demand. The strategy also relies on the removal of market barriers and the correction of market failures to meet environmental, energy, and economic objectives. The strategy reduces energy consumption and carbon emissions through improved end-use energy efficiency and increased use of renewable energy and nuclear power. The legislative content of the National Energy Strategy is embodied in the Energy Policy Act of 1992 (EP Act), which contains thirty titles. Included in the EP Act are energy-efficiency standards and increased funding for research and development, as well as for studies directed at improving the U.S. planning process for dealing with global change.

Under both the National Energy Strategy and other programs, the United States has taken a lead in adopting prudent strategies to reduce greenhouse gases— strategies that are also justified on grounds other than climate change, such as reforestation and improved energy efficiency.

Voluntary Green Programs

In 1991, the U.S. government through the Environmental Protection Agency created several "green" programs. Each program targets an individual energy end use, assesses barriers that are preventing the penetration of advanced, energy-conserving technologies in its market, and employs a strategy tailored precisely to overcome those barriers through voluntary, public/private partnerships. Each program was designed comprehensively with strong attention to implementation and relies on one or more of several key elements:

• Encourage corporate-wide purchasing frameworks so that energy efficiency and full-life-cycle cost are considered up front. This helps to overcome internal organizational barriers (for example, so that departments responsible for purchasing equipment consider energy costs in their decisions-even when their department does not pay the electricity bills).

• Identify energy-efficient products so that corporate purchasers and consumers can make educated purchasing decisions. This helps overcome the lack of good information, which makes it difficult to choose the most cost-effective products.

• Promote mass purchases of energy-efficient technologies to improve economies of scale and to reduce prices.

Once the efficient technologies have moved into mass markets, their prices may fall to levels equal to or even below those of less efficient alternatives.

• Encourage industry to commercialize more resource-efficient technologies by demonstrating that these products will sell. Clear "market-pull" signals organized through mass-purchase initiatives and utility program coordination aimed at new technologies can help get products off the drawing board and onto store shelves.

• Promote sensible utility regulation and legal frameworks to encourage cost-effective investments in energy conservation and methane-recovery programs. Too often, regulatory barriers prevent cost-effective efficiency investments and increase capital requirements. Ensuring that companies and consumers can indeed profit from the wise use of resources-by improving energy efficiency or capturing and using methane for energy-leads to a more productive and less polluting economy.

• Create "environmental best practices" agreements to integrate environmental considerations into the design and planning of products and services. Placing environmental concerns in a primary role can lead to well-designed products, cost-effective manufacturing processes, and a wiser use of scarce natural resources.

State and Local Actions

To respond to concerns about global climate change, many states have begun developing inventories of greenhouse gas emissions, identifying impacts, and examining a wide range of policy options to reduce emissions.

The production and use of electric power and natural gas account for a significant amount of greenhouse gas emissions nationally. States can reduce greenhouse gas emissions and promote energy efficiency through utility-related regulations, energyefficiency standards for buildings and appliances, tax incentives for switching to alternative fuels and cleaner technologies, and state procurement practices. These efforts are likely to have the greatest impact on greenhouse gas emissions in the near term and should have a variety of other short-term economic and environmental benefits.

In 1990, the United States consumed 84.6 quadrillion Btus1 of energy and produced 1,279 million metric tons (MMTs) of carbon. Energy production and consumption in the United States are the single largest sources responsible for greenhouse gases that are released into the atmosphere. Therefore, any efforts to moderate greenhouse gas emissions should include efforts that seek to improve the efficiency of energy production and distribution, reduce energy consumption, and encourage consumers to switch to lower-carbon fuels when it is economically efficient to do so.

In 1990, the largest end-use energy consumer was the industrial sector, which used about 32.1 quadrillion Btus (38 percent) of the primary energy supplied. The transportation sector followed next with 22.5 quadrillion Btus (27 percent). Residential and commercial energy consumption comprised about one-third of primary energy supplied to end users, with the residential sector consuming about 20 percent more than the commercial sector.

Petroleum products dominated primary energy supply in the United States in 1990, providing about 40 percent of the energy supplied. Natural gas and coal followed, with each providing more than one-fifth of the

1One quadrillion Btu is known as one quad.

primary energy supplied. Nuclear power and renewable energy supplied the remainder of energy user needs, each supplying more than 7 percent (Figure 24).

Energy Demand

Since the mid 1970s, the federal, state, and local governments and government-regulated utilities of the United States have undertaken a number of actions to improve energy efficiency and reduce projected energy demand. These actions have included:

• Mandatory energy-efficiency standards for new buildings, major home appliances and equipment, and new light-duty motor vehicles.

• Financial support for improving the efficiency of lowincome housing, schools, and other public buildings.

• Financial incentives for investing in energy efficiency in buildings and industry in general.

• Substantial funding for public transit and other more energy-efficient modes of transport.

• Public information and education programs.

• Collaborative government-private industry research, development, and demonstration of more energyefficient technologies.

• Collaborative government-private industry research, development, and demonstration of renewable-energy technologies.

• Research, development, and demonstration of highefficiency, fossil fuel electricity-generating technologies, such as clean coal and natural gas fuel cells.

