[Senate Hearing 110-1121]
[From the U.S. Government Publishing Office]
S. Hrg. 110-1121
GREEN JOBS FROM ACTION ON GLOBAL WARMING
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FIELD HEARING
BEFORE THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
AUGUST 14, 2007-SAN JOSE, CA
__________
Printed for the use of the Committee on Environment and Public Works
Available via the World Wide Web: http://www.fdsys.gpo.gov
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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 JOHN BARRASSO, Wyoming1
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
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1Note: During the 110th Congress, Senator Craig
Thomas, of Wyoming, passed away on June 4, 2007. Senator John
Barrasso, of Wyoming, joined the committee on July 10, 2007.
C O N T E N T S
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Page
AUGUST 14, 2007
OPENING STATEMENTS
Boxer, Hon. Barbara, U.S. Senator from the State of California... 1
WITNESSES
Cinnamon, Barry, CEO, Akeena Solar President, California Solar
Energy Industries Association.................................. 4
Prepared statement........................................... 6
Hanemann, W. Michael, Chancellor's Professor, Department of
Agriculture and Resource Economics, and Goldman School of
Public Policy Director, California Climate Change Center at UC
Berkeley, University of California, Berkeley................... 8
Prepared statement........................................... 10
Musk, Elon, Chairman of Tesla Motors............................. 12
Prepared statement........................................... 14
Unger, Bill, Partner Emeritus at Mayfield Fund Environmental
Entrepreneurs.................................................. 15
Prepared statement........................................... 17
Klafter, Bruce S., Senior Director, Environment, Health and
Safety, Applied Materials...................................... 26
Prepared statement........................................... 27
Zimmerman, Patrick R., Ph.D., Chief Technology Officer, C-Lock
Technology..................................................... 31
Prepared statement........................................... 33
Collins, Kevin R., President and Chief Executive Officer,
Evergreen Energy Inc........................................... 35
Prepared statement........................................... 37
GREEN JOBS FROM ACTION ON GLOBAL WARMING
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TUESDAY, AUGUST 14, 2007
U.S. Senate,
Committee on Environment and Public Works,
San Jose, CA.
The committee met, pursuant to notice, at 11 a.m. Santa
Clara County Building, 70 West Hedding Street, San Jose, CA,
Hon. Barbara Boxer (chairman of the committee) presiding.
Present: Senator Boxer.
OPENING STATEMENT OF SENATOR BARBARA BOXER, U.S. SENATOR FROM
THE STATE OF CALIFORNIA
Senator Boxer. The hearing will come to order. I want to
welcome the panel here. I am very pleased to have you all here.
I'm very excited about what you're going to tell me and I
guarantee you that that information will be given to my
colleagues as we move forward with important legislation.
Global warming is the greatest environmental threat faced
by mankind--is this working yet? Yes? No? How about that?
Better?
Global warming is the greatest environmental threat that we
face. We have now arrived at a time in our history when human
activities related to green house gas emissions could bring
dangerous consequences. In July I traveled to Greenland with
nine other colleagues to view the rapid melting of the enormous
Greenland ice sheet.
If the Greenland ice sheet were to melt, the sea level
would rise 23 feet. This would have disastrous consequences,
particularly for California and the California bay delta. Do we
have a map here, Michael?
This map--and, Michael, why don't you point out--this map
shows what a 23 foot sea level rise would mean to this area of
California. It would inundate Highway 880 which runs from here
to Oakland.
It would flood the bay delta nearly all the way to
Sacramento. Places like the San Francisco Airport and entire
neighborhoods would go under water. The costs of these kinds of
impact are enormous and greatly exceed the cost of controlling
emissions. As Sir Nicholas Stern, the internationally renowned
former chief World Bank economist had said, the dollars to
fight global warming now will save us $5 later.
In fact, most cost projections show that while fighting
global warming would cost funds to support it, gross domestic
product will continue to increase just a little bit more
slowly. For instance, EPA has determined that if the
legislation offered by Senators Lieberman and McCain were to be
enacted, U.S. GDP would increase by 112 percent by 2030 instead
of by 113 percent, a net decrease of 1 percent estimated
growth.
In fact, I believe even these projections may be too
pessimistic. I believe that we cap carbon emissions and fight
global warming we would be better off for it in every way
including economic growth.
You know, I've been around for a while, started my career
in local government, sat on the air pollution board in San
Francisco, and everyone said oh, my God, if we get clean cars
and we have to clean up our cars, economic growth will halt.
The fact is none of that ever proved to be true. The fact is if
you can't breathe you can't work. The fact is we ignore the
environment at our peril if we truly want economic growth and
that's why this has been so far ahead of the government because
they get this point.
I believe the fight against global warming is a win win.
Why? We increase our energy efficiency. We increase our energy
independence. We increase our global competitiveness, by
creating clean energy technology which we can export to the
rest of the world.
The International Energy Agency estimates that the world
will spend over $20 trillion on new energy technology by 2030.
Let me reiterate that. The world will spend over $20 billion on
new energy technology by 2030. I just visited Gloom Energy. If
any of you have ever seen this place it just changes the way we
think about the future.
It gives you tremendous hope because it's a brilliant idea
of how we're going to face our future. It really is in many
ways a leapfrog technology. It's a technology that's going to
help us till we get to the final solution of our energy needs.
These technologies can either be clean technologies that we
create or dirty technologies. They can either be developed or
made in the United States or elsewhere. Well, the world doesn't
want to buy dirty technology. The word has already decided
that. If it would be nice if our administration decided that as
well. I certainly hope that we're all moving in this direction,
not in the way that I had hoped in terms of the speed with
which people come to grips with it, but I think there's an
inevitability that we can see right here in Silicon Valley.
We can see where venture capital is going. It's going into
these energies these clean energies. By capping carbon
emissions we have done here in California we will stimulate
investment in these clean technologies. If we just say
technology is the situation which our president says, I agree
with him, but we have to add something to it, and that is we're
going to incentivize these technologies by making sure there
are caps in place.
Otherwise, the capital on it is just not going to flow in a
steady stream to indicating them. If you look at California we
see Cleantech investments. Again, we're in the Silicon Valley
making such investment, more than a billion dollars spent on
such investment, and that's just the beginning.
According to University of California Berkeley professor
Michael Hanemann, who's here with us today, carbon reduction
can be a net boon to the economy. According to Professor
Hanemann, if California takes eight specific steps to fight
global warming, the result would be a net increase of gross
State product of $60 billion and create 20,000 in the new jobs.
Companies that are here today, companies I'm very proud of, can
help create good new green jobs for Americans.
That is why I approach global warming with hope, not fear,
actually excitement because I believe if we get started, this
is going to have a life of its own, and again, it's a total win
win situation.
You know, if somebody said to me, ``Senator, what if you're
wrong?'' What if I'm wrong? It's not about me. It's about the
scientists. They have totally agreed on this. This isn't, you
know, something that I'm doing because it's an easy task. It's
a hard task. People don't like to think 20, 30, 40, 50, 60
years ahead. We have enough problems just finding a babysitter.
This isn't something that politicians embrace because it's
tough to get people excited about an issue that's hitting us
years down the road. But the fact is if we start doing this it
will take on a life of its own. Even if the scientists are
wrong, which I do not believe they are wrong, but even if they
are wrong what have we done? We've created a cleaner economy.
People save money. You can read breathe the air, all of the
wonderful salutary effects that will come from fighting global
warming.
So that's the great news. This isn't like a situation where
you have the disease and the cure is worse than the disease.
People say you take this medicine, the good news is, you know,
you'll are be cured of cancer but you'll die of a heart attack.
This isn't the case with global warming. To fight global
warming you have all these benefits that go along with it, and
if we act soon, we have a chance to avoid the worst effects of
global warming, and in doing so we'll strengthen our economy,
create new jobs for millions of Americans.
At 60 California Congress have said, and this is important,
folks, the most expensive thing we can do is nothing, is
nothing. So anyone who advocates turning away from this issue
because it's complex or you can't get people interested in it,
anyone, any political leader that does that just doesn't
deserve to stay in office.
It's as simple as that. It's just simple because this is
the change of our generation and we have to step up to the
plate. I just became a grandma again, so I had my first 12
years ago, my second grandson about a month ago, and I'm
looking at this little child, outside of the fact that he's a
genius and you can also see it in his eye, I realize that when
he's a 40-year-old guy he's going to really start thinking
about what I did and my moment of truth. You know, I just want
to thank all of you who are on this panel today because you are
really in the trenches and you get this and your testimony that
you give today--this is quite an official hearing, and your
testimony is going to be printed and distributed and read, and
I will be sure it gets to everyone on my committee, but more
than that, to the leadership, to the Administration, and to
everyone else.
So I am very, very pleased to now turn it over to the panel
but I'm going to give a quick, very brief introduction, not
even talk about all the merits you bring, just your title, and
give people an idea who's on the panel. Barry Cinnamon, chief
executive officer of Akeena Solar, Michael Hanemann, who I
spoke about, and those are the people who don't believe in
global warming. They visit me as moments like this.
Michael Hanemann you've heard about, Department of
Agriculture and resource economist at University of California
Berkeley; Elon Musk, chairman of Tesla Motors; Bill Unger,
partner emeritus at Mayfield Fund; Bruce Klafter, senior
director, Environment, Health and Safety, Applied Materials;
Pat Zimmerman, director and chief of Atmospheric Science School
of Mines and Technology; Kevin Collins, president and CEO of
Evergreen Energy.
So we're going to hear the testimony. I may have a question
or two. Then we'll go to the news conference where I'll answer
questions from the media and hope that my friends here will
follow me just in case they follow the questions.
We may or may not need that. So maybe, Jen, if you could
let me know that we're going ahead on each topic, and we'll
just leave it at this. So Mr. Cinnamon, chief executive officer
of Akeena Solar, please go ahead.
STATEMENT OF BARRY CINNAMON, CEO, AKEENA SOLAR PRESIDENT,
CALIFORNIA SOLAR ENERGY INDUSTRIES ASSOCIATION
Mr. Cinnamon. Very good. Thank you, Senator Boxer, for the
opportunity to testify before this committee. I share your
passion for solving these problems.
I founded one of the leading solar installation companies
in the United States, Akeena Solar, and I'm also president of
the California Solar Energy Industry Association representing
the solar industry in California. So I look forward to giving
you a hands-on perspective of the job creation benefits of
renewable technologies. Clean energy is indeed a win win win.
Senator Boxer. Is his microphone on? Could you hear it on
the back? They cannot hear it in the back.
Mr. Cinnamon. Is indeed a win win win. We win for the
economy, we win for the environment, and we win by solving our
energy problem.
I've divided my remarks into three categories, jobs created
by Akeena Solar, jobs created by our industry in California,
and jobs created on a national basis. The jobs created by
companies like Akeena Solar are tangible and not subject to
speculation. At the end of July, Akeena Solar employed 159
full-time and 11 part-time people.
Of these 170 people, 9 are in New Jersey, which is the
second best solar State in the country behind California, and
the remaining 161 people are spread out over seven offices we
currently have in California, and we're doubling and tripling
on an annual basis, so that trend will continue.
The nature of this job is not what many people would expect
when we look into solar power. Only 63 percent are on the
operational side. Of these 62 jobs only 36 percent are of our
work force are actually rooftop installers. The rest of the
jobs are operational jobs or highly paid engineers,
technicians, documentation specialists, as project managers,
and we have another 59 employees in sales, marketing, finance,
and administration.
The peril's vague, and many of these are good, solid, white
collar jobs. Although I do not have a any specific data on the
indirect jobs that we create, I do think that it is certainly
consistent with the job multiplier that was calculated in the
UC Berkeley study cited below.
As we do our work, our employees are substantial consumers
of construction materials, solar panels, vehicles, parts,
supplies, and subcontractors coexist, so keeping a lot of other
companies in business, and our employees are local members of
the community and spend their salaries around town.
Anecdotally, the hot dog vendor has certainly seen a very big
jump in business from our lunchtime crowd.
This job multiplier effect continues for California. In
2005 Akeena Solar in conjunction with the California Solar
Energy Industries Association authored a white paper entitled
``The Economics of Solar Power For California.'' The lesson
that we learned from that certainly extends throughout the
country.
One of the key findings of this white paper was that the
renewable energy industry is a powerful job creation engine.
California investments in solar since 2001 have helped
stimulate the development of a huge new high technology
industry.
Several studies have attempted to quantify the economic
benefits of solar energy resources. Among these studies it was
concluded that have dollar invested in new solar generation
would result in an additional 50 cents of economic activity
compared to producing the same power through conventional
means.
Included within this increased technology activity are more
jobs for Californians. Each megawatt of solar generation would
produce an additional 40 person years of employment. Professor
Dan Kammen of UC Berkeley also studied the incremental economic
benefits associated with renewables.
His study estimated that 1.6 to 2.2 additional jobs, just
call it two jobs, is created per megawatt of solar installed
over the life of a facility, compared to jobs created by
conventional electrical generation. Assuming a 20- to 25-year
facility life, this results in very similar numbers to the
California association results when additional 40 person years
of employment per megawatt installed.
Why does the solar industry produce more jobs and more
economic benefits than comparable spending on conventional
electrical supplies? Simply because the majority of the costs
for national gas, fire, and power production are fuel.
California obtains only 15 to 17 percent of its gas supplies
with in-State sources.
So we're buying that fuel from out of state sources. In
contrast, installing solar generation requires skilled local
labor and many components are made and manufactured locally.
To put this in perspective----
Senator Boxer. Mr. Cinnamon, I'm going to ask you to wind
up because each person has 5 minutes. We need to--if you could
sort of summarize.
Mr. Cinnamon. I'll summarize it very quickly.
Senator Boxer. We gave everyone 5 minutes.
Mr. Cinnamon. Great. You may have heard that solar power is
cost effective. Well, in fact, it is cost effective. It costs
us less than 19 cents a kilowatt hour to generate the power.
When we add the extra economic benefits of the strong
domestic job creation, instead of increasing pain as a forum of
fossil fuel, it becomes an economic imperative to move as
quickly as we can for these new energy sources. Thank you.
[The prepared statement of Mr. Cinnamon follows:]
Statement of Barry Cinnamon, CEO, Akeena Solar, President, California
Solar Energy Industries Association
introduction
Thank you for the opportunity to testify before this committee. As
a result of my work in the solar industry since the 70s, founder of one
of the leading solar installation companies in the U.S., and president
of the California Solar Energy Industries Association, I look forward
to providing the Committee with a real hands-on perspective of the job
creation benefits of renewable technologies. I have divided my remarks
into three categories--jobs created by Akeena Solar, jobs created by
our industry in California, and jobs created on a national basis.
akeena solar jobs
First, the direct jobs created at Akeena Solar are tangible and not
subject to speculation. As of the end of July, Akeena Solar employs159
full time and 11 part time people. Of this 170, 9 are based in New
Jersey (the second best solar state in the country), and the remaining
161 are spread out over the seven offices we currently have in
California.
101 of these jobs, or 63 percent, are on the operation side of the
business. However, only 62 of these jobs, or just over 36 percent of
our workforce are actual rooftop installers. The balance of our
operational jobs are for highly paid engineers, technicians,
documentation specialist and project managers. The balance of the 59
employees at Akeena Solar are in sales, marketing, finance and
administration.
Although I do not have any specific data on the indirect jobs that
we create, I do think that it is certainly consistent with the job
multiplier that was calculated in the UC. Berkeley study noted below.
As we do our work our employees are substantial consumers of
construction materials, solar panels, vehicles, parts, supplies and
subcontractor services. Additionally, our employees are members of the
community and spend much of their salaries locally. Anecdotally, the
hot dog vendor down the street from our office has certainly seen a
jump in business from our lunchtime crowd.
california solar jobs
In 2005 Akeena Solar, in conjunction with the California Solar
Energy Industries Association, authored a White Paper entitled `The
Economics of Solar Power for California.' One of the key findings of
this White Paper was that the renewable energy industry is a powerful
job creation engine.
California's investments in solar generation since 2001 have helped
stimulate the development of a significant new high technology
industry. Continued state support for the solar industry is cruc al if
the industry is to grow to the point that it is self-supporting.
Importantly, investments by consumers and the state in solar generation
will produce greater benefits for the California economy than will
investments in the gas-fired CCGT and CT plants that they replace.
