[Senate Hearing 110-1084]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1084
 
    EMERGING TECHNOLOGIES AND PRACTICES FOR REDUCING GREENHOUSE GAS 
                               EMISSIONS

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


                                HEARING

                               before the

SUBCOMMITTEE ON PRIVATE SECTOR AND CONSUMER SOLUTIONS TO GLOBAL WARMING 
                        AND WILDLIFE PROTECTION

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 9, 2007

                               __________

  Printed for the use of the Committee on Environment and Public Works



      Available via the World Wide Web: http://www.access.gpo.gov/
                            congress.senate

                               __________



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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED TENTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut     JOHN W. WARNER, Virginia
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
HILLARY RODHAM CLINTON, New York     JOHNNY ISAKSON, Georgia
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         CRAIG THOMAS, Wyoming
BERNARD SANDERS, Vermont             LARRY E. CRAIG, Idaho
AMY KLOBUCHAR, Minnesota             LAMAR ALEXANDER, Tennessee
SHELDON WHITEHOUSE, Rhode Island     CHRISTOPHER S. BOND, Missouri

       Bettina Poirier, Majority Staff Director and Chief Counsel
                Andrew Wheeler, Minority Staff Director
                                 ------                                

Subcommittee on Private Sector and Consumer Solutions to Global Warming 
                        and Wildlife Protection

               JOSEPH I. LIEBERMAN, Connecticut, Chairman

MAX BAUCUS, Montana                  JOHN W. WARNER, Virginia
FRANK R. LAUTENBERG, New Jersey      CRAIG THOMAS, Wyoming
BERNARD SANDERS, Vermont             JOHNNY ISAKSON, Georgia
BARBARA BOXER, California (ex        JAMES M. INHOFE, Oklahoma (ex 
officio)                             officio)


                            C O N T E N T S

                              ----------                              
                                                                   Page

                              MAY 9, 2007
                           OPENING STATEMENTS

Lieberman, Hon. Joseph I., U.S. Senator from the State of 
  Connecticut....................................................     1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     3
Boxer, Hon. Barbara, U.S. Senator from the State of California...     6
Warner, Hon. John W., U.S. Senator from the Commonwealth of 
  Virginia.......................................................     9
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..    11
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...    12
Craig, Hon. Larry E., U.S. Senator from the State of Idaho.......    15

                               WITNESSES

Chiang, Yet-Ming, professor, Department of Materials Science and 
  Engineering, Massachusetts Institute of Technology.............    17
    Prepared statement...........................................    20
    Response to an additional question from Senator Lautenberg...    24
Little, Mark M., senior vice president and director, GE Global 
  Research.......................................................    25
    Prepared statement...........................................    27
Stanway, James W., senior director, Global Supplier Initiatives, 
  Wal-Mart Stores, Inc...........................................    29
    Prepared statement...........................................    31
    Responses to additional questions from Senator Lautenberg....    34
Rencheck, Michael W., senior vice president for Engineering, 
  Projects and Field Services, American Electric Power...........    35
    Prepared statement...........................................    37
    Response to an additional question from Senator Inhofe.......    50
Fees, John A., chief executive officer, The Babcock and Wilcox 
  Companies......................................................    51
    Prepared statement...........................................    53

                          ADDITIONAL MATERIAL

Article, Financial Times (London, England), Thursday, April 26, 
  2007, London Edition 1, Industry Caught in `Carbon Credit' 
  Smokescreen, by Rebecca Bream, Stephen Fidler and Fiona Harvey.    71
News Release, American Electric Power (AEP), AEP to Install 
  Carbon Capture on Two Existing Power Plants; Company will be 
  First to Move Technology to Commercial Scale...................    43
Letter from John Bruton, Ambassador, Head of Delegation, European 
  Union, Delegation of the European Commission, February 22, 2007    73


    EMERGING TECHNOLOGIES AND PRACTICES FOR REDUCING GREENHOUSE GAS 
                               EMISSIONS

                              ----------                              


                         WEDNESDAY, MAY 9, 2007

                           U.S. Senate,    
     Committee on Environment and Public Works,    
            Subcommittee on Private Sector and Consumer    
   Solutions to Global Warming and Wildlife Protection,    
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman (chairman of the subcommittee) presiding.
    Present: Senators Lieberman, Boxer, Carper, Craig, Inhofe, 
Voinovich and Warner.
    Senator Lieberman. Good morning and welcome to the hearing.
    I apologize to the witnesses and my colleagues that I am a 
bit late this morning. I had to go to a briefing that was 
unexpected in the Capitol.
    I want to welcome everyone here this morning. This is a 
hearing on Emerging Technologies and Practices for Reducing 
Greenhouse Gas Emissions.

 STATEMENT OF HON. JOSEPH I. LIEBERMAN, U.S. SENATOR FROM THE 
                      STATE OF CONNECTICUT

    Senator Lieberman. Today, we are going to examine the 
private sector innovation that can put America on a path to 
curbing global warming without handicapping our economy, 
provided--and this is the ``provided''--the Federal Government 
sends a strong new signal to the marketplace.
    Last Friday, the Intergovernmental Panel on Climate Change 
(IPCC), issued a report on mitigating global warming. The 
report reflects the consensus reached by delegates from 120 
countries. It finds that existing technologies--existing 
technologies--can reduce our greenhouse gas emissions 
significantly over the next two decades, and that 
commercializing these technologies would provide the cobenefits 
of increasing energy security and decreasing air pollution.
    The IPCC report also concludes, however, that without 
strong new Government action, market forces alone will not lead 
to significant emissions reductions. For example, the IPCC 
finds that most voluntary agreements between industry and 
governments have not achieved anything near the emissions 
reductions required. By contrast, an effective carbon price 
signal could realize the potential of existing technologies to 
cut greenhouse gas emissions in all sectors of our economy.
    A portfolio of existing technologies could set us on a safe 
emissions reduction track if governments like ours establish 
effective policy drivers for further development, acquisition, 
deployment and diffusion of those technologies.
    So the purpose of today's hearing is in a very sort of on 
the ground detailed practical way, to examine some of the 
technologies that could help fill out that winning portfolio 
that I have described. These innovative solutions, I want to 
stress again, exist today, but they need new Government action 
if they are to be commercialized widely enough and quickly 
enough to avert the climate disaster that we fear.
    The specific innovations that today's witnesses will 
describe also illustrate the cobenefits that the IPCC report 
mentions. These are technologies and practices that can also 
enhance America's energy independence and security, and improve 
public health, actually invigorate our economy, and improve our 
trading position in the world even as they preserve and enhance 
our ability to deal with the oncoming threat of global warming.
    Fortunately, some of the technologies that our witnesses 
will describe also demonstrate that we can curb global warming, 
while continuing to use our most abundant, reliable natural 
energy source in America, and that is coal, coal reserves, to 
generate electricity particularly.
    I am obviously not suggesting in what I have just said that 
we can accomplish all that we need to accomplish for nothing, 
that action will carry no price. What I am suggesting, however, 
is that all signs point to a very positive net return on any 
large new investment that we make in accelerating the 
deployment of these technologies to reduce global warming 
pollution.
    We have an extraordinary group of witnesses here today. 
Four of the five are executives at significant and respected 
American corporations: American Electric Power, Babcock and 
Wilcox, General Electric and Wal-Mart. These companies are 
really leaders in energy, industrial and commercial sectors 
within our economy.
    One of our witnesses is both a professor at one of the 
country's most esteemed engineering institutions, MIT. I say 
that notwithstanding the fact that my long time legislative 
director, Bill Bonvillian, is now the Washington representative 
of MIT, so I resent the institution for taking him from me, but 
nonetheless. This particular witness, beyond being on the MIT 
faculty, is a principal of a company that is developing cutting 
edge vehicle technologies for General Motors and other 
automotive companies.
    So we are really privileged to have with us five witnesses 
that can speak with authority about emerging technologies that 
have the potential to start this country moving down a safe and 
productive pathway to greenhouse gas emission reductions.
    Senator Warner, who I would not normally call next, has 
yielded to Senator Inhofe, who has to go on to another meeting. 
I am proud to recognize him now.
    [The prepared statement of Senator Lieberman follows:]
     Statement of Hon. Joseph I. Lieberman, U.S. Senator from the 
                          State of Connecticut
    Good morning, and welcome to this hearing on emerging technologies 
and practices for reducing greenhouse gas emissions. Today, we will 
examine the private sector innovations that can put America on a path 
to curbing global warming without forcing us to abandon our coal, give 
up our cars, or handicap our economy, provided the Federal Government 
sends a strong, new signal to the marketplace.
    Last Friday, the Intergovernmental Panel on Climate Change, known 
as the IPCC, issued a report on mitigating global warming. This report 
reflects a consensus reached by delegates from 120 governments. It 
finds that existing technologies can reduce our greenhouse gas 
emissions significantly over the next two decades, and that 
commercializing these means of reducing greenhouse gas emissions would 
provide the cobenefits of increasing energy security and decreasing the 
air pollution that directly harms human health.
    The IPCC report also concludes, however, that without strong new 
government action, market forces alone will not lead to significant 
emissions reductions. For example, the IPCC finds that most voluntary 
agreements between industry and governments have not achieved 
significant emissions reductions beyond business as usual.
    By contrast, an effective carbon-price signal could, according to 
the IPCC, realize the potential of existing technologies to cut 
greenhouse gas emissions in all sectors of the economy. A portfolio of 
existing technologies could set us on a safe emissions track if 
governments like ours established effective policy drivers for the 
further development, acquisition, deployment, and diffusion of those 
technologies.
    The purpose of today's hearing is to examine some of the 
technologies that could help fill out that winning portfolio. These 
innovative solutions exist today. But they need bold new government 
action if they are to be commercialized widely enough and quickly 
enough to preserve our ability to avert climate catastrophe.
    The specific innovations that today's witnesses will describe also 
illustrate the cobenefits that the IPCC discusses. These are 
technologies and practices that can enhance America's energy security, 
improve public health, invigorate our economy, and improve our trading 
position in the world even as they preserve our ability to avoid 
leaving our children a world wracked by global warming.
    Fortunately, some of the technologies that our witnesses will 
describe also demonstrate that we can curb global warming while 
continuing to use our abundant, reliable coal reserves to generate 
electricity.
    I do not mean to suggest that we can get something for nothing that 
action will carry no price. What I am suggesting, rather, is that all 
signs point to a tremendously positive net return on any large, new 
investment that we as a Nation make in accelerating the deployment of 
technology to reduce global warming pollution.
    Four of today's five witnesses are executives at large American 
corporations: American Electric Power, Babcock & Wilcox, General 
Electric, Wal-Mart. These companies are titans of the energy, 
industrial, and commercial sectors of our economy. One of our witnesses 
is both a professor at one of the country's most esteemed engineering 
institutions, MIT, and a principal of a company that is developing 
cutting-edge vehicle technology for General Motors and others.
    These witnesses can speak with authority about emerging 
technologies that have the potential to start this country moving down 
a safe emissions pathway. Gentlemen, I look forward to hearing your 
testimony.
    With that, I will invite my friend and colleague, Senator Warner, 
to make an opening statement.

STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM THE STATE 
                          OF OKLAHOMA

    Senator Inhofe. Thank you, Mr. Chairman.
    I thank Senator Warner for yielding to me.
    Thanks for having a hearing focusing on technology. I 
believe that our Nation's pioneering of technology has been a 
vital component in America's prosperity, and I am fully 
committed to expanding new technologies and making our Nation a 
better place to live.
    What technology paths and goals we choose will help 
determine if further innovation acts as a catalyst or a drag to 
future economic growth. Mr. Chairman, clearly we disagree on 
the state of science. Just last year, we discovered for the 
first time that trees emit methane, which is a greenhouse gas, 
which wasn't included in any of the previous models. It seems 
as if we find out new things on almost a daily basis. New 
science is coming out all the time.
    After Katrina, Senator Gore and some of the others seized 
the opportunity to claim global warming is causing more 
hurricanes, but 3 weeks ago, a peer-reviewed study found 
warming will increase wind shear, which reduces both the 
severity and the number of hurricane. Just last week, another 
peer-reviewed study by one of our Government's leading 
scientists, Dr. Christopher Landsea, found that the annual 
trend in the number of hurricanes since 1900 has in fact not 
increased.
    My point is this: our policies should reflect a little 
humility when it comes to whether or not we are omnipotent. 
That is why I oppose propping up uncompetitive technologies for 
the sole purpose of trying to avert an over-hyped catastrophe 
by mandating attacks on carbon, or whether it is a cap and 
trade system.
    Make no mistake, the various proposals currently before the 
Senate are taxes. The Kyoto Protocol--and we have talked about 
this many times before--would have imposed a tax increase of 
approximately $2,700 on each family of four. That came out of 
the study that is quite old right now, but more recently, I say 
to Dr. Chiang, MIT has come out with a study of many of the 
proposals showing that, for example, the Sanders-Boxer bill 
would impose a tax equivalent of more than $4,500 on a family 
of four by 2015. Senator Lieberman, the Lieberman-McCain bill 
is not much better. It would be $3,500 by 2015. That is a tax 
equivalent, assuming that Government sells the allowances and 
the amount of money, and then divide that into the families.
    Now, if you carry that on out to 2020, the Sanders-Boxer 
bill would be $392 billion. Anyway, it would be even more 
substantial than it would be by 2015. I want to submit this 
report from MIT for the record immediately following my 
remarks.
    Who would bear these costs? According to the Congressional 
Budget Office study released 2 weeks ago, a carbon cap in trade 
would result in a massive wealth redistribution from the poor 
and the working class to wealthier Americans. In short, carbon 
caps would artificially and needlessly raise the cost of energy 
the most on people who can least afford it. It astounds me that 
any Senator could support such a proposal.
    I believe we should focus on approaches that unite, rather 
than divide. That is why I have supported for quite some time 
the Asia Pacific Partnership, and believe it should be fully 
funded and expanded. This would promote trade and transfers of 
technology between our Nation and developing countries, leading 
to increasing energy supplies and reducing pollution.
    Mr. Chairman, it would also help you in your goal of 
reducing greenhouse gases from countries such as China, which 
later this year will become the largest emitter of 
CO2. I think from my experience--I don't know 
whether any of the other members of this committee share this 
experience--the criticism that countries like China, India, 
Mexico and other countries don't have to share in all these 
problems and expenses that Americans do is something they find 
very offensive.
    While we may disagree, Mr. Chairman, on the reasons, I 
share your view that nuclear energy is a vital component of our 
energy future. I applaud you that you have recognized its 
importance in the legislative proposals. We need more energy 
and we need to reduce our reliance on foreign sources. I think 
nuclear power and hydro--yes, I said ``hydro''--should be a 
part of this equation. They neither pollute nor emit greenhouse 
gases.
    We can't stop there. Our Nation is abundant in coal, and we 
should pursue coal to liquid technologies for both energy 
security and military applications. I think you and I are both 
aware of the fact that they have used this on the B-52 now very 
successfully. It is something in the future that I am hoping we 
will be depending upon.
    Quite frankly, I see little difference between coal to 
liquids refineries and IGCC powerplants when it comes to carbon 
dioxide emissions. Unlike higher ethanol mandates, coal to 
liquids would increase our reliance on foreign sources.
    So that really is the fundamental question: Does our Nation 
have a vision of increasing domestically supplied energy? Or 
will we put ourselves on an energy diet and increase our 
reliance on foreign energy supplies? I hope that my colleagues 
join me in this vision of hope instead of defeat.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Inhofe follows:]
       Statement of Hon. James M. Inhofe, U.S. Senator from the 
                           State of Oklahoma
    I want to thank the Chairman for having this hearing focusing on 
technology. I believe that our Nation's pioneering of technology has 
been a vital component in America's prosperity and I am fully committed 
to expanding new technologies in making our Nation a better place to 
live.
    What technology paths and goals we choose will help determine if 
further innovation acts as a catalyst or a drag to future economic 
growth. Mr. Chairman, clearly we disagree on the state of science. Just 
last year, we discovered for the first time that trees emit methane, a 
potent greenhouse gas. This shocking news underscored how little we 
know about some of the most basic processes of the planet.
    And new science is coming out all the time. After Katrina, Gore and 
some others seized the opportunity to claim global warming is causing 
more hurricanes. But 3 weeks ago, a peer-reviewed study found warming 
will increase wind shear, which reduces both the severity and number of 
hurricanes. And just last week, another peer-reviewed study by one of 
our government's leading scientists, Dr. Christopher Landsea, found 
that the annual trend in the number of hurricanes since 1900 has, in 
fact, not increased.
    My point is this--our policies should reflect a little humility 
when it comes to whether or not we are omnipotent. That is why I oppose 
propping up uncompetitive technologies for the sole purpose of trying 
to avert an over-hyped catastrophe by mandating a tax on carbon--
whether it is in the form of a direct tax or hidden in the guise of a 
cap and trade scheme.
    And make no mistake, the various proposals currently before the 
Senate are taxes. The Kyoto Protocol would have imposed a cost of 
$2,700 per family of four. The global warming bills before Congress 
today are even worse. A new MIT study of the many proposals shows that 
the Sanders-Boxer bill would impose a tax-equivalent of $366 billion 
annually, or more than $4,500 per family of four, by 2015. And the 
Lieberman-McCain bill is not much better, imposing more than $3,500 on 
families each year.
    I would like to submit the report for the record.
    And who would bear these costs? According to a Congressional Budget 
Office study released 2 weeks ago, a carbon cap and trade would result 
in a massive wealth redistribution from the poor and working class to 
wealthier Americans. In short, carbon caps would artificially and 
needlessly raise the cost of energy the most on the people least able 
to afford it. It astounds me that any Senator could support such a 
proposal.
    I believe we should focus on approaches that unite, rather than 
divide. That is why I support the Asia Pacific Partnership and believe 
it should be fully funded and expanded. This would promote trade and 
transfers of technology between our Nation and developing countries, 
leading to increasing energy supplies and reduced pollution. Mr. 
Chairman, it would also help you in your goal of reducing greenhouse 
gases from countries such as China, which later this year will become 
the biggest emitter of carbon dioxide on the planet.
    Mr. Chairman, while we may disagree on the reasons, I share your 
view that nuclear energy is a vital component of our energy future. And 
I applaud that you have recognized its importance in legislative 
proposals. We need more energy and we need to reduce our reliance on 
foreign sources. I think nuclear power and hydro--yes, I said hydro--
should be a part of this equation. They neither pollute nor emit 
greenhouse gases.
    But we cannot stop there. Our Nation is abundant in coal, and we 
should pursue coal-to-liquid technologies for both energy security and 
military applications. And, quite frankly, I see little difference 
between coal-to-liquids refineries and IGCC power plants when it comes 
to carbon dioxide emissions. And unlike higher ethanol mandates, coal-
to-liquids will decrease our reliance on foreign sources.
    And that really is the fundamental question: does our Nation have a 
vision of increasing domestically supplied energy, or will we put 
ourselves on an energy diet and increase our reliance on foreign energy 
supplies? I hope my colleagues join me in a vision of hope, not defeat.

    Senator Lieberman. Thank you, Senator Inhofe. I do want to 
say that the MIT report to which you referred will be included 
in the record without objection.
    [The referenced document was not available at time of 
print.]
    Senator Lieberman. I was trained in the conduct of hearings 
by Senator Warner, whose example inspired me on the Armed 
Services Committee. Normally, in that committee only the 
chairman and the ranking member give opening statements. I have 
continued that in the Homeland Security Committee. This is a 
much more participatory committee.
    So we will invite opening statements from all the Members 
who are here. I hope they will keep them within the time limit 
because we have a series of votes later in the morning.
    Senator Boxer, who is the chair of the overall committee, 
thanks for being here.
    Senator Boxer. Senator, thank you.

STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM THE STATE OF 
                           CALIFORNIA

    Senator Boxer. Mr. Chairman and Ranking Member of this 
distinguished subcommittee, thank you for your leadership on 
this important issue.
    I want to take on the question of cost here, since Senator 
Inhofe was on the attack on that point. I would recommend those 
of you who have a chance to go down the hall. A few doors down, 
there is a hearing now being called by Senators Biden and 
Lugar. It started about 9:30 a.m. Members of the intelligence 
community, foreign relations community, and Pentagon have all 
said that if left unchecked, global warming would be a major 
cause of war. This is not any other administration but the Bush 
administration's own people. What is the cost of war?
    So although I am sure that it isn't put into many 
scientists' calculations, we better make sure we understand 
that our own Pentagon has warned us actually since 2003 that we 
must take action. Also, I would put in the record the report of 
Sir Nicholas Stern, who was the lead economist at the World 
Bank, who said that spending $1 now save $5 later.
    I think the cost question is really debatable. In my former 
lifetime, I was a stockbroker. I know the difference between an 
investment that pays dividends and an expenditure. What we 
invest here makes sense. That is what we are going to learn 
today, because we are going to hear from the leaders in our 
society in terms of profits and economic motivation. We are 
going to learn from them that there is a great opportunity 
here.
    Now, the IPCC report, as Senator Lieberman noted, says that 
the market for energy technology between now and 2030 will be 
at least $20 trillion. The report found that addressing global 
warming is affordable. It will cost one tenth of a percent per 
year, while increasing business opportunity. As I said before, 
if we do nothing, the costs can't even be calculated. We need 
to act now, and the earlier the better. Many businesses, who 
you have assembled here today, recognize this.
    We already had a hearing with some of the members of US 
CAP, including Duke Energy, DuPont, and BP, who called for 
action and recommended that we in Congress enact mandatory 
global warming legislation that reduce greenhouse gas emissions 
by at least 60 percent, which is Senator Lieberman and Senator 
McCain's bill, or 80 percent, which is the Sanders-Boxer bill.
    Yesterday, and I think this is really important, and 
Senator Warner in particular I would address this to you, 14 
new members joined US CAP, including General Motors, AIG, 
ConocoPhillips, and Shell. We will be planning a full committee 
hearing with this second group to hear about their strong 
commitments to address global warming, because they recognize 
that caps on greenhouse gas emissions are needed not only to 
save the planet, but also to give them a clear road map for the 
future in terms of global economics.
    I have been meeting with the leaders of the European 
Economic Community. They are so far ahead of us. They are 
reducing greenhouse gas emissions as we speak. Companies that 
want to do business all over the world understand that they 
have to adapt. They know what is coming.
    So I just want to say, and I again will put the rest of 
this in the record, we will hear from one of the world's 
largest companies, GE, developing and selling carbon 
sequestration technology that is key to the whole coal 
business. They are also involved in wind turbines, compact 
fluorescent light bulbs, solar panels, efficient appliances. 
Another company, American Electric, is helping to lead the way 
in providing carbon capture and sequestration.
    Again, we will hear from Professor Chiang and he will also 
tell us about the possibilities for electric cars. As a driver 
of a hybrid vehicle--as a matter of fact, we in our family own 
three hybrid vehicles--I can tell you that I get between 40 
miles a gallon and 55 miles a gallon. That is here now, and 
they are affordable cars. Saturday night, I was in San 
Francisco with my husband and we stopped in front of a gas 
station because we couldn't believe our eyes: gas over $4 a 
gallon. OK? This is where it is headed. Let's face facts. 
Getting 50 miles per gallon is one good temporary solution.
    Wal-Mart has reduced its energy consumption through the use 
of daylight harvesting. I see we have actually opened the 
curtains. I say to the staff, good thinking. We have to take 
advantage of outside lighting. These are small points, but it 
proves that there are things that we can do. Wal-Mart is 
aggressively monitoring their energy use nationwide.
    So clean technologies are creating jobs already, but the 
signal that we send here is absolutely crucial. We have the 
ingenuity, we have the spirit to lead the world in this. When 
you hear, Senators, anybody say, ``Oh, China, we can't do 
anything until China does it.'' That is ridiculous. We don't 
sit back and wait for China to do the right thing. We never 
have. We are the leader. We have to go for it, and then China 
will buy our green technologies and the world will be better 
for it.
    So to the two Senators leading the subcommittee, I am very 
grateful to you for your leadership.
    [The prepared statement of Senator Boxer follows:]
        Statement of Hon. Barbara Boxer, U.S. Senator from the 
                          State of California
    Thank you, Chairman Lieberman and Ranking Member Warner for holding 
this hearing on emerging technologies and practices to reduce 
greenhouse gas emissions and address global warming.
    Increasing energy efficiency and developing new, advanced 
technologies can help us solve one of the greatest threats to the well 
being of mankind: global warming. It can also make the United States a 
world leader in new technologies that we can export to the rest of the 
world.
    There is great economic opportunity in addressing global warming. 
The most recent IPCC report notes that the market for energy technology 
between now and 2030 will be at least $20 trillion. The report also 
found that addressing global warming is affordable and will only cost 
0.1 percent per year, while increasing business opportunity.
    We need to act now, and the earlier we do so, the lower the costs 
will be.
    Many businesses have begun to recognize this fact. In January, a 
group of large businesses teamed up with environmental groups to form 
the U.S. Climate Action Partnership (or US CAP).
    The businesses in US CAP, including Duke Energy, DuPont, and BP, 
issued a ``Call for Action'' and recommended that Congress enact 
mandatory global warming legislation and reduce greenhouse gas 
emissions by 60 percent to 80 percent. Yesterday, US CAP added 14 new 
members, including GM, AIG, ConocoPhillips, and Shell.
    We are now planning a second hearing on US CAP with members we have 
not yet heard from to learn about their strong commitments to 
addressing global warming.
    These businesses recognize that caps on greenhouse gas emissions 
are needed to save our planet and they embrace the opportunity to 
compete in the world market that will result.
    They are investing in clean technology and clean energy, because 
they believe, as I do. that there is an enormous business opportunity 
at stake and fighting global warming can also make American business 
more globally competitive.
    Today we will hear from a number of companies who are positioning 
themselves to take advantage of these opportunities.
    One of the world's largest companies, GE has an aggressive business 
strategy to be the world leader in these technologies. GE is developing 
and selling carbon sequestration technology, wind turbines, compact 
fluorescent light bulbs, solar panels, efficient appliances, and other 
energy efficient technologies.
    Another company, American Electric Power, is helping to lead the 
way in proving carbon capture and sequestration technologies. By 2008, 
AEP will have in place a coal burning power plant in West Virginia that 
will use a new technology to capture and sequester their carbon 
dioxide. They are not standing still.
    We will also hear from Professor Chiang from MIT who will tell us 
about the possibilities for electric cars and new advances in battery 
technologies.
    Finally, I am very excited to hear from Wal-Mart, who has taken 
aggressive action to significantly increase its energy efficiency. They 
will show us how we can fight global warming and save money at the same 
time.
    Wal-Mart has reduced its energy consumption through the use of 
``daylight harvesting'' that adjusts the lighting in their stores to 
take advantage of outside lighting. They are using many energy 
efficient technologies, such as LED lighting and advanced refrigeration 
units. They aggressively monitor their energy use nationwide through a 
central location in Bentonville, Arkansas.
    Wal-Mart also has a goal to reduce its energy use and greenhouse 
gas emissions by 20 percent within 7 years.
    In 2006, clean energy investment in the United States was over $55 
billion. This number is projected to increase in coming years, reaching 
$226 billion by 2016.
    Clean technology will create jobs. 1.4 million new jobs are 
projected in this area by the year 2025. Clean technology will reduce 
our dependence on foreign oil. And, of course, it will put the United 
States in position to stop global warming.
    I believe we must fight global warming to protect our economy as 
well as our planet.
    The United States can use its ingenuity and innovative spirit to 
lead the world in clean technology development. Mandatory greenhouse 
gas limits will require us to develop a wide range of commercial 
technologies that we can use at home and export to the rest of the 
world, including to India and China.
    Many have said global warming is not happening, but we now know 
that it is.
    Many have said we could not afford to address this problem, but now 
we know that is not the case either. There is no excuse for continued 
inaction.
    I look forward to the day when we can look back and tell our 
children and grandchildren that we were able to solve this problem and 
also succeed economically.
    The businesses before us today will help us get there and I commend 
them for their leadership.
    I look forward to hearing all of the witnesses' testimony.

