[Senate Hearing 108-929]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-929
 
      CLIMATE CHANGE--GREENHOUSE GAS REDUCTIONS AND TRADING SYSTEM

=======================================================================



                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            JANUARY 8, 2003

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation





                  U.S. GOVERNMENT PRINTING OFFICE
95-341                    WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001




       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
      Jeanne Bumpus, Republican Staff Director and General Counsel
               Kevin D. Kayes, Democratic Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on January 8, 2003..................................     1
Statement of Senator Brownback...................................     5
Statement of Senator Burns.......................................     6
Statement of Senator Ensign......................................    42
Statement of Senator McCain......................................     1
    Prepared statement...........................................     3
Statement of Senator Nelson......................................    40
Statement of Senator Sununu......................................     8
Statement of Senator Wyden.......................................     4

                               Witnesses

Claussen, Eileen, President, Pew Center on Global Climate Change.    45
    Prepared statement...........................................    47
Cogen, Jack, President, Natsource................................    51
    Prepared statement...........................................    52
Inslee, Hon. Jay, U.S. Representative from Washington............    11
Krupp, Fred, President, Environmental Defense Fund...............    56
    Prepared statement...........................................    57
Lieberman, Hon. Joseph I., U.S. Senator from Connecticut.........     8
Mahoney, Hon. James R. Ph.D., Assistant Secretary of Commerce for 
  Oceans and Atmosphere, Department of Commerce, and Director, 
  U.S. Climate Change Science Program............................    14
    Prepared statement...........................................    17
Overbey, Randy, President, Alcoa Power Generating, Inc...........    64
    Prepared statement...........................................    67

                                Appendix

Hon. John F. Kerry, prepared statement...........................    75
Response to written questions submitted by Hon. Ernest F. 
  Hollings to Hon. James R. Mahoney Ph.D.........................    75
Written response to additional verbal questions from January 8, 
  2003 hearing by Hon. James R. Mahoney Ph.D.....................    85
Response to written questions submitted by Hon. John F. Kerry to:
    Eileen Claussen..............................................    92
    Fred Krupp...................................................    98
    Randy Overbey................................................   103


      CLIMATE CHANGE--GREENHOUSE GAS REDUCTIONS AND TRADING SYSTEM

                              ----------                              


                       WEDNESDAY, JANUARY 8, 2003

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:30 p.m. in room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    Senator McCain. Good afternoon. The National Academy of 
Sciences has said, ``Greenhouse gases are accumulating in the 
Earth's atmosphere as a result of human activities causing 
surface air temperatures and subsurface ocean temperatures to 
rise. Temperatures are, in fact, rising. The changes observed 
over the last several decades are likely mostly due to human 
activities, but we cannot rule out that some significant part 
of these changes is also a reflection of natural variability.'' 
I want to repeat, that is the conclusion of the National 
Academy of Sciences.
    Over the last five years, the Commerce Committee has held 
several hearings on climate change. Two of the last five years, 
1998 and 2002, have been the warmest in terms of average global 
temperatures ever recorded. According to a recent report from 
the National Oceanic and Atmospheric Administration (NOAA), 
nine of the warmest years have occurred since 1990. As reported 
in the New York Times on December 31, 2002, many experts think 
it's more likely than not 2003 will either match or exceed the 
1998 average temperature record of 58 degrees Fahrenheit.
    Researchers at the University of Texas, Wesleyan 
University, and Stanford University recently reported in the 
journal, Nature, that global warming is forcing species around 
the world, from California starfish to alpine herbs, to move 
into new ranges or alter habits that could disrupt ecosystems. 
The report stated that there is very high confidence, defined 
as having more than 95 percent of observed changes which were 
principally caused by climate change, that climate change is 
already affecting living systems. The end result of these 
changes could be substantial ecological disruption, local 
losses in wildlife, and extinction of certain species.
    This and many other reports over the years have highlighted 
time and again the consequences of a warming climate system. We 
have seen the destruction of heat-sensitive coral reefs, the 
melting of glaciers at unprecedented levels, the increase of 
wildfires, and the spreading of diseases. A large German 
insurance company has estimated that global warming could cost 
$300 billion annually by 2050 in weather damage, pollution, 
industrial and agricultural losses, and other expenses.
    Our international partners, the states, and private 
industry are reacting to this challenge. For example, 
California has enacted legislation that will regulate tailpipe 
emissions of greenhouse gases. The European Union just recently 
approved an emissions trading system. The World Bank has 
estimated that greenhouse gas trading will be a $10 billion 
market by 2005. Final ratification of the Kyoto Protocol rests 
with Russia.
    Industry is also paying attention to what's happening. Law 
firms and insurance companies are setting up business units to 
deal with climate-related risks.
    Thus far, however, little has actually been accomplished to 
reduce greenhouse gas emissions. The United States must do 
something, but it must also do the right thing. Many have 
focused on what we do not know or the uncertainties around 
climate change. I prefer a more sound and scientific approach 
of starting with what is known or given, and then proceeding to 
solve the problem at hand.
    We cannot say with 100 percent confidence what will happen 
in the future. We do know the emission of greenhouse gases is 
not healthy for the environment. As many of the top scientists 
throughout the world have stated, the sooner we start to reduce 
these emissions, the better off we will be in the future.
    In 2001, Senator Brownback and I began working to develop a 
solution to the climate change problem, and introduced 
legislation that proposed creating a registry system that would 
facilitate the trading of credits for the reduction of 
greenhouse gases. Several provisions of that bill were 
contained in last year's Senate-passed energy bill.
    Also in 2001, Senator Lieberman and I announced our 
intention to develop legislation to require mandatory 
reductions in greenhouse gas emissions and provide for the 
trading of emissions allowances. We have been working with 
industry and the environmental community to develop legislation 
to move the country in the right direction and demonstrate 
leadership on this important issue. It will be the first 
comprehensive piece of legislation in this area. Not only will 
it not place the burden on any one sector, it would allow for 
the partnering across sectors through the trading system to 
most effectively meet the required reductions.
    The bill, which we hope to introduce in the near future, 
will propose a cap-and-trade approach to reducing greenhouse 
gas emissions. It would require the promulgation of regulations 
to limit greenhouse gas emissions from the electricity 
generation, transportation, industrial, and commercial economic 
sectors. The affected sectors represent approximately 85 
percent of the overall U.S. emissions for the year 2000. The 
bill also would provide for the trading of emission allowances 
and reductions through the Government-provided greenhouse gas 
database, which would contain an inventory of emissions and a 
register of reductions.
    Given the far-reaching implications of this issue, the 
Secretary of Commerce and the Administrator of the 
Environmental Protection Agency (EPA) or their designees have 
been invited to testify here today. Although the EPA did not 
provide a witness, I am pleased that Dr. James Mahoney of NOAA 
has agreed to appear and discuss the scientific research that 
we all agree should be the foundation of any action taken in 
this area.
    I also thank the other witnesses here today for testifying 
and helping us understand the issue and its implications of the 
legislative proposal. I look forward to hearing about how the 
rest of the world, the states, and the industry are addressing 
climate change.
    The United States is responsible for 25 percent of 
worldwide greenhouse gas emissions. It's time for the United 
States to do its part to address this global problem; and a 
discussion of mandatory reductions is the form of leadership 
that's required to address this global problem.
    I thank my colleagues for their forbearance. That'll be the 
longest opening statement I intend to give as Chairman of this 
Committee.
    But we are talking about a very difficult, a very complex, 
and a very controversial issue, but one which I think is of the 
absolute most critical importance to the future of this nation 
and the world.
    [The prepared statement of Senator McCain follows:]

   Prepared Statement of Hon. John McCain, U.S. Senator from Arizona
    The National Academy of Sciences has said, ``Greenhouse gases are 
accumulating in the Earth's atmosphere as a result of human activities, 
causing surface air temperatures and subsurface ocean temperatures to 
rise. Temperatures are, in fact, rising. The changes observed over the 
last several decades are likely mostly due to human activities, but we 
cannot rule out that some significant part of these changes is also a 
reflection of natural variability.''
    Over the past five years, the Commerce Committee has held several 
hearings on climate change. Two of the last five years, 1998 and 2002, 
have been the warmest, in terms of average global temperatures, ever 
recorded. According to a recent report from the National Oceanic and 
Atmospheric Administration (NOAA), nine of the warmest years have 
occurred since 1990. As reported in the New York Times on December 31, 
2002, many experts think it is more likely than not 2003 will either 
match or exceed the 1998 average temperature record of 58 degrees 
Fahrenheit.
    Researchers at the University of Texas, Wesleyan University, and 
Stanford University recently reported in the journal Nature that global 
warming is forcing species around the world, from California starfish 
to Alpine herbs, to move into new ranges or alter habits that could 
disrupt ecosystems. The report states there is ``very high 
confidence,'' defined as having more than 95 percent of observed 
changes which were principally caused by climate change, that climate 
change is already affecting living systems. The end result of these 
changes could be substantial ecological disruption, local losses in 
wildlife, and extinction of certain species.
    This and many other reports over the years have highlighted time 
and again the consequences of a warming climate system. We have seen 
the destruction of heat-sensitive coral reefs, the melting of glaciers 
at unprecedented levels, the increase of wildfires, and the spreading 
of diseases. A large German insurance company has estimated that global 
warming could cost $300 billion annually by 2050 in weather damage, 
pollution, industrial and agricultural losses, and other expenses.
    Our international partners, the states, and private industry are 
reacting to this challenge. For example, California has enacted 
legislation that will regulate tailpipe emissions of greenhouse gases. 
The European Union just recently approved an emissions trading system. 
The World Bank has estimated that greenhouse gas trading will be a $10 
billion market by 2005. Final ratification of the Kyoto Protocol rests 
with Russia.
    Industry is also paying attention to what's happening. Law firms 
and insurance companies are setting up business units to deal with 
climate-related risks.
    Thus far, however, little has actually been accomplished to reduce 
greenhouse gas emissions. The United States must do something, but it 
must also do the right thing. Many have focused on what we do not know 
or the uncertainties around climate change. I prefer a more sound and 
scientific approach of starting with what is known or given and then 
proceeding to solve the problem at hand.
    While we cannot say with 100 percent confidence what will happen in 
the future, we do know the emission of greenhouse gases is not healthy 
for the environment. As many of the top scientists throughout the world 
have stated, the sooner we start to reduce these emissions, the better 
off we will be in the future.
    In 2001, Senator Brownback and I began working to develop a 
solution to the climate change problem and introduced legislation that 
proposed creating a registry system that would facilitate the trading 
of credits for the reduction of greenhouse gases. Several provisions of 
that bill were contained in last year's Senate-passed energy bill.
    Also in 2001, Senator Lieberman and I announced our intention to 
develop legislation to require mandatory reductions in greenhouse gas 
emissions and provide for the trading of emission allowances. We have 
been working with industry and the environmental community to develop 
legislation to move the country in the right direction and demonstrate 
leadership on this important issue. It will be the first comprehensive 
piece of legislation in this area. Not only will it not place the 
burden on any one sector, it would allow for the partnering across 
sectors through the trading system to most effectively meet the 
required reductions.
    The bill, which we hope to introduce in the near future, will 
propose a ``cap and trade'' approach to reducing greenhouse gas 
emissions. It would require the promulgation of regulations to limit 
greenhouse gas emissions from the electricity generation, 
transportation, industrial, and commercial economic sectors. The 
affected sectors represent approximately 85 percent of the overall U.S. 
emissions for the year 2000. The bill also would provide for the 
trading of emissions allowances and reductions through the government 
provided greenhouse gas database, which would contain an inventory of 
emissions and a registry of reductions.
    I thank Senator Lieberman for his commitment and leadership in 
drafting this piece of legislative initiative. We have asked our 
witnesses today to review a draft of the legislation as part of their 
testimony. Their comments will be factored into the introduced bill. 
After introduction, the legislative process will continue and, as we 
learn more from the many stakeholders in this process, we plan to 
incorporate that new knowledge into the bill. We also hope that our 
colleagues in the Senate and the Administration will work with us to 
improve upon and ultimately adopt this much needed legislation.
    Given the far reaching implications of this issue, the Secretary of 
Commerce and the Administrator of the Environmental Protection Agency 
(EPA) or their designees have been invited to testify here today. 
Although the EPA did not provide a witness, I am pleased that Dr. James 
Mahoney of NOAA has agreed to appear and discuss the scientific 
research that we all agree should be the foundation of any action taken 
in this area.
    I also thank the other witnesses here today for testifying and 
helping us understand the issue and its implications of the legislative 
proposal. I look forward to hearing about how the rest of the world, 
the states, and industry are addressing climate change.
    The U.S. is responsible for 25 percent of the worldwide greenhouse 
gas emissions. It is time for the U.S. government to do its part to 
address this global problem, and a discussion of mandatory reductions 
is the form of leadership that is required to address this global 
problem.

    Senator McCain. Senator Wyden?

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you, Mr. Chairman. I want to 
congratulate you for choosing this as the topic for the first 
session, and also our colleague, Senator Lieberman. Your 
bipartisan approach is exactly the way to attack this issue.
    By any calculation, the United States is now 25 percent of 
the global climate change problem, and is zero percent of the 
solution. The fact is, the rest of the world is now moving 
forward without America. Our government persists in saying that 
it's just not possible to do anything more than research. And I 
think this is a fundamental mistake.
    The fact of the matter is, there is clear evidence with 
respect to what is causing the problem, and we know that there 
are concrete actions that can be taken to reduce the problem. 
Yet, it seems to me the United States is, in effect, saying to 
more than 175 other countries that what they're doing is 
basically wrong, and somehow when all this research is 
completed, we're going to convince them of the fact and they're 
going to change their minds. I think that's a mistake. I think 
we ought to be moving forward.
    I see my colleague, Senator Brownback, here. He and I have 
introduced legislation, along with Senator Craig that is 
bipartisan. The FREE legislation, the Forest Resources for the 
Environment and the Economy, would let us move forward with 
carbon sequestration programs. We know, for example, the carbon 
sequestration programs can make a genuine difference with 
respect to reducing the greenhouse gas problem, but yet, we 
cannot get support from the Administration to move beyond 
research.
    I support research, but it is critically important that we 
act. The Administration's inaction is hobbling our economy, and 
it is stealing growth opportunities from U.S. companies. It is 
robbing U.S. energy production companies of the certainty that 
they need when they consider whether and how to make capital 
investments in their plants. And the Administration's inaction 
is robbing U.S. farmers and forest owners of economic 
opportunities that exist today.
    Finally, I would say, Mr. Chairman, that there is a huge 
opportunity to help our technology sector at a time when it is 
hurting. Our companies are in a position to make significant 
investments and create a significant number of new jobs in 
technologies that can reduce the global climate change problem.
    I'm particularly pleased at what you, Mr. Chairman, and 
Senator Lieberman, and my colleague from Kansas, Senator 
Brownback have sought to do--which is to force some action. It 
is time to get beyond the research, which is certainly helpful, 
and translate that work into specific and concrete actions that 
we know, that the scientists tell us, can make a difference.
    Thank you.
    Senator McCain. Thank you.
    I'd like to welcome our newest member of the Committee, 
Senator Sununu.
    Senator Sununu, our practice here is that when the hearing 
starts, whoever is here--we go by seniority, and those who come 
later are recognized under the early-bird rule, which I'm sure 
you're very familiar with. And so next is Senator Brownback.
    Senator Brownback?

               STATEMENT OF HON. SAM BROWNBACK, 
                    U.S. SENATOR FROM KANSAS

    Senator Brownback. Thank you very much, Mr. Chairman, and I 
appreciate your holding this hearing--the first one out of the 
box on this subject--and your persistence on working on it. I 
think it's an important issue. It's a tough issue. But you've 
certainly never been one to shy away from tough issues, and I'm 
glad you're grabbing and dealing with this one as well. And I 
appreciate seeing my old friend, Joe Lieberman, working as well 
with Ron on this subject.
    I just want to point out one narrow topic on this, because 
you can look at a whole array of issues to address on global 
climate change, and a way to address it policy-wise. The one 
that I want to build on is--what Ron already cited--the area of 
carbon sequestration and conservation practices. And you've got 
a witness that's going to testify about that today.
    I think there are things that we can do to positively 
affect our net national carbon emissions that have other 
environmental benefits and which can have a positive effect on 
the overall economy, and that we can get through legislatively. 
I think these are things that we can get done.
    Of course I'm referring to carbon sequestration and 
conservation practices. Mr. Krupp will tell us about some of 
the innovative projects that his organization is working on in 
the Pacific Northwest. And these are projects that not only 
suck carbon out of the atmosphere, but have the more tangible 
benefits, as well, benefits of improving water quality and 
preserving wildlife habitat. It's a three-win issue in doing 
this.
    In my home state of Kansas, the potential for bringing 
carbon into the soil is vast. As we speak, the Chicago Climate 
Exchange is working out the details of a project that will, all 
at once, provide a new revenue stream for farmers, improve soil 
conservation techniques, and reduce our net carbon output. Now, 
some estimates I've seen believe that the potential for carbon 
sequestration in this pilot project could exceed the amount of 
carbon that Germany emits each year.
    I look forward to working with the Chairman and this 
committee and others to consider this part of the climate 
change debate. I believe that if we're gentle and wise, carbon 
sequestration is the crossroad at which the various sides of 
this debate can meet while additional research is going forward 
in other areas, as well.
    I look forward to hearing from the witnesses on the broad 
cross-section of the topic here, but I think clearly we have 
some things that we can get done and clearly should get done 
and that will have a broad cross-section of positive inputs on 
carbon, on carbon emission, on soil quality, on soil 
conservation, and on the environment.
    Thank you, Mr. Chairman.
    Senator McCain. Thank you very much. Senator Brownback, may 
I say that that issue is transcendent in importance and, I 
believe, has to be part of the overall addressing of the 
climate change issue. I thank you for the work you've done on 
it.
    Senator Burns?

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. Thank you very much, Mr. Chairman. And thank 
you for getting the year started off right--Congress started 
off right--because this is, without a doubt, one of the 
greatest challenges that we probably have in doing something 
good for our planet.
    Nobody has to tell me about global warming. We're going 
into our sixth year of drought. And we don't--we think maybe it 
might be permanent in Montana, so anybody who wants to buy some 
shoreline properties in Montana where you can play golf all 
winter long and ski also, you're welcome to do so.
    There are two different ways that we can look at this 
issue, and I think the Chairman has been right, and I think my 
friend from Oregon's right, that we tend to stall things with 
the old adage of ``more research is needed.'' There is no 
question that more research is needed on this issue, especially 
when we take a look and see what's happening around the world.
    The emissions in this country continue to go down every 
year. So we're doing some things right. Now, last year, the 
Washington Post reported that emissions decreased last year. 
One of the reasons was 4.4 reduction in manufacturing output. 
And then, when we start talking about--start trading on--caps 
on emissions and--especially on carbon dioxide, we're taking a 
look at the cap-and-trade programs--they'll be similar to the 
carbon tax. And we know what the carbon tax did. It both would 
raise the cost of carbon-based fossil fuels, which leads to 
higher energy prices, and imposed costs on users and some 
suppliers of the energy, and we know that there is a small job 
loss in that. I'm not going to participate in any kind of a 
program that exports more jobs from this country. And we've 
already got a flood of jobs leaving our country, and I'm just 
not going to contribute to that.
    We know that global climate change research is probably the 
biggest weather forecast of all time. And just like I say, in 
Montana, we're suffering from drought and it has no signs of 
letting up. I've never seen the snow pack in the Big Horns or 
the Beartooth as small as it is now. Now they're getting a 
little more, and, of course, most of our snows, and heavy 
snows, will come probably starting about the first of February 
up high and then moving down--on down to lower elevations as 
the year goes on. But, we will get the vast amount of our 
moisture, especially for irrigation and to recharge our rivers 
and stream flows, after the first of March.
    So I congratulate the President. The President is working 
on something that we're going to be very much interested in. As 
you know, this summer we will have the Earth Observation Summit 
to improve our international observation efforts and to read 
and also to study our history. And I think history will tell 
us--or give us, pretty much, the blueprint to the future.
    So, as we move forward, the global approach toward global 
climate change research needs to be done with the best science 
possible. There's no doubt about that. But I'm also confident 
that we must now set a strategic plan, a plan that the 
President has outlined, to be put forward--and we look forward 
to working with everybody on this committee, especially the 
Administration and everybody--I don't think there's anybody in 
this country that does not really understand the changes that 
are taking place around us.
    And I thank you, Mr. Chairman.
    Senator McCain. Thank you, Senator Burns.
    Senator Sununu, welcome to the Committee. You bring your 
experience with you from the House on these issues, and we 
certainly welcome you. One of my favorite states. It's going to 
be fun.
    [Laughter.]

               STATEMENT OF HON. JOHN E. SUNUNU, 
                U.S. SENATOR FROM NEW HAMPSHIRE

    Senator Sununu. Thank you very much, Mr. Chairman.
    Of course, as a new member of the Senate, it is a great 
pleasure to be here. And as the newest member of the Committee, 
I'm excited to be here, as well. My hunch is that you're not 
the only person in this room that harbors a special love for 
the state of New Hampshire.
    [Laughter.]
    Senator Sununu. But my guess is we won't hear too much more 
of that, at least not today.
    The proposals that we'll talk about here today, as you have 
all made clear, have enormous environmental and economic 
implications, and that's why I think it's important that we 
have a thorough discussion and debate of new ideas, new 
proposals, new technologies that might deal with some of the 
concerns that we all share.
    There are also important international implications to this 
discussion, because many of those that have looked long and 
hard at these issues recognize that in 10 or 15 years, 
developing nations which are not party to any of the discussion 
or regulations in the Kyoto Protocol will be responsible for 
the majority of CO2 emissions in the world. And I 
think as we look at the future, as we try to predict the 
implications, the technical and climate implications, of 
CO2 emissions, and try to formulate ideas for 
addressing the concerns raised here, we need to also find ways, 
and perhaps new technologies that might bring some of these 
countries into the fold, so to speak, because if, indeed, we're 
going to take action, you can't simply take action with regard 
to 1 or 2 or 10 or even 15 percent of pollutants or other 
emissions, like CO2, and expect to really have a 
global impact and a long-term impact.
    So, I'm pleased to be here. I look forward to the testimony 
of our witnesses and know enough about the Senate that it would 
be a mistake for a junior member to delay the testimony of 
Senator Lieberman any further.
    Thank you, Mr. Chairman.
    Senator McCain. Thank you very much. And, again, welcome, 
Senator Sununu.
    We'd like to welcome before the Committee our friend and 
colleague, Senator Lieberman.

            STATEMENT OF HON. JOSEPH I. LIEBERMAN, 
                 U.S. SENATOR FROM CONNECTICUT

    Senator Lieberman. Thanks, Mr. Chairman.
    Senator Sununu, New Hampshire is also one of my favorite 
states.
    [Laughter.]
    Senator Lieberman. And since you're the Senator from there, 
you could have gone on further.
    [Laughter.]
    Senator Lieberman. Mr. Chairman, Senator Wyden, Senator 
Burns, Senator Brownback, thank you all. Mr. Chairman, I 
particularly thank you for the now more than a year in which 
you and I and our staffs have been working with people in the--
in business and environmental communities to fashion this 
practical program to deal through the marketplace, not with 
bureaucratic mandates, but with the very real problem of global 
warming, which, as you and others on the Committee have said, 
is a problem that, not only affects the American people and 
will affect our children and grandchildren even more if we 
don't do something about it, but, to which we contribute about 
25 percent of the apparent cause of the problem.
    Mr. Chairman, I thank you for your leadership on 
environmental conservation and protection, and I appreciate 
particularly that you chose this as your first hearing of this 
new term as you begin--or reassume the chairmanship of the 
Commerce Committee. I view this as the first step in a very 
important road we are going to go down that will culminate--
must culminate--with this country taking credible action to 
address the global problems of our warming planet.
    In the--in the next day or two, Mr. Chairman, we will 
introduce this most comprehensive bill ever introduced in 
Congress to tackle the emission of greenhouse gases, and I hope 
our colleagues on both sides of the aisle will join us in 
introducing it.
    Simply put, our bill is designed to heat up American 
innovation in order to cool down our changing planet and 
changing climate. Global warming is real. The year 2002, is the 
second-warmest year on record, slightly cooler than the record 
warm year of 1998, but, as Senator Burns indicated, for reasons 
that we're not happy about, because manufacturing is down. The 
ten warmest years have all occurred since 1987, with nine of 
them happening since 1990.
    According to a NASA study released last month, the 
permanent summer ice cap over the Arctic ocean is disappearing 
far faster than previously thought, and will, at this rate, be 
gone--totally gone--by the end of this century, with very 
serious consequences for America and the planet. And just last 
week, two major new research studies said that global warming 
is already posing a very serious threat to the world's plants 
and animals, a danger that is likely to rise dramatically with 
the temperature in the coming years.
    I think the debate over the science of climate change has 
pretty much ended after a lot of hesitation. President Bush 
said last year that he agreed that this was real and a problem. 
But unfortunately, the proposal that the Administration has put 
forward thus far will allow greenhouse gas emissions to keep 
increasing indefinitely, presenting us and our progeny in this 
country, in the world, with a bigger and bigger environmental 
crisis to tackle down the road.
    Not only will our environment be threatened by this 
neglect, but two other effects that have been mentioned here 
will occur. And the first is on American business. It will 
suffer from regulatory uncertainty. Unwilling to make short-
term investments in pollution-reduction technology because 
they'll be waiting to see what we, in Washington, are going to 
do. Business always asks for certainty in taxes and regulation 
and the like, and we can offer it with this proposal:
    First, America's stature in the world will be affected. But 
more practically and importantly, some of our most critical 
alliances, particularly as we are at war against terrorism 
today, and perhaps soon against Iraq, some of our most 
important alliances are affected by our unwillingness to join 
the rest of the world in dealing with a problem that the people 
of some of our closest allies in the world are very anxious 
about.
    Just in the last day or two, Prime Minister Blair--who is, 
obviously, our closest ally in current troubles with Iraq, and 
close ally and supporter, of course, in the war against 
terrorism--said something to this effect, Mr. Chairman, that, 
``Just as we, in Britain and Europe, have listened to the 
United States when it comes to matters such as the war on 
terrorism and Iraq, we must ask our allies and friends in 
America to listen to us when it comes to other problems.'' And 
right at the top were climate change and global warming.
    Mr. Chairman, you have already described, I think, quite 
well, how the plan works with characteristic clarity and, by 
Senate standards, notwithstanding your own high personal 
standards, remarkable brevity, but let me underscore briefly 
two points. First, the environmental results. We'll achieve 
steady but measured progress in reducing harmful emissions into 
the atmosphere if this proposal is adopted, and that contrasts 
sharply with the Administration's prescription for business as 
usual. We do less than is explicitly called for under the Kyoto 
agreement, but we sure do a lot more than nothing here. This is 
real substantial progress, responsible action.
    Second, the economic results. Because of the 
entrepreneurial model of our proposal, which is built around 
American businesses and farms--and Senator Brownback makes a 
very important point here about the potential return to 
America's farmers in being part of dealing through 
sequestration, with the problem of global warming--this model 
is built around America's private sector, not around the 
Federal Government's bureaucracy. And so we give companies 
total flexibility to tackle the problem as they see fit. We 
believe that will unleash the genius of American enterprise and 
create a boom of new high-paying jobs in the innovation economy 
as companies compete to drive down their emissions.
    Mr. Chairman, finally and more broadly, global warming is, 
like so many other problems in life, if we put off fixing it 
today, it's going to become harder tomorrow, certainly more 
costly, and certainly more complex. However, if we have the 
foresight and the fortitude to act now, to act like leaders who 
see a problem coming over the horizon, and are prepared to do 
something about it today to make it better tomorrow, if we're 
prepared to tap the tremendous well of talent and technology 
that is our unique American resource, then we're going to put 
our nation in better environmental and economic health for the 
future. We're going to make this nation one that is not at the 
mercy of its problems, but in control of its destiny. And it 
takes the kind of action that is required by our proposal.
    I urge my colleagues, on both sides of the aisle, and 
people on--leaders on both ends of Pennsylvania Avenue to take 
a good open-minded look at our proposal. We've worked real hard 
at it. We've got some--as you'll hear today, some impressive 
support from both the business community and the environmental 
community. We ought to be able to make this a bridge to action.
    Mr. Chairman, again, I thank you for your leadership, and I 
look forward to working with you and other members of the 
Committee to move our legislation along.
    Senator McCain. Thank you very much, Senator Lieberman. I 
know you have other pressing duties, and we thank you for your 
statement. And we're going to have a lot of very interesting 
aspects of this issue, and I look forward to working with you 
as we address this very vital issue.
    Thank you very much, Senator Lieberman.
    Senator Lieberman. Thank you.
    Senator McCain. Congressman Inslee was going to be here, 
but--oh, here he is.
    Welcome, Congressman Inslee. Thank you.

                 STATEMENT OF HON. JAY INSLEE, 
              U.S. REPRESENTATIVE FROM WASHINGTON

    Mr. Inslee. Thank you, Senator. Thank you, Senator McCain, 
Senator Lieberman, and all the senators involved in this.
    You know, I think this is a really great day, because this 
day, the U.S. Senate's been caught in the act of leadership. 
And you have decided----
    Senator McCain. Thanks for the compliment.
    [Laughter.]
    Senator Burns. You're treading on thin ice already.
    [Laughter.]
    Senator Burns. Getting thinner.
    Mr. Inslee. And we need it. We need it. We need it, because 
we need leaders who will not sing Nero's song, which he sang as 
Rome burned, which was, ``We need more research.'' And you've 
decided to sing a different song of saying, we ought to take 
action. And I think if you look back in a few decades, you may 
find that today's hearing was one of the most important 
hearings of this Congress.
    And I just have two comments, and perhaps one suggestion. 
The first comment is that I believe that what you have 
proposed, the basic thread of what you have proposed, is 
entirely consistent with two basic American values. The first 
is the basic American value of American realistic common sense. 
And the second is the basic American value of optimism in our 
technological abilities. And I want to address why I think 
those values--you've hit the mark in the basic thrust of the 
bill you intend to propose, which we intend to, in some way, 
join in the House on a bipartisan basis.
    First, and--because of realism and common sense, Americans 
now are becoming familiar with this graph over here, which is 
an absolutely unambiguous, scientifically unchallengeable fact 
of nature, which is the concentrations of carbon dioxide in our 
atmosphere are not only rising, but they're exploding. Because 
if you see with the dawn of the industrial age, and now we're 
in the--in this century, this chart doesn't just rise; it 
explodes, unless the U.S. Senate and the U.S. House and this 
Congress take some action. And people know--because it's an 
unambiguous fact that CO2 has some warming 
propensity--that there are going to be some changes to our 
climate. And people get that.
    And Senator, let me tell you how much they get it in my 
neck of the woods. In the Yakima Valley, which is a largely 
agricultural producing area in eastern Washington, you've got 
the Yakima River system. And it irrigates apples, peaches, and 
hops--tremendous agricultural area. Those folks who drive 
tractors, who figure out their budget, have now figured out 
something else. They have got to spend close to a billion 
dollars developing new irrigation storage facilities to make up 
for the snow pack that's going to be gone when the snow level 
rises in the next several decades. And they are now coming to 
Congress, or shortly will be, to try to help finance this 
multimillion-dollar project to solve this problem. The reason--
--
    Senator Burns. Where is this?
    Mr. Inslee. This is the Yakima River in eastern Washington.
    The reason I mention this is that when people, on a day-to-
day basis, factor into their business decision-making the 
necessity of dealing with this problem, it's high time for us 
to do the same thing in Congress. And we've all heard the 
apocryphal stories which are true of dead Intuit Indians 
popping up to the surface of the tundra in the Arctic because 
the tundra is melting, and the polar ice cap being 10 percent 
reduced in scope and 30 to 40 percent already reduced in depth.
    You know, in Glacier National Park--I was there a few weeks 
ago, and the dark humor is, they're going to need to change the 
name to ``Puddle National Park'' in several decades. And that 
is a realistic projection of what could happen if we don't act 
here in Congress.
    But what is happening is, the American people are 
exercising their common sense in realizing that we've simply 
got to act. And unfortunately, all the U.S. Government has 
offered to date is a voluntary system. And we know that you can 
run a bake sale on a voluntary system, but you can't run a 
global climate change program on a voluntary system. And your 
stepping into the breach is very much appreciated. And I'm 
working with a group in the House to try to change the ostrich 
position to the eagle position when it comes to climate change.
    The second issue, second comment, I want to make. It's 
consistent with the American value of optimism. You know, if 
you look at the debate that has raged about this subject--it's 
extremely controversial, because it's a tough one--I posit that 
it's a debate between the optimists and those who are not so 
optimistic about our technological abilities, because those of 
us who are optimists believe that the nation who followed John 
F. Kennedy to the Moon can follow the U.S. Senate and the House 
to some meaningful reduction of global climate change gases. 
That's the theory of optimism, and it's well-placed.
    Look at what British Petroleum did. Here's an American 
corporation, certainly not an avant garde--you know--wacko 
environmental outfit. Under the leadership of Chairman Brown, 
they decided to reduce their greenhouse gas emissions to 1990 
levels in 11 years. They made a corporate decision to do that. 
A pretty visionary thing for a corporation to do. And what did 
they do? They reduced it to 10 percent less than their 1990 
emissions, and they did it in 3 years instead of 11 years. 
Here's a hard-headed bottom-line corporation that showed the 
American business industry that this can be done. This is 
really weird. This isn't pointy-head academics talking about 
this. So, we know that this job can be done.
    And I also want to suggest that this is an economic issue. 
You know, you had the missile gap in the 1960s. You've got a 
clean technology gap that's widening right now. Why should the 
leader in clean cars be Japan? Why should the leader in wind-
turbine technology be Denmark? Denmark is ahead of the United 
States on wind-turbine technology. Why should the leader in 
solar-cell technology be Germany? We should be the leader in 
all of these technologies, because the world's going to beat a 
path to the door, and we need some Federal leadership to do 
that.
    We're starting to do that in the State of Washington. We've 
got the Zantech Corporation making inverters up in Mount 
Vernon. We've got the largest wind-turbine generator in North 
America in southeastern Washington State. We have the 
capability. This is an economic-development issue.
    And let us not forget the national-security ramifications 
of reducing our addiction to foreign oil. There is a study done 
by the last Administration which concluded that--if we had 
continued our efficiency gains of the late 1990s, we could save 
potentially 5 million barrels of oil a day. Now, to put that in 
perspective, we only import about 8 million barrels a day. 
That's a significant reduction in having to be addicted to the 
Mideast fuel. If we adopt the renewable-energy technologies 
that are already available, the studies show we could save 3 
million barrels a day. We have these technologies now. We need 
some leadership, and I want to thank you.
    Third, just a small suggestion. I think it's very important 
that all of us, when we talk about limiting greenhouse gas 
emissions, try to incorporate in our proposals ways to get 
there. And I hope that in all of our bills we pass, we'll have 
a commitment to the R&D budget increase that is necessary from 
the U.S. Federal Government to help the emergence of these new 
technologies. And perhaps this is something we can incorporate 
in these bills as we go through to make sure that we stay on 
the message of optimism.
    So, in that spirit of optimism and can-do, I want to thank 
you and stay for any questions that I might be able to answer.
    Senator McCain. Well, thank you very much, Congressman 
Inslee. You make a very eloquent and informative statement, and 
we thank you for coming over, and we look forward to working 
with you.
    Mr. Inslee. We will be working on a bipartisan basis, I 
hope, in the House. Thank you.
    Senator McCain. Thank you, sir.
    Now, we'd like to ask the Honorable James Mahoney, the 
Assistant Secretary of Commerce for Oceans and Atmosphere, and 
Director of the U.S. Climate Change Science Program of the U.S. 
Department of Commerce, to come forward and join us.
    Welcome, Secretary Mahoney. Thank you for taking the time 
to be with us today, and we look forward to hearing your 
statement.

            STATEMENT OF HON. JAMES R. MAHONEY PhD.,

           ASSISTANT SECRETARY OF COMMERCE FOR OCEANS

          AND ATMOSPHERE, DEPARTMENT OF COMMERCE, AND

         DIRECTOR, U.S. CLIMATE CHANGE SCIENCE PROGRAM

    Dr. Mahoney. Thank you, Mr. Chairman. Senator McCain, 
Senator Wyden, Senator Burns, Senator Sununu. It's an honor for 
me to be here in front of you, and it's a pleasure for me to be 
here for a third time in the last year since you first grilled 
me in my confirmation hearing a year ago this month, as a 
matter of fact. I hope I can demonstrate some progress over the 
little less than a year since I began my position.
    I'm here today to present testimony on the Administration's 
strategic plan for Federal research on climate change, and 
specifically to talk about the uniquely successful workshop on 
that strategic plan, which was held here in Washington this 
last month. That workshop involved participation from a little 
over 1,300 climate specialists from the United States, 
representing 47 of the 50 states, and from 36 other nations. We 
believe it was the largest single group debating what we know 
and where we should go on issues of climate change that we've 
ever had in a single event.
    Even more than the sheer numbers, though, we are especially 
proud to be held to the measure of openness and transparency 
that we tried to strike in publishing that plan and opening 
that workshop to the broadest possible kind of comment and 
critique, and that's the path we're on. It's the path we're on 
in trying to lay out our scientific information for the 
American public, for the international public, and, of course, 
very much for you here in the Senate and the House of 
Representatives, as well. And that's my purpose here today.
    In my statement, to limit my time speaking so that I can 
give the floor back to you, I want to simply highlight, of 
course, a few key points. And if you're following along, I 
tried to summarize some of these at the very front, in the 
first couple of pages. We view the Federal Government Climate 
Change Science Program as trying our very best to fill the role 
of credible fact-finder about the tremendously complex set of 
information that we have relative to climate and global change.
    And I might put three legs on the stool related to that. 
One is clearly the science and the science uncertainty that 
we're dealing with. Second, we have a special interest in 
improving our ability to monitor regionally and globally the 
interactions between climate and ecosystems that are so much at 
the core of the discussions we've already been hearing here in 
the last half-hour. And third, we are attempting to use all of 
the science, $20 billion worth invested by the U.S. taxpayers 
over the last 13 years, to develop the ability to answer a 
series of if-then questions so that--on a basis of agreed 
debate and peer review--we can start addressing the issues of 
``If we do this, what do we expect? And what are the social and 
economic consequences as well as the ecosystem consequences of 
those actions?''
    This is the way that we're trying to be responsive and 
responsible to your direction under the Global Change Research 
Act, in the first case, and to the direction of the President, 
who has asked to have this work accelerated, in his statements 
beginning in 2001.
    Moving quickly, we have put together, at the President's 
direction, a major new integrated management structure for all 
of this work. There are 13 Federal agencies involved in this 
research and we count on the books and on the budgets you see, 
$1.7 billion annually for this research. In fact, this last 
year we looked at the related research recounted in other 
accounts, and the total for the U.S. is about $3 billion a year 
in the research. And certainly, the public is due to receive 
very able answers from this research.
    Third, I'll reserve for a few minutes just to make a quick 
comment about this draft strategic plan that we've used to try 
to begin a robust discussion. Fourth, on the same workshop I 
mentioned a minute ago, I have a couple of other comments I 
want to make before I conclude.
    And I'll turn, fifth, out of these ten summary points, to 
note that we have specifically asked the National Academy of 
Sciences to take on a very special task relative to this new 
focused planning, public review, and international review of 
our activity. The Academy has appointed a special 17-member 
expert committee, and the Academy will, of course, use its 
normal full system of structure, including careful review 
internally, to assure the high quality of its report in this 
area.
    They have read our Discussion Draft Strategic Plan. They 
attended and participated among the 1300 in this workshop. They 
are preparing two reports for the Nation in the next few 
months. They're doing one report rather quickly so that they 
can give us guidance as we complete this plan, and then they 
will look at the whole thing, and later, by the end of the 
summer of this year, will produce another report in which they 
will lay out their view of the path we're on in our science, 
our measurement, our technology reviews, and all the rest of it 
as part of that activity.
    Next, we are talking planning here because we felt it was 
necessary to cast a proper eye on what questions we are 
addressing. What can we answer? What new information can we 
bring to the table over the next year, two years, three, four 
years? This is the time frame that the President has asked for. 
We want to be clear that we complete this updated plan after we 
have resolved all the comments we have received, and we have 
received hundreds already since that workshop during the open-
comment period. Now, we'll be turning our direction directly to 
reporting findings and results and reporting analyses of what 
if-then types of questions.
    So, that's what's on the horizon immediately for this work, 
in addition, of course, to carrying on the important 
fundamental basic research.
    Next, a point on integrating science and technology. We 
have a very strong theme that the ultimate answers to the 
global warming challenges will be technologically driven, and 
the technologies that we'll be talking about, in most cases, do 
not exist today, or at least are not commercialized today, and 
we need our science to point us in the proper directions about 
the priorities there. We also need our science, when we look at 
technologies, to look at the intended consequences, as well as 
the unintended consequences, of major technological shifts.
    Ninth out of these ten summary points, I'm pleased to 
announce here today that the Bush Administration is sponsoring 
a major global Earth-observing summit which will be held here 
in the summer of this year. And we're doing that specifically 
to put the proper attention on the importance of integrated 
ecosystem and climate observations worldwide, and to encourage 
our partners in both the developed world and the developing 
world to really take the excellent measurement systems we 
already have and get them to the level that we can answer 
questions near- and long-term in the way that we need to. That 
will be a major U.S.-led initiative. It will happen in the 
summer, and it will be a precursor to suggestions we expect to 
table at the Ninth Council of the Parties under the U.N. 
Framework Convention, when that is held next December. So we're 
on a very active program of developing these steps.
    Tenth of my ten summary points, we earnestly ask for 
dialogue from the Senate, from the House, and from, as we have, 
the general public. We are more than willing to work with you 
and your staff. My colleagues and I--will rue that I say--we 
will say that we welcome questions. There's always a heavy 
workload with that, but--but we take seriously the sense that 
there is a major investment in this research and we have to 
make better use of it, and that's the path that we're on.
    Just before concluding, having gone through that as kind of 
the structure for this, I'd like to take just a couple of 
minutes on the Strategic Plan. And I'll just name the 
guidelines we put in place to develop this comprehensive plan. 
First, we said it had to be driven by questions. This is not 
just scientific research. The questions in all the areas are 
aimed at the issue of, ``What do we know? What are the 
consequences?''
    Second, we're looking at and integrating the near-term 
questions--because they're on the table here--with the long-
term view, because we have a decades-long issue of both the 
challenge of global climate change issues and the response that 
we expect.
    Third, we've gone out by every conceivable means to get the 
science community around the world, the stakeholder community 
around the world, to deal with these questions with us. And I 
might note that in that stakeholder community, somewhat in the 
sense of Senator Burns' comments and others' before, the 
regional resource managers concerned with water supply, 
agriculture, and other systems have a great need for 
understanding the climate variability data we have, and we're 
trying to bring that to their attention.
    That's the nature of some of this, and I will close with a 
comment about this workshop which I have mentioned. It was very 
pleasing, because I think we had strong, but very civil 
discussion among those of very different points of view. The 
general feeling, I will say--and others can give their 
comment--was a remarkable openness and civility while having 
sharp debate. We've indicated the list of major Government and 
international leaders who spoke in the conference. Even more 
importantly, we've indicated in the prepared statement the list 
of 24 specialty topics that were covered. All of that is on our 
website. All of the comments and, of course, the plan and the 
final plan will be on the website as well.
    And I would just mention that at the workshop, and as a 
theme for this discussion today, I would make one point about 
where we view all of this. And I said it at the beginning of 
the workshop, and I certainly want to have my statement today 
include this: We view, and I view, that the status of the Earth 
and climate system is the capstone environmental issue of our 
generation, and it will be for the generation of our children, 
as well.
    And there's a corollary to that. This issue is so big and 
so challenging, massively uncertain in many cases now, 
massively costly and dislocating as to what we may need to do 
about it, that because of the importance of the issue, we not 
only need to understand it, but we need to really drive the 
development of new classes of technology. And I would argue 
that we need to be careful not to simply assume we can do 
something short-term and get there. If our concerns bear out 
over the months and years ahead, then we really need to be 
moving toward fundamental shifts in technology.
    And the other part of the theme, we are using this whole 
climate-science effort and our allied effort in the technology 
area to really address the question of, first, what can we do 
about the uncertainties that exist--not so much about ``Is 
there any global warming or not?'' That issue is virtually 
settled, but on the issue of differentially, what makes a 
difference, and where can we get--and there's a world of 
places--there's a world of initiative we still need on that 
issue, and we're very much after that.
    I'll conclude by calling your attention to this major 
Earth-observing summit that will run this summer. We believe it 
will be a clear example of U.S. leadership in this area. We're 
pleased to see that come forward.
    Mr. Chairman and all of you on the Committee, I thank you 
for hearing me in this statement.
    [The prepared statement of Dr. Mahoney follows:]

