Climate Change: Preliminary Observations on the Administration's 
February 2002 Climate Initiative (01-OCT-03, GAO-04-131T).	 
                                                                 
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 earth's climate. The		 
Administration's 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		 
Administration's publicly available documents (1) explain the	 
basis for the Initiative's 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, GAO's testimony is based on its	 
analysis of publicly available Administration documents.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-131T					        
    ACCNO:   A08638						        
  TITLE:     Climate Change: Preliminary Observations on the	      
Administration's February 2002 Climate Initiative		 
     DATE:   10/01/2003 
  SUBJECT:   Air pollution control				 
	     Climate statistics 				 
	     Environment evaluation				 
	     Environmental monitoring				 
	     Environmental research				 
	     Performance measures				 
	     Strategic planning 				 
	     Global Climate Change Initiative			 

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GAO-04-131T

                    United States General Accounting Office

GAO Testimony

Before the Committee on Commerce,
Science, and Transportation
United States Senate

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

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

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 earth's climate.

The Administration's 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 Administration's publicly
available documents (1) explain the basis for the Initiative's 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, GAO's
testimony is based on its analysis of publicly available Administration
documents.

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.

October 1, 2003

CLIMATE CHANGE

Preliminary Observations on the Administration's February 2002 Climate
Initiative

The Administration stated that the Initiative's 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 Administration's 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,

o  	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.

o  	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.

o  	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.

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.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

1To 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.

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,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.

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

Summary 	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.

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

Background

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.

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

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

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.

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

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

Initiative, and to 150 tons per million dollars under the Initiative (an
18-percent decline).

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 2006.3 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 2003.4

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.

3Federal 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).

4Light 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).

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:

o  	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.

o  	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.

o  	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 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
         1                     Tax credit for combined heat and power systems 
         2                            EPA Combined Heat and Power Partnership 
         3          Department of Energy challenge to heat and power industry 
         4                    Tax credit for residential solar energy systems 
         5           Tax credit for electricity from wind and certain biomass 
                                                                      sources 
         6         Tax credit for electricity from additional biomass sources 
         7                       Tax credit for new methane landfill projects 
         8                   Tax credit for new hybrid or fuel-cell vehiclesa 
         9                                      Funding for geothermal energy 
         10                                  Renewable energy on public lands 
         11                                                   Hydrogen energy 
         12                 Coal-fired, zero-emissions electricity generation 
         13                                                     Fusion energy 
                                                       Improving fuel economy
         14                               Advancing hydrogen-based fuel cells 
         15    Department of Energy public-private projects for low-cost fuel 
                                                              cell technology 
         16                           Fuel economy standards for light trucks 
         17                                  Tire pressure monitoring systems 
         18                             High-efficiency automobile technology 
                                      Promoting domestic carbon sequestration
         19                                      Conservation Reserve Program 
         20                          Environmental Quality Incentives Program 
         21                                           Wetland Reserve Program 
         22                                        Forest Stewardship Program 
                                   Challenging business to decrease emissions
         23                                       EPA Climate Leaders Program 
         24                                            Semiconductor industry 
         25                                                Aluminum producers 
         26                                      EPA Natural Gas STAR Program 
         27                             EPA Coal Bed Methane Outreach Program 
         28                                                    AgSTAR Program 
         29                             Ruminant Livestock Efficiency Program 
         30                                        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.

aAlso listed in improving fuel economy category.

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