Momentum for a Carbon Tax in the US?

(I've been extraordinarily busy both professionally and personally, so I apologize for not being able to update the blog for the past few months)

A carbon tax has been discussed on this blog several times, once about the introduction in Japan  and another about my publication work. Since then, the interest levels seem to have risen over a carbon tax in the US, both nationally and locally.

At federal level, POLITICO reports that debate is growing over a carbon tax, which is drawing push back by the coal and oil industry and manufacturing businesses. This push back is predictable given the expected financial burden on them, but the fact that they have issued a report to reaffirm their opposition may be a sign that a carbon tax may become a major topic of Congress in the coming several years.

The Obama administration has been silent about the issue, but my take is that it is focusing on regulatory approaches such as EPA's new GHG standards on power plants first, and therefore trying not to make extra noise on other issues at this point. Nevertheless, the idea on a carbon tax has been tossed around Congress with the ongoing debate to find a new revenue source to reduce budget deficit, so Congress may be able to introduce a carbon tax as a part of fiscal deal, not a part of comprehensive climate bills as the advocates have envisions.

(Source: Northwest Economic Research Center)

Meanwhile, a carbon tax is becoming a hot topic at state level in the West Coast. In Washington state, it became one of the major topics of discussion in its long-range energy vision called the Washington State Energy Strategy in 2011, and the Northwest Economic Research Center (NERC) evaluated and analyzed a potential carbon tax in Oregon (I've participated in both studies).

Furthermore, Washington State Governor Inslee recently signed into a comprehensive climate study bill, which will evaluate various ideas including a carbon tax according to my sources, and an advocacy group led by U of Washington Professor Bauman has launched a champagne to put a carbon tax bill on a ballot measure in the state. Oregon is also moving forward with several bills being tossed around the legislatures such as HB 2792 and HB 2874.

These movements yet to overcome a series of political hurdles and push back, but in a time with little hope for passing comprehensive climate legislation at Congress, this could be one of the few effective and realistic options left to curb GHG emissions in the US. 

New Prime Minister and Energy Policy Overhaul in Japan - Again

The spectacular political drama over post-Fukushima energy policy overhaul in Japan has shown a new development in the past few weeks. On the day after Christmas, Shinzo Abe sworn in as the 7th Prime Minister in 7 years (his second), after the landslide victory by his Liberal Democratic Party (LDP) - actually a conservative party contrary to its name.

Prime Minister Abe (Speaking at Fukushima Daiichi nuclear power plant)

(Source: New York Times)

Since then, his administration quickly moved to repeal the Innovative Strategy for Energy and the Environment, whose primary goal is to phase out all nuclear power plants by sometime in the 2030s. He now calls for new construction of nuclear reactors if they are “completely different from those at the Fukushima Daiichi nuclear power plant.” It is anticipated to face intense oppositions from some anti-nuclear groups and activists, but given the weakening the Democratic Party of Japan (DPJ) who drafted the Innovative Strategy of Energy and the Environment, the rebooting and new construction could take place soon after the Nuclear Safety Commission finalizes the new rule in the coming July.

In the mean time, he decided to drop the commitment to reduce Japan’s GHG emissions by 25% relative to the 2030s, and directed the Minister of the Environment to set a less stringent reduction goal by November. His decision is based on the forecast used for the Innovative Strategy for Energy and the Environment, showing the level of GHG emissions in 2020 will be only 7% lower than the 1990 levels. However, as I wrote on previous posts, when rebooting existing reactors and adding planned reactors as he suggests, the reduction level is likely to be somewhere around 25% in 2020 under low growth scenario. So, in short, the administration’s energy policy overhaul began with contradiction, and it is unclear where the reform is headed.

Expert Panel (Comprehensive Natural Resource and Energy Forum) 

The expert panel is expected to discuss fuel mix for electricity generation, and to a lesser extent, review the energy demand forecast. It is unclear what the level of GHG emissions will be under the new forecast, but it could affect the next round of the international negotiation over the reduction target beyond 2020. So, I plan to continue to monitor the development and critically review the new forecast.

Analysis of Japan's New Energy Strategy 4/4: Policy Implications

The analyses in the past three posts on the Innovative Strategy for Energy and the Environment, - Japan's comprehensive energy policy overhaul in response to the nuclear accident in Fukushima - have shown a variety of the plan's problems such as (1) inconsistency between its goals and measures, (2) technical and economic difficulties of closing all nuclear power plants by the 2030s, and (3) unrealistic energy demand forecast. The plan's policy implications range from economy to energy security, and this post discusses its impact on environmental policy both domestically and internationally.

