[Senate Hearing 110-1202]
[From the U.S. Government Publishing Office]





                                                       S. Hrg. 110-1202

                     GREEN JOBS CREATED BY GLOBAL 
                          WARMING INITIATIVES

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 25, 2007

                               __________

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





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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

                           September 25, 2007
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     2
Sanders, Hon. Bernard, U.S. Senator from the State of Vermont....    30
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland   209

                               WITNESSES:

Sigmar, Gabriel, Federal Minister for Environment, Nature 
  Conservation and Nuclear Safety, Federal Republic of Germany...    32
    Prepared statement...........................................    34
    Responses to additional questions from Senator Boxer.........    35
Armey, Richard K., Chairman, Freedomworks........................    87
    Prepared statement...........................................    88
Khosla, Vinod, Founder, Khosla Ventures..........................    91
    Prepared statement...........................................    93
    Respspnse to an additional Question from Senator Boxer.......   106
Ringo, Jerome, President, Apollo Alliance........................   108
    Prepared statement...........................................   110
Winegarden, Wayne, Partner, Arduin, Laffer and Moore Econometrics   114
    Prepared statement...........................................   116
    Responses to additional questions from Senator Boxer.........   118
Berrigan, Carol, Director of Industry Infrastructure, Nuclear 
  Energy Institute...............................................   143
    Prepared statement...........................................   144
    Responses to additional questions from:
        Senator Boxer............................................   147
        Senator Inhofe...........................................   148
Klobuchar, Hon. Amy, U.S. Senator from the State of Minnesota....   154
Kammen, Daniel, Professor of Energy and Society, Professor of 
  Public Policy in the Goldman School, Professor of Nuclear 
  Engineering, and Director of the Renewable and Appropriate 
  Energy Laboratory, University of California, Berkeley..........   156
    Prepared statement...........................................   158
Green, Kenneth, Visiting Fellow, American Enterprise Institute 
  for Public Policy Research.....................................   166
    Prepared statement...........................................   168
    Responses to additional questions from Senator Inhofe........   170
Blittersdorf, David, CEO, Earth Turbines; Founder, NRG Systems...   185
    Prepared statement...........................................   186
    Responses to additional questions from Senator Boxer.........   189
Culpepper, Mark, Vice President of Strategic Marketing, SunEdison   190
    Prepared statement...........................................   192
    Responses to additional questions from Senator Boxer.........   195
Gilligan, Donald, President, National Association of Energy 
  Service Companies..............................................   196
    Prepared statement...........................................   197
    Response to an additional question from Senator Boxer........   202

                          ADDITIONAL MATERIAL

Letter from The Center for American Progress.....................   214
    Statements from:
        Apollo Alliance Urban Habitat............................   218
        The Nature Conservancy...................................   241

 
                     GREEN JOBS CREATED BY GLOBAL 
                          WARMING INITIATIVES

                              ----------                              


                      TUESDAY, SEPTEMBER 25, 2007

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The full committee met, pursuant to notice, at 2 p.m. in 
room 406, Dirksen Senate Office Building, the Hon. Barbara 
Boxer (chairman of the committee) presiding.
    Present: Senators Boxer, Inhofe, Lautenberg, Sanders, 
Alexander, Klobuchar, Barrasso

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

    Senator Boxer. The hearing will come to order. I want to 
welcome all of our distinguished panelists. Lovely to see you 
here.
    When Senator Inhofe came in, he jokingly said our honeymoon 
is over because yesterday we worked so closely together on the 
water infrastructure of the Country, and global warming, we 
view it a little differently. But speaking just for myself, I 
believe global warming is one of the greatest challenges our 
generation faces and I believe that the scientists have 
determined that we must take action because if global warming 
goes unheeded, we will face impacts such as drought, loss of 
snow pack, and water supplies, significant extinction of 
species, and extreme weather events. We have already seen some 
of this happening.
    In July, I traveled to Greenland with 10 colleagues to view 
the rapid melting of the enormous Greenland ice sheet. If the 
sheet were to melt, the sea level would rise by 23 feet and it 
would be disastrous for our coastlines. I don't think I will 
ever forget that trip. It was very powerful. But I approach 
this whole issue with hope, not fear. There is a great 
opportunity in addressing global warming. By taking action to 
solve it, we will help our economy and create many jobs.
    Today, we had a briefing from the Europeans. They are very 
clear. They have the numbers to show how jobs are increasing, 
while they cut back on carbon emissions. In Britain since 1990, 
they have reduced their greenhouse gas emissions by about 15 
percent, but their economy has grown by over 40 percent. I 
think we can use American know-how and innovation to experience 
the same success by producing domestically renewable energy, 
biofuels and energy-conserving products.
    In fact, a study completed this August by the University of 
California at Berkeley projected that meeting the caps from 
AB32--that is California's landmark global warming 
legislation--could boost gross State product in my State in 
2020 by up to $74 billion and create 89,000 new jobs. This is 
just my State of California.
    In fighting global warming, we can increase energy 
efficiency, increase our energy independence, improve our 
national security, and increase our global competitiveness. The 
reports from the Pentagon State that they believe in future 
years if we do nothing, that global warming will be the major 
cause of wars.
    So I am going to place the rest of my statement in the 
record and do a couple of housekeeping things. First, I want to 
say that when Tom Friedman said ``Green is the new red, white 
and blue,'' I thought he captured my sentiments exactly. But 
what I want to do, because of my schedule and because of his 
extreme interest in this hearing, is to turn the gavel over to 
my colleague, Senator Sanders. He will run the hearing after we 
hear from Senator Inhofe.
    So Senator Inhofe, please go forward.
    [The prepared statement of Senator Boxer follows:]

        Statement of Hon. Barbara Boxer, U.S. Senator from the 
                          State of California

    Global warming is one of the greatest challenges of our 
generation.
    According to a recent Intergovernmental Panel on Climate 
Change report, if global warming goes unchecked, we will face 
impacts such as drought, loss of snow pack and water supplies, 
significant extinction of species, and extreme weather events.
    In July, I traveled to Greenland to view the rapid melting 
of the enormous Greenland Ice Sheet. If the Greenland Ice sheet 
were to melt, the sea level would rise by 23 feet. This would 
have disastrous consequences for our coastlines.
    But I approach this issue with hope, not fear. There is 
great opportunity in addressing this issue.
    By taking action to solve global warming, we will help our 
economy and create many new jobs.
    I believe that if we cap carbon emissions and fight global 
warming, we will be better off for it in every way, including 
economically.
    Take a look at Britain. Since 1990 they have reduced their 
greenhouse gas emissions by about 15 percent, while its economy 
has grown by over 40 percent.
    Today, Britain's environmental industries are the fastest 
growing sector of the country's economy, growing from about 
135,000 jobs to over 500,000 jobs in just the last 5 years.
    We can use American know-how and innovation to experience 
the same success by producing domestically renewable energy, 
biofuels, and energy-conserving products domestically.
    In fact, a study completed this August by the University of 
California, Berkeley projected that meeting the caps from AB32, 
California's landmark global warming legislation, could boost 
Gross State Product in 2020 by up to$74 billion. It would 
create 89,000 new jobs in California. And this is only in 
California.
    In fighting global warming we can increase energy 
efficiency, increase our energy independence, improve our 
national security, and increase our global competitiveness.
    As 60 California Economists have said: ``The most expensive 
thing we can do is nothing.''
    When we create and build clean energy sources and energy 
efficient technologies, we will export these technologies to 
the rest of the world. America will rebuild our manufacturing 
sector and create new, skilled ``green collar'' jobs.
    Green jobs are our future. I agree with Tom Friedman who 
says, ``green is the new red, white and blue.''

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

    Senator Inhofe. Thank you, Madam Chairman.
    I am just amazed every time I hear people talk about the 
science is settled and all that. Fortunately, this is not a 
hearing where we are going to be talking about the science, but 
you are going to hear some recent things that have happened. 
Without question, the preponderance of the science that is 
coming along is primarily those individuals who are on the 
other side of the issue coming over and becoming skeptics.
    While I do think holding this hearing is important, I have 
no doubt in my mind what would happen to our jobs should we 
start having a cap and trade system or a tax system. So I think 
it is very important to have this. I welcome all of the 
witnesses, particularly my good friend Dick Armey, with whom I 
served in the House, and who is from Texas and saw fit to get a 
good education and went to Oklahoma University to get his Ph.D. 
It is nice to have you here.
    I would note with regret that Paul Renfrow of OGE was going 
to be on this panel. He is not able to because of the death of 
Steve Moore, who has been their Chairman, Madam Chairman, for 
probably 15 or 20 years.
    We have held numerous hearings in this Committee on the 
issue of climate change. I have lost count, about 20 or 21, I 
guess. In contrast, a hearing on job impacts of carbon mandates 
on the U.S. economy is an important one. I will be blunt. Like 
several of our witnesses today, I believe carbon mandates are 
job destroyers. Our witnesses will testify today on how 
devastating carbon mandates would be to the economy, costing up 
to $10,400 for a family of four. It is kind of a grueling 
number. First all, we had the Wharton Econometrics survey, and 
then that was followed by an MIT study and the numbers keep 
going up.
    They are staggering numbers, and the burdens will not be 
shared equally. I think we all understand that the poor are the 
ones that will be carrying the brunt of the loss. As a strong 
supporter of nuclear energy, I was gratified that we could 
expect more nuclear plants to come online and thousands of good 
jobs in the building of new reactors that will create. Today, 
we celebrated the first new application in 30 years. I am just 
very, very excited about that. We have been working on this for 
quite some time.
    In fact, while we are looking at the crisis we have in 
energy in this Country, it is not just oil and gas and coal and 
nuclear and renewables, it is all of the above. I would like to 
submit for the record the testimony of Dr. Gabriel Calzada.
    Senator Boxer. Without objection.
    [The referenced testomony follows:]

 Statement of Gabriel Calzada, Associate Professor of Economics, King 
  Juan Carlos University, MadridPresident, Instituto Juan de Mariana 
                                (Spain)

    Madame Chairman and respected Members on this Committee, my 
name is Dr. Gabriel Calzada, Associate Professor in Economics 
at the King Juan Carlos University in Madrid, Spain and 
President of the Instituto Juan de Mariana, a classical liberal 
think tank. I appreciate the opportunity to provide comments 
for the record of this hearing addressing the issue of ``green-
collar jobs'', or specifically the notion that adopting carbon 
constraints will produce jobs.
    In short, while certainly this is literally true as with 
any regulatory scheme will directly create some jobs out of 
necessity to deal with or capitalize upon it, it says nothing 
about the quality or sustainability of the jobs, their actual 
gross or net benefit or contribution to the economy. More 
important, the claim notably does not include any consideration 
of the jobs that such regulations cost an economy, particularly 
when the scheme in question is one adopted by only a few 
countries worldwide and involves a basic requirement of most 
industries: the availability and affordability of energy.
    It is on that latter count that I will focus my remarks 
today, specifically to note how Europe's cap-and-trade scheme 
has demonstrably chased existing and future jobs away from 
Europe's Members State economies. I read much about how 
whatever the United States adopts, if anything, it will of 
course not indulge in the mistakes of Europe's scheme which it 
is an understatement to describe as less than successful.


           avoiding europe's costly mistakes: is it possible?


    One rarely reads the specifics of how this avoidance will 
come about, what of the Emission Trading Scheme's (ETS) 
pitfalls will the U.S. Congress ``engineer out'', should it 
choose this rationing path. In truth, such claims are very 
curious given that Europe has not learned how to fix its scheme 
to avoid these massive downsides.
    As regards a U.S. plan, one typically reads only general 
statements about auctioning some amount of overall emission 
allocations instead of giving them all away as Europe has done 
(despite the authority to auction some, albeit quite small, 
portion). It is important to first note that this proves far 
more difficult in practice than in theory--after all, when 
industry participants advocate for such a scheme they mean that 
they support the specific scheme that they have in mind, under 
which they envision making money, and I need not tell Congress 
that these constituencies have proven willing to lobby heavily 
to gain what they seek, and avoid being the ones to pay under 
whatever design is chosen if any.
    Further, simply auctioning some (politically realistic, 
that is, likely quite small) quantity of emission allocations 
as opposed to handing out for free the suddenly (if 
artificially) valuable certificates does not avoid other 
problems inherent in such schemes as applied to a ubiquitous 
product of industrial activity. I say ``product'' as opposed to 
``byproduct'' because CO2 emissions from any given 
source increase as one more efficiently combusts hydrocarbon 
energy.
    These other problems inherent to cap-and-trade as applied 
to carbon dioxide include a) that policymakers can determine an 
emission cap or the cost, but not the emission cap and the 
cost; any GHG policies mild enough to make it through the 
policymakers are of such small effect as to be without remote 
chance of having a climatic impact; the costs imposed on the 
activity are typically far beyond the assessed societal cost of 
the activity; and, most important in this context, cap-and-
trade particularly as applied to CO2 is inherently 
subject to gaming. There is after all a reason that Enron was 
the pioneer pushing for exactly this scheme in the U.S.
    I regret that I do not have space permitting me to address 
each of these, today, but am willing to provide responses in 
writing to any questions seeking more detail. Instead, I 
specifically wish to focus on Europe's newest export to the 
U.S.: jobs lost due to having convinced itself of artificially 
low estimates of the cost of, and artificially high speculation 
about potential gain from, regulating greenhouse gases.


         europe's newest export: kyoto jobs, thanks to its ets


    The Kyoto Protocol is steeped in mythology, the leading 
myth being Europe's supposed successful performance under the 
global warming treaty. Even the European Environment Agency 
annually admits the truth: since Kyoto (1997), through 2006 
(the latter year's figures being unofficial) Europe's 
greenhouse gas (GHGs) emissions are well up, not down, and 
rising not falling. Although EEA's most recent statement from 
June of this year notes a year-over-year reduction, 2005 
compared to 2004, enough figures are in the public domain to 
note that this was a function of the German economy's downturn 
which, like EU GHG emissions, was reversed in 2006.
    Another myth involves the U.S., whose economic (and 
population) growth has far outpaced Europe's while its 
emissions have actually increased at a fraction of Europe's 
rate under any modern baseline (since Kyoto was agreed). A 
vibrant economy, not name-calling or rationing energy use 
emissions, has proven the better tool for improving one's GHG 
performance, by pulling through new technologies. In my opinion 
that is the preferable ``green jobs'' pathway.
    Now, the U.S. has also begun receiving a ``Kyoto windfall'' 
in the form of foreign direct investment from those few 
countries actually bound by Kyoto. Thus it is all the more 
mysterious why U.S. policymakers are so driven to shift the 
U.S. focus from growth to rationing by mimicking the approach 
of this failed pact, cutting off Europe's newest export of 
jobs.
    Consider the case of Spain, which unlike the U.S.--but like 
many European countries--was allowed to increase GHGs under 
Kyoto. ``Comply with Kyoto, no matter what,'' was current 
Spanish Prime Minister Zapatero's slogan when campaigning for 
La Moncloa--Spain's White House. Three years later, Kyoto's 
``cap-and-trade'' model is costing Spaniards a fortune even 
while their chances of complying with the Protocol are at zero, 
as is typical throughout Europe and most of Kyoto's few covered 
countries.
    Possibly due to the resulting blackouts, Spanish 
authorities remain in the dark about the costs of their 
stubborn commitment to Kyoto's cap-and-trade scheme. For 
example, in the province of Valencia the government fined and 
temporarily closed a paper mill, a ceramic tile manufacturer 
and a glass maker for not possessing GHG permits, until the 
administration could create a way for the companies to acquire 
permits. Meanwhile the central government has issued over 20 
national ``Kyoto'' plans regulating a myriad of economic 
activities, futilely distorting the national economy.
    Yet despite (because of?) harmful regulations Spain's 
emissions have increased by nearly 50 percent. When the 
European market for GHG permits opened, then-Environment 
Minister Cristina Narbona promised ``the maximum companies 
entering the [Emission Trading Scheme (ETS)] will have to pay 
will not be over 85 million euros per year.'' One year later, 
Spanish companies paid about 300 million (about $388 million), 
3 1/2 times the minister's avowed cost ceiling. And this is 
just the tip of the iceberg.
    The Instituto Juan de Mariana estimated Spain's cap-and-
trade cost for the years 2008--2012 as between 4 and 7 billion 
(between about $5.5 to $9.5 billion USD)depending on various 
factors including the price at the time we conducted this 
report (appx. 21 for future credits); this was from 10 to 16 
times Minister Narbona's prediction. A PriceWaterhouseCoopers 
study elevated the price of Kyoto for Spain to 15 billion, or 
35 times the minister's promise. The government has been forced 
to admit that costs in the billions of euros will ensue, but 
downplays it. That is to say, the government announced that the 
cost for 2008--2012 could be up to more than 3 billion (the 
exact estimate was 3067 million, coming quite close to our 
earlier estimates, particularly when one considers they began 
with an 85 million per year prediction).
    Regardless, this drag on the economy accrues no 
environmental benefit, as even Kyoto's most ardent champions 
admit: this is the first of 30 such steps, they say.
    Some Spanish employers already shut their doors or shifted 
new investment to countries not requiring GHG rationing. 
Consider North American Stainless Steel, a subsidiary of 
Acerinox S.A., the world's second-largest stainless steel 
producer and the largest Spanish investor in the U.S. Acerinox 
decided to expand its investments in Kentucky in large part 
because the ETS is wrecking Spain's competitiveness. Expanding 
operations in Spain has become prohibitively expensive due to 
the added cost for every ton of CO2 . This helps to 
explain why this large manufacturer plans to invest just a 
fraction of what it will invest in Kentucky (270 million, or 
about $350 million) in its home market (41 million) (exchange 
rates vary, these cited are as of the time of particular of Mr. 
Munoz's relevant remarks).
    Acerinox's then-CEO (now retired) Victoriano Munoz noted on 
24th February 2005, just after announcing one significant USD 
investment in Kentucky, that his company does not want to 
invest in Spain because they find difficulties in complying 
with Kyoto and ``I would not like to find myself buying quotas 
from France or Germany''.
    Mr. Munoz also said as early as 2004 that, unlike its 
European counterparts, North American Stainless had 
significantly improved its comparative advantage by the U.S. 
staying out of Kyoto. Not coincidentally, just a few months 
later the company decided to expand its U.S. presence, adding 
175 new jobs in Carroll County, KY, while holding back new 
investments in Spain. In early 2005, when presenting the 
company's 2004 figures Munoz explained that principal drivers 
behind Acerinox re-directing investments toward its American 
factory included the cost of complying with Kyoto and the 
continuous blackouts in Spain (even a failing European 
performance under Kyoto has limited its power supply options).
    South Africa is exempt from Kyoto and--like 155 countries 
which continue to reject the rationing approach of Kyoto and 
``cap-and-trade''--is unlikely to ever enact similar policies. 
As such, Acerinox's South African branch also benefits from 
Kyoto's destructive impact on Europe's economy with, as Munoz 
put it in the 2006 shareholders meeting, ``a great strategic 
value''. On one hand it boasts a reliable electricity supply, 
unlike Kyoto-mired Spain. On the other hand, a tightening of 
requirements in Europe (which Kyoto demands must continue ever 
deeper) or the possible eventual adoption of a similar 
rationing scheme by the U.S. makes that plant an important 
strategic asset.
    That is, were the U.S. to make clear that it was not in 
fact going to impose some new and improved version of Europe's 
disastrous example, even more investment would apparently flow 
to your shores. Following Europe's example, it is reasonable to 
conclude, would similarly drive existing and future investment 
away. Regrettably, many political leaders do find political 
appeal in, to date at least rhetorically, touting Kyoto-style 
regulation, leaving investors somewhat wary.
    Many energy-intensive companies face the dilemma whether to 
pay the excessive costs of complying with Kyoto, or to instead 
redirect investments to other countries. Munoz repeatedly warns 
of Kyoto creating a ``very grave'' situation for Spanish 
industry, ``forc[ing] us into a second industrial 
restructuring.'' In his opinion, ``Kyoto is one of the biggest 
problems Spain will have to deal with in the coming years.''
    It is also useful to note that Europeans are not being made 
wealthy by selling windmills and solar panels to each other, as 
the rhetoric leading up to enactment of its carbon trading 
scheme would have led one to believe. Instead, it is only 
utilities and brokers who are clearing massive, indeed 
``windfall'' profits from selling the credits given them by the 
State or else--if instead used to offset their own production--
incorporating their market value into the price of their 
electricity (after all, once granted by the State it is a 
valuable asset that could have been sold), directly on the 
backs of ratepayers.
    This causes me to remark on one other aspect of imposing 
carbon controls on an economy, which is particularly relevant 
to the claim that such controls create jobs. That is, the 
manufacture of ``renewable'' energy sources--which of course 
are heavily subsidized under such schemes both directly and 
indirectly--is often cited in an artificial way as proof of 
some resulting profitability that generates wealth and jobs for 
everyone. Please consider the current Spanish law on the 
subject, which is not unique from what one should expect in a 
world of state-imposed carbon-constraints: the ``fixed sell 
price'' (for wind-energy-producers) to distributors of energy 
is 73.22/MWh, which is between 136 percent and a 209 percent of 
the market price. This results in great redistribution (the 
money going from millions of Spaniards to the ones that have 
license to open a windmill field), in a game leading people to 
believe that windmills are creating (net) jobs while, in the 
best case, it destroys jobs in other sectors to create new ones 
in these privileged sector Unfortunately, the future is now and 
Kyoto is already one of Spain's economic problems due to the 
lost of competitiveness and outsourcing brought about by 
rationing GHG emissions. A whole generation of European 
policymakers still must learn that there is no gain for the 
environment from rationing energy use. In the meantime and for 
now, countries like U.S. and South Africa are becoming refuges 
for international investment.


                               conclusion


    In conclusion, I respectfully suggest that the U.S. take a 
long and serious look at the truth behind Europe's experience 
with a carbon ``cap-and-trade'' scheme, and also the problems 
inherent in such a scheme. It is not sufficient to State that 
the Clean Air Act's ``acid rain'' program is a useful analog, 
for not only is that program's success oversold (e.g., 
SO2 emissions had been falling for 20 years, and 
unrelated interventions such as rail deregulation occurred 
which are not likely to rescue a CO2 scheme from 
reaching the estimated cost to the economy). But also know that 
Europe expressly enacted its CO2 program with the 
benefit of that experience, too.
    The practical realities of applying cap-and-trade to 
CO2 simply do not match the sunny rhetoric, and it 
seems clear that the jobs gained from imposing such a burden on 
the U.S. economy will be far outweighed by the jobs lost due to 
the reduced competitiveness resulting from imposing this drag 
on the availability and affordability of energy.
    Thank you again for allowing me to comment for the record.

    Senator Inhofe. He tells a story of North American 
Stainless Steel, a subsidiary of Acerinox, the world's second 
largest stainless steel producer. The Kyoto Protocol's 
emissions trading system is wrecking Spain's competitiveness 
and adding to the bottom line cost of production in that 
country, so the company announced in 2005 that it would expand 
operations in Carroll County, Kentucky, creating an additional 
175 jobs. CEO Victoriano Munoz explained the decision by 
saying, ``I would not like to find myself buying quotas from 
France and Germany.''
    Government projections all show that mandates will worsen 
the economy. Of course, the hardest burdens will hit on the 
poor. It is no coincidence, Madam Chairman, that the average 
American can expect to live 25 years longer than less than a 
century ago, and the real standard of living has increased six-
fold. These leads were driven by rapid growth that was 
unleashed in the 20th century. I am concerned that instead of 
continuing our amazing success story, we will write a very 
different story for the future generations.
    Instead of continuing to prosper, we will write laws that 
become the engine of the Nation's decline. I urge my colleagues 
to safeguard the future prosperity of the Nation and reject 
symbolic climate gestures that threaten that prosperity.
    Thank you, Madam Chairman. Indeed, the honeymoon is over.
    [The prepared statement of Senator Inhofe follows:]

       Statement of Hon. James M. Inhofe, U.S. Senator from the 
                           State of Oklahoma

    Madame Chairman, thank you for holding this hearing today. 
I would like to welcome all of our witnesses, but especially 
that of Dick Armey, who is not only a man of great substance, 
but great learning. And I would note with regret that Paul 
Renfrow of OG&E will not be joining us due to the passing of 
OG&E's CEO, Steve Moore. Steve was a good and decent man and 
the people of my State will miss him.
    We have held numerous hearings in this Committee on the 
issue of climate change, but few of any substance. In contrast, 
a hearing on the job impacts of carbon mandates on the U.S. 
economy is an important one. I will be blunt: like several of 
our witnesses today, I believe carbon mandates are job 
destroyers.
    Our witnesses will testify today on how devastating carbon 
mandates would be to the economy, costing up to $10,800 a year 
for a family of four. These are staggering numbers. And the 
burdens will not be shared equally. Some will win, but many 
more will lose--and some people will lose everything as their 
jobs are shipped overseas.
    As a strong supporter of nuclear energy, it is gratifying 
that we could expect more nuclear plants to come online, and 
the thousands of good jobs the building of new reactors will 
create. But more jobs will be lost elsewhere than are created. 
I would like to submit for the record the testimony of Dr. 
Gabriel Calzada of Madrid. He tells the story of North American 
Stainless Steel, a subsidiary of Acerinox, the world's second-
largest stainless steel producer. Kyoto Protocol's emissions 
trading system is wrecking Spain's competitiveness and adding 
to the bottom line costs of production in that country, so the 
company announced in 2005 that it would expand operations in 
Carroll County, Kentucky, creating an additional 175 jobs. CEO 
Victoriano Munoz explained the decision by saying ``I would not 
like to find myself buying quotas from France or Germany.''
    Government projections all show that mandates will worsen 
the economy. Of course, the hardest burdens will be borne by 
the poor and working class, as a Congressional Budget Office 
analysis showed earlier this year. Their energy costs--already 
five times higher than wealthier Americans as a percentage of 
their monthly budget--will mushroom.
    It is no coincidence, Madame Chairman, that the average 
American can expect to live 25 years longer than less than a 
century ago. And the real standard of living has increased 6-
fold. These leaps were driven by the rapid growth that was 
unleashed in the 20th Century. I am concerned that, instead of 
continuing our amazing success story, we will write a very 
different story for future generations. That instead of 
continuing to prosper, we will write laws that become the 
engine of the Nation's decline. I urge my colleagues to 
safeguard the future prosperity of the Nation and reject 
symbolic climate gestures that threaten that prosperity.
    Thank you.

    Senator Boxer. Yes, I am sad to say it sure is.
    I would like to place in the record two things. One is 
recent climate change news in the last 2 weeks of all the 
stories that point to what is happening in the real world out 
there on the ground. The other is a report by the Ella Baker 
Center for Human Rights talking about what we need to do as we 
move forward for social justice in this global warming 
legislation.
    [The referenced documents follows:]



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    Senator Boxer. Now, as promised, I will hand the gavel over 
to Senator Sanders. You are in charge, sir.

          OPENING STATEMENT OF HON. BERNARD SANDERS, 
             U.S. SENATOR FROM THE STATE OF VERMONT

    Senator Sanders.
    [Presiding.] Thank you very much, Senator Boxer, for 
holding this hearing. I want to thank all of our guests for 
being here. I must say that Senator Inhofe and I have never had 
a honeymoon.
    [Laughter.]
    Senator Sanders. As liberal as I am, Senator, I don't want 
to marry you. I want to be very clear about that.
    I think that in fact to a very significant degree the 
scientific debate is over. I think what the most knowledgeable 
people in this world are telling us is that if we do not act 
and if we do not act boldly, the world that we are going to 
leave to our kids and our grandchildren will be a world in 
which the climate will be inhospitable. There will be droughts. 
There will be famine. There will be wars. There will be forest 
fires. That is the bad news.
    The good news is that in fact we do know how to address 
this issue. We know it, and we will clearly learn more and more 
as the years go by. But right now, we have the knowledge and we 
have the technology to address this issue. It seems to me that 
it will be a terrible, terrible thing for our kids and our 
grandchildren if we do not address this crisis and if we do not 
address it boldly and aggressively.
    Now, some people say, well, if you go forward aggressively, 
there is going to be economic dislocation, and they are right. 
I think it is the moral responsibility of Congress, the U.S. 
Government, to make sure that those people who are hurt as we 
transform our energy system are in fact protected, whether it 
is loss of jobs, higher bills or whatever. We must protect 
them.
    But on the other hand, and I think we are going to hear 
testimony to this today, the evidence is overwhelming that if 
we go forward in addressing the crisis of climate change, we 
can create millions of good-paying jobs. There will be economic 
dislocation, but at the end of the day I believe we will create 
far more jobs than we will lose.
    I come from a rural State, the State of Vermont. The 
evidence is out there now. While family farmers are being 
driven off of the land, we can create hundreds of thousands of 
new jobs as we move toward biofuels making our Country more 
energy independent.
    In terms of energy efficiency, there are huge numbers of 
jobs to be created as we retrofit our homes, as we build 
automobiles that get good mileage per gallon, as we recognize 
the fact that our rail system today is far behind the rest of 
the world. Just think about the jobs we create as we develop a 
new rail system which can compete with Europe and Japan.
    In terms of sustainable energy, I read in the Los Angeles 
Times today that homes in California that have solar units are 
selling far faster than other types of homes. We have yet to 
begin to scratch the surface in the potential of what solar 
energy can do for our Country. Think of the jobs that will be 
created when millions and millions of homes throughout this 
Country have solar units--both manufacturing the photovoltaics 
and installing them, maintaining them--huge numbers of jobs.
    There will be testimony later from a gentleman from the 
State of Vermont, David Blittersdorf, who is manufacturing 
small wind turbines. Think of what job creation means in the 
United States when millions of people in rural America have 
small wind turbines in their homes, which on average can 
produce half the electricity that they need.
    So Madam Chair, I believe that if we are smart, we 
accomplish two things: We reverse global warming; we reduce CO2 
emissions, and at the same time, we can create millions of 
good-paying jobs. I believe it is the moral responsibility of 
our government in a variety of ways to lead us in that 
direction.
    [The prepared statement of Senator Sanders follows:]

       Statement of Hon. Bernard Sanders, U.S. Senator from the 
                            State of Vermont

    Good afternoon. I want to begin by thanking Sen. Boxer for 
offering me the opportunity to chair today's hearing--``Green 
Jobs Created by Global Warming Initiatives.'' As she knows, I 
feely very strongly that there are huge opportunities 
associated with taking bold action to combat global warming and 
this hearing is meant to focus our attention on one of the most 
important: green job creation here in America. I have more than 
3 minutes worth of opening statement, so I ask that my full 
statement be submitted for the record.
    The science is settled: to avert the worst effects of 
global warming, we must change our ways and we must do it 
quickly. We must do it quickly not only because millions of 
people across the globe are at risk of losing access to clean 
drinking water or because our military leaders tell us we 
should expect armed conflicts due to environmental refugees, 
for these reasons are obvious. In my view, it is absolutely 
imperative that we be bold, that we be aggressive, that we 
listen to the scientific community, that we save this planet 
from irreparable damage.
    I know some have suggested that if we move forward 
aggressively severe economic dislocation will take place. Let 
me respectfully disagree. While there will be, of course, 
economic dislocation, dislocation that Congress must address, 
at the end of the day as we move away from fossil fuels and 
toward energy efficiency and renewable energy, we can create 
millions of good paying jobs, jobs that will help us create a 
stronger economy, not a weaker economy.
    I come from a rural State and there are estimates that we 
can create hundreds of thousands of good paying jobs in rural 
America as we move forward toward bio-fuels.
    We are beginning to see in Germany, Japan and California 
the creation of large numbers of jobs in solar technology, an 
area I believe has enormous potential for our entire country. 
Imagine what it would mean in America if we were building 
photo-voltaic units for millions of homes, if we were building 
solar power plants, if we were researching improved solar 
technology. How many new jobs would be created as we make this 
planet cleaner and safer?
    The same is true for wind technology--both in terms of 
small wind turbines and large wind farms. Imagine what it would 
mean to our economy if we produced and installed millions of 
small wind turbines all across our country that can provide, on 
average, half the electricity a home utilizes.
    And there is geothermal, and many other technologies. Of 
course, there is the whole issue of energy efficiency and 
retrofitting our homes, our offices, our schools, our 
factories. And, what about our transportation system, with a 
more efficient way of producing cars that get more miles per 
gallon, as well as a new rail system.
    Our job as a government is to send a strong signal about 
where we want to go in the future. We do this by supporting 
green technologies and getting them in the hands of consumers. 
By doing this, we will transform and modernize our economy and 
create millions of good paying jobs.
    To be clear, a weak signal won't do the trick--it won't 
lead to nearly as many new ``green collar'' jobs as will a 
strong one. The bolder we are, the clearer it is that America 
is going to help lead the way to a new global future. In fact, 
the United States must reduce emissions by at least 80 percent 
compared to 1990 levels, by the year 2050.
    It is time for a new green economy to make these reductions 
a reality and today's hearing will begin to illustrate some of 
the tremendous opportunities that are out there--if only we are 
brave enough to put in place the policies that will open the 
floodgates for jobs in energy efficiency and renewable energy.
    We know that in a purely economic analysis, inaction on 
global warming is more costly than action. According to Sir 
Nicholas Stern, former Chief Economist of the World Bank, ``If 
no action is taken we will be faced with the kind of downturn 
that has not been seen since the great depression and the two 
world wars.''
    Let me note that it is quite appropriate for us to be 
having this hearing today--2 days before the President begins 
his ``Major Economies Meeting on Climate Change.'' As I 
understand it, the Administration has made it clear going into 
this meeting that two things are off the table: 1) Mandatory 
limits on greenhouse gas emissions, and 2) Cap and Trade 
proposals. I hope today's hearing shows the Administration that 
everyday they spend fighting against bold action is a day that 
this country loses opportunities for job development and 
economic advancement. Pure and simple--this administration is 
holding back growth in the green economy of the future.
    In closing, there is no doubt that if we act boldly, if we 
act aggressively, we can break our dependency on fossil fuels, 
substantially lower greenhouse gas emissions, move to 
sustainable energy and, in the process, create millions of good 
paying jobs.
    I look forward to hearing from the witnesses and appreciate 
their appearing in front of the Committee this afternoon.

    Senator Boxer. Now it is yours.
    Senator Sanders. Now it is mine. All right. OK.
    We are delighted to have a very wonderful panel with us, 
and I want to thank all of the panelists for being here. 
Panelists will have 5 minutes to make their presentation. We 
are going to begin with Hon. Sigmar Gabriel, who is the German 
Minister for the Environment, Nature Conservation, and Nuclear 
Safety. Mr. Gabriel, we thank you very much for being with us 
today.

