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1 STRATEGIES FOR REDUCING GREENE008E GAS EMISSIONS: FEY FINDINGS AND RECOMMENDATIONS Emissions of greenhouse gases (GHGs), especially from energy production and use, and their impact on global climate emerged as a major national issue in the United States during the 1980s. As a result, Congress (P.L. 100-371, 1988) directed the U.S. Department of Energy (DOE) to ask the National Academy of Sciences and the National Academy of Engineering to assess the current state of research and development (R&D) in the United States in alternative energy sources, and to suggest energy R&D strategies involving roles for both the public and private sectors, should the government want to give priority to stabilizing atmospheric concentrations of GHGs. The findings and recommendations of the Committee on Alternative Energy Research and Development Strategies, appointed by the National Research Council in response to Congress's directive, are provided in this report and summarized in this chapter. The energy R&D strategies and actions recommended by the committee are structured to facilitate prudent and decisive responses by the United States, despite uncertainties regarding the effects of GHGs on global climate. END-USE SECTOR ANALYSIS Electric Power Sector The electric power sector has the potential to produce and deliver electricity essentially free of GHG emissions, primarily CO2. Currently, however, electricity is generated worldwide predominantly from fossil fuels, with coal being the dominant fuel choice. Low- or non-CO2-emitting power generation technologies based on nuclear fission reactors, renewable resources, and geothermal energy are commercially available, and technically, could supply the world's energy needs. Because of unfavorable economics as well as environmental, health, and safety concerns, it is by no means clear that these technologies could be deployed on the scale required without substantial research, development, and demonstration (RD&D) and lower costs. The transition from coal to these low- or non-CO2-em~tting technologies will involve major changes in the selection and deployment of generating facilities in energy markets served by the electric utilities and in the economy as a whole. Integral to the transition are efficiency improvements in generation; installation of cogenerating units; shifts or retrofits of generation capacity to lower carbon fuels, such as natural gas; and improvements in transmission, distribution, and storage systems to reduce energy losses and maximize use of the most efficient generating facilities. 3

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Transportation Sector In the United States cars and light trucks produce well over half the GAG emissions attributed to the transportation sector. The most significant near-term opportunities for reducing these emissions are to be found in improving the fuel efficiency of cars and light trucks and in using transportation systems more efficiently (e.g., increasing the average load factor of passenger cars). Generally, realizing these opportunities would not require new technology, but rather would exploit existing technology that is ready (or nearly ready) for commercial application. If , in the long ter=, major reductions in GHG emissions must be achieved, even higher energy productivity increases must be attained and new energy sources and fuels must be found. Innovation in cars and light trucks is almost completely in the hands of the large domestic and foreign manufacturers, most of whom perform extensive R&D on new products. The federal role in technology R&D should be limited to strengthening the technology base and nurturing research in potentially important areas in which the automotive companies are not likely to invest heavily (e.g., basic research on materials and advanced batteries). Public policy must be shaped to stimulate additional improvements in vehicle efficiencies and more efficient use of transportation systems if GHGs are to be reduced. Buildings Sector Over the long term, energy use and GHG emissions in residential and commercial buildings can be reduced by more than 70 percent through successful development and implementation of technology. Energy demand in buildings can be decreased by technologies that reduce heat loss, such as improved wall, window, and roofing materials and insulation. The demands can be further decreased by increasing the eff iciency of the equipment used to heat, cool, ventilate, and light buildings. Also, high-efficiency appliances and office equipment can be developed to reduce energy use. Finally, technological opportunities exist for greater use of cogeneration systems, natural gas, CO2 neutral fuels derived from biomass, and non-G~G energy resources (such as solar) to reduce GHG emissions. These opportunities must be pursued by a combination of private and federal R&D accompanied by public policies and incentives for technology implementation, because the number of decision makers involved in energy-related issues in the buildings sector approaches the total population of building users from homeowners and tenants to shopkeepers, office workers, and building managers. Industry Sector The efficiency of energy use can be improved and the form of energy use can be altered to significantly reduce industrial 4