The forecast for greenhouse gas (GHG) emissions in the energy plan predicts that Japan's emissions can be reduced only by 5% by 2020 relative to 1990 levels. The government originally envisioned much greater level of reduction, but the plan's goals to close nuclear power plants by the 2030s translates into increasing reliance on thermal plants using fossil fuel and therefore more emissions from electric sector. Take for example, the emission factor of electricity generation surged by a large margin in 2011 (which means dirtier electricity), because the government hasn't sanctioned the reboot of reactors (with one exception) after the earthquake (see below). As many reactors continued to operate til mid-year, the full impact on the emission factor is yet to come in 2012 data.

(Source: Agency for Natural Resources and Energy)

Back in 2009, Japan's then Prime Minister Hatoyama announced at the UN general assembly  that his nation is committed to reduce GHG emissions by 25% relative to 1990 levels by 2020. This goal was seen as inspirational and ambitious by many energy policy experts, and in my view it could have been a critical catalyst to produce stringent nation-by-nation GHG reduction target for the second commitment period of the Kyoto Protocol. The new energy plan however indicates that the inspirational goal is now far out of reach for Japan, and some politicians began to loudly call for the goal to be dropped.

Under such circumstances, Japan's delegation remained silent about its own GHG reduction target at the recent UN's Climate Change Conference (COP 18) in Doha. Furthermore, Japan decided not to participate in the second commitment period running from 2012 to 2020 (to reduce GHG emissions within the Kyoto Protocol), which helped some other nations such as Russia and New Zealand to do the same. For the record, Japan had been reluctant in participating in the second commitment prior to the adoption of the energy plan due largely to the lack of participation by the US and China, but the energy plan seems to have played the critical role in finalizing the decision. In this way, COP 18 produced "negative" progress toward global GHG reductions, at least in the short to medium run. The energy plan is certainly not the only cause of the failure of COP 18, but it did negatively contributed the atmosphere of negotiation and encouraged several other nations to abandon their legally-binding commitments.

(Source: UNFCCC)

Once again, the plan's GHG emissions forecast is deeply flawed, and in my view it is misleading the public that the inspirational target was a product of pure idealism and far out of reach for Japan. However, the actual levels of GHG emissions are likely to be far lower than the plan's forecast due to a variety of factors such as (1) unlikely scenarios over nuclear power, (2) bloated energy demand forecast, (3) recently implemented policy measures not considered in the plan such as a carbon tax, and (4) robust and lasting nationwide efforts to reduce electricity consumption.

In conclusion, the Innovative Strategy for Energy and the Environment, after political twist and turns, ended up having many defects ranging from the incoherent goal to close all nuclear power plants by the 2030s to the overestimated GHG emissions, and for this reason, I wish the world to take extreme cautions when examining the energy plan and its implications.

Analysis of Japan's New Energy Strategy 3/4: Demand Forecast

The previous two posts of the analysis on Japan' new energy plan - the Innovative Strategy for Energy and the Environment - focused on the supply side of the planned energy system. Now the focus shifts to the demand side, especially on the energy demand forecast used in the plan. It is imperative to thoroughly analyze the demand forecast because it determines how much supply, ranging from fossil fuel to renewable energy, will be needed in the long run, and ultimately affects what strategies will be needed to secure resources, maintain economic competitiveness, and protect the environment. In this post, I will argue that the energy demand forecast in the plan overestimates future energy demand by assuming unrealistic economic growth and neglecting demographic, industrial, and lifestyle changes that Japan has been experiencing.

Economic Outlook

The changes in energy demand have traditionally been driven by economic growth. For this reason, the first order of business in forecasting energy demand is to predict the future economic growth. It is obviously not an easy task to forecast economic growth up to 2030 - the plan's target year. The government originally prepared two different scenarios for economic growth: (1) Safe Scenario and (2) Growth Scenario. The below table summarizes the assumed average annual growth rates for real GDP in Japan. They seem fairly low even in Growth Scenario, but many critiques argue that they are still too high for a nation with declining population, particularly a rapid decrease in working age population. In response to the criticisms, a new scenario called Low Growth Scenario was added to reflect the actual growth rate per working age population in the past decade.

