Text for Recommended mitigation options for controlling greenhouse gas emissions : final report, October 2008

              Recommended Mitigation Options for
Controlling Greenhouse Gas Emissions
Climate Action Plan Advisory Group
(CAPAG)
North Carolina
Final Report
October 2008
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North Carolina leaders, including the General Assembly, have acted upon concerns that North
Carolina would be prudent to examine steps that could and should be taken to address climate
change and any man made components of the problem. The concerns include potential that the
state’s vast coastal areas and other resources may suffer damage from climate changes. In 2002
the North Carolina General Assembly passed, and the Governor signed, a major bill, commonly
known as the Clean Smokestack Act (CSA), that is resulting in major reductions in sulfur
dioxide (SO2) and oxides of nitrogen (NOx) emissions from coal-fired power plants.
The CSA also charged the North Carolina Division of Air Quality (DAQ) with studying and
reporting on potential controls for carbon dioxide (CO2) emissions from coal-fired electric power
plants. This resulted in a series of reports with recommendations for reducing North Carolina’s
carbon emissions. One of those recommendations was to develop a climate action plan. Under
the CSA’s Section 13 requirements, the Division released a draft inventory and forecast of the
state’s GHG emissions as well as the third report (September 2005) with a list of
recommendations assembled by the Division.
The Center for Climate Strategies (CCS), a non-profit organization with expertise and a history
of similar efforts regarding greenhouse gas (GHG) emissions, prepared the draft inventory and
forecast under contract and through donated funds. The Center also made recommendations on a
process which would result in a prioritized list of GHG mitigation options. Following the
publication of the September 2005 report, the North Carolina Department of Environment and
Natural Resources (DENR) with management supplied by the DAQ, initiated a follow up to that
report and began the first steps toward a comprehensive climate action plan by commencing a
facilitated stakeholder process to consider potential mitigation options.
During this period, the state General Assembly also established the Legislative Commission on
Global Climate Change (LCGCC, or “the Commission”) to assess GHG concerns and, among
other things, provide a recommendation to the General Assembly regarding whether the state
should establish a cap on emissions, and if so, what that cap should be. The Commission held its
first meeting in February 2006 and initiated a climate-related fact-finding effort regarding the
science and potential recommendations. The DAQ (assisted with support from CCS) was asked
to provide technical background and implementation support to the work of the LCGCC. This
cooperative effort was initiated and is expected to continue through the Commission’s life,
currently proposed to be extended until October 2009.
DAQ recognized that it was possible, and even likely, that many potential GHG mitigation
options would stimulate economic growth and new jobs in the state, in addition to reducing the
effects of climate change. Thus, a stakeholder process was initiated which called on over 40
volunteer stakeholders representing a broad range of interests and expertise to be formed into a
body to be called the Climate Action Plan Advisory Group (CAPAG). This diverse group of
North Carolina citizens, representing business, industry, environmental and educational
organizations and government, took on the responsibility of analyzing and making
recommendations for priority options to reduce GHG emissions in the state. Many of the
CAPAG members were also members of the LCGCC. Their work included:
• Development, prioritization, analysis and approval of a final collection of existing and
proposed actions that could contribute to GHG emissions reductions.
• Review and approval of an inventory of historical and forecasted GHG emissions in North
Carolina as a basis against which to gauge priorities and progress.
• Consideration of costs and emission reductions of recommended options.
This report is the outcome of that effort, one that involved a distinguished and broad group of
stakeholders including other state agencies, with technical support and facilitation from the CCS.
North Carolina has undertaken several efforts to conserve energy while addressing GHG
emissions. The North Carolina State Energy Office has developed and is currently updating the
State Energy Plan.1 Examples of efforts undertaken by other entities include the following:
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In addition, during 2007 the North Carolina General Assembly considered several bills related to
mitigation options that were also considered by the CAPAG. The following includes legislation
passed by the General Assembly and signed by the Governor. Note that the CAPAG had
completed analysis of its mitigation options before the final requirements of these bills were
determined. As a result, the GHG reductions and costs (or cost savings) reflected in this report
have not been aligned specifically with these new statutes.
• Senate Bill (SB) 3 (Promote Renewable Energy/Energy Efficiency) includes the following:
○ Requires a percentage of energy sales in North Carolina to come from new renewable
sources and efficiency measures on the following schedule: 3% by 2012 (up to 0.75%
1 See Annex A to Appendix E (Residential, Commercial and Industrial Sectors) for summaries of the North Carolina
State Energy Office (SEO) and State Energy Plan (SEP) policies and programs related to RCI mitigation options.
Also note that that plan is now being updated.
from efficiency); 6% by 2015 (up to 1.5% from efficiency); 10% by 2018 (up to 2.5%
from efficiency); and 12.5% by 2021 (up to 5% from efficiency).
○ Requires specific amounts of electricity sales from: (1) solar (0.02% in 2010 up to 0.2%
in 2018); (2) swine waste (0.07% in 2012 up to 0.2% in 2018); and (3) poultry waste
(170,000 megawatt hours in 2012 up to 900,000 megawatt hrs in 2014.
○ Requires any new biomass energy facility to meet Best Available Control Technology
(BACT). Other language was included to ensure that renewable energy technologies do
not have secondary, undesirable consequences. Impacts on residential consumers must
not exceed $10 per year 2008-2011; $12 per year 2012-2014; and $34 per year 2015 and
beyond.
○ Allows for ongoing review of construction costs for new power plants and recovery of
costs in a general rate case.
• SB 567 (Allow Distribution of E-Blend Fuels) - Allows E85 to be dispensed from dispensers
approved for E10 provided the manufacturer has initiated the process for approval by an
independent testing lab.
• SB 1272 (Definition of Biodiesel) - An individual that produces biodiesel for use in a private
(non-commercial) vehicle is exempt from the motor fuels tax.
• SB 1277 (State Diesel Vehicles’ Warranties/B20 Fuel) - Every new diesel vehicle purchased
by the State shall be covered by an express manufacturer’s warranty that allows the use of
B20 fuel.
• SB 1452 (Diesel School Buses to Use Minimum B20 Fuel) - Requires that 2% of the annual
diesel used by North Carolina school buses be B20 by June 2008 (2% = ~ 500,000 gallons).
• SB 668 (Energy Conservation in State Buildings) - Energy Conservation in State Buildings –
Specific performance criteria and goals for sustainable, energy efficient public buildings
must be established.
• SB 670 (Energy Devices That Use Renewable Resources) - Use of Solar Collectors on
detached single-family residences – As long as they aren’t facing public access or common
areas, an ordinance, deed restriction, covenant and other similar agreements cannot prohibit
or have the effect of prohibiting their installation.
The CAPAG first met in February of 2006 and was charged with making recommendations to
DAQ that would then be a resource list and as input to further state consideration and proposals
for action. The CAPAG met seven times with the final decisional meeting held in July 2007. In
addition a meeting to review this report’s capture of the intent of the members of CAPAG was
held in October 2007. This report addresses comments provided at that meeting and shortly
thereafter. In all, about 75 meetings and significant conference calls of the CAPAG and their
supporting technical work groups (TWGs) were held between February 2006 and July, 2007 to
identify and analyze various potential mitigation actions.
The CAPAG was assisted and supported by, five TWGs representing local and outside expertise
in key sectors selected for analysis: Energy Supply (ES); Residential, Commercial, Industrial
(RCI); Transportation and Land Use (TLU); Agriculture, Forestry, and Waste Management
(AFW); and Cross-Cutting Issues (CC). The TWGs consisted of CAPAG members as well as
individuals not on the CAPAG with interest and expertise in the issues being addressed by each
TWG. CAPAG members as well as individuals not on the CAPAG with interest and expertise in
the issues being addressed formed each TWG. Where members of the TWG did not fully agree
upon recommendations to the CAPAG, the summary of their efforts was reported to the CAPAG
for their further consideration and actions. (See Appendix B for a listing of the members of each
group.)
The CAPAG process involved a model of informed self-determination through a facilitated
stepwise consensus building approach. Under the oversight of DENR, the process was conducted
by the CCS, an independent, expert facilitation and technical analysis team. It was based on
procedures that CCS consultants have used in a number of other state climate change planning
initiatives since 2000, but adapted specifically for North Carolina. The CAPAG process sought,
but did not mandate consensus, and it explicitly documented the level of CAPAG support for
individual mitigation options and key findings established through a voting process, outlined and
agreed to in advance.
The 56 top priority (out of over 300 total) recommendations adopted by the CAPAG and
presented in this report underwent two levels of screening by the CAPAG. First, a potential
mitigation option being considered by a TWG was not accepted as a “priority for analysis” and
developed for full analysis unless it had a supermajority of support from CAPAG members
present at the decisional meetings (with a “supermajority” defined as 80% or more of the
CAPAG members attending a meeting agree). Second, after the analyses were conducted, only
options that received at least majority support from CAPAG members present at the decisional
meetings were adopted by the CAPAG and included in this report. In total, of the 56
recommended mitigation options adopted by the CAPAG, more than 85% (48) received
unanimous consent, and just over 14% (8) received a majority of support, of those present at the
CAPAG decisional meetings. The TWGs recommendations to the CAPAG were documented
and presented to the CAPAG at each CAPAG meeting. All meetings were open to the public,
were widely advertised, and all materials for and summaries of the CAPAG and TWG meetings
were posted on the project website.
With CCS providing facilitation and technical analysis, the TWGs prepared mitigation options
for CAPAG consideration using a “mitigation option template” conveying key information:
• Mitigation option description
• Mitigation option design (goals, timing, parties involved)
• Implementation mechanisms
• Related policies / programs in place
• Type(s) of GHG reductions
• Estimated GHG reductions and costs (or cost savings)
• Key uncertainties
• Additional benefits and costs
• Feasibility issues
• Status of group approval
• Level of group support
• Barriers to consensus
In its deliberations, the CAPAG modified and embraced various mitigation options. The final
versions for each sector, conforming to the mitigation option templates, appear in Appendices E
through I and constitute the most detailed record of decision of the CAPAG. Appendix D
presents a description of the methods used for quantification of mitigation options. CCS and the
TWGs produced estimates of the GHG emission reductions and costs (or cost savings) of various
mitigation options, both in terms of a net present value from 2007-2020 and a dollars-per-ton
cost (i.e., cost-effectiveness).2 The key methods are summarized here:
• Using the projection of future GHG emissions (see below) as a
starting point, analysis of the impact of mitigation options produced estimates of the GHG
reductions attributable to each option in the years 2010 and 2020, and cumulative over the
time period 2007-2020. Many options were estimated to affect the quantity or type of fossil
fuel combusted; others affected methane (CH4) or CO2 sequestered, etc. Among the many
assumptions involved in this task was selection of the appropriate GHG accounting
framework, namely, the choice between taking a “production-based” approach versus a
“consumption-based” approach to various sectors of the economy.3 The CAPAG took a
“production-based” approach in all sectors except the electricity sector, in both forecasting
emissions and in estimating the GHG impacts of mitigation options. This issue, along with
other GHG estimation issues (e.g., analysis of overlapping or interacting mitigation option
impacts), are discussed in detail in Chapter 2 (GHG Inventory and Reference Case
Projections), Appendix D (Methods for Quantification), and Chapters 3 through 6 and
Appendices E through H for each sector.
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○ Standard approaches were taken here. The “present
value” of costs was calculated by applying a real discount rate of 5%. Dollars-per-ton
estimates were derived as an annualized cost per ton, dividing the “present value cost” by
the cumulative GHG reduction measured in tons. As was the case with GHG reductions,
the period 2007-2020 was analyzed.
2 The analysis addressed emission reductions and associated cost or cost savings and did not attempt to estimate
specific price changes or utility rate changes that might result from implementation of a mitigation option.
3 In brief, a production-based approach estimates GHG emissions associated with goods and services produced
within the state, and a consumption-based approach estimates GHG emissions associated with goods and services
consumed within the state. In some sectors of the economy, these two approaches may not result in significantly
different numbers, however, the power sector is notable in that it is responsible for large quantities of GHG
emissions, and states often produce far more or far less electricity than they consume (with the remainder
attributable to power exports or imports). North Carolina imports electric power and must account for the emissions
this consumption creates, even though they are not produced in-state.
○ Many options created easily monetized cost savings (e.g., fuel savings and
electricity savings). In these cases, monetized cost savings were subtracted from
monetized costs, resulting in net costs. These net costs could be positive or negative;
negative costs indicated that the option saved money or produced “cost savings.”
