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5 Labs Study: Scenarios of U.S. Carbon Reductions Notes and Comments--[GCC (Global Climate
Change)] [Binder]
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21
4
10
2
5 Labs Study:
Scenarios of U.S. Carbon Reductions
Notes and Comments
Joe Aldy
CEA
GCC:
5 Labs Study
Notes and
Comments
8/22 phone call
David Chien, EIA
will find at 1 energy consumption w/ flat frel efficiency
new E/GDP rate
w/ diesel tech - heavily dependent on NOx catalyst
care tech way to 80 given PM regs
Nox + PM - - trade-off w/ GH6
distillate tech T Nox, PM
must scar + need
can't meet current enission
heavy funding
stds w/ present catadyst
diesel hybrid in 1.3ht duty vehicle
NSO% heavy truchs are independent operators
will slow diffusion
#
will email his comments
frel prizes do 1.3e N 10 0/gal
-current tech costettective for Tmpa - these will consis
1 priceT brings in more tech.
- -path of fel prices matter, not end + begining prices
lag + pine expectations
combining cars + It. truchs
fuel economy has improved, not flat as implied by DOE;
above CAFE floor by 1,2mpg
dom manufacturers Tupg by 1 since 1920
imports desling in thel economy
truchs have ben vflat
8/19 ontz- DOES presentation
Joe Romm
study should withstand GAO audit
2 pee reviews 1) EPRI, GRI, NAS, UT, Stan, Harv.
2) AI Linh- UNC
DeCamd
labs told not to examine policies
loohed e $50/ton be they were to many supply optims
become attractive at that price
Climate Technology Strategy -ashed of agencies by Pres, Secy
PCAST- Energy R+D Strategy
37% of b/dys can be captured w/ stds
D.O I tell
Jeff wants to meet w/ the IAT modelers
you?
and have them do a set of emissions
paths the 2050 (1990, -10% 1990) Peak
2015, maybe Peah 2025). leff said he world
like to talk to you abat this.
only SGM can do this w G-Cubed.
We need to define The policy-space better first
Stringency
ISO-CARBON tax
flexibolity
8/15
Dand Chien, EIA 586-3994
6ft may
Art Andersen, EIA 586-1441
left mog
Andy Kydes ? phone#
can answer that question
assume Im
1/2 grad
ref case: 1,096%
1.063%
2015: 110.87 of vads net case
om em tradi
110.27 grads cans fuel etc
+ lab study
8
,03% In in Onergy growth
Zena 1: AV ationder ation 186
Is, 87% 001096 ,01096
should be revised basiline
01063
0/8/15/97
cons
00033
17.7 grads constant fuel eff 97-2015
17.1 goads ref
111 guads total
6 guads
.5
300,000 bornels/day
E/CDP disappears: is the ronding
VMT T is
drives more than fuel economy still biz
9/4 phone conversation al Mak Mazer
DOE
Slabs study
Д beas to enougy savings
want to heap costs in
not a full CBA
will be more careful w( cost-effectiveness
so will remove some
will address baseline issue
8/12 ntz w/ Treasury
1
accel of what world already be adapted ~Syrs = = fiture
get a couple of ex for end of week
what 3 the
time havizon
energy use in refrigs over past 20yrs
(
- AHAM data on energy intersity
check literater
1
Consumer Reports on fridges
Romer
do you really get bens into perpetuity
Jaffe
-depresiation of knowledge
CRF 33%-15%
mahe equivalence statement, es = costs of clim corp inc
tax for energy eff investments
process not completed - still on-gang - hopeful to
finish up this week (week from today)
will release revenues names when process 3 ca
should he final draft before ;
are released
mainly indistry, some academics
some just evew a specific section
Some review whole report
have sent a letter that reviewers are happy
will release "draft-final next meah (lean
IAT process)
will accept comments in future if easily
Mailyn Brown Oah Ridge Noth Cab
8
DOE lab study - - mostly internal review
6 member of tech review: EPRI
GRI
Mansanto
(or 2 universities
have seen 2 drafts
next draft will be available for as despread review next
week
some more additional analysis
better cost-savings analy 513
better refinement of fuel smiteling behavior
8/1 DOES Draft
1. BAU
2. Alternative View
3. bldgs- no reference to 25/ton scenario
>
don't and
how this
industry "
13 calculated
trans
from Howard Grangecht
hatt
- bldgst trans would regishe (AFE, bldg codes
- bldgs assumes AC electricity, not me
- no behavioral adaptation = study
1pm Friday -Eric Macris
Copy of DOES presentation pachage from Bob
15% at total private investment costs -govt costs - new is DOES
-get from Eriz
NPV in DOES is to society not owner
Peg- - 9 Tounes ≤ R
1000,000
DOE Labs Study
as
lead authors
Marilyn Brown 423-576-8152
ORNL
Mak Levine 510-486-5238 LBNL
buildings
Jan Koomey -lead; Levine was co-auther -ash him first
Loot till Monday
industry
Gale Boyd - lead: 630-252-5393 Argonne
- Gale i3 out of the office until 8/19
-call Joe Roop: 509-372-4245 PNNC
Joe originally passed me on to hale -ash him if
he can set us the documentation, or who else at
Argonne could
transportation
Steve Plothin: 202-488-2403 Argonne - D C.ffice
utilities
call your contacts
We want:
1) to know when report will be ne leased
2) documentation:
inputs
bacaline, efficiency, high
outputs
efficiency
preferably on dish (esp. spreadsheet models)
Star Hadley 423 574 -8018
Eric Hirst 423 574-6304
Tradeable Permits -
&
5 Labs Study (mid. June draft)
Methodology
Baseline: AE097 for bldgs. industry
modified AE097 for transportation t electric
Suite of Technologies assembled existing info on
performance and costs of energy efficient tech
bldgs - database B extensive
trans - database B sufficient
ind - database 3 partial; analysis relies on historical
relations b/t energy Use + economic activity + much less
on explicit technological opportunities
Scenarios: 1) Baseline / Business As Usual
2) Efficiency - the nation T its emphasis an energy
efficiency thru T public + privante sector efforts;
reduces, but doesn't eliminate, mht barriers + lags
3) High Efficiency/Low Carbon - focused national R+D
effort (T tedpolices, T stateprograms, active private
\
sector involvement) transform mhts plus
domestic C permit trading e $50/ton
Don't Consider: 1) market acceptance: we have confined
on analysis to technology costs, and have not
assessed policies or programs to achieve mut
acceptance. "(p.xvi)
2) implementation costs; "Ignoring the implementation
costs, this means that the cast of reducing carbon
emissions are negative overall. "(pixvi)
Note: implementation costs of energy efficiency
and the other requirements to achieve rapid
and undespread mht acceptance of technologies
will raise the cost of the scenarios, as discussed
below, "(p.xviii)
Estimate of net costs ≤ 105/yr.
Assumes ≤0 net costs of all tech adoption,
≤ $ < $6 b/yr costs to utilities (850/ton permit 125mth
and L $46/45 costs to industry + bldgs (s0/ton 75ml)
all costs are for peimits
Models weren't integrated 1. The model runs for each
of the 3 end-use sectors werenot integrated and
therefore may overstate the effects of technology
penetration. Inan integrated modelling effort, fuel
prices might fall as consumption declines, resulting
is less penetration of energy -consering technologies
(p.1-2)
e
"While there 3 considerable variation in the methodologies
used to estimate the energy savings and emissions
reductions potential of each sector, the 3 sector
chapters are consotent in their use of a combination
of technology analysis and model - based forecasting
and each sector uses consistent conceptual definitions
of scenarios. "(pil-4) hd appears different than
other 2 in into chp disussion
Efficiency case
-"assumes that notl policy, possibly in combination with
exogenous events, leads to on A in the cast-ethectiveness
and deployment of energy-ethrient technologies. "(p.1-5)
"cost effective "=" tech is cost effective if it deliness
a good or since at equal or love life cycle costs
relative to current practice " (p.(.S)
Ettiziency assumes , better tech (inciental effects
from R+D the 2010, revolutionary effects by 2020,
2
higher penetration rates - invigorated set of what
transformation programs that remove or reduce mht
failures which inhabit the Use of energy efficient
systems
This scenario "also tahes into account real-world
experience + program implementation constraints which
Suggest that it .3 not reasonable to assume that
every consumer will purchase the least-cost, high
efficiency tech aption "(p.(-6)
High Efficiency: policy annomed in 2000 - phased-on
,
thro 2010 (prize CT the 2 2010) a policy
"annornement effect"
fed R+D price of C
4
other contrices R+D
s
Di psychology
Mathodological Differences Across Sectors
-differences due = part to each sector's modeling approach
ind achieves hi eff by doubling penetration rates
trans postulates a set of tech breakthoughs
Cost-ettectiveness by sector: bldgs: 7% disc rate -hrizon operation 1 thtine
trans: 7% discrate- horizm: 540
ind: CRF =15% (payback <7yrs)
"This report does not describe in detail the policies
that might be implemented to achieve frigher
penetrations of energy effiziency technologies (q.1.7)
"Additional work will be needed to further refine
on analysis of technologies, to improve understanding
of what i3 needed to achieve market penetration
of the technologies, and to assess costs and
benefits of policies "(p.1-7)
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
17TH AND PENNSYLVANIA AVENUE, NW
WASHINGTON, DC 20500
THE OLD EXECUTIVE OFFICE BUILDING
TO: See distribution list
OFFICE:
FAX NUMBER:
TEL NUMBER:
***
FROM: Joe Aldy
FAX NUMBER: (202) 395-6853
TEL NUMBER: 395-1455
ROOM:
NO. OF PAGES (inc cover) 4
DATE:
9/4/97
SUBJECT:
5 Labs Study
MESSAGE:
Distribution:
Joe Romm, DOE
586-9260
Mark Mazur, DOE
586-9626
Eric Petersen, DOE
585-2176
T.J. Glauthier, OMB
395-4639
Bob Tuccillo, OMB
395-5836
Jon Gruber, Treasury
622-2633
Robert Gillingham, Treasury
622-2633
Peter Orszag, NEC
456-2223
EXECUTIVE OFFICE OF THE PRESIDENT
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON, D.C. 20500
SENIOR ECONOMIST
MEMORANDUM
TO:
Joe Romm
Acting Assistant Secretary for Energy Efficiency and Renewable Energy
FROM:
Randy Lutter Refer and Joe Aldy
DATE:
September 4, 1997
RE:
Comments on revised executive summary and chapter one of
Scenarios of U.S. Carbon Reductions
We appreciate the opportunity to review the August 29 draft of the executive summary and
chapter one of Scenarios of U.S. Carbon Reductions. In this draft, we note that the authors
addressed many of our comments made at the August 19 meeting. Since this is a Department of
Energy labs report, and not an interagency or CEA report, we do not intend to hold up the report
simply because the views presented do not conform in all respects to our own. However, two
modifications to chapter one should be made prior to the release of the report.
First, all references to the "cost-effectiveness" of technologies should be removed and the
estimates of costs and benefits in table 1.5 should be deleted. As we noted in our August
22 comments, the report does not appropriately account for all of the costs associated
with technology adoption decisions. Without an assessment of the behavioral responses
to policies aimed at stimulating technology adoption, the private cost of achieving these
emission reductions is unknown. Further, the report insufficiently details the costs of
government programs, and does not ascribe any costs to society of standards. Thus,
claims of "cost-effectiveness" are premature at best.
The benefits resulting from energy cost savings do not reflect appropriate energy prices
and should not be provided in this table. Since the analyses are not integrated, the energy
prices do not reflect declines in demand, resulting decreases in prices, and the behavioral
responses of consumers. However, qualitative statements could be included in the text,
such as: "The adoption of energy efficient technologies would result in substantial energy
cost savings to consumers."
Second, chapter one should clarify the divergence between the report's BAU case and the
Annual Energy Outlook 1997 reference case. We understand that transportation
emissions under the BAU reflect a modified assumption about fuel efficiency
improvements in the AEO reference case. However, we do not understand the
discrepancy in emissions for the buildings and industry sectors between the two reports
(see comment 8 in August 22 memorandum). A discussion of the assumptions that
resulted in this divergence, or a modification of the projected emissions would be
appropriate.
We look forward to receiving your responses to our August 22 memorandum in the near future.
SCENARIOS OF U.S. CARBON REDUCTIONS
CA: JAF RL
SR
Potential Impacts of Energy-Efficient and Low-Carbon Technologies
JA
by 2010 and Beyond
Prepared by the
Interlaboratory Working Group on
Energy-Efficient and Low-Carbon Technologies
Oak Ridge National Laboratory*
Lawrence Berkeley National Laboratory*
Pacific Northwest National Laboratory
National Renewable Energy Laboratory
Argonne National Laboratory
Prepared for
Office of Energy Efficiency and Renewable Energy
1
U.S. Department of Energy
*Coordinating laboratories for this study
copied
1
exec sun:
Ded only 2 words
from 8/29/97
EXECUTIVE SUMMARY
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States. 1 The study documents in detail how four key sectors of the economy
- buildings, transportation, industry, and electric utilities - could respond to directed programs and
policies to expand adoption of energy-efficiency and low-carbon technologies, an increase in the relative
price of carbon-based fuels by $25 or $50/tonne (e.g., as a result of a cap on domestic carbon emissions and a
market for carbon "permits"), and an aggressive program of targeted research and development. Current
projections suggest that a carbon emissions reduction of 380 million metric tons per year (MtC/year) is
required to stabilize U.S. emissions in 2010 at 1990 levels.
The study, which has been peer-reviewed by industry and academic experts, uses a technology-by-
technology assessment as well as an engineering-economic modeling approach. It draws upon a wide
variety of technology cost and performance information to assess potential impacts. Analysis of the
buildings, industry, and transportation sectors quantifies the impacts of end-use energy-efficiency
improvements on carbon emissions. The utility sector analysis estimates the impacts of those
improvements on utility carbon emissions, and quantifies additional emissions reductions through
conversion of a number of coal power plants to natural gas, dispatching of the utility grid with $25 and
$50/tonne carbon permit prices, the accelerated use of biomass cofiring and wind energy, and other low-
carbon electricity supply options. Finally, a number of other promising low-carbon technologies are
examined to determine their potential for reducing emissions in the end-use sectors, including advanced gas
turbines in industry, transportation biofuels, and fuel cells in buildings.
Three overarching conclusions emerge from the analysis of alternative carbon scenarios. First, a vigorous
national commitment to develop and deploy energy-efficient and low-carbon technologies has the
the
potential to restrain the growth in U.S. energy consumption and carbon emissions such that levels in 2010
are close to those in 1997 (for energy) and 1990 (for carbon). We analyze a case in which energy efficiency
policy
can reduce carbon emissions by 120 MtC/year by 2010. We analyze a second case, with policies that
promote adoption of energy-efficient and low carbon technologies and a $25/tonne carbon permit price,
with emission reductions of 230 MtC/year in 2010. Under a $50/tonne carbon permit price and aggresive
policies, 2010 emissions could be cut by about 380 MtC/year. The analysis also suggests that substantial
additional savings are available if permit prices were to begin to rise above the $50/tonne level.
The second conclusion is that, if feasible ways are found to implement the carbon reductions as described
above, all the cases (with reductions varying between 120 and 380 MtC/year by 2010) can produce energy
savings that are roughly equal to or exceed costs.² The analysis includes only technologies estimated to be
cost-effective under 2010 energy prices (with a $25/tonne and $50/tonne carbon permit price for the
respective cases); it has not, however, analyzed specific policies to achieve the cases, identified the
political feasibility of policies, or described a pathway to achieve the cases.
The third conclusion is that a next generation of energy-efficient and low-carbon technologies promises to
enable the continuation of an aggressive pace of carbon reductions over the next quarter century. This
report documents a wide array of advanced technology options that could be cost-competitive by the year
2020, assuming a vigorous and sustained program of energy R&D beginning now and extending beyond 2010.
I The five national laboratories participating in the study were: Argonne National Laboratory (ANL). Lawrence Berkeley
National Laboratory (LBNL). National Renewable Energy Laboratory (NREL), Oak Ridge National Laboratory (ORNL),
and Pacific Northwest National Laboratory (PNNL). LBNL and ORNL were the co-leaders of the effort.
2 Here we count as benefits only the energy savings to the nation. We have not credited reduced CO₂ emissions or
other external benefits. Costs include the increased technology cost plus an approximate estimate of the costs of
program and policy implementation.
September 15, 1997
Analysis Results
Chapter 1
Chapter 1
ANALYSIS RESULTS
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States.¹ The stimulus for this study derives from a growing
recognition that any national effort to reduce the growth of greenhouse gas emissions must consider
ways of increasing the productivity of energy use. To add greater definition to this view, we
quantify the reductions in carbon emissions that can be attained through the improved performance
and increased penetration of efficient and low-carbon technologies by the year 2010. We also take a
longer-term perspective by characterizing the potential for future research and development to
produce further carbon reductions over the next quarter century. As such, this report underscores the
value of energy technology research, development, demonstration, and diffusion as a public response
to global climate change.
Three overarching conclusions emerge from our analysis of alternative carbon reduction scenarios.
First, a vigorous national commitment to develop and deploy cost-effective energy-efficient and
low-carbon technologies could reverse the trend toward increasing carbon emissions. Along with
utility sector investments, such a commitment could halt the growth in U.S. energy consumption and
carbon emissions so that levels in 2010 are close to those in 1997 (for energy) and in 1990 (for carbon).
It must be noted that such a vigorous national commitment would have to go far beyond current
efforts. Second, if feasible ways are found to implement the carbon reductions, the cases analyzed in
the study are judged to yield direct benefits that are roughly equal to or greater than costs. Third, a
next generation of energy-efficient and low-carbon technologies promises to enable the continuation
of an aggressive pace of carbon reductions over the next quarter century.
1.1 OBJECTIVES OF THE REPORT
The purposes of this study are threefold:
1. To provide a quantitative assessment of the reduction in energy consumption and carbon
emissions that could result by the year 2010 from a vigorous national commitment to accelerate
the development and deployment of cost-effective energy-efficient and low-carbon
technologies;
2. To document the costs and performance of the technologies that underpin a year 2010 scenario
in which substantial energy savings and carbon emissions reductions are achieved;
3. To illustrate the potential for energy-efficiency and renewable energy R&D to produce further
reductions in energy use and carbon emissions by the year 2020.
1.2 METHODOLOGY
To achieve these objectives, we started with the Annual Energy Outlook 1997 (AEO97) reference case
forecasts for the year 2010 (Energy Information Administration, 1996). After thoroughly reviewing
these forecasts on a sector-by-sector basis, and working with ELA staff, we chose to accept the EIA
"business-as-usual" (BAU) scenario as is for buildings and industry. We modified some of the
1
September 9, 1997
Chapter 1
Analysis Results
assumptions and data to produce a new BAU case - not greatly different from the EIA case - for the
transportation and the electric utility sectors.²
We then assembled existing information on the performance and costs of technologies to increase
energy efficiency or, for selected end-uses, to switch from one fuel to another (e.g., from electricity to
natural gas for residential end-uses or from gasoline to biofuels for transportation). For the buildings
sector, the technology performance and cost data base are extensive. For transportation, the data
base - although less fully developed than for buildings - is sufficient for our purposes. For industry,
only partial information on technologies and costs is presently available. As a result, the analysis
for industry relies primarily on historical relations between energy use and economic activity and
much less on explicit technological opportunities. The industrial analysis also includes some
examples of industrial low-carbon technologies. The analysis of low-carbon supply technologies in
the electricity sector is based on a review of the literature including detailed technology
characterizations prepared by DOE in conjunction with its national laboratories and industry.
Next we created scenarios of increased energy efficiency and lower carbon emissions using the
technology data-(or, in the industrial sector, historical relations) as key inputs. We chose to run
three scenarios other than the BAU case. We have termed the first the "efficiency" (EFF) case. It
assumes that the United States increases its emphasis on energy efficiency through enhanced public-
and private-sector efforts. The general philosophy of the efficiency case is that it reduces, but does
not eliminate, various market barriers and lags to the adoption of cost-effective energy efficiency
technology.3
The other two cases, dubbed the $25 permit and the $50 permit "high-efficiency/low-carbon"
(HE/LC) cases, describe a world in which, as a result of commitments made on a climate treaty or
other factors, the nation has embarked on a path to reduce carbon emissions. Both of these cases
assume a major effort to reduce carbon emissions through federal policies and programs (including
environmental regulatory reform), strengthened state programs, and very active private sector
involvement. Both also include a focused national R&D effort to develop and transform markets for
low-carbon energy options (e.g., fuel cells for microcogeneration in buildings and advanced turbine
systems for combined heat and power in industry). The difference between the two HE/LC cases is in
the assumption of a carbon permit price resulting from a domestic trading scheme for carbon emissions
with a cap on U.S. emissions (or from equivalent policy measures that increase the price of carbon-
based fuels relative to those with less carbon). We assume a domestic permit price of $25 and $50
per tonne of carbon for the two cases. Both of these HE/LC cases include a program of research,
development, demonstration and diffusion that is more vigorous than in the efficiency case. In the
buildings and industry sectors, the carbon price signal, combined with policies promoting energy
efficiency, is believed to trigger most of the additional carbon reductions. In the transportation
sector, it is the R&D-driven technology breakthroughs that generate the bulk of the carbon
reductions beyond the efficiency case. For the electricity sector, higher prices for carbon-based fuels
cause larger shifts from coal to natural gas; for this sector, these same higher relative prices
combined with federal and private research, development, and demonstration can bring advanced
low-carbon technologies to market.
Although most of the analysis focuses on 2010, we also look beyond this date. Here we describe new
technologies, materials, processes, manufacturing methods, and other R&D advances that promise
to offer significant energy benefits by the year 2020; for this time period, we make no effort to
forecast specific levels of market penetration, energy savings, or carbon reductions. Thus, instead of
creating scenarios we describe the technological innovations that could enable the continuation of an
aggressive pace of decarbonization well into the next quarter century, if appropriate investments in
R&D were made.
2
September 9, 1997
Analysis Results
Chapter 1
1.3 BACKGROUND
The decade of gains in energy productivity achieved by the U.S. following the 1973-74 Arab oil
embargo represents a period of economic growth that was decoupled from increases in energy
consumption, resulting in substantial economic benefits. Between 1973 and 1986, the nation's
consumption of primary energy froze at about 74 quads - while the GNP grew by 35%. Starting in
1986, energy prices began a descent in real terms that has continued to the present. As a result,
energy demand grew from 74 quads in 1986 to 91 quads in 1995, and carbon emissions have been
increasing at a similar pace.
Despite the growth in energy consumption since 1986, the U.S. economy today remains more energy
productive than it was 25 years ago. In 1970, 19.6 thousand Btu of energy were consumed for each
(1992) dollar of GDP. By 1995, the energy intensity of the economy had dropped to 13.4 thousand Btu
of energy per (1992) dollar of GDP. The U.S. Department of Energy (DOE) estimates that the
country is saving $150 to $200 billion annually as a result of these improvements.
Nevertheless, many cost-effective energy-efficient technologies remain underutilized, as discussed
in Chapter 2. A host of market barriers account for these lost opportunities. And declining energy
R&D expenditures may cause promising technology options to be foregone.
The rationale for government support of energy-efficiency R&D is strong. Much energy-efficiency
research is both long-term and high-risk and therefore is not adequately funded by the private
sector - despite the possibility of sizable gains in the long run. Furthermore, advances in energy
efficiency offer substantial public benefits (such as carbon reductions and improved national security
through greater oil independence) that cannot be fully captured in the private marketplace.
The benefits of past public investments in energy-efficiency R&D have been well documented.
Between 1978 and 1996, DOE spent approximately $8 billion on energy-efficiency research,
development and demonstration (RD&D). Just five of the technologies that were developed or
demonstrated with a fraction of this DOE support have resulted in net benefits of $28 billion
through 1996. Many other R&D successes have produced technologies yielding substantial energy
and cost savings in the market. The DOE RD&D portfolio has also led to significant environmental,
health, productivity, and economic competitiveness benefits.
1.4 RESULTS
1.4.1 Prospects for Improved Efficiencies by the Year 2010
Table 1.1 and Figure 1.1 compare the nation's primary energy use in quads for the years 1990 and 1997
(projected) with the results of three scenarios for 2010. (We have included only the high-
efficiency/low-carbon case at $50/tonne in the table and figure for simplicity.) The $50/tonne
HE/LC case shown below does not reflect the energy impacts of the selected low-carbon technologies
described later in this summary (e.g., stationary fuel cells for buildings, advanced turbine systems
and biomass gasification in industry) or the supply-side options shown in Table 1.4.
3
September 9, 1997
Chapter 1
Analysis Results
Table 1.1 Primary Energy Use in Quads: 1990-2010
2010
Business-as-
High-Efficiency/
1990
1997
Usual
Efficiency
Low-Carbon
Case
Case
Case ($50/tonne C)
Buildings
29.4
33.7
36.0
34.1
32.0
Industry
32.1
32.6
37.4
35.4
33.6
Transportation
22.6
25.5
32.3
29.2
27.8
Total
84.2
91.8
105.7
98.7
93.4
Source: Energy use estimates for 1990 come from EIA (1996a, Table 2.1, P. 39). Energy use estimates for 1997 come
from forecasts conducted for EIA (1996b). Numbers may not add to the totals due to rounding.
The major observations are as follows:
In the business-as-usual case, energy use increases by 22 quads (26%) between 1990 and 2010; 8
quads of this increase have occurred during the first seven years of this 20-year period. The
fastest growing sector during these initial seven years has been buildings (4.3 quads) followed
by transportation (2.9 quads) and industry (0.5 quads). In the BAU case, the fastest growing
sector during the remaining 13 years is transportation (6.8 quads). This is followed by industry
(4.8 quads) and then buildings (2.3 quads). The rapid projected growth in the energy consumed
for transportation is driven by estimates of increased per capita travel and minimal fuel
efficiency gains.
The efficiency scenario cuts the overall growth between 1990 and 2010 from 22 to 15 quads. This
is a 17% increase over the level of energy consumption in 1990, down from a 26% increase in the
BAU case. Relative to the BAU case, the efficiency scenario for transportation delivers
slightly more energy savings (3.1 quads) than do the same scenarios for the industrial (2.0) or
buildings (1.9) sectors. Compared with 1997 levels, the smallest increase in energy growth for
this case is in buildings (0.4 quads), followed by industry (2.8 quads), and transportation (3.7
quads).
The high-efficiency/low-carbon scenario with a $50/tonne carbon charge further decreases the
overall growth between 1990 and 2010, reducing it from 22 to 9 quads. This is an 11% increase
over the level of energy consumption in 1990. Relative to the BAU case, the high-
efficiency/low-carbon scenario for buildings, industry, and transportation delivers energy
savings ranging from 3.8 to 4.5 quads for each sector. Compared with 1997 levels, the buildings
sector is down about 2 quads and industry and transportation are up 1 and 2 quads, respectively.
4
September 9, 1997
Analysis Results
Chapter 1
Figure 1.1 Primary Energy Use in Quads: 1990-2010
120
100
80
Buildings
Energy
60
(Quads/year)
Industry
40
20
Transportation
0
1973
1986
1990
1995
1997
Efficiency
Case
Business
High
as
Efficiency/
Usual
Low
Carbon
2010 Scenarios
Note: The high efficiency/low carbon scenario values represent the $50 per tonne carbon charge.
Table 1.2 documents the impact of these projected energy savings in 2010 on carbon emissions in that
same year. It also presents the results of the HE/LC scenarios with both $25 and $50 per tonne
carbon charges. These scenarios show significant carbon reductions from the combination of greater
efficiency improvements and increased use of advanced low-carbon technologies. 4 In these cases, a
number of low-carbon technologies have high rates of adoption (e.g., advanced turbine systems and
biomass gasification in industry), the utility grid is dispatched to reduce carbon emissions (by using
many coal plants for intermediate power and by running more natural gas plants as base load), a set
of coal-based power plants are repowered, nuclear plant lifetimes are extended, and key renewable
energy technologies are deployed. In all cases, these technologies and measures are estimated to be
cost-effective with a differential carbon fee of $50/tonne.
