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



 
 LEGISLATIVE PROPOSALS TO REDUCE GREENHOUSE GAS EMISSIONS: AN OVERVIEW
=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 19, 2008

                               __________

                           Serial No. 110-130


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


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                    COMMITTEE ON ENERGY AND COMMERCE

                  JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California          JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts          Ranking Member
RICK BOUCHER, Virginia               RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York             FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            BARBARA CUBIN, Wyoming
BART STUPAK, Michigan                JOHN SHIMKUS, Illinois
ELIOT L. ENGEL, New York             HEATHER WILSON, New Mexico
GENE GREEN, Texas                    JOHN SHADEGG, Arizona
DIANA DeGETTE, Colorado              CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                    Mississippi
LOIS CAPPS, California               VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania             ROY BLUNT, Missouri
JANE HARMAN, California              STEVE BUYER, Indiana
TOM ALLEN, Maine                     GEORGE RADANOVICH, California
JAN SCHAKOWSKY, Illinois             JOSEPH R. PITTS, Pennsylvania
HILDA L. SOLIS, California           MARY BONO MACK, California
CHARLES A. GONZALEZ, Texas           GREG WALDEN, Oregon
JAY INSLEE, Washington               LEE TERRY, Nebraska
TAMMY BALDWIN, Wisconsin             MIKE FERGUSON, New Jersey
MIKE ROSS, Arkansas                  MIKE ROGERS, Michigan
DARLENE HOOLEY, Oregon               SUE WILKINS MYRICK, North Carolina
ANTHONY D. WEINER, New York          JOHN SULLIVAN, Oklahoma
JIM MATHESON, Utah                   TIM MURPHY, Pennsylvania
G.K. BUTTERFIELD, North Carolina     MICHAEL C. BURGESS, Texas
CHARLIE MELANCON, Louisiana          MARSHA BLACKBURN, Tennessee
JOHN BARROW, Georgia
DORIS O. MATSUI, California

                                 ______

                           Professional Staff

                 Dennis B. Fitzgibbons, Chief of Staff

                   Gregg A. Rothschild, Chief Counsel

                      Sharon E. Davis, Chief Clerk

                 Bud Albright, Minority Staff Director

                                  (ii)
                 Subcommittee on Energy and Air Quality

                    RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina,    FRED UPTON, Michigan
    Vice Chairman                         Ranking Member
CHARLIE MELANCON, Louisiana          RALPH M. HALL, Texas
JOHN BARROW, Georgia                 ED WHITFIELD, Kentucky
HENRY A. WAXMAN, California          JOHN SHIMKUS, Illinois
EDWARD J. MARKEY, Massachusetts      JOHN B. SHADEGG, Arizona
ALBERT R. WYNN, Maryland             CHARLES W. ``CHIP'' PICKERING, 
MIKE DOYLE, Pennsylvania                 Mississippi
JANE HARMAN, California              ROY BLUNT, Missouri
TOM ALLEN, Maine                     MARY BONO MACK, California
CHARLES A. GONZALEZ, Texas           GREG WALDEN, Oregon
JAY INSLEE, Washington               MIKE ROGERS, Michigan
TAMMY BALDWIN, Wisconsin             SUE WILKINS MYRICK, North Carolina
MIKE ROSS, Arkansas                  JOHN SULLIVAN, Oklahoma
DARLENE HOOLEY, Oregon               MICHAEL C. BURGESS, Texas
ANTHONY D. WEINER, New York          MARSHA BLACKBURN, Tennessee
JIM MATHESON, Utah                   JOE BARTON, Texas (ex officio)
DORIS O. MATSUI, California
JOHN D. DINGELL, Michigan (ex 
    officio)
                                 ------                                

                           Professional Staff

                     Sue D. Sheridan, Chief Counsel
                        John W. Jimison, Counsel
                   Rachel Bleshman, Legislative Clerk
                    David McCarthy, Minority Counsel
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     2
Hon. John Barrow, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     5
Hon. Ralph M. Hall, a Representative in Congress from the State 
  of Texas, opening statement....................................     6
Hon. Mike Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     7
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................     8
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................    10
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    11
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    12
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................    13
Hon. Doris Matsui, a Representative in Congress from the State of 
  California, opening statement..................................    14
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................    15
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................    16
Hon. Jay Inslee, a Representative in Congress from the State of 
  Washington, opening statement..................................    17
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    18
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............    20
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................    20
Hon. Mike Rogers, a Representative in Congress from the State of 
  Michigan, opening statement....................................    21
Hon. Darlene Hooley, a Representative in Congress from the State 
  of Oregon, opening statement...................................    23
Hon. Roy Blunt, a Representative in Congress from the State of 
  Missouri, prepared statement...................................   185
Hon. Tom Allen, a Representative in Congress from the 
  Commonwealth of Kentucky, prepared statement...................   312
Hon. Mary Bono Mack, a Representative in Congress from the State 
  of Tennessee, prepared statement...............................   312

                               Witnesses

Kraig R. Naasz, President and Chief Executive Officer, National 
  Mining Association; Accompanied by Glenn Kelly, Vice President, 
  Government Affairs, National Mining Association................    24
    Prepared statement...........................................    27
Michael Goo, Climate Legislative Director, Natural Resources 
  Defense Council................................................    32
    Prepared statement...........................................    34
    Answers to submitted questions...............................   340
Alan Reuther, Legislative Director, United Auto Workers..........    66
    Prepared statement...........................................    67
Lisa Jacobson, Executive Director, Business Counsel for 
  Sustainable Energy.............................................    73
    Prepared statement...........................................    75
Thomas R. Kuhn, President, Edison Electric Institute.............    96
    Prepared statement...........................................    99
    Answers to submitted questions...............................   381
Frank L. Bowman, Admiral, U.S. Navy (retired), President and 
  Chief Executive Officer, Nuclear Energy Institute..............   139
    Prepared statement...........................................   140
    Answers to submitted questions...............................   384
Mary Minette, Director for Environmental Education and Advocacy, 
  Evangelical Lutheran Church in America.........................   143
    Prepared statement...........................................   146
Ford West, President, The Fertilizer Institute...................   174
    Prepared statement...........................................   176
John Felmy, Chief Economist, American Petroleum Institute........   209
    Prepared statement...........................................   210
Robert C.Baugh, Executive Director of AFL-CIO Industrial Union 
  Council and Chair of AFL-CIO Energy Task Force.................   224
    Prepared statement...........................................   226
Emily Figdor, Director, Federal Global Warming Program, 
  Environment America............................................   232
    Prepared statement...........................................   235
    Answers to submitted questions...............................   470
Jason S. Grumet, Executive Director, National Commission on 
  Energy Policy..................................................   246
    Prepared statement...........................................   249
    Answers to submitted questions...............................   473
Douglas Scott, Director, Illionois Environmental Protection 
  Agency.........................................................   258
    Prepared statement...........................................   261
Randal Mullett, Vice President, Government Affairs, Con-way, Inc.   272
    Prepared statement...........................................   274
Paul N. Cicio, President, Industrial Energy Consumers of America 
  \1\............................................................   303
    Prepared statement...........................................   303
    Answers to submitted questions...............................   475

                           Submitted Material

Report, dated May 29, 2008, from Wood Mackenzie..................   314
Letter of May 16, 2008, from the National Petrochemical & 
  Refiners Association to Messrs. Dingell and Boucher............   327

----------
\1\ Mr. Cicio did not present an oral statement at the hearing.

 
 LEGISLATIVE PROPOSALS TO REDUCE GREENHOUSE GAS EMISSIONS: AN OVERVIEW

                              ----------                              


                        THURSDAY, JUNE 19, 2008

                  House of Representatives,
            Subcommittee on Energy and Air Quality,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:40 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Rick 
Boucher (chairman) presiding.
    Members present: Representatives Boucher, Butterfield, 
Melancon, Barrow, Waxman, Markey, Doyle, Harman, Allen, Inslee, 
Baldwin, Hooley, Matheson, Matsui, Dingell (ex officio), Upton, 
Hall, Shimkus, Blunt, Bono Mack, Walden, Rogers, Myrick, 
Sullivan, Burgess, Blackburn, and Barton (ex officio).
    Staff present: Bruce Harris, Lorie Schmid, Laura Vaught, 
Alex Haurek, Chris Treanor, Rachel Bleshman, David McCarthy, 
Andrea Spring, Amanda Mertens Campbell, and Garrett Golding.

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Boucher. The subcommittee will come to order.
    We begin this morning by welcoming to the subcommittee a 
new member, both of this subcommittee and also of the full 
Committee on Energy and Commerce. I have known and had the 
privilege of working with the gentlelady from California, Doris 
Matsui, for a number of years, both prior and since her 
election to the House of Representatives, and I can say that 
she brings to the work of our subcommittee an experience that 
will enlighten our work and further our efforts, and I just 
want her to know how warmly we welcome her this morning and how 
much we look forward to working with her.
    This morning, the subcommittee continues our climate change 
hearings, which are preparatory for the drafting and approval 
by the committee of a cap-and-trade program for greenhouse gas 
emissions, and we are planning additional hearings on that 
subject during the latter part of this summer.
    Today's hearing focuses on a variety of cap-and-trade 
proposals that have been introduced in both Houses of Congress 
during the course of last year and this year. During the day, 
interested stakeholders will have an opportunity state their 
views on the various provisions of five currently pending 
measures, and we will benefit from having their views as we 
draft our own cap-and-trade legislation in this committee.
    Today we are examining H.R. 1590, the Safe Climate Act of 
2007, introduced by Mr. Waxman; H.R. 6186, the Investing in 
Climate Action and Protection Act, introduced by Mr. Markey; S. 
2191, America's Climate Security Act of 2008, introduced by 
Senators Lieberman and Warner; the Senate amendment 4825, 
introduced by Senator Boxer as a substitute during Floor 
consideration of the Lieberman-Warner measure; and S. 1766, the 
Low Carbon Economy Act of 2007, introduced by Senators Bingaman 
and Specter. Each of these proposals makes a valuable 
contribution in the effort to address the climate change 
challenge. While the provisions in each of the bills will be 
subject to ongoing debate, the authors are to be commended for 
their considerable efforts to assemble proposals that advance 
our understanding of the alternative meals through which 
greenhouse gases can be controlled through the market-based 
mechanisms of cap-and-trade.
    Today's witnesses will inform the subcommittee of the 
components of cap-and-trade that are most important to them and 
the extent of which their core needs either are met or are not 
met by the pending bills. That overview will be tremendously 
instructive to the subcommittee as we prepare to draft our own 
cap-and-trade measures.
    While all of the bills we are examining rely on cap-and-
trade programs to control emissions, they vary greatly in their 
design and in their respective means of operation. They employ, 
for example, different methods for allocating allowances, 
contain contrasting timetables and targets for achieving 
emission reductions, vary with respect to cost containment 
opportunities including the use of domestic and international 
credits and offsets, have different definitions of covered 
entities and varying points of regulation, and proposed varying 
means of engaging developing nations. The views of our 
witnesses on these and other aspects of the pending bills will 
be welcome this morning.
    Our shared goal is to pass into law a program which 
achieves the needed reductions in greenhouse gas emissions at 
the least possible cost to the public and with the least amount 
of economic disruption. By commenting on the pending bills, we 
hope that the witnesses will suggest to us ways that those 
goals can be achieved.
    That concludes my opening statement.
    Mr. Boucher. At this time I am pleased to recognize the 
ranking Republican member of our subcommittee, the gentleman 
from Michigan, Mr. Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman. I too want to 
welcome Doris Matsui to our committee, and look forward to 
working with her on a number of issues as it impacts our great 
country.
    I want to thank you and Chairman Dingell for holding this 
hearing, my friend, Mr. Boucher. However, the nature of the 
bills that we are examining today is disappointing. I agree 
that climate change needs to be addressed and I am a strong 
proponent of reducing greenhouse gas emissions. But I find it 
hard to believe that a cap-and-trade scheme is the only way to 
address this global problem.
    We are fortunate to be serving on a great committee with 
some of the brightest minds in the Congress. How it is that for 
an issue of paramount importance we can come up with only one 
approach: cap-and-trade? By design, this approach works by 
increasing energy costs and slowing down economic growth. 
Rather than making energy more expensive and sending American 
job overseas, we should be pursuing an approach that promotes 
and encourages clear energy and builds economic strength 
through exporting American technology and thus creates jobs 
rather than exporting those same jobs. Climate change policy 
must adhere to a set of commonsense principles. Legislation 
must, one, provide a tangible environmental benefit to the 
American people; two, advance technology and provide the 
opportunity for export; three, provide and protect American 
jobs; four, strengthen U.S. energy security; and five, require 
global participation. I am sure that every one of us is in 
agreement with many of these principles yet not one of the 
bills we are discussing today would meet the whole test.
    We must take a sector-by-sector approach that cultivates 
innovation and technology and efficiency rather than arbitrary 
government mandates. Thoughtful choices need to be made on how 
we are going to meet our ever-increasing energy demand as we 
keep our economy moving. Arbitrary mandates are not sound. Both 
the United States and European Union reduced emissions between 
2005 and 2006 but the United States' percent reductions were 
4.3 times greater than the EU's and the EU, of course, has been 
using a cap-and-trade scheme; we haven't.
    We have a wealth of resources and ingenuity to meet the 
challenge. By investing in clean coal, providing incentives for 
renewable power, giving tax credits to businesses to increase 
their energy efficiencies, helping our auto manufacturers 
develop more fuel-efficient vehicles, and creating a regulatory 
environment that spurs a renaissance in nuclear power, we can 
drastically reduce greenhouse gas emissions. No mandates, no 
lost jobs, no spike in costs, rather just the opposite: cleaner 
air, more jobs, and stable costs.
    Last week, Mr. Chairman, you and I and Ranking Member 
Barton, other members from both sides of the aisle took a great 
step in the right direction by introducing legislation that 
will create a carbon capture and storage technology fund. The 
legislation will help reduce greenhouse gas emissions and 
promote existing and exciting new technologies that will not 
only keep energy costs down for consumers but also foster new 
jobs and build a stronger economy. With that approach, we will 
fortify our Nation's energy supply with American-made energy 
and protect the pocketbooks of our Nation's consumers, 
exporting American ingenuity and not the jobs.
    The recent failure in the Senate highlights the many 
problems with cap-and-trade. Members of both parties have 
repeatedly raised objections and the Democratic leadership in 
the Senate in fact withdrew the bill because it failed to 
garner enough support from either party. In fact, my State's 
two Democratic Senators expressed serious concerns in a letter 
signed by other Members of the Senate to Majority Leader Reid 
and Chairwoman Boxer. In their correspondence, Senators Levin 
and Stabenow recognized that the ``cap-and-trade program 
developed in the Lieberman-Warner bill has the potential to 
raise over $7 trillion. Much of these funds will be indirectly 
paid for by consumers through increased energy prices,'' is 
what they wrote, concluding that they could not support final 
passage of the Boxer substitute. The only consensus achieved 
during the Senate debate was that cap-and-trade was not the 
right approach.
    I commend my two Senators for recognizing that the cap-and-
trade legislation would cost Michigan families about $7,000 a 
year by 2050 and increase national electricity rates by 44 
percent by the year 2030. Some analysts see electric rates 
increasing 115 percent to pay for higher fuel costs, building 
new plants, and recovering global warming fees. At a time of 
economic slowdown, do we really need legislation that would cut 
GDP by some almost $3 trillion? At a time when our economy is 
squeezed by record gas prices, we are considering legislation 
that would increase gas prices another 144 percent by the year 
2030. Under cap-and-trade, we will be unified in our longing 
for the good old days of $4 gasoline.
    On top of the skyrocketing costs for consumer, cap-and-
trade legislation will send American jobs in energy-intensive 
industries overseas. Take the steel industry, for example. Here 
in the United States, steel producers are the most efficient in 
the world. On average, American steel makers emit 1.2 tons of 
greenhouse gases per ton of steel made. Compare that to the 
Chinese steel emissions estimated to be in the neighborhood of 
4 to 5 tons per ton of steel produced. We are not helping the 
environment by sending industries that operate cleanly and 
efficiently in the United States to a regulation-free China. 
China is the number one emitter in the world and their 
greenhouse gas growth every year equals the current output of 
Germany.
    In closing, I would like to put the scale of the emissions 
reductions being called for by these bills in perspective. The 
proposals would mean that the United States cannot emit more in 
the year 2050 than we emitted in the year 1910. That is a 
daunting task, considering that in 1910 the United States had 
only 92 million people compared to some 420 million that we are 
likely to have by 2050; and in per capita income in current 
dollars, it is about $6,000. Michigan's working families are 
already struggling to get by. How in the world can we in good 
conscience pursue a policy that will not only have little 
environmental benefit but also puts the costs squarely on the 
backs of hardworking American families? Not to mention that the 
only nations in the world today that emit at the same level 
mandated in this bill are poor, developing countries such as 
Belize, Haiti and Somalia. Shouldn't our global warming 
solution actually lower temperatures? Can anyone here say today 
for sure with certainly what the global temperature reductions 
will be as a result of this legislation? In fact, a strong 
argument can be made for just the opposite, that these bills 
would in fact worsen the environment.
    I yield back.
    Mr. Boucher. Thank you very much, Mr. Upton.
    The gentleman from Georgia, Mr. Barrow, is recognized for 3 
minutes. Before I recognize Mr. Barrow, let me note that in 
accordance with the rules of the full committee and 
subcommittee, any member who decides to waive an opening 
statement will have 3 minutes added to that member's time to 
question the first panel of witnesses.
    The gentleman from Georgia.

  OPENING STATEMENT OF HON. JOHN BARROW, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Barrow. I thank the Chair. It is ordinarily my custom 
to waive opening but this is too important an opportunity to 
get my two cents in on this.
    First, I want to commend you, Mr. Chairman, and the 
chairman of the full committee, Mr. Dingell, for your 
leadership in this effort. We are reaching something of a 
milestone in the work of this committee on this subject. We 
have had up to 20 years in the course of this Congress on the 
subject of climate change. In the course of those 20 hearings, 
we have considered exhaustively the scientific evidence of our 
contribution to the problem and our responsibility to do 
something about it. We have surveyed every sector of the 
economy and every interest group we can in order to get their 
feedback and now we are getting down to brass tacks. Now we are 
starting to look at specific, concrete pieces of legislation to 
address this issue. While we do that, and I want to 
acknowledge, everybody understands the importance of this issue 
as it relates to the cars they may drive, the appliances they 
will have to buy, the electric bills they are going to have to 
pay, everybody can feel a connection to those things that have 
to do with their cost of living.
    But I want to put in a word, just one word for the role of 
agriculture in this whole process. As the only Member of 
Congress who serves on both the Energy and Commerce Committee, 
on the one hand, and the House Ag Committee, on the other, I 
feel like I have not only a unique sensitivity to this issue 
but a unique responsibility to speak up for incorporating 
agriculture in this process. The EPA estimates that right now 
agriculture is involved in carbon sequestration activities and 
agriculture is responsible for sequestering something like 1 
percent of the total amount of carbon emissions in our entire 
economy. The EPA also estimates that if they were properly 
engaged, if agriculture was properly included and motivated and 
incentivized and engaged in this process, they could sequester 
up to 20 percent of all carbon emissions in the entire United 
States economy. Any other sector of the economy that is putting 
out as much carbon and could make a 20-fold increase in the 
solution to the problem ought to get a lot of attention, and I 
want to make sure we don't lose sight of the role that 
agriculture can play. Whether agriculture is going to be 
allowed to play a role as a big part of the solution as opposed 
to just a part of the problem is going to depend on whether or 
not this committee incorporates them properly. I understand the 
challenges of measuring compliance and the role that 
agriculture can play but we need to engage them because there 
is just too much potential there for solving the problem for us 
to ignore the role of agriculture.
    Finally, I want to make sure that folks understand the 
importance of us looking into the issue of a safety valve. I 
know there has been a lot of discussion about that. I think it 
is important that we make sure that the mandates don't get too 
far out in front of the technology and so what I want to do is 
hear about the advantages and disadvantages of including a 
safety valve as a part of this committee's work and the 
legislation byproduct of the committee.
    With that, Mr. Chairman, I want to thank you once again for 
your leadership and I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Mr. Barrow.
    The gentleman from Texas, Mr. Hall, is recognized for 3 
minutes.

 OPENING STATEMENT OF HON. RALPH M. HALL, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Hall. Mr. Chairman, I thank you for that, and I am just 
thinking back here to when global warming and all those 
conversations started. I don't remember ever taking a position 
that there is just absolutely nothing to it, like some have, 
and I have always thought we needed to have an eye toward 
technology and an eye toward cleansing the methods of obtaining 
energy from the fossil fuels to nuclear to right on up to all 
of them, and Mr. Chairman, I respect you as chairman of this 
committee and I know you as one of the more reasonable members 
of this body, and I think Mr. Upton said one giant comparison 
of the population difference from the time it all started until 
today, and the gentleman from Georgia spoke of the cars you 
drive and the effect you have on that.
    Let me caution you about one other thing that it seems most 
everybody has forgotten, and my speech will be about caution 
today. There is a cash register looming out there. It is larger 
for some people than it is for others. Russia does not 
recognize it. India will not look at the cash register. China 
ignores it completely except contributing to the damage to the 
earth with their coal thrust and every 5 or 6 days starting a 
new one, and there is just no way you can get around the 
American taxpayer who is going to find out sooner or later that 
you are probably going to raise taxes three or four times on 
everybody in here and everybody you know and maybe not know for 
50 or 60 years whether it helped or not, and I have heard 
people say, and I think this is not a good statement but I have 
heard it said they are just as worried about global freezing as 
they are global warming. Now, I would say to you that, and I 
appreciate the careful approach to climate policy that you have 
outlined, Mr. Chairman.
    I want to point out an example of what can happen if we 
don't take a careful approach. It relates to the treatment of 
natural gas in the Senate's Lieberman-Warner-Boxer bill, and 
despite all the long-time modeling done by the EPA and private 
firms, no one apparently thought to ask natural gas processors 
and producers how the gas market really works and whether the 
long-term models could capture near-term effects of the bill, 
and so the bill was drafted to require that natural gas 
processors and/or producers pay for emission allowances for all 
of the end-use customers who burn gas. Never mind that the 
processors and producers have no control over the end-use 
emissions. According to an analysis done by one of the leading 
energy consulting firms in the world, Wood Mackenzie, the 
approach could have put more than 30 percent of natural gas 
supply at risk. In closing, let me say that is because 
exploration and production companies, mainly independent, 
spending more than they earn and all of their cash flow to find 
and produce gas and they have to reduce drilling investment to 
pay for consumer emissions allowances. This makes no sense, Mr. 
Chairman. That is why we need to be careful, and I would like 
to submit a news release from the American Exploration and 
Production Council and the Wood Mackenzie report for the 
hearing record and ask unanimous consent that they be included.
    Thank you, Mr. Chairman. I yield back my time.
    Mr. Boucher. Thank you, Mr. Hall. Without objection, that 
material will be included in the record.
    Mr. Hall. I thank the chair.
    [The information appears at the conclusion of the hearing.]
    Mr. Boucher. The gentleman from Massachusetts, Mr. Markey, 
was here previously and announced his intention to waive an 
opening statement. The gentleman from Pennsylvania, Mr. Doyle, 
is recognized for 3 minutes.

   OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman. Mr. Chairman, I am 
happy that we are beginning our examination of the various 
climate change proposals which have been introduced in this 
Congress, and while each of these proposals offer constructive 
suggestions as to the path this subcommittee should follow as 
we draft our legislation, I do not believe any of these 
proposals in and of themselves provide the complete solution we 
need. Simply put, the time is now for Congress to address this 
problem. The time for scientific discovery is passed and today 
we have ample evidence that this problem is real and that there 
are actions we can take to address it. The President has 
acknowledged this reality by transmitting to Congress a plan to 
address the problem. The EPA is actively implementing their 
authority to unilaterally regulate greenhouse gases and our 
power industry is delaying new investment until they see the 
playing field Congress will create. We can no longer put our 
heads in the sand and pretend this is not a problem. We must 
act and we must act now.
    As we move forward toward a achieving a substantial 
reduction in greenhouse gases though, it is important to 
recognize the reality on the ground and not to legislate 
mandatory reductions that are beyond our technical ability to 
achieve. Instead, we must ensure that the funds generated by 
this bill do not go to the general treasury but instead are 
reinvested to achieve our dual goal of achieving energy 
independence while combating the threat of global warming. As I 
have said before, there is no silver bullet that will solve 
this problem for us. We need a broad energy portfolio that 
increases renewables and new sources of energy while we 
continue to improve the resources we have today. Clean coal and 
nuclear, two energy sources which today power most of America, 
must continue to play a key role as we move into the carbon-
constrained world. Simply put, we have many challenges ahead of 
us.
    I have been working with Congressman Jay Inslee to address 
the very real concerns about international competition and job 
and emission leakage that may occur as a result of our final 
bill. Our policy is narrowly tailored, affecting only those 
industries which are high carbon-intensive and face an 
internationally set price for their goods. This policy, which 
some of you may know as an output-based, or benchmark policy, 
will address the real-world challenges these industries face 
while encouraging them to do their part to reduce our Nation's 
greenhouse gas emissions. I look forward to hearing our 
panelists' thoughts on this proposal.
    In conclusion, Mr. Chairman, I reiterate my offer to work 
with any member of this committee to construct what I believe 
will be landmark legislation to combat climate change. The time 
is now. The American people have demanded action and I am ready 
to answer that call with my colleagues.
    I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Mr. Doyle.
    The gentleman from Texas, Mr. Barton, the ranking member of 
the full committee, is recognized for 5 minutes.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman. As you know, I am a 
skeptic on this issue, but one thing you and I are in agreement 
on: if anything is going to be done, it should be done in this 
committee, it should start in this subcommittee, so we 
appreciate the hearing, we appreciate the number of witnesses, 
and we appreciate the attendance of the audience.
    Also on behalf of the Republicans, we wish to welcome our 
newest member to the Committee, Congresswoman Matsui. We will 
soon have a subcommittee called the California Subcommittee. We 
are delighted to have another representative of the California 
delegation on our committee.
    Mr. Chairman, we are at the crossroads with this hearing 
today and the debate over whether to constrain carbon dioxide 
by rationing energy. As we all know, at the beginning of this 
Congress our new Speaker, Speaker Pelosi, announced it was her 
objective to enact a carbon cap-and-trade bill in this 
Congress. Her intent was to establish a price signal on carbon, 
in other words, a strategy to make fossil fuel energy more 
expensive in America in order to repress or suppress the public 
demand for it. Let us go back and see where we were at the 
beginning of this Congress in terms of a carbon signal. The 
price of unleaded gasoline was selling on average nationally 
for $2.30. Today it is $4.07. I would say that is a pretty 
strong signal. Diesel fuel was $2.58 a gallon. Today it is 
$4.70. Natural gas was $6.60 a thousand cubic feet. It is 
expected to hit $12 this fall. Twelve dollar natural gas means 
home heating will come close to doubling. Gas-fired electricity 
prices will rise significantly and industries that rely heavily 
on natural gas including chemicals, fertilizers and others in 
manufacturing will continue their exodus to other countries. We 
only have two fertilizer manufacturers that are still doing 
business in the United States, for example. Home construction 
has stalled. Auto workers are being laid off by the thousands. 
Food prices are soaring. Airlines are canceling flights because 
they can't afford to pay for the aviation fuel. Small 
businesses throughout the United States are failing. I met with 
a farmer yesterday who told me it cost him over $1,200 to fill 
up his tractor, $1,200. How much more of a price signal do we 
need on carbon? How much greater of a burden must we place on 
the American people?
    And for what environmental benefit? EPA estimates that if 
the Lieberman-Warner bill would have passed the Senate and been 
enacted, that it would reduce greenhouse gas emissions by 2050 
by 25 parts per million, 25 parts per million. At that rate, it 
wouldn't change the temperature one degree, not one degree with 
temperature change if Lieberman-Warner were to be enacted and 
be implemented in the 2050 time zone. It would not change 
global temperatures. It would transform the U.S. economy for 
the worse.
    If in January 2007 Speaker Pelosi had called for a consumer 
price signal as high as those that we are suffering already 
today, she would have stood virtually alone in her strategy. 
Those price signals are hitting us. They are hurting our 
economy. We do need to do something about them. Enacting a cap-
and-trade bill, in my opinion, is not the solution. The World 
Resource Institute says that Mr. Waxman's bill, H.R. 1590, Mr. 
Inslee's bill, H.R. 2809, and the Sanders-Boxer bill would 
reduce greenhouse gas emissions in the United States by 80 
percent below 1990 levels by 2050. Where does that number come 
from? I don't know. I am told that it is also Senator Obama's 
proposal. I do know that if we reduce CO2 by 80 
percent below the 1990 level, it is going to take us back to an 
emission level that we last had in 1910, when there were about 
40 million people in America and two-thirds of them lived on 
the farm and the method of transportation was foot power or 
animal power. In the State of Texas, the average per capita 
carbon emission today is 31 tons. In the great State of 
Vermont, it is zero. I don't quite understand that since each 
of us emit a third of a ton of CO2 every year just 
breathing. But whatever it is and whatever part of our great 
nation, going back to 1910 emission levels, in my opinion, 
makes no sense. In Texas alone, the National Association of 
Manufacturers says that the Lieberman-Warner bill would cost 
the average household $8,000 a year.
    Mr. Chairman, I could go on and on but I think you get the 
gist of what I am trying to say. I believe, as you believe, 
that we do need to look at this issue seriously. That is why I 
have endorsed and I am a cosponsor of your bill to begin a 
research program on how to best capture or convert 
CO2. That is putting the horse before the cart. That 
is actually, let us develop the technology, let us see what the 
problem is, let us continue to do research on the science but 
let us don't take the U.S. economy off the cliff by enacting 
some of the bills that are before us today.
    With that, Mr. Chairman, I again thank you for the hearing. 
I thank our witnesses. I look forward to hearing their 
testimony and I look forward to hearing our members ask some 
questions. I yield back.
    Mr. Boucher. Thank you very much, Mr. Barton, for your 
thoughtful remarks and also for your coauthorship of our 
legislation to promote the research on carbon capture and 
storage.
    The gentlelady from California, Ms. Harman, is recognized 
for 3 minutes.

  OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Harman. Thank you, Mr. Chairman, and welcome to our 
witnesses and also welcome to my California sister, Doris 
Matsui. Mr. Barton has it partly right. There are lots of 
Californians on this committee and most of them, most of us are 
women. That is why, as I told Chairman Dingell recently, the 
Committee is doing so well, and P.S., California has the 
largest delegation in Congress, of the Democrats from 
California, a majority are female and both of our Senators 
happen to be female. That is why California is doing so well.
    On that subject, as you and I discussed before the hearing, 
Mr. Chairman, one of our Senators, Barbara Boxer, is chairman 
of the Environment and Public Works Committee, as you know. She 
is the author of one of the bills before us. She did ask to 
testify this morning and I gather that there was an issue about 
the amount of time she could spend here and whether she would 
have time to take questions from members. I do appreciate your 
offer to telephone her and to arrange for her to testify at one 
of our hearings in the near future on this subject. I know we 
are having many hearings.
    Mr. Boucher. Will the gentlelady yield?
    Ms. Harman. I would be happy to yield to you.
    Mr. Boucher. Yes, I will be happy to do that, and I would 
say for those who might be interested, that Senator Boxer was 
in fact invited to testify today under the same circumstances 
that all other members of Congress are invited to testify, and 
I think her time frame perhaps did not permit the potential for 
answering questions. But we will clarify with her the fact that 
she is welcome at future hearings and hope that she can join 
us.
    Ms. Harman. Well, I appreciate that. Reclaiming my time. I 
want to commend her and the whole Senate for trying to take up 
this subject of cap-and-trade on the Senate floor last week. I 
think there are lessons to be learned from what happened there 
and I would like us to learn them. I do consider this to be the 
greatest legislative committee in the House. Most of the major 
environmental laws have originated here and I think we can do 
our work well on this subject, and I look forward to this 
committee authoring major cap-and-trade legislation in the near 
future.
    Let me just make a few points. Number one, the looming 
likelihood of $5-a-gallon gas has generated the political will 
to change our energy habits. Now we need the political 
leadership. Number two, we are facing two interrelated 
problems, the dependence on oil as our primary fuel, and global 
climate change. Addressing both is an economic and a national 
security imperative. Number three, cap-and-trade is an 
essential part of the solution but not the only part. We need 
to be creative and look at a variety of short-, medium- and 
long-term measures that foster alternative fuels and 
technologies. This committee has done a very good job on the 
subject of efficiency. Mr. Upton and I are the light bulb 
authors. Efficient light bulbs is big part of the answer but so 
is a creative market-based system to put the right price on 
carbon and have a trading arrangement so that we reduce the 
greenhouse gases in our atmosphere.
    I thank you for this hearing and yield back the balance of 
my time.
    Mr. Boucher. Thank you very much, Ms. Harman.
    The gentlelady from Tennessee, Ms. Blackburn, is recognized 
for 3 minutes.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Ms. Blackburn. Thank you, Mr. Chairman. I want to thank you 
for the hearing. I want to thank our witnesses for their 
preparation and for being here with us today and taking the 
time to come and testify on the prospects of a cap-and-trade 
system, and how they feel it would be administered.
    I think that by this point it is no secret to anyone on 
this committee that I do have some very serious concerns about 
the carbon reduction schemes because I do fear that they would 
drastically affect this Nation's energy supply and that they 
could possibly significantly distort the marketplace. Worse 
yet, I think that what we are beginning to see in some reports 
of some studies that have taken place over the past decade, 
things in scientific journals that show that any recent global 
warming could or could not be caused by humans and could or 
could not be caused by the sun and other natural causes that 
really have no link to human activity, and I found it rather 
curious that we are seeing data collected by satellites and 
weather balloons that indicate that global temperatures have 
cooled by 0.7 degrees Celsius over the past 16 months. I think 
that should be instructive to us because this has offset the 
warming that took place over the past 100 years, but the IPCC 
models that have been presented to us time and again had 
predicted significant rising in temperatures and no cooling. So 
that is a little bit of a head scratcher there and I think 
deserves a revisit by this committee and those of us who are 
going to review this issue.
    Now, Mr. Chairman, I know you are aware and some of the 
others, we made a trip, a fact-finding mission to look at and 
investigate some of these trading schemes, and what I came away 
from that trip with was a concern, a true concern that the 
trading system in the scheme was flawed and did have some 
problems and that you didn't always end up with your goal, 
which was to reduce CO2 emissions, and now what we 
are seeing is if carbon sequestration and reduction of 
emissions is your goal, then it would be difficult to achieve 
that goal and have that outcome if it were only the U.S. 
participating in this and only Europe participating in this. It 
would require worldwide participation and participation by some 
of the countries that are currently the most significant global 
polluters, and what we also have found out that this type of 
scheme could result in a wealth transfer to those who can gain 
the market and will reduce economic investment to solve more 
pressing problems such as diseases, malnutrition and water 
sanitation. A cap-and-trade system or carbon tax system will 
likely lead to shuttering power plants that will only make 
Americans poorer and more reliant on foreign energy sources and 
could have a negligible effect on environmental improvement.
    So I am looking forward to hearing from our witnesses 
today, Mr. Chairman. I thank you again for the time. I yield 
back.
    Mr. Boucher. Thank you very much, Ms. Blackburn.
    The Chairman of the full committee, the gentleman from 
Michigan, Mr. Dingell, is recognized for 5 minutes.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Mr. Chairman, I thank you for holding this 
hearing. I commend you for your leadership and the vigor with 
which you are addressing perhaps the most difficult, complex 
issue that I have faced on this committee during the time that 
I have had the honor to serve here.
    Before I make my statement, I would like to observe that 
today is the first hearing that is being attended by our new 
member, Mrs. Matsui, and I would like to welcome her this 
morning. I also would like to observe that she is not the first 
Matsui to serve upon this committee. Her dear husband, my good 
friend, Bob, was a member of this committee in earlier days. He 
was the successor to my beloved friend, John Moss from 
California, and the two of them served this Congress and served 
their State and their districts with extraordinary dignity and 
capability. So welcome to you, Mrs. Matsui. We are honored that 
you are here with us.
    I also want to thank our witnesses this morning, ladies and 
gentlemen at the witness table and others who will be appearing 
before us. Thank you. We need your wisdom and we have given you 
a very difficult task, that is, comparing and commenting on 
five key climate change legislative proposals, a total of more 
than 1,000 pages of legislative text which I anticipate as we 
go forward will grow. I also want to express the thanks of the 
committee for your willingness to prepare the thoughtful 
testimony on this difficult and complex issue which, I repeat, 
is probably the most complex and difficult that I have had to 
confront during my time on this committee.
    Since this hearing was announced, we have been asked why we 
are holding a hearing that looks at five different lengthy and 
complicated legislative proposals. The answer is very simple. 
As we move forward with drafting the climate legislation that 
this committee will be presenting to the Congress, there is 
much that we can learn from these legislative proposals. We 
need to know how people feel about them, how they are going to 
impact upon the different industry groups, upon labor and upon 
every ordinary citizen and conservationist and person who does 
business or who has interest and concerns on these matters. The 
authors of the bills, including Mr. Waxman and Mr. Markey, have 
put a great deal of thought and effort into their bills. We 
need to build on these efforts to move the legislation forward 
to understand how we can pass the best legislation which will 
best serve the public interest of this country and of the 
world.
    We also can see that we need to learn from the efforts of 
the other body. The Senate debate revealed a strong bipartisan 
support for addressing climate change with a cap-and-trade 
program. This is an important development. The Senate debate 
also showed, however, that the other body has far from a 
consensus on what to include in such a program. It also is 
apparent from that discussion that there is small evidence of a 
consensus in the country on these matters. Now, I mean no 
disrespect to the Senate or to anyone else when I say this 
because as I pointed out, this is an enormously complex issue. 
I have no delusions about the amount of effort that it is going 
to take to first of all come up with proper legislation, and 
second, to create a coalition that will pass a responsible 
climate change bill, but we must pass such legislation and this 
committee intends to devote its vigorous effort to achieving 
that great purpose.
    Today's hearing is designed to give us a beginning of our 
overview of these key legislative proposals. We will need a 
large number of additional hearings to delve into the details 
of the legislation because legislation of this complexity and 
difficulty needs careful and thorough attention to achieve the 
purpose of passing good legislation.
    I look forward to the testimonies of our witnesses today 
and I thank them and congratulate them for their appearance. I 
also want to know what issues are most important to them and I 
want to hear what the witnesses think about these bills and 
what they do right and what they do wrong and what they fail to 
address and what needs addressing and how our legislation can 
improve upon the proposals now before us. Given the number of 
witnesses appearing before us today, I conclude my statement 
here and I thank you, Mr. Chairman, for your extraordinary 
leadership in this particular matter, and I commend and thank 
my colleagues for their participation.
    Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Chairman Dingell.
    The gentleman from Oregon, Mr. Walden, is recognized for 3 
minutes.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Thank you, Mr. Chairman. I appreciate the 
hearing and look forward to hearing from the witnesses. I will 
admit up front, I have to step out for a meeting here in a few 
minutes but I do have the testimony and will be back.
    This is an issue I think that we all care a lot about from 
various perspectives. Clearly, I think each of us wants to do 
the right thing for the environment. I mean, I have been 
fortunate enough to go invest in two hybrid vehicles but it 
still costs me 50 bucks or thereabouts to fill up my Prius here 
in Washington and certainly about that in Oregon to fill up my 
hybrid Escape. We have passed legislation here that has been 
helpful and under your jurisdiction. There have been provisions 
I have disagreed with and think we should revisit, like on 
biomass from forests not counting toward renewable fuel 
standards seems to be rather absurd. It either is biomass and 
is a renewable fuel or it is not. It shouldn't matter from 
which forest it comes.
    What troubles me, though, today in America and in my 
district, people are having trouble filling up their tanks. I 
have an orchard in my hometown of Hood River known for its 
famous pear production. Their fertilizer costs double year to 
year. You go talk to people about trying to fill up, as the 
chairman said, a tractor fuel tank, or I know we have a witness 
later that is going to talk about $1,400 to fill up a truck 
tank for diesel, and while we need to do the right thing for 
the environment, we don't need to kill our economy in the 
process. And I note there are lots of provisions in some of 
these bills to spend the magical money that comes from no 
consumer and yet we all know it is the consumer that is going 
to pay the bill here, and there are estimates as high as $6 
trillion in costs to consumers, and I think we have to be 
cognizant of that. It is very disturbing to me, especially when 
some of the other major emitters in the world would be left out 
of any framework. They can continue to pollute and to create 
jobs and offshore our jobs to them where they will be more 
competitive, and that is not good for our country, especially 
with the economy we face.
    I met with the CEO of one power company who told me their 
power generation costs under Warner-Lieberman would go up two-
and-a-half times. So if you like what has happened at the gas 
pump, if you like what is happening with natural gas prices, 
you are going to love some of these bills if you are a 
consumer. And the biggest advocates for some of these bills are 
frankly the traders and the speculators around the world 
because they know there is a lot of money to be had, and what 
we have seen in the oil markets and all the hearings we have 
had on speculation in the oil markets has led me to believe 
that if we move down this path, we better darn well make sure 
the regulatory framework is there so that consumers don't get 
ripped off by the traders if indeed that could occur, and I 
think we have seen defaults overseas on some of the trading 
markets by some of the traders and we are talking America's 
future economy here as well.
    So as we try to work to do the right thing for the 
environment, let us not forget the Wal-Mart moms and the diesel 
truck driving dads out there in America who need fuel now and 
don't need higher energy costs now, and there are lots of 
things we can invest in as a government, especially the 
research side, Mr. Chairman, like your bill, make sure we have 
the technologies in place for the future and I am all for that.
    Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Walden.
    The gentleman from Maine, Mr. Allen, was previously in 
attendance and announced his intention to waive his opening 
statement. The gentlelady from California, Ms. Matsui, is 
recognized for 3 minutes.

