The industrial energy price scenarios for this study assume that price impacts for individual fossil fuels in each OECD region that are directly related to their carbon content. Effects on industrial fuel prices are assumed to be phased in beginning in 2000. Half of the effect is realized by 2005, and the full effect is realized by 2010. For electricity, price effects depend on the baseline fuel mix, flexibility in dispatch, fuel and heat rate parameters for new capacity, and the supply curves for current and potential fuels, all of which differ across regions. In the calculation provided below that reflects only the current fuel mix, electricity has a higher average carbon content in the U.S. than in Europe or Japan. The actual extent to which the average industrial energy price "add factors" presented below would be reflected in the prices paid by the individual industries that are the focus of this study is dependent on specific implementation details of actual mitigation policies that are beyond the scope of this study. For the present study, a default assumption might be that the relationship between industry-specific energy prices and the all-industry average price within the United States adheres to the recent historical experience as outlined in Table 2 above. However, industry analysts are free to posit and adopt alternative assumptions based on their industry-specific knowledge. Tables 4 and 5 outline the assumed energy price “add factors" for the two scenarios outlined in section 4 of the technical guidance paper. |