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Waste Not, Watt Not

The American Clean Energy and Security Act Funds State Energy Efficiency Programs

SOURCE: AP/Mary Ann Chastain

Two workers install energy efficient windows in a home in West Columbia, SC. The American Clean Energy and Security Act would provide up to $65 billion from 2012 to 2020 for state and local government energy efficiency programs.

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See state-by-state data on energy savings, cost savings, job creation, and pollution reductions from efficiency investments under the American Clean Energy and Security Act (.xls)

Energy efficiency is the “low-hanging fruit” of energy policy, and is the quickest, easiest, and most cost-effective way of driving new investment, creating jobs, saving consumers money, and cutting pollution. Energy efficiency alone could cheaply—and often profitably—provide two-thirds the necessary greenhouse gas reductions to reduce carbon emissions to 80 percent below 1990 levels by 2050—a level based on the science-driven conclusion that the risks of dangerous climate impacts rise sharply as planetary warming exceeds 2°C from preindustrial levels. The American Clean Energy and Security Act, H.R. 2454—which passed the House and is now pending in the Senate—recognizes and invests in the economic benefits of energy efficiency.

The bill would provide up to $65 billion in allowances from 2012 to 2020 for state and local government energy efficiency programs (see chart). These funds are in addition to other investments in energy efficiency from utilities and the federal government. The state and local programs in ACES would create up to 137,000 jobs in 2015 from energy efficiency investments that year [1]. It would save consumers up to $63 billion on their electricity bills from 2012-2020, while reducing enough greenhouse gas pollution during this period to equal taking 26.5 million cars off the road.

These projections are based on our analysis that provides estimates of efficiency investments, job creation, electricity savings, and greenhouse gas pollution reductions under state and local government energy efficiency programs funded by ACES. This includes the cumulative benefits from these efficiency investments. Once a building is made more efficient, the electricity savings and pollution reductions accrue every year compared to business as usual. So the lower energy costs that occur due to investments in 2012 are also a benefit in 2013, 2014, and so on. Any energy savings from efficiency measures undertaken in 2013 are in addition to the savings in 2012.

There are many techniques to increase energy efficiency. State and local programs can fund investments that include insulating and weather-stripping homes, constructing “green” rooftops, replacing leaky windows, installing efficient heating and cooling systems, and replacing inefficient appliances with those that have high Energy Star ratings.

Retrofitting existing buildings can make the biggest and most meaningful dent in carbon emissions, and it can lay the foundation for sustained economic growth. The Center for American Progress and Energy Future Coalition report “Rebuilding America” describes the federal policies necessary to create a nationwide market for building efficiency retrofits.

Accomplishing these and other energy efficiency improvements would create jobs and save consumers money, contributing to the nation’s economic recovery. Along with much-needed jobs, economy-wide energy-saving opportunities are worth more than $130 billion annually to the U.S. economy. This is why consultancy McKinsey & Co. concluded that energy efficiency represents a “vast, low-cost energy resource for the U.S. economy, but only if the nation can craft a comprehensive and innovative approach to unlock it.”

The American Clean Energy and Security Act, or ACES, contains such “comprehensive and innovative” provisions that capitalize on the benefits of energy efficiency investments. The Environmental Protection Agency, for example, determined recently that the bill would lead to a 7-percent decline in the average household electric bills by 2020 due to its energy efficiency measures. This would save the average household $84 annually in lower bills.

What’s more, “The Economic Benefits of Investing in Clean Energy” by the University of Massachusetts and Center for American Progress, found that investments in renewable energy and energy efficiency under the American Recovery and Reinvestment Act and ACES would create 1.7 million net new jobs. These jobs would include positions for electricians, heating/air conditioning installers, carpenters, construction equipment operators, roofers, insulation workers, building inspectors, civil engineers, iron and steel workers, millwrights, and industrial production managers.

An essential program in the American Clean Energy and Security Act would give substantial financial support to state and local governments to undertake energy efficiency efforts. The bill (Title I, Subtitle D) would create the State Energy and Environment Development program, or SEED, to provide up to $8 billion annually to states in the form of pollution allowances that they could sell to emitters on the open market. These funds would then be invested in different efficiency and renewable energy technology efforts depending on the needs of each state and its local governments to use for initiatives such as retrofitting public and private buildings, community energy education, schools programs, and programs that incentivize efficiency.

The funds from SEED allowances would dramatically expand state and local efficiency programs. This would create jobs, save consumers money, and reduce greenhouse gas emissions. This has the potential to create up to 137,000 jobs in 2015 if states invest all of their discretionary allowances into efficiency programs. California could add up to 8,600 jobs undertaking efficiency projects. Ohio would add up to 5,300 new jobs, while 6,300 are possible in Pennsylvania.

