Economic Report President

Box 5-8.—Energy Efficiency Since the 1970sEnergy efficiency in the United States is now much greaterthan it was at the time of the first oil shock just over 25 years ago.Nevertheless, because of growth in the economy, the United Statestoday consumes more energy than it did in 1973. The ratio of energyuse to GDP, a measure of the energy intensity of output, fell rapidlyin the 1970s and early 1980s but stopped declining in the late1980s. More recently it has again begun to decline (Chart 5-2). Yetdespite these efficiency gains, total energy use rose by 27 percentbetween 1973 and 1997 (Chart 5-3), stimulated by populationgrowth and rising GDP per capita. Virtually the entire increasecame after 1986, a year that ushered in a period of relatively lowenergy prices. Before 1986, relatively high energy prices had keptenergy use flat.One of the most dramatic increases in energy use has been inthat by motor vehicles: their annual fuel consumption rose 54percent between 1970 and 1996. Although the average fuel efficiencyof new passenger cars more than doubled between 1973 and1996, from 14.2 to 28.5 miles per gallon, the fuel efficiency of theNation’s vehicle fleet has not increased as much, because of a shifttoward light-duty trucks and sport-utility vehicles. The efficiencygains were also partly offset by an increase in miles traveled pervehicle and a large increase in the number of vehicles. The neteffect of these changes has been a small decline in fuel use pervehicle but a large increase in total energy consumption (Chart 5-4).Energy use in homes, in contrast, was about the same in theearly 1990s as it was in the 1970s, as efficiency gains have keptpace with increases in the number of households, in average housesize, and in the average number of appliances per household. Forexample, the efficiency of the average new refrigerator improved192 percent from 1972 to 1996. Energy use per household declinedrapidly in the late 1970s and early 1980s but has been stable since.designed to spur the development and adoption of new energy- andcarbon-saving technologies through tax incentives and R&D investments.Many of the efforts within the CCTI reflect recommendationsmade in a 1997 report by the President’s Committee of Advisors onScience and Technology. The Committee found that “the inadequacy ofcurrent energy R&D is especially acute in relation to the challenge ofresponding prudently and cost-effectively to the risk of global climaticchange from society’s greenhouse gas emissions.” By providing publicsupport for energy R&D through the CCTI, the level of innovationwill likely increase, offsetting in part the appropriability problemsassociated with this type of R&D.207