Several studies have attempted to quantify the economic benefits of
the accelerated development of solar resources. The California Solar
Energy Industries Associat on has used an input-output model (E3AS)
developed by The Goodman Group (TGG). The E3AS software estimates the
regional economic impacts of a new technology by tracing the industries
involved through successive rounds of supply linkages. At each step,
the program traces the portion of the inputs required from each
industry that are supplied within the regional economy being modeled.
The study concluded that each $1 invested in new solar generation would
result in an additional $0.50 of economic activity in California,
compared to producing the same power through conventional means.
Included within this increased economic activity are more jobs for
Californians: each megawatt of solar generation would produce an
additional 40 person-years of employment.
Professor Dan Kammen of U.C. Berkeley has also studied the
incremental economic benefit associated with renewable energy. In an
April 2004 review of the available studies on the jobs created by
photovoltaic generation, Dr. Kammen cites estimates of 1.6 to 2.2
additional jobs created per MW of PV installed, over the life of a
facility, compared to the jobs created by conventional electric
generation. Assuming a 20- to 25-year facility life, this results in
very similar numbers to Cal SEIA's result of an additional 40 person-
years of employment per megawatt installed.
Why will the solar industry produce more jobs and more economic
benefits than comparable spending on conventional electricity supplies?
The majority of the costs of natural gas-fired power production are
fuel costs. California obtains only 15 percent to 17 percent of its gas
supplies from in-state sources, so most of the spending for fuel does
not benefit the California economy. In contrast, installing solar
generation requires skilled local labor, and many solar components are
manufactured in the state. If the state provides long-term support for
the solar industry, suppliers will be encouraged to locate plants in
the state, close to a. major long-term market.
renewable energy jobs
In 2008 Renewable Energy (RE) contributed to 6 percent of the U.S.
energy market. Of this 6 percent solar PV held a 1 percent market
share. There were 194,000 RE jobs in 2006 which powered a $39.2 B
industry while creating an additional 446,000 jobs directly and
indirectly. Most of these jobs that were created were scientific,
technical, professional and skilled positions. Additionally, 95 percent
of the jobs were in the Private Sector.
In 2006 Solar PV accounted for 6,800 jobs, $1 B in revenue and
helped create an additional 15,700 jobs directly and indirectly. The
following diagrams outline the growth of renewable energy jobs and
revenue between 2006 and 2030.
U.S. Estimated Revenue in 2030
----------------------------------------------------------------------------------------------------------------
Renewable Energy Photovoltaics
----------------------------------------------------------------------------------------------------------------
Base Case..................................................... $95 Billion $14 Billion
Moderate Case................................................. $227 Billion $30 Billion
Advanced Scenario............................................. $1,305 Billion $48 Billion
----------------------------------------------------------------------------------------------------------------
Management Information Services & American Solar Energy Society
U.S. Estimated Jobs in 2030
----------------------------------------------------------------------------------------------------------------
Renewable Energy Photovoltaics
----------------------------------------------------------------------------------------------------------------
Base Case..................................................... 1.305 Million 200,000
Moderate Case................................................. 3.138 Million 450,000
Advanced Scenario............................................. 7.935 Million 750,000
----------------------------------------------------------------------------------------------------------------
Management Information Services 8 American Solar Energy Society
In an aggressive scenario RE Jobs would increase 1,700 percent from
2006 to 2030 and at the same time the revenue would increase by 1,400
percent. The increase in jobs and revenues would have a significant
positive impact for each state as displayed below:
Benefits to States
------------------------------------------------------------------------
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(1) New Investments
(2) Total Industry Sales
(3) Industry Profits
(4) Creation of Direct/Indirect Jobs
(5) Specific jobs created by occupational skill
(6) Stimulation of the manufacturing Sector
(7) State & Fed Tax Revenues
(8) Technology development and spinoffs
(9) Revitalization of depressed regions
One of the greatest benefits of RE and PV is the potential to
revitalize depressed regions of employment. Nowhere has this been more
effective than in Eastern Germany. Through state assistance, federal
aid and EU funding for regional development Eastern Germany has
utilized the manufacturing of solar power technology to become a model
for economic rehabilitation. For example, the Eastern German state of
Thuringia has more than 15 companies that cover the entire PV Value
Chain. One company, Solon, has 150 employees producing 60 MW of panels
each year on 6 production lines that run off 3 shifts a day/24 hours a
day. The boom of RE in Germany has spurred the employment level to
increase 36 percent in 2 years.
While Germany has been very successful in RE in the past, the U.S.
has even greater potential due to higher demand, more opportunity and
better resources, for example better solar radiation. One state very
similar to Eastern Germany is Ohio. In the last 10 years Ohio
manufacturing jobs have decreased by 23 percent. In fact, the total
share of U.S. jobs decreased in Ohio from 4.6 percent to 4.0 percent.
Through the wide scale deployment of RE and specifically Solar PV
states like Ohio would be able to secure well paying, highly skilled
employment that would not be subject to foreign outsourcing.
conclusion
Generating electricity from clean, renewable sources is the future.
Our early investments in this future are already paying off in the form
of cleaner and less expensive energy.
You may have heard that solar power is not cost effective. That
statement is certainly not true for rooftop solar power. The typical
small residential solar power system costs $24,000 and will generate
4,300 kwh of electricity per year, virtually maintenance free for 30
years. These energy costs work out to about 19 cents per kwh. I am
confident that most of the California residents in here
today pay much more than that for electricity--probably closer to 34
cents! Wth current incentives for solar power, these costs work out to
about 11 cents per kwh--less than a third of the top marginal
electricity costs in California.
When we add the extra economic benefits of strong domestic job
creation--instead of increasing payments to foreign countries for
fossil fuels--it becomes an economic imperative to move as quickly as
we can to these new energy sources.
sources
Akeena Solar and the Califomia Solar Energy Industries Association,
``The Economics of Solar Power for California.'' August 23, 2005
(Daniel M. Kammen, Kamal Kapadia, and Matthias Fripp (2004),
``Putting Renewables to Work: How Many Jobs Can the Clean Energy
Industry Generate?'' (RAEL Report, University of California Berkeley,
Energy & Resources Group, April 13, 2004).).
Platts Renewable Energy Report, ``Renewable Energy Report'', June
12, 2006 Management Information Services, Inc., ``Economic and Jobs
Impacts of the Renewable Energy and Energy Efficiency Industries: U.S.
and Ohio,'' July 2007.
Senator Boxer. Thank you so much. Now W. Michael Hanemann,
Chancellor's Professor, Department of Agriculture and Resource
Economics, University of California at Berkeley. Welcome, sir.
STATEMENT OF W. MICHAEL HANEMANN, CHANCELLOR'S PROFESSOR,
DEPARTMENT OF AGRICULTURE AND RESOURCE ECONOMICS, AND GOLDMAN
SCHOOL OF PUBLIC POLICY DIRECTOR, CALIFORNIA CLIMATE CHANGE
CENTER AT UC BERKELEY, UNIVERSITY OF CALIFORNIA, BERKELEY
Dr. Hanemann. Senator Boxer and other members of the
committee, I greatly appreciate the opportunity to appear
before you today. I'm a professor of environmental economics
and policy at the Goldman School of Public Policy at UC
Berkeley. The first point I want to make is that government
action needs to be taken. Voluntary measures, while helpful,
are not going to solve the problem. From an economic
perspective greenhouse gas emissions are an example of an
externality, like other forms of pollution, and voluntary
measures by those who emit the pollutant will be insufficient.
The second point is that global warming is more complex
than other problems of pollution which is Congress has dealt
with in the past, and will require a broader set of policy
measures.
Many economists have tended to view global warming through
the prism of the Nation's highly successful experience in
dealing with sulfur dioxide in the 1990 Clean Air Act. Through
the cap and trade system introduced under Title IV we achieved
a 50 percent reduction in emissions that cost substantially
less than we anticipated.
Because of its success, this has been seen by some
economists as a precise template for dealing with the
greenhouse gas emissions. I disagree. While I believe that
emission trading needs to be part of the policy mix, trade by
itself it won't solve the problem of greenhouse gases. A
broader approach is required with a more specific purpose on
technology innovation and adoption.
How did title 4, emission trading, solve the problem of
SO2? Owners of power plants responded by changing
operations, by modifying combustion, for example, by end of
pipe treatment, installing scrubbers to remove emissions.
What should be noted is the strategies not used. Energy
conservation and demand management played essentially no role
in the reduction of SO2. Renewal managing played no
role. New combustion technologies played no role. What was done
involved known and mature technologies.
With greenhouse gases this is a different situation.
There's no low CO2. There's no post combustion
scrubber that can be applied to existing demands. This is not a
mature technology. Renewable sources of energy will have to
play an important role.
Maybe nuclear will play a role. The point is that we're the
electricity generation--the focus of greenhouse reduction has
to be on new technology and its cost effective incorporation in
design.
Moreover, with greenhouse gases we can't solve the problem
by focusing just on electricity generation. Electricity
generation accounts for about two-thirds of the SO2
emissions in the United States. But only about one-third of the
greenhouse gas emissions, and in California only one-fifth of
greenhouse gas emissions is due to other sources, among which
transportation looms large.
So these other sources, too, technology innovation, will
play a major role, for example, through innovations such as
hybrid vehicles and ethanol fuel. Greenhouse gases differ from
SO2 also in the timeframe. As you know, Governor
Schwarzenegger set two policy goals for California, by 2020 to
reduce our emissions back to what they were in 1990, and by
2050 to reduce our emissions 80 percent below their level in
1990.
We have those two policy objectives as we understand. The
short-term objective is to deploy existing near-term
technologies to roll back emissions to their level in 1990. The
long-term objective is to stimulate innovation and investment
in new technologies for a major decarbonization of the future
economy.
As the greenhouse gases that are on--unlike SO2,
innovation will play a central role. Another important
difference is energy conservation in behavioral change. I'd
like to mention quickly one statistic, that in the United
States electricity use per capita since 1975 has grown by about
50 percent. In the western states it has grown by about two-
thirds. In California it has not grown at all.
We believe that an important factor here is the regulation
of energy efficiency in appliances by the California Energy
Commission. So this brings me in concluding to focus on the
economics that we now sense, reduction. You mentioned the
report that he published in January 2006 showing that meeting--
that programs would lead to a net growth in gross State product
and in jobs.
In August 2006 he issued a supplementary report which shows
how to meet the full 19--the full goal of reducing emissions
back by 2020 to their level in 1990, and he included in
addition to those regulatory programs the concept of emission
trading to achieve the rest of the target and assist in whereby
some of the profits from some issuance of the permits will
cloud back to--he showed an even larger economic gain, an
increase of $74 billion in gross State product, and 89,000 new
jobs.
To summarize, first I should point out his analysis was
restricted to California, which is certainly different in
certain respects from the national economy.
But I want to emphasize in closing the key features of this
analysis in California are certain to carry over nationally. In
fact, the finding that greenhouse gas emission reduction
contributes to economic growth in three important ways.
First, energy efficiency puts money in consumers' pockets,
and that leads to economic growth and creation of jobs. Second,
policies that enable firms to invest in new technologies that
stimulate innovation and benefit--innovation is the most
important long-term source of growth of income and employment
in the United States.
Third, as you know, policies that promote energy efficiency
reduce our dependence on imported fuels, which itself has a
cost in terms of economic security.
Just with three areas where I think California has a
distinct advantage. One is information technology and
particularly a distributed sensing and collection of
information such as smog dust. The second is energy and
efficiency which California has pioneered. The third is the
Cleantech exemplified by Mr. Cinnamon and Mr. Musk, who's now
about to testify. Thank you for your consideration.
[The prepared statement of Dr. Hanemann follows:]
Statement of W. Michael Hanemann, Chancellor's Professor, Department of
Agricultural & Resource Economics, and Goldman School of Public Policy,
Director, California Climate Change Center at UC Berkeley, University
of California, Berkeley
Senator Boxer and other members of the Senate Committee Environment
and Public Works Committee, I greatly appreciate the invitation to
appear before you today.
I am a professor of environmental economics and policy and Director
of the California Climate Change Center in the Goldman School of Public
Policy. Since the Center was established four years ago, my colleagues
and I have been working on various aspects of climate change and its
implications for California, including the potential adverse impacts to
California's economy, society and ecology, and also the policies that
California needs to adopt to reduce our greenhouse gas emissions in an
effective manner and at a tolerable cost.
Climate change and global warming are the greatest environmental
policy challenges that we face today not only because of the scale and
magnitude of the problem but also because of its complexity and
novelty. However, climate change is also a great opportunity because it
inevitably will force a substantial change in how we generate and use
energy throughout our economy, and this will require major
technological innovations. If this is done right, with the right
policies in place, and also with a degree of good fortune, it can
become a source of economic growth for California and for the United
States.
Thc first point to be made is that governmental action needs to be
taken. Voluntary measures, while helpful, are not going to solve the
problem. From an economic perspective, greenhouse gas emissions are an
example of an externality, like other forms of pollution, and voluntary
measures by those who emit the pollutant will be insufficient to yield
the required reduction in pollution.
The second point is that is that, as noted above, global warming is
more complex than other problems of pollution which Congress has dealt
with in the past, and it will require a broader set of policy measures.
In my observation, many economists have tended to view global
warming through the prism of the nation's highly successful experience
in dealing with sulfur dioxide (S02) under 'Title IV of the
Clean Air Act Amendments of 1990. Through the cap and trade system
introduced under Title IV, we achieved a 50 percent reduction in
emissions at a cost substantially less than had been anticipated.
Because of its success, this has been seen by some economists as a
precise template for dealing with greenhouse gas emissions. I disagree.
While I believe that emission trading needs to be part of the policy
mix in dealing with greenhouse gases, by itself it will not solve the
problem of greenhouse gases: a broader approach, with a more explicit
focus on technology innovation and adoption, is required.
How did Title IV emission trading solve the problem of
S02? The emissions cap was applied to individual generating
units, and they responded in several ways. Owners of power plants
responded by changing operations--by modifying combustion, switching
from high- to low-sulfur coal, and by changing the order of dispatch
across different facilities--and by end of pipe treatment, installing
scrubbers to remove emissions post-combustion. What should be noted is
the strategies not used. Energy conservation and demand management
played essentially no role in the reduction of SO2.
Renewable energy sources played no role. New combustion technologies
played no role. What was done involved known and mature technologies.
There was some experimentation and innovation in plant operation, but
technological innovation in the sense we normally think of played no
role in the events post 1990.
With greenhouse gases there is a very different situation. There is
no low CO2 coal; fuel switching with biomass is a
possibility but this can only be done on a limited scale and this is
not a mature technology. There is no post-combustion scrubber that can
readily be applied to an existing coal-fired generating unit. There is
the potential of carbon capture and sequestration, but this is not a
mature technology in electricity generation. Renewable sources of
electricity will play an important role. Maybe nuclear will ultimately
play an important role, especially if the disposal problem can be
solved effectively. With electricity generation per se, the focus for
greenhouse gases is clearly on new technology and its cost-effective
incorporation in the design of new power plants.
Moreover, with greenhouse gases, unlike SO2, we cannot
expect to solve the problem by focusing on electricity generation
alone. Electricity generation accounts for about \2/3\ of all
SO2 emissions in the United States. With greenhouse gases,
by contrast, electricity generation accounts for only about \2/3\ of
emissions and in California it accounts for only \2/3\ of emissions.
The majority of emissions are due to other sources, among which
transportation looms very large. For these other sources, too,
technological innovation will play a major role, for example through
innovations such as hybrid vehicles or cellulosic ethanol for vehicles.
Greenhouse gases differ from SO2, also in the time frame
of the problem. As you know, Governor Schwarzenegger has set two policy
goals for California: by 2020 to reduce our greenhouse gas emissions
back to their level in 1990, and by 2050 to reduce our emissions 80
percent below their level in 1990. The second goal--at least, a
reduction roughly of that order of magnitude and on that timeframe--
needs to be met by all of the developed countries if a severe and
dangerous increase in the global atmospheric concentration of
CO2 is to be avoided. This will require profound innovation
to permit as substantial restructuring of energy use in the modem
economy.
There are thus, two policy objectives for greenhouse gases, short-
term and long-term. The short-term objective is to deploy existing and
near-term technologies to roll back emissions to their level of 1990.
The long-term objective is to stimulate innovation and investment in
new technologies for a major decarbonization of the future economy.
In short, for greenhouse gases, unlike SO2, innovation
will play a central role if we are to meet the short- and long-run
policy objectives.
