[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

                              ----------                              


                        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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.''
---------------------------------------------------------------------------
    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.



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