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


 
 THE ECONOMICS OF GLOBAL WARMING: SHAPING HOW U.S. COMPANIES ARE DOING 
                                BUSINESS

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

                             FIELD HEARING

                               before the
                          SELECT COMMITTEE ON
                          ENERGY INDEPENDENCE
                           AND GLOBAL WARMING
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 28, 2008

                               __________

                           Serial No. 110-45


             Printed for the use of the Select Committee on
                 Energy Independence and Global Warming

                        globalwarming.house.gov




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                SELECT COMMITTEE ON ENERGY INDEPENDENCE
                           AND GLOBAL WARMING

               EDWARD J. MARKEY, Massachusetts, Chairman
EARL BLUMENAUER, Oregon              F. JAMES SENSENBRENNER, Jr., 
JAY INSLEE, Washington                   Wisconsin, Ranking Member
JOHN B. LARSON, Connecticut          JOHN B. SHADEGG, Arizona
HILDA L. SOLIS, California           GREG WALDEN, Oregon
STEPHANIE HERSETH SANDLIN,           CANDICE S. MILLER, Michigan
  South Dakota                       JOHN SULLIVAN, Oklahoma
EMANUEL CLEAVER, Missouri            MARSHA BLACKBURN, Tennessee
JOHN J. HALL, New York
JERRY McNERNEY, California
                                 ------                                

                           Professional Staff

                    Gerard J. Waldron Staff Director
                       Aliya Brodsky, Chief Clerk
                 Thomas Weimer, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............     1
    Prepared statement...........................................     3
Hon. John Larson, a Representative in Congress from the State of 
  Connecticut, opening statement.................................     5
    Prepared statement...........................................     8
Hon. Christopher H. Shays, a Representative in Congress from the 
  State of Connecticut, opening statement........................    14
Hon. Christopher Scott Murphy, a Representative in Congress from 
  the State of Connecticut, opening statement....................    16
Hon. Joseph Courtney, a Representative in Congress from the State 
  of Connecticut, opening statement..............................    17

                               Witnesses

George A. David, Chairman, United Technologies Corporation.......    18
    Prepared statement...........................................    22
John G. Rice, Vice Chairman of General Electric and President of 
  GE Infrastructure..............................................    25
    Prepared statement...........................................    28
Daniel C. Esty, Yale Center for Environmental Law and Policy.....    35
    Prepared statement...........................................    38


 THE ECONOMICS OF GLOBAL WARMING: SHAPING HOW U.S. COMPANIES ARE DOING 
                                BUSINESS

                              ----------                              --
--------


                         MONDAY, JULY 28, 2008

                  House of Representatives,
            Select Committee on Energy Independence
                                        and Global Warming,
                                                    Washington, DC.
    The committee met, pursuant to call, at 11 a.m., in the 
Mark Twain Museum, Hartford, Connecticut, Hon. Edward Markey 
[chairman of the Committee] presiding.
    Present: Representatives Markey and Larson.
    Also Present: Representatives Shays, Murphy, and Courtney.
    Staff Present: Stephanie Herring.
    Chairman Markey. This hearing is called to order.
    This is the Select Committee on Energy Independence and 
Global Warming, and I am pleased to hold this hearing in the 
historic Mark Twain House and Museum, and we thank the museum 
for hosting this event.
    I want to thank Congressman John Larson from Connecticut, 
who is a member of the Select Committee, named by Speaker 
Pelosi at the creation of the Select Commission, so that we 
would have one of the leading advocates for all of these issues 
to deal with oil and gasoline prices aggressively, to deal with 
the issue of global warming aggressively, and Mr. Larson and I 
traveled around the world with the Speaker, and no matter where 
we go he talks about the companies that are going to be 
testifying today as the solutions to the problem. If you come 
to Connecticut, he said, we have the solution. So, this is a 
conversation of the Speaker and I, and he had all around the 
world.
    His District is home to some of America's truly great 
companies, companies that will lead the way on solving the 
global warming problem. So, we are glad to be here to see first 
hand how Connecticut can lead us to a new energy future.
    As Congressman Larson knows, I am fond of quoting Mark 
Twain, and not just when I am in this museum. One quote that I 
am particularly familiar with and use quite often is that, as 
Mark Twain says, ``History doesn't repeat itself, but it does 
tend to rhyme,'' meaning that the story of our energy policy in 
our country over the past 35 years, unfortunately, is a story 
that has all too familiar rhyme to it.
    I have been in Congress for 32 years, and during that time 
I have heard Doomsday prophets wax lyrical as they repeatedly 
exaggerate the cost of new technologies. While I have heard the 
predictions, I have also seen technologies continually exceed 
our expectations, and seeing is believing.
    When the Mark Twain House was built 130 years ago, it was 
considered modern because of revolutionary features like gas 
lighting. Mark Twain could never have imagined that today we 
would be kept cool by the latest in geothermal technology. His 
home, now the first museum in the Nation to achieve LEED 
certification, stands as a reminder that technology will 
continue to unlock doors our imaginations have yet to dream.
    America has a proud history of dreaming big and aiming 
high. A President from my home state, John Kennedy, set a bold 
goal for America, send a man to the moon and back in just nine 
years. He was setting the goal high, not because it is easy, he 
said, but because it is hard. He recognized that ambitious 
goals require the invention of technologies and metals not yet 
imagined.
    The challenge facing our Nation on climate change is equal 
to the challenge our Nation faced to explore the moon, and I am 
confident that American ingenuity and technology will answer 
with the same speed and spirit as it did a generation ago.
    In the process of developing and deploying these 
technologies, a new green job market is being created that 
stands ready to hire in increasingly large numbers. The 
technologies we deploy to save our planet will have to be 
produced, installed and maintained. This will require a 
transformation in our workforce, from coal mines to wind farms, 
from oil rigs to solar plants. Future low emission cars will 
not only drive us to work, they will drive our economy. 
Renewable energy from wind and solar will not only power our 
homes, they will power job growth.
    Today we will hear and learn from two great American 
companies that have been leaders, not only in developing the 
technologies that will help transform us into a low carbon 
world, but have changed their own day-to-day operations in 
order to decrease their carbon footprints. They have done all 
this while continuing to see profits grow.
    These companies serve as examples of the economic 
prosperity that can be unleashed by pursuing the principle of 
environmental stewardship. While protecting the environment is 
a valued moral principle on its own, it is rapidly revealing 
market opportunities far greater than business as usual.
    For too long, naysayers have insisted that protecting our 
planet will be the death nail for our economy, but the climate 
is changing, and as we face the greatest moral obligation of 
our time, to protect our planet, we are also discovering 
business opportunities embedded in being good stewards of the 
environment.
    As Mark Twain also said, ``Prosperity is the best protector 
of principle.''
    I now recognize the Gentleman from the State of 
Connecticut, and our host here in Hartford, Congressman John 
Larson.
    [The prepared statement of Mr. Markey follows:]

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    Mr. Larson. I thank you, Mr. Chairman, and what an honor it 
is for me to have the distinguished Chair from Massachusetts, 
the Dean of the New England Delegation, as you heard him say 
he's been in Congress 32 years, and served with distinction 
and, certainly, Speaker Pelosi knew when she selected him to 
Chair this very able Select Committee the role and the 
responsibility and acumen that he possesses. I'm honored that 
you are here today in Hartford to conduct this very important 
hearing.
    I also apologize, Ed, I did tell you that I was going to 
have Jim Calhoun and, perhaps, Ray Allen show up. Mr. Markey, 
as you may or may not know, is an avid Boston Red Sox fan, nice 
win last night, put them in a better frame of mind, and also a 
Patriot man, but a Celtic fan as well. And, this was not a 
basketball injury, contrary to the popular belief, and we are 
glad to see that the Chairman is on the mend. I'm completely 
honored to be here at the Mark Twain House as well, and want to 
again applaud Jeffrey Nichols, the Director here, what a great 
setting to hold a public hearing.
    I can't help but think what Mark Twain would think about 
all of this, but as the Chairman pointed out, of course, this 
is the first museum in the Nation, and the first building in 
Connecticut, to become a certified leadership in energy and 
environmental design, or a LEED building. This means that it 
meets the highest standard for sustainability, energy 
efficiency, water savings, and indoor environmental quality. I 
think they deserve a round of applause, don't you?
    And, the Chairman indicated, and it is true, he does like 
to quote Mark Twain often in our Committee hearings and 
meetings, and he does. It is with a little bit of trepidation, 
however, that I recall some of Twain's comments about Congress. 
He actually said that, ``Fleas can be taught nearly anything 
that a Congressman can.'' He further said, ``It is the will of 
God that we must have a Congressman, and we must bear the 
burden, therefore.''
    So, with that I'm happy also to be joined by my 
distinguished colleagues in the State of Connecticut, the Dean 
of our Delegation in Connecticut, Chris Shays, is from the 4th 
Congressional District, Joe Courtney from the 2nd Congressional 
District, and Chris Murphy from the 5th Congressional District, 
that will participate today in this very important hearing.
    Criticism of climate change legislation often centers on 
the fact that any legislation would be devastating to business. 
It is often believed that doing the right thing for the 
environment, and for one's shareholders, must be mutually 
exclusive.
    This hearing today, I believe, will leave no doubt that the 
ideas and innovation that are good for the environment can also 
be good for business' bottom line.
    I am proud to represent the State of Connecticut and the 
kind of business leaders that we have in this great State, and 
especially today with the opportunity to have United 
Technologies Corporation, under the leadership of its Chairman, 
George David, and G.E., under the leadership of Mr. John Rice, 
who leads the company's Infrastructure Division, G.E.'s 
largest.
    George David, flat out, for me is an inspiration, and I 
wish all of you could have had the opportunity I did last year 
to see the Speaker of the House engaged in a one-on-one 
discussion about energy and energy policy, and back and forth 
between the two of them talking about the laws of physics and 
science. Most of the conversation, I will confess, was over my 
head, but, nonetheless, it was very pointed and sincere.
    As many of you know, it was George David who got the nod 
from Mayor Bloomberg to come to New York City and address the 
Conference of Mayors in those cities about the importance of 
the greening of America, the kind of technology that we need to 
be moving forward with.
    He has been the epitome of what corporate leadership should 
be all about. Not only in making sure that the corporation 
which he leads became more efficient and more productive, but 
also providing educational opportunity for his employees, a 
fact that is not very well advertised, but I know that you can 
see employees are grateful for as well.
    He has created more employee shareholders and invested more 
than $700 million in providing college degrees to UTC 
employees. He has simultaneously invested in developing more 
environmental friendly and efficient UTC products by the use of 
science and physics. Pretty incredible, don't you agree?
    Mr. Rice will tell us about G.E.'s ground breaking project, 
now how do I say this correctly, John, ecomagination.
    Mr. Rice. Perfect.
    Mr. Larson. He would have said perfect even if I had 
pronounced it wrong, which is a good sign, but under his 
leadership, and since the launch of this program in 2005, G.E. 
has consistently had to set new goals for itself because it 
keeps meeting and exceeding those that it sets.
    His testimony today builds on G.E.'s strong belief in 
public education on these important environmental issues.
    I had the opportunity to have dinner with him in Washington 
and talk about this almost a year ago, and am so pleased with 
the progress. And, of course, we heard from--our Caucus heard 
earlier this week from T. Boone Pickens, and he was very upbeat 
about his relationship with G.E. and all that you are doing 
with wind technology as well.
    And, Dan Esty, as the Chairman pointed out, is down at 
Yale, but once--and he's there because of the Chairman himself, 
who says he wrote your recommendation, Dan, and we are so 
pleased that because of that recommendation you were able to 
succeed and come, he's written a book, ``Green to Gold,'' which 
is a book that deals with the positive interaction and 
potential for greater interplay between business and the 
environment.
    Connecticut has been, as the Chairman says, a leader in 
moving technology forward, and largely because of the 
corporations that reside here, but also because of Yankee 
ingenuity and the genius of Connecticut. We have great 
opportunity here in this State, including something we refer to 
as the Connecticut Center for Advanced Technology, and I'm glad 
Elliott Ginsberg is here today representing them, but to 
embrace the technology, especially, that that will, ultimately, 
capture hydrogen, the most abundant element, having eight 
companies, four major companies, and, certainly, UT power that 
leads the world in terms of focusing on fuel cell, fuel cell 
technology, to have powered the space stations and have been 
certified for more than 100,000 hours of success in these 
areas, certainly, is a tribute to Yankee ingenuity, and, 
certainly, a tribute to United Technologies Corporation.
    So, I'm encouraged and inspired by the leadership, and 
excited, as I am sure all of the Members are here, to listen to 
the testimony, and also thank the people who have attended 
today. I think you are in for a special treat, and I am 
especially grateful for Chairman Markey for bringing 
Washington, D.C. to Hartford, Connecticut.
    And, with that, Mr. Chairman, I'll yield back.
    [The prepared statement of Mr. Larson follows:]

