Greenhouse warming is a global phenomenon, an important fact with regard to mitigation because releases of greenhouse gases have the same potential effect on global climate regardless of their country of origin. An efficient mitigation strategy for the United States would allow the United States to take cooperative action in other countries; some of the most attractive low-cost mitigation options may be in the poorest developing countries.
This analysis of mitigation costs and the potential for reducing potential greenhouse warming was developed by the Mitigation Panel (see Part Three) and is derived almost entirely from experience and data in the United States. The analytical framework is general, however, and could be applied in other countries.
The application of this framework to a diverse array of mitigation options is a pioneering effort. These "first-order" analyses are meant only to be initial estimates of the cost-effectiveness of these options. They demonstrate a method that can be used in determining appropriate mitigation options. The intent is to illustrate the manner in which options should be evaluated with the best estimates available.
This analysis is a cross-sectional, as opposed to a longitudinal, analysis of options over time. It does not attempt, for example, to project future levels of economic activity and their implications for greenhouse gas emissions. The analysis does account, however, for future consequences of current actions. The direct effect of each option on greenhouse gas emissions is assessed. The panel does not examine those options under the different overall emission rates that might occur at future times. This analysis must therefore be seen as an initial assessment of mitigation options in terms of their return on investment under current conditions. A subsequent analysis should consider appropriate strategies under conditions existing at the time.
The Role of Cost-Effectiveness
A mitigation strategy should use options that minimize effects on domestic or world economies. Strategies therefore should be evaluated on the basis of cost-effectiveness as well as other considerations. Care must be taken to ensure that estimates of both costs and effects are comparable. Cost calculations, for example, need to use consistent assumptions about energy prices, inflation, or discount rates. Benefits must be evaluated in standard terms, such as the equivalent amount of CO2 emission reductions.
The cost of mitigation may include a number of components, some of which are difficult to measure. Three different kinds of costs need to be distinguished. First are direct expenditures to reduce emissions or otherwise reduce potential greenhouse warming. These include, for example, the purchasing of energy-efficient air conditioners or insulation. Second are long-term investments that increase the overall efficiency of large-scale systems. Examples include investment in more efficient electricity generation and industrial facilities. Third are possible substitutions among final goods and services that require different amounts of energy. An example is the substitution of public transit for private automobiles.
Current expenditures to reduce greenhouse warming are in principle the easiest to measure because there generally are current market transactions from which to obtain data. For longer-term capital expenditures, a discount rate must be used to calculate the present value of costs so they can be compared with costs of other options. Where major substitutions of final goods or services are required, the full costs are difficult to determine. The potential loss in value to consumers of the changes in consumption patterns must be estimated.
Technological Costing Versus Energy Modeling
There are two choices for estimating the costs of various mitigation options: "technological costing" and "energy modeling." Technological costing develops estimates on the basis of a variety of assumptions about the technical aspects, together with estimatesoften no more than guessesof the costs of implementing the required technology. This approach can be useful for evaluating emerging technologies when it is hard to apply statistical methods to estimate costs from market data. Technological costing relies implicitly on economic assumptions, and like energy modeling assumes that direct costs are a good measure of total cost.
Energy modeling uses a variety of techniques to project energy uses and supplies by region over time. Often, energy modeling uses data on prices and quantities consumed to construct statistical behavioral relationships. Unlike technological costing, energy models strive to ensure that the projections
are internally consistent by keeping track of the overall relationship between energy supplies and demands.
Neither approach is perfect. Technological costing studies are often criticized as providing overly optimistic estimates. Their main weaknesses are that they are not always consistent with observed market behavior and that they sometimes fail to allow for impacts on quantities and prices in other markets and therefore neglect "general equilibrium" effects of major actions undertaken. Energy modeling analyses are challenged because of weaknesses in model specification, measurement error, and questionable relevance of historical data and behavior for future untested policy actions.
In this study, the cost-effectiveness indicators for mitigation actions are derived mostly from technological costing rather than energy modeling analyses In some instances, these analyses show mitigation actions yielding a net savings, implying that investment in these actions would yield a positive economic return. Realizing such net savings, however, would require a set of conditions not now in existence. In other words, achieving such savings would require overcoming private or public barriers of various kinds. If these impediments can be overcome at relatively low cost, society could achieve substantial benefits from these actions, often even if greenhouse warming were not a problem.
