Cost-Effective Carbon Dioxide Reduction Initiatives

Howard Geller, John DeCicco and Steven Nadel

1993

Executive Summary

President Clinton has committed the United States to at least stabilizing its emissions of greenhouse gases at 1990 levels by 2000. In order achieve this target and realize further reductions in U.S. greenhouse gas emissions beyond 2000, in keeping with the goals of the global warming treaty, new initiatives will need to be taken to reduce fossil fuel consumption and resulting carbon dioxide (CO2) emissions. The United States will be developing and analyzing various options this summer as it revises its climate action plan. Policies and programs to increase the efficiency of energy supply and use are likely to top the list of new initiatives because of their availability, cost effectiveness, and ability to significantly reduce CO2 emissions.

This paper proposes and analyzes ten national energy efficiency initiatives. Each initiative would be led by the Federal government, but would leverage significant amounts of private investment in energy efficiency measures. The improvements in energy efficiency that would result from these initiatives are cost effective for society, i.e., the resulting energy savings more than pay for the initial investments. In this manner, energy efficiency improvements are able to cut CO2 at a net negative cost (i.e., with economic benefits for the nation).

A number of the proposed energy efficiency initiatives expand upon current programs; others are entirely new initiatives (see Table S-1). Overall, we propose that the Federal government increase its funding of energy efficiency programs by about $3.6 to 4.3 billion per year during 1995-2010. This in turn would leverage about five times as much private investment in energy efficiency measures throughout the economy. The new or expanded Federal energy efficiency programs could be funded by shifting funding priorities within the current energy budget and by adopting new revenue-neutral fee and incentive programs.

By undertaking these ten energy efficiency initiatives, we project that national CO2 emissions would be reduced by nearly 9% in 2000 (see Table S-2). In addition, national energy use in 2000 would fall by 7% and consumers' energy bills would be reduced by over $50 billion that year. By 2010, CO2 emissions would fall by 20%, national energy use would fall by nearly 17% and consumers' energy bills would be slashed by over $160 billion per year. These reductions in CO2 emissions, energy consumption, and energy bills are relative to projected levels based on the Reference Case in DOE's Annual Energy Outlook 1993.

The ten energy efficiency initiatives would eliminate about 81% of the projected growth in national CO2 emissions between 1990 and 2000. The initiatives will fully offset the projected growth in CO2 emissions by 2003, and would reduce CO2 emissions to about 2% below their 1990 level by 2010. Further reductions in CO2 emissions would result from pursuit of other energy efficiency adoptions, adopting a gasoline or broader energy tax, efforts to shift to less carbon-intensive fuels, moving towards a more efficient intermodal transportation system, and accelerated adoption of renewable energy technologies.

We estimate that the ten energy efficiency initiatives would cut energy bills paid by households and businesses by over $1.3 trillion during 1994-2010, in return for an overall investment (public and private) of $360 billion. Besides cutting CO2 emissions and saving consumers and businesses money, the targeted energy efficiency programs could result in a net increase of over 550,000 jobs in the U.S. economy within ten years. The energy efficiency initiatives also would reduce our trade deficit, enhance energy security, and cut emissions and other pollutants associated with energy use.

Limiting CO2 emissions in 2000 to their level in 1990, with significant reductions thereafter, thus requires prompt and aggressive action. Energy use and CO2 emissions increased in the United States over the past five years in spite of weak economic growth. Much will need to be done to get the United States "back on the energy efficiency track." Taking quick and strong action on energy efficiency should be embraced rather than resisted, as it offers a win-win strategy for the domestic economy and the global environment.

Click to order hard copy.

29 pp., 1993, $10.00, E934