Real GDP Annual Growth Rate Assumptions (Source: National Policy Unit)

	2011-2020	2021-2030	Note
Growth Scenario	1.8%	1.2%	Assumption in Rebirth of Japan: A Comprehensive Strategy
Safe Scenario	1.1%	0.8%	Assumption in Fiscal Management Strategy
Low Growth Scenario	0.2%	0.4%	Continuation of the average growth rate per working age population in the past decade

These growth rates are one of the most critical determinants of future energy demand. The figure below suggests that the energy demand in 2030 can be substantially lower under Low Growth Scenario. The difference between Growth Scenario and Low Growth Scenario in 2030 is about 20% of the energy demand in Growth Scenario in 2030.

Figure: Energy Demand Forecast (Source: National Policy Unit)

This indicates that the amount of power plants needed to meet the energy demand should be significantly different under the three scenarios. For example, if the electricity demand is substantially lower than today as in Low Growth Scenario, it is possible to shut down most coal-fired power plants to curb greenhouse gas emissions, or alternatively, shut down most nuclear power plants as about half of the public desires nowadays without compromising reliability of electric grid. The fuel mix for electricity generation in this way can be altered under different growth assumptions. The plan however only focuses a single fixed fuel mix for the three growth scenarios, which further undermines the plan's cohesiveness and feasibility in my view.

Industrial Sector

The discussion above shows the lack of interaction between supply and demand scenarios. The next problem to point out is the energy demand itself. There is a variety of indicators used to predict energy demand for each sector, and in this blog post I focus on parameters used to forecast energy use in industrial and transportation sector. As the figure below shows, most drivers of industrial activities shows either upward or steady trend (click the figure to enlarge).

Figure: Industrial Output Trend and Forecast (Source: National Policy Unit)

I would argue that this assumption is unrealistic for two reasons. One reason is that the level of materialistic consumption has been declining due to changing demographics and lifestyle. Take for example, the plan assumes the level of paper production to be steady at a current level until 2030. On the contrary, the population, particularly working age population is on the decline, and the society as a whole is depending more and more on paperless transaction. While the plan assumes the level of paper production will remain steady, paper producers expects their businesses to shrink in coming decades; Oji Paper, a major paper producer in Japan, just announced massive payoffs and factory closings despite increasing profits, primarily to cope with expected decline in paper demand. Another shrinking energy-intensive industry is cement; the most massive infrastructures such as dam, highway, and subway are already built out in Japan, and the aging society along with declining population will obviously curb the appetite for new housings and office buildings. There will of course be demand for maintenance and replacement, but it won't be as much as new development.

The other reason is the structural changes that the Japanese economy is facing today. The level of industrial output has declined steadily through the 2000's for most products as assembly lines continued to move to China and Southeast Asia. In fact, once enjoying enormous trade surplus, Japan is now in red in trade balance due not only to increasing import of fossil fuel but also to declining exports. Japan managed to maintain positive balance of payments through returns on investment abroad, and Japan's economy itself is becoming more service-oriented. Unless this trend is somehow suddenly reversed, for good or bad, industrial activities are likely to continue to decline. For these reasons, while it is understandable for politicians and officials to have a motivation to draw upward trend, the energy demand in industrial sector is likely to be significantly lower than the forecasts due to lower-than-expected production level.

Transportation Sector

The demand for transportation fuels, mostly gasoline and diesel for automobiles, are determined by the distance traveled (VKT: vehicle kilometers traveled) and fuel efficiency. The fuel efficiency is expected to increase significantly thanks to continuous improvement in internal combustion engine and large deployment of hybrid and electric vehicles. There is a variety of predictions and opinions on the level of alternative vehicle penetration, but I would say the plan's assumptions on fuel efficiency are neutral and realistic.

Figure: Total Vehicle Travel Demand Trend and Forecast (Source: National Policy Unit)

There is a problem on the assumed VKT, or distance traveled, however. The above figure shows that vehicle kilometers traveled by passenger vehicles are assumed to decline continuously til 2030. When looking at this figure on per capita basis, it is assumed to be more in 2030 than in 2020. This is an odd assumption in my view, because the amount of driving has been on decline on per capita basis in aging societies (elderlies usually drives less), and it is difficult to come up with an explanation for the sudden change in the trend in 2020. Furthermore, Generation Y'ers - also known as Millennial Generation - tends to drive less and less as they prefer to live close to urban centers and rely on public transportation to get around. For whatever reasons, this is causing automobile travels to decline in most industrial nations. These demographic and lifestyle changes could significantly reduce driving on per capita basis, and the assumed VKT in the plan is likely to overestimate the energy demand from automobile use.

