Energy & Technology

Residential End-Use Efficiency

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Quick Facts

  • Energy use in residential buildings accounts for about 17 percent of U.S. greenhouse gas emissions. Half of these emissions are due to two of the largest energy end uses--heating, ventilation, and air conditioning (HVAC) equipment and lighting. This factsheet focuses on the remaining 50 percent of emissions that are due to a variety of appliances, such as water heaters and refrigerators.
  • An investment in end-use energy efficiency increases the availability of system-wide electricity generation and transmission capacity for other uses; as such, end-use efficiency can be considered a resource, often described in terms of “negawatts,” that provides energy savings comparable to the electricity generated by power plants.
  • U.S. residential per household electricity consumption has increased 39 percent since 1970, reflecting the overall trend toward larger homes and a greater variety of appliances and electronics in each home. However, there is evidence of recent trends towards more energy efficient new homes and stabilization of home sizes. 


Residential buildings account for about 17 percent of U.S. greenhouse gas (GHG) emissions measured in carbon dioxide equivalents (CO2e) (including both direct emissions, such as from residential furnaces, and the indirect emissions from generating the electricity consumed in these buildings).1 The large share of residential building energy consumption attributable to space heating and cooling varies with climate conditions.2 Energy consumed by the roughly 110 million residential buildings3 in the United States is used to power various end uses, each of which require different technological improvements or behavioral changes to increase energy efficiency and conservation. Improving residential end-use energy efficiency is a challenge given the long lifetimes of appliances, such as refrigerators and ovens, and the preferences and usage patterns of households.4

An investment in end-use energy efficiency increases the availability of system-wide electricity generation and transmission capacity for other uses. Thus, end-use energy efficiency can be considered a resource, often referred to as a “negawatt,” available to balance electricity supply and demand, just as is done with other resources such as coal or wind power generation. Like these other resources, “negawatts” from end-use energy efficiency are available in varying amounts at different levels of investment.  When considering costs over the lifetime of an investment, end-use energy efficiency can be one of the lowest-cost means of meeting energy demand and of reducing GHG emissions.


Four options for increasing energy efficiency and reducing greenhouse gas emissions from the residential sector include (1) incorporating high-efficiency or renewable on-site power generation to displace less efficient and/or more carbon-intensive grid power; (2) reducing whole building energy consumption through well-designed energy codes and standards including, but not limited to, those involving the building’s “envelope,” which consists of the structural materials,  fenestration (e.g. windows and doors), air sealing, and insulation (see Climate TechBook: Building Envelope);(3) improving end-use appliance energy efficiency; and 4) educating homeowners about their home’s operation and maintenance as related to energy. As Figure 1 shows, two of the largest residential end-uses – heating, ventilation, and air conditioning (HVAC) equipment and lighting – are responsible for just under 50 percent of direct and indirect residential GHG emissions. The remaining residential energy end uses are the focus of this factsheet and are described below.


Figure 1: Greenhouse Gas Emissions by End Use in the Residential Sector, 2007

Source: Energy Information Administration (EIA) Annual Energy Outlook, 2009
*Note: “Other Energy Uses” includes small electric devices, heating elements, and motors; such appliances as swimming pool and hot tub heaters, outdoor grills, and outdoor natural gas lighting; wood used for primary and secondary heating in wood stoves or fireplaces; and kerosene and coal. “Other Electric Uses” includes color TVs (6%), PCs (2%), furnace fans (2%), dishwashers (1%), freezers (1%), and clothes washers (1%).
  • Hot water heaters are the second largest end use of electricity in households, contributing 13 percent of total residential GHG emissions. Water heating efficiency can be improved through the use of technologies such as heat pumps, integrated HVAC-water heating systems which make use of waste heat, and tankless water heaters.5
  • Electric plug loads (other electric uses) include a variety of devices such as: personal computers and peripherals (e.g., printers, scanners, and speakers); television and other audiovisual equipment; personal care appliances such as hair dryers and electric toothbrushes; and kitchen appliances such as coffee makers, toasters, and microwaves. Energy use by these devices has historically accounted for about 10 percent of total residential GHG emissions, but this share is increasing. Means to improve the energy efficiency of these devices include energy efficiency standards for the power supplies of these devices, or the devices themselves.
  • Refrigeration and Freezers are responsible for about 7 percent of GHG emissions from the residential sector, and are among the biggest success stories for energy efficiency standards (see Figure 2). Since the 1970s, refrigerators and freezers have increased in size by a third while consuming two-thirds less energy at one-third the price.  
  • Dishwashers, clothes washers, and dryers contribute 6 percent of residential GHG emissions. For these appliances, optimal usage patterns such as running full loads and using efficient settings can improve energy efficiency. In terms of technology, appliance research has led to the development of modern dishwashers which consume about half as much energy as models from the 1970s,6 and front-loading (horizontal axis) clothes washers which use 60 percent less energy and 40 percent less water than top-loading washers.7 There is little variation among the efficiencies of clothes dryers, but natural gas-powered dryers tend to be cheaper to operate than electric clothes dryers because natural gas has usually been cheaper than electricity.8   
  • Cooking through the use of electric or natural gas ovens and ranges contributes about 3 percent of residential GHG emissions. Self-cleaning, convection, natural gas, and models without pilot lights tend to be the most efficient ovens, with possible energy savings of as much as 20 percent with convection ovens.9 However, cooking practices such as using copper, flat-bottomed cookware on ranges and glass or ceramic pans in ovens, matching cookware size to range top size, and using smaller appliances to cook small dishes are more important than technology advances to achieve further gains in energy efficiency.10
  • Other energy uses include miscellaneous consumption in the household through small electric devices, heating elements, and motors; such appliances as swimming pool and hot tub heaters, outdoor grills, and natural gas outdoor lighting; wood used for primary and secondary heating in wood stoves or fireplaces; and kerosene and coal. These end uses are responsible for as much as 13 percent of residential GHG emissions.
Figure 2: Household Refrigerators/Freezers Average Electricity Use by Year of Purchase

Source: National Research Council, 200911

Environmental Benefit/Emission Reduction Potential

In 2003, researchers estimated that residential end-use energy efficiency standards for appliances and HVAC systems could achieve 8-9 percent reductions in primary energy12 consumption and associated CO2 emissions13 by 2020 compared to a “business-as-usual” scenario which extrapolated historical market-induced energy efficiency improvements from the mid-1980s.14 These cumulative reductions translate to 1.4 gigatons (Gt) of CO2-e by 2020, equivalent to the lifetime emissions from four-and-a-half 1000 megawatt (MW) coal power plants, or 4.4 Gt of CO2-e by 2050, equal to the lifetime GHG emissions from fourteen 1000 MW coal power plants.15

A 2009 analysis by McKinsey and Company estimated that a 27 percent reduction in residential primary energy consumption and associated GHG emissions in 2020 is possible with profitable (positive net present value) energy efficiency investments in lighting, end-use appliances, and building envelop upgrades in new, existing, and low-income homes.16  McKinsey calculated that about 30 percent of total residential primary energy reductions could be achieved through more efficient electronics and end-use appliances, equal to 1.8 quadrillion BTUs of primary energy.

Since 2003, two energy bills (the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007) have imposed new energy efficiency standards.  The 2009 federal economic stimulus bill (American Recovery and Reinvestment Act) also included funding for state energy efficiency programs and assistance for low-income homeowners, which may accelerate the pace of energy efficiency improvements. In addition, climate change bills considered by the U.S. Congress also include appliance efficiency provisions. The net effect of these recent pieces of legislation will be to realize a significant portion of the potential GHG emission reductions possible from residential energy efficiency.


