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Washington, D.C. — According to the independent American Council for an Energy-Efficient Economy (ACEEE) most economists — including both critics and supporters of climate and energy legislation — are getting it wrong today when it comes to forecasting the impact of reducing greenhouse gases on the U.S. economy. A new ACEEE report finds that U.S. energy consumption and the greenhouse gas emissions could both be cut about in half by 2050 through increased energy efficiency, while achieving "a small but net positive gain" in the economy.
Titled "The Positive Economics of Climate Change Policies: What the Historical Evidence Can Tell Us," the ACEEE report states: "Most economic policy models now suggest a significantly negative impact on the economy if U.S. policy makers choose to reduce greenhouse gas emissions to any significant extent. There are a number of reasons for these inappropriate outcomes. Primarily, they are an artifact of the models and not the data. By turning to the historical record in the United States we can examine recent data to inform policy makers and business leaders what the economic policy models should be saying about energy and climate change policies. We can also use this historical record to perform a diagnostic assessment of recent modeling exercises to improve our understanding of their missed opportunities. Based on the available record and the economic evidence to date, energy efficiency is a substantially larger and more cost-effective resource than most economic policy models now acknowledge."
The new ACEEE report concludes:
* Energy efficiency investments can provide up to one-half of the needed greenhouses gas emissions reductions most scientists say are needed between now and the year 2050.
* Investments in more energy productive technologies can lead to substantial net energy bill savings for the consumer and for the nation’s businesses on order of about half or $2 trillion by 2050 (measured in constant 2007 dollars).
* Non-energy expenditures within the U.S. tend to be more labor-intensive and provide a greater rate of contribution to the nation’s Gross Domestic Product compared to expenditures on energy. Instead of taking jobs away from the economy, the diagnostic assessment here suggests "a small but net positive gain" in the economy. Hence, shifting away from the production and consumption of conventional energy resources, in favor of more productive investments in energy efficient technologies, can lead to a more robust economy and to a greater level of overall employment opportunities with the U.S.
John A. "Skip" Laitner, director, ACEEE Economic and Policy Analysis Program, American Council for an Energy-Efficient Economy, said: "Energy efficiency has been the cheapest and largest resource to satisfy growing demands for energy-related services in the US economy. Indeed, productive investments and informed behaviors have enabled energy efficiency to meet three-fourths of the growth in new energy service demands since 1970. The opportunity for even greater efficiency gains is huge. By 2050 our initial findings suggest we could be reducing our energy demands by as much as 50 percent – a huge net savings for our wallets and our family budgets … Perhaps the most immediate barrier, however, is the complete misreading of the historical track record about energy efficiency. To that extent, it is our hope that our diagnostic review may help overcome that critical first barrier – recognizing those missed opportunities."
Economist James Barrett, Ph.D., climate policy expert and independent consultant, said: "The vast majority of the climate and energy policy alternatives put forward are based on the thinking of 13 years ago: That climate policy is a painful thing. To minimize the pain, we must minimize the policy. As a result, the only approaches taken seriously are those with off-ramps, safety valves, that rely on large numbers of international carbon offsets, paying others to reduce emissions for us … The reality, of course, is that the theory underlying these economic models is far from reality. Not only do opportunities for low-risk, high-return efficiency investments exist, they abound. The evidence presented in this study shows that we can reduce pollution while increasing growth. We can cut energy use while increasing our economic output." Barrett has served as an economist at the Economic Policy Institute and the Joint Economic Committee of the U.S. Congress.
Building on the available economic data and the larger historical record, ACEEE’s report outlines a diagnostic review to evaluate the recent assessments of proposed climate change legislation now before the U.S. Congress. In particular, previous climate policy assessments focused on HR 2454, the American Clean Energy and Security Act of 2009. The intent of ACEEE’s diagnostic review is to highlight critical missing assumptions that most economic models are failing to take fully into account that would likely change many of the modeling results done to date.
What are most economic models failing to take fully into account?
As one of the richest and more technologically advanced regions of the world, the United States has expanded its economic output by more than three-fold since 1970. Per capita incomes are also twice as large today compared to incomes in 1970. Notably, however, the demand for energy and power resources grew by only 50% during the same period. This decoupling of economic growth and energy consumption is a function of increased energy productivity: in effect, the ability to generate greater economic output, but to do so with less energy. Having achieved these past gains with a haphazard and often counterproductive approach to energy efficiency and energy policy, there is compelling evidence to suggest that even greater energy productivity benefits can be achieved.
ABOUT ACEEE
The American Council for an Energy-Efficient Economy is an independent, nonprofit organization dedicated to advancing energy efficiency as a means of promoting economic prosperity, energy security, and environmental protection. ACEEE was founded in 1980 by leading researchers in the energy field. Since then the organization has grown to a staff of more than 40. Projects are carried out by ACEEE staff and collaborators from government, the private sector, research institutions, and other nonprofit organizations. For information about ACEEE and its programs, publications, and conferences, visit www.aceee.org.
