[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




                         ENERGY AND TAX POLICY

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

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 28, 2007

                               __________

                            Serial No. 110-9

                               __________

         Printed for the use of the Committee on Ways and Means
















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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       JIM MCCRERY, Louisiana
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            DAVE CAMP, Michigan
JOHN LEWIS, Georgia                  JIM RAMSTAD, Minnesota
RICHARD E. NEAL, Massachusetts       SAM JOHNSON, Texas
MICHAEL R. MCNULTY, New York         PHIL ENGLISH, Pennsylvania
JOHN S. TANNER, Tennessee            JERRY WELLER, Illinois
XAVIER BECERRA, California           KENNY C. HULSHOF, Missouri
LLOYD DOGGETT, Texas                 RON LEWIS, Kentucky
EARL POMEROY, North Dakota           KEVIN BRADY, Texas
STEPHANIE TUBBS JONES, Ohio          THOMAS M. REYNOLDS, New York
MIKE THOMPSON, California            PAUL RYAN, Wisconsin
JOHN B. LARSON, Connecticut          ERIC CANTOR, Virginia
RAHM EMANUEL, Illinois               JOHN LINDER, Georgia
EARL BLUMENAUER, Oregon              DEVIN NUNES, California
RON KIND, Wisconsin                  PAT TIBERI, Ohio
BILL PASCRELL JR., New Jersey        JON PORTER, Nevada
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama

             Janice Mays, Chief Counsel and Staff Director
                  Brett Loper, Minority Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 21, announcing the hearing..................     2

                               WITNESSES

Ronald G. Prinn, Sc.D., Professor, Department of Earth, 
  Atmospheric, and Planetary Sciences, Massachusetts Institute of 
  Technology, Cambridge, Massachusetts...........................     6
Stephen Schneider, Ph.D., Professor, Department of Biological 
  Sciences, Stanford University, Stanford, California............    14
The Honorable Eileen Claussen, President, Pew Center on Global 
  Climate Change, Arlington, Virginia............................    23
W. David Montgomery, Ph.D., Vice President, Environmental 
  Practice, CRA International....................................    27

                       SUBMISSIONS FOR THE RECORD

Fees, John A., Babcock and Wilcox Companies, statement...........    72
NGVAmerica, statement............................................    77
Nuclear Energy Institute, statement..............................    82
Willers, Mark, Minwind Energy, Rock, MN, statement...............    84
Williamson, Donald, Conyers, GA, letter..........................    85























 
                         ENERGY AND TAX POLICY

                              ----------                              


                      WEDNESDAY, FEBRUARY 28, 2007

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10:20 a.m., in 
room 1100, Longworth House Office Building, Hon. Charles B. 
Rangel (Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
February 21, 2007
FC-10

                  Chairman Rangel Announces Hearing on

                         Energy and Tax Policy

    House Ways and Means Committee Chairman Charles B. Rangel (D-NY) 
today announced the Committee on Ways and Means will hold a series of 
hearings on energy and tax policy. The first hearing will focus on 
climate change and take place on Wednesday, February 28, 2007, in the 
main Committee hearing room, 1100 Longworth House Office Building, 
beginning at 10:30 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    For the past decade, there has been significant debate regarding 
the topic of global warming. Recent scientific evidence indicates that 
our dependence on fossil fuels as a source of energy is having an 
adverse impact on the environment. In his State of the Union address, 
President Bush asked Congress to work with him to reduce American 
dependence on gasoline and to increase the supply of alternative fuels. 
Numerous bills have already been introduced this Congress by Members of 
both parties that would create new tax incentives or extend existing 
tax incentives for the development of renewable resources and increased 
energy efficiency.
      
    In announcing the hearing, Chairman Rangel said, ``Climate change 
and global warming will have a tremendous impact on the quality of life 
here in America and around the world. The Federal Government needs a 
better understanding of what contributes to global warming so that we 
may play a significant role in preventing further damage.''
      

FOCUS OF THE HEARING:

      
    This hearing will focus on a scientific discussion of the factors 
contributing to global warming and the effects of such changes on 
climate changes.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
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March 14, 2007. Finally, please note that due to the change in House 
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FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
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    1. All submissions and supplementary materials must be provided in 
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    Note: All Committee advisories and news releases are available on 
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noted above.

                                 

    Chairman RANGEL. Now the Committee will come to order.
    Let me welcome these outstanding witnesses that we have 
today as this Committee embarks on a concern that has attracted 
late but international attention.
    This debate has come a long way since our former Member of 
this Committee, Tom Downing, and his buddy Al Gore, many, many 
years ago, attempted to bring this issue before the Committee 
and the Congress.
    The curiosity and the debate is over. Global warming is a 
fact, and human energy consumption is driving some of the 
detrimental effects of climate change.
    The Federal Government can and must play a role in changing 
this behavior. Carbon-based fuel consumption is one of the 
contributing factors to global warming problems, and the 
Federal Government can and must use the Tax Code to encourage 
the development of alternative sources of energy, reducing 
Americans' reliance on oil and other traditional carbon fuels 
as a priority on her agenda.
    Since we last met, the Committee has developed legislation 
to that effect.
    The goal of this hearing is to offer members a full 
scientific understanding of climate change and global warming 
so that with the understanding the Committee is able to move 
forward with tax policies that will move forward with the 
responsibility of solving the problem.
    We intend to frame the Committee's future work in crafting 
a package of tax incentives that will accelerate the 
development of clean, renewable energy and promote greater 
energy efficiency.
    I would like to welcome our panel of witnesses and thank 
them 
for taking the time to join with us and to share their views wit
h us.
    Dr. Ronald Prinn, professor, Department of Earth, 
Atmospheric, and Planetary Sciences, Massachusetts Institute of 
Technology; Dr. Stephen Schneider, professor, Department of 
Biological Sciences, Stanford; Ms. Eileen Claussen, president, 
Pew Center on Global Climate Change; and W. David Montgomery, 
vice president of environmental practice, CRA International.
    The panel of witnesses includes some of the leading 
academic perspectives on climate change. These witnesses will 
be able to quantify the effects of our nation's reliance on 
carbon-based fuels, on climate change, and summarize the 
effects of scientific and business communities to address 
global warming.
    These witnesses can also provide some big picture overview 
of how the tax system can be utilized to complement regulatory 
efforts and to encourage the development of clean and renewable 
energy alternatives.
    I am happy to yield to the Ranking Member, James McCrery, 
for his comments.
    Mr. MCCRERY. Thank you, Mr. Chairman.
    Today's hearing marks the start of what is likely to be a 
series by this Committee to explore issues dealing with two 
important goals, one of which is to improve America's energy 
independence; the other is to address issues relating to global 
climate change.
    As we begin to explore the issue of climate change, I do 
note the lack of disagreement--another way of saying the 
agreement--among the panelists on the fact that the Earth is 
experiencing a period of warming.
    A related issue, which I am sure the panelists will 
discuss, is the degree to which human activity is responsible 
for these changes.
    We need not attempt to settle that debate here. Rather, we 
should focus on whether the tools at this Committee's disposal 
can be appropriately deployed to address the issue of climate 
change.
    In making such an evaluation, I would like to suggest three 
questions that we should apply to this discussion. I hope they 
will be useful to all of us as we debate whether to ask our 
constituents to make difficult sacrifices today that might only 
marginally reduce largely unknown risks in the future.
    First, what are the dangers of global climate change and 
when do they manifest themselves?
    Any inquiry into the issue of global climate change must 
examine the impact of changes in the Earth's temperature and 
when those changes are going to be felt.
    Second, can the United States, acting on its own, reverse 
or even slow global warming?
    As this issue begins to take shape, I'm sure that each of 
us will be urged by various interest groups to support a 
variety of solutions to global warming, which could include an 
array of tax-based carrots and sticks to encourage the 
development of greenhouse gas-reducing technologies as well as 
punishments on those who are deemed to be contributing to the 
problem.
    Before we rush to enact legislation, let's be sure we 
understand whether placing new burdens on our economy in the 
name of fighting global warming--an economy I should point out 
which is already significantly more greenhouse gas-efficient 
than many other nations--is going to make a measurable dent in 
the pace of climate change.
    Third, what are the direct and indirect costs on our 
economy for what improvement in the global climate?
    This is, in many ways, the single most important issue for 
this Committee, as the true costs of our actions must be 
considered in a broader context.
    What level of damage are we willing to do to our economy in 
exchange for what level of reduction in the rage of global 
climate change?
    Is it worth sacrificing one percentage point of growth in 
our GDP for 1 degree less in the planet's average temperature 
in 2107?
    How many lost jobs does that translate into for American 
workers?
    What exactly are the negative effects of that 1 degree of 
average higher temperature?
    These are tough questions, but they are questions we must 
ask if we are to reach the right conclusions.
    Similarly, if countries like China, India, and Russia do 
not implement similar restrictions, or even make a commitment 
to reduce their greenhouse gas emission to levels of most of 
the developed world, we need to ensure that we are not making 
the problem worse.
    After all, if the sticks that we apply to our economy drive 
up the cost of producing goods in the United States, the 
inevitable result will be to chase good jobs overseas, where 
manufacturing is often done with far less regard to its impact 
on the environment and the global climate.
    Surely, that is a result that each of us would find 
unsettling.
    Mr. Chairman, I hope that this Committee will consider 
these three major questions as we go through this discussion.
    I yield back the balance of my time.
    Chairman RANGEL. Thank you, Mr. McCrery.
    [The opening statement of Ms. Tubbs Jones follows:]
      Opening Statement of The Honorable Stephanie Tubbs Jones, a 
           Representative in Congress from the State of Ohio
    Today we are facing what some have termed an energy ``crisis.'' 
Others are calling it an energy ``crunch.'' I would call it an 
opportunity for Cleveland, Ohio and the United States to lead the world 
in alternative energy technology.
    Cleveland has suffered from a shift away from heavy manufacturing 
in recent decades, allowing a well-educated workforce to atrophy and 
our heavy industry to decline. However, if we act soon to invest in the 
research and manufacture of wind turbines and other equipment for 
alternative fuel technologies, we can use this industry as a stimulus 
to bring Cleveland, Northeast Ohio, and other communities hurting in 
the same way back to the vanguard of high technology industry. It has 
been estimated that 11,000 sustainable jobs could be created by the 
growth of wind turbine manufacture in Ohio. We cannot afford to ignore 
this opportunity of our children's economic and environmental future.
    Despite the current Administration's unwillingness to confront this 
global challenge, I am confident this Congress can create greater 
opportunities for Ohio and American business. With the right mix of 
federal policy and development of new technology, we can find a way 
forward.
    I appreciate the testimony by the distinguished panel, and I look 
forward to discussing these issues with you both today and in the 
future.

                                 

    Chairman RANGEL. Dr. Prinn, thank you so much for making 
yourself available to the Committee, and therefore to Congress 
and our great Nation.
    It took a long time for us to catch up to where you've been 
for so long, so I ask your indulgence and your patience with 
us, but together, you can be assured that probably what has 
been a long-lived dream is about to become a reality, not just 
for us but for humankind.
    So, we thank you for being here, and I say to the entire 
panel, don't be surprised that we'll be calling you back.
    Dr. Prinn.

 STATEMENT OF RONALD G. PRINN, Sc.D., PROFESSOR, DEPARTMENT OF 
   EARTH, ATMOSPHERIC, AND PLANETARY SCIENCES, MASSACHUSETTS 
       INSTITUTE OF TECHNOLOGY, CAMBRIDGE, MASSACHUSETTS

    Dr. PRINN. Honorable Chairman and Members, I want to thank 
you all for the opportunity to present some key issues 
regarding climate.
    First, is climate changing?
    Global warming or cooling can be driven by any imbalance 
between the energy the Earth receives through the sun and the 
energy it radiates back to space, as invisible infrared 
radiation. It is that simple.
    The concentrations of carbon dioxide and many other long-
lived greenhouse gases have increased substantially over the 
past two centuries, due in large part to human activity.
    These greenhouse gas increases temporarily lower the flow 
of infrared energy back to space and increase the flow of this 
infrared energy down toward the surface.
    These straightforward facts lead to the rising of 
temperatures at the surface and in the lower atmosphere.
    Recently, the Intergovernmental Panel on Climate Change, in 
its fourth assessment, concluded that warming of the climate 
system is unequivocal.
    As one example, the last 12 years include the two warmest 
and 11 of the 12 warmest years since the year 1850.
    There is no doubt in my mind that climate is already 
changing in very significant ways.
    This begs the obvious question, how much of this is due to 
human activity?
    Ten years ago, I gave testimony during the House Countdown 
to Kyoto hearings, in which I stated that I was not convinced 
at that time that the human signal had arisen from the noise of 
natural variability.
    I am now convinced that the human influence is proven with 
significant probability.
    The observations of continued rapid warming and the recent 
improvements in climate theory and models are among the reasons 
for the change in my conclusion.
    Now, human influence on climate is indicated if the 
observed global patterns of climate change over, say, the past 
50 to 100 years, are shown to be consistent with those 
predicted by climate models which include the human influences 
but not consistent with the patterns predicted when the human 
influences are neglected.
    The observed 1906 to 2005 temperatures at the global and 
continental scales are compared by the IPCC to the range of 
temperatures from multi-model simulations with and without 
human forcing.
    The separation of these two model temperature ranges during 
recent decades, and the fact that the observations follow the 
forced model range much more closely, argues that the signal of 
human influence has indeed arisen from the noise, and I agree.
    The IPCC fourth assessment has specifically concluded that 
there is greater than 90 percent chance that most of the 
observed increase in globally average temperatures since the 
mid-20th century is due to the observed increase in 
anthropogenic greenhouse gas levels.
    The conclusions about human influence by the IPCC provide a 
substantial impetus for lowering future greenhouse gas 
emissions.
    Now, concern about climate change is driven, also and 
especially, by forecasts of significant warming over the next 
century, but how good are these forecasts?
    At MIT, we have developed an integrated global system model 
which consists of coupled models of economic development and 
its associated emissions, natural bio-geochemical cycles, 
climate processes, and ecosystems.
    We've used several hundred runs of this model with 
different assumptions to estimate the probability of changes in 
surface temperature between 1990 and the year 2100 for two 
hypothetical cases, no explicit climate policy, and a stringent 
policy.
    The stringent policy keeps atmospheric carbon dioxide in 
the year 2100 to be below twice its pre-industrial level. 
That's chosen somewhat arbitrarily.
    For clarity, the probabilities of the various amounts of 
warming from the MIT study are projected onto two wheels, as 
shown in this illustration.
    The no-policy wheel that you see in front of you shows 
about one chance in four of greater than 3 degrees Centigrade 
warming by the year 2100.
    That's one quarter of the circle.
    Such a warming is regarded by most climate scientists as 
very dangerous.
    The policy wheel indicates that the odds of exceeding 3 
degrees Centigrade warming drop dramatically when the carbon 
dioxide level is capped in the way I mentioned.
    Imagine now that you are playing a game called the 
greenhouse gamble, and you have $100,000 in winnings.
    To end the game and collect your money, you must finally 
spin one of these two wheels.
    If you land on any part of the wheel corresponding to 
warming exceeding 3 Degrees Centigrade, you lose, say, $10,000 
of your winnings.
    You can spin the no-policy wheel, on the left-hand side, 
for free, but you must pay to spin the policy wheel, with its 
much lower odds of losing your money.
    How much of your $100,000 would you be willing to give up 
in order to spin the policy wheel?
    The world is currently spinning the no-policy wheel. We are 
not spinning the one on the right-hand side.
    To help you make the decision on how much money you want to 
spend to spin the policy wheel, we should ask, what are the 
risks of climate change?
    I advise you not to look too much on the spinning wheels. 
It can be quite disturbing.
    The projected warming of the polar regions in the no-policy 
case is about twice the value shown on the wheel, twice.
    Also, the no-policy case projects sea level rises of about 
8 to 31 inches due to the warming oceans and melting of 
mountain glaciers.
    These conclusions point to the great vulnerability of 
coastal and polar regions to global warming.
    The Greenland and west Antarctic ice sheets together 
contain the equivalent of 39 feet of sea level rise.
    It's therefore very significant that the IPCC fourth 
assessment concludes that the last time the polar regions were 
significantly warmer than present for an extended period of 
time, the reductions in polar ice volume led to four to six 
meters of sea level rise, which is 13 to 19\1/2\ feet of sea 
level rise.
    Also, recent research has suggested a significant 
connection between increasing sea surface temperatures and the 
duration and wind speeds in typhoons and hurricanes.
    If further research confirms this, the increased storm 
damages, which typically rise as the cube of the wind speed, 
could be very costly.
    Regarding the needed emission reductions, it's important to 
know that it matters very little where the long-lived 
greenhouse gases are emitted, and that substantial reductions 
of the type in the policy wheel that I show there, require 
ultimate participation by all nations, not just the currently 
rich nations.
    To better calibrate the policy response, we also need to 
improve the accuracy of estimates of the impacts of climate 
change on natural and human systems.
    Natural ecosystems may not be able to adapt. Some of these 
effects can be potentially mitigated by adaptation, 
particularly in the human systems.
    Finally, I emphasize that we cannot wait for perfection in 
either the climate forecasts or the impact assessments before 
taking action.
    The long-lived greenhouse gases emitted today will last for 
decades to centuries in the atmosphere.
    Added to this is the multi-decade period needed to change 
the global infrastructure for energy and agricultural 
production and utilization without serious economic impacts, 
and we certainly do not want serious economic impacts.
    Thank you.
    [The prepared statement of Dr. Prinn follows:]
 Statement of Ronald G. Prinn, Sc.D., Professor, Department of Earth, 
    Atmospheric, and Planetary Sciences, Massachusetts Institute of 
                  Technology, Cambridge, Massachusetts
    Honorable Chairman and Members of the House Committee on Ways and 
Means, I respectfully submit the following testimony in response to 
your invitation of February 14, 2007.
    I have been a member of the faculty of the Massachusetts Institute 
of Technology since 1971. I specialize in atmospheric science, and in 
my capacity as Director of the MIT Center for Global Change Science and 
Co-Director of the MIT Joint Program on the Science and Policy of 
Global Change, I have also gained appreciation of the various other 
disciplines in the natural and social sciences involved in the climate 
debate.
    I will address here some key issues that in sum provide a 
significant scientific impetus for lowering greenhouse gas emissions. 
First, I will briefly say something about the current evidence for 
climate change. Second, I will discuss detection of the human influence 
on climate that is so important to policy. Third, I will address the 
uncertainty in current forecasts. Fourth, I will review the risks to 
humans and natural ecosystems that arise from allowing very significant 
future global warming to occur. Finally, I will comment on the 
unresolved issues in climate science that need future resolution.
IS CLIMATE CHANGING?
    Climate is usefully defined as the average of the weather we 
experience over a ten- or twenty-year time period. Long-term 
temperature, rainfall and sea level changes are typical measures of 
climate change, and these changes can be expressed at the local, 
regional, country, or global scale. When the global average temperature 
changes we call that global warming or cooling.
    Global warming or cooling can be driven by any imbalance between 
the energy the Earth receives, largely as visible light, from the sun, 
and the energy it radiates back to space as invisible infrared 
radiation. The greenhouse effect is a warming influence caused by the 
presence in the air of gases and clouds which are very efficient 
absorbers and radiators of this infrared radiation. The greenhouse 
effect is opposed by substances at the surface (such as snow and desert 
sand) and in the atmosphere (such as clouds and colorless aerosols) 
which efficiently reflect sunlight back into space and are thus a 
cooling influence. Easily the most important greenhouse gas is water 
vapor but this gas typically remains for only a week or so in the 
atmosphere. Water vapor and clouds are handled internally in climate 
models. Concerns about global warming revolve around less important but 
much longer-lived greenhouse gases, especially carbon dioxide. The 
concentrations of carbon dioxide and many other long-lived greenhouse 
gases (methane, nitrous oxide, chlorofluorocarbons, lower atmospheric 
ozone) have increased substantially over the past two centuries due 
totally or in large part to human activity. When the concentration of a 
greenhouse gas increases (with no other changes occurring) it 
temporarily lowers the flow of infrared energy to space and increases 
the flow of infrared energy down toward the surface which raises 
temperatures at the surface and in the lower atmosphere. The rate of 
surface temperature rise is slowed significantly by the uptake of heat 
by the world's oceans that then causes sea level to rise. This delaying 
action of the oceans means we are already committed to future warming 
due simply to the greenhouse gases already in the atmosphere.
    The Intergovernmental Panel on Climate Change (IPCC) Fourth 
Assessment, whose summary for policy makers was released earlier this 
month, summarizes the direct observations of recent climate.\1\ They 
conclude that ``warming of the climate system is unequivocal, as is now 
evident from observations of increases in global average air and ocean 
temperatures, widespread melting of snow and ice, and rising global 
average sea level.'' They also conclude that ``at continental, 
regional, and ocean basin scales, numerous long-term changes in climate 
have been observed. These include changes in Arctic temperatures and 
ice, widespread changes in precipitation amounts, ocean salinity, wind 
patterns and aspects of extreme weather including droughts, heavy 
precipitation, heat waves and the intensity of tropical cyclones.'' 
There is no doubt in my mind that climate is already changing in very 
significant ways. This begs the obvious question; how much of this is 
due to human activity?
CAN WE DETECT HUMAN INFLUENCE?
    Human influence on climate is indicated if the observed global 
patterns of climate change over say the past 50-100 years are shown to 
be consistent with those predicted by climate models which include the 
human influences, but not consistent with the patterns predicted when 
the human influences are neglected. The predictions which neglect human 
influence are taken as a measure of the natural variability of climate 
and are thus used to represent the ``noise'' out of which the human-
caused ``signal'' must arise for a definitive detection. The 
imperfections of current climate models make them less than ideal tools 
for defining natural variability and uncertain predictors of the 
climate response to human forcing. There are other difficulties 
associated with the inadequacies in climate observations and poor 
knowledge of past levels of aerosols and their quantitative effects on 
sunlight reflection.
    Ten years ago, I gave testimony during the House ``Countdown to 
Kyoto'' hearings in which I stated that I was not convinced at that 
time that the human signal had arisen from the noise of natural 
variability. I am now convinced that the human influence is proven with 
significant probability. The observations of continued rapid warming 
over the last 12 years, which include the 2 warmest years, and 11 of 
the 12 warmest years since 1850,\1\ and the recent improvements in 
climate theory and number and quality of models, are among the reasons 
for the change in my conclusion.
    The IPCC Fourth Assessment has concluded that there is greater than 
90% chance that most of the observed increase in globally averaged 
temperatures since the mid-20th century is due to the observed increase 
in anthropogenic greenhouse gas levels.\1\ Some of the arguments for 
this strong conclusion are visibly captured in Figure 1 reproduced here 
from the IPCC report.




Figure 1. Comparison of observed continental- and global-scale changes 
in surface temperature with results simulated by climate models using 
natural and anthropogenic forcings from the IPCC Fourth Assessment.\1\ 
Decadal averages of observations are shown for the period 1906-2005 
(black line) plotted against the centre of the decade and relative to 
the corresponding average for 1901-1950. Lines are dashed where spatial 
coverage of observations is less than 50%. Dark gray shaded bands show 
the 5-95% range for 19 simulations from 5 climate models using only the 
natural forcings due to solar activity and volcanoes. Light gray shaded 
bands show the 5-95% range for 58 simulations from 14 climate models 
using both natural and anthropogenic forcings.

    The observed 1906-2005 temperatures are shown at the global and 
continental scales and are compared to two bands; one band shows the 
range of multi-model simulations without anthropogenic forcings (i.e. 
the ``noise'') while the other shows the range with these forcings 
(i.e. the ``signal''). The separation of these two bands during recent 
decades, and the fact that the observations follow the ``forced'' band 
much more closely, argue that the ``signal'' of human influence has 
arisen from the ``noise.'' Even if the probability is not quite 90%, 
the conclusions about human influence by the IPCC Fourth Assessment 
provide a substantial impetus for lowering future greenhouse gas 
emissions.
HOW GOOD ARE THE FORECASTS?
    Concern about climate change is driven especially by forecasts of 
significant warming over the next century. The computer models used to 
make these forecasts attempt to simulate with some, but not complete 
success, the behavior of clouds, water vapor, long-lived greenhouse 
gases, atmospheric and oceanic circulation, and many other essential 
climate processes on the regional and global scale. These models are 
remarkable in their complexity and, despite their limitations, are 
invaluable tools for scientific research.
    Integrating and understanding the diverse human and natural 
components of the problem is a must when informing policy development 
and implementation. As a result, climate research should focus on 
predictions of key variables such as rainfall, ecosystem productivity, 
and sea level that can be linked to estimates of economic, social, and 
environmental effects of possible climate change. Projections of 
emissions of greenhouse gases and atmospheric aerosol precursors should 
be related to the economic, technological, and political forces at 
play. In addition, such assessments of possible societal and ecosystem 
impacts, and analyses of mitigation strategies, should be based on 
realistic representations of the uncertainties of climate science. At 
MIT, we have developed an Integrated Global System Model (IGSM) to 
address some of these issues and to help inform the policy process. The 
IGSM consists of a set of coupled sub-models of economic development 
and associated emissions, natural biogeochemical cycles, climate, air 
pollution, and natural ecosystems. It is specifically designed to 
address key questions in the natural and social sciences that are 
amenable to quantitative analysis and are relevant to climate change 
policy.\2\ The IGSM is arguably unique in its combination of scientific 
and economic detail, climate-atmospheric chemistry-ecosystem feedbacks, 
and computational efficiency. It does make some important 
simplifications to enable computational efficiency, but the effects of 
these are likely to become important, at least for global average 
climate forecasts, only after 2100.
    To help decision-makers evaluate how policies might reduce the risk 
of climate impacts, quantitative assessments of uncertainty in climate 
projections are very useful. We have used several hundreds of runs of 
the IGSM together with quantitative uncertainty techniques to achieve 
this assessment.\3\ The IGSM physical climate model is flexible, which 
enables it to reproduce quite well the global behavior of more complex 
climate models. This flexibility allows for analysis of the effect of 
some of the structural uncertainties present in existing models. The 
MIT study includes uncertainties in anthropogenic emissions of all 
climatically important gases and aerosols, and in critical climate 
processes involving clouds, aerosols and deep ocean overturning. The 
MIT estimates of key climate model uncertainties are constrained by 
observations of the climate system. Also, uncertainty in emissions 
includes expert judgment about variables that influence key economic 
projections.
    The probability of changes in the mean global surface temperature 
and sea level between 1990 and 2100 were calculated for two 
hypothetical cases: no explicit climate policy, and a stringent policy. 
The stringent policy keeps atmospheric CO2 levels in the 
year 2100 in the median case to be just below 550 parts per million 
(which is about twice the preindustrial CO2 level). Absent 
mitigation policies, the median projection in this study shows a global 
average surface temperature rise from 1990 to 2100 of 2.4+C, with a 95% 
confidence interval of 1.0+C to 4.9+C. For comparison, the recent 
Fourth Assessment Report of the IPCC reports a range for the global 
mean surface temperature rise by 2100 of 1.1 to 6.4+C for 6 assumed 
emission scenarios.
    Communicating the results of an uncertainty study like this to the 
public and policy makers needs to be achieved with clarity. The average 
person on the street is in fact very familiar with the problems of 
dealing with uncertainty--they just do not describe it with 
probabilities. Anyone who plays cards, bets on horses, or plays 
roulette is gambling with significant knowledge about the odds of 
various outcomes. Similarly, people have become comfortable with these 
issues when it refers to their health--you have high bad cholesterol 
levels and your doctor informs you that your chances of a heart attack 
are significantly greater than average unless you take steps to lower 
these levels. With this in mind, I share with you one way that I (and 
my MIT colleagues) have found quite effective in communicating the 
value of climate policy despite the uncertainties.\4\ We call it the 
``greenhouse gamble'' which is a variant on the ``wheel of fortune.'' 
The probabilities of various amounts of warming from the above MIT 
study are projected onto two wheels, as shown in Figure 2.






Figure 2. The probabilities for various amounts of global average 
warming between 1990 and 2100 calculated from two multi-hundred sets of 
model forecasts are projected onto two wheels.\3\ The left-hand wheel 
is for ``no policy'' and the right-hand wheel is for ``policy'' (see 
text).

