There is a broad agreement in the scientific community that the earth's climate is changing and that the primary cause over the past few decades is an increasing concentration of greenhouse gases (GHGs) in the atmosphere. Most climate scientists have concluded that human activities—e.g., fossil fuel combustion, land clearing, and industrial and agricultural operations—have played a central role in climate change, particularly in recent decades. A variety of efforts that seek to address climate change are currently underway or being developed on the international, national, and sub-national level (e.g., individual state actions or regional partnerships). These efforts cover a wide spectrum, from research initiatives to GHG emission reduction regimes. If Congress establishes a federal program to manage or reduce GHG emissions, the emission requirements would likely impact different states differently. However, predicting the different impacts of policies is a complicated task, because multiple factors play a role. Such factors include alternative design elements of a GHG emissions reduction program, the availability and relative cost of mitigation options, and the regulated entities' abilities to pass compliance costs on to consumers. Underlying climate change policy discussions are GHG emissions and the factors that determine their levels and growth. One of the primary factors is GHG emissions intensity. In this report, GHG emissions intensity is a measure of GHG emissions from state sources divided by the state's overall economic output, or gross state product. Because carbon dioxide (CO 2 ) is the primary GHG in the vast majority of states, the report focuses on CO 2 emissions intensity and its determining factors. These factors vary significantly across state lines. An analysis of these factors and how they compare among the states may contribute to a more informed debate regarding potential policy approaches. Three broad factors influence GHG emission levels in a nation or state: population, per capita income, and GHG emissions intensity of the economy. A state's GHG emission levels can be approximated by multiplying together these three variables. Equation 1 expresses this relationship: The equation indicates that each of the variables can play a significant role in shaping a state's GHG emissions. For instance, if one of these variables increases, while the other two remain constant, GHG emissions will increase. The three emissions drivers do not operate independently of one another: a change in one variable may influence another variable. The three variables—population, per capita income, and GHG emissions intensity—differ substantially among the states and play varying roles when determining a state's GHG emissions. Table 1 shows this relationship for the 10 U.S. states with the highest GHG emission levels in 2003. These 10 states accounted for almost 50% of total U.S. GHG emissions in 2003. A similar table for all 50 states is included in the Appendix to this report. Table 1 provides a snapshot of information. Annual changes (or growth rates, which can be either positive or negative) in the GHG emission drivers will influence whether GHG emissions rise or fall. In order to reduce emissions, the sum of the three variable rates—population, income, and intensity—must be negative. To put this goal in perspective, consider the annual average rates of change for the United States between 1990 and 2000 ( Table 2 ): Table 2 reveals that the growth rates were positive for both U.S. population and per capita income during the 1990s. Although GHG intensity decreased during that time period, the decline was not enough to offset the increases from the other two variables, and GHG emission levels increased by 1.4% annually. Annual growth rates for GHG emissions and the emission drivers vary significantly among the U.S. states. The Appendix contains a table listing the growth rates for all 50 states. In some states, GHG intensity declines were well above average declines, but these annual reductions were offset by increases in population, per capita income, or a combination of the two. Of the three GHG emission drivers—population, per capita income, and GHG emissions intensity—the most relevant in terms of climate change policy is GHG intensity. Decreases in population and/or per capita income would contribute to lowering a state's GHG emissions. However, growth in population and personal income is generally considered a positive social outcome, and policies that would seek to directly limit these emissions drivers are essentially outside the bounds of public policy. GHG intensity is a simple measure of GHG emissions per unit of output. Although most GHG reduction regimes address actual emissions, the national target in the United States—as announced by the Bush Administration—aims to reduce the GHG emissions intensity of the national economy. In 2002, the Bush Administration set a voluntary target of reducing the ratio of U.S. GHG emissions to the U.S. Gross Domestic Product (GDP) by 18% by 2012. According to the Administration, meeting this target would reduce intensity beyond