Energy

Can Nuclear Be Part of Our Clean Energy Future?

Nuclear energy is often touted as a reliable, carbon-free element in our electricity portfolio, but three major challenges must be overcome before it can play a bigger role in our energy mix: cost, reactor safety, and waste disposal. Recent progress on each of these fronts shows that nuclear energy may indeed be a greater component of our clean energy future.

As a zero-carbon energy source that also has the highest capacity factor, new nuclear generation is especially well suited to provide baseload generation, which is an emerging gap in our electricity system. As electricity demand rises, aging coal plants are retired, and we pursue greenhouse gas emission reductions, there is a growing need for new low- and zero-carbon baseload electricity generation. Without technological breakthroughs in electricity storage technology, wind, and solar, energy cannot adequately meet baseload demand due to intermittency. Natural gas is lower emitting than coal, but it still emits greenhouse gases and has historically been vulnerable to price volatility.  

Low-Carbon Innovation for a Strong Defense

As discussed in the first part of this blog series A Strong Defense for Low-Carbon Innovation, the U.S. Department of Defense (DOD) has both the demand for and procurement capabilities to advance the development and deployment of innovative low-carbon technologies. This post highlights a variety of leading businesses innovating and creating new opportunities in response to the U.S. Department of Defense efforts, and some of the challenges businesses encounter along the way.

Strategic public-private partnerships are key to helping the DOD meet its energy goals and present significant low-carbon business opportunities. Employing the expertise of companies, such as those specializing in electricity generation or computer technology, gives the DOD access to specialty skills and knowledge needed to advance innovative low-carbon technologies. Businesses, in turn, have the potential to enhance their competencies through government-funded research and development, or provide new technologies for commercial markets after large-scale demonstration through the DOD.

A Strong Defense for Low-Carbon Innovation

This post is the first of a two-part series on low-carbon innovation in the defense industry. It looks at how the DOD is uniquely positioned to drive low-carbon innovation. The second part in the blog series looks at how businesses are working with the DOD to bring low-carbon solutions to market.

From GPS to the Internet, the U.S. Department of Defense (DOD) has a history of driving the creation of innovative technologies now used every day by Americans. With low-carbon policies a major challenge in Washington today, many clean energy advocates are seeking leadership from the DOD, which is the single largest consumer of energy in the country, to help drive clean energy solutions. Motivated by the need to better protect troops and support its operations, the DOD is becoming more involved in low-carbon technology research, development, and deployment. As stated in the 2010 Quadrennial Defense Review (QDR), this work will shape the future commercial potential of energy technologies, as “military installations [serve] as a test bed to demonstrate and create a market for innovative energy efficiency and renewable energy technologies.”

All Energy Sources Entail Risk, Efficiency a No-Brainer

At the moment, our attention is riveted by the events unfolding at a nuclear power plant in Japan. Over the past year or so, major accidents have befallen just about all of our major sources of energy: from the Gulf oil spill, to the natural gas explosion in California, to the accidents in coal mines in Chile and West Virginia, and now to the partial meltdown of the Fukushima Dai-ichi nuclear reactor. We have been reminded that harnessing energy to meet human needs is essential, but that it entails risks. The risks of different energy sources differ in size and kind, but none of them are risk-free.

Energy and Climate Goals of China's 12th Five-Year Plan

Energy and Climate Goals of China's 12th Five-Year Plan
March 2011

By Joanna Lewis

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The 12th Five-Year Plan (FYP) adopted by the Chinese government in March 2011 devotes considerable attention to energy and climate change and establishes a new set of targets and policies for 2011-2015.[1]  While some of the targets are largely in line with the status quo, other aspects of the plan represent more dramatic moves to reduce fossil energy consumption, promote low-carbon energy sources, and restructure China’s economy.  Among the goals is to "gradually establish a carbon trade market."  Key targets include:

  • A 16 percent reduction in energy intensity (energy consumption per unit of GDP);
  • Increasing non-fossil energy to 11.4 percent of total energy use; and
  • A 17 percent reduction in carbon intensity (carbon emissions per unit of GDP).

Energy

The relationship between energy and economic growth matters greatly in China; without a reduction in energy intensity since the late 1970s, the country would need to consume three times the energy it does today to sustain its economic growth.  At the center of China’s 11th Five-Year Plan (2006-2010) was a target to decrease the overall energy intensity of the economy by 20 percent. This target was implemented in response to increases in energy intensity experienced between 2002 and 2005, the first increase experienced after several decades of rapidly decreasing energy intensity.  To reverse the unexpected increases in energy intensity, the government mobilized a national campaign to promote energy efficiency, targeting in particular the largest and least efficient energy consuming enterprises. The Top 1,000 Program targeted approximately 1,000 companies (consuming about one-third of the country’s energy) for efficiency improvements.

The 12th FYP builds directly on the 11th FYP energy intensity target and its associated programs, setting a new target to reduce energy intensity by an additional 16 percent by 2015.[2] While this may seem less ambitious than the 20 percent reduction targeted in the 11th FYP, it likely represents a much more substantial challenge. It is likely the largest and least efficient enterprises have already undertaken efficiency improvements, leaving smaller, more efficient plants to be targeted in this second round. Under preparation is a new “Top 10,000” program, which is modeled after the Top 1,000 Program but adds an order of magnitude of companies to the mix.  But as the number of plants grows, so do the challenges of collecting accurate data and enforcing targets.

The closure of inefficient power and industrial facilities also helped contribute to the decline in energy intensity during the 11th FYP period, with a reported 72.1 GW of thermal capacity closed.[3] Total plant closures are equivalent to 16 percent of the size of the capacity added over the period. An additional 8 GW of coal plants are reportedly to be shut down in 2011 alone with further closures no doubt on tap over the next five years.

While final data are not yet available, the country likely fell short of meeting its 11th FYP energy intensity target of 20 percent, instead achieving in the range of 19.1 percent. There is no doubt, however, that much was learned though efforts to improve efficiency nationwide. Many changes were made to how such national targets are enforced at the local level, including the incorporation of compliance with energy intensity targets into the evaluation for local officials.  

The 12th FYP includes a target to increase non-fossil energy sources (including hydro, nuclear and renewable energy) to 11.4 percent of total energy use (up from 8.3 percent in 2010).[4] While not formally enshrined in the 12th FYP, another recent notable announcement is a cap on total energy consumption of 4 billion tons of coal equivalent (tce) in 2015.[5] To meet the cap on energy consumption, annual energy growth would need to slow to an average of 4.24 percent per year, from 5.9 percent between 2009 and 2010. The government is also trying to slow GDP growth rates, targeting 7 percent per year – far below recent growth rates. Lower GDP growth rates make it even more challenging for China to meet energy and carbon intensity targets, since energy and carbon need to grow more slowly than GDP for the country to achieve declining energy and carbon intensity.

Carbon

In the lead-up to the Copenhagen climate negotiations in the fall of 2009, the Chinese government pledged a 40-45 percent reduction in national carbon intensity from 2005 levels by 2020. To achieve this 2020 target, the 12th FYP sets an interim target of reducing carbon intensity 17 percent from 2010 levels by 2015. Whether this target will result in a deviation from China’s expected carbon emissions over this time period depends on the corresponding GDP growth, but many studies have found that this target will be challenging for China to achieve without additional, aggressive policies to promote low carbon energy development.[6]

Also promised in the 12th FYP is an improved system for monitoring greenhouse gas emissions, which will be needed to assess compliance with the carbon intensity target, and to prepare the national GHG inventories that, under the Cancún Agreements, are to be reported more frequently to the UNFCCC and undergo international assessment.

The 12th FYP establishes the goal of "gradually establish[ing] a carbon trade market," but does not elaborate. A handful of provinces have announced interest in piloting carbon trading schemes. The Tianjin Climate Exchange, partially owned by the founders of the Chicago Climate Exchange, is positioning itself to be the clearinghouse for any future carbon trading program.[7] While some have suggested that Guangdong province may be targeted for a pilot program at the provincial level, other reports speculate that the program would begin within a single sector, such as the power sector, or begin by including only state-owned enterprises, which are often the target of early government policy experiments (as was the case with mandatory market shares for renewable energy placed on the large state-owned power companies). Other likely locations for pilots might include China’s low-carbon cities and provinces.[8]

Implementing a carbon trading scheme in China, even on a small-scale or pilot basis, will not be without significant challenges. Concerns have already been raised from both domestic and foreign-owned enterprises operating in China about how the regulation could affect their bottom lines. But the key challenge is likely technical, resulting from the minimal capacity currently in place to measure and monitor carbon emissions in China.

