to 6 percent. No direct comparison of the differing concepts of technology adoption and technological advancement is possible between the Five Lab Study and AEO98.

Additional Assumptions

For the HE/LC Case, an additional 31 million metric tons of carbon equivalent greenhouse gas emission reduction are included in Table 1.4 of the Five Lab Study due to results that were not part of the LIEF modeling exercise. These include 14 to 24 million metric tons from Advanced Turbine Systems (ATS) and 12 to 16 million metric tons of biomass and black liquor gasification, cement clinker replacement, and aluminum technologies. The cement clinker replacement and advanced aluminum production cells are assumed to reduce emissions by 1 to 2 million metric tons and 3.5 million metric tons of carbon equivalent, respectively by 2010. None of these technologies is included in AEO98.

Electricity Sector Assumptions for AEO98 Reference Case and Five Lab Study Cases

In each of the Five Lab Study cases, deregulation of the electric power industry is assumed. In the Efficiency Case, greenhouse gas emissions reductions in the utility sector result from lower electricity demand in end-use sectors. In the High Efficiency Case, further reductions occur as a result of an assumed $50/ton carbon permit trading price and utility supply side assumptions for fossil, nuclear, and renewable technologies.

Electricity Deregulation

• The AEO98 assumes competitive prices in 2010 in three regions - New York, California, and New England. The Five Lab Study assumes competitive prices in 2010 in all regions.

Electricity Demand Growth

In AEO98, electricity demand is expected to grow 1.6 percent per year from 1996 to 2010. In the Five Lab Study Efficiency Case, electricity demand is projected to grow at 1.1 percent per year (so total demand is projected to be 10 percent lower than AEO98 in 2010), and in the Five Lab Study High Efficiency Case, it grows at 0.2 percent per year (and total demand is projected to be 17 percent lower than AEO98 in 2010). The lower electricity demand growth in the Five Lab Study results from their estimates of efficiency improvements in the end use sectors and lower growth for

new uses.

Nuclear Retirements

• Twenty gigawatts of nuclear capacity are projected to be retired by 2010 in AEO98; 11 gigawatts are projected to be retired by 2010 in the BAU and Efficiency Cases in the Five Lab Study. In the High Efficiency Case, life extension is assumed for all but 3 units, so only 1 gigawatt of nuclear capacity is projected to be retired by 2010.

Coal Retirements

AEO98 estimated its projections of retired coal units based on utility announcements and limited economic retirements. In the Five Lab Study, similar assumptions were used in the BAU and Efficiency Cases, but an additional 75 gigawatts of economic retirements (due to the assumed $50/ton carbon permit trading price) were included in the High Efficiency Case.

Repowering from Coal to Natural Gas

AEO98 projects repowerings of coal units with natural gas based on utility announcements only. In the Five Lab Study, similar assumptions were used in the BAU and Efficiency Cases, but an additional 50 gigawatts of coal capacity could be repowered with natural gas (due to the assumed $50/ton carbon permit trading price) in the High Efficiency Case based on a plant-by-plant cost analysis.

Power Plant Efficiency

• AEO98 assumes that operating efficiencies for existing fossil-fired plants remain constant over time. In the Five Lab Study, a similar assumption was used in the BAU and Efficiency Cases, but a 5 percent improvement is included in the High Efficiency Case.

Renewable Assumptions for AEO98 and the Five Lab Study

Total projected capacity additions from biomass cofiring, wind, and hydropower in the High Efficiency Case of the Five Lab Study range from 26 to 51 gigawatts (GW). Addressed in the Five Lab Study report, but not included in the High Efficiency Case, are capacity additions for landfill gas, photovoltaics, geothermal, and solar thermal, which total 12 to 28 GW. In AEO98, these technologies were projected to provide 5 GW of capacity additions between 1996 and 2010.

Biomass Cofiring

AEO98 does not include biomass cofiring. The Five Lab Study assumes up to 8 to 12

Wind

In the AEO98 Reference Case, wind capacity is projected to increase by 1.5 GW between 1996 and 2010, reflecting already announced wind facilities and future market competition. In general, life-cycle costs for wind are higher than those for natural gas technologies, in regions requiring new capacity. The Five Lab Study projected wind capacity additions of 8 to 23 GW reflect the assumed $50 carbon permit fee in the High Efficiency Case.

