True Cost of Energy Efficiency?
By Staff News & Analysis - April 29, 2013

In 2012, America had the most energy efficient economy in US history. The EIA released new energy data this week showing that the U.S. had the most energy-efficient economy in history last year, based on the amount of energy consumed to produce each real dollar of Gross Domestic Product (GDP). In 2012, it required only 6,990 BTUs of energy (petroleum, natural gas, nuclear and renewables) to produce each real dollar of GDP, an all-time record low. Even though the US produced 2.2% more real output last year compared to 2011, the total energy consumed in 2012 was actually 2.45% lower than the previous year, which led to a 4.6% reduction in the total energy consumed to produce each dollar of GDP in 2012. – American Enterprise Institute

Dominant Social Theme: The US is making great progress when it comes to alleviating environmental pollution.

Free-Market Analysis: Like you, dear reader, we were very happy to see that the US had the most energy efficient economy in US history. But unlike the Energy Information Agency (EIA), we don't consider this an unalleviated good.

We would rather the US had an ECONOMY – which seems to be an increasingly dubious reality – rather than merely an energy efficient one. We have been told for so long that energy efficiency and alleviation of industrial pollution are a kind of Holy Grail. But now that we have reached this sacred place, where are the rewards?

The American Enterprise Institute is known as conservative and "right wing," but this celebration of energy efficiency makes us doubt the AEI's credentials. By noting this achievement without providing the authoritarian frame of reference that accompanied it, the AEI makes it seem as if this goal is an unadulterated good.

But it is not. It was surely achieved by coercion as much as driven by competition. Fedgov itself mandates all sorts of energy efficiency goals, such as miles per gallon. And that coercion when multiplied by all the other Fedgov mandates and monetary price fixing has resulted in a basically ruined economy.

In fact, the economy is so distorted that even the injections of trillions of dollars of paper money cannot revive the corpse. AEI glosses over this, however, in its determination to celebrate "energy efficiency."

Looking over a longer time period, the US now uses less than half the energy required in the mid-1970s to produce a dollar of output. In other words, the U.S. economy is twice as energy-efficient today compared to the 1970s due to technology, innovation and improvements that allow us to produce increasing amounts of output with decreasing amounts of energy.

The new EIA data showing that we're living in the most energy-efficient economy in history probably won't get much media attention (especially compared to an event like Earth Day), even though it's an ongoing and remarkable story of environmentally-friendly, green achievement. As Steven F. Hayward commented in 2008, "The consistent improvement in America's energy efficiency is an untold and under-appreciated long-term story."

This last paragraph is worth noting because it makes a distinction between Earth Day and energy efficiency. But as we have noted, plenty of coercion is involved in "energy efficiency." As a matter of fact, we'd give up some of this efficiency for additional employment.

When these sorts of simplistic analyses are trumpeted, the larger impact of the regulatory state goes unnoted. But it should be noted. Even the best results of regulatory democracy come at a tremendous cost.

After Thoughts

In this case, given the state of the US economy, we would venture the costs could be seen as quite high.

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