STATEMENT OF SIGMAR GABRIEL, FEDERAL MINISTER FOR ENVIRONMENT, 
  NATURE CONSERVATION AND NUCLEAR SAFETY, FEDERAL REPUBLIC OF 
                            GERMANY

    Mr. Gabriel. Thank you, Madam Chair, members of the 
Committee, ladies and gentlemen. Thank you very much for giving 
me the opportunity to explain the German and European strategy 
for combining the reduction of greenhouse gases with economic 
growth and economic success.
    In Germany, climate policy became last year the major 
pillar for economic modernization and growth. We want to be 
more efficient in using energy. We want to become more 
independent from energy imports, and we want to create a new 
industry and new jobs in our country.
    For us, the markets of the future are green. The needs of a 
growing world population, and in particular the growing 
consumer demands of the global middle and upper classes can 
only be satisfied by a more efficient use of resources and the 
sustainable use of the environment.
    Today, we are 6.5 billion people on our planet. Fifty years 
ago, we were only 2.5 billion. We have needed millions of years 
to become 2.5 billion people in the world, and now we will only 
need 50 years to become 6.5 billion people. We know that in the 
middle of the century, we will be more than 9 billion people, 
and from then on, half of the population will live in 
industrialized regions with industrialized mass production.
    Environmental technologies, and in particular innovative 
energy technologies, are the lead markets for this future. We 
estimate that the turnover in Germany in these markets alone 
will grow from 150 billion Euro today, to 1,000 billion Euro in 
the year 2030. This means that it will significantly exceed the 
turnover of traditional sectors of industry such as motor 
vehicle manufacturing and engineering.
    The German government and the governments of the European 
Union member states want to make the most of these 
opportunities, want to make Europe the most innovative and 
efficient economic region in the world. To achieve this, we 
need a new deal for environment, economy and employment. For 
us, we believe we are able to combat climate change through 
energy efficiency and through renewable energies.
    Just as your United States President Franklin D. Roosevelt 
responded to the Great Depression in the last century with his 
New Deal by combining public investment, social policy and 
economic reforms, we too need such a deal in view of today's 
climate crisis.
    The Government has the task of laying down clear framework 
conditions and creating incentives for innovations. During 
Germany's European Union presidency, the Union adopted a far-
reaching decision in May 2007. Our goal in the European Union 
is to reduce greenhouse gas emissions by 30 percent by the year 
2020 if other industrialized countries also make commitments, 
but in any event, by 20 percent. In doing this, we are already 
securing investment in the European Carbon Market. In the long 
term, the European Union is aiming for a 60 percent to 80 
percent reduction of its greenhouse gas emissions by 2050.
    Germany has also set itself ambitious targets. By 2020, we 
are aiming for a 40 percent reduction in greenhouse gas 
emissions as compared to the base year 1990. This is 10 
percentage points more than the European Union target. With the 
recently adopted future-oriented energy and climate package, 
which is unique worldwide, we have moved a big step closer to 
reaching our target. The package of measures will provide 
impetus for all carbon dioxide relevant key areas, promote 
climate protection and create jobs in our country.
    Environment and climate protection are already real job 
promoters. Currently, around 3.5 million people are employed in 
the environmental protection sector in the European Union. In 
Germany, this figure is around 1.5 million. This means that 
already 3.8 percent of the German work force is employed in the 
environmental protection sector.
    Let me highlight only two examples. The expansion of 
renewables shows how our country is benefiting from its role as 
a driving force for climate protection. Within just 2 years 
from 2004 to 2006, employment in the renewable sector rose by 
50 percent, to 235,000 jobs. At least 134,000 jobs, almost 60 
percent of the employment figures calculated for 2006, can be 
directly attributed to the Renewable Energy Resources Act.
    The dynamic employment development in the field of 
renewables will create more than 400,000 jobs by 2020. This 
generates demand in other industries, too, and gives the 
industry sustainable growth in lead markets. Solar power 
installations and wind turbines made in Germany are an export 
hit all over the world.
    The second example is that of combined heat and power. By 
2020, we want to double the share of electricity from combined 
heat and power to 25 percent in our country. The additional 
demand in plant manufacturing and the local construction 
industry leads to major labor market effects, securing and 
creating jobs on a six figure scale.
    Thank you very much for your attention.
    [The prepared statement of Mr. Gabriel follows:]

 Statement of Sigmar Gabriel, Federal Minister for Environment, Nature 
      Conservation and Nuclear Saftey, Feeral Republic of Germany

    The markets of the future are green. The needs of a growing 
world population and in particular the growing consumer demands 
of the global middle and upper classes can only be satisfied by 
a more efficient use of resources and the sustainable use of 
our environment.
    Environmental technologies and in particular innovative 
energy technologies are the lead markets of the future. For 
Germany, Roland Berger Strategy Consultants predicts that 
turnover in these markets alone will grow from 150 billion euro 
today to 1000 billion euro in the year 2030. This means that it 
will significantly exceed the turnover of traditional sectors 
of industry such as motor vehicle manufacturing and 
engineering.
    The German government and the governments of the EU Member 
States want to make the most of these opportunities--we want to 
make Europe the most innovative and efficient economic region 
in the world. To achieve this we need a new deal for 
environment, economy and employment.
    Just as President Franklin D. Roosevelt responded to the 
Great Depression in the last century with his ``New Deal'' by 
combining public investment, social policy and economic 
reforms, we too need such a ``deal'' in view of today's climate 
crisis. The government has the task of laying down clear 
framework conditions and creating incentives for innovations.
    Under Germany's EU Presidency the European Union adopted a 
far-reaching decision in March 2007: our goal is to reduce 
greenhouse gas emissions by 30 percent by the year 2020 if 
other industrialised countries also make commitments, but in 
any event by 20 percent. In doing this we are already securing 
investment in the European carbon market. In the long term, the 
EU is aiming for a 60--80 percent reduction of its greenhouse 
gas emissions by 2050.
    Germany has also set itself ambitious targets: by 2020 we 
are aiming for a 40 percent reduction in greenhouse gas 
emissions as compared to the base year 1990; this is 10 percent 
more than the EU target.
    With the recently adopted future-oriented energy and 
climate package, which is unique worldwide, we have moved a big 
step closer to reaching our target. The package of measures 
will provide impetus for all CO2-relevant key areas, 
promote climate protection and create jobs in Germany.
    Environmental and climate protection are already real job 
motors: currently around 3.5 million people are employed in the 
environmental protection sector in the EU. In Germany this 
figure is around 1.5 million. This means that already 3.8 
percent of the German work forces are employed in the 
environmental protection sector.
    With this policy, Germany will continue in its pioneering 
role on the lead markets of the future. Successful energy and 
climate policy also has positive impacts for Germany as a 
location for business and innovation. It secures both jobs and 
a livable environment.
    The example of renewable energies: we have ambitious 
expansion targets for renewable energies (in the electricity, 
heat and fuel sectors): we want to achieve a share of 25 to 30 
percent by 2020.
    The expansion of renewables shows how our country is 
benefiting from its role as a driving force for climate 
protection: within just 2 years, from 2004 to 2006, employment 
in the renewables sector rose by 50 percent--to 235,000 jobs. 
At least 134,000 jobs almost 60 percent of the employment 
figures calculated for 2006 can be directly attributed to the 
Renewable Energy Sources Act. The dynamic employment 
development in the field of renewables will create more than 
400,000 jobs by 2020. This generates demand in other industries 
too and gives the industry sustainable growth in lead markets. 
Solar power installations and wind turbines made in Germany are 
an export hit all over the world.
    The example of combined heat and power: by 2020, we want to 
double the share of electricity from combined heat and power, 
to 25 percent. The additional demand in plant manufacture and 
the local construction industry leads to major labour market 
effects--securing and creating jobs on a six-figure scale.
    The example of low-emission power plants: scenario 
calculations assume a global growth in the construction of 
power plants up to 2020, with an estimated capital requirement 
of several trillion Euros. This will have a corresponding 
effect on the labour market. We will implement measures and 
strategies to speed up investments in state-of-the-art, low-
emission power plant technologies.
    The example of energy efficiency: energy efficiency 
standards and consumer-friendly labelling will be developed for 
all energy-consuming appliances and products. Efficient and 
rational energy use particularly benefits labour-intensive 
sectors in the building industry, engineering and trades. 
Private budget restructuring and the demand for domestic 
products stimulate employment and growth at home. At the same 
time, it encourages the improvement of technological know-how 
and keeps the domestically generated value added at home, 
instead of transferring it abroad for energy imports.
    The example of building modernisation: raising the energy 
standards for buildings under the Energy Saving Ordinance 
triggers investments on a large scale. These standards comprise 
considerably stricter requirements for new buildings, 
modernisation obligations for existing buildings etc.
                                ------                                


 Responses by Sigmar Gabriel to Additional Questions from Senator Boxer

    Question 1. Germany has a population not quite a third the 
size of the U.S. and has nearly doubled the installed wind 
power. How has Germany managed such success? Do you think the 
U.S., with even better wind resources, could have a similar 
degree of success if the right incentives and price signals are 
in place?
    Response. Germany's main means of promoting electricity 
generation from renewable energy sources, the Renewable Energy 
Sources Act (EEG), has proven to be extremely successful. This 
was revealed in the first progress report on the EEG, (refer to 
http://www.erneuerbare-energien.de/inhalt/39915/). The EEG has 
proven a huge success with respect to climate protection and 
intergenerational justice, technological leadership and 
innovation, energy supply, and jobs. Guided by this act, German 
manufacturers have achieved a leading position on the world 
market in this important market segment. On a macroeconomic 
scale, the benefits arising from the EEG already outweigh the 
costs.
    Under the EEG, grid operators have to pay fees for 
electricity from renewable energy sources. The difference 
between the fees and the market price for electricity from 
traditional sources is returned to the consumers on their 
electricity bills as the EEG apportionment. The different types 
of renewable energy sources receive different fees based on the 
cost of electricity generation. The fee level is guaranteed for 
a period of 20 years. This created a perfect investment 
environment which, in turn, led to a strong domestic industry 
with enormous innovations, making Germany the technological 
leader in this regard. It offers new and profitable business 
opportunities for traditional industries such as shipping, 
concrete, metals, and mechanical engineering.
    The EEG's success is evident: In 2006, 45 million fewer 
tons of carbon emissions (CO2 ) were emitted because 
of the EEG. That is 8 million tons more than in 2005. These 
figures show that the EEG significantly contributes to climate 
protection. The use of renewable energy sources prevented over 
100 million tons of carbon emissions in 2006. The EEG 
furthermore helps generate jobs. Of the 236,000 jobs in the 
renewable energy sector, 134,000 were created through the EEG, 
approx. 75,000 of which are in the wind energy sector. 
Renewable energies are also a considerable investment factor 
and have become important for the export industry. Nine billion 
euros were invested in EEG installations in Germany in 2006. 
More than 70 percent of the wind power plants produced in 
Germany were exported, and the prospects of the photovoltaic 
sector developing in a similar way are promising.
    Electricity from renewable energy sources expands the range 
of offerings on the electricity market and thus causes prices 
to fall due to this ``merit-order-effect''. Wholesale prices 
for electricity declined by about 5 billion euros in 2006. In 
addition, fuel imports (0.9 billion euros) and adverse effects 
on the environment and the climate (about 3.4 billion euros) 
are avoided. The economic benefit of the EEG therefore came to 
approx. 9 billion euros. On a macroeconomic scale, the benefits 
from the EEG thus already clearly outweigh the costs. 
Furthermore, the share of renewable energies and the 
corresponding savings in carbon emissions are increasing, while 
wholesale electricity prices are falling at a faster rate than 
the EEG apportionment.
    This long-term policy framework was the driving force 
behind the German success story. In addition, wind power is a 
relatively low-cost renewable energy source which allows for 
competition in some locations with conventional fuels, 
particularly during peak load.
    I am absolutely convinced that the U.S. can do at least as 
well as Germany. In fact, wind energy is booming in the U.S. 
According to estimates, plants with a capacity of approx. 3,000 
megawatts are likely to be installed this year ? much more than 
we currently have installed in Germany. I am very pleased that 
many U.S. states have agreed on targets for renewable energies 
and implemented funding programs. Currently, there are 24 
states plus the District of Columbia that have Renewable 
Portfolio Standards in place. Four other states--Illinois, 
Missouri, Virginia, and Vermont ? have nonbinding goals for the 
adoption of renewable energy. Hence, the U.S. is catching up 
quickly.

    Question 2. Germany has experienced a significant increase 
on jobs in environment related industries with about 1.5 
million people employed in this sector. Though there may have 
been a cost involved in the creation of these jobs, do you 
think Germany is better off having created these jobs and 
caused the industry to grow?
    Response. Growing global demand for technology that helps 
protect the environment is leading to the creation of new 
markets and opening up considerable economic opportunities. The 
German environmental protection industry has always played a 
leading technological role over the past years. For example, 
German companies were more active than their competitors in 
securing patents for new products and production methods in 
environmentally related fields. With world market shares 
between 15 and 25 percent, German companies are today major 
international suppliers of environmental goods and services. 
This leading role in environmental protection also has a 
positive effect on the labor market. Employment remains stable, 
with over 1.5 million workers. At the same time, the market for 
renewable energy is undergoing particularly dynamic expansion. 
It currently employs about 230,000 people, compared with just 
57,000 in 1998.
    According to current estimates, about 1.5 million workers 
are engaged in environmental protection in Germany, totaling 
3.8 percent of the overall workforce in Germany. Environmental 
protection does not limit itself to ``traditional'' end-of-pipe 
activities. Instead, the employment effect of integrated 
environmental protection--energy efficient products ? and the 
effect of central environmental policy action fields are taken 
into account.
    In our opinion, we will not be able to achieve sustainable 
economic growth without promoting resource efficiency and 
environmental technology. Due to scarce resources, the market 
share of these technologies will substantially increase in the 
future. Environmental policy therefore provides valuable 
impetus for innovation and the labor market. We have been very 
successful in generating positive effects on the labor market 
through environmental policy. German firms would not have been 
leading companies worldwide without a progressive and reliable 
environmental policy.

    Question 3. You predict that investment in renewable energy 
will create more than 400,000 green jobs in Germany alone. 
Would you describe what kinds of jobs these would be?
    Response. The estimate of some 400,000 green jobs in 2020 
is taken from recent research studies carried out on behalf of 
the Federal Ministry for the Environment. They refer to a 
cautiously optimistic scenario for the future development of 
the German market share in renewable energy.
    Under these assumptions, total employment in Germany can be 
estimated as 415,000, of which 320,000 will be in production. 
The dominant sector is wind industry (160,000 jobs) followed by 
biomass and biogas technologies (55,000) and the photovoltaic 
industry with some 30,000 jobs. The remaining jobs in 
production will be created in the other sectors.
    Operation and maintenance will require 55,000 jobs and the 
production and distribution of fuels from renewable resources 
will employ 40,000 people. These estimates suppose increases in 
productivity for the respective sectors that reflect the 
maturity of each sector.
    As to the types of jobs, new specializations and training 
will be required in operation and maintenance. Additionally, 
agricultural production of biomass secures employment in rural 
areas. Since Germany has rather high wages and therefore high 
production costs, the competitive advantages will be in the 
high-tech sectors of the respective technologies. Off-shore 
wind energy, high-end solutions of photovoltaic systems (facade 
integration, polymers, dyes, other new materials), and solar 
thermal power technologies as well as engineering solutions for 
the distribution of power will be the main fields.



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    Senator Sanders. Thank you very much.
    Dick Armey is a previous colleague of mine in the House of 
Representatives. He was the Majority Leader there, and is 
currently the head of FreedomWorks. Dick, thanks very much for 
being with us.

           STATEMENT OF RICHARD K. ARMEY, CHAIRMAN, 
                          FREEDOMWORKS

    Mr. Armey. Thank you, Mr. Sanders, and thank you, Madam 
Chairwoman, and Senator Inhofe.
    It is my pleasure to be here. When I received this 
invitation, I received the invitation and determined to respond 
to it as the professional economist that I am by academic 
training and as the Chairman of FreedomWorks, an organization 
of 830,000 American citizens, all devoted to understanding of 
free market economics and the application of free market 
economic solutions to our Nation's problems.
    I, like yourselves, found this to be an intriguing 
question, and immediately consulted literature on the subject 
of environmental regulation and job creation. I found the 
literature to be somewhat divided on the matter. I may say, as 
Senator Inhofe suggested, that the literature tends to be 
moving from the direction of early writings demonstrating a 
belief that environmental regulation is a net job creator, to 
later writings that reflect some doubt on that.
    My own judgment and evaluation is that the best that you 
could say is that there would be at the very best no net job 
reduction from increased environmental regulation, but even 
within that context, there would be a reallocation of jobs 
between the private and the public sector. Since the private 
sector is that sector of our economy that embraces free 
bilateral exchanges between willing individuals and the public 
sector embraces the mandates of behavior on people, I would 
argue that no freedom-loving individual could rejoice in seeing 
jobs shift from the private sector, where freedom reigns, to 
the public sector where regulation and mandates and control 
reign.
    My own belief is that the greater result is that there 
would be a net loss of job opportunities within the context of 
opportunity costs. While there could still be net growth in the 
economy, it would simply be substantially less.
    Why would that be? Because whatever we do with respect to 
concerns with the environment, it inevitably relates to energy: 
electricity, fossil fuel energies and so forth. These are among 
the three or four highest linkage factors in our economy. That 
is, when the cost of energy goes up, the cost of everything 
goes up. When the cost of everything goes up, you see a 
leftward, as it were, a leftward shift in the supply curve. 
That means, of course, there will be reduced output and reduced 
job opportunities. I think American labor, for example, 
instinctively knows that.
    As I further looked at it, I found myself going back to 
Armey's axiom No. 1: the market is rational; the government is 
dumb. I know that seems very harsh. I love that axiom more, 
quite frankly, for the alliteration than for the harshness of 
the alliteration. But when you use this axiom, you must 
understand that when an economist uses the term ``rational,'' 
he does not mean ``sensible,'' as in agreement with me. The 
term ``rational'' means ``rationing,'' the market is the chief 
instrument for rationing scarce resources, which is the 
fundamental problem of an economy. How you take the wealth of 
your Nation, as Adam Smith demonstrated, which is your 
resources, and your resourcefulness, and in fact get the most 
you can out of it. The market has a history of leading people 
to decisions that best utilize, most efficiently utilize and 
most effectively conserve scarce resources.
    The unhappy story about government policy is that 
government policy generally leads you in exactly the opposite 
direction. One need not look further than the world's history 
of agriculture policy to see how dramatically obscene it is 
with respect to the question of effectively allocating and 
conserving scarce resources. To wit, I would suggest that it is 
so insane that even the Russians wouldn't have attempted to 
shut down perfectly good agriculture land in the Midwest, with 
almost ideal climatic conditions for the production of crops, 
so that you could open up a similar amount of acres in the 
Southwest desert, and produce exactly those same crops by 
irrigating with one of our most precious resources, clean 
water. Now, if that doesn't demonstrate the folly of government 
choice.
    Well, just parenthetically, why is it that government is so 
less rational than the market? It is the choice criteria. 
Governments make decisions by criteria called political choice 
criteria, which is inherently intellectually and morally 
inferior to virtually any criteria I can think of, because 
political criteria is about what is in it for me now or my 
party in the next election.
    The economic criteria by which market choices are made are 
in fact objective criteria based on fact toward rational 
objectives.
    I thank you.
    [The prepared statement of Mr. Armey follows:]

         Statement of Richard K. Armey, Chairman, Freedomworks

    Good afternoon. Madam Chairman and Members of the 
Committee: as you may know, after leaving my post as Majority 
Leader of the U.S. House of Representatives, I became Chairman 
of FreedomWorks, an 850,000-member grassroots organization that 
promotes market-based solutions to public policy problems. 
Thank you for inviting me here today to discuss ``Green Jobs 
Created by Global Warming Initiatives.'' On behalf of the 
members and supporters of FreedomWorks, I urge the Committee to 
conduct a careful assessment of the economic impacts of climate 
change polices as it evaluates policy options. While it is true 
that subsidies and regulatory incentives can increase 
employment in particular greener industries, this can only be 
done by reallocating resources away from existing uses. A new 
regulatory regime to reduce greenhouse gas emissions is a 
costly undertaking that will have a significant impact on the 
economy; Congress should not ignore the economic aspects of 
this issue.
    While a significant new regulatory program and subsidies 
for green businesses undoubtedly would expand the resources 
devoted to greenhouse gas reductions, these gains come at the 
expense of everyday activities elsewhere in the economy, 
especially activities in more carbon-intensive industries. In 
effect, limitations on the use of carbon-based fuels constitute 
a supply shock in the energy market. Throughout the economy, 
consumers will face increased energy costs as well as higher 
prices associated with new product efficiency standards. These 
higher prices will reduce economic activity and have an adverse 
impact on employment. Academic analysis demonstrates the cost 
of previous oil supply shocks.\1\
---------------------------------------------------------------------------
    \1\See, for example, James Hamilton and Anna Maria Herrera, ``Oil 
Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary 
Policy,'' Journal of Money, Credit, and Banking, vol. 36, pp. 265-286, 
April 2004, which examines the impact of oil supply shocks and argues 
the Fed policy could not offset their consequences.
---------------------------------------------------------------------------
    Any action to reduce greenhouse gas emissions entails a 
significant reduction in the use of carbon-intensive forms of 
energy, which will affect all consumers and businesses. 
Assessing and understanding these costs must be an integral 
part of the current debate on climate change. Uncertainty may 
frame the scientific debate over global warming, but from an 
economic perspective, most studies analyzing the economic 
effects of climate change policies note that the transition is 
not costless.
    For example, a recent study by Michael Canes identifies 
four main categories of costs associated with a cap and trade 
program, a prominent policy option for addressing climate 
change: the restriction on the use of fossil fuels, which could 
cost tens of billions annually; the price volatility associated 
with the cap on energy use, which could have ``periodic GDP 
growth impacts of a few tenths of 1 percent''; rent seeking 
costs, which could be as high as $60 billion per year; and the 
monitoring and information costs, which could be as much as $1 
billion per year in the United States alone.\2\ A paper by 
Arthur Laffer and Wayne Winegarden notes that under a cap and 
trade program, the economy could shrink by 5.2 percent by the 
year 2020.\3\
---------------------------------------------------------------------------
    \2\Michael E. Canes, ``The Adverse Economic Impacts of Cap-and-
Trade Regulations,'' September 2007.
    \3\Arthur Laffer and Wayne Winegarden, ``The Adverse Economic 
Impacts of Cap-and-Trade Regulations,'' Arduin, Laffer, & Moore 
Econometrics, September 2007.
---------------------------------------------------------------------------
    New regulations and Federal spending to mitigate greenhouse 
gas emissions create new opportunities for some sectors of the 
economy. However, these jobs come at the expense of activity 
elsewhere in the economy. At best, the shift in economic 
activity will create no new jobs or wealth; it simply 
reallocates employment among sectors of the economy. At worst, 
it means that other economic actors will have to forgo 
investment decisions that would have expanded the economic pie 
rather than simply reapportion the existing slices.
    A regulatory program shifting production to new ``green'' 
sectors of the economy will require significant expenditures 
throughout the economy. With the current role of more carbon-
intensive energy in our economy, these costs could be 
substantial. Such mandates would increase the supply of greener 
energy and production, which, given current technologies, would 
increase energy costs throughout the economy. It is true that 
particular sectors of the economy may gain, but this cannot be 
said for the economy as a whole. With resources diverted from 
other uses, we may actually be poorer than we otherwise would 
be. We must realize that this is a costly venture that can 
decrease economic growth. These programs take resources from 
one group to be spent by others. Real economic growth, on the 
other hand, requires policy changes that create incentives to 
produce.
    Major regulatory efforts to reduce greenhouse gases are 
broad in their impact and run the gamut from a carbon tax (an 
idea recently floated by Rep. Dingell) to discourage the use of 
fossil fuels, to a cap and trade system for allocating permits 
to emit greenhouse gases. To varying degrees, economic research 
on programs to reduce emissions of greenhouse gases concludes 
that there will be a reduction in output, particularly in the 
short-run. This drop in output suggests a lower degree of 
economic activity associated with the higher costs of factor 
inputs. With economic output decreasing, it becomes difficult 
to demonstrate that mandates for greener energy can increase 
employment opportunities for the overall economy.
    Examining the response to previous environmental 
regulations may provide insights into the impact of climate 
change policies. A recent paper by Michael Greenstone examines 
some of the potential economic effects of clean air 
regulations.\4\ The author notes that, according to the U.S. 
Bureau of the Census, American manufacturers spend roughly $30 
billion per year on pollution abatement. To determine the 
economic impact of these costs, Greenstone examines the Clean 
Act Amendments of 1970 and 1977. The Clean Air act establishes 
regulatory standards for the four criteria pollutants; more 
importantly, it also establishes requirements for attainment 
across the country. Industries that emit criteria pollutants in 
counties that are in non-attainment are subjected to more 
rigorous regulation. This provides a useful way to compare 
economic activity in regulated (non-attainment) and unregulated 
(attainment) counties in order to determine the impact of 
environmental regulations.
---------------------------------------------------------------------------
    \4\Michael Greenstone, ``The Impacts of Environmental Regulations 
on Industrial Activity: Evidence from the 1970 & 1977 Clean Air Act 
Amendments and the Census of Manufactures,'' National Bureau of 
Economic Research Working Paper 8484, September 2001.
---------------------------------------------------------------------------
    The findings provide a cautionary note on the ability to 
create green jobs through regulation. In particular, Greenstone 
concludes, ``The paper provides new evidence that environmental 
regulations retard industrial activity. I find that in the 
first 15 years after the CAAAs [Clean Air Act Amendments] 
became law (1972-1987), non-attainment counties (relative to 
attainment ones) lost approximately 590,000 jobs, $37 billion 
in capital stock, and $75 billion (1987$) of output in 
polluting industries.''\5\
---------------------------------------------------------------------------
    \5\Ibid. p. 28.
---------------------------------------------------------------------------
    New mandates and subsidies to reduce greenhouse gas 
emissions would obviously spark employment in less carbon-
intensive sectors of the economy, but this may not offset the 
employment dislocations created by regulations. As Greenstone 
notes in his evaluation of past regulations, ``recent research 
indicates that these frictions [dislocations due to 
environmental regulations] may be quite substantial and can 
persist as long as a decade (Blanchard and Katz 1992). 
Jacobson, LaLonde, and Sullivan (1993) document that displaced 
workers endure substantial wage losses. Consequently, people 
who lost their jobs due to environmental regulations may have 
suffered long-run wage declines.''\6\ The impact of reducing 
greenhouse gas emissions is even more sweeping in nature than 
previous regulations, especially when considering the state-of-
the-art for alternative energy sources, which are currently 
more costly and a limited substitute to existing energy 
supplies.
---------------------------------------------------------------------------
    \6\Ibid., p. 28.
---------------------------------------------------------------------------
    In another study, similar results are found with respect to 
decisions to build new manufacturing plants. Examining data on 
location decisions for plants in New York, the results suggest 
that, in fact, environmental regulations can have a real and 
significant impact on economic activity. The authors conclude: 
``Our major results are consonant with the received literature, 
namely that ``dirty'' firms respond to environmental 
regulations. But, the matching method, by controlling for 
differences in lagged plant formations, indicates that the 
effect of environmental regulation on new plant formation may 
be drastically higher--as much as 3.5 times--than previously 
reported.''\7\
---------------------------------------------------------------------------
    \7\John A. List, Daniel Millmet, Per G. Frediriksson, and W. Warren 
McHone, ``Effects of Environmental Regulations on Manufacturing Plant 
Births: Evidence from a Propensity Score Matching Estimator,'' Review 
of Economics and Statistics, November 2003, Vol. 85, No. 4, Pages 944-
952.
---------------------------------------------------------------------------
    Randy A. Becker and J. Vernon Henderson examine a similar 
issue in a paper assessing the costs of clean air 
regulation.\8\ Also using the impacts of the Clean Air Act, the 
authors study the issue of environmental compliance from the 
cost side, focusing on plant operating costs if moved from an 
attainment to non-attainment area. Using this methodology, they 
are able to identify a lower bound on regulatory costs.
---------------------------------------------------------------------------
    \8\Becker, Randy A. and Henderson, J. Vernon, ``Costs of Air 
Quality Regulation,'' National Bureau of Economic Research Working 
Paper No. W7308, August 1999.
---------------------------------------------------------------------------
    Becker and Henderson conclude, ``In terms of quantifying 
the costs of air quality regulation, our basic results show 
that heavily regulated plants indeed face higher production 
costs than their less-regulated counterparts. This is 
particularly true for younger plants, which is consistent with 
the notion that regulation is most burdensome for new (rather 
than existing) plants. ``Unregulated'' plants, however, also 
appear to be affected by regulation (or at least the threat of 
regulation), as we found that they produce at levels far short 
of the levels that minimize average total costs.''\9\
---------------------------------------------------------------------------
    \9\Ibid. p. 23.
---------------------------------------------------------------------------
    That these results suggest that mandates or environmental 
regulations could have adverse affects on economic growth are 
not surprising. In a competitive economy, firms seek to 
maximize profit, and they organize themselves accordingly. 
Firms are already structured in ways that achieve the greatest 
efficiency and minimize costs. New mandates that increase the 
price of factor inputs will affect the ability of firms to 
achieve the same levels of output for the same levels of cost. 
As far back as Adam Smith economists have noted that in a free 
and competitive market firms will seek out profit 
opportunities. In fact, the market is a discovery process that 
seeks to use resources more efficiently; for example, energy 
efficiency has improved dramatically in the United States as 
businesses have been able to reduce the amount of energy 
required to produce a dollar's worth of output. Government 
policies that impede the market process will impose costs on 
the economy by limiting the ability for firms to adapt to new 
circumstances.
    Indeed, government policies can also generate unintended 
consequences as firms respond to political incentive and engage 
in rent-seeking behavior. For example, as Bruce Ackerman and 
William Hassler detailed in their 1981 book, Clean Coal/Dirty 
Air: How the Clean Air Act Became a Multibillion-Dollar Bail-
Out for High-Sulfur Coal Producers, earlier attempts to 
regulate environmental problems such as sulfur dioxide 
pollution from coal plants produced counterproductive 
results.\10\ Eastern coal producers, saddled with dirtier coal 
than other parts of the Nation, and environmentalists 
infatuated with a specific technology--in this case, smokestack 
scrubbers--formed an alliance to mandate the technology on all 
coal plants in America. This was despite evidence that coal 
scrubbers were often ineffective, and that combining lower-
height smokestacks with the use of low-sulfur coal could 
produce cleaner outcomes. Instead of focusing on results, such 
as clean air, too often the political dynamics in Congress lead 
to rent-seeking, protectionism, and mandates, with results that 
run contrary to the stated purpose of the initial effort. With 
respect to coal, this counterproductive dynamic continued into 
the 1990's, when the Clinton administration blocked the 
development of the largest deposit of low-sulfur coal in 
America by declaring Utah's Kaiparowits Plateau a ``National 
Monument.'' New, green technology programs can generate similar 
incentives to use the political process rather than the market 
process for allocating scarce resources, and the potential 
costs of rent-seeking should be included in an evaluation of 
such policies.
---------------------------------------------------------------------------
    \10\Bruce Ackerman and William Hassler detailed in their 1981 book, 
Clean Coal/Dirty Air: How the Clean Air Act Became a Multibillion-
Dollar Bail-Out for High-Sulfur Coal Producers Yale University Press 
(1981).
---------------------------------------------------------------------------
    Madam Chairman and Members of the Committee, FreedomWorks 
urges caution and a thorough economic analysis of the costs and 
benefits associated with policies for greenhouse gas reduction. 
Sound energy policies are critical to a strong economy. Energy 
is an input to all the goods and services we consume. It heats 
and cools our homes, and fuels our transportation system. 
Affordable and reliable energy is an important component to 
continued economic growth, and the potential for new global 
warming mandates poses real costs for the economy and for 
consumers.
    Thank you.
                                ------                                


    Senator Sanders. Thank you.
    Let me give the gavel back to the Chairman for a second.
    Senator Boxer.
    [Presiding.] Momentarily here, I have asked to go out of 
order because one of my most famous constituents is here. I 
wanted to have the honor of introducing him to everyone. I 
think that Dick's talk about the private sector and capitalism 
and how he believes in that is a perfect introduction for our 
next speaker.
    Vinod Khosla is one of the most influential people in the 
Silicon Valley and beyond. He is listed in Forbes magazine as 
one of America's most successful 400 people. Vinod is a world-
renowned venture capitalist. He co-founded Sun Microsystems and 
ran it until 1984, I believe, when he joined Kleiner Perkins 
venture capitalists, a firm, and he was one of the first 
venture capitalists to visualize that a combination of internet 
technology and fiber optics could make communications so fast, 
cheap and easy.
    So we are so happy that you are here to share your wisdom 
with us. Taking off on what Dick Armey said about the 
brilliance of the private sector, here you are. Tell us what 
you think we should be doing in terms of global warming, and if 
you feel it will create jobs or lose jobs.

              STATEMENT OF VINOD KHOSLA, FOUNDER, 
                        KHOSLA VENTURES

    Mr. Khosla. I come before you here today not to make an 
environmental case for climate change legislation, but rather 
an economic one. I believe climate change legislation is good 
for our economy, our national security, and our 
competitiveness. It is good for job creation and GDP growth.
    I come here as a believer in free markets and a level 
playing field. Today, we carry immense risks associated with 
commodities upon which our society depends, risks we 
desperately need to start mitigating. Lord Oxburgh, the former 
Chairman of Shell, has predicted that oil prices could hit $150 
a barrel within the next 20 years. We spend over $300 billion a 
year on oil imports and estimate that we spend $50 billion a 
year on protecting just our oil interests in the Middle East. 
Should we be spending more money lining Hugo Chavez's pockets 
and funding the people who fuel terrorism?
    The case for coal is similar. The cost of coal is felt 
directly on our health and our health care costs. The American 
Lung Association notes that a 2004 study estimated 24,000 
premature deaths each year due to power plant pollution. In my 
written testimony, I submit a chart of the death rates around 
coal power plants. But one does not need to believe in climate 
change to support climate change legislation. The uncertainty 
around such legislation is hurting the U.S. economy and jobs 
creation, and many executives would prefer to deal with the 
known legislation, even if unwarranted, than dealing with the 
uncertainty of unknown future legislation.
    Delays in investment delay job creation and increase the 
cost of power to industry consumers and reduce our 
competitiveness. Climate legislation will, on the other hand, 
create real competition for fossil energy.
    First, the issue of price impact of coal versus renewable 
power. From a consumer and industry cost of energy point of 
view, we need to create competition for traditional energy 
sources and to account for external costs associated with them. 
Competition will drive down the cost of oil energy, but because 
of huge subsidies provided to traditional energy sources in the 
past, alternative greener technologies will need legislation to 
get started before they achieve economies of scale.
    With declining cost curves and rapidly improving 
technologies, these alternatives I believe will be cheaper than 
traditional energy sources, helping both industry and our 
environment. We are particularly optimistic about solar CSP 
technologies when it comes to power. In its cost advantages 
over coal, one of our investments, AUSRA, is expecting costs 
below 7 cents a kilowatt hour at market interest rates, a cost 
even nuclear power and IGCC coal cannot achieve.
    Corn ethanol has reduced demand for gasoline in the past 
year, but beyond corn ethanol, the cheaper and more economical 
future is that of cellulosic ethanol. In fact, Range Fuels, one 
of our investments, can produce cellulosic ethanol that is 
cheaper than oil and will be in production by the end of next 
year. We believe this technology will achieve $1 a gallon 
wholesale prices within the decade. Competition for fossil 
energy sources is what we are asking for on a level playing 
field.
    When it comes to job creation, the solar CSP technology I 
mentioned creates twice as many jobs as a coal power plant. 
Black and Veatch, a traditional power industry engineering 
firm, has estimated that not only does it create almost twice 
as many jobs, but for each dollar spent it generates $1.40 of 
gross State output compared to roughly 90 cents to a dollar for 
each dollar invested in natural gas fuel power generation.
    The job creation data is not just a study. The numbers have 
been validated at AUSRA, one of our investments, is starting to 
build plants and compute construction costs and operations 
costs. When it comes to costs of biofuels and oil creation, in 
Brazil they estimate that a dollar invested in biofuels 
generates 20 times the number of jobs as a dollar invested in 
oil. Range Fuels will build its first plant in Soperton, 
Georgia. The first plant will create 70 jobs, but more 
importantly a University of Georgia analysis, an independent 
analysis, estimated that it could be worth $110 million per 
year to the county, including $500,000 in tax revenues.
    Moreover, as paper mills have shut down across the Country, 
these plants will offer opportunity to reduce their impact. 
Imagine 1,000 such plants spread across 1,000 counties across 
America.
    There is also substantial risk to the status quo. Business 
in the status quo is in a holding pattern. No sane CEO would 
bet that no climate change legislation will be enacted in the 
next 50 years, the typical life of their plants. We must remove 
this unnecessary risk for our businesses. The devil we know is 
better than the one we don't when it comes to climate change 
legislation.
    Even a conservative magazine like The Economist documents 
both insured and uninsured costs of climate change. I submit a 
graph in my written testimony, but most importantly the editor 
there told me that 2 years ago, he wouldn't have believed an 
economic case for climate change. Today, he does. And that is 
from a conservative organization like The Economist.
    Thank you very much.
    [The prepared statement of Mr. Khosla follows:]

          Statement of Vinod Khosla, Founder, Khosla Ventures


                              introduction


    Madam Chairman and honorable members of the Committee, 
there is a climate crisis, a security crisis and an impending 
oil crisis and these crisis's have the potential to create a 
large jobs crisis. As Stanford economist Paul Romer has said, a 
crisis is a terrible thing to waste. America's scientists and 
technologists, powered by new ideas and the energy of America's 
entrepreneurs, are best equipped to solve this problem. 
Specifically, the focus on environmental technologies, often 
criticized by some for potentially hurting the US economy, are 
an unprecedented economic opportunity with many beneficial side 
effects. Many business leaders like the CEOs, from companies 
like DuPont, GE and Duke Energy, who have called for tough 
Federal limits on carbon dioxide emissions. Recently, that call 
was echoed by institutional investors managing $4 trillion in 
assets. Climate change and climate change legislation presents 
an opportunity for the country. It will create jobs, not 
destroy jobs. Climate change is principally about our 
dependence on oil, coal and efficiency. I respectfully come 
before you today not to make an environmental case for climate 
change legislation but rather an economic one. Climate change 
legislation is good for our economy, our national security and 
our competitiveness. It is good for job creation and GDP 
growth. I come before you as a believer in free markets and in 
our advantage in innovation driven economic competition.
    Madam Chairman, I submit the evidence of the U.S. Climate 
Exchange partnership, a group whose members run the gamut from 
automakers (GM, Ford) to utilities and power producers (PG&E, 
Duke Energy), from insurance (AIG, Marsh) to oil (Shell, Conoco 
Phillips, BP). As they note:
    ``In our view, the climate change challenge, like other 
challenges our country has confronted in the past, will create 
more economic opportunities than risks for the U.S. economy. 
Indeed, addressing climate change will require innovation and 
products that drive increased energy efficiency, creating new 
markets. This innovation will lead directly to increased U.S. 
competitiveness, as well as reduced reliance on energy from 
foreign sources. Our country will thus benefit through 
increased energy security and an improved balance of trade.''
    However, there are many forces that will oppose this 
change. Each $4 change in the price of a barrel of oil costs 
Saudi Arabia (a country with a smaller population than 
California) a trillion dollars. Oil interests will and are 
funding massive PR campaigns against the moves to replace oil. 
In my Wall Street Journal editorial on January 23, 2007, I 
called on President Bush to declare a war on oil. This war is 
winnable, politically feasible with small compromises, and a 
great boon to all Americans--rural or urban, workers or 
shareholders, educated or unskilled.


                 macro trends: oil, coal & natural gas


    Today, we carry immense risk associated with the 
commodities upon which our society functions--risk we 
desperately need to start mitigating, risk that is costing us 
dearly and has the potential to cost us even more. Lord 
Oxburgh, the former chairman of Shell, noted recently that the 
oil industry had its head ``in the sand'', and predicted that 
oil prices could hit $150 per barrel within 20 years. What 
would that do to our competitiveness given our large oil 
consumption? In addition, he noted that ``we may be 
sleepwalking into a problem which is actually going to be very 
serious and it may be too late to do anything about it by the 
time we are fully aware.''\1\ In the last 8 years, oil has gone 
from roughly $15 a barrel to $80--a rise of greater than 500 
percent. Senator Richard Lugar has pointed out that we spend 
over $300 billion a year on oil imports, and estimates that we 
spend an additional $50 billion a year (at least) on protecting 
just our oil interests in the Middle East. He goes on to note 
that by 2025, we will require almost 30 million barrels of oil 
per day! Should we really be spending more money lining Hugo 
Chavez' pockets and funding the people who fuel terrorism?
---------------------------------------------------------------------------
    \1\http://news.independent.co.uk/business/news/article2966842.ece
---------------------------------------------------------------------------
    The risks of coal (and to a lesser extent, natural gas) are 
similar. Over the last few years, coal plant costs have risen 
rapidly--Innovest Strategic Advisors noted that ``In 2006, the 
cost of new coal-fired power plants increased by 40 percent. 
This is representative of a continuing trend in which capital 
costs have increased by 90--100 percent since 2002.\2\ The 
president of Siemens Power Group noted that ``There's real 
sticker shock out there.''\3\ One common example is Duke 
Energy's proposed Cliffside plant, which was initially priced 
at $2 billion for 2 800-MW units. 18 months down the line, the 
price tag had risen to $3 billion. When the State utility 
approved only one of the two units, Duke came back with a cost 
estimate of $1.83 billion--an 80 percent rise before 
construction had even started! Elsewhere, even newer, touted 
``clean coal'' is prohibitively expensive--The AEP power plant 
in West Virginia had construction costs rise to $2.23 billion 
for a 630 MW plant, more than 70 percent higher than previous 
estimates. This is a capital cost of $3,539/kW! These cost 
increases impacts U.S. competitiveness and job creation.
---------------------------------------------------------------------------
    \2\http://www.net.org/proactive/newsroom/release.vtml?id=29196,
    \3\http://www.nytimes.com/2007/07/10/business/worldbusiness/
10energy.html?--r=1&oref=slogin



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




    Meanwhile, the immense pollution and carbon dioxide 
emissions of coal power loom over us like a dark cloud. The 
health risks of coal pollution have been cited often, but it 
bears repeating--The cost of coal is felt directly on our 
health and our healthcare costs. The American Lung Association 
notes that a 2004 study attributed 24,000 premature deaths each 
year due to power plant pollution. In addition, the ALA notes 
that ``research estimates over 550,000 asthma attacks, 38,000 
heart attacks and 12,000 hospital admissions are caused 
annually by power plant pollution.''\4\ In the last century, 
more than a 100,000 deaths have been a result of mining, with 
over 200,000 black lung deaths.\5\ This is part of the burden 
of coal. The typical 500 MW coal plant generates as much 
CO2 as 600,000 cars! These effects impact healthcare 
costs and hence US competitiveness and job creation. The chart 
below (from the Clean Air Task Force) shows the death rate 
around current coal power plants.
---------------------------------------------------------------------------
    \4\http://lungaction.org/reports/sota06--protecting.html
    \5\http://stateofnature.org/sagoMineDisaster.html



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    

    Coal plants produce approximately 130 million tons of toxic 
solid waste yearly--approximately three times the total 
municipal garbage in the U.S.\6\
---------------------------------------------------------------------------
    \6\``Big Coal: The Dirt Secret Behind America's Energy Future'', 
Jeff Goodell


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




    Most importantly, the risks associated with these older 
energy technologies and future carbon emission costs has 
decreased investment and hurt job creation. One does not need 
to believe in climate change to support climate change 
legislation. The uncertainty around such legislation is hurting 
the US economy and jobs creation and many executives would 
prefer to deal with known legislation even if unwarranted 
rather than dealing with the uncertainty of unknown future 
legislation. In the last few years, we have finally started to 
realize the enormous externalities associated with coal, and 
public opinion has demanded that action be taken. There is 
strong consensus that some sort of carbon regulation is just 
around the corner. A 2004 survey of power company executives 
suggested that 50 percent of them expect carbon-trading laws in 
place within the next 5 years. Why? Because the uncertainty is 
making investment decisions difficult. And the perceived risk 
of climate legislation is worse than the legislation itself. 
David Crane, the CEO of NRG Energy noted that ``I've never seen 
a phenomenon take over the public consciousness'' and that 
``This is the kind of thing that could stop coal.'' Gary Serio 
of Entergy Corp. notes that ``It's very likely the investment 
decisions many are making, to build long-lived high-carbon-
dioxide-emitting power plants, are decisions we'll all live to 
regret.'' This investment risk is a significant factor 
associated with coal--a new coal plant is not a one or 5 year 
investment, but rather a 50 year one. Many companies are 
delaying or canceling plans ( see Appendix A for examples) to 
build new plants due to the cost and the sense of uncertainty 
of carbon emissions risk--a coal plant built without accounting 
for carbon costs may well prove to be uneconomic when carbon 
prices are taken into account. Synapse Energy Economics 
conducted a study and noted ``Any utility proposing to build a 
coal plant would be reckless to make such a long term 
investment without fully assessing a variable [carbon 
pricing][that could easily increase costs by $86 million per 
year on average, or $4.3 billion over a 50-year period, for a 
600 MW coal plant [projections for the Big Stone II plant with 
the mid-range CO2 price projections of approximately 
$20 per ton].''\7\ This is a significant reason why 6 of the 10 
largest power companies in the US support a carbon cap-and-
trade regulation scheme--uncertainty about the costs and 
environment is not conducive to making large, long-term 
investments. Delays in investment delay job creation and 
increase the cost of power to industry, reducing our 
competitiveness. Climate legislation will on the other hand 
create real competition for fossil energy.
---------------------------------------------------------------------------
    \7\UCS, ``Gambling With Coal'', www.ucsusa.org and http://
www.State.sd.us/puc/commission/dockets/electric/2005/el05--022/
testimonyschlisselsommer.pdf.
---------------------------------------------------------------------------
    This investment risk and the cost to consumers and industry 
``risk'' is captured well when we examine what happened to 
natural gas prices and the investment in gas power plants.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    The history of gas prices is a cause for pause--the chart 
above compares the predicted prices of natural gas in each year 
to actual prices that were realized on the market. The basic 
message: 5 years is impossible to predict, let alone fifty! 
When making a 50-year plant investment, commodity price-
variability has to be considered; it does not seem to be 
accounted for today. Today, many of the gas plants built in the 
1990's are essentially uneconomic, reduced to a role as peaking 
plants--with the capital investment essentially a sunk cost. 
Newer technologies like that from Great Point Energy that I 
will discuss later ameliorate these effects.