Figure: Vehicle Travel Demand Trend and Forecast (Source: National Policy Unit)

The freight side of vehicle kilometers traveled is more difficult to predict. Yet, I would argue that the demographic change and more service-oriented economy mentioned earlier is likely to curb the demand for traditional bulky goods such as paper and construction materials. The challenging part is to incorporate these social changes into demand forecast, and I don't have a clear solution for it. My point here is that the overall energy demand should be much less than the plan's forecast.

The implication of these forecasts on a variety of topics such as greenhouse gas emissions and fuel mix for electricity generation will be discussed in the next post, which is scheduled to be published in December.

Analysis of Japan's New Energy Strategy 2/4: Feasibility

The previous post discussed the inconsistency between the goal and measures adopted in the Innovative Strategy for Energy and the Environment - Japan's new energy plan in response to the nuclear accident in Fukushima. This blog post examines the feasibility of the goal to phase out all nuclear power plants by the 2030s from economic and technical perspectives.

Current and Planned Electricity Demand and Fuel Mix

(Source: National Policy Unit)

Economic Feasibility

The economic problem of the plan's goal to phase out nuclear power is relatively well-known. Nuclear power is arguably less expensive than other fuel sources, even when accounting for the cost of discommissioning of reactors and cleanup of Fukushima Daiichi power plant. The below figure compares the cost of electricity generation from various sources, based on the official estimate by the National Policy Unit. 

(Source: National Policy Unit)

It shows that nuclear power will continue to be less expensive than other fuel sources, and shifting from nuclear to renewable energy is likely to adversely impact electricity costs, even with the declining costs of renewable energy. This cost estimate is highly sensitive to various assumptions ranging from a discount rate to crude oil price forecast, and it will remain a subject of debate no matter what assumptions are chosen. I do however find the cost estimate fair and reasonable after examining various assumptions used in the study, and it is possible that higher-than-expected crude oil prices may drive up the generation costs from fossil fuel higher.

The cost difference in the above figure may not be so large to most people, but the actual cost differences are much larger from now on. Since the majority of the costs of nuclear power already incurred at the time of construction, the operation costs to generate additional electricity from now on is so much less than the cost figure above, which would amount at 5 yen/kWh. In other words, the marginal costs of electricity generation from nuclear power is so small that any attempt to replace nuclear power with other fuel sources, particularly with fossil fuel, will require the electric rates to be raised.

The plan has economic analyses on the scenario, arguing it would lower Japan's GDP by 1.2 to 7.6%, but the range is too large to draw any conclusion. Given the recent struggle over electricity rate raise, it is difficult to imagine that the public will accept much higher rate than today. The plan has yet to address the funding issues to deploy renewable energy at large scale.

Technical Feasibility

The other problem is the technical feasibility of massive introduction of renewable energy, which is less well-known to the general public than the cost problem mentioned earlier. According to the Mid- and Long-term Roadmap for Global Warming Measures, which explores the potentials of renewable energy sources and energy conservation measures and is the basis for the Innovative Strategy for Energy and the Environment, solar and wind are expected to account for about half of electricity generation from renewable energy sources.

Current and Planned Electricity Generation from Renewable Energy Sources (TWh)

	2010	2030	% (2030)
Hydro	69.9	106.7	31%
Geothermal	3.2	13.5	4%
Biomass/Waste	19.9	38.4	11%
Marine	0	14.2	4%
Wind	3.8	64.6	19%
Solar	3.5	105.8	31%
Total	100.4	343.2	100%

(Source: the Ministry of the Environment)

Since the plan expects renewable energy sources to generate about 30% of electricity in 2030, solar and wind will be responsible for about 15% of electricity generation. This may or may not pose significant challenges to the electric grid. Because electricity generation from these sources are dependent on weather, the output varies not only from day to day but also from second to second. Solar and wind are thus called variable or intermittent energy sources. The variability of solar and wind can be problematic to the grid. Demand and supply always needs to be in balance to maintain constant frequency within a grid; if this fails, it could alter the frequency of electricity and possibly cause power outage or damage electronic devices everywhere.

There are several possible solutions to this problem: (1) demand side management (and smart grid), which controls the demand either mechanically or through pricing incentives, (2) deployment of rapidly responsive thermal plants, and (3) energy storage, mostly likely in the form of pumped storage hydroelectricity (PSH). These solutions are costly, but it is possible that a combination of these techniques will enable a large introduction of intermittent energy sources.

