[House Hearing, 111 Congress]
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HEARING
BEFORE THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
----------
JANUARY 15, 2009
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Serial No. 111-1
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Printed for the use of the Committee on Energy and Commerce
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THE U.S. CLIMATE ACTION PARTNERSHIP
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HEARING
BEFORE THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JANUARY 15, 2009
__________
Serial No. 111-1
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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20402-0001
COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan JOE BARTON, Texas
Chairman Emeritus Ranking Member
EDWARD J. MARKEY, Massachusetts RALPH M. HALL, Texas
RICK BOUCHER, Virginia FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida
BART GORDON, Tennessee NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York ROY BLUNT, Missouri
GENE GREEN, Texas STEVE BUYER, Indiana
DIANA DeGETTE, Colorado GEORGE RADANOVICH, California
Vice Chairman JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California MARY BONO MACK, California
MIKE DOYLE, Pennsylvania GREG WALDEN, Oregon
JANE HARMAN, California LEE TERRY, Nebraska
TOM ALLEN, Maine MIKE ROGERS, Michigan
JAN SCHAKOWSKY, Illinois SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas TIM MURPHY, Pennsylvania
JAY INSLEE, Washington MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York STEVE SCALISE, Louisiana
JIM MATHESON, Utah PARKER GRIFFITH, Alabama
G.K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
______
Professional Staff
Philip S. Barnett, Staff Director
Kristin L. Amerling, Chief Counsel
Earley Green, Chief Clerk
David Cavicke, Minority Staff Director
(ii)
C O N T E N T S
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Page
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 1
Prepared statement........................................... 3
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 6
Hon. Lois Capps, a Representative in Congress from the State of
California, opening statement.................................. 6
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 6
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 8
Hon. John B. Shadegg, a Representative in Congress from the State
of Arizona, opening statement.................................. 9
Hon. Doris O. Matsui, a Representative in Congress from the State
of California, opening statement............................... 11
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 12
Hon. Donna Christensen, a Representative in Congress from the
Virgin Islands, opening statement.............................. 13
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 14
Hon. Zachary T. Space, a Representative in Congress from the
State of Ohio, opening statement............................... 15
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, opening statement..................................... 16
Hon. Betty Sutton, a Representative in Congress from the State of
Ohio, opening statement........................................ 17
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 18
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 18
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 19
Hon. Gene Green, a Representative in Congress from the State of
Texas, prepared statement...................................... 20
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 21
Hon. John P. Sarbanes, a Representative in Congress from the
State of Maryland, opening statement........................... 22
Hon. Roy Blunt, a Representative in Congress from the State of
Missouri, opening statement.................................... 23
Hon. G.K. Butterfield, a Representative in Congress from the
State of North Carolina, opening statement..................... 25
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 25
Hon. Henry Waxman, a Representative in Congress from the State of
California, opening statement.................................. 27
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 28
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 30
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 31
Witnesses
Jeffrey R. Immelt, Chairman and Chief Executive Officer, General
Electric....................................................... 33
Prepared statement........................................... 35
Answers to submitted questions \1\...........................
Jim Rogers, Chairman, President, and Chief Executive Officer,
Duke Energy.................................................... 41
Prepared statement........................................... 42
Answers to submitted questions............................... 145
Frances Beinecke, President, Natural Resources Defense Council... 51
Prepared statement........................................... 53
Answers to submitted questions............................... 153
Fred Krupp, President, Environmental Defense Fund................ 56
Prepared statement........................................... 57
Answers to submitted questions............................... 171
Eileen Claussen, President, Pew Center on Global Climate Change.. 60
Prepared statement........................................... 61
Answers to submitted questions \1\...........................
Peter A. Darbee, Chairman, Chief Executive Officer, and
President, PG&E Corporation.................................... 66
Prepared statement........................................... 67
Answers to submitted questions............................... 182
Preston Chiaro, Chief Executive Officer, Rio Tinto............... 71
Prepared statement........................................... 72
Answers to submitted questions............................... 191
James Mulva, Chairman and Chief Executive Officer, Conoco-
Phillips....................................................... 78
Prepared statement........................................... 79
Answers to submitted questions............................... 205
Jonathan Lash, President, World Resources Institute \2\..........
Prepared statement........................................... 84
Answers to submitted questions............................... 220
George Nolen, President and Chief Executive Officer, Siemens
Corporation \2\................................................
Prepared statement........................................... 90
Answers to submitted questions............................... 238
John Rowe, President and Chief Executive Officer, Exelon
Corporation \2\................................................
Prepared statement \3\.......................................
Answers to submitted questions............................... 251
David Crane, President and Chief Executive Officer, NRG Energy,
Inc. \2\.......................................................
Prepared statement........................................... 95
Answers to submitted questions............................... 265
Mark Tercek, President and Chief Executive Officer, The Nature
Conservancy \2\................................................
Prepared statement........................................... 99
Answers to submitted questions............................... 277
Jeffry E. Sterba, Chairman of the Board and Chief Executive
Officer, PNM Resources \2\.....................................
Prepared statement........................................... 105
Answers to submitted questions............................... 289
Submitted Material
Letter of February 19, 2009, from United States Climate Action
Partnership, to Hon. Henry Waxman and Hon. John Dingell........ 305
----------
\1\ Mr. Immelt and Ms. Claussen did not respond to submitted
questions for the record.
\2\ Messrs. Lash, Nolen, Rowe, Crane, Tercek, and Sterba did not
present oral statements at the hearing.
\3\ Mr. Rowe did not submit a prepared statement for the record.
THE U.S. CLIMATE ACTION PARTNERSHIP
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THURSDAY, JANUARY 15, 2009
House of Representatives,
Committee on Energy and Commerce,
Washington, DC.
The committee met, pursuant to call, at 9:15 a.m., in room
2123, Rayburn House Office Building, Hon. Henry Waxman
(chairman of the committee) presiding.
Present: Representatives Waxman, Dingell, Markey, Pallone,
Rush, Eshoo, Stupak, Green, DeGette, Capps, Doyle, Harman,
Schakowsky, Gonzalez, Inslee, Baldwin, Matheson, Butterfield,
Melancon, Barrow, Hill, Matsui, Christensen, Castor, Sarbanes,
Murphy of Connecticut, Space, McNerney, Sutton, Braley, Welch,
Barton, Hall, Upton, Whitfield, Shimkus, Shadegg, Blunt, Pitts,
Bono, Walden, Terry, Rogers, Murphy of Pennsylvania, Burgess,
Blackburn, and Gingrey.
Staff Present: Phil Barnett, Kristin Amerling, Karen
Lightfoot, Greg Dotson, Alexandra Teitz, Lorie Schmidt, Earley
Green, Caren Auchman, Zhongrui ``JR'' Deng, Rob Cobbs, Matt
Weiner, Alex Barron, Melissa Bez, Carla Hultberg, Caitlin
Haberman, Matt Eisenberg, Amanda Mertens Campbell, Andrea
Spring, Jerry Couri, Peter Spencer, and Garrett Golding.
Mr. Waxman. The meeting of the Committee will please come
to order. We are here today for a hearing. And before we even
call our witnesses in the room, we are going to recognize
members for opening statements.
Mr. Pallone, are you prepared for your opening statement?
Mr. Pallone. Sure.
Mr. Waxman. The gentleman is recognized for 5 minutes.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman.
I want to first thank you all for--I was going to say thank
all the panel, but they are not here yet, so I will forego
that.
The U.S. Climate Action Partnership, USCAP, has called for
leadership in calling for national legislation to slow, stop,
and reverse the growth in greenhouse gas emissions. It is
encouraging to see such a broad coalition of leaders from the
energy industry, financial services, and the environmental
community working together to reduce carbon emissions. Everyone
here understands the serious threat global climate change
represents to the world.
The Fourth Assessment Report of the Intergovernmental Panel
on Climate Change predicted serious risks and damages to
species, ecosystems, and human infrastructure if action is not
taken to reduce emissions. It is time for Congress to pass
legislation that will set the necessary emission reduction
targets and will ensure we meet those targets in the short and
long term. We cannot afford to wait another year to act.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Pallone follows:]
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Mr. Waxman. Thank you very much, Mr. Pallone.
The gentleman from Kentucky.
Mr. Whitfield. Thank you, Mr. Chairman. It is my
understanding that we have 1-minute opening statements?
Mr. Waxman. No, we are giving members 5 minutes.
Mr. Whitfield. Oh, 5 minutes. OK. Thank you, Mr. Chairman.
Mr. Waxman. You don't have to take 5 minutes.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. OK. I want to thank the chairman for having
this hearing today with testimony from the United States
Climate Action Partnership.
I might note that last night I was looking at the Web site
of the partnership, and I noticed that, a few months ago, they
conducted a poll in 46 swing congressional districts. And in
that poll, they asked the question of whether or not stringent
climate change enforcement efforts should be taken in the
United States even though action would not be taken in China
and in India. And that raised an interesting question in my own
mind, because with the economy being what it is today, not only
in the U.S. but around the world, I think if there is ever a
time that we have to be cognizant and aware of additional costs
to produce electricity, to produce energy, and particularly so
if other countries are not taking the necessary steps to
address this issue as well.
So I would also point out that I was reading an article in
the New York Times just recently, and it was talking about the
cap-and-trade system in Europe. And it points out that in
Europe, which created the world's largest greenhouse gas market
3 years ago, early evidence suggests the whole approach could
fail. It specifically says that, this week, the European
Environment Agency reported that emissions from factories and
plants that trade pollution permits rose in 2006 over the
previous year, and it also rose the first 2 years of the
operation of the cap-and-trade system.
So while the U.S. Climate Action Partnership is a strong
advocate for some of these programs, I think at this particular
time in the history of our country, with the economy being what
it is, we have to move cautiously to reflect upon the
additional costs that anything we might do will bear on
production of energy. And if the U.S. has an undue amount of
that cost, then it certainly will place us at an economic
disadvantage with other developing economies around the world.
So, with that, I yield back the balance of my time.
Mr. Waxman. Thank the gentleman for his opening statement.
Ms. Capps?
OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Capps. Thank you, Mr. Chairman, for holding this
hearing with the U.S. Climate Action Partnership.
My remarks will be limited to a minute. But I do want to
thank these companies and organizations for their blueprint for
legislative action, and to let them know that it makes an
important contribution to helping solve the global warming
problem.
Our witnesses agree that now is the time for action. They
agree on the creation of a mandatory economic-wide program to
address global warming. They also agree on a more aggressive
emission reduction schedule with significantly narrowed ranges.
What is more, the companies and groups before us today also
make clear that by acting now, we can help, and not hurt, the
economy.
Through global warming legislation we can drive the
development of new technologies. We can create new American
jobs, and we can support workers in the transition to a green
economy. It will be a challenge to enact meaningful
legislation, but it can be done.
And I join you, Mr. Chairman, in supporting that notion.
We must face the challenge of global warming now. It is one
of the great challenges of our generation. And with the help of
groups and businesses like those in the Climate Action
Partnership, this is a challenge we can and we will meet. I
look forward to the testimony of our witnesses, and to passing
the strongest global warming bill that we can.
Thank you, and I yield back.
Mr. Waxman. Thank you, Ms. Capps.
Mr. Shimkus?
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman.
A terrible start to hopefully a better year. It started
yesterday. Now we are faced with a preparation time of 1
minute, now granting 5. My complaint yesterday was that it is
important for USCAP to hear our comments. Of course, they are
not here. And I understand they are doing a press conference.
So it is more important for USCAP to do a press conference,
probably with the vast majority of my colleagues on the other
side of the aisle, versus hearing the concerns of over 670,000
people in my congressional district about how global climate
change will cost jobs.
I am going to hold the fossil fuel Democrats accountable.
If there is any place you are going to be held accountable in
this Congress, it is going to be in this committee. So if you
are from a coal-producing State or a petroleum-producing State,
you better get prepared to defend your votes, as global climate
change will destroy the fossil fuel industry.
So I am just giving you notice. If, on the floor, we can't
get these amendments on the floor, you will be held accountable
in this committee, if we proceed through regular order, on the
movement that will destroy coal in this country. It will
destroy crude oil production in this country. So be prepared
for a battle.
I can't address USCAP; they are not here. It is interesting
in their first release of their report, guess what they have?
It is not in the new one. We only got this--this was released
an hour and 15 minutes ago. In their first release, what do
they have as a picture in their portfolio? They have a trading
floor. A trading floor. My question is, why is that trading
floor no longer in this report? You know why? Because we are
bailing out Wall Street because of traders who abused the
system.
Let's develop, this is a great idea, let's develop a
trading floor for U.S. emissions, and let's let the big money
folks at Goldman Sachs control it. Is that a great idea in this
environment? That is what is being proposed.
I have talked in this committee numerous times about a
carbon tax. At least it is honest. Because climate change does
a simple premise: It monetizes carbon. It puts a value to
carbon. And someone is going to pay that cost. Now, the cap-
and-trade system is a shell game to hide the cost from the
ultimate person who is going to pay. And who is that person who
is going to pay? The person who is going to pay is the
individual consumer, because industry is going to pass those
costs on. Great idea in a struggling economy. The best thing we
can do to help the economy move forward is increase the cost of
energy when we can only be competitive in a worldwide
environment if we have low-cost fuel.
We saw, part of this recession is because we don't have a
diversified fuel portfolio. We have been sending signals to the
fossil fuel industry that, we do not want to use your low-cost
fuel. And what has happened? The supply-and-demand curve
increased the cost. Now we have low-cost fuel. Why? The economy
is in a recession.
Do we want to continue to move in that direction? This, my
friends, guarantees, guarantees rural America, coal-producing
States more job loss. How do I know this? It has happened. Go
back to the Clean Air Act. Go back to my congressional
district. Go back to the numerous coal mines. I have a picture
being produced, sent to me in Kincaid, Illinois. Great picture.
All these miners, all this equipment, all these facilities, no
longer there. Closed. And I know those folks who are from coal-
producing States understand.
And again, I appreciate this extra time, Mr. Chairman. I
fear that giving USCAP the opportunity to roll this out in a
press conference instead of hearing the concerns from the
people in my congressional district is a terrible, terrible,
bad start on a very important issue that will take bipartisan
activity. And I will again just put my fossil-fuel Democrats on
record. They know the work we did in the last Congress of
raising the issue of coal on the floor of the House. With new
rules, we may not get that chance. I can guarantee you, I can
guarantee you, coal, you will get a chance to vote in support
of coal as this legislation moves forward.
I yield back.
Mr. Waxman. Thank you very much.
Ms. Harman?
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman.
I want to say to you that I appreciate the opportunity to
give a brief opening statement. I think it will afford
especially our new members a chance to put their views out. And
I know, based on your history, that you will conduct this
committee in a way that does give the newest members an
opportunity to be heard. So as a fairly old member, I want to
thank you on their behalf.
One of my children's favorite books was called, ``It is a
Terrible, Terrible, Very Bad Day,'' by Judith Viorst, a
wonderful Washington writer. Unlike Mr. Shimkus, I don't think
it is a terrible, terrible, very bad day. I actually think it
is a pretty terrific first hearing for this committee. And I
look forward to being back when our witnesses will testify and
to putting a few views forward.
USCAP is a partnership between public policy, nonprofits,
and the private sector. And I want to say that, in my view,
public-private partnerships can work, and the model is an
excellent one for us to use as the basis for legislation,
critical legislation, that we are going to be embarked on in
the energy area.
This committee, for example, helped broker a public-private
partnership on a range of energy-efficiency issues in our 2007
Energy Independence and Security Act. Congressman Upton and I
were extremely active on one of those partnerships regarding
energy-efficient light bulbs. We worked with leading
environmental groups, like the NRDC and the lighting industry,
including Philips and Mr. Immelt's General Electric. It wasn't
an easy process. The parties started negotiations very far
apart. But with lots of work and the willingness of all sides
and both sides of the aisle on this committee to listen
respectfully to each other, we managed to craft groundbreaking
legislation. We banned the 100-watt incandescent light bulb and
required all lighting sold in the United States to be 30 to 40
percent more efficient than it is today by 2014 and 300 percent
more efficient by 2020. We laid the groundwork for bringing
lighting manufacturing back to the U.S. and to overcoming
concerns about mercury, which is in some of the existing light
bulbs presently produced.
I think that our public-private partnership can be a model
for future legislation, including legislation on the subject of
climate change. And I think that USCAP will help us craft
legislation that is both far-reaching and driven by consensus.
I hope this committee and our witnesses will use the public-
private partnership model as we move forward.
And again I thank you for the opportunity to put my views
out there.
Mr. Waxman. Thank you very much.
Mr. Shadegg?
OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARIZONA
Mr. Shadegg. Thank you, Mr. Chairman.
I would begin by expressing my support for the comments
made by my colleagues Mr. Whitfield and Mr. Shimkus.
I think we ought to talk about the procedure for this
hearing, because I am deeply troubled by it. And I won't make a
judgment call as to whether it is fair or appropriate. I will
let the public and the people in this room make that judgment
call.
To my knowledge, this is the first time that in a routine
hearing before this committee, members have been compelled to
give their opening statement without the witnesses present.
That is one of the opportunities where we as a member of the
committee get an opportunity to express ourselves to the full
panel about an issue. It was a concern expressed in yesterday's
debate about the denial of opening statements to the members of
the panel. But today I don't get the chance to make my concerns
about this issue apparent to the members of the panel during an
opening statement.
Instead, as Mr. Shimkus noted, they are holding a press
conference, I understand, over in the Cannon Building, where
they can't hear me express either my concerns or the concerns
of my constituents about the issue, point one.
Point two, the minority was told that it could not have a
minority witness on this panel. If it wanted a minority witness
or a minority panel, it had to have it on a separate panel, and
they had to be prepared to talk about this report, which was
issued only, as my colleague Mr. Shimkus noted, an hour and 15
minutes ago. Pretty difficult to ask a witness to come before a
United States congressional committee and be prepared to answer
questions about a report that they have for only an hour and 15
minutes. And so the minority declined to have any witnesses. I
think that is a stifling of the minority's rights.
Next we were told that these witnesses will have a very
limited time, indeed that the distinguished CEOs who will be
here--the Chairman of ConocoPhillips; the Chairman of Duke
Energy; the President and CEO of Exelon; the Chairman and CEO
of General Electric; the President and CEO of NRG; the Chairman
and President of PG&E; the Chief Executive of the Energy Rio
Tinto; the President and CEO of Siemens--all are on a very
limited time period, and they can arrive here at 10 or 10:30
but will have to leave by 12:30.
So therefore, Congressman Shadegg, it is highly unlikely
you will get to ask them any questions, but certainly Mr.
Gingrey at the bottom of this dais will not get to ask them any
questions. Again, a repression of the ability of the minority
to express its views, forget majority-minority, just of
congressmen to express their views to the members of the panel.
I am deeply troubled by that.
I share Mr. Shimkus's concerns about the effect of carbon
cap and trade on this economy. I worry about its impact on
jobs.
I would like to, on the substance of this hearing, make the
point that I believe we need to act prudently. There are many
things that we can do right now to reduce greenhouse gases that
will have two benefits, not just one. There are other things
that we could do right now to reduce greenhouse gases that will
have only one benefit and will have a significant cost. Let me
explain that. If we as a Congress were to require dramatically
more efficient buildings in this country, buildings that were
built by landlords who didn't care about how efficient they
were to make them more efficient, that would both reduce
greenhouse gases and reduce our consumption of energy in
general and reduce our consumption of foreign oil. Good policy,
two benefits. If we were to do the same with homes, two
benefits: reduce greenhouse gases and reduce our consumption of
energy and our consumption of foreign oil. Same with more
efficient automobiles, alternate vehicles, alternate fuels,
wind, fuel, solar. There are a lot of things we can do that
will have two benefits: It will reduce greenhouse gases and
also reduce our use of energy in general and reduce our
reliance on foreign countries, some of whom are not our
friends, for energy, period.
