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close this bookClimate Protection and the National Interest (WRI, 1997, 56 pages)
View the document(introduction...)
View the documentElectric Power Production
View the documentTransportation
View the documentZero Emission Vehicles: - Electric and Hydrogen Cars
View the documentHydrogen-Powered Fuel-Cell Vehicles
View the documentNext Steps


The problems of greenhouse warming, air pollution, and oil security are intimately linked through the gases, pollutants, and technologies associated with fossil fuel combustion. If these linkages are not respected, haphazardly adopted strategies developed to deal with the problems individually might alleviate one only to exacerbate another.

Measures to cope with these problems will affect all energy-consuming sectors of the economy (buildings, industry, transportation, and utilities). Buildings and factories will have to become more energy efficient, reducing their on-site fuel use for heating, cooling, refrigeration, and lighting. Especially Significant will be the changes in power generation and transportation. These two sectors account for almost two thirds of U.S. energy consumption and are the two largest sources of CO2 emissions.52

Figure 2 shows that direct CO2 emissions from buildings and factories have remained fairly steady while those from power plants and transportation have been growing. Electric power plants account for about 36 percent of CO2 emissions,53 and for the most part the utilities believe they have little choice but to burn fossil fuels. The growth in utility CO2 emissions reflects the long-term trend toward electrification of the economy. Consumers are increasingly buying their energy in the form of electricity rather than as coal, oil, or natural gas.

To be absolutely clear - we must now focus on what can and what should be done, not because we can be certain climate change is happening, but because the possibility can't be ignored.

John Browne, CEO, BP
at Stanford University
May 19, 1997

Transportation currently accounts for 30 percent of U.S. carbon dioxide emissions, 80 percent of carbon monoxide releases, 49 percent of nitrogen oxides, and 37 percent of organic compound emissions.54


· Motor vehicles are major sources of air pollution and are the fastest growing source of carbon dioxide emissions. Vehicles also account for about half of U.S. oil consumption, equivalent in volume to all imports. Sensible domestic policies to address climate change, air pollution, and energy security would prescribe a long-term strategy to introduce emissionless vehicles ultimately powered by non-fossil energy sources. This is far from the case. Both the Clean Air Act and the Energy Policy Act broadly encourage the use of virtually any alternative fuel that has some potential clean air benefit including methanol, ethanol, compressed natural gas, and even synfuels made from coal.a These fuels have only marginal clean air benefits and little or no climate benefit. Their widespread use would frustrate attempts to reduce greenhouse gas emissions. Policies on federal fleet purchases are only compounding the problem. In 1995, the federal government purchased almost 19,000 alternative fuel vehicles of which less than 0.3 percent were emission-less; the rest bum fossil fuels or ethanol made from corn and offer little climate benefit. In short, federal policies on alternative fuels fail to recognize the links between motor vehicle fuels and the problems they give rise to.

a "Comparative Alternative /Clean Fuel Provisions of the Clean Air Act and the Energy Policy Act," Alternative Fuel Information, US Department of Energy.

· The United States is a major factor in the climate problem: with less than 5 percent of the world's population, the United States accounts for about 22 percent of global energy-related CO2 emissions. Despite the need to curtail CO2 releases, U.S. emissions continue to rise (almost 9 percent between 1990 and 1996), paced by transportation and electric-power production. Given the critical need to begin the transition to renewable energy sources, federal research, development, and demonstration resources should be focussed on beginning the move to renewables. Instead, the budget heavily emphasizes the burning of fossil fuels. In Fiscal Year 1997, the Congress appropriated $267 million dollars for solar energy technologies but $365 million dollars for fossil fuel research and development. Federal priorities seem out of sync with the urgent challenge to begin the transition from fossil to sustainable energy sources.

· In 1991, the United States went to war to ensure continued access, on favorable terms, to Persian Gulf oil. Yet, neither the Congress nor the Administration will support the kinds of domestic measures that would help cut U.S. oil dependence and enhance national security.