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emissions of GHGs. In many instances the technologies are currently available, but neither market signals nor government policies encourage investments to achieve these improvements. Continued R&D efforts by industry to improve processes and reduce energy use, complemented by collaborative projects with the federal government and the results of basic research, will reduce the energy required per unit of production by an average of about 1.S percent per year. Changing fuels can reduce GHG emissions, but implementation depends on the relative price and availability of electricity and natural gas versus coal and oil. Increased recycling of materials also offers a means of reducing energy use and GHG emissions. Call STATUS OF ALTE~ATI" ENERGY RSO Through its assessment of alternative energy R&D programs within the federal government, it is apparent to the committee that only limited investments are being made in technologies relevant to the reduction of GHG emissions. For example, federal funding for DOE's civilian energy R&D in the solar and renewables program declined by 89 percent on a constant dollar basis, from FY 1979 to FY 1989; conservation program funding declined by 61 percent, electric energy program funding declined by 76 percent, and funding for the nuclear fission program declined by 78 percent. Private sector funding by individual companies also declined during the 1980s for conservation and renewable energy technologies. The Gas Research Institute and the Electric Power Research Institute have R&D programs in end-use technologies and conservation and in renewable energy that are complementary to DOE's efforts. In the aggregate, however, current funding for alternative energy R&D in the United States is not sufficient to address the problem of achieving major reductions in GHG emissions. FINDINGS No single technological fix that would significantly reduce GHG emissions during the next few decades was identified by the committee in any of the four end-use sectors. The uses of energy are too diverse. Rather, two broad technological pathways exist that by the year 2050 could lead to significant reductions (from today's levels) in GHG emissions. These pathways, which are not mutually exclusive, involve Increases in energy productivity through improvements in the efficiency of energy use and conversion technologies and Development of and shift to the use of low- or non-GHG- emitting energy technologies. The pace at which the nation can pursue either or both of these pathways must be tempered by prevailing international economic competitiveness and by issues related to domestic energy s

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supplies and the environment. If the United States can become highly eff icient in the production and use of energy, the burden of achieving a shift to non-GHG-emitting alternative energy sources would be greatly reduced. Up to the year 2000, the only technologies that can have a significant impact on the reduction of GHG emissions are those already developed and available. While R&D per se will have little effect on the adoption of these technologies, incentives and regulations by the federal government can have major influence. Changes in public policies will be required if markets are to be stimulated to adopt available technologies that are highly energy efficient. RECOMMENDATIONS The following two energy R&D strategies, which could lay the groundwork for achieving reductions in GHG emissions, are recommended to the federal government: ~ Focused R&D Strategy. Pursue energy R&D that is aimed at reducing GHG emissions and that would make sense for other reasons even in the absence of concerns about global climate change. Insurance Strategy. Pursue energy R&D that would be viable only in the presence of concerns about global climate change. Each R&D strategy addresses, in general terms roughly the same set of technologies and spans the full range of activities from fundamental research to technology adoption but with differing objectives and costs. Both strategies follow the conventional R&D paradigm of reducing uncertainties about the cost and performance of a technology by producing new knowledge. The fundamental difference between them is the difference in the magnitude, timing, and costs of actions that can be justified on non-GHG grounds and those that need a GHG justification. In both strategies federal funding is needed because of the inability of private firms to capture the benefits of basic research and because the price of fossil fuels is less than the full social cost associated with their use. The federal R&D program under the Insurance Strategy will be considerably more costly to the government (involving multibillion dollar increments over the Focused R&D Strategy), and a greater fraction of the government's R&D would be directed toward reducing the uncertainties associated with the technology-adoption phase. Through the Insurance Strategy the nation would, over time, invest in the development and demonstration of a variety of ''backstop" technologies for their "insurance" or option value. 6

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It is not sufficient to define energy R&D priorities in isolation from the marketplace for which the products of the R&D are intended. Prevailing market forces must be considered and government actions may be required to achieve specific national objectives. In the past, particularly at times of crisis, the government has used intervention mechanisms such as taxes, tax credits, energy efficiency standards, loan guarantees, subsidies, federal procurements, and liability limitations to influence the supply and demand of fuels and energy resources. In the event that the nation makes a commitment to reduce emissions of GHGs significantly, such actions ought to be considered again as a supplement to the Focused R&D and Insurance strategies. This would stimulate energy R&D in the private sector and the adoption of GHG- reduc~ng technologies in the marketplace. In the near term (i.e., from the year 1990 to 2000), such actions could spur the adoption of GHG-reducing technologies that already exist and that can be shown to be economically viable for reasons other than low-GHG emissions but that are not currently being used. Similarly, In the longer term such actions could apply to low- or non-GHG-emitting technologies for which R&D has helped reduce cost and performance uncertainties. The committee has not evaluated the efficacy of market intervention mechanisms that might be appropriate for achieving various levels of reductions in GHG emissions over time, but the evaluations ought to be done before the government invokes such actions. Focused RED Strategy - Actions The high-priority energy R&D opportunities and enabling policies that ought to be addressed now in the context of this strategy are highlighted below. The actions suggested represent those considered to be the most important from among a longer list of promising options analyzed by the committee. Their execution entails changes to the current federal R&D program priorities and selective reprogramming of R&D funds within existing budget outlays. . Fossil Energy Increase the efficiency of electricity generation using currently available h~gh-efficiency options such as the gas turbine/steam turbine combined cycle Develop substantial improvements in the combined cycle and other advanced gas-turbine-based technologies for firing with natural gas or a gaseous fuel derived from biomass Achieve economic recovery of gas from known domestic reserves 7

