While the American Gas Association (AGA) supports a portfolio of federal energy efficiency measures, including market-based incentives, voluntary programs, and minimum efficiency codes and standards, we strongly believe that any energy or climate change legislation must recognize the leading role U.S. natural gas customers have already played in improving energy efficiency and reducing greenhouse gas emissions at home and at work. In fact, by using energy wisely and making smart choices every day, our members’ customers have reduced their per-household consumption so dramatically that there has been virtually no growth in emissions in nearly three decades, despite a 70 percent increase in households using natural gas.

With this in mind, AGA supports climate change and energy policies that focus on reducing energy consistent with the recent recommendations of a study published by the National Academies (NA). That study recommended using a full-fuel-cycle measurement when determining an end-use product’s overall energy efficiency. This full-fuel-cycle measurement takes into account the amount of energy produced and lost from the point of production to the final point of use, which is far more accurate and would provide consumers with more complete information on energy use and environmental impacts. For example, in producing, generating and transmitting electricity from its point of origin to the electric outlet in a customer’s home or business, 70 percent of the useable energy is lost. By contrast, producing and delivering natural gas directly from its point of origin to the customer’s burner tip loses only about 10 percent of its usable energy.

The NA study also supports the “carbon footprint labeling” provisions championed by AGA that were recently included in the Waxman-Markey climate change legislation. These provisions would expand the existing Federal Trade Commission EnergyGuide labeling program for appliances to include carbon footprint information.

AGA will continue to inform lawmakers about the benefits of natural gas and the energy efficiency and environmental advantages of incorporating the full-fuel-cycle measurement into any climate change energy legislation. As these critical issues are addressed in the next few weeks, we are committed to being involved in the debate on behalf of our members’ natural gas customers.

The old adage goes, “knowledge is power,” but in the case of energy efficiency standards for households and businesses, we believe that “knowledge saves power.” Rather than setting rigid quotas that may or may not be realistic and achievable, policymakers can help households and businesses to make the most efficient use of energy by accurately informing them about how much energy their appliances consume throughout the entire energy cycle.

The Department of Energy (DOE) can do this by changing its measurement of energy use to take into account the total energy required and used from point of production to the point of consumption. Consumers would benefit from this changed regulatory approach by DOE in several ways, perhaps most tangibly through improvements to the familiar yellow EnergyGuide label that DOE places on water heaters, refrigerators and common household and commercial appliances. The revised EnergyGuide label would take into account “full-fuel-cycle measurement,” the amount of energy used from the point of power generation to its final use in cleaning dishes, heating, cooling and so forth. This change would give consumers the information they need to make energy efficiency decisions; serendipitously aligning with the same principles that the “smart grid” is based on: giving consumers more information and control over their energy usage.

For example, a regulatory shift to full-fuel-cycle measurement would let consumers know that a typical electric water heater loses 70 percent of its energy from the point of power generation to the home or business where it’s used, compared to a natural gas water heater, which loses only 10 percent of energy. Because the current appliance labeling provides an incomplete accounting of energy losses, it actually misleads efficiency-minded consumers into purchasing the less efficient appliance. We think significant energy savings can be achieved in the residential and commercial markets if consumers are given the information to make a better-informed decision than they have been.

This shift in energy-efficiency thinking will allow natural gas to continue to play an important role in achieving the nation’s climate and energy goals. Power generators have turned to natural gas since the 1990s because of its low emissions and rapid ability to meet swings in demand. Since the 1970s, increasing numbers of U.S. households and businesses also have turned to natural gas. It’s a little-known fact that the average U.S. natural gas-household in 2007 actually consumed 39 percent less than the average 1970 household, thanks to high-performance natural gas appliances and better building practices. Consumers should be informed of the efficiency benefits of natural gas and policies that support full-fuel-cycle measurement should be a part of any government efficiency program.

More information about full-fuel-cycle measurement is contained in a 2009 National Academies report to the Department of Energy, Review of Site (Point-of-Use) and Full-Fuel-Cycle Measurement Approaches to DOE/EERE Building Appliance Energy-Efficiency Standards.

Should Uncle Sam turn down our lights? This isn’t the right question. The goal behind efficiency legislation is to reduce the amount of energy used to provide a given service—not to reduce the quality or quantity of that service. Uncle Sam’s bulb isn’t so dim as to force Americans to use less light; rather, legislation being considered in Congress would stimulate the development and deployment of new technologies that provide the same level of service—be it lighting, heating, cooling, dishwashing, etc.—but use far less energy to do it.

