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Tuesday, January 26, 2010

Identifying Incentives and Barriers to Federal Agencies Achieving Energy Efficiency and Greenhouse Gas Reduction Targets

Anthony Andrews
Specialist in Energy and Energy Infrastructure Policy

Richard J. Campbell
Specialist in Energy Policy

This report identifies incentives for and barriers to federal agencies achieving the energy efficiency goals and greenhouse gas (GHG) reduction-targets outlined in recent laws and executive orders. 

The federal government is the single largest consumer of energy in the United States, but consumes only 1% the total energy used. Federal energy spending represents upwards of 1% of its total budget (discretionary and mandatory spending). Since the 1970s, Congress has enacted various laws that reduce energy consumption in the federal sector by improving energy efficiency. The Energy Policy Act of 2005 (EPAct 2005) included measures to reduce energy and water in congressional buildings, install advanced meters to reduce electricity use in federal buildings, enact performance standards to improve federal buildings, and to reduce the federal government's electric energy consumption through renewable energy offsets (P.L. 109-58). The Energy Independence and Security Act of 2007 (EISA) mandated further energy savings measures in government operations, including energy upgrades to the Capitol complex, permanent authority to use "energy savings performance contracts," and federal procurement of energy efficient products and renewable fuels (P.L. 110-140). 

Two recent executive orders guide federal agencies in reducing energy consumption and GHG emissions. In 2007, Executive Order 13423, Strengthening Federal Environmental Energy, and Transportation Management directed federal agencies to improve energy efficiency and reduce green house gas emissions by reducing energy intensity. In 2009, Executive Order 13514, Federal Leadership in Environmental, Energy, and Economic Performance established GHG emissions reduction goals for federal agencies. 

Federal agencies can take advantage of several financing mechanisms to make energy efficiency improvements without increasing their operating budgets. These include Energy Savings Performance Contracts, Utility Energy Savings Contracts, and Power Purchase Agreements. In some cases, agencies may share in the savings gained from reduced energy costs made through the improvements. New authority to combine appropriated funds with energy savings performance contracts could further energy efficiency improvements, but the lack of federal rules delays implementation. However, federal agencies may be reluctant to participate in this financing option if it reduces their opportunity to retain savings from the improvements. 

The new GHG reduction goals come after three decades of effort to reduce energy consumption. GHG emissions associated with operating federal buildings result from consuming fossil fuels used in generating electricity and heating. Significant energy reduction resulted early from easily achievable, low-cost improvements that translate into GHG reductions. The opportunity for GHG reductions in the future may come through smaller, more difficult to achieve reductions in energy consumption based on high-tech solutions. 

The prospect of a reducing the federal budget by reducing energy consumption may be low. However, policy makers may wish to weigh direct monetary savings against the benefits of clean energy in terms of avoided emissions of regulated pollutants and greenhouse gases.

Date of Report: January 25, 2010
Number of Pages: 18
Order Number: R41040
Price: $29.95

Document available electronically as a pdf file or in paper form.
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