Hydropower

In the AEO98 Reference Case, projected hydropower capacity increases by 2.1 GW between 1996 and 2010. The Five Lab Study assumes that increasing generation at existing hydropower plants and adding generating capacity at existing dams could result in the addition of 10 to 16 GW by 2010.

Apparent Contradictions in Greenhouse Gas Emissions Estimates

Q17. Your testimony indicated that EIA is projecting an increase in energy-related carbon dioxide emissions from 1990 to 2010 of between 367 and 537 MMTCE (depending on the economic assumptions—low, reference, high), with 457 as the reference level. This is in direct contrast to the official State Department estimates submitted under the July 1997 Submission of the United States of America Under the United Nations Framework Convention on Climate Change (Climate Action Report), which estimated the increases in future energy-related carbon dioxide emissions from 1990 to 2010 at 307 MMTCE.

Q17.1. Please explain this 50% difference between the State Department's and
EIA's reference figures.

A17.1. The Climate Action Report projects energy-related carbon emissions in 2010 to be 1,634 million metric tons, while the Annual Energy Outlook 1998 (AEO98), on which the testimony was based, projects 2010 emissions to be 1,803 million metric tons.

There are three primary reasons for the difference in the projections. First, the analysis in the Climate Action Report started with the EIA projections of carbon emissions from the Annual Energy Outlook 1997 (AEO97). Projections of carbon emissions are higher in AEO98, as noted in Question 2. AEO98 projected that carbon emissions in 2010 would be 1,803 million metric tons, compared to the AEO97 projection of 1,722 million metric tons. This difference of 81 million metric tons accounts for about half of the difference between the State Department's and

Second, the Climate Action Report estimates that the Climate Change Action Plan (CCAP) reduces carbon emissions by 2010 by about 95 million metric tons, while EIA estimates the impact in 2010 to be 36 million metric tons in AEO98, accounting for an additional 59 million metric tons of the difference between the projections. Finally, the Climate Action Report excludes emissions from international bunker fuels; however, AEO98 includes these in order to reconcile with EIA consumption data. From 1990 through 1996, annual carbon emissions from international bunkers range between 22 and 24 million metric tons, a difference that persists in the AEO98 projections even though international bunker fuels will not be counted under the Kyoto Protocol. In subsequent Annual Energy Outlooks, we will add a note to the carbon emissions table that indicates this difference between EIA projections and some other projections.

The remaining difference of approximately 5 to 7 million metric tons in the projections cannot be directly accounted for and may be the result of differences between the methodologies used. It should be noted that the Climate Action Report states that the "energy baseline was roughly calibrated to the 1997 Annual Energy Outlook,” implying a less-than-exact match from which the analysis began.

Differences in the estimation of the impacts of CCAP result from several factors. The program sponsors of CCAP tend to be more optimistic about the impacts of voluntary or demonstration programs on the purchase of more efficient equipment, for example. Also, in keeping with the general philosophy of using current laws and regulations in the Annual Energy Outlook, the AEO98 includes only those standards that have been through the final approval process while the CCAP analysis includes additional standards that are expected to be issued but are not yet in final approved form. In addition, some of the CCAP estimates used the current standard as the baseline from which to compute energy savings, although equipment shipment data indicate that average purchases are sometimes more energy efficient than the standard. The AEO98 baseline is generally higher in efficiency than the standards, lowering the potential savings. Finally, the AEO98 analysis is based upon estimates of energy consumption by end use from EIA survey data. Differences in savings estimates can occur as the CCAP program sponsors use different estimates of end use consumption.

In summary, the different projections result from the differences between AEO97 and AEO98, which was not available at the time the Climate Action Report was issued; from the differences in accounting for international bunkers; and from differences in analyzing the impacts of CCAP on energy use and emissions reductions.

Q17.2. Should we consider 457 or 307 MMTCE as the Administration's best estimate of future growth energy-related carbon emissions?

A17.2. The reasons for the different estimates are noted in the response to Question 17.1. We are only in the position to evaluate our own projections. Any projection of future energy use and energy-related greenhouse gas emissions is highly dependent on the data, methodologies, and assumptions used in the projections and should be viewed from this context. As an independent analytic agency, EIA does not take policy positions on behalf of the Administration, but strives to make its projections as objective and reliable as possible, using our best analysis and understanding of energy markets. The projections in AEO98 reflect ongoing trends in technology development and demographics and represent EIA's best estimate of future greenhouse gas emissions given our analysis of the impacts of all current laws, regulations, and energy programs.