oversight

Climate Change: Preliminary Observations on the Administration's February 2002 Climate Initiative

Published by the Government Accountability Office on 2003-10-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States General Accounting Office

GAO                          Testimony
                             Before the Committee on Commerce, 

                             Science, and Transportation 

                             United States Senate 



For Release on Delivery
Expected at 9:30 a.m.
Wednesday, October 1, 2003   CLIMATE CHANGE

                             Preliminary Observations
                             on the Administration’s
                             February 2002 Climate
                             Initiative

                             Statement of John B. Stephenson, Director
                             Natural Resources and Environment




GAO-04-131T 

                                                October 1, 2003


                                                CLIMATE CHANGE

                                                Preliminary Observations on the
Highlights of GAO-04-131T, a report to          Administration's February 2002 Climate
Senate Committee on Commerce,
Science, and Transportation                     Initiative



In 2002, the Administration                     The Administration stated that the Initiative’s general goal is to slow the
announced its Global Climate                    growth of U.S. greenhouse gas emissions, but it did not provide a basis for its
Change Initiative. It included,                 specific goal of reducing emissions intensity 18 percent by 2012. Any
among other things, a goal                      reduction in emissions above the 14-percent reduction already anticipated
concerning U.S. carbon dioxide and              would contribute to this general goal. However, GAO did not find a specific
other greenhouse gas emissions,
which are widely believed to affect
                                                basis or rationale for the Administration’s decision to establish a 4-
the earth’s climate.                            percentage-point reduction goal beyond the already expected reductions.

The Administration’s general goal               The Administration identified 30 elements that it expected would reduce
was to reduce the growth rate of                U.S. emissions and contribute to meeting its 18 percent reduction goal by
emissions, but not total emissions,             2012. The 30 elements include a range of policy tools (such as regulations,
between 2002 and 2012. Its specific             research and development, tax incentives, and other activities) that cover
goal was to reduce emissions                    four broad areas: (1) improving renewable energy and certain industrial
intensity 18 percent, 4 percentage              power systems, (2) improving fuel economy, (3) promoting domestic carbon
points more than the 14 percent                 sequestration (for example, the absorption of carbon dioxide by trees to
decline already expected.                       offset emissions), and (4) challenging business to reduce emissions. GAO
Emissions intensity measures the
amount of greenhouse gases
                                                found that the Administration provided estimates of the reductions
emitted per unit of economic                    associated with 11 of the 30 elements, but not with the remaining 19
output. In the United States, this              elements. Of these 11 estimates, GAO found that 3 estimates represented
ratio has generally decreased for 50            future emissions reductions related to activities that occurred after the
years or more. Under the Initiative,            Initiative was announced. However, the other 8 estimates represented past
emissions would increase, but less              or current emissions reductions or related to activities that were already
than otherwise expected.                        underway before the Initiative was announced. Specifically,

GAO was asked to testify on                     • 	 In five cases, an estimate is provided for current or recent reductions,
whether the Administration’s                        but no information is provided about the expected additional savings to
publicly available documents (1)
                                                    be achieved by 2012, the end of the Initiative.
explain the basis for the Initiative’s
general and specific goals, (2)
identify elements to help reduce                • 	 In two cases, the elements are expected to yield savings over many
emissions and contribute to the 18                  years, but it is not clear what emissions reductions will be achieved by
percent reduction goal, as well as                  2012.
their specific contributions, and (3)
discuss plans to track progress in              • 	 In one case, savings are counted for an activity that began prior to the
meeting the goal.                                   announcement of the Initiative.
This testimony is based on ongoing
                                                It is, therefore, unclear to what extent the 30 elements will contribute to the
work, and GAO expects to issue a
final report on this work later this            goal of reducing emissions and, thus, lowering emissions intensity by 2012.
year. Because of time constraints,
GAO’s testimony is based on its                 The Administration plans to determine, in 2012, whether the 18-percent
analysis of publicly available                  reduction goal was met. Unless the Administration conducts one or more
Administration documents.                       interim assessments, it will not be in a position to determine, until a decade
                                                after announcing the Initiative, whether its efforts are having the intended
www.gao.gov/cgi-bin/getrpt?GAO-04-131T.
                                                effect or whether additional efforts may be warranted.
To view the full product, including the scope
and methodology, click on the link above.
For more information, contact John B.
Stephenson at (202) 512-3841.
Mr. Chairman and Members of the Committee:


