Policy Outlook for 2005 and Beyond

Kateri Callahan

March 1, 2005

There are formidable challenges to achieving meaningful action on policies, programs and funding to advance energy efficiency by the new 109th Congress. The Bush administration and the Congress are faced with mushrooming federal and U.S. trade deficits, a stagnant economy and the financial pressures of a continuing war. In addition, the president has announced an extremely ambitious and full agenda of important domestic issues–from social security to tax reform–that will compete as priorities against the need to address energy issues. While comprehensive energy policy remains a stated priority, it is not clear that this goal can or will be accomplished.

The Bush administration goes to work on its second term in a political and fiscal environment far different from the one it enjoyed at the beginning of its first term. Record budget deficits are the biggest difference. The high deficits are squeezing discretionary program spending, including federal energy efficiency programs such as building efficiency research and support for building codes. In addition to federal spending pressure, the deficits will make enactment of tax incentives for energy efficiency technologies more difficult.

Countering the pressures from budget deficits and other domestic priorities is the spiraling cost of energy in the United States. Spikes in petroleum and natural gas prices are having a particularly hard impact on U.S. stock markets, international manufacturing competitiveness, and ultimately, on the U.S. economy. During January 2005, crude oil prices reached $40.08 per barrel, up 29 percent the previous year. Gasoline prices averaged $1.82 per gallon, up 17 percent from 12 months earlier. January natural gas prices hovered around $6 per MMBtu, about on par with January a year ago, but still triple the price level that prevailed during much of the 1990s. Pressure from businesses and industry for federal action is mounting. Consumers, who have been hard-hit this year by skyrocketing fuel costs, are making themselves heard as well.

The 109th Congress convenes with a slightly more conservative make-up, as Republican majorities increased in both the House and Senate. While the leadership has announced plans to pass comprehensive energy legislation, it is as yet unclear whether such legislation will contain all, or even some, of the provisions that were in the comprehensive energy package, H.R. 6, which failed in the 108th Congress; whether those provisions will be modified; or whether Congress ultimately crafts something completely new.

Energy efficiency is the cheapest, quickest and cleanest way to extend our energy supplies and, therefore, begin to contend with exorbitant energy prices. The energy efficiency provisions of H.R. 6, which include tax incentives to spur energy efficiency upgrades in buildings, the purchase of energy efficient products and technologies, and energy efficiency standards for appliances and other equipment, would deliver meaningful energy savings to our country. The Alliance to Save Energy (ASE) is working to ensure that these provisions–as well as a number of other important energy efficiency policies that were not included in H.R.6–are considered and enacted by this Congress.

The ASE believes that energy efficiency must be the cornerstone of any meaningful national energy policy. The challenges to our success are great, but the return to the country would be enormous in terms of energy savings, avoidance of greenhouse gas and other pollutants, national energy security, and of course, a more robust and competitive economy. Energy efficiency is not simply good public policy; it is good business for our nation.