[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
BUSINESS ACTIONS REDUCING
GREENHOUSE GAS EMISSIONS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JUNE 8, 2005
__________
Serial No. 109-16
__________
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
______
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COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas BART GORDON, Tennessee
LAMAR S. SMITH, Texas JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California LYNN C. WOOLSEY, California
KEN CALVERT, California DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland MARK UDALL, Colorado
VERNON J. EHLERS, Michigan DAVID WU, Oregon
GIL GUTKNECHT, Minnesota MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland RUSS CARNAHAN, Missouri
W. TODD AKIN, Missouri DANIEL LIPINSKI, Illinois
TIMOTHY V. JOHNSON, Illinois SHEILA JACKSON LEE, Texas
J. RANDY FORBES, Virginia BRAD SHERMAN, California
JO BONNER, Alabama BRIAN BAIRD, Washington
TOM FEENEY, Florida JIM MATHESON, Utah
BOB INGLIS, South Carolina JIM COSTA, California
DAVE G. REICHERT, Washington AL GREEN, Texas
MICHAEL E. SODREL, Indiana CHARLIE MELANCON, Louisiana
JOHN J.H. ``JOE'' SCHWARZ, Michigan DENNIS MOORE, Kansas
MICHAEL T. MCCAUL, Texas
VACANCY
VACANCY
C O N T E N T S
June 8, 2005
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Sherwood L. Boehlert, Chairman,
Committee on Science, U.S. House of Representatives............ 9
Written Statement............................................ 9
Statement by Representative Bart Gordon, Minority Ranking Member,
Committee on Science, U.S. House of Representatives............ 9
Written Statement............................................ 10
Statement by Representative Judy Biggert, Chairman, Subcommittee
on Energy, Committee on Science, U.S. House of Representatives. 11
Prepared Statement by Representative Eddie Bernice Johnson,
Member, Committee on Science, U.S. House of Representatives.... 10
Prepared Statement by Representative Russ Carnahan, Member,
Committee on Science, U.S. House of Representatives............ 11
Witnesses:
Mr. James E. Rogers, Chairman, CEO, and President, Cinergy
Corporation
Oral Statement............................................... 12
Written Statement............................................ 14
Biography.................................................... 20
Dr. Mack McFarland, Environmental Manager, Fluorochemicals
Business, E.I. DuPont De Nemours and Company
Oral Statement............................................... 21
Written Statement............................................ 22
Biography.................................................... 24
Mr. Ronald E. Meissen, Senior Director, Engineering, Environment,
Health & Safety, Baxter International, Inc.
Oral Statement............................................... 25
Written Statement............................................ 27
Biography.................................................... 32
Dr. Robert H. Hobbs, Director of Operations, United Technologies
Research Center, United Technologies Corporation
Oral Statement............................................... 33
Written Statement............................................ 34
Biography.................................................... 38
Discussion....................................................... 39
Appendix 1: Answers to Post-Hearing Questions
Dr. Mack McFarland, Environmental Manager, Fluorochemicals
Business, E.I. DuPont De Nemours and Company................... 68
Appendix 2: Additional Material for the Record
Statement of Tom Catania, Vice President of Government Relations,
Whirlpool Corporation.......................................... 70
Climate Change Science: An Analysis of Some Key Questions,
Committee on the Science of Climate Change, National Research
Council, The National Academies................................ 100
BUSINESS ACTIONS TO REDUCE GREENHOUSE GAS EMISSIONS
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WEDNESDAY, JUNE 8, 2005
House of Representatives,
Committee on Science,
Washington, DC.
The Committee met, pursuant to call, at 10:10 a.m., in Room
2318 of the Rayburn House Office Building, Hon. Sherwood L.
Boehlert [Chairman of the Committee] presiding.
hearing charter
COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
Business Actions to Reduce
Greenhouse Gas Emissions
wednesday, june 8, 2005
10:00 a.m.-12:00 p.m.
2318 rayburn house office building
Purpose
On June 8, 2005, the Science Committee will hold a hearing on what
several leading businesses in a variety of industries are doing to
reduce emissions of greenhouse gases.
The Bush Administration has initiated a number of programs to
encourage businesses to take voluntary actions to reduce emissions of
greenhouse gases. Either as part of the Administration programs or
other efforts, many U.S. companies are working to reduce greenhouse gas
emissions. (See attached list.) Some companies have begun simply by
taking stock of the emissions they produce. Others have set targets for
reducing their emissions and are taking steps to meet them by improving
energy efficiency, switching to energy sources that produce fewer
greenhouse gases, or eliminating greenhouse gases from manufacturing
processes.
The motivations of these companies vary. Some find the scientific
evidence of a changing climate compelling. Others face domestic or
international competitive pressure, while others face pressure from
lenders or shareholders. Some see advantage in creating new products or
businesses that may hold a competitive advantage in future markets.
Still others see financial risk to their businesses should the climate
change substantially.
The Committee plans to explore the following overarching questions
at the hearing:
1. What concrete actions are businesses taking to reduce
greenhouse gas emissions? In what ways are these actions
beneficial to the company?
2. Why are businesses taking these actions and what are the
most important drivers for them?
Witnesses
James E. Rogers, Chairman, CEO and President, Cinergy Corp. Based in
Cincinnati, Cinergy provides electricity to 1.5 million customers in
Ohio, Indiana and Kentucky, has more than 7,000 employees, and
generated $4.7 billion of revenue in 2004. It owns 13,000 megawatts of
electric generating capacity and is largely reliant on coal as a fuel
source. Cinergy and Duke Power, a major utility in the Southeast United
States, recently announced plans to merge.
Dr. Mack McFarland, Environmental Manager, Fluorochemicals Business,
E.I. DuPont de Nemours and Company. As a multinational chemical and
product manufacturer based in Delaware, DuPont ranks 66 among the
Fortune 500, with 55,000 employees worldwide and 2004 revenues of $27.3
billion.
Mr. Ron Meissen, Senior Director, Engineering, Environment, Health &
Safety; Baxter International Inc. Baxter is a global health care
company that supports treatment of medical conditions including
hemophilia, immune disorders, kidney disease, cancer, trauma and other
conditions. Based in Deerfield, Ill., and with facilities throughout
the United States and the rest of the world, Baxter has 51,000
employees and generated $8.9 billion of sales in 2003.
Robert Hobbs, Director of Operations, United Technologies Research
Center, United Technologies Corporation (UTC). Ranked 22 among the
Fortune 500 and based in Connecticut, UTC businesses include Carrier
heating and cooling, UTC Fire & Security systems, Hamilton Sundstrand
aerospace systems and industrial products, Otis elevators and
escalators, Pratt & Whitney aircraft engines, Sikorsky helicopters and
UTC Power fuel cells. In 2004, UTC had 210,000 employees and generated
$37 billion in revenue.
Background
Carbon dioxide (CO2) is a greenhouse gas and an
inevitable product of combustion. It is the greenhouse gas that has
received the most attention, but others gases such as methane, nitrous
oxide, hydrofluorocarbons and sulfur hexafluoride are also produced by
human activities and have a greater greenhouse effect than
CO2.
In a speech in February 2002, President Bush ``reaffirmed America's
commitment. . .to stabilize atmospheric greenhouse gas concentrations
at a level that will prevent dangerous human interference with
climate,'' and initiated a number of voluntary programs aimed at
reducing greenhouse gas emissions. Specifically, the President has
committed to reducing the Nation's greenhouse gas intensity--the amount
of greenhouse gases emitted per unit of economic activity--by 18
percent by 2012. Several states and other countries have contemplated
or are now attempting to implement mandatory emission-reduction
policies.
In May 2001, the Bush White House requested a report from the
National Academy of Sciences on the status of scientific understanding
of climate change. The Academy's reply is attached.
What are companies doing to reduce their greenhouse gas emissions?
A number of United States-based businesses have begun to inventory
and reduce their greenhouse gas emissions. These are some of the
activities companies are undertaking:
Identifying and tracking greenhouse gas emissions. An inventory is
necessary to establish a company's baseline of greenhouse gas
emissions. It is usually the first step for any company planning to set
a reduction target, to develop options for reducing emissions, and to
track progress toward a target. It is also necessary for any company
wishing to accurately assess the risk posed by any particular
shareholder resolution, regulatory proposal, or lending policy related
to climate change. Moreover, it is essential for companies
participating in voluntary or mandatory greenhouse gas trading market.
According to economists, trading markets would lower the costs of any
future greenhouse gas regulation, should one be implemented.
Companies have developed a variety of approaches for inventorying
their greenhouse gas emissions. While all companies generally include
direct emissions from internal operations, they must also decide
whether to include indirect emissions generated from the electricity
they buy or from the products they sell. Utilities, for example, tend
to count only those emissions that are directly the result of
generating electricity. Energy intensive manufacturers, however,
include not only the emissions generated in their manufacturing
processes, but also usually include in their inventories emissions
generated by the electricity they purchase to power their operations.
Appliance manufacturers and other companies whose largest emissions
arise from the use of their products often include those emissions in
their inventories. Companies participating in emissions trading markets
have realized that it is important to maintain careful accounts of each
type of emission to avoid double counting or trading the same emissions
twice. Most companies report that they have developed their inventories
through a ``learn by doing'' approach.
Setting targets for reduction. A number of companies have set
targets for reducing the greenhouse gas emissions in their inventory.
Some have set targets in absolute terms, while others have pledged to
reduce emissions relative to production or revenue. Still others have
expressed their commitment in terms of cutting energy use. Among the
companies that have set absolute emission reduction targets, Nike has
pledged to reduce greenhouse gas emissions 13 percent below its 1998
inventory by 2005. DuPont set a goal (and has already surpassed it) of
reducing greenhouse gas emissions 65 percent below its 1990 inventory
by 2010. Using the same target date and baseline date, Alcoa has
pledged a 25 percent reduction, British Petroleum 10 percent, and
Johnson & Johnson 7 percent. Eastman Kodak has committed to reducing
its energy use 15 percent by 2004 below the amount it consumed in 2000.
Among companies that have pledged to reduce emissions relative to
output or revenue rather than in absolute terms, Pfizer has plans to
reduce its greenhouse gas emissions by 35 percent for every dollar in
revenue the company earns by 2007 using 2000 as its baseline year.
Baxter International has pledged to make a 30 percent reduction per
unit of production value by 2005 using 1996 as its baseline year. And
United Technologies Corporation committed to a 40 percent reduction per
dollar of revenue by 2007 using 1997 as its baseline and has already
met that target.
Improving energy efficiency. Improving energy efficiency reduces
greenhouse gases, and may also save a company money. Some companies are
improving the efficiency of their manufacturing processes or their
lighting and heating systems. Reductions of greenhouse gas emissions,
which accompany these efficiency gains, are often viewed as a bonus.
For example, United Technologies Corporation and IBM have found that
energy efficiency provides a significant opportunity to save money and
reduce greenhouse gas emissions.
Changing manufacturing processes. Some companies are altering their
manufacturing process to reduce emissions of potent greenhouse gases
such as nitrous oxide or fluorocarbons. For example, DuPont met a
substantial portion of its commitment to reduce greenhouse gas
emissions by reducing emissions of nitrous oxide in the nylon
manufacturing process. IBM pledged to reduce emissions of
perfluorocarbons, a potent greenhouse gas, by 40 percent per unit of
production (and 10 percent in absolute terms) from its semiconductor
manufacturing operations.
Green power purchasing. In states that allow consumers to choose
among utilities, companies can reduce emissions by switching, in whole
or in part, to ``green power'' suppliers, which generate electricity
from renewable energy sources that do not emit greenhouse gas, such as
wind, solar, biomass, and geothermal. For example, Staples, Bristol-
Myers Squibb and Johnson & Johnson have purchased or are purchasing
``green power'' that allows them to claim significant reductions in
greenhouse gas emissions.
Sequestration. A number of businesses have been ``road-testing''
carbon sequestration projects--the long-term storage of carbon dioxide
in its organic form in forests or soils, or in liquid form in the
ocean, so as to prevent its release into the atmosphere. For example,
DTE Energy, Wisconsin Energy Corporation, Georgia-Pacific, and
Weyerhaeuser, are working to enhance carbon sequestration in forests
and soils to offset their greenhouse gas emissions. American Electric
Power and British Petroleum are developing technologies to sequester
carbon dioxide in the ocean or in underground, depleted oil and gas
reservoirs, coal seams, or saline aquifers. Many scientists believe
that there is much still to learn about whether the carbon dioxide
placed in these so-called carbon sinks can be considered to be
permanently removed from the atmosphere.
Why are companies reducing greenhouse gas emissions?
According to a variety of recent reports that have surveyed
business practices,\1\ businesses that are investing to reduce
greenhouse gas emissions do so because they believe such investments
will help them compete.
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\1\ See World Resources Institute, ``A Climate of Innovation:
Northeast Business Action to Reduce Greenhouse Gas Emissions,'' (2004);
Pew Center on Global Climate Change, ``Corporate Greenhouse Gas
Reduction Targets,'' (2001); Kolk, A., and J. Pinske, ``Market
Strategies for Climate Change,'' European Management Journal, 22
(3):304-14 (2004); Coalition for Environmentally Responsible Economies
(Ceres), ``Electric Power Climate Risk Disclosure: A Comparison of 2004
Reports Released by American Electric Power, Cinergy and TXU.'' (2005).
In addition, a number of companies have issued annual reports, which
describe their actions to reduce greenhouse gas emissions and their
rationale.
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Reducing greenhouse gases can make a company more competitive in a
variety of ways. Actions to reduce emissions can make a company more
energy efficient or can lead it to develop new products. Such
advantages can benefit a company's bottom line, even if the company
never encounters pressure to reduce greenhouse gases in the future.
Companies also decide to reduce greenhouse gases as a way to manage
future risks as many appear to view as real the possibility that
shareholders, creditors, or governments may some day require them to
reduce their emissions of greenhouse gases. Some companies take the
position that the scientific evidence that man-made greenhouse gas
emissions may be harming the climate is credible.\2\ Others are
``hedging their bets'' either about future climate change or about
future constraints on emissions. In the process, some companies have
discovered that emission reductions can in fact benefit them today. For
example, while compiling a greenhouse gas inventory, some companies
have discovered opportunities to improve efficiency that they had not
previously identified.
---------------------------------------------------------------------------
\2\ The aluminum manufacturer Alcoa, Inc., has said on its website
that ``the time for debate is long past'' and that while ``the science
may or may not be incomplete, [i]f you get this one wrong, you don't
get a second chance.'' On its website, British Petroleum says, ``There
is an emerging consensus that climate change is, at least in part,
linked to the production and consumption of carbon based fuels. As a
major supplier of these fuels it's only right that we play a part in
finding and implementing solutions to one of the greatest challenges of
this century.''
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These are some of the reasons that businesses have found compelling
enough to justify their taking steps to inventory or reduce greenhouse
gas emissions:
Increased efficiency saves money. Investments in energy
conservation and efficiency can yield direct savings in energy costs
and lower the per-unit cost of production for some companies. For
example, between 1990 and 2000 DuPont held its energy use constant
while boosting its production by 35 percent, saving the company $2
billion. Efficiency and conservation are particularly valuable to
companies whose greenhouse gas emissions come from the energy purchased
from electric utilities, as reducing expenditures for electricity
purchases can directly benefit such a company's bottom line.
Competitive advantages may go to innovators. A number of companies
are betting that future markets will favor more energy efficient
products. For automobile and appliance manufacturers that make products
that use electricity or that themselves emit greenhouse gases, creating
more efficient products may give these companies a competitive
advantage. It may also improve the public's perception of the company
as being environmentally responsible. For example, a number of
automakers are investing in hybrid vehicle technologies, which are up
to 50 percent more efficient than conventional gasoline engines.
Whirlpool, whose products are responsible for 95 percent of its
greenhouse gas emissions, has committed to reducing the emissions from
its products by three percent between 1998 and 2008. General Electric
recently announced plans to double its spending on developing
environmental and energy-efficient products and to double revenue from
those products to $20 billion by 2010.
Early action is a hedge against future regulations or other
pressures. Although companies are facing a good deal of investment and
regulatory uncertainty surrounding reduction of greenhouse gas
emissions, some companies have decided that acting in the near-term is
more cost-effective than reacting later when there may be less
uncertainty, but potentially higher costs. They believe that beginning
to reduce emissions now and continuing steadily over time will be
cheaper than being forced to make large reductions all at once in the
future should it become necessary to do so. For example, companies are
measuring and tracking their greenhouse gas emissions and participating
in a variety of emissions trading programs to learn how to track and
trade emissions. Dow Corning and Baxter International are two of a
number of companies participating in the Chicago Climate Exchange, a
voluntary market to demonstrate trading of CO2 emissions.
These companies appear to believe that first-hand knowledge of how
greenhouse gas markets work may benefit them in the future.
Direct financial risk from climate change. Some companies face
direct financial risks from climate change. For example, insurance
companies and the companies that reinsure them are beginning to
recognize financial risks from climate change. On its website, Swiss
Re, one of the leading global reinsurers, says that ``the world of
insurance and re-insurance will have to face a new challenge:
developing and implementing strategies and business solutions to deal
with climate change and a carbon-constrained future.'' The company says
that climate change may alter not only the average losses faced by
insurers, but the range and annual fluctuations of those losses.
Pressure from investors and lenders to reduce risk. Individual and
institutional shareholders as well as the lending arms of major
financial institutions are increasingly concerned with the risks they
might face should regulation, public perception or other pressures one
day induce companies to emit fewer greenhouse gas emissions. They are
beginning to recognize that some companies within a given sector will
likely perform better than others should reductions in greenhouse gas
emissions ever be required. To protect the future value of their
stocks, an increasing number of investors have introduced shareholder
resolutions calling on companies to develop climate change strategies,
cut greenhouse gas emissions, invest in renewable energy, and disclose
greenhouse gas information. In addition, lending institutions, such as
Bank of America and JPMorgan Chase, have committed to figuring out how
to take these considerations into account in their investment
decisions. There has also been growth in specialized stock indices,
such as the Dow Jones Sustainability Index, that recognize companies
that are taking early action and that attract some investors seeking
``green'' stocks.
Influencing the policy and regulatory debate. Some companies
believe that their experience in applying various approaches to
reducing greenhouse gases to their operations will lend credibility to
their efforts to shape climate policy. For example, American Electric
Power has committed to reduce or offset emissions by four percent
between 2003 and 2007 and is gaining real world experience in tracking,
reducing and trading greenhouse gas emissions by participation in the
Chicago Climate Exchange. These actions, the company has said, have put
it in a better position to inform the current policy debate on climate
change. Duke Power's CEO recently announced steps that his company
would take to reduce greenhouse gas emissions. In addition, in an
attempt to influence the national policy debate, he also called for an
economy-wide, mandatory carbon tax to reduce the dependence of our
economy on fossil fuels and thus lower greenhouse gas emissions.
Questions to the Witnesses
The witnesses were asked to respond in their testimony to the
following questions:
James Rogers, Cinergy
What concrete actions is Cinergy taking to reduce
greenhouse gas emissions? In what ways are they beneficial to
Cinergy?
Why is Cinergy taking these actions and what are the
most important drivers for them?
Dr. Mack McFarland, Dupont
What concrete actions is DuPont taking to reduce
greenhouse gas emissions? In what ways are they beneficial to
DuPont?
Why is DuPont taking these actions and what are the
most important drivers for them?
Ronald Meissen, Baxter International
What concrete actions is Baxter Health Care taking to
reduce greenhouse gas emissions? In what ways are they
beneficial to Baxter?
Why is Baxter taking these actions and what are the
most important drivers for them?
Robert Hobbs, United Technologies Corporation
What concrete actions is UTC taking to reduce
greenhouse gas emissions? In what ways are they beneficial to
UTC?
Why is UTC taking these actions and what are the most
important drivers for them?
The following companies are among those that are taking action to
address greenhouse gases. The lists include
companies participating in the Pew Center's
Business Environmental Leadership Council (BELC) or
the Environmental Protection Agency's (EPA)
Voluntary Climate Leaders Program. Some companies
participate in both.
According to the Pew Center's web site, members of the Business
Environmental Leadership Council (BELC) are taking any of the following
types of action to address greenhouse gas emissions: set targets for
emissions reductions; implement innovative energy supply and demand
solutions; participate in emissions trading; and invest in carbon
sequestration opportunities and research. They also agree on several
beliefs:
1. We accept the views of most scientists that enough is known
about the science and environmental impacts of climate change
for us to take actions to address its consequences.
2. Businesses can and should take concrete steps now in the
U.S. and abroad to assess opportunities for emission
reductions, establish and meet emission reduction objectives,
and invest in new, more efficient products, practices and
technologies.
3. The Kyoto agreement represents a first step in the
international process, but more must be done both to implement
the market-based mechanisms that were adopted in principle in
Kyoto and to more fully involve the rest of the world in the
solution.
4. We can make significant progress in addressing climate
change and sustaining economic growth in the United States by
adopting reasonable policies, programs and transition
strategies.
According to EPA's Climate Leaders web site, EPA's Climate Leaders
program is an EPA industry-government partnership that works with
companies to develop long-term comprehensive climate change strategies.
Partners set a corporate-wide greenhouse gas (GHG) reduction goal and
inventory their emissions to measure progress. By reporting inventory
data to EPA, Partners create a lasting record of their accomplishments.
Partners also identify themselves as corporate environmental leaders
and strategically position themselves as climate change policy
continues to unfold.
3M Mack Trucks, Inc.
ABB Marriott International, Inc.
Air Products Maytag
Advanced Micro Devices, Inc. Melaver, Inc.
Alcan Aluminum Corporation Miller Brewing Company
Alcoa National Renewable Energy
Laboratory
American Electric Power NiSource Inc.
Ball Corporation Noble Corporation
Baltimore Aircoil Company Norm Thompson
Bank of America Corporation Oracle Corporation
Baxter International Outfitters, Inc.
Boeing Novartis
BP Ontario Power Generation
California Portland Cement Pfizer Inc.
Calpine PG&E Corporation
Caterpillar, Inc. Polaroid Corporation
CH2M Hill Praxair, Inc.
Cinergy Corp. PSEG
Cummins, Inc. Quad/Graphics Inc.
Deutsche Telekom Raytheon Company
DTE Energy Rio Tinto
DuPont Roche Group U.S. Affiliates
Eastman Kodak Company Rohm and Hass
EMC Corporation Royal Dutch Shell
Entergy Shaklee Corporation
Exelon Corporation SC Johnson
Fetzer Vineyards St. Lawrence Cement
First Environment, Inc. Staples, Inc.
FPL Group, Inc. STMicroelectronics
Frito-Lay, Inc. Sun Microsystems, Inc.
GAP Inc. Sunoco
GE Transportation Target Corporation
General Motors Corporation Tenneco Automotive
Georgia-Pacific The Collins Companies
Green Mountain Energy Company The Hartford
Hasbro, Inc. Toyota
Hewlett-Packard Company TransAlta
Holcim Tyson Foods, Inc.