- In constant dollars, fuel prices are near an all-time low. Yet, there is no support for a revenue-neutral increase in the fuel tax (offset by reductions in taxes on income and investment) that would reduce the growth rate in oil consumption and increase the economic attractiveness of non-petroleum technologies such as electric-drive vehicles.

- With federal approval, speed limits on interstate highways have been greatly increased despite the fact that higher speeds lead to significant drops in vehicle fuel efficiency. Tests by DOE's Oak Ridge National Laboratory show that cars consume 33 percent more fuel to drive a mile at 75 mph than at 55 mpg.b
Hence, federally sanctioned higher speed limits encourage greater fuel consumption and higher CO2 emissions.

b Stacy C. Davis and David N. McFarlin, "Transportation Energy Data Book: Edition 16," USDOE, Oak Ridge National Laboratory, ORNL-6898, pp. 3-47.

- The average fuel efficiency of new cars and light trucks (including minivans and sport utility vehicles) has been dropping since 1987, largely the result of all-time lows in fuel prices. Despite the clear security and environmental threats engendered by this trend, the federal government has done little beyond sponsoring a long-term "Big Three" research program (PNGV - the Partnership for a New Generation of Vehicles) that will have little discernible effect on U.S. oil consumption for many years.

- Federal legislation to encourage the use of alternative fuels - such as ethanol - actually encourages the sale of less fuel-efficient new vehicles.c This is so because the federal fuel-efficiency standard (Corporate Average Fuel Efficiency, CAFE) for multi-fuel vehicles permits automakers to take an effective efficiency credit much higher than the vehicle's measured value running on gasoline. Ford and Chrysler, unable to meet their gasoline CAFE standard, will build new vehicles capable of running on 85 percent ethanol even though these vehicles are almost certain never to operate on the fuel. Up to 40 percent of Chrysler s future minivan fleet will come under this provision. As a result, Chrysler's minivans will be rated at about 133 mpg rather than the actual 20 mpg, regardless of what fuel is used in the vehicles.
In short, by sins of both omission and commission, federal policies are exacerbating the linked energy problems of climate, pollution, and oil security.

c Dale Jewett, "Makers' Ethanol Plan Provides Federal Fuel-Economy Bonus," Automotive News. June 23, 1997; Southeastern Regional Biomass Energy Program, "Update," July 1997.

Emissions of air pollutants from transportation are projected to grow in the future. Transportation also accounts for nearly two thirds of oil consumption and so is a major factor in the nation's increasing reliance on imported oil. The continued growth in transportation emissions reflects, in part, the decline in the real cost of driving. In real terms, a gallon of gasoline costs a third less in 1995 than it did in 1950 - and less than a gallon of bottled spring water.

It is clear that if we are to come to grips with our three-pronged energy problem, fundamental long-term changes will have to occur in the way electric power is generated and motor vehicles are powered. In the near term, the various pollution and climate risks that we have outlined can be reduced through improved energy efficiency and fuel substitution. Energy efficiency is the most effective means available for dealing with these intertwined problems and it must be the cornerstone of long-term change. Moreover, improved efficiency will also increase U.S. competitiveness in world markets.


In terms of their carbon and pollution emissions, the fossil fuels differ significantly. Natural gas combustion emits the least amount of CO2 and air pollution per unit of energy. Oil emits between 38 and 43 percent more CO2 than natural gas, and coal, between 72 and 95 percent more.55 (See Figure 13.) Synthetic oil made from coal (produced, for example, to reduce oil imports) emits much more CO2 than conventional oil. From both climate and air pollution perspectives, natural gas is the most attractive fossil fuel and synthetic fuels are the least. Over the long run, the use of more sustainable, non-fossil energy technologies will have to be greatly expanded if fossil fuel CO2 emissions are to be controlled. How this might happen and what their effects would be on our economy are outlined next.

Electric Power Production

Increased efficiency in power generation and consumption is the first priority in reducing CO2 emissions by utilities. Improvements in efficiency would yield double dividends by both reducing carbon emissions and cutting releases of sulfur and nitrogen compounds. Benefits of efficiency include reduced greenhouse warming (by cutting carbon dioxide), less acid deposition (by reducing sulfur and nitrogen emissions), and lower concentrations of ground-level ozone (by limiting the nitrogen oxides that ozone needs to form).

