[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]
CREDIT FOR EARLY ACTION: WIN-WIN OR KYOTO THROUGH THE FRONT DOOR
SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES, AND REGULATORY AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
JULY 15, 1999
Serial No. 106-37
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
60-254 CC WASHINGTON : 2000
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
David A. Kass, Deputy Counsel and Parliamentarian
Carla J. Martin, Chief Clerk
Phil Schiliro, Minority Staff Director
Subcommittee on National Economic Growth, Natural Resources, and
DAVID M. McINTOSH, Indiana, Chairman
PAUL RYAN, Wisconsin DENNIS J. KUCINICH, Ohio
BOB BARR, Georgia TOM LANTOS, California
LEE TERRY, Nebraska PAUL E. KANJORSKI, Pennsylvania
GREG WALDEN, Oregon BERNARD SANDERS, Vermont
HELEN CHENOWETH, Idaho HAROLD E. FORD, Jr., Tennessee
DAVID VITTER, Louisiana
DAN BURTON, Indiana HENRY A. WAXMAN, California
Marlo Lewis, Jr., Staff Director
Barbara Kahlow, Professional Staff Member
Joel Bucher, Professional Staff Member
Gabriel Neil Rubin, Clerk
David Sadkin, Minority Counsel
C O N T E N T S
Hearing held on July 15, 1999.................................... 1
Hakes, Jay, administrator, Energy Information Administration. 39
Kemp, Jack, distinguished fellow, the Competitive Enterprise
Ridenour, David, vice president, National Center for Public
Policy Research; Fred Krupp, executive director,
Environmental Defense Fund; Fredrick Palmer, general
manager and chief executive officer, Western Fuels
Association; and Kevin Fay, executive director,
International Climate Change Partnership................... 58
Letters, statements, etc., submitted for the record by:
Fay, Kevin, executive director, International Climate Change
Letter dated August 16, 1999............................. 99
Prepared statement of.................................... 89
Hakes, Jay, administrator, Energy Information Administration:
Information concerning methane........................... 58
Prepared statement of.................................... 42
Kemp, Jack, distinguished fellow, the Competitive Enterprise
Institute, prepared statement of........................... 16
Krupp, Fred, executive director, Environmental Defense Fund,
prepared statement of...................................... 71
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio:
Article dated December 23, 1997.......................... 38
Prepared statement of.................................... 4
McIntosh, Hon. David M., a Representative in Congress from
the State of Indiana, prepared statement of................ 8
Palmer, Fredrick, general manager and chief executive
officer, Western Fuels Association, prepared statement of.. 82
Ridenour, David, vice president, National Center for Public
National Policy Analysis................................. 60
Prepared statement of.................................... 64
CREDIT FOR EARLY ACTION: WIN-WIN OR KYOTO THROUGH THE FRONT DOOR
THURSDAY, JULY 15, 1999
House of Representatives,
Subcommittee on National Economic Growth, Natural
Resources, and Regulatory Affairs,
Committee on Government Reform,
The subcommittee met, pursuant to notice, at 3:15 p.m., in
room 2154, Rayburn House Office Building, Hon. David M.
McIntosh (chairman of the subcommittee) presiding.
Present: Representatives McIntosh, Ryan, Terry and
Staff present: Marlo Lewis, Jr., staff director; Barbara
Kahlow and Joel Bucher, professional staff members; Luke
Messer, counsel; Gabriel Neil Rubin, clerk; David Sadkin,
minority counsel; and Earley Green, minority staff assistant.
Mr. Ryan [presiding]. The hearing will come to order. David
McIntosh, the chairman of the hearing, is running late. We are
going to try and buy some time and wait for him, but we had
some votes a few minutes ago that had thrown everybody's
schedules off, so I apologize, Mr. Kemp.
I am Paul Ryan, the vice chairman of the subcommittee. I
have got to tell you this is a distinct honor to be sitting
here in front of my former employer talking about this.
Mr. Kemp. It's my honor.
Mr. Ryan. No, it's really mine, Jack.
First we will go to the ranking member, Mr. Kucinich, for
an opening statement.
Mr. Kucinich. Thank you, Mr. Ryan. I want to thank Mr.
McIntosh publicly. I will thank him again when he comes for
holding this hearing today.
I support the concept of early action credits. In theory,
this type of proposal would encourage businesses to reduce
greenhouse gas emissions by rewarding them with credits that
can be used to make future required reductions or sold on the
market to another business that is not able to make reductions
as cost-effectively or efficiently. Early action would
encourage industry to reduce emissions of greenhouse gases now
as opposed to 10 or 15 years from now when the effects become
What makes an early action credit even more attractive is
that some of the largest companies in the world, those with the
most at stake, are actively engaging in the process. A credit
program protects businesses against the uncertainty of future
emission reduction requirements and gives those businesses
incentives to act in a way that benefits the economy and the
environment. Later today we will hear more about this from
Kevin Fay, the executive director of the International Climate
Change Partnership, which represents some of the largest
manufacturers, refineries and chemical companies in the world.
Today's hearing could not come at a better time. On June
29, the New York Times ran an article with the headline,
``Human Imprint on Climate Change Grows Clearer.'' The
following week, much of the company was in the grips of a
deadly heat wave which took over 70 lives. It was just a few
short years ago that another record heat wave in the Midwest
killed more than 80 people in Chicago alone.
Climate change, however, is not just about heat waves.
Scientists have linked the increase in greenhouse gases to the
increased frequency and intensity of extreme weather patterns
including droughts, floods and hurricanes. Unfortunately, it
seems as though headlines about the damage, destruction, and
human suffering caused by those events are becoming more and
more common. Last summer's drought in Texas and the Southwest
combined with the severe drought 2 years earlier was described
by public officials as ``the costliest and most devastating the
region has seen since the Dust Bowl years.'' Researchers at
Texas A&M determined that the 1998 drought cost the State's
farmers and ranchers $2.4 billion in potential income, while
the farm-dependent businesses suffered an additional loss of $8
billion. In Florida last year, fires and drought caused an
estimated $150 million in damage to agriculture. I am sure you
all know that the list of weather-related damage goes on and
We have before us an opportunity to forge an alliance among
environmentalist and industry groups, Republicans and
Democrats, and others who support using market mechanisms to
reduce greenhouse gas emissions in the most cost-effective and
I support the basis of the Kyoto Protocol. I also believe
that reducing greenhouse gas emission and cleaning the air we
breathe is an important domestic policy in its own right. Over
the past 30 years this Nation has taken great strides toward a
cleaner and healthier environment. We passed the Clean Air Act,
the Clean Water Act, the Safe Drinking Water Act and a number
of other laws because it was good for the American people, not
just because we signed an international treaty. In fact, just
yesterday Senator Jeffords introduced a bipartisan utility
restructuring bill that sets caps on carbon dioxide emissions.
A credit program could be used to encourage early reductions to
meet that bill's goals.
The U.S. economy is in the midst of the longest peacetime
expansion in its history. We have every reason to believe that
we can reduce greenhouse gas emissions and keep the economy
strong. According to a recent study by the American Council for
an Energy-Efficient Economy, the United States was able to
stabilize its energy-related carbon emissions in 1998 while
continuing robust economic growth. I want to restate that.
According to a recent study by the American Council for an
Energy-Efficient Economy, the United States was able to
stabilize its energy-related carbon emissions in 1998 while
continuing robust economic growth. Furthermore, total energy
used was down last year, even though gasoline and fuel prices
were falling for much of the year. In other words, it is
possible to control carbon emissions without harming the
economy or drastically increasing fuel prices.
We have the unique occasion of being able to address this
issue in a proactive manner as opposed to reacting to the
disastrous consequences we may find in the future. Mr.
Chairman, we have a long way to go. There are many different
concerns that need to be addressed before we can enact an early
action program. Our distinguished panelists offer many
different perspectives and will raise a number of concerns. I
am looking forward to hearing from the witnesses this
afternoon. I thank the Chair for the opportunity. I certainly
want to join in welcoming Mr. Kemp, who I have a great
admiration for, for all of his public-spirited works and for
his vision in working with a whole range of issues that affect
this country. So, Mr. Kemp, welcome.
Mr. Kemp. Thank you.
Mr. Ryan. Thank you, Mr. Kucinich.
[The prepared statement of Hon. Dennis J. Kucinich
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Mr. Ryan. Let me open with a brief statement that this is
an issue that goes far beyond environmentalism. This is an
issue that goes far beyond cleaning up our air standards. This
is an issue that goes well into the political-philosophical
makeup of not just this country, but the world. The Kyoto
Protocol is not just an environmental vehicle. This Kyoto
Protocol is becoming a political vehicle, a political power
grab by many under many standards. I am looking very forward to
hearing your testimony, Jack, on this issue.
We are going to hopefully hear from a good host of
witnesses today on early action credits, whether or not the
devil is in the details. Are early action credits truly free
market vehicles toward achieving ends that are scientifically
justifiable or not, or are early action credits vehicles toward
circumventing the U.S. constitutional process of Senate
ratification of treaties, as the Constitution of this land
still requires, the last time I checked? This is something that
is of dire importance and consequence not only to our
institution, our democratic institution, our Constitution, but
also let's look at the scientific--let's look at whether or not
the science jury is in or not. I think we have to take a look
at this issue in a holistic formula as to whether or not sound
science tells us this is a wise course to take, whether or not
this does allow Americans to craft laws for America, whether or
not this is constitutional, and whether or not this violates
At this time I would like to check with Mr. Terry if he
would like to make an opening statement.
Mr. Terry. No. I will yield to the chairman.
Mr. Ryan. I would like to recognize and turn over the gavel
now to the chairman of this subcommittee, Mr. McIntosh.
Mr. McIntosh. Why don't you keep the gavel until we break
for the vote.
Thank you for starting this process, and let me apologize
for being late. Not often do you get a chance to meet with the
chairman of the Ways and Means Committee. He came up to me at
the end of the last vote and said, I want to hear your concerns
about my tax bill. We had a half-hour discussion on the floor,
and I apologize for being late. I think that we will get an
even better tax bill. I am happy about that.
Now, I want to briefly explain the purpose of today's
hearing, which Mr. Ryan has gone into and then I will put my
full statement into the record. This subcommittee has been
looking into the question of what the administration is doing
to advance the Kyoto policy without going to the Senate for
ratification. We had a hearing on May 20th in which we looked
into whether they were follow- ing the Knollenberg language in
last year's appropriations bill. It became very apparent they
are not, and it's not an effective tool in preventing them from
using a back-door implementation strategy.
On May 27th, Senator Don Nickles and I wrote to Carol
Browner essentially asking if EPA was implementing the Kyoto
Protocol under the guise of existing law, how would anybody
outside the Agency know, because their answers are so circular.
I have yet to get a satisfactory answer back to that one. What
we did get was incomplete, essentially saying that they have
committed not to im- plement it. Thus EPA believes that the
language restricting spend- ing in future bills is unnecessary,
and we are supposed to trust their commitments. But in short,
the agencies have not come forward in any meaningful way to
respond to serious questions about whether they are using
regulation as a back-door tool.
Now we see a lot of action on proposing early action
crediting that would reward companies for doing today what they
would later be compelled to do under the Kyoto Protocol. It may
sound attractive at first, but when you start thinking about
it, you see that it creates a conflict of interest between the
private interest and the public good. People will take actions
and receive these illusory credits and, therefore, create
political pressure for the Senate to adopt a policy that is
patently bad for the country.
Today's hearing will also look at what types of problems
are there with the system, what sort of financial conflicts are
there with those who are advocating this early crediting
provision, and what would be a better voluntary, truly
voluntary, program that could be a win-win for the country
without taking us down the path of ratifying the Kyoto
With that, I would put the balance of my statement into the
record and yield back the time to the chairman.
Mr. Ryan. No objection.
[The prepared statement of Hon. David M. McIntosh follows:]
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Mr. Ryan. Jack, we have a vote. Do you have time?
Mr. Kemp. Yes.
Mr. Ryan. We will recess for about 7 minutes for the
purpose of voting and come back and swear you in and get going.
How does that sound?
Great. Recess for 7 minutes.
Mr. McIntosh [presiding]. The committee will come to order.
Let us begin immediately with our first panelist, and
welcome, Mr. Kemp. Let me ask you, if you would, join me in
taking an oath. Chairman Burton has asked that I swear in all
witnesses before the subcommittee. If you would please rise and
take the oath with me.
Mr. McIntosh. Thank you very much.
Mr. Kemp. Thank you.
Mr. McIntosh. Mr. Kemp, welcome to the subcommittee, and
share with us your views.
