The Opportunity - If our recommendations are as successful as we expect, they will have the following effects over the next 25 years:
Energy Future Coalition
Reduced oil dependence: U.S. consumption of oil would be reduced by 3 million barrels per day about 15 percent of current U.S. consumption, comparable to total U.S. imports from the Persian Gulf. This result would be obtained by:
· Introducing new technology that could economically produce more than
50 billion gallons per year of ethanol. This would be the result of a successful
demonstration program of cellulosic biomass conversion. If all this production
replaced gasoline in the transportation sector, it would displace 2.6 million
barrels per day of oil.
· Facilitating the adoption of hybrid electric and other advanced fuel-saving technologies in the automotive sector. Because these options will be introduced gradually, because consumer acceptance remains unproven, and because the fleet takes about 15 years to turn over, we have attributed savings of only 400,000 barrels per day of oil to this initiative. If the entire fleet became 25 percent more efficient in this time frame, the additional fuel savings would be at least 1.2 million barrels per day.
Job creation: These economic benefits would stimulate job creation indirectly, and our proposals would also have direct effects on employment:
Based on analyses performed by the New Growth Initiative for the Apollo Alliance
for energy independence, the biofuels and energy efficiency investments described
above could produce over one million jobs in the U.S. economy by 2015, jobs
that would stay in the U.S. because the investments must be made here.
Additionally, our recommendations lay the basis for preserving and ultimately increasing employment in the automotive, coal, and power technology industries. U.S. automakers would be more competitive in future domestic and international auto markets. And maintaining coal as a viable fuel in a carbon-constrained world is crucial to the jobs picture in this industry, which has been shedding jobs for decades.
The long-term job benefits of positioning the U.S. to compete effectively in the emerging automotive and coal gasification markets are very large. According to New Growth Initiative estimates, a strong and competitive automobile industry could create 500,000 jobs over the next 30 years. Similarly, the clean coal export market, according to a General Accounting Office report, represents a potential of some 600,000 jobs for power equipment industries. It is also important to recognize that these job benefits arise from a substantial restructuring of the U.S. energy industry. This transition might result in some job losses in this sector or other sectors. Assistance for any displaced workers would be appropriate - a process that would be easier if the U.S. is creating new energy jobs at the same time.
Click here for a compilation of job creation and economic growth reports.
Improved economic growth: These initiatives are intended to stimulate private
investment on an economically attractive basis. While it is difficult to estimate
their aggregate impact on the economy, it is clear that the benefits of this
stimulus are large. For example:
· In a recent report, the National Research Council estimated that the cost to the nation's economy of oil dependence is $5 per barrel. This cost includes two macroeconomic effects. One is the exposure to price volatility that creates economic losses as oil prices fluctuate. The other is the cost of the artificially high oil price supported by the OPEC cartel. Avoiding this cost on 3 million barrels per day would save the nation $5.5 billion per year. Other studies suggest savings in the same range.
· The End-Use Efficiency Working Group calculates that its proposed reduction of 225 billion kilowatt-hours of electricity demand would cut consumers' electric bills by some $15 billion per year.
· Analysts differ on the appropriate cost to assign to the potential damages of climate change, but a modest estimate of the damages would be $10 to $25 per ton of carbon. Using this metric, cutting carbon emissions by 180 million tons per year would be worth $1.8 billion to $4.5 billion annually.
Other, less predictable benefits would flow from:
· Creating a more reliable and secure electricity system. The Electric Power Research Institute estimates that power outages and power quality disturbances cost businesses in the U.S. more than $100 billion a year. Simply reducing the cost of electricity outages, and using a more conservative impact estimate of $50 billion a year, would more than justify investment in the smart grid. The benefits of that investment whould also include increased efficiency of power distribution and increased capacity for end-use conservation.
· Creating new markets for American products. This is a direct effect of encouraging economic development abroad - e.g., by creating the financing tools proposed by the International Working Group. In addition, ending predatory pricing of agricultural products by redirecting farm subsidies to producing energy benefits would increase rural income in the developing world by billions of dollars annually. Gaining experience on carbon capture and sequestration technologies would position the U.S. to participate in the global market for carbon control. Developing biorefineries for the conversion of biomass to petroleum substitutes would similarly create worldwide market opportunities.
Mitigated climate change: U.S. emissions of carbon would be reduced by 180 million tons per year, or about 10 percent of total U.S. greenhouse gas emissions in 2001. This result would be obtained by:
· The biofuels and automotive recommendations outlined above.
· Exploiting the opportunities for reducing electricity use through co-funding of state and local efficiency programs as envisioned by the End-Use Efficiency Working Group. These steps would cut electric demand by 225 billion kilowatt hours per year, which would reduce carbon emissions by 40 million tons per year, assuming no change in the mix of fuels used to generate electricity.
· Note that credit is not taken here for the potential deployment of carbon capture and sequestration technology for coal-based electricity generation. Development of this technology will not result in widespread deployment unless an economic benefit is created for reducing carbon dioxide emissions. Illustratively, however, adoption of carbon capture and sequestration by 10 percent of existing coal-based electricity generation would reduce carbon emissions by 60 million tons a year.
· Even though the Coalition's goals in these two areas focus on U.S. impacts, similar actions by other countries would greatly increase the benefits for the U.S. as well as for the world as a whole.
Costs and benefits: The cost to the government of deploying biorefineries and advanced vehicles and co-funding state and local efficiency programs would be about $30 billion.
This package also includes recommendations for federal expenditures on technology
research demonstrations that will lay the groundwork for future progress. We
give highest priority to research on hydrogen fuels, fuel cells, and carbon
capture and sequestration, along with a major effort to demonstrate new gasification
technology for the production of electricity from coal. The cost of these recommendations
is $30-40 billion. These costs are similar to the cost of energy incentives
and research programs that are being considered in Congress.
Given the quantifiable economic benefits outlined above of at least $22 billion per year, the entire program would pay for itself with approximately three years' worth of benefits, and we feel confident the benefits are, if anything, considerably underestimated.