When considering costs over the lifetime of an investment, residential end-use energy efficiency can be one of the lowest-cost means of meeting energy demand and of reducing GHG emissions. For example, analysts from McKinsey and Company estimated that energy efficiency improvements in residential electronics would have a net savings of $101 per metric ton of CO2 (tCO2) avoided and that improvements in water heater efficiency would have a net savings of $11/tCO2 when considering lifecycle costs.17 These analysts argue that incremental capital costs are minimal for energy efficiency improvements in residential appliances.18 These estimates consider the economic potential for energy efficiency investments, and do not take into account behavioral changes, or regulatory, market or demographic factors that may affect the levels of energy efficiency practically achievable through appliance investments in the residential sector.

A 1998 report from researchers at the Lawrence Berkeley National Laboratory estimated that the cost of energy savings19 for many efficient appliances mandated by standards was below residential market electricity rates of 5-9 cents per kilowatt-hour (kWh), from as low as 0.15 cents per kWh for energy saved with clothes washers, 3.5-4.9 cents per kWh for dishwashers, and 5.0-5.8 cents per kWh for refrigerators, to as high as 7.3 cents per kWh for clothes dryers using a 7 percent discount rate.20

Energy efficiency cost estimates are highly dependent on the choice of household discount rate. Consumers have been observed to use 20-100 percent discount rates in making residential appliance purchases.21  The social discount rate is usually much lower than the private discount rate, meaning that more projects appear socially beneficial than privately beneficial. Other researchers argue that the cost-efficiency relationship for appliances is unclear, and that the incremental costs are substantial for efficient appliances, especially when bundled with other costly premium features.22

Current Status

U.S. residential per household electricity consumption has increased 39 percent since 1970, reflecting the overall trend toward larger homes and a greater variety of appliances and electronics in each home.23 However, there is evidence of recent trends towards more energy efficient new homes and stabilization of home sizes. The U.S. Department of Energy Smart Home Scale shows today’s new homes are 30 percent more energy efficient than the existing housing stock, and U.S. Census data show that their median size stabilized between 2005 and 2007 and subsequently has been trending downward.24,25 Efficient residential end-use appliances are becoming more common in the market through the use of energy efficiency standards and the ENERGY STAR® voluntary labeling program. Energy efficiency standards increase the average efficiency of products sold on the market by banning the sale of products that are less efficient than the standard. Minimum energy efficiency standards for residential end-use appliances are regularly updated at the federal and state levels as technology advances or with new legislation. The Energy Independence and Security Act of 2007 (EISA) established higher energy efficiency standards for refrigerators, freezers, dishwashers, and power supplies for electric plug loads. The U.S. Department of Energy is also currently updating standards for water heaters and clothes washers and published new standards for cooking ranges in 2009. ENERGY STAR® labels are applied to the appliances in different categories that rank in the top 25 percent of those available on the market in terms of energy efficiency. The market penetration of ENERGY STAR® products varies by end use, from as high as 95 percent for new LCD screens to as low as 16 percent for battery charger systems sold in 2007.26

Obstacles to Further Development or Deployment

  • Lack of a price on GHG emissions
    Electricity prices that do not reflect the full societal cost of GHG emissions from traditional fossil fuel power generation limit the incentive to invest in energy efficiency by reducing the cost savings possible with efficient appliance upgrades and increasing payback periods for such investments. Without a price on GHG emissions, the private benefits of investing in energy efficiency are less than the societal benefits of such investments.
  • Lack of Awareness and Information
    Many consumers and building developers are unaware of the energy efficiency of the appliances in their buildings, and do not have knowledge about the best-in-class technology available for many end uses or the potential cost and energy savings from such devices. 
  • Behavioral Barriers
    Households do not always make rational choices about appliance investments.  They may use simplistic financial measures such as payback periods which ignore the possibility of future fuel price increases, they choose from a subset of appliances which may not contain the optimal appliances because of time- or resource-constraints, they are biased toward the status quo, and they are more willing to take risks to avoid losses than to achieve gains in making economic decisions. Behavioral economics research points to monetary and non-monetary/information-based interventions that can address this barrier.27
  • Split Incentives
    In the highly fragmented buildings industry, those who pay energy bills may not make decisions about the specifications and purchase of large household appliances. For example, in the market for newly constructed homes, builders may not install the most efficient appliances if they are not sure that the incremental cost of the appliance will be reflected in the selling price of the house, while buyers must pay the higher lifetime energy bills from less efficient appliances. In the rental market, which accounts for almost a quarter of residential energy use,28 owners may have the capital to invest in energy efficient appliances, but have limited incentive to do so because tenants pay electricity bills.  This effect varies by appliance; for example, 90 percent of buyers of new homes obtained their dishwashers and cooking ranges through their builders, while 60 percent of buyers purchased their refrigerators themselves through a retailer.29
  • Ownership Transfer Issues
    Residential end-use energy efficiency improvements often yield savings and payback periods longer than most homeowners are likely to stay in a particular house. Since residential housing markets do not always capitalize energy efficiency investments in home prices,30 benefits accrue to future owners through lower energy bills. This factor mainly affects purchasing decisions for less portable appliances with long lifetimes such as refrigerators, laundry equipment, and ovens.
  • Capital Constraints
    Residential homeowners often apply high discount rates of 20-100 percent or higher for energy efficiency improvements, higher than rates of return for most financial investments.31  Compared to commercial or industrial decision-makers, residential households tend to be more risk-averse and have greater sensitivity to initial capital costs because they lack liquidity and have a higher cost of capital or limited access to capital. This effect is more pronounced in lower-income and capital-constrained households. Streamlined loan approval processes, favorable loan terms, and direct rebates can help to address this barrier.
  • Rebound Effects
    Rebound effects describe the partial increases in energy consumption due to energy efficiency investments that can occur either by making an appliance less expensive to use and thereby encouraging greater use of it, or by reducing overall electricity prices in wholesale markets, leading to greater electricity consumption in general. The rebound effect may erode some of the estimated energy savings and emission reductions possible with residential end-use energy efficiency. Researchers have estimated that 10-40 percent of water heater efficiency gains are negated by increased water heater usage, but little to no increase in energy consumption is seen in other appliance markets, though indirect effects due to the purchase of larger appliances with premium features were not measured.32
  • Additionality
    A danger with energy efficiency programs is that the financial incentives for energy efficiency are partially captured by individuals who would have made these investments even in the absence of policy interventions.  If this occurs, it limits the extent to which programs improve energy efficiency and decreases the cost-effectiveness of the program
  • Unequal Treatment of Energy Efficiency and Supply-Side Resources
    In general, utilities have more incentive to invest in power generation or transmission upgrades than in energy efficiency because their profits are often tied to electricity sales and capital cost recovery. 

