Greater US efficiency can counter global energy chaos

Much of the proposed energy response to Russia’s invasion of Ukraine has focused on increasing domestic oil and gas production. While this will help, another powerful tool that has not received sufficient attention is increasing U.S. energy efficiency.

Not only would greater domestic energy efficiency reduce the influence of Russian oil and gas on the U.S. it also would provide other important benefits to American consumers and the economy. Any strategy to counter Russian-induced energy chaos should give greater weight to promoting energy efficiency domestically.

Some have described how increased domestic oil and natural gas production is essential to protecting U.S. strategic interests. While true, the impact can be overestimated. Even as the U.S. has become a leading petroleum producer and net petroleum exporter, a meaningful portion of the oil purchased by Americans at the pump and elsewhere continues to be produced abroad. Last year, for example, the U.S. imported 8.47 million barrels per day of petroleum, equivalent to 43 percent of the nation’s consumption. Looking ahead, imports are expected to continue even as domestic production grows because of various factors, including mismatches between the type of crude oil produced domestically and U.S. refinery capacity. Increasing domestic production can help to shift the share, but it won’t remove the significant presence of imported oil in U.S. markets.

Greater energy efficiency, however, provides an important strategic complement to domestic production by helping to lower how much oil and natural gas Americans need to consume. Whether through better insulation in homes and commercial buildings, improved industrial processes, efficient HVAC systems or more fuel-efficient vehicles — as well as more mundane actions such as engine tune-ups and maintaining proper tire pressure — energy efficiency saves energy with various attendant benefits.

Of particular note in today’s high-price environment, energy efficiency helps to reduce the exposure of American consumers to price volatility from international energy markets. When you need less energy to commute to work or to heat your home, surges in international oil prices will have a smaller impact on household expenses. Dampening U.S. demand for energy through efficiency also helps to diminish upward pressures on prices, benefitting all consumers. It reduces how much money American consumers send abroad to foreign energy suppliers, thereby improving the U.S. trade balance through lowered imports while improving household energy budgets. 

Importantly, energy efficiency generally involves investments in domestic businesses, from American manufacturers to more local service providers. The contractor who installs efficient windows or heat pumps is typically from nearby. Spending locally to create jobs rather than spending on energy imports that fund foreign governments should resonate politically. Moreover, because Europe and other countries will need to invest more in their own energy efficiency for security and climate reasons, the global market for energy efficiency products and know-how should grow. Promoting energy efficiency domestically can help the U.S. industry become a leader in these technologies, creating business opportunities worldwide.

Domestic energy production is indeed a strategic asset for the U.S., and domestic energy efficiency generates many similar gains. Additionally, it can help to support Europe and other allies by increasing the amount of energy the U.S. has available to export under any level of domestic production. And by selling a greater share of domestic production abroad, not only do strategic partners benefit, but once again the U.S. trade balance will improve.

For some, the most important attributes of energy efficiency are the climate benefits. The International Energy Agency’s model (IEA) consistently ranks energy efficiency as the leading clean energy technology. For example, it drives 37 percent of the emissions reductions needed to achieve the “well below 2 degrees Celsius” temperature goal of the Paris Agreement — more than renewables, which weigh in at 32 percent. Greater U.S. energy efficiency provides a way to insulate wallets from price surges while protecting people from the increased fires, droughts and other damage that unchecked climate change could wreak. It would also improve air quality by reducing pollutants through less energy use.

Government programs within the Department of Energy and state-level agencies, as well as private-sector businesses, have been implemented to promote energy efficiency. Many provide financial support to households and industries to purchase energy-efficient equipment, with returns to consumers and society far outweighing costs.

Yet, a much greater effort is needed to spur the substantially greater amounts of investment required to combat climate change. As set out in the IEA’s modeling, a four-fold increase in energy efficiency investments in the U.S. is needed by the 2030s, and a similar increase is required globally.

Given all these advantages, why isn’t there more investment in energy efficiency? The reasons are numerous and well-known within the energy efficiency community. They include an industry that lacks financial and political weight, especially compared to petroleum companies and other energy suppliers. Energy efficiency also, unfortunately, lacks appeal. While the geopolitics of “Big Oil” have captured imaginations for decades, installing insulation and other stories about saving energy are less compelling. While energy efficiency may lack appeal, its benefits, however, are too big to ignore, especially in today’s volatile world.

The U.S. needs greater energy efficiency to protect its consumers from energy chaos driven from abroad, whether that’s Russia’s invasion of Ukraine or future unforeseeable or even predictable events.

Philippe Benoit has over 25 years of experience working in international affairs, including prior management positions at the World Bank and the International Energy Agency.  He is currently research director at Global Infrastructure Analytics and Sustainability 2050.