or exceed their current license renewal dates. In a special case we examined, it was assumed that new nuclear plants could be built if they were economical. New nuclear construction was permitted for the 1990+9% case and the 1990-3% case. In the 1990+9% case, no new nuclear plants are built because the estimated price for carbon permits is not high enough to overcome the estimated high costs of nuclear construction and operation. In the 1990-3% case, it is additionally assumed that the high costs normally associated with the first few units of a new technology could be overcome. In this case, over 40 gigawatts of new nuclear capacity is estimated built in the later years of the projections, illustrating that new nuclear plants could play a role in reducing carbon emissions if their initial construction costs could be reduced. However, in the current environment, other issues such as siting and waste disposal are likely to limit the contribution that nuclear-generated electricity can make to addressing climate change.

The carbon dioxide reductions attributable to the higher nuclear generation in each of the carbon reduction cases analyzed depends on the source of generation that is displaced. For the most part increased nuclear generation would be expected to displace coal-fired generation, but in some regions it may displace natural gas steam or combined-cycle generation. The tables below show our estimates of the higher nuclear generation and capacity, and give estimates of the carbon reductions due to increased nuclear generation in each of the carbon reduction cases.

Nuclear Capacity and Generation in Alternative Cases
(Capacity in gigawatts, generation in billion kilowatthours)

Carbon Savings From Increased Nuclear Generation in 2020

(Generation in billion kilowatthours, carbon reduction in million metric tons per year)

Note: Assumed heatrates for various types of power plants: coal 10,000, gas steam 10,300, and gas combined-cycle 7,000.

Impact of the Kyoto Protocol of Natural Gas and Renewables

Q13. The EIA analysis indicates that natural gas and renewable energy grow faster under the Protocol. How much faster?

A13.

In 2010, natural gas consumption is higher than in the reference case by a range of 2 to 12 percent across the various carbon reduction cases we examined. For 2020, the range of increased natural gas usage is 6 to 10 percent. Reductions in natural gas consumption in the end-use demand sectors due to efficiency improvements, fuel switching, and higher estimated prices are more than offset by increases by the electricity generation sector as a result of substitution for coal-fired generation. Renewable energy consumption is estimated to be between 2 and 16 percent higher in 2010, relative to the reference case, and between 9 and 70 percent higher in 2020 as renewable technologies develop further. Most of the estimated increase in renewables is for electricity generation, primarily from

Geller Testimony-“The EIA Study is Seriously Flawed.": "FLAW #1. IGNORING ONGOING AND LIKELY POLICIES, PROGRAMS AND TRENDS"

Q14. In his testimony, Mr. Geller states that “The EIA study (in all cases) fails to account for ongoing and/or likely policies, programs, and associated trends that will lead to reductions in carbon emissions." Please respond.

A14.

As a policy neutral organization, EIA does not speculate on the future development and enactment of energy policies and programs. This assumption is used in developing the Annual Energy Outlook reference case and all analyses performed as a service request, unless the client specifically requests us to incorporate policy initiatives which they have specified. In this study, the client requested us to use policies and other assumptions as incorporated in the Annual Energy Outlook 1998 (AEO98) and to rely on market forces to reduce carbon emissions. This was appropriate, because it is important that policymakers understand the costs of meeting the Kyoto Protocol in the absence of new policies and legislative initiatives. Also, the assumption of future policies could bias the results of the analysis, since some policies might lower the cost of compliance while others, intended to achieve different goals, could actually raise it. For instance, the Powerplant and Industrial Fuel Use Act of 1978 curtailed the use of natural gas for new generating capacity resulting in additional construction of coal-fired power plants. These plants are currently some of the lowest cost producers of electricity in this country. This policy, intended to make natural gas available to high priority customers, particularly in the residential sector, in fact, has contributed to the higher level of greenhouse gas emissions in this country.

Geller Testimony-"The EIA Study is Seriously Flawed.": "FLAW #2. “EMISSIONS REDUCTIONS DON'T START UNTIL 2005.”

Q15. In his testimony, Mr. Geller states that "EIA assumes the country waits until 2005, just three years before the first budget period starts, to begin emissions reductions. This ignores the reality of voluntary commitments and early action, as mentioned above." Please respond.