Industrial Policy

The 12th FYP also includes many new industrial policies to support clean energy industries and related technologies. Industries targeted include the nuclear, solar, wind and biomass energy technology industries, as well as hybrid and electric vehicles, and energy savings and environmental protection technology industries.[9]  These “strategic and emerging” industries are being promoted to replace the “old” strategic industries such as coal and telecom, (often referred to as China’s pillar industries), which are heavily state-owned and have long benefited from government support.[10] This move to rebrand China’s strategic industries likely signals the start of a new wave of industrial policy support for the new strategic industries which may include access to dedicated state industrial funds, increased access to private capital, or industrial policy support through access to preferential loans or R&D funds.

Other targets encourage increased innovative activity, including a target for R&D expenditure to account for 2.2 percent of GDP, and for 3.3 patents per 10,000 people. During the 11th FYP period, an estimated 15.3 percent of government stimulus funding was directed towards innovation, energy conservation, ecological improvements and industrial restructuring.[11]

 

The old pillar industries

The new strategic and emerging industries

1

National defense

Energy saving and environmental protection

2

Telecom

Next generation information technology

3

Electricity

Biotechnology

4

Oil

High-end manufacturing (e.g. aeronautics, high speed rail)

5

Coal

New energy (nuclear, solar, wind, biomass)

6

Airlines

New materials (special and high performance composites)

7

Marine shipping

Clean energy vehicles (PHEVs and electric cars)

Sources: “Decision on speeding up the cultivation and development of emerging strategic industries,” www.gov.cn, September 8, 2010, http://www.gov.cn/ldhd/2010-09/08/content_1698604.htm; HSBC, China’s next 5-year plan: What it means for equity markets, October 2010. 

Other Targets

The 12th FYP also includes targets to increase the rate of forest coverage by just over 21 percent and the total forest stock by 12.5 million hectares by 2015. Also mentioned are targets for the construction of 35,000 km of high-speed rail and improvements in subway and light rail coverage, as well as a goal to connect every city with a population greater than 500,000.[12]

Outlook

The 12th FYP provides a glimpse into the minds of China’s leadership as it lays out a methodological plan for moving the country forward. It includes a strong emphasis on new energy and climate programs and clearly illustrates China’s commitment to increased environmental protection. The Plan itself provides a framework for progress, but leaves the details of implementation to policy makers, with many new policies and programs likely to follow in the coming weeks.

Some of the targets will no doubt prove challenging to implement. The national energy and carbon intensity targets will prove particularly difficult if economic growth rates slow in line with targets put forth in the plan. Implementation of energy conservation and efficiency programs at the facility level will prove increasingly demanding as more and more facilities are incorporated into current programs. The non-fossil energy target relies on extensive increases in nuclear energy capacity, but growth in nuclear plants may slow as efforts to improve safety and regulation will be implemented in the aftermath of the recent Japanese nuclear disaster.[13] If nuclear targets are reduced, the share of renewable energy will need to increase even more than current targets propose.

Overall, China’s Plan represents many ambitious climate and energy goals, and lays out a strategic roadmap for the county to endeavor to pursue over the next five years.

Notes and References



[2]“Key targets of China's 12th five-year plan,” Xinhua, March 5, 2011. http://www.chinadaily.com.cn/xinhua/2011-03-05/content_1938144.html


[3] Wen Jiabao.  Report on the work of the Government. Delivered at the Fourth Session of the Eleventh China National People’s Congress, March 5, 2011. http://blogs.wsj.com/chinarealtime/2011/03/05/china-npc-2011-reports-full-text/

[4]“China announces 16 pct cut in energy consumption per unit of GDP by 2015,” Gov.cn, March 5, 2011. http://www.gov.cn/english/2011-03/05/content_1816947.htm; “Zhang: ‘Twelfth Five’ push to non-fossil energy to account for 11.4 percent share of primary energy,” people.com.cn, January 6, 2011. http://energy.people.com.cn/GB/13670716.html

[5]Fellman, Joshua. “China to Hold Primary Energy Use to 4.2 Billion Tons in 2015, Xinhua Says.” Bloomberg, October, 20, 2010. http://www.bloomberg.com/news/2010-10-30/china-to-hold-primary-energy-use-to-4-2-billion-tons-in-2015-xinhua-says.html


[6] See, e.g. Cohen-Tanugi, David. “Putting it into Perspective: China’s Carbon Intensity Target.” NRDC White Paper, October 2010.

[7]The Tianjin Climate Exchange (TCX) is a joint venture of China National Petroleum Corporation Assets Management Co. Ltd. (CNPCAM), the Chicago Climate Exchange (CCX) and the City of Tianjin.

[8]In July 2010, NDRC announced the selection of official low carbon pilot provinces and cities, including the provinces of Guangdong, Liaoning, Hubei, Shaanxi and Yunnan, and the cities of Tianjin, Chongqing, Shenzhen, Xiamen, Hangzhou, Nanchang, Guiyang, and Baoding.
 

[9]“Decision on speeding up the cultivation and development of emerging strategic industries," www.gov.cn, September 8, 2010, http://www.gov.cn/ldhd/2010-09/08/content_1698604.htm

[10]Over 70 percent of SOE assets and profits are concentrated in the “old” magic 7 strategic industries. HSBC, China’s next 5-year plan: What it means for equity markets, October 2010.
 

[11]HSBC, China’s next 5-year plan: What it means for equity markets, October 2010.

[12]Seligsohn, Deborah and Angel Hsu. “How does China’s 12th Five-Year Plan address energy and the environment?” China FAQs, march 7, 2011. http://www.chinafaqs.org/blog-posts/how-does-chinas-12th-five-year-plan-address-energy-and-environment

[13]Yue, Yang. “China may revise nuclear power target.” Marketwatch.com from Caixin Online, March 29, 2011.
http://www.marketwatch.com/story/china-may-revise-nuclear-power-target-2011-03-29

 

Joanna Lewis
0

Towards a Climate-Friendly Built Environment

Buildings Cover

Towards a Climate-Friendly Built Environment

Prepared for the Pew Center on Global Climate Change
June 2005

By:
Marilyn Brown, Oak Ridge National Laboratory
Frank Southworth, Oak Ridge National Laboratory
Therese Stovall, Oak Ridge National Laboratory

Press Release

Download Report (pdf)

Read the In-Brief summarizing this report

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

Buildings in the United States – homes, offices, and industrial facilities – account for over 40 percent of our nation's carbon dioxide emissions. Most of these emissions come from the combustion of fossil fuels to provide heating, cooling, and lighting and to run electrical equipment and appliances. The manufacture of building materials and products, and the increased emissions from the transportation generated by urban sprawl, also contribute a significant amount of greenhouse gas (GHG) emissions every year. In this report, authors Marilyn Brown, Frank Southworth, and Theresa Stovall identify numerous opportunities available now, and in the future, to reduce the building sector's overall impact on climate. 

This Pew Center report is part of our effort to examine key sectors, technologies, and policy options to construct the "10-50 Solution" to climate change. The idea is that we need to tackle climate change over the next fifty years, one decade at a time. Looking at options for the near (10 years) and long (50 years) term, this report yields the following insights for reducing GHG emissions from the largest portion of our nation's physical wealth – our built environment.

  • This sector presents tremendous challenges. There are so many different energy end uses and GHG-relevant features, multiple stakeholders and decision-makers, and numerous market barriers to energy efficiency.
  • Yet numerous opportunities exist. In the near term, simply bringing current building practices up to the level of best practices would yield tremendous energy and cost savings. Past studies have shown that many climate-friendly and cost-effective measures in the buildings sector are not fully utilized in the absence of policy intervention. The R&D and six deployment policies examined in this report could reduce forecasted energy consumption and carbon emissions of buildings in the United States in 2025 by almost one-quarter, or by an amount roughly equal to 10% of total projected U.S. carbon emissions. In 2025 and beyond, newly constructed net-zero-energy homes and climate-friendly designs for large commercial buildings and industrial facilities could begin to generate sizeable GHG reductions by displacing the energy-intensive structures that embody today's standard practices.
  • An integrated approach is needed to reduce GHG emissions from the diverse and fragmented building sector. Such an approach coordinates across technical and policy solutions, integrates engineering approaches with architectural design, considers design decisions within the realities of building operation, integrates green building with smart-growth concepts, and takes into account the numerous decision-makers within the industry.
  • An expansive view of the building sector is needed to completely identify and capitalize on the full range of GHG-reduction opportunities. Such a view needs to consider future building construction (including life-cycle aspects of buildings materials, design, and demolition), use (including on-site power generation and its interface with the electric grid), and location (in terms of urban densities and access to employment and services).

The authors and the Pew Center would like to thank Robert Broad of Pulte Home Sciences, Leon Clarke of the Pacific Northwest Laboratory, Jean Lupinacci of the U.S. Environmental Protection Agency, and Steven Nadel of the American Council for an Energy Efficient Economy for their review of and advice on a previous draft of this report, and Tony Schaffhaeuser for contributions to an early version this paper.