Another important difference for the short-term policy objective is
energy conservation and behavioral change. As noted earlier, these
played essentially no role in the reduction of SO2 but they
will be crucial for meeting California's 2020 goal for greenhouse gas
reduction.
In this context I would like to draw your attention to California's
remarkable success in promoting energy conservation through the
regulatory programs of the California Energy Commission (CEC), which
was established 30 years ago. Over that period of time, electricity use
per capita in the United Stales has increased by about 50 percent; in
the Western states, it has increased by about \2/3\. In California,
however, it has not increased at all. My colleague Professor Max
Auffhammer in the Department of Agricultural & Resource Economics at
Berkeley and I are currently conducting a study to pinpoint the reasons
for this striking divergence; it seems clear that at least part is
attributable to California's unique history in regulating appliance
efficiency through the CEC: it is an example of regulation-induced
innovation.
This brings me to the economics of greenhouse gas reduction. As pan
of a larger study on Managing Greenhouse Gas Emissions in California,
co-directed with my colleague Professor Alex Farrell and issued in
January 2006, my colleague Professor David Roland-Holst conducted a
study of the economic cost to the California economy of reducing
greenhouse gas emissions in California. The January 2006 analysis
focused on a set of emission reduction regulations which together
accounted for about half of the 2020 reduction target. In August 2006,
he released an updated analysis accounting for all of the 2020 emission
reduction target; it combines the regulatory strategies in his earlier
report with an emission trading system covering the remainder of the
economy and bringing about attainment of the full 2020 target. His
analysis uses the BEAR model, currently the most disaggregated and
sophisticated computable general equilibrium model of the California
economy. His August 2006 report finds that that meeting the 2020 cap
can stimulate the state's economy. He projects the cap to boost annual
Gross State Product (GSP) in 2020 by $60 billion and create 17,000 new
jobs. if the emissions trading system is implemented so as to create
direct incentives for innovation, by using revenues from the sale of
emission permits to finance innovation, he estimates the gains to be
even larger: $74 billion in GSP and 89,000 new jobs.
His analysis is restricted to California, which is different in
certain respects from the national economy. But, some key features of
his analysis for California are certain to carry over to the national
economy, in particular his finding that greenhouse gas emission
reduction contributes to economic growth in that important ways:
(1) Energy efficiency increases consumer purchasing power and puts
money into the economy, stimulating job growth and incomes.
(2) Policies that enable firms to invest in new technologies
stimulate innovation, which is the most important long term source of
growth in income and employment.
(3) Policies that promote energy efficiency also reduce our
dependence on imported fuels that are an important threat to our
economic security.
Thank you for your consideration.
Senator Boxer. Thank you so much--really appreciate--you
covered a lot of ground in five minutes. Thank you.
Mr. Elon Musk, chairman of Tesla Motors. I've had the
pleasure of riding along in your cars and I'm looking forward
to hearing from you.
STATEMENT OF ELON MUSK, CHAIRMAN OF TESLA MOTORS
Mr. Musk. Thank you. In addition to being the chairman and
principal owner of Tesla Motors, I'm also chairman of Solar
City, which is a complementary endeavor, energy generation to
the energy consumption of Tesla Motors car. So I'll talk in
terms of those two companies because I think those are very
appropriate, which is that by pursuing green technologies we
not only save the environment but we actually support and grow
the economy.
If we fail to go in that direction our economy will be
harmed and. Tesla Motors' initial product is a sports car. It's
an expensive sport car, but it allows us to enter the market at
the high end where we can do low unit volume and a high price
just as new--whether it's a software or a laptop at higher
price and lower unit volume because as we ensure the technology
we're able to bring out the technology and make it available to
a larger and larger segment of the population.
It also helps refute some of the misapprehensions about
electric vehicles. This is a first-class car. It goes 0 to 60
in under 4 seconds. It has a range, in fact, just driving
around the Bay Area we've got the range as high as 267 miles on
a single charge.
It's fully guaranteed. In fact, it's been crash tested. The
Roadster is the only production electric car that has done
that. We're moving quite quickly beyond the Roadster to more
mass market vehicles.
Model number 2, where anyone for a price of around $50,000
for a four-door five-passenger sedan and the model 3 will go
even beyond that lower price and higher quality. We're also
working on providing electric drive train technology to the
conventional car business to the marriage suppliers which we
think will further accelerate the adoption of electric
vehicles.
In terms of jobs we've grown from two employees in 2003 to
almost 300 today in 4 years. We expect to add another 400
employees with our New Mexico plant and we expect to really
just double and triple the employee volume year over year
beyond that time.
We expect eventually to have several direct jobs and with
some appropriate multiplier on indirect jobs in the future.
Getting to Solar City, you have to address both the
consumption and the production of power. I think my prediction
is that by the middle of the century a majority of our power
will be solar. A combination of photovoltaic as well as
thermal.
So if in the case of Solar City it's growing extremely
quickly. It's creating a tremendous number of jobs, a range of
jobs; engineering, but also green color jobs. These are jobs
that people can obtain who don't necessarily have a college
degree, and it's the--Solar City will pay between 15 and $22 an
hour for somebody who doesn't even have a college degree, two
to three times the minimum wage, opportunities for advance
employment that can be applied in other areas.
So in less than a year in operation Solar City has created
a 160 new jobs and plans on hiring 1,200 new jobs over the next
2 years. Those are direct jobs. As I said, there's an
opportunity to go from installer to team lead to regional
supervisor, and this is just in California.
We continue to expand to other states. So as your committee
and the Congress as a whole consider legislation to address
energy policy, I urge you and Congress to adopt policies that
will continue to offer new technologies like Tesla Motors and
the other companies that are represented here today. It's very
important that we have these incentives. I'm a huge proponent
of subsidies or special advantages or anything, that sort of
thing. I'm a believer in the free management under ordinary
circumstances. We have consumption of the common good. That's
the fundamental issue. The common good is the environment as
over see to the atmosphere--you see similar problems in
fisheries where the consumption for the common good, willing to
let go and fish out of the sea, it's destructive to everyone.
So if we properly recognize the cost of to the economy and
the atmosphere and at the gas pump and at the power plant then
it--there would be no issue.
There would be no--but we don't----
[The prepared statement of Mr. Musk follows:]
Statement of Elon Musk, Chairman of Tesla Motors
Madame Chairman (and Members of the Committee), welcome to Silicon
Valley and thank you for the opportunity to testify before the
Committee today on the Subject the creation of so-called ``green jobs''
in the high tech and industry. As the Chairman of two clean tech
companies that are focused on combating global warming, I enjoy a front
row seat from which to view the rapid creation of new jobs and in one
case--a wholly new industry.
While the number of jobs created by Tesla Motors, Solar City and
other players in the Clean Tech arena is impressive, and the rate of
job growth is even more so, perhaps the most striking aspect of the
jobs we are creating is embodied in their diversity. As has often been
the case in Silicon Valley, we have created a wealth of new jobs for
holders of advanced technical and management degrees. However, the
truly notable aspect of the Clean Tech revolution is its ability to
create high quality ``green collar'' jobs in addition to those high end
technical positions. Tesla Motors and Solar City are both exemplars of
this phenomenon.
As I believe you are aware, Tesla Motors' initial product is a
high-performance electric sports car called the Roadster. However, the
intent is to build electric cars of all kinds, including low-cost
family vehicles. As our unveiling of the Tesla Roadster has
demonstrated, reports of the death of the electric car have been
greatly exaggerated. The Roadster defies all conventions associated
with environmentally friendly cars, particularly those of a purely
electric nature.
My apologies for the brief commercial, but to understand what is
possible, I must present the key facts of the vehicle:
0 to 60 mph in 3.9 seconds
135 MPG equivalent
Over 200 mile driving range on a single charge
Fully DOT-compliant crash tested, with airbags, crash
structures, etc.
The Tesla Roadster is designed to beat a gasoline sports car like a
Porsche or a Ferrari in a head-to-head showdown, but it has more than
twice the energy efficiency of a Prius. In other words, it is a great
sports car without significant compromises. Now, some may question
whether this really does any good for the world. Are we really in need
of another high-performance sports car? Will it actually make a
difference to global carbon emissions and our oil dependence?
Well, the answers are no and not much. However, that misses the
point. Almost any new technology initially has high unit cost before it
can be optimized. This is no less true for electric cars. Tesla's
strategy is to enter at the high end of the market, where customers are
prepared to pay a premium, and then drive down market as fast as
possible to higher unit volume and lower prices with each successive
model.
Tesla's second model will be a large four door family car starting
at $50,000 and the third model will be a smaller, more affordable four
door. In keeping with a fast-growing technology company, all free cash
flow is plowed back into R&D to drive down the costs and bring the
follow-on products to market as quickly as possible. When someone buys
the Roadster sports car, they are actually helping to pay for the
development of the low cost family car.
Since the Tesla Motors' birth in 2003, the company has grown from 2
employees to over 300, with a headquarters and R&D center here in
Silicon Valley, a vehicle development center outside of Detroit and
plans to break ground on a vehicle assembly plant (in New Mexico) that
will employ an additional 400 employees later this year. While the
early employees of the company were, not surprisingly, engineers and
technical experts, as we have move into a manufacturing phase, we will
be aggressively adding high quality high paying hourly jobs. It is
worth noting that every one of our employees enjoys a full benefits
package, is an equity shareholder in the company and will share in the
success of the enterprise.
Vehicle manufacturing is a supplier intensive business and so while
the aforementioned direct employment numbers are impressive enough, it
is safe to say that the indirect job creation that Tesla is and will
continue to catalyze, while difficult to quantify can safely be assumed
to be a Significant multiple of the direct labor pool.
Our second company, SolarCity, is focused on bringing solar power
to every home and business and in so doing it is measurably reducing
the carbon footprint of the growing number of communities where
SolarCity operates. By creating a trusted brand and bringing cost-
reducing innovations to the market, SolarCity has become the largest
residential solar installer in California.
In contrast to Tesla Motors Solar City is neither a manufacturing
company nor a developer of high technology. Rather, it is a service
company focused on the installation of residential solar systems. Since
solar installation is a labor intensive enterprise and because the
number of systems installed drives the success of the enterprise as a
whole, Solar City's success to date and as future prospects are
fundamentally dependent on the creation of a high quality ``green
collar'' labor pool. In other words, the more jobs that SolarCity can
create, the more the company will succeed.
In less than a year of operation, SolarCity has created 160 new
jobs and has plans to hire an additional 1200 well-paid ``green
collar'' workers by We end of 2009. These ``green collar'' jobs are
high-quality jobs that enable individuals with limited experience and
limited advanced education and training to learn a skilled trade and
develop valuable skills and experience. These jobs pay well ($15-22/
hour), include benefits and stock options and offer the opportunity for
career advancement: from installer to senior installer to team lead to
regional supervisor. As SolarCity extends its business from California
across the country, the company and the industry will prosper in direct
relation to the number of jobs that the company can create.
As your committee and the Congress as a whole consider legislation
to address Climate Change and Global Warming in the fall, I am hopeful
that you will to drive for policies and legislation that will support
the continued development of promising new technologies like Tesla
Motors' performance electric cars and to encourage companies that are
applying new business models to expand renewable energy generation like
Solar City. You can do so by encouraging incentives for consumers to
adopt these technologies--in particular by creating tax policies that
pull larger unit volumes into the market and help to accelerate our
ability to get to economies of scale and effort on the supply side. You
can also encourage job training programs that will increase the
available labor pool for the green work force that our continued
success will demand.
In conclusion, I believe that we are just now beginning to
understand the promise of job and wealth creation that is embodied in
the drive to develop the alternative technologies and business models
that will address the tern crises of petroleum dependence and global
warming. But I am certain beyond a shadow of a doubt that if we as a
nation commit to supporting these industries we will be laying the
groundwork for America's economic prosperity and competitive advantage
for decades to come.
Thank you for your time. I will be happy to address your questions.
Senator Boxer. Thank you so much.
Mr. Unger, Bill Unger, partner emeritus at Mayfield Fund.
STATEMENT OF BILL UNGER, PARTNER EMERITUS AT MAYFIELD FUND
ENVIRONMENTAL ENTREPRENEURS
Mr. Unger. I'm also a member of Environmental
Entrepreneurs, which is an 800 member organization of CEOs and
investment professionals that believe that a good economy is
also a good environmental policy. One of the things that
venture capital industry is most proud of is job creation and
the role we play in it. In 2006 venture back companies since
1970 provided 10.4 million jobs and these job companies had
revenues of $2.3 trillion. 17.6 percent of total GP in this
country.
Since 1970 for every $28,000 invested we created one job. I
say we. I shouldn't say--we provided counsel to help them do
it. But how does this really happen? First I think it's the
wealth of technology generated in our national laboratories and
our universities. These with other public and private
institutions are national resources.
Really, they're treasures. I'm on the advisory board at
Berkeley, college of engineering, also at Illinois. There's
clearly more work going on than we can take advantage of today.
DARPA and NIH have played a crucial role in nurturing
technology development with microventure capitalists. We help
on the front end in nurturing technology. Then we can bring
them to the marketplace.
The United States is no longer the world leader in two
important clean energy fields. We're third in installing behind
Denmark and Spain. We're third in photovoltaic power installed
behind Germany and Japan.
These are technologies that were developed in our national
laboratories. Taxpayer dollars paid for this and we need to
need to be first again. There's many other examples of that in
the country.
Since the energy crisis of the 1970's total Federal
spending on energy research is down. Some of this is made up by
the venture capital industry and by other funded research. But
by and large, we're still operating with quite a handicap.
We can regain this market share. In 1998 the semiconductor
industry was doomed because the Japanese were going to eat our
lunch and the game was over. Some groups helped turn that
around. We can do that again.
The second reason is the public and private investments in
biotechnology and software have been very strong and there's a
spillover effect of this in the Cleantech. So we're able to
benefit from that Cleantech even though energy source is down.
We can also measure the people who were entrepreneurs in
the 1980s and 1990s and are now going into Cleantech. So we
have a wonderful pool of experienced entrepreneurs and
experienced technologists who want to apply themselves to this
next industry.
There isn't anyplace in the world, much less in the United
States--certainly the United States has more of these
capabilities than anyplace else in the world, and we should be
taking advantage of it.
So it's a great story. Last year there was $2.9 billion
invested in Cleantech, which is up 75 percent from 2005. It's
now the third largest venture sector, bigger than some--I
cannote this, bigger than medical devices. The analysis from UC
Berkeley that we all read from the professors who do this
concluded that if renewable energy sector generated more jobs
per megawatt of power installed per unit of energy produced and
dollar of investment than the fossil fuel-based energy sector.
Our analysis shows that for every $100 million invested
generates 2,700 new jobs. If we invest the $14 to $19 billion
we expect to be invested over the next 4 years that will create
400 to 500,000 new jobs. The National Venture Capital
Association actually--their numbers would say it would create
over 600,000 new jobs during that time.
There are still barriers which have been said by other
folks and I don't need to repeat them, we have to head off a
climate crisis, though, and we can't treat that lightly. We
need consistent policy. We need to have some even playing field
so that the long-term subsidies in traditional energy
generating industries and the trade barriers do not unfairly
impact us. We like a level playing field.
So as with and the other strategies mentioned before, we
know you hear a lot about that, and I would only gather we
would like to see the states not prohibited from being more
aggressive, whatever the national energy policy turns out to
be.
There are people who say move slowly and incrementally on
this turn it or the action is unnecessary. Those who say the
market forces are enough without government mandate we believe
are incorrect. The problems are much too big and much too
urgent. We need to have both. We should not be the people our
parents warned us about who pass the buck.
You can have this kind of economy and address global
warming. We have all the capital and entrepreneurial skills to
do this. We need the government to work together with private
sectors. We need government leadership today to stand up to do
this.
We are the country that showed what could be accomplished
in World War I and World War II, the Manhattan project, the
Marshall Plan, and the space program are all examples when
others would have held back.
We succeed when we do this. We need to be the people we've
been waiting for. If we do this, we will be the people that our
children will say give a better world to their children.
