TERM PAPER

UNDER THE SUBJECT

BUSINESS ENVIRONMENT
SUBMITTED TO
MISS PALWINDER KAUR
LECTURER
SUBMITTED BY
ARUN KUMAR SAINI
MBA I st. SEM. ( 195 )
ROLL NO. : A25
SECTION: RT1903 -C
REG. NO. : 10907007
SUBMISSION DATE: 10/12/2009

LOVELY INSTITUTE OF MANAGEMENT

 ACKNOWLEDGEMENT
I would like to express my gratitude to all those who gave me
the possibility to complete this term paper. I want to thank that the
department of management of Lovely Professional University for giving
me permission to commence this term paper, to do necessary research
work and to use departmental data.

I am deeply indebted to my lecturer MS.PALWINDER MAM whose

help stimulating suggestion and encouragement helped me in all the time
of research for and writing of this term paper.

My friend especially DILBAG and BHANU supported me in my

research work. I want to thank them for all their help, support, interest
and valuable hints’ also thank my roommate, DILBAG to provide me
the resources. My friend looked the final version for correcting and
offering suggestions for improvements

Especially would like to give my special thanks to GOD whose blessing

enabled me to complete this work.
CONTENTS
 ACKNOWLEDGEMENT………………………………………………
………...2

 INTRODUCTION…………………………………………………………
………..4

 ROLE OF PRIVATE
SECTOR……………………………………………………6

 POLITICAL
EFFECT………………………………………………………………..7

 ECONOMICAL
EFFECT…………………………………………………………..8

 SOCIAL
EFFECT…………………………………………………………………….
10

 TECHNOLOGIAL
EFFECT……………………………………………………….14

 LEGAL EFFECT………………………………………………….
…………………..17

 WIND
POWER……………………………………………………………………
….20

 ENVIRONMENT
EFFECT…………………………………………………….…..23

 REFERENCE &
BIBLIOGRAPHY……………………………………………….29
 Power Sector In India
 INTRODUCTION
India has a deficit in power generation and the public sector has not
been able to meet the increasing demand. The dynamic growth
witnessed by the economy has not been matched by the power
sector in India. In fact experts believe the deficit in power supply has
been the biggest infrastructure constraint. The power generation is
dominated by the government through the public sector units and
distribution is almost entirely controlled by the government.

The government came up with the Accelerated Power Sector

Development and Reform Programme in 2001 to restructure the
power sector. The electricity act 2003 was passed to make the state
governments introduce reform to
bring in competition and
efficiency in the sector. The Post
reforms various state
governments have chalked out
strategies to overcome the power crisis. In spite of all these
measures the power scenario has not witnessed any dramatic
change. Investment into the sector has not been up to the
expectation.

ElectricityGeneration
Coal is the most important resource for power generation in India,
taking care of half of the primary energy needs and a third of total
energy needs. Coal reserves in India are substantial high but low in
quality. Because of economic and security reasons, coal would play a
vital role as a raw material for power generation. Most of the coal
based power plants use conventional sub critical pulverized coal
technologies and below par in converting coal to electricity. The
reasons for the bad performance of the coal based power plants are
due to:
• Challenges in the coal supply industry.
• Not having clear-cut performance standards.
• Negligible incentive for continual performance improvement due to
negligible competition.
• Insufficient investments in R&D.
• Substandard operational and management practices.
• Not having sufficient facts and accountability.

Controls to check the negative impact on the eco system due to the usage
of coal is not sufficient. The trend of relying on imported gas over the past
decade raises concern with respect to security and continuity of supply.
There is not much initiative to upgrade current technology and to come up
with new technology for generating power based on coal.

HydroelectricPower
Hydroelectric power generation in India started much before Independence
in 1897 at Darjeeling. In 1902 another power station was set up at
Sivasamudram in Karnataka. Over 25 per cent of electricity produced by
India today is from hydropower. Some of the major states generating
hydroelectricity are Himachal Pradesh, Karnataka, Kerala, Jammu &
Kashmir, Meghalaya, Tripura and Sikkim.

SolarPowerInIndia
India has a very high density of population and has high solar isolation,
making it an ideal scenario for solar power in India. The first applications for
solar power has been for water pumping to replace India's four to five
million diesel powered water pumps. New projects are on the pipeline and
an area of 35,000 square km has been set aside in the Thar for solar power
projects.