Possible Fuel Mix in the US for Summer 2050

(Source: National Renewable Energy Laboratory)

The problem of the plan is that it basically neglects the problem per se. My sources tell me that there was no simulation over the impact on each electric grid, and it is unclear if the plan's planned fuel mix is even technically possible.

On the contrary, the National Renewable Energy Laboratory, a research arm of the Dep. of Energy (of the United States), has recently conducted a very detailed study called the Renewable Electricity Futures Study. This study examines when and where renewable energy is harvested and how it would impact the grid, and it simulates various load and weather scenarios at hourly level. The simulation's resolution is astonishing, and it even explores electricity interchange among all major grids in the US.

Renewable Energy Generation Bases in 2050

(Source: National Renewable Energy Laboratory)

This is the level of analysis needed before the government announces the bold plan (which now sounds unlikely to be carried on by the next administration), because even inspiration goals could alter investment decisions.

In sum, regardless of your position on the plan's goal to phase out nuclear power, the plan fails to examine economic and technical hurdles to achieve the goal and identify countermeasures to solve the obstacles, and I cannot help saying the plan will turn out to be nothing but pie in the sky.

In the next blog post scheduled in November, I will discuss the flaws in economic and energy demand forecasts embedded in the plan.

Analysis of Japan's New Energy Strategy 1/4

After the series of twists and turns, the Japanese government has finally completed the energy policy overhaul in response to the nuclear accident at Fukushima Daiichi power plant. Despite the resistance from the business communities and power generators, its comprehensive plan called the Innovative Strategy for Energy and the Environment aims at phasing out all nuclear power plants from the electricity generation fuel mix by the 2030s.

Cabinet Members Finalizing the Innovative Strategy for Energy and the Environment

(photo credit: The Asahi Shimbun)

This plan however contains a variety of contradictory policy measures, and needs careful attentions to analyze the impact. Since it is such a large and important topic to cover, I will discuss and analyze the plan in details over several posts from various perspectives, including its feasibility, flaws in demand forecast, and implications for greenhouse gas emissions.

* This blog is intended to be purely analytic and won't state my position on specific goals and measures.

Basics

The primary objective of the plan is to set a target fuel mix for electricity generation in 2030 along with conservation measures to reduce the nation's reliance on nuclear power. The government originally prepared three options for electricity generation fuel mix in 2030: (1) no nuclear power, (2) 15% nuclear power, and (3) 20-25% nuclear power.

The business communities supported 20-25% nuclear scenario due to the concern over the costs and instability of alternative energy sources, mostly renewable energy, while anti-nuclear activists supported no nuclear power scenario over the fear of another accident. The poll suggests the public is also split evenly on this issue. Although many experts saw the 15% scenario as a realistic scenario and good compromise between the two, the Noda Administration picked "no nuclear power" scenario for political reasons which are beyond the scope of this blog.

The plan however calls for phase-out of nuclear power by "sometime" in the 2030s, instead of just saying 2030. This expression"sometime" in the 2030s was expected to ease the concerns from the business communities and power generators, but it diluted the message and purpose of the whole energy policy overhaul and drew negative reactions from the media. Furthermore, there was a last minute change in the positioning of the plan; the administration initially sought official cabinet approval to make the plan basis for related legislation and regulation, but instead, the plan is now called "reference document", which yields little legal authority over government actions.

For good or bad, this scenario expects renewable energy to be the substitute for nuclear power, and its share of electricity generation fuel mix needs to jump from about 10% in 2010 to 35% in the 2030s, whose feasibility will be discussed in the next blog post (see figure below).

Current and Planned Electricity Demand and Fuel Mix

(Source: National Policy Unit)

Besides the generation fuel mix, the plan calls for deploying exhaustive strategies to reduce consumption, such as massive introduction of electric vehicle (60% in new vehicle market sales in 2030, including plug-in electric vehicle) and mandatory deployment of high efficiency light bulbs (e.g. LED). Combing these strategies, the plan aims at reducing electricity consumption of 10% and overall energy consumption of 20% by 2030 (when compared to 2010).

Principles

The plan calls for phase-out of all nuclear power plants by "sometime" in the 2030s, and it has three basic principles toward this goal. The first principle is to establish so-called "40-year rule" which mandates phase-out of a nuclear power plant after 40 years of operation. This strategy is based on the assumption that the infrastructure not only decays with time but also becomes obsolete as time progress. While there is no scientific evidence to support this specific time frame of "40-year", it is reasonable to phase-out outdated plants build in the 1960s and 1970s at the end of its planned lifetime.

