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GCC [Global Climate Change] CEQ [Council on Environmental Quality]/NEC [National Economic Council] April/May 1997
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GCC [Global Climate Change] CEQ [Council on Environmental Quality]/NEC [National Economic Council] April/May 1997
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Records of the Council of Economic Advisers (Clinton Administration)
Jeffrey Frankel's Files
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FOIA Number: 2017-1095-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Council of Economic Advisers
Series/Staff Member:
Jeffrey Frankel
Subseries:
OA/ID Number:
13723
FolderID:
Folder Title:
GCC [Global Climate Change] CEQ [Council on Environmental Quality] / NEC [National Economic
Council] April/May 1997
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Row:
Section:
Shelf:
Position:
S
20
4
11
1
THE WHITE HOUSE
WASHINGTON
NEC PRINCIPALS' MEETING
April 1, 1997
5:00 p.m., Room 472
Agenda
I.
Introduction
a. Update on Budget
b. Update on Financial Services Modernization
c. Update on Comp Time
d. Update on Welfare-to-Work CEOs 5011 Ely Segal helps create
9:00 used. mtg.
leve:
e. Other Issues
Chila He Ey 0 ndr
defin. reseland. Sect.5
II.
Process on Energy/Environmental
Moybe
a. PM/Ozone
fn 3:45 Katzen NNES
r nevi nk
b. Electricity Restructuring Thus Apr. 10 mtg.
C willman Deps group
c. Climate Change
III. Poverty Measurement Donmsholola Issues Frank R. OMB kill(hair. Need N uplate weasure
IV. China B.lat. deficit
V. Update on Denver Summit
VI. NAFTA Trucks 7 progress in_Trilers.
Small More issues rPwdivs.
PREDECISIONAL DRAFT
4/29
DO NOT QUOTE OR CITE
OPTION 1 - 90% by 2010 and reduce thereafter: Reduce greenhouse gas emissions to
90% of 1990 levels by a multi-year period around 2010 and to lower levels thereafter.
OPTION 2 - Stabilize by 2010 and reduce thereafter: Reduce greenhouse gas
emissions to 1990 levels by a multi-year period around 2010 and to lower levels
thereafter.
OPTION 3 - 110% by 2010 and stabilize by 2020: Reduce greenhouse gas emissions to
110% of 1990 levels by a multi-year period around 2010 and to 1990 levels by a multi-
year period around 2020.
White House Climate Change Task Force
durr.
734 Jackson Place, NW Washington, DC 20503
Meeting Notice
This Friday we will provide base-case climate science and economics briefings, and
announce next steps for peer review and public release of modeling results.
Times and locations:
Congressional Brief: 10- 12 AM Friday, April 25 In S 116 (Open To House And
Senate Climate Staff)
Public Brief: 2- 4 PM. Friday. April 25 In The Department Of Commerce -
Auditorium
Presenters and agenda:
Dirk Forrister. chair of the White House Climate Change Task Force. will provide
an overview and introduce the presenters.
Dr. Rosina Bierbaum. White House Office Of Science And Technology Policy,
will provide a base-level analysis of past. present and future greenhouse gas emission
levels and atmospheric concentrations.
Tom Karl. NOAA National Center For Climatic Data Research. will provide analysis
of past climate changes in the US in the context of increasing concentrations of
greenhouse gasses, and discuss potential future climate changes. Much of Tom's work
is published in the most recent issue of Scientific American.
Dr. Ev Ehrlich, Under Secretary Of Commerce will present economic baselines for
the US and its major energy-using sectors and key assumptions for the base case. He
release. will also announce plans for peer review of action-based scenario results. and public
Contact: Tom Peterson (202) 343-1060
OUT r.
4/23 Draft
Messages
Without action to address greenhouse gas emissions, global emissions and concentrations rise
significantly.
For our nation, rising concentrations offer signs of potential impacts that prompt our concerns for
an enhanced greenhouse world.
The U.S. and most other countries will miss our aim of returning to 1990 levels by 2000, which is
prompting us to push for an improved international policy framework in Kyoto.
We are engaged in a thorough economic analysis that begins with mainstream energy,
environmental and economic baselines described today.
From this baseline information, we are running a comprehensive set of modeling scenarios to
inform decisions on level, timing and flexibility of policy approaches.
This work is being reviewed by 12 independent economic modeling experts to ensure that it
benefits from peer critique.
OUTLOOK AND PRIORITIES: CLIMATE CHANGE OUTREACH
1.
Economic and Science Base Case Briefings. Ev Ehrlich, Rosina Bierbaum and Tom
Karl will brief congressional staff (10 am) and interest groups (2 pm) on Friday, April 25.
Science brief for farm groups on Thursday.
Science press availability for Tom Karl (also Albritton, Bierbaum?) on Thursday,
due to interest following President & Vice President's remarks on Earth Day.
VP Op Ed offered to several major papers.
2.
Joint Implementation Recognition Ceremony. Bob Dixon & USIJI team coordinating.
No cabinet officials available because of conflicts with PCSD and Service Summit.
Are agencies interested in sending Deputy or Assistant Secretaries to speak about
importance as component of policy?
3.
Climate Change Analysis Workshop. Early June. Need a working group to plan and
conduct the workshop.
Should we begin with Gardiner proposal as basis for planning? Who is willing to
be logistics lead?
4.
Industrial Impacts: Strategic Focus. Hunker effort needs "swat team" to gain closure.
Interesting overtures from industry groups ready to offer constructive input.
Should we have public involvement effort on strategic industries prior to
finalizing draft?
5.
Strategic Planning Session on Outreach. The priority events above fit into a complex
negotiating and issue management effort. A coordinated strategic planning "off site"
could save us major time later. Our first attempt to schedule became infeasible, but we are
interested in trying again with more notice.
Who would like to participate in this type of planning session?
Handouts
President and Vice President Earth Day Remarks and Clips
Ehrlich's Briefing Materials
Calendar of Upcoming Events
Notional Scope of June Workship
Vice President's Japan Speech
Senator Chafee's Speech
7x 7 x 3 yrs. 3 YOB.
CLIMATE CHANGE
Meeting Agenda -- April 23, 1997
I. Overview of Economic Modeling
XXX
II. Overview of Outreach Activities
III. Deputies Decision Memo
IV. Frankel Proposal for Coal Subsidy Ban
Allsen
sendel Fax
CMB
4566546. Doall.
High ewporthaf CEXTIME
BUT sometimes one hears Those ETCC people
We're enjoy you ol!
arejust intered.
no
1. Leaving aside uncenachties + compliance,
want a reasonable, protical path
2. unforesecably slow or rapid progress (1.9. techn.)
3. Compliance: when d country falls uniside
target fath, want 10 presene same incentive
for them TO get bach in.
Date:
Tue, 22 Apr 1997 12:23:49 -0500
From:
Kelly Sims <[email protected]>
Subject:
Clinton on Floods/Global Warming
To:
[email protected]
Sender:
[email protected]
>From CNN this morning:
WASHINGTON
(AllPolitics, April 22) -
Before he departed this
morning for the
flood-ravaged upper
Midwest, President Bill
Clinton called for
intensifying the research into
links between global climate
change and destructive weather.
Clinton, who will tour devastated Grand Forks,
N.D., by helicopter and meet with evacuees, said it
will take more research to find if there is a link
between weather disasters and global warming.
"We do not know for sure that the warming of the
earth is responsible for what seems to be a
substantial increase in highly disruptive weather
events, but many people believe that it is," Clinton
said. "And we have to keep looking into it. We have
to find the best scientific evidence we have. And we
have to keep searching for the answers to this."
Clinton and Vice
President Al Gore
used the occasion
to mark the 27th
observance of
Earth Day, also
announcing an
expansion of the
right-to-know law
that allows people to learn about toxic substances
that industries release in their communities.
"We're giving them the most powerful tool in a
democracy - knowledge," Clinton said.
Federal authorities are
expanding the
10-year-old law to
cover seven new
industries, including
mining, electrical utilities
and hazardous waste
treatment.
Clinton said making the information available is "one
of the best things we can do in Washington to
protect the environment."
"In the decade that it [the law] has been on the
books, citizens have joined with government and
industry to reduce the release of toxic chemicals by
43 percent," the president said.
Kelly Sims, Science Policy Director
Ozone Action
1636 Connecticut Avenue, NW
Third Floor
Washington, DC 20009 USA
Voice: (202) 265-6738
Fax: (202)986-6041
Date: 04/22/97 Time: 10:19
CClinton expands campaign against polluters
WASHINGTON (AP) Suggesting that global warming may be to blame
for this year's severe floods, President Clinton today expanded an
''early warning system'' for detecting toxic chemicals in the
environment.
Under new regulations in the decade-old 'Community Right to
Know'' program, seven additional industries and 6,100 new
facilities will be forced to disclose the levels of toxic chemicals
they release into the air, water and land.
''By expanding community right-to-know, we're giving Americans a
powerful very powerful early-warning system to keep their children
safe from toxic pollution, the president said. 'We're giving
them the most powerful tool in a democracy knowledge.'
With Vice President Al Gore at his side on the White House lawn,
Clinton timed the announcement to coincide with today's 27th annual
Earth Day celebration. The president was to have unveiled the news
at an environmental fair along Washington's endangered Anacostia
River but instead decided at the last-minute to tour the flooded
upper Midwest.
Gore was substituting for the president at the outdoor Anacostia
celebration that was expected to draw 1,000 local schoolchildren to
learn about the polluted river and cleanup efforts.
Speaking to reporters before his departure for Grand Forks,
N.D., Clinton questioned whether global warming had anything to do
with this year's severe floods.
'We do not know for sure that the warming of the earth is
responsible ... but many people believe that it is and we have to
keep looking into it, he said.
'Every American has noticed a substantial increase in the last
few years of the kind of thing we're going to see in North Dakota
today, and if there is a larger cause that can be eased in the
future, we ought to go after that solution.
Clinton's right-to-know directive expanded the information
required of companies already disclosing how much pollution they
emit and increased by about 30 percent or 6,100 sites the
number of industrial facilities required to file reports.
He also added seven industrial categories, including some which
used mercury, lead and arsenic, to the 20 that already report on
toxic releases. The new categories are metal mining, coal mining,
electric utilities, commercial hazardous-waste treatment, petroleum
bulk terminals, chemical wholesalers and solvent recovery services.
Gore said the plan will streamline the collection of data and
reduce burdens on businesses.
''This measure probably has more support across all lines in
America than any other thing that we do, because when you give the
American people information they can use to protect themselves,
people at the grassroots level find very creative ways to convince
those sources of pollution to reduce the emissions into the air and
water, Gore said.
APNP-04-22-97 1032EDT
EARLY BANKING
Issue. Should the U.S. support credit for early actions taken (or to be taken) by parties to the Kyoto
agreement?
Background. The United States has a long, bipartisan history of encouraging voluntary early greenhouse gas
reductions. Early voluntary early action benefits the environment in the most economically efficient way --
with no regulation except registry and tracking. In the Kyoto agreement, the U.S. should support credit for
early action by the U.S. or other parties.
Numerous firms have entered partnerships with the U.S. and other governments to voluntarily reduce
emissions. In entering these agreements with the U.S., firms were assured that they would receive proper
credit against future obligations. In response to congressional questioning and industry letters, Under
Secretary of State Tim Wirth and Assistant Secretary of State Eileen Claussen reiterated U.S. government
intention to provide credit for early actions -- comments echoed recently by then Deputy Secretary of Energy
Charles Curtis.
Unless these reductions are assured credit in the international agreement, there is higher likelihood that firms
that undertook early action will be penalized in comparison to firms that took no action. If early actions are
assured credit, firms that fail to take action will be penalized and those that act will be rewarded.
Industry/Environmental NGO Joint Recommendation. Last Thursday, major industry and environmental
groups reportedly agreed in concept on a set of recommendations outlined in the attached paper. They
propose to allow project-based crediting for international and domestic actions that generate tonnes during
the pre-budget period.
They provided three ways in which parties would be permitted to add tonnes acquired early to their first
budget accounts: (1.) approved joint implementation projects that are also reported on the host's national
communication; (2.) domestic afforestation projects that are improvements from a baseline; and (3.) for
international emissions trades where the tonnes are also subtracted from the transferring party's first budget.
However, for domestic actions, they support deducting the tonnes from the first budget account of the country
sponsoring the incentive program.
Needed Fixes. The international agreement needs to be more clear on two points:
1.
Nations must be free to allocate their budgeted tonnes to firms as incentives for actions taken in the
pre-budget period. The current U.S. protocol is silent on this, while it is explicit on other forms of
temporal transfers (banking and borrowing), creating a possible reading of intentional exclusion.
2.
Firms should receive credits (tonnes of carbon equivalent emissions allowed) for actions that reduce
emissions early in another country (via joint implementation or international emissions trading).
Again, the language is explicit on availability of these locational flexibility provisions with no timing
constraints beyond the other timing provisions of the protocol -- which could be read as controlling in
absence of explicit timing provisions.
Language.
[Insert in Article 2 Paragraph (2) (b) after "below" the following:]
" or allocated or acquired prior to the first budget period for later use during the budget period
under paragraphs 6 and 11 below."
[Insert in Article 2 after Paragraph 5 the following new paragraph 6 and re-number accordingly:]
"Prior to the first budget period, an Annex A or Annex B Party may allocate tonnes of carbon
equivalent emissions allowed for a budget period that may be used during a budget period as
incentives for pre-budget actions that reduce, avoid or sequester net greenhouse gas emissions."
[Add a new Article 2.11 as follows:]
"11. An Annex A or Annex B Party may include in its budget tonnes of carbon equivalent
greenhouse gas emissions allowed for a budget period to provide incentives for actions to
be taken prior to the beginning of the first budget period as follows:
"(a) Actions taken with Annex A or Annex B Parties reported according to Article 6
(International Emissions Trading); and
"(b) Actions taken with any Party that is in neither Annex A nor Annex B reported
according to Article 7 (Joint Implementation)."
05/27/97
17:22
202 647 0191
STATE OES/EGC
1
001
United States Department of State
Assistant Secretary of State for Oceans and
International Environmental and Scientific Affairs
Washington, D.C. 20520
Any pages, total
May 27, 1997
145
TO:
Distribution
FROM:
OES - Rafe Pomerance, Acting
DAR for
SUBJECT:
Assistant Secretaries Group: Climate Change Meeting
The next Assistant Secretaries group meeting is scheduled for tomorrow, Wednesday,
May 28, from 10:30 a.m. to 12:00 p.m., in Main State Room 7835. Attached please find new
draft language for Annex C. On the basis of our decisions, additional simplified papers with
proposed changes to our draft Protocol text will be prepared. These will be cleared through a
paper process, and submitted to the Convention Secretariat in time to meet the June 1, 1997,
deadline. Please call Lilly Roots-Wiggins (647-1554) to confirm your attendance at this
meeting.
Attachment:
As Stated
05/27/97
17:23
202 647 0191
STATE OES/EGC
003/003
LEGAL
ID:202-736-7115
MAY 28'97
5:31 No 002 P.01
Additional U.S. Proposals
(references are to the original U.S. submission)
Article 1 (Definitions)
Replace definition 3 ("Greenhouse gas") with the following:
"Greenhouse gas" means any greenhouse gas covered in
Annex C of this Protocol.
Replace definition 4 ("Tonne of carbon equivalent") with
the following:
"Tonne of carbon equivalent" means one metric tonne of
carbon, or a quantity of one or more other greenhouse
gases equivalent to one metric tonne based on the
global warming potentials decided by the Parties in
accordance with Annex C of this Protocol.
Article 2 (Emissions Budgets)
Delete paragraph 7
Article 3 (Measurement and Reporting)
Replace paragraph 2 with the following:
For the purposes of implementing paragraph 1 and
promoting comparability, consistency, and
transparency, the Parties shall, not later than their
first Meeting, decide on agreed best available methods
for the measurement by Parties of anthropogenic
emissions by sources, and removals by sinks, of
greenhouse gases, taking into account the best
available methods determined by the IPCC. They shall
also decide on appropriate adjustments to measurements
of emissions and removals where agreed best available
methods have not been used. The Parties shall
periodically update agreed best available methods
based on evolving scientific knowledge, including
advice from the Subsidiary Body for Scientific and
Technological Advice referred to in Article 12.
Annex C
Replace descriptive language with the following:
All greenhouse gases, their sources and sinks, with
global warming potentials as decided by the Parties au
their first meeting (taking into account the IPCC's
global warming potentials for 100-year time horizons)
and as subsequently updated by the Parties to reflect
evolving scientific knowledge.
05/27/97
17:23
202 647 0191
STATE 0ES/EGC
5
002/003
CLIMATE CHANGE DISTRIBUTION LIST
OSTP
Rosina Bierbaum
456-6202
FAX: 456-6025
CEA
Alicia Munnell
395-5036
FAX: 395-6958
OMB
T.J. Glauthier
395-4561
FAX: 395-4639
Justice
Lois Schiffer
514-2701
FAX: 514-0557
Commerce
Jeffrey Hunker
482-6055
FAX: 482-4636
NOAA
Terry Garcia
482-3567
FAX: 482-6318
Treasury
Joshua Gotbaum
622-2220
FAX: 622-2633
Interior
Brooke Shearer
208-6291
FAX: 208-1873
$
USTR
Jennifer Haverkamp
395-7320
FAX: 395-4579
Agriculture - Charlie Rawls.
720-6158
FAX: 720-5437
CEQ
Dirk Forrister
343-1060
FAX: 343-1162
EPA
Mary Nichols
260-7400
FAX: 260-5155
David Gardiner-
260-4332
FAX: 260-0275
DOE:
Mark Chupka
586-5523'
FAX: 586-0861
DOT:
Frank Kruesi
366-4544
FAX: 366-7127
NEC:
Mark Mazur
395-5147
FAX: 395-6809
CEQ
David Sandalow
456-6543
FAX: 456-2710
CEQ
Steve Seidel
395-3706
FAX: 456-6546
AID
David Hales
875-4205
FAX: (703) 875-4639
MAY-22-1997 14:33
OES FRONT OFFICE
202 647 0217 P.01 02
United States Department of State
Bureau of Oceans and International
Environmental and Scientific Affairs
Alician
Washington, D.C. 20520
CC. JAF
js
DATE:
5-22-97
wm
NUMBER OF PAGES TO FOLLOW:
1
FAX TO:
SEE DISTRIBUTION LIST
TELEPHONE:
FAX:
OFFICE:
FAX FROM: EILEEN B. CLAUSSEN
TELEPHONE:
FAX:
OFFICE:
MESSAGE: ASSISTANT SECRETARIES CLIMATE CHANGE MEETING
WEDNESDAY, MAY 28 from 10:30-12:00, Rm. 7835. Please RSVP
to Lilly Wiggins at 647-1554 by COB: Tuesday, May 27.
Thank you.
MAY-22-1997 14:33
OES FRONT OFFICE
202 647 0217 P.02 02
CLIMATE CHANGE DISTRIBUTION LIST
OSTP
Rosina Bierbaum
456-6202
FAX: 456-6025
CEA
Alicia Munnell
395-5036
FAX: 395-6958
OMB
T.J. Glauthier
395-4561
FAX: 395-4639
Justice
Lois Schiffer
514-2701
FAX: 514-0557
Commerce
Jeffrey Hunker
482-6055
FAX: 482-4636
NOAA
Terry Garcia
482-3567
FAX: 482-6318
Treasury
Joshua Gotbaum
622-2220
FAX: 622-2633
Interior
Brooke Shearer
208-6291
FAX: 208-1873
USTR
Jennifer Haverkamp
395-7320
FAX: 395-4579
Agriculture - Charlie Rawls
720-6158
FAX: 720-5437
CEQ
Dirk Forrister
343-1060
FAX: 343-1162
EPA
Mary Nichols
260-7400
FAX: 260-5155
David Gardiner
260-4332
FAX: 260-0275
DOE:
Mark Chupka
586-5523'
FAX: 586-0861
DOT:
Frank Kruesi
366-4544
FAX: 366-7127
NEC:
Mark Mazur
395-5147
FAX: 395-6809
CEQ
David Sandalow
456-6543
FAX: 456-2710
CEQ
Steve Seidel
395-3706
FAX: 456-6546
AID
David Hales
875-4205
FAX: (703) 875-4639
TOTAL P.02
MAY-20-1997 16:10
OES FRONT OFFICE
202 647 0217 P.02/17
United States Department of State
Assistant Secretary of State for Oceans and
International Environmental and Scientific Affairs
Washington, D.C. 20520
Cc: Amp
May 22, 1997
J.S
TO:
Distribution
FROM:
OES - Eileen B. Claussen a
SUBJECT:
Assistant Secretaries Group: Climate Change Meeting
The next Assistant Secretaries group meeting is scheduled for Thursday, May 22, from
10:00 to 11:30 a.m., in Main State Room 7835. It is my intention to use this meeting to take
decisions on a series of issues related to joint implementation, Annex C (which gases/sectors
should be included in the Kyoto agreement), and early banking (whether there should be any
credit for early action prior to the beginning of the first budget period). On the basis of our
decisions, simplified papers with proposed changes to our draft Protocol text will be prepared.
These will be cleared through a paper process, and submitted to the Convention Secretariat in
time to meet the June 1, 1997, deadline. Please call Lilly Roots-Wiggins (647-1554) to confirm
your attendance at this meeting.
Attachment:
As Stated
MAY-20-1997 16:10
OES FRONT OFFICE
202 647 0217
P.03/17
PROPOSED AGENDA
May 22 Assistant Secretaries Meeting
Annex C gases/sectors - Decision on comprehensive approach (with discounting)
versus limited list.
Early Banking - Decision on whether the international agreement should include
provisions ensuring that early reduction efforts be credited against a future obligation:
if so, what options should be developed.
Joint Implementation -
- are Л projects restricted to non-Annex A/B hosts?
- when do credits from projects begin?
- must guidelines for JI be adopted by Kyoto - if not, by when?
- should final agreement in Kyoto on targets be contingent on inclusion of л ?
- how should additionality be addressed in the agreement?
- what should be in included in the JI review process?