  OPENING STATEMENT OF HON. DORIS MATSUI, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Matsui. Thank you, Mr. Chairman. I am so pleased to be 
here today and I want to thank everyone for their very warm 
welcome.
    Mr. Chairman, the Energy and Commerce Committee has 
jurisdiction over so many issues that are important for my 
district, the city of Sacramento. Since coming to Congress, I 
have wanted to be a part of this committee and help craft 
legislation that affects so many aspects of our country. I am 
truly looking forward to working with each and every one of 
you.
    Mr. Chairman, I am encouraged that this committee is 
further examining climate change. Increased droughts, wildfires 
and Sacramento's risk of food are daily reminders to my 
constituents that this issue affects them personally. Because 
global warming is such a widespread problem, we must take care 
to craft responsible and intelligent solutions that put us on 
the right course from the beginning. This committee and 
subcommittee have been extremely active in the 110th Congress. 
I look forward to joining your efforts and continuing to 
promote sound policy that affects the health, safety and 
welfare of the American people.
    Mr. Chairman, I thank you for your leadership and your 
commitment to these issues. I look forward to the testimony. I 
yield back the balance of my time.
    Mr. Boucher. Thank you very much, Ms. Matsui.
    The gentlelady from North Carolina, Ms. Myrick, is 
recognized for 3 minutes.
    Ms. Myrick. Well, thank you, Mr. Chairman. I want to 
welcome our witnesses as well and look forward to everyone's 
testimony. I too will leave for a little while. But actually, 
Mr. Walden said pretty much everything I was going to say, 
including support for your bill, so with that, I will just 
yield back.
    Mr. Boucher. Thank you very much, Ms. Myrick.
    The gentlelady from Wisconsin, Ms. Baldwin, is recognized 
for 3 minutes.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman. I really appreciate 
your holding this hearing today because I really think it is 
important that we take the time to examine the legislative 
proposals that have been introduced thus far as these proposals 
will clearly serve as guideposts for legislation that this 
subcommittee will ultimately draft and consider over the months 
to come.
    I commend Mr. Waxman and Mr. Markey as well as our Senate 
colleagues for their contributions and there is no doubt that 
despite the potentially contentious nature of some of the 
provisions, a lot of hard work has gone into ironing out the 
various proposals that we have before us today. As I have said 
many times, I believe that we have a responsibility to our 
planet and to future generations to address climate change with 
firm, bold, and decisive actions that reduce greenhouse gas 
emissions. We must set a roadmap for repairing the damage we 
have done to our environment.
    In adopting a cap-and-trade plan, we also have a 
responsibility to the Nation, businesses, workers, and 
consumers to ensure that American industries remain competitive 
and the production of American products remains right here in 
America, and that prices and costs remain reasonable and 
affordable, and for that reason, it is crucial that we evaluate 
and understand the provisions in these bills and the effects 
that they will have on our planet, on our businesses, and on 
our constituents.
    I am pleased that we will be hearing from such a wide 
variety of witnesses today who can provide very different 
perspectives on the language of the bills before us. I expect 
that much of the testimony today will be focused on concerns or 
criticisms with the legislation but I do hope that we will also 
hear about the sound provisions, those that industry and 
environmentalists and labor unions, religious leaders believe 
are necessary to reducing greenhouse gas emissions, creating 
green jobs, boosting our economy, and aiding communities and 
ecosystems vulnerable to harm from global warming. Certainly 
the process of designing a cap-and-trade bill will not be easy 
and there will be many difficult decisions yet to be made but 
one thing is clear: the costs of inaction are too great for us 
to fail to act. I hope this hearing will show us how we can 
rise to that challenge.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Boucher. Thank you very much, Ms. Baldwin.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
3 minutes.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman. I do appreciate you 
having this hearing and I want to applaud your efforts so far 
in working in a bipartisan manner to, if we are going to move 
in this direction, to have a system designed that we can 
address the fossil fuel use and carbon capture and 
sequestration, which is critical. I am also optimistic that if 
you remain at the helm here along with Chairman Dingell, if we 
move in this direction, which I am not a fervent believer we 
should do so, but if we do, that we won't destroy our economy 
in the process, and that is my commitment to you. I really do 
believe this is one of the greatest opportunities for harm in 
the economy of this country that we have seen in a long time.
    The Senate did a great job last week bringing up the 
climate bill when we had historical high energy prices, and 
that is the debate that we have been trying to have in this 
committee for the past year-and-a-half, and we have moved the 
environmental community to accept the principle that this will 
cost. Now, how much it will cost is up for debate. I think from 
my perspective, people have to understand that I represent 
southern Illinois. The Clean Air Act was a great benefit to 
clean air and emissions but it disproportionately harmed and 
destroyed the economy of southern Illinois. There will be 
winners and there will be losers, and if we don't identify that 
fact, then we are doing--we will be going down a path.
    I am not embarrassed about the internal combustion engine 
in this country. It has provided jobs and the economy and a 
standard of living unrivaled in the world today, and I am not 
going to back down from the benefits. Why do you think the 
Chinese are building a coal-fired power plant every 2 weeks? 
They want to have the standard of living that we have. Why do 
you think they are not moving down to climate change? Because 
they want to have the standard that we are going to have, that 
we have today, and at $136 a barrel of crude oil today and 
$4.07 for a gallon of gas, the costs as Chairman Dingell 
pointed out earlier in this Congress, 50 cents additional 
gallon of gas. So that would be $4.57 for climate change for no 
environmental benefit because we know India and China are not 
going to go there. Chairman Boucher and I sat across from a 
Chinese official who said it is our turn to reap the benefits 
of fossil fuels in this world, and we are going to do it. We 
asked him twice.
    So let us be careful, let us be diligent, first do no harm. 
I yield back.
    Mr. Boucher. Thank you very much, Mr. Shimkus, and I 
appreciate those thoughtful remarks.
    The gentleman from Washington State, Mr. Inslee, is 
recognized for 3 minutes.

   OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Inslee. Inaction here will damage the U.S. economy as 
the Midwest changes its climatic system and severe storms sweep 
and health problems arise due to global warming. Action will 
improve the U.S. economy when we become the clean energy 
supplier to the world. Pessimism will hurt us here. Optimism is 
the name of the game to rely on the innovative spirit of 
America to solve this problem.
    I want to focus on the necessity of auctioning off the 
permits under this bill and I want to do it because of four 
reasons: it will help the U.S. economy. Could we put up chart 
number one?
    [Chart shown.]
    Mr. Inslee. We have to radically increase our innovation, 
our pace of innovation towards clean energy in this country, 
and I want to show a chart here of the research and development 
budgets of the United States. On the left, far left, is energy, 
a pittance, a peppercorn, as they used to say in law school. In 
the middle is the graph for our health R&D, and on the right is 
our research budget for military expenditures. We have gone 
down significantly. We are hurting. You look at it, it is a 
pathetic research and development budget. We need to use the 
revenues from the auction proceeds to increase this budget 
dramatically to capture the clean energy technology so we can 
sell it to China and sell it to India and make green money in 
America. Next chart, please.
    [Chart shown.]
    Mr. Inslee. We need to do what we have done in the past in 
this country when we had a major--could we go to the next chart 
up, please?
    [Chart shown.]
    Mr. Inslee. This shows what we have done in the past with 
our research budgets when we have had major national 
challenges. On the left is what we did with our research budget 
in the Manhattan Project. Next is what we did in the R&D budget 
in the Apollo Project. The next is the rise in the defense 
budget in the last several decades. The second to the right is 
the War on Terror, and if we do an auction and use the proceeds 
for R&D and have a five or ten times increase in our research 
budget, we can develop the solutions it will take to have a 
clean energy decarbonized economy in the United States, perhaps 
with clean coal and other assortments.
    The right shows a vision for America that is based on 
optimism and our ability to develop a clean energy technology 
and it is dependent upon the revenues from the auction of these 
permits. That is not the only reason to do that. The second 
reason is, we should not give away a public resource that 
belongs to the citizens of the United States worth billions of 
dollars based on largesse decisions by the U.S. Congress. The 
market should decide who gets those permits. The second reason 
why it makes sense, if you are a capitalist, you ought to favor 
auction. And third, what we learned in Europe is if you don't 
do an auction, you get massive windfall profits by utilities 
who take the value of these non-auction permits, pass the cost 
down to your consumers and increase utility bills.
    So for four reasons, we have got to have auction, we have 
got to do it as soon as possible. I look forward to this. I 
think we ought to approach this with a little humility because 
if we don't get this right, the planet isn't going to be around 
the way we know it, so I hope we do.
    Mr. Boucher. Thank you very much, Mr. Markey--I am sorry, 
Mr. Inslee.
    Mr. Markey. I never looked so good.
    Mr. Boucher. Well, I was actually thinking about Al Gore. 
You know, a slide show, if converted into a documentary, can 
take you a long way, and maybe this is the beginning of 
something big. Thank you, Mr. Inslee.
    The gentleman from Texas, Mr. Burgess, is recognized for 3 
minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman, and thank you for 
holding this hearing today.
    I appreciate the legislative proposals that the Committee 
has under consideration and recognize that each is the product 
of good intentions. Some of them vary on scope, the targets and 
the baseline emissions and allocations of credits but the 
inherent property in each of the regimens before us today is, 
there will be a cost, there will be consequences and, of 
necessity, there will be restrictions. The point of any carbon 
control program is to assign carbon a monetary value and then 
make individuals decide if they are willing to pay the price 
for changed behavior. I can tell you that most of America and 
certainly the Americans in my district are not ready to pay the 
high cost of carbon compliance and their behavior has already 
changed. High transportation fuel costs have already forced 
American families to adjust their budgets and their lives due 
to their energy costs. With any of the proposals before us 
today, there will be additional costs and there will be 
additional restrictions.
    Mr. Chairman, I might also point out that the law of 
unintended consequences not yet been repealed but what we have 
seen in the past 18 months is, it used to be the sins of the 
father were visited upon the son so it took a generation for 
these unintended consequence to come full circle. Now we are 
seeing them come full circle in a period of as little as four 
to six months' time. Witness what we did with the ethanol 
mandate in December and what has happened to food and other 
commodity prices in May and June and that of course was before 
we had a major earthquake in China, a cyclone in Burma, and 
Iowa was submerged.
    Well, Mr. Chairman, there is a wide range of witnesses here 
today. The fact that it takes such a broad group of individuals 
to help explain these proposals is an indication as to the 
amount of work that you have undertaken, the size and the scope 
and the impact of this legislation. Unfortunately, carbon cap-
and-trade legislation is a consumer compliance arrangement and 
will have a behavioral control mechanism. So maybe we should 
take a poll of the Nation and we can ask them, are you willing 
to pay still more for your energy? I will tell you from the 
letters and phone calls coming into my office and my district 
office right now, people may be optimistic because they are 
Americans and they live in the greatest country in the world 
but they are a little bit mad for that 3 to 4 minutes that it 
takes them to full up their tank and they do that two or three 
times a week. So I think I know the answer for my district, are 
you willing to pay more for energy, the answer is no, and they 
want this Congress to do something and reduce the cost of 
energy.
    On the issue of selling the carbon on a new exchange or new 
commodities market, there is probably not a person in the 
country who doesn't wonder if there is some type of market 
manipulation going on right now in the oil futures market and 
wonders if there are not people out there who are betting 
against America and driving the cost up. Will there not be new 
opportunities for manipulation in a cap-and-trade scheme and a 
carbon-traded market?
    Mr. Chairman, there is a great deal more than I know we 
need to go into today. I know we have got a long panel of 
witnesses. So I am going to yield back my time.
    I do think it is a little bit odd that we don't have more 
representation from the natural gas industry here. When we 
think of climate change, my district in Texas in Tarrant and 
Denton counties is one of the richest areas, one of the most 
prolific areas for drilling currently and we are drilling down 
into the Barnett shale 8,000 feet below the ground, because we 
used to be a seabed that was rich with small sea creatures that 
are now responsible for the production of that natural gas. 
That is climate change on a grand scale and we are reaping the 
benefits of that climate change today in my district in Texas. 
But I do wish we could hear from someone from the natural gas 
industry because I do think they are going to play a crucial 
role in whatever the future holds for this country, and I will 
yield back my time.
    Mr. Boucher. Thank you very much, Mr. Burgess, and let me 
assure the gentleman that we will be inviting representatives 
from the natural gas industry to testify at future climate 
change hearings.
    The gentleman from Massachusetts, Mr. Markey, was here 
earlier and has now returned and I would ask if he would care 
to make an opening statement.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Boucher. The gentleman is recognized for 3 minutes.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. And I want to thank you, Mr. Chairman, and 
Chairman Dingell for holding this hearing to consider proposed 
climate legislation including the Investment in Climate Action 
and Protection Act, or ICAP, which I introduced earlier this 
month.
    The scientific debate on global warming is over. The chorus 
for action is deafening and the costs of delay grow by the day. 
We must act now to cap heat-trapping pollution and spark a 
clean energy revolution that will save the planet and return 
America to a position of economic and moral leadership. We can 
only do that by enacting legislation that satisfies four core 
principles. One, we must reduce greenhouse gas emissions 
quickly and deeply enough to avoid dangerous global warming at 
least 80 percent by 2050. Two, we must transition America to a 
clean energy economy by investing aggressively in efficiency 
and renewable energy technologies. Three, we must avoid 
windfalls for polluters and protect American consumers and 
workers using climate legislation as a vehicle to create jobs 
and grow our economy. And four, we must help defend vulnerable 
communities and ecosystems against those impacts of global 
warming that unfortunately can no longer be avoided.
    I can only support legislation that satisfies these 
principles, which are set forth in a letter to the Speaker that 
Mr. Waxman, Mr. Inslee, and I have circulated with 80 other 
members including six on this subcommittee. The ICAP bill 
reflects these principles. It sets up a cap and a best system 
that is science-based, consumer-focused, market-fueled and 
technology-driven. It reduces covered emissions by 85 percent 
by 2050. It makes polluters pay by auctioning 100 percent of 
pollution allowances by 2020. ICAP returns over half of the 
proceeds directly to consumers through tax credits and rebates. 
The result: 80 percent of Americans would reduce benefits and 
two-third of U.S. households would be fully compensated for any 
cost increases from the bill. ICAP invests trillions of dollars 
in efficiency, clean energy technology, and in American 
farmers, workers and communities. Finally, it sets up a system 
of carrots and sticks to ensure that countries like China and 
India will take comparable action.
    I look forward to working with Chairman Dingell, with you, 
Chairman Boucher, and other members of the committee to develop 
climate legislation that is effective and fair. ICAP provides a 
model and I will work to build support for this approach. I 
thank you and I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Mr. Markey.
    The gentleman from North Carolina, Mr. Butterfield, is 
recognized for 3 minutes.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. I want to thank you, Mr. Chairman, for 
convening this most important hearing today. We have certainly 
been looking forward to it, and I want to thank you for your 
leadership in this area. You told us a few months ago that you 
were serious about climate change and today is a demonstration 
of your willingness to tackle head-on this very important 
issue.
    I also want to thank the eight witnesses who sit in front 
of us. Thank you very much for coming and giving us your 
testimony today. We are going to listen very carefully and 
review all of your written testimony as well.
    But Mr. Chairman, I agree with my colleagues that the 
question with global climate change legislation is not whether 
Congress should act but rather how we move forward in a most 
responsible and expeditious manner. We all agree that this is a 
very, very fundamental issue that we must address. The world is 
watching and the American people are watching, and I agree that 
we cannot continue to ignore this issue. We are currently 
experiencing the disturbing effects of climate change. Most of 
us now agree with that, from the melting of the icecaps to the 
exacerbation of the hurricane season, and I am from North 
Carolina and certainly we understand that, all the way to the 
substantive evidence and suggesting that these problems will 
continue to grow if we don't act responsibly. And so, Mr. 
Chairman, it is my hope that we will soon put forward carefully 
constructed policy which addresses this issue in a direct but 
balanced way. We must work together, and I want to pledge my 
cooperation to my friends on the other side of the aisle that 
we will work together on this issue.
    Among the numerous issues essential to the discussion of 
this matter mitigating the cost on low- and middle-income 
families. That is very important. When the cost of reform 
reaches the many low-income residents who I represent, we need 
to ensure that they are not swept away and swept up and away. 
We must take every opportunity to allay the costs and provide a 
safety net for people of modest means. As this discussion moves 
forward, it is important to remember that those who contribute 
the least to this problem should not be forced to shoulder the 
greater burden.
    And so I thank you, Mr. Chairman, for your vision and for 
your leadership. At this time I am going to yield back the 
balance of my time.
    Mr. Boucher. Thank you very much, Mr. Butterworth. The 
gentleman----
    Mr. Butterfield. Butterfield.
    Mr. Boucher. I am sorry, Mr. Butterfield.
    Mr. Butterfield. Thank you, Mr. Barker.
    Mr. Boucher. I am just going to recognize somebody else at 
this point. The gentleman from Michigan, Mr. Rogers, is 
recognized for 3 minutes.

  OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Rogers. Thank you, Mr. Chairman. I am not sure how you 
follow that, but thank you.
    Mr. Chairman, thank you for holding today's hearing. It is 
clear to me now that there are really two schools of thought on 
how we deal with our energy crisis. The first school of thought 
is one that is represented by most of today's witnesses is, 
quite frankly, my colleagues' school of thought on the other 
side of the aisle. They say that high gas prices are a good 
thing because high gas prices will get people to use less. I 
give Barack Obama credit for having the guts to say he likes 
$4-a-gallon gasoline. At least it is an honest answer. It is an 
answer the American people can appreciate, and most of today's 
panelists are going to tell us the same version of the very 
same thing: high energy prices are a good thing, high energy 
prices will get us to consume less, high energy prices will get 
us to switch to other fuels. But I ask, at what cost?
    We know that cap-and-trade is going to cost over $1 
trillion in new taxes. We also know that every plan before us 
today will destroy jobs and raise the price of energy. The only 
questions are how many and how much. In my home State of 
Michigan, we struggled with high energy prices, high taxes, and 
bad policy. The high price of natural gas and President Bush's 
terrible decision to impose steel tariffs has done more to 
destroy manufacturing jobs in my State than anything else. That 
is a lesson that this committee should learn from. When you 
raise the cost of doing business at home and then you make it 
more expensive to import products, you destroy jobs and, quite 
frankly, you destroy lives.
    We cannot continue down this road. We cannot ignore the 
pleas of working Americans and our middle class to lower gas 
prices now. We certainly cannot support a plan that will bring 
us $5 or $6-a-gallon gasoline and electric bills that are twice 
what they are today. I know that some people will say that high 
prices are important because they send the price signal to the 
market. I suppose that is true. But high energy prices send 
another signal as well. It is a signal to working Americans 
that Washington simply doesn't care about them, that if you are 
in the middle class, we may in fact ruin your opportunity to 
stay there.
    It is offensive that we would seriously consider a plan to 
raise gas prices today. It is offensive to the mother who can 
no longer afford to attend her children's away sports games. It 
is offensive to the independent truckers who are selling their 
trucks and getting out of the business they love because their 
margins are gone today. It is offensive to the airline workers 
who again are on the precipice of bankruptcy.
    Mr. Chairman, there is another way. We can be energy 
independent. We can be a whole lot cleaner as well. Right now 
in my home State, Michigan researchers are working 24 hours a 
day to produce lithium ion batteries. We can make and unleash 
the intellectual capital of this country in a better way versus 
big regulation, big mandates and big tax bills. It benefits no 
one when we charge the average American twice as much for their 
electric bill, twice as much for their gasoline, and to the 
end, we make Wall Street very, very rich and the average 
American much less better off.
    I would urge us to pick innovation over regulation and 
taxes, Mr. Chairman, and I look forward to further discussion 
of this important debate.
    Mr. Boucher. Thank you very much, Mr. Rogers.
    The gentlelady from Oregon, Ms. Hooley, is recognized for 3 
minutes.

 OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Ms. Hooley. Thank you, Mr. Chair, for holding this 
important hearing and I thank all of our witnesses appearing 
before us today and providing that testimony.
    We have a long day of testimony before us so I won't take 
very long in my opening remarks. Let me just say over many 
years in Congress, I have sat through dozens of hearings on 
climate change in multiple committees: Science Committee, 
Budget Committee, and this committee. And now comes the really 
hard work. We are going to address climate change but how? How 
much of our lives will change? How much will it cost? Who will 
be the winners? Do we have to have losers? And to me and the 
many people in Oregon that I have talked to about this, 
striking a balance is key. I met with Oregon's energy producers 
and major consumer groups, agriculture, forestry, environmental 
groups, and many kinds of businesses. Almost to a person, they 
encouraged me to work for legislation that would, number one, 
take meaningful steps to cut emissions, reduce current carbon 
levels in the atmosphere, and provide opportunities for 
American businesses to prosper. In addition, they said 
legislation should account for the economic results of 
addressing climate change for those businesses adversely 
affected. Legislation should also provide money for ecosystem 
adaptation. They urged me to get Congress to act now.
    Last year I asked scientists from the Intergovernmental 
Panel on Climate Change if it was too late to reverse the 
effects of climate change. Dr. Richard Alley, a lead author of 
IPCC's assessment report, Climate Change 2007, stated that the 
loss of snow pack due to global warming will cause summer 
droughts in the West, which could adversely affect farmers and 
fisherman and the health of our salmon stocks. Could it be that 
we are already seeing that with the most recent salmon 
disasters?
    Through the Bush Administration and prior Congresses, we 
have shown little concern with global climate change. States 
like Oregon and Illinois who are testifying here today have 
filled that void and led the way in many key areas by being 
aggressive and working to curb carbon emissions and setting 
standards for renewable energy production. As an Oregonian, I 
am proud of the strides we have made as a State to be a leader 
in this and other environmental matters. However, it is no 
substitute for gains we can make as a country if we establish 
policies that affect the country as a whole, and that is the 
task before us, and I look forward to your testimony.
    Mr. Boucher. Thank you very much, Ms. Hooley.
    The gentleman from Louisiana, Mr. Melancon----
    Mr. Waxman. Mr. Chairman, may I just ask----
    Mr. Boucher. Mr. Waxman?
    Mr. Waxman. I would like to waive my opening statement and 
reserve that time for questions because I have to go over and 
chair another meeting. I just wanted to make that point.
    Mr. Boucher. That is fine. The gentleman will have 3 
minutes added to his time for questioning the first panel.
    The gentleman from Louisiana, Mr. Melancon, is recognized 
for 3 minutes.
    Mr. Melancon. Thank you, Mr. Boucher. I am not going to 
take the 3 minutes. I would rather have it spent with 
discussions and input from the panel that is here, so I just 
waive the rest of my time. Thank you.
    Mr. Boucher. The gentleman waives his opening statement and 
3 minutes will be added to his questioning time.
    We welcome now our first panel of witnesses, and we thank 
each of our guests for their patience this morning. The first 
witness will be Mr. Kraig Naasz, the President and Chief 
Executive Officer of the National Mining Association; Mr. 
Michael Goo, the Climate Legislative Director for the Natural 
Resources Defense Council; Mr. Alan Reuther, Legislative 
Director of the United Auto Workers, Ms. Lisa Jacobson, the 
Executive Director of the Business Council for Sustainable 
Energy; Mr. Thomas Kuhn, the President of the Edison Electric 
Institute; Ms. Mary Minette, Director of Environmental 
Education and Advocacy for the Evangelical Lutheran Church in 
America; Admiral Frank Bowman, the President and Chief 
Executive Officer of the Nuclear Energy Institute; and Mr. Ford 
West, the President of the Fertilizer Institute. We welcome 
each of you, and without objection, your prepared written 
statements will be made a part of the record. We would now 
welcome your oral summaries, and given the number of witnesses 
we have both on this panel and the next, we ask that your oral 
statements be kept to approximately 5 minutes.
    Mr. Naasz, we will be happy to begin with you.

  STATEMENT OF KRAIG R. NAASZ, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, NATIONAL MINING ASSOCIATION; ACCOMPANIED BY GLENN 
  KELLY, VICE PRESIDENT, GOVERNMENT AFFAIRS, NATIONAL MINING 
                          ASSOCIATION

    Mr. Naasz. Thank you, Mr. Chairman. Chairman Boucher, 
Ranking Member Upton and members of the subcommittee, I 
appreciate this opportunity to testify this morning.
    As you mentioned, my name is Kraig Naasz. I am President 
and CEO of the National Mining Association. NMA represents coal 
producers, mineral producers and mining equipment manufacturers 
with combined annual sales of $200 billion.
    NMA is committed to playing a constructive role in the 
development of policies to address global climate change and to 
meet our Nation's growing demand for energy. We stand ready to 
assist you to achieve these important and inextricably linked 
objectives.
    Coal is a prime source of energy in the United States and 
throughout the world and is likely to remain so as global 
energy demand continues to increase. Coal presently fuels 40 
percent of the world's electricity generation. In the United 
States, 50 percent of our electricity is generated from coal 
and the Energy Information Administration projects that number 
will grow to 54 percent by 2030. EIA also estimates that the 
demand for electricity will increase by 30 percent over the 
next 2 decades to meet the needs of a growing population and 
expanding economy.
    As such, meaningful efforts to address climate change in a 
sustainable manner will depend upon the development and 
deployment of advanced clean coal and carbon capture and 
storage technologies. To that end, NMA commends Chairman 
Boucher, Representatives Barton, Upton, Doyle, Matheson, 
Whitfield, and Shimkus, among others, for introducing the 
Carbon Capture and Storage Early Deployment Act. This important 
legislation, while not the subject of today's hearing, will 
help to reduce greenhouse gas emissions by providing the 
funding needed to bring CCS technologies to commercial 
fruition. NMA looks forward to working with you, Mr. Chairman, 
in support of this important legislation's enactment.
    In developing federal climate change legislation, it is 
essential that Congress gets it right. The consequences for 
getting it wrong are starkly described in the National Energy 
Technology Laboratory's recent analysis wherein NETL finds that 
dramatic shifts away from coal will lead to, and I quote, 
``Spectacular price increases for households and industry with 
serious and damaging implications for the reliability of 
electricity supply and the viability of the U.S. economy.''
    Furthermore, the National Electric Reliability Council has 
warned that many regions of our country face an imminent 
shortage of capacity to generate and transmit electricity.
    The good news is that 27 coal-based generating units and 
plants representing more than 15,000 megawatts of electricity 
are currently being constructed throughout the United States. 
Given the demand forecast, even more facilities would likely be 
underwent were it not for the uncertainty regarding the form 
and timing of efforts to reduce greenhouse gas emissions.
    With these considerations in mind, NMA supports the 
adoption of federal climate legislation that promotes America's 
continued economic and energy security. We believe such 
legislation should promote the continued use of our Nation's 
abundant coal resources as a critical part of a diverse and 
affordable supply of energy, that it should promote the 
accelerated development and deployment of advanced clean coal 
and CCS technologies, establish a uniform legal framework for 
long-term carbon storage, encourage energy efficiency, 
harmonize emission reduction expectations with the commercial 
deployment of cost-effective emissions control technology, 
ensure an economy-wide approach that supports economic growth 
and the global competitiveness of energy-intensive industries, 
and include appropriate participation by developed and 
developing countries.
    Regrettably, the Boxer-Lieberman-Warner Climate Security 
Act failed to meet these objectives and the Senate was not 
provided with an opportunity to consider any substantive 
amendments. As such, NMA strongly opposed the Climate Security 
Act as crafted. In our view, neither the Safe Climate Act nor 
the Investing in Climate Action and Protection Act addresses 
the principles we view as necessary to sustain affordable and 
reliable energy for American families and businesses.
    The Low Carbon Economy Act sponsored by Senators Bingaman 
and Specter represents a more workable framework that with 
appropriate modification could promote the development of 
technologies needed to achieve its proposed emissions 
reductions. However, significant modification would be required 
to address our industry's other major objectives. In our 
assessment, each of these legislative proposals falls well 
short of balancing our environmental aspirations with our 
energy needs. However, I wish to underscore that NMA remains 
committed to working with you to develop legislation that 
addresses climate concerns while providing continued economic 
and energy security.
    Mr. Chairman, this concludes my oral remarks. Again, I 
appreciate this opportunity to appear before you this morning 
and I look forward to answering your questions.
    [The prepared statement of Mr. Naasz follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Mr. Naasz.
    Mr. Goo, we will be happy to hear from you.

STATEMENT OF MICHAEL GOO, CLIMATE LEGISLATIVE DIRECTOR, NATURAL 
                   RESOURCES DEFENSE COUNCIL

    Mr. Goo. Thank you, Chairman Boucher and Ranking Member 
Upton for the opportunity to testify and for holding this 
hearing on legislative proposals to reduce greenhouse gas 
emissions. My name is Michael Goo. I am the Climate Legislative 
Director for the Natural Resources Defense Council.
    To begin my testimony, I will emphasize but not belabor the 
point that global warming is upon us now. As dramatic satellite 
photos show--see page 2 of my testimony--since 1979, the extent 
of summertime arctic ice has declined by 40 percent. Last night 
at 1:38 a.m., I received an e-mail, and I will emphasize that 
at NRDC, we do work 24 hours a day on global warming. The 
BlackBerry uses a little electricity but we try and make sure 
it is renewable energy. Anyway, the e-mail forwarded an article 
from the BBC from a colleague in California and it said that 
some researchers are predicting that the arctic ice could be 
gone in the summertime by 2013. Now, most of the bills before 
you begin to take action in 2012. That is just one year before 
the arctic ice would be gone, too late to save the arctic ice. 
We need action. We need it now.
    You are going to hear a lot about costs today. The first 
point to remember about cost is that the cost of inaction is 
much larger than any possible cost of action. Lord Nicholas 
Stern in a study commissioned by the British government has 
estimated that the cost of inaction globally will be 5 to 11 
percent of global GDP. Building on that work, researchers at 
Tufts University has recently analyzed the cost of inaction for 
the U.S. economy and found that doing nothing will cost the 
United States more than $3.8 trillion annually by 2100.
    The second point is that these bills are not, contrary to 
the arguments of some, economy killers. Cost models analyzing 
the entire U.S. economy uniformly predict the GDP will increase 
with climate legislation in place. I repeat, GDP will increase, 
it will continue to rise with climate legislation just a little 
bit more slowly. EIA, the Energy Information Agency, for 
instance, predicts that between 2007 and 2030, 23 years, GDP 
will increase by 74.9 percent without the Lieberman-Warner 
bill, and by 73.5 to 74 percent with the Lieberman-Warner bill. 
That is a difference of just 1.6 percent over 23 years.
    As the Congressional Research Service has explained, the 
GDP per capita impact of S. 2191 is within the noise of the 
reference cases. We need to recognize that with regard to our 
energy future, the die is not yet cast. cap-and-trade bills can 
dramatically affect that outcome in a positive fashion, 
especially if revenues are recycled to fund new technologies 
and mitigate impacts on consumers. Models that predict very 
high cost impacts for specific energy systems often ignore the 
vast untapped reserves we have for energy efficiency. They 
assume that low carbon technologies will not advance or will 
advance very slowly and they ignore the impacts of new policies 
like the recently enacted CAFE provisions. In short, they 
predict for at least the next decade a static energy picture 
using mostly outdated energy technologies and ignoring the 
possibility of funding sources worth hundreds of billions of 
dollars. That need not be the future if this committee acts 
now.
    An analysis by Michael J. Bradley Associates makes clear 
that reducing emissions to close to the level in the Lieberman-
Warner bill can be done without massive switching to natural 
gas and another undesirable effects. The limits, a 20 percent 
reduction by 2025, can be met with just a 10 percent increase 
in energy efficiency, deployment of renewable energy at twice 
the current rate, and 6 gigawatts of carbon capture and 
sequestration per year between 2015 and 2025. That is not a 
moon shot. It is eminently doable.
    Of all the committees in the Congress, this committee is 
uniquely suited to dealing with the problem of global warming. 
It has a deep reservoir of expertise and experience, both in 
the environmental area and in the energy field. And many of its 
members participated in the 1990 Clean Air Act amendments 
including Chairman Boucher, Congressman Dingell, and many other 
members of this committee. The bills now before you provide 
many excellent examples of ways in which global warming 
legislation can reduce emissions consistent with 
scientifically-based targets while helping to limit costs, 
create jobs, grow our economy, increase our energy 
independence, and spur new energy technologies for export to 
the world at large. But none of them are perfect.
    We urge you to act now to draft legislation as soon as 
possible and to seek to report such legislation to the full 
Committee on Energy and Commerce and to the full House of 
Representatives. We cannot afford to wait any longer.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Goo follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Mr. Goo, and let me note, 
following your testimony, that Mr. Goo did serve as one of the 
counsels for this subcommittee for a number of years and 
provided highly valuable service, and we are delighted to have 
you return today in a different capacity and thank you for your 
remarks. Mr. Goo mentioned Sir Isaac Stern. He will be the lead 
witness at a hearing this subcommittee will conduct one week 
from today and so those who are interested in his report and 
some of the conclusions that it reaches are welcome to attend 
that session.
    Mr. Reuther, we will be happy to hear from you.

 STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, UNITED AUTO 
                            WORKERS

    Mr. Reuther. Thank you, Mr. Chairman. My name is Alan 
Reuther. I am the legislative director for the UAW. The UAW 
appreciates the opportunity to testify before this subcommittee 
on legislative proposals to reduce greenhouse gas emissions. We 
applaud the Boxer-Lieberman-Warner, the Markey, the Bingaman-
Specter and the Waxman bills for all establishing an economy-
wide cap-and-trade program to reduce greenhouse gas emissions 
from the major sources of emissions in the United States. We 
are also pleased that most of these bills cover the fossil 
fuels and transportation sectors on an upstream basis. This 
minimizes regulation, promotes economic efficiency and ensures 
that all sectors are required to participate in reducing 
greenhouse gas emissions.
    The UAW opposes the provisions in the Waxman bill that 
would require EPA to regulate greenhouse gas emissions from 
light-duty vehicles. This would simply relax the pressure from 
the federal cap on other sectors without producing any 
additional reduction in greenhouse gas emissions beyond the 
level mandated by the federal cap. Thus, the only result of the 
EPA regulations would be to shift the burden of reducing 
greenhouse gas emissions from the relatively low cost electric 
power sector to the much higher cost auto sector. The UAW 
supports the safety valve cost containment provisions in the 
Bingaman-Specter bill. However, we also welcome the approach 
set forth in the Boxer-Lieberman-Warner bill, which would 
permit a pool of allowances to be borrowed from the future and 
auctioned to parties at set prices.
    The UAW applauds the Boxer-Lieberman-Warner, the Bingaman-
Specter and the Markey bills for including provisions designed 
to protect American businesses and workers from being placed at 
a competitive disadvantage by imposing carbon allowance 
requirements on certain imports from other nations that do not 
adopt comparable programs to reduce greenhouse gas emissions. 
However, these provisions need to be strengthened by making it 
clear that finished products such as automobiles and auto parts 
are covered under the international carbon allowance 
requirements.
    The UAW would especially like to commend the Boxer-
Lieberman-Warner and the Bingaman-Specter bills for using a 
portion of the revenues from the auction of carbon allowances 
to finance a program to encourage auto manufacturers and parts 
companies to retool facilities in the United States to produce 
advanced technology vehicles and their key components. This 
program can help to speed up the introduction of these 
vehicles, thereby reducing oil consumption and greenhouse gas 
emissions. At the same time, it can create tens of thousands of 
jobs for American workers.
    The UAW strongly opposes the provisions in the Boxer-
Lieberman-Warner, Markey and Waxman bills that would allow the 
EPA to retain residual authority under the Clean Air Act to 
regulate CO2 emissions. This means that EPA could 
supersede key decisions that Congress will make in enacting a 
federal cap-and-trade program concerning the timetable for 
reductions in CO2 emissions, the appropriate point 
of regulation and the distribution of economic burdens. We 
believe this would be inappropriate and untenable.
    The UAW also strongly opposes the provisions in the Boxer-
Lieberman-Warner and Markey bills that would supersede pending 
litigation over whether California and other States may 
regulate auto CO2 tailpipe emissions. We believe the 
courts should be allowed to resolve whether these regulations 
are tantamount to regulating fuel economy and are preempted by 
the federal CAFE program.
    In addition, the Boxer-Lieberman-Warner, Markey, and Waxman 
bills all fail to deal with the important issue of how State 
climate change measures will interface with the federal cap-
and-trade program. Because of this critical deficiency, State 
climate change measures would result in zero additional 
reduction in greenhouse gas emissions beyond the level already 
mandated by the federal cap-and-trade programs established by 
these bills. Although State measures could reduce emissions 
from a particular sector, this would simply relax the pressure 
from the federal cap on other sectors without providing any net 
environmental benefit. To avoid this nonsensical result, the 
UAW submits that any entities regulated by State climate change 
measures must be allowed to purchase and retire allowances from 
the federal cap-and-trade program to satisfy the State 
standards to the extent they are more stringent than comparable 
federal standards. This would guarantee that State measures 
actually produce additional reductions in greenhouse gas 
emissions while also allowing this to be accomplished in the 
most economically efficient manner.
    In conclusion, the UAW appreciates the opportunity to 
testify before this subcommittee. We look forward to working 
with the members of this subcommittee, the entire Congress and 
a new Administration to pass strong federal legislation that 
can achieve reductions in greenhouse gas emissions necessary to 
combat climate change while at the same time enhancing 
prospects for economic growth and the creation of jobs for 
American workers. Thank you.
    [The prepared statement of Mr. Reuther follows:]

                       Statement of Alan Reuther

                              Introduction

    Mr. Chairman, my name is Alan Reuther. I am the Legislative 
Director for the International Union, United Automobile, 
Aerospace & Agricultural Implement Workers of America (UAW). 
The UAW represents over one million active and retired workers 
across the country, many of whom work or receive retirement 
benefits from auto manufacturers and parts companies. The UAW 
appreciates the opportunity to testify before this Subcommittee 
on legislative proposals to reduce greenhouse gas emissions. We 
will focus on comments on the Climate Security Act of 2008 (S. 
3036) sponsored by Senators Boxer, Lieberman, and Warner; the 
Investing In Climate Action and Protection Act (H.R. 6186) 
sponsored by Representative Markey; the Safe Climate Act (H.R. 
1590) sponsored by Representative Waxman; and the Low Carbon 
Economy Act (S. 1766) sponsored by Senators Bingaman and 
Specter.
    The UAW shares the growing national concern about climate 
change. Scientific studies have confirmed that human use of 
fossil fuels is contributing to global warming. These studies 
underscore the major environmental challenges posed by global 
warming, including rising sea levels, changes in climate 
patterns, and threats to coastal areas. To avoid these dangers, 
we believe the growth in greenhouse gas emissions must be 
reduced and ultimately reversed.
    To address the problem of global warming in a meaningful 
way, the UAW believes we need a broad, comprehensive policy 
that will require all sectors of the economy to come to the 
table to help reduce our nation's greenhouse gas emissions. 
This includes stationary sources, such as power plants and 
factories. It includes our fossil fuels, such as coal, oil, and 
natural gas. And it includes all mobile sources, such as 
planes, trains, buses, and ships, as well as light duty 
vehicles, which have already had their carbon emissions reduced 
through the reformed CAFE program that was enacted last year.
    We believe each sector should be required to contribute to 
the reduction of greenhouse gases in a proportionate manner. No 
sector should enjoy a free ride or be exempted. No sector 
should be required to bear a disproportionate burden, or to 
shoulder costs that would have a devastating impact on its 
operations or employment.
    To achieve these objectives, the UAW strongly supports the 
establishment of an economy-wide mandatory tradable-permits 
program that will slow the growth of, and eventually reduce 
greenhouse gas emissions in the United States. We believe this 
type of ``cap-and-trade'' program should mostly be done on an 
``up-stream'' basis in order to minimize regulation and to 
ensure that all sectors of the economy participate in reducing 
greenhouse gas emissions. We also believe this program should 
include mechanisms to ensure that no sector is hit with 
unacceptable spikes in the price of carbon permits or burdens 
that would have a negative impact on economic growth and jobs. 
In addition, this program should include measures to ensure 
that our businesses and workers are not placed at an unfair 
competitive disadvantage with U.S. trading partners and 
developing countries. Finally, this program should carefully 
delineate the authority of the Environmental Protection Agency 
(EPA), as well as the authority of the states, and ensure that 
any state climate change measures are integrated with the 
federal program in a way that leads to further reductions in 
greenhouse gas emissions in an economically efficient manner.

                  Structure of CAP-and-Trade Programs

    The UAW applauds all of the legislative proposals for 
establishing economy-wide cap-and-trade programs to reduce 
greenhouse gas emissions. By covering the electric power, 
industrial, transportation and fossil fuels sectors, these 
bills effectively address the major sources of greenhouse gas 
emissions in the United States.
    The UAW also applauds the Boxer-Lieberman-Warner, Markey 
and Bingaman-Specter bills for covering the fossil fuels and 
transportation sectors on an ``upstream'' basis. This minimizes 
regulation, promotes economic efficiency, and also ensures that 
all sectors are required to participate in reducing greenhouse 
gas emissions. In contrast, we oppose the approach in the 
Waxman bill that simply leaves key decisions about the point of 
regulation and operation of the cap-and-trade program to the 
discretion of the Environmental Protection Agency (EPA). In our 
judgment, these critically important policy decisions should be 
made by Congress, not left to the discretion of a federal 
agency.
    The UAW also opposes the provisions in the Waxman bill that 
would direct EPA to regulate greenhouse gas emissions from 
light duty vehicles. We believe it is wrong to focus 
exclusively on light duty vehicles, and exclude other parts of 
the transportation sector. Furthermore, because the Waxman bill 
establishes a cap-and-trade program covering the transportation 
sector, EPA regulations dealing with light duty vehicles would 
not produce any additional reduction in greenhouse gases beyond 
the level mandated by the federal cap. Although the EPA 
regulations would reduce greenhouse gas emissions from the auto 
sector, this would relax the pressure from the federal cap on 
other sectors, especially the electric power sector. In the 
end, there would not be any net environmental benefit. The only 
result of the EPA regulations would be to shift the burden of 
achieving greenhouse gas reductions from the relatively low 
cost electric power sector ($20-30 per ton) to the much higher 
cost auto sector ($90-100$ ton). See ``Bringing Transportation 
into a Cap-and-Trade Regime.'' A. Denny Ellerman, Henry D. 
Jacoby, and Martin B. Zimmerman. MIT Joint Program on the 
Science and Policy of Global Change, Report No. 136, pps. 7-11, 
June 2006. This directly contradicts the fundamental tenet 
underlying the establishment of an economy-wide cap-and-trade 
program.
    We would note that various industries--such as airlines and 
steel--have already put forward amendments to exempt the coal 
or oil that they use from the requirements of the cap-and-trade 
programs. We oppose such ``carve outs'' for specific 
industries. To the extent any industries are exempted, this 
will only serve to increase the pressure on the rest of the 
industries and sectors that are still covered under the cap-
and-trade programs. In the end, this could unravel the 
prospects of enacting any meaningful federal program to combat 
climate change, which in our judgment must be premised on an 
equitable distribution of the resulting economic burdens.

                            Cost Containment

    The UAW believes it is essential that any cap-and-trade 
program include an effective mechanism for preventing price 
spikes and ensuring that no sector of the economy is forced to 
bear disproportionate costs or burdens that would have a 
negative impact on employment. In our judgment, the failure of 
the Markey and Waxman bills to include such provisions 
represents a serious deficiency.
    The UAW supports the ``safety value'' contained in the 
Bingaman-Specter bill. However, we also welcome the approach 
set forth in the Boxer-Lieberman-Warner bill, which would 
permit a pool of allowances to be borrowed from the future and 
auctioned to parties at set prices. In our judgment this could 
provide a workable mechanism for containing costs. However, we 
believe more work needs to be done to ensure that any pool of 
allowances is sufficiently large and is made available at 
acceptable prices.

                       International Competition

    The UAW applauds the Boxer-Lieberman-Warner, Bingaman-
Specter, and Markey bills for including provisions designed to 
ensure that American businesses and workers are not placed at a 
competitive disadvantage with our trading partners and 
developing nations. In particular, we welcome the provisions 
that would impose carbon allowance requirements on certain 
imports from other nations that do not adopt comparable 
programs to reduce greenhouse gas emissions.
    However, in our judgment these provisions still need to be 
strengthened in a number of respects. Most importantly, we are 
concerned that finished products, such as automobiles and auto 
parts, may not be covered under the international carbon 
allowance requirements. This would pose a major threat to the 
jobs of American workers, especially as China and India 
continue to ramp up their auto industries for export to the 
United States. Failing to extend the international carbon 
allowance requirements to finished products made from energy-
intense materials will drive the production of these products 
off-shore. It also will undermine the protection of U.S. 
suppliers of energy-intense materials by removing the 
international allowance requirements from these materials once 
they are formed into finished products.
    The UAW regrets that the Waxman bill does not appear to 
include any provisions to deal with the critically important 
issue of international competition.