Policy Options to Help Promote Residential Energy Efficiency

  • A Carbon Price
    A price on carbon, such as that which would exist under a GHG cap-and-trade program (see Climate Change 101: Cap and Trade), would make energy efficiency a more cost-effective option compared to electricity from traditional fossil fuel generation.
  • Energy Efficiency Resource Standards (EERS)
    An EERS is a market-based mechanism to encourage more efficient generation, transmission, and use of electricity and natural gas. State public utility commissions or other regulatory bodies set electric and/or gas energy savings targets for utilities, often with flexibility to achieve the target through a market-based trading system. All EERS’s include end-use energy savings improvements. 19 states have an EERS (see C2ES’s EERS web page).
  • Policies to Promote Smart Grid Deployment
    Smart grid technologies, including communication networks, advanced sensors, and monitoring devices, form the foundation of new ways for utilities to generate and deliver power and for consumers to understand and control their electricity consumption at the building level and at the level of individual electronic appliances (see Smart Grid factsheet).
  • Appraisal Practices
    Appraisal practices and standards should accurately reflect the financial benefits provided by more energy efficient homes and buildings.
  • Innovative Financing and Subsidies
    Financing mechanisms whose rates and limits reflect the benefit of more energy homes or buildings and leasing arrangements – such as loans with favorable terms, rebate programs, and green mortgages – would lower the up-front capital required for consumers to invest in end-use energy efficiency. For example, in 1995, Congress mandated a national energy efficiency mortgage program which insures loans for energy efficiency investments incorporated into new or refinanced mortgages administered through the U.S. Department of Housing and Urban Development.33
  • Low-Income Weatherization Assistance
    Subsidies for energy efficiency investments can share the welfare benefits of energy efficiency improvements among all segments of society.
  • Point of Sale and Rent Interventions
    These policies can address ownership transfer issues. Information dissemination or requirements and incentives for energy audits or appliance upgrades during home sales or new rental contracts can encourage households to improve residential end-use efficiency.34
  • Decoupling of Utility Profits from Electricity Sales
    By ensuring cost-recovery for initial incremental capital costs and a rate of return for energy efficiency investments equal to returns on power generation and transmission investments, state regulators can make utilities indifferent between energy efficiency investments and power generation investments.35,36 Decoupling programs can also serve to adjust electricity rates periodically to maintain stable utility revenues despite increases or decreases in electricity consumption (see C2ES factsheet on Decoupling).
  • Utility-Based Incentive Programs
    Several states have adopted different models of utility-based direct energy efficiency incentive programs which disseminate efficiency information, subsidize energy audits, provide incentives for energy efficient new residential construction, or offer rebates for efficient equipment. For example, electricity consumers in northern California face a “systems benefit charge” which is pooled and administered by distribution utilities for system-wide energy efficiency investments. Vermont has created an independent energy efficiency utility to administer energy efficiency projects. States such as New York, Wisconsin, and Ohio administer energy efficiency investments through state agencies.
  • Energy Efficiency Standards
    Efficiency standards have been mandated at the federal level for a wide variety of residential products.37 Industry associations often develop voluntary energy efficiency standards as a way to stay ahead of federal regulations and identify premium products.38 Energy efficiency standards have been one of the two largest sources of CO2 emission reductions in the buildings sector.39 Some analysts argue that efficiency increases due to energy standards are modest compared to energy efficiency gains that can be realized through higher energy prices, which can be achieved through a price on carbon. For example, in an econometric study, researchers found a 5 percent increase in water heater efficiency due to high prices during the oil crises in the 1970s, compared to a 2 percent increase due to energy standards in 1990.40
  • Voluntary Labeling
    Labeling systems such as the ENERGY STAR® program can lower information gaps in the residential sector. The ENERGY STAR® program is one of the two largest sources of CO2 emissions reductions in the buildings sector.41 Voluntary labeling and information dissemination programs can provide clear financial and technical information useful for household decision-making, such as simple financial analyses and identification of a subset of best-in-class products from which consumers can choose.
  • Non-Monetary Interventions
    Programs such as the Sacramental Municipal Utility District (SMUD)’s ) “smiley face” experiment may help to address behavioral barriers. SMUD included smiley faces on bills of customers whose usage was low relative to nearby households, and frowning faces on households with high usage. This induced an energy savings of approximately 2 percent relative to households with standard bills. These and other interventions which increase access to information, or use framing, social pressure, or default options can help to change behaviors to improve end-use energy efficiency.42,43
  • Behavioral Response Research
    There is limited empirical data on the behavioral response to policy interventions to improve energy efficiency; such data can be used to design better policies to lower behavioral barriers to energy efficiency.

Related Business Environmental Leadership Council (BELC) Company Activities

Related C2ES Resources

10-50 Workshop Energy Efficiency Papers

Gilbert Metcalf, Tufts University (Overview) (pdf)

Lynn Price and Ernst Worrell, Lawrence Berkeley National Laboratory (pdf)

Vivian Loftness, Carnegie Mellon University (pdf)

Richard Newell, Resources for the Future (pdf)

Appliances and Global Climate Change: Increasing Consumer Participation in Reducting Greenhouse Gases, 2000 

Brown, M. A., Southworth, F., and Stovall, T. K.  2005.  Towards a Climate-Friendly Built Environment.

The U.S. Electric Power Sector and Climate Change Mitigation, 2005 

What’s Being Done in the States:
Appliance Efficiency Standards,   
Energy Efficiency Resource Standards

Further Reading/Additional Resources

American Council for an Energy-Efficient Economy (ACEEE).  Consumer Guide To Home Energy Savings

U.S. Department of Energy (DOE), Energy Efficiency and Renewable Energy Program. 
-    Appliances and Commercial Equipment Standards

Dubin, J. A.  1992.  “Market Barriers to Conservation: Are Implicit Discount Rates Too High?” California Institute of Technology Working Paper.

Electric Power Research Institute. 2009. Assessment of Achievable Potential from Energy Efficiency and Demand Response Programs in the U.S. Technical Report # 1016987.  January.

Gillingham, K., Newell, R., and Palmer, K.  2009.  Energy Efficiency Economics and Policy.  Resources for the Future Discussion Paper # 09-13.  April. 

Greening, L. A., Greene, D., Difiglio, C.  2000. “Energy efficiency and consumption - the rebound effect - a survey.”  Energy Policy. Vol 28, p. 389-401. 

Howarth, R. B., Haddad, B. M., Paton, B. 2000. “The economics of energy efficiency: insights from voluntary participation programs.”  Energy Policy. Vol. 28, page 477-486.

Koomey, J. G., Mahler, S. A., Webber, C., and McMahon, J. 1998. Projected Regional Impacts Of Appliance Efficiency Standards For The U.S. Residential Sector. LBNL-39511.

Kushler, M., York, D., Witte, P. 2006. Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Incentives.  ACEEE report # U061. October.

McKinsey and Company, 2007. Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost? December. 

McKinsey and Company, 2009. Unlocking Energy Efficiency in the U.S. Economy.  July. 

Meyers, S, McMahon, J. E., McNeil, M., and Liu, X.  2003. “Impacts of US Federal Energy Efficiency Standards for Residential Appliances,” Energy. Vol 28, June: 755–67.

Newell, R., Jaffe, A. and Stavins, R. 1998. “The Induced Innovation Hypothesis and Energy-Saving Technological Change,” Resources for the Future, Discussion Paper, October.

Train, K. 1985.“Discount Rates in Consumers’ Energy-Related Decisions: A Review of the Literature.” Energy Vol. 10, No. 12: 1243-1253.