The second principle is to reboot existing power plants as soon as safety is confirmed by the Nuclear Regulatory Commission (of Japan), which is slated to make a start this month. This is a relatively simple strategy but is expected to be politically challenging to reboot any plant, especially the ones owned by Tokyo Electric Power Company (TEPCO) and Fukushima Daini power plant, which didn't have major damage from the Tsunami but sits nearby Fukushima Daiichi power plant. (some reactors are currently in use as an emergency measure to meet the higher demand in summer)

The third principle is not to build new reactors or replace existing reactors with new ones. This principle sounds consistent with the goal, but there is a confusion about the definition of "new reactors," which is discussed in the following section.

Analysis

The plan argues that Japan can achieve the goal by "sometime" in the 2030s with these principles, but as most analysts suggest, this is far from true. When implementing "40-year rule," the remaining capacity of existing nuclear power plants won't be zero until 2049 (see the green line in figure below). It's possible that the reactors in Fukushima won't ever be rebooted due to the strong emotion toward nuclear power in Fukushima, but even in this case, the remaining capacity won't change significantly (see the blue line in figure below).

Furthermore, Yukio Edano, the Ministry of Economy, Trade, and Industry (METI), told the press earlier this week that the plants under construction in Shimane and Oma will continue to be built, and that the METI shall give permits to planned plants in most cases. Although the third principle of the plan prohibits new reactors to be built, METI's interpretation is that the plants under construction or in preparation today do not fall into this "new reactor" category. Assuming METI can realize his comment, Japan will have about 20GW of nuclear capacity in 2050, which is far from eliminating nuclear power by "sometime" in the 2030s. (For the sake of simplicity, I assumed that the plant in Shimane will be operational in 2014, the one in Oma will be operational in 2017, and other planned plants will be operational in 2020.)

When comparing these capacity projections to the electricity demand forecast (1 trillion kWh), nuclear power will have 15% of electricity market share with existing plants, and 28% with existing and planned plants (assuming its capacity factor at 80%). These projections suggest under the principles in the plan, Japan cannot achieve "no nuclear power" scenario by "sometime" in the 2030s.

The administration itself admits the feasibility problem of the plan, and it is highly likely that the plan will be revised significantly by other administrations in a few years. In the mean time, the next blog post, which I intend to write "sometime" in October, will look at feasibility of planned massive introduction of renewable energy.

A Carbon Tax Paper Published!

Previously I have conducted an extensive study on the impact of a carbon tax in Washington state. The initial study was for my master's degree as well as for the Washington State Energy Strategy, a state energy planning project that I worked for at the Washington State Department of Commerce; this phase of the study was completed last summer.

Since I left the US to begin my work for the Japanese government, I continued to refine the model to forecast the impact of a carbon tax on greenhouse gas emissions. At the same time, I wanted to share my study more broadly with other energy policy experts, so I decided to publish my study on an academic journal called Energy Policy.

The publication process on an academic journal typically stretches over a year, but I am glad to announce that my article is published much sooner than expected on its September edition. This article focuses on the methodology and analysis results of my forecasting model called C-TAM, which stands for carbon tax analysis model.

Through the review process, several comments were directed toward how C-TAM treats the impact on the electric grid, and in response I added a new scenario called "aggressive fuel mix change scenario" where a carbon tax curb the demand for coal in respect to its high carbon content (= coal-fired power plants are most carbon intensive means to generate electricity).

This scenario results in larger impact on greenhouse gas emissions as the above figure shows. While I noted this scenario as an alternative scenario to the base scenario called "standard fuel mix change scenario," it may actually be more realistic than the base scenario.

A large uncertainties associated with the impact on the electric grid is still the major weakness of the model. Furthermore, I believe that the price elasticity of demand, an indicator of the degree to which a change in price induces a change in energy demand, for transportation fuels may need reassessment after the gas price began to rise dramatically since 2007.

C-TAM still has rooms for improvement, but this publication can be a significant milestone to rationalize the discussions about a carbon tax, or more broadly the development of energy policy portfolio. I have been receiving inquiries from various folks about C-TAM from other parts of the US, and I hope it can play a pivotal role in implementing a carbon tax worldwide to reduce greenhouse gas emissions on a global scale.