According to reports the government has initiated a massive project to

popularize solar energy systems. It is estimated these projects will
generate 200,000 megawatts by 2050.The government has taken steps to
install small scale photovoltaic panels, commercial scale solar plants and
solar lightning systems to give impetus to the domestic manufacturers.

NuclearPower
The increasing awareness to generate power without polluting the
environment and at the same time meet the increasing demand for power
due to the rapid growth in the economy has resulted in the government
shifting focus towards nuclear power. The Department of Atomic Energy
has proposed to use locally available uranium resources in Pressurized
Heavy Water Reactors (PHWRs),followed by the recycling of spent fuel in
Fast Breeder Reactors for generating nuclear power. Some of the salient
features are:

• USA will not interfere with India's nuclear programme for military
purpose.
• US will help India to have strategic reserves of nuclear fuel as a
contingency measure against future disruption of supply.
• Both the countries agreed that nuclear trade between the two nations
should be mutually beneficial.

 Role Of Private Sector

The government has set in reforms to allow the entry of private sector in
power generation. But the process has been hampered by the fact that the
ultimate purchase of power is the state governments. At present the private
sector accounts for about 15% of the total capacity, mostly in the
renewable energy sector.
Reliance energy Ltd
is one of the leading groups in the private sector for power generation. It is
into generation, transmission, distribution and trading of power. It
distributes over 5000 MW of power the largest in the country.
Essar power ltd
installed India's first new generation state of the art power project at Hazira
in 1990's .The 515 MW natural gas fired combined cycle has regularly set
new standards of excellence in the power sector and confirms to the
highest operating benchmark. It has the unique feature of being able to
operate on both naphtha and gas simultaneously.
GMR power corporation pvt ltd
commissioned a 200 MW power plant in Chennai in 1998.The power
generated is supplied to the TamilNadu Electricity Board. The unique
feature of the plant being the sophisticated sewage treatment unit, which
treats sewerage water to convert it to clean water for its own use.

Tata Power Ltd

it is India's largest private sector power utility, serving the nation over nine
decades. It has generation capacity in Mumbai, Delhi, Jojobera, Jharkhand
and Karnataka. It has made its presence felt in all aspects of power
whether it is thermal, hydro, solar, wind and transmission and distribution
Political and social effects

Wallonia became the country of the general strike. A

general strike is the "cessation of work by a majority of
the workers in all industries of a locality or nation. Such
a stoppage is economic if it is for the purpose of
redressing some grievance or pressing upon the
employer a series of economic demands. It is political if
called for the purpose of wresting some concession
from the government or if the goal is the overthrow of
the existing government.

The power industry is among the most influential lobbies in the United States.
While it may not have the muscle of the defense industry or the depth of agency-
penetration of the farm lobby, the power lobby can exercise its will on Capitol
Hill. The Waxman-Markey solution for distributing carbon allowances is a case in

Reducing Regulation
As with other regulated industries, such as transportation, telecommunications,
natural gas, and banking, federal policy toward the electric utility industry has
been to reduce regulatory oversight through partial (though substantive)
deregulation.(2) The Federal Energy Regulatory Commission (FERC) has played a
major role in the movement toward regulation by market forces. FERC's open
market vision for the electric industry is that greater reliance on market forces
achieved through increasing levels of deregulation will stimulate the development
of a workably competitive industry.
Social Goals and Industry Characteristics
There are a variety of social goals that are important for the ordering and operation
of the electric power industry. Social objectives include efficient supply and
utilization of electricity, consumer protection, equitable responsibility for
maintaining the electric power infrastructure, reduction of adverse environmental
and social externalities, community cohesion, and promotion of socially beneficial
technological progress and pathways.
Electric Utilities and Competition
Competition can be an effective control mechanism for achieving various social
goals. Increased competition can foster greater efficiency in the construction and
operation of generating facilities and reduce outage costs by providing greater
supply diversity and flexibility in meeting customer needs.