    Senator Lieberman. Thank you, Senator Boxer.
    Senator Warner, it is all yours.

    STATEMENT OF HON. JOHN W. WARNER, U.S. SENATOR FROM THE 
                    COMMONWEALTH OF VIRGINIA

    Senator Warner. Mr. Chairman, I think I will put my 
statement into the record so we can get to our witnesses here.
    I have been here for some many years in this wonderful 
institution. I am watching this issue in terms of how the 
Senator meets the challenges of a new frontier. We start off 
and there is enormous emotion in the hinterland, justifiably 
so. I think there are strong indications in science, fact 
finding, to bring to our attention something is going awry in 
terms of the fluctuations in our temperatures and the 
consequences that flow from them.
    Now, how do we deal with the problem? We come to the 
threshold issue here today. You have heard the honest opinions 
of colleagues here, all of whom I respect. They differ 
strongly. We are going to have to forge a consensus, and do it 
in such a way that we do not do undue damage to our economy. I 
draw from Chairman Boxer's comment, that we do not just wait 
for others to lead.
    This is an opportunity for the United States of America to 
show strong leadership, but do it in a way that reflects a 
clear understanding that we can't move much faster than 
technology will permit. We cannot thrust a burden upon our 
private sector to take steps, steps which scientifically 
indicate a reduction in the carbon problem, until such time as 
that technology and its relationship to our economics, is 
clearly understood and the consequences are understood.
    We are in a one-world global market. As we try and get a 
few hours rest at night, the other half of the world is wide 
awake trying to figure out how to take the market away from us, 
and the jobs, and the like. That is the reality in which we 
live. But I feel that I want to try to join others in seeing 
what we can do to get a start, a significant start, but not a 
start that will suddenly deal a blow to our economy, because if 
we make a false start and fail to harness all the emotion and 
interest in this country behind that start, and then it just 
proves to have been wrong, I don't know when we would be able 
to regain an opportunity like the one that is before us now.
    So we are fortunate on this committee to have strong 
leadership. My good friend, Joe Lieberman, and I, we have 
served on the military committee together for many, many, many 
years. We have partnered on quite a few things and taken some 
fairly bold initiatives, I might add. But I am prepared to try 
and work with my chairman of this subcommittee and the chairman 
of the full committee--my friend, Senator Inhofe, he and I have 
been here in the Senate almost the same length of time now--but 
do it in such a way that this start can continue to gather 
momentum and grow, and not halt and stop because of some faulty 
miscalculations.
    So having said that, Mr. Chairman, I yield the floor.
    [The prepared statement of Senator Warner follows:]
        Statement of Hon. John W. Warner, U.S. Senator from the 
                        Commonwealth of Virginia
    I join Chairman Lieberman in welcoming our witnesses today to 
provide testimony on their views and experiences in developing and 
deploying new technologies to control carbon dioxide emissions.
    I am pleased that the subcommittee will hear from some of our 
Nation's leading companies in supplying energy, manufacturing, retail 
and emerging technologies.
    As we examine the feasibility of a regulatory program to control 
carbon dioxide emissions, it is essential that we understand the 
commercial availability of existing technologies and the prospects for 
carbon reduction technologies that may be available in the near future.
    These technologies are critical to the environmental success of any 
program, and critical to maintaining a robust economy.
    Any future efforts in the Congress to develop a bipartisan 
consensus on this complex issue will depend on the successful efforts 
of the private sector, as represented by our witnesses today, to 
demonstrate the widespread use of existing technologies. While there 
may be technologies available today to begin the modest control of 
greenhouse gases, certainly, any significant reductions in carbon 
dioxide emissions will be achieved only by the development of new 
technologies.
    My general question to all of our witnesses today is what should 
the Federal Government be doing to further stimulate the marketplace to 
promote the broad deployment of existing technologies to reduce carbon 
emissions. I look forward to your testimony.

    Senator Lieberman. I thank you, my dear friend, for a very 
thoughtful and important statement. Obviously, I look forward 
to working with you. I think this subcommittee can play a real 
leadership role in beginning a process that one recognizes the 
problem of global warming, the reality that you have stated, 
and second, achieves a workable consensus that we can take 
forward to the full committee and hopefully to the Floor. I 
thank you very much for that statement.
    Senator Carper.

STATEMENT OF HON. THOMAS R. CARPER, U.S. SENATOR FROM THE STATE 
                          OF DELAWARE

    Senator Carper. Thanks, Mr. Chairman.
    I feel a special affinity to this panel, more so than 
usual. One of them is here representing a university where our 
oldest son goes to school. It is nice to have you with us 
today. Another of you represents a company whose sole energy 
business is headquartered in Newark, DE, near the University of 
Delaware. Several of you represent companies that are 
incorporated in the State of Delaware. For that, we are 
especially grateful.
    One of you knows that when----
    Senator Warner. All right. Enough.
    [Laughter.]
    Senator Warner. You have so many conflicts of interest that 
I think you have to stop. Cease and desist.
    [Laughter.]
    Senator Carper. I have to get this one in. One of you knows 
that when a guy from Columbus, OH--I went to Ohio State--says 
``O H'' that the response is----
    [Laughter.]
    Senator Carper. I am delighted that you are all here. A lot 
of times we preface our statements by saying this is an 
important hearing. Sometimes they are, and sometimes they are 
not. This is an important hearing. We are just grateful that 
you all have joined us today to help us address what we all 
know is a big problem, and one that does not defy solution. I 
am convinced that by working together that we can whip global 
warming.
    Senator Boxer and I serve together on another committee 
called the Commerce Committee, and we have been working in the 
last week or so on legislation that seeks to reduce our 
dependence on foreign oil, and also improve fuel efficiency in 
our cars, trucks and vans. About one third of our 
CO2 emissions come from the transportation sector, 
and about 40 percent from the utility sector, and the rest 
comes from a bunch of different places. But if we can somehow 
focus on utilities and on transportation on mobile sources, 
that is about three quarters of the CO2 emissions 
that are going up into the air in this country.
    We believe that you are going to help us today figure out 
how to get our arms around that. It is not just enough for our 
universities and our companies to focus on it, including our 
science companies. We think the Federal Government has a role 
here, too, and I always say sort of a three or four part role.
    One, we need to provide a clear public policy, a regulatory 
framework, providing a clear path, what our expectations are. I 
think we need to pass climate change legislation. My hope is 
that we will do that, if not this year, then next. I believe a 
role of the Federal Government is to fund basic R&D. The role 
of the Federal Government is to help commercialize emerging 
technologies. An appropriate role of the Federal Government is 
to provide in certain instances tax credits or tax incentives 
to encourage people to purchase some of those hybrid vehicles 
like Senator Boxer drives, or low emission diesel vehicles that 
are just starting to work their way onto our roads.
    I have been working on a couple of pieces of legislation 
for the utility sector and the transportation sector that seek 
to fulfill really all of these Federal roles. I recently 
introduced with some of my colleagues legislation to reduce 
CO2 emissions from powerplants, and I am proud to 
have, among others, Senator Lieberman and a number of our 
colleagues as cosponsors of that bill.
    While I believe in an economy-wide approach on 
CO2, we started on the utility sector and we would 
like to build out from there. If we do an economy-wide bill, my 
hope is that our utility sector will be part of that economy-
wide bill. Our legislation also seeks to accelerate the 
deployment of new non-emitting powerplants with solar, nuclear, 
as well as clean coal technology with carbon recapture.
    For the transportation sector, just yesterday in the 
Commerce Committee, we reported out new legislation with much 
stronger fuel efficiency standards, and reducing CO2 
emissions and reducing our reliance on foreign oil. Much like 
the power sector bill that I have introduced, the Commerce 
Committee's CAFE bill not only provides specific targets and 
time lines, we also include incentives for technology advances. 
I added an amendment to the bill to increase our investment in 
new battery technology, lithium batteries, something that we 
very much need to do. Our friends in Japan are ahead of us. We 
need to catch up and the Federal Government has an obligation 
to help us do that.
    But those two measures are I think a couple of important 
steps to get us on the right track to reversing the increase in 
CO2 and the threat of global warming.
    We are delighted that you are here. We look forward to 
hearing from you and to asking questions of you.
    Thank you.
    Senator Lieberman. Thanks very much, Senator Carper. It 
struck me that the one connection you have with the witnesses 
that you didn't mention was Mr. Stanway from Wal-Mart. If your 
family is like most American families, there is an imbalance of 
payments between you and his company.
    [Laughter.]
    Senator Carper. Mr. Stanway and I are from the same part of 
Arkansas, and when you hear him speak, you will know what I 
mean.
    [Laughter.]
    Mr. Stanway. Yes, the assumption my family is American may 
well have been a jump there.
    [Laughter.]
    Senator Lieberman. Welcome.
    Senator Voinovich.

 STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR FROM THE 
                         STATE OF OHIO

    Senator Voinovich. Thank you, Mr. Chairman. I thank you for 
holding this hearing today on global warming and emerging 
technologies and practices for reducing greenhouse gas 
emissions.
    As I have often said, this is a difficult and controversial 
topic. I understand the need to continue to debate this issue 
and work together to better utilize advances in technology to 
reduce greenhouse gases.
    I believe solutions to global warming need to be addressed, 
and I look forward to hearing from the witnesses today. I am 
particularly happy to see two Ohio-based companies are being 
represented here today. Mr. Rencheck is the senior 
vice president of American Electric Power. Dr. John Fees is 
chairman and CEO of Babcock and Wilcox Companies. We appreciate 
your being here today.
    In the past, the EPW Committee has focused solely on the 
problem of global warming. I am glad that this subcommittee is 
now discussing solutions to the problem. Congress passed the 
Energy Policy Act of 2005 and I am concerned about the lack of 
funds available to implement the bill. The important research 
and development programs were authorized, including carbon 
sequestration, and IGCC technology that many believe will help 
this country tackle the problem of greenhouse gas emissions.
    The Energy Policy Act also authorized a loan guarantee 
program to encourage private sector investments for those 
energy projects that avoid, reduce or sequester air pollutants 
or greenhouse gases. Unfortunately in this fiscal environment, 
many important programs are not being funded. It is clear that 
we must get serious about partnerships and strategies that 
maximize Federal energy funding. It is critical that 
policymakers work in conjunction with the scientific community 
to develop policy solutions that are in the best interest of 
our State and Nation.
    For example, one area that requires further research is the 
development of technology to capture greenhouse gases and 
sequester carbon dioxide. I am hoping to hear some more about 
that today. We have to recognize, and I am glad that the 
Chairman does, that the United States is the Saudi Arabia in 
terms of coal, with a 250-year coal supply. In my State, 85 
percent of the energy is generated by coal.
    We also need to follow through on the Energy Policy Act 
provisions to make sure that they are being adequately 
implemented. I am afraid that the Administration's 
implementation of the loan guarantee provision has been slow at 
best, and left much to be desire. I met recently with Secretary 
Bodman and OMB's Director Portman to discuss the importance of 
the 2005 energy bill provisions and getting the Administration 
to do something about implementing them.
    For the past 2 years, I have called for what I refer to as 
the ``second Declaration of Independence,'' independence from 
foreign sources of energy for our Nation's competitiveness, and 
for our national security. I think that we also have to 
understand that if we are never going to get anywhere in this 
committee or in Congress, we have to harmonize our energy, our 
environment, and our economy.
    For some reason, we have never been able to. I have been 
here for 8 years, and we have never been able to get in the 
room and do that. It just doesn't happen. We do need a Sputnik-
like commitment to funding energy technology, particularly 
technology for carbon capture and sequestration. It is a 
worldwide problem and we have to realize that we have a role to 
play, but we also must recognize that others have a role to 
play. The more we engage them in this debate, the better off we 
are going to be and better off the world is going to be.
    So I am glad that you have called this hearing. I just want 
to say, any climate change legislation must take into 
consideration the state of technology. I am going to ask that 
an article that appeared in the April 26 issue of Financial 
Times be inserted in the record. The title of the article is 
``Industry Caught in Carbon Credit Smokescreen.''
    [The reference document follows on page 71.]
    Senator Voinovich. I have to tell you, if what some people 
are proposing here for cap and trade is anything like they have 
in Europe, we are in big trouble, because our economy grew more 
during this period than theirs did, and their emissions 
increased more than our emissions here in the United States. So 
I think we have to be very careful in walking down this road 
that we do it right and make sure that it is in harmony with 
the technology that these folks are going to tell us about 
today.
    Thank you.
    [The prepared statement of Senator Voinovich follows:]
     Statement of Hon. George V. Voinovich, U.S. Senator from the 
                             State of Ohio
    Chairman Lieberman and Senator Warner, I thank you for holding this 
hearing today on global warming and emerging technologies and practices 
for reducing greenhouse gas emissions. As I have often said, this is a 
difficult and controversial topic, and I understand the need to 
continue to debate this issue and work together to better utilize 
advances in technology to reduce greenhouse gas emissions.
    I believe solutions to global warming need to be addressed, and I 
look forward to hearing from the witnesses here today. I am 
particularly happy to see that two Ohio based companies are here to 
testify. I would like to thank Michael Rencheck, Senior Vice President 
of American Electric Power, and Dr. John Fees, Chairman and CEO of The 
Babcock and Wilcox Companies for being here to discuss technology 
options to address global warming. In the past the EPW Committee has 
focused solely on the problem of global warming, and I am glad this 
subcommittee is now discussing solutions to the problem.
    Congress passed the Energy Policy Act in 2005, but I am concerned 
about the lack of funds available to implement the bill. Important 
research and development programs were authorized including carbon 
sequestration and IGCC technology that many believe will help this 
country tackle the problem of greenhouse gas emissions. The Energy 
Policy Act also authorized a loan guarantee program to encourage 
private sector investments for those energy projects that avoid, 
reduce, or sequester air pollutants or greenhouse gases. Unfortunately, 
in this fiscal environment many important programs are not being 
properly funded.
    It is clear that we must get serious about partnerships and 
strategies that maximize Federal energy funding. It is critical that 
policymakers work in conjunction with the scientific community to 
develop policy solutions that are in the best interest of our State and 
Nation. For instance, one area that requires further research is the 
development of technology to capture greenhouse gases and sequester 
carbon dioxide so that we can continue to rely on coal for energy--we 
are the Saudi Arabia of coal as we have 250 years of supply--my state 
relies 85 percent on coal for electric generation, that not only 
protects our environment but public health.
    We also need to follow through on the Energy Policy Act provisions 
to make sure they are being adequately implemented. I am afraid that 
the Administration's implementation of the loan guarantee provision has 
been slow at best and much to be desired. I recently met with Secretary 
Bodman and OMB Director Portman to discuss the importance of the 2005 
energy bill provisions, especially the loan guarantee provision, in 
jump-starting new nuclear and clean coal projects.
    For the past 2 years, I have called for a `Second Declaration of 
Independence'--independence from foreign sources of energy--and for our 
Nation to take real action toward stemming our exorbitantly high oil 
and natural gas prices. Instead of considering them separately, we must 
harmonize our energy, environment, and economic needs. This is an 
absolute must as we consider any additional solutions to address global 
warming.
    Today, we need a national, Sputnik-like commitment to funding 
energy technology, particularly technology for carbon capture and 
sequestration. We should also elevate this challenge, in the array of 
carbon capture and sequestration, to the international level.
    This is a worldwide problem. We have to realize that we have a role 
to play, but we also must recognize that others have a role to play and 
the more we can engage them in this debate, the better off we are going 
to be and the better off the world is going to be.
    The issue is what do we do from a responsible policy perspective to 
deal with the problem and offer economically sound solutions? It is 
something I hope the full EPW Committee can work together on to develop 
responsible global warming policies that ultimately harmonize our 
energy, environment, and economic needs--which we have not been able to 
do for the 8 years I have been a member of this committee. Any climate 
change legislation must take into consideration the state of 
technology.
    Chairman Lieberman and Senator Warner, I again thank you for 
holding this hearing today.

    Senator Lieberman. Thanks, Senator Voinovich. Without 
objection, we will include the article from the Financial 
Times, as well as the full text of the opening statements of 
Senators Boxer and Warner, and the sections of the Stern 
Report, to which Senator Boxer referred.
    Thanks for your statement, too, Senator Voinovich. I hope 
that we can use this subcommittee as a forum for beginning to 
have exactly the kind of discussion about how we go forward 
together, including folks like this, who can tell us how to do 
it.
    Senator Craig, thanks for being here.

 STATEMENT OF HON. LARRY E. CRAIG, U.S. SENATOR FROM THE STATE 
                            OF IDAHO

    Senator Craig. Mr. Chairman, thank you for holding this 
hearing. I appreciate it. It is an issue that obviously we are 
all spending a good deal of time on, as we should.
    I have struggled over the last decade to bring this issue 
into perspective. I surprised a lot of conservatives at the 
tail end of the Clinton administration when I was in Belgium at 
a climate change conference announcing that, yes, I agree with 
the science, that our world is warming and we need to 
understand why it is. But the question is why is it, and we are 
still struggling with that. Some have already drawn 
conclusions. I am one of those who has not.
    Having said that, I want to share with you an experience I 
had last weekend that is really quite fascinating. It was in 
the setting of my home State of Idaho, which just happens to be 
by EPA standards the cleanest State in the Nation. We have less 
carbon in the atmosphere per capita. We emit less than any 
other State in the Nation. So we are very proud of that as a 
State. It is a marvelous place to live. The stars are very 
bright at night.
    But I was at what is known as Hagerman Fossil Beds. It is 
an area that I helped protect about a decade ago. It is a 
unique place. It is a large bend in the Snake River on a bluff 
that is about 500 feet high from the river's edge up to the top 
of a plateau. I was with a young anthropologist, and boy, when 
he was given the opportunity to get the attention of a U.S. 
Senator, did I get all of the information. I spent several 
hours with him. He explained to me something that I found 
fascinating. In another life, I might have become a geologist. 
I spent a lot of time studying it at our university.
    Here is the story that he told me. He said if you start at 
the top layer of soil at the top of this bluff--we were 
standing across the river looking at it--he said that top layer 
is about 1 million years old. Then he said the 500-foot bluff 
represented 3.2 million years of time. He said, here, Senator, 
there are more fossils collected than any other place in the 
world, to our knowledge. They have found what is now known as 
the ``Hagerman horse,'' which was a predecessor of the horse. 
They have found mastodons, and then a myriad of other things.
    He said it is like a textbook. It is page after page after 
page, layer after layer after layer. The world now comes there, 
and all of the anthropological students of the world come there 
to study. It is a fascinating place. I am in a warehouse with 
fossils all around me.
    So I said, is there anything we can draw from this? Well, 
he said it is unique. It is interesting. He said, for example, 
at this 1-million-year-old layer, this place was about four 
times wetter than it is now, and much warmer. Then he says, you 
drop down here, and then it is much colder. These animals and 
plants could not have lived in that climate. He said in fact it 
was severely cold here at this time, at this period.
    Then you drop down, and further layers were down into the 2 
million plus, and then it is all of a sudden warmer again, and 
the plants and the animals, all of the insects that are 
captured in this huge time capsule. Then all of a sudden 
appears a mastodon, and then all of a sudden appears the horse. 
He said it is like pages in a textbook, Senator. We have never 
found anything quite like it.
    I said, conclusions to be drawn? No. He said it is just 
reality. It is time. It is the history of the evolution of the 
world in a 500 foot cliff with all of these pages to be turned 
and studied--warm, cold, warm, cold, wet, dry, wet, dry. 
Evolution.
    Well, that was the mission I took on a good number of years 
ago when I went up to Woods Hole to begin to study ocean 
decimal oscillation. Fascinating idea. A reality we now believe 
happened in the North Atlantic. It is happening in the Pacific. 
Some call is El Nino or La Nino. There is a lot about our world 
we don't know. There is a lot about it we do know.
    I have drawn the conclusion that anything we do now and 
into the future ought to be clean, and all of our technologies 
ought to be clean. Frankly, George said it well. EPAct set us 
on that course. Last week, we introduced legislation to set us 
on another course of clean transportation fuels or cleaner 
transportation fuels.
    I have drawn the conclusion that technology leads us there. 
Commanding and controlling an economy does not necessarily do 
that. It could in fact damage us severely. The rest of the 
world is struggling along behind us. They all complied with or 
attempted to, they ratified Kyoto, but none could comply, 
because they found out they had to shut down their economies to 
comply. Many are even talking about getting off of it by 2012. 
That doesn't excuse the reality that our globe is getting 
warmer, and that we ought to push ourselves aggressively toward 
the new technologies.
    But I am not about to turn to our country and our workforce 
and say, ``turn out your lights; that is the way we survive 
this.'' We don't even known truly the impact of carbon in the 
atmosphere. We think we know. But we do know geologic time, and 
we know this world has gone through phenomenal changes over a 
long period of time.
    I just happened to be at the textbook of geologic time last 
week at the Hagerman Fossil Beds, and spent a good number of 
hours there. I thought I would relate that experience to you. 
It is interesting that all during that timeframe that that 500-
foot cliff represents, European man was non-existent, and the 
emission of greenhouse gases, at least created by man, were 
nonexistent, and yet the world changed and changed and changed 
again.
    Thank you, Mr. Chairman.
    Senator Lieberman. Thanks, Senator Craig.
    Now we turn to the witnesses. As you can hear, I think the 
debate about whether the globe is warming is over. There is 
still some debate about what is causing it. But obviously, I 
join with the IPCC in saying that humans are causing it. What 
we really want to focus on with this extraordinary panel is a 
description of the emerging technologies and practices that you 
are individually and corporately involved in, that will have 
the effect of reducing greenhouse gas emissions, and of course, 
what significance can the Government play in at least sending 
you market signals that will encourage the innovative 
developments that you have been part of.
    Dr. Chiang, thanks for being here. We will start with you. 
Dr. Chiang is the aforementioned Professor of Material Science 
and Engineering at MIT.
    Senator Warner. Mr. Chairman, would you indulge me for 1 
minute?
    Senator Lieberman. Certainly.
    Senator Warner. I wonder if our panel would help us sort 
through the terms ``global warming'' and ``global climate 
change.'' We are proud to have some colleagues here from 
Alaska, and they pound the table, furious when you talk about 
global warming, because they claim there are parts of Alaska 
that are experiencing severe cooling compared to previous 
standards. If you could unite us on one term, it would help us 
begin to interpret this for the public.
    Thank you very much.
    Mr. Chiang. I am not sure that I will in particular be able 
to do that, but I think that extremes in temperature are part 
of the phenomenon of global warming. So perhaps one of our 
other witnesses can address that later.