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    Chairman Markey. Thank you. Thank you, John.
    Now, let me just, at this juncture, we have a lot of seats 
down here in the first row, really great seats. These are, you 
know, box seats. We have other seats that are throughout the 
audience, and we really do recommend that rather than, you 
know, standing for an hour and a half or so that you move down 
and get comfortable, so that you can enjoy this hearing. So, 
please, feel comfortable.
    Mr. Larson. Let the record show, however, that there was 
standing room only at this event.
    Chairman Markey. So, let me turn now and recognize my good 
friend, the Gentleman from Connecticut, Chris Shays.
    Mr. Shays. Thank you, Mr. Chairman, for bringing the Select 
Committee on Energy Independence and Global Warming here, and I 
want to say that Ed can tell you that the longer you are in 
Congress the more you appreciate seniority.
    And, I want to say to my colleague, John Larson, that I 
will always suck up to you, because I am pretty convinced you 
will be some day the Speaker of the House. You have to 
understand that we have many ways to walk into the Chamber, but 
one day I saw him get there early and greet every member who 
walked in one way, and when they left he was there shaking 
hands with every member, Republican and Democrat, who went out 
the other way. And, he is just, as is Ed, just a great Member, 
as are my two new colleagues, Joe and Chris.
    It's a little confusing to have three Chrises in the 
delegation, but, in fact, one time I was at a meeting where I 
was a new member, and a senior member was talking about all the 
great things that I had done, he said, Chris has done this, and 
Chris has done that, I said this is absurd, I haven't done 
that. He looked at me and he said, ``Chris, would you like to 
say anything?'' I was about to stand up, and Chris Dodd was 
right behind me. So, I have learned to make sure my last name 
is called.
    I want to be very candid about this meeting, because I 
think we need to go where the truth takes us, and one of the 
big failures, I think, in Congress has been that we have not 
been having meaningful debate for any number of years, and we 
all lose.
    We got into this mess, this mess, in a bipartisan way, and 
we need to get out of it in a bipartisan way. One reason why we 
have this Select Committee is getting good legislation out of 
the Commerce Committee is difficult. You had the Senior Member 
of the entire Delegation, excuse me, in Congress, John Dingell, 
who literally didn't believe that minivans, SUVs, cars and 
trucks should get better mileage, and you understood he was 
from Detroit, and you have this nexus between labor and 
management in the car industry, no layoffs, if we have layoffs 
we are going to cover you, but don't allow there to be 
intervention on the part of the Government. So, we have really 
been punting this issue for years to the credit, obviously, of 
Democrats, more Democrats have wanted to deal with this issue 
than Republicans, but the fact is this, that we have not been 
dealing with it because we have not wanted to face up to some 
tough choices.
    There are lots of inconvenient truths that confront our 
country. Global warming is one of them. Energy independence is 
another. We will have to compromise, ultimately, to have energy 
independence, and I think Ed knows this, and he is trying to 
steer us in a direction where that compromise will happen.
    We have, in this country, energy independence when it comes 
to electricity, and we sometimes forget that. Admittedly, it is 
coal, it is nuclear, and it is hydro, but industry throughout 
the United States--you would not know it in New England because 
our energy costs are so high here--but energy cost for our 
manufacturers around the country is below the world average in 
cost or right at the world average, and there is a view that we 
will, ultimately, be able to compete with the rest of the 
world, not because of labor costs, but energy costs will prompt 
labor costs, and that you will start to see more manufacturing 
come back to this country.
    But, it is going to be a mixture of getting conservation to 
make sure that we have better mileage in our SUVs, cars, 
minivans and trucks, and not the pathetic 35 miles a gallon by 
the year 2020, we have Europe going to 48 miles by the year 
2012. So, it is a good step forward, it didn't have that 
movement under Republicans. Candidly, we have it now under a 
new Democratic Congress, but I think we are going to have to be 
moving in a much quicker way.
    It is going to involve alternative fuels in a big way, but 
alternative fuels will not replace conventional fuels in the 
short run. It is going to involve nuclear power, which some 
environmentalists do not want to see happen, but some 
environmentalists say it better happen if we are going to deal 
with global warming. It is going to involve our producing more 
oil and gas in this country.
    One of the great ironies is to look at Canada. They are 
mining their coast for gas, they are getting that gas from 
their coast. They are transferring it by pipeline in Canada, 
then coming down to heat in Massachusetts 400,000 homes with 
natural gas. That is what is happening. And, the absurdity that 
you would want to continue to pay people overseas to bring in 
oil and gas, when we can produce it here, is something that has 
to be part of this debate.
    We have a huge balance of payments problem, we have a 
national security problem, oil and gas from Russia, from the 
Middle East, from Nigeria, from Venezuela, no, we want it from 
countries like Canada and the United States.
    So, I would just say in conclusion that we have a great 
country. We need to be more plain speaking about what is going 
on. We need to have Republicans and Democrats work together. We 
need to see a vote in Congress to understand what people feel 
about drilling, not in ANWR, that is protected, but off our 
coast, and I will conclude by this comment about drilling, if 
Great Britain had not mined their northern slope they would not 
be the power they are today. Norway is the richest country in 
the world, because they have managed their resources and they 
have mined the North Sea. We go all the way from Canada and 
then there is nothing happening in our coast line.
    I may disagree with some of my colleagues about this, but I 
am absolutely convinced that it has to be part of this mix.
    And, I will just end by saying that John Larson can boast 
about UTC, but given that G.E. is right in the center of my 
District I can boast about G.E. So, let us just collectively, 
as Connecticut legislators, just recognize we have a great 
state, with lots of innovation, and we are very proud of all 
our companies, and we love our Yalie as well.
    Chairman Markey. The Gentleman's time has expired.
    Now we have--Jim Calhoun never had as good a recruiting 
class as the United States Congress had with these two freshmen 
who are now in the United States Congress. They are 
outstanding. They both made an incredible mark in just their 
first term, and let me begin by introducing, for an opening 
statement, Chris Murphy.
    Mr. Murphy. Thank you very much. That is the first time 
that I have ever been compared to Ben Gordon in my life.
    Mr. Chairman, we really appreciate you coming down and 
giving us the opportunity to have access to your Committee, 
which has done such great work, and to allow us to be involved.
    And, I'd like to say to Chris that, even though I'm just a 
freshman, I also appreciate seniority, but only because I have 
no choice in the matter.
    I think, though, there may be some irony in some of Twain's 
comments regarding Congress, I think there is a decent degree 
of synthesis, in terms of being here today.
    Mark Twain came to Connecticut because at that moment in 
time Connecticut and Hartford were the epicenter of the 
Nation's cultural and arts movement, and our desire here today, 
and I think it will be witnessed by the testimony we will hear, 
is that we think in a world defined by a quest to develop 
renewable or alternative energy, Connecticut can be the 
epicenter of that world as well.
    And, that's what we will hear today, and that's the message 
that Chris, and John, and Rosa, and Joe, and I bring to 
Washington every day that we are down there, because we have 
such great stories to tell, those on the panel, those other 
companies like Fuel Cell Energy in the 5th District of 
Connecticut, and others around our great state.
    I want to hear from the panel, so I don't have very much to 
say except for this, this is really--what we are talking about, 
the Holy Grail of Federal policy, because our ability to 
harness domestically produced renewable energy sources solves 
so many different problems. Often, you know, Government 
compartmentalizes everything--too often. Here we have an 
ability with one solution to solve so many different problems. 
We can no longer emit 25 percent of the world's pollution with 
only 5 percent of the world's population. We will do great 
justice to the world's environment and ecosystems if we are 
able to solve this problem.
    By commercializing these products, and making investments, 
and creating markets for the development of renewable energy, 
we will do something about energy prices, because we know that 
we are on the verge of having these renewable sources be truly 
price competitive with older sources of energy.
    But lastly, we talk about the jobs and the economy pieces, 
this is about national security as well, and Chris touched on 
this, our ability to grow, domestically produce renewable 
sources of energy, is also our ability to make sure that our 
conversations around the globe are done with our national 
security interest first in mind, rather than our national 
energy interest, and that, maybe, is one of the most important, 
most fundamental things that we can do to protect the next 
generation of Americans.
    So, it is an absolute honor to be part of this Delegation. 
Chris is right, this is a bipartisan problem, and our ability 
to hold forums like this I think extends our ability in 
Washington to make this a bipartisan solution as well.
    Chairman Markey. Great. The Gentleman's time is expired.
    My mother is Christine Courtney, and she said the Courtneys 
are a very intelligent people, and I think the last year and a 
half has borne witness to that reality in Washington, and so I 
introduce Joe Courtney for an opening statement.
    Mr. Courtney. Thank you, Mr. Chairman.
    I was just about to begin by saying what an intelligent, 
good looking, and articulate Chairman we have today. It is a 
coincidence that----
    Chairman Markey. You will go far in our system, yes.
    Mr. Courtney. I represent the eastern half of Connecticut. 
In the last three weeks, I was at a factory in Westbrook, the 
Lee Company, 800 employees, they make aircraft parts, very 
energy-intensive factory. They turned on an acre of solar 
panels, again, just a couple of weeks ago, with a cheering 
crowd there to witness it.
    A couple weeks ago I was at Windham Hospital, where we cut 
the ribbon for a UTC fuel cell power plant, which will take up 
40 percent of the energy costs to run the hospital. Lee Company 
will be 20 percent for the solar panels.
    STR Technology up in Enfield, which makes the protective 
coating for solar panels, they are now working three shifts, 
24/7, they can hardly keep up with the demand that's coming in 
from all over the world, as well as the U.S., in terms of the 
product that they were out there pretty lonely selling 10 or 15 
years ago.
    Every single one of these stories is united by one aspect, 
which is that the renewable energy production tax credits make 
these enterprises feasible, and we have two people here today, 
three people, really, Chairman Markey, John Larson, Chris 
Shays, who have been strong advocates, they were prophets, in 
terms of the value of this type of public policy, but in every 
instance when I went to visit over the last few weeks it was--
the message was loud and clear that without those production 
tax credits these efforts would not have been possible, and 
they show that there really is an intersection between public 
policy and the challenges that the other members have talked 
about here this morning.
    We have obviously got to extend the tax credits, which are 
due to expire in December, but we have a much bigger step to 
take after that battle is finished, and I look forward to the 
witnesses helping guide us as policymakers to make sure that we 
take this challenge as an opportunity and work out great 
solutions, not only for our country, but for the State of 
Connecticut.
    Thank you, Mr. Chairman.
    Chairman Markey. Great, the Gentleman's time has expired.
    And, one last invitation to everyone whose legs are 
starting to get wobbly up there, who might want to reconsider 
whether or not they would like to move down and to sit in the 
front, please, we welcome you to----
    Mr. Courtney. You are allowed to leave any time you want, 
so it is not a two hour commitment.
    Chairman Markey. So, come on down. You are welcome. Great.
    Our first witness, Mr. George David, is the Chairman of the 
Board at United Technologies Corporation. He joined UTC in 
1975. He served as President and CEO, and presided over UTC's 
transformation to a $63.5 billion conglomerate with a focus on 
research and development. He's chaired the boards of the 
graduate business school at the University of Virginia. He's 
Vice Chairman of the Peterson Institute for International 
Economics.
    It's a great honor to have you with us today, Mr. David, 
whenever you are ready, please begin.

