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Technology And Greenhouse Gas Emissions: An Integrated Scenario Analysis Using The LBNL-NEMS Model

Jonathan G. Koomey, R. Cooper Richey, Skip Laitner,
Robert J. Markel, and Chris Marnay

Lawrence Berkeley Laboratory,
Berkeley, CA 94720
and
United States Environmental Protection Agency
Office of Atmospheric Programs
Washington, DC 20401

September 1997

Abstract

The common perception among many policy makers and industry leaders is that the twin objectives of reducing greenhouse gas emissions and promoting a more competitive economy are inherently contradictory. Many believe that anything done to lower such emissions will necessarily restrict economic activity. Others argue that if the economy moves forward at current levels of efficiency, growth in greenhouse gas emissions will be inevitable and the global climate will be seriously damaged. Because of the "unavoidable tradeoff" between these two objectives, the various industry, government and environmental groups wage a constant policy battle over which objective merits the greater support. From a perspective of cost-effective investments in technology, however, it becomes increasingly clear that these two goals are not at all contradictory. The reason is that the U.S. economy falls short of an optimal level of overall carbon efficiency.

Figure ES-1 illustrates the different points of view in a schematic way. The curves on this graph represent different "Production Possibility Frontiers" that characterize the relationship between carbon emissions mitigation and economic activity. The frontier defines the outer boundary of what is feasible given a set of technologies and economic activity levels.

Most modeling of the costs of reducing carbon emissions assumes that the reference case carbon intensity is on the frontier, and that any increase in carbon mitigation must also result in a decrease in Gross Domestic Product (this point of view corresponds to the curve labeled "Assumed Year 2010 Business-As-Usual Case Frontier"). Our analysis demonstrates that the "Actual Year 2010 Business-As-Usual Case Frontier" is further out than the assumed frontier, which means that both carbon mitigation and GDP can be increased at the same time, given the right set of policies and programs. In addition, since the frontier is a function of technology, and the cost of that technology is a function of policy choices made between now and 2010, taking aggressive actions now to reduce carbon emissions can actually move the frontier further out than it would be given the technologies that exist in the reference case. This possibility is represented by the curve labeled "Year 2010 Aggressive Implementation Case Frontier".

This report describes an analysis of possible technology-based scenarios for the U.S. energy system that would result in both carbon savings and net economic benefits. We use a modified version of the Energy Information Administration's National Energy Modeling System (LBNL-NEMS) to assess the potential energy, carbon, and bill savings from a portfolio of carbon saving options. This analysis is based on technology resource potentials estimated in previous bottom-up studies, but it uses the integrated LBNL-NEMS framework to assess interactions and synergies among these options.

The U.S. economy now emits 192 grams of carbon for each dollar of value-added (measured as GDP in constant 1996 dollars) that it produces. With a "normal" rate of improvement in the Business-As-Usual case, it appears that by the year 2010, the nation would reduce this emissions rate to about 170 grams per dollar. Despite this improvement in the emissions rate, however, the anticipated growth in the economy will increase total carbon emissions to 1803 MtC in 2010, or to about 23 percent above 1996 levels.

The LBNL-NEMS analysis conducted in this study suggests that implementing a set of policies to encourage the development and deployment of energy-efficient and low-carbon technologies can close this gap — to the benefit of both the climate and the economy. In this study, we find a cost-effective path that can reduce the rate of carbon emissions to 147 grams per dollar of GDP. This will reduce carbon emissions to about 1530 MtC by 2010.

Other studies suggest that with the right mix of policies and technologies, the frontier might actually extend well beyond that described in this report (ASE et al. 1997, Brown et al. 1998, Interlaboratory Working Group 1997, Krause 1996, Laitner et al. 1998).

The High-Efficiency Low Carbon scenario analyzed in this study would result in significant annual net savings to the U.S. economy, even after accounting for all relevant investment costs and program implementation costs. This strategy would result in roughly half of the carbon reductions needed to meet the Kyoto target being achieved from domestic U.S. investments. Not pursuing this technology-led investment strategy would have an opportunity cost of more than $50B per year for the U.S. in 2010 and more than $100B per year by 2020.

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