    The ``no policy'' wheel shows about 1 chance in 4 of greater than 3 
degrees centigrade warming between now and 2100 if there are no 
significant efforts to curb greenhouse gas emissions. Such a warming is 
regarded by most climate scientists as very dangerous. The ``policy'' 
wheel, that keeps greenhouse gas levels below twice their preindustrial 
levels, indicates that the odds of exceeding 3 degrees centigrade 
warming drop dramatically. Imagine that you are playing ``the 
greenhouse gamble'' and have $100,000 in winnings. To end the game and 
collect your money you must finally spin one of these two wheels. If 
you land on any of the sectors of the wheel corresponding to warming 
exceeding 3 degrees centigrade you lose say $10,000 of your winnings. 
You can spin the ``no policy'' wheel for free but must pay to spin the 
``policy'' wheel with its much lower odds of losing your money. In this 
game the $10,000 represents an (arbitrary) penalty for the damages 
caused by dangerous climate change and the money you are willing to 
give up represents the cost of mitigating policy. How much of your 
$100,000 would you be willing to give up in order to spin the 
``policy'' wheel?
    I emphasize that the uncertainty represented by the ``no policy'' 
wheel is not a sound argument for inaction. The fact that there is some 
probability for small amounts of warming is countered by comparable 
probabilities for dangerous amounts of warming. I emphasize that the 
exact odds of various amounts of warming depicted in the two wheels are 
not as important as the qualitative differences between them. Indeed, 
more recent research at MIT,\5\ and other work reported in the IPCC 
Fourth Assessment,\1\ implies that the probabilities of large amounts 
of warming may be underestimated in these wheels.
WHAT ARE THE RISKS?
    The projected warming of the Arctic and Antarctic regions in the 
MIT ``no-policy'' case are about 2.5 and 1.8 times greater respectively 
than the quoted global average warming (this uneven warming is evident 
from past observations and is seen in essentially all other climate 
model simulations). Also, the warming in the ``no-policy'' case is 
accompanied by projected sea-level rises of 0.2 to 0.84 meters due to 
warming (and hence expanding) oceans and melting of mountain glaciers. 
The IPCC Fourth Assessment reviews forecasts from a large number of 
other more comprehensive climate models revealing qualitatively similar 
asymmetry in warming, and sea level rises of 0.18 to 0.59 meters (1990 
to 2095) depending on the emission scenario used. These sea level 
estimates are conservative since they do not include the possibility of 
significant melting of the Greenland and Antarctic ice sheets.
    These conclusions and many others in the literature point to the 
great vulnerability of coastal and polar regions to global warming. The 
Greenland and West Antarctic ice sheets together contain the equivalent 
of 12 meters of sea level rise. It is therefore significant that the 
IPCC Fourth Assessment\1\ concludes that ``the last time the polar 
regions were significantly warmer than present for an extended period 
(about 125,000 years ago), reductions in polar ice volume led to 4 to 6 
meters of sea level rise.'' Also vulnerable are Arctic tundra and 
frozen soils which contain the equivalent of about 80 years of current 
fossil fuel carbon emissions,\6\ and Arctic summer sea ice cover (a 
cooling influence) that is already decreasing.\1\
    Other expected consequences of global warming include increases in 
heat waves and high latitude precipitation. There are also expected to 
be some benefits of warming, for example increases in the length of the 
growing season in cold regions, that also need to be considered. Recent 
research has suggested a significant connection between increasing sea 
surface temperatures and the duration and wind speeds in typhoons and 
hurricanes.\7\ If further research confirms this, the increased storm 
damages, which typically rise as the cube of the windspeed, could be 
very costly. There are other thresholds and vulnerabilities in the 
climate system that, added to those discussed above, make it prudent to 
attempt to limit the amount of future global warming by lowering 
greenhouse gas emissions.\8\
CONCLUDING REMARKS
    Regarding the needed emission reductions, it is important to note 
that it matters very little where the long-lived greenhouse gases are 
emitted and that, according to our emissions projections,\3\ very 
substantial reductions will require ultimate participation by all 
nations, not just the currently rich countries. Another important point 
is that the predicted warming in 2100 is sensitive to the total 
emissions up to that time but relatively insensitive to the temporal 
pattern of the emissions. Hence higher emissions in the near term can 
potentially be offset by lower emissions later on.
    To better calibrate the policy response, we need to improve the 
accuracy of estimates of the impacts of climate change on natural and 
human systems. Here the research is less mature, but we need to better 
understand and quantify these effects. Some of these effects, 
specifically impacts on human health, agriculture, forestry, water 
supply and quality, and flood-prone coastal and riverine settlements, 
can be potentially mitigated or avoided by adaptation. Natural 
terrestrial, coastal, and oceanic ecosystems may not be able to adapt. 
We also need to address the environmental impacts of future potential 
renewable energy sources operating at the multi-trillion watt scales 
needed for them to make a significant contribution to future total 
energy demand (e.g. billions of acres of land for biofuels, many 
millions of wind turbines). It goes without saying that quantitative 
studies of all of these issues will require significant improvement in 
the accuracy of climate predictions at the country and regional level. 
The challenges here are great, but accurate quantification of impacts 
is essential to define the appropriate balance between the costs of 
policies to lower greenhouse gas emissions and the impacts avoided by 
these policies.
    Finally, I emphasize that we should not wait for perfection in 
either climate forecasts or impact assessments before taking action. 
The long-lived greenhouse gases emitted today will last for decades to 
centuries in the atmosphere and the severity of the risk is obvious 
from the fact that scientists cannot presently rule out the rapid 
warming forecasts. Added to this is the multi-decade period needed to 
change the global infrastructure for energy and agricultural production 
and utilization without serious economic impacts.
REFERENCES
    (1) Intergovernmental Panel on Climate Change, Climate Change 2007: 
The physical science basis, Summary for Policy makers (2007), http://
www.ipcc.ch/
    (2) Prinn, R.G., Complexities in the Climate System and 
Uncertainties in Forecasts, in The State of the Planet: Frontiers and 
Challenges in Geophysics, eds. 
S. Sparks and C. Hawksworth, Geophysical Monographs, 150, American 
Geophysical Union, pgs. 297-305, 2004.
    (3) Webster, M., C. Forest, J. Reilly, M. Babiker, D. Kicklighter, 
M. Mayer, 
R.G. Prinn, M. Sarofim, A. Sokolov, P. Stone and C. Wang, Uncertainty 
Analysis of Climate Change and Policy Response, Climatic Change, 61, 
295-320, 2003.
    (4) MIT Joint Program on the Science and Policy of Global Change, 
http://web.mit.edu/globalchange/
    (5) Forest, C.E., P. Stone and A.P. Sokolov, Estimated PDFs of 
climate system properties including natural and anthropogenic forcings, 
Geophysical Research Letters, 33, L01705, doi:10.1029/2005GL023977, 
2006.
    (6) Sabine, S.L., M. Heiman, P. Artaxo, D. Bakker, C.A. Chen, C. 
Field, N. Gruber, C. LeQuere, R.G. Prinn, J.E. Richey, P. Lankao, J. 
Sathaye and R. Valentini, Current Status and Past Trends of the Global 
Carbon Cycle, in The Global Carbon Cycle, ed. C. Field and M. Raupach, 
Island Press, Washington D.C., pgs. 17-44, 2004.
    (7) Emanuel, K.A., Increasing destructiveness of tropical cyclones 
over the past 30 years. Nature, 436, 686-688, 2005.
    (8) Rial, J., R. Pielke, M. Beniston, M. Claussen, J. Canadell, P. 
Cox, H. Held, N. de Noblet-Ducoudre, R.G. Prinn, J. Reynolds and J. 
Salas, Nonlinearities, Feedbacks and Critical Thresholds within the 
Earths' Climate System, Climatic Change, 65, 11-38, 2004.

                                 

    Chairman RANGEL. Thank you, doctor.
    Dr. Schneider is a professor at the Department of 
Biological Sciences. He has served over half-a-dozen presidents 
and certainly brings to us an international reputation.
    We are honored to have you present among us, and we are 
anxious to listen to your testimony.

STATEMENT OF STEPHEN SCHNEIDER, Ph.D., PROFESSOR, DEPARTMENT OF 
 BIOLOGICAL SCIENCES, STANFORD UNIVERSITY, STANFORD, CALIFORNIA

    Dr. SCHNEIDER. Thank you very much, Mr. Chairman.
    As a point of personal preference, I can remember back in 
the mid-1970s, as a 31-year-old, when I first testified in the 
House and also in the Senate, and I recall your sitting up 
there, too, when we were discussing this problem cordially, as 
an interesting curiosity in science.
    In fact, in the mid-1970s, we were just beginning at that 
point in the research community to recognize the greater 
likelihood of warming versus cooling from human activities, and 
some people were beginning to talk about long-term concerns for 
policy.
    If I had to summarize, as I'm sometimes forced to do in a 
20-second sound bite in a TV program, so what have you all 
learned in the last 30 years since you've all been discussing 
this in Congress and elsewhere, I guess my single fastest quip 
would be that ``nature has cooperated with theory,'' that most 
of what we predicted, not precisely, but warming, increased 
heat waves, decreased cold waves, increasing intensity of 
tropical cyclones, hurricanes, those kinds of events would 
occur, and indeed they have.
    Now, it's often said that the science is settled, and 
indeed, with regard to warming of the last century, an 
incredibly unusual word for scientists was used by the 
Intergovernmental Panel on Climate Change when they said it was 
unequivocal.
    However, what fraction of that global warming was due to 
nature, what fraction was due to us is not completely 
unequivocal, but I believe the words they used, also very 
strong language for scientists, was ``very likely'' that at 
least the last several decades could not be explained without 
the buildup of greenhouse gases in the atmosphere; and I 
personally concur with that.
    The first slide suggests that, despite the fact that our 
confidence in the observed trends, both occurring as a reality 
and at the same time having a deep underlying cause that's both 
natural and human-driven, scientists can't explain it all 
without either one. Moreover, we still have substantial work 
left to do in figuring out precisely how much we'll be warming 
in the future.
    There are, in fact, two fans of uncertainty.
    One is human behavior. If you look at this figure--and this 
is one of those unfortunate figures we scientists love so much.
    I tell my students that a figure is supposed to save 1,000 
words, not take 1,000 words. I fear this one may be in the 
latter category. Fortunately, it's in my written testimony.
    The main point that it conveys is there's a large fan of 
uncertainty in the colored bars. Those are primarily related to 
assumptions of how many people there will be in the world, what 
standards of living we'll have, and what technologies we're 
going to use to get there--highly polluting or lower polluting. 
It makes a big difference.
    Then there are bars on the right-hand side of the figure. 
That represents a second fan of uncertainty, which is the 
uncertainty in the internal dynamics of the bio-geophysical 
system.
    All together, it gives you a very daunting range of 
projections for warming by the end of this century, somewhere 
between 1.1 Celsius and 6.4--1.1 is larger than we now have, 
which is around 0.7, when we've already experienced increased 
intensity of hurricanes and fires and heat waves and ice 
shrinkage, and therefore, you could argue that we'd rather not 
warm up 1.1 degress more.
    On the other hand, 6.4 degrees Celsius would be, as Ron 
Prinn said, a warming that I don't know any serious scientist 
who has studied the problem would advise that we risk. It's the 
temperature difference between an ice age and an inter-glacial 
cycle occurring not in five to ten thousand years, but in one 
to two centuries, would probably represent a massive extinction 
crisis and many, many difficult outcomes.
    So, what is it that we have to be concerned about? It's 
risk management.
    I do not believe the scientific community will anytime in 
the near future be resolving precisely that range of 
uncertainty, and just like anyone who buys insurance, invests 
in deterrence, or makes any strategic hedge, you have to 
consider the balance between the price of the premium and the 
benefit of the policy, and that's precisely what we will be 
doing here, because I do not think that you can rule out 
substantially dangerous change, nor can we precisely pin it 
down in the foreseeable future.
    The next picture, which I promise you we won't go over 
here, but it's in the written testimony, basically says that it 
isn't just happening to our thermometers, it's happening to 
nature.
    What those three panels show you, in a few phrases, is that 
plants are blooming earlier in the spring by a week or two, 
that birds come back earlier on migration, and the problem is, 
they don't all do it together, so you tear apart the fabric of 
ecological communities, and that's occurred at something like 
six tenths of a degree Celsius warming in the past 50 years, 
and we shudder to imagine what would happen if we were 
unfortunate and came out at the 6 degree warming end with ten 
times more change than in the past 50 years.
    Finally, I want to stress an aspect that's very 
significant.
    There are two issues.
    One is, it's perceived in the world now that climate policy 
is on the track and is no longer just an issue for 
conversation.
    Therefore, there will be elements who will try to sneak in 
under the wire and build in--what the economists call ``lock 
in''--the largest emitting plants they can get away with before 
they're controlled.
    What I would suggest to the Committee is to consider 
whether the rules that you set up would prevent anybody from 
having a perverse incentive to do the wrong thing.
    If the baseline data against which they have to compare 
their emissions were in the past and not in the future, there 
would be little opportunity for chicanery to sneak in under the 
wire, and those again are the kinds of issues I think that 
you'll have to carefully address as you look at the policy.
    Finally, let me conclude with this figure, which is 
complicated, but I can summarize it simply.
    A former friend of mine was the astronomer, Carl Sagan, and 
he used to always get made fun of from his accent when he 
talked about billions and trillions of stars and galaxies.
    We have a bit of a billions and trillions problem in 
dealing with climate change, as well.
    There are all sorts of groups that will tell you how many 
billions or trillions it might cost to have one mitigation 
option or the other, and even if they were accurate--and trust 
me, I've read a lot of this literature; there's a wide range of 
uncertainty in that literature, as well.
    Even if they are accurate, it's not adequate to say that we 
will lose 1 percent of GDP in the future when the economy will 
be eight times larger, and therefore that's trillions of 
dollars, and then take that trillions of dollars lost in 2100 
and compare it to the present economy, where it looks like a 
Great Depression, because almost all models project something 
like a 2 percent per year growth rate in the economy.
    What that means is, if there were a loss of 1 or 2 percent 
in GDP associated with mitigation policy, as many models 
suggest, what would it mean in terms of a delay to be a given 
percentage richer?
    Well, this is work explained in the text, and it's just one 
set of examples. Please do not take these numbers literally. 
The framework is what it was designed to look at.
    I'll conclude by saying, almost every study shows that even 
a loss of a few percent in GDP, which can translate into 
staggering numbers of trillions of dollars, is only a year or 
two delay in being, say, 500 percent richer by 2100.
    So, what we learn is that the growth rate in the economy, 
which nearly everybody projects, makes up for the extra cost of 
mitigation in somewhere between 6 months and a few years, and I 
just submit to you whether it's a good insurance policy to 
avoid the more dangerous aspects of climate change to stay 
under the 3 degrees that my colleague, Ron Prinn, has said is a 
dividing point for dangerous effects by being 500 percent 
richer in 2101 with mitigation per capita, rather than 2100 
without it, and avoid most of that climate risk.
    Thank you very much.
    [The prepared statement of Dr. Schneider follows:]
    Statement of Stephen Schneider, Ph.D., Professor, Department of 
     Biological Sciences, Stanford University, Stanford, California
    Honorable Chairman and Members of the House Committee on Ways and 
Means, I respectfully submit the following testimony in response to 
your invitation of February 14, 2007.
Introductory Remarks
    In 1976 I had the honor as a 31-year-old of appearing before the 
Congress for the first time, testifying in support of the establishment 
of a U.S. National Climate Program Office to coordinate activities in 
the government dealing with the then fledgling discussions of climate 
change. At that point the research community was just recognizing the 
greater likelihood of warming versus cooling from human activities, and 
the various agencies responsible for climate related research and 
management needed to coordinate their many independent activities. That 
Office was established and climate change work became a major feature 
of the efforts of several agencies and the Congress. Since that time, I 
have personally participated in some two dozen hearings in the House 
and Senate (as well as many Parliamentary hearings in several 
countries) on climate variability and change, dealing with both climate 
science and related policy implications (please refer to my website for 
more information on my work and views on the vast range of climate 
issues I can only touch on today: climatechange.net).
    If I had to summarize in a phrase the major advance since that 
early interest in climate in the Congress three decades ago, it would 
simply be that since the mid 1970s, ``Nature has cooperated with 
theory.'' The warming typically projected then was primarily based on 
the theory that additional heat trapping associated with the known 
increases of human-produced greenhouse gasses in the atmosphere would 
drive warming. In fact, recent studies have shown that most of the 
mainstream projections since the mid-1970s in the peer reviewed 
literature and in National Research Council reports that projected up 
to one degree Celsius warming by 2000 were accurate to about a factor 
of two. Impacts such as increased heat waves, decreased cold snaps and 
increased hurricane intensities were all projected in the 1980s, and 
such expectations have been largely supported by subsequent data. The 
many uncertainties in climate science--in particular how clouds might 
affect the sensitivity of the climate to heating produced by increasing 
greenhouse gasses--were always openly acknowledged, leading to roughly 
a threefold uncertainty in estimates of how much warming there would be 
from a doubling of CO2 in the atmosphere above a pre-
industrial benchmark concentration of 280 parts per million: roughly 
1.5 to 4.5+C warming over a few centuries if CO2 were to 
double. I wish I could report to the Committee that advances in climate 
science have substantially narrowed that range. But despite the 
dramatically increased scientific confidence we now express in the 
observed warming of the past 30 years, and the high likelihood that 
much, if not most, of it is a result of human activities, we are still 
not able to produce a substantially narrowed range of potential warming 
over the next hundred years. As Figure 1 shows, the likely range of 
warming for 2090 projected in the mainstream literature and summarized 
by the recently released Intergovernmental Panel on Climate Change 
(IPCC) Working Group 1 Report, covers a very large range: 1.1 to 6.4 
degrees Celsius. About half that uncertainty is due to geophysical 
issues like how clouds will govern climate sensitivity, and the other 
half results from uncertainties in human behavior: how many people will 
be in the world, what standards of living they will demand and to what 
extent development goals will be achieved through greenhouse gas-
emitting energy systems and land clearing activities. Such choices can, 
as the figure shows, make a major difference in climate change risk.
So What if the Climate Changes?
    The bottom end of that 1.1 to 6.4+C range on Figure 1 would still 
be problematic for many regions and sectors, but the top end estimate 
is virtually certain to be very highly impacting for nearly all sectors 
and regions, and particularly devastating to nature. Note in Figure 2, 
that already--with about 0.6+C observed warming--that plants and 
animals are showing a discernible response to warming from human 
activities (see the lower two panels of the Figure). If that amount of 
warming increases by a factor of ten to the 6.4+C upper limit suggested 
by IPCC as possible by 2090, then most ecological estimates suggest a 
major extinction crisis for species--with some 50% of all existing 
biodiversity either going extinct or becoming endangered. These species 
would have to move substantial distances to find suitable new climate 
space, and in the process be forced to confront highly disturbed 
landscapes fragmented by factories, farms, freeways and urban 
settlements.
    Over the past two decades, research has intensified on the impacts 
of projected warming on coastlines, agriculture, ecosystems, human 
health and cultures near coastlines and in high mountains--where 
warming can significantly contribute to sea level rise and the melting 
of ice systems. Again, if forced to summarize this work in a sentence: 
some systems might benefit in aggregate dollar terms from up to a few 
degrees of warming (in particular agricultural productivity in higher 
latitudes), but even small amounts of warming can have detrimental 
effects to agriculture in warmer regions, can increase the intensity of 
hurricanes or wildfires, and can alter ecological balances. Scientific 
assessments based on the literature have shown that even small amounts 
of warming would negatively affect more people and systems than would 
be benefited. Warming beyond a few degrees is generally found in the 
scientific literature to have a vast preponderance of significant 
negative effects on food production, forests, species, coasts, human 
health, wildfires and the delivery of such services as water supplies 
and flood protection. Figure 1 suggests that this level of warming is 
considered likely unless major mitigation activities are undertaken.
    In short, a continuation of ``business as usual'' raises a serious 
concern from the risk-management point of view, given that the 
likelihood of warming beyond a few degrees before the end of this 
century (and its associated impacts) is a better than even bet. Few 
security agencies, businesses or health establishments would accept 
such high odds of potentially dangerous outcomes without implementing 
hedging strategies to protect themselves, societies and nature from the 
risks--of climate change in our case. This is just a planetary scale 
extension of the risk-averse principles that lead to investments in 
insurance, deterrence, precautionary health services and business 
strategies to minimize downside risks of uncertainty.
Portfolio of Options: Efficiency, Learning, Adaptation and Mitigation
    Fortunately, many studies over the past decade and a half have 
shown that there is a portfolio of options to deal with the risks of 
climate change. First of all, since we are already committed to some 
level of further climate change regardless of our actions to mitigate 
emissions, it makes sense to invest in adaptation strategies to reduce 
the negative effects. This could involve research and/or extension 
activities such as the development of more climatically tolerant crops, 
coastal protection measures, and creating interconnections and improved 
migration pathways for species forced to relocate in response to 
warming. In particular, as the world's largest economy--and 
CO2 emitter--we in the U.S. will be increasingly called upon 
to be a partner in helping less developed countries to improve their 
adaptive capacity via targeted development activities. Given that 
hotter and poorer regions and groups are less well able to marshal 
resources for adaptation, increasing global attention will be paid to 
those vulnerable regions as the globe sees accelerating warming (now 
projected with high confidence by nearly all mainstream climate 
scientists and reported in many National Research Council reports and 
by the IPCC). And not only poor countries will be vulnerable to extreme 
climatic events that ride on top of warming trends, demonstrated all 
too well by the aftermath of the 2003 European heat wave that took an 
estimated 50,000 lives prematurely and the still dire straits for most 
of the victims of Hurricane Katrina.
    But adaptation is most effective for less than a few degrees of 
warming, and is virtually ineffective against harm to natural systems 
like ice sheets, ecosystems or those social systems with little 
resource base to adapt. For warming beyond a few degrees, the 
scientific literature suggests that adaptation becomes a very 
questionable prospect and the safer strategy is to avoid the risk of 
warming beyond a few degrees. This requires mitigation policies that 
reduce the emissions that cause the warming in the first place, and 
here is another area where a portfolio of strategies have been 
proposed. The sequencing of such strategies will be a major occupation 
of the governance of climate change risks. I often suggest that the 
first element in this sequence should be actions already prevalent in 
many counties, states and at the federal level: mandatory performance 
standards for energy efficiency of buildings, automobiles, air 
conditioners, refrigerators, energy supply systems and other 
technologies. Other strategies could involve capturing greenhouse 
gasses from smokestacks and sequestering them underground, a 
potentially promising entry in the portfolio of options, but one whose 
cost and efficacy at the gigantic scale needed (some trillion tons of 
carbon to be sustainably and safely buried for centuries or more) is 
not yet assured at all. Therefore, what is called for, in my view, is 
another step in the sequencing of actions: public/private partnerships 
to foster learning-by-doing projects to make renewable energy systems 
cheaper and more available and to explore other options from both cost 
and safety aspects. It is not just R&D, but R, D & D--the second D 
being ``demonstration''--as deployment of prototype systems to compete 
for future market share based on their improved performance gained from 
the demonstration investments is the key to learning-by-doing. And 
there can be little learning-by-doing without the ``doing.'' Similarly, 
there can be little return on investment until there is investment, and 
the policy debate thus will need to focus on incentives to promote such 
investments.
    Ultimately, reduction of greenhouse gas emissions by some 60-80% by 
mid century and to near zero by century's end (what is needed to have a 
fighting chance to stay below a few degrees more warming globally) is 
increasingly called for (by California, Illinois, South Australia and 
the UK among others). To achieve such admirable sustainability goals 
for climate protection, most studies suggest that we need both 
``carrots and sticks,'' and that carrots alone (like public support of 
private ventures in cleaner technologies) will not suffice--and that a 
penalty must be implemented for dumping our tailpipe and smokestack 
wastes into the atmosphere as if it were a free sewer. With no clear 
disincentives, this dumping is likely to only continue to increase. 
Such a ``dumping fee'' is essential over time as an incentive both to 
reduce emissions and to stimulate private investment in greener 
alternatives.
Avoiding High Emissions ``Lock-in''
    The recent attempts of some power producers to try to rush into 
service--and thus ``lock in'' high emitting power plants for 50 years--
seems a clear attempt to ``sneak in under the wire'' of climate policy, 
and to pre-empt the likelihood of coming controls on emissions. 
Emissions baselines against which reductions will be scaled need to be 
set in the past, not the future. This strategy may send a signal to 
investment bankers that the sneak-in-under-the-wire game carries the 
high investment risk of a substantial future carbon liability, and may 
thus blunt this ``lock-in'' concern.
    Despite some claims to the contrary, a fee for emissions is not an 
interference in the free market, but in fact the opposite: having a 
price for a commodity that does not reflect all the costs (like coastal 
damages from sea level rise and stronger storms) is a violation of 
market principles: what economists call a ``market failure'' or 
``externality.'' The solution is for governments to act to protect our 
shared atmospheric commons via policies that impose a fee on polluters 
covering the full cost of emissions. For such a ``shadow price on 
carbon'' to be effective as a motivator to reduce pollution and to 
invest in cleaner technologies, it must be perceived by both consumers 
and producers as inexorable, unavoidable by hunkering down and waiting 
for a few years or sneaking in under the wire. However, some sectors 
might be especially burdened by a shadow price on carbon, and although 
I do not personally believe we should hold the sustainability of our 
life support system hostage to any special interest, at the same time 
we could sequence these emission fees over time--decades perhaps--and 
ramp them up at a rate that gives the particularly affected sectors 
some time to adjust--but not to escape or be grandfathered, as that 
would likely increase substantially the risks of warming beyond a few 
more degrees.
The Numbers Game
    Finally, it is common for some opposed to climate policies to cite 
frightening absolute numbers: trillions of dollars of annual costs for 
climate mitigation policies; or a few percent of GDP lost. But let me 
report that there is a wide variance across economic models on how much 
mitigation might cost--and some estimates suggest that it could 
actually improve the economy at first by promoting the implementation 
of cost-effective efficiency actions sooner. But even if one accepts 
some of the seemingly staggering estimates like trillions of dollars of 
costs, let me add some perspective. Figure 3 shows the results that 
Christian Azar from Sweden and I (Azar and Schneider, 2002) produced 
based on conventional economic models that estimate the costs of 
climate policy. We found that a typical shadow price on carbon (a 
carbon fee or tax, for example) to prevent the concentrations of 
CO2 from more than doubling was around $200 per ton carbon 
emitted. A fee twice that high could eventually keep concentrations 
near present values (though an overshoot of concentrations above 
present in the next half century seems unavoidable--see Schneider and 
Mastrandrea, 2005). Azar and I used typical economic models estimates 
of the costs of such policies, although we believe them personally to 
be too pessimistic. These models estimate between a half a percent and 
several percent GDP lost annually by century's end.
    Let us reframe this for perspective. If the annual costs in the 
future were indeed a few trillion dollars lost from climate policies, 
and one compared that to today's level of GDP, it would indeed seem 
astronomically high--equivalent to a depression--some tens of percent 
loss of economic production. But that comparison would be totally 
misleading, if not pernicious. We can't legitimately compare potential 
future costs of climate mitigation policies to the present size of the 
economy. Nearly all mainstream economic analyses typically project GDP 
growth rates of some 2% per year--barring pandemics, world wars or 
other unforeseeable catastrophes we all work so hard to prevent. A few 
numbers to illustrate this follow.
    If the current economy of the world now were about $40 trillion and 
it grew at 2% per year, then in 100 years it would be about eight times 
bigger--about $320 trillion annually. So indeed, a 2% loss in 2100 from 
a century of shadow prices on carbon that reduced most of the climate 
change risks would be a seemingly very daunting figure: about $6.4 
trillion--a major fraction of the economy today. But in 2100, that loss 
would be made up in only one year by economic growth! In other words, 
if our economy continues to grow as typically projected, that growth 
will swamp the costs of mitigation. In this simple demonstration, we 
would be about 500% per capita richer on average in 2101 with major 
climate policies to reduce risks versus being 500% per capita richer in 
2100 having taken no climate policy action and thus faced with full 
risks of dangerous climate change. In the language of risk-management, 
such an investment in mitigation is a cheap insurance policy or hedging 
strategy to avoid significant threat to our planetary life support 
system. It is unacceptable to compare future costs to the present scale 
of the economy. Framing costs in terms of the delay time to be x% 
richer is much more understandable than frightening, but largely out of 
perspective, absolute dollar costs.
    But just because overall costs of climate mitigation may not be a 
large number relative to projected growth in the economy, there will 
still be, as mentioned earlier, individuals and groups with more than 
average difficulties. Thus, the critical challenge to governance is to 
both protect the planetary commons for our posterity and the 
conservation of nature, while at the same time fashioning solutions to 
deal fairly with those particularly hard hit by both the impacts of 
climate change (via adaptation programs) or from climate policies 
(perhaps via job retraining, incentives for relocation of industries, 
side payments, etc.).
    I am often asked if I am optimistic or pessimistic about addressing 
climate change. In a sentence: I am optimistic that we can affordably 
and effectively sequence a series of policy steps to deal with climate 
change via efficiency, learning, adaptation and mitigation, but I am 
also pessimistic that we will fail to prevent a considerable climate 
change risk while we debate and delay the implementation of such 
policies. When I testified on many occasions to this honorable body 
over the decades, I always was asked and offered the personal opinion 
that steps to anticipate and reduce risks via climate policies were 
already called for, as the sooner one starts, the lower the eventual 
risks and costs. Given that the scientific evidence now is overwhelming 
that global warming is a reality, that humans are responsible for a 
considerable chunk of it, and that in the decades ahead we will become 
the dominant factor in climate change and related impacts, a clear and 
effective portfolio of policies is now more urgently needed than ever.
    I deeply appreciate the opportunity to address this Committee and 
look forward to seeing the outcome of your efforts in the form of fair 
and effective actions to reduce the risks of climate change that will 
certainly grow considerably in the decades ahead if we continue to 
increase, rather than reverse, our emissions of greenhouse gasses. 
Thank you very much.
References
    Azar, C. and S.H. Schneider, 2002: Are the Economic Costs of 
Stabilising the Atmosphere Prohibitive? Ecological Economics, 42, 73-
80.
    Root, Terry L., Dena MacMynowski, Michael D. Mastrandrea, and 
Stephen H. Schneider, 2005: ``Human-modified temperatures induce 
species changes: Joint attribution.'' Proceedings of the National 
Academy of Sciences, 102(21), 7465-7469.
    Stephen H. Schneider, Michael D. Mastrandrea, 2005: ``Probabilistic 
assessment of `dangerous' climate change and emissions pathways.'' 
Proceedings of the National Academy of Sciences, 102(44), 15728-15735.





Figure 1. The figure shows clearly how dependent long term warming is 
on typically assumed emissions scenarios and that there is still a very 
broad range of projected risks from these standard scenarios--the 
lowest of which (B1) is still a doubling of atmospheric concentrations 
of CO2 above pre-industrial levels and the highest (A1FI) is 
a tripling of CO2 by 2100. Only via aggressive mitigation 
policies can emissions be brought to much lower levels than a doubling. 
The full range is 1.1 to 6.4+C warming. (Source: Intergovernmental 
Panel on Climate Change, Working Group 1, Fourth Assessment Report, in 
press.)





Figure 2. The study of causal connection by separation of natural and 
anthropogenic forcing factors compares observed temporal changes in 
animals and plants with changes over the same time periods in observed 
temperatures (dark blue bars) as well as modeled temperatures using (i) 
only natural climate forcing; (ii) only anthropogenic climate forcing 
and (iii) both forcings combined. The locations for the modeled 
temperatures were individual grid boxes corresponding with given animal 
and plant study sites and time periods. The agreement (in overlap and 
shape) between, the observed and modeled plots is weakest with natural 
forcings, stronger with anthropogenic forcings and strongest with 
combined forcings. Thus, observed changes in animals and plants are 
likely responding to both natural and anthropogenic climate forcings, 
providing a direct cause and effect linkage (``joint attribution'') 
between observed species movements and modeled natural and 
anthropogenic forcing factors. (Source: Root et al 2005).
      

    

Figure 3. Global income trajectories under business as usual (top 
curve) and for the case of stabilizing the atmosphere at 350 (bottom 
curve), 450 and 550 ppm. Note that we have assumed rather pessimistic 
estimates of the cost of atmospheric stabilization (average costs to 
the economy assumed here are $200/tC for 550 ppm target, $300/tC for 
450 ppm and $400/tC for 350 ppm) and that the environmental benefits 
(in terms of climate change avoidance and reduction of local air 
pollution) of meeting various stabilization targets have not been 
included. (Source: Azar and Schneider, 2002).

                                 

    Chairman RANGEL. Thank you, doctor.
    We will hear next from The Honorable Eileen Claussen, 
president, Pew Center on Global Climate Change and Strategies 
for the Global Environment.
    She spends her lifetime studying climate change, and we are 
honored to have you present with us this morning.

