Samiksha Jaiswal (Editor)

Energy policy of the United States

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Energy policy of the United States

The energy policy of the United States is determined by federal, state, and local entities in the United States, which address issues of energy production, distribution, and consumption, such as building codes and gas mileage standards. Energy policy may include legislation, international treaties, subsidies and incentives to investment, guidelines for energy conservation, taxation and other public policy techniques.


Several mandates have been proposed over the years, such as gasoline will never exceed $1.00/gallon (Nixon), and the United States will never again import as much oil as it did in 1977 (Carter), but no comprehensive long-term energy policy has been proposed, although there has been concern over this failure. Three Energy Policy Acts have been passed, in 1992, 2005, and 2007, which include many provisions for conservation, such as the Energy Star program, and energy development, with grants and tax incentives for both renewable energy and non-renewable energy.

There is also criticism that federal energy policies since the 1973 oil crisis have been dominated by crisis-mentality thinking, promoting expensive quick fixes and single-shot solutions that ignore market and technology realities. Instead of providing stable rules that support basic research while leaving plenty of scope for American entrepreneurship and innovation, congresses and presidents have repeatedly backed policies which promise solutions that are politically expedient, but whose prospects are doubtful, without adequate consideration of the dollar costs, environmental costs, or national security costs of their actions.

State-specific energy-efficiency incentive programs also play a significant role in the overall energy policy of the United States. The United States refused to endorse the Kyoto Protocol, preferring to let the market drive CO2 reductions to mitigate global warming, which will require CO2 emission taxation. The administration of Barack Obama has proposed an aggressive energy policy reform, including the need for a reduction of CO2 emissions, with a cap and trade program, which could help encourage more clean renewable, sustainable energy development. Thanks to new technologies such as fracking, the United States has in 2014 resumed its former role as the top oil producer in the world.


In the Colonial era the energy policy of the United States was for free use of standing timber for heating and industry. In the 19th century, new emphasis was placed on access to coal and its use for transport, heating and industry. Whales were rendered into lamp oil. Later, coal gas was fractionated for use as lighting and town gas. Natural gas was first used in America for lighting in 1816., it has grown in importance for use in homes, industry, and power plants, but natural gas production reached its U.S. peak in 1973, and the price has risen significantly since then.

Coal provided the bulk of the US energy needs well into the 20th century. Most urban homes had a coal bin and a coal fired furnace. Over the years these were replaced with oil furnaces, not because of it being cheaper but because it was easier and safer. Coal remains far cheaper than oil. The biggest use of oil has come from the development of the automobile.

Oil became increasingly important to the United States, and, from the early 1940s, the U.S. government and oil industry entered into a mutually beneficial collaboration to control global oil resources. By 1950, oil consumption exceeded that of coal. The abundance of oil in California, Texas, Oklahoma, as well as in Canada and Mexico, coupled with its low cost, ease of transportation, high energy density, and use in internal combustion engines, lead to its increasing use.

Following World War II, oil heating boilers took over from coal burners along the Eastern Seaboard; diesel locomotives took over from coal-fired steam engines under dieselisation; oil-fired electricity plants were built; petroleum-burning buses replaced electric streetcars in a GM driven conspiracy, for which they were found guilty, and citizens bought gasoline powered cars. Interstate Highways helped make cars the major means of personal transportation. As oil imports increased, US foreign policy was inexorably drawn into Middle East politics, supporting oil-producing Saudi Arabia and patrolling the sea lanes of the Persian Gulf.

Hydroelectricity was the basis of Nikola Tesla's introduction of the U.S. electricity grid, starting at Niagara Falls, NY in 1883. Electricity generated by major dams like the Jensen Dam, TVA Project, Grand Coulee Dam and Hoover Dam still produce some of the lowest-priced ($0.08/kWh), clean electricity in America. Rural electrification strung power lines to many more areas.

Utilities have their rates set to earn a revenue stream that provides them with a constant 10% – 13% rate of return based on operating costs. Increases or decreases of the operating costs of electricity production are passed directly through to the consumers.

The federal government provided substantially larger subsidies to fossil fuels than to renewables in the 2002–2008 period. Subsidies to fossil fuels totaled approximately $72 billion over the study period, representing a direct cost to taxpayers. Subsidies for renewable fuels, totaled $29 billion over the same period.