STATEMENT OF JACK KEMP, DISTINGUISHED FELLOW, THE COMPETITIVE
Mr. Kemp. Well, Mr. Chairman, first of all, thanks for
having these hearings. Thanks for focusing the light of these
hearings on this issue. I have absolutely no question in my
mind that this will be a healthy debate. We don't need to fear
it. I think all of us should welcome all sides to it. That's
what a liberal democracy is all about, small L, small D.
I have a confession to make, Mr. Chairman. I'm not a
climatologist, I am not an oceanographer. I didn't invent the
PC. I did invent the forward pass, but not the PC.
I'm really pleased to be with you. I appreciate your
indefatigable spirit in approaching this issue. I am sorry that
Mr. Ryan is not here, one of my old comrades in arms and a
terrific guy. The same could be said about Dennis Kucinich, who
gave us some anecdotal evidence concerning today's topic.
Dennis, I just mentioned your name. I'm glad you came back.
I didn't want to do it behind your back.
Dennis, I just wanted to say off the top of my head when I
heard about various climate problems in the South and in the
Southwest and maybe even in Cleveland, OH, who knows, I was
reminded of my experience as a skier. My wife and I and family
have skied a lot all over the world, but mostly in Colorado and
Montana. I was in Vail, CO, last winter and they were bemoaning
the fact that there wasn't a lot of snow in Vail. Of course,
people were blaming it on global warming. And then there was a
lot of snow in the Alps, and people who should know better
blamed too much snow on global warming. Ten years ago there was
no snow in the Alps and lots of snow in Vail, and that, too,
was blamed on global warming.
Again, I'm not an expert. I am just a layman like all of us
here who wants to get at the truth. I said earlier, this is a
healthy debate. It can be done with civility, I hope. We don't
need to burn down buildings in the name of saving the
wilderness. We really have to bring some rationality to this
I come today as a fellow of the Competitive Enterprise
Institute. I have another hat as codirector of Empower America.
I'm very close to my friends at the Citizens for a Sound
Economy. I am a man of the center right, a progressive, if you
will, conservative. My values are conservative, not unlike
those of the panel. But I hope to be progressive in terms of
working for change, progress, reform, a better future not only
for the folks of our country, but the folks who live in those
parts of the world that look to the United States of America at
the end of the cold war for real leadership.
Leadership comes from example, not from bullying people,
and from knowing your own background. Mr. Mayor, Mr.
Congressman, and you too, David McIntosh, Mr. Chairman, I think
all of us, left and right, Republican and Democrat, male and
female, ought to lead by example, not by bombing people and
bullying tactics. Having said that, I am really thrilled to be
here and appreciate again the opportunity that Chairman
McIntosh has given to me and the men and women who will testify
subsequent to my testimony.
I'm going to create a historical record here today. I am
going to be relatively brief. It's no secret that Jack Kemp has
been called the Hubert Humphrey of the Republican party.
Senator Humphrey said one time, he didn't think his speeches
were too long, he enjoyed every minute of them. I want to
submit my full testimony, Mr. Chairman, for the record and just
summarize it and get to questions.
Mr. McIntosh. Without objection, the entire testimony will
Mr. Kemp. H.L. Mencken, the great iconoclast, said one
time, to every human problem there is a solution, simple, neat,
and wrong. I think as my buddy Fred Smith has said, early
action credits in effect are energy rationing, and it's a wrong
solution to the problem, in my opinion, and I have some doubts
as to the nature of the problem.
I don't want to offend anybody. I do have respect for my
opponents. I spent 13 years of my life in professional
football. As I came out of that career, I found that some of
the best friends I have in my life are the guys that used to
beat me to a pulp on Sunday. They are friends. I expect that in
politics. It's tough.
Look, the issue here is bigger than Kyoto, albeit that's a
big issue and deserves the attention of this committee. It's
bigger, in my opinion, than the debate and discussion of global
warming or the disputes over climatic changes. In my opinion,
Mr. Chairman, the issue is whether or not the U.S. Congress is
going to endorse, in effect, a third way style of command-and-
control economics and politics. By third way, I mean in the
international arena, the idea of allowing an international
bureaucracy to trespass on the sovereignty of that which Paul
Ryan alluded to in his opening comments. And I know, Mr.
Chairman, you have been a champion of protecting U.S.
sovereignty; that is, that the United States should pass its
laws, and it should affect the United States and hopefully
affect other countries by setting an example, but not by
turning our decisionmaking over to supranational authorities.
Congressman Kucinich mentioned earlier clean air, clean
water, and I forget the other one. I want you to know, Dennis,
I voted for all of them. I believe in those goals as do, I
think, most men and women of good will and civility throughout
this country. There has been a lot of progress. We can debate
excesses, but I don't think that anybody can debate that we
have to have standards.
That's not the debate here. It's whether we are, as Fred
Smith has pointed out, going to ration energy at a time when
many countries and continents of the world are beginning to
emerge into what I call an Internet century, but with almost
Fourth World capability. I spent part of the month of April in
Ghana. It was an incredible trip, and they are talking about
trading with the United States. I look at that map over there
indicating places on the Earth that are going to have their
George Gilder had an interesting article, Mr. Chairman, in
the Wall Street Journal saying that Kyoto is kind of a zero sum
approach to ecology. He mentioned that India, that huge
continent of India, over a billion people, uses less than one-
tenth the energy per capita as the American people. To tell
them, Gilder writes, that their billions of citizens cannot
even match current Western uses of fuel oil or fertilizer and
other chemicals is to tell them that they can't perhaps feed
enough people or let alone gain them wealth without some form
of a war. That's what causes wars, telling people that the only
access to resources is to take it from someone else. I believe
that is the predicate that has been laid down. I'm not accusing
anybody of wanting a war, but as Gilder pointed out, nothing so
pollutes the world as war.
I urge you to read the morning paper that talks about what
happened with the bombing in Serbia with regard to pollution.
They had to send their children miles and miles away because of
nausea and other problems.
This is not the place to go into that, but I did want to
make the comment that this is a zero sum approach that will
consign millions of black and South Asian and Latino, Third
World and Fourth World countries to poverty when you and I have
discovered in a postcolonial, post-cold war world that the
answer to poverty is markets, and freedom, and private
property, and limited government, and the rule of law, and
incentives for men and women to work and save and invest and
invent and take us forward into an age in which technology is
going to come up with solutions to problems that we cannot even
see in our limited scope here on the eve of the new millennium.
We want America to be cleaner, greener, and wealthier. That's
the debate at least from our side of the issue.
In my opinion, Mr. Chairman, the Kyoto Protocol and
legislation is attracting unwarranted corporate support. I
noticed that Vice President Gore, bless his heart, last year
announced an emissions trading agreement between a Canadian
company and a New York energy company. Vice President Gore
said, ``These two major corporations are seeing and seizing an
opportunity to protect our planet, build their bottom line, and
grow the economy.''
So it sounds like it's positive, but in my opinion, it's
still a zero sum approach because there are thousands of small
businessmen and women anxious to go into business who are going
to be, in my opinion, compromised. The corporate community is
naturally--many of them are naturally attracted to this
approach, getting valuable credits for advance action that
allegedly reduces fossil fuel emissions, but it creates, in my
opinion, a profound dilemma. The treaty hasn't been submitted
for ratification, and most people don't think that it's been
submitted because it couldn't pass. With all due respect to the
Senate, it couldn't pass. In my opinion, what the
administration has in mind is luring corporate America into
these early action credits so that they can buildup a rationale
for ratification of Kyoto, to build support for Kyoto. I still
think that it's not going to be ratified.
I would add that it's unworkable. It is unworkable for the
very reasons indicated by the chart, Mr. Chairman, that you
have put up over here. It has taken time away from important
things like cutting capital gains taxes.
That was a serious comment, by the way.
The science of warming, the role of fossil fuels and
greenhouse gases and their relations to fundamental forces in
the Earth's climate for eons, even before the industrial
revolution, is in contention. Joel Bucher wrote in March that
Dr. Hansen, James Hansen, the very same distinguished American
scientist who caused so much alarm in the 1980's claiming that
global warming would bring catastrophic temperature increases,
recently declared before the scientific community, as Joel
characterizes his comments in the prestigious Journal of the
National Academy of Sciences, that predicting global
temperatures with climate modelling is all but impossible.
With all due respect, modelling climate has yet to reach a
point that most men and women would agree is capable of
deciding for us what we should be doing to have that cleaner
and greener Earth that most men and women of common sense want.
The Kyoto pledge to cut emissions to 7 percent below the
1990 level, which would be by 2010, Mr. Chairman, close to a 40
percent reduction, would, according to several economic
forecasting firms, cost the U.S. economy well over $300 billion
a year, close to $3,000 per household, raise gasoline prices by
65 or 70 cents a gallon. I admit that I don't know. I don't
have to know. But I do know that rationing has never worked
anywhere on the face of the Earth. That's what this is. I can't
imagine America on the eve of a millennium in which we can
create not only more wealth for our own country, but help
provide an example for the rest of the world, would want to
introduce into our political economy such a Malthusian zero sum
rationing idea. The administration's own Energy Information
Administration estimates a $64 billion per year cost; someone
said a conservative estimate of the cumulative cost would be
close to $400 billion by the year 2010. Again, I'm not throwing
these numbers out because they are perfect, I just do it to use
it as a metaphor. There is a huge cost involved with Kyoto,
notwithstanding the fact that it's consigning people to almost
perpetual poverty in many parts of the world.
I said that many of our major corporations, including
energy producers, see early credits as a way to gain a windfall
for steps that they would have taken anywhere, anyway, and a
way, perhaps, to gain a competitive market advantage over
smaller, often more entrepreneurial competitors. I don't want
to pit the little guy versus the big guy. The American dream is
to start small and grow your business. I'm not anti-big
business or corporate business, but my bias is clearly toward
the entrepreneur, the men and women who are the innovators and
the wealth creators and the risk-takers who may fail, but can
The real fight in this issue, Mr. Chairman, is about our
energy future, our economic future and that of the world. The
Kyoto mindset implies taxes on energy use, on the use of energy
as far as the eye can see. Direct taxes are already under
serious review in Canada and the EU, the European Union, I
should say. Early action credits are touted as a market
approach by everybody who supports it. I appreciate their
fidelity to markets. I doubt very much whether they really
understand the market if they think this is a market approach.
I'm not trying to be a smart aleck up here, but I am trying
to suggest that you can't set prices, Mr. Chairman. That's why
socialism has failed from Eastern Europe to every part of the
world, because you can't price goods and services. You can't
establish the value of anything if the market doesn't set those
prices. I'm not talking about libertarian, 19th century
Darwinian biological competition, not at all. I think there are
places where markets must be enhanced, must be protected. I am
for antitrust laws, but I think having the Federal Government
get into building cars, subsidizing ethanol, overseeing
investment subsidies, it really doesn't make much sense, in my
I mentioned earlier that there is a large cost to Kyoto. I
hope people will read ``Early Action Crediting: Growing the
Kyoto Lobby at Small Business' Expense, a policy brief by CEI,
and also CSE's explanation and analysis,'' which was published
February 12 of this year. As I said, I think this treaty cedes
U.S. sovereignty to global bureaucrats.
I would be glad to answer any questions. I apologize for
perhaps going on a little bit longer than I wanted to, but I
think this is an important issue, and I welcome the debate. I
know that I have got a lot to learn, but maybe there are others
who have something to learn as well.
Mr. McIntosh. Thank you, and I appreciate your forceful
argument for true free markets.
[The prepared statement of Mr. Kemp follows:]
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Mr. McIntosh. Let me explore with you a little bit the
point that you were making that this really isn't a market
mechanism that is being created. One of the things that amazes
me about the proposals for early action crediting is that they
create something that could have a value in the marketplace
only if the Kyoto Protocol is ratified and it becomes law. And
so I don't know what label you would give to it, some kind of
future I guess, some sort of credit that at a future date would
have a value if the Senate ratifies the treaty. To me that
creates a problem of incentives in that people who are granted
those credits from the government have a great deal of
incentive to want the treaty to be ratified because this piece
of paper gains value in the marketplace when those restrictions
go into place. For those who don't have the piece of paper,
then the restrictions are all the more costly because they have
to comply with the treaty.
Others have characterized it as sort of an insurance
policy. I'd like to ask you to comment on the validity of that
assumption, the argument that if the Senate does the wrong
thing and ratifies the treaty, at least some of us in the
marketplace will get a little money back.
