consumption, general and industry-specific economic conditions also play an important role.

Coal consumption is projected to drop sharply in the carbon reduction cases, given its extreme price disadvantage. In the 1990+24% case, coal consumption in 2010 is lower by 422 trillion Btu (16 percent) than in the reference case; in the 1990+9% case it is 737 trillion Btu (28 percent) lower, and in the 1990-3% case it is about 1 quadrillion Btu (36 percent) lower. The projected reductions in coal consumption are predominantly due to projected reductions in boiler fuel use.

The industrial sector consumes coal mainly as a boiler fuel and for production of coke in the iron and steel industry. For example, 75 percent of manufacturing consumption of steam coal was used in boilers in 1994. Coal-fired boilers have substantially higher capital costs than do gas-fired boilers, because of their materials handling requirements. For large steam loads, however, coal's price advantage over natural gas offsets its capital cost disadvantage. But in the carbon reduction cases, coal suffers from both a capital cost and a fuel cost disadvantage. As a result, a substantial amount of boiler fuel use switches from coal to natural gas and petroleum products.

The projected reduction in total steam coal consumption in the industrial sector in 2010 (including for uses other than boiler fuel) in the 1990-3% case relative to the reference case is more than 50 percent. Still, the reduction is less severe than that projected for the electric utility

sector. Electricity generators, in addition to switching to natural gas, also have the available options of nuclear power and renewable energy sources.

Consumption of metallurgical coal, which is used to produce coke for iron and steel production, also is reduced sharply in the carbon reduction cases. The reduction has several causes: substitution of natural gas in production processes, replacement of domestic coke production with coke imports, replacement of some coke-based steelmaking capacity with electricity-based capacity, and reduced production of domestic steel.

In the carbon reduction cases, natural gas consumption is subject to two countervailing effects. The effect of generally higher energy prices, and consequent lower levels of industrial activity, is to reduce natural gas consumption. On the other hand, natural gas prices do not increase by as much as the prices of competing fuels. As noted above, this results in relatively greater use of natural gas as a boiler fuel. The carbon reduction cases also induce additional cogeneration using natural gas, which increases natural gas consumption and reduces requirements for other boller fuels.

In the 1990+24% and 1990+9% cases, natural gas consumption is projected to increase slightly, because the impact of increased boiler fuel use outweighs the reduction caused by lower industrial output. In the 1990-3% case, natural gas consumption is unchanged from the reference case in 2010. Here, the drop in industrial output and the substitution for other boiler fuels have offsetting effects.

In the reference case, industrial carbon emissions are projected to be 83 million metric tons higher in 2010 than they were in 1996 (Figure 46). Emissions attributable to increased electricity consumption account for more than half the increase. In contrast, electricity-based emissions account for more than 70 percent of the emissions reductions in the carbon cases. For example, in the 1990+9% case, electricity-based carbon emissions in 2010 are 79 million metric tons lower than in the reference case. A reduction of 19 million metric tons in carbon emissions from the combustion of fossil fuels brings industrial sector emissions to approximately their 1990 level. Carbon emissions in the 1990-3% case fall to 418 million metric tons, 58 million tons below the 1996 level and 35 million tons below the 1990 level. Again, electricity-based emissions account for threefourths of the reduction from projected levels in the reference case.

Part of the reduction in electricity-based carbon emissions for the industrial sector is due to lower electricity consumption in the carbon reduction cases

Figure 47). A larger part of the reduction results from sharply lower carbon intensity of electricity production. In the reference case, approximately 18.5 million metric tons of carbon are emitted in the production of 1 quadrillion Btu of delivered electrical energy, as compared with only 12.6 million metric tons in the 1990-99% case and only 10.2 million metric tons in the 1990-3% case (38 percent less than in the reference case). Industrial energy intensity fell by 17 percent between 1980 and 1996. In 1996, approximately 7,100 Btu of energy was required to produce a dollar's worth of Industrial output. In the reference case energy intensity continues to fall, and in 2010 it is projected that only 5,900 Btu will be required for each dollar of industrial output. The impact of the carbon reduction cases on Industrial energy intensity results from opposing effects. The effect of higher energy prices is to reduce energy intensity, whereas reduced or falling output growth limits the amount of new, less energy-intensive capital equipment that will be added to the existing stock, thereby retarding the rate of decline in energy Intensity. Additional structural shifts in the composition of Industrial output further reduce energy Intensity. Fuel switching contributes to reduced carbon but does not affect energy intensity.)

The projected rate of decline in industrial energy Intensity is smaller in the more stringent carbon reduction cases (Figure 48). Some process steps in the energy-intensive Industries approach the minimum level of energy Intensity assumed to be practically achievable. In addition, in the more stringent carbon reduction cases, Industrial output is more severely

reduced, resulting in smaller incentives for the addition of new, less energy-intensive capital equipment. The changes in energy Intensity for the industrial subsectors (Figure 49) indicate that slower growth in output can lead to less pronounced declines in energy intensity in the more stringent carbon reduction cases.

The change in aggregate industrial energy intensity can be decomposed into two effects. One is the change in energy intensity that results from a change in the composition of Industrial output. For example, if the