[The prepared statement of Mr. Unger follows:]
Statement of Bill Unger, Partner Emeritus at Mayfield Fund,
Environmental Entrepreneurs (E2)
Good morning Committee Chair Boxer, Ranking Member Inhofe and
Members of the Committee, I am Bill Unger, a Partner Emeritus at
Mayfield Fund, a venture partnership investing in technology companies
since 1970, and a member of Environmental Entrepreneurs (E2), a
volunteer organization of business and investment professionals who
believe that good environmental policy is good economic policy. I now
spend only a part of my time investing in for profit companies, and
more of my time as a board member of several non-profit organizations,
such as CARE USA, YouthNoise, The Anita Borg Institute for Women and
Technology, as an Advisor to and member of E2. I also serve on the
advisory boards of the Colleges of Engineering at The University of
California at Berkeley and The University of Illinois at Chicago. I
appreciate the opportunity to be here today to share my views as a
venture capitalist, and as a member of E2, on the creation of new jobs
created in ``Cleantech'' related industries, including jobs created by
measures taken in response to threat of Global Warming. In particular,
I would like to show how the economic and employment growth of the
Cleantech sector is related to a national carbon policy.
Some history of the Venture Capital industry's impact on our
economy will set the stage. One of the achievements the venture capital
industry is most proud of is our role in job creation. For example, the
U.S. semiconductor industry, as of the year 2000, employs 210,000
people in high-wage manufacturing jobs, and had sales totaling $102
billion in the global market in 2000 (50 percent of total worldwide
sales). In 1999, this sector was the largest value-added industry in
manufacturing in the U.S.--larger than the iron, steel and motor
vehicle industries combined.
The 2005 employment data show a heavy concentration of venture
capital supported jobs in the software industry as well, with nearly
860,000 jobs--almost 90 percent of the total jobs in the sector.
Venture-backed companies recorded $210 billion in sales in 2005, which
represents more than 36 percent of the industry's total revenues
generated that year.
In 2006, venture backed companies provided 10.43 million U.S. jobs
and these companies had revenues of $2.3 Trillion. The revenue
represents 17.6% of US GDP. Data from the National Venture Capital
Association, (this entire study is at http://www.nvca.org/pdf/
NVCA_VentureCapital07_2nd.pdf.) shows that at the end of 2006, one
ongoing job existed in venture backed companies for every $28,463
invested in venture capital since 1970, or about 3,500 jobs for every
$100M invested by the Venture Capital industry. (Investment in the 5
years preceding the jobs and revenue measurement date is not included
because its effect on 2006 statistics would be minimal.) Furthermore in
2006, these companies generated $7.87 in revenue for every dollar
invested. This is very impressive for an industry that typically
invests less than 0.2% of GDP each year.
Looking just at the biotech world, for every dollar of venture
capital invested, $4.43 in revenue was being produced in 2006 ($83
Billion total). As with VC in general, most of these investee companies
failed. For every $76k of investment, one ongoing job existed in 2006
(and these are typically high-paying jobs). This refers only to the
investment economic effect of biotech investment.
Publicly funded research, especially through such entities as DARPA
and the NIH have played a crucial role in manning technology
development to the point where the Venture industry, which likes to
invest in product development, can fund companies to bring valuable new
products and solutions to the market place. At Mayfield Fund, we funded
companies such as Atari, Silicon Graphics, Compaq, 3Com, Genentech,
Amgen and over 100 hundred other public companies that are examples of
this kind of success. In 1990 Mayfield led the second round investment
in Sandisk. There were few cell phones by today's standards, no digital
cameras, no MP3 players, no Blackberries; a slower, simpler time. All
these markets and more were enabled by Flash Memory technology created
by the founding team. I suspect there are few of us here who haven't
purchased a device with the Sandisk name on it, or a device with
Sandisk memory in it. Mayfield was the founding investor in Millennium
Pharmaceuticals, which was the pioneering company in genetic design of
pharmaceuticals based on an individual's reaction to disease at the
molecular level. In the early 1990's, Mayfield funded Heartstream, the
manufacturer of the defibrillator machines found now in virtually even-
public building and every airport. When this company was started, it
took a special truck, a suitcase sized $10,000+ machine, and specially
trained technicians to save a life. Today you can buy one on Amazon.com
for $1100.
Mayfield Fund and the Venture industry have seen the unfolding of
the semiconductor, software, medical device biotechnology, computer,
networking and communications industries, creating millions of jobs and
trillions of dollars in revenue.
Cleantech has some important similarities to these success stories,
and some differences. Cumulative venture investment in the Cleantech
sector of venture investing from 1999 through 2006 totaled $11.1
billion\1\ So though it is early times in Cleantech investing, by
historical standards we think there are encouraging signs for economic
growth and job creation.
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\1\ According to the Cleantech Capital Group, $7.4B was invested
from 1999 through Q2 2005. Q3 2005 was $.425B. Q4 2005 was $.502B and
2006 was $2.9B for a total of $11.1B.
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2006 was a banner year for the cleantech industry--with total
venture investments surpassing those of the medical devices,
telecommunications, and semiconductor sectors--all of which it had
trailed in 2005. Venture investments in cleantech firms in North
America totaled $2.9 billion, a 78 percent increase over the same total
in 2005, and a 243 percent increase since 2001. This total also
represented 11 percent of all North American venture capital
investments for the year ($27.0 billion),\2\ making cleantech the third
largest venture capital category--after only software and
biotechnology.
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\2\ Cleantech Venture Network; PricewaterhouseCoopers/National
Venture Capital Association Money TreeTM Report (CVN;
MoneyTree). (2007). http://www.pwcmoneytree.com/exhibits/
MoneyTree_4Q2006_Final.pdf.
In fact, since the economic downturn of 2000-2001, cleantech is one
of the few U.S. industries to experience real growth in venture
investments. While U.S. venture capital investments as a whole were off
by 33 percent in 2006 compared to 2001, investments in American
cleantech companies were up 243 percent in that time--more than two and
a half times the growth rate of the next strongest industry
(electronics/instrumentation) over that period.\3\
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\3\ Ibid CVN; MoneyTree.
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So let's define Cleantech. The cleantech industry encompasses a
broad range of products and services, from alternative energy
generation to wastewater treatment to more resource-efficient
industrial processes. Although some of these industries are very
different, all share a common thread: they use new, innovative
technology to create products and services that compete favorably on
price and performance while reducing humankind's impact on the
environment. To be considered ``cleantech,'' products and services
must:
Optimize use of natural resources, offering a cleaner or
less wasteful alternative to traditional products and services;
Have their genesis in an innovative or novel technology or
application;
Add economic value compared to traditional alternatives.
The eleven cleantech categories, as defined by the Cleantech
Venture Network, are\4\:
---------------------------------------------------------------------------
\4\ Environmental Information Technology (IT) and Enabling
Technologies had also been considered cleantech categories by the
Cleantech Venture Network until October 2006.
---------------------------------------------------------------------------
Energy Generation
Energy Storage
Energy Infrastructure
Energy Efficiency
Transportation
Water & Wastewater
Air & Environment
Materials
Manufacturing/Industrial
Agriculture
Recycling & Waste
Some findings from the E2 Cleantech Report of 2007\5\ show real
progress:
---------------------------------------------------------------------------
\5\ Cleantech Venture Capital: How Public Policy Has Stimulated
Private Investment, May 30, 2007 http://www.e2.org/jsp/
controller?docId=12959
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finding 1: growth in cleantech accelerated in 2006, with significant
activity in the public markets
In 2006, cleantech became the third-largest North American venture
capital investment category (11 percent of all venture investments),
behind software and biotechnology. Total North American venture capital
invested in cleantech companies reached $2.9 billion in 2006, an
increase of 78 percent over the $1.6 billion invested in 2005.
A significant increase in investments during the second and third
quarters of 2006 was driven by capital targeted for companies moving
into production. Cilion, Altra, Bloom Energy, Renewable Energy Group,
and Nanasolar--all of which represent new renewable energy technology
or biofuels--collectively accounted for more than $600 million in
investment in 2006. But this boom can also pose challenges: Companies
with new technologies have difficulty accessing capital for
manufacturing build-outs. While established technologies such as corn
ethanol can rely on debt financing, the first thin film solar or
cellulosic ethanol facilities cannot as readily access debt financing
because of the higher risks associated with first production
facilities. These companies are forced to either raise additional
equity capital and/or look to government assistance. As part of the
2005 Energy Act, the Department of Energy granted six cellulosic
facilities special financing of up to $385 million to help build their
first production facilities that, in aggregate, should reach 130
million gallons per year.\6\
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\6\ ``DOE Selects Six Cellulosic Ethanol Plants for up to $385
Million in Federal Funding'' http://www.energy.gov/news/4827.htm
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Cleantech is now an established investment category in the public
markets. There are multiple stock indices including the Cleantech
Capital Indices (CTIUS), WilderHill's ECO, Ardour Capital's Alternative
Energy Indexes (e.g. AGINA, AGIGL), and Clean Edge's CELS and CLEN
indexes. The 45 public companies that make up the Cleantech Index
(CTIUS) have an aggregate market capitalization of over $300 billion.
The performance of CTIUS over the past two years has been strong. In
the two years through April 23, 2007, CTIUS has risen 38.9 percent,
from 850 to 1180.6. This growth outpaced that of the S&P 500 Index
(+28.6%), the NASDAQ Index (+29.9%), and the Dow Jones Industrial
Average (+26.1%) over that period. After Sunpower and Suntech went
public in late 2005, no fewer than seven photovoltaics companies
(Canadian Solar, First Solar, PowerFilm, Akeena Solar, ReneSola, Trim
Solar Limited, and Solarfun Power Holdings) went public in 2006. Recent
IPOs in the biofuels sector have included Aventine Renewable Energy,
Pacific Ethanol, Verasun, and U.S. BioEnergy. Perhaps because of this
robust IPO market and the increase in publicly traded companies, the
past two years in cleantech investing has moved from a specialty area
of investment to one with broad participation from all major venture
capital firms.
finding 2: energy prices, entrepreneurial talent, and advances in
technology are industry factors accelerating growth
Several important factors accelerated cleantech's growth in 2006:
Sustained high oil prices have driven investor interest in
alternative fuels. Most alternative fuel business plans are designed to
compete with oil prices above $40 to $45 per barrel.
As the cleantech market matures, it is attracting
entrepreneurial management talent from other venture sectors--
especially from information technology and biotechnology. These
experienced entrepreneurs make it both easier to attract investments
and more likely the company will develop into a viable business.
Advances in technologies have been the basis for many new
companies, including nano-materials used in thin-film solar and new
chemistry in battery technologies.
finding 3: public policies at the national and state level have
accelerated cleantech growth
National and State policies have provided early foundations for
many cleantech sectors, although investors do not expect those policies
to continue in the long term. While the federal government has ramped
up its efforts to promote ethanol, the current boom is primarily the
result of states rapidly phasing out the MTBE gasoline additive and
replacing it with ethanol. Venture activity in corn and cellulosic
ethanol was a significant portion of investment growth in 2006, and
investment in renewable electricity has been driven primarily by state
renewable portfolio standards. Policies that provide long-term
certainty are the most successful at driving business investment.
finding 4: climate change is beginning to influence growth in cleantech
Many of the biggest news stories of the past few years have been
tied directly to extreme weather phenomena--from disastrous hurricanes
to record droughts, wildfires, heat waves, and melting polar icecaps.
The public has grown increasingly aware of environmental issues,
judging by public opinion polls showing rising public concern about
global warming and energy security. Investors, sensing the level of
public interest in these stories--and therefore an opportunity in the
market--are beginning to invest in industries that reduce human impacts
on the ecosystem. Climate change policies will play a key role in the
growth of cleantech as it becomes increasingly apparent that products
and processes that reduce greenhouse gases will see increased demand.
finding 5: cleantech can create thousands of new jobs
Analysis from the University of California at Berkeley\7\ concluded
``the renewable energy sector generates more jobs per megawatt of power
installed, per unit of energy produced, and per dollar of investment
than the fossil-fuel-based energy sector.'' E2's own analysis found
that every $100 million in venture investment generates an average of
2,700 new jobs. We estimate additional U.S. cleantech investment
between 2007 and 2010 will be between $14 billion and $19 billion,
resulting in 400,000 to 500,000 new jobs. If one uses the data from the
National Venture Capital Association of 3,500 jobs per $100 million,
the job figure could be as much as 665,000 jobs.
---------------------------------------------------------------------------
\7\ Kammen, D., Kapadia, K., & Fripp, M. ``Putting Renewables to
Work: How Many Jobs Can the Clean Energy Industry Generate?'' Energy
and Resources Group/Goldman School of Public Policy at University of
California, Berkeley. (2004). http://rael.berkeley.edu/files/2004/
Kammen-Renewable-Jobs-2004.pdf.
---------------------------------------------------------------------------
Lots of good news for the industry, and much remains to be done. In
spite of the many steps that have been taken in support of the
cleantech industry, barriers still remain, keeping it from growing fast
enough to head off the climate crisis. The most common barriers are
inconsistent policy, long term subsidies for conventional industries,
and trade barriers.
Although government agencies play key regulatory roles in some
venture backed industries, they have generally been even handed (in the
case of the FDA and Biopharmaceutical approvals) or an agent of change
for the future (in the case of the breakup of ATT in the 1970s),
creating competition to the benefit of the economy, consumers and
employees. The energy industry is different as the existing
infrastructure protects the existing companies and the status quo. For
example, customers do not directly choose the source of their
electricity. Their electric utility company makes that choice for them.
We did a survey of investors in Cleantech, and among the investors
we surveyed, the most often cited complaint about the current
regulatory environment surrounding cleantech was the inconsistency and
unpredictability of policies affecting the industry. In an open-ended
question about industry barriers, 37 percent of our survey respondents
volunteered their strong desire for a long-term, predictable approach
to policymaking in this arena. As one investor noted, ``If the federal
policy is unclear or inconsistent, it introduces an element of risk
that detracts from the attractiveness of a potential investment. If a
federal policy is supportive and appears stable, it makes the
investment more attractive.'' It appeared to be the group consensus
that a less than perfect--but predictable--policy would be preferred
over a better policy that comes and goes and can't be relied on.
Take the wind energy sector as an example. The renewable energy
Production Tax Credit (PTC) is equally important to the success of the
wind energy industry, which faaces both economic and technical hurdles
in competing with traditional fossil power sources. But unlike the
VEETC and the ethanol import tariff, which have remained in place for
many years, the PTC has suffered a yo-yo like fate, lapsing and being
renewed approximately every two years--to the consternation of
investors and companies, who find themselves unable to plan ahead in
such an uncertain environment. As a result of this policy uncertainty,
the wind industry has experienced a dramatic boom-bust cycle, as the
figure below demonstrates.
Another barrier that investors mentioned regularly in the survey
(27 percent of the investors surveyed discussed it) is the fact that
cleantech products aren't playing on a level playing field with
traditional alternatives. These respondents believe that conventional
technologies (e.g. fossil fuels) regularly receive large government
subsidies that give them a price advantage, even though these
technologies have been mainstream for decades. (According to the U.S.
Government Accountability Office, the petroleum industry alone received
as much as $150 billion in tax incentives between 1968 and 2000.\8\)
One investor suggested ``corporate welfare for larger companies
provides a hidden subsidy to non-cleansed, companies. Provide equal
subsidies for all technologies, or provide none. Let market forces
decide the best application of innovation.''
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\8\ ``Tax Incentives for Petroleum and Ethanol Fuels.'' U.S.
Government Accountability Office. (September 25, 2000). http://
www.gao.gov/archive/2000/rc0030lr.pdf.
---------------------------------------------------------------------------
While the relatively modest subsidies and incentives that the
cleantech industry receives always receive intense scrutiny, the large,
long-term subsidies that conventional industries are given are more
often taken for granted. Investors were not, however, arguing for large
incentives to prop up the industry. As Bill Reichert, Managing Director
of Garage Technology Ventures said, ``The investment has to make sense
independent of the public policy or the subsidy or the environmental
fad of the month.''
As the investors in our survey noted, cleantech products are
frequently at a competitive disadvantage compared to conventional
products. In addition to receiving significant subsidies, conventional
products generally waste more natural resources and emit more pollution
than cleantech products, thus imposing a cost on society that is not
reflected in their price tags. In order to help level the playing field
the prices of products need to better reflect their true economic costs
to society, thereby sending a signal to consumers about the real
effects of their choices.