Prepared Statement of Hon. James R. Mahoney, Ph.D., Assistant Secretary 
  of Commerce for Oceans and Atmosphere, Department of Commerce, and 
             Director, U.S. Climate Change Science Program,
    Good afternoon Senator McCain, Senator Hollings and Members of the 
Committee. I am James R. Mahoney, Assistant Secretary of Commerce and 
Deputy Administrator of the National Oceanic and Atmospheric 
Administration (NOAA). I am appearing today in my capacity as Director 
of the United States Climate Change Science Program (CCSP). CCSP 
integrates the Federal research on global change and climate change, as 
sponsored by thirteen Federal agencies (the Departments of Agriculture, 
Commerce, Defense, Energy, Health and Human Services, Interior, State, 
and Transportation; together with the Environmental Protection Agency, 
the National Aeronautics and Space Administration, the National Science 
Foundation, the Agency for International Development, and the 
Smithsonian Institution) and overseen by the Office of Science and 
Technology Policy, the Council on Environmental Quality, the National 
Economic Council and the Office of Management and Budget. In February 
2002 President Bush created a new cabinet-level management structure, 
the Committee on Climate Change Science and Technology Integration, to 
manage the over $3 billion annual budget of federal climate change 
research and technology development programs. CCSP, which integrates 
the work of the U.S. Global Change Research Program (USGCRP) created by 
the Global Change Research Act of 1990 with the Climate Change Research 
Initiative (CCRI) launched by the President in June 2001, is a key 
element of the President's climate science and technology development 
management structure.
    In response to your invitation, I am very pleased to have this 
opportunity to present testimony on the Administration's November 2002 
Discussion Draft Strategic Plan for federal research on climate change, 
and on the uniquely successful workshop on the draft plan, held in 
Washington, D.C., on December 3-5, 2002. The workshop was designed to 
facilitate extensive discussion and comments on the draft plan from all 
interested domestic and international groups and individuals, including 
the scientific community, a wide range of stakeholders, interested 
members of the public, and the media. The open comment period begun 
before the workshop continues until a deadline of January 18, 2003, for 
receipt of written comments. We look forward to providing this 
Committee, as well as other interested elements of the Congress, with a 
report on the comments and their resolution--and with the updated 
strategic plan--by the end of April 2003, as announced in the workshop 
documents. I note that all elements of the strategic planning process, 
including the Discussion Draft Strategic Plan, all of the workshop 
proceedings and all written public comments, will be available at the 
website www.climatescience.gov.
                       SUMMARY OF THIS STATEMENT
    1. ``Credible Fact Finder'': Responding to the direction of 
President Bush that the best available scientific information be 
developed to support decision making on global climate change issues, 
CCSP has developed its strategic planning and public review processes 
to facilitate ``credible fact finding'' on: (a) key climate science 
issues, (b) comprehensive, high quality climate and ecosystem observing 
and data management systems, and (c) the development of meaningful 
decision support resources in the form of responses to ``if . . ., then 
. . .'' questions, which depends on achieving significant progress 
under (a) and (b) above.
    2. New, Integrated Management Structure: The CCSP has implemented a 
comprehensive, interagency management structure to assure effective and 
efficient deployment of approximately $1.7 billion (annual budget) in 
directly sponsored research and $1.3 billion of related research 
conducted by the thirteen CCSP collaborating Federal agencies. During 
the past nine months this new management structure has: (a) completed a 
comprehensive strategic review of the ongoing research programs in all 
CCSP collaborating agencies, (b) produced an interagency integrated 
climate science budget request for FY 2004, to be included in the 
President's budget request to be sent to Congress, and (c) prepared the 
basis for operational interagency management of the FY 2003 
appropriated budgets when they become available.
    3. November 2002 Discussion Draft Strategic Plan: The CCSP recently 
published an extensive ``draft for discussion'' of its new 10-year 
strategic plan. The draft plan is structured around key questions in 
the science, observations and decision support areas, to encourage a 
focus on the information needed to underpin public discussion of 
climate change issues. The Discussion Draft Strategic Plan responds to 
the requirements for periodic updates as specified by the Global Change 
Research Act of 1990 (PL 101-606), and to the direction of President 
Bush that climate change research activities be accelerated, so as to 
provide the best possible scientific information that can be developed 
in the near term. The Discussion Draft Strategic Plan (discussed 
further below) is available on the web site www.climatescience.gov.
    4. December 3-5, 2002, Workshop on the Discussion Draft Strategic 
Plan: The workshop held last month here in Washington was a key element 
in the process of developing the scientific basis to evaluate the 
effectiveness and efficiency of a range of climate change mitigation 
and adaptation options. The workshop was the most highly attended and 
structured discussion of climate change issues held to date, and it was 
conducted with a 100 percent commitment to open and transparent 
discussion of the issues. The workshop is discussed extensively later 
in this statement, and all of the documentation on the workshop 
proceedings also appears on the web site www.climatescience.gov.
    5. Comprehensive Review by the National Academy of Sciences: CCSP 
has requested that the National Academy of Sciences (NAS)--National 
Research Council conduct a comprehensive review of the draft and final 
versions of the CCSP Strategic Plan. The Academy appointed a special 
17-member committee of experts in the physical, biological, social and 
economic sciences, and this committee reviewed the Discussion Draft 
Strategic Plan, and participated throughout the recent workshop. The 
NAS committee will provide preliminary public recommendations by 
February 2003 to assist in the update of the strategic plan. The 
committee will provide a second public report in September 2003, 
commenting on the updated strategic plan as well as the open public 
review process being used to develop the strategic plan and the 
subsequent findings to be reported by CCSP.
    6. Updated CCSP Strategic Plan Scheduled for April 2003: CCSP will 
publish its updated strategic plan for the climate science program by 
the end of April 2003, after consideration of all of the workshop 
discussions and the full range of the written comments received by the 
January 18, 2003, deadline for comments. The plan, which will be 
subject to future modification as warranted by the emergence of key 
science findings and key public questions to be addressed, will guide 
the conduct of the federal research activities during the critical next 
few years of public discussion about climate change.
    7. Shift to the Reporting of Findings After the Strategic Plan is 
Completed: As described in the Discussion Draft Strategic Plan, CCSP 
will focus on the development of structured, climate science findings 
after the updated strategic plan is completed in April 2003. Future 
reports will address the three principal foci of the strategic plan: 
(a) reducing key scientific uncertainties, (b) designing and 
implementing a comprehensive global climate and ecosystem monitoring 
and data management system, and (c) providing decision support 
resources to support public evaluation of climate change response 
options, based on evaluation of a wide range of scenarios and response 
options.
    8. Integration of Scientific and Technological Developments: One of 
the principal themes of the workshop was the likely need for 
breakthrough technology options to address the long-term challenge of 
global climate change. The only effective approaches to long-term 
global stabilization and ultimate reduction of net greenhouse gas 
emissions, if found necessary, will require major new technologies, not 
simply incremental improvements of current technology. The likely 
growth of global population and economic output in the upcoming decades 
will only amplify this need. CCSP is working closely with the Climate 
Change Technology Program to assure that: (a) science drives the 
definition of technology needs, and (b) science is used to evaluate 
both the intended and the unintended consequences of proposed 
technology innovations.
    9. Major US-Led Earth Observation Summit Announced: Building on the 
need for a truly integrated global climate and ecosystem observing and 
data management system as documented in the CCSP Discussion Draft 
Strategic Plan and discussed extensively during the December workshop, 
the Administration is taking the initiative to host an Earth 
Observation Summit to be held in Washington, D.C., during the summer of 
2003 time frame. The meeting will bring together senior international 
government and nongovernment leaders in climate science, technology and 
environment, to develop a commitment to a new level of comprehensive, 
climate-quality global monitoring, and to initiate the planning to 
implement this commitment. The meeting (further described later in this 
statement) will target the Science Advisors and the Science or 
Technology Ministers of the G-8 nations and other nations, and will 
serve as a foundation for reinvigorating comprehensive observation of 
the Earth's climate system, which will be a focus of the December 2003 
Conference of the Parties of the United Nations Framework Convention on 
Climate Change.
    10. Request for Congressional Dialogue and Input to the Strategic 
Plan: The climate change science strategic planning process has already 
benefited from a wide range of review and comment (before, during and 
after the recent workshop) by the domestic and international climate 
science community, by a large group of stakeholders representing 
diverse interests on climate change issues, and by the rapidly 
increasing group of users of climate change information and 
projections. We invite comments and questions by members and staff of 
the Senate and the House of Representatives so that the question-based 
strategic plan can be fully responsive to the public interest. We have 
already engaged in briefings with a number of members and staff, and we 
are prepared to respond promptly to other requests for briefings or 
written responses to questions.
    The remainder of this statement provides further details in four of 
the key areas mentioned above: (1) background information on the U.S. 
Global Change Research Program and the Climate Change Research 
Initiative; (2) the November 2002 CCSP Discussion Draft Strategic Plan; 
(3) the December 2002 Workshop on the draft strategic plan, including 
its purpose, structure, operations and feedback to date; and (4) the 
summer 2003 U.S.-led Earth Observation Summit planned to promote a new 
level of state-of-the-science measurement and data management 
capability to support decision making about global change.
I. BACKGROUND ON THE U.S. GLOBAL CHANGE RESEARCH PROGRAM AND THE 
        CLIMATE CHANGE RESEARCH INITIATIVE
    The U.S. Global Change Research Program (USGCRP), well known to 
many in this audience, was launched as a series of research initiatives 
in 1987, and was codified by the Global Change Research Act, which was 
signed into law by President George H.W. Bush in 1990. To date, over 
$20 billion of research funding has supported the USGCRP, which has 
contributed significantly to the international body of research, 
monitoring and computer modeling of global change over the past 15 
years. The USGCRP is continuing its major role in the exploration, 
discovery and analysis of global change phenomena, and is sharing the 
results of this research with the entire world community.
    In May 2001, the Bush Administration asked the National Academy of 
Sciences--National Research Council to provide an updated evaluation of 
key questions about climate change science, in view of the body of 
research developed by the international climate science community, with 
specific reference to the recently completed Third Assessment Report of 
the Intergovernmental Panel on Climate Change (IPCC). The findings of 
the NAS Committee on the Science of Climate Change, reported in June 
2001, continue to guide the development of the focused climate research 
and technology programs announced by President Bush also in June 2001:
    ``Greenhouse gases are accumulating in Earth's atmosphere as a 
result of human activities, causing surface air temperatures and 
subsurface ocean temperatures to rise. Temperatures are, in fact, 
rising. The changes observed over the last several decades are likely 
mostly due to human activities, but we cannot rule out that some 
significant part of these changes is also a reflection of natural 
variability.''
    ``Because there is considerable uncertainty in current 
understanding of how the climate system varies naturally and reacts to 
emissions of greenhouse gases and aerosols, current estimates of the 
magnitude of future warming should be regarded as tentative and subject 
to future adjustments (either upward or downward). Reducing the wide 
range of uncertainty inherent in current model predictions of global 
climate change will require major advances in understanding and 
modeling of both (1) the factors that determine atmospheric 
concentrations of greenhouse gases and aerosols, and (2) the so-called 
`feedbacks' that determine the sensitivity of the climate system to a 
prescribed increase in greenhouse gases. There is also a pressing need 
for a global system designed for monitoring climate.''
    ``Making progress in reducing the large uncertainties in 
projections of future climate will require addressing a number of 
fundamental scientific questions relating to the buildup of greenhouse 
gases in the atmosphere and the behavior of the climate system. Issues 
that need to be addressed include: (a) the future usage of fossil 
fuels; (b) the future emissions of methane; (c) the fraction of the 
future fossil fuel carbon that will remain in the atmosphere and 
provide radiative forcing versus exchange with the oceans or net 
exchange with the land biosphere; (d) the feedbacks in the climate 
system that determine both the magnitude of the change and the rate of 
energy uptake by the oceans, which together determine the magnitude and 
time history of the temperature increases for a given radiative 
forcing; (e) details of the regional and local climate change 
consequent to an overall level of global climate change; (f) the nature 
and causes of the natural variability of climate and its interactions 
with forced changes; and (g) the direct and indirect effects of the 
changing distributions of aerosols. Maintaining a vigorous, ongoing 
program of basic research, funded and managed independently of the 
climate assessment activity, will be crucial for narrowing these 
uncertainties.''
    ``Because of the large and still uncertain level of natural 
variability inherent in the climate record and the uncertainties in the 
time histories of the various forcing agents (and particularly 
aerosols), a causal linkage between the buildup of greenhouse gases in 
the atmosphere and the observed climate changes during the 20th century 
cannot be unequivocally established. The fact that the magnitude of the 
observed warming is large in comparison to natural variability as 
simulated in climate models is suggestive of such a linkage, but it 
does not constitute proof of one because the model simulations could be 
deficient in natural variability on the decadal to century time 
scale.''
    I also quote from a February 2002 statement of President Bush, 
responding to the NAS report:
    ``Addressing global climate change will require a sustained effort, 
over many generations. My approach recognizes that sustained economic 
growth is the solution, not the problem--because a nation that grows 
its economy is a nation that can afford investments in efficiency, new 
technologies, and a cleaner environment.''
    President Bush took several steps to address climate change issues 
in June 2001, including issuing a new challenge to the climate change 
scientific and technological communities. He created the Climate Change 
Research Initiative (CCRI) and the parallel National Climate Change 
Technology Initiative (NCCTI), and asked federal science and technology 
specialists to take on new responsibilities to accelerate the 
development of policies to respond to climate change issues. 
Specifically, a short-term focus (defined as covering 2 to 5 years) was 
assigned to CCRI, to speed the development of information that can 
improve science-based decision-making.
    In February 2002 President Bush further strengthened the climate 
change science and technology programs by creating a new cabinet-level 
management structure, placing responsibility and accountability for the 
$3+ billion annual budget science and technology programs in the 
relevant cabinet departments. In September 2002, Commerce Secretary 
Evans and Energy Secretary Abraham reported to the President on the 
first six months of climate change science, technology and emission 
reduction activities achieved under the new cabinet-level management 
structure. The report from Secretaries Evans and Abraham, which 
includes the organization chart for the federal program, is attached to 
this statement. Implementation of the President's new management 
structure has resulted in several actions that have strengthened the 
federal programs in climate change science and technology development. 
For example:

    A thorough reevaluation of the climate change science 
        programs in all 13 participating federal agencies was completed 
        in August 2001. This has created a substantial new basis for 
        interagency collaboration, and has provided the essential 
        background for preparation of the interagency CCSP Discussion 
        Draft Strategic Plan.

    A full interagency crosscut of the FY 2004 climate change 
        research budget request was prepared in September 2002. This 
        integrated interagency budget crosscut will facilitate 
        efficiency and effectiveness in the commitment of future budget 
        resources to the climate change science program.

    The interagency science and technology programs are now 
        being reviewed on a frequent basis by high-level appointees of 
        President Bush. For example, the President has designated an 
        operating review committee composed of deputy cabinet level 
        officials representing each of the collaborating agencies. This 
        review committee has held a full agenda meeting nearly every 
        month since the President designated its oversight 
        responsibility in February 2002, and has been responsible for 
        achieving a substantially improved level of integration among 
        the federal climate science and technology programs, together 
        with the voluntary emission reduction programs and the several 
        international collaborative programs in which the United States 
        participates.

    CCSP is designed to serve in a ``credible fact finder'' capacity, 
providing a source of credible and useful information in three broad 
categories:

    1. Science: The causes and projected effects of global climate 
change, including the understanding of both individual processes and 
multiple-factor interactions.
    2. Observations and data: Observing system design and measurement 
methodologies for climate and ecosystem parameters, including high 
quality data archives, to facilitate trend analyses and other 
measurement-based scientific studies.
    3. Decision support resources: Evaluation of ``If . . .'', then . . 
.'' questions, which depends on achieving significant progress under 
(1) and (2) above.

The research activities sponsored by the CCSP are designed to provide 
critical information about a number of the natural resource issues 
affected by climate variability and change. This will involve both a 
focus on national and global level mitigation and adaptation issues as 
well as a focus on regional and sectoral adaptation responses to 
climate variability.
II. THE DISCUSSION DRAFT STRATEGIC PLAN FOR THE U.S. CLIMATE CHANGE 
        SCIENCE PROGRAM
    The CCSP Discussion Draft Strategic Plan outlines a comprehensive, 
collaborative approach for developing a more accurate understanding of 
climate change and its potential impacts. It builds upon the 
significant investments we have already made in climate change science, 
and it is guided by the priority information needs identified by 
stakeholders and scientists, both nationally and internationally.
    The Discussion Draft Strategic Plan, the comprehensive workshop 
discussions and written comment processes, and the ongoing review by 
the National Academy of Sciences were all designed to support the 
``credible fact finder'' role of CCSP. The following guidelines are 
being used to advance the CCSP ``credible fact finder'' strategy:

    1. Question-based strategic plan: The draft plan was developed from 
a series of key questions in each of the principal climate change 
science topic areas. For each question the draft plan summarized the 
current state of knowledge; described the improved information expected 
within the next 2 to 4 years and beyond; and reviewed the uncertainties 
unlikely to be resolved within 2 to 4 years. This question-based 
approach fosters agreement on the appropriate questions to be 
addressed, and it enhances communication among the large number of 
contributors to and users of the strategic plan.
    2. Integration of Long Term USGCRP and Short Term Focused CCRI 
Studies: USGCRP has largely focused on long-term studies in key science 
areas, including atmospheric composition, climate variability, the 
carbon cycle, the water cycle, climate-ecosystem interactions, human 
dimensions of climate change, land use/land cover interactions with 
regional climate change, and climate model development and evaluation. 
CCRI has a short-term focus on reducing scientific uncertainty where 
possible, developing integrated global observing systems for oceans, 
atmosphere and ecosystems, and developing decision support resources to 
enhance public and policy-maker evaluation of climate change response 
options. The CCSP integrated management of the USGCRP and CCRI helps 
bridge the discovery and characterization focus of USGCRP and the 
differentiation and strategy investigation focus that President Bush 
called for in the CCRI.
    3. Combined scientific community and stakeholder review: All of the 
strategic plan review actions (including the workshop, the written 
comment period and future opportunities to comment on CCSP draft 
findings) are intended to encourage review, comments, challenges, 
questions and alternative recommendations from both the international 
scientific community and the various interested stakeholder 
communities.
    4. Policy relevant but policy neutral analyses: The CCSP studies 
are intended to be policy relevant (i.e., focused on the range of 
climate change outcomes and response options of interest to the United 
States and other governments) while remaining policy neutral to assure 
credibility among all interested stakeholders. The CCSP studies and 
reports do not recommend specific policy options; instead, the studies 
address ``If . . .'', then . . .'' questions that explore the projected 
outcomes of various policy options.
    5. Transparency and comprehensiveness guidelines: CCSP has a policy 
of full transparency in its plans, reports and data records. To 
maintain credibility among users of the CCSP analyses and projections, 
CCSP draft and final plans, reports of findings and projections of 
future outcomes will be posted on publicly accessible web sites, and 
all comments communicated by interested stakeholders also will be 
posted for public review. CCSP will aim to make its analyses 
comprehensive (i.e., covering the range of plausible policy options) 
within the limits of the resources available for analysis. Moreover, 
CCSP will facilitate comparison with other studies whenever possible.
    6. Reporting of the basis for findings and the degree of certainty 
in findings: CCSP aims to describe the basis for each of its key 
findings and projections, with sufficient detail to allow independent 
reviewers to replicate the underlying analyses. CCSP will also 
characterize the degree of certainty associated with each of its key 
findings and projections. Where appropriate, ``confidence level'' 
descriptions will be used to communicate these characterizations. The 
introduction of uncertainty is not intended to imply a basis for 
inaction. In cases where the uncertainty of analyses or projections is 
so large as to make the discrimination between options impractical, 
this finding will be reported directly.
III. THE U.S. CLIMATE CHANGE SCIENCE PROGRAM STRATEGIC PLAN WORKSHOP
A. Themes for the Workshop
    Two important themes were used to guide the workshop deliberations:

    The status of the entire Earth and climate system is a 
        capstone issue for our generation and will continue to be so 
        for our children. The Administration fully embraces the need to 
        provide the best possible scientific basis for understanding 
        the complex interactions that determine the constantly changing 
        nature of our Earth's life support systems. Ultimately a new 
        generation of technology, not yet developed or commercially 
        demonstrated in most cases, will likely be needed to achieve a 
        long-term balance between the lifestyle aspirations of the 
        global population and the protection of essential Earth 
        systems.

    The 13 Federal agencies sponsoring the Climate Change 
        Science Program, together with the Administration's senior 
        science and policy leaders, intended that the workshop serve to 
        accelerate the application of basic climate research to address 
        the ``fundamental uncertainties'' identified by the National 
        Academy of Sciences and to evaluate response strategy options. 
        This is consistent with the President's call to focus on the 
        profoundly important--and challenging--range of fundamental 
        scientific uncertainties, technology development and public 
        policy questions that we need to address.

B. The Workshop Experience
    The workshop was a seminal event in the consideration of global 
climate change issues, attended by a very large group of United States 
and international climate specialists and stakeholders.

    More than 1,300 climate specialists participated in the 
        workshop, including individuals from 47 states and 36 nations. 
        This appears to be the largest-ever participation in a focused 
        climate science review program. Participants included 
        substantial representation from all of the climate science 
        areas, as well as extensive representation from each of the 
        principal domestic and international stakeholder groups dealing 
        with climate science issues.

    The workshop set a high standard for open and transparent 
        proceedings--which was the goal of the Administration. The 
        Discussion Draft Strategic Plan was published for review by all 
        participants prior to the workshop; all plenary sessions 
        (including all keynote addresses) were recorded and posted on 
        the website for public review and use; findings of all 24 
        specialty sessions were documented for public use; all invited 
        commenter presentations are currently being posted on the 
        website; and all written comments received up to January 18, 
        2003, will be posted on the website.

    The principal science leaders and the relevant cabinet-
        level agency leaders in the U.S. government all participated in 
        the workshop, along with the principal international climate 
        science leaders. These included:

    Hon. Spencer Abraham, Secretary of Energy
    Dr. Bruce Alberts, President of the National Academy of 
Sciences
    Dr. Samuel W. Bodman, Deputy Secretary of Commerce (on 
behalf of Secretary Donald L. Evans, who was out of the country during 
the workshop)
    Hon. Robert Card, Under Secretary of Energy
    Dr. Rita R. Colwell, Director of the National Science 
Foundation
    Hon. David Garman, Assistant Secretary of Energy
    VADM Conrad C. Lautenbacher, USN (Ret), Administrator, 
National Oceanic and Atmospheric Administration
    Dr. John H. Marburger, Director, Office of Science and 
Technology Policy
    Prof. G.O.P. Obasi, Secretary General, World Meteorological 
Organization
    THon. Sean O'Keefe, Administrator, National Aeronautics and 
Space Administration
    Dr. R. K. Pachauri, Chairman, Intergovernmental Panel on 
Climate Change
    Hon. Christine Todd Whitman, Administrator, Environmental 
Protection Agency

    Approximately 225 climate specialists were invited 
        participants during the specialty sessions of the workshop, 
        including presenters of the plan elements, invited review 
        panelists, moderators and rapporteurs. More than 300 other 
        individuals provided comments during the specialty sessions. 
        The specialty sessions focused on specific themes of the 
        strategic plan as well as crosscutting themes in the plan. The 
        24 specialty discussion sessions during the workshop were:

                1. Emerging Climate Science Issues
                2. Observations and Monitoring Systems
                3. Atmospheric Composition
                4. Carbon Cycle
                5. Climate Modeling
                6. Climate--Land Use/Land Cover Interactions
                7. Climate Variability and Change
                8. Water Cycle
                9. Human Contributions and Responses to Climate Change
                10. Climate-Quality Data Management Systems
                11. Scenario Development to Support National-Scope 
                Decisions
                12. International Collaboration
                13. Climate Variability and Change (second session of 
                topic #7)
                14. Climate--Ecosystem Interactions
                15. Resolution of Disparities in Tropospheric 
                Temperature Records
                16. Stabilizing Greenhouse Gases in the Earth's 
                Atmosphere: Opportunities
                   for Technology and Innovation
                17. Resource Management Decision Support
                18. Grand Challenges in Observations, Modeling and 
                Information Systems
                19. Crosscut: Climate Variability--Atmospheric 
                Composition--Water Cycle
                20. Crosscut: Carbon Cycle--Ecosystems--Land Use/Land 
                Cover
                21. Interactions Between Data, Observations and 
                Modeling
                22. Scenario Development and Risk-Based Decision 
                Support
                23. Applied Climate Modeling
                24. Reporting and Outreach Plans

    We have invited all interested persons, whether they 
        attended the workshop or not, to submit written comments on the 
        draft strategic plan to be posted on the website, up to the 
        cutoff date of January 18, 2003. We will consider all comments 
        in developing the updated version of the strategic plan, 
        scheduled for April 2003.

    At the request of CCSP, the National Academy of Sciences--
        National Research Council has appointed a 17-member expert 
        committee, including physical, biological and social scientists 
        and economists. The NAS committee reviewed the Discussion Draft 
        Strategic Plan prior to the workshop; they participated in the 
        workshop; they will review the public comments posted on the 
        website; and they will issue two reports during 2003 expressing 
        their conclusions and recommendations regarding the 
        objectivity, quality and comprehensiveness of the draft and 
        final versions of the new strategic plan, and regarding its 
        implementation.

C. Feedback from the Workshop

    The general response to the process of providing a public draft 
plan prior to the workshop, encouraging fully open discussion at the 
workshop, and accommodating written comments received after the 
workshop was extremely positive.
    The following lists illustrate some of the general and specific 
comments received at the workshop. These comments are not priority-
ranked, because the open comment period is still under way.
    Illustrative general comments: General recommendations voiced at 
the workshop included:

    1. Prioritize and sequence the scientific research needs and 
identify the resources required to carry out the high-priority science.
    2. Create a more holistic strategic plan; the individual chapters 
in the discussion draft were not adequately cross-linked.
    3. Provide realistic timelines for the science goals.
    4. Clarify the interagency process for implementing the plan.
    5. Note that resource limitations are not only financial, but also 
include hardware capabilities and human capital.
    6. Balance short-term and long-term science goals and activities, 
with reasons for each.
    7. Increase the attention to the detection and attribution of 
climate change impacts.
    8. Encourage accelerated development of climate models, especially 
for applied analyses of scenario projections.
    9. Facilitate stakeholder communication with the scientific 
community, including international stakeholders.
    10. Develop requirements and guidelines for regional climate change 
analyses.
    11. Build on the lessons learned from the National Assessment, 
particularly in terms of researcher-stakeholder interactions and the 
need for objective analysis.
    12. Develop a strategy for studying and forecasting potential 
nonlinear and abrupt climate changes.
    13. Designate focused research programs that address specific, 
significant, known scientific uncertainties about climatic change, and 
that assign agency responsibilities for quantifying the degree and 
nature of scientific uncertainties.

    Illustrative specific comments: The following list is a sample of 
the many hundreds of specific recommendations voiced during the 
workshop:

    1. To reduce the uncertainty in the estimates of climate 
sensitivity, the uncertainties in radiative forcing must be reduced, 
and observations and analyses of Earth's surface temperature must be 
continued.
    2. There should be a major focus on aerosols, emphasizing the 
regional nature of aerosol emissions and impacts and the importance of 
Asia, Africa, and Amazonia.
    3. An increased focus on the global hydrologic cycle, particularly 
water vapor and water budgets, is needed.
    4. The high prioritization of aerosol effects on climate was 
endorsed, but stratospheric and tropospheric ozone issues also need to 
receive a high prioritization.
    5. Effective study of climate feedbacks from polar regions will 
require a substantial integrated observation field program.
    6. A coordinated combination of scientific research, observations, 
and modeling will improve understanding of climatic change.
    7. Many communities will need to be involved in prioritizing and 
implementing studies of land-use change, including local stakeholders 
and international partners.
    8. Linkages between the water cycle, carbon cycle, ecosystems, and 
land-use change should be emphasized.
    9. The importance of economics and technology in predicting future 
land-use change should be emphasized.
    10. It is essential that funding of basic scientific research that 
may lead to unanticipated insights, results, and breakthroughs be 
continued.
    11. Missing items in the plan include the need for improved 
greenhouse gas emissions inventories and the effects of aviation on 
climate.
    12. The plan should more fully address ecosystem and social science 
data and research linked to global change.
    13. Sophisticated systems should be planned (and then implemented) 
to enable all users to search and retrieve global change data via the 
internet, including delivery of near-real time global temperature data 
sets.
    14. Climate variability should be cast in a probabilistic context.
    15. Guidelines for monitoring the effects of climate change on 
ecosystems, both on land and in the ocean, should be provided.
    16. A greater emphasis is needed on how feedbacks are changing and 
how they could play out in the future.
    17. Dynamic performance monitoring of an integrated climate 
observing system is needed with resources to address and fix problems 
in near-real time.
    18. Providing decision support is not only a two-four year 
problem--the need will continue indefinitely in the future.
    19. Uncertainty analysis is key to providing meaningful decision 
support resources.
    20. Regional analyses are particularly needed by resource managers 
dealing with climate variability for design applications.
    21. Resources are limiting the rate of progress in applied computer 
modeling.
    22. Scenarios must integrate science insights and knowledge from 
other sources (e.g., indigenous perspectives).
    23. The computational requirements for climate modeling could 
easily make use of a million-fold increase in computing power over the 
time period of the CCSP.
    24. There is not enough emphasis on impacts and adaptation 
analysis.
    25. Continuous scientific evaluation of technology options 
(especially breakthrough technologies) is needed.
    26. The context of the two-center climate modeling strategy must be 
defined within the overall CCSP strategy.
    27. An outreach strategy is needed for ``multiple publics'' and 
stakeholders.
    28. Seasonal-interannual timescales should serve as test beds for 
elucidating the processes and mechanisms important to climate change.
    29. Higher resolution (regional) models are needed for both better 
simulations of regional climates and users/customers who want regional 
details.
    30. Make GCOS Upper-Air Network (GUAN) into an Upper Air Climate 
Reference Network.
    31. Independent measurements (e.g., GPS, Lidar, proxy measurements, 
biological and new technologies) and multiple independent analysis 
groups are needed to resolve disparities in tropospheric temperature 
records.
    32. Long-term funding, access to dedicated supercomputers, full and 
open access to data, and stewardship of historical data are all major 
challenges to observations, modeling, and information systems.

D. Next Steps After Completion of the CCSP Strategic Plan

    Following the April 2003 completion of the new strategic plan, CCSP 
will focus on the reporting of findings and ``if . . ., then . . .'' 
analyses to the interested national and international communities. We 
plan to report findings using the same open and transparent approach as 
adopted for the Discussion Draft Strategic Plan and the workshop. The 
goal is for the Climate Change Science Program to serve as ``credible 
fact finder'' on the challenging issues associated with characterizing 
and, where necessary, mitigating and adapting to climate change.

IV. ANNOUNCEMENT OF A SUMMER 2003 EARTH OBSERVATION 
        SUMMIT
    As part of the Administration's plan to enhance the use of sound 
science, credible decision support methods, and high quality 
observations on oceans, climate, and ecosystems, the Administration is 
taking the initiative to host an Earth Observation Summit in 
Washington, D.C., in the summer of 2003. The CCSP workshop provided the 
starting point for this high-level event, which will serve as a 
foundation for reinvigorating the Earth's observing system. This 
activity is being coordinated through the National Science and 
Technology Council's Committee on Environment and Natural Resources.
    Although our capability to provide global observations of the Earth 
system is at an all-time high, the requirements for comprehensive, 
integrated climate and ecosystem observations are also demanding. The 
investments made by the United States over the past decade through the 
USGCRP, as well as by our foreign partners (notably in Europe and 
Japan), have provided unprecedented global views of the Earth as a 
complex, interacting system. However, such advances do not limit the 
need for highly calibrated and well-distributed in-situ measuring 
systems, especially in developing countries and countries with 
economies in transition.
    The Earth Observation Summit will be significant at the 
international level, particularly for meeting the needs of sustainable 
development and international environmental conventions such as the 
U.N. Framework Convention on Climate Change.
    The expected applications for a fully integrated Earth observation 
system are many, including natural resource management, daily weather 
prediction, El Nino prediction, and evaluation of climate models. The 
ultimate goal is transparency in the global acquisition and use of 
climate and ecosystem information, and better international 
coordination in creating the measurement and data management resources. 
Seamless acquisition and long-term storage of data on the Earth's 
biological, physical and chemical cycles--water, carbon, open ocean 
nutrients, atmospheric chemistry, energy balance, etc.--are essential 
to fill in the data gaps for more accurate modeling. Global data 
collection will provide earlier and better forecasts of extreme natural 
events that can lead to major benefits in energy use, and in food and 
water management.
    To achieve an integrated global observing system, a significant 
number of developed countries and organizations must be willing to 
commit the necessary resources to make it happen. The Earth Observation 
Summit will bring together senior international governmental and 
nongovernmental leaders for science, technology and the environment 
involved in global Earth observation. We plan to invite the Science 
Advisors or Science and Technology Ministers of the G-8 and other 
developed nations to participate in the summit. We aim to join the 
participants in a renewed evaluation of the benefits of an integrated 
global observing system. We believe this summit is especially timely as 
all nations prepare to review the adequacy of the Earth's climate 
observing system at the Ninth Conference of the Parties to the U.N. 
Framework Convention on Climate Change in December 2003.
                            CLOSING COMMENT
    Comprehensive, objective, transparent and well-reviewed scientific 
inquiry must be the core methodology used to evaluate the highly 
complex relationships between natural and anthropogenic influences on 
Earth systems, and to project potential outcomes of the many different 
investment and action strategies that have been proposed to mitigate or 
adapt to potential changes in global conditions. If we fail to fully 
evaluate the scientific information bearing on global change, we would 
be subject to the justifiable criticism that our strategy to cope with 
potentially our largest-ever investment in environmental management 
would be seen as a ``ready-fire-aim'' approach. CCSP will provide 
substantial, credible information to inform the public search for 
effective and efficient strategies responsive to the challenges of 
global climate change.
                              ATTACHMENTS
    1. The original announcement and invitation to participate in the 
climate science workshop (one page) is attached.
    2. The September 2002 letter report from Commerce Secretary Evans 
and Energy Secretary Abraham to President Bush is also attached. It 
provides an update on the progress on the climate change science and 
technology programs and the voluntary emission reduction program under 
the new cabinet-level management structure initiated by President Bush 
in February 2002.
                                 ______
                                 
Announcement and Invitation
U.S. Climate Change Science Program: Planning Workshop for Scientists 
        and Stakeholders
    The Workshop. The U.S. Climate Change Science Program will hold a 
comprehensive Workshop on the U.S. Climate Change Science Program, from 
December 3-5, 2002 in Washington, D.C., to receive comments on a 
discussion draft version of its Strategic Plan for climate change and 
global change studies. The U.S. Climate Change Science Program 
incorporating the U.S. Global Change Research Program (USGCRP) and the 
Climate Change Research Initiative (CCRI) is jointly sponsored by 13 
U.S. Government agencies. The workshop will review the USGCRP/CCRI 
plans with emphasis on the development of short-term (2-5 years) 
products to support climate change policy and resource management 
decision-making.

    Background. The U.S. Global Change Research Act of 1990 initiated 
the USGCRP that continues today as a major sponsor of global change 
research. In June 2001, President George W. Bush directed the USGCRP 
agencies to develop a focused Climate Change Research Initiative (CCRI) 
with the goal of accelerating the USGCRP research activities in the 
next 2 to 5 years, to assist in the development of public policy and 
natural resource management tools related to climate change issues. 
When finalized, the draft strategic plan reviewed during and after the 
workshop will provide the principal guidance for the U.S. global change 
and climate change research programs during the next several years, 
subject to revisions as appropriate to respond to newly-developed 
information and decision support tools.

    Purpose of Workshop. The workshop responds to the President's 
direction that the U.S. global change and climate change science 
programs must be objective, sensitive to uncertainties, and well 
documented for public debate. The U.S. global change and climate change 
research programs must consistently meet the highest standards of 
credibility, transparency, and responsiveness to the scientific 
community, as well as to all interested user groups, and our 
international partners. To assure the continued scientific credibility 
of the U.S. Climate Change Science Program, the workshop will provide a 
comprehensive review of the discussion draft of the strategic plan. The 
workshop discussions, supplemented by written comments submitted during 
a 30-day post-workshop period, will be reflected in the final strategic 
plan.

    Who Should Attend?

    Members of the scientific community interested in reviewing 
        and commenting on the plans and expected deliverables of the 
        USGCRP/CCRI research program

    Members of the climate stakeholder and resource management 
        communities interested in commenting on the planned application 
        of the USGCRP/CCRI scientific, economic, and energy system 
        information to policy and resource management decisions

    Members of the international climate change community 
        interested in reviewing and discussing the updated U.S. 
        research and decision support plans

    Workshop Topics. The workshop will include a plenary session each 
day, as well as the following breakouts:

    Observations, Monitoring, and Data Management

    Scenario Development and Evaluation

    Climate Models: Implementation and Application

    Decision Support Tool Development

    Atmospheric Composition

    Carbon Cycle

    Water Cycle

    Climate Variability and Change

    Ecosystem Interactions: Forcing and Feedbacks

    Human Contributions and Responses to Climate Change

    Land Use/Land Cover Change

    International Scientific Collaboration

    Public Communication of Information and Findings

    Invited Keynote Speakers. Several senior U.S.-based and 
international science and user group leaders have been invited to be 
keynote speakers for the plenary sessions. A partial list of invited 
keynote speakers includes:

    Dr. Bruce Alberts, President, NAS

    Hon. Robert Card, Under Secretary of Energy

    Dr. Rita R. Colwell, Director, NSF

    VADM Conrad C. Lautenbacher, Administrator, NOAA

    Dr. John H. Marburger, Director, OSTP, EOP

    Prof. G.O.P. Obasi, Secretary General, WMO

    Hon. Sean O'Keefe, Administrator, NASA

    Dr. R.K. Pachauri, Chairman, IPCC

                               Marriott Wardman Park Hotel,
                                 2660 Woodley Road, Washington, DC.

    Workshop/Reviewer Process. The workshop will include daily plenary 
sessions and several breakout sessions. Each breakout session will 
begin with a summary presentation of an element of the Discussion Draft 
Strategic Plan, and will include invited reviewer comments, as well as 
general attendee comments. Summary records will be prepared for every 
session.

    Publication of the Discussion Draft Strategic Plan. The Discussion 
Draft Strategic Plan will be posted on the website 
www.climatescience.gov by November 11, 2002 for scientific and public 
review. Comments, questions and suggestions are welcomed from both 
scientific and stakeholder communities during and after the workshop. 
Comments can be submitted up to January 18, 2003.

    Oversight by the National Academy of Sciences. An advisory 
committee appointed by the National Academy of Sciences (NAS) will 
undertake an independent review of the Discussion Draft Strategic Plan, 
and will give consideration to the scientific and stakeholder community 
comments during and after the Workshop.

    Product. The U.S. Climate Change Science Program will be 
responsible for preparation of the final version of the strategic plan, 
based on its evaluation of information presented at the workshop and/or 
posted on its website, as well as full review of the recommendations 
developed by the NAS. The final strategic plan will be published in 
April 2003.

    Sponsoring Agencies. The Departments of Agriculture, Commerce, 
Defense, Energy, Health and Human Services, the Interior, State, and 
Transportation; Environmental Protection Agency; National Aeronautics 
and Space Administration; National Science Foundation; Smithsonian 
Institution; and U.S. Agency for International Development.

    Schedule. Tuesday, December 3: 9:30 a.m.-5:30 p.m.
    Wednesday, December 4: 8:30 a.m.-5:30 p.m.
    Thursday, December 5: 8:30 a.m.-4:00 p.m.

    Registration and Logistical Information is available at the website
www.climatescience.gov.