In some cases, the U.S. has used its energy policy as a means to pursue other international goals. Richard Heinberg, a professor from Santa Rosa, California argues that a declassified CIA document shows that the U.S. used oil prices as leverage against the economy of the Soviet Union. Specifically, he argues that the U.S. intentionally worked with Saudi Arabia during the Reagan administration to keep oil prices low, thus decreasing the purchasing power of the Soviet Union's petroleum export industry. When combined with other U.S. efforts to drain Soviet resources, this was eventually a major cause in the dissolution of the Soviet Union.

Energy imports

The United States receives approximately 84% of its energy from fossil fuels. This energy is used for transport, industry, and domestic use. The remaining portion comes primarily from Hydro and Nuclear stations. Americans constitute less than 5% of the world's population, but consume 26% of the world's energy to produce 26% of the world's industrial output. They account for about 25% of the world's petroleum consumption, while producing only 6% of the world's annual petroleum supply.

Almost all of Canada's energy exports go to the United States, making it the largest foreign source of U.S. energy imports. Canada is the top source of U.S. imports of oil, gas. and electricity.


In 2012, the US produced 60% of the petroleum it used, the remainder being imported. The largest sources of imported oil were Canada, Saudi Arabia, Mexico, Venezuela, and Russia. Oil imports into the US peaked in 2005, when imports supplied 60% of US consumption; they have declined since, due both to increased domestic oil production, and reduced consumption.

The 1973 oil embargo highlighted the vulnerability of the United States to oil supply disruptions when it depends on imports from nations that are either politically unstable or opposed to US interests. Perceived remedies include measures to reduce demand for petroleum (such as conservation or alternative fuels), increase the supply of petroleum (by increasing domestic production, or maintaining petroleum reserves), or enhance the reliability of foreign imports (through foreign policy). The Federal Department of Energy was started to direct the various approaches.

Conservation. A National Maximum Speed Limit of 55 mph (88 km/h) was imposed to help reduce consumption, and Corporate Average Fuel Economy (aka CAFE) standards were enacted to downsize automobile categories. Year-round Daylight Saving Time was imposed, the United States Strategic Petroleum Reserve was created and the National Energy Act of 1978 was introduced. Alternate forms of energy and diversified oil supply resulted.

Re-design of cities, telecommuting, mass transit, higher housing density and walking could also reduce automobile fuel consumption. Carpooling, flexcars, Smart cars, and shorter commutes could all reduce fuel use.

Increasing supply. The United States Strategic Petroleum Reserve was created to augment supply in case of a national emergency.

Alternative fuels. Two-thirds of U.S. oil consumption is in the transportation sector. The US – an important export country for food stocks – converted approximately 18% of its grain output to ethanol in 2008. Across the US, 25% of the whole corn crop went to ethanol in 2007. The percentage of corn going to biofuel is expected to go up. In 2006, U.S. Senators introduced the BioFuels Security Act.

The proposal has been made for a hydrogen economy, in which cars and factories would be powered by hydrogen fuel cells. However, energy would have to be used to produce the hydrogen, and hydrogen cars have been called one of the least efficient, most expensive ways to reduce greenhouse gases. Other plans include making society carbon neutral and using renewable energy, including solar, wind, and methane sources.

It has been suggested that automobiles could be powered by the following forms of energy: 60% by grid electricity, 20% by biofuels, and 20% by direct solar. Re-design of cities, telecommuting, mass transit, higher housing density and walking could also reduce automobile fuel consumption.

Enhance reliability of foreign sources One purpose of American foreign policy, especially in the Middle East, is commonly seen as securing the continued flow of petroleum exports from the region.

The proposed Keystone XL pipeline from Canada is a way to enhance the security of US petroleum supply.

Natural gas

The United States is a net importer of natural gas, most of it by pipeline from Canada, with a smaller amount of LNG from other sources. Net gas imports into the US peaked in 2007, when the country imported 16.4 percent of the natural gas it consumed, and was the world's largest net importer of natural gas. By 2013, despite growing use of natural gas in the US, net imports had fallen to 5.0 percent of consumption.


The United States mines more coal than it uses, and is an exporter of coal.


