August 3, 2001

August 3, 2001 | WebMemo on Energy and Environment

Summary of the Center for Data Analysis Evaluation of the President's National Energy Plan

The Heritage Foundation's evaluation of President Bush's National Energy Plan is the first independent, integrated analysis of this important public policy initiative.  Prepared by the Center for Data Analysis of The Heritage Foundation, in partnership with DRI/WEFA, Inc. (the nation's premier economics consulting firm), this study evaluates the plan's effects in major energy markets and in the general economy.

The economic and industry models used in the study compare the Bush Plan to a baseline that assumes current law and regulations continue from 2000 to 2030.  Thus, the estimates reflect the differences in energy supply, demand, infrastructure, price, and economic performance between what would occur by 2030 under current law and the alternative results under the Bush Plan.

The economic basis for pro-growth, taxpayer-friendly changes to the nation's energy policies is compelling.  Americans will spend $74.4 billion more on energy this year than in 1999, an average of $934 per family.  The largest increase comes from gasoline ($41.2 billion), followed by natural gas ($13.9 billion), electricity ($10.5 billion), and fuel oil ($8.8 billion).  These costs only will rise if the decision-makers in Washington fail to adopt a long-term energy plan. 

Compared with what would occur under current law by 2030, the Bush Plan, if enacted and implemented in its entirety, would produce the following results:  

  • Improve the nation's energy efficiency by 20 percent in 2020 compared with what otherwise would occur without the Bush Plan.

  • Reduce total demand for energy. 
    Energy conservation and efficiency programs would reduce the total demand for energy by almost 4.2 quadrillion British thermal units compared with what otherwise would occur in 2030 without Bush Plan - enough energy to run almost 40 million homes for one year.

  • Ease electricity capacity pressures.
    Improved appliance and transmission efficiencies in the plan would reduce capacity needs by 6.2 percent in 2030 compared with what otherwise would occur without the Bush Plan.  By 2030, the Bush Plan would cut the number of new power generation units needed by about 364 from what otherwise would be required under current law.

  • Cut electricity losses suffered in transmission.
    By 2030, infrastructure upgrades and expansions would reduce average line losses by 50 percent compared with what otherwise would occur without the Bush Plan.

  • Lower consumer electricity prices. 
    The end user's cost for electricity would be consistently lower under the Bush Plan than under current law.  By 2030, electricity prices for residential users would decrease by 2.6 percent, for commercial users by 2.1 percent, and for industrial users by 3.7 percent compared with what they otherwise would be without the Bush Plan.

  • Reduce reliance on coal and natural gas. 
    The Bush Plan would extend the life of nuclear power plants and reduce the need for electricity generated from coal and natural gas in 2030 by 13 and 12 percent, respectively, compared with what otherwise would occur under current law-improving prospects for reaching key environmental goals.

  • Reduce gasoline demand. 
    While preserving consumer choice, the Bush Plan's market-based approach to car and truck fuel economy would reduce the demand for gasoline products by nearly 12 percent or 18.9 billion gallons of gasoline in 2030 compared with what otherwise would occur without the Bush Plan.

  • Increase petroleum supplies. 
    By 2030, the Bush Plan's exploration and development activities would increase total U.S. production by 27 percent above what it otherwise would be without the Bush Plan.

  • Reduce dependence on foreign oil. 
    By 2030, under the Bush Plan U.S. dependence on foreign petroleum would fall nearly 8 percentage points below what it otherwise would be without the Bush Plan.

  • Increase oil-refining capacity. 
    By providing more regulatory certainty to refinery owners and reducing the number of petroleum product specifications, the Bush plan would increase capacity by 7.7 percent in 2030 compared with what it otherwise would be without the Bush Plan. 

Greater energy efficiency, lower prices, and less dependence on foreign sources of energy would improve the nation's general economic performance.  Implementing the Bush Plan would promote faster economic growth, create over 1.5 million job opportunities, and increase annual disposable income.

Specifically, the CDA dynamic analysis projects that the Bush Plan would achieve the following:

Increase economic growth. 
In 2025, GDP (adjusted for inflation) would be $540 billion higher than it otherwise would be without the Bush Plan.  The average annual rate of economic growth would be 0.1 percentage point per year higher (3.2 percent versus 3.1 percent) throughout the entire period of 2005 to 2025 under the Bush Plan compared with what otherwise would occur under current law.

Create more job opportunities. 
By 2025, over 1.5 million more Americans would be working under the Bush Plan than otherwise would be under current law.  Moreover, under the Bush Plan the unemployment rate throughout the years 2005 through 2025 would average just 4.8 percent instead of 5.1 percent without the plan.

Increase family income. 
By 2030, lower energy prices and higher economic growth resulting from the Bush Plan would increase the annual disposable personal income for an average family of four (adjusted for inflation) by $1,828 compared with what it otherwise would be without the Bush Plan.

Increase investment. 
Under the Bush Plan, investment (adjusted for inflation) would increase by an average of $65 billion per year throughout 2005 to 2025 compared with what otherwise would occur without the plan.  By the end of 2025, the net capital stock would be $1.4 trillion higher under the Bush Plan than under current law. 

This summary and the full report were produced by the Center for Data Analysis at The Heritage Foundation.

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