We are pleased to be here today to discuss our preliminary observations
on certain aspects of the Administration’s February 2002 Global Climate
Change Initiative. This Initiative included, among other things, a goal
related to domestic emissions of carbon dioxide and other greenhouse
gases.

Specifically, the Initiative established the goal of reducing U.S. emissions
intensity 18-percent by 2012, which is 4 percentage points more than the
14-percent reduction that was otherwise expected to occur. In 2012, this
4-percent reduction in emissions intensity is expected to translate into a
100 million ton reduction in carbon emissions below levels that would be
expected in the absence of the Initiative. The Initiative is comprised of 30
elements, including partnerships with industry and tax credits, designed to
achieve the reduction in emissions intensity.

It is important to note that the Administration’s goal is to reduce emissions
intensity, not total emissions. Emissions intensity measures the amount of
greenhouse gases emitted per unit of economic output. For example, in
1990, U.S. emissions totaled 1,909 million metric tons of carbon equivalent
and economic output (or Gross Domestic Product) totaled $9,216 billion.1
Dividing these numbers yields an emission intensity ratio of 207 tons of
emissions per million dollars of economic output. Emissions intensity
changes in response to variations in either emissions or economic output.
For example, if emissions increase more slowly than economic output
increases, the ratio decreases. If emissions increase more quickly than
economic output increases, the ratio increases. If emissions and economic
output increase by the same proportion, emissions intensity does not
change.

Our testimony, which is based on ongoing work, discusses the extent to
which the Administration’s public documents (1) explain the basis for its
general goal of reducing emissions and its specific goal of reducing
emissions intensity 18 percent by 2012, (2) explain how the elements
included in the Administration’s Initiative are expected to reduce


1
 To allow for comparisons among greenhouse gases, which differ in terms of their effects
on the atmosphere and their expected lifetimes, emissions are sometimes measured in
million metric tons of carbon equivalent (which we refer to as million metric tons). The
economic output number is expressed in 1996 dollars.



Page 1                                           GAO-04-131T Climate Change Initiative
            emissions and contribute to the goal of reducing emissions intensity 18
            percent, and (3) discuss the Administration’s plans to track progress
            toward meeting the goal. We expect to issue a final report on the results
            of our work later this year.

            Our testimony is based on our analysis of the Administration’s February
            2002 Global Climate Change Policy Book and subsequent White House fact
            sheets, as well as congressional testimony by administration officials, an
            August 2003 report on federal climate change spending,2 and related
            documents. Because of time constraints, we limited our work to
            reviewing these documents.

            We performed our work between July and September 2003 in accordance
            with generally accepted government auditing standards.


            In summary, in our review of the Administration’s documents, we found
Summary 	   that the Administration provided a general basis for its climate goal, but
            did not provide a detailed rationale for the emissions intensity target that it
            established. That is, we did not find a specific justification for the
            additional 4-percentage-point reduction--as opposed to any other target
            that could have been established—or what achieving a 4-percent reduction
            is specifically intended to accomplish.


            The Administration’s documents identified 30 elements that it expects to
            help reduce greenhouse gas emissions, but did not consistently provide
            information on how each element would contribute to the approximately
            100 million metric tons that it estimates the Initiative will save in 2012. In
            11 cases, the Administration provided an estimate of the element’s
            contributions, but in 19 other cases it did not provide such an estimate.
            Moreover, while 3 of the 11 estimates represented future savings levels
            related to activities that occurred after the Initiative was announced, the
            other 8 estimates were based upon past or current savings levels or were
            related to elements that were underway before the Initiative was
            announced. Furthermore, we found no current and comprehensive source
            for information about all 30 of the Initiative’s elements and their expected
            contributions toward achieving the goal of the Initiative.