 ECONOMICS ANALYSIS ON POWER INDUSTRY

 Energy demand in Asia is expected to grow significantly
on the back of substantial economic growth. Asia has
been emphasizing on energy independence by
developing economically viable alternate fuels such as
renewable energy, hydroelectricity, and befouls. The
recent spectacular growth of the Indian economy was
based on sound economic fundamentals and this trend
is likely to continue. The country’s gross domestic
product (GDP) is expected to grow by 7.4 percent
duri2006-2007. Strategic sectors including aviation,
telecommunications, banking and financial services,
construction, and services sectors such as healthcare
have been showing tremendous growth potential since
2003. Once these prospects are tapped, the economy
is likely to accelerate between 2007 and 2010.

 The reform process, which has deregulated the Indian

economy and has given a boost to domestic and
foreign investments, is expected to continue at the
same pace. This trend, supported by flexible tax
structures, will make India one of the prime global
destinations for business. Since the 1990s, the
Government has made considerable progress in
nurturing the economy by encouraging private sector
activity. The infrastructure related to the marketing of
petroleum products has been allotted FDI of up to 74.0
percent. Huge opportunities exist in the private sector,
particularly for foreign companies setting up their own
projects or joint ventures with public sector companies.

Benefits of this Service

Identify New Market Opportunities

The future trends of the economic environment of India

have been analyzed along with their impact on energy
industry. This analysis will provide valuable information
to industry participants on opportunities in specific
segments of the industry.

Understand Future Industry Trends

The research gives an insight into the energy industry,

discusses its dependence on the prevailing economic
scenario, and forecasts its future. This will help
industry participants to gauge the future direction of
the industry, enabling them to devise appropriate
strategies to improve market share.

Comprehend Policy and Regulatory Environment

A detailed analysis of the economic framework of the

Indian energy industry offers insights into the
economic parameters as they exist and the future
direction of the same. This is particularly beneficial in
the case of the energy industry, as these economic
indicators form an important criterion for industry
performance.
 Devise Country Entry Strategies

The research provides valuable information and

analysis of the strengths and weaknesses of the
economy of India, which are relevant for the energy
industry. This is particularly useful in devising country-
specific strategies for industry participants.

Evaluate Industry Segment Potential

This study offers detailed coverage of economic issues

affecting the industry and their future direction. It
provides both country and industry trends and
forecasts for major variables and is an excellent tool
for companies that plan to enter new geographic
markets. This will help corporate planners in
developing accurate business plans and enhance
credibility to planning company resources

 SOCIAL EFFECTS
In terms of social structure, the Industrial Revolution witnessed the triumph of a
middle class of industrialists and businessmen over a landed class of nobility and
gentry.

Ordinary working people found increased opportunities for employment in the new
mills and factories, but these were often under strict working conditions with long
hours of labor dominated by a pace set by machines. However, harsh working
conditions were prevalent long before the Industrial Revolution took place. Pre-
industrial society was very static and often cruel—child labor, dirty living
conditions, and long working hours were just as prevalent before the Industrial
Revolution.
Factories and urbanization

Manchester, England ("Cotton polis"), pictured in 1840, showing the mass of

factory chimneys

Industrialization led to the creation of the factory. Arguably the first was John
Lobe’s water-powered silk mill at Derby, operational by 1721. However, the rise
of the factory came somewhat later when cotton spinning was mechanized.

By 1746, an integrated brass mill was working at Warmley near Bristol. Raw
material went in at one end, was smelted into brass and was turned into pans, pins,
wire, and other goods. Housing was provided for workers on site. Josiah
Wedgwood and Matthew Bolton were other prominent early industrialists, who
employed the factory system.

Child labor
A young "drawer" pulling a coal tub along a mine gallery

Child labor had existed before the Industrial Revolution, but with the increase in
population and education it became more visible. Many children were forced to
work in relatively bad conditions for much lower pay than their elders.

Housing

Over London by Rail Gustavo Dore c. 1870. Shows the densely populated and
polluted environments created in the new industrial cities

Poor people lived in very small houses in cramped streets. These homes would
share toilet facilities, have open sewers and would be at risk of damp. Disease was
spread through a contaminated water supply. Accidents in factories with child and
female workers were regular. Dickens' novels illustrate this; even some
government officials were horrified by what they sawStrikes and riots by workers
were also relatively common.