5
September 9, 1997
Chapter 1
Analysis Results
Table 1.2 Carbon Emissions (MtC): 1990-2010
2010
Business-as-
High-Efficiency/
Usual (BAU)
Efficiency Case
Low-Carbona
1990
1997
Case
$25/tonne
$50/tonne
Buildings
460
511
571
546
527
509
Industry
452
482
534
512
488
452
Transportation
432
486
616
543
528
513
Utilitiesᵇ
-
-
-
-
-48
-136
Total (rounded)
1340
1480
1720
1600
1490
1340
Change from 1990
140
380
260
150
0
Change from BAU
-
-
-
-120
-230
-380
aThis scenario includes the carbon emission reductions resulting from a carbon permit price of $25 or $50/tonne:
(1) dispatch of power plants in which natural gas is favored relative to coal, (2) repowering and partial
repowering of coal-based power plants to convert to natural gas, and (3) introduction of selected low-carbon
technologies to replace conventional ones, primarily in the industrial and utility sectors.
bThe entries in the last two columns are negative as they correspond to reductions in carbon emissions resulting
from the increased use of natural gas and low-carbon technology for electricity generation as a result of the
$50/tonne carbon permit price in this scenario.
Table 1.2 presents results for the business as usual and three efficiency and/or low carbon cases in
2010 as point estimates, because they are meant to be scenarios. When we use these scenarios for
analysis, in section 1.5, we describe sources of uncertainty and the effects of uncertainty on our
understanding of the implications of these cases. For now, we only describe the different cases.
Figures 1.2 and 1.3 complement the above table by illustrating the carbon emissions reductions from
each scenario. The major observations are:
In the BAU case, carbon emissions are forecast to increase by approximately 380 million tonnes.
The energy-efficiency gains incorporated in the efficiency case cut overall growth between 1990
and 2010 by one-third (from 380 to 260 million tonnes). This represents a carbon increase of 19%
above 1990 emissions.
The HE/LC scenario with $25/tonne carbon charge has the potential to reduce carbon emissions
by 230 million tonnes from the BAU case in 2010. The largest part of these carbon reductions are
from increased efficiency, but major changes in electricity supply (carbon-based dispatching and
repowering) contribute nearly 35 million tonnes, and other low-carbon technology, particularly
renewables and advanced turbine systems, produce approximately another 25 million tonnes.
The HE/LC scenario with $50/tonne carbon charge has the potential to reduce carbon emissions
by approximately 380 million tonnes, thereby achieving 1990 carbon emission levels in 2010. Of
this 380 million tonne carbon reduction, about 190 million tonnes are from increased energy
efficiency, 140 million tonnes results from increases in the use of low-carbon fuels and
technologies in the utility sector, and 50 million tonnes results from the use of low-carbon
technology in industry and transportation.
6
September 9, 1997
Analysis Results
Chapter 1
Figure 1.2 Reductions in Carbon Emissions from Each Scenario
400
380
Other Low-Carbon Technologies
Electricity Supply Technologies
Energy-Efficient Technologies
Million Tonnes of Carbon Emissions Reduction
300
230
200
120
100
0
Efficiency
HE/LC Case
HE/LC Case
Case
$25/tonne C @ $50/tonne C
Figure 1.3 Reductions in Carbon Emissions from Each Type of Technology
400
HE/LC Case @ $50/tonne C
HE/LC Case @ $25/tonne C
Million Tonnes of Carbon Emissions Reduction
300
Efficiency Case
200
190
140
100
50
0
Energy-
Electricity
Other
Efficient
Supply
Low-Carbon
Technologies
Technologies
Technologies
100 million of the 140 million tonnes of carbon reductions in the utility sector comes from
redispatching the utility system (favoring the use of low-carbon fuels) and from repowering
coal plants with natural gas. Both are cost-effective with a $50/tonne carbon charge. The
remaining 40 million tonnes are from renewables (wind, co-firing coal-based power plants with
biofuels, expansion of hydropower capacity), nuclear power plant life extensions, and power
plant efficiency improvements.
The remaining 50 million tonnes of carbon reductions in industry and transportation are about
equally divided among three sets of fuels/technologies: (1) advanced combustion turbine
cogenerators in industry, (2) biomass and black liquor gasification and low-carbon industrial
processes, and (3) cellulosic ethanol/gasoline blends for automobiles.
Approximately 140 MtC of the increase in carbon emissions between 1990 and 2010 will have
occurred by the end of 1997; thus, it is useful to look at the 13-year forecast starting with 1997.
7
September 9, 1997
Chapter 1
Analysis Results
The carbon reductions incorporated in the efficiency case cut the overall growth in carbon
emissions between 1997 and 2010 from 240 million tonnes (as forecast in the BAU case) to 120.
The HE/LC scenario with $50/tonne carbon charge reduces carbon emissions in 2010 by about 130
million tonnes (compared with the 1997 level).
Table 1.3 provides a comparison of the growth rate in energy and in carbon emissions for the four
cases, from 1990 to 2010. For the BAU and efficiency cases, the growth in carbon emissions is slightly
more rapid than the increase in energy demand. For the HE/LC cases, carbon emissions decline
while energy consumption rises. The carbon reduction reflects the increased deployment of low-
carbon fuels and technologies as a consequence of the relative increase in price of carbon-based fuels
precipitated by the $50/tonne incentive.
Table 1.3 Average Annual Energy and Carbon Growth Rates, 1997 to 2010, for Four Cases
High Efficiency/
High Efficiency/
Business-As-
Efficiency
Low Carbon Case
Low Carbon Case
Usual (BAU)
Case
($25/tonne)
($50/tonne)
Gross Domestic Product
(GDP)ᵃ
1.88%
1.88%
1.88%
1.88%
Energy Demand
1.09%
0.56%
0.34%
0.13%
Carbon Emissions
1.16%
0.60%
0.05%
-0.76%
Energy Consumption Per
-0.77%
-1.30%
-1.51%
-1.71%
GDP (E/GDP)
Carbon Emissions Per GDP
-0.70%
-1.25%
-1.79%
-2.59%
(C/GDP)b
a The Gross Domestic Product (GDP) in 1995 was $7251 billion in 1995 dollars. The 1.88% annual growth was
assumed to apply to the entire period, 1995-2010 to derive the results above.
b The carbon decrease per unit GDP growth for 1990 to 2010 is 0.7%, 1.1%, 1.4% and 1.9% per year for the
reference, efficiency, $25/tonne HE/LC, and $50/tonne HE/LC cases, respectively.
It is useful to compare the scenarios in this study to those of other studies. The 1991 report by the
Office of Technology Assessment (OTA) titled Changing by Degrees (U.S. Congress, 1991) analyzed
the potential for energy efficiency to reduce carbon emissions by the year 2015, starting with the
base year of 1987. Its "moderate" scenario results in a 15% rise in carbon emissions, from 1300
MtC/year of carbon in 1987 to 1500 MtC/year of carbon in 2015 (compared to a BAU forecast of 1900
MtC/year). Its "tough" scenario results in a 20% to 35% emissions reduction relative to 1987 levels,
or emissions levels of 850 to 1000 MtC/year of carbon in 2015. Our efficiency and HE/LC cases ranging
from 1.3 to 1.6 billion tonnes of carbon emissions in 2010 are comparable to OTA's "moderate" case and
show considerably higher emissions than OTA's "tough" case.
Another benchmark is provided by the 1992 National Academy of Sciences (NAS) report on Policy
Implications of Greenhouse Warming (National Academy of Sciences, 1992). This study identified a
set of energy conservation technologies that had either a positive economic return or that had a cost
of less than $2.50 per tonne of carbon. Altogether, NAS concluded that these technologies offer the
potential to reduce carbon emissions by 463 million tonnes, with more than half of these reductions
arising from cost-effective investments in building energy efficiency. Our efficiency and HE/LC
cases suggest the potential for reducing carbon emissions by between 120 and 380 million tonnes by the
year 2010. One reason that the NAS estimate is higher is because it is not limited to the 2010 time
8
September 9, 1997
Analysis Results
Chapter 1
frame, but rather characterizes the full potential for carbon reductions. Thus, it did not take into
account the replacement rates for equipment and processes, and other factors that prevent the
instantaneous, full market penetration of cost-effective energy-efficient and low-carbon
technologies.
1.4.2 R&D's Potential for Further Benefits by 2020
If carbon reductions in 2010 and beyond are to be sustained at reasonable cost, vigorous R&D efforts
are needed to fill the pipeline of next-generation energy technologies. It is difficult to estimate the
carbon savings that will accrue from these technologies; however, our effort to characterize their
features suggests that an aggressive pace of carbon reductions over the next quarter century can be
sustained, with a sufficient investment in R&D. Our analysis of R&D potential for the year 2020
focuses on opportunities for improved energy-efficiency and renewable energy technologies. The
potential long-term contributions of carbon sequestration, advanced coal technologies, and nuclear
power may also be significant. However, the treatment of vigorous R&D initiatives to improve
these supply options beyond 2010 is beyond the scope of this report.
Renewable energy technologies will likely play a crucial role in limiting carbon emissions over the
long term. Low-carbon energy supply options are needed to fuel domestic and international economic
development without stimulating further global warming. Although renewable resources account for
only 7% of the nation's total energy consumption at present, many believe that they are at the
beginning of a long-term growth trajectory. With continuing technological development and cost
reductions, renewables could become preferred energy resources some time within the next several
decades. Early evidence of this transition is seen in the continuing adoption of renewable power
systems, including especially wind farms and biomass power systems, even in the face of low gas-
fired power generation costs and considerable uncertainty in today's electric energy sector.
With a vigorous and sustained program of research, development and deployment, biomass, wind,
photovoltaics, geothermal, and solar thermal technologies could deliver significant quantities of
electricity in 2020, thereby substantially displacing carbon emissions. For example, the use of
forestry and agricultural residues in biomass power systems continues to be an attractive power
option where those residues exist. The successful development of higher-efficiency biomass
gasification systems would make. this technology competitive in a wider range of applications,
including for power systems using dedicated feed stock supply systems. At the same time, biological
and agricultural research on biomass production will lead both to higher biomass yields and better
species for energy conversion purposes in the future.
A second area in which a vigorous and sustained R&D effort could spawn a range of key
improvements is in wind power systems. Potential improvements include:
Advanced blade shapes that increase wind power capture while reducing stress loads,
Elimination of gearboxes through development of direct-drive generators,
Variable speed turbines, and
Better resource prediction that will increase the value of wind power to power systems
operators.
A third area of renewables development that is at the beginning of a long-term growth path is the
use of renewables in buildings. Solar daylighting, passive solar designs, solar water heating, and
geothermal heat pumps already are cost-competitive in many applications, but are not yet widely
September 9, 1997
9
Chapter 1
Analysis Results
used. R&D advances could substantially accelerate their market penetration. In addition, building-
integrated photovoltaic products will benefit directly from advances in materials research. The
ultimate vision is that many buildings will become "net energy generators" through a combination of
renewable energy and energy-efficiency technologies.
In the next quarter century, improved energy-efficiency technologies will result from a combination
of incremental advances and fundamental breakthroughs. Incremental improvements in all sectors
can be achieved by the greater reliance on more precise and reliable sensors and controls or on lower-
cost sensors and controls, often integrated into industrial processes, transportation systems, and
buildings. Advanced manufacturing technologies, including rapid prototyping and ultraprecision
fabrication, also offer broad opportunities for continuous incremental improvements in energy
efficiency and renewable energy. Breakthroughs in bioprocessing, separations, superconductivity,
catalysts, and materials can have wide-ranging impacts on energy efficiency and carbon emissions by
the year 2020. Examples of specific technology opportunities are described in this report, by sector.
Six R&D areas offer great promise to reduce significantly the energy requirements of our nation's
buildings in 2020:
Advanced construction methods and materials,
Adaptive building envelopes,
Multi-functional equipment,
Integrated, advanced lighting systems,
Improved controls, communications and measurements, and
]combineding in 8/29/97 dratt
Self-powered buildings.
In addition to the broad application of better process modeling, sensors, and controls in industry,
many process/industry-specific opportunities for efficiency gains exist. These are described for each
of DOE's targeted industries of the future: pulp and paper, chemicals, petroleum refining, glass,
aluminum, iron and steel, and metal casting.
Many of the advanced technologies that have the potential to significantly improve the energy
efficiency of transportation need considerable R&D investment before they can become commercially
available in the year 2020. For example, to achieve fuel economies in the 60-80 miles per gallon
(MPG) range and remain affordable and safe, light-duty vehicles will need:
Breakthroughs in manufacturing processes for composite materials,
Large reduction in fuel cell costs and/or cost reductions and performance gains in batteries,
Utra-low rolling resistance tires,
High-efficiency accessories, and
Highly aerodynamic designs.
Opportunities for R&D to lead to improvements in the energy efficiency of other transportation
modes are also described in this report.
10
September 9, 1997
Analysis Results
Chapter 1
In all, the continued adoption of energy efficient and renewable energy technologies and a steady
flow of technology improvements from collaborative R&D programs with industry could make such
environmentally friendly technology an attractive option for domestic and global energy economies
in the future. With strong public-private partnerships to support the necessary R&D and market
transformation activities, ample cost-effective energy products and practices will be available in
2020.
1.5 ASSESSMENT OF COSTS, ENERGY SAVINGS, AND SOURCES OF CARBON
REDUCTIONS
The business-as-usual scenario projects an increase of 380 MtC/year between 1990 and 2010. In our
efficiency scenario, in which the nation actively pursues policies and programs to promote market
acceptance of energy efficiency while expanding commitments to research and development, energy-
efficient technologies reduce this growth in carbon emissions by 120 MtC/year. Under a carbon cap
and trading system, in which permits for carbon sell for either $25 or $50/tonne C, very substantial
carbon reductions appear possible. Detailed results for these cases, showing the sources of the carbon
reductions, are contained in Table 1.4. (Summaries of these results were presented in Figures 1.2 and
1.3.) Results indicate that, for the $50/tonne HE/LC case, there is a potential to roughly return to
1990 levels of carbon emissions in 2010. About two-thirds of the increase in carbon emissions is
eliminated in the case with a $25/tonne carbon charge (Table 1.4).
The estimates in Table 1.4 include ranges for most of the electricity supply options and the other
low-carbon technologies. There are no ranges for the efficiency technologies because the models used
to estimate their penetration are nonstochastic. When selecting a single estimate for the $50/tonne
case, numbers from the low end of the ranges were generally selected in order to be cautious. Because
we did not conduct an integrating analysis in which supply options compete against one another, we
felt it important to minimize potential overlap by entering the supply options in conservative
quantities. Also note that several renewable resources that could play a greater role by 2010 are
omitted from Table 1.4; these resources include include photovoltaics, geothermal, solar thermal,
and landfill gas.
One should not ascribe too much significance to specific entries in Table 1.4 There are many different
technologies, both on the supply and demand side of the energy system, that will compete to
achieve carbon reductions in an environment in which policies and economic signals favor such
reductions. Thus, for example, Table 4.1 shows advanced turbine systems in industry cutting carbon
emissions by 17 MtC/year in 2010, co-firing coal with biomass reducing emissions by the same
amount, and other low-carbon supply technologies (wind, nuclear plant extensions, hydropower
expansion, and power plant efficiency) contributing 24 MtC/year. The actual choice of technology
depends on how the economics of the different systems evolve over time, how the industry to supply
technology develops, the nature and speed of deregulation within the utility industry, and numerous
other factors that cannot be known today. As such, we do not intend the results in Table 1.4 to be
taken as a prediction of one technology over another to achieve carbon reductions. In this instance,
we have posited one of many possible mixes of supply technologies. These same comments apply to
the demand-side sectors and technologies.
We summarize below the expected technology costs in 2010, as well as the cost of implementing a
carbon permit system. While these costs are necessarily uncertain, they are our best estimates and,
in our view, as likely to be high as to be low. We note, however, that we have focused our analysis
on technology costs, and have not assessed the viability of specific policies or programs to achieve
market acceptance. As described below, we do account for program and policy costs in an
approximate manner.
11
September 9, 1997
Chapter 1
Analysis Results
Table 1.4 Potential Annual Reductions in Carbon Emissions in 2010, Compared to the Business-As-
Usual Forecast for 2010 (MtC)
High-Efficiency/Low-Carbon
Case
Efficiency
Case
$25/tonne
$50/tonne*
Buildings
Energy efficiency
25
42
59
Fuel cells
2
3
25
44
62
Industry
Energy efficiency
22
36
51
Advanced turbine systems
5
17 (15-26)
Biomass and black liquor gasification,
5
14 (13-16)
cement clinker replacement, and
aluminum technologies
22
46
82
Transportation
Energy efficiency
61
74
87
Ethanol
12
14
16
73
88
103
Utility Supply Options
Carbon-ordered dispatching
25
55
Converting coal-based power plants to
9
40 (25-66)
natural gas
Co-firing coal with biomass
5
17 (16-24)
Wind
2
7 (6-20)
Extending the life of existing nuclear
3
5 (4-7)
plants
Hydropower expansions
2
4 (3-5)
Power plant efficiency
2
8 (7-13)
48
136
Total (rounded)
120
226
383
"Numbers in parenthesis are ranges, as documented in the text of the report. See Appendix A-1 for a description of
the derivation of the results in this table.
Appendix A-2 describes the full set of calculations used to derive the direct costs and benefits of the
cases. The costs considered include the incremental technology investment by consumers and
businesses, fuel price increases, and the estimated cost of federal, state, and local programs required
to achieve the carbon emissions reductions. These constitute the direct costs of the scenarios. The
highest of these by far is the incremental investment costs. However, the generally higher first cost
of these technologies is counterbalanced by substantially lower operating costs. The benefits
considered are limited to the savings in operating (energy) costs from the technology investments.
We have presented the direct and most easily quantified of the costs and benefits, but have not
attempted a full benefit-cost calculation. We do not account for indirect effects of policies (e.g., the
reallocation of investment dollars to efficiency investments). We do not account for the increased
cost of some R&D programs that are needed to achieve the scenario results nor do we count the
benefit of reduced carbon and other pollutant emissions. Also, we have not analyzed any possible-
12
September 9, 1997
Analysis Results
Chapter 1
redistribution of wealth that could arise from a carbon trading system or other policy to increase the
price of carbon-based fuel.
Considering only these direct costs and energy-saving benefits of the scenarios, we have analyzed
the economics of carbon emissions reductions from two different perspectives in order to establish a
credible range of costs. In the first, which we label "optimistic," we evaluate all costs and benefits
with a real discount rate that approximates the cost of capital for efficiency investments for the
different end-use sectors: 7% for buildings, 10% for transportation, and 12.5% for industry.
The lowest discount rate, for buildings, is based on the fact that the money for residential buildings
is derived from home mortgages or home improvement loans. The higher rate for industry reflects
the fact that energy-efficiency investments have to compete with investments for other projects.
These discount rates are not those that describe current market behavior, but rather are reflective of
costs of capital if the market did invest in the energy-efficiency measures. For the "optimistic"
case, we assume costs for efficiency measures brought about by utility, federal programs, and state
programs (e.g., demand-side management programs by utilities, federal market transformation
programs) to be 15% of technology costs. We also assume that at least half of the efficiency occurs as
a result of federal policies (e.g., standards or carbon permit charges) which add very low direct
program costs. Thus, the overall costs of implementation are taken to be about 7% in the "optimistic"
case. The electric supply-side technologies are assumed to add an incremental cost of $30/tonne
carbon in 2010, based on an average estimate of the incremental costs of the technologies from the
appropriate sections of this report.
These programs and policies are not specified in this study, but the broad nature of the actions could
include technology R&D partnerships such as the current Partnership for a Next Generation of
Vehicles and Industries of the Future; energy efficiency codes and standards; expanded partnerships,
technical assistance, and information programs to accelerate the adoption of energy-efficient
technologies; incentives through the tax system directed at investments in energy-efficient
technology in industry; and a variety of non-federal programs to accelerate market diffusion of
energy-efficient and low-carbon technologies.
The second perspective, which we label "pessimistic," assumes that there are hidden costs
associated with achieving widespread market acceptance of many of the efficiency and low-carbon
technologies, even after the imposition of a carbon charge and the implementation of major policies
and programs to promote a low-carbon future. In this perspective, we evaluate costs and benefits at a
real discount rate of 15% for buildings and 20% for transportation and industry. Program costs are
increased to 30% of the cost of efficiency measures, an estimate that is a high bound compared with
federal, state, and utility experience. Overall implementation costs (programs and directed
policies) are taken to be 15% of technology investments in this case. Other data and assumptions in
this case are the same as for the "optimistic" case.
The results of the economic analysis are presented in Table 1.5. Estimated direct costs are $26-$49
billion per year for the efficiency scenario and $51 to $88 billion per year for the high-
efficiency/low-carbon scenario. Estimated savings per year in 2010 are $42 to $51 billion per year in
the efficiency case and $70-$88 billion per year for the high-efficiency/low-carbon case. The costs,
which are a small portion of annual gross private domestic investment of about $1.4 trillion in 2020,
A
are likely to be more than balanced by savings in energy bills. Thus, net costs to the U.S. economy are
estimated to be near or below zero in this time frame.
September 9, 1997
13
Chapter 1
Analysis Results
Table 1.5 Estimated Costs and Energy Savings of the Efficiency and High-Efficiency/Low-Carbon
Scenarios Optimistic and Pessimistic View Estimates (billions of 1995$, annualized)
Efficiency
High-Efficiency/Low-Carbon
Case
Caseᵇ
Energy
Energy
Costsd
Savingsc
Carbonᶜ
Costs
Savings
Carbon
(billion
(billion
Savings
(billion
(billion
Savings
1995$)
1995$)
MtC
1995$)
1995$)
MtC
Energy Efficiency
Buildings
7-14
14-17
20-25
14-26
26-33
49-62
Industry
3-5
6-7
18-22
8-13
12-15
66-82
Transportation
16-30
22-27
58-73
23-43
32-40
82-103
Electricity Dispatch
0
0
0
2
0
44-55
Electricity Repowering
0
0
0
2
0
32-40
Other Low-Carbon Techologies
0
0
0
2
0
33-41
Total
26-49
42-51
96-120
51-88
70-88
306-383
a Energy efficiency category includes ethanol in transportation.
b Energy savings and carbon savings in the HE/LC case are relative to BAU case.
c In the "pessimistic" case, we have assumed that only 80% of the carbon savings are achieved, even though the
technology and implementation costs are unchanged. The range on carbon savings represents this assumption.
d Costs are calculated from differing viewpoints: the "optimistic" case uses discount rates that vary between 7%
and 12.5% for the different sectors, as described in the text. For the "pessimistic" case, the discount rates used to
annualize costs vary between 15% and 20%. Also in this case, the cost of implementing programs (30%) and an
overall package of programs and policies (15%) is taken to be twice that of the "optimistic" case.
The range of estimates in Table 1.5 reflects our attempt to "bound" optimistic and pessimistic
assessments. There are clearly other ways in which these bounds could be described, just as there are
many scenarios that could have been analyzed. However, we believe that the assumption that 80%
of the carbon reductions are achieved at the costs identified, valuation of costs and benefits at
discount rates noticeably higher than the likely cost of capital, and doubling the cost of programs
and policies from typical experience today is a strong reflection of pessimism in costs for our cases. It
is worth noting that if the implementation costs were taken to be much higher than we believe to be
reasonable 50% of investments costs for programs and 25% overall this would add about $10
billion per year to the costs of the high-efficiency/low-carbon in the pessimistic case.
In addition to these costs, one needs to calculate the impact of the cases on natural gas demand. In
all of these cases, natural gas replaces very large quantities of coal. Higher natural gas demand
would result in higher natural gas prices, which in turn would increase the cost of substituting
natural gas for coal in power production, etc. As it turns out, our scenarios have somewhat reduced
gas demand compared with the BAU case (or with AEO97 baseline for 2010, on which the price of
natural gas in our work is based). Specifically, demand for natural gas in the HE/LC ($50/tonne)
case declines in 2010 by 2 quads compared with the business-as-usual case. This is the result of
declines of 0.5 quads for buildings, 1.0 quads for industry, and 0.5 quads for electricity. The latter
occurs because of the balance among three factors: increase in gas demand because of the large-scale
substitution of natural gas for coal, decrease of gas demand because of the use of many low-carbon
technologies that do not use natural gas (wind, nuclear power plant extensions, power plant
efficiency upgrades, hydropower expansion, co-firing with biofuels), and the large increase in
cogeneration, which reduces demand for natural gas for heating applications.
14
September 9, 1997
Analysis Results
Chapter 1
The sum of the second and third effects are somewhat greater than the first, and thus total natural
gas demand associated with electricity generation declines. This will reduce the cost of natural gas,
a benefit that we have not included in the analysis.
The $50/tonne carbon charge, while not constituting a direct cost, does represent a potentially large
transfer payment. The magnitude of the transfer payment, as well as the losers and winners from
the transfers, depends on the nature of policy and its implementation as a cap and trade system or
some alternative. The amount of money that could be in play is very large: $50/tonne times 1.3
billion tonnes per year equals $65 billion per year.
In short, while there will surely be winners and losers for these energy-efficiency and low-carbon
scenarios, our analysis shows that their net economic costs - under a range of assumptions and
alternative methods of cost analysis - are favorable.
The achievability of the cases depends on many factors. In all cases, carbon reductions require the
nation to embark on an aggressive set of policies and programs. Such efforts could occur in response to
an international agreement on climate change or to other events that result in a national
determination to reduce the growth of carbon emissions. In the high-efficiency/low-carbon cases, we
assume a vigorous national program of research, development, demonstration, and diffusion, and a
trading regime for carbon with a domestic permit price of either $25/tonne or $50/tonne carbon.
Without some scheme that provides strong incentives for switching from coal to natural gas, and for
deploying other low-carbon technologies, much of the potential for carbon reductions will not be
realized.
Government policies and programs that encourage and/or require the adoption of energy-efficiency
and low-carbon technologies will be needed, along with incentives for industry to invest more in
these technologies. Additional private and public investments are necessary, not only to accelerate
the introduction of new technologies into the market before 2010 but also to ensure the availability
of technologies for the period after 2010. The transportation and utility sectors are especially
dependent on early technological advances to achieve the scenario results in 2010.-
There is no assurance that these and other driving forces will cause the scenarios we have described
to take place. Our major conclusion is that technology can be deployed to achieve major reductions in
carbon emissions by 2010 at low or no net direct costs to the economy. Cost-effective energy efficiency
alone can take the nation 30 to 50% of the way to 1990 levels. Two additional utility sector measures
can reduce carbon emissions by another 30% at an estimated cost of $50/tonne carbon: carbon-based
dispatch and conversion of existing power plants from coal to natural gas.⁵ Finally, we identify
several additional technologies that can contribute up to 20% of the estimated carbon reductions,
also for less than $50/tonne. A next generation of advanced energy-efficiency and renewable energy
technologies promises to enable the continuation of an aggressive pace of energy and carbon
reductions over the next quarter century.
1.6 REFERENCES
Energy Information Administration (ELA). 1996. Annual Energy Outlook 1997: With Projections to
2105, DOE/ELA-0383(97) (Washington, DC: U.S. Department of Energy), December.
National Academy of Sciences (NAS). 1992. Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base (Washington, DC: National Academy Press).
September 9, 1997
15
Chapter 1
Analysis Results
Office of Technology Assessment (OTA). 1991. Changing by Degrees: Steps to Reduce Greenhouse
Gases, OTA-0-482 (Washington, DC: U.S. Government Printing Office) February.
ENDNOTES
1 The five national laboratories participating in the study were: Argonne National Laboratory
(ANL), Lawrence Berkeley National Laboratory (LBNL), National Renewable Energy Laboratory
(NREL), Oak Ridge National Laboratory (ORNL), and Pacific Northwest National Laboratory
(PNNL). LBNL and ORNL were the co-leaders of the effort.
new
2 The differences between the AEO97 BAU case and ours for 2010 are (1) 1.2 quads higher use of oil in
transportation (32.3 instead of 31.1 quads) because auto fuel economy does not increase and (2) lower
use of oil for electricity generation (declines from 1.5% of generation to 0.1%) and slightly higher use
of natural gas and coal. In all other regards, including price of all fuels and delivered energy, our
reference case and the AEO BAU case are essentially identical.
3 See Section 2.2.3 for a definition of cost-effective energy efficiency technology.
4 $50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline or 0.5 cents per kilowatt-hour
for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at
34% efficiency). $25 per tonne would cut these gasoline and electricity price increments in half.
5
The cost curve for repowering is relatively flat; as such, considerable additional reductions are
possible at a cost not too different from $50/tonne. The results are highly sensitive to the price
differential between coal and natural gas; at a lower (higher) price differential, a higher (lower)
permit price of carbon is needed.
calculate C emissions from oil in electricity generation
16
September 9, 1997
POTUS American University speech, 9/9/97
Excerpt on climate change
Next, we must meet a very large environmental challenge
in the next three months. We will work toward a worldwide climate
change treaty this December in Kyoto that protects the environment
even as it promotes global growth by committing the nations that sign
on to it to specific, clear guidelines in the reduction of greenhouse
gas emissions into the atmosphere. We know - (applause.) You can
clap for that - that's all right. (Applause.)