that of intensity reductions expected under a business-as-usual scenario. Based on data available in 2002, GHG emissions intensity was projected to decline by 14% under a business-as-usual scenario. Critics of the Administration's intensity target have pointed out that (1) the intensity target is more precisely quantified at 17.5%; and (2) more recent data indicate that the U.S. intensity declined by 16.2% between 1990 and 2002. Thus, some observers have described the effect of the intensity target as "negligible." Intensity targets are sometimes viewed with skepticism, because the intensity target proponents may imprecisely describe (or overstate) how reductions in emissions intensity would affect actual emission levels. For example, the Administration has stated that meeting the U.S. emissions intensity target would lead to GHG emission reductions. Arguably, such a description can be misleading, because the reductions would occur within the context of increasing U.S. emissions. In other words, U.S. emissions would continue to increase, but if the intensity target is met, the emissions increase would be less than business-as-usual. Moreover, there is some uncertainty as to whether the "reductions" will be achieved at all. The Administration's projected reductions are based on GDP forecasts. If the GDP increases at higher than projected rates, absolute emissions can increase beyond business-as-usual scenario, while still meeting the intensity target. Although some have questioned the environmental efficacy of intensity targets (i.e., their ability to lower GHGs), the effectiveness of an emissions target depends primarily on its stringency, not whether it applies to emissions intensity or absolute emissions. Meeting an aggressive intensity target can result in actual emission reductions, if the intensity decrease outpaces the combined increases in population and per capita income. In fact, if the United States is to reduce its emissions, while maintaining population and per capita income growth rates, a stringent reduction in GHG emissions intensity would be required. The GHG intensity levels display a considerable range among the 50 states. Table 3 lists the states with the five highest and five lowest GHG intensity values (based on 2003 data). The table shows that the ends of the spectrum differ by more than an order of magnitude. What factors determine a state's intensity and lead to the wide variances among the states? In the United States, carbon dioxide (CO 2 ) emissions have historically accounted for 85% of the nation's GHG emissions, excluding land use changes and forestry. In all but four states, CO 2 emissions accounted for at least 80% of the state's GHG emissions in 2003. As the dominant GHG, the intensity of CO 2 emissions significantly impacts the overall GHG intensity. If Table 3 were to rank states based on CO 2 emissions intensity, the results would be nearly identical. Due to the dominance of CO 2 emissions in the vast majority of states, this report focuses on its role in driving overall GHG emissions intensity, and thus GHG emissions. (Note that the Appendix contains a table listing CO 2 emissions intensity and its drivers for all 50 states). Approximately 98% of the U.S. CO 2 emissions in 2003 were from energy use. The primary factors that determine CO 2 emissions intensity in a state are its energy intensity and the carbon content of its energy use (or fuel mix). The relationship between CO 2 emissions intensity, energy intensity and carbon content of energy use is shown in Equation 2 . Energy intensity is the amount of energy a state consumes—typically measured in tons of oil equivalent (toe)—per its level of economic output (gross state product). Table 4 shows the states with highest and lowest energy intensity levels in 2003. A comparatively high energy intensity figure indicates a states uses more energy (toe) per economic output (GSP) than other states. There is wide gulf (a factor of five) between states at either end of the spectrum. Multiple factors influence a state's energy intensity. This section of the report compares energy intensity levels with five potential drivers: economic structure, transportation use, public policy, state climate, and gross state product. An overall assessment of the factors and their interactions with energy intensity is provided at the end of this section. A state's economic structure likely plays an important role. For instance, a primary economic factor is whether the state's economy is based more on high-energy industries or low-energy industries. A state with a GSP based on a high ratio of high-energy industries is likely to have a higher overall energy intensity than a state with proportionately more low-energy sectors (e.g., finance, professional services). Table 5 lists (1) the five states with the highest percentages of their GSP resulting from high-energy intensive industries; and (2) the five states with the highest percentages of their GSP based on low-energy intensive industries. A comparison of Table 4 and Table 5 indicates a correspondence between energy intensity and a state's economic structure.