      price impact on consumers & industry: coal versus renewables


    From a consumer and industry cost of energy point of view, 
we need to create competition for traditional fossil energy 
sources and to account for external costs associated with them. 
We need to give them choices. Competition will drive down the 
costs of all energy but because of the huge subsidies provided 
to traditional energy industries in the past alternative 
greener technologies will need legislation to get them going to 
the point where they can achieve economies of scale. Given 
there immature technologies and rapidly declining cost curves 
(while traditional fossil energy costs are rising), we believe 
these alternatives will be cheaper than traditional energy 
sources in the future, helping both our industry and our 
environment, while materially improving our energy and national 
security.
    Fortunately, renewable energy sources across the spectrum 
offer ways to alleviate much of the risks and costs outlined, 
providing us energy and fuel at lower costs with significantly 
reduced environmental impact. The Union of Concern Scientists 
(UCS) conducted a study on the effects of the implementation of 
a basic RPS (20 percent of electricity be renewable by 2020). 
The study noted that such an energy standard would result in 
the lowering of ``business-as-usual'' electricity prices by 1.8 
percent each year (and natural gas prices at 1.5 percent lower) 
with a cumulative effect of approximately $49 billion by 
2020.\8\ Importantly, these benefits would be felt across the 
economy, in the commercial, industrial, and residential 
sectors. Meanwhile, rising coal plants costs (as detailed 
earlier) have led the firms to ask for higher electricity 
rates, further burdening consumers and industry. In response to 
the price rise in its IGCC coal plant, AEP filed testimony in 
West Virginia requesting a $108 million rate increase to 
support the construction!\9\
---------------------------------------------------------------------------
    \8\http://www.ucsusa.org/clean--energy/renewable--energy--basics/
renewing-americas-economy.html
    \9\http://www.energyonline.com/Industry/
News.aspx?NewsID=7158&Costs--Rise--fo
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    We are particularly optimistic about concentrated solar 
power (CSP) technology, and its cost advantages over coal (one 
of our investments--Ausra, is working in this area). We expect 
prices to decline to the $0.07/KWh range (when the first 700MW 
plant is built\10\), below that of next generation IGCC coal 
($0.08 + carbon pricing, commodity risk), IGCC coal plus carbon 
capture and sequestration CCS ($0.10 + commodity risks, cost of 
sequestration, insurance against leakage liability), and gas-
fired CC ($0.12 + commodity risk). The recently announced PG&E 
power purchase agreement (for 550MW) to purchase solar thermal 
power came in at approximately $0.10/KWh.\11\ Environmentally, 
CSP plants produce no CO2 emissions (or 
NOx, SO2, Mercury, sludge or any of the 
other coal ``externalities''). CSP bears no transportation, 
supply or commodity price risk--the sun is a viable source of 
solar energy for a few billion years, slightly longer than 
coal. Meanwhile, any traditional pulverized coal plant built 
now is both an environmental menace for 50 years (with 
increasing emissions as the plants get older), as well as an 
investment failure once carbon pricing is introduced. I'd also 
like to question the ``conventional wisdom'' about solar power 
across the country. Traditional wisdom holds that solar power 
is not competitive in the Southeast. However, at Senator Lamar 
Alexander's request, we were able to compute the cost of solar 
power in Tennessee at below $0.06 KWh (using TVA's cost of 
capital).
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    \10\Dr. David Mills, Ausra
    \11\http://www.iht.com/articles/2007/07/25/business/solar.php
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      price impact on consumers & industry: oil versus renewables


    Elsewhere, oil offers one of the best opportunities toward 
reducing consumer and industry transportation costs. And it 
offers America, with its abundant land resources compared to 
other economies, a competitive advantage. Initially ethanol and 
other biofuel products will serve as an effective substitute 
product for oil, helping to give American consumers more 
options and choice (while oil prices were significant in 2006, 
demand was partially satisfied by the 5 billion gallons of 
ethanol consumed domestically--how much higher might gasoline 
prices have risen if an additional 4 billion gallons of 
gasoline was required?). Contrary to popular belief it also 
reduced net Federal subsidies and helped the rural economy too. 
Discussing corn ethanol, economist John Urbanchuk notes ``A 33 
percent increase in crude oil prices--which translates into a 
$1.00 per gallon increase in the price of conventional regular 
gasoline--results in a 0.6 percent to 0.9 percent increase in 
the CPI for food while an equivalent (33 percent) increase in 
corn prices ($1.00 per bushel) would cause the CPI for food to 
increase only 0.3 percent.''\12\ (The next time someone 
suggests a food v. biofuel problem with ethanol, its worth 
pointing out that food v. oil is the real problem. Incidentally 
a 16oz steak takes the same amount of corn to produce as a 
gallon of ethanol.). More importantly, corn ethanol subsidies 
have actually been a net benefit to the Federal treasury--The 
USDA's chief economist noted recently that if you look at the 
Fiscal Year 2006 corn program, the cost was about $8.5 billion 
[2005 crop]. Shift forward 1 year to Fiscal Year 2007 costs 
(2006 crop), direct payments are $2.1 billion for corn--a net 
decrease of $6 billion in corn subsidy costs because of $3 
billion ethanol subsidies. Beyond corn ethanol, the cheaper and 
more economical future is that of cellulosic ethanol. In fact, 
Range Fuels (one of our investments) can produce cellulosic 
ethanol that is cheaper (on a per mile driven basis) than oil 
and will be in production next year! Furthermore, we believe 
that $1 a gallon wholesale cellulosic ethanol (with mpg similar 
to that of gasoline today) is possible within a decade. Even 
accounting for the 25 percent less mileage of ethanol as 
compared to gasoline (in today's gasoline optimized engines), 
this will provide significant cost savings to consumers and 
industry across the board, without the commodity risk of big 
oil.
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    \12\http://www.ethanolrfa.org/objects/documents/1157/food--price--
analysis----urbanchuk.pdf
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                  job creation: coal versus solar csp


    Many of the old economy jobs are dying slowly The National 
Mining Association reports that employment in the coal industry 
(coal miners) is almost half of what it was 25 years ago.\13\ 
From a job creation and economic perspective, renewable energy 
will be a significant boom. The previously cited UCS study 
estimated that a 20 percent renewable power standard would 
create 355,000 new jobs over the period--far more than electric 
generation from fossil fuels (197,000 is the estimate for the 
latter). The threshold would spur more than $72 billion in new 
capital investment; by 2020, it would likely be providing an 
additional $8.2 billion income and $10.2 billion in GDP for the 
U.S. economy.\14\
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    \13\http://www.nma.org/pdf/c--trends--mining.pdf--NMA
    \14\http://www.ucsusa.org/clean--energy/renewable--energy--basics/
renewing-americas-economy.html


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Elsewhere, a study at UC Berkeley (assuming a 20 percent 
national renewable standard by 2020) concluded that ``Investing 
in renewable energy such as solar, wind and the use of 
municipal and agricultural waste for fuel would produce more 
American jobs than a comparable investment in the fossil fuel 
energy sources in place today.''\15\. California has been one 
of the leaders in the usage of renewable energy, and benefits 
are set to flow--estimates suggest that the adoption of AB 32 
will reduce CO2 emissions by 25 percent, while 
creating 83,000 new jobs and $4b in income.
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    \15\http://www.scienceblog.com/cms/node/2618
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    In California, Black and Veatch, a traditional power 
industry engineering firm, conducted an extensive study on the 
economic benefits of solar CSP plants. They noted that each 100 
MW of CSP resulted in 94 permanent operation and maintenance 
jobs, compared to 56 and 13 for a combined-cycle and simple-
cycle turbine (technology used in coal IGCC and PC 
respectively) plant. It also noted that each 100MW would bring 
$628 million in impact to the state's gross output, compared to 
just $64 million for a combined-cycle and $47 million for a 
single-cycle turbine plant.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Black & Veatch notes that ``For each dollar spent on the 
installation of CSP plants, there is a total impact (direct 
plus indirect impacts) of about $1.40 to gross State output for 
each dollar invested compared to roughly $0.90 to $1.00 for 
each dollar invested in natural gas fueled generation.''\16\ 
Going further, Black and Veatch estimated the impact of low-
deployment (2,100MW) and high-deployment (4,000MW) scenarios 
for CSP in the State. They determined:
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    \16\``Economic, Energy, and Environmental Benefits of Concentrating 
Solar Power in California'', Black and Veatch, April 2006
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    ``The deployment scenarios would result in about $7 billion 
and $13 billion in investment, respectively, of which an 
estimated $2.8 and $5.4 billion is estimated to be spent in 
California. This level of in-State investment has a total 
impact on Gross State Product of nearly $13 billion for the low 
deployment scenario and over $24 billion for the high 
deployment scenario, not including impacts from ongoing O&M 
expenditures. This level of investment creates a sizable direct 
and indirect impact to employment during construction at about 
77,000 and 145,000 job-years for the low and high deployment 
scenarios, respectively. Ongoing operation of the CSP plants 
built under the deployment scenarios creates a total annual 
economic impact of $190 and $390 million.''
    The study also noted ``that the installation of CSP, wind 
or other non-gas plants in lieu of new natural gas fueled 
generators can relieve a portion of the demand pressure behind 
gas price volatility. Lawrence Livermore Laboratory and others 
suggest that the natural gas price could decline by one to 4 
percent for each change of 1 percent in demand. The 4,000 MW 
high deployment scenario could result in a savings of $60 
million per year for natural gas in California for a 1 percent 
price reduction for a 1 percent usage reduction. At the higher 
price impact range, the California savings could be four times 
greater.'' On top of all the economic benefits, CSP would also 
be significantly more environmentally friendly that coal--with 
almost no carbon footprint. The job creation data has been 
validated by the actual plant construction plans and jobs 
estimates of one of our investments, Ausra.


                   job creation: oil versus biofuels


    The previously cited UC Berkely study noted that a biomass-
centric approach would be a substantial boon to the US economy. 
Professor Daniel Kammen stated that ``Renewable energy is not 
only good for our economic security and the environment, it 
creates new jobs . . . At a time when rising gas prices have 
raised our annual gas bill to $240 billion [2003--2004 oil 
prices], investing in new clean energy technologies would both 
reduce our trade deficit and reestablish the U.S. as a leader 
in energy technology, the largest global industry today.''\17\ 
Today, an $80 barrel of oil provides limited value-added here 
in the US. By importing oil and refining the fuel domestically, 
we capture perhaps $5 or so of ``value add'' on top of the $80 
of value of the import. With corn ethanol and cellulosic 
ethanol, and other advanced biofuels offer us an opportunity to 
do far more--instead of capturing $5 of $85 in value, we can 
capture all of it within the country! America's availability of 
land, technology, and know-how gives us a significant 
competitive advantage. Imagine the scenario--cellulosic ethanol 
technology developed in Denver, utilizing available land and 
forest waste in Oklahoma, Georgia, Montana, Idaho, and 
Washington, and delivering cheap $1 cellulosic ethanol across 
the country! This isn't some pipe dream--rather, something we 
expect as reality within the next couple of years! Can we 
imagine the impact of spending the $320 billion (that we 
currently spend on oil imports) fueling agriculture in rural 
America, and reducing the trade deficit domestically?
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    \17\http://www.berkeley.edu/news/media/releases/2004/04/13--
kamm.shtml
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    Beyond the general examples cited here, we see specific 
examples of how action to combat climate change can help. Range 
Fuels (one of our investments), is soon to break ground on the 
first commercial-scale cellulosic ethanol plant in Soperton, 
Georgia, using wood waste that lies uncollected in Georgia's 
forests. The first plant will create 70 jobs for the area, with 
subsequent plants to follow. A University of Georgia analysis 
notes that ``the ethanol plant would be worth $110 million per 
year to the county, including nearly $500,000 of tax revenue. . 
.  Range Fuels also expects to hire up to 80 full-time 
employees at wages much higher than the regional average.''\18\ 
Moreover, as paper mills have shut down across the country, 
both Range Fuels and Mascoma (as well as other cellulosic 
ethanol approaches) offer an opportunity to help replace their 
impact and utilize their feedstock. Imagine a thousand such 
plants spread across a thousand counties across America.
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    \18\http://www.agobservatory.org/headlines.cfm?refID=99779
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                        impact on rural america


    While we have made the case that renewable energy will be 
good for America, its worth emphasizing that it will offer 
significant benefits to rural America in particular. The UCS 
study estimated than an extra 30,000 jobs would be created in 
agriculture alone, and that the 20 percent RPS would generate 
approximately $16.2 billion in income to farmers, ranchers, and 
rural landowners. Elsewhere, a 2004 NRDC study estimates 
producing the biomass feedstock necessary for biofuels could 
generate more than $5 billion a year in income for farmers (by 
2025)\19\. While some will ignore studies form environmental 
organizations as biased, it is hard to overcome the logic of 
replacing all $80 of the value of imported oil by products 
produced in America. This makes economic sense, especially 
since it also creates competition for oil. Biomass and 
agricultural based energy could permanently correct the rural/
urban economic development imbalance that has developed over 
the last 50 years. It could shift much of the oil portion of 
our GDP to rural GDP and create millions of new jobs.
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    \19\http://www.nrdc.org/air/energy/biofuels/biofuels.pdf
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                 risks of coal, oil and the status quo


    While the economic case for action is significant, it's 
worth reiterating the risks inherent in our current status quo. 
From an investment perspective, the current climate finds 
businesses in a holding pattern, unwilling to fully commit 
resources because of what may happen next--carbon pricing and a 
fuller appreciation of the externalities of our current energy 
sources has the potential to blow the old investment models out 
of the water. What sane CEO would bet that no climate change 
legislation will be enacted in the next fifty years, the 
typical life of their investments? We must remove this 
unnecessary risk for our businesses. The devil we know is 
better than the one we don't when it comes to climate change 
legislation.
    As we've detailed with coal and natural gas plants, an 
investment is not simply a one or 5 year gamble--it's a fifty 
year belief that prices and the economic climate will continue 
to allow the plant to be an economical source of power. Can you 
imagine the economic impact of $100 billion coal plants that 
are no longer economic (in a carbon-constrained world), their 
capital written-off almost completely? This sense of investment 
risk is present with oil as well--despite claims that the oil 
industry is doing all it can to lower prices, no new refinery 
has been built for 30 years. Lynn Westfall, the chief economist 
of Tesoro (an oil refinery owner) notes that ``if you were to 
ask us to go build a brand new refinery anywhere in the world, 
I would tell you you'd be lucky to have it up and running in 
six or 7 years,'' Westfall says. ``And then you'd need 10 to 15 
years of today's margins to pay it back. So building a new 
refinery is a 20-year bet that margins are going to remain very 
high.''\20\ These are the kind of gambles that we can no longer 
afford to continue taking.
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    \20\http://www.npr.org/templates/story/story.php?storyId=10554471
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    There are real costs to climate change and they are 
becoming very visible. The effect of previous (and current) 
fossil fuel usage on our climate can be perceived in economic 
costs as well as environmental ones. A GAO report notes that 
``Using computer-based catastrophe models, many major private 
insurers are incorporating some near-term elements of climate 
change into their risk management practices. One consequence is 
that, as these insurers seek to limit their own catastrophic 
risk exposure, they are transferring some of it to 
policyholders and to the public sector.''\21\ It goes on to 
point that insurers (public and private) have paid $320 billion 
in weather-related claims since 1980, and as a result, private 
insurers are factoring in climate change into their weather 
models and accounting for it--in a way public insurers haven't. 
As the report notes:
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    \21\http://www.gao.gov/new.items/d07285.pdf
---------------------------------------------------------------------------
    ``Major private and Federal insurers are both exposed to 
the effects of climate change over coming decades, but are 
responding differently. Many large private insurers are 
incorporating climate change into their annual risk management 
practices, and some are addressing it strategically by 
assessing its potential long-term industry-wide impacts. The 
two major Federal insurance programs, however, have done little 
to develop comparable information. GAO acknowledges that the 
Federal insurance programs are not profit-oriented, like 
private insurers. Nonetheless, a strategic analysis of the 
potential implications of climate change for the major Federal 
insurance programs would help the Congress manage an emerging 
high-risk area with significant implications for the Nation's 
growing fiscal imbalance.''


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Without significant action on the climate change problem 
(by reducing our usage to fossil fuels), the public taxpayer 
could be stuck with the bills of willful ignorance. When a very 
conservative magazine like the Economist documents through a 
skeptics lens the actual cost, insured and uninsured, of 
extreme weather related events, we must take note and consider 
this an economic not an environmental ``nice to have'' 
phenomenon.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Recently, an Economist editor admitted to me that 2 years 
ago you could not convince him to do anything about climate 
change on an economic basis. Today, he went on to say, they can 
document the real costs and risks of this potentially 
catastrophic problem as the chart above shows. He is now a 
believer that we should be addressing climate change as an 
economic phenomenon. When even those who would ignore the 
environmental aspects perceive renewable energy as a winning 
alternative, isn't it about time that we start listening?
    Despite our apprehension about most coal plants, we do 
believe coal is a valuable economic resource and we should use 
it: given the scale of U.S coal reserves, utilizing them does 
seem like a prudent approach if the externalities are not 
overwhelming. One such approach is converting the coal to an 
environmentally friendlier fuel, such as natural gas 
(GreatPoint Energy--one of our investments, is working on such 
an approach). The advantages include cleaner fuel's and cheaper 
transportation using the existing pipeline network as well as 
higher reliability (as compared to expected reliability of IGCC 
coal plants). Moreover, the overall cost of production is 
expected to be less than $4.00/MMBtu, far below today's natural 
gas prices of $7--8 /MMBtu. At this cost, GreatPoint Energy's 
gasification technology represents one of the lowest cost 
incremental sources of natural gas in North America--lower than 
new exploration and production, LNG imports, and other means of 
producing natural gas from carbon feedstocks through 
conventional gasification. Just as hybrid technology increases 
automobile efficiency and effectively reduces carbon emissions 
by roughly 20 percent, the GreatPoint technology reduces CO2 
emissions by over 20 percent from coal use versus conventional 
coal technology. Add carbon sequestration to this process and 
carbon emission form coal based power plants can be reduced by 
more than 40 percent while keeping coal as a fuel source! The 
net effect is one of replacing $7 MMBtu natural gas with a 
cheaper alternative, while using less energy (and less need for 
imported LNG), and reduced carbon emissions--all while 
utilizing a resource, coal, that we have plenty of. No less a 
coal supporter than Senator Dorgan has told me he is a 
supporter of such approaches.


    energy & the role of the ``innovation ecosystem'' as a disrupter


    Massive change in our energy industries is possible. For 
those of you who don't believe this is possible, there are many 
precedents for massive change. In 1982 when I started Sun 
Microsystems, I was told that one could not compete against 
IBM, Digital Equipment Corporation, Data General, Burroughs, 
Control Data and other stalwarts of the computer business. Most 
of them are now gone and a few have adjusted, humbled by the 
seemingly ``toyish'' microprocessor. In 1996 I got in a room 
with the CEO's of nine major US media companies, including the 
Washington Post, New York Times, Knight-Ridder, Tribune, Cox, 
Times-Mirror and others and tried to explain how the internet 
would disrupt their business models, and little companies like 
Yahoo, Ebay, Google and others would be a threat. Today Google 
is worth as much as all of them combined. The pharmaceutical 
companies went through a similar experience, ignoring 
biotechnology in the early days. Ten years ago every major 
telecommunications company told me that they would never adopt 
the internet IP protocol as their core network just as we were 
starting a telecommunications equipment company called Juniper 
to produce IP equipment. Major ``experts'' like AT&T laughed at 
the idea that all long distance calls would be virtually free 
to consumers. Today, for failing to heed that trend, major 
players like AT&T are mere brands, their company sold for a 
song. In each of these cases less than 10 years later, 
yesterday's ``unthinkable fact'' is today's ``conventional 
wisdom''. I expect to see the same in the energy business, with 
biofuels cheaper than oil, with more environmentally sound 
power generation technologies cheaper than coal based power 
generation, and increases in efficiency reducing the cost of 
power and offering our country an economic advantage.
    The country that gets to this new future first will have a 
significant advantage globally. Tens of new Google's and 
Yahoo's and Microsoft's will be created in the next two or 
three decades. The country to develop these technologies and 
companies first will have a large share of these new economic 
sectors. America can be that country given our large markets, 
our competitive advantage in innovation and technology 
industries, and our university and R&D system. Trillions of 
dollars of new market value are at stake and we are well 
positioned to capture this value and its associated jobs and 
economic growth. And we can make the whole world a better place 
in the process.


                               conclusion


    I believe that climate change will provide an opportunity 
for America to shine even further by leveraging the 
``innovation ecosystem'', our biggest economic advantage in the 
world economy. We can get a huge competitive advantage from our 
Universities and R&D ecosystem, something traditional providers 
of energy don't have. Investments in the clean tech sector have 
risen fourfold in the past 5 years, and rose 78 percent in 2006 
to $2.9 billion--and are projected to grow to about $10 billion 
by the end of this decade (creating 500,000 new jobs)\22\. The 
smartest people, companies, and capital are recognizing the 
scale of the opportunity, are recognizing the sheer size and 
potential present in finding new energy solutions. All of the 
entrepreneurs present today will not succeed, but will all of 
the efforts fail? As Paul Romer puts it, new technologies will 
help demolish the old specter of diminishing returns, which led 
economic thinkers such as Ricardo and Keynes to suppose that 
growth had its limits. Instead, these new technologies create 
increasing returns, because new knowledge, which begets new 
products, is generated through research.\23\ The combination of 
brilliant ideas and entrepreneurial spirit should lead us to a 
safer and more secure future. The power of ideas fueled by 
entrepreneurial energy is our future. Climate change 
legislation can help us get there faster and first--ensuring 
American dominance in the foreseeable future.
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    \22\http://www.americanventuremagazine.com/articles/742
    \23\http://www.versaggi.net/ecommerce/articles/romer-econideas.htm
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                  coal's unpopularity: a rising trend


    The following is a report highlighting trends in coal power 
plant construction. Detailed are instances in states where key 
decisions by regulators, public officials or utilities 
themselves have led to coal plant construction being postponed 
or canceled all together. In addition, the renewable portfolio 
standards set by each of the 20 states that have passed them 
are detailed as well. Finally, maps illustrating the potential 
for solar, geothermal and wind energy in Nevada are included. 
Below are specific examples as to why, nationwide, a growing 
trend against coal power plant construction may be occurring.
    Most Newly Proposed Coal Power Plants Are Never Built. 
According to the Department of Energy, proposals to build new 
power plants are often speculative and typically operate on 
``boom & bust'' cycles, based upon the ever changing economic 
climate of power generation markets. As such, many of the 
proposed plants will not likely be built. For example, out of a 
total portfolio (gas, coal, etc) of 500 GW of newly planned 
power plant capacity announced in 2001, 91 GW have been already 
been scrapped or delayed. [Tracking New Coal-Fired Power 
Plants: Department of Energy, 5/1/07].
    Since 2006 Nearly Two Dozen Coal Projects Have Been 
Canceled. According to the National Energy Technology 
Laboratory, a division of the Department of Energy, nearly two 
dozen coal projects have been canceled since early 2006. 
[Tracking New Coal-Fired Power Plants: Department of Energy, 5/
1/07].
    The Cost of Raw Materials Needed to Build Coal-Fired Plants 
Has Risen. One industry study showed that the cost of raw 
construction materials such as cement and steel is far higher 
than thought just 2 years ago. [Spokesman-Review, 9/5/07].


           coal projects scaled back: state specific examples


    Below are highlights from states across the country where 
regulators or utilities themselves have taken the lead in 
curbing the new coal plant construction. In each instance, the 
decisions made were done with an eye toward concerns over 
public health and climate change. While the list below is not 
exhaustive, it provides insight into the recent decisions the 
could be implemented elsewhere.
Colorado: Colorado's Xcel Energy Agreed to Supplement its Coal Power 
        Generated Electricity With Wind
    Power. Even in states where coal projects are going 
forward, they are happening more often with a nod to 
environmental concerns. Xcel Energy, through its Public Service 
of Colorado unit, agreed to obtain 775 megawatts worth of wind 
power to supplement the power that will come from a 750 
megawatt coal plant it is building near Pueblo. It also has 
agreed to install more pollution controls at existing units, 
and to cut energy demand by more than 300 megawatts in coming 
years. ``It will change their portfolio in a fundamental way,'' 
says Vickie Patton, senior attorney for Environmental Defense 
in Colorado. [Wall Street Journal, 7/25/07].
Florida: Florida Governor Charlie Crist Celebrated the Cancellation of 
        a Key Coal Plant Project.
    Florida Governor Charlie Crist backed up the symbolism of 
his meeting on global climate change in Miami with a stern 
rebuke to the future of coal-powered energy plants in the 
State. After Florida's Public Service Commission turned down an 
application for a coal plant in Glades County, Crist said the 
future of coal plants in the State is ``not looking good.'' 
Crist said followed with ``We're moving in a different 
direction.'' [Sarasota Herald-Tribune, 7/4/07].
    Florida Governor Charlie Crist Said Utilities Must Stop 
Relying on Coal and Natural Gas Plants. After the Public 
Service Commission denied Florida Power and Light Co.'s request 
to build a coal-fired plant in Glades County, Governor Charlie 
Crist hailed the decision and said that utilities must stop 
relying on coal and natural gas plants that generate carbon 
dioxide, a probable cause of global warming. [Palm Beach Post, 
7/4/07].
Kansas: Because of Colorado's Newly Enacted Renewable Energy Mandate, a 
        Two Utility Companies Have Canceled a Coal Plant Project.
    One of the most ambitious proposals for new coal power 
plants in 2006 was to construct three units with a total 
generating capacity of 2,100 megawatts in western Kansas. The 
two cooperatives involved, Tri-State in Colorado and Sunflower 
Electric Power in Kansas, have scaled down the project to two 
units. One reason was that Colorado adopted a law requiring 
rural electric co-ops to get 10 percent of their power from 
renewable resources. [Washington Post, 9/4/07].
North Carolina: Due to Rising Costs Duke Energy Was Forced By the NC 
        Utilities Commission to Cancel a Coal Plant Project.
    Duke Energy Inc. created a stir last year when it announced 
that the expected cost of a new twin-unit power plant in North 
Carolina had ballooned to about $3 billion, up 50 percent from 
about 18 months earlier. That run up in cost and other factors 
compelled the North Carolina Utilities Commission to nix one of 
the two proposed units. According to a recent press report, the 
plant that was approved is expected to cost more than $1.8 
billion. [Wall Street Journal, 7/25/07; Baltimore Sun, 9/4/07].
Oklahoma: Oklahoma Corporation Commission Rejected Application For 
        Coal-Fired Plant, Opponents Argue Their Decision Will Save Rate 
        Payers Money.
    The Oklahoma Corporation Commission rejected a request from 
the state's three largest public utilities to proceed with 
plans to build a coalfired power plant. The commission turned 
down the proposal by Oklahoma Gas & Electric, American 
Electric-Power Service Company of Oklahoma and the Oklahoma 
Municipal Power Authority. The $1.8 billion dollar plant would 
have been built in Red Rock in Noble County, about 80 miles 
north of Oklahoma City. Chesapeake Energy Corp. was one of the 
most ardent campaigners against the coal plant. Aubrey 
McClendon, the company's chairman and chief executive officer, 
said the decision will save consumers money in the long run. 
``This is a win for Oklahoma ratepayers,'' McClendon said. 
``Coal is cheap today, but we believe it won't always be cheap. 
It's only logical that there will be a day when something 
that's as detrimental to the environment and to public health 
is priced in a different way. Coal has done wonderful things 
for our national economy in the 19th and 20th centuries, but 
this is the 11st century. Oklahoma needs to show leadership 
here. It is a great first step from these courageous Oklahoma 
Corporation commissioners to say no to what we think was an 
ill-conceived idea for the 11st century.'' Oklahoma Treasurer 
Scott Meacham also came out publicly against the proposal, 
saying he was concerned with the plant's potential impact on 
global warming. [Daily Oklahoman, 9/11/07].
Texas: In Order to Be Bought Out By Private Investors, Texas Utility 
        Corporation Was Forced to Cancel Eight Coal Plant Projects.
    TXU Corp, the Texas energy giant, was faced with attacks 
from environmentalists after it proposed building 11 new coal 
plants in the State. The resulting legal skirmishes and 
investor concerns about the high cost of the plants sent its 
share price plummeting. As a result, a weakened TXU agreed in 
February to reduce the number of coal plants it planed to build 
from 11 to three as part of a deal to sell itself to two large 
private equity firms for $45 billion. [Baltimore Sun, 9/4/07].
Washington: One Western Utility Took it Upon Itself to Shift From Coal 
        to Renewable Energy Sources.
    Avista Utilities planed to sell more electricity generated 
by natural gas plants and giant windmills rather than investing 
in new coal power plants, according to a long-term power plan 
released by the company. Clint Kalich, the company's resource 
planning manager, said he agrees with the assessment of Puget 
Sound Energy that the future of Northwest energy will be more 
``gassy, windy.'' Washington utilities submit 20-year power 
plans every other year to State regulators. The studies predict 
population and business growth and future energy needs. While 
the Northwest has long relied on river dams for generating 
ample megawatts, the future lies in underground gas stores and 
the wind. In a change from power planning in 2005, Avista this 
time around is ruling out new megawatts from coal plants. The 
company has also determined that building and partnering in a 
nuclear power plant is too expensive and too unpredictable. 
[Spokesman-Review, 9/5/07].
                                ------                                


 Response by Vinod Khosla to an Additional Question from Senator Boxer

    Question. (Senator Boxer): Can you elaborate on how the 
development of cellulosic ethanol will lead to the creation of 
new jobs, greener emissions, and energy independence?
    Response. From an environmental perspective, the benefits 
of cellulosic ethanol are fairly indisputable: most projections 
suggest that it can reduce greenhouse gas emissions per mile 
driven by 60-80 percent over gasoline, thus making a 
substantial impact on total GHG emissions. The NRDC has 
projected that with certain choices, we could theoretically 
achieve negative GHG emissions per mile driven, setting up a 
scenario where driving more (and by extension, the demand for 
excess fuel it generates) could actually help the reduce carbon 
emissions! Growing feedstock for cellulosic ethanol offers 
other, ancillary benefits as well--miscanthus (and other would 
be grass cocktails) use significantly less water and almost no 
fertilizer (after the growing season it sends its nutrients 
back to the root system (stored in rhizomes for the winter) 
which is not harvested), almost no tillage, richer soil because 
it actually fixes carbon into the soil (hence the negative 
carbon per mile driven in the NRDC estimate), and much greater 
biodiversity.
    From a jobs and economic perspective, I'd like to highlight 
the examples I noted in my written testimony. A UC Berkeley 
study (directed by Professor Daniel Kammen, who also testified) 
noted that a biomass-centric approach would be a substantial 
boon to the US economy. Professor Kammen stated that 
``Renewable energy is not only good for our economic security 
and the environment, it creates new jobs . . . At a time when 
rising gas prices have raised our annual gas bill to $240 
billion [2003-2004 oil prices--about 50 percent higher today], 
investing in new clean energy technologies would both reduce 
our trade deficit and reestablish the U. S. as a leader in 
energy technology, the largest global industry today.'' In 
Brazil, studies cited by the Ministry of Agriculture have shown 
the sheer economic impact of ethanol vs. gasoline--the ethanol 
production process (car and fuel) has lead to 21.87 jobs for 
each job produced by gasoline!
    The NRDC (in a 2004 study) noted that to displace 7.9 
million barrels of oil daily by 2050, we would need to utilize 
approximately 1.3 billion tons of biomass. A University of 
Tennessee study model predicted that with a switchgrass price 
of $40 per ton, total farmer net income would increase $12.1 
billion--or 32 percent more than a USDA baseline estimate 
(based on their price forecasts). The net returns for farmers 
would increase more than $5.1 billion per year. Importantly, 
this benefit would not be confined to the Midwest--virtually 
every part of the country would benefit at some level. The 
DOE's Office of Science notes that ``Conservative projections 
suggest that 10,000 to 20,000 jobs could be created for every 
billion gallons of biofuel produced.'' Elsewhere, Professor 
Bruce Dale (a cellulosic expert writing at the Aspen Institute, 
a non-partisan think tank) noted
    ``Assuming that each plant spends about $165 million 
annually for biomass feedstock and that this raw material total 
represents 70 percent of total plant spending for all supplies 
and labor, then each plant will spend roughly $240 million per 
year for operations, or about $70 billion annually among all 
three hundred plants at the end of the 20 year transition 
period. Once again using data for corn dry mills, the local 
economic base surrounding these biorefineries would expand by 
about $140 billion per year and household income would expand 
by $25 billion annually, mostly in rural areas. The projected 
impact is very large, and would probably result in over 50 
percent increase in total economic activity in affected areas. 
Assuming that each $200,000 in plant sales would support one 
new direct job in the agricultural and biorefining sectors, and 
an ethanol selling price of $1.00 per gallon, then a half 
million new direct jobs would be created, with a significant 
multiplier for indirect service and supporting jobs? These 
numbers, although imprecise, are not at all unreasonable. 
Currently the U. S. fuels and chemicals industry employs about 
900,000 people, many of them in commodity organic chemicals and 
fuels with total sales on the order of $1 trillion annually. As 
domestic oil and natural gas supplies have become more costly 
and scarcer, the fuels and chemicals industry is increasingly 
attracted to overseas locations where oil and natural gas are 
cheaper and supplies assured. As a result both domestic 
employment and economic activity suffer.''
    Beyond the general examples cited here, we see specific 
examples of how action to combat climate change can help. Range 
Fuels (one of our investments), is soon to break ground on the 
first commercial-scale cellulosic ethanol plant in Soperton, 
Georgia, using wood waste that lies uncollected in Georgia's 
forests. The first plant will create 70 jobs for the area, with 
subsequent plants to follow. A University of Georgia analysis 
notes that ``the ethanol plant would be worth $110 million per 
year to the county, including nearly $500,000 of tax revenue? 
Range Fuels also expects to hire up to 80 full-time employees 
at wages much higher than the regional average.''\1\ Moreover, 
as paper mills have shut down across the country, both Range 
Fuels and Mascoma (as well as other cellulosic ethanol 
approaches) offer an opportunity to help replace their impact 
and utilize their feedstock. Imagine the potential when this 
model is replicated across the US!
---------------------------------------------------------------------------
    \1\http://www.agobservatory.org/headlines.cfm?refID=99779
---------------------------------------------------------------------------
    Third, cellulosic ethanol offers a way toward energy 
independence. Can we imagine the impact of spending the $320 
billion (that we currently spend on oil imports) fueling 
agriculture in rural America, and reducing the trade deficit 
domestically? Instead of funding the Middle East (including Al 
Queda's backers), we invest in American farmers; instead of 
being held ransom by OPEC, we control our own supply. The DOE 
projects that by 2025, more than 70 percent of our consumption 
of petroleum will be imported, leaving the country susceptible 
to significant price and supply shocks. Petroleum accounted for 
approximately 35 percent of the US trade deficit in 2006, and 
projections have suggested that the proportion could rise as 
high as 70 percent over the next 10-20 years. Today, an $80 
barrel of oil provides limited value-added here in the US. By 
importing oil and refining the fuel domestically, we capture 
perhaps $5 or so of ``value add'' on top of the $80 of value of 
the import. Cellulosic ethanol and other advanced biofuels 
offer us an opportunity to do far more--instead of capturing $5 
of $85 in value, we can capture all of it within the country! 
America's availability of land, technology, and know-how gives 
us a significant competitive advantage. Imagine the scenario--
cellulosic ethanol technology developed in Denver, utilizing 
available land and forest waste in Oklahoma, Georgia, Montana, 
Idaho, and Washington, and delivering cheap $1 cellulosic 
ethanol across the country! This isn't some pipe dream--rather, 
something we expect as reality within the next few years. Our 
projections show that by 2030, we can meet a significant 
majority of our gasoline demand (assuming a 1 percent demand 
growth rate--accounting for very conservative increases in CAFE 
and more efficient engines) through ethanol (primarily 
cellulosic).

    Senator Boxer. Thank you so much, Bernard.
    Senator Sanders.
    [Presiding.] OK.
    Jerome Ringo is the President of the Apollo Alliance. 
Jerome, thanks a lot for being here.