Now, there are students here from all over the world,
students from all over our country. Many of you have witnessed -
and your families have witnessed - in your own homes, significant
changes in climatic patterns in the last decade, and more extreme
climatic develops. It is becoming a part of the common parlance of
America, all over the country, to talk about the 500-year flood we
had along the Mississippi River. One member of Congress, who
happened to be a member of the other party, said to me the other day
- he said, "Mr. President, we've had three 100-year floods in the
last five years in my home state." He said, "Does that mean I get to
wait 500 years before we have another bad flood?"
Many of you who are studying this issue know that a
panel of over 2,500 scientists has concluded that the climate of the
Earth is significantly warming in ways that will have not entirely
predictable, but almost certainly destructive consequences unless we
do something about it.
This is something that will affect people of all
incomes, of all backgrounds, from all parts of our country, and,
indeed, the whole world. We need the young people of America,
particularly the university students who are in a position to study
this issue, to make this a gripping national issue. And we also need
people who have the confidence in our ability to break new
technological and scientific barriers to stand up and say, you cannot
make me believe that we can't reduce greenhouse gas
emissions substantially and still grow the American
economy. We could reduce them 20 percent tomorrow
with technology that is already available at no cost if
we just changed the way we do things. (emphasis added)
Now, this will be a very controversial debate. And
there will be people who say, President Clinton has spent five years
killing himself to revitalize the American economy and now he's going
to take it down overnight be committing to reduce greenhouse gas
emissions in America. That is not true. But if you let the sea
level rise and we flood the southern coast of Florida and we flood
the southern coast of Louisiana, and we otherwise disrupt what life
in the United States is like over the next 50 years, then your
children will pay the price for our neglect. We can grow this
economy and do right by the environment. I think you believe that,
and I need you to help me convince the American people that it can be done.
09/04/97 THU 12:46 FAX 202 6222633
4.
081
Economic Policy
Department of the Treasury
Office FAX of
Washington, D.C. 20220
Date:
Number of pages including cover sheet:
Name
Fax Number
Phone Number
To: T.J. Glauthiek
395-4639
395-4561
Joe Aldy
395 - 6853
395-1455
From: Robert Gillingham
202-622-2633
622-0563
REMARKS:
Urgent
For your review
Reply ASAP
Please comment
09/04/97 THU 12:46 FAX 202 6222633
0 2
"
DEPARTMENT OF THE TREASURY
SHEEVIRT
WASHINGTON, D.C. 20220
THE
September 4, 1997
The
MEMORANDUM FOR T. J. GLAUTHIER
FROM:
Robert Gillingham
Jonathan Gruber
SUBJECT:
5-Labs Revision
We think this revision is a substantial improvement. Most of our comments are
editorial (see attached draft). The major exceptions revolve, not surprizingly,
around the treatment of "cost" estimates. We continue to feel that the analysis
presents scenarios that could be achieved, rather than scenarios that should be
achieved-regardless of climate benefits-on the basis of cost savings. To address
this concern, we recommend (1) eliminating the modifier "cost-effective" when
referring to technologies, (2) deleting Table 1.5 and substantially modifying or
eliminating the discussion of costs on pp. 15 through 18, and (3) weakening the
claim of rough cost/benefit parity in the second overarching conclusion in the
executive summary (e.g., recognizing that energy savings are a substantial offset
without arguing relative magnitude).
We continue to believe the scenarios are informative primarily in terms of what
is technically feasible. We do not believe the paper demonstrates the validity of the
criteria used for selecting "cost-effective" technologies. The reasons for this
skepticism are outlined in our earlier comments - the underlying model of the costs
of technology adoption is not economically rigorous, with limitations that include
low discount rates, and in particular extremely low implementation costs.
We view these criteria as one way of selecting technologies that could be
adopted; the paper then does a very good job of quantifying the impact of adopting
these technologies on energy use and carbon emissions. A possible substitute for
Table 1.5 might be a table of reductions in energy consumption valued at today's (or
2010's) prices to quantify the energy-cost saving, with the appropriate caveat that it
would take a full-blown general-equilibrium analysis (beyond the scope of the
paper) to determine what prices would actually obtain. Going further than that, in
our opinion, is too ambitious and-for the purposes of this paper-is not critical.
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EEI DIVISION
3
MEMORANDUM
August 29, 1997
TO:
T.J. Glauthier (OMB), Jeff Frankel (CEA), Robert Gillingham and Jon Gruber (Treasury),
Peter Orszag (NEC)
FROM: Mark D. Levine and Marilyn Brown
RE:
Executive Summary and Chapter 1 of the Report "Scenarios of U.S. Carbon
Reductions"
CC:
Joe Romm, Eric Petersen, Mark Mazur
We are faxing to you a modified version of the Executive Summary and Chapter 1 of the referenced
report. In this version, we have attempted to respond to the concerns expressed in the meeting on August
19 while still expressing the major findings of the report
We have received two sets of comments from you and expect to give you substantive responses to these
comments in the near future.
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EXECUTIVE SUMMARY
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States.¹ The study documents in detail how four key sectors of the economy
Pa.
rally
- buildings, transportation, industry, and electric utilities - could respond to directed programs and
policies to expand adoption of energy-efficiency and low-carbon technologies, (an increase in the relative
price of carbon-based fuels by $25 or $50/tonne (e.g., as a result of a cap on domestic carbon emissions and a
market for carbon "permits"), and an aggressive program of targeted research and development. Current
projections suggest that a carbon emissions reduction of 380 million metric tons to per we year have (MtC/year) more they is what
required to stabilize U.S. emissions in 2010 at 1990 levels.
was groen out
The study, which has been peer-reviewed by industry and academic experts, uses a technology-by-
technology assessment as well as an engineering-economic modeling approach. It draws upon a wide
variety of technology cost and performance information to assess potential impacts. Analysis of the
buildings, industry, and transportation sectors quantifies the impacts of end-use energy-efficiency
improvements on carbon emissions. The utility sector analysis estimates the impacts of those
improvements on utility carbon emissions, and quantifies additional emissions reductions through
conversion of a number of coal power plants to natural gas, dispatching of the utility grid with $25 and
$50/tonne carbon permit prices, the accelerated use of biomass cofiring and wind energy, and other low-
carbon electricity supply options. Finally, a number of other promising low-carbon technologies are
examined to determine their potential for reducing emissions in the end-use sectors, including advanced gas
turbines in industry, transportation biofuels, and fuel cells in buildings.
based property
Three overarching conclusions emerge from the analysis of alternative carbon scenarios. First, a vigerous
tear
really
national commitment to develop and deploy cost-effective energy-efficient and low-carbon technologies
fe
about
has the potential to restrain the growth in U.S. energy consumption and carbon emissions such that levels
in 2010 are close to those in 1997 (for energy) and 1990 (for carbon). We analyze a case in which energy
efficiency can reduce carbon emissions by 120 MtC/year by 2010. We analyze a second case, with policies
that promote adoption of energy-efficient and low carbon technologies and a $25/tonne carbon permit
price, with emission reductions of 230 MtC/year in 2010. Under a $50/tonne carbon permit price and
aggresive policies, 2010 emissions could be cut by about 380 MtC/year. The analysis also suggests that
substantial additional savings are available if permit prices were to begin to rise above the $50/tonne
level.
carbon
The second conclusion is that, if feasible ways are found to implement the carbon reductions as described
above, all the cases (with reductions varying between 120 and 380 MtC/year by 2010) can produce direct
weaker
benefits that are roughly equal to or exceed costs.2 The analysis includes only technologies estimated to be
cost-effective under 2010 energy prices (with a $25/tonne and $50/tonne carbon permit price for the
respective cases); it has not, however, analyzed specific policies to achieve the cases, identified the
political feasibility of policies, or described a pathway to achieve the cases.
The third conclusion is that a next generation of energy-efficient and low-carbon technologies promises to
enable the continuation of an aggressive pace of carbon reductions over the next quarter century. This
report documents a wide array of advanced technology options that could be cost-competitive by the year
2020, assuming a vigorous and sustained program of energy R&D beginning now and extending beyond 2010.
1 The five national laboratories participating in the study were: Argonne National Laboratory (ANL). Lawrence Berkeley
National Laboratory (LBNL), National Renewable Energy Laboratory (NREL). Oak Ridge National Laboratory (ORNL).
and Pacific Northwest National Laboratory (PNNL). LBNL and ORNL were the co-leaders of the effort.
2 Here we count as benefits only the energy savings to the nation. We have not credited reduced CO2 emissions or
other external benefits. Costs include the increased technology cost plus an approximate estimate of the costs of
program and policy implementation.
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001
Analysis Results
Chapter 1
Chapter 1
ANALYSIS RESULTS
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States.¹ The stimulus for this study derives from a growing
recognition that any national effort to reduce the growth of greenhouse gas emissions must consider
ways of increasing the productivity of energy use. To add greater definition to this view, we
quantify the reductions in carbon emissions that can be attained through the improved performance
and increased penetration of efficient and low-carbon technologies by the year 2010. We also take a
longer-term perspective by characterizing the potential for future research and development to
produce further carbon reductions over the next quarter century. As such, this report underscores the
to global climate change.
value of energy technology research, development, demonstration, and diffusion as d metigating public response
Three overarching conclusions emerge from our analysis of alternative carbon reduction scenarios.
First, a vigorous national commitment to develop and deploy cost-effective energy-efficient and
low-carbon technologies could reverse the trend toward increasing carbon emissions. Along with
utility sector investments, such a commitment could helt the growth in U.S. energy consumption and
carbon emissions so that levels in 2010 are close to those in 1997 (for energy) and in 1990 (for carbon).
It must be noted that such a vigorous national commitment would have to go far beyond current
efforts. Second, if feasible ways are found to implement the carbon reductions, the cases analyzed in
the study are judged to yield direct benefits that are roughly equal to OF greater than costs. Third, a
next generation of energy-efficient and low-carbon technologies promises to enable the continuation
of an aggressive pace of carbon reductions over the next quarter century.
substantially offset
1.1 OBJECTIVES OF THE REPORT
The purposes of this study are threefold:
1. To provide a quantitative assessment of the reduction in energy consumption and carbon
emissions that could result by the year 2010 from a vigorous national commitment to accelerate
the development and deployment of cost-effective energy-efficient and low-carbon
technologies;
2. To document the costsmend performance of the technologies that underpin a year 2010 scenario
in which substantial energy savings and carbon emissions reductions are achieved;
3. To illustrate the potential for energy-efficiency and renewable energy R&D to produce further
reductions in energy use and carbon emissions by the year 2020.
1.2 METHODOLOGY
To achieve these objectives, we started with the Annual Energy Outlook 1997 (AEO97) reference
case forecasts for the year 2010 (Energy Information Administration, 1996). After thoroughly
reviewing these forecasts on a sector-by-sector basis, and working with EIA staff, we chose to accept
the ELA "business-as-usual" (BAU) scenario as is for buildings and industry. We modified some of
4
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Analysis Results
the assumptions and data to produce a new BAU case not greatly different from the ELA case for
the transportation and the electric utility sectors.
We then assembled existing information on the performance and costs of technologies to increase
energy efficiency or, for selected end-uses, to switch from one fuel to another (e.g., from electricity to
natural gas for residential end-uses or from gasoline to biofuels for transportation). For the buildings
sector, the technology performance and cost data base are extensive. For transportation, the data
base although less fully developed than for buildings- is sufficient for our purposes. For industry,
only partial information on technologies and costs is presently available. As a result, the analysis
for industry relies primarily on historical relations between energy use and economic activity and
much less on explicit technological opportunities. The industrial analysis also includes some
examples of industrial low-carbon technologies. The analysis of low-carbon supply technologies in
the electricity sector is based on a review of the literature including detailed technology
characterizations prepared by DOE in conjunction with its national laboratories and industry.
Next we created scenarios of increased energy efficiency and lower carbon emissions using the
technology data (or, in the industrial sector, historical relations) as key inputs. We chose to run
three scenarios other than the BAU case. We have termed the first the "efficiency" (EFF) case. It
assumes that the United States increases its emphasis on energy efficiency through enhanced
public- and private-sector efforts. The general philosophy of the efficiency case is that it reduces,
but does not eliminate, various market barriers and lags to the adoption of cost-effective energy
efficiency technology.²
The other two cases, dubbed the $25 permit and the $50 permit "high-efficiency/low-carbon"
(HE/LC) cases, describe a world in which, as a result of commitments made on a climate treaty or
other factors, the nation has embarked on a path to reduce carbon emissions. Both of these cases
assume a major effort to reduce carbon emissions through federal policies and programs (including
environmental regulatory reform), strengthened state programs, and very active private sector
involvement. Both also include a focused national R&D effort to develop and transform markets for
low-carbon energy options (e.g., fuel cells for microcogeneration in buildings and advanced turbine
systems for combined heat and power in industry). The difference between the two HE/LC cases is in
the assumption of a carbon permit price resulting from a domestic trading scheme for carbon
emissions with a cap on U.S. emissions (or from equivalent policy measures that increase the price of
carbon-based fuels relative to those with less carbon). We assume x domestic permit price of $25
what type
and $50 per tonne of carbon for the two cases. Both of these HE/LC cases include a program of
research, development, demonstration and diffusion that is more vigorous than in the efficiency
case. In the buildings and industry sectors, the carbon price signal, combined with policies promoting
are
sekatt
energy efficiency, is believed to trigger most of the additional carbon reductions. In the
to
transportation sector, it is the R&D driven technology breakthroughs that generate the bulk of the
carbon reductions beyond the efficiency case. For the electricity sector, higher prices for carbon-
based fuels cause larger shifts from coal to natural gas; for this sector, these same higher relative
prices combined with federal and private research, development, and demonstration can bring
advanced low-carbon technologies to market.
Although most of the analysis focuses on 2010, we also look beyond this date. Here we describe new
technologies, materials, processes, manufacturing methods, and other R&D advances that promise
to offer significant energy benefits by the year 2020; for this time period, we make no effort to
forecast specific levels of market penetration, energy savings, or carbon reductions. Thus, instead of
creating scenarios we describe the technological innovations that could enable the continuation of an
aggressive pace of decarbonization well into the next quarter century, if appropriate investments in
R&D were made.
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Analysis Results
Chapter 1
1.3 BACKGROUND
The decade of gains in energy productivity achieved by the U.S. following the 1973-74 Arab oil
embargo represents a period of economic growth that was decoupled from increases in energy
consumption, resulting in substantial economic benefits. Between 1973 and 1986, the nation's
consumption of primary energy froze at about 74 quads - while the GNP grew by 35%. Starting in
1986, energy prices began a descent in real terms that has continued to the present. As a result,
energy demand grew from 74 quads in 1986 to 91 quads in 1995, and carbon emissions have been
increasing at a similar pace.
has continued to mynove its
Despite the growth in energy consumption since 1986, the U.S. economy today remains more energy produc twitg.
productive than It was 25 years age. In 1970, 19.6 thousand Btu of energy were consumed for each
(1992) dollar of GDP. By 1995, the energy intensity of the economy had dropped to 13.4 thousand
Btu of energy per (1992) dollar of GDP. The U.S. Department of Energy (DOE) estimates that the
country is saving $150 to $200 billion annually as a result of these improvements.
Nevertheless, many cost-effective energy-efficient technologies remain underutilized, as discussed
in Chapter 2. host of market barriers account for these lost opportunities. And declining energy
R&D expenditures may cause promising technology options to be foregone
Thream reasons
The rationale for government support of energy-efficiency R&D is strong. Much energy-efficiency
research is both long-term and high-risk and therefore is not adequately funded by the private
export
sector - despite the possibility of sizable gains in the long run. Furthermore, advances in energy
efficiency offer substantial public benefits (such as carbon reductions and improved national security
through greater oil independence) that cannot be fully captured in the private marketplace.
The benefits of past public investments in energy-efficiency R&D have been well documented.
Between 1978 and 1996, DOE spent approximately $8 billion on energy-efficiency research,
development and demonstration (RD&D). Just five of the technologies that were developed or
demonstrated with a fraction of this DOE support have resulted in net benefits of $28 billion
through 1996. Many other R&D successes have produced technologies yielding substantial energy
and cost savings in the market. The DOE RD&D portfolio has also led to significant environmental,
health, productivity, and economic competitiveness benefits.
1.4 RESULTS
1.4.1 Prospects for Improved Efficiencies by the Year 2010
Table 1.1 and Figure 1.1 compare the nation's primary energy use in quads for the years 1990 and 1997
(projected) with the results of three scenarios for 2010. (We have included only the high-
efficiency/low-carbon case at $50/tonne in the table and figure for simplicity.) The $50/tonne
HE/LC case shown below does not reflect the energy impacts of the selected low-carbon technologies
described later in this summary (e.g., stationary fuel cells for buildings, advanced turbine systems
and biomass gasification in industry) or the supply-side options shown in Table 1.4.
6
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Table 1.1 Primary Energy Use in Quads: 1990-2010
2010
Business-as-
High-Efficiency/
1990
1997
Usual
Efficiency
Low-Carbon
Case
Case
Case ($50/tonne C)
Buildings
29.4
33.7
36.0
34.1
32.0
Industry
32.1
32.6
37.4
35.4
33.6
22.6
25.5
32.3
29.2
27.8
Transportation
Total
84.2
91.8
105.7
98.7
93.4
Source: Energy use estimates for 1990 come from ELA (1996a, Table 2.1, P- 39).
Energy use estimates for 1997 come from forecasts conducted for ELA (1996b).
Numbers may not add to the totals due to rounding.
The major observations are as follows:
In the business-as-usual case, energy use increases by 22 quads (26%) between 1990 and 2010; 8
quads of this increase have occurred during the first seven years of this 20-year period. The
fastest growing sector during these initial seven years has been buildings (4.3 quads) followed
by transportation (2.9 quads) and industry (0.5 quads). in the BAU case, the fastest growing
sector during the remaining 13 years is transportation (6.8 quads). This is followed by industry
(4.8 quads) and then buildings (2.3 quads). The rapid projected growth in the energy consumed
for transportation is driven by estimates of increased per capita travel and minimal fuel
efficiency gains.
The efficiency scenario cuts the overall growth between 1990 and 2010 from 22 to 15 quads. This
is a 17% increase over the level of energy consumption in 1990, down from a 26% increase in the
BAU case. Relative to the BAU case, the efficiency scenario for transportation delivers
slightly more energy savings (3.1 quads) than do the same scenarios for the industrial (2.0) or
buildings (1.9) sectors. Compared with 1997 levels, the smallest increase in energy growth for
this case is in buildings (0.4 quads), followed by industry (2.8 quads), and transportation (3.7
quads).
The high-efficiency/low-carbon scenario with $50/tonne carbon charge further decreases the
overall growth between 1990 and 2010, reducing it from 22 to 9 quads. This is an 11% increase
over the level of energy consumption in 1990. Relative to the BAU case, the high-
efficiency/low-carbon scenario for buildings, industry, and transportation delivers energy
savings ranging from 3.8 to 4.5 quads for each sector. Compared with 1997 levels, the buildings
sector is down about 2 quads and industry and transportation are up 1 and 2 quads, respectively.
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0.8
Analysis Results
Chapter 1
Figure 1.1 Primary Energy Use in Quads: 1990-2010
120
100
80
Buildings
Energy 60
(Quads/year)
Industry
40
20
Transportation
0
1973
1986
1990
1995
1997
Efficiency
Case
Business
High
as
Efficiency/
Usual
Low
Carbon
2010 Scenarlos
Table 1.2 documents the impact of these projected energy savings in 2010 on carbon emissions in that
same year. It also presents the results of the HE/LC scenarios with both $25 and $50 per tonne
carbon charges. These scenarios show significant carbon reductions from the combination of greater
efficiency improvements and increased use of advanced low-carbon technologies. 3 In these cases, a
number of low-carbon technologies have high rates of adoption (e.g., advanced turbine systems and
biomass gasification in industry), the utility grid is dispatched to reduce carbon emissions (by using
many coal plants for intermediate power and by running more natural gas plants as base load), a set
of coal-based power plants are repowered, nuclear plant lifetimes are extended, and key renewable
energy technologies are deployed. In all cases, these technologies and measures are estimated to be
cost-effective with a differential carbon fee of $50/tonne.
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Chapter 1
Analysis Results
Table 1.2 Carbon Emissions (MtC): 1990-2010
2010
Business-as-
High-Efficiency/
Usual (BAU)
Efficiency Case
Low-Carbona
1990
1997
Case
$25/tonne
$50/tonne
Buildings
460
511
571
546
527
509
Industry
452
482
534
512
488
452
Transportation
432
486
616
543
528
513
-
-
-
-
-48
-136
Utilitiesᵇ
1490
1340
Total (rounded)
1340
1480
1720
1600
Change from 1990
140
380
260
150
0
Change from BAU
-
-
-120
-230
-380
-
This scenario includes the carbon emission reductions resulting from a carbon permit price of $25 or $50/tonne:
(1) dispatch of power plants in which natural gas is favored relative to coal, (2) repowering and partial
repowering of coal-based power plants to convert to natural gas, and (3) introduction of selected low-carbon
technologies to replace conventional ones, primarily in the industrial and utility sectors.
bThe entries in the last two columns are negative as they correspond to reductions in carbon emissions resulting
from the increased use of natural gas and low-carbon technology for electricity generation as a result of the
$50/tonne carbon permit price in this scenario.
Table 1.2 presents results for the business as usual and three efficiency and/or low carbon
cases in 2010 as point estimates, because they are meant to be scenarios. When we use these
scenarios for analysis, in section 1.5, we describe sources of uncertainty and the effects of
uncertainty on our understanding of the implications of these cases. For now, we only
describe the different cases.
Figures 1.2 and 1.3 complement the above table by illustrating the carbon emissions reductions from
each scenario. The major observations are:
In the BAU case, carbon emissions are forecast to increase by approximately 380 million tonnes.
The energy-efficiency gains incorporated in the efficiency case cut overall growth between 1990
and 2010 by one-third (from 380 to 260 million tonnes). This represents a carbon increase of 19%
above 1990 emissions.
The HE/LC scenario with $25/tonne carbon charge has the potential to reduce carbon emissions
by 230 million tonnes from the BAU case in 2010. The largest part of these carbon reductions are
from increased efficiency, but major changes in electricity supply (carbon-based dispatching
and repowering) contribute nearly 35 million tonnes, and other low-carbon technology,
particularly renewables and advanced turbine systems. produce approximately another 25
million tonnes.
The HE/LC scenario with $50/tonne carbon charge has the potential to reduce carbon emissions
by approximately 380 million tonnes, thereby achieving 1990 carbon emission levels in 2010. Of
this 380 million tonne carbon reduction, about 190 million tonnes are from increased energy
efficiency, 140 million tonnes results from increases in the use of low-carbon fuels and
technologies in the utility sector, and 50 million tonnes results from the use of low-carbon
technology in industry and transportation.
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Figure 1.2 Reductions in Carbon Emissions from Each Scenario
400
360
Other Low-Carbon Technologies
Electricity Supply Technologies
Energy-Efficient Technologies
Million Tonnes of Carbon Emissions Reduction
300
230
200
120
100
0
Efficiency
HE/LC Case
HE/LC Case
Case
25/tonne C
$50/torine C
Figure 1.3 Reductions in Carbon Emissions from Each Type of Technology
400
HE/LC Case $50/tonne C
HEALC Case $25/tonne C
Million Tonnes of Carbon Emissions Reduction
300
one
Efficiency Case
200
190
140
100
50
0
Energy-
Electricity
Other
Efficient
Supply
Low-Carbon
Technologies
Technologies
Technologies
100 million of the 140 million tonnes of carbon reductions in the utility sector comes from
redispatching the utility system (favoring the use of low-carbon fuels) and from repowering
coal plants with natural gas. Both are cost-effective with a $50/tonne carbon charge. The
remaining 40 million tonnes are from renewables (wind, co-firing coal-based power plants with
biofuels, expansion of hydropower capacity), nuclear power plant life extensions, and power
plant efficiency improvements.
The remaining 50 million tonnes of carbon reductions in industry and transportation are about
equally divided among three sets of fuels/technologies: (1) advanced combustion turbine
cogenerators in industry, (2) biomass and black liquor gasification and low-carbon industrial
processes, and (3) cellulosic ethanol/gasoline blends for automobiles.
Approximately 140 MtC of the increase in carbon emissions between 1990 and 2010 will have
occurred by the end of 1997; thus, it is useful to look at the 13-year forecast starting with 1997.
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The carbon reductions incorporated in the efficiency case cut the overall growth in carbon
emissions between 1997 and 2010 from 240 million tonnes (as forecast in the BAU case) to 120.
The HE/LC scenario with $50/tonne carbon charge reduces carbon emissions in 2010 by about 130
million tonnes (compared with the 1997 level).
Table 1.3 provides a comparison of the growth rate in energy and in carbon emissions for the four
cases, from 1990 to 2010. For the BAU and efficiency cases, the growth in carbon emissions is slightly
more rapid than the increase in energy demand. For the HE/LC cases, carbon emissions decline
while energy consumption rises. The carbon reduction reflects the increased deployment of low-
carbon fuels and technologies as a consequence of the relative increase in price of carbon-based fuels
precipitated by the $50/tonne incentive.
Table 1.3 Average Annual Energy and Carbon Growth Rates, 1997 to 2010, for Four Cases
High Efficiency/
High Efficiency/
Business-As-
Efficiency
Low Carbon Case
Low Carbon Case
Usual (BAU)
Case
($25/tonne)
($50/tonne)
Gross Domestic Product
(GDP)4
1.88%
1.88%
1.88%
1.88%
Energy Demand
1.09%
0.56%
0.34%
0.13%
Carbon Emissions
1.16%
0.60%
0.05%
-0.76%
Energy Consumption Per
-0.77%
-1.30%
-1.51%
-1.71%
GDP (E/GDP)
Carbon Emissions Per GDP
-0.70%
-1.25%
-1.79%
-2.59%
(C/GDP)b
The Gross Domestic Product (GDP) in 1995 was $7251 billion in 1995 dollars. The 1.88% annual growth was
assumed to apply to the entire period, 1995-2010 to derive the results above.
b The carbon decrease per unit GDP growth for 1990 to 2010 is 0.7%, 1.1%, 1.4% and 1.9% per year for the
reference, efficiency, $25/tonne HE/LC, and $50/tonne HE/LC cases, respectively.
It is useful to compare the scenarios in this study to those of other studies. The 1991 report by the
Office of Technology Assessment (OTA) titled Changing by Degrees (U.S. Congress, 1991) analyzed
the potential for energy efficiency to reduce carbon emissions by the year 2015, starting with the
base year of 1987. Its "moderate" scenario results in a 15% rise in carbon emissions, from 1300
MtC/year of carbon in 1987 to 1500 MtC/year of carbon in 2015 (compared to a BAU forecast of 1900
MtC/year). Its "tough" scenario results in a 20% to 35% emissions reduction relative to 1987 levels,
or emissions levels of 850 to 1000 MtC/year of carbon in 2015. Our efficiency and HE/LC cases
ranging from 1.3 to 1.6 billion tonnes of carbon emissions in 2010 are comparable to OTA's "moderate"
case and show considerably higher emissions than OTA's "tough" case.
Another benchmark is provided by the 1992 National Academy of Sciences (NAS) report on Policy
Implications of Greenhouse Warming (National Academy of Sciences, 1992). This study identified a
set of energy conservation technologies that had either a positive economic return or that had a cost
of less than $2.50 per tonne of carbon. Altogether, NAS concluded that these technologies offer the
potential to reduce carbon emissions by 463 million tonnes, with more than half of these reductions
arising from cost-effective investments in building energy efficiency. Our efficiency and HE/LC
cases suggest the potential for reducing carbon emissions by between 120 and 380 million tonnes by the
year 2010. One reason that the NAS estimate is higher is because it is not limited to the 2010 time
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frame, but rather characterizes the full potential for carbon reductions. Thus, it did not take into
account the replacement rates for equipment and processes, and other factors that prevent the
instantaneous, full market penetration of cost-effective energy-efficient and low-carbon
technologies.
1.4.2 R&D's Potential for Further Benefits by 2020
If carbon reductions in 2010 and beyond are to be sustained at reasonable cost, vigorous R&D efforts
are needed to fill the pipeline of next-generation energy technologies. It is difficult to estimate the
carbon savings that will accrue from these technologies; however, our effort to characterize their
features suggests that an aggressive pace of carbon reductions over the next quarter century can be
sustained, with a sufficient investment in R&D. Our analysis of R&D potential for the year 2020
focuses on opportunities for improved energy-efficiency and renewable energy technologies. The
potential long-term contributions of carbon sequestration, advanced coal technologies, and nuclear
power may also be significant. However, the treatment of vigorous R&D initiatives to improve
these supply options beyond 2010 is beyond the scope of this report.