    STATEMENT OF YET-MING CHIANG, PROFESSOR, DEPARTMENT OF 
 MATERIALS SCIENCE AND ENGINEERING, MASSACHUSETTS INSTITUTE OF 
                           TECHNOLOGY

    Mr. Chiang. Mr. Chairman, Senator Warner, Madam Chairman, 
Senators, one of the problems I often have following such 
interesting speakers is I tend to forget what I want to say 
myself. So I will try not to do that.
    There are four basic points I want to make today. One is 
that there is a revolution going on in the electrification of 
vehicles. I believe that the benefits to the environment and to 
national security from that can no longer be disputed.
    The second point is that the battery technology that I will 
talk about today. I am a technologist. I will talk about 
battery technology. We all use batteries. We never think they 
are good enough. But this battery technology I will talk about 
today is ready and able for a new type of hybrid vehicle called 
the plug-in vehicle. It is ready today and I hope to convince 
you of that.
    The third is that we believe this is really just the tip of 
the iceberg. Vehicles and their electrification will do a great 
deal for the environment and for our dependence on oil. But 
also, other forms of energy--nuclear energy, solar, and wind--
will, over time, benefit from these battery advances as well.
    Then the final point has to do with American 
competitiveness in this area. We are at a position where for 
the first time in about 20 years, we have the technological 
lead in advanced batteries. What this committee can do is to 
help ensure that we maintain that lead and build on it.
    So to my first point, the transportation sector accounts 
for about two thirds of our oil consumption today, and as 
Senator Carper alluded to earlier, about one third of the 
CO2 emitted is from the transportation sector. The 
number is really quite large. A gas car puts out upwards of 400 
grams per mile driven. That is nearly a pound. If this were a 
pound of byproduct by the roadside, we would be all appalled, 
but we can't see it and so we have become used to it.
    So the hybrid electric vehicles have been a very compelling 
solution. They are on their way, and by 2010 there will be some 
65 or 70 models of hybrid vehicles on the road. I just want to 
clarify the difference between the conventional hybrid vehicle 
and the plug-in hybrid that I will speak about. Conventional 
hybrids use gasoline and are assisted by a battery. A plug-in 
hybrid uses electricity from the grid. It is one solution on 
the continuum to all-electric vehicles.
    So the hybrid vehicles can give you that 45 to 55 miles per 
gallon, but what we like to say is that when hybrid vehicles 
dream, they dream of becoming plug-ins.
    [Laughter.]
    Mr. Chiang. A plug-in will give you upwards of 100 miles 
per gallon. I will tell you more about that in a little bit. If 
we were to replace each gas-operated car with a plug-in, we 
would reduce the gas consumption of that car by 80 percent and 
we would reduce the CO2 output by 50 percent. Many 
people ask you if this electricity that we are using to power 
these plug-ins is coming from electricity generation, in 
particular coal, aren't we just paying for our pollution in a 
different way? So it turns out that with the national blend of 
electrical power sources, we get that 50 percent reduction. If 
it were solely coal, the reduction is about 30 percent, which 
is still very significant.
    So let me turn to the technology that makes this happen. It 
is nanotechnology. It is research that we originally did under 
support from the U.S. Department of Energy at MIT. The fact 
that it is nanotechnology is scientifically interesting, but 
the important point today is what is has enabled in terms of 
battery technology.
    In 2002, we started a company called A123Systems. It is 
named after a force constant. We have been told that the name 
does not roll off the tongue very well, but nonetheless what 
this company set out to do was to take this new nanotechnology 
and to commercialize it. Our first commercial test bed was 
power tools. Power tools are a nearer term target than 
vehicles. So today you can buy 36 volt power tools made by 
DeWalt Power Company--Dewalt is Black and Decker. This puts 
four horsepower in a two pound package, five times the previous 
power tool technology. So you can think about what that could 
really do for vehicles.
    So from the very beginning, and currently today we are 
producing millions of those batteries for the power tool 
industry. This is truly scaled-up production. But from the 
beginning, what we were interested in was vehicles. So the most 
direct way that I can give you an example of what this could do 
for vehicles, and we are working on both HUVs--HUVs being 
conventional hybrids--and plug-ins. I refer to a car that I 
have actually brought with me today. It is parked over there, 
and I invite all of you to come down and see it and to even 
drive it. This is a hybrid vehicle which has been supplemented 
with a battery module, which takes the place of the spare tire. 
That is as big as it is. You get all your trunk space.
    With that, you can get 100 miles per gallon on the highway, 
and 150 in the city. I have the ideal commute.
    Senator Carper. Is your car for sale?
    [Laughter.]
    Mr. Chiang. Yes, it is. We can talk.
    I have almost an ideal 40 mile commute, which is the 
electric range of this vehicle, when I commute to MIT. So I can 
drive to MIT and park in a special parking spot, one of several 
that have plugs, and for a 50 cent recharge, I get to go the 
next 40 miles. Of course, then I get MIT to pay for that 50 
cents.
    This technology is ready and will be going to fleets this 
year, and next year our company aims to make it available to 
the individual consumer.
    Senator Lieberman. So it is cost effective now? In other 
words, you have the costs down to where the market will afford 
it?
    Mr. Chiang. At this point, the car that I will show you, 
the add-on that gives you this capability is roughly $10,000 
today, but it has already come down very significantly from 
just a couple of years ago and the costs continue to decrease. 
One of the things that will spur the adoption of these 
vehicles, in addition to the kind of legislation we are talking 
about today, are incentives to make it more affordable to 
consumers the same why that hybrids were made more affordable 
to the consumer.
    In short, it is still a little expensive, but we expect it 
to become very affordable.
    OK. So now what will happen, we are working with a number 
of manufacturers. In the plug-in area, for example, we are 
working with GM, but those cars will take about 5 years to come 
online. So one of the points I want to make is that in the 
interim, before the 5 years, we really can do something. What 
we can do is to start implementing those modules and to help 
the existing and growing fleet of hybrid vehicles become 
upgraded to this 100 miles per gallon.
    OK. Now, I will just speak very briefly to the adaptation 
of this technology to wind and solar.
    Senator Lieberman. Speak as quickly as you can, just for 
the sake of time. I appreciate it.
    Mr. Chiang. OK, very good. I will just say that we are 
going to get there, and it is going to be applied to wind and 
solar. We hope it will enable the adoption of those.
    My final point really has to do with American 
competitiveness at this point.
    Senator Lieberman. Go right ahead.
    Mr. Chiang. I am sorry?
    Senator Lieberman. Please, go ahead and develop that last 
point.
    Mr. Chiang. OK. So about 15 years ago when lithium 
batteries first reached the market, Asian companies really got 
the lead. Now that we have the lead in this new battery 
technology, the others are not far behind. What we need in 
order to develop an American-based high quality job profile for 
the American battery industry is to have incentive legislation 
that really speeds the adoption of these plug-in hybrids and 
other vehicles. The reason for that is because the more that we 
are able to get these into the marketplace and to learn how to 
continue to innovate, the more we will succeed in the long 
term.
    I have had my nose to the grindstone for 5 years developing 
the technology, so I am not an expert on cap and trade, but I 
think I can say that anything that can be done to help this 
technology get out there, we can accelerate the implementation 
by several years, and that will reap many benefits in the long 
term.
    Thank you.
    [The prepared statement of Mr. Chiang follows:]
   Statement of Yet-Ming Chiang, Professor, Department of Materials 
   Science and Engineering and Massachusetts Institute of Technology
         breakthrough battery technology at the center of the 
                       plug-in hybrid revolution
    Mr. Chairman, Senator Warner and Members of the Subcommittee;
    I thank you for the opportunity to appear before you today to 
explain and answer questions about a recent breakthrough in lithium ion 
battery technology that we and others believe will help enable this 
Nation to lead a worldwide plug-in hybrid transportation revolution 
starting now.
    Let me explain.
                  the technology and its capabilities
    Five years ago, research conducted in my group at MIT under U.S. 
Department of Energy support resulted in new nanomaterials that we 
believed could enable breakthroughs in lithium ion battery power, 
safety, and durability. This technology was spun off by forming the 
company A123Systems, itself initially supported by the DOE with a 
$100,000 SBIR grant. Today the Company has raised over $100 million, 
has over 300 employees and operates facilities in Watertown, 
Massachusetts and Ann Arbor, Michigan. We sell millions of batteries 
annually to Black and Decker (Dewalt) and others for high powered 
handheld applications. We are simultaneously developing higher powered 
solutions for the aerospace and defense industries and have been chosen 
by GM, and other major American and European automakers, to help 
develop and power their hybrid and plug-in hybrid sedans, SUVs, trucks, 
buses and heavy equipment moving vehicles which will be coming on line 
over the next decade.
    This has all been made possible by the development of our unique 
nanotechnology-enabled based lithium ion battery, which we call 
Nanophosphate, which has a combination of power, durability and safety 
in excess of any rechargeable battery that has come before. When I 
describe our innovation as nanotechnology, what I mean is that we have 
designed and engineered key active materials in the battery to take 
advantage of physical and chemical behavior only accessible when the 
materials are reduced to a few nanometers in dimension. This behavior 
enables the material to store and release lithium ions with great 
facility and over a very long service life, all while being much safer 
than any previous lithium ion battery.
    While the fact that our batteries are nanotechnology-enabled is of 
scientific interest--and indeed the science behind them is 
fascinating--what the end user and society benefits from are their new 
performance capabilities. In DeWalt's new 36 volt power tool, our 
battery technology delivers twice the power of a corded tool with 2-3 
times the runtime of conventional cordless tools. In vehicle 
applications, the advances over previous technology are no less 
dramatic, as I will now explain.
    The automotive industry is in the middle of a critical transition 
to electric drive because switching from imported oil to a diversifying 
electric grid is a national security and environmental imperative, now 
made possible as a result of these battery technology breakthroughs. 
The evidence for this transformation continues to mount. Fueled by 
strong consumer demand for greener vehicles and a growing awareness of 
our greater responsibilities to our planet and our national security, 
there are now over 65 hybrid vehicle (HEV) launches planned by 2010. 
A123Systems is working with leading American and European automakers to 
develop batteries for upcoming hybrids and are working with the DOE and 
the U.S. Advanced Battery Consortium (USABC) to optimize our technology 
and provide leading price/performance in this market.
    However, the next generation of technology beyond the conventional 
hybrid is the plug-in hybrid (PHEV). This game-changing technology will 
further displace the use of petroleum through shifting a much greater 
fraction of the vehicle's power to electric drive, using advanced 
batteries that are recharged from the grid. This technology is one 
where the U.S. automakers have established technological leadership and 
which delivers many immediate benefits including 100 MPG or greater 
fuel economy and reduced emissions, not just measured at the tailpipe 
but including that due to the additional electricity generated. 
A123Systems is a leading developer and supplier of battery technology 
for plug-in hybrids. We are working with General Motors and other 
leading American and European automobile and heavy equipment 
manufacturers to validate and introduce this technology into the 
market. But how long will it take to see the benefits of these new 
vehicle technologies, which apply to passenger vehicles, large trucks, 
buses and fleet vehicles, and can change both the emissions and fuel 
consumption profiles of some of our largest concentrations of polluting 
commerce?
                  interrelationship with cap and trade
    Over the years, the Congress has been in the forefront of 
recognizing the need to nurture these kinds of breakthrough 
technologies through legislation to kick start consumer demand. For 
example, putting the CLEAR ACT in place in 2005 was critical to both 
educating the public and producing the hybrid sale volumes that have 
lead to ever improving costs and economics. As a result, today's 
growing demand for hybrid vehicles is a tribute to the public's 
underestimated desire to do something about the health and national 
security risks of ever rising petroleum dependency when presented with 
economic choices.
    The overarching question before this committee today is how much 
more governmental stimulation is needed and how much faster can we go?
    Let me suggest that the answer to that question depends on both the 
availability of new technologies and the practicality of the additional 
government initiatives which can be deployed.
    On the first question of advanced technologies that are waiting and 
ready to enter the economy based on additional incentives, I can speak 
with some authority. They are here, ready to go, and await your 
leadership to make it happen as soon as possible.
    Let me be specific. We at A123Systems have spent substantial energy 
strategizing on how to best move along the continuum from producing 
millions of our high performance lithium ion batteries for handheld 
applications today, to adding the manufacturing bandwidth required in 3 
to 5 years to supply the major automakers with batteries for their 
fully designed and tested original equipment plug-in hybrid vehicles. 
Speed of execution is of the utmost importance to us. To address the 
power tool market, we developed game-changing battery technology from 
initial concept to full-scale manufacturing in just 33 months. Our 
customers tell us this is the fastest commercialization of a new 
battery system in history. It is testimony to the speed with which this 
type of technology can move when the will is there. Clearly, in the 
emerging and highly competitive plug-in hybrid arena, similar 
dedication to speed of execution will be critical to American 
competitiveness.
    So we asked ourselves how best to ensure the earliest and ultimate 
success of the tens of millions of original equipment plug-in hybrids 
that will need to be rolling off the major manufacturers' production 
lines through the next decade. Our answer was to develop Battery Range 
Extender Modules that can be installed in the spare tire well of any 
existing hybrid.
    The result of that effort is parked right outside this building. On 
its face, it is one of the almost 1 million standard production hybrids 
now on the road in the United States. Its original equipment nickel 
metal hydride battery provides enough power to go a few miles on 
electricity alone. But this car differs from most of its brethren in 
that it also has a supplemental module small enough to fit into its 
spare tire well. This module contains our current production battery 
cells and delivers enough usable energy for the vehicle to achieve as 
much as 150 MPG in urban driving and 100 MPG in highway driving with a 
40 mile electric range. This module is charged overnight from a regular 
120 volt extension cord which plugs into the bumper.
    Since the average commuter travels under 30 miles per day, off-peak 
nightly charging of this module both improves a utility's load factor, 
lowering everyone's electricity bills, while reducing total gasoline 
consumption and emissions dramatically. In fact, DOE's Argonne National 
Lab has tested an earlier version of this module providing independent 
validation of the 150 MPG urban efficiencies that plug-in hybrids 
provide. Prototypes now being driven around the country, including here 
in Washington, have been obtaining the same results--mileage that is 
two to three times the 45 to 55 MPG today's production hybrids achieve. 
Keeping in mind that this is the first fully-developed version of a new 
technology, the performance can only improve from here.
    Numerous studies have also shown that emissions will drop 
significantly even after accounting for the generation of additional 
electricity. With charging occurring predominantly in the off-peak 
evening hours, a large percentage of this generation is made up of no 
emission, constantly running nuclear and hydro resources. The remainder 
comes from coal, which will continue to be baseloaded until cleaned up 
or replaced, with or without a plug-in revolution. The bottom line is 
that today's state-of-the-art baseload generating mix is far more 
efficient in terms of emissions than an individual tailpipe, and the 
policy choices we are in the process of making to improve the emissions 
profile of our electric generation grid will only improve that 
advantage.
    Over time as battery costs are reduced, these improvements in 
battery technology also will benefit renewable energy technologies such 
as wind and solar, for which storage is a key issue, and will allow 
them to take on an increasing fraction of the baseload. The durability 
seen in this new generation of lithium ion batteries suggests that 
life-cycle costs will be significantly reduced over older technologies, 
such as lead-acid batteries, that have lower initial costs but a much 
shorter lifespan and higher maintenance costs. Reduced emissions from 
the electrification of vehicles starting now will therefore be further 
accelerated in the future as the same advanced battery technologies are 
used to help additional renewables come on-line even while continuing 
to increase the number of plug-in vehicles. These are synergistic 
effects.
    So now let me be clear about where the technology stands: It is 
possible to achieve over 100 MPG with reduced emissions from a standard 
production hybrid equipped with a supplemental battery module using our 
current production lithium ion cells. And yes, it is affordable, 
reliable and a logical bridge between the even more efficient OEM plug-
ins that we aim to enable in mass by the beginning of the next decade, 
and the ever growing millions of conventional hybrids that will be sold 
in the interim. A123Systems will be testing our current technology with 
various fleets in 2007 and intends to market this standardized module 
nationwide in 2008 in order to accelerate the adoption of plug-ins. It 
will be certified to meet all applicable new car test standards and can 
be installed by trained mechanics in less than 2 hours, without any 
changes to the underlying electronics, mechanics or materially useable 
space of the production hybrid other than the installation of the plug 
in the rear bumper.
    Our battery modules that can create PHEVs from HEVs will be, for 
all intents and purposes, ready to go by the end of this year. The 
faster it is deployed, the cleaner and safer this country will become. 
So how much more should the government do? I would suggest that the 
greater the potential for known but not well publicized technologies to 
make a real difference in emissions and mileage, the more important it 
is for you to act aggressively.
    The applicable market in the United States is already the fastest 
growing segment of the automobile industry. There will be almost 1 
million standard hybrids on the road through the course of this year. 
With over 60 hybrid models expected by 2009, there will be 5 million 
standard hybrids on the road by 2010. By 2015 there may be as many as 
15 million regular hybrids on American highways. As a matter of 
additional government action to stimulate deployment, it is clear that 
if several thousands of dollars in tax credits were needed to start 
moving consumers from 15 MPG vehicles to initially more expensive 45 
MPG hybrid vehicles, one option would be to do at least as much to 
achieve the 80 percent oil savings and 50 percent emissions reductions 
that would accumulate if each 45 MPG vehicle is now replaced with a 150 
MPG comfortable, high performance plug-in hybrid.
    Given the reality of the technology sitting outside of this hearing 
room for everyone to see and touch and experience, what other measures 
could help make plug-ins the cutting edge of the transportation 
revolution not 5 years from now but NEXT YEAR? How do we work into the 
market's pricing mechanism an accounting for the clear environmental 
benefits that tax incentives do not address?
    Clearly I know a lot more about how to make a battery than I do 
about how to construct a fair yet complicated regulatory framework. But 
from where I sit, the sooner PHEVs are deployed, the sooner we 
drastically cut our oil imports and improve our deteriorating 
environment. The transportation sector currently provides one third of 
all our CO2 emissions. If a fair cap and trade system that 
increases the cost to emit CO2 can be put in place and 
administered so all parties understand the rules and have to play by 
them, we have no doubt that the rate of deployment of cutting edge 
facilitators like these modules, and ultimately OEM plug-ins, will be 
significantly accelerated.
    Demand-pull incentives to kick start this promising breakthrough 
that holds the potential to cut our transportation-based use of oil by 
80 percent and emissions by 50 percent has strong precedent with clear 
success. Increased research dollars to further lower costs and create a 
level playing field with our Asian competitors in the battery industry, 
who until now have established superiority as a result of heavy 
government investment, also has established government precedence in 
other U.S. business sectors. Today, A123Systems is in the marketplace 
and in the lead ahead of the Asian governments who are our real 
competitors. They are investing. If we are to avoid the past mistakes 
of losing the commercialization race to Asia, we will have to level 
this playing field with active government involvement in ensuring the 
development of a new domestic battery industry.
    And finding a way to price the environmental benefits of our new 
American technologies, whether through cap and trade or other 
regulatory mechanisms, will be the ultimate show of national will and 
leadership needed to reverse our energy fortunes as quickly as we need.
    I urge all of you to come outside and look at the car and battery 
of the future to see what has already been done on the technology side. 
With your prompt collective action, over the course of the next year 
the average American can be in a full, responsive, comfortable sedan 
that can get over 100 MPG in combined city/highway driving for under 
$30,000. And as volumes increase, prices also can be expected to 
eventually fall as in any new breakthrough product. And with a cap and 
trade system, corporate America will demand more of these vehicles even 
sooner to stay in the game.
    Clearly the original equipment hybrids due out early in the next 
decade, utilizing even better batteries integrated directly into the 
vehicle at the factory, will be more efficient and less costly. But 
there can be as many as 15 million standard hybrids on the road when 
plug-in volumes skyrocket from 2012 to 2017. Like the initial version 
of any breakthrough product, our battery technology and the PHEVs it 
will enable in the immediate future, will be much better than what was 
there before, and not nearly as good as it is going to get. But it can 
be an important part of a logical technology and policy continuum as we 
inevitably move to a dominantly plug-in hybrid national fleet.
    In summary, you can count on our technology as one of the presently 
available breakthrough tools at your disposal which requires creation 
of a regulatory and business environment that will assure its mass use 
at the earliest time to begin reducing GHG emissions and our dependence 
on foreign oil. If we are collectively able to move up by several years 
the adoption of this particular technological solution, it will:
     Introduce a public hungry for tangible action now to a new 
American technology that lets them be part of the logical next step of 
a transportation revolution they have already started with their 
unprecedented demand for the standard hybrids available today.
     Gather invaluable experience and data for the next 
generation of factory produced vehicles through earlier widespread use 
of this new battery technology in real volumes in the everyday world.
     Stimulate earlier battery cost reductions from the earlier 
volume sales
     Advance by years the much needed 80 percent reduction in 
oil consumption and 50 percent emissions savings associated with each 
plug-in on the road.
     Serve the purpose of potentially speeding up the roll-out 
of the all important factory produced plug-ins as a result of the 
growing public awareness and demand.
                               conclusion
    This Nation can turn our current energy vulnerabilities into a new 
technological renaissance that simultaneously reduces our greenhouse 
gas emissions, reduces our consumption of foreign oil, and produces an 
increasing number of good American jobs. We can do it by using a 
combination of incentives, grants to a more efficient, diversified, 
balanced and cleaner domestic electric grid, and fair and administrable 
pricing of the environmental value of new and enabling technologies. 
With your political will and leadership, and the kind of technological 
breakthroughs that I have discussed today, we will succeed.
    Thank you Mr. Chairman and Members of the committee for this 
opportunity to explain what we are doing and comment on what you 
propose. We appreciate your interest and support. We will now be glad 
to address any questions you may have on this or any other subject.
                                 ______
                                 
      Response by Yet-Ming Chiang to an Additional Question from 
                           Senator Lautenberg
    Question. Your testimony indicates that you need a regulated 
environment for greenhouse gases in order for your product to flourish. 
What must be the cost of carbon dioxide emissions for a company to 
start utilizing your technology?
    Response. The lithium ion battery technology that we have developed 
enables hybrid and plug-in hybrid automotive, bus, truck, and other 
transportation technologies which if implemented broadly will have a 
dramatic impact on US greenhouse gas emissions. Since the users of this 
technology will range from individual citizens to large corporations, 
the cost of carbon dioxide emissions that will motivate one to use this 
technology will vary widely. For example, an individual American 
citizen will be motivated to use the technology in order to reduce 
their driving expense, to improve the environment, and to reduce US 
dependence on imported oil, even in the absence of any charge for 
CO2 emission. On the other hand, measures such as cap-and-
trade legislation would motivate a company that operates a large fleet 
of vehicles, as one example, to adopt our clean transportation 
technology if the cost of the carbon emissions is more than offset by 
the cost to transition to the new technology, with added benefit also 
accruing from the reduction in fuel costs. This is one ``equation'' by 
which the cost could be calculated, but naturally the specific numbers 
will depend on the industry involved and the specific scenario. The 
largest barrier to widespread adoption of our technology is the higher 
initial cost, but this will be reduced over time as the product matures 
and manufacturing costs are reduced due to economies of scale.

