• Decision making that does not consider or value energy efficiency;

  • Perceived risks associated with the performance of relatively new energy efficiency measures;

  • Energy prices that do not reflect the full costs imposed on society by energy production and consumption (i.e., that insufficiently account for externalities);

  • Human and psychological factors, such as risk aversion, loss aversion, and status-quo bias.

The AEF Committee reviewed policies and programs at the federal and state levels that have attempted to overcome or compensate for these barriers so as to reduce energy use. These approaches are discussed below.

Federal, State, and Utility Policies and Programs

Certain policies and programs have played important roles in reducing energy use and energy intensity in the United States. For example, over the past 30 years the federal government has devoted billions of dollars to energy efficiency R&D. It has also adopted a number of laws—notably during the 1975–1980 period—that stimulated educational efforts, created financial incentives, and authorized the setting of efficiency standards. More recent legislation has established minimum efficiency standards on a wide range of household appliances and commercial/industrial equipment, as well as tax incentives to motivate commercialization and adoption of highly efficient products and buildings. In addition, many states have implemented building energy codes, utility-based energy efficiency programs, and other policies to complement the federal initiatives.

This review does not consider energy taxes that have been enacted over the past 30 years because increases have been very modest. The federal tax on gasoline, for example, was increased incrementally from 4¢/gal in 1973 to a total of 18.4¢/gal in 1993, but it has not been increased since then. Corrected for inflation, the gasoline tax in 2006 was only 26 percent greater than its value in 1973.

Vehicle Efficiency Standards

The United States adopted energy efficiency standards for cars and light trucks, known as CAFE standards, in 1975. These standards played a leading role in the near-doubling of the average new-car fuel economy and the 55 percent increase in the fuel economy of light trucks from 1975 to 1988 (Greene, 1998). Unfortu-

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