ECONOMIC REPORT OF THE PRESIDENT

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in the United States where new wind and solar can come online at a similar or lower cost than new coal.30 Note that EIA projections suggest that the unsubsidized LCOE for wind and solar will continue to be above that for natural gas (conventional combined cycle), on average across the United States, in 2018 and 2022 (EIA 2016a). To better understand what is driving the declining carbon intensity, CEA estimates the portion of carbon intensity in electricity generation decline due to two factors: a reduced carbon intensity of fossil-fuel generation driven by a shift toward natural gas resources, and an increase in electric generation from renewable resources. To do so, CEA uses an analytical approach that develops estimates of counterfactual emissions holding constant the carbon intensities of the electric generating portfolio in 2008. In particular, CEA first considers the case where the emissions factor associated with the portfolio of fossil-fuel electric generation; that is, the emissions per unit of energy generated from a fossil-fuel resource, in 2008 is held constant through 2015. As the emissions factor reflects the mix of resources in the fossil-fuel electric generating portfolio in 2008, this factor reflects the composition and efficiency of coal, natural gas, and petroleum generation resources in 2008. Applying this factor to the total electricity generated from fossil-fuel resources from 2009 to 2015 develops a counterfactual level of emissions had the portfolio of fossil-fuel resources remained constant in mix and efficiency over this time. Then, the difference between the quantity of emissions in the counterfactual and the observed emissions from electricity generated by fossil fuels during this time provides an estimate of emissions saved as a result of the reduction in carbon intensity of fossil-fuel electricity generation.31 This reduction in carbon intensity is expected to stem primarily from increased natural gas generation, though would also include improvements in technical efficiency from fossil fuel resources. Much of the shift toward natural gas comes from rising supplies and falling prices of natural gas in the United States, though some may stem from policies that have aimed to account for and internalize some of the externalities of coal combustion. Next, in a similar fashion, the analysis considers the emissions outcomes if the emissions factor from the entire portfolio of electricity generating resources in 2008 were held constant through 2015. The difference between these counterfactual emissions and total actual emissions from 30 Wind: DOE (2015), Wiser and Bolinger (2014); Solar: Galen and Darghouth (2015), Bolinger and Seel (2015). 31 This analytical approach holds fixed the observed kWh demand from fossil fuels and total power when estimating counterfactual emissions. To the extent that the shift to natural gas led to an increase in electricity demand, this approach would overstate the impact of coal-to-gas switching on reducing emissions. Addressing Climate Change | 465
Figure 7-23 Decomposition of Emission Reductions from Power Sector, 2008–2015 Million Metric Tons 2,500 2,400 Counterfactual - Total Power Sector 2015 2,300 2,200 2,100 2,000 Actual - Total Power Sector Reduction from Increased Zero- Carbon Generation Reduction from Cleaner Fossil-Fuel Generation 1,900 1,800 2008 2009 2010 2011 2012 2013 2014 2015 Source: Energy Information Administration; CEA Calculations. electricity generation would then represent the total avoided emissions from changes in the carbon intensity of the entire electricity portfolio. By subtracting total avoided emissions attributed to reduced carbon intensity from fossil fuel resources calculated as described above, the remaining difference between actual and counterfactual emissions can be attributed to an increase in resources with zero-carbon footprints; that is, an increase in the share of renewable energy resources.32 For 2015, 284 million metric tons (MMT) (66 percent) of 428 MMT total avoided emissions was due to reduced carbon intensity from lower-carbon fossil resources, leaving 144 MMT (34 percent) attributable to increased generation from renewables. Figure 7-23 shows this decomposition from 2008 to 2015. Decomposition of the Unexpected and Total Declines in Emissions This section summarizes overall contributions to the observed emissions decline by decomposing reductions into those attributable to lower energy intensity, lower carbon intensity, and the difference from projections 32 While this could include increased generation from nuclear power, the EIA shows that net generation from nuclear power remained fairly constant over the period, with an overall reduction in 2015 compared to 2008. Year-to-year fluctuations in nuclear or hydro power can affect annual changes in the contribution of non-carbon energy, but the overall result of significant contribution from non-hydro renewables over time is not altered by these sources, as both hydro and nuclear power saw small declines over the 2008-15 window. 466 | Chapter 7
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ECONOMIC REPORT OF THE PRESIDENT To
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C O N T E N T S ECONOMIC REPORT OF
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economic report of the president To
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eforms in history. Banks have sharp
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the annual report of the council of
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C O N T E N T S CHAPTER 1: EIGHT YE
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. THE ECONOMIC RATIONALE FOR FEDERA
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2.4. Government Purchases as Share
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4.iii. Premium for the Benchmark Pl
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6.18. Systemic Risk (SRISK) 2005-20
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C H A P T E R 1 EIGHT YEARS OF RECO
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Figure 1-1 Actual and Consensus For
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Figure 1-3 Real Hourly Wage Growth
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Figure 1-4 Real GDP per Capita: Eur
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Figure 1-6 Household Net Worth in t
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Figure 1-8 Global Trade Flows in th
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Subsequent revisions to fourth-quar
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Percent 6 Figure 1-9 Fiscal Expansi
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substantial costs to the Federal Go
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worked to promote innovation and in
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expansion, a period of low producti
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The 2017 Economic Report of the Pre