Why should government do this? If energy efficiency is a desirable trait, won’t the market simply produce more efficient goods and services on its own? Market forces, primarily concern over high and volatile energy prices, have driven impressive gains in energy efficiency over the last several decades. But we know there are still significant energy efficiency opportunities that remain untapped. For example, a 2007 analysis conducted by McKinsey & Co. estimated that technically achievable energy efficiency improvements could offset approximately 85 percent of the projected growth in electricity demand out to 2030.

While many of these efficiency improvements are technically cost-effective, a variety of “market failures” impede their implementation. The fact that tenants are typically responsible for paying electric bills, whereas landlords are usually responsible for capital investments that improve energy efficiency, leads to split incentives that can obstruct efforts to reduce energy use. Informational barriers are also a complicating factor. Managers responsible for purchasing computer equipment and other appliances often have little knowledge about the benefits of energy efficiency. As a result, they base purchasing decisions on upfront costs and fail to consider longer-term savings that may result from buying a more energy efficient piece of equipment.

Of course, the key driver today behind new energy efficiency requirements is concern about climate change. Through the American Clean Energy & Security (ACES) Act of 2009, Congress is debating legislation that includes a greenhouse gas cap-and-trade system that would ultimately reduce emissions 83 percent below 2005 levels by 2050. The bill will put a price on carbon, thereby counteracting the central market failure associated with climate change: the social costs of greenhouse gas emissions are not priced into the costs of energy production.

Putting a price on carbon is essential but it is not a silver bullet and it does not obviate the need for additional policies that promote energy efficiency, because it does not address the kinds of market failures mentioned above (nor is it designed to). Detailed modeling of ACES conducted by the EPA indicates that the price signal generated by cap and trade will indeed encourage consumers to use less energy, through conservation and switching to cheaper, less energy-intensive products. However, when the price signal is combined with the energy efficiency measures included in the bill, both emissions and the overall macroeconomic cost of the program are lower. The efficiency policies included in the ACES Act are therefore critical as they drive relatively low-cost measures that reduce electricity demand, making it easier and cheaper for society to meet emissions reduction targets.

Federal, state, and local governments all have a role to play in setting and enforcing efficiency requirements. The ACES Act recognizes this: under the legislation, for example, states can adopt a national building code developed by the Department of Energy, or draft their own code, provided it achieves at least the same level of savings. As a result, the legislation strikes a good balance by setting a strong national floor but giving states the freedom to innovate and be more aggressive if they so choose.

As the founder of the new building codes coalition mentioned in the blog query (the Building Energy Efficient Codes Network or “BEECN”), the Alliance to Save Energy responds with a resounding “YES” to federal energy efficiency mandates for buildings, appliances, and equipment.

Appliances can last for years, major building systems like heating and central AC for decades, and buildings themselves for 100 years or more. These long life spans demand reasonable federal mandates to ensure that we “lock out” unnecessary and expensive energy waste and “lock in” benefits for consumers and businesses. And with buildings producing about 40 percent of total U.S. CO2 emissions (about the same amount as the entire economies of Japan and India combined), we must address this sector to confront climate change.

Building in efficiency “from the ground up” – whether when constructing a home or office building or when manufacturing light bulbs, office equipment, home appliances, electronics, etc. – is the best and most cost-effective way to capture the maximum energy, monetary, and environmental savings. But it is tempting for builders – who after all will not occupy the home or office, or pay the energy bills, or worry about how much it will pollute – to install lower-end appliances or HVAC equipment or put in less insulation to help hold down the purchase price. What a mistake! The truth is that the additional cost of the efficiency measures typically is offset – or more than offset -- by lower energy costs.

The current system of building code adoption and enforcement has produced a patchwork situation that begs for a national fix. Some states have strong codes, while others have no codes at all; and enforcement – which happens at the local level – can be spotty even in states that have adopted codes.

The climate bill passed by the House in June would put the nation squarely on a path of continuous improvement in the efficiency of our new homes and buildings. The 30 percent improvement above the current model code, to be implemented when legislation is enacted, is readily attainable with available, affordable, off-the-shelf technology. Many builders are already voluntarily exceeding that degree of improvement, and anecdotal evidence indicates that “green builders” are weathering the current economic downturn better than conventional builders.

On the standards side, minimum energy efficiency requirements for appliances account for about 20 percent of the energy savings achieved from all efficiency policies from the 1970s to 2000 and are first on the list of economy-wide energy-saving measures. By simply removing inefficient products from the market, one appliance standard can, in one fell swoop, achieve far more than incremental and incidental actions by individual consumers. And the consumer “wins” over the entire life of the products through reduced energy costs.