Emissions Trading - Distribution of paper; NOTE: This paper is an explanation and
elaboration of existing U.S. proposals only.
MAY-20-1997 16:10
OES FRONT OFFICE
202 647 0217 P.04/17
Joint Implementation Issue Paper
(DRAFT 5/20/97)
Joint Implementation (JI) is one of the highest U.S. priorities in the negotiations.
Along with emissions trading, it is a key flexibility element, providing an option for
Parties to use reductions achieved through projects in other countries to offset domestic
emissions. It also establishes a new form of currency for developing countries, allowing
them to generate credits for sale or for future banking. However, a number of critical
unresolved questions have been identified in the interagency process, and decisions must
be taken on these in order to allow Л to proceed. These are detailed below.
1. Can JI projects be hosted in non-Annex A/B Parties only, or may projects be
developed in Annex A and B Parties as well?
The existing text does not (legally) preclude any Party from hosting JI projects,
although many in the Administration and in other countries have interpreted the U.S
proposal as allowing JI only in the territory of a non-Annex A/B Party. A number of
advantages have been identified for allowing JI projects to be undertaken globally: if a
country does not have the capacity to develop a national emissions monitoring program,
or is not willing or able to adhere to an emissions budget, it could still participate in a JI
regime (something that may apply specifically to the EIT countries); prior to the budget
period, it may be desirable to allow reductions to be undertaken (see question #2 below);
and, if emissions trading does not become part of the Kyoto agreement, we may want to
preserve the option of JI between all Parties (noting in particular the EU proposal, in
which there is no emissions trading, and JI is only allowed between Annex A/B Parties)
Conversely, if JI is open to all Parties (and particularly if it is comparatively easy to
develop, review and agree on the transfer of credits for reductions), there may be a lesser
incentive for Parties to take on a budget obligations and join Annex A. As one of the
"carrots" in the U.S. proposal is the ability to participate in low cost trading, this situation
may set up a perverse incentive. Finally, if л is to be allowed between Annex A/B
countries, some modification of the existing text may be required to allow for debiting Л
TCEs from the participating Annex A/B Party.
2. When may JI projects begin to generate TCEs (following the start of the first
budget period, at any time, including prior to the beginning of the first budget
period, only once guidelines have been approved by the MOP)?
The current text of the U.S. proposal does not stipulate when TCEs may be
generated from л projects. Allowing projects to generate TCEs immediately may ensure
that project development proceeds without interruption, while removing the credit option
until the first budget period may significantly reduce the number of projects undertaken.
Inasmuch as projects are supposed to be credited only for "additional" actions, this would
MAY-20-1997 16:10
OES FRONT OFFICE
202 647 0217 P.03 17
Joint Implementation
DRAFT 5/20/97
Page 2
mean a loss in global emissions reductions. It should be noted that a proposal has been
submitted to the AGBM (by Norway) that would allow Л to begin after the pilot phase
ends, and once modalities have been agreed.
Allowing л projects to generate TCEs prior to the first budget period may create
some difficult compliance issues - particularly if they are allowed prior to the
development of review guidelines. There is the further specific question of whether
projects should be "grandfathered" from the present, and whether these would need to bc
reviewed and approved again at the start of the budget period. Some of these questions
may not be answerable until decisions have been taken on issues related to the review and
approval process discussed later in this paper.
3. Should guidelines, criteria and other modalities for JI be Included in the Kyoto
agreement or be agreed upon later? If later, when?
Option 1. Provide for an "Annex "D" in the agreement which would contain (1) an a
priori list of acceptable JI project types, as well as (2) general language on
guidelines, criteria and other modalities for projects not included in the list. While
possibly desirable, it is looking increasingly less likely that we can agree on the
elements of such an Annex within the USG - or negotiate one internationally within
the Kyoto timeframe.
Option 2. Set a date no later than the end of the Activities Implemented Jointly (AIJ)
pilot phase (i.e., not later than December 31, 1999), or one year later, for adoption of
the guidelines. This option acknowledges a connection between the Berlin decision
on Activities Implemented Jointly (AIJ) and ultimate progress on JI. However, it
presumes a successful conclusion to the AIJ pilot phase, and that л projects will be
developed even if there is no clear incentive from the Kyoto language in the form of
agreed procedures. It also presumes the Kyoto agreement has entered into force -
since guidelines could only be adopted by the Meeting of the Parties.
Option 3. Call for adoption of guidelines no later than one year after entry-into-force
of the agreement. This sets a different date certain for guidelines, and does not tie
itself to the AU program - which is a no-crediting effort and may bog down allowing
TCEs to be generated or traded. However, entry into force may be a much delayed
event - and will be independent of issues related to the adequacy of JI guidelines or
criteria. Of course, if entry into force were delayed, there would be no need for any
"credits" against the targets either.
Option 4. Allow JI to proceed without guidelines specified in the agreement,
presumably on the basis of MOP decisions. This option assumes that we do not need
to specify guidelines at this time. Implicit in this choice is that guidelines would
likely be developed at a later date, and that Parties have until the first budget period
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Joint Implementation
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Page 3
(if "early action" is disallowed) before guidelines would need to be developed.
However, it presumes that project developers would be willing to move forward with
projects to allow the testing of various guidelines- even in the absence of
international agreement. It also presumes that no projects would proceed without
guidelines; if projects did get initiated, there would be no way to weed out bogus
efforts.
4. Is it necessary to make our acceptance of the final agreement contingent on the
successful negotiation of such guidelines? If the guidelines are held up, is the
U.S. willing to allow JI to proceed without them?
JI is one of the critical flexibility issues proposed in the U.S. draft protocol. The
economic analysis suggests that significant additional cost-savings are possible from JI
over those available from emissions trading (presuming the latter is allowed in Annex A
or B countries only, and the former in developing countries). If JI is not included in the
agreement, such cost-saving opportunities will be lost. In such a case, the United States
might choose to negotiate a lower target- although our ability to do this may be
constrained by the form of the "package" deal negotiated in Kyoto.
The U.S. could also insert language into the agreement calling for conditions on
entry into force pending resolution of any questions on JI guidelines, or we could not sign
the agreement until such issues were resolved. If conditions were imposed, they could
create some interesting problems. For example, in the absence of a new set of Parties,
agreement on the guidelines would be undertaken by all FCCC Parties, not just those to
the protocol, allowing countries not likely to join the new agreement to block the
guidelines and delay the protocol's entry into force.
However, there is a strong concern that JI not be allowed to proceed without
guidelines - and that setting entry into force contingent on agreement of guidelines will
inappropriately delay global action on climate change. In this case, there would be no
link between setting guidelines and agreement on a binding target in Kyoto.
5. How should "additionality" be treated in the agreement?
In the existing text, we stipulated that "projects must provide a reduction in
emissions that is additional to any that would otherwise occur." There is general
agreement that some form of additionality must be present to ensure that "bogus"
emissions are not counted. However, additionality is not easily measured. Even the use
of the word "additionality" has its supporters and detractors. The additionality issue has
been among the most complex in the USLII panel deliberations; it has not been
satisfactorily resolved for many projects, and both agencies and project developers
disagree over the application of this criterion. Any decision is likely to have political
opponents, either from the environmental community or the private sector, and it is
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recognized that each would need to periodically be reviewed. Several approaches have
been advanced; these need not be mutually exclusive:
Do not attempt to resolve the additionality issue by Kyoto, but agree that the
guidelines must more fully address the questions prior to allowing project derived
TCEs to be exchanged between Parties.
Develop a list of a priori acceptable project types (an "Annex D"). It seems unlikely
that such an Annex could be negotiated prior to Kyoto; if this option were chosen, a
placeholder may need to be inserted into the text.
Redefine additionality as "an enhanced Greenhouse Gas Benefits", and require that
net GHG emissions with the project be less than the GHG emissions associated with
the reference case for that activity within a particular country and year. For example,
a power plant retrofit will be 10% more efficient than some existing standard, and the
GHG reduction associated with the 10% difference could be claimed in its entirety
Develop guidelines for determining additionality through a more stringent standard in
which a determination would be made as to whether a project would have happened
anyway (e.g., whether the utility planned to upgrade the power plant in its normal
course of business), and that the project is over and above "no regrets" actions. Only
those projects meeting this criteria would be allowed. While likely to generate more
environmental benefit, there are concerns that such standards could not be readily
defined, and could lead to a circumstance in which no projects would be undertaken.
6. Review Process
A number of issues have been raised on the form and structure required for an
adequate review process. The fundamental conflict is between the extent of the review
necessary to ensure verifiability and credibility versus the risk that excessive transaction
costs will stifle JI activity.
Extent of the Review. Upon submission of projects that have generated TCEs, should
the FCCC Secretariat conduct only a "checklist" review (to determine whether all the
requested information plus appropriate back-up materials have been provided) or
conduct a more comprehensive review in which individual project reports are checked
for accuracy and validity? The former allows for significantly more rapid turn-
around, and does not require the Secretariat to call into question Parties' reports.
However, because of its cursory nature, it will likely not cull out projects which do
not meet all criteria, particularly in cases where issues of "additionality" are
ambiguous. The latter alternative could impose a significant (and potentially costly)
burden for project review on the Secretariat, and could delay allowing project TCEs
to be recorded, likely increasing project transaction costs and limiting the number of
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projects. It is possible that multiple stages of a review process could be agreed, in
which the initial review could be more comprehensive, and subsequent reviews
adhering to a simplified checklist - unless a Party objected to the allowing of TCEs.
Frequency and Timing of Reviews. The nature and frequency of reviews will have a
direct impact on transaction costs and the required Secretariat budget, as well as on
the credibility of those projects with acceptable TCEs. In addition to the concept of
random audits, and the existing provisions requiring annual reporting on emissions
reductions generated or exchanged through Л, proposals have been made for the
following (not necessarily mutually exclusive) options:
- annual review of each project through the Party's required annual report on JI
(to insure that TCEs claimed during any given year are legitimate);
- review in the course of a National Communication review (presumably on a
three-year cycle) of Annex A/B Parties, which would included any Л projects
undertaken; and for
- review only if requested by a Party (noting that any Party might, at any time,
challenge the TCEs generated from a project - leading to an automatic review,
and possible action by an implementation committee).
Who conducts the review - the Secretariat? Annex A/B review teams? Independent
auditors? With adequate financial support, the Secretariat could develop the expertise
necessary to fully review projects. Using the existing procedures for review of Annex
A/B communications may be viable in that teams include both Secretariat
representatives and representatives of Parties; however, to date, review teams have
not had much expertise in matters specifically related to JI activities, and might
overlook problems in projects. While it is generally agreed that independent
auditors(conducting reviews of all projects on a random basis) would be desirable,
there is a question of who supervises them; it may be undesirable to have it done by
the Secretariat, but difficult if not impossible to have direct oversight by the MOP or
the SBSTA. Some do not believe that independent auditors would supervision,
but rather that the market would ensure high quality auditors (i.e., we can depend on
the private sector's need to have accurate information for the validity of л credits).
Finally, it was generally agreed that the Secretariat would have the role of preparing a
synthesis report at regular intervals to be considerd by the MOP in assessing progress
under Л.
Approval of the Review. Once the review has been completed, other questions have
been raised about approval of projects. One alternative is to make approval automatic
if no concerns are raised, and allow it to be blocked if any objectionable practices are
uncovered. However, this raises a question of whether the Secretariat should be
allowed to reject non-complying projects, potentially opening the system to
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accusations of too much centralized authority being vested in a UN body - and out of
the control of Parties. Conversely, if the review must be approved by Parties (or a
subset of Parties), considerable time may pass between project submission and review
- significantly increasing transaction costs. Finally, it is clear that in some cases,
there will be contested reviews; in this context, a number of agencies have proposed
using an "Implementation Committee" to address unresolved issues. However,
agreement on the establishment of such a committee would not be consistent with the
earlier decisions adopted in the separate decision paper on compliance issues; this
earlier decision may need to be reconsidered.
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Annex C: Which Gases/Sectors to Include in the Kyoto Agreement?
(DRAFT 5/20/97)
The January 17, 1997 draft U.S. protocol text defines "greenhouse gases" to be those
gases for which a global warming potential is set forth in Annex C; Annex C is to "list
greenhouse gases not covered by the Montreal Protocol, with the exception of gases, or particular
sources and sinks, for which there is insufficient knowledge of the GWP or inability to accurately
measures emissions or removals. GWPs would be developed by the IPCC." This paper seeks to
identify two possible options to complete Annex C: (1) a comprehensive approach (with some
discounting), and (2) a limited list.
Option 1. Comprehensive Approach with Some Discounting
All sources and sinks of greenhouse gases not included in the Montreal Protocol.
Annex I Parties to use most detailed available agreed inventory methods (e.g., detailed IPCC
method); if estimates are made using less rigorous methods (e.g., default IPCC), an
uncertainty factor would be added to emissions estimates for budget years.
- Uncertainty factors would be determined by IPCC or OECD/Annex I Experts Group and
adopted by the Meeting of the parties (MOP); factors will be specific to gas/sector/source
and estimation method.
The base level is established using existing 1990 inventories; it is not modified as methods
improve, except to recalculate based on new GWPs (as agreed by MOP).
Key Points
Allows maximum flexibility across gases to comply with budget; U.S. already uses best
method and could count all control efforts.
Maximizes environmental protection through comprehensive coverage of GHGs, ensuring
tracking and control even of gases with "uncertain" emissions.
Provides incentive to use best methods for reporting (uncertainty factors are only a backstop
if less rigorous methods are used).
Accommodates GHG emissions trading and JI (does not require separate provisions to allow
project-based Л in non-Annex C gases).
No problem of adding gases/sectors; everything is already in.
Potential problems:
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ANNEX C PAPER
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Uncertainty of estimate for some gases may lead to offset of certain emissions with
reductions from less certain sources (likely a relatively small component of most national
totals, although for some, may be up to 30%); even with the best methods, some
sources/sinks are only known to ±50% or +100%.
Requires development/agreement of uncertainty factors (although a similar problem exists
unless a blanket acceptance of gases is allowed).
Generic (in contrast with Party-specific) uncertainty factors may reduce incentive for data
improvement in some cases.
May be opposed by Parties using less rigorous methods, who may have to improve or inflate
inventory (particularly developing countries).
Option 2. Limited List
Include only sources, removals and sectors that can be accurately estimated or measured in
Annex C; others are omitted, and controlled only through general existing FCCC obligation.
- Propose a threshold of ±20% for inclusion in Annex C (would include about 95% of the
total US 1990 inventory; some excluded gases/sectors are now included in U.S. Climate
Change Action Plan, including N2O from fertilizer use and CH4 from ruminants).
- The following list includes those GHGs estimated by US agencies to be accurate to
within +20% now in the United States, or projected to attain that accuracy within 5
years:
All energy-related carbon dioxide (CO₂) emissions and above-ground forest sinks
All emissions of high GWP gases (HFCs, PFCs, and sulfur hexafluoride (SF₆),
Most methane (CH₄) emissions (e.g., about 76% of US 1990 CH4 emissions)
Some nitrous oxide (N₂0) emissions (e.g., about 14% of US 1990 N₂O emissions)
Review and update contents of Annex C every five years with input from SBSTA and/or
IPCC, allowing for additions or deletions as methodologies are improved.
Parties set goal of achieving accurate estimation and measurement of all GHGs by 2020.
Baseline established on basis of included gases only.
Key Points
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Emphasizes verifiability, but is still (at least for U.S.) quite comprehensive and flexible.
Simplifies and protects the rigor of compliance by restricting trading and offsets to the GHG
sources/sectors that can be accurately measured/estimated.
Avoids substitution of less certain reductions (about 3% of US 1990 inventory is not known
to better than +100%) for more certain emissions.
Provides incentive for improving sink and emissions methodologies in cases where actions in
non-included gases/sectors are less expensive than Annex C actions.
Potential problems:
Could require adoption of policies and measures to address non-included gases/sectors or
leave those gases/sectors uncrontrolled.
May require special - and potentially complex - provisions for amending Annex C.
Could establish disincentive to develop/improve non-Annex C gases/sector methods.
Could set a bias against developing countries- where a larger proportion of emissions will be
in non-Annex C gases.
Conclusions
Both options leave some key decisions up to subsequent expert group agreement. This
paper does not seek to identify what would happen in the case of a failed effort to gain agreement
- for example, in option 1 of ther is no agreement on "ucertainty" factors, or in option 2, if there
is no agreement on what sources are measurable within ±20%.
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ANNEX C PAPER
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Page 4
Annex C Analysis
Business as Usual Emissions for the United States: 1990-2020 (MMTCE)
1990
2000
2010
2020
INCLUDED (under Option 2)
1508.7
1662.8
1822.0
1972.1
SINKS
125.0
-109.0
-108.0
-92.0
EXCLUDED (under Option 2)
73.4
75.1
79.4
82.8
TOTAL
All Gases/Sources
1457.1
1628.9
1795.4
1962.9
Environmental Impact for U.S. under Annex C Options (MMTCE)
Scenario
1990
2010
2020
Business as Usual
1457
1795
1963
Option 1- Comprehensive
Annex C-Capped
1457
1457
1457
Uncontrolled
0
0
0
Total
1457
1457
1457
Option 2- Including Sinks
Annex C-Capped
1384
1384
1384
Uncontrolled
73
79
83
Total
1457
1463
1467
Option 2- Excluding Sinks
Annex C - Capped
1509
1509
1509
Uncontrolled
-52
-27
-9
Total
1457
1482
1500
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EARLY BANKING: CREDITS FOR EARLY REDUCTION
(DRAFT 5/20/97)
Background
"Early banking" is the term used to describe actions that are taken prior to the beginning of
the first budget period for credit against obligations in that period. The rationale for early
banking is based on a presumption that it eases compliance costs; however, inasmuch as the costs
of complying will be a function of the timing and level of the first budget period (as well as the
domestic distribution of the obligations), it is unlikely that the true value of early banking can be
conclusively resolved without knowing these constraints.
Advantages of early banking include creating an incentive for emission reductions prior to
the start of carbon budget periods; potentially creating a fund of extra emission rights from early
action that eases requirements in, and effectively lengthens the first control period; and
encouraging early experience that may reduce resistance to complying with later binding
obligations. Disadvantages include difficulty in negotiating (given that most other countries will
perceive this effort as a ruse to allow U.S. emissions to continue to grow during the budget
period); difficulty in compliance (there will be no budget against which reductions will be
measured), and a perception that the entire issue can be accommodated through domestic
allocation systems - in which early efforts can be credited by allowing extra emissions to those
early reducers in out-years.
This paper suggests several options for treating the early banking issue: (1) rewarding
early reductions by adding allowances in the budget period; (2) recognizing that countries may
credit early actions domestically, but do not provide for an additional "pool" of international
credits; (3) providing for early banking only in Л projects, and (4) rejecting early banking.
Several issues are raised in this paper that may warrant additional consideration. While
each of these are addressed briefly here, they are also raised in other documents being considered
in the interagency process - the first in discussions of the budget level and timing, and the
second in the paper on Л.
(1) The U.S. has specifically rejected a budget period which begins in 2005 or before. Some
concern has consequently been expressed that there may only be weak incentives, if any, to
reduce carbon emissions prior to the first control period - a concern that is exacerbated if
the first period does not begin until 2010. Early banking has been proposed to address this
late start. Furthermore, with a considerable delay prior to the initiation of the first budget
period, some transition economies with "excess" reductions may be forced to forego the
benefits from monetizing their reductions; early banking may to a certain extent also
alleviate their concerns.
(2) We have not yet taken a decision on the timing for allowing Л credits to be counted. If
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tons can be generated prior to the first budget period, they may be banked for use in that
first period.
Constituency Views
Domestic industries that have opportunities for early carbon reduction clearly favor early
banking. This group includes both industries that have already claimed reductions and those who
could make initial or further reductions prior to the first control period. These groups want
assurance that their early reductions: will be rewarded; will not be the basis for tighter limits in
the future; and will be compensated commensurate with costs incurred. However, most industry
groups are significantly more concerned that early banking provisions would be interpreted as an
early target - - which they have flatly rejected.
Some environmental groups would like to see early banking provisions to create an
incentive for early actions, but only if credits would not result in increases in cumulative
emissions. However, most environmental constituencies would strongly prefer a 2005 target to
any provisions on early banking.
Transition-economies' actual emissions are anticipated to lie well below the likely
obligations set in the first budget period. These countries may favor early banking as a way
monetize the "underages". Environmental interests (and many in the OECD) believe that such
reductions exist solely as a result of economic downturns, and trading them could result in a
redistribution of wealth internationally but lead to no net environmental gain. While the
transition economies' concerns could be met with an early target, they are likely to oppose a later
target with no banking.
Option 1: Reward Early Reductions with Net Added Credits
In this option, the Kyoto agreement would provide for extra allowances to be granted to
Parties in the first budget period equal to the number of early reductions taken prior to the
beginning of the period. Essentially, this would compensate Parties which incur costs to achieve
early reductions. A key concern is how to measure the extent of an early reduction. While a
baseline is needed, neither the 1990 baseline nor the first control budget is necessarily the proper
test; the right interim baseline could be some interpolation between the two. Imprecision in the
benchmark for quantifying early reductions could open the door to later emissions that were not
offset by real early reductions, and environmental loss. Of course, choosing any year will
implicitly "reward" some for taking early action- although the domestic allocation of the reward
is a matter that will still need to be determined through internal distributions of initial permits.
Pro:
Added allowances maximize incentives for early action.
Early reductions that reduce cumulative emissions can be given additional allowances
without environmental loss.
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May contribute to a useful technology jump start.
May reduce opposition/political barriers to adoption of more stringent target.
Con:
Request for international approval for early banking invites a counter-demand for earlier
adoption of binding targets.
Proving real reductions requires an emissions benchmark. If additionality is not proven, then
added allowances may increase net carbon emissions.
Early reductions permit Parties to do less in the first control period by using early credits:
this could make second period compliance more difficult.
Would require a Party-by-Party interpolation of appropriate baselines.
