[Senate Hearing 110-1121]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 110-1121

                GREEN JOBS FROM ACTION ON GLOBAL WARMING

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

                             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
                                 ------                                

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

                              ----------                              
                                                                   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

                              ----------                              


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

-------------------------------------------------------------------------
(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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \3\ Ibid CVN; MoneyTree.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
 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\
---------------------------------------------------------------------------
    \6\ ``DOE Selects Six Cellulosic Ethanol Plants for up to $385 
Million in Federal Funding'' http://www.energy.gov/news/4827.htm
---------------------------------------------------------------------------
     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.''
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
     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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.)
---------------------------------------------------------------------------
    \15\ ``Senate Bill No. 1368.'' California Energy Commission. 
(September 29, 2006). http://www.energy.ca.gov/ghgstandards/documents/
sb1368_bill_20060929_chaptered.pdf.
---------------------------------------------------------------------------
     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.
---------------------------------------------------------------------------
    \16\ World Wind Energy Association. (2007). http://www.wwindea.org/
home/index.php?option=com_content&task=view&id=167&Itemid=43
---------------------------------------------------------------------------
    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.]
  

                                  
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