cents per kilowatt hour with no CO2 emissions and no NOx or SOx emissions. We see these kinds of inefficiencies in every other sector of the economy. The average automobile engine is only 20 to 25 percent efficient. Again, through the Partnership for a New Generation of Vehicles, we are working on technologies to capture some of the inefficiencies in the automobile engine. For instance, the energy lost by braking can be captured with high-energy storage devices, so-called regenerative braking. So the Department is very bullish on our ability to double and triple the efficiency of existing vehicles. In the area of buildings, the EPA and the Department of Energy have demonstrated time and again that there are countless buildings-that virtually every building can have its energy consumption reduced 25 to 50 percent, cost-effectively, today. One more example. Eight to ten baseload power plants in this country do nothing but provide energy for the electronic appliances in your home when they're not even turned on, when they're just in standby mode. I think this notion that the permit price for carbon dioxide is going to be high, based on economic models, we should be very wary of that sort of analysis, when we have seen, particularly in the case of sulfur dioxide trading, that the initial estimates, based on very sophisticated models, showed that the price for permits would be $600 to $1,500 a ton, and they now trade in the $70 to $100 range. Let me just conclude by saying that the President has made clear that an aggressive strategy of technology development and deployment will be part of his climate policy, and what the five-labs study shows is that such a strategy can allow us to reduce greenhouse gas emissions without raising the Nation's energy bill. Thank you. [The prepared statement and attachments of Mr. Chupka and Mr. Romm follow:] STATEMENT OF MARC W. CHUPKA ACTING ASSISTANT SECRETARY FOR POLICY AND INTERNATIONAL AFFAIRS AND JOSEPH ROMM ACTING ASSISTANT SECRETARY FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY BEFORE THE SUBCOMMITTEE ON ENERGY AND ENVIRONMENT COMMITTEE ON SCIENCE U.S. HOUSE OF REPRESENTATIVES OCTOBER 9, 1997 Introduction Thank you very much for giving us the opportunity to discuss two recent climate change reports sponsored by the Department of Energy. The two studies that we'll be discussing are: Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond, prepared for the Energy Efficiency and Renewable Energy office by a group of five national laboratories, including: Oak Ridge National Laboratory Lawrence Berkeley National Laboratory National Renewable Energy Laboratory and Argonne National Laboratory, and The Impact of High Energy Price Scenarios on Energy-Intensive Sectors: Perspectives from Industry Workshops prepared by Argonne National Laboratory under contract with DOE's Office of Policy and International Affairs. Five-Lab Study Mr. Chairman, we appreciate the opportunity to come before you and discuss the results of our in-depth analysis, Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond. This is the most comprehensive analysis of energy efficient and low carbon energy technologies ever undertaken. While the details of how the U. S. and the world will address climate change remain undecided, its findings should be good news to those who are concerned about meeting the challenge of a changing climate. Overall, the report makes three important conclusions. First, it demonstrates that a vigorous national commitment to develop and deploy energy-efficient and low-carbon technologies has the potential to restrain US energy use at or near 1997 levels, and US carbon emissions at or near 1990 levels. Second, it concludes that, with the right policies, the nation's energy savings would equal approximately the costs of achieving these reductions. (But only with the assumption of energy price increases). Third, it finds that the next generation of energy-efficient and low-carbon technologies will allow us to continue an aggressive pace of carbon reductions over the next twenty five years. These findings have been extensively peer-reviewed by some of the most credible and knowledgeable people in energy economics and policy. Dr. Stephen DeCanio, former senior economist of the Council of Economic Advisors under President Reagan, and now a professor of Economics at the University of California at Santa Barbara stated, for example: "I believe these conclusions are well supported by the data and analysis contained in the Report. The Report represents the best kind of careful, technology-specific modeling that can be done prior to direct observation of the market consequences of a clear, unambiguous policy signal (including a price signal) indicating the nation's determination to reduce greenhouse gas emissions." Before discussing the findings in more detail it is important to understand exactly what this Report is; and --equally important --what it is not, and why we undertook the Report. Limitations of the Study This study is not a full macroeconomic analyses. It does not weigh the many benefits of reducing greenhouse gasses. To put it another way, it does not measure the very real costs of doing nothing. It does not, in general, attempt to measure the ancillary benefits associated with improvements in human health