Option 2: Domestic Implementation
Recognizing the advantages of early compliance, countries (including the United States)
might choose to credit early action against future allowances. Providing such credit would,
however, reduce the pool available for allocation during the budget period. Domestic decisions
would determine how many future allowances would be so allotted, and how many would remain
available for normal distribution. Of course, countries would need to consider how many credits
to carve out, recognizing that some constituencies will not be willing to take early action, and
will object to the effective increase in price attached to a reduction in the number of permits
allocated later. No legal text would be required to allow this alternative. However, to provide
some textual grounds in the agreement for countries to take such steps, hortatory language might
be inserted urging early compliance; such an option might also address the desire for a near-term
target. If this option were chosen, considerable thought would be needed in the development of
any language.
Pro:
Early reductions, if real, reduce cumulative carbon and reduce the entry emissions level at the
start of the first period. Early actions may also stimulate technologies that reduce long term
compliance costs.
Successful early reduction experience could make full implementation easier by reducing
uncertainty.
Some problems of an interim emission baseline are avoided; the control period baseline still
applies.
Allowing this type of early banking extends the interval for the first control period
compliance.
This option would be entirely within our domestic purview; no treaty language would be
required.
Con:
Including this option will likely incite others to recommend an earlier start date for the
budget period a outcome we have already rejected.
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The national incentive to make early reductions is limited because there is no added emission
right to offset either the cost of early reduction (compared to later implementation) or the real
reduction in cumulative emissions resulting from reduction prior to the control period.
Those who do not take early reductions will complain at the reduction in the size of the pool
later; the more early actions that occur, the more the pool would have to be reduced.
There is no guarantee Congress will follow Executive Branch proposals in developing carve-
outs.
Option 3: Early Credits for JI Projects only
JI projects that meet established criteria for atmospheric carbon reduction and satisfy tests
of additionality could be granted early reduction credits even if early banking for reduction of
overall national emissions were not approved. This issue is particularly relevant with respect to
economies in transition, which anticipate significant financial benefits from the sale of reductions
in the pre-2010 period. It is clear that issues related to monitoring, measurement and
additionality (all discussed in the separate JI paper) would need to be resolved prior to moving
forward with this option.
Pro:
Early Л captures environmental benefits that would be lost without credits for early action.
Private financing for early Л will not appear without bankable credits.
Successful Л early experience could reduce anxiety over adoption of the first period
emissions budgets.
Con:
Not all early reduction opportunities can meet the л project definitions. For example, some
valuable early reductions are domestic process modifications that could not be credited
without early banking provisions.
If early Л is allowed without agreement on criteria to ensure real reductions, adoption of this
option may lead to granting of bogus credits.
Option 4: Reject Early Banking
Of course, a fourth alternative is always available- - to reject early banking for inclusion in
the U.S. draft Protocol. There-is a clear concern that proposing any of the options listed above,
particularly in light of our inability to also announce a stringent target, will be met with
enormous skepticism. Such an announcement would likely be perceived as an effort to defer any
action rather than as an effort to lower costs. Furthermore, while some flexibility advantages
may accrue to adopting one of these alternatives, rejecting an explicit textual change to support
early banking would not preclude allowing the United States to develop an early banking
proposal at a domestic level.
TOTAL P.17
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CLIMATE CHANGE DISTRIBUTION LIST
OSTP
Rosina Bierbaum
456-6202
FAX: 456-6025
CEA
Alicia Munnell
395-5036
FAX: 395-6958
OMB
T.J. Glauthier
395-4561
FAX: 395-4639
Justice
Lois Schiffer
514-2701
FAX: 514-0557
Commerce
Jeffrey Hunker
482-6055
FAX: 482-4636
NOAA
Terry Garcia
482-3567
FAX: 482-6318
Treasury
Joshua Gotbaum
622-2220
FAX: 622-2633
Interior
Brooks Yeager
208-6182
FAX: 208-4561
USTR
Jennifer Haverkamp
395-7320
FAX: 395-4579
Agriculture - Charlie Rawls
720-6158
FAX: 720-5437
CEQ
Dirk Forrister
343-1060
FAX: 343-1162
EPA
Mary Nichols
260-7400
FAX: 260-5155
David Gardiner
260-4332
FAX: 260-0275
DOE:
Mark Chupka
586-5523`
FAX: 586-0861
DOT:
Frank Kruesi
366-4544
FAX: 366-7127
OVP
Pete Jordan
456-9501
FAX: 456-9500
CEQ
David Sandalow
456-6543
FAX: 456-2710
Mark Mazur
CEQ
Steve Seidel
395-3706
FAX: 456-6546
AID
David Hales
875-4205
FAX: (703) 875-4639
04/30/97 WED 14:22 FAX 202 482 4636
POLICY
4.
001
To:
Alicia Munnell, Jeff Frankel, Mark Mazur,
Council of Economic Advisors
FACSIMILE
Fax #: 395-6958
Re:
Climate Change Sectoral Paper
Date:
April 30, 1997
Pages: 30, including this cover sheet.
Attached please find the Climate Change Sectoral Paper per the memorandum you should
have received dated April 28 from Jeffrey Hunker and Judy Greenwald.
Please call 482-4127 to confirm receipt.
Thank you.
From the desk of
Sandra L. Hawkins
U.S. Department of Commerce
14th & Constitution Avenue, NW, Rm 5835
Washington, DC 20230
(202) 482-6055
Fax: (202) 482-4636
04/30/97 WED 14:22 FAX 202 482 4636
POLICY
4.
002
Outline: Sectors Paper
Needs:
1. Sources and Trends of US Emissions
breakout by key industries
2. Transportation
better discussion of Car Talk
recommendations and impacts
Technology (PNGV) and other
regulatory impacts
Other transportation sectors
(eg: aircraft/air engine)
3. Electricity
Impact of
deregulation/restructuring?
4. Industry Sectors
That Will Benefit
? -- Needs analysis/
5. Energy Intensive Industry Sectors
All: tie analysis to the modeling
results
All: final review by agency
analysts
a. Aluminum
b. Petroleum refining
c. Steel
d. Cement
e. Pulp and paper
Needs to be prepared
f. Chemicals
Needs to be prepared
g. Others?
Identified?
6. Buildings/residential stock
?
04/30/97 WED 14:22 FAX 202 482 4636
POLICY
4.
003
draft as of 4/14/97
SECTOR EMISSIONS AND MITIGATION OPTIONS
SOURCES AND TRENDS OF U.S. EMISSIONS
Total U.S. greenhouse gas emissions in 1995 were 1,557 MMTCe
(million metric tons of carbon equivalent), with gross emissions of 1,674
MMTCe offset by 117 MMTC of carbon sequestered by the nation's forests.
Emissions have increased by about 7% since 1990. Of the total, methane
accounts for 11% (mainly from landfills and agricultural activities), nitrous
oxides about 3%, and the various halocarbons 2%. While currently small in
aggregate, these gases can play an important role in future warming because
of the magnitude of their heat-trapping potential and their atmospheric
lifetimes. The remaining 85% of U.S. emissions are carbon emissions from
fossil fuel combustion and other industrial activities.
Annual U.S. fossil-related carbon emissions have grown by about
1.2% per year since 1950 and are projected to rise at almost the same rate
over the next twenty years. There are three ways of viewing these
emissions:
Primary fuel use: Coal's share of the total has fallen from 50% in 1950 to
35% in 1996; while oil's share has risen from 36% to 42% and natural gas'
share has risen from 14% to 23%. However, these shares are now expected
to remain fairly steady over the next quarter century.
First-tier energy users: The influence of the electric utility sector on total
emissions has grown over time as the American economy has steadily
Increased its use of electricity. It now accounts for about 35% of total
emissions - with over 85% of its total due to the combustion of coal.
Similarly, the transportation sector's
share of fossil-related carbon
emissions has grown from 28% in
1950 to 33% in 1996, with oil
accounting for practically all of the
fuel used in this sector. Thus, the
transportation and utility sectors
together currently account for 68%
of U.S. fossil-related carbon
emissions.
End-use sectors: It is also useful to attribute electricity-related carbon
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emissions to the sectors that consume the electricity rather than to the utility
sector which produces it. Thus, viewed from the perspective of final energy
demand, the importance of the residential and commercial sectors has
increased since 1950, while industry's share of total emissions has fallen.
This reflects the changing importance of the manufacturing and services
sectors of the economy.
Emissions are now roughly equally distributed among households and
commercial businesses (35%), transportation (33%), and industry (32%).
These shares are projected to remain fairly constant over the next twenty to
twenty-five years.
(NOTE: NEED TABLE SHOWING HISTORICAL AND PROJECTED ENERGY
USE AND GREENHOUSE GAS EMISSIONS BY END - USE SECTOR --
HOUSEHOLDS, TRANSPORTATION, INDUSTRY, WITH SECOND TABLE
BREAKING OUT INDUSTRY BY THE ENERGY INTENSIVE SECTORS AND
ALL OTHERS -- CHEM, STEEL, ALUMINUM, GLASS, PAPER, ETC).
Eig.
INVO
Histork
1600
140g
120
1000
/
/
$30
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TRANSPORTATION
Contribution to greenhouse gas emissions
Passenger cars and light duty trucks (light vehicles) contribute the majority of
transportation emissions. Emissions from light vehicles alone accounted for
20% of total U.S. greenhouse gas emissions in 1990, and in the absence of
new policy measures are expected to rise from about 250 million metric tons
of carbon equivalent (MMTCe) in 1990 to 350-400 MMTCe in 2010.
The major factors underlying the rapid growth in emissions from light
vehicles are growth in vehicle miles traveled, stagnant new fleet fuel
economy levels, and growth in the relative proportion of light trucks sold,
which have lower CAFE standards than cars.
Tren
30
$4.00
$3.00
CAFE New Economy Car
$2.00
(1990$)
CLUCKS
CAFE
Light
New
$1.00
Estimated
1813
$0.00
STATE
Truck
1978
1980
1982
1984
1986
1988
1990
1881
Background on the automobile industry
Actual growth in vehicle miles traveled (VMT) since 1990 has averaged
2.4% per year. Growth in VMT is a function of a number of factors,
including demographic changes (e.g., more women in the workforce;
immigration), land use patterns, the cost of driving each mile (now at an all-
time low on an inflation-adjusted basis), among others.
Corporate average fuel economy of new car fleets increased steadily along
with increasing CAFE standards throughout the late 1970s until the mid
1980s. Since then, new car and light truck fuel economy has been stagnant
as new more efficient technologies have been applied to performance (which
has increased by 60% for all light vehicles in the last 15 years) and utility
rather than to fuel economy. Absent a driving force such as policy changes
or fuel price increases, no significant increase in new fleet fuel economy is
expected to occur. Further, because new vehicle fuel economy has been
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stagnant for several years, the in-use fleet of cars and light-trucks has also
nearly reached a fuel economy equilibrium.
In fact, the overall in-use fuel economy of the combined new light vehicle
fleet (i.e., cars and light trucks such as minivans, sport utility vehicles, and
pickup trucks) has already begun to decline due to higher sales of light
trucks. These have gone from under 25% of the market in 1982 to almost
45% today. A key reason that this shift is important in terms of GHG
emissions is that light trucks face lower CAFE standards than cars (almost 7
mpg lower). Moreover, since light trucks tend to last longer than cars, they
are likely to be driven more miles over their lifetime than cars.
Possible Climate Change Policies
(NEED A BETTER MORE DETAILED BUT PUNCHY DESCRIPTION OF THE
POLICY RECOMMENDATIONS AND DISAGREEMENTS FROM CAR TALK --
PLUS THEIR ESTIMATED EMISSIONS IMPACTS)
- REGULATORY
- TECHNOLOGY
In 1994, President Clinton convened a Federal Advisory Committee Policy
Dialogue to assist in the development of measures to significantly reduce
greenhouse gas emissions from personal motor vehicles ("CarTalk").
Although CarTalk ended without consensus among all members of the
Committee, the process did result in a number of analyses and proposed
policy options. The analyses concluded that there are essentially three ways
to reduce carbon emissions from light vehicles: improve fuel economy; use
fuels with lower life-cycle carbon emissions (such as alcohol fuels from
certain biomass processes); or reduce miles driven. Historically, most
government regulatory efforts have been directed at improving fuel economy
although, as stated earlier, such efforts are proving less effective.
PNGV?
Another opportunity for addressing transportation related emissions is
through the Intermodal Surface Transportation Efficiency Act (ISTEA). This
Act establishes the rules for federal transportation funding to the states. In
1991, ISTEA authorized $140 billion in transportation projects over six years.
The Act expires in 1997 and Congress is now considering options for its
reauthorization. These could include provisions that would indirectly reduce
greenhouse gas emissions. Examples include the following:
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Congestion Mitigation and Air Quality Improvement Program: Additional
funds could be targeted to transportation projects that reduce air
emissions and energy consumption on a long-term sustainable basis.
Brownfields Restoration: Successful redevelopment of brownfields can
help revive inner city areas and reduce sprawl, thereby reducing vehicle
miles traveled. More funds could be made available for these projects.
Incentive Funds: A new $500 million Fuel Efficiency Incentive Fund could
be established to reward the ten states that are able to reduce fuel
consumption, on a per capita basis, by the greatest amount over the next
five years.
Factors Shaping Industry Response
(To come -- need to discuss strategic risk of CAFE, vehicle standards versus
market demand; shifting market demand? Foreign manufacturer responsies
or technologies?)
OTHER TRANSPORTATION SECTORS
(AIRLINES, RAIL, TRUCK - HOW RELEVANT, ANY POLICES OR IMPACT?)
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ELECTRICITY
Contribution to greenhouse gas emissions
Electric generators are responsible for about 35% of national emissions of
carbon dioxide, with over 85% of electricity-related emissions coming from
coal combustion.
Background on Electric Generation
Fossil fuel power plants generated over 80% of U.S. electricity in 1970, but
that share has fallen to about two-thirds as nuclear power's share has risen
from virtually nil to about 22%; and it is expected to rise back to about 80%
over the next twenty years as the existing stock of nuclear plants are phased
out.
Although the overall efficiency of fossil generation - - the rate at which fossil
energy is converted to electricity - has barely changed in the past 35 years,
modest improvements are expected over the next twenty years as natural
gas-fired generation doubles its share of total generation from about 15%
today to over 30%. New natural gas-fired "combined cycle" power plants -
basically jet engines bolted to the floor - yield very high conversion
efficiencies because they turn turbines both directly and indirectly using their
waste heat.
Renewables are forecast to have high growth but remain a small part of the
base. Excluding hydroelectric power, whose expansion possibilities are very
constrained, renewable electricity generation is expected to double over the
next twenty years but will still account for less than 2% of total electricity
generation.
STRUCTURE OF INDUSTRY/
ROLE OF COGEN/ SMALL PROVIDERS
FEDERAL/STATE POLICY
FACTORS SHAPING INDUSTRY RESPONSE
Emissions can be reduced either by making generation and distribution less
carbon intensive or by reducing the amount of electricity demanded. Efforts
at the latter generally focus on making the electric system and electric
customers more energy efficient.
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DEREGULATION
States are currently adopting retail competition for the electricity industry.
This trend could be accelerated with federal legislation. Retail competition is
expected to lower the price of electricity by as much as 20-25% in certain
regions and change the fuel mix of generation. Preliminary EPA and DOE
analysis indicates that utility greenhouse gas emissions could rise by as much
as 2-6% as a result. To mitigate the environmental impacts of competition
and maintain the environmental benefits of current state level renewable and
demand side management programs, a number of options have been adopted
at the state level (for states that have already adopted competition) or are
under consideration for the rest of the nation. These include:
A "portfolio standard" for renewable energy or greenhouse gas emissions:
This would require that all generators meet a specified level of renewable
generation or greenhouse gas emission reduction either by undertaking
such projects themselves or purchasing "credits" from others who have.
A social benefit fund: Revenues from a charge on transmission service
are used to subsidize energy efficiency projects, renewables, R&D, or low
income consumers. California has adopted this approach.
Information disclosure requirements: Generators could be required to
disclose the emission profiles of their generation, facilitating the marketing
of "green" electricity.
Additional air pollutant requirements: Many states are hesitant to adopt
retail competition because they perceive that differing regional
environmental requirements put their electric industry at a competitive
disadvantage and will result in more pollution being transported into their
states. Thus, additional environmental provisions to "level the playing
field" - which could include greenhouse gas emission reductions - are
currently being debated.
TECHNOLOGY OPTIONS
Technological options for reducing the emissions from electric generation
include the following:
Substitution of lower carbon emitting fuels such as renewable energy or
natural gas for coal
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Greater use of existing sources of nuclear generation by improving their
reliability
Use of more energy efficient generation equipment for fossil fuels, such
as combined cycle gasification systems or fluidized bed technologies for
coal, or high efficiency turbines for natural gas.
Many of these technologies are currently penetrating the market
and their importance will grow in the future. The next generation of
natural gas technologies (including gas turbines and fuel cells), for
example, could achieve energy conversion efficiencies of 70% or more by
2005.
- High efficiency coal-fueled power plants, such as integrated gasification
combined cycle perhaps combined with a fuel cell, could achieve
efficiency exceeding 55%, with half the CO2 emission of current plants.
- Renewable technologies-wind power, photovoltaics, biomass power,
solar thermal, and geothermal-have seen sharp cost reductions in the
past two decades, some by a factor of ten.
Further R&D, coupled with expanded deployment to achieve economies
of scale and improvements in manufacturing, would likely make one of
more these technologies competitive with fossil fuels in a large number of
areas in the next two decades. (NEED MORE BACKUP ON THIS. WHAT
WILL MAKE THIS HAPPEN?).
(WHAT DOES THIS MEAN?
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INDUSTRY
Overview
Industry analysis needs to focus both on
1) those sectors facing structural and transitional pressures
because of climate change policies; and
2) sectors which will more directly benefit.
The seven most energy-intensive industries-steel, aluminum, petroleum
refining, chemicals, pulp and paper products, glass, and metal casting- -
may face significant structural adjustment pressures, which public policy
needs to take into account. These sectors account for about 80% of the
energy consumed in U.S. manufacturing and more than 90% of the
hazardous waste.
Overall, the industrial sector directly emitted approximately 300 million
metric tons of carbon in 1994 from the combustion of fossil fuels and
industrial processes. In addition, electricity consumption by this sector is
indirectly responsible for an additional 120 million metric tons of
emissions.
-
The major manufacturing sectors and their CO2 emission estimates are
summarized below.
Sector
Direot Carbon Emissions
Million Metrio Tons
Primary Metals Industry (SIC 33)
38.9*
Chemical and Allied Products (SIC 28)
48.8*
Paper and Allied Products (SIC 26)
53.5"
Petroleum Refining (SIC 2911)
13.0'
Cement (including non-combustion CO2
15.0' Estimates are from 1991
emissions)
MECS and net of electricity.
"For paper mills, over 50% of
energy input is from waste wood.
The carbon estimate incorporates
emissions from wood based fuels.
Emissions would be considerably
lower (19 MMTC) if the carbon
emissions from wood (a renewable
source of biomass) were assumed
to be zero.
"Estimates are from CO2 Trading
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Issues, Volume 1, Decision Focus
Inc. (based on 1988 MECS).
Manufacturing industry as a whole experienced dramatic
improvements in energy efficiency (i.e. increases in output per unit of energy
input) during the energy crisis of the late 1970s and early 1980s, as
industries reduced their energy use and energy-intensive industries' share of
total manufacturing output decreased. The energy-intensive industries
discussed above all experienced significant energy efficiency improvements,
with improvements between 1977 and 1985 ranging from about 14% for
the Paper and Allied Products industry to more than 40% for the Chemicals
and Allied Products industry. However, many of these industries actually
experienced decreases in their energy efficiency (i.e. increases in their energy
intensity per unit of output) between 1985 and 1991 after energy prices fell.
No single industry sector dominates in generating CO₂ emissions.
Paper and allied products is the largest sector (including direct emissions
from by-products), followed by chemical and allied products, primary metals,
and petroleum refining.
(NEED TABLE)
(NEED DISCUSSION OF WINNING SECTORS - NO DISCUSSION IN THIS
DRAFT OF THESE).
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ALUMINUM INDUSTRY
Contribution to Greenhouse Gas Emissions
(to come)
Background on the aluminum industry
The industry has three major segments :
-- primary aluminum, produced by electrolytically reducing alumina into
aluminum;
-- secondary aluminum from recycling aluminum, which is used mostly
for castings for the auto industry; and
-- semifabricated products, where primary aluminum is then processed
into sheet, plate, foil, extrusions, etc.
In general, primary aluminum supplies about 45 percent of domestic
aluminum consumption, secondary aluminum about 30 percent, and imports
the remaining 25.
Total U.S. primary aluminum capacity is about 4.2 million tons, and employs
about 21,500 persons; secondary aluminum employees (), and
semifabricated products employees 39000 (?). Value-added is about equal in
primary and semifabricated products.
Overall, the United States is globally competitive all parts of the industry, and
is a net exporter of semifabricated aluminum products. Domestic primary
capacity has remained competitive because of continuous upgrades in
existing plants, and that the capital stock is fully depreciated. No new
domestic smelting capacity has been added since 1980 and domestic
primary aluminum production is not sufficient to meet domestic demand. The
United States is a net importer of primary aluminum.
The corporate players differ by segment. Primary and semifabricated product
aluminum is dominated by the large vertically integrated producers such as
Alcoa, Alcan, Alumax, Kaiser, and Reynolds. A large portion of the trade in
both products -- especially with Canada, the largest trading partner -- is
actually intercompany transfers between facilities.
Secondary aluminum is a more fragmented industry. The metal produced is
used principally by the foundry industry, and approximately two-thirds of the
secondary metal produced is consumed by the auto industry. The majority of
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these facilities are in Southern California, and the Midwest.
Factors Shaping Industry Response
Primary aluminum is highly dependent upon the cost of electricity --
approximately one-third the cost of producing primary aluminum is the cost
of electricity.
Utility restructuring may have a significant impact on competitiveness: The
primary aluminum industry in the US purchases electricity at approximately
half the price of other industries, in part because of hydro power (Pacific
Northwest) and in part because of long term negotiated rates. Any change in
pricing due to restructuring would have major impacts. (NB -- IS THERE ANY
ANALYSIS ON THIS? WILL RESTRUCTURING HAVE AS BIG/BIGGER AN
IMPACT AS CC?)
