Linking energy efficiency to economic productivity: recommendations for improving the robustness of the U.S. economy

Abstract

The evidence continues to mount. Energy efficiency is not just a way to save big money for households and business, or to achieve cost‐effective and very big reductions in greenhouse gas emissions; it is also a critical resource if the United States is to maintain the robustness of its economy. In short, the efficient use of energy plays a more prominent role in the economic process than is generally understood. But the role of high‐quality energy as it enable economic activity is badly defined and poorly tracked within the standard national economic accounts. The analysis builds on a new set of data and insights indicating that, based in 2010 data, the U.S. economy is only 14% energy efficient. In other words, our economic activity wastes 86% of the energy used in the production and distribution of goods and services. This level of energy inefficiency imposes an array of costs that constrain the robustness of the American economy. This assessment explores new terms and concepts—many of which are familiar to physicists and engineers, but have not generally become part of normal policy discussion. As a result, the current system of economic accounts (which tracks employment, investment, and income) limits insights and understanding about: (1) the current dynamics of productivity improvements and routine economic activity; and (2) the mix of price signals, policies, and incentives designed to redirect purposeful effort and productive investment. Applying these insights has the potential to transform the economy into one that provides both social and environmental well‐being, and that is also sustainable over the long run. WIREs Energy Environ 2015, 4:235–252. doi: 10.1002/wene.135This article is categorized under: Energy Efficiency > Economics and Policy Energy Efficiency > Systems and Infrastructure