○ Estimates costs and cost savings were based on “direct
effects” (i.e., those borne by the entities implementing the option).4 Implementing entities
could be: individuals, companies, and/or government agencies, etc. In contrast,
conventional cost-benefit analysis takes the “societal perspective” and tallies every
conceivable impact on every entity in society (and quantifies these wherever possible).
○ Estimates costs and cost savings were
based on implementing entities in North Carolina, not on a broader societal perspective
(national or global). One implication of this is that national taxes or subsidies that affect
actions in North Carolina were not part of the analysis.
• The CAPAG recommendations were guided in part by the GHG
reductions and monetized costs and cost savings of various options, but members also felt
that other considerations should also have weight. The CAPAG developed a checklist for
TWGs to use to keep in mind important human, social, economic, environmental, and other
factors that may warrant consideration when evaluating GHG emission reduction strategies.
The TWGs were asked to examine these qualitative terms where deemed important, and
quantify them on a case-by-case as needed depending on need and where data were readily
available.
In support of requirements to the CSA and in cooperation with DENR, CCS prepared a draft
document, entitled
(hereafter ).5 The projection of future
emissions aimed to capture as accurately as possible the trajectory of emissions given policies
and programs in place as of 2004. The draft was presented to the CAPAG at its first meeting, and
then approved by unanimous consent at the CAPAG’s fifth meeting following technical review
and revision.6 The included detailed coverage of all economic sectors
and GHGs in North Carolina, including future emissions trends and assessment issues related to
energy, economic, and population growth. The assessment included estimates of total statewide
4 “Additional benefits and costs” were defined as those borne by entities other than those implementing the option.
These indirect effects were quantified on a case-by-case basis depending on magnitude, importance, need and
availability of data.
5 , prepared by
the Center for Climate Strategies for the North Carolina DENR/DAQ, February 2006,
http://www.ncclimatechange.us or http://daq.state.nc.us/monitor/eminv/gcc.
6 , prepared by the
Center for Climate Strategies for the North Carolina DENR/DAQ, September 2007, http://www.ncclimatechange.us
or http://daq.state.nc.us/monitor/eminv/gcc.
“gross emissions” (leaving aside carbon sequestration7) and “net emissions” (in which reductions
due to sequestration are subtracted from gross emissions) on a production basis for all sources
and a consumption basis for the electricity sector (see prior discussion under “Analysis of
Options” in this chapter for an explanation of the production versus consumption approach).
Further discussion of the issues involved in developing the inventory and reference case
projections is summarized in Chapter 2 (Inventory and Projections of GHG Emissions) and
discussed in detailed in the final report for the .
The revealed substantial emissions growth rates and related mitigation
challenges. Figure 1-1 shows the reference projections for North Carolina’s gross GHG
emissions (not counting sequestration) as rising fairly steeply to 256 MMtCO2e by 2020,
growing by 88% over 1990 levels. Figure 1-1 also provides the sectoral breakdown of forecasted
GHG emissions. Accounting for sequestration in North Carolina’s forests and soil would
decrease the gross estimates from 23 to 24 MMtCO2e per year. On a net emissions basis (using
the consumption-based approach), North Carolina’s GHG emissions grow by about 106% over
1990 levels (about 232 MMtCO2e in 2020).
7 Sequestration refers to the storing of carbon in mines, brine strata, oceans, plants and soil. As trees and other plants
grow they remove CO2, the principal GHG, from the atmosphere transforming the carbon (C) through
photosynthesis into cellulose, starch and sugars, thus sequestering it in their structures and roots. The oxygen (O2) is
released back into the atmosphere. North Carolina’s forests and agricultural lands are capable of sequestering much
CO2, as described in Chapter 6 (Agriculture, Forestry and Waste Management).
The inventory and projection of North Carolina’s GHG emissions provided several critical
findings, including:
• As is common in many states, the electricity and transportation sectors are the two sectors
with the largest emissions, and are expected to continue to grow faster than other sectors.
• Consumption of electricity is growing faster in North Carolina than population. In addition,
there appears to be a trend toward an increasing reliance on natural gas and imported
electricity. Vehicle-miles traveled (VMT) are also projected to grow faster than the state’s
population. Freight traffic (resulting in increased diesel consumption) and increasing use of
hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) as substitutes for ozone-depleting
substances (ODS) in refrigeration, air conditioning, and other applications is also increasing
more rapidly than population.
While North Carolina’s emissions estimated growth rate (88% from 1990 to 2020 on a gross
emissions, consumption basis) presents challenges, it also provides major opportunities. Key
choices on technologies and infrastructure can have a significant impact on the emissions of a
fast-growing state. The CAPAG’s recommendations document the opportunities for the state to
reduce its GHG emissions while continuing its strong economic growth by being more energy
efficient, using more renewable energy sources, and increasing the use of cleaner transportation
modes, technologies, and fuels. The inventory and reference case projections are discussed in
more detail in Chapter 2 of this report and the entire study appears in the final report for the
.8
The CAPAG offers 569 recommended options to DENR for mitigating North Carolina’s GHG
emissions. Among the CAPAG members that attended each decisional meeting, the level of
support for these options is very high; 86% (48 options) received unanimous consent, and 14%
(8 options) received a super majority. Figure 1-2 below presents:
• Projected growth in North Carolina’s gross GHG emissions on a consumption basis (blue
line). The consumption based approach accounts for emissions associated with the generation
of electricity in-state and imported from out-of-state to meet North Carolina’s demand for
electricity.
• Projected emissions if each and every one of the CAPAG’s recommendations is completely,
strictly and properly implemented and the estimated reductions are fully achieved (green
line).
8 Detailed documentation of the inventory and reference case projections is provided in Final North Carolina
Greenhouse Gas Inventory and Reference Case Projections, 1990-2020, prepared by the Center for Climate
Strategies for the North Carolina DENR/DAQ, September 2007, http://www.ncclimatechange.us or
http://daq.state.nc.us/monitor/eminv/gcc.
9 This number is based on the total number of options approved by the CAPAG (see Table 1-3). Some options were
renumbered (i.e., AFW-7 to AFW-4b; TLU 2 to TLU-1b) or combined (e.g., AFW 9&10), and others were divided
into sections a, b, c to yield a total of 56 options supported by CAPAG.
As the figure illustrates, full adoption by the state and complete, strict and proper implementation
of each and every one of the CAPAG’s recommendations are projected to reduce gross GHG
emissions (consumption basis) by approximately 47%, from 256 million metric tons of carbon
dioxide equivalent (MMtCO2e) in the reference case forecast to 137 MMtCO2e by 2020.
Implementation of CAPAG’s recommendations would thus be estimated to reduce North
Carolina’s gross GHG emissions to within 1% of 1990 levels by 2020. Table 1-1 provides the
numeric estimates underlying Figure 1-2. Table 1-3 shows the estimated GHG reductions; costs
or savings from each option; and, its cost effectiveness (cost or savings per ton of reduction).
Detailed descriptions and analysis of these options are presented in Chapters 3 through 7 of this
report, and in the Appendixes.
The CAPAG’s recommendations tabulated in the Executive Summary, along with a listing of the
estimated reductions for each. Chapters 3 through 7 and the Appendices provide detailed
descriptions and analysis of GHG reductions, costs, additional impacts, feasibility, etc. for
individual options developed by the five TWGs/sectors:
• Residential, Commercial, Industrial (RCI)
• Energy Supply (ES)
• Transportation and Land Use (TLU)
• Agriculture and Forestry (AF)
• Cross-Cutting Issues (CC)
There can be a large imprecision in the GHG reductions associated with various options. Figure
1-3 presents the estimated tons of reductions for each mitigation option recommendation for
which estimates were available, expressed as a cumulative figure for the period 2007–2020.
In addition to the imprecision in GHG reductions achieved by each option, there are also
uncertainties in the exact cost (or cost savings) per ton of reduction achieved. Figure 1-4 presents
the estimated dollars per ton cost (or cost savings, depicted as a negative number) for each
recommended mitigation option, for which cost estimates were available. This measure is
calculated by dividing the net present value of the cost of the option by the cumulative GHG
reductions, all for the period 2007–2020.
In some cases, there is a wide variation in the cost effectiveness of mitigation options depending
on the assumptions used in the analysis. As an example, option TLU-5 (Tailpipe GHG
Standards) recommends that North Carolina adopt California GHG emissions standards for light-duty
vehicles to reduce GHG emissions (also known as the Pavley standards). California
standards require GHG emissions reductions of about 30% from new vehicles, phased in from
2009 to 2016, through a variety of means. The California Air Resources Board (CARB)
estimated that the cost of compliance in a new vehicle in model year 2016 would be
approximately $1,000. To determine the net impact on consumers, CARB calculated the increase
in monthly loan payments versus the savings from reduced fuel consumption. Their net resulting
estimate is that consumers would achieve a net savings, starting at the time of purchase, of
approximately $3.50 to $7.00 / month.
In contrast, automobile manufacturers estimate that the California standards would cost around
$3,000 per vehicle, and calculated that savings on fuel would offset less than half of that cost for
consumers. A review of the literature and assumptions used to derive the different estimates
gives a range of cost-effectiveness values of –$38 to –$117 per ton of CO2e reduced. That is, for
each ton reduced, between $38 and $117 would be saved. More than ten other states have
adopted the California standards and, among other factors that support the use of a savings
estimate toward the higher end of the range, manufacturers should realize economies-of-scale
that would lower manufacturing costs as additional states adopt and implement the standards.
Although we believe that savings are likely to be higher than the –$38 per ton end of the range,
we use a cost-effectiveness of –$38 per ton of CO2e reduced in our calculations in an effort to be
conservative.
Note that this option cannot be implemented until any pending law suits are settled and the US
Environmental Protection Agency issues a waiver under the Clean Air Act authorizing California
to implement the standards. This may take some months.
In July 2007, CCS engaged the Appalachian State University (ASU) Energy Center to conduct
further analysis of the potential economic and jobs impact of the CAPAG’s recommended
mitigation options. Resource limitations prevented analysis of all options so, in consultation with
DAQ/ DENR, the ASU Energy Center prioritized thirty options for analysis. Together these
options account for more than 90% of the GHG emissions reductions associated with the
recommended mitigation options. The thirty options were bundled into twenty-three scenarios
with similar options grouped together for analysis. This analysis was not part of the materials
that were available and discussed or reviewed by the CAPAG directly but is believed consistent
with their work and recommendations. The details of this study are included separately as a
stand-alone report.10
For the study, the ASU Energy Center utilized the NC Energy Scenario Economic Impact Model
(NC ESEIM). Originally developed in 2005 for the North Carolina Energy Policy Council, the
10 A complete copy of the ASU Energy Center report entitled “Secondary Economic Impact Analysis of GHG
Mitigation Options for North Carolina” is available at http://www.ncclimatechange.us or
http://daq.state.nc.us/monitor/eminv/gcc.
peer-reviewed model assesses the impacts of various energy policies on the North Carolina
economy, measured in terms of employment, employee and proprietor compensation (income),
and the incomes earned by labor and capital (gross state product).
At the core of the NC ESEIM is an input-output economic impact model that estimates how a
given change in public policy might result in positive or negative impacts to the economy. Input-output
analysis conceives of the economy as a set of interrelated sectors where the consumption
of finished goods and services, or final demand, catalyzes a chain reaction of production. As
final demand for goods and services change, the upstream sectors in the economy respond
accordingly, creating a ripple or multiplier effect. The economic multipliers in the NC ESEIM
are derived from data published by the Minnesota IMPLAN Group.11
This approach is distinguishable from the approach undertaken by the CAPAG. The CAPAG
sought to quantify the direct costs and cost savings borne by those entities implementing an
option to mitigate GHG emissions. The quantified costs were subtracted from the quantified cost
savings to produce a “net direct cost.” Building on the work of the CAPAG, the ASU Energy
Center sought to measure the full multiplier effect of both positive and negative changes in final
demand resulting from a given option. Moreover, the secondary analysis considers the relative
effect of an option on all of the affected sectors of the state's economy.12 Therefore, the ASU
Energy Center report should be considered a complement to the CAPAG report that seeks to
identify the likely ancillary effects of implementing a given option.