The locus of primary aluminum production already is shifting gradually to low
energy cost countries abroad. The last greenfield smelter in the US was built
in 1980, and there are no plans to build further. While on average, the U.S.
primary aluminum industry is around the median in terms of the costs of
production internationally new primary aluminum capacity is being added in
countries with cheap energy. Globally, new capacity is being constructed in
-countries with cheap sources of energy to produce electricity. These include
the Middle East (natural gas), South Africa (coal), and Canada (hydro).
Canada and South America are particularly well-positioned because they have
almost 100 percent hydro based power.
Japan's strategy is noteworthy. With only one small aluminum plant
domestically, Japan has historically undertaken joint ventures worldwide, i.e.
Brazil, Australia and Indonesia, where energy prices and quantities have been
guaranteed over a long term. (NEED MORE DETAILS -WHICH
COMPANIES?).
The future of U.S. primary aluminum will depend on differences (if any) in
the price and availability of hydro and coal generated electricity. These
differences will have substantial regional impacts. Almost all the smelters in
the eastern part of the U.S. rely upon coal based electricity whereas the
smelters in the northwest use hydro based electricity. Should a policy be
Implemented based on carbon emissions, the eastern smelters in the U.S.
could be impacted more than western smelters. The impact on the western
smelters would depend on the cost increases to hydro based electricity.
The location of semifabricated production is linked to primary aluminum
production:
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There is a close relationship, both physically and economically, between
primary production facilities and semifabricating facilities. Semifabricating
facilities, generally, are located near their source of primary aluminum in
order to reduce costs.
Secondary aluminum is less sensitive to climate policies, but its potential is
limited.
Secondary aluminum continues to increase in significance as a component of
the overall supply of aluminum, it is restricted in its growth potential by the
amount of primary metal consumed, and it is not substitutable for primary
aluminum in all of its end-uses. The recycling industry uses only 10 percent
of the energy required by primary producers and recycling typically uses
natural gas. The effects of energy price adders on this industry depend
critically on how policy actions affect natural gas prices relative to coal based
and hydro based electricity prices.
Technological and Investment Options
Technological change is incremental: The Hall-Heroult electrolytic process for
producing aluminum has remained relatively unchanged in the hundred years
since it was developed. This process has experienced continuous and gradual
improvements that have reduced energy consumption per metric ton by
about 25 percent from 1960 to 1994. No new process for producing
aluminum is expected, but DOE analysis pointed to "semirevolutionary and
retrofit modifications" that could benefit existing capacity in the U.S. and in
OECD Europe.
In order to reduce energy consumption, and, thus costs, the domestic
industry, and in some cases in conjunction with the Government, is working
on improving the current electrolytic technology. These improvements would
decrease energy consumption, and hence greenhouse gas reductions.
Analytical Results of Sectoral Impacts
(NOTE: NEED IAT MODELING RESUTLS TO REPLACE DOE ANALYSIS)
In DOE's analytical base case of no new environmentally-driven constraints
on aluminum production, practically all new alumina reduction plants will be
built in developing countries, with the only exceptions being a few developed
countries with access to low cost hydro power.
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The aluminum industry purchases electricity at approximately half the price
of other industries, primarily because of its use of hydro power. The effects
of the assumed fuel price adders on this industry depend on the future
structure of the electricity market and the degree to which the assumed fuel
price adders were applied.
If the fuel price adders were only half as large for aluminum as for
other industries, the least competitive plants in the U.S. and in Europe
would close, which would reduce capacity in these regions by about
20 percent and 8 percent respectively.
If the aluminum industry were subject to the same fuel price adders as
the industry average, the domestic industry could not compete with
developing countries that can produce aluminum in the $1,300 to
$1,550 range.
the revised economics would cause all of the US capacity to
be noncompetitive by 2010 and virtually all of OECD-Europe
except that in Canada, Iceland and Norway The loss of
employment would be about 23,000 directly from the aluminum
smelters.
In contrast to the primary aluminum producers, the aluminum recycling
industry would be positively affected by the assumed fuel price effects. The
significant increase in costs of producing primary aluminum would encourage
a shift to recycled aluminum. However, the U.S. recycling market has a
limited capacity to expand; about 70 percent of the aluminum cans in the
U.S. is currently being recycled, and the predicted likely maximum is 80
percent.
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PETROLEUM REFINING SECTOR
Contribution to US greenhouse gas emissions
(To come)
Background on the Petroleum Refining Industry
Refinery products include refinery gases, distillate and heavy fuel oils, and
transportation fuels including gasoline, jet fuels, diesel and bunker fuels. The
US industry is particularly geared to the production of transportation fuels.
The petroleum refining industry is unique in being both the producer of fuels
used as inputs downstream, and also a significant consumer of these
products (8% of its output).
During the last 20 years, the U.S. refinery capacity has been approximately
stable, but has declined somewhat since 1980. The refinery capacity in
Western Europe has declined during the last 20 years. The OECD countries
have accounted for a declining share of world capacity during the last two
decades, because of both the declining capacity from within the OECD and
the expansion in capacity in the developing countries.
The rate of return on refinery investments is currently 6 to 7 percent, which
is just over one-half of the industry average.
Factors Shaping Industry Response
Charting the industry's evolution is complex, and industry impacts will be
very sensitive to the precise form of the policies adopted. Key sensitivities
include:
Whether policies affect only downstream demand of refinery products, or
also increase costs of fuel used in refining. In petroleum refining, fuels are an
input of the refinery process in addition to being an output. Relative
international competitiveness of US refineries will be affected more by the
extent to which prices of fuel used as an input are increased -- since these
may change relative costs versus overseas competitors -- as opposed to
policies that affect the overall demand for the refinery products produced.
Also, policies to promote the use of non-petroleum fuels as substitutes will
clearly have an impact.
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The extent to which marine transportation costs (the price of marine bunker
fuel) are affected by climate policy: Transportation costs of crude oil and
refined products are important in determining world trade flows and refinery
location. Bunker fuel can account for 25 to 55 percent of transportation cost
for a long haul voyage on a large crude oil carrier, and an increase in bunker
fuel costs could affect -- and perhaps counter -- shifts in refining capacity
offshore.
Other factors that will affect the response of the industry include:
-- characteristics of individual refineries: The refineries most vulnerable are
located in highly competitive regions, they are typically old, and they produce
a standardized product subject to a high degree of competition. Many of the
old refineries are only marginally profitable under existing conditions. Less
affected refineries will be those that have been renovated and modernized in
the last five years, or produce specialized products.
The impact of increased fuel costs to refineries would also vary
regionally. The large East Coast market is served by local refineries, by Gulf
Coast refineries, and by foreign sources. The Gulf Coast refineries account
for about 55 percent of U.S. capacity. DOE analysis highlighted differing
views as to their vulnerability to cost increases that affected them but did
not affect foreign suppliers. The Midwest and Rocky Mountain regions,
which account for about 25 percent of U.S. capacity, are relatively
geographically isolated and would be less impacted by energy price adders.
The West Coast refineries are subject to stringent environmental controls and
could also be undercut by lower import prices.
The conflict between refinery emissions and policies to produce
environmentally enhanced fuels. Refinery emissions can be reduced by
producing a larger share of lower grade heavier products, such as fuel oil.
However, these products produce significant emissions when burned.
Lighter, high grade products are environmentally cleaner when burned, but
they result in more emissions in the refinery process.
Technology and Investment Options
The U.S. refinery sector relies significantly on natural gas in the refining
process. In the short run, there is therefore little opportunity to improve
emissions by switching to fuels with lower carbon emissions.
Longer term, radical breakthroughs in refinery technology are possible and
would enable the refinery processes to operate at lower temperatures and
atmospheric pressures. Such breakthroughs would be of major importance
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in reducing energy use in refinery operations. These advancements include
improved catalyst technologies and biotechnology process.
Analytical Results of Sectoral Impacts
(NOTE: NEED IAT ANALYSIS TO REPLACE DOE ANALYSIS)
DOE examined the impact of exogenous increases in energy prices (fuel price
adders) under two cases: included that the impact of the assumed fuel price
adders on the global refinery industry would be "substantial, adverse, and
complex with possibly unintended consequences." The impact of the
assumed price effects depends on whether they apply only to refinery use of
fuels or if they would also be applied to refinery products.
If price increases (add factors) only applied to refinery products (ie --
the consumption of refined products), the demand for these products
would decline substantially and so would refinery revenues and new
investments.
Refineries in non-affected countries would bear part of the cost to the
extent that they sell products in participating countries.
If the add factors were levied also applied against fuel used in the
refining process in OECD countries, the result would be a significant
increase in the operating costs of refineries, while competing refineries
in non-affected countries would not be subject to these cost increases.
In this case, most OECD refining would be shut down.
Some minor segments of U.S. and OECD refining may remain, e.g., those in
highly interior regions with local crude supplies or, possibly, those refineries
whose production was focused on high-value non-fuel products.
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STEEL INDUSTRY
Contribution to US greenhouse gas emissions
(to come)
Background on the Steel Industry
The U.S. market accounts for about one-fifth of steel demand worldwide.
There are three sectors in the U.S. steel industry:
- Integrated producers (58% of shipments) produce steel starting with
iron ore and coal.
- Minimills (40% of shipments) melt ferrous scrap in an electric furnace
to produce steel. This sector has grown rapidly in the last 25 years,
largely at the expense of integrated mills, and will be bringing on line
huge increases in flatrolling capacity through the rest of the 1990's.
-Specialty steel producers (2% of volume, 10% of value of shipments)
melt scrap with alloying elements nickel and ferrochromium to produce -
stainless steel, electrical steel, and alloy tool steel products.
Growth varies by product. The demand for carbon steel has still not
rebounded to levels achieved in the early 1970's, while specialty steel
demand has increased an average of 4 percent over the last 30 years.
The United States is one of the few markets in the developed world where
there is not significant overcapacity. In fact, domestic producers presently
do not have the capability to supply their own market. Foreign producers
supplied 21.2 percent of apparent domestic consumption in 1995. In the
last several months, comparatively strong U.S. market and high prices
encouraged a near record levels of imports.
(EMPLOYMENT?)
Factors Shaping Industry Response
A. Competitive and Structural Factors
Integrated producers while profitable and highly competitive -- remain
financially weak:
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Beset by catastrophic losses and some bankruptcies in the 1980's, since
1981 integrated producers have sharply reduced their capacity and invested
heavily in new technologies. They are now considered highly efficient; many
mills are now recognized as world class and quality is on a par with that of
Japan and Germany.
While the integrated mills are now profitable, they remain weak financially -
with a return on assets have been well below that of minimills and S&P 500
firms as a whole, and face difficulties raising capital. Furthermore,
integrated mills will have to spend billions to conform to the 1990
amendments to the Clean Air Act, in large measure to reduce air toxics from
coke ovens. Shutdowns are certain to occur.
Minimills and specialty producers are in much better shape - being generally
more profitable than integrated producers. Capital expenditures to construct
a greenfield minimill are only a fraction of that for an integrated mill.
Technologically innovations that boost productivity and reduce costs are
coming along continually.
Minimills are very sensitive to the price of scrap: Melting ferrous scrap in an
electric furnace to produce steel has generally been less costly than making
steel from iron ore and other raw materials via the integrated route.
However, the recent rise in the price of scrap has narrowed the minimills'
edge.
The integrated and specialty producers already face substantial import
competition. The US market has been particularly susceptible to imports.
Foreign producers captured a large share of the increased consumption
during the 1990's. Exports are not very important to the U.S. steel industry.
U.S. steelmakers have faced a near constant problem of global overcapacity
in the steel industry. When markets are weak overseas, this has resulted in
periodic surges in imports and consequent filings of unfair trade petitions,
alleging dumping and massive government subsidies. In the last 15 years
industry has won numerous cases.
Measures that increase coal prices will have a far more dramatic impact on
integrated mills than on minimills, while all of the industry will be affected by
electricity price increases: About 60 percent of the energy required to
produce steel is derived from coal, and most of that is needed to produce
coke. However, only integrated producers use coke. Steel companies from
all sectors are very large users of electricity and consequently would all be
adversely affected by higher electric rates.
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B. Technology Options
After a historical record of lagging technologically, the domestic steel
industry has begun to exhibit a high rate of technological change, including:
-- thin slab casting, enabling minimills to produce flat rolled sheet at a
minimill scale. Capital costs are low; productivity is high, and quality is
improving. Since Nucor Corporation's initial mill was constructed in 1989,
more than 7 million tons of (annual) flat rolled capacity have been built in the
United States; 12 million tons more are expected to be added by 2000.
-- new processes to extract iron from iron ore without using coke. At least
four facilities are now under construction in the United States to produce
steel scrap substitutes. Typically they will use coal or natural gas as a
reductant to produce iron. To replace antiquated (1940's era) coke ovens,
Geneva Steel is expected to build a Corex direct reduction project in Utah.
The facility, which will receive a $150 million grant from the Department of
Energy's Clean Coal Technology Development Program, will include power
and oxygen facilities.
Analytical Results of Sectoral Impacts
(NOTE: NEED IAT ANALYSIS TO REPLACE DOE ANALYSIS)
Based on the DOE roundtable, at present energy costs are about $54/ton for
integrated producers (using the Basic Oxygen Furnace) and about $44/ton for
minimills (using the electric arc furnace). Integrated mills rely primarily on
coal for energy; minimills are primarily electricity users.
Without new polices, energy costs for producing steel are projected to
decline over the next two decades; domestic shipments will increase and
imports decline.
With the assumed increase in energy prices, shifts from US producers could
be reduced by about 30% and employment reduced by about 65%.
- the major effect would be on integrated mills in the Pittsburgh-
Chicago corridor;
- hot and cold rolled steel would be the most affected product
category;
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- there would be a large increase in imports of steel slabs, while
downstream processing could remain in the US.
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THE CEMENT INDUSTRY
Contribution to US greenhouse gas emissions
Cement manufacturers are the fourth largest source category among the
manufacturing sector. In 1994, calcining cement manufacture (a non-
combustion process by which limestone materials are converted to lime)
accounted for 9.5 million metric tons of carbon emissions, while fuel
combustion accounted for another 6 million MMTC.
Background on the Cement Industry
Over the last two decades, cement demand has grown less rapidly than GNP
because construction growth has not kept pace with GNP growth and
cement has grown at a slightly slower rate than overall construction.
The cement industry ships over $5 billion from 120 firms employing about
17000 workers. Domestic shipments and consumption of cement have
remained at about the same level for the last two decades.
The manufacturing process of cement is standardized world wide in terms of
both process and use of raw materials. The raw materials (chiefly limestone)
are burned inside a cement kiln at a temperature of around 2700°F to
produce a hard granular intermediate product termed "clinker". This product
is then finely ground into cement.
The cement industry is energy intensive, with energy costs being about 30
percent to 40 percent of total manufacturing costs. The domestic industry
switched to coal as the principal energy source during the 1970's.
Although overland transportation of cement limits production and use to
within a few hundred miles, the fact that it can be transported by water
world wide at low cost makes it a international industry.
US cement capacity peaked in the early 1980's, and has since declined. This
has been accompanied by significant restructuring. Since 1975, 54 plants
have been shut down and the industry has lost about half of its labor force.
The number of cement kilns has similarly decreased by 50 percent. Most US
plants are located in rural areas, and are oftentimes the major employer.
No new greenfield plants have been built in the US In 10 years.
Factors Shaping Industry Response
A. Competitive and Structural Factors
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Domestic production is susceptible to increased import penetration: Almost
all the large US markets are accessible by water, and hence to imports.
Furthermore, 65-70% of US cement capacity is foreign owned -- with three
of the top five firms foreign. About 90% of cement imports are handled by
domestic producers, who use imports to supplement domestic capacity.
Hence, corporate profitability is not necessarily linked to the health of the
domestic industry.
B. Technology and Investment Options
The manufacture of cement uses a process that is standard worldwide, with
no apparent new manufacturing technologies which could dramatically
increase energy efficiency.
Rather, opportunities are incremental:
Replacement of inefficient capacity: Scale economies, incremental
improvements, and operating practice affect energy efficiency -- with US
plants less efficient than others (see table). Japanese kilns, for example, are
on average larger than the largest US kiln.
(Table -- US energy efficiency versus Japanese and European )
Incentives for this investment are unclear. The market is growing slowly;
there is no need for additional capacity, and many investment decisions are
made by non-US firms.
Potential for fuel switching: The extremely high burning temperatures permit
the use of waste fuels such as sludge, old tires, and even some hazardous
wastes. The cement industry is in the unique and enviable position of
making an effective use of waste fuels. Almost anything that burns can be
used to fuel a cement kiln, and typically without additional air quality
problems. It is unclear as to the potential for significant expansion of low
grade because: (1) permits are hard to obtain, (2) it is difficult to find waste
that is suitable and accessible and (3) the industry is unwilling to burn
municipal waste.
Similarly, it would not be feasible to switch to natural gas. The industry
switched to coal during the 1970s and is now better equipped to burn coal
than gas. (NB -- WHY IS THIS? DOES IT MAKE SENSE?)
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Allow the use of blended cement. Cement blended with fly ash, blast furnace
slag, or other pozzolans could reduce overall costs while not compromising
quality. Existing building codes, state highway departments and other
standards (STM standards) effectively preclude this cost saving measure.
Analytical Results of Sector Impacts
(NOTE: NEED IAT ANALYSIS TO REPLACE DOE ANALYSIS)
Based on the DOE roundtable analysis, the initial impact of higher energy
prices would be to increase the price (NB -- OR COST?) of domestically
produced cement by 13-20% by 2010, creating a large gap between the
price of U.S. produced cement and cement produced by non-OECD countries
whose energy prices are assumed to remain at baseline (no mitigation) levels.
Cement imports would displace domestic production. Imports were
estimated to increase from the 1994 level of 13.1 percent to capture
45.9% percent of the market in the year 2010 in one scenario case,
compared to 19.8% in the base case.
The result of lost market share would be the closure of domestic
cement plants and foregone capital investments that would have been
made to take advantage of growing demand.
Approximately 26 million metric tons of clinker capacity would be shut
down by 2010 in scenario 1 and 17 million metric tons in scenario 2.
The plant closures would cause job losses: 5,800 and 3,700 in
scenario 1 and 2 respectively by 2010. These losses are significant
because cement plants are often located in small communities where
the plant is one of the major employers.
The most likely outcome of the assumed energy price increases in
OECD countries would be the development of new cement production
capacity in countries not subject to the price increases. The purpose
of these plants would be to supply the U.S. market. These plants
would use the same technology and emit the same amount of carbon
dioxide as new capacity installed in the U.S.
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NEEDED:
DISCUSSIONS OF PAPER/ CHEMICAL/GLASS SECTORS
PLUS DISCUSSION OF 'WINNERS' SECTORS
RESIDENTIAL AND COMMERCIAL SECTORS
These sectors, sometimes called the "buildings" sector, account for
35% of final energy demand. The major components of energy use are the
following:
End Use
Shares of Total
Space heating
26.8%
Air conditioning
9.8%
Water Heating
10.8%
Refrigeration
5.0%
Lighting
14.7%
Cooking
2.6%
Other Appliances/Uses
30.3%
Total
100%
Although the commercial sector's total energy use has risen over the past
twenty years, the sector has experienced dramatic improvements in energy
efficiency in terms of energy use per square foot of building space, on the
order of 30% between 1979 and 1992. Commercial energy use per square
foot is expected to decline modestly - by about 0.2% per year or 4% in total
- over the next twenty years.
Residential energy use per household has declined by about 25% since
1978, while residential energy use per capita has declined by about 18%,
despite an increase in the amount of residential space per person that must
be heated, cooled, and lit. Residential energy use per square foot is expected
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to decline by about half a percent per year over the next twenty years.
Major technologies for improving end-use efficiency and/or reducing
emissions:
Better insulation of building shells, water heaters
Better control systems for regulating the use of energy consuming
equipment (time and temperature controls by zone, energy-use optimizers,
energy management systems)
High efficiency heat pumps
Heat pump water heaters
Decreased hot water requirements through low flow shower heads, better
designed clothes washers and dishwashers
Increased motor/compressor efficiencies for refrigerators
High efficiency lighting - fluorescent fixtures, electronic ballasts, control
systems
Substitution of lower-carbon fuels (on a full fuel-cycle basis)
DOE operates a program of test procedures, energy conservation standards,
and labeling for certain major energy using equipment in the residential and
commercial sectors. These include refrigerators, freezers, air conditioners,
water heaters, furnaces, dishwashers, clothes washers, clothes dryers and
kitchen ranges, ovens, commercial heating and air-conditioning equipment,
certain incandescent and fluorescent lamps, distribution transformers, and
electric motors. The Energy Policy Act of 1992 (EPACT) also established
maximum water flow-rate requirements for certain plumbing products and
provided for voluntary testing and consumer information programs for office
equipment, luminaires, and windows.
DOE estimates that the federal appliance standards implemented to date will
reduce carbon emissions by 14 million tons in the year 2000. Further
development of standards could result in additional reductions, although
recent bipartisan attacks on implementing new standards under EPACT have
stalled recent efforts to make progress in the appliance standards area.
Pre-decisional Draft -- Do Not Cite or Quote
28
28
APR-28-1997 09:18
OES FRONT OFFICE
202 647 0217 P.02 04
United States Department of State
twice sosten
Assistant Secretary of State for Oceans and
International Environmental and Scientific Affairs
Washington, D.C. 20520
CC: SAF
April 28, 1997
JS
TO:
Distribution
OAF alimb the out day
FROM:
OES - Eileen B. Claussen Eile
on
SUBJECT:
Climate Change Papers
fhe
The next Assistant Secretaries group meeting is scheduled for Friday, May 2, at
1:00 p.m., in Main State Room 7835. It is my intention to use this meeting to review and
-
approve a series of papers which will already have been vetted through the interagency process at
the staff level. After that, we will have one week for general consultations with the public and
the environmental community to seek informal comments. Following those meetings, there will
be a further revision of the papers, taking into consideration the comments received.
