sectoral economic costs and benefits of ghg mitigation - IPCC

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Energy Intensive Industries energy cost that helps us to remain competitive when other components of our manufacturing costs are higher. If our energy costs are disproportionately increased, the delicate competitive balance of total manufacturing costs is distorted. In late 1998, we learned how relatively small increments in cost structures can quickly create serious trade balance problems. A couple of studies on the potential impacts of higher energy prices illustrate the effect. Both Argonne 1 and the Economic Strategy Institute 2 have concluded that a Kyoto-driven doubling of steel industry energy costs would lead to a shift of about 30% of current domestic steel manufacturing to developing countries. This shift in manufacturing corresponds to a loss of about 100,000 direct steelmaking jobs and perhaps four to five times that for supporting businesses. Perversely, no net environmental improvement will be realized if that production occurs in developing countries where steel is manufactured with less energy efficiency than in the United States. We also need to be aware of competitive distortions among competing materials, and even within the domestic steel industry itself, by artificially altering the energy cost structure. The Administration has been having consultations with energy-intensive industries to encourage voluntary reductions and has asked industries to establish stretch goals, which they describe as energy reductions above and beyond business-as-usual. If we equate business-as-usual as doing the things that make economic sense – for example, those measures that have resulted in the 45% reduction over 25 years – then a stretch goal suggests doing things that do not make economic sense. To accelerate the trend beyond business-as-usual, therefore, we need to change the economics – to take steps for more rapid injection of technology and turnover of capital stock. Incentives to accelerate more rapid technological change can assume a variety of forms, and ACCF has studied many of these mechanisms. They may include investment tax credits, production credits for achieving stated energy efficiency goals, tax credits for research and development investments related to energy efficiency, rapid amortization or expensing of energy savings investments, expedited permitting for energy efficiency technology projects, or removal of other regulatory impediments or barriers. As has been aptly explained by other panelists, however, the real challenge with any financial incentives is to make them revenue-neutral or budget-acceptable. The steel industry has had some discussions with Congressional staffs working on tax incentive legislation and several of these options are under consideration. One of particular interest to the steel industry is a tax credit for co-generation facilities that utilize waste gas or waste heat that is characteristic and prevalent in our industry. Utilization of these fuels to generate electricity can replace purchased electricity that might be coal-based and associated with higher carbon dioxide emissions. One fundamental requirement for any tax credit for the steel industry is the need to apply the credit to the alternative minimum tax, because income tax credits are of no value to many steel companies who have net operating losses carried forward. However, the real key to stimulating more rapid turnover of capital stock and injection of more energy efficient technology is improved profitability. Industries that are profitable – e.g., pharmaceuticals, medicine, information technology – invest in new technology and devote a large percentage of their revenues to research and development (R&D). The American steel industry spends on the order of one-half of one percent of its revenues on R&D. The Japanese steel industry spends 2-3% of its revenues on R&D, and I would guess the industries mentioned above spend considerably more. If energy efficiency comes about through more rapid investment in technology, if technology flows from R&D, and if R&D is a function of profitability, then our policies need to be focused not just on tax incentives but on more fundamental measures to make energy-intensive industries like steel more competitive and profitable. 238
Bruce A. Steiner References Sutherland, R.J. “The Impact of Potential Climate Change Commitments on Energy-Intensive Industries: A Delphi Analysis,” Argonne National Laboratory, Washington, DC, February 1997. Szamosszegi, A.Z., L. Chimerine, and C.V. Prestowitz, “The Global Climate Debate: Keeping the Economy Warm and the Planet Cool,” Economic Strategy Institute, Washington, DC, September 1997. 239
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INTERGOVERNMENTAL PANEL ON CLIMATE
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Preface Preface Assessment of the s
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Contents Additional Submissions ♣
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PART I INTRODUCTION AND SUMMARY 1
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Ogunlade Davidson I therefore urge
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Lenny Bernstein from mitigation mea
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Terry Barker, Lenny Bernstein, Ken
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Ulrich Bartsch and Benito Müller I
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Ulrich Bartsch and Benito Müller T
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Ulrich Bartsch and Benito Müller R
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Ulrich Bartsch and Benito Müller C
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Ron Knapp The top seven coal export
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Ron Knapp would impose on the US ec
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Ron Knapp "Because of the high carb
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Ron Knapp the adverse impact of Kyo
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Davoud Ghasemzadeh and Faten Alawad
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Jonathan Stern Discussion: Impact o
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Jonathan Stern Energy Research Inst
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Jonathan Stern “Hot Air” Finall
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Seth Dunn and Michael Renner Table
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Seth Dunn and Michael Renner Servic
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Seth Dunn and Michael Renner Figure
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Seth Dunn and Michael Renner Table
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Seth Dunn and Michael Renner Policy
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Jonathan Pershing Fossil Fuel Impli
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Jonathan Pershing Economic Models A
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Jonathan Pershing uneven, and that
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Jonathan Pershing global oversupply
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Jonathan Pershing Table 5 Oil Produ
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Jonathan Pershing The question of t
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Jonathan Pershing Gas demand will v
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Jonathan Pershing It is necessary t
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Jonathan Pershing According to the
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Jonathan Pershing (h) Countries who
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PART III RENEWABLE ENERGY 105
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Patrick Criqui, Nikos Kouvaritakis
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José R. Moreira Discussion: Biomas
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José R. Moreira 5 Case C - Social
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José R Moreira The results indicat
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José R Moreira 7 Case E - Health D
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José R Moreira When a project is u
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Garba G. Dieudonne Impacts of Mitig
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Garba G. Dieudonne SMALL-SCALL HYDR
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Garba G. Dieudonne Issues Associate
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Garba G. Dieudonne The us of renewa
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Garba G. Dieudonne cooperatives and
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Oliver Headley Table 1 Intense Hurr
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Renewable Energy Table 3 Examples o
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Renewable Energy Table 5 Comparison
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Transport Mitigating GHG Emissions
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Transport the two objectives is the
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Transport The rapid expansion in th
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Transport Altering the mix of vehic
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Transport in the 1990s. Railways, d
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Transport The Indian study conclude
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Transport Synergy between local and
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Transport Figure 6 Transport relate
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Transport Lack of technology data D
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Transport • 10% of the autoricksh
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Transport Categories vary in applic
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Transport innovative mechanisms suc
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Page 214 and 215: PART V ENERGY INTENSIVE INDUSTRIES
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Page 260 and 261: Households and Services Ancilliary
Page 262 and 263: Households and Services it is based
Page 264 and 265: Households and Services • Heating
Page 266 and 267: Households and Services Impact of G
Page 268 and 269: Households and Services This defini
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Page 272 and 273: Households and Services 3.2 Technic
Page 274 and 275: Households and Services Tennant, T.
Page 276 and 277: PART VII PANEL DISCUSSION 270
Page 278 and 279: Panel Discussion In some sectors (p
Page 280 and 281: Appendix Appendix A Meeting Program
Page 282 and 283: Appendix 1030 Coffee/Tea 1100 Sessi
Page 284 and 285: Appendix Marc Darras Gaz de France,
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