Mr. Kemp. That really is--again, I have great sympathy,
hopefully some understanding of their position. And with all
due respect, Mr. Chairman, I think you were the first to really
bring this issue to the forefront of public opinion, at least
to the business community, that they had better watch out
because it is a slippery slope into which they are, in my
opinion, being ``incentivized'' is a good word, seduced is a
pejorative. I think it is seduction, it is very seductive to
think that you can gain an advantage when you get that credit.
And you have got to be big, Mr. Chairman. You have got to be a
big guy on the block in order to take advantage. You are going
to have lots of lawyers and lots of accountants and lots of
folks focusing on this issue. That rules out the men and women
of entrepreneurial talent who are trying to move up that
I want to say something, and be careful that I say it
correctly. If you stop and think about the history of freedom
of enterprise, from Adam Smith in the 18th century to today in
Milton Friedman, I don't think there is an economist at least
one who is market-oriented who doesn't have some fear or
distrust of laws that make it easy for people to collaborate in
order to keep other competitors out.
I don't mean that to pick on anybody. I just think that
it's a very human condition. When I was quarterback of the
Buffalo Bills, I did not want any competition with me. I only
wanted one quarterback on each football team. But it really
gives advantage to the big guy. I can't imagine the party of
Lincoln giving an advantage to the big guy over the little guy.
This is what it does. It really does. It's economically
unsound, it is politically seductive, and it is going to give
tremendous power not only to the bureaucracy of the United
States--and I don't want it for a Republican administration or
a Democratic administration. I wouldn't want to give this to
any of our Republican candidates nor give it to the two
Democratic candidates or the Independent party. I guarantee,
Mr. Chairman, and you know this far better than Jack Kemp, this
gives tremendous power to the international bureaucracy.
Mr. McIntosh. Well, both directly and indirectly, because
it assumes the ratification of the treaty, which empowers them
The second question I have is would you agree that before
we implement any type of early action credit where the benefit
is related to emission reductions complying with Kyoto, that we
have to make the decision whether or not we are going to adopt
Kyoto as policy? I have introduced a bill that says essentially
before any further action can be done to set up this type of
credit program, the Senate has to be given a chance to debate
and ratify the Kyoto Protocol----
Mr. Kemp. Yes, absolutely.
Mr. McIntosh [continuing]. So we know whether it is going
to be the policy of the country or not. To reverse that means
that you are making the decision without debate, without any
normal course under the Constitution.
Mr. Kemp. I was absolutely shocked, Mr. Chairman, with all
due respect, to have the President of the United States of
America saying in December 1997 that we are going to have a
program to pursue our course, and we are going to do it
whatever happens at Kyoto.
It's unbelievable. Unbelievable. He said the other day we
are going to intervene in any part of the world in which there
is a violation of human rights irrespective of any vote in the
U.S. Congress. We have converted NATO from a defensive
organization to an offensive organization without a debate in
the U.S. Congress. This is what I call third-way politics, as
pursued by this administration, the Blair administration, the
Schroeder administration in Germany. Someone has got to stand
up, Mr. Chairman, and question what is happening to political
economic policies in the world today through third-way
politics. It's seductive. It's mesmerizing, but it's really
sacrificing the sovereignty of the United States of America.
Mr. McIntosh. I think one of the great things that you have
contributed to the sovereignty debate is that you point out it
cuts across apparent ideological lines. When you trample on the
safeguards in the Constitution, the division of powers, for
whatever ends, whether they are ostensibly conservative or
ostensibly liberal, government does a great injustice to
Those are the two questions that I have. Mr. Kucinich, do
you have any questions?
Mr. Kucinich. Yes, I do.
Again, thank you, Mr. Kemp, for your testimony. I have to
say that I am with you on the sovereignty questions. As a
matter of fact, Mr. McIntosh and I have had a chance to work
together on some of the more serious sovereignty and
constitutional issues in this Congress. I also have a great
deal of respect for the legislative process and for the
Senate's prerogative. As someone who favors Kyoto ratification,
I would not want to see the Senate in any way be usurped. The
decisions have to flow from the U.S. Senate on this treaty, or
any kind of treaty for that matter. I happen to believe that a
treaty should have some force then, but to try to implement it
in other ways, I wouldn't favor that either.
I would wonder, though, what your views would be--let's
say, for example, if Kyoto was a dead issue here, and we were
just talking about a condition in this country where we could
incentivize aggressive behavior on the part of corporations
Mr. Kemp. I would be in favor of that. I have even talked
about allowing for the full expensing of the cost of equipment
used to clean up the air and the water. Why shouldn't someone
be incentivized? I think there should be incentives----
Mr. Kucinich. I think that we agree on that, too. The
concern here, and I understand the concern the chairman
expressed, that you would not want to see an incentive
mechanism put into place that might be an excuse for bypassing
the process in the Senate.
Mr. McIntosh. That's right. In fact, I have talked with
colleagues about the possibility of substituting incentives. If
you gave somebody basically a tax deduction and say, move
quicker toward reducing air pollution, assuming that is a goal
that we all share, that might be a more appropriate way to
achieve the goal.
Mr. Kemp. The President just spent a week running around
the country. I'm not belittling it. In fact, I was invited on
that tour to show bipartisan support for trying to attract
capital into areas that are without capital. I would prefer
that we do it through changing the Tax Code as opposed to
having an international bureaucracy force India, China, Asia,
Latin America and Third World and Fourth World countries to cut
their use of energy before they ever get a chance to get out of
the grinding poverty into which centuries and millennia have
been allowed to occur.
Mr. Kucinich. What I think is interesting is that where we
can get some concurrence on the importance of incentivizing
environmentally and even socially beneficial conduct, the
question is this debate over Kyoto. One of the reasons why I
favor it is because I would like to see the United States take
leadership in this area. Let me state why: Because I think that
we can use this as an opportunity to create greater
efficiencies and enable our industries here to capture new
markets and to enable us to continue our leadership and perhaps
the controlling of and even transformation of pollution
Mr. Kemp. Well, I like what you say, and I think that you
have raised a very important point, and obviously you have been
talking with Mr. McIntosh.
I would remind everybody that may be listening or watching
or maybe who will hopefully read this testimony, as convoluted
as it may sound, do you know what the cost of MIPS in the
United States on the eve of the new century, millions of
instructions per second computerwise? Less than $1. Do you know
what it was 10 years ago? $10,000; $250,000 20 years ago. We
are now, with our ability technologically, able to deliver
instructions through computers in those little microprocessors
at a cost of less than $1 for millions of instructions per
second. Wow. Why don't we, the greatest Nation on the face of
the Earth, with all our faults and all of our problems and all
of the work that we have got to do, why don't we recognize that
freedom of enterprise, freedom of trade, and incentives for men
and women to invent and innovate is the greatest example that
we can have to help the rest of the world enjoy some of the
benefits of the wealth-creating society?
What bothers me about this, Dennis, is that it's predicated
upon using less energy at a time in which we are going into an
Internet century in which the needs of electricity are going to
be exponentially increasing in the 21st century. The answer is
not rationing. The answer is wealth creation and freedom of
Mr. Kucinich. I would agree with you on wealth creation. I
would also suggest, Mr. Kemp, that perhaps the answer is also
in new technologies which do not have the same by-product in
terms of pollution. One of the things that I notice British
Petroleum is doing is looking more and more at solar research
as opposed to the increased consumption of fossil fuel.
Mr. Kemp. Just don't give them a tax credit, please. We
have too many tax credits in the Tax Code. It's the worst Tax
Code that I have ever even seen in my life.
I apologize. I have absolutely--lucky for you all--run out
of time. I apologize. But I know a lot of people want to
Mr. Kucinich. Could I give a one-sentence benediction from
William Buckley? He is talking about these ideas that we are
speaking of today. He says, ``It's quite a brilliant
application of the idea, putting a cash price on inordinate
consumption, which is very different from forbidding it.''
So that's--I have been reading him since I was in high
Mr. Kemp. There is hope for you yet, Dennis.
Mr. Kucinich. And for you.
Mr. McIntosh. Thank you. We appreciate you very much for
coming and joining us today.
Mr. Kucinich. Could I put Mr. Buckley's column into the
record, Mr. McIntosh?
Mr. McIntosh. I would be honored to include that in the
record. It says, ``Conservatives Should Hail Kyoto Pact.'' I
will have to give it close scrutiny.
[The information referred to follows:]
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Mr. McIntosh. The next panel is Mr. Jay Hakes, who is the
Administrator of the Energy Information Administration.
Welcome, Mr. Hakes. If you want to stay standing, I will
administer the oath.
Mr. McIntosh. Thank you. And please share with us a summary
of your testimony. We will include the full written remarks
into the record and then get to the question and answers.
STATEMENT OF JAY HAKES, ADMINISTRATOR, ENERGY INFORMATION
Mr. Hakes. Thank you, Mr. Chairman, for inviting me, and I
certainly have pared down my remarks. I am happy to talk about
the voluntary reporting of greenhouse gas emissions, which is a
program that is administered by the Energy Information
Administration. In the past year interest in this program has
grown, but this hearing is the first time that I have testified
before a congressional committee on the subject.
The Energy Policy Act of 1992 in section 1605(b)
established this data collection which allows individuals or
companies at their option to report annually on the reductions
in the emissions of carbon dioxide, methane, or any of the
other greenhouse gases. They can also report on carbon sinks
such as forestation activities. The details of this program can
be found in my written testimony, and I won't repeat that.
I would talk perhaps about what I think has been some of
the success of the voluntary reporting program. This program
has been designed to be user-friendly. Using integrated
software, we have made it relatively easy to report, given
particularly the complexity of this fairly new issue. It's been
easy to access and analyze the data that has been submitted. To
encourage participation, reporters are offered many different
ways of reporting and are allowed considerable flexibility in
how they calculate their savings.
As you may be aware, many companies report under this
program and the number is growing. So far this year we have 172
companies that report under this program, and that's well above
the 108 that submitted reports in 1994, the first year of the
program. Participation is particularly high in the electric
utility industry where companies accounting for two-thirds of
utility emissions do report under the program.
Although there is no third-party verification of the
reports, the energy expertise of EIA has allowed us to work
with the companies to develop data that we do believe to be
accurate. The hope that the reports would document useful
examples of how to reduce emissions that could be emulated
elsewhere seems to have been at least partially realized. For
example, the recycling of sulphur hexafluoride first reported
in the 1996 cycle now seems on the way to becoming a widespread
industry practice. In turn, we have been able through numerous
phone calls, e-mails and other communications to educate many
companies on how to measure the emissions of greenhouse gases,
and this is significant because until recently there was no
reason for them to track them and, therefore, no experience.
Despite the successes, using the existing program for new
purposes such as documenting credits for early reduction would
face a number of formidable challenges. Since these credits
would have economic value, the standards for reporting them
would probably have to be much more rigorous than under the
current program. The flexibilities that have made the voluntary
program a success so far may limit its adaptation to a program
requiring greater uniformity.
Let me just give a couple of illustrations of the issues
that would arise. First is the issue of baselines. To award
credit for early action, there would need to be a common
agreed-upon baseline from which savings are calculated. To know
how much emissions are being reduced, we need to know the
number from which the resulting emission levels should be
subtracted to calculate the savings. The current program allows
flexibility in baselines that would be difficult to maintain in
a more rigorous system to award credit. The current program
allows reporters to calculate savings by subtracting the
current emissions from their expected levels in the absence of
Although these reports provide useful information, they
leave unresolved the issue of what is sometimes called
additionality; that is, how can you tell whether the action
would have been part of a normal business practice even without
the voluntary program or whether it would have produced the
savings that went--or whether it produced savings that went
beyond or were additional to what would have been expected in a
business-as-usual case. If reporters are rewarded for something
they would have done anyway, it is conceivable that a large
number of credits would be awarded without significantly
reducing the expected trajectory of rising U.S. emissions. EIA
projects that under current policies, emissions are likely to
be 33 percent higher in 2010 than 1990.
The current voluntary reporting program also allows
reporters to use historic levels of emissions as their
baselines for calculating savings. A reporter could, for
instance, subtract his 1998 emissions from his 1990 emissions
and use the remainder as his savings. During that period,
however, the reporter may have sold part of its operations
responsible for a large part of its emissions to a second
entity. The second entity is not required to report and
wouldn't be penalized; therefore, there could be leakage of
I would be glad to conclude at that point, seeing the red
light on, and answer your questions.
Mr. Terry [presiding]. You can keep going.
Mr. Hakes. I just had a few more comments. The second
problem was the problem of leakage, which I think, along with
addition-ality, are the two big conceptual problems that these
approaches are going to have to wrestle with. There are other
complex issues such as property rights that are discussed in my
written testimony, and I would refer you to that.