Papers will then be cleared by the Assistant Secretaries group, and given to the Deputies
for approval prior to submission to the Climate Convention Secretariat in time to meet a June 1
deadline.
Where possible, Assistant Secretaries should help provide agency input toward staff-level
work on these papers. Only through this input will it be possible to narrow the range of issues
which may require Assistant Secretary-level decisions.
Please call Lilly Roots-Wiggins (647-1554) to confirm your attendance at this meeting.
We hope to have all the papers distributed by Wednesday, April 30.
Attachment: List of climate change papers
APR-28-1997 09:18
OES FRONT OFFICE
202 647 0217 P.05 04
List of Papers for Review/Approval at May 2 Assistant Secretaries Meeting
Emissions Trading - No new text for the U.S. protocol; this paper would explain and
elaborate on implementation of existing U.S. proposals.
Joint Implementation - The decision will not be on text; rather, on elements for elaboration
on the existing text (i.e. a focus on credit determination, verification, review and reporting).
New text will be required by June 1.
Annex C gases/sectors - Significant issues regarding the possible exclusion of either
greenhouse gases or sectors. Text for the U.S. protocol proposal is required by June 1.
Developing Country Initiatives - Decisions will not be taken with respect to new text; instead
discussions will focus on the level of financial contributions for the country studies program,
USIJI, etc.
Early Banking - (Draft paper is being circulated at the staff level.) The issue is whether the
international agreement should include provisions ensuring that early reduction efforts be
credited against a future obligation. If yes, the text will be required by June 1.
Reporting / Compliance - While this paper has already been approved at the Deputy level.
decisions on other papers may lead to modification of the text (new text is required by
June 1).
Please note that other papers may be developed; however, none are expected to require new text
by June 1.
APR-28-1997 09:18
OES FRONT OFFICE
202 647 0217 P.04 04
PROPOSED AGENDA
May 2 Assistant Secretaries Meeting
1. PAPERS TO BE REVIEWED/APPROVED
Emissions Trading - Explanation and elaboration of existing U.S. proposals only.
Joint Implementation - Decision on elements for elaboration on the existing text (i.e. a
focus on credit determination, verification, review and reporting).
Annex C gases/sectors - Significant issues regarding the possible exclusion of either
greenhouse gases or sectors.
Developing Country Initiatives - Discussions to focus on the level of financial
contributions for the country studies program, USIJI, etc.
Early Banking - Should the international agreement include provisions ensuring that
early reduction efforts be credited against a future obligation.
Reporting / Compliance - Paper has already been approved at the Deputy level.
2. OTHER BUSINESS
TOTAL 9.04
APR-28-1997 09:18
OES FRONT OFFICE
202 647 0217 P.01 04
CLIMATE CHANGE DISTRIBUTION LIST
OSTP
Rosina Bierbaum
456-6202
FAX: 456-6025
CEA
Alicia Munnell
395-5036
FAX: 395-6958
NEC
Elgie Holstein
456-5370
FAX: 456-2223
OMB
T.J. Glauthier
395-4561
FAX: 395-4639
Justice
Lois Schiffer
514-2701
FAX: 514-0557
Commerce
Jeffrey Hunker
482-6055
FAX: 482-4636
NOAA
Terry Garcia
482-3567
FAX: 482-6318
Treasury
Joshua Gotbaum
622-2220
FAX: 622-2633
Interior
Brooks Yeager
208-6182
FAX: 208-4561
USTR
Jennifer Haverkamp
395-7320
FAX: 395-4579
Agriculture - Charlie Rawls
720-6158
FAX: 720-5437
CEQ
Dirk Forrister
343-1060
FAX: 343-1162
EPA
Mary Nichols
260-7400
FAX: 260-5155
David Gardiner
260-4332
FAX: 260-0275
DOE:
Mark Chupka
586-5523'
FAX: 586-0861
DOT:
Frank Kruesi
366-2222
FAX: 366-3937
OVP
Pete Jordan
456-9501
FAX: 456-9500
CEQ
David Sandalow
456-6543
FAX: 456-2710
CEQ
Steve Seidel
395-3706
FAX: 456-6546
AID
David Hales
875-4205
FAX: (703) 875-4639
04/25/97 FRI 14:41 FAX 2024566474
CEQ
001
THE WHITE HOUSE
WASHINGTON
ac.JAF 55
April 25, 1997
MEMORANDUM FOR DISTRIBUTION
FROM:
Mark Mazur
David Sandalow
SUBJECT:
Climate Change
1. Our next meeting will be Wednesday, April 30 from 2:00-3:30 in OEOB Room 472. We will
discuss the deputies decision memo.
Attendance is invitees only. Everyone on the attached list has been cleared into the building. For
questions concerning clearance, please call Wendy Philleo (456-6224)
2. The next deputies meeting is being scheduled for early in the week of May 12. An
announcement will go directly to the deputies.
3. Draft attachments to the decision memo are attached to this memo, as follows:
--Technology Policies (Rosina Bierbaum)
-- Emissions, Concentrations and Their Consequences (Rosina Bierbaum)
-- Overview of Domestic Greenhouse Gas Emissions Trading Programs (David
Gardiner)
In addition, State Department (Eileen Claussen) has distributed an attachment on the
international negotiations. Two other attachments (one on the economic modeling, the other on
transition issues) are being prepared and will soon be circulated.
Please provide any comments on the three attached papers, or the State Department paper, to the
contact listed above by COB Tuesday, April 29.
Total number of pages including cover: 20
04/25/97 FRI 14:42 FAX 2024566474
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1
002
DISTRIBUTION:
Organization
Name
Fax
State
Eileen Claussen
647-0217
Rafe Pomerance
Commerce
Everett Erhlich
482-0432
Jeffrey Hunker
482-4636
OSTP
Rosina Bierbaum
456-6025
CEA
Alicia Munnell
395-6958
Jeff Frankel
Mark Mazur
Treasury
Joshua Gotbaum
622-2633
Justice
Lois Schiffer
514-0557
Interior
Brooks Yeager
208-4561
NOAA
Terry Garcia
482-6318
OMB
T.J. Glauthier
395-4639
USTR
Jennifer Haverkamp
395-4579
Agric
Charlie Rawls
720-5437
DOE
Mark Chupka
586-0861
Joe Romm
EPA
Mary Nichols
260-5155
David Doniger
David Gardiner
260-0275
DOT
Frank Kruesi
366-7127
OVP
Pete Jordan
456-9500
CEQ
Steve Seidel
456-6546
PCSD
Marty Spitzer
408-6839
TaskForce
Dirk Forrister
343-1162
USAID
David Hales
703-875-4639
DOL
Ed Montogmery
219-4902
04/25/97 FRI 14:42 FAX 2024566474
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003
The Role of Technology Policies in Limiting Greenhouse Gas Emissions
"Economics studies have found that there are many potential policies to reduce greenhouse gas
emissions for which the total benefits outweigh the total costs. For the United States in
particular, sound economic analysis shows that there are policy options that would slow climate
change without harming American living standards, and these measures may in fact improve
U.S. productivity in the long run."
The Economists' Statement on Climate Change, Feb. 13, 1997 (signed by more
than 2,000 economists, including six Nobel Laureates)
A strategy to accelerate the diffusion of existing technologies and the research, development
and deployment of more advanced technologies is a critical component of any U.S. policy to
stabilize greenhouse gas emissions. Any emissions control program - without such a
technology strategy - would result in higher prices for carbon allowances than would otherwise
be the case. Analysis suggests than an accelerated technology effort has a large potential for
bringing down this price, and thus the cost to the economy. In addition to major studies in the
early 1990s, forthcoming analysis by five leading National Laboratories finds that a large
potential remains for reducing U.S. energy consumption and greenhouse gas emissions while
meeting the full energy needs of U.S. businesses and families.
The next 50 years may see a doubling of global population and a four-fold increase in
GDP/capita. Merely stabilizing greenhouse gas concentrations at twice pre-industrial levels,
requires technology (i.e. emissions/GDP) to improve by more than a factor of ten during the next
few decades and then be rapidly deployed throughout the world. Leadership in the environment
and international trade will go to the nation that first develops these leapfrog technologies.
In 1980, we devoted $2 billion to energy efficiency and renewable energy. Today, we spend
well under half that. Key underfunded areas include low-carbon power generation (including
clean fossil technologies and renewable energy) and energy efficiency in transportation,
buildings, and Industry. The technology RD&D strategy will focus on the most promising RD&D
for mitigating CO2 - focusing on four strategic thrusts: (1) clean power generation, (2) energy
efficiency, (3) carbon sequestration accompanying a transition to a hydrogen-based economy,
and (4) basic and very advanced research. Responding to the climate problem may require
breakthroughs in all of these areas. The actions described herein capture the key opportunities
beyond those contained in the Administration FY 1998 budget request in the areas of energy
efficiency and clean power generation.
Investment in this technology strategy are estimated to reduce 2010 carbon emissions by 30 -
60 million metric tons (per year).. Beyond 2010, resulting reductions would be greater as old
stock is replaced with zero and low-carbon technologies and another generation of advanced
technologies begin to enter the marketplace. Key elements in this strategy are summarized
below.
Advanced Industrial Turbines an aggressive 5-year RD&D program could substantially reduce
the carbon intensity of and pollution from industrial energy consumption. Accelerating the
current RD&D effort in advanced gas turbine cogeneration and biomass gasification could allow
significant market penetration by 2010 of distributed power plants with total efficiencies in
excess of 85% and efficient use of natural gas and biomass fuels. The efficiency improvements
Pre-decisional Draft- Do Not Cite or Quote
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004
alone could yield a carbon drop of 6 MMT in 2010, with biomass gasification yielding much
more.
Advanced Industrial Process Technologies the Industries of the Future process can be
accelerated, resulting in successful development of new technologies sooner. The investment,
matched 50-50 with industry, will focus on technologies with the greatest greenhouse gas
reduction potential. Such technologies include carbon-free aluminum production cell cathodes,
separations in chemical processes, novel membranes and "green" chemicals, and dilute oxygen
combustion.
Fuel Cells for Buildings With an aggressive 5-year R&D effort aimed at fuel cells (running on
hydrogen converted from natural gas), such as proton-exchange membrane (PEM) fuel cells,
this technology could become the most cost-competitive energy provider for buildings (and light
industry). If successful, a building in 2010 using efficient technologies with electricity and hot
water provided by an 80-90% efficient fuel cell could have no first-cost penalty with well under
half the energy bill of a typical 1990 building and one-quarter the greenhouse gas emissions.
Advanced Diesel Engines A 55% efficient diesel for heavy trucks (and 45% efficient for cars,
sport utilities, and light trucks) is a plausible near-term outcome of expanded research. This is an
efficiency that no other engine can surpass or even match before 2010. Additional RD&D could
accelerate development of the "clean diesel" - 50% more efficient than conventional gasoline
vehicles and without the particulate and NOx emissions problems of the current technology.
While vehicle turnover is quite slow, this initiative could result in carbon savings of 10 MMT by
2010 and substantially more thereafter.
Enhanced PNGV Initiative -- sustained funding for the PNGV (Partnership for a New
Generation Vehicle) initiative will accelerate development of advanced vehicles and allow them
to be commercially introduced in 2005 at a lower cost increment over conventional vehicles.
The funding will be targeted to reducing costs for key components such as the power electronics
building block, ceramic materials, and lightweight materials - as well as manufacturing
techniques for producing PNGV vehicles.
Transportation Biofuels Ethanol is a prime candidate for an intense RD&D effort. Federal
R&D has brought the cost of ethanol from $3.60 per gallon in 1980 to $1.20 per gallon. With
continued R&D in bio-engineered organisms and fast-growing crops, the current biofuels
program is expected to produce ethanol from cellulosic waste and herbaceous or woody crops for
under $0.70 per gallon by 2005, competitive with oil at its current. Use of ethanol from woody-
biomass-derived E85 (85% ethanol) results in a 90% reduction in greenhouse gases. Estimated
carbon savings from use of ethanol largely as a gasoline blend is 20 MMT in 2010.
Biomass Combustion for Power Generation Much progress has been made in both co-firing
biomass fuels with coal and direct biomass gasification and combustion. A huge potential exists
in the near- to mid-term to reduce air emissions through co-firing. An aggressive RD&D
program could result in up to 15% co-firing of biomass with coal at zero- to very low capital cost
cutting carbon emissions by 40 MMT per year in 2010.
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005
Next Generation of Wind Turbines - The cost of wind power has dropped from 25 cents per kWh
in 1980 to 5 cents today. Acceleration of the current RD&D effort for the next generation of
wind turbines will result in a 2.5 cents/kWh wind turbine in good wind sites - competitive with
advance gas technologies. This effort could result in a 5-10 MMT/year reduction in carbon by
2010 and 25-35 MMT/year by 2020.
Photovoltaics - Photovoltaic (PV) cells, which convert sunlight into electricity, have dropped
from 90 cents per kilowatt-hour in 1980 to well under 20 cents today. An accelerated RD&D
effort, together with through economies of scale and improvements in manufacturing from
increased production, will ensure continued drops in cost. This acceleration could result in
rooftop PV applications on 1 million buildings across the U.S. by 2010.
Advanced Power Generation Technologies - Accelerated RD&D on several fossil energy power
generation technologies is another critical component of the strategy. These technologies include
large stationary fuel cells for utility power generation, advanced turbines and coal gasification.
In addition to the portfolio of R&D options related to less CO2-intensive technologies for energy
supply and use, capture and disposal of CO₂ offers an additional alternative for reducing
atmospheric concentrations of CO2. If major reductions in CO₂ emissions are necessary, and
global reliance on fossil fuels continues beyond the middle of the next century, then some form
of CO2 sequestration will almost certainly be needed. A long-term R&D strategy would include
demonstration of a number of sequestration options and research into their possible
environmental impacts; converting CO₂ into an industrial chemical feedstocks; other novel
sequestration options, such as CO₂ fixation by micro-algae; selectively permeable membranes for
CO2 capture; processes for converting fossil fuels and biomass into CO₂ and hydrogen;
development of hydrogen infrastructure technology, including transportation and storage; and
PEM fuel cells.
Another long-term area for expanded R&D is superconductivity. Superconductors offer the
possibility of storing and transmitting electricity with virtually zero loss, with potential savings
of 5% to 10% of all electricity presently generated by utilities. Highly efficient superconducting
motors could have an even larger impact since motors currently consume 60% of all electricity.
While U.S. and German funding is roughly $40 million annually, Japan spends nearly $70
million, not including their superconducting MagLev train program, with some $3.5 billion being
spent over five years. Significant increases in both basic and applied research in
superconductivity should be an essential part of a low-CO₂ R&D strategy
A number of areas of basic research could prove crucial to responding to climate change,
including biotechnology, fermentation microbiology, combustion research, polymer and ceramic
science, process engineering, supercritical CO2, new materials synthesis, and nanotechnology.
We need to better understand the underlying biochemistry of the bioconversion of carbon dioxide
to methane or to other potential fuels and feedstocks. This new research includes the ability to
sequence the genetic material of microorganisms and plants, to develop new molecular genetic
engineering techniques, and to understand biophysical and biochemical pathways of
photosynthesis.
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Emissions, Concentrations, and Their Consequences
Concerns about the potential effects of human induced climate change lead to the
signing of the Framework Convention on Climate Change (FCCC), whose ultimate
objective is to achieve' stabilization of greenhouse gas concentrations in the
atmosphere at a level that would prevent dangerous anthropogenic interference with the
climate system." Concentrations of greenhouse gases have already risen significantly
above those of the preindustrial era as a result of past emissions: concentrations of
carbon dioxide (CO2) have risen 30%, methane (CH4) has more than doubled, and
nitrous oxide (NOx) has risen by about 15%. Global temperatures have increased about 1
degree F. over the last century and are expected to increase another 2 to 6 degrees over
the next century. This rate of warming is greater than any sustained rate of warming of
the last 10,000 years, or since the innovation of agriculture (IPCC, WG I Summary for
Policy Makers, 1995).
In the absence of emissions control policies, concentrations in the atmosphere are
projected to reach a tripling of pre-industrial carbon dioxide levels over the next century
(See Figure 1)-levels that have not been seen on the earth for 50 million years.
Most estimates of the effects of climate change are those associated with a
doubling of the preindustrial concentration of carbon dioxide to approximately 550 parts
per million (ppm), or an increase in all greenhouse gas concentrations that together would
have an equivalent capacity to trap heat.
The climatic changes that would result from an equivalent doubling of carbon
dioxide would have pervasive effects, some of them irreversible, on the environment and
human societies.
Health Effects
Effects of climate change on the health of human populations (WHO, 1996) will
vary across populations depending on environmental circumstances, social resources, and
preexisting health status. The risk of adverse health impacts is considered to be greatest
in the world's less developed regions (IPCC, 1995).
Climate change can directly affect health by increasing heat stress. A study of
deaths associated with summer time heat stress and winter time illnesses in 44 US cities
estimated that climate change could double the number of weather related deaths (See
Figure 2). The elderly are at greatest risk in the US and urban populations in developing
countries are also especially vulnerable to heat stress.
The incidence of infectious diseases, which are still the world's leading cause of
fatalities, may increase as a result of climate change. Climate change may extend the
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geographic ranges of disease-carrying vectors such as mosquitos, which can increase the
populations exposed to diseases such as malaria, dengue and yellow fever. Globally, the
population potentially exposed to malaria could increase by one-third, with a possibility
of 50-80 million additional malaria cases per year.
Climate change can reduce air quality and increase levels of air borne pollen and spores
which exacerbate respiratory disease, asthma, and allergic disorders.
Water Resources
Changes in precipitation and increased evaporation due to higher temperatures can
be expected to cause large changes in water runoff in some regions, affecting the quantity
and quality of water supplies for domestic and industrial uses, irrigation, hydropower
generation, navigation, stream ecosystems and water based recreation. Increased
variability in the hydrologic cycle is expected to result in more severe droughts and/or
floods in some places but less severe in others (IPCC, WG I Report, 1995).
Areas of greatest vulnerability are those where water supplies and quality are
already problems, such as arid and semi-arid regions of the world and some low lying
coastal areas, deltas and small islands. In some cases these areas coincide with conflict
prone areas which are highly dependent on water originating in areas outside their borders
such as Cambodia, Syria, Sudan, Egypt and Iraq (IPCC, WG II Report, 1995).
In the United States, the Colorado River Basin would suffer decreased summer
runoff, coinciding with peak demand for irrigation, unless precipitation also increases
substantially. Reductions in runoff of up to 25 percent in the basin are projected under
some scenarios of 2xCO2 equivalent climate change. Runoff losses of this magnitude in
water short regions such as the Colorado River basin are likely to adversely affect water
deliveries, exacerbate salinity problems, reduce hydropower generation, and reduce water
storage in reservoirs (Nash and Gleick, 1993).
Forests and Natural Areas
Climate change can dramatically alter the geographic distributions of individual
tree species and of forest and vegetation types (Figure 3). One-third of the Earth's forests
would undergo a major change in the type of vegetation that could be supported as a
result of an equivalent doubling of CO2. In boreal forests, which are the forests most
vulnerable to climate change, two-thirds of the currently forested area may undergo a
change in vegetation type. In some instances, a change in vegetation type will result in a
loss of forest area as the land converts to grassland or shrubland. Globally, forested areas
may decline 10 percent after forests reach a new equilibrium under a new 2xCO2
equivalent climate (IPCC, WG II Report, 1995).
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In the United States, western conifer forests could decrease in area and be
replaced by broadleaf forests; eastern deciduous forests may be replaced by grasslands
along their western boundary
Wetlands represent another critical set of ecological systems at risk from climate
change. For example, the IPCC found that precipitation changes and salt water intrusion
from sea level rise could adversely affect the ecological communities of the Florida
Everglades and degrade the habitat for many species of wading birds. The wetlands of
the prairie pothole region of North America, which supports half the waterfowl
population of this continent, could diminish in area and change dramatically in character
in response to climate change according to the IPCC.
Coastal Areas
In the next century, average global sea level is projected to rise about 20 inches
The IPCC estimates that a 20 inch rise in average global sea level and population growth
along coasts would double the population at risk from storm surges from roughly 45
million at present to over 90 million world wide.
Rising sea level erodes beaches and coastal wetlands, causes the gradual
inundation of low lying areas and increases the vulnerability in coastal areas to flooding
from storm surges and intense rainfall. Along US coasts, a one foot rise could erode
ocean beaches 100-150 feet. A two foot rise would inundate 3000 to 7000 square miles
of coastal lowlands and 20-60 percent of U.S. coastal wetlands. Figure 3 shows how a 1
meter rise would affect Florida.
Even if concentrations of greenhouse gases are stabilized in the future, sea level
would continue to rise long after, perhaps for several centuries, and reach levels much
higher than projected for the next 100 years. For example, after an equivalent doubling
of CO2, the equilibrium sea level rise several centuries in the future is estimated to be at
least seven feet.
Agriculture and Food Supply
Climate strongly affects crop yields and projected changes in average yields under
an equivalent CO2 doubling can exceed 30 or 40 percent for some crops and locations.
But despite the potentially large changes in yields, average global food production is not
expected to change substantially. This is because farming practices are considered to be
highly adaptable to different climates, because production of important food crops can
shift to new locations in response to changes in climate, and because CO2 has beneficial
effects for plant photosynthesis and water use efficiency that can offset deleterious effects
of changes in climate. Not taken into consideration in this judgment, however, are the
potential effects of changes in climate variability on agriculture and the disruptions that
may accompany adjustments of agricultural systems to climate change.
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Impacts are likely to vary considerably across regions and, in contrast to global
food production, some regions may suffer substantial reductions in agricultural
production. Estimates of climate change impacts on agriculture indicate that developing
countries are more vulnerable to losses than are developed countries (See Figure 5).
Projected decreases in agricultural production in developing countries have been
estimated to increase the population at risk from hunger by 5 to 50 percent, or 40 million
to 300 million persons (Rosenzweig, Parry and Fischer, 1995).