IBM U.S. Steel Corporation
Intel United Technologies Corp.
Interface, Inc. Unilever HPC
International Paper Volvo Trucks North America, Inc.
Johnson & Johnson We Energies
Johnson Controls, Inc. Weyerhaeuser
John Hancock Financial Services Whirlpool
Lafarge North America Inc. Wisconsin Energy Corporation
Lockheed Martin Xerox Corporation
Source:
http://www.pewclimate.org/
companies-leading-the-way-be
lc/company-profiles/
http://www.epa.gov/climateleaders/partners/index.html
Chairman Boehlert. Good morning. It is a pleasure to
welcome everyone here this morning for this important and, I
hope, eye-opening hearing.
We spend a lot of time in Washington talking about what
might or might not be done about climate change in theory, but
meanwhile, out in the ``real world,'' real companies that make
real money, making real products for real people are taking
action.
So we ought to be sure that our debate here is informed by
the real experience. We need to understand why your companies
are taking steps to reduce greenhouse gas emissions and what
you have learned through your actions.
I don't want to say much more than that. I think today's
testimony speaks for itself, and my own views on climate change
are well known.
I just want to thank our witnesses for being here today. I
think that you and your companies are real heroes. You are
taking a broad view while still remaining hardheaded, bottom
line-oriented business people who have an obligation to protect
your companies. But you are putting the enlightened back in
self-interest. Somewhere Adam Smith's invisible hand is
applauding.
I thank you for appearing today.
And I recognize Mr. Gordon for any comments he might care
to make.
[The prepared statement of Chairman Boehlert follows:]
Prepared Statement of Chairman Sherwood L. Boehlert
It's a pleasure to welcome everyone here this morning for this
important and, I hope, eye-opening hearing. We spend a lot of time in
Washington talking about what might or might not be done about climate
change--in theory--but meanwhile, out in the ``real world'' real
companies that make real money making real products for real people are
taking action.
So we ought to be sure that our debate here is informed by that
real experience. We need to understand why your companies are taking
steps to reduce greenhouse gas emissions and what you've learned
through your actions.
I don't want to say much more than that. I think today's testimony
speaks for itself, and my own views on climate change are well known.
I just want to thank our witnesses for being here today; I think
that you and your companies are real heroes. You're taking a broad
view, while still remaining hardheaded, bottom-line oriented business
people who have an obligation to protect your companies. But you're
putting the ``enlightened'' back in self-interest. Somewhere Adam
Smith's ``invisible hand'' is applauding.
Mr. Gordon.
Mr. Gordon. Thank you, Mr. Chairman, and good morning. And
as usual, I concur with your remarks. And I want to thank you
for calling this hearing on the voluntary efforts that U.S.
businesses are making to improve their energy efficiency and
reduce their greenhouse gas emissions.
It is refreshing to hear something positive on this issue.
The programs these companies have initiated demonstrate that
not all efforts to reduce emissions result in economic losses
or put our businesses at an economic disadvantage.
These programs are obviously not cost-free, but they appear
to be cost-effective. The firms represented here have made
investments that are returning economic and environmental
dividends.
The voluntary programs undertaken by these firms and others
can also help us to better understand how far current
technologies can take us in reducing greenhouse gases and what
level of investment is required to achieve them.
Perhaps the experience gained through this type of
voluntary effort will give us insights into the types of
government research and development efforts we should focus on
and the type of adjustment programs that might be needed to
reduce the costs and improve the effectiveness of technologies
that reduce energy consumption and emissions.
So once again, thank you, Mr. Chairman, for calling this
hearing, and I look forward to hearing from our informed
witnesses.
[The prepared statement of Mr. Gordon follows:]
Prepared Statement of Representative Bart Gordon
Good morning. Thank you, Mr. Chairman for calling this hearing on
the voluntary efforts that U.S. businesses are making to improve their
energy efficiency and reduce their greenhouse gas emissions.
It is refreshing to hear something positive on this issue. The
programs these companies have initiated demonstrate that not all
efforts to reduce emissions result in economic losses or put our
businesses at an economic disadvantage.
These programs are obviously not cost free, but they appear to be
cost effective. The firms represented here have made investments that
are returning economic and environmental dividends.
The voluntary programs undertaken by these firms and others can
also help us to better understand how far current technologies can take
us in reducing greenhouse gases and what level of investment is
required to achieve them.
Perhaps the experience gained through this type of voluntary effort
will give us insights into the types of government research and
development efforts we should focus on and the type of adjustment
programs that might be needed to reduce the costs and improve the
effectiveness of technologies that reduce energy consumption and
emissions.
These programs demonstrate that we have technologies available
today to reduce energy use and emissions. We may not be able to address
all of our energy and environmental security issues through voluntary
efforts alone, but the reductions achieved by these companies show that
we can begin to improve our energy efficiency.
I look forward to hearing your testimony and thank you for
appearing before the Committee this morning.
Chairman Boehlert. Thank you very much, Mr. Gordon.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Representative Eddie Bernice Johnson
I want to thank Chairman Boehlert and Ranking Member Gordon for
bringing the issue of global climate change and the control of
greenhouse gases before the Committee today. I appreciate their
continued leadership on science and environmental policy issues.
I am pleased to hear from businesses that have had the foresight
and the capability to begin developing suitable and equitable
approaches in solving this shared problem of the control of greenhouse
gases.
Business leadership is necessary if we are to avoid further
catastrophic effects of our actions on the environment.
One of the most profound challenges we face in the 21st century is
the problem of global climate change.
Time and again, the world's leading atmospheric scientists have
warned us about the devastating impact of climate change. We now have
irrefutable proof of its impact on our economy, our way of life, our
health and our children.
Because our country is leading the world in the output of those
negative elements that lead to climate change, I am embarrassed that we
are one of the last industrialized nations to accept responsibility to
clean up our environment.
I realize that solutions may not be easy, quick, or cheap; however,
if we do not address this problem now, future costs will be measured in
dire consequences to our lives and our children's lives.
Mr. Chairman, I want to acknowledge and applaud TXU and UPS for
their clean air efforts in the right direction in my district. It will
take efforts like this where businesses, based on their own set of
values and their sense of right and wrong, will step up to the plate
and make the right decisions about what effect their companies
activities are having on the environment.
An effective program to fight climate change need not involve huge
increases in energy prices or draconian rules that choke industries and
damage a company's economic well-being. There are immense business
opportunities in creating approaches to sustainable growth and
development.
We must invest in the development of new technologies that will
provide new and environmentally friendly sources of energy that include
both conventional and non-conventional energy sources. We must work
with other nations in a cooperative manner. A well-crafted strategy can
address global climate change and maintain our preeminent economic
position in the world.
What gives me hope is the fact that the same science and technology
that discovered and produced the harmful effects of climate change is
the same type of science and technology that Congress and businesses
can depend on to come up with solutions to the threat climate change
poses.
In Texas, a slight change in the average temperature has already
begun to adversely affect our inland and marine fisheries, beaches,
forest composition, water supply, agribusiness and health (more Lyme
disease and asthma, for example).
The suffering is unacceptable and unnecessary in the richest and
most innovative country in the world. Increasing health care costs
strain an already struggling health care system.
I urge all of my colleagues to look at this issue closely, and I am
looking forward to working with businesses, non-profits and my
colleagues to reduce the impact of carbon emissions from coal-burning
plants, greenhouse gases, and other human-generated pollutants upon our
citizens.
[The prepared statement of Mr. Carnahan follows:]
Prepared Statement of Representative Russ Carnahan
Mr. Chairman and Mr. Ranking Member, thank you for holding this
hearing.
It is inspiring to hear that the four companies' represented before
us have been able to simultaneously lower energy costs while
voluntarily reducing greenhouse gas emissions (GHG). The efforts of
these companies should be applauded and imitated by others.
The United States accounts for between one-fifth and one-fourth of
current global GHG emissions annually. These companies have volunteered
to help in reducing GHGs and in doing so have been positive examples.
Yet, our nation as a whole has a responsibility to address our role in
GHG emissions and in the larger issue of climate change.
I believe we can do more in the area of reducing emissions. Earlier
this year, I sponsored an amendment to the Energy Bill that would offer
tax credits for hybrid vehicles to both manufacturers and consumers. I
hope that industry and government alike can examine areas where
everyone can work together to reduce greenhouse gas emissions.
I welcome the witnesses to our committee today and look forward to
hearing their testimony. Thank you.
Chairman Boehlert. And our distinguished panel, and it is a
very distinguished panel. It consists of Mr. James R. Rogers,
Chairman and CEO and President of Cinergy Corporation; Dr. Mack
McFarland, Environmental Manager, Fluorochemicals Business,
E.I. DuPont de Nemours and Company.
And for the purpose of an introduction, the Chair
recognizes Mrs. Biggert.
Ms. Biggert. Thank you, Mr. Chairman.
It is a privilege for me to introduce Mr. Ron Meissen, a
Senior Director at Baxter International who manages the
company's worldwide environment, health, and safety resources.
With an MBA and Bachelors and Masters degree in civil
engineering, Mr. Meissen is a 30-year employee of Baxter Global
Health Care Company that produces medical supplies and
biopharmaceuticals for the treatment of hemophilia, immune
disorders, kidney disease, cancer, trauma, and other
conditions. Baxter generated $8.9 billion in sales in 2003
thanks to the hard work of 51,000 employees at 64 different
facilities in seven states, one U.S. territory, and numerous
foreign facilities in other countries.
Headquartered in my home state, Baxter is one of Illinois'
great corporate citizens in part because of its commitment to
reducing energy consumption and associated greenhouse gas
emissions. So I would like to welcome Mr. Meissen to the
hearing today.
Thank you, Mr. Chairman. I yield back.
Chairman Boehlert. Thank you very much for that commercial.
It is a pleasure to have that introduction.
And our final witness, Dr. Robert Hobbs, Director of
Operations, United Technologies Research Center, United
Technologies Corporation.
And I just might add that all of these witnesses are very
distinguished in their careers and their accomplishments, and I
very much appreciate, gentlemen, you serving as resources for
this committee, because we have so much to learn from people
with real-life experiences in the ``real world.'' Sometimes we
are insulated from the ``real world,'' so we welcome the ``real
world'' to Capitol Hill.
With that, let me start out with Mr. Rogers, who will be--
oh, let me also add that the Whirlpool Corporation has
submitted testimony, and we appreciate that, for the record.
(See Appendix 2: Additional Material for the Record.)
Mr. Rogers, and all of the witnesses, your full statements
will appear in their entirety in the record. We would ask that
you try to summarize your remarks, which will afford us ample
opportunity to sort of pick your brains some more.
Mr. Rogers, welcome.
STATEMENT OF MR. JAMES E. ROGERS, CHAIRMAN, CEO, AND PRESIDENT,
CINERGY CORPORATION
Mr. Rogers. Thank you, and good morning.
I appreciate the opportunity on behalf of Cinergy to
testify today at what I hope will be a series of hearings on
the issue of global warming.
My name is Jim Rogers. I am the CEO of Cinergy. We serve
approximately 1.5 million customers in Ohio, Indiana, and
Kentucky. As you know, we have recently announced a merger with
Duke Energy, which is headquartered in Charlotte, North
Carolina.
As a Midwest utility, coal fuels most of our generating
plants. We burn approximately 30 million tons of coal a year.
That makes us the fifth largest consumer of coal. And despite
this utilization of coal, which is one of our greatest
resources in this country, we recently, in fact, in 2003,
announced a voluntary commitment to reduce greenhouse gas
emissions to five percent below our 2000 levels and to do this
by the period 2010 to 2012.
To reach that goal, we are going to spend over $21 million
on a variety of projects that we anticipate, with these
projects, cutting about 30 million tons of greenhouse gas
emissions.
We are not alone in this country in industrial America in
terms of working to reduce greenhouse gas emissions. There are
94 Fortune 500 companies that are working today to reduce
emissions.
The question you are probably asking yourself is: ``Why
would a primarily coal-burning utility in the Midwest take on
such a commitment?'' And as I think about it, I look back over
the last decade and we spent $1.7 billion to reduce the
emissions of SOX, NOX, and Mercury from our plants. We are
looking, over the next five years, to spend roughly $1.8
billion to reduce SOX, NOX, and Mercury from our plants.
My position and our company's position on the issue of
global warming has evolved. This is not an overnight
recognition on our part. We have opportunities for research and
participate in domestic and international economic and
environmental discussions, and from these various
vantagepoints, we have come to believe several things. One is
the world is warming. Two, human activities have contributed to
the warming. Thirdly, and this is the part that needs more
work, it is not clear, and I don't think we fully understand
what the impact should be.
But understanding all of that, it has led us to the
conclusion that the prudent path at this point in time is to
take actions today to prepare to live in a carbon-constrained
world tomorrow.
But the question you have to ask is, and I have asked
myself is: ``What if we were wrong. What if the scientists that
say this is a problem are wrong? Will the steps we have taken
be inappropriate? Will it leave the world in a worse spot than
it would have been otherwise?''
And I believe the answer is simply this. As we work to
reduce greenhouse gas emissions, we will work to create
environmentally-friendly technologies. We will be pursuing
methods of saving energy far more efficiently than we have
before. We will be working in this country to lower our
dependency on foreign oil by encouraging the development of
numerous auto fuel sources. These advantages can shape our
economy into one that is cleaner and more self-reliant, and who
can argue with that outcome?
In our 2004 annual report, we did something quite
different. We focused on the issue of global warming. And the
headline was, ``Can we find common ground?'' So rather than
rely on all of the smart people, the scientists, and all of the
others, we went to the people who have a stake in our company:
the investors, the employees, the customers, policy-makers. And
we asked them: ``How should we, as a company, be thinking about
this issue?''
And I would urge you to look at our website, because you
could see our annual report there, and you could look at what
people were saying. But let me quickly tell you the signposts
that have motivated us to deal with this issue.
One signpost is the states are increasingly taking on the
role of regulation of greenhouse gas emissions. Just look
across this country, and there are over eight states that are
now either registering your CO2 emissions or looking
at ways to regulate it.
Congress is continuing to look at this issue as signpost
two. Not only is this committee addressing how businesses are
reacting to global warming, the Senate, as you know, has been
tackling the issue in a number of ways.
We believe that the Clear Skies legislation that is now
pending, this multi-emission legislation, is stalled because of
the lack of progress on carbon.
The third signpost that we see is that Kyoto was approved,
and we believe that can have possible trade implications going
forward.
And the fourth point that I would highlight is that our
shareholders are increasingly asking companies to quantify
their greenhouse gas emissions. Several years ago, we had a
shareholder proposal, and that has helped stimulate and
accelerate our thinking on these important issues.
The other signpost I would mention is that trading markets
are developing both here and abroad, and so smart people that
make money from having markets develop are already anticipating
that this is going to be an issue and that there will be a
trading of emission allowances from reduction of
CO2.
And the last point I would make is as you look around our
society, look at the movies, look at the books, and look at the
cover of Business Week and the cover of National Geographic, it
is all about global warming. It is in the consciousness of
people across this country.
So our--my challenge to you, and the challenge that we
have, is to find a way to reduce emissions, to find a way to
invest more in technology, and to make sure that we have
technology to do that.
And I would say in conclusion that we have invested in IGCC
coal gasification. We were one of two companies that
participated in a project in the early 1990s. We built a coal
gasification facility using Dow technology. And we are
currently in negotiation with GE and Bechtel to build another
coal gasification. We believe that is an important technology
to allow us to utilize one of the greatest resources we have in
this country, and that is coal.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Rogers follows:]
Prepared Statement of James E. Rogers
Good Morning. My name is Jim Rogers, I am Chairman, CEO and
President of Cinergy. Cinergy was formed ten years ago by the
combination of PSI Energy in Indiana and Cincinnati Gas & Electric. As
you know, Cinergy also recently announced a merger with Duke Energy
based in Charlotte, North Carolina.
Let me tell you a bit about our company before I explore our
interest in greenhouse gas emission policies.
Cinergy serves approximately 1.5 million customers in Ohio,
northern Kentucky and much of Indiana. We operate nine coal-fired
generating stations that burn almost 30 million tons of coal per year.
As a Midwest utility Cinergy has ample access to coal. And with
rising natural gas prices, coal is the most economical choice for
supplying our customers with electricity. Despite our generating
choice, in 2003 Cinergy committed to reducing our greenhouse gas
emissions to five percent below 2000 levels during the period of 2010
and 2012. To reach that goal we are spending $21 million to fund
projects through the remainder of the decade. We plan on reaching the
goal despite a growing demand for electricity in our region, and taking
into account the electricity penalty we will realize when the bulk of
our generating units are outfitted with pollution control equipment to
meet new Environmental Protection Agency regulatory requirements.
All in all we expect that we will need to cut greenhouse gas
emissions by a total of 30 million tons.
While electric rates in the Midwest are likely to increase as a
result of pollution control expenditures to reduce sulfur dioxide,
nitrogen oxide and mercury, no increases will be due to our carbon
commitment.
We made our decision to reduce GHG emissions despite the fact that
there currently is no commercially viable method of capturing and
sequestering carbon from coal fired power plants. However there are new
technologies on the horizon and research on carbon capture and
sequestration applications will and must continue to keep coal a viable
and necessary fuel for the future.
In fact, Cinergy is completing a feasibility study on the
construction of an Integrated Gasification Combined Cycle power plant
(IGCC)--the state of the art coal plant technology available to us
today. It is relatively easier and less energy intensive to capture
CO2 from an IRC's high pressure synthesis gas than from
conventional pulverized coal flue gas. In addition, sulfur dioxide,
nitrogen oxide and mercury emissions are substantially reduced with
IGCC technology and because it is more efficient even without carbon
capture components, it does reduce carbon emissions.
According to industry analysts' estimates, the cost of IGCC is 10-
20 percent more then traditional pulverized coal. Those costs will come
down, however, if the appropriate incentives are made available and we
are able to deploy five or more facilities over the next decade. It is
also a technology that is a necessary component of any international
technology transfer program. Developing countries that today operate
plants without even the simplest of pollution control equipment can
with technologies such as IGCC begin reducing all emissions more
efficiently and completely.
Let me turn to the subject at hand. Why has Cinergy taken on this
commitment and why expend so much attention on greenhouse gas
emissions?
I spend a good deal of my time, not just in running the company--
but also in researching and participating in domestic and international
economic and environmental conferences so that I can appropriate the
wisdom from those venues back to our shareholders and all of our
stakeholders. Over the past several years I have developed a better
understanding of climate change and I see the debate in the scientific
world honing in on a few basic facts: that the world is warming and
that human activities have contributed to the warming. What the impacts
will be I don't think we yet fully understand.
Because of this, I believe people increasingly will believe that
greenhouse gas emissions should be reduced and that actions should
begin today to prepare for that eventuality.
But what if I and the multitude of scientists and industries
agreeing with that premise are wrong? If we approach this issue
appropriately, then we will have worked to create new environmentally
friendly technologies, pursued methods of saving energy far more
efficiently and work to lower our dependence on foreign oil. We will
have advanced to a multitude of fuel sources and technological
configurations that will help move our economy into a cleaner and more
self reliant future. And I don't know anyone that can argue effectively
against that outcome.
Let me share with you some of what I call signposts that I have
observed over the past several years which helped guide me to the
development of our position today. We published these signposts in our
2004 annual report because we chose not to ignore the issue of
greenhouse gases but to address it in a positive manner.
Signpost #1
The states are taking action
Four states have an overall cap on GHG emissions and two have a cap
on power plant CO2 emissions. Eight states regulate GHG
emissions. And, eight states have filed suits against Cinergy and four
other utilities to curb their GHG emissions, while others are involved
in suits with EPA over the need to regulate carbon.
A coalition of nine northeast states has initiated the regional
greenhouse gas initiative which would create a regional market based
cap and trade program.
Governor Schwarzenegger of California an executive order
identifying a goal to reduce emissions including:
By the year 2010, to reduce California's GHG
emissions to less than those produced in 2000.
By 2020, to reduce GHG emissions below 1990 levels.
By 2050, reduce overall emissions a full 80 percent
below 1990 levels.
He noted that the state is going to accelerate the timetable to get
more energy from renewable sources 20 percent by 2010 and a third by
2020.
These sources include solar, wind, geothermal, and biomass from
agriculture and other waste.
The state's fleet of government vehicles, all 70,000 of them, will
be replaced with hybrids.
Signpost #2
An increasing number of Members of Congress are expressing concern
about global warming.
While in 1997 the U.S. Senate voted to reject the Kyoto Protocol,
that did not mean they were rejecting the issue. I think that it is
important to remember that the ratified 1992 Agreement of the Parties
has an objective of stabilizing atmospheric greenhouse gas
concentrations ``at a level that prevents dangerous anthropogenic
interference with the climate system'' has never been refuted.
Senators McCain and Lieberman have introduced and modified their
climate reduction proposal and those voting favorably have increased
even though there are still not enough votes to pass the Senate.
Multi-Emissions legislation, which I have championed for years,
sadly can't move past the Senate Environmental and Public Works
Committee because the issue of climate remains unresolved. That hurts
the utility industry and its customers because also unresolved are
rules that regulate sulfur dioxide, nitrogen oxide and mercury as
well--all which will undoubtedly cost rate payers millions in unneeded
expenditures because the roadmap for an eventual solution to those
issues will be tied up in courts for years.
Signpost #3
Kyoto has been approved by 38 Industrial nations this year.
Europe wants to accelerate GHG mitigation and some countries,
including Tony Blair with whom I met yesterday, are interested in
exploring what lies beyond Kyoto's 2012 expiration.
I think that it is also important to consider that while industry
in Europe is mandated to deal with emissions reductions, that issue
could become increasingly confrontational in trade discussions as the
lack of a U.S. policy could possibly be considered a trade subsidy.
Signpost #4
A growing number of shareholders are asking companies to quantify the
risks associated with GHG emissions.
Increasingly investor groups are asking utilities and other
companies to quantify their GHG emission risks and to determine what
steps are being taken to manage those risks.
The assets of socially responsible mutual funds are growing faster
then the mutual fund industry as a whole.
And, the California Public Employee Retirement System (CalPERS)
announced that it will sign onto the Global Carbon Disclosure Project,
an international effort to improve the transparency of business risks
associated with climate change.
Signpost #5
CO2 and GHG emissions trading markets are developing in
Europe and the U.S.
The EU initiated its emissions trading scheme this year and
facilitates the trading of CO2 allowances among 12,000 EU
industrial installations.
The Chicago Climate Exchange established in 2003, has grown from 13
to 85 members.
Signpost #6
Global Warming is becoming part of our everyday consciousness.
The issue served as cover stories for Business Week and National
Geographic in 2004.
And this past Saturday's New York Times included a front page story
discussing world-wide technology advances in energy efficiency. The
story highlighted countries that have outperformed the U.S., from Japan
with its newly manufactured kilowatt saving refrigerators and air
conditioners to Germany with its impressive new fuel efficient homes
and to Singapore which is placing new restrictions on autos to
encourage increased bus and rail usage.
