1 Incentives and Expectations for Reducing Carbon Emissions: A Look at United States Energy Consumption Adjustments James (Jim) Sweeney Stanford University Director Precourt Energy Efficiency Center Professor, Management Science and Engineering

2 Imported Crude Oil Real Prices

3 Consumption Trends Changed In All Sectors of the US Economy

What Forces Changed ? INITIAL CHANGES 1973/1974 AND AFTER Oil Prices (1973/74 oil crisis) Other Energy Prices Realization that the energy world had changed, perhaps for a long time Changed expectations of prices Changed expectations of regulations Changed actual regulations LATER CHANGES Changed realization about climate problems (1979: NAS warning; 1990: First IPCC assessment.) Changed expectations about carbon and energy restrictions and prices

Energy Use Labeling/ Nudges

Building Certifications/Labeling/Feedback

Federal Equipment Efficiency Standards: Residential

Carbon Disclosure Project: “Putting a price on risk: Carbon pricing in the corporate world” Internal Carbon Prices: North American Corporations.

Approximate Chain of Causation Energy Security (Avoid Consequences of Disruptions) Environmental Protection (Mitigate GHG Emissions) Economic Motivations (Reduce Energy Costs) Efficiency Standards (Cars/Trucks/ Appliances/ Buildings) Labeling, Nudges, Subsidies, Other Incentives Efficient Practices, Technology, Corporate Innovation Efficient Purchases, Buildings Government R&D, R&D incentives NGO Advocacy Industrial Restructuring OBJECTIVES INSTRUMENTS OUTCOMES

10 Imported Crude Oil Real Prices Long time of low prices Ten years of high prices Twenty years of prices Ten years of high prices What are expectations for future prices?

11 Reductions in US Energy Intensity Pre-Energy-Crisis, low prices, no policy: 0.55% per year decline Energy-Crisis, high prices, much policy: 2.7% per year decline Post-Energy-Crisis, low prices, moderate policy: 1.7% per year decline 14,000 BTU/$ GDP in 1973 Data Source: EIA, Monthly Energy Review 6,000 BTU/$ GDP in 2014 Recent Years, high prices, moderate policy: 1.7% per year decline

Changing Light Efficacy: Lumens per Watt (LPW) 2015 vs 1973 Source: Finelite, Inc. Application Light Source Efficacy (Lumens Per Watt) Light Source Efficacy (Lumens Per Watt) Watts/Lumen Reduction Light Bulb Typical 60 Watt Incandescent (A-19) 14 LED bulb equivalent (A-19) 8483% Cobrahead Street Light High-Pressure Sodium 48LED9348% High Bay Industrial 400 watt Metal Halide (14K lumens) watt LED (18K lumens) 8564% Office Recessed 2x4 Luminaire 40 Watt, T12 Fluorescent 60 2x4 Recessed LED Luminaire 11548% Kitchen Down Light 5-inch diameter, 65 watt, incandescent (BR40) 10 5-inch diameter, 12 watt, LED (BR40) 6785% Track Lighting 2.5-inch dia., 45 watt spot, incandescent (R20) inch dia., 5 watt, LED (R20) 6587%

Buildings Title 24

Commercial/Industrial Building Systems Empire State Building Retrofit Stanford ESI Microsoft Dashboard

Cars and Trucks: On-Road Fuel economy from 1923 to 2013 Source: Michael Sivak and Brandon Schoettle (2015) 1973 Chevy Impala 2014 Chevy Impala

Energy Intensity of Air Travel Yield Management:

17 Factors Reducing US Carbon Dioxide Intensity

18 Energy Efficiency, Domestic Supply, Imports Data Source: EIA, Monthly Energy Review

Approximate Chain of Causation Energy Security (Avoid Consequences of Disruptions) Environmental Protection (Mitigate GHG Emissions) Economic Motivations (Reduce Energy Costs) Efficiency Standards (Cars/Trucks/ Appliances/ Buildings) Labeling, Nudges, Subsidies, Other Incentives Efficient Practices, Technology, Corporate Innovation Efficient Purchases, Buildings Government R&D, R&D incentives NGO Advocacy Industrial Restructuring OBJECTIVES INSTRUMENTS OUTCOMES Carbon Tax

20 Should Countries Implement Carbon Taxes? Yes, but … At least nine classes of strategies could enhance energy efficiency: –Encourage processes of economic innovation; energy taxes/pricing; R&D; Information provision; Nudges; Stochastic rewards; Financial incentives; Competitions; Regulation Most nations can use some strategies from each class. But differing cultures and differing economic traditions among nations influence which strategies are acceptable. We need to accept that reality. International policy has now accepted idea that nations differ from one another and choose differing mixes of strategies, even with common goals of carbon mitigation.

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