   STATEMENT OF THE HONORABLE EILEEN CLAUSSEN, PEW CENTER ON 
           GLOBAL CLIMATE CHANGE, ARLINGTON, VIRGINIA

    Ms. CLAUSSEN. Thank you, Mr. Chairman and Members of the 
Committee, for the opportunity to speak about the important 
issue of global climate change.
    As you have heard from Doctors Schneider and Prinn, it is 
now well-established that climate change is occurring and that 
humans are primarily responsible.
    The recently released summary of the IPCC's Fourth 
Assessment Report calls the evidence of climate change 
unequivocal, and expresses over 90 percent confidence that most 
observed warming is due to human influence.
    Left unabated, climate change will have tremendous 
consequences for our country and the world.
    The greenhouse gases emissions that contribute to climate 
change come from a wide variety of sources and sectors 
throughout the economy.
    These include transportation, electric power generation, 
use of energy in our homes and offices, and manufacturing.
    Just as there is no single sector or emissions source that 
is responsible for greenhouse gases emissions, there is also no 
single technology or policy that will solve global warming. We 
need a portfolio of policies and technologies to meet this 
challenge.
    The Pew Center believes that there are three things we in 
the United States must do to reduce the real and growing risks 
posed by global climate change.
    First, we must enact and implement a comprehensive national 
mandatory market-based program to progressively and 
significantly reduce U.S. greenhouse gases emissions in a 
manner that contributes to sustained economic growth.
    Second, while taking the necessary first step of placing 
limits on our own emissions, the United States must also work 
with other countries to establish an international framework 
that engages all the major greenhouse gas-emitting nations in a 
fair and effective long-term effort to protect our global 
climate.
    Third, we must strengthen our efforts to develop and deploy 
climate-friendly technologies and to diffuse those technologies 
on a global scale.
    Only in this way will we achieve our environmental 
objectives and keep costs to a minimum.
    Recently, the Pew Center joined with three other NGOs and 
ten companies, including BP, Caterpillar, Duke Energy, DuPont, 
and General Electric in announcing the U.S. Climate Action 
Partnership, or USCAP.
    Together, we are calling for a combination of mandatory 
approaches, technological incentives, and support for 
demonstration projects.
    The USCAP went into detail as to how we think these goals 
should be achieved.
    Given this Committee's interest and jurisdiction, let me 
highlight only the recommendations focused on Federal 
technology research, development, demonstration, and 
deployment.
    Let me reiterate that any solution to this problem will 
require a portfolio of technologies.
    The United States will continue to burn coal and natural 
gas. We will continue to use nuclear energy. We will need to 
ramp up our use of renewable energy resources.
    Transportation will be a key part of our future, but given 
our interests in both energy security and climate change, we 
will need to see far greater use of bio-fuels, advanced 
diesels, and hybrids in the short term, as well as continuing 
innovation in fuels and technologies over the longer term, 
including use of electric of hydrogen-powered vehicles.
    The USCAP recommends the following key characteristics of a 
technology program:
    First. A mix of deployment policies to create incentives to 
use low-greenhouse-gas-emitting technologies and address 
regulatory of financial barriers.
    Such policies could include loan guarantees, investment tax 
credits, and procurement standards.
    For example, tax incentives currently available to a 
limited number of hybrid electric cars and trucks could be 
extended to a larger number of qualifying vehicles.
    Second. Stable, long-term financing, for example, in the 
form of a dedicated revenue stream or other means not reliant 
upon annual congressional appropriations.
    Third. Joint public/private cost sector cost sharing and 
oversight.
    The Department of Energy's FutureGen project is an example 
of a joint public/private initiative, with costs shared between 
the Government and the companies in the projects's Alliance.
    The USCAP believes, however, that we need more 
demonstration projects to demonstrate the potential for long-
term sequestration in a variety of geologic structures.
    Fourth. Establishment of performance criteria and a 
technology roadmap to guide RD&D and deployment program 
investment decisions.
    Finally. Establishment of a public/private institution to 
govern the administration of the RD&D and deployment program 
fund.
    From our own work on technology policy, the Pew Center has 
found that Government has not always been good at picking 
technology winners, so it is best to have programs and 
incentives that serve to promote a variety of technologies and 
approaches.
    The Committee could also consider incentives for energy 
efficiency measures in businesses, homes, and vehicles; for 
capture and sequestration of carbon that would otherwise be 
emitted from coal-burning power plants; for energy efficient 
transmission and distribution systems; and for transportation 
planning measures that reduce miles driven.
    I thank the Committee for considering steps to address 
global climate change and look forward to your questions.
    Thank you.
    [The prepared statement of Ms. Claussen follows:]
 Statement of The Honorable Eileen Claussen, President, Pew Center on 
               Global Climate Change, Arlington, Virginia
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to speak to the Committee about the important issue of 
global climate change. My name is Eileen Claussen and I am the 
President of the Pew Center on Global Climate Change.
    The Pew Center on Global Climate Change is a non-profit, non-
partisan and independent organization dedicated to providing credible 
information, straight answers and innovative solutions in the effort to 
address global climate change. Forty-two major companies participate in 
the Pew Center's Business Environmental Leadership Council (BELC), 
making the BELC the largest U.S.-based association of corporations 
focused on addressing the challenges of climate change. Many different 
sectors are represented, from high technology to diversified 
manufacturing; from oil and gas to transportation; from utilities to 
chemicals. These companies represent $2.5 trillion in market 
capitalization, employ over 3.3 million people, and work with the 
Center to educate the public and policy-makers on the risks, challenges 
and solutions to climate change.
    As you have heard from Drs. Schneider and Prinn, it is now well 
established that climate change is occurring and that humans are 
primarily responsible. The recently released summary of the IPCC's 4th 
assessment report calls the evidence of climate warming ``unequivocal'' 
and expresses over 90% confidence that most observed warming is due to 
human influence. Left unabated, climate change will have tremendous 
consequences on our country and the world.
    The greenhouse gas (GHG) emissions that contribute to climate 
change come from a wide variety of sources and sectors throughout the 
economy. These include transportation, electric power generation, use 
of energy in our homes and offices, manufacturing, and many others. 
Just as there is no single sector or emissions source that is 
responsible for greenhouse gas emissions, there is also no single 
technology or policy that will solve global warming. We need a 
portfolio of policies and technologies to meet this challenge.
    The Pew Center believes there are three things we in the United 
States must do to reduce the real and growing risks posed by global 
climate change: First, we must enact and implement a comprehensive 
national mandatory market-based program to progressively and 
significantly reduce U.S. greenhouse gas emissions in a manner that 
contributes to sustained economic growth. Second, while taking the 
necessary first step of placing limits on our own emissions, the United 
States must also work with other countries to establish an 
international framework that engages all the major greenhouse gas-
emitting nations in a fair and effective long-term effort to protect 
our global climate. Third, we must strengthen our efforts to develop 
and deploy climate-friendly technologies and to diffuse those 
technologies on a global scale. Only in this way will we achieve our 
environmental objectives and keep costs to a minimum.
    Recently, the Pew Center joined with 3 other NGOs and 10 companies, 
including BP, Caterpillar, Duke Energy, DuPont, and GE in announcing 
the U.S. Climate Action Partnership (USCAP). Together, we are calling 
for a combination of mandatory approaches, technological incentives and 
support for demonstration projects.
    We chose emission reduction targets with technology in mind: to 
allow for capital stock turnover and for the development and deployment 
of new technologies. In five years, emissions should be between 100 and 
105% of today's levels, in other words, no more than 5% above current 
levels. In ten years, emissions should be 90-100% of today's levels. By 
2050, we would like to see emissions cut 60 to 80% from current levels. 
It is the considered judgment of the U.S. Climate Action Partnership 
that these cuts are both technologically achievable and economically 
sound.
    The USCAP went into detail as to how we think these goals should be 
achieved. Given this Committee's interests and jurisdiction, I will 
highlight only the recommendations focused on federal technology 
research, development, demonstration, and deployment. But let me 
reiterate that we will need a portfolio of technologies. The U.S. will 
continue to burn coal and natural gas; we will continue to use nuclear 
energy; and we will need to ramp up our use of renewable energy 
sources. Transportation will also be a key part of our future, but 
given our interests in both energy security and climate change, we will 
need to see far greater use of biofuels, advanced diesels and hybrids 
in the short term, as well as continuing innovation in fuels and 
technologies over the longer term--including use of electric--or 
hydrogen-powered vehicles.
    The USCAP recommends the following key characteristics of a 
technology program:

      A mix of deployment policies to create incentives to use 
low-GHG technologies and address regulatory or financial barriers. Such 
policies could include loan guarantees, investment tax credits and 
procurement standards. For example, production tax credits currently 
available to some categories of renewables could be extended to other 
zero-GHG electricity sources. Likewise, tax incentives currently 
available to a limited number of hybrid-electric cars and trucks could 
be extended to a larger number of qualifying vehicles.
      Stable, long-term financing (for example, in the form of 
a dedicated revenue stream or other means not reliant upon annual 
congressional appropriations).
      Joint public/private sector cost-sharing and oversight. 
The Department of Energy's FutureGen project is an example of a joint 
public/private initiative, with costs shared between the government and 
the companies in the project's Alliance. The USCAP believes, however, 
that we need more demonstration projects to demonstrate the potential 
for long-term sequestration in a variety of geologic structures.
      Establishment of performance criteria and a technology 
roadmap to guide RD&D and deployment program investment decisions; and
      Establishment of a public/private institution to govern 
the administration of the RD&D and deployment program fund.

    It is important that incentives be consistent enough to provide the 
certainty needed for large-scale investment decisions. For example, the 
short-term nature of the production tax credit for wind power has 
resulted in a boom and bust cycle in which investments have been strong 
while the credit is in effect but drop quickly as it expires, hampering 
consistent growth in this sector.
    From our own work on technology policy, the Pew Center has found 
that government has not always been good at picking technology winners, 
so it is best to have programs and incentives that serve to promote a 
variety of technologies and approaches. Projects could be selected via 
a reverse auction, allowing proposals for reduction projects to compete 
on a level playing field for funding. An auction could specify 
technology categories as well as offer a broad competition to elicit 
new, as-yet-unknown technologies.
    The Committee could also consider incentives for energy efficiency 
measures in businesses, homes, and vehicles; for capture and 
sequestration of carbon that would otherwise be emitted from coal 
burning power plants; for energy efficient transmission and 
distribution systems; and for transportation planning measures that 
reduce miles driven.
    Many of the companies we work with have set voluntary targets and 
reduced their GHG emissions significantly. The majority have done so by 
finding efficiency opportunities in their operations and most have had 
no net cost to implement those reductions. This is not to say that all 
reductions will be free, or that a regulatory scheme alone would be a 
sufficient response to climate change. But it does suggest that moving 
forward with both a push (through technology incentives) and a pull 
(through a price signal) could allow us to meet a series of emission 
reduction objectives such as those recommended in the USCAP proposal.
    Here are some examples of what companies have been able to achieve.
    DuPont used seven percent less total energy in 2004 than it did in 
1990, and has lowered its GHG emissions by 70% during that time despite 
an almost 30 percent increase in production. Compared to a linear 
increase in energy with production, this achievement has resulted in $2 
billion in cumulative energy savings.
    From 1990 to 2002, IBM's energy conservation measures resulted in a 
savings of 12.8 billion kWh of electricity--avoiding approximately 7.8 
million tons of CO2 and saving the company $729 million in 
reduced energy costs.
    The pharmaceutical company Baxter reduced its process-related GHG 
emissions by 99 percent between 1996 and 2002 by phasing out the use of 
certain solvents. These process changes resulted in reductions 
equivalent to over 3 million metric tons of carbon dioxide. Alcoa's 
aluminum smelters reduced generation of PFC's (powerful greenhouse 
gases) by 75% from 1990 to 2002.
    These leading firms are curbing their contributions to climate 
change, but their voluntary efforts are not enough to achieve the 
comprehensive reductions in greenhouse gases needed across the economy. 
To achieve that goal, we need to enact the measures discussed above.
    I thank the Committee for considering steps to address global 
climate change and look forward to your questions.

                                 

    Chairman RANGEL. Our next witness will be Dr. David 
Montgomery, who is the vice president of Environmental 
Practice.
    We are thankful that you've taken time to share your views 
with us. You may proceed.

   STATEMENT OF W. DAVID MONTGOMERY, Ph.D., VICE PRESIDENT, 
           ENVIRONMENTAL PRACTICE, CRA INTERNATIONAL

    Dr. MONTGOMERY. Thank you, Mr. Chairman.
    I'm honored by your invitation and the opportunity to be 
here.
    Since the starting point of this discussion is climate 
science, I thought I should outline briefly a bit of my 
understanding of that subject.
    I'm an economist, but anyone who works on climate economics 
and policy has to have some understanding of the science, and 
just a few words on mine.
    There is clear evidence that the Earth is warming. The 
amount of warming that's been caused by human activity is open 
to debate, but there is no question that the human race can 
play a role in slowing or stopping that trend. Clearly, 
something should be done.
    The questions are, what will the alternatives cost, what 
will be effective, and where to start.
    Two points that were mentioned by Professor Prinn in his 
written testimony I think shed a great deal of light on these 
questions.
    He stated, and this is my paraphrase, that it does not 
matter where greenhouse gases originate, they're all mixed in 
the atmosphere and contribute equally to warming everywhere.
    This observation implies that the costs of meeting any 
climate goal can be reduced by ensuring that emission 
reductions occur in the countries where they're least costly.
    Professor Prinn also mentioned that it's pretty much 
irrelevant when emission reductions occur.
    This observation implies the decision about how much to 
abate now and how much to abate several decades in the future 
can be based pretty much exclusively on the relative costs, 
because either way, we can achieve the same reduction in long-
term temperatures.
    So, let me return to the three questions of cost, 
effectiveness, and where to start.
    First, cost:
    Limits on greenhouse gas emissions will impose a cost on 
the U.S. economy, and the cost will be larger for tighter 
targets.
    In previous studies of proposals for U.S. emission limits, 
my colleagues and I have estimated annual losses that range 
from about three-tenths of a percent of GDP to about 1.9 
percent of GDP in 2020, for proposals actively under 
consideration.
    In every case, exactly the same mechanisms are at work:
    The need to adopt more costly methods of electricity 
generation, to invest in producing more expensive low-carbon 
fuels and to undertake investments to increase energy 
conservation, divert resources that would otherwise be 
available to produce the goods and services that make up GDP.
    Higher energy costs raise the cost of U.S. manufacturing 
relative to competitors in countries that do not adopt limits 
on greenhouse gases emissions and they lead to a flow of jobs 
and investment out of the United States toward those countries.
    Emissions reductions achieved at these costs in the United 
States or even other industrial countries are also unlikely to 
make much difference in global temperatures over the next 
century. There are two fundamental reasons.
    First, virtually all projections agree that the vast 
majority of emissions over the next century will come from 
developing countries, in particular China and India.
    Second, with today's technology, it's simply not 
economically feasible to achieve emission reductions on the 
scale required to stabilize global temperatures.
    These two points suggest to me that the highest priorities 
for climate policy have to be developing countries and R&D. 
Both require immediate action and are immense challenges.
    Without involvement of developing countries and a dramatic 
new commitment to R&D, it strikes me that it will be nearly 
impossible to reduce emissions sufficiently to manage climate 
risks effectively.
    Halting the growth of emissions from developing countries 
will not be an easy task.
    These countries have consistently opposed any attempts to 
initiate discussion of limits on their emissions in 
international negotiations. They fear that such limits would 
condemn them to continued poverty.
    They also gain competitive advantages from having 
industrial countries go first and take the lead in reducing 
emissions, but this creates additional resistance on their part 
to limits on emissions.
    Finally, developing countries generally have such poor 
legal and market institutions that it's pretty clear they 
couldn't implement efficient policies to reduce emissions, even 
if they desired to do so right now, without much more deep 
economic reforms.
    Nevertheless, some solution must be found. If developing 
countries continue on their current course, it would not be 
possible to stabilize temperatures.
    I think it is possible to reconcile their desire for 
improved living standards with lower emissions, but what it 
takes at the start is much more rapid and deeper economic 
reforms to release the market forces that lead to energy 
efficiency and that set the stage for the kind of market-based 
policies that can reduce emissions effectively and efficiently.
    I think the Asia-Pacific Partnership is a start in this 
direction.
    R&D is also an absolute necessity. Stabilization of 
greenhouse gas concentrations requires that, at some point, our 
net emissions fall to zero on a global basis. That is, the rate 
at which we put emissions into the atmosphere has to be 
balanced by the rate at which they are removed.
    R&D to create new technological options is a necessity if 
that stabilization goal is to be economically feasible.
    One study estimates that to get on a path toward 
stabilization, within the next 50 years, the world will require 
twice as much energy from carbon-free sources as the total 
amount of energy we produce today.
    I don't think that could be done at affordable cost with 
today's technology or with incremental improvements. A massive 
program of R&D focused on breakthrough discoveries leading to 
new approaches and technologies is required.
    Even mandatory limits on emissions over the next decade or 
two, I do not believe will provide sufficient or credible 
incentives for that kind of R&D.
    Development and transfer of new technology is also critical 
to the role of developing countries. If we can reduce the cost 
of reducing their emissions, transfer technologies that help 
their economic growth as well as reducing their emissions, we 
can reduce their resistance to doing something.
    What does all this imply for near-term emission limits?
    The choice of how much to do today and how much to plan on 
doing tomorrow to reduce emissions involves balancing the high 
costs of immediate reductions against the potentially much 
lower costs of achieving reductions of exactly the same 
magnitude in the future with new technologies that we can 
produce through a commitment to R&D today.
    One way of striking this balance between what to do today 
and what to do once new technologies are available is by 
considering modest financial incentives for reducing greenhouse 
gases in the near term that are designed to rise at a rate that 
would be sufficient to provide an incentive for the adoption of 
new cost-effective technologies once they become available.
    Thank you, Mr. Chairman, for your invitation.
    [The prepared statement of Dr. Montgomery follows:]
Statement of W. David Montgomery, Ph.D., Vice President, Environmental 
                      Practice, CRA International
    Mr. Chairman and Members of the Committee:
    I am honored by your invitation to appear today, as the Committee 
addresses issues of climate science and its implications for climate 
policy. I am Vice President of CRA International, and an economist by 
profession and training. Much of my work for close to 20 years has 
dealt with the economics and policy of climate change. It is impossible 
to do climate economics and policy without some understanding of the 
state of climate science, and I am particularly honored to sit here 
because I have known Professor Prinn for most of the time that I have 
worked on climate policy and I have relied on his writing and 
presentations as the clearest and most objective account of the state 
of climate science. Having said that, I should also add that any errors 
are my own and should not be blamed on him.
    Since the starting point of this discussion is climate science, it 
might be helpful if I begin by stating my understanding of some key 
aspects of that subject. There is clear evidence that the Earth is 
warming. The extent to which human activity has had a role in that 
warming is open to debate, but there is no question that we can play a 
role in slowing or stopping the trend. But we must do so with a clear 
understanding of the benefits as well as the costs of various 
approaches, and what difference specific actions can make in the 
consequences of climate change.
Key Points
    My testimony contains five key points.

      Mandatory U.S. greenhouse gas controls and any version of 
the Kyoto Protocol will impose a significant cost on the U.S. economy 
and will lead to a shift of investment away from the U.S. and toward 
countries like China and India that are not willing to undertake 
similar efforts.
      By creating these competitive advantages, unilateral 
policies adopted by industrial countries will actually strengthen the 
incentives for countries like China and India to resist controls.
      Since China, India and other developing countries will be 
responsible for the majority of global emissions over the next century, 
any prospect for halting global warming depends crucially on inducing 
these countries to cut their emissions.
      Even if all industrial countries met the emission targets 
set in the Kyoto Protocol, the emission reductions bought at these 
costs would not be sufficient to prevent most of the temperature 
increases now projected for the next century.
      Effective R&D is a necessity, in order to develop new 
technologies that will make it possible to reduce greenhouse gas 
emissions sufficiently to stop climate change at costs that do not 
exceed public willingness to pay, here and abroad.
      Minimizing the costs of achieving climate goals requires 
making sure that the timing of emission reductions matches with the 
availability of these new technologies.

Summary
    Limits on greenhouse gas emissions will impose a cost on the U.S. 
economy, and the cost will be larger for tighter targets. In previous 
studies that have looked at a range of proposals for U.S. emission caps 
set at varying levels, my colleagues and I have estimated annual losses 
that range from 0.3% to about 1.9% of GDP in 2020. In every case, we 
see exactly the same mechanisms at work. The need to adopt more costly 
methods of electricity generation, to invest in producing more 
expensive, low-carbon fuels and to undertake more intensive energy 
conservation measures diverts resources that would otherwise be 
available to produce the goods and services that make up GDP. Higher 
energy costs raise the costs of U.S. manufacturing relative to 
competitors in countries that do not adopt limits on greenhouse gas 
emissions.
    Due to these higher energy costs, there will be an even greater 
shifting of investment from the United States (and other industrial 
countries) into countries like China and India. Emissions in the United 
States will fall, especially as our share of energy intensive 
industries shrinks, but they will grow even faster in China as 
factories rise there that would otherwise have been built here. 
Moreover, given the much lower level of energy efficiency in countries 
like China, the leakage of emissions will be much greater than the 
leakage of investment.
    The relative share of the United States and other industrial 
countries in global emissions is rapidly shrinking, and over the next 
century the vast majority of greenhouse gas emissions will come from 
developing countries. China's emissions are expected to exceed the U.S. 
in the next year or two and then to move far ahead.
    Mandatory limits on emissions in the United States, or even in 
conjunction with other industrial countries, will not be sufficient to 
achieve stabilization of greenhouse gas emissions at any reasonable 
level. Emissions from developing countries are growing too rapidly. 
Moreover, due to their relative technological backwardness, investments 
in reducing emissions from developing countries could have a much 
bigger ``bang for the buck'' than in the United States.
    Adopting mandatory limits will not automatically lead developing 
countries to follow our lead. Instead, limits on emissions from 
industrial countries will cause a shift in investment toward those 
developing countries, so that our emission reductions will be offset by 
greater increases in emissions outside the United States. Once they 
build industries based on energy cost advantages, developing countries 
will be even more unwilling to adopt policies that would threaten those 
industries.
    The implication of these observations is not that the United States 
should do nothing. It is that gaining the participation of developing 
countries is probably the highest priority for climate policy, because 
without that participation it is impossible to prevent large 
temperature increases.
    Immediate funding for R&D is also required. Stabilization of 
greenhouse gas concentrations requires that at some point we achieve 
zero net emissions on a global basis--that is, the rate at which 
emissions are put into the atmosphere must equal the rate at which they 
are removed. R&D to create new technological options is a necessity if 
that stabilization goal is to be economically feasible. One study 
estimates that in order to get on a path toward zero net emissions, 
within the next 50 years the world will require twice as much energy 
from carbon free sources as the total amount of energy produced 
today.\1\ That cannot be done at affordable cost with today's 
technology or with incremental improvements in that technology. A 
massive program of R&D focused on breakthrough discoveries leading to 
new approaches and technologies is required. Even mandatory limits on 
emissions over the next decade or two will not provide a sufficient, 
credible incentive for that R&D.\2\
---------------------------------------------------------------------------
    \1\M.I. Hoffert, et al. ``Advanced Technology Paths to Global 
Climate Stability: Energy for a Greenhouse Planet'' Science, Vol. 298, 
November 1, 2002, p. 981-7.
    \2\W.D. Montgomery and A. Smith, Price, Quantity and Technology 
Strategies for Climate Change Policy,'' Chapter 27 in M. Schlesinger, 
H. Kheshgi, et. al, eds. Human-Induced Climate Change: An 
Interdisciplinary Assessment, Cambridge University Press, forthcoming 
2007.
---------------------------------------------------------------------------
    Again, the correct implication to draw from this analysis is not 
that we should do nothing until new technologies somehow become 
available. An immense effort will be required to develop those 
technologies, and it must start now. Congress should give high priority 
to the design and funding of an effective R&D program that relies 
heavily on the private sector that will have to adopt and use the 
technologies.
    Since climate change is driven by the sum total of emissions over 
long periods of time, it is possible to greatly reduce the costs of 
climate policies and achieve greater benefits by adjusting the timing 
of emission reductions to match with the availability of new 
technologies that provide emission reductions at lower cost. Thus, 
incentives for the deployment of cost-effective greenhouse gas-reducing 
technologies could be provided through a modest financial penalty on 
emissions that balanced the costs and benefits achieved.
Climate science and climate policy
    There are two conclusions from climate science that I think are 
broadly accepted and that are critical to the comparison of costs and 
benefits. The first is that warming is caused by concentrations of 
greenhouse gases in the atmosphere, and that those concentrations build 
up slowly as greenhouse gases are added to the atmosphere. The time 
scales involved in this accumulation are long, since net annual 
emissions are only a small fraction of the total stock of carbon 
dioxide in the atmosphere.
    The second conclusion is that it does not matter where a greenhouse 
gas is released, it will make the same contribution to concentrations 
in the atmosphere--and all other climate effects--whether it originates 
in California, Virginia, Germany or China. This leads to the notion of 
where flexibility, that costs of achieving any climate goal can be 
substantially reduced by policies that ensure emissions are reduced in 
the geographic regions where it is least costly to do so.
    Another implication that I draw from these robust conclusions is 
that to a first approximation it is also pretty much irrelevant when 
emissions enter the atmosphere, since concentrations grow so gradually 
over time. There is some disagreement on how irrelevant the timing of 
emissions is to temperature increases, but I think all would agree with 
some notion of when flexibility, that the costs of achieving any 
climate goal can be substantially reduced by choosing the best timing 
for emission reductions.
    The nature of climate processes also implies that the more 
immediate and irreversible an impact is found to be, the less relevant 
it is to the decision about what to do. The limited ability of the 
industrial countries to influence emissions from developing countries, 
and the slow effect of changes in emissions on greenhouse gas 
concentrations suggests that changes that can be observed today are 
likely to be unavoidable. The benefits of action to reduce greenhouse 
gas emissions take the form of avoided damages. If certain damages 
cannot be avoided, then they do not play a role in the balancing of the 
costs and benefits of action. In the language of decision analysis, we 
call a bad outcome that cannot be avoided a ``worry''--something we 
fret about but cannot change--as opposed to a ``risk'' that can be 
managed and reduced through actions still available to us.
    With this as background, I would like to discuss the question of 
what various kinds of policy approaches can achieve in reducing the 
risks and consequences of climate change, and what they will cost.
What can emission limits on industrial countries accomplish?
    The Kyoto Protocol is frequently cited as a standard for effective 
action on climate change. Unfortunately, even if all the countries that 
originally signed the Protocol were to meet those targets, the result 
would fall far short of what is required to stabilize global 
temperatures. MIT researchers have estimated that the Kyoto Protocol, 
if all its signatories were to continue forever to keep emission at or 
below its targets, would produce a reduction of 0.5+C in global average 
temperatures by 2100 (about a 14% reduction from uncontrolled 
temperatures).\3\ Other mainstream climate scientists have estimated 
that it would take 30 Kyotos to achieve what they consider acceptable 
concentrations of greenhouse gases in the atmosphere,\4\ and that the 
targets for the 2008-2012 period would produce a reduction in global 
average temperatures in 2050 of just 0.07+C.\5\
---------------------------------------------------------------------------
    \3\J. Reilly et. al., ``Multi-Gas Assessment of the Kyoto 
Protocol,'' Nature 401: 549-555 (1999).
    \4\D. Malakoff, Science 278, 2048 (1997).
    \5\T.M.L. Wigley, Geophys. Res. Lett. 25, 2285-2288 (1998).
---------------------------------------------------------------------------
    All these estimates assume that all parties to the Protocol 
actually meet their targets. It is not just the United States that will 
have emissions in excess of the Kyoto Protocol target. At this point, 
Australia, Japan, Canada, and the European Union itself appear likely 
to fail to reduce emissions sufficiently to meet their targets. The 
European Union may be able to comply with its obligation, but only if 
it purchases large quantities of ``hot air'' from Russia, an action 
with leads to no net decrease in global emissions.
    It is not the lack of U.S. participation that makes the Kyoto 
Protocol fall short of achieving sufficient reductions in emissions to 
achieve climate goals. The reason for the ineffectiveness of the Kyoto 
Protocol--and this would still be the case if the U.S. were to 
undertake unilaterally a standard equal to or tighter than Kyoto--is 
that developing countries are not only outside of the agreement but are 
benefiting from the competitive distortions that it creates.
    Any industrial country that sets a mandatory cap on carbon dioxide 
emissions will have to incur higher energy costs to meet that cap. The 
tighter the cap, the greater that cost will be. In previous studies 
that have looked at a range of proposals for U.S. emission caps set at 
varying levels, we have estimated annual losses that range from 0.3% to 
about 1.9% of GDP in 2020.\6\ For proposals that apply a constant or 
declining cap, or provide for a rising carbon tax, these costs would 
increase over time. In every case, we see exactly the same mechanisms 
at work. The need to adopt more costly methods of electricity 
generation, to invest in producing more expensive, low-carbon fuels and 
to undertake more intensive energy conservation measures diverts 
resources that would otherwise be available to produce the goods and 
services that make up GDP. Higher energy costs raise the costs of U.S. 
manufacturing relative to competitors in countries that do not adopt 
limits on greenhouse gas emissions.
---------------------------------------------------------------------------
    \6\Prepared statement of Dr. Anne E. Smith before the Committee on 
Energy and Natural Resources, United States Senate, Washington, DC 
September 20, 2005.
---------------------------------------------------------------------------
    This is the key to the problem of the Kyoto Protocol and any other 
form of unilateral action by industrial countries to limit their 
emissions. Due to these higher energy costs, there will be an even 
greater shifting of investment from the United States (and other 
industrial countries) into countries like China and India. Emissions in 
the United States will fall, especially as our share of energy 
intensive industries shrinks, but they will grow even faster in China 
as factories rise there that would otherwise have been built here. 
Moreover, given the much lower level of energy efficiency in countries 
like China, the leakage of emissions will be much greater than the 
leakage of investment.
    Finally, the competitive advantage that China and India would gain 
from unilateral emission limits in the United States makes those 
countries even less likely to agree to future limits on emissions. Once 
they build industries that depend on a difference in energy cost to 
succeed, developing countries will be even more unwilling to undertake 
policies that threaten those activities.\7\ Thus far from providing a 
moral example that will bring countries like China into an 
international agreement, naive unilateral action will create economic 
disincentives for those countries to limit their emissions.
---------------------------------------------------------------------------
    \7\H.D. Jacoby, R. Prinn et. al., Kyoto's Unfinished Business, 
Foreign Affairs Vol. 7, No. 4.
---------------------------------------------------------------------------
    This is particularly important because developing countries will 
replace the industrial world as the largest source of greenhouse gas 
emissions over the next century. These countries are expected to 
continue rapid population and economic growth which, combined with 
essentially wasteful energy use, leads ultimately to emission far 
surpassing our own. China is a good example. Its rate of economic 
growth has exceeded 8% per year for the past decade, and every added 
dollar's worth of output in China increases greenhouse gas emissions by 
double the amount associated with a dollar's worth of output in the 
United States. Energy-related technology used in most of China still 
lags far behind the United States.\8\ Thus China's greenhouse gas 
emissions are expected to exceed ours within the next year or two, and 
to keep on increasing from there. India is a similar story, though at 
this time a smaller economy.
---------------------------------------------------------------------------
    \8\P. Bernstein, W.D. Montgomery and S. Tuladhar, ``Potential for 
Reducing Carbon Emissions from Non-Annex B Countries through Changes in 
Technology,'' Energy Economics, 2006.
---------------------------------------------------------------------------
Promoting cost-effective emission reductions in developing countries
    The remedies are not easy to find, but it is clear they are not 
being provided by the Kyoto Protocol or its Clean Development 
Mechanism. China, again, is claiming most of the money going into the 
CDM, by building factories that produce exotic greenhouse gases and 
then earning CDM credits for destroying those same gases. All of the 
major developing countries have expressed their opposition to any form 
of mandatory cap on their carbon dioxide emissions, because of valid 
concerns that in their current state of institutional development such 
caps would interfere with their industrial growth.
    Paradoxically, there are in fact immense opportunities for reducing 
emission in these countries in ways that would improve their prospects 
for economic growth--if the governments of China and India can muster 
the political strength and will to end market distorting policies even 
though these policies may have the support of important 
constituencies.\9\ If they are able to meet this challenge, a dollar 
spent in developing countries could be expected to create much larger 
emission reductions than the same dollar spent in the United States or 
any industrial country. These opportunities exist because of the 
outmoded technology used in China and other developing countries, and 
the lack of market institutions to create effective incentives for 
efficient energy use. Thus large emission reductions can be achieved in 
developing countries through introduction of technologies that are now 
the standard in industrial countries, and at the same time improve 
their productivity and prospects for economic growth. The situation is 
exactly the opposite in the United States, where our generally 
efficient markets and advanced technology means that we must incur 
substantial additional costs to reduce emissions.
---------------------------------------------------------------------------
    \9\W.D. Montgomery and S.D. Tuladhar, ``The Asia Pacific 
Partnership: Its Role in Promoting a Positive Climate for Investment, 
Economic Growth and Greenhouse Gas Reductions.'' International Council 
for Capital Formation, June 2006.
---------------------------------------------------------------------------
    Finding approaches to engaging these developing countries is 
therefore critical to managing climate risks, and these approaches must 
directly address technology transfer and institutional reform. Although 
the Kyoto Protocol offers little hope of doing so, the Asia Pacific 
Partnership has had a promising beginning along these lines but it 
requires more adequate funding and greater emphasis on institutional 
reform if it is to achieve its potential.
R&D to make reduction of climate risks feasible
    One of the clear implications of climate science is that 
stabilization of atmospheric concentrations of greenhouse gases will 
require the world (not just the U.S.) to reduce greenhouse gas 
emissions intensity to near-zero levels. Halting climate change is 
possible only if large-scale greenhouse gas emission reductions can be 
implemented at costs that are both politically and economically 
acceptable. The magnitude of possible reductions in the next decade or 
two achievable with today's technology is dwarfed by the magnitude of 
reductions that are required and that successful innovation would 
supply.
    Hoffert et al.\10\ identify an entire portfolio of technologies 
requiring intensive R&D, suggesting that the solution will lie in 
achieving advances in many categories of research. They conclude that 
developing a sufficient supply of technologies to enable near-zero 
carbon intensity on a global scale will require basic science and 
fundamental breakthroughs in multiple disciplines. This kind of R&D 
effort appears to be the only way to hope to achieve meaningful 
reduction of climate change risks. Emission limits that do not 
simultaneously incorporate specific provisions that directly support a 
substantially enhanced focus on energy technology R&D will not 
effectively reduce climate risks.
---------------------------------------------------------------------------
    \10\M.I. Hoffert et al., p. 981.
---------------------------------------------------------------------------
    Development and transfer of new technology is also critical to 
preventing increases in emissions from developing countries. Although 
there are large present opportunities to reduce emissions in China and 
India through application of technologies that do not require either 
R&D or emission limits to be economic in industrial countries, 
preventing future growth in their emissions requires new, low cost 
technologies suited to their use.
    Designing such an R&D program is a huge challenge for Congress, 
because it takes not a single vote but a sustained commitment over many 
Congresses to provide stable, growing funding for R&D aimed at 
breakthrough technologies for zero carbon energy. That requires a 
consistent commitment to funding, design of effective incentives to 
motivate private sector investment in R&D, tolerance of the failures 
that inevitably come with serious research, and most of all, avoiding 
the temptation to fritter the money away on large scale demonstrations 
of current technology that may provide jobs for a members' districts 
but contribute little or nothing to providing the radically different 
technologies that will be required to stabilize global temperatures.
    The notion of when flexibility is closely connected to R&D policy. 
It suggests that it is possible to reduce the costs of climate policies 
and achieve greater benefits by adjusting the timing of emission 
reductions to match with the availability of new technologies that 
provide emission reductions at lower cost. The choice of how much to do 
today and how much to plan on doing tomorrow to reduce emissions 
involves balancing high costs of reducing emissions with today's 
technology against the potentially much lower costs of achieving 
reductions of the same magnitude in the future. One way of striking 
this balance is to consider modest financial incentives for reducing 
greenhouse gas emissions in the near term, designed to rise over time 
at a rate that would be sufficient to provide an incentive for the 
adoption of new, cost-effective technologies as they become available.