             STATEMENT OF JEROME RINGO, PRESIDENT, 
                        APOLLO ALLIANCE

    Mr. Ringo. Thank you very much. Senator Sanders, Chairwoman 
Boxer, and Ranking Member Inhofe, thank you for inviting me 
here today.
    As the president of an alliance of labor, business, 
environmental and urban interests working to catalyze a clean 
energy revolution in America, I am pleased to offer today these 
thoughts on meeting challenges of global climate change and 
creating millions of good green collar jobs.
    Although we have not yet endorsed any specific climate 
change proposals, the Apollo Alliance understands the need to 
cap global warming pollution and decisively launch our Nation 
on the path to a cleaner energy future. A long-term national 
commitment to capping and reducing carbon emissions will send 
an essential market signal and drive investment into a whole 
new generation of cleaner energy technologies and services.
    But capping carbon emissions alone will not position our 
Country to lead the world into the clean energy future, with 
all of the new businesses, products, jobs and exports applied 
therein. To do that, we must explicitly recognize the climate 
change challenge for the economic opportunity that it is, the 
opportunity to transform our Country into the cleanest, most 
energy efficient, most productive Nation on earth and the 
world's undisputed leader in clean technology.
    That is where you come in. Our Country is respected the 
world over for the remarkable way we bring public and private 
sector resources to bear to solve scientific and technological 
challenges. We have done that in medicine. We have done that in 
space. And now it is time to do the same in the field of clean 
energy.
    Fortunately, there are strategies for capping and reducing 
carbon emissions which if properly designed would produce as 
much as $100 billion per year in funding that could and should 
be reinvested to spur a clean energy revolution in America. 
Four years ago, we estimated that the public investment of $30 
billion per year over 10 years could generate three million new 
jobs, new clean energy jobs. A carefully targeted investment 
strategy funded with the value created from carbon credits 
could generate many more new jobs than our original estimate.
    However, only a very disciplined approach to these 
investments would produce a good return for the American public 
in terms of jobs, economic opportunity, national security and 
reduced climate risk. I would like to suggest seven investment 
priorities.
    First, Congress should fully fund American clean energy 
research and development programs, the first stage in the 
technology development cycle. Without adequate research and 
development, we might fall behind in such pivotal technologies 
as power storage from intermittent renewable energy 
technologies.
    At the same time, Congress should take steps to ensure that 
public support translates into opportunities to manufacture and 
commercialize these products in America first. Solar PVs were 
invented in America with public dollars, but have been largely 
commercialized and marketed abroad. This is a mistake we cannot 
afford to repeat.
    Second, the Federal Government should support early 
commercialization of the most promising and strategically 
important clean energy and energy efficiency technologies to 
emerge from our laboratories. New technologies that show 
promise on an experimental scale sometimes fail to attract 
sufficient private capital for the first full scale commercial 
prototypes because of the perception of higher risks. For 
instance, demonstration at commercial scale of advanced coal 
technologies with carbon capture and storage will essentially 
be attracting the private capital necessary for mass 
deployment.
    Third, Congress needs to provide market certainty and 
predictability to renewable energy producers.
    Fourth, Congress should develop policies to encourage the 
manufacture of clean energy components in the United States.
    Fifth, Congress should use proceeds from the auction of 
carbon credits to catalyze a massive public and private 
initiative to retrofit American buildings, save energy, and 
dramatically cut domestic energy costs.
    Again, also the carbon cap policy Congress adopts must 
level the playing field for American industry so the costs of 
compliance here in America also applies to importers with no 
comparable carbon restrictions of their own.
    And the seventh is that Congress needs to support education 
and training initiatives to prepare America for a new 
generation of green collar jobs.
    In conclusion, from Iraq to New Orleans, from the fuel pump 
to the melting ice sheets of the Arctic, the tragic 
consequences of our Nation's excessive dependence on fossil 
fuel are driven home to us every day. This is not a dependency 
that we can afford to ignore. To do so would be a form of 
national betrayal, a betrayal for those who have already 
suffered so much, both at home and abroad, and a betrayal of 
our children and grandchildren whose future is quite literally 
in our hands.
    Our Country is respected the world over for our technology 
prowess, our entrepreneurial energy, and our willingness to 
rise to global challenges. This is our moment to shine. Let's 
lead the world into a clean energy future with good jobs across 
America.
    Thank you, Senator Sanders.
    [The prepared statement of Mr. Ringo follows:]

         Statement of Jerome Ringo, President, Apollo Alliance

    Thank you for inviting me to testify today. As the 
President of the Apollo Alliance, an alliance of labor, 
business, environmental and urban interests working to catalyze 
a clean energy revolution in America, I'm pleased to offer 
these thoughts on meeting the challenge of global climate 
change and creating millions of good ``green collar'' jobs for 
men and women across our great nation.
    Although we have yet to endorsed any of the specific 
climate change proposals currently moving through Congress, the 
Apollo Alliance understands and supports the need to cap global 
warming pollution and decisively launch our nation on the path 
to a cleaner energy future. A long term national commitment to 
capping and reducing carbon emissions will send an essential 
market signal to investors and decisionmakers, and drive 
investment into a whole new generation of cleaner energy 
technologies and services, here in America and worldwide. But 
capping and reducing carbon emissions ? alone ? will not 
position our country to lead the world into the clean energy 
future, with all of the new businesses, products, jobs and 
exports implied therein. To do that, we must explicitly 
recognize the climate change challenge for the economic 
opportunity that it is: the opportunity to transform our 
country into the cleanest, most energy efficient, most 
productive nation of Earth, and the world's undisputed leader 
in clean tech.
    And that is where you come in. Our country is respected the 
world-over for the remarkable way we bring public and private 
resources to bear to solve scientific and technological 
challenges. We've done that in medicine, we've done that in 
space, and now it is time to do the same in the field of clean 
energy. Fortunately, there are strategies for capping and 
reducing carbon emissions which, if properly designed, will 
produce as much as $100 billion per annum (from the auction of 
carbon emissions allowances)\1\, funds that can and should be 
reinvested to spur the clean energy revolution in America. If 
we channel the value of these credits to smart investments in 
clean power technologies, the revitalization of an advanced, 
fuel-efficient transportation sector, high-performance, energy-
efficient buildings, and new education and training 
opportunities for green collar workers, our climate policy will 
create millions of good, new American jobs and foster the 
growth of a new generation of clean energy enterprises in 
America, while simultaneously reducing the risk of catastrophic 
global warming and enhancing our national security.
---------------------------------------------------------------------------
    \1\Darren Samuelsohn, ``Big Bucks at Stake in Cap-and-Trade 
Allocations,'' Greenwire, July 17, 2007.
---------------------------------------------------------------------------
    Four years ago, we issued an analysis of the job creation 
impacts of our clean energy investment agenda. The analysis 
showed that a public investment of $30 billion per year over 10 
years could generate 3 million good, new clean energy jobs.\2\ 
While we have yet to assess the job creation potential of a 
larger, more comprehensive clean energy investment strategy, it 
is clear that a carefully targeted strategy could generate many 
more new jobs than our original estimate. The logic is 
straightforward:
---------------------------------------------------------------------------
    \2\The Perryman Group, ``New Energy for America ? The Apollo 
Alliance Jobs Report: For Good Jobs & Energy Independence,'' the Apollo 
Alliance, January 2004.
---------------------------------------------------------------------------
    First, while job growth in traditional fossil fuel powered-
generation and fuels may level off over time with carbon caps, 
hundreds of thousands of additional jobs will be created in the 
clean energy technology sector, including renewables, clean 
coal, and bio-fuels.
    Second, transitioning our power infrastructure to cleaner 
sources will stimulate significant growth in the construction 
industry. For instance, building an Integrated Gasification 
Combined Cycle (IGCC) plant with carbon capture and storage 
(CCS) creates a vast range of jobs for laborers, sheet metal 
workers, pipe fitters, equipment operators, engineers, project 
mangers, and others.
    Third, done right, moving to a clean energy future could 
create a whole new generation of manufacturing jobs for clean 
energy parts and components, from advanced technology vehicles 
and drive trains, to wind towers, solar panels, steel pipes for 
geothermal plants and CCS, and stainless steel boilers for 
ethanol refineries. As data from the Renewable Energy Policy 
Project indicate, if we adopted a national strategy that 
resulted in 185,000 installed megawatts of renewable energy 
generation (about 20 percent of our current installed 
capacity), and if we ensured that component supply was anchored 
in the United States, renewable energy manufacturing alone 
could benefit 33,000 manufacturing firms and create 678,000 
jobs in just 20 states (see attachment A), including 
Southeastern and Midwestern states hard hit with manufacturing 
job loss.
    Fourth, jobs in clean energy and in energy efficiency tend 
to be domestic jobs. By replacing oil imports with domestic 
bio-fuels, and by moving to a new generation of hybrid-
electric, advanced diesel, and other advanced-technology 
vehicles that use domestic fuel sources, we can keep our 
petrodollars at home supporting domestic jobs. In addition, if 
we fully exploit the huge untapped potential for energy 
efficiency retrofits of our nation's buildings, we will create 
jobs that, by their nature, must be done here. With the 
emerging slump in the nation's housing market, there is 
probably no smarter way to keep our trades people and 
contractors fully employed then through massive incentives for 
energy efficient building renovations.
    In sum, extrapolating from our earlier estimates, we are 
confident that a carbon cap and reductions policy linked to a 
robust clean energy investment agenda will create substantially 
more than 3 million good, new jobs.
    Priorities for Catalyzing a Clean Energy Revolution in 
America
    While the prospect of making a $100 billion public 
investment in our clean energy future is promising, only a very 
disciplined approach to these investments will produce a good 
return for the American public. In the balance of my testimony, 
I'd like to suggest seven priorities to guide our nation's 
clean energy investment strategy, priorities that will provide 
a fourfold return to the American public by simultaneously 
cutting greenhouse gas emissions, enhancing national security, 
expanding our economic competitiveness, and creating good jobs 
for men and women across America.
    First, Congress should fully fund America's clean energy 
research & development programs, the first stage in the 
technology development cycle. Public funding for research and 
development, channeled through our nation's vast network of 
universities and research institutions, has been responsible 
for many of the most important technological and scientific 
breakthroughs we've made as a society. Today as we gear up to 
meet this critical energy challenge, a challenge of immense 
proportions both in its scope and its complexity, it is time to 
give our very best scientists and technologists the resources 
they need to make the next generation of important discoveries 
in the clean energy field. Without adequate public dollars 
flowing to R & D, for instance, we may fall behind in such 
pivotal technologies as power storage from intermittent 
renewable energy technology. Furthermore, to the extent that 
American ingenuity and public investment produce promising new 
energy technologies, we should not lose the opportunity to 
manufacture and commercialize these products in America first, 
much as our competitors now do, and export them to the rest of 
the world. In the past, we have watched as technologies 
pioneered in America were commercialized abroad. Solar 
photovoltaics, for instance, were invented in America with 
public dollars, but have been largely commercialized and 
marketed abroad. Clearly this is a mistake we can't afford to 
repeat.
    Second, when necessary, the Federal Government should 
support early commercialization of the most promising clean 
energy and energy efficiency technologies to emerge from our 
laboratories. New technologies that show promise on an 
experimental scale sometimes fail to attract sufficient private 
capital for larger scale commercialization because of the costs 
involved and the perception of higher risks. Such is the case, 
for instance, with advanced coal technologies with carbon 
capture and storage. Demonstration of these technologies at 
commercial scale will be essential to attracting the private 
capital necessary for mass deployment.
    Advanced coal with carbon capture and storage (CCS) has 
vast job-creation potential. As pressure grows to limit carbon 
emissions, more resources will be devoted to retrofitting 
outdated pulverized coal plants with more advanced, cleaner-
burning technologies, creating thousands of good-paying 
construction jobs for operating engineers, electricians, 
laborers, and others. CCS may also require the construction and 
maintenance of an extensive pipeline system for transporting 
CO2 ; according to a recent study from MIT, the 
CO2 pipeline system could eventually be one-third of 
the size of the system now used to transport natural gas\3\, 
generating jobs for steelworkers, pipe fitters, and welders as 
well as heavy-equipment operators. Finally, exporting advanced 
coal and CCS technologies developed in the United States to 
trading partners like India and China will both curb carbon 
emissions from coal plants globally and create new 
international employment opportunities for American engineers 
and geologists.
---------------------------------------------------------------------------
    \3\Massachusetts Institute of Technology, ``The Future of Coal,'' 
March 2007.
---------------------------------------------------------------------------
    Third, Congress needs to provide market certainty and 
predictability to renewable energy producers. The system of 2-
year tax credits now in place hobbles the renewable industry 
and must be replaced with longer-term incentives that provide a 
higher level of certainty to renewable energy investors and 
producers. Doing so will not only level the playing field with 
well-subsidized traditional power sources, but establish the 
central importance of renewables to our nation's energy future. 
To encourage innovation, and avoid picking winners and losers, 
incentives should be based on performance, not technology.
    The American Council on Renewable Energy estimates that 
with consistent public support, renewable energy could provide 
the equivalent of 50 percent of today's US generating capacity 
by 2025. Sixty-five percent of that renewable energy potential 
could come from wind and solar power; geothermal could provide 
an additional 16 percent, including all-important base-load 
power. Funds generated from the auction of carbon credits could 
be used to reimburse the Treasury for a 10-year extension of 
the renewable energy production and investment tax credits. 
Doing so would create a large array of jobs, from laborers who 
pour the footings for wind towers and iron workers who 
construct the towers, to pipe fitters who install geothermal 
facilities and steelworkers who manufacture and assemble 
components. The Solar Electric Industries Association predicts 
that just an 8-year extension of the solar investment tax 
credit would create 55,000 jobs within the solar industry and 
$45 billion in economic investment.\4\
---------------------------------------------------------------------------
    \4\Solar Energy Industries Association, Fact Sheet on the Securing 
America's Energy Independence Act, 2007.
---------------------------------------------------------------------------
    Fourth, Congress should develop policies to encourage the 
manufacture of clean energy components in the United States. 
Germany, China and other manufacturing powerhouses aren't shy 
about domestic manufacturing incentives; we shouldn't be 
either. In addition to its obvious economic benefits, domestic 
manufacturing furthers our carbon emissions reduction goals in 
measurable ways: a wind tower shipped halfway around the world 
has a much larger carbon footprint than a wind tower made in 
America. Finding ways to encourage domestic manufacturing would 
also help businesses around our country expand into this 
emerging manufacturing sector. According to analysis by the 
Renewable Energy Policy Project, many states have the 
industrial capacity, supply chains, and skilled workforce 
needed to expand into renewable energy manufacturing. (See 
Attachment A.)
    Today, as you have probably heard from others, the United 
States is losing the race to capture the renewable energy 
manufacturing markets of the future. For example, eight of the 
world's ten largest wind manufacturers are foreign companies 
and nine of these companies are today building factories in 
China. Legislation to cap and reduce carbon emissions will help 
the United States resume the position it once had at the 
forefront of the renewable energy industry by expanding 
domestic demand for electricity generated with low-and zero-
carbon emissions. Expanding domestic demand, coupled with 
reforms in our system of tax credits to provide greater 
certainty, will together do much to attract clean energy 
component manufacturers to build plants in America. But given 
the strategic importance of the renewable industry to our clean 
energy future, Congress may want to go further and consider 
providing Federal loan guarantees and other incentives to 
manufacturers who build new facilities in the United States or 
convert idled assembly lines to renewable energy technology. 
Clean energy manufacturing opportunities would provide high-
wage employment opportunities to the 50 percent of the US 
workforce that has no more than a high school education. And, 
as you undoubtedly know, manufacturing tends to create larger 
multiplier effects through local economies than construction or 
service work by creating local supply chains.
    Fifth, Congress should use proceeds from the auction of 
carbon credits to catalyze a massive public and private 
initiative to retrofit American buildings, save energy, and 
dramatically cut domestic energy costs. Heating, cooling, 
lighting, and industrial processes in buildings consume 40 
percent of our energy and produce roughly the same share of our 
carbon emissions. Clearly, retrofitting our homes, businesses, 
and public buildings is one of the most immediate and 
significant steps we can take as a nation to cut energy costs 
and use, and reduce carbon emissions.
    Although energy retrofits can often pay for themselves with 
the money saved on electricity bills, Federal funding could 
help states and cities establish revolving loan funds and other 
financial mechanisms to jumpstart retrofits of public offices, 
schools, low-income residential properties and other priority 
properties. Money saved on the energy costs of public buildings 
could be recycled to hire more teachers, police, firefighters, 
or healthcare workers. As one of the largest energy users in 
the Nation, the Federal Government itself could save millions 
of taxpayer dollars on its own energy bills by expanding 
programs to retrofit Federal buildings across the Nation.
    Retrofitting the stock of existing buildings will put 
American men and women to work as energy auditors, sheet metal 
workers to install advanced HVAC, electricians, plumbers & pipe 
fitters, building operations and maintenance, and more. 
Manufacturers of heating and cooling equipment will also get a 
boost from a national commitment to greater energy efficiency 
in buildings. Since most older buildings are located in urban 
areas, Congress should also support initiatives to create green 
pathways out of poverty for young Americans from the inner 
city. Building retrofit work offers career ladders starting 
with basic labor and moving up to glazer, sheet metal worker, 
electrician, and independent contractor.
    Sixth, the carbon cap policy Congress adopts must level the 
playing field for American industry so the cost of compliance 
here in America also applies to importers with no comparable 
carbon restrictions of their own. As has been proposed, this 
goal could be accomplished by requiring importers of energy-
intensive products not subject to strict carbon controls to buy 
and surrender US carbon credits before their products enter the 
US market. This proposal is critical to encouraging our trading 
partners to follow the US lead in controlling carbon emissions.
    Seventh, Congress needs to support education and training 
initiatives to prepare Americans for a new generation of green 
collar jobs in the clean energy economy. The National Renewable 
Energy Labs have identified lack of skilled workers as one of 
the leading barriers to deployment of clean energy 
technologies.\5\ High schools, vocational schools, junior 
colleges, labor-management apprenticeship programs, and 
universities will all be called on to prepare our young people, 
trades people, managers, engineers, and scientists to fill the 
gap. Green collar job training can provide pathways out of 
poverty for urban youth in renovating energy-leaking buildings. 
Labor-management training programs often provide some of the 
best skills training available for trades people and the 
companies that employ them. Congress should also consider 
creating a Clean Energy Corps, a service corps to engage 
Americans of all ages in the challenge of transforming our 
country's energy future.
---------------------------------------------------------------------------
    \5\R. Margolis and J. Zuboy, ``Nontechnical Barriers to Solar 
Energy Use: Review of Recent Literature,'' National Renewable Energy 
Laboratory, 2006.
---------------------------------------------------------------------------
    Conclusion
    From Iraq to New Orleans, from the fuel pump to the melting 
ice sheets of the Arctic, the tragic consequences of our 
nation's excessive dependence on fossil fuel are driven home to 
us every day. This is not a dependence we can afford to ignore. 
To do so would be a form of national betrayal: a betrayal of 
those who have already suffered so much, at home and abroad, 
and a betrayal of our children and grandchildren whose future 
is quite literally in our hands.
    Let us not fail them. Let us instead carefully and 
thoughtfully transform this tremendous challenge into a 
powerful opportunity, an opportunity to make America stronger 
and more secure, strategically, economically and 
environmentally. Let us grow a new generation of clean energy 
businesses and put Americans to work transforming our nation 
into the clean energy capital of the world. We can do it, and 
with your leadership and strategic investments in our clean 
energy future, we will do it. Please, ladies and gentlemen, 
lead the way.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Senator Sanders. Thank you very much, Jerome.
    Wayne Winegarden is a Partner with Arduin, Laffer and Moore 
Econometrics. Thank you very much for being with us.

  STATEMENT OF WAYNE WINEGARDEN, PARTNER, ARDUIN, LAFFER AND 
                       MOORE ECONOMETRICS

    Mr. Winegarden. Thank you. Thank you, Madam Chairwoman and 
to the Committee, thank you for inviting me to provide this 
testimony here today.
    A recent study that I co-authored with Dr. Arthur Laffer 
examined the impacts of cap and trade legislation on the U.S. 
economy. Economic growth can be described as a process of 
creative destruction because in the process of creating jobs 
and economic opportunities, entrepreneurs destroy a smaller set 
of jobs. Cap and trade legislation has the inverse effect. In 
the process of creating a few green jobs, a larger number of 
jobs and economic opportunities would be destroyed.
    Passing cap and trade legislation is akin to imposing an 
energy supply shock on the U.S. economy. Fossil fuels currently 
account for 86 percent of our total energy consumption. 
Renewable energy sources are not currently able to replace an 
adequate amount of the lost energy output from fossil fuels. 
Consequently, in the short term, meaningfully limiting 
greenhouse gas emissions can be achieved only by limiting the 
Country's energy supplies.
    The U.S. economy has endured several significant energy 
supply shocks over the last 40 years. These shocks occurred in 
1974 to 1975, 1979 to 1981 and in 1990. The previous energy 
supply shocks caused on average oil prices to spike 113 
percent, the Nation's economy to shrink by 2.1 percent, and the 
unemployment rate to rise by 2.6 percentage points.
    With respect to today's economy, a 2.6 percentage point 
increase in the unemployment rate is equivalent to the loss of 
nearly four million jobs. Over a longer term horizon, a 
legislative energy supply shock would have significant negative 
implications. To provide a sense of the potential economic 
costs, we estimate that compliance with the Kyoto Protocol 
could reduce total economic activity by 5.2 percent in 2020, 
compared to where it would be without the cap and trade 
legislation. Due to a reduction in economic growth, by 2020 
every man, woman and child would be about $2,700 poorer in the 
baseline scenario, or about $10,000 energy dollars for a family 
of four.
    Additionally, regardless of one's position on the global 
warming consensus, cap and trade legislation is an inferior 
policy choice to address global warming concerns. The 
Congressional Budget Office, Alan Greenspan, Paul Volcker and 
Gregory Mankiw are just a few of the notable economists and 
economic organizations that have also concluded that cap and 
trade legislation is not the appropriate policy to address 
global warming concerns.
    By definition of a cap and trade policy, which is called a 
quantity constraint in economics, the dynamics of the 
marketplace necessarily leads to significant price volatility. 
Price volatility increases overall economic instability, with 
detrimental effects for economic growth and jobs. The European 
experience with cap and trade exemplifies these fundamental 
flaws. The value of the greenhouse gas allowances in Europe 
nose-dived in April, 2006 due to a mismatch between the 
allowances granted and natural market demand. Such extreme 
price volatility is a natural consequence of policies that 
arbitrarily cap quantities.
    Finally, global warming regulations will only be effective 
if these regulations are universally adopted. Failure to 
achieve universality in a global warming policy greatly reduces 
its environmental effectiveness, and yet the economic costs 
will remain higher, especially as energy-sensitive companies 
leave the U.S. in search of cheaper energy supplies.
    As an example of companies locating jobs based on low cost 
energy, Dow Chemical has created an explicit strategy to expand 
its manufacturing capacity using overseas partners that, in 
part, have access to cheaper energy supplies. Another example, 
the aluminum industry, including United Company RUSAL, Alcoa, 
and Norsk Hydro, has been moving aluminum production out of 
countries with higher energy costs, including the United 
States, in search of cheaper power sources. Increasing energy 
costs in the U.S. relative to other countries through cap and 
trade legislation will accelerate these trends causing 
production and jobs to leave the U.S. at an even faster rate.
    The costs of reducing carbon emissions are by no means 
trivial. Therefore, it is not enough to simply press forward in 
the name of global warming. Our analysis illustrates that cap 
and trade legislation is the wrong policy that will impose 
significant economic costs on the U.S. economy and will create 
significant economic disincentives.
    However, if appropriately constructed, a proactive 
government policy can be implemented which reduces the amount 
of carbon emissions, while minimizing, if not eliminating, the 
potential adverse economic impacts. Such a policy will 
simultaneously implement a carbon tax with a static dollar for 
dollar reduction in marginal income tax rates. The pro-growth 
incentives from a marginal tax rate reduction are an integral 
part of an environmental policy that addresses a potential 
risk, while safeguarding our current economic progress.
    Thank you for the opportunity to testify here today.
    [The prepared statement of Mr. Winegarden follows.]

            Statement of Wayne Winegarden, Partner, Arduin, 
                     Laffer and Moore Econometrics

    Thank you to the members of the Committee on Environment 
and Public Works for inviting me to provide this testimony 
today.
    I am Wayne Winegarden, a partner in the economics 
consulting firm Arduin, Laffer & Moore Econometrics. Our firm 
provides research and analysis to clients on economic, 
regulatory and fiscal issues.
    A recent study that I have co-authored with Dr. Arthur 
Laffer, which is enclosed at the end of my testimony, examined 
the expected impacts of cap-and-trade legislation on the U.S. 
economy. Our analysis concluded that if implemented, cap-and-
trade legislation would impose significant economic costs on 
the U.S. economy.
    In my testimony today, I would like to emphasize three key 
economic consequences from passing cap-and-trade legislation.
    First, passing cap-and-trade legislation is akin to 
imposing an energy supply shock on the U.S. economy.
    Fossil fuels currently account for 86 percent of our total 
energy consumption. Renewable energy sources are not currently 
able to replace an adequate amount of the lost energy output 
from fossil fuels. Consequently, in the short-term, 
meaningfully limiting greenhouse gas emissions can be achieved 
only through limiting our supply of energy. Disrupting the 
country's energy supplies, whether by domestic legislation or 
from a foreign oil embargo, is the definition of an energy 
supply shock.

    The U.S. economy has endured several significant energy 
supply shocks over the last 40 years. These have 
included:CO2
     The OPEC oil embargo of 1974-75, which dramatically 
increased oil prices as a direct result of OPEC's drastic 
reduction in world oil supplies.
     The oil supply disruptions of 1979-81, which also 
dramatically increased oil prices due, in part, to another Mid-
East-related interdiction in world oil supplies.
     Iraq's invasion of Kuwait in 1990 that created another 
severe disruption in global oil supplies.

    The experience from the historical energy supply shocks all 
tell the same story--energy supply shocks cause the U.S. 
economy to decline, the number of unemployed people to rise, 
and the value of the stock market to fall. On average, the 
previous energy supply shocks caused oil prices to spike 113.2 
percent, the nation's economy to shrink by 2.1 percent, and the 
unemployment rate to rise by 2.6 percentage points. With 
respect to today's economy, a 2.6 percentage point increase in 
the unemployment rate is equivalent to the loss of nearly 4 
million jobs.
    Over a longer-term horizon, a legislated energy supply 
shock could have significant negative implications with respect 
to the potential growth prospects of our economy. The extent of 
the economic costs is directly related to the severity of the 
required emissions reduction and the speed with which the 
economy can adjust its productive and consumption behavior to 
the new incentives created by the cap-and-trade legislation.
    To provide a sense of the potential economic costs, based 
on the average real growth rate in the economy of 3 percent a 
year, and assuming that energy efficiency (or the U.S. 
economy's ability to produce the same amount of output with 
less energy) accelerates to the higher energy efficiency rates 
that were associated with the energy crises of the 1970's, 
compliance with the Kyoto Protocol would reduce total economic 
activity by 5.2 percent in 2020 compared to where it would be 
without the cap-and-trade legislation.
    The implications of such a discrepancy are significant. Due 
to the reduction in economic growth, by 2020 every man, woman, 
and child would be about $2,700 poorer than the baseline 
scenario--or about $10,800 for a family of 4.
    The second key economic consequence from passing cap-and-
trade legislation is that regardless of one's position on the 
global warming consensus, cap-and-trade legislation is an 
inferior policy choice to address global warming concerns. The 
Congressional Budget Office, Alan Greenspan, Paul Volker, and 
Gregory Mankiw are just a few of the notable economists/
economic organizations that have also concluded that cap-and-
trade legislation is the wrong policy to address global warming 
concerns.
    Cap-and-trade legislation is inefficient, in part, because 
the supply and-demand curves across all of the markets that use 
energy are not known with certainty when the initial cap-and-
trade policies are established; and the marketplace is dynamic 
causing the supply and-demand curves to shift over time, and 
oftentimes in unpredictable ways.
    By definition of the cap-and-trade quantity constraint, the 
quantity of the emission allowances cannot change and may 
become substantially inappropriate in subsequent years. Changes 
in supply and-demand, then, can only be accommodated through 
changes in prices causing significant price volatility as the 
dynamic marketplace adjusts over time. Price volatility 
increases overall economic instability, with detrimental 
effects for economic growth and jobs.
    The European experience with cap-and-trade exemplifies 
these fundamental flaws. The value of the greenhouse gas 
allowances in Europe nose-dived in April 2006 due to a mismatch 
between the allowances granted and actual market demand. While 
some observers try to explain these variations as a result of 
poor planning on the part of governments, such extreme price 
volatility is a natural consequence of policies that 
arbitrarily cap quantities. This price volatility is what 
should have been predicted prior to Europe's implementation of 
cap-and-trade, and supports the contention that cap-and-trade 
is not the appropriate policy response for addressing the 
issues related to greenhouse gas emissions.
    The third key economic consequence arises because global 
warming regulations will only be effective if these regulations 
are universally adopted across the globe. Failure to achieve 
universality in a global warming policy will greatly reduce its 
environmental effectiveness and yet will not significantly 
reduce its economic costs. If only one-half of the earth 
implements pollution reducing environmental policies, total 
pollution emitted would decline but by far less than one-half 
of the decline if the whole earth implemented the same 
pollution reducing environmental policies. Pollution of the 
environment is truly as global as the earth's stratosphere. 
Chinese pollution affects global warming from Santiago, Chile 
to Vladivostok, Russia and from polar ice cap to polar ice cap. 
An environmental policy imposed on one specific location will 
only push polluting industries out of that location and into 
other locations more polluting tolerant. While the earth's 
atmosphere could be little impacted, production in the specific 
location could be devastated.
    As an example of companies locating jobs based on low-cost 
energy, Dow Chemical has created an explicit strategy to expand 
its manufacturing capacity using overseas partners that, in 
part, have access to cheaper energy supplies. Another example, 
the Aluminum industry, including United Company RUSAL, Alcoa 
Inc., and Norsk Hydro ASA, has been moving aluminum production 
out of countries with higher energy costs (including the U.S.) 
in search of cheaper power sources. Increasing energy costs in 
the U.S. relative to other countries through cap-and-trade 
legislation will accelerate these trends causing production and 
jobs to leave the U.S. at an even faster pace.
    The costs of reducing carbon emissions are by no means 
trivial; therefore, it is not enough to simply press forward in 
the name of global warming. Global warming may well be serious, 
but so are the economic consequences from combating global 
warming. What we can say with a high degree of certainty is 
that policies designed to reduce greenhouse gas emissions per 
se would have a large and negative impact on the long term 
growth of America. Consequently, environmental action at all 
costs is not the answer.
    Our analysis illustrates that cap-and-trade legislation is 
the wrong policy that will impose significant economic costs on 
the U.S. economy, and will create significant economic 
disincentives, which are increased when global warming policies 
are used as a means to increase the government's revenues--
regardless of the intended government spending program to which 
the money is dedicated.
    However, if appropriately constructed, a pro-active 
government policy can be implemented which reduces the amount 
of carbon emissions while minimizing (if not eliminating) the 
potential adverse economic impacts. Such a policy will 
simultaneously implement a carbon tax with a static dollar for 
dollar reduction in marginal income tax rates. The combination 
of a higher carbon tax coupled with lower marginal income tax 
rates would simultaneously reduce overall carbon emissions 
while mitigating the potential adverse economic impacts from 
the proposed carbon tax increase by increasing the incentives 
in the economy to work, invest and innovate. The pro-growth 
incentives from a marginal tax rate reduction are an integral 
part of an environmental policy that addresses a potential risk 
while safeguarding our current economic progress.
                                ------                                


         Respones by Wayne Winegarden to Additional Questions 
                           from Senator Boxer

    Question 1. Could you explain in detail what the impact of 
a contraction of more than 5 percent in economic growth would 
do?
    Response. Our analysis examined the economic impact from a 
reduction in energy use that would accompany any meaningful cap 
and trade regulation. Our analysis created a baseline scenario 
that estimated total economic output and total economic output 
per capita in 2020 based on:

     Total economic output growing at its historic rate of 3.0 
percent per year through 2020;
     The U.S. population growing at its historic rate of 0.8 
percent per year from the end of the U.S. Census projection in 
2010 through 2020; and,
     Total energy consumption growing at its historic rate of 
1.1 percent per year through 2020.

    Our analysis then restricted total energy usage to the 
level consistent with adherence to the Kyoto Protocol as 
estimated by the Federal Energy Information Agency. We adjusted 
total energy usage due to the fact that the U.S. economy's 
energy usage rate changes when the price of energy increases: 
higher energy prices provide an incentive for people to 
economize on their energy use. Therefore, when energy prices 
are accelerating, people's energy efficiency also increases. 
Higher energy efficiency allows the economy to produce $1 of 
economic output with less energy inputs. We assumed that 
overall energy efficiency would accelerate to the levels seen 
during the time period around the 1970's energy crises.
    Based on these assumptions, total economic output in 2020 
with cap and trade regulations would be 5.2 percent smaller 
than total economic output in 2020 under the baseline scenario. 
This is a reduction in per capita income growth of $2,700, or a 
reduction in annual growth in GDP per capita of approximately 
0.4 percent per year. A reduction in growth of this magnitude 
can lead to large differences in opportunities, jobs and 
overall welfare.
    The historical performance of the U.S. economy illustrates 
the overall impact that a reduction in economic growth of this 
magnitude can have on the welfare of people in the U.S. The 
timeframe from 1961 ? 2006 can be divided into four periods 
based on overall economic performance that occurred:

     1961--69
     1970--83
     1984--91
     1992--06.

    In 1961--69 overall GDP per capita rose at an average rate 
of 3.3 percent. This fell to an average 1.6 percent average 
rate from 1970 ? 83. Once the economy took off in the early 
1980's, growth in GDP per capita accelerated rising an average 
2.4 percent per year, which include the recession years of 
1990-91. The resulting economic boom of the 1990's through 
today has maintained the strong growth experienced during the 
1980's with GDP per capita rising 2.0 percent a year on 
average, which includes the recession year of 2001, see Table 
1.


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    During the periods when real GDP per capita growth was 
stronger, the economy created more jobs, people's wealth 
increased at a faster rate, and the average income of the 
poorest people in the country (those with incomes in the bottom 
20 percent of the income distribution) rose at a faster pace, 
see Table 2. As illustrated in Table 2, a reduction in annual 
economic growth of a percentage point or less a year, if it 
persists over a long period of time, significantly reduces the 
overall growth in people's well-being.
    Table 2: Average Annual Growth in Employment, Wealth, and 
the Income of the Poorest Households in the U.S.



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Just like a small decrease in savings can have a large 
impact on a person's overall welfare in the long-run, policies 
that decrease our economy's growth rate will have large impacts 
on our overall welfare in the long-run. The result is that the 
overall income of the country will be smaller, the overall 
wealth of the country will be smaller, the growth in job 
opportunities for Americans will be reduced, and the income for 
the poorest households in the country will grow more slowly.
    2. In terms of the U.S. economy, what can be expected to 
happen if we commit to unilateral caps on carbon emissions, but 
China and other developing countries do not?
    Universality is a key precondition for a successful 
environmental strategy. An environmental policy imposed on one 
specific location raises the costs of production for that area. 
The Federal Energy Information Agency (EIA) examined the cost 
from implementing the cap and trade regulations associated with 
the Kyoto Protocol in the United States. This study, conducted 
in 1998 during the Clinton-Gore Administration, found that 
higher energy costs would result from adhering to the cap and 
trade regulations contained in the Kyoto Protocol.\1\ According 
to the report, a cap and trade system that reduces carbon 
emissions in the U.S. by 7 percent below the 1990 level would 
raise gasoline prices by nearly 53 percent and energy prices by 
more than 86 percent. Of course, many of the caps on carbon 
emissions currently under consideration would lead to larger 
reductions in carbon emissions and, consequently, larger 
increases in energy prices.
---------------------------------------------------------------------------
    \1\(1998) Impacts of the Kyoto Protocol on U.S. Energy Markets and 
Economic Activity. Energy Information Administration October (SR/OIAF/
98-03).
---------------------------------------------------------------------------
    The higher energy and regulatory costs are not benign to 
overall economic growth. One key ingredient for economic growth 
is growth in productivity ? or the ability to create more 
output with the same amount of inputs. Cap and trade 
regulations increase the costs to produce the same amount of 
output, thereby lowering productivity. Simultaneously, the cap 
and trade regulations are increasing the costs to consumers, 
causing consumers to spend more money in order to acquire the 
same amount of goods. Both of these effects negatively impact 
overall economic growth.
    The adverse economic impacts on the United States if China 
and other developing countries do not commit to caps on carbon 
emissions (and other greenhouse gasses) are amplified further. 
Companies do not locate jobs as a matter of social conscience. 
Instead, companies locate jobs based on which location is the 
most cost-effective. As current globalization trends 
illustrate, when the U.S. is not the most cost-effective 
location, industries and jobs leave the U.S. in search of the 
most cost-effective locale.
    If the U.S. were to pass cap and trade legislation, 
manufacturers in the U.S. that emit carbon dioxide or other 
greenhouse gasses would face additional costs. If other 
countries, such as China and India do not impose cap and trade 
regulations on manufacturers, manufacturing products in these 
countries will gain a cost advantage vis-a-vis the U.S. A 
decrease in the costs of production in countries such as China 
and India provides an additional incentive for manufacturers to 
relocate jobs from the United States to China, India or any 
other country that does not impose the cap and trade costs on 
manufacturers in their countries.
    An environmental policy imposed on one specific location 
will only push polluting industries out of that location and 
into other locations more polluting tolerant; perhaps 
significantly reducing the amount of desired pollution 
reduction achieved. However, due to the incentives described 
above, production in the specific location that is imposing the 
cap and trade regulations could be devastated.
    For instance, if the U.S. were to increase its gasoline 
tax, gasoline consumption in the U.S. will decline for sure. 
But, simultaneously, gasoline and other oil products will 
become cheaper and more plentiful to other nations such as 
China, India and Brazil. Greg Mankiw in his advocacy for a 
carbon tax stated explicitly: ``?as a higher gas tax 
discouraged oil consumption, the price of oil would fall in 
world markets.''\2\ The net effect from the gas tax is in part 
a relocation of carbon emissions that could ironically increase 
overall carbon emissions because China, India and Brazil are 
gallon-for-gallon far more serious polluters of the world's 
environment.
---------------------------------------------------------------------------
    \2\N. Gregory Mankiw, ``Raise the Gas Tax,'' The Wall Street 
Journal, October 20, 2006.
---------------------------------------------------------------------------
    The need for universality in a global warming policy holds 
true whether the policy is being considered in California, the 
United States, Europe, Japan, or any individual country or 
region. Without universal commitment to a carbon reduction 
regime, people will have the incentive to move businesses that 
emit carbon from the countries or regions with restrictive 
carbon policies to the countries or regions without restrictive 
carbon policies. The point is simple: failure to achieve 
universality in a global warming policy will greatly reduce its 
effectiveness and yet will not significantly reduce its costs.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Senator Sanders. Thank you very much, Wayne.
    Carol Berrigan is the Director of Industry Infrastructure 
with the Nuclear Energy Institute. Carol, thanks very much for 
being with us.

