Cheap, clean and easily accessible? An energy resource any U.S. president could love

Energy efficiency, though not the most exciting topic in these political times, has been and will continue to be fundamental to three things President-elect Donald Trump has promised to improve – economic growth, trade deficits, and national security – and one thing about which he promised to keep an open mind – climate change.

Energy efficiency is about making or consuming more goods and services with less energy, not sacrificing quality of life. No need for the latter. The United States has made big gains in economically reducing energy use, and plenty more opportunities remain.

{mosads}How does that improve the U.S. economy, trade deficits and national security?  Smarter use of energy reduces oil imports, frees domestic coal and natural gas for export, and reduces vulnerability to international energy trade as a political weapon.  Reducing energy in manufacturing cuts costs, making our products more competitive in international markets.  Reducing households energy costs frees money for buying other goods or reducing debt.  Energy efficiency in the military allows aircraft to fly farther, ships to remain on battle station longer and ground forces to reduce the enormous vulnerability of fuel convoys.  Reductions in energy use lessen U.S. emissions of carbon dioxide and other pollutants, good for both the global environment and the air we breathe.

Energy efficiency has another advantage: it has been a non-partisan issue ever since energy rose to national prominence in 1973 – also a time of heightened partisanship – and politicians of both parties have supported energy efficiency ever since. A Democratic Party-controlled Congress and Republican President Richard Nixon, just two weeks before he resigned, created the U.S. Federal Energy Administration (FEA) to address the 1970s oil crisis, in which OPEC embargoed exports to the United States and other supporters of Israel.

President Gerald Ford directed the FEA to develop broad measures to improve energy efficiency and increase domestic energy production.  The resulting “Project Independence Report” emphasized that we needed both energy efficiency and increases in domestic energy production to achieve energy self-sufficiency.  As a member of the team that developed that framework, I thought that energy efficiency and domestic production enhancements would have roughly equal impacts. I never expected what actually happened: Energy efficiency would have far greater impact.

Later, as an FEA office director, I worked with Democratic Party staff of the House and Senate committees who were drafting the first-ever U.S. automobile fuel efficiency standards.  We examined countless proposals to boost car and truck fuel economy, which then was a lowly 12.5 miles per gallon on average for new automobiles.  We did so based on facts and analysis, united by a common goal that was clearly in the national interest.

The effort was completely bipartisan. Even in the FEA office I directed, as a Republican I was probably outnumbered by Democrats. Party affiliations were irrelevant for analysis of policy options. In the end, the Republican president, Gerald Ford, and the Democratic-controlled House and Senate enacted the Energy Policy & Conservation Act of 1975, the federal government’s first comprehensive approach to energy policy.

Since then, volatile energy prices, improved understanding of issues and new public policies led businesses and families to pay attention to energy consumption. This trend has been global, though particularly strong in the United States. Prior to 1973, total U.S. energy use grew almost in line with general economic growth, trailing GDP by just 0.5 percent. Since then, energy-efficient processes and technologies permeated the entire economy, and energy use has grown on average 2.0 percent less than real GDP.

The difference between 0.5 percent and 2.0 percent annually may seem small, but over time it has been massive.  Had pre-embargo growth patterns continued, we would now consume 85 percent more energy than we actually consume.  And in addition, had there been no increases in domestic energy production, our energy net imports would be ten times as high as they are.  Oil prices would be drastically higher than we have ever seen. The U.S. trade deficit would have ballooned to frightening levels. The United States would still be vulnerable to oil imports used as an international political weapon. Increased domestic oil, gas, nuclear and hydropower production helped reduce energy imports since the oil embargo, but the contribution from wiser energy use has been about four times that of all domestic energy production increases taken together.

Almost all energy efficiency gains have been profitable for firms and have reduced consumer costs. New lighting technologies, better HVAC systems, new contractual forms for commercial office space, and better information systems have reduced energy costs for commercial buildings.  Airlines burn one-fourth as much fuel to fly a passenger one mile as they did in 1973, resulting in lower airfares. U.S. industrial production has more than doubled since 1973, but the industrial sector uses less energy in 2015 than in 1973.

From Ford through Barack Obama, every president except Bill Clinton has signed legislation advancing energy efficiency. These laws have included mileage requirements for cars, appliance standards, tax credits, Energy Star certifications, and labeling.

So, what can the Trump administration do?  Plenty. The National Academies estimated in 2009 that cost-effective technologies could reduce U.S. energy consumption 30 percent – 35 percent by 2030. This estimate did not include overcoming non-technical barriers to efficiency, such as limited information, institutional inertia and market imperfections.  Addressing these issues could provide additional savings. Specific possible actions are too numerous to discuss here.

However, there is a general framework the new administration could use as it hones energy policies. First, it will be well served by embracing existing energy efficiency programs (managed by the DOE, DOT, EPA, and FTC) as crucial for improving the economy, foreign trade, national security, and the environment. These programs should be enhanced, keeping oversight to assure that they continue to meet cost-benefit criteria.

Second, research and development enabled many of the energy efficiency gains. The federal government paid for some R&D, though the private sector, primarily manufacturers, made most investment, often linked to federal R&D. But Federal energy research has decreased since the early 1980s. Reversing those reductions and encouraging energy efficiency R&D in the private sector will deliver new benefits.

Third, price signals are crucial to continuing private sector energy-efficiency innovation. A revenue-neutral carbon tax could include the real external costs the unaided free market does not capture. Although it is opposed by many people, economic conservatives should reconsider a revenue-neutral carbon tax. For every dollar raised, other taxes would be cut. A price on all carbon-dioxide emissions could replace the labyrinth of tax credits and subsidies across all sources of energy, creating a level playing field for competition based on merit and consumer choice.

Regardless of political persuasion, we can all agree that smarter use of energy is the cheapest, cleanest, most abundant energy resource we have, and we should be able to support policies consistent with that agreement.

James L. Sweeney, a Stanford University professor of management science and engineering, is the author of Energy Efficiency: Building a Clean, Secure Economy (Hoover Press, 2016). He is the director of Stanford’s Precourt Energy Efficiency Center, and a senior fellow of the Hoover Institution, of the Stanford Institute for Economic Policy Research and of the Precourt Institute for Energy.

The views expressed by authors are their own and not the views of The Hill.