Organisation of labour
Working people also formed friendly societies and co-operative societies as mutual
support groups against times of economic hardship. Enlightened industrialists, such
as Robert Owen also supported these organisations to improve the conditions of
the working class.

Electric Utilities and Competition

Competition can be an effective control mechanism for achieving various social
goals. Increased competition can foster greater efficiency in the construction and
operation of generating facilities and reduce outage costs by providing greater
supply diversity and flexibility in meeting customer needs.
The existence of comprehensive regulation and monopoly service areas has not
been inconsistent with competition. Electric utilities compete with each other in
the sale of wholesale and retail power. Competition at wholesale involves sales
from one electric utility company to another and depends on the access to
transmission services. Competition in the sale of retail power occurs for customers
along the boundaries of utility service areas, customers who have multiple location
options (industrial customers), customers
 TECHNOLOGICAL EFFECT
Description

The harnessing of solar energy is not new in fact, development of solar

energy dates back more than 100 years, to the middle of the industrial
revolution. Solar energy is pollution-free, an important benefit when the
cost of removing pollutants from the environment is considered. For
example, a typical SWH system will, over its lifetime, displace 10.5
tons of CO2 if replacing a natural gas system, or 71.5 tons if replacing
an electric system.

The solar thermal industry is capable of becoming a dynamic,

innovative annual business within 20 years, unlocking a new global era
of economic, technological and environmental progress. The benefits of
solar power are compelling: environmental protection, economic
growth, job creation, diversity of fuel supply and rapid deployment, as
well as the global potential for technology transfer and innovation. The
underlying advantage of solar energy is that the fuel is free, abundant
and inexhaustible. The total amount of energy irradiated from the sun to
the earth’s surface is enough to provide for annual global energy
consumption 10,000 times over.

Solar thermal power uses direct sunlight, so it must be sited in regions

with high direct solar radiation. Among the most promising areas of the
world are the South-Western United States, Central and South America,
North and Southern Africa, the Mediterranean countries of Europe, the
Middle East, Iran, and the desert plains of India, Pakistan, the former
Soviet Union, China and Australia.
A major benefit of solar thermal power is that it has little adverse
environmental impact, with none of the polluting emissions or safety
Effects of Energy Use
Increased dependence on coal and oil and inadequate use of renewable resources
have resulted to the following adverse effects:
 Increased imports of coal and oil impose a high financial burden and
expose India to oil supply shocks originating from external factors.
 India has become the sixth largest greenhouse gas emitter in the word,
the second fastest growing one next to China.
 Urban pollution from combustion of fossil fuels
 Indoor air pollution resulting from unprocessed biomass use, which has
adverse health effects.

Developments in the Field

As result of legal and policy initiatives of India in the renewable energy sector, the
nation has the most developed and diversified renewable energy market in the
region. The annual turnover of the renewable energy industry in India is
approximately USD500 million, with a total renewable energy investment of around
USD 1 billion. Current installed capacity is just a fraction of the estimated total
economic potential of 100,000 MW.
 The table below summarizes India’s installed Unit Cumulative
renewable energy capacity, up to September 30, Achievement
2006: Renewable Energy Source
Wind Power MW 6,070
Small hydro (up to 25 MW) MW 1,850
Biomass power MW 542
Biomass gasifiers MW 76
Solar PV MW 3
Waste-to-energy MW 35
In addition, several measures have been taken to upgrade automobile technology,
improve fuel quality, enhance pollution under control checking systems, and expand
urban public transport systems. The gross emission standards for vehicles have been
made progressively more stringent and a roadmap has been developed to improve
fuel quality.
Some state governments are promoting bio-diesel production,
including setting up state bio-diesel boards and implementing buy-
back schemes with farmers. Private players have already come
into the plantation phase of the bio-diesel production chain in
some states. In Gujarat, private companies are already producing
quality bio-diesel that meets the American Society for Testing and
Materials (ASTM) 16750 standard.
  LEGAL EFFECT ON POWER INDUSTRY
As part of its efforts to address high energy demand and
consequent shortages, as well as the adverse environmental
effects of intense energy use, India has enacted legislation and
pursued policies to improve its alternative energy availability in
the electricity and transport sectors

Global history of the use of nuclear power. The Three Mile Island accident is one of
the factors cited for the decline of new reactor construction.

