Waxman-Markey Bill would make the U.S. a world leader in advancing energy efficiency and addressing climate change

Washington, D.C., May 14, 2009 – Major elements of the “Waxman-Markey” greenhouse gas cap and trade bill that have emerged in preparation for a full Energy and Commerce Committee mark up next week represent a critical and effective framework for making the U.S. a world leader in advancing energy efficiency and addressing climate change. The Alliance to Save Energy strongly supports the Waxman-Markey framework and urges committee members to ensure that decisions on important “still missing” pieces of the bill -- like the allocation of carbon allowances -- in no way diminish or undermine the energy and greenhouse gas savings promised by the announced cap and trade program.

An effective cap on carbon emissions will encourage people to become more efficient and will drive innovation in energy efficiency technologies. According to a recent EPA analysis, under the Waxman-Markey cap and trade mechanism, growth in energy consumption would be flat between now and 2050. Alliance President Kateri Callahan said: “By creating a market-based incentive to reduce emissions through the lowest cost means available, a carbon cap and trade program has the potential to be the most significant energy efficiency policy ever implemented in this country, and would help make the U.S. economy the most energy efficient in the world.”

Alliance Senior Vice President of Policy and Research Joe Loper added: “Rather than government picking winners and losers, the Waxman-Markey bill sets a cap on carbon emissions, letting the marketplace decide how best to respond. Energy efficiency will be a big winner, but the biggest winner will be our children.” If fully implemented, the Waxman-Markey cap and trade system would reduce carbon emissions by more than 80 percent of covered emissions, in line with recommendations from the world’s leading scientists.

As committee members iron out remaining provisions and details, the Alliance urges them to avoid changes or additions that would diminish or waste opportunities to use cost-effective energy efficiency. The Alliance noted that the bill must address market barriers to energy efficiency, such as incomplete information and split incentives (e.g., landlords who buy the energy-using appliances often do not pay the energy bill). Alliance Director of Policy Lowell Ungar said: “While the carbon cap will save energy, tapping the full potential of energy efficiency requires complementary policies, including strong building energy codes and appliance standards, as well as significant funding for energy efficiency programs.”

For example, an early draft of the bill included an aggressive policy and timetable for improvement in building energy codes to reduce the energy used in homes and commercial buildings—about 40 percent of all energy use in this country—at the time of construction, when it’s cheapest and easiest to do so. In addition, the renewable electricity standard (RES) provision includes an energy efficiency resource standard—a recognition of the fact that the cleanest and cheapest kilowatt-hour of electricity is usually the one a utility does not have to generate—though much of the 5 percent efficiency target would be achieved under existing state programs.

Finally, it will be critical for lawmakers to provide a robust allocation of allowances to energy efficiency. The Alliance to Save Energy, along with a coalition of more than 100 organizations, has called on Congress to over time set aside funds, rising to roughly 26 percent of the cap and trade proceeds (roughly $30 billion annually) for energy efficiency.