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Improve reservoir characterization through basic geoscience research to enable future resource recovery Define GHG emissions as one criterion in evaluating new approaches to coal combustion Nuclear Energy Determine through social science research the conditions under which nuclear options would be publicly acceptable in the United States Conduct an international study to establish criteria for globally acceptable nuclear reactors Conservation and Renewable Energy Utility Systems Provide RD&D support to new and improved technology for electric storage and for alternating current and direct current systems components Develop an efficient, flexible, and reliable network to operate the electric power system in the most environmentally acceptable way Photovoltaics Accelerate R&D on materials and module manufacturing to increase efficiency and reduce costs of photovoltaic systems Transportation Technologies . Improve batteries for vehicle propulsion to achieve higher performance and durability and reduce costs Adapt alternative fuels (e. g., alcohols) to engines and vehicles Reduce emissions from efficient power plants such as the diesel Evaluate vehicle systems to assure the safety of smaller cars built with lightweight structural materials Investigate innovative electric transportation systems 8

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Building Envelope/Superinsulation Develop advanced insulation materials for building walls, windows, and roofs Develop non-GHG foams and evacuated panel technology Building Operating Practice Develop controls, expert systems, diagnostics, and feedback systems to minimize energy use in the construction, commissioning, and operation of buildings Building Implementation R&D Implement existing technologies with carefully planned and monitored demonstrations and research on motivation and decision making Industrial Process Energy Efficiency Continue industry-government cooperative programs such as the metals initiative (i.e., steel and aluminum) Recycling of Materials Develop improved separation technologies Create markets for postconsumer-recycled materials in the manufacture of high-quality products Biomass and Biofuel Systems Expand through basic research, our understanding of the mechanisms of photosynthesis and genetic factors that influence plant growth Perform systems analyses to define and prioritize infrastructure requirements with expanded use of biomass-derived fuels Assess the potential environmental impacts of biomass production (e.g., through silviculture), including impacts on biodiversity and the availability of water resources The R&D activities outlined above would have to be supplemented by government actions to stimulate the adoption of technologies and processes for reducing GHG emissions. In the near term such actions would include the following: 9

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. . Electric Power Increase U. S. nuclear power plant availabilities to levels conforming to the best internal' onal practice Facil itate greater environmental dispatch of generation facilities Transportation Inform consumers and develop and implement policies to stimulate the market for cars and light trucks that are significantly more energy efficient than current models Develop and implement policies to achieve higher productivity of transportation energy use Buildings Enact substantial changes in the regulatory environment to allow electric and gas utilities to earn from investments in energy productivity as well as energy supply and to decouple utilities' net revenues from their sales volumes Stimulate, through competitive bidding, nonutility investments in energy supply and conservation that reduce GHG emissions . Industry Encourage front-end separation of wastes through incentives or penalties Eliminate regulations counterproductive to waste management and recycling Encourage, in conjunction with the electric power sector, the installation of cogeneration units Insurance Strategy This strategy incorporates the lessons of past failures with large R&D projects and envisions major outlays of federal funds to develop and demonstrate the viability of promising low- or non- GHG-emitting technology options for "insurance" purposes. The RD&D would be undertaken even though the technologies are clearly not cost competitive today in comparison to their higher-GHG-emitting, fossil-fueled counterparts (and may never be feasible without federal support of R&D and market intervention). These alternative technologies would be developed to the level necessary to understand their costs and impacts if concerns about GHG emissions 10

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and climate change heighten and the need to deploy such technologies in the marketplace becomes much more compelling. Because of their multibill~on dollar cost implications, decisions regarding the Insurance Strategy and related market interventions ought to be made in light of other national and international policy considerations. The committee has identified energy RD&D targets that would be important to pursue under this strategy. The choice of policy instruments that the government might consider for market intervention to accompany the RD&D would depend on the magnitude and timing of GHG reductions to be achieved. The choice would also be strongly influenced by the difference between the prevailing price of carbon-based energy and the cost of the new technology for displacing it. Fossil Energy Fund an exploratory study to ascertain if there are viable approaches (economically and environmentally) for removing and sequestering CO2 Nuclear Energy On the strength of the public acceptability and global reactor studies performed under the Focused R&D Strategy, fund an industry-led or -managed program to develop and demonstrate an advanced reactor Conservation and Renewable Energy Stimulate production (at the rate of about 10 megawatts per year each) of the three to five most promising photovoltaic technologies; the same should be done in the areas of solar thermal and wind energy conversion Demonstrate "new" projected storage systems such as compressed gas, battery arrays, and superconducting magnets Develop approaches for federal cost-sharing and utility procurements of renewable energy technologies or electricity generated by them. Such financing mechanisms should enable manufacturers to compete in niche markets (both domestic and export) to sustain production at levels sufficient to determine the ultimate potential of the technologies. Select a major metropolitan center at which to demonstrate higher productivity of transportation energy use 11