According to the IAEA, the Three Mile Island accident was a significant turning
point in the global development of nuclear power . From 1963 to 1979, the number
of reactors under construction globally increased every year except 1971 and 1978.
However, following the event, the number of reactors under construction declined
every year from 1980 to 1998. Many similar Babcock and Wilcox reactors on order
were canceled — in total, 51 American nuclear reactors were canceled from 1980 to
1984.

Cleanup

Three Mile Island Unit 2 was too badly damaged and contaminated to resume
operations; the reactor was gradually deactivated and mothballed. TMI-2 had been
online only three months but now had a ruined reactor vessel and a containment
building that was unsafe to walk in — it has since been permanently closed.
Cleanup started in August 1979 and officially ended in December 1993, having cost
around US$975 million. Initially, efforts focused on the cleanup and
decontamination of the site, especially the defueling of the damaged reactor.
Starting in 1985 almost 100 tons of radioactive fuel were removed from the site, the
defueling process was completed in 1990, and the damaged fuel was removed and
disposed of in 1993 However the contaminated cooling water that leaked into the
containment building had seeped into the building's concrete, leaving the
radioactive residue impossible to remove.

Health effects and epidemiology

Main article: Three Mile Island accident health effects

In the aftermath of the accident, investigations focused on the amount of radiation

released by the accident. According to the American Nuclear Society, using the
official radiation emission figures, "The average radiation dose to people living
within ten miles of the plant was eight millirem, and no more than 100 millirem to
any single individual. Eight millirem is about equal to a chest X-ray, and 100
millirem is about a third of the average background level of radiation received by
US residents in a year."

Based on these low emission figures, early scientific publications on the health
effects of the fallout estimated one or two additional cancer deaths in the 10-mile
area around TMI. Disease rates in areas further than 10 miles from the plant were
never examined. Local activism in the 1980s, based on anecdotal reports of
negative health effects, led to scientific studies being commissioned. A variety of
studies have been unable to conclude that the accident had substantial health effects.

Activism and legal action

See also: List of anti-nuclear groups in the United States#Three Mile Island Alert
Anti-nuclear protest at Harrisburg in 1979, following the Three Mile Island
Accident. In 1981 citizens' groups succeeded in a class action suit
against TMI, winning $25m in an out-of-court settlement. Part of
this money was used to found the TMI Public Health Fund.[

According to Eric Epstein, chair of Three Mile Island Alert, the TMI plant operator
and its insurers paid at least $82 million in publicly documented compensation to
residents for "loss of business revenue, evacuation expenses and health claims"..

Lessons learned

In addition to the improved operating training, improvements in quality assurance,

engineering, operational surveillance and emergency planning have been instituted.
Improvements in control room habitability, "sight lines" to instruments, ambiguous

In 1979, as Pennsylvania state secretary of health in the Thornburg administration,

Gordon K MacLeod, MD, managed the health effects of the Three Mile Island
nuclear accident. He criticized Pennsylvania's preparedness, in the event of a
nuclear accident, at the time for not having potassium iodide in stock, which
protects the thyroid gland in the event of exposure to radioactive iodine, as well as
for not having any physicians on Pennsylvania's equivalent to the Nuclear
Regulatory Commission.
Viewed from the west, Three Mile Island currently uses only one nuclear generating
station, TMI-1, which is on the left. TMI-2, to the right, has not been used since the
accident. Note that this is a pre-accident photo taken when TMI-2 was in operation.

 WIND POWER

Wind power is the conversion of wind energy into a useful form of energy, such
as using wind turbines and tethered wind energy systemsto produce electricity and
traction.

At the end of 2008, worldwide nameplate capacity of wind-powered generators

was 121.2 gigawatts (GW). In 2008, wind power produced about 1.5% of
worldwide electricity usage; and is growing rapidly, having doubled in the three
years between 2005 and 2008. Several countries have achieved relatively high
levels of wind power penetration, such as 19% of stationary electricity production
in Denmark, 11% in Spain and Portugal, and 7% in Germany and the Republic of
Ireland in 2008. As of May 2009, eighty countries around the world are using wind
power on a commercial basis.