According to ACEEE, the 25 product standards that are to be implemented by the Obama administration have the potential to lower consumers’ and businesses’ annual energy bills by about $16 billion; reduce peak electricity demand by enough to eliminate the need for 200 new 300-megawatt power plants; and cut annual global warming CO2 emissions by about 150 million metric tons when fully implemented. And all of this happens with no sacrifice to the consumer in terms of product performance.

Appliance standards and effective building energy codes – which remove costly inefficiencies from our economy while still affording consumers choices – should be the foundation upon which we build sound energy and climate policy for the U.S.

The national reach and authority of the federal government are needed to ensure that robust standards are implemented uniformly so that all parts of the nation and all consumers and businesses reap the benefits of energy efficiency – in the buildings they occupy, and with the equipment they use within them.

The following perspective was cowritten with Jonathan Rothwell, senior research analyst in the Metropolitan Policy Program at Brookings:

Far from “paternalistic,” President Obama’s new light bulb standards are in no way overly intrusive and point very much to the need for progress on several quite huge elements of the nation’s energy quandary.

As it happens, it was President George Bush who opened this particular front in the push to improve energy efficiency when he signed the Energy Independence and Security Act of 2007 which mandated the Department of Energy (DOE) to increase the standards of light bulbs and other household appliances. That President Obama is now simply requiring DOE to speed up rulemaking on the earlier law is hardly despotic.

Nor is the law itself radical. According to the New York Times, the European Union is phasing in more efficient fluorescent and incandescent bulbs by 2012, and similar legislation exists in Australia, New Zealand, Japan, Brazil, and elsewhere. Aside from those precedents, the rationale for government intervention in lighting and other appliance’s efficiency is straightforward and compelling. Blurry information ensures that consumers are rarely aware of the environmental and political cost of inefficient bulbs. At the same time, bulbs’ retail prices don’t reflect their social price. Tighter standards bring the market closer to reality. And they will help with the largest market failure of them all—the extreme fragmentation of building and appliance marketplaces. Building and real estate markets are highly fragmented in that none of the many players—banks, mortgage companies, architects, real estate agents, landlords, construction firms, contractors, decorators, furnishing stores, homebuyers, renters, and utilities—have a clear and consistent incentive to introduce or demand energy saving innovations. Given all that, it’s not intrusive but merely overdue for DOE to speed the adoption of bulbs that will be as much as 80 percent more efficient and help consumers save $4 billion a year on energy bills between 2012 and 2042 even as they help eliminate the need for 5 to 11 quadrillion Btu of energy and perhaps 2 to 7 gigawatts of generating capacity or as many as 14 coal-fired power plants

But that’s just the lowly light bulb. As a recent Brookings Institution report on the varying carbon footprints of U.S. metropolitan areas points out, lighting is just one sliver of the massive—and massively inefficient—energy system that is the nation’s built environment. Buildings—how they are built, and also where they are located—hold out huge opportunities for energy savings that are very much an appropriate object of federal concern. Buildings—through the energy they use—are responsible for 39 percent of U.S. carbon emissions (lighting accounts for about 12 percent of that consumption). At the same time, transportation—generated by all of that driving around between the buildings—generates another one-third of the nation’s carbon footprint. In fact, our group at Brookings calculates that transportation accounted for 50 percent of the nation’s growth of carbon emissions since 1991 with much of the growth owing to the super-suburbanization of American metros which saw a ubiquitous increase not only in daily travel distances, but also in the number of household car trips. Between 1970 and 2005, the average annual vehicle miles traveled (VMT) per household increased almost 50 percent, from 16,400 to 24,300. VMTs rose more than 10 percent just between 2000 and 2005. And here the federal government bears considerable responsibility for promoting such trends through federal policies that have invested disproportionately in highways as opposed to rail and mass transit; compartmentalized housing and transportation policy; maintained lending standards at the Federal Housing Administration (FHA) and elsewhere that encourage single-family homeownership in low-density neighborhoods; and retained income tax subsidies for home owners that increase with lot size (as Joseph Gyourko and Richard Voith have shown).

All of which underscores why the Obama administration and Congress should be if anything going farther with the sort of reforms that seem so troubling to those bridling against the light bulb rules. In fact, a number of important initiatives being advanced by the administration suggest that the government may at last be having something of a “light bulb” moment about the ways little things—untended—become big problems.