                 Investing in New Technologies and Jobs

    The UAW is pleased that all of the proposals would reinvest 
revenues raised from the auctioning of carbon allowances to 
spur research and development of advanced, low carbon 
technologies, and to promote the deployment of these 
technologies throughout our nation. This can be critically 
important in ensuring that our economy continues to grow and 
that we create the jobs of the future in this country.
    The UAW would especially like to commend the Boxer-
Lieberman-Warner and Bingaman-Specter bills for including 
robust provisions that would use a portion of the revenues from 
the auction of carbon allowances to finance a program to 
encourage auto manufacturers and parts companies to retool 
facilities in the United States to produce advanced technology 
vehicles (hybrids, plug-in hybrids, clean diesels) and their 
key components. This type of program can help to speed up the 
introduction of these advanced technology vehicles, thereby 
reducing oil consumption and greenhouse gas emissions. At the 
same time, it will provide a significant incentive for auto and 
parts manufacturers to retool facilities in this country to 
produce these vehicles of the future and their key components. 
This can create tens of thousands of jobs for American workers.

      Residual EPA Authority to Regulate CO2 Emissions

    Even though the Boxer-Lieberman-Warner, Markey, and Waxman 
bills establish an economy-wide cap-and-trade program to reduce 
greenhouse gases, they would also allow the EPA to retain 
residual authority under the Clean Air Act to regulate 
CO2 emissions. This effectively means that EPA would 
be free to disregard key decisions that Congress will make in 
considering these bills concerning the timetable for reductions 
in CO2 emissions, the appropriate point of 
regulation, and the distribution of economic burdens. Instead, 
EPA would be free to regulate CO2 emissions from the 
electric power, industrial, transportation and fuels sectors in 
ways that differ fundamentally from these bills. The UAW 
submits that it is inappropriate and untenable to allow a 
federal agency to supersede decisions by Congress in this 
manner.
    In the absence of any federal cap-and-trade program, the 
UAW understands the importance of EPA's existing authority to 
regulate CO2 emissions. But if Congress is going to 
take the difficult step of enacting a comprehensive federal 
cap-and-trade program to combat climate change, we do not 
believe it makes any sense to allow EPA to proceed in ways that 
differ from this program.

                            State Authority

    The Boxer-Lieberman-Warner, Markey, and Waxman bills all 
preserve existing state authority to regulate greenhouse gases. 
However, the Boxer-Lieberman-Warner and Markey bills also 
supersede pending litigation over the scope of that authority, 
and make it clear that California and other states may regulate 
auto CO2 tailpipe emissions. The UAW strongly 
opposes these provisions as unnecessary and overreaching. We 
believe the courts should be allowed to resolve the contentious 
issue of whether the states may regulate auto CO2 
tailpipe emissions, or whether this is tantamount to regulating 
fuel economy and is preempted by the CAFE program. Attached to 
this testimony is an addendum setting forth the reasons why we 
believe the California auto CO2 tailpipe emissions 
standard is both pre-empted and seriously flawed.
    In addition, the Boxer-Lieberman-Warner, Markey and Waxman 
bills all fail to deal with the important issue of how state 
climate change measures--whatever their scope--will interface 
with the federal cap-and-trade program. Because of this 
critical omission, the unfortunate reality is that state 
climate change measures would result in ZERO additional 
reduction in greenhouse gas emissions beyond the level already 
mandated by the federal cap-and-trade programs established by 
these bills. Although state measures could reduce emissions 
from a particular sector, this would simply relax the pressure 
from the federal cap on other sectors, without providing any 
net environmental benefit. See ``Bringing Transportation into a 
Cap-and-Trade Regime.'' A. Denny Ellerman, Henry D. Jacoby and 
Martin B. Zimmerman. MIT Joint Program on the Science and 
Policy of Global Change, Report No. 136, pps. 7-11, June 2006.
    The UAW submits that this is a nonsensical result. If the 
states are going to be allowed to implement climate change 
measures that impose significant economic burdens on particular 
industries, a mechanism should be established to ensure that 
these state measures can interface with the federal cap-and-
trade program in an appropriate manner, and thereby provide 
additional reductions in greenhouse gas emissions.
    The UAW believes this can easily be accomplished by 
allowing entities regulated by state climate change measures to 
purchase and retire allowances from the federal program to 
satisfy the state standards (to the extent they are more 
stringent than comparable federal standards). This would 
guarantee that the state measures actually provide an 
environmental benefit through additional reductions in 
greenhouse gas emissions, while also allowing this to be 
accomplished in the most economically efficient manner in 
keeping with the fundamental premise of the federal cap-and-
trade program.

                               Conclusion

    The UAW appreciates the opportunity to testify before this 
Subcommittee on various legislative proposals for reducing 
greenhouse gas emissions. These proposals have many positive 
features, and therefore represent an important first step in 
the effort by Congress to deal effectively with the threat 
posed by global warming. At the same time, there are still many 
serious problems and issues that need to be resolved. The UAW 
looks forward to working with the Members of this Subcommittee, 
the entire Congress, and a new administration to pass strong 
federal legislation establishing an economy-wide cap-and-trade 
program to reduce greenhouse gas emissions. If this is done 
correctly, it can achieve the reductions necessary to combat 
climate change, while at the same time enhancing prospects for 
economic growth and the creation of jobs for American workers.

                                ADDENDUM

         State Auto CO2 Tailpipe Emissions Standards

    For a number of reasons, the UAW strongly opposes the 
provisions in the Boxer-Lieberman-Warner and Markey bills that 
would supersede pending litigation concerning the scope of 
state authority to regulate greenhouse gas emissions, and make 
it clear that California and other states may regulate auto 
CO2 tailpipe emissions
    First, these provisions would directly interfere with the 
ongoing litigation in the federal courts over whether the state 
CO2 tailpipe emissions regulations are pre-empted. 
In our judgment, the courts should be allowed to determine 
whether current law forbids the states from making such 
regulations. Although several lower federal courts have issued 
decisions on this issue, so far there has not been a definitive 
ruling by a Court of Appeals or the Supreme Court. 
Specifically, in Massachusetts v. EPA the Supreme Court did not 
consider the issue of whether state regulations regulating 
CO2 tailpipe emissions from automobiles are 
preempted by the Energy Policy and Conservation Act (EPCA).
    When higher federal courts do consider this issue, the UAW 
believes they will conclude that state CO2 tailpipe 
emissions regulations are indeed preempted. EPCA expressly 
preempts state standards that are ``related to'' the federal 
corporate average fuel economy standards (CAFE). 29 U.S.C. 
32919 Congress made this judgment when it established the CAFE 
program because it wanted to avoid the negative economic 
consequences on the auto industry of a multitude of different 
state standards.
    As a scientific matter, there is no dispute that reducing 
CO2 tailpipe emissions from automobiles is directly 
and overwhelmingly related to their fuel economy. The only way 
to significantly reduce CO2 tailpipe emissions is to 
substantially increase fuel economy through the adoption of 
engine, transmission and other vehicle technologies that 
increase fuel economy. There is a direct and indisputable 
correlation between the CO2 tailpipe emissions and 
fuel economy. As a result, statements by the California Air 
Resources Board (CARB) and the leading congressional advocates 
of the California CO2 tailpipe emissions standard 
all refer to the fuel economy (mpg) target achieved by that 
standard.
    Second, it is important to recognize that the California 
CO2 tailpipe emissions standard directly conflicts 
with the new reformed CAFE program enacted by Congress in the 
Energy Independence and Security Act of 2007 (EISA). 
Specifically, the California standard:
     Is not based on an attribute-based system like the 
reformed CAFE program. Instead, it applies the same rigid 
formula to all manufacturers, regardless of their product mix. 
This undercuts the effectiveness of the standard, since 
companies producing towards the smaller end of the passenger 
car and light truck markets will not have to make as great an 
effort to reduce the CO2 emissions and to increase 
the fuel economy of their fleets. In effect, it significantly 
discriminates against full line manufacturers.
     Does not maintain separate standards for passenger 
cars and light trucks. As a result, it discriminates against 
and penalizes companies whose product mix is more oriented 
towards the light truck market.
     Exempts auto manufacturers whose production is 
below a certain threshold. This also undercuts the effort to 
reduce CO2 emissions and improve fuel economy. And 
it gives a major competitive advance to newer entrants into the 
auto market.
    Third, granting a waiver to California will not simply 
result in two standards for vehicles, a federal standard and a 
more stringent California standard adopted by many states. 
Instead, in order to comply with the CO2 tailpipe 
emissions standards adopted by California and other states, 
auto manufacturers would have to make sure that the vehicles 
they sell in each state satisfy this stringent standard. 
Because of product mix differences in different states, it 
would be virtually impossible for the auto manufacturers to 
satisfy this compliance burden. Even though a manufacturer is 
selling the same type of vehicles with the same technologies in 
each state, as a result of product mix differences the 
manufacturer might be in compliance in one state, but flunk the 
same standard in another state.
    Fourth, the reduction in greenhouse gas emissions and 
improvement in fuel economy which proponents of the California 
standard hope to achieve will be significantly offset by 
increased CO2 tailpipe emissions and decreased fuel 
economy in states that have not adopted this standard. The new 
federal CAFE standard established by Congress in EISA simply 
requires the auto manufacturers to comply with stiffer fuel 
economy targets for their entire nationwide fleets of passenger 
cars and light trucks. To the extent that California and other 
states impose more stringent fuel economy/CO2 
standards on the vehicles sold by manufacturers in those 
states, this simply relaxes the fuel economy target that the 
manufacturers will have to meet in the rest of the country to 
remain in compliance with the new CAFE standard. In effect, the 
manufacturers will be able to increase the number of larger, 
less fuel efficient passenger cars and light trucks that they 
sell in the states that have not adopted the California 
CO2 tailpipe emissions standard.
    Fifth, allowing states to proceed with CO2 
tailpipe emissions standards would raise the prospect of states 
seeking to combat global warming through measures that place 
the economic burden on the economies of other states. In our 
judgment, this type of ``economic warfare'' raises troubling 
constitutional issues.

                                SUMMARY

    The UAW applauds all of the legislative proposals on 
climate change for establishing economy-wide cap-and-trade 
programs to reduce greenhouse gas emissions. We also commend 
the Boxer-Lieberman-Warner, Markey and Bingaman-Specter bills 
for covering the fossil fuels and transportation sectors on an 
``upstream'' basis, which will minimize regulation and ensure 
that all sectors are required to participate in reducing 
greenhouse gas emissions.
    The UAW supports the provisions in the Bingaman-Specter 
bill that would establish a ``safety value'' to contain costs. 
But we also welcome the provisions in the Boxer-Lieberman-
Warner bill that seek to achieve the same objective by creating 
a pool of allowances that could be borrowed from the future and 
auctioned at set prices.
    The UAW applauds the Boxer-Lieberman-Warner, Bingaman-
Specter, and Markey bills for including provisions to ensure 
that American businesses and workers are not placed at a 
competitive disadvantage with our trading partners, by imposing 
carbon allowance requirements on imports from other nations 
that do not adopt comparable programs to reduce greenhouse gas 
emissions. However, we believe these provisions need to be 
strengthened to make it clear that certain finished products, 
such as automobiles and auto parts, are covered by these 
protections.
    The UAW commends the Boxer-Lieberman-Warner and Bingaman-
Specter bills for including robust provisions that would use a 
portion of the revenues from the auction of the carbon 
allowances to finance a program to encourage auto manufacturers 
and parts companies to retool facilities in the United States 
to produce advanced technology vehicles and their key 
components. This would help to reduce greenhouse gas emissions, 
while creating tens of thousands of jobs for American workers.
    The UAW strongly opposes the provisions in the Boxer-
Lieberman-Warner, Markey and Waxman bills that would allow the 
EPA to retain residual authority under the Clean Air Act to 
regulate CO2 emissions. This would effectively allow 
EPA to disregard key decisions that Congress will make 
concerning the timetable for reductions in CO2 
emissions, the appropriate point of regulation, and the 
distribution of economic burdens.
    The UAW also strongly opposes the provisions in the Boxer-
Lieberman-Warner and Markey bills that would supersede pending 
litigation over whether the California auto CO2 
tailpipe emission standard is tantamount to regulating fuel 
economy and is preempted by the CAFE program. This contentious 
issue should be left for the courts to resolve.
    In addition, the Boxer-Lieberman-Warner, Markey and Waxman 
bills all fail to deal with the important issue of how state 
climate change measures will interface with the federal cap-
and-trade program. Because of this omission, state climate 
change measures would result in ZERO additional reduction in 
greenhouse gas emissions beyond the level already mandated by 
the federal cap-and-trade programs established by these bills. 
Although state measures can reduce emissions from a particular 
sector, this would simply relax the pressure from the federal 
cap on other sectors, without providing any net environmental 
benefit.
    The UAW believes this fundamental defect in the three bills 
can easily be solved by allowing entities regulated by state 
climate change measures to purchase and retire allowances from 
the federal program to satisfy the state standards (to the 
extent they are more stringent than comparable federal 
standards). This would guarantee that the state measures 
actually provide an environmental benefit through additional 
reductions in greenhouse gas emissions, while also allowing 
this to be accomplished in the most economically efficient 
manner.
                              ----------                              

    Mr. Boucher. Thank you very much, Mr. Reuther.
    Ms. Jacobson.

   STATEMENT OF LISA JACOBSON, EXECUTIVE DIRECTOR, BUSINESS 
                 COUNSEL FOR SUSTAINABLE ENERGY

    Ms. Jacobson. Thank you, Mr. Chairman and members of the 
subcommittee for the opportunity to share views of clean energy 
businesses in the United States. Our industries are actively 
investing capital and creating jobs that help our Nation reduce 
greenhouse gas emissions. They include advanced batteries, 
biomass, biogas, fuel cells, geothermal, hydropower including 
new waterpower resources such as ocean, tidal and in-stream 
hydrokinetic, natural gas, solar, wind, and supply-side and 
demand-side energy efficiency. I have provided more detailed 
perspectives on the five legislative proposals in my written 
testimony so I will use my time this morning to describe why 
existing clean energy technologies need to be the centerpiece 
of any federal response to climate change and provide 
recommendations on how specific elements are needed in the 
legislation to stimulate these investments.
    The Council's members are businesses and we support federal 
action to address climate change. We therefore commend the 
bill's sponsors and committee members for their leadership in 
the development of national climate change legislation and we 
appreciate the thoughtful work that this committee has also put 
into the issue to date. As businesses, we support market-based 
approaches such as cap-and-trade. We think that offers a chance 
to effectively and cost-effectively reduce emissions and 
stimulate investment that we will need for our future energy 
sources.
    The Council feels strongly that we do not need to wait to 
begin to reduce greenhouse gas emissions. We have technologies 
that are readily available today and many of them are cost-
effective to reduce greenhouse gas emissions. According to a 
March 2008 report by McKinsey and Company, the Nation can 
reduce greenhouse gas emissions in 2030 by 3 to 4-and-a-half 
gigatons. That is up to 28 percent below 2005 levels by using 
existing tested approaches and high-potential emerging 
technologies. McKinsey estimates that the total needed 
investments to achieve this is 1.5 percent of the investments 
the U.S. economy is expected to make over this period. 
Deploying existing clean energy technology as soon as possible 
will ease this transition to a future carbon-constrained 
economy. Starting early pays clear dividends. This is even more 
urgent in the period leading up to 2020 as the United States 
faces electric demand growth and regulatory uncertainty on 
climate change policy is stalling some domestic sector 
investments. Existing technologies can help smooth out this 
transition.
    Further, deployment of existing technologies creates high-
paying U.S. jobs and increases our economic prosperity. Every 
State can benefit and these jobs are not easily outsourced. 
Therefore, existing clean energy technology deployment 
represents the vital first phase of a U.S. climate change 
program.
    In order for clean energy technologies to be able to play 
their role in reducing emissions, a federal climate change 
program must do several things. First, it must send clear, 
predictable signals to the market to invest in these sectors 
over the short, medium, and long term. Businesses need to know 
where to invest their capital. Second, it must ensure that 
financial mechanisms such as allocation policy and auction 
proceeds are directed at near-term emission reduction. These 
provisions also send signals to the market and can drive 
significant market growth in existing clean tech sectors. 
Third, it must address regulatory and market barriers in the 
power sector, providing incentives and policy direction that 
shifts our Nation to less emitting energy generation, 
distribution, and use. The Council has released a package of 
energy policies and incentives under the Clean Energy 
Deployment Path to Climate Solutions Act that can be adopted by 
Congress immediately. This will deploy existing technology and 
start us down the path to reduce emissions. Fourth, it should 
include a robust offset program as a vehicle to deploy 
technology in sectors that are not under a cap and to lower the 
cost of compliance. However, integrity in this offset program 
is critical. Finally, we support credit for early action to 
recognize businesses and other entities that take steps now to 
reduce emissions. This will also deploy technology.
    As with other major economy-wide proposals, the details 
will be critical. We need to ensure that there is clarity in 
the markets and we start forward with the first phase of a U.S. 
climate change program ensuring that existing clean energy 
technology is deployed.
    Thank you very much for your time and your consideration.
    [The prepared statement of Ms. Jacobson follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Ms. Jacobson.
    Mr. Kuhn.

    STATEMENT OF THOMAS R. KUHN, PRESIDENT, EDISON ELECTRIC 
                           INSTITUTE

    Mr. Kuhn. Thank you, Chairman Boucher and members of the 
Committee. My name is Tom Kuhn, president of Edison Electric 
Institute, and I would first like to commend the Committee for 
their thorough and very inclusive work that they have done on 
this particular issue. I think that the white papers and the 
many, many hearings you have are designed to address the 
difficulty and complexity of this issue.
    The electric industry has been a leader in reductions of 
greenhouse gas emissions since 1994. We established a program 
to do that and we are responsible for about two-thirds of the 
overall emissions reductions that have been reported to the 
Federal Government at this point in time. More than a year ago, 
our board of directors did take a unanimous position that 
indicated we would support legislation to achieve greater 
reductions in greenhouse gas emissions and to establish a price 
of carbon, either by a tax or a cap-and-trade.
    I would first like to mention the magnitude of that 
challenge though. With population economic growth, the Energy 
Information Administration estimates that by the year 2030, 
electricity growth will grow by 30 percent and that is after 
factoring in the very significant provisions that you passed in 
the Energy Policy Act of 2007 for energy efficiency. 
Electricity is the lifeblood of the economy so our main job to 
supply electricity and to make sure it is reliable and there 
when people need it.
    In order to do this job to reduce greenhouse gas emissions 
where you are going to have to increase the electricity supply 
and at the same time reduce emissions, we are going to need the 
full suite of technologies to accomplish this issue, and I 
would like to talk a little bit about--turn to a slide that we 
have that was done by the Electric Power Research Institute 
that talks about again the challenges of this task.
    [Slide shown.]
    The EPRI put up a--did a thorough, exhaustive study and we 
have complemented it by a tremendous amount of work by our CEO 
team over the past year and a half to look at all the 
technologies that we would need to deal with the global climate 
issue, and I might emphasize that this work talks about the 
technological feasibility of these technologies so that we are 
really pushing the envelope on them and would need significant 
public policy support in order to accomplish it.
    First, we start out with energy efficiency, which we call 
the fifth fuel, and I think we have done a great deal over the 
past decades, several decades on energy efficiency but we do 
believe we can do a great deal more and we can do it with the 
help of major new technologies such as advanced meters and 
information systems and new technologies in the building 
efficiency and appliance efficiency that can enable us to 
achieve a lot more. The Congress is talking about policies that 
would reduce the depreciation for advanced meters. That would 
help very much. Incidentally, on that target, I might point out 
that electricity growth for the past 10 years has been over 2 
percent. The Energy Information Administration talks about it 
declining to somewhere in the neighborhood of 1 percent and 
EPRI is talking about the possibility of going to .7 percent. 
So again, that talks about the magnitude that we are looking to 
to achieve in the area of energy efficiency.
    In the area of renewables, the industry has been strongly 
supportive of additional renewables. In fact, wind is one of 
the fastest growing fuels that we see. But once again, we 
estimate here, the Energy Information Administration talks 
about a doubling of renewables between now and the year 2030. 
EPRI is pushing for a quadrupling of those renewables. Right 
now renewables produce about 2 percent of our overall electric 
generation so if we do that, we will get a lot more and it will 
be very necessary but it still would not produce a significant 
percentage of the overall generation. In order to get more 
renewables, we are going to need transmission policies that 
will allow us to get the transmission to where the renewables 
are needed, and we certainly also need tax support that would 
entail extension of the production tax credits and the 
investment tax credits for renewables.
    Nuclear generation--every CEO of electric utilities around 
the world who are members of our organization will indicate 
that if you are going to make the goals that you want to make 
with global climate change, you will need additional nuclear 
power plants. We now have about 118 gigawatts of nuclear energy 
in this country. The Energy Information Administration talks 
about many additional nuclear power plants that would be 
brought on board by the year 2030. We are talking about the 
possibility of bringing 64 gigawatts of new nuclear plants on 
by that period of time, and that again is a huge challenge but 
one that will be necessary.
    New clean coal technologies and carbon capture and 
storage--again, if you see that chart, you see the big bar that 
is going to be necessary for us to bring on carbon capture and 
storage and new clean coal technologies that will enable us to 
remove the carbon from--or capture and sequester and remove the 
carbon from coal power plants. This is a huge task and one that 
we need to advance with a great deal of funding for these new 
technologies in the near term.
    Finally, plug-in hybrid electric vehicles. We think the 
PHEVs can provide a great deal not only in the energy and 
security side but on the environmental side as these vehicles 
come in and reduce our dependence on oil and also allow us to 
reduce greenhouse gas emissions in a major way.
    All of these things are ambitious targets, and if we have 
overly ambitious targets, particularly in the near term, it 
will entail us moving toward more use of natural gas and that 
would further drive up natural gas prices and would certainly 
hurt our ability to make the long-term goals. We believe that 
need every one of these technologies. There is no silver 
bullet. You can't pick out energy efficiency and renewables and 
said that will do it all. You can't pick out nuclear and say 
that will do it all. We need everything in order to get it 
done.
    We do have four additional major principles that I would 
just like to say, first----
    Mr. Boucher. Mr. Kuhn, your time is about 2 minutes over at 
this point and----
    Mr. Kuhn. Cost containment mechanisms are going to be very 
important, like a safety valve. Offsets will be very important 
to reduce the cost. We need all nations to participate and we 
certainly need to harmonize the federal and state policies in 
order for us to do this thing with an overall national policy.
    I very much appreciate the opportunity to testify, Mr. 
Chairman.
    [The prepared statement of Mr. Kuhn follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Mr. Kuhn.
    Admiral Bowman.

  STATEMENT OF ADMIRAL FRANK L. BOWMAN, U.S. NAVY (RETIRED), 
PRESIDENT AND CHIEF EXECUTIVE OFFICER, NUCLEAR ENERGY INSTITUTE

    Admiral Bowman. Thank you, Mr. Chairman, Ranking Member 
Upton and Ranking Member Barton. Thank you very much to the 
committee for allowing me this opportunity to represent the 
nuclear energy industry at this hearing to discuss these 
legislative proposals. I am retired Admiral Skip Bowman, 
president and chief executive officer of the Nuclear Energy 
Institute.
    NEI has taken no specific position on the various 
legislative proposals currently before Congress. Nonetheless, 
NEI is deeply engaged in and committed to the debate over 
climate policy. A year ago the NEI executive committee endorsed 
a set of principles establishing the nuclear industry's policy 
on climate change. Those principles included support for 
federal action or legislation to reduce greenhouse gas 
emissions. NEI and I personally believe that federal action 
through legislation cannot wait for completion of the 
technologies needed to mitigate carbon emissions and that 
federal action must be implemented now but must place immediate 
emphasis on approaches and technologies that can be deployed in 
the early years.
    Let me address two issues that should be recognized and 
reflected in any legislative initiative to control carbon. 
First, we see a growing consensus that any credible program to 
reduce greenhouse gas emissions in the United States and 
worldwide will require a portfolio of technologies similar to 
what Mr. Kuhn just said, technologies and approaches and that 
nuclear energy is an indispensable part of that portfolio. This 
conclusion that nuclear power is an essential component of any 
carbon reduction initiative is unambiguous, it is beyond 
question and is supported by an impressive body of mainstream 
research and analysis. I just counted eight of these recent 
reports including a report from the National Academies of 
Sciences of 13 countries just last week, including the United 
States and indeed all of the G8 countries.
    Second, we believe it is imperative to address the major 
investment challenge facing the electric power sector as it 
seeks to develop and deploy the low-carbon and zero-carbon 
technologies necessary to reduce greenhouse gas emissions. 
Federal climate legislation must obviously include targets and 
timetables for carbon reduction but legislation must also help 
industry be provided with the technology and the means to 
achieve those targets and timetables. In our view, that will 
require an aggressive program of financing support; more 
aggressive and ambitious than anything in place today.
    Analyses of the various legislative proposals the 
subcommittee is considering today, including the modeling 
conducted by the Environmental Protection Agency and the Energy 
Information Administration, all show that nuclear plant 
construction must accelerate in a carbon-constrained world. In 
NEI's analysis of the Lieberman-Warner bill, the model 
forecasts more new nuclear capacity than could realistically be 
built, and in those modeling runs where nuclear energy 
expansion is constrained, carbon emissions and carbon prices 
are higher, electric sector consumption of natural gas soars, 
electricity and gas prices are higher, and GDP losses are much 
greater. Let me assure you that the U.S. nuclear industry hears 
this call to action and is moving forward as quickly as we can 
to license, finance and build new nuclear plants in the United 
States. Seventeen companies or groups of companies are 
preparing license applications for as many as 31 new reactors, 
nine applications for construction and operating license are 
currently under review by the Nuclear Regulatory Commission for 
a total of 15 new plants.
    But for new nuclear plant construction, one of the most 
significant financing challenges is the cost of these projects 
relative to the size, market value, and financing capability of 
the companies that will build them. New nuclear power plants 
are expected to cost as least $6 to $7 billion in today's 
money. U.S. electric power companies simply do not have the 
size, the financing capability, or the financial strength to 
finance these projects on balance sheets on their own. These 
first projects must have financing support, either loan 
guarantees from the Federal Government or assurance of 
investment recovery from State governments, or both. We should 
not confuse those loan guarantees with subsidies. They are not. 
Every penny of the cost is borne by the industry. The modest 
loan guarantee program authorized by the 2005 Energy Policy Act 
was a small step in the right direction but it does not 
represent a sufficient response to the urgent need to rebuild 
our critical electric infrastructure. Limits imposed by 
appropriations report language have resulted in loan guarantee 
volumes that will not begin to cover the project cost. Time 
limits imposed by that report language have introduced 
uncertainty into the process. We believe the United States will 
need something similar to the clean energy bank concept now 
under consideration by a number of members of Congress. 
Creation of this financing entity should be an integral part of 
any climate change legislation.
    Mr. Chairman, I appreciate the opportunity to testify and 
look forward to questions.
    [The prepared statement of Admiral Bowman follows:]

                      Statement of Frank L. Bowman

    On behalf of the nuclear energy industry, the Nuclear 
Energy Institute (NEI) appreciates the opportunity to discuss 
legislative proposals to reduce greenhouse gas emissions.
    NEI is responsible for defining and implementing nuclear 
industry policy on generic regulatory, financial, technical and 
legislative issues. NEI members include all companies licensed 
to operate commercial nuclear power plants in the United 
States, and hundreds of other companies and organizations that 
provide equipment, fuel and services to the nuclear energy 
industry.
    NEI has taken no position on the specific legislative 
proposals currently before Congress. We leave to others the 
complex policy issues of how best to structure a program to 
reduce carbon emissions. Nonetheless, NEI is deeply engaged in, 
and committed to, the debate over climate policy. A year ago, 
the NEI Executive Committee endorsed a set of principles 
establishing nuclear industry policy on climate change. Those 
principles included support for federal action or legislation 
to reduce greenhouse gas emissions.
    In this statement let me address two issues that should, we 
believe, be recognized and reflected in any legislative 
initiative to control carbon emissions.
    First, we see a growing consensus that any credible program 
to reduce greenhouse gas emissions in the U.S. and worldwide 
will require a portfolio of technologies and approaches, and 
that nuclear energy is an indispensable part of that portfolio. 
This conclusion is supported by an impressive body of 
mainstream research and analysis.
    And second, we believe it is imperative to address the 
major investment challenge facing the electric power sector as 
it seeks to develop and deploy the low-carbon and zero-carbon 
technologies necessary to reduce greenhouse gas emissions. 
Federal legislation must obviously include targets and 
timetables for carbon reduction, but legislation must also help 
provide industry the technology and the means to achieve those 
targets and timetables. In our view, that will require an 
aggressive program of financing support-more aggressive and 
ambitious than anything in place today.
    The growing body of mainstream research and analysis shows 
that nuclear power is an important part of the portfolio 
required to reduce carbon emissions. The most recent came from 
the Organization for Economic Cooperation and Development 
(OECD)'s International Energy Agency (IEA) last week. The IEA's 
2008 Energy Technologies Perspective asserts that ``A global 
revolution is needed in ways that energy is supplied and used. 
Far greater energy efficiency is a core requirement. 
Renewables, nuclear power, and CO2 capture and 
storage must be deployed on a massive scale.''
    Last week's IEA report amplifies the findings in its World 
Energy Outlook, the pre-eminent global energy forecast, which 
was published earlier this year. In the 2008 edition of that 
forecast, the IEA analyzed what must be done to stabilize the 
concentration of CO2 in the atmosphere at 450 parts 
per million (ppm)--the level judged necessary by the 
Intergovernmental Panel on Climate Change to avoid irreversible 
damage. In that scenario, world nuclear generating capacity 
more than doubles--from 368 gigawatts today to 833 gigawatts in 
2030. Even with this ambitious growth, the additional nuclear 
capacity does not shoulder the entire carbon reduction load: 
end-use energy efficiency, improved efficiency of coal-fired 
power plants, and major gains in CO2 capture and 
storage are also necessary.
    This conclusion--that nuclear power is an essential 
component of any carbon reduction initiative--is unambiguous 
and beyond question. It is shared by leaders and governments 
around the world, including Yvo de Boer, Executive Secretary of 
the United Nations Framework Convention on Climate Change. Mr. 
de Boer said last July that he had never seen a credible 
scenario for reducing carbon emissions that did not include 
nuclear energy.
    In addition to policy leaders, the world's scientific 
community agrees that nuclear energy must play a significant 
role in meeting the dual challenges of electricity production 
and greenhouse gas reduction. The most recent assessment report 
from the Intergovernmental Panel on Climate Change identifies 
nuclear energy as one of the ``key mitigation technologies.''
    Closer to home, analyses of the various legislative 
proposals that have come before Congress, including the 
modeling conducted by the Environmental Protection Agency and 
the Energy Information Administration, all show that nuclear 
plant construction must accelerate in a carbon-constrained 
world. In EIA's analysis of the Lieberman-Warner legislation, 
the model forecasts more new nuclear capacity than could 
realistically be built during the forecast period. And in those 
modeling runs where nuclear energy expansion is constrained, 
carbon emissions and carbon prices are higher, electric sector 
consumption of natural gas soars, electricity and gas prices 
are higher, and GDP losses are greater.
    Given that additional nuclear power is essential, what then 
must we do to ensure development and deployment of nuclear 
energy and the other clean energy technologies necessary to 
address the climate challenge?
    We must start by facing the facts. The United States is 
increasingly dependent on older, less efficient, more costly 
generating capacity. We have roughly one million megawatts of 
electric generating capacity today, and almost one-half of that 
is more than 30 years old. Almost 20 percent is more than 40 
years old. Continuing to operate that older, less efficient, 
generating capacity, continuing to defer capital investment in 
newer, cleaner, more efficient generating technologies, is 
frustrating our ability to achieve cleaner air and reduce 
carbon emissions, and will continue to do so.
    Consensus estimates show that the electric sector must 
invest at least $1 trillion between now and 2020 for new 
generating capacity, new transmission and distribution, 
efficiency programs, and environmental controls. That is more 
than the book value of the entire existing electric power 
supply and delivery system, and it does not include the cost of 
carbon controls. Addressing this investment challenge--and we 
must address this problem--will require innovative approaches 
to financing.
    Meeting these investment needs will require a partnership 
between the private sector and the public sector. The times 
demand innovative approaches, combining all the financing 
capabilities and tools available to the private sector, the 
Federal Government and State governments.
    In terms of new nuclear plant construction, one of the most 
significant financing challenges is the cost of these projects 
relative to the size, market value and financing capability of 
the companies that will build them.
    New nuclear power plants are expected to cost at least $6 
to 7 billion. U.S. electric power companies do not have the 
size, financing capability or financial strength to finance new 
nuclear power projects on balance sheet, on their own-
particularly at a time when they are investing heavily in other 
generating capacity, transmission and distribution 
infrastructure, and environmental controls. These first 
projects must have financing support---either loan guarantees 
from the Federal Government or assurance of investment recovery 
from State governments, or both.
    The states are doing their part. Throughout the South and 
Southeast, state governments have enacted legislation or 
implemented new regulations to encourage new nuclear plant 
construction. Comparable Federal Government commitment is 
essential.
    The modest loan guarantee program authorized by the 2005 
Energy Policy Act was a small step in the right direction, but 
it does not represent a sufficient response to the urgent need 
to rebuild our critical electric power infrastructure. We 
believe the United States will need something similar to the 
Clean Energy Bank concept now under consideration by a number 
of members of Congress--a government corporation, modeled on 
the Export-Import Bank and the Overseas Private Investment 
Corporation, to provide loan guarantees and other forms of 
financing support to ensure that capital flows to clean 
technology deployment in the electric sector. Creation of such 
a financing entity should be an integral component of any 
climate change legislation.
    Such a concept serves at least two national imperatives.
    First, it addresses the challenge mentioned earlier--the 
disparity between the size of these projects relative to the 
size of the companies that will build them. In the absence of a 
concept like a Clean Energy Bank, new nuclear plants and other 
clean energy projects will certainly be built, but in smaller 
numbers over a longer period of time.
    Second, federal loan guarantees provide a substantial 
consumer benefit. A loan guarantee allows more leverage in a 
project's capital structure, which reduces the cost of capital, 
in turn reducing the cost of electricity from the project. 
Electricity consumers--residential, commercial and industrial--
are already struggling with increases in oil, natural gas and 
electricity prices. The high cost of energy and fuel price 
volatility has already compromised the competitive position of 
American industry. We know that the next generation of clean 
energy technologies will be more costly than the capital stock 
in place today. In this environment, we see a compelling case 
for federal financing support that would reduce consumer costs.
    If it is structured like the loan guarantee program 
authorized by Title XVII of the 2005 Energy Policy Act, in 
which project sponsors are expected to pay the cost of the loan 
guarantee, such a program would be revenue-neutral and would 
not represent a subsidy.
    The public benefits associated with a robust energy loan 
guarantee program--lower cost electricity, deployment of clean 
energy technologies at the scale necessary to reduce carbon 
emissions-are significant. That is why the U.S. government 
routinely uses loan guarantee programs to support activities 
that serve the public good and the national interest--including 
shipbuilding, steelmaking, student loans, rural 
electrification, affordable housing, construction of critical 
transportation infrastructure, and for many other purposes.
    Achieving significant expansion of nuclear power in the 
United States will require stable and sustained federal and 
state government policies relating to nuclear energy. The new 
nuclear power projects now in the early stages of development 
will not enter service until the 2016-2020. Like all other 
advanced energy technologies, continued progress requires 
sustained policy and political support.
    In closing let me assure you that the U.S. nuclear industry 
is moving forward as quickly as we are able to license, finance 
and build new nuclear plants in the United States. Seventeen 
companies or groups of companies are preparing license 
applications for as many as 31 new reactors. Nine applications 
for construction and operating licenses are currently under 
review by the Nuclear Regulatory Commission for a total of 15 
new plants.
    We expect four to eight new U.S. nuclear plants in 
operation by 2016 or so. Assuming those first plants are 
meeting their construction schedules and cost estimates, the 
rate of construction would accelerate thereafter. With the 
necessary investment stimulus and financing support, we could 
see approximately 20,000 MW of new nuclear capacity (that would 
be about 15 plants) on line in the 2020 to 2022 time frame, and 
65,000 to 70,000 megawatts (or 45 to 50 plants) by 2030.
    These plants will produce clean, safe, reliable 
electricity, around the clock, at a stable price, immune to 
price volatility in the oil and natural gas markets.
    But construction of these new nuclear plants will have 
other benefits too. At the peak of construction, a nuclear 
plant will employ 2300 skilled workers and, on completion, 
approximately 700 workers to operate and maintain the plant. 
New nuclear plant construction will also lead to new investment 
in the supply chain--in new manufacturing facilities to produce 
pumps, valves, pipe, electrical cable, and other equipment and 
components. That will create more jobs, new opportunities and 
higher economic growth, and allow the United States to reclaim 
economic opportunity that has moved overseas over the last 
several decades.
                              ----------                              

    Mr. Boucher. Thank you, Admiral Bowman.
    We have a series of four votes pending on the Floor of the 
House, and experience tells us that completing that work will 
take approximately 45 minutes, and so we have two additional 
witnesses to testify on this panel followed by questions from 
members here and then an entire second panel of witnesses 
following that. With apologies to our witnesses and with the 
hope that you can be patient for a bit longer, we are going to 
recess the subcommittee and reconvene here at about 12:15. So 
with that said, the subcommittee stands in recess.
    [Recess.]
    Mr. Boucher. The subcommittee will come to order, and with 
the apologies of the Chair for our delay, I want to thank 
everyone here for their patience. We had concluded Admiral 
Bowman's testimony at the time of the recess of the 
subcommittee, and Ms. Minette is next, so we will be very 
pleased to receive your oral summary.

STATEMENT OF MARY MINETTE, DIRECTOR FOR ENVIRONMENTAL EDUCATION 
      AND ADVOCACY, EVANGELICAL LUTHERAN CHURCH IN AMERICA

    Ms. Minette. Thank you, Mr. Chairman, and thank you to the 
Subcommittee. I am here today representing the Evangelical 
Lutheran Church in America, which is the spiritual home to 
about 4.9 million Lutherans around the country, and also the 
National Council of Churches, which represents 35 Christian 
denominations including my own.
    As members of the NCC, we may not agree on how to take 
communion on Sunday but we all agree that climate change is one 
of the most pressing issues facing God's creation. As 
Christians who are called to protect God's planet and God's 
people, we are obligated to speak and to act in response to 
this moral crisis. Christ taught us to seek justice, to care 
for our neighbor and to provide special care and consideration 
for the least of these, those living in poverty. Our response 
to climate change must reflect this call to justice, 
particularly for those living in poverty around the world who 
are least responsible for climate change and most likely to 
suffer greatly from its impacts if we do not act now. God's 
first command to us in the book of Genesis was to tell and tend 
what God had made. The language there is about stewardship, 
caring for resources that are not your own and recognizing that 
humans are part of a network of creation.
    In early 2006, the NCC and our interfaith partners 
developed a set of principles based on justice and stewardship 
that we have used as a lens to evaluate each of the legislative 
proposals that have been introduced in the 110th Congress and 
that this committee is considering today. We have identified 
three main policy priorities which must be included in 
legislation in order to protect God's creation and God's 
people.
    First, as a matter of stewardship, we must acknowledge the 
recommendations of the scientific community and work to ensure 
that the average global temperature does not increase by more 
than 2 degrees Celsius. Recent reports indicate that to meet 
this goal, we must reduce our emissions by 15 to 20 percent by 
2020 and at least 80 percent by 2050. Next, we know that 
inaction on climate change will harm those living in poverty 
the most but we also must ensure as a matter of justice that 
low-income consumers are not pushed further into poverty by the 
burden of higher energy costs due to climate legislation. 
Finally, justice requires that we acknowledge our role as a 
nation in contributing to climate change and calls for 
international adaptation assistance for vulnerable developing 
nations who are least responsible for climate change yet are 
already suffering from its effects. Adaptation assistance would 
allow these countries to develop plans to prevent the most 
serious devastation while also providing financial support for 
disaster relief.
    America's Climate Security Act, the legislation sponsored 
by Senators Lieberman and Warner, calls for 15 percent 
emissions reduction by 2020 and 65 percent by 2050, which falls 
short of our long-term goals. The bill would provide financial 
assistance to low-income consumers but would not provide enough 
funding in the bill's early years to offset rising costs for 
people in poverty and only 30 percent of the bill's consumer 
assistance funds are set aside for low-income consumers. The 
legislation also includes international adaptation assistance 
for developing nations. The faith community worked closely with 
Senator Warner on this program and we applaud his leadership 
and the leadership of Senator Boxer, who worked to expand 
funding for adaptation assistance in the substitute bill.
    The Low Carbon Economy Act, sponsored by Senators Bingaman 
and Specter, fails to meet the criteria established by our 
faith principles. With relatively low emissions reduction, 
minimal assistance to low-income consumers and no funding for 
international adaptation assistance, the faith community has 
concerns about the impacts of this legislation on God's 
creation and God's people.
    House legislation includes the Safe Climate Act, introduced 
by Congressman Waxman, long a leader on the issue of climate 
change. The bill calls for strong emissions reductions that 
meet our faith principles. However, it does not specifically 
address domestic energy assistance or international adaptation 
assistance. Congressman Markey introduced the Investing in 
Climate Action and Protection Act, ICAP, in June, which 
requires the United States to reduce its greenhouse gas 
emissions to 85 percent below 2005 levels by 2050, meeting the 
standards set in our faith principles. In addition, it provides 
for a tax refund and energy rebates that will help 80 percent 
of Americans with energy costs including low-income Americans. 
The legislation also provides adaptation assistance to 
developing nations of about $180 billion over the life of the 
bill.
    I also would like to briefly mention a bill that we were 
not asked to consider, which is the Climate Matters bill, which 
was introduced just this week by Congressman Doggett, which we 
feel also meets our call for stewardship and justice, calling 
for strong emissions reductions, financial assistance to low-
income and middle-income families suffering from rising energy 
costs, and international adaptation assistance.
    All of these bills are important. They may take different 
approaches and we may have different perspectives on their 
ultimate effectiveness but each of them represents real 
leadership on the part of their sponsors and cosponsors. The 
legislators who have introduced these bills are those who see 
our change in climate, and from their different political 
perspectives want to do something about it to protect our 
common future and the future of this plant. I urge the members 
of the subcommittee to join them in working for stewardship of 
God's good creation and justice for people in poverty. The 
urgency of this issue cannot be overstated and our obligation 
cannot be ignored.
    Thank you very much for your time.
    [The prepared statement of Ms. Minette follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Ms. Minette.
    Mr. West.