Increasingly, U.S. businesses are stepping up to take action. Not
just in the utility industry but if you look at the President's
voluntary climate reduction program, numerous business have made
commitments to reduce emissions. Even Exxon-Mobile is now advertising
voluntary actions it is taking to reduce its impact on climate trapping
emissions.
But what does all of this domestic and international activity mean
for the U.S.? While other countries are incentivizng new technologies
in a comprehensive fashion, we are arguing about what to do. And where
will those other countries take those technologies? To China which
according to the New York Times consumes 11.5 times the energy of Japan
to produce the same industrial output.
Despite the fact that Japan is far from meeting its Kyoto target--
it is already moving from industry to home and automobile--in attempts
to dramatically increase efficiency and alternative vehicle use. And
who is dominating the world market on hybrid vehicle sales? The
Japanese car manufacturers. Meanwhile Japan has nearly tripled its
industrial output from 1973 to today while keeping its overall energy
consumption roughly flat.
While the world is deploying leapfrogging technology in an effort
to deal with climate change, the U.S. lags sorely behind; concerned
that movement to address the climate issue might create some kind of
economic instability.
So how do you and we in industry alter the climate paradigm?
I think that it will require a number of steps--smaller steps then
embracing Kyoto that will set us on the right path.
First, again, there are aspects of climate science that are
indisputable even thought significant additional scientific work
remains to refine the unknowns.
CO2 is at its highest concentrations in the past
400,000 years
The Earth is getting warmer
The warming is caused by a combination of human and natural
processes.
Second, I think that we have all recognized that Kyoto was a 10,000
pound gorilla, and too much for the U.S. to tackle. As a result, I
think that it is important to eliminate the linkage between any kind of
carbon reduction policy and Kyoto.
While I believe that the best approach to climate is an economy
wide approach--I think the path there may need to be more creative and
perhaps even incremental in order to demonstrate the ability to control
emissions in an economically viable way.
Whatever emission reduction approach is adopted, I believe that
coupling it with legitimate methods of advancing technology is crucial.
I know that this committee focuses on Research and Development. I
believe that taking a hard look at what programs are funded and what
can be jump-started in order to bring them closer to commercial
adaptation is important. Much of the discussion on R&D tends to focus
on the R and not so much on the D--development or what I think we need
to see is Deployment. Getting these technologies into the marketplace
earlier and more effectively is an issue that I believe is often
overlooked.
And, I think that beyond traditional government programs, the
development of technology funds to help offset the costs of meeting
emission reduction targets can work, not only by spreading out the cost
of those targets throughout the entire economy but by also helping the
U.S. regain the lost momentum to lead the energy efficiency technology
race. Ideas abound about how to fund these off budget--and they may not
be practical right now--however beginning the discussion is important
if optimal solutions to meeting a greenhouse gas reduction target are
to be utilized.
Third, I also think it's important to greatly simplify the
implementation of taking on emission reduction commitments. As a
Utility company executive I am mystified each and every time the issue
of meeting climate reduction programs or even the development of a
voluntary registration of emissions arises, with it surfaces the host
of issues that makes a solution all but impossible. How do you deal
with past actions, additionality, every household and homeowner taking
on a commitment? The Answer: Don't.
Let's not follow the complicated example of our friends across the
``pond'' that have developed hundreds of varying allocation rules for
every industry or fuel type. Keep it simple. Make a forward looking
commitment, meet it and if you go below it--allow those tons to be used
to trade with others.
And finally as the Committee continues to examine greenhouse gas
emissions I would urge you to be creative. This commitment in my own
company has empowered our employees to creatively address how best to
meet that commitment. The Acid Rain Program reforms to command and
control regulations helped minimize the role of the government in
business decisions and unleashed the power of the market by making
reductions a good investment. This is the one of the economically
efficient paths forward. To take another approach provides naysayers
with the unwavering momentum that challenges the possibility of forward
movement.
I believe that the country needs leadership in this area. I don't
believe that I am being disloyal to the President whom I support, to
Congress or to my shareholders when I say that the time is now to move
positively toward reachable goals that will not only put us on track to
operate in a greenhouse constrained environment, but on a track that
will also make this country the technological leader it once was and
can be again.
Measuring Baseline GHG Emissions
The table below summarizes Cinergy's baseline 2000 GHG emissions.
Cinergy is reporting corporate-wide GHG emissions that include all of
Cinergy's business activities.
Cinergy GHG Goal Reductions
Cinergy chose to adopt a voluntary GHG emissions cap of five
percent below Cinergy's 2000 GHG emissions for the period 2010 through
2012 because we wanted to emphasize on-system GHG reductions. Cinergy
could have chosen a different goal such as committing to reduce our GHG
emissions one (1) percent per year beginning 2004. However, such a
commitment would probably have to be met through the purchasing of
offsets. To identify, design, and implement on-system reductions will
require a certain amount of lead-time. Cinergy believes that the
results of on-system reductions will be much more beneficial to the
Company and to the electric industry in general. Cinergy designed its
GHG goal to provide an opportunity for the Company to first explore
implementation of cost-effective on-system methods of reductions.
Part of Cinergy's GHG Management Goal was a pledge to spend up to
$21 million on CO2 reducing and offsetting projects from
2004 to 2010. In 2004 and 2005 Cinergy allocated $3 million in each
year to various projects designed to reduce, offset, or provide
research in the reduction of Cinergy's CO2 emissions. The projects
selected by the internal Cinergy GHG Management Committee included:
Prior to 2004 Cinergy has implemented a number of projects and
activities specifically for the reduction of GHG emissions or for other
business reasons that have reduced or offset our GHG emissions in the
following areas:
Power plant efficiency
Combined heat and power
Landfill gas capture and electric generation
End-user energy conservation
Renewable energy generation
Terrestrial sequestration
SF6 usage reduction
Fly ash reuse
Materials recycling
These past and future projects and activities that are not directly
connected to the expenditure of the $21 million will continue to reduce
GHG emissions.
The table below presents the amount of GHG reductions or offsets
for each of the project categories. Emission reductions for 2004 are
still being calculated.
The table below provides aggregated data for Cinergy's GHG
emissions and reductions for the years 2001 through 2003. Data for 2004
is still being aggregated. The company's reduction target is based on
Cinergy's baseline emissions that include its large generating plants,
non-regulated generating plants, combined heat and power plants,
fugitive natural gas emissions, SF6 emissions, and emissions from fleet
vehicles.
The reader should not assume that Cinergy has already met its GHG
goal of reducing its GHG emissions more than the five percent below our
2000 GHG emissions. While Cinergy's GHG emissions were below our year
2000 corporate baseline emissions of more than 73 million tons, the
lower emissions are due to the slow economy in 2001 and 2002 and mild
summer and winter weather in 2002 and 2003. GHG emissions in 2003 were
higher because of increased economic activity. The slow economy and
mild weather lowered demand for electricity so Cinergy generated less
and therefore lower associated GHG emissions. Cinergy cannot predict
future weather or economic conditions with absolute certainty. Cinergy
uses internal models to project electricity demand into the future.
Based on certain scenarios modeled during evaluation of the Cinergy GHG
goal, Cinergy anticipates that the demand for electricity will grow and
that our GHG emissions will exceed our 2000 baseline emissions anywhere
from one million tons to more than 12 million tons annually during the
2010 through 2012 time period.
Biography for James E. Rogers
Mr. Rogers, 57, has been CEO for more than 16 years--at PSI and now
at Cinergy. Prior to the formation of Cinergy, he joined PSI Energy,
Inc., in 1988 as the company's Chairman, President and Chief Executive
Officer. Prior to joining PSI, he was Executive Vice President,
Interstate Pipelines for the Enron Gas Pipeline Group. Before joining
Enron Corp., Mr. Rogers was a partner in the Washington, D.C. office of
Akin, Gump, Strauss, Hauer & Feld (a law firm based in Dallas, Texas).
He represented energy companies before the Federal Energy Regulatory
Commission (FERC), the Department of Energy, various Congressional
committees and federal courts.
Immediately before joining Akin, Gump, Strauss, Hauer & Feld, Mr.
Rogers was Deputy General Counsel for Litigation and Enforcement of the
FERC. In this position he directed all aspects of the FERC's litigation
and enforcement. Previously, Mr. Rogers served as Assistant to the
Chief Trial Counsel at the FERC, as a Law Clerk for the Supreme Court
of Kentucky, and as Assistant Attorney General for the Commonwealth of
Kentucky, where he acted as intervener on behalf of State consumers in
gas, electric, and telephone rate cases. He was a reporter for the
Lexington (Kentucky) Herald-Leader from 1967 to 1970.
Mr. Rogers has served more than 38 years cumulatively on the boards
of Fortune 500 companies. He is currently a director of the following
corporations: Cinergy Corp., Fifth Third Bancorp and Fifth Third Bank.
He serves as 2nd Vice Chairman of the Board, is on the Executive
Committee and is Chairman of the Strategic Planning Committee of the
Edison Electric Institute. He previously served as Chairman of the
Environmental Policy Committee. He also serves on the Board of the
American Gas Association and the U.S. Chamber of Commerce.
Mr. Rogers also serves on numerous civic boards and has published
numerous articles on energy and environmental issues. He formerly
served as director of the following corporations: Duke Realty Corp.,
Bankers Life Holding Corporation; A O Irkutskenergo (a Russian
hydroelectric/coal-fired steam utility), INB (Indiana National Bank)
and NBD Indiana Inc. He has testified before Congressional Committees
13 times since 1989.
Mr. Rogers attended Emory University (Atlanta, Georgia) and holds a
B.B.A. and J.D. degree from the University of Kentucky, where he was a
member of the Kentucky Law Journal and Beta Gamma Sigma (Academic
Honorary Society). He was named to the Hall of Fame at the Carol Martin
Gatton College of Business and Economics and the Hall of Fame of the
College of Law, both of the University of Kentucky. He also received an
honorary Doctor of Law degree from Indiana State University.
Chairman Boehlert. Thank you very much, Mr. Rogers.
Dr. McFarland.
STATEMENT OF DR. MACK McFARLAND, ENVIRONMENTAL MANAGER,
FLUOROCHEMICALS BUSINESS, E.I. DuPONT DE NEMOURS AND COMPANY
Dr. McFarland. Good morning, Chairman Boehlert, Mr. Gordon,
and members of the Committee.
My name is Mack McFarland, and I am the Global
Environmental Manager for DuPont's Fluorochemicals Business.
In that role, I advise our worldwide operations on a range
of environmental and business matters. I appreciate this
opportunity to share our experiences regarding greenhouse gas
emission reductions with you.
DuPont is a science-driven company with a commitment to
safety, health, and environmental protection. We use science to
derive products and services that improve the quality and
safety of people's lives. We also use science to drive how we
develop, manufacture, and manage our products throughout their
life cycle.
As a 200-year-old company, we take the long view and strive
for sustainable growth that benefits our shareholders, the
societies in which we operate, and the global environment. It
is that commitment to sustainable growth and the science that
underpins our approach to global climate change.
Our experience with climate change actually began with
another global environmental issue, stratospheric ozone
depletion. DuPont developed the first fluorochemical
refrigerating gases, CFCs, in the 1930s. In the 1970s, when it
was proposed that CFCs might deplete stratospheric ozone,
DuPont delved into the science. In 1988, based on the
scientific consensus presented in the International Ozone
Trends Panel Report and our evaluation of that science, we
voluntarily and unilaterally committed to phase out CFCs.
We also used our science capabilities to lead in the
development of alternative products to meet the growing
societal demand for air conditioning and refrigeration. This
experience with the CFC ozone issue provided us with a keen
understanding of the implications of environmental issues that
are global in scope and decades to centuries in duration.
Global climate change was a natural extension of this
experience. With the beginning of the negotiations of the UN
Framework Convention on Climate Change, we again delved into
the science. We concluded that the scientific understanding,
while imperfect, was certainly sufficient to indicate a
legitimate issue. In 1991, we took a hard look at our own
greenhouse gas emissions and realized that they were not
insignificant. While we recognize that it would take concerted
global action across all economic sectors to address global
climate change, we determined that we needed to take
responsible action and reduce our own emissions footprint.
The largest contributors to our footprint were unintended
byproduct emissions, nitrous oxide associated with the
manufacture of a key raw material for nylon, and HFC-23
associated with the manufacture of a fluorochemicals
refrigerant.
We set aggressive goals to reduce our greenhouse gas
emissions by 40 percent on a global carbon equivalent basis by
the year 2000, using 1990 as a base year. We also set goals to
address carbon dioxide emissions from energy use, aiming to
keep energy use flat, even as production grew.
By the year 2000, we exceeded our original goals globally.
In 1999, with our 2000 goals in sight and the scientific case
for climate change continuing to strengthen, we reaffirmed our
commitment to action on greenhouse gases and set aggressive new
goals for the year 2010. We committed to reduce our global
carbon equivalent greenhouse gas emissions by 65 percent, using
1990 as a base year. We committed to continue to hold our
global energy use flat. And finally, we committed to acquire 10
percent of our global energy in the year 2010 from renewable
resources. By the year 2004, we had exceeded the emission
reduction goal and had held energy use flat while global
production grew by over 30 percent.
We are also making steady progress on our renewable energy
goal. We have spent over $50 million to achieve the byproduct
emission reductions and have made additional investments in
energy efficiency. On the other hand, achieving the energy flat
goal has saved us over $2 billion.
In conclusion, first, we determined that enough was known
about global climate change to provide a basis for concern and
warrant prudent action on our part. Second, we set and achieved
aggressive greenhouse gas emission reduction goals that, while
costly to pursue, have created an overall cost savings for the
company due to reduced energy use. Third, we believe that
climate change is clearly an environmental, social, and
economic challenge and must be addressed with all of these
aspects in mind. Fourth, although we have no regrets over
taking these actions, we do have a concern that developing
policy regimes around the world do not adequately account for
the actions of early movers. This can place the early movers at
a competitive disadvantage and act as disincentives to others
to step up with bold, voluntary action.
Thank you. I will be happy to answer any questions.
[The prepared statement of Dr. McFarland follows:]
Prepared Statement of Mack McFarland
Good morning Chairman Boehlert, Mr. Gordon, and Members of the
Committee. My name is Mack McFarland, and I am the Global Environmental
Manager for DuPont's fluorochemicals business. In that role I advise
our worldwide operations on a range of environmental and business
matters. I appreciate this opportunity to share our experiences
regarding greenhouse gas emission reductions with you.
DuPont is a science driven company with a commitment to safety,
health and environmental protection. We use science to derive products
and services that improve the quality and safety of people's lives. We
also use science to drive how we develop, manufacture and manage our
products throughout their life cycle. As a 200-year-old company we take
the long view, and strive for sustainable growth that benefits our
shareholders, the societies in which we operate and the global
environment. It is that commitment to sustainable growth and dedication
to science that underpins our approach to global climate change and
greenhouse gas emissions reductions.
Our experience with greenhouse gas reductions actually began with
another global environmental issue; stratospheric ozone depletion.
DuPont developed the first fluorochemical refrigerant gases,
chlorofluorocarbons, or CFCs, in the 1930s. They were developed as safe
alternatives to the more dangerous refrigerants then in use, such as
ammonia. In the 1970s when it was proposed that CFCs might deplete
stratospheric ozone DuPont delved into the science. In 1988, based on
the scientific consensus presented in the International Ozone Trends
Panel Report, and our evaluation of that science, we voluntarily and
unilaterally committed to phase out CFCs. We also used our science
capabilities to lead in the development of alternative products to meet
the growing societal need for air conditioning and refrigeration. This
experience with the CFC/ozone issue provided us with a keen
understanding of the implications of environmental issues that are
global in scope and decades to centuries in duration.
Global climate change was a natural extension of this experience.
With the beginning of negotiations for the UN Framework Convention on
Climate Change we again delved into the science. We concluded that the
scientific consensus, while imperfect, was certainly sufficient to
indicate a legitimate issue.
In 1991 we took a hard look at our own greenhouse gas emissions and
realized that they were not insignificant. While we recognized that it
would take concerted global action across all economic sectors to
address global climate change, we determined that we needed to take
responsible action to be part of the solution, and to reduce our own
emissions ``footprint.'' The largest contributors to our footprint were
unintended by-product emissions associated with manufacture of a key
raw material for nylon and with manufacture of a fluorochemicals
refrigerant; nitrous oxide from our nylon plants and trifluoromethane
or HFC-23 from some of our fluorochemical plants. Both have significant
global warming potentials.
We set aggressive goals to reduce our global greenhouse gas
emissions by 40 percent on a carbon-equivalent basis by the year 2000,
using 1990 as a base year, with most of our actions targeted at nitrous
oxide and HFC-23. We built a detailed inventory of our global emissions
and a system to search out the lowest cost emissions reductions in our
global operations, as well as a system to track and publicly report our
ongoing emissions. We also set goals to address carbon dioxide
emissions from energy use, aiming to keep energy use flat even as
production grew.
We recognized that this was a significant undertaking that needed
to be done in as flexible and cost effective a manner as possible.
This, of course, is as true for a national or global program as it is
for a single company's actions. The byproduct emissions were reduced
both by traditional abatement technologies and, more importantly, by
changing our manufacturing processes to avoid producing them in the
first instance. We pursued our energy goals through a wide variety of
large and small projects, including everything from expanding our use
of highly efficient co-generation to changing light bulbs in our
offices.
So, how have we done against these goals? By the year 2000, we
exceeded our original goals globally. In 1999, with our 2000 goals in
sight and the scientific case for climate change continuing to
strengthen, we reaffirmed our commitment to action on greenhouse gases
and set aggressive new goals for the year 2010.
First, we committed to reduce our global carbon-
equivalent greenhouse gas emissions by 65 percent using 1990 as
a base year (vs. our original 40 percent goal).
Second, we committed to continue to hold our global
energy use flat using 1990 as a base year. The achievement of
this goal will require that our business growth be much less
raw material and energy intensive than in the past--a move that
is very consistent with our overarching goals of sustainable
growth.
Third, we have committed to acquiring 10 percent of
our global energy use in the year 2010 from renewable
resources. We want to show that we are serious about the need
for renewable energy to be a part of our future. We also want
to indicate that we are prepared to work with energy suppliers
and others to develop a robust renewable energy market.
We have been making steady progress on our 2010 goals. Through a
technology breakthrough in our fluorochemical operations, we have
reduced our global carbon-equivalent emissions by over 72 percent. We
also continue to hold our energy use flat while our global production
has grown over 30 percent since 1991. This has resulted in a reduction
of 420 million cumulative metric tons of greenhouse gas emissions from
our global operations versus business as usual. We are also making
solid progress in meeting our renewable energy goal with about five
percent of our current energy use from renewable resources such as
wind, hydropower and landfill gas.
In 2004 we divested our nylon business and we are now in the
process of recalculating our goals by subtracting the emissions of that
business from both our 1990 baseline and from the emissions for
subsequent years. We will of course make the recalculated goals public.
Let me share with you a few of the things we have learned from our
experience with reducing greenhouse gas emissions.
First, these kinds of reductions are not a simple
matter and have economic ramifications. We have spent over $50
million dollars in our efforts to reduce nitrous oxide and HFC-
23, as well as spending on energy efficiency projects.
That leads me to a happier second key learning--the
sort of programmatic actions necessary to address greenhouse
gases can lead to unexpected benefits. Our hold-energy-use-flat
goal has helped us to focus effort on energy savings activities
and projects that might not have otherwise risen far enough up
on our capital spending priorities to have been pursued. The
result? We have saved over $2 billion dollars on energy costs
since 1991, and this is the ``gift that keeps on giving'' in
ongoing operating cost savings.
Third, as various greenhouse gas emissions policy
regimes develop around the world there seems to be little
effort to take account of the actions of early movers like
ourselves. This can place the early movers at a competitive
disadvantage and act as a disincentive to other entities to
step up with bold voluntary actions.
In conclusion:
We determined that enough is known about global
climate change to provide a basis for concern and warrant
prudent action on our part;
We have set and achieved aggressive greenhouse gas
emissions reduction goals that while costly to pursue, have
created an overall cost savings for the company due to reduced
energy use;
Climate change is clearly both an environmental and
economic challenge and must be addressed with both of these
aspects in mind.
Thank you. I will be happy to answer any questions.
Biography for Mack McFarland
Summary CV
Mack received a B.S. in chemistry from the University of Texas at
Austin in 1970 and a Ph.D. in Chemical Physics from the University of
Colorado in 1973. From 1974 through 1983, first as a Post-Doctoral
Fellow at York University and then a research scientist at the NOAA
Aeronomy Laboratory, Mack planned, conducted and interpreted field
experiments designed to probe the cycles that control atmospheric ozone
concentrations. These studies included measurements of gases and
processes important to the global climate change issue. In late 1983
Mack joined the DuPont Company. His primary responsibilities have been
in the areas of coordination of research programs and assessment and
interpretation of scientific information on stratospheric ozone
depletion and global climate change. During 1995 and 1996, Mack was on
loan to the Atmosphere Unit of the United Nations Environment Programme
and in 1997 he was on loan to the Intergovernmental Panel on Climate
Change (IPCC) Working Group II Technical Support Unit. The value of his
contributions to DuPont has been recognized through a C&P Flagship
Award, Environmental Respect Awards, and Environmental Excellence
Awards. In 1999, Mack was awarded an individual Climate Protection
Award by the U.S. Environmental Protection Agency for his contributions
in providing understandable, reliable information to decision-makers.
Education
Ph.D. in Chemical Physics, 1973, University of Colorado. Thesis title:
Development of a Flow-drift Technique for Ion-molecule Kinetic
Studies.
B.S. in Chemistry with Honors, Special Honors, 1970, University of
Texas at Austin.
Publications
Co-author of over 40 scientific publications primarily in the areas
of reaction kinetics and atmospheric measurements of trace gas
concentrations.
Work Experience
March, 1998-present: Principal Scientist, Environmental Programs in
DuPont Fluoroproducts, Wilmington, DE.
March, 1997-February, 1998: On loan (from DuPont) to the
Intergovernmental Panel on Climate Change (IPCC), Working Group
II (WG II), Technical Support Unit (TSU), Washington, D.C.
Decision-makers rely on IPCC Assessment Reports as their
primary source of scientific, technical and socio-economic
information on global climate change. The TSUs play lead roles
in the IPCC process by helping to assure that reports are
complete, objective and policy relevant.
March, 1995-February, 1997: On loan (from DuPont) to the Atmosphere
Unit of the United Nations Environment Programme (UNEP),
Nairobi, Kenya. Responsibilities during this assignment
included representing UNEP at international meetings, assisting
in strategy development for the Atmosphere and other UNEP
programs, and preparing policy relevant materials for
publication.
December, 1983-February, 1995: Principal Consultant, Environmental
Programs (most recent title) in DuPont Fluoroproducts (formerly
Freon(r) Products), Wilmington, DE. Primary responsibilities
included management of atmospheric science research programs;
representing DuPont in scientific meetings and before
regulatory bodies, the media and customers; facilitating the
preparation of scientific assessments; and analysis and
communication of information on stratospheric ozone depletion
and global climate change for development and implementation of
business strategies.