But we don't get to discuss that today because we are only
discussing cap and trade. Cap and trade, I would suggest to
you, is a single-benefit strategy. It will not reduce our
consumption of energy. It will not reduce our consumption of
foreign oil. But I don't get to tell the executives who are
coming here any of that because I don't get that chance. I want
them and their lobbyists to know that I intend to submit
questions in writing in them to find out if those CEOs came
here by corporate aircraft, if they have calculated the carbon
footprint of their corporate aircraft, if they know how much it
will cost their company to buy the carbon credits to keep all
of their corporate aircraft in the air, and if they are willing
to report that cost to their stockholders in their annual
report so that, as Mr. Shimkus points out, the cost of buying
these cap-and-trade permits, which is going to be borne by the
American public and is going to cost us jobs, is known.
I agree with Mr. Shimkus, a straightforward carbon tax
would tell the American people what this costs. A cap-and-trade
system is designed to hide that from the American consumers.
And the American consumers deserve the truth.
I thank you, and I yield back.
Mr. Waxman. Thank the gentleman.
Just for the record, members should know the following. The
purpose of a hearing is to hear what the witnesses have to say,
not to tell the witnesses just what we have to say. But we will
have an opportunity to ask questions of the witnesses or their
designees if some of the CEOs cannot stay. So members are not
going to be denied the opportunity to be questioned--members
are not going to be denied the opportunity to question or make
statements to the people from USCAP.
Mr. Shimkus. Would the chairman yield?
Mr. Waxman. Let me just finish this other point. We did
not set any criteria for minority witnesses that they had to
say this or they had to say that. We had no requests for
minority witnesses. This is not the last hearing on the issue.
And we certainly are going to have many witnesses with many
points of view.
Who asked me to yield?
Mr. Shimkus. Mr. Chairman, but it is true that many of
these titans of industry are leaving at 12:30. So the
individual CEOs who we may want to ask questions of will not be
there.
Mr. Waxman. That is correct. And that was an understanding
we had with Mr. Barton, because they are not going to stay,
each of them, for the whole hearing. But there will be their
designees to answer questions who are very familiar with their
proposals.
Mr. Shimkus. And with all due respect, I don't want to
talk to the designee; I want to talk to the CEOs. I yield back.
Mr. Waxman. Let's see. The gentlewoman from California,
Ms. Matsui.
OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Matsui. Thank you, Mr. Chairman.
And I thank you very much for calling today's hearing. I
applaud your leadership and vision on this critical and
pressing issue.
I also would like to commend Chairman Markey on his
tireless work focusing our attention on the problem of climate
change. I am eager to work with both of you and with all my
colleagues on this committee and on the Energy and Environment
Subcommittee.
In my hometown of Sacramento, we live at the confluence of
two great beautiful rivers. The constant threat of flooding
makes it even more urgent than ever that we address the issue
of climate change. Unless we take action now, our way of life
in Sacramento, in California, and across this Nation will be
changed forever. I look forward to hearing from each of today's
witnesses about how we can advance solutions that are
effective, innovative and efficient.
I, again, thank you for your leadership on this issue, Mr.
Chairman.
I yield back the balance of my time.
Mr. Waxman. Thank you very much.
The gentleman from Oregon.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Thank you very much, Mr. Chairman.
And I want to cover a couple of points. I had the
opportunity, as did several of my colleagues last summer, to
spend an evening with some of these CEOs talking about their
ideas and their proposal for cap and trade. And I remember
asking the CEO of General Electric at this dinner, and the
others, I said, now, in order for a cap-and-trade system to
work, you have to price energy higher than it is today.
And they all agreed with that.
I said, well, you have some of the smartest financial
people in the world working for your companies; how much more
does energy have to be priced at to create a trading market?
And they hemmed and hawed a bit, and I threw out the idea of
like $20 to $25 a ton of carbon, which I think is what it
trades for in Europe. And they didn't disagree with that.
I said, so the price of energy will naturally be higher
once you assume you have to have a higher price to create a
market to trade in. And they agreed.
I said, so if the price of energy is higher as a result of
the policy that Congress adopts, and I am supposed to go home
and sell to my constituents, it is good for them and for the
country and the globe, then would each of you, and I would ask
them this today if I get a chance, commit in your companies not
to chase cheaper energy elsewhere in the world for your
manufacturing? I think that is a pretty simple request.
None of them would commit to that, and said so. So it
strikes me as odd that, at a time when our country is facing
unprecedented economic problems, that we have these CEOs asking
for higher energy costs but unwilling to commit not to chase
cheaper energy elsewhere in the world for manufacturing. That
bothered me a lot.
Now, I am not sure what they are about, to tell you the
truth. I do know, as I look at the people who are involved,
they are very respected people and companies. But I also
recognize some names that, frankly, the taxpayers are having to
bail out right now, like AIG. And many of these companies, I
think, seek--would benefit from whatever happens in a cap-and-
trade proposal, especially if you are a trader.
And in meetings I have had overseas with some of the
European leaders and all, it seemed to me, over time, the
people most aggressively advocating a cap-and-trade system were
those who were going to be trading in it. And it bothers me,
because when we look at what we are going through right now
because of the way debt was traded and derivatives and all of
those new instruments we are learning about, and the utter
collapse of our economy as a result, it perplexes me that we
are going to create in theory a new system of cap and trade by
driving energy costs higher with no guarantee jobs won't go
overseas.
Now, having said that, I am proud to come from the State of
Oregon. I am probably the only member of my congressional
delegation that drives a hybrid in Washington and one in my
home district. And I believe in conservation and recycling. It
is part of our heritage as Oregonians. And I think we have done
a lot in the last 9 years or so on improving the environment.
Renewable fuels, for example, since 2001, it is a 500 percent
increase by 2022. Vehicle fuel economy, a 40 percent increase
will occur by 2020. Lighting efficiency, many on this committee
have supported the bipartisan effort to improve lighting, 25 to
30 percent lighting efficiency improvement by 2012 to 2014, and
70 percent by 2020. Appliance efficiency standards up 45
percent since 2001. Federal Government operations, bigger than
most countries, by the way, just what operates in the Federal
Government, we have already put in place a 30 percent
efficiency and 20 percent renewable fuel use by 2015. Renewable
power, 26 States now have that requirement, and it is a 500
percent increase to date. Building codes, we have already said,
Federal Government promoting new 30 percent model code.
There are many things that we are doing that I think we can
be proud of as this country in reducing our carbon emissions
and improving our efficiency, reducing our use of energy.
But the thing that remains here is, there is no viable cap
and trade--or I am sorry, no viable carbon capture and storage
technology readily available in the commercial market today. I
will get into that more later on I hope.
But before we create new standards and requirements, we
better make sure we understand what is going to happen to our
economy and what technology is available.
Thank you, Mr. Chairman.
Mr. Waxman. Thank you, Mr. Walden.
Ms. Christensen.
OPENING STATEMENT OF HON. DONNA CHRISTENSEN, A REPRESENTATIVE
IN CONGRESS FROM THE VIRGIN ISLANDS
Ms. Christensen. Good morning.
Thank you, Chairman Waxman, and let me take this
opportunity at our first official hearing to say what an honor
it is to have been elected to serve on Energy and Commerce, and
I look forward to a productive tenure on this committee working
with you and my colleagues to address issues that come under
our jurisdiction that are some of the most challenging in our
Nation. And climate change is one of these, and perhaps
considered the greatest, challenge facing the world today.
In my district, the U.S. Virgin Islands and the entire
Caribbean region, we are very concerned, of course, about its
impact on sea levels, changing weather patterns and, most
importantly right now, the bleaching and loss of our coral
reefs, the coral reefs that are so important to our food, the
health of our sea resources, the livelihood of some of my
constituents, and our tourism-based economy. As a physician, a
member of the Health Subcommittee, and someone who has worked
for a long time on national health care issues, the predicted
impacts of climate change on health are also frightening,
especially because the troubling trends have already started,
and we have not as a Nation taken any meaningful steps to
reduce greenhouse gases and global warming.
So I look forward to the testimony of the partnership and
the members who are going to be here with us today. Not
surprisingly, cap and trade is a cornerstone of their
recommended strategy. I would be very interested, though, in
our panelists' comments and opinions on another proposal that I
have recently learned about and which I find very I intriguing,
cap and dividends. And so I applaud the diversity of the
partnership and the hard work that I know it must have taken to
reach consensus on their call for action, and I look forward to
their testimony and working with them and you on these
important issues.
Mr. Waxman. Thank you very much, Ms. Christensen.
Mr. Terry?
Mr. Terry. I will waive.
Mr. Waxman. Who is next? Does it go--yes. The gentlelady
from----
Ms. Blackburn. From Tennessee, Mr. Chairman.
Mr. Waxman. Yes.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Ms. Blackburn. Yes. Thank you so much. I want to thank you
for the hearing today.
And I will be pleased that the witnesses are here to visit
with us today.
I join my colleagues in wishing that they would be able to
stay and answer some of the questions that we have that are
specific to the issue and specific to how their industries are
planning to address this issue.
Just a couple of thoughts. Number one, I am one of the ones
on this committee that still has very serious reservations
about the plans that we are hearing from the new President,
what he is contemplating to stop the growth of greenhouse
gases. I think that we have to look at some of the data that is
coming in that addresses the issue of climate change and also,
certainly, of cooling.
I found it very interesting that England, for example,
recently has experienced temperatures 2 degrees Celsius colder
than Antarctica and that they have had an average temperature
in 2008 that was 1 degree Celsius less than 2007. So when we
hear the talk of global warming and we experience what we have
experienced in my home State in Tennessee with colder
temperatures and we hear data such as this, it does cause us to
question the global warming science.
Secondly, the mandatory reduction in emissions on
greenhouse gases through the cap-and-trade system. I think that
the more we talk to those in business and industry, the more we
see the impact that this is going to have and the negative
impact that this is going to bring to our economy, the transfer
of wealth from industries and consumers to companies that are
promoting inefficient and inadequate technologies, essentially
picking winners and losers in the free market.
The European emissions trading system, when you look at
that trading scheme as they call it, and Mr. Chairman, I find
that very appropriate, using the word, the trading scheme, it
provides in my opinion ample evidence of how companies game the
system for their benefit. But even if the weaknesses of a cap-
and-trade system are addressed, it will still reduce the
availability of energy and drive up the cost of economic
development, which is something we are actually trying to
reduce right now. So this is not only counterintuitive, it
appears that it will be counterproductive in many ways.
I also have concerns, and I know we are not addressing this
specifically in this hearing, but it is a related issue, about
the EPA regulating and moving to regulate greenhouse gases and
the monster of a bureaucracy that that would require and the
need to get permits for everything from cows to schools to
churches for greenhouse emissions and the economic slowdown
that this would cause if we were all sitting around waiting for
the EPA to issue a $175 tax per cow or $20 tax per hog. For our
agricultural interests in our States, this just seems like a
very cumbersome and counterproductive bureaucracy.
So we have plenty on our plate today, Mr. Chairman. I thank
you for the hearing. I hope that it is a robust discussion of
issues, and I yield the balance of my time.
Mr. Waxman. Thank you very much, Ms. Blackburn.
Next would be the gentleman from Ohio.
OPENING STATEMENT OF HON. ZACHARY T. SPACE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Space. Thank you, Mr. Chairman.
If I could just express what an honor it is to serve on
this committee that deals with so many seminal issues at this
crossroads in history. I would like to begin by offering my
thanks to Chairman Waxman for holding this hearing today. I am
excited to have an opportunity to work with the members of this
committee and organizations like USCAP to address the issues of
climate change. Climate change is a very real and very pressing
issue facing this country. And we as Members of Congress have a
responsibility to address it.
What remains is the question of how to answer the call to
action in a responsible fashion that both lowers our Nation's
damaging emissions and protects the ability of our economy to
grow. I believe that it is a goal that all of the members of
this committee share and one we can work together to achieve.
I am greatly encouraged by the work of USCAP in assembling
some of the foremost energy producers and strongest advocates
for environmental protection in the Nation to proactively
address this crucial challenge. I look forward to the testimony
today and applaud the participating members of USCAP for the
progressive, cooperative, and aggressive approach to this
critical issue.
I yield back my time.
Mr. Waxman. Thank you very much, Mr. Space.
Mr. Gingrey?
OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Gingrey. Mr. Chairman, thank you.
And I join my new member colleagues in expressing my
gratitude and excitement about serving on the committee and
this being the first opportunity to utter any words on the
committee. I hope they won't come across as sounding too
negative, because certainly that is not my intent. But I do
have some concerns, both in regarding process and policy.
And I would like to voice my strong concerns, first off,
about the process by which today's hearing has been conducted
by the majority. The mission statement of the United States
Climate Action Partnership pledges that the organization will
work with Congress on these critical environmental issues. I am
deeply troubled that, despite this pledge, the majority has
elected to give the members of this committee almost no time to
digest the recommendations made by USCAP on climate change.
Although I firmly believe that the committee should not be
dismissive, and certainly I am not, of their report, Mr.
Chairman, I believe that we would be better served by the
information given to members and staff less than 90 minutes ago
if we were to hold this hearing on a future date. With more
time, members could properly analyze and scrutinize the
important work of USCAP so we could have a more engaging and
productive hearing.
Unfortunately, due to what seems to me like the political
expediency of this organization for the majority, we will not
have that opportunity for the American people. So much of my
concerns then for the process.
In regarding policy, you know, this cap and trade, which is
going to be the focus of the hearing, and we heard Mr.
Whitfield earlier explaining the lack of really meaningful
progress in the European Nations over a 2- or 3-year period
regarding cap and trade, where greenhouse gases have not been
reduced, and I would hate to see cap and trade go the way of
wetlands mitigation, community service in lieu of jail time,
and some of these other things that sound so great on paper
that really don't work out in the long run.
You know, in the report that we just got, I see in the
prologue, it says, in January 2007 we issued our call for
action, in which we joined together to call for prompt
enactment of national legislation in the United States to slow,
stop, and reverse the growth of greenhouse gases emissions over
the shortest time reasonably possible.
Now, that was in January 2007. I was a member of the
Science Committee at that time. Our first hearing of the year
was the Honorable Nancy Pelosi. Our second hearing of the year,
and it was a joint hearing with this committee, was former Vice
President Al Gore. Our economy was far different in January of
2007 than it is today.
But U.S. Cap goes on in this report to say today, U.S.
leadership is essential for establishing an equitable and
effective international policy framework for robust action by
all major emitting countries. For this reason, action by the
United States should not, should not, be contingent on
simultaneous action by other countries, i.e., China and India.
I say to my colleagues, and I will wrap it up with that, Mr.
Chairman, that there are no Pacific Island Nations in immediate
danger of being underwater because of global warming and the
rise in the sea level, but there are many economies, many
companies, General Motors, Chrysler, et cetera, who are under
water today. And I think we have a real crisis in our economy.
And this may not be the time for the United States to take that
kind of a chance. Let's take this slow, and let's listen to
what these folks have to say today, but let's don't jump to
action too quickly, maybe like we did in the $800 billion
bailout.
And I yield back the balance of my time.
Mr. Waxman. I thank the gentleman.
The gentlelady from Ohio, Ms. Sutton.
OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Ms. Sutton. Thank you, Mr. Chairman.
Before I begin, I would like to thank you for holding this
hearing and for getting us off to a quick start on an
incredibly critical issue before this country and, frankly, the
world at large.
I am truly honored to be a part of this body, where we are
going to seek solutions for these complex issues that face us
as a Nation and, certainly as a representative from Ohio, that
face my constituents.
This is critically important to have these folks here today
so that we can learn more about the members from the U.S.
Climate Action Partnership and about how they think we can best
advance our Nation's energy policy. USCAP's alliance, which
includes major industrial and energy companies and
environmental groups, demonstrates that business interests and
environmental interests can work together to pursue policies
that will meet the multidimensional challenge before us.
I am encouraged by USCAP's efforts to work together as we
discuss policies that will both protect our environment and
spur the development of advanced technologies and jobs. Make no
mistake, it is critical that we find ways to effectively
address global warming. And I am looking forward to finding the
right solutions that will concurrently preserve and create jobs
for today and tomorrow.
Thank you.
Mr. Waxman. Thank you very much, Ms. Sutton.
The Chair wishes to recognize the chairman emeritus of the
committee, Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, thank you.
I commend you for this hearing.
It is a remarkable event when we find that we have the
large number of both NGO heads and the heads of American
businesses coming together. I would like to point out also that
the directors of Edison Electric Institute endorsed a set of
points of agreement on climate change last week. All of this
points to one fact: Climate change is recognized as being the
most critical climate issue facing us by everybody involved.
When the USCAP's call to action was released, it made news,
as well it should. For the first time, a diverse group of
entities, who oftentimes are at odds on environmental matters,
agreed on the critical need for action on climate change. The
call to action calls for Federal climate change legislation to
follow six key principles. However, for the most part, it does
not get into the level of detail necessary for a complicated
legislative resolution to the problem.
Today USCAP released a more detailed set of
recommendations. While we have not yet had the opportunity to
delve into these recommendations, I do look forward to hearing
more about them when our witnesses appear today.
As earlier stated, Mr. Chairman, climate change is the most
critical environmental issue facing us. Last Congress we held a
number of hearings, issued a number of white papers on the
subject of climate change, and in fact, Mr. Boucher and I put
forward draft legislation that was written specifically to
address the six goals in the call to action. All of this was
intended to set us up for prompt action this year.
This hearing builds upon that record. I look forward to
working with you and all my colleagues to address climate
change in the manner which achieves reduction amounts that
scientists agree is necessary while protecting domestic jobs.
Thank you, Mr. Chairman.
Mr. Waxman. Thank you, Mr. Dingell.
Mr. Rush?
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. Thank you, Mr. Chairman.
And I, too, want to commend you for holding this hearing,
thus quick starting our activities of this committee on this
very, very important issue.
Mr. Chairman, I think that we are going to be well served
by the esteemed panel that you have assembled for today. And I
also do want to thank each and every one of them for making
such an appearance before this committee.
Among those who will be testifying today is my good friend
Mr. John Rowe, who is the President and the CEO of Exelon. I
have worked with Mr. Rowe on many energy-related issues, and I
find him to be a very hardworking and innovative and forward-
thinking individual. I look forward to hearing his remarks
regarding the innovative and very, very excellent practices
that Exelon has adopted in becoming an industry leader in the
production and distribution of clean and renewable energy
sources.
I would also like to say that I look forward to hearing
from all of our distinguished panelists as they seek to rally
the Congress as well as the other industries to move us all
forward in developing cleaner energy policies and technologies
that we sorely need for the continuing success of our economy
and of our future as a Nation and, indeed, of the world's
population. I look forward to hearing them outline the steps
that their own companies have enacted in order to move this
Nation forward in that direction.
And Mr. Chairman, in conclusion, I just want to again thank
you for gathering us together so that we can have a great
beginning as we initiate this 111th Congress.
I yield back the balance of my time.
Mr. Waxman. Thank you, Mr. Rush.
Mr. Burgess?
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman, and thank you for
holding this hearing, briefing, that we are having this
morning, an unusual mix of stakeholders who will come before
our committee today, and I am interested to see the
recommendations that this group will offer us.
From what I understand, it is a consensus blueprint to help
guide future action on climate change legislation for this
committee. And the vagueness of the report is an example of the
nuances that exist in crafting policy to control consumer
energy use without further damaging our economy, which is
already under some strain.
One of the leaders in the energy industry today who is
unfortunately not going to be with us, Rex Tillerson from
ExxonMobil, was in Washington last week. Mr. Tillerson
suggested that a carbon tax would be the fair and equitable way
to transparently control carbon emissions. I think our former
Chairman in the last session, the last Congress, Mr. Dingell
also had a similar recommendation.
When you have an industry leader asking for an additional
tax burden to simply provide a better environment for his long-
term investments and business planning, you begin to appreciate
some of the pressure that the CEOs are under to continue to
increase revenue in such a strained economic environment. They
need transparency. They need clarification to compensate for
the unexpected volatility in their marketplace.
Unfortunately, clarity is not part of this 30-page report
released from embargo by USCAP this morning. Somewhat vague on
implementation, it is very complex in plan and would require
new and integrated systems development. And that costs money
and increases the number of variables in the regime. As we have
seen in the financial industry, sophistication, complexity, and
increased variables add distortions and volatility to the
market; not to mention, variables in complexity add the
opportunity for manipulation, and would require a strong
Federal regulator. That is an additional burden on the U.S.
taxpayers and further strain on our Federal budget.