The voluntary data that EIA has collected has been done in
a very transparent manner, and it may be possible to go back
the fact and recast it with new assumptions. But I think that
is a challenge that would be difficult, but not necessarily
impossible. So that is basically what I plan to comment on, and
as I said, I would be glad to answer your questions.
[The prepared statement of Mr. Hakes follows:]
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Mr. Terry. I thank you very much. I will start with one
question. In your oral testimony here, you had mentioned some
of the difficulties in making initial determinations to set
baselines and what I envision is a deepening bureaucracy. Have
you been able to establish how much staff it takes now, full-
time staff, to do a voluntary reporting program? How much it
would have to grow and expand to make it into an overseeing
Mr. Hakes. We do both the annual inventory reporting of the
greenhouse gases and the voluntary reporting, which are two
different programs with three different employees and a budget
of $600,000. The acid rain program at the EPA, which does
sulfur trading, which is a much more elaborate program, I think
is about $10 million. What we're talking about here is probably
substantially larger than that. We have not had a reason at
that point to calculate what those resources would be. I think
that the range could be considerable, depending on how this was
designed. I think a lot of people are designing programs; there
are just a lot of options. But it would certainly be much
bigger and more expensive than what we're talking about with
the voluntary program.
Mr. Terry. Well, does the sulfur dioxide emissions trading
program provide a basis for estimating the administrative
complexity and costs of the greenhouse gas emissions credit
Mr. Hakes. Well, I think it's been used as an example and I
think it has some advantage. It shows that there are some
advantages to trading. But the sulfur system is much more
complex because up to the present period it's covered about 115
utilities and so that's a fairly manageable universe. It's
about to expand to 2,000 utilities and that makes it bigger.
But if you look where energy is used and combusted, that's
obviously a much bigger, more complex universe than people who
are emitting sulfur. There are ways of designing the system to
limit the number of reporters but the more you do that you lose
the downstream ability to trade. So there's a lot of
compromises that would probably have to be made.
Mr. Terry. I appreciate that.
Mr. Kucinich. Mr. Hakes, thank you very much for your
testimony. I think the Energy Information Administration should
be commended for all of its hard work in implementing the
1605(b) voluntary reporting program, and I agree with your
testimony that we could learn a lot from that program as we
debate any plan for early action credits. I have just a few
questions for you.
Mr. Hakes. Thank you.
Mr. Kucinich. When did the Federal Government start its
voluntary reporting program?
Mr. Hakes. 1994.
Mr. Kucinich. That would be in the Bush administration,
Mr. Hakes. Well, that was when it started to operate. It
was established by the Energy Policy Act of 1992.
Mr. Kucinich. It was established during the Bush
Mr. Hakes. It was authorized statutorily in the Bush
Mr. Kucinich. Do you believe that offering incentives to
companies that voluntarily reduce their emissions has been
Mr. Hakes. It's a hard question to answer. I would say that
during the 1990's that emissions have continued to grow at more
or less the pace they were growing before. We have had
increases in emissions every year since EPACT was passed. And
as I say, our projections are that emissions are likely to
reach 33 percent above 1990 levels. So I think there have been
some successes but the overall trajectory of the emissions
increases does not seem to have changed very substantially.
Mr. Kucinich. What about for companies that participate in
Mr. Hakes. Well, those companies have reported large
savings and undertaken activities. I think the question of
additionality has not really been addressed because there's no
real baseline against which the savings can be calculated
that's uniform. So it's hard to say whether these are
activities that they would have done under normal business
practices or whether they were additional activities that they
undertook because of the voluntary programs.
It's clear that there's a success story here in that the
economy has been growing at a very rapid rate, more rapid than
was expected, and emissions have been rising much slower than
economic growth. So certainly the companies and the
technologies are very successful in the sense of keeping
emissions well below the economic growth. The economy has been
growing quite rapidly, but they have not been successful in
changing that trajectory so that the emissions are either
stable or going down.
Mr. Kucinich. So you don't really take a position on the
Mr. Hakes. Well, EIA is a statistical agency, not a policy
Mr. Kucinich. I understand that. I'm just interested in
Mr. Hakes. Well, it would be hard for me to give an opinion
apart from my official position I think.
Mr. Kucinich. Oh, give it a try. OK, my next question.
Mr. Hakes. OK.
Mr. Kucinich. As you noted, the 1605(b) program was
designed to encourage entities to take voluntary action to
reduce their emissions and reward them with publicity. This is
very different, however, as I think we know, from an early
action credit program that would award these entities with
tangible assets for tangible verifiable emission reductions. In
fact, a GAO report found that ``Many of the claims for reducing
greenhouse gas emissions that have been submitted to the
voluntary reporting program would probably be ineligible for
With this in mind, is it possible to set up an accounting
system to implement a credit program?
Mr. Hakes. Yeah, I think it is possible.
Mr. Kucinich. Thank you. Thank you, Mr. Chairman.
Mr. McIntosh [presiding]. Actually that was going to be my
first question. Do you think it's possible to implement a
credit program? Actually, before I get into that, let me say I
commend you for the work you are doing in terms of keeping an
honest track of what is done out there in this area and not
trying to be a heavy handed bureaucracy but merely truly
implementing a voluntary program.
You know, I'm an optimist too. I think lots of things are
possible. But let's explore that. In your testimony you
mentioned that it might be quite extensive and costly to do.
Can I--and I know Mr. Terry explored some of those costs, but
are the barriers essentially conceptual? And you mentioned a
couple in terms of being able to discern whether it was
something that would occur in the normal course of a business
practice. Are the problems mainly technical in measuring the
reductions, or are they political where you might get entities
gaming the system?
Mr. Hakes. Yeah, I think that they're really all three. I
mean, I actually have tried to attend a lot of technical
sessions on this issue, more than I normally would because I
think the technical issues are so wrapped up into the
conceptual and political, and there are a lot of decisions that
have to be made that create winners and losers. I mean, how you
calculate the baseline that may help one company and another
way of calculating might help another company? And that's why I
think it would be inappropriate if such a system would have the
EIA make a decision about what the baseline should be. I mean
that's a decision I would think the Congress would make.
Mr. McIntosh. Let me interject. You think therefore there's
such inherent tradeoffs that it needs to be a political
decision by Congress rather than a technical decision?
Mr. Hakes. In the best sense of the word, yeah. I mean,
it's a policy decision much as the tax code is a policy
decision. Who gets taxed. It has technical issues, it has
conceptual issues, and it has political issues.
Mr. Kucinich. Mr. Chairman, no one ever games that system.
Mr. McIntosh. My office is in Longworth and having been
blocked for 2 days now getting in and out with all the
lobbyists over there as the tax bill is being written, that's a
But I think you make an interesting and important point
that it can't merely be thought of as a technical decision
because there are winners and losers that result from the
choices being made.
Mr. Hakes. That's definitely my view, yes.
Mr. McIntosh. Any estimate of how expensive it would be
once those winners and losers were chosen to actually implement
Mr. Hakes. Well, let me explain why that's a difficult
question to answer. When we think about this question
initially, the thought is, well, everybody that drives an
automobile is emitting carbon and therefore if we had to track
every automobile in the United States that would be a very
expensive system and very onerous. The technical people that
I've seen that have looked at this have usually moved away from
that and moved back to more of an upstream approach where they
might say tax at the oil refinery, which then sends a price
signal up through the system. And that makes it a lot easier to
You lose some of the advantages of trading. So the
policymakers have to design a system, and I'm sure they would
take into account the administrative complexity of it, and my
suspicion is that you might move more to an upstream system.
But until we know the answers to those questions it would be
hard to know how big this reporting system would have to be. If
you do it at the upstream where there's a more limited number
of refineries, it's certainly a lot easier than keeping track
of every automobile.
Mr. McIntosh. Right. And so given the pervasiveness of
energy consumption in society, to do it with 100 percent
accuracy you would essentially need to have a tracking system
for every activity.
Mr. Hakes. I don't know if the issue is so much accuracy as
it is to maximize the trading potential. Because the person who
is driving the automobile has choices about the efficiency of
that automobile. And I think if we were measuring things at the
refinery that it probably would be possible to get accurate
counts. But energy is so widespread that one can think of areas
where things might fall through the cracks. And this would
certainly be a formidable challenge I think to make sure that
everyone was treated fairly.
Mr. McIntosh. Let me move in a different direction. The
administration has told us all over and over again that the
Kyoto Protocol is a work in progress. They're still negotiating
with the other foreign countries hoping to get some of the
Third World countries to sign up for mandated reductions in
energy use or global warming gases being emitted. Is there a
risk that if we adopt an early action credit at this time, that
it will impact the negotiations over the implementing rules of
the Kyoto Protocol?
Mr. Hakes. Well, I think there are two major areas of that
treaty that are unsettled, that it would be extremely useful to
know the answer to before setting up this program. One of them
is the level of domestic effort that will be required. The
treaty contains a lot of offsets against what you have to do
domestically. The most obvious one is the trading. And we
could, for instance, purchase credits from Russia, which is by
most estimations going to have a lot of credits to sell because
their economy has collapsed and they haven't been using energy
as much. But there are other offsets such as sequestration and
other things that might allow emissions to grow in this country
and still meet the Kyoto limits. But since the treaty is not
interpreted the same way by all parties, we really don't know
the answer to that yet.
The second thing that would be very useful to know is what
would be the equivalency between activities like forestation
and the reductions in emissions. Because many of the programs
that the utilities are reporting right now, for instance, are
things like reforestation activities, but we don't--we do have
formulas for comparing say methane emissions with carbon
emissions but we don't have a formula for comparing
sequestration activities with emissions activities. So it would
be difficult to construct a system that would fairly reward
these different activities until we had that.
Mr. McIntosh. One other question that's a pet personal
issue. Assuming you were going to credit all different sources,
you mentioned the formula between methane and carbon, would
this system create an incentive for eliminating wetlands
because they are a source of methane gas?
Mr. Hakes. My technical expert says that it is an extremely
small matter statistically and probably would not be a big
factor in the larger numbers.
Mr. McIntosh. That is what I see in terms of the amount of
methane gas produced, but I don't know what the formula between
carbon dioxide and methane is.
Mr. Hakes. We would be glad to get those calculations to
you subsequent to the hearing and compare notes on that.
[The information referred to follows:]
Wetlands account for 15-20 percent of total global natural
and man-made methane emissions. However, these emissions are
concentrated in tropical (rather that temperate zone) wetlands.
According to researchers Matthews and Fung, worldwide temperate
zone methane emissions are about 5 to 10 million metric tons.
Dividing the U.S. figure for temperate zone wetlands from the
Department of Interior's Status and Trends of Wetlands in the
Coterminous U.S. by the Matthews and Fung's figure for world
temperate zone wetlands, results in the U.S. having about 57
percent of world temperate zone wetlands. This implies U.S.
natural wetland emissions of 3 to 6 million tons of methane,
equivalent to 63 to 126 million tons of carbon dioxide
equivalent (using 1 ton of methane equals 21 tons of carbon
dioxide, the Intergovernmental Panel on Climate Change's 100-
year integration global warming potential of methane), or 17 to
34 million tons of carbon equivalent. This is equal to about 1
to 2 percent of U.S. GWP-weighted anthropogenic greenhouse gas
Mr. McIntosh. Thank you. That would be helpful. I don't
have any other questions.
Do you have anything?
Thank you very much, Mr. Hakes, and we will followup and
let me ask unanimous consent now to keep the hearing record
open for 10 days on some of the technical questions.
OK. Our third and final panel for the day is the big one.
Let me call forward Mr. David Ridenour, Mr. Fred Krupp, Mr.
Frederick Palmer and Mr. Kevin Fay. You all stay standing as I
administer the oath. As I explained, Chairman Burton requires
us to swear in each of the witnesses here.
Mr. McIntosh. Let the record show that each of the
witnesses answered in the affirmative, and what we will do is
ask each of you to summarize in 5 minutes or less your written
testimony and put into the record the complete testimony. Let's
simply go left to right and start with--my left to right at
least--Mr. Ridenour. Welcome. If you would like to begin, share
with us a summary of your testimony and then we'll include the
whole thing into the record.