While more sophisticated econometric models exist, input-output analysis is typically a
reasonable approximation of the economic impacts associated with the type of modest policy
changes considered by the CAPAG. Moreover, numerous national, regional, and state-level
studies, including reports for Florida, Maryland, and Texas, utilize a similar approach in
estimating the potential economic impacts of changes in energy policy.13
The NC ESEIM, as well as its application in the Secondary Economic Impact Analysis, has
undergone extensive peer-review. An initial review of the model was performed by Adam Rose,
Ph.D., Economist and Research Professor at the University of Southern California (Rose and
Wei 2005). Dr. Rose also coordinated an anonymous peer review of the Secondary Economic
Impact Analysis during the summer of 2008. Based on these comments the Energy Center has
made a number of refinements to the underlying methodology so as to fully and properly account
for the potential implications of the options analyzed.14
11 Minnesota IMPLAN Group, Inc. (2005). North Carolina State Data Package, 2004.Stillwater, MN, Minnesota
IMPLAN Group, Inc. The Minnesota IMPLAN Group (www.implan.com) is the developer of IMPLAN
Professional, a computer software application for conducting input-output economic analysis in use by more than
1,000 public and private institutions.
12 For a more detailed overview of the analytical approach used by the NC ESEIM please refer to Chapter 1 of the
ASU Energy Center Report.
13 See Laitner, J.A. 2008. "Positive Returns: State Energy Efficiency Analyses Can Inform U.S. Energy Policy
Assessments." American Council for and Energy Efficient Economy, at http://www.aceee.org/.
14 For a complete discussion of the methodological refinements made as a result the peer review process please refer
to Appendix C of the ASU Energy Center Report.
On the whole, implementation of the modeled mitigation option bundles would result in a mildly
positive economic impact on North Carolina’s economy. By 2020, the mitigation options
analyzed would result in the creation of more than 15,000 jobs, $565 million in employee and
proprietor income, and $302 million in gross state product. For the study period, 2007–2020, the
mitigation options analyzed would generate more than $2.2 billion net present value (NPV) in
net additional employee and proprietor income and more than $1.2 million (NPV) in net gross
state product (see Table 1-4).15 The base year for the NC ESEIM is 2004; therefore all results are
reported in 2004 dollars.
Table 1-5 presents summary results for the ES mitigation options analyzed. By 2020, these
options would result in the creation of more than 1,700 jobs, $26 million in employee and
proprietor income, but a decrease in $118 million in gross state product. Over the study period,
2007–2020, the options would decrease employee and proprietor income by $297 million (NPV)
and net gross state product by $1.046 billion (NPV).The base year for the NCESEIM is 2004;
therefore all results are reported in 2004 dollars.
The negative effects of the option are driven primarily by the technology and fuel price
assumptions of the CAPAG, which result in a “negative payback” where commercial and
industrial end-users spend more to install and operate CHP systems than a business as usual case.
As a result, firms in these sectors reduce their final demand for endogenous goods and services,
the effect of which is amplified throughout the economy, causing the negative effects. Moreover,
15 Net present value (NPV) is calculated assuming a discount rate of 5%.
in order to remain consistent with the final integration of all option preformed by the CAPAG,
the efficiency components of ES-2 are assumed to obtained by the demand side options of the
RCI sectors.
Table 1-6 presents summary results for the RCI mitigation options analyzed. By 2020, these
options would result in the net creation of more than 9,100 jobs, $364 million in additional
employee and proprietor income, and $42 million in net gross state product. Over the study
period, 2007–2020, the options would generate $1.9 billion (NPV) in additional employee and
proprietor income and $937 million (NPV) in gross state product. The economic impacts
associated with these options are driven primarily by energy bill savings resulting from energy
efficiency measures.
Table 1-7 presents summary results for the AFW options analyzed. By 2020, these options would
result in the net creation of more than 3,300 jobs, $183 million in additional employee and
proprietor income, and $331 million in gross state product. Over the study period, 2007–2020,
the options would generate nearly $649 million (NPV) in additional employee and proprietor
income and $1.2 billion (NPV) in gross state product. The positive economic impacts associated
with these options are driven primarily by capital investments to build manufacturing capacity to
meet the biofuels production goals articulated in the mitigation options.
Table 1-8 presents summary results for the TLU mitigation options analyzed. By 2020, these
options would result in the creation of more than 870 net jobs and $48 million in net gross state
product but the loss of $8 million in employee and proprietor income. Over the study period,
2007–2020, the options would generate $128 million (NPV) in gross state product but the loss of
$91 million (NPV) in employee and proprietor income. The bulk of the positive economic
impacts associated with these options are driven by consumer re-spending of reduced vehicle
operating costs.
The negative impacts associated with TLU-5 are largely the result of the relative effect of
reduced vehicle operating costs versus the displacement of retail gasoline sales. While TLU-5
results in a net savings to vehicle owners, the positive multiplier effect of these savings do not
outweigh the constrictive multiplier effect of displaced retail gasoline sales. However, it should
be noted that the modeling assumptions of this option are intentionally conservative. For
example, it assumes as the U.S. Energy Information Administration’s 2007 regional retail fuel
price forecast for gasoline, which averages $2.21 per gallon over the study period and is
considerably lower than the current market prices. Variability in the baseline fuel price
assumption is considered and discussed in a set of sensitivity analyses in Chapter 6 of the ASU
Report. These sensitivities suggest that if energy prices remain at, or near, their recent highs then
vehicle greenhouse emissions standards would result in substantial positive economic impacts.
At its October 16, 2007 meeting, the CAPAG requested a summary of the potential annual
upfront public and private investments associated with the mitigation options. These results are
summarized in Table 1-9. The potential annual investment costs associated with the options are
based on the methods used to estimate the costs or cost savings of each option analyzed during
the CAPAG process, and supplemental research conducted by the Appalachian State University
(ASU) Energy Center. 16
While implementation of some of the mitigation options may require significant upfront
investments of public and/or private resources, these investments, in many cases, also result in
significant savings over time. Moreover, many of the mitigation options result in ongoing
savings beyond the period included in the CAPAG and ASU Energy Center analyses. Finally,
almost all of these initial investment costs will be financed over time reducing the actual annual
costs borne by the public and private sectors.
Consider for example TLU-5 (Tailpipe GHG Standards). As noted above, this mitigation option
would require automakers to install additional pollution control technologies increasing the
purchase price of a new vehicle and monthly car payments. However, these same pollution
control technologies will increase fuel economy and reduce the vehicle operating expenses,
which tend to offset the increased purchase price.
16 Documentation of the methods used to develop estimates of the upfront investment costs is provided in the ASU
Energy Center’s report “Secondary Economic Impact Analysis of GHG Mitigation Options for North Carolina,” at
http://www.ncclimatechange.us or http://daq.state.nc.us/monitor/eminv/gcc.
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The transportation sector is a major source of GHG emissions in North Carolina—currently
accounting for 29% of the State’s gross GHG emissions. Transportation emissions are
determined by technologies, fuels, and activity rates. Activity rates, in turn, are determined in
part by population, economic growth, and land use choices that affect the demand for
transportation services. GHG emissions from the transportation sector totaled about
52.7 MMtCO2e in 2000.
Figure 5-1 shows historical and projected Transportation and Land Use (TLU) GHG emissions
by fuel and source, and illustrates their rapid growth. TLU emissions are expected to more than
double from 1990 from 2020. On-road vehicle miles traveled (VMT) are forecast to continue to
grow faster than the population, and rapid growth in freight VMT is also expected. The high
overall growth in transportation sector emissions suggests many opportunities and challenges for
reducing North Carolina’s GHG emissions.
Options for reducing emissions from transportation fall into three categories:
1. Reducing GHG emissions per vehicle mile traveled,
2. Reducing the carbon intensity of fuels, and
3. Reducing activity rates, either absolutely or relative to the baseline. Policies may produce
modal switches to lower-emission means of travel, and/or decrease the total amount of
travel.
North Carolina has substantial opportunities to reduce emissions in each category:
• In North Carolina and in the nation as a whole, vehicle fuel efficiency has improved little
since the late 1980s, yet many studies have documented the potential for substantial increases
consistent with maintaining vehicle size and performance.
• The use of fuels with lower GHG emissions is growing and larger market penetration is
possible.
• North Carolina also has taken steps to increase transit options and plan for growth that
reduces emissions, but the state can absorb its rapid growth in development patterns that will
produce far less travel, and far lower emissions than forecast.
The Climate Action Plan Advisory Group (CAPAG) recommends a set of 13 mitigation options
for the Transportation and Land Use sector that offer the potential for major economic benefits
and emissions savings. As summarized in Table 5-1, these mitigation recommendations come
from each of the available reduction categories above, and could lead to emissions reductions
from reference case projections of 25.5 MMtCO2e per year by 2020, cumulative savings of 232
MMtCO2e from 2008 through 2020, and net cost of over $4.3 billion to the North
Carolina economy through the year 2020 on a net present value basis (NPV).1 The weighted
average cost of saved carbon from the mitigation options for which quantitative estimates of both
costs and savings were prepared was –$19 per metric ton of CO2 equivalent.
The estimated impacts of the individual mitigation options are shown in Table 5-1. The CAPAG
mitigation recommendations described briefly here (and in more detail in Appendix G) result not
only in significant emissions and costs savings, but offer a host of additional benefits as well.
These benefits include (but are by no means limited to) reduced local air pollution, more livable,
healthy communities, and increased transportation choices.
In order for the TLU mitigation options recommended by the CAPAG to yield the levels of
savings described here, the options need to be implemented in a timely, aggressive, and thorough
manner. To be most effective, the group of mitigation options aimed at VMT reductions and
increased transportation choices (TLU-1a, Land Development Planning, and TLU-1b, Multi-
Modal Transportation and Promotion) will require change at every level of government, and as
such will be most effective with focused leadership by the State, including training, outreach,
and technical assistance to local governments and businesses (either directly or via local
governments). For example, TLU-1b, Multi-modal Transportation and Promotion, includes one
of the empirically most powerful ways to reduce emissions, employer-based commute benefits.
Among businesses that implement them, these are very popular and cost-effective. Yet for a
1 The net cost savings are based on fuel expenditures, operations, maintenance, and administrative costs, and
amortized, incremental equipment costs. All NPV analyses here use a 5% real discount rate.
variety of reasons, businesses implement these benefits at a much higher rate with government
technical assistance.
Next, the State Clean Car program must clear several hurdles before North Carolina or any other
state can adopt it, including EPA approval of the original California Clean Car Program (that
other states can then opt into) and a court challenge to the underlying notion of regulation of
GHG emissions from vehicles. If for any reason North Carolina is not able to implement the
Clean Car Program, other options would need to play a larger role if the State is to meet its
emissions reduction goals. For example, the mitigation options under the Rebates/Feebates
Options Bundle (TLU-3b) could substantially improve fuel efficiency through market
mechanisms and consumer labeling. Feebate proposals usually have two parts: (1) a fee on
relatively high emissions vehicles; and (2) a rebate or tax credit on low emissions vehicles.
As a final example, Pay-As-You-Drive Insurance would require the State to not only allow
insurance companies to offer customers a way to save each time a customer chooses to drive
less, but also to promote that option, if the State is to see the levels of adoption analyzed here.
Most of the recommended mitigation options would produce substantial economic benefits for
North Carolina. The sources, and calculations, of these benefits are detailed in Appendix G.
Because the form of several of the recommendations leaves the State and its constituents
substantial latitude in how to act to achieve the recommended goals, it was not possible to
estimate financial costs and benefits for all options.
For example, TLU-1a recommends that the State’s local jurisdictions develop growth plans.
Given the substantial portion of forecast emissions growth driven by increasing driving, growing
in more compact, mixed-use patterns is simply essential to meeting the State’s emissions
reduction targets. For the same reason, changing development patterns also offers the single
largest potential emissions reduction from transportation. Each jurisdiction can develop its own
approach to planning for growth, and because we cannot know which approach each will choose,
we cannot estimate the cost for each, or, as a result, the likely total cost. In the case of TLU-1a,
CCS reviewed experience in, and estimates for, growth planning in other states. With few
exceptions, experience and forecasts across a wide variety of planning choices show
net cost savings from planned growth relative to the kind of growth now prevalent in North
Carolina. North Carolina and its communities would likely save billions of dollars from shorter
sewer lines, fewer needed new roads, and fewer new schools. But given the wide range of
choices available to North Carolina communities under recommended TLU-1a, it is not possible
to put a point estimate on the benefits that will likely be produced by those choices
The benefits from other recommended options were more straightforward to forecast. The
technology required in TLU-5, tailpipe GHG standards for example, would more than pay for
itself in reduced fuel consumption, while substantially reducing North Carolina’s GHG
emissions.