The United States is a net importer of electricity from Canada, and a net exporter to Mexico. Overall, in 2012 the US had net electricity imports of 47 thousand gigawatt-hours, which was less than 1.2% of the electrical power generated within the US.

Nuclear power in the United States depends largely on imported uranium. In 2011, US uranium mining provided 8 percent of the uranium concentrate loaded into nuclear reactors. The remainder was imported. Principal sources of imported uranium were Russia, Canada, Australia, Kazakhstan, and Namibia.

Energy consumption

Buildings and their construction consume more energy than transportation or industrial applications, and because buildings are responsible for the largest portion of greenhouse emissions, they have the largest impact on man-made climate change. The AIA has proposed making buildings carbon neutral by 2030, meaning that the construction and operation of buildings will not require fossil fuel energy or emit greenhouse gases, and having the U.S. reduce CO2 emissions to 40 to 60% below 1990 levels by 2050.

Energy consumption can vary widely from state to state in the U.S. In 2012 for example, there was a large gap in electricity consumption by state between the top three states - Louisiana (1254 kWh/mo.), Tennessee (1217 kWh/mo.) and Mississippi (1193 kWh/mo.) - and the bottom three states - Maine (531 kWh/mo.), Hawaii (544 kWh/mo.) and Vermont (565 kWh/mo.).

When President Carter created the U.S. Department of Energy in 1977, one of their first successful projects was the Weatherization Assistance Program. During the last 30 years, this program has provided services to more than 5.5 million low-income families. On average, low-cost weatherization reduces heating bills by 31% and overall energy bills by $358 per year at current prices. Increased energy efficiency and weatherization spending has a high return on investment.

The "Energy Independence and Security Act of 2007" has a significant impact on U.S. Energy Policy. It includes funding to help improve building codes, and will make it illegal to sell incandescent light bulbs, as they are less efficient than fluorescents and LEDs.

Technologies such as passive solar building design and zero energy buildings (ZEB) have demonstrated significant new-construction energy bill reductions. The "Energy Independence and Security Act of 2007" includes funding to increase the popularity of ZEBs, photovoltaics, and even a new solar air conditioning program. Many energy-saving measures can be added to existing buildings as retrofits, but others are only cost-effective in new construction, which is why building code improvements are being encouraged. The solution requires both improved incentives for energy conservation, and new energy sources.

The Energy Independence and Security Act of 2007 increases average gas mileage to 35 mpg by 2020. The current administration and 2007 legislation are encouraging the near-term use of plug-in electric cars, and hydrogen cars by 2020. Toyota has suggested that their third-generation 2009 Prius may cost much less than the current model. Larger advanced-technology batteries have been suggested to make it plug-in rechargeable. Photovoltaics are an option being discussed to extend its daytime electric driving range. Improving solar cell efficiency factors will continue to make this a progressively more-cost-effective option.

Energy efficiency

There are many different types of energy efficiency innovation, including efficient water heaters; improved refrigerators and freezers; advanced building control technologies and advances in heating, ventilation, and cooling (HVAC); smart windows that adapt to maintain a comfortable interior environment; new building codes to reduce needless energy use; and compact fluorescent lights. Improvements in buildings alone, where over sixty percent of all energy is used, can save tens of billions of dollars per year.

Several states, including California, New York, Rhode Island, and Wisconsin, have consistently deployed energy efficiency innovations. Their state planning officials, citizens, and industry leaders, have found these very cost-effective, often providing greater service at lower personal and social cost than simply adding more fossil-fuel based supply. This is the case for several reasons. Energy efficient technologies often represent upgrades in service through superior performance (e.g. higher quality lighting, heating and cooling with greater controls, or improved reliability of service through greater ability of utilities to respond to time of peak demand). So these innovations can provide a better, less expensive service.

A wide range of energy efficient technologies have ancillary benefits in improved quality of life, such as advanced windows that not only save on heating and cooling expenses, but also make the workplace or home more comfortable. Another example is more efficient vehicles, which not only save immediately on fuel purchases, but also emit fewer pollutants, improving health and saving on medical costs to the individual and to society.