If I had the opportunity, I would ask these individuals
here today the following questions: Would a carbon tax provide
a clearer signal that industry is asking for, and is it a
comparable alternative to what has been outlined in this
report? Secondly, do you think the implementation of this
report will help turn profits and increase domestic economic
activity? And are you willing to step down from your position
if it does not? Has the economic downturn already slowed,
stopped, and reduced carbon emissions, which makes the
recommendations in this report unnecessary?
Thank you, Mr. Chairman, and I will yield back the balance
of my time.
Mr. Waxman. Thank you, Mr. Burgess.
Mr. Green?
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman.
Let me begin by saying I look forward to working with you
as our new chair of the Energy and Commerce Committee. Over the
years I have known you to be a tireless defender of public
health and environment, qualities that will serve our committee
well as we begin to tackle the many critical issues facing our
Nation.
It is timely that our first full committee hearing in this
Congress focuses on the U.S. Climate Action Partnership,
especially since the blueprint for the legislative action was
just released this morning.
President-elect Barack Obama has signaled that his
administration will ``help lead the world toward a new era of
global cooperation on climate change.''
To be truly successful, any efforts to reduce greenhouse
gas emissions must be global in nature and must result from an
extensive buy-in in a range of diverse U.S. stakeholders, from
our industrial base to the consumers who pay the bills. That is
what makes the efforts of USCAP so important.
USCAP members--from utilities and environmental groups--
came together to form a call to action to reverse greenhouse
gas emissions, and today I hope to learn specifics about the
USCAP new ``Blueprint for Legislative Action.'' And I commend
them for attempting the difficult task of compromise on such a
complex issue. And I look forward to the testimony.
Following up on my colleague from Texas, I also read the
statement last week by the CEO of Exxon, and I guess our
committee and the Congress has a tough decision, because I have
some concerns about cap and trade, because if you do just have
a carbon tax, people know how much it is, the industry can
produce using that, and as consumers, we know. Whereas with a
cap and trade, it is always changing. And I have to admit, with
our most recent economic crisis with mortgage trading and
slicing and dicing things, how much money was taken out of the
market, I am a little concerned about a cap and trade. And I
hope the panel will talk about that, as compared to just a
straight up carbon tax that again it is tough to get the votes
for in Congress, but it is also--probably also the cleanest and
most transparent thing that Congress can do and just put a tax
on what we should be putting in our atmosphere.
So, Mr. Chairman, thank you again for holding our first
hearing on this issue.
Mr. Waxman. Thank you, Mr. Green.
Ms. Schakowsky?
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you so much, Mr. Chairman.
The science is clear: global climate change is real and
poses an immediate threat to our planet and our way of life.
The 2007 report of the Intergovernmental Panel on Climate
Change unequivocally found that our climate is warming and that
the primary cause of this warming is due to human activities.
And in some ways, it is a relief to have arrived at this point,
where there is such a great consensus in the scientific
community, and now as we move forward in the policymaking
community to address this problem.
I think for years we have squandered the time by arguing
over whether this is real or not real and how we should move.
Human-caused pollution has already caused drastic changes to
the world's ecosystem. If emissions continue unabated, our
Nation and the world will continue to experience unprecedented
weather patterns, resulting in heat waves, droughts, wildfires,
floods, public health threats, and the extinction of thousands
of plant and animal species. This crisis warrants immediate
policy response.
I heard some of my colleagues talk about moving slowly,
moving carefully. I don't think those are the same things. I
think we definitely need to move carefully, but I also think we
need to move swiftly and boldly. The longer we wait, the harder
and more costly it will be to limit climate change, and
therefore I think, Mr. Chairman, it sends an excellent message
that our first committee hearing of the year is on this
important topic.
And I am very grateful that the panel is here today. I hope
we do have a robust discussion of their recommendations.
I for one am a bit concerned about the pace that is
recommended here. When they have a little chart about emission
reduction targets, it looks like what they are saying is, the
way it reads is that there would be an 80 percent reduction of
2005 levels of emissions by 2050. I think that is inadequate. I
think we have to be talking more like an 80 percent reduction
of 1990 levels and that we are going to have to move more
swiftly to address these problems.
Others of my colleagues have said things like, government
shouldn't pick winners and losers in the energy arena. Well,
that is exactly what we have done for generations, is pick
winners and losers; the winners being the big oil companies,
the nuclear industry. Government has always made decisions
about the most judicious way to achieve our policy goals in
terms of helping industry. And now, I think, it will be our
obligation to make sure that we create systems that will
encourage the most efficient ways to reduce pollution and save
our planet be available in the marketplace.
In the weeks and months ahead, we must continue to work
together with the players that are going to be here on this
panel and with all the different interests within our own
Congress to put forward the most aggressive proposal possible
to solve this imminent crisis.
So, again, Mr. Chairman, I thank you so much for holding
this hearing and look forward to working with you.
I yield back the balance of my time.
Mr. Waxman. Thank you, Ms. Schakowsky.
Mr. Sarbanes?
OPENING STATEMENT OF HON. JOHN P. SARBANES, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MARYLAND
Mr. Sarbanes. Thank you, Mr. Chairman. I appreciate your
holding this hearing. I am looking forward to serving on the
committee and serving under your leadership with respect to
this and many other issues.
This is the most pressing issue of our time, really of any
time. And it is fitting that we are having the hearing so early
in the session. I look forward to hearing from these witnesses
from USCAP. I wanted to just cite some statistics about what
could happen to the Chesapeake Bay. I hail from Maryland, and
the Chesapeake Bay is clearly a treasure for our State and the
region, but also a national treasure. And to recount some of
the projections of what would happen if we don't take the steps
we need to with respect to global warming as it would affect
the Chesapeake Bay, I think really bringing this home:
according to a report by the National Wildlife Federation, if
we continue on our current course and fail to reduce carbon
emissions, and this assumes an increase in 3 degrees Fahrenheit
by the end of this century, global warming would cause the loss
of, with respect to the Chesapeake Bay, more than 167,000 acres
of undeveloped dry land; 58 percent of the beaches along the
ocean coasts; 69 percent of estuarine beaches along the bay,
more than half of the region's tidal swamps and wetland
habitats would be replaced by more than 266,000 acres of open
water, which is equal to about 415 square miles. This would be
cataclysmic. And this is just one example of the effects of not
addressing global warming.
What I am curious to learn more about from this report,
from the panel's discussion today and from other hearings we
will have on the topic is whether the targets for reducing
emissions which are being set forth according to certain time
frames actually correlate to the degree to which we have to
slow, stop, and then reverse the global warming trend overall,
because we can become seduced by the targets for reducing
carbon emissions without necessarily linking them to the pace
at which we actually have to stop global warming and reverse
global warming. And it may be that the targets set are not
aggressive enough, as the congresswoman just indicated.
Bringing the market into this enterprise, which is what the
recommendation here is of USCAP, is obviously critical. That
alone can't do it. I think we are going to have to have a
hybrid approach in order to achieve the levels of reduction
that we seek and that are going to make a real difference. So
there needs to be a multi-pronged approach. But more than
anything, what should come from this hearing and others that we
have on the topic is the urgency with which we need to move
with respect to reducing global warming and reducing our carbon
emissions. We really don't have any time to wait. And humans
are, of course, very capable of delaying on all fronts. And so
we have to move quickly. We have to move quickly as
policymakers.
I know this committee is going to be critical to doing
that. And I thank you for holding the hearing today.
Mr. Waxman. Thank you, Mr. Sarbanes.
Mr. Blunt?
OPENING STATEMENT OF HON. ROY BLUNT, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MISSOURI
Mr. Blunt. Thank you, Mr. Chairman.
As it relates to this hearing today, clearly this is going
to be a topic that this committee will deal with during this
Congress and spend a lot of time on.
I do wish we could have had more time to look at the
partnership proposal before we had a hearing on the proposal.
Certainly as we look at energy this year, my view has been and
will continue to be that we need to find more of it, to find
more American energy, to use less of it and to invest in the
future. One of my concerns as we approach this topic of climate
change is that we want to be sure that we're investing in the
future in a way that doesn't cost jobs and opportunity and
creates new jobs and new opportunities at the same time.
Even if we knew, Mr. Chairman, where we were going to be in
terms of the best way to power the economy 25 years from now,
I'm not sure--as a matter of fact, I'm absolutely confident it
would not be wise to try to get there in 5 years. To see the
transition in the economy that could occur in a way that cost
American jobs and cost American opportunity would be a huge
mistake. We're all concerned about passing along a strong
economy and a strong environment. I know that we have many
different views on this committee as to whether or not we're in
global warming caused by human activity or we're in the climate
change activities that have happened throughout the history of
the planet.
Clearly there's always been climate change. There's a rush
to determine that somehow the current climate changes are
caused by things that we can impact in a significant way by
immediate action. There's less debate about whether they're all
immediate actions would create lost jobs and lost economic
opportunity. This needs to be dealt with in the most thoughtful
possible way. I don't disagree at all with previous comments
that what we can do quickly we need to do quickly. But I do
disagree that everything should be done in the quickest
possible time frame. Everything should be done in a time frame
that makes sense for American families, for the American
environment but also for the American top competitive position
in the world. And those are some of the topics that I'm sure
we'll cover.
In this hearing today, obviously we have lots of name
plates in front of us. So if everybody who's going to be
testifying gives a 5-minute opening statement, everybody that
would like to ask questions of this panel today won't be able
to ask all the questions we'd like to ask. But clearly this is
the launching point for what will be an important debate in
this committee, an important debate in this country, and will
have massive impact on the future of American opportunity if we
make the wrong decisions.
And so Mr. Chairman, again, let me thank you for the way
you got the committee started yesterday. I look forward to
working with you personally. I know that this topic of
environment and energy is one that our ranking member Mr.
Barton has spent an incredible amount of time on, as I have and
others have, and we are eager for the right opportunity--for
opportunities to discuss what the future should look like for
the American environment and American energy. And I yield back.
Mr. Waxman. Thank you very much, Mr. Blunt. I've asked Mr.
Barton and Mr. Markey and Mr. Upton to hold off on their
opening statements, along with my opening statement, before we
hear immediately from the witnesses. But I want to ask if any
member wishes to make, other than the four I mentioned, wishes
to make an opening statement at this time?
Mr. Barton. Mr. Chairman, did you ask for unanimous
consent?
Mr. Waxman. No. I was asking if any Member wishes to make
an opening statement. If not, I would ask unanimous consent
that we--when we reconvene at 10:30 that opening statements--
the only opening statements we will have will come from the
chairman, the ranking member of the full committee, the
chairman and the ranking member of the Energy and Environment
Subcommittee.
Mr. Barton. Reserving the right to object.
Mr. Waxman. The gentleman is recognized for his
reservation.
Mr. Barton. First, let me say that you have just had one
of your Members come in so we may want to give him a right to
make an opening statement.
Mr. Waxman. We certainly will.
Mr. Barton. I will not object to the unanimous consent
request. But I want to make the point that in discussions about
this proceeding, I encouraged you to begin early so that
members that wished to make opening statements could. And you
were agreeable to that. I think we have shown this morning that
opening statements are a positive part of a hearing record. And
I hope that in the future, although we've changed the rules so
that opening statements and hearings are now at the discretion
of the Chair, that you will continue to work with me and others
so that we give members that wish to an opportunity to make an
opening statement, because I do think it's important that we
have members that are allowed to do that.
And this committee, although it may be one of the few
committees that still allows it, has always allowed every
member on both sides of the aisle the opportunity to give some
sort of an opening statement, maybe a 1-minute or a 3-minute
before we begin the hearing process. So I want to thank you,
even though it's now discretionary because of our rule change,
that you did use your discretion to start the hearing early so
that we could have opening statements. And I hope we continue
that discretion.
Mr. Waxman. If the gentleman would yield, you have
certainly made this point very clear to me. And I'm open to it
and we'll try to work together.
Mr. Barton. OK.
Mr. Waxman. I have a unanimous consent request pending. I
would like to revise it by saying that if the two members who
have just joined us wish to make opening statements they are
able to do so at this time.
Mr. Butterfield.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Butterfield. Mr. Chairman, I certainly apologize for
being late. I figured out a lot of things from being in
Washington, but one I haven't figured out is how to be in two
places at one time. So thank you very much for recognizing me.
Mr. Chairman, Ranking Member Barton, we certainly have a
historic opportunity in this Congress and in this committee to
revolutionize our energy and environmental policy.
Accomplishing the monumental task of passing and implementing
energy reform demands and bipartisanship in this body in
cooperation between the actors involved and the crafting of the
policy, which certainly includes our witnesses today from
USCAP.
Transformation of our attitude to one of cooperation and
recognition of a common problem is sorely needed not only to
combat the climate change crisis but to mobilize every sector
of our society to participate in the process to make us more
economically and environmentally secure. It is certainly our
responsibility to confront these issues aggressively but
prudently, recognizing that in our policy, there will be
winners, there will be losers. The poorest among us, those who
are least responsible for greenhouse gas emissions, will be the
losers in nearly any iteration of policy that puts a price on
carbon. When crafting our policy, Mr. Chairman, to curb
emissions, we must mitigate the rising cost of energy on
Americans poor who contributed the least to the problem and can
least afford to bear the weight of a costly solution. So I
thank the witnesses today for their efforts to find consensus
among diverse actors and eagerly anticipate the opportunity we
have in the coming months to effect change. Thank you. I yield
back.
Mr. Waxman. Thank you very much, Mr. Butterfield. Mr.
Murphy, do you wish to make an opening statement?
Mr. Murphy of Pennsylvania. Yes. Thank you, Mr. Chairman.
How much time?
Mr. Waxman. Five minutes.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy of Pennsylvania. Thank you. I thank you not
only for the opportunity to make an opening statement but also
to recognize the importance of members speaking to these
issues.
Early this morning I had a chance to go over to the Senate
Hart Building and listen to some of the presentations of the
United States Climate Action Partnership and had a preview of
some of the important things that they'll be saying today. As
we look at this, as Members of Congress, I hope that this
committee can add some other elements to this. Certainly we all
want clean air and clean water and clean land for coming
generations. Even if there are still disputes about climate
change, we need to join our hands together when it comes to
making sure we keep this planet clean for following
generations. But it is important as we look at these issues,
we're also addressing them from the standpoint of how we do
this on a global perspective and not just a local perspective.
United States has lost hundreds of thousands, perhaps millions
of jobs in manufacturing over the years, some of it is
technologies have changed, but some of it also has come from
jobs moving overseas where there are not the same pollution
controls or expectations, where products can be made cheaper
because they pay lower wages and don't have legacy costs or
health or other elements there.
But in the area of producing energy in clean and efficient
ways, it is ones we have to look at in a global perspective. I
look at my area of Pittsburgh as an example. Pittsburgh in the
1800s was referred to by Charles Dickens as hell with the lid
off. It continued to be a highly polluting area where people
understood if they went to work, even white collar workers,
they brought a couple shirts to work, and they would change
them a couple times during the day because of the soot that was
left on their clothes.
Health problems and that sort of dirtiness were seen as
part of life, yet Pittsburgh underwent amazing transitions
where now it is really a model of a city as how things have
cleaned up. We have bass fishing tournaments now in rivers that
were once ones where nothing seemed to live. We also have to
understand however that part of the cause of that came because
steel left Pittsburgh. We have a great team called the
Steelers. But quite frankly, I don't think steel is made
anywhere within the city limits of Pittsburgh anymore. We've
replaced it with other things. There are great companies that
are headquartered such as U.S. Steel and other steel
manufacturers. But they make that steel throughout the world
now. We also are known in that U.S. steel made a tremendous
investment in its cleratin coke works by investing over $1
billion to make sure that coke--you can make steel without
coal, but to make sure that that pollution is reduced there
too. We applaud them for that.
But what happens with other countries with regard to how
they make steel, how they make manufactured products and how
they make their energy to make those products is of concern.
Developing countries like China and India emit an estimated 2.5
to 5.0 metric carbons of CO2 emissions per metric
ton of crude steel. The United States averages 1.2 metric tons
of CO2 emissions per metric ton of crude steel.
Cutting emissions in the U.S. has been done. But carbon
emissions in other countries is two to four times that amount.
That being the case, if we simply say that a cap and trade
program in this country will be looked at and companies are
allowed to or will continue to move their factories overseas to
make their raw goods and their parts where cap and trade does
not apply, we have done nothing to clean up this planet.
Nothing.
In fact we've just played this massive shell game by
saying, we'll make these heavy industry parts in other
countries, ship them back over here, put them together and say
we've cleaned up our area. We have done no such thing. We have
to make sure that whatever we do for carbon emissions and other
pollution areas that we do this on a global perspective if
we're going to do this at all. I'm tired of seeing our jobs go
over to China. I'm tired of continuing to fund both sides of
the War on Terror when we are sending things over to the
Mideast when we can do so much here with our rich talent.
So I hope that we all as colleagues join together then in
seeing what we can do with the United States being a leader in
bringing other nations to the table on this. We have to have
solutions. We cannot afford to not the have solutions. We
cannot afford to ignore this and we cannot afford to simply
shuffle the jobs off to other countries and turn away and
pretend we did something meaningful. With that, I yield back.
Thank you very much, Mr. Chairman.
Mr. Waxman. Thank you, Mr. Murphy. Mr. Welch.
Mr. Welch. Thank you, Mr. Chairman and ranking member. My
opening statement is, I'm glad to be here, and I look forward
to working with the committee. Thank you.
Mr. Waxman. Thank you, Mr. Welch. Seeing no other members
that wish to be recognized at this time for an opening
statement, other than the four I mentioned earlier, the
unanimous consent request before us is to recess until 10:30,
at which point we will hear from the chairman and ranking
member of the full committee, chairman and ranking member of
the subcommittee, and the witnesses that are before us. Without
objection that will be the order. We'll recess for another 5 or
6 minutes.
[Recess.]
OPENING STATEMENT OF HON. HENRY WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. The meeting of the committee will please come
to order. I am pleased to welcome you all here today to the
first hearing of the Energy and Commerce Committee in the 111th
Congress. We're holding this hearing on one of the most
important issues Congress will face. It concerns our children's
future, our economic future, and our security as a Nation. It
is also about responding to the economic crisis we face.
Today we're going to hear from some of our Nation's most
prominent leaders in business and environmental community.
These diverse leaders have come together in the U.S. Climate
Action Partnership to call for legislation to reduce the threat
of global warming. They recognize that the key to a revitalized
economy and our long-term prosperity as a Nation lies in
addressing climate change and transitioning to a clean energy
economy.
We are struggling with a grave economic crisis. Many
Americans have already lost their jobs, their homes, their
retirement savings. Many more are worried about their economic
future. As Congress acts to address the immediate crisis, we
must also lay the foundation for sustained long-term economic
growth and security.
Our environment and our economy depend on congressional
action to confront the threat of climate change and secure our
energy independence. U.S. industries want to invest in a clean
energy future, but uncertainty about whether, when, and how
greenhouse gas emissions will be reduced is deterring these
vital investments. Companies are caught in a dilemma. They are
reluctant to invest in old polluting technologies because they
know that tougher regulations are inevitable but they can't
invest in new cleaner technologies until they know what
Congress is going to require.
Our job is to extend to these industries a way to end the
regulatory limbo and set our Nation on a responsible path for
reducing climate change and achieving energy independence. Our
committee will be acting quickly and decisively to reduce
global warming and end our dependence on foreign oil. My goal
as Chairman is to pass a comprehensive climate and energy
legislation in the committee before the Memorial Day recess.
That's an ambitious schedule, but it's an achievable one.
We cannot afford another year of delay. As of today's hearing,
we will show through the testimony a consensus is developing
that our Nation needs climate legislation. Our job is to
transform this consensus into effective legislation. The
legislation must be based on the science and meet the very
serious threats we face. We are fortunate that Ed Markey, one
of the most experienced legislators in Congress, will be
chairing the Energy and Environment Subcommittee. We're also
fortunate that we have so many skilled and knowledgeable
members on both sides of the aisle on this committee.
Finding a consensus is not always easy, but I know that
with the leadership that we will be able to have in our
subcommittee from other members, we can succeed. Climate
change, energy independence, and health care are going to be
the committee's highest priorities. Passage of the children's
health bill yesterday was a down payment on health reform.