Several of the TLU options (below) show higher estimated net savings than most other options
both in and out of TLU. This subsection summarizes the source of those estimates.
A wide variety of empirical experience suggests that the policies and investments listed in the
Option Design and Implementation Mechanisms sections are likely to produce substantial net
savings, as in the following four examples.
1.
Nationally, transit produces net economic returns on investment: “For every $10 million
invested, over $15 million is saved in transportation costs to both highway and transit users.
These costs include operating costs, fuel costs, and congestion costs.”2
At a high level, then, the benefits of the proposed investment in transit can be estimated as
follows:
Without knowing more about how North Carolina will make its
transit investments, it is not possible to do a finer-grained analysis. However,
. [Portions of the
following sections dealing with a possible savings multiplier are italicized.]
2.
Unlimited Access transit at the University of California-Los Angeles costs $810,000 a year,
and has total benefits of $3,250,000 a year,3 . Similar
programs at other universities show similar results.4 The many educational institutions in
North Carolina could see similar savings.
Universities are in some senses unique institutions, but the general types of challenges
(especially demand for, and costs of providing, parking), and the types of benefits enjoyed in
response to commute benefits programs, are equally available to businesses. A report on this
topic notes:
“Eco Passes also offer significant advantages for employers who offer free parking to all commuters,
because those who shift from driving to transit will reduce the demand for employer-paid parking spaces. A
survey of Silicon Valley commuters whose employers offer Eco Passes found that the solo-driver share fell
from 76 percent before the passes were offered to 60 percent afterward. The transit mode share for
commuting increased from 11 percent to 27 percent. These mode shifts reduced commuter parking demand
by approximately 19 percent.
2 Cambridge Systematics, Inc.,
1999.
3 Jeffrey Brown, Daniel Hess, and Donald Shoup, “Fare-Free Public Transit at Universities: An Evaluation,”
23:69–82, 2003.
4 Jeffrey Brown, Daniel Hess, and Donald Shoup, “Unlimited Access,” 28:233–267, Kluwer, 2001.
“Given the high cost of constructing parking spaces in the Silicon Valley,
of required parking spaces.”5
3. Per public dollar, a Transportation
Management Organization (TMO) can
6
4. This policy is estimated to reduce VMT by
3,317,688,733 in 2012, and 3,970,779,011 in 2020. The current IRS-estimated cost of driving
a mile in a personal vehicle is $0.485. At that rate, total savings will be
Thus, the estimated $162,500,000/year in total savings for this Option used for the summary
table is very conservative.
If, as in the above example, revenue is used to fund multi-modal options promotion that reduces
VMT, then we can estimate net benefits as shown below:
If, in an effort to be conservative, we limit the savings to the 7× savings multiplier found in a
study for Minnesota DOT, 7 then the net benefits fall as follows:
We use this lower number in Table 5-1.
5 Ibid., p. 260.
6 Minnesota Department of Transportation, Modal Options Identify Project, “Measurement and Evaluation,” 2006.
7 Ibid.
A review of $/ton estimates prepared for the California Clean car-type regulation for California
Air Resources Board (CARB), Northeast States for Coordinated Air Use Management
(NESCAUM), and CCS produces an estimate of between $117 saved for each metric ton of
CO2e reduced at the high end, and roughly a third of that (~$38 saved for each ton) at the low
end. We used the low end in an effort to be conservative. This figure takes into account not only
the higher initial cost of the California Clean Car, but also the costs of financing that car. Both
the higher costs and the savings from reduced fuel consumption would start immediately upon
purchase, and CARB estimates that the net savings would begin immediately as well.
The Transportation and Land Use Sectors include emissions reduction opportunities related to
reducing GHG emissions per miles of travel, reducing the carbon content of transportation fuels,
and using transportation and land use policy to reduce the need to travel by high-emitting modes.
Additional detail on each of the options summarized below can be found in Appendix G.
The CAPAG recommends that North Carolina promote land planning and development that
supports conservation of high quality natural and cultural resources and supports more compact
development, and as a result reduces growth in driving and emissions. Do so by supporting and
promoting private and public planning and development practices, including infrastructure
provision, that reduce the number, length, or travel mode of trips made in North Carolina.
The suggested statewide goal is to reduce projected increase in VMT by 10% statewide by 2020.
(Value was developed after review of targets in several other states, and an assessment by the
group of the ability to meet the target.)
Meeting the goal will require diverse implementation tools. Providing many options, statutory
changes, and program assistance for smaller communities will be essential.
•
The plan should designate planned growth areas and natural resource areas within that
jurisdiction and any extraterritorial jurisdiction for a planning horizon of at least 25 years.
The land use and development plan should include standards and criteria for conservation
area and/or urban service area designations to accommodate a minimum 20-year growth
forecast agreed upon by the each county and municipality; establish development and
conservation goals; recognize important natural and human resources; and, express
appropriate policies, practices and strategies to implement these goals. Local planning
programs should include appropriate public involvement processes to achieve consensus on
the development and conservation vision for the community.
•
Maryland, Minnesota, and Denver, CO, as well as the non-profit Triangle Land Conservancy
have developed “greenprints” of areas that have old-growth forests, productive agricultural
lands, water supply watersheds, historic sites or other critical and irreplaceable resources.
Adding this as a required element of all transportation plans would be a simple and
meaningful step that would greatly enhance the effect and benefits of NC GS 136-66.2
without requiring new zoning or regulatory powers. The November 2004 passage of tax
increment financing legislation demonstrates that North Carolina can and does make room
for new ideas that help achieve economic development goals in concert with infill
development objectives. The NC Small Town Economic Development (NCSTEP) initiative
created grant funds that are being used in 33 communities to plan for growth and
development in a way that will help those communities benefit from growth and minimize
negative impacts.
Regulatory incentives such as withholding transportation funds for noncompliance have worked
in Tennessee and should be considered in North Carolina as well.
The CAPAG recommends that the State work with its constituents to shift passenger
transportation mode choice to lower emitting choices. Ensure that transportation is integrated
with and appropriately serves land-use development plans (developed under TLU-1a).
Implement the North Carolina transportation plan allocation of 13% of state transportation
spending to transit.
Implement policies that increase use of public transportation, producing a shift to lower emitting
mode choices, by the following policies:
• Improve Transit Service (frequency, convenience, quality).
• Expand Transit Infrastructure (rail, bus, Bus Rapid Transit).
• Focus new development on transit-served corridors (Transit-Oriented Development).
• Expand Transit Marketing and Promotion (including tax-free and employer-paid Commuter
Benefits, and Parking Cash Out).
• Expand Transportation System Management and Design, which speeds both transit and other
traffic.
• Improve bike and pedestrian infrastructure both as feeders and as stand-alone modes.
• Many programs are in place and are therefore immediately expandable/implementable.
Enhancement and continuation can begin short-term. These implementation mechanisms
include
○ Aggressively support and aid the creation of Regional Transportation Districts (RTDs).
RTDs can sell bonds for capital projects, and member governments can levy taxes for
operation and maintenance subject to voter approval.
○ Make planning and funding rules more flexible to allow transit operators to provide
service to places outside of their municipal jurisdictions.
○ Abolish or reduce minimum parking requirements in zoning codes, and allow localities to
establish parking maximums.
○ Create a best practice guide and recognize developers who adhere to best practice when
designing and locating new private and public development.
○ Require planning to extend beyond 5 years (20 years recommended) for all systems.
○ Create incentives or require the purchase of biodiesel fuel (minimum: B20) as a part of
all public bus replacement programs. Conover has already done so with great results.
○ Location of State Facilities—Locate state facilities near transit facilities. Where and when
appropriate/possible all state government offices should be located downtown. Similarly,
provide transit to serve concentrations of state employees.8
○ State Targeting of Infrastructure Investments—Legislatively appropriated capital outlay
funds, state public revolving loan fund, and other state-funded infrastructure initiatives
should be used for projects that encourage walkable and traditional communities, and are
supportive of transit.
○ Make maintenance of infrastructure a priority—Fix it First. Revise any state
infrastructure programs; transportation, water, sewer, that fund new systems but not
maintenance or upgrades for existing systems.
○ Replace “average cost pricing” for utilities services with rate structures that charge full
marginal costs for both new infrastructure and for water, sewer, electricity, and telephone
service delivery.
○ Fund the transportation-related programs in this mitigation option with monies generated
by other mitigation options such as feebates and/or gas tax.
The CAPAG recommends that the State vary motor vehicle registration fees by vehicle
emissions to provide a surcharge on higher emitting vehicles.
This surcharge would raise funds for State of North Carolina to support transportation-related
projects that reduce GHG. It would raise these funds through a mechanism that is directly tied to
a significant source of GHG emissions from cars and trucks. It is not envisioned that the scale of
the surcharge would affect the fleet mix; the goal of this policy is revenue-raising that is tied to
emissions.
• 5.1 million North Carolina LDV registrations per year at an average of $7.25 per vehicle
would produce $37 million per year for programs to reduce emissions from travel.
• The most efficient regionally funded regional commuter programs can reduce VMT for a
cost of 2 cents/mile. Most regional commuter programs cost more per mile. On the other
hand, few are as well funded as this proposal, and there are almost certainly economies of
scale and scope.
• $37 million per year times $0.02 per mile equals 1,850,000,000 VMT = 2% of total statewide
VMT; 3% of total urban LDV VMT.
The CAPAG recommends that the State charge a sliding scale of fees and rebates for new light-duty
vehicles based on their emissions of greenhouse gases and/or other measures of a vehicle’s
8 This is an Executive Order from North Carolina Governor James Holshouser.
environmental impacts. This will provide an incentive for manufacturers to sell cost-effective
efficiency technologies, and for consumers to buy lower-emitting vehicles by
• Having price signals reflect emissions levels and thus have emissions levels more directly
enter buying decisions, and
• Sending a signal to manufacturers to produce increasingly low-emitting vehicles for the
market
The revenue should be used to create a dedicated revenue stream for promotion of low emitting
or no emitting GHG transportation alternatives (e.g., hybrid tax credits, transit infrastructure). In
addition,
• Emissions could be considered relative to other vehicles within each class or across classes
based on their design variations.
• The rebate/feebate could be set as a multiplier for an excise tax so that the fee or rebate is
determined not only by the emissions rate of the vehicle but by its price as well.
• Generally the rebate/feebate design needs to be simple, minimize the number of pivot points,
be well-documented, and be designed to maximize consumer attention.
A wide variety of economics literature finds that vehicle buyers do not buy all the efficiency
technology that is cost-effective, taking into account the net present value of both the fuel
savings and the additional technology cost. Feebate analyses find that the fuel savings that result
from a feebate program would pay for additional costs, producing net cost savings:
“The reduction in consumer surplus is more than compensated for by unvalued fuel savings that are
realized. The benefits are positive for all rates up to $1000 but marginal costs begin to outweigh benefits
between $500 and $1000. Adopting two or more classes reduces the benefits significantly while creating a
relative subsidy for larger vehicles.”
As a result: Net benefits range from $40 per ton for a low feebate, to $10 per ton for a high
feebate.
The CAPAG recommends that North Carolina reduce idling-induced emissions from heavy-duty
diesel trucks by providing—or helping the market to provide—electrical hook-ups to power
heating, cooling, and other needs while stopped.
North Carolina should analyze existing pilot projects at major truck stops on interstate highways
(principally, I-40 and I-85) and initiate other efforts at other places where truck traffic is high;
then, progress to include all major truck stops statewide with at least one multi-unit electrified
stop in each of the 17 urban areas in North Carolina.
North Carolina has several TSE pilots in place. While programs are in discussion there are no
policies or laws to enforce participation.
The CAPAG recommends that North Carolina join with the 13 other states that have adopted the
State Clean Car Program to reduce emissions of GHGs from vehicle operation.9
TLU-5 would use California Clean Car standards for cars and light trucks to reduce GHG
emissions. California standards require GHG emissions reductions of about 30 % from new
vehicles, phased in from 2009 to 2016, through a variety of means.10 Other Clean Car Program
elements include standards requiring reductions in smog- and soot-forming pollutants, and
promoting introduction of very low-emitting technologies into new vehicles.
The General Assembly could enact legislation in 2009, at the earliest, unless tied to a 2007 bill
carried over to 2008 so that North Carolina can implement the California standards.11
The CAPAG recommends that the State work to increase market penetration of biofuels in North
Carolina by a mixture of policies (voluntary and/or mandatory) to achieve feasible goals—
offsetting fossil fuel use (gasoline) with production and use of starch-based and cellulosic
ethanol.
