Five Aces and a Winking Dealer The Costs of and Reasons for the U.S.’s Failure to Invest in Energy Efficiency

Abstract

The energy and environmental policy of the United States has long
been guided by an ideological belief that economic growth is only pos-
sible via environmental degradation, and environmental protections are
therefore possible only at the expense of the economy. This belief struc-
ture implicitly assumes that energy efficiency—wherein the combustion
of less fuel leads to lower cost energy and reduced emissions—does not
exist. While much has been written about the regulatory barriers to in-
terconnection and non-utility power generation, these barriers are sim-
ply subsets of a much larger problem: a regulatory structure that ac-
tively discourages investments in energy efficiency, particularly in the
electric-generation sector. This structure is directly responsible not only
for over-pollution throughout the U.S. economy, but also for unnecessar-
ily high retail electricity prices. However, on a more constructive note,
this failure implies that many of the most intractable environmental
questions—which invariably take the form of “how much can we afford
to pay for pollution abatement?”—are essentially non-issues. From NOx
to CO2, an investment in previously discouraged energy efficiency will
invert all conventional wisdom to become that most desired of creatures:
a revenue-generating pollution control strategy. We’ve paid for bad leg-
islation long enough—the time is now to fix these rules and begin rec-
ognizing the economic and environmental benefits of energy efficiency.