Informing Climate Change Policy Through Economics and Engineering Perspectives on Energy Efficiency

Energy “sustainability” and energy supply have again emerged as central public policy issues and are at the intersection of the economic, environmental, and security challenges facing the nation and the world. The goal of significantly reducing greenhouse gas (GHG) emissions associated with energy production and consumption, while maintaining affordable and reliable energy supplies, is one of the most important issues. Among the strategies for achieving this goal, increasing the efficiency of energy consumption in buildings is being emphasized to a degree not seen since the 1970s. “End-use” efficiency is the core of the State of California’s landmark effort to reduce its GHG emissions, of other state and local climate-change initiatives, and is emphasized in emerging federal GHG abatement legislation. Both economic and engineering methods are used to analyze energy efficiency, but the two paradigms provide different perspectives on the market and technological factors that affect the diffusion of energy efficiency. These disparate perspectives influence what is considered the appropriate role and design of public policy for leveraging not just efficient end-use technology, but other sustainable energy technologies. We review the two approaches and their current roles in the GHG policy process by describing, for illustrative purposes, the U.S. Environmental Protection Agency’s assessment of energy efficiency in the American Clean Energy and Security Act of 2009 Discussion Draft. We highlight opportunities and needs for improved coordination between the engineering, economic and policy communities. Our view is that a better understanding of disciplinary differences and complementarities in perspectives and analytical methods between these communities will benefit the climate change policy process.