In 1994, Amory Lovins developed the design concept of the Hypercar. This vehicle would have ultra-light construction with an aerodynamic body using advanced composite materials, low-drag design, and hybrid drive. Designers of the Hypercar claim it would achieve a three- to five-fold improvement in fuel economy, equal or better performance, safety, amenity, and affordability, compared with today's cars. Lovins says the commercialisation of the Hypercar began in 2014, with the production of the all-carbon electric BMW i3 family and the 313 miles per gallon Volkswagen XL1.

Energy budget, initiatives and incentives

An incentive resulting from US energy policy is a factor that provides motive for a specific course of action regarding the use of energy. In the U.S. most energy policy incentives take the form of financial incentives. Examples of these include tax breaks, tax reductions, tax exemptions, rebates, loans and specific funding. Throughout US history there have been many incentives created through U.S. energy policy.

Most recently the Energy Policy Act of 2005, Energy Independence and Security Act of 2007, and Emergency Economic Stabilization Act of 2008, each promote various energy efficiency improvements and encourage development of specific energy sources. U.S. Energy policy incentives can serve as a strategic manner to develop certain industries that plan to reduce America's dependence on foreign petroleum products and create jobs and industries that boost the national economy. The ability to do this depends upon which industries and products the government chooses to subsidize.


The 2012 budget that President Obama submitted to Congress calls for a 70 percent increase over the 2011 allocation for federal research and development activities related to renewable energy. The Office of Science in the Department of Energy would receive $2.0 billion for basic energy sciences to discover new ways to produce, store and use energy. Included in that amount are allocations of $457 million for solar energy; $341 million for biofuels and biomass R&D, including a new reverse auction to promote advanced biofuels; and more than doubling investment in geothermal energy to $102 million. The budget includes funding to accelerate the deployment of new models of energy research pioneered in the last several years, including $550 million for the Advanced Research Projects Agency–Energy, a program that supports breakthrough ideas.

Public investment

Public investment can enable the development of infrastructure projects through the use of public funds, grants, loans or other financing options. These funds provide a means for allocating the capital necessary for the development of renewable energy technologies.

Tax incentives

Federal tax incentives can be designed to accelerate market adoption, create jobs, encourage investment in a public good (reduced pollution) or encourage investment in renewable technology research and development. The Production Tax Credit (PTC) reduces the federal income taxes of qualified tax-paying owners of renewable energy projects based on the electrical output (measured in kWh) of grid-connected renewable energy facilities. The Investment Tax Credit (ITC) reduces federal income taxes for qualified tax-paying owners based on dollars of capital investment in renewable energy projects. The Advanced Energy Manufacturing Tax Credit (MTC) awards tax credits to new, expanded, or re-equipped domestic manufacturing facilities that support clean energy development.

Loan guarantees

The Department of Energy's Loan Guarantee Program, established by the Energy Policy Act of 2005 and enhanced by the American Recovery and Reinvestment Act of 2009, attempts to pave the way for investor support of clean energy projects by providing a guarantee of financing up to 80% of the project cost. The program is scheduled to end on September 30, 2011, unless Congress passes further legislation.

Renewable portfolio standard

A Renewable Portfolio Standard (RPS) is a mandate that requires electricity providers to supply to their customers a minimum amount of power from renewable sources, usually as a percentage of total energy use. As of June 2010, such standards have been enacted in 31 U.S. states and the District of Columbia. For example, Governor Jerry Brown signed legislation requiring California's utilities to get 33 percent of their electricity from renewable energy sources by the end of 2020. Congress has considered a national RPS since 1997: the Senate has passed legislation three times, and the House once. As of April 2011, both houses have not acted in unison to pass legislation.

Biofuel subsidies

In the United States biofuel subsidies have been justified on the following grounds: energy independence, reduction in greenhouse gas emissions, improvements in rural development related to biofuel plants and farm income support. Several economists from Iowa State University found "there is no evidence to disprove that the primary objective of biofuel policy is to support farm income."

Consumer subsidies

Consumers who purchase hybrid vehicles are eligible for a tax credit that depends upon the type of vehicle and the difference in fuel economy in comparison to vehicles of similar weights. These credits range from several hundred dollars to a few thousand dollars. Homeowners can receive a tax credit up to $500 for energy efficient products like insulation, windows, doors, as well as heating and cooling equipment. Homeowners who install solar electric systems can receive a 30% tax credit and homeowners who install small wind systems can receive a tax credit up to $4000. Geothermal heat pumps also qualify for tax credits up to $2,000.