     STATEMENT OF GEORGE DAVID, CHAIRMAN OF BOARD, UNITED 
                    TECHNOLOGIES CORPORATION

    Mr. David. Mr. Chairman and Congressmen, thank you very 
much for being here. Thank you for those introductory comments. 
John Larson, I especially thank you for yours, you are your 
usual enthusiastic self about UTC.
    Since we are here in our own home state and city of 
Hartford, Connecticut, I should make just the quickest comments 
about UTC. We are New England's largest private employer. We 
have had $60 billion in revenues this year. The products 
include, as this group here knows so well, Pratt & Whitney 
aircraft engines, Sikorsky helicopter, Otis elevators, Carrier 
air conditioning systems. We also make fuel cells, as has been 
referred to by our congressional visitors today, and also on-
site co-gen products which we have particular interest in our 
conversations.
    Now, I have a single message, it is one of great, great 
optimism. I think it is also based on a very solid foundation 
of science and physics. We are a big research spender, some 
$3.5 billion a year, as has been noted earlier, and I think we 
speak with both knowledge and also with great optimism. And, 
the reason why is because the common denominator of every 
single thing that UTC does is, we convert energy to useful 
work, whether it is overcoming gravity with elevators or 
aerospace, or climate with carrier heating and air conditioning 
systems, all these things are bound together by the consumption 
of energy to make useful work for our planet.
    And, out of that background, I have a single point to 
emphasize today, which is we can do more with less. We can do 
far, far more with far, far less in energy consumption. And, to 
do so with nothing, relying on nothing more than the laws of 
physics, which I believe are about as solid and reliable a 
foundation as we will find for anything on the face of this 
earth.
    We are also starting in conservation from a remarkably low 
base. On physics, if we take the energy coming out of the 
ground expressed in some measure like BTUs or other physical 
equivalent, 91 percent of that energy is wasted before it 
becomes final or useful work. And, final or useful work would 
be the hot air in your hair dryer, or it could be the rotation 
of the wheels of your car, 91 percent in physical terms just 
disappears and goes away. And, that is because we have the 
legacy of well more than a century of cheap energy, nearly free 
energy, and because it is free we have learned to waste it. 
And, in physics you don't have to have anything remotely 
approaching 91 percent waste. I think this is the biggest 
single opportunity for us to solve the energy problem, and I 
put that ahead of renewables, ahead of alternatives, ahead of 
convention fossil fuels. Do more with less.
    And, by the way, that does not mean--well, the conventional 
viewpoint about conservation is sleep in the cold, work in the 
dark. I don't mean that whatsoever. This is simply having the 
same standard of living we have today, but simply having more 
efficiency in the underlying conversion processes.
    I have four examples to touch briefly in the few minutes 
allotted to me this morning. One is, half the energy in central 
station power plants goes up the stack as waste heat. Now, why 
is that, because you cannot move heat economically. An 
alternative is to move the power generation from the central 
station to on site locally in buildings, and then recapture and 
reuse the waste heat.
    On measurement, a central station power plant operates with 
a physical energy conversion of efficiency in the low 30 
percent. If you do the power generation on site, recapture and 
reuse the waste heat for other building uses like air 
conditioning, yes, heat can make cold in air conditioning. You 
can run the physical conversion efficiency from the low 30s to 
the high 70s percent capture, and that goes a long way toward 
removing or toward working away at that 91 percent of energy 
which is otherwise wasted.
    I think another one that is to me startling and transparent 
in its simplicity and its power. We waste energy by not 
recapturing it from vehicles and other accelerated objects when 
they are braked. You have to think about that for a second. 
Isaac Newton taught us that in the 17th century. The energy of 
deceleration is equal to an opposite to the energy of 
acceleration. Yet, for more than a century of vehicles we have 
never captured the energy of acceleration via the process of 
braking or deceleration.
    But, there are some examples that work today. Otis 
elevators with regenerative drives, this is a very simple 
example, recapture the energy on descent that went into the 
elevator on ascent. And, the result of that is that we can run 
elevators today that use 75 percent less electric power than 
were used in comparable elevators measured in speed and load 
only a decade ago, four times improvement in efficiency, and it 
is that basic principle of recapturing the energy of 
acceleration via the process of deceleration, and that is the 
laws of physics just as naked as we can possibly get them, and 
it can be done.
    Of course, elevators are relatively small energy users in 
the entire world, vehicles are much bigger ones, and let us 
note the fact that we have never, until hybrids very recently, 
recaptured the energy of acceleration in cars, and the 
principal benefit of hybrids is not so much the gas electric 
combination, it is the recapture of energy in the braking 
cycle.
    A third example is heat transfer instead of heat 
dissipation. Heat is everywhere in the world, and it goes 
everywhere in the world. We are doing a multi-year study with 
the World Business Council for Sustainable Development. A 
couple of statistics are revealing. First of all, buildings 
that count for 40 percent of the world's total energy load, 
they are actually a larger component of energy load than are 
vehicles in the entire world.
    Within buildings, and here is one example, hot water 
heating uses a surprising 15 percent of the 40 percent energy 
consumption for buildings, and yet, again, this goes back to 
physics, we still do it the old way. Think about hot water 
heating in your house. We do it just the same way we did it 
thousands of years ago with a pot over a camp fire. That is, we 
heat hot water conductibly with the direct insertion of energy 
into the water.
    I want to borrow from air conditioning for a second. That 
means the physical conversion of that process is definitionally 
less than one, that is, BTUs can become calories, and there is 
a physical conversion process and definitionally it is less 
than one when you have the pot over the camp fire, because you 
will have some energy that dissipates and goes somewhere else.
    Now, you can also transfer heat. Heat is everywhere in our 
world. You can also transfer heat and you can concentrate it, 
the same way you do with a heat pump, which some people have in 
residences, and are growing applications, but you can do the 
same thing with hot water heating. Just take heat that is in 
the atmosphere, concentrate it, move it, and put it into the 
hot water, with an energy conversion efficiency of three to 
four times higher than you have with the direct insertion, as 
we would have with the pot over the camp fire.
    And, that means that you can drop the energy consumption 
for hot water heaters by 70 percent, that again, is 15 percent 
of buildings, and buildings are 40 percent of the world. These 
are big numbers. In fact, hot water heating savings are, 
potentially, several percentage points of the total world 
energy demand.
    The fourth opportunity is electric power generation from 
geothermal. We build some products today that do that right now 
with geothermal energy as low as 165 degrees Fahrenheit, the 
U.S. Geological Survey says there is 10 percent of energy load 
in America can be met by geothermal applications with water at 
this temperature or higher.
    The point of all these examples is that energy 
conservation, in significant amounts, reflects the laws of 
physics. It is feasible today, good financial returns, products 
exist, products are coming, and there is great impact to drop 
this 91 percent of energy that is wasted.
    I think to close this may be with an internal comment, 
conservation in a company like ours can be achieved both in our 
products, that is, I have spoken here about air conditioning, 
things like that, geothermal, elevators, but also inside our 
operations internally. And, for the latter, that is operations, 
since 1997 this company has reduced its gross energy load by 20 
percent in absolute terms, while the company has grown to more 
than twice the size. That is an energy efficiency improvement 
of more than 50 percent, that is, normalizing energy for 
volume, 20 percent absolute, companies twice as big.
    At the same time, our water consumption has gone down by 40 
percent expressed in gallons, again, in absolute reduction. 
Looking ahead, we have taken 3 percent per annum goals for 
energy, reduction absolute, that is 12 percent over the four-
year period from 2007 to 2010, and by the way, we beat that 3 
percent in the first year of this four-year goal period last 
year. So, it can be done, both in terms of products we build, 
relying on things like physics which are so reliable, you can 
see examples in internal operations of a great company like 
UTC.
    And, I guess just to summarize this and restate, there is 
too much talk about alternative energy sources, I believe, and 
we have heard comments today, and I do not mean that to be in 
any sense a negative or a critical comment, I just think we 
always focus about the idea about renewables, and we can have 
some wonderful new things, and new sources, and, therefore, not 
oil. I think the biggest single source we have available to us 
is conservation, more with less.
    And again, I do not mean the variety of conservation of 
sleep in the dark, or sleep in the cold, work in the dark, 
rather it is the simple notion, get rid of the waste and do 
more with less. It is a flat fact that most energy conversion 
processes are far, far from optimized. We can double, triple 
these easily, look at our own operations, energy is down 20 
percent in a company twice the size, where general development 
is hot water heating by heat transfer, recapture of otherwise 
waste heat. The potential is clear and compelling.
    And again, what has held us back is this century of cheap 
energy, and the prospect is changing and changing, I believe, 
forever. So, let us go back and use some physics and the basic 
principle of more with less, and we will lick this problem. 
This is a problem that can be solved.
    Sometimes we have problems that cannot, this one can.
    [The statement of Mr. David follows:]

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    Chairman Markey. Thank you, Mr. David, very much.
    The next witness, John Rice, is currently the Vice Chairman 
of General Electric, as well as President and CEO of G.E. 
Infrastructure, a business segment which includes energy, 
aviation, rail, oil, gas, water, energy, financial services, 
and aviation financial services.
    Mr. Rice joined G.E. in 1978, was also President and CEO of 
G.E. Energy, a leading supplier of power generation technology 
energy services and energy management systems.
    We welcome you, sir, and whenever you are ready, please 
begin.

   STATEMENT OF JOHN RICE, VICE CHAIRMAN, GENERAL ELECTRIC, 
             PRESIDENT AND CEO, G.E. INFRASTRUCTURE

    Mr. Rice. Thank you, Mr. Chairman and Members of the 
Committee. We really appreciate this opportunity to testify 
this morning.
    At our heart, I think most of you know this, G.E. is a 
technology company that has withstood the test of time for 125 
years because of a commitment to invest in the technologies 
that solve big problems, meet market needs and improve 
standards of living.
    As you all know, a focus of this hearing is around 
sustainability, and in that context we are proud of our 
commitment to ecomagination, which is the program under which 
most of our sustainability efforts lie. When we launched 
ecomagination in 2005, it included four major commitments, that 
we would first double our investment in environmentally 
responsible technologies, second, that we would significantly 
reduce our own greenhouse gas emissions, third, and 
importantly, that we would sell more products and services and 
demonstrate that these new technologies would be valuable to 
our customers and deliver a return to our shareholders, and 
fourth, that we would be very public about our commitments and 
our progress toward them. Earlier this year, we added a fifth 
commitment, to reduce our own water consumption by 20 percent 
by 2012.
    Three years into the mission, we are meeting or exceeding 
each of our goals, and in light of the focus of this hearing, 
and what we are learning as a company as we take this journey, 
I would like to reinforce three points.
    First, we believe that it is critical for companies like 
ours, and governments like the United States, to invest in 
advanced technology that reduces fuel consumption and 
emissions. But, these efforts also, as my colleague just 
pointed out, must apply to the enormous installed base, as well 
as the next generation jet engines, locomotives and gas 
turbines.
    The products that we bring to market will help secure our 
energy future by allowing consumers the benefit of cleaner 
energy from a broader range of sources. Some ask if we can 
afford to invest, when the real question is whether we can 
afford not to.
    The second point is that we are dealing with big problems 
that have taken decades, even centuries, to create. Solving 
them demands big investments and a coordinated approach, which 
attracts large companies like G.E., UTC and many others. 
Sustainability, therefore, requires a cycle of investment and 
reinvestment that introduces new technologies and improves them 
over time, just as it has for combined cycle gas turbines, or 
wind turbines, or just about any other energy conversion 
technology you can think of.
    Capital must be allocated and investments sustained over 
long periods of time, and this can only happen if reasonable 
returns and risk reward trade offs are available. Progressive 
environmental groups understand this and are allies now, where 
they used to be adversaries.
    Anything else, anything other than this, will not deliver 
truly sustainable improvements in technology, and progress on 
climate change. All of us know that addressing climate change 
will require a basic shift in the way we produce and use 
energy, which is the underlying architecture of our economy and 
a fundamental building block in everyone's standard of living 
in every country in the world.
    Solutions must be both technically viable and commercially 
acceptable. That is, available at a price that the market 
accepts. Too often today, we see the debate focus on one or the 
other, but not both. We believe that a cap and trade program 
can provide a reliable market pricing mechanism for carbon that 
will stimulate and accelerate research, development and 
deployment of sustainable technologies over the long term.
    It can also ensure that appropriate incentives or returns 
flow quickly and predictably to investors and risk takers, who 
are bringing new technology to markets. However, we also think 
that the program is likely to be constructed to phase this 
pricing in over time.
    During this transition period, sensible government policies 
are going to be necessary to stimulate the deployment of low 
carbon technologies, such as renewables and cleaner coal with 
carbon capture and sequestration. In effect, government must 
play a more substantial and stabilizing role as a bridge 
between technical and commercial viability.
    The need for clarity and consistency in this area is 
especially critical at this time. Capacity additions are being 
made in the U.S. and around the world with long-term 
implications. In some cases, decisions to invest in carbon free 
or low-carbon technologies are being deferred largely because 
economic or risk reward models assign no value to carbon 
reductions.
    The third point that I would like to make is that there is 
no one special technology that is going to solve the climate 
change problem. Since our portfolio includes an extremely broad 
range of energy solutions from wind turbines to nuclear 
reactors, and just about everything in between, we can have a 
pretty objective view about the trade offs among the various 
choices. Simply stated, if the goal is energy security, we will 
need as many choices as possible.
    We believe that our country's energy and climate policies 
must promote a balance of reliable, clean and low-cost energy 
from a diverse fuel mix. These policies must recognize the 
continuing importance of all current and potential fuel 
sources. Because coal will remain an important fuel for the 
U.S. and many other countries, it is imperative that climate 
change policies promote development and deployment of carbon 
capture and sequestration technology as rapidly as possible, 
and ideas like replacing nuclear with wind might make for nice 
headlines, but will never work unless we are prepared to find 
space for another 150,000 wind turbines, which would require 
about 7 million acres, to replace the hundred reactors we have 
today that will be decommissioned at some point.
    As you know well, there is important work to be done, and 
the U.S. Government must play a proactive role with regulations 
and incentives that encourage the biggest and best deployment 
of private capital.
    Again, thank you very much for the opportunity to testify.
    [The statement of Mr. Rice follows:]