Technological costing and energy modeling are in rough agreement, given the large uncertainties in the best available knowledge. This enhances the credibility of the results.
Planning a Cost-Effective Policy
Investment involves choosing among alternative uses of resources. Finding the least-cost mix of responses to greenhouse warming entails comparing all the different possible responses. Figure 6.1 illustrates that the least-cost plan will probably involve a mix of responses. For simplicity, only two hypothetical options are plotted. They are shown as curves giving the cost for achieving various reductions in greenhouse gas emissions (or the incident radiation, or changing the earth's reflectivity). For comparability, all responses are translated into CO2-equivalent emissions.
Both options exhibit increasing cost for increasing reductions in emission (the curves gradually bend upward). If the only alternative were to achieve the desired level of reduction by choosing one option, the clear preference would be option B. Option B produces each level of reduction at lower cost (c´´) than option A (c´).
If, however, it were possible to select some of option A and some of option B, the greatest payoff would come from a mixture of the two. Option B should be selected up to the point at which the cost of additional reductions
with option B exceeds the cost of the first reductions with option A (shown by the dashed line). Thereafter, the most cost-effective strategy would be to select some of A and some of B until the desired level of reduction is achieved.
Figure 6.2 extends the comparison to additional options with different characteristics. Option C shows "negative cost," or net positive benefits, associated with achieving the initial reductions in CO2 emissions. An example is energy conservation, such as better insulating of hot water heaters to reduce heat loss. The cost of insulating would be less than the cost of adding electricity generating capacity if the conservation measures were not implemented.
Option D illustrates a "backstop technology." A backstop technology provides an unlimited amount of reduction at a fixed cost. An example would be an abundant energy source that provides electricity with no CO2 emissions at all. Where a backstop technology exists, its cost sets a ceiling on the investment in reducing emissions. Only options costing less than D should be considered, no matter how much emission reduction is desired.
The heavy line in Figure 6.2 shows the cost-effective combination of options. Option C is selected up to the point at which option B becomes more cost-effective. Option A is added when it becomes cost-effective. The heavy line showing the cost-effective combination becomes horizontal when the cost reaches that of the backstop technology.
An Assessment of Mitigation Options in the United States
Several premises are central to the design of a well-conceived mitigation policy. First, responses to greenhouse warming should be regarded as investments in the future of the nation and the planet. The actions required will have to be implemented over a long period of time. They must, however, be compared to other claims on the nation's resources.
Second, cost-effectiveness is an essential guideline. The changes in energy, industrial practices, land use, agriculture, and forestry that are likely to be needed to limit emissions of greenhouse gases require investments over time. These are likely to be large enough to affect the economy in various ways. The sensible guideline is cost-effectiveness: obtaining the largest reduction in greenhouse gas emissions at the lowest cost.
A true cost-effectiveness analysis of reducing greenhouse gas emissions would measure only the costs of interventions taken solely because of greenhouse warming. This is difficult in practice because many of these actions contribute to several social goals, making it hard to distinguish the costs and benefits attributable to greenhouse warming alone. There are two ways such complications might be handled: by adding benefits to reflect contributions to multiple goals or by reducing costs to reflect their allocation among different goals. For example, eliminating CFC emissions would slow both the depletion of the ozone layer and the onset of greenhouse warming. A proper accounting of reducing CFC emissions would either assign additional benefits to reflect those gained in the area of ozone depletion or reduce the cost allocated to greenhouse warming proportionate to the contribution of those actions to other goals. In either case, the cost-effectiveness ratio would be improved if multiple social goals were considered. Similarly, several actions that would reduce greenhouse gas emissions are mandated by the Clean Air Act. A full cost-effectiveness analysis would account for the fact that society has already decided to bear these costs, so that only additional costs and benefits would be included in the analysis of greenhouse warming. Limits on time and resources precluded complete analysis of these complications in this study, and the results presented here should be considered a first cut that points the way for further analyses.
Third, a mixed strategy is essential. A least-cost approach produces a variety of options. A mixed strategy, however, requires comparison of options in different sectors of the economy.
In comparing various mitigation options, this panel emphasizes three factors. The first factor is the cost-effectiveness of the option. In calculating cost-effectiveness, the panel converted reductions of all greenhouse gases into CO2-equivalent emission reduction in order to be able to compare all options on the same basis.
