specific cases, which are reflected in the chart on my left. Fortunately, we have color available to us, which makes this analysis much easier, given the complexity of it.

These scenarios range from one, where carbon emissions from the energy sector in the period 2008 to 2012 are cut 7 percent below 1990 levels to a case where carbon emissions are constrained to grow only 24 percent above 1990 levels. The former represents a situation with no offsets from forestry activities, other gases, or international activities to reduce the obligation to cut domestic greenhouse gas emissions. The latter is a case that requires high levels of reliance on reductions or emissions credits from outside the domestic energy sector, through mechanisms such as international emissions trading or the Clean Development Mechanism in addition to forestry, sinks, and other gases. The growth in the least stringent case, the 24 percent above case, represents a cut of 122 million tons, or 7 percent of carbon emissions from the base, or about 22 percent of the total effort to comply with the Kyoto Protocol on greenhouse gas reductions without offsets from other gases other than CO2 or international emissions trading.

To get to the results: using the prices based on the carbon content of each fuel as the mechanism for pricing carbon, EIA estimates that the resulting carbon price would range between $67 and $348 a metric ton in the year 2010 in the six cases analyzed.

Obviously, the price signal falls most heavily on the carbon-intensive fuels, particularly coal. These price signals generally would be sufficient to produce the fuel switching, efficiency gains, and reductions in demand for energy services needed to meet the Kyoto Protocol. The price range narrows from $99 to $305 by 2012.

Estimates of the cost per ton to reduce carbon emissions have little meaning for many Americans. As a result, it's important to look at the impacts on the prices energy users actually pay. The price of a gallon of gasoline, for instance, would increase an estimated 14 to 66 cents in 2010, from a projected level of $1.25. The pric of electricity would be more heavily impacted, rising an estimated 20 to 86 percent over the baseline price in 2010. This would equate to a 4 to 62 percent above 1996 levels.

We also looked at the macro economy. Here, we noted that the impacts on the macro economy are typically represented by effects on the gross domestic product. We have portrayed these impacts two ways: effects brought about through changes in the quantity of energy consumed within the economy, represented by changes in the potential GDP; and transitional effects brought about when energy prices also change. We have shown a very large variety here. We've not only represented the seven cases, but we've showed three different ways of analyzing the impacts on the economy.

Basically, in the year 2010, the economic impacts-I've misplaced that number-by 2010, EIA estimates that the gross domestic product will be $13 billion to $396 billion smaller than in the reference case, depending on severity of the carbon target and the amount of transition costs. This represents a projected reduction between 0.1 percent and 4.2 percent from the expected level otherwise.

Even with these greater impacts, however, the economy is 30 percent larger than in 1996. By 2020, these differences narrow, and

poster on that? We don't have a poster on that, but that's contained in the testimony. So, what you see is we have higher cost than other studies during this transition period between 2008 and 2012; there is a rebound effect that occurs some years after that. And when you get back to the year 2020, the economic impacts are substantially reduced from what they are in the transition period.

I think I will stop at that point, and I'll be glad to take your questions.

[Dr. Hakes' prepared statement and biography follow:]

STATEMENT OF

JAY HAKES

ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION

DEPARTMENT OF ENERGY

BEFORE THE COMMITTEE ON SCIENCE

U.S. HOUSE OF REPRESENTATIVES

OCTOBER 9, 1998

At the request of the House of Representatives' Committee on Science, the Energy Information Administration has completed a detailed study of the potential, carbon-related impacts of the Kyoto Protocol on the price of energy in the United States and on the overall economy. The uncertainties involved in such an analysis are many, not the least of which is ambiguity about how much carbon emissions from energy use would actually have to be reduced in the United States versus how much of the Kyoto Protocol requirement could be met by other factors, such as reduced emissions from other greenhouse gases and international emissions trading. For this reason, further studies will clearly be needed.

Despite the limitations of this study, we believe the general direction of our conclusions are likely to be reflected in the actual course of events, if the reductions in emissions are eventually agreed to and the Kyoto Protocol is adopted and implemented. Our study of the Kyoto Protocol impacts assumes no change to current policies, except for the Kyoto Protocol itself. As a result, it does not explore energy policy options that might mitigate or aggregate the magnitude of the impacts.

As in much of the work of EIA, proponents on all sides of the debate can find some support in this report, but our goal has been to independently develop the strongest possible analysis regardless of what the impacts might be on the debate. Whatever their weaknesses - and there are several -- models, such as the National Energy Modeling System (NEMS) used by EIA provide disciplined methodologies for analyzing complex issues.

The National Energy Modeling System has several strengths and weaknesses. Unlike some other models, which are global in nature, it does not explicitly represent several important measures in the Protocol, such as international emissions trading, or greenhouse gases other than carbon dioxide from energy use. Changes to the other gases could either increase or decrease the difficulty for U.S. compliance with the Protocol. On the other hand, more than 80 percent of the human-originated greenhouse gas emissions are energy related, and we attempted to deal with the uncertainties about the extent of international trading and other potential offsets. NEMS deals with year-to-year changes in energy equipment and economic factors, so it captures short-term or transitional effects that might be missed by models without this level of detail. It also deals with energy sectors in greater detail than other energy models. It is widely used by outside groups, and its methodologies are relatively transparent to other energy and economic experts.

To deal with the many acknowledged uncertainties, particularly those concerning the extent of international trading, we have portrayed the Kyoto Protocol impacts on the domestic energy sector across a broad range of possible domestic emissions reduction requirements, in order to provide the maximum amount of relevant information to policy makers. Although emission opportunities in other countries are not explicitly identified in this analysis, the broad range of possible reduction scenarios analyzed implicitly includes a range of emission opportunities in other countries as they may relate to U.S. purchases of emissions permits. This range of reduction requirements is compared to a base case in which ELA projects that, if current policies continue, carbon emissions from energy use will reach 1791 million metric tons in 2010, an

million metric tons

U.S. energy sector carbon emissions in the reference and six target cases, 1990-2020

.

To cover a broad range of possibilities, we have focused on a menu of six specific cases. These range from one where carbon emissions from the energy sector in 2008-2012 are cut 7 percent below 1990 levels to a case where carbon emissions are constrained to grow only 24 percent above 1990 levels. The former represents a situation with no offsets from forestry activities, other gases, or international activities to reduce the obligation to cut domestic carbon emissions. The latter is a case that requires high levels of reliance on reductions or emissions credits from outside of the domestic energy sector, through mechanisms such as international emissions trading or the Clean Development Mechanism in addition to offsets from forestry, sinks, and other gases. The growth in the least stringent case (the 24 percent above 1990 case) represents a cut of 122 million tons (or 7 percent) of carbon emissions from the base (no new policies) case, or about 22 percent of the total effort to comply with the Kyoto Protocol on greenhouse gas reductions without offsets from gases other than CO2 or international emissions trading. In all cases, end-use consumers in the U.S. start to take action to meet the Kyoto Protocol target beginning in 2005, while capital-intensive supply businesses (e.g., electric utilities) begin to take action as early as 1999.

For purposes of this study, the level of domestic energy-related carbon emissions was held at each of the six alternative target levels throughout the 2008 to 2020 period. In reality, future domestic emissions under a scenario in which the U.S. undertook to meet the Kyoto Protocol's emissions reduction commitment would depend on the levels of the emissions reduction obligation after 2012 (the Protocol now covers only the 2008 to 2012 period) and changes in other regions of the world that could affect opportunities for international emissions trading.