Drawing on its findings, the Energy and Transportation Task Force developed three strategic
goals that were used to craft the policy recommendations discussed in the next chapter. The
first goal deals with sustainable economic growth as a whole; the second with sustainable energy,
and the third with sustainable transportation.
|Goal 1||Indicators of Progress|
|SUSTAINABLE ECONOMIC GROWTH|
Pursue economic, environmental, and social policies that encourage global competitiveness and a long-term economic growth rate of at least 2.5 percent per year. Environmental improvements must be realized while providing opportunities and income gains that are distributed broadly throughout society and contribute to reducing poverty and inequity.
|The Energy and Transportation Task Force did not develop indicators for this goal beyond a 2.5 percent annual increase in the Gross Domestic Product (GDP) recognizing the Council as a whole would best supply indicators for the other aspects of the goal.|
ECONOMIC GROWTH FORECASTS
|Annual Energy Outlook 1995||1990-2010||1.8-2.7%|
|Council of Economic Advisors||1990-1999||2.4%|
|Data Resources Inc.||1993-2010||1.7-2.8%|
|Goal 2||Indicators of Progress|
Improve the economic and environmental performance of U.S. energy supply and use, while ensuring that all Americans have access to affordable energy services and increasing the competitiveness of American business
Reduced energy costs for manufacturers benefits the economy, thereby increasing international competitiveness. By lowering waste production, increased efficiency also leads to lower regulatory compliance costs.
Increased efficiencies translate into fewer environmental impacts from pollution and waste.
The energy intensity of the economy (energy consumed per dollar of GDP) is a fundamental measure of sustainability that combines both technological efficiency (energy consumed per unit of service provided) and the mix of energy-using activities that make up the national economy. Both of these components tend to reduce energy intensity as the economy evolves.
ENERGY USE FORECASTS
|Annual Energy Outlook 1995||1990-2000||-5.6-8.1%||+12-16%||+17-22%||+13-17%||+14-19%||+21-29%|
|Annual Energy Outlook 1995||1990-2010||-13.9-18.6%||+17-27%||+27-40%||+23-33%||+22-33%||+42-64%|
|Alternative Energy Future*||1990-2010||-30%||-25% and -11%*||-25%||--||--||--|
Source: Annual Energy Outlook 1995, p. 100, table B2, and p. 122, table B 19 (For 2000 and 20 1 0 forecasts); U.S. Department of Energy, Energy Information Administration, Annual Energy Review 1993 (Washington, D.C., 1994), p. 17, table 1.7 (for 1990 data).
Although the Task Force's energy intensity indicator level exceeds long-term historical rates by a significant amount, it is not without precedent: the energy intensity of the economy fell by 2.0 percent per year between 1974 and 1986, a time of rising real energy prices and new regulation aimed at increasing energy efficiency.19 These indicator values are technically feasible and could be economically beneficial if energy and transportation policies, including research and development, are structured properly.
The 10 percent improvement from 1990 levels, for example, is at the high end of base-case energy forecasts, which range from about 5.6-8.1 percent, depending on assumed rates of economic growth and short-term changes in energy markets. (See table 2.)
The 30 percent improvement by 2010 is nearly identical to the Energy Policy Act directive (30 percent improvement over 1988 levels) that guides the development of the Department of Energy's Least Cost Energy Strategy study.20 It is significantly higher than baseline forecasts, which tend to be in the 15-20 percent range. The base case forecast for America's Energy Choices yielded a 24 percent improvement.21 Few energy forecasts extend to 2025. The 1991 National Energy Strategy projected that the economy would be 32-41 percent more energy efficient in 2030 than in 1990, making the 2025 level of 50 percent improvement in the energy/GDP ratio appear to be a significant stretch but probably feasible.22
In addition to energy market forecasts, "bottom-up" technology analysis conducted in the last decade shows that more widespread adoption of existing energy efficiency technology could reduce energy demand by 25-45 percent--implying that a 50 percent aggregate reduction in the economy would be possible through diffusion of improved technology and the shifting composition of economic output to less energy-intensive products and services.23
Assuming a 2.5 percent average annual growth rate in the economy between 1990 and 2025, over-all primary energy use would be slightly higher than current levels by 2030 even if the efficiency indicator level is achieved. If other measures of progress are reached--for example in renewable energy and fossil generation efficiency--and if environmental technologies continue to reduce many of the pollutants associated with conventional energy supplies, then the overall environmental impact of this level of consumption could be significantly less than today's. Assuming that technologies improve and that rational policies are used to achieve the target, the economics could be distinctly favorable on a nationwide basis.