Questions about Workshop Objectives and Presentations:
James R. Mahoney, Ph.D.
Assistant Secretary of Commerce for
Oceans and Atmosphere, and
Director, U.S. Climate Change Science Program
[email protected]
                                 ______
                                 
                                 The Secretary of Commerce,
                                  Washington, DC, September 9, 2002
The President,
The White House,
Washington, DC.

Dear Mr. President:

    We are writing to report on our progress since you established a 
new management structure to lead the comprehensive Federal climate 
change science and technology program. You designated that a cabinet-
level Committee on Climate Change Science and Technology Integration, 
which we jointly lead with annual rotation as Chairman, take direct 
responsibility for operational oversight of the interagency programs in 
climate change science and technology development. The Committee's 
oversight function is greatly assisted by the regular participation of 
Office of Science and Technology Policy Director John Marburger and 
Council on Environmental Quality Director James Connaughton. The senior 
management supervision of climate science and technology development 
also includes the deputy secretary-level Interagency Working Group on 
Climate Change Science and Technology, as illustrated in the enclosed 
figure.
    On June 11, 2001, you committed the Federal Government to pursue a 
broad range of strategies to address the important issues of global 
climate change by launching three initiatives: the Climate Change 
Research Initiative to accelerate science-based climate change policy 
development, the National Climate Change Technology Initiative to 
advance energy and sequestration technology development, and increased 
international cooperation to engage and support other nations on 
climate change and clean technologies. Moreover, on February 14, 2002, 
you complemented these initiatives by calling for increased incentives 
to reduce greenhouse gas emissions through improvements to the 
Department of Energy's Voluntary Reporting of Greenhouse Gases Program. 
This letter provides you with an update on progress being made in these 
four related areas: (1) federal climate research, (2) technology 
development, (3) the voluntary emissions reduction program, and (4) 
collaborative international activities being led by the Department of 
State.
Federal Climate Research
    Comprehensive activities are under way to accelerate the elements 
of our Nation's climate and global change research, monitoring, and 
decision tool development that will provide the most useful information 
to inform public discussion on climate change issues in a timely way. 
This work is being carried out in the new observation-rich era that is 
emerging as a result of the significant U.S. investments in monitoring 
systems that allow us to better characterize and understand the Earth 
system.
    We have asked the Climate Change Science Program Office (CCSPO) to 
undertake consolidated interagency management of the U.S. Global Change 
Research Program (USGCRP), conducted according to the provisions of the 
Global Change Research Act of 1990, and the Climate Change Research 
Initiative (CCRI). This will ensure internal consistency of the focused 
CCRI studies within the larger body of global change research conducted 
by the USGCRP and other supporting programs.
    A comprehensive interagency inventory of climate and global change 
research programs was initiated by CCSPO in May. This essential 
stocktaking exercise (the first conducted in several years) will 
enhance coordination, efficiency, and effectiveness of the entire 
research effort. All CCSPO agencies have fully participated in this 
inventory and these include: Department of Commerce, Department of 
Energy, National Science Foundation, National Aeronautics and Space 
Administration, Department of Agriculture, Environmental Protection 
Agency, Department of the Interior, Department of Health and Human 
Services, Smithsonian Institution, Department of State, Agency for 
International Development, Department of Defense, and Department of 
Transportation. The inventory review has also involved the Office of 
Science and Technology Policy, the Office of Management and Budget, and 
the Council on Environmental Quality. An analysis of the inventory will 
be completed by mid-September, and will provide important input to the 
specification of priority CCRI elements in FY 2004 budget planning. We 
are also developing metrics for each of the CCRI and USGCRP research 
programs so that we can effectively assess their progress.
    The annual report describing the ongoing activities and plans of 
the USGCRP, Our Changing Planet, is undergoing agency review, and will 
be published in October. This FY 2003 edition of Our Changing Planet 
incorporates information on the CCRI, including plans aimed at 
accelerating the reporting of scientific information to support public 
discussion of climate change issues.
    A fully-updated strategic plan for U.S. global change research is 
under development. This will be the first comprehensive update to the 
strategic plan for the USGCRP (and CCRI) since the original plan 
resulting from the 1990 Global Change Research Act was adopted. A draft 
of the updated plan will be made available for public comment by early 
November and will undergo comprehensive review by the scientific 
community, interested stakeholders, the general public, and interested 
international specialists at the Workshop on U.S. Climate Change 
Science Program to be held in Washington, D.C., on December 3-5, 2002. 
The workshop will ``jump start'' a comprehensive review of the updated 
research and reporting plans for U.S. global change research. The 
workshop will focus on key unresolved scientific issues, plans for 
needed global climate and ecosystem monitoring systems, and plans to 
develop and demonstrate decision-support tools to facilitate public 
discussion about climate change issues. The workshop will also review 
plans and schedules for future USGCRP/CCRI reports on specific 
findings. A final version of the strategic plan, taking account of 
workshop and other written comments, as well as National Academy of 
Sciences' review comments, will be published in April 2003.
    All these activities are being carried out in support of the 
implementation of our new research strategy, which focuses on three 
broad tiers of activities: (1) scientific inquiry, which has been the 
core activity over the years, with several key uncertainties continuing 
to need resolution; (2) observations and monitoring systems which have 
always been a key part of the program, but have often been 
insufficiently integrated to support strategy analyses; and (3) 
development of decision -support tools, including detailed analyses of 
projected environmental, economic, and energy system outcomes of 
various scenarios. The CCRI activities will enhance the larger ongoing 
USGCRP by providing targeted focus to each of these three tiers where 
significant improvements in decision-relevant information is possible 
during the next 2 to 5 years.
    CCSPO staff is regularly involved in discussions with a wide array 
of members of the national and international scientific communities, 
and with a broad group of climate stakeholder representatives. The 
program office encourages comments and critiques from all sources and 
welcomes in-person discussions, subject only to the practical 
limitations of staff time. With respect to staff, the USGCRP 
coordinating office staff is being augmented with specialists to 
address the focused CCRI questions.
Technology Development
    The National Climate Change Technology Initiative (NCCTI) is 
continuing its in-depth review of federal research and development 
(R&D) activities, and is developing approaches to pursue advanced 
technologies that can yield cost-effective means to mitigate the risks 
associated with climate change. The current state of U.S. climate 
change technology R&D is being assessed and ways to strengthen basic 
research, enhance private-public partnerships, and promote cutting-edge 
technologies are being examined. Options for improving technologies for 
measuring and monitoring greenhouse gas emissions are being explored by 
the Department of Energy and other collaborating agencies.
    To find creative ways to motivate the development of innovative 
technologies, a process of open solicitations for technologies to 
compete against each other using the criteria of emissions reduction, 
avoidance, or sequestration potential is being pursued. This approach 
will help ensure that all possible options are explored.
    High priority technologies that are now being pursued include: 
hydrogen-based energy systems, biofuels, low-speed wind turbines, fuel 
cells for transportation, zero net energy buildings, CO2, 
capture and geologic sequestration, terrestrial sequestration research 
in forest management, and agricultural land management. Recent examples 
of progress in these areas include:
    Fuel Cells for Transportation--The transport sector accounts for 
about one-third of U.S. carbon emissions, of which slightly more than 
half are from light-duty passenger vehicles. These carbon emissions 
from transportation can be sharply reduced or eliminated if the 
vehicles are fueled by hydrogen, with carbon emissions, if any, from 
hydrogen production sequestered. A major effort is under way to enable 
the development of a hydrogen production and delivery infrastructure.
    Additionally, a key companion technology is the hydrogen fuel cell. 
The Department of Energy plans to accelerate fuel cell R&D in several 
areas. The new FreedomCAR research partnership will focus on developing 
technologies such as fuel cells and hydrogen from domestic renewable 
sources. The long-term results of this cooperative effort will be cars 
and trucks that are more efficient, less expensive to operate, and emit 
no harmful pollutants or greenhouse gases.
    CO2 Capture and Sequestration--Research and development 
to better understand the natural processes by which carbon is 
converted, recycled, and reused in natural systems, particularly in 
deep geologic settings, is being carried out. The scientific basis for 
large-scale carbon sequestration in geologic reservoirs, such as coal 
seams, deep brine fields, and oil and gas reservoirs is being studied. 
Research awards were recently made in this area and a consortium of 
fossil energy stakeholders, state and local agencies, technology 
developers, and university researchers is being formed to examine 
diverse sequestration approaches, especially in the geologic area.
    Agriculture and Forestry--The Federal Government is enhancing 
conservation programs that have the benefit of sequestering carbon in 
forested areas, including their soils, and offsetting agricultural 
emissions of greenhouse gases. These programs include the Conservation 
Reserve Program, which assists farm owners and operators to conserve 
and improve soil, water, air, and wildlife resources by removing 
environmentally-sensitive land from agricultural production and 
returning it to long-term resource-conserving (including carbon) cover; 
the Environmental Quality Incentives Program, which helps producers 
make beneficial and cost-effective changes to cropping and grazing 
systems, nutrient and pest management, and conservation measures to 
improve soil, water, and related natural resources; the Wetland Reserve 
Program, which restores and protects wetlands with the result that 
carbon is stored in those ecosystems; and the Forest Stewardship 
Program, which provides additional technical and financial assistance 
to nonindustrial, private forest owners.
Voluntary Emissions Reductions Programs
    On July 8, 2002, we joined Agriculture Secretary Veneman, and 
Environmental Protection Agency Administrator Whitman, in recommending 
improvements to the Department of Energy's Voluntary Reporting of 
Greenhouse Gases Program. The primary goal of these improvements is to 
create a comprehensive and transparent program to report and credit 
real greenhouse gas reductions.
    The proposed improvements also include developing fair, objective, 
and practical methods for reporting baselines, calculating real 
results, and awarding transferable credits for actions that lead to 
real greenhouse gas reductions. Developing such methods is central to 
achieving the objective of ``measurement accuracy, reliability, and 
verifiability,'' as specified in your February 14, 2002, direction to 
the four of us.
    We are aggressively pursuing improvements in the Voluntary 
Reporting of Greenhouse Gases Program. Elements of this process include 
stakeholder workshops; updating technical guidelines; public comment 
periods to review the revised guidelines; developing reporting forms, 
software, and a public-use database; and Office of Management and 
Budget clearance of the new reporting forms. After completion of this 
process, we plan to adopt new guidelines by January 2004, for reporting 
2003 annual data. The process will fully engage the many stakeholders 
who are concerned about climate change.
    In addition to improving the voluntary emissions reduction 
registry, the Department of Energy and the Environmental Protection 
Agency have been working with energy intensive companies and industry 
sectors to identify opportunities for cost-effective greenhouse gas 
reductions and to facilitate consensus building on common reporting 
methodologies and voluntary strategies.
Support for Collaborative International Activities
    The United States continues to lead all nations in research and 
technology development directed at climate change. We are maintaining 
our support of the U.N. Framework Convention on Climate Change (UNFCCC) 
and the Intergovernmental Panel on Climate Change (IPCC). We are 
especially pleased that Department of Commerce scientist Dr. Susan 
Solomon was recently elected co-chair of the IPCC Working Group I, 
focusing on the scientific information regarding climate change.
    The Department of State reports that numerous high-level 
interagency bilateral climate dialogues are in progress. These include 
support of joint climate change programs, scientific research programs, 
as well as technical and policy discussions in Australia, Canada, 
Central America (Belize, Costa Rica, El Salvador, Guatemala, Honduras, 
Nicaragua, and Panama), European Union, India, Italy, Japan, and 
People's Republic of China. The Department of State leads these 
bilateral efforts, which involve several other agencies, including the 
Department of Energy, Department of Commerce, U.S. Agency for 
International Development, Environmental Protection Agency, Department 
of Agriculture, and Department of Transportation. More high- level 
bilateral activities are expected in the near future, including joint 
research and cooperation with Brazil, Mexico, Republic of Korea, 
Russian Federation, South Africa, and Ukraine. In addition, the 
Departments of State and Energy co-chair a newly established 
interagency Task Force on International Energy Cooperation to oversee 
collaborative efforts on the research, development and deployment of 
current and emerging cleaner energy technologies.
    U.S. obligations under the UNFCCC are being met through broad-based 
interagency activities in many other countries. These include 
diplomatic engagements (including Ministerial meetings), institution 
and long-term capacity building (an example is U.S. support for 
development of climate offices in the Ukraine), education and training 
on key issues of significance to the United States (such as 
international workshops on monitoring of greenhouse gases), technology-
focused support and assistance (for example, the June U.S.-Indo 
workshop on fuel cells), and mitigation programs (such as methane 
emissions reduction and improved forest management practices). 
Additional international efforts include recent meetings with the Asia-
Pacific Economic Cooperation (APEC) and representatives from several 
European nations to develop support for a global observing system, and 
numerous initiatives to transfer clean energy technology to developing 
and transition countries, measure greenhouse gas emissions, promote 
improved land use to capture and store carbon in soils and plants, 
assess potential impacts of climate change in other countries, and 
develop capacities to adapt to potential climate change. We are also 
promoting tropical forest conservation through the Tropical Forest 
Conservation Act, thereby helping to address the world's greenhouse gas 
problem through the storage of carbon in tropical forests.
    Our interagency activities will continue on a very active path 
forward, involving science and technology improvements, substantial 
enhancement of the Emission Reduction Program, and rapidly increasing 
international collaboration to address the important issues associated 
with climate change. We will provide similar updates on our progress 
every 6 months, and more frequently when warranted by specific 
developments.

        Respectfully,
                                              Donald Evans,
                         Secretary of Commerce, and Chairman of the
                                   Committee on Climate Science and
                                             Technology Integration
                                           Spencer Abraham,
                             Secretary of Energy, and Vice-Chairman
                            of the Committee on Climate Science and
                                             Technology Integration



    Senator McCain. Thank you very much, Dr. Mahoney. And your 
complete statement, which is a very detailed and helpful one, 
will be made a part of the record. Thank you for appearing here 
today.
    As you've heard discussed a couple of times here, we've--
according to your organization, NOAA's data, the 2002 average 
global temperature was the second warmest on record. The ten 
warmest years have all occurred since 1987, with nine of them 
since 1990. The Greenland ice sheet suffered from the greatest 
surface melt in the 24-year satellite record in 2002. Many are 
predicting the global average temperature in 2003 will match or 
exceed the record 1998 temperature. I could go into many other 
manifestations of this situation, such as 70 percent of the 
coral reefs in the world dying, et cetera. Some of those 
stories are anecdotal; many of them are backed with scientific 
evidence.
    How do you explain the significance of all this data?
    Dr. Mahoney. Well, Mr. Chairman, first, I'd begin by noting 
your opening statement began with a quote from the National 
Academy of Sciences report, the report requested by the 
Administration in 2001. I'd note that the same quote begins my 
statement about our strategic plan. And I think there's a 
commonality here. That is, we have a body of evidence. We asked 
the academy to review it. The IPCC--the Intergovernmental Panel 
on Climate Change--has reviewed this extensively. The U.S. is a 
major participant there. We're deeply involved in the Fourth 
Assessment Report-planning for IPCC these days.
    And in all of that body of evidence, I think we could draw 
a conclusion and the President has drawn this as well--that is 
that we do have evidence of global climate change.
    I think it's important to cite that there are substantial 
uncertainties about causes. And because of that uncertainty 
about causes, there's also substantial uncertainty about the 
mitigation methods that might be effective in time. So I would 
not use the time of this committee to try to debate the 
question of whether there is any evidence of global change. I 
believe that the President has said that there is, and I 
believe he has laid out a program that is aimed at trying to 
address, on the science side, questions of how can we better 
understand it. And let's understand, in particular, what we do 
about it, because that's not easy to see. And he has laid out a 
program to enhance these technology initiatives and a program 
of a series of steps that are intended to reduce the emissions 
that would occur otherwise.
    So on the--on the point you started with, and I'll stop my 
answer there, I wouldn't--I wouldn't presume to argue your 
basic point back to the Committee.
    Senator McCain. Well, I guess--I know that you know that 
what I'm trying to get at here is--the National Academy of 
Sciences went on to say that greenhouse gases are accumulating 
in the Earth's atmosphere as the result of human activities, 
causing surface air temperatures and sub-surface ocean 
temperatures to rise. And I think, in all fairness, we cannot 
rule out that some part--some significant part of these changes 
is also a reflection of natural variability. But they conclude 
that it's a result of human activities.
    And the criticism that has been directed at your very noble 
efforts is that the U.S. has invested about $20 billion over 
the last ten years in research in this area, and yet, as I 
understand it--and perhaps you can help me out here--the 
Administration's position is that we need to do more research, 
rather than take concrete action. Is that an inaccurate 
characterization of what you're doing?
    Dr. Mahoney. Senator McCain, I believe it's inaccurate. I 
think neither you nor I would argue against more research in 
its place, so I'm not going to say that I have a problem with 
that part. Yes, we need more research, for a number of reasons, 
but I fundamentally dispute the concept that there is no action 
being taken by this Administration otherwise.
    Senator McCain. What action could you tell me is being 
taken?
    Dr. Mahoney. I think there's substantial action underway in 
the technology development area. I think there's substantial 
action underway in the voluntary emission-reduction program.
    And I would note one part of that, because I've had the 
chance to participate in the Administration's senior management 
review and development--the developments of that plan--I am 
delighted, under American jurisprudence that we are beginning 
with a voluntary program among companies, and there are many--
there are, for example, 31 corporations now in the EPA Climate 
Leaders Program, who are willing to join the 1605(b) major 
emission-reduction program voluntarily right now.
    In my view, if we started at the beginning with a mandatory 
program, I would see the possibility of years of litigation 
about the ``devil-in-the-details'' kind of issues. How do we 
credit things when a company sells a division or closes this or 
opens something else, and the like? I believe----
    Senator McCain. They're doing that pretty successfully in 
Europe--not mired down in litigation with a cap-and-trade 
practice in the European countries.
    Dr. Mahoney. Well, I--my comment included the comment of 
the American jurisprudence system. It's my observation that we 
might well see, under property-rights arguments, major 
challenges to some of those issues under a mandatory system. I 
personally believe that we have the opportunity to prove 
concepts by engaging those companies--and there are many--who 
are willing to take this up effectively at this time.
    Senator McCain. Well, I thank you, Doctor. We just, I 
guess, have a fundamental difference of opinion. I don't think 
a voluntary program meets the urgency of the situation. I just 
don't envision that, it would be bogged down in lawsuits 
because we pass laws all the time that require certain actions 
to be taken in order to comply with the law.
    But I thank you. I do appreciate all the work that you're 
doing. I'd be interested in hearing more about the technology 
that's being developed. But I would hope also, that the 
Administration, in its deliberations, would look at what's 
being accomplished in Europe in the cap-and-trade business, 
which, according to predictions, could be as much as a $10 
billion business in a few years.
    I thank you for appearing today, Dr. Mahoney, and we look 
forward to working with you.
    Senator Wyden?
    Senator Wyden. Thank you, Mr. Chairman. I will tell you, 
with all due respect, Dr. Mahoney, I just don't think these 
workshops are going to cut it. I think when you look at what 
comes out of them, there's just no ``there'' there when it 
comes to really dealing with the problem. And the question I'd 
like to start with is what evidence, short of flooding of the 
National Mall, would persuade the Administration to actually 
support a cap on greenhouse gas emissions?
    Dr. Mahoney. Well, Senator, with respect, I think you're 
asking me to take my role in a science program and do something 
sort of above my pay grade to say how the policy decisions are 
made relative to balancing the very substantial economic 
dislocations that may relate to some of these climate change 
initiatives. For example, just to cite a data point rather than 
to take only that point, some of the projections relative to 
complying with the Kyoto agreement that have been produced 
outside of government in the last few years project annual 
costs, in current dollars, of $400 billion forever. I would 
think, as a citizen, that any administration would want to be 
very careful about looking at the issues of economic 
dislocation, and finding the best technology solutions to 
develop policies here. If it came down to a bumper sticker, it 
would come down to the issue about what exactly should we do? 
And I think honest people can disagree about what exactly ought 
to be done.
    Senator Wyden. Well, certainly honest people can disagree. 
The problem is, nobody in the world agrees with us. I mean, you 
keep talking about international cooperation, and I'm hunting 
and pecking for somebody who's anxious to pursue the approach 
the Administration wants with us.
    Let me ask you about something that clearly relates to the 
science agenda. In 1992, the United States signed and ratified 
the U.N. Framework Convention on Climate Change. It set goals 
stabilizing greenhouse-gas concentrations in the atmosphere at 
a level that would prevent dangerous interference with the 
climate system. It said such a level should be achieved within 
a time frame sufficient to allow ecosystems to adapt naturally 
to climate change.
    Now, we had testimony in this committee last summer, and 
it's also in the Climate Action Report, that greenhouse gas 
emissions are going to increase by 43 percent between 2000 and 
2020. So, in your scientific opinion, has our country even met 
the goal that was laid out in 1992? That's, in effect, a decade 
ago.
    Dr. Mahoney. Well, the goal that was laid out in 1992 turns 
on a definition of ``dangerous impact,'' and I think those 
issues are very much in debate. Is the U.S. on a path today 
that will reduce total greenhouse gas and total CO2 
emissions now and over the next few years? Not directly by the 
actions now. I agree with that statement.
    I would also note, since you've made the reference about 
other nations, I noticed in the paper the other day, Italy's 
population is 38 million today. It's projected to be 31 million 
by 2012. Italy will have little difficulty in meeting the Kyoto 
goal, for example, because it will have almost 25--or will have 
20 percent fewer people. Germany has a stable population. The 
U.S. has a massively growing population. So there are 
considerations about what is equity, and what do we measure 
when we talk about meeting these goals and we look among our 
international partners.
    Senator Wyden. Are you counting Italy now as coming out for 
the Administration's approach?
    Dr. Mahoney. No, Senator. I was----
    Senator Wyden. Everywhere I look, Dr. Mahoney, I see 
scientists who say you have to go further than the 
Administration's approach. The world is saying that you have to 
go further. The reason I asked you about other nations is, I 
think that's an important measure. The world thinks we're 
sitting on the sidelines and if you can maybe furnish for the 
record some evidence from other countries, I would find that 
useful, because I think it's very telling. The President is 
right to stress international cooperation as a way to deal with 
a variety of problems. The world does not agree with our 
position, and they do not agree by an overwhelming majority.
    To pursue this question on science issues, you all, at the 
recent climate conference, had Dr. Warren Washington, the 
Director of the National Science Board, stated, and I'll quote 
here, ``We should start doing something now. We should get 
started even though we don't have all of the answers now.'' 
What would be your response to that? At a minimum, it seems to 
me, you've got a chance to use the science that is out there 
now. Senator Brownback, Senator Craig and I have put bipartisan 
bills in front of you, bills that are backed by significant 
segments of American industry--agriculture, the technology 
sector, the farming sector--these are bipartisan bills. Isn't 
what Dr. Warren Washington said at your climate conference 
something that would justify going beyond where the 
Administration is today?
    Dr. Mahoney. Well, let me start by saying I have the 
highest regard for Dr. Warren Washington. I've worked with him 
closely for many, many years. He is a great American scientist. 
His view, therefore, has a lot of weight.
    At the same time, I would note that Dr. Washington is 
speaking about this in a capacity, looking at part of the 
issue. I think it's fair to say that government has to look at 
the issue of, how we make the progress we need to make while 
balancing many other real concerns, including the health of the 
economy, on the matter.
    As the President pointed out in his statement a year ago, 
it's axiomatic that advanced environmental control only occurs 
when economies are healthy. And we see that around the world. I 
have no dispute with Dr. Washington saying this, but I don't 
think that that especially represents the view of an 
administration responsible for balancing many considerations.
    I'm not here to argue for or against a particular course of 
action. I want to make it clear, my responsibility is to lay 
out what we know about the science. We're trying our very best 
to do that.
    Senator Wyden. My time is up. I would only say, Secretary 
Mahoney, while nobody disputes, here, the value of research--
and we are going to support continuing it--when people like 
Warren Washington, whom you say you respect and have attested 
to your admiration for today--said it's time to go beyond that, 
I hope that somehow this will serve as a wake-up call for the 
Administration.
    I thank you.
    Senator McCain. Senator Burns?
    Senator Burns. Thank you, Mr. Chairman.
    You pretty much answered, Dr. Mahoney, the--most of the 
elements of the Administration's strategic plan for the 
program, and I understand that there are numerous subjects that 
come out of the workshop that you have identified for further 
study. Could you give me a list of--or give me an idea of some 
of those things on that list and what you think must be done?
    Dr. Mahoney. Yes, Senator Burns, I'd be glad to. And I'll 
try to do it in quick form so that you can use----
    Senator Burns. Okay.
    Dr. Mahoney.--use your time well.
    I'll start with the idea, if I have to put things on a 
bumper-sticker level, what we want out of all the science is 
the issue of, what exactly should we do? What are the courses 
that can get us the protection we need at the best cost and the 
best effectiveness on both a short- and then a long-term basis?
    But then, in terms of specific questions and comments, you 
have, probably, my written statement. And pages 11 through 13 
of that--and I'll say for the--for anyone who's listening, 
otherwise, this is all on the website, too, so it's all fully 
available--we've been asked to really deal with cross-cutting 
links, look at issues between ecosystem impact and climate 
impacts in both directions. We've been asked to really focus on 
identifying the kinds of technologies that can make a big 
difference.
    Let me give an example about that. A move of--take CAFE 
limits--Corporate Average Fuel Economy limits--well-known to 
this Committee. If we were to increase the CAFE limits, there's 
no doubt that brings an environmental and a greenhouse-gas 
benefit. But if we take, in a generation's time--15 or 20 
years--petroleum-based engines out of motor vehicles, in favor 
of hydrogen fuel cells, then we take almost a third of the 
greenhouse gas emissions off the table for the U.S. And so, the 
kind of issue for us to project is, How far should we go with 
incremental increases or incremental improvements that get 
incrementally and quickly more costly, versus how much should 
we, in fact, look at the opportunities, as the Administration 
is doing through DOE with the FreedomCAR, with the major motor 
vehicles manufacturers and this kind of issue?
    And I think there are many other examples. I would cite, 
again, we got many comments back about--we have a great panoply 
of environmental and climate data. We can do much better 
providing climate information to help the water-resource 
management that you mentioned, and forestry management. Almost 
independent of what's changing over 10 or 15 or 50 years, we 
know now and we can do a better job of designing transport 
systems, dam systems, and all the rest, and we've been pushed 
to provide more of that. And I think that that's a real benefit 
for the Nation.
    Senator Burns. Also recommended out of this workshop, was a 
global observation system. Do you support that idea? And how 
would we deploy such a tool?
    Dr. Mahoney. Yes. I strongly support it. And I want to 
point out at the outset that the U.S. has been absolutely the 
world leader in developing and implementing a global observing 
system over the last decade and even in the decades before 
that.
    I'd cite the work of NASA, in particular, and my own 
agency, NOAA. Of course, we all are familiar with the weather 
and oceanographic stations and NASA's satellite stations. 
There's been much development and implementation of a great 
system already. But the more we look, the more we agree that 
what we need to do is take the other step to make sure that we 
really get the data together, get the observations and the 
requirements for them together, and get the data quality and 
its archiving and its ability to be accessed together, so that 
we can really look at trend information, going forward.
    To give one very specific example, El Nino, the great 
biennial oscillation that was discovered in the 1980s, until 
that appeared, because of observations, no one was even 
thinking about the possibility that there were two-year cycles 
in our weather. As you know, we're back in an El Nino condition 
right now. We're seeing massive storms on the West Coast and 
the like. That has opened our eyes about phenomena that we 
never knew, that greatly influence agriculture, water 
management, and all the rest, around the world, not only in the 
U.S. We believe there are more benefits coming from this, and 
this is why the Administration is taking the lead on behalf of 
the U.S. to really bring the rest of the world here to 
Washington at the highest government level to discuss these 
issues in preparation for the U.N. session that will run in 
December of this year so that we can take some concrete steps 
by then.
    Senator Burns. We are nearing--we are nearing enough 
nations signing the Kyoto Protocol recommendations. And will 
you also be making plans--once Russia decides that this is a 
good thing for their country and is ready to make the offer of 
some responsibility for their contribution to the greenhouse 
situation; once China makes up its mind that it wants to--as do 
all the countries around the world--to put into place some 
mandatory conditions that we might observe in this country?
    Dr. Mahoney. Well, I think there are some very big ``ifs'' 
in that, Senator.
    Senator Burns. There are always ``ifs.''
    Dr. Mahoney. Well, as you know, the Kyoto Accord sets no 
requirements for emission reduction in the developing nations. 
And so, China, India, Brazil, Indonesia, and so forth, have no 
requirements under the Kyoto Accord to control anything. The 
requirements fall on the developed countries. That was one of 
the big concerns. It was the reason that this Senate voted 95-
to-nothing to advise the President in 1997, just over five 
years ago now, that it would--but it did not prefer signing 
that--or did not prefer the U.S. joining in that Accord. I 
think there's a big hypothetical on the issue that, as we 
understand from our science, from our monitoring, and from some 
very challenging issues of international equity about what 
works for five years, ten years, and what works in the long-
term, I have no doubt that the discussions will continue about 
what's the best path forward. But the view has been that the 
Kyoto Accord, uniquely relative to the U.S., would have a very 
heavy adverse effect in its current form. Even if Russia signs 
and the Accord comes into force, I don't see that the 
Administration--and I know it's the President's position, not--
would go forward to then become a signatory to that. I think 
that, like anything else, the issue is on the table as to--as 
we learn, what is the right path forward.
    Senator Burns. Well, may I follow up with just one 
question?
    It's my observation that, even though we find the Kyoto 
Accords somewhat unacceptable in this country, I do not believe 
it serves the issue very well or this country very well just to 
stop talks on the international level on what we can do and 
should do. I think those talks and that dialogue have to 
continue.
    And I thank you, Mr. Chairman.
    Senator McCain. Thank you, Senator Burns.
    Senator Sununu?
    Senator Sununu. Thank you, Mr. Chairman.
    One point of clarification there. You mentioned countries, 
developing countries, that weren't included in Kyoto--China, 
Brazil, India, Indonesia--but I think it is the case, while 
they're not bound by any reductions, they do get to vote to 
ratchet up the reductions on all of the signing countries. I 
think they get a vote. And when a level--a certain level of 
countries--I think 75 percent of the countries, including 
developing countries--vote to make a change in the treaty, then 
that change would go into effect. So while they're not bound by 
any reductions, as I've come to understand the treaty, they 
actually do get a vote to change the terms of the agreement.
    You mentioned the voluntary program in the United States 
that you've been working on. How do you measure the success of 
that program?
    Dr. Mahoney. We measure the success of it by inventorying 
reductions in emissions. And we are in the process of running 
the development of those activities, right now engaging dozens 
and dozens of industries across the country. And I know the 
comment--I'd also measure this by a sense of, can we get 
something in operation and get it moving very quickly? And 
``quickly,'' when we think of making major corporations move 
and we think in the Washington sense, is probably a year or 
two; it's not this week or this month.
    I note, by comparison, after ``Superfund'' passed, it was 
almost a decade before there was nearly any clean-up because--
there was so much litigation about the endpoint standards and 
all the rest of it. So my measure of success in the voluntary 
program is that if, in a reasonable time--and I would take 
``reasonable'' to be in the range of about two years; hopefully 
quicker--but if, within a couple of years, we can show real 
progress, I think that is much faster than the time-scale we 
might see with a prescribed mandatory program. That's why I 
feel that working----
    Senator Sununu. Sure, that--your time table is two years--
--
    Dr. Mahoney. Yes.
    Senator Sununu.--to achieve real progress, I guess. And my 
question was, how do you measure progress?
    Dr. Mahoney. The progress is measured specifically by 
reductions in the total emissions, or the net emissions----
    Senator Sununu. The sort of aggregate reductions in 
emissions.
    Dr. Mahoney. That's right. The CO2, typically, 
or all greenhouse gases.
    Senator Sununu. And what would be your goal for aggregate 
reductions in that two-year period?
    Dr. Mahoney. Well, the goal, I think, is better stated in 
the President's goal which is the 18 percent reduction in 
intensity--or, in other words, an 18 percent improvement in 
emission efficiency--by the year 2012. And it's our intent to 
meet that goal, which is a very onerous one, for the U.S.
    Senator Sununu. So, are you going to measure progress by 
aggregate emissions or by a reduction in intensity? Those are 
really two different measurements, aren't they?
    Dr. Mahoney. Both measurements will be fully available. 
They convert one to the other, although the conversion is not 
all that easy. But I----
    Senator Sununu. I'm trying to make it easy for you, though. 
If you sort of pick one and then focus on one, and then you 
don't achieve the other, you're less--much less likely to come 
back here, whether I'm still a Senator or not, and have someone 
say, ``Aha, but you didn't achieve the other. Even though you 
reduced the intensity, aggregate output increased.''
    Dr. Mahoney. The primary measure, because it's consistent 
with the Administration's program, is intensity. And we also 
will be reporting aggregate reductions overall. But the primary 
measurement is intensity.
    Senator Sununu. Where does the United States rate today, 
compared to all other countries, on intensity? We know we are 
responsible for 25 percent. I assume that means aggregate. We 
emit more CO2 than any other country, but where do 
we rate in terms of intensity?
    Dr. Mahoney. To give the honest answer, I can't. I don't 
know, so I don't want to guess, Senator.
    Senator Sununu. And I assume intensity is, what, output of 
CO2 per dollar of economic output, or----
    Dr. Mahoney. Per----
    Senator Sununu.--per BTU?
    Dr. Mahoney.--per dollar of economic output. But I would 
note one thing that I do know, that the intensity in the U.S. 
improved 12 percent through the 1990s, and we're projecting 
under the President's plan, another 18 percent improvement in 
that--in the period out to 2012.
    Senator Sununu. Could I ask you to put together a summary 
of intensity, at least for a select number of countries, 
including the United States, so we can see--given that you've 
said this is the measure by which you will determine whether 
you're successful or not, I would think we'd want to know--at 
least how we're doing compared----
    Dr. Mahoney. I would be----
    Senator Sununu.--with some other countries.
    Dr. Mahoney. I'd be delighted to.
    Senator Sununu. Thank you very much.
    Senator McCain. Senator Nelson. And before Senator Nelson--
well, Senator Nelson, go ahead.

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. I would defer to you, Mr. Chairman.
    Senator McCain. Go ahead.
    Senator Nelson. You mentioned NASA. We're going to have a 
global surveillance ready in NASA by 2004. What's going to be 
their contribution to your overall efforts at measuring climate 
change?
    Dr. Mahoney. Well, NASA is the biggest single contributor 
to this overall climate change program right now because of the 
major role NASA plays with its spacecraft observations, with 
the Mission to Planet Earth series and the Whole Earth 
Observation series of satellites and data analysis.
    I'd just add, Senator, that NASA does much more than simply 
observe. NASA provides first-rate science, analysis, and 
computer models in its work, as well, so it is a major 
contributor to the national effort.
    Senator Nelson. Mr. Chairman, you will know that global 
warming will have as much effect on my State as any with the 
vast coastline, with most of the population of Florida being on 
the coast, with the fact that, even though we're a land called 
``Paradise,'' we're a peninsula sticking down into the middle 
of something known as ``Hurricane Highway,'' and the fact that 
global warming will increase the intensity of storms and their 
frequency, not even to speak of pestilence, as a result of a 
warm climate, and not even to speak of the question of the 
coral reefs. Does this Administration agree that global warming 
has resulted in the bleaching of coral reefs?
    Dr. Mahoney. Well, I don't know that I'd want to make the 
broad statement that, ``the Administration agrees.'' I don't 
know if that has been brought to the attention of the whole 
Administration. Does the science support the argument that 
there is bleaching? I would say yes, the weight of evidence is 
that there is evidence of bleaching. I would dispute some of 
the percentage numbers we've seen, but I think that there's 
persuasive science that suggests this is a concern.
    Senator Nelson. Well, there's a fellow named Lautenbacher.
    Dr. Mahoney. Yes.
    Senator Nelson. Is he the NOAA administrator?
    Dr. Mahoney. Yes. Admiral Conrad Lautenbacher is my 
immediate boss. He's administrator, I am deputy at NOAA.
    Senator Nelson. Well, he said that the U.S. was ten years 
away from a definitive answer on the causes of climate change. 
Now, you have an enormously impressive background in public 
health. What do you think about waiting ten years, and the 
public health risk, to get around to some definitive answer on 
the causes of climate change?
    Dr. Mahoney. Well, Senator, I don't know the context in 
which the ten-year reference was made. I think reasonable 
people could easily say--for example, if we're talking about 
really understanding better what we've got and what the causes 
are and all the rest, I could understand many people, myself 
included, who might say--you know, we need ten years to get 
there. So, I want to be somewhat careful about that 
hypothetical.
    I'd go back to what I said a few minutes ago, and that 
Senator McCain, in his opening comments from the chair made--
that is, the Academy report is pretty clear, President Bush was 
very clear in his statements in 2001, and it is our view that 
there is real evidence of global change, and that it is seen to 
be likely that there are significant human effects, but there 
is also substantial uncertainty about their scope and about 
what would make a difference.
    Senator Nelson. And do you think that carbon dioxide from 
fossil fuels is the dominant contributor to this change that 
you just mentioned?
    Dr. Mahoney. It is most likely the most important 
contributor. Probably the next-most important contributor--and 
maybe 50 to 60 or 67 percent in importance at the extreme is 
CO2--is the existence of aerosols in the atmosphere, 
the fine particles, especially aerosols that result from 
basically low-temperature combustion in home heating units and 
the like that are used literally by the hundreds of millions in 
many developing countries around the world.
    We have major research underway right now about the so-
called ``Asian Brown Cloud'' issue, which has major health 
effects, as well as climate impact. It has been tagged with 
Asia because of the obvious sources in China and India and 
Indonesia, but it is not unique to that area.
    So, when we talk about the greenhouse gases, they're the 
whole set, basically carbon-based gases including carbon 
dioxide, methane, many others of the higher hydrocarbons. But 
the aerosol contribution is one of a special note. And when we 
talk about strategies for improving and protecting public 
health and improving the safety of the world, part of the issue 
for us, as a science question, is, how well can we sort these 
things out? Because we are at the verge of making very 
substantial global investments, the better we can understand 
what will get us improvement and protection, and what is better 
than something else, the better we'll do that job.
    Senator Nelson. You know, the United States has a PR 
problem abroad, with other countries, because they don't think 
we're serious about doing something about climate change. And 
in part, a good bit of that impression was due to how we 
handled the Kyoto proposal. If you were handling Kyoto over, 
how would you do it, Dr. Mahoney?
    Dr. Mahoney. Well, I'll give you a personal opinion if I 
can use my phrase that ``it's above my pay grade,'' because I 
never forget--and it's not a cop-out--but government has to 
balance many things. I'd start from the matter that when that 
Accord was negotiated, there was a typical cliffhanger, 
twelfth-hour negotiation about that. I'd like to think, 
personally, I would not have gotten to the endpoint that we 
signed, to when we agreed to the Kyoto Accord in the first 
case. So that's where I would start my handling of it.
    I'd next note that--the 95-to-nothing vote by the Senate 
saying, ``This isn't right for the U.S.,'' and then go forward 
from there.
    And I'm aware that we have a PR problem. I believe that we 
are engaging our partner nations in any number of forums these 
days on these issues. We have a vast array of bilateral and 
multilateral partnerships right now, and I think we understand 
the issues. I think we expect to see our colleague nations 
understand the seriousness of our commitment to move forward in 
a number of areas and, in particular, to advance technology. 
And, very much in the sense of what Senator Lieberman said in 
his opening comments here too, hopefully this will be to the 
benefit of the American economy by bringing more production and 
primarily-good production here to the American economy in the 
technology area.
    Senator Nelson. Thank you, Mr. Chairman. Did EPA refuse 
your invitation to come?
    Senator McCain. Declined.
    [Laughter.]
    Senator McCain. Senator Ensign?