  STATEMENT OF FORD WEST, PRESIDENT, THE FERTILIZER INSTITUTE

    Mr. West. Chairman Boucher, Ranking Member Upton, thank you 
and members of the committee.
    The fertilizer industry encompasses the production and 
distribution of the three basic nutrients required for plant 
growth: nitrogen, phosphate, and potash. These are commodities 
that are traded as commodities in the worldwide market. Natural 
gas is the feedstock or the raw material to produce nitrogen 
fertilizer. We take nitrogen from the air, combine it with 
hydrogen from natural gas and produce ammonia, which is the 
basic building block for all nitrogen fertilizer. There is no 
economic substitute for producing nitrogen fertilizer other 
than the use of natural gas, and that makes nitrogen fertilizer 
uniquely sensitive to the price of natural gas and to public 
policy that affects the supply and demand and use of natural 
gas. Phosphate and potash are minerals. We mine those. 
Certainly climate change will have a direct and indirect effect 
on those businesses, but today I want to focus my comments on 
nitrogen production, and it is the most vulnerable fertilizer 
of the impact of cap-and-trade systems. Nitrogen fertilizer is 
essential to the United States and world food production. The 
majority of nitrogen products produced are sold for crop 
production and fertilizer nutrients, they produce the food and 
the feed that nourishes the world. Forty to 60 percent of the 
world's food production is tied to the use of fertilizer.
    Another critical use of nitrogen products is to scrub 
nitric oxide emissions from coal-burning facilities, diesel 
engines and natural gas-fired turbines. In 2007, nitrogen 
products, ammonia and urea, were used in this manner to remove 
650,000 tons of NOx from the U.S. skies with no 
byproducts.
    Soaring natural gas prices have exacted a heavy toll on 
America's nitrogen fertilizer producers and farmer customers 
they supply. Since 1999, the U.S. nitrogen industry has closed 
26 nitrogen fertilizer production facilities due primarily to 
high natural gas prices, and I think this is one of the 
unintended consequences of the Clean Air Act we passed in 1990 
when we declared that natural gas is the environmental fuel of 
choice, and the utilities began using natural gas to burn to 
produce electricity. Currently, there are only 30 nitrogen 
plants operating in the United States and over half of the 
nitrogen we use in the United States is imported and it is 
imported from countries with weaker environmental standards, no 
climate change policies, and the majority of these countries 
are those from whom we are striving for energy independence. 
The result is, the United States is increasingly becoming 
dependent on foreign sources for nitrogen from places that 
charge very low or no cost for the natural gas. Examples of 
these are the Middle East, China, Russia, Venezuela. Last year 
we imported over 300,000 tons of nitrogen from Libya, 477,000 
tons from Egypt, 1.8 million tons from the Middle East, and 
over 3 million tons from the former Soviet Union, and if this 
trend continues and if we have public policy that drives 
natural gas prices higher, then America's food security and by 
our extension our natural security will be jeopardized.
    Within the climate change debate, the fertilizer industry 
has some grave concerns that the remaining nitrogen production 
facilities will be severely impacted during any transition 
period that we have as utilities continue to fuel switch to 
natural gas for generating electricity. Fuel switching has 
already caused the price of natural gas to go very high and it 
is causing--and if it continues and we are above $12 today, it 
will cause additional U.S. production to move offshore. In 
climate change, we are trying to do this at a time we are 
having kind of what is called the world food crisis of 2008. 
The world demand for food is an all-time high. It is causing an 
all-time high in fertilizer prices, and any decline in our 
domestic production for fertilizer will even cause higher 
production cost for farmers. The fertilizer industry 
commissioned a study on the impact of high energy costs 
resulting from climate change from higher energy costs. Using 
the Lieberman-Warner bill, the Doane Advisory Services measured 
the production costs increases for eight commodities. Doane 
economists found that the Lieberman-Warner legislation would 
add somewhere between $6 to $12 billion to the total production 
costs leading to significant decline in farm income, and these 
estimates may be low because we used the energy price forests 
from the Department of Energy and they have been roundly 
criticized as being too low. Mr. Barrow brought up about 
agriculture. Certainly agriculture has to be part of this 
solution on climate change.
    The record demand for food in this world food crisis that 
we are in has resulted in record demand for fertilizer. The 
surge in world demand has meant that U.S. farmers and farmers 
around the world are paying the highest prices they have ever 
paid for fertilizer. With food demand levels predicted to stay 
high and fertilizer prices predicted to stay high, Congress 
must really tread cautiously and consider all the ramifications 
and unintended consequences of such sweeping policy as climate 
change, especially if it forces the utilities to use more 
natural gas to produce electricity. Any climate change policy 
must take into account essential industries such as fertilizer, 
which we believe is a strategic commodity to our national 
security, and it is frightening to imagine what the 
uncertainties would be like if we have to import all our 
fertilizer to meet our food production goals. Currently at the 
natural gas prices we have today, 90 percent of the cost of 
production of a ton of ammonia is tied to natural gas. We 
produced 11 million tons of ammonia last year using 33 million 
BTUs per ton and every dollar increase in natural gas costs our 
industry $400 in increased production costs, and that figure 
far exceeds any other American industry. Complicating the 
climate change, we are limiting where we can look for supply of 
gas. That is a complicating factor here as we look at climate 
change.
    I just want to end by sending that critical to our food 
production is to maintain our current domestic production of 
fertilizer, nitrogen phosphate and potash, and I will be glad 
to answer any questions.
    [The prepared statement of Mr. West follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Mr. West, and I want to 
express appreciation to all of the members of this panel for 
their thoughtful testimony here this morning and this 
afternoon.
    I am going to begin my questions with the first witness, 
although the first witness has been replaced by a stand-in, and 
we want to welcome to the panel Mr. Glenn Kelly, who is vice 
president for government affairs of the National Mining 
Association. Mr. Naasz, I think is not feeling particularly 
well today and had to leave for that purpose. Mr. Kelly, we 
thank you for standing in in his stead.
    In Kraig's testimony, he stressed the need for a uniform 
legal framework in order to govern the storage of carbon 
dioxide on a permanent basis. You have reviewed the five bills 
that we are hearing today. Do you see in any of those five 
bills the kinds of regulatory certainty contained in a legal 
framework that would encourage the carbon capture and storage 
projects to move forward?
    Mr. Kelly. The simple answer, Mr. Chairman, is no, not in 
any of the five legislative proposals that we have examined for 
the purpose of this hearing. In fact, during consideration in 
the Senate of the Lieberman-Warner legislation, we offered, or 
attempted to secure an amendment to that legislation that would 
put in place ultimately the legal and liability framework that 
we foresee as necessary for the treatment of----
    Mr. Boucher. Do you have--has your industry worked with 
others to develop a proposal for what that framework ought to 
be?
    Mr. Kelly. We have. We have specific legislative text that 
we showed to a number of Senators.
    Mr. Boucher. So you have developed that. Let me ask you 
this question. The European Union at the present time is 
formulating regulatory framework for carbon capture and 
storage. Have you made reference to that at all or looked at it 
for comparative purposes as you developed your position?
    Mr. Kelly. I don't believe we have.
    Mr. Boucher. Thank you very much.
    Mr. Goo, let me turn to you. I notice in the testimony of 
NRDC that you addressed the presence of various forms of safety 
valves in the five bills that we have under consideration here, 
and as I interpret your testimony, you have strong objection to 
a kind of an unlimited safety valve that would release 
potentially an infinite number of additional emission 
allowances into the market upon the triggering of a certain 
price level but you have a somewhat greater level of comfort 
with more circumscribed kinds of safety valve provisions. Could 
you describe for us what kind of provision you would be more 
comfortable with if we had a strategic reserve of allowances, 
for example, that had a quantified number so that that number 
of allowances would be the maximum that could be released? I 
guess it might be possible for the financial market to price 
that better than a potentially unlimited release. Is that the 
kind of approach that you think would make sense and could you 
elaborate on that?
    Mr. Goo. Thank you, Mr. Chairman. Absolutely, we do oppose 
the classic safety valve because that allows emissions to be 
released into the atmosphere for a said cost. We also don't 
necessarily think that a price trigger is necessary. We think 
that banking, borrowing, offsets and other means of cost 
containment should be looked at first but in the end, NRDC's 
concern is integrity of the emissions cap. In the Senate 
proposal, the substitute amendment proposed by Senator Boxer, 
there is a proposal worked on by the Nicholas Institute and the 
National Commission on Energy Policy and many other interest 
groups that NRDC was able to support. This takes a reserve of 
allowances from the years 2030 to 2050. It would be 
approximately one year's worth of allowances, or 6 million 
tons. It would allow release of those allowances in years prior 
at a set price between $22 and $30 per ton with the price set 
by the President, and an amount of 450 million tons per year or 
a little less than 10 percent. We think that that is a cost 
containment solution that would limit volatility in the market 
while nevertheless maintaining the integrity of the emissions 
cap, and we think it is something that the Congress should look 
at.
    Mr. Boucher. Thank you, a very thorough answer.
    Mr. Kuhn and Mr. West, let me conclude my questions with 
you. Both of you have made reference to the potential economic 
disruption that could occur if coal-fired electric utilities 
are required because of the early schedule for greenhouse gas 
emissions reductions to surrender using coal and to fall to 
some other fuel. Mr. West made the point, and I think he is 
right, that if they are required to default to another fuel, it 
is very likely to be natural gas, which is the next least 
expensive fuel, and both of you have pointed to economic 
disruption that could occur in the event that that occurs. So 
my question to both of you is this: do you believe that it is 
possible from the effective date of a cap-and-trade program 
until the time when carbon capture and sequestration 
technologies are available, affordable, and reliable that the 
utilities could be required to take reductions, and if so, how 
would they be able to achieve those reductions consistently 
with their continued ability to use coal?
    Mr. Kuhn. Mr. Chairman, this is a very, very critical 
question, and I think it relates to the importance of moving 
carbon capture and storage technology demonstration 
projections, which is incorporated in your legislation, but I 
think that it is going to be extremely important to align the 
dates and timetables that you have in the bill with the ability 
to bring on carbon capture and storage and nuclear plants so 
that we don't have this massive switching to natural gas. We 
have already seen tremendously high prices for natural gas, 
questions about supply and availability. I think Mr. Goo 
mentioned that he expects carbon capture and storage projects 
to be able to come in place by 2015 and at 6 gigawatts a year. 
I don't see that substantiated by any other analysis. MIT, the 
Coal Utilization Resource Council, et cetera, all talk about 
the availability of carbon capture and storage sometime in the 
2020 to 2025 range, and that is when they are available. The 
deployment would follow that maybe 5, 10 years afterwards. We 
both are in total agreement that we need to move this as fast 
as possible. If we can make it happen faster, God bless us, but 
we need to be realistic when we set these targets and 
timetables.
    Mr. Boucher. Well, my time is expired. Let me just ask a 
leading question, which I try to refrain from doing, but not 
getting the answer I was seeking initially, would you agree 
that between the effective date of the law and the time when 
carbon capture and storage technologies become available and 
are ready to use, that the coal-fired utilities and other 
emitters in the economy could be required to take reductions 
that could be achieved by installing efficiency, by purchasing 
offsets and credits, either domestically or internationally or 
by other kinds of cost containment means?
    Mr. Kuhn. I fully agree with that. I think that----
    Mr. Boucher. And your organization would not oppose an 
approach that requires that reduction to be taken early on as 
long as they are achievable through those kinds of mechanisms?
    Mr. Kuhn. Early reductions are going to come from energy 
efficiency and renewables. The mid-term reductions will come 
from nuclear plants and coal plants with carbon capture and 
storage.
    Mr. Boucher. All right. Thank you, Mr. Kuhn.
    Mr. Upton.
    Mr. Upton. Thank you all. I know that the entire country is 
of course very concerned about the high gas prices that we are 
experiencing and I don't know how many of you might have seen 
USA Today's front-page story earlier this week, headlined 
``Utilities Raising Price of Power.'' Here is a shocker: 
electricity bills are heading up, way up. It goes on to say 
that the price of coal which fires half of the U.S. power 
plants has doubled since last year, largely because of surging 
energy use in countries such as China and India. Natural gas 
prices are up nearly 50 percent on high U.S. demand. Cost to 
build a power plant has also gone up more than doubling since 
the year 2000, and South Carolina Electric and Gas wants to 
boost rates some 37 percent by 2019 to cover its share of two 
nuclear reactors covering $10 billion and goes on to talk about 
other increases as well, and I just would say particularly, Mr. 
Kuhn, independent of the need to reduce emissions, how much 
investment is going to be needed over the next 30 years to 
maintain the current electricity infrastructure and keep up 
with the demand to ensure the reliability of the grid? What are 
your estimates?
    Mr. Kuhn. Our estimates and those of others are in excess 
of $1 trillion. We are very concerned also about increasing 
prices for fuel that are causing electricity prices to increase 
and this emphasizes even more the need for bringing on new 
technologies and additional technologies that can give us the 
fuel diversity we need and the supply to help keep those prices 
down.
    Mr. Upton. Mr. Kelly, what impact will the cancellation, as 
have seen over the last year, the cancellation of dozens of 
coal-fired plants have on electricity rates and the reliability 
of the grid?
    Mr. Kelly. From the coal production point of view, we have 
concerns that increasing pressure at the local level that has 
led to cancellation of a number of these plants is going to 
potentially force generators to look for an alternative fuel 
source, namely principally natural gas, which would result in 
higher demands for gas and ultimately higher prices. We believe 
that given the fact we have got a 240-year-plus supply of 
affordable domestic coal, that we ought to be using that as a 
resource in conjunction with all the other sources. We are 
going to need--given the pace of the growing demand for 
electricity in this country, we are going to need all sources 
of energy and that is nuclear, renewables, gas, and coal.
    Mr. Upton. I want to spend a little time on nuclear. 
Admiral Bowman, the proponents of cap-and-trade often rely 
heavily on the assumptions of new nuclear power plants to keep 
the costs of the program down and achieve the emission 
reductions. What is your realistic estimate of how many new 
nuclear plants we might be able to bring online by the year 
2030, and then again maybe by 2050?
    Admiral Bowman. Mr. Upton, we are doing this slowly 
intentionally so that we do it correctly this time around. Let 
me start in a little bit shorter term. By 2016, 2017, we 
believe we will have four to eight new nuclear plants online.
    Mr. Upton. Some of us would like it to be 48.
    Admiral Bowman. I am one of them. But we are going slowly. 
We are doing it cautiously. We are doing it so that it comes 
out right. Based on the experience at that first wave of four 
to eight plants experiences as they are going along in the 
regulatory process and the construction process, we believe we 
could see as many as 20 plants online by 2020, and then our 
target for 2030 certainly depends on so many factors that it 
would be difficult for me to say but I believe achievable that 
68 gigawatts that Tom Kuhn talked about earlier from the 
Electric Power Research Institute, 64 gigawatts is achievable. 
That means we are talking on the order of 30 to 50 new plants 
by 2030.
    Mr. Upton. So it is my understanding that of course we use 
about 20 percent of our power today is generated from nuclear. 
To maintain 20 percent by the year 2030, we have to have 52 new 
plants on line is the estimate that I have seen. Is that 
correct?
    Admiral Bowman. Our number says more around 30,000 
megawatts, which would be closer to 25 to 30 plants, just to 
maintain the 20 percent portfolio share.
    Mr. Upton. Now, in my remaining time, Mr. Goo, as you know, 
nuclear power is responsible for about 70 percent of our 
Nation's zero-emission power. What role do you see for the NRDC 
as it relates to nuclear power?
    Mr. Goo. Nuclear power will continue to be part of the mix 
of our energy supply for the foreseeable future, and under a 
carbon-constrained world, nuclear power will undoubtedly 
receive a benefit because of the fact, as you mentioned, that 
it is essentially a lower or zero-carbon source of energy. We 
have traditionally had a history of opposing nuclear power 
because of safety, waste and numerous other reasons. However, 
as far as a carbon cap system is concerned, we believe that 
nuclear power need not receive any further subsidies and that 
it should compete in the marketplace on its own.
    Mr. Upton. My time is expired but I would just like to put 
into the record a letter from the National Petrochemical and 
Refineries, if I might.
    Mr. Boucher. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Boucher. The gentleman from Pennsylvania, Mr. Doyle, is 
recognized for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman.
    Mr. Goo, welcome back to the Committee. Good to have you 
here. As you know, I share your organization's goals of 
establishing a national policy to reduce greenhouse gases and 
like you, I believe we can do it without deindustrializing the 
American economy. But one of the particular areas that I do 
haves some concerns with is the issue of international 
competition and job leakage and emission leakage that may occur 
as a result of this policy we are looking at. As you know, 
Congressman Inslee and I have proposed a new approach known as 
output-based or benchmark approach to addressing some of these 
very real concerns, and we believe that this approach, which 
essentially pays for the increased costs these industries will 
face as a result of these policies will not only help us 
address the competition and leakage issues but will also help 
us bring industries like steel and cement and other carbon-
intensive industries forward in a new carbon-constrained world. 
I would just like you to share your thoughts on that proposal 
and how you see that as being advantaged or disadvantaged 
compared to other proposals that are before the committee.
    Mr. Goo. Well, thank you, Congressman Doyle. I appreciate 
your interest in the issue and I appreciate your work with 
Congressman Inslee. It is a formidable duo, the two of you 
working on something together. So there are proposals in the 
existing bills to deal with the international competitiveness 
issue. They have made a substantial advance in that regard in 
terms of border tax adjustments and those kinds of things. But 
those provisions as they were considered in the Senate, I think 
people felt that they did need further work, that they didn't 
necessarily meet the goals. There are trade issues associated 
with them under the World Trade Organization rules and those 
kinds of things. Your proposal, which we have not had a chance 
to examine in detail, adds further progress to that, to 
consideration of that issue. We look forward to working with 
you on it. I think it is, looking across the industries you 
correctly identified that are vulnerable to competition because 
of their energy impacts and looking at their output and how 
that relates to the output of similar industries in other 
countries, it looks like the right way to go.
    Mr. Doyle. Thank you very much.
    Mr. Kelly, as Mr. Naasz had said in his statement, I am one 
of the cosponsors with Chairman Boucher for the Carbon Capture 
and Storage Early Deployment Act, because I believe coal is 
going to continue to play a strong role in providing energy to 
our country, and I think it is important, as the chairman does, 
that we move down this path to carbon sequestration as quickly 
as possible. But I also think it is critical that we don't 
duplicate efforts as we create this new fund and we look at the 
role of the National Energy Technology Lab and their role in 
carbon capture and CCS and this new bill that the chairman is 
moving forward. I wonder if you could comment on two things. 
What do you see as the critical components in a successful CCS 
program? What do we need to do to take these estimates from 
2020 to 2025 and accelerate them? You know, what isn't being 
done or what needs to be done to accelerate the deployment of 
carbon capture technology? And then secondly, what role do you 
think the NETL should play in concert with this proposal that 
is being advanced by Chairman Boucher so that there isn't a 
duplication of efforts?
    Mr. Kelly. Thank you, Congressman, and thank you again for 
your support of the legislation. The mining association 
believes it is absolutely critical that we move forward as 
quickly as possible on trying to fund accelerated development 
of carbon capture and storage technology. With regard to the 
first question about what would constitute the components of a 
successful program and what can be done to accelerate it, our 
analysis that we have looked at indicates one of the reasons 
why I think Tom Kuhn indicated the time frame for expected 
delivery and availability and commercial deployment of carbon 
capture and storage is at the 2020 to 2025 and maybe slightly 
beyond range is, in the process of developing the technologies 
which have never been tested on the scale that will be required 
to achieve the emission reductions that we are all 
contemplating, it would require, first, sufficient 
demonstration, that we know that the carbon in some shape or 
form can be captured but the long-term requirement to 
demonstrate that once it is stored and capped in a facility, 
whether it is underground or where that might be, in order to 
gain public confidence, it is going to require some time to be 
able to demonstrate that it is safe and secure and that we 
understand exactly what is happening in the geologic formation 
and so forth. That is several years. So the key is to do a 
number of these demonstration projects in different formations, 
using different techniques to see which ones are most 
successful and which ones can be brought on to scale commercial 
deployment in the future. So we think that is absolutely 
critical.
    In terms of what can be done to accelerate the type of 
reductions, the Coal Utilization Research Council has promoted 
something they call the near-term plan, and that is very much 
focused on energy efficiencies, but it also would help support 
the development of the type of basic research that would be 
necessary for CCS technologies. And then lastly, Congressman, 
with regard to the question on NETL, the system, the way your 
legislation would operate, applicants would be able to seek 
support from the fund in order to conduct the research and 
conduct demonstrations and develop the technology, and I think 
NETL would be a key partner in that process if not an outright 
recipient of that type of support. So we very much see them as 
a key partner and very much involved in the process looking 
further down the road.
    Mr. Doyle. Thank you.
    Mr. Chairman, I see my time is up. I would just like to 
say, Mr. Kuhn, I think that the full portfolio approach is 
right on the money. I enjoyed a lot of remarks in your 
testimony and wish I had more time to speak to you about it, 
but I see my time is up.
    Mr. Boucher. Thank you very much, Mr. Doyle.
    We are honored to have as a member of the subcommittee the 
Minority Whip of the House, the gentleman from Missouri, Mr. 
Blunt, and I am pleased to recognize him for 5 minutes.
    Mr. Blunt. Thank you, Chairman Boucher, and thank you for 
holding this hearing. I have an opening statement that I will 
just insert into the record.
    [The prepared statement of Mr. Blunt follows:]

                      Statement of Hon. Roy Blunt

    This hearing focuses on five bills, each of which 
establishes a cap-and-trade program intended to achieve 
substantial decreases in greenhouse gas emissions.
    The environmental community and some members here have 
urged the U.S. to reduce its greenhouse gas emissions (GHG) to 
at least 60-80% below 2005 levels by 2050.
    The EPA, MIT, CRA International and others have analyzed 
the economic impact of several of these bills. All of these 
models show substantially higher electricity, gasoline, diesel 
and natural gas prices, along with a corresponding decline in 
economic activity.
    I would like to put that in perspective:
    In 2006 the U.S. emitted 5.8 billion metric tons of carbon 
dioxide, or just under 20 tons per capita. An 80% reduction in 
these emissions from 1990 levels means that the U.S. cannot 
emit more than about one billion metric tons of CO2 
in 2050.
    Were man-made carbon dioxide emissions in this country ever 
that low? The answer is probably yes--from historical energy 
data it is possible to estimate that the U.S. last emitted one 
billion metric tons around 1910. But in 1910, the U.S. had 92 
million people, and per capita income, in current dollars, was 
about $6,000.
    By the year 2050, the Census Bureau projects that our 
population will be around 420 million. This means per capita 
emissions will have to fall to about 2.5 tons in order to meet 
the goal of 80% reduction.
    The only nations in the world today that emit at this low 
of a level are poor developing nations, such as Belize, Jordan, 
Haiti and Somalia.
    Even France and Switzerland, compact nations that generate 
almost all of their electricity from non-fossil fuel sources 
(nuclear for France, hydro for Switzerland) emit about 6.5 
metric tons of CO2 per capita.
    EPA estimates that in 2006, approximately 34% of greenhouse 
gas emissions were from electric power plants, 28% from the 
transportation sector, 19% from industry and the remaining 19% 
from the residential, agriculture and commercial sectors.
    So to put the enormity of the reduction goal into an 
understandable context, if 100% of GHG emissions were 
eliminated from the electric and transportation sectors, it 
would still leave the United States approximately 18% short of 
the 80% goal, even assuming no increases in the years ahead.
    Right now our cars and trucks consume about 180 billion 
gallons of motor fuel. To meet the 2050 target, we shall have 
to limit consumption of gasoline to about 31 billion gallons, 
unless a genuine carbon-neutral liquid fuel can be produced. To 
show how unrealistic this is, if the entire nation drove 
nothing but Toyota Priuses in 2050, we'd still overshoot the 
transportation emissions target by 40%.
    Such a goal envisions a massive overhaul of our 
infrastructure and economy, an overhaul perhaps larger and 
certainly more difficult and costly than the electrification of 
our economy in the early part of the last century. The cost of 
such an overhaul, should it even be technically feasible, 
easily with be in the many trillions of dollars.
    Even if the United States were to reduce its GHG emissions 
substantially, this alone would make a negligible contribution 
to global GHG concentrations.
    Unilateral action by any one country will simply serve to 
transfer jobs, economic activity and GHG emissions to other 
countries that do not have similar emissions reduction 
requirements.
    Unless China and India, two of the fastest growing GHG 
emitters, and other developing countries are brought into a 
regulatory regime, global GHG concentrations will not decline 
materially regardless of what the United States does.
    Any action on Climate Change must achieve meaningful 
environmental benefits, and should rely on technological 
advancements and consumer choices rather than government 
mandates and more layers of bureaucracy.
    A technology-based approach will reduce emissions, keep 
jobs in America, and strengthen America's energy security by 
encouraging clean, affordable, and reliable supplies of 
American energy for consumers.
    Climate change is a global problem and it requires a global 
solution. Therefore, any U.S. action must also require 
comparable action by developing countries, such as China, whose 
carbon emissions have already exceeded those in the U.S. 
Without joint international action, jobs and emissions will 
simply shift overseas, to countries that require few, if any, 
environmental protections, harming the global environment as 
well as the U.S. economy.
    Finally, the American public deserves transparency in the 
process. We must fully engage the American people and keep them 
informed about potential choices and the impacts that those 
choices will have on their daily lives.
    I believe the bills that we are focusing on here today, if 
enacted, will be detrimental to the U.S. economy driving up the 
costs of electricity, gasoline, diesel and natural gas prices 
at a time when American consumers are already paying too much.
    Mr. Chairman, we need meaningful, practical emissions 
reductions that result in a cleaner, healthier environment, not 
those that merely tax consumers and shift emissions overseas.
    Thank you Mr. Chairman.

                  Republican Climate Change Principles

    Any action to reduce greenhouse gas emissions should: 1) 
provides tangible environmental benefits to the American 
people; 2) advances technology and provides the opportunity to 
export; 3) protect U.S. jobs; 4) strengthen U.S. energy 
security; and 5) require global participation.

                Provide Tangible Environmental Benefits:

     We need meaningful, practical emissions reductions 
that result in a cleaner, healthier environment, not those that 
merely shift emissions overseas to other countries.

                   Advance and Invest in Technology:

     We should promote technologies that reduce 
emissions, increase America's energy security, and keep prices 
for consumers affordable;
     Need advancement of alternative forms of energy 
such as clean coal technologies to increase the use of 
America's vast supply of coal, to reduce emissions, and to keep 
America's coal-dependent communities strong;
     We need expansion of emissions-free nuclear power, 
including policies that encourage construction of new nuclear 
power plants and timely completion of the long term nuclear 
waste storage site;
     We need to promote increases in energy efficiency 
by removing bureaucratic barriers that prevent businesses from 
using innovative technologies that produce cleaner energy.

               Protecting Jobs Here in the United States:

     I believe Americans should know the costs they 
will bear to reduce greenhouse gas emissions and the 
environmental benefits those reductions will provide;
     Our actions need to promote economic growth and 
expansion keeping and increasing jobs in the United States.

                  Strengthening U.S. Energy Security:

     We need to reduce America's dependence on energy 
from unfriendly and unstable foreign governments by producing 
more American Energy;
     I support a diverse U.S. energy portfolio.

Requiring Global Participation and Promoting International Cooperation:

     We need policies that create a level playing field 
for American workers in the global market place.
     China, India, and similar countries must agree to 
meaningful emissions reductions before Congress imposes carbon 
mandates on American workers.
                              ----------                              