STATEMENTS OF DAVID RIDENOUR, VICE PRESIDENT, NATIONAL CENTER
FOR PUBLIC POLICY RESEARCH; FRED KRUPP, EXECUTIVE DIRECTOR,
ENVIRONMENTAL DEFENSE FUND; FREDRICK PALMER, GENERAL MANAGER
AND CHIEF EXECUTIVE OFFICER, WESTERN FUELS ASSOCIATION; AND
KEVIN FAY, EXECUTIVE DIRECTOR, INTERNATIONAL CLIMATE CHANGE
Mr. Ridenour. OK. Thank you. Mr. Chairman, thank you for
the opportunity to testify on early action crediting. I'm David
Ridenour, vice president of the National Center for Public
Policy Research, a Washington, DC, think tank. The National
Center has never received government funding and we have no
financial stake in the decisions of this subcommittee. In
addition to representing the National Center, I'm representing
12 members of the Cooler Heads Coalition, coalition of
nonprofit groups concerned with consumer costs of the Kyoto
Protocol. Together these groups represent nearly 4 million
Americans. It's not often that free market groups like mine
agree with the Sierra Club, Ozone Action, Friends of the Earth,
and National Environmental Trust. But when it comes to early
action crediting proposals under discussion, we agree on
First, such programs can't possibly benefit the
environment, second, they can't possibly benefit the economy.
Even if one assumes that man-made greenhouse gas emissions are
responsible for global warming and neither satellite nor
weather balloon data support this, early action crediting could
prove counterproductive. These programs would make it more
difficult for small businesses and family farms to comply with
Kyoto's emissions targets. They would allow the President to
offer companies reducing emissions prior to 2008, when the
Kyoto Protocol is slated to take effect, emissions credits that
these companies could either use or sell during Kyoto's first
emission budget period 2008-2012. But unlike the developing
countries, the United States would not be entitled to more
credits during the first budget period for any emissions
reductions occurring prior to 2008. In other words, every early
action credit the President grants would mean one less credit
in the U.S. pool during 2008-2012. Since most small businesses
lack the political context and expertise to negotiate deals
with the Clinton administration, and lack the financial
resources to reduce their emissions early, large businesses
would likely garner most of the early credits. Thus, the
burdens of Kyoto would rise for small firms while dropping for
By making compliance more difficult for small firms early
crediting will make it less likely the United States could meet
the Kyoto targets and unless of course we were willing to kill
the goose that lays the golden egg: Small businesses which
create two-thirds of all new jobs.
Early action crediting appears designed more to create a
pro-Kyoto corporate lobby than to reduce emissions. As you
know, prospects for Kyoto's ratification has been poor thanks
in part to industry opposition. In response the Clinton
administration included provisions in its fiscal year 2000
climate change budget designed to build corporate support for
Kyoto. For example, the budget included a $273 million program
to make buildings more energy efficient. This provision may
explain why Honeywell, which was recently awarded a DOE
contract to work on building efficiency, now supports the
treaty. Other examples of the administration's efforts are
included in the National Policy Analysis No. 233, which I have
here that I would be grateful if it could be entered into the
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Mr. Ridenour. Early action crediting is another means of
building corporate support for Kyoto. Early crediting would
help build corporate support because it would give companies
earning credits a vested interest in seeing to it that the
credits are worth something. Without Kyoto ratification, the
credits would be worthless. Early credits are the industry's
insurance against the possibility that Kyoto will be ratified.
But in buying the insurance, Kyoto ratification would become
even more likely. It's analogous to buying auto insurance to
increase your chances that you'll actually be in a car crash.
The fact that early action credits could influence or preordain
the outcome of the Senate's consideration of the Kyoto Protocol
is particularly distressing. As Senator Byrd said of a high
profile Senate deliberation, don't tamper with this jury.
We shouldn't tamper with Kyoto's jury either.
The final issue concerns accounting and verification.
Independent third parties would be permitted to measure
corporate emissions reductions but there are no guidelines for
who would qualify for this work. This certainly brings the
validity of any accounting into question in my view.
We're also concerned with the very people pressing for
early action crediting and for third party monitoring could
profit from it. According to the environmental group Nonprofit
Accountability Project, the Environmental Defense Fund, through
its quote Satellite Group Environmental Resources Trust, would
provide monitoring services for a fee.
Of greater certain to me, however, is the incentives that
would be created for corporations to give and give generously
to the EDF or similar group. Corporations will be tempted to
pay tribute to monitors knowing that they are the final
arbiters of who does and doesn't deserve emissions credits, who
is a good corporate citizen and who is not.
Third party monitoring could compromise not only the
integrity of accounting and verification but our political
I want to thank the chairman very much for the opportunity
to address this hearing. Thank you.
[The prepared statement of Mr. Ridenour follows:]
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Mr. McIntosh. Appreciate that very much, Mr. Ridenour.
Mr. Krupp, welcome to this subcommittee and please
summarize your testimony. We'll put the entire written
testimony into the record.
Mr. Krupp. Appreciate that. Mr. Chairman, members of the
subcommittee, thank you for the invitation to testify on behalf
of the Environmental Defense Fund. I am the executive director
of the Environmental Defense Fund. We're an organization of
300,000 members with offices located across the country. Our
formal involvement with climate policy extends back at least 15
years as our scientists, economists and attorneys have worked
to understand the problems and suggest workable solutions.
I would like to begin with a statement for those who seem
to believe that the possibility of human induced climate change
is nonexistent and that all questions surrounding that issue
already have been settled once and for all. To those who are
comfortable in such a position, who believe that no risk is
posed even by the questions raised by the body of accumulating
science on global warming, I would offer that the notion of
rewarding companies for voluntary actions to reduce greenhouse
gas emissions is patently absurd. If there is no possibility of
a problem, then no policy consideration is even necessary.
On the other hand, for those who are either convinced that
climate change is a problem, or, perhaps this is the most
important group, for those who believe that we as a society are
now operating in a context of change and uncertainty concerning
climate change, a credit for voluntary action program offers a
compelling management option to a set of serious environmental
and economic risks.
With that in mind, let me provide some history on this
issue. In early 1997 before the Kyoto negotiation began, my
group developed a proposal for rewarding businesses that
undertook voluntary actions that resulted in greenhouse gas
emission reductions. The proposal reflected two key beliefs:
First, that the threat of human induced climate change demands
prompt and vigorous action to curb greenhouse gas emissions;
second, that for the sake of both the environment and the
economy, policy tools used to accomplish this should tap to the
maximum extent possible the ingenuity and resources of the
private sector instead of relying solely on the mandates of
politicians and government.
Our proposal reflected an existing reality as well that, to
put it mildly, there has been no or little consensus here in
Washington to support decisive action. Thus, our own preference
for strong aggressive policies to achieve greenhouse gas
emissions reductions is simply not in our view politically
feasible in this time.
In short we thought this would be a modest, prudent
proposal. Accordingly, EDF's proposal to achieve immediate
reductions now through a voluntary basis offered U.S.
businesses the chance to use voluntary actions to create real
economic benefits for themselves. Let me emphasize these two
critical points, voluntary, real reductions in emissions and
those real reductions occurring now, not a decade from now. At
the same time by creating this environmental and economic quid
pro quo a credit for voluntary action program also gives
policymakers here in Washington a strategy for manag- ing the
high stakes issue. Again unless one is firmly convinced that
climate change is not and will never be a problem, then climate
change represents an environmental and economic risk as well as
a potentially calamitous track for future policymakers. Credit
for voluntary action is nothing more than a tool for managing
this suite of risks. The basic concept that we proposed is
reflected in Senate bill 547, introduced by Senator Chafee
along with a bipartisan group of 11 cosponsors and echoed in
legislation that was introduced yesterday by Representatives
Lazio and Dooley.
The concept is simple. A company could earn emissions
reduction credits if it succeeds in reducing its greenhouse gas
emissions below current levels or sequestering greenhouse gases
over the next decade. The logic of this approach and the
related legislation is reflected in simple arithmetic.
According to the leading analysis, U.S. greenhouse gas
emissions could be more than 30 percent above 1990 levels if
our economy continues on a so-called business as usual course.
While the expected economic growth is essential, the prospect
of the attendant emissions growth represents a triple threat to
the environment, to business, and public policymakers.
The credit for voluntary action proposal is aimed as
diffusing the threats implicit in the projected emissions
growth while preserving economic progress. Here's how. If
greenhouse gas emissions represent a serious standard to danger
to the environment the prospect of at least 9 more years of
unchecked emissions increases represents an ever increasing
environmental risk. Under a credit for voluntary action
approach, the environment would benefit directly as companies
work to earn credits by achieving real greenhouse gas
reductions. At the same time for any businesses contemplating a
future greenhouse gas limitation regime, whether created under
the Kyoto Protocol or other domestic or international policy,
that same unchecked emissions increase poses an economic
threat. For if future U.S. policymakers should decide to either
ratify the protocol or otherwise adopt comparable emissions
limitations, then those additional emissions represent that
much more of an expense that will have to be incurred in
meeting such emissions limitations.
The credits businesses could earn under the proposed
program represent nothing less than a form of insurance against
the high cost of a future regulatory regime since businesses
could use those credits as a means of complying with such a
regime. In addition, we believe that the incentive to earn
credits that could be used in such a way would spark a private
sector led process of searching for the most cost effective
strategies and techniques for reducing greenhouse gas emissions
in turn, creating a larger economic momentum toward lowering
greenhouse gas reduction costs.
Finally, for policymakers 9 more years of greenhouse gas
emissions increases on the scale projected also represent a
threat. Even the most adamant and categorical opponents of
Kyoto Protocol characterize the science surrounding global
warming and climate changes uncertain. Current uncertainties in
fact may be masking a grave threat. This uncertainty does not
provide justification for inaction. Credit for voluntary action
provides the opportunity to manage that uncertainty.
Simply put, the chance to earn emissions reduction credits
for emissions reductions achieved in the short term would allow
the environment, businesses and policymakers to opt out of the
game. The alternative, so long as today's policy stalemate
resulting inaction persists, sounds like the title of a movie
from a few years ago, ``No Way Out.'' Not even those companies
who see substantial economic risk from future compliance
liability will have any options or tools for managing the risk.
Finally, Mr. Chairman, let me close by saying that like
many, if not all members of this committee, the Environmental
Defense Fund believes that the greatest opportunities to make
discoveries about true costs, about cost savings and about
technological innovation are created when the resources of the
private sector are engaged in market based incentives. This is
precisely the strategy that would be embodied in the credit for
voluntary action program. It's voluntary, it's market based, it
can provide certainty where none now exists. It can let the
market work. We strongly encourage this Congress to make that
possible. Thank you for the opportunity to be here and of
course I would be happy to answer questions.
[The prepared statement of Mr. Krupp follows:]
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Mr. McIntosh. Thank you, Mr. Krupp. And we will get to
questions after the end of the panel presentations.
Mr. Palmer, welcome to the committee, and please share with
us a summary of your written remarks.
Mr. Palmer. I appreciate it, Mr. Chairman. I want to
congratulate you on your leadership on this important issue.
Let me briefly describe who I am here representing today,
Western Fuels Association. I am CEO of it. Western Fuels is a
coal cooperative. We are owned by rural electric cooperatives
and municipal electric utilities. These utilities put in coal
fired power plants some 15 and 20 years as the result of
project energy independence in the Carter years. They have
invested billions of dollars in these assets. The Rio Treaty,
the Kyoto Protocol, the Chafee early action legislation are all
designed to curtail the utilization of coal as a boiler fuel in
the United States. And that's what brings me to the committee
My message to the committee today is a very simple and
straightforward one and it is this: I think what's happened in
the last 5 years with the development of the Internet and the
telecommunications revolution and technology that surrounds it
may very well moot the issue of the Rio Treaty and Kyoto
Protocol. The growth of the Internet is now generally
recognized. Indeed very recently the Commerce Department
produced a study called the Emerging Digital Economy II. It's
an excellent study. I have it here in front of me. I refer to
it in my testimony. It's 42 pages of detailed information on
the explosive growth of the Internet in the United States and
abroad. Intel's vision is for a billion people to be connected
on line within the next 5 to 10 years. That would entail not
only a billion people but tens of millions of businesses doing
E-Commerce on line. The next 50 years the world's population is
projected to grow to some 10 billion people. So in the next 50
years we will have well in excess of a billion people on line.
The people that we work with on energy matters we went to
them and asked them what the electricity implications of this
means with respect to the explosive growth of the Internet. And
I would note here that the Department of Commerce left out a
huge part of the examination in their study. Nowhere in this
study will you see any discussion about the electricity
implications of the growth of the Internet. It's simply not
there, and it's something that needs to be addressed.
