Concerns about environmental damages, climate change, energy security, and the high cost of new electricity infrastructure have led to an increased emphasis on energy efficiency at both the federal and state levels of government. The Obama administration has promoted energy efficiency as an important component of a multi-faceted strategy for reducing greenhouse gas emissions. Several states have had policies to promote energy efficiency for electricity for three decades or more but, recently, many have adopted a new approach. Known as an energy efficiency resource standard, or EERS, this method sets a minimum amount or percentage of energy savings to be achieved by a particular date. Twenty states currently have EERS policies and there have been proposals for a federal standard as well.
Two new discussion papers by RFF researchers offer an in-depth look at EERS policies. In “Putting a Floor on Energy Savings: Comparing State Energy Resource Standards,” Senior Fellows Karen Palmer and Tim Brennan and Research Assistants Sam Grausz and Blair Beasley describe the different features that characterize the 20 state-level EERS policies currently in place. A primary effort was to translate the different state policies into comparable terms to assess their relative stringency. These policies, which on average require reductions exceeding 12 percent of covered energy sales when fully implemented, are quite ambitious compared to the achievements of past policies. The authors also compare other features, including flexibility measures, measurement and verification protocols, and the use of penalties and positive incentives.
In “Energy Efficiency Resource Standards: Economics and Policy,” Brennan and Palmer compare an EERS to other policies designed to meet stated objectives, such as reducing greenhouse gas emissions or getting consumers to make cost-effective investments in energy efficiency. They note that reducing energy use may be achieved in a more direct and cost-effective manner through a tax on energy use or a cap-and-trade system. An EERS can be efficient, however, depending on how energy efficiency policies affect energy use and the relationship between energy use and environmental effects or other harms.