                                 

    Chairman RANGEL. Let me thank this entire panel.
    You have not made experts out of us, but you've certainly 
made us aware that we have to join in with our colleagues in 
Government and the private sector to arrest this climate change 
that is so dangerous to humankind.
    I assume in your studies, when you refer to tax incentives, 
that that has not really been a part of your studies, that you 
just know that we would have to somehow provide ways for people 
to use alternative fuels.
    Have any of you come across any readings that you might 
suggest to us, since our primary responsibility will not be to 
determine the alternative, but to provide the tax assistance to 
encourage people to use it? Have you done any studies or had 
discussions in that area?
    Dr. Prinn.
    Dr. PRINN. I'm a climate scientist, primarily, but I do co-
direct a program at MIT that includes a significant economics 
component.
    There is a lot of debate among economists about the 
relative roles of a simple tax to send a price signal through 
the system to lower emissions, to providing tax incentives for 
the development of alternative energies, all the way to cap and 
trade ideas where you put a limit on the emissions and have 
permits that would be traded.
    From my view, just as somebody watching from the side, that 
debate continues among the relevant community of academics, at 
least, as to which of these ways, or what combination of them, 
will work best.
    So, I personally can't give you some very highly focused 
advice, particularly on the value of tax incentives relative to 
these other possibilities.
    Chairman RANGEL. Thank you.
    Dr. SCHNEIDER. Yes. Thank you, Mr. Chairman.
    I, too, am a climate scientist, but have for the last 15 
years been working very closely with economists and we've 
written a number of joint papers on just exactly these 
questions.
    I guess I could characterize the bulk of the comments I 
hear from my economics colleagues as they generally tend to 
have preferences for carbon taxes to other factors on the 
grounds of simplicity and reduced transaction costs, but those 
are still debated within the community.
    Nearly all of them would agree with David Montgomery's 
statement that you have to look both across time and in other 
places for the lowest-cost option.
    In my own personal work, one of the things that we did is 
we tried to take a look at how using, in the context of a very 
simple economic model, how a range of carbon taxes imposed in 
this model would affect emissions and then how that affects the 
probability of dangerous climate outcomes. Well, you have to 
define that according to how many degrees of warming there is.
    There is absolutely no question that if we don't have some 
price on carbon, that you end up with a much higher probability 
of being in the upper range of risk and if you do have controls 
on carbon, then you substantially lower that likelihood.
    It's just like Ron Prinn's wheel. Without some form of 
policy incentive, whether it's cap and trade or taxes, that's 
important.
    One final remark that I have heard in these debates, and 
not just from economists, more likely from political scientists 
or sociologists or people in the political world, is that 
whatever the policies that we implement, they will have impacts 
differentially on different groups.
    We know that it was not the richest people who were harmed 
in Katrina in the aftermath of the floods, just as we know it 
was not the younger people, but the elderly, that were hurt in 
Europe in the heat wave of 2003, and we also know that there's 
a differential impact on people according to each policy.
    So, not only do we have to look to reducing the overall 
magnitude of our footprint on the Earth through a variety of 
possible policies that you will examine, but we also have to 
take a look at the distribution of either the impacts of 
climate or the impacts of policy on special groups and see what 
side payments we may need to do to get them to participate more 
willingly.
    Chairman RANGEL. Thank you.
    Ms. Claussen.
    Ms. CLAUSSEN. Let me try to explain a little bit about the 
Pew Center.
    We work very closely with 42 major corporations, and they 
cover a wide range of sectors.
    We have utilities that are primarily gas-fired. We have 
utilities that are primarily coal-burning. We have forest 
products, chemicals, a lot of energy-intensive industries.
    As a group, both based on the analytical work we've done 
and from their own analyses, I think there is a clear 
preference for a cap and trade system rather than a tax, carbon 
tax.
    There are a number of reasons for that, the most important 
being that in the cap and trade system, it is the market that 
sets the price, whereas in a tax system, it is the Government 
that sets the price, and it is not clear exactly what the right 
price should be to draw new technologies into the market.
    So, as a group, they much prefer a cap and trade.
    The second reason they prefer a cap and trade system is 
because there are cap and trade systems in Europe, and they 
extend into parts of the developing world, and the larger the 
market, the cheaper it is to find inexpensive reductions.
    So, were we to go one route and the rest of the world to go 
another route, I think we would not realize the kinds of cost 
savings that we might if we all did the same kind of thing.
    So, there is clear preference for a cap and trade.
    That said, we also agree as a group that you not only need 
rules that set limits, and you can be modest in how you start 
and become more stringent as time goes on, but that you also 
need tax incentives and carrots to help get the technology 
developed and into the marketplace.
    Neither one of these by themselves will do what we need to 
get done, but the combination is probably where we need to go.
    Chairman RANGEL. Thank you.
    Dr. Montgomery.
    Dr. MONTGOMERY. Thank you.
    There are, I think, three points I'd like to make on this.
    The first one is on the use of prices, like carbon taxes, 
versus quantity caps. Prices and taxes are market based 
instruments just like cap and trade, but a carbon tax for 
example has much lower cost risks than a mandatory cap.
    Although Ms. Claussen and I work with many of the same 
businesses, I find that there are some very strong economic 
arguments for considering the price approach rather than the 
mandatory cap approach.
    We have done some studies, where we have looked at various 
uncertainties that would affect the price of carbon and the 
cost of meeting an emission cap.
    We can never be sure what's going to happen, for example, 
to electricity demand over the next few years. It's driven by 
all sorts of things we don't know--economic growth, 
temperatures. Therefore, we don't know what the cost of meeting 
mandatory caps will be.
    What we find is that, with a rigid cap on emissions, you 
can have very large volatility in the price of emission 
allowances, which then reflects itself in potentially 
destabilizing influences on the economy.
    That can be avoided by a price approach or by hybrid 
policies, such as a safety valve which limits how high the 
price of an allowance can go under a cap and trade system, all 
of which can be very important to reducing overall costs.
    The second point, in which I agree with Ms. Claussen, is 
that the analysis that we've done in looking at the effect of 
long-term emission caps or announcements of future carbon 
prices suggests that they will not provide an effective or a 
credible incentive for R&D today.
    Therefore, we really need to think about how to put in 
place current incentives and programs to provide encouragement 
for the kinds of long-term R&D that are necessary to give us 
new technology. We're not going to see that without active 
money put into it today.
    Chairman RANGEL. Thank you so much.
    Mr. McCrery.
    Mr. MCCRERY. Thank you, Mr. Chairman.
    I want to thank the panel. You've provided some excellent 
testimony today, not all of which is in the jurisdiction of 
this Committee, but certainly you contribute to our broader 
understanding of the problem and how we might fit into the 
solution.
    Dr. Montgomery in his testimony brings up some very 
important questions, and I think his testimony is most 
relevant, frankly, to the operations of this Committee.
    I think most of us are convinced that the scientific 
evidence presented by the three scientists on the panel, or the 
two scientists and the Pew Foundation, which I'm sure has 
scientists on board, is accurate, and we don't quarrel with 
that.
    The question, though, for this Committee is, how do we use 
tax policy to help with the human effort to allay this, or 
delay or overcome potentially this dangerous increase in the 
Earth's temperatures?
    Dr. Montgomery talks about how, if we impose some 
solutions, either from a tax standpoint or from a general cost 
standpoint, we shift competitive advantages from the United 
States to other nations, and this is something that another of 
your Boston colleagues, Michael Porter, has written about the 
advantages of nations and how those create jobs or 
opportunities for job creation, economic growth.
    We certainly don't want to do anything, I think, that 
unduly shifts those competitive advantages to other nations 
that would have an impact, a negative impact on our economic 
growth and job creation here in this country.
    So, the question, I guess, that we have to ask ourselves 
is, how far can we go in terms of implementing policies here in 
this country without some kind of comfort level that other 
nations are going to participate in this effort to bring down 
global warming?
    It's kind of a chicken-and-egg thing, I guess. How to get 
to agreement unless we agree?
    Certainly, I'm concerned about the United States moving 
forward with punitive measures such as that suggested by the 
U.N. yesterday, which calls for a carbon tax here in the United 
States of something in excess of $50 per ton, and I question 
whether we should go unilaterally in that direction.
    Dr. Montgomery also offers, I think, some direction for us, 
supported by Ms. Claussen, in terms of encouraging the 
development of new technologies that could help us deal with 
the problems associated with the increasing use of carbon fuels 
in our society and around the world.
    In fact, I'm optimistic that if we appropriately develop 
those technologies, that could actually become an economic 
bonus for us, but we've got to figure out how we do that 
without micromanaging that development here from the Federal 
Government, because we don't have a very good track record of 
industrial policy from here in Washington.
    So, I'm encouraged by the testimony that you've given us 
today. I hope you will help us sort through these questions and 
develop with us some approaches that provide the greatest 
opportunity for both addressing the global climate change 
challenge and not diminishing and perhaps even increasing 
economic growth here at home. That's the challenge they we 
face.
    So, thank you all very much, and we look forward to working 
with you as we move forward in this.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you.
    Mr. Levin, you may inquire.
    Mr. LEVIN. Thank you, Mr. Chairman.
    Welcome to the panel.
    Let me ask you a question that I think a lot of us have 
been pondering for some time.
    Mr. McCrery mentions that there is increasing consensus 
that there is climate change, global warming.
    I want to ask you this, because it relates to the issue of 
urgency which relates to what we do.
    Why do you think there's been such disagreement? What has 
caused it?
    In the work with other people, all of you have done so 
broadly, in addition to perhaps views of science, there seems 
to be something at work.
    Why has there been such a process of denial for so long? 
What's been at work here, do you think?
    Dr. SCHNEIDER. Well, I'll be happy to try a stab at that.
    Mr. LEVIN. Be as blunt as you can.
    Dr. SCHNEIDER. That's not usually a problem for me.
    Back in the 1970s, as I referred to in the oral remarks, it 
was very easy to have debate.
    We were just sorting out the cooling effect of dust and 
smoke from the warming effect of greenhouse gases, and it took 
a lot of studying.
    By the mid to late 1970s, the warming became the clear 
winner.
    We were uncertain about the effects of clouds. If you 
increase heating, you evaporate more water, you make more 
clouds. That could cool the Earth back down. It's what we call 
a stabilizing feedback.
    On the other hand, if you make the clouds taller, they trap 
more heat, they make it worse.
    That's part of the reason why we've had that uncertainty.
    So, there's been a lot of those kinds of arguments, and 
naturally, scientists enjoy looking at the cutting edge, trying 
to make their reputations by finding a new way to see it.
    However, over the last 30 years, the preponderance of 
evidence has become virtually overwhelming that the warming is 
real, that at least the last several decades of it are 
preponderantly due to us, and that there will be substantial 
change in the future, though as I showed you it still has a 
wide range of uncertainty built in.
    Mr. LEVIN. Let me ask you, the one issue, though.
    Why has there been the lineup there has been as to whether 
there is or there isn't? What's been motivating, what have been 
motivating forces beyond?
    Dr. SCHNEIDER. Clearly there are interests in the world, 
and those interests or ideologies have very different 
perspectives on their personal worldviews about whether it's 
more important to protect the planetary commons, to deal in 
long-term risks, or to protect nature, or whether it's more 
important to maintain market share for selected clients or 
protect entrepreneurial rights.
    So, what's happened is that the climate problem has also 
partly gotten mixed up with ideological politics to where 
somebody from the deep ecology groups grabs out of context the 
worst case, the end of the world case, and somebody from an 
enterprise institute grabs out of context, oh, it's good for 
you, so you get end of the world and good for you extremes, the 
two lowest probability outcomes, getting big play, and the 
media then proceeds with that, when in fact the vast bulk of 
the knowledgeable community believes them to be low probability 
and everything else in the middle is of more concern.
    I guess that's not a foreign concept in this town, as well, 
that we have that tendency to polarize.
    Scientists find it very distasteful, frankly, getting 
engaged in that.
    We like to fight with each other over the nuance of the 
details of the theory or the data rather than link it to 
ideology, but unfortunately, when you're in a science which has 
a lot of public involvement and has stakeholders with very 
opposite views, it's never surprising that you get some 
conflict and some selective inattention to inconvenient 
information----
    Mr. LEVIN. Okay. Anybody else?
    Yes, Dr. Prinn. The yellow light is on.
    Dr. PRINN. I think the root of the debate, if you like, or 
at least the legitimate debate, is the obvious uncertainty in 
simulating and forecasting climate.
    You can look at that wheel that I showed and you can look 
at a little sliver there that shows almost no warming with no 
policy, and you'd say, if you're comfortable with that, then 
you can argue from that little sliver that it's not an issue.
    You can argue from the other side of the wheel, where it 
says that there's some probability of even much greater than 5 
or 6 or 7 degrees Centigrade or almost double that in 
Fahrenheit, and you can make a case that we are facing the 
greatest threat to human----
    Mr. LEVIN. Why do some people say one thing and some people 
say another? Why do people line up on the two camps or the two 
attitudes?
    Dr. PRINN. I think there's been a difficulty for some 
scientists to decide to look at this as an issue of just 
working out the odds.
    It happens to be that Steve Schneider and I agree very 
strongly in the need to embrace the uncertainty and to see this 
as a decision-making process, if you like, under that 
uncertainty.
    The uncertainty is such that it's a double-edged sword. You 
can look at it and say, on one side, the possibility that there 
may be very little warming, arguing for inaction, then on the 
other side, lots of warming, arguing for action.
    I think the truth lies largely in the middle, and that's 
the point that I tried to make in my presentation here, and I 
think also Dr. Schneider is making the same point.
    I personally have evolved in my own views.
    I mentioned that 10 years ago I was not convinced that the 
human signal had arisen out of the noise with the observations 
available to that point, and the techniques available. Now my 
conclusion has changed.
    Scientists do change. We change our minds based on more 
evidence.
    I think that process is going on, it looks like a glacial 
pace to some, but slowly but surely, the opposition to the 
notion that humans are making a very significant impact on 
climate, and particularly in the future are likely to make a 
very dangerous impact unless we do something, is now a debate 
that many think, or consider to be, largely complete.
    Mr. LEVIN. Thank you. The red light is on.
    Chairman RANGEL. Mr. Herger.
    Mr. HERGER. Thank you very much.
    I can understand why people would be concerned, and that 
people might change.
    Dr. Prinn, you just mentioned that your opinion changed in 
the last 10 years.
    Archaeologists tell us we went from a, over a long period 
of time, over millions of years, from a dinosaur stage where it 
was very warm, to an ice age, back to where we are now, and I 
remember just 30 years ago scientists, some of you, were 
telling us it was cooling. Remember? We weren't going through a 
warming, it would cool. This is just in 30 years.
    I think if you look, as I, in at what limited information I 
have, you look over a period of hundreds of years, you actually 
have several hundred year periods where it will be colder, then 
it will be warmer, and really, to really understand what's 
going on, you really need to take several thousand years to 
really look at it.
    That's not really the focus of my question.
    Ms. Claussen, I would like to ask you, if I could, you 
suggest that the United States must take the lead in addressing 
climate change by unilaterally imposing a mandatory emission 
reduction program in the United States after taking this 
initial step, you suggested we should then work with other 
countries in encouraging them to reduce their emissions.
    This view is contrary to Mr. Montgomery's testimony where 
he argued that unilateral action by the United States actually 
increases the incentives for China and India to resist 
controls.
    In addition, the Financial Times reported just yesterday 
that, quote: ``China's surge of investment in heavy industry 
and power capacity since 2000 has seen energy efficiency levels 
retreat and pollution measurements soar. China added power 
capacity last year equal to the entire grids of the U.K. and 
Thailand combined, 90 percent of it coal-fired.
    To feed its growing stack of steel, aluminum, and cement 
plants and the like, China is home to 16 of the world's 20 most 
polluted cities.'' Close quote.
    Ms. Claussen, based on this recent history, what is the 
basis for your belief that if the United States acts 
unilaterally, countries such as China and India will follow?
    Ms. CLAUSSEN. Let me try to answer that by putting it in a 
little bit of context.
    There are 20 countries who account for about 85 percent of 
the world's greenhouse gas emissions, and if we're going to 
find a real solution to deal with this problem, at least those 
20 have to be engaged. That's point number one.
    The second point is that there are other countries who have 
actually taken steps to reduce their emissions. Most of them 
are in Europe, and they do not include the large developing 
countries, as you point out.
    We have been absent from the global table to try to talk 
about what the framework should be over the past eight or more 
years, and I think that's a problem.
    I do not think that we have sufficient credibility to 
design a framework that would include those 20 major emitters 
unless we at least take some steps on our own.
    Don't forget, we are still the world's largest emitter. We 
are still responsible for most of the concentrations of 
greenhouse gases that are in the atmosphere.
    Mr. HERGER. That's changing, is that not, and just within a 
few years, China would grow to be number one?
    Ms. CLAUSSEN. Well, they'll be number one in current 
emissions, but looking historically at it----
    Mr. HERGER. Even a few years after that, at the rate 
they're going, they will become number one.
    Ms. CLAUSSEN. I'm not arguing with you that China's 
emissions aren't really important here. I'm just saying that I 
think we have a responsibility to take some actions.
    Now, I do not agree with the assumption that----
    Mr. HERGER. Should it be unilateral, as you pointed out----
    Ms. CLAUSSEN. I do not agree with the assumption that if we 
take some action, we are necessarily going to cause great 
economic harm to the United States, and I would like to just 
suggest that the Committee take a look at some of the actions 
that major companies have taken to reduce their emissions.
    There are 20 or 30 big corporations that have set targets 
for themselves, on a voluntary basis, and that have reduced 
significant amounts of emissions, much more than the kinds of 
levels that are being talked about either in the House or in 
the Senate at the present time, and not one of them has found 
that to result in a cost.
    Most of those reductions have taken place because of 
efficiency improvements. Most of those have actually been 
beneficial to the bottom line.
    So, taking some steps here, I believe, will give us the 
credibility to work with the big emitters in the developing 
world, because you need them, you can't solve it without them, 
and to try to design a framework that moves everyone in the 
right direction.
    I think without some leadership from us, it won't happen, 
and without some action in the United States, we will not have 
the ability to lead.
    Mr. HERGER. Well, I agree with what you've just--your last 
comment, but I think it comes down to common sense, it comes 
down to not bankrupting our economy by unilaterally going out, 
when we look at what the rest of the world is doing, and doing 
things that do make sense, and when we do that, I think it's a 
win-win, but not if we do it the other way.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    It's always amazing, when we have a panel that all agree 
that something needs to be done.
    What we're really talking about here is the rate at which 
we're going to move.
    Mr. Herger just used the word ``bankrupt'' which I think is 
not helpful in the discussion when we get out on those ends.
    The question that I want to ask, and I'd like to reframe 
what Mr. McCrery said. He talked about the problems if we led 
and all this, and what it would do to our economy.
    I would like to talk to you or hear from you about what 
happens if we do not lead in this world change. Let me give you 
the example.
    It's a tiny one. It's really a minor one, but it's 
instructive, I think.
    We had wind incentives here in this Congress which were 
allowed to expire, and now if you go and look at wind 
generators across the face of the Earth, almost all of them are 
made in Denmark, a country of six or eight or nine, ten 
million, I'm not sure exactly, population.
    They took the lead and ran with it, and left us in the 
dust.
    My feeling is that there is a cost to not taking hold of 
this. Since we all agree across the panel that something must 
be done, really, there is going to be a cost.
    I'd like to hear you talk about the other areas in which we 
are behind the rest of the world in terms of our moving, 
whether it's solar paneling in Germany or whether it's the--
well, there are many places that some of us are aware of.
    I'd like to hear you talk about it in terms of the places 
where we, our industry is losing jobs and losing opportunities 
because we have not taken the incentive and used the 
Government.
    I happen to think that the answer to Mr. Levin's question 
about why change was never made was because people were afraid, 
and our industrial concerns that if we admitted there was a 
need for reaction to climate change, the Government would get 
involved, and they didn't want to disrupt the laissez faire 
system. Clearly, we're beyond that.
    I'd like to hear you talk about what directions we ought to 
be going in, and who is ahead of us now.
    Any one of the three of you.
    Or Mr. Montgomery, Dr. Montgomery.
    Dr. MONTGOMERY. Thank you.
    Let me start with a thought, which is that what I am really 
concerned about the United States being behind is something the 
rest of the world is equally far behind, which is the scale of 
investment that's required in R&D at a fundamental stage to 
create the kind of breakthroughs that are needed to give us, 20 
or 30 years from now, technologies that we can't conceive of 
today, but which are absolutely necessary if we're going to get 
on a path to really managing the dangers of global warming.
    Providing subsidies for wind power in the near term----
    Mr. MCDERMOTT. Don't get hung up on wind power, because 
that's really a minor issue. There are much larger issues than 
that. I only used it as an illustrative indicator of what we've 
done before.
    Dr. MONTGOMERY. No, no. I understand, and I agree with you.
    I think that there's a difference between providing 
subsidies for low-carbon technologies available now, which is 
really just buying current emission reductions, versus 
providing incentives for R&D which set the stage for much 
larger emission reductions in the future, which can take off on 
their own.
    That's where I think we're far behind. I don't think we're 
losing much if we do not subsidize current technologies. 
Putting a price on carbon can bring current technologies into 
the market and bring about reductions in emissions, but the 
real investment for the future is in the R&D side.
    Mr. MCDERMOTT. The rest of the panel?
    Ms. CLAUSSEN. Let me try to make a couple of points.
    If we look at where the greenhouse gases emissions come 
from, they come from electricity and transportation. That 
together is about 70 percent of the problem.
    Mr. MCDERMOTT. Right.
    Ms. CLAUSSEN. We aren't going to find a technological 
solution unless we tackle those two big things, because when 
you look at something like manufacturing, and if there is a 
price on carbon, you're going to get efficiency improvements 
and process changes, and I think those industries are going to 
go ahead and do that.
    So, the big issues we really have to deal with are 
electricity and transportation.
    On electricity, I do not think there is a single solution. 
I think we are going to use nuclear, I think we are going to go 
into more renewables, I think we are going to burn coal.
    Actually, coal is the thing that concerns me the most, and 
because we have vast reserves of coal, China and India have 
vast reserves of coal, they are industrializing, they are all 
going to burn coal.
    So, the real question is, how do you find a way to burn 
coal that doesn't harm the climate, and what does it take to 
get you there?
    There are some technologies being developed that are going 
to make it easier to capture the carbon stream. We have done 
very, very little work on exactly how to do it from the range 
of technologies, and even less on how you might sequester that 
carbon stream and keep it in deep geologic formations for a 
long, long period of time.
    So, I would say if we were going to concentrate on 
anything, it would be both demonstrating those technologies in 
a major scale, not just one demonstration here that will give 
you some results in 15 years, but a lot of demonstrations that 
could both prove that it works, assuming we can make it happen, 
and bring down the cost, because the cost now is actually very, 
very high, and then dealing with transportation.
    Again, I think there are lots of things to do there. I 
wouldn't put all my money on one particular technology there.
    It may be that hydrogen fuel cells will be the answer to 
this, but I'm not convinced.
    I think we need to make sure that there's some competition 
and that money goes into a variety of these technologies so you 
can actually get the beset one to deal with the problem.
    Now, when you look at other countries, a lot of them are 
starting to move along those same lines. I think if we were to 
do this in a vigorous way, put in a certain amount of money, 
create the incentives, get a price on carbon, we could really 
do the job that needs to be done here and get our industries to 
be the most successful at it.
    If we just wait, others will find the space out there, and 
they'll do it before we do it.
    Chairman RANGEL. Mr. Camp.
    Mr. CAMP. Thank you very much, Mr. Chairman.
    I appreciated just the remarks you made, because I do think 
we need to go beyond just implementing Kyoto, which is often 
what we get to when we talk about global warming or climate 
change, now, I guess to take into account that we had a hearing 
canceled because of the ice storm, on global warming, in 
Congress.
    I think that there is an economic cost to Kyoto, and the 
geophysical research letters published about 10 years ago 
estimated that if every nation on Earth lived up to the U.N.'s 
protocol on global warming, it would prevent no more than a 
10th of a degree of warming, Fahrenheit, every 50 years.
    So, if we really want to alter the warming trend 
significantly, would we have to cut emissions by larger amounts 
than called for by Kyoto, and if so, do we have the technology 
to be able to do that, to reduce greenhouse gas emissions?
    I guess Dr. Prinn, do we have the technology to go beyond 
that?
    Dr. PRINN. Well, I'm optimistic that we do.
    The issue of coal in the United States was brought up by 
Eileen Claussen, and I think there is a major challenge for the 
Nation regarding coal-fired power plant. Going into the future, 
the way in which those can work and also keep emissions down to 
essentially being non-existent, is to look very carefully at 
carbon capture and sequestration to be accompanied by the 
burning of the coal.
    I personally think that one way or another, significant 
effort has to be put in to see if this is economically 
feasible?
    I think it's technologically feasible, but is it 
geologically feasible with the capacity of these reservoirs, to 
go down about seven, eight miles deep in some places. Can they 
take all of this carbon dioxide, and keep it there? A small 
leakage is all right, but if the answer to that is yes, and if 
the economics works out, and the technology, as I say, I think 
is largely there, then coal can continue to be an important 
source of electrical energy for the Nation.
    The utilities right now are faced with a dilemma. They need 
to perhaps build a few more power plants. What are they going 
to do? Are they going to continue to build conventional coal-
fired power plants that may be, with great difficulty and cost, 
converted to carbon capture, or not at all, or do they look at 
nuclear power, do they begin to think that renewables, bio-
fuels will power utilities into the future?
    They, I think, have got great difficulties in front of 
them, and the more that there's some leadership on this issue 
for the Nation, to say this is where we're going, we're going 
to reduce emissions, it will help utilities make those very, 
very expensive decisions----
    Mr. CAMP. Well, and there has been a lot done, particularly 
in the auto industry.
    The automakers have, a majority of them have already 
committed to achieving at least a 10 percent reduction in 
greenhouse gases by 2012, and that's from a baseline of 2002.
    We had some testimony about the 1970s, and I will just say 
that vehicles today are 99 percent cleaner than they were in 
the 1970s, and that's just one particular industry.
    Looking at another industry, in the refrigeration industry, 
for example, home appliances, they're much more efficient than 
they were just a few short years ago.
    However, I do think the economic cost of Kyoto is something 
we should look at. The estimates show it could cost 2.4 million 
U.S. jobs, double the cost of electricity, raise the cost of 
gasoline by an additional 65 cents a gallon, reduce the U.S. 
output by 300 billion, which is greater than the total 
expenditure in primary and secondary education.
    So, I do think we have to look at the costs and tradeoffs, 
and my question would be, is the cap and trade program a viable 
program to reduce emissions?
    I guess I would just ask each of you quickly to answer. I 
know I don't have much time left.
    Dr. PRINN. Potentially, yes. I realize the debate I think 
is going to be between taxes versus cap and trade.
    Dr. SCHNEIDER. The short answer is yes, but like anything 
that complicated, the devil is in the details and how it's 
structured, from the point of view of incentives, or fairness, 
it will matter both politically and from the efficiency point 
of view.
    Mr. CAMP. All right.
    Ms. Claussen.
    Ms. CLAUSSEN. Yes, widely supported by those in the 
industry who would like to see us take on some kind of 
requirement here.
    Mr. CAMP. Dr. Montgomery?
    Dr. MONTGOMERY. No, if the purpose is developing the new 
technologies and bringing down radically the costs of 
technologies like carbon capture and sequestration.
    A cap and trade system can get the technologies we have 
available off the table and into use, but it can't get the new 
technologies onto the table that we're going to need in the 
future.
    Mr. CAMP. All right. I do agree with my colleague that we 
need to take a longer view of the warming issue.
    I want to thank the Chairman for his time. Thank you.
    Chairman RANGEL. Mr. Neal?
    Mr. NEAL. Thank you very much, Mr. Chairman.
    In my former life, I was much involved, as you know, with 
issues that are pretty mundane, in the level of local 
Government, like taking the pressure off the landfill, so we 
constructed at the time, in Springfield, Massachusetts, the 
largest regional recycling facility in America--103 communities 
participated. As part of an integrated approach, we did waste 
to energy. It shortly worked.
    Now we're sitting back, and we're looking at what's next 
and what's new.
    For you, Dr. Prinn, I'd like to ask, it's difficult, even 
based upon the hearing that we've had this morning, as we look 
at alternative energy, it's hard to gauge what the next great 
breakthrough is going to be in terms of innovation. Isn't that 
true?
    Dr. PRINN. I certainly agree.
    I think that most of us believe that we're going to have to 
have about 10 or 20 solutions, that there's not going to be a 
single one. Depending on the part of the country or, indeed, 
the Nation, the various nations around the world, they will 
choose among these 10 or 20 options, so there isn't a single 
one.
    Ones where I think some breakthroughs would be very nice to 
see is on the renewable side, on the issue of bio-fuels, an 
efficient way in which you can take cellulose and convert it 
into the chemicals necessary to produce alcohol for fuel.
    In principle, it can be done, but breakthroughs are needed 
to produce alcohol as a bio-fuel.
