gas emissions from all
  sectors over the coming decades, sufficient to
  offset growth of global emissions.
• substantial reductions in CO2 emissions from
  energy use in buildings can be achieved using
  mature technologies for energy efficiency (high
  agreement, much evidence).
• survey of literature indicates that there is a
  global potential to reduce approximately 29 of
  the projected baseline emissions by 2020
  cost-effectively negative cost in the
  residential and commercial sectors (high
  agreement, much evidence).

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IPCC AR 4 EE Is A Critical Component of GHG
Abatement Portfolio

• The range of stabilization levels can be achieved
  by deployment of a portfolio of technologies that
  are currently available and those that are
  expected to be commercialised in coming decades.
• This assumes that appropriate and effective
  incentives are in place for development,
  acquisition, deployment and diffusion of
  technologies and for addressing related barriers

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Price Signals Insufficient to Realize All
Cost-effective Energy Efficiency

• Energy efficiency faces known, persistent market
  barriers
• Landlord tenant problem
• Builder buyer problem
• Poor/inadequate information
• Lack of capital
• Price increases resulting from mandatory carbon
  reduction policies (e.g., cap and trade on power
  sector or carbon tax) will not address EE market
  barriers.
• Energy demand is relatively price inelastic
• Complimentary policies to address these barriers
  are important to control costs of meeting GHG
  reduction objectives.
• Many of the policies at the state and local level

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National Action Plan for Energy Efficiency
Addresses Utility Barriers

• National Action Plan for Energy Efficiency
• Recommendations
• Recognize energy efficiency as a high-priority
  energy resource.
• Make a strong, long-term commitment to implement
  cost-effective energy efficiency as a resource.
• Broadly communicate the benefits of and
  opportunities for energy efficiency.
• Provide sufficient, timely and stable program
  funding to deliver energy efficiency where
  cost-effective.
• Modify policies to align utility incentives with
  the delivery of cost-effective energy efficiency
  and modify ratemaking practices to promote energy
  efficiency investments.

• Released on July 31, 2006 at the National
  Association of Regulatory Utility Commissioners
  meeting
• Goal To create a sustainable, aggressive
  national commitment to energy efficiency through
  gas and electric utilities, utility regulators,
  and partner organizations
• 60 member public-private Leadership Group
  developed five recommendations and commits to
  take action
• Commitments to energy efficiency by 120
  organizations
• Released its Vision for 2025 in November 2007

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Vision for 2025

• Released November 12, 2007
• Long-term Aspirational Goal
• To achieve all cost-effective energy efficiency
  by the year 2025
• Equivalent to more than 50 of expected growth
  over next twenty years
• Framework for implementing Action Plan
  recommendations
• Puts the 5 recommendations into Action
• Is a living document open to new ideas will be
  refined
• Is a plan need to know where you want to go in
  order to get there
• A challenge for new thinking
• 10 Implementation Goals
• Action needed over next 10-15 years to lay policy
  foundation by 2025
• Highlights need for new technology
• Offers initial approach to measure progress
• Currently being refined by Leadership Group
• Not a mandate respects state processes not one
  size fits all

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Visions 10 Implementation Goals

• Establishing Cost-Effective Energy Efficiency as
  a High-Priority Resource
• Developing Processes to Align Utilities
  Incentives Equally for Efficiency Supply
  Resources
• Establishing Cost-Effectiveness Tests
• Establishing Evaluation, Measurement, and
  Verification Mechanisms
• Establishing Effective Energy Efficiency Delivery
  Mechanisms
• Developing State Policies to Ensure Robust Energy
  Efficiency Practices
• Aligning Customer Pricing and Incentives to
  Investment in Efficiency
• Establishing State of the Art Billing Systems
• Implementing State of the Art Efficiency
  Information Sharing and Delivery Systems
• Implementing Advanced Technologies

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Key New/Ongoing Efforts

• National Action Plan for Energy Efficiency
  considering issue paper in this area for 2008
• Energy Modeling Forum (EMF) has committed to a
  new study (EMF-25) addressing energy demand and
  efficiency in a growing economy and notes the
  potential for EE to contribute to reduced carbon
  intensity.
• States continue to evaluate and implement options
  to leverage energy efficiency within GHG
  reduction strategies