All of this job creation would occur from these energy efficiency investments alone. As noted in “The Economic Benefits” study, they represent only a fraction of the clean-energy investments and new jobs that would occur under other energy efficiency, renewable energy, and global warming pollution reduction provisions in ACES. The

legislation has a number of other provisions that would create jobs, lower electric bills for consumers, and cut pollution. These include:

  • The Clean Energy Deployment Administration—the Green Bank—which could underwrite state and local governments’ credit obligations to support energy efficiency (and renewable) investments made by private individuals.
  • More efficient building codes, which would be established to cut energy use in half by 2016. States could sell allowances to implement these new codes.
  • More efficient standards, which would be established for appliances for outdoor lighting, televisions, commercial grade natural gas furnaces, and other inefficient appliances.

These and other measures in H.R. 2454 would save energy, cut costs, and reduce pollution beyond this analysis of state and local governments spending allowance value on energy efficiency programs.

Energy efficiency benefits the U.S. economy. It reduces consumer energy bills, makes America more energy independent, and cuts global warming pollution. Efficiency also creates jobs. The technology necessary to make our lives more energy efficient and our economy more secure is ready and easily accessible. Under the American Clean Energy and Security Act, the United States can move toward both a sustainable and a thriving economy. Efficiency standards and the subsequent job creation, consumer savings, and pollution reductions are just some of the many reasons why the Senate should pass similar legislation this fall.

Daniel J. Weiss is a Senior Fellow and the Director of Climate Strategy at American Progress. Erica Goad is a former intern and Jonathan Aronchick a current intern with the Energy team at American Progress.

Endnotes

[1] The number of jobs created each year due to state spending under these efficiency programs varies depending on the total dollar amount invested in each program. The peak investment is $8.2 billion of allowances in 2015, which is used for calculating the job creation that year. The average total allowance value is $7.2 billion annually from 2012-2020, which would create an average of 120,000 jobs annually. Unlike energy and greenhouse gas reductions, the job totals are not cumulative. Every year of spending creates a number of jobs for that year alone.

 

Methodology

The data used in this analysis does not exist in one place. The data on allowance allocation estimates for state and local efficiency programs was obtained from the World Resource Institute and Georgetown Climate Center based on their analysis of allowances to states. Their analysis is “Analysis of Allowances to States Under H.R. 2454” by John Larsen, Kate Zyla, and Gabriel Pacyniak. This report summarizes the Allowance Distribution to States and Energy Consumers under H.R. 2454.

From 2012 to 2020, ACES would provide 1.2 billion allowances for “energy efficiency – home heating oils through states” and “energy efficiency – through states (SEED + EE building codes + building retrofit).” There are 2 billion allowances provided during this same period for the “energy efficiency OR renewable energy (or other) – through states” program, which states have discretion to spend on a combination of renewables and efficiency. For the purposes of this analysis, the assumption is that 100 percent of the allowances value is used for state and local energy efficiency programs. Thus, the jobs, energy and consumer savings, and greenhouse gas pollution reductions are upper bounds. The allowance value calculations assumes Congressional Budget Office allowance price of $16 to $26 per ton from 2012-2020.

The benefits from an investment in efficiency continue to accrue annually in the years following the investment. For instance, the nationwide investment in state efficiency programs of $6.4 billion in 2012 would yield a reduction in electricity use of nearly 13,000 MWh. The efficiency measures that produce this result will remain in place in 2013, so there will be another 13,000 MWh electricity savings. These savings are in addition to the new savings from the additional efficiency measures funded by the $6.7 billion in 2013. So the electricity savings and greenhouse gas pollution reductions are cumulative, and the figures in this analysis reflect this phenomenon.

The Department of Energy developed an “estimated expected benefits” calculator that local governments can use as a resource when submitting their Energy Efficiency and Conservation Block Grant proposals. Since applicants for EECBG formula grants for efficiency are required to estimate the numbers of jobs created, the energy saved, and the greenhouse gas emissions reduced for each activity, the calculator was developed to assist with these estimates. Thus, the calculator can be used to estimate the direct benefits of state investments in energy efficiency.

The estimated value of the reduced electricity use was derived using each state’s 2007 average electricity rate from the Department of Energy. Since electricity prices increased in 2008, the estimated savings from lower electricity use are fairly conservative. The greenhouse gas reductions were derived using the Environmental Protection Agency’s 2005 estimate of state CO2 emissions per kilowatt hour multiplied by the energy savings from DOE’s benefits calculator.

“The Economic Benefits of Investing in Clean Energy” analysis by the Political Economy Research Institute and Center for American Progress estimates that the direct, indirect, and induced effect for $1 million in spending is 16.7 jobs. This figure was used for the job creation estimates in this report.

Thanks to Benjamin Goldstein, John Larsen, and Kate Zyla. Special Thanks to Will Thomas.

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