Our preliminary work suggests, Mr. Chairman, that for a
billion additional people to be connected on line worldwide
would require the installation of generating capacity in the
world equal to what exists in the United States today. That's
not going to be solar and it's not going to be wind and it
isn't going to be biomass. It's going to be primarily coal
fired electricity and natural gas. This discussion we're having
today over global warming or the threat of catastrophic global
warming is one that began in 1988 before the Internet emerged.
The Internet didn't emerge until 1995. It is now becoming clear
that the Internet is going to cause a tidal wave of electricity
demand worldwide that will result in more and more carbon
dioxide emissions going into the air, created by human beings.
Whether the Environmental Defense Fund, the Sierra Club, the
Natural Resources Defense Council, the Clinton administration
or anybody else likes it or not, it's going to happen, and the
impediment to the Internet and the development of the American
economy will only come from our own government if we make
another major mistake in energy policy the way we did in the
1970's with the Fuel Use Act and stand in the way of the market
that is developing this wonderful technology and the energy
assets that are required worldwide to serve it. For that
reason, Mr. Chairman, we oppose the Chafee early action
legislation. We oppose the Kyoto Protocol, and we believe that
the Rio Treaty will be soon recognized to be an anachronism.
In closing let me say this. There have been references to
the science here today. I'm not going to talk about it. I have
my own views on it. I think the science is bogus on the
question of catastrophic global warming. Of course people are
going to impact climate. No question about that, no argument
from me. That's not the issue. The words of the Rio Treaty,
however, focus on dangerous interference with the climate, not
will there be any climate change by humans. Of course we change
the climate. We impact the climate. But there has been no
science suggested, developed, examined, or underscored by any
of the environmental groups, by any of the government agencies
that are involved in it, by any of the governments that are
involved in the U.N. deliberations that should or could deny to
the American people the robust utilization of fossil fuels as
our economy has enjoyed over the years.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Palmer follows:]
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Mr. McIntosh. Thank you, Mr. Palmer, and I will have a
couple questions for you when we get to that session. Our final
witness on this panel is Mr. Fay. Welcome. Please summarize
your written remarks and we'll put them entirely into the
Mr. Fay. Thank you, Mr. Chairman. My name is Kevin Fay. I
serve as executive director of the International Climate Change
Partnership, the coalition of U.S. industries and associations
as well as international associations interested in the policy
development process with respect to global climate change, and
we appreciate the opportunity to be here today. We were
organized in 1991. We're one of the largest industry coalitions
in the world dedicated to this issue. We have consistently
stressed the need to provide legally binding assurances that
voluntary actions to reduce greenhouse gas emissions be
credited in the event any future mandatory scheme is to be
adopted by the government.
It's been suggested that supporting credit for early action
may unwittingly create support for the Kyoto Protocol or that
instituting a credit for early action program is tantamount to
implementation of the Kyoto Protocol. We do not agree. ICCP
believes that the Kyoto Protocol is incomplete and should not
be ratified in its current form and should not be implemented
without the advice and consent of the Senate. While the treaty
does make a good start, we believe, in establishing a market
based framework for addressing the issue on a global basis, it
is a work in progress. It sets ambitious targets to be met in a
most difficult timeframe and does not yet provide for
developing country participation. Further, the treaty
negotiators have also failed to yet identify an appropriate
long term objective.
We believe that credit for early action legislation can and
should be Kyoto Protocol neutral. Regardless of the fate of the
treaty, investments made in energy efficiency, in the reduction
of greenhouse gas emissions should be legally protected if and
when any mandatory program is implemented. The predicate for
this stems not from the Kyoto Protocol but from the Framework
Convention on Climate Change which the United States signed
during the Bush administration and sent to the Senate and was
ratified in 1992. This agreement is what establishes 1990 as
the baseline for measuring greenhouse gas emissions and also
requires signatories to make measures to reduce them.
Responding to this commitment and to the subsequent U.S.
climate change action plan, many companies have already taken
steps to reduce their greenhouse gas emissions. Enactment of
credit for early action legislation represents in our view open
door compliance with the Framework Convention and sends a
positive public policy message that those who acted in response
to this national commitment will not be penalized. Companies
that have already taken action or are contemplating doing so
want to ensure these contributions are not ignored if and when
a mandatory phase of emission reductions begins. Failure to
recognize these contributions could unfairly force companies to
make even greater reductions through increasingly more costly
options. This would have the perverse effect of penalizing
those companies who acted early. Assurance of baseline
protection is an important step in this process. In addition to
removing existing disincentives to action, a credit for early
action program could provide an additional incentive for
technical as well as policy innovation. Now is the time to
experiment with the broad range of options and to more
precisely determine the costs and benefits of various
opportunities for reductions.
This type of experimentation and innovation, which only
occurs in the United States, in terms of dealing with these
issues in our view not only spurs economic growth but could
provide an insurance policy against truly wrenching economic
impacts in the event that much deeper cuts in the emissions
were to becoming necessary in the future.
Finally, while many have touted the success of market based
mechanisms in reducing environmental compliance costs, the fact
remains that our experience with such mechanisms is very
limited. An active credit for early action could provide useful
experience and educate both government and industry alike as to
policies that perhaps should be avoided. It has been argued
that small businesses and farmers will be hurt by a credit for
early action program. Again we do not agree. ICCP is currently
encouraging a simplified approach to credit for early action
that will allow small businesses to participate with minimal
administrative or bureaucratic burdens. Discussions have also
included the issue of credit for changes in land management
practice that could allow farmers to participate. In addition,
the program should create a market for the technical
innovations that are often made by small entrepreneurial
companies. And last but not least we should keep in mind that
is an entirely voluntary program. There are no mandates for
small business or farmer participation.
We believe the precedent for crediting early action was
established in the 1990 Clean Air Act Amendment when companies
who moved early on sulfur dioxide emission reductions received
additional consideration in the subsequent sulfur trading
program. Drawing on the statutory precedent is important for
the climate change issue. However, given the scope of
industries covered and the enormous task to be undertaken, the
government should go on record now by developing experience in
advance of any regulatory requirements.
The United States is on record in support of a responsible
action to address greenhouse gas emissions. We have ratified
the Framework Convention on Climate Change. Congress has funded
a variety of activities under the climate change action plan,
and other significant government programs. It is not
unreasonable to request assurance from the government these
activities, whether past or in the future, not place the
voluntary actors in future regulatory jeopardy. There are a
number of legislative proposals that seek to address this short
term aspect of climate change policy. We commend S. 547,
introduced by Senators Chafee, Lieberman and Mack and others,
to create--to eliminate these disincentives and provide credit.
We commend the efforts of Senators Murkowski and Hagel in
their legislation to compel more systematic attention to the
long term challenge of climate change and to focus on the
necessary role of research and technology in meeting that long
term challenge. We also commend the newly introduced
legislation by Representatives Lazio and Dooley to help advance
the debate on these issues in the House. None of these
initiatives meet all of our objectives but we are committed to
working with the appropriate parties to address these concerns,
such as provision for growth and product coverage.
We believe it is time to start forging a bipartisan
national strategy for addressing the climate change challenge.
That strategy should begin by liberating the leadership, which
Jack Kemp called for earlier in his testimony, of U.S. industry
in this global cause. U.S. industry will be a major player in
developing technologies to reduce greenhouse gas emissions,
making investments in equipment, facilities and products, and
generating reductions in their operations. Enactment of
legislation that removes disincentives for early action and
that preserves investments already made will help to retain our
competitive edge and provide significant economic and
environmental benefits for our Nation as well as for the world.
Thank you very much.
[The prepared statement of Mr. Fay follows:]
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Mr. McIntosh. Thank you, Mr. Fay. And let me say that Mr.
Kucinich had to go to Rules Committee about an amendment he is
putting forward and will try to be back, but he wanted everyone
to know that is why he's not here right now. My first question
is to Mr. Fay, and picking up on your closing statement, are
you saying that American businesses will not take leadership in
reducing emissions without the type of incentive provided by
the early action credit program?
Mr. Fay. I think the American business is taking leadership
every day in developing technologies every day, but the fact
remains that what's happened with the passage--with the
ratification of the Framework Convention and the establishment
of 1990 as the baseline for measurement of any future action on
climate change--it potentially puts any actor in jeopardy if
their economic activity has increased, even if they have
tremendously reduced their emissions, if in fact a future
regulatory program is adopted that establishes a different
baseline. No. 1.
No. 2, that baseline, 1990, is starting to get pretty far
away. What most business are finding, it is tremendously
difficult to go back and even produce a significant data base
to establish what the emissions were at that point. And so it
is time to get experience with what are the emissions that are
occurring for those entities, and how do they measure that. We
don't have a good handle on that.
Mr. McIntosh. So to solve both of those problems you don't
need a credit, you need a baseline.
Mr. Fay. We think at a minimum as a credit for early action
it should be some baseline action or baseline assessment
Mr. McIntosh. Which seems reasonable--to find out exactly
how many emissions we do have. Very different beast than a
credit program. You think in the absence of a credit program
that businesses would reduce their level of experimentation
with new technologies?
Mr. Fay. I think that it's not a question of whether they
would reduce their experimentation. I think it's a question of
whether they would take overt steps different from their
businesses as usual course. We're innovating all the time.
That's not a question. Could it affect product implementation?
Perhaps it could, yes.
Mr. McIntosh. What do you mean by affect product
Mr. Fay. If it could affect the investments that achieve
say short term changes versus research in the longer term,
technological evolution, that most would suggest, if you agree
with the climate change theory, are going to be necessary in
order to reduce the emission concerns.
Mr. McIntosh. Which way does the credit program change
Mr. Fay. We think the credit program eliminates both
disincentives and possibly creates some incentives. I think it
works first toward eliminating disincentives for some of the
short term actions.
Mr. McIntosh. OK. So with the credit program you'll have
more short term actions and fewer long term investments in
Mr. Fay. I think you'll be more willing to take some
shorter term actions that may be marginal.
Mr. McIntosh. OK. And then finally, the commitment that
your members have made to reducing emissions, will that be
lessened in any way if there's not an early action credit
Mr. Fay. It's not a question of whether it will be
lessened. It's a question of whether the impression is that
they feel as though they're being placed in a position of
future regulatory jeopardy. If they take steps to reduce----
Mr. McIntosh. Before we get to that, when you say it's not
a question, does that mean the answer to the question is no?
Mr. Fay. Repeat the question again.
Mr. McIntosh. Will your members do less or have less of a
commitment to reducing greenhouse gas emissions if we don't
pass an early action credit program?
Mr. Fay. I think it does affect short term investment on
marginal investment, yes.
Mr. McIntosh. So some of your members will in the short
term do less to reduce their emissions.
Mr. Fay. I think it's a question of where they apply their
capital. It could affect where they apply their capital.
Mr. McIntosh. And that could lead to fewer----
Mr. Fay. In the short term, yes.
Mr. McIntosh. Which of your members would reduce their
Mr. Fay. Well, I will not get into speaking for individual
company decisions on capital investments decisions.
Mr. McIntosh. So you don't know of any that would do that,
you think there might be some.
Mr. Fay. No, I will not get into speaking for individual
company investments decisions. I would be happy to come back
and talk with you on that. I'm not prepared to address that
specific topic in terms of those companies today.
Mr. McIntosh. OK. And we have unanimous consent to keep the
record open. Why don't you give us a complete answer to that
within the next 10 days so we can put that into the record.
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Mr. McIntosh. The reason I've asked you these questions is
because I want to know what behavior will change versus what
desire there is for people to make money. Because it strikes me
that when companies make money off of an early action credit,
somebody else is going to have to pay for it in the future in
terms of taking even greater reductions that they may make at
some future date.
Mr. Fay. I don't think we're suggesting that we're trying
to make money on early action credits. I think what we are
suggesting is we don't want to be in a position of creating
again, regulatory jeopardy in the future if their actions, if
their actions that were taken today don't count 10 years from
now. But the question is would they.
Mr. McIntosh. But the question is would they not take those
Mr. Fay. And I would have to suggest that there are actions
that may not be taken today.
Mr. McIntosh. That's what I would like you to supply for
us--some concrete examples of that. Let me now turn to Mr.
Palmer. I've got a question for you. You mentioned the
Internet. Have you seen any projections in terms of the
percentage of the electricity generated that will be used by
the Internet say 5, 10 or 15 years out?
Mr. Palmer. If you take the historical path, the studies
that we did with the Internet begins with coal. And these are
preliminary conclusions because no one has looked at this, and
I might just add as a digression here I think it might be very
useful for this committee to ask the GAO to take a look at
electricity implications of what Congress has done here and the
administration itself. We have to answer these questions if
we're going to grow the Internet because you need electricity.