Replacing gasoline with ethanol can reduce GHG’s to the extent that the ethanol is produced
with lower GHG content. Biodiesel has a lower GHG content than fossil diesel, so using
biodiesel instead of fossil diesel reduces GHG emissions.
This option is linked with policy options AFW-2, Biodiesel Production, and AFW-6, Policies to
Promote Ethanol Production. This option seeks to develop the demand for biofuels, whether
produced locally or out-of-state. (Options AFW-2 and AFW-6 pursue the GHG benefits
achievable beyond TLU options by promoting in-state production of ethanol and biodiesel using
feedstocks and production methods with greater GHG benefits than the likely business-as-usual
national market production methods, e.g., conventional starch-based ethanol.)
The goals for this policy should be phased in utilizing biofuels to replace the specified
percentages of gasoline and diesel consumed for transportation throughout North Carolina by the
specified years, as shown Table 5-2, below. The goals of this policy can be achieved through a
combination of a renewable fuels standards, financial incentives, outreach, and market-based
mechanisms.
9 Also known as the “Pavley” standards (after Assemblywoman Fran Pavley who introduced the legislation) or
“California GHG emission standards.”
10 For detailed information, see: http://www.arb.ca.gov/cc/ccms/ccms.htm
11 The California standards currently are being litigated, and timing may be affected as a result. Recent court
decisions have found that CO2 can be a pollutant under the Clean Air Act (CAA). Many observers see this as
clearing the way for the required EPA waiver under the CAA.
The CAPAG recommends pursuing these goals through the following mechanisms:
• Pursue DOE and State funding for more alternative fuel pumps throughout the State and for
introducing appropriate infrastructure throughout the State. Some federal tax incentives
currently exist for the purchase of alternative fuel vehicles. When the federal incentives
expire, examine the feasibility/need to continue such incentives for alternative fuel vehicles.
• Reduce or eliminate the motor fuels tax on biodiesel and ethanol (E85). Develop a system to
provide for monthly credit for biodiesel and E85 blended fuel that would be equivalent to the
state motor fuels tax owed on the biofuels portion of the fuel blend. (This could follow in the
wake of elimination of tax on “home brew” biodiesel by 2007 legislature.)
Monthly tax credits would be claimed on the same form (Biodiesel and Fuel Alcohol
Providers Form) marketers currently file with the North Carolina Department of Revenue
(DOR) Motor Fuel Tax Division to pay fuel tax. This would reduce pump price of Biofuels
as marketers would pass most of the credit on to consumers to be competitive. Credits could
be paid out of General State Revenues, DOT highway funds. Credit would be revenue neutral
as it would be equal to the tax that would have been paid by marketers for biofuel portion of
blend.
• Develop a $0.25/gallon credit for biodiesel and ethanol use in North Carolina vehicles.
As above, the tax credit would be claimed on the DOR Biodiesel and Fuel Alcohol Providers
Form. Similarly, this would reduce price of Biofuels as marketers pass the credit on to
consumers in order to be competitive. General State Revenues, or DOT highway funds could
pay for the credit. Unlike above, this credit would not be revenue neutral as the state would
be providing incentive for fuel sold to non-taxable entities (local and state government) as
well as sales to taxable entities. However, only the biofuel portion of blended fuel would be
eligible for 25-cent credit. For example a B20 blend would get a 5-cent credit.
• Create a tax credit for biodiesel producers.
• Develop a mandated Renewable Fuel Standard (RFS), corresponding to the penetration rates
listed above.
The RFS should include a cost trigger, so that if the cost of alternative fuels exceeds
conventional fuels by more than a specified amount, the RFS would be temporarily removed.
The cost trigger should be based on costs over a period of time, and not spot prices.
Additionally, production issues should be included in the trigger, such as water use in
growing corn (or other crops) for the biofuels, such that the production of the biofuels does
not increase GHG emissions or cause other resource problems.
The CAPAG recommends that the State reduce GHGs by increasing the efficiency of vehicle
fleets generally, beginning with government lead by example. Also increase fleet use of
alternative fuels.
• Increase government fleet use of low-GHG fuels and more efficient vehicles to reduce
greenhouse gas emissions from fleets. In addition to CO2 reductions, this would reduce
emissions affecting ozone, sulfur, and carbon monoxide loadings.
• Set statewide GHG reduction targets for fleets phased in over period of probably 8-10 years
to allow fleet turnover to absorb most of the costs of replacing existing fleets. Other measures
regarding more frequent maintenance and part specifications could be phased in much faster.
The CAPAG recommends that the State implement state policies, and support the development
of local policies, to reduce hours of operation and thus emissions from idling trucks and buses
(principally), perhaps off-road engines as well.
These would reduce greenhouse gas emissions from heavy vehicles and reinforce Truck Stop
Electrification (TSE).
This would require working with trucking groups truck stops, and places where trucks stop as
well as with government to formulate an agreeable policy approach, phasing schedule, and
legislative content.
About 15 states and a number of local governments have adopted anti- idling legislation.12 More
are sure to follow or are already being discussed at some level. Toronto has had a law in place
since 1996. Many North Carolina counties and the State Board of Education (Policy No. EEO-M-
003) have adopted school bus idling policies already.13 The Clean School Bus USA program
(USEPA) should also be consulted.14
The CAPAG recommends that the State reduce diesel emissions from older diesel
engine/emission systems through a broad retrofit and/or retirement program. Create incentives
and encourage retrofits through a combination of funding and education/promotion.
12 See http://atri-online.org/research/idling/Cab%20Card%20July%202006.pdf
13 See http://www.ncbussafety.org/idling.html
14 See http://www.epa.gov/cleanschoolbus/
This policy would reduce children’s exposure to diesel emissions by retrofitting school buses in
North Carolina with diesel oxidation catalyst (DOC) control devices, and/or diesel particulate
filters, which have the auxiliary benefit of reducing some GHGs and carbon black.
Beyond school buses, the CAPAG recommends that the state speed retirement and/or retrofit of
all older diesels through information and incentives.
• to purchase DOC pollution control devices and/or
particulate traps for school buses that are not equipped with pollution control devices.
• An information and education component is needed to
provide truck and bus owners, school districts, and municipal organizations with information
regarding the significant emissions reductions that could be achieved by retrofitting or
retiring certain truck or bus engines with high annual emissions and replacing them with
vehicles meeting the new emissions standards. Provide information on potential funding
partners, grants, or loans available from a number of organizations for this purpose.
• Develop a loan or grant program allowing
truck owners to accelerate new vehicle purchases or to apply retrofit technologies to their
fleets.
Currently in North Carolina, there is an ongoing effort to retrofit school buses across the State
with diesel pollution control devices. An estimated 15% of the school buses in the State are
already equipped with some type of pollution control device. Sources of funding include Federal
and State grants, local funding and gifts from private industry. The primary purpose of these
diesel pollution control devices is to reduce particulate matter.
Legislation currently under consideration, HB 1912: School Bus Retrofits in Nonattainment
Areas, addresses school bus retrofits.
The CAPAG recommends that the State use Pay-As-You-Drive (PAYD) insurance pricing to
convert a portion of insurance to a variable cost with respect to vehicle travel, so premiums are
directly related to mileage. PAYD makes insurance more actuarially accurate and allows
motorists to save money when they reduce their mileage. The less you drive the more you save.
Proposal would require insurance companies to offer PAYD as part of their menu of insurance
choices in North Carolina. A pilot project could be implemented first on a small scale as soon as
possible. Option design is to have full North Carolina light-duty fleet PAYD coverage by 2020.
Technology will play a vital role in dramatically reducing carbon emissions from the cars of the
future. Fuel cells, plug-in hybrid, low weight carbon-fiber bodies, and other technologies will
require research, development, and commercialization. The CAPAG recommends that because
of its strong research university and both its high-tech and auto parts manufacturing, that North
Carolina (especially through the Department of Commerce) encourage advanced automobile
technology research and recruit the new generation of manufacturers.
Studies can evaluate if there is an economic opportunity around the development and
commercialization of advanced technology vehicles and suggest possible models for the
Department of Commerce to take advantage of such opportunities.
The following are goals of this policy:
• Enable North Carolina’s economy to establish itself in the research, development, and
commercialization of advanced automotive technologies.
• Grow North Carolina’s capacity to recruit sustainable industry.
The CAPAG recommends that TLU-7 (Procure Efficient Fleets) also include transit bus fleets.
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Substantial input on was provided by RCI Technical Work
Group (TWG) members, especially focusing on State Energy Office (SEO) and State Energy
Plan (SEP) policies and programs Because many of these policies and programs are relevant to
more than one of the RCI Options, we have established Annex A (provided with analysis
workpapers—Annex B—accompanying this document.) that provides details on these policies
and have retained only the titles of the policies in the “Related Policies/Programs section for the
RCI individual options. SEO Contract refers to contracts currently in place with the State Energy
Office for the services outlined.
Utility-funded Demand-Side Management (DSM) programs reduce either the consumption of or
the demand for conventional sources of electricity and fossil fuels. Examples of DSM programs
include technical assistance for and implementation of energy efficiency and renewable energy
measures, electrical (and in some cases fuel) demand responses, alternative rate schedules, and
research activities. This option is designed to work in tandem with other strategies under
consideration by the Residential, Commercial, and Industrial (RCI) Technical Work Group
(TWG) and by other TWGs that can also encourage efficiency gains.
It is recommended that DSM programs funded by gas and electric utilities in North Carolina be
expanded to yield higher levels of energy savings, demand response, and greenhouse gas (GHG)
emissions savings.
Specific recommendations from the RCI TWG include proposing that the North Carolina
General Assembly and the North Carolina Utilities Commission (NCUC) take an active role in
encouraging the investor-owned, cooperative and municipal utilities to pursue active DSM
programs.
Examples of utility-funded programs that this option supports include
• Efficiency programs for new residences, such as ENERGY STAR®, Environments for
Living, HealthyBuilt Homes, and the Green Building Council’s Leadership in Energy and
Environmental Design new program for homes (LEED-H), or other programs.
• Efficiency programs for existing residences, such as Home Performance with ENERGY
STAR. Development of this program should follow a comprehensive survey and analysis of
existing residences to determine key strategies that will provide the greatest impact for the
least investment.
• Renewable energy programs for new and existing residences.1
• Programs focused on low-income weatherization of new and existing homes (such as
Systems Vision).
• Programs focused on rental properties.
1 Including cost-effective alternatives to fossil-fuel-based energy, such as solar water heating, passive solar designs,
solar space heating and pool heating (only to replace electric or fossil-fuel-based existing pool heating), residential
biofuels, photovoltaics, and other strategies.
• Efficiency programs for new commercial buildings, using commercial ENERGY STAR and
LEED-NC as starting points.
• Efficiency programs for existing commercial buildings, using the work of the SEO’s Utility
Savings Initiative, ongoing energy audit and technical services, and previous programs, such
as the federally funded Institutional Conservation Program, and programs in other states, as
additional sources.
• Efficiency programs for new and existing industrial facilities, based on ongoing efforts of
North Carolina State’s Industrial Energy Extension Service and Industrial Assessment
Center, Advanced Energy’s industrial efficiency programs, and other related projects.
• Renewable energy programs for new and existing commercial buildings and industrial
facilities, with the same focus as renewable energy programs for new and existing residences.
• Demand response and demand reduction programs for all sectors.
• Technical assistance, education, training, consumer outreach, and promotional activities to
support the DSM programs.
• Grants, loans, performance contracting arrangements, and other incentive programs to
provide financial support or incentives for implementation of DSM programs.
The goal for this option is to reach a level of DSM investment in North Carolina equal to
1.5% of utility revenues. This level of investment would have placed North Carolina among the
top ten US States in DSM investment per unit electricity sales revenue, based on a national
compilation of energy efficiency investment for the year 2003.2
Start ramping up programs from existing levels starting in 2007, reaching goal levels by
2012.
• Utilities: Through the rate-making process, utilities and the NCUC will develop a mechanism
to include the cost of DSM programs in the respective utility’s rate base, or provide for a
separate surcharge that utility customers pay.
• State Agencies: The NCUC, the Public Staff, the SEO, the Department of Environmental and
Natural Resources (DENR), the State Construction Office, and others shall be involved in the
design and implementation of the DSM programs.