            2
            Federal Climate Change Expenditures: Report to Congress, Aug. 2003.



            Page 2                                        GAO-04-131T Climate Change Initiative
             Finally, the Administration states that it plans to determine, in 2012,
             whether the goal of reducing emissions intensity was met. However, the
             documents we reviewed did not indicate whether it plans to assess its
             progress in the interim. Unless the Administration conducts one or more
             interim assessments, it will not be in a position to determine, until a
             decade after announcing the Initiative, whether its efforts to meet the goal
             are having the intended effect or whether additional efforts may be
             warranted.

             To help the Congress credibly assess the likelihood that the Initiative will
             achieve its stated goal, we believe that it would be helpful if the
             Administration would make readily available more current and complete
             information regarding the basis for establishing its emissions intensity
             goal, the elements intended to help achieve it as well as their expected
             contributions, and plans for monitoring interim progress toward the goal.
             Providing such information would constitute a small, but important step
             toward addressing broader issues in the policy debate now before the
             Congress about the challenges posed by global climate change.


             Carbon dioxide and certain other gases trap some of the sun’s heat in the
Background   earth’s atmosphere and prevent it from returning to space. The trapped
             energy warms the earth’s climate, much as glass in a greenhouse. Hence,
             the gases that cause this effect are often referred to as greenhouse gases.
             In the United States, the most prevalent greenhouse gas is carbon dioxide,
             which results from the combustion of coal and other fossil fuels in power
             plants, the burning of gasoline in vehicles, and other sources. The other
             gases are methane, nitrous oxide, and three synthetic gases. In recent
             decades, concentrations of these gases have built up in the atmosphere,
             raising concerns that continuing increases might interfere with the earth’s
             climate, for example, by increasing temperatures or changing precipitation
             patterns.


             In 1997, the United States participated in drafting the Kyoto Protocol, an
             international agreement to limit greenhouse gas emissions, and in 1998 it
             signed the Protocol. However, the previous administration did not submit
             it to the Senate for advice and consent, which are required for ratification.
             In March 2001, President Bush announced that he opposed the Protocol.

             In addition to the emissions intensity goal and domestic elements
             intended to help achieve it, the President’s February 2002 climate initiative
             includes (1) new and expanded international policies, such as increasing
             funding for tropical forests, which sequester carbon dioxide, (2) enhanced


             Page 3                                     GAO-04-131T Climate Change Initiative
                        science and technology, such as developing and deploying advanced
                        energy and sequestration technologies, and (3) an improved registry of
                        reductions in greenhouse gas emissions. According to testimony by the
                        Chairman of the White House Council on Environmental Quality, the
                        President’s climate change strategy was produced by a combined working
                        group of the Domestic Policy Council, National Economic Council, and
                        National Security Council.

                        While U.S. greenhouse gas emissions have increased significantly, the
                        Energy Information Administration reports that U.S. emissions intensity
                        has generally been falling steadily for 50 years. This decline occurred, in
                        part, because the U.S. energy supply became less carbon-intensive in the
                        last half-century, as nuclear, hydropower, and natural gas were
                        increasingly substituted for more carbon-intensive coal and oil to generate
                        electricity.

                        The Administration explained that the Initiative’s general goal is to slow
Administration’s        the growth of U.S. greenhouse gas emissions, but it did not explain the
Public Documents        basis for its specific goal of reducing emissions intensity 18 percent by
                        2012 or what a 4-percent reduction is specifically designed to accomplish.
Provide a Context But   Reducing emissions growth by 4 percentage points more than is currently
Not a Specific Basis    expected would achieve the general goal, but—on the basis of our review
                        of the fact sheets and other documents--we found no specific basis for
for the 18-percent      establishing a 4-percentage-point change, as opposed to a 2- or 6-
Goal                    percentage-point change, for example, relative to the already anticipated
                        reductions.

