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A10. EIA has no direct knowledge of the analysis underlying the proposal.

Information Available to the Administration When It Agreed to the Kyoto Protocol

Q11. Between October 22, 1997 and the end of the international negotiations in Kyoto on December 11, did anybody in the Executive Branch ask EIA to provide any analyses of the energy or economic impacts of the emissions reductions that would be required of the United States if the United States agreed to the provisions that eventually were contained in the Kyoto Protocol?

If the answer is yes, please provide the following information:

Q11.1 Who requested such analysis?

Q11.2 When were these analyses requested?

Q11.3 To whom were the requests for any such analyses made?

Q11.4 What analysis or other responses were provided by ELA pursuant to those requests?

Q11.5 When did EIA provide such analyses?

Q11.6 Did you, personally, oversee or approve these analyses or other responses that were provided by EIA?

Alternatively, if the answer is no:

What is your understanding of the identity of the analyses that were relied on by the Administration between October 22, 1997 and the end of the international negotiations in Kyoto on December 11, insofar as energy and economic consequences of that proposal to the nation were concerned?

All. No. EIA was not requested to provide any analyses of the energy and economic consequences that would result from an agreement by the United States to the provisions of the Kyoto protocol. EIA has no knowledge of the analyses used by the Administration during that time period to assess the consequences of the provisions of the Kyoto protocol.

October 1997 EIA Service Report Entitled, Analysis of Carbon Stabilization Case (SRPIAF/97-01)

Q12. On page E-2 of the Service Report, EIA states that “all of the findings indicated in this report are based on the IAT assumptions and additional assumptions provided by the client in order to implement IAT assumptions." The Service Report then says: "These assumptions have not been assessed by the Energy Information Administration.”

Please provide a statement of all of the IAT assumptions and the additional assumptions provided by DOE that were material to the Service Report, and how these assumptions and data differ from those used by EIA in its preparation of the Annual Energy Outlook 1998.

A12. The modeling runs in the Service Report were based on variations on the reference case assumptions in the Annual Energy Outlook (AEO) 1997, as opposed to the most recently published Annual Energy Outlook 1998. Differences in assumptions between the 1997 and 1998 outlooks are discussed in the response to Question 2 above.

EIA developed modifications to the National Energy Modeling System (NEMS) AEO97 reference case model assumptions under the guidance of the DOE Office of Policy and International Affairs. The modifications were based on DOE's interpretation of IAT discussions on the modeling of greenhouse gas emission stabilization cases. In addition, because the prices required for greenhouse gas emission stabilization to 1990 levels are well outside the historical price and consumption data series used to develop NEMS, EIA modified some NEMS behavioral parameters to reflect potentially greater demand responsiveness to higher prices.

The IAT included a scenario originally referred to as the "policy announcement case" to describe various energy market actions that could take place in reaction to the signing of a carbon stabilization treaty. The IAT assumed that the combined effect of these actions would be to increase the rate of decline in the ratio of energy consumption to GDP to 1.25 percent per year, as compared to the annual decline of .9 percent in the AEO97 reference case. To implement the policy announcement case in NEMS, DOE specified changes to various assumptions that would result in improved efficiency of energy use. Most of these changes relate to a more optimistic appraisal of the impact of the Administration's Climate Change Action Plan (CCAP) and the willingness of businesses and consumers to invest in energy efficient technologies. Together, the effect of these assumptions in NEMS was to reduce projected greenhouse gas emissions in 2010 by about 45 million metric tons (mmt) of carbon equivalent and 100 mmt by 2020, compared to the AEO97 reference case, which was extended to 2020 per the client's request. Assumptions modified in NEMS for

Commercial and Residential Sectors:

The rate of growth in miscellaneous electric use was cut 15 percent starting in 2010.

• The nonmonetary component of hurdle rates for energy equipment purchase decisions was cut by 20%.

• Commercial sector shell efficiency improvements were assumed to occur 20% faster, resulting in about a 1% difference in efficiency in existing building shells by 2015. The sensitivity of residential shell efficiency improvements in existing homes to changes in energy prices was doubled compared to AEO97.

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Commercial building fuel and technology switching was allowed for new equipment and retrofits.

Industrial

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The Administration estimate of the impacts of the Climate Change Action Plan, the six Department of Energy and Environmental Protection Agency programs, was adopted, resulting in an additional 30 billion kilowatt-hour reduction in electricity demand by 2010, and an additional reduction of 220 trillion Btus of fossil fuel use.

Transportation

• The American Council for an Energy-Efficient Economy technology assumptions were incorporated: 50 percent lower technology costs beginning in 2010 and 33 percent greater marginal fuel efficiency.

Vehicle travel was reduced by 2.6 percent to account for the greater impact of the Climate Change Action Plan programs of the Environmental Protection Agency (1.13 percent reduction assumed in AE097).

Electricity

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A carbon externality cost was included in the capacity planning decisions.