1 U.S. Environmental Protection Agency.  2009 U.S. Greenhouse Gas Inventory Report.
2 In contrast, commercial building electricity consumption is largely driven by the size of lighting, computer, and other electronic loads.  Brown, M. A., Southworth, F., and Stovall, T. K.  2005.  Towards a Climate-Friendly Built Environment. page ES-iv. 
3 U.S. Census Bureau. American Housing Survey.
4 Brown et al. 2005.
5 Brown et al. 2005, page 31.
6 American Council for an Energy-Efficient Economy (ACEEE).  Consumer Guide To Home Energy Savings.
7 U.S. Department of Energy.  Appliance Success Stories.
8 Flex Your Power.  2009. Clothes Dryers Product Guides
9 ACEEE. 2007. Consumer Guide to Home Energy Savings: Cooking.
10 ACEEE, Cooking, 2007.
11 NRC (National Research Council). 2009. Realistic Prospects for Energy Efficiency in the United States. Washington, D.C.: National Academies Press.
12 Primary energy is defined as the energy contained in the fuels (e.g., coal, natural gas, and petroleum) consumed directly or indirectly by the household. The delivered energy is the energy actually consumed by the household and will reflect conversion and transmission losses from the primary energy. The delivered energy from natural gas used directly in a household is about the same as the primary energy from natural gas, except for any losses from transportation. In contrast, the primary energy of electricity is often 2-3 times higher than the delivered energy of electricity used by the household, depending on the resource mix (of coal, natural gas, nuclear, renewable, etc.) used to produce the electricity and taking into account the energy losses that occur during the generation and grid transmission of electricity. For example, in the case of coal-fueled electricity, the primary energy is the energy value of the coal used in the power plant. The delivered energy is the energy value of electricity delivered to a home, which will be less than the primary energy because power plants convert only a fraction of the primary energy to electricity and then electricity is lost during transmission and distribution.
13 The GHG emissions associated with a unit of primary energy (measured in quadrillion British thermal units (Btus) or quads) depends on the fuel mix. For example, as U.S. electricity generation becomes less carbon-intensive through the use of more renewables, nuclear, and natural gas instead of coal, the GHG emissions per unit of primary energy will decrease.
14 S. Meyers, J. E. McMahon, M. McNeil and X. Liu, “Impacts of US Federal Energy Efficiency Standards for Residential Appliances,” Energy 28 (June 2003): 755–67. See also S. Meyers, J. E. McMahon, M. McNeil and X. Liu, “Realized and Prospective Impacts of U.S. Energy Efficiency Standards for Residential Appliances,” Lawrence Berkeley National Laboratory, LBNL-4950, June 2002.
15 Assumes a 73.8 percent capacity factor (source: EIA), and 50-year lifetime for a coal power plant, and a CO2 emissions rate equal to the U.S. coal fleet average emissions rate, calculated from the EPA Emissions Inventory and the Energy Information Administration’s Electric Power Annual 2007 report.
16 McKinsey and Company, 2009. Unlocking Energy Efficiency in the U.S. Economy.  July. 
17 Costs and emission reductions assessed from present to 2030 with a 7 percent discount rate (cost/savings in 2009$). McKinsey and Company, 2007. Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost? December: p. ES-xiii.  The GDP deflator was used to convert 2005 dollars to 2009 dollars.
18 McKinsey and Company, 2009.
19 Cost of conserved energy is an energy efficiency cost metric defined as the ratio between the incremental levelized annual cost for the efficient appliance and the annual electricity savings in comparison with a baseline appliance. Levelized annual costs are the sum of annual electricity and maintenance costs (if any) and amortized capital costs at a given discount rate. 
20 Koomey, J. G., Mahler, S. A., Webber, C., and McMahon, J. 1998. Projected Regional Impacts Of Appliance Efficiency Standards For The U.S. Residential Sector. LBNL-39511. Cost of conserved energy in 2009 calculated by escalating rates from 1995 by the GDP deflator. All prices are in 2009 dollars.
21 Train, K. 1985. “Discount Rates in Consumers’ Energy-Related Decisions: A Review of the Literature. ”Energy 10(12):1243-1253.
22 McKinsey and Co., 2009
23 Calculated from residential end-use electricity consumption data from the Energy Information Administration’s Annual Energy Review 2008, table 8.9: Electricity End Use, and the U.S. Census Bureau number of households data.
24 U.S. Department of Energy Smart Home Scale
25 U.S. Census. New Residential Construction: Quarterly Starts and Completions by Purpose and Design.
26 U.S. Environmental Protection Agency. 2008. ENERGY STAR® Unit Shipment and Market Penetration Report: Calendar Year 2007 Summary.
27 Gillingham, K., Newell, R., and Palmer, K.  2009.  “Energy Efficiency Economics and Policy.”  Resources for the Future Discussion Paper # 09-13.  April.
28 EIA, Residential Energy Consumption Survey (RECS), Total Energy Consumption, Expenditures, and Intensities, 2005, Table US1.
29 J.D. Power and Associates.  Press Release.  9 November 2005.
30 Dubin, J. A.  “Market Barriers to Conservation: Are Implicit Discount Rates Too High?” in Economics of Energy Conservation.
31 Azevedo, I. L.  “Energy Efficiency and Conservation: Is Solid-State Lighting A Bright Idea?”  ECEEE paper, 2007.
32 Greening, L. A., Greene, D., Difiglio, C.  2000. “Energy efficiency and consumption - the rebound effect - a survey.”  Energy Policy. Vol 28, p. 389-401. 
33 U.S. Department of Housing and Urban Development. Energy Efficient Mortgages and FHA Mortgage Insurance.
34 McKinsey and Co, 2009, page xi-Exhibit F.
35 Kushler, M., York, D., Witte, P. 2006. “Aligning Utility Interests with Energy Efficiency Objectives: A Review of Recent Efforts at Decoupling and Performance Incentives.”  ACEEE report # U061.
36 Solar Electric Power Association (SEPA).  2009.  “Decoupling Utility Profits From Sales.” SEPA Report # 03-09. February.
38 Examples of industry-led appliance standards programs include the Association of Home Appliance Manufacturers’ (AHAM) Standards program, and the 80 Plus Program for 80% greater efficiency power supplies for plug loads developed by electric utilities,
39 Brown et al., 2005, page vi.
40 Richard Newell, Adam Jaffe, and Robert Stavins, “The Induced Innovation Hypothesis and Energy-Saving Technological Change,” Resources for the Future, Discussion Paper, October 1998, and Quarterly Journal of Economics 114, no.3, pp. 941–75.
41 Brown et al., 2005, page vi.
42 Kaufman, L. “Utilities Turn Their Customers Green, With Envy.” New York Times. 30 January 2009.
43 Ayres, Ian et al., 2009, Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage, NBER Working Paper 15386.

Options for reducing energy consumption in residential buildings

Options for reducing energy consumption in residential buildings

Embracing a Cleaner Coal Future

The role of coal in the future U.S. energy mix is a key issue in the Senate debate over climate legislation. Another senator has recently drawn attention to the importance of carbon capture and storage (CCS) technology to coal. On December 3, Senator Robert Byrd (D-WV) issued an opinion piece entitled “Coal Must Embrace the Future.”

West Virginia produces more coal than any state other than Wyoming and accounts for about 13.5 percent of total U.S. coal production. Coal-fueled power plants provide nearly 98 percent of West Virginia’s electricity. Coal mining accounts for about 6 percent of West Virginia’s state GDP and 3 percent of total state employment.

Senator Byrd’s opinion piece addresses issues related to mountaintop removal mining and climate change. Notably, on the question of climate change, Senator Byrd writes that:

To be part of any solution, one must first acknowledge a problem. To deny the mounting science of climate change is to stick our heads in the sand and say “deal me out.” West Virginia would be much smarter to stay at the table. The 20 coal-producing states together hold some powerful political cards.

Disinterested analyses (e.g, from MIT and EPRI) project coal with CCS to be a significant component of a least-cost portfolio of low-carbon energy technologies.  Coal currently provides nearly half of all U.S. electricity. Senator Byrd’s opinion piece reinforces the distinct importance of preserving a significant role for coal in a future U.S. energy supply in order to secure broad political support (i.e., at least 60 votes in the Senate) for action on climate change.

Senator Byrd earlier stated that he did not support the climate and energy bill passed by the House in June (H.R. 2454, the American Clean Energy and Security Act of 2009) “in its present form.” Our recent brief describes the significant investments the House energy and climate bill includes for demonstration and deployment of CCS with coal-fueled power plants. The senator does, however, highlight in his opinion piece that he has been working for the past six months with a group of coal state senators on provisions that could be included in a Senate climate and energy bill that would facilitate a transition to a low-carbon energy future for the coal industry.

In short, Senator Byrd’s opinion piece is a candid assessment of the situation as he sees it: the science supporting man-made climate change is clear; U.S. climate and energy legislation will pass eventually; cooperative, constructive engagement by coal state Senators in crafting such legislation is the best strategy for protecting the interests of their constituents.

Fittingly, one of the most advanced CCS projects in the world recently began operation in Senator Byrd’s home state—American Electric Power’s Mountaineer Plant Carbon Dioxide Capture & Storage Project.

Steve Caldwell is a Technology and Policy Fellow

Dorgan Delves Deeper into CCS

Not surprisingly, Senator Byron Dorgan (D-ND) is interested in carbon capture and storage (CCS) and its application to coal-fueled electricity generation. North Dakota gets almost 90 percent of its electricity from coal, and the state is the 10th largest producer of coal in the United States.