Today's hearing starts our work on climate change and energy
independence. We'll be working on both issues at the same time.
I welcome our distinguished witnesses and look forward to their
testimony. But first we're going to hear from the Ranking
member of the full committee, the Chairman and the ranking
member of the subcommittee. Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman. Before I give my
statement I want to make sure that we have on the record,
members will be allowed, time permitting, to ask questions of
the witnesses and if time does not permit, we will be able to
give written questions and the answers will be submitted for
the record.
Mr. Waxman. Without objection, that will be a unanimous
consent request that will be adopted. Any objections? Hearing
none, that will be the order.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Mr. Chairman, I'm very willing to work with
you and others on the Committee to try to accomplish the goal
that you just announced. I think it's good for the new chairman
to have goals and that's certainly a worthy goal. Having said
that, I want to make a couple of comments that are cautionary.
First, several of our members, in their opening statements
earlier before the panel got here, indicated that the science
is settled on climate change. The science is not settled. This
is not a hearing to debate the science, so I won't do that. I
would point out though until Christopher Columbus discovered
America in 1492 the science was settled that the earth was
flat. I will also point out that until the mid-1800s, the
science was settled that if somebody was sick, you bled them,
and as late as the mid-1940s the science was that airplanes
couldn't exceed the speed of sound.
Science has a way of being settled status quo that turns
out not to be. What I will say is that science is settled that
CO2 concentrations are increasing in the atmosphere.
That's a true statement. I will also stipulate that in some
parts of the globe, temperatures are going up. I'm still not
sure what average world temperature means. To me, what's more
important is what's the temperature in Arlington, Texas, at a
time certain in a place certain. But having said that, until
you show me one of these U.N. models that can predict the past
with at least 50 percent accuracy, much less the future, I'm
not going to stipulate that the science is settled.
Having said that, we're here today because we've got a
distinguished list of panelists who have joined together to
come up with a matrix on how to help our environmental and our
economic issues. And they are distinguished. I know at least
\2/3\ of them personally. And I will stipulate that they're all
men and women of honor and integrity. One of the things that
they say in their statement of principles is that they want a
plan that's economically viable. Let me just read the stock
prices of the witnesses today that are before us. We have the
CEO of Conoco-Phillips. His stock price a year ago was $75.15 a
share. It closed yesterday at $48.82. That's a 35 percent
reduction. Duke Energy, Mr. Rogers is with us. His stock price
a year ago was $20.05. It closed yesterday at $14.89. That's a
decline of 26 percent. Mr. John Rowe, who represents Exelon,
his stock price a year ago was $77.49. It closed yesterday at
$52.84. That's a decrease of 32 percent. Mr. Crane, who
represents NRG, $40.99, $23.17 yesterday, minus 43 percent.
General Electric, one of the bedrocks of American industry,
$35.27 a year ago, $13.87. That's a decline of 61 percent.
Unfortunately I own some of that stock.
So I want my G.E. folks to get with the program here. Rio
Tinto, $402.09, closed yesterday at $81.52. A decline of 80
percent. Siemens closed yesterday 61 percent off. PNM, Mr.
Sterba, who has got a new hairdo I see.
Mr. Sterba. Yes, sir.
Mr. Barton. $20.09 a year ago, $10.31 yesterday, a decline
of 49 percent. And the winner, in terms of least decline is
Pacific Gas and Electric, Mr. Darbee. Their stock a year ago
was $44.22. Yesterday it was $36.52 which is a decline of only
17 percent. It must be something about the California economy,
Mr. Chairman, it is helping or maybe Mr. Darbee is just an
unbelievably excellent leader. My point is, there's not one CEO
here today whose stock price is even close to what it was a
year ago. We're in a very serious economic recession. And you
cannot tell me that if we adopt one of their principles of a
mandatory, mandatory cap and trade program on CO2
emissions for our economy that it's going to help their stock
prices.
Now stock price is an inelegant value of the whole economy.
I understand that. But we should be about protecting jobs,
creating jobs. If we can do things, Mr. Chairman, that improve
energy efficiency, if we get more energy or we get more output
for less energy, and there's an environmental benefit
consequently because of that, that's a good thing. But if we
say we have to do things to lessen CO2 regardless of
the economic consequences, in my opinion, that's a bad thing.
So I think we should start with solutions that work. Mr.
Boucher has a bill that is an R&D program for CO2
carbon capture, conversion and sequestration. There's consensus
on both sides of the aisle that that bill is a good first step.
We should move that bill, Mr. Chairman. Then let's look at the
experience in Europe of their cap and trade program, which is
not working. Which is not working. And go from there. And last
thing, we don't have the CEO of ExxonMobil here. I don't know
if they're a part of USCAP. But their CEO has come out and
said, if we have to do something about carbon, let's have a
carbon tax.
Now I'm not an advocate of a carbon tax. But I do believe
that if you really, really, really want to reduce
CO2, a carbon tax is the most efficient way to do
it. And we should get with our friends at Ways and Means and
give that some serious consideration. With that, Mr. Chairman,
I'll yield back. I do appreciate the witnesses being here. I've
read the synopsis of their program. And I do agree with their
conclusion that we want to do things that are sustainable, that
protect the economy and show that America can be a world
leader. I do agree with that.
Mr. Waxman. Thank you Mr. Barton. Mr. Markey.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman, very much. The
coalition of American businesses and environmental groups
before us today represents the evolution that has occurred on
the issue of global warming. We have emerged from the last
decade primordial ooze of discord and delay on global warming
action. We have now arrived on terra firma where hard emissions
reductions targets must supplant voluntary measures that aren't
up to the job. And instead of struggling to stay afloat in a
mire of skepticism, we're now poised to march forward with a
new climate-friendly Obama administration and congressional
leadership. But evolution will only take us so far on this
issue. What we now need is legislative intelligent design.
Now the hard task of enacting global warming legislation is
before us. The witnesses here today, their shareholders and
members and a growing majority of Americans know that the key
to our economic growth, national security, and planetary
survival is to pass energy and climate legislation that will
finally unleash the clean energy revolution that has been
building for years. The CEOs that are testifying before us
today are not here to harm shareholder value. They are here to
help lay out a plan, which will enhance shareholder value in
the years ahead. To target where the economic growth
opportunities are for our country and to create the jobs that
will employ Americans for this generation and generations to
come. That is why they are here. They understand the problems
better than any that our country is faced with today
economically.
Our country has been hit by an economic tsunami. At the
same time, we are feeling the early effects of a climate storm
that is growing stronger and approaching faster than predicted
just a few years ago. Comprehensive clean energy and climate
legislation is the solution to both of these problems. And it
is a solution for the whole country. High tech hubs like
Massachusetts and sunny California will benefit. But so will
steelworkers in Pennsylvania and former Maytag manufacturing
workers in Iowa who are building blades for wind turbines. And
ranchers in Texas and South Dakota are seeing their relentless
winds turned into revenue with every turn of the wind turbine
sprouting on their lands. Last year I introduced iCAP, the
Investing in Climate Action and Protection Act, as my
contribution to the climate policy discussion. Many of the core
ideas of iCAP are reflected in the discussion draft put forward
by Chairman Dingell and Chairman Boucher this past October. And
many are consistent with the blueprint issued by the U.S.
Climate Action Partnership today. Those developments bode well
for the work before us. And I look forward to working with you,
Chairman Waxman, chosen newly as the chairman because you have
shown such tremendous leadership on this issue. I look forward
to working with the other members of the committee, the
administration and the American people to enact climate
legislation that will save our economy and protect the planet.
As the new chairman of the Energy and Environment
Subcommittee, I am committed to moving a bill as quickly as
possible in partnership with Chairman Waxman and all of the
members, bipartisan, Democrat and Republican so that we can as
quickly as possible deal with this issue because the urgency of
the problem demands swift action. So I thank you, Mr. Chairman.
I think it's very appropriate that you made this the first
hearing and the quality of this first panel represents the
magnitude of this issue. And I yield back the balance of my
time.
Mr. Waxman. Thank you very much, Mr. Markey. Mr. Upton.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman. I just hope that
this hearing is not necessarily a sign of things to come. I can
remember when Republicans took the majority in the 1990s and I
can remember sage advice given by my friend, Mr. Markey, who
said that we ought to have the subcommittee chairman of
Oversight and Intel, his advice was that we not have more than
one panel and not more than six or seven witnesses and always
allow the minority to have an equal say in terms of the folks
on that panel. And admittedly, we have one panel today, but we
have far more than six or seven. And I'm not sure that the
minority was afforded the opportunity to, in fact, insist on a
couple different witnesses. I also wish that we had received
this blueprint earlier than this morning.
Clearly it was printed before today. It would have been
nice to at least have taken it home last night to be able to
digest some of the summaries and the information rather than
get it thrust at us literally at 9:00 this morning over in the
Cannon Building.
But I would confess that climate change is real. I
recognize that we have a problem, and in fact, we do need to
take action. I have never been a fan of cap and trade. We're
fortunate to look at the EU's failure and their inability to
reduce global gas emissions. Climate change policy must adhere
to a number of different commonsense principles. It must
provide a tangible environmental benefit to the American
people. It has to advance technology and provide the
opportunity for export. It has to protect American jobs. It has
to strengthen U.S. energy security. And it does require global
participation. I'll support legislation--I won't support
legislation that doesn't meet those standards.
In my State of Michigan, things are really, really tough.
Our governor told us last week that our unemployment offices
across the state are fielding 100,000 calls an hour. By design,
a cap and trade approach works by increasing energy costs and
slowing down economic growth. We can't afford that in Michigan.
As a former member of this committee from the other side of the
aisle, Sherrod Brown, now a Senator from the State of Ohio
during the Senate cap and trade debate last year, sent a letter
to Majority Leader Reid who said, and I am quoting directly
from his letter, that cap and trade programs developed in the
Lieberman-Warner bill have the potential to raise over $7
trillion.
Much of those funds will be indirectly paid for by
consumers through increased energy prices. I think he had it
right. The only consensus achieved during that Senate debate
was that the cap and trade approach was not appropriate. Rather
than making energy more expensive, hurting our fragile economy
and sending American jobs overseas, we need to be pursuing an
approach that promotes and encourages clean energy, builds
economic strength through exporting American technology and
thus creates jobs rather than exporting them. And I propose
instead of setting an arbitrary cap that isn't linked to
tangible global greenhouse gas reductions or recognizable drop
in global temperatures that we should begin working on a clean
energy policy that spurs investments in that technology and
American jobs. More nuclear.
We need to invest in clean coal technologies like carbon
capture. We need to invest more in wind and solar and other
renewables like hydro and we need more conservation. We must
take a sector-by-sector approach that cultivates innovations in
technology and efficiency rather than arbitrary government
mandates. And we must meet our ever increasing energy demands
as our economy begins to move forward and recover from this
recession that we've been in, particularly in Michigan, for a
long, long time. And you can't exclude China or India.
Mr. Chairman, I look forward to the presentation and the
questions that we'll be able to afford ourselves, both in
person as well as in writing. I yield back the balance of my
time.
Mr. Waxman. Thank you Mr. Upton. Today we're honored to
have with us 14 chief executive officers and presidents of a
broad range of businesses and leading environmental
organizations, all of whom are here as members of the U.S.
Climate Action Partnership or USCAP. USCAP is a coalition of
over 30 businesses and leading environmental groups with the
common purpose of urging Congress to enact climate change
legislation promptly. And I would note that two other members,
Alcoa and Deere and Company had been invited to testify and
ultimately were unable to do so. This is a truly a
distinguished panel. And I can spend a great deal of time
discussing their accomplishments and their portfolios and their
stock prices. But I think that since the purpose of this
hearing is to hear from them and time is short, I'll forgo a
full introduction.
Joining us today are Jonathan Lash, President, World
Resources Institute. James Mulva, Chairman and Chief Executive
Officer of Conoco-Phillips. George Nolen, President and Chief
Executive Officer of Siemens Corporation. Fred Krupp, President
of Environmental Defense Fund. John Rowe, President and Chief
Executive Officer of Exelon Corporation. David Crane, President
and Chief Executive Officer of NRG Energy. Preston Chiaro,
Chief Executive Officer of Rio Tinto. Jeffrey Immelt, Chairman
and Chief Executive Officer of General Electric. Frances
Beinecke, President of Natural Resources Defense Council. Jim
Rogers, Chairman and President, Chief Executive Officer of Duke
Energy. Peter Darbee, Chairman, CEO and President of PG&E
Corporation. Eileen Claussen, President of the Pew Center on
Global Climate Change. Mark Tercek, President and Chief
Executive Officer, The Nature Conservancy. And Jeffry Sterba,
Chairman, CEO and President of PNM Resources.
Mr. Waxman. As I understand it, we're going to hear from
six witnesses--no, in agreement with the witnesses, six
witnesses will waive their opening statement. And we thank them
for their understanding. For the remainder, we'll hear 2-minute
oral statements from each, and we have written statements from
all of the witnesses, which we will enter into the record.
I would like to also forewarn members, which I have
mentioned this before, that some members of the panel will have
to meet prior engagements this afternoon with the incoming
administration. And as Mr. Barton and I have discussed, when
this group of witnesses needs to leave, they will leave behind
a group of designated replacements and will stay until we have
finished with all our questions from all of the members who
wish to ask questions.
We're going to start a new policy in this committee that
all witnesses that testify before us do so under oath. So I'd
like to ask you if you would now that you are comfortably
seated to please stand and raise your right hands.
[Witnesses sworn.]
Mr. Waxman. The record will indicate each of the witnesses
answered in the affirmative. We'll turn to our first witness
for a statement, Mr. Immelt from General Electric.
STATEMENT OF JEFFREY R. IMMELT, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, GENERAL ELECTRIC
Mr. Immelt. Good morning, Mr. Chairman. Thank you and
Ranking Member Barton, members of the committee, good morning,
and it's an honor to be here this morning. Thank you for this
opportunity. I'm Jeff Immelt, chairman of G.E. I understand we
might have gotten off on the wrong foot this morning. I want to
apologize for any process difficulties or misunderstandings we
had. But we are honored to be here and we look to being
responsive. We've been briefed on what the opening comments
were. And please know directly from all of us that there is no
intention to be disrespectful in any manner. We are here to be
helpful in this process. So let me say that from the outset.
We've launched a clean energy initiative in G.E. about 5 years
ago. Here's what we've learned so far. We've reduced our own
carbon footprint from where we were in 2004 by 8 percent
between now and then. That represents about $100 million
savings per year.
So in an industrial setting, we've taken it on internally
to great results. We've invested approximately $3 billion in
clean energy R&D each year over that time period. That has
generated $17 billion in 2008 revenue, 20 percent annual
growth. Ranking member Barton, if this was our only business,
our stock price would be doing much better right now. This is
actually a great place to invest. And we've created
competitiveness. 20 percent of our jobs inside G.E. are tied to
green products. And that pulls with it another 60,000 supplier
jobs.
We are a net exporter of these products. So we view this as
being a core of our global competitiveness. That's just a
background of how I have come here.
I represent, and we've all come together as the members of
U.S. Climate Action Partnership, each one will go through some
of the aspects of the blueprint that we've introduced today.
But I would just make maybe four points at a very high level.
One is that we really have gathered together a very diverse
group of leaders. We represent industrial customers, utilities,
car companies, oil companies. We really have tried to put
together a representative segment of the industrial complex in
the United States as well as having some of the leading NGOs in
this field and experts over a long period of time.
The second point I'd make is that what we try to do is a
balanced and integrated approach with the understanding that
economics are important, that solving the environmental issues
are important, and we've tried to link in the proposal--the
right trade-offs you know that can be--should be considered as
we go forward with this kind of legislation. I'd say the third
thing that we try to do is represent in cap and trade a market-
based approach for pricing carbon that we think over the long
term will stimulate technology and make that a tremendous
source of great strength as we go forward. The last comment
that I would make is that we've always viewed U.S. Climate
Action Partnership as a catalyst for change. We don't think we
have all the answers. We think this is a starting point that
can be built on and please accept that in the spirit with which
it's given. We are people trying to solve what we view as a
problem, trying to turn that into an opportunity and trying to
do that in the context of being good citizens and being
constructive in this dialogue. So thank you very much. And I'll
turn this over to Jim Rogers.
Mr. Waxman. Thank you, Mr. Immelt.
[The prepared statement of Mr. Immelt follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Mr. Rogers.
STATEMENT OF JIM ROGERS, CHAIRMAN AND PRESIDENT, CHIEF
EXECUTIVE OFFICER, DUKE ENERGY
Mr. Rogers. I'm Jim Rogers. I'm the CEO of Duke Energy. We
serve a population of more than 11 million people in the in
five States in the Midwest and in the Carolinas. On their
behalf, I want to thank you for holding this hearing on USCAP's
blueprint for legislative action. The song lyrics ``You can't
always get what you want, but if you try some time, you might
find you get what you need'' is not only a great line from a
classic Rolling Stones song, but I suspect it is a feeling each
of us have had as we created this blueprint for legislative
action. We develop legislative proposals to be considered as a
package, ones that seek to carefully balance the oftentimes
conflicting demands of protecting our environment, our economy
and our consumers. Decarbonizing our economy by 80 percent
between now and 2050 would be a historic undertaking. It will
not be cheap. And it will not be easy.
The sooner we pass climate change legislation, the better
off our economy and the world's environment will be. If we go
about it in the right way, we cannot only avoid unnecessary
economic harm and dislocation, but we can also ignite a lower
carbon green revolution and more rapidly put this recession in
our rear view mirror. It's my judgment that if we can couple a
short-term stimulus package with this longer-term climate plan,
we have the ability to stimulate greater confidence from
consumers, entrepreneurs and corporations and we all know
recessions are put in the rear view mirror when you have the
capability to build confidence in the future and make
investments.
And let me quickly say, for our company, we plan to invest
$25 billion in infrastructure over the next 5 years. It is
critical we know the rules of the road of climate change as
soon as possible to make sure that we are making the right
investments. Regulatory uncertainty is postponing investments
and renewables in other green technologies. It's postponing the
creation of jobs from apprentices to engineers to Ph.Ds. Our
one fear--and I will leave this with you--is that many in
Congress will look for reasons to postpone action on climate
legislation this year. As a former consumer advocate who fought
rate increases of utility companies in the 1970s, I believe by
starting now we have a better chance to smooth out and minimize
the inevitable cost increases that will be imposed on U.S.
consumers. We have important provisions in this blueprint that
mitigate the cost impact on electric consumers by achieving
president-elect Obama's stated objective to reduce carbon
emissions by 2020. Thank you, Chairman Waxman and the
committee. I appreciate the opportunity to be here today.
Mr. Waxman. Thank you Mr. Rogers.
[The prepared statement of Mr. Rogers follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Ms. Beinecke.
STATEMENT OF FRANCES BEINECKE, PRESIDENT, NATURAL RESOURCES
DEFENSE COUNCIL
Mr. Beinecke. Thank you very much, Mr. Chairman, and all
members of the committee for being here today and hearing the
recommendations of USCAP. I am Frances Beinecke, President of
the Natural Resource's Defense Council, and I want to
congratulate you for devoting the first hearing, Chairman
Waxman, of your chairmanship to addressing global warming. You
are demonstrating that you share our understanding of the
urgency of enacting comprehensive legislation to cut global
warming pollution. The scientific basis for prompt action has
become even more compelling in the 2 years since USCAP issued
its call for action. The Nobel Prize-winning Intergovernmental
Panel on Climate Change issued its most definitive report and
even more recent findings show that global warming is occurring
at a pace that equals or exceeds the upper bounds of earlier
predictions. We see this in higher global temperatures, in the
shrinking Arctic ice sheet in the increasing acidification of
the oceans and increasing sea level rise. Global warming is no
longer a distant threat, but a present danger to public health
to national security, to biodiversity to the planet.
Some will suggest that the current economic crisis is a
reason to delay comprehensive climate legislation. I believe
that the opposite is true. The work this committee has already
started on economic stimulus legislation can jump-start
investments in clean energy infrastructure and help get our
economy back on track. These public investments will leverage
much more private spending and will be far more effective if
Congress follows the economic stimulus bill by promptly
enacting legislation that establishes a clear roadmap for
achieving the 80 percent reduction in global warming pollution
that's needed by mid century.
