ization of high-efficiency appliances, electronic lighting ballasts, and low-emissivity windows, which provided net economic benefits to the buildings sector far in excess of the RD&D costs.

In contrast to the outcomes of its buildings technology program, the DOE’s transportation technology RD&D program has had little effect on the vehicle marketplace to date. During the 1980s and 1990s, the DOE chose to focus on advanced engines and power systems for which the technological problems could not ultimately be solved or that evoked little industry or customer interest. The more recent emphasis on hybrid and fuel-cell technologies, implemented through government-industry RD&D partnerships, shows greater promise (NRC, 2008a,b). This experience demonstrates that RD&D projects should be carefully selected and designed, taking into account the technological, institutional, and market barriers involved.

The DOE operates a number of programs to promote greater energy efficiency in industry, including RD&D on advanced technologies as well as deployment programs. These efforts are estimated to have saved about 3 quads of energy cumulatively and about 0.4 quads in 2005 alone (DOE, 2007b).

Federal Incentives and Grants

Federal tax credits of 15 percent for households and 10 percent for businesses were created in the late 1970s and early 1980s to stimulate investment in energy efficiency measures. Subsequent studies, however, were unable to show that the tax credits had expanded purchases of the technologies or measures involved (Clinton et al., 1986; OTA, 1992). This failure has been attributed to flaws in the design of the programs, notably that the incentives were too low, that they were based on cost rather than performance, and that they applied exclusively to commonplace energy efficiency measures such as home insulation and weather stripping. After costing the U.S. Treasury around $10 billion, these unsuccessful tax incentives were discontinued in 1985 (OTA, 1992).

Based in part on this experience, new tax credits were enacted in 2005 for innovative energy efficiency measures that included hybrid, fuel-cell and advanced diesel vehicles, highly efficient new homes and commercial buildings, and very efficient appliances. These tax credits were intended to support the commercialization and market development of these innovative technologies, but not necessarily to save a significant amount of energy. In addition, a 10 percent tax credit of up to $500 was adopted for energy retrofits to the building envelope of existing homes. Other than the tax credits for advanced vehicles, these new tax credits



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