                STATEMENT OF HON. JOHN ENSIGN, 
                    U.S. SENATOR FROM NEVADA

    Senator Ensign. Thank you, Mr. Chairman. Just a brief 
opening--a couple of comments.
    There is, obviously--I think most of the scientific world 
believes that there is significant global warming going on. 
There is, I think, a question, as far as the human factor, that 
you've pointed out, and I think that's one of the most 
important questions to answer, from a scientific perspective, 
because that's really what we can control. We can't really 
control natural causes. And when we look historically, there 
are major climatological changes, historically--we can see that 
in the polar icecaps and the history of the various thicknesses 
that have gone on over geologic time.
    But regardless of how or what the scientific evidence shows 
on global warming and the human effect, I think that there are 
great arguments for us to try to get less dependent on fossil 
fuels anyway, simply from a strategic standpoint. I think 
there's a very strong argument that the amount of money that we 
spend keeping oil flowing to the United States from outside of 
the United States--there are very, very strong arguments that 
it makes us less safe as a country. Certainly much of the 
terrorism that's financed around the world seems to be, at 
least, coming from certain parts of the world, and especially 
it empowers some of those states to have state-sponsored 
terrorism. It improves their coffers, I guess, is the best way 
to say it.
    And so, I actually think that it's important for us as a 
country, to look--even if global warming weren't occurring, for 
us to look toward becoming less dependent on fossil fuel, as 
you mentioned, fuel cells. There are many other ways, 
obviously, and potential technologies that we can look at for 
the future, and I think it's very important that this body, and 
this Committee, in particular, and your agency--look at how we 
can, as a Government, partner with the private sector in 
developing and bringing some of these technologies to the 
marketplace. We need to ensure that people will use them and 
where they're convenient--where they can actually become mass-
marketed instead of just, one fleet of cars here, or whatever 
it is--becomes a regular part of our everyday lives.
    And I agree with Senator Lieberman's comments and others 
that talk about how that actually can be a huge benefit to our 
economy, simply because if we can develop those technologies, 
other countries are going to want those, and that can really 
help us try to export some of those technologies. So, I'm 
encouraged by some of the comments that the Administration is 
wanting to go in that direction, and I want to work with the 
Administration and my colleagues who share some of the same 
visions, because I think it's absolutely critical that we do 
this as a Nation.
    You know, global warming can be controversial to all the 
people it wants to be controversial to, but when we look at 
this strictly from a security standpoint, in my opinion, 
regardless of how you feel about all the other arguments, you 
can agree that we need to go that direction simply from a 
security standpoint.
    Just any comments you have.
    Dr. Mahoney. Well, Senator, first of all, thank you. I 
appreciate the comments. And, they are something that are very 
agreeable to me in my personal view, certainly, and I think--
the view of the Administration, as well. I would note, at this 
workshop last month, we were delighted to feature some 
discussions that were led by representatives of a major 
international corporate group led by Exxon-Mobil, who has just 
made a commitment of $100 million for technology-development 
work in a program that they are sponsoring after a competition 
that's led by Stanford University. And that represents the 
private sector getting money into our major academic 
institutions specifically looking to advance technologies in 
those areas which are of this nature, generally breakthrough 
technologies--not incremental changes, but a different way to 
do things. We are in the process of working very closely, happy 
to say, that's private and university. We won't co-opt and slow 
it down with bureaucracy, but we're doing all we can to 
collaborate with them. We'll be having other ongoing 
collaboration. We're making sure that we provide access to our 
information and our facilities as much as it can help that 
whole program. So, that's one example of this thing.
    And I'd mention the example--when you look at the sectors 
that lead to--that bring greenhouse gases to the atmosphere in 
the U.S. economy--and these proportions are different in other 
places--the manufacturing sector in the U.S. is 25 percent. 
It's down a lot. And we'll squeeze more out the next few years. 
That's part of what's happening. But the motor vehicle sector, 
and transportation sector, generally, continue to increase, and 
they are now 30 percent and growing.
    And so, I'd just suggest the thought of an experiment that 
instead of cutting 30 percent to 27, 26, 25 percent, we could 
cut from 30 percent to zero over 20 years by changing our 
technology and eliminating the use of motor vehicles--or of 
oil--petroleum--to drive those vehicles, we'd be on the right 
track. And it's fascinating that Exxon-Mobil, in that business, 
is supporting this kind of technology development. I think 
they'll have plenty of market for petroleum products around the 
world--in fact, maybe a more stable market if we can see some 
of these things move in that direction. So, I hope we'll see an 
era of substantial increase in this kind of private-public-
academic cooperation.
    Senator Ensign. Well, thank you, Mr. Chairman. I appreciate 
your leadership on this. These are very important hearings to 
have, and hopefully we can look to solutions in the future. 
Thank you.
    Senator McCain. Thank you, Senator Ensign.
    Senator Wyden has a 30-second issue.
    Senator Wyden. Thank you, Mr. Chairman.
    Just on the nature of research, in 1992, Dr. Mahoney, the 
U.N. Convention said we ought to stabilize greenhouse gas 
concentrations at a level that would prevent dangerous 
interference with the climate system. What is your definition 
of a dangerous level of emission?
    Dr. Mahoney. Senator, I think--I used ``capstone issue'' in 
my statement today. I used it in the workshop. I would say, in 
this field, that's a ``capstone issue,'' and it's part of the 
difficulty we have. If you look around the world right now, 
it's not just a U.S., but a global problem. Everybody's 
wrestling with this.
    We know some things. We know that CO2 
concentrations--to use that as the best surrogate--have gone 
from 280 parts per million pre-industrial time to 360 parts per 
million, and we expect them to go up much more. Begs the 
question, should they be back to 280 someday? Should they be 
360, 400, 500, 600, 700? Our British colleagues, who are 
actively working on emission reductions, as you know, are 
exploring the 400-, 500-, 600-type scenarios. No one, to my 
knowledge, has a good handle on that yet, and I hope that our 
research and debate will help surface that question more.
    I don't mean to duck it, but it's one where no one has 
wanted to play the first card so far, and we have to deal with 
that question, whether it's by that measure, or by the measure 
of the effects in the world.
    Senator McCain. Thank you, Dr. Mahoney. Let me just tell 
you what bothers me a little bit about the voluntary thing 
before we close here. And there's an article by John Fialka in 
the Wall Street Journal, The Bush Administration's, Mr. Samuel 
Bodman, whom you work with, ``Deputy Secretary at the Commerce 
Department, said U.S. emissions are expected to grow by 30 
percent during the next decade, resulting in a net increase of 
12 percent if the Bush target is achieved.'' That's a little 
disturbing.
    But I want to thank you, Dr. Mahoney, for being here today. 
We look forward to working with you. And I think that the event 
that you held recently was very helpful in educating a lot of 
people about the issue, and I--we look forward to working with 
you. Thank you for appearing here today.
    Dr. Mahoney. Thank you, Senator. Thank you, Senator Wyden.
    Senator McCain. Alright. The last panel will be Ms. Eileen 
Claussen, the President of The Pew Center on Global Climate 
Change, Mr. Jack Cogen, President of Natsource; Mr. Fred Krupp, 
President of the Environmental Defense Fund; and Mr. Randy 
Overbey, the President of ALCOA Power Generating, Incorporated.
    I'd like to welcome all of our witnesses. Thank you for 
your patience. It's obvious that this issue has a lot of 
attention from many of the members.
    Ms. Claussen, we'll begin with you. Welcome.

           STATEMENT OF EILEEN CLAUSSEN, PRESIDENT, 
              PEW CENTER ON GLOBAL CLIMATE CHANGE

    Ms. Claussen. Thank you very much, Mr. Chairman, Senator 
Wyden. It's a pleasure to be here.
    My name is Eileen Claussen, and I'm the President of the 
Pew Center on Global Climate Change, a nonprofit, nonpartisan 
organization dedicated to providing credible information, 
straight answers, and innovative solutions in the effort to 
address climate change.
    The Pew Center, and the 38 companies that comprise its 
Business Environmental Leadership Council, accept the view of 
most scientists that enough is known about the science and 
environmental impacts of climate change for us to take action 
now. Although the climate change issue must ultimately be 
addressed globally, the United States must take responsibility 
for its own emissions, currently 24 percent of the global 
total.
    Let me begin by describing efforts in other countries to 
address climate change. Virtually all industrialized nations 
have committed themselves to reducing their greenhouse gas 
emissions, most to levels below their emission levels in 1990. 
Despite U.S. opposition to the Kyoto Protocol, the United 
States' closest allies, including the European Union, Canada, 
and Japan, support the Protocol and have moved forward with 
ratification. The Protocol is likely to enter into force later 
this year, when Russia is expected to ratify it.
    In anticipation of entry into force, and on a parallel 
track, governments are deeply engaged in developing and 
implementing domestic policies to meet their Kyoto targets and 
are looking to emissions trading to help them do so. Last 
month, for example, the European Council reached an agreement 
on the establishment of a mandatory trading system for carbon 
dioxide. This system will encompass all the member states of 
the European Union, including the ten approved for new 
membership in 2004. Member states overcame some political 
differences to reach agreement on this system, and its 
operation will provide valuable lessons for the future of 
greenhouse gas emissions trading.
    We are seeing activity in developing countries as well. 
China, India, Mexico, Brazil, and others, are undertaking 
measures, including market and energy reforms, fuel switching, 
and pollution controls that have had the indirect effect of 
reducing the growth of their countries' combined greenhouse gas 
emissions by nearly 300 million tons a year.
    In the United States, the greenhouse gas targets set by 
national policy will, in fact, allow for continued significant 
growth in emissions for at least the next decade, estimated at 
30 percent over 1990 levels by 2012. But at the State level, 
steps are being taken to reduce emissions. At least two-thirds 
of the states have programs that, while not necessarily 
directed at climate change, are achieving real greenhouse gas 
emission reductions. For example, Texas and 11 other states 
require electric utilities to provide a certain amount of power 
from renewable energy sources. And actually, Governor Pataki 
today said that New York would join those States and will set a 
renewable portfolio standard. So, it'll be Texas plus 13--plus 
12.
    New Hampshire, Oregon, and Massachusetts are regulating 
carbon dioxide emissions from power plants. Nebraska, Illinois, 
North Dakota, Oklahoma, and Wyoming are taking steps to allow 
agricultural interests to sell stored or sequestered carbon as 
a commodity. California has enacted a law to require reduction 
of greenhouse gases emitted from cars, sport utility vehicles, 
and light-duty trucks. State leadership in addressing climate 
change has been striking.
    Equally striking, I think, has been the leadership 
demonstrated by the private sector. Forty major corporations 
with substantial U.S. operations have established voluntary 
greenhouse gas reduction targets. These efforts are substantial 
and commendable, but they are hardly enough. The companies that 
are truly committed to tackling climate change know that we 
will never achieve the deep emission cuts necessary unless 
everyone moves far enough and fast enough in the right 
direction, and that will happen only when the Government 
requires it.
    In this context, the draft bill we are discussing today 
represents an important milestone. Its enactment would 
establish a comprehensive national framework that would put the 
United States on a path toward significant long-term emission 
reductions. The draft act incorporates several critical 
features. It would establish ambitious environmental goals 
through binding caps on greenhouse gas emissions. It would 
provide companies the flexibility they need to reduce emissions 
as cost-effectively as possible, allowing emissions trading 
across sectors, gases, national borders, and providing credit 
for carbon storage through sequestration. It would take a 
phased approach, allowing time for the capital and technology 
investments needed to achieve deeper emissions cuts over the 
long term, and it would seek to treat all affected parties 
fairly, recognizing the reductions of those who have taken the 
lead in reducing their emissions and assisting consumers, 
workers, and communities affected by climate change policy.
    As with any legislation this far-reaching and complex, 
there is room for debate on the specifics, even among those who 
share the act's objectives and support its broad approach. 
Nonetheless, the draft act offers a solid foundation for 
crafting an effective national climate policy that draws on 
America's strengths, and begins to fulfill its responsibility 
to protect our global climate.
    We appreciate the vision and leadership that you have shown 
with Senator Lieberman in drafting this bill, and look forward 
to providing any assistance that might be useful to the 
Committee as it proceeds to act on it.
    Thank you.
    [The prepared statement of Ms. Claussen follows:]

           Prepared Statement of Eileen Claussen, President, 
                  Pew Center on Global Climate Change
    Mr. Chairman and Members of the Committee, thank you for this 
opportunity to testify regarding the draft American Investments for 
Reduction of Emissions Act of 2003. My name is Eileen Claussen, and I 
am the President of the Pew Center on Global Climate Change.
    The Pew Center on Global Climate Change is a non-profit, non-
partisan, and independent organization dedicated to providing credible 
information, straight answers, and innovative solutions in the effort 
to address global climate change. Since 1998 the Pew Center has 
published 43 peer-reviewed reports--aimed primarily at policy-makers 
and opinion leaders--on the science and environmental impacts of 
climate change, the economic costs and benefits of climate change 
policies, domestic and international policy alternatives for addressing 
climate change, and technology options for reducing greenhouse gas 
emissions. Thirty-eight major companies in the Pew Center's Business 
Environmental Leadership Council (BELC), most included in the Fortune 
500, work with the Center to educate the public on the risks, 
challenges, and solutions to climate change. The BELC companies do not 
contribute financially to the Center.
    The Pew Center accepts the view of the great majority of scientists 
that enough is known about the science and environmental impacts of 
climate change for us to take action now. As noted in 2001 by the 
National Research Council of the National Academy of Sciences, 
``[g]reenhouse gases are accumulating in Earth's atmosphere as a result 
of human activities, causing surface air temperature and subsurface 
ocean temperature to rise.'' \1\ The potential consequences of this 
warming include sea-level rise and increases in the severity or 
frequency (or both) of extreme weather events, including heat waves, 
floods, and droughts, with potentially major impacts to U.S. water 
resources, coastal development, infrastructure, agriculture, and 
ecological systems.\2\ We consider the risk of these and other 
consequences sufficient to justify action to reduce greenhouse gas 
emissions significantly. Moreover, much of this action must occur in 
the United States, which produces 24 percent of global emissions, 
making it the world's largest greenhouse gas emitter. U.S. greenhouse 
gas emissions are expected to grow by 12 percent by 2012 under current 
Administration policy.\3\
---------------------------------------------------------------------------
    \1\ ``Climate Change Science: An Analysis of Some Key Questions,'' 
Committee on the Science of Climate Change, National Research Council, 
2001.
    \2\ Wigley, T.M.L., 1999, The Science of Climate Change: Global and 
U.S. Perspectives, Pew Center on Global Climate Change; Neumann, J.E., 
G. Yohe, R. Nicholls, and M. Manion, 2000, Sea-Level Rise and Global 
Climate Change: A Review of Impacts to U.S. Coasts, Pew Center on 
Global Climate Change; Frederick, K.D. and P.H. Gleick, 1999, Water and 
Global Climate Change: Potential Impacts on U.S. Water Resources, Pew 
Center on Global Climate Change.
    \3\ ``Pew Center Analysis of President Bush's February 14th Climate 
Change Plan,'' Pew Center on Global Climate Change, 2002, available at 
http://www.pewclimate.org/policy/response--bushpolicy.cfm.
---------------------------------------------------------------------------
    The Pew Center also believes that the cost to the United States of 
meeting a given emissions target can vary substantially depending on 
the policy approach taken. In general, the most cost-effective 
approaches allow emitters flexibility in deciding how to meet a target; 
provide early direction so targets can be anticipated and factored into 
major capital and investment decisions; and employ market-based 
mechanisms, such as emissions trading, to achieve reductions where they 
cost the least.
    The Pew Center welcomes this opportunity to share its views on the 
draft American Investments for Reduction of Emissions Act of 2003, 
which, when introduced, will be the most significant piece of climate 
change legislation ever put before Congress. To provide some context 
for the Committee's review of this draft legislation, I would like to 
begin with an overview of climate change efforts already being 
undertaken by other countries, as well as by states and industry here 
in the United States.
    Because climate change is a global challenge that requires a global 
solution, I think it is important that a discussion of U.S. policy 
start with a full understanding of how the issue is being addressed 
elsewhere in the world. I would like to emphasize two points: virtually 
all industrialized nations have now committed themselves to reducing 
their greenhouse gas emissions; and most view emissions trading as an 
essential component of their climate change strategies.
    More than ten years ago, at the Earth Summit in Rio de Janeiro, the 
United States joined other nations in approving the United Nations 
Framework Convention on Climate Change. Recognizing that additional 
efforts were necessary to effectively address climate change, the 
parties subsequently negotiated the Kyoto Protocol, which sets binding 
emission targets for industrialized countries. While far from perfect, 
the Protocol represents a significant diplomatic achievement. Largely 
at the insistence of the United States, the Protocol includes several 
innovative mechanisms to ensure that emissions are reduced as cost-
effectively as possible, chief among them an international system of 
emissions trading.
    The present U.S. Administration has made clear it will not submit 
the Kyoto Protocol to the Senate for ratification. Nevertheless, other 
countries, including the United States' closest allies, continue to 
support the Protocol and have moved forward with ratification. Last 
month, Canada became the 100th country to ratify the agreement. Apart 
from the United States, Australia is the only country to state 
explicitly that it is not prepared to ratify the Kyoto Protocol. 
However, the Australian government remains committed to meeting its 
Kyoto emissions target and has not ruled out ratifying the treaty at a 
future date. The Protocol still must be ratified by Russia in order for 
it to enter into force. Russia has announced its intention to ratify 
the treaty, and is expected to do so later this year.
    On a parallel track, governments are deeply engaged in developing 
and implementing domestic policies to meet their Kyoto targets. Japan, 
for instance, has set national targets for carbon dioxide and for other 
greenhouse gases, and is developing more than 100 measures to improve 
energy efficiency, promote renewable energy, enhance carbon 
sequestration and advance other efforts to reduce emissions. In 
addition, the Canadian government recently adopted a comprehensive plan 
that calls for binding emissions reduction agreements with industry, 
increased government support for technology research, and targeted 
measures such as energy efficiency standards.
    Some countries are contemplating emissions reductions well beyond 
those required under the Kyoto Protocol. The German government has said 
it is prepared to reduce emissions 40 percent below 1990 levels by 
2020, provided other countries agree to steeper cuts as well. In the 
United Kingdom, the Royal Commission on Environmental Pollution is 
recommending a 60 percent reduction in U.K. emissions by 2050, and 
Prime Minister Blair has called for a similar reduction worldwide.
    Each of these countries is pursuing a strategy tailored to its 
national circumstances, such as its energy mix, regulatory culture, and 
economic profile. And each, it is worth noting, is looking to emissions 
trading to help meet its target. Some may rely primarily on the 
international trading system established under the Kyoto Protocol, 
while others are developing domestic systems of their own. The European 
community, which at first viewed U.S. arguments for emissions trading 
with deep skepticism, is now leading the way in establishing greenhouse 
gas markets. In Denmark, a cap-and-trade system regulating carbon 
emissions from the power sector was enacted in 1999. Last year, the 
U.K. became the first country to introduce a broad-based greenhouse gas 
trading system. While voluntary in nature, the U.K. system provides 
strong incentives for companies to take on binding emissions targets. 
These and other systems are still in their early stages, but the volume 
of trading is rapidly increasing. A recent World Bank study projected 
that the number of greenhouse gas credits traded worldwide would 
increase four-fold from 2001 to 2002. In the first trade under the 
Kyoto system, a Japanese firm last month purchased 200,000 credits from 
which Slovakia intends to invest the proceeds in domestic emissions 
reduction projects.
    One of the most significant steps in the development of the 
greenhouse gas market came last month when the European Council reached 
agreement on the establishment of a European trading system for carbon 
dioxide. This system, which is subject to final approval by the 
European Parliament, will encompass all the member states of the 
European Union (including the ten approved for new membership in 2004), 
which have a combined economy larger than that of the United States. In 
its initial phase, the system will cover six sectors--including 
electric utilities, steel producers, and oil refiners--which together 
account for nearly half of Europe's carbon dioxide emissions. 
Individual member states will set targets and allocate allowances among 
their emitters, and facilities that fail to meet their targets will 
face significant penalties. The system is designed to be compatible 
with the Kyoto system and with other national systems, but trading will 
be permitted only with countries that have ratified the Kyoto Protocol. 
Member states overcame strong political differences to reach agreement 
on this system, and its operation will provide valuable lessons for the 
future of greenhouse gas emissions trading.
    I would like to offer one final note on what is happening 
internationally. As you know, one of the chief criticisms of the Kyoto 
Protocol is that it does not establish greenhouse gas emissions limits 
for developing countries. Whether or not one believes the Kyoto 
Protocol is fair in this respect--and I happen to believe it is--I 
think the more important question is whether or not developing 
countries are in fact taking steps to limit their emissions. The Pew 
Center recently undertook an analysis of climate change mitigation in 
six developing countries, including China, India, Mexico, and 
Brazil.\4\ We identified many measures underway in those countries 
that, while not necessarily motivated by climate concerns, are 
significantly reducing the growth of their greenhouse gas emissions. We 
calculated that these measures--which include market and energy 
reforms, fuel switching, and pollution controls--have reduced the 
growth of these countries' combined greenhouse gas emissions by nearly 
300 million tons a year. These findings suggest significant 
opportunities to further reduce emissions growth in developing 
countries while helping them to achieve stronger economic growth and 
other development priorities.
---------------------------------------------------------------------------
    \4\ Chandler, W., R. Schaeffer, Z. Dadi, P.R. Shukla, F. Tudela, O. 
Davidson, and S. Alpan-Atamer, 2002, Climate Change Mitigation in 
Developing Countries, Pew Center on Global Climate Change.
---------------------------------------------------------------------------
    Clearly, significant greenhouse gas reduction activities are 
occurring abroad, but U.S. states are undertaking important activities 
as well. In fact, the recent state leadership in addressing climate 
change has been striking. At least two-thirds of the states have 
programs that, while not necessarily directed at climate change, are 
achieving real greenhouse gas emissions reductions. Measures that have 
proven controversial at the Federal level, such as renewable portfolio 
standards and mandatory reporting of greenhouse gas emissions, have 
been implemented at the state level, often with bipartisan support and 
little controversy.
    The Pew Center recently published a report on state initiatives to 
reduce greenhouse gas emissions.\5\ This report found that Texas and 
eleven other states have enacted legislation that requires utilities to 
provide a certain amount of renewable power as part of their total 
offering of electricity. Texas has also established a Renewable Energy 
Credits (RECs) Trading Program that gives utilities considerable 
flexibility in meeting the requirement. Under this market-based 
program, every certified renewable energy project in Texas produces one 
credit for every kilowatt-hour of electricity that it generates. These 
credits can be purchased by electricity providers to meet any shortfall 
in their own generation of renewable energy. A carbon cap-and-trade 
program would work on the same principle.
---------------------------------------------------------------------------
    \5\ Rabe, B., 2002, Greenhouse & Statehouse: The Evolving State 
Government Role in Climate Change, Pew Center on Global Climate Change.
---------------------------------------------------------------------------
    Important work is being done in other states, as well. New 
Hampshire and Massachusetts have recently started directly regulating 
carbon dioxide emissions from power plants. Nebraska, Illinois, North 
Dakota, Oklahoma, and Wyoming are linking agricultural policy with 
greenhouse gas reduction, and are taking steps to allow agricultural 
interests to sell stored, or ``sequestered,'' carbon as a commodity. 
California has enacted a law to require reduction of greenhouse gases 
emitted from cars, sport utility vehicles (SUVs), and light-duty 
trucks. And the New England governors have joined with the premiers of 
the five eastern provinces of Canada in committing to reduce regional 
greenhouse gas emissions to 1990 levels by 2010 and to ten percent 
below 1990 levels by 2020.
    There are similar examples of leadership in industry. A growing 
number of companies are voluntarily committing themselves to greenhouse 
gas reduction targets. At last count, the Pew Center had identified 
more than 40, most either based in the United States or with 
significant U.S. operations. BP, for example, has reduced greenhouse 
gas emissions to 10 percent below 1990 levels--eight years ahead of 
target--and now has pledged to keep them there at least until 2010. 
Alcoa is working to reduce its greenhouse gas emissions by 25 percent 
below 1990 levels by 2010. DuPont is aiming for a 65 percent reduction 
below 1990 levels, also by 2010.
    The Pew Center recently studied several companies that have taken 
on targets and found they are motivated by several things.\6\ They 
believe the science of climate change is compelling. They know in time 
the public will demand strong climate protections, and they can get 
ahead of the curve by reducing their emissions now. They want to 
encourage government policies that will work well for business. They 
also cite one other important motivation: To improve their competitive 
position in the marketplace. That, in fact, has been the result. The 
companies are finding that reducing emissions also helps to improve 
operational efficiencies, reduce energy and production costs, and 
increase market share--all things that contribute to a healthier bottom 
line. While addressing climate change is not necessarily profitable, 
the evidence so far suggests it is certainly affordable.
---------------------------------------------------------------------------
    \6\ Margolick, M. and D. Russell, 2001, Corporate Greenhouse Gas 
Reduction Targets, Pew Center on Global Climate Change.
---------------------------------------------------------------------------
    To summarize: Other countries are moving forward to address climate 
change, and, in the United States, states and companies are exercising 
leadership to fill the void left by inaction at the federal level. In 
this context, I believe the draft American Investments for Reduction of 
Emissions Act of 2003 represents an important milestone in the effort 
to ensure that the United States does its part to address global 
climate change. Its enactment would establish a comprehensive national 
framework that would put the United States on a path toward significant 
long-term emissions reduction.
    The draft Act incorporates several features that would be critical 
to the success of a national climate change strategy. First, it would 
establish ambitious environmental goals through binding caps on 
greenhouse gas emissions. Recognizing the need for reductions from all 
the major sectors, the Act would apply this cap economy-wide, providing 
an important signal to key players throughout the economy to increase 
energy efficiency and develop alternative fuels and technologies to 
reduce greenhouse gas emissions.
    Second, the Act would provide companies with the flexibility they 
need to reduce emissions as cost-effectively as possible. It would 
establish a rigorous nationwide system allowing emissions trading 
across sectors, gases, and national borders, and would provide 
reasonable credit for carbon storage through sequestration.
    Third, the Act would take a phased approach that respects economic 
realities. As mentioned, our work has demonstrated that there are many 
cost-effective--in fact, cost-saving--opportunities to reduce emissions 
in the short- and perhaps medium-term. However, achieving the emissions 
cuts ultimately needed to avert the most adverse consequences of 
climate change is not a cost-free proposition. The Act's phased 
approach would take advantage of the relatively easy steps now readily 
available, while allowing time for the capital and technology 
investments needed to achieve deeper emissions cuts over the long term.
    Finally, the Act would seek to treat all affected parties fairly. 
It would recognize the real and verifiable reductions of those who have 
taken the lead in reducing their emissions, and would provide 
assistance to consumers, workers, and communities affected by climate 
change policy.
    As with any legislation this far-reaching and complex, there is 
significant room for debate on the specifics, even among those who 
share the Act's objectives and would support its broad approach. 
Nonetheless, we believe the draft Act offers a solid foundation for 
crafting an effective national climate policy that draws on America's 
strengths and begins to fulfill its responsibility to protect our 
global climate. We appreciate the vision and leadership shown by 
Senators McCain and Lieberman in drafting the American Investments for 
Reduction of Emissions Act of 2003 and look forward to providing any 
assistance that might be useful to the Committee as it acts on the 
bill.

    Senator McCain. Thank you very much, Ms. Claussen. Thank 
you for all your hard work on this issue.
    Mr. Cogen?

         STATEMENT OF JACK COGEN, PRESIDENT, NATSOURCE

    Mr. Cogen. Good afternoon, Mr. Chairman and Mr. Wyden. 
Thank you for inviting me to testify.
    My name is Jack Cogen, and I am the President of Natsource, 
LLC, an energy and environmental commodity broker headquartered 
in New York City. Natsource also has offices in Europe, Japan, 
Canada, and down here in Washington. We're among the largest 
brokers in environmental commodities, including SO2, 
NOX, and greenhouse gases.
    My testimony today will focus specifically on the 
greenhouse gas trading provisions of the draft legislation 
entitled Market Investments and Reductions of Emissions Act 
2003.
    At the outset, I want to acknowledge the wide range of 
opinion as to what is the most appropriate policy response to 
address climate change. Natsource does not take a position on 
whether or how much greenhouse gas emissions should be reduced. 
Rather, the draft legislation that's the subject of this 
hearing reflects the view that a relatively broad cap with 
emissions trading is the most appropriate response.
    Based on my company's experience with emissions markets, 
the most effective trading programs generally have the 
following characteristics: They are cap-and-trade systems with 
well-defined emissions limitations. They provide significant 
compliance flexibility. They feature strong enforcement 
provisions and penalties to ensure compliance and instill 
confidence in the program. They are relatively simple. They 
provide companies with the certainty--and I can't emphasize 
that enough--the certainty they need to plan and implement 
cost-effective strategies over time.
    The remainder of my statement will address the extent to 
which the draft bill, specifically Title I, is consistent with 
these elements. Of the various emissions trading markets in 
which Natsource participates, the Acid Rain Program and the 
NOX OTC Budget Program have been among the most 
effective, because they establish a well-defined emissions cap 
for regulated sources.
    Similarly, the draft legislation would establish a well-
defined emissions cap. Assuming effective enforcement, the 
overall emissions reductions required by these caps can be 
anticipated with a high degree of certainty. Legislation would 
also need to provide clearer guidance regarding allocations so 
that covered entities would have more certainty to plan long-
term investment and compliance strategies.
    I should point out that the draft bill would allow the 
Secretary of Commerce to revisit the level of the emissions 
caps. While this provision may be desirable because of the 
evolving state of knowledge about climate change, it 
nonetheless leaves open the possibility that emissions-
reduction requirements could change in the future. This would 
substantially increase the difficulty of making forward sales, 
which are essential for the financing of abatement investments.
    Emissions trading provides compliance flexibility that 
allows participants to seek out low-cost emissions reductions. 
In both the Acid Rain Program and the NOX Budget 
Program, cost savings have been estimated in the billions of 
dollars, largely because of considerable flexibility provided 
by emissions tradings and robust markets.
    Several provisions contained in the draft bill would help 
to lower costs compared with less flexible approaches. First, 
the scope of the trading program would take advantage of lower 
reduction costs in some sectors. Second, the ability to bank 
unused allowances for future use would enable sources to 
optimize the timing of their emissions-reduction activities. 
Third, allowing U.S. emitters to purchase approved allowances 
from abroad provides a potentially cost-effective compliance 
option, as does sequestration.
    However, imposing quantitative limits on the ability of 
U.S. companies to use emissions allowances from other nations 
would restrict access to a potentially cost-effective supply of 
reductions and raise the overall cost of the emissions-
reduction program. The draft bill would also limit the use of 
sequestration credits; likewise, contributing to higher costs.
    Violations are rare in the Acid Rain Program and the 
NOX OTC Budget Program because of effective 
compliance provisions that have created confidence in the value 
of the tradeable commodities and contributed to the development 
of a robust allowance market. In my view, the proposed bill's 
emissions monitoring provisions, greenhouse-gas allowance 
tracking system, and penalties for excess emissions would 
provide an adequate deterrent to potential violators.
    The relative simplicity of the Acid Rain Program has 
contributed to the development of a robust SO2 
allowance market and significant cost savings. In contrast, the 
NOX Budget Program's cost savings have been 
constrained by complex banking provisions and uncertainty about 
future requirements under the NOX SIP Call, which 
have made emitters more reluctant to engage in potentially 
beneficial trades. The draft bill generally appears to be 
consistent with this need for simplicity.
    That concludes my remarks, Mr. Chairman. I want to commend 
you and Senator Lieberman for recognizing the importance of 
market mechanisms to achieving cost-effective emissions 
reductions. You and other lawmakers will ultimately decide 
whether a cap-and-trade system for greenhouse gases should be 
adopted in the U.S.
    I'd be glad to respond to questions. Thank you.
    [The prepared statement of Mr. Cogen follows:]

         Prepared Statement of Jack Cogen, President, Natsource
    Good afternoon, Mr. Chairman and Members of the Committee. Thank 
you for inviting me to testify. My name is Jack Cogen and I am the 
President of Natsource LLC, an energy and environmental commodity 
broker headquartered in New York City. Natsource also has offices in 
Europe, Japan, Canada, and Washington, D.C.
Description of Natsource and Its Experience in Climate Change
    Natsource facilitates physical and derivatives transactions of 
electricity, natural gas, coal, emissions permits, emissions 
reductions, and renewable energy certificates. Natsource's Greenhouse 
Gas (GHG), Renewable Energy, Strategic Services, and Brokerage Unit 
utilizes the company's first-hand knowledge of energy and environmental 
markets, and its domestic and international public policy expertise on 
global climate change and related environmental issues, to provide 
consulting and strategic services to corporations, international 
financial institutions, and governments seeking the most recent 
information on markets and policy trends to shape their strategies.
    Natsource has developed one of the largest brokerage operations of 
environmental commodities in the world, with brokers and policy experts 
in the United States, United Kingdom, Canada, Australia, and Japan. We 
are among the largest brokers of sulfur dioxide and nitrogen oxides in 
the United States and of renewable energy certificates and greenhouse 
gases in the world. In 2002, Natsource brokered the first swap of UK 
and Danish greenhouse gas allowances, and in 2001, brokered the first 
transactions in allowances from the UK and Danish greenhouse gas 
emissions trading programs--the world's first greenhouse gas trading 
systems. In 2000, Natsource brokered first-of-their-kind transatlantic 
and transpacific greenhouse gas transactions and the largest 
transatlantic greenhouse gas transaction.
Recent Greenhouse Gas Market Activity
    A recent review of international greenhouse gas emissions trading 
conducted by Natsource for the World Bank concluded that market 
activity between 2001 and June 2002 significantly increased in volume 
when compared to the previous 5 years. The report was commissioned by 
PCFplus, the research arm of the World Bank's Prototype Carbon Fund. 
Natsource provided a similar analysis for PCFplus in 2001 that reviewed 
market activity from 1996 to 2001.
    Our key conclusions from the report include: (1) approximately 40 
million metric tons were traded between 2001 and June 2002, compared to 
the 55 million metric tons that Natsource estimates were transacted 
between 1996 and 2001 and nearly doubling total market volume; (2) the 
first trades of greenhouse gas compliance instruments occurred in the 
UK and Danish markets; (3) trading of reductions generated from 
projects undertaken in Latin America, Asia, and Africa increased; (4) 
trading of reductions generated by fuel switching, energy efficiency, 
and renewable energy increased; and (5) Verified Emissions Reductions 
traded in the range of US$1 and $5 per metric ton of carbon dioxide 
equivalent, while UK allowances traded as high as US$18.60 (L12) per 
metric ton of CO2e. The trading volume estimates provided by 
Natsource are conservative. Other market participants have estimated 
higher levels of trading activity.
    The trend in increased trading activity will likely continue in the 
future as national, regional, and international greenhouse gas 
emissions trading programs develop over the next five years.
Comments on Draft Legislation
    My testimony today will address draft legislation entitled the 
``American Investments for Reduction of Emissions Act of 2003'' from 
the perspective of my company's considerable experience with greenhouse 
gas emissions trading, as well as trading in sulfur dioxide and 
nitrogen oxide allowances. My comments will focus specifically on Title 
I of the bill, ``Market Driven Greenhouse Gas Reductions,'' and the 
extent to which the trading design and mechanisms in the bill will 
facilitate achieving environmental and economic objectives.
    Natsource provides strategic counsel and brokerage services to its 
clients, but the firm does not take a position on whether or not 
greenhouse gas emissions should be reduced. Many of our clients have 
their own views about this question and engage Natsource to provide 
advice and analytical support for assessing and managing financial risk 
caused by limitations on greenhouse gas emissions.
    At the outset, I want to stipulate that the single most irrefutable 
fact about climate change is that there is a wide range of opinion as 
to what is the most appropriate policy response to address climate 
change. Trading is but one means of achieving emissions reductions. 
There are others such as regulatory measures, research and development 
into new technologies and financial incentives. This testimony does not 
address the efficacy of those but focuses on our company's experience 
in emissions markets. The draft legislation that is the subject of this 
hearing reflects a view that a relatively broad cap-and-trade system is 
an economically efficient mechanism to reduce greenhouse gas emissions. 
This would be the first piece of legislation in Congress that proposes 
to extend greenhouse gas emissions reduction requirements beyond the 
electric utility sector, which was the focus of legislation introduced 
by Senators Jeffords and Carper in the 107th Congress. With Title I of 
the draft bill as the framework for an emissions reduction program, my 
testimony will address provisions that deal with greenhouse gas 
emissions trading and markets, particularly the extent to which the 
bill's provisions represent an economically efficient, market-based 
system for reducing greenhouse gas emissions.
    It is also important to note that simplicity is one of the most 
important elements necessary to create an efficient market. If the 
private sector is provided with a target and a workable policy 
framework, for the most part, experience has shown they will figure out 
how to achieve cost-effective compliance with their emissions 
limitations. The more complex the policy framework and the more 
constrained the market, the greater compliance costs will be. My 
testimony looks at those essential elements necessary to create a 
workable trading market.
Capping Emissions
    Of the various emissions trading markets in which Natsource 
participates, the Acid Rain Program and the NOX OTC Budget 
Program have been effective in achieving significant reductions at low 
cost. One of the key features that these two successful programs share 
is a well-defined ``cap,'' or a maximum mass-based limitation on 
regulated sources' emissions in a given year. The cap allows regulated 
firms to plan their investment and production decisions more 
efficiently based on the value of emissions reductions.
    These emissions caps have been essential to ensuring that the 
programs achieve tangible and predictable environmental benefits. For 
example, in the case of the Acid Rain Program, the Environmental 
Protection Agency (EPA) reports that in 2001, regulated emissions 
sources reduced their aggregate emissions by approximately 39 percent 
relative to 1980 levels, or 33 percent relative to 1990 levels.\1\ In 
contrast, the environmental performance of trading programs that 
utilize limits other than caps is considerably less certain.
---------------------------------------------------------------------------
    \1\ Environmental Protection Agency (2002) ``Acid Rain Program--
2001 Progress Report,'' Office of Air and Radiation, November, 
Washington, D.C.
---------------------------------------------------------------------------
    The greenhouse gas emissions trading system envisioned in the bill 
currently under consideration recognizes the importance of a well-
defined emissions cap. It would require emissions sources in four key 
emitting sectors of the economy to reduce their greenhouse gas 
emissions to 2000 levels by 2010 and to 1990 levels by 2016. Assuming 
effective enforcement of the system's provisions, the emission 
reductions required by these caps can be anticipated with a high degree 
of certainty from the system's outset.
Flexibility
    The great advantage of emissions trading relative to alternative 
policy approaches is the flexibility provided to sources to determine 
how best to comply with their emissions limitations. Under an emissions 
trading system, emitters may choose either to reduce their own 
emissions or to acquire surplus allowances from another emitter that 
managed to over-comply with its own emissions limitation. Whenever 
emitters face different internal emissions reduction costs, this 
opportunity to trade creates a win-win situation for both buyers and 
sellers. Companies purchasing allowances are able to comply with their 
emissions limitation more cheaply than if they had been required to 
carry out internal emissions reductions, and companies selling 
allowances are able to reap a financial gain from improving their 
environmental performance. The financial benefits can then be used to 
invest in additional emissions reductions. For example, in 1998 and 
1999, Public Service New Hampshire used proceeds from the sale of 
NOX allowances to finance the installation of equipment that 
has significantly reduced their NOX emissions.
    In both the Acid Rain Program and the NOX Budget 
Program, cost savings have been estimated in the billions of dollars, 
owing largely to emitters' ability to trade with one another, or to use 
other compliance options, and to save or ``bank'' unused allowances for 
future use. In addition, the opportunity to bank allowances has 
motivated significant over-compliance in both programs. During the 
first 7 years of the Acid Rain Program, for example, regulated sources 
had exceeded the required level of SO2 emissions reductions 
by a cumulative total of 9 million tons.\2\
---------------------------------------------------------------------------
    \2\ Ibid.
---------------------------------------------------------------------------
    Several emissions trading provisions contained in the draft bill 
should help to achieve cost savings in reducing greenhouse gas 
emissions. First, the envisioned greenhouse gas trading program would 
apply to a broad range of economic sectors that face different internal 
emissions reduction costs. It is these differences in internal 
abatement costs among firms and sectors that make gains from trade 
possible. Second, the ability to bank unused allowances for future use 
and, conditional on achieving additional future reductions, to 
``borrow'' future allowances for current use would enable sources to 
optimize the timing of their emissions reduction activities in order to 
achieve maximum environmental benefit at minimum cost. For example, the 
banking provision in the Acid Rain Program has allowed emitters to 
achieve a significant savings in compliance costs while planning for 
future compliance costs in an effective fashion. Third, internal 
emissions reduction costs vary considerably from country to country. 
Allowing emitters based in the U.S. to take advantage of these cost 
differentials by purchasing allowances from abroad should further 
reduce compliance costs. Finally, sequestration of carbon dioxide is 
another cost-effective option for reducing atmospheric concentrations 
of greenhouse gases. Sequestration activities, such as reforestation, 
also yield additional co-benefits such as preservation of wildlife 
habitat. The bill's provision, granting credit for sequestration 
activities, would provide an incentive for emitters to carry out such 
activities.
Limitations on Flexibility
    In light of the many benefits associated with the flexibility 
inherent in emissions trading, I should note the bill's constraints on 
the use of allowances acquired from abroad and of credits generated 
through sequestration activities. We know that the location in which 
greenhouse gas emissions reductions occur is immaterial to the level of 
global greenhouse gas emissions. However, from an economic perspective, 
the location in which reductions occur is of considerable importance, 
since countries and facilities within countries face different internal 
emissions reduction costs. The ability of U.S. companies to take 
advantage of international cost differentials while meeting their 
collective emissions limitation depends on their having the ability to 
seek emission credits from abroad without constraints. The proposed 
quantitative limits on the import of credits would raise the overall 
costs of achieving the program's greenhouse gas targets by reducing the 
extent to which U.S. companies would be able to access this potential 
source of lower cost reductions. Limitations on the use of 
sequestration credits would have a similar effect in raising overall 
reduction costs. I should point out that the U.S. opposed all 
qualitative and quantitative constraints on flexibility in 
international climate change negotiations recognizing that constraints 
increase the costs of compliance.
Ensuring Compliance
    Sources and regulators must know that there will be clear penalties 
for non-compliance with emissions limitation requirements. During the 
seven years since the Acid Rain Program began, only two sources have 
violated their emissions limitations. In a program whose 2001 emissions 
cap amounted to 9,553,657 tons of SO2, the eleven tons of 
excess emissions involved in these two violations point to an 
outstanding record of compliance.\3\ The program's financial penalties 
for non-compliance provide significant incentives for compliance. 
Similarly, violations in the NOX OTC Budget Program during 
2001 amounted to a mere 57 tons of NOX out of a total 
allocation of 195,401 tons.\4\ The rarity of violations in these two 
programs can be attributed to the existence of effective compliance 
provisions. These include an accurate emissions reporting system, a 
simple and reliable system for tracking sources' holdings and transfers 
of allowances, and strong financial penalties for those sources that 
exceed their emissions limitations. In addition to ensuring the 
programs' environmental integrity, these strong compliance provisions 
have also helped to assure potential market participants of the value 
of the programs' tradeable commodities, thus making possible the cost 
savings associated with development of a robust allowance market.
---------------------------------------------------------------------------
    \3\ Ibid.
    \4\ Environmental Protection Agency (2002) ``2001 OTC 
NOX Budget Program Compliance Report,'' Office of Air and 
Radiation, March 26, Washington, D.C.
---------------------------------------------------------------------------
    In my view, each of these compliance provisions is addressed in the 
bill under consideration. The bill's emissions monitoring provisions, 
greenhouse gas allowance tracking system and penalties for excess 
emissions would provide an adequate deterrent to potential violators.
Simplicity and Regulatory Certainty
    Emitters' willingness to engage in emissions trading depends 
largely on their understanding of the trading program's provisions and 
on their confidence that they can plan their future operations 
according to the nature of those provisions. The simplicity and high 
level of regulatory certainty under the Acid Rain Program are two 
reasons for the development of the program's robust and mature 
emissions allowance market. Emitters in the program understand how 
trading can benefit them, and they optimize their future operations on 
the basis of this knowledge. As a result, cost savings have been 
significant.
    In contrast, cost savings under the NOX Budget Program 
are probably somewhat smaller than they might otherwise have been 
because of complexity and regulatory uncertainty in the program. 
Complex banking provisions have caused emitters to ``leave value on the 
table'' by declining to engage in potentially beneficial trades whose 
implications were difficult to understand. Uncertainty about the 
relationship between the status of the NOX OTC program's 
successor program, the ``NOX SIP Call,'' made it hard for 
emitters to anticipate what reductions would be required of them in the 
future, and this uncertainty reduced emitters' ability to reduce 
compliance costs by optimizing their emissions reduction investments 
over time.
    Generally speaking, the greenhouse gas trading system outlined in 
the draft bill appears to be consistent with the need for simplicity. I 
would urge the Committee to keep this need in mind, as well as the need 
for regulatory certainty regarding allocations, as legislation is 
debated.
Closing
    In closing, Mr. Chairman, I want to commend you and Senator 
Lieberman for your efforts to develop legislation that relies on market 
mechanisms to achieve cost-effective greenhouse gas emissions 
reductions. My company's experience in emissions markets suggests that 
the draft bill contains useful provisions that would help to achieve 
this objective. Continued refinement of key provisions, especially 
those relating to flexibility, is important to assuring an economically 
efficient emissions trading program.
    Thank you again for the opportunity to testify. I look forward to 
responding to any questions you or the other Committee Members might 
have and to providing any insights that the firm has in market design 
as development of the legislation proceeds.