    There are limits to bio-fuels, because it is going to take 
land that we presently use for growing food, and there will be 
a competition.
    So, it has to be looked at, and said, will it work at the 
very large scale?
    Certainly for bio-fuels, cellulosic alcohol, as it's 
called, it's something where we would like to see a 
breakthrough.
    I would also say for solar energy, that increasing the 
efficiency of the solar panels will make a very, very big 
difference, and lowering, of course, their cost.
    Mr. NEAL. With the exception of the Clinton health care 
plan, the most strident debate that I've participated in during 
this Committee's--my time on this Committee was the debate 
between ethanol and oil.
    I don't have to tell you, it brought out the worst in some 
of the Members of the Committee.
    We have moved beyond that, haven't we? I guess the specific 
question, Dr. Prinn, that I'd like to raise with you is, how 
would you suggest that we proceed with tax policy based upon, 
as you've indicated, the next round of innovations?
    Dr. PRINN. I would certainly see this as an area where tax 
incentives could work, because initially, companies, private 
entities that would want to do the necessary research to make 
these breakthroughs are putting up large capital, and with 
perhaps some chance that they'll make nothing, because they 
don't make the discoveries.
    So, tax incentives I think would help certainly for the 
development of new inventions, if I can call them that.
    Getting those new inventions, once they are there, from off 
the lab bench as it were, and then beyond that, is an issue, 
that involves seriously looking at economics and so on, that 
would be there--I'm not sure what tax incentives do, and I 
think there are others on the panel that could comment much 
more intelligently on that.
    Mr. NEAL. I'm going to ask Ms. Claussen that right now.
    The nature of the tax policy here at the Committee level 
has been really to do temporary tax incentives.
    Do you think that's the way that we ought to proceed, or do 
you think that we ought to be doing something that's much more 
consistent with the future?
    Ms. CLAUSSEN. Yes, I do, because I actually think things 
that go into effect and then are gone in a year or gone in 2 
years are very disruptive.
    They do not get you to the longer-term investments that you 
actually need to make the difference.
    So, if there is some way to do these things over a long 
period of time in a consistent way, I think we're going to see 
a much different picture coming out of companies and the 
private sector in the kinds of technologies that we need for 
the future.
    Mr. NEAL. Dr. Schneider and Dr. Montgomery, feel free to 
comment as well.
    Dr. SCHNEIDER. Yes. I think if we look back at history, the 
degree to which people believe something is inexorable is 
really very important to whether they take a long-term reaction 
or hunker down and wait it out.
    When the OPEC oil embargoes took place in the 1970s, most 
people believed that was real, and that's when the United 
States turned to a combination of efficiency standards in 
automobiles, air conditioners, refrigerators, which has given 
us indelible benefits ever since. You can calculate in the many 
billions the dollars we saved from those.
    When we have short-term fluctuations, people wait it out, 
and they just go for business as usual.
    So, a signal from the Congress that they were serious and 
that even if the start was slow, it was going to ramp up 
inexorably, I think would lead to substantial performance 
change.
    Mr. NEAL. Dr. Montgomery?
    Dr. MONTGOMERY. Yes. I think that permanent tax incentives, 
especially for R&D, are critically important.
    The difficult part is they really need to be very broadly 
defined rather than targeted to specific activities, and I 
think there may actually be general agreement on that, that we 
don't want even the Committee on Ways and Means picking exactly 
which technologies should be developed and how.
    Of course, the problem with that, as you know, is it makes 
the tax incentives very expensive, because it makes it easier 
to qualify. You may end up giving some money to something that 
would have happened anyway.
    That's the risk, I think, of getting the kind of broad try 
everything out and see if it works R&D that's necessary.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Weller.
    Mr. WELLER. Thank you, Mr. Chairman, and I commend you and 
Mr. McCrery for convening this hearing this morning.
    I believe that climate change is real. I also believe it's 
caused by human activity.
    If you look at the maps of the 15th century used by the 
European explorers when they came to our own hemisphere, you 
see Bahaman Cays that are no longer above water.
    So, clearly, so-called global warming has been occurring 
for a long time.
    However, if you look at the data, it's occurring much 
faster today.
    So, I, for one, believe human activity is clearly having an 
impact on the climate, and causing climate change.
    I also believe, Mr. Chairman, that the solution requires a 
global solution. We can't go alone in addressing the issue of 
climate change.
    As my friend, Mr. Herger, noted, China will soon eclipse 
the United States in emissions, so clearly, they need to be 
involved, as well.
    I also want to commend my colleagues who noted there is an 
economic impact to this, as we look at what policies we may 
want to adopt.
    Manufacturing is important in my district, and some 
policies advocated by some would drive the jobs, manufacturing 
jobs currently in my district to China and Asia, because 
they'll move to places where these policies don't exist as a 
place to do business. So, we need to take that into account.
    I also hope, Mr. Chairman, as we move forward, that we 
consider energy independence as part of our strategy to 
complement our goal of addressing the issue of climate change, 
and I hope we'll build on what I believe are the successful 
policies that were included in the 2005 Energy Policy Act, what 
many of us call the energy bill.
    I've seen in my own district the tax incentives for 
promoting alternative sources of energy, such as wind and bio-
fuels, the impact they've had, and clearly, rural Illinois and 
rural America were the winners of that energy bill, because 
we've had hundreds of millions of dollars in new investment in 
wind energy in the district I represent.
    There's five new ethanol and bio-diesel plants in the 
works, moving forward with construction, and there's over $1 
billion in additional wind energy investment alone in the 
district that I represent planned and moving forward over the 
next couple years.
    So, clearly, the energy bill of 2005 has made a difference 
in promoting renewable and alternative sources of energy, and I 
hope as we move forward that we do look at making permanent the 
renewable production tax credit and look for tax incentives 
that reward investment in new technology, such as marrying the 
hybrid and flexible fuel technology vehicles that soon will be 
coming on the market, and encouraging consumers to buy those.
    I guess my first question is for Dr. Montgomery.
    Dr. Montgomery, you talked about the need for R&D being a 
key part of our effort to address CO2 gas emissions.
    Ways and Means of course has jurisdiction over tax. A lot 
of discussion today has been fairly broad, well beyond the Ways 
and Means jurisdiction.
    As we look at energy independence initiatives, climate 
change initiatives, and I hope we can do both, that a lot of us 
advocate renewable and alternative sources of energy as part of 
that solution, how would you structure tax policy when it comes 
to that area, as attracting greater investment that will be 
part of our effort on climate change?
    Dr. MONTGOMERY. I tend to think about this question in 
terms of the continuum of activities from basic laboratory 
research, development, demonstration, and commercialization.
    I actually see the role for the Committee on Ways and Means 
and tax incentives of the kind you're talking about mostly at 
the front end, where we're talking about basic research and 
R&D.
    I think that after making the scientific breakthroughs, 
creating the technological options, at some point in that 
process--and the really hard part of designing anything is 
figuring out where that point is--I think it becomes the 
private sector's responsibility, that the technology is never 
going to be developed or deployed effectively if it continues 
to be owned and pushed by the Government.
    So, there we need to be thinking about market-oriented 
incentives for giving an incentive to deploy the technology.
    Mr. WELLER. Doctor, is nuclear power part of the solution?
    Dr. MONTGOMERY. Absolutely.
    Mr. WELLER. Do others in the panel agree that nuclear power 
is part of the solution?
    Dr. PRINN. Yes, I certainly do. We need to look at it and 
regard it as a possible significant solution, particularly for 
utilities.
    Mr. WELLER. The other two on the panel, do you support 
nuclear power as part of the solution?
    Ms. CLAUSSEN. Nuclear power is now about 20 percent of our 
electricity source. I don't see any way that we can address 
climate change without it.
    Dr. SCHNEIDER. I guess I'll give a comparable answer to 
what I said before. It all depends on how you do it. Questions 
of cost and safety are there.
    I certainly am not an idealogue who has ever said ``No 
nukes.'' I just want to compete it against all the other 
alternatives, and that also has to include costs for how you're 
going to deal with wastes, particularly wastes that might go to 
countries that we may not be so anxious to have access to those 
wastes, and that's part of the cost cycle.
    The other question is, there are legal, federally mandated 
limitations to liabilities on their insurance risk, which is a 
subsidy, and I'm not arguing the subsidy is wrong, but I'm 
arguing it's all part of the cost factor.
    So, I think if we competed it with all the other things, 
including the R&D, we'll see what emerges. However, I would 
certainly not rule it off the table.
    Chairman RANGEL. Mr. Doggett.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    Thanks to each of you for your testimony.
    I've been in and out of your testimony this morning because 
of a hearing where the Chairman of the Federal Reserve is 
testifying in the next building over, in the Budget Committee, 
and I had a chance to ask him questions about the topic you're 
here testifying on, and was encouraged by his response on the 
cap and trade system.
    Indeed, it seems to me that the number of true global 
warming deniers is shrinking by the day, and more and more 
responsible businesses are coming forward, way ahead of this 
Congress, and suggesting that we need prompt action to deal 
with the realities that you've described to us.
    We need more to come forward and we need more to not only 
admit there's a problem, but encourage us to take meaningful 
action about it.
    Unfortunately, in my home State of Texas, we have one of 
the most irresponsible corporations that is out of the 
mainstream, and that's Texas Utilities, which has gotten a 
great deal of attention in its desire to use outdated 
technology and get in, as Dr. Schneider said in his earlier 
testimony, I think, as a good example of--you used the term 
``chicanery,'' and that's certainly applicable to Texas 
Utilities, in sneaking under the wire.
    Even with the encouraging developments of the last few 
days, that prospective new purchasers of Texas Utilities would 
go forward with only three of the 11 plants that it originally 
proposed, just the Oak Grove plant alone would burn 2.5 million 
pounds per hour of the dirtiest Texas lignite that I think 
we've got, and on its first day of operation, as projected, it 
would suddenly become the fourth largest emitter of mercury in 
the country.
    Together, the three plants that are proposed for online 
would emit approximately 22 million tons of carbon dioxide 
annually.
    Texas Utilities, under old or hopefully better, though it 
could hardly get worse, management, is not the only company 
that is proposing to build for the past instead of for the 
future.
    There are other companies in the utility industry that are 
still in the wrong direction, though many, many more are taking 
the approach that you suggest.
    I think my question is first to Dr. Schneider, about 
whether it isn't necessary--we've had various members ask about 
carrots, but there's also the stick side of tax policy, and 
don't you think that we need some immediate and serious action 
to stop a probable race to the bottom where the irresponsible 
try to sneak in under the wire and engage in what you've called 
chicanery?
    Dr. SCHNEIDER. Thank you very much, Congressman, and I 
applaud your stand in your own State.
    We want to try to make certain that what we do, as I said 
earlier, has a degree of inexorability in it, because when you 
say that the United States is not a party to the Kyoto 
Protocol, in irony, through the capitalist system, we in a way 
already are, that many investment banking companies believe 
there's a fairly high probability that there will be a shadow 
price on carbon, which therefore means carbon emissions is a 
liability against the balance sheets of companies, whether it's 
from cap and trade, taxes, or other policies, and therefore, 
they're already affecting the loan rates to carbon emitters.
    I think that might be a way that the Committee could 
consider dealing with people in that ``sneak under the wire'' 
mode, which is if you have a retroactive date at which the 
baseline is set, that not only rewards the people who had the 
courage to be early adapters, but it prevents the idea of 
trying to maximize your emissions so that you can then have a 
baseline that's high and cut below it.
    So, I think there may be ways that you could do that, 
because then, if they had a high liability, their own 
investment banking community may not be very wiling to give 
them the kinds of loans at the costs that they'd be willing to 
pay.
    So, I think there are instruments that you could use short 
of direct command and control that probably would take 
advantage of market forces and reduce the likelihood of the 
``sneak in under the wire'' that we're going to see not just 
there but in many other places.
    Mr. DOGGETT. These businesses are competitive. They're not 
interested in having a competitor have an unfair advantage, and 
they need some certainty.
    You believe that taking some action now, perhaps even 
before we can get the Administration to agree to a cap and 
trade system, to provide a little of that certainty, that you 
can't sneak in under the wire while you lobby for inaction, 
that that would be something that would be helpful to the 
forward-looking businesses that want to address climate change?
    Dr. SCHNEIDER. Yes. As our Chair knows, we actually talked 
about doing those kinds of things 20 and 30 years ago, and now 
that the evidence is so abundant, we're finally moving to do 
it.
    What's unfortunate is, had we taken small steps earlier, it 
would be cheaper and easier to do it now, so we're rushing and 
looking at more costs than we otherwise would have had, but the 
more we delay, the most costs will build on top of that 
[continuing]. So, I think that your strategy to send inexorable 
signals is admirable.
    Chairman RANGEL. Mr. Linder.
    Mr. LINDER. Thank you, Mr. Chairman, and thanks to each of 
you. Dr. Montgomery, is it clear that we are talking mainly 
about carbon emissions here?
    Dr. MONTGOMERY. Yes. Well, we are all referring to carbon 
emissions. Carbon dioxide is clearly the most prevalent of the 
greenhouse gases. It is really important for----
    Mr. LINDER. Isn't water vapor more prevalent?
    Dr. MONTGOMERY. That is a question I am going to defer to 
Professor Prinn, because he really knows about water vapor.
    Dr. PRINN. Water vapor is, indeed, the most important 
greenhouse gas in the atmosphere. It, however, has a very short 
lifetime. It lasts maybe the order of a week or so, once it 
evaporates, before it condenses and gets back to the surface. 
So, it is short-lived. It's budget in the atmosphere is 
largely--totally, I would say totally--unaffected by the direct 
emissions of water vapor by humans. In other words, we are not 
controlling that.
    What we are worried about in the climate issue is that we 
are beginning to indirectly control the levels of water vapor 
in the atmosphere. When the oceans warm up, that does increase 
the water vapor, at least in the lower part of the atmosphere.
    So, water vapor is, indeed, very important as a greenhouse 
gas. It is incorporated in all of these climate models that you 
heard me talking about. It is a source of some of the 
uncertainty that you see in these forecasts, and so on, but it 
is there, it is important.
    What we are considering now for the climate issue that is 
being discussed here today, is the long-lived greenhouse gases, 
whose emissions are being dominated by human activity. That is 
the big difference between the two.
    Mr. LINDER. What role does precipitation play in your 
model?
    Dr. PRINN. What role does----
    Mr. LINDER. Precipitation play in your model.
    Dr. PRINN. It is very important, because it removes the 
water vapor from the atmosphere, and keeps the atmosphere a lot 
cooler than it would otherwise be, but there are many other 
complexities as well.
    Evaporation and condensation and all of these complex 
processes that you think of to do with a water cycle, we try to 
encapsulate in these climate models--with imperfections, of 
course.
    Mr. LINDER. Dr. Schneider, you said you testified here in 
1976 and the consensus was that warming was going to be a 
bigger problem than cooling. Is that correct?
    Dr. SCHNEIDER. By 1976, it had tipped, and 5 years earlier 
it was much more confusing.
    Mr. LINDER. In 1975, we--Newsweek wrote an article called, 
``The Clean World,'' which was a--the article stated that 
scientists were ``almost unanimous in the view that the trend 
will reduce agriculture productivity for the rest of the 
century. If the climatic change is as profound as some 
pessimists fear, the resulting famines could be catastrophic.''
    What clicked between 1975 and 1976?
    Dr. SCHNEIDER. Well, I would guess that Newsweek was 
probably a few years behind in reading the scientific 
literature. Because when we write things, it takes a while for 
them to get out.
    Back around 1970, it really was not clear whether the 
increase in hazes was going to reflect more sunlight away and 
cool the Earth down, relative to the amount of warming from 
increasing CO2.
    What happened--in fact, I personally thought that cooling 
was more likely in the first paper I ever wrote in 1971--but I 
was proud that by 1975 I changed my mind, and the reason was 
two facts. One is that we found out that those hazes were 
largely concentrated in industrial and agricultural burning 
areas, only one sixth of the world, whereas the greenhouse 
gases were global, so therefore, the aerosols had less total 
impact. The second thing we discovered was it wasn't just 
CO2, but methane and chlorofluorocarbons that were 
greenhouse gasses.
    So, I would say by 1975 those inside the scientific tent 
had already pretty well switched over to warming. By 1976, I 
think that was the dominant theme in most of the hearings in 
this body. Of course, with media, some lag behind that.
    Mr. LINDER. Recently there has been an article about 
research at the University of California that said that 300 
million years ago there were 2,000 parts per million of volume 
of CO2 in the atmosphere. How do you explain that?
    Dr. SCHNEIDER. Well, it is a very important thing to study 
the history of the Earth's climate, not to find analogies to 
today--I don't think we could, because the continents were in 
different positions, the concentrations of the atmosphere were 
different, different plants and animals--but it's the backdrop 
against which we calibrate our understanding of how the system 
works.
    Way back then, there was a change in the rate at which the 
ocean floor was spreading. There are mid-ocean ridges, and 
there is lava going on under there. This was discovered in the 
fifties, when we had an explosion of scientific research that 
went out and found it. When that floor spreads more rapidly, 
then it puts up more CO2.
    So, the geologic timeframes of 100 million years ago, 200 
million years ago, saw that very much larger sea floor 
spreading. The consistency in that is if you're making all that 
lava come up, you're putting all the rubble in the oceans. 
Therefore, the oceans have a smaller volume, and the sea levels 
would be higher.
    In fact, most of the geologic evidence is 100 million years 
ago, for example, sea levels were something like 300 meters 
higher. All the ice in the world today couldn't give you more 
than 70 meters. It had to be something else.
    So, then what we do, is we take the same computer models 
that we use to project the future, and then we try to move the 
continents around, we change the CO2, and we try to 
see if we can get anywhere near agreement to the kinds of 
scanty data we have from ancient history. It's a mixed bag, but 
by and large, when the models projected it would be a lot 
warmer it was a lot warmer. They don't get the numbers right, 
but they get the basic directions.
    Mr. LINDER. Thank you very much. Thank you.
    Chairman RANGEL. Mr. Pomeroy.
    Mr. POMEROY. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing. For years, I aspired to the Committee 
on Ways and Means, only to find when I got here, we really 
weren't talking about important stuff. I appreciate the 
leadership you brought to this Committee, when we do get to 
have these hearings exploring the depth of the problems, and 
then the role tax policy might apply in addressing those 
problems.
    Dr. Montgomery, I found your comments very interesting. I 
was just going to see if I tracked them through, because they 
don't entirely strike me as consistent. You indicated that 
marketplace dynamics will incent new technology innovation 
above all other things, but you indicate that steps we might 
take, relative to global climate change, unless embraced across 
the developing world, would simply drive activity into 
developing countries and damage our competitiveness.
    It seems to me, the only thing you assert by way of 
pressure we can create, driving technological innovations which 
may save us from this problem, would be the R&D tax credit. I 
agree with you, it's critically important, and I agree with 
you, it ought to be broad-based, and I agree with you, it ought 
to be permanent, but it seems to me to be a bit of a slender 
reed to say this is it, in terms of responding to global 
climate change.
    Have I understood you correctly, or would you care to 
clarify where I am not complete?
    Dr. MONTGOMERY. I think there--let me try to clarify three 
parts of it. I certainly don't think that R&D alone will lead 
to stabilization of greenhouse gas concentrations or 
temperatures.
    We need three things. We need R&D incentives and funding in 
order to create the technologies and put them on the shelf. At 
an appropriate pace, and over time, we need market-based 
incentives that could be provided by cap and trade systems, by 
a carbon tax, by a safety valve, by a number of approaches, to 
get those technologies off the shelf.
    We need to think about the timing of when we want to do 
those two things, because I think it's very important that we 
not have financial disincentives for CO2 emissions, 
until the technologies are available that make it possible to 
reduce emissions effectively and cheaply. We don't want to get 
the targets ahead of the technology.
    Mr. POMEROY. I agree with you in part--but in part, 
necessity is the mother of invention. So, if this is kind of an 
abstract undertaking, ``Gosh, it will be neat when we get this 
technology,'' you've got one dimension of urgency versus, 
``Holy cow, the new deadline is approaching.''
    Dr. MONTGOMERY. The general thinking among economic 
theorists--and my thinking, and what I was publishing on since 
the 1970s--was if we can just get a cap-and-trade system out in 
the market, we don't have to worry about anything else. I think 
that was overly optimistic.
    The problem is that in order to create incentives for R&D 
and the development of new technologies, we have to look at 
market conditions 10 to 20 years from now. I am now convinced 
that it's not possible for the congress to create a credible 
enough incentive, because of your inability to lock in future 
congresses and future Administrations to this policy, to think 
that what is enacted today, in terms of the cap-and-trade 
system, will be convincing enough to the private sector about 
what's going to happen 20 years from now to their investments, 
to induce the massive amount of R&D we need today. I wish I 
didn't think this, but I----
    Mr. POMEROY. I'm sorry, I do apologize, I keep 
interrupting, but I'm just in a dialog sense here.
    Dr. MONTGOMERY. Yes.
    Mr. POMEROY. Do you really think that the business 
community is betting on the heat coming off of global climate 
change, that the concentration of this congress may abate in a 
future congress?
    Dr. MONTGOMERY. No, but I do not think that they are 
willing to bet that future congresses will be taking a hard 
enough line to put the scale of resources that are needed into 
R&D today.
    The reason I don't think the R&D is a slender reed is 
because we are probably talking about 10 times as much R&D 
investment as is taking place today across the board. It is a 
very difficult task and the Committee on Ways and Means's job 
is to try to figure out where in the world all this money is 
going to come from.
    Mr. POMEROY. Thank you for that. I--my remaining time, just 
a tiny bit of time, Dr. Prinn, I would ask you. You talked 
about carbon sequestration, putting CO2 under 
ground. By the way, North Dakota hosted a fabulous 
demonstration of that, with the gasification plant and the 
CO2 shipped to Canada, pumped into their oil wells, 
enhancing oil recovery.
    Are there other credible technologies under development? I 
have heard about an algae capture technology. Is there other 
things, when we talk about carbon sequestration, that are under 
development, other than what plants absorb, or what we pump 
into oil wells?
    Dr. PRINN. Yes. There--well, sequestration in geological 
reservoirs is certainly one. There has been quite a lot of 
discussion about the possibility of putting carbon dioxide in 
the deep parts of the ocean.
    Generally, it is considered difficult, and may be, in fact, 
politically impossible, because of the law of the sea, and 
other concerns about its permanence. So, I don't think the 
ocean is going to play the role that people might hope it 
would.
    Mr. POMEROY. Okay.
    Dr. PRINN. There has been some talk about fertilizing the 
ocean with iron, to increase the production of phytoplankton, 
and therefore, some small fraction of those sink down and 
become a carbon loss. My view on that is also that it's not of 
the scale that is useful. Again, it runs into issues to do with 
dumping of stuff in the ocean.
    So, I would come back and say what are the things that are 
worth pursuing right now? Or at least should be on the table. 
The geological reservoirs--very big saline aquifers that, of 
course, the western states have vast volumes of, and also 
sequestration in soils and forests, as viable places where we 
can store carbon in ways that we can have some control over in 
the future.
    Chairman RANGEL. Thank you so much. Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate your 
continuing this effort. I feel like we might apply for college 
credits in the economics of poverty and trade. Today's hearing 
was, I thought, really very helpful. I deeply appreciate it.
    I want to pursue the notion there is this expectation that 
somehow there is a lot of high-tech solutions. I appreciate, 
Dr. Montgomery, your talking about there is probably some stuff 
out there on the horizon that we should be looking at, and we 
might accelerate the progress.
    It seems to me that, for all intents and purposes, there is 
an awful lot that we can do right now. The reference from 
several of our experts 75, 80 percent of this is 
transportation, electricity, and agriculture.
    If we were to get serious--and I am from a region in the 
northwest, where I have--I represent a city that actually is 
about at its 1990 emissions level right now. For the last 25 
years, the largest single source of energy has been 
conservation. It has been achieved at, I don't know, 3,000--at 
half the price of a coal-fired plant. We haven't scratched the 
surface, it seems to me, in that area.
    I want to just throw a couple of ideas past the panel, and 
maybe get a little feedback. If we were to establish an oil 
import fee that would set a figure for oil in perpetuity at $50 
a barrel, escalated with inflation, if we were to move in an 
area of carbon tax, if we were to have the Federal Government's 
carbon footprint's reduced--I think it's safe to say we are the 
largest generator of greenhouse gases of any entity in the 
world, and if we were to set aside one percent of our energy 
bill for conservation, if we would commit not to purchase any 
vehicles that did not meet a specific level, absent some sort 
of waiver, if we committed to have renewable portfolio standard 
for the Federal Government, these are little things that are 
within our power.
    I won't even talk about the farm bill that is up for 
reauthorization, with an opportunity through the farm bill and 
the legislation, that we could use on this Committee to change 
the carbon footprint of agriculture in this country, both to 
reward the right stuff, and penalize some of the things that we 
don't want.
    Aren't there lots of simple, common-sense things that we 
can do that will make a difference now, over the next five or 6 
years?
    Ms. CLAUSSEN. Let me try first to answer. Absolutely, yes. 
There is absolutely no question about it. Do we have a need for 
long-term technology in R&D? Yes, but can we do a lot in the 
short term? I think there is no question.
    I think the easiest way is not only to look at the City of 
Portland, or some states that have done these things, but just 
to look at what private industry has done, because virtually 
all of the companies that have set targets--and many of them 
are much more stringent than the U.S. target was--have found 
that they could meet those targets by efficiency improvements.
    They were, in many cases, just sort of things that I would 
consider silly things that were turning off the computers at 
night, changing the lighting. Doing all of these very simple 
things, which actually are great for the bottom line, and can 
result in significant reductions.
    That is why we, and a lot of the companies we work with, 
would like to see a price on carbon, because that would really 
motivate that kind of behavior, and in fact, we could make 
significant reductions without significant cost.
    Dr. SCHNEIDER. Yes. In California, we have had bipartisan 
support over the last 30 years for a whole series of 
performance standards in houses, in machinery, and so forth.
    In fact, Art Rosenfeld, with the California Energy 
Commission, then spent about a half-a-million dollars of 
taxpayer money in a competition that led to the invention of 
the electronic ballast that made the compact fluorescent 
possible. When I asked him what was the payback, he spent all 
lunch thinking about it, and then came up with a number like $1 
trillion. It was a pretty good return.
    Why does California do it? It does it because it adheres to 
what I like to call the 7-11 principle. If you can do better 
than a 7 percent return on investment--typical of a mortgage 
rate--or an 11-year payback, it's something to consider, a 
mandatory control, because you have a win-win associated with 
that.
    That, in fact, is why, in California again, about 15 
percent of the electricity demand has been reduced by these 
actions, including about half of that in utilities in private 
sector, and the estimate is about $5 billion a year saved. 
Again, it eliminates bipartisan bickering a great deal, when 
everybody wins.
    I also think that in the end, though, while we have a lot 
we can do to start--and the sequencing should certainly be on 
performance standards first; we have heard that from everybody, 
and I think we're in agreement--but we also should remember the 
learning by doing, which means getting the costs and the prices 
down for available alternatives, not just exotic, uninvented 
technology, but hot tower solar, and batteries that you could 
use for plug in hybrids. The technology is here, it's just not 
here at the cost we would like. Learning by doing first takes 
doing, just as return on investment takes investment.
    So, finding the ways to encourage the investment and the 
doing is what will bring these online cheaper, sooner.
    Chairman RANGEL. Mr. Thompson, please.
    Mr. THOMPSON. Could I just ask a question, Mr. Chairman, 
for a request from----
    Chairman RANGEL. Yes.
    Mr. BLUMENAUER. Ten seconds. I just--if you have ideas of 
where the Federal Government can emulate what you are talking 
about in the private sector, or the State of California, I 
would welcome a little brief note, or something of that nature. 
Thank you for your indulgence, Mr. Chairman.
    Chairman RANGEL. Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman. I want to thank all 
the witnesses for being here for your testimony today.
    Ms. Claussen, if you would, please, I think we all know 
that forests have a certain benefit of absorbing 
CO2. Up in my district--I represent a district in 
Northern California--there is an organization, The Pacific 
Forest Trust, and they registered the state's first forest 
carbon project with the California Climate Action Registry. 
They have got about 2,100 acres of working forest land that 
they have designated as this project. I highlight the fact that 
it is working forest land.
    I am told that that one project is expected to curb about 
500,000 tons of carbon dioxide CO2 emissions through 
sequestration. This seems like a pretty promising program. I 
would like to know what, in your view, what role projects of 
this nature can play, and if you believe that--this is the tax 
Committee--if you believe that, in our effort to deal with 
this, any comprehensive plan should take into account and 
include incentives for these types of programs.
    Ms. CLAUSSEN. I am not familiar with the very specific 
project you mention, but should sequestration in forests and 
soils play a role in this? I think the answer is yes.
    Now, it is--I'm not exactly sure whether this is a solution 
for the long term--and I suspect it is not--but while we move 
forward in other areas, and while we deal with new technologies 
that can be more permanent----
    Mr. THOMPSON. Why do you say it's not a solution for the 
long run?
    Ms. CLAUSSEN. Because I think it is very hard--although in 
some cases, you can do it--it is very hard to guarantee the 
life of the forest over a really long period of time.
    Mr. THOMPSON. It is certainly a part of any solution----
    Ms. CLAUSSEN. It is certainly a part of the----
    Mr. THOMPSON. --short run or long run.
    Ms. CLAUSSEN. You bet. It is certainly part of the 
solution. It can do a lot in the short to medium term. It 
should be a part of any comprehensive program.
    Mr. THOMPSON. How do you quantify the value of the tax 
