While generally found to be cost effective, critics claim that appliance and equipment energy
standards can have negative effects (e.g., leading to increased demand by reducing the effective cost of
energy services and forcing consumers with high discount rates (disproportionately found among the poor)
to purchase a minimum level of efficiency). Also, uniform national standards may not be ideal for a
country with highly variable climate conditions, energy prices, and preferences. Based on a large body of
literature to date, these concerns would appear to be small relative to the magnitude of the national
benefits. Also, any impacts on low income households can be addressed as part of a larger package that
includes progressive elements such as weatherization assistance for the income qualified.
B. Financial Incentives
Financial incentives can best induce energy efficient behavior where
relatively few barriers limit information and decision making opportunities
(e.g., in owner occupied homes).
Financial incentives include tax credits, rebates, low interest
loans, energy efficient mortgages, and innovative financing, all of which address the barrier of first costs.
State agencies have a great deal of experience implementing financial incentives to promote
investments in energy efficiency and renewable energy. Much of this experience comes from revolving
loan mechanisms targeting energy efficiency in state facilities. Revolving loans allow borrowers to repay
the debt through the stream of cost savings generated by the funded projects. Examples include the Iowa
Energy Bank, the Maryland Revolving Loan Program, the Oregon Public Benefit Funds Program, and the
Texas LoanSTAR Program.
State and local governments have also experimented with developer based
incentives (such as New Jersey's Smart Growth Tax Credit)
and impact fees, including locationally effi
cient mortgages and reduced business taxes to promote more compact, mixed use, and pedestrian friendly
urban development; however, these practices have seen limited application to date. Two well documented
financial incentives utility based financial incentive programs and low income weatherization assis
tance are the exception.
Utility based Financial Incentive Programs. Utility based financial incentive programs have been in
operation since the early 1980s, when it became clear that information and education alone produced
only limited energy and demand savings. By reducing demand, energy efficiency is a low cost contributor
Towards a Climate Friendly