CPF_AssessingUSClimatePolicyOptions

By the Numbers: Greenhouse Gas Emissions and the Fossil-Fuel Supply Chain in the United States
Daniel S. Hall

Summary

This issue brief presents information on greenhouse gas (GHG) emissions in the United States to provide background for the design of a domestic climate policy. It starts by detailing current U.S. GHG emissions, including breakdowns of emissions by greenhouse gas and by economic sector. Following that, patterns of production, distribution, and use of fossil fuels in the U.S. economy are examined to estimate the number of sources that would potentially be regulated under a domestic climate policy.

Greenhouse Gas Emissions and the Fossil-Fuel Supply Chain in the United States

Current, annual U.S. GHG emissions total more than 7 billion metric tons of carbon dioxide equivalent (CO2e) (emissions for 2005 totaled 7.26 billion metric tons CO2e). Emissions have been growing by about 1 percent per year since 1990. CO2 is the primary greenhouse gas, accounting for more than four-fifths of U.S. GHG emissions; the remaining 16 percent is composed of methane, nitrous oxide, and various fluorinated gases.
The sectors with the largest emissions are electricity generation (33 percent) and transportation (28 percent). The primary drivers of emissions in these sectors are coal-burning for electricity generation and oil use for transportation.
Almost all U.S. CO2 emissions are generated by the combustion of fossil fuels. Because CO2 emissions from fossil fuels can be calculated directly and accurately based on the carbon content of the fuel, there is flexibility about where in the fossil-fuel supply chain to regulate CO2 emissions. Although it is often assumed that regulation of CO2 would occur "at the smokestack" (that is, at the point of emissions), the ability to calculate emissions based on carbon content means that regulation can be accomplished at any point from fossil-fuel production ("upstream"), to processing or distribution ("midstream"), to actual end use ("downstream").
There are typically fewer upstream producers, or midstream processors and/ or distributors, than there are downstream users. This is particularly true for oil and natural gas, which have a very small number of processing and distribution facilities (that is, oil refineries and natural gas processors or pipeline distributors) and a very large number of end users (for example, automobiles and homes).
Regulating CO2 emissions at upstream or midstream entities would facilitate the inclusion of virtually all fossil-fuel emissions in a market-based (tax or cap-and-trade) climate policy. Such regulation would likely involve fewer than 3,000 sources: around 1,000 entities for coal (either coal mines or large coal-burning facilities); and another 500-700 each for oil and natural gas (including refineries, natural gas processors, and importers/exporters). A purely downstream approach that regulates only large stationary emitters (primarily electricity generators and industrial sources) would likely involve about 10,000 entities and cover about half of U.S. fossil-fuel emissions. Melding this approach with midstream coverage of transportation fuels (refineries and importers) would add the same 500-700 entities and net about another third of these emissions, thus covering 80 percent of U.S. fossil-fuel emissions (or about two-thirds of total U.S. GHG emissions). Issue Brief #4 on the scope and point of regulation provides further discussion on the policy issues surrounding where to regulate emissions.
Emissions of non-CO2 GHGs come from a variety of sectors and activities, and are often widely dispersed. Although smaller in percentage terms, non-CO2 emissions are important in discussions of climate policy because they often account for a substantial share of projected near-term emission reductions. Options for including these gases in a climate policy are discussed further in Issue Briefs #14 and #15, on non-CO2 gases and offsets respectively.