    Mr. Blunt. And thanks for putting this panel together, a 
broad diversity of views, some of which I didn't get to hear 
earlier but I have been listening and looking through the 
comments that have been made already. I have just a few 
questions here.
    Mr. West, clearly we are in what I think you described and 
others are describing as this world food crisis, which seems 
more of a crisis because of the world food opportunities we 
have gotten used to for so long, but in that regard, we are now 
very dependent on places like Russia and Libya and Egypt. What 
is the difference in that kind of dependency and the dependency 
we used to have on places like North Carolina and Louisiana and 
other places to get our fertilizer and what happens if that 
trend continues?
    Mr. West. Well, I think currently world food demand has 
driven the price of fertilizer off the charts. Farmers are 
paying the highest prices they ever paid for fertilizer, and 
the difference is, our distribution system is much longer now. 
Farmers have traditionally been used to setting their planting 
date, going to their fertilizer dealer and saying I am planting 
tomorrow, get the fertilizer there. Today that is not true. The 
farmers have to start planning much longer now than they ever 
have, and because the logistics of bringing urea fertilizer 
from Qatar is 45 days on the seas, 20 days coming up the river. 
So it is a lot longer logistic system. And I think in this 
tight supply, every ton of fertilizer that is produced in the 
world today is being bid on by three or four countries, India, 
China, Brazil, and that fertilizer doesn't necessarily have to 
come to the United States, and that is the difference.
    Mr. Blunt. In that regard, the increase in price of 
fertilizer, is it being driven--give me some percentage of how 
much it is being driven by cost of natural gas and other energy 
and how much it is being driven by demand.
    Mr. West. Today it is being driven by demand, and that is 
why we are able to continue to produce nitrogen fertilizer in 
this country at $12 gas. Now, if you look since 1999, I said we 
closed all these plants. We closed 13 plants when natural gas 
averaged $4. By the time it got to $7, we had shut down 25 
plants. It is world demand for food that is driving fertilizer 
prices around the world that has allowed us to keep producing 
nitrogen fertilizer today in the United States.
    Mr. Blunt. And 10 or 15 years ago, who was the biggest 
nitrogen exporter in the world? What country?
    Mr. West. Russia has always played a big role in nitrogen 
export and when they--when the fall of the Soviet Union, the 
world fertilizer use fell 17 percent, and Russia has never 
really caught up with their use of fertilizer. They still 
import 50 percent of their food, and their production of 
fertilizer is to the world market and they have always been a 
major player.
    Mr. Blunt. So this is another case where the world market 
is truly driving the price.
    Mr. West. Yes, sir.
    Mr. Blunt. And food generally probably relates to another 
day but for purposes of this committee, I think that, you know, 
ethanol is one of the easiest things to blame for cost of food 
as opposed to energy, competition for food, bad weather 
conditions, lots of things have kind of come all at once that 
created this crisis.
    Admiral Bowman, Mr. Barton and Mr. Upton both have 
legislation on spent fuel, and I wonder if you have looked at 
that and if your group or you personally have taken a position 
on that bill.
    Admiral Bowman. Mr. Blunt, the nuclear industry recognizes 
that the disposal of used nuclear fuel is and never has been a 
technical issue. It has always been a political issue. We 
really have two means available today that are perfectly 
satisfactory from a safety and security point of view. One is 
to do exactly what we have been forced to do that, and that is, 
hold it on site where it was produced. The second is to 
continue down the path required by U.S. law to license and open 
and operate Yucca Mountain. Those two means both would 
satisfactorily address the method of disposal of----
    Mr. Blunt. What about spent fuel recycling?
    Admiral Bowman. That is used fuel. However, we think that 
there is a better way, and it is that, sir. It is rather than 
bury in a way up to 90 percent of the energy content of the 
rods, rather to look into an advanced reprocessing system that 
does not contribute to proliferation risk, proliferation 
concerns in this country, and we the nuclear industry very much 
support that way of doing business, that is, an interim storage 
method at one or two sites, three sites centralized, followed 
by a robust research and development approach to develop an 
advanced reprocessing capability that does not produce pure 
plutonium as a byproduct and then determine what type of end 
product is left and achieve the proper disposal of that end 
product at that time. It doesn't have to happen today. We don't 
have to determine the disposal of that end product today 
because we don't know what it is until we complete this R&D.
    Mr. Blunt. Is it safe to assume, looking at what other 
countries have done, that that end product becomes a much 
smaller issue to deal with in terms of size and storage and all 
than the non-recycled product we have now? Would that be right?
    Admiral Bowman. To a certain extent, it is correct, sir. 
The other countries that are reprocessing today are using the 
method that the United States developed specifically for the 
production of nuclear weapons. It is called plutonium-uranium 
extraction, PUREX. The downside of that process is that it does 
produce a pure stream of plutonium as a byproduct. I think the 
United States will not and should not go back to that method of 
reprocessing. I think that there is a method to reprocess that 
would combine that plutonium with the other long-lived 
radioactive elements and then fission that entire group to 
really reduce the volume requirements of a repository. Today in 
France, for instance, the reprocessing technique reduces the 
volume required for high-level waste disposal by about 60 
percent, 66 percent, but it doesn't reduce the repository 
requirements because the repository requirements are based on 
the heat load of the product. So we need to go the next step in 
this country. If we are going to reprocess, we need to do it 
smarter than what is being done in the world today.
    Mr. Blunt. Now, essentially in France--I see I am about to 
run out and I am not a good enough attender at this committee 
to assume I should have much more time than anybody else has, I 
am absolutely confident of that. The technology they are using 
in France, for instance, was largely developed by us as 
military technology and then converted. Is that what I heard 
you say?
    Admiral Bowman. Yes, sir, not just largely, completely 
developed by the United States for the specific----
    Mr. Blunt. A number of staffers from this committee visited 
some French nuclear sites within the last few months and were 
reminded over and over again that every bit of technology that 
was making that system work, at least the people in France that 
were making the system work, over and over again reminded them 
that that technology was developed by us, not by them, and they 
are the ones using it and using it to great advantage in a 
great renewable source.
    Thank you, Chairman. I yield back.
    Mr. Boucher. Thank you very much, Mr. Blunt, and I would 
say for your benefit that we will be looking at a range of 
nuclear issues including the potential for reprocessing as part 
of our subcommittee's work in a future month.
    The gentlelady from Wisconsin, Ms. Baldwin, is recognized 
for 5 minutes.
    Ms. Baldwin. Thank you, Mr. Chairman.
    As the months go by and given the Senate debate last week, 
it is becoming ever more likely that we will not be passing 
into law a comprehensive cap-and-trade bill this year. And 
given those political facts, I have spent a lot of time 
considering what steps Congress could take this session to get 
a head start, if you will. For instance, most of the bills that 
we are looking at today have greenhouse gas registry 
provisions, and one of the things that we learned from the 
phase I implementation of the European cap-and-trade system was 
the importance of having high-quality data about emissions on 
hand in order to assure that appropriate distribution of 
allocations occurred, and essentially that means having sectors 
and/or facilities report their greenhouse gas emissions. As you 
may all know, a tiny provision in the 2008 consolidated 
appropriations bill requires the EPA to establish a registry so 
that we can begin gathering greenhouse gas emissions data and 
so that we don't make the same missteps that the European Union 
did in implementing phase I and phase II of their cap-and-trade 
program.
    I want to actually ask a few questions to explore the 
adequacy of the current registry provisions and about potential 
modifications we could make at this juncture. I wanted to start 
with Mr. Goo and Mr. Kuhn. Are you both familiar with the EPA's 
efforts and have you been invited at all to participate in 
their process of establishing a registry, and if so, could you 
elaborate on some of the suggestions that you have made to 
design a registry and recognizing of course that we already are 
doing emissions registry in the electrical sector. Mr. Goo 
first.
    Mr. Goo. Thank you for the question. We actually--as you 
know, EPA is now working on a registry because of the 
appropriations language and we have been talking to them about 
it. There is a registry provision in the Lieberman-Warner bill. 
It is title I of the Lieberman-Warner bill, and we support that 
as well. So I guess if you are going to work on a registry 
provision, which we encourage you to do, we would like to work 
with you on that to make sure that what is happening at EPA 
fits in with what you are doing. So registry is extremely 
important, that we get good information form all the sectors 
now in advance of a cap-and-trade system so that the system 
will work well. As you have noted, the European system didn't 
work well because of that precise issue. So again, it is an 
important issue and we look forward to working with you on it.
    Ms. Baldwin. Mr. Kuhn?
    Mr. Kuhn. Congresswoman, thank you for the question. We 
strongly support a registry. As I mentioned in my testimony, we 
have been reporting for 14 years now and we believe that the 
registry has to be complete. It has to be--the emissions 
reductions obviously have to be verifiable. We do think that 
there should be credit for early actions. That was mentioned by 
somebody else this morning. I think that those companies and 
organizations that are out doing reductions on a company basis, 
on an industry basis are to be commended for their early 
actions.
    Ms. Baldwin. Thank you.
    I have three related questions to the registry, and I would 
also invite other panelists if you have a comment, I would 
welcome all comments on this, but I will start again with Mr. 
Goo. These are the three questions. A, do you believe that EPA 
is currently operating under enough guidance to establish the 
registry? Secondly, greenhouse gas registries in the bills that 
we are examining today differ based on whether they cover--
whether they look at covered facility or entity. For example, 
the Boxer substitute, I think, follows the facility approach 
and the Markey bill looks at effective entities and I would 
like to hear your thoughts on which direction we should go. And 
then lastly, it is my understanding that EPA in their 
rulemaking is operating under authority in the Clean Air Act to 
set up the greenhouse gas registry and it is my understanding 
that the registry designed in the Markey bill also establishes 
its framework within the Clean Air Act. But I wonder if you 
have any thoughts about whether the Clean Air Act provides the 
appropriate authority or whether it might be more appropriate 
to set up a registry under the Emergency Planning and Community 
Right to Know Act because as we know, the Community Right to 
Know Act already contains a registry, the Toxic Release 
Inventory, that requires public disclosure of toxic releases 
and I just wondered if you had comments on those three 
questions starting with Mr. Goo.
    Mr. Goo. Thank you. The first question, do I think EPA has 
adequate guidance, EPA has a long history of dealing with these 
issues so they tend to know what they are doing but the 
guidance that was provided by Congress in the appropriations 
act is really fairly sparse so it certainly would not hurt to 
direct them with more specificity and a more comprehensive 
system. I think that makes sense.
    The next question is whether or not EPA should use a 
covered facility or a covered entity definition. I think that 
the finer grain definition that we have, the easier it is going 
to be to know what we are doing. I actually am not prepared now 
to address the differences between the Markey bill versus the 
Boxer and how those different definitions work, especially 
under the Clean Air Act, but we will take a look at that and 
get back to you.
    The final question, Emergency Planning and Community Right 
to Know, obviously it is very important that the public have 
transparency. That is the basis of the Emergency Planning and 
Community Right to Know Act. It is also important that under 
the Clean Air Act, there is already an existing system for 
enforcement as Mr. Kuhn has noted, that the power industry has 
been reporting under the Clean Air Act for a number of years. I 
think we probably need to look to see which of those two 
statutes or maybe a combination of those two statutes would 
work.
    Mr. Kuhn. I think Mr. Goo said it all. I really think we 
would look forward to working closely with you on those 
specific questions but I think the general drift of what he 
said was correct.
    Mr. West. I would just say from a fertilizer perspective, 
EPA is pretty knowledgeable about our emissions because they 
have studied our industry for years, and we don't have any 
problems with the registry and working with the registry.
    Mr. Boucher. Thank you, Ms. Baldwin.
    At this time, we are pleased to recognize the gentleman 
from Oregon, Mr. Walden, for 5 minutes.
    Mr. Walden. Thank you very much, Mr. Chairman.
    Mr. Kelly, I want to go to you first because we are talking 
a lot about creating a system that would rely upon carbon 
sequestration, compression and storage. Is there technology in 
place, in operation today that does all three of those things?
    Mr. Kelly. Currently, not on the scale that we are talking 
about for electric generation. There is currently, what I 
understand, and I am certainly no expert on, in enhanced oil 
recovery, limited amounts of carbon dioxide are used to 
facilitate that process. However, again, I am not qualified to 
really----
    Mr. Walden. Mr. Kuhn, can I go to you maybe from the 
electric institute? Talk to me about that. Is there proven 
technology today, commercially available, to sequester, 
compress and then store carbon from power generation?
    Mr. Kuhn. Maybe the key here to your question is proven. 
Once again, on the capture side, we have a number of 
technologies that are being worked on right now.
    Mr. Walden. Commercially available?
    Mr. Kuhn. I think they are more in the demonstration side, 
and there is no CO2 capture technology that is right 
of the shelf right now.
    Mr. Walden. And when you capture, then don't you also have 
to compress before you can store?
    Mr. Kuhn. Well, that is the other--the situation is, you 
need a major addition to the pipeline capacity. You would need 
to replicate a lot of pipelines in this country to get the gas 
to where you want to store it and then there is the 
sequestration question.
    Mr. Walden. So you would have to build all new, a bunch of 
new pipelines across the country. Is that correct?
    Mr. Kuhn. Yes.
    Mr. Walden. And then when you go to store it, isn't carbon 
a pollutant now? Isn't it described as a pollutant under the 
Clean Air Act?
    Mr. Kuhn. Under the Supreme Court finding.
    Mr. Walden. Right. And is it legal to put a pollutant in 
the ground?
    Mr. Kuhn. I think the legality is that you would have 
licensing questions, you would have public acceptance 
questions, you would have liability questions and those are, I 
think as we look at the, again, what we call the technical 
issues and the non-technical issues, the non-technical issues 
are every bit as challenging as the technical issues.
    Mr. Walden. And I think the technical issues about having 
the technology in place to do what is called for under this 
legislation, we aren't quite there yet. But we need to--I 
understand, but we need to invest and get there and make sure 
it is also commercially available and affordable. Now, in 
February of 2007, you talked about principles for carbon 
signals in the market. Gasoline is now double what it was then. 
Natural gas is now double what it was then. There are some 
estimates that electricity costs are going to be up 29 percent 
this year because of increased cost of coal. How high a price 
signal in addition to the current market do you think is 
necessary to reduce carbon demand?
    Mr. Kuhn. Well, I think a price signal that would be based 
on a carbon cap-and-trade system or a tax or whatever would be 
carbon specific as opposed to the----
    Mr. Walden. So how high does that need to be? Our chairman 
had a sort of draft proposal out there of an additional 50-
cent-a-gallon tax, carbon tax, and he has since withdrawn that. 
Is that what you think it would take? How big a signal?
    Mr. Kuhn. We think several things are very important. 
Number one, the price initially should be moderate and----
    Mr. Walden. What does that mean?
    Mr. Kuhn. To make sure that it does not harm the economy. I 
think that is a question of----
    Mr. Walden. So in addition to the current market price, you 
still think there needs to be additional cost?
    Mr. Kuhn. Well, I think that if you are going to establish 
a cap-and-trade system, there certainly would be an additional 
cost on there. I think it is important to have a safety valve 
to make sure that the price does not go----
    Mr. Walden. And I hate to cut you off. I have got a minute 
and 13.
    Mr. West, I represent 70,000 square miles of the most 
beautiful patch of the country possible, I may get argument 
from my colleagues, and a lot of that is agriculture, and you 
probably heard me in my opening comments say, I have got fruit 
growers that are paying double for fertilizer. What is $12 
natural gas going to do to those folks, and are we going to see 
your industry continue to go offshore, and how do we compete?
    Mr. West. Well----
    Mr. Walden. And what kind of price signal do you need, do 
you think is needed for the fertilizer industry and what effect 
does that have on feeding people, which by the way, is a 
humanitarian issue.
    Mr. West. The current price of fertilizer is tied to world 
food demand. That is what driving the fertilizer price.
    Mr. Walden. It is not tied to natural gas prices, sir?
    Mr. West. The world food demand is allowing us to continue 
produce at $12 natural gas in the United States. As I said 
before, we shut down plants when gas was $4, had 25 shut down 
when gas was $7. We are producing fertilizer today at $12 
because the world demand for food, which has driven up the 
world demand for fertilizer, and that is why today's price of 
fertilizer is at record levels and, as you know, commodity 
prices are also at record levels. We went to $22. The reason it 
did that was because the demand for food brought on by weather 
conditions in Australia and places like that.
    Mr. Walden. Well, I just raise these issues because I 
continue to--when I look at the cost of what it costs to fill 
up the tank in the tractor or the pickup or the whatever and 
the effect that is having all the way to the grocery store, and 
I sit in these hearings and hear this isn't enough, we have got 
to have additional cap-and-trade system that could equal $6 
trillion, this is going to do enormous damage to the Wal-Mart 
mom and the diesel truck driving dad.
    Mr. West. If the price of natural gas continues because of 
the demand generated by the utilities going to natural gas----
    Mr. Walden. Right, away from coal.
    Mr. West [continuing]. Then we will close our facilities, 
have to go into the world market and purchase 8 million tons or 
11 million tons of ammonia. That will drive the world price of 
fertilizer even higher.
    Mr. Walden. My time is expired, Mr. Chairman. Thank you for 
your courtesy.
    Mr. Boucher. Thank you very much, Mr. Walden.
    The gentleman from Washington State, Mr. Inslee, is 
recognized for 5 minutes.
    Mr. Inslee. Thank you.
    Just kind of in response to some concerns people have 
brought up today about cost, I just want to note, we are all 
sort of suffering under the tyranny of the status quo and 
everybody is thinking that we are locked in to the technologies 
we have today and it is very frustrating to me, having spend 
the last couple years getting to know the people who are 
developing the new visions. I had lunch with a guy the other 
day who has a company called Sapphire Energy. It is a 
California-Washington company. They just raised $50 million 
venture capital. They have a technology to use algae to produce 
not biofuel but gasoline with the same ATSM characteristics of 
gasoline, which would be a net-zero CO2 emitting net 
technology today. I went to talk to Google the other day, who 
has made a multimillion-dollar investment in a company called 
Altarock that has enhanced geothermal, which where you don't 
depend where springs are. You punch a hole down 3 kilometers 
and you bring up water at 300 degrees Kelvin and you produce 
steam, and according to the DOE, there is enough energy to 
produce half the electricity in the United States. We had a 
solar thermal company sign a contract the other day with Ford 
in California for 400,000 homes, and it is frustrating to me 
that we don't think of these things that are just around the 
corner of commercialization that the cap-and-trade system is 
pivotal to their commercialization, both by creating a fund 
that I talked about earlier for R&D and for driving demand for 
these products. I just want to note that. If anybody wants to 
make a comment on what I said, feel free. Mr. Kuhn?
    Mr. Kuhn. Congressman, in my testimony, I extensively 
talked about our support for just the kinds of technologies you 
are talking about. We definitely need to push energy efficiency 
to the maximum extent possible, and the good news, as you 
indicated, is there are many technologies. I mentioned the 
advanced meters and information system, the plug-in hybrid 
vehicles and things of that nature that can contribute greatly, 
and I think that we need to have the public policies that will 
help support and make them happen. Additionally, on the 
renewable side of the equation, we have many things happening 
there as well and we need to have the public policies that will 
support that but I would say, the conclusion that they can do 
it all I think is wrong.
    Mr. Inslee. No, no, I want to make sure you understand. I 
am not suggesting they can do it. I totally believe in a 
portfolio approach, a smorgasbord, spreading our risk. Any 
portfolio diversifies. I believe we should be doing research on 
any single CO2-emitting technology possible that is 
available to us. But I want to ask you this question. In 
dividing up the research dollars and what we do, this is a bill 
we are not considering but it has been proposed. We have sort 
of a wires charge to finance clean coal sequestration 
technology research, and I support research on clean coal 
sequestration. I think it is worthy of research to see if there 
a way we can sequester CO2 and make that a 
commercially viable technology. I think it is a little bit of a 
long shot but I think it is worthy of that. But I think it is 
critical that we don't allow that to swallow the research 
budget with all the other technologies that we have. How would 
you suggest, Mr. Kuhn, and I will ask the others, how do we 
divide up the R&D pie or the loan guarantee pie amongst all of 
these potential technologies, between solar thermal, advanced 
biofuels, enhanced geothermal, transmission grid improvements, 
nuclear, clean coal. How should we make sense of this to divide 
that up? Does anybody have any general ideas in that regard? I 
am presuming everybody agrees that everyone should be involved, 
every technology, but do you have any other suggestions?
    Mr. Kuhn. I just might say, you have to look at each 
technology specifically and see what is most needed. The carbon 
capture and storage issue is a demonstration issue and needs a 
great deal of funds to help move those demonstrations. In the 
House Appropriations Committee, I think the other day there was 
a doubling of the funds in there for energy efficiency and 
renewables, and certainly I think that is a good thing, but in 
addition, on the renewable side, you need some of those 
production tax credits and investment tax credits as well so on 
the nuclear side, it is mostly about loan guarantees so there 
are different approaches that are needed for each of the 
technologies and you have to approach it that way.
    Mr. Inslee. Right. Let me ask one quick question. I hope 
all of you will share your thoughts, but what Mr. Doyle and I 
are working on, a way to reduce the impact of this on energy-
intensive industries that might be exposed to international 
competition. I will look forward to your thoughts about that. 
Also, Ms. Baldwin was talking about this early registration 
bill that I am very interested in. I have actually introduced a 
bill last year about this. I would appreciate any of your 
thoughts about that, how to do that. Does anyone think it is a 
bad idea to pass a registration and data-gathering bill this 
year? Would anybody be opposed to doing that this year so we 
can get out of the gate at least gathering data?
    Mr. Goo. Congressman, let me just address a few things that 
you have mentioned. First of all, a registry bill this year 
would be great but a full cap-and-trade bill would be even 
better so we can get that done as soon as possible. That is 
really the primary goal. We do have registry efforts already in 
place, and as I explained to Congresswoman Baldwin, it is 
important to do more in that area and we would support work 
there. But I couldn't agree with you more about the 
transforming effect of the allowance revenue on our economy and 
the need to not look at our economy and particularly our energy 
economy as a static picture. That doesn't have to be the case. 
And what you need is, you need a push from below, the money 
from below you also need to pull, that is the price signal from 
above. CBO has made that quite clear, that you can't get these 
technologies into the marketplace if you don't have the push 
and the pull.
    Now, with regard to how the money should be divided up, 
there are really sort of two main needs. One is the technology 
need and the other is the need to mitigate the impacts on the 
lowest income producers and wage earners in our society. So 
that is the first thing. But when we get to the technology pie, 
we should look at things like performance-based standards for 
giving the money. We should look at things like reverse 
auctions for giving the money. Those are the--I see your time 
is up.
    Mr. Inslee. Thank you.
    Mr. Boucher. Thank you very much, Mr. Inslee. Thank you, 
Mr. Goo.
    The gentleman from Illinois, Mr. Shimkus, is recognized for 
5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. I know Ms. Bono Mack 
wants to do a unanimous consent to submit some questions for 
the record because I imagine you might be ending this with 
votes with his panel. Is that true?
    Mr. Boucher. If it is at all possible to do so. Ms. Bono 
Mack, would you like to make a unanimous consent request?
    Ms. Bono Mack. I am sorry, yes, please, if we could just 
submit questions for the record.
    Mr. Boucher. Without objection, the record will remain open 
for a period of 2 weeks in order for questions to be submitted 
and responses to be received from the witnesses.
    Ms. Bono Mack. I thank the chair.
    Mr. Boucher. Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. I just want to 
register a complaint, Mr. Chairman. You are playing the 
Lutheran card on me, and that is unfair. I would note that the 
Evangelical Lutheran Church in America is a little more 
moderate than my brand but we want to welcome you here, and 
come in and see me and we can talk about really the harm that 
is going to be done to the people you are hoping to address. 
That is where a lot of this debate is coming from.
    Who can tell me what the number one issue on the public 
mind is today? Anyone want to guess? National polls are pretty 
clear, no surprise to anybody. Mr. Kuhn?
    Mr. Kuhn. High energy prices probably.
    Mr. Shimkus. High energy prices. It should be no surprise 
to anybody. In January of 2007, crude oil price was about $58 a 
barrel. Today it is $134 a barrel. Gasoline prices have gone 
from--it is up $1.75 actually in just one year. Now, I would 
like to ask everybody in traditional Chairman Dingell yes or 
no, will movement on a climate bill increase the cost of 
gasoline? Mr. Kelly, yes or no?
    Mr. Kelly. It depends.
    Mr. Shimkus. Be brave. What do you mean, it depends?
    Mr. Kelly. I think the expectation is yes.
    Mr. Shimkus. Mr. Goo?
    Mr. Goo. As a percentage of household income, your energy 
prices will be lower.
    Mr. Shimkus. The question is, will the gallon of gasoline 
be more expensive under a climate change regime?
    Mr. Goo. Perhaps slightly.
    Mr. Shimkus. That is about the best as I am going to get so 
I will take it. Thank you.
    Mr. Reuther. Yes.
    Mr. Shimkus. Thank you.
    Ms. Jacobson?
    Ms. Jacobson. Certainly it is possible but the key is the 
policies in place that will help mitigate that for consumers.
    Mr. Shimkus. Certainly it is possible? We are the 
politicians here. You are the expert.
    Ms. Jacobson. Well, not on fuels, on the power sector, 
but----
    Mr. Shimkus. Well, we are going to get to that. Just 
prepare for question number two.
    Mr. Kuhn?
    Mr. Kuhn. Yes.
    Mr. Shimkus. Admiral Bowman?
    Admiral Bowman. Yes, sir. Let me quickly add, if the 
impetus draws us to plug-in hybrids fed from nuclear power 
plants, I think we can make it neutral.
    Mr. Shimkus. And actually we are very excited about that 
opportunity. We are going to talk about plug-in hybrids a 
little bit if I have time but I don't think I have a lot of 
time.
    Ms. Minette?
    Ms. Minette. I am no expert but I would say probably yes.
    Mr. Shimkus. That is a good guess.
    Mr. West?
    Mr. West. Yes.
    Mr. Shimkus. Great. Now, let us go to electricity. Any 
climate bill present will increase the cost of electricity. Mr. 
Kelly?
    Mr. Kelly. All five bills that we studied for this hearing 
would lead to price increases.
    Mr. Shimkus. Do you have a percentage?
    Mr. Kelly. We have got analysis that we have done from CRA 
International, which I would be happy to supply, that would 
show the projected price increases for the Lieberman-Warner 
legislation.
    Mr. Shimkus. What is the increase?
    Mr. Kelly. By 2030----
    Mr. Shimkus. If Kraig was there, he could give it to me.
    Mr. Kelly. That is quite possible. I will have to get back 
to you on that, sir.
    Mr. Shimkus. All right. Thank you.
    Mr. Goo? But it is going to increase.
    Mr. Goo. If revenues are recycled as in the Markey bill, 
the cost impacts to the lowest wage earners in the American 
public can be mitigated entirely.
    Mr. Shimkus. OK, but that is not in line with the GAO 
report. Is that correct?
    Mr. Goo. That is again----
    Mr. Shimkus. My time is running. Mr. Reuther?
    Mr. Reuther. Yes.
    Mr. Shimkus. Ms. Jacobson, my expert.
    Ms. Jacobson. Many of the studies confirm that there will 
be some increases, but if you do more efficiency like ACEE 
reports shows----
    Mr. Shimkus. The answer is yes, there----
    Ms. Jacobson. Well, there are a variety of studies on this 
so I think we don't quite know yet because we don't know what 
the legislation is going to look like.
    Mr. Shimkus. Mr. Kuhn?
    Mr. Kuhn. If this is another issue which is high on the 
minds of the American people, we need to solve, the answer is 
yes, it certainly will have a cost.
    Mr. Shimkus. Admiral Bowman?
    Admiral Bowman. The answer is yes but less so if nuclear is 
a part of the program.
    Mr. Shimkus. Ms. Minette?
    Ms. Minette. Again, I am not an expert but what I have read 
is in the short term, yes, in the long term, perhaps not as 
much.
    Mr. Shimkus. And I think most people worry about immediate 
cost escalations to get kids to school. Mr. West?
    Mr. West. Yes.
    Mr. Shimkus. Of course, I appreciate your testimony because 
I represent rural America and fertilizers.
    Let me just say, Mr. Chairman, that everyone at this panel 
concurred that climate change legislation will increase gas 
prices and electricity prices.
    Mr. Boucher. Thank you very much, Mr. Shimkus. I think that 
point was made.
    We have another series of recorded votes on the Floor of 
the House and 6 minutes, 42 seconds in which to respond to 
those. Mr. Waxman, if you want to attempt your questions, I 
will be happy to stay here with you.
    Mr. Waxman. I will try to make it less than the time 
allotted to me.
    Mr. Boucher. You have a total of 8 minutes.
    Mr. Waxman. Let me just see if I can do it in 3.
    Mr. Boucher. That will be fine.
    Mr. Waxman. As this committee and the Congress develop 
legislation to tackle global warming, it is essential we get 
the fundamentals right. We are confronting a looming crisis 
with very little time to avoid catastrophe. Unless we adopt a 
real and comprehensive response based on what the science says 
is necessary, our efforts will be in vain. That is the 
foundation for my legislation, the Safe Climate Act, and I am 
pleased that 152 of my colleagues have joined me on this bill 
to date. I have also worked with two members of this committee, 
Mr. Markey and Mr. Inslee, to develop a set of broad principles 
for global warming legislation, which complement and supplement 
the Safe Climate Act. Over 80 of our colleagues have joined 
with us on those principles, and we expect to expand that 
support.
    We believe there are four key goals for global warming 
legislation. One, reduce emissions to avoid dangerous global 
warming; two, transition America to a clean energy economy; 
three, recognize and minimize any economic impacts from global 
warming legislation; and four, aid communities and ecosystems 
vulnerable to harm from global warming. I would like to ask if 
any of the witnesses disagree with these goals and presumably 
you would support those goals, unless you disagree. Yes?
    Mr. Kuhn. Mr. Waxman, certainly it is easy to support those 
goals. I think that with respect to the economic impacts, we 
strongly believe that any legislation needs a safety valve 
and----
    Mr. Waxman. Well, my goal was recognize and minimize any 
economic impacts.
    Mr. Kuhn. I certainly agree with that goal. I am just 
talking about things that might help us get there.
    Mr. Waxman. Now, I would like to know if this panel agrees 
that climate legislation must reduce emissions to the degree 
science tells us is necessary. Does anybody disagree with that 
idea?
    Mr. Kuhn. Consistent with the availability of technology to 
get us there, and certainly we agree with your long-term goals.
    Mr. Waxman. I would like to be informed whether you agree, 
this panel, that the Intergovernmental Panel on Climate Change 
is the preeminent scientific body on this matter and we should 
look to it to understand what emissions reductions are 
necessary. Anybody disagree with that?
    And I would be interested to know if you agree that to 
protect our environment, economy, energy security and national 
security, we need to transition America to a clean energy 
economy. Anybody disagree with that? Thank you for your lack of 
agreement, or at least lack of disagreement.
    I have been working on legislation to address global 
warming since 1992. There is now a widespread call for 
congressional action although, as today's testimony shows, not 
everyone is on the same page yet. That is why this committee 
must exercise leadership. We must have clear vision for our 
Nation's energy future and we must make that vision a reality. 
It won't be easy but I know it can be done, and it must be done 
soon, and I look forward to working with the chairman and 
members of this committee, the interests represented here today 
and many others to adopt strong global warming legislation that 
meets the principles I have outlined today before it is too 
late. Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Waxman.
    We do have some other members who want to propose 
questions, Mr. Barton is here, for example, and so I am going 
to ask this panel to remain, if you don't mind doing so. If it 
is not possible for you, we understand. We have a series of 
four votes pending, and that will take approximately 45 
minutes. So pending the conclusion of those votes, the 
subcommittee stands in recess.
    Mr. Barton. Mr. Chairman, my questions will be very easy so 
I hope they will stay.
    Mr. Boucher. Well, potentially they will be enticed by that 
assurance to remain here.
    Mr. Barton. They won't be mean.
    [Recess.]
    Mr. Boucher. The subcommittee will reconvene. Well, my 
apologies to the veterans of panel number one, and thank you 
for your tremendous patience.
    The gentleman from Texas, Mr. Barton, the ranking member of 
the full committee, is recognized for his questions.
    Mr. Barton. Well, thank you, Mr. Chairman. The person I 
wanted to ask the first question to is just now sitting down, 
so as soon as Mr. Kuhn gets seated. If we will have the media 
capability, I would like for Mr. Kuhn to put his chart back up 
that talked about 2008 prism of solutions, something like that. 
It showed the amount of emissions, CO2 emissions by 
year from 1990 up to 2050 and various scenarios, how various 
bills and policies would impact that. No, not that one. It is 
more of a graph. It shows by year and then strategies, 
technologies to ameliorate. It had a heading, 2008, and I think 
prism something. No, that is not either. That is it.
    [Chart shown.]
    Mr. Barton. You can't see that very well from here but I 
studied it when it was up. The vertical graph is tons of U.S. 
emissions and the horizontal graph is timeline, and Mr. Kuhn, 
in 1990 that chart I think shows total U.S. emissions were 
about 1,800 gigatons. Is that correct?
    Mr. Kuhn. That is correct.
    Mr. Barton. OK. Right answer. Now, most of the proposals 
that we are looking at today for reductions, and put aside for 
a second whether I think we need to reduce or not. I am still 
skeptical that CO2 is a pollutant, but let us assume 
that we do need to reduce emissions. Most of the bills today 
require emissions order of magnitude in the 80 percent range. 
What is an 80 percent reduction from 1,800?
    Mr. Kuhn. Congressman, an 80 percent reduction from 1,800, 
I am not sure I have got the math there----
    Mr. Barton. About 4.6?
    Mr. Kuhn. Right.
    Mr. Barton. We would reduce the number of tons down to 
actually 360 gigatons for the entire U.S. economy.
    Mr. Kuhn. Congressman, this chart only goes through 2030. 
It is not taking us out to 2050, but----
    Mr. Barton. OK. I am going to get to my point. The point I 
am trying to get at it is, at 360 gigatons for the whole U.S. 
economy in 2050, we are probably going to have around 400 
million Americans, that is either 1 ton per American or maybe 
10. I don't have a slide rule with me. But as I said earlier, 
in Texas right now, per capita tons of CO2 emissions 
is 31 tons. I don't think we have a concept of what 80 percent 
off of 1,800 is but it is a very small number and I do know 
that just me talking up here in Congress, respiring in and out, 
inhaling, is a third of a ton a year. What kind of economy do 
we have if we go from the baseline of 1,800 gigatons in the 
U.S. economy to 360 gigatons?
    Mr. Kuhn. Well, Congressman, I warned in my testimony about 
picking out targets and timetables that didn't mesh with our 
ability to get the technologies available. Again, I think it is 
very easy to pick out a target and timetable. It is a whole 
other question if you want to ask how we are going to do this, 
and I think the how we are going to do this question really 
needs to be considered before you pick out the target and 
timetable, and I think in many cases, that is not being done. 
If you extrapolate that chart out to 2050, again, I think what 
we would be saying is if you had the full suite of technologies 
in play at that point in time, including nuclear, which is a 
zero carbon, carbon capture and storage on coal plants, at 
least on new coal plants, and have been putting them on from 
the 2030 time frame on, and that you have renewables and that 
you have energy efficiency and you have plug-in hybrid 
vehicles, you would essentially be in a much lower carbon fuel 
supply situation. But I think when some people arbitrarily will 
pick out numbers and just say, well, let us go 10 percent 
higher, let us go 10 percent higher than that, it does become 
more of a wishful thinking than a real----
    Mr. Barton. Well, my point is that we throw these numbers 
around and the public and members just take them on faith, but 
an 80 percent reduction from a 1990 baseline is a huge 
reduction.
    Now, I want to ask Mr. Goo a question. He used to work 
around here and he is now doing a good job at the National 
Resources Defense Council. He was a bright fellow when he 
worked for Chairman Dingell before so I am assuming he is still 
a bright fellow. Do you know--and if you don't, it is OK, 
because I don't--how many tons does the average car emit out of 
the tailpipe? I was going to ask this to Mr. Reuther but he is 
not here. How much does the average vehicle emit in tons of 
CO2 each year if you drive it the average number of 
miles, which I think is around 18,000 miles?
    Mr. Goo. I don't want to give you the impression I am not 
that bright but I actually----
    Mr. Barton. Well, no, I don't----
    Mr. Goo [continuing]. Know the answer off the top of my 
head.
    Mr. Barton. I thought you might actually know. That is the 
only reason I asked you.
    Mr. Goo. Yes, I apologize.
    Mr. Barton. Well, I want to say, and again, I could be 
wrong, and I have been many times, as Mr. Boucher would tell 
you, but I think it is around 3 tons. If it around 3 tons, and 
we add a third of a ton just by breathing, we have almost used 
up the 80 percent number reduction in breathing and driving, 
and we are not talking about heating or cooling or cooking or 
anything like that. My last question----
    Mr. Goo. Congressman, could I just----
    Mr. Barton. Yes, sir.
    Mr. Goo. We were not actually going to be covering human 
emissions. We are not going to be trying to reduce emissions 
from humans, so----
    Mr. Barton. I know, but you have a cap.
    Mr. Goo. The cap doesn't apply to human emissions.
    Mr. Barton. It applies to total emissions?
    Mr. Goo. It doesn't apply to human emissions. It would 
apply to emissions from so-called covered sources, so----
    Mr. Barton. I know, but the whole point of the cap is to 
reduce the total number of emissions. Isn't that correct?
    Mr. Goo. That is correct, but from covered sources, not 
from humans.
    Mr. Barton. I understand that. I am not saying you are 
going to tell us we have to breathe every other minute or 
something. I am not saying that. Only every person can breathe 
on alternate days, I am not saying that. But if you have a cap 
and you are reducing total emissions and we are part of the 
emissions, even though we are not covered, you have to reduce 
more emissions from what is covered. I mean, that is just--that 
is a fact.
    Mr. Goo. No, the cap doesn't cover those emissions.
    Mr. Barton. So----
    Mr. Goo. They are outside the cap.
    Mr. Barton. OK. We are going to pass a law that----
    Mr. Goo. Allows us to breathe.
    Mr. Upton. Mr. Goo, I think what he is trying to ask is, if 
Texas chili is going to be still allowed or not.
    Mr. Goo. Texas chili and Dr. Pepper will still be allowed.
    Mr. Barton. Well, my time is expired and I need to yield 
back to the very gracious chairman. I understand that two-
thirds of CO2 is noncontrollable, it is not covered, 
to use Mr. Goo's term, but if you set that number up there is a 
total emissions, that is not manmade emissions, it is total. If 
you set the total, you reduce it, you have to reduce that which 
is covered.
    Mr. Goo. None of the bills that this committee is 
considering now would cap those emissions.
    Mr. Barton. I understand that.
    Mr. Goo. The 80 percent reduction would only apply to 
basically industrial sources and other sources.
    Mr. Barton. Oh, you are saying the 80 percent number 
doesn't apply to the total?
    Mr. Goo. Yes, that is right. It doesn't apply to the total. 
It doesn't apply from trees. It doesn't apply from soil. It 
doesn't apply from people.
    Mr. Barton. It only applies to that which is controllable?
    Mr. Goo. That is right.
    Mr. Barton. All right. That even reinforces my point. If 
that is the case, Mr. Goo, tell me what the temperature change 
if we met that goal in the year----
    Mr. Goo. The temperature change that we need to avoid is a 
2-degree Celsius temperature change.
    Mr. Barton. No, I asked what the temperature change effect 
would be.
    Mr. Goo. The temperature change effect with action from 
other countries, comparable action----
    Mr. Barton. No, that is not what I asked. If we meet the 
goal in these bills, what is the temperature impact worldwide? 
And the answer is zero.
    Mr. Goo. It is slightly above zero but it is not sufficient 
to avoid catastrophic global warming.
    Mr. Barton. It is zero, or close to zero.
    Mr. Chairman, I yield back.
    Mr. Boucher. As much as I am enjoying this exchange----
    Mr. Barton. I understand.
    Mr. Boucher. Let me say the gentleman's time is expired 
and----
    Mr. Barton. It did.
    Mr. Boucher [continuing]. I thank him for his questions.
    The gentleman from Massachusetts, Mr. Markey, is recognized 
for 5 minutes.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Shimkus asked earlier whether climate legislation would 
raise gasoline and electricity prices. I am convinced that my 
legislation, the ICAP legislation, cap and invest, will unleash 
a technological revolution and actually put money back in 
consumers' pockets because of the lower priced goods that will 
ultimately save them energy. But let us be clear about these 
bills and how they work. ICAP, for example, in my bill, there 
is a 100 percent auction of pollution allowances and it returns 
over half of the proceeds to low- and middle-income consumers 
through tax credits and rebates. Eighty percent of Americans 
under my approach would receive benefits and two-thirds of all 
households would be fully compensated for any additional costs 
resulting from the bill, increased gasoline or electricity 
prices. Mr. Shimkus's district, for example, over 96 percent of 
his constituents would receive benefits and over 70 percent 
would be held completely harmless under my ICAP legislation. So 
I would like to ask quickly each one of the people on the 
panel, do you believe, yes or no, that that kind of mechanism, 
some kind of mechanism like that is an essential element in 
climate legislation, that we take care of consumers? Mr. Kelly?
    Mr. Kelly. We would advocate that climate legislation 
should address the----
    Mr. Markey. Yes or no, please.
    Mr. Kelly [continuing]. Issues at hand, so it would have to 
address the question of emissions.
    Mr. Markey. Right, but should there be rebates, yes or no, 
rebates and tax breaks for the consumers who are affected in 
these groups that I was just mentioning?
    Mr. Kelly. We don't have policy on that but I suspect the 
answer would be no.
    Mr. Markey. Would be no. OK. Thank you.
    Mr. Goo?
    Mr. Goo. Emphatically yes.
    Mr. Markey. Thank you.
    Ms. Jacobson?
    Ms. Jacobson. Yes, of course, and if I may, I would like to 
also acknowledge the large energy efficiency and renewable 
energy investments your legislation has, which also will help 
mitigate price impacts.
    Mr. Markey. Thank you.
    Mr. Kuhn?
    Mr. Kuhn. We think there should be allowances that would go 
to customers through their local distribution companies as an 
alternative way that you would do that and would be based on a 
formula but also I think you have to worry about the economic 
competitiveness. So you are worried about the industries and 
things of that nature and the impacts of the prices that they 
might incur.
    Mr. Markey. But you would support rebates to consumers. 
Thank you.
    Admiral Bowman?
    Admiral Bowman. I have two yesses, yes for the consumers 
but also a part of that should be delivered to generating the 
required technologies and the low-carbon ability to generate 
electricity.
    Mr. Markey. Thank you.
    Ms. Minette?
    Ms. Minette. Absolutely, and we very much like the 
approach----
    Mr. Markey. Absolutely yes?
    Ms. Minette. Absolutely yes.
    Mr. Markey. OK. Good. Thank you.
    Mr. West?
    Mr. West. Who am I to disagree with the Lutheran Church? Of 
course.
    Mr. Markey. Beautiful. Now, we have heard a lot of doom and 
gloom today about why we can't act now to save the planet. We 
don't have the technology, it will ruin the economy. Those are 
the very same arguments that were used by the technology 
community, the telecommunications community, that wanted to 
hold onto the black rotary dial phone for 80 more years, and 
when we broke up, all those monopolies, when we passed the 1996 
Telecommunications Act, who would have thought we would all be 
carrying around BlackBerries and iPods and broadband service 
just 10 years later? A revolution unimaginable really to those 
that really wanted to hold onto the black rotary dial phone. I 
think the same kind of revolution is about to occur: lowering 
the costs, improving our lives.
    Mr. Goo, could you tell us how you think these new 
technologies are going to meet these challenges?
    Mr. Goo. Absolutely. I completely agree with your comments 
about the state of computer technology just 30 years ago, and 
most of the models that we see predict a very static energy 
situation. We think that the billions and billions of dollars 
that will be created under a cap-and-trade system can be used 
to incentivize these technologies and encourage their 
development and we are going to see a low-carbon future under 
which we are more energy independent and we have more business 
opportunities and more jobs, green jobs, good green jobs in 
America.
    Mr. Markey. And one final question to you and Ms. Minette. 
Ms. Minette, your testimony highlights the importance of 
auctioning pollution allowances rather than giving them away 
free to polluters. Isn't it true that giving allowances for 
free to polluters will not in most cases reduce costs to 
American consumers and instead result in windfall profits for 
the polluters themselves?
    Ms. Minette. That is our position, yes.
    Mr. Markey. Mr. Goo?
    Mr. Goo. Yes, it is absolutely the case. It is interesting, 
if you give somebody $1, they don't give it back to you unless 
you give them something worth something. If you give pollution 
allowances to these companies, they will keep them and they 
will charge more for the electricity, and interestingly enough, 
they will actually charge you for that carbon allowance that 
they receive for free.
    Mr. Kuhn. Mr. Markey, I----
    Mr. Markey. If the chairman would allow? Yes, Mr. Kuhn?
    Mr. Kuhn. I would totally disagree with that, and I think 
if we are not talking about giving them to the companies, we 
are talking about giving them to the consumers, and rather than 
putting the money back in the government and having it given to 
a whole lot of different interests, we are trying to decide 
what the difference is between low-income and middle-income. We 
are talking about exactly the way that this was impacted to the 
consumers, in other words, if the utility industry is 
responsible for 34 percent of the emissions, those allowances 
can go back. We are regulated industries and I guarantee, the 
regulators are going to make sure this money gets back to the 
consumers.
    Mr. Markey. We just have to avoid the fiasco that unfolded 
in Europe. Otherwise we are just going to engage in repetition 
syndrome and we have to take note of what did happen there. 
Thank you, Mr. Kuhn.
    Thank you, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Markey
    The gentleman from Texas, Mr. Burgess, is recognized for 5 
minutes.
    Mr. Burgess. Mr. Kuhn, if you wouldn't mind just expanding 
on that a little bit, I am not sure you had enough time to 
adequately answer the question or weigh in on your observation 
of the answers that were given previously. In a regulated 
environment, how would that money actually devolve then to the 
consumer?
    Mr. Kuhn. Well, number one, we are talking about cost 
containment mechanisms because I think we have all agreed that 
this is going to be--any kind of legislation will impact the 
consumer, electricity consumers, and we are just talking about 
the electricity segment here, but under that situation, this is 
why we feel very strongly that there needs to be a safety 
valve, particularly to prevent the volatility of a market that 
is occurring in Europe right now and economic harm to the 
economy, so I think the safety valve is a major cost 
containment mechanism that needs to be put in place. We think 
that ample use of offsets need to be put in place because that 
is where you will probably get the most cost-effective 
emissions reductions from offsets, at least in the early years. 
And thirdly, on the allowance side of the question, we don't 
have an agreed-upon position in our industry in terms of how 
the allowances should be allocated from the standpoint of 
customers that may be most effective because they are receiving 
their power from coal or whether or not customers that might be 
affected by they are already receiving electricity from clean 
power sources but we do know that all those allowances we 
believe should go back to the local distribution companies and 
should be--and with the work of the regulators would ensure 
that they go back to the customers. I think it has been 
misinterpreted. In Germany, for example--and it is not all the 
EU but in Germany in particular, there was a situation where 
allowances went to the companies and did not get to the 
customers because they have a different regulatory situation. 
So it is----
    Mr. Burgess. How would that work in a State where 
deregulation of the electrical utility has occurred?
    Mr. Kuhn. I think that in restructured States, 
particularly----
    Mr. Burgess. Texas, for example.
    Mr. Kuhn. Texas, for example. In Texas, for example, if the 
allowances went to the LDC, they would be sure to get back to 
the customers, and again, you could have a formula based on an 
input formula and an output formula and figure out how that 
should be divided, but make sure that it goes back to the LDC 
and that ensures it going back to the customers.
    Mr. Burgess. I think in your testimony you talked about 
advances in technology, things like net metering that would 
make a difference in the future. Is that correct?
    Mr. Kuhn. That is correct.
    Mr. Burgess. Now, in Texas, we do have net metering but I 
have encountered constituents who have attempted to do their 
own thing with either solar panels, windmills, and have 
encountered having to purchase a rather large liability policy 
in order to have the electric meter flow both ways. Is that in 
fact common for the consumer to have to buy a liability policy 
when they want to engage in net metering?
    Mr. Kuhn. Well, I think the issue about specifically how 
net metering might be done in different States, their 
regulation is done on a State level and so it certainly differs 
from place to place.
    Mr. Burgess. It seems to me if we want to foster that, 
which sounds like a good idea when you brought it up in your 
testimony, I do agree with you that advances in technology will 
make the distribution and use of electricity much more 
efficient in the future, but there must be some way we can 
allow either by capping liability or by some method so that 
these rather large liability policies won't be stock and trade 
in the future.
    Admiral Bowman, can I ask you, what are some of the 
obstacles right now to getting America back on its feet as far 
as the evolution of nuclear power? It just seems like it takes 
so long and it is so expensive and we did do some things in 
2005 and the reason we put the time limits on there was because 
we didn't want people sitting on the sidelines until you know 
what froze over. I forgot it is going the other way but 
nevertheless, that was the reason for putting those timelines 
on there. What are the major obstacles to getting nuclear power 
up and going?
    Admiral Bowman. The major obstacle is the one that I 
addressed in both my written and oral testimony, and it is the 
financing of this. These plants are expensive. I would dare say 
that on a megawatt-hour basis, they are not any more expensive 
than any of the new power plants that we are going to see 
coming down the line. We have done a great deal of work on 
granularity of exactly how much it is going to cost to build a 
new nuclear plant.
    Mr. Burgess. Are advances in technology helping bring that 
price down or are they actually contributing to the cost 
increase?
    Admiral Bowman. The advances in technology are not so 
revolutionary that we don't understand them. They are more 
evolutionary off existing systems that we have today but in 
each case, we have a different way to ensure a little bit more 
safety in this new generation of power plants but the single 
thing that is an impediment today is the loan guarantee program 
and financing these large, high-cost nuclear plants on a 
relatively small market capitalization business so that if you 
put it on the balance sheet of a $7 billion business. If you 
put a $7 billion project on a $7 billion business, Wall Street 
will have a field day with lowering the debt rating.
    Mr. Burgess. Is there any difficulty in getting the actual 
reactors and materials that are needed to build the plant?
    Admiral Bowman. That has not become a problem. We are 
certainly aware of the bottlenecks in the infrastructure 
because we haven't built in a long time. We are aware that the 
rest of the world is going in this direction. Those people who 
are in that first wave that I discussed earlier, those four to 
eight plants that might be online by 2016, are already buying 
long lead time components. In some cases, those long lead time 
components have been delivered. If they aren't delivered, the 
companies are in the queue. So that is not causing the 
difficulty.
    Mr. Boucher. Thank you very much, Mr. Burgess, Admiral 
Bowman.
    The gentleman from Utah, Mr. Matheson, is recognized for 5 
minutes.
    Mr. Matheson. Well, I thank the chairman and I thank the 
panel. It has been a long day, and assuming no one walks in the 
door, I think I am the cleanup batter today.
    I want to talk a little bit in the context of cost 
containment about how allowances can help mitigate that issue, 
and it seems to me that the ability to bank credits and to have 
some flexibility in how allowances are used assists in that 
effort as a tool to help with cost containment or cost 
mitigation. Does anyone on the panel have a problem with 
legislation that permits the banking of allowances?
    Mr. Kuhn. Congressman, we feel strongly that you need 
something stronger than just the banking and borrowing. Number 
one, if you do borrow, you are going to be borrowing from 
future allowances, which most likely are going to be much more 
expensive in the future and I think that is going to cause 
problems, at least in the beginning years when you are putting 
in place the largest trading system that has ever been 
established in the world, a multitrillion-dollar trading 
system. We all know the challenges we have had with a lot of 
trading systems. You can go back to the Enron situation or 
mortgage-backed securities or whatever. There has been a lot of 
volatility in a lot of trading systems. There has been a lot of 
manipulation. And we think that you need a strong safety valve 
or collar that would ensure that the economy doesn't get 
harmed, that the price does not go over a particular level, or 
perhaps maybe even a collar that doesn't go below a certain 
level so that it might not incent new technologies because 
banking and borrowing, at least in the beginning years, is not 
going to be enough.
    Mr. Matheson. Well, I was going to split it into two 
questions. You already anticipated the second one. Because the 
first was about banking allowances, which I think in terms of 
environmental effect, I am assuming you get it either way. So I 
didn't anticipate anyone would have a problem necessarily with 
the banking. But now I want to ask about the borrowing and I 
want to see if that is something that people support or not 
support, and I would mention two things. One, in response to 
what you said, Mr. Kuhn, I am assuming if the market develops, 
you are going to have a forward price. That is the whole point 
of markets and futures. If some cap-and-trade legislation is 
put in place and it sets caps over the years that the 
marketplace is going to price those allowances out over time. 
It won't do it perfectly in the start-up, I understand that, 
but I do think that there will be a differential in price that 
will reflect those more expensive in future years, so if you 
want to borrow against them, I would think the borrowing would 
reflect that premium. And secondly, I know at least one of the 
legislative proposals that has been put out has an interest 
rate, if you will, a 1.1 percent cost if you borrow for the 
future. So I want to ask the people on the panel how they feel 
about borrowing allowances in general and if the interest rate 
associated with borrowing, if the 1.1 is reasonable or if that 
is a reasonable approach to have an interest rate. I just want 
to see if people on the panel have any comments on that 
structure.
    Mr. Goo. We strongly support borrowing. We think it is a 
way to have some cost containment without breaking the 
emissions cap. We also support the interest rate. The 10 
percent interest rate that was in the Lieberman-Warner bill is 
something we support. If we borrow, there are some consequences 
from too much borrowing because the climate is warming. We just 
can't borrow willy-nilly and we don't want to put ourselves in 
a situation we can't pay back. But we support borrowing.
    Mr. Matheson. So would you say there should be some overall 
boundaries set on how much could be borrowed?
    Mr. Goo. We support--in the Lieberman-Warner bill, there is 
a 15 percent limit on borrowing. We support that.
    Mr. Matheson. Anybody else have any comments on borrowing 
or banking?
    Mr. Kelly. Congressman, I would be happy to. We did some 
analysis on this that was included in analysis of Lieberman-
Warner impact that CRI conducted for us and they found that all 
the incentives were actually for banking as opposed to 
borrowing. We would be happy to supply this to you and your 
office.
    Mr. Matheson. I appreciate that. One other thing I will 
just mention real quick. I just recently was told about a 
proposal that the notion of writing a provision in the 
legislation that would allow allowances to be turned in, 
instead of being turned in every quarter or every year, it 
would be over a 2-year period and allow a little more 
flexibility for people in terms of a compliance period. Has 
anyone on the panel thought about that and have any opinion on 
having a 2-year compliance period instead of a 1-year 
compliance period for allowances?
    Mr. Goo. We think that is an interesting idea and that it 
may help ease some of the volatility in the market. It is sort 
of like having businesses can choose their own tax year so if 
you are having a hard year or you have a growth in a particular 
year, then all the allowances don't come due at December of the 
year causing an interest in prices, so we think it is an 
interesting concept.
    Mr. Matheson. Thanks, Mr. Chairman.
    Mr. Boucher. Thank you very much, Mr. Matheson, and our 
thanks to all of the panel members. We appreciate your patience 
and the long time that you have spent with us today. The 
information we have gained from you is tremendously valuable 
and has well justified your long-term presence here. So with 
our thanks, this panel is excused and we welcome now our second 
panel of witnesses: Dr. John Felmy, the Chief Economist for the 
American Petroleum Institute; Mr. Robert Baugh, the Executive 
Director of the AFL-CIO Industrial Union Council and Chair of 
the AFL-CIO Energy Task Force; Mr. Joseph Hart, Vice President 
of the American Trucking Association; Ms. Emily Figdor, the 
Director for the Federal Global Warming Program of Environment 
America; Mr. Jason Grumet, the Executive Director of the 
National Commission on Energy Policy; and Mr. Douglas Scott, 
the Director of the Illinois Environmental Protection Agency.
    Without objection, the prepared written statement of each 
of our witnesses will be made a part of the record. We would 
welcome your oral summaries and ask that they be kept to 
approximately 5 minutes.
    Dr. Felmy, we will be happy to begin with you.

