the economics of climate change policy prepared for: ceo climate change task force meeting american...
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U.S. Economic and Energy Trends U.S. Economic and Energy Trends Producing a dollar of Gross Domestic Product requires 33¢ of energy use GHG emissions fell by 1.5% in 2006 and energy intensity declined by 4.2% Population will rise by 22% over the next 25 years Substantial increases in investment will be needed to meet rising demand: electricity alone will require $412 billion over next 25 years Proposals to reduce GHGs will impact U.S. economic growth and employment.TRANSCRIPT
The Economics of Climate Change PolicyThe Economics of Climate Change Policy
Prepared for:CEO Climate Change Task Force Meeting
American Public Power AssociationWashington, D.C.December 3, 2007
By: Dr. Margo Thorning, Ph.D. By: Dr. Margo Thorning, Ph.D. Senior Vice President andSenior Vice President and
Chief EconomistChief EconomistAmerican Council for Capital FormationAmerican Council for Capital Formation
Washington, D.C. www.accf.orgTel: 202-293-5811 [email protected]
Trends in Global Energy Use and Carbon Emissions: Trends in Global Energy Use and Carbon Emissions: 2007-20302007-2030
Primary energy demand projected to increase by 1.8 % annually.
Fossil fuels projected to be dominant energy source
Renewable energy share projected to increase from 7% to 8% percent
Carbon emissions projected to increase by 1.8% annually
Developing countries account for over three quarters of the CO2 increase
China’s CO2 emissions exceeded the U.S. in 2006
U.S. Economic and Energy TrendsU.S. Economic and Energy Trends
Producing a dollar of Gross Domestic Product requires 33¢ of energy use
GHG emissions fell by 1.5% in 2006 and energy intensity declined by 4.2%
Population will rise by 22% over the next 25 years
Substantial increases in investment will be needed to meet rising demand: electricity alone will require $412 billion over next 25 years
Proposals to reduce GHGs will impact U.S. economic growth and employment.
Greenhouse Gas Emissions: Under EIA Baseline Forecast Greenhouse Gas Emissions: Under EIA Baseline Forecast and S. 2191 Targets and S. 2191 Targets
(Million Metric Tons CO2 Equivalent)(Million Metric Tons CO2 Equivalent)
0
1000
2000
3000
4000
5000
6000
7000
8000
1990 2000 2010 2020 2030 2040 2050
Million Metric
Ton
s CO2 Eq
uiva
lent
Covered GHG Emissions
S. 2191 Emissions Target2012
Gap in 2030:4,311 MMtCO2e
Per Capita Greenhouse Gas Emissions: Under EIA Baseline Per Capita Greenhouse Gas Emissions: Under EIA Baseline Forecast and S. 2191 Targets Forecast and S. 2191 Targets
(Metric Tons CO2 Equivalent per Person)(Metric Tons CO2 Equivalent per Person)
0
5
10
15
20
25
1990 2000 2012 2020 2030
Mill
ion
Met
ric T
ons
CO
2 Equ
ival
ent p
er P
erso
n
Baseline Forecast
S.2191
Historical Data
Gap = 33%
U.S. Per Capita Emissions: Effort Required U.S. Per Capita Emissions: Effort Required to Meet Lieberman / Warner Targetsto Meet Lieberman / Warner Targets
Emissions Population Per Cap GHG % S. 2191 Required Per Cap %Year (MMTCO2E) (Millions) Emissions Change Targets GHG Emissions Change1990 4,810 249 19.32000 5,414 282 19.2 -0.8% 5414 19.22012 5,995 314 19.1 -0.6% 5,200 16.5 -13.8%2020 6,614 336 19.7 3.2% 4,432 13.2 -20.2%2030 7,783 364 21.4 8.7% 3,472 9.5 -27.6%
Historical and Baseline Emission S. 2191 Targets
Economic Impacts of Lieberman/Warner Bill (S. 2191) Economic Impacts of Lieberman/Warner Bill (S. 2191) on the U.S. Economy on the U.S. Economy
(compared to the baseline forecast with no mandatory carbon caps)(compared to the baseline forecast with no mandatory carbon caps)
Price of Permit to Emit Carbon: $35 to $55 per ton of CO2 in 2015, rising to $60 to $120 by 2030
Gross Domestic Product decreases by: 1.0% to 1.6% by 2015 2.0% to 2.5% by 2050
U.S. Employment falls: 1.2 to 2.3 million net job loss by 2015 1.5 to 3.4 million net job loss by 2020
Natural Gas Prices Rise by 15% to 20% through 2030
Electricity Prices Rise by: 36% to 65% by 2015 80% to 125% by 2050
Source: Anne E. Smith, CRAI, testimony before U.S. Senate Committee on Environment and Public Works, Nov. 8, 2007.
Greenhouse Gas Emissions in the European Union: Greenhouse Gas Emissions in the European Union: Gap Between Projections* and Kyoto Targets in 2010Gap Between Projections* and Kyoto Targets in 2010
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
EU-15UK
SwedenGermany
FranceBelgium
NetherlandsIrelandGreece
DenmarkPortugalFinland
ItalySpain
AustriaLuxembourg
* Projections assume existing measures already in place.Source: European Environmental Agency, November 2007.
Target
Greenhouse Gas Emissions Associated with Existing and Greenhouse Gas Emissions Associated with Existing and New Investment in 2001New Investment in 2001
(Million tons of Carbon per $Billion of GDP)(Million tons of Carbon per $Billion of GDP)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
China India U.S. Japan
Mill
ion
tons
of C
arbo
n pe
r $B
illio
n of
GD
P
Installed Base New Investment
Source: Promoting a Positive Climate for Investment, Economic Growth and Greenhouse Gas Reductions, W. David Montgomery and Sugandha Tuladhar (see www.iccfglobal.org)
U.S. Capital Cost Recovery for Smart Meters Compares Poorly with Our Trading Partners
(Percent of Nominal Capital Cost Recovered After 5 Years)
Source: “International Comparison of Depreciation Rules and Tax Rates for Selected Energy Investments,” prepared for the American Council for Capital Formation by Ernst & Young LLP, May 2007. For full report, please see www.accf.org.
100.0%
90.0%
63.1%
63.1%
57.7%
49.7%
49.7%
45.0%
39.8%
31.2%
29.5%
23.1%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%
India
Malaysia
Germany
Canada
Rep of Korea
Taiwan
Japan
Indonesia
China
Brazil
United States
Mexico
Capital Cost Recovered After 5 Years
Use cost / benefit analysis before adopting policies
Reduce cost of U.S. energy investment through tax code improvement and incentives for non profits
Remove barriers to developing world’s access to more energy and cleaner technology by promoting economic freedom and market reforms
Increase R&D for new technologies to reduce energy intensity, capture and store carbon, and develop new energy sources
Promote nuclear power for electricity
Promote truly global solutions and consider expanding the Asia Pacific Partnership on Development with its focus on economic growth and technology transfer to other major emitters
Practical Strategies for Reducing Practical Strategies for Reducing Global Greenhouse Gas GrowthGlobal Greenhouse Gas Growth