    Senator McCain. Thank you very much, Mr. Cogen.
    Mr. Krupp, welcome.

              STATEMENT OF FRED KRUPP, PRESIDENT, 
                   ENVIRONMENTAL DEFENSE FUND

    Mr. Krupp. Thank you, Mr. Chairman.
    Senator McCain, Senator Wyden, my name is Fred Krupp, and I 
am President of Environmental Defense Fund, a nonprofit group 
representing more than 300,000 members.
    Since 1967, we have used science and economics to find new 
solutions to the most serious environmental problems. I 
appreciate the chance to testify today on one of the most 
urgent of those problems, global climate change. I'm pleased 
this hearing focused on the impressive proposal, the Climate 
Stewardship Act of Senator McCain and Senator Lieberman to 
tackle that problem.
    The threat of global warming touches America's bedrock 
values, including responsible stewardship for the environment 
and care for future generations. The greenhouse gas emissions 
we add to the atmosphere today will remain there for decades. 
Over time, the resulting climate change will range from the 
undesirable to the catastrophic. Effects like increased storms 
and droughts, the disappearance of glaciers, and sea-level rise 
so severe that the entire National Mall here in Washington 
could be flooded regularly are well within the range of 
outcomes scientists tell us we might expect. This is a legacy 
few Americans want to leave for future generations. To avoid 
such a future, substantial reductions in greenhouse gas 
emissions must begin now.
    Climate change is a man-made problem and can be addressed 
by people's actions. Fortunately, America has a history of 
attaining strong environmental protection with continual 
economic growth. Curbing greenhouse gas emissions is not only 
imminently affordable, but can also bring a host of benefits. 
The McCain-Lieberman bill would deliver actual reductions in 
emissions below current levels by the middle of the next 
decade.
    The world has a narrow time window. Failure to begin 
reducing emissions within the next decade could foreclose the 
chance to avert dangerous global warming. Every year of delay 
is like playing another round of global climate roulette.
    Opponents of mandatory greenhouse gas reductions often 
claim they would stifle economic growth, but the McCain-
Lieberman bill will foster innovation and stimulate lowest-cost 
reduction thanks to its ambitious use of emissions trading and 
flexibility. The legislation emulates one of the most 
successful environmental programs in U.S. history, the Federal 
Acid Rain Program. And I might point out, in response to Dr. 
Mahoney, that after that program was passed into law, there was 
an absolute minimum of either administrative or judicial 
litigation.
    The bill will tap American ingenuity by creating an 
emissions-trading market that integrates virtually every major 
economic sector, including transportation, agriculture, and 
forestry. This breadth is crucial in making the legislation 
efficient and effective.
    Our belief in what this bill can achieve is a reflection of 
our own experience. Working in a Partnership for Climate 
Action, Environmental Defense Fund has partnered with eight of 
the world's largest corporations successfully pursuing their 
own commitments to reduce and cap their greenhouse gas 
emissions. For example, DuPont pledged to cut its emissions by 
65 percent by 2010. It has reached and surpassed that goal nine 
years ahead of schedule, enjoying a savings of $1.65 billion.
    We believe Senators McCain and Lieberman made the right 
choice in allowing farmers and landowners to opt to participate 
in the greenhouse gas reduction market. Investments in the 
land-use sector can provide a critical supply of cost-effective 
high-yield emissions-reduction opportunities like carbon 
sequestration.
    We believe the legislation should establish criteria for 
what will be considered valid carbon sequestration projects and 
credits. I look forward to working with the sponsors to design 
those standards.
    The bill's use of emissions trading and flexibility will 
allow even greater and earlier greenhouse gas reductions to be 
more affordable. Taking advantage of this, and tightening the 
reduction levels in the time table now in the bill will only 
enhance its value.
    Some will say this bill is unrealistic, that it cannot be 
done, that we do not know enough to act, that the future is 
uncertain. For too long, such complaints have stopped us from 
doing anything. But it most emphatically can be done. It must 
be done, and it will be done. To accept anything less would be 
to abandon our responsibility to the environment and to 
generations yet to come.
    Thank you.
    [The prepared statement of Mr. Krupp follows:]

Prepared Statement of Fred Krupp, President, Environmental Defense Fund
Introduction

    Mr. Chairman and members of the Committee, my name is Fred Krupp 
and I am President of Environmental Defense Fund, a national nonprofit 
organization based in New York, representing more than 300,000 members. 
Since 1967 we have linked science, economics and law to create 
innovative, equitable and cost-effective solutions to the most serious 
environmental problems.
    I appreciate the opportunity to testify here today on what 
Environmental Defense considers one of the most urgent environmental 
problems of our time--global climate change. I am very pleased, 
moreover, that the focus of the hearing is the impressive proposal 
offered by Senators McCain and Lieberman (shared with Environmental 
Defense in draft form on December 20) to tackle that problem. Finally, 
I am particularly grateful to this Committee for the previous hearings 
it has conducted to create a sound, well-balanced record of scientific 
understanding of global climate change.
    Thanks to those hearings, I know that my testimony on the McCain-
Lieberman legislation will be considered against a backdrop of 
increased understanding. First, there is strong scientific consensus 
that human activities contribute substantially to the buildup of heat-
trapping greenhouse gases (GHG) in the atmosphere. Second, if GHG 
emissions continue to rise, the world will face increasingly 
devastating environmental disruptions affecting not only our most 
precious natural ecosystems but also, potentially, the world food 
supply and human health.
    This state of affairs challenges our American values and our 
American ingenuity. Fortunately, I believe that, taken as a whole, the 
McCain-Lieberman bill is a serious and credible response.
    Later in this testimony, I will address a number of concerns that 
we have, some quite serious, with particular provisions in the bill. 
For now, however, I think Senators McCain and Lieberman and their 
staffs should be congratulated for putting together comprehensive 
legislation that could form the basis of a successful strategy for 
addressing global climate change.
Climate Change and American Values
    Our success in this endeavor will require responsible environmental 
stewardship--one of the bedrock values held by Americans.
    The GHG emissions produced by the first automobile that rolled off 
the assembly line in Detroit are still in the atmosphere. Each new ton 
of greenhouse gases emitted today will reside in the atmosphere for 
decades. Over time, the resulting warming will change the climate--and 
the environment--in countless ways. Impacts could range from the die-
off of coral reefs and the loss of vital fisheries to sharply increased 
cycles of storms and drought. Sea level rise could be so severe that 
the entire National Mall here in Washington would be flooded regularly. 
That this could be the legacy of our own everyday actions is a notion 
that few Americans alive today would knowingly tolerate. America's 
commitment to caring for our natural heritage prompts us to demand that 
our national leaders take responsible actions to help curb global 
warming.
    Responsible stewardship requires that we take the necessary steps 
to protect the climate from the harmful effects of GHG emissions. 
Because greenhouse gases build up incrementally in the atmosphere, 
stabilizing their concentrations will require very significant 
reductions in emissions over the next century. Moreover, most 
scientists agree that in order to avoid the kind of drastic 
environmental damage that most would consider unacceptable, substantial 
reductions in total GHG emissions must begin now. Highly respected 
analyses indicate that world leaders have a narrow time window in which 
to act. Failure to begin reducing total GHG emissions within the next 
decade (the period covered by the McCain-Lieberman bill) may foreclose 
the chance our children and grandchildren have to avert dangerous 
climate change in the future.
Climate Change and American Ingenuity
    Throughout history, American ingenuity has enabled our nation to 
triumph over adversity. We need to unleash that same can-do spirit 
today to help curb global warming. The challenge arises from the fact 
that GHG emissions are the direct result of fundamental economic 
activities--like producing energy, food and clothing, transporting 
ourselves and our goods, using our lands and forests and even creating 
and sharing data. No matter how powerful our commitment to 
environmental protection is, unless we can ensure our continued 
economic prosperity, policies seeking to reduce GHG emissions likely 
will not succeed.
    That's where Americans' ability to solve problems comes in. 
Achieving significant GHG reductions that the economy can afford will 
require inventiveness and entrepreneurship. The good news is that 
climate change is a man-made problem, and thus can be addressed by 
human actions. Our nation's record of success in attaining high levels 
of environmental protection while enjoying continual economic growth 
suggests that curbing U.S. GHG emissions not only is eminently 
affordable, but also could bring about a host of benefits to the 
public. The best GHG policies will be those that set clear emissions 
reduction targets and explicitly allow businesses and individuals to 
seek a broad mix of the strategies. Through experimentation and 
innovation, they will devise new technologies and invest in GHG 
emissions reductions that deliver the biggest environmental and social 
payoff at lowest cost. At the same time, it is critical that those 
policies be as close to all-encompassing as possible, so that energy 
producers, industrial manufacturers, farmers and landowners and other 
key economic actors have a chance to contribute their expertise to the 
search for the best ways to reduce GHG emissions.
    This approach reflects more than just blind faith or naive 
optimism. Anticipating the eventual need to comply with GHG 
requirements, many firms and landowners already are experimenting 
successfully with GHG reduction strategies. Several years ago, DuPont, 
a charter member of Environmental Defense's Partnership for Climate 
Action (PCA), announced its intention to cut its GHG emissions by 65 
percent by 2010. In 2001, the company reached, and surpassed, that 
goal, nine years ahead of schedule. Since 1990, DuPont has succeeded in 
holding its energy use at 1990 levels. In 2000 alone, the program 
yielded a $325 million savings; overall the company attributes a $1.65 
billion savings to its program.
    In Washington State, the Pacific Northwest Direct Seed Association, 
representing 300 farmers owning 500,000 acres, has joined with Entergy, 
the power company, to promote direct seeding, a practice that enhances 
soil carbon sequestration and provides a host of other benefits such as 
improved soil productivity, reduced erosion and better wildlife 
habitat. In this partnership, Entergy will lease 30,000 tons of carbon 
offsets over a ten-year period from participating landowners. In 
addition to the carbon benefits to the atmosphere, the lands affected 
by the project will contribute less runoff to nearby waterways, helping 
to improve the habitat for critical steelhead and salmon runs.
    Finally, perhaps the best-known example of can-do success in 
reducing GHG emissions is that of BP, the global petrochemical company. 
In 1998, the company launched a private initiative to reduce its GHG 
emissions ten percent below 1990 levels by 2010. Last year, BP 
announced that it had achieved its target eight years ahead of 
schedule, and at no net cost to the business, all while achieving 
steady and robust economic growth.
    These are not theoretical models, but real-life actions. In 
addition to BP, DuPont and Entergy, Environmental Defense has also been 
working with Alcan, Pechiney, Ontario Power Generation and Shell in the 
Partnership for Climate Action (www.pca-online.org). Each of these 
firms has established a cap on GHG emissions voluntarily and is 
undertaking measures to limit emissions to the committed levels. Each 
company is succeeding in its efforts, while continuing to prosper.
McCain-Lieberman and Environmental Stewardship
    Environmental Defense believes that the McCain-Lieberman bill 
embodies America's core commitment to responsible environmental 
stewardship. First, it would deliver the single most crucial response 
to the dangers of climate change--actual reductions in GHG emissions 
below current levels. The current policy debate on climate change 
features a host of potential approaches, including voluntary 
initiatives, technology subsidies and tax-like schemes such as cost 
safety-valves. None of these, however, would accomplish what this bill 
would do--guarantee actual reductions in GHG emissions. Again, to curb 
the unwanted effects of climate change means limiting the 
concentrations of greenhouse gases in the atmosphere. GHG 
concentrations can be limited only by reducing actual emissions. 
McCain-Lieberman would do just that--mandate the reduction of U.S. GHG 
emissions.
    Second, the bill mandates GHG reductions below current levels by 
the middle of the next decade. Our best analysis suggests that this 
requirement could keep open the window of opportunity that policy-
makers in the future must have if they are to achieve sufficient 
reductions for ultimate success in curbing climate change over the 
balance of the century.
    Since GHG emissions build up in the atmosphere, every year of delay 
in reducing emissions is akin to playing another round of ``global 
climate roulette.'' The ambitious use of emissions trading and 
flexibility will increase affordability and spur even greater and 
earlier GHG reductions than are required in the bill as currently 
drafted. Tightening the reduction levels and timetable now in the bill 
will only enhance our legacy to future generations. Again, because of 
the long-lived nature of greenhouse gases in the atmosphere, by 
achieving even greater reductions sooner, the bill would make it that 
much easier for future generations to achieve the reductions needed to 
solve the climate problem on a long-term basis.
McCain-Lieberman and American Ingenuity--and Economic Prosperity
    By requiring GHG emissions reductions across virtually all sectors 
of the U.S. economy, the McCain-Lieberman bill taps the know-how and 
inventiveness of the broadest possible swath of economic players. It 
does so by integrating in a GHG emissions trading market virtually 
every major economic sector that can contribute to solving this 
problem, including transportation, agriculture and forestry.
    Opponents of mandatory GHG reduction policies often claim that such 
policies would cost too much and stifle economic growth. They also 
question whether the kinds of innovations needed to achieve reductions 
can be found in the near term. By incorporating emissions trading as 
its centerpiece (along with a mandatory emissions cap), the McCain-
Lieberman legislation emulates one of the most successful environmental 
programs in U.S. history--the federal Acid Rain Program. Under the 
McCain-Lieberman approach, companies that achieve more GHG reductions 
than required can save their extra reductions to use against their own 
future emissions increases or can trade those reductions to other 
companies that are having trouble meeting their emissions limits.
    Consequently, companies will have a direct financial incentive and 
unlimited opportunity to make as many low-cost reductions as possible, 
as soon as possible. That means that the lowest-cost reducers will be 
acting in a way that will result in overall compliance costs being 
lower. It also means innovative companies that achieve more reductions 
than required will be financially rewarded by the emissions trading 
market. The emissions trading framework provides flexibility for 
companies to change and grow while meeting their emissions requirements 
at the same time.
    In 1990, Congress used a similar approach to achieve reductions in 
sulfur dioxide, a chief cause of acid rain. Sulfur dioxide emissions at 
U.S. power plants were reduced and capped through a program that 
allowed the plants to save or trade extra emissions reductions. As a 
result, the acid rain program has achieved more total reductions than 
required, at lower cost than predicted and through technological 
innovations not seen under previous air pollution programs. Meanwhile, 
the power sector has enjoyed steady economic growth. Emissions trading 
can also be a useful tool for reducing GHG emissions because their 
environmental effects are not local, but national and global. Thus, it 
is the quantity of reductions achieved, not their location, that 
determines the environmental success of the program.
    Simply put, the acid rain emissions trading program has done what 
markets do best--drive down costs. The economic performance of the 
McCain-Lieberman emissions trading system can be expected to be even 
more robust than that of the acid rain emissions trading system. The 
latter covered only the power sector in the United States. The McCain-
Lieberman market would embrace a vastly more numerous and more diverse 
set of economic actors. Standard economic theory suggests that their 
number and diversity would intensify the search for cost savings by the 
participants and would more richly reward that search by providing an 
enormous multiplicity of cost-effective reduction opportunities.
    By creating a market, the McCain-Lieberman bill takes the challenge 
of cost head-on and meets it with the most powerful of cost-savings 
tools. It is in markets that Americans' relentless ingenuity, the 
engine of our nation's economy, has always thrived.
Economic and Environmental Performance under McCain-Lieberman
    The U.S. Acid Rain Program, thanks to its cap-and-trade framework, 
has achieved not only full compliance with its emissions reduction 
requirements at a lower-than-predicted cost but also more reductions 
than required along with incremental technological innovation. The 
McCain-Lieberman legislation employs the same framework in an even more 
ambitious way and can be expected to produce even more dramatic 
environmental and economic results.
    To be effective environmentally, it is essential that the bill 
impose a cap across all major GHG-emitting sectors of the U.S. economy. 
The economy-wide framework makes possible the bold innovation at the 
heart of McCain-Lieberman, i.e., its adoption of an emissions trading 
system to integrate all sectors into a functioning GHG reduction 
market. The result is that participants in the market, whether they are 
subject to reduction mandates or simply seeking to make incremental 
reductions, can search across the nation--and, to some extent, 
overseas--for the most productive GHG reduction opportunities. Under 
the bill, that search can encompass, as it should, the agriculture and 
forestry sectors as well. Every time it yields a new opportunity, the 
emissions trading market will reward the GHG reduction investment. For 
this reason, as illustrated by the success of the Acid Rain Program, 
the McCain-Lieberman approach promises a suite of benefits including 
not just lower costs, but accelerated reductions and continual 
environmental innovation.
    In light of this, Environmental Defense believes that Senators 
McCain and Lieberman were right to include, as part of the emissions 
trading system, the fuel and automotive segments of the transportation 
sector, as well as the agricultural and forestry sectors. Again, we are 
convinced that the broader and more dynamic a GHG-reduction market is, 
the greater will be its success in reducing costs and delivering 
enhanced environmental performance along with technological innovation.
The Importance of Forests and Farmland
    While climate and energy policies are inextricably linked, climate 
policy demands more than just a re-tooling of the nation's energy, 
industrial and transportation sectors. The McCain-Lieberman bill is 
pioneering a comprehensive and rational climate policy that encompasses 
the effects of land use as well.
    The Earth's climate is warming as a result of increasing 
concentrations of atmospheric greenhouse gases released not just from 
energy and industrial sources but also through land-use activities. 
Most significantly, these activities include forest management and 
agricultural practices in both croplands and grasslands. As forests 
grow, they absorb vast amounts of carbon dioxide from the atmosphere 
through photosynthesis. This carbon is then sequestered in woods, 
leaves, roots and soils (hence the term ``carbon sequestration''). When 
forests are harvested, burned, or cleared for agriculture, much of the 
carbon stored in plant matter and soils is emitted into the atmosphere 
as carbon dioxide, the primary greenhouse gas.
    Agricultural activities also play an important role in the global 
carbon cycle as croplands and grasslands store large amounts of carbon. 
Practices such as conservation tillage, grassland restoration and use 
of cover crops enhance carbon storage in agricultural soils. In 
contrast, land clearing and plowing release carbon dioxide by exposing 
soils to air and sunlight.
    By sequestering carbon, forests and agricultural lands can act as a 
carbon ``sink.'' The capacity of soils and biomass to remove carbon 
from the atmosphere depends upon location, soil type, vegetation type, 
climate, human or natural disturbances, and other factors.
    Historically, releases of carbon dioxide from land-use activities 
have contributed substantially to increased concentrations of 
atmospheric greenhouse gases. Prior to the surge in human activities, 
primarily the burning of fossil fuels, atmospheric concentrations of 
CO2 were around 280 parts per million (ppm). Today, 
CO2 concentrations are approximately 378 ppm. Figures 1 and 
2 show the relative contribution of land-use activities, notably 
deforestation, to global greenhouse gas emissions.




    In view of this, Environmental Defense Fund believes that Senators 
McCain and Lieberman made the correct fundamental choice in allowing 
farmers and landowners to opt to participate in the GHG reduction 
market. Within the framework of a cap-and-trade system, investments in 
the land-use sector can provide a critical mass of cost-effective, 
high-yield emissions reduction opportunities. Thus, emissions 
reductions made through carbon sequestration have the potential to play 
a valuable role in a broad ensemble of tools to combat climate change.
    In our view, both the environmental performance and the economic 
performance of a GHG reduction market demand that in the search for 
carbon sequestration and GHG reduction opportunities, farmers and 
landowners be allowed to act on a level playing field with other 
emissions sources. To ensure such a level playing field, land-use-
generated GHG ``credits'' must be rigorously proven to represent real, 
surplus and durable reductions or increments of sequestration to the 
same degree that surplus GHG emissions allowances or allotments do. 
This stricture, far more than the imposition of quantitative limits on 
the use of land-use-generated credits, will be key to ensuring the 
environmental integrity of a GHG trading system that encompasses 
sequestration and other land-related crediting.
McCain-Lieberman and Regulatory Innovation
    Thanks to its use of the cap-and-trade framework, the McCain-
Lieberman bill, like the federal Acid Rain Program, introduces a 
noteworthy regulatory innovation. Under the bill, it would be 
businesses and landowners, not governmental officials or regulators, 
who would be making the pivotal choice in determining the best means of 
compliance. The bill would establish that GHG sources are legally 
accountable for achieving a specified level of emissions reductions and 
to continually monitor and report their actual emissions. The 
regulators' only job would be to ensure that each source meets its 
monitoring and reporting requirements and that its actual annual 
emissions equal its allotment of allowable emissions.
    How sources reduce their GHG emissions would be left completely to 
the discretion of their operators. As a result, it would be up to them 
to adapt to the continually changing economic and technical 
circumstances while still meeting their emissions cap. The burden and 
the opportunity of lowering costs would be placed squarely on the 
firms. In place of regulatory variances and other cost-relieving 
methods that entail compromise of standards and forego actual emissions 
reductions, firms under a cap-and-trade system must turn to emissions 
banking and trading for cost control. Because of the built-in cap-based 
structure of the bill, cost savings through emissions trading in no way 
would lessen the amount of total emissions reductions or their 
environmental benefit.
Issues of Implementation
    For the McCain-Lieberman bill to fulfill its promise, a number of 
technical issues and concerns need to be addressed and fully resolved.

    Targets and Timetables. As mentioned above, Environmental Defense 
believes that a GHG emissions trading system will deliver cost savings 
significant enough to make aggressive reduction mandates and deadlines 
affordable. Environmental Defense believes that the proposed targets 
and timeframe should be modified so that the U.S. would retain the 
option of rejoining the global community and participating in the Kyoto 
Protocol. To achieve this, the bill should bring U.S. emissions to just 
below 1990 levels by 2012. To date, 100 countries have ratified the 
Protocol, including the members of the European Union and Japan. Last 
fall, Russia announced its intention to ratify this year, an action 
that will bring the Protocol into legal force as the vehicle that much 
of the world regards as the framework for addressing climate change.
    Fuel Economy Standard Credits. Given our support for the bill's 
efforts to create an economy-wide emissions trading market, 
Environmental Defense is certainly open to approaches that permit some 
form of emissions trading between automobile manufacturers and other 
GHG sources. To some extent, however, the inclusion of petroleum 
producers in the GHG reduction mandate renders trading of credits 
generated by automakers redundant; in fact, in the absence of 
appropriately crafted provisions, such trading could entail in-
aggregate double-counting. Beyond that, any attempt to qualify and 
quantify improvements in CAFE as GHG reduction credits or allowance-
equivalents requires a highly specific set of provisions to ensure 
environmental integrity. Creating such credits through the project-
based reduction and crediting provisions included in the draft's 
registry title, which are inadequate in and of themselves, are not 
appropriate to apply here.
    Terrestrial Carbon Sequestration. Environmental Defense believes 
that there should be a set of criteria established in the legislation 
as to what carbon sequestration projects will yield valid credits. The 
legislation does not yet include these rigorous criteria. Environmental 
Defense believes that eligible domestic carbon sequestration activities 
should be limited to forest conservation, grassland conservation and 
restoration, cropland management and reforestation of native species 
(where feasible) on lands that have not been in forest use for the 
previous 10 years. Afforestation and carbon storage in wood products 
should be ineligible carbon sequestration activities. Terrestrial 
carbon sequestration, when done properly, can provide a double 
environmental benefit--by reducing greenhouse gases and by protecting 
native species.
    Incentives for Capital Investment. This ``borrowing'' provision, 
though well intended, has no place in a market-driven system. Such a 
provision is likely to replicate the negative experience of attempts to 
single out specified investments for tax subsidies. Here, the program 
would delay reductions, either unnecessarily or in ways that distort 
investment decisions. This is exactly what market systems aim to avoid. 
Banking and multi-sector trading are themselves amply sufficient to 
foster and facilitate capital investments.
    Baseline Protection. Companies that have initiated climate policies 
early and that have begun to reduce their GHG emissions must be treated 
equitably. As I mentioned, Environmental Defense has been working with 
some of the world's largest corporations through the Partnership for 
Climate Action (PCA). Baseline protection is intended to ensure that 
forward-looking companies such as BP and DuPont, which are acting on 
the problem in advance of a legal mandate, are not penalized.
    The Importance of the 1990 Baseline. The year 1990 has long been 
considered the appropriate base year for benchmarking GHG emissions 
performance of countries. When the U.S. ratified the United Nations 
Framework Convention on Climate Change (UNFCCC) in 1992, the agreement 
called for all parties (countries) to reduce emissions to 1990 levels 
by the year 2000. The Berlin Mandate, which was agreed to at the first 
Conference of parties to the UNFCCC in 1995, called for mandatory and 
binding targets for emissions relative to the 1990 base year. The Kyoto 
Protocol also uses a 1990 base year for national commitments. These 
seminal decisions have paved the way for international recognition of 
1990 as the appropriate base year for measuring the GHG emissions 
performance of nations. Since the economy and individual companies have 
changed substantially since 1990, it is appropriate to use more 
contemporaneous data in the establishment of procedures for the 
allocation of emissions allowances. However, the nation and our GHG 
reduction goals should be explicitly referenced in 1990 terms in 
keeping with our international commitments.
    Title II National Greenhouse Gas Database. Environmental Defense 
has a number of concerns with this section of the bill. The language 
fails to ensure that credit-generating reductions are real and surplus 
and thus consistent with environmental integrity. First and foremost, 
any entity that wants to register reductions must report on an entity-
wide basis. Unfortunately, this bill allows for voluntary project 
reductions, rather than entity-wide reductions, to be eligible for 
credit. Such a loophole could undermine much of the carefully 
constructed architecture of the bill. In addition, the references to 
``direct'' and ``indirect'' emissions raise the specter of double-
counting.
    Role of Environmental Protection Agency. Ever since its founding, 
the U.S. Environmental Protection Agency has taken the lead in 
implementing federal laws designed to protect and improve the 
environment. That should also be the case for addressing climate 
change. EPA administers the federal acid rain program, which involves 
the nation's electric power producers in a cap-and-trade program 
analogous to what is proposed in this legislation. Thus, EPA has the 
experience to take the lead role here as well. Clearly though, on an 
issue as complex and far reaching as climate change, many other 
agencies in the federal government will have valuable and key roles to 
play.
    Environmental Compensation. Although the draft includes a financial 
penalty for sources whose emissions exceed their allowances, it fails 
to provide a mechanism for ``making the environment whole''--that is, 
for restoring the lost emissions reductions. Such a provision is 
explicitly set forth in the federal acid rain program under which an 
allowance is deducted from a source's allocation for each ton of excess 
emissions. This, together with the program's financial penalties, is a 
key to its success and should be included here.
    International Emissions Trading. Environmental Defense appreciates 
the inclusion of provisions in the draft bill to ensure the 
environmental integrity of GHG reductions transferred from sources 
operating under GHG emissions reduction programs in foreign countries. 
In our view, perfecting these provisions is far more vital to the 
environmental integrity of the GHG reduction market created by the bill 
than the imposition of a quantitative limit on the use of such credits. 
In fact, for sound reasons, the Kyoto Protocol itself imposes no such 
quantitative limit on international transfers. To the extent that it 
remains important to keep U.S. political and policy options open over 
time, domestic climate legislation should seek to be more, rather than 
less, compatible with the global system likely to develop under the 
Protocol.
    Geologic Sequestration. Sequestering carbon after it is emitted is 
the subject of much current attention. While Environmental Defense 
believes these technologies, like terrestrial sequestration, should be 
explored and tested, the standards must be rigorous, and the 
legislation does not yet articulate those standards. For example, 
language should specify that the originating entity (i.e., the entity 
that emitted the carbon) is responsible for any carbon that is 
subsequently lost from storage to the atmosphere. This creates the 
right incentives for entities to pick sound disposal sites and site 
operators, and to assure the long-term effectiveness and financial 
viability of storage sites, or to compensate for any failures. There 
also needs to be language creating a process for obtaining the 
Administrator's approval of the suitability of geo-storage sites, 
reviewing both the geology and the capacity of the entity that will 
manage the site.
Conclusion
    For those of us who support meaningful action to combat climate 
change, the draft bill represents a significant breakthrough. Its 
comprehensive GHG reduction and trading framework sets the threshold 
for any serious proposal that purports to tackle the issue of GHG 
reductions and climate change. For this, its authors deserve the thanks 
of all Americans.

    Senator McCain. Thank you very much, Mr. Krupp.
    Mr. Overbey, welcome.

            STATEMENT OF RANDY OVERBEY, PRESIDENT, 
                  ALCOA POWER GENERATING, INC.

    Mr. Overbey. Yes, thank you very much, Mr. Chairman.
    My name is Randy Overbey. I'm President of ALCOA's energy 
business. We're grateful for the opportunity to testify before 
your Committee today.
    ALCOA, the company I represent, is the leading producer of 
primary aluminum, fabricated aluminum, alumina, and is active 
in all major sectors of the industry. We serve aerospace, 
automotive, packaging, building and construction, commercial 
transportation, and industrial markets. Our company has over 
$20 billion in sales and operates in over 38 countries in the 
world. About 50 percent of our employees and our operations are 
in North America, with substantial other operations in Europe, 
Australia, South America, and Asia.
    ALCOA is a values-based company, and I'm proud to represent 
our company today because of that. We have a published vision 
to be the best company in the world, and don't back up from 
that. In support of this vision and our values, ALCOA has 
established clear, measurable goals to achieve cleaner air, 
better use of land and water, and protection of human health. 
Our environmental goals include reductions of SO2 by 
60 percent by the year 2010, the reduction of NOX by 
30 percent by 2007, and especially relevant to this discussion, 
the reduction of greenhouse gas emissions by 25 percent by the 
year 2010.
    We have developed a climate change policy in our company. 
That company--that policy states that rather than further 
debate the science, we have decided that the risk of 
significant climate change is an issue of vital importance to 
requiring action and requires action. We have not waited on 
others, but we have moved forward.
    The policy states that we will continue to improve energy 
efficiency in all our operations. We will improve our 
operations by implementing best-practice technologies to reduce 
greenhouse gases.
    ALCOA supports cooperative action by all countries that, 
one, reduce emission to levels that would prevent dangerous 
changes to the climate, rely on an open international economic 
system that would lead to sustainable economic growth and 
development in all countries, and, thirdly, encourage 
leadership from developed economies to enable all countries to 
contribute to effective management of greenhouse gas emissions.
    I'm proud to report that we're on target, or ahead of 
target, on all of our environmental metrics. On Tuesday of this 
week, Alain Belda, the CEO of ALCOA, announced that we have 
achieved a 23.5 percent reduction in greenhouse gas emissions 
since the year 1990.
    Aluminum smelters, primary production facilities, 
periodically emit greenhouse gases known as PFCs. These 
emissions usually occur when there is an interruption to the 
electrolytic smelting process, known as an anode effect. ALCOA 
signed a national agreement called the Voluntary Aluminum 
Industrial Partnership with EPA to reduce PFC gases from anode 
effects from our smelters by at least 40 percent in the year 
2000, relative to 1990. And similar agreements have been signed 
with agencies in Australia, Canada, and Norway.
    From 1990 to the year 2000, our efforts have reduced PFC 
emissions by 56 percent, with almost a third of our 26 smelters 
achieving 80 percent or better. Our new goal with EPA is to 
reduce these emissions an additional 27 percent by 2005. We're 
also proud to report that last year, ALCOA received the Climate 
Protection Award from EPA for progress in reducing these gases.
    And beyond PFC emissions, ALCOA just became a charter 
member of EPA's Climate Leaders Program supporting the registry 
and reporting of greenhouse gas emissions from our facilities. 
We've also signed a memorandum of understanding with DOE in an 
approach to proactively improve our energy management. And I'm 
glad to report that that program is making good progress as 
well.
    ALCOA is also engaged currently in developing an internal 
emission trading mechanism to focus even more strongly on 
emissions in our company and to prepare for the future.
    In light of our visions, values, and internal goals, ALCOA 
appreciates the opportunity to support this committee's efforts 
to deal with global climate change and its potential impacts. 
We recognize and support the broad scope of this draft 
legislation and encourage you to address, as directly as 
possible, greenhouse gas emissions from all major sectors of 
the economy and society. We believe a cap-and-trade system 
would provide the incentives and rewards necessary for all 
parties to initiate reductions in greenhouse gases.
    But let me offer one caution here. We believe also that 
caps and allowances are critical in their design. Any design 
must recognize the economy, our ability to compete, and the 
impact on emissions. ALCOA recommends that the initial free 
allocation of emissions certificates for impacted sources be at 
least 85 percent of the total allowances that the source's 
effective year needs. As the market develops and full economic 
impacts of the cap-and-trade program are better understood, the 
allocation levels could be modified to ensure that the goals of 
the act are achieved in the least economically disruptive 
manner. Otherwise, our primary aluminum plants, as well as many 
other manufacturing facilities that compete with plants outside 
the U.S., may be put at significant economic risk. We also 
recommend that ultimate allocations of certificates be on a 
company-by-company basis to better recognize those companies 
that have taken early action to reduce greenhouse gases.
    We believe other key components of this legislation are, 
one, the inclusion of the six greenhouses gases recognized 
under the U.N. framework, credits for reductions occurring 
after 1990 issued at a comparable rate as the base-year 
allowances to recognize and reward early and significant 
greenhouse gas reductions.
    As I have mentioned, ALCOA has already made substantial 
progress since 1990. A 25 percent reduction of greenhouse gases 
is our goal. We're at 23.5 percent as we report today. And we 
believe we need to be credited for that early work.
    We also support a national greenhouse gas database and 
registry in support of a cap-and-trade system, and a bonus for 
accelerated reductions for covered entities who sign agreements 
to reduce their greenhouse gases below 1990 levels.
    ALCOA appreciates the opportunity to make these comments, 
and we offer to work constructively with the Committee as you 
move forward. And I'd be happy to try to answer any questions.
    Thank you.
    [The prepared statement of Mr. Overbey follows:]

            Prepared Statement of Randy Overbey, President, 
                      Alcoa Power Generating, Inc.
Mr. Chairman:

    My name is Randy Overbey and I am President of Alcoa's Energy 
Business. We are grateful for the opportunity to appear before you 
today as you and Senator Lieberman prepare to address this issue, which 
is of such importance.
    Alcoa is the world's leading producer of primary aluminum, 
fabricated aluminum and alumina, and is active in all major aspects of 
the industry. Alcoa serves the aerospace, automotive, packaging, 
building and construction, commercial transportation and industrial 
markets.
    The company has over $20 billion in sales and operates in 38 
countries. Over fifty percent of our operations are in North America 
with substantial operations in Europe, Australia, South America and 
Asia.
    Alcoa is the leading producer of primary aluminum and fabricated 
aluminum in the United States. We also manufacture packaging materials, 
vinyl products and automotive electronic equipment.
    Alcoa is a values-based company with a published vision to ``be the 
best company in the world''. In support of this vision, and our values, 
Alcoa has established clear measurable goals to achieve clearer air, 
better use of land and water, and the protection of human health. Our 
environmental goals include reducing our:

Sulfur Dioxide emissions 60 percent by 2010
Nitrogen Oxydes 30 percent by 2007
Greenhouse gas emissions 25 percent by 2010

    Alcoa has developed a Climate Change Policy. Rather than further 
debate the science, we have decided that the risk of significant 
climate change is an issue of vital importance requiring action. We 
have not waited on others, but we have moved forward.
    The policy states that:

    We will continue to improve energy efficiency in all our 
        operations.

    We will improve our operations by implementing best 
        practice technologies to reduce GHG emissions.

    Alcoa supports cooperative action by all countries that:

    Reduce emissions to levels that will prevent dangerous 
        changes to the world's climate systems utilizing least-cost 
        global actions

    Rely on an open international economic system that would 
        lead to sustain economic growth and development in all 
        countries; and

    Encourage leadership from developed economies to enable all 
        countries to contribute to effective management of greenhouse 
        gas emissions.

    We are on target or ahead of target on all our environmental 
metrics. On Tuesday of this week Alain Belda, CEO of Alcoa announced 
that we have achieved a 9.1 percent reduction in SO2 
emissions, a 30 percent reduction in NOX emissions, and a 
23.5 percent reduction in greenhouse gas emissions.
    Aluminum smelters periodically emit a GHG known as perfluorocarbon 
(PFC). These emissions usually occur when there is an interruption to 
the electrolytic smelting process, known as an ``anode effect''.
    Alcoa signed a national agreement, the Voluntary Aluminum 
Industrial Partnership with the EPA, to reduce PFC gases from anode 
effects in our smelters by at least 40 percent in year 2000 relative to 
emissions in the base year 1990. Similar voluntary agreements have been 
signed with agencies in Australia, Canada and Norway.
    From 1990 to 2000, our efforts have reduced PFC emissions by 56 
percent with almost a third of our 26 smelters achieving reduction of 
80 percent or better. Our new goal with the EPA is to reduce these 
emissions an additional 27 percent by 2005. Last year, Alcoa received a 
Climate Protection Award from the EPA for progress in reducing these 
gases.
    Beyond PFC emissions, Alcoa became a Charter member of the EPA's 
Climate Leaders Program to make reductions in all other sources of GHG 
emissions from our facilities and signed a Memorandum of Understanding 
with the DOE/OIT in a proactive approach to our energy management.
    In addition, Alcoa is presently developing an internal emission 
trading mechanism to focus even more strongly on emissions and to 
prepare for the future.
    In light of our visions, values and internal goals, Alcoa 
appreciates the opportunity to support this Committee's efforts to deal 
with Global Climate Change and its potential impacts.
    We recognize and support the broad scope of this draft legislation 
and encourage you to address, as directly as possible, GHG emissions 
from all major sectors of the economy.
    We believe a cap and trade system will provide the incentives and 
rewards necessary for all parties to initiate reductions in GHG 
emissions.
    We also believe the caps and allowances are critical in their 
design. Any design must recognize the economy and our ability to 
compete, as well as the impact on emissions.
    Alcoa recommends that the initial free allocation of emission 
certificates for impacted sources be at least 85 percent of the total 
allowance that the source's effective year needs. As the market 
develops and the full economic impacts of the cap and trade program are 
better understood, the allocation levels can be modified to ensure that 
the goals of the act are achieved in the least economically disruptive 
manner possible.
    Otherwise, our primary aluminum plants, as well as many other 
manufacturing facilities that compete with plants located outside the 
U.S., may be put at significant economic risk. We also recommend that 
ultimate allocations be on a company-by-company basis to better 
recognize those companies that have taken early action to reduce GHGs.
    We believe other key components of this proposed legislation are:
    The inclusion of the six Greenhouse Gases recognized under the UN 
Framework on Climate Change.
    Credits for reductions occurring after 1990 issued at the 
comparable rate as the base year allowances to recognize and reward 
early and significant GHG reduction efforts. Alcoa, as I have 
mentioned, has made substantial progress since 1990 and will continue 
to do so. We need to be credited for this work.
    A National GHG Database and Registry in support of the cap and 
trade system.
    A bonus for accelerated reductions for covered entities who sign 
agreements to reduce their GHG emissions below 1990 levels.
    Alcoa appreciates the opportunity to make these comments and offers 
to work constructively with the Committee as you move forward. We will 
try to answer whatever questions you may have.