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    Chairman Markey. Thank you, Mr. Rice, very much.
    Our next witness, Dan Esty, is currently Hillhouse 
Professor of Environmental Law and Policy at both Yale Law 
School and the Yale School of Forestry and Environmental 
Studies. He is also the Director of the Yale Center for 
Environmental Law and Policy and the Center for Business and 
Environment.
    Mr. Esty's research focuses on next generation regulation, 
environment, trade and governance. He also was an intern in my 
office in 1979, and I wrote the recommendation for him to win a 
Rhodes Scholarship, so along with Jim Calhoun he is one of 
Boston's great contributions to Connecticut. Okay?
    So, we welcome you, Dan, whenever you are ready, please 
begin.

STATEMENT OF DAN ESTY, HILLHOUSE PROFESSOR OF ENVIRONMENTAL LAW 
  AND POLICY, YALE LAW SCHOOL AND YALE SCHOOL OF FORESTRY AND 
      ENVIRONMENTAL STUDIES; DIRECTOR OF YALE CENTER FOR 
   ENVIRONMENTAL LAW AND POLICY, AND CENTER FOR BUSINESS AND 
                          ENVIRONMENT

    Mr. Esty. Thank you, Mr. Chairman.
    It is really a great pleasure, and I am still grateful for 
that opportunity to different leaflets in those early Markey 
campaigns. And then, you did get me to Washington where it took 
me nearly a decade to escape, and I have now been at Yale 14 
years.
    But, in my time in Washington, I did have the fortune to 
work for an EPA that actually tried to do something, had the 
privilege to be the Chief Negotiator of the Framework 
Convention on Climate Change for the EPA, and I think the 
issues that you have put forward for us to think about today 
are ones that have sadly not made progress for a very long 
time.
    So, I want to reflect on where we are and where we need to 
go.
    I think America stands at a watershed moment. I think we 
face a triple policy challenge that is almost unprecedented in 
its complexity and its urgency.
    As you have already made clear, all of you, in fact, have 
spoken, the climate pressure on us is mounting, the greenhouse 
gases are building up, we cannot lay back. We have, in fact, 
spent too much time not addressing this issue for a good 
period, and we have to step up.
    And, at the same moment we face an energy crisis, real 
pressures on real people, with $4 a gallon gasoline and the 
threat of heating oil at prices that are going to be hard to 
bear this winter. And, I think that is a challenge that we have 
to take seriously.
    So, we are going to need clever policy that responds, both 
to the need to bring greenhouse gases down, and to respond to 
the climate issues in the energy relationship, and, frankly, 
there is a third piece to this, and that is our independence, 
our energy independence, and the economic consequences of 
shipping something above $650 billion a year overseas to pay 
our energy bill, not to mention the geostrategic challenge of 
being reliant on the Middle East. I think all of us become 
frustrated with the situation in Iraq. I think even more 
generally that Middle East is an area that we understand is 
complicated, and we do not do well there. And, if we stay on a 
fossil fuel track, even if we were to get out of the Middle 
East it means reliance on other places, like Russia, and 
Kazikstan, and Venezuela, and Nigeria, it is almost a laundry 
list of places we do not want the life blood of our economy 
dependent.
    So, I think we are at a moment where the commitment to a 
clean energy future is critical. And, this will present 
challenges, it will require sacrifice, but I also want to focus 
on the opportunities. This, as Congressman Larson made mention, 
is what I have spent a good bit of time researching for more 
than 15 years, have been arguing that the critical point of 
leverage for policy progress on the environment is the business 
world. So, I think engaging the private sector in the search 
for solutions, and we have heard two great examples already 
today, is the critical challenge in front of us.
    And, let me just identify three quick points in that 
regard. I think we have a revolution going on in business 
attitudes towards the environment, and I want to talk about 
that. I think we have an opportunity for a policy rethink and a 
revolution in policy progress. And finally, I think the link to 
our economic future is really important to stress.
    In terms of the sea change in business attitudes, you could 
not have had a more beautiful demonstration of that than what 
we have heard already today. When I first got to Washington, 
almost every corporate leader talked about the environment as a 
burden, as a cost, as regulations to follow. What you have 
heard today is a whole new attitude and, frankly, while these 
are leading examples there are hundreds, thousands of 
businesses and business leaders across the country that 
understand today there is an up side opportunity in responding 
to society's needs, and engaging in the search for technology 
solutions. So, I think we really do have a big opportunity in 
that regard.
    You know, for all of you who have seen this, you know, this 
is UTC, and it is all of what George David talked about and 
more, just dozens of different interventions across the 
efficiency conservation platform, but also in terms of new 
technology in fuels, and the same thing is going on at G.E., 
where John Rice and Jeff Immelt are investing in high-
efficiency locomotives, jet engines, wind power, solar power, 
clean water, it is a full-bore spectrum of technology 
opportunities that they are pushing.
    I think the challenge then is to produce a police 
revolution that supports the sea change in business attitudes, 
and that really requires us, I believe, to put innovation front 
and center in how we envision our policy structure, and we 
really focus on creating incentives that engage the private 
sector.
    So, what does that mean? Number one, make polluters pay for 
the harms they cause. Fundamental principle, we talk about it, 
we do not do it. We often just simply set a standard and say, 
if you bring emissions down to there you are okay. I say no 
good, make people pay for every bit of their emissions, and I 
think the first step is the climate change package that has a 
cap and trade program. But, I say, let us get serious about it, 
auction all the permits, and let us move over time to a broader 
commitment to making polluters pay and having a price on every 
bit of harm that is caused.
    Second, if we really are serious about innovation, we have 
got to promote broad-scale innovation. We want to have a lot of 
money devoted to this sector, and we want to have a lot of 
players betting in diverse directions about what the future is 
going to require. And that, I think, requires more than just a 
cap and trade program in a climate change context. I believe we 
need a policy portfolio of incentives.
    And some of this again is already under debate. We need 
green building standards, we need commitments to energy 
efficiency. We, frankly, need funding mechanisms to ensure that 
every-day people can bring some of these important conservation 
activities into their own homes. There is big challenges of 
both cost and inertia in getting us to retrofit all of 
America's houses to be the energy efficient places we need them 
to be.
    So, I do think we have to have a portfolio approach with 
lots of different incentives. And, I promise you, and these 
guys I think have already hinted at it, that at $125 a barrel 
for oil every single company in America can do a lot to improve 
its efficiency, and every single one of us is under invested in 
efficiency in our own homes. This is a huge challenge. We need 
to address it together.
    And finally, competitiveness. If we, as a nation, do not 
step up and push forward this clean energy future, others will 
do it. We saw just last week a huge effort being launched in 
Abudabi to create a cluster around clean energy. G.E. is, in 
fact, involved. That cluster should be in Connecticut. We need 
to have the same level of commitment here to really pushing out 
technology innovation and our own commitment to a clean energy 
future.
    And, I think it is absolutely the case that what Saudi 
Arabia is to oil we in this country are to innovation and 
technology development, and it is a policy structure to support 
that that I think we need to push for.
    And so, let me close by saying that this is not just an 
environmental challenge, but, of course, it is. It is not just 
an energy challenge, and, of course, it is. I think it is a 
fundamental challenge to the future of our country and to our 
prosperity.
    And, speaking as a former negotiator, it is not just 
important that the U.S. get on the game plan, which we have not 
been for eight years, but we have to lead the program. There 
are no examples of a successful response to a global 
environmental challenge, and, frankly, we have never had one as 
big as climate change, but even smaller challenges, we have 
never succeeded where the U.S. is anything less but driving the 
bus. So, we need to get ourselves in that front seat, and 
really push out on this innovation model.
    Thank you very much, Mr. Chairman.
    [The statement of Mr. Esty follows:]