The targets during the first decade of the program are
among the most important and most challenging of a bill's
design features. Since the U.S. is late in cutting emissions,
we need to make up for lost time, but some stakeholders are
concerned about the cost and feasibility of meeting deep
emission reduction targets, particularly in the early years.
This tension has led to a range of views on the appropriate
near-term targets. In the blueprint, USCAP recommends emission
limits for cap sources and for total U.S. emissions that would
be equivalent to an 80 percent reduction by 2050, nearly 50
percent reduction by 2030 and a range of 14 to 20 percent
reduction by 2020. It's important to stress that these targets
are tightly linked to the other recommendations included in the
blueprint as will be described by my colleagues.
I'd also like to be clear that NRDC believes the science
justifies a reduction of at least 20 percent by 2020. We joined
request the USCAP consensus because we believe it is critical
to enact climate legislation this year, and we believe that the
blueprint shows a way to marshal the support from diverse
constituencies needed to achieve that goal.
Mr. Chairman and all members of the committee, we have a
short window of opportunity to enact effective global warming
legislation and secure our physical economic and environmental
future. We look forward to working with all of you to achieve
that in the coming year. Thank you.
[The prepared statement of Ms. Beinecke follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Thank you very much, Ms. Beinecke.
Mr. Krupp.
STATEMENT OF FRED KRUPP, PRESIDENT, ENVIRONMENTAL DEFENSE FUND
Mr. Krupp. Thank you, Mr. Chairman. I am honored to be
here. This blueprint for climate security is a blueprint
because it has a cap that protects the atmosphere. The cap is
the legal guarantee that pollution actually goes down. But the
cap does a lot more than that. The cap creates customers. And
if America has ever needed customers at home and abroad both
for new and existing technologies, now is that time. And thank
you, Mr. Chairman, for your commitment to move legislation out
of this committee by the Memorial Day recess. For the sake of
our atmosphere and our economy, we really need Congress to
enact this legislation this year. My role is to talk about cost
control measures, the most powerful of which is the cap and
trade program itself. Cap and trade creates competition that
will drive costs down while amplifying the effect of any
stimulus package that you've passed. These measures--other
measures will also be needed.
And these measures should protect the economy, drive
investment and energy efficiency and maintain the environmental
integrity of the overall emissions budget. Emissions offset,
that is activities that reduce greenhouse gas emissions that
are not included in sectors that are not part of the cap, are a
critical cost control measure recommended in the USCAP
blueprint. Since USCAP is recommending stringent emissions
targets, we also recommend the generous use of offsets to help
moderate the compliance costs. USCAP recommends that Congress
establish a board to set an overall annual upper limit for
offsets starting at 2 billion metric tons with the authority to
increase offsets up to 3 billion metric tons. Since the quality
of offsets is an important--as important as the quantity, we
also recommend that Congress direct EPA to establish a rigorous
and transparent process for ensuring that all our offsets
represent real and additional reductions.
In addition, the board should oversee system-wide strategic
offset and allowance pool, a carbon board which includes a
reserve pool with additional offsets and as a measure of last
resort the ability to borrow from future compliance periods
that could be released into the market to prevent undue
economic harm if necessary.
Quality as far as carbon tons created by reducing tropical
deforestation, would be eligible both for the international
offset portion and for this strategic offset reserve. Thank
you.
[The prepared statement of Mr. Krupp follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Thank you, Mr. Krupp.
Ms. Claussen.
STATEMENT OF EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON GLOBAL
CLIMATE CHANGE
Ms. Claussen. Chairman Waxman, Ranking Member Barton, and
members of the committee, my name is Eileen Claussen and I'm
the president of the Pew Center on Global Climate Change. I am
going to say a few words about USCAP's recommendations
regarding the allocation of allowance value. Greenhouse gas
emission allowances in an economy-wide cap and trade system
will represent trillions of dollars in value over the life of
the program. USCAP believes the distribution of allowance value
should facilitate the transition to a low-carbon economy for
consumers and businesses, provide capital to support new low
and zero greenhouse gas-emitting technologies and address the
need for humans and the environment to adapt to climate change.
USCAP recommends that a significant portion of allowances
should be initially distributed free to capped entities and
economic sectors particularly disadvantaged by the secondary
price effects of a cap and that free distribution of allowances
be phased out over time. The USCAP blueprint identifies
principles to guide the fair and equitable allocation of
allowances to end use consumers of electricity, natural gas and
transportation fuels, low-income consumers and workers in
transition, energy intensive industries that face international
competition, trade exposed commodity products, competitive
power generators and other nonutility large stationary sources,
programs to achieve technology transformation and adaptation
needs of vulnerable people and ecosystems at home and abroad.
One of our main objectives is to dampen the price impact of
climate policy on the customers of electricity and natural gas,
particularly in the early years of the emissions constraint.
And therefore, we believe that a significant portion of
emission allowance value should also be allocated to electric
and natural gas local distribution companies which are cost
regulated and where the prices--the price alleviation would be
passed on to consumers. Thank you.
[The prepared statement of Ms. Claussen follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Thank you, Ms. Claussen. Our next witness to
testify is Mr. Darbee from PG&E.
STATEMENT OF PETER A. DARBEE, CHAIRMAN, CHIEF EXECUTIVE
OFFICER, AND PRESIDENT, PG&E CORPORATION
Mr. Darbee. Mr. Chairman, Ranking member Barton, other
members of the committee, thank you for the opportunity to be
here this morning. I'm going to address the issue of energy
efficiency, one of my favorites. From virtually every angle, be
it cost or technology or the size and value of the benefits,
one of the best strategies to attack the climate problem is
improving our energy efficiency. It, as Time Magazine said in a
recent cover story, it's perfectly clean, remarkably cheap,
surprisingly abundant and immediately available. Its cost is
about 2 or 3 cents a kilowatt hour, which is I think as cheap
or cheaper than any alternative energy source. USCAP hardly
seconds the appraisal of Time magazine. Fortunately for 30
years, PG&E has designed and run some of the world's most
effective energy efficiency initiatives. This success is just
one of the many indicators pointing to the enormous benefits
available naturally in this field. In USCAP's view, these
include not only lower energy emissions, but also economic
investment, jobs and not the least savings for our customers.
The key lies in the right mix of policies, programs and
incentives. With that as the goal, USCAP's specific
recommendations are the following: Setting or updating codes
and standards for buildings and end use technologies at the
Federal and State levels, including improving efficiency in
Federal buildings. Expanding tax credits, incentives and
rebates for buildings that outperform energy efficiency codes.
Fully funding energy efficiency outreach in education.
Providing incentives to manufacturers and retailers who embrace
highly efficient equipment and appliances, using tax and
regulatory policies to drive consumers and manufacturers
towards more energy efficiency product and processes.
Developing a generally accepted approach for measuring and
tracking energy reductions and corresponding emissions
benefits. Encouraging State regulators to align policies so
that utilities are incentivized to put a high priority on
energy efficiency and demand management. A prime example of
this is revenue decoupling which eliminates the incentives for
utilities to sell more energy as they are currently motivated
to do today. Tracking and reporting State progress on energy
efficiency potentially rewarding the leaders with additional
energy efficiency funding, and finally, labelling buildings to
provide information on the value of energy savings and
requiring that information be factored into loan applications
and underwriting.
Together we believe these steps would jump start major
progress towards boosting the overall energy efficiency of the
U.S. economy. Thank you for this opportunity to speak before
you.
[The prepared statement of Mr. Darbee follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Thank you, Mr. Darbee.
Now we'll hear from Mr. Chiaro from Rio Tinto. There's a
button on the base.
STATEMENT OF PRESTON CHIARO, CHIEF EXECUTIVE OFFICER, RIO TINTO
Mr. Chiaro. Chairman Waxman, Ranking member Barton, and
distinguished members, members of the committee, thank you for
agreeing to listen to our views this morning. I am Preston
Chiaro, chief executive energy and minerals for Rio Tinto. We
are a major minerals and metals producer with operations and
markets worldwide. Here in the U.S., we're the second largest
coal producer and we are also the world's second largest
producer of uranium for nuclear power generation. Our coal and
uranium together provide the fuel for about 9 percent of the
Nation's electricity generation. Our U.S. businesses employ
over 15,000 people in 31 States with major operations in
California, Kentucky, Utah, and Wyoming.
I want to talk this morning about technology, many low
greenhouse gas emitting technologies already exist. And these
technologies will be important for near-term reductions. But we
must also develop the long-term critical path solutions that
will allow us to meet aggressive reduction targets over time.
Critical path technologies such as carbon dioxide capture and
storage or CCS need stable predictable funding sources not
subject to annual appropriations in order to compress and
accelerate the technology deployment and commercialization time
frames. CCS really is a key, enabling technology to unlock an
environmentally friendly future for fossil fuels.
The proposals outlined in the blueprint are intended to
promote CCS technologies to levels above and beyond what a
CO2 market price signal alone will yield. Our
specific recommendations include first by 2010, a comprehensive
national strategy for implementing all necessary rules and
removing legal barriers for CCS deployment. Second, funding for
five gigawatts of projects to demonstrate full integration and
viability of CCS with power production and other industrial
processes.
Demonstration projects must be underway even before a cap
and trade program is in place. Third, direct funding of CCS
projects for sequestered CO2 from coal and other
fossil fuels made on a first come first serve basis. Funding
levels must be adequate to cover the incremental costs of
capturing and storing CO2 instead of emitting it
into the atmosphere, and sufficient to encourage deployment on
the order of about 72 gigawatts. We believe this will keep coal
in the overall generation mix and avoid a costly dash to gas
within the power sector.
Once an adequate regulatory framework and financial
incentives are in place and CCS technology has been
successfully deployed in commercial settings, we recommend that
all new coal plants meet a reasonable performance standard. We
believe that these policy recommendations will go far in
ensuring that coal remains a cornerstone of electricity
generation in the future while responding to the imperative to
reduce man-made greenhouse gases. Thank you.
[The prepared statement of Mr. Chiaro follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Thank you very much, Mr. Chiaro.
And finally we'll hear from Mr. Mulva from Conoco-Phillips.
STATEMENT OF JAMES MULVA, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
CONOCO-PHILLIPS
Mr. Mulva. Good Morning, Mr. Chairman and committee
members. As chairman of Conoco-Phillips, the third largest,
U.S.-based integrated energy company, we support the integrated
set of recommendations included in USCAP's blueprint for
legislative action. Greenhouse gas emissions from
transportation fuel represent nearly \1/3\ of U.S. total.
Clearly, this sector must be covered by any comprehensive
national policy. However, reducing these end use emissions is
going to be complicated. It would require a systematic approach
that involves fuel providers, vehicle and equipment
manufacturers, consumers, public officials and policymakers.
Now the blueprint offers several key recommendations specific
to transportation.
First, emissions from transportation should be included in
an economy-wide cap. Second, fuel providers should be
responsible for securing allowances for the resulting consumer
emissions. And third, coordinated performance measures should
be established for all factors involved and that is vehicles,
fuels and consumers. Including transportation within the cap
will provide the environmental certainty that's needed. It will
encourage efficiency, technological progress and more energy
conscious consumer practices. Recommended performance measures
include one, a greenhouse gas-based fuel performance standard
that's challenging but it's also economically and technically
feasible. Two, improve vehicle emission standards. And three,
strong policies that would reduce emissions from travel,
stimulate investments in efficiency and encourage less carbon
intensive infrastructure development. These measures should be
periodically reviewed and updated for their effectiveness. Our
company and other USCAP members are committed to working with
Congress and the new administration. We urge you to enact
legislation that effectively protects the climate while also
assuring the safe, secure and affordable energy supplies that
sustain our economy and standard of living. Thank you.
[The prepared statement of Mr. Mulva follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. Thank you very much for your testimony.
I note that these are the members of your group selected to
give oral statements, but we have written statements from the
rest of you, and those will certainly be in the record.
[The statements of Jonathan Lash, George Nolen, David
Crane, Mark Tercek, and Jeffry Sterba follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Waxman. I want to start off the questioning by
yielding to Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much. This is a
question to the CEOs. You've heard the concern that adopting
the kind of proposals that you're putting before us today could
harm your companies. I'm going to ask each one of the CEOs, do
you agree with that suggestion or do you disagree? Mr. Mulva, I
just need a yes or no because I have several questions.
Mr. Mulva.
Mr. Mulva. No, I don't believe what we are proposing will
harm our company and its long-term prospects for opportunities
in investment.
Mr. Markey. Thank you. Mr. Nolen.
Mr. Nolen. I also don't believe it will hurt our company
and will make it better in the long term.
Mr. Markey. Mr. Rowe.
Mr. Rowe. No, sir.
Mr. Markey. Mr. Crane.
Mr. Crane. No.
Mr. Markey. Mr. Chiaro.
Mr. Chiaro. No, sir.
Mr. Markey. Mr. Rogers.
Mr. Rogers. No, with respect to our company as well----
Mr. Markey. I am coming back to you with another question.
Thank you. Mr. Darbee.
Mr. Darbee. No, sir.
Mr. Markey. Mr. Sterba--Mr. Tercek. I'm sorry.
Mr. Tercek. I'm with the Nature Conservancy.
Mr. Markey. Mr. Sterba.
Mr. Sterba. No, I don't. It's inappropriate.
Mr. Markey. Let me go to you now, Mr. Rogers. You say that
the current economic downturn actually provides Congress with
its best opportunity to pass meaningful and sustainable climate
legislation. Can you briefly expand on that?
Mr. Rogers. Sure. Because as I study many of the proposals
for the economic stimulus and I look at sort of the green
stimulus that's embedded in that, if that is passed and we have
climate legislation pass this year where the economic impact
won't be immediate because of the way the plan works, I think
the combination of the two together provides the kind of
roadmap that will allow companies like ours to start making the
decision.
And let me also be very blunt about this. I don't think
it's going to be cheap or easy to achieve the objectives in the
blueprint. And the sooner we get started, the better. And quite
frankly, I believe having a debate about this in the middle of
the recession is the right time to do debate it because
economic considerations will be carefully taken into account.
Mr. Markey. Thank you Mr. Rogers. Mr. Chiaro, you
represent the second largest coal producer in the United
States. And yet in your testimony, you say that legislation
could encourage innovation, enhance America's energy security,
foster economic growth and improve our balance of trade. Could
you briefly expand on that?
Mr. Chiaro. Coal has some fundamental characteristics that
I believe make it a viable and in fact essential fuel for the
future. Like every other fuel source, it has environmental
aspects that must be controlled. We have done a good job
controlling particulate emissions from coal, sulfur dioxide
emissions from coal, other aspects of coal mining and so on.
And this is just simply the step in that procession of
technology development to produce technology carbon capture and
storage that can address the C02 emissions from coal-fired
generation.
Mr. Markey. Thank you Mr. Chiaro.
Mr. Crane, you say in your testimony that addressing the
climate legislation is the paramount challenge facing our
generation and that it is a moral imperative that we act
without any further delay. Please expand.
Mr. Crane. Well, I think just from our perspective, our
role as business leaders is to target our companies as to the
social and economic dynamics in which we live. And this is the
most compelling one. As a major carbon emitter and someone who
stands ready with capital to invest in green technologies, what
we really need is to work hand in hand with yourselves to
provide clarity so we know where to invest.
Mr. Markey. Thank you.
Mr. Immelt, you testified that your wind turbine business
has grown from $300 million to $6 billion in just 6 years. And
you also state that GE's clean-tech ecomagination business is
growing at 20 percent a year and will soon reach $25 billion
and create tens of thousands of jobs. So you see this as a
great economic opportunity for GE, huh?
Mr. Immelt. Sir, I believe not just in the United States,
but globally, the interest in clean technology is high. We see
demand for these products on a global basis, and most
importantly we are a net exporter of all these products out of
the United States. So I think that investing in clean
technology and innovation, clean technology is a great business
proposition for many companies in this country.
Mr. Markey. Thank you.
Ms. Beinecke, you say that the cost of inaction is very
high for our economy and our country. Could you please expand?
Ms. Beinecke. Well, the evidence, the scientific evidence
of what the consequences of global warming are, are just
mounting very, very rapidly as I indicated. And so there will
be not only severe ecological consequences, but severe
humanitarian consequences as a result of that. And so every day
that we delay in enacting climate legislation and getting on
the path reducing our carbon emissions, puts not only all of
our ecological systems at risk but puts literally hundreds of
millions of people around the world at risk for not being able
to have secure futures.
Mr. Markey. Chairman Waxman and I are committed to acting
to deal with this urgent problem and to do so in a fashion that
represents the urgency of the problem.
Thank you all for being here today.
Mr. Waxman. Thank you, Mr. Markey. Mr. Blunt.
Mr. Blunt. Thank you, Mr. Chairman. If--as we put this or
other things into legislation, we will of course have to come
up always with cost estimates, with economic impact estimates.
Ms. Claussen, are there those estimates in the report?
Ms. Claussen. No, we do not have them in the blueprint. We
have done some economic modeling and we have looked carefully
at the economic modeling that's been done over the last year
over pieces of legislation like the Lieberman-Warner bill.
It is our conclusion that you cannot derive point estimates
that are meaningful here, but you can get a lot of insights.
And we took those insights into account when we developed the
blueprint. For example----
Mr. Blunt. Let me ask a couple of questions about that.
They are not here yet, we will need to look for them.
Lieberman-Warner was the plan that was discussed last year and
the estimates from the Energy Information Administration, from
EPA, from the National Association of Manufacturers, they all
had estimates that showed significant gross domestic product
reductions by 2030. I know in my State alone, in Missouri, the
estimate of one of those reports was that we would lose--have a
net loss of 57,000 to 76,000 jobs, obviously not a loss that we
would want to have at any time and particularly not at this
time.
I'm wondering, Mr. Darbee, as you looked at this topic, how
much of that is offset by new jobs, and what's in this report
that doesn't create 140 percent increase in gas prices by 2050,
for instance, that Warner-Lieberman was purported to increase.
Mr. Darbee?
Mr. Darbee. Well, Congressman, let me say that there were
a lot of concerns when we started on the energy efficiency
route 30 years ago in California, along the same lines. And
people felt that really working hard on energy efficiency as
well as choosing the route on renewables that we did would hurt
the economy. And yet the California economy has grown better
than average in the United States over that 30-year period. So
as we look at it, there are tremendous opportunities with
respect to investments in energy efficiency, in investments in
renewable technology. You've heard from the CEO of GE about the
opportunities there. So I think there will be many puts and
takes. Some estimates have indicated that the cost would be
below 1 percent of GNP. Those costs are not insubstantial. But
when one thinks about the consequences of inaction, just for
example in water in the West or hurricane damage in the East,
they more than swamp the costs associated with dealing with
climate change. And what we've learned from business is the
sooner you start working on a major problem, the more degrees
of freedom you have in solving that, and the solutions are
cheaper. So the cost will not be inconsequential, but they will
be less than the cost of inaction.
Mr. Blunt. Where are we? I'm interested in the argument
that Mr. Rogers I thought made effectively, that the sooner you
start, the more you average out the ultimate cost that these
things may have to have. Is that in the report somewhere? The
averaging out, the goals, have we--has goals been designed in a
way that we are really thinking about the incremental cost and
the impact that has?
I'll let you, Mr. Darbee, answer that too, if you want.
Mr. Darbee. I don't believe that we have that in the
report, although if my colleagues can identify something that
I've missed, I don't think it is there. Supporting that, we
have done, as Ms. Claussen indicated, a fair amount of economic
analysis, as have others like McKenzie, that suggest that the
costs are manageable and less than the costs of inaction.
Mr. Blunt. Yes. I think Ms. Claussen used the--we talked
some in the hearing already in your testimony about the 2020
figure. I guess I will just go down the line, the same line
that my friend Mr. Markey went down. And my question would be:
Are you confident that this doesn't have negative economic
impact on your companies in terms of job loss or other costs in
the first decade?
And, Mr. Mulva, I think you got to lead off last. It is
really just a yes or no question, is the first decade as
opposed to between now and 2050.
Mr. Mulva. Addressing climate change will increase our
cost structure providing energy.
Mr. Nolen. No, it will not, as a provider of the
technology.
Mr. Blunt. Mr. Rowe?
