Energy: Can We Get More? Can We Use Less

Amy Myers Jaffe

Wallace S. Wilson Fellow for Energy Studies

James A. Baker III Institute for Public Policy

Houston MegaRegionsSeptember 24, 2009

Local Government

Annual Renewable

Energy Usage (kWh)

Percentage of Total

Electricity Use

Houston 438,000,000 34%

Dallas 333,659,840 40%

Chicago 333,659,840 20%

Los Angeles 214,635,000 54%

Laurel, MD 70,000,000 33%

Top 5 U.S. Renewable Energy Purchasers

Cement production

3.0%

Gas flaring0.7%

Non-fuel hydrocarbons

0.3%Bunker fuel (non-

inventory)4.0%

Gaseous fuels20.2%

Liquid fuels36.4%

Solid Fuels35.4%

Source: EIA

Sources of CO2 (2000-2005)

Road Petroleum UseUS and China (1980-2005)

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Thous bbl/d

US

China

Carbon Emissions from Road Petroleum UseUS and China (1980-2005)

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Million Metric Tons

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China

• Privately owned registered cars and trucks in the United States has risen from 138 million vehicles in 1975 to 247 million vehicles in 2005.

• US road petroleum consumption represents 33% of all global use, compared to 5% for China and 17% for all of Europe.

• Low fuel prices in the US have contributed to urban sprawl and a high average number of miles driven rate. In the US, an average individual may spend up to 2 hours a day in stop and go traffic to travel 30 miles to work.

Climate and Energy Security Policy Will Focus Heavily on Promoting or Regulating Automobile

Efficiency and Other Policies Related to Reducing Fuel Use

• Most forecasts indicate that future growth in global oil demand will come almost entirely in the transportation sector

• The US Department of Energy predicts that the transport sector will generate almost half of the 40% rise in US carbon emissions projected for 2025. Road transportation emissions constitute 75% of transportation emissions globally and in the OECD. – European demand has been flat due to effective policies. Studies show that

fuel taxes are more effective than congestion taxes, biofuels mandates, or consumer incentive rebates for purchasing fuel efficient cars.

– U.S. is now trying to fashion an effective policy: Thoughtful changes in land use planning and sustainable energy policies are needed in major US cities

– If every American would drive about 45 miles less per vehicle per week, by living closer to work, telecommuting, commuting by carpool or by using public transportation, the US could shave 20% off its demand for imported oil and related GHG emissions

– The extent to which China and India, in particular, also adopt similar policies is very important to future trends in energy and climate security

Fuelslower CO2 per gallon

4

Vehicles increase mpg

1

Driving reduce miles driven

2

Taxation reduce miles driven

3

Biofuel content in fuel mix

Fuel and vehicle efficiency

Congestion charge, transit lanes, road tolls, telecommuting

Taxation on gasoline or reduced duty on cleaner fuels: Taxation on carbon of imported fuels

Potential Issues

BiodiversityFuel vs. Food

Rebound – consumers drive efficient vehicles further

Trade Relations Problems

Examples

In general, policy makers have a range of tools to affect demand

Replace

Reduce

Offset

Objectives

Carbon Markets

5 Emissions trading scheme, carbon neutral products and services

CO2 leakage problems; verification issues; market design problems

New U.S. Efficiency Standards will Reduce U.S. Oil Demand

0.0

2.0

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18.0

2006

2008

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2016

2018

2020

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2030

million b/dU.S. Motor Fuel Use under 3 Scenarios

6.7 million b/d savings

5.6 million b/d savings

0.0

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2020

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2028

2030

mpgU.S. Light Vehicle Fuel Efficiency

under 3 Scenarios

50 mpg for new vehicles by 2020**

35 mpg for new vehicles by 2020*

Notes:*CAFE phased in according to Senate bill by 2020** Efficiency improv ements accelerate in 2015In both cases, new v ehicles penetrate the stock at 6.5% per y ear

• Fuel efficiency improvements have significant benefit, but are offset by growth in vehicle stocks and miles driven (income and “rebound” effects)

– High prices are revealing a demand response as recent miles driven data are slightly lower

• Similar arguments hold in all countries, with potential for efficiency improvement varied across countries

• Policy is multi-pronged in its approach– A technological breakthrough, such as with plug-in hybrid vehicles, could push

demand lower farther into the future. Once these alternatives are adopted, the market is forever changed

– Biofuels can induce even further reductions in demand

Congestion in US cities is worsening at an alarming rateSource: Texas A&M 2007 Urban Mobility Report

Urban Congestion is a Major Contributor to GHG Emissions and Energy Waste

Source: US Bureau of Transportation Statistics

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Gal

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aste

d (

mill

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s)

Years

Annual Wasted Fuel Due to CongestionAtlanta, GA

Boston, MA-NH-RI

Chicago, IL-IN

Dallas-Fort Worth-Arlington, TX

Detroit, MI

Houston, TX

Las Vegas, NV

Los Angeles-Long Beach-Santa Ana, CA Miami, FL

New York-Newark, NY-NJ-CT

Philadelphia, PA-NJ-DE-MD

Phoenix, AZ

San Francisco-Oakland, CA

Portland, OR-WA

Seattle, WA

Washington, DC-MD-VA

Indianapolis, IN

Atlanta, GA

Boston, MA-NH-RI

Chicago, IL-IN

Greenhouse gas emission targets will be hard to meet without changing our commuting habits

Source: APTA

Adjusting commuting habits are the single largest thing individuals can do to lower their personal carbon footprint

Source: APTA