                        According to the Administration’s analysis, emissions under its Initiative
                        will increase between 2002 and 2012, but at a slower rate than otherwise
                        expected. Specifically, according to Energy Information Administration
                        (EIA) projections cited by the Administration, without the Initiative
                        emissions will increase from 1,917 million metric tons in 2002 to 2,279
                        million metric tons in 2012. Under the Initiative, emissions will increase to
                        2,173 million metric tons in 2012, which is 106 million metric tons less than
                        otherwise expected. We calculated that under the Initiative, emissions
                        would be reduced from 23,162 million metric tons to 22,662 million metric
                        tons cumulatively for the period 2002-12. This difference of 500 million
                        metric tons represents a 2-percent decrease for the 11-year period.

                        Because economic output will increase faster than emissions between
                        2002 and 2012, according to EIA’s projections, emissions intensity is
                        estimated to decline from 183 tons per million dollars of output in 2002 to
                        158 tons per million dollars in 2012 (a 14-percent decline) without the



                        Page 4                                    GAO-04-131T Climate Change Initiative
                        Initiative, and to 150 tons per million dollars under the Initiative (an 18-
                        percent decline).

                        The Administration identified 30 elements (26 in February 2002 and
Administration’s        another 4 later) that it expected would help reduce U.S. emissions by 2012
Public Documents        and, thus, contribute to meeting its 18-percent goal. These 30 elements
                        include regulations, research and development, tax incentives, and other
Estimated               activities. (The elements are listed in Appendix I.) The Administration
Contributions for       groups them into four broad categories, as described below.
Some, but Not All, of   Providing incentives and programs for renewable energy and certain
the Initiative’s        industrial power systems. Six tax credits and seven other elements are
                        expected to increase the use of wind and other renewable resources,
Elements                combined heat-and-power systems, and other activities. The tax credits
                        cover electricity from wind and new hybrid or fuel-cell vehicles, among
                        other things. Other elements would provide funding for geothermal
                        energy, primarily in the western United States, and advancing the use of
                        hydropower, wind, and other resources on public lands. Still other
                        elements involve research and development on fusion energy and other
                        sources.

                        Improving fuel economy. Three efforts relating to automotive technology
                        and two other elements are expected to improve fuel economy. The
                        technology efforts include advances in hydrogen-based fuel cells and low-
                        cost fuel cells. Two of the five elements are mandatory. First, a regulation
                        requiring the installation of tire pressure monitoring systems in cars and
                        certain other vehicles was finalized in June 2002 and will be phased in
                        between 2003 and 2006.3 Properly inflated tires improve fuel efficiency.
                        Second, a regulation requiring an increase in the fuel economy of light
                        trucks, from the current 20.7 miles per gallon to 22.2 miles per gallon in
                        2007, was finalized in April 2003.4

                        Promoting domestic carbon sequestration. Four U.S. Department of
                        Agriculture programs were identified as promoting carbon sequestration
                        on farms, forests, and wetlands. Among other things, these programs are
                        intended to accelerate tree planting and converting cropland to grassland
                        or forests.



                        3
                        Federal Motor Vehicle Safety Standards; Tire Pressure Monitoring Systems; Controls and
                        Displays, 67 Fed. Reg. 38704 (2002)(to be codified at 49 C.F.R. pts. 571 and 596).
                        4
                        Light Truck Average Fuel Economy Standards, Model Years 2005-2007, Final Rule, 68 Fed.
                        Reg. 16868 (2003)(to be codified at 49 C.F.R. pt. 533).



                        Page 5                                          GAO-04-131T Climate Change Initiative
Challenging business to reduce emissions. Voluntary initiatives to reduce
greenhouse gases were proposed for U.S. businesses. For major
companies that agreed to establish individual goals for reducing their
emissions, the Environmental Protection Agency (EPA) launched a new
Climate Leaders Program. In addition, certain companies in the
aluminum, natural gas, semiconductor, and underground coal mining
sectors have joined voluntary partnerships with EPA to reduce their
emissions. Finally, certain agricultural companies have joined two
voluntary partnerships with EPA and the Department of Agriculture to
reduce their emissions.