    Senator Lieberman. Thank very much, Dr. Chiang. I find it 
very exciting. You took me beyond where I understood that the 
plug-in technology was. The other point to make, very briefly, 
insofar as we are concerned about energy independence, is that 
the last time I heard, we only derive 2 percent to 3 percent of 
electricity from oil, so that, yes, there are problems with 
coal, but coal at least is American coal, and 20 percent of the 
rest is gas and 20 percent nuclear, and the rest a mix of 
alternatives.
    So anytime we get somebody to plug-in for a mile of 
vehicular travel, it is a dramatic reduction in our dependence 
on foreign sources of oil.
    Mr. Chiang. Just very briefly, much of this recharging I am 
talking about is a nighttime phenomenon, where the dependence 
is more on other forms that are nonpolluting than on coal.
    Senator Lieberman. Right. I must say the first time I heard 
about an electric car and a plug-in, I thought it was a big 
flaky, but then of course over the years, what am I doing and 
what we are all doing, we are plugging in our cell phones our 
Blackberrys and the rest at night. There is no reason why we 
couldn't and shouldn't be plugging in our cars.
    Dr. Little, thank you very much for being here. Dr. Mark 
Little is the director of GE Global Research, unfortunately 
located in Delaware, but the company overall is headquartered 
in Connecticut. Thank you for being here.
    [Laughter.]

    STATEMENT OF MARK M. LITTLE, SENIOR VICE PRESIDENT AND 
                  DIRECTOR, GE GLOBAL RESEARCH

    Mr. Little. Mr. Chairman and members of the committee, good 
morning and thank you for the opportunity to address you. My 
complete comments have been submitted for the record.
    I do have the great privilege of leading GE Research, GE's 
central research and development organization and one of the 
world's largest and most diversified industrial research labs. 
I oversee 28,000 technologists across the company and around 
the world, representing virtually every discipline.
    I am here to comment on available technologies that could 
readily be deployed if the Federal Government issues 
regulations to address climate change. As you know, GE is a 
founding member of the U.S. Climate Action Partnership and we 
launched a worldwide initiative called Ecoimagination, which 
focuses on getting more green technologies and products into 
the marketplace.
    If the Federal Government were to enact climate change 
legislation today, the regulated community has many viable 
technology options. I will focus my remarks on six key 
technologies that we believe could have the most immediate 
impact. They are IGCC or cleaner coal; wind energy; solar 
powered batteries; biofuels; and nuclear power.
    I will briefly highlight each technology and discuss how 
Government can partner with industry to maximize the 
opportunities each presents.
    For IGCC or cleaner coal, GE's energy business has a 
product on the market today that converts coal and other fossil 
fuels in to cleaner burning energy systems. Along with 
dramatically reducing emissions and particulates, this 
technology provides a more advantageous and economical way to 
capture carbon dioxide by separating and capturing it before 
combustion. But to fully realize the environmental benefit of 
this technology, we will need a clear, consistent policy on 
carbon emissions set forth by the Government.
    Placing a monetary value on carbon and adopting rules 
governing carbon sequestration would go a long way toward 
ensuring that the Nation would meet its greenhouse gas 
objectives and that IGCC technology can be a viable solution in 
helping us get there.
    Wind energy is another available carbon-free technology. 
With the help of Government incentives like the production tax 
credit and individual States' efforts to adopt renewable 
portfolio standards, wind technology today is economically 
competitive with other sources of energy, but we believe much 
more can be done. With more investment in R&D by the industry, 
Government and academia, we can further improve the economics 
and accelerate the speed and scale with which wind power can be 
deployed.
    Solar power is another carbon-free technology available 
today. In States like California and New Jersey, where strong 
Government incentives are in place, solar is thriving. But to 
be a truly viable choice for residential and commercial 
consumers across the country, we need to accelerate the level 
of investment by Government, industry and academia in solar 
energy. A great initiative doing just that is the U.S. 
Department of Energy's new Solar America initiative, in which 
GE is proud to be a partner. The thrust of this initiative is 
to accelerate new advancements in solar technology to reduce 
the cost of solar power to economically competitive levels by 
the year 2015.
    High energy batteries and hybrid systems are other 
available technologies. GE has made significant progress with 
its own battery research initiatives. They have been critical 
to our rail business in its development of a hybrid locomotive, 
which we will demonstrate for the first time this month at a GE 
Ecoimagination event in California.
    Within 2 to 3 years, batteries could have a real impact on 
heavy duty vehicle industries, and soon after plug-in hybrids 
for the automotive industry. GE is now collaborating with the 
U.S. Government on a variety of projects to advance battery 
research.
    Nuclear power is another carbon-free source of energy 
available today. Recent permitting, licensing and policy 
changes have helped to encourage new U.S. plant opportunities, 
but we believe much more can be done to promote nuclear power. 
While past incidents raised public concerns over safety and 
reliability of nuclear power, significant progress has been 
made since then to address these issues and to make nuclear an 
even safer and more reliable source of energy.
    Finally, although GE does not produce biofuels, we are 
working on new technologies that will enable our turbine 
products to burn many more types of fuels. GE Energy has a 
product today, the Jenbacher engine, which can operate on 
biofuels from many sources. We will continue to drive new 
developments in the research lab to make GE's power generation 
and turbine products even more fuel flexible.
    I cannot emphasize enough that the success of each of these 
technologies is incumbent on having the right policies and 
committed research and development partner in the Government to 
help accelerate these advances.
    Mr. Chairman, I want to thank you and members of the 
committee for the opportunity to testify. Addressing the issue 
of climate change is one of the greatest challenges the United 
States, and indeed the world, will face this century. The good 
news is that we have a host of technologies available today 
that can support swift action by Congress to pass meaningful 
climate change legislation.
    Thank you.
    [The prepared statement of Mr. Little follows:]
   Statement of Mark M. Little, Senior Vice President and Director, 
                           GE Global Research
    Mr. Chairman, members of the committee. Good morning and thank you 
for inviting me to address the committee and provide GE's perspective 
on technologies that could be readily deployed in the event Congress 
passes climate change legislation.
    I am Mark Little, Senior Vice President and Director of GE Global 
Research, GE's centralized R+D organization. We are one of the world's 
largest and most diversified industrial research labs, with a proud 
heritage of innovation spanning the Center's 107-year history.
    From developing the first U.S. jet engine to developing many of the 
technologies that helped build today's modern electrical grid, GE 
researchers have a proven record of moving the state of technology 
forward in a meaningful and practical way. Our breakthroughs have had 
real impact not only in transforming the Nation's infrastructure, but 
also in improving people's lives.
    In my role, I oversee more than 28,000 technologists across the 
company and around the world representing virtually every scientific 
discipline. Our mission today is the same as it was at the time of our 
founding in 1900--to drive innovations that create new or better GE 
products and meet the needs of our customers and of society.
    We gather at a time when concerns about energy security and global 
climate change are at the top of everyone's list. In May 2005, GE 
launched ecomagination. Ecomagination represents the company's 
commitment to develop cleaner, more efficient and environmentally 
friendly products. As part of this initiative, we have pledged to 
double our level of R+D investment in green technologies from $700 
million to more than $1.5 billion by the year 2010.
    Since launching ecomagination, we already have more than doubled 
the number of green products from the 17 that had originally been 
identified. GE's customers and consumers now have more and better 
choices to reduce their emissions and energy consumption. In the years 
ahead, we will introduce even more products to help address the 
challenges of global climate change.
    In February 2007, GE's Vice Chairman, and President and CEO for GE 
Infrastructure, John Rice, testified before the Subcommittee on Energy 
& Power, Energy & Commerce Committee in the U.S. House of 
Representatives, and called for the enactment of U.S. legislation on 
climate change at the earliest date possible. He further stated that 
science has reached a point where such legislation is possible.
    Indeed if Congress enacted climate change legislation today, the 
technology now exists to support viable options for the regulated 
community. We have technologies available that can help prevent 
unacceptable greenhouse gas concentrations, such as those suggested by 
USCAP. I will focus my remarks on six key technologies that we believe 
could have the most immediate impact. They are: The Integrated 
Gasification Combined Cycle (IGCC) system, or cleaner coal; wind 
energy; solar power; batteries; biofuels; and nuclear power.
    In discussing each of these technologies, it's important to 
understand that success in providing readily available solutions is 
directly tied to government setting a clear, consistent policy 
direction and continuing its strong commitment with industry and 
academia to aggressively invest in and accelerate the advancement of 
clean energy technology. We have already seen how government policies 
can positively impact the growth and availability of clean energy 
solutions.
    The enactment of the Federal Production Tax Credit (PTC) and new 
Renewable Portfolio Standards in more than 20 states have helped to 
fuel a three-fold expansion of the wind industry in the United States 
over the past few years. In Europe where policies have been more 
consistently applied, the growth has been more rapid and substantial.
    The first technology I would like to discuss is the Integrated 
Gasification Combined Cycle (IGCC) system, or cleaner coal. GE's Energy 
business has an IGCC product on the market today that successfully 
converts coal and other fossil fuels into a cleaner burning energy 
source. Compared to a traditional pulverized coal plant, an IGCC plant 
emits less than half of the sulfur oxides, nitrogen oxides, mercury and 
particulate matter. It also provides a much more advantageous way to 
capture carbon.
    In an IGCC plant, the capability exists to separate and capture 
carbon before combustion. We believe this presents a much more 
effective and economical way of removing carbon versus the method that 
could be used today of removing it from the exhaust at the very end of 
the combustion process.
    We are focused on several advanced gasification technologies to 
improve our IGCC platform. We're addressing everything from increasing 
process efficiency to reducing capital costs and emissions.
    To fully realize the environmental benefits of IGCC technology, we 
will need a clear, consistent policy set forth by the government on 
carbon emissions.
    Currently, the increased environmental benefits for IGCC come with 
increased capital costs. With no value placed on carbon and no 
regulations governing carbon sequestration or liability associated with 
it, little incentive exists to adopt this technology. And while we have 
research programs that are aggressively working to reduce the capital 
costs of IGCC technology, those solutions will not be available in the 
short-term.
    Placing a monetary value on carbon and adopting rules governing 
carbon sequestration would go a long way toward ensuring that the 
Nation meets its greenhouse gas emissions goals, and that IGCC 
technology can be a viable solution in helping us get there. The fact 
that nearly 50 percent of the Nation's electricity is derived from coal 
makes IGCC technology a critical part of the technology solutions 
needed.
    Wind energy is another available, carbon-free technology that 
already has had a tremendous impact in Europe and is beginning to have 
real impact here in the United States. With the help of government 
incentives like the Production Tax Credit (PTC) and individual states' 
efforts to adopt Renewable Portfolio Standards, wind is economically 
competitive today with other traditional sources of energy. But for all 
of wind energy's success, we believe there is much more room for 
improvement.
    Just consider that in the short time since GE got into the wind 
business in 2002, we have been able to improve the wind capture of our 
wind turbines by 30 percent. But with more investment in R+D by 
industry, government and academia, we can do even more to improve the 
economics and accelerate the speed and scale in which wind assets can 
be readily deployed.
    At GE's research lab, we are exploring new, lighter and more 
aerodynamic blade designs, lighter composite materials and better 
electronics and controls to make further improvements to GE's wind 
turbines and large-scale energy systems. We believe that another 15 
percent wind capture can be added with more advanced technology 
development. By industry partnering with the government, we could 
greatly accelerate this effort.
    Solar power, when coupled with government incentives, is another 
carbon-free technology that is available today. In states like 
California and New Jersey where strong government incentives are in 
place, solar is thriving. But if solar is to be a truly viable choice 
for residential and commercial consumers across the country, we need to 
accelerate the level of investment by government, industry and academia 
in solar energy research. I want to commend the U.S. Department of 
Energy (DOE) for doing just that with the recent launch of its Solar 
America initiative.
    Solar America, of which GE is proud to be a partner, is exactly the 
kind of bold initiative that is needed to make solar power economically 
competitive across the United States. Right now, the price of solar 
power is around 30 cents per kilowatt-hour. That is much too high. To 
encourage more widespread availability and use, we need to cut that 
cost in half. This reduction is the whole thrust of DOE's initiative.
    The general view across the solar industry is that the goal of 
economic viability will not be reached until at least the year 2030. 
Through Solar America, we believe that aggressively accelerating 
breakthroughs in less costly and more efficient materials and 
improvements to the solar module systems could cut that timeline in 
half to 2015.
    The next technology I would like to discuss is high-energy 
batteries and hybrid systems.
    GE has made significant progress with its own battery research 
initiatives. It has been critical to our Rail business and its 
development of a hybrid locomotive, which we will be demonstrating for 
the first time later this month at a planned GE ecomagination event in 
California.
    Within 2 to 3 years, we believe batteries could have a real impact 
on the heavy-duty vehicle industry and soon after plug-in hybrids for 
the automotive industry. GE is currently collaborating with the U.S. 
government on a variety of projects to advance battery technologies.
    Although GE is a not a producer of biofuels, we are working on new 
technologies that will enable our turbine products to burn several 
types of biofuel. GE Energy already has a product, the Jenbacher 
engine, which can operate on biofuels such as methane gas from 
landfills. We will continue to drive new developments in the research 
lab to make GE's power generation and turbine products more fuel 
flexible, so that they can accommodate a variety of more 
environmentally friendly, domestic generated biofuels.
    Finally, I would like to discuss a carbon-free technology 
alternative that is not only available today, it is providing 16 
percent of the world's electricity and 20 percent of all electricity 
produced in the United States--nuclear power. In fact, GE last week 
announced a contract with Dominion, one of the Nation's largest energy 
producers, to supply critical project components in the event Dominion 
decides to build a third nuclear-powered electric generating unit at 
its North Anna Power Station in Mineral, Virginia.
    More recent permitting, licensing and policy changes have helped to 
encourage new U.S. plant opportunities, but we believe more can be done 
to promote new opportunities in nuclear power.
    In a world that is searching for carbon-free alternatives, nuclear 
represents one of the most mature and attractive solutions for bringing 
more carbon-free power online in a significant way. While past 
incidents raised public concerns over the safety and reliability of 
nuclear power that persist today, significant progress has been made 
since then to address these issues and make nuclear a safe, reliable 
source of energy.
    As the U.S. Congress considers climate change legislation, GE 
believes several technologies can be readily deployed today in the 
short-term to meet new greenhouse gas emissions goals set forth in such 
legislation. But the success of these technologies is incumbent upon 
having the right policies and a committed research and deployment 
partner in government to help accelerate needed advancements.
    Mr. Chairman, I want to thank you and members of the committee for 
the opportunity to provide testimony. Addressing the issue of climate 
change is one of greatest challenges the United States and indeed the 
world will face in the 21st century. The good news is that 
we have a host of technologies available today that can support swift 
action by Congress to pass meaningful climate change legislation.
    Thank you.

    Senator Lieberman. Dr. Little, thank you. Great report. 
Really good news. Thank you.
    Mr. Little. Thank you.
    Senator Lieberman. Mr. James Stanway, director of Project 
Development at Wal-Mart, indicating by your manner of speech 
either that I am not familiar with all Arkansas dialects, or 
that Wal-Mart truly has become a global enterprise.
    [Laughter.]

STATEMENT OF JAMES W. STANWAY, SENIOR DIRECTOR, GLOBAL SUPPLIER 
               INITIATIVES, WAL-MART STORES, INC.

    Mr. Stanway. Chairman Lieberman, Ranking Member Warner and 
distinguished members of the committee, no, I am not originally 
from Arkansas, but I have 3 years ago become a U.S. citizen.
    Senator Lieberman. Welcome. Thank you.
    Mr. Stanway. Wal-Mart Stores thanks the subcommittee for 
its work on this important issue and for holding this hearing 
today. As the largest retail company in the world, the largest 
private consumer of electricity in the United States, and the 
owner of one of the largest private truck fleets in the 
country, Wal-Mart takes a keen interest in the serious risks 
and opportunities of climate change.
    More than 2 years ago, our CEO Lee Scott, announced that 
Wal-Mart would make sustainability an organizing principle for 
the company and he announced three goals: to be supplied 100 
percent by renewable energy; to create zero waste; and to sell 
products that sustain our resources and environment.
    Wal-Mart has already taken steps to mitigate its greenhouse 
gas emissions and we are dedicated to making further 
significant progress. Among other things, we are committed to 
reducing greenhouse gas emissions at our existing facilities--
that is stores, clubs, and distribution centers--by 20 percent 
by 2012, and improving our truck fleet efficiency by 25 percent 
by 2008, and 100 percent by 2015.
    The goals we have adopted for reducing energy consumption 
in our stores and our vehicle fleets are ambitious. Wal-Mart 
has installed auxiliary power units, APUs, on our trucks. These 
APUs alone save 10 million gallons of diesel fuel per year. Our 
installed lighting load, the daylight harvesting systems that 
were referred to, these turn out the lights when the curtains 
are open. It is not just simply opening the curtains. You have 
to turn off the lights, too. It is 40 percent than the baseline 
established in the Energy Policy Act of 2005. Our retrofits 
have resulted in a 15 percent to 20 percent reduction in our 
energy load and a savings to our company of about $19 million a 
year.
    Within only 15 months, we have developed a prototype store 
that is 20 percent more energy efficient than our existing 
stores. These stores will form the model for our future 
construction. We operate a centralized energy management system 
from our home office in Bentonville. This allows us to dial 
down energy usage, for example in the event of a load crisis, 
such as the one we saw in California several years ago, and 
indeed at the request of utilities in Connecticut when they ask 
us to for system stability.
    Just this Monday, we announced a major purchase of solar 
power which, when fully implemented, could be one of the 
country's, if not the world's, top 10 largest ever solar power 
initiatives.
    While this is only a partial list of our accomplishments, 
the bottom line is that we are aggressively attacking our 
greenhouse gas footprint. Our successes within Wal-Mart have 
led to an aggressive program to work with our suppliers, to 
wring more efficiency and emissions reductions from our supply 
chain. Through our Wal-Mart energy program, we have arranged 
for surveys of selected suppliers' facilities and suggested 
improvements. As an example, our first partner in this program 
was a manufacturer of children's clothes and underwear in 
Georgia called Dana Undies. Wal-Mart engineers went to the 
65,000 square foot facility and suggested a number of 
operational and capital improvements in the areas of lighting 
and cooling. The result was a 52 percent decrease in 
electricity costs for that company's operation.
    While the payback from many of these technologies are 
short, small businesses and consumers are often turned off by 
the up front cost and complexity. I would like to mention two 
ways we are addressing this. Wal-Mart has launched a nationwide 
campaign to sell 100 million compact fluorescent, or CFL, light 
bulbs. We are making the CFL more affordable to consumers, as 
well as helping educate them on the benefits of this 
technology. We have already seen sales go from less than 5 
percent to 15 percent of our total light bulb sales, and we 
hope that trend continues.
    Last month, our Sam's Clubs in Phoenix, AZ test marketed a 
lighting retrofit program specifically designed for small 
business owners. Selling through a market channel such as 
Sam's, direct buying the technology, and adopting a community-
based marketing approach, we hope to deliver prices that will 
enable small businesses to make investments in energy 
efficiency, reduce their operating expenses, and thus reduce 
their greenhouse gas emissions. In other words, achieve the 
same efficiency that Wal-Mart and other large companies are 
already harvesting.
    We believe we have shown that energy savings and emissions 
reductions can be achieved in ways that will benefit companies 
and consumers of all shapes, sizes and incomes. Clearly, 
however, a properly designed regulatory framework could help 
considerably. A properly designed system will enable the market 
where real carbon reductions have a value, and where this could 
be passed back to those customers by using the product's carbon 
value to rollback the technology price.
    A market-based approach under a cap and trade system that 
allows downstream actors to monetize carbon value offers 
opportunities like Wal-Mart and others to innovate and deliver 
more value to customers. We urge Congress to recognize the type 
of progress we have already begun to make by including the 
mechanisms such as a carbon credit set-aside program that would 
allow more players to harvest the value of energy efficiency in 
the economy. The result would be more emissions reductions, 
more energy efficiency, and more savings to all.
    Thank you for your time in allowing me to speak on behalf 
of Wal-Mart on this very important topic. We look forward to 
working with you.
    [The prepared statement of Mr. Stanway follows:]
    Statement of James W. Stanway, Senior Director, Global Supplier 
                   Initiatives, Wal-Mart Stores, Inc.
    Chairman Lieberman, Ranking Member Warner, and distinguished 
Members of the committee:
    Wal-Mart Stores, Inc., thanks the subcommittee for its work on this 
important issue and for holding this hearing today. Wal-Mart 
appreciates the opportunity to participate in this critical discussion.
                               background
    Wal-Mart is based In Bentonville, Arkansas. Our company employs 
approximately 1.3 million Associates from all 50 states and 
approximately 1.8 million Associates worldwide. Each week over 176 
million customers worldwide choose to shop at Wal-Mart, which we feel 
reflects the success of our dedication to providing Every Day Low 
Prices to our customers. Wal-Mart does not just operate stores, clubs, 
and distribution centers in communities; we take a proactive stance in 
community involvement on a number of Issues.
                 purpose of hearing and wal-mart's role
    As we understand it, the purpose of today's hearing is to discuss 
emerging technologies and practices for reducing greenhouse gas 
emissions. As the largest retail company in the world, the largest 
private consumer of electricity in the United States, and the owner of 
one of the largest private heavy-duty truck fleets in the country, Wal-
Mart takes a keen interest in the serious risks--and opportunities--of 
global climate change. More than 2 years ago our CEO Lee Scott 
announced that Wal-Mart would make ``sustainability'' an organizing 
principle for the company. In recognizing that climate change is among 
the greatest issues confronting our business, our customers, and our 
communities, he announced three goals for our company: to be supplied 
100 percent by renewable energy; to create zero waste; and to sell 
products that sustain our resources and the environment. Since that 
time we have acted rapidly to become a cleaner, greener and more 
sustainable company.
    A crucial part of reaching the company's environmental goals is 
reducing our impact on the world's climate. Wal-Mart already has taken 
steps to mitigate its greenhouse gas emissions and we are dedicated to 
making significant further prowess. Among other things, we are 
committed to investing approximately $500 million annually in 
sustainable technologies and innovations; reducing greenhouse gas 
emissions at our existing stores, Sam's Clubs and distribution centers 
by 20 percent over the next 5 years; designing and opening a viable 
prototype that is 25-30 percent more efficient and wilt use 30 percent 
less energy; and improving our vehicle fleet's efficiency by 25 percent 
in 3 years and 100 percent in 10 years. Just this Monday, we announced 
a major purchase of solar power from three solar power providers for 22 
combined Wal-Mart stores, Sam's Clubs and a distribution center in 
California and Hawaii. When fully implemented, the aggregate purchase 
could be one of the country's, if not the world's, top-10 largest ever 
solar power initiatives.
    This past January we announced our support of the effort by the 
companies and organizations of the U.S. Climate Action Partnership (US-
CAP), and endorsed the group's call for strong mandatory national 
policies and market-based programs for greenhouse gas reductions. Wal-
Mart looks forward to working with Congress and the White House to 
enact meaningful legislation to slow, stop and reverse the growth of 
greenhouse gas emissions. To be clear, we take this position because we 
believe it is in the best interest of our customers, our employees, our 
stockholders and our Nation to tackle this challenge. But we also 
believe that with the right policies, businesses large and small--from 
Wal-Mart, to our suppliers, to small businesses across the country--can 
save. We believe this because of what we are seeing every day as we 
undertake our aggressive sustainability agenda.
    In this testimony, we will address four subjects today: (1) how 
Wal-Mart has succeeded in mitigating its own carbon footprint and how 
that has added savings to our customers; (2) the successes we have had 
working with our suppliers to increase efficiency and reduce emissions; 
(3) how we are helping small businesses and consumers save money by 
reducing their own carbon footprint; and (4) the elements of any 
Federal climate legislation that we think are needed to achieve the 
greatest greenhouse gas reductions for the lowest cost while ensuring 
benefits for customers.
                            our own efforts
    The goats we have adopted far reducing energy consumption in our 
stores and our vehicle fleet are ambitious. However, with the 
remarkable innovation and dedication of our associates and our 
partners, we have found these changes to be not only achievable, but 
cost effective, and we are ahead of our own aggressive schedule.
     With regard to our goal of a 25 percent improvement in our 
vehicle fleet efficiency, we are ahead of schedule. Wal-Mart has 
installed auxiliary power units (APUs) on its trucks as part of our 
fuel conservation policy. For individual trucks, we have achieved 28 
percent improvement over our base 2005 truck/trailer (that improvement 
consists of fuel additives, aerodynamic improvements to the truck/
trailer, weight reduction, fuel efficient tire application, and APUs). 
We have over half of that improvement installed on all 7,200 trucks (8 
percent from APU, 2 percent from additives, 6 percent from tires). The 
use of the Mills alone saves 10 million gallons of diesel fuel and 
prevents 100,000 metric tons of CO2 from entering the 
atmosphere,
     We have developed over the last decade what might be the 
most efficient lighting system in the world. We have implemented 
daylight harvesting, computer controlled continuous dimming, T8 
lighting and other efficiency technologies in 1,000 stores. We vary 
light output on our sales floor from 100 percent to 0 percent 
(completely off on bright sunny days) and reduce late night light 
levels (35 percent). In fact, our installed lighting load is more than 
40 percent less than the baseline established in the Energy Policy Act 
of 2005 and our retrofits have resulted in a 15-20 percent reduction in 
our energy load and a savings to the Company of about $90 million per 
year.
     Within only 15 months, we have developed and opened two 
new prototype stores that are mare than 20 percent more efficient than 
our existing stores. These stores will farm the model for future 
construction.
     The EER rating of our High Efficiency HVAC units ranges 
between 10.8 and 13.2, versus the industry standard of 9.0. Units are 
4-17 percent more efficient than California's Title 24 standard 
requirements.
     We now utilize LED Lighting in all of our internally 
illuminated building signage far new construction (except Sam's Clubs) 
and are replacing existing signs with LEDs. These changes represent a 
70 percent increase in efficiency.
     We recently opened a new facility in Savannah, Georgia, 
which included what was at the time the first low temperature 
CO2 secondary (pop refrigeration system in the United 
States. On the day of the grand opening we conducted tours of the 
facility, including detailed descriptions of the systems, to 
representatives from our competitors Target, Food Lion, Publix, and 
Costco.
     In 2006 we committed to examine the packaging of every 
product we sell, and have encouraged our suppliers to reduce packaging 
and to use reusable or recyclable materials. February 1, 2007 we made 
our ``packaging scorecard'' available to all 60,000 suppliers. We will 
improve that scorecard between now and February 1, 2008, when it will 
become a factor in merchandise buying decisions.
     Wal-Mart has adopted its Plastic Sandwich BaleTM program 
in over 3,000 stores, a process that greatly increases the recycling of 
packaging plastics. In 2005, the company recycled over 5,734 tons of 
plastic significantly saving energy and reducing greenhouse gases.
     In 2005 Sam's Club partnered with NatureWorks to introduce 
use of PIA fresh cut produce packaging to replace conventional 
packaging, saving the equivalent of 800,000 gallons of gasoline and 
reducing more than 11 million lbs. of greenhouse gases.
     Centralized Energy Management--All U.S. stores are 
monitored and controlled from our home office in Bentonville. This 
allows us to dial down energy usage, for example, in the event of a 
load crisis such as the one we saw in California several years ago.
     Wal-Mart Supercenters and Neighborhood Markets (over 
2,000) capture waste heat from refrigeration equipment to heat water 
for the kitchen prep areas of the stores, saving 165 million BTUs per 
year.
                       working with our suppliers
    The bottom line is that we are dramatically improving our 
greenhouse as footprint. These savings help us to fulfill our 
commitment to our customers to provide them with low prices. And our 
successes within Wal-Mart have led to an aggressive program to work 
with our suppliers to wring more efficiency and emissions reductions 
from the supply chain. Through ``Wal-Mart Energy'', we offer an energy 
efficiency program that can significantly lower our suppliers' energy 
costs. We arrange for a survey of our suppliers' facilities and suggest 
improvements based an technologies Wal-Mart is already using. We then 
use our existing supplier relationships and bid management expertise to 
arrange the lowest-cost services for the supplier. Wal-Marts supply 
chain is dispersed across all 50 states; small companies and large are 
already seeing great success.
    As an example, our first partner in this program was a manufacturer 
of children's clothes and underwear in Georgia called Dana Undies. Like 
many U.S. companies, Dana Undies was facing challenges competing on 
price with competitors and pointed to energy costs for much of the 
problem. Wal-Mart engineers went to the 65,000 square foot Dana 
facility in Georgia and suggested a number of operational and capital 
improvements in the areas of lighting and cooling. The result was a 52 
percent decrease in energy costs. As Dana Undies CEO Steve Varon has 
said, the technology to achieve significant energy reductions exist 
today, ``All you need is the will and a great partner like Wal-Mart.''
    working with small businesses and helping customers save energy
    Because of our buying power and size, we are able to invest in 
energy efficiency in a cost effective manner. For small businesses and 
consumers, there are often challenges to taking advantage of these 
opportunities and we are working to address those. In our energy 
related business efforts, we are looking to address two key challenges: 
the upfront costs of dean energy technologies and inadequate channels 
to market.
    While the payback for many of these technologies is short, small 
businesses and consumers often are turned off by the upfront costs and 
complexity. Below are two examples of how we are addressing this.
     18 Seconds. Wal-Mart has launched a nationwide campaign to 
sell 100 million compact fluorescent light bulbs (CFLs). Our partner GE 
sells CFLs to Wal-Mart in large numbers and we offer them to consumers. 
Here is where we are doing what we do best--offering products at 
everyday low prices--and we are making the CFL more affordable to 
consumers, as well as helping educate them on the benefits of this 
available technology. We are dedicating prime display space for CFLs, 
adding educational displays, educating our sates associates and 
creating friendly competition among stores based on CFL sales. We have 
already seen sales go from less than 5 percent to 15 percent.
     Energy Efficiency for Small Businesses. Last month, our 
Sam's Clubs in Phoenix, Arizona test marketed a lighting retrofit 
program designed for small business owners. Selling through a market 
channel such as Sam's, direct buying the technology and adopting a 
community based marketing approach, we hope to deliver prices that 
enable small businesses to make investments in energy efficiency, 
reduce their operating expenses and reduce greenhouse gas emissions. 
Hughes Performance, a small manufacturer of transmissions for dragsters 
and race cars in Phoenix was our first customer. After working with our 
program CEO Jim Hughes said, ``The program was great because as a small 
business owner you get so caught up in the daily activities of running 
a company that this kind of improvement doesn't even cross your mind. I 
didn't realize how much small efficiencies could add up and improve my 
bottom line. Now I expect to save on my electric bill each month, and 
as a small business owner, every bit helps.''
    Our small business program is also meant to overcome the challenge 
of getting efficiency technologies to market. Many traditional Energy 
Service Companies focus on Large corporations, since the transaction 
costs of pursuing smaller entities prohibit downstream sales. Utilities 
have also undertaken to market energy efficiency but sometimes operate 
in a regulated environment that discourages such efforts and they often 
have a limited relationship or brand with their customer base. Non-
traditional energy efficiency providers can greatly reduce these 
marketing and sales costs. We are proving this model.
 designing a regulatory program to help consumers and small businesses
    We believe we have shown that energy savings and emissions 
reductions can be achieved in ways that will benefit companies and 
consumers of all shapes, sizes and incomes. Clearly, however, a 
properly designed regulatory framework could help considerably.
    In a greenhouse gas regulators/regime, the value of energy savings 
will include both the savings in the cost of energy and the value of 
the greenhouse gas emissions avoided. A properly designed system will 
enable a market where real carbon reductions have a value and this 
value could be monetized and passed back to those customers by using 
the products' ``carbon value'' to rollback the technology price. 
Companies like Wal-Mart are in an excellent position to add that value 
into the product delivery and value chain and use the competitive 
pressures of the market to pass that value an to consumers in the form 
of reduced costs. We believe that making that carbon value available 
downstream will increase efficiency and speed to market. As with any 
business sector, the more economic opportunity, the more market 
entrants, the more innovation and an acceleration of products to market 
occurs. A regulatory regime that creates a robust carbon market can 
drive innovation--both in technological and marketing fields--which 
U.S. companies could excel at in both domestic and global markets.
    A market-based approach under a cap and trade system that allows 
downstream actors to monetize carbon value offers opportunities for 
businesses like Wal-Mart to innovate and deliver more value to 
customers. The utility sector will require many years to decarbonize 
its electricity production, but that does not mean other sectors of the 
economy--such as the end user--cannot economically reduce consumption 
and effectively ``buy time'' for the new low or no carbon electricity 
sources to be built. We urge the Congress to recognize the type of 
progress that we have already begun to make by including a mechanism--
such as a carbon credit set-aside program--that would allow more 
players to ``mine'' the value of energy efficiency. The result will be 
more emissions reductions, more energy efficiency and more savings to 
all.
                               conclusion
    At Wal-Mart, we are known for saving our customers money, and we 
have been successful because we innovate our way to savings. We believe 
that the challenge of global warming presents just another opportunity 
for innovation and the creation of value. We support Congress' efforts 
to craft climate legislation because we believe--and we have shown--
that reducing emissions and saving energy will be profitable and that 
the benefits can be shared by all.
    Thank you for your time in allowing me to speak on behalf of Wal-
Mart on this very important topic. We look forward to working with you 
to effectively and constructively address these issues.
                                 ______
                                 