Congress needs to consider an integrated set of policies which will
both address climate change and will stimulate private investment to
provide the solutions. I will briefly mention three important policies:
1. Mandatory National Carbon Cap
A mandatory, comprehensive national cap on greenhouse gas
emissions, coupled with an emissions trading market, would immediately
place a value on the release of carbon dioxide and other greenhouse
gases, rewarding those companies that already operate in a clean and
efficient manner, and forcing those companies that do not to improve
their performances. More importantly, any changes that industry would
make to reduce its environmental footprint and come into compliance
with the cap would be done efficiently. By establishing an economy-wide
cap on greenhouse gases--without specifying specific technologies or
strategies--the market would naturally find the most cost-effective
responses, whether by purchasing emissions credits, becoming more
efficient, or altering the materials or processes used. Thus it should
come as no surprise that 59 percent of respondents in our survey (17 of
29) said a national mandatory cap-and-trade system would be critical or
important in influencing their investment decisions.
When ten major U.S. corporations\9\ joined forces with four
environmental advocacy groups in January to form the U.S. Climate
Action Partnership (USCAP) and called on Congress to quickly pass
legislation to tackle global climate change, it became clear that a
significant, growing portion of U.S. businesses believe a carbon cap is
necessary for U.S. competitiveness. USCAP, whose corporate members have
a combined market capitalization of over $850 billion and whose non-
profit groups have well over one million members worldwide,
specifically called for a mandatory cap-and-trade program, along with
an accelerated technology research, development and demonstration
program, and diplomatic efforts to convince other countries to follow
suit.\10\ As of July, USCAP had grown to 29 members organizations.
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\9\ This group has since been joined by ConocoPhilips, the third
largest U.S. oil company and second largest U.S. oil refiner, with a
market capitalization of $116 billion.
\10\ ``Major Businesses and Environmental Leaders Unite to Call for
Swift Action on Global Climate Change.'' (Press Release). United States
Climate Action Partnership. (January 22, 2007). http://www.us-cap.org/
media/release.pdf.
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The unprecedented action of business leaders, including those from
the utility industry, proactively and voluntarily seeking government
regulation has been repeated several times since the January 2007 press
conference. In March 2007, under the leadership of CERES, more than 50
major institutional investors with combined funds under management
exceeding $4 trillion signed a statement asking Congress to impose
clear, consistent climate change regulations to help them mitigate
climate change risks. Because ill addition to making them more
competitive globally, a national carbon standard would allow American
companies to avoid having to navigate a chaotic maze of state-by-state
climate policies. ``Without national policies, the competitiveness of
American business will be compromised. We don't think we can wait,''
said Fred Buenrostro, Jr., CEO of CalPERS, the country's largest public
pension fund.\11\
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\11\ Herbst, M.'' Investors Call on Congress to Go Green.''
Business Week. (March 20, 2007). http://www.businessweek.com/bwdaily/
dnflash/content/mar2007/
db20070320_535194.htm?chan=top+news_top+ness+index_top+story.
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One week prior to the March 2007 CERES announcement, a bipartisan
group of Silicon Valley venture capitalists and entrepreneurs testified
in Congress about the need for greater federal tax incentives and
research funding in cleantech. With a sense of urgency, they also
recommended consolidating all federal energy research into a National
Institute of Energy that could support public-private partnerships, in
the model of the medical sciences' National Institute of Health. ``We
are in a crisis, and we have to translate this crisis into opportunity.
Missing this moment would be horrible.'' said Aart de Geus, CEO of
Synopsys, an electronic design automation company.\12\ These business
leaders are also part of a bipartisan group of dozens of technology
company CEOs known as TechNet, which also advocates establishing a
national 9renewable portfolio standard, a national renewable energy
credit marketplace, and a system of long-term, declining incentives for
clean technologies.\13\
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\12\ Davies, F. ``Silicon Valley Leaders: Political Climate Right
for `Green Tech.' '' San Jose Mercury News. (March 15, 2007). http://
www.mercurynews.com/search/ci_5440875.
\13\ ``Green Technologies: An Innovation Agenda for America.''
TechNet. (2007). http://www.technet.org/resources/GreenTechReport.pdf.
2. National Renewable Energy Standard
California's experience over the past few decades demonstrates
that, far from hurting an economy, well-designed cleantech
regulations--such as California's advanced energy efficiency and air
quality regulations--can actually stimulate innovation, leading to new
economic growth. Knowing that, it becomes clear why 65 percent of the
investors we surveyed (19 of 29) said a national renewable energy
standard would be a critical or important factor in their investment
decisions. In the increasingly carbon-constrained world in which we
live, improving the performance of our renewable energy technologies
through innovation will be extremely important--not only for our
environment but for our economic competitiveness as well. A national
renewable energy standard could be a major contributor in driving this
innovation in next-generation clean energy technologies.
3. More Public R&D Investment
While growth of the clean technologies would benefit from programs
that increase demand (for example a cap-and-trade system or renewable
portfolio standard), the industry still needs strong investment in
basic R&D. Since the energy crises of the 1970s, federal spending on
energy research is down significantly, with private investments making
up some, but not all, of the difference. Fortunately for the cleantech
industry, public and private investments in complementary industries
such as biotechnology, semiconductors, and software have been quite
strong in recent years, and there is a high degree of technical
knowledge spillover from these industries to cleantech sectors. In
fact, some of the same people who were involved in startup companies in
those other industries in the 1990s are now getting involved in ethanol
and photovoltaics companies, among others.\14\
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\14\ Richtel, M. ``Start-up Fervor Shifts to Energy in Silicon
Valley.'' The New York Times. (March 14, 2007). http://www.nytimes.com/
2007/03/14/technology/14valley.html?ex=
1176609600&en=678b72b953a2ae32&ei=5070.
---------------------------------------------------------------------------
Still, the success of the cleantech industry should not depend on
spillover from its cousin industries, or from private investment alone.
Public investment in cleantech research is also crucial, for several
reasons:
In its magnitude alone, it can accelerate the pace of
research innovation and development.
It helps to reassure private investors that this area is
important to the public, is worth investing in, and will receive real
public support. As one investor in our survey said, public support from
individual states ``sends a message to entrepreneurs, investors and
others that the state intends to create a business environment that is
supportive of cleantech.''
Public investment in basic R&D is still necessary to growing new
industries of the future. The investors participating in our survey
noted that a cleantech product must be able to stand on its own merits,
and while they would not invest in a company solely on the basis of
government support or subsidies, many noted that government investments
are important and would encourage a higher level of private investing.
For instance, 59 percent of respondents (17 of 29) said that a
government program that matched private investment dollars would be
critical or important to their investment decisions. One investor even
noted that his fund's specific investing strategy is to ``leverage
publicly funded research at labs and universities, so greater
investment on the federal level in that research would be beneficial,
as long as it is focused on commercial outcomes.''
the importance of implementation
Aside from the policies themselves, the manner in which they are
implemented is crucial to their success. For instance, it's very
important that when a carbon cap (or renewable energy standard or other
program) is enacted nationwide, that measure should not preempt states
from going even further. If particular states or regions want to enact
more stringent carbon caps, or more aggressive renewable portfolio (or
fuel) standards this will only improve the country's environmental
health and competitiveness in the cleantech marketplace--it would cost
other regions nothing.
The consistency and reliability of the federal policies that are
enacted is another important factor. As mentioned earlier, 37 percent
of the investors participating in our survey (11 of 30) responded to an
open-ended question about the barriers facing the industry by stating
the necessity of having predictable, long-term policies in place. This
is a strong concern of many stakeholders in the industry. Given that
many cleantech companies must compete against subsidized conventional
alternatives, having supportive policies stripped away unexpectedly can
wreak havoc on them. This is plainly evident in the wind installations
and production tax credit. Entrepreneurs and investors both need to
have the ability to plan ahead beyond the end of the current fiscal
year.
There are questions often asked when these topics are discussed, I
will try to anticipate a few of these.
1. It seems like investment and activity in Cleantech is growing
and healthy, so why should the government intervene?
Because we are in a crisis. A dramatic decrease of carbon released
into our climate has to happen quickly. Without intervention, our auto
industry has made no progress at all in increasing mileage and
decreasing emissions in decades, while Japan and the European community
already meet or exceed the 35 mpg standards proposed for the United
States to meet by 2018 (the most aggressive proposal)! This has helped
neither the environment, nor the American auto industry. While
California has passed legislation requiring power it buys to be
generated through clean technology, there are those in Congress who
would like to see this overturned, as it is more aggressive than what
other states might demand. California's Greenhouse Gases Emission
Performance Standard Act (SB1368) that became law on January 1, directs
the California Energy Commission to set greenhouse gas emissions
standards for the baseload electricity used by the state (whether
generated in-state or imported from out of state).\15\ The law
effectively prevents the state from signing any long-term procurement
contracts for traditional coal-fired power, or any electricity that
comes from sources that emit more than a clean, efficient natural gas
power plant. (However, the law doesn't explicitly ban any particular
form of energy generation--electricity from coal plants with carbon
sequestration, for example, would still be able to be sold in the
state.)
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\15\ ``Senate Bill No. 1368.'' California Energy Commission.
(September 29, 2006). http://www.energy.ca.gov/ghgstandards/documents/
sb1368_bill_20060929_chaptered.pdf.
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While almost no electricity from coal is currently generated
inside California, the state still imports a fair amount of coal-
generated power from outside its borders--and at last count, dozens of
new coal power plants were being planned for construction in western
states, many with the aim of selling their power in the growing
California electricity market. But SB1368 sends a strong signal to
western energy markets, aiming to discourage these large, long-term
investments in highly polluting technologies. As a result, cleaner
production technologies, like geothermal, wind, or small hydro, will
receive a significant competitive advantage in the state.
2. Is this just a bubble that will blow away and things will return
to normal?
No, the world has changed. In the last 10 years over 400 million
people have emerged from poverty in India and China. They want cars,
refrigerators. They want to travel and have air conditioning when it is
too hot. They want to live like us, and to do that they need to have as
much energy as we use. Meanwhile, the industrialized world continues to
use as much energy as ever. Competition for resources has irrevocably
changed the game.
3. Will this mean that the government picks winners and losers?
No, it does not. The government did not tell automobile
manufacturers how to increase mileage when the first CAFE standards
were set. Nor did it tell refrigerator manufacturers how to reduce
their energy consumption (since those standards were set in the 1970's,
energy use in refrigerators has dropped 75%, the equivalent of not
building 100 to 300 power plants). But the government did tell them
they HAD to meet performance standards, and they did. We recommend a
declining carbon cap coupled with federal R&D in a variety of
technologies. Let the market have a flatter field for competition.
4. Does this mean that every company wins with a carbon cap
strategy?
Not at all. Change has always been a constant, the components of
the Dow Jones Index continually have turned over since it's creation
over 100 years ago and our economy thrives by creating industries that
add jobs and that add value. Some companies will resist change and
those that are better at adapting will replace them. The result will be
a net increase in economic output and jobs and a more competitive U.S.
This has always been so. Industries that expect or need the government
to protect them from change cannot compete in the modern world (if in
fact they ever could in any era, today there are no Railroad, Steel or
Airline stocks in the Dow).
5. Should the U.S. link its carbon policy to decisions by China and
India?
Only if we want to slow ourselves down. Our contribution to Global
Warming is significant and needs to be reduced. California decided that
an early start on climate would make the state more competitive vis-a-
vis the rest of the U.S. The U.S. will be in a better position to sell
cleantech to China and India if we get our country moving first. As we
continue to show that our policies create a more robust economy and a
cleaner environment, they will rush to join us. They already have a
significant appetite to buy cleantech products and services, and they
are now buying some of them from countries other than us. The U.S. is
no longer the world leader in two important clean energy fields--it
ranks third in installed wind power production behind Denmark and
Spain,\16\ and third in photovoltaic power installed behind Germany and
Japan. We can regain market leadership with a simple policy of a
declining carbon cap coupled with federal R&D is a variety of
technologies.
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\16\ World Wind Energy Association. (2007). http://www.wwindea.org/
home/index.php?option=com_content&task=view&id=167&Itemid=43
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6. What else should we be doing?
We need to be the people the world has been waiting for, the people
our children will say made the decisions that gave their children a
safer and healthier place to live. We should not be the people who pass
the buck, the people our parents warned us about.
Senator Boxer. Mr. Unger, thank you so much. I so agree
with the view and so far, everyone, I just think that you
really put it into the perspective that we need to think about
it as, you know, we all need to make a living and we all need
to take care of our families, but we need to also do something
that gives back.
Otherwise, it's useless. I think the beauty of this is
we're showing that we can do both. We can do well and we can do
good for society. You should be proud of that and I think--and
you are and I think you need to say that more, and don't be
inhibited because you need to challenge others who have the
ability to join with you. Then it's just unstoppable.
Bruce Klafter, a senior director, environmental health at
Applied Material, welcome.
STATEMENT OF BRUCE S. KLAFTER, SENIOR DIRECTOR, ENVIRONMENT,
HEALTH AND SAFETY, APPLIED MATERIALS
Mr. Klafter. Thank you, Senator Boxer. I have the corporate
responsibility and sustainability for my company. I welcome the
opportunity to be here today. I thought it would be instructive
for you and the committee to learn a little bit about how an
established Silicon Valley company is attacking some of the
problems we're discussing today.
It's becoming a very substantial business for us and our
contention is that the same economic engine that's been fueling
the boom here in Silicon Valley can be extended into tackling
problems like global warming and I think it holds tremendous
promise.
We've already seen this business take off tremendously for
us and wanted to give you a little context about this. Applied
Materials is a 40-year-old company. We're celebrating our 40th
anniversary this year. We're the global leader in
nanomanufacturing technology. We have portfolio of products
that are used to fabricate semiconductor devices. We are also
now providing equipment that's used to manufacture low E low
maintenance glass, thin film photovoltaic panels, and a variety
of other products.
As what we call an infrastructure company, a company that
produces manufacturing equipment, we can play a vital role in
commercializing some of the technologies that you're hearing
about because the key to proliferating them is the ability to
manufacture them at a reasonable cost.
That's been our value proposition for 40 years and that's
what we're trying to do right now. We recently reorganized some
of our company and announced the formation of an energy and
environmental solutions group which contains some of the
working groups that are working in these particular areas.
So just a couple of words about the products we're making.
The one that we announced last year in September 2006 was a
thin film photovoltaic factory production line. We're providing
entire factory product lines to customers around the world to
manufacture photovoltaic thin film.
So this is not traditional crystalline silicon that you see
on roof tops that Mr. Cinnamon's company installs and so on.
This is a different type of product, related technology
converting sunlight into electricity. We're going to move into
other areas of EV or photovoltaic in the future as well.
We announced, again, this strategy in September of 2006 and
just at the time that's passed since that point we've already
announced seven contracts worth over $500 million in Spain,
Germany, China, Taiwan, and elsewhere, so you mentioned in your
introductory remarks the importance of establishing product
that we can export around the world providing solutions to
global citizens.
That's exactly what we've been able to establish in this
short a time. We hope to enter into contracts with U.S.
customers as well. We'd like to see manufacturing of this
product in the United States but we've already established
tremendous tracks around the world and I share Mr. Cinnamon's
observations about the fact that Germany and other countries
have been leading the way.
We need to establish U.S. presence in this industry as
well. Now, the focus of our discussion today is green jobs.
Just in that time and also understand we've been laying
strategy--the foundation of it for some time.
But approximately 10 percent of our global workforce now,
that's about somewhere between 14,000 and 15,000 individuals,
10 percent of that workforce is now employed in the energy
environmental solutions area, so well over a thousand people.
As the others mentioned, these are all very high paying, very
good jobs.
We have engineers who are optimizing the process. We have
engineers who are laying out the factory line. We will have
engineers and technicians that will travel around the world to
install these production lines and help our customers make them
work and optimize the output from those lines.
We expect to see from each one of these factories that we
set up additional jobs created. Our estimate is that while this
is a fairly highly automated type of process, there will be at
least 150 or more jobs in each one of these factories that are
set up. As these are scaled up from 40 or 50 megawatts of
annual production perhaps to a gigawatt, where you put several
of these factory production lines together, you'll have
hundreds of jobs in each one of these locations.
Our hope is this will become a distributed type of
manufacturing process where we are not shifting products around
the world to see them where we need to consume them.
The other thing I wanted to point out today in the time I
have that we shouldn't overlook the fact that responsible
corporations around the world are also customers of these
technologies. We are turning on our own 28 kilowatt solar
installation in Austin, Texas next week. That has to be the
largest commercial installation in Austin at the present time,
and later this year we'll begin installing a two megawatt
installation in Sunnyvale, California which we believe is the
largest corporate installation in the United States.