Renewable energy technologies will likely play a crucial role in limiting carbon emissions over the
long term. Low-carbon energy supply options are needed to fuel domestic and international economic
development without stimulating further global warming. Although renewable resources account
for only 7% of the nation's total energy consumption at present, many believe that they are at the
beginning of a long-term growth trajectory. With continuing technological development and cost
reductions, renewables could become preferred energy resources some time within the next several
decades. Early evidence of this transition is seen in the continuing adoption of renewable power
systems, including especially wind farms and blomass power systems, even in the face of low gas-
fired power generation costs and considerable uncertainty in today's electric energy sector.
With a vigorous and sustained program of research, development and deployment, biomass, wind,
photovoltaics, geothermal, and solar thermal technologies could deliver significant quantities of
electricity in 2020, thereby substantially displacing carbon emissions. For example, the use of
forestry and agricultural residues in biomass power systems continues to be an attractive power
option where those residues exist. The successful development of higher-efficiency biomass
gasification systems would make this technology competitive in a wider range of applications,
including for power systems using dedicated feed stock supply systems. At the same time, biological
and agricultural research on biomass production will lead both to higher biomass yields and better
species for energy conversion purposes in the future.
A second area in which a vigorous and sustained R&D effort could spawn a range of key
improvements is in wind power systems. Potential improvements include
Advanced blade shapes that increase wind power capture while reducing stress loads
Elimination of gearboxes through development of direct-drive generators
Variable speed turbines, and
operators. Better resource prediction that will increase the value of wind power to power systems
A third area of renewables development that is at the beginning of a long-term growth path is the
use of renewables in buildings. Solar daylighting, passive solar designs, solar water heating, and
geothermal heat pumps already are cost-competitive in many applications, but are not yet widely
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used. R&D advances could substantially accelerate their market penetration. In addition,
building-integrated photovoltaic products will benefit directly from advances in materials
research The ultimate vision is that many buildings will become "net energy generators" through a
combination of renewable energy and energy-efficiency technologies.
In the next quarter century, improved energy-efficiency technologies will result from a combination
of incremental advances and fundamental breakthroughs. Incremental improvements in all sectors
can be achieved by the greater reliance on more precise and reliable sensors and controls or on lower-
cost sensors and controls, often integrated into industrial processes, transportation systems, and
buildings. Advanced manufacturing technologies, including rapid prototyping and ultraprecision
fabrication, also offer broad opportunities for continuous incremental improvements in energy
efficiency and renewable energy. Breakthroughs in bioprocessing, separations, superconductivity,
catalysts, and materials can have wide-ranging impacts on energy efficiency and carbon emissions
by the year 2020. Examples of specific technology opportunities are described in this report, by
sector.
Five R&D areas offer great promise to reduce significantly the energy requirements of our nation's
buildings in 2020:
Advanced construction methods and materials
Adaptive building envelopes
Multi-functional equipment
Integrated, advanced lighting systems. controls and communications and
Self-powered buildings.
In addition to the broad application of better process modeling, sensors, and controls in industry,
many process/industry-specific opportunities for efficiency gains exist. These are described for each
of DOE's targeted industries of the future: pulp and paper, chemicals, petroleum refining, glass,
aluminum, iron and steel, and metal casting.
Many of the advanced technologies that have the potential to significantly improve the energy
efficiency of transportation need considerable R&D investment before they can become commercially
available in the year 2020. For example, to achieve fuel economies in the 60-80 miles per gallon
(MPG) range and remain affordable and safe, light-duty vehicles will need
Breakthroughs in manufacturing processes for composite materials
Large reduction in fuel cell costs and/or cost reductions and performance gains in batteries
Utra-low rolling resistance tires
High-efficiency accessories and
Highly aerodynamic designs.
Opportunities for R&D to lead to improvements in the energy efficiency of other transportation
modes are also described in this report.
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In all, the continued adoption of energy efficient and renewable energy technologies and a steady
flow of technology improvements from collaborative R&D programs with industry could make such
environmentally friendly technology an attractive option for domestic and global energy economies
in the future. With strong public-private partnerships to support the necessary R&D and market
transformation activities, ample cost-effective energy products and practices will be available in
2020.
1.5 ASSESSMENT OF COSTS AND SOURCES OF CARBON REDUCTIONS
The business-as-usual scenario projects an increase of 380 MtC/year between 1990 and 2010. In our
efficiency scenario, in which the nation actively pursues policies and programs to promote market
acceptance of energy efficiency while expanding commitments to research and development, energy-
efficient technologies reduce this growth in carbon emissions by 120 MtC/year. Under a carbon cap
and trading system, in which permits for carbon sell for either $25 or $50/tonne C, very substantial
carbon reductions appear possible. Detailed results for these cases, showing the sources of the carbon
reductions, are contained in Table 1.4. (Summaries of these results were presented in Figures 1.2 and
1.3.) Results indicate that, for the $50/tonne HE/LC case, there is a potential to roughly return to
1990 levels of carbon emissions in 2010. About two-thirds of the increase in carbon emissions is
eliminated in the case with a $25/tonne carbon charge (Table 1.4).
The estimates in Table 1.4 include ranges for most of the electricity supply options and the other
low-carbon technologies. There are no ranges for the efficiency technologies because the models used
to estimate their penetration are nonstochastic. When selecting a single estimate for the $50/tonne
case, numbers from the low end of the ranges were generally selected in order to be cautious. Because
we did not conduct an integrating analysis in which supply options compete against one another, we
felt it important to minimize potential overlap by entering the supply options in conservative
quantities. Also note that several renewable resources that could play a greater role by 2010 are
omitted from Table 1.4; these resources include include photovoltaics, geothermal, solar thermal,
and landfill gas.
One should not ascribe too much significance to specific entries in Table 1.4 There are many different
technologies, both on the supply and demand side of the energy system, that will compete to
achieve carbon reductions in an environment in which policies and economic signals favor such
reductions. Thus, for example, Table 4.1 shows advanced turbine systems in industry cutting carbon
emissions by 17 MtC/year in 2010, co-firing coal with biomass reducing emissions by the same
amount, and other low-carbon supply technologies (wind, nuclear plant extensions. hydropower
expansion, and power plant efficiency) contributing 24 MtC/year. The actual choice of technology
depends on how the economics of the different systems evolve over time, how the industry to supply
technology develops, the nature and speed of deregulation within the utility industry, and numerous
other factors that cannot be known today. As such, we do not intend the results in Table 1.4 to be
taken as a prediction of one technology over another to achieve carbon reductions. In this instance,
we have posited one of many possible mixes of supply technologies. These same comments apply to
the demand-side sectors and technologies.
We summarize below the expected technology costs in 2010, as well as the cost of implementing a
carbon permit system. While these costs are necessarily uncertain, they are our best estimates and,
in our view, as likely to be high as to be low. We note, however, that we have focused our analysis
on technology costs, and have not assessed the viability of specific policies or programs to achieve
market acceptance. As described below, we do account for program and policy costs in an
approximate manner.
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Table 1.4 Potential Annual Reductions in Carbon Emissions in 2010, Compared to the Business-As-
Usual Forecast for 2010 (MtC)
High-Efflciency/Low-Carbo
Case
Efficiency
Case
$25/tonne
$50/tonne*
Buildings
25
42
59
Energy efficiency
2
3
Fuel cells
25
44
62
Industry
Energy efficiency
22
36
51
5
17 (15-26)
Advanced turbine systems
Biomass and black liquor gasification.
5
14 (13-16)
cement clinker replacement. and
aluminum technologies
22
46
82
Transportation
61
74
87
Energy efficiency
16
Ethanol
12
14
73
88
103
Utility Supply Options
Carbon-ordered dispatching
25
55
Converting coal-based power plants to
9
40 (25-66)
natural gas
Co-firing coal with biomass
5
17 (16-24)
2
7 (6-20)
Wind
Extending the life of existing nuclear
3
5 (4-7)
plants
Hydropower expansions
2
4 (3-5)
Power plant efficiency
2
8 (7-13)
48
136
Total (rounded)
120
226
383
"Numbers in parenthesis are ranges, as documented in the text of the report. See Appendix A-1 for a description of
the derivation of the results in this table.
Appendix A-2 describes the full set of calculations used to derive the direct costs and benefits of the
cases. The costs considered include the incremental technology investment by consumers and
businesses, fuel price increases, and the estimated cost of federal, state, and local programs required
to achieve the carbon emissions reductions. These constitute the direct costs of the scenarlos. The
highest of these by far is the incremental investment costs. However, the generally higher first cost
of these technologies is counterbalanced by substantially lower operating costs. The benefits
considered are limited to the savings in operating (energy) costs from the technology investments.
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Using these factors as the direct costs and benefits of the scenarios, we have analyzed the economics
of carbon emissions reductions from two different perspectives in order to establish a credible range
of costs. In the first, which we label "optimistic," we evaluate all costs and benefits with a real
discount rate that approximates the cost of capital for efficiency investments for the different end-
use sectors:
7% for buildings
10% for transportation
12.5% for industry.
The lowest discount rate, for buildings, is based on the fact that the money for residential buildings
is derived from home mortgages or home improvement loans. The higher rate for industry reflects
the fact that energy-efficiency investments have to compete with investments for other projects.
These discount rates are not those that describe current market behavior, but rather are reflective of
costs of capital if the market did invest in the energy-efficiency measures. For the "optimistic"
case, we assume costs for efficiency measures brought about by utility, federal programs, and state
programs (e.g., demand-side management programs by utilities, federal market transformation
programs) to be 15% of technology costs. We also assume that at least half of the efficiency occurs as
a result of federal policies (e.g., standards or carbon permit charges) which add very low direct
program costs. Thus, the overall costs of implementation are taken to be about 7% in the
"optimistic" case. The electric supply-side technologies are assumed to add an incremental cost of
$30/tonne carbon in 2010, based on an average estimate of the incremental costs of the technologies
from the appropriate sections of this report.
These programs and policies are not specified in this study, but the broad nature of the actions could
include technology R&D partnerships such as the current Partnership for a Next Generation of
Vehicles and Industries of the Future; energy efficiency codes and standards; expanded
partnerships, technical assistance, and information programs to accelerate the adoption of energy-
efficient technologies; incentives through the tax system directed at investments in energy-efficient
technology in industry; and a variety of non-federal programs to accelerate market diffusion of
energy-efficient and low-carbon technologies.
The second perspective, which we label "pessimistic," assumes that there are hidden costs
associated with achieving widespread market acceptance of many of the efficiency and low-carbon
technologies, even after the imposition of a carbon charge and the implementation of major policies
and programs to promote a low-carbon future. In this perspective, we evaluate costs and benefits at a
real discount rate of 15% for buildings and 20% for transportation and industry. Program costs are
increased to 30% of the cost of efficiency measures, an estimate that is a high bound compared with
federal, state, and utility experience. Overall implementation costs (programs and directed
policies) are taken to be 15% of technology investments in this case. Other data and assumptions in
this case are the same as for the "optimistic" case.
The results of the economic analysis are presented in Table 1.5. Estimated direct costs are $26-$49
billion per year for the efficiency scenario and $51 to $88 billion per year for the high-
efficiency/low-carbon scenario. Estimated savings per year in 2010 are $42 to $51 billion per year in
the efficiency case and $70-$88 billion per year for the high-efficiency/low-carbor case. The costs,
which are a small portion of annual gross private domestic investment of about $1.4 trillion in 2020,
are likely to be more than balanced by savings in energy bills. Thus, net costs to the U.S. economy
are near or below zero in this time frame.
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Table 1.5 Estimated Costs and Benefits of the Efficiency and High-Efficiency/Low-Carbon
Scenarios Optimistic and Pessimistic View Estimates (billons of 19955, annualized)
Efficiency
High-Efficiency/Low-Carbon
Case*
Caseb
Benefitsc
Costsd
Carbonc
Benefits
Costs
Carbon
(billion
(billion
Savings
(billion
(billion
Savings
1995$)
1995$)
MtC
1995$)
1995$)
MtC
Energy Efficiency
Bulldings
14-17
7-14
20-25
26-33
14-26
49-62
Industry
6-7
3-5
18-22
12-15
8-13
66-82
Transportation
22-27
16-30
58-73
32-40
23-43
82-103
Electricity Dispatch
0
0
0
0
2
44-55
Electricity Repowering
0
0
0
0
2
32-40
Other Low-Carbon Techologies
0
0
0
0
2
33-41
Total
42-51
26-49
96-120
70-88
51.88
306-383
a Energy efficiency category includes ethanol in transportation.
b Benefits and carbon savings in the HE/LC case are relative to BAU case.
C Benefits are calculated as annual energy savings. The scenarios are meant to be point estimates. In the
"pessimistic" case, we have assumed that only 80% of the carbon savings are achieved, even though the technology
and implementation costs are unchanged. The range on carbon savings represents this assumption.
d Costs are calculated from differing viewpoints: the "optimistic" case uses discount rates that vary between 7%
and 12.5% for the different sectors, as described in the text. For the "pessimistic" case, the discount rates used to
annualize costs vary between 15% and 20%. Also in this case, the cost of implementing programs (30%) and an
overall package of programs and policies (15%) is taken to be twice that of the "optimistic" case.
The range of estimates in Table 1.5 reflects our attempt to "bound" optimistic and pessimistic
assessments. There are clearly other ways in which these bounds could be described, just as there are
many scenarios that could have been analyzed. However, we believe that the assumption that 80%
of the carbon reductions are achieved at the costs identified, valuation of costs and benefits at
discount rates noticeably higher than the likely cost of capital, and doubling the cost of programs
and policies from typical experience today is a strong reflection of pessimism in costs for our cases. It
is worth noting that if the implementation costs were taken to be much higher than we believe to be
reasonable - 50% of investments costs for programs and 25% overall - this would add about $10
billion per year to the costs of the high-efficlency/low-carbon in the pessimistic case.
In addition to these costs, one needs to calculate the impact of the cases on natural gas demand. In
all of these cases, natural gas replaces very large quantities of coal. Higher natural gas demand
would result in higher natural gas prices, which in turn would increase the cost of substituting
natural gas for coal in power production, etc. As it turns out, our scenarios have somewhat reduced
gas demand compared with the BAU case (or with AEO97 baseline for 2010, on which the price of
natural gas in our work is based). Specifically, demand for natural gas in the HE/LC ($50/tonne)
case declines in 2010 by 2 quads compared with the business-as-usual case. This is the result of
declines of 0.5 quads for buildings, 1.0 quads for industry, and 0.5 quads for electricity. The latter
occurs because of the balance among three factors:
Increase in gas demand because of the large-scale substitution of natural gas for coal
Decrease of gas demand because of the use of many low-carbon technologies that do not use
natural gas (wind, nuclear power plant extensions, power plant efficiency upgrades,
hydropower expansion, co-firing with biofuels), and
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The large increase in cogeneration, which reduces demand for natural gas for heating
applications.
The sum of the second and third effects are somewhat greater than the first, and thus total natural
gas demand associated with electricity generation declines. This will reduce the cost of natural gas,
a benefit that we have not included in
The $50/tonne carbon charge, while not constituting a direct cost, does represent a potentially large
transfer payment. The magnitude of the transfer payment, as well as the losers and winners from
the transfers, depends on the nature of policy and its implementation as a cap and trade system or
some alternative. The amount of money that could be in play is very large: $50/tonne times 1.3
billion tonnes per year equals $65 billion per year.
In short, while there will surely be winners and losers for these energy-efficiency and low-carbon
scenarios, our analysis shows that their net economic costs - under a range of assumptions and
alternative methods of cost analysis - are favorable.
The achievability of the cases depends on many factors. In all cases, carbon reductions require the
nation to embark on an aggressive set of policies and programs. Such efforts could occur in response to
an international agreement on climate change or to other events that result in a national
determination to reduce the growth of carbon emissions. In the high-efflciency/low-carbon cases, we
assume a vigorous national program of research, development, demonstration, and diffusion, and a
trading regime for carbon with a domestic permit price of either $25/tonne or $50/tonne carbon
Without some scheme that provides strong incentives for switching from coal to natural gas, and for
deploying other low-carbon technologies, much of the potential for carbon reductions will not be
realized.
Government policies and programs that encourage and/or require the adoption of energy-efficiency
and low-carbon technologies will be needed, along with incentives for industry to invest more in
these technologies. Additional private and public investments are necessary, not only to accelerate
the introduction of new technologies into the market before 2010 but also to ensure the availability
of technologies for the period after 2010. The transportation and utility sectors are especially
dependent on early technological advances to achieve the scenario results in 2010.
There is no assurance that these and other driving forces will cause the scenarios we have described
to take place. Our major conclusion is that cost-effective technology can be deployed to achieve
major reductions in carbon emissions by 2010. Cost-effective energy efficiency alone can take the
nation 30 to 50% of the way to 1990 levels. Two additional utility sector measures can reduce carbon
emissions by another 30% at an estimated cost of $50/tonne carbon: carbon-based dispatch and
conversion of existing power plants from coal to natural gas.4 Finally, we identify several
additional technologies that can contribute up to 20% of the several carbon reductions, also for less
than $50/tonne. A next generation of advanced energy-efficiency and renewable energy technologies
promises to enable the continuation of an aggressive pace of energy and carbon reductions over the
next quarter century.
1.6 REFERENCES
Energy Information Administration (ELA). 1996. Annual Energy Outlook 1997: With Projections to
2105, DOE/ELA-0383(97) (Washington, DC: U.S. Department of Energy), December.
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National Academy of Sciences (NAS). 1992. Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base (Washington, DC: National Academy Press).
Office of Technology Assessment (OTA). 1991. Changing by Degrees: Steps to Reduce Greenhouse
Gases, OTA-0-482 (Washington, DC: U.S. Government Printing Office) February.
ENDNOTES
1 The five national laboratories participating in the study were: Argonne National Laboratory
(ANL), Lawrence Berkeley National Laboratory (LBNL), National Renewable Energy Laboratory
(NREL), Oak Ridge National Laboratory (ORNL), and Pacific Northwest National Laboratory
(PNNL). LBNL and ORNL were the co-leaders of the effort.
2 See Section 2.2.3 for a definition of cost-effective energy efficiency technology.
3 $50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline or 0.5 cents per kilowatt-hour
for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at
34% efficiency). $25 per tonne would cut these gasoline and electricity price increments in half.
4 The cost curve for repowering is relatively flat; as such, considerable additional reductions are
possible at a cost not too different from $50/tonne. The results are highly sensitive to the price
differential between coal and natural gas; at a lower (higher) price differential, a higher (lower)
permit price of carbon is needed.
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fl
ERNEST ORLANDO LAWRENCE
FAX
BERKELEY LAB
BERKELEY NATIONAL LABORATORY
CC:JA
Date:
August 29. 1997
Total Pages:
To:
See Distribution
Fax No.:
See Distribution
Location:
From:
Mark Levine & Marilyn Brown
Phone:
(510) 486-5238
Location: LBNL
Subject: Memorandum
Distribution:
T.J. Glauthier (OMB)
(202) 395-4639
Jeff Frankel (CEA)
(202) 395-6947
Jon Gruber (Treasury)
(202) 622-2633
Robert Gillingham (Treasury)
(202) 622-2633
Peter Orszag (NEC)
(202) 456-2223
Joe Romm
(202) 586-9260
Eric Petersen (DOE)
(202) 586-2176
Marilyn Brown (ORNL)
(423) 576-7572
ERNEST ORLANDO LAWRENCE BERKELEY NATIONAL LABORATORY 1 ONE CYCLOTRON ROAD 1 BERKELEY, CA 94720
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002
MEMORANDUM
August 29, 1997
TO:
T.J. Glauthier (OMB), Jeff Frankel (CEA), Robert Gillingham and Jon Gruber (Treasury),
Peter Orszag (NEC)
FROM:
Mark D. Levine and Marilyn Brown
RE:
Executive Summary and Chapter 1 of the Report "Scenarios of U.S. Carbon
Reductions"
CC:
Joe Romm, Eric Petersen, Mark Mazur
We are faxing to you a modified version of the Executive Summary and Chapter 1 of the referenced
report. In this version, we have attempted to respond to the concerns expressed in the meeting on August
19 while still expressing the major findings of the report.
We have received two sets of comments from you and expect to give you substantive responses to these
comments in the near future.
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EXECUTIVE SUMMARY
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States. 1 The study documents in detail how four key sectors of the economy
- buildings, transportation, industry, and electric utilities - could respond to directed programs and
policies to expand adoption of energy-efficiency and low-carbon technologies, an increase in the relative
price of carbon-based fuels by $25 or $50/tonne (e.g., as a result of a cap on domestic carbon emissions and a
market for carbon "permits"), and an aggressive program of targeted research and development. Current
projections suggest that a carbon emissions reduction of 380 million metric tons per year (MtC/year) is
required to stabilize U.S. emissions in 2010 at 1990 levels.
not
based
this
study's
BAU
The study, which has been peer-reviewed by industry and academic experts, uses a technology-by-
technology assessment as well as an engíneering-economic modeling approach. It draws upon a wide
variety of technology cost and performance information to assess potential impacts. Analysis of the
buildings, industry, and transportation sectors quantifies the impacts of end-use energy-efficiency
improvements on carbon emissions. The utility sector analysis estimates the impacts of those
improvements on utility carbon emissions, and quantifies additional emissions reductions through
conversion of a number of coal power plants to natural gas, dispatching of the utility grid with $25 and
$50/tonne carbon permit prices, the accelerated use of biomass cofiring and wind energy, and other low-
carbon electricity supply options. Finally, a number of other promising low-carbon technologies are
examined to determine their potential for reducing emissions in the end-use sectors, including advanced gas
turbines in industry, transportation biofuels, and fuel cells in buildings.
there government policies programs
Three overarching conclusions emerge from the analysis of alternative carbon scenarios. First, a vigorous
national commitment to develop and deploy cost-effective energy-efficient and low-carbon technologies
has the potential to restrain the growth in U.S. energy consumption and carbon emissions such that levels
in 2010 are close to those in 1997 (for energy) and 1990 (for carbon). We analyze a case in which energy
this
efficiency can reduce carbon emissions by 120 MtC/year by 2010. We analyze a second case, with policies
Policy
that promote adoption of energy-efficient and low carbon technologies and a $25/tonne carbon permit
price, with emission reductions of 230 MtC/year in 2010. Under a $50/tonne carbon permit price and
aggresive policies, 2010 emissions could be cut by about 380 MtC/year. The analysis also suggests that
substantial additional savings are available if permit prices were to begin to rise above the $50/tonne
level.
not true
The second conclusion is that, if feasible ways are found to implement the carbon reductions as described
above, all the cases (with reductions varying between 120 and 380 MtC/year by 2010) can produce direct
benefits that are roughly equal to or exceed costs.² The analysis includes only technologies estimated to be
cost-effective under 2010 energy prices (with a $25/tonne and $50/tonne carbon permit price for the
respective cases); it has not, however, analyzed specific policies to achieve the cases, identified the
political feasibility of policies, or described a pathway to achieve the cases.
The third conclusion is that a next generation of energy-efficient and low-carbon technologies promises to
enable the continuation of an aggressive pace of carbon reductions over the next quarter century. This
report documents a wide array of advanced technology options that could be cost-competitive by the year
2020, assuming a vigorous and sustained program of energy R&D beginning now and extending beyond 2010.
I The five national laboratories participating in the study were: Argonne National Laboratory (ANL), Lawrence Berkeley
National Laboratory (LBNL). National Renewable Energy Laboratory (NREL). Oak Ridge National Laboratory (ORNL).
and Pacific Northwest National Laboratory (PNNL). LBNL and ORNL were the co-leaders of the effort.
2 Here we count as benefits only the energy savings to the nation. We have not credited reduced CO2 emissions or
other external benefits. Costs include the increased technology cost plus an approximate estimate of the costs of
program and policy implementation. Explain/ID om.ted costs
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Chapter 1
Chapter 1
ANALYSIS RESULTS
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States.¹ The stimulus for this study derives from a growing
recognition that any national effort to reduce the growth of greenhouse gas emissions must consider
ways of increasing the productivity of energy use. To add greater definition to this view, we
quantify the reductions in carbon emissions that can be attained through the improved performance
and increased penetration of efficient and low-carbon technologies by the year 2010. We also take a
longer-term perspective by characterizing the potential for future research and development to
produce further carbon reductions over the next quarter century. As such, this report underscores the
value of energy technology research, development, demonstration, and diffusion as a public response
to global climate change.
govt
Three overarching conclusions emerge from our analysis of alternative carbon reduction scenarios.
First, a vigorous national commitment to develop and deploy cost-effective energy-efficient and
low-carbon technologies could reverse the trend toward increasing carbon emissions. Along with
utility sector investments, such a commitment could helt the growth in U.S. energy consumption and
carbon emissions so that levels in 2010 are close to those in 1997 (for energy) and in 1990 (for carbon).
It must be noted that such a vigorous national commitment would have to go far beyond current
efforts. Second, if feasible ways are found to implement the carbon reductions, the cases analyzed in
the study are judged to yield direct benefits that are roughly equal to or greater than costs. Third, a
next generation of energy-efficient and low-carbon technologies promises to enable the continuation
of an aggressive pace of carbon reductions over the next quarter century.
1.1 OBJECTIVES OF THE REPORT
The purposes of this study are threefold:
1. To provide a quantitative assessment of the reduction in energy consumption and carbon
emissions that could result by the year 2010 from a vigorous national commitment to accelerate
the development and deployment of cost-effective energy-efficient and low-carbon
technologies; document
2. To document the costs and performance of the technologies that underpin a year 2010 scenario
in which substantial energy savings and carbon emissions reductions are achieved;
3. To illustrate the potential for energy-efficiency and renewable energy R&D to produce further
reductions in energy use and carbon emissions by the year 2020.
1.2 METHODOLOGY
To achieve these objectives, we started with the Annual Energy Outlook 1997 (AEO97) reference
case forecasts for the year 2010 (Energy Information Administration, 1996). After thoroughly
reviewing these forecasts on a sector-by-sector basis, and working with EIA staff, we chose to accept
the EIA "business-as-usual" (BAU) scenario as is for buildings and industry. We modified some of
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Analysis Results
the assumptions and data to produce a new BAU case - not greatly different from the EIA case - for
the transportation and the electric utility sectors.
We then assembled existing information on the performance and costs of technologies to increase
energy efficiency or, for selected end-uses, to switch from one fuel to another (e.g., from electricity to
natural gas for residential end-uses or from gasoline to biofuels for transportation). For the buildings
sector, the technology performance and cost data base are extensive. For transportation, the data
base - although less fully developed than for buildings - is sufficient for our purposes. For industry,
only partial information on technologies and costs is presently available. As a result, the analysis
for industry relies primarily on historical relations between energy use and economic activity and
much less on explicit technological opportunities. The industrial analysis also includes some
examples of industrial low-carbon technologies. The analysis of low-carbon supply technologies in
the electricity sector is based on a review of the literature including detailed technology
characterizations prepared by DOE in conjunction with its national laboratories and industry.
Next we created scenarios of increased energy efficiency and lower carbon emissions using the
technology data (or, in the industrial sector, historical relations) as key inputs. We chose to run
three scenarios other than the BAU case. We have termed the first the "efficiency" (EFF) case. It
assumes that the United States increases its emphasis on energy efficiency through enhanced
public- and private-sector efforts. The general philosophy of the efficiency case is that it reduces,
but does not eliminate, various market barriers and lags to the adoption of cost-effective energy
efficiency technology.²
The other two cases, dubbed the $25 permit and the $50 permit "high-efficiency/low-carbon"
(HE/LC) cases, describe a world in which, as a result of commitments made on a climate treaty or
other factors, the nation has embarked on a path to reduce carbon emissions. Both of these cases
assume a major effort to reduce carbon emissions through federal policies and programs (including
environmental regulatory reform), strengthened state programs, and very active private sector
involvement. Both also include a focused national R&D effort to develop and transform markets for
low-carbon energy options (e.g., fuel cells for microcogeneration in buildings and advanced turbine
systems for combined heat and power in industry). The difference between the two HE/LC cases is in
3
the assumption of a carbon permit price resulting from a domestic trading scheme for carbon
emissions with a cap on U.S. emissions (or from equivalent policy measures that increase the price of
Q25 ~ back be detail case this this up to up
carbon-based fuels relative to those with less carbon). We assume a domestic permit price of $25
and $50 per tonne of carbon for the two cases. Both of these HE/LC cases include a program of
research, development, demonstration and diffusion that is more vigorous than in the efficiency
case. In the buildings and industry sectors, the carbon price signal, combined with policies promoting
energy efficiency, is believed to trigger most of the additional carbon reductions. In the
transportation sector, it is the R&D-driven technology breakthroughs that generate the bulk of the
carbon reductions beyond the efficiency case. For the electricity sector, higher prices for carbon-
based fuels cause larger shifts from coal to natural gas; for this sector, these same higher relative
prices combined with federal and private research, development, and demonstration can bring
advanced low-carbon technologies to market.