But the preliminary conclusions in our study, the ``Internet
Begins with Coal,'' is that current U.S. demand is about 8
percent as related to the Internet. And 30 to 40 percent of all
increased U.S. demand since the Internet became a big thing,
1995, the growth and electricity demand is related to the
Internet. It you take that and extrapolate it there are about
60 or 70 million Americans on line today and there are a total
of 150 million people approximately on line worldwide. You
could come up with some numbers with respect to what happens
when you go to a billion.
Now, the conclusion that we have in our report is that when
you go to a billion, worldwide, you need electricity generating
capacity equal to what's on the ground in the United States
today and what is on the ground in the United States today is a
very large number. We burn a billion tons of coal in the United
States today in power plants.
Mr. McIntosh. Per year you said.
Mr. Palmer. Per year, 1 billion tons. In close to 500 power
plants. I'm suggesting, Mr. Chairman, that it is going to swamp
all of the policy experts' projections with respect to
electricity demand. It makes people like Amery Lovins, who made
his living preaching negawatts, and it makes him yesterday's
news. The notion that we are going to conserve our way to a
brighter future is nonsense. You have to burn fossil fuels to
make electricity and the coming demand worldwide because of the
Internet is enormous and it's not stoppable.
Mr. McIntosh. I'll have to think a little bit to wrap my
hands around the billion or----
Mr. Palmer. Billion people on line.
Mr. McIntosh. Speaking in the United States you indicated
there were about 60 million people connected to the Internet.
Mr. Palmer. 60 to 70 million are the numbers I see most
Mr. McIntosh. What are the projections for the number of
people ``on line'' in 5 or 10 years?
Mr. Palmer. Our growth is actually projected to be
percentagewise not as great, so we might go to 150, you might
get a little over a doubling, but it's the rest of the world
where the growth is going to be the greatest. But even in the
United States the growth will be dramatic.
Mr. McIntosh. And so if it doubled the number of users does
that mean, is it fair to say that Internet-related electricity
demand goes from about 8 percent to about 15 percent?
Mr. Palmer. I think that's right. Well actually it depends
on what happens to the rest of the economy. And this isn't in
the study, but I do think we see it in our business that the
Internet driving, the economy through the new startup companies
in the Internet. You see it with young people that you know,
maybe members of your family that go to work for the dot coms.
I have a daughter who has done that, the startups, the boutique
firms. It's happening everywhere all the time. This
extraordinary growth in the U.S. economy that we have is
nationwide and it tends to be very even no matter where you go.
I believe it is related to that. So if you have more economic
growth generated by the Internet, then the Internet itself,
those numbers may change. But I would say it would be safe to
conclude that if you have a doubling of people on the Internet
in the United States that the electricity supply required for
the Internet would go to 15 to 20 percent based on the study,
this preliminary study we've done.
Mr. McIntosh. Just so I can again get my hands around that
billion people figure, the electricity that you said required
to fuel that will be equal to the amount produced by the United
Mr. Palmer. Yes.
Mr. McIntosh. What percentage will that be assuming a
static amount of electricity used for other purposes for
Mr. Palmer. The United States today is 25 percent of the
total electricity demand worldwide. We are criticized for this
by the way. The environmental community thinks we live too
well, that we need to cut back the way we live. That we need to
change the way we live. We use by far more energy than any
other society on Earth. We're 25 percent of that total. So if
you double worldwide production, in the next 5 to 10 years
because of the billion people that Intel says are going to be
on line, 1 billion additional people, you're adding an
increment of 25 percent to worldwide electricity demand by
definition. And I think that probably is going to understate
it, which is going to be a lot of CO2 in the air.
Mr. McIntosh. From the Internet. So therefore between 20
and 30 percent, we would have to work out the math, of
worldwide electricity consumption in the future will go to the
Mr. Palmer. Will go to the Internet.
Mr. McIntosh. And Internet-related demand currently is a
very small percentage.
Mr. Palmer. Right now it's a very small percentage.
Mr. McIntosh. Thank you. I wanted to get in my own mind
where we were headed with that and what the magnitude was. I do
have a couple more questions but let me turn now to Mr. Terry
see if he has any.
Mr. Terry. The new motto is recycle, reuse and log off?
Mr. Palmer. That's it. We're going to ration Internet
access. So put in for your time slot.
Mr. Terry. Well, I'll remember that when I want to check
out the Huskers Web site the next time out. For the
Environmental Defense Fund, there's no reason for you to just
sit there, let me ask you a question. One of my concerns in
this allocation is who are the winners and the losers by way of
big business versus small businesses. I missed the first part
of your testimony, but I know that you've hinted about it and
or discussed it in your written testimony. Let's talk about it
a little bit more.
The crediting program would if reallocate the compliance
credits from firms that don't act early to those who do--I
think that's the way it works--you nonetheless maintain that
small businesses would enjoy some form of economic benefits,
that the overall burden on the national economy would be less.
I'm getting lost on that to tell you the truth. For one, it
assumes that small businesses would not be able to compete in
this, which is probably an accurate statement. But also it
seems to recognize that they would benefit because of what I'll
call a ``trickle down theory.'' But I'm getting lost how
they'll benefit from that. Perhaps you could explain to me how
small businesses that wouldn't be able to compete for these
will enjoy this benefit?
Mr. Krupp. Absolutely. That's a very fair question and a
good one. I think what you're really asking is a design
question. Can you on the Hill together with those in the
private sector design a system that allows small business a
level playing field and equal access to participate. I'm
confident that you can. In fact the proposal that was
introduced yesterday by Congressman Lazio and Congressman
Dooley and about 10 other Congressmen does allow small
businesses to play and allows small businesses to earn these
credits through a variety of means, first of all by making
sequestration credits available. It's easy to see how
sequestration credits could be monetized and parceled out and
purchased by small businesses. Second, it facilitates the
playing by small businesses which would be expected to face
higher transaction costs by allowing a pooling concept, a bunch
of small businesses, associations of dry cleaners could get
together, associations of any sort could get together and pool
So, in terms of the premise that it's important that small
businesses be allowed to play, I completely agree. And I think
there are ways through intelligent design that a good credit
for early action bill can anticipate that and I would include
the proposal by the Congressmen introduced yesterday in that
I would say that you're quite right that as the expected
emissions growth goes down because there are incentives to make
that business as usual curve go down, the burden on the whole
economy, including small businesses, would go down. So that is
yet another advantage.
Might I mention that I've become aware of an enterprise in
Iowa recently, Sherwood Forestry, a couple of enterprises,
actually, Americo 2 and Sherwood Forestry, both of which are
small businesses devoted to working directly with farmers to
harvest carbon dioxide sequestration credits on a strictly
business basis. Now, our information is that one of these
businesses is working in cooperation with the Iowa Farm Bureau.
This is the sort of participation not only by small
conventional business, but also by small farmers and farming
businesses that Senator Lugar, actually a Republican from your
home State, as you know, Mr. Chairman, of Indiana--he has
actually introduced a bill on the Senate side to facilitate
such transactions to allow more small farmers to play. It's
really a design question and a very legitimate concern, and one
that can be addressed.
Mr. Terry. I appreciate that. Even though I represent an
urban area of Omaha, NE, it's a rural State. Our Farm Bureau
was in here asking for $14 billion in bailout because of the ag
economy. I was wondering how they are going to pool those
resources. Maybe the government should just go ahead and buy
the credits for them. I am still at a loss of how small
businesses are going to be able to accumulate the assets to
participate and play in this.
Let me go on, though. I want to ask Mr. Fay one question
here. One of the ICCP's credit for early action principles is
no limit should be placed on the amount of emission reductions
or enhancement of things for which early action credit could be
earned. But all of the experts--the Center for Clean Air
Policy, the Pew Center, Resources for the Future--acknowledge
that the early action program would reallocate Kyoto budget
period credits from those who do not act early to those who do.
This principle seems downright greedy. In fact, someone might
even suspect the ICCP advocates of early action crediting
because ICCP member companies expect to corner the market. Fair
Is that a reasonable suspicion or not in your opinion?
Mr. Fay. It's not a reasonable suspicion at all, Mr. Terry.
The reason that we have said that there shouldn't be any limits
is because if entities are able to produce verified reductions,
there is no legitimate reason, in our view, for them not to be
credited with those reductions. That doesn't deal with the
issue of--what we have set as one of our principles is that you
should be credited with the reduction.
We are not saying that the value of the credit should be
determined at this time. That will be determined when
ultimately the Congress gets around to adopting some future
programs. So there shouldn't be a question of whether you have
earned the credit, did you actually reduce the ton. But what
that is precisely worth, that is not going to be decided until,
if and when there is a mandatory program.
But you shouldn't start discounting credits. If an industry
has taken steps and reduced a million tons of carbon, they
ought to be credited with reducing a million tons of carbon.
It's pretty silly to start discounting that now.
If you have got to the point where there was a mandatory
program, you might be limited in how many of those credits you
could use at one time. That perhaps might be a reasonable
proposal. But if the incentive is to encourage taking steps to
reduce tons, it is--it would be a silly exercise, particularly
at this stage in a voluntary program to start saying, well, you
can't have credit for--you can only have credit for half of
what you actually did. That, as an exercise, is--in our view,
is pretty silly.
It is not a question of trying to corner the market to
other people's disadvantage. We would like to see those credit
programs be designed ultimately to establish the fact that the
reductions occurred and not ultimately to disadvantage any
future actors if there is a mandatory program. We are not
saying there should be a mandatory program in the future.
Mr. Krupp. Congressman Terry, if I might add, the idea that
big businesses may stand to gain more credits, if you look at
the fact, if we are trying to bend down the business's usual
curve, big business who are the big emitters are the ones that
we are trying to incent. So if one thinks climate change is
real or may be real, if one thinks there are risks to the U.S.
economy by allowing the curve to continue and face regulatory
action in the future that would be harsher if we don't bend
down the curve, then, yes, the idea is to come up with a system
that will get big emitters to emit less. So I would acknowledge
that to you.
I would also note, though, that the United Kingdom, Canada,
New Zealand, Norway, Denmark, in their highest levels of
governments and their parliaments are moving ahead to establish
these programs. When you think of the benefits that would
accrue to their economies as they develop new technologies, new
ways to power the Internet with less energy, new ways to have
more efficient cars, it becomes a real risk that if we don't
adopt a similar system, we will be left behind competitively
from a competitiveness standpoint. That troubles me.
I see this proposal as a very modest proposal in view of
Mr. Terry. Let me give you the forum here.
Mr. Ridenour. I would like to throw in my 2 cents here. It
has been suggested that this emissions crediting system would
allow us to spread out over time and avoid the wrenching
consequences of Kyoto. It is an insurance policy, we are told.
But they wouldn't allow us to avoid these wrenching
consequences. Early crediting would simply redistribute them as
you have wisely suggested, to small business. The plain fact of
the matter is that small businesses don't have the kind of
lobbying power here in Washington, DC, to be able to get early
credits. The Kyoto Protocol, as you have also suggested and
groups such as the Pew Center have suggested, requires that any
credit that is given by the President of the United States,
would have to come out of the total that is allowed for the
United States under the Kyoto Protocol. That's assuming, of
course, that there aren't changes to the Kyoto Protocol. But
right now as it stands, it would come out of our allotment.
That is something that should concern us a great deal.
Remember, small business creates two-thirds of all new jobs in
this country. We are talking about competitiveness here.
I also want to point out that if we are really concerned
about people who are disadvantaged in this country, blacks and
Hispanics, we can't possibly support early action crediting.
What kind of businesses do you suppose they have? They are
small businesses. We should not snuff out their chance at the
Mr. Terry. I have got some folks in my office, but this is
fun. Can I have one more question?
Mr. McIntosh. Sure. You have been with us diligently all
Mr. Terry. Getting back to Mr. Fay, I guess we are going
right to left from our perspective at least. In your testimony,
you write that, ``the failure of the credit voluntary emissions
reductions could, unfairly,'' force early reducers to make more
costly reductions later.
But isn't this a problem of your own making, a problem
groups like the ICCP have brought upon themselves by promoting
the concept of a mandatory global treaty?
Mr. Fay. I don't think that I am going to characterize us
as promoting a mandatory global climate treaty. We were
organized to provide what we consider to be responsible input
into a policy process. We have attended all of these
It is pretty amazing to go to a negotiation for 10 years to
watch 170 countries, including our own government, including
Republicans and Democrats, and there is no country opposed to
dealing with climate change. So if you want to look big
business in the eye and say, well, climate change isn't an
issue, it would be pretty hard to convince them of that based
on the activity that we have seen to date.
