Energy Efficiency:

Alliance to Save Energy's Callahan says 'feebate' could replace CAFE increase

As Congress tries to nail down a comprehensive energy bill, lawmakers and lobbyists continue to debate how to solve the U.S. energy crisis. During today's OnPoint Kateri Callahan, president of the Alliance to Save Energy, addresses the need to build for the future through energy efficiency. She discusses gaps in the 2005 Energy Policy Act and talks about a shift in American behavior as a result of higher gas prices. Callahan also discusses ASE's efforts to raise awareness about green development.

Transcript

Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is to Kateri Callahan, president of the Alliance to Save Energy. Kateri, thanks for being here.

Kateri Callahan: Well, thanks for having me on.

Monica Trauzzi: You recently testified before Congress discussing gaps in the U.S. energy policy, particularly in the area of energy efficiency. Talk about what some of those main points are that you made.

Kateri Callahan: Sure. Well, I think there are a couple of things. We just had the Energy Policy Act put into place in August of 2005. And almost simultaneous with that law were the hurricanes and the price spikes in the natural gas and particularly in oil and gasoline. I think that made not only policy makers and the media, but the country at large aware of the situation that we have with rising and sustained high gasoline, high oil prices. There's been a clamor for action by the president and by the Congress. All the polls show that people in America want action, not just to address the current high price of gasoline, but longer term solutions so that we can have a secure energy future. The Energy Policy Act, while it gave very important incentives to hybrid electric, clean diesel, very efficient vehicles, it largely didn't do anything about the current vehicle stock and the majority of vehicles that are placed on the roads today. Hybrids represent only 1 oercent of a 17 million plus new car market every year. We have to do something to raise the fuel efficiency of all of those vehicles. And we need to do it quickly, but we need to do it well, meaning we need to build for the future.

Monica Trauzzi: Your contention is that the fiscal year '07 budget cuts many vital programs in R&D that would help energy efficiency. What type of patterns are you seeing with this administration as compared to previous administrations?

Kateri Callahan: Right. Well, since about 2002, and really the start of this administration, we've seen energy efficiency program's funding slide by more than a third. So it is not a good trend. Even while the administration, I think, is focused and recognizes that energy efficiency is the cheapest, quickness, cleanest solution and they're urging Americans to be more efficient, they're not putting their money, unfortunately, where their mouths are on this one. The energy efficiency budget has been allowed to deteriorate to the point where we don't think there is adequate funding. And we think that there's a good rational for really increased funding. Studies that have been done on the energy efficiency programs, at the Department of Energy for example, indicate that for every dollar this government invests in those energy efficiency programs, we're getting a return on the investment of $20 in terms of investment into the economy and energy savings. The same thing with the Energy Star program, which is run at EPA and DOE contributes to. That program, for every dollar that goes into the Energy Star program, we see $75 in consumer energy savings and a spark of $17 of private-sector investment into the economy. If you look at it, in that kind of return on investment, the country really ought to be putting more money into energy efficiency, not less.

Monica Trauzzi: But there are certain members, many members of Congress who feel that we should import oil from the Alberta oil sands. We should drill in ANWR. We should increase supplies through offshore drilling. So why shouldn't these programs be part of an overall energy policy?

Kateri Callahan: Well, I think that from our perspective you need a balanced mix. I mean you do need to meet the anticipated growth in energy needs. You're going to need new supply options, as well as energy efficiency. But you could basically, some studies show, there was a five lab, the national labs did a study that showed that you could basically flatten the growth in demand curve by employing energy efficiency practices. So it needs to be our first option. I can't be our only option. We are going to have to look at new supplies and, in fact, we are. Our concern is that we not focus so much on new supplies and alternatives that we forget to look at our greatest resource, which is the energy we're currently wasting and be more efficient in our use of energy.

Monica Trauzzi: In so many aspects of their lives though Americans are proving that they're not really all that concerned with energy consumption. They're driving large cars. They're moving into increasingly larger homes. So will advocating for this change really help? Will it really get them to move on this?

Kateri Callahan: Well, I think price signals have to be right. And what you're seeing with the price at the pump, for example, is causing attitudinal and, we think, behavioral changes in American people. A recent PEW poll found that, and the CNN poll confirmed like 60 percent of people are now saying that they would consider buying a more fuel efficient vehicle. It used to be, in the list of attributes that people were looking at in cars fuel economy fell well below the first 10, the first 20 attributes. It fell well below cup holders for example. That was a more important feature than fuel economy. That is not so today. When you have prices of gasoline hovering at three dollars a gallon it's having a financial impact on more than half the population. And that is causing changes in behavior. Same thing this winter, when natural gas prices were projected to be so extremely high, insulation flew off the shelves at the home improvement stores. And the vendors that are participating in the alliance said they couldn't meet the demand for insulation. So people are smart when it's a pocketbook issue and I think what's important today is that that pocketbook issue is allowing the media and policymakers to also educate people about the other important impacts of overuse of energy, and those are the environmental and the energy security threats to our country. So there's a growing recognition of that.

Monica Trauzzi: So you're proposing this feebate as a way to get around the lack of an increase in CAFE standards.

Kateri Callahan: Right.

Monica Trauzzi: Explain what that is.

