Will Energy Efficiency Stimulus Distract America from the Real Task at Hand?

December 19, 2008 |

An efficiency stimulus plan seems at first glance to be an unadulterated good: it puts Americans to work, saves energy and money, and cuts greenhouse gas emissions, all with investments that should pay for themselves. But there are reasons to be nervous about the overwhelming focus on energy efficiency by green leaders and Obama's top energy and climate advisors. This narrow focus threatens to distract from the critical work ahead: overcoming the technology gap that exists between the current state (and cost) of today's clean energy technologies and fossil fuels.

An efficiency program will not create the new industries that the American economy needs to increase employment and productivity in the long term. An efficiency program will not create new exports that will bring global capital in to the American economy. And, equally as important as short term stimulus, America needs to have a plan to achieve those objectives as quickly as possible as well.

Obama's primary focus must be on making clean energy cheap -- what Google calls RE<C, renewable energy cheaper than coal -- not on reducing energy consumption.

Global energy demand will triple by 2050 as the world population grows to nine billion humans. This means that even if the whole world heads toward European levels of efficiency, with those in the developing world increasing their emissions as they develop and America achieving efficiency gains the same level as those in the EU, then by 2050 we end up with 9 billion people each emitting 10 tons of carbon a year, or 90 billion tons of annual carbon dioxide emissions. Clearly, efficiency can only play a limited role in a prosperous and equitable clean energy future.

The central challenge of any pursuit of a new global clean energy economy is bringing nascent clean energy technologies into the market as quickly as possible. Bringing these technologies through the "valley of death" that faces all new products and then scaling them up to capture a significant market share in the global energy sector is the true energy challenge of our era. Commercializing technologies is an incredibly intensive process, and if we want to speed up their success rates, it is essential that the Obama administration design a public investment framework that helps support that process for critical breakthrough energy technologies. And he must start today, since these energy innovation efforts will take time.

These two reasons--economy and energy--aren't in themselves reasons to be wary of an efficiency stimulus program. But a large-scale efficiency program might have both political and fiscal ramifications that hamper the Obama administration's ability to tackle these two crucial challenges at once.

The fiscal ramifications are pretty cut and dry--there is only so much money that Obama will be able to spend on economic revitalization and the more he allocates for short-term stimulus, the less he will be able to spend on maintaining the long term competitiveness of the American economy. A smart option would be to ensure that short term stimulus measures can provide a bridge to sustained growth, but efficiency does not meet this condition.

The political ramifications are a bit more subtle. The next four years look like they will be the toughest economic times America has seen since the Great Depression. It is entirely possible that the Obama administration will have to focus on the economy and give up other pieces of his platform like entitlement reform or climate change and energy investment. Efficiency stimulus now could give Obama political cover to withdraw from bolder energy-related promises later if it appears he will not be able to enact that part of his agenda. He will be able to point at his efficiency programs as addressing the energy challenge in order to dodge those sorts of accusations while not actually having done even the barest minimum necessary to spur innovation.

Herein lies the Efficiency Trap--if Barack Obama spends the next few years focusing on energy efficiency without also making the vital investments in energy technology innovation and enabling infrastructure that are truly necessary, then what will America have to show for it? A few jobs, yes, perhaps an increase in consumer spending, and an almost insignificant reduction in global carbon emissions. We will not have created new industry, we will not be on track to truly revitalize the economy, and we will not have begun the task of developing technologies that could allow 9 billion humans to live decent lives while also sustaining America's economic growth for decades to come. The Efficiency Trap will be easy to fall into--after all, it is politically expedient and it lies at the intersection of energy and economic issues that propelled voters to pull the lever for Barack Obama in the first place.

Obama has not yet fallen into this trap. But it is critical to look ahead to possible barriers that stand in the way of a clean energy economy. Much of what Obama does in the next four years will revolve around the economic recession and his ability to think strategically about how to work with, through and around it. An efficiency program works great as a short term stimulus plan. However, it does little to address the technology gap needed for a clean energy transition, and it does little to drive the innovation that will propel long term economic growth well into the 21st century. If Obama is truly clear eyed about the challenges he faces, then he already knows that an efficiency program is far less than the full measure of devotion he must have to overcoming America's interlinking energy, economic and climate challenges.


Efficiency is certainly an important part of the equation, but most of the studies show you start getting diminishing returns after a ~30% reduction in energy use. Also, if you are talking about boosting exports, there are many developing countries that need advanced energy generation technologies even if efficiency is taken into account.

By club penguin on 2009 06 05

While it may be small compared to the size of the stimulus package, these green measures ( http://www.savingtoinvest.com/2009/05/green-energy-home-and-auto-tax-crdits.html ) are a step in the right direction to making America less dependent on non-renewable energy sources. Bravo.

By Andy on 2009 05 05

Energy recession is now on the world top problem. We are facing lack of oil energy. While more middle class people are becoming dependent on online payday loans to help them through a crisis, the US of A has been getting more dependent on foreign sources for our energy needs. President Obama has this in mind, of course, as he has been promoting the investment in green energy solutions. Green industry might be the shot in the arm that we need, to curb our oil habit and get energy from cleaner sources. More jobs created might also mean less people needing online payday loans. A healthy amount of green investment and energy reform will be a part of his stimulus package. Read more about payday loans and green energy initiatives here.

By ElishaX on 2009 01 28

RMI has always estimated high on efficiency. A 30% reduction in energy use is significant. I fully agree with the previous post in that we need both efficiency and low carbon energy sources. It is the ideological debate of efficiency vs new energy that concerns me.

By R Margolis on 2008 12 23

This article shares a common Breakthrough problem: the assumption that we can only do one thing well at any one time. The stimulus package numbers I've seen thrown around are much larger than the efficiency-stimulus numbers. Where will the rest of the money go? Now that we're committed to serious deficit spending for a few years, the pot is not capped, and a bunch will also go toward new technology development and deployment.

A modernized transmission grid is a serious part of the stimulus discussions, and is a prerequisite for getting over the deployment hump. Yes, it's not the sexy new technology y'all think will save us, but it is a necessary foundation (and employs people NOW). I wish y'all would understand that America is capable of walking and chewing gum at the same time.

By Asa on 2008 12 22

Adam, I think you're getting this quite wrong. Studies (see the Rocky Mountain Institute, for example) suggest that we simply waste 30% of our energy, and I've seen the number as high as 50% in buildings. This energy can be saved at extremely low cost, especially in comparison to new technologies. If you are serious about global warming, this is low-hanging fruit that is extremely important. It will take years to scale PV up to 30% of our electricity (not to mention cost-competitivity), and most analysts think that wind can satisfy no more than 20% of electricity even with better grids.

Of course we need investment, and conservation isn't as sexy as the cool new toys we'll be making to "repower america." But it is almost a sin to ignore what conservation can do for energy and global warming (all over the world-- even China's coal plants are tremendously inefficient). As a professor of mine once said, "A joule saved is worth more than a joule earned."

By Dan Sanchez on 2008 12 20

This article is definitely on the mark. Efficiency is certainly an important part of the equation, but most of the studies show you start getting diminishing returns after a ~30% reduction in energy use. Also, if you are talking about boosting exports, there are many developing countries that need advanced energy generation technologies even if efficiency is taken into account.

By R Margolis on 2008 12 19