       STATEMENT OF CAROL BERRIGAN, DIRECTOR OF INDUSTRY 
            INFRASTRUCTURE, NUCLEAR ENERGY INSTITUTE

    Ms. Berrigan. Thank you, Mr. Chairman.
    Mr. Chairman and members of the Committee, I am Carol 
Berrigan, Director of Industry Infrastructure at the Nuclear 
Energy Institute. I appreciate this opportunity to express the 
industry's views on the potential for global warming 
initiatives to produce green jobs.
    Let me begin by thanking members of this Committee for 
their longstanding oversight of the U.S. nuclear industry and 
the NRC. The 104 reactors operating in the U.S. today are among 
our Nation's safest and most secure industrial facilities due 
to the oversight of this Committee, which is to be commended. 
They are the Nation's lowest cost producers of baseload 
electricity and represent over 70 percent of the Nation's 
emissions-free generation portfolio, avoiding nearly 700 
million tons of carbon dioxide annually.
    Did you know that on a life cycle basis, nuclear's 
emissions footprint is comparable to renewables? Carbon 
mitigation strategies from Princeton, Columbia, Harvard and the 
Pew Center for Global Climate Change have concluded a clear 
path for meeting the global challenge of reducing greenhouse 
gases relies in part on an expanded portfolio of low emission 
sources of electricity, including nuclear power.
    Responsible climate change legislation must address the 
connection between energy costs, trade, and employment. A 
carbon-constrained economy may lead to the use of readily 
deployable lower CO2 -emitting technologies such as 
natural, that can have a perverse impact on manufacturing and 
agricultural sectors. Nuclear power must play a role in a 
carbon-capped economy to alleviate price pressures on natural 
gas supplies and to maintain a competitive trade balance in a 
global economy.
    A September 8th resolution adopted by the AFL--CIO's 
Building and Construction Trades Department and submitted as an 
attachment to my written testimony, states: ``If America wants 
to seriously address greenhouse gases and global warming, then 
we must be serious about expanding our nuclear power generating 
capacity. The technology to build zero-carbon nuclear reactors 
is already available. Pricing on new reactors is no longer 
unreliable and they will fit into existing electrical grids 
seamlessly. America needs the power and the jobs that new 
nuclear generation will provide.''
    Nuclear energy clearly links to creating those green jobs. 
Today, the average nuclear plant employs between 400 and 700 
people, and pays substantially more than average salaries in 
the local community. The median salary for an electrical 
technician is over $67,000 a year; for a mechanical technician, 
over $66,000; and for a reactor operator, over $77,000 per 
year. These jobs often do not require a 4-year degree and 
include medical benefits, pensions and generous incentive 
compensation plans. These are wonderful jobs.
    Regardless of the carbon control policy selected, credible 
analyses indicate an increasing role for nuclear energy. The 
technology-based EPRI prism scenario indicates roughly 64 
gigawatts of new nuclear capacity by 2030, translating to 
roughly 46 new nuclear power plants. Forty-six additional 
plants will generate over 64,000 to over 82,000 construction 
jobs, with peak employment over 128,000, including skilled 
trades, engineers, project managers, and construction 
supervisors. Once built, these 46 plants can permanently employ 
over 18,000 to 32,000 workers and generate over 18,000 to 
32,000 additional jobs in the local community; nearly $20 
billion in annual expenditures, $920 million in State and local 
tax revenues, and $3.45 billion in Federal taxes.
    Beyond the jobs in construction, new nuclear plants will 
require components and commodities including pumps, valves, 
piping, tubing, cement and steel rebar.
    What can this Congress do to help ensure that Americans get 
as many of these new green jobs as possible? This Congress has 
demonstrated leadership in addressing work force challenges 
from the American Competes Act to support for nuclear 
engineering education, and we thank you for this. But there is 
more work to be done in developing the technical and skilled 
trade work force that our Nation will need. We must raise 
awareness about the impending skilled craft labor shortages and 
its potential impacts; elevate the image and prestige of 
skilled craft careers; attract, recruit and train workers, 
particularly from untapped and under-represented labor pools; 
align investments in work force development initiatives; and 
implement performance-based education and training through 
vocational and technical programs at the secondary and post-
secondary level.
    Congress should consider policies to encourage investment 
in energy sector manufacturing, and also pass implementing 
legislation for the Convention on Supplementary Compensation.
    In conclusion, Mr. Chairman, it has been shown that any 
credible program to reduce GHG emissions must include nuclear 
energy. In doing so, the industry will hire and retain tens of 
thousands of skilled and well paid workers. Those jobs will be 
based in the United States and will contribute to two of our 
highest national priorities: the climate and energy security.
    Scanning 63-84
    Thank you.
    [The prepared statement of Ms. Berrigan follows:]

   Statement of Carol Berrigan, Director of Industry Infrustructure, 
                        Nuclear Energy Institute

    Madam Chairman, Ranking Member Inhofe and members of the 
Committee, I am Carol Berrigan, Director of Industry 
Infrastructure at the Nuclear Energy Institute. I appreciate 
this opportunity to express the industry's views on the 
potential for global warming initiatives to produce green jobs.
    Let me begin by thanking the Members of this Committee for 
their long-standing oversight of the U.S. nuclear industry and 
the Nuclear Regulatory Commission. The 104 reactors operating 
in the United States today are among the safest and most secure 
industrial facilities in the United States in part due to the 
oversight of this Committee for which the Committee is to be 
commended. In addition, they are the nation's lowest cost 
producer of base-load electricity, averaging just 1.72 cents 
per kilowatt-hour.
    Those 104 nuclear power plants produce one-fifth of 
America's electricity, and U.S. utilities are preparing to 
build advanced-design nuclear power plants to meet our nation's 
growing electricity demand.
    Today, nuclear energy represents over 70 percent of the 
nation's emission-free generation portfolio, avoiding 3.12 
million short tons of Sulfur Dioxide, .99 million short tons of 
Nitrogen Oxide and 681 million metric tons of Carbon Dioxide 
compared to the fossil fuels that would have been burned in the 
absence of nuclear energy.
    On a life-cycle basis, all energy-generation technologies 
emit some amount of CO2 during the manufacture of 
components (whether it be pressure vessels, wind turbines, or 
photovoltaic cells) and other activities not directly 
associated with the production of electricity at the power 
plant, a number of studies by organizations such as the 
Organization for Economic Co-Operation and Development have 
concluded that nuclear energy's emissions ``footprint'' is 
comparable to renewables.
    Nuclear energy holds `great potential' for meeting our 
nation's future climate related goals. Climate change is 
increasingly important as Federal, State and local policymakers 
consider energy supply and greenhouse gas mitigation. Given 
those concerns and the need for affordable and reliable base-
load electricity production, policymakers and energy industry 
leaders are evaluating an expanded role for nuclear power. Just 
this morning, NRG announced that it has taken concrete steps 
toward this expanding role with the submission of a Combined 
Operating License Application for new nuclear reactors to be 
built in Texas.
    Carbon mitigation strategies from Princeton University, 
Columbia University's Earth Institute, Harvard University and 
the Pew Center on Global Climate Change have reached a similar 
conclusion: A clear path toward meeting the global challenge of 
reducing greenhouse gases relies in part on an expanded 
portfolio of low-emission sources of electricity, including 
nuclear power.
    A 2006 report by the Progressive Policy Institute states 
that expanding nuclear power should be part of a plan that 
would help avert a dangerous long-term energy crisis and 
address air-quality issues. The Institute's ``Progressive 
Energy Platform'' states that nuclear energy ``holds a great 
potential to be an integral part of the diversified energy 
portfolio for America.''
    At a 2004 State of the Planet Conference at Columbia 
University, scientists, academics and government officials 
identified four essential elements for human well-being: 
energy, food, water and health. Maintaining access to energy, 
conferees said, ``will require new technologies, in some 
combination of renewable and nuclear energy; energy 
conservation; and industrial carbon sequestration.''
    Nuclear energy also is part of the strategy for combating 
climate change in an energy security plan released by the 
Center for American Progress, a progressive think tank. The 
center recommends that the United States establish a 
``renewable portfolio standard'' mandating that 10 percent to 
25 percent of electricity be produced from renewable resources 
and nuclear energy by 2025.
    The linkage between nuclear energy and the creation of 
green jobs was forcefully expressed on September 8th in a 
resolution adopted by the AFL-CIO's Building and Construction 
Trades Department. Let me quote ``if America wants to seriously 
address greenhouse gasses and global warming, then we must be 
serious about expanding our nuclear power generating capacity. 
The technology to build zero-carbon nuclear reactors is already 
available. Pricing new reactors is no longer unreliable. And 
they will fit into existing electrical grids seamlessly. 
America needs the power and the jobs that new nuclear 
generation will provide.''
    In a carbon controlled environment, nuclear energy offers 
substantial additional benefits. We all recognize that 
responsible climate change legislation must address the 
interconnection between energy costs, trade, and employment. 
The imposition of emission controls by some, but not all, major 
emitting nations may disrupt the competitive trade balance 
between nations and inappropriately shifts jobs to countries 
without emissions controls, where manufacturing costs will be 
less. A carbon constrained economy may lead to the use of 
readily deployable lower CO2 emitting technologies, 
such as natural gas, that can have a perverse impact on our 
manufacturing and agricultural sectors. Nuclear power must play 
a role in a carbon capped economy to alleviate price pressures 
on natural gas supplies, and to maintain a competitive trade 
balance in the global economy.
    Studies have generated varying estimates of the amount of 
new nuclear generation that will be deployed under a variety of 
climate change initiatives. If you refer to Chart 1, you will 
see a number of the different analyses depicted. Regardless of 
the carbon control policy selected, the preponderance of the 
credible analyses indicate an increasing role for nuclear 
energy.
    I draw your attention to the EPRI analysis on the bottom of 
the chart. This analysis is a technology-based assessment. It 
indicates roughly 64 GW of new nuclear generating capacity 
deployment by 2030.
    Since the interest of this Committee is job creation, I 
will describe what this 64 GW of new nuclear capacity means in 
terms of employment. Let me first preface my remarks by stating 
that for the purpose of this discussion, each new nuclear plant 
will be referenced at roughly a 1.4 GW. In reality, the nuclear 
plant designs under consideration by U.S. utilities range in 
size from 1.1 GW to 1.7 GW in generating capacity. The 64 GW in 
additional nuclear capacity translates to roughly 46 new 
nuclear plants.
    Today, the average operating nuclear plant employs 400 to 
700 people and jobs at these plants pay substantially more than 
the average salaries in the local area. For example, the median 
salary for an electrical technician at a nuclear power plant is 
$67,517, for a mechanical technician, it is $66,581 and for a 
reactor operator, it is $77,782. A senior reactor operator's 
median income is $85,426. Jobs in the nuclear industry are 
great jobs to have, they commonly include family medical 
benefits, pensions and generous incentive compensation plans. 
And, jobs in the nuclear industry are safe with fewer reported 
accidents than numerous other industries, including banking and 
other white-collar occupations.
    In addition to direct employment, each plant creates 
economic activity that generates 400 to 700 additional jobs 
within the local community and produces approximately $430 
million annually in expenditures for goods, services and labor, 
and through subsequent spending because of the presence of the 
plant and its employees. The average nuclear plants also 
contributes more than $20 million annually to State and local 
tax revenue, benefiting schools, roads and other State and 
local infrastructure and provides annual Federal tax payments 
of $75 million.
    In addition to the ongoing employment at the nation's 
nuclear fleet, each new nuclear plant that is constructed will 
employ between 1,400 and 1,800 people during construction with 
peak employment of up to 2,800 individuals. These jobs include 
skilled trades such as welders, pipefitters, masons, 
carpenters, millwrights, sheet metal workers, electricians, 
ironworkers, heavy equipment operators, insulators, engineers, 
project managers, and construction supervisors.
    These 46 additional plants will generate 64,400 to 82,800 
construction jobs (with peak employment at 128,800). Once 
built, these 46 plants can generate 18,400 to 32,200 permanent 
fulltime jobs operating each plant, 18,400 to 32,200 in 
additional jobs in the local community, $19.78 billion in 
annual expenditures for goods, services, labor and through 
subsequent spending, $920 million in local State and local tax 
revenue and $3.45 billion in Federal tax revenues.
    Beyond the jobs in construction, new nuclear plants will 
require components including pumps, valves, piping, tubing, 
insulation, reactor pressure vessels, pressurizes, heat 
exchangers, and moisture separators to name a few, and 
commodities like cement, structural steel, steel reinforcing 
bar, stainless steel, cable tray and cabling.
    What can this Congress do to help ensure that Americans 
gets as many of these green jobs as possible?
    The first area in which Congress can provide leadership is 
in the development of the work force. As you may already be 
aware, the nuclear industry, like many other parts of the 
energy sector, is seeing the leading edge of a wave of 
attrition due in large part to demographics. We project that as 
many as 35 percent of our incumbent work force may be eligible 
to retire within 5 years. Further, there are few work force 
training programs focused on the skills needed for successful 
employment in the nuclear energy industry and there has been an 
overall decline in high quality career and technical education.
    I encourage you to develop and support work force 
development policies that 1) address the science, technology, 
engineering, and math (STEM) workforce challenges identified in 
the National Science Foundation's ``Gathering Storm'' report, 
and 2) address the challenges of developing a high quality 
technical work force with a focus on the skilled trades.
    This Congress has demonstrated significant leadership in 
addressing some of these work force challenges. The recently 
enacted America Competes Act establishes a solid policy 
framework for addressing the challenges in the STEM workforce 
and we look forward to this Act's implementation. This Congress 
has long supported the nuclear engineering education and 
university programs and we thank you for your continuing 
support.
    But there is work to be done in developing the technical 
and skilled trades workforce that our nation will need to 
deploy additional generating capacity, including nuclear. 
Specifically we must:

     raise awareness of the impending skilled craft labor 
shortage and its impact on the energy sector
     elevate the image, status and prestige of skilled craft 
careers in the energy sector
     attract, recruit and train workers, particularly from 
untapped and under-represented labor pools
     align investments and work force development initiatives 
to ensure collaboration and coordination of government, 
industry and labor efforts in the develop the energy skilled 
trades work force
     build partnerships that promote talent and economic 
development
     implement performance-based education and training 
programs for skilled craft workers through vocational and 
technical education programs in secondary and post-secondary 
educational environments.

    The second area in which this Congress can provide 
leadership is in the development of nuclear manufacturing 
infrastructure in the U.S. When the current fleet of nuclear 
power plants were built from the 1960's to the 1980's, there 
was a substantial nuclear manufacturing infrastructure in the 
U.S. As new nuclear construction declined from the late 1980's 
through the turn of the century, the domestic nuclear industry 
contracted.
    Congress should consider policies that will encourage 
investment in energy sector manufacturing to provide components 
to the nuclear industry, as well as other energy technologies 
the Nation will need. The United States has long been a leader 
in innovation and advanced manufacturing. I encourage you to 
promote policies that take advantage of the growth of our 
energy sector, and American ingenuity, productivity and 
entrepreneurship by encouraging the manufacturing industries 
that will support future energy development to produce their 
products in the U.S.
    This can be achieved though a number of initiatives. First, 
Congress should support the export of U.S. nuclear products and 
services by passing implementing legislation for the Convention 
on Supplementary Compensation. We commend this Committee for 
leadership on this issue.. Second, Congress should consider 
financial incentives for investment in manufacturing through a 
number of instruments including tax credits or accelerated 
depreciation of capital investments.
    Madam Chairman, in conclusion, nuclear energy can make a 
significant contribution to the reduced GHG emissions goals of 
any global warming initiative. In fact, any credible program to 
reduce greenhouse gas emissions must include nuclear energy. In 
doing so, the industry will hire and retain tens of thousands 
of skilled and well-paid workers. Those jobs will be based in 
the United States and will contribute to two of our highest 
national priorities; the climate, and energy security.
                                ------                                


Response by Carol Berrigan to an Additional Question from Senator Boxer

    Question. Were you aware of the Center for American 
Progress's relationship to this report and their stance on 
nuclear power?
    Response. When I presented my testimony, I was unaware of 
the Center for American Progress's relationship to this report 
and their stance on nuclear power as expressed in the letter 
from Mr. Podesta. Thank you for drawing this issue to my 
attention and forwarding a copy of the letter expressing their 
concern.
    As it appears, the correct citation for the report is ``The 
National Security Task Force on Energy'' whose members 
included: Madeleine K. Albright, Samuel R. Berger, Rand Beers, 
Carol Browner, William Danvers, Tom Daschle, John Deutch, 
Thomas J. Downey, Michle A. Flournoy, Leon Fuerth, Suzanne 
George, Denis McDonough, James C. O'Brien, Peter Ogden, John 
Podesta, Susan E. Rice, Wendy R. Sherman, Gayle Smith, Tara 
Sonenshine, Jim Steinberg and Timothy E. Wirth.
    Upon researching the correct citation for this report and 
review of the CAP letter, I noticed that the July 26, 2006 
press release for this report that is posted on the CAP 
website, clearly marked with a copyright notice for CAP states 
that ``The Center for American Progress today hosts a morning 
conference to unveil a new report, ``Energy Security in the 
21st Century,'' which presents a comprehensive strategy for 
sharply reducing our dependence on foreign oil, confronting the 
threat posed by climate change, eliminating key proliferation 
threats, and building a more secure international energy 
environment.''
    The same press release goes on ``There is widespread 
agreement across the political spectrum that America's 
addiction to oil leaves it dangerously dependent on unstable or 
hostile regimes for its energy supply. This vulnerability is 
growing as new conflicts flare up in oil-rich regions and gas 
prices skyrocket to record highs. The Bush administration has 
demonstrateda willingness to acknowledge the existence of such 
energy security challenges, but has failed to implement a plan 
to meet them.By following this report's recommendations, 
however, the United States can chart a new course toward 
increased energy independence and enhanced national, economic, 
and environmental security.''
    The bolded sentence above can easily be interpreted as an 
unqualified endorsement of the report's recommendations by the 
organization that issued the press release. I would encourage 
CAP to qualify their press statement so it does not appear as 
though CAP is affiliated with or endorses the report.
    Further, I agree with Mr. Podesta's statement that the 
report does not provide an unqualified endorsement of the use 
of nuclear power for energy generation, nor does my testimony. 
As in my testimony, the report specifies support for nuclear 
power for inclusion in a national renewable portfolio standard. 
Mr. Podesta notes that the report recommendation states 
``responsibly generated nuclear power''. The U.S. commercial 
nuclear industry has an impeccable track record of generating 
safe, affordable and clean nuclear power. The commercial 
nuclear industry also has an excellent record of responsibility 
managing its used fuel. In my view, my testimony and the 
recommendation are consistent.

Responses by Carol Berrigan to Additional Questions from Senator Inhofe

    Question 1. Can you explain what the barriers are to siting 
new nuclear plants?
    Response. Most of the new nuclear power plants announced to 
date would be built on ``brownfield'' sites, which already 
include one or more operating nuclear power plants. Many of 
these sites were originally scheduled for more reactors than 
were actually built and, in general, and have the 
infrastructure and attributes (e.g., available land, cooling 
water, transmission access, strong local public support) to 
support new nuclear plant construction. There is substantial 
capacity in the United States to build new nuclear plants on 
existing sites.
    The barriers to siting new nuclear plants include the 
physical characteristics of the site and the permits necessary 
from State and local authorities.
    The physical characteristics of the site include specific 
criteria such as geology, hydrology, meteorology, demographics, 
environmental sensitivity, and land use. In addition, the 
location must meet the physical needs (e.g., for cooling water 
supply) of the intended plant design and the business needs of 
the project sponsor (e.g., proximity to large electrical load 
centers and transmission corridors.)
    In order to receive a combined construction permit and 
operating license (COL) from the Nuclear Regulatory Commission, 
a company planning to build a new nuclear plant must 
demonstrate that the site meets all applicable standards 
necessary to protect public health and safety and the 
environment. NRC reviews, and additional reviews by State and 
local agencies, include examination of such issues as 
environmental impacts, effluent discharges, hazardous materials 
controls, water use, sewer hook ups, road use and traffic 
controls, property taxes, building codes and inspections.

    Question 2. What are the consequences if we had carbon caps 
and did not aggressively build new reactors?
    Response. Analyses by the Energy Information Administration 
(EIA), the Electric Power Research Institute (EPRI), and others 
indicate that new nuclear plants are essential to achieve 
reductions in carbon emissions from the electricity sector 
needed to meet the proposed carbon caps now under 
consideration. In one such analysis, ``The Power to Reduce 
CO2 Emissions'', EPRI concluded that 
``CO2 emissions reductions policies will create a 
cost to the U.S. economy'' (p. 4-3). The cost to the economy 
depends on whether a full portfolio of technology advancements 
and deployment can occur. These significant technology 
advancements include coal with carbon capture and 
sequestration, nuclear, renewables and aggressive end-use 
efficiency. If these technologies (including substantial 
numbers of new nuclear plants) are not deployed, the net cost 
to the nation's economy will be much greater because the 
alternative is a heavier reliance on natural gas plants.
    Increasing demand for natural gas in the electricity sector 
would put greater upward pressure on natural gas prices. 
Natural gas prices have already more than doubled in the U.S. 
since the 1990's, creating a large economic burden for 
industries like chemicals, plastics and others that use natural 
gas as a fuel and a feedstock. Not only do high natural gas 
prices affect the industrial and electrical sectors, but the 
residential sector will also see higher prices for the natural 
gas needed for heating. Relying on more natural gas for power 
generation would only exacerbate this problem.
    The EIA has analyzed several legislative proposals to 
mitigate greenhouse gas emissions. For instance, Senators 
Lieberman and McCain proposed S. 280, the Climate Stewardship 
and Innovation Act of 2007, which would establish caps on 
greenhouse gas emissions starting in 2012 with increasingly 
stringent caps in 2020, 2030 and 2050. The EIA analysis 
estimated an increase of 145 gigawatts (GW) of new nuclear 
capacity (equal to more than 100 new nuclear plants) would be 
needed by 2030 to meet the S. 280 caps.
    The EIA also analyzed a proposal by Senators Bingaman, 
Landrieu, Murkowski, Specter, Salazar, and Lugar which would 
establish annual emissions caps based on targeted reductions in 
greenhouse gas intensity, defined as emissions per dollar of 
Gross Domestic Product (GDP). This proposal is not as drastic a 
greenhouse gas reduction as proposed by Senators Lieberman and 
McCain, but still requires a 47 GW increase in new nuclear 
capacity by 2030.

    Question 3. What is the importance of providing baseload 
energy to the grid versus variable energy?
    Response. Baseload power plants--typically nuclear plants 
or coal-fired power plants--and intermittent or variable 
resources--often renewable resources ? both have their place in 
America's electric supply system.
    Baseload power plants provide the electricity required on a 
24 hour per day, 7 day per week, 365 day per year basis. 
Baseload power plants produce large amounts of electricity with 
high reliability. Their large capacity helps the electric 
transmission system adjust to normal variations in electricity 
demand (e.g., as industrial facilities ramp up and down). They 
are also typically the lowest-cost generating plants on the 
system.
    Intermittent or variable energy resources include many 
renewable energy sources, such as wind and solar. Wind farms, 
for example, typically have capacity factors in the 30--35 
percent range due in large part to the intermittent or variable 
nature of the wind. This attribute represents a challenge for 
operators of the transmission system, because they must have 
back-up resources on standby to manage the fluctuations in 
output associated with intermittent or variable resources. 
Nonetheless, the transmission system has demonstrated that it 
can manage this challenge. Renewables can and must play a 
significant role in America's electricity supply, because they 
(like nuclear power plants) are emission-free and carbon-free 
when generating electricity.
    Baseload sources of electricity (like nuclear and coal-
fired power plants) and intermittent sources like many 
renewable resources thus serve different needs. Intermittent or 
variable resources alone cannot supply the large volumes of 
around the clock electricity required by our $11 trillion, 4-
trillion-kilowatt-hour-a year economy.

    Senator Sanders. Thank you very much.
    Let me take a few minutes to ask some questions, then we 
will go to Senator Alexander and then Senator Lautenberg.
    Mr. Gabriel, thank you again very much for being with us 
today. It is generally recognized that Germany has been perhaps 
the leader in the world in moving toward solar technology and 
solar energy. Can you explain what the feed-in program is? I 
know my friend Dick Armey likes to create a whole lot of 
capitalists. My impression is that you are creating many, many 
small business people in Germany who are making money by 
selling solar energy into the system.
    Would you talk a little bit about that in particular, and 
what Germany is doing with regard to solar energy?
    Mr. Gabriel. Thank you, Mr. Chair. We not only created 
small businesses, but also some American companies came to 
Germany to produce solar wafers. In the east part of Germany we 
had some areas where we lost thousands of jobs after the 
reunification. Nobody wanted to go there, and now this is the 
area where we get thousands of new jobs, all in the solar 
industry. In Saxony-Anhalt, for example, we have around about 
2,000 new jobs and some of them, half of them are created by 
American companies.
    Senator Sanders. Are they producing photovoltaics?
    Mr. Gabriel. They are producing photovoltaics, from the 
beginning, from the wafers, up to the cells. These are big 
companies--Q-cells, for example, and some others--with United 
States owners of these companies. So what we did in the past is 
that we set a clear and stable and a long-term political 
framework for this new industry. The framework is a feed-in 
tariff which starts relatively high and then over the time of 
15 or 20 years, every year decreases.
    You can say, to be very honest, that every German adult has 
to pay by his electricity bill at the end of the month, one 
Euro per month for this feed-in tariff. You can say, OK, one 
Euro is one Euro and it is 12 Euros a year. Maybe for some 
people this is a lot of money, but we thought for creating a 
new industry, and for creating hundreds and thousands of jobs, 
it is not very much.
    Senator Sanders. Let me ask you how it works. I own a house 
in Germany, right? And I install a photovoltaic unit.
    Mr. Gabriel. And you have the right to feed in your 
produced electricity in the German grid.
    Senator Sanders. And if I produce more than I consume, I 
make money on that?
    Mr. Gabriel. Yes. You are a power producer.
    Senator Sanders. I am a power company.
    Mr. Gabriel. Yes, you are a power company and you can feed 
in your electricity in the German grid and you get money, a 
stable amount of money. But every year it goes down and 
decreases over the period of years.
    Senator Sanders. Let me ask you, how many homes in Germany 
now have these units and this arrangement and what is your hope 
for the future?
    Mr. Gabriel. Some 100,000. I don't know exactly.
    Senator Sanders. Is that a growing number?
    Mr. Gabriel. Yes, of course, of course.
    Senator Sanders. And people like that idea?
    Mr. Gabriel. People like this idea, and they like the idea 
to use the special form of renewable energy which is the best 
form for their house. Some of them use geothermal power. Some 
of them use photovoltaics. Some others use wind.
    Senator Sanders. OK, in my limited time let me go to Mr. 
Khosla. You made the point that your concern in this issue was 
not just environmental and global warming, but was very 
economic and profit-making and job growth. Could you amplify on 
that a little bit please?
    Mr. Khosla. Absolutely. I believe that even for people who 
don't believe in global warming, climate change legislation is 
warranted, mostly because it will create competitors for 
traditional energy sources. All the indications are that in the 
relatively short term, being three to 5 years, we will have 
cheaper sources of energy than oil when it comes to 
transportation, and coal-based IGCC power when it comes to 
power generation.
    So I am making strictly an economic argument by giving 
choice in the marketplace and creating competition, and frankly 
leveling the playing field. Because traditional industries have 
had huge subsidies, and in fact continue to have subsidies, 
which makes it very difficult for newcomers to compete, 
especially since they are not at scale.
    Senator Sanders. When you are talking about sustainable 
energy, what are you talking about? Solar, wind, geothermal?
    Mr. Khosla. Yes. I am mostly talking about solar and 
geothermal energy for power generation, and biofuels competing 
with oil.
    Senator Sanders. What do you see, in my remaining minute 
here, what do you see as the potential of solar? Will prices go 
down, do you believe?
    Mr. Khosla. I believe that today we can be below 10 cents a 
kilowatt hour for solar thermal, not solar photovoltaic 
technologies, which are newer technologies getting recent 
attention. At the request of Senator Alexander, in an area that 
is not friendly to solar like Tennessee, we made a computation 
of the cost of solar thermal power in Tennessee at TVA's cost 
of capital. The answer was below 6 cents a kilowatt hour.
    Senator Alexander was kind enough to spend 6 hours looking 
at the issues.
    Senator Sanders. OK. Thank you very much.
    Senator Inhofe?
    Senator Inhofe. Thank you, Mr. Chairman.
    I would have to say that Senator Alexander might be the 
only one who would spend 6 hours on such a subject. He is 
famous for that and he is a very thoughtful person.
    Let me address something to Mr. Armey. Dick, our friend 
Dingell over in the House has proposed a carbon tax, higher tax 
as a way of reducing carbon emissions, such as 50 cents per 
gallon of gasoline in tax and so forth.
    Now, I am not for that, but I am also not for a carbon tax. 
I think as I look at this, and I say, you know, recently you 
have seen such changes in the science and all this, but the one 
thing that seems to be a certainty, even though the science is 
not, is the cost of this thing. The only response I have to 
Dingell is, I think that is a more honest way of doing it. To 
me, a cap and trade thing is the way of going in the back door 
and not letting people know how much this is costing.
    What do you think?
    Mr. Armey. I have to agree with that. I mean, you could 
take the proposition as advanced by Congressman Dingell and 
take it all the way back to Arthur Cecil Pigou and the early 
research on what is called economic externalities and trespass 
against the environment that really was a consequence of the 
government's failure to define the proprietorship of the 
environment and therefore charge for its use.
    The one thing about the Dingell approach that I like is it 
simply sets the cost out there and it tells business, if you 
want to find a way to stay in business, produce for a good 
return for your investors, then innovate, create.
    What I would argue is that the history of innovation, 
invention and creation is such that the best of it has come in 
pursuit of a profit by private innovators and creators, and the 
worst of it has come from government-inspired decisionmakers. I 
happen to be, for example, a big fan of wind. I think it is a 
great opportunity. I would argue that it is only by virtue of 
government action that we do not today see cheap wind off the 
Nantucket coast. It is clearly a politically defined NIMBY 
problem of people in high places getting the government to stop 
it. So the fact of the matter is again if it were left to a 
free market, you would be generating wind energy off cape wind 
today.
    Why do we not have better nuclear? I would argue that if 
French engineers can be depended upon, American engineers can 
do the job. And yet we have government barriers to it. I would 
argue that it is because of government regulation that we have 
never fully developed the marvelous low sulfur coal resources 
we have, indeed have even put some of them in State parks while 
we continue to try, without much success, to scrub dirty coal, 
again because of government regulations.
    The market is fluid. The market encourages the genius of 
the private sector, what my daddy used to call the practical 
American genius to find the solution.
    Now, the problem with the cap and trade is the first thing 
I always ask about cap and trade, and I have a recommendation 
for this committee should you pursue cap and trade, is where do 
you make the initial allocation of the allotments? I say, give 
them to Medicare. Let Medicare peddle them to the private 
sector. We can solve another problem of a badly mismanaged 
government program's liquidity crisis.
    Where else are you going to get them? My guess is 
politicians will make decisions about who are our best friends, 
and on that basis the initial allocations of carbon allotments 
will be made, apparently politically defined distribution and 
redistribution of wealth.
    Then from that the market can probably make some allocative 
decisions. But what waste and inefficiencies will be borne from 
that in the outset is hard to measure.
    Senator Inhofe. I think you have actually answered about 
three more questions I was going to ask you. So I appreciate 
that very much.
    Mr. Winegarden, you heard what I said about it. Isn't that 
a more honest way of doing it than cap and trade? What do you 
think?
    Mr. Winegarden. It is absolutely a more honest way because 
you are putting the cost explicitly out there. You have a 
measure of the economic costs that you are imposing. What we 
would emphasize, and we have written a paper on this, is the 
importance of taxes are a negative incentive. So if we are 
going to impose a very large negative incentive on the economy, 
what we want to do is we want to offset that with a positive 
incentive by cutting marginal tax rates elsewhere so that we 
have a complete balancing out of the negative effects from the 
tax.
    Senator Inhofe. Yes. I am not sure if that is what 
Congressman Dingell has in mind.
    Let me just ask one other thing. I think we will get a 
chance to go 1 minute over here. One of the things that has 
bothered me is all these things--you know, we went 15 years up 
until about 1995 without one additional coal-fired generating 
plant. The Chinese are cranking them out about once a week.
    Now, would you buy the argument that somehow we could pass 
something that should apply to developed countries, and then 
all of a sudden because of the good example that we have set 
that China will follow. What do you think about that, Dick?
    Mr. Armey. Well, I mean, I laugh. Now, I hear a lot of 
people who complain in America that we are exporting all our 
manufacturing jobs. If we put such stiff costly environmental 
regulations in this Country that are prohibitive, we might very 
well likely see manufacturing done in China or other nations 
with lesser standards that has a greater global impact on the 
environment than what would happen had these manufacturing 
facilities been kept in this Country under a less rigorous 
standard.
    Senator Inhofe. So if we are going to export our jobs, they 
are going to be in a place where they are going to pollute more 
than if they were staying here. That is a good point.
    Thank you, Mr. Chairman.
    Senator Sanders. Thank you.
    Senator Lautenberg.
    Senator Lautenberg. Thanks very much, Mr. Chairman. I am 
sorry that I wasn't here to hear all of the testimony expertly 
given with slightly different points of view in some cases.
    One of the things is, I come out of the computer business. 
I ran a company called ADP. One of the things that we used to 
do in our search for air conditioning and better air quality 
for the staff working was to recirculate our air. When I went 
back after being here several years and saw the reduction in 
the size of the computer facility, I thought we had lost all 
our business, but in fact what had happened is the computer 
manufacturers got with the drill and got more information 
processed with a lot less requirement for heat and cooling and 
so forth.
    So Mr. Khosla, we are pleased to see you here. Some of the 
legislative proposals include a safety valve to permit 
companies to emit more than they cap if the cost to those 
companies goes above a certain price. Well, you are an 
investor. Do such provisions as a safety valve undermine the 
use of new cleaner technology? And what effect might such a 
provision have on the investment side of things?
    Mr. Khosla. Sir, I am a fan of safety valves. I do believe 
consumers deserve low prices, and I am not a huge fan of the 
German system of feed-in tariffs, which unnecessarily raises 
prices and is market-inefficient. There are technologies that 
could supply power in Germany at under 10 cents, yet solar 
power is under 10 cents, yet the feed-in tariff rates are at 40 
cents.
    So I do believe we should have something like the renewable 
popelier standard where the price of electricity goes to the 
most competitive technology. But if that price is too high, we 
should have some safety valves. It is a balancing act. Is it 
too high or too low? I first believe that no technology should 
be subsidized for more than 7 years after it is introduced in 
the marketplace. That is sufficient time for a technology to 
mature scale and get to market. Most technologies will make it 
in that timeframe.
    So really I differ from most of the panel in saying green 
technologies will succeed because they are cheaper, because 
they are subject to the same kind of innovation. I was one of 
the founders of Sun Microsystems back in 1982 and I know what 
happens to costs when you start innovating. We have gone 
through it in the telecom business. Ten years ago, I said long 
distance calls would be free. AT&T didn't believe it. They were 
sold for a song.
    There are many, many examples of costs coming down. But if 
technologies get long-term subsidies, then inefficient 
technologies will make it to market. So my answer is, we do 
need safety vales to protect consumers and industry, but in 
fact we do need legislation to get these alternatives started 
and to compete in the marketplace and create more targets.
    Today, the problem is not that cheaper technologies are not 
available, it is lack of competition. Competition will drive 
down costs.
    Senator Lautenberg. Thank you.
    Mr. Gabriel, welcome here. In Germany, you have set targets 
for carbon emission reductions. They are much stronger than the 
European Union's target. Having set a stronger target, has that 
been of help to the clean energy industry in Germany?
    Mr. Gabriel. First of all, would you allow me one remark? 
Ten years ago when we started with wind energy, everybody said 
that it would be too high, and result in a high price for 
electricity, but the electricity sector today in the field of 
renewable energy is competitive with the rest of the 
electricity sector. And 70 percent of the windmills we produce 
are going to the export.
    We think that to invest in solar for the next 7 years or 8 
years will be the next chance, the next opportunity for Germany 
to export solar and thermal technologies and photovoltaics. So 
our strategy is not only to reduce carbon dioxide, not only to 
be more independent from energy resources from Russia and other 
countries. It is also an industry strategy for the export of 
our technologies. I only want to explain that this is the 
reason why we are able to explain to our population that they 
have to pay subsidies, it is because we want to create new 
jobs.
    Your question was, whether they helped, the ambitious 
targets for our industry. Of course, we have the same struggle 
you have in your discussions with your industry. But the 
interesting thing is that yesterday the German industry 
association presented a new study made by McKinsey about the 
energy and climate targets of the German government. And what 
they said--they were our hardest strugglers in the industry--
they said that the ambitious targets of the German government 
will help the industry to become more efficient and here we are 
only discussing about 5 percent or 6 percent of our program for 
climate and energy, the majority of the issues are already 
being accepted by the industry.
    Senator Lautenberg. Thank you.
    Senator Sanders. Thank you very much, Senator Lautenberg.
    Senator Klobuchar.

         STATEMENT OF HON. AMY KLOBUCHAR, U.S SENATOR 
                  FROM THE STATE OF MINNESOTA

    Senator Klobuchar. Thank you, Mr. Chairman.
    I am from Minnesota and we have a very aggressive renewable 
energy standard for electricity: 25 percent by 2025; 30 percent 
for Xcel. It is a bipartisan effort supported by a Republican 
Governor. Because of that and our strong work in the ethanol 
area, we have just seen revitalization of a lot of our rural 
communities. I have seen it firsthand.
    My first questions were about wind energy. I think it was 
in your testimony, Mr. Khosla. You talked about how, according 
to some studies, an extra 30,000 jobs could be created in 
agriculture alone with an aggressive renewable electricity 
standard. Could you talk a little bit about where those jobs 
are coming from? I look at that only because I was in a tiny 
town in Minnesota where half the population was working at a 
wind tower manufacturing company. There was a recent article in 
The Wall Street Journal about how these wind turbines take 
8,000 parts and there are delays. Where will these jobs come 
from, and what do you think we should be doing so that these 
jobs are home-grown jobs in our own Country?
    Mr. Khosla. Senator, I can speak to both the study level 
and the individual level. At the various levels, econometric 
studies by various institutions, the Union of Concerned 
Scientists, even the NRDC and others, have proven that 
renewable energy generates twice as many jobs. The fallacy, of 
course, is in the assumptions. You can make one set of 
assumptions and come up with one answer; make another set of 
assumptions, and come up with a different answer. In fact, I 
wrote one of the first computer courses in 1977 for the School 
of Public Affairs to teach econometrics. So I am very familiar 
with the topic and the sensitivity of the assumptions.
    What I can tell you is at the specific level, when we take 
a company we have invested in, like AUSRA, and compare its job 
creation to that of coal, IGCC plants or pulverized coal 
plants, there are twice as many jobs. I haven't looked at the 
wind industry directly. When I compare somebody like Range 
Biofuels, which is producing cellulosic ethanol, to oil, for 
dollar of investment, you create far more jobs.
    So whether it is at the study level, but more important to 
me at the specific example level of replacement technologies 
for oil and coal, we see more job creation.
    But equally importantly, we will see lower prices, and 
because of that we will see larger economic growth, and that is 
where I believe the econometric models you have heard about are 
wrong. They don't assume a role for technology. That is where I 
think the discrepancy comes.
    Senator Klobuchar. Other ideas from other panelists? One of 
the things we have talked about is having the tax credit last 
for a longer time. It has been like a game of red light/green 
light. Going off and on is harder for people to invest in wind 
because of that.
    Any other thoughts from the panelists on what we can do? In 
Germany, could you talk a little bit about how you built such a 
big industry?
    Mr. Gabriel. I can only give the same answer, because of 
the feed-in tariff and the stable framework. We started with 
wind energy maybe 10 or 15 years ago. When we asked our 
economists, they said that it was impossible to get more than 4 
percent of the electricity out of the wind energy sector. ``You 
will create too high costs. It is not competitive.''
    Today, we see that it is one of the biggest parts of our 
exports. The steel industry in Germany gets a lot of incentives 
out of the wind industry. Of course, they have to produce a lot 
of windmills, but again, 70 percent of the windmills which are 
produced in Germany today, they are going to the export. The 
biggest German wind companies, they get into discussion with a 
French company who wanted to buy them, and there is also an 
Indian company who wants to buy them.
    So at the beginning, there was a stable framework where the 
investments in the industry are secure, this was the beginning 
of this success story. Today, of course the industry is 
competitive.
    Senator Klobuchar. Thank you.
    Senator Sanders. OK. Well, let me just take this 
opportunity to thank this panel for your very thoughtful 
presentation on an issue of enormous consequence. Thank you 
very much.
    OK, if we could bring up the second panel please.
    I want to thank our panelists for being here. Two panelists 
that were intending to be here are unable to be here. That is 
Paul Renfrow, who is the Vice President of Public Affairs at 
OGE Energy Corporation, and Dorothy Rothrock, who is the Vice 
President for Government Relations of California Manufacturers 
and Technology Association. Their remarks will become part of 
the record.
    [The referenced documents can be found on pages 209-213.]
    Senator Sanders. Thank you all very much for being here. 
Let's start with Daniel Kammen, who is Professor of Energy and 
Society, Professor of Public Policy in the Goldman School, 
Professor of Nuclear Energy and Director of the Renewable and 
Appropriate Energy Laboratory, University of California in 
Berkeley.
    Senator Inhofe. Mr. Chairman.
    Senator Sanders. Yes?
    Senator Inhofe. I think it might be worth mentioning, since 
there is media here, that the two that were not able to be here 
for very good reasons were both our witnesses. So it might be a 
little skewed the other direction this way.
    Senator Sanders. OK. Thank you.
    Senator Inhofe. Which is fine.
    Senator Sanders. Mr. Kammen.