      Responses by James W. Stanway to Additional Questions from 
                           Senator Lautenberg
    Question 1. Last year, CEO Lee Scott stated a goal of reducing Wal-
Mart's greenhouse emissions by 20 percent and reducing energy costs by 
30 percent in 7 years. How confident are you that you can meet that 
goal, and which ``green building'' technologies have yielded the 
highest emissions reduction and cost savings?
    Response. We have begun to implement technologies to achieve our 
goal and have seen great progress. Because we are truly attempting 
unprecedented energy and emission-saving changes, we do not yet know if 
all the technologies we have planned to develop and deploy will work. 
Nevertheless, we fully intend to meet our stretch goals. The best 
results so far have been in the area of lighting technologies. Simply 
upgrading to the latest fluorescent technologies and adding new 
controls, for example, has proved very successful. These controls range 
from motion sensors to daylight harvesting systems which turn lights 
off on sunny days when integrated with skylights/windows. LED lighting 
is evolving quickly and we are adopting this technology for use in our 
refrigerated food cases. We expect further LED product evolution to 
enable this technology to be applied more widely. Variable speed drives 
applied to our refrigeration systems and white roofs are also 
delivering good results.

    Question 2. The work that you are starting to undertake in 
improving energy efficiency in your supply chain is very important. You 
have reportedly helped one of your suppliers reduce electricity bills 
by 60 percent by using simple efficient lighting technology. When your 
suppliers make these improvements, does Wal-Mart keep the energy 
savings or does the supplier? Does Wal-Mart re-negotiate the price of 
the goods based on these savings to the supplier?
    Response. The supplier retains the energy savings and Wal-Mart does 
not re-negotiate the price of goods based on these initiatives.

    Question 3. If there was a cap-and-trade system in place for carbon 
dioxide, would you require your supply chain to provide your company 
with the credit for the emissions reductions? Is Wal-Mart considering 
doing this?
    Response. We would only negotiate for the `GHG credits' if we 
invested or were otherwise involved in creating the efficiency gain. We 
do intend to do this by selling technology to our supply chain at 
prices they could not achieve on their own--in other words bulk buying 
and deployment of energy efficient technology within the Wal-Mart 
supply chain. If the GHG value was assigned to Wal-Mart then the cost 
of the technology could be lowered--it simply becomes another source of 
economic value. Some suppliers may wish to retain the GHG value but 
many would not have the scale of operations to effectively harvest the 
financial value of these credits under any foreseeable regulatory 
regime. Just as we would bulk buy technology for the supply chain--we 
would bulk sell the GHG credits if such a mechanism existed. We believe 
that by adopting a supply chain approach to energy technology we can 
overcome a profound market failure currently existing, i.e., the 
inability of energy efficient technologies to be sold and deployed 
without significant transaction costs.

    Senator Lieberman. Thanks, Mr. Stanway. Again, and I know 
we are going to hear it from our last two witnesses, but you 
have told a story of good business practices, innovation to 
make the business more efficient and profitable, but also 
tremendous what I call corporate citizenship to deal with the 
problem. I thank you for it.
    Mr. Stanway. Thank you.
    Senator Lieberman. Michael Rencheck is next, senior vice 
president for Engineering, Projects and Field Services, 
American Electric Power. He apparently has something to do with 
the State of Ohio.
    Mr. Rencheck. That is correct.

  STATEMENT OF MICHAEL W. RENCHECK, SENIOR VICE PRESIDENT FOR 
  ENGINEERING, PROJECTS AND FIELD SERVICES, AMERICAN ELECTRIC 
                             POWER

    Mr. Rencheck. Good morning, Mr. Chairman and members of the 
committee. Thank you for inviting me to participate in today's 
hearing.
    American Electric Power is one of the Nation's largest 
electric utilities with more than 5 million retail customers in 
11 States. We are also one of the Nation's largest power 
producers, with over 38,000 megawatts of generating capacity 
with a very diverse mix of generating assets. But of particular 
note today, AEP is one of the largest coal-fired electric 
generators in the United States and we have implemented a 
portfolio of voluntary reductions to avoid and offset 
greenhouse gases during the past decade.
    Coal generates over 50 percent of the electricity used in 
the United States, and is extensively used worldwide. As the 
demand for electricity increases significantly, coal will 
increase as well. In the future, coal-fired electric generation 
must be zero emission or close to it.
    This will be achieved through new technologies that are 
being developed today, but are not yet proven or commercially 
available. Like most companies in our sector, AEP needs new 
generation. We are investing in new clean coal technology that 
will enable AEP and our industry to meet the challenge of 
reducing greenhouse gas emissions for the long term. This 
includes plans to build two new integrated gasification 
combined cycle plants, IGCCs, and two state of the art 
ultrasupercritical coal plants. These will be the first new 
generation of ultrasupercritical coal plants in the United 
States.
    AEP has also taken the lead in commercialization of carbon 
capture technology for use on new generation, and more 
importantly, for retrofit on existing generation. We signed a 
memorandum of understanding with Alstom for post-combustion 
capture technology, using Alstom's chilled ammonia system. 
Starting with the commercial performance verification project 
in mid to late 2008 in West Virginia, a project that will also 
include storage in deep geological sequestration in a saline 
aquifer, we will move to the first commercial size project at 
one of our 450 megawatt coal-fired units, our Northeastern 
Plant, in Oklahoma by late 2011. This will capture about 1.5 
million metric tons of CO2 a year, which will be 
primarily used for enhanced oil recovery.
    We are also working with Babcock and Wilcox to take its 
oxy- coal combustion technology from the drawing board to 
commercial scale activity in the next decade.
    AEP is very comfortable leading technology. We have a long 
and impressive list of technological firsts that we have 
achieved during our first 100 years. But we have identified one 
very important caveat during our century of technological 
achievement and engineering excellence. Proving technology to 
be commercially viable and proving it out for wide scale 
commercial use are two different things. It takes time to 
develop off the shelf commercial technology offerings.
    AEP is not calling for indefinite delay in the enactment of 
mandatory climate change legislation until the advanced 
technology such as carbon capture and storage is developed. 
However, as the requirements become more stringent during the 
next 10 years to 20 years, and we move beyond the ability of 
current technology to deliver those reductions, it is essential 
that the requirements for deeper reductions allow sufficient 
time for the demonstration and commercialization of advanced 
technologies.
    How can you help? It is also important to establish public 
funding, as well as incentives for private funding, for the 
development of commercially viable technology solutions, as 
well as providing the legal and the regulatory structures to 
facilitate their development. AEP believes that IGCC, advanced 
coal and carbon capture technologies, need to be advanced. But 
the building of an IGCC and the timely commercial development 
of carbon capture and sequestration technologies will require 
additional public funding.
    AEP and others in our sector have already invested heavily 
in the research and the early deployment of technologies that 
may be commercially viable at some point in the future to 
address greenhouse gas emissions. For this reason, separate 
investment tax credits are needed to facilitate both the 
construction of IGCC, advanced coal technologies, and carbon 
capture and sequestration technologies.
    Of significance here, the final decider on the type of 
power generation that can be built in many States is the public 
utility commission of that State. The commission determines how 
or if a utility can recover the costs of new generation or 
retrofits of existing generation. How do you reconcile a 
Federal mandate for expensive greenhouse gas mitigation, with 
States that desire to cap energy costs? The utilities and their 
shareholders remain caught in the middle and need your help to 
research, develop and build this type of generation.
    American industry has long been staffed by excellent 
problem solvers. I am confident we will be able to develop 
technologies to address emissions of greenhouse gases in a more 
efficient manner. We have the brain power. We need the time, 
funding assistance, and legal and regulatory support.
    Thank you very much for allowing me to participate today.
    [The prepared statement of Mr. Rencheck follows:]
      Statement of Michael W. Rencheck, Senior Vice President for 
   Engineering, Projects and Field Services, American Electric Power
    Good morning Mr. Chairman and distinguished members of the Senate 
Committee on Environment and Public Works Subcommittee on Private 
Sector and Consumer Solutions to Global Warming.
    Thank you for inviting me here today. Thank you for this 
opportunity to offer the views of American Electric Power (AEP) and for 
soliciting the views of our industry and others on climate change 
technologies.
    My name is Mike Rencheck, Senior Vice President-Engineering 
Projects & Field Services of American Electric Power (AEP). 
Headquartered in Columbus, Ohio, we are one of the Nation's largest 
electricity generators--with over 36,000 megawatts of generating 
capacity--and serve more than five million retail consumers in 11 
states in the Midwest and south central regions of our Nation. AEP's 
generating fleet employs diverse sources of fuel--including coal, 
nuclear, hydroelectric, natural gas, and oil and wind power. But of 
particular importance for the committee members here today, AEP uses 
more coal than any other electricity generator in the Western 
hemisphere.
                      aep's technology development
    Over the last 100 years, AEP has been an industry leader in 
developing and deploying new technologies beginning with the first high 
voltage transmission lines at 345 kilovolt (kV) and 765kV to new and 
more efficient coal power plants starting with the large central 
station power plant progressing to supercritical and ultrasupercritical 
power plants. We are continuing that today. We implemented over 11 
selective catalytic reactors (SCRs), 9 Flue Gas Desulphurication units 
with others currently under construction, and we are a leader in 
developing and deploying mercury capture and monitoring technology. In 
addition, we continue to invest in new clean coal technology plants and 
R&D that will enable AEP and our industry to meet the challenge of 
significantly reducing GHG emissions in future years. For example, AEP 
is working to build two new generating plants using Integrated 
Gasification Combined Cycle (IGCC) technology in Ohio and West 
Virginia, as well as two highly efficient new generating plants using 
the most advanced (e.g. ultrasupercrifical) pulverized coal combustion 
technology in Arkansas and Oklahoma. We are also supporting a leading 
role in the FutureGen project, which once completed, will be the 
world's first near-zero CO2 emitting commercial scale coal-
fueled power plant. We are also working to progress specific carbon 
capture and storage technology.
           aep's major new initiative to reduce ghg emissions
    Just this past month, AEP announced several major new initiatives 
to reduce AEP's GHG emissions and to advance the commercial application 
of carbon capture and storage technology and Oxy-coal combustion. Our 
company has been advancing technology for the electric utility industry 
for more than 100 years. AEP's recent announcement continues to build 
upon this heritage. Technology development needs are often cited as an 
excuse for inaction. We see these needs as opportunities for action.
    AEP has signed a memorandum of understanding (MOU) with Alstom, a 
worldwide leader in equipment and services for power generation, for 
post-combustion carbon capture technology using Alstom's chilled 
ammonia system. It will be installed at our 1300-megawatt Mountaineer 
Plant in New Haven, W.Va., as a ``30-megawatt (thermal) commercial 
performance verification'' project in mid- to late-2008 and it will 
capture go to 100,000 metric tons of carbon dioxide (CO2) 
per year--Once the CO2 is captured, we will store it. The 
Mountaineer site has an existing deep saline aquifer injection well 
previously developed in conjunction with DOE and Battelle. Working with 
Battelle and with continued DOE support, we will use this well (and 
develop others) to store and further study CO2 injection 
into deep geological formations.
    Following the completion of commercial verification at Mountaineer, 
AEP plans to install Alstom's system on one of the 450-megawatt coal-
fired units at its Northeastern Plant in Oologah, Oklahoma, as a first-
of-a-kind commercial demonstration. The system is expected to be 
operational at Northeastern Plant in late 2011, capturing about 1.5 
million metric tons of CO2 a year. The CO2 
captured at Northeastern Plant will also be used for enhanced oil 
recovery.
    AEP has also signed an MOU with Babcock and Wilcox to pursue the 
development of Oxy-coal combustion that uses oxygen in lieu of air for 
combustion, which forms a concentrated CO2 post combustion 
gas that can be stored without additional post combustion capture 
processes. AEP will work with B&W on a ``30-megawatt (thermal) pilot 
project in mid-2007 then use the results to study the feasibility of a 
scale 100-200MW demonstration. The CO2 from the 
demonstration project would be captured and stored in a deep saline or 
enhanced oil recovery application.
    In March, AEP voluntarily committed to achieve an additional five 
million tons of GHG reductions annually beginning in 2011. We will 
accomplish these reductions through a new AEP initiative that will add 
another 1000 Mw of purchased wind power into our system, substantially 
increase our forestry investments (in addition to the 62 million trees 
we have planted to date), as well as invest in domestic offsets, such 
as methane capture from agriculture, mines and landfills.
          aep perspectives on a federal ghg reduction program
    While AEP has done much, and will do much more, to mitigate GHG 
emissions from its existing sources, we also support the adoption of an 
economy-wide cap-and-trade type GHG reduction program that is well 
thought-out, achievable, and reasonable. Although today I intend to 
focus on the need for the development and deployment of commercially 
viable technologies to address climate change and not on the specific 
policies issues that must be addressed, AEP believes that legislation 
can be crafted that does not impede AEP's ability to provide reliable, 
reasonably priced electricity to support the economic well-being of our 
customers, and includes mechanisms that foster international 
participation and avoid creating inequities and competitive issues that 
would harm the U.S. economy. AEP supports reasonable legislation, and 
is not calling for an indefinite delay until advanced technology such 
as carbon capture and storage (CCS) is developed. However, as the 
requirements become more stringent during the next 10 to 20 years, and 
we move beyond the ability of current technology to deliver those 
reductions, it is essential that requirements for deeper inductions 
coincide with the commercialization of advanced technologies.
     phased-in timing and gradually increasing level of reductions 
 consistent with technology development that is facilitated by public 
                                funding
    As a practical matter, implementing climate legislation is a 
complex undertaking that will require procedures for measuring, 
verifying and accounting for GHG emissions, as well as for designing 
efficient administration and enforcement procedures applicable to all 
sectors of our economy. Only a pragmatic approach with achievable 
targets, supported by commercial technology, and reasonable 
timetables--that does not require too many reductions within too short 
a time period--will succeed. Past experience with the Clean Air Act 
Amendments of 1990 (which involved a vastly simpler SO2 
allowance trading system for just the electric power sector), strongly 
suggests that a minimum of 5 years will be necessary to have the 
administrative mechanisms in place for full implementation of the 
initial GHG emission targets.
    AEP also believes that the level of emissions reductions and timing 
of those reductions under a Federal mandate must keep pace with 
developing technologies for reducing GHG emissions from new and 
existing sources. The technologies for effective carbon capture and 
storage from coal-fired facilities are developing, but are not 
commercially engineered to meet production needs, and cannot be 
artificially accelerated through unrealistic reduction mandates.
    While AEP and other companies have successfully lowered their 
average emissions and emission rates during this decade, further 
substantial reductions will require the wide-scale commercial 
availability of new clean coal technologies. AEP believes that the 
electric power industry can potentially manage much of the expected 
economic (and CO2 emissions) growth over the course of the 
next decade (2010-2020) through aggressively deploying renewable 
energy, further gains in supply and demand-side energy efficiency, and 
new emission offset projects. As stated above, AEP supports reasonable 
legislation, and is riot calling for an indefinite delay of GHG 
reduction obligations until advanced clean coal technology is 
developed. However, as the reduction requirements become more 
stringent, and move beyond the ability of current technologies to 
deliver those reductions, it is important that those stringent 
requirements coincide with the commercialization of advanced 
technology. This includes the next generation of low- and zero-emitting 
technologies. In the case of coal, this means demonstration and full-
scale deployment of new IGCC units with carbon capture, new 
ultrasupercritical or oxy-coal plants with carbon capture and storage, 
as well as broad deployment of retrofit technologies for carbon capture 
and storage at existing coal plants. The next generation of nuclear 
technology will also play an important role in meeting significant 
reduction targets.
    However, today's costs of new clean coal technologies with carbon 
capture and storage are much more expensive than current coal-fired 
technologies. For example, carbon capture and storage using current 
inhibited monoethanolamine (MEA) technology is expected to increase the 
cost of electricity from a new coal fired power plant by about 60-70 
percent and even the newer chilled ammonia carbon capture technology we 
plan to deploy on a commercial-sized scale by 2012 at one of our 
existing coal-fired units will result in significantly higher costs. It 
is only through the steady and judicious advancement of these 
applications during the course of the next decade that we can start to 
bring these costs down, in order to avoid substantial electricity rate 
shocks and undue harm to the U.S. economy.
    Simply put, our Nation cannot wait a decade or longer to begin the 
development and commercialization of IGCC and carbon capture and 
sequestration technologies. The need for new electric generating 
capacity is upon us now. The need is real and it is pressing. 
Unfortunately, the deployment of advanced coal electric generation 
technology, such as IGCC, is expensive now and will only become more so 
if development is postponed.
    AEP believes that IGCC is the best commercially ready technology 
for the future inclusion of CCS but that the timely development of 
commercially viable CCS technologies will require additional public 
funding. Our IGCC plants will incorporate the space and layout for the 
addition of component to capture CO2 for sequestration, but 
AEP does not plan to incorporate CCS equipment until after the plants 
are operating and the technology is demonstrated and proven.
    Our IGCC plans will be among the earliest, if not the first, 
deployments of large-scale IGCC technology. The cost of constructing 
these plants will be high, resulting in a cost of generated electricity 
that would be at least twenty percent greater than that from 
conventional pulverized goal (PC) combustion technology. As more plants 
are built, the costs of construction are expected to come into line 
with the cost of PC plants.
    To help bridge the cost gap and move IGCC technology down the cost 
curve, there is a need for continuation and expansion of the advanced 
coal project tax credits that were introduced by the Energy Policy Act 
of 2005. All of the available tax credits for IGCC projects using 
bituminous coal were allocated to only two projects during the initial 
allocation round in 2006. More IGCC plants are needed to facilitate 
this technology. AEP believes an additional $1 billion of section 48A 
(of the Internal Revenue Code) tax credits are needed, with the bulk of 
that dedicated to IGCC projects without regard to coal type.
    Along with an increase in the amount of the credits, changes are 
needed in the manner in which the credits are allocated. Advanced coal 
project credits should be allocated based on net generating capacity 
and not based upon the estimated gross nameplate generating capacity of 
projects. Allocation based upon gross, rather than net, generating 
capacity potentially rewards less efficient projects, which is 
antithetical to the purpose of advanced coal project tax incentives. 
AEP also believes that the Secretary of Energy should be delegated a 
significant role in the selection of IGCC projects that will receive 
tax credits.
    On a critical note, the inclusion of carbon capture and 
sequestration equipment must not be a prerequisite for the allocation 
of these additional tax credits due to the urgent need for new electric 
generating capacity in the U.S. AEP also believes that this requirement 
is premature and self-defeating, since the technology to capture and 
sequester a significant portion of an IGCC project's CO2 
does not currently exist. The addition of yet-to-be-developed carbon 
caption and sequestration technology to an IGCC project would cause the 
projected cost of a project to increase significantly, making it that 
much more difficult for a public utility commission to approve.
    AEP also believes that additional tax incentives are needed to spur 
the development and deployment of greenhouse gas capture and 
sequestration equipment for all types of coal fired generation. We 
suggest that additional tax credits be established to offset a 
significant portion of the incremental cost of capturing and 
sequestering CO2. These incentives could be structured 
partly as an investment tax credit, similar to that in section 48A (of 
the Internal Revenue Code), to cover the upfront capital cost, and 
partly as a production tax credit to cover the associated operating 
costs.
    In summary, AEP recommends a pragmatic approach for phasing in GHG 
reductions through a cap-and-trade program coincident with developing 
technologies to support these reductions. The emissions cap should be 
reasonable and achievable in the early years of the program, the cap 
should be set at levels that slow the increase in GHG emissions. 
Allowing for moderate emissions increases over the first decade is 
critical due to limitations on currently available GHG control options 
and technologies. The stringency of the cap would increase over time-
first stabilizing emissions and then requiring a gradual, long-term 
decline in emissions levels. The cap levels should be set to reflect 
projected advances in new carbon-saving technologies, which advances 
AEP believes can be facilitated by Federal incentives. In the case of 
the electric power sector, additional time is necessary to allow for 
the deployment of new nuclear plants as well as the demonstration and 
deployment of commercial-scale gasification and advanced combustion 
facilities fully integrated with technologies for CO2 
capture and storage. Substantial GHG reductions should not be required 
until after the 2020 timeframe.
    Requiring much deeper reductions sooner would very likely harm the 
U.S. economy. For AEP and the electric sector, the only currently 
available strategy to achieve substantial absolute CO2 
reductions prior to 2020 without the full-scale deployment of new 
technologies will inevitably require much greater use of natural gas, 
in lieu of coal-fueled electricity, with the undesirable effects of 
higher natural gas prices and even tighter supplies.
               technology is the answer to climate change
    The primary human-induced cause of global warming is the emission 
of CO2 arising from the burning of fossil fuels. Put simply, 
our primary contribution to climate change is also what drives the 
global economic engine.
    Changing consumer behavior by buying efficient appliances and cars, 
by driving less, and by similar steps, is helping to reduce the growth 
of GHG emissions. However, these steps will never be nearly enough to 
significantly reduce CO2 emissions from the burning of coal, 
oil and natural gas. Such incremental steps, while important, will 
never be sufficient to stabilize greenhouse gases concentrations in the 
atmosphere at a level that is believed to be capable of preventing 
dangerous human-induced interference with the climate system, as called 
for in the U.S.-approved U.N. Framework Convention on Climate Change 
(Rio agreement).
    For that, we need major technological advances to effectively 
capture and store CO2. The Congress and indeed all Americans 
must come to recognize the gigantic undertaking and significant 
sacrifices that this enterprise is likely to require. It is unrealistic 
to assume, and wrong to argue, that the market will magically respond 
simply by the imposition of severe caps on CO2 emissions. 
The result will not be a positive response by the market, but rather a 
severe impact on the economy. Not when what we are talking about, on a 
large scale, is the capture and geologic storage of billions and 
billions of tons of CO2 with technologies that have not yet 
been proven anywhere in the world.
    CCS should not be mandated until and unless it has been 
demonstrated to be effective and the costs have significantly dropped 
so that it becomes commercially engineered and available on a 
widespread basis. Until that threshold is met, it would be 
technologically unrealistic and economically unacceptable to require 
the widespread installation of carbon capture equipment. The use of 
deep saline geologic formations as the primary long-term geologic 
formations for CO2 storage has not yet been sufficiently 
demonstrated. There are no national standards for permitting such 
storage reservoirs; there are no widely accepted monitoring protocols; 
and the standards for liability are unknown (and whether Federal or 
state laws would apply), as well as who owns the rights to these deep 
geologic reservoirs remains a question. Underscoring these realities, 
industrial insurance companies point to a lack of scientific data on 
CO2 storage as one reason they are disinclined to insure 
early projects. In a nutshell, the institutional infrastructure to 
support CO2 storage does not yet exist and will require 
years to develop. In addition, application of today's CO2 
capture technology would significantly increase the cost of an IGCC or 
a new efficient pulverized coal plant, calling into serious question 
regulatory approval for the costs of such a plant by state regulators. 
Further, recent studies sponsored by the Electric Power Research 
Institute (EPRI) suggest that application of today's CO2 
capture technology would increase the cost of electricity from an IGCC 
plant by up to 50 percent, and boost the cost of electricity from a 
conventional pulverized coal plant by up to 60-70 percent, which would 
again jeopardize state regulatory approval for the costs of such 
plants.
    Despite these uncertainties, I believe that we must aggressively 
explore the viability of this technology in several first-of-a-kind 
commercial projects. AEP is committed to help lead the way, and to show 
how this can be done. For example, as described earlier in this 
testimony, AEP will install carbon capture controls on two existing 
coal-fired power plants, the first commercial use of this technology, 
as part of our comprehensive strategy to reduce, avoid or offset GHG 
emissions.
    AEP is also building two state-of-the-art advanced 
ultrasupercritical power plants in Oklahoma and Arkansas. These will be 
the first of the new generation of ultrasupercritical plants in the 
United States.
    AEP is also advancing the development of IGCC technology. IGCC 
represents a major breakthrough in our work to improve the 
environmental performance of coal-based electric power generation. AEP 
is in the process of permitting and designing two of the earliest 
commercial scale IGCC plants in the Nation. Construction of the IGCC 
plants will start once traditional rate recovery is approved.
    IGCC technology integrates two proven processes--coal gasification 
and combined cycle power generation--to convert coal into electricity 
more efficiently and cleanly than any existing uncontrolled power 
plants can. Not only is it cleaner and more efficient than today's 
installed power plants, but IGCC has the potential to be retrofitted in 
the future for carbon capture at a lower capital cost and with less of 
an energy penalty than traditional power plant technologies, but only 
after the technology has been developed and proven.
    AEP is also a founding member of FutureGen, a groundbreaking 
public-private collaboration that aims squarely at making near-zero-
emissions coal-based energy a reality. FutureGen is a $1.5 billion, 10-
year research and demonstration project. It is on track to create the 
world's first coal-fueled, near-zero emission electricity and hydrogen 
plant with the capability to capture and sequester at least 90 percent 
of its carbon dioxide emissions.
    As an R&D plant, FutureGen will stretch--and indeed create--the 
technology envelope. Within the context of our fight to combat global 
climate change, FutureGen has a truly profound mission--to validate the 
cost and performance baselines of a fully integrated, near zero-
emission coal-fueled power plant.
    The design of the FutureGen plant is already underway, and we are 
making great progress. The plant will be on-line early in the next 
decade. By the latter part of that decade, following on the 
advancements demonstrated by AEP, FutureGen and other projects, CCS 
technology should become a commercial reality.
    It is when these technologies are commercially demonstrated, and 
only then, that commercial orders will be placed on a widespread basis 
to implement CCS at coal-fueled power plants. That is, roughly around 
2020. Widespread deployment assumes that a host of other important 
issues have been resolved, and there is governmental and public 
acceptance of CCS as the proven and safe technology that we now believe 
it to be. AEP supports rapid action on climate change including the 
enactment of well thought-out and achievable legislation so that our 
Nation can get started on dealing with climate change. However, the 
complete transformation of the U.S. electricity system will take time, 
and we can't put policy ahead of the availability of cost-effective 
technology. The development of technology must coincide with any 
increase in the stringency of the program.
    What will happen if the Congress does the opposite, and mandates 
deep reductions in the absence of a proven, viable technology? It is 
the proverbial road of good intentions, and only dangerous consequences 
can follow. The most immediate would be a dramatic--and very likely 
costly--increase in the use and price of natural gas by the utility 
sector, since there would be no other identifiable alternative. This 
would have significant adverse impacts on consumers and workers by 
driving up the cost of gas for home heating and cooking, and would 
further increase costs to any industry dependent upon natural gas as a 
feedstock, such as chemicals and agriculture with a further exporting 
of jobs overseas.
    A huge challenge that our society faces over the remainder of this 
century is how we will reduce the release of GHG emissions from fossil 
fuels. This will require nothing less than the complete reengineering 
of the entire global energy system over the next century. The magnitude 
of this task is comparable to the industrial revolution, but for this 
revolution to be successful, it must stimulate new technologies and new 
behaviors in all major sectors of the economy. The benefits of projects 
like FutureGen and the ones AEP is pursuing will apply to all countries 
blessed with an abundance of coal, not only the United States but also 
Nations like China and India.
    In the end, the only sure path to stabilizing GHG concentrations 
over the long term is through the development and utilization of 
advanced technologies. And we must do more than simply call for it. Our 
Nation must prepare, inspire, guide, and support our citizens and the 
very best and the brightest of our engineers and scientists; private 
industry must step up and start to construct the first commercial 
plants; and our country must devote adequate financial and 
technological resources to this enormous challenge. AEP is committed to 
being a part of this important process, and to helping you achieve the 
best outcome at the most reasonable cost and timelines possible. Thank 
you again for this opportunity to share these views with you.