Large-scale wind farms are connected to the electric power transmission

network; smaller facilities are used to provide electricity to isolated locations.
Utility companies increasingly buy back surplus electricity produced by small
domestic turbines. Wind energy as a power source is attractive as an alternative to
fossil fuels, because it is plentiful, renewable, widely distributed, clean, and
produces no greenhouse gas emissions. However, the construction of wind farms is
not universally welcomed because of their visual impact and other effects on the
environment.

Wind power is non-dispatchable, meaning that for economic

operation, all of the available output must be taken when it is
available. Other resources, such as hydropower, and standard
load management techniques must be used to match supply with
demand. The intermittency of wind seldom creates problems
when using wind power to supply a low proportion of total
demand

Annual Wind Power Generation (TWh) and total electricity

consumption(TWh) for 10 largest countries

2005 2006 2007 2008

R
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Total Total Total Total
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Consu Consu Consu Consu
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 h)

 ENVIRONMENTAL ANALYSIS
Environmental Effects of SF6 Gas, and its use in Electric
Power Industry
Because of excellent insulation and are quenching properties, Sulphur
hexafluoride (SF6) was considered as the most suitable gas for use in electric
industry. A tremendous growth of SF6 based Circuit Breakers and Substations
continued from late seventies up to 1993, when it was suddenly declared as
25,000 time more potent as compared to CO2, which is a major contributor to
Green House Effect causing global warming. This effect and the high cost of
SF6 prompted researchers to investigate about its behaviour in a mixture with
other insulating gases such as Air, N2 etc so that a low cost, environment
friendly insulation system be made feasible. Keeping in view the rising trend in
the use of SF6 (which will be released in atmosphere sooner or later) and its
potentiality of influencing the environment, an effort has been made in the
present work to analyse various mixtures of SF6 with different environment
friendly insulating gases. This work is a step in the direction of meeting the
emission norms suggested by the United Nations

Economic Effects of a Complex Agreement Depend on

Many Assumptions
The Kyoto Protocol, negotiated by more than 160 nations in December 1997, aims
to reduce net emissions of certain greenhouse gases (primarily carbon dioxide
(CO2)). Each of the participating developed countries must decide how to meet its
respective reduction goal during a five-year period (2008-2012); but specific
ground rules remain to be worked out at future negotiating sessions. The next
meeting is in Buenos Aires (November 1998).

In a study entitled Impacts of the Kyoto Protocol on U.S. Energy Markets and
Economic Activity, the Energy Information Administration (EIA), an independent
statistical and analytical agency in the U.S. Department of Energy, has projected
that meeting the U.S. targets under the Protocol will call for significant market
adjustments:

 Reductions in CO2 emissions will result in between 18 and 77 percent less

coal use than projected in the EIA Reference Case in 2010, particularly
affecting electricity generation, and between 2 and 13 percent less petroleum
use, mainly affecting transportation.
 Energy consumers will need to use between 2 and 12 percent more natural
gas in 2010 and between 2 and 16 percent more renewable energy, and
extend the operating life of existing nuclear units.
 To achieve these ends via market-based means, average delivered energy
costs (in inflation-adjusted 1996 dollars) must be between 17 and 83 percent
higher than projected in 2010.
 The amount prices must rise is uncertain. Accounting procedures and
international trading rules for greenhouse gases are not finalized.
Forecasting technological change and public response to it under various
pricing scenarios is an inexact science. The more stringent the need for
domestic emission reductions, however, the more costly the adjustment
process will be.

EIA undertook this study in response to a request by the Chairman and Ranking
Minority Member of the House Committee on Science that it analyze impacts of
the Protocol (which the President has not yet submitted to the U.S. Senate for
ratification) on U.S. energy use, prices, and the general economy in the 2008-2012
time frame. That is when this country is supposed to reach an average level of net
greenhouse gas emissions 7 percent lower than they were in 1990--having shown
demonstrable progress toward that goal by 2005. At the Committee's request, EIA
assumed that actions begin in 2005.