In the United States, eastern and southern areas of the United States are projected
to experience losses in agriculture under a number of scenarios, while northern and
western areas are projected to benefit (Adams et al., 1995).
Catastrophic Events, Surprises and Rates of Change
There are various feedback effects between the atmosphere, oceans, and terrestrial
systems that amplify or dampen changes in climate that are projected to result from
human emissions of greenhouse gases. Uncertainties about these effects are largely
responsible for differences in the warming projected by different models for a doubling of
carbon dioxide. But because of the complexity and non-linearity of the processes and
interactions, abrupt, large and unpredicted changes in climate and/or sea level are
possible. Assessments of the potential effects of climate change have not examined the
possible consequences of these types of changes.
There are also other potentially significant feedbacks not accounted for in climate
and sea level rise projections. For example, the rates of warming projected to result if no
further actions are taken to control greenhouse gas emissions would cause suitable
climates for many tree species to move polewards at rates that are an order of magnitude
greater than the species can naturally migrate (IPCC, WG II Report, 1995). This could
cause significant losses of forest productivity and dieback of forests. As a result,
enormous quantities of carbon could be released to the atmosphere and significantly
amplify the warming and the environmental and social impacts of climate change.
Though the probabilities of such events are considered to be low, they are expected to
grow the more rapid is the rate of warming (IPCC, WG I Report, 1995).
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010
750
700
650
CO2 concentration record from present to 160,000
years ago obtained from Vostok ice core. Projection
600
from present to 2100 is based on IPCC's mid-range
projection of CO2 emissions.
530
Temperature anomaly measures difference from
modern surface temperature at Vostok.
500
Temperature Anomaly CO
450
400
CO2 Consentration (spent)
850
800
Anteretic CO2
4
250
2
0
a
200
,
&
150
0
Anteratic Tempers ture
160000
120000
80000
40000
0
Year TO
Figure 1 Projected rise in CO2 concentration
is unprecedented.
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Average Annual Excess Westher-Related Mortality for
1993, 2020 and 2050 Climate
%
-
160
New York City
140
⑉
0
Los
Angeles
Ultria
1993
2020
1050
Kalhetmin - Given (1997) Charact of *1.(1999)
OFDL39 Climate Change Scenario AEPA
Name Instades - - and - - - - - altrante
Figure 2 Weather related deaths projected to
increase.
B
e
Procent and future gengraphical targe for engar maple. A: Present renge (from Fewells, 1965). Bt TXOO2 climate-space in
2090 AD. under the OISS Black area is the producted species map: stippled area to potential - 01 2XOO2
climate-space in 2090 AD. under the OFDL - Black - is the prodicted specise runge, stippled - to partential
1
USEPA, 1989
Figure 3 Southern boundary of sugar maple range projected to shift north.
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South Flor
Shoreline C
after a 1-Me
in Sea L
Figure 4 Potential inundation from 3
foot rise in sea level.
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Percent Change
from Baseline
Source: Based on data supplied by Rosemaweig. 1996.
No date
-40-30 -20 -10 0 10 20 30
Figure 5 Estimated changes in average wheat yields for GISS 2xCO2 equivalent climate change vary by
region.
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Draft 4/22
Overview of Domestic Greenhouse Gas Emissions Trading Programs
This paper describes options for a domestic emissions trading program to meet an
international agreement on an emissions target for greenhouse gases. Emissions trading
involves allocating or auctioning emissions allowances, and allowing the trading of
allowances in a market. Emission trading creates new, marketable assets that can have
substantial value, so distributional issues will be an important component of program
design. Allocation designs or auction revenues can be used to address these distributional
issues.
An emissions trading program, like any program designed to limit greenhouse
gases, must contain certain elements. First, an agreed upon emissions budget, and any
rules governing provision for the project-specific crediting of reductions made in activities
not explicitly covered by the budget, must be established. A central authority must be
given the domestic responsibility for verifying compliance and must be provided sufficient
information to do SO. Finally, noncompliance with allowance limitations or reporting
requirements must generate real consequences, such as penalties or subtraction of
allowances.
What types of Activities Should Require a Permit
The decision for determining permit holders should consider the following:
Coverage: While it may not be necessary to ensure that every ton of greenhouse gas is
accounted for within an emission trading regime, the scope of coverage of the trading
program should be sufficient to ensure compliance with targets set in accordance with
an international agreement.
Administrative and compliance feasibility: The number of sources involved in the trading
program should be small enough to be administratively feasible and large enough to
ensure market competition.
Potential to Diffuse Low Greenhouse Gas Technologies: Alternative points of
intervention should be evaluated for their ability to provide incentives for research,
development, adoption and diffusion of low greenhouse gas technologies.
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Market Impacts: Any program that limits emissions will affect the bottom line of firms.
The permit program will have economic impacts that vary depending on program
design. For example, exempting certain sizes or categories of sources from permit
requirements because of administrative or equity concerns (e.g., small boilers or home
heating oil) has competitive implications within the energy market.
Public Acceptance: The program must consider the ease or difficulty with which various
allocation approaches would be accepted by the public.
Consistency with the international trading system: The domestic program should be
consistent with any international prescriptions concerning the coverage of sources and
gases.
Carbon dioxide currently accounts for about 85% of U.S. greenhouse gas emissions
and number in the hundreds of millions since they include sources such as automobiles and
residential gas water heaters. However, since virtually all of the carbon contained in fossil
fuel extracted from the ground (with the possible exception of certain feedstocks) is
eventually released to the atmosphere, a trading program need not focus uniquely on
direct emitters, but can be implemented through other points in the energy market. These
include fuel imports, fuel extraction, processing, refining, distribution, and secondary
conversion (e.g., coal to electricity). In addition, these points could vary by sector. For
example, an emission trading program could focus on the point of final combustion for
coal, but on refining for oil, or distribution for natural gas. Given the wide variety of
options available for including energy sources in a trading program, a few alternative
programs are described below for illustration.
Carbon Sources
A Program Targeting Primary Fuel Producers
The primary fuel producing sector - extraction, processing, refining, and distribution -
has many levels where a permit program could be implemented. One option would be to
require permits at the point of first sale (a permit is surrendered with the first inter- or
intra- company transaction). Such a system would include transactions between a coal
company and an electric utility, between a natural gas producer and its marketing arm,
between a natural gas producer and a broker, or between an oil extraction company and its
refinery operations. Fuel importers would also require permits to import fuel. This would
capture the carbon from fuel consumed in the refining process. The number of market
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actors under this program design would be under 5000 and virtually all carbon in the
energy sector would be included in the program.
A Program of Emission Trading at the Sectoral Level
An emissions trading program could also be applied at the point of combustion,
allowing trading among affected sources. This system would be most comparable to the
current SO₂ emission allowance trading system.
Targeting the six largest industrial CO₂ emitting sectors (electric utilities, cement,
primary metals, pulp and paper, petroleum refining and chemicals) in a sectoral trading
program could encompass as many as 20,000 market participants and 90 percent of
industrial CO₂ emissions. Mobile source emissions could be indirectly included in the
system by allocating transportation equipment manufacturers permits for emissions
associated with their automobile fleets or by including refiners in the program. Residential
and commercial emissions could be similarly addressed by focusing upstream in the energy
system.
Emissions Trading Combined with other Approaches
In order to minimize increases in permit prices or to reduce the size of potential
transfers, emissions trading options could be used in conjunction with existing voluntary
(e.g., Climate Change Action programs), regulatory, or standards setting approaches
(e.g., appliance efficiency standards). Alternatively, emissions trading could be used as the
primary tool for most sectors, while others where trading might be less applicable, could
be covered by alternative limitations.
Other Greenhouse Gases and Sinks
Other gases account for the remaining 15% of greenhouse gas emissions (on a carbon-
equivalent basis). Most important among these is methane, which accounts for 11% of
national emissions. Since gases differ in their lifetimes and in their potential to trap heat in
the atmosphere, an "exchange rate" has been developed by climate researchers and could
be applied here.
Several, although not all, of the many sources of non-carbon greenhouse gases could
likely be included in a trading system. For example, methane emitting coal mines, landfills,
livestock manure management facilities and potentially natural gas distribution systems
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may meet the criteria described above for inclusion in a greenhouse gas trading program.
These sources account for 7% of national greenhouse gas emissions. Similarly, emissions
of some sources of other gases could potentially be included (e.g., magnesium
production).
Forests in the United States currently remove an amount of carbon equal to 8% of
national emissions from the atmosphere. Their inclusion in the trading program would
theoretically enhance the system's flexibility. However, translating the potential of sinks
into monitorable, verifiable, and cost effective emission reductions would require the
development of a comprehensive national accounting system for sinks. The decision on
whether to include sinks in the trading system will be influenced by the outcome of the
international negotiations.
Allocating Permits
In an emission trading system, some mechanism must be provided for allocating
permits to sources. This could be done on the basis of baseline/historical emissions (where
permits are given to those currently emitting) or through an auction (where revenues
accrue to the government). These two mechanisms might also be combined: a portion of
permits could be allocated on the basis of historical emissions while the rest are auctioned.
In any case, the value of these assets could be large depending on the permit price, which
is determined by the emissions target and the costs of substitutes. Given that an auction
could produce substantial revenues, some decision would have to be made with respect to
what to do with the proceeds. These could be used to redress inequities in the distribution
of control costs, fund R&D for less carbon intensive energy sources and end uses, or to
reduce taxes or the deficit. Under one such option, a reserve of allowances or a portion of
auction revenues could be set aside to encourage manufacturers of energy consuming
equipment to produce equipment more efficient than the average in use or than required
by current mandatory efficiency standards. Such a program could yield reductions in
energy demand and help buffer the consumer from the impact of higher energy costs.
Allocation Based On Baseline/Historical Emissions
Under this approach, sources are given a number of permits based on baseline fuel
production or emissions and an allocation formula. Various allocation formulae can be
devised, weighted to greater or lesser degrees in favor of sources with high historical
emissions. Emissions allowances are endowed to facility operators for no cost and would
be transferable. Those receiving permits thus obtain assets of potentially large value from
the government at no cost.
Such an allocation mechanism could create entry barriers. In a capital intensive sector
like primary fuel production, where entry barriers are already substantial, new entrants
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would be further disadvantaged if they had to purchase permits - especially if existing
holders hoard permits. This problem could be mitigated by withholding a number of
permits for purchase by new entrants or by auctioning a portion on the open market. Such
an auction would also facilitate price discovery in a new market. Although new firms will
still be disadvantaged (as they will pay for all of their permits), they would be able to enter
the market.
It may be desirable to design an allocation that would allow credit for early emissions
reductions (those achieved prior to the start of the program, but after the baseline period)
-- in particular for those that reduced greenhouse gas emissions as part of government
sponsored voluntary programs. If credits for past actions are given, the total credits
allowed would need to be deducted from the overall permit allocation in order not to
exceed national greenhouse gas emissions target.
Auction
Alternatively, an auction could be used to allocate permits. In this case, permit holders
would pay the market clearing price for every unit of greenhouse gas released. Auctions
ensure that permits are available for trade, and would serve to inform potential traders
about current price levels. All participants have equal access to permits, placing new
entrants on the same footing as existing emitters. As discussed earlier, since an auction
could produce substantial revenues, some decision would have to be made with respect to
what to do with the proceeds.
Conclusion
Past experience with emission trading programs indicates that they can help
significantly reduce the costs of meeting environmental objectives. This is due in part to
the incentives they provide for developing and diffusing new environmental technologies.
Thus, final compliance costs for the programs that have incorporated emissions trading
have, in general, been dramatically lower than ex ante expectations. With careful attention
to design, a system of emissions trading could be instituted for greenhouse gas emissions.
Such a program would provide similar incentives to research, develop, and diffuse low
greenhouse gas technologies and result in achieving targeted emission levels at the lowest
possible cost.
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ATTACHMENT: US Experience with Emissions Trading
The US has had more experience with emissions trading than any other country in the
world. Specific programs include:
Sulfur Dioxide (SO) Allowance Trading: The Clean Air Act Amendments of 1990
required a 50% reduction in SO₂ emissions from electric utility boilers. To accomplish
this goal, a fixed number of of emission allowances were allocated to electric utilities
based on a formula reflecting hidstoric emissions. In addition, a small portion of
allowances are auctioned every year to facilitate price discovery and new entrants.
Participants need to conduct regular monitoring of emissions and make an annual
accounting of their emissions. Penalities are imposed if emissions exceed the number
of allowances held by a source.
A functioning allowance market now exists, involving both bilateral exchanges
between companies and brokered exchanges through third parties. This market, along with
other factors, has helped to dramatically reduce the costs of the abatement program.
Intially, forecasters claimed that a 50% reduction in SO2 would correspond to allowance
prices in the range of $400 - $1,000. However, current market prices are around $100.
In addition, 1995 emissions were actually 40% below the legally required levels for that
year.
Water Effluent Trading: The US generally has regulated surface water quality through a
system of discharge limits for large sources of water pollution. In addition, states have
standards for ambient water quality which are often not attained even after large
dischargers apply "best technology." The reason is that small ("nonpoint") sources
(such as runoff from farms) contribute significantly to water pollution. A number of
state and local governments are employing trading systems for watersheds thaither
permit trading among large dischargers, or allow large dischargers to fulfill their
requirements by controlling nonpoint sources. These include the Fox River in
Wisconsin, the Dillon Reservoir in Colorado, and the Tar-Pamlico River in North
Carolina. The latter two programs are designed to manage future economic growth. -
Thus, the quantity of effluent allowances allocated exceeds current discharge levels.
Once growth consumes this excess, trading is expected to reduce compliance costs.
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Inter-refinery Lead Trading: EPA operated a lead trading program from 1983 to 1987 as
phased out lead from gasoline. Lead trading allowed refiners and importers to trade lead
reduction credits in order to meet limits for the lead content of gasoline. The quantity of
allowances to which a firm was entitled was determined by the amount of leaded fuel
produced by the firm and the contemporaneous EPA standard. Those who bettered the
standard could sell their credits to others. Some 10 billion grams of lead were traded
during the course of the program at prices ranging from 0.75 to 5 cents per gram.
Allowing the trading of lead credits reduced the costs of the program by approximately 20
percent.
Criteria Air Pollutant Trading: EPA first began incorporating aspects of emissions
trading in its air program in 1974, when it allowed a modified source to use "credits"
earned by another source within the same plant to avoid additional regulatory
requirements. Since then, emission trading has substantially expanded. Trades have
numbered in the thousands and have been estimated by Hahn and Hester (1986) to
have achieved savings between $525 million and $12 billion.
Market Mechanisms for Chlorofluorocarbon (CFC) Phaseout: Under the 1987 Montreal
Protocol to limit stratospheric ozone depletion, the U.S. required the phase out of the
production of CFCs by 1996. As part of its program, the U.S. adopted a tradeable permit
regime covering CFC manufacturers and importers. These allowances were allocated
based on each firm's 1986 market share. As the market for CFCs declined, the system
allowed firms to allocate production among different facilities according to the least-cost
pattern of supply. It also gave CFC users the flexibility to switch between different CFC
compounds, within the overall limit on allowances. This program helped reduce the costs
of the phaseout. In 1988, EPA estimated that the cost to halve CFC use would be $3.55
per kilogram. By 1993, it became clear that all uses could be eliminated by 1996 at a cost
of $2.45 per kilogram.
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CC:JAF JS
CLIMATE CHANGE DISTRIBUTION LIST
OSTP
Rosina Bierbaum
456-6202
FAX: 456-6025
CEA
Alicia Munnell
395-5036
FAX: 395-6958
NEC
Elgie Holstein
456-5370
FAX: 456-2223
OMB
T.J. Glauthier
395-4561
FAX: 395-4639
Justice
Lois Schiffer
514-2701
FAX: 514-0557
Commerce
Jeffrey Hunker
482-6055
FAX: 482-4636
NOAA
Terry Garcia
482-3567
FAX:482-6318
Treasury
Joshua Gotbaum
622-2220
FAX:622-2633
Interior
Brooks Yeager
208-6182
FAX:208-4561
USTR
Jennifer Haverkamp
395-7320
FAX: 395-4579
Agriculture - Charlie Rawls
720-6158
FAX: 720-5437
CEQ
Dirk Forrister
343-1060
FAX: 343-1162
EPA
Mary Nichols
260-7400
FAX: 260-5155
David Gardiner
260-4332
FAX: 260-0275
DOE:
Mark Chupka
586-5523'
FAX:586-0861
DOT:
Frank Kruesi
366-2222
FAX:366-3937
CEQ
Mark Mazur
456-6224
FAX:456-2710
OVP
Pete Jordan
456-9501
FAX:456-9500
CEQ
David Sandalow
456-6543
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CEQ
Steve Seidel
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AID
David Hales
875-4205
FAX: (703) 875-4639
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P.03 06
Climate Change - International Context
Background
There is international agreement that the climate change problem is significant
and warrants additional near-term action. Further, there is a global recognition that the
existing U.N. Framework Convention on Climate Change, signed in 1992, is inadequate
to address this near term need. Current negotiations to develop next steps under the
Convention began in April 1995 at the first meeting of the Parties to the Convention. At
that session, the Parties agreed to begin negotiations toward a new legal instrument (a
protocol or an amendment to the Convention) that would deal with next steps - in
particular, how to address climate change in the post-2000 period. They agreed to
conclude this effort by their third meeting, now set for Kyoto in December 1997.
In July 1996 at the second meeting of the Parties the United States called for an
approach which would include three key elements: a legally binding target (instead of the
voluntary aims of the existing Convention), flexibility in implementation (e.g., emissions
trading and joint implementation), and the participation of developing countries. The
U.S. call galvanized the negotiations, with ministers endorsing the objective of a legally
binding instrument in the Geneva Declaration adopted by a large majority at the meeting.
U.S. Protocol Proposal
In January 1997, the United States tabled a framework protocol proposal that
amplified the positions set forth in Geneva:
developed countries would adopt binding emissions budgets covering specific
periods, although no budget levels or timeframes were specified; provisions would be
developed for detailed monitoring, review and compliance;
among
countries with budgets would be able to trade emissions between themselves, and
jointly implement projects with countries that do not have budgets, so that the most
cost-effective reductions can be taken;
developing countries would be required to take measures that reduce emissions,
measure the effects of these measures, and report on the actions taken;
advanced developing/newly developed countries (e.g., Korea and Mexico) would
agree, on a voluntary basis, to adopt binding emissions budgets that might differ
from those for industrialized countries; and
all Parties would agree to adopt binding GHG emissions budgets in a future, post-
Kyoto negotiation, with provisions for automatic "graduation" from one category
to another based on agreed indicators.
APR-24-1997 10:39
OES FRONT OFFICE
202 647 0217
06
2
Views Abroad
The U.S. proposal has received mixed reactions abroad. Some view it as the
most comprehensive and forward looking of any proposal yet tabled. Others criticize it
for focusing on design features without providing any indication of the level of
emissions reduction to which we are prepared to commit. Countries (and positions) fall
within several different groups:
European Union: Strong domestic green politics drive many key players in the
EU (Germany, Netherlands, Denmark), although differences with the southern tier
(Italy, Spain, Portugal) as well as France split the EU on some issues. They have set a
target of 15 percent reduction below 1990 levels by 2010 for all developed countries
(with the EU to meet the target jointly rather than as individual countries). While all
analyses suggest that this is an unrealistic goal, it provides the EU with the moral high
ground. Nominally supporting flexibility, the EU largely limits this to members states.
They also reject a strong call for developing country actions.
Non-EU Developed Countries (Japan, Canada and Australia, Eastern
Europeans, NIS/FSU): Japan, as host (and chair) of the Kyoto meeting is anxious for
its success, but has reached no internal agreement on a desired outcome. Both Japan
and Australia have supported allowing each industrialized country to have a different
reduction target based on national circumstances (an idea considered almost impossible
to negotiate by Kyoto). Canada and Australia have supported including flexibility
provisions and developing country obligations in next steps, while Japan is weak on
both. Many Eastern European countries await their turn to join the EU and have been
reluctant to challenge EU positions. Further, most have seen dramatic declines in their
own emissions due to economic decline - and few anticipate even returning to 1990
levels until 2005 or 2010. Russia (the world's third largest emitter) is the most vocal in
the NIS/FSU group and takes a line independent of the EU. Russia has supported
flexibility provisions and developing country participation - largely the result of a
successful Gore-Chernomyrdin process.
Developing Countries: Big countries (principally China, India and Brazil) drive
the international developing country position; they argue that the developed world is
responsible for global warming and should pay to redress the problem. Despite the
public rhetoric, some (including China and Brazil) have been willing to engage
constructively on a bilateral basis, and have significant domestic programs. OPEC, led
by Saudi Arabia and Nigeria, fears that action to combat global warming will diminish
oil revenues. They have called for developing countries to be "compensated" if their
economies are affected, and have blocked adopting rules of procedure under the
Convention. Small Island States, with an alliance 37 members strong, fears that sea
level rise will inundate them. They have pushed for aggressive next steps (i.e., a 20
percent reduction in OECD emissions below 1990 levels by the year 2005).
APR-24-1997 10:39
OES FRONT OFFICE
202 647 0217
P.05 06
3
The Kyoto Agreement: Key Elements
For us to reach an agreement that is in line with the framework we have proposed,
and with a chance of Senate ratification, there are five elements that will be required:
1) Intensive Diplomatic Efforts: These are now underway at all levels and in various
fora. Ultimately, they may require the personal involvement of the President and Vice-
President. Opportunities such as the G-7, UNGASS, and APEC must be used to stress
the importance we attach to reaching an agreement, to promote understanding of our
position and to highlight what will be needed for the United States to sign on.
2) Agreement on Emissions: We cannot hope to convince others of the desirability of
flexibility (the EU) or the need for greater commitment (developing countries) unless we
have a serious emissions reduction target to put on the table. The bottom line number
need not be announced until late in the negotiations - but a signal of the direction in
which we intend to move must be given as soon as possible. For example, were we to
indicate at UNGASS that we believe a reduction target in Kyoto must take us below 1990
levels, we may be able to prevent other countries from taking key elements of our
position off the table.