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    Chairman Markey. Thank you, Mr. Esty, very much, and that 
completes time for opening statements.
    Now we will turn and recognize the Members for questions 
for our panel.
    Mr. David, you are saying we have to learn how to use more, 
how to get along with less, and get more out of it. My mother 
actually used to say to me beginning at age ten, ``Eddie, you 
have got to learn how to work smarter, not harder.'' And, she 
would always say that immediately after she had said that she 
was going to donate my brain to Harvard Medical School as a 
completely unused human organ. And, this is from age ten on.
    And, what you are talking about, actually, goes right to 
the heart of these issues. So, unbelievably, Newt Gingrich, 
actually, beginning in 1995, as soon as he took over, actually, 
put a rider on the Department of Transportation bill forbidding 
the Department of Transportation from improving the fuel 
economy standards, forbidding, every single year, unbelievable. 
Cannot make it smarter, cannot make it less hard.
    Beginning 2001, President Bush missed all 35 deadlines for 
improving the appliances, that is, air conditioning, toasters, 
stoves, refrigerators, lighting, everything that leads to the 
consumption of electricity, missed all 35 deadlines for every 
single appliance, which is working smarter, getting less 
electricity to power the same appliances.
    So, now we are in a new era, thank goodness, and in 
December of 2007 we were able to include my increase in fuel 
economy standards from 25 to 35 miles per gallon, which backs 
out, by the way, the equivalence of all the oil that we import 
from the Persian Gulf, improvements in all the appliances that 
we have, starting to reduce, in other words, our energy 
consumption, but still only at the beginning of this journey.
    So, talk to us a little bit, Mr. David, if you could, and 
then you, Mr. Rice, about the jobs that are there. You know, 
this opportunity that we have, to actually increase employment. 
Tell us what is going on at each of your companies, in terms of 
new job opportunities for you and export opportunities, as you 
develop these new technologies.
    Mr. David. Well, I think you heard from Mr. Esty a moment 
or so ago the compelling statement that maybe Saudi has got the 
oil, but we have the technology. And, I suppose we could, with 
a little effort, make a variation on your mother's statement to 
you, that we do have the technology.
    America has also built its presence in the world, after 
all, companies like ourselves, and I think G.E. as well, we are 
well more than half of our revenues arise outside the United 
States. Almost all of our research and development is done here 
domestically. Something like 95 percent of our R&D spend is in 
North America, even though 60 percent of the revenues of the 
company come from outside the United States.
    This is a very typical pattern, where we take presence in 
world markets to generate revenues and profitability, which we 
use to sustain investment in our own domestic market. That is a 
basic equation for this company and for many, many people like 
us. I believe we need extraordinary commitment to technology. 
If you will permit, oh, I do not know, maybe the greatest 
abstraction of all, in the last 50-60 years in the postwar 
period, America has invented almost everything in the world. 
That is a simple fact, and whether it is the Internet, or 
material sciences, or jet engines, or space, control theory, 
digital control, digital communications, it goes on, and on, 
and on. And, very large amounts of that has been done with 
pioneering investment by the U.S. Government.
    We have seen some reductions in U.S. Government R&D 
spending in the last 10 or 15 years; it is a long-term trend 
down. I think that is unfortunate and could well be reversed. 
We have to simply reaffirm every single day that.
    Let me take another one of the grand statements, 80 percent 
or so of the GDP of America is new since the second World War, 
as we have five times more physical product, whether it is 
software in that kind of a sense, or something physical like a 
computer or a car, we have five times more than we had in our 
country 50 or 60 years ago. Almost all of that has been 
facilitated by technological advances, large amounts of which 
have been funded with government leadership, also funded by the 
private sector. We need an extraordinary commitment in our 
country to the role of technology.
    Technology and science give us the things that we have 
today. You see leading examples for the two companies 
represented before you here today, you see many examples with 
things like NIH and our Government, health research, science is 
incredibly important to America, and it is important to jobs at 
home, because it creates--that is our resource in all of this, 
is we know how to do things better as a nation, and that is how 
we maintain competitiveness worldwide, how we maintain jobs at 
home, how we continue the transition of our society away from 
building a lower value addition, older style components, and to 
building higher, and higher, and higher technology for exports 
that are in need all across the world.
    There couldn't be a stronger way of saying that, we need to 
reaffirm the technology agenda for this nation, and I think 
these environmental changes, these opportunities to chip away 
at this 90 percent of energy that is wasted out of simply bad 
process, bad equipment, that is a huge business opportunity for 
us, and science and technology will----
    Chairman Markey. More jobs for Connecticut.
    Mr. David. Yes, that is true.
    Chairman Markey. Mr. Rice.
    Mr. Rice. Well, as you pointed out, Mr. Chairman, Saudi 
Arabia has the oil, but they get their gas turbines from us, 
produced in Greenville, South Carolina, where 75 percent of the 
production from that facility now gets exported to Saudi 
Arabia.
    So, we need them, at least for now, and they need us. The 
fact of the matter is that there are jobs associated with this 
everywhere you look, whether it is the jobs that develop the 
next generation technologies, and we know those are important, 
but also the jobs to improve the efficiency of the installed 
base.
    You know, we have 75,000 pieces of equipment installed 
around the world. That is a jet engine, it is a locomotive, it 
is a gas turbine, that consume fuel. And, if we can make these 
5, or 10, or 20 percent more efficient, while we are working on 
the next generation technology, there are enormous savings that 
go with that.
    So, one suggestion is to take many states, we were talking 
about this earlier, in 2000 there were seven states with 
renewable portfolio standards. Today there are 29 or so, but 
they don't all address efficiencies in the installed base. And, 
if you would give credit for improvements to the installed base 
along with the addition of wind power technology, or solar or 
anything else, I think you would see even more money flow to 
the development of capabilities which will help that installed 
base run more efficiently and more effectively. And, I think 
that's a relatively straightforward thing that can be done.
    Chairman Markey. Well, you know what, you put your finger 
right on it. We actually, that is, in December we had a bill 
that almost, it passed the House overwhelmingly, and then in 
the Senate it was going to be 15 percent of all electricity had 
to come from renewables by 2020.
    Mr. Rice. Right.
    Chairman Markey. With 4 percent that could actually be 
efficiency, that is, if you built more efficiency into the 
electrical generating system you could get credit for that.
    But, the Southern Company blocked us, along with Senator 
Domenici, from putting it on the books. Okay? And, I think that 
would have unleashed a revolution across all 50 states that 
would have empowered United Technologies, General Electric, and 
other companies as well.
    And, I will just make this other kind of thought right 
here, that I drive a Camry, a Toyota Camry hybrid, and it gets 
14 miles per gallon more than the regular Camry, which is the 
most popular sedan in the United States. And, at $4.20 a gallon 
I am going to get the pay back for the differential, but they 
are only making 60,000 this year. They made 60,000 last year at 
Toyota, because they built a new Tundra SUV plant in Texas last 
year, so they were moving, they wanted to sell more Tundras, 
and they were actually naming the vehicle after the thing which 
would get destroyed.
    So, unfortunately, you do have to put these laws on the 
books, okay, because even Toyota was against 35 miles per 
gallon by 2020, unbelievable, okay? So, we have to set some 
standards.
    But, I think industry would then respond as each of you 
have said.
    Let me turn now and recognize again----
    Mr. Esty. Can I just add one thing, Mr. Chairman?
    Chairman Markey. Yes.
    Mr. Esty. That there is another segment of the job 
opportunity, you just brought up the high tech opportunities, 
but there is also the green collar jobs, and I think there is a 
huge potential for installation of new insulation in houses, of 
new windows, of solar cells, and I think we should not overlook 
that this is not just the high tech opportunity, although it is 
important, but that there are opportunities across the 
spectrum, and I think, you know, we get nervous as a society 
that it will somehow be just a few companies, or just a certain 
part of the population, but it really can be something we all 
benefit from.
    Chairman Markey. I agree with you, and another way of 
saying green collar are really just blue collar people now, 
instead of doing the old stuff they did, just doing this new 
stuff, putting in the new solar panels, doing this new work, 
it's really blue collar powered. It opens up a new job 
opportunity for that whole sector that feels it is getting left 
behind. But, if we do this revolution correctly it will not.
    Let me turn and recognize the Gentleman from Connecticut, 
Mr. Larson.
    Mr. Larson. Thank you, Mr. Chairman, and let me thank the 
panelists again. You know, your testimony was outstanding.
    I would just like to follow through on a couple of points. 
We were fortunate, as I said in my remarks, opening remarks, to 
be visited by T. Boone Pickens, who is getting great notoriety 
of late with his commercials on TV, previously had notoriety 
that wasn't so great, funding swift voting of John Kerry, but, 
nonetheless, he came with an entrepreneurial spirit and 
somewhat of a message to the Democratic Caucus that one 
couldn't help but take heed, and it centered around a lot of 
what the discussion was here today.
    Willingness on the part of business to invest money, 
Government acts best, I feel, when it operates as a collective 
enterprise, when it embraces, not only the business sector, but 
the academic and labor sectors, in the manner in which that we 
can provide those incentives.
    Now, Mr. David, you started with the notion of being able 
to do more with less, and the whole ethic of conservation. How 
would we, from a policy standpoint, get at that issue, and it 
is a question I would like to see all of the panelists asked, 
but because I think that from a standards standpoint to try to 
shoot towards uniformity, it is great that companies like 
United Technologies and G.E. have this kind of ethic and see 
it, but what is it that Government could do in this collective 
manner, this collective enterprise, so to speak, to augment 
what your business has done, your businesses have done?
    Mr. David. Okay, John, thank you for that question. I think 
we have the answers in front of us, and we had them for a long 
time. There are a couple of mechanisms in our Government. One 
is very long-term research funding, with places like ARPA, the 
Advanced Research Projects Agency, all the national 
laboratories, National Institutes of Health, National Science 
Foundation, things like this, and we have this long history, as 
was mentioned earlier, of Government leadership in research and 
development.
    There is a certain amount of grant funding that is 
allocated to private industry, that buys down the cost of these 
very, very long-range kinds of research programs, and so I 
would certainly applaud it and call for continuation of that 
kind of government leadership in R&D. It has made our Nation, 
it has made the world in the last 50 years. That is a sweeping 
statement, but it is true. Government leadership in research 
and development, science, innovation and technology has remade 
the world. That's a fact.
    The second thing is, I think very much on the minds of the 
Committee and its Chairman, you have mentioned it a couple 
times today, which are these investment tax credits for 
renewables and for conservation. And, I'll state the reason 
why.
    I think, actually, in many of these energy conservation 
devices, I think the need for the investment tax credits is 
greater than the need for R&D funding, because many of these 
products are at the stage of maturity today, where they are 
technically proven, they work, prototypes are done, prototype 
fleets have been built, and now the problem is to create market 
demand, and here is the simple problem, and I will round it off 
for ease in communication.
    A lot of these new technologies cost around $3,000 a 
kilowatt to install the equipment. We have had renewables and 
conservation investment tax credits in place for the last 
several years, and in the Reingold bill continuing now, it has 
passed the House and is in front of the Senate, we've had these 
tax credits in the range of $1,000 per kilowatt. It buys down 
the initial capital cost by about a third.
    And, the reason why we need that is because we have to 
build the fleet and build the volume. Realize, it takes 
something like fuel cells, which people talk about as an 
ultimate answer to replacing gasoline for power in vehicle 
propulsion, the fact of the matter is that vehicle fuel cells 
today cost even more than $3,000 a kilowatt and they need to 
get down to the range of $100 a kilowatt to be, ultimately, 
effective. That is a very, very long way to go. We will get 
there, because the fact of the matter is, you set the target 
price of $100 a kilowatt relative to an internal combustion 
engine, which has been in development for 150 years, and where 
we build 50 million or 60 million internal combustion engines a 
year.
    Fuel cells are in their infancy, and we have got to seed 
the fleet to get the volume, to get the cost down, at which 
point the investment tax credits go away, and industry competes 
entirely on its own.
    So, my appeal would be more for these renewables and 
conservation tax credits. That is the most important thing, is 
we need to build the volumes to get the cost down, to let this 
go away.
    Mr. Larson. Aside from the tax credits, which we hope 
Congress will pass, I would like you to comment, all three of 
you, on the length of the tax credit, because this is important 
to research and development, and given the maturity of, or the 
stages of particular development, and then also the idea, and 
this is what Mr. Pickens said at our caucus, the idea that if 
you are, you know, mandating use, for example, he used the 
example of wind and solar, which is for some parts of the 
country very important, but maybe in other parts of the country 
not as applicable. But, whether it is mail trucks, or school 
buses, or whether it is the buildings themselves, and whether 
it is geothermal, or fuel cell, or whatever the particular 
technology might be, is it important for government, much like 
it did in the TVA, much like it did in the Highway System, much 
like it did as was noted in DARPA, to lead the way and say, 
listen, here is what we need in order to be energy independent 
in ten years.
    We know, and I think the term you used, Mr. David, was 
seed, this is what we are going to have to do to seed this, to 
