EIA Reports

U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
December 9, 1998

Electricity Prices and Carbon Emissions Affected by Proposed Policy Changes

The proposed Comprehensive Electricity Competition Act's requirement that 5.5 percent of electricity be generated from renewable sources other than hydroelectricity by 2010 could account for a reduction in carbon emissions of 20 million metric tons in 2010 and 25 million metric tons in 2020. Electricity prices would be almost 2 percent higher in 2010 than they otherwise would be, an increase of about $1 a month (in constant 1997 dollars) on the average residential electricity bill. After 2010, the price impact is less because the technologies become more economical as they penetrate the market, according to an analysis included in Annual Energy Outlook 1999, released today by the Energy Information Administration (EIA).

The Outlook expands on the reference case projections released last month and analyzes the energy-related impacts of different scenarios of economic growth, technology penetration, and certain policy initiatives.

If competitive, or marginal cost, retail electricity pricing is assumed for the entire country, the national average price of electricity would be about 5 percent lower in 2005 than in the reference case, but 4 percent higher in 2020 as rising natural gas demand and prices affect marginal cost electricity prices. The reference case projections assume competitive retail pricing in the five regions of the country, out of 13, in which the majority of the States have already enacted legislation on competitive retail electricity pricing. The reference case also assumes competition in wholesale electricity markets for the entire country. Through 2020, carbon emissions differ by less than one percent between the competitive pricing case and the reference case.

Other highlights from Annual Energy Outlook 1999 include:

• If the economy grows more rapidly than in the reference case, at an average annual rate of 2.6 percent rather than 2.1 percent, both energy demand and carbon emissions would be 4 percent higher than the baseline projection in 2010 and 8 percent higher in 2020. In this case, carbon emissions would reach 1,858 million metric tons in 2010 and 2,124 million metric tons in 2020, 38 and 58 percent higher, respectively, than in 1990. (Figure 1).

• If the economy grows at a slower rate of 1.5 percent a year, energy demand and carbon emissions would be 4 percent lower than in the reference case in 2010 and 8 percent lower in 2020, with emissions rising to 1,718 million metric tons in 2010 and 1,826 million metric tons in 2020, 28 and 36 percent higher, respectively, than 1990 levels.

• More rapid development and adoption of energy-efficient technologies than that assumed in the reference case would lower energy demand in 2010 by 3 percent below the reference case and lower carbon emissions by 4 percent, or 69 million metric tons. In 2020, energy demand would be lower by 7 percent and emissions by 6 percent, or 127 million metric tons. (Figure 2).

• Technology could develop at a slower rate however; and, if the characteristics of energy- using equipment do not change from those currently available, energy demand in 2010 would increase above the reference case by 3 percent and carbon emissions would increase by 4 percent, or 67 million metric tons. In 2020, energy demand and emissions would be higher by 6 and 7 percent, respectively, or 130 million metric tons.

In addition to analyzing the impacts of world oil markets, economic growth, technology, and electricity regulations, Annual Energy Outlook 1999 discusses recent and proposed regulatory changes in energy markets and other current energy issues. The report can be accessed on EIA's Internet site at http://www.eia.doe.gov/oiaf/aeo99/homepage.html. Assumptions underlying the projections in the Outlook and more detailed, regional projections will also be available on the Internet site by December 17, 1998.

EIA Program Contact: Mary J. Hutzler, 202/586-2222
EIA Press Contact: National Energy Information Center, 202/586-8800, infoctr@eia.doe.gov

EIA-98-29

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