Power plant emissions of sulfur and nitrogen pollution could also be reduced by using cleaner, more efficient generating technologies such as the new highly efficient gas turbines; by installing "clean-coal" technologies (some of which, however, could increase CO2 emissions); or by switching to comparatively cleaner fuels, such as natural gas. More efficient lighting, refrigerators, heat pumps, water heaters, and industrial machinery all represent economically attractive opportunities to reduce carbon and pollution emissions at attractive costs.

To control the greenhouse problem over the longer term, measures in addition to efficiency improvements will be needed in the production of electric power. Neither "clean-coal" technologies nor any other practical technology now on hand can remove and dispose of the enormous quantities of carbon dioxide that fossil fuel burning sources would produce in the coming years.a Today, the only two long-term candidates for electric-power production are the renewable sources (such as solar cells, wind turbines, hydropower, solar thermal, and biomass), and nuclear power. With either source of energy, air pollution - high levels of ozone, acid deposition, carbon monoxide, and particulates - would largely disappear. Renewable electricity technologies - especially solar cells and wind turbines - are strong candidates for future power production and are already supplying power for some utilities. Despite this trend, the use of renewable technologies by utilities could be in jeopardy with the restructuring of the power industry that is occurring. Under most proposals, electric power producers will have little incentives to use anything but the cheapest possible source of electricity, which for the most part will not be renewables - at least not in the near future. Several factors could affect this situation. Some consumers may prefer to purchase "green" power even if it is somewhat more expensive. Secondly, if a sizable carbon tax were imposed, renewable energy sources would become more financially attractive. Lastly, under some proposals, power producers will be required to generate minimal amounts of power from renewable sources.

a To appreciate the enormity of this storage problem, consider that the United States emits about 100 trillion cubic feet of CO2 each year from burning fuels, mostly from dispersed sources. This is about 5 times the volume of gas handled by the entire U.S. natural gas industry.

Solar sources are particularly appropriate for decentralized, off-grid applications and the costs of several renewable technologies are dropping. Still, accelerated research on solar cells, wind technologies, and energy storage (for example, using hydrogen, flywheels, and batteries to store energy for later use) is needed. Subsidized purchases of renewable energy technologies to expand markets and reduce costs would also represent money well spent.

Nuclear power's comeback in the United States seems unlikely, at least for the near term. Today's nuclear plants - light-water reactors - have proven complex and expensive to build and operate. With restructuring in the wings, risk-conscious U.S. utilities seem unlikely to order any more. The prospect of second-generation nuclear technologies (smaller, passively safe, fuel-efficient, standardized fission reactors without plutonium recycle) offers a potentially more attractive alternative, but bringing these reactors to market could take decades. Public acceptance would also almost certainly require significant progress on the problems of radioactive waste disposal and plutonium proliferation.


As we have seen, transportation is a major source of greenhouse gases and air pollution and the largest consumer of oil. Several measures would help solve all three transportation-related problems at the same time. As with power production, improving transportation efficiency is first on the list. If U.S. cars, trucks, and buses were more fuel efficient, oil consumption and carbon dioxide emissions would drop, less oil would have to be imported, and the rate of greenhouse warming would slow down. The good news is that the technology needed to greatly increase transportation fuel efficiency is largely in hand. If Americans gradually replace their gas guzzlers with more efficient vehicles, the risks associated with spiraling oil imports as well as the risks of climate change will decrease. The bad news is that the trend in new-vehicle fuel efficiency is downward, not upward, as consumers are buying more light-duty trucks (sport-utility vehicles, minivans, and pick-up trucks) to meet their personal transportation needs. About 40 percent of new personal vehicles fall into the light-duty truck category, and they are much less fuel-efficient than cars. (According to tests by Consumers Union, typical sport-utility vehicles have a fuel efficiency of about 10 mpg in city driving.) The average fuel efficiency of new cars and light trucks taken together peaked at 26.2 mpg in 1987 and had fallen to 24.8 mpg by 1995. (See Figure 14.) This drop in new-vehicle fuel efficiency combined with sustained growth in the number of drivers and vehicles add up to a continued increase in gasoline consumption. (See Figure 15.)