Other subsidies

Recent energy policy incentives have provided, among other things, billions of dollars in tax reductions for nuclear power, fossil fuel production, clean coal technologies,renewable electricity production, and conservation and efficiency improvements.

Federal leases

Ceasing to issue new leases for fossil fuel extraction on federal lands and waters, and avoiding renewals of existing leases for resources that are not yet producing would reduce global CO2 emissions by 100 million tonnes per year by 2030, and by greater amounts thereafter.

Electricity distribution

Long distance electric power transmission results in energy loss, through electrical resistance, heat generation, electromagnetic induction and less-than-perfect electrical insulation. In 1995, these losses were estimated at 7.2%. Energy generation and distribution can be more efficient the closer it is to the point of use, if conducted in a high-efficiency generator, such as a CHP. In the generation and delivery of electrical power, system losses along the delivery chain are pronounced. Of five units of energy going into most large power plants, only about one unit of energy is delivered to the consumer in a usable form.

A similar situation exists in gas transport, where compressor stations along pipelines use energy to keep the gas moving, or where gas liquefaction/cooling/regasification in the liquiefied natural gas supply chain uses a substantial amount of energy, even though the scale of the loss is not as pronounced as it is in electricity.

Distributed generation is a means of reducing total and transmission losses.


  • production: 9.688-million-barrels-per-day (1,540,300 m3/d) (2010 est.)
  • consumption: 19.15-million-barrels-per-day (3,045,000 m3/d) (2010 est.)
  • Heat engines are only 20% efficient at converting oil into work. Electric transmission (production to consumer) loses over 23% of the energy due to generation, transmission, and distribution.

    Carbon dioxide emissions

    The EPA has the authority to regulate greenhouse gas emissions, under the Clean Air Act, and is one of the agency's seven priorities.

    Public opinion

    The U.S. results from the 1st Annual World Environment Review, published on June 5, 2007 revealed that:

  • 74% are concerned about climate change.
  • 80% think their Government should do more to tackle global warming.
  • 84% think that the US is too dependent on fossil fuels.
  • 72% think that the US is too reliant on foreign oil.
  • 79% think that the US Government should do more to increase the number of hybrid cars that are sold.
  • 67% think that the US Government should allow more off shore drilling.
  • The public is also quite clear on its priorities when it comes to promoting energy conservation versus increasing the supply of oil, coal, and natural gas. When asked which of these should be the higher priority, the public chooses energy conservation by a very wide 68 percent-to-21 percent margin. The public also predominantly believes that the need to cut down on energy consumption and protect the environment means increased energy efficiency should be mandated for certain products. Ninety-two percent of Americans now support such requirements.

    However, when energy policy and climate change are compared to other issues, they are rated extremely low in terms of importance. A Pew Research Center poll on public priorities for 2011 found that global warming ranked last of twenty-two possible policy priorities. The same survey in 2012 found similar results.

    Gallup found that from 2009 through the latest poll in March 2013, public opinion has been nearly evenly split on whether to give priority to the environment or to developing energy sources such as oil, gas, and coal. This represents a shift from poll results from 2001 through 2008, when clear pluralities of Americans wanted environmental concerns to take priority over developing fossil fuel resources. However, public opinion still heavily favors an emphasis on wind and solar energy (59 percent) over fossil fuels (31 percent).

    General legislative policy, legislation and plans

    The current head of the U.S. Department of Energy under the Obama administration is Dr. Ernest Moniz, who succeeded Dr. Steven Chu in May 2013.

    As of September 2012, "The mission of the Energy Department is to ensure America's security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions."

  • Catalyze the timely, material, and efficient transformation of the nation's energy system and secure U.S. leadership in clean energy technologies.
  • Maintain a vibrant U.S. effort in science and engineering as a cornerstone of our economic prosperity with clear leadership in strategic areas.
  • Enhance nuclear security through defense, nonproliferation, and environmental efforts.
  • Establish an operational and adaptable framework that combines the best wisdom of all Department stakeholders to maximize mission success.
  • In December 2009, the United States Patent and Trademark Office announced the Green Patent Pilot Program. The program was initiated to accelerate the examination of patent applications relating to certain green technologies, including the energy sector. The pilot program was initially designed to accommodate 3,000 applications related to certain green technology categories, and the program was originally set to expire on December 8, 2010. In May, 2010, the USPTO announced that it would expand the pilot program.

