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Sequestration: A Potential Obstacle for Energy Efficiency Progress?

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Date: Dec 11, 2012

Congress

With increasing talk of the “fiscal cliff” – and, in particular, sequestration – looming on the horizon for 2013, it is important to understand the implications these spending cuts might have for energy efficiency initiatives and investments. If sequestration is implemented as planned, the benefits of energy efficiency will not likely reach their full potential.

Background on Sequestration

Under the Budget Control Act of 2011, at least $1.2 trillion in automatic discretionary spending cuts would be enacted once the Joint Select Committee on Deficit Reduction (known as the “Super Committee”) and Congress failed to propose and pass a plan to reduce the deficit by Dec. 23, 2011. Since the Super Committee was unsuccessful in advancing legislation to decrease federal deficit, across-the-board spending cuts are set to go into effect in January 2013. However, the “fiscal cliff,” which not only includes sequestration but also a myriad of tax matters, can still be prevented if Congress can settle on a deficit-reduction package by the end of 2012.

Impact on Energy Efficiency Program Funding

Sequestration has been described as a “blunt and indiscriminate instrument” that will cut budgets across the board, but little information has been provided on how it will directly affect each program. Under the Sequestration Transparency Act of 2011, President Barack Obama was required to submit to Congress an Office of Management and Budget Sequestration report on the potential impacts of sequestration across various departments and agencies. The report, released August 2012, states that non-exempt defense discretionary funding will be cut by 9.4% and non-exempt nondefense discretionary funding will be but by 8.2%.

Sequestration will likely have a significant impact on energy efficiency initiatives underway and planned by the Department of Energy (DOE), as it would impose an 8.2% reduction ($148 million out of a $1.8 billion budget) for DOE’s Office of Energy Efficiency and Renewable Energy (EERE).This implies budget cuts for programs such as research and development, building energy codes, Energy Star, federal energy management, the State Energy Program, and the Weatherization Assistance Program.

Maintaining Energy Efficiency Funding is Key to Driving Economic Growth

Benefits from investments in energy efficiency programs are proven and extensive, ranging from creating jobs to balancing budgets and saving money.

  • Cost and Energy Savings: The United States could save trillions of dollars if it invested in a comprehensive and innovative energy efficiency plan, according to a 2009 McKinsey & Company report titled "Unlocking Energy Efficiency in the U.S. Economy." This report suggests that energy efficiency measures could reduce annual energy consumption by 23%, saving 9.1 quadrillion Btu of energy and about $1.2 trillion.
  • Job Creation: Over 830,000 jobs were created in the energy and resource efficiency segment of the economy in 2010, according to a green jobs assessment by the Brookings Institute. This is an increase from the 675,000 jobs generated in 2003, suggesting that with sufficient support, job creation in energy efficiency will continue to grow.

These gains, however, will be more difficult to achieve and sustain if Congress fails to avert the sequestration.

“The Alliance, in collaboration with the energy efficiency community, will continue working to ensure that Congress maintains investments in energy efficiency programs at appropriate levels should an alternative to sequestration be considered during the lame duck session,” said Alliance to Save Energy Director of Government Relations Rob Mosher .

Additional Resources:

Alliance Policy Intern Christina Ospina contributed to this article.