The Administration provided some information for all 30 of the Initiative’s
elements, including, in some cases, estimates of previous or anticipated
emission reductions. However, inconsistencies in the nature of this
information make it difficult to determine how contributions from the
individual elements would achieve the total reduction of about 100 million
metric tons in 2012. First, estimates were not provided for 19 the
Initiative’s elements. Second, for the 11 elements for which estimates
were provided, we found that 8 were not clearly attributable to the
Initiative because the reductions (1) were related to an activity already
included in ongoing programs or (2) were not above previous or current
levels. We did find, however, that the estimated reductions for the
remaining 3 elements appear attributable to the Initiative.


We have concerns about some of the 19 emission reduction elements for
which the Administration did not provide savings estimates. At least two
of these elements seem unlikely to yield emissions savings by 2012. For
example, the April 2003 fact sheet listed hydrogen energy as an additional
measure, even though it also stated a goal of commercializing hydrogen
vehicles by 2020, beyond the scope of the Initiative. Similarly, the same
fact sheet listed a coal-fired, zero-emissions power plant as an additional
measure, but described the project as a 10-year demonstration; this means
that the power plant would not finish its demonstration phase until the last
year of the Initiative, much less be commercialized by then.

Of the 11 elements for which estimates were provided, we found that the
estimated reductions for 8 were not clearly attributable to the Initiative. In
five cases, an estimate is provided for a current or recent savings level, but
no information is provided about the expected additional savings to be
achieved by 2012. For example, the Administration states that aluminum
producers reduced their emissions by 1.8 million metric tons to meet a
goal in 2000, but it does not identify future savings, if any. Similarly, it


Page 6                                     GAO-04-131T Climate Change Initiative
states that Agriculture’s Environmental Quality Incentives Program, which
provides assistance to farmers for planning and implementing soil and
water conservation practices, reduced emissions by 12 million metric tons
in 2002. However, while the Administration sought more funding for the
program in fiscal year 2003, it did not project any additional emissions
reductions from the program.

In two cases, it is not clear how much of the claimed savings will occur by
the end of the Initiative in 2012. The requirement that cars and certain
other vehicles have tire pressure monitoring systems is expected to yield
savings of between 0.3 and 1.3 million metric tons a year when applied to
the entire vehicle fleet. However, it will take years for such systems to be
incorporated in the entire fleet and it is not clear how much of these
savings will be achieved by 2012. Similarly, the required increase in light
truck fuel economy is expected to result in savings of 9.4 million metric
tons over the lifetime of the vehicles covered. Again, because these
vehicles have an estimated lifetime of 25 years, it is not clear how much
savings will be achieved by 2012.

In one case, savings are counted for an activity that does not appear to be
directly attributable to the Initiative. Specifically, in March 2001 (nearly a
year before the Initiative was announced), EPA and the Semiconductor
Industry Association signed a voluntary agreement to reduce emissions by
an estimated 13.7 million metric tons by 2010. Because this agreement
was signed before the Initiative was announced, it is not clear that the
estimated reductions should be considered as additions to the already
anticipated amount.

Estimates for the remaining 3 of the 11 elements appear to be attributable
to the Initiative in that they represent reductions beyond previous or
current levels and are associated with expanded program activities. These
are:

• 	 Agriculture’s Conservation Reserve Program was credited with
    additional savings of 4 million metric tons a year. This program
    assists farm owners and operators to conserve and improve soil,
    water, air, and wildlife resources and results in carbon sequestration.

• 	 Agriculture’s Wetland Reserve Program was credited with additional
    savings of 2 million metric tons a year. This program helps convert
    cropland on wetland soils to grassland or forest and also sequesters
    carbon emissions.



