standards and incentives: overview » introduction » energy saving laws
Emissions reduction targets or energy savings goals establish a target date by which greenhouse gas emissions or energy consumption must be reduced to a pre-set benchmark. When referring only to energy savings, these goals may also be called energy-efficiency resource standards (EERS). Energy-efficiency resource standards and emissions reductions goals often provide the impetus for adoption of energy-efficiency programs at the state and local levels.

Click on the links below to learn more about energy-efficiency resource standards and emissions reductions goals:

Energy-efficiency resource standards

EERS's typically call for utilities to achieve a reduction in load growth or energy use over a specified time period, and may come with penalties for failure to achieve specified goals, providing a strong incentive for utility companies to enact residential energy-efficiency initiatives. Reductions may be reached through improvements in the efficiency of energy generation, transmission, and consumer use, and via a wide array of initiatives; for example, Minnesota's New Generation Energy Act of 2007 set a goal for utilities to achieve an annual 1.5 percent savings in retail sales through "energy conservation programs, rate design, energy codes, appliance standards, market transformation programs, programs to change human behavior, improvements to utility infrastructure, and waste heat recovery." [1] In some cases, EERS's also allow reductions to be achieved through a market-based trading system that permits utilities that exceed their target savings to sell credits to under-performing utilities. [2]

In order to pay for these and other energy-efficiency initiatives -- whether adopted in support of an energy savings goal or not -- many utilities assess a small fee on customers' utility bills, which is often called a public benefits charge but goes by many other names, including "public goods charge" (California), "energy efficiency charge" (Vermont), and 'system benefits charge" (New York).

According to the Pew Center on Global Climate Change, as of September 2008, 23 states collected or had in development public benefit funds dedicated to energy efficiency and renewable energy projects and capitalized and sustained with the proceeds from public benefit charges. In most cases, the funds support related work as well, including research, consumer education, and energy assistance for low-income families.

Renewable Portfolio Standards
Solutions in Action
In 1999, Texas became the first state to establish an EERS, which called for electric utilities to counterbalance five percent of load growth in 2002 through improved energy efficiency and reduced end-use energy consumption. Utilities were able to achieve this standard at low costs, and in 2007 it was increased to call for an offset of 15 percent of load growth by 2009 and 20 percent of load growth by 2010.

Click here to leave this site and view a list of state EERS descriptions compiled by the American Council for an Energy-Efficient Economy. [PDF]

In some states, energy-efficiency goals have been adopted in conjunction with renewable portfolio standards (RPS's), which establish a target date by which providers must acquire a minimum share of energy through renewable resources. In many cases, savings achieved through energy-efficiency initiatives may count towards attainment of these goals. For example, Michigan Public Act 295, passed in October 2008, requires investor-owned utilities and others to obtain ten percent of retail electricity sales from renewable sources by 2015, with annual interim goals starting in 2012. The law also requires energy providers to adopt energy savings goals and file plans for achieving greater "energy optimization" -- or efficiency -- with the state's Public Service Commission. Energy optimization programs that improve efficiency through reductions in consumer use of energy, electricity, or natural gas may be used to meet a portion of the RPS requirement. To fund these efforts, utilities may assess surcharges on customers' bills, up to $3/month for residential customers. [3]

Recommendations for states considering adoption of an Energy-Efficiency Resource Standard
Adapted from Nadel 2006: Energy Efficiency and Resource Standards: Experience and Recommendations
  • Vest responsibility for administering the program with state utility commissions, which have jurisdiction over investor-owned utilities and, in some cases, public utilities
  • Set initial goals at relatively modest annual levels (0.25 percent of the previous year's sales) -- savings are cumulative, and will grow quickly as programs ramp-up -- and increase goals and target periods as the program progresses
  • In general, focus on achieving results at the end-user level; i.e., through energy-efficiency improvements in homes and commercial facilities
  • Allow savings credits to be traded or purchased at lower rates from the program administrator to promote lower-cost solutions, and establish caps to keep costs relatively low
  • Appropriate savings targets may be based on a percentage of energy sales or load growth, or in terms of absolute energy use, but the "share of sales" metric minimizes uncertainty and may be revisited with less frequency than other measures
  • Ensure monitoring and verification of energy savings using accepted protocols
  • To give standards "teeth," some states levy penalties for failure to achieve specified goals and/or provide incentives for exceeding goals

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Emissions reductions goals

Emissions reduction goals, while similar in concept to EERS's, differ in that they seek to achieve reductions in greenhouse gas emissions, rather than energy consumption (although the two are related). For example, with passage of the 2008 Global Warming Solutions Act, the state of Massachusetts called for a reduction of greenhouse gas emissions to 80 percent below 1990 emissions levels by 2050, with interim targets to be achieved in 2020, 2030, and 2040. [4] Targets may be reached in a variety of ways, including adoption of emissions caps for new and/or existing power plants, increased reliance on renewable energy sources, and maximizing the energy efficiency of buildings and appliances, among many others.
Solutions in Action
With passage of Assembly Bill 32 in September 2006, the State of California adopted the country's first enforceable greenhouse gas emissions cap. AB32 calls for reductions in emissions by 2020 to 1990 levels -- a reduction of 30 percent from projected "business-as-usual emission levels" in 2020, or 15 percent from current levels. (A long-range goal, formalized by Executive Order, requires by 2050 an 80 percent reduction in emissions from 1990 levels.) A Scoping Plan, which was approved in 2008, lays out the specific activities that will be used to achieve this goal; these activities must be put into place by 2012.

In 2010, the National Housing Conference hosted the Partners in Innovation preservation forums, a series of three regional forums focused on strengthening and supporting affordable rental housing preservation efforts through innovative partnerships, policy development, and legislative reform. The regional forums took place in Boston, MA; Portland, OR; and Denver, CO in 2010.

View the following presentations on establishing emission reduction goals from the Partners in Innovation: Preserving Affordable Rental Housing Through Energy Conservation in Boston on April 14, 2010.

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Energy savings and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits

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Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings

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and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale

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Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption.

[1] Energy Efficiency Resource Standards Around the U.S. and the World. [PDF] 2007. Washington, DC: American Council for an Energy-Efficient Economy.
[2] Energy Efficiency and Resource Standards: Experience and Recommendations. 2006. By Steven Nadel. Washington, DC: American Council for an Energy-Efficient Economy.
[3] Michigan Incentives/Policies for Renewables & Efficiency. Web Site. 2009. Database of State Incentives for Renewables & Efficiency.
[4] Climate Change 101: State Action. [PDF] 2009. Climate Change 101: Understanding and Responding to Global Climate Change. Arlington, VA and Washington, DC: Pew Center on Global Climate Change and the Pew Center on the States.