We do believe that there is some compelling scientific
concern out there that this is an issue that is going to be
dealt with. We also believe that technology, hopefully, will
deal with this problem or survive the policy processes so that
technology can deal with the problem. We think that we are
going to have the technology solutions to do that.
But there is no question the policy process is moving on
ahead and no one seems inclined to say there is not going to be
a climate change policy. What we are saying is, if you are
going to do this, it should be done on a market basis. Every
economic study that I have seen says that the market-based
approach reduces costs 40 to 80 percent. But if you are going
to do this, that's a policymaker's decision. And at the same
time we should try to do this as cost effectively as possible
so that we can manage our way through this and so that we can
introduce the technologies to achieve the objectives that,
frankly, the policymakers have yet to identify.
Mr. McIntosh. Thank you for joining us, Mr. Terry; I
I do have a couple of more questions, just following up on
Mr. Terry's and our earlier discussion, Mr. Fay. Am I incorrect
in understanding that one of your core concerns is the fairness
of the baseline that gets established in the future? Would that
concern be solved if either at the time the protocol is
ratified or as a separate policy statement in advance of that,
the Senate and Congress agreed that when they establish the
baseline for compliance they will adjust from 1990 forward,
based on what industry changes has happened?
Mr. Fay. That goes a long way toward addressing our
concerns, yes. I would also be willing to accept Mr. Kemp's
offer of a tax expensing provision in lieu of a credit, if they
would like to do that, too.
Mr. McIntosh. Well, I will tell you my concern about an
early action credit program goes way down when the credit that
is received is a tax credit or even a credit against other
environmental compliance, because you don't have these perverse
incentives in the policy debate on Kyoto. That's really a
timing question. Once the decision has been made by the Senate
to ratify that treaty then, sure, have the credits for actions
that are already established policy. OK.
Mr. Fay. Let me just say, though, that we started talking
about credit long before there was a Kyoto. We don't see this
as Kyoto driven. The problem is the Framework Convention that
we ratified and is the official statement of the United States
on climate change: that climate change is a problem, that 1990
is going to be our baseline and we have made a national
commitment to reduction measures and, now, all of the
discussions about mandatory programs in the future. Well,
between 1990 and whenever we get to that mandatory program,
things are going to change. Companies like Intel, the
semiconductor industry is five times the size they were then.
Mr. McIntosh. You read ``Kyoto'' as a shorthand for
mandatory requirements in the future, which I don't think is
established policy of the country.
Mr. Fay. No. I am saying that our credit protection
discussion is not--our opposition is not based on the fact that
Kyoto is out there. It's based on the fact that all of the
discussion that we have seen on climate, every indicator that
we have seen is that at some point somebody is going to propose
a mandatory program. We are not saying that we want a mandatory
program. We would love to do it on a voluntary basis if we
Mr. McIntosh. Let me be clear, my concern about a program
for early action credit is giving you credit toward any future
mandatory program because it creates perverse incentives for
adopting that policy. Credits toward other things, such as tax
credits, I am happy to do; I think that makes sense. You create
incentives for people to do something that is socially useful.
That's assuming the science is correct or assuming, as Mr.
Krupp pointed out, that in uncertainty you want to take some
Thank you. I think that you have cleared up in my mind the
different concerns that your group has, although I really would
like some of those specifics that we talked about.
Mr. Krupp, let me ask you, have you had a chance to see a
story--I think it appeared today in the GreenWire, titled,
``Critics say EDF tainted by association with ERT?''
Mr. Krupp. I have.
Mr. McIntosh. You haven't seen that?
Mr. Krupp. I have seen that.
Mr. McIntosh. So you are familiar with it. Some critics say
that EDF would profit from the policy of which it is a leading
supporter, essentially this early action credit policy. Now,
some people believe that EDF was the chief outside consultant
in developing some of the language of that legislation
specifically over in the Senate. Is that perception a correct
Mr. Krupp. I think EDF was one of a series of constituent
groups that participated in discussions that led to the Senate
Mr. McIntosh. Did you work at all or did EDF work at all on
the measurement and verification section?
Mr. Krupp. I am sure we consulted on the entire bill.
Mr. McIntosh. I assume that you are familiar with this.
That section would permit qualified independent third parties
to measure, track, and report emission reductions on behalf of
participants. You are more familiar with this legislation than
I am, having consulted and given opinions to the Senate in its
drafting. What type of organizations are qualified to measure,
track, and report emissions reductions and would EDF or
Environmental Resources Trust or EEI, I guess, would any of
those entities fit the description of qualified independent
Mr. Krupp. Let me--EDF, I am told, would not fit the
description. It's unclear whether ERT would or not. Perhaps it
would be useful, Mr. Chairman, since you have raised the
question if I--I understand it is a legitimate question to ask
when the money is involved, what is going on--if I explained a
little bit about ERT and EDF.
Mr. McIntosh. I'm sorry, Mr. Krupp, but would you repeat
Mr. Krupp. Since you have raised this issue, perhaps you
would like me to explain, and I would appreciate the
opportunity to explain a little bit about EDF's role and ERT's
Mr. McIntosh. Absolutely. In fact, that was going to be my
next question. Please do.
Mr. Krupp. I think when money is involved people have a
right to ask questions. I don't take offense at people asking
tough questions of us, just as we ask tough questions of
ourselves and others. Especially since there are folks who
don't like emissions trading to begin with, I can understand
why these questions would be asked.
Let me make three points----
Mr. McIntosh. Also, if I can interject, so you know where I
come from, I like the concept of emissions trading in general.
I commend what EDF has done in some of the other areas, in acid
rain and any other policy areas. So it's not an automatic that
I'm opposed to those types of ideas. I tried to explain earlier
some of the factors that lead me to be concerned about this
particular legislation. But you are right, there are probably
some people out there who are opposed to----
Mr. Krupp. I appreciate that, Mr. Chairman, that you were
part of the Bush administration that came up with the historic
innovation of acid rain emissions trading, and I am very
appreciative of that. But the Environmental Defense Fund's
advocacy of these market-based solutions, as is illustrated by
that particular example, when we advised the White House--and
``advised'' is the right word in all of these cases--about how
to establish a market-based policy for acid rain is part of a
long tradition at the Environmental Defense Fund of believing
that market-based solutions offer flexible opportunities to get
performance, get environmental benefits.
We have worked with legislators on water marketing in
California, part of the Miller-Bradley act that was enacted at
CDPIA. We have worked with companies from McDonalds to--as
various as from McDonalds to British Petroleum on various
voluntary programs to get environmental gains, just as we have
continued to litigate and engage a whole wide variety of tools.
So at no time has the Environmental Defense Fund's advocacy
been affected by the fact that a couple of years ago we did
help to create an independent 501(c)3 organization whose
mission, I might say, is my second point, is also environmental
protection. The whole concept that there is a supposed conflict
of interest between two independent 501(c)3s, both nonprofits,
both with environmental missions, one that chooses advocacy and
one which chooses transactions, strikes me as odd. I just don't
see it. But to the extent that the Environmental Resources
Trust ever earns fees or revenues that exceed expenses, as I
understand their operations, those revenues would be plowed
right back into environmental projects. In no case will funds
ever flow from the Environmental Resources Trust to the
Environmental Defense Fund.
My third and final point is that because the missions of
these organizations are both environmental missions, because
both organizations believe in market-based transactions, I
think the fact that EDF has a continuing relationship and that
three of our staff members serve on the board of Environmental
Resources Trust is a useful confluence that allows for
synergies because if one believes that these market mechanisms
are good ways to achieve environmental progress, as we do, then
having the ability to work with an organization that is doing
demonstration transactions like ERT is good from the
perspective, my perspective as head of the Environmental
So I don't see the case for a conflict; I see a real
confluence. But there are no revenues that are going to flow
back to the Environmental Defense Fund from this whatsoever.
Mr. McIntosh. OK. You have addressed the conclusion which
that article moved toward, and I am glad that you were able to
put that on the record. Let me, though, ask you a couple of
questions about ERT. I think that I understand the difference
between EDF and ERT. You are telling me they are separate
entities with some overlap on the board, and you EDF helped ERT
to get started, but they are run as independent organizations.
You may not be able to answer some of my questions about
them, but let me ask you if you know. Does ERT have contracts
or memorandums of agreement to monitor and certify emissions
reductions with any company at this point, particularly any
Mr. Krupp. Yes.
Mr. McIntosh. They do? Do you know what that arrangement is
and what that company is?
Mr. Krupp. The company is Niagara Mohawk.
Mr. McIntosh. What is the nature of that memorandum of
understanding and, in particular, how is ERT compensated for
providing the monitoring services?
Mr. Krupp. It's--there is compensation for the reporting of
emissions that is provided to ERT by Niagara Mohawk under that
Mr. McIntosh. And I think this came from a press release
from ERT, but they were to receive some of the compensation as
a commission on reductions sold or transferred, is that right,
and then some emissions credits themselves?
Mr. Krupp. That was discussed but, no, that is not the way
that it works.
Mr. McIntosh. OK. Share with me then how it does work.
Mr. Krupp. I think I just did. There is straight monetary
compensation for the provision.
Mr. McIntosh. OK. It's a flat fee that they are paid?
Mr. Krupp. Yes.
Mr. McIntosh. OK. And they are capable of entering into the
business of monitoring those emissions credits for which they
understandably would ask for a fee to do that work?
Mr. Krupp. Yes.
Mr. McIntosh. Let me ask this.
Mr. Krupp. Mr. Chairman, I guess the services that are
provided really are reporting as opposed to monitoring. ERT
would have to interact with others who would do the monitoring.
Mr. McIntosh. So the company or monitors--they hire someone
else to monitor, and the ERT certifies that they are correct?
Mr. Krupp. Essentially, yes. An independent public registry
is provided by ERT.
Mr. McIntosh. Based on my experience in the Bush
administration that you referred to, an independent registry
gives people a great deal of comfort that, in fact, reductions
are occurring. I understand the purpose of it.
You can understand, I think, dealing in public policy as
you do, the concern that arises that there would be, if not an
actual monetary benefit to the Environmental Defense Fund, an
appearance that there may be a potential here to benefit from
Would you support language being added to the legislation
that prohibits companies or charitable organizations, whatever,
from receiving compensation other than compensation for the
monitoring service from those individuals or those entities
that they monitor? In other words, people with conspiracy
theories could construct a scenario where ERT is monitoring
Mohawk and Mohawk is also approached by EDF for a financial
contribution. Would you agree that it would be important, to
maintain the integrity of the legislation, that that be
Mr. Krupp. I think there is a simpler solution, Mr.
Chairman. Environmental Defense Fund doesn't accept
contributions from anyone that emits. We have never accepted a
corporate contribution from a utility or manufacturer, period.
Mr. McIntosh. So yours are more broad in avoiding that
appearance of conflict?
Mr. Krupp. I think that we have found, in effect, a
solution. We are not supported by companies that emit
pollution, manufacturing business and the oil business. Out of
our $30 million budget last year, I would be surprised if one-
tenth of 1 percent of our income came from corporate
foundations, and if so, I think Newman's Own gave us a gift.
Mr. McIntosh. Two questions then arise. I think that you
are correct in pointing out that that would solve the problem
for you. I assume that you would make pledges to not change
that policy if EDF or ERT entered into the monitoring business.
Mr. Krupp. We are not going to change that policy.
Mr. McIntosh. Given that, do you think that it would be
good to change the legislation so that other non-profit
organizations would have the same legal restraints that you
have adopted voluntarily?
Mr. Krupp. I would be happy to look at any suggestions that
you draft and comment on specific language.
Mr. McIntosh. Good. I appreciate that.
I appreciate your candor on this, and hopefully we have
given you the opportunity to respond to that article.
I have no further questions. Anybody else?
Mr. Ryan. Where is Jack Kemp?
Mr. McIntosh. Catching a football.
Mr. Ryan. I just want to apologize, Mr. Chairman. Like you
got dragged into an office with the Ways and Means chairman, I
did with the majority leader on some important issues--
important to Wisconsin. So sorry about being late.
Mr. McIntosh. Diary farmers?
Mr. Ryan. It has something to do with part of our daily
diet; let's put it that way. At this time I really have no
Mr. McIntosh. Thank you, Mr. Ryan. As I said, we will keep
the record open for 10 days. If the minority has any additional
questions, since Dennis wasn't able to get back, you can
forward those on to the witnesses.
Thank you for participating. I appreciate it greatly. The
hearing is adjourned.
[Whereupon, at 5:44 p.m., the subcommittee was adjourned.]