go along with the investment tax credits and to accompany the 
research and development that is currently going on. It is that 
kind of triumvirate something that we should--direction we 
should be moving in.
    Mr. Rice.
    Mr. Rice. Well, I think that is exactly where we should be 
headed, and this whole discussion, I think, elaborates the 
comment I made about the bridge between technical viability and 
commercial viability. People want to talk, a lot of times we 
get questioned, well, is this possible? Can it be done?
    Carbon sequestration, carbon capture and sequestration can 
be done today. It is technically viable. Is it commercially 
viable? Not yet. There are complicated things that have to be 
sorted out, but it is viable, and so we have to be thinking in 
terms of both technical viability and commercial viability, and 
the production tax credit will bridge the gap. Take technical--
I mean, wind turbines have been technically viable for decades, 
but it was .30 cents a kilowatt ten years ago, and now it is 
.08 cents a kilowatt. Okay, how did we get down that cost 
curve? Well, incentives in Europe helped, the Europeans spent a 
lot of money to do this, as has now the U.S. Government.
    But, having a two to three year, on again, off again, 
production tax credit is probably the most expensive, 
inefficient way to run a supply chain. I mean, you have wind 
suppliers now, component manufacturers, that will not invest, 
will not take a long-term view on capacity because they only 
get a two or three year window. So, we cannot, and I understand 
everybody supports it, and we are thinking about a one year 
extension, and that would be better than nothing, but we really 
need to pass the ball a little bit further down the field, 
because starting and stopping does not help us bring the cost 
down.
    Mr. Larson. On the Ways and Means Committee, we passed an 
eight-year extension.
    Mr. Rice. And, that is exactly, exactly what we ought to be 
thinking about, and if you sunset it after that, or you say, 
look, industry, you get it right over this eight-year period, 
and then you are on your own, I think companies like ours can 
live with that.
    Chairman Markey. The gentleman's time has expired. Again, 
that lost by one vote in the Senate, we needed 60 votes, and 
Senator Domenici was opposing it, so we lost it. But, we are 
going to still try before we adjourn, five more weeks.
    Let me turn now and recognize the gentleman from 
Connecticut, Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman.
    I want to actually move backwards for a second from the 
question that Mr. Larson posed, regarding what the right 
government incentives are, and just ask you, and maybe I will 
direct it first to Mr. Esty, why doesn't the market work here? 
I mean, certainly, you would understand from a business 
perspective how important it is for G.E. and UTC to make those 
investments in conservation, but why doesn't the market create 
the right incentives for the level of conservation investment 
and renewable energy investment that we want. And, are there 
pieces of market mechanics that actually work against 
conservation?
    For instance, I remember being stunned, I should have known 
this, but stunned at a conversation with an electricity 
distribution company when they told me that they still give 
volume discounts in distribution of electricity, which would 
seem to actually be a market force that works against 
investments in conservation.
    You talk a little bit, and I am happy to ask this question 
to Mr. Rice, Mr. David as well, where are the market failings 
here?
    Mr. Esty. So, in simple terms, we have an element of harm 
that is not being priced. So, when we burn fossil fuels, and it 
is not only the greenhouse gases we send up the stack, it is 
the localized pollutants as well, if you do not pay for that 
you end up doing more of it than you otherwise would.
    So, I think getting the price signals right is very 
fundamental, and that does mean putting a price on greenhouse 
gas emissions, through a cap in trade mechanism. There are 
other ways to do that.
    And, I think it is also getting at the sort of risk that 
the investor faces in going in to becoming a solutions 
provider. These are big companies, and they have done very well 
jumping into this space, but I think we have to have an even 
broader set of players out there. We need to engage, not only 
big companies, but small. We need every entrepreneur, and one 
of the great successes in America is kind of the solo garage-
based inventor, and we need to have a signal to every one of 
those guys that there is a big pay day coming if you can 
contribute to improved energy efficiency in one way or another, 
an alternative fuel, any part of this solution.
    And again, I think we are facing a world where the 
solutions are going to be coming from a lot of directions. We 
need scale and diversity of effort. And, I do think that means, 
as the other panelists have mentioned, some government 
investment, particularly, when the risks are big, or the pay 
off is far away, or there is a gap to commercialization. So, I 
think targeted government money is critical.
    But, I think, you know, fundamentally, we should go back to 
Ed Markey's mother, who may be the hero of this hearing, but I 
think we have got to, not only have business work smarter, I 
think we have to make policy work smarter, and that goes to, 
Congressman Murphy, your point, every public utility commission 
in this country should be rewarding those that generate 
electricity, not just for the amount they generate, but for 
delivering services, providing heat, providing light, providing 
air conditioning, and if they can invest in the conservation 
they should be rewarded for that, and not simply for how many 
electrons they pump out the door.
    Mr. Murphy. A second question maybe for Mr. David and Mr. 
Rice. Can you talk a little bit about the global market for 
these technologies, both from a renewable standpoint and from 
devices that are going to provide more levels of conservation? 
Are there the right policy incentives in other parts of the 
world, global warming agreements, a predicate to making some of 
these technologies marketable in countries like China or India? 
What is the landscape globally for the export of the 
technologies that we are producing, or could potentially 
produce?
    Mr. David. I wonder if I could just combine an earlier 
question and the last question, Congressman.
    I think I need to reaffirm the principle of predictability, 
and the comment has been made about an eight-year life on the 
renewables credits, certainly, I think private sector would 
applaud that and say you need that kind of a duration to give 
some confidence to cause people to invest privately.
    I think another one we need to pay attention to and this 
runs to the market behavior, is that some predictability in the 
cost of energy. The fact of the matter is, we have what we have 
today because we have had 100 and some odd years of, literally, 
free energy. And, we have seen energy costs, oil costs, double 
in the last year alone, and so people are not quite sure that 
is going to last. And, maybe it will go back to the way it was 
before. We had oil price spikes, you will recall, after the 
first Arab war in the early 1970s, big oil price spike up to, I 
guess, over $100 a barrel, expressed in 2007 currency, and then 
it went back down to $10 a barrel ten years ago.
    So, there is a question of predictability, and I think we 
need to say to our world that we are going to have a cost of 
carbon, whether it is cap and trade or carbon tax or something, 
there has got to be a conviction that high costs of energy are 
with us for a very, very long time.
    To turn to your more recent question, Congressman Murphy, I 
will take our experience in China to respond to you 
specifically, is that I rate the Chinese, and this is based on 
very large UTC presence there, something like 15,000 employees 
and several billion dollars of revenue, and a long time 
presence, and 40 operating companies, I rate the Chinese, 
actually, quite high on their commitment to conservation. They 
have--they are in the middle now of their so-called 11th five-
year plan that started in 2006, that ends in 2011, and there 
is, one of the two primary goals as stated is an energy 
intensity goal, which is to reduce the energy intensity of the 
Chinese economy by 20 percentage points between 2006 and 2011. 
And, they are tracking it precisely, they publish the results, 
they have fallen short in the first couple of years by a 
percentage point or so, because, realize, 20 percent over five 
years is 4 percent per annum and they are coming in more like 3 
or 3.5 percent.
    There is a great deal of pressure and tension in Chinese 
industry to do things to comply and to drive down the cost, or 
drive down the consumption of energy to get this national 
energy intensity goal right, so I would rate their appetite 
very high, in fact, for export equipment, and technology, and 
U.S. ideas, there are lots of things.
    China, in some respects, is--well, we have heard our 
President say that they are the biggest part of the problem, 
and the way you get to that is by virtue of you look in at the 
increases coming in emissions in the next five, or six, or ten 
years, and it clearly, more comes from China than everywhere 
else. So, we say, you know, the future problem is theirs, while 
we conveniently forget the past problem is ours.
    We still produce far more hydrocarbon emissions in the 
United States than China does today. We still do. So, the fact 
that they are building new, and they are growing and expanding, 
means their cost to save, their cost to conserve, is lower than 
ours is. We are faced with a retrofit problem, they are faced 
with a new build problem, and, therefore, their appetite is 
high. They do see good returns. The nation is driving this 
hard, and I think it is a tremendous opportunity for America to 
go and, to me, if you said big opportunities in the world for 
exporters, I'd say conservation equipment to the nation of 
China. It's sort of right up there at the very, very top.
    Chairman Markey. The Gentleman's time has expired.
    The Chair recognizes the Gentleman from Connecticut, Mr. 
Shays.
    Mr. Shays. Again, Mr. Chairman, thank you for holding this 
hearing, and thank you for inviting me to participate.
    My daughter just graduated from Vermont Law School on 
Environmental Policy, and Yale School of Forestry and 
Environmental Policy, and she thinks I am a work in process, as 
good as I think I am doing here.
    But, maybe it is because I am the only Republican in New 
England, I feel like when I--John McCain says I'm the last of 
the Mohicans, but I am an endangered species, and I know that 
Democrats want to protect endangered species.
    So, I just want to state for the record----
    Chairman Markey. It is good that we are in a museum.
    Mr. Shays. You know----
    Chairman Markey. New England Republican.
    Mr. Shays [continuing]. I can never outclass this guy, but 
I do it at my peril, and Barney Frank as well.
    I do want to say that there was a vote in the Senate when 
we voted on Kyoto, when it was negotiated, and Bill Clinton was 
in the bus. He was driving the bus. And, the Senate voted 95 to 
0 to say do not give us Kyoto without China and India as part 
of the mix.
    So, I just, I kind of get a little uneasy when I hear, 
well, Domenici did this, and so on, because we will get not to 
first base if that is the way our mentality is. The bottom line 
is, Bill Clinton never submitted Kyoto to this Senate, because 
it did not include that.
    I said to President Bush, I wish he had just submitted 
Kyoto to the Senate without prejudice, it would have had about 
ten votes. Now you think every Senator would have voted for it.
    The question I would like to ask you, Mr. Esty, is I 
support cap and trade, I want polluters to pay, but it was 
pointed out to me by those who tend to have investment in coal, 
that really what we then do is we bring up significantly the 
price of coal, which is what has generated most electricity in 
the United States, and has enabled those companies that still 
can compete with the rest of the world in manufacturing to have 
modest energy costs. Again, not in New England. We don't want 
to produce, and we do not want transmission lines here.
    But, so my question is, will cap and trade have to be 
phased in, so that industry can deal with the increased costs, 
or will cap and trade not impact the cost of energy and 
electricity?
    Mr. Esty. Let me say that I think you have identified 
something very important, and I hope this Committee will do 
more with it over time, and that is the progress on the 
domestic front in responding to these issues, has to be done 
with an eye on the international negotiations.
    And, frankly again, as competitiveness has become an 
important issue, we cannot simply sit back and ask, well, will 
China and India step up. I believe we absolutely must have a 
beyond Kyoto protocol that engages every country in the world, 
and again, as someone who studies these issues, I will tell you 
we have never had success in galvanizing the world in response 
to a challenge on anything but the principle of common, but 
differentiated, responsibility, common meaning every country 
steps up, every country has to do something.
    Mr. Shays. Yes, but let me just say, differentiating 
meaning we scale the level of obligation, but my question is, 
what will be the impact to our industry and to our jobs when we 
put a cap and trade in? How do we phase it in?
    Mr. Esty. So, two things. First, as long as everybody is 
stepping up the price of coal around the world, the competitive 
disadvantage is much reduced. So, having that global commitment 
is very important.
    And second, I think there will have to be some transition 
work done. We will have to have mechanisms that try to minimize 
the impact on industries that are in sensitive positions.
    Mr. Shays. I happen to know a lot of members on both sides 
of the aisle who want dearly to move forward, but they are 
trying to deal with the reality that we have to compete with 
the rest of the world, and we do not want to put people out of 
work in that process.
    I want to make sure from G.E. and UTC's issue, when T. 
Boone Pickens came in, it was reported at first that he wanted 
to--it was this billion dollar investment, and non-profit 
almost attitude on wind power, he came back to the Senate and 
said, you are not hearing me if you think this replaces the 
need to increase our production of fossil fuels. He said you 
need to do all of the above. In fact, I disagreed with him 
because he said we also had to do ANWAR.
    But, is it the position of your two companies that in the 
process of your working the way you are working that we do not 
need to increase the production, and, hopefully, in our own 
country, of fossil fuels?
    Mr. Rice. We think that--we were one of the founding 
members of U.S. cap, so we have come out in support of cap and 
trade. We understand----
    Mr. Shays. No, that is not my question.
    Mr. Rice. No, I know.
    Mr. Shays. I just want to make sure you answer my question 
before you tell me what you want me to know.
    Mr. Rice. Well, no, but we do believe that you need--T. 
Boone Pickens is a great customer, he buys a lot of wind 
turbines. We believe you need everything, including fossil 
fuels to solve this point. And, that was the thread of my 
comments, that you need a portfolio, it is not really about 
energy----
    Mr. Shays. We need all of the above.
    Mr. Rice [continuing]. Independence. Right, because you 
need, you need everything. We have 150 years, 200 years worth 
of coal in this country, we have to find a way to use it. We 
cannot just cut that off, we have to find a way to use it 
efficiently, and effectively, and keep people working, while 
we----
