And the first graph that is up here on the screen shows what we project as the normal and expected rate of carbon growth, which is a 33 percent increase from 1990 to 2010. It is important to note that ongoing efforts in research, development and deployment are assumed in this baseline case. Without these efforts, we would expect the baseline to rise above the levels seen here. It is the new or expanded efforts that have the greatest potential to reduce emissions below the baseline. Studies of carbon savings and revenue impacts, whether done by us or others, are not exact science. We do believe, however, it is possible to provide the Committee with reasonable estimates. Some aspects of the initiative are easier to quantify than others. In cases where quantification was particularly difficult, some of the research, development, and deployment programs, to be specific, our report uses qualitative analysis. So in the 50 pages where we were discussing R&D, we were not ignoring it. We also believe that the EIA estimates are not slanted either in the direction of pessimism or optimism. With regard to the tax incentives, the tax portion of the initiative contains incentives that are modest and short term compared to earlier tax energy incentives that we have seen. As a result, it is not surprising that the estimated impacts are modest. Carbon savings reach 5 million metric tons in 2004, but after the incentives end, the residual effect falls to about 3 million metric tons by 2010. In 2010, this would represent about one-fifth of a percent drop in estimated carbon levels. Larger incentives of longer duration would produce larger savings. The results of our model runs suggest that most of the people receiving the proposed tax incentives would have undertaken the purchase of more energy-efficient equipment without the incentives. Existing state mandates to build wind power plants and sell electric vehicles, if they remain in force, will likely have greater impacts than the tax incentives. The study of potential tax revenue losses by the Treasury Department estimated higher levels of market penetration for solar rooftops and combined heat and power than did ELA, but Treasury estimated lower penetration for the rest of the equipment. As a result, estimation of carbon savings using the Treasury estimates for market penetration would likely produce results that are fairly similar to, or lower than, the EIA estimates. With regard to research, development, and deployment, research and development plays an important role in improving America's energy options, as well as contributing to the overall economy and the quality of life. More efficient power plants, better insulating windows, and advanced biomass for lighting are but a few of the success stories of R&D. As I said a moment ago, however, continuation of historic levels of R&D are assumed in the EIA baseline. [Chart.] [The information follows:] And I can illustrate this point with this graphic which shows that if you look at the top line that is if you freeze technology and just have the technology you have today, which makes the point that in the middle line which is our most likely projection, there is a lot of technological advance going on. Let me reflect on Mr. Reicher's reference to the A.D. Little study. We have a lot of respect for the A.D. Little firm, and we are very pleased that their work is being used. But let me explain what it actually means. The A.D. Little study projects a 112 million metric ton savings, but those are for separate programs. When you run them as an integrated run, you go down to a 75 million metric tons saving. Of the 75 million metric tons, 67 are already in our midbaseline case. So the difference between us and A.D. Little is not 120 or 112 million metric tons-it is 8 million metric tons, and most of those efforts are already in the baseline that do not produce cuts from the expected 33 percent growth. And I think an 8 million metric ton difference is a reasonable difference among experts like you would find at A.D. Little and experts like you find at EIA. Expanded R&D will produce greater savings, however, it is important to remember that many technology advances that get press Coverage never achieve commercial success. And even when they do, there is usually an extended period between the availability of the technology and market impact. Voluntary programs can move technology into the market more quickly. In some cases, these programs encourage behaviors that would not likely have occurred without the program. Standby power that EPA has talked about is a good example of that kind of program. I would like to congratulate them on the announcement of their program on sulfur hexachloride last week. That seems to have a good potential for producing new results. In some cases, however, voluntary programs document actions that would likely have occurred without the program. In these cases, savings cannot be subtracted from the EIA baseline, and care must be taken to avoid double counting. For a variety of reasons, it is difficult to quantify the links between carbon savings and programs for research, development, and deployment. This doesn't mean, however, that the impacts are insubstantial. There has been some comment that we have not taken into account the synergies between R&D and tax credits. In fact, we have looked carefully at the potential synergies. However, because of the short timeframe of the credits and the longer timeframes of R&D, there are only limited opportunities for such potential synergies to actually occur. Some reference has been made to combined heat and power in the written testimonies, and I hope that we will get a chance to compare notes on that later on and see why we differ. With regard to appliance efficiency standards, there does not seem to have been as much controversy about that, so I will pass over that, except to say that when we adopted a scenario of aggressive appliance efficiency standards, that we did find a saving of 5.4 million metric tons in the year 2010. All of our work has used well-developed statistical models that are well documented, fully transparent, and widely reviewed. Our testimony in recent years on issues ranging from electric restructuring, to the introduction of new types of gasoline, to the impacts of proposals to reduce carbon emissions, I think has stood up well over time to close scrutiny. And I believe this current study is in that tradition. [The statement and biography of Dr. Hakes follow:] |