Commentary on Presentations by Bassett, Brown, and Rosenfeld in the Symposium on Extreme Energy Efficiency

1. Commentary on Presentations byBassett, Brown, and Rosenfeldin the Symposium onExtreme Energy Efficiency John P. Holdren Heinz Professor & Director Program on Science, Technology, & Public Policy John F. Kennedy School of Government HARVARD UNIVERSITY 2005 Annual Meeting of the American Association for the Advancement of Science Washington, DC • 21 February 2005

2. The big questions (and answers) • What do we mean by “extreme”? Kaarsberg,Bassett: Thinking “outside the box”. Holdren: The challenge to efficiency is extreme, which is why thinking outside the box is required. • How much technical efficiency potential is there and where is it to be found? Bassett, Brown, Rosenfeld: Huge, growing, everywhere. Holdren: I agree. • How much of the potential do we need to exploit? Holdren: Addressed in the rest of this commentary. • How are we going to make it happen? Edenhofer, Clay/Roop, Laitner (coming next).

3. How much of the potential do we need to exploit? MOTIVATIONS THAT DETERMINE THE “NEED” • Saving money – demand side (savings on energy bills exceed investments needed to achieve the savings) • Saving money – supply side (reduced pressure to expand supply allows foregoing costliest options, worst sites) • Reducing air pollution, water pollution, habitat destruction, accident risks, & waste-management burdens from supply options • Reducing greenhouse-gas emissions from the energy-supply sector. All of these are worthy motivations, but the most demanding is the last. It defines how much we need (& means that the incentive structure for efficiency must reflect this driver).

4. Increase in C-free energy needed to stabilize atmospheric CO2 below 550 ppmv To avoid a doubling of preindustrial CO2, conventional fossil primary energy must not exceed 500 EJ in 2050 and 350 EJ in 2100. Starting from 350 EJ of conventional fossil fuel in 2000 and BAU rates of change in world GDP and energy intensity, it follows that EJ/yr of C-free energy needed in 2050 and 2100, compared to 100 EJ/yr actual in 2000, are… 2000 2050 2100 ------- ------ ------ C-free energy under BAU 100 600 1500 ...if E/GDP falls 1.5%/yr 100 350 800 ...if E/GCP falls 2.0%/yr 100 180 350

5. Commentary on Presentations byEdenhofer, Clay/Roop, and Laitnerin the Symposium onExtreme Energy Efficiency John P. Holdren Heinz Professor & Director Program on Science, Technology, & Public Policy John F. Kennedy School of Government HARVARD UNIVERSITY 2005 Annual Meeting of the American Association for the Advancement of Science Washington, DC • 21 February 2005

6. Addendum on how much efficiency we need • Dr. Edenhofer’s opening remarks reminded me of some-thing I should have said in connection with my “thought experiment” on the relation between the rate of efficiency improvement and needed growth in carbon-free energy: • My numbers corresponded to stabilizing CO2 at 550 ppmv. But it’s increasingly apparent that this target is too weak to avoid “dangerous anthropogenic interference”. If the goal is to avoid exceeding 2°C above pre-industrial, CO2 must be held to 400-450 ppmv. • All else equal, that means the C-free energy require-ments for any given rate of efficiency improvement in the 21st century go up. • On the other hand, my economic-growth baseline was IS92a, which some analysts think too high. If global economic growth is assumed to be lower than that, this reduces the needs for C-free energy from those shown in my table.

7. How are we going to get there? • Dr. Edenhofer noted that models of the costs of reducing GHG emissions generally overstate those costs by failing to account adequately for induced technological innovation and for learning. • I agree. • In addition, some distinguished economists (e.g., Harvard’s Dale Jorgenson) argue that conventional analyses don’t adequately reflect benefits for economic growth that will result if revenues from C taxes or permit sales are used to reduce other taxes. • It’s also the case that the typical portrayals of costs in terms of lost GDP are less alarming than they look at first sight. For example, the statement that US GDP might be 3% lower in 2050 under carbon constraints than under BAU only means that Americans would need to wait until 2051.5 to be as rich as they otherwise would have been in 2050.

8. How are we going to get there? (continued) • The analysis by Clay, Kaarsberg, Hopson, & Roop reinforced the proposition that the more realism and relevant detail one adds to energy/economic models, the larger are the predicted positive impacts of advanced technologies on energy intensity & carbon intensity and the lower the net costs (or the larger the net benefits) to the economy of implementing those technologies. • The paper by Laitner underlined once more the “extreme” technical potential for increased energy efficiency available across every sector of the economy, while reinforcing earlier contentions about how much of this potential we must capture in order to address the global climate-change challenge.

9. How are we going to get there? (continued) TAKE-AWAY MESSAGE ON WHAT TO WORK FOR NOW • A price on carbon emissions, either as a carbon tax or a cap-and-trade approach, SOON. • A significant ramp-up in CAFÉ standards (because initial C price will be below the real cost of emissions and will not reflect the oil-dependence externality). • Extension & expansion of tax incentives for private-sector energy RD&D. • A doubling of Federal investments in ERD&D, emphasizing end-use efficiency and low- & no-carbon supply. • A companion program to subsidize accelerated deployment of the most attractive options emerging from demo. • A tripling of Federal investments in international cooperation on ERD3. See www.energycommission.org.