    Mr. Shays. Mr. David.
    Mr. David. If I understand the question correctly, Chris, 
we are not afraid of increases in the cost of energy at all.
    Mr. Shays. That is not what I asked. The question I asked 
is, is your position that we do not need to increase the 
production of domestic fossil fuels, because we can rely on 
renewables and so on. That is the question. And, it is not a 
difficult question.
    Mr. David. I think we should increase the cost of carbon, 
and let the market decide.
    Mr. Shays. Does your company believe that we should 
continue to buy fossil fuels overseas, transferring $600 
billion overseas, or do you think it would be wise for us to 
end up buying from ourselves with American jobs and American 
production, or is that not something you think about?
    Mr. David. Pardon me for repeating myself, I think again, 
we should increase the cost of carbon and let the market 
decide.
    Mr. Shays. Do you support drilling off our coast?
    Mr. David. Pardon me for repeating myself again, I think we 
should increase the cost of carbon and let the market decide.
    Mr. Shays. But, see, what I think is, we need straight 
talk, and I feel like you want to--and I want to be candid, I 
feel like you do not want to say what is the obvious. Do you 
think it makes sense for us to tell Canada to drill for oil off 
the coast and sell to us, because we do not have enough natural 
gas, so we buy from them, or do you think it would be a wise 
public policy decision. I have to vote on this issue. I want to 
know should I be supporting drilling off the coast or not. You 
are a major manufacturer, you are into technology, are you 
saying technology solves the problem and we do not need to deal 
with conventional fuels? It is not a difficult question.
    Mr. Rice. Fossil fuels today represent 70-75 percent of the 
power generation of the United States, and to my way of 
thinking finding responsible ways to access as much of our 
fossil fuel sources as we can is the only way to go forward. 
You have got to do it responsibly. You have to do it cost 
effectively, and you have to develop the rest of the 25 and 30 
percent wind, and solar, and all of the alternate forms of 
power generation.
    Mr. Shays. Let me just ask you this then, Mr. David. I 
thank you for your answer.
    Mr. David, do you disagree with that answer, or agree with 
it?
    Mr. David. Again, I want to look at the big picture. I 
think we need to drive down consumption and drive up 
renewables, and the way you will cause that to happen is by 
increasing the cost of carbon.
    Mr. Shays. Do you agree with his answer or not? It is not a 
difficult question. Your own employees, if you would ask them a 
question you would want a straight answer. Do you agree or 
disagree with his answer?
    Mr. David. The market will cause increased production of 
fossil fuels. It will cause them less if we have higher cost of 
carbon.
    Mr. Shays. I do not disagree with what you said, but I want 
to know the answer to this question. I do not know why you are 
reluctant to give it to me, and I guess I am not going to get 
an answer.
    And, I do not want to have a dispute with someone so 
important, but I just feel like we do not have straight talk, 
give me straight talk.
    Chairman Markey. The Gentleman's time----
    Mr. David. State the question precisely.
    Mr. Shays. No, I will not do it again.
    Chairman Markey. Let me turn----
    Mr. David. I misunderstand why there is tension. Can you 
help me with that?
    Mr. Shays. Yes, because I feel like because you are 
involved in technology you do not want to offend Democrats, you 
do not want, you want to be careful, you want to be like Alan 
Greenspan and have everyone think you agree with them. It is 
such a simple gosh darn question. Do you think that we need to 
increase production of fossil fuels in this country? Do you 
think it makes sense? If you do not, just tell me, it does not 
make sense to drill off our coast, we should get it from 
Canada, we should get it from Saudi Arabia. We should not do 
it. It is a straightforward question. It could be yes or no.
    Mr. David. The fact is that energy consumption in the world 
is not going up very rapidly. Oil production and consumption 
last year went down by about a 1/2 percent globally. We are 
talking about things at the margin, and we do not need to go 
out and to have vast new efforts to tap vast new sources of 
fossil fuel. We need to look for renewables. We need to look 
for conservation. We can solve this problem without having 
these enormous increases in fossil fuels. Some are required, 
not that much.
    The way to deal with that is to increase the cost of 
carbon. I am sorry to be so repetitive about that.
    Chairman Markey. Let me turn now and recognize the 
Gentleman from Connecticut, Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    One, actually, I think Mr. David's comments started to sort 
of go in a direction I was wanting to ask about, which is the 
fact that, you know, there is sort of this all of the above 
sort of discussion. Dan, you sort of mentioned about having the 
portfolio as diverse as possible.
    But, at some point, I mean, particularly, in the 
transportation sector, I mean, you really do not have an 
infinite ability to just choose all technologies. I mean, T. 
Boone Pickens talked about, you know, running cars and 
transportation on natural gas. I mean, that was sort of his 
message the other day when he was at the caucus.
    The government of Israel right now is talking about going, 
you know, straight electric, in terms of, you know, no liquid 
fuel.
    But, you know, in both cases, and I know, you know, fuel 
cells were being talked about by Arnold out in California, but, 
you know, when you set up a transportation system, I mean, you 
have got to set up a distribution system for keeps, or for an 
awful long time, in terms of, you know, whether you are 
switching batteries, or filling up the liquid natural gas.
    And, I mean, it does seem at some point, if we are really 
going to transform on the transportation side, you know, we 
really don't have the ability to just sort of, you know, say, 
you know, anything goes, and everybody can jump in. I mean, you 
know, we sort of have to have some consistent thread about how 
you, you know, what energy you are going to choose as a country 
to--and, I mean, so is sort of the Israeli vision feasible here 
in the U.S., or is it the T. Boone Pickens, and do we, you 
know, as a country, have to make a choice? And, is that choice 
in Washington?
    Mr. Esty. So, I think we have to be careful not to have 
government make that choice, so I am going to echo George 
David's comments, I think we want to let the marketplace test 
out these ideas. I think we want to at least for the next 
number of years see lots of thinking going in different 
directions, because we cannot tell what is going to emerge as 
low cost.
    And, the real answer to Representative Shays' concern is, a 
day when the price of the alternative energy is coming under 
the price of burning fossil fuels, because then we get out from 
under the burden we feel, which I think we all feel, which is 
we do not want to have a cost of energy so high that it harms 
our competitiveness, threatens our prosperity.
    So, I actually think the long-term goal is low energy 
prices, but to get there we have to make sure that these market 
signals are right. We are going to have to make people pay for 
the harms they cause.
    And, I do think that if you made me guess as one person who 
studies this, but I could be wrong, I think we are going to 
head for an all electric future. I think we are going to come 
in some day with a way to generate electricity cheap enough 
that we can have an electric car.
    I used to think hydrogen was more likely, I now think why 
not go directly to electricity, and as someone who also drives 
a hybrid I have been actually pretty pleased with the electric 
push that my car gets as we get going.
    But, I think it is really tough to decide that, and I think 
the history here is that when the government picks winners we 
do not do well. I mean, not to criticize our Congress, but, you 
know, corn-based ethanol will not be the solution to our energy 
future. I just promise you that.
    And, all the effort that has gone into corn-based ethanol 
is really distraction from getting on to all of the things we 
really do need to go for.
    So, let us be careful about that, and I guess the one other 
thing I would say, in terms of transportation, in the short run 
we have got to make it easy for people who are helping to do 
their part by switching to public transit, to the bus, to the 
subway, and, you know, I have a kid who is taking an internship 
in New Haven, and is riding the Waterbury New Haven bus, it is 
totally overcrowded by the time it hits Chester. You know, we 
need to provide extra buses, extra support, for people who are 
changing their lives to be part of a more carbon efficient 
future, and I think we have under invested in that element of 
society that supports, particularly, those at the lowest income 
levels.
    Chairman Markey. Great. We----
    No, please, go ahead.
    Mr. Courtney. No, I didn't know if the other two had a 
comment about sort of liquid fuel for cars and transportation's 
future.
    Mr. Rice. Well, I think you hit on a very good point. I 
mean, whether it is jet engines or locomotives, you know, we 
are working on hybrid technology, we are working on power 
saving technologies, at both UTC and G.E. But, there are short-
term answers, which do not carry some cost that goes with that.
    And so, I think that--I totally agree with Dan's comments.
    Mr. David. Of course, we have--we have built fuel cells in 
UTC for longer than anybody else in the world, and, obviously, 
we are invested in that. I think we are going to migrate, 
ultimately, to fuel cell power compulsion, maybe in buses 
first, cars second.
    Cars are a good long way in the future, because of the cost 
per kilowatt. It is very high. Also, there are power density 
issues, because fuel cells are relatively faulty, and to put 
them into a smaller vehicle like a car makes it harder. I do 
not want to say it is not going to happen, but it is going to 
be a decade or two in the future, where other applications like 
buses are right here and now. In fact, there is a fuel cell 
powered bus outside today, and we will probably provide some 
rides, or folks can take a look at it. It is in service today 
here in Hartford.
    Mr. Courtney. Thank you.
    Chairman Markey. Okay. So, we will do a quick round here of 
two minutes apiece for any members that have any other 
questions, and the Chair is going to recognize himself.
    The wind revolution is taking off, Boone Pickens came in, 
he talked about it, he is going to invest $4 billion of his own 
money, 7,000 megawatts of electricity are going to be 
constructed this year.
    Just to give everybody an idea, when you think of the 
Seabrook Nuclear Power Plant, or you think of the Albulcany, 
that's a 1,000 megawatts. Okay, so there is not going to be a 
new nuclear power plant that actually gets commissioned in the 
United States for ten more years. This year, 7,000 megawatts of 
wind. So, by the time the first nuclear power plant gets 
commissioned, finally turns its switch, there will be 125,000 
megawatts of wind before the first 1,000 of nuclear actually 
gets commissioned. That's because the market is moving toward 
wind. The price has come down, there is no price on carbon, and 
states and countries want to move in that direction.
    So, the market is beginning to reflect that, and we 
actually had a hearing on the Select Committee two weeks ago, 
where we had in Shai Agassi, who is the guy running the project 
in Israel, we had the guy who is running the program in 
Denmark, they have 2 million cars in Denmark, they say with 
2,500 megawatts of wind they can power the entire fleet of 
vehicles on electricity in Denmark. So, they are moving in that 
direction as well, the all electric future using all wind 
electrical generating capacity.
    So, there is something that is happening out in this 
marketplace, and what Pickens said to us is, he said, I want 
you to remember three numbers. He said the numbers are, we 
consume 25 percent of the oil in the world on a daily basis. We 
are 4 percent of the population, and we have 2 percent of the 
world's oil reserves. So, it is 25, 4 and 2.
    And, he said to us that since we consume 21 million barrels 
a day, and we only produce 5.9 million barrels, we cannot drill 
our way out of it. We are going to have to innovate our way out 
of it. We are going to have to find the new technologies, move 
to electric vehicles, move to natural gas, because we have a 
lot of domestic natural gas. Believe it or not, we produce 
twice as much natural gas each day as we do oil, and there is a 
potential to produce upwards of 20 million barrels of oil if we 
go to natural gas on a daily basis, which is what he was 
talking to us about, and that would all be on the lower 48 
where we already are, and everyone wants that drilling to take 
place.
    And, that is half the emittance of coal, that is, natural 
gas has half the carbon content of coal, so that gives us a 
route. He was giving us a path looking at wind and looking at 
natural gas, away from coal, away from the greater pollutants, 
even away from oil, which he felt in the long run was non-
sustainable.
    So, I think that was a good vision for us, for our country, 
and it is something that has to be combined with a cap and 
trade system, a mandatory cap and trade system, so that every 
industry does understand that there is a price, there is a 
price on carbon.
    And, once you do that, wind, and solar, and all these other 
technologies, become much more attractive. Energy efficiency 
becomes much more attractive. Geothermal becomes much more 
attractive. They all look like they are where you should be, 
and where we should have been the whole way, because they are 
abundant, they are plentiful, they are cheaper than fossil fuel 
once you say that it is a pollutant as well, and it has to pay 
an extra price because of that.
    So, that is just a comment that I would add at this point, 
and once we do that I think we are tapping into domestic 
resources, that is, what is already here, this indigenous 
source of energy that we have in our country already.
    So, I'm going to stop there and ask if any other Members 
here, at this point, have anything they want to add.
    Mr. Larson. Well, thank you, Mr. Markey, and again, thank 
the panelists.
    I would just add that the Ways and Means Committee is going 
to be having a hearing as well on the whole subject matter area 
of proposed tax on carbon, and while I expect that little will 
happen in the Congress, it goes back to the discussion that Mr. 
Markey raised in our Committee over the issue of cap and trade 
versus a carbon tax. And, when he inquired of our esteemed 
colleague, Mr. Sensebrenner, he said that he was opposed to a 
cap and trade system, because he thought that the credits would 
be fairly difficult, et cetera, and Mr. Markey responded by 
saying, well, would you be in favor of a carbon tax then, like 
Mr. Larson is proposing? He says, no, we are going to be 
opposed to both, because they raise taxes, period.
    And, I think therein lies some of the political dilemma 
that Congress faces, but it is an inconvenient truth to address 
the fact that, as Mr. Pickens did, that we are dealing with 
consuming 25 percent, have 4 percent of the world's population, 
and 2 percent of those reserves. And, to look at pollution and 
ignore it is to stare into the face of harm's way into the 
future, and we have to face that future.
    I believe that we have to come up with a system that is 
ultimately revenue neutral. I believe that some form of trust 
fund that passes the savings along by way of a payroll 
