POLICY MODELING FOR ENERGY EFFICIENCY IMPROVEMENT IN US INDUSTRY¹

We are just beginning to evaluate and model the contributions policies make toward improving energy efficiency. In this article, three recent studies are reviewed. They represent an important step in the analyses of climate-change mitigation strategies. All studies model estimated policy impacts rather than the policies themselves. Often the policy impacts are based on assumptions, as the effects of a policy are not certain. Most models incorporate only economic (or price) tools, which, for estimating impacts, costs, and benefits of mitigation strategies, recent studies have proven are insufficient. The studies reviewed are a first effort to capture the effects of nonprice policies. They contribute to a better understanding of the role of policies in improving energy efficiency and mitigating climate change. All policy scenarios result in substantial energy savings compared with the baseline scenario used; they also result in substantial net benefits to the US economy. Because the industrial sector is the most diverse and, arguably, the most challenging energy-demand sector to model, studying policies for them is no easy task. The challenges, which are many, fall into two categories: appropriate level of detail (i.e., sector, technology, and policy) and representations of decision making. A better understanding of decision-making behavior, technology choice, and policy impact and effectiveness is needed to improve our understanding of the potential effectiveness of future energy efficiency policies as well as to improve policy modeling. With these developments, the current and next-generation policy models and studies have the potential to become richer representations of the industrial sector.