Improved new-vehicle fuel efficiency encouraged through market mechanisms would be an important first step toward reducing motor-vehicle CO2 emissions. For all its benefits, though, it seems unlikely that new-car fuel efficiency can rise fast enough to overcome the momentum of increased vehicle use. Motor vehicles depend totally on a depletable fossil fuel - oil. Until economically and technologically attractive alternative fuels become widely available, we will not be able to solve the problems engendered by motor vehicle use; consumers will have little alternative other than to continue buying oil-powered cars and trucks.

The world needs alternatives to oil-powered vehicles.56 And the burden for developing the technological alternatives rests squarely on the industrialized countries that make them: 80 percent of these vehicles are made in the United States, Japan, and Europe. No one else can do it. Various carbon-based fuels, burned in internal combustion engines (ICE), are being promoted as substitutes for gasoline to reduce air pollution. These fuels include blends of gasoline and methanol (wood alcohol) or ethanol (grain alcohol, made from corn) and compressed natural gas (CNG). Methanol (as presently produced) and CNG are based on fossil fuels, and their use is not sustainable over the long haul. Moreover, they offer little if any improvement over gasoline in reducing greenhouse gas emissions. As for air pollution, CNG offers benefits while methanol-gasoline blends could actually increase ozone formation. The widespread deployment of methanol or CNG in ICE vehicles should not be encouraged.


Ethanol produced from corn, for use in gasohol, is also not a long-term solution. In 1995, about 9 percent of the motor-vehicle fuel pumped at service stations in the United States was gasohol, a mixture of 10 percent ethanol and 90 percent gasoline. Ethanol production is heavily subsidized by the federal government ($0.54 per gallon) and various agricultural states. Gasohol probably offers no ozone benefit.57 And it takes large amounts of fossil fuels to make. Under very favorable circumstances, ethanol derived from corn has an energy ratio of only 1.24.58 That is, ethanol production yields only 24 percent more energy than is used in making it.

Viewed solely as a means of cutting air pollution, these fuels have varying degrees of merit. All three would reduce carbon monoxide emissions relative to conventional gasoline. CNG would also reduce ozone concentrations. But when the impact of these fuels on global warming is taken into account, their attractiveness fades.

Zero Emission Vehicles: - Electric and Hydrogen Cars

The vehicles most capable of dealing with pollution, climate change, and oil security are electric-drive vehicles (EVs) powered by batteries, flywheels, or hydrogen fuel cells. Powered by electric motors they have no combustion engine on board. As a result, they are Zero Emission Vehicles (ZEVs), at least as far as the vehicle itself is concerned. Of course, somewhere there is an energy plant making electricity or hydrogen, and the emissions of these plants must be evaluated to determine the total impact of the EVs.

How much battery-powered electric vehicles can cut CO2 emissions depends mostly on two factors: the electrical efficiency of the vehicles, and the emissions from the power plants that produce the electricity used to charge them. If EVs are charged by electricity from natural gas power plants (steam), carbon dioxide emissions would fall by about 50 percent compared with comparable gasoline vehicles.59 In contrast, charging EVs with electricity generated from coal would cut greenhouse gas emissions by only about 20 percent. Charging from oil-fired plants would reduce emissions by about 30 percent. In the longer term, CO2 and pollution emissions could be entirely eliminated by using renewable energy technologies to charge the batteries. Regardless of which fuel is used to generate the electricity, EVs could be powered strictly from domestic sources, improving both national security and the nation's balance of trade. Switching to battery-powered EVs would significantly reduce emissions in urban areas - EVs emit no street-level pollutants. If the batteries were charged at night avoiding peak power demands during the day, no new power plants would have to be built. Ozone, which cannot form without sunlight, would be reduced. No matter how they are recharged, the use of EVs would lead to reduced oil consumption. The greatest reduction would come from recharging them without burning oil.

