Reducing U.S. greenhouse gas emissions
to levels called for in a 1997 international agreement reached in Kyoto, Japan, would cost the U.S. economy between
$13 billion and $397 billion in 2010 (1992 dollars), or between 0.1 percent and 4.2 percent of average gross domestic
product (GDP). U.S. GDP in 2020 would be between 0.2 percent and 0.8 percent lower than if the measures to reduce
emissions were not implemented, according to detailed projections described in Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, from the Energy Information Administration
(EIA). The results are also summarized in a supplement, What Does the Kyoto Protocol Mean to U.S. Energy Markets and the U.S. Economy?
The Kyoto Protocol was an outgrowth of the 1992 Framework Convention on Climate Change, a United Nations response to concerns that rising concentrations of anthropogenic greenhouse gases could raise average surface temperatures and change the global climate. More than 160 nations met in December 1997 to negotiate binding limits on greenhouse gas emissions for developed nations. Should the Protocol be ratified and become effective, the United States would be required to reduce emissions to 7 percent below 1990 levels during the "commitment period" of 2008 to 2012.
The EIA study looked at the macroeconomic and energy-market impacts of six energy-related carbon-reduction scenarios in relation to a reference case. In the reference case, no reductions are enforced and carbon emissions are assumed to rise to 33 percent above the 1990 level of 1,346 million metric tons in 2010. The carbon-reduction cases are defined as follows:
- 24 Percent Above 1990 Levels (1990+24%)
Assumes carbon emissions can increase to an average of 1,670 million metric tons per year during the commitment period.
- 14 Percent Above 1990 Levels (1990+14%)
Assumes carbon emissions average 1,539 million metric tons per year between 2008 and 2012.
- 9 Percent Above 1990 Levels (1990+9%)
Assumes carbon emissions average 1,467 million metric tons per year during the commitment period.
- Stabilization at 1990 Levels (1990)
Assumes emissions reach 1,345 million metric tons per year.
- 3 Percent Below 1990 Levels (1990-3%)
Assumes annual emissions are reduced to 1,307 million metric tons.
- 7 Percent Below 1990 Levels (1990-7%)
Annual emissions are reduced to 1,250 million metric tons. This case assumes that the target is met entirely by reducing domestic energy-related carbon emissions.
EIA assumes that a carbon price is added to fuel prices based on their carbon content. These carbon prices in 2010
are projected to range from $67 per metric ton of carbon (1996 dollars) in the 1990+24% case to $348 per metric
ton in the 1990-7% case. Prices generally flatten or decline after about 2010 (see figure). Producer
and consumer prices for energy also rise as a consequence of carbon price increases: roughly speaking, in 2010
each 10-percent increase in aggregate energy prices could lead to a 1.5-percent increase in producer prices and
a 0.7-percent increase in consumer prices.
Energy sector impacts vary. The energy intensity of the economy (expressed as energy consumed per dollar of GDP) declines in all carbon-reduction cases, by as much as 3 percent per year between 2005 and 2010 in the 1990-7% case, compared to 1.0 percent in the reference case. Reductions in carbon emissions from electricity generation account for two-thirds to three-fourths of total carbon reductions across the cases and electricity consumption is projected to be lower in 2010, accompanied by use of more efficient generation technologies. However, fuel-switching to less carbon-intensive technologies accounts for most of the reductions.
Consumption of coal, the most carbon-rich of the fossil fuels, declines sharply in all carbon-reductions cases, falling by 18 percent to 77 percent in 2010 relative to the reference case. Petroleum demand also falls in both the United States and other developed countries with carbon-reduction targets, which drives world oil prices down and somewhat reduces U.S. dependence on petroleum imports. Nuclear power gains, as rising fossil fuel prices make it economic to postpone the retirements of a number of nuclear plants. Natural gas consumption is 2 percent to 12 percent higher in 2010 compared with the reference case. Renewable energy consumption, especially from wind and biomass, increases between 2 percent and 16 percent by 2010 and between 9 percent and 70 percent 10 years later, achieving as much as a 22-percent share of total electricity generation in 2020.
The analysis, which was requested by the U.S. House of Representatives Committee on Science, includes detailed chapters on the scope and methodology of the study, energy market results, end-use energy demand, electricity supply, fossil fuel supply, and economic impacts. Chapter 7 compares the EIA study results with those of other studies of the costs of mitigating carbon emissions.
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URL: http://www.eia.doe.gov/emeu/plugs/plkyoto.html
File last modified:
October 30, 1998