and the environment that would come about from using less energy per unit of production and from using cleaner energy sources. Substantial reductions in air emissions of NOx, SOx, particulates, and heavy metals could result as an ancillary benefit of an intelligent climate mitigation strategy. It does not capture increases in productivity associated with more efficient use of energy inputs, nor does it attempt to measure the opportunity costs of investments in energy efficiency and renewable energy. It also does not examine the effects of international trading and joint implementation, both of which could substantially reduce costs. It does not measure the economic costs of the policies that would have to be enacted to ensure that these technologies were adopted. Finally, it does not account for the improvements in our balance of trade, and increases in assuring our national security that would flow from policies that displaced oil imports from unstable sources. The study is also not a prediction. Rather it is a careful analysis of what is achievable with a vigorous commitment to research, development, and deployment of efficient and low carbon technologies, backed up by carefully designed and intelligently implemented policies. Motivations for the Study We initiated the study because "bottoms-up" analyses allow for a more careful examination of the most critical variable in assessing the costs of reducing greenhouse gasses --the role of technology and innovation. We felt this approach could supplement more traditional “top-down” analyses in important ways: First, for years traditional "top down" economic analyses and models have been producing a widely diverging range of results concerning the cost of cutting carbon emissions. The disparity was sufficiently large, that we could gain little in the way of insight that would help us formulate policies. As noted by Dr. Janet Yellen, Chair of the President's Council of Economic Advisors in testimony before the Senate Committee on Environment and Public Works on July, 17, 1997: "... The effort to develop a model or set of models that can give us a definitive answer as to the economic impacts of a given climate change policy is futile. Rather, we are left with a set of parameters and relationships that influence estimates of the impacts. In my view, it is more productive to employ a broad set of economic tools to analyze policy options than to seek to develop a single definitive model." Second, traditional econometrics analyses are not very effective at capturing the effect of technological innovation. Quite simply, the models tend to underestimate the effects of technological innovation on both our ability to respond, and the costs of responding to market signals. Quite often, industry finds cheaper, more innovative ways of accomplishing environmental objectives than anything government or industry can predict. For instance, EPA projected that compliance with the Clean Air Act's acid rain program would run between $450 and $600 per ton of sulfur dioxide emissions. The actual price for those allowances have recently ranged between $70 and $100 a ton. In contrast, a "bottom-up" analyses starts with technology, and estimates the potential and costs from detailed data about technological performance. We undertook this study because no one has performed a "bottom-up" study since 1991, when both the Office of Technology Assessment and the National Academy of Sciences conducted "bottom-up" analyses on the potential to capture energy efficiency in the market place, and because it would increase our understanding of the contribution of technological innovation in forging a cost effective strategy. Findings Three of the most important variables in the cost of reducing greenhouse gas emissions are: 1) the existence of low carbon energy supply alternatives; 2) the existence of low-cost energy efficient technologies; and 3) the rate of technological innovation. The Report finds that there are substantial inefficiencies both in how we generate energy, and in how we use it. The National Laboratories Study systematically analyzes four sectors of our economy to identify such opportunities: Utilities; industry; buildings; and transportation. The report examines 3 cases. One is a moderate efficiency case, which assumes a vigorous national commitment to developing and accelerating the use of energy efficient and low carbon technologies. The other two are high efficiency/low carbon cases which assume a still more aggressive national commitment in the form of price or other market signals, an aggressive R&D investment program, and regulatory reinvention initiatives designed to stimulate adoption and development of clean and efficient technologies. Utilities: Within Utilities, the study identifies potential carbon reductions of up to 136 million metric tons of carbon (MtC) by 2010. These reductions come from increasing the efficiency of existing plants, switching to increased use of natural gas, co-firing coal plants with biomass (biomass is a nearly carbon neutral fuel over its life cycle), introducing a more efficient and costcompetitive wind turbine, expanding hydropower, and extending the life of nuclear facilities. Other renewable energy sources such as photovoltaics will come on line later, contributing to |