Titled "The Positive Economics of Climate Change Policies: What the Historical Evidence Can Tell Us," the ACEEE report states: "Most economic policy models now suggest a significantly negative impact on the economy if U.S. policy makers choose to reduce greenhouse gas emissions to any significant extent. There are a number of reasons for these inappropriate outcomes. Primarily, they are an artifact of the models and not the data. By turning to the historical record in the United States we can examine recent data to inform policy makers and business leaders what the economic policy models should be saying about energy and climate change policies. We can also use this historical record to perform a diagnostic assessment of recent modeling exercises to improve our understanding of their missed opportunities. Based on the available record and the economic evidence to date, energy efficiency is a substantially larger and more cost-effective resource than most economic policy models now acknowledge."
The new ACEEE report concludes:
* Energy efficiency investments can provide up to one-half of the needed greenhouses gas emissions reductions most scientists say are needed between now and the year 2050.
* Investments in more energy productive technologies can lead to substantial net energy bill savings for the consumer and for the nation’s businesses on order of about half or $2 trillion by 2050 (measured in constant 2007 dollars).
* Non-energy expenditures within the U.S. tend to be more labor-intensive and provide a greater rate of contribution to the nation’s Gross Domestic Product compared to expenditures on energy. Instead of taking jobs away from the economy, the diagnostic assessment here suggests "a small but net positive gain" in the economy. Hence, shifting away from the production and consumption of conventional energy resources, in favor of more productive investments in energy efficient technologies, can lead to a more robust economy and to a greater level of overall employment opportunities with the U.S.
John A. "Skip" Laitner, director, ACEEE Economic and Policy Analysis Program, American Council for an Energy-Efficient Economy, said: "Energy efficiency has been the cheapest and largest resource to satisfy growing demands for energy-related services in the US economy. Indeed, productive investments and informed behaviors have enabled energy efficiency to meet three-fourths of the growth in new energy service demands since 1970. The opportunity for even greater efficiency gains is huge. By 2050 our initial findings suggest we could be reducing our energy demands by as much as 50 percent – a huge net savings for our wallets and our family budgets … Perhaps the most immediate barrier, however, is the complete misreading of the historical track record about energy efficiency. To that extent, it is our hope that our diagnostic review may help overcome that critical first barrier – recognizing those missed opportunities."
Economist James Barrett, Ph.D., climate policy expert and independent consultant, said: "The vast majority of the climate and energy policy alternatives put forward are based on the thinking of 13 years ago: That climate policy is a painful thing. To minimize the pain, we must minimize the policy. As a result, the only approaches taken seriously are those with off-ramps, safety valves, that rely on large numbers of international carbon offsets, paying others to reduce emissions for us … The reality, of course, is that the theory underlying these economic models is far from reality. Not only do opportunities for low-risk, high-return efficiency investments exist, they abound. The evidence presented in this study shows that we can reduce pollution while increasing growth. We can cut energy use while increasing our economic output." Barrett has served as an economist at the Economic Policy Institute and the Joint Economic Committee of the U.S. Congress.
Building on the available economic data and the larger historical record, ACEEE’s report outlines a diagnostic review to evaluate the recent assessments of proposed climate change legislation now before the U.S. Congress. In particular, previous climate policy assessments focused on HR 2454, the American Clean Energy and Security Act of 2009. The intent of ACEEE’s diagnostic review is to highlight critical missing assumptions that most economic models are failing to take fully into account that would likely change many of the modeling results done to date.
What are most economic models failing to take fully into account?
As one of the richest and more technologically advanced regions of the world, the United States has expanded its economic output by more than three-fold since 1970. Per capita incomes are also twice as large today compared to incomes in 1970. Notably, however, the demand for energy and power resources grew by only 50% during the same period. This decoupling of economic growth and energy consumption is a function of increased energy productivity: in effect, the ability to generate greater economic output, but to do so with less energy. Having achieved these past gains with a haphazard and often counterproductive approach to energy efficiency and energy policy, there is compelling evidence to suggest that even greater energy productivity benefits can be achieved.
ABOUT ACEEE
The American Council for an Energy-Efficient Economy is an independent, nonprofit organization dedicated to advancing energy efficiency as a means of promoting economic prosperity, energy security, and environmental protection. ACEEE was founded in 1980 by leading researchers in the energy field. Since then the organization has grown to a staff of more than 40. Projects are carried out by ACEEE staff and collaborators from government, the private sector, research institutions, and other nonprofit organizations. For information about ACEEE and its programs, publications, and conferences, visit www.aceee.org.
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