Executive Summary

The energy services required by residential, commercial, and industrial buildings produce approximately 43 percent of U.S. carbon dioxide (CO2) emissions. Given the magnitude of this statistic, many assessments of greenhouse gas (GHG) reduction opportunities focus principally on technologies and policies that promote the more efficient use of energy in buildings. This report expands on this view and includes the effects of alternative urban designs; the potential for on-site power generation; and the life-cycle GHG emissions from building construction, materials, and equipment. This broader perspective leads to the conclusion that any U.S. climate change strategy must consider not only how buildings in the future are to be constructed and used, but also how they will interface with the electric grid and where they will be located in terms of urban densities and access to employment and services. The report considers both near-term strategies for reducing GHGs from the current building stock as well as longer-term strategies for buildings and communities yet to be constructed.

The United States has made remarkable progress in reducing the energy and carbon intensity of its building stock and operations. Energy use in buildings since 1972 has increased at less than half the rate of growth of the nation's gross domestic product, despite the growth in home size and building energy services such as air conditioning and consumer and office electronic equipment. Although great strides have been made, abundant untapped opportunities still exist for further reductions in energy use and emissions. Many of these-especially energy-efficient building designs and equipment-would require only modest levels of investment and would provide quick pay-back to consumers through reduced energy bills. By exploiting these opportunities, the United States could have a more competitive economy, cleaner air, lower GHG emissions, and greater energy security.

GHG Emissions: Sources and Trends

GHG emissions from the building sector in the United States have been increasing at almost 2 percent per year since 1990, and CO2 emissions from residential and commercial buildings are expected to continue to increase at a rate of 1.4 percent annually through 2025. These emissions come principally from the generation and transmission of electricity used in buildings, which account for 71 percent of the total. Due to the increase in products that run on electricity, emissions from electricity are expected to grow more rapidly than emissions from other fuels used in buildings. In contrast, direct combustion of natural gas (e.g., in furnaces and water heaters) accounts for about 20 percent of energy-related emissions in buildings, and fuel-oil heating in the Northeast and Midwest accounts for the majority of the remaining energy-related emissions. Based on energy usage, opportunities to reduce GHG emissions appear to be most significant for space heating, air conditioning, lighting, and water heating.

Mechanisms of Change

Because the building industry is fragmented, the challenges of promoting climate-friendly actions are distinct from those in transportation, manufacturing, and power generation. The multiple stakeholders and decision-makers in the building industry and their interactions are relevant to the design of effective policy interventions. Major obstacles to energy efficiency exist, including insufficient and imperfect information, distortions in capital markets, and split incentives that result when intermediaries are involved in the purchase of low-GHG technologies. Many buildings are occupied by a succession of temporary owners or renters, each unwilling to make long-term improvements that would mostly benefit future occupants. Regulations, fee structures in building design and engineering, electricity pricing practices, and the often limited availability of climate-friendly technologies and products all affect the ability to bring GHG-reducing technologies into general use. Some of these obstacles are market imperfections that justify policy intervention. Others are characteristics of well-functioning markets that simply work against the selection of low-GHG choices.

Numerous individual, corporate, community, and state initiatives are leading the implementation of "green" building practices in new residential development and commercial construction. The most impressive progress in residential green building development and construction is the result of communities and developers wanting to distinguish themselves as leaders in the efficient use of resources and in waste reduction in response to local issues of land-use planning, energy supply, air quality, landfill constraints, and water resources. Building owners and operators who have a stake in considering the full life-cycle cost and resource aspects of their new projects are now providing green building leadership in the commercial sector. However, real market transformation will also require buy-in from the supply side of the industry (e.g., developers, builders, and architects).

Affordability, aesthetics, and usefulness have traditionally been major drivers of building construction, occupancy, and renovation. In addition to climatic conditions, the drivers for energy efficiency and low-GHG energy resources depend heavily on local and regional energy supply costs and constraints. Other drivers for low-GHG buildings are clean air, occupant health and productivity, the costs of urban sprawl, electric reliability, and the growing need to reduce U.S. dependence on petroleum fuels.

Technology Opportunities in Major Building Subsectors

The technical and economic potential is considerable for technologies, building practices, and consumer actions to reduce GHG emissions in buildings. When studying the range of technologies, it is important to consider the entire building system and to evaluate the interactions between the technologies. Thus, improved techniques for integrated building analyses and new technologies that optimize the overall building system are especially important. In this report, homes and small commercial buildings and large commercial and industrial buildings are analyzed separately for their energy-saving and emission-reduction potential, because energy use in homes and small businesses is principally a function of climatic conditions while energy use in large buildings is more dependent on internal loads. 

Applying currently available technologies can cost-effectively save 30 to 40 percent of energy use and GHG emissions in new buildings, when evaluated on a life-cycle basis. Technology opportunities are more limited for the existing building stock, and the implementation rate depends on the replacement cycles for building equipment and components. However, several opportunities worth noting apply to existing as well as new buildings, including efficiencies in roofing, lighting, home heating and cooling, and appliances. Emerging building technologies, especially new lighting systems and integrated thermal and power systems, could lead to further cost-effective energy savings. All of these potential effects, however, are contingent upon policy interventions to overcome the barriers to change.

Community and Urban Subsystems

Evidence suggests that higher-density, more spatially compact and mixed-use building developments can offer significant reductions in GHG emissions through three complementary effects: (1) reduced vehicle miles of travel, (2) reduced consumption for space conditioning as a result of district and integrated energy systems, and (3) reduced municipal infrastructure requirements. Both behavioral and institutional barriers to changes in urban form are significant. The effect of urban re-design on travel and municipal energy systems will need to be tied to important developments in travel pricing, transportation construction, and other infrastructure investment policies.

Past studies have concluded conservatively that changes in land-use patterns may reduce vehicle miles traveled by 5 to 12 percent by mid-century. More compact urban development could also lead to comparable GHG reductions from efficiencies brought about by district and integrated energy systems, with a small additional decrement from a reduced need for supporting municipal infrastructures. In total, therefore, GHG reductions of as much as 3 to 8 percent may be feasible by mid-century, subject to the near-term enactment of progressive land-use planning policies.

Policy Options

Policy research suggests that public interventions could overcome many of the market failures and barriers hindering widespread penetration of climate-friendly technologies and practices. The mosaic of current policies affecting the building sector is complex and dynamic, ranging from local, state, and regional initiatives, to a diverse portfolio of federal initiatives. Numerous policy innovations could be added to this mix, and many are being tried in test-beds at the state and local level.

In this report, buildings energy research and development (R&D) and six deployment policies are reviewed that have a documented track record of delivering cost-effective GHG reductions and that hold promise for continuing to transform markets.   The six deployment policies include (1) state and local building codes, (2) federal appliance and equipment efficiency standards, (3) utility-based financial incentive and public benefits programs, (4) the low-income Weatherization Assistance Program, (5) the ENERGY STAR(r) Program, and (6) the Federal Energy Management Program. Annual energy savings and carbon-reduction estimates are provided for each of these policies, both retrospectively and prospectively. Summing these values provides a reasonable estimate of the past and potential future impacts of the policies.

Annual savings over the past several years from these R&D and six deployment policies are estimated to be approximately 3.4 quadrillion Btu (quads) and 65 million metric tons of carbon (MMTC), representing 10 percent of U.S. CO2 emissions from buildings in 2002. The largest contributors are appliance standards and the ENERGY STAR Program. Potential annual effects in the 2020 to 2025 time frame are 12 quads saved and 200 MMTC avoided, representing 23 percent of the forecasted energy consumption and carbon emissions of buildings in the United States by 2025. The largest contributors are federal funding for buildings energy R&D (especially solid-state lighting) and appliance standards.

Conclusions and Recommendations

The analysis presented in this report leads to several conclusions:

  • An expansive view of the building sector is needed to completely identify and exploit the full range of GHG-reduction opportunities. Such a view needs to consider future building construction (including life-cycle aspects of buildings materials, design, and demolition), use (including on-site power generation and its interface with the electric grid), and location (in terms of urban densities and access to employment and services).
  • There is no silver bullet technology in the building sector because there are so many different energy end uses and GHG-relevant features. Hence, a vision for the building sector must be seen as a broad effort across a range of technologies and purposes.
  • An integrated approach is needed to address GHG emissions from the U.S. building sector - one that coordinates across technical and policy solutions, integrates engineering approaches with architectural design, considers design decisions within the realities of building operation, integrates green building with smart-growth concepts, and takes into account the numerous decision-makers within the fragmented building industry.
  • Current building practices seriously lag best practices. Thus, vigorous market transformation and deployment programs are critical to success. They are also necessary to ensure that the next generation of low-GHG innovations is rapidly and extensively adopted.
  • Given the durable nature of buildings, the potential for GHG reductions resides mostly with the existing building stock for some time to come. However, by 2025, newly constructed net-zero-energy homes and climate-friendly designs for large commercial buildings and industrial facilities could begin to generate sizeable GHG reductions by displacing the energy-intensive structures that embody today's standard practices. By mid-century, land-use policies could have an equally significant impact on GHG emissions. This inter-temporal phasing of impacts does not mean that retrofit, new construction, and land-use policies should be staged; to achieve significant GHG reductions by 2050, all three types of policies must be strengthened as soon as politically feasible.
  • Similarly, applied R&D will lead to GHG reductions in the short run, while in the long run basic research will produce new, ultra-low GHG technologies. This does not mean that basic research should be delayed while applied R&D opportunities are exploited. The pipeline of technology options must be continuously replenished by an ongoing program of both applied and basic research.