We hope that we'll be leapfrogged in the future, but we're
very happy to make a substantial investment in that type of
technology ourselves. So thank you very much.
[The prepared statement of Mr. Klafter follows:]
Statement of Bruce S. Klafter, on Behalf of Applied Materials, Inc.
Honorable members of the Committee, Senator Boxer, Senator Inhofe,
my name is Bruce Klafter. I am Head of Corporate Responsibility and
Sustainability for Applied Materials, Inc., and am based in our Santa
Clara, California, headquarters. Applied Materials. is the global
leader in nanomanufacturing technology solutions with a broad portfolio
of innovative equipment, service and software products for the
fabrication of semiconductor chips, flat panel displays, solar
photovoltaic cells, flexible electronics and energy efficient glass
Founded in 1967, Applied Materials creates and commercializes the
nanomanufacturing technology that helps produce virtually every
semiconductor chip and flat panel display in the world. The company
recently entered the market for equipment to produce solar arrays and
energy efficient glass. To support our customers, Applied Materials
employs approximately 14,000 people throughout the world (8,000 in the
United States). In fiscal year 2006, Applied Materials recorded net
sales of U.S. $9.17 billion. We are pleased to offer this testimony to
the Committee and hope that an explication of Applied Materials green
business strategy will be instructive to the Committee's understanding
of the tremendous opportunities created by taking action on global
warming.
green means growth
Applied Materials is making significant investments of capital and
other resources into developing and growing substantial new lines of
business focused on ``green'' technology. By ''green'' technology, we
are referring to a variety of equipment, products and services that
enable generation of energy from renewable sources, help our customers
use energy as efficiently in their operations and that prevent or
minimize the greenhouse gases generated in those same operations. Our
new Energy and Environmental Solutions Group reflects our view that
``going green'' creates jobs and economic opportunity.
It is also our view that the United States Congress has an
important role to play in crafting legislation that promotes
development of innovative, advanced green technologies, that encourages
businesses and consumers to employ those technologies and that creates
conditions favorable to the domestic manufacture and distribution of
green products. As one of the leading high-technology companies in
Silicon Valley and the world, we have long worked with Congress and
federal agencies to help to fuel the amazing job creation engine that
high tech has become. Green jobs are a natural extension of the high-
tech job phenomenon with the added benefit of making direct and
important contributions to addressing some of the most pressing
problems facing the world today. Applied is involved in several green
technologies:
Photovoltaics.--Photovoltaics, or more commonly, direct conversion
of sunlight to electricity, has long represented a great opportunity
for the world to access clean, renewable energy. Solar energy
generation produces no pollution and requires little or no maintenance.
It can be distributed throughout the grid, and offers the most power
during peak demand periods. By alleviating peak power demand, solar
energy lowers the number of conventional power plants needed, and
reduces strain that causes transmission failures. Despite these
advantages, solar currently generates a very small fraction of total
energy generation in the United States.
As worldwide energy demand continues to rise, the overall solar
equipment market is expected to grow from approximately $1 billion in
2006 to more than $3 billion in 2010, according to industry estimates.
Just last week, one analyst predicted the thin-film PV market could
grow to $7.2 billion by 2015. Notably, these estimates do not include
additional opportunities for service-related growth, so the real
economic impact will be a much larger number. Applied Materials intends
to capture and accelerate this growth by dramatically lowering the cost
to produce solar cells, thereby allowing widespread generation of this
clean, renewable energy.
Glass Coatings.--Collectively, buildings in the United States
consume 68 percent of all electricity. Direct energy purchases for
household and vehicle use constitutes approximately one-third of the
energy demand in the United States. Our Glass Coating Products Group
aims to make a dent in those demands, window by window.
We design and manufacture equipment that coats architectural glass
(the kind seen commonly in homes, offices, as well as commercial and
industrial buildings) with ``low eminence'' (Low-E) materials. Low-E
materials are high-quality metal/oxide films on glass that reduce the
flow of heat into and out of buildings. Low-E glass improves efficiency
of buildings heating and cooling while still allowing light to pass
through the windows (solar gain).
Our Low-E glass coating equipment, manufactured in North America
and Europe, has contributed to reducing the cost of energy-efficient
glass 10-fold over the last decade, bringing new building technology to
many consumers for whom costs have previously been prohibitive. These
high-quality films on architectural glass have facilitated energy
efficiency improvements in buildings worldwide.
Today our installed base of this equipment in glass manufacturing
plants has enabled the application of energy efficient films on more
than 20 billion square feet of architectural glass. The savings in
energy enabled by our films and equipment is roughly equivalent to the
oil contained in 57 large oil tankers. Stated another way, the total
energy saved through installation of windows coated using Applied
Materials technology equates to the amount of energy it would take to
heat 30000 homes for one year.
In developing economies such as China and India, our equipment was
the first of its kind installed in architectural glass factories that
are making the Low-E glass used in buildings and in areas where extreme
temperatures are the norm. More than 100 Applied Materials employees
work in Fairfield, California, manufacturing our glass coating
equipment. More than 80 percent of these systems are exported to Asia
and other markets through the Port of Oakland. These regions represent
important markets for exports of American equipment. While these export
success stories are good news, it is important to note that these
factories are not being built in the United States. We believe this can
change if the right mix of public policies is put in place.
Automotive Glass.--In addition to providing technologically
advanced solutions for lowering energy demands in buildings, our Glass/
Web products increase energy efficiency in hundreds of thousands of
automobiles. Known in the automotive world as Solar Infrared Reflective
glazing, or SIRR, coated automotive glass reflects more than 60 percent
of the sun's thermal heating potential from the car interior. This
improves fuel consumption and comfort, by reducing the need for air
conditioning without reducing visible light. This translates into a
savings in vehicle tailpipe emissions and greater fuel economy.
Our aim is to improve market access to SIRR glass for automobiles
and Low-E glass for buildings. As energy conservation becomes more
important to society and regulatory initiatives develop, our technology
will enable integration of these important technologies in buildings
and cars.
economic impact
Applied formally announced its solar strategy in September, 2006
and in the space of just 10 months the company has entered into seven
contracts worth over $500 million and representing over 200MW of annual
thin-film PV production. Within Applied Materials, approximately 10
percent of Applied's global workforce of 14,000 employees is involved
in the production or servicing of our green products. Throughout
Silicon Valley, hundreds of jobs are already tied to solar and more are
added all the time. It is worth noting that the business will generate
a wide variety of well-paid jobs requiring different skills and
experience: design engineers; engineers optimizing the production
process itself; engineers designing the factory layout; installation
teams; service technicians; and a wide variety of jobs such as sales
and account teams, marketing, etc. Distributed solar energy always
involves local distribution and installation and Applied Materials'
customers will establish partnerships with many PV integrators and
installers, each of whom will employ technicians and many others.
Externally, green products drive economic development and jobs as
well For example, a newly announced plan to build a new 40-megawatt
facility in Bielefeld, Germany, to become operational by mid-2008,
would add 150 long-term jobs (and this does not include the
construction jobs). Our own internal analyses for operation of a 60-MW
thin-film fab estimate 160 employees per fab. The economics of
producing solar power collectors favor manufacture close to the market,
which means there could be dozens of these plants in almost every
region of the country. If the right set of policies are in place to
stimulate demand by commercial and residential customers, solar demand
will drive this investment.
Estimates of the job-generating impact of just PV vary, but all are
significant. According to the Solar Energy Industry Association, for
example, extending the solar tax credit could bring 55,000 new American
jobs and more than $45 billion in economic investment. According to a
study by Dr. Roger H. Bezdek of Management Information Services, Inc.,
and the American Solar Energy Society, US private-sector employment in
photovoltaics last year was approximately 7,000 direct jobs and 16,000
indirect jobs. Depending on the public policy environment for PV
technology, this sector could grow to anywhere from 200,000 to 750,000
employees by 2030. These are significant numbers and involve mostly
high-paying jobs.
Similarly, a recent paper from the IC2 Institute at the University
of Texas in Austin cites research showing ``renewable energy generates
more jobs in its construction and manufacturing sectors, per megawatt
of installed power capacity, than does fossil fuel generation.
Specifically for PV generation, far more jobs are produced constructing
PV facilities than are produced by the construction and operation of
coal and natural gas-fired plants.''
At this point, it is instructive to compare the United States with
the world leader in renewable technologies--Germany. Germany has about
one-fourth the GDP and population of the United States, yet renewables
employ 20,000 more workers than in all of the United States
(approximately 214,000 there vs. 194,000 here).
Applied is intent on leading others to make investments in solar
photovoltaic energy. Earlier this year we announced our plan to install
a 2.0 megawatt (mW) system on our main R&D campus in Sunnyvale,
California. This will be one of the largest PV installations on an
existing corporate campus in the United States, if not the largest and
involves a multi-million dollar investment. In addition, Applied has
already installed a 28 kW system at our manufacturing facility in
Austin, Texas. The Austin installation is one of the largest commercial
PV systems to date. Our plans are an illustration of how policy can
influence decisionmaking--we were able to make the California
installation substantially larger because there are financial
incentives in California that scale to the output of a system. The
incentives in Texas, by contrast, are minimal. With action by Congress,
hopefully solar and renewable policy nationwide can be enhanced.
policy recommendations
First and foremost, Applied urges the extension and expansion of a
robust solar investment tax credit. Although the Senate's energy bill
did not include tax provisions, the House did include tax provisions in
its bill and we hope the Senate-House conference report will include a
tax title. We would like to see a combination of the best elements from
both chambers, which would include an eight-year extension of both the
residential and commercial investment credits and a removal of the
$2,000 residential cap. Importantly, the solar tax credits should be
able to offset fully any AMT (alternative minimum tax) liability.
Although it benefits other renewables far more than solar, we
generally favor a national renewable portfolio standard and would like
to see inclusion of a solar ``set-aside'' or triple credit for solar in
any RPS scheme. This would be a temporary measure that would disappear
as the industry matures and achieves commercial viability.
The creation of ARPA-E in the America COMPETES Act is another
welcome step forward. We would hope that at least some portion of the
increased funding toward STEM (science, technology, engineering and
mathematics) education be directed toward solar energy because we face
a serious shortage of talent in this industry.
Moving forward, we would strongly support Senator Menendez's bill
S. 1016, the Solar Act. This measure would establish national standards
for the interconnection and net metering of solar energy systems, based
on the most progressive state standards to date. The legislation would
require utilities to credit their customers at retail electric rates
for supplying excess solar power to the grid. The bill would also
establish that ownership of renewable energy credits (RECs) resides
with the solar system owner for purposes of selling or trading to meet
a state or federal renewable portfolio standard.
On the international trade front, we strongly encourage the US
Trade Representative to continue its efforts to negotiate a sectoral
agreement that would reduce or eliminate tariffs on environmentally
friendly goods. Such an agreement could do for ``green'' what the
Information Technology Agreement has done for IT products.
conclusion
Applied Materials is convinced that the issues of climate, energy
and environmental stewardship are serious challenges, but we are
equally convinced of our ability to tackle these challenges
successfully. We are confident that our technology, ingenuity and
inventiveness will turn these challenges into an economic win for the
United States and that Silicon Valley will again lead the way.
Senator Boxer. Thank you, sir. I think it's an important
point to walk the walk and to utilize these new amazing
technologies. I just--right before I came here I did two stops.
The second stop was at Sun Microsystems where they showed me
their conservation program.
They took a lot of campuses and they consolidated them.
That's the first thing they did, and then this amazing
innovation of the way they cool their huge servers onsite as
opposed to cooling the room.
So they--as the heat comes out they cool it immediately at
the site and they have saved already 50 percent of their energy
bill. Imagine the numbers we're talking about here. As we get
to the point where now they're telling us some of their
customers are complaining the cost to run the computers is now
almost more than the cost of the computer itself.
So the energy factor in all of this, you all know this,
this is what you're dealing with. This is the potential that
the solar folks are going to go after. What they have done, I
just hope you will go visit them because, actually, they want
to become the model, and I gave them a little conservation
award.
The fact that they have figured out a way to reduce their
cost by half, and they've just sort of gotten started and they
installed all this new type of equipment. It's pretty
remarkable in less than a year so you might want to run over
there.
But your point, Mr. Klafter, is right. We need not only to
invent these technologies, we need to start using them here, to
have your technologies be sold elsewhere and not here doesn't
make much sense, does it? OK.
So moving along, Mr. Pat Zimmerman, director of the
Institute of Atmospheric Sciences at the School of Mines and
Technology, welcome, sir.
STATEMENT OF PATRICK R. ZIMMERMAN, Ph.D., CHIEF TECHNOLOGY
OFFICER, C-LOCK TECHNOLOGY
Dr. Zimmerman. Thank you, Senator Boxer, for the
opportunity to testify today. I have a good example of what
even the preregulatory phase of a cap and trade system has
done. As of August 1, I resigned my position as director of the
Institute of Atmospheric Sciences as a professor of the
Department of Atmospheric Sciences to become the chief
technology officer for C-Lock Technology.
C-Lock Technology is a wholly owned subsidiary of Evergreen
Energy that was created based on patented technology that I
developed at the Institute of Atmospheric Sciences. Our
technology is focused on creating a framework that will
accurately quantify greenhouse gas emissions.
Quickly, it will minimize transaction cost. It's very
transparent. It increases the ease of independent third party
verification, and it provides offsets that can be mixed from
various sources to maximize liquidity. All that is designed to
minimize transactional cost so rewards go directly to the
people and businesses that create offsets.
So today I'm going to talk a little bit about some of the
things that need to be done in order for businesses like this
to do well. Of course, these businesses create many jobs, from
my own job to the graduate students that I hire at the
university to further scientific research to jobs in rural
communities.
The focus of C-Lock initially was on agriculture. We
calculate that if a cap and trade--when a cap and trade program
is fully implemented that roughly a billion dollars a year can
be injected into rural economies and create something like $6
to $7 of additional benefits all along the value chain.
These are jobs in places that traditionally have had low
paying jobs. Earlier in my career, I was a scientist at the
National Center for Atmospheric Research where our work focused
on the interactions between biology and radiation balance of
the atmosphere, and it was an exciting job. It was important to
lay the groundwork for understanding climate change.
But when I got the opportunity to move to South Dakota and
apply cutting edge science and transform it into technology
that people can use every day, to move South Dakota from its
extractive agrarian past to a technology driven future, I
jumped at the chance.
There's a few things we need. The first thing we need is we
need credit for early action. What's holding up the market now
is that people are waiting. They're waiting for the rules. I
think that an incentive to move forward regardless of what the
rules will be will be important.
Those incentives can come as a form of, say, a tax
incentive, so that if you buy credits that--that meet certain
criteria for they're independently verified, they're
scientifically sound, and make a real difference in the
atmosphere, will you be sure that some of that investment won't
be lost regardless of future rules. That would create a real
improvement.
Second, we need some sort of uniformity. Right now 38
states have implemented greenhouse gas rules. They're all
slightly different. People who buy credits don't know are these
credits compatible with your registry or California's registry
or--and so Federal legislation is needed to provide that
framework.
Third, we need to resolve issues of ownership. In South
Dakota, Wyoming, and Montana much of the land is owned by
Federal Government and it's leased by independent operators.
Many of those operators have come to me and said can I earn
carbon credits for doing reclamation projects that decrease
erosion, that plant trees that are going to remove
CO2 from the atmosphere now. I can't give them an
answer.
So we need Federal policy on leased lands that dictates
that improvements that are made by the land owner or the lessee
belong to the lessee or maybe they're shared, but we need
something in writing. We've got to apply those offsets if the
ownership is not clear.
But the fundamental framework for all of this has to be
science-based. It has to be scientifically sound. It has to be
credible. There should never be a farmer who's interviewed who
says, ``Yes I've been doing no till for 30 years and now I get
a chance to be paid for doing no till, so I'm going to keep
doing it.''
Now, that doesn't mean that you can't design a system that
will encourage that farmer to stay in a management practice
that continues to store CO2. In fact, the
agricultural sector is vital because all of the technology that
we've talked about today, the thing that we can do right now to
remove CO2 from the atmosphere that we need to do
right now to keep climate from moving to a state of relatively
stable equilibrium to another state of another different
climate regime, we need to keep CO2 from
accumulating. Agriculture can do that right now. U.S.
agriculture can do that better than almost any agricultural
system in the world because almost 60 percent of our land mass
is managed, whereas the global average is only 7 percent.