The above assumptions made to implement the IAT policy announcement case were also incorporated under the other cases presented in the Service Report, all of which included greenhouse gas emissions trading within the United States to achieve the remainder of the emissions reductions. A number of other modifications to assumptions and methodology were made in consultation with the client to reflect changes in energy markets that could accompany a greenhouse gas emissions stabilization agreement. These changes are

• In the residential sector, a price elasticity (-0.15) was applied to all end-use services. In AEO97, the elasticity was only applied to space conditioning.

• In the commercial sector, a short-run price elasticity (-0.15) was applied to refrigeration, office equipment and miscellaneous electric end uses if fuel prices differed from 1993 prices by more than 30 percent. The AEO97 assumed zero price elasticity for these end uses. The elasticities for electric space heating and space cooling in AEO97 were -0.10; they were changed to -0.15.

• In the industrial sector, “leakage" of a portion of the U.S. energy intensive industries was assumed for the stabilization cases to reflect decreased competitiveness vis-à-vis non-Annex I countries. This assumption was implemented by reducing projected manufacturing output by up to 25 percent from their baseline levels by 2020 in selected energy-intensive industries. The leakage assumption was omitted from the final sensitivity analysis which imposed a $40 per ton carbon permit price.

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In the transportation sector, fuel efficient vehicles like those proposed under the Partnership for a New Generation of Vehicles were assumed to capture 5 percent of the new light duty vehicle sales by 2015; 20 percent by 2020.

In the cases with more stringent greenhouse gas emissions reduction goals of 10 to 15 percent below 1990 levels (1210 and 1142 million metric tons), it was assumed that E85 (a mixture of 85 percent ethanol and 15 percent gasoline) would become competitive with motor gasoline after 2010, as ethanol was assumed to not require carbon emissions permits. For these cases (the 1210 and 1142 million metric ton cases only), the alternative-fuel vehicle market shares were adjusted to favor the selection of E85/gasoline hybrid vehicles. These cases resulted in a substitution of about 2 quads of E85 for gasoline, saving about 30 million tons of carbon equivalent in emissions reductions.

In the cases assuming 1990 levels of greenhouse gas emissions in 2010, the operating licenses of nuclear units which were scheduled for retirement in 2000 and beyond were assumed by the DOE client to be extended by 20 years. This assumption implies the continued use of existing nuclear plants through 2020, a significant source of greenhouse gas emissions reductions (30-100 million metric tons of carbon equivalent, assuming it substitutes for either advanced gas combined cycle or existing coal-based generation) compared to the AEO97 assumptions.

The DOE client assumed that, after 2015, nuclear plants, or some other carbon-free generating technology of equivalent cost and performance, would become available. Post-2015, these plant additions were allowed to compete with other generating

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The assumed maximum fraction of natural gas used in predominately coal-fired plants was increased. For those coal plants recently burning some natural gas, the maximum share of gas use was increased by 5 percentage points over the current percentage used. The AEO97 assumption was that each coal plant's maximum gas share was equal to its current fraction of gas use.

• New ethanol supply technologies were assumed to become available beginning in 2010 at prices ranging from $0.75 to $1.02 per gallon (1995 dollars), depending on production levels. The AEO97 assumption for ethanol supply costs were from $0.97 to $1.40 per gallon in 2010. Ethanol is available for blending with gasoline, as E85 for ethanol-fueled vehicles, and for ETBE production. Substituting ethanol for gasoline reduces overall greenhouse gas emissions.

Q13. On page 10, the Service Report states: "In the carbon stabilization cases, the operating licenses of nuclear units were assumed by the DOE client to be extended by 20 years."

Did EIA understand that such assumption about license extension applied to all of the existing nuclear plants in the United States or only to some of them; and, if to only some, how much additional nuclear generation would result in the years 2010 and 2020 as a result of such assumption?

A13. In the Service Report, all nuclear units were assumed to retire 20 years later than in the base case, resulting in no retirements by 2010 and only two units (1.3 gigawatts (GW)) retiring by 2020, compared to 65 units (51.5 GW) retiring in the base case. In 2010, nuclear generation is 10 percent higher (62 billion kilowatt-hours (bkwh)) with life extension as compared to the base case. In 2020, the life extension assumption results in almost double the nuclear generation of the base case (increase of 92 percent, 330 bkwh).

Q14. On page 10, the Service Report also states: “In the carbon stabilization cases, the operating licenses of nuclear units were assumed by the DOE client to be extended by 20 years."

Did EIA understand that such assumption about license extension applied to all of the existing nuclear plants in the United States or only to some of them; and, if to only some, how much additional nuclear generation would result in the years 2010 and 2020 as a result of such assumption?

A14. In the Service Report, all nuclear units were assumed to retire 20 years later than in the base case, resulting in no retirements by 2010 and only two units (1.3 gigawatts (GW)) retiring by 2020, compared to 65 units (51.5 GW) retiring in the base case. In 2010, nuclear generation is 10 percent higher (62 billion kilowatt-hours (bkwh)) with life extension as compared to the base case. In 2020, the life extension assumption results in almost double the nuclear generation of the base case (increase of 92 percent, 330 bkwh).

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