• Third-party Efficiency Providers: North Carolina has considerable expertise in its
universities, nonprofit organizations, and private consulting and technical service companies
to provide services for the DSM programs. The overall effort should seek to develop a
2 American Council for an Energy-Efficient Economy’s (ACEEE’s)
Dan York and Marty
Kushler, American Council for an Energy-Efficient Economy. Report No. U054, October 2005. See also rankings in
December 2006, prepared for the NCUC by GDS Associates, Inc.
statewide “efficiency industry” that will expand beyond the efforts of the DSM programs
alone.
• Regulators: The NCUC, with input from the Public Staff, will likely be the approving and
oversight body for the programs.
• Others: A wide variety of stakeholders will provide input into the development and continued
operation of the DSM programs.
Demand-Side Management programs around the country vary substantially, with dozens of
different types of implementation mechanisms. Potential implementation mechanisms and
supporting activities for this mitigation option include the following:
• Primary Implementation Mechanism—Utilities will develop and manage their own Demand-
Side Management Programs, with input from the NCUC and other stakeholders, and with
approval from the NCUC, and will include the expenses of the program in the overall rate
base.3
• Overall Management—There are different options for overall management of utility
programs:
○ Each utility manages its own programs.
○ Utilities contract with others (public agencies, nonprofit agencies, and/or private
contractors) to manage some or all of a utility’s programs.
• Supporting Activities:
○ Direct payment incentive programs: Utility customers who implement specific efficiency
or renewable measures receive partial rebates. For example, builders of ENERGY STAR
homes receive an incentive of a given amount per square foot up to a maximum
incentive.
○ Rebate programs: Utility customers who purchase energy efficient or renewable products
receive an incentive payment upon submitting their purchase receipts.
○ Loan programs: Utility customers receive a preferential loan to finance the purchase of
high-efficiency heating, ventilation, and air conditioning (HVAC) systems for
commercial buildings.
○ Preferential rates: Participants in load control programs or homebuyers who select (for
example) ENERGY STAR homes receive lower rates.
○ Marketing programs: Utilities purchase advertising to promote the DSM programs and
recognize those who participate.4
○ Technical service programs: Utilities provide directly, through the managing
organization, or through subcontractors, technical assistance, analysis, and
recommendations.
3 The NCUC might also consider offering utility incentives to provide substantial programs.
4 Marketing on consumer products programs can include incentives, retailer training, marketing and promotion,
education, and similar efforts.
○ Research and development (R&D) programs: Utilities support applied research which
promises fairly quick implementation, such as high-efficiency HVAC and humidity
control systems, insulated/non-vented attics, improved commercial ventilation control
strategies, and electricity generation from biomass.5
•
• Reduction of energy consumption in State agencies and
universities.
• Electric Utilities providing DSM programs include Progress Energy, Dominion Power, and
Duke Energy. Programs are mostly information, with a few financing programs.6 Gas utilities
and other fuel provider organizations include Piedmont Natural Gas, Scana − Public Service
Company North Carolina (PSCNC), North Carolina Propane Gas Association, North
Carolina Petroleum Marketers Association, and Carolina Fuel Institute.
• At the May 23 Climate Action Plan Advisory Group (CAPAG) meeting, the Environments
for Living program was noted as an example, with builders having built 80,000 homes in the
South and Southwest under the program in the last 5 years.7 Also, it was noted that solar
water heating is included in the NC Green Power Program.
• The NC HealthyBuilt Homes (HBH) program, supported in part by the NC SEO, has been
very active in the State.
• ENERGY STAR Homes is another example of building performance standards and
certifications in use in North Carolina.
• Policy on net metering has been established by the NCUC, and corresponding tariffs
approved.8 The establishment of Small Generator Interconnection Standards is designed to
streamline the process for customers seeking to install net metering applications, as well as
other small renewable energy generation applications.9
• Free refrigerator disposal programs already exist in North Carolina.
• In 1980, the NCUC established a systems benefit charge, creating a nonprofit corporation to
administer the funds with the charter “to encourage energy efficient economic development
in North Carolina.” The nonprofit Advanced Energy operates programs for subsidized and
5 Such support can include funding of research and development for energy efficiency and renewable energy and
could be implemented through R&D contracts with private firms, grants and contracts with universities, intramural
R&D conducted at government labs, and R&D contracts with private/public consortia.
6 Other ongoing programs in North Carolina that are relevant to this option include the Industrial Extension Service
(IES) at North Carolina State University (NCSU), energy and water efficiency programs at the Division of Pollution
Prevention and Environmental Assistance (DPPEA), Western Waste Reduction Partners (WRP) and other similar
programs. The North Carolina State Energy Office also offers a number of programs in many sectors. See also
http://www.seea.us/PDFs/SEEA DSM.pdf
7 See http://www.eflhome.com/
8 See Docket No. E-100, Sub 83.
9 See Docket No. E-100, Sub 101.
market-rate home construction, and provides energy efficiency assistance to North Carolina
industry.10
• The SEO is involved in federal Industries of the Future. The Clean Smokestacks Act of 2002
(CSA) recommendation A-5: Promote and Support Efforts to Establish North Carolina as a
World Leader in GHG, Non-Carbon Fuels and Energy Efficiency Technologies SEP
promotes further incentives for high-efficiency motors.
• operated in conjunction with the North
Carolina State University (NCSU) Industrial Extension Service.
•
•
•
•
•
• Develop performance contracting procedures and other ways to finance energy
efficiency projects for state and local governments, university and public school systems, and
public housing.
• Duke Power has a special needs low-interest loan program for low-income residents for
HVAC equipment and weatherization measures.
Principally, the reduction in GHG emissions (largely carbon dioxide [CO2]) from avoided
electricity production and avoided on-site fuel combustion. Less significant are the reduction in
methane (CH4) emissions from avoided fuel combustion and avoided pipeline leakage. Other
GHG impacts are also conceivable, but are likely to be small (black carbon, nitrous oxide [N2O])
and/or very difficult to estimate (materials use, life cycle, market leakage, etc.).
The table below shows the incremental savings of this option over and above any savings that are
expected to accrue from current utility DSM programs in North Carolina. Figure E-1 compares
the overall utility revenues devoted to energy efficiency programs under the RCI-1 option as
analyzed (at spending levels required to offset growth in emissions). Please see Annex B to these
descriptions for additional details of the analysis of this option.
10 See http://www.advancedenergy.org/
Costs of DSM programs from a rough average of compilations of program
experience for Northwest utilities and estimates for an energy efficiency program as part of a
renewable portfolio standard in North Carolina11 (electric) and from utility programs nationwide
(gas).
The CAPAG suggests reviewing the interplay of approaches in RCI-1
through RCI-3 when analyzing these options.
Sufficient energy efficiency opportunities are available and achievable to
offset growth in utility sales. Baseline growth in electricity sales are as included in the Inventory
and Forecast prepared for the CAPAG.12 Transmission and Distribution loss fractions are
assumed to start at 6.3% of generation in 2006, and falling to 5.6% of generation by 2020. These
11 GDS Associates, Inc. Report for the NCUC,
December 2006.
12 At the January 24 CAPAG meeting, a CAPAG member expressed doubts that sufficient generation and/or imports
would be available in North Carolina to meet the future levels of electricity demand included in the baseline
forecast.
values are consistent with those used for evaluation of energy supply options related to the
electricity sector.
• North Carolina-specific costs of DSM programs at savings levels modeled.
• Levels of spending/savings from existing DSM programs in North Carolina.
• Impact of electricity energy efficiency programs on peak demand as well as energy
requirements.13
• Reducing use of electricity and natural gas through this option also reduces emissions of
local and regional air pollutants, such as sulfur and nitrogen oxides, which in turn reduce the
human health and other impacts of those emissions.14
• Co-benefits include transmission/distribution system costs reduction
None cited.
• Costs and performance vary substantially between measures that might be considered for
DSM programs. Some measures may present low capital costs and higher operating costs (or
vice versa), and there is uncertainty about the costs and savings for other measures.
• Interaction with appliance standards and utility programs.
Completed.
Unanimous consent.
None.
13 TWG members requested estimates of the impacts of RCI-1 and other options on peak power demand as well as
on electric energy requirements. The magnitude of changes to peak power demand could affect both avoided costs
and avoided GHG emissions associated with energy efficiency actions.
14 Tools such as the EPA’s COBRA (Co-benefits Risk Assessment Model) and BenMAP (Environmental Benefits
Mapping and Analysis Program) can be used to obtain estimates for the economic benefits of reduction of non-GHG
air pollutant emissions that accompany GHG emissions reduction.
The public benefits charge (sometimes call systems benefits charge) is a fee assessed to utility
customers based on their usage of energy in a given time period. With deregulation in many
states, the utility commissions often lose the ability to require the electric utilities to have
efficiency programs. The result in many states is the development of the public benefits charge,
which is a non-bypassable charge on electric bills. The funds collected are then provided to a
third party to provide energy efficiency programming.
It is recommended that North Carolina’s existing Public Benefits Charge be significantly
increased to support more investments in energy efficiency and renewable energy options. While
the State has a well-established public benefits charge and fund, the charge to consumers has not
changed since its inception in 1980. Since that time, other states have implemented public
benefits charges that are significantly higher than in North Carolina. If North Carolina were to
raise its public benefits charge to the level of the national average collected by other states, funds
collected would be more than 20 times higher. The increased charge in other states has allowed
them to take the lead and drive energy efficiency both locally and nationally.15
It is recommended that these increased public benefits charges be collected under the oversight
of the NCUC, and invested in residential, commercial, and industrial energy efficiency and
renewable energy programs through one or more third-party administrators. Long-term
consistency in management and dedicated application of funds collected via public benefits
charges to the target programs will be crucial to the success of this initiative.
Investments in energy efficiency and renewable energy made using public benefits funds would
be expected to span a wide variety of residential, commercial and industrial applications.16
Reduce GHG emissions from RCI activities by providing public benefit charges adequate
to implement energy efficiency and renewable energy programs comparable to the more
effective public benefits charge-funded programs in the United States. Information from a
national compilation on existing and planned electric utility spending on energy efficiency
programs in other states was reviewed, and indicated spending in the range from a fraction of
15 Because almost all public benefit charges are currently assessed in cold weather states, the majority of research
and program development has been directed to issues faced in the Northeast and Northwest. While some of these
programs can be translated to North Carolina, many cannot, due to differing electric rates and climates.
Unfortunately, there are no substantial public benefits programs in the Southeast, leaving the area shallow in terms
of energy efficiency programs at a time when population growth is pushing electric demand to new highs.
16 Applications could include (but would by no means be limited to) measures such as solar-powered (absorption) air
conditioning, ground-source heat pumps, and efficiency improvement programs for window air conditioning units,
lighting, water heating, plug loads, networked personal computer management, power supplies, motors, pumps,
boilers, and other appliances and equipment.
one percent to approximately three percent of utility revenues. On that basis, 1% of utility
revenues was chosen as an appropriate public benefits charge goal for North Carolina at present.
Three-year phase-in of public benefits charges from the current level to a level
consistent with the goals above.17
The public benefits charge is collected from customers of all gas and electric
utilities. The collected Public Benefits Fund (PBF) is then spent on energy efficiency and
renewable energy investments in all sectors. All relevant stakeholder groups are involved in the
design, governance and oversight, management, and implementation of programs to invest these
funds.
As stated above, we believe the most effective implementation method is to work through the
NCUC to increase funding in the established program. While funding will increase, funding
allocations do not have to stay the same.
Potential implementation mechanisms and supporting activities for this mitigation option include
• Provision of programs with substantial incentives for consumers to participate, and that
include retailer training, marketing and promotion, education, and other elements designed to
ensure program effectiveness.
• Funding of R&D for Energy Efficiency, Renewable Energy, and Other GHG Reduction
Strategies. Funding from the Public Benefits Charge can in part be used for R&D contracts
with private firms, grants and contracts with universities, intramural R&D conducted at
government labs, and/or R&D contracts with private/public consortia.
• Performance-based Contracting for funding of energy efficiency improvements, with capital
costs paid back through energy savings.
• Establishment of a Reinvestment Fund providing financing for energy-efficiency and other
GHG emissions-reduction efforts. This fund would be used in part to create infrastructure to
deliver energy-efficiency and renewable technologies. Allowing state agencies to keep the
net savings from energy efficiency actions undertaken with the use of public benefits funds,
or to reinvest savings in energy-efficiency or other projects, will be crucial to the success of
fund initiatives in the public sector. The Reinvestment Fund can take the form of a Special
capital fund for businesses developing renewable energy sources, such as the Pennsylvania
“Energy Harvest” program.