In mid-2008, Senator Dorgan convened a group of stakeholders with interest in CCS under the banner of a “Clean Coal and Carbon Capture and Sequestration Technology Development Pathways Initiative” (CCS Initiative) and asked them to provide input related to a number of key questions regarding CCS. Participants included representatives from the electric power industry, coal industry, manufacturing, labor, academics, and NGOs. The questions posed by the Senator focused on such issues as how much funding for CCS is required to ensure the technology is ready for broad deployment and how the United States can expand its cooperation with other key coal-producing and coal-consuming nations to accelerate international deployment of CCS.

On December 1, Senator Dorgan released a report prepared by the National Energy Technology Laboratory (NETL) that summarized input provided by the CCS Initiative participants.

Providing a Nuclear Boost

This week, Senators Lamar Alexander (R-TN) and Jim Webb (D-VA) released a bill intended, among other things, to dramatically expand the U.S. nuclear reactor fleet and, reportedly, to double the production of nuclear power in the United States by 2020.

In previous blog posts, we have highlighted what proposed climate and energy legislation in the House and Senate does for nuclear power. Many analyses, such as studies by the U.S. Environmental Protection Agency (EPA) and the Energy Information Administration (EIA), agree that the bulk of the most cost-effective initial greenhouse gas (GHG) emission reductions are found in the electricity sector and that nuclear power can play a key role in reducing GHG emissions from electricity generation as part of a portfolio of low-carbon technologies.

Putting a price on carbon, as a GHG cap-and-trade program would do, is likely the best option for expanding nuclear power generation since it makes the cost of electricity from nuclear and other low-carbon technologies more economical compared to traditional fossil fuel technologies. For example, in its analysis of the American Clean Energy and Security Act of 2009 (ACESA) passed by the House of Representatives in June of 2009, EIA projected that nuclear power might provide nearly twice as much electricity in 2030 as it does today.

A key challenge is cost. The construction of much of the existing nuclear fleet saw significant cost overruns and delays, which makes financing the first new plants after a hiatus of several decades difficult. Government loan guarantees can help the first-mover new nuclear power plants overcome the financing challenge. The demonstration of on-budget and on-time construction and operation by these first movers would facilitate commercial financing of subsequent plants.

Could the U.S. undertake a very large expansion of nuclear power? Nuclear power plants are massive undertakings, and a typical plant might cost on the order of $6 billion dollars and take 9-10 years to build from licensing through construction. Nonetheless, 17 applications for construction and operating licenses (COLs) for 26 new reactors are under review by the Nuclear Regulatory Commission (NRC)—all submitted since 2007. One can also look at the historical pace of nuclear power deployment in the United States for a sense of what might be reasonable once the nuclear industry ramps up. More than a third of the 100 gigawatts (GW) of nuclear generating capacity that provides a fifth of U.S. electricity came online in 1971-75, and more than 90 GW of U.S. nuclear power came online in the 1970s and 1980s.

One can see that putting a price on carbon, via cap and trade, will likely spur a significant expansion in U.S. nuclear power over the coming decades (as part of a portfolio of low-carbon technologies) facilitated by loan guarantees to support a few first-mover projects.

Steve Caldwell is a Technology and Policy Fellow

Deploying Our Clean Energy Future

By Eileen Claussen

Fall 2009

This article appears in the Innovations journal special edition, “Energy for Change: Creating Climate Solutions”, published by MIT Press.

Journal Launch Event: November 24, 2009 at the National Academy of Sciences in Washington, DC

Download the Article (pdf)

The United States and the rest of the world face a momentous choice. It is a choice that will determine the nature of our economies and our climate for generations to come. One option is to continue down our current energy path—relying to a substantial degree on fuels and technologies that will result in ever-increasing levels of atmospheric greenhouse gases(GHGs). The other option is to chart a new path—a path by which we protect the climate and rebuild our economies by developing and deploying clean energy technologies.

The choice is obvious: we must pursue a clean energy future.



Click here for more about how to obtain a copy of the entire special edition from MIT Press.




by Eileen Claussen, President--Appeared in the Innovations journal special edition, “Energy for Change: Creating Climate Solutions”, Fall 2009

Going Rogue, DOE Style

Bacteria that produce gasoline.  “Blown wing” technology for wind turbines. Enzymes that capture carbon dioxide. Batteries that store solar energy overnight.  This is a short list of the 37 projects recently selected as the recipients of $151 million in research grants from the Advanced Research Projects Agency-Energy, or ARPA-E. In short, it’s the Department of Energy’s version of going rogue.   

ARPA-E is a new agency within the DOE that aims to fund cutting-edge energy and climate research. This may not be the conventional approach of government programs, but it is not unprecedented: ARPA-E is modeled on a Defense Department program, known as DARPA, that played a significant role in the commercialization of microchips and the Internet along with other high-tech innovations.

ARPA-E was created by Congress in August 2007 under the America COMPETES Act, but was left unfunded until Congress authorized $400 million for the agency in this year’s stimulus bill. The agency began to mobilize its resources this fall. In September, Arun Majumdar, a scientist at the Lawrence Berkeley National Laboratory in California, was confirmed as the agency’s director and soon after announced the winners of the first round of proposal solicitations. The 37 winning projects represent 1% of submitted proposals and include high-risk and high-payoff ideas and technologies in all stages of development. ARPA-E hopes that down the line the more promising projects will get picked up by venture capitalists or major companies willing to invest more resources to bring these projects from the laboratory to the marketplace.

The focus on high risk and high payoff means that ARPA-E must expect failure as well as success. Energy Secretary Steven Chu, one of the original visionaries of the ARPA-E concept, believes a few projects could have “a transformative impact.” In this economic climate, many investors overlook high-risk, but also high-reward, energy research and technology development. ARPA-E is an innovative and welcome approach to keep these projects in the pipeline, as a radical breakthrough in advanced technology could facilitate a U.S.-led transition to a global clean energy economy.        

Olivia Nix is the Solutions intern

Cellulosic Ethanol

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Quick Facts

  • Cellulosic materials, such as agricultural or forestry residues, short rotation woody crops, and a variety of grasses, can be used to produce biofuels like ethanol. The process of converting cellulosic materials to ethanol is more complex than current ethanol production from corn or sugarcane, and the technology is not yet used at commercial scale.
  • Cellulosic ethanol is currently an emerging technology and will require continued technological advancements and reduced costs to become commercially viable. 
  • The Energy Independence and Security Act (EISA) of 2007 includes requirements for cellulosic ethanol use, beginning with 100 million gallons of cellulosic ethanol in 2010 and increasing yearly to 16 billion gallons by 2022. EISA also requires that cellulosic ethanol achieve at least a 60 percent reduction in life-cycle greenhouse gas emissions per gallon relative to gasoline.


Ethanol, an alcohol that can be produced from a wide variety of plant materials as feedstocks, is used as a liquid fuel in motor vehicles. At present corn starch and sugarcane are the two main feedstocks used, respectively producing starch- and sugar-based ethanol. Another type of plant material, cellulose, can also be used to produce ethanol, but doing so requires additional processing to break down the cellulosic materials into sugars. Ethanol produced from cellulose is referred to as cellulosic ethanol.

Cellulosic materials, which provide structure to plants, are found in the stems, stalks, and leaves of plants and in the trunks of trees. The abundance of cellulosic materials – roughly 60 to 90 percent of terrestrial biomass by weight – along with the fact that they are not used for food and feed (unlike corn and sugarcane), are key reasons why cellulosic ethanol and other cellulose-based biofuels have attracted scientific and political interest. Cellulose and hemicellulose, which are referred to collectively as cellulosic materials, can be broken down into sugars, which can then be fermented into ethanol. Cellulosic materials being examined for the production of biofuels include those derived from switchgrass, prairie grasses, short rotation woody crops, agricultural residues, and forestry materials and residues.

