Appendix II

List of Nonfederal Groups Commenting on

the Five-Lab Study

Air-Conditioning and Refrigeration Institute
Alliance to Save Energy

American Automobile Manufacturers Association

American Council for Capital Formation

American Council for an Energy-Efficient Economy

American Forest and Paper Association

American Foundrymen's Society

American Iron and Steel Institute

American Metalcasters Consortium

American Petroleum Institute

Association of Home Appliance Manufacturers

Chemical Manufacturers Association

Consumer Energy Council of America/Research Foundation

Edison Electric Institute

Environmental and Energy Study Institute

Global Climate Coalition

International District Energy Association

International Project for Sustainable Energy Paths

National Association of Home Builders

National Association of Manufacturers

National Hydropower Association

National Mining Association

Natural Gas Supply Association

Natural Resources Defense Council

Nuclear Energy Institute

Primary Glass Manufacturers Council

Reason Public Policy Institute

Renewable Fuels Association

Resources For the Future

Steel Founders Society of America

The Aluminum Association

DOE does not disagree per so with the two principal limitations noted in the "Results in Brief"
that "the study's usefulness is limited because it did not identify the policies needed to achieve its
estimate of 394 million metric tons of carbon reductions by 2010" and did not
consider the costs to the nation's economy of reaching this goal." 2-3). Both of t
Imitations are noted in the S-Lab Report However, while these t
study, the GAO report should state in the Results in Brief secti
do not invalidate the conclusions of the study. In fact, the GAO
this section the essential conclusion of the report, that "a vigor
develop and deploy energy efficien

growth of U.S. energy consu

low-carbon technologies has the
carbon emissions...and can prod

Study Executive Summary).
and the total macroeconomic costs of the

are roughly d to or exceed costs"
nature of the policies s

conclusions.

With

stional commitan

of the policies, the GAO report repeatedly criticizes the 5 Lab S

not specifying the precise policies needed to achieve the three carbon reduction scenarios.
fact is indeed a limitation and certainly worth noting. However, as stated clearly in the stu
purpose of the study to assess the feasibility of major carbon amissions reductions through
aggressive technology scenarios. The absence of a roadmap of specific policies does not in a
way invalidate the conclusions of the study-especially since the study did consider a wide
of policy implementation costs in the calculation of overall costs and benefits (5 Lab Study
11 to 1-15 and Appendix A-2). It should also be noted that since the publication of the study, the
Administration has indeed provided many of the elements of the policy roadmap in the
announcement of the Climate Change Technology Initiative - a combination of higher budgets for

Appendix III

Comments From the Department of Energy

Now on p 13.

Now on p. 6.
See comment 1.

Now on p. 9.
See comment 1.

Guerrero
Page 2

July 27, 1998

technology RD&D and tax incentives to accelerate the use of highly efficient and low-carbon technologies. This initiative, if enacted, will provide many of the actions and incentives to accelerate the use of energy efficient and low-carbon technologies that indeed can reduce carbon emissions at low cost.

With regard to the full costs to the nation's economy not being considered, the study acknowledges that a fall macroeconomic analysis was not performed. However, the GAO report should also acknowledge that the study did also not consider the full range of benefits of these technologies. In particular, the scenarios would produce such benefits as lower cost of state compliance with Clean Air Act regulations, decreases in oil import costs (and hence less negative U.S. balance of trade), increased electricity system reliability (and therefore decreased costs of power outages) and possible increased public health due to concomitant reductions in emissions of NOx, sulfur, particulates and ozone While it is quite difficult to quantify these benefits, many studies have suggested that the benefits are real and substantial.

Several times in the GAO report, organizations appear to criticize the S-Lab Report for not
reflecting current conditions (eg, top of p. 17). In particular, assumptions on discount rates,
capital recovery factors and technology penetration rates are cited as optimistic given current
conditions DOE does not believe these comments are relevant. The point of the entire 5 Lab
Study is to describe what could happen under conditions which deviate from today's situation --
1.6., where there's an aggressive national commitment to energy efficiency, including a $50 per ton
carbon fee. So by design the assumptions differ from a business as usual view of the future.
These assumptions are well grounded in historical experience of what is indeed possible and the
study states in several places that achieving these scenarios will be challenging, but is possible
with a sustained national commitment.

The following more specific comments are offered.

• The major point of the DeCanio study is not that "the kinds of policies implemented to
achieve any particular greenhouse gas emission reduction target "will have a significant impact
on the cous" (p. 3). His main point is that there are many policies that could have very low,
if any, net costs. The DeCanio article supports this position through illustrations and by citing
the Economists' Statement on Climate Change that "For the United States in particular, sound
economic analysis shows that there are policy options that would slow climate change without
harming American living standards, and these measures may in fact improve U.S. productivity
in the longer run. These additional points should be noted.

• Change "transportation and industry" to "transportation" on p. 11. Some organizations did express disagreement with the discount rates used for industry, as described in the subsequent section on capital recovery rates.

Now on p. 13.
See comment 7.

Now on p. 14.
See comment 8.

Now on p. 14.
See comment 9.

Querrero
Page 3.

27, 1998 ·

Change "more the

saly" in footnote 13, p. 10

During material after the first sentence in the section on "Technology adoption rate on ge 14: "The study's adoption rate for the transportation sector was not a significant issue among the groups we contacted" DOE assumes this is the case since adoption rates for transportation are not discussed in the GAO report and because the 5-lab study is quite conservative in this regard

• Eliminate the following phrase at the top of p. 15: "and questioned whether builders of these structures would install the most energy efficient technologies available." The 5-Lab Sundy does not assume that the most energy efficient technologies will be installed. Therefore this comment is irrelevant

• At the top of p. 14 the GAO report fails to note that Marc Ross identified the lower discount rates as applicable to "strategic" investments-i.c., 19% for large projects (not 15 to 25%) and 35% for small to medium projects (not 35 to 60%) DOE believes this should be noted by GAO since the 5-Lab Study characterized its most aggressive scenario as one where energy investments are viewed se strategic

• At the bottom of p. 16, the AAMA suggests that the longevity of passenger cars and light duty trucks is increasing (now about 14 and 16 years, respectively), "making it more difficult to achieve part of the carbon reductions estimated for the transportation sector by 2010 * But the 5-Lab Study's analysis explicitly uses the lifetime of vehicles as a parameter in the NEMS model--the longer the lifetime (as is the trand), the slower the pace of technological change. Therefore, how could the extended lifetime of vehicles make the carbon reductions more difficult to achieve? The scenarios are based on these extended lifetimes.

• Eliminate the following sentence from the bottom of page 17: "However, officials from ELA, the American Petroleum Institute, and the Edison Electric Institute said that it is optimistic to assume that significant switching from coal to natural gas could occur without an increase in gas prices. The sentence is not correct (ie, higher gas prices would discourage shifts from coal to gas) and it is placed between two sentences that to belong together.

• Please insert the following sentence at the bottom of the section on "Timing of Technology Breakthrough" on page 17: "For example, they note that the study does not anticipate vehicles with fuel cells entering the market before 2007 in the most aggressive case, yet a number of manufacturers, including Daimler Benz, have announced that they will have such vehicles on the road before then. In addition, Toyota has announced it will introduce its Prius hybrid vehicle in the U.S. in 2000, several years ahead of the entry year described in the S-Lab Study's most aggressive scenario."

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