 STATEMENT OF JOHN FELMY, CHIEF ECONOMIST, AMERICAN PETROLEUM 
                           INSTITUTE

    Mr. Felmy. Thank you, Mr. Chairman and Ranking Member 
Upton. My name is John Felmy. I am the chief economist of API, 
the national trade association of the U.S. oil and natural gas 
industry. API represents nearly 400 companies involved in all 
aspects of the oil and natural gas industry including 
exploration and production, refining, marketing and 
transportation as well as the service companies that support 
our industry.
    API believes it is important to address global climate 
change. We are committed to working with Members of Congress on 
policies that are environmentally effective, economically 
sustainable, and fair. Good policies can help contain costs and 
enhance our competitiveness while tackling the hard issue of 
managing greenhouse gas emissions.
    We all have a role to play in addressing climate change, 
and the U.S. oil and natural gas industry has been trying to do 
its part. Companies have invested in alternative fuels and 
refinery efficiency improvements, which reduce emissions. 
Through API, they have developed tools for tracking emissions, 
which are needed to measure our progress, and these companies 
have 4 decades of experience capturing and storing 
CO2 to enhance domestic oil production and reduce 
our reliance on imports. Virtually 100 percent of the natural 
gas produced by API members is with companies participating in 
EPA's Natural Gas STAR program.
    Between 200 and 2006, the U.S. oil and natural gas industry 
invested $42 billion in carbon mitigation technologies. This is 
45 percent of the total for all U.S. companies and the Federal 
Government combined. Nearly $3.5 billion of that was in non-
hydrocarbon technologies including wind, biomass, solar, and 
geothermal.
    We believe climate legislation should meet some basic 
criteria for a robust, cost-efficient national policy for long-
term reductions in greenhouse gases. These criteria including 
balancing reasonable cost burdens, encouraging low-carbon 
technologies, providing a uniform national policy, and finding 
the most cost-effective way to reduce emissions without 
choosing winners and losers. The Lieberman-Warner bill fails to 
meet these criteria. For example, it would have imposed 
disproportionate costs on the supply of natural gas, gasoline, 
diesel, aviation fuel, and other petroleum products such as 
heating oil. This unbalanced cost burden is the consequence of 
providing only 3 percent of the needed emissions allowances for 
fuels and natural gas sectors.
    These costs could have contributed to increases in consumer 
prices according to analysis by the U.S. Energy Information 
Administration and the Congressional Budget Office. Our own 
supply-side study estimated that the legislation could have 
seriously affected supplies of both natural gas and fuels.
    Clean-burning natural gas has low levels of greenhouse gas 
emissions. According to a Natural Gas Council study, climate 
legislation is likely to increase the demand for natural gas. A 
sound climate policy should enable more supply of natural gas, 
not less. However, a study by ICF International commissioned by 
API and included with my testimony estimates the Lieberman-
Warner bill would have reduced natural gas supplies by 12 
percent. The estimated fall in natural gas supplies is because 
of the added costs of production and gas processing. A Wood 
Mackenzie study estimates even greater supply reductions. Our 
ICF study also estimates that the legislation would shift 
refinery capacity overseas by 3 million barrels a day, or 17 
percent of U.S. capacity. The estimated shift in refinery 
capacity would have also meant lost jobs and the export of 
emissions overseas.
    From our review of the Lieberman-Warner bill, we have 
identified additional shortcomings. It fails to establish a 
uniform national policy that coordinates with other 
legislation, Federal and State, to reduce redundancy and 
inefficiency. It fails to safeguard against potentially 
triggering overlapping federal regulations for greenhouse gases 
under the Clean Air Act, NEPA and the Endangered Species Act. 
The bill locks in an inflexible 40-year schedule of allowance 
allocations that fails to allow for midcourse corrections, and 
it does not provide a sufficiently transparent signal of cost 
which weakens the impact on consumer behavior.
    In conclusion, managing greenhouse gas emissions will 
require new energy technologies and sensible policies. A sound 
approach involves investment, equitable cost, consistent 
national policies, transparent signals for consumers and 
development of all sources of energy including coal, nuclear, 
oil, natural gas, and new alternatives. We hope to work with 
you and your colleagues to help develop sound policy.
    That concludes my remarks, which have focused on the 
analysis of the Lieberman-Warner legislation. API is still 
examining the other bills you are considering today. I would 
like to submit for the record the executive summary of our ICF 
study, which is the first to focus on supply-side impacts of 
the legislation. I would also like to submit an analysis we 
commissioned of the financial investments into climate 
mitigation technologies. I would be happy to answer your 
questions. Thank you.
    [The prepared statement of Mr. Felmy follows:]

                        Statement of John Felmy

    I am John Felmy, chief economist of API, the national trade 
association of the U.S. oil and natural gas industry. API 
represents nearly 400 companies involved in all aspects of the 
oil and natural gas industry, including exploration and 
production, refining, marketing, and transportation, as well as 
the service companies that support our industry.
    API believes it is important to address global climate 
change and manage greenhouse gas emissions. We are committed to 
working with Members of Congress on policies that are 
environmentally effective, economically sustainable, and fair. 
Good policies can help contain costs and enhance our 
competitiveness while tackling the hard issue of greenhouse gas 
emissions.
    We all have a role to play addressing the climate change 
challenge, and the U.S. oil and natural gas industry has been 
trying to do its part. Companies have invested in alternative 
fuels and refinery efficiency improvements, which has reduced 
emissions. Working with EPA and others, they've reduced natural 
gas flaring and virtually 100% of the natural gas produced by 
API members is from companies participating in EPA's Natural 
Gas STAR program. Through API, they've developed a suite of 
tools for estimating and tracking emissions, without which any 
progress will be hard to measure. And, for many years now, 
they've been building experience capturing and storing 
CO2, boosting domestic oil production in the process 
and reducing our reliance on imports.
    Between 2000 and 2006, the U.S. oil and natural gas 
industry invested $42 billion in carbon mitigation 
technologies, more than either than the Federal Government or 
all other businesses and industries combined. Nearly $3.5 
billion of that was in non-hydrocarbon technologies, including 
wind, biomass, solar and geothermal.
    One climate change proposal that was considered by the 
Senate earlier this month fell short of meeting what we believe 
are the essential criteria for a robust, cost-efficient 
national policy for long-term reductions in greenhouse gases. 
These criteria include balancing reasonable cost burdens; 
encouraging low-carbon technologies; providing a uniform 
national policy; and finding the most cost-effective ways to 
reduce emissions without choosing winners and losers.
    For example, the Lieberman-Warner bill would have imposed 
disproportionate costs on the supply of natural gas, gasoline, 
diesel, aviation fuel, and other petroleum products such as 
heating oil. This is the consequence of providing only three 
percent of the needed emission allowances for the fuels and 
natural gas sectors while granting some other sources of 
emissions as much as 300 percent of their needed allowances.
    These costs would have helped raise consumer prices, 
according to analyses by the U.S. Energy Information 
Administration and the Congressional Budget Office. And they 
would have seriously affected natural gas supplies and fuel 
production. A study by ICF International commissioned by API 
estimates the legislation would have reduced natural gas 
supplies by 12 percent and driven overseas some three million 
barrels per day or 17 percent of our refinery capacity. The 
shift in refinery capacity would also have meant lost jobs. A 
Wood Mackenzie study estimates greater reductions in natural 
gas supplies.
    The projected fall in natural gas supplies is troubling. 
Natural gas is relatively clean-burning. It produces barely 
half the greenhouse gas emissions of coal. A rational climate 
change policy should encourage more use of natural gas, not 
less. Indeed, the legislation, while at the same time it could 
reduce supplies, would also have spurred demand for natural 
gas, according to a recent Natural Gas Council study.
    The shifting of refinery capacity overseas also would have 
meant exporting rather than controlling some emissions.
    From our review of the Lieberman-Warner bill, we've 
identified additional shortcomings:
    It fails to establish a uniform national policy that 
coordinates with other legislation, Federal and State, to 
reduce redundancy and inefficiency. For example, it fails to 
safeguard against potentially triggering overlapping federal 
regulations for greenhouse gases under the Clean Air Act, NEPA, 
and the Endangered Species Act.
    It locks into an inflexible 40-year schedule of allowance 
allocations that fail to allow for mid-course corrections.
    And, it does not provide a sufficiently transparent signal 
of all the costs, which weakens the impact on consumer 
behavior.
    In short, a sound approach to managing greenhouse gas 
emissions that involves investment, equitable costs, consistent 
policies, and understandable signals still remains to be 
advanced. We hope to work with all of you and your colleagues 
to help make that happen.
    That concludes my remarks. I'd like to submit for the 
record two studies API commissioned on supply-side impacts of 
legislation and a report on investments into climate mitigation 
technologies. I would be happy to answer your questions. 
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


                              ----------                              

    Mr. Boucher. Thank you, Dr. Felmy. Those documents may be 
submitted as a part of your prepared statement and will appear 
in the record.
    Mr. Baugh.

  STATEMENT OF ROBERT C. BAUGH, EXECUTIVE DIRECTOR OF AFL-CIO 
INDUSTRIAL UNION COUNCIL AND CHAIR OF AFL-CIO ENERGY TASK FORCE

    Mr. Baugh. Thank you, Chairman Boucher. I would like to say 
on behalf of the 9 million members of the AFL-CIO, thank you 
for the opportunity to testify here today. We have been engaged 
in this process over the last 18 months with our energy task 
force working with the business community, the environmental 
community, community organizations and Members of the House and 
the Senate to work our way through and understand this and come 
to some conclusions, and we have. We found your white papers 
quite helpful that you issued from this committee.
    The AFL-CIO believes it is time for our Nation to take bold 
steps to meet the 21st century challenges related to climate 
change. We believe it is real. We believe something needs to be 
done and we support a new environmental economic development 
policy, both policies come together, it is not one or the 
other, with a balanced approach that ensures diverse, abundant, 
affordable energy supplies and creates good jobs for American 
workers that improves the environment. We do support a cap-and-
trade program that is transparent and economy-wide, and note 
that the legislations under consideration do do that. We also 
believe they have to have timetables and standards that are 
sensitive to development and deployment of new technology and 
we think there is a problem there, and I will talk more about 
that in a second.
    We also believe there should be an economic development 
policy from cap-and-trade that has principles to it, one that 
domestic investment of the auction proceeds, we need to be sure 
of that, that do create jobs here, the capturing of cutting-
edge technologies and the discouraging of the offshoring of the 
manufacturing and production of this work. I think the idea 
is--that is why it is economic development--to reinvest these 
dollars in our economy. And these investments need to be 
supported by an international component that provides both 
incentives and a border mechanism enforced through trade regime 
to encourage the rest of the world to engage in similar 
activities around climate change, and there must be adequate 
resources to address the needs of displaced workers and the 
communities that may be affected by this as well as low- and 
moderate-income relief from the cost of any such programs.
    We support a robust investment portfolio that includes 
carbon capture and sequestration technology, advanced 
technology vehicles, renewable energy and biomass, the 
electrical grid modernization, relief for low- and moderate-
income workers, worker training and more, and the Senate bill 
certainly reflects that investment portfolio and we recognize 
that the Markey bill has similar investment portfolio pieces 
into it. It is not as spelled out as much in the Waxman 
legislation.
    I want to make one statement. There is an immediate need 
that has been said by the previous panels for the investments 
in CCS technology, and I want to applaud this committee and the 
chairman and the members of this committee who have supported 
the carbon capture and storage early deployment act. This has 
to happen now. We can't wait 2, 3, 4 years for the 
implementation of auction monies to come down the road, a very 
important step forward, and we applaud your actions on this. We 
are fully supportive of that.
    In the short term, there is a wide variety of actions that 
can be taken to capture the difference between the technology 
gap that exists here and the standards and timelines that are 
being proposed, and this includes the modernization of the 
grid, the retrofit of buildings, what we do about mass transit 
and home weatherization are all things that are technologies 
that are there that we can move on and make a difference to cut 
the demand. It is not going to solve the complete gap between 
the technology and the timeline.
    We supported caps and timetables in the Bingaman-Specter 
bill. There they come in shorter than the other ones that we 
were looking at in the other three pieces of legislation which 
are more stringent. I think those bills fail to recognize the 
technology gap that has been addressed here by other people, 
especially in the 2020 time frame. That is where the big push 
is, and our concern is that that time frame and that standard 
and timeline will actually push the issue of fuel switching 
that has been discussed earlier on the panels this morning.
    We also support a very limited market approach with price 
control mechanisms. We did support the safety valve that has 
been talked about in the Bingaman-Specter bill. We have also 
looked with interest upon the emergency off ramp, as it was 
called, in the Lieberman-Warner legislation that was proposed 
that used borrowing and other mechanisms to address the idea 
that this is a cost control mechanism.
    We very much recommend a regulated and restricted trading 
system. We remain deeply, deeply troubled with a simple market-
only approach that is open to speculation and windfall profits 
by individuals and entities such as hedge funds that are never 
going to use these carbon credits. We believe it should be 
restricted that the people actually have to buy them and use 
them.
    In addition, we are very concerned about the use of 
offsets. We should approach this cautiously. The international 
allowances need to be approached again with caution. We need to 
be sure that they can be verifiable and that they are actually 
permanent, and in fact, I met with two EU commissioners on 
their energy commission recently and discussed this issue, and 
in their phase II reform, they limited offsets to 15 percent. 
Their concern was that if they made them too readily available, 
their domestic industries would not make the investments in 
their own industries to make the changes that need to be made, 
a very interesting approach that I didn't really realize what 
they had done until I had the chance to sit down and go through 
this with them. We want viable, competitive domestic 
industries. We want them to make those investments.
    We believe Congress needs to be better informed about the 
impact of cap-and-trade and the performance on energy-intensive 
industries. We have worked with the National Commission on 
Energy Policy. They are completing four studies of four major 
industries, steel, aluminum, chemical, part of the chemical 
industry, and paper, to really better understand the impact of 
a cap-and-trade program on these. Frankly, we have been 
operating with too little information about these impacts. We 
really look forward to these reports, which should be available 
in the next couple of weeks, is my understanding.
    We do support the inclusion of the international language 
that was in the Boxer-Lieberman-Warner package and the 
Bingaman-Specter bill has been raised in the other legislation 
and we think it is an important step forward to addressing the 
part. We think there is additional steps that could be needed 
around that. We are very open to discussion on this but we 
think the international component is important in terms of 
sending the right signals that the whole world has go to do 
their part in this, and we shouldn't move forward without that.
    We believe Congress also needs to take action to address 
the conflict between a State and Federal cap-and-trade 
programs, Alan Reuther mentioned in his testimony this morning. 
We fully concur that that is something that needs to be 
addressed.
    We have learned a lot as a committee, as a trade union over 
the last 18 months. We do believe there will be some price 
impacts to this. We believe they can be addressed. We also view 
this with optimism as we learned the rest of the world did when 
we participated in the negotiations in Bali that within crisis, 
there is opportunity, and we tried to take that point of view, 
and that is why we so strongly the investment portfolio that 
offers a view of how we invest in new technologies, in 
renewable energies, in our existing technologies to re-engineer 
them so that we do have clean coal. There is another way to do 
this and we do believe it is possible. Our only hurdle in this 
is the standards and timelines, the technology gap and the 
steps we take both to mitigate that and to move ahead for the 
future.
    Thank you.
    [The prepared statement of Mr. Baugh follows:]

                      Statement of Robert C. Baugh

    Chairman Boucher, on behalf of the 9 million members of the 
AFL-CIO, I want to thank you and the members of the 
Subcommittee on Energy and Air Quality of the House Energy and 
Commerce Committee for the opportunity to testify this 
afternoon on this important subject. Our comments will focus on 
the Federation's climate change initiatives in relation to the 
Climate Security Act of 2008 (S. 3036). Sponsored by Senators 
Boxer, Lieberman, and Warner; the Investing In Climate Action 
and Protection Act (H.R. 6186) sponsored by Representative 
Markey; the Safe Climate Act (H.R. 1590) sponsored by 
Representative Waxman; and the Low Carbon Economy Act (S. 1766) 
sponsored by Senators Bingaman and Specter.
    The AFL-CIO believes it is time for our Nation to take bold 
steps to meet the 21st Century challenges related to climate 
change. Scientific evidence has confirmed that human use of 
fossil fuels is undisputedly contributing to global warming, 
causing rising sea levels, changes in climate patterns and 
threats to coastal areas. Unrestrained growth in greenhouse gas 
emissions poses critical economic and environmental issues. 
This challenge is an opportunity to enact an energy policy that 
will result in a cleaner planet, greater energy efficiency, and 
the revitalization of our manufacturing base.
    The world is looking to the United States for leadership 
because we are the most energy-intensive nation in the world 
and one of its leading emitters of greenhouse gas. Our Nation 
can lead a new technological revolution in the way energy is 
generated and used that can be of benefit to the world as a 
whole and serve as a foundation for the revival of the middle 
class in the United States. But to accomplish this, we need a 
strategic approach centered on domestic investment in new 
technologies and good jobs. And we need to lead in fostering a 
shared international response to this issue.

                         Policy and Principles

    Over the past 18 months, our interaction with Congress and 
many other businesses, industry, environmental and 
international labor organizations, has helped evolve and 
sharpen the thinking of the AFL-CIO Energy Task Force.
    The February 2007 report by the AFL-CIO Energy Task Force 
recognized that ``reliable and affordable electrical energy, is 
the lifeblood of the manufacturing, transportation, 
construction and service industries;'' .and that we must 
``maintain diversity in the electric utility industry, by 
retaining all current generating options, including fossil 
fuels, nuclear, hydro and renewables, to ensure a stable, 
reliable and low-cost supply of electricity for the United 
States.''
    That report was also driven by our belief that a strong and 
diverse manufacturing base is in the national interest. This 
sector is in a deep and ongoing crisis. Since 1998, some 3.9 
million manufacturing jobs were lost and 35,000 manufacturing 
facilities closed while the nation amassed trillion of dollars 
in trade deficits. The offshoring of skilled work, R&D, design, 
engineering and more continues to erode our innovative and 
technical capacities. Solving the climate change crisis is an 
opportunity to address the manufacturing crisis.
    The AFL-CIO supports a new industrial policy, and an 
environmental economic development policy, which places 
manufacturing and trade at the center of a green economy 
program. New investment in a sustainable energy infrastructure 
must be structured to create good jobs and ensure stable energy 
prices. These must be supported by effective trade policies. 
Without these key elements, there is a serious risk of driving 
good jobs offshore into nations without emission regimes and 
far less carbon efficient production.
    A set of environmental economic development principles has 
helped guide the Federation's efforts:
    1) Our Nation should embrace a balanced approach that 
ensures diverse, abundant, affordable energy supplies, creates 
good jobs for America's workers, and improves the environment.
    2) Our Nation should adopt an economy-wide cap-and-trade 
program that is transparent and requires all sectors to come to 
the table to reduce their carbon emissions. It should have 
timetables and standards that allow for the development and 
deployment of new technology and should help finance the new 
technologies that can provide clean energy at prices close to 
conventional sources.
    3) Energy incentives and investments by the Federal 
Government must be based on a set of economic development 
principles that clean the environment and create jobs but will 
not encourage offshoring of manufacturing jobs.
    4) Investments must be used to identify, develop and 
capture cutting-edge technologies and to manufacture and build 
these technologies here for domestic use and export.
    5) The international component of any climate change cap-
and-trade program must provide both incentives and a border 
mechanism enforced through a trade regime, to ensure that major 
developing nations, such as China and India, participate.
    6) There must be adequate resources to both address the 
transition needs of workers and communities adversely affected 
by legislation, as well as, financial assistance to assist low- 
and moderate-income families.
    The AFL-CIO is here today to reinforce these principles 
with the Energy and Air Quality Subcommittee, just as we have 
in every discussion held with staff and Members of Congress.

             Investing for the Future: Greening the Economy

    Meeting the future energy needs of the Nation while 
reducing our carbon footprint offers difficult choices and huge 
opportunities. It requires a commitment to major long-term 
investments, that these be invested domestically and that the 
technology and products resulting from the investments be 
produced domestically. In this way the Nation can maximize the 
outcomes from its investments by assuring that those dollars 
recirculate through the domestic economy. This is environmental 
and industrial policy working in harmony. All the legislation 
we are addressing today took steps in this direction.
    The Markey and Waxman bills and Boxer-Lieberman-Warner and 
Bingaman-Specter legislation all provided for an investment 
portfolio based on auction proceeds. The Waxman bill does not 
provide the level of detail that appears in the other bills. 
The AFL-CIO was most deeply engaged in the Senate stakeholder 
process that developed a robust portfolio in both bills. This 
included carbon capture and sequestration technology (CCS), 
advanced technology vehicles, renewable energy and biomass, 
electric grid modernization, relief for low- and moderate-
income families, worker and community transition, worker 
training, and more. These investments were bolstered by 
domestic investment requirements and international provisions 
regarding the participation of developing nations, including a 
border mechanism.
    While the climate change bills all invest in CCS 
technology, those investments may be years away. There is an 
immediate need for investment in CCS technology. The AFL-CIO 
applauds the introduction of the Carbon Capture and Storage 
Early Deployment Act by Chairman Boucher. This legislation will 
create a non-governmental fund and entity to accelerate the 
deployment of carbon capture and storage technologies. This is 
an investment that needs to be made now so that the technology 
is available as soon as possible to meet the carbon emission 
standards of the future.
    In the short term, there are a wide variety of options for 
emissions reduction that can help bridge some of the gap 
between the coal technology of today and the carbon capture and 
sequestration technology of the future. There is also an 
enormous potential for energy savings and good jobs in making 
our economy more energy-efficient. The modernization of the 
160,000 miles of high transmission lines that make up the 
electrical grid and the retrofitting public, industrial and 
commercial buildings and home weatherization also increase 
energy efficiency and create jobs. The expansion and increased 
usage of mass transit and passenger rail offers similar 
opportunities for the economy and the environment.
    Another important investment policy incorporated in the 
Senate legislation was to impede the ability of manufacturing 
firms to game the system simply for financial gain or to drive 
them offshore. Firms cannot collect credits for reductions 
achieved through closures, cutbacks, or outsourcing work. Only 
actively operating manufacturing facilities (including new 
facilities) receive allowances, and their allocation is based 
on the number of production employees at those U.S. facilities. 
The point of the system was to encourage a positive change in 
the domestic behavior of energy producers and manufacturers 
while retaining jobs and our technical capability to produce 
goods.
    The Bingaman-Specter, Boxer-Lieberman-Warner and Markey 
legislation all identified worker and community transition and 
worker training as critical investments. The Boxer-Lieberman-
Warner identified major areas of worker investment, one of 
which corresponds with previous House legislation on green 
jobs. The worker and community transition is modeled after the 
best elements of TAA legislation and previous displaced worker 
legislation over the past 25 years. In addition to strong 
training, education, and counseling benefits it provides for 
wage replacement, health care, retirement bridges, and other 
forms of economic and social assistance. It also recognizes the 
burdens that may fall on communities heavily dependent upon an 
affected industry and offers community planning and other forms 
of economic development assistance. The green jobs training 
program is modeled after House legislation that encourages 
collaborative community and labor-management initiatives.

             Cap and Trade, Timelines and Cost Containment

    A cap and trade system begins with the actual cap and an 
emission standards timeline The AFL-CIO supported the standards 
and timeline within the Bingaman-Specter bill. These were 
reasonable and recognized the linkage between standards and 
technical capability for mass deployment of new CCS technology. 
The caps and timetables established in the Boxer-Lieberman-
Warner, Markey, and Waxman bills are more stringent. These fail 
to take into account the actual state of technology development 
and deployment necessary to achieve their proposed standards.
    The AFL-CIO believes that any approach for addressing 
greenhouse gas emissions must be done upstream on an economy-
wide level, with contributions from each sector in proportion 
to the greenhouse gas emissions of that sector. Also, any 
auction of carbon permits should be reasonable in scope and 
must assure that no sector is disproportionately burdened. The 
Boxer-Lieberman-Warner, Bingaman-Specter, and Markey bills do 
take an upstream approach with the burden being shared across 
sectors.
    The AFL-CIO supports a limited market approach to cap and 
trade, with regulatory mechanisms that act as a price control 
to prevent any serious long-term damage to the economy. The 
Bingaman-Specter legislation contained a safety valve and the 
Boxer-Lieberman-Warner legislation offered an alternative 
approach to controlling price spikes through a borrowing from 
the future mechanism with set pricing. The Waxman and Markey 
bills fail to provide similar protections.
    Carbon pricing has a direct relationship to fuel switching 
(from coal to natural gas) and that has serious consequences 
for the economy. The goal should be to encourage the adoption 
of new technologies like carbon capture and storage and 
discourage fuel switching. The AFL-CIO worked with the NCEP and 
members of the environmental community to identify the price 
triggers for fuel switching and ways to avoid this scenario. 
The Boxer-Lieberman-Warner bill did take this concern into 
account.
    Fuel switching is directly related to our ongoing concern 
over the cost containment measures, and any legislation's 
timetable and standards for emission reductions in the 2020 
period. While the Boxer-Lieberman-Warner bill offers one form 
of cost control it does not solve the problem of the 2020 
standards in theirs and the Waxman and Markey bills. The 
stringent timelines will act as a trigger for massive fuel 
switching. It is in the 2020-2030 period that CCS technology 
should become available for mass deployment. But, the early 
aggressive targets will have already triggered the investment 
decisions for compliance. We urge that there be greater 
flexibility in the standards and timetable.

                          Market Functionality

    The Stern Commission cited climate change as the greatest 
market failure in history. Today, open and unregulated markets 
have left the Nation in a housing crisis, soaring food costs, 
world capital markets in turmoil, and still dealing with the 
fallout of Enron. Even as this testimony is being delivered 
Congress is looking into the role speculation and futures 
contracts are playing in oil, grain and commodities markets. 
Thus, we remain deeply troubled with a simple market-only 
approach that is open to speculation and windfall profits by 
individuals and entities that have nothing to do with carbon 
emissions.
    The open and ``unlimited trading'' initially proposed in 
legislation means that anyone, can buy allowances from a 
limited and declining pool. With well over 10,000 firms needing 
allowances, we reject the notion that letting additional 
speculators (those not needing to use carbon emission credit) 
into the market to create more liquidity is neither necessary 
nor desired. However, letting these speculators in will create 
windfall profits and drive prices higher leaving consumers and 
industry to pay the price.
    In addition, the ability of purchasers to bank these 
allowances in perpetuity creates additional risks. While some 
would argue that unlimited banking might help business decision 
making, it also may lend itself to uncompetitive behavior in 
search of windfall profits or market advantage.
    Open access and unlimited banking leaves the system open to 
predatory and speculative trading practices, the hoarding of 
allowances and windfall profits that will fuel volatile pricing 
in the market. This will have a direct and detrimental pricing 
impact on the public, utilities sector, and energy-intensive 
industries.
    The AFL-CIO believes that the goal of any climate change 
legislation with a cap and trade program is to move industries 
and consumers to change behavior and lower carbon emissions. 
The Federation recommends a regulated and restricted approach 
to the trading of allowances. We believe that:
     Market participation (as purchasers not sellers) 
should be limited to firms that intend to use the allowances. 
With an accurate carbon footprint and a declining pool of 
allowances, available prices will rise but not be artificially 
inflated by speculators.
     The banking of allowances should be limited and 
regulated to avoid non-competitive and speculative behavior. 
There needs to be a limit on the amount of allowances any 
particular firm can bank related to its actual needs. In 
addition, there should be a ``time certain'' by which a firm 
must use the allowances or revert back to the auction pool. A 
firm would always be able to reenter the market and bank a 
limited amount for a limited duration. These steps will help 
create a more certain, less speculative, trading environment.
     The allowances and market will be created for 
buyers and sellers who need to use them. Purchasing and 
retirement of allowances should be limited to entities 
regulated by state performance or efficiency standards in any 
sectors covered under the federal cap-and-trade program seeking 
to meet state standards more stringent than any comparable 
Federal standards, by purchasing and retiring Federal 
allowances.

                  Offsets and International Allowances

    The use of offsets and international allowances as tools 
for cost containment needs to be approached with caution so 
that the outcomes sought for the long run, a cleaner planet and 
viable competitive domestic industries, are achieved. It is in 
our interest to assure that domestic industry makes the needed 
investments in transformational technology. Our concern is that 
these investments will be deferred with the easy availability 
of less expensive offsets and allowances. This would be a 
formula for business closure in future years.
    In recent meetings with EU officials and European traders, 
the AFL-CIO has learned that the EU had the same concerns in 
mind with their recently implemented phase II reform. Under 
their system, offsets are limited on average to 15% because 
they fear that too many easily obtained offsets will undermine 
efforts to assure that domestic investments for mitigation are 
made. They want viable competitive clean industries in their 
countries. The EU does not have domestic offsets only 
international offsets. To date their experience with 
international offsets has been problematical and filled with 
concerns over the validity of these offsets.
    The AFL-CIO remains concerned about the ability to monitor 
the legitimacy of domestic and foreign offsets. The Boxer-
Lieberman-Warner legislation recognized these concerns and took 
steps to assure their legitimacy. However, this bears further 
examination. Project based international offsets may interfere 
with the adoption of a systematic carbon emission regime in the 
Nation selling the offsets. Additionally, offsets must be both 
verifiable and there must be enforcement mechanisms in place to 
assure that investments into allowable offsets actually result 
in the reductions of green house gasses.
    The idea should be to use these tools to help a firm 
balance that transition, but not to avoid making needed 
industry investments. The need for flexibility in the use of 
offsets and international allowances should be tempered with 
requirements that the purchasers must also be making progress 
with domestic investments to improve carbon emission 
performance. This needs to be made explicit in the legislation.

                      Energy Intensive Industries

    There is far too little known about the impact of a cap-
and-trade program on energy intensive industries such as steel, 
aluminum, paper, chemicals, airlines and others. The AFL-CIO 
has raised this issue consistently through the stakeholder 
process on the Senate bills. The Federation encouraged a set of 
economic impact studies that the National Commission on Energy 
Policy has commissioned for the steel, aluminum, paper, and 
chemical industries. These will be finished within the next few 
weeks. The Boxer-Lieberman-Warner legislation recognized this 
concern by making additional free allocations of allowances 
available for these sectors. The NCEP studies will be a 
valuable source of data to help inform future decision-making.
    There needs to be additional analysis of the economic 
impact on other sectors such as the aviation industry. The 
Airline Pilots Association points out the acute situation of 
this sector and its price sensitivity. Record fuel prices have 
wreaked havoc on the airline sector with four air carriers 
having ceased operations and more than 9,000 airline employees 
having lost their jobs this year and thousands more facing 
furlough this fall. The industry like others has a record of 
accomplishments in reducing GHG and conserving fuel, but fuel 
costs, industry consolidation, and a weakening economy will 
continue to threaten our national aviation system for the 
foreseeable future. Congress needs to be better informed on the 
impact of cap and trade and performance of energy intensive 
industries so that these factors can be taken into 
consideration when crafting legislation.

         International Aspects: The Need for a Global Solution

    The inclusion of an international section in the Boxer-
Lieberman-Warner, Bingaman-Specter, and Markey bills to assure 
that our industries and workers are not put at a competitive 
disadvantage with our trading partners is an important step 
forward. The Waxman bill does not address this concern. It has 
been a critical issue for our support of any legislation. The 
AFL-CIO believes that having a dynamic and healthy industrial 
base is in the best interest of the Nation and we must do our 
best to cut our carbon emissions. However, this cannot be a go 
it alone proposition.
    The participation of developing nations is critical to 
solving this problem, while assuring the competitiveness of 
U.S.-based manufacturing. Mexico and Brazil account for more 
than half the emissions from Central and South America. 
Deforestation is estimated to account for 20-30 percent of 
carbon emissions with the burning of forests in the Amazon 
basin acting as a major contributor.
    In 2007 China passed the United States in carbon emissions. 
They have a new ``1950's technology'' coal plant coming online 
every week with 500 plants being planned. They are dirty but 
cheap to build. Unabated, by 2030 China's emission will grow 
139 percent and make up 26 percent of the world's total. They 
and other major developing nations must be part of the solution 
or everything we the EU and other nations do to cut carbon 
emissions will be for naught.
    There is a second economic implication of the non-
participation of these nations. China and other rapidly 
developing countries are already a magnet for manufacturers 
seeking to avoid labor, environmental, currency, and other 
standards. Seventy percent of China's foreign direct investment 
is in manufacturing, with heavy concentration in export-
oriented companies and advanced technology sectors. Much of 
this energy resource will be dedicated to China's manufacturing 
export platforms, which already account for nearly 40 percent 
of Chinese GDP.
    To put it bluntly, it is not in our national interest to 
see our efforts to reduce carbon emissions become yet another 
advantage that a developing nation uses to attract business. 
However, it is in our interest and the worlds interest to have 
developing nations become part of the solution because the 
problem cannot be solved without them.
    While we applaud the inclusion of international language in 
the Senate and Markey bills there is more that can be done to 
strengthen them. For example, the coverage should include more 
finished products. The AFL-CIO stands ready to work with 
Congress to address the critical issue of international 
competitiveness.

                        Federal and State Issues

    Many states have enacted or are considering measures to 
reduce greenhouse gas emissions. This includes state or 
regional cap-and-trade programs, performance or efficiency 
standards relating to autos, utilities, fuels and other sectors 
covered under the cap in the federal legislation, as well as, 
initiatives in areas outside of the cap (e.g. building codes, 
conservation, transportation planning).
    The Boxer-Lieberman-Warner, Markey and Waxman bills all 
preserve existing state authority to regulate greenhouse gases. 
However, the Boxer-Lieberman-Warner and Markey bills also 
supersede pending litigation over the scope of that authority, 
and make it clear that California and other states may regulate 
auto CO2 tailpipe emissions. In addition, the Boxer-
Lieberman-Warner, Markey and Waxman bills all fail to deal with 
the important issue of how state climate change measures--
whatever their scope--will interface with the federal cap-and-
trade program
    In exchange for the establishment of the federal cap-and-
trade program, the states should be pre-empted from having 
state or regional cap-and-trade programs affecting the sectors 
covered under Federal legislation. This would prohibit state 
programs that cap emissions from the electric power, 
transportation or industrial sectors, or require the purchase, 
sale or retirement of allowances in these sectors. This is 
necessary to prevent regulated entities from having to submit 
duplicative allowances for the same ton of carbon, and to 
establish a level national playing field for an economy-wide 
emissions trading program.
    The Federal cap-and-trade program should be the exclusive 
Federal authority for dealing with greenhouse gas emissions 
from those sectors covered under the cap. This is necessary to 
prevent EPA from issuing regulations that impact these sectors 
and have the effect of overriding the decisions made by 
Congress in the cap-and-trade program concerning the stringency 
of the federal cap, the point of regulation, and the 
distribution of economic burdens. EPA should retain any 
existing authority it may now have under the Clean Air Act to 
regulate in sectors that are outside the cap.

                               Conclusion

    The AFL-CIO believes climate change is both a crisis and an 
opportunity for our nation. By taking the right legislative 
steps--timelines, standards and a safety valve sensitive to the 
economic impacts on business, workers and communities, assuring 
that our investments capture the intellectual property of 
cutting edge technology, by producing these new technologies 
and goods domestically, and engaging the developing world in 
the solution -- we can have a cleaner planet, greater energy 
efficiency and a revitalized manufacturing base.
    The Federation looks forward to working with Congress to 
achieve these goals.

                                Summary

    The AFL-CIO believes it is time for our Nation to take bold 
steps to meet the 21st century challenges related to climate 
change. We support a new environmental economic development 
policy with a balanced approach that ensures diverse, abundant, 
affordable energy supplies, creates good jobs for America's 
workers and improves the environment. We support a cap and 
trade program that is transparent, economy-wide with timetables 
and standards sensitive to development and deployment of new 
technology.
    Investments from cap-and-trade should be based on a set of 
economic development principles: domestic investment of auction 
proceeds, job creation, capturing cutting-edge technologies and 
discouraging offshoring. These investments need to be supported 
by an international component that provides both incentives and 
a border mechanism enforced through a trade regime. And, there 
must be adequate resources for displaced workers and their 
communities and for low and moderate-income families.
    The AFL-CIO supports a robust investment portfolio that 
includes: carbon capture and sequestration technology (CCS), 
advanced technology vehicles, renewable energy and biomass, 
electric grid modernization, relief for low- and moderate-
income families, worker, and community transition, worker 
training and more. There is an immediate need for investment in 
CCS technology. We applaud the Carbon Capture and Storage Early 
Deployment Act by Chairman Boucher. In the short term, there 
are a wide variety of options for emissions reduction that can 
help bridge the technology gap: modernization of the electrical 
grid, building retrofits, home weatherization, improved mass 
transit, and the renewable energy and biofuels initiatives 
already underway.
    The Federation supported the caps and timetables in 
Bingaman-Specter. The other bills are more stringent and fail 
to recognize the technology gap that exists especially in the 
2020 timeframe. This can trigger fuel switching. Also, we 
support a limited market approach with price control 
mechanisms, i.e., the safety valve in Bingaman-Specter. The 
Boxer-Lieberman-Warner legislation offered an alternative 
approach.
    The Federation recommends a regulated and restricted 
trading system. We remain deeply troubled with a simple market-
only approach that is open to speculation and windfall profits 
by individuals and entities like hedge funds. In addition, the 
use of offsets and international allowances needs to be 
approached with caution so that the outcomes sought for the 
long run, a cleaner planet, and viable competitive domestic 
industries, are achieved
    Congress needs to be better informed on the impact of cap 
and trade and performance of energy intensive industries. The 
inclusion of international language in the Boxer-Lieberman-
Warner, Bingaman-Specter, and Markey is an important step 
forward in addressing part of that concern but additional steps 
are needed. Congress also needs to take action to address the 
conflict between State and Federal cap and trade programs.
    The AFL-CIO believes climate change is both a crisis and an 
opportunity for our nation. The Federation looks forward to 
working with Congress on this landmark legislation.
                              ----------                              

    Mr. Boucher. Thank you very much, Mr. Baugh.
    Ms. Figdor.

  STATEMENT OF EMILY FIGDOR, DIRECTOR, FEDERAL GLOBAL WARMING 
                  PROGRAM, ENVIRONMENT AMERICA

    Ms. Figdor. Thank you for the opportunity to share my views 
regarding these legislative proposals. My name is Emily Figdor 
and I am the director of the Federal Global Warming Program at 
Environment America. Environment America is the new home of 
U.S. PIRG's environmental work. We are a federation of State-
based, citizen-funded environmental advocacy organizations.
    My testimony today outlines three principles for strong, 
effective and fair global warming legislation and provides an 
overview of how well five major House and Senate bills fulfill 
those principles.
    Twenty years ago this summer, NASA scientist James Hansen 
appeared before Congress for the first time to warn the 
American people of the dangers posed by global warming. Today 
thousands of families in the Midwest are struggling to recover 
from devastating floods. The extreme rainstorms that caused 
those floods have become more common over the last 60 years and 
scientists predict they will become even more common in a 
warming world. These events remind us that inaction has 
consequences. It is vital, therefore, that we listen to what 
scientists are telling us today. They say that the United 
States and the world must begin reducing global warming 
pollution now and achieve steep reductions soon if we hope to 
avoid the most catastrophic impacts of global warming.
    While achieving these reductions is a challenge of historic 
scale, the United States has the energy efficiency and 
renewable energy technologies to reduce emissions. A 2006 
Environment America analysis found that the United States could 
reduce its emissions by nearly 20 percent by 2020 by taking 
just five technologically feasible steps to improve energy 
efficiency and use more renewable energy, and these solutions 
would also make America more energy independent, reinvigorate 
our economy and create good, new jobs here at home.
    To get us there, Congress must pass global warming 
legislation that fulfills three principles. First, the 
legislation must be strong enough to get the job done, meaning 
that it must be able to deliver the domestic emission 
reductions that science tells us are necessary to prevent the 
worst effects of global warming. That means reducing total U.S. 
global warming emissions by at least 15 to 20 percent by 2020 
and by at least 80 percent by 2050. Second, the legislation 
must accelerate the transition to clean energy economy. Capping 
global warming pollution while subsidizing polluters is like 
gunning the engine of a car while riding the brake. By 
contrast, smart climate policies that pair a carbon cap with 
investments in clean energy technology and infrastructure can 
shift America's energy transition into high gear. Finally, the 
legislation must maximize the benefits of our investments in 
clean technologies and minimize societal costs.
    Any response to global warming will have an impact on 
American families. All Americans will benefit from a cleaner 
and more efficient economy that is less dependent on foreign 
oil. But some families may also experience increased burdens. 
It is important therefore that any climate policy is designed 
to maximize the benefits American families will reap in terms 
of cleaner air, improved energy efficiency and greater energy 
independence and minimize the costly experience in terms of 
higher energy bills. Studies including one released just 
yesterday by CBO show that auctioning emission allowances and 
returning some or all of the auction revenue to the American 
people reduces the societal cost of the cap-and-trade program. 
By auctioning allowances, we can assure that precious dollars 
are not siphoned away to unjustly pad the profits of Big Oil 
and other fossil fuel industries. At the same time, we can 
redirect those dollars towards the achievement of two very 
important goals: helping Americans make the transition to a 
clean energy economy and making that transition easier by 
returning some of the money to Americans who face the greatest 
burden from energy costs.
    Turning to the legislation before us today, Congressman 
Waxman's Safe Climate Act and Congressman Markey's ICAP bill 
meet these three principles for strong, effective and fair 
climate legislation. Unfortunately, the Senate bills do not. 
First and foremost, the Senate bills would not achieve the 
degree of emission reductions demanded by the science. Two of 
the bills have weak emission reduction targets and all three 
include mechanisms that undermine the ability of the 
legislation to achieve their targets. These mechanisms include 
a price cap, a cost containment auction and large-scale offset 
programs. These mechanisms are designed to contain costs. 
However, there are other ways to contain costs in cap-and-trade 
programs that will enhance rather than jeopardize the 
environmental integrity of the legislation. An analysis 
conducted for the Regional Greenhouse Gas Initiative shows that 
increasing investments in energy efficiency can significantly 
reduce allowance price as well as overall increases in energy 
prices that result from the cap-and-trade program. Legislation 
that incorporates improved energy efficiency standards, the 
removal of non-market barriers to energy efficiency 
improvements and vigorous financial support for energy 
efficiency would reduce compliance costs while preserving the 
program's environmental integrity.
    Thank you for the opportunity to present these views today. 
I look forward to working with the subcommittee and the full 
committee to craft strong, effective and fair global warming 
legislation.
    [The prepared statement of Ms. Figdor follows:]
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    Mr. Boucher. Thank you very much, Ms. Figdor.
    Mr. Grumet.

  STATEMENT OF JASON S. GRUMET, EXECUTIVE DIRECTOR, NATIONAL 
                  COMMISSION ON ENERGY POLICY

    Mr. Grumet. Thank you very much, Chairman Boucher, Ranking 
Member Upton and Mr. Barton. On behalf of the National 
Commission of Energy Policy, I appreciate the opportunity to be 
here with you today and I appreciate the three of you sticking 
with us. It is a testament to your commitment to this tough 
discussion.
    Mr. Chairman, in 2001, the National Commission on Energy 
Policy brought together a group of 20 diverse leaders, diverse 
both in expertise, in ideology and political history. We 
brought together an aggressively bipartisan group of leaders 
from the energy industry, from organized labor, leaders in the 
environmental advocacy, consumer advocacy communities and 
officials from the past three Administrations, and our goal was 
simple. It was to develop a set of principled, detailed, and 
pragmatic compromises across the energy policy debate. On 
climate change, as you can imagine, we had some spirited, at 
times contentious discussions but I was pleased that in 
December of 2004 we were able to release a set of 
recommendations which were unanimous. Our group concluded that 
the problem was real and that there was an imperative to act. 
We also concluded that it was possible, in fact, to develop a 
well-designed program that had a mandatory economy-wide cap on 
greenhouse gas emissions that would achieve our environmental 
imperatives while at the same time accelerating necessary 
technology and protecting the economy. We elaborated those 
recommendations in a report in 2004 and updated recommendations 
in 2007, and we have appreciated the interest of this committee 
in our work to date.
    Mr. Chairman, the differing views reflected here today are 
evidence of the work that we have yet to do. At the same time, 
the work of this committee, the bills before this testimony and 
the testimony that I think we have all heard is a sign of some 
optimism because it reveals that there is a growing center of 
gravity around a number of key themes. I believe that we see 
that the discussion is moving towards support for an economy-
wide cap that is upstream in the energy food chain and that 
targets investments to clean technologies and towards consumer 
protection. I also believe it is clear that we are going to 
have to have a program that limits costs and links the actions 
of the United States to what happens in the rest of the world.
    I want to commend Chairman Dingell and his staff and staff 
of the committee for the white papers on costs, on 
international competitiveness and on the Federal-State 
relationship because we on the Energy Commission believe that 
these in fact are the three key issues that are going to have 
to be resolved in order to build the kind of bipartisan 
consensus that we need for action, and I guess I would like to 
just follow the lead of the committee and try to telegraph 
where we see some of the kernels of optimism for the kinds of 
principal compromise that we think are both possible and 
necessary.
    Mr. Chairman, first on cost, while acknowledging the 
problem, there are some who still would argue that we should 
solve this problem at no cost. There are others who argue that 
the imperative is so great that we should do whatever is 
necessary regardless of cost. I think our commission believes, 
and it is, I think, a rather obvious conclusion, that of course 
there has to be a middle ground, a middle ground that allows 
the market to work, that creates real incentives for the 
economy to innovate but that provides predictable and 
transparent costs at the outset of a program. Within our 
organization and our commission, we found very sincere and 
intelligent people reach incredibly distinct and different 
positions on the expected costs of climate action based on a 
number of reasonable and different assumptions. We found after 
a year of having ``my modeler is smarter than your modeler'' 
discussions, there was a better way forward and it was a way 
that allowed people to have their disagreements and still in 
fact advance a mandatory program. It was to have an agreement 
that didn't at the end of the day require one side to say trust 
me to the other side. We think that a safety valve is the most 
transparent and obvious way to do that. We have worked with 
folks in the Senate to find other mechanisms that we think can 
provide the same kind of predictable and transparent cost 
containment and we believe that it is going to have to be part 
of the ultimate solution.
    On the important issue of international competitiveness, 
the entry points in this discussion, I think, are well known. 
They are a decade old. It is the Kyoto fight. It is the on one 
hand, America, go fix it, and on the other hand, let us wait to 
be led by others. Again, of course, this is not where the 
solution lies. The Energy Commission recognizes that this is 
global warming and not American warming. We recognize that we 
cannot afford to design a program that is going to export jobs 
and import carbon. We have to link what we do here in the 
United States to what happens or doesn't happen in the rest of 
the world.
    At the same time, the story of our country is not waiting 
to be led by others to solve problems that we believe are real. 
We believe this problem is real and we believe the U.S. is 
going to have to take real action. The solution, we believe, is 
a combination of positive incentives for technology investment, 
both here and overseas, and countervailing trade measures that 
will ensure that if other major nations, major emitters and 
trade partners, do not take in fact real action, that there 
will be consequences. We are, I think, appreciate of the work 
that our friends in organized labor have done along these lines 
and think that this provides a pathway for future discussion.
    Finally, on the question of the great federal republic in 
which we live, the relationship between Federal Government and 
States in solving this problem again, the outlines of the 
debates are simple. Some would argue that Federal action has to 
provide a complete and total preemption of all State 
activities, otherwise chaos would reign. Others say that 
because of States' rights, States should be able to do whatever 
in fact they want and have what would ultimately be duplicative 
regulation. Of course, the answer is somewhere in the middle. 
We believe that there has to be and is a path forward that 
would acknowledge the leadership that States have taken to date 
that provides both tolerance and incentives for States to take 
on complimentary efforts that achieve energy efficiency and 
address what they have unique ability to do, but ensure that 
State efforts do not create a muddle of currencies. We have to 
have a consistency across the program that allows for a single 
national currency for the market to function if we are going to 
protect the environment and protect the economy.
    So let me just close with one more point of optimism and 
that is to recognize that this committee has quite a history of 
both full-throated and active debate but also tackling 
incredibly complicated issues like the Clean Air Act and 
bringing forth a compromise that not only has the substantive 
integrity but the political pragmatism to move the legislation. 
It is that kind of leadership that we are going to have to rely 
on here. The National Commission on Energy Policy, our parent 
organization, the Bipartisan Policy Center, is eager to 
continue to work with you as a resource along the way.
    Thank you for your time.
    [The prepared statement of Mr. Grumet follows:]
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    Mr. Boucher. Thank you very much, Mr. Grumet.
    Mr. Scott.