Ethanol is chemically the same whether it is produced from corn, sugarcane, or cellulose, but the production processes are different and the necessary production technologies are in different stages of development. Corn- and sugar-based ethanol production technologies have been used at commercial scale for decades (see Climate TechBook: Ethanol). In contrast, some of the technologies needed to produce cellulosic ethanol, an “advanced biofuel” (broadly defined as a biofuel derived from organic materials other than simple sugars, starches, or oils1) are quite new. As of mid-2009, no large, commercial-size cellulosic ethanol facilities were in operation in the United States.


The production of ethanol from cellulosic materials is more complicated than the processes employed for starch- or sugar-based ethanol, because the complex cellulose-hemicellulose-lignin structure in which cellulosic materials are found needs to be broken up before fermentation can begin. The cellulosic ethanol conversion process consists of two basic steps: pretreatment and fermentation. This two-step process increases the complexity of, and processing time required for, converting the cellulosic biomass into ethanol, relative to the processes used to convert corn or sugarcane to ethanol.

  • Pretreatment
    Pretreatment is necessary to prepare  cellulosic materials for a subsequent hydrolysis step which converts the hemicellulose and cellulose into sugars. Typical pretreatment involves a chemical pretreatment step (e.g., acid) and a physical pretreatment step (e.g., grinding). These steps make the cellulose more accessible to enzymes that catalyze its conversion to sugars in a subsequent step and begin the breakdown of  hemicellulose into sugar. Following pretreatment, the conversion of cellulose to sugar is completed using a chemical reaction called hydrolysis, normally employing enzymes secreted by certain organisms (typically fungi or bacteria) to catalyze the reaction. The pretreatment and hydrolysis process usually results in one co-product, lignin, which can be burned to generate heat or electricity. Using lignin instead of a fossil-based energy source to power the conversion process reduces cellulosic ethanol’s life-cycle greenhouse gas (GHG) emissions, compared to corn-based ethanol. (This is also an example of biomass substitution for fossil fuels; for more information, see Climate TechBook: Agriculture Overview.)
  • Fermentation
    Once the sugars have been obtained from the cellulosic materials, they are fermented using yeast or bacteria in processes similar to those used for the corn-based ethanol production. The liquid resulting from the fermentation process contains ethanol and water; the water is removed through distillation, again similar to the corn-based ethanol process. Finding the most effective and low-cost enzymes for the pretreatment process and organisms for the fermentation process has been one of the main areas of research in the development of cellulosic ethanol.2

The type of feedstock and method of pretreatment both influence the amount of ethanol produced. Currently, one dry short ton3 of cellulosic feedstock yields about 60 gallons of ethanol.4 Projected yields with anticipated technological advances are as high as 100 gallons of ethanol per dry short ton of feedstock.5

Environmental Benefit/Emission Reduction Potential

Cellulosic ethanol has the potential to provide significant lifecycle GHG reductions compared to petroleum-based gasoline. In addition, the use of cellulosic materials to produce ethanol may yield a variety of other environmental benefits relative to corn-based ethanol.

  • GHG emission reduction potential
    Researchers at the University of California at Berkeley estimated that on a life-cycle basis, cellulosic ethanol could lower GHG emissions by 90 percent relative to petroleum-based gasoline.6 Other analyses have shown that cellulosic ethanol produced using certain feedstocks could be carbon-negative, which means that more carbon dioxide (CO2) is removed from the atmosphere than is emitted into the atmosphere over the entire life-cycle of the product (see Climate TechBook: Agriculture Overview for a discussion of carbon storage in plants and soils).7 However, these studies do not include estimates of emissions due to indirect land use change (discussed under “Obstacles to Further Development”), which can affect GHG emission profiles significantly.

    An analysis undertaken by the California Air Resources Board as it developed the California Low Carbon Fuel Standard found significant life-cycle GHG emission reductions from cellulosic ethanol relative to gasoline (see preliminary estimates in Table 1).8

Table 1: Life-cycle GHG Intensity for Cellulosic Ethanol, based on the California GREET Model9


FuelFeedstockCA GREET GHG
GHG Reduction
Compared to Gasoline
Cellulosic EthanolFarmed Trees1.6098.3%
Cellulosic EthanolForest Residues21.4077.7%
California Gasoline (incl. 10% ethanol) 95.9 

Note: These impacts do not include the impact of indirect land use change on GHG emissions.

  • Other environmental considerations
    Using biomass for transportation fuels raises questions regarding land use and land use change, fertilizer and pesticide use, water consumption, and energy used for production and cultivation of feedstocks. Grasses and trees generally require lower inputs than other row crops such as corn. For example, grasses (e.g., switchgrass) are perennial crops that do not need to be re-planted for up to 20 years. Both grasses and trees require fewer passes of field equipment compared to annual crops such as corn,10 and they generally have lower fertilizer and pesticide needs.11 In addition, cellulosic feedstocks can be grown on marginal lands not suitable for other crops, although in this case per acre yields can be lower than feedstocks grown on other lands. Feedstocks can also include a variety of residues (e.g., agricultural and forestry residues). Where agricultural and forestry residues are used, care must be taken to ensure long-term soil health.


The increased complexity and longer processing time associated with producing ethanol from cellulosic materials also makes cellulosic ethanol more expensive to produce than corn- or sugarcane-based ethanol. As of early 2009, no commercial-scale facilities in the United States were producing cellulosic ethanol and costs will remain largely uncertain until the technology is demonstrated at a commercial scale. In 2006, U.S. Department of Energy (DOE) researchers reported achieving a cellulosic ethanol production cost of $2.25 per gallon.12 At this cost, cellulosic ethanol is competitive with petroleum-based gasoline when oil prices are near $120 per barrel.13

Two key factors that shape the cost of producing cellulosic ethanol are the high capital costs and uncertain feedstock costs.

  • High capital costs
    A first-of-its-kind cellulosic ethanol plant with a capacity of 50 million gallons per year is estimated to cost $375 million, roughly 6 times the capital cost of a similarly sized corn ethanol plant.14 These high initial investment costs can present a considerable hurdle to deployment, especially given the greater risk associated with investments in new technologies.  As the technology matures, future plants are expected to have reduced capital costs.15
  • Uncertain feedstock costs
    Like all biofuels, costs of cellulosic ethanol are highly sensitive to feedstock costs. Therefore, estimating biomass supply costs is critical to estimating future cellulosic ethanol prices. Future feedstock production costs are uncertain and predictions depend on the assumptions made by analysts. Some predict that as the cellulosic ethanol industry matures, establishing a larger market for cellulosic crops and allowing feedstock producers to gain experience, costs could decline. On the other hand, as demand increases for cellulosic materials and the supply of low-cost waste products is used up, costs could increase. If technological advances and experience bring down capital costs, uncertain feedstock costs will continue to be an important factor in determining the cost competitiveness of cellulosic ethanol with other liquid motor fuels.

    The overall cost of cellulosic ethanol is expected to decline in the future as technological advances are made, particularly in pretreatment steps. Table 2 provides a summary of cost estimates from several recent studies.

Table 2: Estimated future costs of cellulosic ethanol and price of oil where ethanol becomes cost-competitive

StudyCellulosic Ethanol
Production Cost

(per gallon)
Cost of Oil
(per barrel)
Projected YearOther Assumptions
Wyman, 2007$0.75$40 Feedstock accounts for 2/3 of production cost; $50/ton feedstock
Goldemberg, 2007$1.07$602012 
Hemelinck et al., 2005$1.50
Aden, 2002$1.00-$1.35$55-$702015-2020Biomass feedstock cost ~$25-$50/dry short ton

Sources: Goldemberg, J. (2007). "Ethanol for a Sustainable Energy Future." Science 315(5813): 808-810. Aden, A., M. Ruth, et al. (2002). “Lignocellulosic Biomass to Ethanol Process Design and Economics Utilizing Co-Current Dilute Acid Prehydrolysis and Enzymatic Hydrolysis for Corn Stover.” Other Information: PBD: 1 Jun 2002. Hamelinck, C. N., van Hooijdonk, G., and Faaij, A. P. C. (2005) “Ethanol from Lignocellulosic Biomass: Techno-economic Performance in Short-, Middle-, and Long-term.” Biomass and Bioenergy 28(4): 384-410. Wyman, C. E. (2007). “What is (and is not) Vital to Advancing Cellulosic Ethanol.” TRENDS in Biotechnology 25(4): 153-157.


