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Policy Options to Promote Energy Efficiency DOCUMENT AVAILABILITY Reports produced after January 1, 1996, are generally available free via the U.S. Department of Energy (DOE) Information Bridge. Web site http://www.osti.gov/bridge Reports produced before January 1, 1996, may be purchased by members of the public from the following source. National Technical Information Service 5285 Port Royal Road Springfield, VA 22161 Telephone 703-605-6000 (1-800-553-6847) TDD 703-487-4639 Fax 703-605-6900 E-mail [email protected] Web site http://www.ntis.gov/support/ordernowabout.htm Reports are available to DOE employees, DOE contractors, Energy Technology Data Exchange (ETDE) representatives, and International Nuclear Information System (INIS) representatives from the following source. Office of Scientific and Technical Information P.O. Box 62 Oak Ridge, TN 37831 Telephone 865-576-8401 Fax 865-576-5728 E-mail [email protected] Web site http://www.osti.gov/contact.html This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof. Making Industry Part of the Climate Solution May 2011 ORNL/TM-2010/78 Energy and Transportation Science Division Making Industry Part of the Climate Solution: Policy Options to Promote Energy Efficiency Marilyn A. Brown,* Georgia Institute of Technology Roderick Jackson, Oak Ridge National Laboratory Matt Cox, Georgia Institute of Technology Rodrigo Cortes, Georgia Institute of Technology Benjamin Deitchman, Georgia Institute of Technology Melissa V. Lapsa, Oak Ridge National Laboratory May 2011 Prepared by OAK RIDGE NATIONAL LABORATORY Oak Ridge, Tennessee 37831-6283 managed by UT-BATTELLE, LLC for the U.S. DEPARTMENT OF ENERGY under contract DE-AC05-00OR22725 *Corresponding author: Dr. Marilyn A. Brown Professor, School of Public Policy Georgia Institute of Technology DM Smith Building 685 Cherry Street, Room 312 Atlanta, GA 30332-0345 email: [email protected] Phone: 404-385-0303 Making Industry Part of the Climate Solution May 2011 Making Industry Part of the Climate Solution May 2011 Table of Contents Table of Contents ......................................................................................................................... i List of Tables .............................................................................................................................. ii List of Figures ............................................................................................................................ iv Acknowledgments ..................................................................................................................... vii Abstract...................................................................................................................................... ix Executive Summary ................................................................................................................... xi 1 Introduction ................................................................................................................. 1 1.1 Industrial Energy Use: An Overview ...................................................................... 2 1.2 Barriers to Industrial Energy Efficiency ................................................................. 8 1.3 Drivers of Industrial Energy Efficiency ................................................................. 12 1.4 The Existing Policy Landscape ........................................................................... 13 1.5 Research Approach ............................................................................................ 16 1.6 Treatment of Uncertainty and Risk ...................................................................... 31 2 Policy Options to Address Regulatory Barriers ...................................................... 35 2.1 Output-Based Emissions Standards (OBES) ...................................................... 36 2.2 Federal Energy Portfolio Standard (EPS) with Combined Heat and Power (CHP) ...................................................................... 54 3 Policy Options to Address Information Gaps .......................................................... 79 3.1 Superior Energy Performance Program .............................................................. 80 3.2 Implementation Support Services ..................................................................... 102 3.3 Small Firm Energy Management ....................................................................... 119 4 Policy Options to Address Financial Challenges .................................................. 137 4.1 Tax Lien Financing ........................................................................................... 137 4.2 Energy Efficient Industrial Motor Rebates ......................................................... 153 5 Policy Synergies and Conclusions ........................................................................ 171 5.1 Policy Synergies ............................................................................................... 171 5.2 Stakeholder Assessment .................................................................................. 173 5.3 Cost-Effectiveness ............................................................................................ 176 5.4 Cost of Carbon Dioxide Emission Reductions ................................................... 179 5.5 Avoided Damages from Criteria Air Pollutants .................................................. 180 5.6 Resource Leveraging ........................................................................................ 180 5.7 Conclusions ...................................................................................................... 181 6 References ............................................................................................................... 185 i Making Industry Part of the Climate Solution May 2011 Appendices A Background on Overall Methodology and Analysis Approach .................................... 203 B Background for Analysis of Output-Based Emission Standards (OBES) .................... 215 C Background for Analysis of a Federal Energy Portfolio Standard Qualifying Combined Heat and Power ........................................................................................ 229 D Background for Analysis of Superior Energy Performance Program (SEP) ............... 235 E Background for Analysis of Implementation Support Services (ISS) .......................... 245 F Background for Analysis of Small Firm Energy Management (SFEM) ....................... 261 G Background for Analysis of Tax Lien Financing ......................................................... 259 H Energy Efficiency Industrial Motor Rebates ............................................................... 271 List of Tables 1.1 Illustrative Activities Addressing Key Barriers in the Industrial Sector .......................... 16 1.2 Conversion of Energy Consumption to Carbon Dioxide Emissions .............................. 24 1.3 Criteria Air Pollutant Damages Associated with Emissions from Electricity Generation and Industrial Heat Production ($2008) ..................................... 26 1.4 Share of Industrial Energy Use by Census Region ...................................................... 29 1.5 Free-Rider Ratios and Rationales by Policy ................................................................ 31 1.6 Summary of Modeling Assumptions for Principal Policies and Sensitivities: Industrial Market Penetration, Policy Duration, and Free Ridership ............................. 33 2.1 State Output-Based Emissions Standards ................................................................... 38 2.2 Stakeholder Assessment of a Federal OBES .............................................................. 43 2.3 OBES Policy Option from the Industrialists‟ Perspective .............................................. 48 2.4 Leveraging of Energy Savings from Cumulative Public Investments in OBES ............. 50 2.5 Leveraging of CO2 Emission Reductions from Cumulative Public Investments in OBES ...................................................................................................................... 50 2.6 Value of Avoided Damages from Emissions of Criteria Pollutants for OBES ............... 51 2.7a Total Social Benefit/Cost Analysis of OBES ................................................................ 52 2.7b Total Social Benefit/Cost Analysis of OBES (7% Discount Sensitivity)......................... 53 2.8 Social Benefit/Cost Analysis of Policy and Discount Rate Sensitivities ........................ 53 2.9 Overall Assessment of OBES Policy ........................................................................... 54 2.10 A Selection
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