By linking near-term action to long-term potential, the building sector can assume a leadership role in reducing GHG emissions in the United States and globally.

Conclusions

The energy services required by residential, commercial and industrial buildings produce approximately 43% of U.S. CO2 emissions. Additional GHG emissions result from the manufacture of building materials and products, the transport of construction and demolition materials, and the increased passenger and freight transportation associated with urban sprawl. As a result, an effective U.S. climate change strategy must consider options for reducing the GHG emissions associated with how buildings are constructed, used, and located.

Homes, offices, and factories rarely incorporate the full complement of cost-effective climate-friendly technologies and smart growth principles, despite the sizeable costs that inefficient and environmentally insensitive designs impose on consumers and the nation. To significantly reduce GHG emissions from the building sector, an integrated approach is needed-one that coordinates across technical and policy solutions, integrating engineering approaches with architectural design, considering design decisions within the realities of building operation, integrating green building with smart-growth concepts, and taking into account the timing of policy impacts and technology advances.

A. Technology Opportunities in the 2005 to 2025 Time Frame

In the short run, numerous green products and technologies could significantly reduce GHG emissions from buildings, assuming vigorous encouragement from market-transforming policies such as expanded versions of the six deployment policies studied here. In the coming decade, given the durable nature of buildings, the potential for GHG reductions resides mostly with the existing building stock and existing technologies. Some of the numerous promising off-the-shelf technologies and practices outlined in this report include reflective roof products, low-E coating for windows, the salvage and reuse of materials from demolished buildings, natural ventilation and air conditioning systems that separately manage latent and sensible heat, smart HVAC control systems, and variable speed air handlers.

Federally funded R&D for energy savings in buildings must also be expanded in the short term so that an attractive portfolio of new and improved technological solutions will be available in the mid and long term. Achieving the goal of a cost-competitive net-zero-energy home by 2020, for example, will require scientific breakthroughs to be incorporated into new and improved photovoltaic systems, power electronics, thermochemical devices, phase-change insulation and roofing materials, and other components. In addition, policies that promote higher-density, spatially compact, and mixed-use building developments must begin to counteract the fuel-inefficient impact of urban sprawl.

In the 2025 timeframe, newly constructed net-zero-energy homes and climate-friendly designs for large commercial buildings and industrial facilities will need to begin to displace the GHG-intensive structures that embody today's standard practices. The emerging technologies described in this report could help significantly reduce GHG emissions from the building sector including

  • sealing methods that address unseen air leaks,
  • electrochromic windows offering the dynamic control of infrared energy,
  • unconventional water heaters (solar, heat pump, gas condensing, and tankless),
  • inexpensive highly efficient nanocomposite materials for solar energy conversion,
  • thermoelectric materials that can transform heat directly into electrical energy,
  • solid state lighting that uses the emission of semi-conductor diodes to directly produce light at a fraction of the energy of current fluorescent lighting,
  • selective water sorbent technologies that offer the performance of ground-coupled heat pumps at the cost of traditional systems,
  • abundant sensors dispersed through buildings with continuously optimizing control devices, and
  • 80-90 percent efficient integrated energy systems that provide on-site power as well as heating, cooling, and dehumidification.

Market transformation policies are expected to continue to improve the existing building stock and play an essential role in ensuring the market uptake of new technologies. In addition, land-use policies could begin to have measurable benefits.

The analysis reported here suggests that six expanded market transformation policies-in combination with invigorated R&D-could bring energy consumption and carbon emissions in the building sector in 2025 back almost to 2004 levels. At the same time, the built environment will be meeting the needs of an economy (and associated homes, offices, hospitals, restaurants, and factories) that will have grown from $9.4 trillion in 2002 to $18.5 trillion in 2025.

B. Building Green and Smart in the 2050 Time Frame

Green building practices and smart growth policies could transform the built environment by mid-century. Some of the climate-friendly features of this transformed landscape that are outlined in this report include:

  • building efficiency measures that dramatically reduce the energy requirements of buildings;
  • high-performance photovoltaic panels, fuel cells, microturbines and other on-site equipment that produce more electricity and thermal energy than is required locally, making buildings net exporters of energy, thereby transforming the entire demand and supply chain in terms of energy generation, distribution, and end use;
  • higher-density communities that enable high-efficiency district heating and cooling;
  • gridded street plans and other compact and readily accessible local street systems that also enable mass transit, and pedestrian and cyclist-friendly pathways to displace other forms of travel;
  • parks and tree-lined streets to act as carbon sinks and to mitigate the "heat island" effect; and
  • in-fill and mixed-use land development to shorten trip distances while reducing infrastructure requirements.

In the long run, improving the locational efficiency of communities and urban systems could possibly have as large an impact on GHG emissions as improving the design, construction, and operation of individual structures.

C. Linking Near-Term Action with Long-Term Potential

Given the durable nature of buildings, the potential for GHG reductions resides mostly with the existing building stock for some time to come. However, by 2025, newly constructed net-zero-energy homes and climate-friendly designs for large commercial buildings and industrial facilities could begin to generate sizeable GHG reductions by displacing the energy-intensive structures that embody today's standard practices. By mid-century, land-use policies could also significantly reduce GHG emissions. This inter-temporal phasing of impacts does not mean that retrofit versus new construction versus land-use policies should be staged; to achieve significant GHG reductions by 2050, all three elements of an integrated policy approach must be strengthened in the near term.

Similarly, applied R&D will lead to GHG reductions in the short run, while basic research will take longer to produce new, ultra-low GHG technologies. This does not mean that fundamental research should be delayed while applied R&D opportunities are exploited. The pipeline of technology options must be continuously replenished by an ongoing program of both applied and basic research. Vigorous market transformation and deployment programs will be needed throughout the coming decades to shrink the existing technology gap and to ensure that the next generation of low-GHG innovations is rapidly adopted.

By linking near-term action with long-term potential in an expansive and integrated framework, the building sector can be propelled to a leadership role in reducing GHG emissions in the United States and globally.

Frank Southworth
Marilyn Brown
Therese Stovall
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U.S. Energy Scenarios for the 21st Century

Energy Scenarios Report Cover

U.S. Energy Scenarios for the 21st Century

Prepared for the Pew Center on Global Climate Change
July 2003

By:
Irving Mintzer, Global Business Network
J. Amber Leonard, Global Business Network
Peter Schwartz, Global Business Network

Press Release

Download Entire Report (pdf)

Download Appendices
Appendix B: Technology Assessments (pdf)
Appendix C: Detailed Model Output (pdf)
Appendix D: AMIGA Model Abstract and Documentation (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

The question of how U.S. energy supply and use—which account for over 80 percent of U.S. greenhouse gas emissions—will evolve over the next several decades is critical to developing sound U.S. climate policy. To answer this question, the Pew Center convened two workshops, including members of its Business Environmental Leadership Council and independent experts, to envision and analyze future energy scenarios for the United States, and to assess the implications of these scenarios for U.S. carbon emissions. The scenarios are:

  • Awash in Oil and Gas, in which oil and gas are cheap, abundant, and reliably available;
     
  • Technology Triumphs, in which the commercialization of climate-friendly energy technologies is accelerated through a combination of state policy, technological breakthroughs, public and private investment, and consumer interest; and
     
  • Turbulent World, in which supply disruptions and energy security concerns lead to aggressive federal energy policy promoting domestic, low-risk resources. 

Climate policy was deliberately excluded from these "base case" scenarios. 

Carbon emissions increase under all these scenarios. This points to the need for a mandatory carbon policy under a broad range of energy futures. Carbon emissions increased much more under Awash in Oil and Gas than in the other two scenarios. This draws attention to the importance of climate-friendly energy technologies and climate-friendly energy policies in moving us toward a low-carbon future. 