The second factor is the ease or difficulty of implementation of the option. Although a particular option may be technically possible for relatively wealthy countries, it may be precluded for social, economic, or political reasons. These implementation obstacles are different for each option considered. The panel estimates emission reductions that could be achieved if explicitly defined feasible opportunities were executed. For example, one option calls for reducing energy use in residential lighting by 50 percent through replacement of incandescent lighting (2.5 interior light bulbs and 1 exterior light bulb
per residence) with compact fluorescent lights. Another option calls for improving on-road fuel economy to 25 miles per gallon (32.5 mpg in Corporate Average Fuel Economy (CAFE) terms) in light vehicles by implementing existing technologies that would not require changes in size or attributes of vehicles. Each option is also evaluated in terms of an optimistic "upper-bound" (100 percent achievement) or a pessimistic "lower-bound" (25 percent) level of implementation. A brief description of the mitigation options considered in this study is found in Table 6.1.
The third factor is the interconnectedness of the option to other issues in addition to greenhouse warming, for example, destruction of the ozone layer or biological extinction. These additional factors, however, were considered only in a qualitative manner and are part of the reason that recommendations are not based solely on the cost-effectiveness calculations developed in this study.
Table 6.2 shows selected mitigation options in order of cost-effectiveness. Some options, primarily in energy efficiency and conservation, have substantial potential to mitigate greenhouse warming with net savings or very low net cost. However, they have not been fully adopted because of various implementation obstacles.
Net savings does not mean that no expenditure is required to implement these options. Rather, it indicates that the total discounted cost of the option over the period of analysis is less than its discounted direct benefit, usually reduction in energy consumption, where the discount rate is 6 percent. At higher discount rates the relative cost would rise. These are options that ought to be, and probably will be, implemented, since they are in the interests of those who implement them. The decisions to start, however, can be hastened through better information and incentives.
Table 6.2 also includes some options that are more costly, face substantial obstacles to their implementation, or have other costs or benefits that are difficult to characterize. For example, reduction of CFC consumption is also beneficial in reducing stratospheric ozone depletion, and the combined benefit derived for greenhouse warming and ozone depletion would raise CFC control options in the ranking of preferred actions. Questions about the appropriateness of current technologies and public opposition to nuclear power, however, currently make this option difficult to implement. To the extent that concern about greenhouse warming replaces concern about nuclear energy and "inherently safe" nuclear plants are developed, this option increases its priority ranking.
Table 6.3 presents what the panel calls geoengineering options. The geoengineering options in this preliminary analysis include several ways of reducing temperature increases by screening sunlight (e.g., space mirrors, stratospheric dust, multiple balloons, stratospheric soot, and stimulating cloud condensation nuclei) as well as stimulation of ocean uptake of CO2. Several
TABLE 6.1 Brief Descriptions of Mitigation Options Considered in This Study for the United States
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options, including space mirrors and removal of CFCs from the atmosphere, are not included among those recommended for further investigation in Chapter 9.
Geoengineering options appear technically feasible in terms of cooling effects and costs on the basis of currently available preliminary information. But considerably more study and research will be necessary to evaluate their potential side effects, including the chemical reactions that particles introduced into the atmosphere might cause or alter. The data presented in Table 6.3 were developed during the course of the study and represent iniial estimates. These or other options may, with additional investigation, research, and development, provide the ability to change atmospheric concentrations of greenhouse gases or the radiative forcing of the planet.
Geoengineering options have the potential to affect greenhouse warming on a substantial scale. However, precisely because they might do so, and because the climate system and its chemistry are poorly understood, these options must
be considered extremely carefully. We need to know more about them because measures of this kind may be crucial if greenhouse warming occurs, especially if climate sensitivity turns out to be at the high end of the range considered in this study. Efforts by societies to restrain their greenhouse gas emissions might be politically infeasible on a global scale, or might fail. In this eventuality, other options may be incapable of countering the effects, and geoengineering strategies might be needed. Some of these options are relatively inexpensive to implement, but all have large unknowns concerning possible environmental side-effects. They should not be implemented without careful assessment of their direct and indirect consequences.
