Tables ES1. Summary of Impacts for Selected Climate Change Technology Initiatives, 2010 ES2. Summary of Impacts for Selected Climate Change Technology Initiatives, 2002-2004 ES3. Summary of Impacts for Proposed Efficiency Standards, 2010 1. Tax Credit Proposal for Energy-Efficient Building Equipment 2. Cost and Performance Data for CCTI Technologies. 3. Projected Energy Savings and Carbon Emissions Reductions from the CCTI Tax Incentive for Energy-Efficient Building Equipment, 2005, 2010, and 2020 4. South Region Building Code Characteristics 5. North Region Building Code Characteristics 6. Projected Energy Savings and Carbon Emissions Reductions in the CCTI Analysis Case for Energy-Efficient New Homes.. 12. Projected Effects of the CCTI Tax Credit on Traditional Industrial Cogeneration, 2000-2002 13. Projected Effects of the CCTI Tax Credit for Traditional Combined Heat and Power (CHP) Systems, 2005, 2010, and 2020 14. Electric Vehicles Currently Available in U.S. Markets and Announced Dates of New Production Prototypes 15. Light-Duty Vehicle Sales by Technology Type, 1997-2020 16. Light-Duty Vehicle Fuel Consumption by Fuel Type, 1997-2020 17. Transportation Sector Carbon Emissions by Fuel Type, 1997-2020 18. Projected Vehicle Sales and Reductions in Projected Tax Revenues in the CCTI Analysis Case by Vehicle Type, 2002-2006 19. New U.S. Wind Generating Capacity Concurrent with the EPACT Production Tax Credit, 1994-1999 20. Projected Effects of the CCTI Biomass Energy Production Tax Credit, 2005, 2010, and 2020 21. Projected Effects of the CCTI Biomass Energy Co-firing Tax Credit, 2004, 2005, 2010, and 2020 40 41 42 43 25. Projected Energy Savings and Carbon Emissions Reductions for Successful PATH Program Goals in New Housing, 2005, 2010, and 2020 48 26. Projected Residential Electricity Savings and Carbon Emissions Reductions for the Energy Star TV/VCR Program in the AEO99 Reference Case, 2005, 2010, and 2020 49 27. Projected Energy Savings and Carbon Emissions Reductions for Successful Million Solar Roofs Program, 2005, 2010, and 2020.. 28. Light-Duty Vehicle Sales by Technology Type, 1997-2020 29. Light-Duty Vehicle Fuel Consumption by Fuel Type, 1997-2020 30. Transportation Sector Carbon Emissions by Fuel Type. 1997-2020 31. Light Truck Sales, 1997-2020 32. Light-Duty Vehicle Fuel Consumption by Fuel Type, 1997-2020 33. Transportation Sector Carbon Emissions by Fuel Type, 1997-2020 34. Heavy Truck Diesel Technology Characteristics in the Reference Case 35. Heavy Truck Diesel Technology Characteristics in the CCTI Analysis Case 36. Heavy Truck Diesel Fuel Efficiency, 1997-2020 37. Market Penetration of CCTI Proposal Technologies in the CCTI Analysis Case 39. Ethanol Consumption and Resulting Carbon Emissions Reductions in the Reference Case, 1997, 2005, 2010, and 2020 40. Projected Uses of Ethanol in the Reference Case, 1997, 2005, 2010, and 2020 59 65 65 45. Efficiency of New Refrigerators, 1972-2001 46. Assumptions for Accelerated Minimum Efficiency Standards Affecting Buildings 47. Comparison of Results: Accelerated Standards Process 83 Executive Summary In February 1999, the Administration's fiscal year 2000 budget request was sent to the U.S. Congress. The request includes more than $4 billion in programs related to climate change. Nearly $1.8 billion of the funding consists of tax incentives, research, development, deployment, and other spending for the Climate Change Technology Initiative (CCTI). CCTI includes tax credits to serve as incentives for deploying energy efficiency improvements and renewable technologies for buildings, light-duty vehicles, industry, and electricity generation. Other funding covers research, development, and deployment for energy-efficient and renewable technologies and appliance efficiency standards. One focus of these programs is climate change; but they often have additional benefits for improved air quality due to reductions in criteria pollutants, energy security, and maintaining U.S. leadership in science and technology. Although the tax credits are largely new initiatives, many of the other programs are continuations or expansions of ongoing research, development, and deployment programs. The total CCTI budget request of $1.8 billion for all Federal agencies includes almost $1.4 billion for research, development, and deployment and nearly $0.4 billion for tax incentives. Of the $1.4 billion in expenditures for programs other than tax incentives, $397 million is the increase over the fiscal year 1999 budget. At the request of the Committee on Science, U.S. House of Representatives, the Energy Information Administration (ELA) conducted an analysis of the potential impacts of CCTI, relative to the baseline energy projections in the Annual Energy Outlook 199:) (AEO99).' This analysis was conducted primarily using the National Energy Modeling System (NEMS), ELA's energy-economic modeling system of domestic energy markets. This analysis discusses all programs in CCTI with the exception of $4 million proposed for electricity restructuring at the U.S. Environmental Protection Agency (EPA), $14 million for management, planning, and analysis for the U.S. Department of Energy (DOE) and EPA, $3 million for EIA, and $10 million for carbon sequestration programs within EPA and the U.S. Department of Agriculture (USDA). The analysis primarily focuses on the tax incentives in CCTI, which are new initiatives