Hydrogen-Powered Fuel-Cell Vehicles

Hydrogen-powered EVs generate electricity using a fuel cell, a battery-like device that converts hydrogen and oxygen directly into electricity, water, and waste heat. The electricity is used to power the vehicle using electric motors. Prototype hydrogen-powered cars and buses have been tested both in the United States and overseas. Production of hydrogen using electrolysis of water is the most likely long-term source of hydrogen with the primary energy supplied by non-fossil energy sources such as renewable technologies. In this case, virtually no carbon dioxide emissions would result.

Hydrogen vehicles have at least two potential advantages over battery EVs - longer range and faster refueling. Yet, their widespread commercial use is farther down the road because of the lack of a supporting infrastructure (such as hydrogen pipelines), high fuel-cell prices, and bulky and heavy hydrogen storage systems.b Still, like electric vehicles, they would form a natural link in developing a sustainable energy system. Their use would reduce oil imports, alleviate trade deficits, and cut air pollution and greenhouse gas emissions.

b Hydrogen is commonly stored on a vehicle as a high-pressure compressed gas. It could also be carried chemically incorporated within methanol (CH3OH), an easily storable liquid. On board the vehicle, the hydrogen would be chemically extracted from the methanol and used to power the fuel cell. Net carbon dioxide emissions would be small if the methanol were produced from biomass. The long-term sustainability of large-scale biomass production remains to be established.

Battery - or hydrogen-powered electric vehicles, re-fueled eventually by emissionless power sources such as wind turbines, photovoltaic cells, or other sustainable energy sources, will serve as a major element of a sustainable transportation system.

Next Steps

It is clear from this report that new energy technologies are emerging that will reduce the unwanted side effects of burning fossil fuels while enhancing environmental and national security. Their development and use offer major opportunities for the Americana business community. With the emergence of new energy technologies such as solar cells, wind turbines, solar thermal collectors, electric-drive vehicles, batteries, and flywheels, a long-term transition is beginning toward a sustainable U.S. energy sector. The trend toward electrification of the economy will continue as fossil-fuel burning gradually gives way to direct electricity production using these new technologies. As costs fall, a global transition to their use will take hold. The move to sustainable technologies will pose major challenges to humanity as we struggle with the economic and institutional barriers to change. Our success in making this first transition will provide a clue to how successful we will be in introducing sustainability into other sectors of the economy.

What can be done to encourage these trends? An approach is sketched out here that relies primarily on market mechanisms to drive the transition. In the short term, national policies should emphasize improving energy efficiency throughout the economy. This can best be encouraged by reforming energy prices to better reflect the climate, pollution, and security costs levied on us all by fossil fuel consumption. Only with such reforms can the environmental and climate benefits of efficiency and renewable energy be fully realized in the market place.

Nor need there be undue concern that the kinds of energy pricing reforms advocated here will have a negative impact on national economic growth. According to a recent World Resources Institute report, under favorable conditions (described below), U.S. fossil-energy consumption can be cut substantially over the coming decades without lowering projected growth in GDP.60 Some of the favorable conditions necessary for this outcome are:

· There must be available non-fossil alternative energy sources at competitive prices in the near future;

· Firms and consumers must be flexible and adaptive in their responses to market signals;

· There should be options to trade CO2 emission rights internationally (so-called Joint Implementation);

· Revenues collected from policies to reduce emissions (either through a tax or through the auction of emission permits) must be used ("recycled") to reduce taxes on income and investment; and

· Economic savings from reduced air pollution and climate damages should be taken into account.

The models that do embody these assumptions indicate that carbon emissions can be cut while the economy continues to grow. Ensuring that some of these conditions are met is, in turn, primarily a matter of public policy.

The market approach advocated here can be coupled with programs of consumer education and energy labeling. Over the longer term, federal and state buying powers can be harnessed to expand the markets for emissionless vehicles and renewable energy technologies. Federal funding is also warranted for basic technological research and development, and for the demonstration of advanced technologies that are nearing commercial competitiveness.