To promote the efficiency of individual buildings, for example, the Department of Housing and Urban Development (HUD) proposes complementing the big Energy Efficiency and Conservation Block Grant in the winter’s stimulus package with the creation of a $100 million energy innovation fund that aims to “catalyze a residential energy retrofit and new construction market in the United States.” This will support local efficiency initiatives, such as green retrofit investment funds, private-sector investments, and on-bill utility financing. Fund dollars will also go towards overhauling the Federal Housing Administration’s Energy Efficient Mortgages program so that more homeowners take advantage of the program—which currently supports only about 1,000 mortgages each year.

At the same time, federal agencies are now moving to reform and integrate their currently compartmentalized and sprawl-inducing policies on transportation, energy, and the spatial arrangement of buildings and transportation. The Department of Transportation (DOT), HUD, and Environmental Protection Agency recently announced “livability principles” that would promote energy efficiency by supporting transportation choices, walkable communities, mixed use and transit-oriented development, and, in general, existing communities as opposed to sprawl. Beyond that, HUD wants to use $150 million of its CDBG funds for a Sustainable Communities Initiative that will “integrate transportation and housing planning decisions in a way that maximizes choices for residents and businesses, lowers transportation costs and drives more sustainable development patterns.” Other grants would be made available for local zoning code reform, state building code overhaul, or other efforts to facilitate mixed-use developments, encourage building rehabilitation, and better link the existing built environment to existing infrastructure. And there are other initiatives in the works. Reform currents are circulating around the massive, usually road-tilted transportation bill reauthorization. And congressional committees have heard testimony proposing the creation of a new “sustainability challenge contracts” that would reward with new flexibility localities and states that devise the boldest, most interdisciplinary proposals for improving regional development patterns and reducing carbon emissions.

In short, President Obama’s push on light bulb standards is a welcome nudge, and throws new light on wide array of other energy efficiency challenges. Hopefully the new engagement might well represent a moment of genuine illumination.

As Congress considers clean energy and climate legislation, most of the fuss has been about whether – and how – to use price signals to encourage clean energy and reduce our dependence on dirty fossil fuels. Should we have a cap and auction system, as President Obama prefers, a carbon tax, as many economists have argued, or cap and trade, as the House recently voted – or should we just pretend that energy markets work just fine without price signals, as the Republican leadership and the Chamber of Commerce seem to prefer? (Markets where you don’t pay for what you use – in this case the globe’s limited carbon sinks – used to be associated with Communism – now they are the heart of a weird cult that calls itself conservatism.)

The argument is beginning to shift a bit. Now the question is, if we have a market price on dumping carbon pollution into the atmosphere, does that mean we don’t need any other reforms of our energy sector to create a clean energy future, cut our dependence on imported oil, and stabilize the climate? That’s not the approach taken by Waxman-Markey – it includes a robust, if partial, suite of investment and regulatory features. But some macro-economists, and some figures in Congress, clearly see a price signal as a substitute for comprehensive energy market reform. Harvard’s Rob Stavins recently wrote “the other titles of the bill include a host of conventional standards, many of which (under the cap‑and‑trade umbrella) will have minimal or no environmental benefits, but will limit flexibility and thereby have the unintended consequence of driving up compliance costs.”

This belief that a price signal on fuel purchases alone will fix our energy sector is simply unfounded. Creating a clean energy economy requires three key reforms. First, we need public investment to develop low-cost, low carbon energy technologies faster than private R&D will get there – just as we needed public investment to get the infrastructure for the information revolution in place. Second, we need to reform energy markets so that incentives are aligned, and market failures fixed – if banks won’t take the energy efficiency of a new house into account in approving mortgages, builders simply can’t put the most cost-effective furnaces, windows and lights into the home – because they can’t recover their investment. And third we need price signals – not just on fuel costs, as a carbon tax would do, but also on purchases of new vehicles and other energy equipment, because the price volatility of oil discourages consumers from buying an efficient car to save on gasoline – they need an incentive on the sticker at the dealer’s lot.

This set of three strategies is at the heart of the Sierra Club’s Climate Recovery Partnership. But you don’t have to take the Sierra Club’s word for this common sense proposition that there is no one solution to our utterly broken, backward and polluting energy economy. Last week the Business Roundtable issued a report documenting that the combination of price signals with technology development and regulatory reform will reduce our emissions of carbon dioxide twice as fast at half the price. So technology + policy reform + price is a package that is four times as effective as price alone.

(The Round Table report also emphasizes their desire for huge new investments in nuclear energy, and a greater emphasis on domestic oil production through opening up public lands and waters. Because HR 2554 doesn’t, in their view, do enough for these pathways, the Round Table declined to embrace HR 2554, but commended the House for moving it forward – putting them in the same camp as the Sierra Club.)