Renewable energy sources typically have fewer environmental impacts than do fossil fuels and have significant domestic and international market potential. Costs have declined significantly for renewable energy technologies over the past 15 years. Continued cost reductions at historical rates will encourage significant market penetration, and expanded markets will encourage further cost reductions. These trends will enhance the affordability of increasing the renewable energy share. However, barriers besides costs exist and these may need to be addressed in order to attain the indicator level. Because the share of hydropower is expected to remain constant, it is not included in the indicator values.24
The Annual Energy Outlook 1995 baseline projections suggest that the Task Force's target of 12 percent in 2010 and 25 percent in 2025 would require concerted policy efforts if they are to be achieved cost-effectively. Interaction with the energy efficiency targets could work either way: reduced energy consumption would increase the percentage contribution of any given level of renewable energy, but slow growth in electric generating capacity could also blunt the market for renewable generating technologies.
Improvements in fossil energy technologies, including transmission and distribution, will improve the efficiency of electricity supply and reduce its environmental impact. Current average efficiency m providing electricity (end-use electricity consumed divided by energy input, including transmission and distribution losses) is 32 percent, which is assumed to remain constant through 201 0 under current projections.28
New electricity generation technology is already capable of yielding much higher efficiencies than the current system average. For example, thermal efficiencies in some new natural gas-direct combined-cycle units are over 50 percent (not including transmission and distribution losses). (See table 3.)
AVERAGE EFFICIENCY OF ELECTRICITY
|Steam Turbine||Combined Cycle|
|Oil & Gas||Coal||Oil & Gas||Coal|
|Best available technology in 1993||35.5%||33.5%||45.1%||40.0%|
|Expected best available technology in 2002||N/A||42.0%||55.0%||50.0%|
Source: U.S. Department of Energy, Fossil Energy Office, Memorandum from FE-4 to PO-62, 27 February 1995.
The U.S. Department of Energy research and development goals for coal-based technology are 55 percent thermal efficiency by 2010 while keeping costs at or below current levels. This is based on gasification/fuel cell technology. Higher overall efficiencies would be possible with maximum waste-heat recovery in some applications--perhaps as high as 65 percent by 2025.
However, capital stock turnover is slow in the electricity generation sector, and increased energy efficiency will further reduce new capacity needs. The Task Force targets in this indicator assume a substantial increase in both the efficiency of new units and a sharp acceleration of projected replacement investment. Therefore, the levels of this indicator are a significant stretch. For example, the 2010 target could be met if roughly 40 percent of capacity averaged about 55 percent efficiency while 60 percent of capacity maintained the current average of 32 percent. But current projections indicate that, without policy changes, almost all of existing capacity will remain in operation in 2010 and that capacity installed between 1990 and 20 1 0 will not significantly increase the current average system efficiency. The year 2025 target could be met if three quarters of the capacity operated at 55 percent efficiency, assuming that the remainder operated at the current system average of 32 percent. Again, projections of utility stock turnover raise significant questions about the feasibility of this indicator level without a significant policy effort.
|Goal 3||Indicators of Progress|
Improve the economic and environmental performance of the U.S. transportation system while increasing all Americans' access to meaningful jobs, services, and recreation.
|Many aspects of the transportation system are defined
and measurable. However, further work is needed on
measures for some important areas.
Because of reduced domestic exploration, dwindling reserves, falling production, and the relatively high cost of U.S. production, oil imports have grown from 37 percent of domestic consumption in 1987 to 44 percent in 1994. Motor vehicles account for approximately two-thirds of all domestic oil consumption and are therefore the major force behind this rising demand.38 In the short-term, imports on balance help the economy through lower prices for fuels, reduced inflation, a rise in real disposable income, and overall economic growth. However, the immediate benefits of imported petroleum come with longer term economic and national security costs as well.
According to the Department of Commerce, substantial reliance on petroleum imports threatens to impair national security. Although U.S. energy security has improved in recent years with the breakup of the Soviet Union and the apparent disarray within the Organization of Petroleum Exporting Countries (OPEC), political and economic problems in the Persian Gulf region make supply disruptions a possibility. Persian Gulf oil has risen to 21 percent of domestic imports and the United States and the Organization for Economic Cooperation and Development (OECD) countries have limited options to offset another major oil supply disruption because: (1) there is little surplus production outside the Persian Gulf, (2) U.S. and OECD government oil stocks provide less protection from an interruption than in the past; and, (3) alternative fuels and electric vehicles would not be able to meet the sudden increase in demand.39 During a major oil supply disruption, there could be substantial hardships for the U.S. economy--caused by inflation, unemployment, and income and productivity losses. Since the post-World War II period, significant supply disruptions have occurred 11 times, three times with major economic implications--the 1973 Arab oil embargo, the Iranian Revolution (1978-80), and the Iraqi invasion of Kuwait in 1990.40 To protect the Middle East and access to oil, the U.S. maintains a significant and costly military presence in the Persian Gulf.