 STATEMENT OF DANIEL KAMMEN, PROFESSOR OF ENERGY AND SOCIETY, 
PROFESSOR OF PUBLIC POLICY IN THE GOLDMAN SCHOOL, PROFESSOR OF 
    NUCLEAR ENGINEERING, AND DIRECTOR OF THE RENEWABLE AND 
   APPROPRIATE ENERGY LABORATORY, UNIVERSITY OF CALIFORNIA, 
                            BERKELEY

    Mr. Kammen. I thank you for the chance to speak and I 
really appreciate the opportunity to address the Committee. But 
the ground rules, as we speak right now, are going to be 
critical for shaping this green economic environment for the 
future. A key concern of mine is not how innovative our economy 
can be--it can be incredibly innovative--but it is setting the 
ground rules that we are here to discuss so that the benefits 
of a green economy can accrue across the entire socioeconomic 
spectrum.
    Several things here to note. One is that in our 2004 study 
that Vinod Khosla cited as well, called Putting Renewables to 
Work, we found that a key finding across a wide range of 
methodologies. We surveyed studies of the green economy done by 
groups that are considered left and right, libertarian, 
liberal, et cetera. They were consistent in their findings that 
there was significant job growth in the clean energy space. In 
fact, those job growth numbers were anywhere from three to ten 
times as many jobs generated in the clean tech area than in 
traditional fossil fuel areas.
    That is not an either/or, that is not that one should fully 
supplant the other, but that in growing a new industry there 
are significant opportunities to buildup that new economic 
environment by investing in the clean tech area, diversifying 
our economy, and critically bringing down the strong volatility 
in prices that we see in oil and natural gas in particular. In 
fact, if any thing affects businesses and the poor 
significantly, it is high volatility in the cost of fossil 
fuels.
    Diversifying the economy to renewables can significantly 
and positively impact that. If you look at a map of the United 
States right now, as I placed in my testimony, it is a 
patchwork. It is a mosaic of a number of States that have 
strong renewable standards--Minnesota, New Jersey, California, 
Texas, Nevada. All have very significant standards in place to 
diversify their economies. We are seeing increasing job growth 
in those areas where we have chosen to invest. The mechanism 
that the U.S. has embraced, the so-called renewable portfolio 
standard is a little bit different than the German feed-in 
tariffs, has been a critical driver for helping to solidify and 
diversify that growth.
    In fact, what we have seen out of that process is a very 
important lesson. If you look at what is taking place in 
Silicon Valley, California, in Route 128 in Boston, in the Oak 
Ridge area in Tennessee, in the Austin, Texas area, we are 
seeing clusters of green tech.
    A critical part of the process has been to let 
entrepreneurs and elected officials, municipalities, citizens 
groups, all work together to find the best ways to diversify 
the economy. That has been a strong driver toward getting low 
cost clean energy systems in place, and to learn. These groups 
learn from each other. Entrepreneurs, business installers all 
need that environment where the lessons are passed back and 
forth. The more that we support those clusters by developing 
the right sorts of tax incentives, by getting expertise in 
public office, and in the hands of entrepreneurs has been a 
critical part of the process.
    So in my testimony, I highlight the job growth expected in 
those States that have adopted these renewable standards and 
looked at what we think will happen if we move this toward the 
Federal level. The standard number being discussed right now is 
roughly a 20 percent renewable obligation at the Federal level. 
That is estimated to produce hundreds of thousands, if not 
millions of new jobs. That is just jobs in the growth of the 
green part of the economy, the new green techs: solar, wind, 
biofuels. When you also look at what we expect from the growth 
in energy efficiency, it is an even larger number.
    Again, the critical part of the process, whether you are 
doing this because of concerns about global warming or business 
diversity, is that the larger the renewable energy sector 
becomes, the more strength we will have against the price 
fluctuations that we have seen in natural gas and oil. So it is 
a major driver of action. In fact, Nevada and a number of 
States have looked at that and have seen those benefits, and 
have observed the price stability that you get in the process.
    Areas of economic growth that are untouched in this area 
right now are plug-in hybrid vehicles, areas to make batteries 
better, areas to make the grid smarter by diversifying and 
essentially making our grid based around the smart technology 
in our cell phones, not the old technology that we have in our 
rotary meters, to allow individuals and businesses and cities 
to sell power back and forth, to again make our economy more 
diverse and strengthened on an economic front as it becomes 
greener.
    A critical thing that California has done is to work 
through a low carbon fuel standard that I am very pleased to 
have been one of the authors of. That essentially sets a carbon 
content of fuels and allows us to legislate that number down 
and to let the market then find out what combination of greener 
biofuels, cellulosic fuels, plug-in hybrid vehicles, or mass 
transit help to meet those needs.
    So a critical aspect for this Committee to do is to find 
and standardize those rules and to do what we can to make sure 
that those job benefits, those green jobs, are not just white 
collar jobs, but are blue collar, so-called green collar jobs, 
as the testimony from Van Jones highlights. These are all areas 
where this strengthening of the economy can be broadly seen by 
all Americans, and not just by the top.
    Thank you very much for the chance to speak today.
    [The prepared statement of Mr. Kammen follows:]

Daniel M. Kammen, Professor of Energy and Society, Professor of Public 
 Policy in the Goldman School of Public Policy in the Goldman School, 
 Professor of Nuclear Engineering, and Directory of the Renewable and 
   Appropriate Energy Laboratory, University of California, Berkeley


                         introduction & summary


    Chairman Barbara Boxer, Senator Barrie Sanders, Hearing 
Chair, and other members of the Senate Environment and Public 
Works Committee, I appreciate your invitation to appear before 
you today. I am particularly appreciative your inspiring 
efforts to develop a comprehensive approach to environmental 
quality, human health protection, and economic development for 
the Nation. I am grateful for the opportunity today to speak 
with you on the energy, climate, and security issues that face 
our nation and the planet.
    In this testimony I highlight the key finding that while a 
continuation of business as usual energy choices will result in 
socially, politically, and environmentally costly and 
destructive climate change, the motivation to invest in 
solutions to climate change can be simply that a green economy 
can also be exceedingly vibrant. In fact, an economy built 
around a suite of low-carbon technologies can be resistant to 
price shocks as well as secure against supply disruptions as 
well as inclusive of diverse socioeconomic groups. A new wave 
of job growth ? both `high technology' and ones that transform 
`blue collar labor' into `green collar' opportunities. The 
combination of economic competitiveness and environmental 
protection is a clear result from a systematic approach to 
investing in climate solutions.
    Clean energy systems and energy efficiency investments also 
contribute directly to energy security and to domestic job 
growth versus off-shore migration. Renewable energy systems are 
more often local than imported due to the weight of biomass 
resources and the need for operations and maintenance.
    A growing number of state, regional, and national economies 
are assuming leadership positions for a clean, low carbon, 
energy economy. These `early actors' are reaping the economic 
benefits of their actions. Among the global leaders are Brazil, 
Denmark, Iceland Germany, Japan, Spain, all of which have made 
significant commitments to a green economy, and all are seeing 
job growth and rapidly expanding export opportunities. In the 
United States several states have embarked on significant 
climate protection efforts, and half of U. S. states have taken 
the vital step of adopting minimum levels of renewable energy 
requirements.
    On the vitally important issue of transportation a set of 
European nations have followed the lead of California, Illinois 
and other U. S. states in adopting a Low Carbon Fuel Standard 
(Kammen, 2007). The goal of a Low Carbon Fuel Standard is to 
reduce the greenhouse impact of fossil fuel emissions, and to 
begin to move toward a diverse set of economically and 
environmentally sustainable transportation choices.


            job growth in a green economy--empirical lessons


    Expanding the use of renewable energy is not only good for 
our energy self-sufficiency and the environment; it also has a 
significant positive impact on employment. My students and I 
have examined the observed job growth in a number of technology 
sectors (Kammen, Kapadia and Fripp, 2004).
    We reviewed 13 independent reports and studies that 
analyzed the economic and employment impacts of the clean 
energy industry in the United States and Europe. These studies 
employ a wide range of methods, which adds credence to the 
findings. In addition to reviewing and comparing these studies, 
we have examined the assumptions used in each case, and 
developed a job creation model which shows their implications 
for employment under several future energy scenarios.


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                  economic benefits--focus on biofuels


    Forecasts of job creation can, in fact be far higher. A 
recent U. S. Department of Energy report Breaking the barriers 
to cellulosic ethanol concluded that:

    A biofuel industry would create jobs and ensure growing 
energy supplies to support national and global prosperity. In 
2004, the ethanol industry created 147,000 jobs in all sectors 
of the economy and provided more than $2 billion of additional 
tax revenue to Federal, state, and local governments (RFA 
2005). Conservative projections of future growth estimate the 
addition of 10,000 to 20,000 jobs for every billion gallons of 
ethanol production (Petrulis 1993). In 2005 the United States 
spent more than $250 billion on oil imports, and the total 
trade deficit has grown to more than $725 billion (U.S. 
Commerce Dept. 2006). Oil imports, which make up 35 percent of 
the total, could rise to 70 percent over the next 20 years 
(Ethanol Across America 2005). Among national economic 
benefits, a biofuel industry could revitalize struggling rural 
economies. Bioenergy crops and agricultural residues can 
provide farmers with an important new source of revenue and 
reduce reliance on government funds for agricultural support. 
An economic analysis jointly sponsored by USDA and DOE found 
that the conversion of some cropland to bioenergy crops could 
raise depressed traditional crop prices by up to 14 percent. 
Higher prices for traditional crops and new revenue from 
bioenergy crops could increase net farm income by $6 billion 
annually (De La Torre Ugarte 2003).


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    A key result emerges from our work, and can be seen in 
Table 1. Across a broad range of scenarios, the renewable 
energy sector generates more jobs than the fossil fuel-based 
energy sector per unit of energy delivered (i.e., per average 
megawatt). In addition, we find that supporting renewables 
within a comprehensive and coordinated energy policy that also 
supports energy efficiency and sustainable transportation will 
yield far greater employment benefits than supporting one or 
two of these sectors separately. Further, generating local 
employment ? including that in inner-cities, rural communities, 
and in areas in need of economic stimulus--through the 
deployment of local and sustainable energy technologies is an 
important and underutilized way to enhance national security 
and international stability. Conversely, we find that the 
employment rate in fossil fuel-related industries has been 
declining steadily for reasons that have little to do with 
environmental regulation.
    The U.S. Government Accounting Office conducted its own 
study of the job creation potential of a clean energy economy 
(GAO, 2004). While focusing on rural employment and income they 
found that:

    . . . a farmer who leases land for a wind project can 
expect to receive $2,000 to $5,000 per turbine per year in 
lease payments. In addition, large wind power projects in some 
of the nation's poorest rural counties have added much needed 
tax revenues and employment opportunities.


           moving to federal action--a green jobs/renewable 
                            energy portfolio


    Twenty-three states and the District of Columbia have now 
enacted Renewable Energy Portfolio Standards, which each call 
for a specific percentage of electricity generated to come from 
renewable energy. Federal legislation should, at minimum, 
solidify State action with Federal support. A great deal would 
be achieved if Congress took the logical step and instituted a 
Federal standard. A 20 percent Federal RPS enacted today and 
required by 2020 is reasonable and achievable.


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    Figure 2. Map of States with Renewable Energy Portfolio 
Standards As of January 2007, 23 states and the District of 
Columbia have enacted or voted to adopt renewable energy 
standards. These plans represent a diversity of approaches and 
levels, but each reflect a commitment to clean and secure 
energy that could be emulated at the Federal level. In addition 
13 states have specific measures to increase the amount of 
solar photovoltaic power in use. These range from specific 
solar energy targets, to double (MD) or up to triple credit 
(DE, MN, & NV) for solar.


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    It is clear that developing a clean energy economy is not 
only good for the environment, but it is good for job creation 
as well.


                            recommendations


    There are a number of measures that the committee should 
consider, and the Nation as a whole would be well-served to 
include in a clearly articulated plan for the development of a 
national energy vision and green jobs strategy. These include:


 raise clean energy research, development, and deployment spending to 
                           reasonable levels


    The U. S. has under-invested in energy research, 
development, and deployment for decades (Kammen and Nemet, 
2005), and sadly the fiscal year budget request is no 
exception. Federal energy research and development investment 
is today back at pre-OPEC levels ? despite a panoply of reasons 
why energy dependence and in-security, and climatic impact from 
our energy economy are dominating local economics, geopolitics, 
and environmental degradation.
    At $2.7 billion, the overall energy RD&D fiscal year 
request is $685 million higher than the fiscal year 
appropriated budget. Half of that increased request is 
accounted for by increases in fission, and the rest is in 
moderate increases in funding for biofuels, solar, FutureGen, 
and $147 million increase for fusion research. However, the 
National Renewable Energy Laboratory's (NREL) budget is to be 
cut precisely at a time when concerns over energy security and 
climate change are at their highest level, and level of need. 
The fact that a plan exists to cut assistance to low-income 
families by 41 percent from fiscal year levels for 
weatherization to improve the energy efficiency of their homes 
is startling.
    The larger issue, however, is that as a nation we invest 
less in energy research, development, and deployment than do a 
few large biotechnology firms in their own, private R&D 
budgets. This is unacceptable on many fronts. The least of 
which is that we know that investments in energy research pay 
off at both the national and private sector levels.
    In a series of papers (Margolis and Kammen, 1999; Kammen 
and Nemet, 2005) my students and I have documented a disturbing 
trend away from investment in energy technology--both by the 
Federal Government and the private sector, which largely 
follows the Federal lead. The U.S. invests about $1 billion 
less in energy R&D today than it did a decade ago. This trend 
is remarkable, first because the levels in the mid-1990's had 
already been identified as dangerously low, and second because, 
as our analysis indicates, the decline is pervasive--across 
almost every energy technology category, in both the public and 
private sectors, and at multiple stages in the innovation 
process. In each of these areas investment has been either been 
stagnant or declining. Moreover, the decline in investment in 
energy has occurred while overall U.S. R&D has grown by 6 
percent per year, and Federal R&D investments in health and 
defense have grown by 10 to 15 percent per year, respectively.
    One of the clearest findings from tracking actual 
investment histories, is that there is a direct and strong 
correlation between investment in innovation and demonstrated 
changes in performance and cost of technologies available in 
the market.


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    Figure 4. The history of declining energy R&D investment by 
both public and private sectors

    Source: Kammen and Nemet (2005) Issues in Science and 
Technology.
    In the case of solar photovoltaics, a 50 percent increase 
in PV efficiency occurred immediately after unprecedented $1 
billion global investment in PV R&D (1978-85). From there, we 
observed significant efficiency improvements, which accounts 
for fully 30 percent of the cost reductions in PV over the past 
two decades. (Increased plant size, also related to the 
economic viability of PV accounts for the largest segment, 40 
percent of the cost decline over the same period of time.)


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    The U.S. experience is not at all unique. A world-leading 
solar energy program was initiated in Japan almost 20 years 
ago. The results have been dramatic.
    The Japanese program integrated both research and 
development efforts. The result of the Japanese program was 
striking: the cost of installed solar PV systems fell by over 8 
percent per year for a decade. A smaller effort in California, 
but without significant R&D spending, resulted in one-half that 
level of innovation and cost improvement. California has now 
embarked on a much larger (10 years, $320 million/year) 
commercialization
    The case of solar photovoltaics is not at all unique. By 
looking at individual energy technologies, we have found that 
in case after case, R&D investment spurs invention and job 
creation. In a set of recent reports we (Kammen and Nemet, 
2005) report on the strong correlation between investment and 
innovation and job creation for the solar, wind, biomas, and 
nuclear industries.
    We also see steady cost declines in solar and wind 
technologies, although the bulk of the manufacturing for each 
technology has been outside the U. S. for many years.


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   provide research support jointly to the departments of energy and 
agriculture, and the environmental protection agency to study a federal 
                        low carbon fuel standard


    The recent explosion of interest in biofuels, including 
ethanol and biodiesel, has been a major advance in diversifying 
our transportation fuels markets. On January 27, 2006, our 
research group at the University of California, Berkeley, 
published a paper in Science, the magazine of the American 
Association for the Advancement of Science, and an accompanying 
website (http://rael.berkeley.edu/ebamm) that provided a 
calculator to compare the greenhouse gas benefits of ethanol 
derived from a range of input biofuels, and produced in 
distilleries powered by different fuels (e.g. coal, natural, 
gas, or through the use of renewables).
    The conclusion of that work was simple: not all biofuels 
are created equal in terms of their carbon content. The next 
logical step was to rank, and then regulate fuels, based on 
their carbon content.
    In January 2007 California Governor Arnold Schwarzenegger 
signed Executive Order 1-07 to establish a greenhouse gas 
standard for fuels sold in the state. The new Low Carbon Fuel 
Standard (LCFS) requires a 10 percent decrease in the carbon 
intensity of California's transportation fuels by 2020. The 
State expects the standard to more than triple the size of the 
state's renewable fuels market while placing an additional 
seven million hybrid and alternative fuel vehicles on the road. 
The standard will help the State meet its greenhouse gas 
reduction goals set by State Assembly Bill 32, which the 
Governor signed last year.
    On February 21, 2007 California Governor Schwarzenegger and 
Senator McCain called for a Federal LCFS. An important piece of 
the LCFS should be the inclusion of electricity as a fuel to 
support the development and use of plug-in hybrid vehicles in 
areas where the average grid power is sufficiently low-carbon 
to result in a net reduction in greenhouse gas emissions. A low 
carbon fuel standard will promote the development of at least 
two important industries: a sustainable biofuels sector; and 
the evolution of the plug-in hybrid sector. Both of these are 
area of potentially strong and sustained job growth. At 
present, however, Detroit automakers have expressed concerns 
about the job benefits of a clean energy economy. A study 
conducted by the University of Michigan found, in fact, that 
job losses could occur if Detroit does not become more 
innovative and competitive. Integration of bioenergy/ethanol 
resources and work to develop the commercially successful plug-
in hybrid industries could both become major areas of new job 
growth.
    Significantly, bioenergy work--agriculture and distilling ? 
and battery construction and vehicle construction are areas 
where high wages can be expected.
    Build Jobs Across Socioeconomic Groups--the Green Jobs 
Program in the U. S. and Overseas
    Green jobs can accrue across the entire economy, from 
laboratory research and development positions, to traditionally 
unionized work in plumbing, electrical wiring, and civil 
engineering. The Green Jobs Act (initially Solis and Tierny, 
H.R. 2847, now part of the H.R. 3221, the Renewable Energy and 
Energy Conservation Act of 2007) invests in worker training and 
career opportunities for low-income Americans, and could be the 
model for expanded job access and development efforts.
    In addition to supporting domestic job creation, clean 
energy is an important and fastest growing international 
sector, and one where overseas policy can be used to support 
poor developing regions ? such as Africa (Jacobsen and Kammen, 
2007) and Central America ? as well as regaining market share 
in solar, fuel cell and wind technologies, where European 
nations and Japan have invested heavily and are reaping the 
benefits of month to year backlogs in clean energy orders. Some 
of those orders are for U.S. installations.


                   brief biography--daniel m. kammen


    I hold the Class of 1935 Distinguished Chair in Energy at 
the University of California, Berkeley, where I am a professor 
in the Energy and Resources Group, the Goldman School of Public 
Policy, and the Department of Nuclear Engineering. I am the 
founding director of the Renewable and Appropriate Energy 
Laboratory (http://rael.berkeley.edu), an interdisciplinary 
research unit that explores a diverse set of energy 
technologies through scientific, engineering, economic and 
policy issues. I am also the Co-Director of the University of 
California, Berkeley Institute of the Environment. I have 
served on the Intergovernmental Panel on Climate Change (IPCC), 
and have testified before both U.S. House and Senate Committees 
on the science of regional and global climate change, and on 
the technical and economic status and the potential of a wide 
range of energy systems, notably renewable and energy 
efficiency technologies for use in both developed and 
developing nations. I am the author of over 200 research 
papers, and five books, most of which can be found online at 
http://rael.berkeley.edu
    In July of last year the Honorable R. John Efford, the then 
Minister of Natural Resources Canada, announced my appointment, 
as the only U. S. citizen, to serve on the Canadian National 
Advisory Panel on the Sustainable Energy Science and Technology 
(S&T) Strategy.
    Recently I played a leadership role in developing and now 
in managing the successful $500 million Energy Biosciences 
Institute award from BP.


                            acknowledgments


    This work was supported by a grant from the Energy 
Foundation, the Karsten Family Foundation endowment of the 
Renewable and Appropriate Energy Laboratory, and the support of 
the University of California Class of 1935.I am delighted to 
thank John Stanley and Joe Kantner, graduate students in the 
Energy and Resources Group at UC Berkeley for their assistance 
in developing this testimony.

    Senator Sanders. Thank you very much.
    Dr. Kenneth Green is a Resident Scholar with the American 
Enterprise Institute for Public Policy Research. Thanks very 
much for being here.

     STATEMENT OF KENNETH GREEN, VISITING FELLOW, AMERICAN 
        ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH

    Mr. Green. Good afternoon, Senator Sanders, Senator Inhofe, 
members of the Committee. I would like to thank you for 
inviting me to speak to you today.
    Before I get to today's topic, I think a few words about my 
background and core beliefs regarding global warming may be in 
order and help to understand everything in context.
    As an environmental scientist by training, I have studied 
the data myself, including reading the IPCC reports, several of 
them in their entirety as a reviewer. I am convinced the 
climate has indeed warmed since about the 1850's. I believe 
that human greenhouse gas emissions have caused and will cause 
some degree of that warming. Exactly how much is still a matter 
of active inquiry. I believe extensive warming could well pose 
significant risks to future generations.
    By philosophy, I am a classical liberal, so I actually 
believe the government has a responsibility to protect people 
from harming each other through the environment, and to protect 
environments held in common for the people. So I think it is 
perfectly fit that Congress be taking up this important 
subject.
    Finally, as an environmental policy analyst who has worked 
with economists for about 15 years, I have tended to argue in 
favor of adaptation mostly in the past, but as our 
understanding of climate change and the public policy 
discussion has matured, I recently embraced the idea of 
mitigating greenhouse gas emissions with a modest revenue 
neutral carbon tax as being the most efficient option and 
superior policy approach to achieving that goal.
    I submitted a recent article on this subject for the 
record, published as an AEI Environmental Policy Outlook called 
Carbon Tax versus Trade, and I recommend that to you.
    Now, to the question of the day: Do global warming 
initiatives create new green jobs? This is a fringe benefit of 
my surname that I am constantly mentioned in environmental 
discussions. I thank my father for that, and his father before 
him.
    The answer, I would say is that global warming initiatives 
can create some jobs, but only at the expense of other jobs. 
Further, I would suggest the end result would be less new jobs 
on net, less economic growth, and most likely the loss of 
existing capital as a byproduct.
    The question of government job creation actually has been 
debated since the 1850's, at least when Frederic Bastiat, a 
French journalist and politician wrote, What is Seen and What 
is Not Seen, an essay in which he refutes the fallacy that 
somehow one can turn a public bad such as breaking a window 
into a public good by claiming it creates jobs for glaziers or 
glassmakers.
    The analogy holds just as well when the government is the 
one that breaks the window of a company selling goods and 
services into the market and favors another company selling a 
different good into the market. Let's put this in global 
warming context and be a bit more specific.
    Assume the Congress bans the sale of incandescent light 
bulbs, and approach favored by many regulatory advocates, and a 
part of the energy bill that has been considered recently. As 
Bastiat would ask, what is seen, of course, will be the 
creation of new jobs making fluorescent light bulbs. It is 
inarguable. If you are going to replace everything with 
fluorescents, you will make new jobs. What is not seen is the 
loss of jobs in the incandescent bulb sector and in face the 
consequences of being successful. If you are really successful 
and you have fluorescent bulbs that use less energy, the energy 
sector will have to produce less energy, there will be less 
bulbs used because they last longer, therefore less will be 
shipped, less will be packaged, less will be disposed of and 
handled and sold. There will be a general downturn in jobs, in 
accordance. That is what will not be seen.
    If you raise CAFE standards, what will be seen is indeed 
more high fuel economy small cars. It is inarguable. What will 
not be seen are the lost jobs making the larger vehicles, sport 
utility vehicles, the supply and the energy that goes into 
them, the profits that come from such high-end vehicles, the 
mid-range vehicles which become unprofitable in terms of their 
mileage. This is, by the way, what happened to the station 
wagon we grew up with, when the CAFE standards the first time 
around made that market niche virtually unprofitable for 
automakers and they ceased making them. That also opened the 
door for sport utility vehicles and minivans which now are an 
environmental problem.
    Finally, let's look at the question of cap and trade. Would 
cap and trade create jobs if it is successful? By definition 
the only thing that is going to reduce carbon emissions is 
higher energy prices. That is what a carbon tax does and that 
is what cap and trade does, simply in an inefficient way 
compared to a carbon tax. If that happens, the cost of goods 
and services goes up. If costs go up, demand goes down, 
competitiveness goes down, and productivity and jobs will be 
not seen. A lot of jobs will be lost and they will not be seen.
    Bastiat made this analogy in the 1850's and he made it very 
well, in which he pointed out that at first blush we see a 
broken window as bad. Someone comes along and says, well, no, 
it is not really that bad because after all it makes work for 
the glaziers. That is true, but the person who had the whole 
window in the first place is now out the cost of a new window 
and out the business opportunity that would have come with that 
cost, and society as a whole is poorer. That will be the case 
with global warming initiatives, just the same as with 
Bastiat's broken windows.
    I, of course, will be glad to take your questions. Thank 
you for having me here today.
    [The prepared statement of Mr. Green follows:]

    Statement of Kenneth Green Visiting Fellow, American Enterprise 
                 Institution for Public Policy Research

    Good afternoon, Senator Boxer, Senator Inhofe, Members of 
the Committee ? thank you for inviting me to speak today on a 
very interesting question: whether or not governmental 
activities ? in this case, global warming initiatives, create 
jobs. The question of government job creation has been debated 
since at least the 1850's, when Frederic Bastiat, a French 
journalist and politician wrote ``What is Seen, and What is Not 
Seen,'' an essay that is, or certainly should be required 
reading for anyone interested in economics and government.
    But before I get to today's topic, I would like to say a 
few words about my background and core beliefs regarding global 
warming policy so my comments can be understood in proper 
context.
    As an environmental scientist by training, my reading of 
the scientific literature (including the synthesis reports of 
the United Nations Intergovernmental Panel on Climate Change) 
has persuaded me that we have observed a real warming of the 
climate since measurements started in the 1850's. Further, I 
believe that the basic physics and chemistry of our planet and 
its atmosphere make it highly likely that humanity's addition 
of greenhouse gases to the atmosphere has caused, and will 
cause some degree of warming of the climate. How much is still 
a matter of active inquiry. And I believe if warming turns out 
to be extensive, it could well pose significant risks to future 
generations.
    As a classical liberal, I believe that government has an 
obligation to prevent people from harming each other via 
environmental contamination, as well as an obligation to 
protect the health of environmental resources held in common 
for the public by Federal, state, and local governments. So 
yes, I think it appropriate that the government considers how 
it might best address the potential harms of global warming.
    Finally as an environmental policy analyst by avocation, I 
have argued that while we should focus mostly on adaptation, 
the most efficient policy to mitigate the risk of manmade 
climate change would be a modest, revenue-neutral carbon tax. 
I'll be glad to discuss any of that during the question period, 
and would like to submit to the record a recent article I co-
authored on the question of a carbon tax for AEI, entitled 
``Climate Change: Caps vs. Taxes.''
    Now, to the question of the day: do global warming 
initiatives ``create'' ``new green'' jobs? The short answer, I 
would say, is that they might do so, but only at the expense of 
other jobs that would otherwise have been produced by the free 
market. Further, I'd suggest that the end result would be 
significantly less jobs on net, less overall economic growth on 
net, and most likely, the loss of existing capital as a by-
product.
    The fallacious idea that one can make jobs by destroying 
others is a variation of Bastiat's Broken Window fallacy. As 
Bastiat explained, imagine some shopkeepers get their windows 
broken by a rock-throwing child. At first, people sympathize 
with the shopkeepers, until someone suggests that the broken 
windows really aren't that bad. After all, they ``create work'' 
for the glazier, who might buy food, benefiting the grocer, or 
clothes, benefiting the tailor. If enough windows are broken, 
the glazier might even hire an assistant, creating a new job.
    Did the child then do a public service by breaking the 
windows? Would it be good public policy to simply break windows 
at random? No, because what's not seen in this scenario is what 
the shopkeepers would have done with the money that they've had 
to use to fix their windows. If they hadn't needed to fix the 
windows, the shopkeepers would have put the money to work in 
their shops, buying more stock from their suppliers, or perhaps 
adding a coffee-bar, or hiring new stock-people.
    Before the child's action, the shopkeepers had the economic 
value of their windows and the money to hire a new assistant or 
buy more goods. After the child's action, the shopkeepers have 
their new windows but no new assistant or new goods, and 
society, as a whole, has lost the value of the old set of 
windows.
    The analogy holds just as well when it is the government 
that comes, and by regulatory fiat ``breaks the window'' of a 
company successfully goods and services into a free market. 
When the government establishes a regulation favoring product A 
over product B, what is seen is the new sales of product A, and 
the jobs associated with such sales.
    What is not seen is the lost sales of product B, and the 
lost jobs that go with it. Because the market is superior at 
efficiently identifying and providing what people want than are 
planners, it is virtually certain that the lost jobs in any 
regulatory scenario will outnumber the created jobs in a 
regulatory scenario.
    Let's put this in a global warming context. Assume that 
Congress bans the sale of incandescent light bulbs, an approach 
some regulatory advocates favor for reducing greenhouse gases. 
Has Congress then ``created'' new jobs making fluorescent light 
bulbs?
    Certainly, some jobs will be made in the fluorescent bulb 
industry. That, as Bastiat would say, is what is seen as a 
result of the action. What is not seen? First, one will have 
eradicated the jobs making incandescent bulbs. But that is only 
the beginning: after all, the very reason fluorescent light 
bulbs are theoretically desirable is that they use less energy, 
and last longer, using fewer materials. Thus, there will be 
less of them made, less of them shipped, less of them packaged, 
and less of them disposed of, and jobs in all of those areas 
will be reduced, not increased. True, some jobs will remain, 
but there will be less of them, and they won't necessarily be 
the same jobs, or jobs in the same part of the country, or, 
necessarily, even jobs in the same country.
    Or let's consider raising CAFE standards. This is another 
popular regulatory approach to control greenhouse gas 
emissions. Would raising CAFE standards make ``new green 
jobs''?
    Let's examine what happens under new CAFE standards. In 
essence, automakers are required to sell more low-profit 
compact/fuel-efficient cars, and less high-profit luxury cars 
and SUVs. Thus, the first effect is to terminate jobs in the 
more-profitable luxury car market, some of which will be 
replaced by jobs in the lower-profit fuel-efficient vehicle 
market. But again, that is only the beginning of the losses. To 
offset the loss of profit, the automakers will have to raise 
costs on luxury cars somewhat (reducing sales on net, but 
increasing profit per sale) or terminate lines of little 
profitability, even if they are popular. This is what the first 
CAFE standards did to the station wagon, paving the way for 
SUVs and mini-vans. And again, the purpose of the exercise is 
to reduce gasoline use, and hence, jobs in the gasoline 
production and distribution pipeline.
    So what is unseen? Fewer vehicles sold over all, with 
industry wide job losses, additional losses of jobs producing 
SUVs, loss of jobs producing mid-range vehicles of limited 
profit potential, loss of jobs in the gasoline sector, and so 
on. Congress can throw subsidies at hybrids and such to try to 
stimulate sales and thus offset some of the harm but they must 
take money away from some other business in order to do it.
    Finally, let's consider the poster-child of global warming 
initiatives, cap-and-trade. Would enacting a cap-and-trade 
scheme create more green jobs, on net, than the non-green jobs 
it would extinguish?
    The first thing to consider is what the effect of capping 
carbon emissions will be: higher prices for energy, a 
fundamental input to production and to the provision of 
services across the entire economy. This is, actually, the 
entire point of the enterprise, since the only way to suppress 
greenhouse gas emissions is to raise energy prices.
    What do we know from the law of supply and demand? Higher 
energy prices will lead to reduced sales of goods and services, 
on net. Thus, lost jobs in energy-intensive sectors of the 
economy will be seen first, and job losses on those who use the 
product of such goods will follow. That's a rather large 
component of the economy, since energy is a primary input to 
pretty much all goods and services in the market today.
    Will some green jobs be created? Certainly, at least among 
government credit auditors, market regulators, and among 
brokers arranging carbon trades. Since technologies to reduce 
carbon emissions from fossil fuel burning do not actually 
exist, one can't argue that new jobs will appear in the carbon-
dioxide catalytic converter sector, or the carbon dioxide bag-
house producers. Carbon emission reductions come only by 
turning down output, or increasing efficiency, which raises 
costs. Nor can one argue that sequestration, whether 
agricultural or otherwise will produce jobs, because the entire 
idea is to stick something carbonaceous in the ground and leave 
it there.
    In conclusion, it has been my privilege to speak to you 
today about whether or not climate change initiatives can 
create new, green jobs. It seems obvious to me that the answer 
is no. I hope you'll hold another hearing soon to discuss 
whether or not a revenue-neutral carbon tax could avoid the 
pitfalls of other global warming initiatives, so that I can 
come back with a happy story to tell, rather than one of such 
negativity.
    I will, of course, be glad to take your questions.
                                ------                                


 Responses by Kenneth Green to Additional Questions from Senator Inhofe

    Question 1. Does it make sense to devote enormous economic 
resources toward reducing greenhouse gas emissions as compared 
to other possible activities such as eradication of disease or 
clean drinking water?
    Response. This question actually subsumes two separate 
questions. The first subsumed question is ``does it make 
economic sense to spend money first on mitigating distant, 
uncertain risks of potentially high cost versus spending money 
to mitigate better known, more proximal risks, such as the 
control of water borne illness.'' The second subsumed question 
is ``does it make political sense to do so.''
    I would argue that it does not make economic sense to 
devote enormous economic resources toward reducing greenhouse 
gas (GHG) emissions at the expense of mitigating better known 
risks that either exist now, or will exist on short time-
horizons. This argument was made exceptionally clear by the 
Copenhagen Consensus project led by Bj rn Lomborg in 2004, in 
which a group of leading economists from around the world 
(including several Nobel laureates) were brought together to 
prioritize where resources should be focused from a standpoint 
of getting the best economic return on investment: that is, the 
most risk averted at the least cost. What emerged from that 
process was the consensus that mitigating climate change was 
too costly, and benefits too uncertain, to rank as a good 
investment compared to a number of other investments, such as 
disease control; ending malnutrition; trade liberalization; 
clean drinking water; adequate sanitation; and so forth. 
Investments in climate change mitigation came in last on the 
list of priorities determined through the Copenhagen Consensus.
    Whether it makes political sense is a separate question. A 
large segment of the electorate has become convinced that 
global warming is the largest crisis humanity will face, and 
studies show that our children now live in fear for their 
future, due to unrelenting waves of alarmist climate change 
projections. To a great extent, the question of climate policy 
has become a values issue, a political issue, and even a moral/
religious issue far more than a scientific or economic issue. 
Only our nation's politicians can make the calculation about 
whether it makes political sense to pander to what are likely 
exaggerated fears based on faulty computer models of future 
climate and risk the wrath of voters who are denied the 
opportunity to ``feel good'' by seeing money spent on climate 
change, whether that spending does any good or not; whether 
that spending is actually to their own detriment on net; and 
whether that spending is at the expense of efforts to stop 
suffering through more prosaic means in the world today.

    Question 2. Which is more damaging economically, a carbon 
cap, or a carbon tax?
    Response. While both a carbon cap and a carbon tax would 
raise energy prices, a carbon cap would almost certainly be far 
more economically damaging than a revenue-neutral carbon tax 
(there would be little difference between the two approaches if 
the carbon tax raised were not revenue neutral). I would refer 
you to an AEI Environmental Policy outlook I co-authored with 
two colleagues in June 07 that considers this question 
at length, which was submitted to the original record of the 
hearing on September 25, 2007.
    Both theory and practice tell us that cap-and-trade would:

     Be generally ineffective at reducing GHG emissions (as 
we've seen in Europe)
     Increase energy prices
     Increase prices of goods and services
     Increase energy price volatility
     Be highly prone to fraud ? all parties have incentive to 
cheat and look-aside
     Be largely opaque to validation (particularly 
internationally)
     Be massively redistributionist & regressive
     Be negated by safety-valves if effective
     Create massive new national (and international 
bureaucracies)
     Self-entrenching
     Self-tightening; and importantly
     Irreversible ? Ending the program would mean buying out 
permit holders
     Create no revenue for enforcement or to offset economic 
damage
    --Auctioning, the favored answer to this has never, and 
will never happen in a meaningful way.
    A revenue neutral carbon tax, by contrast, would:

     Be generally effective at reducing GHG emissions
     Increase energy prices
     Increase prices of goods and services
     Create incentives for energy conservation throughout the 
economy
     Create incentives for entrepreneurialism
     Price stabilizing
     Be less redistributionist
     Be less prone to corruption (Gov't has incentive to 
enforce)
     Use existing collection mechanisms
     Allow regulatory streamlining: a vast number of existing 
regulations become redundant with a carbon tax, and most 
important
     Create a revenue stream to offset economic damage
     Be adjustable: tax reform happens on election cycles ? 
compare that with Kyoto.
     We modeled that a tax of $15.00 per ton of CO2 emitted 
would:

    --Increase the price of coal by 83 percent
    --Increase the price of oil by 11 percent
    --Increase the price of natural gas by 9.6 percent; and
    --Add about $0.14 to a gallon of gasoline
    --Raise about $80billion annually
    --Could be used to reduce income taxes by 13 percent or
    --Could be used to reduce corporate taxes by 29 percent, or
    --Could be used to reduce payroll taxes by 10 percent

    In virtually all respects, a revenue-neutral carbon tax is 
a superior policy to carbon cap-and-trade.

    Question 3. With environmentalists opposing coal, nuclear, 
hydroelectric dams, natural gas, and often wind farms, can you 
discuss what the effects of constraining energy would be?
    Response. Energy (along with capital and labor) is a 
fundamental input into our economy, and, the costs of energy 
are reflected in all of the goods and services we produce.
    The fundamental economic law of supply and demand tells us 
unequivocally that driving up the price of energy would drive 
up energy prices, reduce demand, and thus constrain economic 
growth. This would be true regardless of the exact mechanism 
that constrains energy use, be it higher prices, supply 
restrictions, use restrictions based on GHG output, or so 
forth. This theoretical relationship is supported by a number 
of studies which have shown that energy consumption and GDP 
growth are co-dependent: that is, reducing one invariably 
reduces the other.
    Higher energy prices would in turn result in higher costs 
for goods and services domestically, which would reduce 
consumption, slowing economic growth still further. Higher 
energy prices would also result in higher priced goods and 
services in the export market, leading to reduced 
competitiveness internationally, as well as increased 
outsourcing as labor and capital seek areas with less expensive 
energy in which they can be more competitive.

    Question 4. What would you say is the biggest fallacy of 
the argument made by those who say government mandates are the 
engine of the economy?
    Response. With all due respect to the government, it is a 
fundamental truth that economic activity is driven not by 
governmental fiat, but by the consensual exchange of value 
between buyers and sellers in a free market. One can, by 
regulatory fiat, demand that a massive quantity of widgets be 
produced, but if there is no market demand for them, there will 
be no economic activity, and thus, no economic productivity. 
One need look no farther than the track record of the former 
Soviet Union with its endless parade of failed 5-year plans to 
see the results of such fatal conceit.
    The idea that a relative handful of government planners can 
made decisions more rationally than the distributed 
intelligence of millions or billions of people is, as Frederick 
Hayek pointed out the fatal conceit of planners and is by far 
the biggest fallacy of those arguing that government mandates 
are the engine of the economy.
    In fact, the situation is exactly reversed: government 
mandates are drags on the engine of the economy, which is the 
exchange of value through the free market. Economic activity 
stems from the consensual exchange of goods in a free market. 
Those exchanges, in turn, depend on the myriad decisions that 
must be made regarding whether a good is worth selling at a 
given price, or buying at a given price. Such decisions are 
made by what one might call the ultimate in distributed 
computing: millions of buyers and sellers, make those decisions 
in billions, or trillions of individual decisions and 
transactions determined based on highly specific circumstances 
of time and place. Maximum efficiency at matching supply with 
demand happens when these decisions are made free of government 
interference, save for the enforcement of contracts between 
buyer and seller.
    Government mandates cannot create true markets. They can, 
on occasion, create false markets in any number of ways that 
force consumers to make less economic choices by limiting their 
options, or that foist off hidden costs on the public by 
requiring producers to use overpriced or inferior materials in 
production. Thus, governments can create a false market 
recycled glass by requiring builders to use insulation made 
from recycled glass. That the false market created is 
inherently less efficient than the market that it replaces (the 
market in fiberglass insulation made from scratch) is obvious, 
since if it were actually cheaper to use recycled glass to make 
fiberglass, there would be profit potential in doing so, and no 
government intervention would be needed.
    Likewise, the government can create false markets in 
certain technologies, such as fluorescent light bulbs by 
banning the sale of incandescent bulbs. But again, this market 
will be inherently less efficient and less economically 
productive because the costs of the equivalent good have been 
forced up by government fiat. Higher prices must inevitably 
suppress demand compared to the status quo ante: a free market 
in incandescent bulbs. Further, as I testified, job losses 
follow the economic losses of government mandates.
    The idea that governments, not individuals engaged in 
consensual transactions through a free market is the eternal 
fallacy of planners and big-government advocates. Government 
mandates can no more make jobs or drive the economy than 
government regulations could set Pi equal to 3.0, or control 
the future climate of the Earth.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Senator Sanders. Thank you very much.
    David Blittersdorf is the CEO of Earth Turbines. He is the 
founder of NRG Systems in Hinesburg, Vermont. David, thanks for 
being here.