Mr. Rowe. It will not have negative effects on my company,
but if we aren't very careful to use the market mechanisms of
cap and trade to limit the costs of what we do, it would have
negative effects on our customers. That's why we think that cap
and trade is so important.
Mr. Blunt. Mr. Crane.
Mr. Crane. In the near term, taken in its totality, would
not impact us in the near term. In the long term it would hurt
us if we don't adapt our technology, change the way we make
electricity, which is part of the plan.
Mr. Chiaro. On balance we believe the opportunities will
outweigh the risks and costs.
Mr. Blunt. In the first 10 years?
Mr. Chiaro. In the first 10 years.
Mr. Blunt. Mr. Immelt.
Mr. Immelt. Congressman, I would agree with my colleagues.
Mr. Blunt. Mr. Rogers.
Mr. Rogers. In the first 10 years, if the allocation
method is done appropriately, it will minimize the cost impact,
but there will be cost impact on our consumers. We are the
third-largest consumer of coal in the country, over 70 percent
of our electricity coming from coal. And for the 25 States with
more than 50 percent of their electricity from coal, it will
also--if the allocation of allowances is not designed right,
could result in significant increases in prices in each of
those States.
Mr. Blunt. And just very quickly, I'm over my time, Mr.
Darbee and Mr. Tercek.
Mr. Darbee. The answer is no.
Mr. Tercek. Like Mr. Rogers, there will be cost increases
that our customers will bear. But if it's not appropriately as
we've laid out, we can minimize what those cost increases are.
Mr. Blunt. Thank you. And thank you, Mr. Chairman.
Mr. Waxman. Thank you, Mr. Blunt.
The Chair would like to now recognize the Chairman Emeritus
of the committee, Mr. Dingell, for his questions.
Mr. Dingell. I thank you for your courtesy. This question
to Dow and Dupont, I believe Mr. Green and Mr. Sterba are
present here.
I have a great concern about designing the climate change
program so as not to put our own American industries at a
competitive disadvantage and driving jobs overseas. I am
particularly concerned about USCAP's views on one issue and
that is chemical companies such as Dow and Dupont. And that is
about the possibility of massive fuel switching occurring from
coal to natural gas. I have fears that this could create
significant increases in the cost of natural gas, which is used
both as a process and as a feedstock.
Could Mr. Green or Mr. Sterba comment on that and tell me
whether this issue was discussed at USCAP? Gentlemen, don't be
shy, the clock is running.
Ms. Claussen. They are not here.
Mr. Dingell. Oh, they are not here.
Ms. Claussen. They are not present.
Mr. Dingell. Could anyone, then, answer that?
Ms. Claussen. Maybe I can reassure you that we spent a
great deal of time with our concerns about trying to avoid the
dash for gas which would put Dupont and Dow at a disadvantage.
That is why we have the cost containment mechanisms that we've
put in here. And that is why we think it is important when you
consider allocation that you do so to companies that could be
adversely affected.
Mr. Dingell. Would anyone else like to make a comment?
Mr. Tercek. I would add, Mr. Dingell, the dash to gas is
something, as has been said, is something we are very, very
focused on. And we must try to avoid near-term price spikes in
cost of carbon and that's why the--all of the mitigating
mechanisms, from allocations to the Carbon Board administering
a reserve fund, to the use of offsets, are a critical component
of this. Otherwise we would run the risk of moving on to
natural gas to the detriment not just of our chemical
companies, but all consumers who use natural gas to heat their
homes.
Mr. Dingell. All right. Ladies and gentlemen, last year
you will recall that Mr. Boucher and I released a discussion
draft, which was our suggestions as to what the committee
should consider as we proceed about this business.
I would like to have each of you give me some comments, or
those of you who seem--who would prefer to do so, to tell us
about the blueprint release today and how it meshes with that
draft or how it would work, because I believe that this is
going to be a very important tool for this committee to use to
begin to arrive at a consensus. Who would like to respond?
Ms. Beinecke. Thank you very much for the question. In our
analysis, there are many elements of the discussion draft that
you and Chairman Boucher prepared that is very consistent with
what is in the blueprint. And I think we could answer
specifically and do an analysis for you going forward. But a
lot of the issues, the targets, the cost containment
mechanisms, the various incentives to drive technology, I think
are quite compatible in both, I think provide a blueprint for
the committee to begin their deliberations this year on how to
enact climate legislation quickly.
Mr. Dingell. Would each of you who is disposed give us
some comments on the question just asked? In other words, do
this please for the record. And I ask, Mr. Chairman, that the
record remain open so that we may have those responses included
into the record on this matter.
Mr. Waxman. Without objection, that will be the order.
Mr. Dingell. Mr. Chairman, I thank you. Ladies and
gentlemen, thank you.
Mr. Waxman. Thank you, Mr. Dingell. Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman.
I think many of you know that our electricity demands in
this country are expected to grow by about 50 percent by the
year 2030. Your plan as you submitted this morning will
reduce--will have a reduction in emissions by 40 percent by
that same year and 80 percent by the year 2050. I wonder if any
of you know when the last time our country--at what year did
our country actually achieve the emissions that are mandated in
this legislation or proposed by 2050? In other words, an 80
percent reduction. Any of you know? Mr. Krupp.
Mr. Krupp. Well, I would have to----
Mr. Upton. I'm told it is about 100 years ago; that our
emissions by 2050 in essence would equal what was in the early
1900s.
Mr. Krupp. Excellent question, Mr. Upton. The historical
experiences that we have in regulating emissions really most
clearly is illustrated by the 1990 Clean Air Act, which called
for a 50 percent reduction not in 22 years as we are calling
for here, but a 50 percent reduction in only 10 years. That was
achieved ahead of schedule for sulfur dioxide. And in fact
under the current administration, the Bush administration, the
President has ordered an additional 70 percent cut in less than
another decade. So combined, the two cuts in sulfur emissions
that have been ordered are greater than 80 percent, in a much
shorter time frame, and have been achieved at a fraction of the
cost predicted by the opponents.
Mr. Upton. Well, this, of course, will be carbon emission
reductions.
Mr. Krupp. That's absolutely true. I think that the sulfur
is very instructive experience. With carbon, the opportunities
for reducing, especially when you consider offsets, are much
broader than with sulfur. With sulfur you really needed end-of-
the-pipe technology. With carbon, energy efficiency reducing
the input from--by using offsets from farmers who can
contribute to reductions opens up a wider array of
possibilities. So I think there's more reason to be optimistic
here.
Mr. Upton. OK. Mr. Rogers, you indicated that unless we
perfected the CCS process by--certainly by the year 2015, that
it would be very difficult to achieve the proposed reductions
by 2020 as well as 2030 and 2050. You know that Mr. Boucher and
I introduced legislation in the last Congress that proposed a
path to get that. We appreciated the industry support for sure.
But that legislation languished, it did not move out of this
committee. The Chairman has indicated he would like to pass
this, the overall legislation, in the next 4 months. You have
indicated that it would be at least 5 years before we'd see
whether this is perfected or not. Can you achieve these
reductions without CCS?
Mr. Rogers. It would be my judgment that--one, I was very
supportive of that legislation.
Mr. Upton. I know that.
Mr. Rogers. I think it is critical. It would be my
judgment that without that legislation, our comparable effort,
that we would be in a place where we can achieve the targets.
But I would say one other thing that I think is very important
for this committee to appreciate. These targets can be met only
if we have aggressive energy efficiency. These targets can only
be met if we have renewables and renewables that we can
actually get to market, which means eminent domain. Because
renewables, without eminent domain, will not get to market
given the ability to build and to build transmission.
Thirdly, in every study, and I would refer you to the EPRI
study, a key component to being able to achieve these levels
and to supply electricity to our economy has required
significant buildout of nuclear units going forward. And if you
take any of these off the table, take coal off the table or if
you take nuclear off the table, our ability to hit these
targets, just not a mission that can be achieved.
Mr. Upton. Mr. Darbee, would you agree with that?
Mr. Darbee. I agree that we need all of the different
technologies that have been identified. The one thing I would
say is that with a cost put on carbon, there are all sorts of
new technologies that we haven't identified yet that may be
available in 2020, and that they may substitute to the extent
that we have----
Mr. Upton. I want to get my last question in. I appreciate
it.
Mr. Krupp and Ms. Beinecke, did you support--did you all
take a stand on the CCS legislation in the last Congress?
Mr. Krupp. We did not.
Ms. Beinecke. Yes, we did and we supported that
legislation.
Mr. Upton. You did support it.
Ms. Beinecke. And the CCS provisions, because we think
getting CCS going rapidly is absolutely critical to solving the
problem.
Mr. Upton. My time has expired. Thank you, Mr. Chairman.
Mr. Waxman. Thank you, Mr. Upton.
Now recognizing members on the rules in the order in which
they appeared at the committee today, Ms. Capps you would be
next.
Mrs. Capps. Thank you, Mr. Chairman. Part of the reason
we're here today is that year after year our understanding of
climate change science has grown: computer models that
predicted increase in temperature, changes in ocean heat
content, and decreases in Arctic sea ice, then strongly
supported by subsequent observation. As this committee takes up
legislation to address climate change, we need to stay apprised
of the latest climate science. We also need to think through
the economic effects of our actions. If history is a guide,
there will be some who will argue that it is simply too
expensive to take action. Each time Congress has considered
adopting environmental protections in the past, we've heard the
same story.
Now, Mr. Krupp, I would like to build on the interaction
you just had with my colleague, Mr. Upton. And you and I have
had a working relationship in my congressional district on the
central coast. In a little fishing village called Morrow Bay,
you helped us demonstrate that we could save that village by
protect--and that protecting the environment could actually
ensure business growth for those fisherman.
I know that the Environmental Defense Fund employs Ph.D.
Economists, and I would like to ask you about the predictive
powers of this discipline. Could you talk about the history of
cost predictions for previous environmental legislation? In
particular, I would like to hear some background on the
accuracy of predictions about the 1990 acid rain program, part
of the Clean Air Act's cap and trade system.
Mr. Krupp. Thank you. It is an excellent question and it
turns out that it is very hard for the economic models to
predict the impact of a dynamic incentive to come up with new
technologies. And these economic models historically have
always underestimated the innovation factor.
Specifically, you ask about the Clean Air Act of 1990.
Costs for removing a ton of sulfur dioxide were estimated
anywhere between $800 a ton and over $2,000 a ton. In the first
phase of the program, costs turned out to be--which is what the
estimates were for--less than $100 a ton. So the estimates were
wrong by up to a factor of 10-fold. And the reason is that the
cap and trade creates buyers for the lowest-cost tech
technology. It creates a hunt, it creates incentives to
innovate. And that basically grinds down the cost.
And that would be my comment. Historically, economists have
always overestimated the cost, without exception.
Mrs. Capps. Well, given our apparent difficulties in
predicting how the economy would change, it is still a very
vitally important topic. Do you have any advice on how
policymakers could best make use of economic predictions about
climate and energy policy?
Mr. Krupp. Well, I think the models still are useful
because they do tell us that the design of the program by your
committee will be extremely important in terms of cost. They
tell us that--I don't think they can give us a number of what
the costs will be, but they say there are some things that you
can do that will make a big difference, and they show us
relatively they will more or less expensive.
For example, allowing the use of offsets will drive the
cost down substantially. And all the models from MIT and
Harvard do show that. And I do think those qualitative
conclusions are correct. They show that the more trading you
allow, the more flexibility between gases and between sectors
that you allow, the more you will drive the cost down of the
program.
Mrs. Capps. Let me just ask--this, I believe, is an
important topic--if any of the rest of you, particularly those
of you who represent an industry, would have some advice along
this line, for example----
Mr. Rowe. Congresswoman Capps, I basically agree with what
Mr. Krupp said. I think we should extrapolate from sulfur--
which is something you didn't want to burn in the first place--
to carbon, which is something you are burning by intent rather
carefully. So I don't think we can be confident of that level
of difference between our hopes and our fears. But I strongly
agree with Mr. Krupp on the importance of the trading system.
This is why other measures are not adequate. We know the
new President will propose a stimulus package. We are all
looking forward to it in hopes. We know this Congress will
consider renewable portfolio standards anew. But you know, my
company has tried very hard to analyze the different costs of
low-carbon energy and put it in a common frame of dollars per
ton of CO2. And we know that some energy efficiency
is as good as free. We just don't know how much, because nobody
can do a good curve. Reducing carbon through natural gas
consumption is somewhere on the order of $10 a ton per
CO2. We think nuclear is something like 40, and
today's wind something like 80. Whereas solar is still above
100, and probably around 3. But solar is evolving
technologically. If you do this all with a relatively crude
tool like RPS, you will tend to get the more expensive
solutions. Whereas if you have the cap and trade system, as Mr.
Krupp has said, in the long run you will get the lower-cost
solutions.
Mrs. Capps. Thank you very much, Mr. Chairman.
Mr. Waxman. Thank you, Ms. Capps. Mr. Whitfield.
Mr. Whitfield. Thank you, Mr. Chairman. I also would like
to thank all of you for taking time from your busy schedules to
be with us today as we explore options and issues related to
this serious subject matter.
I notice that Mr. Markey in his questions to you, Mr.
Chiaro, announced that you operate the second-largest coal
producer in the U.S. It was my understanding that you all
recently announced your plans to divest that coal operation in
the U.S. That would lead me to believe that since you are part
of an organization that wants to put a cap on carbon and you've
made a decision to sell the coal-producing part of your
company, that you're not optimistic about the possibility of
operating a coal company in the U.S. Is that true or not?
Mr. Chiaro. I thank you for the question. The impetus
behind putting a number of our assets around the world for sale
was really the acquisition of a company called Alcan, major
aluminum producer. And the principal reason that we bought
Alcan is because they have a large proportion of the power that
is required to produce aluminum, is produced by hydro, a low-
carbon emitting form of energy. So only in that sense was the
decision to sell a range of assets, including some of our coal
assets here in the U.S., related to climate change. When we
looked at the assets that we would sell, and the criteria that
we used to distinguish those that we would put up for sale
versus those that we would keep, climate change was indeed on
the list, but it was very far down the list. It wasn't even in
the top five criteria.
The principal reason for deciding to sell some of our coal
assets in the U.S., by the way not all of them, really was
related to profitability. And I must say the Bureau of Land
Management does a good job of extracting value for the
taxpayers out of the coal deposits in the Powder River Basin,
so I congratulate them.
Mr. Whitfield. Do you all operate any coal facilities
outside the U.S.?
Mr. Chiaro. Indeed we do. We are the largest coal
producers in Australia and we have very active exploration
programs underway to find more coal around the rest of the
world.
Mr. Whitfield. What about China?
Mr. Chiaro. We do not have any activities underway in
China right now. We don't mine coal in China. In fact we sell
very little coal--of our coal into China. China, as you're
aware, is the largest producer of coal in the world right now.
Mr. Whitfield. You know what, Mr. Immelt, when I go to the
Rotary Club down in my district, the people oftentimes complain
that on environmental issues that the U.S.--they're advocates
that we should lead the way. And your organization is saying
that we should lead the way on the cap and trade, for example.
And yet in China they are bringing on two new coal-powered--one
new coal-powered plant every 2 weeks. In fact, I read that last
year just electricity produced by coal in China exceeded all
electricity produced by every measure in Great Britain last
year. Just the new. And I know that your company is certainly
selling a lot of equipment to build some of those new coal-
powered plants in China.
What about this criticism that we take a lead on this, that
China is not following us at all, and the detrimental impact it
will have on our economy, the detrimental impact it will have
on--because our electricity costs will be higher--what about
that argument?
Mr. Immelt. Congressman, we spent a lot of time just
trying to frame the globalization debate. You'll see an an
entire section as part of the blueprint where we talk about the
ability to drive competitiveness so that our industries
aren't--aren't disadvantaged versus China and India. And
clearly if you think about Dow, Dupont, GE, Alcoa, the people
that are up here, we need to run--you know, kind of globally
competitive footprint. And so we think about that.
The other counter I would make, sir, is that, you know, we
are a net exporter of clean products, you know. And so I really
believe that there is an export opportunity here if we lead and
innovate in the area of high-efficiency engines, in the area of
super-light materials and some of the entrepreneurial structure
that exists.
Mr. Whitfield. Did you all actually sell $600 billion
worth of windpower equipment last year?
Mr. Immelt. Not $600 billion, no. I wish.
Mr. Whitfield. Well, Mr. Markey said that they went from
$300 million----
Mr. Immelt. About $6 billion last year.
Mr. Whitfield. How much?
Mr. Immelt. About $6 billion.
Mr. Whitfield. Oh, OK. One final comment I would just
make, I was reading this article in the New York Times
basically a few moments ago, that said that in Europe, which
created the world's largest greenhouse gas market 3\1/2\ years
ago, early evidence suggested the whole approach could fail
because emissions are going up. GAO came out in December 2008
on a study of European Union's emission and trading system. And
they basically had said that available information could not
substantiate emissions in reductions, could not substantiate
any development in new technology, growth in the economy or any
of the things that you all are saying will--can flow from a cap
and trade system.
I say that simply as we move forward--obviously we're going
to get into this--all of us I think have the right goals in
mind. We want to be fair-minded and don't want to put the U.S.
at a disadvantage economically. So I look forward to working
with all of you and the other committee members as we move
forward.
Mr. Markey [presiding]. The gentleman's time has expired.
The Chair recognizes the gentlelady from California, Ms.
Harman.
Ms. Harman. Thank you, Mr. Chairman. Not only is it huge,
but it reflects the gamut of interest in this issue from fossil
fuel producers to environmental advocates. And I suggest, as I
did in opening remarks about an hour ago before the panel was
physically in front of us, that this is the model to solve
these problems. My guess is that some of you voted for the
incoming administration, some of you didn't. But that doesn't
matter, what all of you are doing is trying to help both I
think the administration and this diverse committee solve a
tough problem. And I don't think it should matter on this
committee whether we supported the next administration or we
didn't. I personally did. But I also think that having all of
you buy into a solution is the way that solution will work. And
I'm looking at nodding heads so I'm very happy to see that.
I talked earlier about what I called the public-private
model and how we used it to solve one little tiny energy
efficiency issue, and that is light bulbs. Mr. Immelt, you were
part of our conspiracy and so was the NRDC, and it was hard to
figure out a program that would really get us to much more
efficient light bulbs by 2020. But guess what? We did. And we
got almost unanimous support in this committee and in the
Congress for what we came up with. So I just put it out that
this, what I call the public-private model, is the best to
solve these problems.
Now, all of the solutions will depend on something we
really haven't talked about this morning and that's what I want
to ask a question about and invite any of you to comment on,
and that is a smart grid. If we don't have a smart grid,
certainly the efficiency pieces of this solution won't work.
I just learned that in our new stimulus package there will
be about $10 billion for investments in smart-grid development.
But I would like to invite you to talk about, any of you--
maybe, Mr. Immelt, we should start with you--the smart grid and
why it is a critical piece of the solution.
Mr. Immelt. Congresswoman, I believe that--I would talk
about both a grid that is smarter and bigger. Maybe start with
bigger first. It was mentioned earlier that if we're going to
increase the penetration of renewables in the country we're
going to need a bigger pipe to push the renewables through from
a storage and efficiency standpoint. So there needs to be some
accommodation there.
And as far as a smart grid--and my colleagues that run
utilities here are probably even more expert than we are--there
is such a huge advantage in efficiency and empowerment to
consumers. And we view this as both a conservation advantage
and also a tremendous advantage to reduce global warming. So I
think the technology actually exists today. It is just how it
gets deployed through the utility structure, you know, what
consumer incentives. But the technology exists really to
empower consumers to make substantial--and industrial customers
to make substantial decreases in their use of energy.
Ms. Harman. Thank you. Before recognizing anyone else, let
me just ask if anyone disagrees that the smart grid is a
critical part of the solution? OK, who else would like to
comment?
Mr. Darbee. If I can comment. My colleague to my right
from Duke Energy was struggling to get the microphone, but in
answer to your question----
Ms. Harman. I'm sure we can accommodate him too.
Mr. Darbee. We are in the midst of PG&E deploying 10
million smart meters, and this is the enabling strategy for
tremendous energy efficiency, demand management, and frankly
one of the things that will solve this country's energy
security issues the best. It enables the electric car that is
coming down the road that we will see between 2010 and 2020. So
it is critically important, we are moving on it.
