2030 Clean Energy Economy Blueprint

August 8, 2009
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by David L. Levy

This summer the Union of Concerned Scientists published Climate 2030: A Blueprint for a Clean Energy Economy. The UCS plan is designed to reduce US greenhouse gas (GHG) emissions by 26% below 2005 levels by 2020, and 56% by 2030, putting the country on target for an 80% reduction by 2050. These are the kind of aggressive targets that are needed from industrialized countries if global warming is to be held roughly at the 2 degrees Celsius ceiling.

UCS clearly understands that the political economy of climate is more important than the science in spurring action. Businesspeople, policymakers, and consumers need to be convinced that they can prosper in a low-carbon future. This report certainly makes that case. It states that:

The nation achieves these deep cuts in carbon emissions while saving consumers and businesses $465 billion annually by 2030. The Blueprint also builds $1.7 trillion in net cumulative savings between 2010 and 2030. Blueprint policies stimulate significant consumer, business, and government investment in new technologies and measures by 2030. The resulting savings on energy bills from reductions in electricity and fuel use more than offset the costs of these additional investments. The result is net annual savings for households, vehicle owners, businesses, and industries of $255 billion by 2030. Under the Blueprint, every region of the country stands to save billions. Households and businesses—even in coal-dependent regions—will share in these savings.

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The report uses a version of the Department of Energy’s National Energy Modeling system to project changes in energy use, emissions, and energy costs. The model was used to forecast the impact of a cap-and-trade system combined with regulatory mechanisms and R&D funding to promote efficiency, renewables, low-carbon transportation, and green growth. The model shows higher carbon prices than envisioned in W-M, due to the tighter cap and fewer offsets: $18 per ton of CO2 in 2011, rising to $34 in 2020, and to $70 in 2030 (in 2006 dollars). Most of the GHG reductions come from the power sector, though the report does not say how much comes from the carbon price and how much from other measures.

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The UCS Blueprint is based on commercially available, rather than breakthrough technologies. It’s meant to be realistic and conservative, so that it can withstand critique. They even included $8 billion in government-related costs to administer and implement policies. The demonstration of savings is quite compelling – by 2030, for example, the model shows consumers saving about $900 annually per household in energy and transportation costs. Although most of the emission reductions come from the power sector, nearly half of the financial savings come from transportation – more efficient cars and more public transportation:

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The targets are substantially tougher than Waxman-Markey, which aims for 17% GHG reduction by 2020. The UCS model still shows the economy growing by 81% between 2005 and 2030, only slightly less than the 84% it would grow in the baseline case without new climate policies (a number that does not take into account the negative economic impacts of climate change on agriculture, tourism, etc.). There is little overall impact on employment. It should be stressed that by construction, these models always show a hit to GDP from raising the price of fuels, because they assume – as economists love to do – that we are already in a blissful state of perfect allocation of resources, so any disturbance must hurt GDP. The model also does not fully account for growth and productivity stimulated by new investments in clean energy.

Despite the limitations of economic modeling, this is a carefully crafted and well executed study – and it has some great graphics and charts. Importantly, it knows what is a cost and what is a benefit, which is surprisingly muddled in many reports. Although the report touts new clean energy investment as a ‘good thing’, generating jobs and reducing emissions, it does recognize that investment is a cost to society, channeling resources that could have been put to another use (I made this point regarding employment in another study – see: Clean Energy – How Many Clean Jobs?).  Energy savings translate into lower costs for consumers and businesses, and do reflect a real economic benefit to society. Of course, they also reduce revenues for companies selling fossil fuels and carbon intense products, from power to conventional cars. What these economic models cannot tell us is which companies and countries will be the long-term winners and losers from a carbon constrained economy.

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