    Greenhouse gas emissions

    Although exceeded by China since 2007, the United States has historically been the world's largest producer of greenhouse gases. Some states are much more prolific polluters than others. The state of Texas produces approximately 1.5 trillion pounds of carbon dioxide yearly, more than every nation in the world except five outside of the United States: China, Russia, Japan, India, and Germany.

    Despite signing the Kyoto Protocol, the United States has neither ratified nor withdrawn from it. In the absence of ratification it remains non-binding on the US.

    The Obama Administration has promised to take specific action towards mitigation of climate change. In addition, at state and local levels, there are currently a number of initiatives. As of March 11, 2007, mayors of 418 US cities in 50 states have endorsed the Kyoto protocol, after Mayor Greg Nickels of Seattle started a nationwide effort to get cities to agree to the protocol. As of January 18, 2007, eight Northeastern US states are involved in the Regional Greenhouse Gas Initiative (RGGI), a state level emissions capping and trading program.

    On August 31, 2006, the California Legislature reached an agreement with Governor Arnold Schwarzenegger to reduce the state's greenhouse-gas emissions, which rank at 12th-largest carbon emitter in the world, by 25 percent by the year 2020. This resulted in the Global Warming Solutions Act which effectively puts California in line with the Kyoto limitations, but at a date later than the 2008–2012 Kyoto commitment period.

    In the non-binding 'Washington Declaration' agreed on February 16, 2007, the United States, together with Presidents or Prime Ministers from Canada, France, Germany, Italy, Japan, Russia, United Kingdom, Brazil, China, India, Mexico and South Africa agreed in principle on the outline of a successor to the Kyoto Protocol. They envisage a global cap-and-trade system that would apply to both industrialized nations and developing countries, and hoped that this would be in place by 2009.

    Chemistry Professor Nathan Lewis at Caltech estimates that to keep atmospheric carbon levels below 750 ppm, a level at which serious climate change would occur, by the year 2050, the United States would need to generate twice as much energy from renewable sources as is generated by all power sources combined today. However, current research indicates that even carbon dioxide concentrations in excess of 450 ppm would result in irreversible global climate change.

    The book, Carbon-Free and Nuclear-Free, A Roadmap for U.S. Energy Policy, by Arjun Makhijani, argues that in order to meet goals of limiting global warming to 2 °C, the world will need to reduce CO2 emissions by 85% and the U.S. will need to reduce emissions by 95%, which can be extended to within a few percent plus or minus of carbon free with little additional change. The book calls for phasing out use of oil, natural gas, and coal which does not use carbon sequestration by the year 2050. Effective delivered energy is projected to increase from about 75 Quadrillion Btu in 2005 to about 125 Quadrillion in 2050, but due to efficiency increases, the actual energy input is projected to increase from about 99 Quadrillion Btu in 2005 to about 103 Quadrillion in 2010 and then to decrease to about 77 Quadrillion in 2050. Petroleum use is projected to increase until 2010 and then linearly decrease to zero by 2050. The roadmap calls for nuclear power to decrease to zero at the same time, with the reduction also beginning in 2010.

    In his book Hell and High Water, author Joseph Romm calls for the rapid deployment of existing technologies to decrease carbon emissions. In a follow-up article in in June 2008, he argues that "If we are to have confidence in our ability to stabilize carbon dioxide levels below 450 p.p.m. emissions must average less than [5 billion metric tons of carbon] per year over the century. This means accelerating the deployment of the 11 wedges so they begin to take effect in 2015 and are completely operational in much less time than originally modelled by Socolow and Pacala."

    In 2012, the National Renewable Energy Laboratory assessed the technical potential for renewable electricity for each of the 50 states, and concluded that each state has technical potential for renewable electricity, mostly from solar power and wind power, greater than its current electricity consumption. The report cautions: "Note that as a technical potential, rather than economic or market potential, these estimates do not consider availability of transmission infrastructure, costs, reliability or time-of-dispatch, current or future electricity loads, or relevant policies."


    Energy policy of the United States Wikipedia

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