Table 5. Gasoline Price, United States vs. Developing Countries, 1996 (U.S. Dollars per Tons of Oil Equivalent) Source: International Energy Agency, Energy Prices and Taxes, Second Quarter 1997 Energy Cost Subsidization by the U.S. and Other Nations Q6. A6. Don't all nations currently have ways of subsidizing energy costs to attract industry to their country? While many nations have means of subsidizing energy costs, there is a global trend away from using energy subsidies. Moreover, the extent to which energy may be subsidized depends on how broadly a subsidy is defined. Controversy exists, for example, over how widely applicable a given tax incentive must be applied before it will no longer be regarded as a subsidy, or whether certain research and development expenditures on emerging energy technologies constitutes a subsidy. U.S. Fossil Fuel Subsidies Q7. A7: Are fossil fuels directly or indirectly subsidized in the U.S.? Again, the answer depends on how broadly or narrowly one defines a direct or indirect subsidy for fossil fuels. The lack of consensus regarding what is an "energy subsidy" has led to a wide range of differences in published estimates. Estimates of federal energy subsidies have been undertaken by the Energy Information Administration (EIA) and by several private organizations. In addition, analyses prepared by the Congressional Budget Office provide estimates of foregone revenues from energy-related tax provisions in each annual report on deficit reductions. EIA estimated overall subsidies to fossil energy sources of $699 million dollars for 1992 in its report on "Federal Energy Subsidies: Direct and Indirect Interventions in Energy Markets" (p.7). The Alliance to Save Energy (ASE), a non-profit private organization, estimated fossil subsidies for 1989 of $13.2 to $21.1 billion in its report by D. Koplow on "Federal Energy Subsidies: Energy, Environmental, and Fiscal Impacts" (p. 16). Both studies generated controversies as to whether some of the items included should be counted as energy subsidies, or whether the size was properly estimated. The largest sources of difference between the EIA and ASE results appear to be related to differences in the definition of "subsidy" employed. In particular, (1) the ASE includes as fossil subsidies items defined as subsidy to fossil electricity production (about $9 billion, or slightly less than 1⁄2 cent/kWh); (2) the ASE includes as fossil subsidies some $9 billion in general investment tax provisions used by fossil energy and electric companies (there is some overlap between the items in this figure and those included as fossil electric subsidies above); these provisions were transitional in 1989 and are no longer in effect; (3) the ASE includes the Strategic Petroleum Reserve as an oil subsidy, at $2 billion; (4) EIA reduces its oil subsidy estimates for $3.1 billion in federal motor fuel excise taxes that were applied to general purposes in that year rather than to highway purposes. Finally, the Congressional Budget Office has recently estimated that a combined reduction of the Federal deficit and national debt of $6.3 billion could be realized over the next six years through a combination of eliminating certain research programs that include fossil fuels, and restructuring of the Power Marketing Administrations which generate some of their power from fossil fuels. Use of Energy Subsidies to Attract Industry Q8. A8. If a country can use energy subsidization to attract industry to locate within their boundaries what would prevent them from doing so now apart from any agreements related to carbon dioxide reduction? There are no impediments to countries using energy subsidies to attract industry, although trade agreements may constrain the ability of countries to preferentially subsidize domestic energy over imported energy sources. Should countries enter into a binding agreement to limit greenhouse gas emissions, they could still subsidize energy under the Framework Convention, but subsidies would not excuse nations from meeting targets and timetables if lower prices encouraged more energy use. HEARING OF THE SUBCOMMITTEE ON ENERGY AND ENVIRONMENT U.S. HOUSE OF REPRESENTATIVES on Countdown to Kyoto-Part 2: The Economics of a Global Climate Change Agreement Thursday, October 9, 1997 Post-Hearing Questions Submitted to Dr. Joseph J. Romm Acting Assistant Secretary for Energy Efficiency and Renewable Energy Five-Lab Study Assumptions Q1. DOES September 25, 1997 press release on the Scenarios of U.S. Carbon Reductions report (hereafter, the Five-Lab study) stated National investment in energyefficiency and clean energy technologies can reduce U.S. emissions of global warming gases and produce energy savings that roughly equal or exceed the costs to implement them. Please provide the details of the calculations that back up the quoted statement, including but not necessarily limited to: Q1.1 The specific assumptions that were made concerning which technologies that can be used to reduce U.S. emissions of global warming gases, when those technologies were assumed to be available, and their assumed performance. Q1.2 The specific assumptions that were made concerning who would make use of the technologies and when (show the type of energy user and energy using sector that would make use of the technologies and the rates of the growth in their adoption, by year). Q1.3 The specific assumptions that were made concerning the capital and operating costs for the technologies, by technology, by energy using sector, and by year. Q1.4 The quantities of energy (each primary energy source and electricity and by energy using sector) that would be used in each year, before, during and Q1.5 The specific assumptions that were made concerning energy conversion ratios, if they were assumed in the calculations. Q1.6 The specific assumptions that were made concerning energy prices for each energy source and each energy using sector for each year, before, during and after the beginning of adoption of the technologies. Q1.7 The specific assumptions that were made concerning the role of existing or potentially new taxes in the calculation, when the taxes would be adopted and by whom they would be paid. Q1.8 The specific assumptions that were made concerning the emissions that are presumed to be associated with each energy or other emissions source, in terms of emissions per unit of energy and total emissions for each pollutant and each energy source (e.g., energy using sector) in each year. Q1.9 Any energy, energy cost, or other cost or savings that was not taken into account in the calculations leading to the quoted conclusion. Q1.10 Any other assumption or calculation that played an part in the reaching the conclusion reflected in the above quoted phrase. Q1.11 Names and specific page and/or table numbers for any references documents that identify or explain the technologies, and/or assumptions. A11-A1.11 The specific assumptions referred to in these questions can be found in detail in Scenarios of Carbon Reductions — Appendices (hereafter, Appendices) which is enclosed with this response. The appendices found in this volume provide a comprehensive set of assumptions and information regarding specific technology performance, type of energy user, capital and operating costs, quantities of energy consumed, energy conversion ratios, energy prices, energy taxation, carbon emissions, omitted considerations and references. Five-Lab Study Specific Calculations Q2. A2. DOE's September 25, 1997 press release on the Five-Lab study reflects DOE's claim that a carbon emissions reduction of 390 million tons would be required, that the potential cost would be $50 to $90 billion per year, and the energy cost savings would be $70 to $90 billion per year through 2010. The Subcommittee is interested in learning about the calculations that support the conclusion in the Press Release. Please provide a copy of that spreadsheet or spreadsheets showing the detailed calculations. See Appendices for detailed calculations supporting the conclusion of the above |