3) Negotiating Flexibility: We will need to decide how much we can achieve in the
Kyoto agreement itself and how much we could defer to subsequent discussions. For
example, to win on some of our flexibility proposals, we may need to be willing to delay
their implementation beyond Kyoto (e.g., subject to further agreement on guidelines).
This could also be true with respect to emissions trading. In each case, we will need to
consider precisely how much we must have in the agreement itself, recognizing that the
commitments will not be implemented until well after the year 2000.
4) Closer Partnership with Developing Countries: For us to be successful, we must
forge a closer partnership with developing countries. Already U.S. bona fides have been
questioned (by developing countries and by other donors) because Congress has not
appropriated the amounts requested by the Administration for the Global Environment
Facility (GEF), the principal vehicle for implementing our financial commitments under
the Convention (we pledged $430 million in 1994, but have been able to contribute less
than half this amount). If we cannot improve our record of meeting our commitments, WC
will not be able to persuade others to take on any serious obligation - particularly
developing countries. We will also need to consider launching a new U.S. initiative to
repackage and enhance existing U.S. bilateral efforts that support developing and
transition countries in responding to the threat of climate change.
5) A Comprehensive Domestic Strategy with Constituency Building: An extensive
effort will be required to develop support for Senate advice and consent to ratification, as
well as for implementing legislation. Key members of Congress, as well as business,
environmental, and state and local government representatives, must be found and
cultivated to help carry the agreement forward. It will be critical that vocal support be
APR-24-1997 10:40
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202 647 0217
P.05 06
4
obtained well prior to Kyoto, or the Administration will be accused (inaccurately) of
negotiating the treaty without adequate consultation. Key to this will be the release of
information on the international process, and on the methods used to generate the
agreement on an emission target. We must also develop a process to educate the public.
TOTAL P.06
APR-24-1997 10:38
DES FRONT OFFICE
202 647 0217 P.01 06
United States Department of State
Bureau of Oceans and International
Environmental and Scientific Affairs
Washington, D.C. 20520
DATE: 4-24-97
NUMBER OF PAGES TO FOLLOW: 5
FAX TO: See Distri bution
TELEPHONE:
FAX:
OFFICE:
FAX FROM: Eileen Claussen
TELEPHONE: 647-1554
FAX: 647-0217
OFFICE:
MESSAGE:
Apr-22-97 15:38 Climate Change Task Force
04/17/07 THU 11:10 FAX 2024566474
CEQ
P.02
001
CC JAF
THE WHITE HOUSE
JS
WASHINGTON
rum
April 17, 1997
MEMORANDUM FOR DISTRIBUTION
FROM:
MARK MAZUR
DAVID SANDALOW
SUBJECT:
Climate Change
There will be a meeting Wednesday, April 23 from 1:00 to 2:30pm in OEOB Room 472. We
will review materials to support decisions by the deputies. Copies will be distributed prior to the
meeting.
Attendance is invitees only. Everyone on the attached list has been cleared into the building.
For questions concerning clearance, please call Wendy Philleo (456-6224).
Apr-22-97 15:38 Climate Change Task Force
04/47/97 THU 11:11 FAX 2024566474
CEQ
P.01
002
DISTRIBUTION:
Organization
Name
Fax
State
Eileen Claussen
647-0217
Rafe Pomerance
Commerce
Everett Erhlich
482-0432
Jeffrey Hunker
482-4636
OSTP
Rosina Bierbaum
456-6025
CEA
Alicia Munnell
395-6958
Jeff Frankel
Mark Mazur
Treasury
Joshua Gotbaum
G22-2633
Justice
Lois Schiffer
514-0557
Interior
Brooks Yeager
208-4561
NOAA
Terry Garcia
482-6318
OMB
T. Glauthier
395-4639
USTR
Jennifer Haverkamp
395-4579
Agric
Charlie Rawis
720-5437
DOE
Mark Chupka
586-0861
Jue Romm
EPA
Mary Nichols
260-5155
David Doniger
David Gardiner
260-0275
DOT
Frank Kruesi
366-7127
OVP
Petc Jordan
456-9500
CEQ
Steve Seidel
456-6546
PCSD
Marty Spitzer
408 6839
TaskForce
Dirk Forrister
343-1162
USAID
David Hales
703-875-4639
DOL
Ed Montogmery
219-4902
A:calendar.wpd
Draft 4/23
COMMON CALENDAR OF CLIMATE CHANGE ACTIVITIES
APRIL
25
Solar Energy Forum in Wash D.C.
25
Congressional staff and NGO briefing on basecase results
Contact: Tom Peterson
343-1060
MAY
5 - 6
G-7 Environmental Ministerial Meeting in Miami
5 - 8
AIJ Project development Workshop in Cairo
13 -15
Adapting to Climate Change and Variability in the Great Lakes conference in
Toronto
Contact:Frank Quinn, NOAA
313/741-2254
20-22
ECOS Meeting in Wash D.C.
Contact: E. Haemissegar
202/260-5448
23
EIC/USCAN Town Meeting in Chicago
27- 29
Great Plains Regional Workshop in Colorado
Contact: J. Mellilo, OSTP
202/456-6202
JUNE
3 - 6
Alaska Regional Workshop in Fairbanks
Contact: J. Mellilo, OSTP
202/456-6202
4
Natural Gas and Climate Change Conference
by DOE and EPA with AGA and Enron
9 - 13
UN General Assembly Special Session on Environment
12-13
International Climate Change Conference in Baltimore Contact: Kevin Fay
703/841-0626
18
Climate Change and the Business Community
by EPA with Business Council for Sus. Energy
20 - 22
G-7 Summit, Denver
24-7
South East Regional Workshop at Vanderbilt U.
Contact: J. Mellilo, OSTP
202/456-6202
26
EPA Region 1 (Boston) Impacts Conference
Contact: E. Haemissegar
202/260-5448
JULY
14-16
North West Regional Workshop in Seattle
Contact: J. Mellilo, OSTP
202/456-6202
28 8/3
SBSTA and SBI in Bonn
29 -8/7
Aspen Regional Impacts Integration/Planning
Meeting
Contact: J. Mellilo, OSTP
202/456-6202
AUGUST
4 - 8
AGBM negotiating session in Bonn
5 - - 14
Review of Regional Workshops in Aspen
Contact: J. Mellilo, OSTP
202/456-6202
SEPTEMBER
3-5
New England Regional Workshop, U of New
Hampshire
Contact: J. Mellilo, OSTP
202/456-6202
early Sept.
South West Regional Workshop in Tucson
Contact: J. Mellilo
202/456-6202
9-11
Mid-Atlantic Regional Workshop at Penn State
Contact: Joel Scheraga
202/260-4029
OCTOBER
7-8
New York-New Jersey Coastal Impacts Conference in Ramapo, NJ
Sponsored by Climate Institute with NJDEP
Contact: John Topping
202/547-0104
10-12
National Impacts Workshop at NAS in Washington Contact: J. Mellilo, OSTP
202/456-6202
27 29
Symposium on Climate Variability, Climate Change and Water Resource
Management in Colorado Springs organized by Corps, NOAA, EPA others
Contact: Eugene Strzepak
703/428-6370
20 26
SBSTA and SBI meetings in Bonn/Geneva
27 31
AGBM negotiating session in Bonn/Geneva
NOVEMBER
17-18
Climate Conference in Wash D.C. by Center for Environmental Information
Contact: Liz Thorndike
607/277-2604
DECEMBER
1-12
Kyoto Conference: Third Meeting of the Parties to Framework Convention
EVENTS IN THE EARLY PLANNING STAGES
Between July and Nov.
EPA Regional Conferences on Climate Change in Atlanta,
Baltimore, Chicago, and San Francisco
04/07/97
16:57
202 260 0780
OPA-OPPE
012/013
DRAFT - March 10, 1997
Integrated Climate Change Analysis and Assesspient
Objective: There is interagency agreement to present climate change policy information in a way
that integrates climate change science, the effects of climate change, the benefits of action, and
impacts of measures. The proposed report synthesizes and consolidates US Government work
already completed or underway. This report will provide an integrated summary of climate
change policy options, along with the results of the Interagency Analytic Team analyses, for
public review and comment. This information will be combined with information on the science
of climate change and the costs of inaction to provide a context within which decisions about
appropriate short-, medium- and long-term strategies can be evaluated.
Proposed Outline:
I. Overview
General review of the science of climate change, the Framework Convention on Climate
Change, the current international negotiations under the Berlin Mandate, and US positions to
date. (CEQ lead)
II. Long-term Projections of Emissions and Concentrations
This chapter will present global projections of greenhouse gas emissions and atmospheric
concentrations for business as usual and policy cases. This chapter could present: various global
emission and concentration pathways; alternative emission allocation schemes to reach
concentration targets; and, emission deflection points and points of global maximum emissions
consistent with various trajectories. (OSTP lead)
III. Analysis of the Effects of Climate Change in the United States
This chapter will provide an assessment of the potential impacts of climate change on the
United States, including effects on health, agriculture, forests, water resources, coastal areas, and
species and natural areas if no actions are taken to mitigate greenhouse gas emissions. The
regional distribution of impacts will be highlighted. Although the primary focus will be on the
impacts in a 2xCO2 world (i.e., CO2 concentrations of 550 ppm), available evidence of impacts
beyond atmospheric concentrations of 550 ppm will be summarized. (EPA lead)
IV. International Negotiation Options
This chapter will reiterate the current US international negotiation positions. It will
define the major points of contention in the negotiations and offer options under consideration.
At a minimum, the chapter should lay out the range of targets and timetables under consideration,
the issues of emission budgets, comprehensiveness, banking and borrowing, Annex I trading, and
Joint Implementation. (DOS lead)
003
013/013
V. Domestic Policy Options
This chapter will provide the domestic options to control the growth in greenhouse gas
emissions. Options to be discussed include: technology diffusion programs, standards and
regulations, emissions trading, sectoral policies (e.g, transportation and energy market reform),
research and development. (EPA/DOE leads)
VI. Economic Impacts of Domestic Policy Options
This chapter will cover the following issues: model selection, baseline emissions
projections, domestic policy scenarios, key assumptions, and results of the Interagency Analytic
Team analyses including the effects on specific sectors and economic opportunities. (DOC lead)
VII. Analysis of Co-Control Benefits of Domestic Policy Options
This chapter is identify other benefits of specific policy options, including other
environmental effects (e.g., reductions in criteria air pollutant emissions), energy security, and
enhanced international trade opportunities and environmental technology exports. (EPA/DOE
leads)
Target Dates:
Initial chapter drafts: April 30
Interagency comments: May 7
Release of drafts for public comment: May 15
outr
003
Today's Topics
Goals of the IAT process
Models we'll use
Our energy-economy baseline (before policy)
The dimensions of the climate change policy
"problem"
IAT Reviewers
004
Goals
Combine different agency perspectives into single
Administration-wide view of the problem
Develop a credible, replicable, and straight-forward
analysis of the policy options for:
VST
-- Administration decision-making
-- Communicating to important stakeholders
-- Educating the public
Provide outcomes for a wide range of variables
-- Macroeconomic
-- International
-- Sectoral and regional
Models We'll Use
Criteria: must be established, widely-understood,
available to the public, and each must bring some
distinguishing feature that adds to the analysis
Constraints: time, cost, and staff availability.
Academic literature has already broadly swept the
field.
04 97 04/22/97 TUE 16 30 16:30 FAA 202 482 0432
Our choices:
i
-- DRI (disequalibrium)
-- Second Generation Model (general equilibrium)
-- Markal-Macro (technology driven)
E UUU
DRI Model
Large macroeconomic model of domestic U.S.
economy
Merges aspects of Keynesian, neoclassical,
monetarist, and supply-side analysis
Short-run behavior embedded in a long-run
growth model
Modeled relationships reflect historical
developments
Linked to energy, regional and sectoral submodels
DRI Model (con't)
Strengths
- Detailed representation of the economy's adjustment to
short-term shocks
- Broad detail in energy, regional, and sectoral submodels
- Role of fiscal and monetary policies during transition
Limitations
- Difficulty in managing forward-looking behavior,
including innovation
- Long-term transitions represented as a series of short-run
adjustments
Second Generation Model
"Computable general equilibrium" model
presumes that economies adjust and then identifies
outcomes
Includes 12 global regions, developed in
international collaborations
Detail on energy technology and oil, greenhouse
gases
Linked to models that can calculate environmental
outcomes
Second Generation Model (con't)
Strengths
- CGE structure allows users to characterize long-term
adjustment path
- 12-region structure identifies who gains or loses in any
policy setting
- Provides details on greenhouse gas emissions and
energy technology
Limitations
- Short-term adjustment issue fly-by
- Little detail on sectors or regions, or energy level-use
detail
Markal-Macro Model
Model allows for direct input of technology
assumptions regarding end-use demand
Penetration rates (implied hurdle rates) can
be varied
Model solves for those technologies that
satisfy energy demands at minimum costs
Cost savings flow through to macro model
Markal-Macro (con't)
Strengths
- Ability to vary technological and hurdle rate
assumptions as inputs
- Provides energy-use detail and emissions information
- Provides implicit values for CO2, NOx, and SO2
emissions
Limitations
- Limited detail on macroeconomic, sectoral, and
regional effects
- Model may "over-optimize" the system or provide
"knife-edge" solutions, as well as assuming perfect
foresight
Baseline Projections
Domestic baseline projections from EIA's
1997 Annual Energy Outlook
International baseline projections from
IEA's 1997 World Energy Outlook
Models calibrated to baseline
Charts and data, including growth rates
follow
Population
340
320
Population
1990
1995
2000
2005
2010
2015
2020
300
DRHDRI Energy
250
264
276
287
299
311
324
AEO97 (NEMS)
250
264
276
287
299
311
280
SGM
250
263
276
287
299
311
323
Millions
Markal Macro
250
263
276
287
299
311
323
260
Average Annual Growth Rate
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
240
DRI-DRI Energy
1.0
0.9
0.8
0.8
0.8
0.8
AEO97 (NEMS)
1.0
0.9
0.8
0.8
0.8
220
SGM
1.0
0.9
0.8
0.8
0.8
0.7
Markal Macro
1.0
0.9
0.8
0.8
0.8
0.7
200
1990
1995
2000
2005
2010
2015
2020
DRI-ORI Energy
AE097 (NEMS)
SGM
Markal Macro
Population grows at a steady rate of about 0.8 percent annually, consistent
with Census estimates.
GDP
$11,000
$10,000
GDP ($Bilion 1992)
1990
1995
2000
2005
2010
2015
2020
DRI-DRI Energy
$6,139
$6,743
$7,522
$8,337
$9,172
$10,003
$10,574
$9,000
AEO97 (NEMS)
$6,139
$6,739
$7,544
$8,390
$9,185
$9,880
SGM
$6,077
$6,635
$7,464
$8,324
$9,172
$9,873
$10,593
Markal Macro
$6,139
$6,739
$7,554
$8,363
$9,181
$9,889
$10,576
Billions $1992
$8,000
OMB - FY98 Budget
Assumptions
$6,142
$6,721
$7,470
$8,343
$9,225
$9,929
$10,581
$7,000
Average Annual Growth Rate
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
$6,000
DRI-DRI Energy
2.0
2.3
2.2
2.0
1.8
1.1
AE097 (NEMS)
2.0
2.4
2.2
1.9
1.5
$6,000
SGM
1.8
2.5
23
2.0
1.5
1.5
Markal Macro
2.0
2.4
2.2
1.9
1.5
1.4
OMB - FY98 Budget
$4,000
Assumptions
1.9
2.2
2.3
2.1
1.5
1.3
1990
1995
2000
2006
2010
2015
2020
DR-OR Energy
ABC97 (NEMS)
SGM
Markal Macro
+
CMB- - FY96 Budget Assumptions
Aging population reduces labor force, lowers long-term growth potential by
2020.
Total Energy Consumption
Total Energy Consumption
120.00
(Quads)
1990
1995
2000
2005
2010
2015
2020
DRIDRI Energy
82.60
88.90
95.80
101.00
105.40
107.30
108.90
110.00
AEO97 (NEMS)
83.73
90.03
97.85
103.40
107.90
110.90
SGM
81.06
87.89
93.63
99.05
103.37
108.44
111.85
Markal Macro
83.73
90.90
95.60
100.70
107.30
111.00
117.10
100.00
Average Annual Growth Rate
Quads
90.00
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
DRHDRI Energy
1.5
1.6
1.1
0.9
0.4
0.3
AEO97 (NEMS)
1.5
1.7
1.1
0.9
0.6
80.00
SGM
1.7
1.3
1.2
0.9
1.0
0.6
Markal Macro
1.7
1.0
1.1
1.3
0.7
1.1
70.00
SGM Projections do not include: geothermal, wind, biomass waste, and other municipal waste
60.00
1990
1995
2000
2005
2010
2015
2020
ORI-ORI Energy
ABC87 (NEMS)
SGM
Markal Macro
Energy consumption growth rates decline in response to slow growth and
enjoy efficiency improvements.
Energy Intensity
$4.0
Energy Intens ity
(T8Lu/$92GDP)
1990
1995
2000
2005
2010
2015
2020
13.0
DRIDRI Energy
13.5
132
12.7
12.1
11.5
10.7
10.3
AEO97 (NEMS)
13.6
13.4
13.0
12.3
11.7
11.2
120
SGM
13.3
13.1
12.5
11.9
11.3
11.0
10.6
(TBtu/$92GDP) (Chain-weighted)
Markal Macro
13.6
135
12.7
12.0
11.7
11.2
11.1
11.0
Average Annual Growth Rate
10.0
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
DRI-DRI Energy
-0.4
-0.7
-1.0
-1.0
-1.3
-0.8
9.0
AEO97 (NEMS)
-0.4
-0.6
-1.0
-0.9
-0.9
SGM
-0.4
-0.8
-1.1
-1.0
-0.5
-0.8
8.0
Markal Macro
-0.1
-1.2
-1.1
-0.5
-0.9
-0.2
7.0
6.0
1990
1995
2000
2006
2010
2015
2020
DRI-DRI Energy
AEO97 (NEMS)
SGM
Markal Macro
Energy intensity falls, reflecting ongoing technical improvements.
017
Minemouth Coal Prices
$24.00
Minemouth Coal Price
($95/ton)
1990
1995
2000
2005
$22.00
2010
2015
2020
DRI-DRI Energy
$23.92
$18.45
$15.28
$14.41
$13.76
$13.16
$12.70
AEO97 (NEMS)
$19.88
$18.83
$18.38
$17.47
$16.92
$15.46
$20.00
SGM
$19.88
$20.10
$18.44
$17.21
$17.04
$17.08
$16.81
Markal Macro
$19.88
$22.73
$17.35
$16.62
$15.64
$16.37
$15.88
$18.00
($95/ton)
Average Annual Growth Rate
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
$16.00
DRI-DRI Energy
-4.6
-3.4
-1.1
-0.9
-0.9
-0.7
AEO97 (NEMS)
-1.1
-0.5
-1.0
-0.6
-1.7
SGM
$14.00
0.2
-1.7
-1.3
-0.2
0.0
-0.3
Markal Macro
2.9
-4.7
-0.8
-12
0.9
-0.6
$12.00
$10.00
1990
1995
2000
2005
2010
2015
2020
DRI-DRI Energy
AEC97 (NEMS)
SGM
Markal Macro
Coal prices decline as low-cost sources gain prevalence in the market.
World Oil Prices
$30.00
World Oll Price ($95/Barrel)
1990
1995
2000
2006
2010
2015
2020
DRI-DRI Energy
$25.23
$17.14
$16.18
$18.93
$21.24
$22.86
$23.95
AEO97 (NEMS)
$24.87
$17.26
$18.20
$19.72
$20.41
$20.98
$25.00
SGM
$24.87
$17.26
$18.20
$19.72
$20.41
$20.98
$21.57
Markal Macro
$24.87
$19.73
$18.98
$21.09
$21.70
$22.32
$23.34
$20.00
Average Annual Growth Rate
($95/Barrel)
(percent)
90-95
96-00
00-05
05-10
10-15
15-30
DRIORI Energy
-6.4
-1.1
3.4
2.4
1.5
1.0
AEO97 (NEMS)
-6.1
1.1
1.7
0.7
0.6
$15.00
SGM
-6.1
1.1
1.7
0.7
0.6
0.6
Markal Macro
-4.1
-0.8
2.2
0.6
0.6
0.9
$10.00
$5.00
1990
1995
2000
2005
2010
2015
2020
DRI-DRI Energy
AEO97 (NEMS)
SGM
Markal Macro
World oil prices rise slightly in real terms as supplies tighten and level grows.
Natural Gas Prices
$3.00
Natural Gas Price (wellhead
$95/Mcl)
1990
1995
2000
2005
2010
2015
2020
$250
DRI-DRI Energy
$1.74
$1.42
$1.82
$2.09
$2.35
$2.47
$2.58
AEO97 (NEMS)
$1.97
$1.61
$1.82
$1.94
$2.01
$2.13
SGM
$1.97
$1.74
$1.98
$1.88
$2.20
$2.15
$2.18
$2.00
Markal Macro
$1.97
$1.85
$1.87
$2.12
$2.26
$2.56
$2.88
Wellhead $95/Mcf
$1.50
Average Annual Growth Rate
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
DRI-DRI Energy
-3.7
5.6
3.0
2.5
1.0
0.9
$1.00
AEO97 (NEMS)
-3.7
2.6
1.3
0.7
1.2
SGM
-2.3
2.8
-1.0
3.4
-0.5
0.3
Markal Macro
-1.2
0.2
2.7
1.3
2.7
2.5
$0.50
$0.00
1990
1995
2000
2005
2010
2015
2020
DRI-DRI Energy
AE097 (NEMS)
SGM
Markal Macro
Natural gas prices rise as natural gas moves into higher-value uses.
Gasoline Prices
$1.40
Gasofine Prices ($95/Gal)
1990
1995
2000
2005
2010
2015
2020
$1.30
DRHDRI Energy
$1.38
$1.21
$1.20
$1.26
$1.31
$1.37
$1.40
AEO97 (NEMS)
$1.34
$1.15
$1.19
$1.21
$1.22
$1.17
SGM
$1.20
Markal Macro
$1.34
$1.15
$1.17
$1.24
$1.23
$1.28
$1.21
(95$/Gal.)