So now we have a framework that's based on science. We have
regulations that make sense. We have solutions to focus on what
we can do now. Then----
Senator Boxer. Sir, I'd like you to wrap it up because
we've got to get to Mr. Collins.
Dr. Zimmerman. OK. OK. Finally, carbon credits need to be
valuable. There needs to be a value associated with these
offsets so that they create incentives for technological
solutions and investments.
So I think it's more important to have a carbon floater
price than it is to have a carbon escape valve. Thank you.
[The prepared statement of Dr. Zimmerman follows:]
Statement of Patrick R. Zimmerman, Ph.D., Chief Technology Officer, C-
Lock Technology
Thank you Chairwoman Boxer, Ranking Member Inhofe, and members of
the Committee for the opportunity to testify today. My name is Patrick
Zimmerman. I am the Chief Technology Officer at C-Lock Technology.
A well-designed Federal greenhouse gas cap and trade system will
link economic incentives and environmental benefits in ways that will
stimulate the economy and create thousands of new jobs across all
economic sectors. Our new business, C-Lock Technology, provides an
excellent example.
C-Lock Technology is a wholly-owned subsidiary of Evergreen
Energy--a company with patented technology to refuse low-rank coals to
improve heating efficiency and significantly reduce pollutants. The
pollutant reductions include the removal of compounds that affect air
quality including sulfur dioxide, oxides of nitrogen and mercury, as
well as decrease the emissions of carbon dioxide.
C-Lock Technology utilizes a patented process to quantify, certify
and aggregate greenhouse gas emission reductions, avoidances and
offsets so that they have maximum value to sellers and buyers. The
process was developed within the Institute of Atmospheric Sciences at
the South Dakota School of Mines and Technology (SDSM&T). All patents
are therefore the property of the State of South Dakota. As the
inventor of this process, I negotiated an exclusive license to develop
commercial applications of this technology and recently left my
position as Director of the Institute of Atmospheric Sciences at SDSM&T
to focus on the C-Lock Technology startup. The new company employs
several full-time Ph.D. scientists, technical staff, graduate students
and undergraduates. In addition it provides opportunities for SDSM&T
professors and their students to collaborate on projects that
accelerate the transformation of advanced technical knowledge and
cutting-edge science into information and technology that people can
use to improve their lives and long-term sustainability,
C-Lock Teelmology is currently participating in the pre-regulatory
phase of the U.S. carbon market and is focusing on the opportunities to
impact the international carbon market created as a result of the Kyoto
Protocol. Our company is actively participating in the education of
undergraduate students, MS students and Ph.D. students who will lead
the carbon companies of the future. Our industry will need
professionals with skills in business, financial markets and
derivatives, ecology and environmental science,
engineering, mathematics and computer science. It is especially
important to note that our company will provide opportunities
throughout small rural communities for individuals with special
communication and technical skills to assist farmers, ranchers and
businesses with strategies to reduce their emissions of greenhouse
gases and sequester carbon in crops and soils.
We have estimated that for eight agricultural states in the
Northern great Plains, greenhouse gas offsets generated by farmers who
engage in agricultural practices that store organic matter in soil and
trees, and ranchers who implement grazing practices that result in
carbon dioxide removal and avoid emissions of methane and nitrous
oxide, could increase the regional income by more than one billion
dollars per year.\1\ In addition, activities that reduce greenhouse gas
emissions and remove carbon dioxide from the atmosphere and transform
them into long-lived vegetation and organic compounds in the soil also
provide important environmental benefits including improved water
quality, decreased soil erosion, improved drought tolerance, improved
habitat, improved resistance to invasive species, and increased rural
tourism and recreational opportunities.
---------------------------------------------------------------------------
\1\ Assuming half of the farmers and ranchers participate and
prices of at least $5/T of carbon doxide equivalent for the next 20 to
30 years.
---------------------------------------------------------------------------
As the policy debate unfolds about the programs to be put in place
to reduce greenhouse gas emissions, I encourage you to keep in mind the
following characteristics to ensure a robust and fair system:
First, every economic sector in every state should have
the ability to participate.
Second, every carbon credit must be scientifically sound
and reduce human- induced climate change. Legislation must demand high
standards so that greenhouse gas emission reductions, avoidances and
offsets remain credible. High standards require accurate
quantification, independent third-party verification and sound science.
Third, solutions that can be implemented now must be
emphasized--we need to buy time as we develop and implement long-term
technological solutions. Immediate removal of greenhouse gases is a
higher-priority than permanence because we might reach the climate
tipping-point before we can implement long-term-technology.
Forth, solutions should divide the liability amongst many
stakeholders to create more accountability and stability than those
that concentrate it in a specific sector.
Fifth, research investments should not favor specific
technologies but rather should be designed to spark innovation. We
cannot afford to pre-select the winners now.
Sixth, to stimulate the fastest development of long-term
solutions carbon credits must be valuable. It is a higher priority to
maintain a carbon credit price floor than a safety valve.
Finally, an effective Federal greenhouse gas policy will
maximize the U.S. global advantage to provide greenhouse gas offsets
now through agriculture and clean coal technology.
Specific Federal issues must he addressed for the greenhouse gas
market to move from its current pre-regulated phase where markets are
inefficient, standards are poorly defined prices are low and there is a
high perceived risk, into the active market phase where resources flow
efficiently from the those with potential liabilities to those who can
remediate those liabilities in a way that immediately stimulates the
production of avoidances, offsets and sinks. Agencies must define the
ownership of carbon credits created on federal lands so that if a
rancher implements a re-forestation project on Federally-leased land,
the ownership of the carbon credits that accrue must be clear for the
carbon credits to be marketable.
There should also be provisions that reduce market uncertainties as
a result of policy uncertainties. Those who take early action to
mitigate their greenhouse gas footprint should be rewarded. Rewards
should be in the form of the provision of market certainty. Early
action will provide valuable experience to inform wise decision- making
In addition, provisions to indemnify and reward early action will
stimulate greenhouse gas-related job creation.
Base-lines from which carbon credits are quantified must be
anchored to documented improvements from the average business as usual
practice. Any other system penalizes those who have taken early actions
to minimize their greenhouse gas impacts. Agricultural offsets belong
in the market system, not the Department of Agriculture subsidy system.
Federal and international greenhouse gas policies need to converge
in order to maximize the liquidity and income potential of greenhouse
gas markets. This will increase incentives to generate greenhouse gas
reductions, avoidances and offsets, and keep market prices high to
stimulate technological solutions and create well- paying jobs.
The U.S. has a huge advantage over many industrialized nations.
More than 60% of the U.S. land area is under agricultural management.
The global average is just 7%. It is therefore imperative that we take
full advantage of our abundant agricultural resources to stimulate
immediate greenhouse gas reductions and offsets while future technology
becomes viable. This will not only preserve and enhance farm jobs,
income, and traditions, buy will also stimulate the creation of new
economic opportunities in rural communities.
Senator Boxer. That's very good points all. Thank you so
much.
So our last and certainly not our least speaker is Kevin
Collins, president and CEO of Evergreen Energy. Following his
testimony I've got a few questions. Now, I need to ask my staff
if we're going to go and do that press conference after or
we're not going to go into the press conference. Yes, no, or
maybe?
We need to leave at exactly 12:20. So here we go. Mr.
Collins, welcome.
STATEMENT OF KEVIN R. COLLINS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, EVERGREEN ENERGY INC.
Mr. Collins. Thank you, Chairwoman Boxer, for the
opportunity to testify today. Clean energy including cleaner
coal is essential to ensure a better environment. Our national
security, economic prosperity, including new American jobs.
Governments, lawmakers, and industries are seeking
solutions to lower harmful air emissions and reduce greenhouse
gas emissions while meeting growing energy demand, keeping
costs low, and achieving results now for the long term.
Our common goal is to put into place the infrastructure,
policies, and other steps necessary to achieve success. I'm
here today to share with you the story about a unique American
technology developed in a Stanford University laboratory only
17 miles from here and financed by the private sector.
This technology provides energy, environmental, economic,
and job creation benefits right now. It reduces CO2
and other emissions. It's a precombustion approach that
transform our traditional view of the coal-fuel cycle by
improving efficiency and environmental performance. This
technology is available not 5, 10 are or 15 years from now, but
today.
The solution is Evergreen Energy's refined coal that we
produce and market as K-Fuel. Cleaner coal must be a central
part of any national energy security policy. The United States
has the world's largest known recoverable coal reserves, 270
billion tons, which implies a roughly 200-year supply at
current consumption rates.
U.S. coal reserves contain more energy than all the world's
oil reserves. Today, about 50 percent of the coal consumed in
the United States comes from western mines, up from almost 0
percent in 1970. That's because western coal, one type that
works with our K-Fuel process, has less sulfur and therefore
cleaner than coal from the east.
Wyoming is the country's largest producing coal State,
producing over 480 million tons per year or nearly 40 of the
U.S. total. The K-Fuel process chemically replicates nature by
chemically and physically transforming coal before it's burned
into a clearing burning fuel. Our proprietary precombustion
process uses heat, pressure, and time to remove water and
reduce pollutants from lower quality coal, thereby raising heat
value.
By increasing the heat value of these low rank coals by
approximately 25 percent, efficiency is improved so that less
tons of coal are consumed to generate the same energy output.
This translates into less CO2 and other pollutants
per kilowatt hour generated.
By doing so, I believe that Evergreen Energy can rightfully
call itself one of today's solutions to the nation's energy
challenges. Refined coal is available today by the ton because
we built the world's first coal refinery in Gillette, Wyoming.
No doubt the millions of dollars spent on this plant have a
significant multiplier effect on the region.
Extrapolating these numbers we can reasonably project that
construction and operation of these coal refineries will create
thousands of new jobs. K-Fuel stands as an example of how the
need for cleaner energy creates new solutions and new
opportunities for all Americans, including the potential for
new jobs.
Our 750,000 ton per year plant uses modular equipment that
can be scaled larger, and Evergreen's plant designs are
targeted to produce between 2 to 10 million tons of refined
coal per year.
Successful test burns and sales of refined coal to
utilities and industrial coal consumers during the past 18
months have demonstrated lower emissions and higher efficiency.
Up to 70 percent of the mercury is removed from the coal. We've
demonstrated lower levels of sulfur dioxide and nitrogen oxide
emissions.
Our engineering calculations show that simply by switching
fuel, K-Fuel reduces CO2 emissions per kilowatt hour
generated. Evergreen Energy is planning to further verify
CO2 reduction benefits achieved by K-Fuel later this
year through test burns.
By using cheap, abundant low-rank coal from areas such as
Wyoming's Powder River Basin, the K-Fuel process adds value and
creates markets for these resources. K-Fuel can increase
generating capacity from derated power plants and provide a
more cost effective emission solution by avoiding costly post-
combustion control technology such as scrubbers.
K-Fuel can also be used by plants with existing scrubbers
to provide improved efficiency and additional emission
reduction benefits. The K-Fuel process is perhaps the only new
energy technology that produces rather than consumes large
amounts of water.
In the arid west where water resources are valuable, the
industrial grade water that is drawn off the precombustion
process may have indeed beneficial uses. Evergreen Energy is
delivering on the need for cleaner coal today, but as we plan
for the future we see significant marketplace opportunities
made possible by the vast reserves of low-rank and low cost
coal readily available around the world.
Accompanying this opportunity is significant potential for
job creation. We're in ongoing discussions with several
utilities about locating K-Fuel coal refineries next to their
power plants, a concept we call K-Direct. The combined heat and
power approach raises efficiency, reduces costs and emission
per kilowatt hour.
Located next to a power plan a K-Direct coal refinery uses
the plant's waste heat as a power source and produces refined
coal and water for the plant's use. Naturally, all the benefits
of K-Fuel are there as well, including the opportunity to
restore efficiency to derated power plants and reduce or
eliminate the need for new or additional back end control
technology.
Looking ahead, there's been too much focus on the solutions
offered by IGCC, FutureGen, and other advanced coal processes.
While these are all promising technologies, they are years from
widespread deployment, and I respectfully raise caution about
overreliance on a limited number of futuristic number of clean
coal technology solutions.
Cleaner coal solutions exist today. This country must have
a balanced portfolio of cleaner coal technology comprised of
precombustion, combustion, and post combustion technologies
that will offer solutions today, years from now, and decades in
the future at reasonable cost. These solutions need to be
accompanied by flexible policies that create balance and equal
incentives.
Senator Boxer. I'm going to ask you----
Mr. Collins. I'm going to move on rapidly. As leaders and
lawmakers you should embrace all energy options, including
nuclear, renewables, and energy efficiency while recognizing
that coal will and must remain a significant piece of the
portfolio.
Evergreen does not view this refined coal as the solution,
but as an important solution that deserves to play a role in
the Nation's comprehensive energy strategy. We're making coal
cleaner, we're creating new jobs, and we're doing it today.
[The prepared statement of Mr. Collins follows:]
Statement of Kevin R. Collins, President and Chief Executive Officer,
Evergreen Energy Inc.
Thank you Chairwoman Boxer for the opportunity to testify today. My
name is Kevin Collins. I am the President and Chief Executive Officer
of Evergreen Energy Inc based in Denver.
Clean energy, including cleaner coal, is essential to ensure a
better environment, our national security, and economic prosperity,
including new American jobs. Governments, lawmakers, and industries are
seeking solutions to lower harmful air emissions and reduce greenhouse
gas emissions while meeting growing energy demand, keeping costs low,
and achieving results now and for the long term. Our common goal is to
put in place the infrastructure, policies, and other tools necessary to
achieve success.
I am here today to share with you the story about a unique,
American technology developed in a Stanford University laboratory only
17 miles from here and financed by the private sector. This technology
provides energy, environmental, economic and job creation benefits
right now. It reduces CO2 and other emissions. It is a pre-
combustion approach that transforms our traditional view of the coal-
fuel cycle by improving efficiency and environmental performance. This
technology is available not 5, 10 or 15 years from now, but today. This
solution is Evergreen Energy's refined coal that we produce and market
as K-Fuel.
Cleaner coal must be a central part of any national energy security
policy. The U.S. has the world's largest known recoverable coal
reserves--roughly 270 billion tons--which implies at current
consumption rates a roughly 200 year supply. U.S. coal reserves contain
more energy than all of the world's oil reserves\1\.
---------------------------------------------------------------------------
\1\ American Coal Foundation website:http://www.teachcoal.org/
aboutcoal/articles/ fastfacts.html
---------------------------------------------------------------------------
Today, about 50 percent of the coal consumed in the U.S. comes from
western mines--up from almost zero percent in 1970. That is because
western coal--one type that works with our K-Fuel process-
has less sulfur and is therefore cleaner than coal from the east.
Wyoming is the country's largest coal producing state, producing over
400 million tons per year or nearly 40 percent of the U.S. total.
The K-Fuel process simply replicates nature. Evergreen
Energy chemically and physically transforms coal--before it is burned-
into a cleaner burning fuel. Our proprietary pre-combustion process
uses heat, pressure, and time to remove water and reduce pollutants
from lower quality coals, thereby raising heat value. By increasing the
heating value of these low-rank coals by approximately 25 percent,
efficiency is improved so that less tons of coal are consumed to
generate the same energy output. This translates into less
CO2 and other pollutants per kilowatt hour generated. By
doing so, I believe that Evergreen Energy can rightfully call itself
one of today's solutions to the nation's energy challenges.
Refined coal is available today by the ton. Evergreen Energy has
built the world's first coal refinery in Gillette, Wyoming. The tens of
millions of dollars spent on this plant no doubt had a significant
multiplier effect on the region as a whole. Extrapolating these
numbers, we can reasonably project that construction and operation of
future coal refineries will create thousands of new jobs.
K-Fuel stands as an example of how the need for cleaner
energy creates new solutions and new opportunities for all Americans-
including the potential for thousands of new jobs.
Our 750,000 ton per year plant uses modular equipment that can be
scaled larger and Evergreen's plant designs are targeted to produce
between two and 10 million tons of refined coal per year.
Successful test bums and sales of refined coal to utility and
industrial coal consumers over the past year and a half have
demonstrated lower emissions and higher efficiency. Up to 70 percent of
the mercury is removed from the coal and we have demonstrated lower
levels of sulfur dioxide and nitrogen oxides emissions. Our engineering
calculations show that due to its higher efficiency, K-Fuel
reduces CO2 emissions per kilowatt hour generated simply by
switching fuel. Evergreen Energy is planning to further verify the
CO2 reduction benefits achieved by K-Fuel later
this year through test burns.