A15. EIA believes it is highly unlikely that energy consumers will make major changes in their choice of energy equipment or their use of energy services in the absence of price changes or policy initiatives such as standards. Historically, end-use consumers have reacted to current prices, not projected future prices of energy when making decisions; and to many non-price factors such as size, comfort, style, and in the case of vehicles, horsepower. Extensive empirical research indicates that energy prices tend to play a minor role in consumers' home or appliance buying decisions. Builders of houses, for example, generally make decisions based on the upfront cost of equipment rather than life-cycle cost; life-cycle costs are more likely to be used by homeowners who remain stationary for long periods and do not rent their units. Since, on average, homeowners move every 7 years, the average homeowner is more likely to place considerably more weight on the upfront cost of the equipment rather than the long-term costs of running that equipment.

companies, have a greater incentive to consider future prices in their capital investment decisions, which is factored into the EIA analysis with their adjustments assumed to start in 1999. As a result, some reductions in estimated carbon emissions occur prior to 2005. Past reaction to voluntary initiatives to reduce energy use has been incorporated to the extent they are seen in the data. Although this approach may be viewed as conservative, it is warranted by the response to previous voluntary initiatives, such as those contained in the Climate Change Action Plan (CCAP). CCAP was the Administration's response to the original Framework Convention on Climate Change negotiated in the international arena in 1992. Greenhouse gas emissions have continued to grow each year since the Plan was formulated and announced in 1993, and no one now expects that U.S. greenhouse gas emissions will return to 1990 levels by the year 2000, as CCAP originally projected.

Voluntary reductions of greenhouse gas emissions are reported to EIA on Form EIA1605, "Voluntary Reporting of Greenhouse Gases". However, the meaning and use of these numbers needs to be carefully evaluated. Some reporters provide reductions from an anticipated baseline (i.e., the level that emissions would have reached if emissions reduction actions had not taken place) and others provide reductions based on an historical level of emissions actually experienced. Many of the reported reductions are already included in our baseline projections. Thus, counting these reported figures as an additional reduction would essentially be double-counting their contribution.

For instance, if one oil company is reducing production of refined products for whatever reason, its emissions would be reduced. However, if the U.S. economy is growing and our overall consumption of petroleum is increasing, those reductions would be offset by another refiner who is increasing production and thus not reduce the total emissions projected in the baseline.

Geller Testimony-“The EIA Study is Seriously Flawed.”: "FLAW #3. "POOR TECHNOLOGY CHARACTERIZATION AND EXTREMELY LIMITED TECHNOLOGICAL RESPONSE."

Q16. In his testimony, Mr. Geller states that "Outside of one 'High Technology' sensitivity run, the EIA ignores or artificially limits key technologies for reducing GHG [greenhouse gas] emissions in the utility, transport, buildings, and industry sectors." Please respond.

A16. EIA's reference case includes the availability and penetration of the advanced technologies that are currently known. The characteristics of these technologies are developed by experts in various technology fields to generate a most likely case and are reviewed and examined by EIA analysts. Thus, these technologies and their characteristics are carefully considered. The penetration rates for these technologies depend on a number of factors, some of which limit their rapid adoption. For example, the stock of energy-using equipment and buildings turns over slowly, and it is unlikely that many consumers will prematurely retire usable equipment. More advanced, efficient technologies tend to be

consider only current energy prices in their equipment decisions and appear to have relatively short payback periods for investment decisions. Moreover, many factors other than energy prices may influence the rate of penetration of more efficient equipment, such as preferences for larger and more powerful vehicles, more appliances, and more travel, all decisions in which energy efficiency and energy prices may play only a small part. For example, consumers and automobile manufacturers have both indicated their preference for increasing horsepower in lieu of efficiency. In the absence of policy initiatives designed to affect consumer choices, other characteristics also tend to slow the penetration of advanced technologies, such as high residential mobility rates, and a disconnect in equipment choice between builders and occupants or between building owners and residents.

“FLAW #4. "NO

Geller Testimony "The EIA Study is Seriously Flawed.":
CONSIDERATION OF NEW POLICIES EXCEPT CARBON TAXES."

Q17. In his testimony, Mr. Geller states that "The EIA study fails to include a scenario where new policies other than a carbon tax are adopted to comply with the Kyoto Protocol. There was no consideration of alternative policy instruments such as new minimum efficiency standards, tax incentives, revenue fees and rebates, federal utility restructuring legislation with provisions to encourage energy efficiency and renewable energy measures, etc. .. . . Without consideration of alternative policies, EIA has not provided a clear picture of the potential impacts of the Kyoto Protocol." Please respond.

A17.

As noted in the response to Q14, EIA does not speculate on future policy initiatives unless requested to analyze specific policies by a client. The Committee requested EIA to incorporate policy and other assumptions from the Annual Energy Outlook 1998. Analysis of other policies, including tax incentives, efficiency standards, and renewable portfolio standards, were not requested and so were not undertaken.

Also, note that we modeled a market of tradable permits for carbon emissions, not a carbon tax. Economic theory and practical experience with programs such as sulfur dioxide trading suggest that such instruments, which address the targeted pollutant at the broadest level, are likely to be cost-effective approaches.

Geller Testimony-“Promoting Greater Energy Efficiency Can Substantially Reduce Greenhouse Gas Emissions While Saving Energy.”

Q18. In his testimony, Mr. Geller states that “Promoting better technologies such as more efficient appliances, lighting, vehicles, and industrial processes as well as renewable energy sources, rather than onerous taxes or heavy-handed regulations, is the key to cutting GHG emissions without harming the economy." Please respond.

A18. There are at least two aspects to Mr. Geller's assertion that should be differentiated and