Technology and greenhouse gas emissions: An integrated analysis using the LBNL-NEMS model

The common perception among many policy makers and industry leaders is that the twin objectives of reducing greenhouse gas emissions and promoting a more competitive economy are inherently contradictory. Many believe that anything done to lower such emissions will necessarily restrict economic activity. Others argue that if the economy moves forward at current levels of efficiency, growth in greenhouse gas emissions will be inevitable and the global climate will be seriously damaged. Because of the "unavoidable tradeoff" between these two objectives, the various industry, government and environmental groups wage a constant policy battle over which objective merits the greater support. From a perspective of cost-effective investments in technology, however, it becomes increasingly clear that these two goals are not at all contradictory. The reason is that the U.S. economy falls short of an optimal level of overall carbon efficiency. Figure ES-1 on the following page illustrates the different points of view in a schematic way. The curves on this graph represent different "Production Possibility Frontiers" that characterize the relationship between carbon emissions mitigation and economic activity. The frontier defines the outer boundary of what is feasible given a set of technologies and economic activity levels. Most modeling of the costs of reducing carbon emissions assumes that the reference case carbon intensity is on the frontier, and that any increase in carbon mitigation must also result in a decrease in Gross Domestic Product (this point of view corresponds to the curve labeled "Assumed Year 2010 Business-As-Usual Case Frontier"). Our analysis demonstrates that the "Actual Year 2010 Business-As-Usual Case Frontier" is further out than the assumed frontier, which means that both carbon mitigation and GDP can be increased at the same time, given the right set of policies and programs. In addition, since the frontier is a function of technology, and the cost of that technology is a function of policy choices made between now and 2010, taking aggressive actions now to reduce carbon emissions can actually move the frontier further out than it would be given the technologies that exist in the reference case. This possibility is represented by the curve labeled "Year 2010 Aggressive Implementation Case Frontier". This report describes an analysis of possible technology-based scenarios for the U.S. energy system that would result in both carbon savings and net economic benefits. We use a modified version of the Energy Information Administration's National Energy Modeling System (LBNL-NEMS) to assess the potential energy, carbon, and bill savings from a portfolio of carbon saving options. This analysis is based on technology resource potentials estimated in previous bottom-up studies, but it uses the integrated LBNL-NEMS framework to assess interactions and synergies among these options.