• North Carolina has the oldest public benefits charge program, established in 1980 by the
NCUC. The original intent of this program was to reduce electric demand in an effort to slow
the need for new power plant construction. The current public benefits charge of 0.003567
17 In other states, a dramatic increase in public benefits funding levels has led to severe growing pains as
administration of such funding was difficult to develop. A 3-year plan of implementation can allow expectations to
be more effectively set and realized.
cents per kWh translates to approximately three cents per month per average residential
customer in the State. The total collected amounts to about $3.5 million per year. These funds
are used for energy efficiency and economic development programs throughout the state.
Because of the small amount of funding, efforts have been specialized to serve specific
markets in the state. Industrial motors and process heating receive much of the attention in an
effort to make our industries more efficient and competitive, thereby retaining and building
the job base. The other primary area of funding is the residential new construction sector.
• CSA recommendation LT-5,
• NCUC is presently investigating several issues involving DSM and Energy Efficiency in the
current Integrated Resource Planning.18 This investigation includes Public Benefit Funds.
• In 1980 the NCUC established a systems benefit charge, creating a nonprofit corporation to
administer the funds with the charter “to encourage energy efficient economic development
in North Carolina.” The nonprofit Advanced Energy operates programs for subsidized and
market-rate home construction, and provides energy efficiency assistance to North Carolina
industry.19
• It was noted during the May 23 CAPAG meeting that the NC Tax Credit for Renewable
Technology Investment has “sunseted” (lapsed), and should be brought back (or replaced
with a program with similar goals).
• Reexamine existing legislation and regulations as pertains to barriers and
strategies to develop wind energy while still protecting North Carolina’s natural beauty.
• Incentives and regulatory or administrative measures for development of
renewable electricity generation facilities, solar water heating, passive and active solar space
heating, and daylighting.
• Facilitate efforts of local governments to finance energy efficiency and
renewable energy projects.
• The NCUC is encouraged to promote policies that create diversity in energy supply
such as natural gas, solar energy, wind energy, biomass, and hydrogen from renewable
sources with particular emphasis on in-state energy development.
• Development of performance contracting procedures and other ways to finance
energy efficiency projects for state and local governments, university and public school
systems, and public housing.
• Continue its work to formulate and advance mortgage-based incentives for high
performance new homes.
• Promotion and development of guidelines for performance contracts, conduct
workshops, and provide technical assistance on developing performance contracting
documents.
18 See in Docket No. E-100, Sub 110.
19 See http://www.advancedenergy.org/(6.9)
As with RCI-1, this option would principally yield reductions in GHG emissions (largely CO2)
from avoided electricity production and avoided on-site fuel combustion. Less significant are the
reduction in CH4 emissions from avoided fuel combustion and avoided pipeline leakage. Other
GHG impacts are also conceivable, but are likely to be small (black carbon, N2O) and/or very
difficult to estimate (materials use, life cycle, market leakage, etc.).
The table below shows the incremental savings of this option over and above any savings that are
expected to accrue from the current public benefits program in North Carolina. Figure E-2
compares the overall utility revenues devoted to public benefits under the RCI-2 option as
analyzed. Please see Annex B under these descriptions for additional details of the analysis of
this option.
Costs of DSM programs from a rough average of compilations of program
experience for Northwest utilities and estimates for an energy efficiency program as part of a
renewable portfolio standard in North Carolina20 (electric) and from utility programs nationwide
(gas).
The CAPAG suggests reviewing the interplay of approaches in RCI-1
through RCI-3 when analyzing these options.
1% of utility electric and gas revenues are spent annually on public benefits
programs (assumed mostly energy efficiency).
• North Carolina–specific costs of energy efficiency investments at savings levels modeled.
• Future expected levels of spending vs. savings from public benefits charge program in North
Carolina
• Co-benefits could include transmission/distribution system costs reduction.
• Would help to provide local employment and grow renewable energy use.
None cited.
• Costs for this option are uncertain, depending on measures included.
• Interaction with appliance standards and utility programs needs to be taken into account.
Completed.
Unanimous consent.
None.
20 GDS Associates, Inc. Report for the NCUC,
December 2006.
Recognizing that governments should “lead by example” the option presented here provides
energy use targets to improve the efficiency of energy use in State and local government
buildings. This option sets energy-efficiency goals for the existing government building stock, as
well as for new construction and major renovations of government buildings.
Elements of this Option Design include the following:
• Adherence by new and renovated government buildings to the energy-related guidelines
included in LEED+ (Leadership in Energy and Environmental Design), a national building
certification program that currently exists in the commercial building arena but would have
more explicit energy efficiency requirements than LEED alone. Conversion of existing
buildings to bring them into compliance with the LEED+ standard.
• Revision of the existing policy(s) that separates construction budgets from maintenance
budgets. By linking these, the increased energy efficient construction or alterations will be
seen as long term savings.
• Extension of green campus initiatives to all public academic and government campuses.
• Energy benchmarking, measurement, and tracking programs for municipal and state
buildings.
• Energy efficiency requirements for new, renovated, and existing government buildings.
• Renewable energy requirements for new, renovated, and existing government buildings.
New construction and major renovations of government buildings must meet LEED+
requirements. Commence with all buildings entering the design phase by 2010. Based on a state
composite average, achieve a 20% reduction from a baseline fiscal year of 2002–03 in energy
consumption per gross square foot per year for the entire North Carolina government existing
building stock by 2027. In the last year of the program, establish a new 5-year goal for
government building energy efficiency improvement.
See the timing targets described in the “goals” section above. This option will build on
the USI (Utility Savings Initiative) program already in place at the North Carolina SEO.
State agencies, University of North Carolina (UNC) System and affiliates,
Community College System and K-12 school districts, local governments and other public
entities, building code enforcement, architects, building designers, engineers, developers,
builders, contractors, regulators—State Construction Office, SEO, Office of State Budget and
Management.
Potential implementation mechanisms and supporting activities for this mitigation option include
• Performance-based contracting (PC) for funding of energy efficiency improvements; capital
costs paid back through energy savings. Should the PC reach a payback period threshold in
perhaps 12 or 15 years, or mandate PC contain a renewable energy component, then funds
are paid back.
• Create a clearinghouse for information on and access to software tools to calculate impact of
energy efficiency and renewable technologies for buildings.
• Energy technologies that should be promoted by this section include but are not limited to
○ Active and passive solar building technologies such as photovoltaic panels, solar hot
water heaters, and solar-powered (absorption) air conditioning.
○ Support for new-to-market technologies, such as solar hybrid lighting (using light guides
to bring daylight into building interiors), where appropriate in select, potentially high
profile, researched and monitored projects for future broad application.
○ Ground-source heat pumps.
○ Focus on specific end uses/technologies such as lighting, water heating, plug loads,
networked computer management, power supplies, motors, pumps, boilers, and cool
roofing.
• Carry out a comprehensive statewide survey of energy and water efficiency features in
existing government buildings to provide information on the potential for energy efficiency
in the NC government building stock.
• The Environments for Living program21 is an example of the types of improvements included
in this option, with builders having built 80,000 homes in the South and Southwest under the
program in the last 5 years. Also, solar water heating is included in the NC Green Power
Program.
• The NC HealthyBuilt Homes (HBH) program, supported in part by the NC SEO, has been
very active in the State.
• ENERGY STAR Homes is another example of building performance standards and
certifications in use in North Carolina.
• The SEO is involved in federal Industries of the Future. CSA recommendation A-5:
“Promote and Support Efforts to Establish North Carolina as a World Leader in GHG, Non-
Carbon Fuels and Energy Efficiency Technologies.”
• Reduction of energy consumption in State agencies and universities.
• The General Assembly should review options, such as a Public Benefits Fund
(PBF) or other means, to enable funding of the recommendations in the State Energy Plan.
21 See http://www.eflhome.com/
• The SEO should organize a statewide effort to develop criteria for a
residential high performance building program to reduce the life cycle cost of new and
existing buildings.
• Development of a Solar Schools Program.
• North Carolina statutes should require that designers of all new public buildings
provide estimates of projected energy consumption and energy costs for the building prior to
construction.
• Implementation of high performance building guidelines developed for North
Carolina in all new public buildings and for new public housing.
• Local governments should be encouraged to implement SEP recommendations and
other energy efficiency programs.
• The SEO should encourage new manufactured homes to comply with the critical
components of the state energy code for site-built residential units and promote ENERGY
STAR manufactured homes.
• The SEO should promote the use of and provide training for commercial building
energy analysis software.
As with RCI-1 and RCI-2, this option would principally yield reductions in GHG emissions
(largely CO2) from avoided electricity production and avoided on-site fuel combustion. Less
significant are the reduction in CH4 emissions from avoided fuel combustion and avoided
pipeline leakage. Other GHG impacts are also conceivable, but are likely to be small (black
carbon, N2O) and/or very difficult to estimate (e.g., materials use, life cycle, market leakage).
Costs of energy efficiency improvements based on studies of costs of building
improvements and code changes.
Estimates fractional savings in energy intensities needed, after code
improvements, in new and existing government buildings. Allocates intensity savings among
energy efficiency, renewable energy sources.
Fractions of electric and gas intensity improvement accounted for by
efficiency improvements, solar thermal, solar photovoltaics (PV), and/or increased biomass use;
fractional savings target of 20% over new code levels.
• Total government building space in North Carolina (regional estimates currently used with
state building floor area data to estimate total government building floorspace—state, local,
county, and schools).22
• Fraction of government agencies occupying leased space in North Carolina (estimate of 10%
of government-owned building space used).
• Rate of building renovations versus new construction in the government sector (estimate of
30% used based on consideration several national and regional sources).
Co-benefits could include transmission/distribution system costs reduction.
None cited.
• Costs for this option are uncertain, depending on the measures included.
• Potential interaction with appliance standards and utility programs.
Completed.
Unanimous consent.
None.
22 Data compiled from NC State Property Office indicates total gross floor area of state-owned buildings in North
Carolina of approximately 106 million square feet as of 2006. Summary data provided by Len Hoey of the NC State
Energy Office.
A market transformation program is designed to create a situation where the bulk of the private
market automatically adopts or incorporates technologies or techniques that result in improved
energy efficiency. The goal of a market transformation and technology development program is
to put energy efficiency technologies and practices into a position where they will be demanded
by the public and chosen by builders and manufacturers. Methods of transformation will be
different for each technology or technique, but often revolve around public and private review of
quality and effectiveness, including partnerships between government agencies, retailers,
manufacturers, and non-governmental agencies.
The intent of a market transformation program is to ensure that voluntary standards are rigorous
enough to set a high bar while being understandable and valuable to the buyer. Market
transformation efforts also often go hand-in-hand with technology development efforts.
A market transformation and technology development program must be long-term and robust.
There must be and enduring support for technology improvement and incorporation.
There must be continued investment in technology development and integration. There must be
independent evaluation of the efficacy of the technologies.
This particular recommendation is broadly defined and does not address a single technology or
market. Rather, it addresses a method for bringing appropriate technologies and processes to the
marketplace. Defined as such, it is recommended that several technologies be included in market
transformation strategies for North Carolina, though others can and should be included as well.
• Promote the appropriate use of National Electrical Manufacturers Association (NEMA)
Premium motors and drives in industrial applications.
• Provide support for implementation of renewable energy applications such as solar water
heaters.
• Target the early retirement of older appliances using a “bounty” program.
• Provide support for processes that recover waste heat from industrial applications.
• Promote the use of ground-source heat pumps by helping to identify and qualify appropriate
applications.
• Encourage increased funding for ENERGY STAR to identify and qualify a greater number of
products under their labeling.
• Encourage and enable smaller purchasers to act in aggregate groups to reduce costs and
quantify emission reduction benefits from technology and process improvements.
• Provide a continuous funding level for near-term research and deployment of energy efficient
technologies and processes.
Because this recommendation involves policy process rather than a specific emissions
reduction technology, the goals will be different and dependent on the selected technologies
included in the programs. A goal of any policy in this area is to provide consistent support with
the end-result being a time when the support can be removed without the program benefits
ending as well. Thus, the goal is to permanently transform markets to increase and accelerate the
uptake of products with higher energy efficiency and of renewable energy products, working
through a regional alliance that achieves savings similar to those achieved in other regions of the
United States.
This mitigation option recommendation requires consistent and long-term thinking.