It also provides the opportunity for smart appliances
within the home. What we envision is people pulling up their
computer on their home page, understanding how much power they
are currently using, and noting if there are any deviations--if
power is being used at an unusually high level in the cellar,
in the bedrooms, in the attic, wherever--so they can call home
and say, something's wrong here and we've got a problem, we
ought to turn off the tower.
Ms. Harman. We only have time for one more comment but I
would invite--Mr. Chairman, may I request that others can
submit their answers for the record?
Mr. Markey. No objection, they would be welcome.
Ms. Harman. Before we call on our friend from Duke Energy,
I would just observe too that a smart grid needs to be
resilient to withstand a cyber attack or other hacking. Let's
just hear one more comment.
Mr. Rogers. We support smart grid. In fact in our 5-year
capital plan, we are going to spend $1.5 billion making our
grid smart. But smart grid means different things to different
people. What it means to us is it means taking our analog and
making it digital. At the end of the day, that will reduce line
losses and will save energy.
The second thing it means to us, it means putting smart
meters in. Smart meters will really allow us--and we're
deploying them today to have a more sophisticated energy
efficiency approach, as Peter Darbee was talking about.
Many people think of the smart grid as simply transmission
lines, but the reality of that is, that is really not
technically the smart grid, it is more in the distribution part
of the system.
Ms. Harman. Thank you, Mr. Chairman.
Mr. Markey. The gentlelady's time has expired.
The Chair recognizes the gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman. I want to touch on a
couple points. I represent a very rural district. We have 10 or
11 national forests within that district and I have been real
active on forest management policy.
Catastrophic wildfires account for vast amounts of
greenhouse gas emissions every year. With a hotter and drier
climate projected for the west and for the northern end of our
country, this situation will only be exacerbated. Depending on
the fire severity and forest type, up to 100 tons of carbon per
acre can be released. And in 2007 alone, 10 million acres of
forests burned. Now, by conservative estimates, that means that
60 million tons of carbon dioxide was spewed into the
atmosphere, not to mention all the other greenhouse gasses and
pollutants. That is roughly the equivalent of 12 million
vehicle emissions for 1 year.
According to the EPA, 562.3 million metric tons of carbon
were unleashed upon the atmosphere by forest fires between 2000
and 2005. Now there is a study out on national forests in
eastern Washington that showed that those forests, left alone,
will become net emitters of carbon rather than carbon sinks by
the late century, due to emissions of catastrophic fire. The
forest would likely burn at a rate of 1.7 percent per year,
meaning the entire forest would burn in less than 100 years.
Actively managed forests could lead to at least a 50 to 60
percent reduction at the current level of acreage burned, due
to wildfire.
So my question to you is--and we have an obligation as
stewards of these great Federal forests to better manage them.
And I would like to know if anybody objects to changing Federal
law to be able to more actively manage these forests along the
lines of what this Congress passed several years ago with the
Healthy Forests Restoration Act.
Does anybody object to moving forward over the condition
class 2 and 3 lands, to give the Forest Service the authority
to do what they do around our communities?
Mr. Tercek. I'll address that.
Mr. Walden. Please
Mr. Tercek. I'll address it from the Nature Conservancy.
Mr. Walden. Yes, sir.
Mr. Tercek. Fire protection is not part of the scope of
our blueprint, but the Nature Conservancy, certainly as a
conservation organization, strongly supports those type of
initiatives.
Mr. Walden. I appreciate that.
Mr. Tercek. On the broad topic of forests, I would like to
note that we do call for forest offset in this document, both
domestically and international. Not only is it an important
source of cost containment, but it is an important opportunity
to protect our forests for a whole range of benefits. And we
also note that the U.S. has an opportunity to be a real leader
here.
Mr. Walden. I'm going to have to cut you off, because I
only have a couple of minutes. I'm sorry, but I appreciate that
and I appreciate the work. And I've toured some of your sites
out in my district where you have done a terrific job doing
what needs to be done.
Mr. Rowe.
Mr. Rowe. Congressman, I would point out not only do we
not object, but the offset provisions in the USCAP
recommendations would create an incentive for folks like us to
invest in better forest management.
Mr. Walden. On Federal lands?
Mr. Rowe. Either way. That's the way the offset provisions
would work.
Mr. Walden. All right. Then I want to move on to wind,
because my district probably has as much wind as many others--
not many other others in the country. And in fact the
Bonneville grid will have up to 30 percent of its power from
wind energy within the next 2 years, which I think is the
highest percentage of any grid in the country.
The point I raise is that in order to smooth that load,
they are now being faced with having to put gas peaking plants
in place. So you all recognize the fact that there are
limitations to some of these alternatives, correct?
Does anybody want to comment on that? Mr. Nolen.
Mr. Nolen. I mean, certainly there are a couple of issues
with wind. First of all, you have to move the wind to where the
people are. You mentioned that your district did not have the
numbers of people so----
Mr. Walden. Transmission.
Mr. Nolen [continuing]. The grid comes in, a very important
point with the grid. We need to do more in storage technologies
of how do you store. But the facts are at the present time,
wind is not a peak load source and so you need some sources
behind it.
Mr. Walden. To firm it up.
Mr. Nolen. To firm it up.
Mr. Walden. Absolutely. And in the Northwest, of course,
we use hydro. And one of the issues that we have in the
Northwest is what sort of credit allocation would there be in a
cap and trade system for a system that has traditionally relied
on hydro? And who picks the date that decides the water flowing
through a dam is renewable and producing energy is renewable
and the water flowing through a more modern dam isn't renewable
or vice versa? How do you account for hydropower as a renewable
energy source if it has been in place since Franklin Roosevelt
was President? Do you include that as a renewable or not? And,
if not, why?
Mr. Krupp. Well, the beauty of the cap and trade system,
Congressman, is that hydropower would not require any permits,
so there would be no cost imposed on it. So although we're not
proposing an RPS, so that definition is not directly relevant
here, all----
Mr. Walden. But it would be under an RPS.
Mr. Krupp. It would be, but that's not what we are here to
propose.
Mr. Walden. It all melds together.
Mr. Krupp. In the cap and trade system all hydro is
advantaged.
Mr. Walden. So it's credited?
Mr. Krupp. It doesn't need a----
Mr. Walden. New hydro is credited?
Mr. Krupp. Old and new hydro, all generating electricity
has no carbon output. Yes.
Mr. Walden. Thank you, Mr. Chairman.
Mr. Markey. The gentleman's time expired. The Chair
recognizes the gentlelady from the Virgin Islands, Ms.
Christensen.
Ms. Christensen. Thank you, Mr. Chairman. And thank all of
the panelists for being here and for the blueprint. I said in
my opening statement that given the diversity of the group, I
really appreciate the fact that you are able to come up with a
consensus document.
I have a couple of, I think, brief questions. But one of
the six key principals in the call for action is to be fair to
all economic sectors, geographic regions and economic groups
that may be disproportionately impacted. And some of the more
disproportionately impacted communities in our country would be
poor and minority or--and sometimes they are the same. So were
there any special considerations--I haven't had a chance to go
through the entire report for low-income minority--
disadvantaged populations?
Mr. Darbee. If I might address that, what is provided for
is that in the case of local distribution companies, that the
benefits of allocations be passed through to customers. And
what we are proposing is that they be passed to the local
distribution companies, and those companies are required to
pass those on to the consumers. And in the case of regulated
electric utilities what we are proposing is the local utility
commissions would undertake that program.
Specific to your question, in California the approach that
we've taken is that we have a REACH program, and so those
people who don't have the economic resources to pay for their
bills in full, we provide economic support for them. We also
have a program on energy efficiency where, for low-income
individuals, they can contact our company. We will send people
out, do an energy audit, and then the utility will pay for the
improvements to their home to make it more energy efficient. So
that was the way that we were thinking about addressing the
particular question you raise.
Ms. Christensen. OK, I will take one more answer, then move
to my next question.
Mr. Tercek. We also have provisions for funding for what
we call adaptations to climate change, inevitable climate
change, including overseas, including island countries that we
can----
Ms. Christensen. Because that was my next question, because
I obviously live in the Caribbean, and we are small economies,
fragile economies, and I was wondering. So if you would just
expand on maybe what you were going to say about the Caribbean.
Mr. Tercek. The Conservancy, our scientists advise us that
there's great opportunity to invest in natural ecosystems that
provide very important adaptation benefits to vulnerable
people. And in our blueprint we recommend that funding be made
available from the sale of allowances to pay for these
programs, both overseas and in the U.S.
Ms. Christensen. Thanks. At a retreat I attended last week,
I came across a new concept that I also mentioned in my opening
statement, which is cap and dividends as an alternative to cap
and trade. And I wonder if anyone would like to comment on the
differences--or the advantages of one over the other, cap and
dividends?
Ms. Beinecke. Well, that's a topic that's gotten increased
interest over the last year. And one of the things that we
envision is first allocations and then move it into an auction
system, and that the proceeds of the auction would go towards
technology development, but the bulk of the resources over time
would go back to the consumer, and that is the dividend
concept.
So I think that the question for the committee to consider
in drafting legislation is sort of what the time frame is for
returning that very significant resource to the consumer.
Ms. Christensen. So it doesn't have to be an either/or, it
can be a----
Ms. Beinecke. We envision a system that actually moves
from one to the other over time. I think that those proponents
proposing the cap and dividend system do envision going totally
in one direction, but USCAP's blueprint actually envisions
first an allocation and then moving to auction over time.
Mr. Rogers. Let me say a cap and dividend has the
potential of creating huge subsidies where most of the money
would come from States that are heavily dependent on coal, like
Indiana, Ohio, Pennsylvania, Michigan. And that, for instance,
you would take $100 out of a State like Ohio and only send $40
back, d the money would go someplace else. So there is some
equity issues associated with a proposed cap and dividend
approach.
Ms. Christensen. Thank you. I don't have any further
questions, Mr. Chairman.
Mr. Markey. The gentlelady's time has expired.
The Chair recognizes the gentleman from Illinois, Mr.
Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. I appreciate the
panel being here. I wish I would have been here for a lot of
the opening statements. I did find the benefit of the opening
statement, though, Mr. Chairman, as I had to go do other
business, had Steering Committee meetings. And since many of
the members are leaving at 12:30, it was my luck that I got
back in time to get around to questions. If we don't have
opening statements, then we don't have a chance to talk to you.
One of the arguments I made yesterday is one of importance
for you all. You are doing what you think is important for your
association or your shareholders. And we have the burden of
doing what is critically important to our constituents, and
they are not minor. Each of us represent 660,000 voters. I was
interested--one of the things I said in my opening statement
was the interest in your first release, which had the trading
floor as part of the debate on how a cap and trade through the
trading floor could be helpful. I was very curious that in this
new one, no trading floor, no picture. And I would ask for a
reason. I would argue because in this cap and trade debate,
which we like to liken to the Clean Air Act and the
NOx and SOx, there are distinct
differences. One is technology was available then, it's still
not available now.
What is being proposed in the cap and trade under this
venue is bringing in the huge money managers, the Goldman Sachs
of the world into this debate, to incentivize. The other thing
about cap and trade that we need to continue to talk about is
the loss of value that has happened in the stock exchange in
the past couple months.
Now, I want to be clear, you all know--we have met, had
dinner, a lot of friends--I am opposed. But if we want to be
clear to my voters, we enact a carbon tax. They know exactly
what the cost is going to be to them, the consumers that are
going to have to pay for this move. Any other process, I will
argue unless you can convince me, is a shell game meant to hide
the cost from the consumer. And I will--we'll have a chance.
It is interesting on the association, too, and I know Rio
Tinto has some mining operations, but no one else. Where is the
coal mine operators?
And the other thing about the association is where is the
members of organized labor? Where is the United Mine Workers?
I'm a Republican, and they a lot of times don't like me, just
by definition, but I have a great relationship with the
operating engineers. I have a great relationship with the
boilermakers. I have a great relationship, again, with the
operating engineers. I have an interesting relationship with
the United Mine Workers. I have a good relationship with those
who build the next generation of power plants today and
tomorrow. Where are they to weigh in on what this is going to
effect to the membership. Because I can tell you, as I did in
my opening statement, I'm going to go to them, and I am going
to want them to be on board. So when there is job loss, which I
predict will happen. We can talk about green jobs, but the
proportional ratio of building a coal-fired power plant and
putting up windmills, which are being built in my district too,
there is no comparable ratio about the jobs and operating a
major nuclear power plant or a coal-fired plant as a window. We
can talk green jobs all we want, real jobs or in real
manufacturing. I'm going to hold--as I talk to my friends on
the other side, I'm going to hold that issue.
Mr. Rowe is a good friend. Illinois is a big power State:
coal, marginal oil, now wind, nuclear power. Nuclear power has
to be part of this debate. How can we move to nuclear power
expansion, Mr. Rowe, if we did not move aggressively on the
high-level nuclear waste in Yucca Mountain?
Mr. Rowe. Congressman Shimkus, you are indeed a good
friend, and as you know I respect you immensely, both when we
agree and on those rare occasions when we disagree. One of the
things we share is a commitment to the importance of
transparency so the public knows what it's getting.
I have, as several members of this panel have in the past,
supported the carbon tax to deal with this problem for the
transparency reason, but it never seemed to catch on. Resources
for the Future did a study and found most Americans want to
deal with the carbon issues. Most Americans don't like a carbon
tax because they know it costs them money. They are pretty
suspicious of a cap and trade system because they rightly think
it will cost them money. But they think renewable portfolio
standards will be free.
As I indicated, while you were called away to something
else, we have at Exelon tried to study the cost of all sorts of
low-carbon solutions; energy efficiency, which is free for a
while, but not forever; gas, which is low cost but an awful lot
to bet on one thing; nuclear, that we think costs around $40 a
ton; and various forms of renewables which tend to be much
higher. I believe we need nuclear in this puzzle----
Ms. DeGette [presiding]. Mr. Rowe, if you could finish up
please, the gentleman's time has expired.
Mr. Rowe. Sorry, I took too much of your time.
Mr. Shimkus. Yucca Mountain?
Ms. DeGette. I'm sorry, the gentleman's time has expired.
Mr. Shimkus. So he can't answer the question on Yucca
Mountain? Just yes or no?
Ms. DeGette. The gentleman would certainly----
Mr. Shimkus. That was the question.
Ms. DeGette. The gentleman would certainly be happy----
Mr. Shimkus. Mr. Rowe, if I provided for your response a
question in writing?
Ms. DeGette. The gentleman from Ohio, Mr. Space.
Mr. Space. I come from one of those so-called coal
districts that Mr. Shimkus identified earlier in his opening.
Apart from that, it is a district that has been suffering from
higher-than-average unemployment rates in a State that suffers
higher-than-average nationwide. Our poverty rate exceeds 20,
sometimes 30 percent in some of my counties. The jobs that we
do have aren't paying enough to get many people out of poverty.
Tens of thousands of people are working in poverty.
Mr. Shimkus has posed a rhetorical question about labor.
Where is labor? What about organized labor? I think that raises
a larger question that I'd be curious, Mr. Rogers, if you could
respond. What effect would this rather sweeping measure have on
the creation of jobs?
Mr. Rogers. First, I appreciate this because, as you know,
we serve Ohio also and we have many--we have over 11 million
people that we serve, including many in Ohio. When I look at
this legislation, this blueprint, several places where I see
jobs that work in your part of the world. One is if we can
successfully achieve carbon capture and sequestration, we can
deploy it. That keeps coal in the mix in a low-carbon world and
that means jobs. It also means jobs in terms of actually the
building of coal gasification facilities in lieu of traditional
coal plants. It means building jobs with respect to building
the carbon capture sequestration going forward. I think it's
going to mean new nuclear plants, and there will be significant
jobs that come from that. I believe in terms of energy
efficiency there will be jobs.
So as I look at this, I believe not just in the short term,
but in the longer term, jobs will be created as we
fundamentally transform our energy infrastructure.
Mr. Space. And has thought been given--and I apologize for
not having been able to read the entire report as of yet--but
has thought been given to the educational and training process
and national policies that could be implemented that would help
develop a workforce in a comprehensive and practical fashion to
fill these potential jobs of the future?
Mr. Rogers. We have not addressed that specific aspect of
it. But I do believe, as we look at new technologies, whether
they are clean tech, renewables, advanced technologies in
nuclear, advanced coal technologies, advanced gas, I think in
all these areas it is going to take a significant number of new
engineers and technicians in order for this to happen.
So I fundamentally believe this is going to happen. I,
personally, believe it is going to happen anyway, because I
look at our fleet, and by 2050 every power plant we have today
will be retired. So if I know what the rules are with respect
to carbon, it allows us to make investments consistent with
achieving a low carbon footprint but, at the same time, of
retiring and replacing. And that process alone will create
significant jobs over the future period.
Mr. Lash. Jim, could I briefly correct you?
Actually, the blueprint specifically addresses,
Congressman, the issue you raised and the need for training. It
is one of the goals we set out for the allocation system, to
provide for the training of the workforce needed to facilitate
these wide-scale transitions.
Mr. Space. And are specific national policies suggested on
how best to implement those goals?
Mr. Lash. Not in detail, sir.
Mr. Space. Thank you.
Mr. Sterba. Mr. Space?
Mr. Space. Yes, sir.
Mr. Sterba. Two of you have asked the question regarding
labor unions. And I would just like to mention that--and it was
not on the House side, but a year, year and a half ago, I stood
with Senator Bingaman, Chairman Bingaman, with the IBEW and, I
believe, the AFL-CIO--I need to verify that that was the second
union--that endorsed a bill that was put forward on the Senate
side, which was a cap-and-trade bill by Senator Bingaman,
Senator Murkowski, and a number of others.
Mr. Space. Has organized labor been involved in any
respect with regard to this USCAP finding?
Mr. Sterba. No.
Mr. Space. All right. Thank you.
I yield back.
Ms. DeGette. The Chair recognizes the gentleman from
Georgia, Mr. Gingrey.
Mr. Gingrey. Thank you, Madam Chairman.
And thank all of you for being here and bringing us the
blueprint.
I want to read from the summary overview in your final--
your commitment, the last paragraph. ``We, the members of the
U.S. Climate Action Partnership, pledge to work with the
President, the Congress, and all other stakeholders to enact an
environmentally effective, economically sustainable, and fair
climate change program consistent with our principles at the
earliest practical date.''
And I heard either one of the witnesses or maybe a member
of the committee say earlier that the goal was to have
legislation to the President before the Memorial Day break. So
that is coming up pretty darn soon.
You know, we are obviously in a pretty tough economic
environment. In this last year, what, 2.5 million jobs lost.
Right now we are on the floor about to vote on a bill, the
second tranche, the $350 billion of the rescue package, to try
to do something about this economy, to get it back on track.
And yet what I am hearing from you, from USCAP, is that you
are recommending something whose cornerstone is cap and trade,
a mandatory cap-and-trade regime, and that it needs to be done
with all due haste.
My question to you--and any of you can respond--is this:
Are you willing to sacrifice more American jobs to achieve the
goals of your report? Are you, at this crucial time in our
Nation's history, willing to push forward with all due haste,
maybe by Memorial Day weekend, with legislation calling for
mandatory cap and trade as its cornerstone, and at the risk of
losing additional jobs?
Anyone?
Mr. Crane. Congressman, it is a great question. And I
think it speaks to an important point, which is the timing
question.
If climate change legislation is passed that has to be
implemented with a cap and trade in several years' time, I
believe, and certainly speaking on behalf of my company, the
first thing it will do is it will unleash additional investment
by us in various technologies designed to prepare for the cap-
and-trade system that is coming.
So, you know, this may be counterintuitive, but I think
quite the contrary, in the near term it will actually unleash
investment and create jobs. And we and many of the companies
that sit here, we have very substantial capital. I think my
company and Jeff's are the two smallest at this panel. We sit
with $1.5 billion in investment capital ready to invest, but we
need to know in what direction.
Mr. Nolen. I would make one comment to say we have talked
a lot this morning about cost. I think, as a group, and I know
for myself that we are much better at driving costs down than
we are with uncertainty. And this is what we have tried to do,
is bring some certainty to our program so that we then can
plan. My personal belief is that the uncertainty has caused a
lot more of our stock prices and employment loss than the cost.
