SR/OIAF/98-03 Distribution Category UC-950 Impacts of the Kyoto Protocol October 1998 Energy Information Administration This report was prepared by the Energy Information Administration, the independent statistical and analytical agency within the Department of Energy. The information contained herein should be attributed to the Energy Information Administration and should not be construed as advocating or reflecting any policy position of the Department of Energy or of any other organization. Service Reports are prepared by the Energy Information Contacts This report was prepared by the staff of the Office of Integrated Analysis and Forecasting of the Energy Information Administration. General questions concerning the report can be directed to Mary J. Hutzler (202/586-2222, mhutzler@eia.doe.gov), Director of the Office of Integrated Analysis and Forecasting; Arthur T. Andersen (202/586-1441, aanderse@ela.doe.gov), Director of the International, Economic, and Greenhouse Gas Division; Susan H. Holte (202/586-4838, Executive Summary, Chapter 1 Chapter 3 Residential.. Commercial. Industrial. Chapter 4 Electricity.. Renewables.. Chapter 5 Natural Gas and Oil. Coal Chapter 6 Chapter 7 sholte@eia.doe.gov), Director of the Demand and Integration Division; James M. Kendell (202/586-9646, jkendell@eia.doe.gov), Director of the Oil and Gas Division; Scott B. Sitzer (202/586-2308, ssitzer@eia.doe.gov), Director of the Coal and Electric Power Division; and Andy S. Kydes (202/586-2222, akydes@eia.doe.gov). Senior Modeling Analyst. Specific questions about the report can be directed to the following analysts: Susan H. Holte Daniel H. Skelly . John H. Cymbalsky Erin E. Boedecker T. Crawford Honeycutt David M. Chien . J. Alan Beamon Thomas W. Petersik James M. Kendell Edward J. Flynn Ronald F. Earley 202/586-4838 sholte@eia.doe.gov 202/586-1722 dskelly@eia.doe.gov 202/586-4815 jcymbals@eia.doe.gov 202/586-4791 eboedeck@ela.doe.gov 202/586-1420 choneycu@eia.doe.gov 202/586-3994 dchien@eia.doe.gov 202/586-2025 jbeamon@eia.doe.gov 202/586-6582 tpetersi@eia.doe.gov 202/586-9646 jkendell@eia.doe.gov 202/586-5748 eflynn@ela.doe.gov 202/586-1398 rearley@eia.doe.gov 202/586-2222 akydes@ela.doe.gov. Preface From December 1 through 11, 1997, more than 160 nations met in Kyoto, Japan, to negotiate binding limitations on greenhouse gases for the developed nations, pursuant to the objectives of the Framework Convention on Climate Change of 1992. The outcome of the meeting was the Kyoto Protocol, in which the developed nations agreed to limit their greenhouse gas emissions, relative to the levels emitted in 1990. The United States agreed to reduce emissions from 1990 levels by 7 percent during the period 2008 to 2012. The analysis in this report was undertaken at the request of the Committee on Science of the U.S. House of Representatives. In its request, the Committee asked the Energy Information Administration (EIA) to analyze the Kyoto Protocol, "focusing on U.S. energy use and prices and the economy in the 2008-2012 time frame," as noted in the first letter in Appendix D. The Committee specified that EIA consider several cases for energy-related carbon reductions in its analysis, with sensitivities evaluating some key uncertainties: U.S. economic growth, the cost and performance of energy-using technologies, and the possible construction of new nuclear power plants. The energy projections and analysis in this report were conducted using the National Energy Modeling System (NEMS), an energy-economy model of U.S. energy markets designed, developed, and maintained by EIA. NEMS is used each year to provide the projections in the Annual Energy Outlook (AEO). In its second letter, in Appendix D, the Committee requested that the analysis use the same general methodologies and assumptions underlying the Annual Energy Outlook 1998 (AEO98). published in December 1997; however, some minor modifications were made to allow greater flexibility in NEMS in response to higher energy prices and to incorporate some methodologies that were formerly represented offline. These differences are outlined in Appendix A. The macroeconomic analysis used the Data Resources, Inc. (DRI) Macroeconomic Model of the U.S. Economy, which is also used for the economic analysis in the AEO. Chapter I of this report provides background discussion of the Kyoto Protocol and the framework and methodology of the analysis. Chapter 2 summarizes the energy market results from the various carbon reduction cases. Chapters 3, 4, and 5 analyze in more detail the issues and results for the end-use demand sectors, the electricity generation sector, and the fossil fuel supply markets, respectively. Chapter 6 provides the results of EIA's analysis of the macroeconomic impacts of carbon reduction under different monetary and fiscal policy assumptions. Chapter 7 compares the results of this study with those from other studies of the costs of carbon reduction, with accompanying tables in Appendix C. Appendix B includes the detailed energy market results from the carbon reduction cases. Within its Independent Expert Review Program, EIA arranged for leading experts in the fields of energy and economic analysis to review earlier versions of this analysis and provide comment. The assistance of the following reviewers in preparing the report is gratefully acknowledged: Joseph Boyer Yale University Lorna Greening Consultant to Hagler Bailly Services, Inc. William Hogan Harvard University William Nordhaus Dallas Burtraw Resources for the Future Richard Newell Resources for the Future William Pizer Resources for the Future Michael Toman Resources for the Future John Weyant Stanford University Energy Modeling Forum. The legislation that established EIA in 1977 vested the organization with an element of statutory independence. EIA does not take positions on policy questions. It is the responsibility of EIA to provide timely, highquality information and to perform objective, credible analyses in support of the deliberations of both public and private decisionmakers. This report does not purport to represent the official position of the U.S. Department of Energy or the Administration. |