With the Shaheen-Portman bill officially dead, the efficiency industry is looking to the next big policy decision: carbon emissions regulations from the Environmental Protection Agency.

Under the upcoming EPA rules for existing power plants, to be announced by President Obama in early June, states will have the flexibility to develop customized plans based on their generation portfolios using a wide array of technologies.

Although the Obama administration has been very supportive of efficiency, many industry professionals and advocates have worried that the EPA would ignore demand-side reductions in favor of renewable energy generation. One finance expert told GTM recently that EPA officials privately regard monitoring and verification for efficiency as akin to "voodoo," adding that they are nervous about putting too much stock in state efficiency programs that can't easily be tracked.

The administration hasn't been very forthcoming about what the rules will look like. But Energy Secretary Ernest Moniz gave a hint today that may bring some relief to those worried about efficiency getting left out of carbon rules.

"I cannot see a credible resolution to our climate change challenges without an enormous contribution from the demand side of the equation. The efficiency side is going to have to drive our strong response," said Secretary Moniz, speaking at the EE Global event hosted by the Alliance to Save Energy.

Secretary Moniz talked extensively about the recent national climate assessment that illustrated the growing regional impacts of climate change on the U.S. He also lamented the ongoing collapse of an Antarctic ice sheet that may raise global sea levels by an additional 4 feet over the next century.

"That just takes us back to the demand side as [being] critical to the equation," he said, explaining that DOE had increased its proposed budget for efficiency by 40 percent, even though overall spending was flat.

But the big question is how that embrace of efficiency within DOE may play out in the EPA, where climate rules will a central driver for cleantech in the coming years. 

Collin O'Mara, CEO of the National Wildlife Federation, called the upcoming rules the "largest single opportunity for investment in energy efficiency in this country." And if EPA leaves the demand side out, it would be a huge blow to the efficiency industry.

Talking to reporters after his speech, Secretary Moniz talked about the process for determining which technologies will qualify for carbon rules. He wouldn't provide any specifics, but said that EPA Administrator Gina McCarthy was considering where demand reductions would fit in.

"She's certainly hearing from the states that efficiency would be an effective tool to meet the standards," said Secretary Moniz. "EPA is looking for as much flexibility as possible in terms of the state response to meeting their goals."

That's a positive signal to the industry as it waits to find out where it fits into the picture at EPA. According to stakeholders involved in the process who declined to be named, some at EPA said that they were not hearing enough from national efficiency groups on how to ensure proper monitoring of demand reductions to prove reductions in greenhouse gases.

Publicly, however, Secretary Moniz showed his support for how technological improvements in LEDs, appliances, engines and power electronics were driving meaningful reductions in energy consumption.

"I think we’re seeing this really happening. Just keep the pedal to the metal and keep pushing for this transformation," he concluded.

Tags: carbon emission standards, carbon emissions, climate change, environmental protection agency, ernest moniz