When a hypothetical mandatory climate policy was imposed on all three scenarios, it was most difficult to achieve under Awash in Oil and Gas, of medium difficulty in Turbulent World, and easiest in Technology Triumphs. This range of difficulty is due to fundamental differences in the base case scenarios. But the unmistakable conclusion is that under all scenarios, a mandatory carbon policy is necessary. 

In the course of the analysis, the Pew Center and the Global Business Network also developed technology assessments revealing that a number of emerging technologies—such as carbon capture and geological sequestration, distributed generation, hybrid-electric vehicles, and hydrogen fuel cells—have the potential to yield multiple economic, environmental, and energy security benefits.

This report explores what might happen to U.S. energy supply and use in the future; the Pew Center plans to turn next to an exploration of what ought to happen. We will use these scenarios to test policy and technology options and identify those that are robust across a broad range of plausible futures. We hope that readers will join us in developing a shared national vision of policies, strategies, and investments that will reduce U.S. greenhouse gas emissions and promote U.S. energy security while maintaining economic growth. 

The Pew Center would like to thank Amory Lovins of the Rocky Mountain Institute and William Chandler of Batelle Memorial Institute for their helpful comments on a previous draft of this report, Skip Laitner for his advice on and review of the modeling analysis, and the Energy Foundation for its generous support of this project.

Executive Summary

This study presents a set of scenarios describing three divergent paths for U.S. energy supply and use from 2000 through 2035. The scenarios presented here are not predictions; taken together however, these potential futures can be used to help identify key technologies, important energy policy decisions, and strategic investment choices that can enhance energy security, environmental protection, and economic development over a range of possible futures. To envision these scenarios and to draw policy-relevant conclusions from them, the Pew Center on Global Climate Change, working with the Global Business Network, convened two workshops with experts from the corporate, academic, and NGO sectors. The Pew Center also commissioned a set of technology assessments and joined with the Global Business Network to analyze the scenarios. 

The trajectory of future U.S. economic growth, energy use, and carbon emissions will be a product of dynamic interactions among a complex set of driving forces, including technological advances, international events, energy and environmental policy, private investment, and consumer behavior. The interactions among these forces and their interplay with other social, economic, environmental, and cultural forces that stimulate change are not completely understood today. However, if the past thirty years are useful as a guide, it is likely that major surprises will occur between now and 2035.

The scenarios developed in this study reflect divergent trends in all of these driving forces. In brief, the three base case scenarios are:

  • Awash in Oil and Gas, a scenario in which abundant supplies of oil and natural gas remain available to U.S. consumers at low prices. Energy consumption rises considerably, and conventional technologies dominate the energy sector. In this low energy price scenario, there are few incentives to improve energy efficiency and little concern for energy issues. Carbon emissions rise 50 percent above the year 2000 level by 2035; 
     
  • Technology Triumphs, a scenario in which an array of driving forces converge to accelerate the successful commercialization in the U.S. market of many technologies that improve energy efficiency and produce lower carbon emissions, and in which U.S. companies play a key role in the subsequent development of an international market for these technologies. Despite sustained economic growth and an increase in energy consumption, carbon emissions rise 15 percent above the year 2000 level by 2035; and
     
  • Turbulent World, a scenario in which U.S. energy markets are repeatedly buffeted by developments both at home and abroad, with unsettling effects on energy prices and mounting threats to U.S. energy security. High energy prices and uncertainty about energy supplies slow economic growth, and the country moves from one technological “solution” to another, finding serious flaws with each, until finally settling on a program to accelerate the commercialization of hydrogen and fuel cells. Despite slower economic growth in Turbulent World, carbon emissions rise 20 percent above the year 2000 level by 2035.

Climate change policy was deliberately excluded from these three base case scenarios; rather, the participants in the scenario development process formulated a hypothetical climate policy overlay. The policy overlay postulated a freeze of U.S. carbon dioxide (CO2) emissions in 2010 and subsequent 2 percent per year decreases from 2010 to 2025, followed by 3 percent per year decreases to 2035. Like the base case scenarios, the policy overlay is neither a prediction nor a recommendation. To achieve the targeted emissions reductions trajectory and create the policy overlay cases, the same portfolio of primarily market-oriented policies and programs was imposed on each base case scenario. 

Carbon dioxide emissions reductions achieved in other countries, carbon sequestration in plants and soils, and reductions in emissions of other greenhouse gases were beyond the scope of this analysis. Other analyses indicate that to minimize the cost of emissions reductions for the energy and energy-intensive industries, it is important to have flexibility in offsetting energy-related CO2 emissions through international emissions trading, non-CO2 greenhouse gas reductions, and carbon sequestration. 

When the postulated policy overlay is applied to each of the base case scenarios, it modifies the pattern of energy technology development. For example, in the base case of theTurbulent World scenario, concerns about energy security stimulate a major national commitment to expanding production of hydrogen from coal and to accelerating the development of hydrogen fuel cells, both for transportation and in stationary power applications. In the policy overlay case for the Turbulent World scenario, the carbon constraint combines with growing public and private concerns about the security of energy facilities to stimulate demand for distributed generation (DG) and for combined heat and power (CHP) systems.

In the Technology Triumphs base case, new technologies already contribute to a slowing in the growth of carbon emissions. In the policy overlay case for Technology Triumphs,the carbon emissions limit forces faster reductions in oil demand, especially in the transportation sector, compared to the Technology Triumphs base case, resulting in accelerated market penetration by hybrid gasoline-electric and diesel-electric vehicles. Imposition of the carbon constraint in the policy overlay case expedites efforts to lower the barriers that typically hold back distributed generation, end-use efficiency improvements, and renewable energy technologies from large-scale commercialization in the United States.

In Awash in Oil and Gas, imposing carbon policies is more complex and more challenging. The base case scenario, built around cheap and abundant resources of oil and gas, includes little private investment in the technologies that improve end-use efficiency or reduce carbon emissions. Thus, meeting the carbon emissions target of the policy overlay introduces tremendous tension into this scenario. Major federal programs are needed to mandate carbon reductions and educate individual and industrial consumers about the climate consequences of their energy use. Yet cheap fuel encourages consumers to drive inefficient vehicles and stimulates air travel. Facing an exceedingly tight constraint on emissions and with little time to upgrade capital stock, public and private decision-makers move aggressively (but late in the scenario period) to develop carbon capture and geological sequestration technology so as to keep combustion-derived carbon dioxide out of the atmosphere.

Taken together, this scenario analysis revealed three important conclusions: 

(1) Climate change policy is needed to stem future emissions growth, regardless of which path the U.S. energy future ultimately takes. In the absence of policies designed to reduce U.S. carbon emissions, these emissions increase over the next three decades in all of the base case scenarios, even those with optimistic assumptions about the future cost and performance of energy technologies.

(2) Policy and investment decisions today, especially those that support key technologies, will have a significant impact on the difficulty of reducing energy-related carbon emissions tomorrow. Early and sustained investment, engineering success, and consumer acceptance of innovative low-carbon and efficiency-improving technologies make the task of reducing emissions easier, as do energy security policies that reduce oil import dependence. Low fossil fuel prices make the task harder by encouraging high-carbon and energy-inefficient investments. Other scenario conditions, such as external events, play a major role as well. 

3) A portfolio of policies combining technology performance targets, market incentives, and price-oriented measures can help the United States meet complementary energy security, climate protection, and economic objectives. Targeted policies can stimulate investment, accelerate the turnover of capital stock, and encourage emissions reductions. Emissions allowance trading, along with informational and other programs designed to address market imperfections, can lower the barriers to commercialization of efficiency-improving measures and new low-emissions technologies. However, policies designed to reduce carbon emissions can entail significant costs for the energy and energy-intensive sectors of the economy. Flexible program design, as well as successful development of major new technologies, can help to reduce these costs.

These principal conclusions are discussed below.

Absent a climate policy, U.S. carbon emissions will continue to increase

In the absence of a mandatory carbon cap, none of the base case scenarios examined in this study achieves a reduction in U.S. carbon dioxide emissions by 2035 relative to current levels. This is true even in the scenario with the most optimistic assumptions about the future cost and performance of energy technologies. Although the future is unlikely to unfold in precisely the manner described by any one of these scenarios, without climate policy U.S. carbon dioxide emissions in 2035 are unlikely to be less than the 1,800 to 2,400 million metric tons of carbon represented in the three base case scenarios. Thus, slowing the buildup of greenhouse gases in the atmosphere will require significant, systematic, and sustained policy intervention in the United States.