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Chapter 4: Reforming the Health Car
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to the ACA and other factors. The A
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than 98 percent of Americans should
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Figure 1-13 Borrowers in Income Dri
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success of the financial rescue and
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einforced U.S. leadership in the ru
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Partnership (OGP), a global partner
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Figure 1-16 Labor Productivity Grow
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Labor Force Participation Household
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number of steps to ensure that econ
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C H A P T E R 2 THE YEAR IN REVIEW
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Percent 11 Figure 2-1 Unemployment
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allowing for additional investments
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Percentage Point 0.6 0.4 Figure 2-3
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public, largely highway constructio
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The size of the Federal Reserve’s
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Figure 2-5 Private-Sector Payroll E
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fell 80 percent from September 2014
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Figure 2-8 Rates of Part-Time Work,
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Figure 2-v Prime-Age Male Labor For
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Output Real GDP grew 1.6 percent ov
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Figure 2-11 Compensation and Consum
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Table 2-i Optimal Weighting for Hou
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esults suggest that, to a first app
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Figure 2-viii Real GDP, Average and
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Figure 2-13 Consumer Sentiment and
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Figure 2-xi Household Debt Service,
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Ratio to Annual DPI 1.10 1.05 Figur
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Figure 2-17 National House Price In
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Index 220 Figure 2-19 Housing Affor
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Figure 2-21 Composition of Growth i
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Figure 2-23 Capital Services per Un
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Box 2-7: Explanations for the Recen
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Figure 2-xv Business Fixed Investme
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Figure 2-26 Foreign Real GDP and U.
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somewhat generalizable (Box 2-8), b
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prices weakened and the global econ
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inadequate demand has contributed t
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Figure 2-31 Nominal Wage Inflation
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Figure 2-33 Real Hourly Wage Growth
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Index 6 Figure 2-36 Financial Condi
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Percent 4.0 Figure 2-38 Nominal Lon
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Dollars per Barrel 80 Figure 2-40 B
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Figure 2-41 IMF World Real GDP Grow
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against the Mexican peso, the Chine
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United Kingdom It has been a turbul
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for example, Japan has grown almost
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Figure 2-45 Credit to Nonfinancial
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Meanwhile, core inflation (excludin
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kept rates low across a wide range
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Investments in surface transportati
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Table 2-2 Supply-Side Components of
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Conclusion The economy continued to
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not increased from 1973 to 2013, in
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developments; individual behavior;
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action affecting income inequality
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have occurred. In doing so, these p
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Percent 24 21 18 15 12 9 6 African
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without the policy response.5 These
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Box 3-2: Income Inequality and the
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unable to obtain insurance at any p
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Figure 3-7B Percent 50 Uninsured Ra
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and have not expanded Medicaid foun
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Box 3-3: Safety Net Policies as Ins
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Millions of People 18 Figure 3-8 Im
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Figure 3-9 Effective Tax Rates for
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Box 3-4: Additional Actions to Make
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$294 million in newly appropriated
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15 10 5 0 -5 -10 -15 Figure 3-12 Pe
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Administration with those of previo
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as a share of potential GDP by Pres
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Figure 3-17 Changes in the Distribu
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30 25 20 15 10 5 0 Single Source: C
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ate on capital gains and dividends
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C H A P T E R 4 REFORMING THE HEALT
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eneficiaries have received cumulati
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form of lower premium costs and ind
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Percent 25 20 Creation of Medicare
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Figure 4-3 Health Insurance Coverag
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90 80 70 60 50 40 30 20 10 0 25 55
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Percent Uninsured 25 CHIP Created 2