By using cheap, abundant low-rank coal from areas such as Wyoming's
Powder River Basin, through the K-Fuel process we add value
and create markets for these resources. K-Fuel can increase
generating capacity from de-rated plants and allow for a more cost-
effective emissions control solution than adding costly post-combustion
control technology, such as scrubbers. However, K-Fuel can
also be used by plants with already installed back-end control
technology to provide improved efficiency and additional emissions
reduction benefits.
The K-Fuel process is perhaps the only new energy
technology that produces rather than consumes large amounts of water.
In the arid West where water resources are increasingly valuable, the
industrial-grade quality water that is drawn off the precombustion
process may have many beneficial uses.
Evergreen Energy is delivering on the need for cleaner coal today,
but as we plan for the future, we see significant marketplace
opportunities made possible by the vast reserves of low-rank, low-cost
coal resources readily available around the world. Accompanying this
opportunity is significant potential for job creation. We are in
ongoing discussions with several utilities about locating K-
Fuel coal refineries next to power plants, a concept we
call K-DirectSM. The combined heat and power approach raises
efficiency, reducing costs and emissions per kilowatt hour. Located
next to a power plant, a K-DirectSM coal refinery uses the
plant's waste steam as a power source and produces refined coal and
water for the plant's use. Naturally, all the benefits of K-
Fuel are there as well, including the opportunity to
restore efficiency to de-rated power plants and reduce or eliminate the
need for new or additional back end control technology.
As we plan for the future of a carbon-constrained world, Evergreen
Energy has established a wholly owned subsidiary, C-Lock Technology,
which uses a proprietary methodology to measure carbon emission
reduction credits. Shortly, you will hear more about C-Lock from Dr.
Patrick Zimmerman. With K-Fuel's carbon avoidance profile,
we anticipate being a very active participant in the carbon market,
Looking ahead, there has been too much focus on the solutions
offered by Integrated Gasification Combined Cycle, FutureQen, and other
advanced coal processes. While these are all promising technologies,
they are years from widespread deployment--and respectfully raise
caution about over-reliance on a limited number of futuristic clean
coal technology solutions. Cleaner coal solutions exist today.
This country must have a balanced portfolio of clean coal
technology options comprised of pre-combustion, combustion, and post-
combustion technologies--Future Gen but also NOW GEN--that will offer
solutions today, years from now, and decades in the future at
reasonable costs. These solutions need to be accompanied by flexible
policies that create balanced and equal incentives.
As lawmakers and leaders you should embrace all energy options
including nuclear, renewables, and energy efficiency while recognizing
that coal will, and must, remain a significant piece of the portfolio.
Evergreen Energy does not view refined coal as the solution but it is
an important solution that deserves to play a role in the nation's
comprehensive energy strategy. We are making coal cleaner, we are
creating new jobs, and we are doing it today.
I thank the Committee for the opportunity to appear today and look
forward to answering your questions.
Senator Boxer. Thank you, sir. Let me just start by asking
you is this actually functioning today? Do you have certain
plants? Where are these plants?
Mr. Collins. There's a plant in Gillette, Wyoming.
Senator Boxer. Have you talked to some of the coal State
senators about this innovation? Have you had the opportunity to
meet with say, for example, Senator Moynovich or Senator
Warner?
Mr. Collins. Some of my colleagues have had a chance----
Senator Boxer. I think it's very important that the coal
State senators understand that we have some movement here. So
the idea is that you cut the amount of coal used and get more
energy. You have the same amount of energy for using less coal?
Is that the notion?
Mr. Collins. You take an unusable resource which is what
these low-rank coals have, high moisture content, that's an
unusable resource by using heat, time, and temperature we're
able to reduce the amount of moisture in that coal, thereby
raising the BTU value of that coal by about 25 percent.
Senator Boxer. So 25 percent less coal is used. Is that my
understanding? To get the same equivalent amount of energy?
Mr. Collins. If you reduce the amount of water, then it
takes less energy to burn that fuel.
Senator Boxer. I see. Got you. I just want to get this
right. 25 percent energy to get the same amount of coal.
Mr. Collins. We are increasing energy content by 25 percent
on average.
Senator Boxer. By.
Mr. Collins. By reducing moisture in that coal by taking
that unusable resource, removing the moisture, and thereby
increasing the heating value of that coal.
Senator Boxer. I see.
Mr. Collins. Therefore, it takes less energy to produce
electricity from that coal.
Senator Boxer. Got it.
I have a few questions. Mr. Cinnamon and Mr. Musk, I hope
you can chime in here. The solar industry is growing by leaps
and bounds. It would grow even more it would seem to me if we
had global warming legislation nationally. So if you really
were to think big on the point that we would do this, that we
would follow the lead of California and we did enact this kind
of legislation, where do you see the potential for solar?
Mr. Cinnamon. OK. There was a study that was done by a
management information services in the American Solar
Generation Society, base case, moderate case, and advanced
scenario, and if we were to fully support this industry, the
advanced scenario, the photovoltaic business would have 750,000
jobs by 2030 and that would be a $48 billion industry. So we
can get there. If we don't, somebody else will.
Dr. Hanemann. I think that's an understatement, quite
frankly. I actually think that this is closer to a trillion
dollar industry, and talk a little bit about the timeframe for
that, but I actually think it's about at least a trillion
dollars' worth of business to be done in photovoltaic.
Senator Boxer. OK.
Mr. Cinnamon. I'd have to agree with that.
Senator Boxer. No argument from you.
Dr. Hanemann, Mr. Zimmerman pointed out something that I
totally agree with. He said based on--you've got a base price.
Do you agree with this in terms of sending a message here if we
enact legislation for the safety valve and all of a sudden
people may well back off their investments?
Dr. Hanemann. I think the safety valve as it's being
proposed as a price cap would be a hindrance to innovation. I
think there are other mechanisms that would achieve the same
basic objective that would be--and those include allowing for
borrowing and the idea has been suggested for a sort of Federal
reserve board. I think having a cap on price and announcing it
in advance is a blunt instrument and a bad way to go about
providing some degree of security.
Senator Boxer. Thank you, sir.
Mr. Musk, a couple of questions. I actually know the
answer, but--to the first one because when I went to Tesla
Motors we talked about this. But what I want you to talk about
is the fact that your cars run on electricity but if you
install a solar panel on the car you could drive a Tesla Motors
vehicle on free zero carbon emissions from the sun; is that
correct? I would like to ask what would that cost--add to the
cost to the car to have a solar pack on the car?
Mr. Musk. Sure. The best way to do that is not to put the
solar pack on the car, but put it on your house or garage or
something like that. That would be the most efficient way of
doing it. Something like a 10 by 15 foot solar panel really
pretty small.
Senator Boxer. On the house.
Mr. Musk. That would then generate about the equivalent of
about 400 miles a week of travel in the car. So the average is
about 200 miles a week, roughly 30 miles a day, so it's roughly
double what your average consumer would do. To get something
like that installed, $7,000 or $8,000, something like that.
Senator Boxer. So it's very possible that we could be
driving a car and not contributing any--pretty much any carbon,
except, of course, what it costs to produce the car.
Mr. Musk. Putting energy back into the grid.
Senator Boxer. Pretty remarkable. I have another question
for you, too. Did you see the movie Who Killed the Electric
Car?
Mr. Musk. Yes, I did, actually.
Senator Boxer. Do you understand what happened there? That
was--how many people in the audience have seen that? Raise your
hand if you saw it. I had a really bizarre feeling after seeing
that. Why would GM want to collect every last one of those
cars? People were begging to keep their cars.
Mr. Musk. It's a combination of factors. That's the
ultimate conclusion of the movie. In part it was a consumer
issue and in part it was a corporate issue, but I think really
at the end of the day it made no sense what GM did. How many
products have you ever seen held at a candlelit vigil for the
destruction of a car?
Senator Boxer. Well, here the manufacturer came out and
bulldozed their own product?
Mr. Musk. Yes, it's crazy.
Senator Boxer. And didn't let anyone keep one.
It's just very--if you haven't seen the film I strongly
recommend you see it just because to me it doesn't make any
sense. So if anyone understands it they can let me know.
Mr. Unger, moving on to you, some argue that an increase in
our research and development funds, as what you're involved in,
which we're so grateful for, will be enough to foster
development of new green technology. A recent CEO report found
that both research and development funds and a mandatory--
greenhouse gas emissions will be needed to foster low carbon
technologies.
Do you agree that we need to marry the two?
Mr. Unger. I think you have to marry the two. I think that
if you go back to CAFE standards--I was just reading last night
when CAFE standards were put on in, I guess--you know, we
almost immediately got up to that number.
Then there was a little dip in the 1980s, and there was an
attribution the if the market is left alone it was really the
mandatory cap that forced that to happen. I think there's no
way, you know, to depend only on market forces in something
that is--if we're only talking about competition, clearly, I'm
going to have an electric car sooner or later. It's going to
last me longer and that will be wonderful, but I have a lot of
time to make that decision. There are other places where I
don't get to make the decision, like I don't get to choose
where I buy my power from.
You know, somebody else decides it. So when you have these
more complex issues, like who do I get my power from or during
what period of time do I have to address an issue which may
take us away from the opportunity to address global warming
because we'll reach that tipping point and then maybe we have
to have a whole new set of technologies to reach it, we need
some help to drive the incentives.
I have not seen at least in my lifetime the opportunity to
save an industry that wasn't already trying to save itself,
whether it's the steel industry, whether it's the textile
industry, whether it's the automobile industry. I think the
real issue is that you have to be willing to take risks, and
I'm biased because I'm a venture capitalist and we get paid for
taking risks and yet in my 20 years in the business with few
exceptions venture capitalists are quite risk averse.
Otherwise, why would so many of us be so successful? Up
until the bubble burst, nobody ever lost money. What kind of
risk is that? So here when we really have to take some risks we
have to address them straightforwardly and find out whether
it's coal or whether it's, you know, an all electric car or a
hybrid model or what is it, but we have to have an even playing
field to get out there. Only the government is powerful enough
to make that happen.
Senator Boxer. I think that message is really key to this
Administration because they pride themselves on being very pro
business but they're not listening to business. They're not
listening to business. That's what I find so extraordinary.
Driving me, a lot of things drive me to do this. First, my
grandchild. Second, what business leaders are telling me, what
scientists are telling me, what environmental groups are
telling me, everyone's telling me the same thing that you just
confirmed. We need mandatory limits.
Without that we won't get those investments we know are
going to save the day. They will save the day. You--a lot of
you on this panel are starting to save the day and you need to
do it in an environment where you feel comfortable that you can
pursue that. So I just--I'm urging you, please, all of you who
may be able to talk to the Jim Thompsons and the George Bushes
and Dick Chaneys----
Mr. Collins. I'd like to insert one thing. The wind
industry----
Senator Boxer. Yes.
Mr. Unger. Really from the Sun but via wind, has been a
victim of inconsistent Federal policy by renewing and not
renewing investment credit, if you look at them there's almost
this, you know, up expecting, you know, the credit expires and
down in terms of the amount of business they can do, and make
people fear and worry about investing in wind energy. We need
to avoid that to let people like me and the people in my
industry have a much longer view, we're willing to tie up our
money for five or 10 years. Just try to leave the rules a
little bit stable.
Senator Boxer. Right. Then if you wait too long, say the
price goes up to the sky and it becomes profitable there's a
lead time here. We're not going to be able to have these
alternatives at the fingertips that we need.
Mr. Klafter, I wanted to talk to you about that coating
glass that helps make the buildings more energy efficient, just
press you on what's the payback for this if, let's say, I don't
know if there's such a thing, an average-sized office building.
How soon does it pay back in terms of the energy efficiency?
Mr. Klafter. I think if you installed that type of
technology in new construction, the payback is fairly short and
the coatings can be applied in such a way that it provides
benefits both in hot climates and also colder ones so that in
colder ones it has insulating value and prevents heat loss in
the structure.
I think that some commercial building owners are finding
that the cost of retrofitting may be a little more tenuous as
far as the return is concerned, but we would like to see this
technology proliferate and start going into all new
construction.
The other thing that we are doing and many other companies
like ours is also doing additional research on how you can use
various types of electronics or electrical devices to change
the tinting and so on with the flip of a switch, and so on, to
provide additional benefits. This is where the future is going
to be going.
Senator Boxer. That's terrific. Is this a substitute, this
product, for double-pane windows or would it be in addition?
Mr. Klafter. I think it would be in addition to. Again, the
type of equipment we produce is designed to make it inexpensive
to apply these types of coatings. A double-pane window alone is
kind of a lower-tech solution.
You do see double-pane windows with gases or other things
injected between the panes. There are a lot of different
solutions. There are many companies in this business. The other
thing I point out about glass is it's also going to be
distributed around the world because you're not going to shift
glazing across the globe. You're going to produce it where you
need to consume it. So that means we're going to have low heat
glass in every country.
Senator Boxer. Thank you.
Dr. Zimmerman, can you tell us about the importance of
being able to calculate emissions of carbon from soil? What's
the relevance of C-Lock technology and similar technology for
legislation to cap emission of greenhouse gases?
Dr. Zimmerman. Yes. Over the last hundred years about half
of the secular trend, half of the CO2 that has
accumulated in the atmosphere has come from land use change and
agriculture. It took 100 years of intensive nonsustainable
agriculture to get that CO2 in the atmosphere.
By modifying land use practices, encouraging things like
buffer strips where there's high erosion you improve soil
quality, you increase the amount of organic matter so it holds
more moisture. You can actually--some modeling studies of
colleagues have shown that increasing soil organic matter
actually can increase drought tolerance for an entire region.
So there's a lot of positive benefits in--both
ecologically, and it's something we can do right now to remove
CO2 and keep other greenhouse gases like methane and
nitrous oxide from getting into the atmosphere.
The C-Lock system, what it does basically it uses the
information superhighway as a backbone to reach out to
communities of farmers and ranchers, it uses generic GIS
Geographic Information System data for climate and so forth,
plus land parcel specific data from individual ranchers.
It has verification built into it so it's really hard to
cheat. It quantifies what we know. For years soil scientists
have been telling me, the IPPC and others, soil is so complex
we can't do this. We got to wait. The fact is we can do it.
The issues are almost the same for factories and other gas
stacks. The other fact is we can quantify what we know and
remove what we don't know, discount the offset on the basis of
what we know, and the C-Lock system allows us to do it.
Senator Boxer. OK. Mr. Collins, there are a variety of ways
to reduce greenhouse emissions from coal. Do you see this as a
growth industry and is this which you're investing in
technologies like K-Fuel?
Mr. Collins. This process reduces CO2. It
reduces other greenhouse gas emissions. We see once these
plants start getting built the thousands of new jobs that would
be created by building----
Senator Boxer. It can't be farmed out to other countries.
That's the thing. A lot of these plants would be here in the
United States.
I just want to thank you all very, very much. You know, for
me when I come home it's a breath of fresh air and now it has
again been that from everything I've done today from this panel
it's sometimes lonely back in Washington when you're from
California. People don't understand the ethic that we have here
about our environment and the ethic that our corporations bring
to the table.
Not everyone, but most of them, that they do want to do
very well and they want to do good for society and they've
found ways to do it, that they've never seen a clash between a
clean environment and a strong economy. As a matter of fact, we
see it in very different ways.
So taking that message back to my colleagues is sometimes
very difficult. I hope that many of you will make yourselves
available to testify in Washington. I would say particularly
our coal friends who are working hard at this, I think we need
to make the case to our colleagues that there is a way to move
forward on coal. There is a way to move forward on ag. There's
some people that think we can't say to the Ag industry ``you're
not part of the solution.'' I think we see now that we can all
be part of the solution.
So I hope all of you by shaking your head nodding will tell
me that you would be willing to come back if I call on you.
Yes? I see that. Good. I trapped you now. And--because we have
a long road. We've had a breakthrough in the committee.
Senators Lieberman and Warner have teamed up so we have the
first Republican on the committee who is ready to pass
legislation.
We have work to do and it's going to accelerate when we get
back. Everything that you've taught me today I'm going to take
back to my colleagues, and so I really appreciate your all
being here. The hearing's adjourned.
[Whereupon, at 12:24 p.m. the hearing was adjourned.]