incentive? Is that----
    Ms. CLAUSSEN. Off the top of my head, I can't give you a 
good answer. If you would like us to provide one for the 
record, we would be happy----
    Mr. THOMPSON. Would you, please? I would appreciate that. 
Thank you.
    Dr. Schneider? Can you--and I had to step out for a little 
bit, and you may have touched on this, and indulge me, please, 
if I am being repetitive--but what are your long-term estimates 
on the impact of global climate change, and a water supply for 
everybody, for municipal, agricultural, and natural resource 
priorities? On the West Coast, in western states?
    Dr. SCHNEIDER. I will start with California and the west, 
because there is probably a legitimately larger concern there 
than in some other areas. That is because when you have a 
Mediterranean climate, where the bulk of the rain comes in in 
the winter, and not in the summer, if you end up with warmer 
seasons--and a lot of our water is stored in snow pack, not 
just in reservoirs, something like half--and you start melting 
them sooner, then you have a flood management problem earlier 
in the spring, and you have less water availability downstream 
in the summer, when you need it.
    If you are several degrees warmer, you need it even more, 
and you increase substantially the risk of wildfire. If there 
has been any unifying factor in California--and I think in 
Oregon and Washington--in concern about not wanting to warm up 
more than a few degrees, it has to do with the risk of wildfire 
associated with that kind of Mediterranean climate, and the 
reduction of water supplies. It is less clear in other places.
    The IPCC collected the results from 20 models, and--
roughly--and while there was disagreement about many parts of 
the world, where it rained more or less, there were a few areas 
where they were all in relative agreement for obvious reasons.
    First, you are going to get more precipitation in the high 
latitudes, both north and south, because the atmosphere holds 
more moisture when it's warm. Second, the Mediterranean 
climates, the Mediterranean itself, South Australia, South 
Africa, California, West Coast, Mexico, will probably have 
substantial water resource problems because they are already 
stressed, and they are already dry in the summer, and adding 
heat is not a good thing.
    Mr. THOMPSON. So, do these studies look at things such as 
increased insalination levels, because of increasing water and 
effect on agricultural products, and things of that nature?
    Dr. SCHNEIDER. Well, there are studies that look at water 
quality, as well as water quantity. There are not thousands of 
them. We are still trying to collect the literature on this.
    Everybody admits that there are uncertainties, from how 
many people in the world, to the emissions, to what it means in 
those water sheds. The one thing we know is we are going to 
change the drought/flood frequency, probably going to increase 
the extremes, pretty much everywhere, but the West looks like a 
particular problem, because of its Mediterranean climate.
    That would affect water quality, as well, because if you 
have run-off of pesticides or herbicides, or other things, at a 
time--in the summer, at a time when you have less actual run-
off, then the concentrations would go up. That can also be 
controlled by local rules, so it will require a combination of 
Federal and local action to protect those systems.
    Mr. THOMPSON. Thank you very much.
    Chairman RANGEL. Thank you. Mr. Nunes.
    Mr. NUNES. Thank you, Mr. Chairman. Mr. Schneider, you, in 
your written testimony, you proposed a $400 billion tax on 
carbon. We're producing about $1.7 billion U.S. tons. Simple 
math shows that that $400 billion per ton tax would be about 
$700 billion a year, and $7 trillion over 10 years.
    So, I have two questions for you. The first is that CVO has 
determined our GDP in 2007 will be about $13 trillion. Given 
that tax collections are already at a historical high, do you 
believe that this tax, a tax of this type, is economically 
sustainable? That is my first question.
    The second question I would like for you to answer is how 
do you suggest--being that we are a tax-writing Committee--how 
do you suggest that we apply this tax to the American people, 
in what form? Gas tax, and so forth, and so forth.
    Dr. SCHNEIDER. Thank you very much for that question, 
because I can clarify that I certainly would never advocate a 
$400 a ton carbon tax snapped on the day after tomorrow.
    What I was doing in that study was showing that even a tax 
that large, which was presumably ramped up over time, and using 
the standard growth rates that would be calculated in most 
economic models, even a number that large--and I acknowledged 
in the testimony that costs would be trillions of dollars--you 
still--when you look at it play out over a century--again, if 
you believe that we will have a 2 percent per year growth rate 
in the economy--even a $400 per ton carbon tax only delays our 
getting 500 percent per capita richer per year or two 100 years 
from now.
    I also said in the testimony that it would be very 
important to take a look not just at who might be 
differentially injured by climate change--such as I had said 
earlier, people living on coast lines and high mountains--we 
also have to take a look at who would be hurt by any policy, 
and deal in fairness to help them through the transition.
    Mr. NUNES. Doctor, if I may, though--because I have limited 
time here--if not $400, then how much? We are--we need to know 
if we are serious about writing this into law, and taxing the 
American people with this carbon tax, if it's not $400, is it 
$200? Is it $300? Is it $150? Where do you start, and how do 
you apply the tax?
    Dr. SCHNEIDER. Well, what I would do personally--and, of 
course, you are calling for my values of the relative merits of 
these--and in my value system, I want to try to send an 
inexorable signal that we are going to slow emissions down. I 
don't believe that starts with a very, very high number, 
because of the dislocation it would have for people who are 
currently locked in to the kinds of work for which those taxes 
would be really very critical.
    Just as a way of perspective, several people had made 
comments, politically and otherwise, that Kyoto, or some other 
similar type policy, would have bankrupted the United States. 
Yet gasoline price went up 2 years ago by $1.50 a gallon, which 
is the equivalent of $270 a ton carbon tax, and didn't do very 
much damage to the economy, though it hurt individuals.
    So, I am a believer in ramping things up slowly, announcing 
it, and giving people time to adjust. In the end, the models 
themselves suggest if you want to control to 350 ppm--that is 
near current levels of CO2--that the numbers are 
somewhere on the order of $400 a ton. I would not personally 
advocate it--it is not in my talks or my articles to say that--
it was just simply scaling.
    Mr. NUNES. So, if we are going to stick with a number, 
though, what would you think it would be?
    Dr. SCHNEIDER. What would I--well, the market is all over 
the place these days, from 10 to 50 dollars per ton, depending 
on where you are. I think you start small, and you say, ``I am 
going to crank the knob up every year, higher and higher, and 
then when we get new studies to find out if we're lucky and we 
are coming out at the low end of climate change, we might crank 
it back. If we find out we're unlucky and we're coming out at 
the high end, let's crank it up more.''
    I will be surprised if it doesn't, in decades, settle 
somewhere well over $100 a ton, as an incentive to do both the 
R&D and to discourage wasteful use.
    Mr. NUNES. Thank you, Dr. Schneider. Thank you, Mr. 
Chairman.
    Chairman RANGEL. Mr. Kind.
    Mr. KIND. Thank you, Mr. Chairman. I want to thank our 
panelists for, not only their testimony, but your patience here 
today, on an incredibly important topic. I just returned from a 
few days over in Europe, to meet with the European parliament 
and the European Union, discussing this very topic, along with 
some other matters. They are absolutely obsessed, as you can 
imagine.
    Because whereas Al Gore says it's an inconvenient truth for 
us, it's a matter of survival for them, in regards to climate 
change, and the impact it's going to have throughout the 
region. They're wondering what we're going to do in this 
session to step up, and start assuming some of the 
responsibility that we have to share on a global level.
    With that in mind, let me ask you just two questions, for 
each or any one of who that want to address it. What is the 
most important thing that we should be doing right away to help 
us reduce the CO2 emissions in this country? 
Secondly, what is the most important thing we can be doing to 
help the emerging and developing world, to try to leapfrog over 
a lot of the mistakes that we have made in the past, so that 
they don't become a significant problem for the rest of us?
    Let me just leave it open to any of you that want to----
    Dr. PRINN. I think it is very important to put a price on 
carbon emissions, even if it starts out at a very modest level. 
I think that needs to be done, one way or another. The issue of 
whether it's a tax or it comes under a cap-and-trade, is 
something that I think is not my area of expertise to comment 
on.
    I think it is extremely important that we work together 
with the other major developing countries, that the United 
States works carefully with China and India, and these other 
big, emerging economies, to see the ways in which we can help 
them develop their economies--we are not going to stop them 
doing that--but in a way that is looking very carefully at 
lowering the emissions that would otherwise occur from those 
developing economies, and with a clear understanding that, at 
some point, they take on restrictions to their emissions. They 
may not start in that direction initially, but at some point 
there is an agreement that they join in, along with us and the 
other OECD countries, to make a global effort at lowering 
emissions. The point----
    Mr. KIND. I have----
    Dr. PRINN. --is that it doesn't matter where the gases are 
coming from.
    Mr. KIND. Right.
    Dr. PRINN. We all live here, it's a global common problem.
    Mr. KIND. Dr. Schneider, do you have any thoughts?
    Dr. SCHNEIDER. Yes. As I had said in my written testimony, 
I think that a lot of this is a sequencing problem. It is 
probably easiest to start smart, start where you get the lowest 
cost and the highest paybacks, which is performance standards, 
not just have them selectively distributed around states, but 
take a look, federally.
    A Congressman made the comment which I agree with, that we 
also had better look at Government procurement. Because it's 
always better to get your kid to believe you when you tell him 
to turn out the lights when you turn off the TV when you walk 
out the door. So, I think the Government being involved is a 
part of it--not just symbolic--but a good way to also have a 
learning-by-doing experiment, and send market signals to 
producers of those efficient products.
    Part of performance standards is CAFE, part of it is 
appliances, bulbs, and housing. I think next in the chain, 
which we have heard from everybody--and I hear no disagreement 
here, though we might have nuances about how we do it--is 
public/private partnerships, so that we can get that learning-
by-doing experiment going. President Bush (the father) once 
said, ``Let 1,000 flowers bloom.'' I don't think we need 1,000. 
A dozen, maybe.
    Mr. KIND. Sure
    Dr. SCHNEIDER. We have to have that competitive market of 
learning by doing, and it is not going to happen just on 
private investment returns. It will take the public 
partnerships. After all, there is a public benefit, which is--
--
    Mr. KIND. Let me go to Ms. Claussen and Dr. Montgomery real 
quick, before my time expires.
    Ms. CLAUSSEN. The answer, I think, a price on carbon--and I 
would advocate through a cap-and-trade system--would be number 
one. In terms of the developing world, I think we have to 
engage with them in a constructive way, so that they can follow 
cleaner development paths. Because, obviously, they're going to 
develop. They obviously need electricity and transportation, 
but there are ways to do it better, and I think we can be 
helpful.
    Mr. KIND. Yes. Dr. Montgomery?
    Dr. MONTGOMERY. I would make my first priority creating a 
stable and growing source of funding for effective R&D, and 
sending it through an effective organization that is outside 
existing executive departments, and outside the appropriation 
process. We can expand on that one.
    Second, for the developing world, I think it is absolutely 
clear the developing world is not going to be able to make a 
big reduction in its growth in emissions without much stronger 
economic, legal, and market institutions. I would start with 
pushing that reform.
    Mr. KIND. Let me just say--and it really hasn't been delved 
into in any great extent, but I don't know how we can get there 
quicker or faster, unless we have a mature nuclear energy 
policy, as well, in this country, and it's something that we 
can share globally with non-proliferation concerns in mind.
    Because everything else sounds great, but that seems to be 
the most obvious direction to get the biggest bang for our 
buck, in short term. Thank you all.
    Chairman RANGEL. Mr. Pascrell is recognized for 5 minutes.
    Mr. PASCRELL. Thank you, Mr. Chairman. Thank you, each of 
the four of you. You did a great job on this panel, and we need 
more dialog, we need more discussion.
    Mr. Montgomery, I want to start off asking you a first 
question. You are an economist, you have testified before this 
Committee about the economic impact of various ideas that have 
been proposed to address climate change. It's kind of like a 
warning, ``Better watch out what you're getting yourself into, 
because this is going to cost a lot of money, that is going to 
cost a lot of money.'' I have a question for you.
    If we fail to respond to global warming, if we fail to 
respond, would there be economic costs associated with higher 
temperatures, higher sea levels, and changes in weather 
patterns? Would you answer that question, Mr. Montgomery?
    Dr. MONTGOMERY. Yes, there would be economic costs.
    Mr. PASCRELL. Why don't you tell us about those?
    Dr. MONTGOMERY. The economic costs we need to take into 
consideration in designing policies are the economic costs that 
we can avoid because of those policies.
    Changing the direction of the climate is going to be a slow 
process, no matter how rapidly we start doing things. 
Therefore, we have to think about time scales on which we can 
accomplish something, given that we need the whole world to do 
things--and which costs that allows us to avoid.
    Mr. PASCRELL. On that----
    Dr. MONTGOMERY. The costs we're looking at avoiding 
certainly are all of those things, and they are going to be 
occurring over the next century.
    Mr. PASCRELL. Well, it appeared from what you all said 
today, and what others have been writing lately, that we have 
come a long way in 6 years, the last five or 6 years. We seem 
to be all on the same page, that now we are dealing with sound 
science.
    Now, Ms. Claussen, you talked about conservation. You gave 
us some very specific examples about how we can reduce 
emissions, and so forth, and so forth. In May of 2001--I want 
your response to what the Vice President of the United States 
said about conservation. He said that, ``Conservation may be a 
sign of personal virtue, but it is not a sufficient basis for a 
sound, comprehensive energy policy.'' Would you please respond 
to that statement by the Vice President of the United States?
    Ms. CLAUSSEN. It's too easy, your question here. I actually 
think conservation is a good basis of a sound energy policy. It 
is the number one thing we can do. It is a win-win. It is not 
the whole game, but there is no question that that is where we 
should start.
    Mr. PASCRELL. By the way, he said that just a little while 
after--a second here, Dr. Schneider--he said that just a little 
while after the President reneged on a campaign promise that he 
made to all of us that he would cap emissions for coal-powered 
plants. Dr. Schneider?
    Dr. SCHNEIDER. I do agree with the Vice President, that it 
gives you personal virtue. The point is, it does more than 
that. The best example I can give you is that initially 
California started performance standards on refrigerators from 
1975, in the OPEC embargo, that were then picked up by many 
states, and eventually the Federal Government.
    It has been calculated out that the amount of electricity 
saved alone through those performance standards is not only 
substantial, it is twice the maximum potential of the energy 
production of the Alaska national Wildlife Refuge, which I 
think is something the Vice President might note.
    Mr. PASCRELL. Thank you, Dr. Schneider. Dr. Montgomery, I 
want to get back to you. Utilizing--I believe utilizing 
conservation efforts, we can retrofit the Tax Code to help us 
encourage conservation. Do you think that that is hyperbole? Do 
you think that is pie in the sky? Or do you think it's 
achievable? Then I have one other question to ask you.
    Dr. MONTGOMERY. Okay. Then I will try to be brief. I think 
you get what you pay for. If you are prepared to pay for energy 
conservation through tax incentives or subsidies--that means 
taking resources away from other uses, because you're 
collecting taxes--and by expending those resources, it's 
certainly possible to bring about conservation.
    I think that is the experience in California, too. 
California has incurred economic costs, it has chosen a 
particular path of industrial development, and it has--by 
expending those resources, it has accomplished something in 
reducing its energy consumption.
    Mr. PASCRELL. You said on page three of your testimony, 
when you were talking about developing nations, and why should 
we ask this of ourselves if we're not going to ask this of 
others, you said the implication of these observations is not 
that the United States should do nothing, it is that gaining 
the participation of developing countries is probably the 
highest priority for climate policy, because without that 
participation, it is impossible to prevent large temperature 
increases. That's what you said.
    Are you implying, or would you accept, or would you support 
this idea, that with participating countries--and whether they 
are developing or they have been developed--that you could 
actually deal with trade agreements with those countries to 
work on these climate changes? Would you accept something like 
that, that we--it be part of our trade deal with countries 
around the world?
    Dr. MONTGOMERY. Yes. I think that trade negotiations are an 
important route to doing something about climate policy. Global 
trade negotiations are tricky enough. We have immense problems 
in dealing with things like the Europeans' insistence on 
subsidizing agriculture, which is impoverishng developing 
countries.
    I would be more inclined to go with regional trade 
agreements. I think that bilateral or Pacific rim negotiations, 
where we talk about trade, we talk about climate, we talk about 
technology transfer, we talk about maybe even incentives for 
U.S. investment in countries, if they will change their 
behavior, I think that's a very important route.
    Mr. PASCRELL. Thank you.
    Chairman RANGEL. Thank you. Mr. Porter.
    Mr. PORTER. Thank you, Mr. Chairman, and thank you all for 
being here today. As you know, I represent the State of Nevada, 
as does my colleague to my right, Congresswoman Shelley 
Berkley. A huge issue for us is, of course, Yucca Mountain and 
opposition to Yucca Mountain.
    We have heard, for probably 20 years, that the Federal 
Government and all of the scientists, who have spent $12 
billion or $13 billion, have told everyone that that site is 
safe for burial of nuclear waste. I said jokingly the other 
day, ``If it was a Saturday Night Live skit, it would probably 
be pretty funny, but it's actually too serious of an issue, the 
Yucca Mountain.''
    It's a problem, it's broken, and I know that you, I 
believe, support nuclear energy, as do I, but I please ask, as 
you look at that as an option, that when we use sound science, 
it's not happening at Yucca Mountain.
    Now, I would also like to add, I guess, the food chain of 
this debate is huge. There is millions, if not billions, that 
have been spent on both sides, and which makes it very 
difficult for the average American to cut to the chase of the 
debate. I'm not questioning your expertise today at all, but I 
know that the American people are in question.
    What can we tell the American people who are residents in 
Nevada, right now, one thing that they could do to help? 
Because I believe there is a problem, and we need to find the 
solution. What's one thing a family can do to make a huge 
difference? I may be oversimplifying, but I have been asked 
that question by schoolchildren, by businesses, by individuals.
    The second part of it is geothermal, of course, is huge for 
the country, one of the largest in the world. Nevada is number 
two in production. I hear constantly from the business 
community that they need more incentives, more incentives for 
solar and geothermal. So, I guess the third part of this is 
what can we do to encourage that? Can we start with Dr. Prinn?
    Dr. PRINN. Yes. Beginning with the issue of geothermal that 
you brought up, I think it is there with great potential, 
particularly in the western states, because you don't have to 
drill down so far to get to the hot rock. I have not seen a 
careful consideration of the cost of getting very large amounts 
of energy from geothermal, and I think that has to be looked at 
very carefully.
    Obviously, in your State, you could look at wind energy as 
an important source, because you have got lands that nobody 
looks at, right?
    Mr. PORTER. We have lots----
    Dr. PRINN. You've got lots of land, and you don't have to 
worry about what we worry about at the Cape Wind project, where 
rich people don't like to see these windmills in their 
horizons.
    On the issue of what the individual person can do, well, 
the way I answer this in the many public talks I give when that 
comes up, is about every four or five or 7 years, depending on 
how frugal you are, you buy a new vehicle. This is one way 
where people can, I think, make a very significant difference. 
They can go for a vehicle that gets twice the mileage, and that 
will half their gasoline cost, right, in doing so, but in doing 
so they will have made an important contribution, particularly 
if it then becomes a popular thing to do. That's something 
everyone can do.
    The way we run our households, of course, the ways we waste 
energy, and we waste money in doing so, and that would apply in 
Nevada and in Massachusetts, and everywhere else. I would now 
leave it to others to----
    Mr. PORTER. Thank you.
    Dr. SCHNEIDER. Yes, I too get asked that question all the 
time. One young lady said, ``I can't negotiate with the 
Chinese. What can I do?'' Of course, I said, ``Do you turn your 
light out when you walk out of the room?'' She said, ``Well, 
most of the time, not all of the time.'' ``How about the 
computer?''
    So, you begin with the things that you can control. You can 
control the number of trips that you take. Do you bother mom 
and dad to drive you downtown the second you want, or with a 
little bit of planning can you do two trips instead of four? 
It's not just simply that those acts are symbolic. They are, 
but when a billion people do them 10 times a day, they go 
beyond symbolic. Plus, they also create the mindset for being 
efficient.
    I agree with Ron Prinn, that you have to take a look very 
carefully at the labels of the air conditioners, the 
refrigerators, the automobiles.
    When you remodel your house, do you build to the minimum of 
the building code, or do you build to a payback criteria, like 
7-11? You need to get some help to try to do that. So, I think 
there are a lot of things we can do.
    Finally, we need to get into organizations. We need to talk 
to people of like mind, or even differences, but who agree in a 
conservation ethic. We talk to each other, we learn from each 
other, and then we network to other groups, because that's what 
makes it politically more possible for leaders to act when they 
have supporting constituents. So, I think there is a whole 
hierarchy of steps.
    Of course, then, from the top down there are the taxes and 
the caps and trades.
    Ms. CLAUSSEN. I think we are all asked this question. I 
usually give a three-part response. When you make a purchase, 
make it with carbon in mind, and that could be whether it's 
your vehicle or your refrigerator or your washing machine.
    I think it is important, if you are going to invest your 
money, that you invest your money in companies that are taking 
steps in the right direction here, and that are advocates for 
good public policy.
    I know I shouldn't probably say the third in hearing, but I 
always say it's important who you vote for, because we need a 
national policy. I would say you should vote for people who are 
going to come up with a sound one.
    Mr. PORTER. Thank you.
    Dr. MONTGOMERY. Mr. Levin started the questioning by asking 
us about why there was such a huge divide in opinions on 
climate policy. I actually think the advice I would give 
everyone in their homes and their families is to study the 
subject seriously, think critically about the extreme 
statements that you hear from any side, read everything Ron 
Prinn has ever written for general consumption, understand the 
subject.
    This really gets to the question of long-term incentives 
for businesses, as well. The expectation of what climate policy 
is going to be, and what businesses need to do in order to 
prepare for it, is driven less by what this congress votes than 
by business's expectation about what the electorate is going to 
expect and demand over 20 years.
    Businesses are not going to be confident of that until we 
have much more consensus among our citizens about what the 
climate problem is, and how you can address it. So, I would say 
study it, and encourage your children to study hard and do 
science and engineering, because we need them in order to get 
R&D to create the future that we are going to depend on.
    Chairman RANGEL. Ms. Berkley.
    Ms. BERKLEY. Thank you, Mr. Chairman, and thank all of our 
witnesses for being so patient and staying the extra 45 
minutes.
    Whenever I hear anybody talk about a nuclear energy as a 
possible part of a solution, and part of our future energy 
portfolio, I get a little bit nervous. I would like to echo 
some of the things that Mr. Porter said. A nuclear energy has a 
very nasty byproduct, and that nasty byproduct is nuclear 
waste. This nation's only solution for its nuclear waste 
problem is to store--ship and store--77,000 tons of very toxic 
radioactive nuclear waste across 43 states to be buried in a 
hole in the Nevada desert, where we have got groundwater 
issues, seismic activity, and volcanic activity.
    When people talk about nuclear energy being clean and cheap 
and safe, it is--I would like to disabuse everybody of that 
myth. If it is so cheap, it costs $2 billion, minimum, to build 
another nuclear power plant--that's why there hasn't been one 
in the last 20 years--I don't think that sounds very cheap. If 
it's such a great cheap source of energy, how come the 
taxpayers, me included, have to keep subsidizing this energy 
source?
    We are already 20 years behind schedule, after the so-
called ``Screw Nevada'' Bill, and nothing much has been done, 
other than we have spent a fortune studying it.
    It requires gazillions of gallons of water for nuclear 
waste. We don't have any water. You may have noticed that Yucca 
Mountain is in the middle of the Nevada Desert. We are now in 
the middle of our seventh year of a 5-year drought, and we 
don't know how long this 5-year drought is going to last. There 
is no water resources in the State of Nevada for the storage of 
nuclear waste.
    We know--and actually, Congressman Porter was the 
Subcommittee Chairman when they were--when we did an 
investigation that found over 1,000 e-mails in--well, I don't 
have a direct quote, let me paraphrase what some of these e-
mails were when we are talking about so-called sound science 
for Yucca Mountain. ``I don't know any of the numbers, so I 
just make them up.'' That was one of the better e-mails, but 
there are hundreds of others that said exactly that. I don't--
``Whatever they ask me for, I give them,'' and I don't know--
``I just make it up.'' That's not exactly sound science.
    The U.S. Circuit Court of Appeals, as you know, overturned 
the EPA radiation standards that were at 10,000 years. They 
said they were short by 290,000 years, and that the EPA is yet 
to come up with adequate radiation standards, because 
radioactive nuclear waste has a half-shelf life of 300,000 
years.
    There is water at Yucca Mountain. Originally--and I was a 
youngster, just out of law school when the ``Screw Nevada'' 
Bill was passed--but they told us that it was so dry that they 
would store the nuclear waste, and the mountain would collapse 
over the nuclear waste, and it would be encased in there for 
gazillions of years. The reality is the last time I took a tour 
of Yucca Mountain there was water dripping. It is not as dry as 
people say it is, as our so-called scientists say it is.
    In an era of terrorism, why would we be generating more 
nuclear waste, when we know there are terrorists out there that 
would love to get their hands on the nuclear waste and use it? 
Why? To harm our country.
    Then last--hardly last, but another issue is 
transportation. There is no safe way to transport nuclear waste 
across this country. For the 77,000 tons that currently exist 
throughout the United States at the nuclear reactor sites, it 
would take 108,000 truck load shipments over a 35-year period 
to now transport the nuclear waste that currently exists. Now 
we're proposing to rely more on nuclear waste and nuclear 
energy?
    Perhaps the most important thing to me is Senator Harry 
Reid, and I have already publicly said that if any nuclear 
waste gets transported to the State of Nevada, we will lay down 
on that railroad track. I am sincerely hoping he is in front of 
me.
    Nonetheless, I can assure you that nuclear waste is not an 
option for this country. It is 20th century technology in a 
21st century world, and we better start figuring out how we're 
going to make up the extra 20 percent of our energy needs that, 
currently, nuclear energy satisfies. Thank you very much. 
Anyone have a comment?
    Chairman RANGEL. What timing. The record will remain open 
for the response to that. We are about to conclude the hearing. 
Mr. Becerra is recognized for 5 minutes.
    Ms. BERKLEY. Thank you.
    Mr. BECERRA. Thank you, Mr. Chairman. I will be brief. I 
want to thank you all for your patience and your wonderful 
testimony. I think it is refreshing to have a discussion where 
we don't talk about whether there is global warming, but what 
we can do to address it.
    So, I hope this will be the last time we have to come 
before Congress to have a discussion about whether there is 
such a thing as global warming, and what we have to do to 
address it. So, thank you for that.
    I hope, as you go on and continue to give your expert 
opinions and your great advice and counsel on these matters, 
that you will also help us formulate policies that will address 
some concerns that I have, that as we try to move toward 
cleaner energies, alternative energies, and alternative methods 
of implementing these new approaches, that we don't forget that 
there are a lot of folks in America, modest income folks, who 
will have a tougher time making the switches over to these new 
energies, or the new methodologies, because it will cost them 
to do so.
    I think everyone in America would love to drive one of 
these fuel-efficient hybrids, or would love to have their hands 
on an electric vehicle. The reality is, for a lot of folks, 
they can't even afford to get a newer, cleaner burning engine 
car, and they have to deal with the 10-year-old vehicle that 
they can afford, which is spewing out much more emission than 
would be a new car. They don't have a choice. So, please, 
please, please, as you are coming up with these ideas, don't 
forget that we have to make amends and make do for modest 
income Americans.
    The other thing I would mention is that I hope we will 
continue to talk about our responsibility, as a nation. Because 
while we talk about the polluters that we see--and every time I 
go to one of these developing countries, you see these large 
municipal buses that are transporting people--Mr. Chairman, I 
will try to be brief.
    Chairman RANGEL. There is a vote on the floor, and Ms. 
Jones wants to be recognized, and I want to say so long to the 
panel.
    Mr. BECERRA. I will conclude, then, by just finishing that 
remark, and leaving a question for you to answer, if you can, 
for the record.
    As much as we see these big buses that are spewing 
pollution in these developing countries, the reality is that we 
are the biggest polluters per capita, as a nation in the world. 
I hope that we will continue to focus on the fact that we need 
to be the leaders, to make sure the rest of the world follows.
    Finally, the question I would have is, please let us know 
in your written comments the importance of predictability. If 
we want to have the private sector invest in these large scale 
projects to get us more energy efficient, what--how can we 
provide them the predictability to make these investments, to 
know that there will be a return on these investments into the 
future? So, the more you give us on that, the better off we 
are.
    With that, I will yield, Mr. Chairman. Thank you very much.
    Chairman RANGEL. Ms. Tubbs Jones.
    Ms. TUBBS JONES. Mr. Chairman, thank you very much. 
Committee panelists, thank you for coming. Two questions I am 
interested in. Coal. Ohio is a big producing coal State, I want 
to know what you think about coal.
    Secondly, about wind power, the first inventor came from 
Cleveland, of turbo-power. So, I would ask you about wind 
power. Mr. Chairman, thanks for being such a great Chair, and 
giving me a chance. I would like to get some answers back in 
writing from you. Thanks.
    Chairman RANGEL. I cannot tell you how impressive your 
testimony has been with this Committee. I have just advised 
staff that I would like to consolidate your testimony, and 
distribute it to the House for us to have, as a guideline, for 
the things that we have to learn in order to do the things that 
we have to do.
    I also want to thank you for your patience for a very long 
hearing that we have had today. Take my word for it, your 
investment in time has made us better Members of Congress. Mr. 
McCrery.
    Mr. MCCRERY. Amen.
    Chairman RANGEL. Thank you again.
    [Whereupon, at 12:55 p.m., the Committee hearing was 
adjourned.]
    [Questions submitted by the Members to the Witnesses 
follow:]
               Questions Submitted by Ms. Tubbs Jones to
             Ms. Claussen, Dr. Montgomery and Dr. Schneider
    Question 1: Coal Energy--Almost 90% of Ohio's electricity comes 
from coal and Ohio has an enormous coal reserve. Coal production has 
been increasing in recent years, with production growing by 1.7% from 
the Appalachian region since 2004.

