IEA commends US government for energy policy acts and outlines challenges on energy efficiency and renewables

(Washington) — 15 February 2008

“The US has made good progress on the way to a more sustainable energy system and successfully demonstrated its ability to react to supply disruptions,” Executive Director Nobuo Tanaka of the International Energy Agency (IEA) said today in Washington. During the presentation of the publication Energy Policies of IEA Countries – United States 2007 Review, Mr. Tanaka also praised the government’s Energy Policy Act 2005 as the first comprehensive energy legislation in over a decade, and commended the government on the passage of the 2007 Energy Bill. He singled out the comprehensive energy efficiency provisions of the 2005 act as vitally important. Mr. Tanaka emphasised that “these provisions should be extended where they are due to expire.”

“Improvements to US energy policy are also possible,” Mr. Tanaka added. “Particular room for energy efficiency improvements exist in transport and in power generation, where pressure to improve efficiency has been low due to low prices for fuels. Particularly in the transport sector, low prices, congestion in urban areas and the lack of mass transport are increasing the use of gasoline, thereby weakening US energy security, and raising greenhouse gas emissions,” Mr. Tanaka said. “We welcome the US plan to increase its fuel efficiency standards, as outlined in the 2007 Energy Bill; however, this will not take full effect until 2020 and we believe that quicker action is possible and necessary to increase oil security in the US and globally, and reduce transport emissions.”

Energy Research & Development
The United States is the world leader in energy R&D, with many new technologies being developed and first deployed there. Funding levels have increased significantly in recent years, and a range of presidential initiatives is further encouraging research in clean and efficient energy technologies, especially in clean coal, second-generation biofuels, and renewable electricity solutions. “The US government is strongly supporting the development of clean energy solutions, which will benefit other countries as well. It is a leader in research funding, and deeply involved in international collaboration,” Mr. Tanaka said. “The work being done in US laboratories today addresses many of the energy challenges we are facing.”

Climate Change
The US government is pursuing a policy of reducing the CO2-intensity of the country’s economy, by keeping the growth of emissions lower than economic growth. While this policy has been very successful since 2000, it still allows net growth of emissions, only at a slower rate. “The success of the US policy since 2000 means that the time has now come to be more ambitious and to aim for real reductions in emissions,” Mr. Tanaka observed. To achieve these reductions, the United States is primarily looking at new technologies, and more efficient use of energy. Both these policies will however require a price signal from the market, and at present, there is no government policy in place that would assign a value to CO2. Also, investors will continue to delay projects that could secure the future of US energy supply. “Emitting CO2 has a cost,” Mr. Tanaka said, “and this needs to be reflected in the price we pay for energy. The lack of a valuation of CO2 emissions means that it is very doubtful if the new technologies the US is developing, such as clean coal or nuclear, will be competitive and be deployed on a sufficient scale to make an impact.”

Energy Efficiency
The IEA commends the decision by the US government and congress to pass the Energy Bill in December 2007, and with it the significant increase in CAFE (the corporate average fuel economy) standards. But it comes after almost two decades of inaction on this front, and the final standards will not be achieved before 2020. Given the technologies being implemented in vehicles today, it is doubtful whether such a long time-frame is really necessary to allow carmakers to adapt and it will leave consumers with vehicles that fall short of the technological possibilities.

In the power generation sector, the amount of fossil fuel used to generate the average kilowatt-hour has hardly changed since 1995, despite advances in technology. Mr. Tanaka observed that “while many other IEA member countries have increased the efficiency of power generation dramatically over the last 10 years, the US has stood still, despite the introduction of new, efficient technology”. Increasing energy efficiency in US power generation is a key element in mitigating the effects of the strong growth of demand for electricity and rising greenhouse gas emissions. The technologies for cleaner, smart power generation exist today, and many of them are being developed in the United States, but they are not being deployed there.

Renewables
The United States has seen tremendous growth in the development of wind power, due to the very supportive framework in some states and the federal production tax credit. But the stop-start nature of the credit has a negative impact on the development of a domestic wind power industry. “The rapid growth of wind power in the US shows what can be done, and what could be done year on year, if the US government were to introduce a federal renewable portfolio standard,” Mr. Tanaka said. “We would very much welcome an Alternative Fuel Requirement for electricity in the US, just like the one for transport fuels, to help the US renewables industry on a sustained growth path.”

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