The EIA is precluded from analyzing alternative policy scenarios as part of the AEO. For example, the AEO does not include any cases in which U.S. greenhouse gas emissions are constrained over the next 25 years, since there is currently no policy that restricts such emissions. However, EIA does publish the results of policy analysis studies performed at the request of members of Congress, and these studies provide an important complement to the AEO because they explore a wider range of factors relevant to energy use projections. Table 2.2 shows additional EIA cases developed recently for a congressionally requested

TABLE 2.2 GHG Policy Cases Modeled by the EIA for Congressionally Requested Studies

 

GHG Intensity Reduction Goal (% per year)a

Safety-Valve Price (2004 dollars per tonne CO2 equivalent)b

 

Case Name

2010-2019

2020-2030

2010

2030

Descriptionb

Cap-Trade 1

2.4

2.8

$6.16

$9.86

 

Cap-Trade 2

2.6

3.0

$8.83

$14.13

GHG cap-and-trade system with safety valve

Cap-Trade 3

2.8

3.5

$22.09

$35.34

Cap-Trade 4

3.0

4.0

$30.92

$49.47

 

Cap-Trade 3 Low Other

2.8

3.5

$22.09

$35.43

Cap-Trade 3 with 50% reduction in “other than energy-related CO2 GHG abatement”

Cap-Trade 3 Low Safety

2.8

3.5

$8.83

$14.13

Cap-Trade 3 with lower assumed safety-valve price

Cap-Trade 3 High Tech

2.8

3.5

$22.09

$35.34

Cap-Trade 3 with more optimistic technology assumptions

NOTE: These scenarios are illustrative of a range of policy proposals that would limit emissions of CO2 from coal combustion.

aGHG intensity refers to annual GHG emissions per dollar of gross domestic product for a given year.

bA cap-and-trade program places an overall limit on total GHG emissions from all emission sources in a given year. The annual cap is determined by the required GHG intensity reduction. Each source is required to hold one emissions “allowance” for each ton emitted, with the total number of annual allowances set by the government to be equal to the total tons in the cap. Allowances may be freely traded, offering sources the option of complying either by reducing emissions, by buying more allowances in the market, or by a combination of both strategies. The “safety valve” allows total emissions to exceed the cap if the market price for allowances exceeds the specified safety-valve price. In effect, the safety-valve price is the maximum price for allowances in the market. All permit safety-valve prices shown in Table 2.2 are in 2004 dollars. The range requested for this study was $10 to $35 in 2010 dollars (corresponding to $8.83 to $30.92 in 2004 dollars shown in the table). The safety valves are assumed to increase by 5 percent annually in nominal dollars from 2010 through 2030.

SOURCE: EIA (2006e).



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