      What place does coal have in the low-carbon emission 
future of this country? Does it have a place?
      If so, what kind of further research must be done and 
what can this Committee do to support that research?

    Response from Ms. Claussen: The United States has significant coal 
reserves and likely will continue to burn coal well into the future. 
However, coal is inherently higher polluting and more carbon intensive 
than other energy alternatives. Large-scale implementation of carbon 
capture and sequestration (CCS) projects will be needed if climate 
change is going to be addressed in a meaningful way.
    The first step is to fund research, development, and demonstration 
of technologies to separate and capture carbon as well as tests of 
carbon storage in a variety of settings. The United States has the 
geological capacity to store the emissions from its coal-fueled plants 
in depleted oil and gas reservoirs for several decades. Capacity in 
other geological reservoirs is estimated to be in the hundreds of 
billions of tons (500 billion tons of capacity); enough to store 
current levels of domestic emissions for over 300 years.
    Once developed, these CCS technologies will need to be deployed to 
demonstrate their feasibility and to determine the costs associated 
with the various options. This would entail some 10-30 demonstrations, 
at scale, of commercial coal plants of a variety of configurations 
capturing and storing their CO2 as well as multiple 
demonstrations of CO2 injection in a variety of geological 
formations and geographic regions across the country. The estimated 
cost per CO2 storage project (not including the acquisition 
of the CO2) is estimated to be $15 million/year for a ten-
year period.\1\ This could be generated through public support, such as 
tax incentives or feebate programs.
---------------------------------------------------------------------------
    \1\Katzer, Doug, ed. 2007. MIT Study on the Future of Coal--Options 
for a Carbon-Constrained World. Cambridge, MA: Massachusetts Institute 
of Technology.
---------------------------------------------------------------------------
    Beyond research and early demonstration projects for commercial 
viability, the development and deployment of CCS technology will 
require a national, economy-wide policy--such as ``cap-and-trade''--
that provides the incentive for greenhouse gas reductions from all 
sectors, including electric power. Most recent estimates indicate that 
a price of at least $25 to $30 per ton of CO2 would be 
needed to drive coal-based electric power plants to install CCS. 
Because states have substantial authority over electricity generation 
and environmental protection, they can play an important role in 
demonstrating, incentivizing and requiring CCS. However, they are no 
substitute for a nationally consistent program that promotes CCS for 
all large sources of emissions. Policies beyond cap-and-trade (such as 
performance standards) may also be needed to stimulate the development 
of CCS technology.
    Finally, a regulatory framework for carbon storage is needed. This 
framework should include proper site selection, permitting processes, 
monitoring requirements, and public participation.

    Response from Dr. Montgomery: Coal will continue to be used for 
many decades as a fuel for power generation in existing facilities 
under all but the most extreme proposals for carbon emission limits. 
However, unless carbon capture and sequestration technologies are 
developed and prove successful, the amount of coal production and use 
is likely to fall dramatically from current levels over the next few 
decades.
    The recent MIT report on ``The Future of Coal'' lays out the R&D 
needs for carbon capture and sequestration in detail. I would emphasize 
two points: 1. that current research funding and plans fall far short 
of what is needed and 2. regulatory oversight and liability rules for 
carbon sequestration must be clear, realistic and flexible if there is 
any chance of sequestration technology succeeding.

    Response from Dr. Schneider: Coal-burning is the most carbon 
dioxide emitting per unit electricity produced major system and thus 
expansion of coal as currently practiced is inconsistent with major 
reductions in greenhouse gases over time. However, the key is to 
transform the ``as currently practiced'' part to include end to end 
management of CO2--probably by a crash R&D program to 
develop safe, long-term underground storage in saline aquifers or other 
suitable formations to keep the CO2 sequestered and thus 
harmless from a climate point of view. It is not assured that the 
promising start with underground CO2 storage in the enhanced 
oil recovery business (tens of millions on tons sequestered so far) 
will ``scale up'' if anything like business as usual emissions occurs 
over the twenty-first century (i.e. over a trillion tons of 
CO2 would have to be safely and permanently stored).
    As noted above, a major R&D program to evaluate the safety and 
permanence of massive scale carbon capture and sequestration is needed, 
along with efforts to lower the unit costs per ton CO2 
stored. This clearly will involve public/private partnerships and thus 
a clear role for the Ways and Means Committee in setting up tax or 
other incentives to spur such partnerships.

    Question 2: Wind Power in Northeast Ohio--A Cleveland inventor, 
Charles Brush, was the first person to use a wind turbine to generate 
electricity as far back as 1888. Today, we have a power-generating wind 
turbine at the Great Lakes Science Center in downtown Cleveland and 
there are plans for more turbines in the works. Just last month, the 
Cuyahoga County Energy Task Force met to move forward with a wind farm 
off the coast of Cleveland in Lake Erie.

      What can we do to continue to encourage the development 
of wind technology? Are there any policies in place today that we can 
build upon to make this technology a central part of our alternative 
energy plan?
      Most importantly, what can this Committee do to help 
cities and programs like the Energy Task Force continue to support this 
technology?

    Response from Ms. Claussen: To encourage the development of 
renewable energy, including wind technology, a mix of policies to 
encourage generation and production and to reduce barriers for 
distributed sources is needed. Policies in place today, such as the 
federal production tax credit (PTC), have helped provide an incentive 
for additional investments. Our work suggests that creating a uniform 
system to track renewable energy credits (RECs) in a consistent manner 
could facilitate trading these credits across the country. In addition, 
incentives for uniform grid interconnection standards at the state 
level would also help to reduce the barriers to further development of 
wind technology.

    Response from Dr. Montgomery: When wind generation is economic, it 
will be brought into the mix by electric generators and utilities who 
are motivated to obtain energy from the lowest cost sources. Putting a 
price on carbon emissions will provide that incentive for wind power 
and other forms of generation with zero carbon emissions. This 
Committee has jurisdiction over tax matters, and could investigate the 
adoption of a carbon tax as an alternative approach to managing carbon 
dioxide emissions that would increase the profitability of wind 
generation and aid all cities and programs that support the technology.

    Response from Dr. Schneider: Similar to my answer for carbon 
capture and sequestration above, public/private partnerships to create 
incentives for innovation in technology and lowering of unit costs of 
electricity are also needed for renewable energy systems like wind 
power. In particular, storage systems to deal with the intermittency of 
wind and very efficient transmission lines are still in the early 
development stages but could get a big boost by tax or other incentives 
to potential developers of these important energy alternatives.
    Clearly, working with them on a balanced program of ``carrots and 
sticks''--incentives for R&D exploration as well as penalties for 
dumping tailpipe and smokestack wastes in the atmosphere--clearly can 
move our development program forward.

    Question 3: National Standards on Renewable Energy--Almost half the 
States of the Union, twenty-four, have enacted some sort of state-wide 
standard for renewable energy. These standards range from a certain 
percentage of power usage to a set number of megawatts produced from 
renewable sources. My home State of Ohio is one of those currently 
without a standard on renewable energy.

      Do you believe that a national standard is needed to curb 
the release of carbon dioxide or should we continue to pursue policies 
state-by-state?
      If a national standard is needed, are there any state 
policies or aspects of state policies that we should implement on a 
federal level?

    Response from Ms. Claussen: As you have correctly pointed out, 
various states have established standards for renewable energy. These 
state standards include targets ranging from modest to ambitious and 
their definitions of renewable energy vary. Though climate change may 
not be the prime motivation behind some of these standards, the use of 
renewable energy does deliver significant GHG reductions. For example, 
Texas is expected to avoid 3.3 million tons of CO2 emissions 
annually with its RPS, which requires 2000 MW of new renewable 
generation by 2009. Increasing a state's use of renewable energy brings 
other benefits as well, including job creation, energy security, and 
cleaner air.
    The Pew Center's preferred approach to federal policy is a cap-and-
trade program that covers all major sectors of the economy. However, 
there may be a role for complementary programs to promote reductions in 
key sectors such as electric utilities. One potential role for the 
federal government would be to establish a uniform platform for 
defining renewable energy and establishing a uniform trading mechanism. 
Although the states may be in a better position to craft a portfolio 
tailored to their unique local resource mix, the current variation in 
state programs makes linkage across states difficult, so federal 
involvement in creating a platform is desirable.

    Response from Dr. Montgomery: Managing climate risks requires 
reducing carbon dioxide emissions in the most cost-effective fashion. 
Renewables have a role to play, but they are not the only option and 
they frequently are not the most cost-effective option. Our research 
finds that a Renewables Portfolio Standard can increase the cost of 
achieving climate goals under a comprehensive cap and trade program or 
carbon tax. The RPS forces adoption of specific renewable technologies, 
and these technologies supplant more cost-effective options such as 
coal-fired generation with carbon capture and sequestration. We find 
that basing climate policy on an RPS alone could cost four times as 
much as achieving the same emission reductions through a comprehensive 
carbon tax or cap and trade program that allowed free choice between 
renewables and other zero emission technologies such as carbon capture 
and sequestration from coal fired generation. An RPS is a solution in 
search of a problem, and it is not a cost-effective solution to the 
problem of carbon dioxide emissions.

    Response from Dr. Schneider: Yes. But, if enough states adopt such 
standards, it will have a major impact on the reduction of greenhouse 
gas emissions and lowering unit costs regardless of whether there is 
national policy. However, in homogeneity in both obstacles and 
opportunities makes it more difficult for the private sector which 
develops the technology--or the investment banking community that backs 
them up--to play on a level field. National scale rules do indeed 
provide more predictability to industries on how to invest. While I 
would never advocate denying states the opportunity to have tougher 
standards--California has led the nation and the world on this in 
pollution control for decades--I certainly think that some minimum 
national standards will make it easier for the business community to 
function in more cost-effective ways as they help us ``invent our way 
out of the problem.''
    A study of the experiences of various states or nations in 
renewable portfolio standards might be useful to the Committee in 
assessing any minimum national standards and avoiding potential 
pitfalls and encouraging demonstrated opportunities. California has 
long insisted on performance standards for buildings and appliances and 
now automobiles and their experience shows it not only reduces 
pollution, but if carefully crafted, provides a return on investment 
for the average consumer better than the mortgage interest rate--and 
thus can lower their effective monthly cost of living. That partially 
explains the strong bipartisanship in California on climate policy and 
energy efficiency--not only does it work for the environment, but it 
saves money too.

    [Submissions for the Record follow:]
      Statement of John A. Fees, The Babcock and Wilcox Companies
    Chairman Rangel, Mr. McCrery and Members of the Committee:
    My name is John Fees and I am the Chief Executive Officer of The 
Babcock & Wilcox Companies.
    It is my privilege to provide this testimony on the combustion-
based technology alternatives available today, and on the near horizon, 
that are designed to capture carbon dioxide emissions from electric 
power plants and to provide testimony on commercial nuclear power--
carbon-free generation.
    The Babcock & Wilcox Company has a rich legacy of providing 
reliable engineered technology solutions for efficient, base load 
electric generation throughout the U.S., North America and across the 
globe. We have sustained our business by developing and commercializing 
realistic solutions. Over many decades, we have successfully met the 
challenges of power generation and provided the technologies and 
equipment to resolve the associated environmental control issues. We 
provide commercially viable solutions to meet emissions control 
requirements of regulated pollutants. We will provide practical 
technologies to resolve the challenges of greenhouse gas emissions as 
well. B&W is a premier, comprehensive provider of clean energy.
    The Babcock & Wilcox Company was formed in 1867. The first utility 
power plant in the United States had a boiler designed and supplied by 
B&W. B&W is the world's expert on steam which is still the most 
economic medium to generate electricity worldwide. B&W has literally 
written the book on ``Steam.'' ``Steam, Its Generation and Use'' a text 
book produced by The Babcock & Wilcox Company, is the longest 
continuously published engineering textbook of its kind in the world, 
first published in 1875 and last updated in 2005.
    Our manufacturing capabilities have also powered national security 
since the start of the last century. Teddy Roosevelt's Great White 
Fleet was primarily powered by B&W boilers. At the end of World War II, 
at the surrender of Japan, 395 of the 400 U.S. Navy ships in Tokyo Bay 
were powered by B&W boilers. In the 1950s, B&W became a major U.S. 
manufacturer and supplier of components for the U.S. Navy's fleet of 
nuclear powered ships and submarines.
    Beyond defense, nuclear power is a route to carbon-free electricity 
generation for civilian purposes. We are the only U.S. manufacturer of 
the heavy nuclear components that will be required for the emerging 
civilian nuclear power plant build-up. As such we anticipate playing a 
critical role in the coming nuclear renaissance to provide clean, safe 
nuclear power.
    Coal-fired and nuclear power plants provide the vast majority of 
the reliable and lowest cost electricity generation in this Country. 
Coal-fired and nuclear power plants combined comprise 41 percent of the 
Nation's electric generation capacity. Due to their cost effectiveness 
these plants generate 69 percent of all the electricity in the Country. 
These technologies are the foundation of our economic competitiveness, 
energy security, and increasing standard of living.
    B&W's position as a premier developer and manufacturer of coal 
technologies and facilities is widely recognized. Thirty-eight percent 
of U.S. coal-fired boilers have been designed and manufactured by B&W. 
B&W supplies around one-third of all environmental control technologies 
and equipment to the U.S. coal power marketplace. We have been selected 
to provide many of the emission control technology solutions used by 
electric power generators to meet the strictest requirements under the 
Clean Air Act, the Clean Air Interstate Rule (CAIR) and various 
stringent air permitting requirements in the states. B&W has also been 
awarded a number of the new, highly efficient supercritical coal fired 
power plant projects, including the first high efficiency Ultra 
Supercritical Power plant in the U.S. in four decades.

Advanced Coal Power Technologies
Efficiencies
    Efficiency at a power plant is measured by the ratio of the 
electricity generated compared to the energy in the fuel used. 
Increasing steam temperatures and pressures provides more energy to the 
steam turbine, enabling higher efficiency and allowing the same amount 
of electricity to be generated by burning less coal. This results in 
less production of CO2 and pollutants derived by coal 
combustion, and reduced fuel costs.
    Many existing U.S. coal-fired plants operate with relatively low 
steam temperatures and pressures (subcritical steam conditions). These 
old plants are generally used during high electricity demand periods 
because of the low generation efficiency, typically in the 30-35 
percent range. When steam conditions exceed the combination of both 
760F and 3200psi, the steam (or working fluid) is said to reach 
supercritical conditions. Efficiencies of these plants exceed 37 
percent. Replacement of a relatively common 37 percent efficient sub 
critical unit with a 40 percent supercritical unit of same generating 
capacity would reduce CO2 emissions by about 8 percent. 
Supercritical plants with efficiencies around 40 percent are already 
commercially available and being increasingly deployed. R&D projects 
with advanced materials and manufacturing methods are underway to 
permit increases of working fluid temperatures to 1200F, and then to 
around 1400F. When this happens efficiencies will rise above 43 percent 
toward 48 percent.




    It is important to note when evaluating coal plant performance, 
that efficiency numbers, taken at face value, can be misleading. The 
U.S. convention for calculating efficiency, called ``higher heating 
value (HHV),'' is different from that used in Europe, ``lower heating 
value (LHV).'' One of the factors responsible for the difference is the 
way moisture in coal is treated in the efficiency calculation. There 
are other factors that enter into the calculation as well. The result 
is that, for virtually identical plant performance (coal fuel in vs. 
power out), the U.S. efficiency (HHV basis) would be reported as being 
2 to 4 percentage points lower than European efficiency (LHV basis).
Pollutants
    The emissions from pulverized coal-fired power plants have been 
reduced tremendously over the past three decades, with this achievement 
due in part to market based regulatory structures pulling technology 
forward for deployment. Great strides have been made in SO2 
and NOx reduction through scrubbing and selective catalytic reduction 
technologies. Fabric filters and improvements in electrostatic 
precipitators have reduced particulate emissions and more recently, 
technologies such as wet electrostatic precipitators and sorbent 
injection are capable of further reductions including fine particulates 
(PM2.5).
    With technologies available to address regulated pollutants and 
major programs to retrofit the existing fleet in progress, public and 
industry attention turned to mercury. As a result, commercially 
available mercury control, for both eastern and western coals are being 
deployed. Now, concerns about climate change have intensified leading 
to the pressing need for the development of ways to address carbon 
dioxide emissions.
Carbon Dioxide Capture
    There are several promising technologies to address capture of 
CO2 from the use of fossil fuels and all are dependent upon 
development of a safe means of permanent storage. Assuming storage 
technologies can be commercialized and enabled, the challenge for coal 
combustion processes becomes one of extracting the CO2 from 
the combustion process. A modern power plant using sub-bituminous coal 
will produce about 1,800 lbs of CO2 per MWh. In an 
uncontrolled state, the CO2 is diluted in the exhaust gas to 
about 15 percent of its volume; this creates a challenge to produce a 
concentrated CO2 stream for storage.
    Three approaches are presently seen as plausible carbon capture 
techniques:

    (1) Oxy Coal Combustion for new and existing plants that burn coal,
    (2) amine scrubbing and other CO2 sorbents for new or 
existing plants that burn coal, and
    (3) pre-combustion processes utilized by IGCC fitted with 
facilities designed to accommodate carbon dioxide capture.

    Oxygen combustion produces a concentrated CO2 in the 
combustion process by supplying pure oxygen instead of air for 
combustion eliminating nitrogen which dilutes the CO2 
concentration. Pre-combustion and amine scrubbing process extract the 
CO2 from the gas stream using a regenerable solvent such as 
monoethanolamine (MEA). Some current studies now show oxygen combustion 
as the least costly while other studies lean toward pre-combustion or 
advanced amines, indicating that technology development is underway and 
competition is strong. None of the technologies has been demonstrated 
at significant size in an integrated full-scale system for electricity 
generation.
Oxy Coal Combustion
    Only the Oxy Coal Combustion process is based upon equipment and 
systems that are already commercially available at the required scale. 
However, there are integration requirements, operating parameters and 
final designs that require verification at larger scale. Oxygen 
combustion and the major operational processes have been demonstrated 
at pilot scale and a new 300 MW commercial plant using this technology 
is being developed by B&W for the SaskPower Corporation to be located 
at Estevan, Saskatchewan.
    In spite of the additional cost to concentrate a CO2 
stream for storage, recent studies show oxygen combustion to be 
competitive with the other capture technologies. Since this technology 
utilizes conventional equipment, it is likely to have a considerably 
lower deployment and operational risk, and has potential for retrofit 
to the existing fleet of conventional plants, where tenable.
    Additionally, recent studies by the U.S. Department of Energy 
indicate oxygen combustion will be the lowest cost solution for coal 
and that the incremental cost increases of electricity using oxy 
combustion is less than the increase associated with amine 
CO2 scrubbing.
    Oxygen combustion provides a means of replacing the nitrogen in air 
with CO2 gas exiting the combustion chamber. By 
recirculating a portion of the combustion stream the oxy coal 
combustion plant effectively replaces the nitrogen in a conventional 
system with CO2 thereby inherently creating a concentrated 
CO2 stream for permanent storage. The net effect is that the 
system looks and acts like a conventional power plant with which power 
plant operators are comfortable, but which is capable of near zero 
emissions given carbon storage. Additionally, by excluding air conveyed 
nitrogen from the combustion chamber there is a sharp reduction in 
nitrogen oxide emissions from this technology, which is likely to 
obviate the need for selective catalytic reduction facilities.
    Although the properties of the flue gas differ from those with air 
firing due to the lack of nitrogen, it has been found that with the 
proper recycle ratio, an existing boiler can be converted to oxy coal 
combustion without changing heat transfer surfaces and only 
experiencing a small impact on fuel efficiency in the boiler island. 
For new units, optimized arrangements are being studied that offer some 
reduction in equipment size and improved performance.
    The first generation of full-scale units is intended to require 
minimal change to the conventional power plant as reasonable to permit 
retrofit application and minimize risk. Advanced air separation 
technologies and optimization of the product gas specification and the 
cleanup/compression process are also expected to improve both 
performance and cost.
Radical Innovations
    We see Oxy Coal technology as one of the potential carbon 
management solutions for the relatively near future. B&W is developing 
a portfolio of potential solutions, including some that are radically 
different from any that are currently approaching readiness for full 
scale testing. One of these approaches involves destruction of carbon 
dioxide, using naturally occurring enzymes to catalyze the reaction. 
While clearly still at the research stage, this approach may bear the 
potential for greatly reducing the costs for carbon dioxide reduction 
in the longer term.
Closing Comments on Combustion-Based Climate Change Technologies
    The first wave of near-zero emission coal plants will start 
operations around 2012. As industry learns from these early commercial 
deployments, we will make adjustments to improve efficiency and 
competitiveness. Technology development, economic and market incentives 
can accelerate the timeframe for implementing widespread carbon capture 
deployments on a commercial scale. This will only be successful if 
legislation does not favor one technology over another. Therefore, when 
considering any incentives for deployment, Congress should avoid 
provisions that provide marketplace advantages or disadvantages for any 
specific technology.
    We are confident that our Oxy Coal Combustion technology can 
provide the most cost-effective solution for some power plants, while 
other technologies are better suited for others.
    We are encouraged by indications that a consensus is building 
toward a market-based system for carbon management. A market-based 
system should encourage an efficient allocation of resources for 
reductions of carbon emissions both at new plants and, where tenable, 
at some existing plants. It is important to recognize that to 
significantly reduce our nation's CO2 emissions, capture of 
CO2 will have to occur at existing fossil-fired plants, 
where tenable.
    We ask that the legislation support the acceleration of resolving 
and expanding Research and Development associated with carbon storage. 
In addition there is a need for clear policies regarding legal 
ownership of and liability for the injected CO2, and concise 
communications to overcome local concerns with large annual injections 
at storage sites. We believe that unless the regulatory and technical 
obstacles to the long-term storage of carbon dioxide from electric 
power plants are resolved, these will become the limiting factors in 
reducing carbon emissions.
Commercial Nuclear Power
    As the European Union recently realized with its decision to count 
nuclear power toward renewable energy goals, nuclear power will be 
central to any efforts to reduce our carbon dioxide emissions. 
Commercial nuclear power provides carbon-free baseload electric power. 
Approximately 20% of all electricity generated in the U.S. is generated 
from carbon-free nuclear energy. While European and Asian countries 
aggressively work to meet the demands of a growing commercial nuclear 
market, America is losing its industrial capacity, intellectual 
expertise, and competitive edge. For reasons of economy, environment 
and national security, this must change.
America's Nuclear Industrial Base is Insufficient
    The unfortunate reality is that the United States does not have the 
domestic resources to build even one power reactor. Once the large, 
heavy forges and piping are acquired from overseas, we have the 
domestic capacity to manufacture about one and a half reactors 
annually. To construct enough reactors over the next twenty-five years 
to just maintain nuclear power's 20% contribution to America's total 
electricity production, we will have to triple that manufacturing 
capacity.
    The Babcock & Wilcox Companies is the one domestic source of 
commercial reactor pressure vessels and steam generators. General 
Electric is the only U.S. manufacturer of commercial fuel assemblies. 
Meanwhile, foreign companies like Alstom, Toshiba, Ansaldo-Camozzi, 
Doosan, Equipos Nuclereas, S.A., Hitachi, Ishikawajima-Harima, and 
Mitsubishi are positioned to supply the vast majority of reactor 
vessels, steam generators and vessel heads that will go into the next 
generation of nuclear power plants.
The Nuclear Industrial Base: A Strategic Asset
    Other nations understand the strategic and environmental 
significance of having a nuclear industrial base to support its nuclear 
activities. As carbon dioxide controls in whatever form, are 
legislated, nuclear energy will move towards being the lowest economic 
cost alternative. Furthermore, nations understand the vulnerability 
that they open themselves to by becoming overly dependent on foreign 
energy sources. The result is that many nations own and/or support 
their nuclear industrial base, make significant investments into their 
nuclear infrastructure, and artificially protect their domestic nuclear 
markets.
    The only exception to this rule is the United States. Foreign 
firms, for the most part, compete openly and freely in the U.S, even if 
they are state-owned. On the other hand, unless the state makes 
specific provisions, most foreign markets are very difficult for U.S. 
firms to access. This, along with the fact that no U.S. commercial 
nuclear power plant has been ordered in three decades, has caused major 
consolidation of the U.S. nuclear industrial base and a loss of our 
dominant position in the commercial nuclear industry.
Leveling the Playing Field
    One of the problems with growing America's domestic commercial 
nuclear infrastructure is that the playing field is not level. Much of 
the global nuclear industry is either heavily subsidized, state owned, 
or enjoys other state-sponsored cost saving or risk mitigating 
measures. This environment makes competing very difficult for American 
companies. Some of the broad structural problems with the international 
nuclear market that perpetuate unfairness and U.S. disadvantage 
include:

      Insurance and Indemnification. Many countries provide 
insurance for nuclear firms or cap liability exposure. This non-tariff 
protection afforded to foreign companies disadvantages U.S. 
manufactures. It allows foreign, state-owned and supported companies to 
freely operate in the United States, but because U.S. firms do not 
enjoy the same protections, they often can not compete abroad. In cases 
where U.S. firms do compete abroad, they do so with increased risk or 
within the context of additional regulation. The Convention on 
Supplementary Compensation for Nuclear Damage (CSC) is a Treaty that 
the Senate ratified that would address this problem. Unfortunately, 
Congress has yet to pass the implementing legislation that the State 
Department requires before the instrument of ratification can be filed 
with the International Atomic Energy Agency. The CSC Treaty will 
establish an international indemnification regime that would commit the 
international community to common standards for handling nuclear 
facility accident claims, and provide for a supplemental international 
fund to pay victims. Without the Treaty, U.S. companies will not only 
be prohibited from competing for work overseas, but prevented from 
fully supporting the President's non proliferation agenda--ceding many 
of those activities to foreign suppliers. This is a serious trade/
export issue.
      Tariffs. Many nations and international political 
groupings maintain significant tariffs on nuclear components. While the 
United States maintains tariffs on some components, it has in the past 
unilaterally waived the tariff on heavy nuclear components, placing 
domestic manufacturers of these components at a distinct disadvantage 
over established foreign competitors. The recently passed pension bill 
contains a provision that lifts the waiver after 2008 except for heavy 
nuclear components contracted for before July 31, 2006. This was a 
compromise position between industry and the utilities. Moving forward, 
the United States must assure tariff parity between the United States 
and its nuclear trading partners.
      Domestic preferences. While nations can compete openly 
with private U.S. firms in the United States, they often maintain 
domestic preferences for their domestic markets. The preferences 
include everything from raw materials to entire reactors and result in 
foreign states having much broader access to U.S. markets then the U.S. 
has to foreign markets. And given their ability to sell at discounted 
rates, private U.S. manufactures are severely disadvantaged in their 
own markets.
      Overregulation. The nuclear industry is inherently 
regulation heavy but some foreign states use gratuitous regulation to 
restrict foreign access to their markets. The additional cost for U.S. 
companies to transverse the regulatory environment is often too 
substantial to maintain competitiveness.
An Energy Policy Act for the Industrial Base
    The Energy Policy Act of 2005 has successfully encouraged progress 
toward constructing the first new U.S. nuclear power plants in thirty 
years. While a critical first step, these efforts focus only on new 
nuclear power plant construction rather than on nurturing and building 
a robust domestic nuclear industry. Recent federal efforts only benefit 
a small portion of the nuclear industry, such as construction 
companies, reactor designers and utility firms. This approach ignores 
the broader domestic nuclear industrial base required to support a 
growing nuclear industry and its employment of highly skilled 
manufacturing jobs. As a follow on to the Energy policy Act of 2005, 
Congress should provide incentives to invest in America's nuclear 
supplier base. These are the companies that will manufacture the 
components, pour the forgings and extract the raw materials needed to 
support a nuclear renaissance. Such a program would help to offset the 
economic advantages of heavily subsidized foreign companies.
    Similar programs are now needed to resurrect America's nuclear 
industrial base. American manufacturers need a tax incentive program 
geared to offset economic advantages of heavily subsidized foreign 
companies.
    Congress should level the playing field. These efforts should focus 
on stimulating the production of those components that are either not 
available in the domestic commercial market or for which there is a 
single domestic supplier; new nuclear technologies; and nuclear 
workforce training programs. Loan guarantee should focus on facility 
capitalization and other capital growth investments. These incentives 
should go directly to companies that manufacture components as well as 
to utilities for buying domestically. This would provide the same sort 
of stimulus for the nuclear industry that existing efforts have 
provided to the commercial reactor design and plant construction 
industries. Congress should include a sunset clause that eliminates the 
incentives once domestic industry has had the opportunity to compete on 
a level playing field and reestablish itself.
    Having a domestic supplier of these components to compete with the 
heavily subsidized international nuclear industry, not only provides 
jobs for American workers, but will be essential to keeping prices in 
check and quality high. Without such an incentive program, it will be 
difficult, at best, for American companies to reenter the commercial 
nuclear business. The U.S. could, thereby, be relegated to spectator 
status as nations such as Russia, France and China, lead the world 
through the emerging nuclear renaissance. Their control of the 
manufacturing base and fuel business could lead to secondary treatment 
in delivery priority for critical components and higher prices. In the 
end, the United States is in danger of shifting its foreign dependence 
from oil and natural gas to nuclear industrial components and 
technology supply and in the process weakening our participation in 
developing nuclear non-proliferation efforts.
    Thank you for the privilege to provide testimony to the Committee 
on these critically important matters.

