An Economist Takes a Look...
Energy Efficiency Continues to be a Major Force in the Economy
According to an economist from the Environmental Protection Agency, hidden within the June 2005 Short Term Energy Outlook from the Energy Information Administration are data suggesting that gains in energy efficiency continue to power much of the nation's economy over the past decade or so (1).
In the period 1996 through mid-year 2005, the annual rate of decline in the nation’s energy intensity averaged 2.1 percent. This is significantly above the historical average of 1.3 percent over the period 1949-2005 and well above the lackluster 0.8 percent rate of decline in the low energy price years of 1986 through 1996. Indeed, over the period 1996 through mid-2005, the data suggest that efficiency improvements have provided about 78 percent of new demands for energy services since 1996 while new energy supplies have provided only 22 percent (2).
In other words, energy efficiency – broadly speaking – has provided more than three times the level of new energy services than has new energy supply. The good news is that new innovations and new technologies are continually entering the market which can maintain that trend. Moreover, the evidence suggests that new innovations are capable of sustaining this rate of energy efficiency improvements for the foreseeable future (3). The bad news is the uncertainty of current policy signals and whether they will catalyze or hinder the flow of goods and services toward continued or even accelerated efficiency gains.