Current Status

Cellulosic ethanol is not yet produced at a commercial scale in the United States. Public and private efforts continue to support research on cellulosic ethanol, and technological advances are expected to reduce costs and improve production methods. As of early 2009, no commercial-size cellulosic ethanol facilities were in operation in the United States. However a number of demonstration plants are in operation and a number of commercial-size facilities are expected to begin production by 2011.16 In 2007, the DOE funded six facilities with annual plant production goals ranging from 11.4 million to 40 million gallons of cellulosic ethanol.17 Although two of the funded companies canceled their plans to move forward due to economic difficulties, the remaining four companies intend to begin production by 2010-2011 and, together, produce a minimum of 70 million gallons of cellulosic ethanol per year. In 2007, the National Academy of Sciences found that the United States, using currently available crop residues as a feedstock, could produce about 10 billion gallons of cellulosic ethanol per year. This value assumes a production yield of 60 gallons of cellulosic ethanol per dry short ton, requiring the use of 160 million dry short tons of crop residues. If technological improvements increase production yields to 90 gallons per dry short ton, as some studies expect, annual production volumes could be about 14 billion gallons of cellulosic ethanol per year.18

In addition to production of ethanol, cellulosic materials are also being examined as a way to produce other biomass-based substitutes for existing fossil fuels (e.g., gasoline, diesel, and jet fuel) and biobutanol. Like the cellulosic ethanol production process, the thermochemical process that produces biomass-based replacements for existing fossil fuels is not yet at commercial scale, and research in this area is ongoing with the support of the DOE.  Biobutanol, like ethanol, is an alcohol-based fuel that can be produced from biomass feedstocks. Biobutanol can be added to gasoline at higher blending quantities than ethanol (in unmodified engines), has a higher energy content per volume than ethanol, and is less corrosive, enabling transport in existing petroleum pipelines.19  Biobutanol is currently in research stages and no commercial production facilities currently exist.

Overall, as of January 2009, there were 26 projects using one of these three pathways (cellulose to ethanol, biomass-based substitutes for existing fossil fuels, or biobutanol) to produce fuel from cellulosic materials.20

Obstacles to Further Development or Deployment

Technological immaturity and high cost are two key barriers to cellulosic ethanol at present. Making this fuel competitive in the marketplace will require more experience and significantly reduced production costs, including capital costs. If the costs of cellulosic ethanol production come down as the technology matures, this fuel will still face some, although not all, of the obstacles that corn-based ethanol currently faces.

  • Flex-fuel vehicle deployment
    Recent research indicates that current passenger vehicles may be capable of running on fuel blends containing up to 20 percent ethanol by volume (E20).21 Higher-level blends (up to E85) can be used by flex-fuel vehicles. Flex-fuel modifications are relatively inexpensive when made during vehicle production (estimated to be $50 - $100 per vehicle22), but retrofitting existing vehicles could be costly. As of 2008, an estimated 7.3 million light-duty E85 vehicles,23 or roughly 3 percent of the roughly 250 million passenger vehicles currently registered in the United States,24 were flex-fuel vehicles. Higher-level blends also require dedicated pumps to dispense the fuel. Currently most of the 1,600 stations with E85 dispensing capability are concentrated in the Midwest, where most ethanol production occurs.25
  • Infrastructure requirements
    Ethanol cannot be shipped in existing crude oil or petroleum fuel pipelines, because ethanol can absorb water and other impurities that accumulate in these pipes, affecting fuel quality, and because ethanol’s corrosiveness can shorten pipeline lifetime. Instead, ethanol is currently transported via rail (60 percent of domestic ethanol shipped), truck (30 percent), and barge (10 percent).26 Currently in the United States, cellulosic feedstocks can be most easily grown in the Midwest and Southeast, but much of the demand for transportation fuels is along the coasts. Thus, large volumes of ethanol may need to be shipped long distances to reach areas of high demand in the future. Without substantial infrastructure investment, increased ethanol shipping could result in significant bottlenecks on both rail and highway networks. These problems could be reduced by encouraging the use of high-level ethanol blends (i.e., E85) regionally instead of low-level blends (E10) on a national basis. Distributing and using ethanol close to where it is produced – i.e., in the Midwest and Southeast – would also minimize the GHG emissions associated with transporting ethanol.27,28
  • Food versus fuel
    Unlike corn ethanol (or ethanol produced from sugarcane), cellulosic ethanol does not necessarily compete with food markets for feedstock directly. However, the production of cellulosic crops is constrained by land availability, which is a limited resource. To decrease competition with other agricultural crops, cellulosic feedstocks could be grown on degraded or marginal farmland unsuitable for production of food crops. However, doing so can decrease yields or increase input energy and fertilizer requirements, which could result in higher feedstock prices and increased GHG emissions.
  • Land use change
    The production of fuels from biomass feedstocks has direct and indirect impacts on land use. For example, clearing grasslands or forests to plant biofuel crops are direct land use changes that result in releases of carbon stored in soils and vegetation. Indirect land use change refers to the land use changes that result from the impacts on land and biomass prices due to increased demand for biomass for biofuel production and the interactions with ongoing demand for food, feed, and fiber products.

    Accounting for indirect land use changes is particularly challenging and relies upon a number of estimates and assumptions. Recent studies have shown that the GHG impacts of indirect land use changes could significantly affect the overall life-cycle GHG emissions of biofuels. Both direct and indirect land-use change remain important areas of concern and a topic of continued scientific research.

Policy Options to Help Promote Cellulosic Ethanol

Federal, state, county, and local governments currently support biofuels in a variety of ways. For a discussion of policies that support biofuel production and consumption generally, see Climate TechBook: Biofuels Overview. The following discussion summarizes policies that specifically target cellulosic ethanol and other advanced biofuels.

  • Mandates requiring biofuel use
    The Energy Independence and Security Act (EISA) of 2007 establishes a renewable fuel standard that steadily increases U.S. biofuel use to 36 billion gallons by 2022. Advanced biofuels comprise 21 billion gallons of the total requirement, with cellulosic ethanol making up 16 billion gallons.
  • Subsidies and tax credits
    In addition to subsidies and tax benefits already in place promoting corn ethanol (discussed in Climate TechBook: Ethanol), producers of cellulosic biofuels benefit from an income tax credit of $1.01 per gallon, more than double the $0.45 tax credit available for corn ethanol.29
  • Funding for pre-commercial scale plants
    Federal funding for pilot-scale advanced biofuel plants will help accelerate advanced biofuels toward profitability. See the ‘Current Status of Technology’ section for more detail on current federal funding.

Related Business Environmental Leadership Council (BELC) Company Activities

Related C2ES Resources

Biofuels for Transportation: A Climate Perspective, 2008.
Agriculture's Role in Greenhouse Gas Mitigation, 2006.
Climate TechBook: Biofuels Overview, 2009.
Climate TechBook: Ethanol, 2009.