STATEMENT OF DAVID BLITTERSDORF, CEO, EARTH TURBINES; FOUNDER, 
                          NRG SYSTEMS

    Mr. Blittersdorf. Senator Sanders and members of the 
Committee, thank you for allowing me to be here.
    NRG is a leading manufacturer of wind measurement systems 
and wind turbine control sensors for the worldwide utility 
scale wind industry. Earth Turbines is a manufacturer of small 
wind turbines for home and community use in the U.S. By growing 
the renewable energy industry, we have a huge opportunity 
today, both to address global warming and to create the green 
jobs here in America.
    I founded NRG in 1982 with only one employee. That was me. 
Now, its products can be found on every continent in the world 
and more than 120 different countries serving electric 
utilities, wind farm developers, research institutes, 
government agencies and universities.
    A company such as NRG in a small rural community such as 
Hinesburg, Vermont that provides highly skilled, well-paid 
jobs, has a ripple effect on the community, State and the 
region. Today under the leadership of my wife, Jan 
Blittersdorf, NRG is experiencing sales growth of over 40 
percent per year. With the twin threats of global warming and 
peaking of world oil production, we are implementing plans to 
accommodate 40 plus percent growth in the foreseeable future.
    Today, NRG staff work in a 3-year old, 46,000 square foot 
new building. It is a world class, energy efficient, renewable 
energy-powered lead gold certified building. We are adding a 
30,000 square foot addition right now. By the way, we are 
basically pre-buying most of our energy for our business for 
the life of the building. Over 80 percent of our energy is 
built in through efficiency and renewables, mainly solar and 
wind.
    Talking about larger-scale wind, today's typical utility-
scale wind turbine can generate as much as two megawatts of 
electricity, or enough power to meet the needs of about 540 
households. That is equal to the carbon emitted from 4,800 
cars.
    Going forward, while wind supply is only about 1 percent of 
America's electricity today, even critics agree that wind could 
supply fully 20 percent of our electric needs in the future, 
further reducing our dependence on foreign oil and other energy 
sources. An interesting fact, the Statue of Liberty's torch is 
powered through the purchase of wind energy. Small wind 
turbines are sold in every State and exports account for almost 
one half of all U.S. manufacturer sales of small wind.
    Then when we look at wind energy, how it displaces fossil 
fuels, it not only reduces associated emissions, but also 
conserves water and puts downward pressure on fuel prices. 
Every megawatt hour of wind energy that displaces fossil fuel 
will conserve 100 to 500 gallons of water. Wind energy often 
displaces natural gas and reduced demand for natural gas helps 
insulate customers from price spikes. A recent report from Wood 
Mackenzie, a power and gas research firm, showed that an 
increase in renewable energy from an RPS, or renewable 
portfolio standard, could reduce natural gas prices by 15 
percent to 20 percent over the next 20 years.
    In 2005, the U.S. became the world's largest market for new 
wind energy, after a decade of falling behind the strong 
markets of Germany and Spain. Policies aimed at grabbing onto 
this market by building skilled workers and new supply chains 
could be a boon to U.S. manufacturing, which has lost over 2.5 
million jobs between 2001 and 2004.
    Quickly, just a couple of snapshots of the new green jobs 
being created in the wind industry. In the town of Pipestone, 
Minnesota, the 1-year old Suzlon wind turbine manufacturing 
plant employs 275 people after just 1 year. LMGlasfiber, a 
builder of wind turbine blades, is building its second plant in 
the U.S. and creating 1,000 new jobs in Little Rock, Arkansas. 
LM's existing plant in Grand Forks, North Dakota already 
provides 750 jobs. Tower manufacturers are adding jobs. Siemens 
is to add 200 in Fort Madison, Iowa, and Aerisyn with 130 jobs 
in Tennessee. DMI Industries is creating 450 jobs in Tulsa, 
Oklahoma.
    With proper and clear support for renewable energy, the 
potential growth for the wind industry could create tens of 
thousands of new manufacturing jobs and hundreds of thousands 
of jobs across the industry. With Jan running NRG, I am 
building our second green business. Earth Turbines is focused 
on wind turbines for individual homes, farms and small 
businesses. We are just starting up, and after almost 30 years 
of wind energy experience, we hope to become the leading home 
wind turbine manufacturer for America.
    The home wind industry is small and has been crippled in 
the past by the low cost of fossil fuels, lack of Federal 
incentives, and nonsupport of policy at the State and Federal 
levels. Investment to jump start this important segment of the 
wind industry is appearing, but strong signals in the form of 
incentives and supportive policy at the Federal level is an 
absolute necessity.
    In closing here, to keep providing new green jobs, spurring 
rural economic development, and addressing global warming, the 
wind industry, both large-scale and small, needs Congress to 
send the kind of strong signals through the policies that I 
have sketched out to really address our energy and 
environmental problems. Legislation such as S. 309, Global 
Warming Pollution Reduction Act, sponsored by Senator Sanders, 
is necessary now.
    I ask you, Congress, to act boldly and swiftly so that we 
can keep wind component factories humming today.
    Thank you.
    [The prepared statement of Mr. Blittersdorf follows:]

         Statement of David Blittersdorf, CEO, Earth Turbines; 
                          Founder, NRG Systems

    Senator Sanders, Chairman Boxer, Ranking Member Inhofe and 
members of the committee, my name is David Blittersdorf and I 
am the founder of NRG Systems and CEO of Earth Turbines. Both 
companies are based in Hinesburg, Vermont. NRG is the leading 
manufacturer of wind measurement systems and wind turbine 
control sensors for the utility-scaled wind industry worldwide, 
and Earth Turbines is a manufacturer of small wind turbines for 
home and community use in the U.S. By growing the renewable 
energy industry, we have a huge opportunity today both to 
address global warming and to create ``green'' jobs here in 
America.


                            large-scale wind


    I founded NRG in 1982, with only one employee?me, and now 
its products can be found on every continent in more than 120 
countries, serving electric utilities, wind farm developers, 
research institutes, government agencies, and universities. A 
company such as NRG, in a small rural community such as 
Hinesburg, Vermont, that provides highly skilled well-paid 
jobs, has a ripple effect on the community, State and region. 
Today, under the leadership of my wife Jan Blittersdorf, NRG is 
experiencing growth of over 40 percent per year, and with the 
twin threats of global warming and peaking of world oil 
production, we are implementing plans to accommodate 40 percent 
or more growth in business for the foreseeable future. Today 
NRG's staff work in a 3-year old, 46,000-square-foot world-
class energy efficient and renewable energy powered LEED gold 
certified building. A 30,000 square foot addition is under 
construction now.
    Today's typical utility-scale wind turbine can generate as 
much as two megawatts of electricity, or enough power to meet 
the needs of about 540 households. It is also interesting to 
note that:

     A single utility-scale wind turbine avoids the same 
amount of carbon dioxide as is emitted by about 4,800 cars.
     In 1998 wind energy produced enough electricity to power 
about 500,000 homes. Today, turbines operating in about 30 
states produce the amount of electricity needed to power about 
3 million American homes ? or about that used by the entire 
population of the State of Virginia, reducing the need for 
fossil fuel electricity generation.
     While wind supplies only about 1 percent of America's 
electricity today, even critics agree that wind could supply 
fully 20 percent of our electricity needs, further reducing our 
dependence on foreign oil.
     The Statue of Liberty's torch is powered through a 
purchase of wind energy.
     Starbucks, Safeway, and Staples are all purchasing wind-
generated electricity.
     Examples of wind energy jobs include 500 workers building 
towers at Beaird Industries in Shreveport, LA, about 1000 new 
jobs coming to a just announced tower manufacturing plant in 
Tulsa, OK, and five new wind energy businesses in Chattanooga, 
TN.
     Small wind turbines are sold in every State and exports 
account for almost one-half of all US manufacturers' sales.
     Wind contributes in ways beyond creating jobs and 
combating global warming. Wind developers pay about $5,000 per 
turbine, per year for 20 years in lease payments to hard-
pressed farmers, ranchers and other landowners from Maple 
Ridge, NY to Abilene, TX. Wind projects also make significant 
contributions to the local tax base of many rural communities.
     When wind energy displaces fossil fuel, it not only 
reduces the associated emissions but also conserves water and 
puts downward pressure on fuel prices. Every megawatt-hour of 
wind energy that displaces fossil fuel will conserve 100 to 500 
gallons of water. Wind energy often displaces natural gas, and 
reduced demand for natural gas helps insulate customers from 
price spikes. A recent report from Wood Mackenzie, a power and 
gas research firm, showed that an increase in renewable energy 
from a Renewable Portfolio Standard could reduce natural gas 
prices by 15--20 percent over the next 20 years.

    In 2005, the U.S. became the world's largest market for new 
wind energy after a decade of falling behind the strong markets 
of Germany and Spain. Policies aimed at grabbing onto this 
market by building skilled workers and new supply chains could 
be a boon to U.S. manufacturing which has lost over 2.5 million 
jobs between 2001 and 2004.
    Here is a snapshot of new ``green'' jobs being created by 
the wind industry:
    Minnesota: In the town of Pipestone, the 1-year old Suzlon 
wind turbine manufacturing plant employs 275 people.
    Iowa: Last December, the announcement of plans by Siemens 
Corp. to open a wind tower manufacturing facility in Fort 
Madison brought 2,600 people to job fairs to compete for 200 
jobs.
    Tennessee: Chattanooga based Aerisyn, another tower 
manufacturer, recently invested $7 million and brought economic 
activity and 130 employees to a once empty warehouse.
    Arkansas: LMGlasfiber, a builder of wind turbine blades, is 
building its second plant in the U.S. and creating 1000 new 
jobs in Little Rock. LM's existing plant in Grand Forks, ND 
already provides 750 jobs.
    Oklahoma: This year, DMI Industries is opening a tower 
manufacturing plant in Tulsa, creating up to 450 jobs. This is 
in addition to 100 jobs already in place at Tulsa's Trinity 
Structural Towers plant. Bergey Windpower in Norman is a 
leading small wind turbine manufacturer who has recently 
expanded into a new facility.
    Michigan: Since 2001, Michigan has lost 130,000 
manufacturing jobs, many of which were in the auto industry. 
Earlier this month at a manufacturing conference in Lansing, 
Governor Jennifer Graholm told participants that renewable 
energy projects will help re-build Michigan's economy and 
create jobs. The Governor stated that ``In the 20th century, 
Michigan was the State that put the Nation and world on wheels. 
In the 21st century, we want to be the State that leads our 
nation to sustainable energy independence.''
    With proper and clear support for renewable energy, the 
potential growth of the wind industry could create tens of 
thousands of new manufacturing jobs and hundreds of thousands 
of jobs across the industry.


                               small wind


    With Jan running NRG, I am building our second ``green'' 
business, Earth Turbines focused on small wind turbines for 
individual homes, farms and small businesses. Earth Turbines is 
just starting up and after almost 30 years of our wind energy 
experience, we hope to become a leading home wind turbine 
manufacturer for North America in the near future.
    The home wind energy industry is small and has been 
crippled in the past by the low cost of fossil fuels, lack of 
Federal incentives and non-supportive policy at the local, 
State and Federal levels. Investment to jump-start this 
important segment of the wind industry is appearing but strong 
signals in the form of incentives and supportive policy at the 
Federal level is an absolute necessity.
    The Rural Electrification Administration (REA), created in 
1935, is an example of success in bringing the benefits of grid 
electricity to farmers and rural communities. Before the REA, 
most rural residents either went without electricity or 
generated their own with wind power. I have met many folks who 
remember that Dad or Grandpa put in a wind generator to power 
the family radio and a few lights. Over a million wind electric 
generators were sold in the early to mid 1900's, but this 
growing industry was silenced by the mid 1950's by the success 
of the REA. It is time to re-power rural America with home, 
farm and community-scale grid connected wind energy.
    The small wind turbine industry is poised for tremendous 
growth. The technology is ``Made in the USA'' and the market is 
asking for products. Today's home wind turbine production is 
measured in the hundreds of turbines per year but the market 
potential is in the hundreds of thousands per year. Volume 
production of a home size wind system could lower the cost from 
$25,000 today to under $15,000 in 5 years, making renewable 
energy a viable option for households across America. With 
effective government policies and incentives in place, the US 
small wind industry could grow at 40-60 percent per year 
compared to 14--25 percent now.


                               next steps


    To realize this opportunity we must take bold steps to 
invest in renewable energy through extensions of the renewable 
energy tax credits and bonds, specifically:

    1) A full value, long term renewable energy Production Tax 
Credit (or PTC) which expires December 31, 2008
    2) An Investment Tax Credit for small wind systems used to 
power homes, farms, and small businesses, and
    3) Clean Renewable Energy Bonds for non-taxpaying, public 
power entities.
    4) A nation-wide renewable energy requirement of at least 
15 percent by the year 2020. (i.e., a Renewable Electricity 
Standard, RES or Renewable Portfolio Standard., RPS.)
    5) A national ``net metering'' law so that small wind 
turbines can connect to the grid in a simple and fair way 
without roadblocks from local power companies.
    6) Group net metering so groups of utility customers to 
jointly own a larger wind turbine and share its output.

    I will expand a bit on the last two items because you may 
be unfamiliar with them. Net metering is the modern way to have 
our society work together in distributed wind and solar 
electricity generation. Power is generated at the point of use 
and is shared by all customers on our electrical grid. It is 
time for standardized countrywide Net Metering; Thirty-two 
states have put net metering into law, but the rules are not 
consistent. We also need to facilitate Group Net Metering, 
which allows a group of customers of a utility to jointly own a 
larger wind turbine and share its output around their community 
homes, farms and businesses.


                               conclusion


    NRG and Earth Turbines represent only a piece of the 
growing wind industry, which is becoming a larger source of 
domestic energy production while producing hundreds of 
thousands of new jobs.
    To keep providing new ``green'' jobs, spurring rural 
economic development and addressing global warming, the wind 
industry, both large scale and small, needs Congress to send 
the kind of strong signals through the policies that I have 
sketched out. To really address our energy and environmental 
problems, legislation such as S. 309 Global Warming Pollution 
Reduction Act sponsored by Senator Sanders is necessary.
    We all ask Congress act boldly and swiftly so that we can 
keep wind component factories humming from Shreveport, 
Louisiana to Hinesburg, Vermont. Wind developers will also keep 
making much-needed land rental payments to farmers and 
ranchers, from Maple Ridge, NY to Abilene, TX, all the while 
producing hundreds of thousands of new ``green'' jobs. I have 
done this and my wife Jan has done it too. I know that our 
country can do even more.
    Thank you.
                                ------                                


        Responses by David Blittersdorf to Additional Questions 
                           from Senator Boxer

    Question 1. Wind has been experiencing significant growth 
in recent years in several nations around the world, such as 
Germany and Denmark. Could the United States experience similar 
growth in wind power and the associated jobs with the wind 
resources we have in this country?
    Response. Absolutely. The United States has vast untapped 
wind resources with the largest amounts in the Midwest. Almost 
every State has viable wind energy resources both on land and 
off-shore. Wind energy could supply at least 20 percent of 
today's electricity and probably supply over 50 percent in the 
future.
    The United States has vast amounts of renewable resources 
in the wind and from the sun. We are a large country with a 
relative low population density and therefore we could live in 
a sustainable way. It would require a major shift in the way we 
think about, produce and use energy in this country.
    Over the last 100 years we have become dependent upon the 
millions of years of solar energy (finite fossil fuels) that we 
are burning at expediential rates. We are at the peak of world 
oil production, within years of the peak of natural gas 
production and coal production MUST decrease if we are to 
achieve a CO2 reduction of 80 percent by 2050. The 
safest carbon sequestration method is to not mine the coal. All 
other methods are either unproven or unreliable. We will have 
consumed most of the world's fossil fuels by 2100. The long 
term answer that must be aggressively started today is the 
complete transition to renewable energy from finite fossil 
fuels and nuclear.
    We must use less energy in everything we do. Huge increases 
in conservation (doing something differently so no energy is 
used), huge increases in energy efficiency (doing something 
differently so less energy is used) and producing energy from 
renewable resources is required. We cannot attempt to produce 
our way out of this looming energy problem with old solutions 
such as substituting one fossil fuel with another. Old thinking 
of what worked for the last 100 years must also be disregarded. 
The energy world is now at a tipping point and we no longer can 
look at our planet earth as a place of infinite resources. We 
must understand the finite physical world and enact practical 
solutions such as wind power now. We have little time before 
the remaining finite mineral and energy supplies are exhausted, 
so we must embark upon the building of the renewable energy 
equipment and systems so that we can live in a sustainable way.
    In 10 years, Germany has grown its wind energy business to 
over 70,000 jobs as renewable grew from a few percent of its 
electricity to over 11 percent. In Denmark, wind turbines are 
its second largest export product. The renewable energy 
industry creates more jobs per energy unit than the fossil fuel 
and nuclear industry. This is because the renewable energy 
business is an on-going energy collection business and the 
fossil fuel and nuclear energy business are one--time mining 
and extraction businesses. We can do much more wind power in 
the U.S. but we need strong leadership and policy at the 
Federal level to move the markets in the correct direction.
    Question 2. Could this occur on its own or will it take tax 
incentives and a price signal from global warming legislation?
    Response. It will not occur on its own. Our economic system 
does not recognize and discounts heavily the value of all 
future physical resources. The market will recognize too late 
the need to shift to renewable energy sources. We will have 
major economic and social shocks if we do not direct 
investments to sustainable, renewable energy technologies.
    Global warming legislation that targets an 80 percent 
reduction in CO2 by 2050 is required. That 
translates to a 5 percent reduction in carbon emissions per 
year, every year for the next 43 years. That also roughly means 
a 5 percent reduction in fossil fuel use every year for the 
next 43 years since almost all carbon emissions come from the 
burning of fossil fuels. This is a major undertaking and will 
require strong policy at all levels of government especially at 
the Federal level.
    Strong prices signals in the form of wind and solar tax 
incentives, feed-in-tariffs for renewable electricity, much 
greater Federal monetary support to re-build and expand our 
electricity transmission grid is required to move the market. 
The present Production Tax Credit (PTC) for wind is not enough 
as it can be used only by a small number of companies. A 
Renewable Portfolio Standard (RPS) is also not enough as it 
forces utilities to hit the minimum targets but in a slow way. 
Incentives must be broad-based to allow everyone to participate 
including homeowners, farmers, small business people and larger 
companies. Feed-in-Tariffs (standard contracts to buy 
electricity at the long term value of renewables), tax credits 
and a tax on carbon emissions will be necessary to actually 
switch how power is generated in this country in a major way. 
Politics and business as usual and the way we have been doing 
things up until now have to fundamentally change.

    Senator Sanders. Thank you very much.
    Mark Culpepper is the Vice President of Strategic Marketing 
for SunEdison. Mark, thanks very much for being here.

   STATEMENT OF MARK CULPEPPER, VICE PRESIDENT OF STRATEGIC 
                      MARKETING, SUNEDISON

    Mr. Culpepper. Thank you. Thank you, Mr. Chairman, as well 
as other members of the Committee, for this opportunity to 
testify in front of the Senate on this important topic.
    SunEdison is the Nation's largest solar energy services 
provider. We are based out of Beltsville, which is more or less 
within a stone's throw of the Capitol, but we have operations 
across the United States, including California, Hawaii, 
Colorado and New Jersey, and then of course in Maryland itself.
    We offer a fairly unique perspective on solar energy. That 
is, we sell solar energy as a service. Specifically, we sell 
electricity and we do that by housing our power plants at 
customer sites, owning them, maintaining them, servicing them, 
and then selling electricity that we generate back to the 
client. We do so under extended contracts. That provides the 
customer with predictable energy costs over a very long period 
of time, as well as the benefits of generating their own clean 
electricity.
    We are proud to count among our clients Kohls, Staples, 
Whole Foods, the city of San Diego, Wal-Mart, Xcel Energy, the 
Sacramento Municipal Utility District, and others. They are 
really driven by a desire to make their energy costs 
predictable and to make a positive contribution to the issues 
around climate change.
    We created this model for this industry segment for the 
energy service provider for solar companies. The results really 
have really spoken for themselves. A short time ago, we had 
roughly 15 employees. Today, we have just under 400 employees. 
That doesn't count, of course, manufacturing jobs that are 
upstream from our business and the industry as a whole.
    If you look at these jobs, what you will find is a couple 
of unique aspects to our model and to what is happening in the 
solar industry. First, solar technology, specifically in 
photovoltaic technology, represents job opportunities in 
literally every county and city in the United States. It is 
true that in the United States there is a great abundance of 
solar energy. Our counterparts from Germany and Japan, who have 
far less solar radiance than we do, actually have much greater 
job coverage because they have had very robust Federal policies 
that support those industries.
    Even upState New York receives more solar energy than 
leading solar markets like Japan and Germany. In fact, if you 
look at the Southeast and the Southwestern United States, they 
represent some of the best potential markets in the world.
    When we put these power plants in place, these facilities, 
we typically hire local workers, train them to our standards of 
excellence and safety, and then put them to work on a 
continuous flow of new projects. This is energy that clients 
don't import from thousands of miles away. They don't extract 
it from the ground beneath countries that have differing views 
than us about the world. Our electricians can't be put on a 
telephone network and outsourced to the far corners of the 
globe. We put real technology on our customers' rooftops and 
that requires real jobs and real skilled labor that is 
American-made and American-manufactured.
    In fact, when I told you about that increase in jobs, most 
of those are in the field out where our key markets live. We 
like to build our solar rooftops at a steady pace in those 
markets, and that means hiring local foremen, warehouse 
managers, logistics managers, inspectors, electricians and so 
on. We think about this as a fairly powerful and transformative 
event in energy markets.
    So there really is an opportunity to strengthen America by 
creating domestic jobs for the U.S. economy for U.S. citizens, 
and strengthening our ability to be independent of foreign 
energy sources. We take this in-house as a matter of great 
pride and highlight that continuously as we move into new 
markets across the United States.
    I think the second point to make here is that a lot of 
solar creates more jobs than a lot of conventional extractive 
energy. That is a point that I won't go into in too much 
detail. It has been made several times in the previous panel's 
comments as well.
    A final point I did want to make, though, is that these 
renewable resources really do play to America's strengths. They 
play to our strength as a mover of capital markets. They play 
to our strength as an innovator and ability to see rapid 
growth, and really take opportunity out of something which has 
traditionally been viewed as a negative or a down opportunity.
    One last point that I will make before I close, there was a 
gentleman who came to work for us named Cris Cisneros in our 
Alamosa power plant. Cris had spent 37 years at the local 
perlite mine before it got shut down. He had an offer to 
operate heavy equipment at natural gas wells, and instead came 
to work for us at SunEdison building our Alamosa power plant. 
When he was asked why, he said, ``Well, it is a nice time to be 
part of history.''
    So thank you for this time to comment, and I look forward 
to your questions.
    [The prepared statement of Mr. Culpepper follows:]

            Statement of Mark Culpepper, Vice President of 
                     Strategic Marketing, SunEdison

    Mr. Chairman, members of the Committee, thank you for the 
opportunity to testify.
    My name is Mark Culpepper, and I am the Vice President for 
Strategic Marketing at SunEdison, LLC. SunEdison, based out of 
Beltsville, Maryland, is the nation's largest solar energy 
service provider.
    We offer a unique perspective on solar energy; we sell our 
customers electricity, as a service. Renewable electricity, 
generated through photovoltaic power plants installed and 
maintained at their facility. This gives them the benefit of 
clean power at predictable price, without the upfront cost and 
hassle historically associated with going solar.
    We're proud to count among our many clients Kohl's, 
Staples, the California State University System, the city of 
San Diego, Wal-Mart, Sacramento Municipal Utility District, and 
Xcel Energy. They're driven by a desire to make their energy 
costs predictable, and to address what many of them perceive as 
a growing climate concern.
    SunEdison created the model for the solar energy service 
provider industry, and the results speak for themselves. 
SunEdison has gone from roughly 15 employees in early 2006 to 
just under 400 today. That does not count, of course, the 
manufacturing jobs upstream from our industry.
    However, we feel that increased attention to the climate 
issue is necessary to continue to send the market signal that 
the domestic solar industry needs to continue this strong 
growth and regain US leadership.
    If you look at these jobs, how many of them there are, and 
how they're distributed, you see two interesting trends:


  1. solar represents job opportunities in literally every county and 
                            city in america.


    Every day the United States receives a great and 
predictable abundance of solar energy, enough to power the 
entire country many times over. Even up State New York receives 
more solar energy than leading solar markets like Japan and 
Germany. In fact, the Southeastern and Southwestern United 
States represent some of the best potential markets in the 
entire world.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Satellite modeling confirms this, and we install wherever 
State policies are right. Yes, we put solar panels in 
California and Hawaii. But we also have installations planned 
or underway in Wisconsin, New Jersey, Connecticut, Oregon, 
Maryland, North Carolina and even up in Ontario, Canada.
    When we put in these power plants, we hire local workers, 
train them to our standards of excellence and safety, and put 
them to work on a continuous flow of new projects.
    We can't pull our client's energy from thousands of miles 
away. Our electricians can't be put on the telephone network 
and outsourced to the far corners of the world. We put real 
technology on our customer's rooftops, and that takes local 
jobs and local talent.
    In fact, when I told you about that increase in jobs ? from 
15 to almost 400 ? the majority of those are in the field, out 
where our key markets live. We like to build solar roofs at a 
steady, accelerating pace in those markets, and that means 
hiring local foremen, warehouse managers, logistics managers, 
inspectors, electricians, and installers. We now have three 
offices in California, two in Colorado, one in Hawaii and one 
in New Jersey, in addition to our Maryland headquarters. Our 
recent job fair in Alamosa, Colorado brought in over 200 
applicants for roughly 70 new jobs.
    That's a powerful thing to think about. You may not have a 
coal seam or a gas pocket in your state. You may not have a 
ready location for a nuclear power plant. But I guarantee you 
have enough solar energy to run a commercial solar system, and 
where that system goes, so do many of the jobs that go with it.
    We also get much of our equipment from inside the US. There 
are major solar panel factories in Perrysburg, Ohio, Frederick, 
Maryland, Marlboro, Massachusetts, Wilmington, Delaware, and 
Memphis, Tennessee. They take wire tape from Torpedo Specialty 
Wire in North Carolina, and Tedlar film from DuPont in Buffalo, 
New York.
    Solar strengthens America by creating domestic jobs for US 
citizens, independent of foreign energy. We take this as a 
matter of great pride.
    Unfortunately, if you look to global manufacturing of these 
panels, you can see that markets with a nationwide commitment 
to reduced climate emissions and renewable energy are pulling 
away from us.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



2. a watt of solar electricity makes more domestic jobs than a watt of 
                  conventional electricity resources.


    This makes sense if you think about it. You create more 
domestic jobs from making, installing and servicing a solar 
power plant than you do from burning fossil fuels.
    Simply put, more labor is involved in creating and 
maintaining a high-tech product than there is in extracting a 
natural resource. Watt for Watt, the number of workers required 
to refine our silicon, manufacture our panels, design these 
systems, and bolt them to the roof, is higher than the number 
required to run a conventional power plant. In fact, studies 
show that a megawatt of solar creates between 7 and 10 times as 
many man hours of employment as would be obtained from a 
megawatt of conventional fuel sources, all else being equal.1
    This is true even as we continue to make our renewable 
resources more efficient and less expensive. In the case of 
solar energy, we have seen over the last 25 years an extremely 
reliable trend ? each time we double the total amount of solar 
energy out in the world, the price of solar energy drops 18 
percent. For the first time, solar is within striking distance 
of retail prices for conventional energy. Market signals like 
those provided by climate legislation would further reduce the 
remaining gap and drive the ``virtuous cycle'' of increasing 
sales driving reduced cost.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    In fact, the Solar Energy Industries Association estimates 
that the solar industry has the potential to create 55,000 new 
US jobs through 2015.


             3. renewable resources build on u.s. strengths


    Solar energy is a uniquely native resource. There's the 
obvious reason that you get it at home; once you've put a solar 
panel on a building, you know where that building's getting its 
power for at least the next 20 years.
    But there's something less concrete, as well. We have a 
great deal of natural resources in this Nation. So do many 
others. But I think most would agree that nowhere else can 
compare with the quality of our engineers, scientists, 
financiers, and manufacturers.
    When you think about it that way, anything that moves us 
toward the world getting its energy from these new technologies 
instead of pulling it out of the ground, will, I believe, tend 
to drive more of the world's energy money toward us, and to our 
strengths as a Nation, rather than to those who have the most 
conventional fuels in hand today.
    Energy sources that address our climate concerns favor the 
United States economy above all others. I think that's an 
advantage we should seize, and the time is now. We have to 
determine whether the country that invented solar power is 
going to be reduced to importing it, bringing in ``solar 
tankers'' full of panels from countries that moved quicker than 
we did. Because the world is changing around us.
    When I think about this, I think about meeting Cris 
Cisneros out at the groundbreaking of our Alamosa plant.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Cris spent 37 years at the local perlite mine before it 
shut down. He had an offer to operate heavy equipment at 
natural gas wells. Instead he came to our job fair, and we 
ended up hiring him and about 6 others from the mine. At the 
groundbreaking, the local paper asked him why he was working on 
our plant instead.
    ``It's nice,'' he said, ``being part of history.''
                                ------                                


 Responses by Mark Culpepper to Additional Questions from Senator Boxer

    Question 1. When you testified before the EPW Committee, 
you told us that ``each time we double the total amount of 
solar energy out in the world, the price of solar energy drops 
18 percent.'' Given the vast solar resources in the United 
States, with the right incentives and market signals, could 
solar potentially produce a significant portion of our nation's 
electricity?
    Yes, it certainly could. There are a few ways to think 
about this:
    Current Industry Capacity--It's generally accepted that the 
global solar industry manufactured approximately 2.7 gigawatts 
of new solar panels in 2006. If all of those panels had been 
sold into the United States, that would have been:
    Five times the amount of new US generation capacity from 
coal in 2005 (the last year for which DOE publishes data;) or
    Almost 10 percent of all new generation in the US in the 
same year.
    What's more, the growth in the industry is phenomenal ? the 
2,600 MW of new manufacturing is up from just under 100 MW in 
1996. The global industry tends to double in size approximately 
every 3 years, (greater than 30 percent compounded annual 
growth). Domestic solar deployment numbers in approaching half 
of all new annual US generation should be possible within a 
decade, with annual US deployment measured in gigawatts within 
5 years.
    Unfortunately, a majority of solar panels today are 
destined for Japan and Germany instead of the United States.
    Available Resources--There's enough sunlight to support 
viable solar energy in every State and congressional district 
in the United States.
    A 2004 Navigant Consulting study (attached--see slide 84/
94) found enough available, unobstructed, unshaded, South-
facing roof space to provide more than 700 GW of solar energy 
to the U.S., without using one acre of land. If you look to 
ground-mounted systems (on landfills or unusable farmland, for 
instance,) this potential increases many times over.

    Question 2. doesn't solar energy create more jobs than the 
same amount of fossil-fuel based electricity?
    Response. Yes. All available studies indicate that Watt for 
Watt, solar energy supports several times as many jobs as any 
conventional fuel resource. This makes intuitive sense--both 
fossil fuel power plants and solar power plants start off with 
low-value raw materials. A fossil power plant burns those 
materials, whereas we form them into a high-tech, high value, 
durable product.
    See for instance (http://rael.berkeley.edu/files/2004/
Kammen-Renewable-Jobs-2004.pdf)--a review of existing studies 
suggests that solar energy supports between 7--10 times as many 
jobs per Watt as coal or gas.

    Senator Sanders. Thank you very much.
    Donald Gilligan is the President of the National 
Association of Energy Services Companies. Donald, thanks a lot 
for being here.

 STATEMENT OF DONALD GILLIGAN, PRESIDENT, NATIONAL ASSOCIATION 
                  OF ENERGY SERVICE COMPANIES

    Mr. Gilligan. Thank you, Senator Sanders for this 
opportunity for the National Association of Energy Service 
Companies to offer testimony. NAESCO is an organization of 
about 75 companies around the Country that deliver about $4 
billion worth of energy efficiency, renewable energy, and 
distributed generation projects each year. To put that number 
in perspective, NAESCO member companies deliver approximately 
the same dollar volume of energy efficiency projects as all of 
the utilities in the country combined.
    NAESCO strongly supports the enactment of greenhouse gas 
limitation legislation and other legislation being considered 
by the Senate that will increase the amount of energy 
efficiency that is implemented in the U.S. We believe that such 
legislation will increase energy security, lower consumer 
prices, and provide significant job growth.
    I would like to excerpt a couple of the key points from my 
written testimony for this brief oral testimony. The first is 
that very few people today are aware of the contribution that 
energy efficiency has made to our economy. Since 1980, about 50 
percent of the U.S. growth in energy use has come from 
improvements in the efficiency of our use. Much of this 
improvement has been due to strong signals from both the 
Federal and the State Government in various Administrations, 
the Congress, Federal agencies and Governors and legislatures 
across the Country.
    Improved energy efficiency has not been a brake on our 
economic growth. I don't think anyone could argue that our 
economy today is weaker than it was in 1980. Energy efficiency 
has in fact contributed substantially to our industrial 
competitiveness. It has made our workplaces and schools more 
productive, and made our homes more comfortable. Imagine what 
our world would be like today if we needed 50 percent more 
energy every day just to continue at our current level of 
economic activity. That is not a very pretty picture.
    We are, however, very far from exhausting the potential for 
energy efficiency. Last year, the U.S. Department of Energy and 
the U.S. EPA convened the National Action Plan for Energy 
Efficiency, which was composed of 70 experts from across the 
Country, and co-chaired by Jim Rogers, who is the CEO of Duke 
Energy. The NAPEE determined that potential electricity savings 
can be as high as 40 percent of our current usage, at a cost of 
about four cents a kilowatt hour, and potential gas savings as 
high as 19 percent, at a cost of about $3 a million BTUs. This 
investment would produce the equivalent of about 20,000 
megawatts of new electricity generation in 10 years. It would 
save consumers about $22 billion a year in 2017.
    Improved energy efficiency doesn't levy penalties on our 
economy. It provides new jobs. Let me give you a couple of 
examples, one of which is the room in which we sit today. About 
10 years ago, the Architect of the Capitol hired two NAESCO-
member companies to design and implement lighting retrofit 
across the whole Capitol complex. That project required about 
30 man-years of labor.
    The second example is my hometown, which is Sharon, 
Massachusetts. Last year, our school saved about $80,000, which 
is the equivalent of two salaries for starting teachers. This 
year we are adding a new skilled mechanical technician, who we 
expect will double his or her salary in energy savings each 
year. If you replicated our program in our little school 
district across the whole State of Massachusetts, that would 
mean 1,000 new teachers and technicians. High-paying, high-
skilled jobs can never be sent offshore. You can't operate a 
school building in Massachusetts from China or from India.
    The third example is the $150 million a year Energy Smart 
program that is being operated by the New York State Energy 
Research and Development Authority. It has been going since 
1998. It is producing right now at its peak of operation about 
4,200 new jobs, and 3,700 of those will be permanent, which 
means they will survive after the program ends, with $275 
million in annual energy bill savings, and about $244 million 
annually in economic growth.
    These are three examples of the type of new jobs which can 
be created by strong bipartisan programs, signals from the 
Congress and from Governors across the States, that we need 
more energy efficiency. I commend you, Senator Sanders, and 
other members of the Committee for pushing this legislation.
    Thank you.
    [The prepared statement of Mr. Gilligan follows:]

Statement of Donald Gilligan, President, National Association of Energy 
                           Service Companies

    Mr. Chairman and members of the Committee, thank you for 
providing the opportunity for the National Association of 
Energy Service Companies (NAESCO) to offer testimony at this 
hearing. NAESCO is an organization of about 75 companies that 
deliver more than $4 billion of energy efficiency, renewable 
energy and distributed generation projects across the U.S. each 
year. To put that number in perspective, NAESCO member 
companies deliver approximately the same dollar volume of 
energy efficiency projects than all of the utilities in the 
country combined, according to a recent study published by the 
Lawrence Berkeley National Laboratory\1\.
---------------------------------------------------------------------------
    \1\``A Survey of the U.S. ESCO Industry: Market Growth and 
Development from 2002 to 2006, available at: http://eetd.lbl.gov/ea/
EMS/reports/62679.pdf
---------------------------------------------------------------------------
    NAESCO strongly supports the enactment of greenhouse gas 
limitation legislation and other legislation being considered 
by the Senate that will increase the amount of energy 
efficiency that is implemented in the U.S. We believe that such 
legislation will increase energy security, lower consumer 
prices and provide significant job growth. My testimony today 
will focus on the potential scale of energy efficiency 
implementation and the employment and economic development 
effects of such implementation.


                  potential scale of energy efficiency


    Few people today are aware of the contribution that energy 
efficiency has made to our national economy during the past 
three decades. Since 1980, improvements in energy efficiency 
have provided more than 50 percent of the U.S. growth in energy 
use\2\. Much of this improvement has been due to the mandates 
and guidance provided by the Congress and Federal and State 
government agencies, in the form of appliance and equipment 
standards, building codes and industrial technology innovation 
programs. These Federal initiatives have been complemented by 
State initiatives, utility energy efficiency incentive 
programs, and performance contracting programs. Improved energy 
efficiency has not been a brake on our economic growth, but has 
in fact contributed to our industrial competitiveness, made our 
workplaces and schools more productive, and made our homes more 
comfortable. Imagine for a minute what our nation would be like 
today if we needed 50 percent more energy supply. It is not a 
pretty picture. Our economy would be hamstrung and our national 
security would be threatened.
---------------------------------------------------------------------------
    \2\``Realizing the Potential of Energy Efficiency,'' July 2007, 
U.N. Foundation, available at: http://www.unfoundation.org/
energyefficiency/
---------------------------------------------------------------------------
    However, we have not, despite this accomplishment, come 
close to exhausting the potential for energy efficiency. Last 
year, the U.S. Department of Energy and the U.S. Environmental 
Protection Administration convened the National Action Plan for 
Energy Efficiency (NAPEE) Leadership Group, about 70 experts 
from utilities, regulatory agencies, customer groups, 
environmental groups, consumer groups, energy efficiency 
organizations and industry. The Co-Chair of NAPEE was Jim 
Rogers, CEO of Duke Energy and, at the time, Chairman of the 
Edison Electric Institute. NAPEE collected the best available 
information from studies around the country and determined that 
potential savings from electric energy efficiency improvements 
ranged from 10 percent to more than 40 percent, and from 10 
percent to 19 percent from natural gas efficiency improvements.
    The cost of these improvements is estimated to average 
about $.04/kWh for electricity and $3/MMBtu for natural gas. 
NAPEE found that a national effort by utilities to invest about 
$7 billion a year in energy efficiency, which would leverage an 
additional $20-30 million of non-utility investment, would 
yield annual savings to consumers of about $22 billion in 2017 
and have a net present value of about $344 billion\3\. The 
program would produce the equivalent of 20,000 megawatts of new 
electric generation and could be financed through utility 
bills, adding approximately 2 percent to current electric 
utility revenues and .5 percent to current gas utility 
revenues.
---------------------------------------------------------------------------
    \3\``National Action Plan for Energy Efficiency,'' July 2006, 
available at: http://www.epa.gov/cleanenergy/actionplan/
eeactionplan.htm
---------------------------------------------------------------------------
    It is important to note that the NAPEE estimates are based 
on currently available technology. But we all know that 
technology does not stand still. A review of studies conducted 
over the past two decades shows consistent estimates of energy 
efficiency potential in the range of 10-30 percent, despite the 
achievements we have made. For example, we are now at the cusp 
of the fourth generation of lighting efficiency improvements 
(electronic lighting or white LEDs) to be commercialized since 
the early 1990's. Each generation replaced the previous 
generation cost-effectively, that is, it paid for itself from 
energy savings.
    Employment and Economic Development Effects
    There is not, as some people believe, a tradeoff between 
energy efficiency and economic growth. Improved energy 
efficiency does not levy penalties on our economy; it provides 
new jobs and economic growth. Let me give you three examples.
    The first example is the building in which we sit today. 
About 10 years ago, the Architect of the Capitol in conjunction 
with an ESCO designed and implemented a lighting retrofit 
program in the Capitol Complex. The project employed a dozen 
surveyors for about 4 months (4 man-years of work) in the 
survey and design phase and another ESCO provided about 30 man-
years of skilled labor retrofitting or replacing hundreds of 
thousands of fixtures.
    The second example is from my home town, Sharon, 
Massachusetts, where our School Committee, of which I am a 
member, has instituted an energy efficiency program. Last year 
we saved $80,000, enough to hire two new teachers; this year we 
are adding a skilled mechanical technician, who, we expect, 
will repay double his or her salary in annual savings. The 
efficiency of our schools before we started our program was 
about average, according to a survey of the schools in one New 
England state. If our program were mirrored across the state, 
it would result in the hiring of nearly a thousand teachers and 
technicians. These are good-paying jobs that can never be sent 
off shore.
    A third example is the $150 million per year statewide 
Energy $mart program operated by the New York State Energy 
Research and Development Authority (NYSERDA). This program, 
which has been operating since 1998, has resulted in the 
creation of 3,700 permanent new jobs, $275 million in annual 
energy bill savings and $244 million annually in economic 
growth\4\. These permanent jobs are net of the jobs that would 
have been created in the utility industry without the improved 
energy efficiency from the Energy $mart program and do not 
include the new jobs created by energy efficiency programs 
operated by either the New York Power Authority or the Long 
Island Power Authority, whose combined annual budget is about 
equal to NYSERDA's.
---------------------------------------------------------------------------
    \4\``New York Energy $mart Program Evaluation and Status Report,'' 
May 2006, available at http://www.nyserda.org/Energy--Information/
06sbcreport.asp
---------------------------------------------------------------------------
    The table below, excerpted from a recent annual evaluation 
report summarizes the job creation by category from the New 
York Energy $mart program.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    NYSERDA's estimates of the jobs created by its statewide 
energy efficiency program are not ``back of the envelope'' 
calculations, but are the products of a sophisticated 
macroeconomic model of the New York State economy. The 
estimates were reviewed and approved for submittal to the New 
York Public Service Commission by the System Benefits Charge 
Advisory Group, a stakeholder group whose members include the 
states major utilities and representatives of all classes of 
consumers. The methodology used to produce the estimates is 
represented in the graphic below.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    The results achieved in New York are to a large extent due 
to the strong, bi-partisan State government policy on energy 
efficiency, initiated by Governor Pataki, expanded by Governor 
Spitzer, and supported by the legislature. The policy sets 
specific targets for greenhouse gas reductions and energy 
efficiency implementation, and provides the programmatic 
infrastructure required to achieve the targets.
    A larger-scale estimate of the employment effects of energy 
efficiency programs has been generated by the American Council 
for an Energy Efficient Economy (ACEEE) in its recent study of 
the impact of energy efficiency programs designed to save 
natural gas in eight Midwestern states\5\. The study's 
estimates of the potential for job creation and economic growth 
from a program that invests $1.1 billion per year for 5 years 
in gas and electric energy efficiency in the eight states are 
summarized in the table below. Please note that the ``Number of 
Jobs'' and ``Employee Compensation'' estimates in the table are 
net of any job losses that would result from reduced energy 
use. These large effects are due to the fact that the affected 
states import almost 90 percent of their natural gas from other 
regions of the U.S. or from Canada, at a cost of nearly $40 
billion per year, which is huge drain on the State economies. 
Efficiency programs enable the states to keep some of that 
money in circulation in the State economies.
---------------------------------------------------------------------------
    \5\``Examining the Potential for Energy Efficiency to Help Address 
the Natural Gas Crisis in the Midwest,'' January 2005, available at: 
http://www.aceee.org/store/
proddetail.cfm?CFID=987754&CFTOKEN=91189203&ItemID=386&CategoryID=7



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    Extrapolating the results of the NYSERDA program and the 
estimates in the ACEEE report enables us to provide an estimate 
of the potential economic effects of a national program of the 
scope envisioned by NAPEE ($7 billion in utility energy 
efficiency investment per year), as summarized in the table 
---------------------------------------------------------------------------
below.