1975-1983: Scientist in the National Oceanic and Atmospheric
Administration (NOAA) Aeronomy Laboratory (AL), Boulder, CO.
While at York University (see below) and NOAA, Mack planned,
conducted and interpreted field experiments designed to probe
the cycles that control atmospheric ozone concentrations.
1974-1975: Post Doctoral Fellow at York University, Downsview, Ontario,
Canada.
Since joining DuPont in 1983, Mack's primary responsibilities have
been in the areas of coordination of research programs and assessment
and interpretation of scientific information on stratospheric ozone
depletion and global climate change. Coordination of research programs
involved two types of activities, both aimed at a cooperative approach
to research and assessment to provide policy relevant information:
project management through representing DuPont on the industry
sponsored research programs to determine potential environmental
impacts of CFCs and their replacements; and influence of direction of
government sponsored research programs to ensure that they were
appropriately focused on providing sound information as a basis for
decisions. Cooperative research efforts tend to build consensus around
key policy relevant scientific information as opposed to isolated
research programs that have led to ``our science/their science''
politicization of environmental issues in some other areas.
Mack has been involved as an author, contributor or reviewer of
every major international assessment on stratospheric ozone depletion
and global climate change. Most recently he was a Lead Author of the
technology chapter of Working Group III (Mitigation) of the IPCC Third
Assessment Report (TAR--the report released in 2001) and a Lead Author
on the Appendix to that chapter: ``Options to Reduce Global Warming
Contributions from Substitutes for Ozone Depleting Substances.'' He was
also a Lead Author of the Technical Summary for the Working Group I TAR
(The Scientific Basis) as well as an Author of the draft Summary for
Policy-makers that was ultimately accepted by the IPCC. In 1999 he was
a member of the UNEP TEAP task force that prepared the report: ``The
Implications of the Montreal Protocol of the Inclusion of HFCs and PFCs
in the Kyoto Protocol.''
Interpretation and communication of scientific information based on
these assessments has provided a basis for developing and implementing
business strategies. Mack has given hundreds of presentations on the
science of ozone depletion and climate change to DuPont management,
DuPont's customers, media representatives, government representatives
and scientists. The value of his contributions to DuPont has been
recognized through a C&P Flagship Award, Environmental Respect Awards,
and Environmental Excellence Awards. In 1999 Mack was awarded an
individual Climate Protection Award by the U.S. Environmental
Protection Agency for his contributions in providing understandable,
reliable information to decision-makers.
Chairman Boehlert. Thank you very much, Dr. McFarland.
Mr. Meissen.
STATEMENT OF MR. RONALD E. MEISSEN, SENIOR DIRECTOR,
ENGINEERING, ENVIRONMENT, HEALTH & SAFETY, BAXTER
INTERNATIONAL, INC.
Mr. Meissen. Mr. Chairman and Members of the Committee, I
would like to thank you for your leadership on this area of
global climate change. I would also like to thank you for
holding this hearing.
I am Ron Meissen, and I manage Baxter's climate
initiatives. I also manage the reduction of Baxter's greenhouse
gas emissions. I appreciate the opportunity that you have
provided to us to describe the balance between environmental
stewardship and business realities.
In my remarks today, I would like to share with you some of
the examples of how Baxter is proactively addressing
environmental issues by driving greater operating efficiencies,
adopting new technologies, and collaborating through public and
private partnerships.
Baxter is a global health care company based in Deerfield,
Illinois that produces biotech, specialty pharmaceutical, and
device products that are used in the treatment of a variety of
complex medical conditions.
In the mid-1990s, Baxter began publicly reporting
information regarding energy use, cost, and associated
greenhouse gas emissions, and was the first company to publish
an environmental financial statement to demonstrate the linkage
between our activities and our bottom line. In 1997, we set a
number of long-term, nine-year goals in environmental health
and safety including a goal to reduce energy usage and
associated greenhouse gas emissions by 30 percent per unit.
A key driver in our proactive initiatives has been the
realization that sound environmental practices can provide a
competitive advantage. By driving greater operating
efficiencies by adopting new technologies and by sharing ideas
and best practices, we have achieved a 35 percent per unit
reduction in greenhouse gas emissions from 1996 to 2004, a 22
percent improvement in energy efficiency during the same
period, and our environmental health and safety investments
over the last six years have yielded a savings of $80 million
in 2004. We estimate that our energy savings and cost avoidance
alone in that year exceeded $9 million.
The benefits go far beyond cost avoidance and energy or raw
material savings. Many of the initiatives that we have put in
place and investments that we have made have yielded higher
quality levels, greater production output, and flexibility in
our operations, reduced waste, as well as improvements in
workplace safety, which is very important to Baxter.
We have pioneered a Lean and Clean approach by applying
Lean manufacturing disciplines to our environmental processes
and environmental know-how to our manufacturing operations. You
may be familiar with Lean manufacturing, which is a process
designed to remove waste and improve quality and efficiency by
reducing or eliminating non-value-added activities and
materials.
At Baxter, we have integrated Clean expertise into our Lean
manufacturing initiatives to not only prevent negative
environmental consequences but also to identify opportunities
for environmental improvement.
Over the past decade, Baxter has grown significantly,
investing in important expansions and upgrades to our
manufacturing base. The investments that we have made also
provide great opportunities to implement environmental
improvements. For example, in the process of expanding our
facility in Bloomington, Indiana, we are using new technologies
to reduce energy usage and associated greenhouse gas emissions.
I also can not speak positively enough about the benefits
of collaboration through public and private partnerships, such
as the U.S. EPA's Climate Leaders program and the Green
Supplier Network.
Last year, Baxter led participation in the health care
industry in the Green Suppliers Network program, which strives
to integrate both Lean and Clean manufacturing principles into
the operations of suppliers common to that particular industry.
So far, seven Baxter suppliers have agreed to participate in
the program in which the U.S. Department of Commerce's
Manufacturing Extension Partnership and the U.S. EPA provide
fronts for technical professionals to train suppliers in Lean
and Clean manufacturing processes. These professionals conduct
a review of the suppliers' operations and recommend areas for
improvement. This program brings expertise to small- and
medium-sized companies that would normally not be considered or
it would be unaffordable to them.
We are a global company, and we must remain globally
competitive. Our 67 manufacturing facilities are located in 28
countries, and we hold all to the same high levels of
standards.
Accordingly, we must closely monitor the actions proposed
and taken by other countries to address climate change. For
example, one of our food manufacturing facilities in Ireland
will be affected by the phase one of the EU Emissions Trading
Directive, which establishes a mandatory carbon cap and trade
system. Climate taxes are also being implemented in some
countries, and we currently pay climate tax for the electricity
that we use in the United Kingdom.
We believe we are well positioned to respond to these
initiatives, because our experience has taught us that
reasonable improvements in energy conservation and emissions
reductions are possible without huge investment, that
investments in technology and improvements in manufacturing
processes can bring both environmental and other benefits,
including quality improvements, reduced raw material costs, and
improved workplace safety, that companies that have been
forward-looking on this issue are in a better position to
compete on a global basis.
In summary, we believe that it is possible to responsibly
address environmental issues and specifically climate change in
a manner that provides economic benefit and is of a competitive
advantage to our company.
Thank you for this opportunity to share with you our
experiences and perspectives.
[The prepared statement of Mr. Meissen follows:]
Prepared Statement of Ronald E. Meissen
Mr. Chairman and Members of the Committee, I would like to thank
you for this opportunity to testify today on climate change and related
activity within the business community, particularly at my company,
Baxter International Inc.
I speak to you today both as a representative of one company that
has been recognized as being at the leading edge of corporate
environmental stewardship and as a practicing expert in the field. My
name is Ron Meissen, and I serve as Senior Director of Environment,
Health and Safety Engineering at Baxter. In addition to my professional
interest in the subject of climate change and sustainability, I have a
strong personal interest in this subject as well--I am currently
pursuing my Ph.D. at the University of Wisconsin in Madison in
sustainable development. The focus of my dissertation research, which I
am hoping to complete in the next year, is the development and
application of a strategic business model to reduce energy related
greenhouse gas emissions.
In my role at Baxter, I coordinate the company's safety,
occupational health, industrial hygiene and environmental engineering
professionals as they lead their respective functions for the company
and provide their expertise to Baxter's facilities and employees
throughout the world. I also oversee Baxter's initiatives related to
climate change and greenhouse gas emissions reductions.
Baxter International Inc. is a global health care company based in
Deerfield, Illinois that assists health care professionals and their
patients with treatment of complex medical conditions including
hemophilia, immune disorders, kidney disease, cancer, trauma and other
conditions. Baxter's 48,000 employees apply their expertise in medical
devices, pharmaceuticals and biotechnology to help make a meaningful
difference in patients' lives. In short, we strive to make a positive
impact on the health and well-being of our local and global
communities, and to conduct our operations in a manner that minimizes
the use of natural resources and impact on the environment. Because of
the life-saving nature of the products that we make, and the
significant impact that we have on human health, Baxter has held
environmental stewardship as a priority for more than two decades, and
has been a pioneer in the areas of environmental financial reporting,
management of environmental, safety and health data, and establishing,
tracking progress against and reporting on specific environmental
goals, including greenhouse gas emissions. We recognize that the health
of the planet affects the health of the people who inhabit it. As a
health care company, we understand this connection and work toward
improving both.
I gave my first speech on global warming in 1989, to a group of my
colleagues attending the company's annual Environmental Conference.
Even then, prior to the more definitive scientific studies that have
emerged over the last decade, some environmental professionals and
enlightened organizations concluded that their emissions were having an
impact on the atmosphere and environment, and began pursuing
initiatives to reduce energy use, reduce emissions and eliminate the
use of compounds and gases believed to contribute to the greenhouse
effect. In the early 1990s, I became very interested in sustainable
development, especially after the Earth Summit Conference in 1992, when
essentially all the nations of the world adopted sustainable
development as world policy.
In the mid-1990s, Baxter began tracking and publicly reporting
detailed information regarding energy use, energy cost and associated
greenhouse gas emissions from all of Baxter's facilities. Then, in
1997, Baxter set a number of long-term environmental, health and safety
(EHS) goals, including a goal to reduce energy usage and associated
greenhouse gas emissions by 30 percent, per unit of production
activity, by 2005 from 1996 levels. Also in the late 1990s, the World
Business Council on Sustainable Development (WBCSD) and the World
Resources Institute (WRI) organized a group of experts and business
leaders to develop the WBCSD/WRI GHG Protocol for calculating
greenhouse gas emissions. I was honored to be a part of that group to
develop what is now the global standard businesses and other
organizations use to determine their greenhouse gas emissions.
Baxter has continued its leadership on this issue in the ensuing
years, becoming one of the initial members of the Pew Center on Global
Climate Change's Business Environment Leadership Council, a non-profit,
non-partisan independent organization that is facilitating exchange of
information and innovative solutions to address global climate change,
a charter member of the U.S. EPA's Climate Leaders Program, a voluntary
EPA industry-government partnership that encourages companies to
develop long-term comprehensive climate change strategies, and a
founding member of the Chicago Climate Exchange, the first voluntary
pilot carbon trading platform in North America.
Our leadership and commitment to reducing our environmental
footprint and advancing the health and welfare of our communities has
been sustained over the years not just by good intentions. A key driver
for these proactive initiatives over the years at Baxter has been the
realization that sound environmental practices can contribute to and in
some cases drive competitive advantage.
By driving greater operating efficiencies, by piloting and in many
cases adopting new technologies, and by sharing ideas and best
practices within the company and through collaborations and voluntary
programs sponsored by the EPA and others, we have achieved among other
things:
A 35 percent reduction in greenhouse gas emissions
from 1996 through 2004, on a per-unit-of-production value
basis;
A 22 percent improvement in energy efficiency from
1996 through 2004, on a per-unit-of-production value basis; and
Savings and cost avoidance totaling several millions
of dollars each year. In 2004 alone, we estimate our energy
savings and cost avoidance exceeded $9 million.
And the benefits go far beyond just cost avoidance and energy or
raw material savings. Many of the initiatives we have put in place in
our facilities have also brought higher production throughput, higher
quality levels, greater production flexibility and optimization of
manufacturing assets, reduced scrap materials and waste, as well as
improvements in workplace safety.
Given the nature of our products and the nature of our operations,
the majority of Baxter's greenhouse gas emissions are carbon dioxide
emissions related to energy usage. Therefore, the focus of our
greenhouse gas management strategy is energy conservation--
specifically, activities and initiatives that improve the energy
efficiency of our facility and reduce our energy costs.
Driving Operating Efficiencies
At Baxter, we view EHS as an integrated part of our operations, not
as a separate or supplemental function. We believe that world-class
manufacturing requires excellence in design, process, purchasing,
quality and EHS. Successful, world-class companies tap all of those
areas of expertise in a seamless manner to reduce waste, drive
efficiency and increase productivity.
By applying Lean manufacturing disciplines to our environmental
processes, and environmental know-how to our manufacturing operations,
we have driven both Lean and Clean concepts and tools through our
organization. The results have been greater efficiencies and
productivity in our manufacturing facilities, as well as reductions in
raw material and energy use, and reduction in waste generation and
emissions.
Lean manufacturing is a process designed to remove waste and
improve quality and efficiency by continuously identifying, reducing
and eliminating non-value-added activities, materials and other
resources in the manufacturing process. Lean tools like value streams
and process mapping help identify opportunities to reduce raw
materials, wasted motion and scrap by standardizing processes and
materials by pinpointing where waste is created. But, Lean
manufacturing initiatives, when taken solely on their own, can
sometimes have negative environmental consequences.
At Baxter, we have integrated our EHS expertise and professionals
into Lean manufacturing initiatives to not only prevent negative
environmental consequences, but also to identify opportunities for
environmental improvement--we call this Lean and Clean. First, we apply
environmental concepts such as waste, water use and emissions to such
commonly used lean tools as value stream maps to incorporate
environmental considerations into the improvement initiative. Secondly,
we apply lean tools to EHS-focused processes as waste water treatment
or safety incident investigations to make our EHS processes more
efficient. And, we integrate our tradition pollution prevention
techniques into Lean and Clean tools to provide a new way of
systematically looking at waste reduction opportunities.
This enables plant personnel to see and think about their processes
differently, which can and does inspire innovative solutions. In a
number of our manufacturing facilities, projects are underway that use
process mapping and other lean manufacturing techniques to reduce the
amount of waste or scrap generated in production. By breaking down all
of the steps in a specific manufacturing process and assessing the
resource allocation in terms of materials, utilities and other
``inputs'' and ``outputs'' for each step, our plants are able to
identify multiple opportunities to reduce both manufacturing costs and
waste. And, since employees themselves generate the ideas, they have a
vested interest in seeing the initiatives through to successful
completion and are motivated to continue to suggest further
improvements.
The American Society for Quality recently recognized our facility
in Marion, North Carolina with its Gold Award for International Team
Excellence for applying Lean tools to one area of the facility. Through
value stream mapping, the team identified a number of opportunities to
reconfigure production processes, which yielded increased product
throughput, decreased the amount of manufacturing floor space required
to get the work done, and reduced energy and heating, ventilation and
air conditioning, or HVAC, requirements. As a result of these changes,
the facility estimates it has saved in excess of $100,000 per year in
utility costs. While $100,000 a year may not seem like a big number,
when you consider that we have 67 manufacturing facilities alone, these
kinds of projects and incremental savings quickly add up to much larger
numbers and do make a difference.
Adopting New Technologies
Over the last decade, Baxter has grown significantly, investing in
important expansions and upgrades to its manufacturing base. The
capital investments that we have made to expand our manufacturing
capacity, assure product quality and advance our product portfolio have
also provided great opportunities for us to implement environmental
improvement.
For example, we are moving away from sterilization methods that use
ethylene oxide to methods that use e-beam sterilization. Baxter is
different from most pharmaceutical companies, because we don't
manufacture pills and tablets. Instead, most of our products are
medications that are administered intravenously or injected, or are
devices. The production process for these types of products typically
requires much more extensive sterilization procedures, which can be
labor and capital intensive. For decades, many of our products have
been sterilized using ethylene oxide. In this process, finished product
is moved along a conveyor belt into a special room or chamber. Then
ethylene oxide gas is released into the room and product exposed to the
gas for a certain length of time to render it sterile. The ethylene
oxide, which is a toxic gas, is then evacuated from the room by means
of vacuum pressure, which is an energy intensive process. Then the
product is moved to another well-ventilated area for a period of time
to allow for any remaining gas to be released from the product. All of
the exhaust gases are required to be treated with a scrubber, also an
energy intensive process.
Now, we are increasingly using alternative, more energy efficient
methods of sterilization that also have considerably less environmental
impact--technologies similar to those used to protect your own mail
from anthrax and other contamination. With e-beam sterilization, we use
high energy electrons to sterilize our products. These newer methods
are significantly more energy efficient and do not have the same
requirements for ventilation and treatment of exhaust gases.
Because of the sterilization processes we employ and the clean room
environments we must maintain in our facilities in order to produce the
highest quality of medical products, our HVAC requirements are very
high, and energy intensive, in some cases representing 60 to 70 percent
of the energy consumption for the facility. Accordingly, this is an
important area of focus for us.
For example, we are currently in the process of expanding our
facility in Bloomington, Indiana, and are employing new technology to
replace clean rooms and thereby reduce our HVAC and lighting
requirements. Through the use of isolators, special pre-assembled self-
contained production and laboratory units, we are able to confine and
more closely control the higher sterility, ventilation and lighting
requirements of a clean room to significantly smaller space. Picture if
you will a trailer sized unit, with equipment inside and the walls made
up of windows. Depending on the particular application, work may done
in the small area within the isolator, or employees may even work
outside of the unit, with their hands and arms inserted into glove-like
apparatus that extends from the window into the unit. Not only will
this approach save a considerable amount in energy costs, less
investment is required in HVAC and other infrastructure. And, the risk
of employees possibly being exposed to chemicals used in the process is
significantly lower.
Sharing Ideas and Best Practices
I cannot speak positively enough about the benefits of
collaboration--the sharing of ideas, practical advice and best
practices within our own organization and through such formal industry
and agency collaborations as the EPA's Climate Leaders and Green
Supplier Network programs.
These programs serve as valuable clearinghouses for sharing of best
practices, real-world experience and multiple perspectives that really
set a strong foundation for continuous environmental improvement across
companies and industries. Most importantly, they are helping to address
some of the most difficult environmental challenges we face today, and
extending the progress that large companies like Baxter have made
further into the supply chain--to the smaller and medium sized
companies that are our suppliers.
Last year, Baxter spearheaded the participation of the health care
industry in a public/private initiative called the Green Suppliers
Network. The objective is to integrate both Lean and Clean
manufacturing principles into the operations of suppliers common to a
particular industry. While large companies like Baxter are able to tap
the expertise that resides within the organization to drive improvement
in operations and reduce their environmental impact, the reality is
that few small or medium size companies have that expertise available
to them internally. Over the years, we had tried to share our own
expertise with select suppliers through conferences, audits, and
meetings, but recognized that the impact that we could have was limited
while the opportunity for improvement was significant. We learned of
the Green Suppliers Network and the impact it was having in other
industries, like the automotive industry, and we were immediately
attracted to the program. Our Purchasing and Environment, Health and
Safety departments have worked to aggressively promote the program with
suppliers. So far, seven Baxter suppliers have agreed to participate in
the program, in which the U.S. Department of Commerce's Manufacturing
Extension Partnership (MEP) and the U.S. EPA provide funds for
technical professionals to train suppliers in Lean and Clean
manufacturing processes.
For a small fee, a participating supplier receives access to
manufacturing consultants experienced in process improvement and waste
reduction, including a week-long review of the supplier's operations,
help in administering relevant training and expertise, and a full
report detailing areas for improvement and change. Experts from EPA's
state pollution prevention technical programs also lend their support.
This program brings expertise and insight to these companies that would
normally not be considered or would be unaffordable.
The first of our seven suppliers to participate already has
implemented a number of changes and yielded impressive results,
significantly reducing energy consumption and therefore cost, and
significantly reducing hazardous waste generation and emissions--
savings that have far exceeded the initial fee and modest capital
investments required. The environmental and economic benefits realized
have motivated this supplier to continue with other initiatives. We
look forward to similar successes with the other suppliers that are
participating.
While we highly value external collaborations such as these, we
also recognize that some of the best ideas can and do come from within
our own company. We have created a number of ways to share and leverage
those ideas and expertise that resides within our global organizations,
including global energy engineering conferences, training sessions and
awards.
We held our last biannual global energy engineering conference in
September 2004 in Austin, Texas, with 60 Baxter energy managers
representing 44 facilities from 21 different countries attended the
week long conference. The conference included training sessions
dedicated to maximizing the performance of plant utility systems and
sharing information on best demonstrated energy practices. At every
biannual conference, each manufacturing facility is asked to identify
three specific energy projects that its energy management team will
commit to implement during the next two-year period. At the next energy
conference, the locations report the results of their three key
projects to all conference attendees. This open sharing of both
successful energy projects and unforeseen challenges has been
beneficial in strengthening individual expertise and broadening
institutional technical knowledge. As part of the conference, we also
present awards to the engineers and facilities that achieve outstanding
performance in such areas as:
Largest percentage of energy cost saved per unit of
production
Largest percentage of energy usage saved per unit of
production
Energy project that has the widest application
throughout Baxter
Most innovative cost saving project implemented at
Baxter
Largest percentage of energy saved of total facility
energy cost in a non-manufacturing facility
Special recognition for outstanding contribution to
Baxter's energy program.
Our next energy conference is scheduled for the fall of 2006, and I
am very excited to hear updates from the facilities on the three
projects that they each committed to in 2004.
While we have achieved reductions in greenhouse gas emissions and
improvements in energy efficiency over the years, we recognize that
much more needs to be done. We are a very global company, with more
than half of our sales and two-thirds of our employees located outside
the United States. Our 67 manufacturing facilities are located in 28
countries, and no matter where a facility is located, all are held to
the same high level of EHS policies, standards and metrics.
We are a global company and we must remain globally competitive.
Accordingly, we must closely monitor actions proposed or taken by other
countries to address climate change, such as implementing regional or
national carbon cap or trade systems. One of our manufacturing
facilities in Ireland will be affected by phase one of the EU Emissions
Trading Directive, which establishes a mandatory carbon cap-and-trade
scheme. Climate taxes also are being implemented in some countries. We
currently pay climate taxes on our electricity use in the United
Kingdom. Here in the United States, 132 mayors from across the country
recently announced that they would voluntarily adopt the Kyoto Protocol
reduction target for their cities. In 2001, Baxter developed its formal
position on climate change, which states that we believe, ``The Kyoto
agreement represents a first step in the international process, but
more must be done, both to implement the market-based mechanisms that
were adopted in principle in Kyoto and to more fully involve all
countries in the solution.''
