The authors examined each of 404 power plants individually to determine what opportunities existed to repower, and increase efficiencies. It is the most exhaustive such analysis ever done.

Industry: Within the industrial sector, the report identifies technologies and efficiencies capable of yielding up to 93 MtC of emission reductions by 2010. As with the utility sector, the industrial sector has been heavily regulated. Ironically, environmental regulations that are focused on a single media or a single contaminant have often forced capital into investments that are suboptimal from the perspective of increasing energy efficiency, or reducing carbon. For example, a facility that installs a scrubber to remove air contaminants can increase its energy demand by up to 10%, increasing net CO2 emissions in the process. Environmental regulations have also tended to discourage adoption of and investment in innovative technologies. As this Administration completes its Regulatory Reinvention Initiative, facilities will have more flexibility to pursue environmental objectives from the perspective of prevention and efficiency. For example, regulatory strategies which encourage a facility-wide approach to meeting Clean Air Act requirements would be a powerful driver to choose cleaner fuels and more efficient energy technologies, processes and procedures as strategy of first choice in meeting requirements. The Report finds that with appropriate regulatory drivers and market signals, there is a potential to substantially increase industrial energy efficiency, displacing up to 62 MtC.

The Office of Energy Efficiency and Renewable Energy is working with the 7 most energy-and -waste intensive industries --Forest Products, Aluminum, Chemicals, Steel, Petroleum Refining, Metal Casting and Glass --under the Industries of The Future Initiative to develop technology roadmaps that help these industries become more efficient, more productive, cleaner, and more competitive. Together they generate 80% of all waste generated in the manufacturing sector, and use about 80% of all manufacturing energy. These industries have established ambitious goals to reduce energy use that are consistent with the technology opportunities identified in the Report.

A number of specific technologies with the potential to reduce the carbon intensity of the industrial sector are expected to come on line soon. Advanced Turbine Systems (ATS), for example, are gas turbines that produce less carbon dioxide per kilowatt hour than technologies used in conventional power markets. When commercialized in 2001, the emissions of CO2 from ATS are projected to be 600lb/kWh, 29%-70% lower than conventional technologies. Orders for these systems are being taken today. ATS are projected to reduce carbon emissions by 17 MtC. Biomass and black liquor gasification, cement clinker replacement, and low carbon aluminum technologies are forecast to contribute to a reduction of another 15 MtC.

Buildings: The analysis shows that substantial reductions in future greenhouse gas emissions can be realized through the use of more energy efficient technologies that save society money. In addition, these technologies often supply other benefits beyond energy, carbon and dollar savings, including: 1) an improved indoor environment, 2) reduced noise 3) higher productivity in offices, factories and schools. These amenities have not been monetized in this report. The carbon reductions in this sector are as high as 62 MtC by 2010. These gains in efficiency can be made by improving the building shell, increasing the efficiency of appliances, and introducing advanced fuel

cells capable of delivering electric power and heat. Again, there are a number of factors that have functioned as barriers for new technologies in this sector. Builders do not bear the long term consequences of their energy decisions; information is frequently not available to designers, builders or consumers; and high first costs frequently discourage investment in the most efficient and cost-effective option when viewed over the lifetime of the facility.

Merely improving the efficiency of the standby mode on US electronic equipment could save 12 million tons of carbon today. By 2010, use of fuel cells, modest shell improvements, and use of

more efficient appliances and equipment will reduce carbon emissions from a typical commercial building such as a hotel by 70%.

The report assumed that with policies to reduce carbon emissions, energy prices would rise; however, an individual consumer's energy bill remained about the same because they would use less energy while receiving approximately the same level of energy services. A substantial amount of the efficiency gains assumed for this sector could result from appliance efficiency standards and from voluntary programs designed to provide information and incentives to adopt efficient technologies.

Transportation: Within the transportation sector the Report finds that development of more efficient vehicles and use of low carbon or carbon neutral fuels such as cellulosic ethanol, have the capacity to reduce carbon emissions by up to 103 MtC by 2010. In the short term, direct injection engines are capable of reducing CO2 per passenger mile by 23% today, although there are a number of technical challenges for cutting other emissions, especially NOx and particulates. Over the long term, advanced fuel cells could theoretically reach efficiencies exceeding 60%.

Argonne Report

The Argonne Report summarizes a series of industry-specific workshops that were convened in June and July of 1996. The workshop participants discussed the effect of hypothetical energy price increase scenarios on the future competitiveness of six energy-intensive industries (aluminum, cement, chemicals, paper, petroleum refining, and steel) that together account for over 70 percent of the manufacturing use of energy for heat, power, and electricity generation.

The workshop participants included industry experts from trade associations, environmental groups, labor unions, government, and the academic and financial communities as well as from companies.