Although most of the analysis focuses on 2010, we also look beyond this date. Here we describe new
technologies, materials, processes, manufacturing methods, and other R&D advances that promise
to offer significant energy benefits by the year 2020; for this time period, we make no effort to
forecast specific levels of market penetration, energy savings, or carbon reductions. Thus, instead of
creating scenarios we describe the technological innovations that could enable the continuation of an
aggressive pace of decarbonization well into the next quarter century, if appropriate (sufficient investments in
R&D were made.
extensive
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1.3 BACKGROUND
The decade of gains in energy productivity achieved by the U.S. following the 1973-74 Arab oil
embargo represents a period of economic growth that was decoupled from increases in energy
consumption, resulting in substantial economic benefits. Between 1973 and 1986, the nation's
consumption of primary energy froze at about 74 quads - while the GNP grew by 35%. Starting in
1986, energy prices began a descent in real terms that has continued to the present. As a result,
energy demand grew from 74 quads in 1986 to 91 quads in 1995, and carbon emissions have been
increasing at a similar pace.
Despite the growth in energy consumption since 1986, the U.S. economy today remains more energy
productive than it was 25 years ago. In 1970, 19.6 thousand Btu of energy were consumed for each
(1992) dollar of GDP. By 1995, the energy intensity of the economy had dropped to 13.4 thousand
Btu of energy per (1992) dollar of GDP. The U.S. Department of Energy (DOE) estimates that the
country is saving $150 to $200 billion annually as a result of these improvements.
Nevertheless, many cost-effective energy-efficient technologies remain underutilized, as discussed
in Chapter 2. A host of market barriers account for these lost opportunities. And declining energy
R&D expenditures may cause promising technology options to be foregone.
The rationale for government support of energy-efficiency R&D is strong. Much energy-efficiency
research is both long-term and high-risk and therefore is not adequately funded by the private
sector - despite the possibility of sizable gains in the long run. Furthermore, advances in energy
efficiency offer substantial public benefits (such as carbon reductions and improved national security
through greater oil independence) that cannot be fully captured in the private marketplace.
The benefits of past public investments in energy-efficiency R&D have been well documented.
Between 1978 and 1996, DOE spent approximately $8 billion on energy-efficiency research,
development and demonstration (RD&D). Just five of the technologies that were developed or
demonstrated with a fraction of this DOE support have resulted in net benefits of $28 billion
through 1996. Many other R&D successes have produced technologies yielding substantial energy
and cost savings in the market. The DOE RD&D portfolio has also led to significant environmental,
health, productivity, and economic competitiveness benefits.
1.4 RESULTS
1.4.1 Prospects for Improved Efficiencles by the Year 2010
Table 1.1 and Figure 1.1 compare the nation's primary energy use in quads for the years 1990 and 1997
(projected) with the results of three scenarios for 2010. (We have included only the high-
efficiency/low-carbon case at $50/tonne in the table and figure for simplicity.) The $50/tonne
HE/LC case shown below does not reflect the energy impacts of the selected low-carbon technologies
described later in this summary (e.g., stationary fuel cells for buildings, advanced turbine systems
and biomass gasification in industry) or the supply-side options shown in Table 1.4.
]-
should be consistent
thru-at include DD QS case
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Table 1.1 Primary Energy Use in Quads: 1990-2010
2010
Business-as-
High-Efficiency/
1990
1997
Usual
Efficiency
Low-Carbon
Case
Case
Case ($50/tonne C)
Buildings
29.4
33.7
36.0
34.1
32.0
Industry
32.1
32.6
37.4
35.4
33.6
22.6
25.5
32.3
29.2
27.8
Transportation
Total
84.2
91.8
105.7
98.7
93.4
Source: Energy use estimates for 1990 come from EIA (1996a, Table 2.1, P. 39).
Energy use estimates for 1997 come from forecasts conducted for EIA (1996b).
Numbers may not add to the totals due to rounding.
The major observations are as follows:
In the business-as-usual case, energy use increases by 22 quads (26%) between 1990 and 2010; 8
quads of this increase have occurred during the first seven years of this 20-year period. The
fastest growing sector during these initial seven years has been buildings (4.3 quads) followed
by transportation (2.9 quads) and industry (0.5 quads). In the BAU case, the fastest growing
sector during the remaining 13 years is transportation (6.8 quads). This is followed by industry
(4.8 quads) and then buildings (2.3 quads). The rapid projected growth in the energy consumed
for transportation is driven by estimates of increased per capita travel and minimal fuel
efficiency gains.
The efficiency scenario cuts the overall growth between 1990 and 2010 from 22 to 15 quads. This
is a 17% increase over the level of energy consumption in 1990, down from a 26% increase in the
BAU case. Relative to the BAU case, the efficiency scenario for transportation delivers
slightly more energy savings (3.1 quads) than do the same scenarios for the industrial (2.0) or
buildings (1.9) sectors. Compared with 1997 levels, the smallest increase in energy growth for
this case is in buildings (0.4 quads), followed by industry (2.8 quads), and transportation (3.7
quads).
The high-efficiency/low-carbor scenario with $50/tonne carbon charge further decreases the
overall growth between 1990 and 2010, reducing it from 22 to 9 quads. This is an 11% increase
over the level of energy consumption in 1990. Relative to the BAU case, the high-
efficiency/low-carbon scenario for buildings, industry, and transportation delivers energy
savings ranging from 3.8 to 4.5 quads for each sector. Compared with 1997 levels, the buildings
sector is down about 2 quads and industry and transportation are up 1 and 2 quads, respectively.
7
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Figure 1.1 Primary Energy Use in Quads: 1990-2010
120
100
80
Buildings
Energy
60
(Quads/year)
Industry
40
20
Transportation
0
1973
1986
1990
1995
1997
Efficiency
Case
Business
High
as
Efficiency/
Usual
Low
Carbon
2010 Scenarlos
Table 1.2 documents the impact of these projected energy savings in 2010 on carbon emissions in that
same year. It also presents the results of the HE/LC scenarios with both $25 and $50 per tonne
carbon charges. These scenarios show significant carbon reductions from the combination of greater
efficiency improvements and increased use of advanced low-carbon technologies. 3 In these cases, a
number of low-carbon technologies have high rates of adoption (e.g., advanced turbine systems and
biomass gasification in industry), the utility grid is dispatched to reduce carbon emissions (by using
many coal plants for intermediate power and by running more natural gas plants as base load), a set
of coal-based power plants are repowered, nuclear plant lifetimes are extended, and key renewable
energy technologies are deployed. In all cases, these technologies and measures are estimated to be
cost-effective with a differential carbon fee of $50/tonne.
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Chapter 1
Table 1.2 Carbon Emissions (MtC): 1990-2010
2010
Business-as-
High-Efficiency/
Usual (BAU)
Efficiency Case
Low-Carbonᵃ
1990
1997
Case
$25/tonne
$50/tonne
Buildings
460
511
571
546
527
509
Industry
452
482
534
512
488
452
Transportation
432
486
616
543
528
513
Utilitiesᵇ
-
-
-
-
-48
-136
Total (rounded)
1340
1480
1720
1600
1490
1340
Change from 1990
140
380
260
150
0
Change from BAU
-
-
-120
-230
-380
-
This scenario includes the carbon emission reductions resulting from a carbon permit price of $25 or $50/tonne:
(1) dispatch of power plants in which natural gas is favored relative to coal, (2) repowering and partial
repowering of coal-based power plants to convert to natural gas, and (3) introduction of selected low-carbon
technologies to replace conventional ones, primarily in the industrial and utility sectors.
bThe entries in the last two columns are negative as they correspond to reductions in carbon emissions resulting
from the increased use of natural gas and low-carbon technology for electricity generation as a result of the
$50/tonne carbon permit price in this scenario.
why don't you detire
scinoid
Table 1.2 presents results for the business as usual and three efficiency/and/or low carbon
cases in 2010 as point estimates, because they are meant to be scenarios. When we use these
scenarios for analysis, in section 1.5, we describe sources of uncertainty and the effects of
uncertainty on our understanding of the implications of these cases. For now, we only
describe the different cases.
Figures 1.2 and 1.3 complement the above table by illustrating the carbon emissions reductions from
each scenario. The major observations are:
In the BAU case, carbon emissions are forecast to increase by approximately 380 million tonnes.
The energy-efficiency gains incorporated in the efficiency case cut overall growth between 1990
and 2010 by one-third (from 380 to 260 million tonnes). This represents a carbon increase of 19%
above 1990 emissions.
The HE/LC scenario with $25/tonne carbon charge has the potential to reduce carbon emissions
by 230 million tonnes from the BAU case in 2010. The largest part of these carbon reductions are
from increased efficiency, but major changes in electricity supply (carbon-based dispatching
and repowering) contribute nearly 35 million tonnes, and other low-carbon technology,
particularly renewables and advanced turbine systems, produce approximately another 25
million tonnes.
The HE/LC scenario with $50/tonne carbon charge has the potential to reduce carbon emissions
by approximately 380 million tonnes, thereby achieving 1990 carbon emission levels in 2010. Of
this 380 million tonne carbon reduction, about 190 million tonnes are from increased energy
efficiency, 140 million tonnes results from increases in the use of low-carbon fuels and
technologies in the utility sector, and 50 million tonnes results from the use of low-carbon
technology in industry and transportation.
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Analysis Results
Figure 1.2 Reductions in Carbon Emissions from Each Scenario
400
380
Other Low-Carbon Technologies
Electricity Supply Technologies
Energy-Efficient Technologies
Million Tonnes of Carbon Emissions Reduction
300
230
200
120
100
0
Efficiency
HE/LC Case
HE/LC Case
Case
$25/tonne C @ $50/tonne c
Figure 1.3 Reductions in Carbon Emissions from Each Type of Technology
400
HE/LC Case @ $50/tonne C
HE/LC Case @ $25/tonne C
Million Tonnes of Carbon Emissions Reduction
300
Efficiency Case
200
190
140
100
50
0
Energy-
Electricity
Other
Efficient
Supply
Low-Carbon
Technologies
Technologies
Technologies
100 million of the 140 million tonnes of carbon reductions in the utility sector comes from
redispatching the utility system (favoring the use of low-carbon fuels) and from repowering
coal plants with natural gas. Both are cost-effective with a $50/tonne carbon charge. The
remaining 40 million tonnes are from renewables (wind, co-firing coal-based power plants with
biofuels, expansion of hydropower capacity), nuclear power plant life extensions, and power
plant efficiency improvements.
The remaining 50 million tonnes of carbon reductions in industry and transportation are about
equally divided among three sets of fuels/technologies: (1) advanced combustion turbine
cogenerators in industry, (2) biomass and black liquor gasification and low-carbon industrial
processes, and (3) cellulosic ethanol/gasoline blends for automobiles.
Approximately 140 MtC of the increase in carbon emissions between 1990 and 2010 will have
occurred by the end of 1997; thus, it is useful to look at the 13-year forecast starting with 1997.
10
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The carbon reductions incorporated in the efficiency case cut the overall growth in carbon
emissions between 1997 and 2010 from 240 million tonnes (as forecast in the BAU case) to 120.
The HE/LC scenario with $50/tonne carbon charge reduces carbon emissions in 2010 by about 130
million tonnes (compared with the 1997 level).
Table 1.3 provides a comparison of the growth rate in energy and in carbon emissions for the four
cases, from 1990 to 2010. For the BAU and efficiency cases, the growth in carbon emissions is slightly
more rapid than the increase in energy demand. For the HE/LC cases, carbon emissions decline
while energy consumption rises. The carbon reduction reflects the increased deployment of low-
carbon fuels and technologies as a consequence of the relative increase in price of carbon-based fuels
precipitated by the $50/tonne incentive.
Table 1.3 Average Annual Energy and Carbon Growth Rates, 1997 to 2010, for Four Cases
High Efficiency/
High Efficiency/
Business-As-
Efficiency
Low Carbon Case
Low Carbon Case
Usual (BAU)
Case
($25/tonne)
($50/tonne)
Gross Domestic Product
(GDP)a
1.88%
1.88%
1.88%
1.88%
Energy Demand
1.09%
0.56%
0.34%
0.13%
Carbon Emissions
1.16%
0.60%
0.05%
-0.76%
Energy Consumption Per
-0.77%
-1.30%
-1.51%
-1.71%
GDP (E/GDP)
Carbon Emissions Per GDP
-0.70%
-1.25%
-1.79%
-2.59%
(C/GDP)b
a The Gross Domestic Product (GDP) in 1995 was $7251 billion in 1995 dollars. The 1.88% annual growth was
assumed to apply to the entire period, 1995-2010 to derive the results above.
b The carbon decrease per unit GDP growth for 1990 to 2010 is 0.7%, 1.1%, 1.4% and 1.9% per year for the
reference, efficiency, $25/tonne HE/LC, and $50/tonne HE/LC cases, respectively.
It is useful to compare the scenarios in this study to those of other studies. The 1991 report by the
Office of Technology Assessment (OTA) titled Changing by Degrees (U.S. Congress, 1991) analyzed
the potential for energy efficiency to reduce carbon emissions by the year 2015, starting with the
base year of 1987. Its "moderate" scenario results in a 15% rise in carbon emissions, from 1300
-check
MtC/year of carbon in 1987 to 1500 MtC/year of carbon in 2015 (compared to a BAU forecast of 1900
HEOR
MtC/year). Its "tough" scenario results in a 20% to 35% emissions reduction relative to 1987 levels,
or emissions levels of 850 to 1000 MtC/year of carbon in 2015. Our efficiency and HE/LC cases
ranging from 1.3 to 1.6 billion tonnes of carbon emissions in 2010 are comparable to OTA's "moderate"
case and show considerably higher emissions than OTA's "tough" case.
case (AE097)
1800
Another benchmark is provided by the 1992 National Academy of Sciences (NAS) report on Policy 2015:
MMILE
Implications of Greenhouse Warming (National Academy of Sciences, 1992). This study identified a
set of energy conservation technologies that had either a positive economic return or that had a cost
of less than $2.50 per tonne of carbon. Altogether, NAS concluded that these technologies offer the
potential to reduce carbon emissions by 463 million tonnes, with more than half of these reductions
arising from cost-effective investments in building energy efficiency. Our efficiency and HE/LC
cases suggest the potential for reducing carbon emissions by between 120 and 380 million tonnes by the
year 2010. One reason that the NAS estimate is higher is because it is not limited to the 2010 time
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frame, but rather characterizes the full potential for carbon reductions. Thus, it did not take into
account the replacement rates for equipment and processes, and other factors that prevent the
instantaneous, full market penetration of cost-effective energy-efficient and low-carbon
technologies.
1.4.2 R&D's Potential for Further Benefits by 2020
If carbon reductions in 2010 and beyond are to be sustained at reasonable cost, vigorous R&D efforts
are needed to fill the pipeline of next-generation energy technologies. It is difficult to estimate the
carbon savings that will accrue from these technologies; however, our effort to characterize their
features suggests that an aggressive pace of carbon reductions over the next quarter century can be
sustained, with a sufficient investment in R&D. Our analysis of R&D potential for the year 2020
focuses on opportunities for improved energy-efficiency and renewable energy technologies. The
potential long-term contributions of carbon sequestration, advanced coal technologies, and nuclear
power may also be significant. However, the treatment of vigorous R&D initiatives to improve
these supply options beyond 2010 is beyond the scope of this report.
Renewable energy technologies will likely play a crucial role in limiting carbon emissions over the
that
long term. Low-carbon energy supply options are needed to fuel domestic and international economic
fraition
development without stimulating further global warming. Although renewable resources account
note
for only 7% of the nation's total energy consumption at present, many believe that they are at the
this
beginning of a long-term growth trajectory. With continuing technological development and cost
one
reductions, renewables could become preferred energy resources some time within the next several
decades. Early evidence of this transition is seen in the continuing adoption of renewable power
systems, including especially wind farms and biomass power systems, even in the face of low gas-
fired power generation costs and considerable uncertainty in today's electric energy sector.
any
(buth
(ast
With a vigorous and sustained program of research, development and deployment, biomass, wind,
we
photovoltaics, geothermal, and solar thermal technologies could deliver significant quantities of
electricity in 2020, thereby substantially displacing carbon emissions. For example, the use of
forestry and agricultural residues in biomass power systems continues to be an attractive power
option where those residues exist. The successful development of higher-efficiency biomass
H
gasification systems would make this technology competitive in a wider range of applications,
including for power systems using dedicated feed stock supply systems. At the same time, biological
campate
and agricultural research on biomass production will lead both to higher biomass yields and better
species for energy conversion purposes in the future.
A second area in which a vigorous and sustained R&D effort could spawn a range of key
improvements is in wind power systems. Potential improvements include
Advanced blade shapes that increase wind power capture while reducing stress loads
Elimination of gearboxes through development of direct-drive generators
Variable speed turbines, and
Better resource prediction that will increase the value of wind power to power systems
operators.
A third area of renewables development that is at the beginning of a long-term growth path is the
use of renewables in buildings. Solar daylighting, passive solar designs, solar water heating, and
geothermal heat pumps already are cost-competitive in many applications, but are not yet widely
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Analysis Results
used. R&D advances could substantially accelerate their market penetration. In addition,
building-integrated photovoltaic products will benefit directly from advances in materials
research. The ultimate vision is that many buildings will become "net energy generators" through a
combination of renewable energy and energy-efficiency technologies.
In the next quarter century, improved energy-efficiency technologies will result from a combination
doesn't
of incremental advances and fundamental breakthroughs. Incremental improvements in all sectors
mention the
can be achieved by the greater reliance on more precise and reliable sensors and controls or on lower-
role of
cost sensors and controls, often integrated into industrial processes, transportation systems, and
consumer
buildings. Advanced manufacturing technologies, including rapid prototyping and ultraprecision
demand
in
fabrication, also offer broad opportunities for continuous incremental improvements in energy
these
advances
efficiency and renewable energy. Breakthroughs in bioprocessing, separations, superconductivity,
catalysts, and materials can have wide-ranging impacts on energy efficiency and carbon emissions
by the year 2020. Examples of specific technology opportunities are described in this report, by
sector.
Five R&D areas offer great promise to reduce significantly the energy requirements of our nation's
buildings in 2020:
Advanced construction methods and materials
Adaptive building envelopes
? 3 there c trade-off w/ IAQ
Multi-functional equipment
Integrated, advanced lighting systems, controls and communications and
Self-powered buildings.
In addition to the broad application of better process modeling, sensors, and controls in industry,
many process/industry-specific opportunities for efficiency gains exist. These are described for each
check these
of DOE's targeted industries of the future: pulp and paper, chemicals, petroleum refining, glass,
descriptions
aluminum, iron and steel, and metal casting.
Many of the advanced technologies that have the potential to significantly improve the energy
efficiency of transportation need considerable R&D investment before they can become commercially
available in the year 2020. For example, to achieve fuel economies in the 60-80 miles per gallon
(MPG) range and remain affordable and safe, light-duty vehicles will need
Breakthroughs in manufacturing processes for composite materials
Large reduction in fuel cell costs and/or cost reductions and performance gains in batteries
Utra-low rolling resistance tires
High-efficiency accessories and
Highly aerodynamic designs.
Opportunities for R&D to lead to improvements in the energy efficiency of other transportation
modes are also described in this report.
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Chapter 1
In all, the continued adoption of energy efficient and renewable energy technologies and a steady
flow of technology improvements from collaborative R&D programs with industry could make such
environmentally friendly technology an attractive option for domestic and global energy economies
in the future. With strong public-private partnerships to support the necessary R&D and market
transformation activities, ample cost-effective energy products and practices will be available in
2020.
1.5 ASSESSMENT OF COSTS AND SOURCES OF CARBON REDUCTIONS
This is AE097
net case
The business-as-usual scenario projects an increase of 380 MtC/year between 1990 and 2010. In our
not DOES
efficiency scenario, in which the nation actively pursues policies and programs to promote market
BAU
acceptance of energy efficiency while expanding commitments to research and development, energy-
efficient technologies reduce this growth in carbon emissions by 120 MtC/year. Under a carbon cap
and trading system, in which permits for carbon sell for either $25 or $50/tonne C, very substantial
carbon reductions appear possible. Detailed results for these cases, showing the sources of the carbon
reductions, are contained in Table 1.4. (Summaries of these results were presented in Figures 1.2 and
1.3.) Results indicate that, for the $50/tonne HE/LC case, there is a potential to roughly return to
1990 levels of carbon emissions in 2010. About two-thirds of the increase in carbon emissions is
eliminated in the case with a $25/tonne carbon charge (Table 1.4).
why alwaysI the
The estimates in Table 1.4 include ranges for most of the electricity supply options and the other
low-carbon technologies. There are no ranges for the efficiency technologies because the models used
to estimate their penetration are nonstochastic. When selecting a single estimate for the $50/tonne
case, numbers from the low end of the ranges were generally selected in order to be cautious. Because
consetintive
being
13
we did not conduct an integrating analysis in which supply options compete against one another, we
god
felt it important to minimize potential overlap by entering the supply options in conservative
substitute
for
check
quantities. Also note that several renewable resources that could play a greater role by 2010 are
it rights
omitted from Table 1.4; these resources include include photovoltaics, geothermal, solar thermal,
these(
on
and landfill gas.
other? with
But
the
One should not ascribe too much significance to specific entries in Table 1.4 There are many different withe of
technologies, both on the supply and demand side of the energy system, that will compete to the b. Homs
achieve carbon reductions in an environment in which policies and economic signals favor such up approach
reductions. Thus, for example, Table 4.1 shows advanced turbine systems in industry cutting carbon that give it
can
emissions by 17 MtC/year in 2010, co-firing coal with biomass reducing emissions by the same
this
amount, and other low-carbon supply technologies (wind, nuclear plant extensions, hydropower
kind
of
expansion, and power plant efficiency) contributing 24 MtC/year. The actual choice of technology
detail
depends on how the economics of the different systems evolve over time, how the industry to supply.
technology develops, the nature and speed of deregulation within the utility industry, and numerous
other factors that cannot be known today. As such, we do not intend the results in Table 1.4 to be
taken as a prediction of one technology over another to achieve carbon reductions. In this instance,
we have posited one of many possible mixes of supply technologies. These same comments apply to
the demand-side sectors and technologies.
why?
We summarize below the expected technology costs in 2010, as well as the cost of implementing a
carbon permit system. While these costs are necessarily uncertain, they are our best estimates and,
in our view, as likely to be high as to be low. We note, however, that we have focused our analysis
on technology costs, and have not assessed the viability of specific policies or programs to achieve
market acceptance. As described below, we do account for program and policy costs in an
approximate manner.
best
or
optimistic
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Table 1.4 Potential Annual Reductions in Carbon Emissions in 2010, Compared to the Business-As-
Usual Forecast for 2010 (MtC)
High-Efficiency/Low-Carbon
Case
Efficiency
Case
$25/tonne
$50/tonne*
Buildings
25
42
59
Energy efficiency
2
3
Fuel cells
25
44
62
why don't
Industry
22
36
5
these vanges have
51
Energy efficiency
17 (15-26)
Advanced turbine systems
Biomass and black liquor gasification,
5
14 (13-16)
cement clinker replacement, and
aluminum technologies
22
46
82
Transportation
61
74
87
Energy efficiency
14
16
Ethanol
12
73
88
103
Utility Supply Options
25
55
Carbon-ordered dispatching
Converting coal-based power plants to
9
40 (25-66)
natural gas
5
17 (16-24)
Co-firing coal with biomass
2
7 (6-20)
Wind
Extending the life of existing nuclear
3
5 (47)
plants
2
4 (3-5)
Hydropower expansions
2
8 (7-13)
Power plant efficiency
48
136
120
226
383
Total (rounded)
Numbers in parenthesis are ranges, as documented in the text of the report. See Appendix A-1 for a description of
the derivation of the results in this table.
Appendix A-2 describes the full set of calculations used to derive the direct costs and benefits of the
cases. The costs considered include the incremental technology investment by consumers and
businesses, fuel price increases, and the estimated cost of federal, state, and local programs required
to achieve the carbon) emissions reductions. These constitute the direct costs of the scenarios. The
highest of these by far is the incremental investment costs. However, the generally higher first cost
of these technologies is counterbalanced by substantially lower operating costs. The benefits
considered are limited to the savings in operating (energy) costs from the technology investments.
does it? Text does not read as such -
sector chapters; Calculations don't reflect prize
increases
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Using these factors as the direct costs and benefits of the scenarios, we have analyzed the economics
of carbon emissions reductions from two different perspectives in order to establish a credible range
of costs. In the first, which we label "optimistic," we evaluate all costs and benefits with a real
discount rate that approximates the cost of capital for efficiency investments for the different end-
use sectors:
this i3 not true
7% for buildings
are these new
10% for transportation
12.5% for industry.
The lowest discount rate, for buildings, is based on the fact that the money for residential buildings
is derived from home mortgages or home improvement loans. The higher rate for industry reflects
the fact that energy-efficiency investments have to compete with investments for other projects.
These discount rates are not those that describe current market behavior, but rather are reflective of
costs of capital if the market did invest in the energy-efficiency measures. For the "optimistic"
case, we assume costs for efficiency measures brought about by utility, federal programs, and state
programs (e.g., demand-side management programs by utilities, federal market transformation
programs) to be 15% of technology costs We also assume that at least half of the efficiency occurs as
a result of federal policies (e.g.) standards on carbon permit charges) which add very low direct
program costs. Thus, the overall costs of implementation are taken to be about 7% in the
"optimistic" case. The electric supply-side technologies are assumed to add an incremental cost of
$30/tonne carbon in 2010, based on an average estimate of the incremental costs of the technologies
from the appropriate sections of this report.
1/2 of reductions f(stds)
These programs and policies are not specified in this study, but the broad nature of the actions could
include technology R&D partnerships such as the current Partnership for a Next Generation of
Vehicles and Industries of the Future; energy efficiency codes and standards; expanded
partnerships, technical assistance, and information programs to accelerate the adoption of energy-
efficient technologies; incentives through the tax system directed at investments in energy-efficient
technology in industry; and a variety of non-federal programs to accelerate market diffusion of
energy-efficient and low-carbon technologies.
realitie, not pessimistic
this appear to be
The second perspective, which we label "pessimistic," assumes that there are hidden costs
associated with achieving widespread market acceptance of many of the efficiency and low-carbon
technologies, even after the imposition of a carbon charge and the implementation of major policies
and programs to promote a low-carbon future. In this perspective, we evaluate costs and benefits at a
real discount rate of 15% for buildings and 20% for transportation and industry. Program costs are
increased to 30% of the cost of efficiency measures, an estimate that is a high bound compared with
federal, state, and utility experience- Overall implementation costs (programs and directed
policies) are taken to be 15% of technology investments in this case. Other data and assumptions in
this case are the same as for the "optimistic" case.
reference this experience
ret savings
The results of the economic analysis are presented in Table 1.5. Estimated direct costs are $26-$49
billion per year for the efficiency scenario and $51 to $88 billion per year for the high-
efficiency/low-carbon scenario. Estimated savings per year in 2010 are $42 to $51 billion per year in
the efficiency case and $70-$88 billion per year for the high-efficiency/low-carbon case. The costs,
which are a small portion of annual gross private domestic investment of about $1.4 trillion in 2020,
are likely to be more than balanced by savings in energy bills. Thus, net costs to the U.S. economy
are near or below zero in this time frame.