Page 7                                     GAO-04-131T Climate Change Initiative
                        • 	 The Environmental Protection Agency’s Natural Gas STAR Program
                            was credited with additional savings of 2 million metric tons a year.
                            This program works with companies in the natural gas industry to
                            reduce losses of methane during production, transmission,
                            distribution, and processing.

                        More current information about certain of these elements and their
                        expected contributions has been made public, but has not been
                        consolidated with earlier information about the Initiative. For example,
                        the Department of Agriculture’s web site includes a June 2003 fact sheet
                        on that agency’s programs that contribute to carbon sequestration. Among
                        other things, the fact sheet estimated that the Environmental Quality
                        Incentives Program, cited above, will reduce emissions 7.1 million metric
                        tons in 2012. However, we did not find that such information had been
                        consolidated with the earlier information, and there appears to be no
                        comprehensive source for information about all of the elements intended
                        to help achieve the Initiative’s goal and their expected contributions. The
                        lack of consistent and comprehensive information makes it difficult for
                        relevant stakeholders and members of the general public to assess the
                        merits of the Initiative.

                        According to the February 2002 fact sheet, progress in meeting the 18-
Administration’s        percent goal will be assessed in 2012, the final year of the Initiative. At
Public Documents Do     that point, the fact sheet states that if progress is not sufficient and if
                        science justifies additional action, the United States will respond with
Not Discuss Plans for   further policies; these policies may include additional incentives and
Monitoring Interim      voluntary programs. The fact sheets did not indicate whether the
                        Administration plans to check its progress before 2012. Such an interim
Progress                assessment, for example, after 5 years, would help the Administration
                        determine whether it is on course to meet the goal in 2012 and, if not,
                        whether it should consider additional elements to help meet the goal.

                        Mr. Chairman, this concludes our prepared statement. We would be happy
                        to respond to any questions that you or Members of the Committee may
                        have.

                        Contacts and Acknowledgments
                        For further information about this testimony, please contact me at
                        (202) 512-3841. John Delicath, Anne K. Johnson, Karen Keegan, David
                        Marwick, and Kevin Tarmann made key contributions to this statement.




                        Page 8                                     GAO-04-131T Climate Change Initiative
         Appendix I                                                                   Appendix I


               Table 1: Summary of Initiative’s Elements Expected to Reduce
                               Greenhouse Gas Emissions


         Number                                           Measure
         Providing tax incentives and programs for renewable energy and certain industrial
         power systems
             1      Tax credit for combined heat and power systems
             2      EPA Combined Heat and Power Partnership
             3      Department of Energy challenge to heat and power industry
             4      Tax credit for residential solar energy systems
             5      Tax credit for electricity from wind and certain biomass sources
             6      Tax credit for electricity from additional biomass sources
             7      Tax credit for new methane landfill projects
             8      Tax credit for new hybrid or fuel-cell vehiclesa
             9      Funding for geothermal energy
            10      Renewable energy on public lands
            11      Hydrogen energy
            12      Coal-fired, zero-emissions electricity generation
            13      Fusion energy
         Improving fuel economy
            14      Advancing hydrogen-based fuel cells
            15      Department of Energy public-private projects for low-cost fuel cell technology
            16      Fuel economy standards for light trucks
            17      Tire pressure monitoring systems
            18      High-efficiency automobile technology
         Promoting domestic carbon sequestration
            19      Conservation Reserve Program
            20      Environmental Quality Incentives Program
            21      Wetland Reserve Program
            22      Forest Stewardship Program
         Challenging business to decrease emissions
            23      EPA Climate Leaders Program
            24      Semiconductor industry
            25      Aluminum producers
            26      EPA Natural Gas STAR Program
            27      EPA Coal Bed Methane Outreach Program
            28      AgSTAR Program
            29      Ruminant Livestock Efficiency Program
            30      Climate VISION Partnership

         Source:	             Data from Global Climate Change Policy Book, Feb. 2002; White House
                              Fact Sheets, July 2002 and April 2003; analysis by GAO.
         a
             Also listed in improving fuel economy category.




360409   Page 9                                                GAO-04-131T Climate Change Initiative
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