For each industry workshop, Argonne commissioned an expert to write a discussion paper to circulate to workshop participants to help focus the dialogue. The experts and the participants were provided with a baseline scenario and energy price increase scenarios suggested from preliminary analyses of policies that did not incorporate many important features of the subsequent U.S. protocol submission of January 1997. In particular, international emission trading, joint implementation, multi-year emission budgets, and developing country commitments were not stipulated in the price scenarios given to workshop participants, and no additional support for technology R&D was assumed. Under the scenarios examined, the workshop participants painted rather grim portraits of potential impacts, such as gradual reductions in output and employment, reduced exports and/or increased imports of these products, possible plant closures, and an increased incentive to locate production facilities in other countries.

Our response to the findings outlined in the Argonne report has been to advocate policies that will assure that the energy price scenarios assumed for purposes of the workshops do not occur. It is

important to note that the workshop findings were based on specific energy price scenarios assumed in mid-1996, which do not reflect key policies listed in the previous paragraph that have been vigorously pursued in international negotiations by the U.S. government in the intervening year and a half. Such provisions would substantially lower the costs of achieving greenhouse gas emission reductions and would lead to industry impacts that are substantially smaller than those discussed in the Argonne workshops. In this regard, it is particularly important to note that the U.S. position is that developing countries should assume additional obligations in the near future to reduce their projected rapid growth of greenhouse gas emissions. No such actions were reflected in the workshop scenarios, and many of the Argonne workshop participants identified the absence of commitments in developing countries as the most critical competitiveness issue.

Conclusion

The conclusions from both of these studies strengthen our resolve to craft a policy position that finds a way forward with minimal economic impact.

From the Argonne report, we learned that any policy that had the sole effect of significantly raising energy prices for energy-intensive industries in the U.S. and some other nations, but not others, could have a deleterious effect on U.S. industries. That key insight has influenced the evolution of the U.S. policy position towards the pursuit of flexibility in global climate change policies, including a reasonable timetable, realistic and achievable objectives, international emissions trading, and joint implementation and strengthened our belief that developing countries must participate in a global effort to mitigate greenhouse gas emissions. By examining scenarios that do not reflect such policies, the workshops identified important economic risks in key industrial sectors that reaffirm the wisdom of the U.S. approach.

From the 5-lab study, we learned that: (1) a vigorous national commitment to develop and deploy energy-efficient and low-carbon technologies has the potential to restrain U.S. energy use at or near 1997 levels, and US carbon emissions at or near 1990 levels; (2) that, with the right policies, the nation's energy savings would approximately equal the costs of achieving these reductions; and (3) 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.

Climate change is an important national and global issue. In the process of developing policy that will meet our environmental objectives in a realistic, balanced way without disrupting our economy, this Administration has assumed the need for a variety of market-oriented, flexible measures both at home and abroad; accelerated research and development of new technologies; and an international regime involving the participation of all nations.

PERIME

Department of Energy
Washington, DC 20585

BIOGRAPHY

Marc W. Chupka

Marc Chupka received his B.A. from Yale College in 1980 and his M.A. and M.Phil degrees in economics from Yale University in 1984. At the Congressional Budget Office from 1984 through 1989, he analyzed the economic impacts of acid rain control legislation, fossil fuel taxes, pollution abatement technology development, and federal budget policy. He received the CBO Director's Award in 1987. In 1989, Mr. Chupka became a Senior Associate at ICF Incorporated, and was promoted to Project Manager in 1991. At ICF. he conducted research for the Environmental Protection Agency primarily on the economic and environmental benefits of renewable energy technology.

In 1991, he became a staff economist with the Joint Economic Committee of the U.S. Congress, working for Senator Al Gore on the economic aspects of environmental and energy policy. He was appointed the Chief Economist of the White House Office on Environmental Policy in March, 1993. and was later named the Associate Director for Air, Energy, and Transportation. Mr. Chupka coordinated the interagency policy development and wrote the Climate Change Action Plan, announced in October, 1993, to meet the President's pledge to reduce U.S. greenhouse gas emissions to 1990 levels by the year 2000.

In March of 1994, he became the Director of Energy Policy Development in the Office of Policy in the U.S. Department of Energy. He coordinated the policy development and was the primary author of Sustainable Energy Strategy: Clean and Secure Energy for a Competitive Economy. released in August of 1995.

In April of 1996, Secretary of Energy Hazel R. O'Leary appointed Mr. Chupka as the Acting Assistant Secretary for Policy and International Affairs. In this capacity, he is responsible for coordinating policy analysis, development and implementation for the Department, including strategic planning and compliance with the Government Performance and Results Act. He leads the Department's activities in areas such as global climate change, electricity restructuring policy analysis, energy security, and international engagement in energy policy and sustainable development. Soon after his appointment, he directed the research and writing of two key reports to the President, An Analysis of Gasoline Markets Spring 1996 (June 1996) and The Electric Power Outages in the Western United States, July 2-3, 1996 (August 1996).

Mr. Chupka resides in Silver Spring with his wife Lois Trojan and their 18-month old daughter
Grace Olivia.