Economic and national security risks can be expected to increase as U.S. oil imports continue to grow because of declining domestic production and increased economic growth. The Energy Information Administration of the U.S. Department of Energy (EIA/DOE) projects that net imports will increase to 51.5 percent of domestic consumption by 2000 and that the United States and its allies will become increasingly dependent on Persian Gulf oil, which will account for 55 percent of world exports by 2000.43
HISTORICAL AND FORECASTED LEVELS OF CARBON
EMISSIONS FROM TRANSPORTATION
100 PASSENGER MILES
|POUNDS PER 100 TON MILES|
|Light Duty Vehicles||19||17||15||Rail Freight||3||3||2|
Source: U.S. Department of Energy, Energy Information Administration, Supplement to the Annual Energy Outlook 1995 (Washington, D.C., 1995), tables 1, 32, 47, 52 and 53; Transportation Energy Data Book: Edition 13 (Washington, D.C., 1993), tables 2.12 and 2.14.
* The Task Force members agreed to defer to the significantly greater analytical resources available to the Presidential Advisory Group on Greenhouse Gas Emissions from Personal Motor Vehicles. Although this group completed its work without issuing a consensus final report, policymakers can refer to the advisory group's docket to review the analytical work and discussion regarding the appropriate level for the passenger-mile components of this indicator.
Emissions of greenhouse gases are an important concern and transportation emissions are growing significantly. A wide range of policies can contribute to attaining the Task Force's indicator levels, including increasing the energy efficiency of vehicles, encouraging use of alternative modes of transportation, increasing vehicle occupancy or load factors, or making use of alternative technologies and fuels. Where alternative fuels could contribute to attaining the indicator levels, full fuel cycle impacts of alternative technologies or fuels should be taken into account to accurately measure their potential contributions to the target. Economic and equity considerations should emphasize policies that enhance the affordability of and access to transportation services.
Because the transportation system is characterized by large fixed investments, slow capital stock turnover and limited opportunity to alter behavior in the short term, no indicator level has been set for the year 2000. In particular, because automobile production plans for the year 2000 are set, any near-term progress toward these indicator levels could only be achieved primarily through shifts in the mode of transportation used, increased vehicle occupancy or load factors, and perhaps increased use of alternative fuels.
There is considerably more opportunity to reduce emissions in the next 15 years through a combination of behavioral factors and technological market shifts, including a small penetration of "New Generation" technologies. The Annual Energy Outlook 1994 projects that on-road vehicle efficiencies will increase 14 percent between 1990 and 2010. 47 However, continued erosion of occupancy or load factors may reduce the benefits from this change. Thus, obtaining significant improvement in emissions per mile could still require a combination of technology improvements and behavioral shifts.
The year 2025 indicator represents a substantial penetration of "New Generation Vehicles" in the personal transportation fleet along with other policies that would decrease emissions in the freight sector.
Congestion puts a high economic burden on society--accidents, wasted time, excessive fuel consumption, and additional pollution per mile traveled. Further, congestion is increasing rapidly in most urban and suburban areas. A measure commonly employed by the National Highway Administration to gauge the driving conditions on major urban highways is the volume to capacity ratio. Moderate congestion is defined as a volume-to-capacity ratio of 0.7 or above, with severely congested conditions defined as volume-to-capacity over 0.95 (that is bumper-to-bumper.49 The afternoon rush hour (4-7 p.m.) was the period of the day when most of these trips were made. The largest number, however, were made for family and personal business rather than commuting to or from work.50 The Roadway Congestion Index (developed by the Texas Transportation Institute for 50 urban areas nationwide) shows that from 1982 to 1990 cities with the greatest population density had the most congestion and the greatest increases in congestion; 47 of the 50 cities experienced congestion increases.51 Traffic congestion in 1990 was also measured as costing, on average, 200,000 hours of delay and $860 million in fuel costs and delay time.52
Stabilizing vehicle miles traveled could require significant changes in land use, transportation infrastructure, mass transit, and commuting patterns. The Task Force's indicator is very aggressive relative to current trends, as vehicle miles traveled have been increasing by over by percent per year and vehicle miles traveled per capita have been increasing over two percent per year.61 Nevertheless, recent statutes such as the Intermodal Surface Transportation Efficiency Act and the Clean Air Act Amendments of 1990 as well as state efforts have begun to focus on reducing the growth in transportation demand.62 For example, the state of Oregon requires planning in urban areas to attempt to reach goals similar to this target. The Task Force is particularly concerned that the attainment of this indicator be reached by providing alternatives that enhance affordable access to jobs, services, and recreation for low income people. Alternatives to single occupancy driving include: increasing passengers in a personal vehicle, using public transport, trains, or planes, walking, bicycling, and other transport.
Projections of vehicle miles traveled in 2025 vary by over 50 percent, depending on demographic and other factors. Forecasts of policy responses also vary. For example, reputable estimates of the price elasticity of vehicle miles traveled to gasoline prices can vary substantially, depending on the magnitude of price changes and the time horizon for behavioral and technology adjustments.