                                 
                        Statement of NGVAmerica
Introduction
    NGVAmerica appreciates the opportunity to provide the following 
statement concerning America's energy policy. NGVAmerica is a national 
organization of over 100 member companies, including: vehicle 
manufacturers; natural gas vehicle (NGV) component manufacturers; 
natural gas distribution, transmission, and production companies; 
natural gas development organizations; environmental and non-profit 
advocacy organizations; state and local government agencies; and fleet 
operators. NGVAmerica is dedicated to developing markets for NGVs and 
building an NGV infrastructure, including the installation of fueling 
stations, the manufacture of NGVs, the development of industry 
standards, and the provision of training.
    The Ways and Means Committee has indicated it will hold a series of 
hearings to address energy and tax policy. This effort also will 
address global warming and the climate change implications of energy 
use. The first hearing on this issue was held February 28, 2007. 
NGVAmerica's comments respond to the committee's invitation for 
interested organizations to provide statements for the record. Our 
statement also addresses the Bush Administration's goal for 2017 of 
using 35 billion gallons of non-petroleum fuels. NGVAmerica has 
submitted a similar statement for consideration by the Senate Finance 
Committee, which is holding hearings on the same issues.
    NGVAmerica is pleased to provide the following statement to the 
committee as it considers these very important issues. NGVs can and 
will play an increasing role in replacing petroleum motor fuels and 
reducing emissions that contribute to climate change. Congress already 
has taken a number of steps to encourage greater use of natural gas and 
other alternative transportation fuels. These steps were enacted as 
part of the Energy Policy Act of 2005 and SAFETEA-LU. These incentives 
include tax credits for alternative fueled vehicles, alternative fuel 
infrastructure and alternative fuel use. Consumers and businesses alike 
are benefiting from the congressional action that was taken to 
encourage the increased use of alternative fuels. However, much more 
must be done if the U.S. is to begin the long process of transitioning 
away from the use of petroleum motor fuels--especially if America is to 
achieve the goal called for the President in his State-of-the-Union 
address of displacing 35 billion gallons of petroleum transportation 
fuels by 2017. This effort will require sustained and significant 
federal support since the risks associated with this effort are simply 
too great for private industry to undertake them alone in the timeframe 
needed. Moreover, this effort will require a mix of different 
transportation fuels to fill the void provided by petroleum since no 
one single fuel appears likely to supplant petroleum.
    The comments provided below discuss the potential benefits of 
increasing the use of NGVs and ways in which the committee can assist 
in achieving them. Increasing the use of natural gas vehicles (NGVs) 
can: (1) reduce America's dependence on foreign oil, (2) improve air 
quality in urban areas, (3) reduce emissions of greenhouse gases, and 
(4) pave the way for the more rapid introduction of hydrogen 
transportation technologies.
Summary of Recommendations
    1.  Extend and amend the tax incentives for purchasing natural gas 
vehicles, using natural gas in those vehicles and building natural gas 
fueling infrastructure.
    2.  Provide the same tax incentive for biogas converted to 
biomethane as currently exists for biogas used for electricity 
generation.
    3.  Provide tax incentives for natural gas use in off-road 
vehicles.

Rationale for Recommendations
Reducing Petroleum Reliance
    There has been much discussion and controversy about the energy 
balance of various alternative fuels and their ability to reduce 
petroleum consumption. In the case of natural gas, each gasoline gallon 
equivalent of natural gas used for transportation displaces nearly 100 
percent of the petroleum that would otherwise be used in the form of 
gasoline or diesel fuel. Furthermore, nearly 85 percent of the natural 
gas currently consumed in the U.S. is from domestic sources--produced 
right here in the continental U.S., the Gulf of Mexico, or Alaska. Most 
of the remainder is imported from Canada. The total U.S. natural gas 
resource base, including proved reserves, is more than 1,300 trillion 
cubic feet, over a 65-year supply of natural gas at current production 
levels.\1\ Thus, U.S. supplies of natural gas are abundant and secure. 
With sufficient will, supplies of conventional natural gas will 
continue to grow as U.S. demand for this valuable fuel grows. And with 
the right incentives, non-conventional, renewable sources of natural 
gas also could increasingly be available to U.S. consumers. For 
example, an analysis previously conducted for DOE estimated that the 
U.S. could feasibly produce 1.25 quadrillion Btu annually. This is 
equivalent to 10 billion gasoline-gallon-equivalent of biomethane from 
landfills, animal waste processing facilities, and sewage.
---------------------------------------------------------------------------
    \1\See--American Gas Associations (U.S. Resource Base)--http://
www.aga.org.
---------------------------------------------------------------------------
    Biomethane is pipeline-quality natural gas produced by cleaning up 
and purifying biogas. Biogas is a mixture of methane and other gases 
produced from the decomposition of organic materials such landfill 
waste. Thus, biomethane is a renewable source of natural gas. In the 
U.S., the production of biomethane has been overshadowed by the 
production of electricity from biogas. This is partly because the U.S. 
tax code encourages renewable electricity production but does not 
encourage biomethane production. In addition, many of the incentives 
recently adopted in the Energy Policy Act of 2005 (grants, loan 
guarantees, demonstration projects) favor bio-refineries that produce 
liquid fuels, or more specifically ethanol. If these incentives were 
expanded to be biofuels-neutral, the U.S. could more quickly realize 
the potential of this valuable fuel source. Other countries are moving 
forward with biomethane development even as they also move forward with 
increased ethanol use. In Sweden, twenty-five biomethane production 
facilities are in use and there are sixty-five fueling stations now 
dispensing biomethane for transit buses and other vehicles.\2\ Some 
positive developments are occurring here in the U.S. California 
officials recently signed a memorandum of understanding to work with 
officials from Sweden to advance the use of biomethane as part of 
California's bioenergy initiative.\3\ And just this year, Prometheus 
Energy, a Washington State-based company, began producing biomethane at 
the Bowerman Landfill in Irvine, California.\4\ This facility will be 
producing 5,000 gasoline-gallon-equivalent of biomethane per day. The 
biomethane will be used to fuel low-emission, transit buses operated in 
Orange County.
---------------------------------------------------------------------------
    \2\See State of California Department of Resources Press Release 
June 29, 2006--http:// resources.ca.gov/press_documents/
CaliforniaSwedenBioenergyMOURelease_06_29_06.pdf
    \3\See Memorandum of Understanding Between State of California and 
Sweden; http:// resources.ca.gov/press_documents/
CaliforniaSwedenBiofuelsMOU.pdf
    \4\See GreenCar Congress (January 25, 2007)--http://
www.greencarcongress.com/2007/01/prometheus_prod.html; or Prometheus 
Energy--http://www.prometheus-energy.com/whatwedo/bowerman.php
---------------------------------------------------------------------------
    If fully utilized, biomethane could offset nearly all or most of 
the future demand for natural gas as a transportation fuel. As noted 
above, the potential exists to produce an estimated 10 billion gallons 
equivalent. This amount of fuel represents nearly a third of the 
President Bush's announced target for 2017 of achieving the production 
and use of 35 billion gallons of non-petroleum motor fuels.\5\ Current 
demand for natural gas as a transportation fuel in the U.S. stands at 
about 200 million gallons per year. Thus, the increased use of natural 
gas for transportation could grow substantially in the coming years, 
offsetting a large amount of petroleum, and be supplied almost 
exclusively by renewable sources. Importantly, most of the fuel inputs 
that would be used to produce biomethane (e.g., sewage, landfill gas, 
animal waste) are currently underutilized or not used at all. 
Therefore, encouraging the production and use of biomethane would not 
harm other industries and would provide additional revenue stream for 
those industries that currently process and handle these feedstocks. 
Farmers and other operators of animal facilities can install anaerobic 
digester systems to convert their animal waste to usable biomethane--
with valuable, sanitary fertilizer as a byproduct. Longer term, 
cellulosic crops could be used to produce biomethane. Currently, the 
focus on cellulosic biofuels is on cellulosic ethanol. However, 
cellulosic crops also could be used to produce biomethane if the 
government were to provide biomethane refineries the same level of 
incentives as currently being given to ethanol biorefineries.
---------------------------------------------------------------------------
    \5\The President's Advanced Energy Initiative now includes a target 
of achieving 35 billion gallons of non-petroleum motor fuels. Few 
details have been released on this target but it is believed that it is 
based largely on increased use of ethanol. A gallon of ethanol, 
however, has far less energy than a gasoline gallon, about 35 percent 
less energy content. If the 35 billion gallon target is based on the 
energy content in ethanol, achieving 10 billion gasoline gallon 
equivalent of biomethane would actually represent about 43-44 percent 
of the President's target.
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Climate Change Benefits
    The use of conventional natural gas in motor vehicles reduces 
greenhouse gas emissions by 15-20 percent.\6\ More recent emission 
testing programs indicate that greenhouse gas reductions from using 
natural gas in heavy-duty applications may be as much as 20-30 percent, 
based on improvements to natural gas engine technology and changes to 
petroleum fueled vehicles.\7\ These emission benefits are in addition 
to the very large reductions in volatile organic compounds, nitrogen 
oxides and air toxics provided by using natural gas as a motor vehicle 
fuel.
---------------------------------------------------------------------------
    \6\See Argonne National Laboratory, GREET Model (2007); http://
www.transportation.anl.gov/software/GREET/
    \7\See National Renewable Energy Laboratory, WMATA Emission Testing 
Report, December 2005; http://www.cleanenergyfuels.com/pdf/NREL-
WMATA_DieselvNG21606.pdf
---------------------------------------------------------------------------
    The greenhouse gas benefits provided by natural gas vehicles are 
significantly greater if the natural gas is biomethane. This is because 
capturing and using biomethane offsets flaring or venting of methane 
emissions that would otherwise occur, and also offsets the emissions 
associated with producing, refining and burning gasoline and diesel 
fuel. Methane is a significant greenhouse gas--estimated to be 21 times 
as intense a greenhouse gas as carbon dioxide. Capturing and 
``flaring'' biogas reduces the methane to carbon dioxide. But, in doing 
so, its energy value is wasted. An energy-wise and greenhouse gas-wise 
alternative is to capture the biogas from these renewable waste 
sources, convert that biogas to biomethane, and use the biomethane to 
displace petroleum or other fossil fuels in transportation or other 
energy applications. If the potential biomethane resources in the U.S. 
were realized (i.e., 10 billion gallons per year), the estimated 
greenhouse gas reductions would be on the order of 500 million metric 
tons of CO2 per year--or the equivalent of removing 90 
million light-duty gasoline vehicles from the roads.
Paving the Way for Hydrogen
    DOE's long-range plans to address energy independence and lessen 
the environmental impact of motor vehicles call for a transition to 
hydrogen fuel cell vehicles (FCVs). This goal includes producing 
hydrogen from renewable energy sources, such as solar, wind, or even 
landfills. In the near-term, however, hydrogen will most likely be 
produced by steam-reforming natural gas. Currently, natural gas steam-
reforming represents nearly all U.S. hydrogen production (used mostly 
by refineries) and about half of world hydrogen supply. Natural gas is 
used because methane (the main constituent of natural gas) has the 
highest hydrogen-to-carbon ratio of any hydrocarbon fuel. Thus, natural 
gas provides a near-term, widely available feedstock with a proven 
technique for separating out hydrogen molecules. During the initial 
launch of hydrogen-fueled vehicles (both FCVs and internal combustion 
engine vehicles, or ICEVs), it is likely that demand for hydrogen fuel 
in the transportation sector will be met through the steam reforming of 
natural gas.
    There is another equally important link between natural gas and 
hydrogen, however. That link is the infrastructure, technology, and 
experience currently being developed to use compressed natural gas and 
liquefied natural gas as transportations fuels. By advancing the market 
for CNG and LNG, it just might be possible to accelerate the transition 
to hydrogen. Attached is a list of some of the ways increased use of 
natural gas is making the hydrogen future more viable.
Tax Policies and Incentives Needed to Increase Natural Gas Use
    In order to achieve the potential benefits of increased natural gas 
use, NGVAmerica urges the Ways and Means Committee and Congress to 
consider the following measures.

1. Alternative Fuel Excise Tax Credit

    The 2005 Transportation Law (SAFETEA-LU, Sec. 11113, Pub. L. No. 
109-59) provides tax incentives for natural gas and other alternative 
fuels when used as vehicle fuels. That alternative fuel credit expires 
on 9/30/2009. This short timeframe sends the wrong message to 
businesses and consumers about the government's support for using 
natural gas and other alternative fuels, and is inconsistent with the 
President's 2017 goal of replacing 35 billion gallons of petroleum with 
alternative fuels. Therefore, the incentive for alternative fuels 
should be extended until the end of 2016. Moreover, Congress should 
clarify that the tax credits provided for alternative fuels are not 
includable in income since such treatment would significantly discount 
the benefit (and, therefore, the impact) of this incentive. The IRS is 
currently looking at the treatment of the tax credits when taken by 
taxable entities, and has indicated that they may be includable income. 
Also, the tax credits for alternative fuels should be amended so that 
they are available on an accelerated basis just like the alternative 
fuel mixture credits; taxpayers filing for alternative fuel credits 
currently must wait until end of year to file certain claims (over and 
above excise tax offsets) while persons filing for alternative fuel 
mixture credits may file multiple claims during the year for payments 
from the government.

2. Alternative Fuel Vehicle Purchase Income Tax Credit

    The 2005 Energy Law (EPAct 2005, Sec. 1341, Pub. L. No. 109-58) 
provides tax credits for the purchase of dedicated alternative fuel 
vehicles, including NGVs. The alternative fuel vehicle credit expires 
on 12/31/2010. As with the fuel credit above, the short timeframe for 
this incentive sends the wrong message to businesses and consumers 
about the government's support for NGVs, and is inconsistent with the 
President's petroleum replacement goal. Therefore, the incentive should 
be extended until the end of 2016. The existing credit covers 80 
percent of the incremental price for dedicated vehicles that meet the 
most stringent emission standards, and 50 percent for other dedicated 
vehicles. Since much of the emphasis on promoting alternative fuels has 
shifted to petroleum replacement and since dedicated NGVs displace 100 
percent of the petroleum that would otherwise have been used, the 
credit for dedicated vehicles should be expanded to 90 percent of the 
incremental price. Congress also should provide a credit of 50 percent 
of incremental cost for the acquisition of bi-fuel NGVs since some 
businesses and consumers will continue to demand the flexibility of a 
multi-fuel vehicle until alternative fueling infrastructure is more 
widespread. In order to make these credits attractive to businesses, 
they should be exempt from tentative minimum tax provisions. Imposition 
of the minimum tax means that most large fleets are only able to use 
the tax credits as an incentive to acquire a very small number of new 
NGVs each year. Fleets represent the best opportunity to maximize the 
use of alternative fuels but this opportunity will not be realized if 
fleets receive an incentive that encourages no more than one or two NGV 
acquisitions each year.

3. Alternative Fueling Station Income Tax Credit

    EPAct 2005 (Sec. 1342, Pub. L. No. 109-58) provides for an income 
tax credit of 30 percent up to a maximum of $30,000 for the 
installation of business NGV fueling stations and $1,000 for home 
refueling equipment. This incentive is inadequate to spur fueling 
station expansion. Large natural gas fueling facilities, capable of 
fast-filling frequent customers, cost up to $1 million. The cost of 
even the least expensive home refueler (with installation) can be 
upwards of $5,000. Therefore, the fueling station credit should be 
increased to 50 percent with a maximum of $300,000, and the home 
refueling credit to a maximum of $2,000. The tax credit for fueling 
infrastructure also should be exempt from the minimum tax provisions. 
Most fueling facilities are currently being developed by a small number 
of companies that build and operate stations for customers. If tax 
credits are subject to minimum tax, these businesses will only be 
encouraged to install a minimal number of new stations each year.

4. AFV and Fueling Infrastructure Tax Credit for Not-For-Profits

    As mentioned above, EPAct 2005 (Sec. Sec. 1341-1342, Pub. L. No. 
109-58) provides an income tax credit for part of the incremental price 
of new alternative fuel vehicles and alternative fuel stations. In an 
effort to ensure that public agencies also could benefit from this 
incentive, Congress provided that, when the purchaser is a public 
entity, the income tax credit can be passed back to the vehicle or 
equipment seller--with the expectation that the seller would pass some 
or all of the incentive to the buyer in the form of a lower purchase 
price. For a number of reasons, however, very few public agencies have 
benefited from this provision. Frequently, the sellers do not have 
sufficient tax liability. Transit bus manufacturers are a good example. 
In other cases, the alternative minimum tax eliminates the seller's 
ability to capture (and, therefore, pass on to the public agency) the 
tax credit. To provide public agencies with a clear and certain 
incentive to buy alternative fuel vehicles and install associated 
fueling stations, Congress should provide public agencies with the 
option of receiving the value of the credit as a federal grant or other 
direct federal payment.

5. Biomethane Production Credit

    Biogas (i.e., methane-rich gas produced from animal waste, crop 
waste, crops, sewage and landfills) that is used to produce electricity 
is eligible for a Section 45 production tax credit.\8\ However, if that 
same biogas is used directly (e.g., for on-site steam production) or is 
converted to pipeline quality methane and used for any other purpose, 
the biogas producer receives no credit. All use of renewable biogas 
should be encouraged. Therefore, the Section 45 biogas credit should be 
redefined to include all energy uses of biogas.
---------------------------------------------------------------------------
    \8\See 26 U.S.C. Sec. 45.

---------------------------------------------------------------------------
6. Tax Credits for Off-Road Vehicles

    The vehicle, infrastructure and fuel use credits for alternative 
fuel vehicles included in the 2005 Energy and Transportation laws are 
generally limited mostly to on-road vehicles. However, about a quarter 
of the fuels used in transportation are used in off-road vehicles. 
Since these vehicles do not have to meet on-road vehicle emission 
standards, they tend to produce far more emissions than comparable on-
road vehicles. To help reduce our dependence on foreign oil as well as 
air pollution, off-road vehicles should be provided financial 
incentives to move to non-petroleum fuels and technologies.
Conclusion
    NGVAmerica appreciates the opportunity to provide these comments. 
We look forward to working with the committee as it crafts legislative 
proposals to address our nation's energy policy in ways that will 
diversify the mix of fuels used in transportation, provide greater 
energy security, reduce reliance on petroleum fuels, and increase the 
use of fuels that address climate change.

                                 ______
                                 
Attachment
    How NGVs and Helping to Paved the Way for a Hydrogen Transportation 
Future

Fuel Storage
    Until major breakthroughs in hydrogen storage technologies are 
realized, hydrogen will most likely be stored on-board vehicles as a 
compressed gas or a cryogenic liquid. Today's prototype hydrogen 
vehicles are able to use existing tank technology for CNG or liquefied 
natural gas (LNG) vehicles as base technologies for hydrogen storage. 
However, to achieve commercialization objectives (e.g., sufficient 
driving range), FCVs and other types of hydrogen vehicles will require 
ongoing advancements in on-board hydrogen storage technology. Fuel 
storage capacity also must be safely increased, while reducing cost and 
weight. Because of similar material and manufacturing issues, several 
companies that make NGV tanks are also designing improved fuel-storage 
systems for hydrogen vehicles, applying their vast experience from 
years of developing onboard CNG and LNG tanks.
Fuel Management and Safety Systems
    As with fuel storage technologies, commonality exists among 
companies working on fuel management systems for NGVs and FCVs. 
Generally, advancements made for natural gas systems also have 
application to hydrogen systems. Onboard safety technology designed for 
NGVs (e.g., gas detection and fire suppression) are also being applied 
to hydrogen vehicles.
Fueling Station Infrastructure & Dispensing Equipment

    Fuel cell vehicles will deliver the greatest benefits (zero 
emissions, highest system efficiency) if they are designed to operate 
on direct hydrogen, rather than operating on hydrogen reformed onboard 
the vehicle. FCVs, therefore, require access to hydrogen fueling 
stations. It is unlikely that, early on, hydrogen for these stations 
will be produced at large methane-reforming plants, and transported to 
the stations via trucks or pipelines. A far more likely scenario is 
that the hydrogen will be reformed in relatively small volumes at the 
local station using pipeline natural gas. Pre-existence of the 
necessary natural gas pipeline infrastructure makes this feasible. The 
U.S. has more than 1.3 million miles of natural gas transmission and 
distribution lines. In addition, the U.S. has more than 1,000 fueling 
stations that currently supply natural gas for motor vehicle use. It 
only makes sense that some of these stations also would be modified to 
serve fleets using hydrogen fuel. In fact, some already are providing 
hydrogen. The existing natural gas infrastructure makes reforming of 
natural gas at existing gasoline stations a convenient, relatively 
cost-effective option for producing hydrogen. Today's natural gas 
dispensers are a bridge technology to pumps that will fuel tomorrow's 
vehicles using either compressed or liquefied hydrogen. Much 
commonality exists between systems that dispense and meter these two 
fuels, whether in gaseous or liquid form. Consequently, today's natural 
gas dispensers are paving the way for affordable, user-friendly 
hydrogen dispensers. NGVs also can be refueled overnight at home--a 
major advantage compared to gasoline vehicles. Today's home refueling 
appliances (HRAs) that dispense CNG are also being designed for longer-
term capability to refuel FCVs in the residential setting. In this way, 
home refueling of NGVs provides a clear pathway to the longer-term 
scenario of fueling FCVs at home.

Natural Gas/Hydrogen Blends

    Compressed hydrogen can be blended with CNG to produce an 
exceptionally clean transportation fuel. With relatively minor vehicle 
modifications, this blend can be used in today's heavy-duty NGVs. For 
example, transit buses at SunLine Transit Agency in the Coachella 
Valley are operating in revenue service on a blend of CNG and hydrogen. 
This is helping SunLine to gradually transition its bus fleet to 100 
percent operation on hydrogen. Similar efforts are underway in other 
areas, such as Las Vegas. Many members of the NGVAmerica are 
cooperating in efforts to develop and demonstrate vehicles that operate 
on this type of hydrogen-natural gas mixture.

Codes & Standards, and Safety Training

    A host of other ongoing issues must be addressed for hydrogen to 
become a common transportation fuel. Many of these issues currently are 
being addressed by users of natural gas vehicles. As hydrogen 
transportation technologies gradually move from the demonstration phase 
into commercial deployment, a new structure of human support services 
will be needed. This includes specialists such as mechanics, 
inspectors, and fire marshals who are familiar with FCVs, hydrogen 
fuel, and fueling stations. The NGV industry is already helping to 
create such a support structure. To serve today's well-established 
markets for NGVs and natural gas fueling stations, thousands of people 
have been trained in related jobs. This support structure continues to 
grow, serving as a harbinger for training of America's future hydrogen 
workforce and the people who will be responsible for deploying hydrogen 
vehicles and fueling stations on a commercial scale.

                                 

                 Statement of Nuclear Energy Institute
    Mr. Chairman, Ranking Member McCrery and members of the Committee, 
the Nuclear Energy Institute\1\ appreciates this opportunity to express 
the nuclear energy industry's views on ensuring America's energy future 
in a carbon constrained world. We are committed to ensuring that clean, 
safe, and reliable nuclear energy is part of that future.
---------------------------------------------------------------------------
    \1\NEI is the organization responsible for establishing unified 
nuclear industry policy on matters affecting the nuclear energy 
industry. NEI members include all companies licensed to operate 
commercial nuclear power plants in the United States, nuclear plant 
designers, major architect/engineering firms, fuel suppliers, and other 
organizations and individuals involved in the nuclear energy industry.
---------------------------------------------------------------------------
    Clearly, the challenge of addressing climate change is a priority 
with the 110th Congress. The leadership of both houses is committed to 
meeting this challenge with policies that will both protect our global 
environment while preserving America's economy.
    The climate legislation introduced to date recognizes the need to 
provide incentives to stimulate the development and deployment of a 
portfolio of clean-energy technologies, including nuclear energy.
    Innovative tax policies are needed to ensure construction of the 
significant amount of new infrastructure that will be required to 
reduce greenhouse gas (GHG) emissions, meet increasing demand for 
electricity, and maintain economic growth in the United States.
Nuclear Energy Is A Non-GHG-Emitting Source of Baseload Electricity 
        Generation
    Nuclear energy plays the single-largest role in the U.S. electric 
industry's contribution to greenhouse gas emissions reductions. At 
present, approximately 30 percent of America's electricity comes from 
sources that produce no air emissions or greenhouse gases: nuclear 
energy, hydroelectric power, wind and solar. Nuclear energy alone 
produces 73% of this carbon-free electricity, enough for one of every 
five U.S. homes and businesses.
    In 2005, the 103 existing nuclear plants avoided the emission of 
682 million metric tons of carbon dioxide (CO2), which is 
more than double the emissions avoided by all the other non-emitting 
sources of electricity combined.
    According to the newly released annual report to the U.S. 
Department of Energy from Power Partners--a voluntary partnership 
between DOE and the electric power industry--improvements and expansion 
of the existing nuclear plants accounted for 54 percent of greenhouse 
gas reductions reported on a project basis by the electric sector in 
2004, the equivalent of taking 100 million automobiles off the road.
    Although continued improvements by the existing nuclear fleet will 
achieve further emission reductions, additional large-scale reductions 
in U.S. GHG emissions will require building new nuclear plants. The 
Energy Information Administration estimates that U.S. electricity 
demand will increase 45% by 2030. America must build 50,000 megawatts 
of new nuclear generation by 2030 just to maintain nuclear energy's 
current 20% share of electricity supply.
Tax Stimulus Is Needed For Building New Clean-Energy Generation
    The electric sector must spend over $750 billion by 2020\2\ to meet 
increasing electric demand and more stringent environmental 
requirements--before considering any climate change policies. Part of 
that investment will be in new baseload generation, some of which will 
be new nuclear power plants.
---------------------------------------------------------------------------
    \2\Sources: Cambridge Energy Research Associates, Edison Electric 
Institute.
---------------------------------------------------------------------------
    The Energy Policy Act of 2005 provided limited financial incentives 
to encourage deployment of new, advanced nuclear plants. Since its 
passage, fifteen companies and consortia have announced plans to 
license more than 30 new nuclear plants. Turning those licensing plans 
into the construction of new nuclear power plants will require federal 
and state government policies that recognize the large capital outlay 
during construction.
    The electric sector is the most capital-intensive among major 
industrial industries. The electric companies shown in Figure 1 have 
all announced plans for new nuclear construction. They are 
significantly more capital-intensive than the major oil companies also 
shown--and significantly smaller.

            Figure 1--Capital Intensity Versus Company Size






    Constructing a new nuclear power plant is a capital-intensive 
project--between $3 and $5 billion each. This is a major investment for 
companies the size of U.S electric companies. To build baseload plants 
that will provide 40-60 years of stable-priced, non-GHG-emitting 
generation, many of these companies will require investment stimulus 
and investment support, to enable them to maintain sound financials and 
ratings during the four to five year construction period.
Carbon-free Nuclear Energy Must Play a Key Role in Our Nation's Energy 
        Future
    The nation's energy portfolio must include clean, reliable and 
affordable energy sources available today, such as nuclear energy. 
Nuclear energy offers several unique advantages. It is the only 
expandable baseload energy source that does not emit carbon or other 
greenhouse gases into the atmosphere during operation. Nuclear energy 
safely and reliably provides price stability for electricity customers 
as the prices for fossil fuels fluctuate.
    There are exciting new opportunities in areas such as hydrogen 
production and plug-in hybrid automobiles, enabling nuclear energy to 
help reduce carbon emissions from the transportation sector.
    Although our nation must continue to employ a mix of fuel sources 
for generating electricity, it is important that nuclear energy 
maintain at least its current 20 percent contribution to U.S. 
electricity production. Maintaining that level of production will 
require construction of a significant number of new nuclear plants 
beginning in the next decade.
    To ensure the electric industry builds capital-intensive new 
nuclear power plants, policies must be in place to stimulate investment 
and provide limited construction support to companies willing to build 
the first plants.

                                 
       Statement of Mark Willers, Minwind Energy, Rock, Minnesota
    In our small community of Rock County we have 9,600 people. We have 
put together 360 farmers and local townspeople to participate in the 
only local-owned multi stockholder commercial wind farm in the United 
States.
    We are asking for review of the policy in section 45 of the IRS Tax 
Code which prohibits farmer, military personnel, and local citizens 
from receiving Production Tax Credit (PTC), and the removal of 
restrictions on alternative minimum tax (AMT) on their income. This is 
accomplished currently by restricting PTCs (for wind) to be used only 
on passive income and not ordinary income. We request that PTCs be 
available on ordinary income with no AMT applicable.
    Local people have no or little passive income. Section 45 tax code 
is penalizing the middle class, working people and promoting more 
foreign ownership. Foreign companies are renting up sites for wind 
turbines for which they can use U.S. tax credits to offset their 
income. We can not compete in this environment. There is presently no 
cap on total PTC outlays so this should be scored at zero. I am 
requesting a chance to explain this to your full committee. I will come 
to Washington, DC to explain in greater detail.
    Please help U.S. citizens first!! There is a GAO report on our 
company putting 7\1/2\ times more income in the local economy. Thank 
you.

                                 

                                             Conyers, Georgia 30012
                                                  February 28, 2007

    While the use of fossil fuels by mankind may have a slight impact 
on the Earth's climate, the level is insignificant when compared to the 
dynamics and subsequent GHG emissions of the Earth itself. The burning 
of fossil fuels is simply recycling the carbon molecules that have been 
present on Earth since it began 4 billion years ago.
    The single largest anthropogenic forcing on our climate comes in 
the form of solar radiation from our own Sun. The largest protector the 
Earth has in preventing dangerous amounts of radiation from penetrating 
our atmosphere in the first place is the magnetic field generated by 
the core dynamo of the Earth itself. The magnetic flux lines that are 
generated in parallel lines of force from the south magnetic pole to 
the north magnetic pole create a shield the reflects much of the energy 
before it ever reaches the upper atmosphere.
    It is also the weakening of this very same magnetic field for the 
past 150 years that is responsible for the rapid climate change we 
perceive is occurring. The weakening of the field can only be theorized 
at this point that the Earth's magnetic field may be in the infancy 
stages of a pole reversal, which has not occurred in over 780,000 years 
(see MSNBC article ``Earth's Weakening Magnetic Field,'' by Andrew 
Bridges, 12/10/2003). The most significant indicator and possibly the 
cause of the degrading field coincides with the rapid acceleration of 
the magnetic poles movement, which is now calculated to reach Siberia 
by 2040 and is moving at a rate of nearly 40km per year. And since the 
Earth's poles are shaped like a traditional bar magnet, this also means 
the South magnetic pole is also moving at the same rate. The normal 
movement up until the late 1980's dictates the movement has been 5 to 6 
km per year.
    The effects of this movement are proven to cause a distortion and 
bending of the normally parallel lines of the protective magnetic 
shield (flux lines). This distortion automatically weakens the 
effectiveness to shield out the solar radiation and has been measured 
to be at least 10% weaker than 100 or 150 years ago (see National 
Geographic ``Earth's Magnetic Field is Fading,'' by John Roach, Sept. 
2004). In layman's terms, this means that 10% more solar radiation is 
getting through to heat up our atmosphere and oceans, causing hot spots 
to occur and violent storms to spawn.
    In addition to the increased thermal activity, the atmosphere is 
also being bombarded with 10% more photon/electron penetration as a 
whole. This increase on the molecular level causes increased electrical 
activity between the Earth and the atmosphere as the unlike charges 
naturally try to cancel the imbalance. This is simply one more effect 
that is noted during thunderstorms, tornadoes, and hurricanes when 
referencing the amount of electrical activity within the storms and the 
increase of ozone production due to lightning.

                                                  Donald Williamson

                                  
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