Kateri Callahan: OK, I'll explain it, but I also would say anything we can do, whether it's improving CAFE standards or it's a feebate type program, we have to take action. There are a myriad of proposals before the Congress, many of which we support. We happen to think that a feebate program makes the most sense. And what that is, is a revenue neutral and really market-based approach to improving fuel economy. You would charge a fee on fuel inefficient vehicles that would go to pay a rebate to fuel-sipping or fuel-efficient vehicles. What you could do with this kind of program is continue to offer complete choice in product lines, everything from small subcompacts up to large SUVs for consumers. And you could offer them those choices, but they would come, some of the vehicles would have no fee or no rebate because they would fall into a zero band, meeting a certain mile per gallon average. Some would cost a little more because they were less efficient. Some would cost less because they are more efficient. So it provides choice. It provides the revenue to provide rebates to drive the technology forward. It's just a, we think the right kind of approach and it will continuously improve the fuel efficiency of the fleet without further action by the Congress.

Monica Trauzzi: So if this program was enacted and was successful, would a CAFE increase become unnecessary? Would consumers start to automatically buy more fuel-efficient vehicles and would they drive the market in that direction?

Kateri Callahan: Well, that's what the studies would confirm, that yes, you would surpass and really, at some point, supplant a CAFE program. And it's not just that consumers would prefer the more fuel-efficient vehicles, the manufacturers would begin putting technology in to get the cars more fuel-efficient, to get them on the side of the rebate and off of the payment side. So it works both with manufacturers in encouraging them to develop and employ new technologies and it encourages consumers, through the price tag on the vehicles, to purchase those more fuel-efficient vehicles.

Monica Trauzzi: But is the fee that you're charging really going to make that much of a difference? For someone who's already spending $20,000 to $25,000 on a vehicle a couple hundred dollars is pretty nominal. So is this really going to have an effect in changing the mindset of consumers?

Kateri Callahan: Well, that's what the trick, is setting the cost point at a point that's high enough that it can induce better behavior if you will, but not so high that it really wreaks havoc in the marketplace. But the studies show that 90 percent of the improvements are going to come in the manufacture of putting new technology in, not from consumers' vehicle choices. So it's in the interest of the manufacturer to put the new technology in. In some respects this is almost transparent, or not transparent, it's almost unseen to the consumer. What they're going to enjoy is more fuel-efficient vehicles. The price tag that they're going to pay for that, there will be some additional fee that will go into the new technologies, but they're going to make that up over the lifetime of the vehicle in savings in gasoline. And with the rebate being attached to it, it should make that more price neutral.

Monica Trauzzi: Isn't this a tax though? Don't we tax gas-guzzling vehicles?

Kateri Callahan: Well, we do tax gas-guzzling vehicles. The difference here is that you're providing both sides. You're covering the entire fleet because not only are you assessing a fee, or if you want to call it a tax, you're also providing a rebate to encourage purchase of the cleaner vehicles. It's more effective that way. The other thing is it's not a tax in the sense that it will be monies collected and put to the general revenues. The way that we're proposing the program it would be a closed loop, so that the fees that are paid by the manufacturers go back to manufacturers that are making fuel-efficient vehicles. So the very fuel-efficient vehicle manufacturers are going to make a little money on this, whereas the ones that are not as fuel-efficient are going to pay that little money.

Monica Trauzzi: I wanted to switch gears for a moment. The Alliance to Save Energy just moved into a new greener building in Washington, D.C. How is your organization working to raise awareness for the LEED certification program?

Kateri Callahan: In many ways. We have something called the Building Codes Assistance Project that we are a primary partner in, or BCAP, that's driving codes and setting the floor for buildings in this country, residential and commercial, all across the country. So it's driving adoption by states of codes. USGBC, which is the U.S. Green Buildings Council, that created the LEED certification process, is a member or is an associate of the alliance. And we, just like that, are members of their group as well. So we work closely together. We produce a lot of information and articles on green buildings, on the LEED certification process. And we are advertising the fact that we're making our space, we're not in a green building, but we're making green space. We are going to be LEED certified for commercial interior space. And we're hoping to get a silver LEED certification there. So we are, if you will, advertising by leading by example the LEED certification process. We're speaking about it all across the country. We're making information available to the 65,000 or so folks that visit our web site every month. So that's how we're really helping.

Monica Trauzzi: And you said you're hoping to get a silver LEED certification. There are two levels above that, there's gold, there's platinum. Why not push to meet the higher standard just to be an example for other organizations?

Kateri Callahan: Well, we pushed to go as high as we can. Some of the constraints are constraints with the building and with this space and, you know, it's not just what we want to do. It's what the building management folks can and will allow. It's what the systems are already like in the building. We're moving into a building that, I believe, it's about 25 years old. So we're constrained in that regard. The other fact though is that it gets more expensive and it gets more difficult. The LEED certification is not just energy efficiency of course, its environmental design. And that's where, you know, we're doing all of the energy efficiency. And if you only looked at that we probably would be able to be at a higher level. But some of the environmental designs, some of the requirements for using materials that are produced, for example, within a 500 mile range, disposal of materials that were in the facility and office equipment that was already there, those kinds of things make it a bit more challenging. So we're going as high as we can get. We think we've got silver. If we can get higher, you know, we're putting the paperwork in at the end of this month, we're certainly going to try to.

Monica Trauzzi: OK, Kateri, we are out of time. Thanks for joining me.

Kateri Callahan: Thank you.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

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