    Senator McCain. Thank you very much, Mr. Overbey.
    Ms. Claussen, one of the objections to Kyoto, and there are 
several, is that developing nations are not included; and, 
therefore, it is assumed that they will then generate more and 
more greenhouse gases and even gain some kind of competitive 
advantage over developed countries, particularly the U.S. What 
has been your experience with what developing countries have 
done, and what--how do you view this issue, given--in light of 
your experience?
    Ms. Claussen. Well, let me start this way. I think you have 
to look at this issue in terms of concentrations of greenhouse 
gases in the atmosphere. And I think if you look at what is up 
there now, the developed world is responsible for most of it. 
And I think it is quite fair that developed countries take the 
lead in doing this. That said, you can't really solve this 
problem unless eventually everybody is a part of it. And so, 
developing countries do have to play a more and more active 
role.
    Now, if you look right now, there is activity in developing 
countries. They do have obligations under the Framework 
Convention on Climate Change. We've done some analysis that 
shows that they are actually reducing their emissions. So it's 
not as if there is no activity taking place there.
    The argument that we should not do something unless the 
developing countries do, I think, is not a useful one, and I 
actually am very disturbed by what the Administration did in 
the last meeting in Delhi, where, having first said that we 
should not be a part of Kyoto because developing countries 
don't have targets, went to Delhi and said, ``Developing 
countries shouldn't have targets,'' which just sort of strikes 
me as a--as a rather bizarre way to approach this.
    I think developed countries----
    Senator McCain. Tell me that again.
    Ms. Claussen. Yes. I mean, part of the reason we do not 
like Kyoto is because we have targets, and developed--
developing countries do not. But the Administration actually 
went to Delhi, the last meeting of the conference of the 
parties, and told developing countries in--you know, in the 
formal setting, that they should, in fact, not have targets 
because they should be concerned with poverty and other issues. 
So it is--it is sort of a difficult thing where they come here 
and say one thing, and then go abroad and say exactly the 
opposite.
    Senator Wyden. Don't get logical.
    [Laughter.]
    Ms. Claussen. Well, if your--if your goal is not to do 
anything at all, it is one way to achieve it.
    Senator McCain. Mr. Cogen, many people, despite the fact 
that it seems to be already--or beginning to be in practice, 
are skeptical about this trading issue of carbon and greenhouse 
emissions. What's the current trading price for a ton of carbon 
dioxide?
    Mr. Cogen. Carbon dioxide is not a really well-defined 
commodity. It's a commodity by jurisdiction. We traded a U.K. 
allowance for one ton of carbon dioxide--but that's a very 
special system--yesterday at around five pounds. That's seven-
and-a-half dollars for a metric ton. The range is from 10 cents 
a ton up to--the highest trade I think we did was about $15.
    Senator McCain. Where do they get this figure that 
they'll--it'll be a $10 billion business?
    Mr. Cogen. That, I don't know.
    Senator McCain. What is your----
    Mr. Cogen. A lot of the models that people use look at 
comparatively high prices of carbon, which, in the beginning 
markets, at least, we just have not seen.
    Senator McCain. What is your prognostication? Will this be 
a pretty going concern, or is it sort of just a sidelight to 
a----
    Mr. Cogen. I think is going to be a large international 
market. But from a tradeable commodity, it's not the U.S. 
Treasury market or the gold market. It's more like the copper 
market. It's a substantial move like----
    Senator McCain. That's not too bad.
    Mr. Cogen. Not too bad--at all. But, on the other hand, 
doesn't change the world each day.
    Senator McCain. Absent U.S. participation, how long do you 
think it'll be before it's a pretty robust business?
    Mr. Cogen. I'd say over the next two years. Europe is 
already--has the rules pretty much in place. We're already 
looking at trading in anticipation of the final rules.
    Senator McCain. Mr. Krupp, you've said that since 1990, 
DuPont has succeeded at holding energy use at 1990 levels 
without economic loss, saving $325 million alone--$1.65 
billion. Why don't other industries look at DuPont, ALCOA, et 
cetera? They're the exceptions, rather than the rule, aren't 
they?
    Mr. Krupp. Yes, well, I think there are more and more 
companies that are looking at the future of the world and 
seeing that it's going to be a carbon-constrained future. And 
to the extent the biggest companies operate in many 
jurisdictions, in multinational companies, the future of that 
world is quite imminent, because all the other industrialized 
countries, except for us and Australia, have signed on.
    Senator McCain. But if DuPont and ALCOA have actually saved 
money, why wouldn't a CEO or a board of directors sit down and 
say, ``Hey, we're--this is a way we can actually increase the--
our profits and our business''?
    Mr. Krupp. Well, some of them are. I would say different 
companies are in different positions. So I wouldn't assert that 
all companies can save money by reducing their emissions. For 
some, there will be a cost. But I think more and more 
companies--as more companies look, there will be a surprising 
number of companies that find out that there are actually 
savings from reducing waste.
    One of the things, Senator McCain, that one of our other 
partners, BP, found out was, when they set up an internal 
trading system like the one that--the sort of system that ALCOA 
I've just heard is contemplating, they found out that once they 
gave incentives to the different business units, the 110 
business units, that parts of the company that had never 
bothered to look at installing valves in Houston for methane 
pipes, they said, ``Hey, if I can get a few dollars from 
another business unit that is going to increase their emissions 
for us to decrease the leakage of methane, it's worthwhile for 
us to do it.'' And as a result of creating a hunt-down 
emissions-reduction opportunity system, the cap-and-trade 
system that causes this hunt to go on, when they added up the 
benefits, they were surprised that they, too, saved several 
hundred million dollars in the process.
    Not every company can do that. I'm not asserting that. But 
I think if we give incentives for the American businesses to do 
that, we will not only have far lower costs than the doomsayers 
are saying, but we will also be innovating and develop this 
sort of products and processes that the world needs to have a 
robust economy while meeting this challenge.
    Senator McCain. Mr. Overbey, I understand you want to--or 
ALCOA wants to reduce its greenhouse gas emissions by 25 
percent below 1990 levels by 2010. Does that require some new 
technology?
    Mr. Overbey. It does not. It requires implementation of 
process changes in technologies of which we are aware. That's 
how we've been able to get to 23-and-a-half percent already. 
And fortunately, we have a technology-exchange network 
worldwide in ALCOA that allows us to take learnings from one 
plant and rapidly move them to another plant so that those 
gains can be quickly achieved. So we believe we can achieve the 
25 percent with process management and technology, and without 
substantial capital to support it.
    Senator McCain. Ms. Claussen, you have heard me repeat the 
statement of the National Academy of Sciences ad nauseam. Do 
you believe that there is sufficient evidence that we should 
begin to act----
    Ms. Claussen. Absolutely.
    Senator McCain.--the United States of America should act?
    Ms. Claussen. Absolutely.
    Senator McCain. Mr. Krupp?
    Mr. Krupp. Absolutely.
    Senator McCain. Mr. Cogen?
    Mr. Cogen. I don't know about the science. I know from a 
business point of view, everyone else is going there.
    [Laughter.]
    Mr. Cogen. Good elbow, Ms. Claussen.
    Senator McCain. Thanks for the straight talk, Mr. Cogen.
    Mr. Overbey?
    Mr. Overbey. Our company, as I said, has already taken a 
position that we are no longer going to debate the science, but 
move forward with actions as rapidly as we can.
    Senator McCain. Can you divine the reasons why--Ms. 
Claussen, why, given this overwhelming body of evidence, that 
there would be a reluctance at least to start beginning to put 
into place the policies that would reduce the threat of climate 
change--i.e., reduce the greenhouse gases?
    Ms. Claussen. No, actually, I really don't understand it, 
because I think you can look at the companies that have already 
taken action--and there are 40 companies with targets--and most 
of them have not found it to be very costly in the beginning, 
because what they're doing is energy efficiency improvements. 
And those things do not hurt the bottom line. Now, I mean, I 
think if you look out 20 years, there are going to be real 
costs here, and I don't think we should shy away from that. But 
in the early stages, I think virtually everyone has found that 
there are things that they can do that make a difference that 
are positive. And why we can't have a system that at least 
starts to get at some of that is absolutely beyond me. And I 
just don't understand it.
    Senator McCain. I thank the witnesses for being here today.
    Senator Wyden?
    Senator Wyden. Thank you. Excellent panel.
    Mr. Cogen, your presence in Central Oregon is much 
appreciated. I know that there has been an interest in our part 
of the country.
    I think the first question I want to ask is about carbon 
sequestration. I mean, you fly over my part of the world, and 
you see these beautiful forests--the same is true of a lot of 
Committee Members here today--beautiful forests, farmland that 
all is in a position to absorb carbon. It seems to me carbon 
sequestration is an ideal example of an area where clearly this 
country can move beyond research. You can talk about a variety 
of other considerations. But to me, carbon sequestration is now 
low-hanging fruit. This is something we can do. We can do it in 
Central Oregon. We can do it across this country in areas where 
there are forests and where there are farms.
    Response to that? We can't get the Administration to move 
in a serious way even on carbon sequestration where there is 
bipartisan support in the United States Senate, where you have, 
all across the country, grassroots groups of industry people, 
environmental people, and others. What plausible reason would 
there be for not moving ahead aggressively here? Perhaps, Ms. 
Claussen and Mr. Krupp, you would have a response to that?
    Ms. Claussen. I'm sorry, I'm going to say it again, I don't 
understand it, either. There is no question there are things 
you can do to sequester carbon in trees and soils. There is no 
question that that's a benefit for everyone. It's a benefit for 
the climate. It's a benefit for bio-diversity. It's not a big-
cost item. Why we can't really get moving in a serious way on 
that, I really--I'm sorry, I really don't----
    Senator Wyden. In Oregon State----
    Ms. Claussen.--I don't understand it.
    Senator Wyden. In Oregon State University, they found that 
forestry alone might be up to a quarter of the solution to the 
global warming problem. Just forestry, in a way that, again, 
brings people together.
    Mr. Krupp, do you have a response to this?
    Mr. Krupp. Well, emissions from deforestation are 
comparable to the emissions globally of the United States, so 
it's clear that forestry practices now are part of the problem 
and, therefore, clear that they can be part of the solution.
    But I'm glad you asked, Senator Wyden, because I have 
brought with me a poster of Ochoco Lumber----
    Senator Wyden. And I didn't--I didn't want you to go home 
without having a chance to show it off. We appreciate your 
being involved in Central Oregon.
    Mr. Krupp.--which--thank you. The benefits of such a 
project, here, can be seen on this forest which has been high-
graded. The big, healthy trees have all been taken out, leaving 
the diseased, spindly ones. The company, you know, has offered 
to replant the area with native trees and do so in a way that 
would lease out the sequestered carbon for 20 years. This would 
not only give us a carbon sequestration benefit, but would 
restore the riparian ecosystem, and would benefit the habitat 
for endangered salmon species. There would be win-win-wins. And 
these are projects that we're involved in. Others in Oregon--
there are many examples of very good projects in this area that 
just have all sorts of benefits.
    I can't tell you--I can't divine the reasons either for not 
going forward with this sort of thing. I can tell you that one 
of the real positives about the legislation, the breakthrough 
legislation that Senators McCain and Lieberman have introduced 
is that in this carbon--in this Climate Stewardship Act, they 
have said that this should be one of the range of options 
available to businesses that are given a reduction burden. And, 
boy, if we could get a system going that financed projects like 
this and lowered the cost of reducing emissions, I think that's 
the quickest way to meet our obligation to the global 
environment.
    Senator Wyden. Well, I had a town meeting in Prineville 
just last weekend in Central Oregon, and they were raving--in 
fact, timber industry leaders were raving about EDF and your 
efforts to reach out and bring people together. What you just 
described is essentially the legislation I've had with Senator 
Craig and Senator Brownback for several sessions. And of 
course, it could be utilized under the McCain-Lieberman 
legislation through the combination of offsets and banking and 
the principles in the legislation.
    Mr. Krupp. Yes, I'm aware of your leadership in that area, 
Senator Wyden. I think that's been a very important initiative 
to get this subject on the table.
    Senator Wyden. A question for any of you. I think you've 
heard me talking about the Framework Convention in 1992, and 
particularly, the requirements there. We looked back over the 
last decade, and clearly, there was a commitment long before 
Kyoto to stabilize greenhouse gases, and I've quote this, ``at 
a level that prevents dangerous interference with the climate 
system.'' And yet, we've had testimony here saying we're going 
to face a 43 percent increase between 2000 and 2020. My 
question to you is--I don't see any strategy to plausibly 
attain what was set out in 1992 on a voluntary basis. I just 
don't see it. I don't see how you're going to get there on a 
voluntary basis to achieve what was set out in 1992.
    Now, I want to give you all a chance to respond to that, 
but that's essentially why I raised it. It's one thing to talk 
about Kyoto. It's one thing to talk about various steps 
forward. But it's quite another to talk about how it was in 
effect under President Bush, then--the current President's 
father--we set out a commitment and we're still not even in the 
ballpark of being able to achieve it voluntarily. I would like 
your assessment as to whether there is a chance to achieve what 
was set out in 1992 on a voluntary basis. Any of you?
    Ms. Claussen. I could start. The fact is, there have been 
voluntary programs in effect throughout the 1990s. I don't know 
if I should be proud of it or ashamed or it, but I actually was 
responsible for many of them when I was at EPA a long time 
ago--for those voluntary programs. And I think they did achieve 
some reductions.
    But are they of the magnitude that you need to really 
address this problem? I think they are not. And the same is 
true for the excellent work that has been done by many in the 
private sector to set their own objectives and to put programs 
in place to meet them. I mean, some of those are truly 
terrific. Many of them are much more stringent than the U.S. 
Kyoto target, and those companies will meet them. But the 
reality is, until you get everyone moving in the right 
direction at a reasonable speed, I think the chances of meeting 
the goals of the convention are almost nil. So, that is why we 
believe we need some kind of a mandatory system.
    Senator Wyden. Mr. Cogen, Mr. Krupp, Mr. Overbey, do any of 
you want to add to that?
    Mr. Cogen. No, I think she said it very well.
    Mr. Krupp. I would say, Senator Wyden, that your analysis 
is accurate. There is no way we're going to get there with a 
voluntary system. There is no way we're going to meet what 
Framework Convention says. That was signed into law by former 
President Bush. There's no way we're going to do what the world 
needs on a voluntary system. The voluntary efforts, so far, 
have been commendable. We encourage them. But it's not 
realistic to expect that it's going to be enough for the 
climate.
    In fact, we heard just a while ago the testimony of Dr. 
Mahoney, who basically repeated the Administration's own 
projections, that even under their enhanced--so-called 
``enhanced voluntary program,'' they are not projecting 
reductions that would meet the framework that the United States 
has already signed up for. They are projecting, according to 
our own analysis, little more than essentially the equivalent 
to business as usual, what would have happened anyway, in terms 
of emissions reductions--nowhere near adequate. In fact, they 
amount to emissions increases.
    Senator Wyden. Mr. Overbey?
    Mr. Overbey. I had mentioned that in our primary aluminum 
processes, we have found--and I want to expand on that 
briefly--we have found technology improvements that reduce our 
costs, make our process more efficient, and reduce emissions. 
And so, that's a wonderful win-win for our business and for the 
environment. And it's attacking those kinds of things through 
technology and through energy efficiency work that we have 
found add real value and impact these emissions.
    Whether those kinds of process changes and technology 
changes are available to other processes and other companies, 
we really don't know that. But we think progress like we've 
demonstrated here can be made. And as we have said in our 
testimony, we think some kind of framework will assist the 
progress, though.
    Senator Wyden. Well, all of you have been excellent. I 
know, we've been at it over a couple of hours, but I think what 
has been very useful about having all of you wrap up, is that I 
think we can use what you've said today to force the 
Administration and force our Government to abandon this 
position of denial. If you really think about it, what they are 
constantly saying is that we just can't get any further than 
research; we deny, in effect, all of what you all have said, 
that you can have these positive programs.
    In my state, shoot, we put CO2 limits on new 
power plants. Western civilization is not going to end as a 
result of some of these innovative approaches that the four of 
you have talked about, and are being practiced in various 
states, in various communities around the country.
    The reason that I asked that last question about the 
commitment we made in 1992 is, I don't see how we're going to 
achieve what we set out as a goal a decade ago unless we move, 
and move aggressively, on the kinds of ideas that you're 
talking about here today.
    And Mr. Krupp, if you can make them work in Prineville, 
Oregon, I think we can build on that around the country.
    Chairman McCain and Senator Lieberman have an excellent 
approach that I think has considerable merit. There are going 
to be other bills, as well. I have a chance to wear multiple 
hats, because I sit on this Committee, and I also sit on the 
Environmental Committee. So you can count on my being in touch 
with all of you in the days ahead as we try to build a 
bipartisan support and end the denial about the possibilities 
of moving forward in a bold way.
    Unless any of you have anything to add further, we'll 
excuse you at this time. The Committee is adjourned.
    [Whereupon, at 4:55 p.m., the hearing was adjourned.]
                            A P P E N D I X

               Prepared Statement of Hon. John F. Kerry, 
                    U.S. Senator from Massachusetts
    Thank you, Mr. Chairman, for holding this important hearing today. 
I can think of no better issue than global climate change to set the 
stage for the Commerce Committee and the important work that lies ahead 
of us in this new congressional session. Moreover, I am pleased to see 
an effort to continue the work that we started in the 107th Session in 
this Committee to create a sound, science-based record of the current 
understanding of climate change.
    It is now widely accepted by the scientific community that human 
activities such as the burning of fossil fuels, deforestation, and 
certain land-use practices are increasing atmospheric concentrations of 
carbon dioxide, which, along with increasing concentration of other 
trace gases, affect global climate. Atmospheric amounts of carbon 
dioxide have increased by 30 percent over the last 200 years, primarily 
as a result of burning fossil fuels like coal, oil, and natural gas and 
a result of deforestation.
    In response to the growing concern over global climate change, the 
Bush Administration has adopted a unique approach of inaction. 
President Bush has offered our Nation and allies skepticism about 
proven science and vague promises rather than genuine leadership on 
global warming. While the President talks about studying the issue, his 
Administration continues to pursue a course which will only increase 
pollution--he broke a promise to cap power plant pollution, rejected 
the only international agreement to solve the problem, submitted a 
budget that cuts funding for clean energy technology, and promotes an 
energy plan that will increase pollution by 35 percent. The President 
has a policy on global warming--and if you care at all about the 
environment, it's a dangerous one.
    Global warming is one of our toughest environmental challenges, 
threatening the health of not only the human population, but wildlife 
and economies worldwide. We have the know-how to start fixing the 
problem, but we have to start now. The technologies to build cleaner 
cars and to modernize power plants are readily at hand. We can lean 
more heavily on renewable energy sources such as wind, sun and hydrogen 
fuel cells. We know how to make more efficient appliances and to 
conserve energy whether we're at home, at work, or on the road.
    The United States has long been the world's leading developer of 
new technologies. But we are also the leading global warming polluter: 
with only 4 percent of the world's population, we produce 25 percent of 
the carbon dioxide pollution. We have a responsibility, as individuals 
and as a nation, to lead the world toward slashing emissions of 
CO2 and other heat-trapping gases.
    It's not going to be easy, but we must rise to the challenge. Since 
human activities over decades or centuries have contributed to global 
climate, the problem is not likely to be addressed simply or quickly. 
Any solution will likely involve a combination of approaches from 
capping emissions to increasing energy efficiency and conservation to 
creating market-oriented carbon reduction strategies.
    I commend the work of my colleagues, Senators McCain and Lieberman, 
for stepping up to the plate and essentially filling in for the Bush 
Administration's lack of vision. It is my hope that our President might 
gain some insight from their legislative proposal and work with us, 
rather than against us, to develop a solution worthy of the American 
people.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Ernest F. Hollings to 
                       Dr. James R. Mahoney Ph.D.
    Question 1. A number of questions have been raised about the 
Administration's focus on research, instead of action to reduce global 
climate change. For example, Dr. Warren Washington, the Chairman of the 
National Science Board, has stated that `` . . .vested interests do not 
want to take action based on early indicators, and with climate early 
indicators is what we have.'' How do you respond to criticisms that the 
Administration is focusing on research, instead of taking concrete 
action?
    Answer. I begin by noting that the Administration is actively 
pursuing a program that already incorporates a wide array of emission 
reductions actions, as well as research and technology development. The 
research activities are managed by the Climate Change Science Program; 
the technology development activities are managed by the Climate Change 
Technology Program; and the emission reduction actions include a large 
number of initiatives involving (among others) voluntary industry 
emission reductions facilitated by government, energy efficiency 
regulations, tax incentive provisions, tax rebate provisions and carbon 
sequestration programs, including major land conservation elements. 
Extensive descriptions of the many emission reduction actions already 
being taken by the Administration are available in other documents, 
which we will provide upon your request.

    Reducing greenhouse gas intensity requires a portfolio of actions 
including (1) research and development on a new generation of 
``breakthrough'' greenhouse gas (GHG) emission reduction technologies 
and (2) active adoption of current technologies where appropriate. 
Candidate short-term actions to limit the growth of GHG emissions 
should be evaluated in terms of their environmental benefits and the 
associated socioeconomic impacts, compared with the option of adopting 
more effective and efficient new technologies likely to be available at 
a later time, while maintaining the same cumulative reduction goals and 
desired levels of environmental protection. Two alternative schedules 
of emissions reductions can lead to different levels of emissions over 
time, but the same ultimate level of GHG concentrations and/or the same 
levels of environmental protection. The choice between paths that 
differ in near-term versus long-term emissions reductions depends on 
whether we can reduce overall costs and/or improve environmental 
benefits by focusing relatively more on research and less on emission 
reductions now, in order to achieve greater and less costly emission 
reductions in the future thanks to improved technologies. The near-term 
versus long-term balance also depends on whether near-term reductions 
require early retirement of productive assets. Consideration of the 
appropriate timing of emissions reductions is all the more important 
because the cost of achieving reductions over a short time horizon 
increases dramatically with the scale of reductions. One estimate 
suggests that a 30 percent reduction in emissions in the near term is 
six times more expensive than a 15 percent reduction. That is, doubling 
the near-term reduction target increases costs six-fold.\1\
---------------------------------------------------------------------------
    \1\ Numerous estimates of the cost to the United States of 
different levels of emissions reductions are presented in John Weyant 
and Jennifer Hill, ``Introduction and Overview,'' The Energy Journal 
(Special Issue, 1999), page xxxvii.
---------------------------------------------------------------------------
    A substantial body of research has examined this issue of balancing 
current and future emission reductions.\2\ It has focused on the key 
features of the climate change problem--the uncertainty associated with 
the benefits and costs of addressing climate change; the replacement of 
existing energy-using equipment, structures, and other physical assets 
required to reduce emissions; and improvements in technology over time. 
These features commonly lead to two related conclusions. First, there 
is significant value associated with better information, suggesting a 
critical role for climate science. Second, the least expensive way to 
achieve a particular concentration target involves a gradual approach 
that avoids drastic changes to the capital stock.
---------------------------------------------------------------------------
    \2\ A summary of the research on this topic can be found in Michael 
Toman, ``Moving Ahead with Climate Policy.'' RFF Climate Change Issues 
Brief, 2000. An additional summary of studies on this topic can be 
found in ``Climate Change 2001: Mitigation,'' Intergovernmental Panel 
on Climate Change: Working Group Three, Third Assessment Report, pages 
544-552. See http://www.ipcc.ch/pub/wg3spm.pdf
---------------------------------------------------------------------------
    I do not agree with the premise of the question that implies that 
research and action are separate and competing objectives in meeting 
long-term global climate change challenges. ``Research'' to improve our 
understanding of global climate change and to reduce the ``fundamental 
uncertainties'' identified by the National Research Council in its 2001 
report is an entirely prudent ``action'' for addressing this complex, 
long-term issue. Moreover, pursuing research that narrows scientific 
uncertainties will enable a better-informed development of policy 
objectives for mitigating global greenhouse gas emissions--in the near-
, mid- and long-term. The Administration sees research on climate 
science and advanced energy technologies as integral components of 
sound policymaking, not as competing or detracting enterprises.
    The need for a new generation of cleaner energy technologies is 
well recognized in the climate specialist community. For example, MIT 
Professor Henry Jacoby observed in 1998, ``The search for cleaner 
energy technologies is central to any long-term response to the threat 
of global climate change.'' President Bush's commitment to accelerated 
research and development on hydrogen fuel cells, carbon sequestration, 
bioenergy, and fusion energy, for example, represent concrete actions 
that have the potential of providing cost-effective paths to 
significant reductions in global greenhouse gas emissions.
    In February 2002, President Bush established a national goal of 
reducing the greenhouse gas intensity of the American economy by 18 
percent in the next decade. He stated his philosophy: ``Addressing 
global climate change will require a sustained effort, over many 
generations. My approach recognizes that sustained economic growth is 
the solution, not the problem--because a nation that grows its economy 
is a nation that can afford investments in efficiency, new 
technologies, and a cleaner environment.''
    Accompanying the President's policy speech was an array of domestic 
and international policy initiatives for achieving mitigation of 
greenhouse gas emissions in the next decade, which have been actively 
pursued by the Administration. These initiatives are summarized in 
Appendix 1 attached to these responses.

    Question 2. In testimony that has been submitted for the record for 
this hearing, Dupont has stated that their scientists have been 
involved in the Intergovernmental Panel on Climate Change (IPCC) 
efforts since its inception. Based upon its scientific analysis, Dupont 
began to systematically address its greenhouse gas emissions over a 
decade ago. Today, Dupont is a considered a leader in the emissions 
reduction area. What do you believe Dupont's scientists realize that 
others apparently did not?
    Answer. I am aware, and I applaud, that Dupont has made significant 
commitments to the reduction of greenhouse gas emissions, but I have no 
specific knowledge of the basis for Dupont's corporate strategy or 
decisions in the climate change area. I strongly support voluntary 
emissions reductions by American corporations as important 
contributions to the Administration's goal of reducing greenhouse gas 
intensity (the amount of greenhouse gas emissions per unit GDP) by 18 
percent by the year 2012.

    Question 3. At your recent workshop on the draft strategy plan for 
federal research, Professor G.O.P. Obasi, the Secretary-General of the 
World Meteorological Organization stated, `` . . .the existence of 
these uncertainties does not imply that there is total lack of 
knowledge on the subject. For example, we are certain of the continued 
increases of the greenhouse gases in the atmosphere. We also know that 
such increases will lead to a change in radiative properties of the 
atmosphere-ocean-land-ice-system. These will be accompanied by 
adjustments that will add to or subtract from the warming. The main 
difficulty we face is the inability to forecast with the desired degree 
of accuracy the magnitude, the rate, the time and space distribution, 
and the consequences of human-induced climate change.'' Do you agree 
with Professor Obasi's assessments?
    Answer. I agree with Professor Obasi's assessment, and would 
highlight his conclusion that, ``The main difficulty we face is the 
inability to forecast with the desired degree of accuracy the 
magnitude, the rate, the time and space distribution, and the 
consequences of human-induced climate change.''

    Question 3a. Do you think that the Administration's strategic plan 
is consistent with his assessment?

    Answer. The Administration's Discussion Draft of the Strategic Plan 
for the Climate Change Science Program is fully consistent with 
Professor Obasi's assessment. The strategic plan builds on that of 
which we are certain (e.g., that greenhouse gas concentrations in the 
atmosphere continue to increase, that such increases will lead to a 
change in radiative properties of the atmosphere-ocean-land-ice system, 
and that adjustments, also called feedbacks, will add to or subtract 
from the resulting warming). The Plan outlines a path forward to 
reducing key uncertainties in climate change science, and takes very 
seriously concerns about impacts on the Earth and the need to develop 
effective, efficient, and scientifically sound means to prevent or 
reduce dangerous interference with the climate system caused by human 
activities.

    Question 4. It has been stated that the Arctic region will 
experience the equivalent of 25 years of climate change impacts in a 
10-year period. Are there any special efforts to study the Arctic 
region given its accelerated reaction to climate change?
    Answer. Yes, there are special efforts to study the Arctic region 
because it may serve as an early indicator of quantitative responses to 
changes in the composition of the atmosphere and because feedbacks from 
changes in the Arctic to changes in climate may be particularly strong. 
U.S. Government personnel and financial resources are supporting the 
Arctic Climate Impact Assessment, an international project under the 
eight-nation Arctic Council to examine the consequences of climate 
variability and change, and the effects of increased ultraviolet 
radiation in the Arctic region. Its scientific findings and policy 
recommendations will be made public in the first half of 2004. Some 
studies by U.S. Federal agencies have been underway for a long time, 
such as the NOAA Observatory in Barrow, Alaska, and the NSF-sponsored 
Long Term Ecological Research site at Toolik Lake, Alaska. These sites 
represent government efforts to obtain long-term environmental data 
that can be used to document aspects of climate change.
    More recently, agencies have jointly planned to undertake the Study 
of Environmental Arctic Change (SEARCH). SEARCH is intended to provide 
an organizing framework for scattered existing activities and may lead 
to new efforts on critical aspects of Arctic climate change. The SEARCH 
science plan calls for a broad program of physical, biological and 
social science activities to understand the causes and impacts of 
Arctic climate change. As an example, the National Science Foundation 
and NOAA efforts are focused on understanding recent change in the 
freshwater cycle in the Arctic and in particular on providing 
circumpolar observations, in association with European partners, of the 
changes in Arctic sea ice and melt water moving into the North 
Atlantic.
    In other federal programs, NASA recently launched the ICESat (Ice, 
Cloud, and land Elevation Satellite) to provide high-resolution data on 
changes in the mass of the Greenland ice sheet. ICESat observations 
along with data from NASA's Gravity Recovery and Climate Experiment 
(GRACE) will provide the first comprehensive assessment of how 
Greenland is growing or shrinking in a changing climate. These 
observations build on results NASA has already obtained from 
scatterometer (Quikscat) observations and other space-based and 
airborne missions. Microwave instruments on NASA, DoD and international 
satellites have resulted in multi-decadal estimates of changes in 
Arctic sea ice cover and its interactions with the climate. The 
Department of Energy also has recently started ecological studies in 
Alaska to evaluate potential impacts of warming on some Alaskan 
ecosystems. The Department of the Interior maintains an array of 21 
deep boreholes in the National Petroleum Reserve Alaska for monitoring 
the thermal state of permafrost. Analysis of temperatures from the deep 
boreholes provided some of the first evidence that the Alaskan Arctic 
had warmed 2-4 degrees Celsius during the 20th century.

    Question 5. What do you believe should be the basis for setting any 
mandatory targets for emission reductions? Do you think that your 
research plan can support such requirements or will it just lead to the 
need for even more research?
    Answer. The basis for any long-term approach to address climate 
change should be the development of a broadly agreed view of what 
constitutes dangerous anthropogenic interference with the climate 
system and at what rate that dangerous level may be attained. Currently 
there is no agreement about a definition of anthropogenic interference; 
this question involves both scientific issues and value judgments. 
Potential mitigation and adaptation strategies also involve economic 
issues and the development of internationally agreed strategies for the 
short and long term. The research plan is directed at obtaining 
structured scientific knowledge to facilitate better informed public 
discussion of these issues. CCSP is not designed to lead to perpetual 
research. However, I note that climate and global change issues are so 
complex, and so compellingly important, that I expect important 
exploratory research and observation programs will be needed over the 
long term.

    Question 6. How does the Administration's strategic research plan 
examine abrupt climate change?
    Answer. The potential for abrupt climatic changes has been 
addressed in Chapter 6 (Climate Variability and Change) of the 
Discussion Draft Strategic Plan for the Climate Change Science Program. 
One of the priority questions identified in this chapter is the 
potential for climate-induced changes that are significantly more 
abrupt than expected, such as the collapse of the thermohaline 
circulation or rapid melting of the major ice sheets.
    The Draft Plan specifies that improved paleoclimatic information 
will be essential for analyzing past abrupt climate change. This 
research will also require expanded observing and monitoring systems, 
particularly for key regions or phenomena that may be especially 
vulnerable or contribute most strongly to abrupt climate change, such 
as the tropical oceans, the Arctic and Antarctic regions, and the 
thermohaline circulation of the ocean. The National Science Foundation 
and partners in the United Kingdom are specifically addressing 
prospects for abrupt change in the thermohaline circulation through the 
joint RAPID Climate Change Initiative. Moreover, research into how to 
better numerically model the full three-dimensional circulation of the 
ocean will be required in order to accurately project the time scales 
and potential impacts of abrupt changes in thermohaline circulation.

    Question 7. The Climate Change Research Initiative is focused on 
short time frame research of between two to five years. However, much 
of the debate concerning global climate change concerns long-range 
projections, such as the possible reduction in water supplies in 
western states, including Arizona, by as much as 30 percent by 2050. 
How much effort does the Administration intend to focus on long-term 
research to resolve controversy over these projections?
    Answer. During much of the first decade of its existence, the 
dominant emphasis of the U.S. Global Change Research Program (USGCRP) 
was on supporting research to improve basic scientific understanding of 
the dynamics of the Earth system and to document, understand, and model 
global-scale environmental changes. USGCRP-supported research has made 
significant advances since the inception of the program, and the 
program will continue to enable the research community to focus on a 
range of very significant scientific uncertainties about climate and 
global change as well to achieve a better understanding of the long-
term effects of climate change. In recent years, the program has 
complemented this basic research component with a stronger emphasis on 
developing the capability to address more effectively the implications 
of climate and global change for society.
    The Climate Change Research Initiative (CCRI) represents a focusing 
of resources and enhanced interagency coordination of ongoing and 
planned research on those elements of the USGCRP that can best support 
improved public discussion and decision making in the near term. A 
particular goal of the CCRI is to measurably improve the integration of 
scientific knowledge, including measures of uncertainty, into effective 
decision support systems and resources. The CCRI programs will 
incorporate performance metrics that call for deliverable products 
useful to policymakers in a short time frame (2-4 years) on issues that 
are both immediate as well as long-term.
    Question 8. Dr. Marburger also referred to the scenarios developed 
under the Intergovernmental Panel on Climate Change (IPCC) as ``ad-
hoc.'' Given the extensive work that went in to the development of 
these scenarios, it is interesting that he reached that conclusion. Do 
you agree with his assessment and have you used any of the IPCC 
scenarios in the development of the strategic plan?
    Answer. The IPCC has produced several sets of emissions scenarios 
over the course of its history: the so-called SA-1990 scenarios for its 
first assessment report; the IS-92 scenarios for the 1995 second 
assessment report; and a third set of scenarios (known as SRES) 
developed as part of a Special Report on Emission Scenarios that 
reviewed factors that contribute to emissions as well as emissions 
scenarios developed in the research literature. Each set of scenarios 
has different characteristics. The SRES are based on what seem to a 
number of analysts to be a highly optimistic set of assumptions in 
which developing countries attain levels of wealth close to that of 
developed countries over the course of the coming century. This 
assumption has unique effects on the emissions trajectories of these 
countries.
    The Discussion Draft Strategic Plan for the Climate Change Science 
Program (CCSP) is not predicated on any particular emissions scenarios. 
We fully expect, however, that the CCSP will develop and analyze 
multiple emission scenarios, incorporating insights gained and lessons 
learned from IPCC activities. Particular plans for FY 2004 include the 
development of emissions scenarios by the Department of Energy to 
provide alternatives to the ``SRES'' scenarios that were published by 
the IPCC.

    Question 9. Dr. Mahoney, as you may know, this Committee developed 
the legislation that became the US Global Change Act of 1990. That 
legislation calls for scientific assessments to be performed and 
reported to Congress. The law requires that these be conducted every 
four years, and the last National Assessment was communicated to 
Congress in 2000. This set of documents presented the most current and 
comprehensive assessment of the implications of climate change for the 
United States, and has been an instrumental tool for communicating 
information on climate change to policymakers, the media, and the 
general public. What is your opinion of the National Assessments 
submitted in 2000?
    Answer. The document ``Climate Change Impacts on the United 
States--The Potential Consequences of Climate Variability and Change'' 
was the first assessment prepared in response to the 1990 Act, more 
than ten years after its passage. The National Assessment Synthesis 
Team, an advisory committee chartered by the Federal Advisory Committee 
Act, produced it. The document was turned in to the Subcommittee on 
Global Change Research (SGCR) within the Executive Branch on October 
31, 2000, and SGCR transmitted the document to the President and the 
Congress at a later date. The document was first published in 2001. 
(This information is contained in the inside title page of the 2001 
publication.) Appendix 2 summarizes the status of the first National 
Assessment, including various reports published in 2001 and 2002, and 
some never published.
    The Assessment was an ambitious undertaking. I commend the 
contributions of the large group of scientists who worked on the 
preparation of the assessment. The project was designed and conducted 
over a period of years before I was confirmed in my position at the 
Department of Commerce and appointed Director of the Climate Change 
Science Program and Chair of the Subcommittee on Global Change 
Research. Had I been involved, I believe that I might have done a 
number of things differently. I believe the National Assessment was 
very ambitious--perhaps overly so--and unduly optimistic about the 
level of confidence it assigned to a number of its findings, especially 
at the regional level. The Global Change Research Act of 1990 does not 
require a specified form of assessment, for example it does not call 
for a regional focus. I believe we should carefully examine the 
strengths and limitations of the 2001 report, and we should apply the 
``lessons learned'' in developing a substantially improved analysis in 
the next assessment. This is the normal progression of research and 
assessment: we should build on the lessons learned in the pioneering 
effort and assure that subsequent efforts demonstrate improved 
credibility as a result of continuing research, measurement and 
assessment.

    Question 10. Why was the 2000 National Assessment never mentioned 
in the Administration's Draft Strategic Plan, when it was the source of 
much of the information presented Administration's ``Climate Action 
Plan--2002''?
    Answer. The Discussion Draft Strategic Plan for the Climate Change 
Science Program was not designed to reiterate or summarize findings 
reported in the research and assessment literature. Few previously 
published documents, assessments or others, were specifically mentioned 
in the draft plan.
    As for the place of the National Assessment in the CCSP strategic 
planning process, the discussions at the workshop on the Discussion 
Draft Strategic Plan, held in Washington, D.C., on December 3-5, 2002, 
and the voluminous review comments we received on the Plan during the 
subsequent public comment period, brought forth a wide range of views 
on the National Assessment. These views range from highly laudatory to 
highly critical. Some of the comments have provided valuable 
perspectives, and we will address these issues appropriately in 
revising and finalizing the Strategic Plan. We intend to evaluate the 
assessment and other approaches for supporting decision making, and to 
incorporate the lessons from these experiences in CCSP planning for 
future decision support activities. We fully expect that lessons 
learned from the conduct of the National Assessment will provide useful 
insight in designing future CCSP projects.

    Question 11. Does this Administration intend to submit the next set 
of national assessments in 2004 (or before), as required by the Act?
    Answer. We intend to comply with Sec. 106 of the P.L. 101-606, the 
Global Change Research Act of 1990, which states:

SEC. 106. SCIENTIFIC ASSESSMENT.

    On a periodic basis (not less frequently than every 4 years), the 
Council, through the Committee, shall prepare and submit to the 
President and the Congress an assessment which----

        1. integrates, evaluates, and interprets the findings of the 
        Program and discusses the scientific uncertainties associated 
        with such findings;

        2. analyzes the effects of global change on the natural 
        environment, agriculture, energy production and use, land and 
        water resources, transportation, human health and welfare, 
        human social systems, and biological diversity; and

        3. analyzes current trends in global change, both human- 
        induced and natural, and projects major trends for the 
        subsequent 25 to 100 years.

    The document ``Climate Change Impacts on the United States--The 
Potential Consequences of Climate Variability and Change'' was the 
first assessment prepared in response to the 1990 Act more than ten 
years after its passage. The National Assessment Synthesis Team, an 
advisory committee chartered by the Federal Advisory Committee Act, 
produced it. The document was turned in to the Subcommittee on Global 
Change Research (SGCR) within the Executive Branch on October 31, 2000, 
and SGCR transmitted the document to the President and the Congress at 
a later date. The document was first published in 2001.
    We note that the agencies that are part of the Climate Change 
Science Program are currently conducting assessments in a distributed 
fashion. For example, the Department of Transportation is conducting an 
assessment of the potential impacts of climate change on transportation 
systems, while both the Environmental Protection Agency (EPA) and NOAA 
are conducting regional assessments through ongoing programs. EPA is 
working with NOAA's Regional Integrated Science and Assessment Program 
to ensure coordination of the agency's ongoing regional assessment 
activities.
    Moreover, the Administration is also supporting international 
assessments in support of the UN Framework Convention on Climate Change 
(through the Intergovernmental Panel on Climate Change), and the 
Montreal Protocol.
    Regarding submission of a ``next set of national assessments in 
2004,'' we do not believe that this is precisely what is called for in 
PL 101-606. However, CCSP is working hard to lay the foundation for a 
successor interagency assessment. Our work includes an evaluation of 
the aforementioned national assessment so that we can learn from and 
improve upon the past. We note that there are several approaches for 
conducting assessments of the issues highlighted in PL 101-606, and 
that the question of assessment design is an important one.
    A core component of the CCSP is its emphasis on decision support 
resources to provide information to support national policy and 
regional/sectoral resource management. The program is making excellent 
progress in designing activities in this area through its strategic 
planning process. A plan for both sectoral and comprehensively 
integrated assessment products is being developed as part of the final 
version of the CCSP strategic plan.

    Question 12. What is NOAA and the Climate Office doing to make this 
happen?
    Answer. NOAA and the other departments and agencies that 
participate in the Climate Change Science Program have recently 
established a federal interagency working group on Decision Support 
Resources. This working group will oversee the planning and 
implementation of CCSP assessment activities, including the activities 
required by the Global Change Research Act of 1990. The Climate Change 
Science Program Office will play an important role in supporting and 
helping to coordinate these activities. The overall effort will be 
managed directly by federal scientists and program managers rather than 
an outside synthesis team as done in the previous assessment.

    Question 13. What is the anticipated schedule?
    Answer. We expect to publish a schedule for transmittal of the 
updated synthesis and assessment as part of the final version of the 
Climate Change Science Program Strategic Plan.

    Question 14. NOAA's FY03 budget represented an $18 million 
``increase'' under CCRI--not USGCRP--for aerosols research, climate 
modeling, carbon cycle, and observations. All these areas were already 
funded at NOAA under the USGCRP in previous years. Of this $18 million 
``increase'', how much is actually research that has never been done by 
NOAA as part of the USGCRP effort?
    Answer. While there are no initiatives in the NOAA FY 2003 Climate 
Change Research Initiative (CCRI) budget increase request that do not 
build on activities of the U.S. Global Change Research Program, all of 
the $18 million will be supporting new activities in those topic areas. 
The CCRI request represents an effort across the agencies to examine 
the major uncertainties delaying progress on projections of future 
climate and focus research effort in these areas.

    Question 15. Is any of this research absolutely new?
    Answer. In addition to augmentation and expansion of existing 
research programs, a new climate modeling center will be established 
within the Geophysical Fluid Dynamics Laboratory (GFDL) at Princeton, 
New Jersey, which will focus on model product generation for research, 
assessment and policy applications as its principal activity. GFDL has 
played a central role in climate research, pioneering stratospheric 
modeling, seasonal forecasting, ocean modeling and data assimilation. 
This core capability will be enhanced to enable product generation and 
policy related research. NOAA and GFDL will develop improved 
``scenarios'' of future human activity as input to climate change 
projections. CCRI will enable NOAA to conduct an evaluation of the 
relative likelihood of the scenarios. The capability to assess the 
plausibility or likelihood of either the individual scenarios, or a 
range of scenarios is one of the factors to reduce the range of 
uncertainty in climate change assessments.

    Question 16. Wouldn't you agree with scientists and other experts 
who say this is just ``dressing up'' old programs in new clothing?
    Answer. The CCRI represents a true refocusing of priorities. NOAA's 
programs build on ongoing USGCRP activities, but we believe it is the 
best use of taxpayer dollars to focus new activity where the science 
community believes results will lead to major reductions of 
uncertainty.

    Question 17. Congress has strongly supported global climate change 
research through the federally coordinated US Global Climate Research 
Program established in the Global Change Research Act of 1990 to 
``assist the nation and the world to understand, assess, predict, and 
respond to human-induced and natural processes of global change.''
    However, this Administration has created a separate CCRI, that 
creates a separation of ``near term'' decision support research from 
``long term'' research of the USGCRP. This is contrary to Congress's 
intent that all federal research be coordinated through USGCRP for use 
as decision support tools on climate change issues. Why are the CCRI 
activities not proposed as part of the USGCRP, as in previous years?
    Answer. CCRI is a new initiative designed to build on the USGCRP. 
The CCRI and the USGCRP are not two separate programs. Rather, they are 
components of an integrated effort, with an integrated management 
structure, encompassed in a single Strategic Plan. The Administration 
has identified a need to develop a sharper focus for near-term research 
efforts and the provision of decision-support information on the issue 
of climate change--a capstone issue of our time and a central (though 
not the exclusive) component of the USGCRP research portfolio. The CCRI 
is a means to accomplish this sharpening of focus, within the overall 
global change research effort.

