Why cheap energy is the biggest threat to climate action

Why cheap energy is the biggest threat to climate action

Falling oil prices and stagnant energy costs have disincentivized tangible action on climate change.

This article originally appeared at the Shelton Group blog.

In last week's State of the Union address, President Barack Obama generated plenty of headlines for his statement  that “no challenge poses a greater threat to future generations than climate change.”

The nation's chief executive also threw down the gauntlet to Capitol Hill, saying, “That’s why I will not allow this Congress to endanger the health of our children by turning back the clock on our efforts.”

The efforts Obama references are most likely the Corporate Average Fuel Economy standards for auto manufacturers (set to gradually increase to 54.5 miles per gallon by 2025) and the Clean Power Plan that the EPA proposed in June to cut carbon pollution from power plants.

While the 56 percent Republican majority in the newly seated 114th Congress certainly could pose a threat to these initiatives, the data shows that an even greater threat is posed by declining energy prices and the (real) priorities of most Americans.

So, what are those priorities?

First and foremost, low energy bills. We found in our Energy Pulse 2014 study that Americans’ biggest energy concern is their “ability to pay for energy” (34 percent), not the “environmental impact of our energy use” (18 percent) or that “we’re using up our energy resources at the expense of future generations” (15 percent).

The fact is residential electricity prices have remained relatively affordable and stable in recent years.

Americans may claim that their home utility costs concern them, but based on self-reported bills (which average only about 5 percent of median monthly earnings), those costs aren’t high enough to force behavior change or make energy-efficient improvements a priority. So as the supply of affordable domestic natural gas has increased and the economy has improved, the economic driver for action has declined.

Likewise, the growth in U.S. shale oil production has driven gasoline prices down, creating the same dynamic for transportation.

When the price at the pump was nearing $4 a gallon, many Americans changed their driving habits, and purchasing shifted to more fuel-efficient vehicles. But now, with global oil prices down by more than 50 percent since June, the automotive industry is experiencing the best sales they’ve seen in as many as 13 years, with Americans primarily flocking back to larger trucks, SUVs and luxury sedans.

This brings us to the second American consumer priority: comfort. This applies to both the preference for big, comfortable cars and the desire to live in temperature-controlled comfort in their homes.

When asked to choose between competing home expenditure priorities in Energy Pulse 2014, Americans prioritized “making my home more comfortable” ahead of “making my home more energy efficient,” “healthier/safer” or “more beautiful.” When energy prices are low, Americans prioritize making themselves comfortable, not conserving energy.

Finally, the third American consumer priority that most threatens climate change initiatives is convenience.

Americans simply expect the lights to come on when they flip the switch. Several coal-dependent, investor-owned utilities have leveraged this priority in their public response to the proposed Clean Power Plan. Southern Company CEO Thomas Fanning was recently quoted in Businessweek as saying, “I don’t think we have the ability to maintain a reliable system” (if forced to follow the proposed rules).

So what does this mean for energy conservation messaging? Without the “stick” of high prices, or truly compromised reliability, it’s hard to get the attention of most Americans.

Encouraging conservation with “carrots” such as purchase rebates or tax incentives is very difficult in the current environment. The best we can do is keep the “real” priorities in mind as we develop energy conservation messaging (prioritize the comfort benefits of energy efficiency rather than the savings benefits while prices are low), and we must increase the size of the carrots. A $20 per ton rebate for a high-efficiency air conditioning system is just not going to cut it.