TABLE 6.2 Comparison of Selected Mitigation Options in the United States
TABLE 6.3 Cost-Effectiveness Ordering of Geoengineering Mitigation Options
Table 6.2 shows estimates of net cost and emission reductions for several options. It must be emphasized that the table presents the Mitigation Panel's estimates of the technical potential for each option. For example, the calculation of cost-effectiveness of high-efficiency light bulbs (one of the building efficiency options) does not consider whether the supply of light bulbs could meet the demand with current production capacities. It does not consider the trade-off between expenditures on light bulbs and on health
care, education, or basic shelter for low-income families. Nor does it consider aesthetic issues about different sources of illumination.
Care must be taken in developing such a table because there is some "double-counting" among potential mitigation options. For example, implementation of both the nuclear and the natural gas energy options assumes replacement of the same coal-fired power plants. Thus, simply summing up the emission reductions of all options to give total reduction in emissions would overstate the actual potential. The options presented in Table 6.2 have been selected to eliminate double-counting.
Finally, although there is evidence that efficiency programs can pay, there is no field evidence showing success with programs on the massive scale suggested here. There may be very good reasons why options exhibiting net benefit on the table are not fully implemented today.
Figure 6.3 illustrates the results of different rates of implementation of those options. The many uncertainties in the calculations of both costs and emission reductions have been collapsed into two lines. The line labeled "25% Implementation/High Cost" assumes incomplete implementation of each option (25 percent implementation of feasible opportunities) and the high end of the range of cost estimates for that option (high cost). This line shows a lower bound of what is reasonable to achieve. The line labeled
"100% Implementation/Low Cost" assumes complete implementation of each option (100 percent implementation) combined with the low range of cost estimates for that option (low cost). This line indicates the upper bound that could be achieved with all options shown. A complete analysis would calculate appropriate implementation rates for each option. That is beyond the scope of this study. It should be realistic to achieve emission reduction and cost results somewhere between the two lines in Figure 6.3.
As pointed out earlier in this chapter, technological costing and energy modeling sometimes yield different results. For this reason, both are presented in Figure 6.4. The "100% Implementation/Low Cost" and "25% Implementation/High Cost" curves are repeated from Figure 6.3, and the range typical of energy modeling is shown. As can be seen from Figure 6.4, the United States should be able to achieve substantial reduction in greenhouse gas emissions at low cost, or perhaps even a small net savings.
Implementing Mitigation Options
An array of policy instruments of two different types are available: regulation and incentives. Regulatory instruments mandate action and include controls on consumption (bans, quotas, required product attributes), production (quotas on products or substances), and factors in design or production (efficiency, durability, processes). Incentive instruments are designed to
influence decisions by individuals and organizations and include taxes and subsidies on production factors (carbon tax, fuel tax) and on products and other outputs (emission taxes, product taxes), financial inducements (tax credits, subsidies), and transferable emission rights (tradable emission reductions, tradable credits).
Interventions at all levels could effectively reduce greenhouse warming. For example, individuals could reduce energy consumption, recycle goods, and reduce consumption of deleterious materials. Local governments could control emissions from buildings, transport fleets, waste processing plants, and landfill dumps. State governments could restructure electric utility pricing structures and stimulate a variety of efficiency incentives. National governments could pursue action in most of the policy areas of relevance. International organizations could coordinate programs in various parts of the world, manage transfers of resources and technologies, and facilitate exchange of monitoring and other relevant data.
The choice of policy instrument depends on the objective to be served. Although this analysis of mitigation options does not include all possibilities, the panel is hopeful that it does identify the most promising options. This analysis provides the beginnings of a structure and, a process for identifying those strategies that could appropriately mitigate the prospect of greenhouse warming.
There is a potential to inexpensively reduce or offset greenhouse gas emissions in the United States. In particular, the maximum feasible potential reduction for the options labeled "net benefit" and "low cost" in Table 6.2 totals about 3.6 billion tons (3.6 Gt) of CO2-equivalent emissions per year. (Here, as elsewhere in the report, tons are metric.) This is a little more than one-third of the total 1990 greenhouse gas emissions in the United States and represents an optimistic upper bound on what could be achieved using these options.
A lower bound can be estimated from Figure 6.4. Arbitrarily using a cutoff of between $10 and $20 per ton of CO2-equivalent emission reduction would produce a level of about 1 Gt of CO2-equivalent emissions per year, or a little more than 10 percent of current greenhouse gas emissions in the United States.
This analysis suggests that the United States could reduce its greenhouse gas emissions by between 10 and 40 percent of the 1990 level at very low cost. Some reductions may even be at a net savings if the proper policies are implemented.