Further Reading/Additional Resources

National Renewable Energy Laboratory, “Biomass Research

Renewable Fuels Association, “Cellulosic Ethanol

U.S. Department of Energy (DOE)


1 Other examples of advanced biofuels include bio-based hydrocarbon fuels (e.g., diesel fuel) from cellulosic materials, biogas from landfills and sewage waste treatment, and butanol or other alcohols produced from organic matter.
2 The U.S. Department of Energy (DOE) is working with biotechnology and biofuel companies to reduce enzyme costs, which are currently one of the key barriers to cost-competitive production of cellulosic ethanol. See U.S. DOE. “Testimony of Alexander Karsner, Assistant Secretary, Office of EERE, Before the Subcommittee on Conservation, Credit, Energy & Research; Committee on Agriculture; U.S. House of Representatives.” March 7, 2007.
3 A dry short ton of material has been dried to a relatively low, consistent moisture level (dry weight).
4 This is based on a mix of feedstocks, mainly waste products and some energy crops. For more information, see Tables 4.3 and 4.5, Committee on Assessment of Resource Needs for Fuel Cell and Hydrogen Technologies, National Research Council. Transitions to Alternative Transportation Technologies: A Focus on Hydrogen. Washington, DC: National Academies Press, 2007.
5 Granda, Cesar B., L. Zhu, and M.T. Holtzapp. (2007). “Sustainable Liquid Biofuels and Their Environmental Impact.” Environmental Progress 26(3): 233-250.
6 Farrell, A. E., R. J. Plevin, et al. (2006). "Ethanol Can Contribute to Energy and Environmental Goals." Science 311(5760): 506-508.
7 High-diversity prairie grasses and agricultural residues, such as corn stover, have both been studied as potentially carbon negative feedstocks when indirect land use change impacts are not included. For more, see Tilman, D., J. Hill, et al. (2006). "Carbon-Negative Biofuels from Low-Input High-Diversity Grassland Biomass." Science 314(5805): 1598-1600.
 Sheehan, J., A. Aden, et al. (2003).
8 For more information, see California Air Resources Board, Low Carbon Fuel Standard Program.
9 These life-cycle GHG intensities were calculated for the purposes of the California Low-Carbon Fuel Standard program. For more information on the analysis, see California Air Resources Board, Stationary Source Division. Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Farmed Trees by Fermentation. Release Date: February 27, 2009. California Air Resources Board, Stationary Source Division. Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Forest Waste, Release Date: February 27, 2009. and California Air Resources Board. Fuel GHG Pathways Update, Presentation: January 30, 2009. 
10 Parrish, D.J. and J.H. Fike. (2005). “The Biology and Agronomy of Switchgrass for Biofuels.” Critical Reviews in Plant Sciences. 24(5): 423-459.
11 Fertilizer impacts can include eutrophication (increased chemical nutrients in an ecosystem) that leads to hypoxia (oxygen depletion) in aquatic environments.
12 Goldemberg, J. (2007). "Ethanol for a Sustainable Energy Future." Science 315(5813): 808-810.
13 All oil prices used for comparison in this section are calculated assuming refinery costs and profits are 30% of crude oil costs, and that distribution and marketing costs and taxes are equivalent for ethanol and fossil fuels.
14 Energy Information Administration. (2007). “Biofuels in the U.S. Transportation Sector.” Accessed April 25, 2009.
15 McAloon, A., F. Taylor, et al. (2000). Determining the Cost of Producing Ethanol from Corn Starch and Lignocellulosic Feedstocks. Other Information: PBD: 25 Oct 2000: Size: 30 p.
16 Fehrenbacher, K. (2008). “11 Companies Racing to Build U.S. Cellulosic Ethanol Plants.” Accessed: March 12, 2009.
17 U.S. Department of Energy. (2007). “DOE Selects Six Cellulosic Ethanol Plants for Up to $385 Million in Federal Funding.” Press Release. Accessed: March 12, 2009.
18 Committee on Assessment of Resource Needs for Fuel Cell and Hydrogen Technologies, National Research Council. Transitions to Alternative Transportation Technologies: A Focus on Hydrogen. Washington, DC: National Academies Press, 2007.
19 Suszkiw, Jan. (2008). “Banking on biobutanol: new method revisits fermenting this fuel from crops instead of petroleum.” Agricultural Research. 56(9):8-9.
20 For more information, see Renewable Fuels Association, “Celluosic Ethanol.”
21 State of Minnesota. (2008). “E20: The Feasibility of 20 Percent Ethanol Blends by Volume as a Motor Fuel.” Minnesota Department of Agriculture and the Minnesota Pollution Control Agency.
22 Yost, N. and D. Friedman. (2006). The Essential Hybrid Car Handbook: A Buyer’s Guide. The Lyons Press: 160 pages.
23 U.S. Department of Energy. (2009). “Light Duty E85 FFVs in Use.” Excel file. Accessed April 27, 2009.
24 Bureau of Transportation Statistics (2009). “National Transportation Statistics, 2009.” Accessed April 27, 2009.
25 For more information on the distribution of E85 stations, see U.S. DOE, “E85 Fueling Station Locations.”
26 U.S. Department of Agriculture. (2007). “Ethanol Transportation Backgrounder.” Accessed April 27, 2009.
27 Morrow, W.R., W.M. Griffin, H.S. Matthews. (2006). “Modeling switchgrass derived cellulosic ethanol distribution in the United States.” Environmental Science & Technology. 40, 2877-2886.
28 Ibid (Wakeley).
29 Renewable Fuels Association. (2008). “Cellulosic Biofuel Producer Tax Credit.” Accessed April 27, 2009.

Ethanol and other biofuels derived from cellulosic materials, e.g. agricultural or forestry residues, short rotation woody crops, and a variety of grasses.

Ethanol and other biofuels derived from cellulosic materials, e.g. agricultural or forestry residues, short rotation woody crops, and a variety of grasses.

Revving Up Transportation

At the Environment and Public Works hearing on Tuesday, both Secretary LaHood of the Department of Transportation (DOT) and Administrator Jackson of the Environmental Protection Agency (EPA) explained that emissions reductions progress is already underway in the transportation sector. Sec. LaHood stated, “We have much to do, but we are not waiting to begin taking aggressive and meaningful action.” 

While the Congress has been working towards establishing comprehensive climate legislation, the DOT, EPA, and Department of Housing and Urban Development (HUD) have been collaborating to develop Federal policies that could help create sustainable communities. The aim is to support and shape state and local land use decisions and infrastructure investments to develop livable communities where people have the option to drive less. According to the DOT, on an average day American adults travel 25 million miles in trips of a half-mile or less and almost 60 percent use motor vehicles for this travel. Walking, biking, and riding transit, regardless of the area where an American might live, are excellent alternatives. “If the presence of these alternatives promotes less driving, then that will reduce road congestion, reduce pollutants and greenhouse gases, and use land more efficiently."

Clean Energy Solutions Take Center Stage

Low-Carbon SolutionsAs President Obama called for U.S. leadership in clean energy technology in a speech at MIT Friday, up on Capitol Hill members of the U.S. Climate Action Partnership (USCAP) demonstrated how they’re already putting innovative ideas into practice.

At a Clean Technology Showcase, we joined six corporations and fellow USCAP members to present cutting-edge solutions to a low-carbon future. While the displays varied from solar shingles to renewably-sourced swimwear to advanced coal technology, all participants agreed that making these solutions mainstream requires enacting comprehensive energy and climate legislation. Economy-wide federal policies that put a price on carbon and deliver incentives for clean energy development and deployment are today’s big missing ingredient.

Instead of the policy talk more common to Capitol Hill, Friday’s event focused on existing and emerging solutions to our energy and climate concerns. It proved an uplifting view of the opportunities that a clean energy economy can deliver.

Yes We Will(!) Lead the Clean Energy Economy of Tomorrow

This afternoon President Obama delivered an energizing speech to students and faculty of MIT on the need for the United States to draw on its “legacy of innovation” in transitioning to a clean energy future. We are engaged in a “peaceful competition” to develop the technologies that will drive the future global energy economy and he wants to see the U.S. emerge as the winner. The President further declared that in making the transition from fossil fuels to renewable energy, we can lead the world in “preventing the worst consequences of climate change."

After citing the ongoing efforts of his Administration on this front, including the $80 billion in the American Recovery and Reinvestment Act (a.k.a the “Stimulus Package”) for clean energy, he talked about what’s needed next – comprehensive legislation to transform our energy system.  He noted that this should include sustainable use of biofuels, safe nuclear power, and more use of renewables like wind and solar technology, all while growing the U.S economy. And he applauded Senator Kerry – also in attendance for the speech – for his work with Senator Boxer on their legislation.

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