 STATEMENT OF DOUGLAS SCOTT, DIRECTOR, ILLINOIS ENVIRONMENTAL 
                       PROTECTION AGENCY

    Mr. Scott. Thank you very much, Chairman Boucher, Ranking 
Member Upton, Ranking Member Barton, Congressman Burgess. My 
name is Doug Scott. I am director of the Illinois Environmental 
Protection Agency. On behalf of Governor Blagojevich, I 
appreciate the opportunity to speak to you today, and let me 
also add my thanks for the work that this committee has done 
and will continue to do, not just today but the white papers 
have been very good about teeing up a lot of the issues that 
all of us are facing, so we appreciate that.
    I have had the opportunity in my position to work on this 
issue from a number of different perspectives. First, in 
Illinois, we studied the issue. I chaired a taskforce that made 
24 separate recommendations to the governor as to how we could 
reduce greenhouse gas emissions in Illinois back to 1990 levels 
by the year 2020. I have served as vice chairman of the Climate 
Registry, which is 39 States, nine Canadian provinces, six 
Mexican states and three Native American tribes which have 
gotten together working on developing and have developed a 
voluntary protocol for greenhouse gas registry and now we are 
working on coordinating that with States that have mandatory 
reporting jurisdictions as well. I chair the Air Committee for 
the Environmental Council of the States, which has passed a 
resolution on this very issue about the States' role in federal 
climate legislation. Illinois is part of the Midwestern 
Governors' Association Greenhouse Gas Accord. Six Midwestern 
States and the province of Manitoba are working to develop 
right now a Midwestern cap-and-trade program similar to the 
initiatives going on with the Western Climate Initiative and 
the Regional Greenhouse Gas Initiative, and finally, Illinois 
was one of 18 signatories to the Governors' Declaration on 
Climate Change, which was presented 2 months ago at Yale 
University, and that document sets forth some guiding 
principles to help develop a State and federal partnership on 
climate change.
    I set all those initiatives out just as a way of trying to 
demonstrate all of the commitments that States are making 
towards addressing this issue and have been making for some 
time, but rather than all of those things being at odds with 
each other, there actually are some fairly unifying principles 
through all of those different organizations.
    First is the assertion that there needs to be a meaningful 
greenhouse gas emission reduction plan, and for it be 
effective, States will have to play a major partnership role 
with the Federal Government, an that role also needs to be 
carefully and robustly delineated in whatever legislation comes 
from Washington. There is the practical necessity of having 
States implement pieces of the program, whether that is 
permitting or monitoring as we do in so many other major 
environmental policies, and the reality that States and 
localities are uniquely situated to best implement portions of 
plans. Things like renewable portfolio standards, land use and 
building codes come to mind. But in addition, there is also the 
realization, and we have heard it expressed already today, that 
federal cap-and-trade legislation by itself may not go far 
enough to reach the levels of reductions that are ultimately 
needed. States will be in the position to implement 
complementary programs to help provide further reductions.
    But beyond that, States have been working on this issue, 
some of them for years, and have already developed programs 
that are working to provide significant reductions. In 
addition, the debate on the Senate floor 2 weeks ago 
highlighted issues and we have heard a lot of them here today 
as well that have already been studied in a lot of the States. 
Many of us have researched what reduction strategies mean to 
us, to our economies, to our employment outlook, and all of 
this information we believe can help inform and shape the 
federal debate. For example, in Illinois, modeling done in 
conjunction with our climate change advisory group demonstrated 
that implementing a comprehensive set of reduction strategies 
could actually provide economic gains as compared to a 
business-as-usual strategy.
    And second, because there has been and continues to be so 
much effort by the States and regions, national policy should 
reward that early action and provide incentives to promote 
future State innovation and action. As a manner of achieving 
this goal, funding that results from revenues raised through a 
cap-and-trade system should in part be directed towards 
specifically targeted objectives that result in greenhouse gas 
reductions, be they implemented through the States or through 
the Federal Government.
    Third, funding for new and innovative technologies is 
critical. In Illinois, we have had the experience of dealing 
with FutureGen, a project that we worked very hard to advance, 
only to have the funding pulled by DOE after a location in 
Illinois was selected for construction. We obviously continue 
to be strong supporters of that project and we are supportive 
of funding being targeted to help bring new technologies to 
commercial application. For instance, we have permitted an IGCC 
plan in Illinois that is capable of carbon capture and 
sequestration but to have commercial viability, there are other 
incentives that are going to be necessary, and I appreciate the 
work, Chairman Boucher, that you have done in recognizing that 
and introducing your legislation along with many cosponsors to 
provide a mechanism to fund innovative technologies.
    Fourth, we believe a federal program should utilize the 
work of the Climate Registry in developing a national 
greenhouse gas registry, and finally, legislation should 
acknowledge the ability of the States to go beyond federal 
requirements, a framework that has served us well in numerous 
major initiatives including the Clean Air Act and the Clean 
Water Act. We believe that this can be accomplished without 
interfering with federal cap-and-trade programs and other 
important federal greenhouse gas strategies. For example, 
States are not interested, I don't believe, in having different 
currencies for greenhouse gases nor are they interested in 
charging businesses twice for the same ton of greenhouse gas.
    I thank you for allowing me to share these thoughts. We 
have a tremendous opportunity to work together and do something 
historic here, and I look forward to the opportunity to work 
with you. Thank you again.
    [The prepared statement of Mr. Scott follows:]
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    Mr. Boucher. Thank you, Mr. Scott.
    Mr. Mullett.

    STATEMENT OF RANDAL MULLETT, VICE PRESIDENT, GOVERNMENT 
                     AFFAIRS, CON-WAY, INC.

    Mr. Mullett. Thank you, Mr. Chairman. My name is Randal 
Mullett. I am a vice president with Con-way. It is a $4.7 
billion trucking and logistics company. We employ 30,000 people 
at nearly 500 locations across the United States. We operate 
11,000 tractors, 40,000 trailers, and we run about a billion 
miles every year on the Nation's highways and roads. Today I am 
also representing the American Trucking Association, where I 
serve as vice chair of their environmental and energy policy 
committee.
    While cap-and-trade continues to be the primary mechanism 
being discussed to promote carbon reductions, it is much more 
effective when applied to stationary sources rather than 
extremely diversified mobile sources such as trucking. We 
appreciate that the committee has taken the time to examine and 
address the uniqueness of the transportation industry in its 
white paper, Scope of a cap-and-trade System.
    As you know, commercial trucks are used for goods movement, 
not pleasure. There are very few discretionary miles. We are 
very concerned about the effect that any cap-and-trade system 
will have on our ability to deliver the Nation's freight. There 
are no commercially viable hybrid line-haul trucks and truck 
fuel economy has remained stagnant for some time, leaving us 
few options. ATA will be working closely with the U.S. DOT and 
the National Academy of Sciences in the evaluation of fuel 
economy and fuel efficiency standards as directed under the 
Energy Information Security Act of 2007.
    The trucking industry is concerned about what a cap-and-
trade system will do to the price of fuel. At today's diesel 
prices, it costs over $1,400 to refuel a typical truck. Over 
1,000 trucking companies failed and over 10,000 independent 
operators, drivers and employees lost their jobs in the first 
quarter of this year alone, and there is a direct correlation 
between these failures and the price of fuel. Significant fuel 
cost increases resulting from cap-and-trade will only 
exacerbate this problem.
    The trucking industry also supports safeguards that ensure 
carbon regulations do not inadvertently disrupt fuel supplies 
for the commercial transportation sector. As you know, we 
cannot choose the fuel we use to transport goods and we cannot 
decouple economic growth from the growth of freight 
transportation. If not anticipated and safeguards not included 
in legislative proposals, a cap-and-trade on mobile sources 
could disrupt the amount of diesel fuel available to motor 
carriers. This may happen if the current mix of mid-level 
distillates that includes diesel fuel, jet fuel, home heating 
oil, and kerosene is changed or it lags behind demand or it is 
diverted to other uses. We fear that a cap-and-trade may also 
have the effect of reducing domestic refining capacity and 
shifting it to regions outside the country, further increasing 
costs, and putting the supply of on-road diesel at risk.
    The trucking industry supports federal preemption of State, 
local and regional climate change laws to avert a regulatory 
patchwork which would hamper the efficient delivery of the 
Nation's goods. In the absence of federal guidance, other 
governmental entities are taking independent action. If federal 
preemption is not enabled, ATA would ask that the Congress 
exempt entities involved in the interstate transport of goods.
    The trucking industry is keenly aware of the need to find 
real solutions to reduce carbon emissions. We have recently 
unveiled a bold sustainability program that will have an 
immediate impact on the environment, reducing fuel consumption 
by 86 billion gallons and reducing the carbon footprint of all 
vehicles by nearly a billion tons over the next 10 years 
without restricting the deliver of the Nation's goods or 
placing undue economic hardship and regulatory burden on the 
trucking industry.
    ATA's recommendations set out real solutions, though low-
tech, for our industry that are achievable today to 
significantly reduce greenhouse gas emissions. The six key 
recommendations set out in the ATA program are: enact a 
national 65-mile-an-hour speed limit and govern new truck 
speeds to 68 miles per hour, decrease idling, reduce highway 
congestion through highway infrastructure improvements, 
increase fuel efficiency through participation in EPA's 
SmartWay programs, promote the use of more productive truck 
combinations, and support a national fuel economy standard for 
medium- and heavy-duty trucks.
    In closing, ATA requests that Congress consider funding 
research and development in the areas of new engine 
technologies, truck aerodynamics, low-carbon fuels, tires, 
batteries, hybrids, and other energy-saving technologies that 
are specific to the operation of line-haul trucks. Technology 
advancements have been stalled for many years and an infusion 
of funding incentives is critical to developing the next 
generation of more efficient and lower- carbon-emitting trucks. 
We as an industry look forward to working with you to help 
reduce our carbon footprint. Thank you.
    [The prepared statement of Mr. Mullett follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Boucher. Thank you very much, Mr. Mullett, and the 
committee's thanks to all of the witnesses for their testimony 
this afternoon.
    Mr. Baugh, let me begin with you, and thank you first of 
all for the endorsements you provided a few moments ago for the 
special fund that Mr. Upton and I and several other members, 
Mr. Barton, are proposing in order to accelerate the arrival of 
carbon capture and sequestration technologies. We appreciate 
very much that strong statement of support and your assistance 
with that. It will be most welcome.
    I want to question you for a moment about the statements 
you made during your testimony about that critical early 
schedule for taking greenhouse gas reductions and the time 
frame in question is the time between the effective date of the 
legislation and the time when carbon capture and sequestration 
technologies become available. During that time frame, if the 
schedule for required reductions is too rapid and too severe, 
coal-fired electric utilities would have no way to meet that 
schedule through regular cost containment mechanisms. They 
could not meet it by installing efficiency or by purchasing 
credits or offsets, borrowing from the future or other similar 
kinds of means. If they were forced because of a very rapid 
required schedule for reductions to stop using coal, they would 
naturally default to the next cheapest fuel, which is natural 
gas, and in your testimony you talk about economic dislocation 
that would occur rather broadly across the country should that 
fuel switch occur, and my question to you is whether or not you 
have done any estimates of job losses that might come in the 
manufacturing sector or perhaps other sectors of the economy 
where you have an opportunity to represent the workers that 
might happen if that schedule in the early years is too severe 
and dramatic fuel switching from coal to natural gas takes 
place.
    Mr. Baugh. Mr. Chairman, no, we have not. We have worked, 
as I said, with the National Commission on Energy Policy and 
urged them, and they have done so to look at the impact of this 
on energy-intensive industries, of how cap-and-trade impacts 
that. I think the point is that we are concerned about the fuel 
switching. I mean, we believe CCS is a viable technology and we 
really need to move it and we need to speed up the timeline as 
much as possible but everything I hear from the science and the 
industry and looking at it says that chart we saw earlier 
really reflects that it won't--2020, 2025 is when you can get 
to the era of mass deployment and it just doesn't match up with 
these. We don't want to trigger the fuel switching. That has 
other cost consequences in and of itself. We have not done any 
estimates, and I am not making claims about the displacement of 
workers or industries relating to it but that is not an answer 
in terms of where we need to go to solve this problem.
    Mr. Boucher. I noticed that from your testimony that you 
are working, I think, with Mr. Grumet on a series of economic 
studies. What do those studies target? Are they targeting what 
happens in the absence of proper border adjustments? Are they 
targeting the effect on jobs in the United States of various 
cap-and-trade scenarios? What are the questions you are asking 
in your studies?
    Mr. Baugh. I don't want to speak for Mr. Grumet. They are 
really his studies.
    Mr. Boucher. Oh, all right.
    Mr. Baugh. But I know what we were trying to get when we 
began to ask, we said we really--there has been so much talk 
about the impacts of this legislation and we really looked 
around and found very little information in terms of how it 
affects these energy-intensive industries, and there is more 
than four but we looked at four big ones. The four that happen 
to be mentioned in the international trade component of the 
language as it turns out is energy-intensive industries. We 
really wanted to understand various scenarios of cap-and-trade 
and how it may impact those. What is the job impact, will it 
lead it displacement, will these industries remain competitive, 
some fundamental questions.
    Mr. Boucher. All right. Mr. Grumet, do you know when those 
studies might be forthcoming and can you tell us if you intend 
to make any recommendations for the Congress based on them?
    Mr. Grumet. I appreciate Bob's confidence that they will be 
ready in a couple of weeks. I hope he is correct, and of 
course, we would be eager to share those with you. These 
studies are not explicitly focused on making policy 
recommendations. I think Bob laid out--the question is right, 
and that is, I think we all recognize that sound carbon policy 
has to make sure that we are not in fact, as we said, exporting 
jobs and importing carbon, and so the first question is, well, 
what would the impacts actually be on internationally 
competitive energy-intensive industries? I think there is a lot 
of anxiety about that but there wasn't a lot of data about it, 
and so we are working together to really try to drill down some 
of these key industries and understand what is in fact the 
actual magnitude of those competitive impacts, and then the 
second desire is to figure out, well, what could you do about 
them because I think in almost all of the legislation, there is 
a shared sense that these are serious issues that have to be 
attended to and there are opportunities by targeting allowances 
to those industries to ameliorate those cost impacts, so the 
desire is to figure out how much that is and how to move those 
resources.
    Mr. Boucher. Thank you, Mr. Grumet.
    Dr. Felmy, if I may, I would like to question you for a 
moment about your statement, I think in your prepared written 
testimony, about the number of allowances as a percent of the 
total assigned in one of the Senate bills, and I presume it was 
Lieberman-Warner that you were analyzing, to the petroleum 
sector and potentially also to the natural gas sector, and I 
think the number that you used was 3 percent of the nationwide 
total being targeted towards you. Do you know if that 3 percent 
represented allowances that were assigned to you based on your 
stationary source emissions, that would be refinery emissions, 
or were these allowances both for your stationary sources and 
also for the fuel that contains the carbon which is then sold 
downstream? Is it one of those or both of those?
    Mr. Felmy. Mr. Chairman, it was both of them.
    Mr. Boucher. And so what do you think an appropriate level 
of allocation would be given the emissions that today emanate 
from refineries and also are contained in the carbon that would 
be sold downstream?
    Mr. Felmy. Well, I think that the answer to that I can't 
give you but what I would propose is that as we go forward on 
this, that we develop an equitable amount of allowances. Of 
course, we as one industry cannot call the tune for everyone 
and so as the process goes forward, we would propose that it 
would be equitable across all industries, just in terms of 
equity across all areas and so on should also be considered.
    Mr. Boucher. Do you happen to know what percent of the 
total CO2 emissions arises from refinery operations?
    Mr. Felmy. I believe it is roughly about 200 million tons 
from refinery operations. Total industry emissions are roughly 
about 2 billion tons out of the total of roughly 6 billion tons 
for the total economy.
    Mr. Boucher. OK. So do the math for me. Is 3 percent 
compensatory to you for that or not?
    Mr. Felmy. In terms of the refinery operations, 200 divided 
by 6,000 gets you roughly on the order of about 3 percent for 
just the refinery operations.
    Mr. Boucher. So it sounds like that 3 percent was really 
targeted for your stationary source emissions?
    Mr. Felmy. That is entirely possible. I am not sure how it 
is developed, Mr. Chairman.
    Mr. Boucher. All right. My time is expired. Thank you very 
much.
    Mr. Upton from Michigan.
    Mr. Upton. Thank you, Mr. Chairman. I appreciate everyone's 
testimony.
    Mr. Mullett, I just want to say a couple things at the 
start, and that is, I sat down with some of my truckers this 
last week and I am very concerned about them but also the 
people that work for them because they are losing their jobs 
and particularly in rural areas. It is really tough. I have got 
a number of counties and often you will see an independent 
operator, maybe it is just him or her and that truck is just 
parked along the side. I was one that supported an increase in 
CAFE, and that was a pretty tough vote coming from Michigan, 
but at the same time, I said I don't want it to be an unfunded 
mandate, that we need to help the industry. In fact, I hope 
that we might have a hearing later on this year, maybe this 
fall, when things perhaps shut down a little bit on the House 
floor in terms of how the industry is going to meet those 
targets as they struggle to do that. It is one of the ideas 
that Mr. Boucher has, Boucher and myself and Mr. Barton and 
Shimkus and others with the Carbon Capture, Storage Early 
Deployment Act. We are going to try to help the industry get 
there in terms of offering an actual fund where we can capture 
this carbon and really help and I want to see that happen with 
the auto industry. I have Eaton in my district, and they are 
doing a terrific job at develop some hybrid technology, and 
when I went out there last summer, we brought the secretary of 
EPA and the administrator, or the administrator rather of EPA, 
and literally we found that the technology that they have now 
can save the average UPS truck 1,000 gallons that they don't 
have to use just on the idling technology and other things and 
I would like to think that whether it be this committee or Ways 
and Means, we can help with legislation to promote that, to 
help the industry, and I would just urge you to talk to your 
colleagues at ATA to see what we can do. We think it is a 
bipartisan bill to try and push those incentives so you don't 
have those unfunded mandates as we struggle with these prices 
that clearly are not going to be going down. I just was struck 
by that in your testimony about all the truckers, literally 
10,000 operations that are out of work just this year because 
of the increase.
    Mr. Felmy, how does the environmental regulations on 
domestic refineries compare to refineries overseas or not in 
this country? I have been to a couple refineries in Texas and 
other places. We have one close to my district. It is in Peter 
Visclosky's district in Whiting, Indiana. There is another one 
in Toledo, Ohio, close to Michigan. How do those refineries in 
terms of the regulations overseas compare to the United States?
    Mr. Felmy. Well, there are two aspects of that. First of 
all is the environmental regulations of the facilities 
themselves in terms of emissions, and I have no personal 
experience with one refinery versus over abroad but at least 
from suggestions that we have very rigorous environmental 
regulations, we have continually reduced emissions from our 
refineries, and then the second aspect is in terms of the fuels 
coming out of the facilities, and our fuels are very clean 
compared to the rest of the world, very low-sulfur gasoline, 
ultra low-sulfur diesel, which we are at 15 parts per million, 
for example, and Europe is 50. You know, and so the investments 
that we made for the last 10 years for the refinery system 
alone are about $55 billion for reduced emissions.
    Mr. Upton. But are we doing a much better job in terms of 
fewer emissions, having cleaner emissions than----
    Mr. Felmy. I really can't----
    Mr. Upton. I think Aruba has the largest refinery. Is that 
right, largest operating refinery in the world? Is it not in 
Aruba?
    Mr. Felmy. That is entirely possible. It is very large. I 
can't give you a definitive answer in terms of the specific 
emissions rates and so on to be able to give you a quantitative 
comparison.
    Mr. Upton. Well, because in your testimony you state that 
the cap-and-trade bills would send perhaps as much as 17 
percent of our refinery capacity overseas, so I have to believe 
that that will have an impact, be transferring that carbon 
emission from here to someplace else and they won't have the 
same technology that we impose on ourselves and in fact you 
would increase then at the end of the day the emissions by 
having a cap-and-trade system.
    Mr. Felmy. There is no question that could certainly 
happen. If you do export industry to areas with less 
environmental restrictions, that could be an outcome, and as 
you see from the study we had done by ICF, you see the 
reduction in refinery capacity in the United States.
    Mr. Upton. My time is quickly winding down. I wanted to ask 
just a simple question of both Mr. Grumet and Ms. Figdor. 
Something that I care a lot about is the expansion of nuclear 
energy and I just to know where your organizations or your 
thoughts are as it relates to that.
    Mr. Grumet. I am not sure I would call that a simple 
question, sir, but I will give you a quick answer if I can. 
Nuclear energy----
    Mr. Upton. Yes is good. Yes is all----
    Mr. Grumet. Nuclear energy needs to be part of the mix 
going forward. It is 70 percent of our non-carbon energy. The 
Commission believes that there are some real challenges and 
that we have to have real effort to specifically address the 
issues associated with waste and proliferation and we think 
that we have to have as an aggressive effort there as we do 
with other non-carbon forms of energy.
    Mr. Upton. Ms. Figdor?
    Ms. Figdor. We think there are many problems with nuclear 
power but one of them is the timing. It would take many years 
to get new nuclear power plants up and running when we need to 
make deep and real reductions in emissions now and so we need 
to invest in the technologies and reap the benefits from the 
technologies that are already available like energy efficiency 
and clean renewable energy.
    Mr. Upton. I yield back.
    Mr. Boucher. Thank you very much, Mr. Upton.
    Mr. Matheson, if you are ready, we will recognize you for 5 
minutes.
    Mr. Matheson. Well, thank you, Mr. Chairman. I am sorry, I 
had a series of meetings where I had to step out for a few 
minutes. I hope you haven't covered it too much already but I 
just wanted to raise the issue of international participation 
for a moment. I wanted to know, I have been focused on this 
issue because I am having trouble getting my arms around it, 
how we are going to make progress on this issue, and I am 
concerned about WTO issues. I am concerned about just practical 
issues, and I am wondering if any of you have comments to offer 
regarding the four legislative proposals that have been put out 
there in terms of if they have realistic starting points in 
terms of addressing international participation in this issue. 
So I don't direct that to anyone in particular but does anyone 
have comments on that?
    Mr. Baugh. Mr. Chairman, I will take the question on since 
we are the ones that have been pushing hard for it. We believe 
it really is a starting point, and we supported the 
international legislation that appeared in the Bingaman-Specter 
bill. We worked through the changes of that that then appeared 
in the Boxer-Lieberman-Warner bill. The attorneys we worked 
with are the top environmental attorneys and trade attorneys in 
the country, and they assured us that it is WTO compliant. Now, 
we absolutely know that no matter what we do, there is going to 
be a WTO test of it, but from our point of view, we think these 
steps we have been taking are WTO compliant. There are 
additional suggestions that have come in that were being 
proposed in the Senate. They weren't taken in the bill but I am 
certainly it is going to be discussed in the House, and we are 
willing to look at that. We are actually willing to look at 
that and other means. I know Mr. Inslee has talked about an 
input-output solution that I have not really had the chance to 
examine--we haven't had the chance to look at. We believe in 
redundancy but we strongly support international steps around 
that. We believe that it is compliant, and sort of the proof in 
the pudding is, what we have proposed, the EU has actually 
threatened to implement on two occasions in the last year. The 
discussion is very live in Europe about it. They have a cap-
and-trade program and they have had it in place 3 years, and 
basically the first rule for the WTO is that you have to be 
doing it to yourself before you can apply it to somebody else, 
and the proposal we put together mirrors that. It says OK, we 
have a cap-and-trade, we are asking other developed countries 
and others to participate. It is not going to be exactly the 
same but they have to have something comparable to do that, and 
if not, if they choose not to, then there would be a cost to 
that, and so it is exactly as the EU has talked about, 
employing that in the European Union it would actually apply to 
us because we don't have a comparable system at this point. But 
I think that is something we have to do and we have to talk 
about these issues together. We can't ignore them. It is very, 
very important.
    Mr. Matheson. Does anybody else have any comment?
    Mr. Grumet. Mr. Matheson, just to add to that a little bit, 
I think that going back now almost 20 years to the Rio Summit 
in 1990, this notion of differentiated commitments was on the 
table and it was the idea that the developed world, the United 
States, was going to have to lead to the solution but we 
couldn't be chumps, right? In other words, we can't solve this 
problem without in fact a meaningful, equitable and efficient 
global program, and the framework that I think now is gathering 
appropriate momentum is recognition that we are going to have 
to take a first step, a real step in this country. It is going 
to have to be measured. We are going to have to have certain 
constraints to make sure that we protect our economy as we move 
forward and there is going to be an inflection point, 7 years, 
10 years out. In other words, the idea that Congress can 
legislate a trajectory for 4 years without a course correction, 
we don't think is particularly realistic. We need to set a 
long-term goal but we have to acknowledge that we are going to 
take a first step, we are going to have to make sure that there 
are real incentives and both positive and negative incentives 
for other countries to join with us, and at a certain point 
several years in the future, we are going to have a gut check, 
not just as a country but as a world, are we going to solve 
this problem or not, and at that point that would be the point 
where we would believe that the kind of cost containment 
measures and others would be I think traded in for the kind of 
ultimate ecological endpoint but that is going to be contingent 
upon a president determining that all of our major trading 
partners are making in fact commensurate efforts to solve the 
problem.
    My last point I guess would be that it is the developing 
countries that are going to suffer the impacts of climate 
change, frankly, much more severely than we in the developed 
world. Our ability to adapt is much greater than that in China 
and other places. The leaders of those countries recognize that 
they have a real challenge here.
    Mr. Matheson. Do you think the concept of a look-back or a 
gut check, as you called it, provision should be put in, not 
just for international participation but across the board on 
all aspects of climate change legislation?
    Mr. Grumet. I am not sure of--my view of what encompasses 
all aspects, I guess I am not certain----
    Mr. Matheson. Just whatever it is in the bill, should there 
be a requirement, a reauthorization, to see how things are 
going? I mean----
    Mr. Grumet. I think whether it is mandated or not, that 
will be the reality. Congress is going to have to be revisiting 
this decision and I think in a number of different bills there 
is an explicit requirement for the president to make a 
determination. On the basis of that determination then a series 
of actions flow from it. I think that is the appropriate way to 
proceed.
    Mr. Matheson. Thanks, Mr. Chairman. I will yield back.
    Mr. Boucher. Thank you, Mr. Matheson, a perfectly riveting 
set of questions.
    The gentleman from Texas, Mr. Barton, for 5 minutes.
    Mr. Barton. Thank you. Mr. Chairman, looking around the 
room, seeing the membership present, I am tempted to ask 
consent to suspend the rules, ask the bills before us to be 
considered as read, considered en bloc, move the previous 
question and call for a 3-minute vote. I think we could dispose 
of this issue in a very timely fashion. But knowing that is not 
in the spirit of this hearing, I am not going to do that. I do 
want to ask some questions.
    Mr. Baugh, you talked not directly but briefly in response 
to an answer to a question about the European cap-and-trade 
program. Are emissions going up or down in Europe because of 
that cap-and-trade program?
    Mr. Baugh. The cap-and-trade program didn't work, and I can 
tell you why. They did a footprint three times too large, they 
had too many emissions so that when it started off, the prices 
stayed low----
    Mr. Barton. All I need is the answer, which you gave me 
honestly.
    Mr. Baugh. It didn't work. They have done a phase II reform 
they just implemented that is looking much more like what we 
are doing here and will have a footprint that is correct and 
will have a different outcome than the first time.
    Mr. Barton. And so far it hasn't worked. I will give you a 
chance to--do you think these changes that they are going to 
implement will make it work?
    Mr. Baugh. I think yes, I already believe it is having an 
impact to make it work differently. We have actually cautioned 
them not to make the mistake the United States is making in 
looking at this with an open, unrestricted market approach. We 
have serious concerns about that when this Congress is actually 
investigating the use of derivatives in futures markets and the 
impact they are having on oil and commodities and food, and we 
are setting up, as somebody noted, the largest trading system 
around. We think it should be a much more focused market.
    Mr. Barton. If I had 10 minutes, I would let you answer 
that a little more fully but I have got just 3 more minutes.
    Mr. Grumet, is that correct?
    Mr. Grumet. I know you are talking to me, but it is Grumet.
    Mr. Barton. Grumet. I am sorry. I am not trying to be 
facetious. I want to get your name right. Mr. Grumet, you 
talked about that we need to take the first step regardless of 
what the developing world does. Have you ever directly 
negotiated with the Chinese?
    Mr. Grumet. Well, actually, I was in China and I bought 
some good stuff at a dirt market so, yes, I have.
    Mr. Barton. Well, that is a great answer to that question. 
Let me rephrase it. Have you ever tried to directly negotiate 
with them on emission reductions?
    Mr. Grumet. Sir, I have never had the pleasure of 
representing the U.S. government in any of those discussions.
    Mr. Barton. Well, I have. Now, this is a dated story, and 
their view may have changed. I am not going to say it is still 
their current view but I think it is. When we went to Kyoto 
under the leadership of Chairman Dingell as the congressional 
observer delegation, we met directly with the Chinese, and 
Chairman Dingell asked the question, and this is 12 years ago 
or whenever the Kyoto Accord was signed or at least 
implemented, but China's position was that they couldn't sign 
on to Kyoto because they were developing. Chairman Dingell said 
well, do you think you will be able to do it in maybe 20 years? 
No, we don't think so. Well, what about 50 years? No, we don't 
think so. Well, what about 100 years? Well, we don't think so. 
Well, will you ever sign on to it? Well, we don't think so.
    Now, China is putting in play a 500-megawatt coal-fired 
power plant every other week, and they are either now exceeding 
U.S. emissions of greenhouse gases or will next year. I don't 
think it is conceivable in the real world that they are ever 
going to sign on anything except take our technology if we 
develop it for free. I think they will accept our plants if we 
adopt some rigidity of regulation that causes the remaining 
industry in this country to shut down. They will take our power 
plants. They will take our steel plants. They will take our 
chemical plants. They will take anything that we ship over and 
they will produce those goods and then ship the goods back to 
us but they are not going to because we adopt something. If 
they were going to do that, they would have already begun to do 
it because of what Europe is trying to do. You know, Europe's 
economy collectively is as large as the United States economy, 
not individually by nation but collectively, so I just 
respectfully disagree that us taking a unilateral first step is 
going to be met by a reciprocal action on the part of countries 
like the Chinese.
    My last question, Mr. Chairman, because I want to go to the 
gentleman that represents the trucking industry. Repeat for us 
how many trucking companies have already gone out of business 
this year.
    Mr. Mullett. I believe the figures that I gave were over 
1,000 and over 10,000 employees and owner-operators. That was 
the first quarter. In the second quarter, there were some 
pretty significant bankruptcies as well.
    Mr. Barton. Now, if we were to adopt--the position right 
now I think of these bills before us, if we adopt some sort of 
a cap-and-trade regime, it does affect mobile sources. There is 
no current technology that I am aware of that cost-effectively 
reduces emissions of mobile sources. How many more trucking 
companies would go out of business just generically if we adopt 
one of these bills? Do you have any estimate of that?
    Mr. Mullett. I do not but I can assure you that there is a 
direct causal relationship between the price of fuel and these 
failures, and there is also a causal relationship between these 
failures and the strength of the overall U.S. economy.
    Mr. Barton. Mr. Chairman, my time is expired. I appreciate 
your graciousness and I yield back.
    Mr. Boucher. Thank you very much, Mr. Barton.
    The gentleman from Washington State, Mr. Inslee, is 
recognized for 5 minutes.
    Mr. Inslee. Thank you.
    Mr. Grumet, I don't know if you were here to hear some 
comments I made about R&D needs for the United States, and I 
would just like to ask your thoughts on what the scope of that 
effort ought to be, how we should define that, and I would also 
like your thoughts on how, assuming we do create a pool of 
revenues associated with a cap-and-trade auction, how should 
that be managed and invested? To what degree should Congress be 
making decisions about allocations between solar thermal and 
clean coal and algae-based fuels? Should there be some new 
structure formed independent of Congress that we haven't seen 
before to do that? Some people have suggested some sort of 
public-private partnership arrangements. I would appreciate 
your thoughts on those subjects.
    Mr. Grumet. Thank you for the question and thank you for 
your leadership on this set of issues. Let me just agree with 
the original premise of your presentation which I did see, and 
that is that based on the heroic scale of the challenges we 
face from both environmental implications and energy security 
implications, the public investment in research and development 
is actually quite anemic. We are investing one-third in real 
dollars today of what we were investing 30 years ago, and so 
fundamentally, we do need as a country to be devoting more 
resources to these challenges. I think it is important also to 
separate between the challenges of kind of pure R&D and the 
challenges of deployment. Our commission proposed that we 
needed to triple the resources going into direct R&D. We think 
that the current structures at DOE with the national labs and 
universities, especially in the public-private partnerships, 
work quite well there.
    Where we think there really has been a tremendous lack of 
investment and focus is on the deployment, the acceleration of 
these new technologies. There is a wonderfully dramatic term, 
the valley of death in the R&D world, one of the neatest things 
we get to say in energy geekery, and this is the idea where 
new, neat ideas basically go to die or go overseas to get 
commercialized, and fundamentally, that is a place where we 
believe government needs to be playing a more significant role. 
I think that the efforts of this committee and this Congress in 
the last couple of energy bills has been a step in the right 
direction. The focus on loan guarantees is a significant and 
important way to take the risk capital out of those decisions 
and advance that discussion. I think there has been a sense 
that we need to do more of that. I believe that there is also 
an important challenge to think about these kinds of mechanisms 
because while there might be a general consensus that we need 
to plus up the resources, I do believe that there has to be 
much greater transparency and accountability in terms of how we 
do that, and let me close with one or two thoughts on 
mechanism.
    One is that it is very tough for the good people at the 
Department of Energy to venture risks because if you are going 
to have an R&D portfolio that is going to be creative, you are 
going to have tremendous successes and you are going to have 
significant failures, and we have a culture which enjoys those 
successes but really doesn't enjoy or like to tolerate those 
failures and so we create a culture of caution in our decision 
making which does not match the challenges that we face. So the 
idea of bringing together the kind of private sector venture 
capital ideal which recognizes that if you have one giant win 
and three medium losses, you are a rock star, we need to bring 
that culture into this discussion and so I think the idea of 
public-private partnerships, greater reliance on these credos 
is a real opportunity going forward.
    I guess the one last point I would make, and this goes back 
to something Mr. Barton was saying, is on the international 
collaboration. We need to be careful to make sure that we don't 
wind up importing CCS technology, importing renewable 
technology, importing smart metering technology from China and 
India because I certainly agree that while we are going to have 
a real challenge in getting those countries to take 
commitments, they are investing in these kinds of technologies.
    Mr. Inslee. And may I add, not just the technology but the 
products as well, so that is another issue. Thank you. I 
appreciate that.
    Mr. Grumet. And my last thought is that having a dedicated 
revenue stream makes this a lot easier but I want to commend 
Chairman Boucher for the focus on moving quickly on CCS. I 
think also Mr. Upton pointed out the important opportunity to 
invest tax credits in retooling domestic vehicle facilities and 
I think we do not have time to wait.
    Mr. Inslee. And we hope those brilliant ideas will be 
applied in other technologies in addition to CCS, and the whole 
smorgasbord that we want to talk about.
    Mr. Scott, could you give us some advice on a Federal 
register? Many of us believe, some of us believe, at least, 
that we should move a bill this year that really moves forward 
with a registry and data collection, even prefatory to a cap-
and-trade system. Could you give us any thoughts on how to 
structure that, anything we should avoid?
    Mr. Scott. Well, I think first of all, I would hardly 
recommend going and using the work that has already been done 
by this coalition of the States that has worked with private 
industry, a large stakeholder process that worked on a protocol 
for that. So rather than reinvent the wheel, I would suggest 
using that work that has already happened and engaging and 
trying to work with both mandatory and with voluntary 
protocols, which is what the Climate Registry has done. So 
there are many, many, very detailed, very technical issues, as 
you know, with that that we have worked through over the course 
of the last year. We have got over 240 voluntary reporters who 
have come on board now with the Climate Registry this quickly, 
so we think the work we have done has been done very well and 
would hardly hold that out to you as a good place to start.
    Mr. Inslee. Well, we will plagiarize as much as we can.
    Mr. Baugh, talking to a blue and green forum about the 
green collar job possibilities of these new developing 
industries, do you have any message you want me to deliver from 
Washington, D.C., to them?
    Mr. Baugh. Yes, I think that green jobs are not just jobs 
in renewable energy. Green jobs are any job that go to cut the 
carbon emissions, and if that is doing advanced automotive 
technology, if that is doing CCS technology, that is what green 
jobs are all about and it is not just all new jobs, it is about 
changing the way certain jobs work. You may be producing new 
things, you may acquire new skills to produce those things. It 
is a combination of some new job opportunities, changing job 
opportunities, getting our manufacturers to produce some of 
those 40,000 parts that go into a wind turbine that they are 
not producing today and the huge opportunities that are coming 
at us. So I think it is about seizing the moment, directing our 
investments towards this job creation opportunity, making sure 
this legislation is economic development and legislation and 
requires the money be spent domestically so that we actually 
generate these new energies. And I want to remind everybody in 
this room, we were here in 1980. We were here in 1980. We led 
the world in photovoltaics, wind turbine technology, battery 
technology, geothermal technology, and all of this developed 
with government investment and money and we blew it when we 
walked away from it in the 1980s because the Germans, the 
Spanish, the Brazilians with the biofuels, the Netherlands all 
took our technologies that sat on a shelf that was developed in 
this country and ran with it and invested in it as nations as 
an industrial policy and today, Congressman, we are shipping 
barges of parts from the Netherlands to the wind turbine 
development that is going on in Hood River. I want that stuff 
made back in those aluminum plants that are closed along with 
Columbia Gorge.
    Mr. Inslee. We are going to work with you and Mr. Doyle 
with this output-based rebate program to try to make sure we 
have domestic production. Thank you. I thank the whole panel.
    Mr. Boucher. Thank you, Mr. Inslee.
    The gentleman from Oregon, Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman.
    Mr. Baugh, I couldn't agree more that I would like to see 
those aluminum plants reopen too. Unfortunately, pressures in 
the region were such and worldwide economy that they couldn't 
sustain, and Enron, although I would hasten to say I think 
Northwest Aluminum was down before Enron, plus they had the 
power contrast with BPA that escaped that so I don't think that 
was exactly--Enron was a huge problem and a huge issue and a 
huge scam and this committee investigated all that, so--but I 
fully concur, although there are probably members of this 
committee that would disagree with both of us on this notion of 
keeping manufacturing in this country. And there were emissions 
associated with those plants and all of that.
    I want to go to Dr. Felmy from API. You made a comment that 
if some of these cap-and-trade proposals were in place--I want 
to make sure I get this right--17 percent of domestic refinery 
capacity could be shoved overseas. Is that what you indicated?
    Mr. Felmy. That is the result of the ICF International 
study of the Lieberman-Warner proposal.
    Mr. Walden. Seventeen percent. How many barrels----
    Mr. Felmy. Three million barrels a day.
    Mr. Walden. How many?
    Mr. Felmy. Three million barrels a day.
    Mr. Walden. And what is the U.S. consumption of gasoline 
per day?
    Mr. Felmy. U.S. consumption of gasoline is--well, total oil 
consumption is 20.6.
    Mr. Walden. In the United States?
    Mr. Felmy. In the United States, million barrels a day. 
Gasoline is roughly around 9, 9.2 million barrels a day.
    Mr. Walden. So is the equivalent then 3 million barrels of 
gasoline a day, or oil?
    Mr. Felmy. No, the typical yields from a barrel are about 
50 percent gasoline, 24 percent heating oil and diesel, 10 
percent----
    Mr. Walden. So the long and short of it though, we drive 17 
percent overseas and then we get to pay somebody else to bring 
it back?
    Mr. Felmy. Short of a demand reduction, that is what would 
happen.
    Mr. Walden. And I am all for some level of demand reduction 
but not the kind we are seeing out there in America today, 
which is people are going broke and our economy is going upside 
down with this type of demand reduction. We send $160 million a 
day to Hugo Chavez. Isn't it true that 95 percent of the 
world's oil supply is controlled by governments and government-
owned entities?
    Mr. Felmy. Well, the numbers are a little more complex than 
that. If you look, roughly 77 percent are government oil 
companies. Then you have a collection of other entities such as 
Russian companies that you have to decide what you want to call 
them. Ultimately it comes down to in terms of the integrated 
oil companies, roughly only about 6 percent----
    Mr. Walden. And we have heard about the Brazilian model 
that they have become pretty much energy independent, in part 
because they have developed sugar-based ethanol, which has had 
an effect on forests, I think, as they expand, but didn't they 
also develop their offshore resource?
    Mr. Felmy. Absolutely. If you look, I believe the numbers 
are in 1980, Brazil produced about 244,000 barrels a day of 
oil, and now they are over 2 million, and when they announced 
energy independence, the president did it on an oil platform.
    Mr. Walden. And that was because of what? How much is 
ethanol and how much is crude oil?
    Mr. Felmy. Well, roughly ethanol, I believe, the 
consumption in Brazil is about 260,000 barrels a day and so oil 
production is in excess of 2 million barrels a day.
    Mr. Walden. So 9, 10 times, something like that?
    Mr. Felmy. That is correct.
    Mr. Walden. What would happen in this country and what 
would happen to the market, the oil market globally, if we were 
to pass legislation opening up either ANWR or the OCS? Would it 
have a positive effect for consumers?
    Mr. Felmy. Well, as an economist, we believe firmly that 
increasing supplies helps consumers, and so being able to 
produce more oil, of course, will take some time.
    Mr. Walden. Absolutely. I understand that.
    Mr. Felmy. But it also will telegraph to the world that the 
country is serious about supply and demand situation so that 
would help in terms of what the market assessment would be 
perhaps further out in the futures market, for example.
    Mr. Walden. I want to switch topics for just a minute and 
ask our panelists the same question. That is, I have had a real 
passion for dealing with forest health and some panelists today 
have referenced that in their testimony about the role of 
forests. We certainly see the decline of forests in the 
industrializing world and we see the destruction of the forests 
here due to fire, a record 9 million acres last year alone. 
Half the Forest Service budget is consumed fighting fire. That 
has to be enormous emissions into the atmosphere. The Forest 
Service for at least 10 or 20 years has done research on 
climate change and has come to the conclusion, and don't hold 
me to this but I think they said it would take 10,000 years for 
the trees to migrate to the point north where the temperature 
will get in 100 years, which means that you are going to have 
increased disease, infestation of bugs, drought and forest 
fire. Now, some of the very organizations that support climate 
change legislation also oppose active management of our Federal 
forests and I just wonder from you all, do you share that view 
that we just leave the Federal forests the way they are today 
or do you support changing Federal law to actually actively 
manage them to cope with what we see coming with higher 
temperatures, disease, bug infestation, overstocking? Dr. 
Felmy, do you have any comment on that?
    Mr. Felmy. I don't have a position on that.
    Mr. Walden. Mr. Baugh, are you going to make any more 
woodies, you know? You might need----
    Mr. Baugh. Since I once served on the Oregon Board of 
Forestry, forest management is important. I can't answer the 
bigger question you are asking here but I do know you address 
it in terms of the pine beetle infestations, which we used to 
deal with in eastern Oregon, where there were choices to be 
made. Do you just let them stand once they have been infested 
or do you go and cut them down and replant, and that is the 
kind of forestry management that does make some sense.
    Mr. Walden. And I concur with you.
    Ms. Figdor?
    Ms. Figdor. I am not sure of your question with regard to 
forestry management and a climate policy.
    Mr. Walden. Sure.
    Ms. Figdor. If so, I think there is a role for carbon 
sequestration, biological sequestration in forests, but we need 
to be careful in making sure that we can accurately quantify 
those.
    Mr. Walden. As we work on that though, do you support 
active management of the forest to reduce them where they are 
overstocked and deal with the disease and bug infestations so 
we can reduce the opportunity for catastrophic fire?
    Ms. Figdor. We support protecting our national forests and 
ensuring that they remain the wild places that----
    Mr. Walden. So you don't support active management?
    Ms. Figdor. We do not.
    Mr. Walden. OK.
    Mr. Boucher. Mr. Walden, our time is about expired here. 
You are about 2 minutes over. We will give Mr. Grumet an 
opportunity to make a response.
    Mr. Walden. Thank you, Mr. Chairman.
    Mr. Grumet. I don't want to belabor this but I think that 
adaptation has to be an active part of the climate debate and 
forests have to be part of adaptation.
    Mr. Walden. Perfect. Thank you.
    Thank you, Mr. Chairman. I apologize.
    Mr. Boucher. That ended on a pleasant note from your 
vantage point, I think.
    Mr. Burgess is recognized for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. Let me just note for 
the record that within my congressional district, we do have 
solar research development at Entech. We have a large windmill 
blade manufacturer in Gainesville, Texas, probably one of the 
largest in the country, and I would just encourage anyone who 
is following the course of these hearings, don't buy those 
cheap Brazilian blades that cost so much money to bring to this 
country and always break in that fierce Texas wind. Get your 
blades from Gainesville, Texas.
    But while I am concerned about those two industries in my 
district, I have a lot more truckers in my district than I have 
people who work at solar research and development and even the 
good people who work at MFG up in Gainesville, so I am very 
concerned, Mr. Mullett, about the problems and the numbers that 
you have shared with us today. They seem pretty stark. Is there 
one thing that you have in mind--and I apologize, I was in and 
out while the testimony was being given but is there one thing 
that you have in mind that might be of some immediate help to 
the truckers in your industry that are so put upon right now?
    Mr. Mullett. Well, I think that there are a couple of 
different things. Number one, the six items that we referenced 
in our sustainability initiative which, while low tech and 
mostly policy decisions, can be quickly implemented at little 
cost and will have real meaningful effect quickly for the use 
of fuel. The second thing I think we can do from an industry 
point of view is send a pretty strong signal to the rest of the 
world that we are serious about maintaining our own energy 
supplies, whether this has to do with drilling, investigating 
the futures markets, something that sends a signal back to the 
rest of the world and speculators that we are not going to 
tolerate these increases in price that are not a direct result 
of supply-demand constraints.
    Mr. Burgess. And I actually could not agree with you more 
on that. In fact, 2 or 3 weeks ago, we had a vote on the House 
Floor to stop filing the Strategic Petroleum Reserve, and I 
realize that it is a proverbial drop in the bucket, but at 
least for the first time on the floor of the House of 
Representatives in a bipartisan fashion, we said supply 
matters, and I think if we are willing to admit that supply 
matters, even in that very little bit that we did, some of the 
other things you referenced will be extremely important. There 
was a move afoot right toward the end of the spring for perhaps 
a rollback on the federal excise tax on gasoline, but my 
understanding is that the federal excise tax on diesel is 
actually a bigger hit than the 18.34 cents on a gallon of 
gasoline, diesel federal excise taxes being about 6 cents 
higher than that. So what about a proposal to roll back the 
federal excise tax on diesel, offsetting that, if you will, 
with ceasing the tax break for ethanol and giving the break to 
the truckers while your industry is in so much peril? I realize 
at 68-mile-per-hour governor may be a great idea going forward 
but you need some help today.
    Mr. Mullett. I would be irresponsible if I said any 
immediate relief for a lot of our industry would not be 
helpful. That having been said, we would not want to take money 
out of the highway trust fund that is in so much jeopardy right 
now because we are actually fearful that further degradation of 
the road systems, increased congestion and things like that may 
more than offset any savings that we would get out of that.
    Mr. Burgess. But now if you offset that money that would 
not going to the highway trust fund from diesel excise tax, if 
you offset that by, my opinion, the appropriate tax going on 
the ethanol to the federal highway trust fund, perhaps we could 
strike a balance there. I will just leave that there for your 
thoughts. There is a bill out there, 5986, expertly crafted, 
and leave it for your consideration.
    But Mr. Grumet, let me just ask you, in Mr. Mullett's 
testimony, he references cap-and-trade as not well suited to 
mobile source applications. So in your world with your National 
Commission on Energy Policy, how do you reconcile that?
    Mr. Grumet. Well, Mr. Burgess, I think that I entirely 
agree that in the early years, the dominant reaction to a cap-
and-trade bill is going to come out of the energy production 
sector, particularly the coal sector. A penny-a-gallon gasoline 
translated or diesel is about $1 a ton of CO2. So if 
we have a carbon price in the $15 or $20 range, which is what I 
am imagining the ultimate outcome would be, that would pass 
through across to 15 cents or so to the American consumer. I 
don't think any of us believe, based on what we have seen over 
the last 2 years, that that in and of itself is going to 
dramatically change the operation or choices we make on the 
motor vehicle transportation side. So our commission believes 
that while we should have an economy-wide program, there are 
more effective and direct ways to address the energy security 
challenges that we face because we are relying on petroleum for 
97 percent of all of our transportation so we supported the 
reform and strengthening of vehicle fuel economy standards that 
Congress acted on. We are actively looking into the low-carbon 
fuel standard, and I think there is a real active discussion 
about whether in fact you should focus those kinds of direct 
measures on the transportation sector or whether it is better 
served to have it all lumped together under one national cap.
    Mr. Burgess. It seems like they are directly focused on the 
transportation sector right now. I mean, you talked about a 
price signal for carbon. I think we are there. Now, we did hear 
testimony on this committee right after Hurricane Katrina that 
gasoline would have to get up to $6 a gallon before you would 
actually influence consumption.
    Mr. Grumet. We are seeing----
    Mr. Burgess. We are seeing it in my district at $3.85.
    Mr. Grumet. And significant pain, and I think the question 
is, are we going to ride along as the victims of that or are we 
going to kind of seize that choice going forward. In the past 
the problem has been the volatility of prices.
    Mr. Burgess. Let me ask you this. On the pricing, do you 
agree with our friend at the end that supply does matter?
    Mr. Grumet. Absolutely. The Commission believes that we can 
neither drill nor conserve our way out of this problem. We have 
to do both.
    Mr. Burgess. And I am happy to hear you say that because 
when we had a lot of the debate on the Energy Policy Act of 
2005 in this committee, a lot of it was, there was a lot of 
criticism directed at the Energy Subcommittee because we 
refused to just simply go in a direction of conservation and 
alternatives. I come from a couple of counties back home where 
there is probably more active drilling into the Barnett shale 
than anywhere else in the world right now, and although we are 
all happy to sell our natural gas at $12 or $14 per million 
cubic feet, I do recognize the pain that it is causing the 
country and look forward to the day when those prices are in 
fact reduced, and I think the ``drill now, drill here, pay 
less'' philosophy certainly in my part of the world, that makes 
a lot of sense.
    Mr. Chairman, you have been very generous with time and I 
will yield back.
    Mr. Boucher. Thank you, Mr. Burgess. Thank you very much.
    Well, this has been a very long day and I want to express 
the Committee's appreciation to this panel you're your 
endurance and for the excellent testimony that you provided to 
us. There may be some additional questions coming to you in 
written form from some of the panel members. If so, your rapid 
response to those would be much appreciated. The record shall 
remain open for 2 weeks for that purpose.
    So with the committee's thanks, this panel is excused and 
the hearing is adjourned.
    [Whereupon, at 4:35 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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                      Statement of Hon. Tom Allen