EIA was asked to do the study for several reasons. More than 80 percent of the
human-originated greenhouse gas emissions are energy-related. EIA's National
Energy Modeling System (NEMS) is perhaps the most complete, integrated,
regional computer model available to simulate all elements of U.S. energy supply
and demand in the context of the full U.S. macroeconomy. NEMS presents year-
by-year projections over a 20-year horizon, accounting for capital stock turnover
and the availability and penetration of specific energy-consuming technologies. Its
annual "Reference Case" assumes no change from existing laws and regulations,
and so it provides a base from which to evaluate policy options or alternative
assumptions.
 EIA Analyzed 6 Cases for Reducing Energy's
Carbon Emissions To Comply with the Kyoto Protocol
Reference--A reference case (based on Annual Energy Outlook 1998) with no new
actions to reduce carbon emissions. 1990+24%--Substantial international
activities, including trading of "carbon emission permits", but with some new
domestic actions to reduce carbon. 1990+14%--Stabilization at roughly 1998
levels. 1990+9%--Moderate level of international activities as well as offsets from
other gases and carbon sinks. 1990--Equivalent to 1990 emissions. 1990-3%--
Substantial domestic actions, plus offsets and sinks. 1990-7%--Kyoto Protocol
target for U.S. lowers 1990 emissions by 7%, with none of the offsets, sinks,
trading in the previous cases. (All carbon reduction cases represent average
emissions for 2008-2012.) Percentages shown represent deviation from the 1990
level.

EIA's six cases cover a range of reductions in energy-linked carbon emissions from
an annual average of 122 million metric tons below the expected baseline
emissions (1990+24% Case) to 542 million metric tons (1990-7% Case) in 2008-
2012. In the 1990+24% Case, domestic actions may furnish about one-fifth of all
reductions, with the rest coming from international activities (including trading),
offsets of other gases, and carbon sinks in the U.S., while the 1990+9% Case
assumes that nearly 60 percent of the reductions result from such domestic
initiatives as fuel-switching, improved technology, and cutbacks in energy use.
EIA did not separately calculate the contributions of international activities, offsets
or sinks for any case. The 1990-3% Case assumes all reductions are from domestic
actions, with a 4 percentage point contribution from sinks and offsets from other
gases. In the 1990-7% case, all reductions must come from domestic energy-
related reductions.

The Kyoto Protocol does not specify targets for greenhouse gases after the period
2008-2012. At the Committee's request, EIA held the target for energy-related
carbon emissions in the commitment period constant to 2020, the end of the
forecast horizon. Targets following the 2008-2012 periods will be a topic at future
negotiating sessions.

"Carbon Price" For a Range of Deviations from 1990

Carbon Emission Levels
To reduce carbon emissions, EIA assumes that a "carbon price" is added to the
price of delivered energy fuels based on their carbon content. For example, coal
prices rise more than petroleum and natural gas prices; and the cost of generating
electricity from non-carbon-emitting nuclear and renewable fuels is not increased
due to the carbon price. Although electricity does not have the carbon price
directly added to it, its price is increased due to the higher cost of fossil fuels used
for generation.

The price increases encourage a reduction in the use of energy services (heating,
lighting, and travel, for example), the adoption of more energy-efficient
equipment, and a shift to less carbon-intensive fuels. The carbon price reflects the
amount fossil fuel prices in the U.S., adjusted for the carbon content of the fuel,
must rise to achieve the removal of the last ton of carbon emissions that meets the
carbon reduction target in each case.

"Carbon Price" Rises with Higher Emissions Reductions,

2008-2012
In most of the cases, the carbon price peaks early in the 2008-2012 period,
reaching between $67 and $348 per metric ton in 2010, and then declines as energy
markets adjust and more efficient, new technologies become available and
gradually penetrate the market. In the least stringent reduction cases, the increase is
more gradual throughout the period because less severe reductions need to be
made. Looking at average carbon prices over the commitment period 2008 to 2012
shows how the cost of compliance increases with increasingly stringent targets.

Differences in the cost of energy will affect the outlook for U.S. jobs, consumer
prices, investment, technical change, and economic growth. Whenever use of a
factor of production such as energy is restricted, economic performance falls for
some period of time, the price of energy and other goods and services rises, and
consumption and employment decline. Hence the various cases affect the national
economy to varying degrees.