or extensions of current tax credits. We are not able to link research and development expenditures directly to program results or to separate the impacts of incremental funding requested for fiscal year 2000 from ongoing program expenditures. Therefore, the research, development, and deployment programs are either addressed qualitatively, analyzed via their impact in the AEO99 reference case, or analyzed by assuming that certain program goals are achieved. Other programs that may have benefits for climate change, but are not part of CCTI, are not included in the analysis. These include electricity restructuring and renewable portfolio standards. Renewable portfolio standards are addressed in the report by referring to analysis in AEO99 on a 5.5-percent standard. NEMS represents energy-consuming and producing technologies with a high degree of detail; however, the pace of technology development and penetration remains a major uncertainty. To project the future of energy markets, EIA relies upon engineering evaluations of the availability, costs, and characteristics of new technologies, continuing patterns of research and development; however, it is not possible to foresee with certainty how energy-using technologies will develop in the future. To be successful a technology must be developed and penetrate the market. Barriers that may limit or slow the penetration of apparently cost-effective technologies include: lack of information, subsidies or regulated prices that may hold energy prices artificially low, differences in incentives between builders Energy Information Administration, Annual Energy Outlook 1999, DOE/EIA-0383(99) (Washington, DC, December 1998). 57-713 99-4 and users of energy equipment, consumer preference for other equipment attributes instead of efficiency, consumer preference for short payback periods, and uncertainties about reliability, installation and maintenance, future technology developments, and infrastructure requirements. EIA analyzes empirical evidence to estimate price elasticities and consumer preferences in order to project consumer reaction to changes in energy prices or improvements in energy efficiency; however, models cannot predict shifts in consumer tastes or market transformations associated with the rapid adoption of new technologies, such as the Internet. Tax Incentives Tax incentives have played a significant role in energy policy for many years. Some incentives have been able to accelerate substantially the introduction of new technologies into the market, while others have had little impact. Both the level of the incentives and likely market conditions are important factors in any assessment of the impacts of changes in the tax laws. Compared to some earlier tax credits, such as the solar tax credit of 40 percent which was enacted in 1978 and expired in 1985, the incentives currently proposed are of small to modest magnitude and of relatively short duration. ССТІ proposes investment tax credits for buildings, vehicles, and industry to lower the initial costs of more energyefficient and renewable technologies and production tax credits for renewable generation technologies. These tax credits are in effect for only a few years for the intended purpose of encouraging the penetration of these technologies, reducing costs, and creating a more mature market. Administration estimates of the revenue impact of the credits are $383 million in fiscal year 2000 and $3.6 billion from fiscal year 2000 through fiscal year 2004. The tax credits proposed in CCTI are as follows: • Buildings Tax Credit for Energy-Efficient Homes. A new $1,000 tax credit would be established for new homes purchased between 2000 and 2001 that are at least 30 percent more efficient than the 1998 International Energy Conservation Code (IECC), a $1,500 credit for homes between 2000 and 2002 that are at least 40 percent more efficient, and a credit of $2,000 for homes between 2000 and 2004 that are at least 50 percent more efficient. Tax Credit for Energy-Efficient Equipment in Existing Homes and Buildings. A new tax credit of 10 percent, up to $250 per unit. would be established for electric heat pumps, central air conditioners, and advanced natural gas water heaters purchased in 2000 and 2001 meeting specified efficiency levels and a 20-percent credit for purchases between 2000 and 2003 of fuel cells, electric heat pump hot water heaters, electric heat pumps, central air conditioners, advanced natural gas water heaters, and natural gas heat pumps meeting specified efficiency levels. The cap is $500 per kilowatt for fuel cells, $1,000 per unit for natural gas heat pumps, and $500 per unit for all other equipment. Tax Credit for Rooftop Solar Systems. A new 15-percent tax credit, subject to a cap, would be established for rooftop photovoltaic systems installed between 2000 and 2006 and solar water heating systems installed from 2000 and 2004 but is not available for solar-heated swimming pools. The cap is $2,000 for the photovoltaic systems and $1,000 for the solar water heating systems. Transportation Tax Credit for Electric Vehicles and Fuel Cell Vehicles. Under current law, the 10-percent tax credit, subject to a $4,000 cap, for the purchase of qualified electric vehicles and fuel cell vehicles begins to phase down in 2002. phasing out by 2005; however, this proposal would extend the credit at its full level through 2006. |