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Legislative actions subsequent to C
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Percent Uninsured 40 35 Figure 4-7
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ecause of the ACA’s provision all
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Box 4-2: Dynamics in the Individual
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projected during the debate over th
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whelming majority of Marketplace en
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Figure 4-v Change in Benchmark Prem
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20 Figure 4-10 Share of Workers in
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percent during the decade preceding
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Panel A: Share with a Personal Doct
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Box 4-3: Interpreting Results from
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Fortunately, the OHIE is not the on
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Figure 4-14 Uncompensated Care as a
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Figure 4-15 Uninsured Rate by Popul
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Figure 4-17 Monthly Gain in Private
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Change in Working-Age Employment to
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this cross-sectional relationship b
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ecent discussions of macroeconomic
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Figure 4-23 Life Expectancy at Birt
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Figure 4-24 Mortality Rate vs. Medi
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more to cover Medicare patients tha
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example, through CMMI, the Administ
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orient payment around the entirety
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Percent of Payments 60 Figure 4-26
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covered under ACO contracts at the
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Additional Steps to Reform the Heal
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legislation that overrides the reco
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Figure 4-28 Health Care Price Infla
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Figure 4-30 Trends in Real Prices f
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average growth rate of real per enr
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Figure 4-34 Growth in Real Costs fo
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made a large, readily quantifiable
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in states experiencing weaker and s
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distribution, holding fixed both sp
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individuals among individuals 65 an
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Figure 4-40 Average Real Deductible
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Figure 4-41 Real Per-Enrollee Presc
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educe the growth rate of Medicare s
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improvements will strengthen ACOs
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-5 0 -2 Figure 4-42 Cumulative Perc
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Woolhandler 2015). These analysts a
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productivity on the job. These bene
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Figure 4-46 Premiums and Cost Shari
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(KFF 2016). Another fifth of tradit
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2030 2028 2026 2024 2022 2020 2018
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C H A P T E R 5 INVESTING IN HIGHER
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Gainful Employment regulations. To
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Thousands of 2015 Dollars 900 800 7
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externalities, credit constraints,
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Figure 5-4 Earnings by Age and Educ
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Figure 5-5 Variation in Earnings by
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Box 5-1: Anti-Poverty Efforts and E
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careers. Some of the effects of the
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eligibility cutoff likewise finds s
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Box 5-2: Federal Investments in K-1
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Evaluations of early local Promise
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America’s College Promise Playboo
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Dollars 45,000 40,000 35,000 30,000
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pre-payment penalty. Second, by tyi
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equirements, pushed efforts associa
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Figure 5-16 Size of Outstanding Loa
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Figure 5-17 Average Monthly Payment
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Figure 5-18 Distribution of Key Out
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Figure 5-20 Earnings by Family Inco
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to student needs and improve test s
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Box 5-5: Making Sure Students Enter
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prior, the early FAFSA reform helps
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Figure 5-ii Number of Institutions
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Figure 5-23 Gainful Employment Earn
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Additionally, Pell Grants can be be
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C H A P T E R 6 STRENGTHENING THE F
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with no easy way to get the funds f
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public has limited information, run
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value added of the sector has gradu
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managers. Thus, after fees, savers
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Too Many Resources in Finance? Beyo
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of the firm after the purchase affe
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Percent 100 Figure 6-2 Mortgage Ori
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Figure 6-4 Case-Shiller Home Price
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Figure 6-7 Global OTC Derivative Ma
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consumer and investor protections.