In the base case scenarios, while U.S. population grows steadily, GDP increases significantly and pushes the rate of growth in aggregate energy demand beyond the rate of improvement in energy efficiency.1 Total primary energy demand grows at an average annual rate that varies from 0.5 percent per year in the Turbulent World scenario to approximately 1.2 percent per year in Awash in Oil and Gas. These annual increases in primary energy use lead to energy consumption levels in 2035 ranging across the three base case scenarios from approximately 120 to 150 Quads (quadrillion British thermal units), up from 100 Quads in 2000.2 

During the same period, U.S. carbon emissions increase from approximately 1560 million metric tons of carbon (MMTC) emitted as carbon dioxide3 in the year 2000, reaching 1800 to 2360 MMTC in 2035. This is equivalent to an increase in annual CO2 emissions of 15 to 50 percent above the 2000 level, and largely parallels the increase in primary energy use. Despite declining carbon intensity of the U.S. economy at an average annual rate of 1.8 to 2.6 percent, carbon emissions rise in all base cases. In the three policy overlay cases, which include mandatory carbon constraints, the carbon intensity of the U.S. economy declines more rapidly than in the base case scenarios, at an average annual rate of 3.6 to 4.2 percent, and by 2035 annual CO2 emissions fall to almost 40 percent below the year 2000 level. 

Choices made today will determine the difficulty of reducing carbon emissions 

Many climate policy analyses create one base case and then overlay various policy options; this scenario planning exercise takes three different base cases and analyzes the effect of imposing the same policy overlay on each of them. Because the conditions of each base case scenario are different, achieving carbon reductions through the policy overlay is not equally difficult for all three scenarios. Aggregate costs to the economy of meeting the carbon emissions constraint differ by more than a factor of two among the scenarios; they are lowest in Technology Triumphs and highest in Awash in Oil and Gas.

The conditions of each scenario influence energy consumption and investment in that scenario, which in turn affect the level of carbon emissions. Each scenario illustrates a unique pattern of public policies, technological choices, and external events that affect prices, investment, consumption, and economic growth. Implementing climate policies modifies the energy mix, the pattern of technological development, and the composition and level of economic activity. For example, low oil and gas prices stimulate high levels of energy consumption and produce high levels of carbon emissions; low prices also discourage investment in energy efficiency-improving measures and carbon emissions-reducing technologies. Thus, the consumption and investment patterns in a scenario can lead to high carbon emissions and put the United States in a poor position to develop future technological solutions. Base case conditions that discourage energy consumption and favor investment in technological advances better position society to reduce carbon emissions.

More specifically, in Technology Triumphs, early and consistent investment in clean and energy-efficient technologies strengthens the economy and leaves the United States better positioned to reduce GHG emissions in the future. By contrast, in Awash in Oil and Gas much more aggressive and stringent policies are required to achieve the targets of the policy overlay because the economy starts from a high emissions trajectory. In addition, although the overall level of economic activity increases substantially in Awash in Oil and Gas, this scenario’s growing reliance on imported oil significantly increases the likelihood that events in politically unstable regions of the world could lead to spikes in oil prices or temporary disruptions of supply. 

A smart investment path today provides a greater capacity to respond to unexpected developments affecting future energy demand and supply. The scenario analysis identified several technologies as critical to the successful evolution of U.S. energy markets, enabling those markets to respond more effectively to uncertain future conditions.

The most important technologies include fuel cells, energy efficiency, CHP, renewable energy, DG, high-efficiency natural gas combined cycle power plants, hybrid electric vehicles, hydrogen production technologies, geological carbon sequestration, and integrated gasification combined cycle (IGCC) coal plants. Many of the electric power technologies are modular, allowing improved matching of supply and demand over relatively short time intervals. Modular technologies may improve the speed with which the energy sector can respond to changes, help to control risk, and maintain profitability in the U.S. energy sector.

Several technologies prove to be wise investments across the scenarios; others play key roles only under certain conditions. Natural gas consumption along with investment in energy efficiency measures, renewable energy technologies, and distributed generation increase in each scenario, both with and without climate policy. In all three policy overlay cases, hybrid-electric vehicles offer multiple benefits and emerge as a key near- or mid-term bridge to a hydrogen economy, and hydrogen makes an important contribution in the out-years. Hydrogen offers the possibility of numerous production pathways, using a variety of feedstocks. It is derived primarily from coal in Turbulent World, from natural gas inAwash in Oil and Gas, and from a variety of sources in Technology Triumphs. Distributed generation increases in each scenario, but to an extent and for reasons that vary by scenario. In the Turbulent World base case, investment in IGCC strengthens the role of coal in the U.S. energy sector. This early investment facilitates the commercialization of IGCC coupled with geological sequestration of CO2, which enables coal to maintain a major role in Turbulent World with Policy, even in a carbon-constrained future. Bio-fuels and nuclear power play modest roles across the scenarios, both with and without climate policy. 

A balanced portfolio of policies can help achieve multiple objectives

A balanced portfolio of market-oriented policies and performance standards—one that includes a carbon cap-and-trade program, incentives for technology development, strategies that remove barriers to new technologies, and efficiency standards—can help to achieve several objectives concurrently. These objectives include economic growth, energy security, and climate protection. These goals are often complementary: programs implemented for one of these reasons often contribute to the achievement of the other objectives as well. For example, in the Turbulent World base case, tough fuel economy standards designed to address energy security have the secondary effect of reducing GHG emissions. In Turbulent World with Policy, the carbon constraint incidentally but significantly reduces oil imports. 

Many key technologies achieve multiple objectives. For example, distributed generation has energy security, environmental, and economic benefits. In both the Turbulent Worldbase and policy cases, DG’s increased market penetration is driven, in part, by its ability to reduce security risks for energy facilities. Many analysts believe that the small, often modular facilities used to provide distributed generation are less likely to be targets for terrorists than would be, for example, large, centralized nuclear power complexes or liquefied natural gas facilities. In Technology Triumphs with and without climate policy, engineering advances, state policy leadership, and sustained interest among private investors converge, contributing to nationwide efforts aimed at breaking the barriers to commercialization for “disruptive” new energy technologies. In Awash in Oil and Gas, the drivers include electric grid congestion caused by rapid electricity demand growth as well as interest in power quality4 for specialized industrial applications and new consumer gadgets. In each of the policy overlay cases, relative to the respective base case, the efficiency benefits as well as the low-carbon characteristics of some DG and renewable energy technologies accelerate their penetration. Several of the most important energy efficiency and low-carbon technologies are cost-competitive today in specific applications. These include many energy efficiency measures in the buildings and transportation sectors, wind power plants, CHP, and combined-cycle turbines. Other important technologies are not yet cost-competitive in the U.S. energy market, including carbon capture and geological sequestration, photovoltaic power systems, and fuel cell vehicles. Full-scale commercialization of these critical technologies requires public policy to sustain investment in technology and market development.

Commercialization and market penetration of key technologies in the policy overlay cases are facilitated by various policies, strategies, and investments. Federal and state initiatives include renewable portfolio standards, fuel economy and air quality requirements, national electric grid interconnection standards, and aggressive R&D investment in hydrogen and fuel cell technologies. Private investment in emerging energy technologies also plays a critical role in all scenarios. This is especially true in the case of a major transition to use of hydrogen as a fuel, which requires sustained and coordinated investment in hydrogen production, transportation, and distribution infrastructure, as well as in fuel cell vehicles. Rapid commercialization of renewable and distributed electric generation also depends on new investment, but is greatly facilitated by removing institutional barriers to their use and by recognizing the full value contributed by these technologies to the operation of integrated electric grids. Because the time lag from technological breakthrough to commercialization is long, it is essential to initiate these investments early on and sustain them over time. 

The hypothetical policy overlay emphasizes “barrier busting” policies and programs to remove institutional obstacles and lower the barriers to commercialization of new technologies. For example, expenditures on informational and educational programs can increase awareness of emerging technological opportunities and increase the ability of U.S. society to respond to unexpected changes in energy markets. Institutional reforms, such as uniform electric grid interconnection standards, facilitate the market penetration of disruptive technologies such as distributed generation and building-integrated photovoltaic power systems. By putting investment in energy-efficiency measures and carbon emissions-reducing technologies on a more equal footing with conventional energy supply technologies, such programs and policies help to ensure fair competition and increase the likelihood that investment moves toward the technologies that have the best long-run return for U.S. society.

In sum, this scenario exercise suggests that in the absence of a mandatory climate policy, U.S. carbon emissions will continue to increase. Policy is needed to encourage investment in climate-friendly technologies and to pull these technologies into the marketplace. Policy and investment choices made today will determine the difficulty of reducing carbon emissions in the future. A smart investment path today provides a greater capacity to respond to surprises tomorrow. A portfolio of technology performance standards and market-oriented policies can stimulate investment, accelerate capital stock turnover, reduce carbon emissions, and enhance energy security across a wide range of possible energy futures.