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Table 1.5 Estimated Costs and Benefits of the Efficiency and High-Efficiency/Low-Carbon
Scenarios : Optimistic and Pessimistic View Estimates (billions of 1995$, annualized)
Efficiency
High-Efficiency/Low-Carbon
Caseᵃ
Caseb
Benefitsc
Costsd
Carbonc
Benefits
Costs
Carbon
(billion
(billion
Savings
(billion
(billion
Savings
1995$)
1995$)
MtC
1995$)
1995$)
MIC
Energy Efficiency
Buildings
14-17
7-14
20-25
26-33
14-26
49-62
Industry
6-7
3-5
18-22
12-15
8-13
66-82
Transportation
22-27
16-30
58-73
32-40
23-43
82-103
Electricity Dispatch
0
0
0
0
2
44-55
Electricity Repowering
0
0
0
0
2
32-40
Other Low-Carbon Techologies
0
0
0
0
2
33-41
Total
42-51
26-49
96-120
70-88
51-88
306-383
compane
8/1
dratt
a Energy efficiency category includes ethanol in transportation.
b Benefits and carbon savings in the HE/LC case are relative to BAU case.
C Benefits are calculated as annual energy savings. The scenarios are meant to be point estimates. In the
"pessimistic" case, we have assumed that only 80% of the carbon savings are achieved, even though the technology
and implementation costs are unchanged. The range on carbon savings represents this assumption.
d Costs are calculated from differing viewpoints: the "optimistic" case uses discount rates that vary between 7%
and 12.5% for the different sectors, as described in the text. For the "pessimistic" case, the discount rates used to
annualize costs vary between 15% and 20%. Also in this case, the cost of implementing programs (30%) and an
overall package of programs and policies (15%) is taken to be twice that of the "optimistic" case.
The range of estimates in Table 1.5 reflects our attempt to "bound" optimistic and pessimistic
assessments. There are clearly other ways in which these bounds could be described, just as there are
many scenarios that could have been analyzed. However, we believe that the assumption that 80%
of the carbon reductions are achieved at the costs identified, valuation of costs and benefits at
discount rates noticeably higher than the likely cost of capital, and doubling the cost of programs
and policies from typical experience today is a strong reflection of pessimism in costs for our cases. It
is worth noting that if the implementation costs were taken to be much higher than we believe to be
reasonable - 50% of investments costs for programs and 25% overall - this would add about $10
billion per year to the costs of the high-efficiency/low-carbon in the pessimistic case.
In addition to these costs, one needs to calculate the impact of the cases on natural gas demand. In
all of these cases, natural gas replaces very large quantities of coal. Higher natural gas demand
would result in higher natural gas prices, which in turn would increase the cost of substituting
natural gas for coal in power production, etc. As it turns out, our scenarios have somewhat reduced
gas demand compared with the BAU case (or with AEO97 baseline for 2010, on which the price of
natural gas in our work is based). Specifically, demand for natural gas in the HE/LC ($50/tonne)
case declines in 2010 by 2 quads compared with the business-as-usual case. This is the result of
declines of 0.5 quads for buildings, 1.0 quads for industry, and 0.5 quads for electricity. The latter
occurs because of the balance among three factors:
Increase in gas demand because of the large-scale substitution of natural gas for coal
Decrease of gas demand because of the use of many low-carbon technologies that do not use
natural gas (wind, nuclear power plant extensions, power plant efficiency upgrades,
hydropower expansion, co-firing with biofuels), and
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The large increase in cogeneration, which reduces demand for natural gas for heating
applications.
The sum of the second and third effects are somewhat greater than the first, and thus total natural
gas demand associated with electricity I generation declines. This will reduce the cost of natural gas,
a benefit that we have not included in
The $50/tonne carbon charge, while not constituting a direct cost, does represent a potentially large
transfer payment. The magnitude of the transfer payment, as well as the losers and winners from
the transfers, depends on the nature of policy and its implementation as a cap and trade system or
some alternative. The amount of money that could be in play is very large: $50/tonne times 1.3
billion tonnes per year equals $65 billion per year.
In short, while there will surely be winners and losers for these energy-efficiency and low-carbon
scenarios, our analysis shows that their net economic costs - under a range of assumptions and
alternative methods of cost analysis - are favorable.
The achievability of the cases depends on many factors. In all cases, carbon reductions require the
nation to embark on an aggressive set of policies and programs. Such efforts could occur in response to
an international agreement on climate change or to other events that result in a national
determination to reduce the growth of carbon emissions. In the high-efficiency/low-carbon cases, we
assume a vigorous national program of research, development, demonstration, and diffusion, and a
trading regime for carbon with a domestic permit price of either $25/tonne or $50/tonne carbon.
Without some scheme that provides strong incentives for switching from coal to natural gas, and for
deploying other low-carbon technologies, much of the potential for carbon reductions will not be
realized.
Government policies and programs that encourage and/or require the adoption of energy-efficiency
and low-carbon technologies will be needed, along with incentives for industry to invest more in
these technologies. Additional private and public investments are necessary, not only to accelerate
the introduction of new technologies into the market before 2010 but also to ensure the availability
of technologies for the period after 2010. The transportation and utility sectors are especially
dependent on early technological advances to achieve the scenario results in 2010.
There is no assurance that these and other driving forces will cause the scenarios we have described
to take place. Our major conclusion is that cost-effective technology can be deployed to achieve
major reductions in carbon emissions by 2010. Cost-effective energy efficiency alone can take the
nation 30 to 50% of the way to 1990 levels. Two additional utility sector measures can reduce carbon
emissions by another 30% at an estimated cost of $50/tonne carbon: carbon-based dispatch and
conversion of existing power plants from coal to natural gas.4 Finally, we identify several
additional technologies that can contribute up to 20% of the several carbon reductions, also for less
than $50/tonne. A next generation of advanced energy-efficiency and renewable energy technologies
promises to enable the continuation of an aggressive pace of energy and carbon reductions over the
next quarter century.
1.6 REFERENCES
Energy Information Administration (EIA). 1996. Annual Energy Outlook 1997: With Projections to
2105, DOE/ELA-0383(97) (Washington, DC: U.S. Department of Energy), December.
August 29, 1997 V2
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Analysis Results
Chapter 1
National Academy of Sciences (NAS). 1992. Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base (Washington, DC: National Academy Press).
Office of Technology Assessment (OTA). 1991. Changing by Degrees: Steps to Reduce Greenhouse
Gases, OTA-0-482 (Washington, DC: U.S. Government Printing Office) February.
ENDNOTES
1 The five national laboratories participating in the study were: Argonne National Laboratory
(ANL), Lawrence Berkeley National Laboratory (LBNL), National Renewable Energy Laboratory
(NREL), Oak Ridge National Laboratory (ORNL), and Pacific Northwest National Laboratory
(PNNL). LBNL and ORNL were the co-leaders of the effort.
2 See Section 2.2.3 for a definition of cost-effective energy efficiency technology.
3 $50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline or 0.5 cents per kilowatt-hour
for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at
34% efficiency). $25 per tonne would cut these gasoline and electricity price increments in half.
4 The cost curve for repowering is relatively flat; as such, considerable additional reductions are
possible at a cost not too different from $50/tonne. The results are highly sensitive to the price
differential between coal and natural gas; at a lower (higher) price differential, a higher (lower)
permit price of carbon is needed.
19
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EPA-OAR/OAP
202 233 9589 P.01/03
CC:JA
UNITED PROTECTION STATES. AGENCY
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
OFFICE OF
AIR AND RADIATION
FAX MEMORANDUM: 3 Total Pages
TO:
Joe Romm, Acting Assistant Secretary
Office of Energy Efficiency and Renewable Energy
U.S. Department of Energy
CC:
Eric Petersen, DOE/EE
Mark Levine, LBL
Marilyn Brown, ORNL
T.J. Glauthier, OMB
Jeffrey Frankel, CEA
Jonathan Gruber, Treasury
FROM:
Skip Laitner
SUBJECT:
Comments on the National Lab Study
DATE:
August 28, 1997
Please note the attached
memo from David Doniser , et al,
Many thanks!
AUG-28-1997 18:06
EPA-OAR/OAP
202 233 9589 P.02/03
UNITED
STATES.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
AGENCY
WASHINGTON, D.C. 20460
PROTECTION
MEMORANDUM
OFFICE OF
AIR AND RADIATION
TO:
Joe Romm, Acting Assistant Secretary
Office of Energy Efficiency and Renewable Energy
U.S. Department of Energy
FROM:
Skip Laitner, EPA/OAP
Julie Gorte, EPA/OPPE
Jim Turnure, EPA/OPPE
THROUGH: David Doniger, EPA/OAR David Dong
SUBJECT:
Comments on the National Lab Study
DATE:
August 28, 1997
This memo outlines a number of EPA suggestions to provide a stronger economic context for the
findings contained in the National Lab Study, Scenarios of U.S. Carbon Reductions: Potential
Impacts of Energy-Efficient and Low-Carbon Technologies by 2010 and Beyond. As it stands,
the combined efforts of DOE and its National Laboratories deserve consideration at the highest
levels. In the interest of improving the final work product, however, our comments for
improvements follow.
(1) What the Report Provides: The report provides an excellent reference for policy makers to
help them understand the role of technology in reducing overall carbon emissions within the
United States. In particular, the scenarios of potential carbon reductions offer a useful
benchmark to gauge the impact of different investment decisions on overall carbon emissions.
The technology costs, energy bill savings, and emission reductions identified for each of the
scenarios and end-use sectors fall within the range of documented estimates with which we are
familiar.
(2) What the Report Doesn't Provide: Although the report provides a reasonable analysis of
the direct costs and benefits of the scenarios, it does not provide any estimate of the indirect or
secondary costs and benefits. This point needs to be made early in the presentation. For
example, the report does not include specific estimates of the R&D costs needed to stimulate the
development of new technology. Neither does it provide estimates of the program costs which
may be needed to accelerate the diffusion of both existing and new technology that can help
reduce carbon emissions. At the same time, however, the report does not provide estimates of
the benefits from reduced emissions of criteria air pollutants or larger productivity gains made
Recycled/Recyclable Printed with Vegetable OII Based Inks on 100% Recycled Paper (40% Postconsumer)
AUG-28-1997 18:06
EPA-OAR/OAP
202 233 9589 P.03/03
possible by energy-efficient and low-carbon technologies. Again, it would be helpful to state
clearly and early what economic costs and benefits are included and which ones are not included.
(3) Magnitude of Investment: We believe it is worth noting that in the period 1998 through
2010, the AEO97 forecast indicates the United States will generate a total investment of $17.2
trillion (in 1992 dollars). If the Lab Study numbers are right, the roughly $400 billion
investment is less than 3 percent of the total investment otherwise anticipated by AEO97. In
other words, we are talking about diverting only 2 to3 percent of the typical investment pattern
away from less-efficient and more carbon-intensive technologies into a more productive mix of
technologies.
(4) The Economic Costs: A separate analysis based upon the results of the Lab Study suggests
that stabilizing to 1990 emission levels by 2010 would require a cumulative investment of $400
billion in the period 1998 through 2010 (based upon 1995 dollars). It further suggests that
energy bill savings will be on the order of $700 billion over that same period of time (also in
1995 dollars). The analysis further suggests that the economic costs (i.e., non-investment
expenditures such as R&D and program costs) are on the order of 7 percent of the technology
investment. This implies, by definition, that the economic costs are about 4 percent of the
cumulative energy bill savings. This number appears to be a reasonable estimate drawn from the
literature. However, it would be useful to provide a range of dollar estimates rather than a mere
percentage of the technology investment costs. Our own estimate suggests that this would be on
the order of $20-25 billion. We e-mailed to you previously the outline of a suggested
methodology that documents how we derived this estimate.
(5) An Integrated Analysis: The individual scenarios are essentially a series of bottom-up
analyses with little or no economic feedbacks that reflect either price or income effects. This is
hardly a fatal flaw since these second order impacts will not likely affect the overall result of the
Lab Study. Still, it would be helpful to understand the influence of such effects on the study
results. For that reason, we suggest that DOE continue the work that EPA began with LBL last
fall, using the NEMS model to evaluate the impact of the Lab Study scenarios. As the early
information from the Lab study became available, we asked LBL to integrate it into the NEMS
framework. The preliminary results are encouraging. That work should be immediately
completed since it will help tell a more complete story. (Note: EPA has completed a similar
macroeconomic analysis using Argonne's AMIGA model which, unlike NEMS, is a CGE model.
The results there, are encouraging as well.)
Cc:
Eric Petersen, DOE/EE
Mark Levine, LBL
Marilyn Brown, ORNL
T.J. Glauthier, OMB
Jeffrey Frankel, CEA
Jonathan Gruber, Treasury
TOTAL P.03
08/26/97 TUE 10:26 FAX 510 486 5404
EEI DIVISION
0001
" : JA
<<<<<<<
RL
ERNEST ORLANDO LAWRENCE
BERKELLY LAR
BERKELEY NATIONAL LABORATORY
FAX
Date:
August 26. 1997
Total Pages: 2
To:
See Distribution
Fax No.:
See Distribution
Location:
From:
Mark Levine & Marilyn Brown
Phone:
(510) 486-5238
Location: LBNL
Subject: Memorandum
Distribution:
T.J. Glauthier (OMB)
(202) 395-4639
Jeff Frankel (CEA)
(202) 395-6947
Jon Gruber (Treasury)
(202) 622-2633
Robert Gillingham (Treasury)
(202) 622-2633
Peter Orszag (NEC)
(202) 456-2223
Eric Petersen (DOE)
(202) 586-2176
Marilyn Brown (ORNL)
(423) 576-7572
&
EANEST ORLANDO LAWRENCE BERKELEY NATIONAL LABORATORY I ONE CYCLOTRON ROAD I BERKELEY, CA 94720
08/26/97 TUE 10:26 FAX 510 486 5454
EEI DIVISION
MEMORANDUM
To:
T.J. Glauthier (OMB). Jeff Frankel (CEA). Jon Gruber and Robert Gillingham
(Treasury). and Peter Orszag (NEC)
From:
Mark D. Levine (LBNL) and Marilyn Brown (ORNL)
Date:
August 26. 1997
Subject:
Response to the Economic Review of the Draft Report "Scenarios of U.S.
Carbon Reductions, 2010"
The purpose of this memo is to note the ways in which we Intend to respond to the review that
was conducted in the multiagency meeting (EPA. CEA, Commerce. DOE. NEC. OMB. OSTP.
Treasury) on August 19.
First, we noted the concern that the report, as written. could be picked up and misunderstood or
misrepresented by the press. In particular. as Jeff Frankel articulated, there might be a sense
that the carbon reduction scenarios could be achieved easily. and that it would only be
necessary to check some box for policies to go into place to bring it about.
We also noted two related concerns: first. that the results were presented as scenarios with
point estimates rather than ranges. Second. we note the belief that was stated that the
economic analysis was incomplete. and that the study may have not included costs associated
with achieving the carbon reductions.
We agree with the first concern. We do not believe that the results we obtained mean that
achieving 1990 carbon emission levels in 2010 is either easy to do or even reasonably
achieveable in the policy environment in which we now find ourselves. We do believe that. if
policies were put in place and effectively implemented. the net cost of the scenario could be low
or even negative. But that depends (among other things) on the ability to reach concensus in
Congress and the White House on a number of matters.
Regarding the presentation of point estimates of both carbon reductions and costs: we agree
that these point estimates can easily lead the reader to assume the these results are known
much better than they are. It is a feature of scenario analysis that one often "pretends"
certainty for a given scenario. in order to illustrate simply the consequences of a set of
assumptions. One then deals with the uncertainty through (1) sensitivity analyses to the
scenarios or (2) offering different scenarios. However. we are sensitive to the concern that
leaving the results as they are will increase the likelihood of misinterpretation by the press
and others.
Finally. regarding the comments on the economics: in our view, we have done a great deal of
work on the microeconomic costs of bringing energy efficiency and low carbon technologies
into the market. We will respond more fully on this when we respond to the memo from Robert
Gillingham and Jonathan Gruber to T.J. Glauthier of August 21 entitled "Comments on the 5-
labs Study." Nonetheless, we do agree that there is more uncertaintly in the economic analysis
than the reader might believe reading the report, and we will strive to make that clear in the
next version.
In conclusion, we intend to respond to the comments in the meeting by modifying the executive
summary and chapter 1. Analysis Results, by either eliminating point estimates or presenting
sensitivity analyses and in other ways (more and better caveats) to try to avoid
misuriderstandings of our results. We will also respond to the written comments separately.
thus permitting a more in-depth exploration of the other issues that were raised about the
study.
&
David.Chien @ eia.doe.gov
08/25/97 02:07:00 PM
Record Type: Record
To:
joseph e. aldy
CC:
Subject: Inter-lab report and AEO97 energy/gdp ratios w/constant MPG
Dear Joseph Aldi of the Council of Economic Advisers:
I have included my two rounds of comments on the inter-lab report.
Also, listed below is the information you requested on the calculation
for the energy increase in fuel consumption in the transportation sector
by holding new vehicle fuel economy constant from 1995 on (620 tril BTU
difference in 2010). Accompanying the results are also calculations for
the energy/gdp ratio for the transportation sector for 1995 and 2010 for
both the reference case and the constant MPG case, as well as the growth
rates associated with both cases.
1995
Ref. Case
Constant MPG
2010
2010
Trans. Energy
24.36Quads
31.4 Q
32.03 Q
GDP(bil $87)
5677
9200
9200
Energy/GDP 4.29E-3
3.41E-3
3.48E-3
Energy/GDP
Annual Growth
-1.5%/yr.
-1.39%/yr.
Inter-lab Report comments
begin 600 EEROMM.WPD
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M1Z/A0`PR#=;8)>" =D3U\JN@"``H
The Five Lab Study
Five National Labs Assess Potential of Energy Technologies to
Reduce Carbon Emissions
- LABS: Lawrence Berkeley, Oak Ridge, Argonne, Renewable Energy, Pacific Northwest
- Externally Peer Reviewed: U. .Tenn, Monsanto, EPRI, GRI, Harvard, NAS,
Stanford (Huntington), UNC (Link), and UCSB (DeCanio)
Assumes
- Expanded Technology Strategy (R&D and Diffusion)
- Carbon Dioxide has a price and is traded
Lab Study Results
US Carbon Emissions in MMTCE
1800
1800
1700
1700
EIA Carbon Estimate
Business
as Usual
1600
- 1600
1500
1500
$ 25/T
2010 Impact of High Efficiency +
1400
Low Carbon Technologies for
1400
Two Permit Trading Prices
1300
$50/T
1300
1200
1200
1990
1997
2010
Low-Carbonechnologies
Technology
Cost to
Incremental
Carbon Reduction
Generate
Cost
Potential
*cents/kWh
$/ton Carbon
(MMT)
Utilities
- Carbon Dispatch
--
$30
55
- Gas Repowering
2.5 - 3.2
$30
40
(24-83+)
- Biomass co-firing
2.7 - 3.2
$38
17
(16-24+)
- Wind
2.5 - 3.5
$42
7
(6-20+)
- Other
--
$25
9
(7-12)
Industry
- Advanced Turbine
2.5 - 3.5
$40
17
(15-26)
- Industry Specific
--
$40
14
(13-16)
Buildings
- Fuel Cell
5.0 - 6.0
$30
3
Transportation
- Non-corn Ethanol
--
--
16
Total (rounded)
180 (160-250)
*Average costs as of 2005
Energy Efficient Technologies
Technology
Carbon Reduction Potential
(MMT)
Utilities
- Generation Efficiency
8 (7-13)
Industry
- R&D and Diffusion
51
Buildings
- Standards and Diffusion
59
Transportation
- Passenger Cars
28
- Light Trucks
28
- Heavy Trucks
14
- Aircraft
14
Total (rounded)
200
Business and Consumer Annual
Costs and Cost Savings in 2010
40
35
Costs
30
Cost Savings
$ billions
25
20
15
10
5
0
Utilities
Industry
Buildings
Transportation
Appendix A-2
5
APPENDIX A-2
KEY OPPORTUNITIES FOR CARBON SAVINGS FROM END-USE
EFFICIENCY IMPROVEMENTS
Each of the three end-use efficiency chapters (Chapters 3-5) assessed the magnitude of carbon savings
that could be achieved by the year 2010 from specific submarkets, energy end-uses, and technologies.
These key opportunities are summarized in the following table. The table includes those submarkets
and end-uses that were estimated to offer the potential for at least 2 MtC of savings by the year 2020.
Tables A-2.2 to A-2.4 list some of the key technologies.
Table A-2.1. Key Opportunities for Carbon Savings From End-Use Efficiency Improvements
Carbon Reductions
Submarkets and Technologies
Estimated by High
with >2 MtC Estimated Reductions
Efficiency/Low Carbon
in 2010:
Case (in MtC)
Buildings
Miscellaneous electric uses: residential
15.9
Miscellaneous electric uses: commercial
8.5
Commercial lighting
6.6
Commercial electric space conditioning
5.4
Residential lighting
4.4
Commercial gas space conditioning
3.3
Residential electric space conditioning
3.1
Electric water heating
2.9
Gas water heating
2.7
Refrigerators/freezers
2.3
Industry
Heavy manufacturing industries:
16.1
Petroleum
4.3
Bulk chemicals
4.1
Pulp and paper
2.6
Iron and steel
2.6
Light manufacturing
24.0
Non-manufacturing
10.8
Transportation
Light-duty vehicles
73.3
Freight trucks
14.1
Air transport
13.9
Freight rail'
2.5
A-2.1
Appendix A-2
Table A-2.2. Illustrative Energy-Efficiency Buildings Technologies
Residential Building End-Uses
Miscellaneous electricity (efficient motors, variable speed drives)
Lighting (halogen IR lamps, compact fluorescent lamps, motion sensors)
Electric water heating (standby loss reduction, horizontal axis clothes washer, heat
pump water heater - post 2000)
Electric cooling (more/improved insulation, spectrally-selective glazings, variable
speed compressors, white roofs, reduced infiltration)
Electric space heating (more/improved insulation, reduced infiltration, low-E argon
glazings, superwindows, improved compressors)
Electric clothes dryers (heat pump clothes dryers at very low penetration)
Refrigeration (improved insulation, improved compressors)
Gas water heating (standby loss reduction, horizontal axis clothes washer)
Gas space heating (more/improved insulation, reduced infiltration, low-E argon
glazings, superwindows, condensing furnaces)
Electric cooking (improved insulation)
Freezers (more/improved insulation, improved compressors)
Oil space heating (low-E argon glazings, superwindows, improved insulation,
reduced infiltration, condensing furnaces)
Commercial Building End-Uses
Miscellaneous electricity (variable speed drives, efficient motors, smart redesign)
Lighting (electronic ballasts, motion sensors, halogen IR lamps, compact fluorescent
lamps)
Electric cooling (system controls, variable speed compressors, switching systems,
white roofs)
Gas space heating (condensing furnaces, fuel cells, system controls)
Ventilation (variable speed drives, system controls)
Refrigeration (improved insulation, better compressors)
Miscellaneous gas (smart redesign, eliminate pilot lights)
Electric space heating (switch to heat pump, system controls)
Gas water heating (standby loss reduction, improved burners, flow
controls)
Electric water heating (standby loss reduction, flow controls)
Oil space heating (condensing furnaces, system controls)
A-2.2
Appendix A-2
Table A-2.3. Illustrative High-Efficiency/Low-Carbor Industrial Technologies
Fuel Switching
Advanced turbine systems for industrial cogeneration applications
Integrated gasification combined cycle technologies for the forest products industry
Motors
Proper load matching
Variable speed drives
Pulp/Paper
Impulse drying
Multiport cylinder drying
On-machine sensors
Chemicals
Pinch analytic techniques
Advanced distillation control techniques
Petroleum Refining
Utility system improvements
Process/equipment modifications
Glass
Oxy-fuel process
Advanced burner technology
Glass batch/cullet preheater technology
Aluminum
New aluminum production cell
Materials recycling
Improve furnace efficiency
Titanium diboride cathodes
Iron/Steel
Direct smelting/direct reduction
Scrap preheating
Hot connection
Process controls
Metal Casting
Computer-aided casting design
Optimized coreless induction melting
Cement
Cement clinker replacement
A-2.3
Appendix A-2
27
Table A-2.4. Key Transportation Technologies Based on the High-Efficiency/Low-Carbon Scenario
Light-Duty Vehicles
Direct-injection stratified charge (DISC) gasoline engine
Turbocharged direct-injection clean diesel engine (TDI diesel)
Hybrid vehicles (gasoline and diesel)
Gasoline fuel cell vehicle
Materials substitution, advanced drag reduction, engine friction and pumping loss
reductions, and transmission improvements
Cellulosic ethanol as a blending component with gasoline
Truck Freight
LE-55 diesel engine
Turbocompound diesel engine
Improved tires
Advanced drag reduction
Electronic controls
Rail
Flywheels
Alternative fuels
Fuel cells
Operational efficiency improvements
Air
Ultra-high bypass turbofans
Material improvements
Aerodynamic drag reduction
Propfans
Laminar flow control
A-2.4
SCENARIOS OF U.S. CARBON REDUCTIONS
Potential Impacts of Energy-Efficient and Low-Carbon Technologies
by 2010 and Beyond
Prepared by the
Interlaboratory Working Group on
Energy-Efficient and Low-Carbon Technologies
Oak Ridge
National Laboratory
ornl
Lawrence Berkeley
<<<<<<<
III
National Laboratory*
Bringing Science to Life
BERKELEY LAB
Pacific Northwest
National Laboratory
NREL
Operated by Battelle fo the
PacificiNorthwest
U.S.Department o Energy
National Renewable
Energy/Laboratory
Argonned ational
abor OF
DRAFT -August 1,1997
Prepired for
Office of Energy Efficiency and
U.S. Department of Event
Coordinating laboratories for this study
EXECUTIVE SUMMARY
This report presents the results of a study conducted by five U.S. Department of Energy national
laboratories that quantifies the potential for energy-efficient and low-carbon technologies to reduce
carbon emissions in the United States. 1 The study documents in detail how four key sectors of the economy
- buildings, transportation, industry, and electric utilities - could respond to directed policies to expand
adoption of energy-efficiency and low-carbon technologies, an increase in the relative price of carbon-
based fuels by $25 or $50/tonne (e.g., as a result of a cap on domestic carbon emissions and a market for
carbon "permits"), and an aggressive program of research, development, and deployment of clean
technologies. Current projections suggest that a carbon emissions reduction of 380 million metric tons (MtC)
is required to stabilize U.S. emissions in 2010 at 1990 levels.
The study, which has been peer-reviewed by industry and academic experts, uses a technology-by-
technology assessment as well as an engineering-economic modeling approach. It draws upon a wide
variety of technology cost and performance information to assess potential impacts. Analysis of the
buildings, industry, and transportation sectors quantifies the impacts of end-use energy-efficiency
improvements on carbon emissions. The utility sector analysis estimates the impacts of those
improvements on utility carbon emissions, and quantifies additional emissions reductions through
conversion of a number of coal power plants to natural gas, dispatching of the utility grid with $25 and
$50/tonne carbon permit prices, the accelerated use of biomass cofiring and wind energy, and other low
carbon electricity supply options. Finally, a number of other promising low-carbon technologies are
examined to determine their potential for reducing emissions in the end-use sectors, including advanced gas
turbines in industry, transportation biofuels, and fuel cells in buildings.
Three overarching conclusions emerge from the analysis of alternative carbon scenarios. First, a vigorous
national commitment to develop and deploy cost-effective energy-efficient and low-carbon technologies
has the potential to restrain the growth in U.S. energy consumption and carbon emissions such that levels
in 2010 are close to those in 1997 (for energy) and 1990 (for carbon). We analyze a case in which energy
efficiency alone can reduce carbon emissions by 120 MtC by 2010. Under more aggressive assumptions
motivated in part by a $25/tonne carbon permit price, a combination of energy-efficient and low-carbon
technologies can reduce 2010 emissions by a total of 230 MtC. Under a $50/tonne carbon permit price,
technology investments reduce 2010 emissions by about 380 MtC. The analysis also suggests that
substantial additional savings are available if permit prices were to begin to rise above the $50/tonne
level,
The second conclusion is that, if feasible ways are found to implement the carbon reductions as described
above, all the cases (with reductions varying between 120 and 380 MtC/year by 2010) can produce benefits
that exceed costs, counting as benefits only the energy savings to the nation. We estimate net benefits of $6
to $38 billion per year in 2010. Such net benefits, not generally observed in macroeconomic models requiring
structural change in the economy to accommodate reductions in carbon emissions, result from the
application of cost-saving energy technologies at the sectoral level.
The third conclusion is that a next generation of energy-efficient and low-carbon technologies promises to
enable the continuation of an aggressive pace of cost-effective carbon reductions over the next quarter
century. This report documents a wide array of advanced technology options that could be cost
competitive by the year 2020, assuming a vigorous and sustained program of energy R&D beginning now
and extending beyond 2010.