    Question 18. Does the Administration have concerns about the 
effectiveness of the USGCRP? If so, please share them with the 
Committee.
    Answer. The Administration is pleased with the effectiveness of the 
USGCRP. The USGCRP has been, overall, a highly successful program, 
supporting research that plays a central role in the scientific study 
of global change. Since its inception the program has received strong 
bipartisan support and I am confident that it will continue to do so. 
Moreover, the new cabinet level management structure that President 
Bush established in February 2002, providing a fully integrated focus 
for the USGCRP and CCRI activities, has provided a higher level of 
continuing oversight of the combined Climate Change Science Program as 
compared to the level of management oversight provided in past years.

    Question 19. If not, explain why the Administration believes that 
the USGCRP is not the appropriate program to coordinate these research 
activities.
    Answer. Not applicable, in view of the response to Question 18.

    Question 20. What is happening to the USGCRP's organization and 
areas of focus, now that CCRI has been launched?
    Answer. The USGCRP's organization and areas of focus have been 
fully retained and strengthened now that CCRI has been launched. A 
highly comprehensive interagency inventory of climate and global change 
research programs was conducted during 2002, and this inventory was 
provided to majority and minority staff of the relevant committees in 
both the Senate and House of Representatives. Additional copies of this 
comprehensive inventory are available from my office, in both CD and 
hard copy format. This essential stocktaking exercise (the first 
conducted in several years) enhanced the coordination, efficiency, and 
effectiveness of the USGCRP. A new interagency working group was 
established to focus on Decision Support Resources to augment the 
previously existing research program elements (which are all 
continuing): Atmospheric Composition, Climate Variability and Change, 
the Global Water Cycle, the Global Carbon Cycle, Ecosystems, Land Use 
and Land Cover Change, and Human Contributions and Responses to Global 
Change.

    Question 21. Despite the President's declaration to cut US green 
house gas intensity by 18 percent in the next ten years, we have heard 
in previous testimony from Mr. James Connaughton, head of CEQ, that his 
proposal will result in steadily increasing GHG emissions. Is this 
still the projected timetable?
    Answer. The Administration's timetable calls for an 18 percent 
reduction in U.S. greenhouse gas intensity by the year 2012. This is an 
ambitious goal, but one to which the Administration is fully committed. 
A few numbers may put the 18 percent target into perspective. If the 
U.S. economy grows 30 percent by 2012 and the GHG emission intensity is 
reduced 18 percent, the GHG emissions would increase a net amount of 
6.6 percent. As another data point, an 18 percent reduction in 
intensity would result in stable emissions if the economy grew 22 
percent during the coming decade.

    Question 22. Speaking as a scientist, doesn't each decade that we 
delay in reducing greenhouse gas emissions commit us to enduring 
greater warming in the future and make it exceedingly difficult to 
stabilize atmospheric GHG concentrations?
    Answer. The following comments from my response to Question 1 are 
applicable here: Reducing greenhouse gas intensity requires a portfolio 
of actions including (1) research and development on a new generation 
of ``breakthrough'' greenhouse gas (GHG) emission reduction 
technologies and (2) active adoption of current technologies where 
appropriate. Candidate short-term actions to limit the growth of GHG 
emissions should be evaluated in terms of their environmental benefits 
and the associated socio-economic impacts, compared to the option of 
adopting more effective and efficient new technologies likely to be 
available at a later time, while maintaining the same cumulative 
reduction goals and desired levels of environmental protection. Two 
alternative schedules of emissions reductions can lead to different 
levels of emissions over time, but the same ultimate level of GHG 
concentrations and/or the same levels of environmental protection. The 
choice between paths that differ in near-term versus long-term 
emissions reductions depends on whether we can reduce overall costs 
and/or improve environmental benefits by focusing relatively more on 
research and less on emission reductions now, in order to achieve 
greater and less costly emission reductions in the future thanks to 
improved technologies. The near-term versus long-term balance also 
depends on whether near-term reductions require early retirement of 
productive assets. A substantial body of research has examined the 
issue of balancing current and future emission reductions.\3\ 
Consideration of the appropriate timing of emissions reductions is all 
the more important because the cost of achieving reductions over a 
short time horizon increases dramatically with the scale of reductions. 
One estimate suggests that a 30 percent reduction in emissions in the 
near term is six times more expensive than a 15 percent reduction. That 
is, doubling the near-term reduction target increases costs six-fold.
---------------------------------------------------------------------------
    \3\ A summary of the research on this topic can be found in Michael 
Toman, ``Moving Ahead with Climate Policy.'' RFF Climate Change Issues 
Brief, 2000. An additional summary of studies on this topic can be 
found in ``Climate Change 2001: Mitigation,'' Intergovernmental Panel 
on Climate Change: Working Group Three, Third Assessment Report, pages 
544-552. See http://www.ipcc.ch/pub/wg3spm.pdf.
---------------------------------------------------------------------------
    The Administration's policy can be characterized as a combination 
of shorter-term and longer-term actions as follows. Shorter-term: 
implement a broad portfolio of no-cost and relatively low-cost emission 
reduction incentives and actions that reduce GHG intensity without 
major adverse economic impacts to the U.S. economy that would hamper 
our ability to invest in a new generation of breakthrough emission 
reduction technologies. Longer-term: immediately accelerate investments 
in major new technologies that have highly favorable benefit-cost 
ratios, i.e., that have the potential to provide major GHG emission 
reductions with relatively lower adverse economic impacts. A prominent 
example is President Bush's renewed commitment, announced in his State 
of the Union address, to accelerate the research and development of 
hydrogen fuel cell vehicles in order to allow commercialization by 
2020. Another is his January 30 commitment to participate in 
international negotiations for the construction and operation of a 
major magnetic fusion project, also known as the International 
Thermonuclear Experimental Reactor (ITER), to produce commercially 
available, clean fusion energy by the middle of this century. A third 
example is his leadership in establishing the Carbon Sequestration 
Leadership Forum, an international research effort designed to make 
carbon capture and sequestration a cost-effective reality. And on 
February 27, the President announced that the United States would 
sponsor a $1 billion, 10-year demonstration project to create the 
world's first coal-based, zero-emissions electricity and hydrogen power 
plant, called ``FutureGen.'' FutureGen will be undertaken with 
international and private sector partners to dramatically reduce air 
pollution and capture and store emissions of greenhouse gases.

    Question 23. Doesn't this mean that either mitigation or 
adaptation, or both, will come at a much greater cost to society in the 
future?
    Answer. On the contrary, aggressive investments in breakthrough 
technologies can yield superior environmental benefits (e.g., removal 
of carbon based fuels from the transportation system) more cost-
effectively than an approach of serial incremental steps that have 
increasingly greater adverse economic impact as the ``bar is raised,'' 
risking the forced, premature retirement of existing capital assets.

    Question 24. I find it interesting that on February 14, 2002, the 
Administration simultaneously opposed mandatory measures for 
controlling CO2 emissions, and endorsed a ``cap and trade'' 
approach for other emissions from power plants, citing the success of 
the SO2 Cap and Trade Program from the Clean Air Act.
    In fact, the Bush Administration praised the features of this cap 
and trade program that are just the sorts of features one would want 
for a CO2 emissions program:

        ``Cost Savings''
        ``Innovation''
        ``Integrity''
        ``Guaranteed Results''

    Please explain why the Administration believes that an approach 
that provides potential cost savings, innovation, integrity, and 
guaranteed results are not appropriate for greenhouse gases such as 
CO2.
    Answer. A national greenhouse gas cap-and-trade system would 
necessarily be a far more complex, expensive, and intrusive system than 
the current sulfur emissions trading program, so one should be cautious 
about drawing conclusions from the experience of the sulfur-trading 
program. For example, SO2 permit trading has been limited to 
one source category (electric power generation plants) and gradually 
grew from 263 units in 1995 to over 2000 units today. SO2 
regulation in the 1970s and 1980s led to netting (allowing emissions 
reduction credits earned elsewhere in the plant to offset the increases 
expected from the expanded more modernized portion), banking 
(established procedures that allowed firms to store emission reduction 
credits for subsequent use in the bubble, offset, or netting programs), 
and bubbling (allowed existing sources to use emission reduction 
credits to satisfy their State Implementation Plan control 
responsibilities); each of which provided firms with increased 
flexibility in reducing emissions. Greenhouse gases, which are 
generated from numerous sectors, rather than dominated by one sector, 
are not presently at this stage.
    On February 14, 2002, in announcing both the Clear Skies and global 
climate change initiatives, President Bush explained why a different 
mitigation approach is needed for greenhouse gas emissions: ``[G]lobal 
climate change presents a different set of challenges and requires a 
different strategy. The science is more complex, the answers are less 
certain, and the technology is less developed. So we need a flexible 
approach that can adjust to new information and new technology.''
    Prior to that, in his March 13, 2001 letter to four senators, 
President Bush emphasized these same points and others: `` . . . I 
intend to work with the Congress on a multipollutant strategy to 
require power plants to reduce emissions of sulfur dioxide, nitrogen 
oxides, and mercury. . . . I do not believe that the government should 
impose on power plants mandatory emissions reductions for carbon 
dioxide, which is not a `pollutant' under the Clean Air Act. A recently 
released Department of Energy (DOE) Report, ``Analysis of Strategies 
for Reducing Multiple Emissions from Power Plants,'' concluded that 
including caps on carbon dioxide emissions as part of a multiple 
emissions strategy would lead to an even more dramatic shift from coal 
to natural gas for electric power generation and significantly higher 
electricity prices compared to scenarios in which only sulfur dioxide 
and nitrogen oxides were reduced.''
    The DOE report referred to by the President also found that 
emissions reductions of SO2 and NOX (reflecting 
current proposals) would have little impact on the nation's electricity 
costs. By contrast, including carbon dioxide would result in 
significant costs for the nation and American energy consumers, 
including: (1) raising the electricity ``resource cost of service'' by 
$20-30 billion annually; (2) increasing national electricity prices by 
39 percent to 42 percent by 2010; (3) raising natural gas prices by 55 
percent to 62 percent by 2010; and (4) lowering U.S. Gross Domestic 
Product by $60-84 billion (in 2010 alone). A July 2001 study by the 
Energy Information Administration revealed similar results, including 
national average electricity price increases of 25 percent to 40 
percent in 2010.

    Question 25. Given your personal experience with the very 
successful SO2 trading program to address acid rain, why 
would you not support a cap and trade approach for CO2?
    Answer. A national greenhouse gas cap-and-trade system would 
necessarily be a far more complex, expensive, and intrusive system than 
the current sulfur emissions trading program, so one should be cautious 
about drawing conclusions from the experience of the sulfur-trading 
program. For example, SO2 permit trading has been limited to 
one source category (electric power generation plants) and gradually 
grew from 263 units in 1995 to over 2000 units today. SO2 
regulation in the 1970s and 1980s led to netting (allowing emissions 
reduction credits earned elsewhere in the plant to offset the increases 
expected from the expanded more modernized portion), banking 
(established procedures that allowed firms to store emission reduction 
credits for subsequent use in the bubble, offset, or netting programs), 
and bubbling (allowed existing sources to use emission reduction 
credits to satisfy their State Implementation Plan control 
responsibilities); each of which provided firms with increased 
flexibility in reducing emissions. Greenhouse gases, which are 
generated from numerous sectors, rather than dominated by one sector, 
are not presently at this stage.
    In the case of SO2, Title IV of the Clean Air Act 
Amendments of 1990 provided for mandatory emission reductions of this 
criteria pollutant by 5 million tons per year compared to 1980 levels 
by 1995, and by another 5 million tons by 2000. As we anticipated 
during the negotiations leading up to the passage of the 1990 
Amendments, the SO2 trading program has been very effective 
in fostering cost effective compliance with the emission reduction 
requirements by the electric utility industry (which was the only 
sector regulated under Title IV).
    I note that there are other anthropogenic greenhouse gases, 
including methane, nitrous oxide, perfluorocarbons, hydrofluorocarbons 
and sulfur hexafluoride--and aerosol and black carbon emissions--that 
all contribute, in still uncertain ways, to the buildup of atmospheric 
greenhouse gases. On this point, I commend the recent study of the Pew 
Center on Climate Change.\4\ Among other things, the Pew Report finds: 
``Efforts to engage developing countries in climate mitigation will 
need to give even greater attention to the non-CO2 
greenhouse gases since these gases typically account for a higher 
percentage of their overall emissions. Non-CO2 gases 
currently account for well over one-half of the GHG emissions in Brazil 
and India, for example, as compared to 20 percent in the United States. 
. . . Modeling studies indicate that a cost-effective abatement 
strategy would focus heavily on the non-CO2 gases in the 
early years. . . . Including the abatement options available for these 
gases would reduce the carbon-equivalent price of the policy by two-
thirds from that needed if the same level of abatement were achieved 
only through reductions in CO2 emissions from fossil 
fuels.''
---------------------------------------------------------------------------
    \4\ ``Climate Impacts and Mitigation Costs of Non-CO2 
Gases,'' prepared by MIT professors Reilly, Jacoby and Prinn (February 
2003)
---------------------------------------------------------------------------
                                 ______
                                 
 Written Response to Additional Verbal Questions from January 8, 2003 
                 Hearing by Dr. James R. Mahoney, Ph.D.
    A number of questions arose during the January 8, 2003 Committee 
Hearing on Climate Change--Greenhouse Gas Reductions and Trading 
System. The following comments provide my further responses on these 
questions.

    1. European cap-and-trade system. Senator McCain inquired whether a 
carbon cap-and-trade system is currently active in Europe.
    There is not yet a European Union (EU)--wide carbon cap-and-trade 
system in place. In 2001, the European Commission proposed a European 
Union-wide greenhouse gas emission trading system. The European 
Parliament and the Council of European Union Environment Ministers have 
considered this proposal, but have not yet reached agreement on a legal 
framework (a Directive) for a cap-and-trade system.
    The Council has approved a draft cap-and-trade Directive that would 
cover carbon dioxide emissions from fixed large point sources starting 
in 2005 and would encompass about half of all carbon dioxide emissions 
in the EU. The European Parliament is expected to consider this plan 
later this year. There are several issues that remain to be worked out 
between the Parliament and the Council, including issues related to the 
method of allocation of permits, the inclusion of project-based 
mechanisms, and opt-in provisions for EU Member States to add 
additional gases or sectors to the trading regime. Following the 
issuance of any cap-and-trade Directive, EU Member States would decide 
on and take additional steps within their own borders to implement the 
Directive.
    Development of technology solutions. Senator McCain inquired about 
what the Administration is doing to develop technology related to 
climate change.
    The Administration has established a new management structure to 
integrate climate change science and technology activities across the 
Federal government. As part of this structure, Secretary Abraham 
established a supporting office, the Climate Change Technology Program 
(CCTP), within DOE and appointed a CCTP Director. A series of 
Interagency Working Groups will provide technical support to the CCTP, 
focusing on specific technical elements in energy production, energy 
efficiency, other greenhouse gases, sequestration, measurement and 
monitoring, and supporting basic research.
    The CCTP helps inventory, coordinate, and prioritize climate change 
technology R&D. The aim of the CCTP is to facilitate, through R&D, the 
meeting of both near- and long-term climate change goals by advancing 
technology development and spurring innovation.
    The President's FY 2004 Budget includes $1.2 billion in directly 
relevant climate change technology R&D and an additional $406 million 
in related R&D spending focused on achieving the President's near- and 
long-term climate change goals. (The CCTP is currently clarifying and 
prioritizing the inventory of Federal climate change technology R&D 
spending.) Much of the Federal funding, when executed, will be 
augmented by other funds from private sources, perhaps by as much as 
another $1 billion, through cost-shared R&D contracts. In addition, 
there are a number of significant privately funded activities, such as 
the Stanford University--based Global Climate and Energy Project.
    In addition, a Competitive Solicitation Program is planned as a 
central component of the President's National Climate Change Technology 
Initiative (NCCTI), operating within the CCTP. If funds are 
appropriated, the technology solicitations will be aimed at exploring 
innovative concepts, technologies and technical approaches that could 
contribute significantly to: (a) future reductions or avoidance of GHG 
emissions; (b) GHG capture and sequestration; (c) conversion of GHGs to 
beneficial use; and/or (d) enhanced monitoring and measuring of GHG 
emissions, inventories and fluxes in a variety of settings. The Program 
would augment the existing base of Federal R&D. Solicitations supported 
by this Program will be peer reviewed and optimized for maximum climate 
change benefit per R&D dollar spent.
    President Bush launched his Hydrogen Fuel Initiative in this year's 
State of the Union address. The goal is to work closely with the 
private sector to accelerate our transition to a hydrogen economy, both 
on the technology of hydrogen fuel cells and a fueling infrastructure. 
The President's Hydrogen Fuel Initiative and the FreedomCAR Partnership 
launched last year will provide $1.7 billion over the next 5 years to 
develop hydrogen powered fuel cells, a hydrogen infrastructure, and 
advanced automobile technologies, allowing for commercialization by 
2020.
    In February 2003, President Bush announced that the United States 
would sponsor, with international and private sector partners, a $1 
billion, 10-year demonstration project to create the world's first 
coal-based, zero-emissions electricity and hydrogen power plant. This 
project is designed to dramatically reduce air pollution and capture 
and store greenhouse gas emissions.
    In January 2003, President Bush committed the United States to 
participate in the largest and most technologically sophisticated 
research project in the world to harness the promise of fusion energy, 
the same form of energy that powers the sun. If successful, this $5 
billion, internationally-supported research project will advance 
progress toward producing clean, renewable, commercially-available 
fusion energy by the middle of the century. Participating countries 
include the United Kingdom, Russia, Japan, China, and Canada.

    2. Projected CO2 Emissions. Senator McCain referred to a 
quote by Deputy Commerce Secretary Samuel W. Bodman in a December 4, 
2002, article in the Wall Street Journal projecting a 12 percent 
increase in U.S. CO2 emissions from 2002 to 2012 under the 
President's plan. That quotation was inaccurately attributed by the 
Wall Street Journal to Deputy Secretary Bodman; it was a response I 
made to an inquiry regarding an estimate of how emissions of 
CO2 from the United States might change during the coming 
years.
    The Administration has adopted a target of decreasing greenhouse 
gas (GHG) emission intensity (emissions per unit GDP) by 18 percent 
from 2002 to 2012. A few numbers may put the 18 percent target into 
perspective. If the U.S. economy grows 30 percent by 2012 and the GHG 
emission intensity is reduced 18 percent, the GHG emissions would 
increase a net amount of only 6.6 percent. As another data point, an 18 
percent reduction in intensity would result in stable emissions if the 
economy grew 22 percent during the coming decade.

    3. Examples of international cooperation. Senator Wyden requested 
that I provide examples of international cooperation with the 
Administration's climate change program.

    Bilateral Agreements

    The Department of State has identified a priority set of countries 
and groups, representing nearly 80 percent of global emissions, with 
which to engage in strategic bilateral partnerships. The United States 
has already formalized cooperative bilateral arrangements with the 
following countries and groups from the priority set: Central America 
Countries, the European Union, Italy, Japan, China, Australia, New 
Zealand, Canada, India, Russian Federation, Mexico, and South Korea. 
For each of these, we are undertaking a range of scientific, technology 
and policy-related activities. We are working to ensure that these 
relationships will deliver real results, and demonstrate the U.S. 
commitment to working internationally to address the problem of climate 
change. Major bilateral activities over the past 10 months include:
    JAPAN: In September 2002, the High Level Consultation Working Group 
on Science and Technology (S&T) selected 13 projects for priority 
implementation. These projects focus on priority areas identified by 
the S&T Working Group. These include: improvements of climate models; 
impact and adaptation/mitigation policy assessment, employing emission-
climate-impact integrated models; observation and international data 
exchange and quality control; research on GHG sinks including land-use, 
land-use change and forestry; research on polar regions; and, 
development of mitigation and prevention technologies. Experts are also 
collaborating on issues relating to developing countries and market-
based approaches.
    AUSTRALIA: In July 2002 Australian Minister for the Environment and 
Heritage, Dr. David Kemp and Under Secretary of State Dobriansky and 
other U.S. participants in the US-Australia Climate Action Partnership 
(CAP) announced 19 projects in five areas: climate change science and 
monitoring; renewable and reduced emission stationary energy 
technologies; engagement with business on technology development, and 
policy design and implementation; capacity building in developing 
countries; and greenhouse accounting in the forestry and agriculture 
sectors.
    INDIA: The United States and India issued a Joint Statement on 
Climate Change in May 2002, announcing their intention to enhance 
ongoing collaborative projects in clean and renewable sources of 
energy, energy efficiency and energy conservation. India also suggests 
acceleration of support in fuel cells, photovoltaic technology, weather 
early warning systems and climate modeling, and research and technology 
development. This work is building on the extensive cooperation between 
India and the United States on climate change and clean energy. A 
working level delegation visited India on February 10-14, 2003 to 
identify specific cooperative projects and initiatives.
    EUROPEAN UNION: In 2002, high-level US-EU representatives 
considered specific areas for strengthened cooperation, including 
science and research, measurement, monitoring and verification of 
greenhouse gas emissions, and market-based incentives. They agreed to 
enhance cooperation on climate-related science and technology research. 
U.S. and EC research managers met in Washington in early February to 
advance these efforts.
    CENTRAL AMERICA: The United States and Central American countries 
have agreed to climate change collaboration under the auspices of the 
Central America-U.S. sustainable development partnership, CONCAUSA. A 
meeting for government focal points to explore and agree upon initial 
areas for cooperation took place in Panama City in January 2003. The 
first U.S. Government--sponsored programming is already planned in the 
form of workshops in April and May 2003, in Guatemala and El Salvador, 
respectively.
    CHINA: Following a year of diplomatic effort by the United States, 
China is showing increased interest in technical collaboration and 
policy discussion. Senior Climate Change Negotiator and Special 
Representative Harlan Watson led a delegation to Beijing in January 
2003 to discuss policy issues, and to identify collaborative activities 
on climate change science and technology. A Joint Statement between the 
United States and China was issued on January 16, 2003, identifying ten 
areas for cooperative research and analysis, including: non-
CO2 gases, economic/environmental modeling, integrated 
assessment of potential consequences of climate change, adaptation 
strategies, hydrogen and fuel cell technology, carbon capture and 
sequestration, observation/measurement, institutional partnerships, 
energy/environment project follow-up to the World Summit on Sustainable 
Development (WSSD), and existing clean energy protocols/annexes. The 
fourth meeting of the U.S.-China Working Group on Climate Change will 
take place in June 2003.
    RUSSIAN FEDERATION: The United States and Russia announced on 
January 17, 2003 the formation of the US-Russia Inter-Ministerial 
Climate Change Policy Dialogue. Dr. Watson has the interagency lead; 
Russia has identified Dr. A.I. Bedritsky, Head of RosHydromet, as their 
coordinator. Initial technical-level discussions will be held in April 
2003, in Moscow and will focus on climate change science and technology 
research issues.
    PLANNED ACTIVITIES: Discussions have been ongoing to establish 
bilateral relationships with a limited number of other key climate 
change partner countries, including Mexico. A diplomatic visit to 
Mexico City took place on March 17, 2003. We will continue to build on 
our existing partnerships, and are establishing milestones for success, 
which will include tangible results in addressing climate change. In 
many cases, cooperation with these countries will help us to pursue 
significant new science and technology initiatives that will benefit 
both the United States and our partner countries.
    Other International Research Cooperation Programs
    The U.S. participates in research in coordination with a great 
number of international programs and some of those programs are 
described below.
    GLOBAL SCALE PROGRAMS: Four programs address global scale research: 
(1) World Climate Research Programme (WCRP) for the physics and related 
chemistry of global change; (2) International Geosphere-Biosphere 
Programme (IGBP) for biology, chemistry and related geosciences of 
global change; (3) International Human Dimensions Program (IHDP); and 
(4) DIVERSITAS for integrative biodiversity science.
    REGIONALLY FOCUSED PROGRAMS: Three notable examples include: (1) 
the Inter-American Institute for Global Climate Change Research (IAI) 
is building scientific capacity and timely decision support resources 
in the Americas; (2) the Asia-Pacific Network (APN) promotes global 
climate change research in the Asia-Pacific region and strengthens the 
links between the science and policy making communities; and (3) the 
International Research Institute for Climate Prediction (IRI) issues 
climate outlooks tonations particularly vulnerable to climate 
variability phenomena such as El Nino and La Nina.

    4. International emissions intensity data. Senator Sununu requested 
that I provide examples of CO2 emissions intensity data from 
other countries.
    The table on the next two pages provides CO2 emissions 
data for the year 2000 from 44 countries, including the United States. 
In addition to gross emissions, emissions are given on a per-unit GDP 
basis using exchange rates, and a per-unit GDP basis using purchasing 
power parities.

                     Selected Energy Statistics for 2000--CO2 Emissions from Fuel Combustion

                                   Emissions
                                   Change in                    Emissions     Emissions Rank
                                    (Mt CO2)      Fraction    Rank per GDP   per GDP  (PPP*)       Change in
       Country* or Region          emissions       Rank of     (kg CO2 per   (kg CO2 per 1995    emissions  per
                                 per GDP (PPP)  Global Total    1995 US$)        US$ PPP)        GDP 1990-2000
                                    1990-2000

World                            23444          100.0%        0.69          0.56               -11.5%
                                 -15.2%
OECD***                          12449          53.1%         0.45          0.51               -10.9%
                                 -12.5%
United States                    5665           24.2% (1)     0.63          0.56               -14,9%
                                 -14.9%
Argentina                        130            0.6%          0.44          0.31               -15.4%
                                 -13.9%
Australia                        329            1.4%          0.73          0.70               -10.8%
                                 -10.7%
Azerbaijan                       28             0.1           6.94 (3)      1.36 (10)
Bahrain                          14             <0.1%         1.96          1.44 (8)           -29.5%
                                 -29.4%
Brazil                           303            1.3%          0.38          0.26               +18.8%
                                 +30.0%
Bulgaria                         43             0.2%          3.48 (9)      0.97               -30.8%
                                 -30.7%
Canada                           527            2.2% (8)      0.75          0.64               -6.9%
                                 -6.8%
China (PRC)                      2997           12.8% (2)     2.88          0.63               -49.4%
                                 -49.6%
Chinese Taipei                   215            0.9%          0.63          0.52               +5.0%
                                 +4.0%
France                           373            1.6%          0.21          0.28               -10.9%
                                 -11.3%
Germany                          833            3.6% (6)      0.31          0.44               -27.1%
                                 -27.0%
Gibraltar                        <1             <0.1%         0.92          1.00               +104.4%
                                 +100.0%
India                            937            4.0% (5)      2.01          0.42               -5.6%
                                 4.5%
Indonesia                        269            1.1%          1.29          0.47               +33.0%
                                 +34.3%
Iran                             292            1.2%          2.78          0.82               +23.0%
                                 +22.4%
Iraq                             77             0.33%         0.95          2.40 (1)           +93.9%
                                 +93.5%
Italy                            426            1.8% (10)     0.35          0.34               -9.0%
                                 -9.2%
Japan                            1155           4.9% (4)      0.20          0.37               -1.5%
                                 -1.6%
Kazakhstan                       123            0.5%          5.46 (5)      1.59 (7)
Korea, South                     434            1.8% (9)      0.70          0.67               +6.0%
                                 +6.1%
Korea, North                     167            0.7%          20.14 (1)                        +20.9%
Kuwait                           63             0.3%          2.33          2.13 (3)           +84.9%
                                 +83.6%
Libya                            39             0.2%          1.14          1.38 (9)           +58.3%
                                 +58.6%
Luxembourg                       8              <0.1%         0.33          0.43               -56.6%
                                 -56.6%
Mexico                           360            1.5%          0.96          0.44               -12.8%
                                 -12.8%
Netherlands                      177            0.8%          0.36          0.45               -16.8%
                                 -16.7%
Netherlands Antilles             3              <0.1%         1.21          1.25               +14.2%
                                 +14.7%
Poland                           293            1.2%          1.79          0.84               -40.6%
                                 -40.6%
Qatar                            35             0.1%          3.04          2.28 (2)           +55.1%
                                 +54.1%
Russia                           1506           6.4% (3)      4.21 (7)      1.35
Saudi Arabia                     261            1.1%          1.87          1.20               +23.8%
                                 +23.7%
South Africa                     296            1.3%          1.73          0.79               -1.7%
                                 -1.3%
Spain                            285            1.2%          0.40          0.40               +6.9%
                                 +7.0%
Syria                            52             0.2%          3.85 (8)      1.05               -3.5%
                                 -3.7%
Thailand                         147            0.6%          0.86          0.40               +22.9%
                                 +21.2%
Turkey                           204            0.9%          1.00          0.48               +22.9%
                                 +11.8%
Turkmenistan                     34             0.1%          4.78 (6)      1.86 (5)
Ukraine                          301            1.3%          6.79 (4)      1.72 (6)
United Arab Emirates             69             0.3%          1.39          1.30               +31.1%
                                 +31.3%
United Kingdom                   531            2.3% (7)      0.41          0.42               -24.2%
                                 -24.1%
Uzbekistan                       115            0.5%          9.57 (2)      2.09 (4)
Venezuela                        129            0.5%          1.61          0.96               +2.5%
                                 2.1%
Fed Rep of Yugoslavia            43             0.2%          3.27 (10)
Former USSR                      0.5%           4.35          1.36          +4.3%
                                 +6.3%

* The country list includes the top ten CO2 emitters for each of the four categories (i.e., fracation of global
  total emissions, emissions per GDP, and emissions per GDP (PPP)) and all countries that emitited more than 125
  Mt of CO2 during 2000.
** PPP is Purchasing Power Parities; other GDP-based values use Exchange Rates.
*** OECD (Organization for Economic Co-operation and Development): Australia, Austria, Belgium, Canada, Czech
  Republic, Denmark, European Communities, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,
  Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Span,
  Sweden, Switzerland, Turkey, United Kingdon, United States.
Sources: International Energy Agency (2002) CO2 Emissions from Fuel Combustion, 1971-2000, 2002 edition. OECD,
  Paris; http://www.iea.org/.

                                 ______
                                 
APPENDIX 1. Examples of GHG Emission Reduction Initiatives of the 
        Administration
Fuel Economy

    In December 2002 the Department of Transportation's National 
Highway Traffic Safety Administration (NHTSA) announced it would seek 
to increase fuel economy standards for light trucks covering model 
years (MY) 2005 through 2007, saving approximately 2.5 billion gallons 
of gas over the life of these trucks. That action marked the first 
proposed change to fuel economy standards in many years. The proposed 
increase of 1.5 mpg (from 20.7 mpg to 22.2 mpg) during this 3-year 
period more than doubles the increase in the standard that occurred 
between MYs 1986 and 1996, when it increased from 20.0 mpg to 20.7 mpg. 
The proposal to establish new fuel economy standards for light trucks 
is just one component of the Administration's comprehensive approach to 
improving vehicle fuel economy.
Tax Incentives for Hybrid and Fuel Cell Vehicles and Renewable Energy

    To encourage Americans to buy more fuel-efficient vehicles, the 
President has proposed tax incentives for the purchase of hybrid ($4000 
credit) and fuel cell ($8000 credit) vehicles through 2007. To advance 
and accelerate the development of even more fuel-efficient vehicles in 
the future, the Administration is also funding and working with 
partners (research universities and the private sector) to leverage 
resources for research and development of new vehicle and fuel 
technologies, including the new hydrogen fuel cell vehicles.
    The President's 2004 budget request continues to seek funding to 
provide incentives for renewable energy sources, as outlined in his May 
2001 National Energy Policy. These incentives include tax credits for 
the purchase of hybrid and fuel cell vehicles, for residential solar 
heating systems, for energy produced from landfill gas, for electricity 
produced from alternative energy sources such as wind and closed-loop 
biomass, and for combined heat and power systems. These incentives are 
subsidies provided through the tax system that constitute $552 million 
of the $4.4 billion in expenditures planned for climate change in FY 
2004. The five and ten-year projections for these tax expenditures are 
$4.2 billion and $5.7 billion, respectively.
Voluntary Business and Industry Initiatives

    Secretaries Abraham and Veneman, Administrator Whitman and Deputy 
Secretary Jackson announced the President's Climate VISION program on 
February 12, 2003. They recognized the significant initiatives that 
major, energy-intensive sectors of the American economy are now 
undertaking to meet the President's challenge. These initiatives build 
upon the progress made by the industrial sector in the past decade; 
from 1990-2001, while the economy grew by almost 40 percent, greenhouse 
gas emissions in the industrial sector were constant. This event marked 
the beginning of a robust partnership between the public and private 
sector that will assure that these initiatives are effectively 
implemented and additional strategies are developed to yield cost-
effective emissions reductions. Examples of the Climate VISION Program 
initiatives include:

    The Business Roundtable's (BRT) Climate RESOLVE 
        (Responsible Environmental Steps, Opportunities to Lead by 
        Voluntary Efforts) initiative will mobilize the resources and 
        expertise of its 150 member companies to enhance their 
        voluntary actions to reduce the greenhouse gas intensity of the 
        American economy. The BRT has committed to achieving 100 
        percent participation of its members in initiatives to reduce, 
        avoid, offset or sequester emissions. These companies 
        collectively generate one-third of the United States' Gross 
        Domestic Product. Climate RESOLVE is one initiative that 
        reaches across industries and sectors to encourage voluntary 
        efforts to manage greenhouse gas emissions by many of the 
        nation's largest companies.

    The American Petroleum Institute (API), whose members 
        represent over 60 percent of U.S. petroleum refining capacity, 
        is committed to increasing aggregate energy efficiency of 
        members' U.S. refinery operations by 10 percent from 2002 to 
        2012. This goal will be met through reduced gas flaring and 
        other energy efficiency improvements, expanded combined heat 
        and power facilities, increased by-product utilization, and 
        reduced carbon dioxide venting. API will also aim for 100 
        percent participation in EPA's Natural Gas Star program and in 
        federal Combined Heat and Power (CHP) programs. API members 
        will develop greenhouse gas management plans to identify and 
        pursue opportunities to further reduce emissions.

    The Edison Electric Institute (EEI) and six other power 
        sector groups, representing 100 percent of U.S. electricity 
        generation, formed the Electric Power Industry Climate 
        Initiative (or EPICI) to reduce the sector's carbon intensity. 
        Other EPICI members include the National Rural Electric 
        Cooperative Association, the Nuclear Energy Institute, the 
        American Public Power Association, the Large Public Power 
        Council, the Electric Power Supply Association, and the 
        Tennessee Valley Authority. By May 2003 a formal memorandum of 
        understanding between EPICI and DOE will be signed, pledging 
        the industry to reduce the power sector's carbon impact in this 
        decade by the equivalent of 3 percent to 5 percent, through 
        increased natural gas and clean coal technology, increased 
        nuclear generation, offsets, and expanded investment in wind 
        and biomass projects.

    Expected initiatives include reforestation in the lower Mississippi 
River valley (UtiliTree II), increased use of coal combustion 
byproducts (C2P2), and expanded use of wind and biomass (Harvesting the 
Wind, etc.). The Edison Electric Institute is also working with DOE to 
develop the Power Partners Resource Guide, a Web-based tool to help 
companies reduce greenhouse gas emissions intensity.

    The National Mining Association (NMA), representing 
        producers of 70 percent of the nation's primary electricity 
        fuels, is committed to achieving a 10 percent increase in the 
        efficiency of those systems that can be further optimized with 
        processes and techniques developed by DOE and made available 
        through the pending NMA-DOE Allied Partnership. The commitment 
        includes steps to recover additional coal mine methane, 
        expansion of land reclamation and carbon sequestration efforts 
        and coal and mining research. For example, technology developed 
        through DOE partnerships is projected to further reduce 
        greenhouse gas emissions by one million metric tons annually 
        by, 2012.

    The Portland Cement Association (PCA), in cooperation with 
        the Department of Energy and the Environmental Protection 
        Agency, has committed to reduce carbon dioxide emissions by 10 
        percent per ton of cement from a 1990 baseline by 2020. The 
        Association and its members who represent more than 95 percent 
        of U.S. cement production have adopted a three part program to 
        achieve the goal that focuses on enhancements to the production 
        process, the product itself and how the product is applied.

    The American Iron and Steel Institute (AISI) 33 member 
        firms, representing nearly three-quarters of the nation's 
        steel-producing capacity, have committed to achieving a 10 
        percent increase in sector-wide average energy efficiency by 
        2012 from 1998 levels. The improvements will come both in steel 
        making efficiency and industry restructuring. In addition, the 
        industry will continue to produce new steel products that 
        enable efficiency gains to industry customers.

    The Semiconductor Industry Association (SIA), in 
        partnership with the Environmental Protection Agency, has 
        committed to reduce a suite of the most potent greenhouse gas 
        emissions by 10 percent from 1995 levels by the end of 2010. 
        The SIA agrees to this goal on behalf of 22 semiconductor 
        manufacturers that account for over 70 percent of this sector's 
        HFC, PFC and SF6 ``perfluorocompound'' emissions. EPA estimates 
        that this goal will reduce emissions by over 13.5 MMTCE in the 
        year 2010, or the equivalent of eliminating greenhouse gas 
        emissions from 9.6 million cars. Perfluorocompounds are among 
        the most potent and persistent of all global warming gases and 
        are used to clean semiconductor manufacturing equipment and to 
        etch silicon wafers to create circuitry patterns. These 
        perfluorocompounds have, on average, 10,000 times the global 
        warming potential of carbon dioxide over 100 years, plus, they 
        can persist in the atmosphere from 2,000 to 50,000 years

    The Magnesium Coalition and the International Magnesium 
        Association. Partner companies in the Environmental Protection 
        Agency's SF6 Emission Reduction Partnership for the Magnesium 
        Industry have committed to eliminate sulfur hexafluoride (SF6) 
        emissions from their magnesium operations by 2010. SF6 is the 
        most potent greenhouse gas known today; more than 23,000 times 
        as strong as the most common man-made greenhouse gas, carbon 
        dioxide. The partner companies committed to eliminating SF6 
        emissions represent 100 percent of U.S. primary magnesium 
        production and approximately 80 percent of U.S. magnesium 
        casting and recycling. The industry's action will reduce 
        overall U.S. SF6 emissions in 2010 by an estimated 20 percent 
        and will have a climate benefit equivalent to eliminating 
        greenhouse gas emissions from more than one million cars.

    The American Chemistry Council (ACC), representing 90 
        percent of the chemical industry production in the US, has 
        agreed to an overall greenhouse gas intensity reduction target 
        of 18 percent by 2012 from 1990 levels. ACC will measure 
        progress based on data collected directly from its members. 
        Activities include increased production efficiencies, promoting 
        coal gasification technology, increasing bio-based processes, 
        and, most importantly, developing efficiency-enabling products 
        for use in other sectors, such as appliance transportation and 
        construction.

    The Aluminum Association, in partnership with the 
        Environmental Protection Agency and the Department of 
        Commerce's National Institute of Standards and Technology, has 
        committed to reduce sector-wide greenhouse gas emissions. 
        Through one of the first voluntary partnerships with EPA in 
        1995, the Voluntary Aluminum Industry Partnership (VAIP) 
        reduced perfluorocarbon (PFC) emissions in 2000 by over 45 
        percent compared to 1990 levels. The VAIP has committed to 
        further reduce PFC emissions by 2005. This year the industry 
        will collaborate with EPA to identify additional greenhouse 
        reductions for multi-gas voluntary reductions. This broadened 
        commitment will enable the industry to make additional 
        reductions through multiple pathways such as energy efficiency 
        and recycling in the most cost-effective and efficient manner.

    The Association of American Railroads (AAR), in 
        consultation with the Department of Transportation, has 
        committed to reducing the transportation-related greenhouse gas 
        intensity of their Class 1railroads by 18 percent in the next 
        decade.

    The Alliance of Automobile Manufacturers (AAM), whose 
        members account for over 90 percent of U.S. vehicle sales, has 
        agreed to reduce greenhouse gas emissions from its members' 
        manufacturing facilities by at least 10 percent by 2012, based 
        on U.S. vehicle production from a 2002 baseline. Activities 
        toward this goal include installing energy efficient lighting, 
        converting facilities' coal and oil power sources to cleaner 
        natural gas, and upgrading ventilation systems.

    The American Forest and Paper Association (AF&PA), in 
        consultation with the United States Department of Agriculture, 
        is committed to reduce their greenhouse gas intensity by 12 
        percent by 2012 relative to 2000. Specific actions include the 
        enrollment of 114 million acres in the Sustainable Forestry 
        Initiative program, the largest sustainable forestry program in 
        the world. AF&PA members also have a strong commitment to 
        recycling and expect fiber recovery rates of at least 50 
        percent, avoiding methane emissions in landfills and increasing 
        carbon storage. The industry will continue to lead all 
        manufacturing sectors in on site electricity generation, 
        deriving over half of its energy needs from renewable energy 
        and biofuels and in many cases supplying supplemental 
        electricity to the surrounding power grid.

    Of these initiatives, President Bush stated: ``I commend these 
initiatives which will help these businesses and industries continue to 
improve their energy efficiency and overall productivity, while 
contributing toward achieving our goal to reduce the greenhouse gas 
intensity of the American economy. As I said last year, every sector of 
the economy will need to contribute to our efforts to achieve our 
ambitious national goal. These initiatives are a first step in what we 
expect to be an ongoing engagement with these and other sectors of our 
economy in the years ahead. . . .''
                                 ______
                                 
   Response to Written Questions Submitted by Hon. John F. Kerry to 
                            Eileen Claussen
    Question 1. If U.S. companies take steps to reduce greenhouse gas 
emissions, won't it help them compete in the international marketplace?
    Answer. Yes. In the short term, the U.S. withdrawal from Kyoto and 
the failure to undertake serious emissions reduction in the U.S. may 
result in a competitive advantage for U.S. firms: they will not face 
greenhouse gas mitigation costs while their competitors in Europe, 
Japan and other developed countries will. However, any short-term 
advantage will likely be far outweighed by the long-term competitive 
disadvantages. First, U.S. firms will not benefit from the improved 
efficiencies, particularly in energy use, that typically result when a 
company undertakes to reduce its emissions. Our review of companies 
with voluntary greenhouse gas targets found that most realized 
substantial energy and operational efficiency improvements--and, in 
some cases, significant cost savings. Second, without a strong market 
signal for emissions reduction, U.S. firms will have little incentive 
to develop the kinds of technologies we and the rest of the world need 
to make the long-term transition to a low-carbon economy. Firms in 
other developed countries, however, will have that incentive and 
therefore will be much better positioned to capture the growing global 
market for clean energy technologies. So, both in terms of operational 
efficiencies and in terms of market positioning, emissions reduction 
will likely result in significant long-term competitive advantage for 
U.S. firms.