Electricity and Coal Industries Face Major Adjustments

W ell over one-third of all primary energy consumed by the United States today
goes into producing and delivering electricity. At the point of use, electricity can
be highly efficient; and there are certain end uses where fuel substitution is not
feasible. More than one-half of all U.S. electricity generated in 1997 was produced
from coal--a fuel that emits more carbon dioxide during combustion than any other
fossil fuel. Thus, electricity production and consumption is likely to be a major
focus in meeting Kyoto targets, accounting for between two-thirds and three-
fourths of the domestic carbon reductions in 2010 in the various cases examined.
Historically, this industry has responded when relative fuel prices have changed.

Cost of Fuels Used to Generate Electricity in the 1990 +9%

Case
Because coal is the most carbon-intensive of the fossil fuels, delivered prices for
coal are affected by carbon prices more than other fuel prices. They are between
153 and 800 percent higher in 2010. The various cases studied for show prices for
electricity between 20 and 86 percent higher in all end-use sectors, reflecting both
the increased fuel costs and the incremental capital investments for non-coal
generating capacity--either by traditional utilities or by non-utility generators in an
increasingly restructured industry. The price rise for electricity is moderated
somewhat by the fact that fuel is only part of the cost of generating electricity and
that the cost of generation from renewables and nuclear power are unaffected by
carbon prices. Neither of these fuels, however, can replace significant amounts of
coal in the 2008-2012 timeframe. By 2020, non-hydro renewables (chiefly wind
turbines, biomass in advanced technological applications, and to a lesser extent,
geothermal facilities) penetrate the market in a significant way--providing as much
as one-fifth of generation at the highest carbon prices. While hydroelectric dams
have accounted for four-fifths of the renewable energy used for U.S. electricity
production to date, the expansion of hydroelectric capacity is capital-intensive and
is likely to meet with environmental objections; thus little additional hydroelectric
capacity is expected. The bulk of the substitution for coal generation would be
natural gas, because of its lower carbon content and the high efficiency of gas-fired
combined cycle plants.

Average Price of Electricity to End-Users

Furthermore, demand for industrial steam coal and metallurgical coal is also
reduced because of a shift to natural gas in industrial boilers and a reduction in
industrial output.

Electricity Generation by Fuel (Reference)

Because domestic coal consumption is between 18 and 77 percent lower in 2010 in

the carbon reduction cases, there would be ripple effects on the industry. For
example, even though total coal production drops, the average price per ton for
coal at the minemouth in 2010 is between 3 and 28 percent higher than the
Reference Case price. This is because a larger share of production would come
from higher-cost Eastern coal mines, which tend to serve the remaining markets.
Carbon prices raise the cost of rail transportation (involved now in delivering two-
thirds of all coal) and make Western coal less competitive. The production of
Western coal is discouraged further by the reduced size of the market and the
reduced profitability of investing in new coal mines (which have been mostly in
the West).

Electricity Generation by Fuel (1990+24% Case)

For the past two decades or so, the number of coal miners in this country has been
declining by nearly 6 percent per year, primarily as a result of improved labor
productivity (especially in large Western surface mines). Without taking the Kyoto
Protocol in consideration, the Reference Case already projects a further
employment drop of more than 15 percent--leaving only about 69,000 U.S. coal
miners by 2010. In the carbon reduction cases, between 10,000 and 43,000 more
jobs could be lost. Some of these job losses could be offset by growth in
employment in the natural gas and renewable industries.

Electricity Generation by Fuel (1990+9% Case)

While no new nuclear power plants are considered in these cases, extending the
licenses of existing plants is projected to become more economical with higher
carbon prices. In more stringent carbon reduction cases, most existing nuclear
plants are operated through 2020, in contrast to the Reference Case outlook that
projected about half of the nuclear plants would be retired by that time.
Electricity Generation by Fuel (1990-7% Case)
Although reduced demand for electricity and improved efficiency in its generation
can contribute to reducing carbon emissions from electricity generation, fuel-
switching accounts for most of the reductions. In the short run, power suppliers
would increase their use of less carbon-intensive plants, including steam plants that
use oil and gas to heat their boilers. Much more efficient and cost-effective
combined-cycle systems increase their share as new capacity is added.

 REFERENCE & BIBLIOGRAPHY

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3) http://www.petroleum.nic.in/
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6) WWW.AIEO .ORG
Vienna International Centre, PO Box 100, 1400
Vienna, Austria
Telephone (+431) 2600-0; Facsimilie (+431)
2600-7; E-mail:

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