Successful examples of transformation programs in other areas of the country were years and
decades in the making. Set up agency/agencies in 2010. Start activities in 2012.
All sectors and stakeholders in the state may be involved in market
transformation programs, including retailers, utilities, manufacturers, nonprofit consortia,
consumers associations, professional associations (engineers, builders, architects, designers),
and state agencies.
Implementation of market transformation programs requires the participation and buy-in of
industry partners, regulatory bodies and consumer groups. Potential implementation mechanisms
and supporting activities for this mitigation option include
• Collaborative marketing of energy efficiency and renewable energy technologies.
• Specific implementation measures mentioned as possible for this option include tax credits,
low/no interest loans, and similar financial incentives to business, industries and commercial
firms to upgrade their equipment (including manufacturing and pollution control equipment)
to more energy-efficient technologies. The latter approach is especially important for small
manufacturers, and can mean access to micro-loans.
• Funding of R&D for Energy Efficiency, Renewable Energy, other GHG Reduction
Strategies.
• Could include patent protection, R&D tax credits, production subsidies or tax credits to firms
bringing new technologies to market, tax credits or rebates for new technology buyers,
government procurement, and demonstration projects.
• Market transformation is an area where the SEO might be funded to contribute.
• There are several related programs in place that can be modeled for other technologies and
processes. One such program is run by the North Carolina Housing Finance Agency
(NCHFA). The NCHFA provides training to their nonprofit builders such as Habitat for
Humanity affiliates. Further, the NCHFA provides a program where organizations may
receive funds to participate in an energy guarantee program for new homes, if the homes are
tested and achieve certain performance levels. More than 1,000 homes in North Carolina are
part of this program, which is now being replicated in other states.
•
• A program exists in North Carolina to dispose of a refrigerator for free.
• The North Carolina Department of Commerce and the SEO should encourage
and support economic development of energy-related enterprises whose products are
intended to increase energy efficiency or use renewable resources.
• In 1980 the NCUC established a systems benefit charge, creating a nonprofit corporate to
administer the funds with the charter “to encourage energy efficient economic development
in North Carolina.” The nonprofit Advanced Energy operates programs for subsidized and
market-rate home construction, and provides energy efficiency assistance to North Carolina
industry.23
• SEO is involved in federal Industries of the Future. CSA recommendation A-5: Promote and
Support Efforts to Establish North Carolina as a World Leader in GHG, Non-Carbon Fuels
and Energy Efficiency Technologies. SEP recommends further incentives for high-efficiency
motors.
•
•
• Energy Improvement Loan Program.
• NC Weatherization Assistance Program, for low income earners; SEP recommends
extending weatherization.
GHG impacts are similar in nature to those noted for RCI-1 through RCI-3 above.
Market transformation program costs and performance based on programs and
experience of the Northwest Energy Efficiency Alliance.
Apply program results in percent savings, from other regions, to
North Carolina.
23 See http://www.advancedenergy.org/
• Market transformation programs can reduce electricity demand by 0.2% annually.
• The implementation must be timed correctly.
It is unknown the degree to which other states in the region will join with North Carolina to
increase program effectiveness.
• The non-energy and non-emission benefits are almost always going to be the economic
drivers behind the success of these programs. Focusing only on emission reductions or only
on payback through energy efficiency of the user will eliminate many technologies when
they could otherwise provide substantial economic benefits. An example is an improvement
to an industrial production line that may have negligible overall energy consumption
reduction at the plant, but that decreases the energy consumption per unit produced (energy
intensity) while speeding up production and retaining jobs in the state.
• Co-benefits could include transmission/distribution system costs reduction.
• Programs could help to lower capital and installation costs.
None cited.
Interaction with appliance standards and utility programs.
Completed.
Unanimous consent.
None.
Appliance efficiency standards reduce the market cost of energy efficiency improvements by
incorporating technological advances into base appliance models, thereby creating economies of
scale. Appliance efficiency standards can be implemented at the state level for appliances not
covered by federal standards, or standards can be jointly developed by multiple states.
This mitigation option involves the replication of standards adopted in other states for appliances
not covered by federal standards. It also involves the State, working together with other states in
the region, advocating for stronger federal appliance efficiency standards where this is
technically feasible and economically justified. Of these options for coverage, implementation of
stronger-than-federal standards together with other states, including states in the Southeast
region, is much preferred by the CAPAG, as it provides a broader market for manufacturers and
thus lowers net costs of higher-efficiency devices to North Carolina consumers.
Elements of this option design include
• Development of committee or other working group to develop recommendations on
appliance standards (similar to existing group for building codes).
• Adoption of State-level Appliance Efficiency Standards, defined sufficiently broad enough to
include, for example, commercial sector, and information technology (IT) equipment.
• Support from North Carolina for adoption of more stringent federal-level appliance
efficiency standards.
• Design of a standard for recycling of materials in appliances.
• Inclusion of water use reduction as a criterion for appliance efficiency improvement.
Increase stringency of appliance standards to the level of those recommended by the
Appliance Standards Awareness Program.24
Adopt new standards by 2010. Standards in force by 2012.
State agencies to enforce state codes and standards.
24 See www.standardsasap.org. The analysis recommends standards for the following products: bottle-type water
dispensers, commercial boilers, commercial hot food holding containers, compact audio products, DVD (digital
versatile/digital video disc) players and recorders, liquid immersion distribution transformers, medium voltage dry-type
distribution transformers, metal halide lamp fixtures, pool heaters, portable electric spas, residential furnaces
and boilers, residential pool pumps, single voltage external AC to DC (alternating current to direct current) power
supplies, state-regulated incandescent reflector lamps, walk-in refrigerators and freezers.
Potential implementation mechanisms and supporting activities for this mitigation option include
• Appliance Standards promulgated by legislation or developed administratively.
• Assistance programs to help low-income consumers with purchase of appliances meeting
more stringent standards, so as to reduce the higher-first-cost burden of higher-efficiency
appliances on those consumers.
• Elevated energy standards for appliances and equipment purchased by public agencies.
• Work with manufacturers and consider impacts on manufacturers when setting new
standards.
• recommends ENERGY STAR from 2008 on.
○ The state is an ENERGY STAR Partner.
• Existing Federal Appliance Efficiency Standards (2005 Energy Bill).
• North Carolina Department of Administration should require that all state facilities
with motors larger than 5 horsepower must develop a motor maintenance program.
• North Carolina should evaluate whether facilities that repair or rewind motors
should be certified or otherwise meet a state efficiency requirement.
• North Carolina should create investment tax credits and other incentives for new
and/or retrofitted manufacturing equipment to encourage modernization and efficiency
improvements.
• The SEO should sponsor workshops on industrial energy efficiency around the
state directed at industrial facility operators, design and process engineers, and owners.
GHG impacts are similar in nature to those noted for RCI-1 through RCI-3 above.
Fractional savings and costs drawn from the Appliance Standards Awareness
Project (ASAP) and the American Council for an Energy-Efficient Economy (ACEEE), 2006.
“Leading the Way: Continued Opportunities for New State Appliance and Equipment Efficiency
Standards.”
Results for North Carolina from report above adapted by adjusting for
different analysis period, discount rate, and energy prices.
Costs and savings from efficiency improvement via standards will be similar
in North Carolina to those indicated in the ASAP/ACEEE report.
It is unknown the degree to which other states in the region will join with North Carolina in
setting higher-than-federal standards so as to increase effectiveness and practical application of
standards.
Reduction in water use for some appliance upgrades.
None cited.
Feasibility enhanced by ongoing efforts in nearby states.
Completed.
Unanimous consent.
None.
Building energy codes specify minimum energy efficiency requirements for new buildings or for
existing buildings undergoing a major renovation. As energy use in buildings in North Carolina
accounts for about one-third of North Carolina’s current gross GHG emissions, amending State
and/or Local Building Codes to make the requirements for minimum energy efficiency levels in
buildings more stringent will have a considerable immediate and ongoing impact in reducing
building-sector GHG emissions.
North Carolina has building energy codes modeled on the International Energy Conservation
Code 2000 for residential and commercial buildings, and enforced by the Building Code
Council. An ongoing process of code amendments for new and renovated residential and
commercial buildings is proposed as follows.
• North Carolina should adopt more stringent building codes to improve the efficiency of
energy use in buildings. North Carolina can use cost-effectiveness tests to identify where
moving beyond national building codes makes economic sense. Also, the state can make
improvements in codes including but not limited to HVAC systems, daylighting design to
reduce lighting needs, electric lighting design, building envelope design, and using integrated
building design strategies.
• North Carolina should move toward adopting innovative features of advanced codes being
implemented in other states, such as lighting efficiency requirements in new homes that go
beyond the codes in force, as appropriate to conditions in the State.
• Statewide enforcement of both existing and new building codes should be improved at all
levels, and enforcement should be fully implemented within 6 months of statewide code
adoption (if applicable).
• North Carolina should regularly update its energy codes. A 3-year cycle could be timed to
coincide with the release of national model codes.
• As appropriate, codes should be modified to remove obstacles to renewable energy use,
daylighting and non-conventional energy-efficient building materials in buildings where
applicable.
• Include programs of education for building inspectors and other building industry
professionals to assure that the new codes are implemented and enforced.
• Enforce existing building energy codes by 2008.
• Establish a new energy code by 2010 that requires new North Carolina residences and
commercial/industrial buildings to be 20% more efficient than buildings meeting current
national building energy codes, and assure that the new code is enforced.
Updated every 6 months when the national energy code changes.
North Carolina Department of Insurance (which can implement new codes),
state and local government building code enforcement agencies, Mobile Home Manufacturing
Industry and Building Industry Associations.
Potential implementation mechanisms and supporting activities for this mitigation option include
• Coordination with consumer products programs, possibly including incentives, retailer
training, marketing and promotion, education, etc.
• Develop Training and Education programs for
○ Builders and contractors (related to HVAC sizing, duct sealing, energy analysis program,
construction and demolition [C&D] waste recycling, renewable energy system
installation, and water distribution systems).
○ Trade school and community college students (for example, including the skills noted
above skills in curricula).
○ Building code and other officials in energy code enforcement.
• Develop a clearinghouse for information on and access to software tools to calculate the
impacts of energy efficiency and solar technologies for buildings.
• North Carolina has building energy codes modeled on the International Energy Conservation
Code 2003 for residential and commercial and enforced by Building Code Council; SEP R-4
recommends reviewing compliance and potential improvement. Analyses of building code
improvements have been undertaken by Jeff Tiller at Appalachian State University (ASU).
Building codes are enforced by the Building Code Council and the North Carolina
Department of Insurance.
• Latest information on Department of Insurance Web site indicates American Society of
Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) 90.1 2004.
• Advanced Energy Corporation, NC Solar Center, and others have ongoing programs in this
and similar areas.
• Training of Building Code and other Officials in Energy Code Enforcement (Recommended
in State Energy Plan).
• Advanced Energy Corporation is currently reviewing nine calculators for assessing building
energy efficiency and solar technologies for buildings. Availability of tools could be
widened.
• In 1980 the NCUC established a systems benefit charge, creating a nonprofit corporation to
administer the funds with the charter “to encourage energy efficient economic development
in North Carolina.” The nonprofit Advanced Energy operates programs for subsidized and
market-rate home construction, and provides energy efficiency assistance to North Carolina
industry.25
• The SEO is involved in federal Industries of the Future. CSA recommendation A-5:
SEP recommends further incentives for high-efficiency
motors.
• NC Weatherization Assistance Program, for low income earners SEP recommends extending
weatherization.
• The SEO should develop programs, in addition to weatherization, to address
energy-efficient housing in the low-income sector.
• The SEO should organize a statewide effort to develop criteria for a
residential high performance building program to reduce the life cycle cost of new and
existing buildings.
• North Carolina statutes should require that designers of all new public buildings
provide estimates of projected energy consumption and energy costs for the building prior to
construction.
• The North Carolina Department of Administration should implement high
performance building guidelines developed for North Carolina in all new public buildings
and new public housing.
• The SEO should conduct a study on current compliance levels of residential and
commercial buildings with the North Carolina state energy code.
• The SEO should create an Energy Code Enforcement Assistance Program to
provide additional energy code enforcement and outreach officials to serve across the state.
• The SEO should encourage new manufactured homes to comply with the critical
components of the state energy code for site-built residential units and promote ENERGY
STAR manufactured homes.
• The SEO should provide training on high performance buildings to building
professionals in a number of di