ELECTRIC UTILITIES: THE IRP
APPROACH

Future demand for electricity services in all sectors is most likely to be met through a wide variety of investments in new generation capacity and in programs and technologies that reduce consumption. Governmentregulated utilities now spend about $2 billion annually on efforts to manage the demand for energy. These include consumer education programs and financial incentives to conserve energy. Regulators and utilities will need to be able to determine which of several available investments is most likely to provide the greatest net social benefits to consumers.

In the last decade, electricity suppliers and public utility commissions in a number of states have experimented with a variety of planning instruments designed to compare the costs and benefits of electricity supply

and demand options. These instruments, variously known as least-cost utility planning, or integrated resource planning (IRP), continue to be refined in light of new knowledge about the full costs of fuel cycles, consumer response to utility investments in conservation, and technological innovation.

IRP is based on the premise that investments in electricity conservation and efficiency should be allowed to compete fairly with electricity supply options. That goal is best achieved by giving consumers and producers appropriate incentives to make efficient consumption and production decisions, and by facilitating competition among providers of both electricity generation and demand-reduction services. IRP is intended to provide a framework for creating such incentives and fostering such competition.

The Department of Energy's Integrated Resource Planning Program encourages utilities and state regulatory commissions to find the most cost-efficient means to meet electricity demand. The program provides accurate and timely information and analytical tools to consumers, utilities, and state commissions. The IRP process has been valuable in pointing out discrepancies in federal and state taxation and regulatory treatment of energy demand and supply investments. It is also designed to provide financial assistance, technical data, and evaluation criteria that will help states and utilities to build such programs. Since 1989, the states have made considerable advances in adopting IRP. In 1991, thirty-two states had some sort of IRP framework in

setting and planning processes. Least-cost planning is being used by PMAs and by other public utilities to forestall the need to invest in new generating capacity and to promote fuel switching. For example, the Bonneville Power Administration is currently using fuel switching (i.e., the direct use of natural gas) as a demand-side management resource. California has tied a utility's rate of return with progress in acquiring cleaner generating capacity. Iowa has passed legislation requiring electric companies to spend 2 percent of their revenues on energy-efficiency programs. Some states are providing incentives for research and development of clean technologies and renewable-energy sources. Given the global warming potential and concentrations of methane in the atmosphere, some states are encouraging natural gas utilities to reduce methane emissions through better inspection and maintenance of natural gas pipelines.

IRP is applied to various activities in the residential, commercial, industrial, and transportation sectors.

RESIDENTIAL AND COMMERCIAL
SECTOR

Households and nonmanufacturing businesses comprise the residential and commercial sector. Together these components account for slightly more than onethird of the consumption of primary energy supplied to all end users. Among the major end-use fuels consumed in the residential and commercial sectors, natural gas use is the largest, followed by electricity, petroleum, and renewable energy. Most of the energy consumed in the residential and commercial sector is used

for space conditioning (heating and cooling). Other major end uses include water heating and lighting.

Buildings

Residential and commercial buildings account for almost two-thirds of U.S. demand for electric power. During the 1970s, virtually all state and local governments established energy-efficiency standards for new residential and commercial buildings. Some of these standards have been strengthened since then, although most have not been substantially changed in over ten years. In January 1989, the Department of Energy issued model voluntary standards for new commercial and multifamily buildings. Just recently, it proposed parallel standards for low-rise residential buildings. Buildings are complex, dynamic systems made up of numerous components and subsystems. The energyrelated subsystems include the building envelope; the lighting system; and the heating, air-conditioning, and ventilation systems. The energy requirements of a building depend not only on the performance of these individual systems, but also on how they are integrated

and operated in the building. The Department of Energy's Advanced Commercial Buildings Program uses a whole-building approach to lower energy use in commercial buildings. It performs research and development on the effects of the systems on each other and develops building designs for minimizing total energy consumption. The Department is also developing computer-aided tools to help builders and architects use optimal design methods. By 2000, annual savings are estimated to be as high as 40 billion kWh.

Support has increased for this program as a result of the National Energy Strategy. Specific efforts include: • Building Efficiency Standards-Expanded support for the adoption of more stringent energy-efficiency standards for new residential and commercial buildings, and financial assistance to states to support the training of building designers and contractors. The EP Act requires states to adopt more stringent energy-efficiency standards for commercial buildings and to consider adopting more stringent standards for new residences.

• Mortgage Financing for Home Efficiency-Support for more widespread use of residential energy-efficiency ratings and mortgage-financing incentives for energy-efficient housing or for efficiency improvements to existing homes.

• Federal Agency Efficiency Programs-Reinforcing the President's Executive Order 12759 to reduce energy use in federal facilities by 20 percent (from 1985 levels) by 2000 by: encouraging innovative financing methods for investments in efficiency, requiring purchases of efficient products, and authorizing rewards to successful federal energy managers.

For example, the Federal Energy Management Program will establish federal leadership in using high-efficiency building components and establishing a data base on their operation. This data base will be essential in widespread private-sector acceptance of these technologies. Federal agency budgets for efficiency investments have more than doubled over the past several years and are expected to double again by the mid-1990s. By 2000, energy savings for the Federal Energy Management Program will be up to 500 trillion Btus per year.

The 21st Century Housing Program is a new Department of Energy initiative that will bring government and industry together in consortia to develop designs and processes that will support the production of high-quality, energy-efficient, and affordable housing. The program emphasizes the integration of efficient building subsystems and the continued research and development of low-cost and low-energy components. The industrialization of the housing industry is