Transcript Document

The Economics of Climate Change Policy
Prepared for:
CEO Climate Change Task Force Meeting
American Public Power Association
Washington, D.C.
December 3, 2007
By: Dr. Margo Thorning, Ph.D.
Senior Vice President and
Chief Economist
American Council for Capital Formation
Washington, D.C.
www.accf.org
Tel: 202-293-5811
[email protected]
Trends in Global Energy Use and Carbon Emissions:
2007-2030
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 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.
Million Metric Tons CO2 Equivalent
Greenhouse Gas Emissions: Under EIA Baseline Forecast
and S. 2191 Targets
(Million Metric Tons CO2 Equivalent)
8000
7000
Covered GHG Emissions
6000
Gap in 2030:
4,311 MMtCO2e
5000
4000
3000
2000
S. 2191 Emissions Target
2012
1000
0
1990
2000
2010
2020
2030
2040
2050
Million Metric Tons CO2 Equivalent per Person
Per Capita Greenhouse Gas Emissions: Under EIA Baseline
Forecast and S. 2191 Targets
(Metric Tons CO2 Equivalent per Person)
25
Baseline Forecast
Historical Data
20
Gap = 33%
15
10
S.2191
5
0
1990
2000
2012
2020
2030
U.S. Per Capita Emissions: Effort Required
to Meet Lieberman / Warner Targets
Historical and Baseline Emission
Year
1990
2000
2012
2020
2030
S. 2191 Targets
S. 2191 Required Per Cap
Emissions Population Per Cap GHG %
Emissions Change Targets GHG Emissions
(MMTCO2E) (Millions)
19.3
249
4,810
19.2
-0.8% 5414
19.2
282
5,414
16.5
-0.6% 5,200
19.1
314
5,995
13.2
3.2% 4,432
19.7
336
6,614
9.5
8.7% 3,472
21.4
364
7,783
%
Change
-13.8%
-20.2%
-27.6%
Economic Impacts of Lieberman/Warner Bill (S. 2191)
on the U.S. Economy
(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:
Gap Between Projections* and Kyoto Targets in 2010
-15% -10%
-5%
0%
5%
10%
15%
20%
EU-15
UK
Sweden
Germany
France
Belgium
Netherlands
Ireland
Greece
Denmark
Portugal
Finland
Italy
Spain
Austria
Luxembourg
Target
* Projections assume existing measures already in place.
Source: European Environmental Agency, November 2007.
25%
30%
35%
40%
45%
Greenhouse Gas Emissions Associated with Existing and
New Investment in 2001
(Million tons of Carbon per $Billion of GDP)
Million tons of Carbon per $Billion of GDP
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
China
India
U.S.
Installed Base
New Investment
Japan
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)
23.1%
Mexico
29.5%
United States
31.2%
Brazil
China
39.8%
45.0%
Indonesia
Japan
49.7%
Taiwan
49.7%
Rep of Korea
57.7%
Canada
63.1%
Germany
63.1%
90.0%
Malaysia
India
0.0%
100.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
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.
Practical Strategies for Reducing
Global Greenhouse Gas Growth
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