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       Background: American Electric Power's Actions to Address 
                             Climate Change
                        ghg reduction commitment
    American Electric Power (AEP) was the first and largest U.S. 
utility to join the Chicago Climate Exchange (cop and make a legally 
binding commitment to gradually reduce or offset its greenhouse gas 
emissions to 6 percent below the average of 1998-2001 emission levels 
by 2010.
    As a founding member of CCX, AEP committed in 2003 to reduce or 
offset its emissions gradually to 4 percent below the average of 1998-
2001 emission levels by 2006 (1 percent reduction in 2003, 2 percent in 
2004, 3 percent in 2005 and 4 percent in 2006). In August 2005, AEP 
expanded and extended its commitment to a 6 percent reduction below the 
same baseline by 2010 (4.25 percent in 2007, 4.5 percent in 2008, 5 
percent in 2009 and 6 percent in 2010). Through this commitment, AEP 
expects to reduce or offset approximately 46 million metric tons of 
greenhouse gas emissions.
                        operational improvements
    AEP has been able to reduce its carbon dioxide (CO2) 
emission by improving plant efficiency for its fossil-fueled plants 
through routine maintenance and investments like turbine blade 
enhancements (installing new turbine blades) and steam path 
replacements that improve the overall heat rate of a plant and, in 
turn, reduce CO2 emissions. A one-percent improvement in 
AEP's overall fleet efficiency can reduce the company's greenhouse gas 
emissions by 2 million metric tons per year.
    AEP has also reduced its CO2 emissions by improving the 
performance and availability of its nuclear generation. AEP's D.C. Cook 
Nuclear Plant in Michigan set plant records for generation and capacity 
factor in 2005. The plant had a capacity factor (energy generated as 
compared to the maximum possible) of 96.8 percent in 2005 and generated 
17,471 gigawatt-hours (GWH) of electricity. Additionally, AEP will 
invest $45 million to replace turbine motors in one unit at D.C. Cook 
in 2006, which will increase that unit's output by 41 megawatts.
    As a member of the U.S. EPA's Sulfur Hexafluoride (SF6) Emission 
Reduction Partnership for Electric Power Systems, AEP has significantly 
reduced emissions of SF6, an extremely potent greenhouse gas, from 1999 
levels of 19,778 pounds (a leakage rate of 10 percent) to 2004 
emissions of 1,962 pounds (a leakage rate of 0.5 percent).
    managing forests and agricultural lands for carbon sequestration
    To reduce carbon dioxide (CO2) concentrations in the 
global atmosphere, AEP has invested more than $27 million in 
terrestrial sequestration projects designed to conserve and reforest 
sensitive areas and offset more than 20 million metric tons of 
CO2 over the next 40 years. These projects include 
protecting nearly 4 million acres of threatened rainforest in Bolivia, 
restoring and protecting 20,000 acres of degraded or deforested 
tropical Atlantic rainforest in Brazil, reforesting nearly 10,000 acres 
of the Mississippi River Valley in Louisiana with bottomland hardwoods, 
restoring and protecting forest areas in the Sierra Madres of 
Guatemala, and planting trees on 23,000 acres of company-owned land.
             deploying technology for clean-coal generation
    AEP is focused on developing and deploying new techeology that will 
reduce the emissions, including greenhouse gas emissions, of future 
coal-based power generation. AEP announced in August 2004 its plans to 
build a commercial-scale Integrated Gasification Combined Cycle (IGCC) 
plants to demonstrate the viability of this technology for future use 
of coal in generating electricity. AEP has filed for regulatory 
approval in Ohio and West Virginia to build a 629-megawatt IGCC plant 
in each of these states. The plants are scheduled to be operational in 
the 2010 to 2011 timeframe and will be designed to accommodate retrofit 
of technology to capture and sequester CO2 emissions.
      developing technology for co2 capture and storage
    AEP's Mountaineer Plant in New Haven, W.Va., is the site of a $4.2 
million carbon sequestration research project funded by the U.S. 
Department of Energy, the Ohio Coal Development Office, and a 
consortium of public and private sector participants. Scientists from 
Battelle Memorial Institute lead this climate change mitigation 
research project, which is designed to obtain data required to better 
understand and test the capability of deep saline aquifers for storage 
of carbon dioxide emissions from power plants.
    AEP is a member of the FutureGen Alliance, who, along with the 
Department of Energy, will build ``FutureGen,'' a $1 billion, near-zero 
emission plant to produce electricity and hydrogen from coal while 
capturing and disposing of carbon dioxide in geologic formations.
    Additionally. AEP funds research coordinated by the Massachusetts 
Institute of Technology Energy Laboratory and the Electric Power 
Research Institute that is evaluating the environmental impacts, 
technological approaches, and economic issues associated with carbon 
sequestration. The MIT research specifically focuses on efforts to 
better understand and reduce the cost of carbon separation and 
sequestration.
                    renewable energy and clean power
    AEP strongly supports increased renewable energy sources to help 
meet our Nation's energy needs. AEP is one of the larger generators and 
distributors of wind energy in the United States, operating 311 
megawatts (MW) of wind generation in Texas. The company also purchases 
and distributes an additional 373.5 megawatts of wind generation from 
wind facilities in Oklahoma and Texas. Additionally, AEP operates 2,285 
megawatts of nuclear generation and 884 megawatts of hydro and pumped 
storage generation.
    More than 125 schools participate in AEP's ``Learning From Light'' 
and ``Watts on Schools'' programs. Through these programs, ALE partners 
with learning institutions to install 1 kW solar photovoltaic systems, 
and uses these systems to track energy use and demonstrate how solar 
energy is a part of the total energy mix. Similarly, AEP's ``Learning 
From Wind'' program installs small-scale wind turbines to provide wind 
power education and renewable energy research at educational 
institutions.
                             biomass energy
    Until the company sold the plants in 2004, AEP co-fired biomass in 
4,000 MW of coal-based power generation in the United Kingdom 
(Fiddler's Ferry and Ferry Bridge). AEP has been evaluating and testing 
biomass co-firing for its smaller coal-fired power plants in the United 
States to evaluate potential reductions in CO2 emission 
levels.
               energy conservation and energy efficiency
    AEP is implementing ``Energy Efficiency Plans'' to offset 10 
percent of the anneal energy demand growth in its Texas service 
territory. In 2003 alone, AEP invested more than $8 million to achieve 
over 47 million kilowatt-hours (kWH) of reductions from installation of 
energy efficiency measures in customers' homes and businesses. Total 
investments for the 4-year program will exceed $43 million, achieving 
more than 247 million kWh of energy efficiency gains.
                   2005 epa climate protection award
    In May 2005, the EPA selected AEP to receive a 2005 Climate 
Protection Award for demonstrating ingenuity, leadership and public 
purpose in its efforts to reduce greenhouse gases. EPA began the 
Climate Protection Awards program in 1998 to recognize outstanding 
efforts to project the earth's climate.
                                 ______
                                 
                                Summary
    American Electric Power (AEP) is one of the Nation's largest 
electricity generators with over 5 million retail consumers in 11 
states. AEP has a diverse generating fleet--coal, nuclear, 
hydroelectric, gas, oil and wind. But of particular note, AEP is one of 
the largest coal-fired electricity generators in the United States.
    Over the last 100 years, AEP has led the Industry in developing and 
deploying new technologies beginning with the first high voltage 
transmission lines at 345 kilovolt (kV) and 765 kV to new and more 
efficient coal power plants starting with the large central station 
power plant progressing to supercritical and ultra critical power 
plants. During the past decade, American Electric Power has implemented 
a portfolio of voluntary actions to reduce, avoid or offset greenhouse 
gases (GHG). During 2003-05, AEP reduced its GHG emissions by 31 
million metric tons of CO2 by planting trees, adding wind 
power, increasing power plant generating efficiency, and retiring less-
efficient units among other measures.
    We also continue to invest in new clean coal technology that will 
enable AEP and our industry to meet the challenge of reducing GHG 
emissions for the long term. This includes plans to build two new 
integrated gasification combined cycle (IGCC) plants and two-state-of-
the-art, ultrasupercritical plants. These will be the first of the new 
generation of ultrasupercritical plants in the U.S. AEP plans to take 
the lead role in commercializing carbon capture technology. We signed a 
memorandum of understanding (MOU) with Alstom for post-combustion 
carbon capture technology using its chilled ammonia system. Starting 
with a ``commercial performance verification'' project in mid- to late-
2008 in West Virginia, we would move to the first commercial-sized 
project at one of our 450-megawatt coal-fired units at Northeastern 
Plant in Oklahoma by late 2011. This would capture about 1.5 million 
metric tons of CO2 a year, which will be used to enhance oil 
recovery.
    Over all, AEP supports the adoption of an economy-wide cap-and-
trade type GHG reduction program that is well thought-out, achievable, 
and reasonable. We believe legislation can be crafted that does not 
impede AEP's ability to provide reliable, reasonably priced electricity 
to support the economic well-being of our customers, and includes 
mechanisms that foster international participation and avoids harming 
the U.S, economy. A pragmatic approach for phasing in GHG reductions 
through a cap-and-trade program coincident with developing technologies 
to support these reductions will be critical to crafting achievable and 
reasonable legislation.
    The development of these technologies will be facilitated by and 
are dependent on public funding through tax credits and similar 
incentives. AEP is doing its part as we aggressively explore the 
viability of this technology in several first-of-a-kind commercial 
projects. We are advancing the development of IGCC and other necessary 
technologies as we seek to build two IGCC plants and two state-of-the-
art ultrasupercritical power plants. In addition, we are a founding 
member of FutureGen, a groundbreaking public-private collaboration that 
aims squarely at making near-zero-emissions coal-based energy a 
reality. Simply put, however, commercially engineered and available 
technology to capture and store CO2 does not exist today and 
we strongly recommend that any legislation you adopt reflect this fact.
                               __________
      Response by Michael Rencheck to an Additional Question from 
                             Senator Inhofe
    Question. What would the cost be to your company if a federally 
mandated climate policy were instituted that created a price of $85 a 
ton for CO2 emissions?
    Response. It is very difficult to answer this question precisely 
because of the large uncertainties involved. We believe that any 
Federal mandated climate policy that creates a price of $85 per ton 
would either require a very large amount of reductions that would 
result in an $85 price or be a tax set at $85 per ton. If it was a 
carbon tax then the costs would on the order of $10-12 billion per year 
costs for AEP (and its customers) with the majority of the costs being 
carbon taxes paid. A cap and trade program that results in a price of 
$85 would cost AEP significantly less than a tax to the extent 
allowances are allocated at no cost rather than auctioned. We would not 
support legislation that would result in a carbon price of $85 per ton.

    Senator Lieberman. Thanks, Mr. Rencheck. Again, a great 
statement, accepting the future goal of zero emissions, 
accepting the challenge of greenhouse gas emissions. AEP I know 
has supported an economy-wide cap and trade system, but quite 
reasonably saying to us not that we ought to wait to set the 
goals, but we have to acknowledge that all the technologies you 
need to meet the goals are not there now. I think asking for 
some reasonable help from Government will help get you there. 
Thank you for a really good statement.
    The next witness on the panel is Dr. John Fees. We are 
honored to have you here as chairman and chief executive 
officer of the Babcock and Wilcox Companies. Good morning.

