Preface

On January 9, 2003, Senators John McCain and Joseph I. Lieberman introduced Senate Bill 139 (S.139), the Climate Stewardship Act of 2003, in the U.S. Senate. S.139 would require the Administrator of the U.S. Environmental Protection Agency (EPA) to promulgate regulations to limit greenhouse gas emissions. On January 28, 2003, Senator James M. Inhofe requested that the Energy Information Administration (EIA) perform a comprehensive analysis of S.139. On April 2, 2003, Senators McCain and Lieberman, cosponsors of S.139, made a further request for analyses of their bill. This Service Report responds to both requests.

To analyze S.139, EIA used an updated version of the Annual Energy Outlook 2003 (AEO2003) reference case AEO2003 was generated using EIA’s National Energy Modeling System (NEMS). S.139 proposes a detailed program for greenhouse gas emission monitoring and control and contains provisions that are either subject to varying interpretation or are intended to be defined after enactment. Based on EIA’s interpretation of the S.139, modifications were made in NEMS to allow modeling of its specific provisions.

The report summarizes the provisions of S.139 and the requests from Senators McCain and Lieberman and Senator Inhofe. It discusses the methodology used for the analysis, the key assumptions made based on EIA’s interpretation of the proposed bill, and lists the scenarios examined as part of the analysis. It presents the projected impact of S.139 on greenhouse gases and the role of offsets. The report examines the impacts of S.139 on the four end-use demand sectors—residential, commercial, industrial, and transportation—and on electricity supply. The analysis also examines the implications of S.139 for fossil fuel supplies, including production, prices, and employment. It discusses the macroeconomic impacts of S.139 under different policy assumptions. Appendix A presents the request letters and subsequent correspondence with the requesters’ staff.

The legislation that established EIA in 1977 vested the organization with an element of statutory independence. EIA does not take positions on policy questions. It is the responsibility of EIA to provide timely, high-quality information and to perform objective, credible analyses in support of the deliberations of both public and private decisionmakers. This report does not purport to represent the official position of the U.S. Department of Energy or the Administration.

Within its Independent Expert Review Program, EIA arranged for leading experts in the fields of energy and economic analysis to review this analysis and provide comment. The reviewers provided comments on a draft version of the report, after an earlier meeting with EIA to discuss the methodology and preliminary results. All comments from the reviewers either have been incorporated or were considered for incorporation. Due to time limitations, EIA was not able to complete all the sensitivity cases suggested by the reviewers. The basis of the sensitivities included in this analysis was to respond to the requests of the Senators soliciting this analysis. As is always the case when peer reviews are undertaken, not all the reviewers are in agreement with all the methodology, inputs, and conclusions of the final report. The contents of this report are solely the responsibility of EIA. The assistance of the following reviewers in preparing the report is gratefully acknowledged:

The projections in the reference case in this report are not statements of what will happen but of what might happen, given the assumptions and methodologies used. The reference case projections are business-as-usual trend forecasts, given known technology, technological and demographic trends, and current laws and regulations. Thus, they provide a policy-neutral reference case that can be used to analyze policy initiatives. EIA does not propose, advocate, or speculate on future legislative and regulatory changes. All laws are assumed to remain as currently enacted; however, the impacts of emerging regulatory changes, when defined, are reflected.