Tuesday
May 20, 2008
Unique Study Shows Many Hurdles for Compliance with Lieberman-Warner Climate Bill
WASHINGTON, D.C. – A new, unique study conducted by NERA Economic Consulting for NPRA, the National Petrochemical & Refiners Association, shows that significant increases in nuclear and wind-generated energy, as well as full realization of uncertain technologies such as carbon sequestration, would be required to meet the demands of S. 2191, pending climate change legislation sponsored by Senators Joe Lieberman (I-Conn.) and John Warner (R-Va.). NERA has assisted in the development and evaluation of cap-and-trade programs for nearly two decades, beginning in the early 1990’s with California’s RECLAIM program and the national acid rain trading program. In 2000, NERA began work on the European Union Emissions Trading Scheme (EU ETS), assisting the European Commission (EC) in developing the initial parameters for the program.
“This study offers a new, unique look at what it would take to meet the requirements of the Lieberman-Warner bill as opposed to simply what the resulting costs would be,” NPRA President Charles T. Drevna said. “The results from NERA show that compliance with the bill would require significant increases in nuclear and wind power, significantly more liquefied natural gas, the realization of carbon capture and sequestration, and significant increases in ethanol use that would not be sustainable.”
Basic Requirements for Compliance with S. 2191, the Climate Security Act
- By 2025: Importation of more than 2.36 trillion cubic feet of liquefied natural gas annually from overseas
- By 2030: At least 70 new nuclear reactors on 35-40 new nuclear sites
- By 2030: A 7-fold increase in new wind power (40,000 new wind turbines and potential land use of up to 2 million acres – more than three times the size of Rhode Island) and a 33-fold increase in biomass-driven electricity generation capacity, which does not currently exist on such a large scale
- By 2030: 68 billion gallons of ethanol blended annually – with roughly 30 billion gallons of cellulosic and more than 25 billion gallons of corn ethanol; significant new infrastructure and vehicle fleets, including a 590 percent increase in E85 vehicles as the majority of existing vehicles and infrastructure are incapable of handling more than E10 (22 million E85 vehicles on the road in 2020; more than 76 million by 2030)
- Virtually no new construction of coal plants that do not have carbon capture and sequestration (CCS) technology. Even with CCS, use of coal as a source of electricity generation is reduced by more than 31 percent in 2030.
Estimated Costs
The NERA study and several other economic assessments of the Lieberman-Warner bill all demonstrate significant economic costs to both businesses and consumers. NERA’s cost and price projections represent the costs only if the previously mentioned energy challenges can be met. Failing to meet any of these landmarks would most likely lead to a significant increase in the cost of the proposed legislation. Based on the data from NERA and other studies, the Lieberman-Warner bill will most likely:
Raise gasoline and petroleum fuel prices by 48 cents per gallon by 2030 (in 2007 dollars) – if the aforementioned hurdles are overcome.
- NERA projects a 13 cents per gallon price increase by 2012 and 48 cents per gallon cost increase by 2030. Once again, these numbers apply only if the previously mentioned energy hurdles can be overcome. If they are not achieved, costs will likely be much higher.
- The price increases are due to the fact the study predicts Lieberman-Warner will add 60 cents per gallon to the cost of making refined petroleum products like gasoline, diesel and jet fuel. Approximately 85-90 percent of this cost is paid for by consumers.
- In aggregate, the costs will be roughly $624 billion in 2007 dollars over the 2012-2030 timeframe in the motor fuels sector alone - $538 billion of this amount will be paid by consumers according to NEMS modeling. Lead to a 3 percent decrease in vehicle miles traveled (VMT) per vehicle, per year. Americans would drive 142 billion fewer miles due to higher fuel costs. The fact that the U.S. Department of Transportation states, “Highway VMT are projected to grow 60% by 2030, in step with the growing U.S. population,” shows the significance of this impact. Increase costs on the petrochemical community by more than $2 billion (2007 dollars) from 2012-2030.