According to DOE laboratory officials, project discussions began in the summer of 1996, a peer review committee was formed in November 1996, and official authorization and a budget of $500,000 were provided in December 1996 to “analyze the impact of energy efficiency technology on energy demand growth in the United States.” Requested by DOE’s Office of Energy Efficiency and Renewable Energy, the five-lab study had a central goal of quantifying the potential for energy-efficient and low-carbon technologies to reduce carbon emissions in the United States by 2010 for four sectors of the U.S. economy—buildings, industry, transportation, and electricity production. Limitations of the Study

The five-lab study is an important step in evaluating the role that energy-efficient and low-carbon technologies can play in the nation’s efforts to reduce global warming gases, according to several groups that we contacted; however, the study’s scope and methodology may limit its usefulness. Additionally, the study does not address the broader economic effects on the nation’s economy, such as how the $50 per ton carbon fee may affect energy prices, energy consumption; and, eventually, economic activity and employment levels in the rest of the economy. DOE laboratory officials agreed that the study does not discuss the policies needed to achieve carbon savings by 2010 but explained that this was not a study objective or task from DOE. However, this methodology focuses on one aspect of the economy—energy—and does not consider the broader impacts on other non-energy related aspects of the U.S. economy. In their opinion, these impacts would be minor because only one sector—electricity generation—relies primarily on the increased price of carbon as an economic stimulus to achieve significant carbon reductions. Most of the representatives of seven industries that used about 80 percent of the manufacturing energy consumed in the United States in 1994 indicated that the capital recovery factor assumed for the industrial sector may not realistically consider the capital constraints, market conditions, and existing manufacturing processes these industries operate under today. Changes in the Electricity Sector

Some groups believed the study’s assumptions about changes that would occur in the electricity sector may be too optimistic. For example, the Treasury Department questioned the study’s conclusion that carbon emissions can be reduced in ways that reduce energy costs more than they increase other societal costs, noting that in its view the study “substantially understates the costs of government policies to promote technology.” Additionally, as noted in the section on key assumptions, the study’s finding that a widespread adoption of energy-efficient technologies can be achieved with a low to no net cost to the nation is heavily dependent on the assumptions made, and we found a disparity of views on some of the key assumptions that may have influenced the study’s results. Objectives, Scope, and Methodology

In view of the Department of Energy’s (DOE) five-lab study’s potential influence on U.S. climate change policy, Senators Larry Craig, Chuck Hagel, Jesse Helms, and Frank Murkowski asked us to provide information on (1) how the study’s scope and methodology may limit its usefulness, (2) key assumptions that may have influenced the study’s results, and (3) the study’s role in the formulation of the October 1997 climate change proposal and the Kyoto Conference’s emission-reduction goals for the United States. GAO Comments

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Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the study conducted by five Department of Energy (DOE) national laboratories on reducing U.S. emissions through energy-efficient and low-carbon technologies, focusing on: (1) how the study's scope and methodology may limit its usefulness; (2) key assumptions that may have influenced the study's results; and (3) the study's role in the formulation of the October 1997 climate change proposal and the Kyoto Conference's emission-reduction goals for the United States.

What GAO Found

GAO noted that: (1) the five-lab study is an important step in evaluating the role that energy-efficient and low-carbon technologies can play in the nation's efforts to reduce global warming gases; (2) however, the study's usefulness is limited because it does not discuss the specific policies needed to achieve its estimate of 394 million metric tons of carbon reductions by 2010 and does not fully consider the costs to the nation's economy of reaching this goal; (3) according to DOE laboratory officials, specifying the types of policies needed to achieve such significant reductions by 2010 was not one of the study's objectives; (4) furthermore, the study assumes a fee of $50 per ton for carbon emissions, which would increase the cost of energy; however, the study does not evaluate the broader impacts that this cost may have on the economy; (5) DOE officials acknowledge that the study does not examine the broader economic impacts of such a carbon fee on the U.S. economy but said that, in their opinion, these broader economic impacts would be minor; (6) the study's finding that the widespread adoption of energy-efficient technologies can be achieved with low to no net cost to the nation is heavily dependent on the assumptions made for four sectors of the U.S. economy--buildings, industry, transportation, and electricity production; (7) among the groups that GAO interviewed, GAO found a disparity of views on key assumptions that may have influenced the study's results; (8) several of the groups questioned some of these assumptions as being too optimistic, such as those about the payback period, rate of adoption of new technologies, or timing of technological breakthroughs; (9) however, most of the representatives of the seven industries that used about 80 percent of the manufacturing energy consumed in the United States in 1994 indicated this assumption may be too optimistic given their current capital constraints, market conditions, and existing manufacturing processes; (10) on the other hand, some groups believed that certain assumptions in the study appear reasonable; (11) the study has been cited as one of many documents considered in formulating the administration's October 1997 climate change proposal; and (12) according to the Department's Assistant Secretary for Energy Efficiency and Renewable Energy, the study was one of the documents considered in formulating the emission-reduction goals for the United States at the December 1997 Kyoto Conference.