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                        additional observations


    One objection that might be raised this line of reasoning 
is that the job creation by large-scale energy efficiency 
programs is, in fact, a zero-sum game: for every job created by 
improvements in energy efficiency, a job is lost in energy 
production and distribution. The NYSERDA and the ACEEE reports 
estimate net jobs created in a State or region, but do not 
estimate net jobs created in the Nation. Will we just be 
substituting new jobs in energy consuming regions of the 
country for jobs lost in energy producing regions?
    NAESCO believes that the answer to this question is no, for 
several reasons.
    First, the marginal energy production jobs displaced by 
efficiency programs are going to be largely overseas, not in 
the U.S. We are dependent on foreign sources for more than half 
of our oil supply and are increasingly on imported Liquefied 
Natural Gas (LNG) to supply fuel for heating and electric 
generation. These imports are a drain on our national economy 
and a threat to our national security. Replacing imports with 
good jobs in energy efficiency is a benefit to the whole 
country.
    Second, the NAPEE scenario described above does not result 
in the elimination of the need for all new electric generating 
plants. It provides the equivalent of about 20,000 MW, or about 
15 percent of the estimated national requirement of 135,000 MW. 
Even if we estimate that a national greenhouse gas reduction 
program would double or triple the size of the NAPEE program, 
we would still not be displacing half of the estimated new 
power plants.
    Third, in no scenario that NAESCO has seen for the growth 
of energy efficiency does the utility industry project layoffs 
of skilled trade workers, the men and women who build and 
maintain power plants and transmission and distribution 
systems. In fact, less than a month ago, the U.S. Department of 
Labor Assistant Secretary for Employment and Training and 
Mississippi Governor Haley Barbour convened a 2-day Energy 
Skilled Trades Summit in conjunction with a meeting of the 
Southern Governors' Association. The Summit brainstormed how 
the utility and energy production industries can meet their 
daunting needs for new skilled workers during the next decade. 
One utility executive predicted that his industry could lose 
half of its skilled trade workers in the next seven to 8 years, 
and has no obvious source for replacing these retirees. So it 
appears that rather than threatening the jobs of utility 
workers, increased energy efficiency programs, which required 
different workers with skill sets than utility construction 
projects, may be required to keep the lights on.
    Fourth, the new energy production and generation 
technologies on which we are all depending ? widespread 
renewables, clean coal, nuclear fuel, oil from shale or tar 
sands ? all require substantial research and development 
efforts, and will not come on line, if successful, for as long 
as a decade. And none of these technologies will be inexpensive 
enough to use inefficiently. Large-scale energy efficiency 
programs will enable the U.S. to bridge this R&D decade and to 
provide the skilled labor and technology infrastructure that 
will make the best use of these precious new energy resources.


                               conclusion


    NAESCO is grateful to the Committee for the opportunity to 
present this testimony. We urge the Committee to act favorably 
on climate change and other energy legislation that will 
substantially increase the implementation of energy efficiency 
across the U.S. We believe that a major national implementation 
will create hundreds of thousands of high-skill, high-wage 
jobs, will provide a substantial boost to our national economy, 
and will increase our national security.
                                ------                                


         Response to an Additional Question from Senator Boxer

    Question. Your organization and its members, who are in the 
middle of it all, believe that such action will not only 
address the problem of global warming, but increase energy 
security, increase jobs and lower consumer prices, is that 
correct?
    Response. In answer to your question, NAESCO strongly 
supports the enactment of greenhouse gas limitation legislation 
and other legislation being considered by the Senate that will 
increase the amount of energy efficiency that is implemented in 
the U.S.

     Energy efficiency contributes significantly to U.S. 
energy security by lowering our demand for imported energy and 
lessening our exposure to the problems of securing that energy 
from insecure or unfriendly nations. According to a recent 
study by the U.N. Foundation, energy efficiency has provided 
more than half of the increased U.S. energy use in the past 25 
years. We would be much less energy secure today if we had to 
procure on the world market 50 percent more energy than we now 
use.
     There are numerous studies that document the fact that 
energy efficiency increases employment, net of any jobs that 
might be lost in the energy supply or delivery industries. 
Samples of these studies include evaluations or large-scale 
energy efficiency programs in Massachusetts and New York, which 
were initiated during the administrations of Republican 
Governors and continue under Democratic Governors, as well as 
projections of the potential employment effects of large-scale 
energy efficiency programs in the Midwest. Based on these 
program results and projections, NAESCO estimates that several 
hundred thousand jobs would be created by a national energy 
efficiency effort of the scale envisioned by the National 
Action Plan for Energy Efficiency (NAPEE)--about $7 billion per 
year.
     Large-scale energy efficiency lowers consumer prices by 
lowering the demand for energy. Numerous studies from around 
the country have documented the fact that modest demand 
reductions, especially during system peak times, can 
significantly lower prices. The cost of the marginal supply 
resources at peak times is several times the average cost of 
supply, and so eliminating the need for those resources lowers 
the average prices which most consumers pay.

    I will be happy to answer any questions that you or your 
staff have about this response, or to provide more information.

    Senator Sanders. Thank you very much.
    See, I have a great opportunity. Nobody else is here so I 
can ask hours of good questions.
    [Laughter.]
    Senator Sanders. Let me start focusing, before I get to Dr. 
Green and Dr. Kammen, talking about wind, solar and energy 
efficiency.
    David, what is the potential in this Country for wind? You 
and I live in a rural State. How much energy can a small wind 
turbine produce for the average home in rural America? How many 
homes could accommodate wind turbines? What would that mean to 
the use of energy in America?
    Mr. Blittersdorf. Well, wind energy can be divided into 
large-scale and small-scale, small for home use. We could be 
having hundreds of thousands of small wind turbines installed 
in rural backyards now. It is a volume market that has to 
develop. Right now, it is measured in the hundreds to thousands 
of installations per year. We need to go to a 100 plus thousand 
installations.
    Senator Sanders. And what percentage of the electric needs 
of a home could a small wind turbine provide?
    Mr. Blittersdorf. In the rural landscape of Western New 
York, the Midwest, it could be 100 percent of the homeowners 
electricity. The wind turbines would probably be net metered. 
If we had a national net metering law instead of State law, you 
would turn your meter back.
    Senator Sanders. So you are saying there are hundreds of 
thousands of homes that could actually produce more electricity 
than they are consuming?
    Mr. Blittersdorf. Exactly, just like what Germany is doing 
with solar and wind.
    Senator Sanders. One of the laws of economics is that the 
more you produce, the more sophisticated the technology. 
Everything being equal, prices should go down. Give me a guess. 
I am living in a rural area. I want a wind turbine. It can 
produce one half or three quarter or maybe all of my energy. 
How much is it going to cost me?
    Mr. Blittersdorf. Today, with the low volumes, we are 
looking at $25,000 per installed wind turbine. But in the next 
5 years, if we got a volume market moving, it could be down to 
$15,000 or $12,000. Basically, you look at the cost curves like 
building a car. You look at the pounds of material. There is no 
reason it should be as high as it is. It is just a volume 
market.
    Senator Sanders. So it could get down to $12,000 or $15,000 
to produce half or more of my electrical needs.
    Mr. Blittersdorf. Yes.
    Senator Sanders. That is a pretty good deal, right?
    Mr. Blittersdorf. Yes.
    Senator Sanders. I will be paying less for electricity 
under that scenario than I am now, in most cases.
    Mr. Blittersdorf. In the long term. If you believe power 
prices will go down over time, no, it would be a bad deal, but 
energy prices are going up.
    Senator Sanders. OK. Thanks, David.
    Mark, let me ask you the same question. I am sitting here 
kind of amazed. In the midst of all the discussion on global 
warming, I don't think we are focused enough on the potential 
of solar. Is it unreasonable to believe that there could be 
millions of homes in the United States which will have solar 
units and solar hot water systems? I think one of the points 
that is made often is that even in States like the State of 
Vermont, which is not the sunniest State in America, it still 
works there. Close your eyes and tell us, if you could snap 
your fingers and make it happen, what would America look like 
in terms of solar energy?
    Mr. Culpepper. Well, we don't focus on the residential 
market, but I can give you some context for other markets, 
particularly for the commercial market which is really an area 
where we have made our claim.
    If you look at, say, a nationwide chain like Wal-Mart where 
they might have 5,000 stores, each one of those stores is 
capable of supporting either a half megawatt to a megawatt of 
power.
    Senator Sanders. Which is what percentage of what they 
consume?
    Mr. Culpepper. Well, if you look at a typical home, a 
typical home might be four kilowatts of power. So when you look 
at Wal-Mart, what we are talking about is theoretically a 
potential to produce basically 2.5 gigawatts to 5 gigawatts of 
power. That is very comparable to some of the largest nuclear 
plants in the country at this point. So that is just one of the 
large big-box retail stores.
    Senator Sanders. And is that because they have an enormous 
amount of space?
    Mr. Culpepper. They have an enormous amount of space on the 
rooftops. However, if you fly into any airport in America, you 
will see a lot of available rooftop space.
    Senator Sanders. What is the potential for solar plants, as 
opposed to rooftop projects, where you normally have an 
enormous amount of paneling?
    Mr. Culpepper. Yes, I think the fundamental difference 
between the two technologies is one is much more of a central 
model, much more based on the existing paradigm. If you look at 
what is going on in the PV solar market, the market that we 
serve, the big paradigm shift--and I know that word is used 
loosely a lot--is that if you look at a typical residential 
user in the State of California that has a solar plant on their 
rooftop, 8 years ago they got all their power from some sort of 
central power plant. Today, they get anywhere from 40 percent 
up to 80 percent of their power from the energy produced on 
their rooftop. That is a significant shift in how America 
produces energy.
    Senator Sanders. But it needn't be either/or. I mean, we 
could do both, couldn't we?
    Mr. Culpepper. We could absolutely do both. I don't think 
that anybody who proposes that one solution is going to solve 
all of our problems is really correct. I do think that a theme 
that has been recurrent here is the idea of the level playing 
field. Those consist of standard interconnection guidelines. 
For example, there are some States where you just can't install 
solar. It is not set up. The regulatory environment is not 
there. It is not because the technology can't support it. It is 
because it hasn't really been provided.
    Senator Sanders. The point has been made that zillions of 
dollars have gone into subsidies and tax breaks for nuclear, 
for coal, for fossil fuel. What would you think the solar and 
wind industry might require?
    Mr. Culpepper. I really can't comment on the wind industry. 
As far as the solar industry goes, we are a supporter of the 
ITC, obviously, and we do believe that these should have a 
fixed time line to them. We have done a very good job I think 
of going pretty far with what we have been given to date. I 
think that one of the benefits of having transparent 
subsidies--and I will say that word, although it is not often 
used--is that it does encourage the industry to move at a 
faster clip than other industries do. Many of the other 
incentives and subsidies in other markets are essentially 
buried subsidies.
    Senator Sanders. Thank you, Mark.
    Donald, when I was Mayor of Burlington, just at the end of 
my tenure, we passed a bond issue to help expand energy 
efficiency in our city municipally owned light department. I 
could be wrong on this, but I believe that now, 16 years later, 
with a lot of growth in the city, I am not sure that we are 
expending any more energy.
    Mr. Gilligan. That is quite feasible.
    Senator Sanders. And I guess California is somewhat similar 
with all the growth taking place. It seems to me that the 
potential, I mean, that is just an extraordinary thing--growth 
and no growth in energy consumption. Talk about the potential 
of energy conservation in that sense.
    Mr. Gilligan. Well, you are right. There are several States 
around the country that have made a target of strong economic 
growth without growth in energy use. California has achieved 
that on a per capita basis over the last 30 years, so they have 
not, in per capita terms, increased energy use, while the 
economy has blossomed significantly. So it is quite feasible to 
have strong economic growth without rampant growth in energy 
use.
    I think in the previous panel, Mr. Armey commented on the 
fact that energy and energy use and economic growth are linked. 
We used to think that in the 1970's. We have broken that link. 
As I mentioned before, we are now using something like 50 
percent less energy per unit of GNP than we used to use. So the 
notion that there is a fixed linkage between energy growth and 
economic growth is simply an obsolete notion.
    Senator Sanders. I have heard, and you can tell me if I am 
right or wrong, that many homes--and I come from a State where 
the climate is very cold, so we are very conscious about 
wasting energy in the winter time--that homes that retrofit can 
reduce their energy consumption 40 percent or 50 percent, which 
seems to be just an extraordinary potential. We are told that 
LED light bulbs that should be on the market within a few years 
can cut energy consumption compared to incandescents by one 
tenth, use one tenth of the energy and last a lot longer.
    Mr. Gilligan. Yes.
    Senator Sanders. Talk a little bit about what you see 
coming down the pike. Again, if you could snap your fingers and 
make this Country energy efficient, what would America look 
like?
    Mr. Gilligan. Well, first of all, we would live in more 
comfortable houses and buildings. The notion that there is a 
tradeoff between energy efficiency and comfort is again another 
obsolete notion. The kind of house that you are talking about 
which uses 50 percent or 60 percent less energy to heat would 
typically be a more comfortable house. The ventilation would be 
better. The house would have a lot of open exposure to the 
south, making it a very pleasant place to live.
    The same with commercial buildings, the LEED buildings that 
you read about or the other energy efficient buildings: these 
are not dungeons. These are terrific places to work. They are 
filled with natural light. They are extremely well ventilated. 
The temperatures are well regulated.
    So I think from the average consumer's standpoint, the most 
important thing would be an increase in comfort and 
productivity. Energy efficiency largely occurs behind the 
scenes. It is in the boiler room. It is in these fixtures in 
the ceiling. People don't know about it. They don't really care 
about it. What they care about is the environment in which they 
live, which would be more pleasant.
    Senator Sanders. It would seem to me that if we, if you 
like, retrofitted America and we made it more energy efficient, 
the number of workers that we would need to do that would be 
just a heck of a lot of people.
    Mr. Gilligan. It is an extraordinary number of people. 
There have been some large-scale studies. There was a study by 
the American Council for an Energy Efficient Economy a couple 
of years ago that said if you had a rather modest sized program 
in the eight Midwestern States that targeted natural gas, it 
would employ about 48,000 new people, new jobs in 10 years, and 
about 60,000 new jobs in 15 years. That is because you would 
stop the hemorrhaging of part of $40 billion of money which 
flows out of that region to other regions and other countries 
to pay for natural gas.
    Senator Sanders. Thanks very much.
    Dr. Kammen, could you elaborate a little bit on how job 
creation based on renewables compares to job creation based on 
fossil fuels? If I am not mistaken, the comparison is pretty 
interesting. Would you say a few words on that?
    Mr. Kammen. Certainly. I would be delighted to. In fact, I 
have mentioned the study that we have done to look at this a 
couple of years ago. We not only did our own assessment, but we 
looked across a range of studies done by groups, again across a 
wide range, and we came to a very consistent answer on that 
point, that there were more jobs generated per dollar invested, 
per megawatt installed.
    But this isn't a special feature that renewables that add 
efficiency are somehow magical. It is largely due to the fact 
that we have under-invested in these areas for a long time. So 
this is a first after benefit. The cities, the states, the 
nations that do this investment first--and I think this is 
unequivocal, and I respectfully disagree with Congressman 
Armey's comments--I believe those numbers are incontrovertible. 
What is an issue for debate, though, is that this benefit is 
not out there forever. The first states and nations to act will 
receive those benefits.
    So the story we are hearing from Germany, irrespective of 
whether there was a renewable portfolio standard or the feed-in 
tariff, was that they had seen those benefits. In fact, German 
solar and wind factories have multi-year backlogs, including to 
export to the United States. So those that act first will get 
these benefits, and as the global economy shifts, we are seeing 
more and more orders for these clean technologies. So it is in 
fact bad for U.S. business, as Mr. Khosla said, that we are 
sending ambiguous signals to our companies. So I believe there 
is a strong argument to be made on the jobs creation level 
alone.
    I want to highlight this issue that has been discussed 
about, well, the growth in jobs in the clean area come at an 
equal or larger expense of the dirty area. In fact, the State 
of California did a study that Senator Boxer alluded to in the 
beginning. I was a participant in that study. That one not only 
did direct observation, totaling up numbers of jobs grown in 
clean areas and lost in other areas, as well as we did 
macroeconomic modeling to look at those benefits.
    In California, that study was endorsed by the Governor and 
endorsed by the legislature, and concluded that in fact the job 
growth was strongly toward a larger growing economy. Yes, there 
are areas that lose and areas that win, but as a State overall, 
and in fact as a Western region, it was an overall plus.
    And so, our conclusion isn't that, well, there is some 
growth, but there is equal loss. Instead, in fact if you re-
tool toward the cleaner economy, you get those benefits and you 
become a much stronger exporting region. I think the U.S. could 
actually learn a lesson from that feature from Germany, from 
Denmark with wind, from Spain with wind, and from California. 
That is a fairly robust message.
    Senator Sanders. Thanks.
    Dr. Green, I suspect you might not be in 100 percent 
agreement with everything that was said, so why don't you take 
a couple of minutes and give us your comments on what you have 
heard.
    Mr. Green. Well, I believe renewable energies of different 
sorts--solar, wind, geothermal and cellulosic ethanol--have 
their place. I think the best way for us to find where that 
place is is to strip all subsidies and all irregularities out 
of the----
    Senator Sanders. You talk about stripping all subsidies. 
Would you take away the Price-Anderson legislation protecting 
nuclear?
    Mr. Green. Absolutely.
    Senator Sanders. You would? OK.
    Mr. Green. If I could snap my fingers, I would take all 
energy subsidy out of the system and let the market find us the 
most efficient types of energy and the most efficient places 
that it can be used in terms of time and space.
    So I agree there are those places. I think what has gone 
unspoken here is the issue of cost. It is very exciting to hear 
people say that their technology is going to be cost 
competitive or is cost competitive. They have been saying this 
now since I remember the 1970's when I was first in California, 
in the oil crisis. I had just gotten a car and wanted to 
distill my own fuel in the San Fernando Valley. So I took up an 
early study of distillation and I was reading even then in 
Popular Science and so forth that cellulosic ethanol was going 
to be 10 years away. That was in 1970. It was still 10 years 
away in the 1980's when I was doing my master's degree in 
molecular genetics and refreshed my knowledge. It is 10 years 
later in the 1990's, and lo and behold it is 2007, and it is 
still 10 years away.
    So it is great to be optimistic, but at the same time one 
has to say if these technologies really are going to succeed, 
the incentive is already infinite that is out there in terms of 
the profit potential. If people really believe it, they don't 
need a subsidy. They just need to go ahead and convince people 
to invest their capital.
    Senator Sanders. Let me ask you a real hypothetical, which 
there is no reason to believe you or anybody else in the world 
knows the answer to. If you took away all of the subsidies, and 
that is, as you know, the nuclear energy industry, for example, 
was built on subsidies, and lives today on subsidies, and coal. 
What is your guess as to what energy does well? What energy 
becomes cost effective?
    Mr. Green. I think you would still find the picture very 
similar to what it is today because of the phenomenon of energy 
density. It is always going to be cheapest to simply pump 
something up that exists, that contains within it the energy to 
refine itself and even to transport itself to market, than to 
use energy to create other forms of energy to generate still 
different forms of energy and move them to market.
    Therefore, pulling oil out of the ground, pulling coal out 
of the ground and burning it would still be the most effective 
and most efficient things to do.
    Senator Sanders. Let me ask you this--and I don't agree, 
but I appreciate where you are coming from--how do you put into 
your free market equation the reality that many thousands of 
people die as a result of the pollution caused by certain types 
of technology--coal and so forth. Kids get asthma and so forth 
and so on. How do you deal with that within the context of a 
free market?
    Mr. Green. That is an interesting question. I grew up with 
asthma in the San Fernando Valley where air pollution in the 
1970's was bad enough that I probably wouldn't be able to read 
your name signs from here. I have always said the thing to do 
from a classical liberal perspective if a harm is done is to 
price that harm, is to put price on it, internalize the 
externality. If it is a genuine externality, internalize it.
    So from the beginning when I started working in public 
policy with Reason Foundation in California, I was for emission 
pricing on vehicles, congestion pricing on highways, parking 
pricing, and requiring employers to give parking----
    Senator Sanders. You would include the damage they do in 
their prices?
    Mr. Green. Yes. I would set the price and let the market do 
its work. The market will find the best response if you set the 
price.
    Senator Sanders. OK. Thanks a lot.
    I think this has been a fascinating discussion, and I think 
you are going to hear a whole lot more of the issues that all 
of you have raised in the coming months and years. Thank you 
very much for your contribution to the process. Thanks.
    The record for this hearing will remain open for 1 week.
    Thank you very much.
    [Whereupon, at 4:05 p.m. the committee was adjourned.]

      Statement of Hon. Benjamin L. Cardin, U.S. Senator from the 
                           State of Maryland

    Thank you for holding this hearing today, and for focusing 
attention on the economic potential of ``green'' and 
``cleantech'' renewable energy industries. In Maryland and 
across the country, these industries are creating thousands of 
new, high-paying jobs. While renewable energy industries--such 
as solar, wind, and biofuels--lack the infrastructure and 
institutional support of the oil, coal, and natural gas 
industries, they are increasingly attracting capital and 
proving their viability and competitiveness with conventional 
fossil fuel-based sources of energy.
    Green energy companies are showing us the future of clean, 
carbon-neutral energy. It is a future that means a cleaner, 
safer, more energy independent America. If we are serious about 
achieving national energy independence and addressing the 
causes of climate change, then these innovative companies and 
their leaders are showing us the way forward. I look forward to 
listening to what they have to say today.
    Sun Edison, a leading solar energy provider based in 
Beltsville, MD, provides a glowing example--pardon the pun--and 
is one of the companies we will hear from today. Using 
photovoltaic panels to capture the natural energy of the sun, 
Sun Edison has developed a successful business model harnessing 
solar energy and selling electricity at increasingly 
competitive rates.
    The company has built solar energy power plants across the 
United States and provides energy to large commercial and 
municipal customers, including Whole Foods, Staples, ACE 
Hardware, and the city of San Diego--all while leaving a 
carbon-neutral footprint. As companies like Sun Edison continue 
to grow, the renewable energy industry has the potential to 
create and sustain hundreds of thousands of safe, high-paying, 
high-tech jobs in our economy.
    I would like to welcome Michael Culpepper, the Vice 
President of Strategic Marketing for Sun Edison, and thank him 
for taking the time to be here with us today and join in this 
very important dialog.
    BP Solar, based in Frederick, MD, is the largest fully 
integrated solar manufacturing facility in the country. It has 
grown from fewer than 50 employees to over 500 in less than 2 
years and shows no sign of slowing down. I visited BP Solar a 
few months ago. We can help companies like BP Solar and Sun 
Edison, and the many more clean energy companies that will 
follow in their footsteps, just by giving them a fair shot at 
success.
    There is a strong consensus among the world's leading 
climate scientists that global warming is happening, that much 
of it stems from burning fossil fuels, and that the 
environmental and economic consequences could be severe.
    As a Senator from Maryland, I am particularly concerned. 
According to 2005 report of the Maryland Emergency Management 
Agency, Maryland is the 3d most vulnerable State to flooding 
and has the 5th longest evacuation times during a tropical 
storm or hurricane event. Tide gauge records for the last 
century show that the rate of sea level rise in Maryland is 
nearly twice the global average. Studies indicate that this 
rate is accelerating and may increase to two or three feet 
along Maryland's shores by the year 2100. Low-lying coastal 
communities such as Smith Island risk being inundated, at 
untold economic costs. I'm pleased the Committee is holding a 
hearing tomorrow on global warming and the Chesapeake Bay. It 
couldn't be more timely.
    The good news is that addressing the threat of climate 
change offers an opportunity--an opportunity both to avert 
catastrophe and to develop new sectors in our economy that will 
provide high-paying jobs here in America and technologies and 
services we can export aboard. Let's harness American science, 
innovation, and technology, which is the greatest in the world. 
I am confident that we can cut greenhouse gas emissions, end 
our dependence on foreign oil, and meet our nation's energy 
needs at the same time.
    Thank you, Madam Chair.

       Statement of Paul Renfrow, Vice President, Public Affairs 
                            OGE Energy Corp.

    My name is Paul Renfrow. I am the Vice President for Public 
Affairs for OGE Energy Corp., which is an electric utility and 
natural gas pipeline company headquartered in Oklahoma City. My 
company and I appreciate the opportunity to come before you 
today to provide what I trust will be a useful perspective for 
you to consider on the issue of green jobs as a result of 
global warming initiatives.
    Our electric utility, which is called OG&E, serves 
approximately 780,000 customers in Oklahoma and western 
Arkansas. Our fossil-fuel generation mix is approximately 60 
percent natural gas-fired, 40 percent coal-fired, and we 
currently have wind power capacity of roughly 3 percent of our 
total generation. Our wind power program is growing quickly and 
is already listed by The National Renewable Energy Laboratory 
as being a leader in terms of size and cost.
    I can report firsthand to you from Oklahoma that the 
interest in environmentally friendly energy and energy related 
consumer behavior is, in fact, providing jobs in our state. The 
most apparent evidence is in the western part of our State 
where wind farms seem to be popping up everywhere. Oklahoma has 
gone from virtually no wind power just a few years ago to being 
ranked 6th nationally in existing installed wind power 
generation capacity today. And, more is on the way. I can 
assure you that OG&E is at least one company that intends to 
add significant amounts of wind power over the next few years. 
In fact we are planning additions in the range of 600 MW by 
2015. And I might emphasize that all of this is happening 
without State or Federal mandates.
    OGE strongly believes that it is incumbent on us as a good 
corporate citizen to both produce reliable and low cost power 
for our customers and to do so in an environmentally 
responsible manner. Our company's response in adopting cleaner 
sources of power generation is therefore motivated not 
necessarily by a legal compulsion but by a belief that it is 
simply the right thing to do. Producing electricity with fewer 
emissions is a rational and worthy objective regardless of 
whether others believe it should be done for reasons related to 
global climate change concerns.
    Our customers want their electricity to be inexpensive and 
reliable, but also as cleanly generated as we can make it. It 
makes good business sense to respond to our customers in that 
regard. It also makes good business sense in our line of work 
to diversify our generation mix to reduce dependency on any one 
fuel choice option. The history of legislated fuel choice 
mandates in Oklahoma is strewn with undeniable and expensive 
disaster stories. OGE's experience with PURPA's mandatory 
purchase obligation is a prime example of what was destructive 
about that Federal policy, costing the ratepayers of Oklahoma 
billions for unneeded but mandated purchases of power that was 
priced out of market.
    The bottom line is that our efforts to invest in ever 
cleaner sources of generation is not premised on global climate 
concerns, but rather on the parallel notion that producing 
power with diversified sources as cleanly as possible is simply 
good business and simply the right thing to do.
    But the subject today is jobs. Those wind farms I 
previously mentioned employ people to secure the land and 
obtain rights of way; people to construct the equipment at the 
factory; people to transport the equipment and people to 
install and operate the machinery. OGE now has an in-house 
development team aggressively finding and evaluating renewable 
projects--which in our State means wind projects since we lack 
other alternatives. We work with wind developers across the 
State to determine the feasibility of such new projects. On the 
transportation side, I might note that what used to be the 
remarkable sight of tractor trailer rigs hauling 120 foot wind 
turbine blades across the State has now become common place and 
barely elicits a second glance.
    One important reality you should understand about our wind 
resources in Oklahoma is that the wind tends to be where people 
are not, meaning that the commercial quality wind sites 
overwhelmingly tend to be in the very rural western part of 
Oklahoma. The significance of this is that these rural areas 
tend not to have existing transmission lines necessary to 
transport the wind power to load centers where it can be used. 
We are working with the Southwest Power Pool to plan and 
construct new transmission lines to deliver the wind power from 
remote areas of the State to the load centers, which will 
entail the investment of hundreds of millions of dollars. 
Again, building the necessary transmission for wind power 
results in more jobs for engineers, construction workers, 
utility linemen, and, of course, lawyers, rate specialists and 
regulatory personnel needed to handle those aspects of such new 
generation.
    In addition to wind power, we are renewing our interest and 
focus on demand side management (``DSM'') programs aimed at 
reducing energy use. Through programs like time of use rates, 
weatherization programs, highly efficient lighting and 
appliance incentive programs, commercial and industrial load 
curtailment programs and consumer education we are already 
reducing our system's demand for power by approximately 200 
megawatts and with additional customer education, better 
technology such as smart meters and other programs, we believe 
that there is another 100 or so megawatts of additional energy 
savings to be obtained.
    Demand side management provides jobs as well. At OG&E we 
have a team of 9 full time employees who design, plan and 
implement these programs. It takes people from our rates, 
engineering, marketing and communications departments for these 
programs to work. We even employ some of our retired OG&E 
employees to help us with programs like weatherization.
    But as we talk about jobs that are related to the 
environment, I want to emphasize that in our view the concept 
of ``green jobs'' extends beyond those associated solely with 
renewable resources and conservation. OG&E sees the notion of 
``green jobs'' as legitimately extending to our efforts to 
provide the next generation of coal-fired facilities in an 
environmentally beneficial way. I am not suggesting that coal 
plants should carry the label of ``green power'' but I am 
saying that advancements in technology are allowing for the 
addition of ever more environmentally responsible coal fired 
generation. In this regard, I want to share with you an 
extremely relevant experience we have just gone through in 
Oklahoma.
    Our State has a wonderful problem. The economy is strong 
and growing. And with that growth comes a demand for power. As 
a result, OG&E's system is in need for base load generation in 
the 2012 timeframe. Our sister utilities in the state, Public 
Service Company of Oklahoma and the Oklahoma Municipal Power 
Authority were experiencing the same need in the same 
timeframe. We partnered with those two utilities to propose 
building one 950 megawatt ultra super critical coal-fired power 
plant together rather than each of us individually building, 
smaller, less efficient plants scattered across the state. An 
ultra-supercritical plant represents the very latest in state-
of-the-art technology and offers major efficiency and 
environmental performance advantages over older technology.
    In reaching the decision of what type of plant to build, we 
quickly discounted wind power because it is not suitable for 
base load generation. We also discounted nuclear because our 
need for power is in 2012 which would be impossible to meet 
with the timeframes associated with nuclear plant construction. 
We have no appreciable untapped hydro power to speak of in 
Oklahoma and it was apparent we could not conserve our way out 
of the need for base load power. So that left gas and coal as 
our effective options.
    Both those fossil fuel options come with pros and cons. 
Natural gas is certainly a cleaner burning fuel, but comes with 
high prices and enormous price volatility. We have low electric 
rates in Oklahoma but because the summers are so hot and so 
long, electric bills can be quite high since our customers tend 
to use a lot of electricity for air conditioning. By the same 
token, just 2 winters ago we were in emergency meetings trying 
to determine how we could supplement the funding of public and 
private low income assistance programs that were not going to 
be able to meet the projected heating needs of those customers 
that winter due to gas prices that had spiked over $10. 
Consequently, summer or winter, we very much understand from 
our customers how much importance they attach to the price of 
their power.
    Coal on the other hand is both abundant domestically and 
significantly cheaper than natural gas--even with the 
uncertainties of future environmental regulation factored in--
it still handily beats the price of natural gas by many 
multiples. Clearly, however, the downside to coal is the 
environmental cost concern.
    Being sensitive to the environment and to the economic 
needs of our customers, we decided to build the coal plant, 
but, to mitigate the environmental concerns, we didn't propose 
just any coal plant. We stepped up to build a state-of-the art 
ultra-super critical plant that is the best proven technology 
available to us today. With the addition of this plant, OG&E's 
projected carbon footprint was projected to be as much as 3 
percent lower than today. This would be accomplished by being 
able to reduce the use of our less efficient plants and through 
increased use of wind power.
    After a lengthy and thorough public review and comment 
process at the Oklahoma Corporation Commission, an 
administrative law judge issued a recommendation strongly in 
favor of approval of the plant, citing $5.5 billion in customer 
savings compared to deployment of a gas-fired base load 
alternative. Nonetheless, 2 weeks ago, our application was 
denied in a 2-1 vote by the Oklahoma Corporation Commissioners. 
While a written order expressing the definitive basis for the 
majority's decision to reject the recommendation of the ALJ's 
report has not yet been issued, from the oral comments at the 
time of the vote it appears that the majority cited concerns 
about process, the evidence of the need for the power, and cost 
recovery. Of special interest to this Committee, environmental 
concerns per se were not identified as reasons for denial of 
the application.
    While one need not necessarily agree with our 
characterization of our proposed ultra-supercritical plant as 
``green power'', it is clear to us that this plant was an 
environmentally responsible option for us to meet the base load 
need. This story is relevant to the hearing today because of 
its jobs impact. This plant was going to directly provide about 
1,000 construction jobs for 5 years or more with dozens more 
jobs required to operate the plant on a permanent basis. That 
doesn't include all the indirect jobs associated with the 
purchase of fuel and supplies, transportation, housing, retail, 
etc. that would have resulted as well.
    I would draw the Committee's attention to several aspects 
of this recent experience:
    First, the new coal-fired technologies such as ultra-super 
critical and IGCC should be viewed the same as ``green'' 
facilities. Such nomenclature would be beneficial in promoting 
the understanding of their environmental purpose and value.
    Second, in terms of the number of jobs produced, these new 
coal-fired facilities create a lot more environmentally 
responsible jobs than do construction and operation of 
renewable-fueled facilities. On any basis of comparison the job 
creating value of these new plants is enormous.
    Third, I would emphasize that beyond the jobs that would 
have been created by the construction and operation of the 
proposed plant, the $5.5 billion in savings to electric 
consumers in Oklahoma would have been a very substantial 
economic engine for enhanced competitiveness and prosperity in 
the region and as an inducement for expanding jobs and 
attracting new job-creating investment into Oklahoma. While we 
need not attempt to categorize that economic activity and its 
job creation as ``green jobs'' per se, the point is that one 
has to appreciate that building the new generation of coal-
fired facilities that will produce low cost electricity is 
simply critical to the overall welfare of our community. And 
that raises a very important additional point on the broader 
``jobs'' story that deserves some elaboration.
    In recent years, we, like many other states, have had our 
share of manufacturing plant closings. Just in the Oklahoma 
City area alone we have had a large tire plant and an 
automobile plant close, taking with them in excess of 4,000 
jobs. In each case, we were called upon by many, including the 
Governor of our state, to see if there was anything we could do 
to lower the energy costs of these plants. We did what we could 
at the time, but were unable to do enough on our own to 
convince the manufacturer to preserve the local plants and the 
associated jobs.
    In each of these instances, we heard the message loudly and 
clearly that the cost of energy matters to businesses and that 
is a key reason we proposed the ultra-supercritical coal-fired 
solution--with its $5.5 billion in customer savings--for 
keeping energy costs low.
    It is ironic that, generically speaking, many of our 
manufacturers leave the U.S. for lower energy and labor costs 
and wind up in countries with who-knows-what kind of government 
monitoring and enforcement of pollution controls. We certainly 
think it would be better to keep those jobs here and provide 
energy that is low cost and sensitive to environmental impact.
    So, as you examine this subject, OG&E encourages you to 
broaden your view to include renewable energy, demand side 
management and more state-of-the-art fossil fueled generation 
as desirable. Furthermore, Congress should be adopting a public 
policy response that facilitates construction of this new 
generation of cleaner fossil fuel-based facilities. By this I 
mean Congress should provide not mandates but incentives such 
as suitable tax, cost recovery and regulatory policies that 
will help utilities design and plan such facilities and 
actually expedite their construction and entry into operation. 
It is not enough to provide incentives only for renewables and 
their associated ``green jobs.'' The contribution of renewables 
is important but limited since they cannot serve as base load 
capacity. Given the relative greater role that coal and nuclear 
generation must play in the future as base load facilities, it 
is practical to consider providing incentives for these 
technologies and their associated jobs.
    On behalf of OG&E, I want to thank you for the opportunity 
to share our views. I am pleased to provide any additional 
information that you find helpful.

  Statement of Dorothy Rothrock, V.P. Government Relations California 
                 Manufacturers & Technology Association

    Good morning Madam Chair and members. Thank you for having 
me here today to talk about climate initiatives and green 
technology development.
    The CMTA represents a broad spectrum of large and small 
manufacturers and technology companies in California. We 
advocate for tax, energy, environmental, litigation and labor 
policies that will keep these outstanding companies competitive 
and growing in the state.
    In AB 32, California decided to cap greenhouse gas 
emissions at 1990 levels by the year 2020. Reaching the goals 
of AB 32 will depend on development of new technologies that 
are both cost effective and technologically feasible. 
Therefore, one of the hoped for outcomes of
    AB 32 is to spur new investments in green technologies to 
the benefit of California and the Nation. But AB 32 only 
imposes the cap and directs the California Air Resources Board 
and other agencies to develop regulations. It does not create 
policies to support new green technology development.
    It is too soon to tell whether California will reap the 
benefits of new green technology company growth in the State 
because of AB 32 or other climate initiatives. Even before AB 
32 there have been opportunities for energy efficiency and 
renewable technologies to succeed in California ? we have a 
renewable portfolio standard and very high energy prices. To 
remain competitive, industries have adopted best practices and 
modern technologies to become highly efficient. For example, a 
steel company in Southern California has nearly doubled 
production since 1990 with only a 19 percent increase in carbon 
emissions.
    Even if AB 32 encourages new green tech companies to grow 
in the state, we don't know if it will make up for economic 
losses that could be caused by an incorrect implementation of 
AB 32. I hope the focus of this hearing is on how California 
and the rest of the country can grow green technology companies 
to help meet the climate change challenge while maintaining a 
healthy economy.
    It is noteworthy that the last technological revolution, in 
computer information technologies and the internet, occurred 
without heavy handed government programs. The power of ever 
faster and smaller digital technologies was simply irresistible 
to companies that wanted to increase productivity and consumers 
who wanted to improve their quality of life. We didn't put a 
cap on analogue transmissions or impose taxes to discourage its 
use. Yet companies selling digital information technologies are 
now some of the largest and most successful in the world.
    Let's learn from that experience and go beyond the debate 
about whether we should impose emission caps, voluntary 
emission targets, carbon taxes, or other programs on the 
economy. We should focus first and foremost on the policies 
that will create the conditions in which green technology 
businesses will be able to succeed, and the policies that will 
encourage industries and consumers to purchase and use the 
technologies. This work is vital no matter what scheme is 
adopted for greenhouse gas emission reductions.
    For example, making California more attractive for green 
technology company development will take much more than passage 
of AB 32--we need to overcome significant barriers to economic 
development, such as:

     The cost of doing business for California manufacturers 
is 23 percent above the national average. (This is a 
devastating premium when you consider that the US average cost 
of doing business is nearly 32 percent higher than our trading 
partners.)
     California is one of only three states that imposes sales 
taxes on the purchase of manufacturing equipment without an 
offsetting tax credit.
     Our labor laws require overtime pay after 8 hours in a 
day rather than after 40 hours a week.
     Permitting processes for facilities development or to 
install major new pieces of equipment are lengthy and 
expensive.
     Companies can't find skilled welders, machinists and 
other technicians because career and technical education 
courses are disappearing from the middle and high schools and 
students are dropping out in record numbers.

    At the State level we need to take care of these 
challenges. At the national level, we need a unified and 
strategic program for climate change along with the incentives 
and policies to reach the goals. We agree with the National 
Association of Manufacturers that we should make permanent the 
R&D tax credit, increase funding for DOE's energy efficiency 
programs, authorize an energy efficiency loan program to spur 
efficiency gains with longer term paybacks, and increase R&D on 
combined heat and power, distributed generation, carbon capture 
and storage, and diesel technology. Leadership on the 
technology development front could be provided by a new agency 
within DOE dedicated to overcoming the long-term, high risk 
technological barriers to the development of advanced energy 
technologies.
    Thank you for your consideration of my testimony today.


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