A Briefing Paper on the Energy Information Administration's Analysis and Report
(Prepared for the Committee on Science, U.S. House of Representatives. October 1998)
The Kyoto Protocol, negotiated by more than 160 nations in December 1997, aims to reduce net emissions of certain greenhouse gases (primarily carbon dioxide (CO2)). Each of the participating developed countries must decide how to meet its respective reduction goal during a five-year period (2008-2012); but specific ground rules remain to be worked out at future negotiating sessions. The next meeting is in Buenos Aires (November 1998).
In a study entitled Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, the Energy Information Administration (EIA), an independent statistical and analytical agency in the U.S. Department of Energy, has projected that meeting the U.S. targets under the Protocol will call for significant market adjustments:
* Reductions in CO2 emissions will result in between 18 and 77 percent less coal use than projected in the EIA Reference Case in 2010, particularly affecting electricity generation, and between 2 and 13 percent less petroleum use, mainly affecting transportation.
* Energy consumers will need to use between 2 and 12 percent more natural gas in 2010 and between 2 and 16 percent more renewable energy, and extend the operating life of existing nuclear units.
* To achieve these ends via market-based means, average delivered energy costs (in inflation-adjusted 1996 dollars) must be between 17 and 83 percent higher than projected in 2010.
* The amount prices must rise is uncertain. Accounting procedures and international trading rules for greenhouse gases are not finalized. Forecasting technological change and public response to it under various pricing scenarios is an inexact science. The more stringent the need for domestic emission reductions, however, the more costly the adjustment process will be.