Conclusions

This study presents a set of scenarios describing three divergent paths for the United States from 2000 through 2035. Many different patterns of energy supply and use could emerge in the future. The scenarios presented here reveal important conclusions about the role of technology in determining future U.S. energy supply, energy demand, and carbon emissions. These scenarios are not predictions; taken together however, they can be used to help identify key technologies, important energy policy decisions, and strategic investment choices that can increase the likelihood of achieving U.S. energy security, environmental protection, and economic development goals across a range of possible futures. Taking these lessons into account can help decision-makers plan for the future, despite uncertainty about how the future will unfold.

This exercise takes three different base case scenarios and analyzes the implications of imposing the same portfolio of policies on each of them. This approach allows conclusions to be drawn about the relative difficulty of implementing a carbon-constraint policy under quite different conditions. External events and other driving forces vary widely among the scenarios, as do policy and investment decisions and the consequent paths of technology development. Some conditions, such as low fossil fuel prices, increase the difficulty of implementing a carbon constraint. In contrast, actions such as early and sustained investment in emerging energy technologies facilitate both domestic economic development and carbon emissions reductions. Taken together, the three policy overlay cases show that a portfolio of market-oriented policies and standards can lead to substantial reductions in U.S. CO2 emissions by 2035, without major negative impacts on the overall level of U.S. economic activity. However, implementation of such policies could have significant costs for the energy and energy-intensive sectors of the economy.

Without a mandatory carbon constraint, the absolute level of emissions rises in each base case scenario, despite the fact that the carbon intensity of the economy declines considerably. In the Pew Center scenarios without a carbon emissions policy, CO2 emissions in 2035 range from 1800 to 2400 MMTC, an increase of 15 to 50 percent over the U.S. year 2000 level. This result points to the need to develop climate change policy in order to stem these increases.

The scenario analysis identified several technologies as critical to the U.S. energy future in a carbon-constrained world. These technologies are beneficial across scenarios, though the relative importance of a particular technology may vary among the scenarios. Most of these technologies would have a place even in a world without a carbon constraint, as they assist the United States in achieving its policy objectives—including environmental and energy security goals—while growing the economy.

Natural gas is one of the most important contributors to the decline of the carbon intensity of the energy sector in both the base and policy overlay cases. The market for natural gas expands in all scenarios, with and without the policy overlays. Substituting natural gas for coal results in approximately half the carbon emissions per unit of energy supplied. Increased use of natural gas also has energy security benefits for the United States.

Energy efficiency improvements also play a key role in reducing carbon emissions. In response to the carbon constraint, the fuel economy of cars and light trucks dramatically improves in the policy cases, significantly reducing oil imports. In each of the scenarios, combined heat and power technology improves the efficiency of electric generation. When the carbon policy overlay is imposed, performance standards for electrical devices and for gas- and oil-fired equipment lead to improved energy efficiency in the residential, commercial, and industrial sectors.

Renewable energy and distributed generation technologies contribute to the reduction of carbon emissions in each of the scenarios and their policy overlay cases. While both renewable energy technologies and DG grow in the base case scenarios, they experience more substantial increases following the implementation of the policy overlay, which aids their commercialization by promoting investment and by breaking barriers to entry in U.S. energy markets.

Nuclear power plays a significant role in each of the scenarios and their associated policy cases. Nuclear power production remains close to the year 2000 level in each scenario, with and without the policy overlays. In the absence of nuclear power, carbon emissions would be significantly higher in 2035.

Geological sequestration emerges as a key technology in the policy overlay cases, allowing continued reliance on fossil fuels even in the face of a carbon constraint. Sequestration is particularly important in Turbulent World with Policy, a scenario in which hydrogen is produced primarily from coal. Geological sequestration allows hydrogen to be produced from fossil fuels without releasing carbon emissions, facilitating the transition to a hydrogen economy.

Hybrid-electric vehicles play an important role in the transportation sector for all cases, except the Awash in Oil base case, and act as a bridge technology for fuel cells in mobile applications. Toward the end of the scenario period, hydrogen and fuel cells become significant in Technology Triumphs with Policy and Turbulent World with Policy. As improvements in energy efficiency slow, the technology for hydrogen and fuel cells matures in these scenarios, accounting for an increasing share of economy-wide carbon reductions.

Many of these critical technologies, however, are not commercially viable in 2003. Public and private investment in these emerging energy technologies plays a key role in their successful commercialization in the Pew Center scenarios. Public policies at the state and federal level are necessary to lower barriers to commercialization of these technologies and to stimulate sustained investment during the course of these scenarios. Included among the policies that promote commercialization of these technologies are a carbon emissions allowance cap-and-trade program for some sectors and a set of equipment-efficiency credit trading programs, as well as renewable portfolio standards, fuel economy and air quality requirements, and electric power grid interconnection standards.

One key insight that emerged is that policy is necessary to address climate change. A second is that there are technologies—with supporting policies and investments—that could address climate change, accelerate capital stock turnover, and enhance the nation's energy security, no matter which direction the future takes. Finally, the scenarios indicate that energy policy and investment decisions made today affect the difficulty of implementing a climate policy tomorrow. If U.S. decision-makers can implement the necessary policies and encourage appropriate investments during the next thirty years, the United States could be better positioned to achieve its complementary economic, energy security, and environmental goals.

About the Authors

Author Bios

Peter Schwartz, Global Business Network

Peter Schwartz is cofounder and chairman of Global Business Network, a Monitor Group company. He is an internationally renowned futurist and business strategist. A specialist in scenario planning, Mr. Schwartz works with corporations and institutions to create alternative perspectives of the future and develop robust strategies for a changing and uncertain world. His current research and scenario work encompasses energy resources and the environment, technology, financial services, telecommunications, media and entertainment, aerospace, national security, and the Asia-Pacific region. Mr. Schwartz is also a venture partner of Alta Partners, a partner of The Monitor Group, and serves on the advisory boards of numerous organizations and companies ranging from The Highlands Group to the University of Southern California’s Institute for Creative Technologies.

From 1982 to 1986, Mr. Schwartz headed scenario planning for the Royal Dutch/Shell Group of Companies in London. His team conducted comprehensive analyses of the global business and political environment and worked with senior management to create successful strategies. Prior to joining Royal Dutch/Shell, Mr. Schwartz directed the Strategic Environment Center at SRI International. The Center researched the business milieu, lifestyles, and consumer values, and conducted scenario planning for corporate and government clients.

Mr. Schwartz is the author/co-author of several works including Inevitable Surprises, The Art of the Long View, The Long Boom, When Good Companies Do Bad Things, and China’s Futures. He publishes and lectures widely and served as a script consultant on the films "Minority Report," "Deep Impact," "Sneakers," and "War Games." Mr. Schwartz holds a B.S. in Aeronautical Engineering and Astronautics from Rensselaer Polytechnic Institute.

 

Irving M. Mintzer, Global Business Network

Dr. Irving M. Mintzer is a member of Global Business Network, Executive Editor of Global Change Magazine, and a Senior Associate of the Pacific Institute for Studies in Development, Environment and Security. Since 1983, Dr. Mintzer has been an active participant in the international debate on national energy strategies and on policy options to reduce the risks of rapid climate change. During the last decade, he has testified on energy policy and climate issues before the U.S. Congress, the British Parliament, the German Bundestag, the Italian Parliament, and the European Parliament. He has been a Senior Special Fellow with the United Nations Institute for Training and Research (Geneva, Switzerland) and a visiting scientist with the Swedish Academy of Sciences, the Soviet Academy of Sciences, and the Hungarian Academy of Sciences. In 1995-96, he was a lead author of Working Group 3 (Economics and Policy Responses) of the Intergovernmental Panel on Climate Change (IPCC) and was co-author of the IPCC Synthesis Panel Report. From 1997 to 2000, Dr. Mintzer taught courses on multilateral negotiations at the Johns Hopkins School of Advanced International Studies in Washington, DC.

Dr. Mintzer is the author of numerous articles in scientific journals and other periodicals. He is co-editor with J.A. Leonard of Confronting Climate Change: Risks, Implications, and Responses and Negotiating Climate Change: The Inside Story of the Rio Convention. Dr. Mintzer holds a Ph.D. in Energy and Resources and a Masters in Business Administration from the University of California, Berkeley.

J. Amber Leonard, Global Business Network

J. Amber Leonard works with Global Business Network and is Senior Associate at the Pacific Institute for Studies in Development, Environment, and Security. She is the Managing Editor of Global Change Magazine and is the Pacific Institute’s Project Director for the New Initiative for a North-South Dialogue on Climate Change, organizing an ongoing series of regional meetings in developing and industrialized countries.