    Question 2. Given our experience in the SO2 cap and 
trade program, and the growing interest in international trading, what 
is the likely effect on the U.S. economy of capping and trading 
greenhouse gas emissions?
    Answer. The emissions trading program for SO2 under 
Title IV of the 1990 Clean Air Act Amendments has been the most 
successful, largest and best known demonstration of emissions trading. 
Estimates of the savings due to emissions trading compared to 
traditional command and control regulation have been up to 57 percent, 
or $20 billion over the 13 years (1995-2007) of the program. Emissions 
permits prices have ranged from $75-200 per ton, compared to prior 
estimates of control costs of $500-1000 per ton. Transaction costs have 
been low (<0.5 percent of the trading price), and there has been a 
lively market for permits and futures. Emissions trading for greenhouse 
gases (GHGs) is expected to yield even greater savings due to the 
greater diversity in abatement costs from various sectors and 
technologies which could provide even greater gains from trade. In 
addition, local environmental concerns are also not an issue as they 
are with SO2, so there can be greater flexibility to trade 
greenhouse gases globally, finding the cheapest abatement 
opportunities. Also, given the long timescale of warming, temporal 
flexibility (i.e., through banking and borrowing emissions credits) can 
be incorporated without compromising environmental results and can thus 
yield lower costs.
    The leading economic-climate models estimate considerable gains 
from GHG trading, with reductions in the marginal abatement cost ($/
ton) of 18-50 percent, reduction in overall costs of 15-75 percent, and 
limited impacts on GDP. Differences between these models include 
assumptions regarding the baseline emissions (and hence required 
reductions), the rate of technological change, the use of flexibility 
mechanisms (non-CO2 greenhouse gases, trading, 
sequestration, etc.), estimates of future energy resources, and the 
economy's flexibility in switching to lower carbon products and 
services.
    The Climate Stewardship Act of 2003 (S. 139) incorporates many 
important flexibility mechanisms such as trading (among sectors, gases, 
and countries), credit for early reductions, and banking and borrowing 
of emission reduction credits. While a comprehensive assessment of 
projected costs of the bill has not been completed, a recent RFF 
analysis finds that, based on available cost-effective reductions in 
the 2010 time frame, the net costs of the program could be less than 1/
10th of 1 percent of the GDP. The authors state, ``The broad coverage 
and flexibility of the trading program make this bill one of the most 
cost-effective domestic proposals to date (even more so than the EU 
trading system).''

Sources: A. Denny Ellerman, Richard Schmalensee, Paul L. Joskow, Juan 
    Pablo Montero, and Elizabeth Bailey. 2000. Markets for Clean Air: 
    The U.S. Acid Rain Program. Cambridge, UK: Cambridge University 
    Press.
Jae Edmonds J., M, Scott, J. Roop and C. MacCracken. International 
    Emissions Trading and Global Climate Change: Impacts on the Cost of 
    Greenhouse Gas Mitigation. The Pew Center on Global Climate Change, 
    December 1999.
William Pizer and Ray Kopp. Summary and Analysis of McCain-Lieberman--
    Climate Stewardship Act of 2003. Resources for the Future. January 
    2003.

    Question 3. From your knowledge of international efforts, how have 
other countries benefited from carrying out greenhouse gas reduction 
strategies similar to the ones you have outlined in your testimony?
    Answer. Most industrialized countries anticipate employing some 
form of emissions trading as a component of their overall climate 
change strategies. The most ambitious of the trading systems being 
implemented or under development is the regional system nearing final 
approval by the European Union. This system will encompass all the 
member states of the European Union (including the ten approved for new 
membership in 2004), which have a combined economy larger than that of 
the United States. Like other governments, the European Union favors 
emissions trading because past experience--including the highly 
successful sulfur dioxide trading program in the United States--
demonstrates that a well-designed trading program can substantially 
reduce the cost of meeting a given emissions target. As the EU trading 
system is not yet in operation, these benefits are yet to be realized. 
However, economic analyses performed during the design of the EU system 
projected that it would reduce the cost to member states of meeting 
their Kyoto targets by as much as 35 percent. This amounts to a savings 
to the members states of approximately $1.3 billion euros a year.(1)

    Question 4. One of the rationales given by the Bush Administration 
for rejecting any measures to require actual reductions in greenhouse 
gas emissions is that these will result in enormous costs to the U.S. 
economy, to the point that no mandatory requirements are acceptable. 
James Connaughton's testimony last July stated that compliance with 
Kyoto would cost the United States $400 billion and 4.9 million jobs. 
Do you agree with this assessment?
    Answer. We do not agree with Mr. Connaughton's estimate of the cost 
of compliance with the Kyoto Protocol. Furthermore, because the limits 
and timeframes used by the Climate Stewardship Act are much less 
stringent than those of the Kyoto Protocol, we would expect the cost of 
complying with the bill to be much less than that of the Kyoto 
Protocol.
    Mr. Connaughton's assertion of very high compliance costs for the 
U.S. meeting its Kyoto target was primarily based on a study requested 
by the U.S. House of Representatives Committee on Science and published 
by the DOE's Energy Information Administration (EIA)--Impacts of the 
Kyoto Protocol on U.S. Energy Markets and Economic Activity in October 
1998. This analysis relied on the EIA's NEMS model and makes rather 
draconian assumptions. In comparison with other climate-economic 
models, the NEMS model is considered to be conservative on a number of 
key modeling parameters:

    Baseline emissions--NEMS projects relatively high business-
        as-usual emissions and hence requires a greater reduction 
        effort.

    Technological change--based on experience with other 
        environmental programs, induced technological change is 
        expected to be perhaps the greatest driver of low cost GHG 
        emission reductions and yet NEMS is pessimistic about the rate 
        of cost reductions of new technologies that climate policy will 
        generate through accelerated innovation.

    Substitution of inputs--the U.S. economy is flexible and 
        can respond to changes in input prices. NEMS restricts the 
        substitution capabilities of both producers and consumers in 
        comparison to historical experience, which can increase 
        compliance costs by 100 percent.

    In addition to these shortcomings of the NEMS model, the analysis 
relied upon by Mr. Connaughton omitted several key components of a 
flexible and cost effective reduction of GHGs:

    International emission trading--a plethora of very 
        inexpensive reduction options are available on a global basis, 
        and Kyoto and any likely domestic program would incorporate 
        trading;

    Non-CO2 GHGs--due to their high potency and 
        historic lack of control efforts, other GHGs (methane, 
        N2O, and the range of industrial GHGs (HFC, PFCs and 
        SF6)), represent considerable low cost reduction 
        opportunities; and

    Sequestration (carbon storage) opportunities are not 
        accounted for.

    The EIA analysis also assumes that entities facing steep reductions 
take no action in anticipation of the policy's start date. It also 
ignores any benefits of climate change mitigation policy (both monetary 
and nonmonetary), through avoidance of environmental and health 
impacts.
    Finally, there are additional factors that could also limit or 
offset the economic impact of GHG reductions:

    Revenue recycling--using proceeds from emissions trading 
        permit revenues to alleviate especially hard-hit sectors (as is 
        done under the Climate Stewardship Act) or to improve the tax 
        system;

    Ancillary benefits such as reduced local air pollution or 
        increased energy security (due to less reliance on foreign 
        energy imports); and

    Reducing non-price barriers to efficiency and technological 
        development,

    Considering only the modeling parameters and the omitted 
flexibility mechanisms, other analyses (EMF, 1999) of the U.S. meeting 
its Kyoto targets gives carbon prices of between $10-80 / ton carbon, 
representing costs on the order of $25-80 billion or 0.1-0.8 percent of 
GDP. Similarly, any impact on employment would be equivalently much 
less harsh, and even further mitigated by support to the hardest hit 
sectors. Some commentators (Barrett and Hoerner, 2002) have even 
suggested that under an emission trading regime the innovative US 
economy would generate more jobs in new technologies than would be lost 
in existing technological sectors.
    Finally, it is unclear whether cost projections regarding the Kyoto 
Protocol are even relevant, given the Administration's decision not to 
pursue ratification. Like the Climate Stewardship Act, any likely 
domestic program will incorporate less strict targets and timetables 
and flexibility options that permit more cost-effective reductions over 
a longer timeframe.

Sources: Weyant J. and Hill J. [Eds] (1999), The Costs of the Kyoto 
    Protocol: A Multi-Model Evaluation, Special Edition of the Energy 
    Journal.
James P. Barrett J., A. Hoerner, S. Bernow and B. Dougherty (2002) 
    Clean Energy and Jobs: A comprehensive approach to climate change 
    and energy policy, Economic Policy Institute.
Edmonds J., M, Scott, J. Roop and C. MacCracken. 1999, International 
    Emissions Trading and Global Climate Change: Impacts on the Cost of 
    Greenhouse Gas Mitigation. The Pew Center on Global Climate Change, 
    December 1999.
Jaffe A. and R. Stavins (1995) Dynamic Incentives for Environmental 
    Regulations: The Effects of Alternative Policy Instruments on 
    Technology Diffusion, Journal of Environmental Economics and 
    Management, Vol. 29 S43-S63.

    Question 4a. Are you aware of any examples where requirements to 
address pollution either had little negative impact on the economy, or 
even provided areas for economic growth?
    Answer. A number of environmental regulations have been found to be 
cost-effective, considering the benefits to health and welfare, 
ecosystems, etc. of reduced pollution. These include regulations 
cutting back on lead in drinking water and gasoline and several toxic 
and criteria air pollutants. For welfare (health) and environmental 
costs, a good example is the SO2 trading system under Title 
IV of the 1990 Clean Air Act Amendments. This program has spurred 
benefits that are 6 times its cost, largely through reductions in 
health impacts and mortalities. And of course, the SO2 
trading programs has very significant but non-monetized savings from 
reduction in forest damage from acid rain. In addition, required 
reporting under EPA's Toxic Release Inventory program yielded dramatic 
cuts in emissions with little effort or cost.
    Studies of states with strong environmental programs have supported 
the conclusion that strong environmental policies do not come at the 
expense of a sound economy.
    Finally, the experience of many U.S. firms that have undertaken GHG 
reductions is that they have found significant cost savings from 
exploitation of efficiency opportunities or redesign of production 
processes.

Source: Stavins R. (2000), ``Experience with Market-Based Environmental 
    Policy Instruments'', RFF Discussion Paper 00-09, January 2000, 
    Washington, D.C.
Templet, P.H., The Positive Relationship between Jobs, Environment and 
    the Economy: An Empirical Analysis, Spectrum (Journal of the 
    Council of State Governments), Spring Issue 1995, pp. 37-49.

    Question 4b. Are there really no mandatory measures to reduce GHGs 
that can be undertaken without adverse impact--and potentially with a 
positive impact--on our economy?
    Answer. There are a range of measures to reduce GHGs that would 
entail zero impact or even benefit the US economy--at least at the 
level of modest reductions. Many of these revolve around energy 
efficiency. A major study (Interlaboratory Working Group, 2000) 
commissioned by the DOE, found a range of public policies that improved 
energy efficiency with overall economic benefits. The study's key 
conclusions were:
    ``Smart public policies can significantly reduce not only carbon 
dioxide emissions, but also air pollution, petroleum dependence, and 
inefficiencies in energy production and use. A range of policies 
exist--including voluntary agreements; efficiency standards; increased 
research, development, and demonstration (RD&D); electric sector 
restructuring; and domestic carbon trading--that could move the United 
States a long way toward returning its carbon dioxide emissions to 1990 
levels by 2010. Additional means would be needed to achieve further 
reductions, such as international carbon trading and stronger domestic 
policies. The overall economic benefits of these policies appear to be 
comparable to their overall costs or such policies could produce direct 
benefits, including energy savings that exceed their direct costs 
(e.g., technology and policy investments).''
    On a company level, firms involved with the Pew Center have found 
that by simply conducting inventories of their GHG emissions or energy 
use they have found many opportunities to increase efficiency and save 
money. At least at the early stages, reduction opportunities appear to 
be cost-effective or low-cost propositions.

Sources: Interlaboratory Working Group (2000). Scenarios for a Clean 
    Energy Future (Oak Ridge, TN; Oak Ridge National Laboratory and 
    Berkeley, CA; Lawrence Berkeley National Laboratory), ORNL/CON-476 
    and LBNL-44029, November 2000.
Michael Margolick and Doug Russell, Corporate Greenhouse Gas Reduction 
    Targets, The Pew Center on Global Climate Change, November 2001.

    Question 4c. Won't U.S. industries be at a disadvantage if other 
countries develop more environmentally efficient technologies?
    Answer. Yes, without a market for lower emitting technologies, even 
generous R&D will not enable the U.S. to remain well positioned in the 
race to commercialize new energy and GHG emission related technologies. 
Only with commercial development and use can the powerful forces of 
incremental innovation and learning-by-using improve the cost and 
performance of these new technologies. The European Union (EU) 
finalized the agreement for a Renewable Directive in September 2001. 
The directive sets goals of doubling the renewable energy share of 
total energy consumption in the EU to 12 percent by 2010, and 
increasing the renewable energy share of electricity generation from 14 
percent in 2001 to 22 percent in 2010. Individual countries are doing 
even better. Denmark, for example, has one of the most mature wind 
power markets in the world and already meets an estimated 12 percent of 
its total electricity demand with wind energy.
    Similarly, in the EU, Japan and Canada, technological improvements 
are being enabled by price supports and market barrier removal in a 
host of key technologies. These include fuel cells, hybrid vehicles, 
combined heat and power, methane recovery from landfills, distributed 
generation, geological sequestration, agricultural practices, energy 
sensors and real-time control, and energy efficiency in buildings.
    While R&D technology development programs can be helpful, domestic 
policies that reduce GHGs would be an essential catalyst and ensure the 
existence of markets for innovative, low-emitting technologies.

    Question 5. One area that has received little attention from this 
Administration is the relationship of automobile emissions and climate 
change. Yet emissions from cars, trucks and other mobile sources 
contribute significantly to overall U.S. emissions of carbon dioxide. 
To what extent must an effective plan to address climate change in the 
U.S. address mobile source emissions?
    Answer. Given its size and rate of growth, it is hard to imagine a 
serious GHG mitigation strategy that would exempt the U.S. 
transportation sector. Over the past several decades, transport 
CO2 emissions have grown faster than those of any other 
sector. Today, U.S. transportation accounts for over one quarter of 
U.S. greenhouse gas emissions, and this share is expected to rise to 36 
percent by 2020. U.S. transportation is also a major emitter on a 
global scale. Each year it produces more CO2 emissions than 
any other nation's entire economy, except China.

    Question 5a. Would CAFE standards that increased fuel economy be a 
sound approach? If not, why not?
    Answer. One approach for reducing greenhouse gas emissions is to 
set efficiency standards for products such as cars--as long as the 
levels and timing of the standards are reasonable. In 2002, the 
National Academy of Sciences found that passenger car fuel economy 
could most likely be increased by 12 percent (for subcompacts) to 27 
percent (for large cars) and light truck fuel economy by 25 (small 
SUVs) to 42 percent (large SUVs), using technologies that would not 
change the size, weight or performance of vehicles. While many of these 
technologies would increase the vehicle's price, fuel savings would 
more than pay back their cost over the life of the vehicle. The Academy 
also concluded that giving auto manufacturers adequate lead time was 
important. The Academy and others have suggested that the CAFE program 
could be improved by establishing a fuel economy credit trading program 
among manufacturers. A company that surpasses the standard could sell 
fuel economy credits to a company that did not meet the standard. This 
would allow a standard to be met at the lowest possible cost on an 
industry wide basis.

    Question 5b. What other approaches might the U.S. consider?
    Answer. Numerous approaches are possible. The approach taken by the 
Climate Stewardship Act is to require oil producers to surrender GHG 
allowances proportional to the carbon content of the fuel they sell. 
However, it is not clear how effectively such an approach would pull 
lower-emitting vehicles into the market. Thus the Climate Stewardship 
Act alsorewards a vehicle manufacturer that exceeds CAFE standards with 
emission credits it can sell in the market.
    Another approach is to establish federal greenhouse gas standards 
for automobiles. In the context of an economy wide GHG cap and trade 
program, the CAFE standards or GHG emission standards could be made 
``tradeable''--auto companies could sell GHG emissions credits if they 
surpass fuel economy standards, and could buy credits if they were 
unable or unwilling to meet the standards.
    Another option is to replace current fuel economy regulations with 
a system of fees and rebates to discourage low-mpg and promote high-mpg 
vehicles. In theory, these feebates should harmonize the interests of 
car buyers and manufacturers. Other creative pricing policies include 
``variabilizing'' some of the fixed costs of vehicle travel by 
converting annual fees and charges into surcharges on motor fuels, 
providing consumers with the opportunity to reduce driving costs by 
driving less. One such idea is ``pay-at-the-pump'' auto insurance, 
where a minimum required amount of insurance (e.g., basic liability) is 
paid for by all via a surcharge on gasoline or diesel fuel.
    There is a whole set of options in the context of the 
reauthorization of the federal highway bill. In partnership with state 
and local actions, federal funding could be used to encourage more 
climate-friendly fuels, vehicles, transportation modes, and ``smart 
growth.''
    Finally, a major initiative to shift the transportation sector to 
low carbon fuel--most likely hydrogen--may be the most important 
solution in the long term. The President's recent announced hydrogen 
initiative is a positive step and one that should be taken immediately. 
However, the President's program would complement, not be substitute 
for, near-term actions to reduce greenhouse gas emissions. In fact, 
measures that focus economic actors on greenhouse gas reduction will 
hasten the transition to a hydrogen economy.

    Question 5c. How would the draft McCain/Lieberman bill trading and 
verification procedures work with respect to emissions from mobile 
sources?
    Answer. Trading and verification procedures are relatively simple 
compared to other forms of environmental regulation. Because the 
requirement to hold allowances is placed on oil refiners, current 
reporting of fuel sales would continue, with the added requirement of 
reporting fuel carbon content, which is relatively straightforward. The 
option for auto efficiency credits would also be relatively 
straightforward, given the small number of vehicle manufacturers, the 
existing requirement that they track and report their fuel economy, and 
the ease of converting this information into GHG emission estimates.

    Question 6. Ms. Claussen, the U.S. is being chastised 
internationally for repudiating the Kyoto Protocol, in particular, and 
stepping away from our leadership role in addressing climate change, in 
general. What should our approach be in the international negotiations 
over climate change? How would this draft bill fit into that approach?
    Answer. The most important step the U.S. can take to establish a 
leadership role on climate change is to demonstrate to the 
international community that it is taking concrete action to begin 
reducing its greenhouse gas emissions. Enactment of this bill would 
send a very strong signal that the U.S. not only recognizes its 
responsibilities as the world's largest greenhouse gas emitter but has 
established a comprehensive national framework that puts it on the path 
toward meeting that responsibility.
    At the same time, the U.S. must make clear to other nations that it 
is prepared to work with them toward establishing a workable, binding 
international framework that ensures that all major emitting 
countries--both developed and developing--do their fair share toward 
meeting this challenge. It is too late at this point to contemplate 
U.S. participation in the first commitment period (2008-2012) under the 
Kyoto Protocol. Rather, the U.S. and other nations should begin 
discussions now with the goal of modifying Kyoto or arriving at a 
successor agreement for the period after 2012. When some developed 
countries tried to initiate such discussions at COP 8 in Delhi, the 
U.S. was among those opposed. Hopefully, at COP 9 this fall in Italy 
the U.S. can play a more constructive role.
    In short, the two overriding objectives of U.S international policy 
on climate change should be to demonstrate concrete action to reduce 
U.S. emissions and to engage in meaningful discussions with other 
nations to set the stage for the negotiation of a binding long-term 
agreement that encompasses all major emitting countries.

    Question 7. As you may know, the state of Massachusetts was the 
first state to initiate a mandatory cap on CO2 emissions 
from its six highest-emitting power plants, and plans to reduce their 
emissions further. In addition, Oregon has placed CO2 limits 
on new power plants. Given the potential for a patchwork of state 
carbon cap and trade programs, what role could the federal government 
play?
    Answer. States are acting because of the absence of federal 
leadership. Enacting a reasonable federal greenhouse gas program, such 
as the Climate Stewardship Act, in consultation with states, is the 
best way for the federal government to avoid a patchwork of state 
carbon cap and trade programs. Provisions for credit for early action, 
as are included in the Climate Stewardship Act, would give credit to 
companies who had already taken action under state programs, thereby 
harmonizing a new federal effort with early state efforts. Nothing in 
the bill prohibits states from taking additional actions.

    Question 7a. What roles are particularly appropriate for the 
states?
    Answer. There is significant overlap between states' energy, 
economic development, and environmental goals, and states have numerous 
authorities that are relevant to greenhouse gas emissions and 
sequestration. Examples include transportation planning and project 
selection, electric utility siting and performance, conventional air 
pollution, and rural development. Many states have already begun to 
exercise these authorities in a climate-friendly manner; it would be 
appropriate for more states to follow suit.

    Question 7b. What would be useful to see in such a system--
consistent national criteria, standards, information coordination?
    Answer. Ultimately a national economy wide cap and trade system is 
essential. A useful first step would be national mandatory reporting. 
This would give each state access to the best available GHG information 
without having to go through the trouble of setting up its own 
registry. This would provide states with a solid information base for 
exercising their authorities in a climate-friendly manner.

    Question 7c. What is a good model for such a coordinated state-
national system?
    Answer. The model found in most major federal environmental laws is 
a good one: Establish a national program that sets standards below 
which no states can fall, while allowing states to use their 
authorities to take additional actions.
                                 ______
                                 
       Response to Written Questions from Hon. John F. Kerry to 
                               Fred Krupp
    Question 1. One of the rationales given by the Bush Administration 
for rejecting any measures to require actual reductions in green house 
emissions is that these will result in enormous costs to the U S. 
economy, to the point that no mandatory requirements are acceptable. 
James Connaughton's testimony last July stated that compliance with 
Kyoto would cost the United States $400 billion and 4.9 million jobs. 
Do you agree with this assessment?
    Answer. No. Mr. Connaughton's testimony last July contained no 
specific citations for his estimate of $400 billion in costs and a loss 
of 4.9 million, so I cannot respond to that claim directly. I would 
point out, however, that the background materials accompanying Mr. 
Connaughton's testimony contain similarly high cost estimates, and 
these do carry citations that in fact undercut his claims of 
astronomical costs. All cost estimates in the ``Book Accompanying 
Presidential Statement (June 11, 2001)''--tab C in his testimony--note 
that they assume a world ``without emissions trading.'' Almost by 
definition, then, these cost estimates are bound to be very high. The 
paragraphs below explain why:
    The economic affects of complying with the Kyoto Protocol have been 
extensively studied and cost estimates have ranged widely from a net 
economic gain to significant cost depending on the set of assumptions 
and analytical technique. Macroeconomic computer models tend to give 
the most pessimistic estimates, and the Administration relies on this 
type of analysis. It has been shown, however, that the output from 
these models is largely determined by a small set of variable factors, 
which can be manipulated in such a way that a modeling run can generate 
either positive or negative costs. Therefore, based solely on 
macroeconomic computer modeling, there is no reason to conclude that 
the costs would in fact be severe. Moreover, these models do not 
incorporate a number of very important cost-reducing factors, such as 
inexpensive reductions in non-CO2 gases, ancillary benefits 
from attendant reductions in other forms of air pollution (e.g., 
particulate matter), and--perhaps the most dramatic cost-reducing 
variable--emissions trading.
    Importantly, we have seen significant, peer-reviewed literature 
that directly contradicts the cost estimates from some economic 
modeling. The U.S. Department of Energy funded a major engineering 
study that concluded that CO2 emissions could be greatly 
reduced at little to no cost owing largely to efficiency gains and fuel 
savings. Technology studies tend to be more optimistic and need to be 
considered alongside macroeconomic analyses. In addition, real-world 
experience is sending a strong signal that the cost to reduce 
greenhouse gas emissions will be relatively low and manageable. Large 
energy-intensive companies have made significant reductions in GHG 
emissions at costs on the order of $5 or $10 per tonne. The first ever 
inter-sectoral GHG emissions trading program was launched in the UK in 
2002 and costs have generally been in the range of $8-$14 per tonne. 
These real-world price signals are a minute fraction of the costs being 
estimated by the Administration. There is a precedent for this type of 
discrepancy. In 1990 there were many pessimistic estimates of the cost 
to reduce sulfur dioxide emissions, but the emissions trading program 
established in the U.S. achieved compliance at a fraction of those 
estimates. Given that the Kyoto Protocol has a market-based emissions 
trading framework, there is evidence to suggest that the Protocol will 
minimize costs and keep them in a range consistent with the experience 
being gained in the UK and other countries.

    Question 2. Are you aware of any examples where requirements to 
address pollution either had little negative impact on the economy, or 
even provided areas for economic growth?
    Answer. Certainly. One of the most relevant examples in the field 
of emissions control is the innovation and economic growth seen under 
the US Acid Rain Program. That program employs a cap and trade system 
very much like that contemplated by the Climate Stewardship Act, and 
its provisions not only allowed substantial growth in the electric 
generation sector, but also provided for innovation in the field of 
emissions control technology.
    Though some experts predicted of extraordinarily high compliance 
costs, the Acid Rain Program's cap and trade structure in fact 
delivered environmental benefits in excess of legal requirements at 
costs far below expert predictions. Both the electric generation sector 
and the environment benefited from this outcome, as shown in the chart 
below:



    The cap and trade system employed for acid rain--like the cap and 
trade system contemplated under the Climate Stewardship Act--avoids 
technology specifications, allowing regulated parties freedom to choose 
the package of emissions reduction methods most appropriate to their 
operations. The result has been innovation in emissions-reduction 
technologies and economic growth in this sector. A major study 
published in 2000 noted that, ``the striking contrast between 
technological stagnation in scrubber technology before 1992, under a 
regulatory regime of direct emission controls, and technological 
progress since then, under a regulatory regime with tradable permits is 
hard to ignore.'' \1\ Scrubber manufacturers, for example, have been 
marketing scrubbers for Phase II of this program at about half the cost 
of Phase I scrubbers.\2\ This innovation has taken place not only 
because of increased competition directly between manufacturers of 
technologies like scrubbers, but as well because all compliance 
options--from scrubbers to fuel switching to energy efficiency--now 
compete with one another in the marketplace of compliance options. 
Unlike a command-and-control scenario, no one compliance technology 
holds a monopoly in the cap and trade system.
---------------------------------------------------------------------------
    \1\ A. Denny Ellerman, Richard Schmalensee, Elizabeth M. Bailey, 
Paul L. Joskow, and Juan-Pablo Montero, Markets of Clean Air: The U.S. 
Acid Rain Program (New York Cambridge University Press, 2000), pp. 242.
    \2\ Ibid., 240.

    Question 3. Are there really no mandatory measures to reduce GHGs 
that can be undertaken without adverse impact--and potentially with a 
positive impact--on our economy?
    Answer. Absolutely not. In fact, we have seen good examples of 
companies growing and succeeding under greenhouse gas caps. Dupont, for 
example, is a company that has taken on a voluntary cap on emissions--a 
cap that could easily have been imposed by a mandatory system--and 
under it dramatically reduced greenhouse gas emissions while 
experiencing major economic growth. Consider the following report on 
Dupont's success, drawn from publicly available materials produced 
through our Partnership for Climate Action:

          DuPont is a science company that manufactures a variety of 
        chemical products and operates in 70 countries. In 2001 
        revenues were $24.7 billion, and the capital expenditure budget 
        was $1.5 billion. In the early 1990s, DuPont established two 
        goals related to emissions of greenhouse gases (GHGs). The 
        first was to reduce its GHGs 40 percent compared to 1990 levels 
        by 2000. In calculating its GHG emissions, DuPont included 
        gases released directly from its facilities (carbon dioxide, 
        fluorocarbons, nitrous oxide, and others) as well as carbon 
        dioxide released indirectly by power generators that provide 
        electricity and steam to DuPont's facilities. A second goal was 
        to reduce global energy use per pound of production by 15 
        percent compared to 1991 levels. In 1999 DuPont supplanted 
        these goals with more aggressive targets to be achieved by 
        2010, namely to reduce GHG emissions by 65 percent versus 1990 
        levels and to hold energy use flat at 1990 levels. In addition, 
        DuPont pledged to supply 10 percent of its energy needs from 
        renewable resources at a cost competitive with best available 
        fossil-derived alternatives...

          By 2000, DuPont had reduced GHG emissions across the company 
        by 63 percent from the base year of 1990, for a reduction 
        equaling 56.2 million metric tonnes (on a CO2-
        equivalent basis). In a hypothetical market for emissions 
        credits, assuming that: (a) DuPont was awarded a tradable 
        allocation amounting to 90 percent of its 1990 emissions, and 
        (b) an average market price of $10 per metric tonne of 
        CO2, then the GHG reductions as of 2000 have a 
        potential market value of $472 million per year \3\--an 
        extraordinary return on investment. Even without a regulated 
        market, DuPont has already sold some reductions to other 
        companies on a voluntary basis, thereby recouping part of its 
        costs.\4\
---------------------------------------------------------------------------
    \3\ Under a typical ``cap-and-trade'' emissions trading system, a 
company receives from a regulating agency an annual allocation of 
tradable credits. It must keep enough credits to cover its annual 
emissions, but if emissions have been reduced below the allocation, 
then the company has a surplus that it can sell. An allocation of 
credits is generally pegged to some base year, such as 1990 in the case 
of the Kyoto Protocol on climate change. If the U.S. were to accept the 
Kyoto Protocol, its previously negotiated commitment is to reduce 
national emissions to 7 percent below 1990 levels. Thus, in this 
hypothetical example, we assume that the U.S. commitment has been 
devolved to individual companies, minus some type of withholding, 
leading to an annual allocation of 10 percent below 1990 emissions, or 
90 percent of the 1990 baseline.
    \4\ See ``DuPont-Entergy Greenhouse Gas Trade'' at www.pca-
online.org.

          Following these early successes, a new slate of projects was 
        prepared, and by the end of 2001 DuPont exceeded its 65 percent 
        reduction goal, nine years ahead of schedule. To reduce energy 
        consumption, DuPont implemented an equally impressive 
        investment strategy. The current DuPont goal is to hold total 
        energy consumption flat at 1990 levels through 2010. With 
        DuPont, as with most companies, the opportunity to reduce 
        energy consumption and consequent CO2 emissions 
        exists at practically every facility. This allows for many 
        project options. While DuPont expects that some business units 
        will increase energy consumption due to production increases to 
        meet market demand, the breadth of reduction opportunities 
        provides ample energy savings at other business units, so the 
        net effect is flat energy use. The energy program and CEP 
        project-selection process spurred a variety of actions 
        throughout the operations at DuPont. Energy efficiency improved 
        because of product portfolio changes, cogeneration, yield 
        improvements, capacity utilization, better uptime, and 
        conservation measures. As shown in Figure 2, overall energy 
        consumption remained flat throughout the 1990s at a time when 
        production grew 35 percent.
        
        

          Converting the energy savings into barrels of crude oil, 
        DuPont avoided the consumption of 16.2 million barrels in 2000 
        alone. Further, using the cost of oil as a rough indicator of 
        average energy cost, and assuming $20 per barrel of crude oil, 
        then cost savings for DuPont in 2000 were approximately $325 
        million. Cumulative cost savings over the ten-year period (the 
        upper layer in Figure 2) amount to $1.65 billion.\5\
---------------------------------------------------------------------------
    \5\ Excerpts from, ``Positive Returns on Greenhouse Gas 
Investments: The DuPont Experience with Advancing Environmental 
Goals,'' available at www.pca-online.org.

    But internal emission reductions are of course not the only aspect 
of a mandatory GHG emissions reduction program. Congress could choose, 
as the authors of the Climate Stewardship Act have, to allow external 
emissions offsets such as carbon sequestration projects. `We know that 
engaging farmers and foresters in carbon sequestration activities can 
benefit the regulated emitter by reducing the cost of compliance with a 
cap on greenhouse gases, but less well appreciated are the benefits 
that accrue to the landowner engaging in a carbon sequestration 
project. Farmers engaging in conservation tillage, for example, tend to 
find that their crop yields increase over time, that they are better 
able to weather drought conditions, that their fields produce less of 
the runoff that harms fish species and impinges on water quality, and 
that they make less of a contribution to harmful local air quality 
conditions. Foresters who manage their timber stands for carbon as well 
as timber create healthier managed forests, and this benefits wildlife 
and water conditions as well as the atmosphere. A comprehensive cost-
benefit analysis that includes the co-benefits obtained through carbon 
sequestration will show a substantial boost in benefits associated with 
carbon-sequestering activities on the land. And as the Climate 
Stewardship Act shows, it's absolutely feasible to incorporate these 
---------------------------------------------------------------------------
provisions within the cost-efficient cap and trade framework.

    Question 4. Won't U.S. industries be at a disadvantage if other 
countries develop more efficient technologies?
    Answer. As greater numbers of countries adopt hard caps on their 
emissions, the marketplace of ideas for controlling GHG emissions will 
only grow. The countries of Europe, for example, have agreed to an EU-
wide emissions trading program under which diverse sectors of the 
European community will be engaged in the efficiency-seeking behavior 
encouraged by the cap and trade system. That investments in new 
technologies to control emissions--and innovation within the technology 
field--will occur is indisputable. It's important to understand that 
the caps on emissions adopted by each of the countries of Europe are 
driving this innovation. The emissions caps create a demand for 
emissions-controlling technology that simply doesn't exist under a 
voluntary system of emissions control. As new products and technologies 
are developed, they will be designed by and for countries other than 
the U.S. Our native talent and entrepreneurial spirit will, most 
certainly, rise to the challenge when ultimately called upon to 
innovate. However, each day we delay in starting our creative engines 
is a day in which foreign industries extend their lead in technology 
development.

    Question 5. To what extent must an effective plan to address 
climate change in the U.S. address mobile source emissions?
    Answer. A plan to address climate change in the U.S. must address 
mobile source emissions to be effective. Transportation is responsible 
for about \1/3\ of U.S. greenhouse gas emissions and cars and light 
duty trucks (passenger vehicles) are responsible for the majority of 
this, about 20 percent of our Nation's total emissions. The emissions 
from U.S. automobiles exceed the total emissions of every other country 
except China, Russia, and Japan. Further, transportation is the 
Nation's fastest growing source of greenhouse gas emissions. According 
to DOE's latest Annual Energy Outlook, transportation sector 
CO2 emissions are projected to grow at a 2.0 percent per 
year compound rate over the next two decades, while other sectors' 
growth rates range from 1.0-1.6 percent per year. Between 1990 and 
2000, carbon emissions from passenger vehicles rose by nearly \1/3\ as 
vehicle miles traveled increased, and larger and more powerful vehicles 
turned the clock back 20 years on the fleetwide fuel economy of new 
vehicles.

    Question 6. Would CAFE standards that increased fuel economy be a 
sound approach?
    Answer. CAFE standards have a proven track record of improving the 
fuel economy of the fleet while allowing automakers flexibility 
regarding how they comply. Stronger CAFE standards would ensure 
substantial near-term oil savings and reduction of greenhouse gas 
emissions, a key component of any sensible energy policy. There are a 
plethora of automotive technologies and design options that automakers 
could use to affordably and safely increase fuel economy.
    On a very short term basis, we recommend that you focus on closing 
loopholes that hamper the ability of the CAFE program to achieve its 
goals. This includes harmonizing car and light truck standards and, in 
the meantime, eliminating gaming of the light truck definition to 
include vehicles that function as cars. Vehicles weighing between 8,500 
and 10,000 pounds (gross vehicle weight) also should be included in the 
program, and testing protocol should reflect real world driving 
conditions. Tightening the program will create a stronger foundation 
for using the CAFE program to drive greenhouse gas reductions for the 
automotive sector.

    Question 7. What other approaches might the U.S. consider?
    Answer. The bottom line is that there is an urgent need to reduce 
oil dependence and greenhouse gas emissions from the automotive sector. 
The administration's focus on fuel cell research and development fails 
to deal with the pressing need for solutions by shifting the focus to a 
speculative, long-term technology goal without the accountability for 
emissions or oil use that could make increased research into new 
technologies a credible piece of a larger overall strategy. CAFE could 
complement and provide a bridge to a variety of future policies that 
will track and create incentives for progress on emissions reductions. 
California demonstrated leadership last year in passing a bill calling 
for maximum feasible reductions in greenhouse gas emissions from 
automobiles. Regulatory mandates could be supplemented with incentive 
and information programs that help consumers contribute to greenhouse 
gas and oil use reductions, including greenhouse gas emission labels on 
vehicles, tax credits for ultra-clean and super-efficient vehicles, and 
fleet policies that track and motivate greenhouse gas reductions.

    Question 8. How would the draft McCain/Lieberman bill trading and 
verification procedures work with respect to emissions from mobile 
sources?
    Answer. Given our support for the bill's efforts to create an 
economy-wide emissions trading market, Environmental Defense is 
certainly open to approaches that permit some form of emissions trading 
between automobile manufacturers and other greenhouse gas sources. To 
some extent, however, the inclusion of petroleum producers in the 
greenhouse gas reduction mandate renders trading of credits generated 
by automakers redundant; in fact, in the absence of appropriately 
crafted provisions, such trading could result in double-counting. 
Beyond that, any attempt to qualify and quantify improvements in CAFE 
as greenhouse gas reduction credits or allowance-equivalents requires a 
highly specific set of provisions to ensure environmental integrity. 
Creating such credits through the project-based reduction and crediting 
provisions included in the draft's registry title, which are inadequate 
in and of themselves, are not appropriate to apply here.
                                 ______
                                 
   Response to Written Questions Submitted by Hon. John F. Kerry to 
                             Randy Overbey
    Question 1. One of the rationales given by the Bush Administration 
for rejecting any measures to require actual reductions in greenhouse 
gas emissions is that these will result in enormous costs to the U.S. 
economy, to the point that no mandatory requirements are acceptable. 
James Connaughton's testimony last July stated that compliance with 
Kyoto would cost the United States $400 billion and 4.9 million jobs. 
Do you agree with this assessment?
    Answer. We have not made an assessment of the national impact of 
Kyoto. Our view is that any program must estimate the true impact on 
the economy, industry's ability to compete in the world markets, and 
the impact on the environment.

    Question 2. Are you aware of any examples where requirements to 
address pollution either had little negative impact on the economy, or 
even provided areas for economic growth?
    Answer. As we said in our testimony, we were able to improve our 
aluminum reduction process resulting in lower cost, reduced emissions 
of PFCs, more stable operation, and in some cases, with limited 
capital. We cannot comment other companies' abilities to make these 
kinds of changes.

    Question 3. Are there really no mandatory measures to reduce GHGs 
that can be undertaken without adverse impact--and potentially with a 
positive impact--on our economy?
    Answer. We believe that a cap and trade mechanism can be balanced 
and effective. The details of the cap, the breadth of society to which 
it is applied, and the allocation methods are all critical factors. A 
cap and trade mechanism which does not carefully take these into 
account could be damaging to the economy and the ability for companies 
like ours to compete on a worldwide basis.

    Question 4. Won't U.S. industries be at a disadvantage if other 
countries develop more environmentally efficient technologies?
    Answer. From our perspective, a great deal of work is underway on 
developing environmentally friendly technologies. Our own pursuit of a 
non-carbon anode for aluminum production is a good example.

    Question 5. As you may know, the State of Massachusetts was the 
first state to initiate a mandatory cap on CO2 emissions 
from its six highest-emitting power plants, and plans to reduce their 
emissions further. In addition, Oregon has placed CO2 limits 
on new power plants. Given the potential for a patchwork of state 
carbon cap and trade programs, what role could the federal government 
play?
    Answer. The Federal Government could assimilate the ``good and 
bad'' from state activities, as well as those around the world, asking 
what has worked and what has not worked. This could help with the 
design of a nation-wide mechanism. Further, the federal government can 
assess the impact on business and industry by working closely with 
those which are most affected. Finally, we believe the government could 
assure a broad-based approach, not one which targets limited segments 
of society

    Question 6. What roles are particularly appropriate for the states?
    Answer. The states can assist by working closely with business and 
industry to assess impacts.

    Question 7. What would be useful to see in such a system--
consistent national criteria, standards, information coordination?
    Answer. We believe, given the science of global warming, that a 
national approach, which fits into the international picture, is the 
right strategy. Further we believe that a single, national GHG 
inventory and registry with clear, internationally accepted accounting 
rules would reduce multiple reporting costs, ensure consistency, and 
facilitate policy and market mechanisms. Simply put, national criteria 
(and not a myriad of state and agency rules) is needed to ensure that a 
ton of GHG emissions should be counted consistency as a ton of GHG 
emitted within any state, by every agency, and recognized 
internationally.
    For corporate entities such as Alcoa, ``The Greenhouse Gas 
Protocol--A Corporate Accounting and Reporting Standard'' is a good 
basis for these national criteria. This protocol was developed jointly 
by the World Resources Institute and the World Business Council for 
Sustainable Development. It represents a fair balance of stakeholder 
interests and has been pilot tested and utilized by a number of 
corporate entities such as Alcoa. Specific accounting details related 
to the aluminum, cement, forest products and oil and gas sectors have 
been written and endorsed by WRI/ WBCSD.

    Question 8. What is a good model for such a coordinated state--
national system?
    Answer. Other than the protocols mentioned above, we are not aware 
of a good, specific model. Our company is working on our internal goals 
and, should we find or develop beneficial approaches, we will be happy 
to share those with the Committee.

    Question 9. James Rogers, the CEO of Cinergy, Inc., testified 
before this Committee that his utility company supported placing a 
carbon commitment in any power plant legislation because ``without some 
sense of what our carbon commitment might be over the next 10, 15, or 
20 years, how can I or any other utility CEO think we have a complete 
picture of what major requirements our plants may face?'' In addition, 
American Electric Power has made a similar statement before this 
Committee. Would you agree with this statement? If carbon emissions 
levels are set, will that add further impetus to developing a 
diversified energy portfolio, such as renewables?
    Answer. As we have mentioned, a global warming emissions cap can be 
effective--the proof is in the design. Other incentives, such as tax 
relief, can spur the development of renewable energy, so, a carbon cap 
is not the only potential answer.

    Question 10. How can even a small utility make future plans, like 
building a new facility, without knowing what carbon emissions levels 
need to be achieved?
    Answer. We concur that clarity of the future is important for 
investment. However, this can be an integrated strategy involving a 
broad segment of society and does not necessarily have to rest only on 
specific facilities.

                                  
