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Testimony:

Before the Committee on Commerce, Science, and Transportation:

United States Senate:

United States General Accounting Office:

GAO:

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:

GAO Highlights:

Highlights of GAO-04-131T, a report to Senate Committee on Commerce, 
Science, and Transportation 

Why GAO Did This Study:

In 2002, the Administration announced its Global Climate Change 
Initiative. It included, among other things, a goal concerning U.S. 
carbon dioxide and other greenhouse gas emissions, which are widely 
believed to affect the earthís climate.

The Administrationís general goal was to reduce the growth rate of 
emissions, but not total emissions, between 2002 and 2012. Its 
specific goal was to reduce emissions intensity 18 percent, 4 
percentage points more than the 14 percent decline already expected. 
Emissions intensity measures the amount of greenhouse gases emitted 
per unit of economic output. In the United States, this ratio has 
generally decreased for 50 years or more. Under the Initiative, 
emissions would increase, but less than otherwise expected.

GAO was asked to testify on whether the Administrationís publicly 
available documents (1) explain the basis for the Initiativeís general 
and specific goals, (2) identify elements to help reduce emissions and 
contribute to the 18 percent reduction goal, as well as their specific 
contributions, and (3) discuss plans to track progress in meeting the 
goal.

This testimony is based on ongoing work, and GAO expects to issue a 
final report on this work later this year. Because of time 
constraints, GAOís testimony is based on its analysis of publicly 
available Administration documents.

What GAO Found:

The Administration stated that the Initiativeís general goal is to 
slow the growth of U.S. greenhouse gas emissions, but it did not 
provide a basis for its specific goal of reducing emissions intensity 
18 percent by 2012. Any reduction in emissions above the 14-percent 
reduction already anticipated would contribute to this general goal. 
However, GAO did not find a specific basis or rationale for the 
Administrationís decision to establish a 4-percentage-point reduction 
goal beyond the already expected reductions.

The Administration identified 30 elements that it expected would 
reduce U.S. emissions and contribute to meeting its 18 percent 
reduction goal by 2012. The 30 elements include a range of policy 
tools (such as regulations, research and development, tax incentives, 
and other activities) that cover four broad areas: (1) improving 
renewable energy and certain industrial power systems, (2) improving 
fuel economy, (3) promoting domestic carbon sequestration (for 
example, the absorption of carbon dioxide by trees to offset 
emissions), and (4) challenging business to reduce emissions. GAO 
found that the Administration provided estimates of the reductions 
associated with 11 of the 30 elements, but not with the remaining 19 
elements. Of these 11 estimates, GAO found that 3 estimates 
represented future emissions reductions related to activities that 
occurred after the Initiative was announced. However, the other 8 
estimates represented past or current emissions reductions or related 
to activities that were already underway before the Initiative was 
announced. Specifically, 

* In five cases, an estimate is provided for current or recent 
reductions, but no information is provided about the expected 
additional savings to be achieved by 2012, the end of the 
Initiative.

* In two cases, the elements are expected to yield savings over many 
years, but it is not clear what emissions reductions will be achieved 
by 2012.

* In one case, savings are counted for an activity that began prior to 
the announcement of the Initiative.

It is, therefore, unclear to what extent the 30 elements will 
contribute to the goal of reducing emissions and, thus, lowering 
emissions intensity by 2012. 

The Administration plans to determine, in 2012, whether the 18-percent 
reduction goal was met. 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 are 
having the intended effect or whether additional efforts may be 
warranted.

www.gao.gov/cgi-bin/getrpt?GAO-04-131T.

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.

[End of section]


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.[Footnote 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 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,[Footnote 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.

Summary:

In summary, in our review of the Administration's documents, we found 
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.

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.

Background:

Carbon dioxide and certain other gases trap some of the sun's heat in 
the 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 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.

Administration's Public Documents Provide a Context But Not a Specific 
Basis for the 18-percent Goal:

The Administration explained that the Initiative's general goal is to 
slow the growth of U.S. greenhouse gas emissions, but it did not 
explain the basis for its specific goal of reducing emissions intensity 
18 percent by 2012 or what a 4-percent reduction is specifically 
designed to accomplish. Reducing emissions growth by 4 percentage 
points more than is currently 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 establishing a 4-percentage-point 
change, as opposed to a 2-or 6-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 Initiative, and to 150 tons per million dollars under the 
Initiative (an 18-percent decline).

Administration's Public Documents Estimated Contributions for Some, but 
Not All, of the Initiative's Elements:

The Administration identified 30 elements (26 in February 2002 and 
another 4 later) that it expected would help reduce U.S. emissions by 
2012 and, thus, contribute to meeting its 18-percent goal. These 30 
elements include regulations, research and development, tax incentives, 
and other activities. (The elements are listed in Appendix I.) The 
Administration groups them into four broad categories, as described 
below.

Providing incentives and programs for renewable energy and certain 
industrial power systems. Six tax credits and seven other elements are 
expected to increase the use of wind and other renewable resources, 
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.[Footnote 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.[Footnote 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.

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 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.

* 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.

Administration's Public Documents Do Not Discuss Plans for Monitoring 
Interim Progress:

According to the February 2002 fact sheet, progress in meeting the 18-
percent goal will be assessed in 2012, the final year of the 
Initiative. At that point, the fact sheet states that if progress is 
not sufficient and if science justifies additional action, the United 
States will respond with further policies; these policies may include 
additional incentives and voluntary programs. The fact sheets did not 
indicate whether the Administration plans to check its progress before 
2012. Such an interim 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.

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.

Number: 1; Measure: Tax credit for combined heat and power systems.

Number: 2; Measure: EPA Combined Heat and Power Partnership.

Number: 3; Measure: Department of Energy challenge to heat and power 
industry.

Number: 4; Measure: Tax credit for residential solar energy systems.

Number: 5; Measure: Tax credit for electricity from wind and certain 
biomass sources.

Number: 6; Measure: Tax credit for electricity from additional biomass 
sources.

Number: 7; Measure: Tax credit for new methane landfill projects.

Number: 8; Measure: Tax credit for new hybrid or fuel-cell vehicles[A].

Number: 9; Measure: Funding for geothermal energy.

Number: 10; Measure: Renewable energy on public lands.

Number: 11; Measure: Hydrogen energy.

Number: 12; Measure: Coal-fired, zero-emissions electricity generation.

Number: 13; Measure: Fusion energy.

Improving fuel economy.

Number: 14; Measure: Advancing hydrogen-based fuel cells.

Number: 15; Measure: Department of Energy public-private projects for 
low-cost fuel cell technology.

Number: 16; Measure: Fuel economy standards for light trucks.

Number: 17; Measure: Tire pressure monitoring systems.

Number: 18; Measure: High-efficiency automobile technology.

Promoting domestic carbon sequestration.

Number: 19; Measure: Conservation Reserve Program.

Number: 20; Measure: Environmental Quality Incentives Program.

Number: 21; Measure: Wetland Reserve Program.

Number: 22; Measure: Forest Stewardship Program.

Challenging business to decrease emissions.

Number: 23; Measure: EPA Climate Leaders Program.

Number: 24; Measure: Semiconductor industry.

Number: 25; Measure: Aluminum producers.

Number: 26; Measure: EPA Natural Gas STAR Program.

Number: 27; Measure: EPA Coal Bed Methane Outreach Program.

Number: 28; Measure: AgSTAR Program.

Number: 29; Measure: Ruminant Livestock Efficiency Program.

Number: 30; Measure: 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.


[End of table]

FOOTNOTES

[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.

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

[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).