1 The five national laboratories participating in the study were: Argonne National Laboratory (ANL), Lawrence Berkeley,
National Laboratory (LBNL), National Renewable Energy Laboratory (NREL), Oak Ridge National Laboratory (ORNL),
and Pacific Northwest National Laboratory (PNNL) LBNL and ORNL were the co-leaders of the effort.
ACKNOWLEDGMENTS
Funding for this report was provided by the U.S. Department of Energy's Office of Energy Efficiency
and Renewable Energy (EERE). Overall guidance and advice on the report was provided by Joe
Romm, Eric Petersen, and Art Rosenfeld. Other EERE staff members provided input and feedback on
individual chapters, including Bill Raup and and John Ryan (Office of Building Technologies, State
and Community Programs), Lou Divone and Jim Quinn (Office of Industrial Technologies), Phil
Patterson (Office of Transportation Technologies), and Joe Galdo (Office of Utility Technologies).
Staff at Lawrence Berkeley National Laboratory (LBNL) and Oak Ridge National Laboratory
(ORNL) put enormous efforts into producing this report, especially as contributions came from many
different places. We gratefully acknowledge Barbara Maximovich, Leslie Shown, Sam Webster,
and Nathan Martin (LBNL) and Tonia Edwards and Kathi Vaughan (ORNL) for word processing
(BM and TE), copy editing (LS and NM), and cleanup of figures (KV and SW).
The completion of this study was guided by a committee of experts from industry, universities, and
utility research organizations. The committee was chaired by Bill Fulkerson (University. of
Tennessee) and included: Morton H. Blatt (Electric Power Research Institute), Daniel E. Steinmeyer
(Monsanto Chemical Company), Robert A. Frosch (Kennedy School, Harvard University), Douglas
C: Bauer (National Academy of Sciences), Hillard G. Huntington (Energy Modeling Forum, Stanford
University) and Thomas Roose (Gas Research Institute).
This report benefited from the contributions and assistance of numerous experts on energy efficiency
and electricity production. The authors would like to acknowledge contributors by chapter:
Chapter 1 (Summary): Jonathan Koomey.
Chapter 3 (Buildings): George Courville, Mike MacDonald, Jeff Muhs, John Tomlinson, Jim Van
Coevering, Robert Wendt (ORNL); Steve Selkowitz, Joe Huang and Steve Johnson (LBNL).
Chapter 4 (Industry): Jim Chang, Hann Huang, Zhuoxiong Mao, John Molburg, Ken Natesan, Leslie
Nieves, and Mike Petrick (ANL), Scott L. Freeman, Gary B. Josephson, and Mark J. Niefer (PNNL),
Wayne Hayden (ORNL), Keith Davidson and Bill Major (OnSite Energy, Inc.), and Nancy
Margolis (Energetics, Inc.).
Chapter 5 (Transportation): K.G. Duleep (Energy and Environmental Analysis, Inc.).
Chapter 7 (Electricity Supply Technologies): Helena Chum, David Kline and Ralph Overend
(NREL), Jack Siegel (Energy Resources International, Inc.), Claud Pugh and Mike Sale (ORNL)
Ronald Wolk contributed to Appendix G-1 and Ronald Fisher contributed to Appendix G-4
Staff members of DOE's Energy Information Administration (EIA) participated in the planning
process for this report, provided advice and assistance with the modelling described the report,
and offered insightful comments on previous drafts. Leading this group were Mary Hutzler, Andy
Kydes, and Barry Cohen Sector specific assistance and feedback was provided by ELA's Erin V.
Boedecker and John Cymbalsky (buildings) Crawford Honeycutt (industry); David Chien and
Friedman (transportation); and Art Holland and Dave Schoeberlein electricity)
Table of Contents
Chapter 1
ANALYSIS RESULTS
1.1
1.1 OBJECTIVES OF THE REPORT
1.1
1.2 METHODOLOGY
1.1
1.3
BACKGROUND
1.3
1.4 RESULTS
1.4
1.4.1
Prospects for Improved Efficiencies by the Year 2010
1.4
1.4.2
R&D's Potential for Further Benefits by 2020
1.9
1.5 ASSESSMENT OF COSTS AND SOURCES OF CARBON REDUCTIONS
1.10
Chapter 2
INTRODUCTION AND BACKGROUND
2.1
2.1 OBJECTIVES OF THE STUDY
2.1
2.2 METHODOLOGY
2.2
2.2.1
Overview
2.2
2.2.2
Time Frame
2.3
2.2.3
End-Use Efficiency Scenarios
2.3
2.2.4
Methodological Differences Across Sectors
2.6
2.2.5
What the Study Does Not Do
2.8
2.3
OVERVIEW OF THE REPORT
2.8
2.4
HISTORICAL ENERGY TRENDS
2.9
2.4.1
National Trends
2.9
2.4.2
Sectoral Trends
2.10
2.5
THE GOVERNMENT'S ROLE IN ENERGY R&D
2.13
2.5.1
Rationale for Government Support
2.13
2.5.2
Past R&D Successes
2.14
2.6
REFERENCES
2.15
Chapter 3
THE BUILDINGS SECTOR
3.1
THE
3.1 INTRODUCTION
3.1
3.2 PROVEN AND NEAR-TERM TECHNOLOGIES
3.1
3.2.1
Generic Assumptions
$3.1
3.2.2
Scenario Definitions
3.2
3.3 SCENARIOS For THE YEAR 2010
3.3
3.3.1
Business-as-Usual Scenario
3.7
3.3.2
Maximum Cost-Effective Energy-Efficiency Potential
39
iv
4.4.3
Chemicals
4.34
4.4.4
Petroleum Refining
4.35
4.4.4.1
Monitoring Overall Energy Performance
4.35
4.4.4.2
Utility System Improvements
4.35
4.4.4.3
Process/Equipment Modifications
4.35
4.4.4.4
Fluid Catalytic Cracking
4.36
4.4.4.5
Fouling Mitigation in Heat Exchangers
4.36
4.4.5
Glass
4.36
4.4.5.1
Oxy-Fuel Process
4.36
4.4.5.2
Advanced Burner Technology
4.37
4.4.5.3
Glass Batch/Cullet Preheater Technology
4.37
4.4.6
Aluminum
4.37
4.4.6,1
Improving Hall-Heroult Cell Efficiency
4.37
4.4.6.2
Materials Recycling
4.37
4.4.6.3
Improve Furnace Efficiency
4.38
4.4.7
Iron and Steel
4.38
4.4.7.1
Direct Smelting / Direct Reduction
4.38
4.4.7.2
Scrap Preheating
4.38
4.4.7.3
Hot Connection
4.39
4.4.7.4
Near Net Shape Casting
4.39
4.4.8
Metal Casting
4.39
4.4.8.1
Computer-Aided Casting Design
4:39
4.4.8.2
Optimized Coreless Induction Melting
4.39
4.5
THE LONGER TERM
4.40
4.5.1
Pulp and Paper
4.40
4.5.1.1
Polyoxometalate Bleaching
4.40
4.5.2
Chemicals
4.41
4.5.2.1
Biological/Chemical Caprolactam Process
4.41
4.5.2.2
Flexible Chemical Processing of Polymeric Materials
4.41
4.5.2.3
Genetic Engineering
4.41
4.5.3
Petroleum Refining
4.41
4.5.3.1
Development of Improved Catalysts
4.42
4.5.4
Glass
4.42
4.5.4.1
Optimizing Electric Boost to Reduce Total Energy Consumption
4.43
4.5.4.2
Recovering and Reusing Waste Heat from Oxy-Fired Furnaces
4.43
4.5.5
Iron and Steel
4.43
4.5.6
Metal Casting
4.44
4.6
CONCLUSIONS
4.44
4.7
REFERENCES
4.48
Chapter 5
TRANSPORTATION SECTOR
5.1
5.1 INTRODUCTION
5.1
5.2 PROVEN AND ADVANCED TECHNOLOGIES
5.5
5.2.1
Material Substitution
5.6
5.2.2
Aerodynamic Drag Reduction
5.6
5.2.3
Improved Automatic Transmissions.
57
5.2.4
Engine Friction Reduction
5.7
5.2.5
Variable Valve Timing
5.8
Chapter 7
ELECTRICITY SUPPLY TECHNOLOGIES
7.1
7.1 INTRODUCTION
7.1
7.2 - REPOWERING COAL-BASED POWER PLANTS WITH NATURAL GAS
7.1
7.2.1
Repowering Approachs
7.2
7.2.2
Repowering Issues
7.2
7.2.2.1
Increase in Natural Gas Demand
7.3
7.2.2.2
Gas Deliverability
7.5
7.2.3
Emissions Reductions
7.6
7.2.4
Cost-Effectiveness
7.8
7.3
RENEWABLE ELECTRICITY TECHNOLOGIES
7.12
7.3.1
Renewable Electricity in 2010
7.14
7.3.1.1
Cofiring Coal with Biomass
7.14
7.3.1.2
Wind Power
7.17
7.3.1.3
Increasing Generation and Capacity at Existing Hydropower Plants
7.20
7.3.1.4
Landfill Gas
7.21
7.3.1.5
Other Renewable Power Technologies
7.22
7.3.2
The Long-Term Role of Renewables
7.24
7.4
EFFICIENCY IMPROVEMENTS IN GENERATION AND TRANSMISSION &
DISTRIBUTION
7.28
7.5 NUCLEAR PLANT LIFE EXTENSION
7.29
7.6 ADVANCED COAL TECHNOLOGIES
7.31
7.7
SUMMARY
7.32
7.8 REFERENCES
7.33
viii
Table
4:10 Examples of Additional Carbon Equivalent Reductions by 2010 Resulting From Low-
Carbon Technologies* (MtC equivalent)
15
Table 4.11
Calculation of 2010 ATS Carbon Savings (MtC) and Corresponding ATS Electricity
Generation (TWh)
18
Table 4.12
Process Carbon Emissions and Energy Use by Sector
25
Table 4.13
Carbon Reductions from Advanced Aluminum Production Cells, in 2010 (MtC)
29
Table 4.14
Summary of Technology Examples
A7
Chapter 5
Table 5.1
Comparison of Three Transportation Energy Scenarios to the AEO97 Reference Case 5.4
Table 5.2
New Light-Duty Vehicle Technologies Added to the Efficiency and High-
Efficiency/Low-Carbon Scenarios+
5.22
Table 5.3
Maximum Technological Fuel Economy Potential Versus NEMS New Car Average
Estimates
5.24
Table 5.4
Key Heavy Truck Fuel Economy Technologies for the Efficiency Scenario in 2010
5.26
Table 5.5
Greenhouse Gas Emissions Factors for Transportation Fuels
5.29
Table 5.6
Impact of Cellulosic Ethanol on Greenhouse Gas Emissions from Light-Duty
Vehicles in 2010
5.31
Table 5.7
Transportation Sector Energy Use and Energy Efficiency Projections to 2010 and 2015 the
(continued on next page)
5.36
Table 5.8
Transportation Sector Energy Use and Energy Efficiency Projections to 2010 and 2015
(continued on next page)
5.38
Table 5.9.
Simple, Total Cost-Effectiveness Estimates for Light-Duty Vehicle Fuel Economy
Technology
5.45
Table 5.10
Transportation Energy Use by Fuel Type
5.50
Table 5.11
Carbon Emissions in 2010 (MtC)
5.50
Chapter 6
Table 6.1
Comparison of Year 2010 AEO97 and ORCED Estimates of U.S. Generating Capacity
and Generation
6.7
Table 6.2
Comparison of ELA and ORCED estimates of generation costs (1995c/kWh)
6.8
Table 6.3
Comparison of Year 2010 Forecasts.
6.9
Table 6:4 Comparison of Year 2010 Forecasts
6.11
Table 6.5
Comparison of Year 2010 Forecasts
6.12
Table 6.6
Carbon Reductions from Electricity Savings by Sector under the Efficiency and
High-Efficiency/Low-Carbon Cases in Million Metric Tons
6.14
Table 6.7
Allocation of Carbon Reductions from the Electricity Saved by the High-
Efficiency/Low Carbon Case (MtC)
6.15
Figures
Chapter 1
Figure 1.1
Primary Energy Use in Quads
1.5
Figure 1.2
Reductions in Carbon Emissions from Each Scenario
1.7
Figure 1.3
Reductions in Carbon Emissions from Each Type of Technology
1.7
Figure 1.4
Cost of Carbon Savings in 2010, High Efficiency/Low Carbon Case (Best Estimate) 1.14
Chapter 2
Figure 2.1
Energy Consumption Per Dollar of Gross Domestic Product
2.10
Figure 2.2
Non-CO2 Greenhouse Gas Emissions by End-Use Sector and Industry
2.13
Chapter 3
Figure 3.1
Relationship Between Costs of Energy Services and Carbon Emissions in the U.S.
Buildings Sector in 2010
3.6
Figure 3.2
Residential Sector Energy Use and Carbon Emissions in 1997 and 2010 by End-Use for
the Business-As-Usual Scenario
3.8
Figure 3.3
Commercial Sector Energy Use and Carbon Emissions in 1997 and 2010 by End-Use for
the Business-As-Usual Scenario
3.8
Figure 3.4
End-Use Electricity Savings, 2010
3.11
Figure 3.5
End-Use Natural Gas Savings, 2010
3.11
Figure 3.6
Electricity Supply Curve By End-Use for Buildings in 2010, High-Efficiency/Low-
Carbon Case
3.12
Figure 3.7
"Best Practice" Home of the Year 2020
3.25
STATE
Figure 3.8
"Best Practice" Composite Commercial Building of the Year 2020
3.27
Chapter 4
Figure 4.1
Share of Energy-Intensive Industries in Manufacturing End-Use Energy
4:3
Figure 4.2
BAU Energy Use and Projected Efficiency Cases in 2010 (quads)*
4.9
Figure 4.3
Carbon Equivalent Emissions for Several Electric Generation Technologies
(pounds per MWh)
..4.17
Figure 4.4
Simplified Diagrams of Advanced Turbine Systems in Power-Only and Cogeneration
Mode Compared to Steam Boiler
4.19
Figure 4.5
Electric Generation Cost Comparison
4.20
Figure 4.6
Purchased Energy in the U.S. Pulp and Paper Industry by Fuel Type, 1972-1994
4:21
Figure 4.7
Self-Generated Energy in the U.S. Pulp and Paper Industry by Fuel Type, 1972-1994 4:22
Figure 4.8
Kraft Boilers in Service in the United States
4.23
Figure 4.9
Non-CO2 Greenhouse Gas Emissions in the United States (MtC equivalent)
4.26
xii
Figure 7.10 Historical and Projected Costs of Electricity from Four Renewable Power
Technologies
7.13
Figure 7.11 30 GW Strategic Plan Scenario
7.16
Figure 7.12 Domestic and International Wind Power Capacity, Grid-Connected
7.18
Figure 7.13 Projections of Wind Power Costs
7.18
Figure 7.14 Sustained Growth Scenario from Shell International (Reproduced courtesy of Shell
International Petroleum Company)
7.24
Figure 7.15 U.S. Commercial Nuclear Power Reactor Generating Capacity
7.31
XIV
Chapter 1
Analysis Results
the ELA "business-as-usual" (BAU) scenario as is for buildings and industry and to modify some of
the assumptions and data to produce a new BAU case - not greatly different from the ELA case - for
the transportation and the electric utility sectors.
We then assembled existing information on the performance and costs of technologies to increase
energy efficiency or, for selected end-uses, to switch from one fuel to another (e.g., from electricity to
natural gas for residential end-uses or from gasoline to biofuels for transportation). For the buildings
sector, the technology performance and cost data base are extensive. For transportation, the data
base - although less fully developed than for buildings - is sufficient for our purposes. For industry,
only partial information on technologies and costs is presently available. As a result, the analysis
for industry relies primarily on historical relations between energy use and economic activity and
much less on explicit technological opportunities. The industrial analysis also includes some
examples of industrial low-carbon technologies. The analysis of low-carbon supply technologies in
the electricity sector is based on a review of the literature including detailed technology
characterizations prepared by DOE in conjunction with its national laboratories and industry.
Next we created scenarios of increased energy efficiency and lower carbon emissions using the
technology data (or, in the industrial sector, historical relations) as a key input. We chose to run
three scenarios other than the BAU case. We have termed the first the "efficiency" (EFF) case.
assumes that the United States increases its emphasis on energy efficiency through enhanced
public- and private-sector efforts. The general philosophy of the efficiency case is that it reduces,
but does not eliminate, various market barriers and lags to the adoption of cost-effective energy
efficient technology.
The other two cases, dubbed the "high-efficiency/low-carbon" (HE/LC) cases, describe a world in
which, as a result of commitments made on a climate treaty or other factors, the nation has!
embarked on a path to reduce carbon emissions. These two cases assume a major effort to reduce
carbon emissions through federal policies and programs (including environmental regulatory
reform), strengthened state programs, and very active private sector involvement. They include
focused national R&D effort to develop and transform markets for low-carbon energy options (e.g.,
fuel cells for microcogeneration in buildings and advanced turbine systems for combined heat and
power in industry). The difference between the two HE/LC cases is in the assumption of a carbon
permit price resulting from a domestic trading scheme for carbon emissions with a cap on U.S.
emissions (or from equivalent policy measures that increase the price of carbon-based fuels relative
to those with less carbon). We assume a domestic permit price of $25 and $50 per tonne of carbon for
the two cases. Both of these HE/LC cases include a program of research, development,
demonstration and diffusion that is more vigorous than in the efficiency case. In some sectors
(buildings and industry), the carbon price signal, combined with policies promoting energy
efficiency, is believed to trigger the bulk of the additional carbon reductions portrayed in the
HE/LC cases. In the transportation sector, it is the R&D-driven technology breakthroughs that the
generate the bulk of the carbon reductions beyond the efficiency case. For the electricity sector?
higher prices for carbon-based fuels cause larger shifts from coal to natural gas; for this sector; these
same higher relative prices combined with federal and private research, development, and
demonstration can bring advanced low-carbon technologies to market.
Although the work focuses on 2010, we also look beyond this date. Here we describe new
technologies, materials, processes, manufacturing methods, and other R&D advances that promise
to offer significant energy benefits by the year 2020; for this time period, we make no effort to
forecast specific levels of market penetration, energy savings, or carbon reductions. Thus, instead of
creating scenarios we describe the technological innovations that could enable the continuation of an WITH
aggressive pace of decarbonization well into the next quarter century, if appropriate investments in
R&D were made
1.2
August 1, 1997
Chapter 1
Analysis Results
carbon reductions incorporated in the efficiency case cut the overall growth in carbon emissions
between 1997 and 2010 from 240 million tonnes (as forecast in the BAU case) to 120. The HE/LC
scenario with $50/tonne carbon charge reduces carbon emissions in 2010 by about 130 million tonnes
(compared with the 1997 level).
1.4 RESULTS
1.4.1 Prospects for Improved Efficiencies by the Year 2010
Table 1.1 and Figure 1.1 compare the nation's primary energy use in quads for the years 1990 and 1997
(projected) with the results of the three scenarios. for 2010. (We have included only the high-
efficiency/low-carbon case at $50/tonne in the table and figure for simplicity.) In addition, the
HE/LC case shown below does not reflect the energy impacts of the selected low-carbon technologies
described later in this summary (e.g., stationary fuel cells for buildings, advanced turbine systems
and biomass gasification in industry) or the supply-side options shown in Table 1.4.
Table 1.1 Primary Energy Use in Quads: 1990-2010
2010
Business-as-
High-Efficiency/
1990
1997
Usual
Efficiency
Low-Carbon
Case
Case
Case ($50/tonne C)
Buildings
29.4
33.7
36.0
34.1
32.0
Industry
32.1
32.6
37.4
35.4
33.6
Transportation
22.6
25.5
32.3
29.2
27.8
Total
84.2
91.8
105.7
98.7
93.4
Source: Energy use estimates for 1990 come from EIA (1996a, Table 2.1, P. 39).
Energy use estimates for 1997 come from forecasts conducted for EIA (1996b).
Numbers may not add to the totals due to rounding.
The major observations are as follows:
In the business-as-usual case, energy use increases by 22 quads (26%) between 1990 and 2010.8
quads of this increase have occurred during the first seven years of this 20-year period. The
fastest growing sector during these initial seven years has been buildings (4.3 quads) followed
by transportation (2.9 quads) and industry (0.5 quads). In the BAU case, the fastest growing
sector during the remaining 13 years is transportation (6.8 quads). This is followed by industry
(4.8 quads) and then buildings (23 quads). The rapid projected growth in the energy/consumed
for transportation is driven by estimates of increased per capita travel and minimal fuel
efficiency gains.
The efficiency scenario cuts the overall growth between 1990 and 2010 from 22 to 15 quads This
is a 17% increase over the level of energy consumption in 1990, down from a 26% increase in the
BAU case. Relative to the BAU case, the efficiency scenario for transportation delivers
slightly more energy savings (3.1 quads) than do the same scenarios for the industrial (2.0) or
buildings (1.9) sectors. Comparediwith51997 levels, the smallest increase in energy growth for
this case is in buildings (0.4 quads), followed by industry (2.8 quads), anditransportation(377)
quads).
1.4
August 1*1997
Chapter 1
Analysis Results
same as Jme
Table 1.2 Carbon Emissions (MtC): 1990-2010
2010
Business-as-
High-Efficiency/
different than
Usual (BAU)
Efficiency Case
Low-Carbon
4. eff w/o lowc
1990
1997
Case
$25/tonne
$50/tonne
Buildings
460
511
571
546
527
509
lower
Industry
452
482
534
512
488
452
-
lower
Transportation
432
486
616
543
528
513
- same
Utilities
-
-
-
-
-48
-136
- higher
Total (rounded)
1340
1480
1720
1600
1490
1340
Change from 1990
140
380
260
150
0
Change from BAU
-
-
-
-120
-230
-380
This scenario includes the carbon emission reductions resulting from a carbon permit price of $25 or $50/tonne:
(1) dispatch of power plants in which natural gas is favored relative to coal, (2) repowering and partial
repowering of coal-based power plants to convert to natural gas, and (3) introduction of selected low-carbon
technologies to replace conventional ones, primarily in the industrial and utility sectors.
b The entries in the last two columns are negative as they correspond to reductions in carbon emissions resulting
from the increased use of natural gas in power plants as a result of the $50/tonne carbon permit price in this
scenario.
Figures 1.2 and 1.3 complement the above table by illustrating the carbon emissions reductions from
each scenario. The major observations are:
In the BAU case, carbon emissions are forecast to increase by approximately 380 million tonnes.
The energy-efficiency gains incorporated in the efficiency case cut overall growth between 1990
and 2010 by one-third (from 380 to 260 million tonnes). This represents a carbon increase of 19%
above 1990 emissions.
The HE/LC scenario with $25/tonne carbon charge has the potential to reduce carbon emissions
by 230 million tonnes from the BAU case in 2010. The largest part of these carbon reductions are
from increased efficiency, but major changes in electricity supply (carbon-based dispatching
and repowering) contribute nearly 35 million tonnes, and other low-carbon technology,
particularly renewables and advanced turbine systems, produce approximately another 25
million tonnes.
The HE/LC scenario with $50/tonne carbon charge has the potential to reduce carbon emissions
by approximately 380 million tonnes, thereby achieving 1990 carbon emission levels in 2010. Of
this 380 million tonne carbon reduction, about 190 million tonnes are from increased energy
efficiency, 140 million tonnes results from increases in the use of low-carbon fuels and
technologies in the utility sector, and 50 million tonnes results from the use of low-carbon
technology in industry and transportation.
100 million of the 140 million tonnes of carbon reductions in the utility sector comes from
redispatching the utility system (favoring the use of low-carbon fuels) and from repowering
coal plants with natural.gas.4-Both are cost-effective with a $50/tonne carbon charge The
remaining 40 million tonnes are from renewables (wind;co-firing coal-based power plants with
1.6
August 1997
with
Chapter 1
Analysis Results
Table 1.3 provides a comparison of the growth rate in energy and in carbon emissions for the four
cases, from 1990 to 2010. For the BAU and efficiency cases, the growth in carbon emissions is slightly
more rapid than the increase in energy demand. For the HE/LC cases, carbon emissions decline
while energy consumption rises. The carbon reduction reflects the increased deployment of low-
carbon fuels and technologies as a consequence of the relative increase in price of carbon-based fuels
precipitated by the $50/tonne incentive.
Table 1.3 Average Annual Energy and Carbon Growth Rates, 1997 to 2010, for Four Cases
isn't
High Efficiency/
High Efficiency/
Business-As-
Efficiency
Low Carbon Case
Low Carbon Case
Usual (BAU)
Case
to
($25/tonne)
($50/tonne)
Gross Domestic Product
(GDP)ᵃ
1.88%
1.88%
1.88%
1.88%
Energy Demand
1.09%
0.56%
0.34%
0.13%
Carbon Emissions
1.16%
0.60%
0.05%
-0.76%
Energy Consumption Per
-0.77%
-1.30%
-1.51%
-1.71%
GDP (E/GDP)
Carbon Emissions Per GDP
-0.70%
-1.25%
-1.79%
-2.59%
(C/GDP)
a The Gross Domestic Product in 1995 was $6,739 billion chained 1992 dollars.
b
The carbon decrease per unit GDP growth for 1990 to 2010 is 0.7%, 1.1%, 1.4% and 1.9% per year for the
reference, efficiency, $25/tonne HE/LC, and $50/tonne HE/LC cases, respectively.
It is useful to compare the scenarios in this study to those of other studies. The 1991 report by the 1449
Office of Technology Assessment (OTA) titled Changing by Degrees (U.S. Congress, 1991) analyzed
the potential for energy efficiency to reduce carbon emissions by the year 2015, starting with the
base year of 1987. Its "moderate" scenario results in a 15% rise in carbon emissions, from 1300
MtC/year of carbon in 1987 to 1500 MtC/year of carbon in 2015 (compared to a BAU forecast of 1900
MtC/year). Its "tough" scenario results in a 20% to 35% emissions reduction relative to 1987 levels,
or emissions levels of 850 to 1000 MtC/year of carbon in 2015. Our efficiency and HE/LC cases
ranging from 1.3 to 1.6 billion tonnes of carbon emissions in 2010 are comparable to OTA's "moderate
case and show considerably higher emissions than OTA's "tough" case.
Another benchmark is provided by the 1992 National Academy of Sciences (NAS) report on Policy
Implications of Greenhouse Warming (National Academy of Sciences, 1992). This study identified a
set of energy conservation technologies that had either a positive economic return or that had a cost
of less than $2.50 per tonne of carbon." Altogether, NAS concluded that these technologies the
potential to reduce carbon emissions by 463 million tonnes, with more than half of these reductions
arising from cost-effective investments in building energy efficiency. Our efficiency and HE/LC
cases suggest the potential for reducing carbon emissions by between 120 and 380 million tonnes by the
year 2010. One reason that the NAS estimate is higher's because it is not limited to the 2010 time
frame, but rathercharacterizes the full potential for carbon reductions. Thus, it did not take into
account the replacement rates for equipment and processes, and other factors that preventithe
instantaneous, sfull market penetration of cost-effective energy-efficient and low-carbon
technologies.
1.8
August 1; 1997
Chapter 1
Analysis Results
efficiency and renewable energy. Breakthroughs in bioprocessing, separations, superconductivity,
catalysts, and materials can have wide-ranging impacts on energy efficiency and carbon emissions
by the year 2020. Examples of specific technology opportunities are described in this report, by
sector.
Six R&D areas are forecast to offer great promise to reduce significantly the energy requirements of
our nation's buildings in 2020: advanced construction methods and materials; adaptive building
envelopes; multi-functional equipment; integrated, advanced lighting systems, controls and
communications; and self-powered buildings.
In addition to the broad application of better process modeling, sensors, and controls in industry,
many process/industry-specific opportunities for efficiency gains exist. These are described for each
of DOE's targeted industries of the future: pulp and paper, chemicals, petroleum refining, glass,
aluminum, iron and steel, and metal casting.
Many of the advanced technologies that have the potential to significantly improve the energy
efficiency of transportation after 2010 need considerable R&D investment before they can become
commercially available in the year 2020. For example, to achieve fuel economies in the 60-80 miles
per gallon (MPG) range and remain affordable and safe, light-duty vehicles will need
breakthroughs in manufacturing processes for composite materials; large reduction in fuel cell costs
and/or cost reductions and performance gains in batteries; ultra-low rolling resistance tires; high-
efficiency accessories; and highly aerodynamic designs. Opportunities for R&D. to lead to
improvements in the energy efficiency of other transportation modes are also described.