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Figure 6-iv Top 5 Banks as Share of
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cult to replace with services from
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Are U.S. Banks Too Big? The questio
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The three federal banking agencies
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Risk Taking The Dodd-Frank Act took
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Box 6-3: The Performance of Communi
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Figure 6-ix Return on Assets of Ban
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egulators can take a more holistic
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Figure 6-13 Repo and Reverse Repo,
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Figure 6-15 Private Funds Reporting
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Days 60 Figure 6-16 Weighted-Averag
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Figure 6-18 Systemic Risk (SRISK),
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In the absence of another financial
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lower funding costs in 2007-09, “
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through the Dodd-Frank Act and othe
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Prior to the financial crisis, one
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asis.24 One of the advantages of ce
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findings from the NRSRO examination
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Prior to the crisis, enforcement of
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Box 6-5: Addressing the Problem of
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Table 6-i Sources of Investment Adv
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financial system and the systems of
Page 420 and 421: Box 6-6: The JOBS Act While it was
Page 422 and 423: Figure 6-23 S&P 500, 2003-2016 Inde
Page 424 and 425: Figure 6-27 Mortgage Delinquency an
Page 426: It created the FSOC to consider ris
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Page 431 and 432: of domestic actions to reduce green
Page 433 and 434: people and vegetation (U.S. Global
Page 435 and 436: investment are much higher than the
Page 437 and 438: Delaying Action on Climate Change I
Page 439 and 440: uses and land management activities
Page 441 and 442: Carbon Pollution Standards for Powe
Page 443 and 444: a projected range of $16 billion to
Page 445 and 446: these resulted in insignificant cha
Page 447 and 448: Figure 7-4 Corporate Average Fuel E
Page 449 and 450: diesel fuel and jet fuel. The Vehic
Page 451 and 452: Box 7-3: Building Resilience to Cur
Page 453 and 454: sources in the oil and gas sector,
Page 455 and 456: emissions and total greenhouse gas
Page 457 and 458: Figure 7-7 Energy Intensity of Real
Page 459 and 460: Figure 7-10 U.S. Petroleum Consumpt
Page 461 and 462: Figure 7-12 Energy Intensity Transp
Page 463 and 464: Figure 7-14c Energy Intensity Comme
Page 465 and 466: Figure 7-16 U.S. Energy Consumption
Page 467 and 468: 2008 to 7 percent in 2015. Figure 7
Page 469: Index, 2008 =0 0.1 0.0 -0.1 Figure
Page 473 and 474: three determinants of emissions? If
Page 475 and 476: Percent 100 80 Figure 7-26 Sectoral
Page 477 and 478: characteristics, and management tre
Page 479 and 480: oil and gas sector) were subsequent
Page 481 and 482: while creating new jobs and raising
Page 483 and 484: such as using similar methodologies
Page 485 and 486: Box 7-4: Supporting Increased Penet
Page 487 and 488: sector, the fee would incentivize p
Page 489 and 490: to be used to decompose emissions i
Page 491 and 492: Reinvestment Act.” NBER Working P
Page 493 and 494: D’Amico, Stefania, et al. 2012.
Page 495 and 496: ______. 2016. “Chapter 3: Develop
Page 497 and 498: Chetty, Raj, et al. 2014. “Where
Page 499 and 500: NBER Working Paper 22170. Cambridge
Page 501 and 502: American Hospital Association and H
Page 503 and 504: Cantor, Joel C., et al. 2012. “Ea
Page 505 and 506: ______. 2012a. “Direct Spending a
Page 507 and 508: Dranove, David, Craig Garthwaite, a
Page 509 and 510: Wars: Global Solutions for Developi
Page 511 and 512: Huang, Jidong, and Frank J. Chaloup
Page 513 and 514: McWilliams, J. Michael. 2016. “Ch
Page 515 and 516: Pinkovskiy, Maxim. 2014. “The Imp
Page 517 and 518: ______. 2016. “Certification of M
Page 519 and 520: Arcidiacono, Peter, V. Joseph Hotz,
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Bulman, George, and Caroline Hoxby.
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______. 2015a. “Economic Costs of
Page 525 and 526:
Dobbie, Will, and Roland G. Fryer J
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Committee on Health, Education, Lab
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Jepsen, Christopher, Kenneth Troske
Page 531 and 532:
Marcotte, Dave E., et al. 2005. “
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Reynolds, Arthur J., et al. 2011.
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Chapter 6 Acharya, Viral. V., Deniz
Page 537 and 538:
Fama, Eugene F., and Kenneth R. Fre
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Wheelock, David C., and Paul W. Wil
Page 541 and 542:
______. 2016a. “The Economics of
Page 543 and 544:
______. 2016c. Short Term Energy Ou
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Interagency Working Group on the So
Page 547 and 548:
Office of Management and Budget (OM
Page 550:
A P P E N D I X A REPORT TO THE PRE
Page 553 and 554:
Council Members and Their Dates of
Page 556 and 557:
Report to the President on the Acti
Page 558 and 559:
consulting with a wide variety of o
Page 560 and 561:
In October, the Council released a
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Research Economists David Boddy . .
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A P P E N D I X B STATISTICAL TABLE
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GOVERNMENT FINANCE, INTEREST RATES,
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Year or quarter Table B-1. Percent
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Table B-2. Gross domestic product,
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Table B-3. Quantity and price index
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Table B-5. Real exports and imports
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Year Total Table B-7. Real farm inc
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Table B-9. Median money income (in
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Labor Market Indicators Table B-11.
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Year or month Table B-12. Civilian
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Table B-14. Employees on nonagricul
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Year or month Table B-15. Hours and
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Government Finance, Interest Rates,
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Table B-19. Federal receipts and ou
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Table B-21. Federal and State and l
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Table B-23. U.S. Treasury securitie
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Year and month Bills (at auction) 1
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Year and month Table B-26. Money st
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