EXHIBIT 2. ELEMENTS OF THE EMISSIONS GAP REDUCTIONS IN CLIMATE PLAN CREDITS: Delayed/incomplete plan implementation 20 MMT The Climate Plan assumes that implementation begins in FY 1994 and that program impacts ramp up rapidly through FY 2000. The plan is already significantly behind schedule. Requests by both DOE and EPA to reprogram funds in FY 94 to initiate the Climate Plan have been rejected by Congressional Appropriations Committees. Meanwhile, despite strong support from the environmental and energy efficiency community, the prospect of securing full funding of the FY 95 budget request for the Climate Plan appears remote unless the Administration intervenes at the highest levels. Assuming that results in 2000 are at the level projected for 1999 implies a 20 MMT shortfall in emission reductions. All carbon is not created equal 10 MMT The Climate Plan uses projected increases in carbon storage in forests (10 MMT in the plan and 7 MMT in the baseline) to compensate for increases in fossil fuel consumption. These increases appear to be based on very opumistic assumptions, and verifying any additional carbon storage will be difficult if not impossible. In any case, increasing forest carbon stocks can not substitute for reducing fossil fuel consumption. The climate treaty obligates the U.S. to preserve and enhance carbon sinks in addition to reducing our emissions. Otherwise, sinks only divert attention from essential reductions in fossil fuel emissions, and could be strictly counter-productive because carbon stored in forests could be returned to the atmosphere at any time due to cutting, dieback, or fire. ADDITIONS TO THE BASELINE: Lower world oil prices 16 MMT The Administration Baseline assumes that prices rise from their 1992 level of about $18 per barrel, returning to 1990 prices of about $23 per barrel in 2000. Starting in the latter half of 1993, however, world oil prices have fallen significantly. The Administration estimated that emissions would be 16 MMT higher in 2000 if oil prices remained constant at 1992 levels, rather than increasing to $23 per barrel by 2000 as assumed. Realistic vehicle fuel economy assumptions 14 MMT Combined new car and light truck fuel economy in the U.S. has remained essentially constant at 25 miles per gallon (mpg) since 1981 according to EPA ratings. The Administration Baseline nonetheless forecasts substantial increases in new car and light truck fuel economy levels by 2000 in the absence of any new price or policy drivers. Apparently, the fuel economy assumptions were arbitrarily selected to keep overall transportation energy demand at the level forecasted by AEO 93, despite adjusting upward the AEO's forecast of vehicle miles traveled. Adopting the Administration Baseline assumption regarding vehicle miles traveled without allowing unrealistic increases in fuel economy, increases year 2000 vehicle emissions by 5%, or 14 MMT. All carbon is not created equal See above. Base program shortfall 7 MMT 3 MMT The Administration Baseline assumes emission reductions of 29 MMT in 2000 from effective umplementation of the Energy Policy Act and EPA's Green Lights and Energy Star Buildings programs at a level reflected in the FY 94 budget request. These base programs, however, were cut by about $100 million in FY 94. We conservauvely assume that the impact of these base programs will be reduced by at least 10%, or 3 MMT. TOTAL 70 MMT Sources: CCAP Technical Supplement; EIA Emissions Inventory 1985-1990; EXHIBIT 4. PROPOSED INITIATIVES TO CLOSE THE GAP 1. Increase Auto Fuel Economy Substantially increase existing CAFE standards and provide market 2. Adopt Pay-at-the-Pump Auto Insurance Eliminate uninsured motorists and make insurance payments more 3. Upgrade Home Energy Efficiency MMTS Reduced 2000 2010 Cut energy waste in America's 90 million existing homes by investing in 4. Strengthen Efficiency Standards Require states to upgrade their building codes for new construction. 5. Reward Efficiency Investments Require states to adopt regulatory reforms that make utility investments 6. Increase Recycling TOTAL Adopt minimum recycled content requirements for aluminum and plastic. Mr. SHARP. Thank you very much. Mr. Heydlauff, happy to hear from you now. STATEMENT OF DALE E. HEYDLAUFF Mr. HEYDLAUFF. Thank you, Mr. Chairman. In addition to my role as the environmental officer of American Electric Power, I also serve as the industry chairman of the Coordinating Committee for the Climate Challenge Program. And I also wanted to indicate that both EEI and AEP are leading members of the Global Climate Coalition, which is the broad-based industry organization following the climate change issue. I had two purposes today: First, was to give you an update on the Climate Challenge Program since the signing of the Memorandum of Understanding on April 21, which you participated in, and we are very grateful for that. The second are a few comments and concerns on the international policy-making on the climate change issue. With respect to the Climate Challenge, since the signing ceremony on April 21, we have negotiated a model participation accord which will represent the basic agreement that individual companies will ultimately sign with the Department of Energy. That accord sets forth three primary obligations for a participating company: The first is that they delineate a type of commitment that they are prepared to make, and those commitments come in one or more of six different forms. The first is to contribute to industry initiatives, and we have five broad-based industry initiatives, one dealing with geothermal heat pumps, one dealing with electric vehicles, one dealing with fluorocarbon management, another dealing with utility investments internationally in energy efficiency programs, and the last being an investment pool that we are creating that would invest in emerging and currently available electrotechnologies and renewable energy resources. And that fund-they are hoping to attract between 50 and 150 million in capital from participating utilities. The second form a utility could take would be to agree to reduce emissions below their 1990 levels by the year 2000. The third type of commitment is to reduce emissions to the 1990 level by the year 2000. The fourth is to reduce to some specific level or by a certain amount by the year 2000. The fifth is to reduce or limit emissions to a given emission rate, which is represented by emissions per kilowatt hour, either sold or generated. And the final commitment and the one which it appears 95-plus percent of the participants will agree to, is to undertake a wide range of specific programs or actions that is have the effect of reducing greenhouse gas emissions in the future. The second overall commitment that a utility makes are obligations that they report annually and that reporting will be done under section 1605(b) Voluntary Reporting Program, probably augmented somewhat by an accounting procedures protocol that we have yet to decide on with the Department of Energy that will probably include more information about specific actions that utilities take. |