Average Annual Growth Rate
$1.10
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
DRI-ORI Energy
-2.6
-0.1
1.1
0.8
0.8
0.4
AEO97 (NEMS)
-2.9
0.8
0.3
0.1
-0.7
$1.00
SGM
Markal Macro
-2.9
0.4
1.2
-0.2
0.8
-1.1
$0.90
$0.80
1990
1995
2000
2006
2010
2015
2020
DRI-DRI Energy
+
AEO97 (NEMS)
,
SGM
Markal Macro
Price projection differences reflect different treatments of transportation
demand technology.
U.S. Carbon Emissions
Carbon Emissions (MMTC)
Total
1990
1995
2000
2005
2010
2015
2020
2,000
ORI-DRI Energy
1,338
1,413
1,516
1,612
1,693
1,767
1,805
AEO97 (NEMS)
1,339
1,424
1,543
1,639
1,722
1,799
1,900
SGM
1,346
1,464
1,549
1,642
1,727
1,826
1,883
1,800
Markal Macro
1,338
1,459
1,540
1,624
1,741
1,833
1,959
CCAP Baseline
1,344
1,414
1,512
1,589
1,667
1,700
CCAP With Actions
1,344
1,414
1,477
1,535
1,593
1,600
Average Annual Growth Rate
MMTC
(percent)
90-95
95-00
00-05
05-10
10-15
15-30
1,500
DRI-DRI Energy
1.13
1.45
1.27
1.01
0.88
0.43
1,400
AEO97 (NEMS)
1.26
1.68
1.24
1.02
0.89
SGM
1.75
1.17
1.20
1.03
1.15
0.62
1,300
Markal Macro
1.81
1.11
1.09
1.44
1.06
1.37
CCAP Baseline
1.04
1.38
1.03
0.98
1,200
CCAP With Actions
1.04
0.90
0.79
0.76
1,100
1,000
1990
1995
2000
2005
2010
2015
2020
OR Energy
+
AE097 (NEMS)
+
SGM
Matal Macro
OCAP Baseline
OCAPWhAdions
Emission growth projected at (?) annually over the 1990-2020 period.
Non-CO2 Greenhouse Gas
Emissions and Sinks
Gas/Source
1990
1995
2000
2010
2020
No CCAP
With CCAP
No CCAP
With CCAP
No CCAP
With CCAP
Action
Action
Action
Action
Action
Action
Methane
169
177
170
148
182
151
186
154
Nitrous Oxides
37
37
36
31
39
34
43
37
HFCs/PFCs/
24
N/A
62
42
132
91
183
133
SF6
Total
230
214
268
221
352
276
412
325
Sinks
-136
N/A
-121
-131
-119
-129
-103
-113
Foreign Baseline
Real Economic Growth
Energy Growth
Emissions Growth
(Annual)
(Quads)
(MMTC)
1990-00
2000-10
2010-20
1990-00
2000-10
2010-20
1990-00
2000-10
2010-20
Australia
2.6
2.5
1.7
1.8
1.2
0.8
1.7
1.2
0.7
Canada
2.4
2.4
1.2
1.7
1.0
0.4
2.2
1.5
0.6
China
8.5
7.7
5.9
3.9
2.8
2.1
3.8
2.8
2.2
Former Soviet Union
-4.0
1.5
1.4
-3.5
1.8
1.2
-4.0
1.6
1.1
India
4.8
4.0
3.5
4.7
2.4
2.9
4.7
2.0
2.9
Japan
2.1
1.8
0.9
2.2
0.8
0.1
2.1
0.9
0.1
Korea
4.5
6.0
4.5
3.9
3.0
2.4
2.7
3.1
3.0
Mexico
3.9
4.0
3.2
4.1
2.9
2.3
4.2
2.9
2.4
Western Europe
2.9
2.2
2.4
2.5
1.6
1.0
2.2
1.8
1.0
Rest-Of-World
3.8
3.7
3.2
3.0
2.3
2.3
2.9
2.4
2.5
Dimensions of the Problem
Emission limits -- levels and timing
International trading -- "Annex I" VS. "Joint
Implementation"
Innovation and diffusion
Related revenue recycling
Collateral benefits, but no climate benefits
can
IAT Reviewers
Dale Jorgensen, Harvard, energy and environmental
modeling
William Nordhaus, Yale, economic effects of energy and
environmental problems
Larry Goulder, Stanford, taxation issues in climate
modeling
John Weyent, Stanford, head of the Stanford Energy
Modeling Forum
Ray Kopp, Resources for the Future, technical change and
carbon policy
Kerry Smith, Duke, trade consequences of environmental
policy
IAT Reviewers (con't)
Robert Repetto, World Resources Institute, capital markets
and environmental policy
Stephen DeCanio, U. of California, energy efficiency and
technology change
Tom Rutherford, U. of Colorado, energy and
environmental modeling
Rich Richels, Electric Power Research Institute, energy
industry perspective
Steve Bernow, Tellus Institute, energy and environmental
modeling
Robert Scott, Economic Policy Institute, labor issues
THE WHITE HOUSE
Office of the Press Secretary
For Immediate Release
April 22, 1997
REMARKS BY THE PRESIDENT
AND VICE PRESIDENT
UPON DEPARTURE
The South Lawn
9:05 A.M. EDT
THE VICE PRESIDENT: Good morning, ladies and gentlemen.
Of course, as you know, the President is about TO depart for North
Dakota and the surrounding area to bring some additional help and
encouragement and solidarity to the victims of the 500 Year Flood in
that area.
Prior to leaving, the President is going to make an
important announcement concerning a major new step forward in our
effort to empower the American people with information needed to
protect their environment. This new step being taken by the
President vastly expands the community's right to know about
pollutants being released into their neighborhoods and into their
communities.
One important aspect of this announcement is the
reinventing feature that streamlines the collection of Information by
the businesses affected by this new announcement and protects the
environment in new ways, while at the same time reducing the burden
of information collection on businesses. This measure probably has
more support across all lines in America than any other thing that we
do; because when you give the American people they can use to protect
themselves, then people at the grassroots level find very creative
ways to convince those sources of pollution to reduce the emissions
into the air and water in the communities where these individuals
live.
It is only one example of the broad-based effort led by
President Bill Clinton to greatly improve the protection of the
environment. Everything from emissions in the smallest community to
the global issues, such as climate change. And, incidentally, our
research effort is continuing to pin down what many scientists have
said is a link between extreme weather events -- not only in this
country, but In other nations as well -- that have long been
predicted to become more common in 8 world where temperatures are
rising even slightly.
I preceded the President to the north central area two
weeks ago and talked with one mayor who said his community had had
six hundred-year floods in the last 10 years. The scientific
community cautions that no one can ever say that a particular event,
even a 500 hundred year flood, is connected to global climate change.
But they do say and have said for two decades that the probability
that such events will occur increases along with climate change.
This announcement, again, on the community's right to
know is a major advance, emblematic of this President's leadership on
the environment. Therefore, on this Earth Day, it is a particular
privilege and pleasure for me to present President Bill Clinton.
THE PRESIDENT: Thank you very much, Mr. Vice President.
Good morning, ladies and gentlemen. As all of you know I am about to
leave for North Dakota, where the people are quite literally in the
fight of their lives. What they have endured is enormous. How they
are enduring it is remarkable. I am going to view the flood damage
to pledge our nation's support to see that we are doing everything we
can do to help them.
You know, Americans have a habit of joining together at
times like this and I think all Americans have been very deeply moved
by the pictures we have seen of 8 town being flooded and burning at
the same time, the people in North Dakota losing everything they
have. I, personally, can't remember a time when a community that
large was entirely evacuated. And we have to stay together.
I think it is appropriate, for the reasons the Vice
President said, that coincidentally this trip is occurring on Earth
Day, because since 1970, the first Earth Day, Americans have stood
side by side against a rising tide of pollution and for the
proposition that we have to find a way to live in harmony with and
grow our economy in a way that is consistent with preserving our
environment.
Earth Day started at the grassroots. Soon the force of
neighbor joining with neighbor grew into a national movement to
safeguard our air, our land and our water. The movement led national
leaders of both parties to put in place the environmental safeguards
that protect us today: the Clean Air Act, the Clean Water Act, the
Environmental Protection Act. In 1995, an attempt to reverse this
consensus and to radically weaken our environmental laws was strongly
rebuffed here in Washington and, even more importantly, all across
America. And in 1996, that consensus began to be restored again.
These environmental protections have done an awful lot
of good. But one of the best things we can do in Washington to
protect the environment is to give people in communities all across
our country the power to protect themselves from pollution. That is
the mission of the Community Right to Know law. This law tells
citizens exactly what substances are being released into their
neighborhoods. In the decade its been on the books, citizens have
joined with government and industry to reduce the release of toxic
chemicals by 43 percent. Under our administration we strengthened
Right to Know, nearly doubling the number of chemicals that must be
reported, making it easier for Americans TO find out what toxics, If
any, are being sent into the world around them.
In 1995, I directed EPA Administrator Carol Browner to
find ways to expand Community Right to Know even further. Today, we
are making good on that pledge. Today, we increased by 6,100 - 30
percent -- the number of facilities that need to tell the public what
they are releasing into our environment. Today, seven new industries
-- Including mining, electric utilities and hazardous waste treatment
centers that use substances like mercury, lead and arsenic - will
now be subject to the Community Right to Know law. Today, more
information will be required from 700 companies already providing
information under the law. It will be more accessible to Americans.
And today we set in motion a process that will guarantee that all the
stakeholders -- including citizens, community groups, environmental
groups and businesses -- will have opportunities to work together
from now on to continue to improve this law.
By expanding Community Right to Know we're giving
Americans a powerful, very powerful early warning system to keep
their children safe from toxic pollution. We're giving them the most
powerful tool in a democracy: knowledge. We are truly living up to
the promise of Earth Day.
I also want to say a special word of thanks to Katie
McGinty for the work that she has done on this, and the White House.
And I want to thank the Vice President for taking my place at the
Earth Day celebration at Anacostia roday, to talk about Community
Right to Know and for all of his work on the environment.
And just let me say in closing, with regard to the
comments he made about climate change and the possible impact it may
have had on the enormous number of highly disruptive weather events
that have occurred just since we've been here in the last four years
and a few months, I think it is very important that we continue to
intensify our government's research efforts in this regard and that
we take the very best knowledge we have and bring it to bear on a lot
of the decisions we'll be having to make together as a country over
the next four years.
We do not know, as the Vice President said, for sure
that the warming of the earth is responsible for what seems to be a
substantial increase in highly disruptive weather events; but many
people believe that it is and we have to keep looking into it. We
have to find the best scientific evidence we have and we have to keep
searching for the answers to this. I think every American has
noticed a substantial Increase in the last few years of the kind of
thing we're going to see in North Dakota today. And if there is a
larger cause which can be eased into the future, we ought to go after
that solution as well. Thank you.
Is a Marshall Plan appropriate? Your Chief of
Staff suggested yesterday it may take a Marshall Plan to help North
Dakota.
THE PRESIDENT: You know, we've had - I suppose because
North Dakota is not highly populated we may -- we've had disasters
which have affected more people. But I believe that probably this is
the highest percentage of people in any state or community that I
have seen affected by this. And, you know, if you look at Grand
Forks you see a place that literally has to be completely rebuilt, or
people have to reconstitute their lives elsewhere. So I do believe
that we're going to have to be prepared to be very creative here.
The Congress has shown in the past, even when it was
quite costly - after the earthquake in California, for example -
that we can unite across party lines to do what has to be done. We
need to take a hard look at this. This situation in North Dakota is
virtually unprecedented in many, many ways and I want to go out
there, make sure that I have read all the information available, talk
to the people there, see for myself and then I'll come back and,
along with the Congressional delegation with Senator Dorgan and
Senator Conrad and Congressman Pomeroy, we'll put our heads together
and see where we go from here.
Q Any idea, Mr. President, on how much money it might
take and will it be there when you need it?
THE PRESIDENT: I think, as I said, my experience in
dealing with the flood in the middle west and all the disasters in
California, the Pacific northwest, the floods in the southeast, is
that Congress finds a way. And 1 think everybody in America has been
totally overwhelmed by what we have seen on television and seen in
the news reports - -- these pictures of buildings completely surrounded
by water, burning down. You know, 1 think it's been an overwhelming
experience. I think the American people are with the people of North
Dakota and I think we'll do what we have to do.
Q Mr. President, are you making any tangible headway
on the Chemical Weapons treaty, on getting the votes for the Chemical
Weapons treaty?
THE PRESIDENT: Well, I hope so. We're working hard on
it. We are working very, very hard on it - I am, the Vice President
is, everyone in our administration is. I worked over the weekend
some on it. We're doing the best we can to put together a strong
case. I think the fact that we have come up with a package of 28
clarifying amendments that respond to 90 percent of the objections,
even of the strongest opponents of the treaty, I think shows the good
faith in which we have proceeded. And we've worked very hard on this
and I'm actually quite optimistic.
Q Have you talked to Senator Lott?
a - for Saddam Hussein and honoring the no-fly zone?
THE PRESIDENT: Well, my message is that we support
people in exercising their religious liberties and in living out
their religious convictions everywhere in the world. And we
certainly support that in the Muslim world. But we don't want TO see
religion, in effect, used and distorted in a way to try to avoid the
international obligations that are imposed. And we intend to
continue to observe the no-fly zone and continue to support the
embargo until he lives up to the conditions of the United Nations
resolutions.
END
9:19 A.M. EDT
Message Sent To:
Kathleen A. McGinty/CEQ/EOP
Shelley N. Fidier/CEQ/EOP
Wesley P. Warren/CEQ/EOP
Dinah Bear/CEQ/EOP
Elisabeth A. Blaug/CEQ/EOP
Bradley M. Campbell/CEQ/EOP
Edward R. Clark/CEQ/EOP
Thomas C. Jensen/CEQ/EOP
Robert S. Kapia/CEQ/EOP
Linda Lance/CEQ/EOP
Keith E. Laughlin/CEQ/EOP
Carolyn D. Mosley/CEO/EOP
David B Sandalow/CEQ/EOP
Peter G. Umhofer/CEQ/EOP
Beth A. Viola/CEQ/EOP
Michael V. Terrell/CEQ/EOP
BIA
4/23/07
Possible scenarios for five-year periods centered on 2010, 2015, and 2020
(100% = 1990 levels of GHG emissions)
2008-2012
2013-2017
2018-2022
A
100%
100%
100%
B
95%
95%
95%
C
90%
90%
90%
D
100%
95%
90%
E
90%
90%
80%
F
Above options with added limit of 110% of 1990 levels in 2005-2007
G
Same as D but shift each period three years forward to 2005-2009, 2010-2014,
and 2015-2019
Comments:
Scenarios (a) - (d) in the draft memo present a number of difficulties:
1)
They are not clear enough about what is to be assumed for the years between those
mentioned in the scenarios. The modeling requires a constraint for each year.
2)
They contain not only different levels but also cover different total time periods.
Implicitly, they also have different length budget periods. The scenarios should be
structured more comparably. Only one variable should be changed at a time.
3)
Lines A, B, and E, below are attempts to make scenarios (a)-(d) more specific and
comparable; different judgments could be made. They are ranked in order of increasing
stringency.
-
Lines A and B correspond to scenario (a) and (b) in the memo, with the additional
specificity that a five-year period around 2010 is assumed, and it is held constant
for two subsequent five-year periods.
Line C is similar, a bit more stringent.
Line D is a new proposal by EPA. Note that it has the same net emissions as line
C, with more in the first period and less in the third. EPA also proposes Line G,
which is equivalent to Line D with the periods shifted forward to begin in 2005.
Predecisional deliberative draft -- do not quote or cite
p.1
Line E corresponds fairly well to scenario (c) in the draft memo.
Scenario (d) in the draft memo is the least stringent, but is difficult to model and
compare with the others because the models go out only to 2020, not 2030. For
the period modeled, scenario (d) corresponds to Line A. How would we model
the 2020-2030 period?
Line F is intended to represent modest additional reductions in 2005 as suggested
in the draft memo.
4)
None of these proposals simulates the benefit of multi-year averaging. It should be
remembered that long-period averaging competes with bindingness/compliance
considerations. We still need a way to simulate the savings potential of 3, 5, or 10 years.
Predecisional deliberative draft -- do not quote or cite
p.2
03/26/97
18:13
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004/004
United States Department of Sta
Assistant Secretary of State for Oceans and
International Environmental and Scientific Affairs
Washington, D.C. 20520
cc: JAF JS
March 26, 1997
TO:
Distribution
FROM:
Eileen B. Claussen
a
SUBJECT:
April 1 Climate Change Submission
The attached document, which was developed by the interagency working group
at the staff level, contains compliance-related revisions and amendments to several of the
articles in the U.S. draft text of January 17, 1997. This is the only text cleared by the
working group and would therefore be the only piece we would submit. I need to know
from you within 24 hours as to whether you would like this piece to be submitted as is. If
the answer is yes, I would have to submit it to the Deputies. To enable this submission to
be made prior to the deadline, clearance at the Assistant Secretary level must be provided
no later than noon, Thursday, March 27. I will assume clearance unless I hear otherwise.
Attachment:
As Stated
03/26/97
18:42
202 647 0774
STATE/OES
001
Text to Be Submitted
(note that Article #s will need to correspond
to the new compilation text)
In Article 2 of the U.S. proposal (Emissions Budgets),
add a new paragraph 6 .bis. as follows:
2.6.bis. At the end of a budget period applicable to a
Party, any amount of tonnes of carbon equivalent
emissions over its emissions budget shall be
subtracted at a rate of [rate greater than that
in paragraph 6] from the subsequent budget period.
In Article 4 of the U.S. proposal (Review and Compliance
Process), substitute for paragraphs 3 to 6 the following text:
4.3 Reviews will be in connection with the review of
communications conducted under Article 10.2 (b) of the
Convention and will be in accordance with guidelines
to be adopted by the Parties at a meeting. These
guidelines shall, inter alia, provide for how
information will be made available to the public and
define mechanisms by which observers and the public
may provide comments, supplemental data or other
information to facilitate and improve reviews. The
guidelines shall be periodically reviewed by the
Parties for appropriate revision.
4.4 Review teams will review all aspects of a Party's
implementation of this Protocol, including the
likelihood that a Party will achieve its emissions
budgets obligations. They will be authorized, inter
alia, to review pertinent information and consult with
the Party in question and others as necessary. They
will prepare a report assessing a Party's
implementation of its obligations, identifying any
areas of apparent non-compliance, as well as potential
problems in achieving obligations.
4.5 Such reports will be circulated by the Secretariat to
all Parties. In addition, the Secretariat will
identify for further consideration any report
indicating a question of implementation.
In Article 6 of the U.S. proposal (International Emissions
Trading), substitute the following text:
6.1. Except as otherwise provided below, any Annex A
or Annex B Party may transfer to, or acquire from, any
Annex A or Annex B Party, any of its tonnes of carbon
equivalent emissions allowed for a budget period, for
the purpose of meeting its obligations under Article 2.
03/26/97 18:12
2026470217
002/004
-2-
6.2 An Annex A or Annex B Party may not transfer or
acquire any of its tonnes of carbon equivalent
emissions allowed if it is not in compliance with its
obligations under Article 3 (Measurement and
Reporting) or if it does not have in place a national
mechanism for certification and verification of trades.
on.
6.3 An Annex A or Annex B Party may not transfer in a
ok
given budget period any of its tonnes of carbon
equivalent emissions allowed if it has exceeded its
emissions budget for that period.
6.4 If a question of a Party's implementation of the
requirements referred to in paragraph 2 or 3 above is
identified by either the review process under Article
4.5 or by the Secretariat under Article 11.2 (b) :
--
transfers and acquisitions of tonnes allowed (in
the case of paragraph 2) and transfers of tonnes
allowed (in the case of paragraph 3) may continue
to be made after the question has been
identified, provided that any such tonnes may not
be used by any Party to meet its obligations
under Article 2 until any issue of compliance is
resolved. Issues of compliance shall be resolved
as expeditiously as possible.
6.5 A Party may authorize any domestic entity (e.g.,
government agencies, private firms, non-governmental
organizations, individuals) to participate in actions
leading to transfer and acquisition under paragraph 1
of tonnes of carbon equivalent emissions allowed.
6.6 The Parties, at a meeting, may further elaborate
guidelines to facilitate the reporting of emissions
trading information.
In Article 10 of the U.S. proposal (Meetings of the
Parties), for paragraph 4, substitute the following text:
10.4 The Parties:
(a) shall periodically review the adequacy of this
Protocol;
(b) shall review the implementation of this Protocol,
including the information submitted in accordance
with Articles 3 and 5, reports received from the
review teams referred to in Article 4, and any
other reports and recommendations received from
processes under this Protocol;
03/26/97
18:12
'2026470217
003/004
-3-
(c) shall implement an appropriate regime
to address cases of non-compliance with
obligations under this Protocol, including
through the development of an indicative list of
consequences, taking into account the type,
degree, and frequency of non-compliance;
(d) may establish an implementation committee
consisting of a subset of Parties to assist them,
including by making recommendations, in carrying
out functions referred to in subparagraphs (b)
and (c) above.
In Article 11 of the U.S. proposal (Secretariat),
for paragraph 2, substitute the following:
11.2 The functions of the secretariat shall be:
(a) to maintain and administer records relating
to the accounting of the emissions budgets
of Annex A and Annex B Parties, including
initial budget allocations, adjustments to
budgets consistent with Articles 2, 6, and
7, annual emissions, and remaining budgets
in a given budget period;
(b) to facilitate the review of implementation
of this Protocol through, inter alia,
coordinating the review of Annex A and Annex
B implementation; coordinating the reviews
under Article 5; identifying for the Parties
questions of implementation, including
whether individual reports are consistent
with reporting criteria; and preparing an
annual compilation and synthesis report that
contains inventory and budget information,
and notes any discrepancies in accounting.
(c) [other].