Fortunately, because of our foresight on this issue, because of the
significant experience we have gained over the years in reducing our
greenhouse gas emissions and energy use, and the experience we have
gained through participation in the Chicago Climate Exchange's
voluntary program for capping and trading greenhouse gas emissions, we
expect to be well-positioned to respond to these and other emerging
cap-and-trade initiatives.
Our EHS policy clearly states that we are committed to continuous
improvement in environmental, health and safety performance. We strive
to conserve resources and minimize or eliminate adverse EHS effects and
risks that may be associated with our products, services and
operations. Because we self-manufacture nearly 90 percent of the
products that we sell, and because we have in place talented
environmental professionals in all of our major facilities, we are able
to more closely monitor our environmental impact, and implement
appropriate changes.
While we recognize that we are in the minority of companies that
voluntarily have taken action on this issue, we are encouraged by the
lessons that our own experience has taught us:
that reasonable improvements in energy conservation
and emissions reductions are possible without huge investment;
that investments in new technology and improvements
in manufacturing process can bring significant benefits in
quality, optimal use of manufacturing assets, reduced raw
material costs, and improved workplace safety as well as
reduced energy requirements and associated greenhouse gas
emissions; and
that companies that have been forward-looking on this
issue are in the best position to build upon the momentum they
have created and better compete on a global basis.
In summary, we believe that it is possible to responsibly address
environmental issues in a manner that provides economic benefit and
competitive advantage. Our experience has proven to us that the
business case is indeed there for taking action to reduce impact on our
climate and environment by decreasing energy consumption and lowering
greenhouse gas emissions.
Thank you for this opportunity to share with you some of our
experiences and perspectives on climate change.
Biography for Ronald E. Meissen
Ron Meissen manages worldwide Environment, Health and Safety (EHS)
resources for Baxter International Inc. In this position, Mr. Meissen
is responsible for providing EHS services to regional and facility team
members through the coordination of Baxter's safety, occupational
health, industrial hygiene and environmental engineering professionals.
Mr. Meissen joined Baxter in 1975 as a project control engineer and
progressed through a variety of positions in energy management and
environmental engineering. He has been actively engaged in the
company's environmental program and reporting and co-founded the
company's EHS sustainability team. For the past 10 years, he has
managed Baxter's greenhouse gas and climate change initiatives and
represents the company in outside climate groups, including the Chicago
Climate Exchange, the Pew Center on Global Climate Change and the U.S.
Environmental Protection Agency Climate Leaders Program.
Mr. Meissen has Bachelor of Science degree in civil engineering
from the University of Wisconsin-Platteville, a Master of Science
degree in civil engineering from the University of Illinois, and a
masters of business administration from Lake Forest Graduate School of
Management. He is currently pursuing his Ph.D. in sustainable
development at the University of Wisconsin-Madison, where he is working
on his dissertation about the development of a strategic business model
to reduce energy-related greenhouse gas emissions.
Chairman Boehlert. Thank you, Mr. Meissen.
Dr. Hobbs.
STATEMENT OF DR. ROBERT H. HOBBS, DIRECTOR OF OPERATIONS,
UNITED TECHNOLOGIES RESEARCH CENTER, UNITED TECHNOLOGIES
CORPORATION
Dr. Hobbs. Good morning, Mr. Chairman and Members of the
Committee. I am Bob Hobbs, Director of Operations at the United
Technology Research Center, the research and development arm of
United Technologies Corporation. United Technologies, based in
Hartford, Connecticut, is a diversified company that provides
high technology products and services to the aerospace and
commercial building industries worldwide. UTC's products
include Otis elevators and escalators, Carrier air conditioning
systems, UTC Fire & Security products and services, UTC Power
fuel cells, Pratt & Whitney aircraft engines and space
propulsion systems, Hamilton Sundstrand aerospace systems, and
Sikorsky helicopters.
UTC is a $38 billion company, the 39th largest in the
United States. Our shareholder return since 1992 is more than
three times that of either the S&P 500 index or the Dow 30
Industrials. UTC is proud of its record of providing
shareholder value within the confines of very good corporate
citizenship.
UTC is pursuing its climate change goals directly by
reducing greenhouse gas emissions produced by UTC operations
and indirectly by developing and manufacturing products that
use less energy and emit smaller amounts of greenhouse gases.
In 1997, UTC resolved to reduce its global energy
consumption by 25 percent by 2007. We exceeded that target
halfway through the 10-year period and so increased the goal to
a 40 percent reduction, which we met last year, two years
early. Since joining the Environmental Protection Agency
Climate Leaders in 2001, we have reduced our greenhouse gas
emissions by 74,000 metric tons as a result of our energy
efficiency goals. In roughly the same time period, our revenues
increased by $9.5 billion, demonstrating that environmental
quality and economic growth can indeed go hand-in-hand. UTC's
environmental performance and achievements recently earned us
one of the EPA's 2005 Climate Protection Awards.
Why is UTC taking a leadership role to address climate
change?
The short answer is that our own corporate policy demands
it. UTC's environmental health and safety policy requires that
we ``conserve natural resources in the design, manufacture, and
disposal of products and delivery of service.''
To quote our Chairman, George David, ``We don't choose
between responsibility and profitability. We pursue both with
discipline and focus.'' Our vision of corporate responsibility
and global sustainability places environmental performance
right alongside financial results. We believe that setting
goals for reduced energy consumption, which translates into
lower greenhouse gas emissions, has already improved our bottom
line performance by reducing production costs and allowing us
to be more competitive.
Environmental leadership doesn't merely enhance our
corporate reputation, it offers our customers world-class
quality and products while increasing efficiency and reducing
waste, making them better stewards of the environment as well.
By creating products that use less energy and help lower
greenhouse gases that contribute to climate change, we can
differentiate our products in an increasingly environmentally-
conscious global marketplace.
UTC has an expansive and diverse portfolio of energy-
efficient and environmentally-friendly products, but let me
talk briefly about one.
UTC Power has developed the industry's first integrated
microturbine and double-effect absorption chiller system, the
PureComfort 240M. The system converts more than 80 percent of
its fuel input to efficient electric cooling and heating
output. I started to say 90, because we see 90 percent fuel
efficiency in our laboratories. They quote 80 in their
literature. We expect it to reduce carbon dioxide emissions by
40 percent and nitrogen oxide emissions by 90 percent over
those of the average central fossil fuel generation plant. In
May, the A&P grocery chain installed a PureComfort 240M in its
Mount Kisco, New York store, citing the technology as one of
the company's commitments to ``make more efficient use of
energy and to protect the environment by minimizing
emissions.''
New corporate climate policies have proven to be
complementary to good business policies, allowing UTC to
understand, manage, track, and minimize our greenhouse gas
emissions and energy use while simultaneously adding business
value.
Thank you, Mr. Chairman, for giving us the opportunity
today to share with you and members of the Committee some of
the specifics of our commitment to reducing greenhouse gases
throughout our operation and across all our product lines. If
you would like further information regarding our environmental
success story, we have copies of the UTC 2004 corporate
responsibility report available here or on our website.
[The prepared statement of Dr. Hobbs follows:]
Prepared Statement of Robert H. Hobbs
Good morning, Mr. Chairman and Members of the Committee. I am Bob
Hobbs, Director of Operations at the United Technologies Research
Center, the research and development arm of United Technologies
Corporation (UTC). United Technologies, based in Hartford, Connecticut,
is a diversified company that provides high technology products and
services to the aerospace and commercial building industries worldwide.
UTC's products include Otis elevators, escalators and people movers;
Carrier heating and air conditioning systems; UTC Fire & Security fire
safety and security products and services; UTC Power fuel cells; Pratt
& Whitney aircraft engines; Hamilton Sundstrand aerospace systems; and
Sikorsky helicopters.
UTC & Corporate Responsibility
UTC is a $38 billion company, the 39th largest in the United
States. Our total shareholder return since 1992 is close to 1000
percent and is more than three times that of either the S&P 500 index
or the Dow 30 Industrials. UTC is proud of its record of solid
corporate citizenship. We've been included in the Dow Jones
Sustainability World Indexes since it began in 1999 and have been rated
AAA by Innovest Strategic Value Advisors. We were also named one of the
world's 100 most sustainable companies at this year's World Economic
Forum in Davos by Corporate Knights and were the only aerospace company
included. UTC's success is rooted in clarity of organization and total
alignment among management about what we want to accomplish. For UTC,
that is shareholder value within the confines of very good corporate
citizenship. We don't choose between one or the other, we pursue both
with discipline and focus.
Shareholder value comes in part from research and development. UTC
spends approximately $2.8 billion annually, 90 percent of that in the
United States, to develop tomorrow's technologies. United Technologies
Research Center (UTRC) works with each UTC business to make certain
their products and services are the most innovative and technologically
advanced in the world. UTRC is an incubator for UTC products,
researching energy and environmental innovations to assist UTC in
developing, and then building, new products for the next generation.
Whether its research on hydrogen production and storage technologies,
inventing ways to heat and cool more efficiently or improving jet
engine design and efficiency, UTRC provides valuable technical
experience to further UTC's pursuit of better environmental quality in
its products.
UTC Voluntary Commitment
UTC is constantly working to reduce the environmental footprint of
our worldwide facilities and operations. We are accomplishing this
objective directly by reducing greenhouse gas emissions produced by UTC
operations and indirectly by developing and manufacturing products that
use less energy and emit smaller amounts of greenhouse gases. We are
driving pollutants in the manufacturing process down to their lowest
achievable levels and reducing our energy consumption so less pollution
is produced in the satisfaction of our energy needs. UTC quantifies
environmental goals, measures progress and reports that progress to our
Board of Directors, employees and community.
In 1997, UTC resolved to reduce its global energy consumption by 25
percent (normalized for revenues) from 1997 levels by 2007. Once we
exceeded that target, we increased the goal to a 40 percent reduction
in our energy use worldwide, and we are already meeting that ambitious
goal. Even as we revised the goal upward, we kept the timetable firm
and still achieved the enhanced goal two years ahead of schedule. Since
joining the Environmental Protection Agency (EPA) Climate Leaders in
2001, we have reduced our greenhouse gas emissions by 74,000 metric
tons as a result of our energy efficiency goals. In roughly the same
time period, our revenues increased by $9.5 billion, demonstrating that
environmental quality and economic growth can indeed go hand-in-hand.
UTC's environmental performance and achievements recently earned us one
of the EPA's 2005 Climate Protection Awards.
Key Drivers in Reducing Greenhouse Gases
Why is UTC taking a leadership role to address climate change? The
short answer is that our own corporate policy demands it. UTC's
environmental, health and safety policy requires that we ``conserve
natural resources in the design, manufacture, use and disposal of
products and delivery of service.'' We take this directive extremely
seriously and have established internal environmental standards that
both comply with the law and go beyond it when necessary to achieve the
goals of this policy. We don't choose between responsibility and
profitability; our corporate responsibility places environmental
performance right alongside financial results.
We would not be where we are today if not for strong commitment of
our Chairman, George David, senior managers and front-line employees in
each of our business units. In a speech given in 1998 at the Earth
Technologies Forum, Mr. David explained his personal motivation in
committing the corporation to address the climate change issue by
stating: ``I have children and prospectively grandchildren and great
grandchildren whose lives and livelihoods concern me.'' Mr. David again
stressed UTC's commitment to sustainability in a 2003 speech to the
Society for Organizational Learning in East Hartford, Connecticut. He
defined UTC's approach to sustainability within the context of five
general themes: energy efficiency of our products and service;
environment, health and safety impacts in our own operations;
productivity in its conventional sense (doing more with less);
opportunities for employees to develop themselves; and legal compliance
and high ethical standards.
Through close coordination among the operating businesses and
corporate headquarters, UTC has brought together a tight network of
experts to gather and analyze energy consumption data; provide
technical assistance; develop benchmarks; and share best practices
across the corporation. We have developed internal guidelines for use
across the units in common energy applications such as lighting and
compressed air. In addition to our energy efficiency goals, we are also
on track to achieve a 60 percent reduction in air pollutants and non-
recycled waste and a 40 percent reduction in water consumption by 2007
(all normalized for revenue). We've been able to achieve such dramatic
progress due in part to our ``Achieving Competitive Excellence'' (ACE)
program. ACE is the internal UTC discipline intended to simplify
procedures, raise efficiency and ensure world-class quality in products
and processes while supporting our environmental commitments.
``Continuous improvement'' in our operations is the key element of ACE.
Climate change is a growing dynamic in the global marketplace. We
believe that setting goals for reduced energy consumption, which
translates into lower greenhouse gas emissions, has already improved
our bottom line performance by reducing production costs and allowing
us to be more competitive. Lower energy costs and improvements in
manufacturing processes are leaving us with more resources to devote to
developing new and innovative products that address climate change and
other environmental and energy problems. We are also keeping ahead of
the curve on potential future climate change regulations by investing
in greenhouse gas reductions now. We hope and trust that policy-makers
will recognize these early commitments to the climate change solution.
Energy Efficiency, Greenhouse Gases and UTC Products
Genuine corporate responsibility requires that we make
environmental considerations priorities in new product development and
investment decisions. Environmental leadership doesn't merely enhance
our corporate reputation; it offers our customers world-class quality
in products while increasing efficiency and reducing waste--making them
better stewards of the environment as well. UTC continuously explores
ways to increase efficiency and reduce greenhouse gas emissions through
the products it develops.
By creating products that use less energy and help lower greenhouse
gases that contribute to climate change, we can differentiate our
products in an increasingly environmentally conscious global
marketplace. Because the energy savings from the use of our products
present our greatest contribution to the reduction of greenhouse gases,
I'd like to give you a snapshot of UTC's expansive and diverse
portfolio of energy-efficient and environmentally friendly products.
UTC Power/Fuel Cells
Our UTC Power division is a full-service provider of clean power
solutions and is the leading developer and producer of fuel cells for
on-site power, transportation and space applications. UTC Fuel Cells
(UTCFC) is a business unit of UTC Power and manufactures the PureCellTM
200 power system, which provides 200 kilowatts of electricity and up to
925,000 btu/hr of heat for combined heat and power applications. Each
PureCellTM 200 avoids the production of 1,100 tons of carbon dioxide
emissions annually, which is why UTC Power earned one of the EPA's
Climate Protection Awards in 2000. Last month, the PureCellTM 200 fuel
cell fleet achieved a major milestone, providing one billion kilowatt
hours of energy production, or enough to power 91,000 homes for a year.
We've already deployed a total of 275 units world wide, including 26 in
New York to date, avoiding 102 million pounds of carbon dioxide
emissions in the Chairman's home state alone.
In addition to its demonstrated environmental and energy efficiency
accomplishments, the PureCellTM 200 is earning a reputation for
reliability as well. A UTC Power fuel cell kept the Central Park police
station operating during New York City's famous power outage in 2003,
and just last month, Russia's leading oil and gas pipeline engineering
company, Orgenergogaz, was able to keep operating during a blackout in
southern Moscow because of the PureCellTM 200. We're keeping lights on
from New York to Moscow and will expand our reach in 2007 when UTC
Power plans to introduce an enhanced version of the PureCellTM 200 with
twice the life span of its existing product.
UTC Power has also developed the industry's first integrated
microturbine and double-effect absorption chiller system, the
PureComfortTM 240M. The system converts more than 80 percent of its
fuel input to efficient electric, cooling and heating output. We expect
it to reduce carbon dioxide emissions by 40 percent and nitrogen oxide
emissions by 90 percent over those of the average central fossil fuel
generation plant. This is equal to the benefits of planting 150 acres
of trees and taking 250 cars off the road, respectively, during the
same time period. In May, the A&P grocery chain, which operates 650
stores in 10 states, installed a PureComfortTM 240M system in its Mount
Kisco, NY store, citing the technology as one of the company's
commitments to ``make more efficient use of energy and to protect the
environment by minimizing emissions.''
Waste heat represents an untapped energy resource. According to the
U.S. Department of Energy's May 2003 Thermally Activated Technologies
Roadmap, total energy loss in the form of waste heat in the United
States is equal to the amount of energy annually consumed by the U.S.
transportation sector or by the entire Japanese economy. UTC Power, in
partnership with Carrier Corporation, another UTC business unit,
developed the PureCycleTM 200 power system to turn waste heat into
electricity, providing a zero-emission alternative to traditional power
sources. In addition to the environmental benefits, the PureCycleTM 200
offers high reliability, low maintenance and cost savings through the
reduced fuel use.
In addition to its portfolio of climate-friendly on-site power
solutions, UTCFC is also developing zero emission, energy efficient
fuel cells for transportation applications with environmental and
energy security benefits. We've deployed zero emission fuel cell buses
in Washington, DC, California, Madrid and Turin. Last year, AC Transit
logged over 8,000 miles operating a Thor 30' hydrogen fuel cell,
hybrid-electric bus developed by ISE Corporation and UTC Fuel Cells.
This bus was deployed in the Oakland, California area and achieved
double the fuel economy of a 30-foot diesel bus. This year, we are
delivering power plants for four fuel cell buses that will be operated
in California by AC Transit and SunLine Transit.
UTCFC is currently working with major automobile manufacturers,
including Nissan, Hyundai-KIA and BMW, and the U.S. Department of
Energy (DOE) on development and demonstration programs for automobiles.
We are teamed with Chevron and Hyundai-KIA as part of DOE's Hydrogen
Learning Demonstration Program and will be deploying a fleet of 32
zero-emission Hyundai-KIA Tucson sport utility vehicles and Sportage
cars as part of the initiative.
Carrier
Carrier Corporation is the world's leading manufacturer of heating,
ventilating, refrigerating, and air conditioning systems and products.
Carrier is at the forefront of its industry, developing systems with
ever-more environmentally sound refrigerants and dramatically reducing
the power requirements of their products. From the smallest window air
conditioning units to the largest centrifugal chillers, Carrier heating
and cooling equipment is distinguished by some of the highest energy
efficiency ratings in the industry. Carrier participates in the EPA's
Energy Star program to provide energy efficient products to residents
and businesses. Carrier supports the goals of the Montreal Protocol to
phase out use of certain substances that deplete the ozone layer, and
in 1994, pioneered the worldwide phase-out of CFCs. Carrier is also
helping lead a revolution in the way the air conditioning industry
handles chlorine-containing refrigerants and is the only air
conditioning manufacturer that provides chlorine-free refrigerants
across its entire product line.
Not a company to rest on its laurels, Carrier is a leading advocate
for a national energy policy with a strong commitment to conservation
and efficiency improvement, including a consensus energy efficiency
standard agreement for commercial packaged air conditioning products,
refrigerants and freezers. Carrier was instrumental in moving the
industry to a 13 SEER [Seasonal Energy Efficiency Ratio] standard,
meaning that Carrier residential air conditioning systems shipped in
the United States after January 2006 will be on average 30 percent more
efficient than today's standard.
Pratt & Whitney
Pratt & Whitney is a world leader in the design, manufacture and
support of aircraft engines, gas turbines and space propulsion systems.
Through the development of better heat resistant coatings, more
environmentally friendly processes, innovative servicing procedures,
more efficient turbine blades and quieter, more fuel efficient engines,
Pratt & Whitney has pioneered most major advances in both military and
commercial aviation. And, the company's new Specialty Materials &
Services business is redefining entire industries by applying
environmental technologies in unique ways. For example, ElectroCoreTM
is a new, advanced power plant emissions control system under
development that will control a variety of pollutants from coal-, wood-
and other solid fuel-fired boilers, ushering in a new way to control
multiple pollutants in power plants and manufacturing facilities.
Otis
Another UTC division, Otis, the world largest manufacturer of
elevators, escalators and moving walkways, reexamined every aspect of
the elevator--from design and installation to operation and
maintenance--and created the Gen2 system that is up to 50 percent more
efficient than conventional elevators. Innovative new regenerative
technologies will reduce the net power requirements of new Otis
elevators installed worldwide even further.
Forming Partnerships
UTC regularly forms partnerships with others to encourage
greenhouse gas reductions and meet energy efficiency goals. As an EPA
Climate Leaders partner, UTC pledged to reduce global greenhouse gas
emissions by 16 percent per dollar of revenue from 2001 to 2007. As an
EPA Energy Star member, we are helping Americans to save energy and
avoid greenhouse gas emissions by providing energy efficient products
in residential and commercial settings. UTC is a founding member of the
Pew Center's Business Environmental Leadership Council, a group of
companies committed to responding to climate change challenges, and the
U.S. Green Building Council, a coalition of companies promoting the use
of green building practices.
Earlier this year, Global Green USA awarded UTC the ``Corporate
Design Award'' for our Sustainable Cities environmental grant and
volunteer effort to advance environmentally responsible building
systems in urban areas. UTC Power joined with the EPA as part of CHP
Partners, a public-private partnership committed to providing clean,
efficient power and thermal energy and reducing pollutants and
greenhouse gases. On the state level, UTC is active with the Regional
Greenhouse Gas Initiative, a multi-state effort to reduce carbon
dioxide emissions, and Governor Rell's Connecticut Climate Change
initiative.
UTC also frequently partners with suppliers to help them reach our
standards. For example, Hamilton Sundstrand provides training for its
suppliers to help them attain UTC environmental levels. And, Pratt &
Whitney is a corporate sponsor of EPA's Strategic Goals Program under
which large companies share with suppliers their best practices in
environmental management systems, pollution prevention and waste
minimization.
Conclusion
Good corporate climate policies have proven to be complementary to
good business policies, allowing UTC to understand, manage, track and
minimize our greenhouse gas emissions and energy use while
simultaneously adding business value. Thank you, Mr. Chairman, for
giving us the opportunity today to share with you and the Members of
the Committee some of the specifics of our commitment to reducing
greenhouse gases throughout our operations and across all our product
lines. If you'd like further information regarding our environmental
success story, we have copies of the UTC 2004 Corporate Responsibility
Report available here and on our website at www.utc.com.
Biography for Robert H. Hobbs
Experience
United Technologies Research Center--1971-present
1997- Director of Research Operations
1996-1997 Director, Chemical Science and Fluid Mechanics Dept.
1995-1996 Director, Mechatronics Dept.
1994-1995 Manager, Collaboration Technology
1994-1994 Manager, Network Technology
1978-1994 Senior Theoretical Physicist
1971-1978 Research Scientist
Applied theoretical modeling in the areas of: dynamical systems,
quantum chemistry, acoustics, fiber-optics, electro-optics, lasers,
semiconductors and diverse physical and chemical systems ranging from
atoms and molecules to elevators and jet engines; and program
management.
MIT DSR--Physics Instructor--1971
MIT Center for Theoretical Physics--Research Assistant--1968-1970
Johns Hopkins Univ. Applied Physics Laboratory--Summer 1963-1965
Research Analysis Corporation--Group Leader--Summer 1960-1962
Johns Hopkins Univ. Operations Research Office--Summer 1959
Educational Background
Massachusetts Institute of Technology, Ph.D. Theoretical Physics--1971
Massachusetts Institute of Technology, S.B. Physics--1964
Publications/Patents
38 papers, 1 issued patent
Hobby
Yacht Racing Administration--1968-present including:
United States Junior Olympic Committee--1992-1996
United States Sailing Association (National Governing Body of
sailing in U.S.)
