ACEEE Report: Flawed Economic Models Understating Benefits of Enhanced Energy Efficiency,...

ACEEE Report: Flawed Economic Models Understating Benefits of Enhanced Energy
Efficiency, Which Could Cut Energy Use and CO2 Emissions in Half By 2050

Most Studies For and Against Greenhouse Gas Reductions Are Misreading the
Historical Record on Energy Efficiency; Study Proposes "Diagnostic Review" for
More Accurate Gauging of Climate Legislation's Impact.

WASHINGTON, July 30 /PRNewswire-USNewswire/ -- The good news is that 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, according to the
independent American Council for an Energy-Efficient Economy (ACEEE). A
major 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 U.S. 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
http://www.aceee.org.

SOURCE American Council for an Energy-Efficient Economy (ACEEE), Washington,
D.C.

Patrick Mitchell, +1-703-276-3266, pmitchell@hastingsgroup.com, for ACEEE