Ms. Leonard has participated in the international negotiations on climate change since 1992. In addition, she has been invited to participate as an expert on climate change at meetings in Bonn, Germany; Rio de Janeiro and Sao Paulo, Brazil; Beijing, China; Dakar, Senegal; and Abidjan, Ivory Coast, among others. Ms. Leonard has also co-convened a series of roundtables for U.S. business leaders focused on the Clean Development Mechanism and the climate negotiations. Prior to joining Global Business Network, Ms. Leonard was a senior editor and project director for the Stockholm Environment Institute (Stockholm, Sweden). She is co-editor with Dr. Irving Mintzer of two books on climate change, Confronting Climate Change: Risks, Implications and Responses and Negotiating Climate Change: The Inside Story of the Rio Convention. Ms. Leonard holds a Masters Degree in Business Administration with a concentration in International Business from Cal State University, San Francisco, and a B.A. from the University of California, Berkeley

 

Irving Mintzer
J. Amber Leonard
Peter Schwartz
0

Designing a Climate-Friendly Energy Policy: Options for the Near Term

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Designing a Climate-Friendly Energy Policy: Options for the Near Term

Prepared for the Pew Center on Global Climate Change
July 2002

By:
Douglas W. Smith, Robert R. Nordhaus, Thomas C. Roberts, Shelley Fidler
Janet Anderson, Kyle Danish, Richard
Agnew, of Van Ness Feldman, P.C.

Marc Chupkam The Brattle Group

Press Release

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Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

Energy use and climate change are inextricably linked. In the current national energy policy debate, choices made today will directly impact U.S. greenhouse gas (GHG) emissions far into the future. In addition, near-term energy policy decisions will affect the costs of implementing any future climate policy. Decision- makers face the challenge of crafting policies that allow the United States to meet its energy needs while acting responsibly to reduce GHG emissions. This report contributes to the debate by examining a number of "climate-friendly" energy policy options for the near term-that is, policies that would advance U.S. energy policy goals during the next few decades while at the same time contributing to efforts to curb global warming.

For this most recent report in the Pew Center's policy series, a diverse team of authors from Van Ness Feldman, P.C. and The Brattle Group has identified key elements of a climate-friendly energy policy. The authors describe important U.S. energy policy objectives, including: (1) a secure, plentiful, and diverse primary energy supply, (2) a robust, reliable infrastructure for energy conversion and delivery, (3) affordable and stable energy prices, and (4) environmentally sustainable energy production and use.

Often, these objectives are thought of as competing goals - that energy policy and security issues are in conflict with environmental objectives and vice versa. In reality, our authors find a substantial convergence between the goals of energy policy and climate policy, and that many feasible and beneficial policies from supply and security perspectives can also reduce future U.S. GHG emissions. Some key elements of a climate-friendly energy policy identified here include: increasing natural gas production and expanding natural gas transportation infrastructure; developing and deploying renewable energy technologies and efficient electricity production technologies; enhancing efficiency of automobiles and light trucks, industry, and buildings; and research and development on non-fossil fuels and carbon sequestration.

The authors caution, however, that a climate-friendly energy policy is not a substitute for climate policy. More significant GHG emissions reductions would be necessary in order to address climate change than can be justified solely on the basis of traditional energy policy objectives. The policy options outlined in this report represent sensible and important first steps in the United States' efforts to reduce GHG emissions.

In other reports and workshops, the Pew Center is evaluating options to produce more dramatic changes to the U.S. energy system, which could eventually lead us to an economy based on energy sources other than the carbon-based fossil fuels that are the primary contributors to global warming. Indeed, in the long run, we can only curb climate change by weaning ourselves of our reliance on fossil fuels.

The Pew Center and the authors wish to thank Ralph Cavanagh, David Greene, Tom Runge, Thomas Casten, and Ev Ehrlich for their comments on previous drafts of this report.

Executive Summary

Energy policy and climate policy are closely linked because the majority of U.S. greenhouse gas (GHG) emissions are in the form of carbon dioxide (CO2) emissions resulting from the combustion of fossil fuels. Energy policies can reduce CO2 emissions by, for example, increasing energy efficiency, reducing reliance on fossil fuels, and shifting from high-carbon to lower-carbon fuels. Conversely, energy policies that miss opportunities to make such changes will leave unchecked the trend of increasing CO2 emissions. Consequently, energy policy decisions made today can help reduce GHG emissions in the near term and can significantly affect how costly it would be to implement any future climate policy.

The federal government is in the throes of one of its periodic comprehensive reviews of U.S. energy policy. It is likely that significant federal energy policy questions will be addressed in the near term, before the development of any climate change regulatory program. Yet, there is also the distinct possibility that the United States will eventually adopt a mandatory GHG reduction program. This report considers energy policies that can be adopted in the context of the energy policy debate, short of adopting a GHG program now, to best position the nation to reduce GHG emissions and to implement future climate change policies. These are the options that make up a "climate-friendly energy policy."

In reviewing policy options, we have identified four key objectives that drive energy policy:

(1) Secure, plentiful and diverse primary energy supply,

(2) Robust, reliable infrastructure for energy conversion and delivery,

(3) Affordable and stable energy prices, and

(4) Environmentally sustainable energy production and use.

In developing a template for a climate-friendly energy policy, we have limited ourselves to a review of energy policy options, i.e., policies that serve one or more of these objectives. We have not considered climate policies that lack a direct energy policy nexus. We have also limited ourselves to relatively near-term energy policy initiatives, i.e., initiatives that could begin to produce energy policy benefits over the next decade or two.

Climate-friendly energy policies fall into one of three general categories-policies that:

(1) Reduce GHG emissions now,

(2) Promote technology advancement or infrastructure development that will reduce the costs of achieving GHG emissions reductions in the future, and

(3) Minimize the amount of new capital investment in assets that would be substantially devalued (or "stranded") if a GHG program were implemented.

Using these guidelines, the following are highlighted as key elements of a climate-friendly energy policy:

Fossil Fuels
Increased natural gas production and expanded natural gas transportation infrastructure will lower the price and increase the availability of natural gas and, in turn, support the continued use of gas in lieu of coal in new power plants.

Electricity
Deployment of efficient electricity production technologies, including combined heat and power, fuel cells, and highly efficient power plant technologies, can significantly increase the amount of useful energy gleaned from fuels, and thus reduce both energy costs and GHG emissions.

Maintaining a role for nuclear and hydroelectric power can enhance diversity of energy supply. It also will reduce growth in fossil fuel consumption for electricity generation and may reduce energy prices.

Deployment of renewable energy technologies can help diversify the nation's energy portfolio. These technologies are environmentally beneficial-most produce little or no GHG emissions.

Building and Industrial Efficiency
Enhancing end-use efficiency in buildings and industry can reduce overall consumer costs in many cases, can reduce the need for new electric power plants, and can reduce GHG emissions related to energy use.

Transportation
Enhancing efficiency of automobiles and light trucks reduces oil consumption, and thereby mitigates reliance on oil imports and reduces GHG emissions.

Research and Development
Research and development on efficient technologies in all sectors can provide options to reduce future energy costs to consumers and future energy consumption, with corresponding GHG benefits.

Research and development on non-fossil fuels and carbon sequestration can provide future alternatives to reliance on oil and could enable continued use of coal consistent with a GHG emissions limitation.

In many areas, there is a substantial convergence between energy policy objectives and climate policy objectives. In particular, climate-friendly energy policies aim to: (1) increase the efficiency of energy use; (2) increase the use of renewable (including biofuels) and other non-emitting technologies; (3) promote the use of natural gas instead of coal or oil; and (4) encourage research and development on new energy technology.

This set of climate-friendly energy policies advances energy policy objectives. Taken together, these measures would build on the policies implemented to date to: enhance energy security by reducing growth in demand for oil, increase the diversity of the country's energy mix, strengthen the energy delivery infrastructure, and contribute to improvements in air quality without significantly increasing consumer energy costs. In addition to the policies listed above, there are other energy policy options that have no significant climate change impacts but may address central energy policy concerns and, thus, should be considered for inclusion in any comprehensive energy policy. These could include policies to increase domestic production of oil, to expand electricity transmission infrastructure, and to promote competitive electricity markets.

The set of climate-friendly energy policies discussed in this report advances climate objectives, but it does not constitute a fully elaborated climate policy. It does not produce the magnitude of reductions needed, for instance, to meet the non-binding goal set forth for the United States in the 1992 Rio Framework Convention on Climate Change, i.e., to return U.S. GHG emissions to 1990 levels. Based on the U.S. Department of Energy's analysis1 of a similar set of policy elements, it appears that this package could significantly slow the projected growth of GHG emissions, but is not sufficient to reduce energy-related GHG emissions from current levels, much less return them to 1990 levels. Moreover, trying to achieve climate goals indirectly through energy policy tools will necessarily be more expensive than achieving the same climate goals through an effectively designed, market-based GHG regulatory program covering all sectors of the economy. Instead, this is a collection of near-term energy policies that stand on their own as energy policies and would help better position the U.S. economy for possible future GHG emissions limitations.

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