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Demonstrate the efficacy of an electric transportation system in at least one major city Develop and demonstrate photovoltaic electricity resources for buildings, including lighting and water heating Develop and demonstrate advanced design, construction, and management practices in programs involving utilities, building authorities of local governments, and energy ~ service companies Reduce energy use in existing buildings through adoption of insulation retrofits, window replacement, and intensive use of diagnostic technologies over a 10-year period Recycling of Materials Conduct a major demonstrate on program to determine the feasibility of greatly increased recycling In several industrial processes Biomass and Biofuels System Develop and demonstrate promising biomass-to-fuels conversion processes, particularly for cellulose and hemicellulose Select and demonstrate on a large scale the use of improved plant species to enhance biomass production Develop strategies to mitigate environmental impacts of large-scale use of biomass Basic and Generic Research The key to realizing the promising technological opportunities for significantly reducing GHG emissions in energy production and use is to perform the underlying basic and generic research. Fundamental research to expand the knowledge base of science and engineering relevant to fuels, materials, processes, and energy systems will facilitate the development of technologies under any R&D strategy the nation may choose to pursue. Particularly important is research in areas such as materials (high-temperature, lightweight, structural); plant physic ogy, biochemistry, and genetics; energy conversion devices and systems; and social, behavioral, and environmental sciences. Such research must be assiduously nurtured. 12

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GHG Emissions Monitoring and Instrumentation The nation is currently ill equipped to correctly formulate and effectively manage an alternative energy R&D strategy because of immense uncertainties surrounding GHG emissions and global climate change. Although an adequate understanding of these relationships could be extracted from information already deposited in the paleogeological record, fundamental scientific uncertainties are likely to persist for decades. Because of the inherently long response times of the phenomena involved, it will take time to test hypotheses and build the necessary knowledge base for a better understanding of global climate change. The United States should lead in an international program to achieve the needed monitoring instrumentation and improve climate modeling capability. Federal Outlays for Alternative Energy R&D The high priority R&D initiatives and technology-adoptzon actions described under the Focused R&D Strategy are estimated to require an incremental annual and sustained funding level equal to about 20 percent of the 1990 civilian energy R&D budget, or approximately $300 million (in 1990 dollars) per year. An approximate distribution of these incremental funds should be as follows: electrical storage, $15 million; photovoltaics, $30 million; biomass, $60 million; buildings, $105 million; recycling, $75 million; and transportation research, $15 million. The committee recommends that DOE initially obtain these funds by reprogramming its efforts in the fusion, fossil energy, and other programs and reallocating them to R&D in conservation and renewables. To the extent possible, funds currently budgeted for the clean coal technology program and for the civilian nuclear reactor development program should be reallocated within those programs to achieve, respectively, high conversion efficiencies of coal to electricity and, with international collaboration, the definition of criteria for globally acceptable reactors. Clearly, international cooperative efforts will almost certainly be required on a number of future technological options such as biomass and renewables, and the proposed nuclear study could exemplify how such undertakings should be planned and conducted. The committee finds it highly unlikely that commercially viable magnetic fusion reactors will make additions of any significance to the U.S. electricity generation mix before the year 20S0. Hence, the emphasis of magnetic fusion R&D in the United States should be on basic research and greater international collaboration. No definitive estimate was made for the funding required for the Insurance Strategy. Depending on the scope of the development programs undertaken and the number of demonstration projects initiated to facilitate the adoption of the GHG-stabilizing technologies, the magnitude of federal expenditures could range from $100 million to $500 million per year for up to 10 years in ~3

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each of the end-use sectors and for each major technology option to generate electricity free of GHG emissions. Such federal expenditures would have to be accompanied by private sector funding if programmatic goals and technology adoption are to be achieved. Leveraging Federal Investments Globally The global character requirement on R&D. development of of the GHG issue imposes a special Both the advancement of science and the alternate "solutions" require an international context. The foreseeable R&D costs to make progress will be high in these two areas; hence, it would be desirable to share these costs as broadly as possible. A major opportunity is at hand for RD&D in cooperation with the developed countries to seek options for energy supply in the developing world. International cooperation in energy RD&D can be encouraged through governmental arrangements and by ad hoc agreements with energy producers. Without international cooperation to stabilize GHG emissions, the efforts by any single nation will fall far short of global needs. 14