President, United States Sailing Foundation--2004-2000
Chairman, Olympic Sailing Committee--1996-2000
President--1991-1993, Vice President--1985-1991, Board
of Directors--1979-1993
Intercollegiate Yacht Racing Assoc. of NA (NGB of collegiate
sailing in U.S.)
CEO--1979-1988
Discussion
Chairman Boehlert. Thank you very much, Dr. Hobbs.
And Mr. Meissen, thank you for commending our leadership.
Let me say to you, to all of you, we want to commend your
leadership. It is music to our ears up here to hear from
leading figures in the ``real world'' outside Washington, DC
and the responsible manner in which you are dealing with this
very important subject.
Let me ask you. When you are out leading the parade, you
are also a target. What has been the reaction that you have had
from your business colleagues? And are you winning any
converts, or is it not in your enlightened self-interest to try
to convert the unconverted?
Mr. Rogers, let me ask you.
Mr. Rogers. Mr. Chairman, I served as a Chairman of the
Environmental Policy Committee for our industry association EEI
for four or five years, and what I have seen in our industry is
a movement toward dealing with these issues in a
straightforward manner. They are all in a little different
place. Some of our companies have nuclear primarily, and it is
easy for them to think about this issue and deal with it. Some
like ourselves are predominantly coal. It is a different--we
start in a different point. But if I look at the climate
programs that existed during the 1990s in terms of greenhouse
gas reductions, I look at what has happened over the last five
or six years, our industry is really starting to step up and
deal with this issue in a very responsible way. And I am proud
to be part of an industry, and one that has such a direct
impact on so many, because who doesn't use electricity. And I
see people increasingly look at this issue in our industry, and
I think that is a good thing.
Chairman Boehlert. Thank you for that. Thank you for your
leadership. I hope that there is some followership.
Dr. McFarland.
Dr. McFarland. Yes, I agree that there is an increasing
trend of industries stepping forward to deal with this issue in
a prudent manner and take action. You see this initially with
global companies that are having to operate in a carbon-
constrained world in other regions. About half of our business
and 40 percent of our operations are outside the United States,
and we are operating in carbon-constrained regimes. And there
are other global companies that are having to do the same. So
it is--you know, as I said, it is a social, economic, and
environmental reality for many companies.
Chairman Boehlert. Mr. Meissen.
Mr. Meissen. I do agree with you. Some people struggle with
this concept of climate change. It is happening in distant
places. It is going to happen in the future. But at Baxter, we
focus on improving efficiencies, environmental stewardship. We
put it in terms of being more efficient, effective, cost-
effective. It makes us more competitive. And that is--by
focusing on our energy management program, which is--most of
our energy greenhouse gas emissions are associated with that.
By driving on that, pushing on that, we are able to also reduce
greenhouse gas emissions.
Chairman Boehlert. Dr. Hobbs.
Dr. Hobbs. Mr. Chairman, I believe our Chairman, George
David, has been both visible and vocal on the issues of
environmental protection and sustainability globally. I am very
proud of the stand he has taken in these issues. UTC also
partners with others, including EPA Climate Leaders, Pew
Climate Center, and closer to home, the Connecticut Climate
Change Group. So we are working with our other industry people
to try to both understand and share practices.
Chairman Boehlert. Well, you know, there are some doubters
out there. We are still doing our leveled best to try to
convince the doubters that they shouldn't be so skeptical.
But Mr. Rogers, in your testimony, you had some interesting
commentary, and I would like you to repeat it a little bit and
ask the others to comment. Suppose we are wrong. What is the
worst case if we are wrong?
Mr. Rogers. If we are wrong, what it means is we have
developed technologies that are more environmentally-friendly.
What is wrong with that?
Chairman Boehlert. That is exactly right.
Mr. Rogers. And we help our customers. Particularly if you
are a power supplier, you help your customers use energy more
wisely. What is wrong with that? And as I see it, we are moving
directionally. I see it with SOX, NOX, mercury, and I see it
with carbon. We are moving more and more to almost, not quite,
because I don't think the cost-benefit test can be met, but we
are moving in a direction of minimizing our emissions from all
operations across this country. I think that that is a standard
that we are moving on around the world. Now there is a place
where it doesn't make sense to reduce further, but the reality
is I think most global companies, both companies that are
looking at what is going on around the world and are looking at
the science are saying, ``We need to deal with this issue. We
need to be responsible about this issue.''
And I remember, Mr. Chairman, a senior partner of mine when
I practiced law here in Washington, Bob Strauss. And Strauss
used to say, ``When you see a parade form on an issue in
Washington, you have two choices: you can throw your body in
front of it and let them walk over you, or you can jump in
front of the parade and pretend it is yours.''
Chairman Boehlert. Very fortunately, he is still providing
leadership in a whole wide range of areas to this day.
Dr. McFarland, do you have a comment?
Dr. McFarland. Yes, I agree entirely that this makes sense
anyway from a wide range--for a wide range of issues. With
global economic growth, we must learn to use our resources,
natural resources, more effectively. Saving energy makes sense,
economic sense, especially when you see rising energy prices,
energy security issues. So even if we are wrong about climate
change, which I believe that we are not, and our company
believes we are not, then the actions that we have taken make
sense.
Chairman Boehlert. Well, as you pointed out in your
testimony, the scientific case continues to be strengthened
every day.
Dr. McFarland. Yes.
Chairman Boehlert. The scientific consensus is clearly
there. You understand it. You have outlined to us the benefits
to your individual companies and to society. I love Mr. Rogers,
and I wish he would speak some time, but we won't have him do
it now, his grandkids theory. We were discussing that
yesterday. And the test that he applies in many of his
decisions: ``How is this going to impact on my grandkids?''
Very important.
Mr. Meissen.
Mr. Meissen. Well, I don't see a downside. I only see an
upside. I see an upside to becoming more energy efficient,
more--reducing costs, becoming more competitive. I see an
upside working with our many suppliers, and by working with
them on the Lean and Clean principles that I mentioned, they
also become more competitive. And also, which is very important
for Baxter and other companies that have many suppliers, they
are more reliable. And they are going to be in business longer
and be there to deliver the products and services that they
provide our company. And I also think that there is no
downside, just an upside in acting responsibly for the company.
And I believe our customers, shareholders, stakeholders expect
us to do that.
Chairman Boehlert. Thank you very much.
And Dr. Hobbs?
Dr. Hobbs. Taking the actions that we have at UTC are not
only protecting the environment, but they are saving us money
and making us more effective in creating better products for
us, so all of that is good. Furthermore, I hope that we don't
have to have the trash pile up in front of our house before we
realize that we should produce less waste. That is really all
we are talking about.
Chairman Boehlert. So it is a win-win situation.
Dr. Hobbs. Absolutely.
Chairman Boehlert. Thank you all very much.
My time has expired.
Mr. Gordon.
Mr. Gordon. Thank you, Mr. Chairman.
So oftentimes, we have a bad news panel. This is nice to
have a good news panel today. Dr. McFarland, I think you hit a
good note when you reminded all of us that we should not
penalize early movers. That needs to be echoed so that as this
process goes forward that we reward and not penalize.
And Mr. Rogers, you were very impressive in laying out the
logic of your case.
But what I would like to do is turn to the international
folks here first.
As we all know, the Kyoto protocol has been ratified by the
requisite number of countries. What I would like to better
understand is what you are going to be required to do
internationally that you are not going to be doing here, what
is the cost of that in terms of competitiveness, and what would
be necessary to get you to the Kyoto levels. So I will--maybe
we will just do it in reverse order here.
Dr. Hobbs. Mr. Gordon, UTC is a global company. We make
more of our revenue outside the United States than inside the
United States, or at least have more employees outside the
United States. We have been taking our environmental actions
globally right from the beginning. The kinds of energy
reductions and----
Mr. Gordon. But if I could----
Dr. Hobbs. I didn't talk about, like, air emission
reductions.
Mr. Gordon. Well, excuse me. I don't mean to be
discourteous, but we have got a limited time here. More
specifically, what are you going to be doing internationally--
what are you going to be required to do internationally that
you are not going to be doing here and how is that----
Dr. Hobbs. Well, what I was about to say is that we are not
going to do anything internationally, because we are already--
we believe we are already doing it.
Mr. Gordon. And are you doing the same----
Dr. Hobbs. We are doing the same thing in the United
States.
Mr. Gordon.--domestically? So it has no impact.
Dr. Hobbs. I believe that is the case.
Mr. Gordon. Thank you.
And what about DuPont?
Dr. McFarland. I think it is the same case for DuPont. We
view this as a global issue. We are taking actions. We do have
plants in Europe, for example, that are under the cap and
trade, but the energy efficiency put us in--well positioned
right now. The question is going forward. But to date, it--
there is no----
Mr. Gordon. So you think domestically you will be meeting
the Kyoto standards?
Dr. McFarland. We reset our goals and we looked at energy
efficiency improvements. It is being done globally.
Mr. Gordon. But do you expect that here, domestically, you
will reach the Kyoto standards?
Dr. McFarland. Yes.
Mr. Gordon. Okay. And what about Baxter? I am not trying to
criticize. I am just trying to better understand here.
Mr. Meissen. We are working to reduce our greenhouse gas
emissions. To meet the Kyoto standard may require some
additional efforts than we currently have. We have been
preparing for a carbon cap and----
Mr. Gordon. Okay. When you say that, do you mean
internationally or domestically?
Mr. Meissen. Both.
Mr. Gordon. Okay.
Mr. Meissen. Both. We are in--we realize that the cap-and-
trade schemes are emerging around the world, and it is taking
place in Europe. And in anticipating that, we became a founding
member of the Chicago Climate Exchange, which is a carbon cap
and trade organization in Chicago, which I might talk about
later, but--as a member company. And there, we are gaining
experience in trading. We are gaining experience in making our
greenhouse gas emissions database more robust. And we are
gaining institutional knowledge in how that operates so that we
can better respond to these cap and trade systems as they
emerge.
Mr. Gordon. So do you expect to meet the international
Kyoto standards?
Mr. Meissen. We expect to meet the emissions limits for
those facilities that are affected.
Mr. Gordon. Internationally?
Mr. Meissen. Right.
Mr. Gordon. Indeed. What more will be needed here in this
country for you to accomplish that?
Mr. Meissen. I believe that as we go forward into the
future, we are going to be adopting more state-of-the-art
technologies, more efficient utility systems. We are going to--
--
Mr. Gordon. Well, is it the cost? I mean, are you concerned
about losing a competitive advantage to do that?
Mr. Meissen. No. I--we are taking--our approach is a global
approach, just like these other gentlemen. And we--by driving
down--we are seeing the benefits of being more efficient in
seeing and realizing those benefits, it is spurring us on to
achieve more.
Mr. Gordon. Mr. Rogers wrote--go ahead, sir.
Mr. Rogers. Congressman, let me caution a little bit on
Kyoto, if I may.
Mr. Gordon. I am not trying to--I am not either advocating
or----
Mr. Rogers. No.
Mr. Gordon. I just want to know where we are to get a
benchmark.
Mr. Rogers. But let me kind of make an important point, if
I may.
If you look at--Kyoto goes back to 1990 levels.
Mr. Gordon. Right.
Mr. Rogers. I think it is impossible, particularly for the
power industry, to go back to 1990 levels, given how much our
economy has grown over the last 15 years. If you put a stake in
the ground around 2000, it is a more prudent approach, given
where we are today across this country in the growth of the
demand for electricity. As I think about going forward, the
prudent way forward is to think more about slowing down the
rate of emissions and then starting to reduce the emissions
level. And that is a strategy that matches up with concerns by
environmentalists who talk about the carbon debt, and also
matches up extremely well with a--from a cost-benefit
standpoint.
And finally, I would suggest that Kyoto is such a
politically-charged word. We are much better off, as we think
about reducing carbon going forward, to come up with a son or
daughter of Kyoto rather than that.
Mr. Gordon. Well, let me ask you this. There are other
countries that have adopted Ktoto. I mean, they may game it or
not. But what is going to happen to those power companies in
the other countries? Are they to go back to 1990? I know that,
as you pointed out, they probably have more of a nuclear base
that might make it easier, but are they going to make the 1990
baseline or are they just going to game it or give up or what
is going to happen?
Mr. Rogers. I had the opportunity yesterday to have lunch
with Prime Minister Blair, and we talked about the United
Kingdom. The United Kingdom is an interesting situation,
because they are meeting their targets and why are they meeting
their targets in the generation? Because they had a lot of
coal. What has happened is, starting in the 1990s, and really
with Thatcher, what they have done is shut down their coal
plants and really converted to gas fire generation in a large
movement. That has been responsible for a lot of their change.
They have been able to take natural gas out of the North Sea,
bring it into the United Kingdom, and use it. If you go to a
country like France, they already have 75 to 80 percent of
their generation in nuclear, so no problem. The countries who
will have the difficulty will be Germany. Germany is--there the
government has cut a deal with the Green Party to effectively
shut down nuclear by 2025. I don't see how they are able to hit
a Kyoto target in 2012 if they are facing a shut down of
nuclear units in subsequent years.
The following point on this is it is not clear yet if they
will hit the Kyoto targets, which are really 2012 targets, and
are other countries. Some of the countries have got a head
start, and the United Kingdom would be an example of that
because of the conversion from coal to gas that happened in the
1990s.
Mr. Gordon. So what does that mean for our competitive
position?
Mr. Rogers. The troubling competitive issue is if they
start to try to say that U.S. companies are subsidized because
they are not----
Mr. Gordon. You inferred a trade problem. So are you
foreseeing that there could be, again, whatever trade
allegations brought against us and penalties on the
international scale?
Mr. Rogers. I could see the EU and countries and companies
in the EU starting to use that as an argument that U.S.
countries are subsidized because they don't have to comply with
Kyoto, as a consequence, their products are cheaper. I think
that is a possibility. We haven't seen that yet, but I think
that is a possibility.
Mr. Gordon. I wish we could talk more, but my time is up.
Chairman Boehlert. Dr. McFarland, did you want to respond
to Mr. Gordon? Okay. Fine.
Mr. Bonner.
Mr. Bonner. Thank you, Mr. Chairman.
Many people back in our Districts have--who have seen
corporations move overseas in a global economy have asked
questions of us over the years what are we doing to stop these
job losses. You have got companies that go to India or China or
places in Europe or Central or South America, and the belief is
that they don't have the same minimum wage standards that we
have. They don't have the same environmental protection laws
that we have. For those of you who have companies in or plants
in other countries, how do our environmental laws and what we
are doing compare with the plant operations that you have got
in China, or in India, or in Europe, or in other parts of the
world? Are we putting our U.S. companies at a disadvantage in
terms of being able to stay on the continent and provide jobs
to American workers? It is an open question.
Dr. McFarland. You know, I would be happy to provide more
information, because this is somewhat outside my area of
expertise. But speaking for DuPont strictly, we have one
environmental standard around the world. And wherever we put a
plant, it is the same standard. So you know, that is not an
issue for us.
Dr. Hobbs. For UTC, it is much the same. Our--we endeavor
to hold everyone that works for UTC to the same standards of
environmental performance, and by the way, the same ethical
performance. And we provide things like education evenly all
over the globe. We don't set wage standards in all of the
places that we have factories, but to the extent that we are
using our rules, we have global standards.
Mr. Bonner. And let me just add to Dr. McFarland since he
has the plant in my District, we are grateful for the jobs that
DuPont provides in south Alabama and consider you all very
good, outstanding corporate citizens.
Mr. Rogers, I would like to go to a question that comes
from one of the comments you made earlier in your statement,
and that is that states are not--and I want to get your quote
right, increasingly taking on added roles in their monitoring
and regulation on greenhouse emissions. In your judgment, since
there are 50 states and obviously 50 different standards, is
that an added hardship or is that something that your company
welcomes in terms of the added emphasis that state governments
are applying?
Mr. Rogers. I think it is an additional hardship from the
standpoint--I mean, you create this patchwork of different
regulations in different states, and it--one of the--from a
national policy standpoint, we ought to have environmental
policies that apply across all of our country in every state,
and we--and it should be a national policy, not state. I think
it would make it very difficult for companies to operate in
this country, particularly in the power industry. If you have
one rule in Alabama, you have got another rule in Georgia,
another rule in the Carolinas. The question is how--what does
that mean when power flows between states. And so to have the
states weighing in with specific rules that are different than
the EPA, I believe, would be a problem.
Mr. Bonner. Thank you, Mr. Chairman.
Chairman Boehlert. Thank you very much.
Mr. Carnahan.
Mr. Carnahan. Thank you, Mr. Chairman.
I want to compliment all of the panel on the work that you
are doing --your leadership in this important environmental
area.
I wanted to get some additional comment from each of you
quickly, because I guess, Dr. McFarland, you had expressed
concern about being put at a competitive disadvantage, and Mr.
Meissen had indicated that he believed they were actually
achieving some competitive advantage from some of the
activities and developments. And I wanted to see if there is
really a difference of opinion here or get your additional
comment about that.
Dr. McFarland. I don't see a difference of opinion on that.
What we are--you know, what Mr. Meissen is talking about is in
the current climate. And we, too, are saving money by our
energy efficiency goals. However, if some sort of regime is set
up where you are set to a standard that is based on historical
performance, then the companies that have moved early have
already picked their low-hanging fruit. They have done the
things that they can do most economically. So if it is set on a
prior performance standard, those that have moved are going to
have to spend more to meet a reduction target, given reduction
target, as compared to those who have not taken action.
So the difference is Mr. Meissen is talking about in the
current climate. And we, too, have saved money in the current
climate, but we are talking about in a regulatory, carbon-
constrained regime where you are set to a standard that is
based on some prior performance.
Chairman Boehlert. Just let me interrupt here, and I will
not take this out of your time.
I want to point out that you should be credited and not
penalized for your early, positive, constructive action, and
that is our objective.
The gentleman is----
Mr. Carnahan. Thank you, Mr. Chairman.
Mr. Meissen, did you have any additional comment?
Mr. Meissen. Okay. Thanks a lot.
I think many companies expect that they would be credited
for the initial activities that they have done. Their
participation in the voluntary programs, such as U.S. EPA
Climate Leaders program, the different registries in different
states. I do believe that it is a challenge to have different
regulations in different states, and a uniform framework and a
uniform time frame, I think, will be beneficial for companies.
They would provide companies flexibility in planning,
especially capital planning cycles, which are multi-year
cycles, and if there is a requirement to invest in maybe
expensive core generation systems, it has great savings also,
then they can work that into their strategic planning cycle and
capital cycle.
Mr. Carnahan. I guess I want to also close with a quick
question to get your opinion about what you believe would be
some of the best things we could do from the public policy
perspective to incentivize and encourage companies to continue
with some of these cutting-edge actions. Really, any of the
panel.
Dr. McFarland. Well, it--to provide some assurance,
regulatory assurance, that those who have--are taking forward--
or are stepping forward with action are credited for those
actions going forward.
Mr. Rogers. I think another thing that the Committee could
do is continue to take a holistic review of the R&D programs
the government now funds and look at ways to jump-start some of
these programs and where the focus is on the D part of the
programs and also more toward the deployment and not just the
development. And I think that would be a movement in the right
direction.
Mr. Carnahan. Thank you, Mr. Chairman.
Chairman Boehlert. The Committee is proud of the leadership
provided in advancing clean coal technology, and I would
imagine, Mr. Rogers, you would be a cheerleader in that arena.
Mr. Rogers. Yes, sir.
Chairman Boehlert. Thank you very much.
The distinguished Vice Chairman of the Committee, Mr.
Gutknecht.
Mr. Gutknecht. Well, thank you very much, Mr. Chairman. And
let me thank you, Chairman, for bringing this distinguished
panel here today.
I want to compliment all of you and your companies for what
you are doing. And I happen to agree that, long-term, this
makes good sense. It makes good business sense, it makes good
environmental sense, and so I just want to congratulate all of
you and the companies that you represent, because the testimony
here has been excellent, and I agree with the basic point.
But I do want to pursue something that Mr. Bonner from
Alabama raised. And I think it is--I wasn't completely
satisfied with the responses that we had. One of the reasons
that the Kyoto protocols received a rather chilly reception up
here on Capitol Hill, I think, was because it exempted some of
the developing countries, and in particular, China and India.
And there is growing concern in all kinds of businesses that I
talk to on a regular basis in my District, and I suspect my
District is no different than the Districts of most of my
colleagues here on this side of the panel, and that is that we
were going to impose fairly strict standards on American
enterprises but not on those in developing countries, like
China and India. I wonder if you could give us a little more
response to that. And how serious is that problem? And long-
term, you know, where do we go from here?
Mr. Rogers. Congressman, let me suggest that you can not
have an effective climate program without having both China and
India as part of it.
The question really is raised, well, what do we do as we
work to make them part of it. I think it has to be the
industrial countries of the world, and clearly China and India,
given how fast they are growing, the number of power plants
they are building, the number of factories they are building.
So the question is how do you get the timing right on that. We
could, as a country--it was good judgment not to go back to
1990 levels at this point. But good judgment also tells you
that we need to work to start to reduce the rate of emissions
in preparation, and but we have to work hard to make sure
internationally we bring those two countries along. If you
could bring those two countries, then over time, you would
bring other developing countries along, but they clearly have
to be part of this to get a good result.
Mr. Gutknecht. Anybody else?
Does it place--particularly small manufacturers. I think it
is easier if you are a big player and you have access to lots
of capital and, more importantly, you have a strong science and
technology base to your company anyway. I think it is
relatively--it is easier for companies like yours, with all due
respect, than it is if you were a smaller company that is
building widgets in north Mankato, Minnesota that--you know,
they can't do that kind of thing. And that is where I think a
lot of the fear was.
Anyway, that is not really a question. I would just yield
back my time. And again, thank you for what you do.
Chairman Boehlert. Mr. Lipinski.
Mr. Lipinski. Thank you, Mr. Chairman.
I would like to, as my colleagues have done, applaud
everyone on the panel here for what your companies have done to
improve the environment.
Now the question that I have, the first question comes from
what Dr. McFarland said, he had talked about he doesn't want
companies to be penalized, those who have picked the low-
hanging fruit, to be penalized if there are some regulations
put out that they are penalized as compared to other companies
who still have the low-hanging out there. And I think we
certainly all agree about that. But my question is, and we will
start with Dr. McFarland, and I want to hear from everyone on
the panel, how far have you gone now in picking all of the low-
hanging fruit. Are you close to the end now of reductions? You
have gotten the low-hanging fruit, and we all know once it gets
tougher, then there is much less economic incentives and other
incentives to make further reductions. Is this it? Are you
close to the end of what is going to be easy to do? And what
incentive is there to do any more?