    Chairman Boucher, thank you for holding this hearing on 
this important topic. Thank you also to all of the witnesses 
here before us today. I look forward to your testimony.
    Climate change is perhaps the most important environmental 
issues facing our planet today. As a leading emitter of 
greenhouse gases, the United States must act to reduce 
emissions that are causing significant changes in our climate.
    I am proud that Maine is a leader in combating climate 
change. My state has joined the Regional Greenhouse Gas 
Initiative, enacted tough new emission standards for 
automobiles, and is aggressively working to develop new sources 
of renewable energy. However, climate change remains a global 
problem, and that requires national and international efforts. 
While Maine is doing the best it can, Maine's actions are no 
substitute for effective leadership in Washington.
    All around, we are seeing the continued impacts of climate 
change: migration patterns are shifting, the ice caps are 
continuing to melt, and weather patterns are becoming more 
erratic.
    The time to act is now and we need comprehensive climate 
change legislation with clear goals and objectives. I believe 
that for climate change legislation to be successful it must 
reduce emissions, facilitate a smooth transition to clean and 
renewable energies, minimize economic impacts and assist 
communities impacted by global climate change.
    I believe to successfully and efficiently curb carbon 
emissions we need to cap emissions to ensure an 80 percent 
decrease below 1990 levels by 2050. Additionally, successful 
climate change legislation also needs to engage other nations 
to develop binding international standards. This is a global 
problem that calls for global solutions.
    While capping current emissions is key to slowing the 
impact of climate change, it is only part of the solution. We 
need to develop long term solutions to facilitate the 
transition from a fossil fuel, carbon intensive economy to an 
economy of renewable energies and green technologies. Climate 
change legislation can make this transition possible by 
reinvesting revenues from allowance auctions into developing 
clean energy technologies. Our options are not limited to 
capping carbon emissions rather we can and should encourage 
complementary policies including smart growth measures, green 
building policies and efficient electricity policies.
    Whatever legislation we enact, it must not hinder the 
States ability to go above and beyond federal standards. States 
around the country, Maine being one of them, have taken far 
greater steps than our current Administration to curb carbon 
emissions. Any federal legislation must set a baseline not a 
ceiling on states' ability to continue to fight climate change.
    There will be costs associated with climate change 
legislation. That is undeniable. What is crucial is how we 
choose to manage these costs and minimize impacts on consumers. 
Revenues from auction allowances should be allocated to the 
public to assist low and moderate income households offset 
possible higher energy costs. Auction revenues should be used 
to invest in research and development into new green 
technologies.
    This is also a great economic opportunity. I firmly believe 
that in the long run, climate change legislation has the 
potential to stimulate economic growth. The middle class jobs 
of the twenty first century will be in the field of energy 
technology, and that industry's job growth will be driven by 
policies enacted by Congress to combat climate change.
    Finally, we cannot neglect communities that are already 
facing impacts from warming and will continue to do so as the 
fight over climate legislation drags on. New legislation should 
provide financial assistance to help state and local 
governments respond and adapt to impacts from sea level rise, 
intensified droughts, water scarcity and additional public 
health impacts.
    Mr. Chairman, cleaner air and a comprehensive strategy to 
combat global climate change go hand-in-hand with energy 
independence and in my opinion must be part of this 
Subcommittee's long-term strategy. I look forward to working 
with you to achieve this goal.
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                    Statement of Hon. Mary Bono Mack

    Mr. Chairman, thank you for this time to provide a few 
brief comments regarding today's hearing on various climate 
change policy proposals.
    Let me first say that I recognize the breadth of this issue 
and the daunting task ahead of this Committee in moving forward 
with eventual legislation. Given other proposals being 
introduced and further refined, I am confident that the proper 
venue for this legislation to be debated and considered is this 
Committee. We've got an excellent cross-section of the country 
represented and have been deeply enmeshed in some of the most 
intense and difficult energy debates of the past decade; it is 
my hope that this Committee can continue to be the foundation 
by which any policies relating to climate change will be 
pursued and enacted.
    I know other Members, much like me, have been hearing from 
residents in their districts regarding the price of energy over 
the last few months. Almost exclusively it's what I'm hearing 
about when I'm at home on the weekends or in my office here in 
DC when constituents call. What we're having a hearing on today 
is definitely related to the future prices our residents will 
see for years to come. That's one reason why the debate must be 
extensive, as the passion and focus of our constituents is 
reflected in how the public is affected by rising prices.
    Most of these climate change proposals about which we'll 
learn more today have within them a fundamental common theme, 
that is, they will likely raise the price of energy in our 
country. This doesn't only apply to individual consumers, but 
to various other sectors of our economy, from electric 
utilities to the transportation industry.
    Representing southern California puts my district at a 
unique place in this debate, much as the issues or concerns 
with various approaches affect regions of the country 
differently. As an example, Mr. Chairman, it's going to get to 
around 115 degrees in parts of my district today. The need for 
air conditioning is clear, and I don't see demand decreasing 
anytime soon. It's really a matter of life or death for many 
older residents as well, much like the winter months affect 
energy needs in the northern portions of our country in the 
winter.
    But this same area of southern California also has great 
potential already being realized in renewable energy sources; 
wind, solar, and geothermal energy development is likely to 
rapidly increase, I'd like to think in part thanks to some of 
the provisions we debated with the EPAct legislation a few 
years ago. Residents come to visit, retire, and raise families 
in this area, and they're also often initially attracted by the 
beautiful environment that surrounds them. I've been committed 
on their behalf to protecting that unique economic and human 
health resource ever since I came to Congress.
    Because of this, as you may know Mr. Chairman, I am open to 
examining a system by which we can achieve carbon dioxide 
emissions reductions. The complexities of any solution are 
going to involve more insight, analysis, and technological 
projections than nearly any other concept we've tackled on this 
Committee. It's a complex undertaking, but one that we began 
last year and I think on which we continue to take a reasonable 
approach.
    We know that the consequences of our actions will affect 
our entire domestic economy, and yet we've also got to keep a 
mind toward how the benefits of any policy can be utilized by 
others. For our efforts to have any real effect, the 
international community must also engage on substantive 
reforms.
    I know much of our focus today will be on various ``cap and 
trade'' approaches, and I look forward to hearing the effects 
they will have on our environment as well as our global 
economy. The facts are pretty clear in our local economy, as 
I'm hearing about the high price of gasoline and diesel fuel 
and its effect already on the residents of California's 45th 
District. These families are already seeing how increased 
energy prices are forcing them to change the way that they 
conduct their lives. The local industries, including housing 
construction are also seeing a severe downturn, not to mention 
the fact that Riverside County had the largest number of 
foreclosed homes in the State. Our area's foreclosure rate was 
the fifth-highest in the entire country last month. It is with 
this in mind that we must be careful about imposing new 
mandates.
    In the end, hearing the concerns expressed by my 
constituents lately, from small independent truck drivers to 
school teachers on the effects high energy prices have on their 
lives, my focus remains with a few important factors: the costs 
to our society, both individual and industrial, the benefits to 
our global environment, and focusing on solutions that are 
based in technologies we can deploy effectively and 
efficiently, from carbon capture to incredible new renewable 
and alternative energy options.
    Thank you Mr. Chairman and I look forward to hearing from 
our numerous panelists today. I yield back the balance of my 
time.
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             Thomas R. Kuhn, Answers to Submitted Questions

              Questions Submitted by Hon. Edward J. Markey

    1. The iCAP Act (H.R. 6186) includes a proposal to mitigate 
costs to consumers of climate legislation by recycling revenues 
from the auction of allowances back to consumers directly 
through rebate and tax credits. Would this system provide a 
measure of protection from higher electricity prices to 
consumers?
    Answer 1. Any mandatory GHG reduction program will lead to 
higher costs to the consumers of electricity. It is important 
to mitigate these impacts, especially during a transition 
period and especially for low-income customers. Auctions may 
have a role in any climate program in the latter years. 
However, auctions in the short to intermediate run may well 
increase total electricity costs to consumers because the 
electric utility (and its customers) wind up paying twice: once 
for the right to emit up to the cap (auction price) and once 
for investments in technologies and other emissions reductions 
costs.
    A far more effective and efficient way to mitigate the 
financial impacts on customers is to rebate or flow-through the 
benefits of allowances to electricity customers in proportion 
to their use and emissions. This can be accomplished by 
allocating the majority of allowances to distribution utilities 
in the early years of a climate program, with additional 
allowances to generating companies in competitive electricity 
markets, and a gradual transition from allocations to an 
auction. To the extent there is an auction of allowances, 
auction proceeds should go toward climate technology 
development and deployment, as well as toward additional 
measures to assist low-income customers.
    In addition to allocation of allowances and auction of 
allowances for the benefit of consumers, there are at least two 
other kinds of cost-containment mechanisms that are necessary 
to help limit the cost impacts of comprehensive cap-and-trade 
legislation on consumers: a price collar (i.e., floor price and 
ceiling price, or ``safety valve'') on allowances, and full and 
robust use of domestic and international offsets. See also my 
response to question 1 from the Honorable Mary Bono Mack.
    2. What, if any, benefit to consumers would result from 
distributing these funds through utility companies?
    Answer 2. Allocating allowances to local distribution 
companies (LDCs) with appropriate adjustment to address impacts 
on unregulated generators is the fairest and most efficient way 
to mitigate impacts of higher electricity prices on customers. 
LDCs have the information to assure that the benefits of 
allowances are rebated to customers fairly. LDCs already handle 
billing and have an infrastructure in place to manage the 
distribution of allocation proceeds. Moreover, an LDC-led 
process would be overseen by state utility regulators. They can 
assure that LDCs protect low-income customers during the 
transition and provide appropriate incentives to promote 
customer efficiency.
    In comparison, there is no simple correlation between 
income taxes paid and electricity use or emission levels--
especially for business taxpayers--so that a rebate system 
based on income tax payments will be inherently less effective 
in targeting rebates to customers.
    3. What benefits may be achieved by providing funding to 
utilities to administer energy efficiency programs?
    Answer 3. Utilities have the scope and scale to develop and 
implement energy-efficiency programs that can help customers 
achieve significant efficiency improvements. In addition, 
billions of dollars of new utility investments in technologies 
such as the smart grid are needed to support new efficiency 
measures, facilitate the most cost-effective adoption of 
carbon-reducing plug-in hybrid technologies for vehicles, and 
efficiently incorporate renewable and distributed energy 
technologies into the grid. Utilities must have appropriate 
business and regulatory incentives to make these programs work. 
Any source of additional funding for such utility programs will 
help promote these measures.
    4. In your experience, has investment by government and by 
utilities in energy efficiency and renewable energy achieved 
emissions reductions? Do you agree that the U.S. could achieve 
emissions reductions through these and other strategies prior 
to commercial-scale deployment of carbon capture and 
sequestration technology?
    Answer 4. Yes, investment by government and by utilities in 
energy efficiency and renewable energy can help to achieve 
emissions reductions. We agree that efficiency and renewables 
are the key to near-term emission reductions. Cost-effective 
energy-efficiency measures are the most direct way to reduce or 
avoid emissions and can be implemented most quickly. However, 
while efficiency can reduce the growth in electricity demand 
(by approximately 38-48 percent by 2030), efficiency alone will 
not eliminate electricity demand growth. While more costly, 
renewable energy also avoids or reduces emissions, but not 
necessarily the need for generation capacity since most 
renewables, particularly wind and solar, only operate 
intermittently and require the construction of back-up 
generating facilities to assure that power is available 
whenever it is needed. In addition, widespread use of 
renewables, especially wind, will require extensive 
construction of new transmission facilities, because the best 
wind sites are usually far from customer locations. We estimate 
that utilities will need to spend $287 billion to construct new 
transmission facilities by 2030 to eliminate congestion in the 
current system, interconnect new renewable resources, and 
assure reliability and security for the system.
    Ultimately, EEI believes that the full portfolio of 
technologies and measures will be needed to reduce, avoid and 
sequester GHG emissions in the power sector, as follows:
     Efficiency and renewables are key to near-term 
reductions.
     Maximizing new nuclear is key to mid-to-longer 
term reductions.
     The aggressive development and deployment of 
carbon capture and storage coupled with advanced coal 
technologies are necessary to preserving the coal option.
     Plug-in hybrid electric vehicles can make a major 
contribution to reducing net GHG emissions, as well as to 
reducing foreign oil dependence and consumer prices at the 
pump.
     Other no and low-emitting carbon technologies 
should be pursued, e.g., the smart grid.
    See my testimony of June 19, 2008, to this Committee (pp. 
5-9, discussing the so-called ``PRISM'' work of the Electric 
Power Research Institute and the need for a full technology 
pathway for GHG reduction, avoidance and sequestration). Any 
one of the above-listed sets of technologies and measures will 
be insufficient in and of itself to address power sector GHGs; 
all are important collectively. Note that the time frames for 
their implementation, or development and deployment, will vary. 
Thus, regarding your last question on implementation time 
frames, it is likely that energy efficiency and renewables will 
be important in the near term; new nuclear energy will be 
important in the mid-term to long term, beginning around 2016-
2018; and carbon capture and storage coupled with advanced coal 
technologies will also be important in the mid-term to long-
term, with widespread commercial deployment projected around 
2025 or later.

               Questions Submitted by Hon. Mary Bono Mack

    1. Mr. Kuhn, thank you for providing testimony at this 
hearing. The District I represent is reaching hot summer 
temperatures quickly; it was around 115 degrees in some parts 
the day of our hearing. So, while there's no need to heat the 
swimming pools, there sure is a lot of energy required to keep 
those air conditioners running.
    Locals facing higher energy bills have asked me about 
climate change legislation we're debating and how it may 
increase their utility bills. What kinds of cost-containment 
mechanisms do you think should be in a comprehensive cap and 
trade bill so we can help ensure prices remain reasonable?
    Answer 1. Assuming a comprehensive cap-and-trade bill is 
the mandatory GHG policy instrument that Congress focuses on, 
at least three kinds of cost-containment mechanisms are 
necessary to help limit cost impacts on consumers and our 
customers: allocation of allowances to GHG-intensive industries 
such as the power sector; a price collar (i.e., floor price and 
ceiling price, or ``safety valve'') on allowances; and full and 
robust use of domestic and international offsets. We expound on 
these mechanisms in greater detail in EEI's ``Working Paper on 
S. 2191, `Lieberman-Warner Climate Security Act of 2007,''' May 
15, 2008, submitted to several Senate Committees and this 
Committee (see pp. 8-14). All congressional cap-and-trade bills 
that we have seen to date would result in significant costs to 
the economy, consumers and our customers, and none has included 
comprehensive and full cost-containment mechanisms that would 
mitigate those costs to the maximum extent possible.
    The economic costs of cap-and-trade legislation are also 
affected by the stringency of targets and timetables and by 
whether those compliance timetables are harmonized with the 
expected development and deployment timelines of advanced 
climate technologies and measures. The full portfolio of 
technologies and measures will be needed to reduce, avoid and 
sequester GHG emissions in the power sector. See my testimony 
of June 19, 2008, to this Committee (pp. 5-9, discussing the 
so-called ``PRISM'' work of the Electric Power Research 
Institute and the need for a full technology pathway for GHG 
reduction, avoidance and sequestration). The cost difference 
between the full portfolio and limited portfolio approaches is 
vast: 45 percent increase versus 260 percent increase in real 
electricity prices. See also my response to question number 4 
from Representative Edward J. Markey
    2. I'm also trying to get a sense of supply needs we'll 
have in the coming years. It's surely going to affect how we 
can put in place technologies in any cap and trade model that 
can still help to meet demand. What will the country need in 
terms of baseload electric generation and electric utility 
infrastructure by, let's say, the year 2030?
    Answer 2. You are correct that GHG emissions reductions, 
avoidances and sequestrations in the power sector must be made 
against the backdrop of population and economic growth. The 
Energy Information Administration has projected that the net 
demand of electric generation will increase by 30 percent by 
2030, even after taking into account energy-efficiency 
improvements due to market-driven efficiency and stricter 
building codes and appliance and other efficiency standards 
mandated by the Energy Independence and Security Act of 2007. 
The technological transformation of America's power sector will 
occur in the face of tremendous capital investment needs in 
order to meet the electricity needs of a growing population and 
economy. Even with substantial energy-efficiency measures, new 
and replacement power plant capacity is projected to total 
150,000 megaWatts and cost $560 billion by 2030. Transmission 
and distribution investment needs are projected to total $900 
billion by 2030. See my testimony of June 19, 2008, to this 
Committee (p. 2).
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    Emily Figdor, Responses to Questions from Hon. Edward J. Markey

    1. What magnitude of emissions reductions do you believe 
are achievable by 2020 and 2025?
    The latest science must dictate the emissions reductions 
that the United States achieves by 2020 and 2025. According to 
the Intergovernmental Panel on Climate Change, to prevent 
temperatures from rising by more than 2 degrees Celsius, 
industrialized countries as a whole must reduce emissions by at 
least 25-40 percent below 1990 levels by 2020. The United 
States must contribute its share of this target by achieving 
significant domestic reductions as well as by providing funding 
to reduce international deforestation and to transfer clean 
technology to developing countries.
    The United States has many tools that it can apply to the 
task of reducing domestic emissions, including a history of 
technological innovation and a growing body of policy 
experience being developed in the states. Indeed, the United 
States already has the technology needed to achieve these near-
term emissions reduction targets. For example, a 2006 
Environment America report found that the United States could 
reduce its global warming emissions by 19 percent below 2004 
levels by 2020 by achieving five simple and technologically 
feasible targets for energy efficiency and renewable energy 
development (along with keeping emissions of non-carbon dioxide 
global warming pollutants constant). More recently, a December 
2007 report by McKinsey & Company found that the United States 
could reduce its annual emissions by as much as 28 percent 
below 2005 levels by 2030 by relying solely on tested 
approaches and high-potential emerging technologies.
    2. How significant might the role of energy efficiency and 
renewable energy be in achieving these reductions?
    Energy efficiency and renewable energy are absolutely 
essential to ensuring that global warming emissions reductions 
are achieved at the least possible cost and with the greatest 
long-term benefits.
    3. What policies would be needed to ensure the deployment 
of energy efficiency and renewable energy required to achieve 
significant emissions reductions by 2020 and 2025?
    The key energy efficiency and renewable energy policies 
needed include the following:
     A renewable electricity standard that will ensure 
that America gets at least 25 percent of its electricity from 
renewable sources by 2020.
     An energy efficiency resource standard for 
electric and gas utilities that requires that energy efficiency 
improvements play an important role in meeting future energy 
needs.
     Strong energy efficiency standards for vehicles 
and appliances.
     Strong building energy codes designed to improve 
the efficiency of homes and businesses. The Federal Government 
also should encourage the construction of green buildings and 
zero-energy buildings that go ``beyond code'' and should adopt 
measures to encourage or require the use of small-scale 
renewable energy technologies like solar water heaters, 
geothermal heat pumps, or solar panels on new residential and 
commercial buildings.
     Transportation and land-use policies that provide 
Americans with viable alternatives to driving by encouraging 
the development of compact, walkable neighborhoods where 
automobile use is an option, not a requirement, and increase 
investment in modern public transportation.
     Policies to reduce global warming pollution and 
promote sustainable practices in other parts of the economy, 
including policies to encourage recycling, efficient use of 
water, sustainable agriculture, and more energy efficient 
industrial practices.
    4. Is it possible to make significant near-term emissions 
reductions without significant fuel-switching to natural gas in 
the electric power sector?
    Yes, if the United States couples aggressive investment in 
energy efficiency with policies that encourage the retirement 
of older, highly-polluting power plants and the addition of new 
renewable energy capacity.
    5. Is it possible to make significant near-term emissions 
reductions in the absence of proven carbon capture and 
sequestration technology in the electric power sector?
    Yes, the United States already has the technology needed to 
achieve the near-term emissions reductions demanded by the 
science using energy efficiency and renewable energy alone.
    6. Do you believe we should wait to set mandatory emissions 
reduction targets in the U.S. until carbon capture and 
sequestration technology is proven in the electric power 
sector?
    No, waiting to reduce U.S. emissions until carbon capture 
and sequestration technology is proven in the electric power 
sector almost surely would foreclose our opportunity to stave 
off catastrophic effects of global warming. According to the 
IPCC, to keep the rise in global temperatures from exceeding 2 
degrees Celsius, global emissions must peak no later than 2015. 
The United States has sat on the sidelines for far too long 
already and must begin to achieve real and sustained cuts in 
emissions immediately.
    7. How would the total cost of implementing a climate 
regime in the U.S. change if we did wait to implement mandatory 
emission reduction targets until carbon capture and 
sequestration technology is proven in the electric power 
sector?
    Given that carbon dioxide is a persistent gas that can 
remain in the atmosphere for more than 100 years, the longer we 
allow the pollutant to build up in the atmosphere, the deeper 
the pollution cuts ultimately will need to be to stabilize 
greenhouse gas concentrations at a level that avoids dangerous 
consequences and the higher the overall cost of the program. If 
action to reduce emissions is delayed by 20 years--the 
potential time it could take until carbon capture and 
sequestration technology is proven in the electric power 
sector--the United States would need to reduce emissions at an 
annual rate that is three to nine times greater than would be 
required for immediate action to meet the same temperature 
target.
    8. Can the aggressive emissions reduction targets 
recommended in your testimony be met without the construction 
of new nuclear power plants? 
    Yes, given an aggressive push to improve energy efficiency 
and expand the production of renewable energy, the United 
States could reduce its total domestic emissions by 80 percent 
by 2050.
    9. How should a carbon cap-and-trade program deal with the 
nuclear power sector?
    The cap-and-trade program should auction 100 percent of 
pollution allowances and preclude any special ``set-asides'' of 
emission allowances for non-emitting technologies, such as 
nuclear power.
    10. Beyond making the nuclear power sector inherently more 
competitive by putting a price on carbon, should a climate 
regime more directly support nuclear energy deployment? Why or 
why not?
    No, nuclear power is extraordinarily expensive and would 
take a decade or more to deploy. By contrast, many energy 
efficiency investments pay economic dividends and can be 
deployed in significant numbers in the near future. Renewable 
energy technologies, such as wind and solar power, have come 
down in cost significantly in recent years, are already cost-
competitive with nuclear power in many circumstances, and can 
be successfully deployed on a time-scale of months to a few 
years. Lavishing even more federal subsidies on a nuclear 
industry that has already consumed tens of billions of taxpayer 
dollars would reduce the amount of funding available for truly 
clean technologies that can make a difference in the short-
term.
    11. In his written testimony, Admiral Frank Bowman from the 
Nuclear Energy Institute made the following statement: ``If it 
[the loan program] is structured like the loan guarantee 
program authorized by Title XVII of the 2005 Energy Policy Act, 
in which project sponsors are expected to pay the cost of the 
loan guarantee, such a program would be revenue neutral and 
would not represent a subsidy.'' Do you agree with this 
assessment?
    No. First, the industry would be receiving a loan that 
private investors have been unwilling to provide. Nuclear 
industry executives have flatly stated that they will not 
proceed with the construction of new reactors without 
government backed loans. Second, the Congressional Budget 
Office has estimated that there will be a 50 percent default 
rate on the loans, which will leave taxpayers on the hook for 
billions in failed nuclear loans.
    12. How would you characterize the support the loan 
guarantee program provides to the nuclear industry?
    It is an unwarranted subsidy to the nuclear industry.
    13. Nuclear proponents claim that the environmental dangers 
of nuclear power are overstated and that spent fuel is purely a 
political issue, not a technical one. Do you agree with this 
assessment?
    No, there is no country on earth which has solved the 
nuclear waste problem--that is, how to isolate it from humans 
and other living things for at least a quarter of a million 
years.
    14. Assuming the Federal Government establishes an economy-
wide cap-and-trade system, do you believe the Federal 
Government must assume long-term liability for closed carbon 
capture and sequestration sites to ensure we meet our emissions 
reduction targets?
    While long-term monitoring of such sites will be critical 
to ensuring that we meet our emission reduction targets, the 
cost must be paid for by the operators of the sites, not 
taxpayers.
    15. The iCAP bill (H.R. 6186) includes a detailed proposal 
for a greenhouse gas registry to be created under the Clean Air 
Act. Do you agree that a greenhouse gas registry should be 
created under the Clean Air Act, and do you support the 
proposal in this bill?
    Yes, a greenhouse gas registry should be created under the 
Clean Air Act, and Environment America supports the greenhouse 
registry in the iCAP bill.
    16. Do you believe the costs of a cap-and-trade system can 
be adequately contained through strategies that would not 
compromise science-based near-term and long-term emissions 
reduction targets? Please provide examples of the cost 
containment strategies that would meet this criteria.
    Yes, to reduce the cost of a cap-and-trade system to the 
American economy, while preserving the environmental integrity 
of the program, the United States should achieve the three 
objectives detailed below.
    1) Improve the energy efficiency of the U.S. economy. 
Technically feasible, cost-effective improvements in energy 
efficiency already have the potential to save vast amounts of 
energy in the United States. Energy efficiency provides several 
important benefits: it reduces demand for imported fossil 
fuels, keeping money within the American economy; it creates 
domestic jobs; and it reduces the cost of achieving reductions 
in global warming pollution by reducing demand for energy. 
Moreover, saving electricity through increased efficiency is 
often less expensive than building new power generation 
capacity.
    There are many policy tools--including efficiency standards 
for buildings, vehicles and equipment, energy efficiency 
portfolio standards for electricity providers, and financial 
incentives for the deployment of energy efficient equipment--
that can be used to improve energy efficiency in the United 
States. Mandatory federal energy efficiency standards are 
already playing an important role in saving energy, reducing 
pollution, and saving money. According to the American Council 
for an Energy-Efficient Economy, energy efficiency standards 
saved consumers $50 billion on their energy bills between 1990 
and 2000, with the benefits of the standards outweighing the 
costs by a factor of 3-to-1.
    Deploying energy efficiency standards and programs as part 
of an overall climate strategy will enable the nation to 
achieve greater emission reductions at lower cost.
    2) Develop and require the deployment of renewable energy 
technologies. Policies to develop and promote new clean energy 
technologies play a key role in achieving emission reductions 
cost-effectively. Renewable energy technologies are 
particularly important, as they produce no global warming 
emissions and are potent domestic job-creators. To achieve the 
steep reductions in global warming emissions that will be 
needed in future years, the United States will need to rely on 
the nation's vast potential for carbon-free energy production. 
Public policy can play a key role in bringing renewable energy 
technologies to the point of market readiness via increased 
federal funding for renewable energy research and development 
and renewable energy standards for electricity production and 
vehicle fuels. It is critical that public policies communicate 
a firm, sustained commitment to renewable energy, thereby 
providing investors, utilities, and others with confidence to 
make long-term investments in renewable energy.
    3) Align economic incentives with the goals of climate 
policy. For decades, fossil fuels have received the lion's 
share of federal energy subsidies. As of 1999, fossil fuels 
received nearly half of all federal energy subsidies, with 
renewable energy receiving 18 percent (with most of those 
subsidies targeted at ethanol production) and conservation 
programs receiving only 4 percent. In addition, a poorly 
designed cap-and-trade system in which emission allowances are 
distributed for free can have perverse economic impacts--
providing windfall profits for the owners of polluting 
facilities at the expense of consumers and minimizing 
incentives for technological innovation.
    By shifting federal subsidies toward clean energy 
technologies and ensuring that any cap-and-trade system 
provides the proper incentives for clean energy development, 
the United States can ensure that taxpayer dollars are not used 
at cross-purposes with the nation's climate protection goals 
and minimize the cost of emission reductions to consumers.
    17. The iCAP bill (H.R. 6186) includes a proposal to 
mitigate costs to consumers of climate legislation by recycling 
the revenue from the auction of allowances back to consumers 
directly through rebates and tax credits. Do you believe a 
system such as this would be an effective way to distribute 
money to citizens? Do you believe there is any benefit to 
distributing these funds through a middle man, such as utility 
companies?
    Yes, Environment America supports the iCAP bill's 
provisions to recycle the revenue from the auction of 
allowances back to consumers directly through rebates and tax 
credits. Recycling auction revenue to consumers directly is 
more efficient and effective than distributing these funds 
through a middle man, such as utility companies.
    18. In your testimony, you mention that ``of the five bills 
[including H.R. 6186], the Safe Climate Act, which was the 
first of these bills to be introduced in the Congress, has the 
strongest science-based framework.'' Please explain.
    The Safe Climate Act covers all sources of U.S. global 
warming emissions, whereas the iCAP bill covers an estimated 87 
percent of U.S. emissions. As a result, the iCAP bill's cap-
and-trade system and complementary policies aim to reduce total 
U.S. emissions by an estimated 73-75 percent by 2050. While the 
bill includes a scientific review mechanism, the science 
already demands reductions of 80 percent by 2050.
                              ----------                              


     Jason Grumet, Responses to Questions from Hon. John D. Dingell

    1. In your testimony you spoke about the research and 
development ``valley of death.'' How would you design a 
technology program to remedy this problem? Should such a 
program be designed to benefit multiple technologies? Why or 
why not?
    The National Commission on Energy Policy recommends the 
creation of a serious and systematic ``early deployment'' 
program for low- and zero-carbon technologies. The goal of such 
a program would be to create effective, accountable, and 
performance-oriented approaches to accelerate commercialization 
for promising technologies.
    Although current levels of effort in energy research, 
development, and demonstration certainly need to be increased, 
the biggest deficits may well be in efforts to bridge the gap, 
or ``valley of death,'' between technology demonstration and 
full commercial competitiveness. Such efforts, in which the 
government's role should be concentrated on options promising 
substantial public benefit, may include government procurement 
programs, reverse auctions for subsidies for specified 
quantities of energy from advanced options, loan guarantees for 
``first movers'' using new technologies at commercial scale, 
and tax incentives. While this program should be designed to 
benefit multiple technologies, there will be policy options 
that are better suited to particular technologies. Not all such 
interventions will necessarily be expensive for the government; 
loan guarantees for well chosen options may not be, for 
example, since for such options the probability of the 
guarantees being called upon will be small.
    2. In your testimony you noted that ``over-reliance on 
offsets could undermine program goals and political support'' 
for climate legislation. What protections do you believe are 
needed to ensure offsets are real, additional, verifiable, and 
enforceable? What do you believe should be the maximum level of 
domestic and international offsets allowed into a national cap-
and-trade system?
    The Commission believes that a carefully designed offsets 
provision is a critical catalyst for cost-effective measures 
not otherwise covered by the trading program. A credible offset 
program must reflect the differing levels of certainty and 
verifiability associated with different types of projects. This 
might be achieved through a tiered system whereby the most 
easily verified project types could use a streamlined procedure 
to apply for allowances while projects that are more difficult 
to verify would require more extensive documentation and 
review. In addition, a cap and trade program might provide 
allowances from a set-aside within the overall pool of 
available allowances to provide incentives to the agriculture 
and forestry sectors for an important set of greenhouse-gas 
mitigation options.
    Regarding the maximum level of offsets allowed, the 
Commission is concerned by proposals that rely on offsets as a 
principal means of near-term cost-containment. Although we have 
not advocated any set limit, the Commission has noted that 
proposals that expect to achieve significant (>10 percent) 
compliance through offsets in the near term will be obligated 
to create a substantial enforcement bureaucracy or risk an 
influx of illegitimate credits. Either of these outcomes would 
badly undermine the viability of a meaningful domestic offset 
program.
    3. In your testimony you noted the needed to protect low-
income households from the costs of climate legislation. The 
iCAP Act (H.R. 6186) includes a proposal to mitigate costs to 
consumers by recycling revenues from the auction of allowances 
back to consumers directly through rebates and tax credits. Do 
you believe a system such as this would be an effective way to 
distribute money to citizens?
    We applaud the general approach taken in H.R. 6186, which 
is consistent with our view that steps should be taken to 
protect low-income households from the costs of climate 
legislation. We think this is a critical issue that needs 
additional analysis as we move forward with legislation. 
Building on existing work by the Center for Budget and Policy 
Priorities, Resources for the Future, and others, Commission 
staff is beginning an extensive effort to explore how the 
household costs of different climate policies might be 
mitigated. We expect to look at a number of issues, including 
how costs vary across regions and how different rebate or tax 
mechanisms impact different income groups.
    4. In your testimony you advocated the use of ``positive 
inducements'' in addition to ``negative consequences'' to 
engage our major trading partners and address competitiveness 
concerns. What ``positive inducements'' do you suggest? Do you 
support the creation of an international clean technology fund 
like the one proposed in the iCAP Act (H.R. 6186) What benefits 
do you expect would be realized from such a fund?
    An international clean technology fund could be an 
important component of an overall strategy to address emissions 
in key developing countries. In our 2004 recommendations, the 
Commission called for a tripling of expenditures to promote and 
participate in cooperative international efforts to advance 
energy research, development, demonstration, and deployment. 
More recently, in our 2007 updated recommendations, we 
advocated creating ``stronger incentives for comparable action 
on the part of key trading partners by using a share of the 
public revenues generated by a greenhouse-gas trading program 
to provide technical and financial resources for the transfer 
of low-carbon technology.'' We are still assessing how such a 
fund might be most effective. However, we believe that if such 
a program is included in a domestic climate bill, it should 
have a strategic framework that ensures that investments are 
made in technologies that can help transform the energy 
economies of key developing countries. It should also be 
structured to create incentives for China, India, and other 
major developing countries to take on their own significant 
greenhouse gas reduction commitments. Finally, it might be 
feasible to design a fund to encourage the export of U.S. 
produced technology to developing countries.
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