In all, the continued adoption of energy efficient and renewable energy technologies and a steady
flow of technology improvements from collaborative R&D programs with industry could make such
environmentally friendly technology an attractive option for domestic and global energy economies
in the future. With strong public-private partnerships to support the necessary R&D and market
transformation activities, ample cost-effective energy products and practices will be available in
2020.
1.5 ASSESSMENT OF COSTS AND SOURCES OF CARBON REDUCTIONS
The business-as-usual scenario projects an increase of 380 MtC/year between 1990 and 2010. In our
efficiency scenario, in which the nation actively pursues policies and programs to promote market
acceptance of energy efficiency while expanding commitments to research and development, energy
efficient technologies reduce this growth in carbon emissions by 120 MtC/year. Under a carbon cap
and trading system, in which permits for carbon sell for $25 and $50/tonne C for the two cases
considered, very substantial carbon reductions appear possible. Detailed results for these cases,
showing the sources of the carbon reductions, are contained in Table 1.4. (Summaries of these results
were presented in Figures 1.2 and 1.3.) Results indicate that, for the HE/LC case, there is
potential to roughly return to 1990 levels of carbon emissions in 2010 at a cost of approximately
$50/tonne carbon. About two-thirds of the increase in carbon emissions is eliminated in the case
with $25/tonne carbon charge.
The estimates in able 1.4 include ranges for most of the electricity supply options and the other
low-carbon technologies. There are notranges for the efficiency technologies because the models used
to estimate their penetration are nonstochastic. When selecting a singlelestimate for the $50/tonne
case, numbers from the low end of the ranges were generally selected in order to be cautious. Because 4
we did not conduct mintegrating analysis in which supply options compete against one another, we
felt it important to minimize potential overlap by entering the supply options in conservativel
1.10
August 1, 1997
Chapter 1
Analysis Results The
We have analyzed the economics of carbon emissions reductions from two different perspectives. In
the first, which we label "best estimate," we evaluate all costs and benefits with a real discount
rate that approximates the cost of capital for efficiency investments for the different end-use
sectors: 7% for buildings, 10% for transportation, and 12.5% for industry. The lowest cost, for
buildings, is based on the fact that the money for residential buildings is derived from home
mortgages or home improvement loans. The higher cost for industry reflects the fact that energy-
efficiency investments have to compete with investments for other projects. These discount rates are
not those that describe current market behavior, but rather are reflective of costs of capital if the
market did invest in the energy-efficiency measures. One could argue that a lower discount rate
should be used for the "best estimate" case namely, a social discount rate which might be between
3 and 7% real - but we have made a more conservative assumption on discount rates. For the "best
estimate" case, we assume costs for efficiency measures brought about by utility, federal programs
and state programs (e.g., demand-side management programs by utilities, federal market
transformation programs) to be 15% of technology costs. We also assume that at least half of the
efficiency occurs as a result of federal policies (e.g., standards or carbon permit charges) which add
very little direct program costs. The electric supply-side technologies are assumed to add an
incremental cost of $30/tonne carbon in 2010, based on an average estimate of the incremental costs of
the technologies from the appropriate sections of this report.
The second perspective, which we label "alternative view," assumes that there are hidden costs
associated with achieving widespread market acceptance of many of the efficiency and low-carbon
technologies, even after the imposition of a carbon charge and the implementation of major policies
and programs to promote a low-carbon future. In this perspective, we evaluate costs and benefits at a
real discount rate of 15% for buildings and 20% for transportation and industry. Program costs are
increased to 15% of the cost of efficiency measures. Other data and assumptions in this case are the
same as for the "best estimate" case.
The results of the economic analysis are presented in Table 1.5. We show results for two of our
scenarios (efficiency case and HE/LC at $50/tonne carbon) and for both the "best estimate" and
"alternative view perspectives. Also, we have grouped the results into just four categories of
energy technologies: For more detail, both on the results and methodology, the reader is referred to
Appendix A-2.
The "best estimate" for the efficiency scenario shows annual net benefits of $26 billion in 2010 ($26
billion in costs and $52 billion in benefits). This value reflects the fact that, even after accounting
for energy-efficiency investment the annual energy savings (without including the benefits of
reduced carbon emissions) are $26 billion greater than the required investment. The "best estimate
for the HE/LC scenario with $50/tonne carbon charge produces an annual net benefit of $38 billion in
2010 ($50 billion in costs and $87 billion in benefits).
The "alternative view." shows annual net direct/benefits for the efficiency scenario of $7 billion in
2010 ($45 billion in costs and $52 billion in benefits). For the HE/LC ($50/tonne carbon) scenario, the
"alternative view" indicates annual net benefits of $6 billion in 2010 ($81 billion in costs and $87
billion in benefits)
1.12
August 1) 1997
Chapter 1
Analysis Results in
Figure 1.4 Cost of Carbon Savings in 2010, High Efficiency/Low Carbon Case (Best Estimate)
400
Start Year: 1997; Forecast Year: 2010.
Baseline Carbon Emissions for year 2010 = 1720 Mt C/year = zero savings point.
300
2010 Carbon permit price = $50/ton carbon (1995$)
Program costs = 7% for demand sectors and 1% for electricity supply side options.
Real Discount Rates: 7% for buildings, 12.5% for industry, and 10% for transport.
Cost of Conserved Carbon (1995$/tonne carbon)
200
100
4
5
6
7
0
-100
2
3
200
1480 MtC/year,
1997.emissions
1340 MtC/year,
1990 emissions
-300
1
-400
0
100
200
300
400
Carbon Savings in 2010 (MtC/year)
Annual
Annual
Savings
Costs
1. Buildings Efficiency
$19.3B
4. Electric Repowering/Other
$2.6B
2. Transport Efficiency
$16.2B
5. Fuel Cells in Commercial Bldgs.
$0.1B
3. Industry Efficiency
$7.9B
6. Electricity Dispatch
$1.8B
7. Industry Other
$1.1B
Total Savings
$43.4B
Total Costs
$5.6B
Total Annual Net Savings (Items 1 through = $38 B/year
The $50/tonne carbon charge, while not constituting a direct cost, does represent a potentially large
APPLICATION
transfer payment. The magnitude of the transfer payment, as well as the losers and winners from
the transfers, depends on the inature of policy/and tits implementation as a cap and trade system or
some alternative The amount of money that could belin play is very large: $50/tonne times 13
billion tonnes per-yeariequals annual revenues of $65 billion they WEST
Instruction the
In short, while there will surely, be winners and losers for these energy-efficiency and low-carbon
scenarios, our analysis shows that their economic costs - under a range of assumptions and
alternative methods of cost analysis - are favorable: from $6 billion to $38 billion per year: in 2010.
1.14
August 1, 1997
Chapter 1
Analysis Results
2 $50 per tonne of carbon corresponds to 12.5 cents per gallon of gasoline or 0.5 cents per kilowatt-hour.
for electricity produced from natural gas at 53% efficiency (or 1.3 cents per kilowatt-hour for coal at
34% efficiency). $25 per tonne would cut these gasoline and electricity price increments in half.
3 The cost curve for repowering is relatively flat; as such, considerable additional reductions are
possible at a cost not too different from $50/tonne. The results are highly sensitive to the price
differential between coal and natural gas; at a lower (higher) price differential, a higher (lower)
permit price of carbon is needed.
1.16
August 1,4997
Chapter 2
Introduction & Background
The report focuses on energy-efficiency and renewable energy R&D. The coverage of additional
selected low-carbon end-use and electricity supply options was based in large measure on their
perceived potential to contribute significantly to stabilizing carbon emissions by 2010 at their 1990
level, which is one possible national target under discussion.
2.2 METHODOLOGY
2.2.1 Overview
To achieve these objectives, we started with the Annual Energy Outlook 1997 (AEO97) reference
case forecasts for the year 2010 (Energy Information Administration, 1996). After thoroughly
reviewing these forecasts on a sector-by-sector basis, and working with EIA staff, we chose to accept
the EIA "business-as-usual" (BAU) scenario as is for buildings and industry and to modify some of
the assumptions and data and produce a new BAU case - not greatly different from the ELA case - for
the transportation and the electric utility sectors.
We then assembled existing information on the performance and costs of technologies to increase
energy efficiency or, for selected end-uses, to switch from one fuel to another (e.g., from electricity to
natural gas for residential end-uses or from gasoline to biofuels for transportation). For the buildings
sector, the technology performance and data base are extensive. For transportation, the data
base - although less fully developed than for buildings - is sufficient for our purposes. For industry,
only partial information on technologies and costs is presently available. As a result, the analysis
for industry relies primarily on historical relations between energy use and economic activity and
much less on explicit technological opportunities. The industrial analysis also includes some
examples of industrial low-carbon technologies. The analysis of low-carbon supply technologies in
the electricity sector is based on a review of the literature including detailed technology
characterizations prepared by DOE in conjunction with its national laboratories and industry.
Next we created scenarios of increased energy efficiency and lower-carbon emissions using the
technology data (or, in the industrial sector, historical relations) as a key input. We chose to run
three scenarios other than the BAU case. We have termed the first the "efficiency" case. It
assumes that the United States increases its emphasis on energy efficiency through enhanced
public- and private-sector efforts. The general philosophy of the efficiency case is that it reduces,
but does not eliminate, various market barriers and lags to the adoption of cost-effective energy-
efficient technology.
The other two cases, dubbed the "high efficiency/low carbon" (HE/LC) cases, describe a world in
which, as a result of commitments made on a climate treaty or other factors, the nation has as
embarked on a path to reduce carbon emissions. They assume a major effort to reduce carbon
emissions through federal policies and programs (including environmental regulatory reform),
strengthened state programs, and very active private sector involvement. They include a focused
national R&D effort to develop and transform markets for low-carbon energy options (e.g.) fuel cells
for microcogeneration in buildings and advanced turbine systems for combined heat and power in THE
industry). The difference between the two HE/LG cases is in the assumption of a carbon permit price
resulting from a domestic trading scheme for carbon emissions with a cap on U.S. emissions (or from
equivalent policy measures that increase the price of carbon-based fuels relative to those with less
carbon). We assume a domestic permit price of $25 and $50 per tonne of carbon for the two cases. the
Both of these HE/LC include a program of research, development, demonstration and diffusion
that is more vigorous than in the efficiency case. In some sectors (buildings and industry), the carbon
price signal, combined with policies promoting energy efficiency, is believed to trigger (the bulk of
the additional carbon reductions portrayed in the HE/LC cases. In the transportation sector, it is
2.2
August 1; 1997
Chapter 2
Introduction & Background
The scenarios for each sector also use the AEO97 energy price forecasts. World oil prices are
assumed to rise from $17 per barrel in 1995 to $20.4 per barrel (in 1995$) in 2010. In AEO97, natural
gas prices in the industrial, electricity, and transportation sectors increase throughout the forecast
period; natural gas prices for the residential, and commercial sectors decrease significantly.
Between 1995 and 2010, the average price of electricity is projected to decline by 0.6% a year as a
result of competition among electricity suppliers. Electricity prices are forecast to decrease the most
for industrial customers and the least for residential customers.
Such macroeconomic and fuel price assumptions strongly influence the rate of penetration of energy-
efficient technologies in each sector. Further details regarding these assumptions can be found in
EIA (1996c).
Frozen Efficiency Baseline. This case, which is analyzed only for the buildings sector, assumes that
energy-consuming equipment and systems existing in the year 1997 remain at the same efficiency
until they are retired. This equipment and these systems retire over the 1997-2010 period at a rate
based on standard equipment lifetimes. It assumes that all new equipment employed after 1997
remains at the efficiency of new devices in the year 1997. The frozen efficiency baseline provides an
upper bound to likely energy demand (under) the economic assumptions applied to all the cases),
because it ignores all forces leading to higher efficiency of new equipment in the business-as-usual:
case. It also ignores any retrofits that might take place if there were economic reasons for earlyt
retirement of equipment.
This case is presented primarily for heuristic reasons: it describes an easily-understood case in
which technology does not change. This is useful for exploring the impacts of technology change
Also, the case is not necessarily divorced from reality: in the era of low energy prices preceding the
oil embargo of 1973-74, the energy efficiency of many household, transportation, and industrial
technologies changed very little.
Business-as-Usual Case. The business-as-usual (BAU) case represents the best estimate of future they
energy use given current trends in service demand, stock turnover, and natural progress in the
efficiency of new equipment. It assumes that R&D and implementation programs at DOE and EPA
continue at more or less current levels, without a significant influx of new funding. It captures likely
changes in efficiencies of new equipment over the analysis period. It also allows for some early
retirement of equipment where cost savings from new energy-efficient products are high relative to:
purchase and installation costs, as in some industrial motor and drive systems and commercials
lighting retrofits.
To create this scenario; the buildings and industry sectors adopted the AEO97 reference case as their
BAU cases. For the transportation sector//welmodified AEO97 somewhat. Specifically, the AEO97
reference case forecasts that the efficiencyJof passenger cars(will increase from 27.5 MPG in 1997 to
31.5 MPG in 2010. We believe such improvements are unlikelysir the absence of increases in real
gasoline prices and hence our BAU case for transportation leaves the MPG performance of Hight duty
vehicles in 2010 unchanged from 1997 performance.
Efficiency Case The efficiency case describesithe (potential for cost-effective, energy-efficient
technologies to penetrate the marketiby&the year2010, given anunvigorated public- and private-
sector effort to promote energy efficiency through|enhanced R&D and market transformation
activities. This caserassumes that national policy) possibly in combination with exogenousleven
leads to an increase in the cost-effectiveness and deployment oftenergy-efficient technologies. Cost-
effectiveness is improved because R&D, in combination with increased deployment efforts, result in
declining capital costs. We do not specify the policies or exogenous events that could precipitate
2.4
August 1, 1997
Chapter 2
Introduction & Background
The actual increases over time in the permit price of carbon (which we model as averaging
either $25 or $50 per tonne for much of this period);
Increased federal effort to accelerate R&D and diffusion of low-carbon technologies;
The development and introduction by other countries of advanced low-carbon technologies; and
The change in consumer preferences and behavior that would result from an international
treaty and national commitment to stabilize greenhouse gases, much like changes in consumer
behavior in the aftermath of the oil embargo of 1973-74.
In summary, this scenario for 2010 describes a combination of better technology, "readier" markets,
and a price of carbon that results in a significantly increased willingness to manufacture, purchase,
and use low-carbon technologies.
2.2.4 Methodological Differences Across Sectors
The operational definitions used to model these scenarios for the individual end-use sectors reflect
the above conceptual definitions, but are nevertheless distinct (Table 2.1). These differences are due
partly to the modeling approaches used for each sector. They also reflect the authors' sense of what
could "drive" significant increases in energy efficiency in each sector. For instance to achieve a
high-efficiency/low-carbon scenario, the transportation analysis postulates a set of technology
breakthroughs. The industrial analysis, on the other hand, achieves its high-efficiency/low-
carbon scenario by doubling market penetration rates and assuming that energy-efficiency decisions
are treated as strategic investments with correspondingly lower hurdle rates.
The sectors also differ in the way that life-cycle costs and benefits are calculated to determine the
cost-effectiveness of technologies in their efficiency scenarios.
The buildings sector employs a 7% real discount rate to value the stream of benefits accruing
from an investment. These benefits accumulate throughout the specific operational lifetimes
assumed for individual technologies. The efficiency case assumes market penetration of about
one-third of the technologies that are cost-effective at a 7% real discount but not adopted in
the business-as-usual case. The HE/LC case doubles this penetration.
The industrial sector assumes a capital recovery factor (CRF) of 15%, rather than 33% (which
is the BAU assumption). Thus, to be considered cost-effective in this sector, an investment
must pay back in no more than approximately seven years.
The transportation sector uses a 7% discount rate, but it is applied only to the first five years of
operation, eventhough the expected lifetime of a vehicle may be much longer This five-year
period is meant to reflect the realities of purchase behavior in this sector and results invo
decisions that are based on considerably less than the full life-cycle of benefits.
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August 1, 1997
Chapter 2
Introduction & Background
2.2.5 What the Study Does Not Do
This report does not describe the policies that might be implemented to achieve higher
penetrations of energy-efficient and low-carbon technologies. (Reviews of a wide range of possible
policy options can be found in several recent publications, including OTA (1991), NAS (1992), and
DOE (1996b)). Rather, this report highlights the potential performance and impacts of
technological developments and transformed markets. The existence of cost-effective technologies
is a prerequisite for public policies to work. Without the technologies, policies to reduce greenhouse
gas emissions will be very costly. Indeed, this analysis suggests that carbon stabilization could
produce net benefits if the nation invests significantly in cost-effective energy-efficiency and low
carbon technologies.
Thus, we believe it is critical to understand the availability of technologies, their performance and
their costs for as many.end-uses of energy as possible. Armed with this knowledge, discussion of
policies becomes much more meaningful. it, such discussion is less likely to lead to good
decisions. Thus, we choose to focus this report on the more narrow topic of technologies in the belief
that doing a credible job in this area will ultimately further the policy/dialogue.
A second reason for focusing on technologies is our belief that the role of R&D on energy-efficient and
low-carbon technologies as a means to deal with climate change and other environmental impacts
has been inadequately recognized. If effective energy technologies are not developed, then the cost
of reducing greenhouse gas emissions (and other environmental impacts of energy) will be very high.
As in the AEO97 reference case, each of the scenarios is completed at the national level. Thus,
regional variations in population and economic activity are not considered, nor are regional the
differences in fuel price, weather, or air quality and environmental conditions that might create
regional niche markets for particular technologies. As a result, our analyses have undoubtedly
overlooked the possible development of regional markets for advanced energy technologies. A4
valuable next step would be to conduct analyses at a finer geographic scale to produce national
estimates that reflect such regional .variations.
2.3 OVERVIEW OF THE REPORT
The rest of Chapter2 sets the stage for the remainder of this report. ,It describes historical energy
and carbon trends both at the national level and by sector, as a backdrop for assessing energy
consumption and carbon emission forecasts. It also discusses the government role in energy R&D,
including the rationale for government supportand some evidence of past energy-efficiency
technology successes that benefited from government sponsorship
Chapters 3 through,5 address each of the major energy end-use sectors: buildings (Chapter 3)
industry (Chapter 4), and transportation (Chapter 5). Four tasks are completed for each sector
1. Energy scenarios with and without a strong efficiency push, focusing on the year 2010, and
including comparisons with the AEO97 projections from the National Energy Modeling
System;
2. Documentation of the cost and performance assumptions for individuallenergy efficient and
low-carbon technologies;
3. Development of three enarios (business-as-usual) efficiency and fficiency /low-
carbon cases) for the year 2010 and an explanation of how the scenarios were developed, and
2.8
August ,19974
Chapter 2
Introduction & Background
to 13.4 thousand Btu of energy per dollar of GDP (1992$) (ELA, 1996a, P. 17). DOE estimates that the
country is saving $150 to $200 billion annually as a result of these improvements.
Figure 2.1 Energy Consumption Per Dollar of Gross Domestic Product: 1973-1995
100.
20
Primary Energy Use
Energy Consumption Per Dollar
of GDP
90
U.S. Primary Energy Use
(in Quads)
80
15
of GDP
Energy Consumption Per Dollar
70
60
10
1970
1975
1980
1985
1990
1995
Year
Starting in 1986, energy prices began their descent in real terms that has continued to the present. As
a result, energy demand grew from 74 quads in 1986 to 91 quads in 1995, and it continues to increase
One of the major lessons of the period since 1973 is that the economy will and can respond to energy
price changes. In addition to prices, other factors are also important and can slow the decline in
conservation activity that otherwise would be expected with declining energy prices. Federal
policies, as well as federal, state, and utility programs and consumer preferences for energy-efficient
appliances, houses, and cars can increase the purchase and use of energy-efficient products.
Technological developments can improve the energy efficiency, reduce the carbon emissions, and
often improve the performance of the product. Demand for energy-efficient products and low-carbon
energy technologies is also strengthened by factors such as environmental concerns.
2.4.2 Sectoral Trends
Each end-use sector functions differently in the U.S. energy marketplace. One of the reasons for
these differences is the differing market structure for delivering new technologies and products in
each sector. Residential and commercial building technology is shaped by thousands of building
contractors and architectural and engineering firms, whereas transportation technology is in the
hands of a few manufacturers.
The principal causes of energy inefficiencies in manufacturing and transportation are not the same as
the causes of inefficiencies in homes and office buildings, although there are some similarities
Legs
(Hirst and Brown, 1990). For example, in the manufacturing sector, energy-efficiency investments
are hindered by a preference for investments that increase output compared with investments that
"reduce operating costs. The cost and relative difficulty of obtaining reliable information oftena
prevents energy-efficient features of buildings from being capitalized into real estate prices. This is!
2.10
August 1, 1997 the
Chapter 2
Introduction & Background
Over the entire period from 1973 to 1997, energy use increased in buildings from 24.1 to 33.7 quads
(40%); in industry, from 31.5 to 32.6 quads (3.5%); and in transportation, from 18.6 to 25.5 quads
(37%). As shown in Table 2.3, the growth in buildings and transportation has been relatively
steady, at less than 1% per year from 1973 to 1986, and between 1.3 and 2.9% per year from 1986 to
1997. Growth in energy demand in industry has been much more volatile during the period, showing
substantial declines during the period of rising prices (a negative 1.3% annual growth for the 13
years of increasing energy prices), an increase of 2.7% per year from 1986 to 1995, and a 2.9% per year
decline from 1995 to 1997.
Table 2.3 Historical Energy Growth Rates: 1973-1997
AAGR
AAGR
AAGR
AAGR
AAGR
1973-97
1973-86
1986-90
1990-95
1995-1997
Buildings
1.41%
0.85%
2.25%
1.77%
2.46%
Industry
0,14%
-1.31%
4.81%
1.45%
-2.87%
Transportation
1.32%
0.86%
2.10%
1.29%
2.86%
Total
0.89%
0.0%
3.18%
1.48%
0.66%
AAGR = Average Annual Growth Rate
The growth of carbon emissions during the period roughly follows that of energy demand growth.
Table 2.4 shows estimated carbon emissions from 1973 to 1997. Like energy, carbon emissions were
flat between 1973 and 1986. The increase in the fraction of coal in the final mix from 17.5% in 1973 to
23.2% in 1986 was offset by the increasing fraction of primary energy from nuclear power, from 0.1%
in 1973 to 6.0% in 1986. From 1986 to 1997, carbon emissions grew more slowly than energy
consumption. This was a result of an increase in the share of natural gas from 22.5% in 1987 to 25,4%
in 1997 and in electricity from nuclear power from 4.5% to 7.2%, combined with a small decrease in
coal (23.3% to 22.5%) and a larger decrease in petroleum (43.3% to 39.7%)
Table 2.4 Carbon Emissions from Fossil Energy Consumption: 1973 to 1997
1973
1986
1990
1995
1997
Carbon emissions from
energy in MtC
1260
1240
1344
1424
1480
1973-97
1973-86
1986-90
1990-95
1995-97
Average annual
growth rates (AAGR)
0.67
-0.12%
2.03%
1.16%
1.95%
for carbon emissions
Sources: Carbon emissions estimates for 1990 are from EIA (1996b, Table 6, 16), and for 1995, are from ELA
(1996b, Table A19, P. 120). Carbon emission estimates for 1973 and 1986 were derived using factors for carbonal
emissions from combustion of oil, natural gas, and coal for 1990.- For 1997, they are from the end-use sector
analyses described in Chapters 3 through 5 of this report.
2.12
August 1,1997
Chapter 2
Introduction & Background
research. results of the R&D. This is characteristic, for instance, of much defense and crime prevention
Based on these three justifications, the rationale for government support of energy-efficiency and
low-carbon technology R&D is strong. Much of this research is both long-term and high-risk and
therefore cannot be afforded by private companies despite the possibility of substantial gains in the
long run. Examples include high temperature superconductivity, fuel cell vehicles, and building
materials with switchable thermal and optical properties. Advances in energy research also offer
substantial public benefits that cannot be fully captured by private entities. Specifically, energy-
efficiency and low-carbon resources improve energy security by reducing the nation's reliance on
foreign sources of oil; they lead to reductions in waste streams; and they reduce greenhouse gas
emissions, which contribute to global warming. Finally, it is possible that governments will in the
future become the principal purchaser of greenhouse gas reductions as the result of future
international agreements. In this case, the third rationale for federal sponsorship of energy R&D
will also apply.
Industry's R&D priorities are shifting away from basic and applied research and toward near-term
product development and process enhancements. Business spending on applied research has dropped
to 15% of overall company R&D spending, while basic research has dropped to just 2%. In addition,
corporate investments in energy R&D, in particular, are down significantly (DOE, 1996a, p. 2).
Great potential exists for public-private R&D partnerships to produce scientific breakthroughs and
incremental technology enhancements that will produce new and improved products for the
marketplace. U.S. industry spends more than $100 billion per year on all types of R&D. The top 20
R&D, performing companies all have R&D budgets exceeding $1 billion per year. These
expenditures dwarf the U.S. government's energy-related R&D appropriations. If climate
mitigation policies reoriented even a tiny fraction of this private-sector expenditure and
capability, it could have an enormous impact. One way to reorient private-sector R&D is through
industry-government R&D partnerships that involve joint technology roadmapping, collaborative
priorities for the development of advanced energy-efficient and low-carbon technologies, and cost
shared R&D.
2.5.2 Past R&D Successes
Some indication of the cost-effectiveness of energy-efficiency R&D can be gleaned from the
experiences to date of DOE's Office of Energy Efficiency and Renewable Energy. From fiscal year
1978 through fiscal year 1994, DOE spent a total of about $8 billion on energy-efficiency R&D and
related deployment programs. Estimates of the benefits of several dozen projects supported by this
funding were published in DOE/SEAB (1995). In response to a detailed review of these estimates by
the General Accounting Office in 1995/96, DOE has revised and updated the estimated benefits
accruing from five technologies that were developed with DOE support. Altogether, these five
technologies alone have resulted in net benefits (i.e., the value of energy saved minus annualized
cost premiums for better equipment) of approximately $28 billion (1996$) and annual emissions
reductions of 16 MtC equivalent (Table 2.5).
Thus, the value of the energy saved by these five technologies, alone, far exceeds the cost to the
taxpayers of DOE's entire energy-efficiency R&D budget over the past two decades. Additional
case studies and benefits are documented in Geller and McGaraghan (1996) and DOE/SEAB (1995).
2.14
August 1, 1997
Chapter 2
Introduction. & Background
Geller, H., and S. McGaraghan. 1996. Successful Government-Industry Partnership: The U.S.
Department of Energy's Role in Advancing Energy-Efficient Technologies. Washington, D.C.:
American Council for an Energy Efficient Economy.
Hirst, E. and M. A. Brown. 1990. "Closing the Efficiency Gap: Barriers to the Efficient Use of
Energy," Resqurces, Conservation and Recycling, 3: 267-281.
Intergovernmental Panel on Climate Change (IPCC). 1996. Climate Change 1995: The Science of
Climate Change (Cambridge, UK: Cambridge University Press), p.5.
James, W.M. (The Procter and Gamble Company). 1997. Presentation at the AAAS S&T Policy
Symposium, Washington, D.C., April 25.
National Academy of Sciences (NAS). 1992. Policy Implications of Greenhouse Warming:
Mitigation, Adaptation, and the Science Base (Washington, DC: National Academy Press).
Office of Technology Assessment (OTA). 1991. Changing by, Degrees: Steps to Reduce Greenhouse
Gases, OTA-0-482 (Washington, DC: U.S. Government Printing Office) February.
Romm, J.J 1994. Lean and Clean Management (New York: Kodansha America Inc.)
Romm, J.J., and C.A. Ervin 1996. "How Energy Policies Affect public Health," Public Health
Reports, 5: 390-399.
U.S. Congress, Office of Technology Assessment. 1991 Changing by Degrees: Steps to Reduce AND
Greenhouse Gases, OTA-0-482 (Washington, DC: U.S. Government Printing Office) February
U.S. Department of Energy (DOE), Office of Policy. 1996a. Corporate R&D in Transition
(Washington, DC: U.S. Department of Energy), March.
U.S. Department of Energy (DOE), Office of Policy and International Affairs. 1996b. Policies and
Measures for Reducing Energy Related Greenhouse Gas Emissions. DOE/PO-0047. U.S. Department
of Energy. Washington, D.C., July.
U.S. Department of Energy (DOE). 1995. Energy Conservation Trends DOE/PO-0034 (Washington,
DC: U.S. Department of Energy, Office of Policy), April.
U.S. Department of Energy, Secretary of Energy Advisory Board (DOE/SEAB). 1995. Task Force on
Strategic Energy Research and Development, Annex 3. (Washington, DC: U.S. Department of
Energy), June.
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August 1, 1997