STATEMENT OF JOHN A. FEES, CHIEF EXECUTIVE OFFICER, THE BABCOCK 
                      AND WILCOX COMPANIES

    Mr. Fees. Good morning, Mr. Chairman. Thank you, Senator 
Warner. It is great to be here with you. My name is John Fees. 
As the Senator has indicated, I am the chief executive officer 
of The Babcock and Wilcox Companies. We employ about 20,000 
people worldwide that work on advanced energy solutions.
    I am here today to testify to you on a technology that will 
limit carbon dioxide emissions from coal combustion generation 
plants, those that provide essentially all of our coal-based 
electric power. Constructive actions by Government will make is 
possible for this and other near-commercial technologies to be 
ready for wide-scale use in the next decade.
    I ask Congress to ensure that any draft legislation on 
carbon capture set standards that will encourage the emergence 
of improved technologies. During the development of climate 
policy, it will be extremely important for Congress to avoid 
pre-selecting technology winners through legislation or 
regulatory provisions that would be biased towards or against 
specific technologies. Our country's interests will be best 
served if Congress promotes marketplace competition among a 
variety of viable technology solutions.
    B&W has a long history of providing technology solutions 
for efficient baseload electrical generation throughout the 
United States, North America and around the globe. The first 
utility plant in the United States had a B&W boiler designed 
and supplied by B&W. B&W has literally written the book on 
steam, which is difficult to lift, but here it is, and its use 
for power generation. It is the longest continuously public 
engineering textbook of its kind in the world, first published 
in 1875, and recently updated in 2005.
    In addition to our coal interests, we are the only United 
States manufacturer of heavy nuclear components for the 
emergence of the nuclear renaissance that is upon us. Coal 
combustion and nuclear plants provide over two thirds of the 
domestic-generated electricity, and they are the foundation of 
our economic competitiveness, our energy security, and the 
basis of our standard of living.
    With coal, B&W has been an environmental technology leader 
at the forefront of the development of technology solutions for 
things like mercury, SOx and NOx emissions, and particulates. 
In power generation, B&W has been awarded a number of new, 
highly efficient, supercritical coal-fired plants in the United 
States, including, as Mike indicated, the first next generation 
ultrasupercritical coal-fired plant. The plant is about 20 
percent more efficient than the average of the installed based 
on coal-fired technology in the United States. Therefore, it is 
20 percent less coal-intensive and 20 percent less 
CO2-intensive, using advanced technology.
    These plants, with their higher efficiencies, are able to 
produce electricity at these lower carbon intensities and 
ongoing efforts will be able to deliver higher efficiencies in 
the future.
    B&W understands that now we must provide realistic 
solutions and timely solutions to climate challenge. B&W is 
doing just that. We are among the leading developers of 
technology in carbon dioxide at the powerplant for subsequent 
storage. Most notably, we are working to commercialize oxy-coal 
combustion. This technology inherently produces a stream of 
undiluted carbon dioxide, with a powerplant configuration very 
close to that of a conventional plant. The process captures 
essentially all of the carbon dioxide produced by burning the 
coal fuel. The carbon dioxide stream is amenable to geological 
storage or for such commercial beneficial uses such as enhanced 
oil recovery.
    We have been working on oxy-coal combustion technology for 
7 years, and we are ready to move forward with the first full-
scale demonstrations. I am particularly pleased to be on this 
panel with Michael Rencheck, whose company, AEP, is evaluating 
the array of potentially viable solutions for this challenge, 
as he indicated. We are partnered with AEP in the feasibility 
study of oxy-coal combustion, with a goal of retrofitting the 
technology to capture carbon dioxide from the existing plants, 
not new plants, but existing plants.
    We are in a parallel effort with Saskatchewan Power, the 
major utility in Saskatchewan, Canada. That plant envisions 
building a new oxy-coal combustion powerplant that will provide 
300 megawatts of additional electricity for the grid, while 
simultaneously supplying 8,000 metric tons per day of carbon 
dioxide for advanced oil recovery.
    Presuming that both of these projects are successful, we 
will have demonstrated the applicability of oxy-coal combustion 
for capturing nearly all the carbon dioxide produced at both a 
new and an existing powerplant. AEP and Saskatchewan Power, 
along with seven other organizations, are members of our Oxy-
coal Advisory Group. They will witness the operation this 
summer of our large pilot-scale oxy-combustion facility in 
Alliance, OH. We will conduct oxy-combustion test operations on 
three different coals: eastern bituminous, western sub-
bituminous, and a lignite. This will be the largest full-scale 
demonstration associated with this type of technology that ever 
existed. It is funded 100 percent by our company.
    The first deployment of near-zero emission coal plants, 
including carbon capture and storage, could start operations 
around 2012, which is not very far away. Given appropriate 
Government action, we anticipate that a suite of technology 
alternatives will be available for the commercial use and 
storage of carbon in the next decade.
    While publicized technology such as oxy-coal combustion are 
a path toward commercialization, other carbon friendly concepts 
can be expected to emerge from B&W and some of our competitors. 
At B&W, we are working on a portfolio of solutions that is 
being nurtured by about a 300 percent increase in our R&D. We 
will spend this year on R&D nearly $48 million of our own money 
trying to develop these technologies for a currently 
unregulated emission. At B&W, we envision advanced technology 
concepts that will enable reductions in CO2 
emissions and the associated costs. We envision small-scale 
demonstrations of new advanced concepts beginning in the 2010 
timeframe, with scale-up demonstrations around 2015.
    Finally, disposition of captured carbon dioxide is a 
critical dimension toward solving climate change. We and other 
technology developers may be able to provide the technical 
capability for carbon capture to be able to get our hands on 
the carbon well before the resolution of the issues with the 
storage in place. We are encouraged by the increased technical 
and public policy attention towards the storage of captured 
carbon. We strongly advocate for a large-scale demonstration of 
captured carbon projects in the neighborhood of 1 million tons 
stored of carbon per year.
    Thank you for inviting me to testify before the committee.
    [The prepared statement of Mr. Fees follows:]
          Statement of John A. Fees, Chief Executive Officer, 
                     The Babcock & Wilcox Companies
    Chairman Lieberman, Senator Warner and Members of the subcommittee: 
My name is John Fees and I am the Chief Executive Officer of The 
Babcock & Wilcox Companies.
    It is my privilege to present this testimony on the combustion-
based technology alternatives available on the near horizon, which are 
designed to capture carbon dioxide emissions from electric power 
plants.
    The Babcock & Wilcox Company has a rich legacy of providing 
reliable engineered technology solutions for efficient, base load 
electric generation throughout the United States, North America and 
across the globe. We have sustained our business by developing and 
commercializing realistic solutions. For over a century, we have 
successfully met the challenges of power generation and provided the 
technologies and equipment to resolve the associated environmental 
control issues. We provide commercially viable solutions to meet 
emissions control requirements of regulated pollutants. We will provide 
practical technologies to resolve the challenges of greenhouse gas 
emissions as well. B&W is a premier, comprehensive provider of clean 
energy.
    B&W was formed in 1867. The first utility power plant in the United 
States had a boiler designed and supplied by B&W. Steam remains the 
most economic means to transfer the heat energy released by burning 
fuel to the turbine/generator, to produce electricity. B&W has 
literally written the book on steam. ``Steam, Its Generation and Use'' 
a text book produced by B&W, is the longest continuously published 
engineering textbook of its kind in the world, first published in 1875 
and last updated in 2005.
    Our manufacturing capabilities have also powered national security 
since the start of the last century. Teddy Roosevelt's Great White 
Fleet was primarily powered by B&W boilers. At the end of World War II, 
at the surrender of Japan, 395 of the 400 U.S. Navy ships in Tokyo Bay 
were powered by B&W boilers. In the 1950s, B&W became a major U.S. 
manufacturer and supplier of components for the U.S. Navy's fleet of 
nuclear powered ships and submarines which are now built in Groton, 
Connecticut and Newport News, Virginia.
    Beyond defense, nuclear power is a route to carbon-free electricity 
generation for civilian purposes. We are the only U.S. manufacturer of 
the heavy nuclear components that will be required for the emerging 
civilian nuclear power plant build-up. As such we anticipate playing a 
critical role in the coming nuclear renaissance to provide clean, safe 
nuclear power. I could easily write a substantial amount on nuclear 
power and its potential to help reduce carbon emissions, but the 
principal focus of this testimony is coal fired generation and carbon 
capture.
    Coal-fired and nuclear power plants provide the vast majority of 
the reliable and lowest cost electricity generation in this country. 
Coal-fired and nuclear power plants combined comprise 41 percent of the 
Nation's electric generation capacity. However, due to their cost 
effectiveness, these plants are highly dispatched, and actually produce 
69 percent of all the electricity in the country. These technologies 
are the foundation of our economic competitiveness, energy security, 
and increasing standard of living.
    B&W's position as a premier developer and manufacturer of coal 
technologies and facilities is widely recognized. Thirty-eight percent 
of U.S. coal-fired boilers have been designed and manufactured by B&W. 
We supply around one-third of all environmental control technologies 
and equipment to the U.S. coal power marketplace. We have been selected 
to provide many of the emission control technology solutions used by 
electric power generators to meet the strictest requirements under the 
Clean Air Act, the Clean Air Interstate Rule (CAIR) rule and various 
stringent air permitting requirements in the states. B&W has also been 
awarded a number of the new, highly efficient supercritical coal fired 
power plant projects, including the first, next-generation, high 
efficiency Ultra Supercritical Power plant in the U.S.
                    advanced coal power technologies
Efficiencies
    Efficiency at a power plant is measured by the ratio of the 
electricity generated compared to the energy in the fuel used. 
Increasing steam temperatures and pressures provides more energy to the 
steam turbine, enabling higher efficiency and allowing the same amount 
of electricity to be generated by burning less coal. This results in 
less production of CO2 and pollutants derived by coal 
combustion, reduced fuel costs and smaller and less costly power plants 
for the same power generated.
    Many existing U.S. coal-fired plants operate with relatively low 
steam temperatures and pressures (subcritical steam conditions). These 
old plants are generally used during high electricity demand periods 
because of the low generation efficiency, typically in the 30-35 
percent range. When steam conditions exceed the combination of both 
760F and 3200psi, the steam (or working fluid) is said to reach 
supercritical conditions. Efficiencies of these plants exceed 37 
percent. Replacement of a relatively common 37 percent efficient 
subcritical unit with a 40 percent supercritical unit of same 
generating capacity would reduce CO2 emissions by about 8 
percent. Supercritical plants with efficiencies around 40 percent are 
already commercially available and being increasingly deployed. R&D 
projects with advanced materials and manufacturing methods are underway 
to permit increases of working fluid temperatures to 1200F, and then to 
around 1400F. When this happens efficiencies will rise above 43 percent 
toward 48 percent. Carbon intensity will be reduced by a further 20 
percent versus current modern plants.

[GRAPHIC] [TIFF OMITTED] 55929.003


    It is important to note when evaluating coal plant performance, 
that efficiency numbers, taken at face value, can be misleading. The 
U.S. convention for calculating efficiency, called ``higher heating 
value (HHV),'' is different from that used in Europe, ``lower heating 
value (LHV).'' One of the factors responsible for the difference is the 
way moisture in coal is treated in the efficiency calculation. There 
are other factors that enter into the calculation as well. The result 
is that, for virtually identical plant performance (coal fuel in vs. 
power out), the U.S. efficiency (HHV basis) would be reported as being 
up to 5 percent lower than European efficiency (LHV basis).
Pollutants
    The emissions from pulverized coal-fired power plants have been 
reduced tremendously over the past three decades, with this achievement 
due in part to market based regulatory structures pulling technology 
forward for deployment. Great strides have been made in SO2 
and NOx reduction through scrubbing and selective catalytic reduction 
technologies. Fabric filters and improvements in electrostatic 
precipitators have reduced particulate emissions and more recently, 
technologies such as wet electrostatic precipitators and sorbent 
injection are capable of further reductions including fine particulates 
(PM2.5).
    With technologies available to address regulated pollutants and 
major programs to retrofit the existing fleet in progress, public and 
industry attention turned to mercury. As a result, commercially 
available mercury control, for both eastern and western coals are being 
deployed. Now, concerns about climate change have intensified leading 
to the pressing need for the development of ways to address carbon 
dioxide emissions.
Carbon Dioxide Capture
    There are several promising technologies to address capture of 
CO2 from the use of fossil fuels and all are dependent upon 
development of a safe means of permanent storage. Assuming storage 
technologies can be commercialized and enabled, the challenge for coal 
combustion processes becomes one of extracting the CO2 from 
the combustion process. A modern power plant using sub-bituminous coal 
will produce about 1,800 lbs. of CO2 per MWh. In an 
uncontrolled state, the CO2 is diluted in the exhaust gas to 
about 15 percent of its volume; this creates a challenge to produce a 
concentrated CO2 stream for storage.
    Three approaches are presently seen as plausible carbon capture 
techniques: (1) Oxy-Coal Combustion for new and existing plants that 
burn coal, (2) amine or other solvent scrubbing for new or existing 
plants that burn coal, and (3) pre-combustion, or integrated 
gasification combined cycle, if the IGCC system is designed and fitted 
with facilities to accommodate CO2 capture. Oxygen 
combustion produces a concentrated stream of CO2 in the 
combustion process by supplying pure oxygen instead of air for 
combustion eliminating nitrogen which dilutes the CO2 
concentration. Pre-combustion and amine or other solvent scrubbing 
processes extract the CO2 from the gas stream using a 
regenerable solvent such as monoethanolamine (MEA). Some current 
studies now show oxygen combustion as the least costly while other 
studies lean toward pre-combustion or advanced amines, indicating that 
technology development is underway and competition is strong. None of 
the technologies has been demonstrated at significant size in an 
integrated full-scale system for electricity generation.
Oxy-Coal Combustion
    The Oxy-Coal combustion process is based upon equipment and systems 
that are already commercially available at the required scale. However, 
there are integration requirements, operating parameters and final 
designs that require verification at larger scale. Oxygen combustion 
and the major operational processes have been demonstrated at pilot 
scale. B&W has been actively engaged in oxy-coal combustion R&D since 
the late 1990s. We will complete a large pilot demonstration this 
summer with a variety of coal types at our 30 MWth 
combustion test facility.
    A new 300 MWe commercial plant using this technology is being 
developed by B&W for the SaskPower Corporation to be located at 
Estevan, Saskatchewan. At this facility the captured CO2 
will be used for enhanced oil recovery.
    In addition, American Electric Power, one of the largest utilities 
in the U.S., has announced it is undertaking a feasibility study with 
B&W with the proposed objective of retrofitting one of its existing 
coal fired power plants with B&W's Oxy-Coal combustion technology for 
carbon capture and storage (CCS).
    In spite of the additional cost to concentrate a CO2 
stream for storage, recent studies show oxygen combustion to be 
competitive with the other capture technologies. Since this technology 
utilizes conventional equipment, it is likely to have a considerably 
lower deployment and operational risk, and has potential for retrofit 
to some of the existing fleet of conventional plants.
    Oxygen combustion provides a means of replacing the nitrogen in air 
with CO2 gas exiting the combustion chamber. By 
recirculating a portion of the combustion stream the oxy-coal 
combustion plant effectively replaces the nitrogen in a conventional 
system with CO2 thereby inherently creating a concentrated 
CO2 stream for permanent storage. The net effect is that the 
system looks and acts like a conventional power plant with which power 
plant operators are comfortable, but which is capable of near zero 
emissions given carbon storage. Additionally, by excluding air conveyed 
nitrogen from the combustion chamber there is a sharp reduction in 
nitrogen oxide emissions from this technology, which is likely to 
obviate the need for selective catalytic reduction facilities.
    Although the properties of the flue gas differ from those with air 
firing due to the lack of nitrogen, it has been found that with the 
proper recycle ratio, an existing boiler can be converted to oxy-coal 
combustion without changing heat transfer surfaces and only 
experiencing a small impact on fuel efficiency in the boiler island. 
For new units, optimized arrangements are being studied that offer some 
reduction in equipment size and improved performance.
    The first generation of full-scale units is intended to require 
minimal change to the conventional power plant as reasonable to permit 
retrofit application and minimize risk. Advanced air separation 
technologies and optimization of the product gas specification and the 
cleanup/compression process are also expected to improve both 
performance and cost.
Development of Other Innovations
    While we see oxy-coal technology as one of the potential carbon 
management solutions for the relatively near future, B&W is also 
developing a portfolio of potential solutions--including some that are 
radically different from any that are currently approaching readiness 
for full scale testing. We have increased our R&D budget by 300 percent 
in the last 5 years, with the great majority of this increase directed 
toward advanced technology. With similar amounts planned on an ongoing 
basis, we envision development of new advanced techniques for the 
capture of CO2 (in addition to oxy-coal combustion); and 
materials developments that will both greatly increase the efficiency 
of new coal plants and synergistically enable reductions in carbon 
capture cost impacts. We envision small scale demonstrations of new 
advanced concepts beginning in the 2010 timeframe, with scale-up 
demonstrations anticipated around 2015.
Carbon Storage
    Disposition of captured CO2 is a critical dimension to 
solving climate challenges. Providing technologies to effectively 
capture CO2 will accomplish little if storage is not 
simultaneously enabled. We, and other technology developers, may be 
able to provide the technical capability for carbon capture well before 
resolution of the issues associated with large scale storage. We are 
encouraged that issues pertaining to actual storage of captured 
CO2 are drawing increasing technical and policy attention. 
Legislation must support the acceleration of technical efforts 
promoting large scale carbon injections associated with advanced coal 
technology and storage. In addition there is a need for clear policies 
regarding legal ownership of and liability for the injected 
CO2, and concise communications to overcome local concerns 
with large annual injections at storage sites. We believe that unless 
the regulatory and technical obstacles to the long-term storage of 
carbon dioxide from electric power plants are resolved, these will 
become the limiting factors in reducing carbon emissions.
Closing Comments
    B&W believes that from a technology standpoint that CO2 
storage from power plants could commence wide scale around 2020. The 
first wave of near-zero emission coal plants are expected to start 
operation around 2012-2013. As industry learns from these early 
commercial deployments, we will make adjustments to improve efficiency, 
competitiveness and performance. After this, around 2015, commercial 
availability of CCS technologies should be available for new plants and 
retrofit of some existing plants. These will take 4-5 years to build 
before the plants come online and begin storing CO2 in the 
2020 timeframe.
    Technology development, economic and market incentives are 
essential to accelerate the timeframe for implementing widespread 
carbon capture deployments on a commercial scale. This will only be 
successful if legislation does not favor one technology over another.
    We are confident that our Oxy-Coal Combustion technology can 
provide the most cost-effective solution for some power plants, while 
other technologies are better suited for others.
    We are encouraged by indications that a consensus is building 
toward a market-based system for carbon management. A market-based 
system should encourage an efficient allocation of resources for 
reductions of carbon emissions both at new plants and, where tenable, 
at some existing plants. It is important to recognize that to 
significantly reduce our Nation's CO2 emissions, capture of 
CO2 will have to occur at a number of existing fossil-fired 
plants.
    B&W is in general agreement with many of the perceptions and 
recommendations cited in the MIT report, ``The Future of Coal'':
     The U.S. Government should promote a suite of technology 
approaches to CCS, and avoid picking winners. Biasing RD&D funds 
towards one technology and/or biasing commercial deployment incentives 
will only discourage investment in technologies that have significant 
potential for marketplace acceptance, improved performance and reduced 
cost.
     An array of large scale CCS projects should be implemented 
in the near to mid-term, with the  1 million ton of captured carbon 
dioxide per plant annually stored at a variety of CO2 
storage sites across the country.
    To facilitate the attainment of commercial readiness of CCS 
technologies, the government will need to provide funding levels well 
in excess of those traditionally available through DOE's Fossil Energy 
programs.
    Thank you for the privilege to testify before the subcommittee on 
these critically important matters.
                                 ______
                                 
                              Major Points
     Society will be best served if an array of competitive 
technologies is available to meet the climate challenge. The promise of 
marketplace competition will stimulate investment in technology 
development. Therefore, while considering carbon management 
legislation, Congress should reject provisions in bills that would 
explicitly or implicitly provide preferential advantage or disadvantage 
to any potentially viable technology. The regulatory system must be 
based on a ``level playing field''.
     Many ways will emerge to capture the CO2 that 
would be otherwise be emitted from coal power plants. The three major 
approaches with the potential to be commercially available in the near 
to mid term may be categorized as oxygen combustion, post-combustion 
scrubbing using sorbents such as amines and other chemicals, and pre-
combustion IGCC, if configured to capture CO2. Of these, 
studies by B&W and others lead us to believe that oxycombustion shows 
great promise in terms of cost effectiveness and nearness to 
commercialization.
     B&W continues to make significant technical progress in 
oxycombustion. We are on track to deploy the first commercial scale 
near zero emissions coal power plant with carbon capture and storage in 
North America using oxycombustion technology. B&W also has a Memorandum 
of Understanding to undertake a feasibility study to retrofit an 
existing U.S. coal-fired power plant for CO2 capture and 
storage utilizing Oxy-Coal Combustion technology.
     It will be necessary to have clear policies regarding 
legal ownership of and liability for the injected CO2; 
concise communications to overcome local concerns with large annual 
injections at storage sites; and, accelerated demonstrations of several 
large scale CO2 injection projects each on the order of  1 
million tons annually.
     We anticipate that the first wave of commercial carbon 
capture plants will begin operation around 2012. Through lessons 
learned at these plants and with additional innovations/modifications, 
improvements in efficiency and cost will be attained with subsequent 
installations. We believe commercial storage of CO2 can 
commence on a large scale in approximately 2020.
     Deployment of coal combustion units with higher steam 
(working fluid) conditions, such as those in modern supercritical steam 
plants, will result in higher efficiency. Increasing the efficiency 
reduces the intensity of CO2 emissions, as less coal fuel is 
required to generate a unit of electric power. Efficiency increases 
also cause proportionately lower generation of traditional pollutants. 
Very low levels of pollutant emissions can be attained with modern 
environmental control facilities.