Dr. McFarland. Well, clearly we have picked the lowest-
hanging fruit, but technology is not static. We are continuing
to drive toward lower emissions and improving our performance
on these. It is difficult to answer, because the way we make
the decisions is to provide marginal cost curves for what
projects we can undertake to achieve, you know, the best
greenhouse gas emission reductions, and those marginal cost
curves change yearly with advances in technology. So I am not
trying to avoid your question, it is just a difficult question
with the technology changing. We could continue to focus on
making project--process--progress to reducing our emissions.
Mr. Lipinski. Are there--right now, and this is for Dr.
McFarland and all of you, are there--do you have items right
now that are in the works in the plans to do more reductions?
Dr. McFarland. Yes.
Mr. Lipinski. Mr. Rogers.
Mr. Rogers. I would approach the question by saying we are
in the business of supplying electricity, and we have to have
the capability to meet whatever demand is placed on us in the
future, and we operate in an area where there is growing demand
for electricity, so we have to build more generation. So our
ability to do that, if we build gas-fired plants, is 2/3 the
carbon emission of a coal plant. Gas prices today are $5 to $7,
and the economics of that are questionable. And the--a broader
question of our country, do we really want to have our power
generation increasingly dependent, ultimately, on foreign
sources of natural gas.
We are also looking at an integrating coal gasification
facility. That would allow us to reduce our emissions even
further, if we can build that and it makes economic sense. We
are currently, as I mentioned before, working with GE and
Bechtel trying to negotiate the building of a facility like
that. And that would be a $1 billion investment. So we continue
to look at investments and the environmental footprint of the
investment is very critical to how--what decision we make.
Mr. Lipinski. Mr. Meissen.
Mr. Meissen. Yes. Most of Baxter's greenhouse gas emissions
are associated with the use of energy. And because of that,
Baxter has a very active energy management program. We have a
network of energy managers in our largest facilities. We hold
energy conferences, a global energy conference every two years.
And we are doing energy audits, energy reviews of all of our
major facilities on a frequent basis. And when we do these
reviews, we do find opportunities. The projects, because of the
dynamics of our organizations and many other companies like us,
the manufacturing processes are changing, the fuel costs are
changing, the opportunities are coming before us that we find.
People say, ``Well, we have picked all our low-hanging fruit,''
and I believe that--my experience at Baxter is that the tree
keeps growing, the fruit keeps coming down lower, and every
year we can go around and pick some more fruit. And so it is a
continuous process of being more efficient and looking for
projects. And we always have a bank of projects that we are
working on and additional projects that we can work before us.
Mr. Lipinski. Dr. Hobbs.
Dr. Hobbs. Mr. Lipinski, UTC is coming to the end of the
first decade of its environmental goals, and we are developing
our goals for the next decade. They will continue to say we
will improve in greenhouse gas emissions and reductions in
energy usage. But we are looking more actively now at other
parts of the value chain for new areas that we can make the
impact. So we are looking at our partners and suppliers. How
can we partner with them to make sure they are doing the same
things we are? But we are looking for additional places to
harvest low-hanging fruit as we go forward.
Mr. Lipinski. Thank you, Mr. Chairman.
Chairman Boehlert. To follow up on Mr. Lipinski's question,
are there federal technology development or demonstration
programs that have or could make a difference? I guess what he
is looking for, and so am I, and I am sure all of us, is sort
of guidance. What more can we do? So are there federal
technology development programs that have made a difference,
or, if they were more adequately funded, could make a
significant difference?
Mr. Rogers.
Mr. Rogers. I am delighted with that question, because I
think back--on the project we are trying to create today on
coal gasification, I think back to the early 1990s. And we were
the beneficiary of a grant from the Department of Energy to
build a coal gasification facility, one of only two that were
built in the United States in the early 1990s. And we built it
in Indiana, Wabash River Plant. And we used the Dow technology
there. And we took the gas that came out of that unit and
generated electricity. Here we are today, more than a decade
later, working on a coal gas plant that is going to be closer
to being what I call a commercial project versus demonstration.
I think it is going to be very critical to have additional
funding for carbon sequestration projects and carbon capture
projects in these coal gas, because the economics of coal gas
is very close to pulverized coal, depending on your assumptions
about how carbon constrained we are in the future. The thing
that really needs to be funded on these coal gas projects is
really the funding of the carbon sequestration. And I think
that would be very important in order to allow further
development of the--because as you know, in technology, it is
not the first generation, often not the second, but it is
generally the third, fourth, and fifth technology, or
generations in these technologies where it becomes very cost-
effective. We need more money to experiment with carbon
sequestration.
Chairman Boehlert. Does anyone else care to comment on
that?
Dr. Hobbs. Mr. Chairman, I personally am from our research
center, and so we have been very pleased to have help from the
government on occasions to help us develop new products more
rapidly that wouldn't come along as quickly without your help.
One of our projects we are working on recently is basically an
air conditioner running backwards. An air conditioner, normally
you put in electricity and you get out cold air. We said,
``Suppose you put in hot air. Can you get out electricity?'' So
we took a Carrier air conditioner, take a thermal waste heat
source and get hundreds of kilowatts of electricity out of it.
In partnership with the Department of Energy, we are able to
try this in some field tests, for instance, at some geothermal
sites in Alaska we are hoping for later in the year. There is
important opportunity to try some things quickly that we
wouldn't be able to do on our own and maybe bring some new
products to market that make really good use of waste energy.
Huge amount of waste energy. If we could harvest a lot more of
that to reduce the generation requirements in this country,
that would be really a neat opportunity.
Chairman Boehlert. Okay. And I would appreciate after this
hearing, we will probably correspond with each of you, one, to
thank you for your outstanding testimony, and two, maybe to ask
some additional questions. And I would appreciate it if you
would give some thought to that question, specific question,
what more do you think, short of writing a blank check for all
research, and that is obviously not going to happen, but what
more do you think, specifically, we should do in terms of the
Congress in providing funding for the demonstration programs
that offer some real promise? And so we will follow through on
that.
Ms. Biggert.
Ms. Biggert. Thank you, Mr. Chairman.
My first question is for Mr. Meissen.
I understand, and it was in your testimony, that there are
a number of companies in the Chicago area that have formed the
Chicago Climate Exchange, the first voluntary pilot carbon-
trading platform. Can you tell me what is its purpose and
something about your participation in that exchange?
Mr. Meissen. Okay. Yes. Thank you, Representative.
Approximately two years ago, the Chicago Climate Exchange
was formed. This is the first multi-sector, multi-national
carbon trading scheme performed in--actually in existence in
the United States. It was formed initially by 14 companies.
Baxter was one. Currently, there are over 90 members in
different--members in different categories of membership.
The purpose of the exchange is to demonstrate that a carbon
cap and trade scheme can work, to demonstrate the procedures,
demonstrate that a metric ton of carbon, there could be a cost
assigned to that in a trading scheme. And for Baxter, we found
that very beneficial to us, because we are learning what that
is all about. We are developing institutional knowledge on how
it works. And that helps prepare us to address carbon cap and
trade schemes as they evolve around the world.
Ms. Biggert. And this is the first? There haven't been any
others throughout the country? Have people contacted you on how
to form this or anything? Is this----
Mr. Meissen. Oh, yes. We have gotten a lot of good
recognition for this. They have asked us about our
participation in it. We have also been asked to speak on that
in a number of forums.
Ms. Biggert. How do the energy requirements of
manufacturing at Baxter differ from some of the other companies
and industries that might be involved?
Mr. Meissen. One of the major differences with energy usage
for Baxter that is a manufacturer of health care products is
that we have to manufacture them in clean rooms under sterile
conditions. And so our clean rooms and production operations
relating to them are very energy-intensive. But we focus a lot
of effort on making those more efficient. And we recently were
going to a concept called isolators where instead of building a
large clean room, we are building a small self-contained
production unit where the basic production takes place, and
those units are much more effective and provide higher levels
of quality. It assures quality and also reduces energy costs.
Ms. Biggert. Okay. Thank you.
And Mr. Rogers, you mentioned a merger with Duke Power. And
I understand that that company has nuclear facilities.
Mr. Rogers. Yes, ma'am, they do, indeed. And actually, one
of the reasons why we thought combining with them was a good
thing for us, we were the largest non-nuclear generator in the
United States, primarily coal and gas, and by combining with
Duke, who is a recognized leader in the operation of nuclear,
it gives us the capability to use that technology, because we
don't--there are no silver bullets for the future, and we don't
know what technology is going to be the right technology,
because we don't know what the rules will be yet with respect
to environmental requirements. And there might be a day where
nuclear again is important to our country. I sense that it
might well be.
Ms. Biggert. So I know that even the Administration has
just come out with talking about how we haven't built a nuclear
facility in years and years and years and that there is some
talk about wanting to further that. Would your company then be
in a position to maybe want to build another reactor?
Mr. Rogers. It is my understanding that Duke has announced
that they would be very interested in building another nuclear
facility. However, it is almost impossible for them to
contemplate that unless there is some resolution on the issue
of storage of spent fuel, and the Yucca Mountain issue has been
a major forever issue in our industry that is yet to be
completely resolved. I think it would be very difficult for
anybody in this country to build a nuclear unit in the face of
no resolution of that spent fuel issue.
Ms. Biggert. Thank you. And we will be having a hearing on
that soon.
Dr. Hobbs, you were talking about the waste heat energy.
What are the obstacles that stand in the way of making this
waste heat productive?
The kind of product that we are looking at works very well
now if there is high-grade waste heat. And the research efforts
we are going to today, particularly, are looking at lower-grade
waste heat, heat that is not as hot when it starts. This
includes all things from solar sources, for instance, solar
collectors, to, as I say, geothermal sites and other sorts of
sites. And the technology we are working on is how to use this
lower-temperature heat effectively, and can you make the whole
process work. It is exciting science right now.
Ms. Biggert. Are there any other market barriers?
Dr. Hobbs. I have still got to make the product work before
I worry about marketing.
Ms. Biggert. Well, thanks for all you are doing, and thank
you all.
Chairman Boehlert. Thank you, Ms. Biggert.
Ms. Woolsey.
Ms. Woolsey. Thank you, Mr. Chairman.
I would like to piggy-back on the last question you brought
up to the panel, because you actually stole my question, so I
am going to just take it and go further with it.
It is clear that it would make a big difference if products
and services that would help you with these new technologies
were already available in the marketplace and that they were
available, affordable, and efficient and did what you needed
them to do.
So I am asking you a couple of things. I mean, I am so
impressed, Dr. Hobbs, that you actually develop your own
products for your solutions. One, if those products were
already available on the market, would you just purchase that
solution and those services, and two, are you able to recoup
your costs by turning that into a sellable product yourselves?
Dr. Hobbs. I hope if somebody else had it we might buy the
company. We partner with all sorts of people for solutions. And
in fact, the place that my research center particularly is
working now is on integrated solutions. We are looking at more
than simple components but at whole systems and how you can
take multiple things and put them together to gain efficiency
and lower total cost and reduce greenhouse gases and so forth
in the process. And so having other people--parts of systems
that belong to other people is perfectly fine. The more things
that we have to play with, the more opportunities there are.
Ms. Woolsey. Right. Any of you that would like to respond
about what in your own industries you would take advantage of
if it were available in the marketplace, and also with the idea
that I believe green technology is the next future industry of
the United States if we will wake up and get behind it. So what
does the Federal Government need to do to help that industry go
forward?
Dr. McFarland, you had a----
Dr. McFarland. Yes. You bring up another issue. What you
heard about today, primarily, are the actions that industry is
taking to reduce its own emissions. And you have heard the
other panel members, and we as well, provide products to
increase the efficiency of our end users. If you look at how
carbon emissions are spread across the economy, assigning the
carbon emissions that--from Mr. Rogers' sites and other
utilities' sites, to the end user, about 1/3 of the emissions
come from industry. About 1/3 come from buildings. And about
1/3 come from transportation. It is not exactly that. I could
get you better numbers on that. You can find them in the
reports.
We have got to engage all of the sectors of the economy.
This is a global issue, as has been pointed out before. We need
to engage all countries. But we also need to engage all sectors
of the economy. And what Dr. Hobbs is talking about is a better
way to convert energy and more efficiently use the resources,
but you have got to have that pool. The industry is generally
very cost-sensitive, and in some cases, more cost-sensitive
than other sectors of the society. So we look at energy already
as a--on the bottom line. Projects that we are talking about
here today I know go beyond what we would--what would be normal
business, because they would not normally make the investment
hurdle. But again, you heard from people here that are looking
at energy as part of the bottom line.
Ms. Woolsey. Thank you.
Anybody else want to comment?
Thank you, Mr. Chairman.
Chairman Boehlert. Mr. Sodrel.
Mr. Sodrel. Thank you, Mr. Chairman.
It is great to have a couple Hoosiers here. In fact, I have
bought some of your electricity, Mr. Rogers, as little as
possible.
Mr. Rogers. Well, thank you for whatever you bought. We
need the money.
Mr. Sodrel. In my other life, I was in the transportation
business, and we found that reducing our energy use was very
cost-effective, but there is that 90/10 rule that people talk
about: you get 90 percent of the benefit by 10 percent of the
money. When we had trucks getting four miles to the gallon, it
wasn't very difficult to get five. And when you got five, it
wasn't very difficult to get six. What we found was that the
latest technology in trucks costs more money to acquire, costs
more money to maintain, and burns more fuel. So it is very
difficult to get the user excited about going out and acquiring
the asset. So I--you know, we talked a lot about the Kyoto
protocols and how that affects our business. And I appreciate
the fact that American-based industries that are operating in
foreign countries will apply our standards to that operation.
That doesn't mean that our domiciled in that country will do
likewise, which puts us at a cost disadvantage.
I guess my question is, Mr. Meissen was talking about, you
know, efforts in his plant, how close are we to getting to the
end here? I mean, I always tell people, in our business, we can
save 100 percent of our energy and create no environmental
problems if we just lay off 600 people and they don't come to
work today. You know, then we could save it all. So it is a
balance between creating jobs and doing it with the minimal
impact on the environment. And my question is how close do you
think you are to the end where it becomes almost prohibitively
expensive to cut emissions any further?
Mr. Meissen. Well, Representative, what we have seen at
Baxter over the last 10 years is we have been able to
accomplish an incremental improvement in energy efficiency and
an incremental improvement or reduction in energy costs. And I
don't see the end in the next decade or--I mean, I see
incremental improvements continuing to increase, because every
once in a while, there is a quantum shift, there is a new
technology. We can go 10 percent all of a sudden in a certain
area. I think it is difficult to anticipate where that end
might be, but I think it is a number of years out for Baxter.
Mr. Rogers. I would respond to that by saying the cost-
benefit curve continues to move, and we really shouldn't, sort
of, have a preordained spot for it in the future, because as
you look at technologies, I look at the combined cycle plants,
gas-fired plants have been developed by GE and how much their
efficiency has been improved over the last decade. I look at
coal gasification and how much we have brought the costs down
and we are going to have the ability to do it even in a cheaper
way going forward. We participated and are joint owner of a
coal generation facility at the Texas City plant with BP where
basically the same concept of capturing the heat and fully
utilizing it within the system has created great efficiencies
in terms of the utilization of natural gas.
So I think our country is on a road, and if we have clear
standards or goal lines with respect to emissions levels, I
think we have the capability in this country to use our
ingenuity and our ability to develop technological solutions. I
think there is no end to what we can achieve.
I had the good fortune in my life to have Neil Armstrong on
our Board of Directors, which always meant that I started every
conversation ``one small step.'' But I think if we had in this
country a kind of a man-to-the-moon type commitment with
respect to technology and certain lines of where we need to be
in the future in terms of emissions level, I think this country
has got the capability to get it done.
Mr. Sodrel. Just a follow up.
Because all of you have worked very hard on emissions and
reducing your emissions, would you work any harder, would you
be any more successful if we passed regulations that moved you
faster than available technology can take you? I mean, is our
new law going to help you become any more efficient than the
existing laws?
Mr. Rogers. Some of my friends in the industry would say,
``Now you have gone from preaching to meddling,'' if you
require us to do something that we don't have the capability to
do or there is not the technology to do. But I believe that we
need to be very sophisticated in the way we think about this,
because sometimes if you put a stake in the ground, you go--you
are forced and you work hard and you make it. There might be
times where you can't make it, and we need to have regulations
that are flexible enough that--and understand that to get the
balance right on a stake-in-the-ground, we are going to make
it, plus some flexibility if it doesn't work out that way. That
is where we have got to have very creative legislation and
regulators that really understand what the goals are and how
best to get there, but at the same time not creating something
that is just impossible.
Mr. Sodrel. Would anybody else like to respond to that one?
Dr. Hobbs. Let me just add two or three words. I think that
if there is additional legislation, flexibility in the
approaches that companies have to approaching it is the key
issue. If--you know, to Mr. Rogers' point, it is the ability to
use different technologies and bring different things to the
table that will be so important for continuing to make these
strides. So if there is legislation, it has to be crafted in a
way that it doesn't inhibit our ingenuity and flexibility.
Ms. Biggert. [Presiding.] The gentleman's time has expired.
The gentleman from Texas, Mr. Green, is recognized for five
minutes.
Mr. Green. Thank you.
And I would like to thank the Chairman and the Ranking
Member. I suppose I am especially appreciative of the Ranking
Member for allowing me the opportunity to occupy this space. It
is a lot bigger when you get here than it appears to be from
the far end of the table.
I do want to acknowledge, as others have, that we have an
outstanding group of experts here today. And I have been more
than impressed with what you have said. I have been inspired.
And Mr. Rogers, just to pick on you, I want you to know that
your comments most recently made about what we are capable of
doing, those are truly inspirational comments. Probably, had we
been in another venue, someone would have applauded what you
said. I think you demonstrated to us by way of your
articulations that if we have the will, we can find the way.
And that is what we are trying to gather now: the will to get
this done, because Americans have always had the ability to
find the way once we have applied the will.
I would like to just mention China for a moment, if I may,
because having visited China, you really don't have to be an
expert to see that there really is a problem there. It is quite
visible. It is almost intuitively obvious to the most casual of
observers. And given that it is now a problem, given that they
are placing more cars on the road, given that they are
attracting businesses from all over the world, given that they
are constructing more buildings and industries, if it is a
problem now, it surely is going to become a major problem in
the future. And the question that we have to grapple with is
how do we get them to comply to come on board if we are not on
board. And I am saying that with as much sincerity as I can,
because I am interested in having you, if you can, to the
extent that you can, give some intelligence with reference to
how do we get this done, which has to be done, without having
done it ourselves. Mr. Rogers, perhaps you can continue to
inspire me.
Mr. Rogers. That is a very tough question.
I believe very strongly that we have to bring China and
India on board, not necessarily all of the other developing
countries at this time. But it is really a question of
leadership. And you are right in your point that it is pretty
hard to preach something when you are not doing it yourself.
But I think the question that we have to ask ourselves is can
we put a stake in the ground on this issue that moves us in
that direction but, more importantly, allows companies in our
country, like the ones here, and other companies, like GE, who
can develop the technologies that they can subsequently sell
into China and India creates a market for their products but
they are products that allow them to create energy in a more
efficient way or to reduce emissions, whether it is SOX, NOX,
mercury, or CO2. And I think all of those are
problems in China and India.
And so my judgment is that we are going to have to lead on
this. I don't think leadership translates into Kyoto. I think
it is something less than that, because I don't think our
country can do it for now. But I do think we can do something.
And we need to do it and say we will go to this place, and if
India and China are not on board at that place, then maybe we
don't go any further. So we have--I think, at the end of the
day, we are going to have to go first in order to bring them
along with us.
And quite frankly, I am impressed with what Prime Minister
Blair is doing. He is taking the G-8 in a couple of months and
basically going to make this issue a primary issue. And he
believes that bringing both India and China on board is
critical to our success on this issue.
Mr. Green. I welcome any additional comments, Mr. Chairman,
if time permits. If not, I will yield back.
Chairman Boehlert. Time does permit. And incidentally, if
we were in a different venue, you had said you would stand up
and applaud. You can stand up and applaud right here. This
venue is--but I don't want you guys to think, quite frankly,
that this is all going to be a cakewalk as you go forward. You
understand that. Maybe absent today are some of the most
critical of our colleagues in terms of this whole issue, and I
am really sorry that they have conflicts and can't be here,
because I would like them to hear what you are saying. And what
you are saying is you are not just altruistic in doing what you
are doing, providing leadership, and you are not just
goodhearted citizens. There is an enlightened self-interest in
doing what you are doing, and it is good for everybody.
So you have got more time, Mr. Green.
Mr. Green. Thank you, Mr. Chairman.
If another panel member would care to give a response. Yes,
sir.
Mr. Meissen. Well, I can't speak to what other industries
and companies are doing, but given the nature of our products
and services and our manufacturing operations around the world,
we operate--we have the same standards around the world, and
these are the same standards on quality, but also in
environmental health and safety policies but also on energy
conservation, water conservation, and other resource
conservation. We have a number of facilities in China and a few
in India that are doing an excellent job on managing resources
and operating in a very cost-effective manner. Actually, a few
best practices are coming. So I think that it first starts with
the company. And in our case, we can't influence maybe what
other companies or larger organizations can do, but we can
influence what we do. We can set our policies. We can set the
direction we want to go. We can set our strategic focus. We see
the carbon cap and trade schemes emerging around the world, and
that is why we got involved in the Chicago Climate Exchange.
The emissions of all of the members of the Chicago Climate
Exchange equal over 1/2 the emissions of Great Britain. And in
the first year of our pilot program, we were able to reduce
that eight percent on an absolute basis. And that is by finding
the most cost-effective in the different facilities and the
different organizations to implement a project that reduces
carbon.
And so when you have a multi-sector, multi-national
organization, you can find the lowest--I mean, the cost--
incremental cost to reduce carbon can be determined, and
therefore, you, cost-effectively, can reduce it for the whole
group.
Mr. Green. Yes, sir. Dr. Hobbs.
Dr. Hobbs. Just one more quick thing.
Sometimes applauding what people are doing good is a good
thing, too, so recently our Carrier division and the state
Environmental Protection Agency of China established a China
Ozone Protection Award. The program recognizes individuals and
organizations promoting the use of non-ozone-depleting
technologies. That is not greenhouse, but it is allied, and--
but we are trying to project the same kind of responsible image
to China that we do in the United States.
Mr. Green. Thank you, Mr. Chairman. I yield back.
Chairman Boehlert. Thank you, Mr. Green.
Chairman Inglis.
Mr. Inglis. Thank you, Mr. Chairman. That enlightened self-
interest you were talking about, Mr. Chairman, comes home with
General Electric who makes those coal gasification turbines in
Greenville, so we are very excited about that. And I think that
it is something that proves the point that you are making, that
industry with enlightened self-interest can do things that
really can help the whole world. So that is exciting.