deduction to the end user, so that the ultimate consumer, the 
person who is ultimately impacted by all of the policies that 
we generate, both from the negative aspects of pollution, but 
everyone knows that any company ultimately will pass on those 
costs to the consumer. So, to make any proposal, cap and trade, 
or a carbon trust fund, or carbon tax, that focuses in this 
area, has to be revenue neutral, has to provide the 
individuals, the end users, with relief by deducting money from 
their payroll taxes, thereby, giving them a tax cut themselves 
to deal with the impending costs, direct and specific aid into 
the technologies like carbon sequestration, like direct relief 
for the potential replacement of mine workers and individuals 
who will be impacted by this, and transitioning them into a 
greener technology and greener opportunities, as well as 
providing an opportunity for investment into new technologies.
    Chairman Markey. The Gentleman's time has expired.
    The Gentleman from Connecticut, Mr. Shays.
    Mr. Shays. Thank you.
    Given my questions, you could have a sense that I am 
arguing for a particular position, but what I am trying to 
argue for is that we look at the whole mix and figure out what 
we do as a country.
    I tell people that being a member of Congress is like going 
to a large university and being told you have to take every 
course and get a passing grade. We tend to know a little about 
everything, and then we specialize in a few areas.
    Since I am not on the Energy Committee, I kept waiting for 
someone to introduce a bill to have increased efficiency in 
CAFE standards, and it did not happen. So, I went to the League 
of Conservation Voters and to the Sierra Club and we created a 
bill, and then--a Democrat, co-sponsors it. I always find a 
Democrat to co-sponsor any bill.
    And, what it said was, you should get 40 miles to a gallon 
by the year 2016. We introduced this five years ago. It said 
that we would have renewable energy, and we would put dollars 
into it. We would take money out of the fossil fuel industry to 
fund it, that we would have appliances that were efficient, and 
that we would help provide incentives to homeowners to have 
fuel efficient heating and insulation.
    That was our bill. We got out of Congress, to the credit of 
this Congress, in the House, 35 miles by the year 2020, and 
Europe is at 2012/48. It is not a problem in the House, it is a 
problem in the Senate. I tell people that the Iraqi Parliament 
is more constructive and gets more things done than the U.S. 
Senate, and I believe it.
    The bottom line to this, though, is that we have to look at 
all issues and all parts of it.
    And, I just want to ask you, Mr. Esty, if you would tell 
me, if you had to rank geothermal, sun power, wind power, and 
bio-fuel, which do you think has the greatest opportunity for 
us, the earliest pay back, and which will have it more 
difficult. Does wind trump sun, are they equal, is geothermal 
out there? If you could give me a sense.
    Mr. Esty. I think in the short to middle term it will 
depend where you are. So, if you are in a sunny spot sun looks 
pretty good, if you are in a windy spot wind looks pretty good. 
If you have got thin crust of the earth, geothermal looks 
pretty good.
    I think one of the challenges we have not talked about is 
the need for innovation goes beyond these technologies to 
transmission. We are really going to have to figure out how to 
move the power from where it is most effectively generated to 
where we consume it. There is, you know, huge potential for 
wind across the Great Plains, Texas, to North Dakota, and that 
is not where the consumption is. We have to figure out how to 
get the power to Chicago, and L.A., and elsewhere.
    So, I think we are going to have to do more to ensure in 
the short run all of those.
    If you made me bet 50 years out, I think solar power will 
dominate, but that is just a thought, and I have been wrong 
before, and would hesitate to have anyone take that too 
seriously.
    Mr. Shays. Does it have to be 50 years, could it be 20 
years?
    Mr. Esty. I think we are going to have a slower paced 
transition than a lot of people are hoping for, but I think we 
could drive it with the right policy structure that puts us in 
a place where these companies, and so many others, are really 
incentivized to put their shoulder to the wheel, and give us 
that clean energy future sooner rather than later.
    Mr. Shays. Thank you.
    Chairman Markey. The Gentleman's time has expired.
    Mr. Murphy.
    Mr. Murphy. Mr. Murphy, just to say thank you again for 
joining us here in Connecticut. I think you can see by the 
robust attendance here how seriously we take this. We are proud 
of what we have done in the state legislature as well as here 
in Connecticut, led by State Senator Gary Labot who is joining 
us and others. We have here a renewable portfolio standard, we 
just passed a climate change bill, and as you can see we have a 
great deal of interest in helping you with your efforts. So, 
thank you again for convening here in Hartford.
    Chairman Markey. Great, and Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman, and thank you for 
bringing your Committee here.
    Every committee in Congress, though, right now is having 
this issue before them. On the Armed Services Committee, on 
which I sit, you know, we are looking at the fact that 90 
percent of the Government's use of energy is in the Pentagon. 
Obviously, more efficient engines is a way to address it.
    The company I mentioned earlier up in Enfield that is 
making the protective coating for solar panels just got a 
contract to build pop-up tents for the Army with the solar 
panels actually right in the fabric to power radio equipment, 
back packs as well. So, we are seeing the greening of the 
Pentagon as well.
    And, on the Education and Labor Committee, I am a founding 
member of the Green School Caucus, because as we know in 
Connecticut, Eastern Connecticut State University did an 
inventory of the school buildings in our state and found that 
they are, perhaps, some of the most inefficient structures of 
all. And, we have to come up with ways, because, particularly, 
local communities are strapped enough in terms of trying to 
find those investment class to make buildings more efficient 
and to incorporate possibly even, you know, energy sources like 
alternative fuels.
    So, it is everywhere in the Congress. I know Chris' 
committees are probably experiencing the same thing, but we 
have here the leadership of the solution with Mr. Markey and 
his Select Committee, and I want to thank you for joining us 
here in Connecticut.
    Chairman Markey. Thank you, I appreciate it. Thank you. 
Thank you very much, Joe.
    What I would ask is each one of our witnesses give us the 
two minutes they want us to remember from their testimony here 
today. What is that you think that everyone should know about 
the future, and what has to happen?
    We will begin with you, Mr. Esty. We will go in reverse 
order of how we started. Please give us your two-minute 
summation of what you think we have to know.
    Mr. Esty. Well, I think we are facing a real challenge as a 
country, and so I appreciate Congressman Shays' passion here. I 
think we are going to have to step up in a very different way 
than we have in the past, and I believe the answer lies with 
innovation, and harnessing the engine of the private sector, 
from the largest companies to the smallest.
    But, having said that, it is critically important that we 
do not think this somehow gives the Government a pass. To the 
contrary, the Government has to get much smarter about the 
policy framework that it creates, and the incentives to engage 
the private sector, and I do want to ensure that those who come 
up with breakthroughs are rewarded for that effort, and I think 
we have to set up a process for doing that.
    And, I think we also want to set out a process that rewards 
our success and ensures that as a country we are achieving 
economic progress alongside energy and environmental progress. 
And, I believe in that regard we probably have an additional 
item that we did not get to today that is worth discussing, and 
that is a floor on oil prices in the short run, to ensure that 
we do not have prices dramatically drop causing a huge 
withdrawal of all this capital that is being invested in new 
technology.
    And, I think we could call it a tax on our energy security 
and future, because what we really want to do is to ensure that 
we are not at risk of an OPEC-induced price change that 
destroys all this innovation that is underway.
    So, I think innovation is the key, and, really, 
understanding the linkages of energy, environment and our 
economic prosperity is essential.
    Chairman Markey. Thank you.
    Mr. Rice.
    Mr. Rice. We believe that it is less about energy 
independence, because the practical aspects of that are very 
complicated and very far out, more about energy interdependence 
and security. How do you build availability, both in what you 
do domestically and what you have access to from outside the 
U.S., that is going to give you the sources of supply that you 
need.
    And, over time, one of the--since we do not have enough 
fossil-based fuels in the United States, one of the ways to 
solve that is going to be through the development of 
alternative technologies, renewables, wind and solar, and I say 
on the solar thing that, you know, today it is where wind was 
ten or 15 years ago. Can it become more mainstream in that 
period of time? I don't know, it is going to take a lot more 
investment, but it certainly is going to be big in the future.
    In the meantime, we have got to be developing every source 
that we have. I do not think we can constrain ourselves, 
because the answers, you know, you cannot bet on one technology 
or two technologies, you have to bet on a portfolio and then 
make them as clean and environmentally responsible as you 
possibly can.
    And so, that is why this is such a tough problem, with so 
many moving parts, and you want to do it without crashing your 
economy, and putting people out of business, and losing jobs. 
Right? That is what we are all about. We believe you can. We 
also think it is a huge global issue.
    I visit 30 countries a year, and every country, I was in 
Southeast Asia two weeks ago, and Vietnam, and Malaysia, and 
Thailand, and Singapore, they are talking about renewables, 
they are talking about nuclear. These people would never have 
been thinking about it five or ten years ago. So, it is a real 
issue in front of real people, and we are all struggling to get 
to the same goal, I think.
    Chairman Markey. Thank you, Mr. Rice.
    Mr. David.
    Mr. David. Mr. Chairman, thank you for that comment to 
summarize. I think I have one suggestion or appeal, and that is 
that we amend the list of renewables, whether they be solar, 
geothermal, wind or anything else, to include conservation. 
That is a very effective, I believe the most cost effective, 
and most readily available, least risk source of renewable or 
alternative energy, is actually conservation.
    Maybe I could go back again to physics for just a moment 
here, and just remind us all that heat is actually never--beg 
your pardon, energy is actually never consumed. Just going back 
to basic physical principles, energy is instead converted. We 
cannot destroy energy, it cannot be destroyed. It is simply 
converted, put into some alternate form.
    And, 91 percent of it is converted to an ineffective use, 
that is, something that is not used for work. We waste 91 
percent of what we have every single day, and it is not 
destroyed, it is just wasted.
    And so, my appeal again, and I think the science, and the 
physics, and the technologies are there. You can conserve 
enormous amounts of this energy, and there is way more 
available from conservation than there is any other source in 
the short term. It is cost effective. It is low risk.
    Chairman Markey. Thank you, Mr. David, very much.
    We have a challenge in the United States. The world is 
going to meet in Copenhagen in December of 2009. They want the 
United States to be the leader, and not the laggard. There has 
to be a follow-on protocol to Kyoto. We need the entire world 
to look at us as the leader. So, the Congress will pass 
legislation in 2009, a mandatory cap and trade system, and both 
President Obama and President McCain have both said that they 
will sign a mandatory cap-and-trade bill, which will put us 
into a new era, because it will put a price on carbon. That is 
the new era.
    And, once that happens, innovation will follow. The lowest 
cost product, service, idea, will win, because otherwise that 
company, that family, that individual, will be paying a higher 
price than they want to.
    So, the pressure nationally will be great to work smarter 
and not harder. And, that is what happened, I was fortunate in 
being the Chairman of the Telecommunications Subcommittee, that 
was the goal when we were writing the 1996 Telecommunications 
Act. Everyone was analog, not digital. Everyone was narrow 
band, not broad band. Not one home in America in 1996 had broad 
band, not one home.
    Think about it today. You go out ten years, it is a world 
of Google, and Amazon, and eBay, and YouTube, words that didn't 
even exist, but it was all bottled up because we were thinking 
old, we were thinking in a way that existed for 100 years.
    But, once we got the policy right, we unleashed a world 
where it was not just the big companies, but thousands and 
thousands of small ideas were able to thrive, and that is what 
we have to do in energy and environment now, we have to reset 
the policy so that we give the incentive to the entrepreneurs, 
to the individuals, to go out and to innovate. And, if we do 
that, and we come back in ten years, as Bill Gates always says, 
there is an over statement of what technologies can accomplish 
in the short run, but there is an under statement in the long 
run, an under estimation. And, I think ten years from now we 
will come back and we will see that that is the case.
    And, one of my favorite Mark Twain----
    Mr. Larson. I hope you come back to Connecticut in ten 
years, though, Mr. Chairman.
    Chairman Markey [continuing]. Well, again, and I am glad 
that we are here, because when he wrote a ``Connecticut Yankee 
in King Arthur's Court,'' it was kind of bringing this Yankee 
Connecticut ingenuity back in time, and letting people see now 
who are thinking in old ways how that technology, you know, 
could affect their society. And, that is what we have to do 
again. We have to unleash this Connecticut Yankee ingenuity in 
a way that Mark Twain showed us it could work.
    And, if we do that, then I think that revolution will not 
only not decrease our quality of life, but increase it, make us 
all much more efficient and in better touch with this planet 
that God gave us and that we have a responsibility to preserve, 
and enhance, and pass on to next generations better off than it 
was when we received it.
    It was a great honor for the Select Committee on Energy 
Independence and Global Warming to be here. Thank you all so 
much for being here.
    Mr. Larson. And, if I could say, if I could just thank you. 
I think you can see from how gifted a Chairman that Ed Markey 
is, and how appropriate a selection by our Speaker, Nancy 
Pelosi, he was to chair this Committee, but I would also point 
out that there are many Connecticut Red Sox in here, too, as 
well, so it is not just Connecticut Yankees.
    Chairman Markey. You know, the same way that David Ortiz 
had to go to Pawtucket for a couple of weeks, I think coming 
out of Washington and coming to Hartford is going to serve our 
Select Committee well. Thank you.
    This Committee is adjourned. Thank you.
    [Whereupon, at 1:14 p.m., the Committee was adjourned.]
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