A concrete example of how policy, innovation and price work together showed up on this morning’s NYT business section. Once the federal government set efficiency standards for light bulbs, researchers began a race not only to find substitute for the conventional incandescent bulb, but also to modernize the conventional bulb to make it efficient so it could meet the new standards. According to Chris Calwell, a researcher with Ecos Consulting who studies the bulb market. “There have been more incandescent innovations in the last three years than in the last two decades.” Think about that – a simple government regulation increases the pace of innovation 700%!

Whether you think, with the Business Round Table, that combining price with other reforms improves performance four fold, or take the light bulb example as a better predictor because it is a real world example, in which case we will make progress seven times as fast, it’s absolutely critical that we understand that we need a strategic combination of technology, policy and price to solve our energy dilemma and start curbing the climate crisis.

The following comments are from Rob Sargent, Energy Program Director for Environment America:

On Friday June 26th, the House of Representatives passed the American Clean Energy and Security Act. In doing so, it took an historic step toward a new clean energy economy and a healthy future.

While the dramatic shift we need in our energy policy and the dire scientific predictions regarding global warming demand that we do much more, Congress took the most difficult first step. There is no question that we will look back on this vote as the critical pivot point in U.S. energy and environmental policy.

First, and foremost, this bill will set the first ever federal limits on the pollution that causes global warming. The bill aims to stop the worst effects of global warming before it’s too late by putting the nation on a trajectory to substantially reduce its global warming pollution – by 17% below 2005 levels by 2020 and by 83% by 2050. By 2020, we could see reductions equivalent to eliminating all of the pollution from 500 million cars and SUVs, which is about half of the vehicles projected to be on the roads worldwide in 2020.

One of the brightest lights in the American Clean Energy and Security Act is an unprecedented national commitment to the energy efficiency of our nation’s buildings, both new and old. It sets strong national targets for making all new buildings 50% more energy efficiency by 2015 through stronger building codes. By 2030, the building codes provisions alone would reduce U.S. emissions by 250 million tons/year and save Americans $28 billion/year. Similarly, by 2020, the lighting and appliance efficiency standards in the bill would save enough energy to meet the electricity needs of 1.5 million household and reduce emissions by 12M metric tons. The bill also established important programs to improve the energy efficiency of existing buildings and provides the resources to help make that happen. The Retrofit for Energy and Environmental Performance (REEP) program included in the bill is estimated to save Americans as much as $10 billion/year by 2030. These provisions will make America smarter about how we use energy and lead to major improvements in the efficiency of our economy while providing more greenhouse gas reductions than any provision in the bill other than the emissions cap.

The bill sets energy savings targets and then empowers state and local governments to adopt and enforce energy efficient building codes. The legislation relies on states and localities to set and improve compliance with codes, and provides them with the resources they need to do so. At the same time, if state and local governments fail to act on this critical element of our nation’s energy policy, the bill provides a federal backstop; which ensures that we take comprehensive action to prevent the excessive amounts of wasted energy in the future.

Investments in energy-efficient homes and buildings will save Americans money, reduce pollution and keep dollars, that would otherwise be exported in local economies. Homeowners will save money on their electric and heating bills more than offsetting any initial investment. And energy efficient homes and buildings reduce pollution, enhance energy independence, ease pressure on the electric grid and natural gas supplies, improve comfort, and create jobs. Builders have already constructed more than 50,000 homes that use 50 percent less energy than current building codes require. Unfortunately, too few home and commercial building owners and tenants receive these benefits today.

For too long, short-sighted builders and developers have been penny-wise and pound foolish when it come to making buildings more energy efficient. We must not let opponents of a strong response on the energy efficiency of our homes, businesses and appliances be allowed to pass the cost of wasted energy and the excess pollution that results from that waste to be passed onto future generations.

Building energy codes, coupled with appliance efficiency codes and strong programs to make our existing buildings more efficient, are a critical element of national energy policy. America’s homes and commercial buildings use more energy than any other sector of our economy. The resulting energy savings will lower the costs of the transition to a clean energy economy and make it easier to meet limits on greenhouse gas emissions, saving money for consumers and businesses across the economy.

That is why a broad spectrum of stakeholders -- ranging from big utilities like Duke Energy and PGE, to the American Chemistry Council, to consumer groups, to environmental groups, along with many architects and builders – strongly support a strong federal guiding hand on building energy codes and standards that will provide tremendous amounts of energy savings for the nation.