Also, Mr. Rogers, we are excited about Duke Power looking
at a nuclear power plant. I think the best--one of the best
sites they could look at is in South Carolina's Savannah River
Site, particularly if they use that technology--use that
opportunity--your new company uses that opportunity to create
hydrogen as a byproduct out of that nuclear reactor that they
would build. We know a lot about keeping hydrogen under
pressure at Savannah River Site, because we have kept tritium
under pressure for 30 years there, and so it would be a
fabulous place for Duke Power to do this, to start moving us
toward fixing what Dr. McFarland was talking about, at least
1/3 of that sector being transportation. If we can create
hydrogen and move toward a hydrogen economy that could propel
us in cars, it would be a fabulous thing. And we have got an
opportunity with that next nuclear reactor. And I hope, Mr.
Chairman, that that becomes an opportunity for us to work in a
very bipartisan way, and also biophilosophical, if that is a
word, way between conservationists and environmentalists.
Conservationists are people who want to conserve things.
Environmentalists are people who have, perhaps, a slightly
different worldview or a different worldview than
conservationists, but there is agreement, it seems to me, or
potential for agreement on things like moving toward hydrogen,
especially if you did it through nuclear.
So that is a little bit of preaching there about the
opportunities that are available.
And the question--I would follow up in what Mr. Green was
asking about. It seems to me that if we are to encourage China
and India to do what we have now figured out to do because our
technology has gotten us to the place where we can do it, if we
can get them, in some way, to go with that technology right off
the starting line rather than to retrofit later. I have got to
assume it is far more expensive--and this is your experience. I
have got to assume it is far more expensive to retrofit an
investment you already have. If we could encourage them to
somehow get involved in this new technology, like coal
gasification turbines made by General Electric, to buy those
first rather than build the quick and easy now, come back later
and find it cost-prohibitive to go that--can--anybody want to
comment on how you can encourage people to do that? Obviously,
your companies are leaders in this.
Mr. Rogers. I think it is really critical that when new
power plants are built in China and India they use the best
available technology. And you are right. I mean, as a company
that in the Midwest we will have spent, over the last decade
and looking forward to 2010, almost $4 billion on retrofits in
terms of putting scrubbers on the back end of plants and
putting SCRs to take NOX out and take SO2 out and to
combine they take mercury out. It is smarter to do it on the
front end. And when you build a power plant, whether you build
it in China or you build it in the United States, you are
building that plant to be there for 40 to 50 years. And that is
why it is so important in this country, and that is why I am so
much a pragmatist about this. I am--all across our country,
power companies, over the next three to five years, are going
to be making decisions about the next generation of power
plants to build. We don't even know what the rules are on SOX,
NOX, and mercury. We don't know what the rules are on carbon.
But we all instinctively know that they are going to be tighter
than they are today and that we will have carbon rules. And
because we will, we are forced to look at nuclear more, look at
coal gasification because those are lower-cost approaches to
taking it out. If you looked at a coal plant today and you--and
if this is the coal plant where the retrofits have been put on,
probably only that much of the coal plant is where the power is
generated. All of the rest is to clean up the air byproduct. If
you look at a coal gasification facility, what you see is you
could do it cheaper, take the SOX, NOX, and mercury out, on the
front end, and so you don't have to build this huge facility on
the back end of the power generation. And that is about as
technical as I ever get.
But my point is that these decisions are 40- and 50-year
decisions. And so to your point, if we can lead with our
technology and to set--help them and do it ourselves, set
guidelines and goal lines, I think we have the ability to make
the right decisions, rather than make the wrong decision and
have to fix it 15 years from now.
Mr. Inglis. Anybody else want to comment about that?
Dr. McFarland. On the issue of leadership and bringing the
other countries, China and India, on board, it is also a matter
of implementing those technologies here to bring the costs
down. And also, there is a long-term issue here that we, to
solve this issue, are going to have to have breakthrough
technologies, and developing and providing the market signals
to implement those technologies in the long run are going to be
absolutely critical to solving this long-term global issue.
This isn't a sprint. It is a marathon. We have got to get
started now. It is going to take decades to really, truly
address this issue. You know, just to put it in perspective, to
achieve the goals of the Framework Convention on Climate
Change, which I like to talk about rather than the Kyoto
protocol, some time in the next 75 to 150 years, global average
per capita emissions of carbon must be one-tenth of what they
are today in the United States and continuing to fall. The more
you emit now, the less you can emit in the future. So it says
you start now, you take incremental steps, and you prepare for
the future.
Chairman Boehlert. Thank you.
The gentleman's time has expired.
To paraphrase an old adage, Dr. McFarland, a journey of
decades starts with the first day of forward movement, and you
guys are moving forward. Thank you.
Mr. Wu.
Mr. Wu. I would like to commend the Chairman for his
leadership on this issue and thank the panel, Mr. Rogers, Dr.
McFarland, Mr. Meissen, Dr. Hobbs, for your private sector
leadership and the enterprises which you represent, whether it
is Cinergy or DuPont or United Technologies or Baxter. Thank
you very much for providing that private sector leadership.
I don't have a question for you all so much as I have a
comment about what is going on in the public sector on this
issue. Now I am way past the age where I take newspaper stories
at face value, but there is a front-page story in today's New
York Times by Andrew Revkin. And anything that says that a
former American Petroleum Institute official is now the Chief
of Staff for the White House Council on Environmental Quality
sort of gets me to read the rest of the article. And the rest
of the article proved rather interesting, because it turns out
that this attorney with an economics background has been
editing science reports on climate. And here is an example of a
paragraph, which he crossed out from a scientific report.
The paragraph would have read, and this is all crossed out,
``Warming will also cause reductions in mountain glaciers and
advance the timing of the melt of mountain snow peaks in polar
regions. In turn, runoff rates will change, and flood potential
will be altered in ways that are currently not well understood.
There will be significant shifts in the seasonality of runoff
that will have serious effects on native populations that rely
on fishing and hunting for their livelihood. These changes will
be further complicated by shifts in precipitation regimes and a
possible intensification in increased frequency in extreme
hydrologic events.''
``Extreme hydrologic events'' is what I think we, in the
Northwest, call a flood. And this is all redacted from a
scientific report. And it would be disturbing in and of itself
were it not for the fact that in the story, it said that
``critics admit that while all Administrations routinely vet
government reports, scientific content in such reports should
be reviewed by scientists,'' and that, further,
``politicization by the White House has fed back directly into
the science program in such a way as to undermine the
credibility and integrity of scientific programs with a
chilling effect and has created a sense of frustration among
scientists.'' And there is a comment of the National Academy of
Sciences that they warn that the Administration's procedures
for vetting reports on climate could result in excessive
political interference with science.
Now you all have provided terrific private sector
leadership in this arena, and Mr. Chairman, you and others on
this committee have provided leadership on this issue in terms
of science. And I would submit that we have an oversight
responsibility to make sure that the integrity of the
scientific process is maintained no matter what the current
political climate may be. There is always a limit to what we
can do, whether that is technologic or political, but we must
exert best efforts.
As you know, Mr. Chairman, on my side of the aisle, I have
been a relative moderate on climate change issues. I have been
more focused on backyard issues than global change issues, but
I do find that a twisting of the scientific process is very
disturbing to me, and I would like to submit this June 8 New
York Times article into the record of the hearing and yield
back the balance of my time.
[The information follows:]
Chairman Boehlert. Thank you.
From one relative moderate to another, the Chair now
recognizes Dr. Ehlers.
Mr. Ehlers. Thank you, Mr. Chairman. I would just observe
that when I stopped reading the New York Times, I increased the
amount of time I had available and reduced my anxiety level.
That is offered in jest, by the way. I don't want a New York
Times editorial about the know-nothing attitude in the Science
Committee.
I had several questions I was going to ask. Many of them
have been touched upon.
Let me summarize with a few comments and some additional
questions.
First of all, on Mr. Green's question and the answers.
I certainly agree that China and India are the greatest
problem in the near future, but I think the Kyoto treaty was
fatally flawed by not setting up a timeline for every nation.
And the reason for that was alluded to by Mr. Rogers, in your
comment that energy investments tend to be very long-term
investments. And if, for example, Uganda and Costa Rica knew
that they were going to be subject to the treaty requirements
in 2020, they would make far different investment decisions now
than they would make if they knew they didn't have to worry
about it until some time in the future, and they wouldn't have
to make retroactive changes. So I really think every nation has
to be--has to know it is going to affect them, because clearly
in sunny climates, particularly central Africa, our good
investments in solar energy over the long run might be much
more productive than investments in burning coal.
That was just a comment.
But Mr. Rogers, also in your testimony, you seemed to
suggest that restrictions on greenhouse gas emissions can
result in leadership and technology and advanced
competitiveness. I think that is a very important factor that
we tend to overlook too often on the Congress, and I have been
impressed with those countries that have adopted, including, at
times, the United States, that have adopted advanced
requirements. They have led to developments of entire new
industries in environmental control and which immediately
becomes an export business when other countries have dropped
those same requirements. But it seems to me that is always
forgotten, or else ignored, by those who say there is no
climate change. We could--if in fact we are wrong in that, or
they are wrong on it, we could be in the situation of having to
import our environmental controls rather than being in the
position of developing them, as Dr. Hobbs says, and exporting
them. Does that make sense to you, or am I in La-La Land here?
Mr. Rogers. No, I think you make a very good point. And at
great risk, I am reminded of a series of articles that were in
the New York Times over the last week talking about the
innovation and the new technologies in Japan, because they are
very focused on reducing their emissions of carbon and
greenhouse gases. And it reminded me that, you know, there is
an advantage to countries who know they are going to have to
deal with this. It is an advantage of going to work, developing
the technology, and solving the problem. And I believe that we
might be left behind, because we don't have the same motivation
here, although these companies are just such wonderful examples
of people that are looking ahead. Because I think the reason
that they are looking ahead is because they know eventually, or
inevitably, that there are going to be requirements and that
they will make money off of these technologies. And they see it
as a trend that is occurring, and they are positioning
themselves for it.
So I support your point very strongly.
Mr. Ehlers. It seems to me that our business community in
the United States is, in many ways, ahead of both the political
community and the general public on that issue, and that is
particularly displayed by the folks represented here.
Two other quick points.
First of all, Dr. Hobbs, I--as a scientist, I have to take
a little exception to the suggestion that you can just reverse
an air conditioner and put in heat and get electricity out. I
don't want people to think that they can buy this thing and
just put a switch on it and flip it and run it backwards.
Dr. Hobbs. Yeah, you have to change a couple of valves, but
it is not much worse--not much more than that.
Mr. Ehlers. Well, we will have to talk about that.
But your second point that you added later is the most
important one. It is very much dependent on the quality of the
heat you are working with. If you have high-energy content
heat, it is very simple. If you have low-energy content, it is
hard to beat the economics, and I hope we can. One thing we
can't beat are the laws of thermodynamics, of course. That is
our ultimate limitation.
Just quickly picking up on Mr. Sodrel's excellent question.
I think another factor that is involved in this is that as
fuel prices increase, and this is not a short-term phenomenon,
even though they may drop next year for a few years, but long-
term, there are going to be sharp uptake as we deplete our
fossil fuel, but particularly petroleum and natural gas
resources. Many new approaches are going to become economically
feasible, so that is another factor that says, you know, things
that don't look feasible now, from an economic standpoint, will
be feasible in 10 years, 15 years, and so let us get the ground
work done.
And I can't let this pass without getting in a very strong
statement saying that that is why it is absolutely important
for the government to continue to support fundamental research
so that you fellows can pick up the results of that and apply
it in a very pragmatic way and solve these problems and make
things more economically feasible. If we don't step up to the
plate, as we should in the Congress and fund the fundamental
research, it is going leave you folks high and dry in the
future. If we do that, it is going to give you lots of
opportunities for applied research technology development that
is going to benefit not only you but the entire country.
As you said, it is better to preach than to meddle, and so
I decided I should preach instead of meddle in your business.
So that is the end of my sermon, Mr. Chairman. Thank you
very much.
Chairman Boehlert. Thank you, Pastor--I mean, Dr. Ehlers.
Listen, we have got truth in advertising. Dr. Ehlers is a
very distinguished scientist in his own right. He is a fellow
of the American Physical Society and one of the strengths of
this committee. And I thank you for your observations.
I am going to speak shortly. I am going to have a whole
room full of lobbyists from the high-tech industries meeting on
Capitol Hill. And part of my message to them is we want you to
lobby us more, because we have to be strong advocates for more
investment in fundamental research. We have to be strong
advocates in more investment in K-12 science and math
education. We are competing in the global marketplace, and we
are not doing as well as we should.
And so--but part of the reason we are doing better than
some people think is the panel before us and the companies you
represent and the leadership you are providing in a very
important, sensitive area.
So I thank you for being facilitators and resources for
this committee. We will follow-up with some additional
questions, as I indicated. In the meantime, have a good day.
This meeting is adjourned.
[Whereupon, at 12:05 p.m., the Committee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Responses by Dr. Mack McFarland, Environmental Manager, Fluorochemicals
Business, E.I. DuPont De Nemours and Company
Q1. If you have any views on federal technology programs that you
believe could help reduce greenhouse emissions with improved focus or
additional funding, please provide them to the Committee.
A1. While many of DuPont's greenhouse gas reductions have involved non-
CO2 process gases, we recognize that energy related
technologies will be the predominant source of GHG reductions. We
therefore believe the following areas are important to pursue (not all
of which lie in the Committee's purview).
There are a range of energy efficiency and
alternative energy provisions in the House and Senate energy
bills currently in conference that we believe are beneficial,
including from the Senate bill provisions 1521, 1522, 1529,
1527, 1524, 1506, 1508, 1501, 1507.
As a general matter support for co-generation and
other forms of distributed generation can help to make energy
use more efficient.
The Department of Energy's biofuels program, under
which we are collaborating on an Integrated Corn Based
Biorefinery, provides great promise to advance non-fossil
fuels.
There are a range of energy efficiency and renewable
energy matters on which additional R&D can yield significant
benefits. They include;
Continuing advances in low cost, distributed
process energy instrumentation that can be installed
without a shut-down. Concurrent advances in control
room energy monitoring supervised by expert systems.
Continuing development to improve the
reliability and efficiency and decrease the capital
cost of: insulation and steam traps, topping cycles,
recovery of waste b pressure generators, modern motors.
Long-term development of separation
technologies that are an alternative to distillation.
Decreasing the capital cost for renewable
energy equipment with particular attention to solar and
large stationary CHP and fuel cells.
Significantly reducing the purity required
for any fuel used in a fuel cell.
Addressing the large scale electrical energy
storage problems (environmental footprint, durability
and cost).
Improving the efficiency and reliability and
reduce the cost for the transmission of electricity.
Decreasing the environmental impact of
storage and production of all forms of biomass.
Appendix 2:
----------
Additional Material for the Record
Prepared Statement of Tom Catania
Vice President, Government Relations
Whirlpool Corporation
Whirlpool Corporation is the world's leading manufacturer and
marketer of major home appliances with annual sales of over $13
billion, producing 42 million appliances per year, and employing 68,000
employees. We have 50 manufacturing and technology research centers
around the globe. Whirlpool markets Whirlpool, KitchenAid, Brastemp,
Bauknecht, Consul, and other major brand names to consumers in more
than 170 countries. We have nine major manufacturing facilities in the
United States. Of these, our plant in Clyde, Ohio is the world's
largest clothes washer plant. Our plant in Marion, Ohio is the world's
largest dryer plant and our plant in Findlay, Ohio is the world's
largest dishwasher plant.
Whirlpool Corporation respectfully submits the following testimony
together with the attached slides describing what we are doing to
reduce greenhouse gas emissions. Some may still debate whether the
science is definitive about the causes of global climate change or even
whether it is, in fact, occurring. Despite any remaining uncertainty,
though, Whirlpool Corporation believes prudence dictates that, when
existing solutions are available to mitigate a company and its
products' impact on the environment, they are worth pursuing especially
where, as has been our experience, many of those solutions are not only
a win for the environment and the consumer, but also for our employees
and our shareholders.
Whirlpool Corporation is first and foremost a consumer and brand
focused home appliance company. Our tens of thousands of shareholders
and employees and tens of millions of consumers expect us to fulfill
our commitments to them to the utmost of our collective ability, and
they also assume that we can exceed their expectations while minimizing
our impact on the environment. We take those expectations to heart. We
have found that reducing the greenhouse gas emissions impact of our
company and its products is quite compatible with what some see as a
more narrow mission of being a profit-maximizing home appliance
manufacturer and marketer.
Market-based Incentives and Public/Private Partnerships
We believe that GHG emissions reductions can be achieved most
effectively and quickly through an appropriate balance of regulatory
measures, market-based incentives, and public/private partnerships.
Such incentives include a manufacturer's tax credit such as the one
being debated in the current Energy Bill for super energy-efficient
appliances. It could also include demand-side management incentives to
consumers that encourage them to choose more energy efficient
appliances. One example nearby was the state of Maryland's exemption of
ENERGY STAR appliances from state sales tax. This program saw a 21
percent increase in the sales of ENERGY STAR appliances.
If the Appliance Manufacturer Tax Credit were passed by Congress
this year in the Energy Bill, it would save over 200 trillion BTUs of
energy, or the equivalent of taking 2.3 million cars off the road, or
eliminating the need for 6 coal-fired power plants for a year. The bill
would also reduce the amount of water necessary to wash clothes by 870
billion gallons or approximately the amount of water necessary to meet
the needs of every household in a city the size of Phoenix, Arizona for
two years.
If, for example, the state of Ohio were to pass a four-year, state
sales tax exemption for consumers of ENERGY STAR clothes washers,
dishwashers, refrigerators, and dehumidifiers, the carbon savings would
be 224,107 m/t. The CO2 avoided would be 822,472 m/t; and
consumers would have $261 million more to put back into the economy and
pay for other products and services.
Public-private market transformation partnerships that have been
successful include the ENERGY STAR program implemented by the U.S.
Environmental Protection Agency and the Department of Energy. This
program is voluntary and yet has become competitively mandatory in the
sense that, if a manufacturer does not participate in the program, the
manufacturer risks losing market share. It is an excellent program that
transforms consumer education into an opportunity for manufacturers to
successfully market a more environmentally friendly product at a
premium. Today, over 40 percent of the appliances in the ENERGY STAR
product categories meet or exceed the ENERGY STAR levels.
If all new appliances sold in the United States were ENERGY STAR
qualified, the electricity saved in one year would be 3.4 billion kWh,
the gas saved would be 109 million kWh, the carbon emissions avoided
would be 2.4 million metric tons, and the savings in monthly
electricity bills would be $618 million.
Voluntary Cap and Trade Program
If a voluntary cap and trade program offers true incentives for our
industry to reduce GHGs, then such a program would be helpful, too.
However, the current thoughts on cap and trade programs do not
incentivize our industry to participate since the proposed programs do
not credit our industry with savings from the life-cycle use of the
product--the largest portion of GHG emissions reductions for appliance
manufacturing. In 2000, the Energy Information Administration (EIA)
reported that in 1999, 28 percent of all residential electricity
consumption in the U.S. came from the use of white goods
(refrigerators, dryers, freezers, clothes washers, cooking, and
dishwashers). The UK Ecolabelling Board reported in 1992 that the
cradle-to-grave assessment of the environmental impact of clothes
washers was allocated such that less than 10 percent of the impact came
from production, distribution, and disposal of the product. Whereas,
life-cycle use of the product accounted for over 90 percent of the
environmental impact. This shows that, if the government wants to
motivate appliance manufacturers to participate in a meaningful cap and
trade program, then it needs to provide credit for the power plant
emissions reduced or avoided through the increased energy efficiency of
our products.
We currently do not participate in the 1605b voluntary emissions
reduction program because there is no clear benefit for our
participation since our indirect emissions reductions would not be
credited in the proposed final interim guidelines. They should be.
Also, we are already reducing emissions voluntarily and so there is no
incentive to become mired in a complex and burdensome emissions
reporting program. Additionally, 1605b fails to recognize emissions
reductions made before the 2003 reporting period.
Unilateral Reductions
Whirlpool Corporation has committed to reducing its GHG emissions
globally by three percent during the period 1998 through 2008 despite a
nearly 40 percent projected increase in production volumes. A
description of this commitment is in the attached presentation.
Whirlpool Corporation made this commitment because it is the right
thing to do and it is a possible thing to do while still addressing our
business objectives of producing consumer-demanded products, employing
people, and generating profits. As national, regional, and global plans
are developed to address climate change, care should be taken to
analyze the overall climate impact of any particular measure. For
example, banning the use of a particular greenhouse gas-emitting
compound as a refrigerant or refrigerator wall insulation material, may
be a net climate detriment if its impact in the product is to decrease
its energy efficiency.
What Whirlpool has done and will continue to do
I am submitting a detailed presentation of what Whirlpool
Corporation has done in the past to address GHG emissions, however, I
will briefly cover a few of the highlights here.
Whirlpool has earned the ENERGY STAR Partner of the Year award six
times since 1999. Whirlpool has led in the crafting of all major
appliance efficiency legislation since 1975 and in the crafting of
every appliance efficiency standard since 1990.
The appliance industry as a whole has contributed significantly to
energy efficiency and consumer savings over the years. Today's
refrigerator uses 61 percent less energy than in 1983, saving the
consumer $59/year vs. a 20-year old unit. Whirlpool's side-by-side
refrigerators use 619 kWh/year, equal to a 75-watt light bulb. In 1980,
as reported by the EIA in 2001, it took $87 per year to operate the
average clothes washer and, in 2001, the cost dropped to only $25 a
year for the highly efficient Whirlpool Duet.
Whirlpool was the first appliance manufacturer to announce in 2003
a global greenhouse gas emissions reduction target. Using 1998 annual
total global emissions from product manufacturing, product lifetime
energy use, and any emissions associated with product disposal as our
baseline, Whirlpool will decrease our absolute total emissions by three
percent by 2008. This reduction will occur despite a projected increase
in unit sales by nearly 40 percent during that period. Such a reduction
results in an annual savings of four million metric tons of carbon in
absolute savings and fifteen million metric tons of carbon annually
compared to our 1998 per unit rate of emissions. Fifteen million metric
tons represents the elimination of 28 coal-fired power plants and the
equivalent of 10 million fewer cars on the road.
This commitment is a global effort. This is something very
important to recognize given that the Kyoto Protocol and a few other
recent climate change proposals do not address climate change on a
truly global basis. Our emissions per unit reductions from 1998 to 2008
are projected to be over 20 percent for production in Europe, India,
and China and nearly 30 percent for production in the U.S. and Canada.
Closing
I appreciate the opportunity to provide comments on this important
subject today. In summary, Whirlpool Corporation knows that it can
contribute meaningfully to a reduction in greenhouse gas emissions
without jeopardizing its leading global position in the industry. In
fact, working on energy and water efficiency has helped us develop some
of the products that are most profitable and loved by consumers.
However, we believe this virtuous cycle is created through market-based
mechanisms that encourage technological innovation, allow flexibility
in global production, credit indirect emissions reductions that occur
during the use of the product, and consistently support public-private
partnerships that stimulate consumers into action. We look forward to
working with you in the future on this important matter. Thank you.