    Senator Lieberman. Mr. Fees, thanks very much.
    Because a vote may go off sometime in the next half hour, I 
am going to limit us each to five minutes of questioning so 
each of us can get a chance to ask a question.
    The totality of your testimony to me is both impressive and 
encouraging, because you said, in very many ways, that there 
are technologies now available that if implemented or acquired 
and dispersed throughout the economy, can begin to reduce 
greenhouse gases, and also have a great effect on our energy 
security and on air pollution.
    I go back to what you said, Mr. Rencheck, I think it is 
important that even where the technologies are not exactly 
where we will need them eventually to be, that should not be an 
excuse for not setting out in law a series of goals, because 
everybody knows we are not going to hit the goals overnight, 
alongside support for the increasingly advanced technologies 
that will enable us to do that.
    The other thing that strikes me, and may I will just ask a 
few of you to comment on it, is that some of the pioneering 
work that you are doing is done on the presumption that global 
warming is real and that at some point before long, the 
Government is going to require people to do something about it. 
Let me ask Dr. Little and Mr. Fees is you would comment on 
that.
    Mr. Little. Senator, I have the great privilege of 
traveling the world over, and I talk to politicians and 
Government officials of all parties in all places. What I see 
everywhere I go is a tremendous interest in this subject, and 
recognition that somehow and some way there will be strong 
Government action to deal with the issue. The forms and 
opinions may differ about what it would take, but around the 
world there is a strong view that there will be something put 
in place.
    So our company is very well recognizing that we need to be 
a global leader in this technology and is pushing ahead very 
aggressively in developing technologies even ahead of the 
missions requirements.
    Senator Lieberman. Thanks.
    Mr. Fees.
    Mr. Fees. We as a company are a technology provider. The 
thing that I need to be able to do is when Mr. Rencheck needs a 
solution, I have to have it.
    Senator Lieberman. Right.
    Mr. Fees. We believe that based upon where the discussion 
is going, the dialogue that we are having in the country, that 
there is going to be some type of limits and regulation 
associated with carbon and we want to be there to be able to 
serve our clients and to be able to get it done. That is why we 
are spending basically $49 million of our own money on an 
unregulated substance at this point.
    Senator Lieberman. I am not asking you to endorse any 
particular program, although if you would like to endorse the 
Lieberman-McCain bill, I wouldn't object, but I take it that 
from a purely business point of view, the sooner the Government 
sends a signal that this is happening, this is going to happen 
as a matter of law, the better it is for the work that you are 
doing. Correct?
    Mr. Little. More than anything, we need clarity of purpose 
to have a long-term view of where the country, where the globe, 
and where our company is going. So clarity of purpose and 
definition of goals is critical to developing technologies for 
success.
    Senator Lieberman. Mr. Rencheck.
    Mr. Rencheck. Regulatory certainty is absolutely important 
in our business. The assets that we build last 40, 60, 80 
years. Without that framework and an understanding of what the 
regulatory framework will entail, then it certainly creates 
great distress in making incremental decisions about asset 
additions. In our business, we have an obligation to our 
customers to keep our rates as low as reasonably achievable, 
and at the same time we have an obligation to protect the 
environment. So we have to keep all of this in balance.
    Senator Lieberman. Dr. Chiang, did you want to answer that?
    Mr. Chiang. Yes. From the point of view of a small company 
like ours, and we are relatively small at this point, the most 
important thing is giving us the opportunity to practice our 
technology. Technology development is a contact sport. Our 
competitors are very able and, as I said earlier, they are not 
too far behind us. They have the benefit of Government action 
over a couple of decades.
    So any form of legislation that allows us to get the 
technology out to where we can practice it and learn from it 
and develop the best practices in the long term is of great 
benefit.
    Senator Lieberman. Mr. Fees, do you want to add something?
    Mr. Fees. Yes. I think there are two things. One is that I 
think industry and our clients need some level of certainty. I 
think this dialogue is creating a level of uncertainty.
    Senator Lieberman. Right.
    Mr. Fees. So I think the sooner we can get to that point, 
the more we can sustain our investments and know where we are 
going as a company.
    The other thing that I think is important, the second 
point, is that the amount of carbon that we are talking about 
sequestering is very large. If you take just coal-fired 
generation today that exists, and if you want to sequester half 
of it, you need an infrastructure that is anywhere, depending 
on whose calculations you believe, to do half of it, one to 
three times the infrastructure for dealing with oil in the 
United States today. So this is a big deal.
    I believe that we will be there as a technology supplier 
for technologies that will put the carbon in your hand, but 
will we be prepared to be able to put it somewhere is the real 
question. The investment is going to be huge. It took us 100 
years as a country to establish that infrastructure that we are 
enjoying today. I think we have to get our minds wrapped around 
the limit that the size of that challenge presents.
    Senator Lieberman. That is a very important point. We 
don't, at this point. I will just say, because my time is up, 
that in addition to giving you as soon as possible a legal and 
regulatory certainty about what is happening, the other thing 
your testimony says is that we have a parallel responsibility 
to continue to invest public funds either directly or through 
investment tax credits in stimulating as rapidly as possible 
the existence of these technologies that we don't fully have 
yet at competitive prices. I am very proud that Senator McCain 
and I have included such a section in our bill.
    Senator Warner.
    Senator Warner. Thank you, Mr. Chairman. I want to commend 
you and others for bringing this distinguished panel. This has 
really been a fascinating session for me. I put myself in the 
category of one who is in the learning process, even though I 
have been on this committee now two decades. We really haven't 
come to grips with this, although we had pioneers like Mr. 
Carper--he is not listening to what I am saying--but he has 
been out here with bills. How many bills have you introduced in 
the last 5 years?
    Senator Carper. Five.
    Senator Warner. Five. He has given them all to me and I 
have looked at them and filed them.
    [Laughter.]
    Senator Warner. We really have to get down to work on this 
thing.
    To what extent can you as an industry, without getting into 
antitrust troubles and competitive troubles, try and put some 
benchmarks of what you really want to see in a Federal 
regulatory program together. Then we will have to do the final 
analysis, but it seems to me it would help us if we could get 
some common starting place.
    Do you want that program to not only have a regulatory 
aspect like we have been successful with the sulfur one? Or do 
you want a grant program out here, direct Federal grant 
subsidies? Do you want some tax relief for the heavy 
investment, Mr. Fees, that your company has made and others?
    Where are we in this thing? Have you got any consensus on 
that? Why don't we just start off, Mr. Little?
    Mr. Little. Senator, if I may, GE, of course, is a member 
of the U.S. Climate Action Partnership, where we have collected 
our resources with a number of nongovernment organizations and 
other very large companies, including, as Senator Boxer 
mentioned, several others including GM, which has just joined. 
That group has put forward some ideas of a policy framework to 
be used as a starting point for discussion about what 
Government might want to consider.
    In there, we talk about a cap and trade regime to enable 
the Government to move forward. As you well know, we have had a 
15-year-old sulfur dioxide cap and trade regime that has 
worked, we think, quite well. That is a policy framework.
    Senator Warner. So we use that as sort of a blueprint and 
build on that?
    Mr. Little. That is what we think, Senator. Yes.
    Senator Warner. Now, what about grants and tax?
    Mr. Little. Well, as you well know also, we have the 
production tax credit, which is supporting wind power today. 
Stability in that regime has had a huge impact. You may know 
that it has been an on again-off again sort of a program, and 
you can see the industry flip on when it is on, and flip off 
when it is off. We have had stability for the last 2 years, and 
that has ignited a tremendous run toward wind power in the 
United States so we think it is a very successful thing. So 
that model also works.
    Senator Warner. I am still a little bit of a skeptic on 
whether the wind power is returning enough net gain into the 
whole energy system, but we really did do some heavy lifting 
for the wind power. They were very clever. Their lobbyist got 
in here and got these provisions. I am quite concerned about 
you are trying to do down in Babcock and Wilcox.
    Mr. Fees. Yes, I think a very strong R&D tax credit for 
work that is going on that is directed towards carbon capture 
technologies would be very beneficial for the industry. We are 
spending a lot of money without a broader-based benefit there 
already, but it would be very, very helpful to encourage 
industry.
    Senator Warner. That is not to be drawn tight enough so as 
to not let it leak out and give tax relief elsewhere and 
concentrate on carbon capture?
    Mr. Fees. I think if we dilute it, it will become a 
problem.
    Senator Warner. Yes.
    Mr. Fees. The other thing is that there is a lot of talk 
about capturing carbon and sticking it in the ground. That is 
really the available thing that we can see in front of us. If 
you go into the decade that goes beyond 2020, into the 2020 
timeframe, we are working on some technologies that would make 
very safe forms of carbon, like bicarbonate, which is an inert 
substance that could be disposed of in regular waste 
repositories at no harm to the environment, so anything we can 
do to encourage that technology to move forward.
    We are working hard to look at how we can do that. Can we 
avoid all this infrastructure that we have to build to stick 
this billions or trillions of tons into the earth by coming up 
with another form and another technology to be able to make 
that happen? We think the technology road map for that is into 
the 2020-plus timeframe, and whatever we can do to move that 
forward would save trillions of dollars in capital investment 
in the United States to put holes into the earth and pump it 
into the ground.
    So I think a good strong R&D tax credit and taking a look 
at those advanced technologies in the future and how could we 
bring those forward would be very helpful.
    Senator Warner. Yes?
    Mr. Rencheck. We are members of the Edison Electric 
Institute. We have taken a look that a cap should be applied to 
all the economy in all sectors on all greenhouse gases. It 
should be an unfettered cap and trade framework that takes a 
look at levels and gradually implements them over time, 
allowing a timeframe for technology to take hold and take root.
    We also think we should be able to use the unrestricted use 
of real and verifiable domestic and international offsets. Also 
as part of a cap and trade system, we ought to be able to take 
a look at historic caps, and then provide those cap and trade 
allowances to companies who need the technology to advance the 
technology.
    Also from that perspective, companies should be given 
credit for the voluntary actions they have already taken over 
the past several decades. We are going to need long-term public 
and private funding for the development of technology. It is 
not going to happen overnight. With increased funding and with 
the increased resources, it can move faster.
    We have also the need for regulatory pre-approval for 
utility cost recovery for energy efficiency and demand side 
management to help stimulate those programs and get them off 
the ground and running.
    Senator Warner. My time is up, and we have to stick to it. 
Edison, I have worked with them for years. They have an 
established record. Could they bring forth, for instance, some 
assessment? All of the colleagues to my left here have bills 
in. I have not yet put anything in. But you have been a 
pioneer, the Senator from Delaware, for years on this issue. I 
need some help in evaluating the merits of their different 
pieces of legislation as we reach towards trying to get a 
consensus on this committee.
    I tell you, I want to join to move this ball forward, but 
there are some very distinguished colleagues to my right here 
who are not quite as enthusiastic as I am. This is going to be 
a hard fought legislative battle. So the more help we can get, 
and the more concept of we are going to take carefully a step 
at a time, and not take an enormous leap, and then end up 
failing and then losing all the benefit of the momentum and the 
interest you have now.
    I thank the Chair.
    Senator Lieberman. Thanks, Senator Warner. I think you and 
I should talk, but I would like to see us sometime soon work 
towards some just working sessions with some of these folks and 
other stakeholders in this discussion, which is important. It 
remains controversial in some quarters, but I appreciate very 
much your commitment to try to move the ball forward.
    Senator Carper, you are much appreciated on this end of the 
panel for your leadership here over the years.
    Senator Carper. I am happy to yield to the Chairman of the 
full committee, if she would like.
    Senator Boxer. No. Go ahead.
    Senator Carper. Thanks for sharing. This has been 
fascinating and most helpful. We are grateful for your 
participation and your counsel.
    Several of you have said words like ``clarity of purpose,'' 
and ``regulatory certainty.'' Several of you have talked about 
Federal support for basic R&D. A couple of you talked about the 
need for the Federal Government to help commercialize 
technologies, whether it is using our purchasing power on the 
defense side or the civilian side, or both. Some of you have 
alluded to tax policy, which would incentivize the production 
of or the purchase of certain kinds of technology.
    I am going to be just real frank with you. Going back to 
what Senator Warner said, we kind of fall apart as a body, and 
with the Administration, when we get to the point of putting 
mandatory caps on carbon emissions. There is a concern, and I 
won't say his name but he is sitting right over there, and used 
to be a Governor of a State, but he has a huge concern. He has 
watched the economic meltdown of his State over the last decade 
or so. He has a huge concern that we not do anything that will 
further that economic disadvantage for his State or for our 
country to put us in an uncompetitive position with somebody 
like China, which may not have any intention of doing anything 
about CO2 for some time.
    In my heart, I believe it is possible to forge these new 
technologies, to address CO2 emissions, and frankly 
to reduce SOx, NOx and mercury from our utility plants, and to 
do it in a way that fosters economic growth, that leads to 
technologies that will lead to new products that we can sell 
not just in this country, but around the world.
    I would welcome any comments. We will just start with you, 
Dr. Chiang, to just respond to that potential.
    Mr. Chiang. Yes. With respect to what Government can do, I 
think that we can think about it, or at least I think about it, 
in terms of how far off is the opportunity and therefore how it 
is addressed. So for things that are essentially ready today, a 
tax incentive of course would work very well, but if it is 
technology that needs to be developed, you might need to find a 
different route.
    So for this plug-in technology that I have been talking 
about, we believe it is here and ready today so a tax incentive 
is a very appropriate way to accelerate that.
    But looking forward, clearly there is going to need to be 
more R&D. We are at the beginning of a new wave in battery 
technology to compete and to grow. For instance, we hear 
regularly about overseas efforts, new national projects in 
Japan. There is a pan-European effort that is attempting to 
unite 50 research labs and industry to develop better 
batteries. That is what we are competing against. So near-term, 
we need to compete with that.
    But in the area of vehicles, the main thing that we want to 
do is to enable the American auto companies to leapfrog their 
competitors. They are our customers, and by doing that, you 
create a lot of jobs in the United States and that is very 
significant.
    Senator Carper. Dr. Little.
    Mr. Little. Senator, I argued earlier that we see a trend 
around the world of trying to do something to go toward greener 
technologies, as I will call them. I believe the United States 
should be a leader in that. I believe our industry should be 
strong and in every phase of it in a portfolio of technologies 
leading the way. I would rather see our country lead than 
follow in nuclear, lead than follow in solar, lead than follow 
in wind.
    Wind is a very interesting example for me. The European 
manufacturers were long the leaders in wind technology, and 
they were importing things into the United States. GE took a 
hold of the wind business from Enron's bankruptcy and that 
business today is a $5 billion business for us. Many U.S. jobs 
are associated with that. That business is as big today as our 
commercial aviation business, as our conventional fossil fuel 
gas turbine and steam turbine business, and is a very, very 
strong business with very high technology and investment.
    I have seen in our gas turbine business us take emissions 
of NOx 15 years ago at 200 parts per million. Today, we can 
make in the same turbines three parts per million of NOx, a 
tremendous technology advance. At the same time, efficiency has 
improved and costs have gone down. That was all driven by a 
societal thrust to drive emissions down, and our company has 
benefitted from that and is able thus to develop high 
technology products that we export all over the world. I think 
that is a great thing for America's economy.
    Senator Carper. Thank you.
    Mr. Stanway, go ahead.
    Mr. Stanway. Another point that I would just like to make 
is there are technologies around today which are perfectly 
economic. You look at them, and a small business can invest in 
them and make a 2-year simple payback. One of the issues here 
is not only do we need to do R&D on new technologies, is we 
need to focus on how do we sell the ones which exist on the 
market today transactionally efficiently.
    Some of these technologies are seriously struggling to make 
inroads not just in the United States, but across a lot of 
industrialized economies. So how do we move that more 
efficiently? I think that is another area that we need to look 
at because it is another area, potentially, of great U.S. 
competitiveness.
    The American economy is good not only both at innovation 
and R&D, but also in the ability to sell.
    Senator Carper. One of the things that my colleague, 
Senator Boxer, has been focusing on is how can the Government 
set a good example with respect to reducing our own levels of 
emissions. For example, I was looking at the light bulbs in the 
ceiling of my office yesterday. They are all incandescent light 
bulbs.
    I don't know what these are. They feel pretty warm. There 
is so much that we can do in terms of helping to commercialize 
these technologies, not just the basic R&D. It is not just 
using the U.S. Government's purchasing power to commercialize 
these technologies, but it is the tax policy as well.
    Mr. Rencheck, my time has expired, and more than expired. 
The Chair has been very generous. Let me halt for now, and I 
will come back. I have to slip out, but I will be right back.
    Thank you.
    Senator Lieberman. Thanks, Senator Carper.
    Senator Voinovich.
    Senator Voinovich. Thank you, Mr. Chairman.
    The question that I would like to have answered is, and I 
was at a meeting a couple of weeks ago, and your folks were 
there from Babcock--we've got it; we capture carbon; we can do 
sequestration. Another gentleman came into my office that wants 
to do coal to liquid, and, we are going to capture carbon; and 
we are going to sequester it.
    When is this going to be ``commercially viable'' in terms 
of your best guess? Because if we are going to deal with this 
whole program, and we go to something like cap and trade, it 
should be reflective of reality. I ran into Carol Browner a 
couple of weeks ago and she said, cap and trade; that is the 
thing to do. We will cap and trade, and by golly, everybody 
will go out there and they will spend the money to get the 
technology that we need to capture carbon and sequester it.
    I said, hold on a minute. I said, do you really understand 
where the technology is and how many years it is going to take 
to develop so it is commercially viable, for example, to put 
capturing carbon on the back end of a retrofit of a coal-fired 
facility we have today?
    So I would like to ask all of you, what is realistic in 
terms of when this would come on to the point where it is 
commercially viable? That is No. 1. No. 2, the issue of how to 
pay for it. Can the private sector do it? Or is the Federal 
Government going to have to pitch in? Or should we look more 
internationally and say this whole issue of capturing carbon 
and sequestration is something important to the world in terms 
of doing something about greenhouse gases? So No. 1, how long 
is it going to take realistically to do it? Who is going to pay 
for it?
    The last one would be new source review, which I understand 
is just a tough one for everybody out there because they don't 
know if they do certain things whether it is subject to new 
source review or not because this thing is in limbo right now.
    Thank you.
    Mr. Rencheck.
    Mr. Rencheck. Yes, to address that, we are moving forward 
with carbon capture and sequestration projects. The first will 
be a product validation in roughly the 10 megawatt electric 
scale for a back-end retrofit. We are also working with B&W on 
an oxy-coal process. So that will pan out whether or not it can 
be scaled, and the scale that we would be looking is in the 
2011 to 2012 timeframe for the first time.
    We are also working with General Electric on IGCC plants 
for installing those from an efficiency perspective.
    Senator Voinovich. The IGCC does a good job on NOx, SOx, 
carbon and mercury, and the potential to do something about 
carbon, and become more efficient, so you are going to emit 
less gases.
    Mr. Rencheck. That is correct.
    Senator Voinovich. But the issue still is, even when you 
are building these plants, you are still going to have the 
carbon problem.
    Mr. Rencheck. That would work on the capture piece, so we 
would see the first type of demonstration projects that capture 
in that 2011 timeframe. At our Mountaineer facility, we are 
also working on a sequestration project. For the past several 
years, we have worked with the DOE and Battelle and others in 
drilling a 9,200 foot hole into the earth and studying the 
geology. We now understand the geology. We understanding the 
saline aquifers. We are moving to the next step with the carbon 
capture process now to begin the injection of CO2 
into those aquifers and begin to study its behavior.
    We hope start doing that with approximately 100,000 tons a 
year at the end of 2008, and are working that in parallel with 
the back-end capture.
    Senator Voinovich. What we need to make good decisions here 
is what is the reality of this in terms of, and I don't mean 
dragging feet, but trying to move forward? When does it become 
viable so that if we put something in place that the company 
says, I am going to natural gas or someplace else because I 
can't afford to do what they are making us do.
    Mr. Rencheck. In the next decade, we need tax incentives to 
support that. Then to address your question on NSR, NSR impedes 
the efficiency improvements on some of these plants, so we 
could effectively make the existing fleet produce less 
CO2 by making them more efficient with the 
regulation corrected.
    Senator Voinovich. Mr. Fees.
    Mr. Fees. Senator, I think it is important when we talk 
about this to think about it from a framework of when would a 
technology provider like ourselves or GE or others be willing 
to enter into a fixed price contract to deliver to American 
Electric Power some of the utility technology. So when I talk 
about these frameworks, I think about it in that realm.
    Right now today, sitting here today I don't think oxy-coal, 
IGCC, or any of those things are quite at that level. These are 
in early stage development, so we are going to be in a 
position, however, thinking about this at three different 
tranches.
    First tranche, having plants capable of being sold and 
delivered that can provide captured carbon ready for 
sequestration early next decade. Several technologies are 
available. The more advanced technologies, where you may not 
have to put it in the ground and do things along those lines, 
is probably early in the following decade, in the 2020 
timeframe, in terms of when we would go off to a utility and be 
ready to sign a contract to be able to do those kind of things.
    So those are about the road maps. I still think that the 
long pole in the tent is what are we going to do with all the 
carbon; where is the infrastructure for it; and also 
legislatively, who owns it. I think there is going to be a big 
debate about when the carbon goes in the ground, who is 
responsible for the carbon? That is a solution that needs to be 
worked on very, very heavily.
    Senator Voinovich. Mr. Chairman, I have spent some time 
with Sam Bodman. I said, sequestration of carbon is a lay-up 
shot. That is easy. So wait a second, we are not sure about 
that, is the question about the geology that you need, and then 
once you put it in the ground, whether or not that is going to 
matriculate out of that, and then cause other problems. It is 
not that easy as you think it is.
    Senator Lieberman. I hear you. Part of our challenge here, 
assuming we want to do something, which I believe a majority of 
us do, is to kind of calibrate how we create statutory and 
regulatory certainty that drives the technology. But also, 
obviously we don't want to demand so much that it is 
unrealistic, and actually has an adverse effect. I think that 
is the sweet spot, if I can put it that way, that we are 
looking for here.
     The vote has gone off, but we have a good 10 minutes 
before we have to go over there.
    Senator Boxer.
    Senator Boxer. Thanks, Mr. Chairman. I will take just 5 
minutes, and again thank you for a fantastic hearing. You have 
had a series of wonderful hearings. The reason we divided the 
global warming task between two subcommittees is because there 
is so much work to be done.
    I think Senator Voinovich has certainly put his finger on 
an issue, which is we have to deal with clean coal. My belief 
is that we need to have a Manhattan Project for clean coal. We 
need to give both incentives and we need to make investments, 
and we need to deal with the issue of the sequestration and the 
responsibility after you have stored the carbon and the rest.
    I am very optimistic on this matter because I approach this 
whole thing with hope. I do want to put a couple of things in 
the record. One is, because Senator Voinovich raised the issue 
of the European Union versus the United States, I have a chart 
that shows just the opposite of what he said, so for what it is 
worth, I am going to place it in.
    Senator Lieberman. Without objection.
    [The referenced document follows:]
    [GRAPHIC] [TIFF OMITTED] 55929.004
    
    Senator Boxer. Also showing the increase in just U.S. 
emissions over the past few years. It is dramatic. If you take 
it out, it is just a straight line up. So we don't have a lot 
of time to waste.
    What has encouraged me so much about this hearing is not 
only the can-do attitude from America's business and scientists 
and researchers, but also Senator Warner's comments about 
looking for what he basically calls the benchmarks of what we 
ought to look at with legislation, Mr. Chairman. If I could 
kind of summarize what I think I heard this panel discuss, and 
I would like you to correct me if I leave something out or if I 
misstate what I heard you say, just from this panel.
    A carbon credit set-aside I think is a really important 
point. There are people out there now doing the right thing. 
They are doing the right thing. They may be motivated by all 
the good reasons. They may be motivated by business reasons. 
They may be motivated by the global marketplace. It doesn't 
matter to me. What matters to me is there are people out there 
doing the right thing who ought to get a reward for doing the 
right thing, and ought to get a carbon credit set-aside.
    So I think that ought to be part of whatever we do because 
as we do move toward a cap and trade, which I think inevitably 
we will do, and I want to point out that there are now four 
candidates for President on the Democratic side who have gone 
onto the Sanders-Boxer bill, and you have Senator McCain who is 
working with Senator Lieberman on cap and trade, and we have 
other Republicans out there who seem very inclined to do 
something.
    When we started talking about this, I said I had two goals. 
One was to make this a bipartisan issue, move forward 
legislation, and also make this part of the presidential 
debate. So looking forward, given the Supreme Court's decision, 
Mr. Chairman, saying that in fact the EPA can just move forward 
on its own.
    So just reading the tea leaves here, whatever reason you 
are doing the right thing, I want to say thank you. I want, 
too, as a legislator and Chair of this great committee, to say 
there ought to be a way to reward those who are doing the right 
thing now. So I thank you, Mr. Stanway, for that point of 
talking about a carbon credit set-aside.
    Then, I think you also are talking about tax credits, 
whether it is to get these batteries moving faster, or to 
stimulate your R&D investments. I hear you talking about, and 
you didn't say a Manhattan Project, but you talked about some 
help from the Federal Government, which makes a lot of sense. 
We are dealing with a situation where, and I want to say this 
very clearly, 40 percent of the species that God created could 
be gone if we do nothing. We are talking about a crisis that 
could come where, just listen to what happened down the hall 
today in Foreign Relations, our intelligence officials and 
defense officials are saying this could be the cause of major 
wars in the future.
    So we need to move forward. I think what has happened here 
today, Mr. Chairman, if I might thank you, is that we are 
coming up with these ideas. Cap and trade is already out there. 
I think we have had pretty much an endorsement of that. So 
credit for work done, Manhattan Project, I think we have some 
concepts here which could really work.
    The very last point I want to make is, Senator Craig is 
struggling with why the world is warming. He has really plunged 
into this issue. I respect him for it. But I want to say that 
over the history of America, we have in fact embraced science. 
The IPCC includes hundreds of the leading scientists in the 
world from over 100 governments, including our own Government 
is part of the IPCC. They are unanimous in saying global 
warming is 100 percent certainty and 90 percent certainty that 
mankind is causing it.
    Now, we could have walked away from the scientists when 
they told us to vaccinate after the polio epidemic. We could 
have walked away from scientists when they said the Cuyahoga 
River is on fire because of toxic pollution there. We could 
have walked away when scientists said, you know, the reason you 
can see the air is it is filthy and dirty and you have to clean 
it up. We could have walked away on AIDS. We could have walked 
away on the Safe Drinking Water Act when the scientists told us 
what we had to do. We could have walked away on brownfields, 
the Endangered Species Act and all the rest. We didn't and we 
are better for it.
    So thank you, Mr. Chairman, for doing this. You are such a 
can-do legislator and it gives me great confidence that we are 
going to really move forward with your leadership in the 
subcommittee. Thank you very much.
    Of course, with Senator Warner's as well.
    Senator Lieberman. Thanks very much, Senator Boxer. Look, 
you are the Chair of the overall committee. You are driving 
this vehicle fuel efficiently, I am sure.
    Senator Boxer. Yes.
    [Laughter.]
    Senator Lieberman. Meaning we are at zero greenhouse gas 
emissions on this committee.
    I want to thank you.
    Senator Boxer. A lot of hot air, but no greenhouse gas.
    [Laughter.]
    Senator Lieberman. The can-do spirit that comes out of this 
panel, and actually will-do, is so classically America at its 
best, which is its combination of innovation and 
entrepreneurship for the general benefit. This country, and you 
look at some of those surveys of public opinion, we need to 
show each other that we can tackle a big problem and solve it. 
I can't think of a better one than this one, because if we do 
this, we also tackle the energy dependence problem, which is so 
serious to us in so many different ways.
    You have been a wonderful panel. I thank you not only for 
great, inspiring testimony, frankly, but for what you are doing 
in your work every day to help us deal with this problem.
    We are going to leave the record of the hearing open for 
another 10 days if you would like to add anything, an 
afterthought, or we have questions that we want to add to you.
    I do want to restate to everyone here, to you and to 
Senator Boxer, that we are going to work very hard on this 
subcommittee to see if we can find a consensus that hopefully 
everybody on the subcommittee, but at least a good bipartisan 
majority, can support and send to the full committee a bill 
that will really begin to take the steps America needs to take 
to confront this great challenge.
    But here is the final word. The testimony today says this 
is a solvable problem. That is the most exciting thing that I 
have learned again today.
    Thank you very much. The hearing is adjourned.
    [Whereupon, at 12 p.m. the subcommittee was adjourned.]
    [Additional material submitted for the record follows.]
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