Mr. Gingrey. Well, I want to make sure you understand my
question before we get another response. It is really a value
question, a value judgment. Even if you would respond and say,
well, no, you believe we won't lose more jobs, we will create
jobs, but I want you to respond to me in regard to that value
judgment of if, in fact, jobs will be lost.
It is a question, I guess, of collateral damage. We ask
those questions all the time of our military: Is it worth the
sacrifice wherever we are engaged? And so that is my question
now.
And it is all about the timing and how important is it. Is
this something that, in 2007, in January, was clearly
appropriate to say ``with all due haste,'' when everything
looked kind of rosy out there? But right now, when things look
pretty grim, is ``with all due haste'' really appropriate in
regard to mandatory cap and trade, or is it something that
might not be put too much on the back burner but could wait a
couple years?
Mr. Rowe. Congressman, in your job there are no no-risk
votes. In my job there are no no-risk energy supply options. We
both labor as best we can to make decisions or recommendations
that try to minimize risk.
In my judgment, the economic efficiency of a cap-and-trade
system radically reduces the risk of dealing with climate
change, which we must do. In my judgment, starting soon, with
appropriate cost constraints, protects the economy better than
putting off a solution and then perhaps doing something more
drastic or more disingenuous. It is all a matter of trying, in
our frail way, to handle risk as best we can.
Mr. Waxman [presiding]. Thank you, Mr. Gingrey.
Mr. McNerney?
Mr. McNerney. Thank you, Mr. Chairman.
Sitting here with this panel in front of me is like a child
in a candy store. So, unfortunately, I only have 5 minutes.
I would like to start with Mr. Darbee. I have a long
relationship with PG&E as a customer and as a business partner,
and I have always found PG&E to be a good business partner to
deal with.
Now, my question for you is, you are embarking on a very
aggressive program for efficiency and bringing in other
technology to generate new power. Could you explain briefly how
that benefits your bottom line?
Mr. Darbee. Well, with energy efficiency we have
collaborated with the State of California. And what occurs
there is that the cost of new energy efficiency to our
customers is about 3 cents.
What we have entered into is a framework in California of
where, if demand for energy goes up, our revenues go down. It
is called decoupling. So we are indifferent to the amount of
power we sell. And if we create savings for our customers, what
happens is that we share some of the savings, a small fraction
of the savings. So on energy efficiency, which is one way that
we meet increased power needs, we make money that way.
If we build new power plants--and most of the power plants
are built by others--if others build new power plants and we
procure that power, we make zero money. It costs X, we pay X
for it, we make no money. About a third of the new power plants
that we build, if we build them we earn a return on the
investment, the equity investment that we have in it.
Is that responsive to your question?
Mr. McNerney. It is. Thank you.
My next question will be for Mr. Immelt. GE is a leader in
producing new energy technology, renewable energy technology.
And I have to say, some of the work I did in the earlier life
benefited the technology that you are using.
Do you see this as a growing part of your bottom line? And
will cap-and-trade legislation help that bottom line grow as a
part of your business model?
Mr. Immelt. I think, Congressman, we are already maybe a
$40 billion or $45 billion company just in energy. And we
invest heavily in R&D as part of that. And so we have products
that do coal, gas, wind, solar, nuclear. We are really almost
agnostic, as to technology. We do it on a global basis. And so,
even without a cap-and-trade program, we would have a
prosperous energy business, because we are really technically
agnostic.
What I would say as a businessman and as an American
businessman is that the energy sector has been chronically
underinvested for a generation, in terms of new innovation in
technology. If you just look at a pie chart of where the
aggregate R&D dollars have gone in this country since World War
II, it is hard to find energy on that segment.
I like solving problems with technology. That is what GE
does as a company. So anything that makes technology come to
the fore is going to be good for GE over time. And what I
believe is that a price for carbon will allow many of these
technologies that have been around for a generation--coal
gasification has been around for a generation. Nuclear has been
around for a generation. Elements of the smart grid have been
around for a generation. We just haven't commercialized them
and taken down the cost curve to make them as competitive as
they can be.
You know, we all come at this with a different perspective.
I view it at its core as a price for carbon is going to bring
energy technology into the 21st century and give the United
States a chance to lead.
Mr. McNerney. Thank you.
Many of my colleagues on the other side of the aisle have
decried the failure of the European cap-and-trade system. Now,
when I hear Mr. Krupp and Ms. Claussen talk about offsets, I
get nervous, because I am thinking about grandfathering, which,
in my opinion, is largely responsible for whatever problems the
European cap-and-trade system has had.
So would you be clear about whether you are including
grandfathering on offsets, Mr. Krupp?
Mr. Krupp. Well, first of all, I want to acknowledge the
concerns of the members of the minority about the European ETS
system. It got off to a rough start. Since then, they have
corrected many of the earlier problems.
The principal problem in Europe is that they didn't have
good inventory numbers for the baseline, which, in this
country, thanks to legislation passed out of this committee in
1990 in part of the Clean Air Act amendments of 1990, we have
long had excellent baseline information about the emissions of
CO2 from power plants. I don't think we will repeat
that mistake.
In Europe, one of the mistakes, I believe, is that they
have not allowed agricultural offsets in the system. And we do
recommend that EPA start a process that could lead to verified,
scientifically valid offsets from the agricultural sector to be
part of the system.
Mr. Waxman. Thank you, Mr. McNerney.
Ms. Sutton?
Ms. Sutton. Thank you, Mr. Chairman.
Thank you all for being here. I appreciate that you are
coming together to try and create a solution.
In fact, Mr. Immelt, I noted in your testimony you said, on
the final page near the end, ``Our commitment as a group now is
to work with Congress, both Houses, both parties, the new
administration, and other stakeholders to enact this year, if
possible, climate legislation consistent with the principles
underlying the call for action and the blueprint, namely. That
legislation must be fair, environmentally protective, and
economically sustainable for our country.''
And I would just add a couple of words as a Representative
from Ohio, that after the word ``country'' we say, ``including
Ohio.'' OK? So, from now on when you guys are looking at that
statement I want in the back of your minds to be ``including
Ohio.'' And I am sure that that is what is intended.
As a new member to the committee, I do have a question; we
have heard some discussion about who is at the table and who is
not at the table. Could somebody just briefly explain to me how
you all came to be and whether or not there is a place at the
table for organized labor, or are they welcome at the table?
Could someone answer that for me?
Mr. Immelt. Well, I would say that, you know, we have been
doing this for maybe 2\1/2\ or 3 years, and the idea was to try
to get a representative sample, you know, of different industry
sectors and NGOs to come together. In that sense, probably most
of us have reviewed a lot of the elements of this with our own
unions, our own teams inside the company. There was never a
desire to exclude anyone from the table.
But I can tell you, with 31 people, it has been hard enough
to get to this point, from a standpoint of how far we have
gotten. And we look forward to further dialogue, under your
leadership, to make sure everybody is represented. But there
was always a sense that the more people we have in, the better.
Ms. Sutton. I appreciate that and also, as a Member of
Congress, the ability to work in a large group.
So a couple of you--manufacturing obviously is important to
me and the considerations of manufacturing as we foster this
solution that I believe can be attained. Several of you, Mr.
Immelt and Mr. Nolen in particular, have talked about the
timing of what we are doing--or I think, Mr. Nolen, you more
specifically--and the need to pass this climate legislation
quickly for several reasons: one, you said, to send the right
signal to get the investment going.
Do you also have concern about the delay resulting in what
would be even steeper requirements to be achieved more quickly
in the future? And tell me how that would impact your
organizations.
Mr. Nolen. I think that Jeff put it correctly first, is
that, just like his company, our company is in all of these
spaces. We also have limited capital as to where we need to go
and to make those investments. In order for me to meet Mr.
Rogers' time frame to do more with sequestration and other
things, we need to put more capital into that, and we need to
have more certainty on the return on our investment in those
areas.
We have choices as to where we put it. Do we put more in
gas, do we put more in wind, do we put more in these areas? And
these are all decisions that we must make. And that is why we
need to speed it up, in order to make the end of the line
really happen. Because it starts, really, with Jeff and
ourselves and other large companies who put the capital in to
build the innovation into these products.
Mr. Immelt. Certainty in the investment world is critical
to success. And what we lack today is certainty in terms of
what is going to happen and when it is going to happen.
I would argue that, today, we have almost the worst of all
worlds. We have 17 States that are developing their own
programs. We have RPS in some areas, not in others. The fact is
that the last 40-plus coal plants haven't been permitted. You
know, so we have an energy policy, it is just that nobody knows
what it is. And it shows up in terms of those consequences.
So, look, I am not--I say this with great respect to my
colleagues--I didn't come to this as an environmentalist. I
come to it as an industrialist. I am a capitalist, pure, plain
and simple. And I just think the system we have today is
untenable over the long term, insofar as, you know, the science
is so compelling on global warming. Something is going to
happen. The more certainty you can give us, the better we can
respond and be efficient on behalf of our shareholders.
Ms. Sutton. Mr. Rogers, did you have a comment?
Mr. Rogers. I see this from the perspective of 700,000
customers just in Ohio and the families and businesses behind
them. And I am making decisions today about what to build and
to get prepared. And the sooner we get started, I think the
better off we will be, because Ohio is very dependent on coal.
And if we can smooth out--and that was what was appealing about
the compromise that was reached here. There was a recognition
that we had to buffer during the transition period on the
consumers of Ohio and all the consumers.
So, in a sense, as a CEO of a regulated utility, I am here
really standing in the shoes of my consumers, saying let's do
this in a way that minimizes cost increases and cost impacts,
because there will be increased costs, and let's smooth it out.
If we delay this 3 years or 5 years, it is only going to
translate, I believe, in a steeper cost curve and a more
draconian outcome for consumers.
Mr. Waxman. Thank you, Ms. Sutton.
Ms. DeGette?
Ms. DeGette. Thank you, Mr. Chairman.
Several of the witnesses today have mentioned the renewable
portfolio standard. And I think it was Mr. Rowe who said that,
as a tool for change, it is sort of a blunt instrument and that
he would prefer to see a cap-and-trade system that might be
more flexible.
And I was kind of struck, too, by what Mr. Immelt just
said, which is that we have this patchwork of energy policies
right now, different renewable portfolio standards in many of
the States, nothing in some States, different standards in
other States.
But I have always felt that giving people some kind of a
goal for reduction is a good idea. The devil is always in the
details, as to what would that standard look like. And, as many
of you probably know, last year we were actually able to pass
an RPS through the House, and it narrowly failed in the Senate.
So I guess I would like to ask you whether you feel that a
national renewable portfolio standard could be developed that
would be part of the overall framework and that would be
workable at helping to set goals.
Mr. Immelt. I would start, but then have my colleagues. I
would say that that is an area where you will see different
opinions on the panel. Some are in favor of it; some aren't in
favor of it.
Ms. DeGette. Well, let's hear from somebody who is not in
favor of it.
Mr. Rogers. I would raise a question about it that hasn't
been resolved. For instance, we are in the wind business. We
have over 500 megawatts under operation, 5,000 under
development in Texas, Oklahoma, and Colorado, because that is
where the wind is. But we are not developing wind in North and
South Carolina because there is no wind. We are not building it
in southern Ohio or Kentucky or southern Indiana because there
is no wind.
If you look across the country and you put a wind map on
the country and then you put a solar map on the country, what
you see, certain regions are very attractive for making
investments in either wind or solar, but it is not uniform
across the country.
Ms. DeGette. Well, sure, and you are absolutely right
about that. But, on the other hand, those other States--nobody
is going to do RPS that says you have to get a certain amount
of your energy from wind or a certain amount of your energy
from solar.
And, in truth, as someone who has worked on these issues
for a long time, I will tell you, every region of the country
has some kind of renewable energy. The trick is to set the
standard at a level that would be a workable level for
everybody.
Mr. Rogers. And I think you are absolutely right about
that, in terms of getting the right renewable level. But what I
find that has been the most difficult, I talk to people who
want wind, because I am in that business, but the same people
that support ITC and supporting wind are also the same people
that oppose eminent domain so I can build a transmission line
and get it to the customer. So, until there is some consensus,
it is unrealistic to hope for wind without passing eminent
domain legislation.
Ms. DeGette. I understand.
Let's hear briefly from somebody who supports a national
RPS standard.
Mr. Sterba. Ms. DeGette, I happen to be one of those rare,
maybe, utility folks who does support a national standard. And,
frankly, the reason is I have seen in the West what happens
when States create their own individual standards and they take
the view that it is not renewable unless it is in my State. And
that disadvantages renewables.
Ms. DeGette. Right. Right.
Mr. Sterba. Because it creates the least effective
resources being built, as opposed to the most effective.
So we need to develop this system. And I 100 percent agree
with Jim that, along with this, we have to address the issue of
transmission, transmission access and siting. And it just
doesn't make sense for natural gas pipelines to be built under
one set of rules and electric transmission lines to be built
under another set of rules, where we cannot get this
infrastructure that is necessary.
Ms. DeGette. I would just say that, in Colorado, we
passed, as most of you know, we passed an RPS several years ago
as part of a voter initiative because all of the utilities
opposed it. And within about 1 year, we had exceeded that
standard. The legislature adopted a new standard that was a
much more stringent standard that they worked with the utility
companies to agree to.
So I hear what you are saying about some of the eminent
domain issues, but I think we could arrive at something, a
fairly low threshold, and then build from that.
Mr. Rogers. I don't want to leave you with the wrong
impression. While I might not support a national renewable
portfolio standard, I have supported a renewable portfolio
standard that was approved in North Carolina, as well as one
that was approved in Ohio.
So I have actually, within the States, approved it because
the local law was written in a way to reflect what the
opportunities were for renewables there, rather than trying to
have a national standard where one size fits all.
Ms. DeGette. I think, though, you could take into account
the regional differences.
Thank you, Mr. Chairman.
Mr. Waxman. Thank you, Ms. DeGette.
The next would be Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman.
I wanted to go back to the consumer question for a minute,
because that is the one that could create the kind of political
blow-back that would make all of this just an academic
exercise.
So I assume you built some models along with these
projections. And I was curious, if you take the 2020 target,
which was to get to 80 percent, to 86 percent of 2005 levels,
if you went forward over this next period and up to that year
without the kind of buffering that you have suggested needs to
happen--and I confess I don't quite understand how the
buffering would work--but without it, you know, give me an
average rate payer and tell me what the percentage increase
would be in their bill if you didn't have the accommodations in
place. And then tell me what you think you could achieve if you
did do the buffering that you mentioned.
Mr. Rogers. We did a lot of modeling in the Lieberman-
Warner bill and all the various aspects of it, so I am going to
kind of recall a lot of those studies. It won't be precise, but
it will give you a zip code.
If you go--and it depends, really, on the State--if you are
in a State like Ohio, where 86 percent is coal, versus a State
like Indiana where it is 94 percent, versus a state like South
Carolina which is 24, it produces different answers. And I
think, in Maryland, I think it is pretty close to 50 percent of
the electricity comes from coal in Maryland. But under
scenarios like that, you are looking at 20 and 40 percent
increases in the price of electricity without--without--any
ability to mitigate cost.
And that is why it became so critical in this blueprint
that we had provisions in there that allowed for the mitigation
of cost. Because, absent that, I agree with your observation
that, if we could pass legislation and if it translates into 20
to 40 percent increases in the price of electricity, the
backlash to that could be devastating to our ability to address
climate change long-term.
And that is why it is so critical and why this group came
together around allowances and came together around the
recognition that 40 percent of the allowances should go to the
utility sector, where 40 percent of the emissions come from,
and that a significant portion of those should be used to
mitigate cost increases during the transition period.
Mr. Sarbanes. With the goal of getting them to what kind
of level against the 20 to 40 that you----
Mr. Rogers. We didn't agree to the specifics of that. But
we all recognized, by using the words ``significant portion,''
that we had to make sure it didn't translate into a draconian
increase in prices during this interim period.
Ms. Claussen. If I could just add one thing to that, this
blueprint stands as a whole. Everything is linked. Our ability
to meet the kinds of targets that we put here, which are quite
aggressive, is based on having some allocation to the local
distribution companies. It is based on the cost containment
measures that we have in here, including the use of verified
real offsets.
So we sort of view this as a way, as a whole, to protect
the environment and have a sustainable economy and not increase
prices hugely to consumers.
Mr. Immelt. Congressman, I would just add one other thing,
is that, you know, the way to think about what we proposed,
there is probably an 80 or 90 percent overlap with an energy
policy and really taking control over technologies that are
going to give us long-term control over energy costs.
Our electricity bills did go up by 40 percent a year ago as
the spike in oil and other natural resources took place. And I
think, when we execute on this plan, we are going to have, over
the long term, a set of technologies that I believe are going
to allow us to have more control over time and more security
over time about how to think about energy technologies and
productivity.
Mr. Sarbanes. Did the projections of what the, sort of,
unbuffered scenario would be accounted for what you hoped the
new technologies will produce in terms of efficiency, or they
did not?
Mr. Rogers. It did. We did take into account the
availability of the technologies, how long it would take us to
bring a nuclear unit on and shut down coal units so we would
reduce our CO2 footprint, and what the cost
implications would be. We looked at the prospect of bringing on
carbon capture and sequestration with respect to existing
facilities. We looked at energy efficiency and did scenarios on
really aggressive energy efficiency and succeeding there. And
we actually looked at different scenarios on renewables, in
terms of the cost implications as well as the availability on a
24-7 basis and that implication.
Mr. Sarbanes. My time is up. I would just say, all the
more reason to be as aggressive on the energy technology as you
are trying to be. I am troubled that so much of that technology
is being purchased overseas, because I think we have lagged far
behind.
Mr. Waxman. Thank you, Mr. Sarbanes.
Before I recognize other members for questioning, I know
that a number of you have to leave, and I want to express my
appreciation. I know you were going to leave at 12:30, and you
have extended your time to be with us. And this has been very
helpful. I have listened to your responses to the questions,
very important and legitimate questions from the members. And I
think it has been very helpful in clarifying the matter.
You do represent a remarkably diverse panel, a cross-
section of American industry and environmental advocates. And
your call to us is to adopt comprehensive, environmentally
protective, economically sustainable, and fair legislation to
address global climate change. And the economic crisis, as I
have heard you all say, is not a reason to not move forward,
but is a real reason why we should move forward at this time.
So I thank you so much for being here, and I appreciate all
the work you have done as a panel in developing the proposals
you have sent to us.
I am looking forward to working with Members of the
Congress on our committee, both sides of the aisle, from
various regions, with the various stakeholders, with the new
President, with Members of the House and the Senate in
leadership positions on both sides of the aisle, as well, in
seeing if we can accomplish this goal this year. It is a very
aggressive timetable.
So I am going to excuse those who have to leave, but I know
we have others that will stay behind to answer further
questions from the members of the committee. Thank you so much.
In fact, it probably isn't a bad idea--if any of the
witnesses that are going to be testifying want to take a quick
break, we can do that.
No, no, we have a whole new group that is coming in from
USCAP that are prepared to answer the questions. They are not
the CEOs, but they are people who have been very involved in
the issues.
We are going to pick up questions where we left off, but I
want to introduce a new set of witnesses. We have Elizabeth
Thompson, the Legislative Director of the Environmental Defense
Fund; Betsy Moler, Executive Vice President of Government and
Environment Affairs for Exelon Corporation; Ann Renee Klee,
Vice President for Corporate Environmental Programs for General
Electric; Daniel Lashof, Ph.D., the Director of the NRDC
Climate Center for NRDC; Steven B. Corneli, Senior Vice
President, Market and Climate Policy for NRG Energy; Janet
Peace, Vice President for Markets and Business Strategy for the
Pew Center on Global Climate Change; Steve Kline, Vice
President of Corporate Environmental and Federal Affairs for
PG&E Corporation; and Robert L. Bendick, Jr., Director of U.S.
Government Relations for The Nature Conservancy.
We are delighted that you are all here to further answer
questions from members of the committee.
As I indicated, it is going to be the practice of our
committee that all witnesses testify under oath. So before you
sit down and get too comfortable, I would like to ask if you
would stand and raise your right hand.
[Witnesses sworn.]
Mr. Waxman. The record will indicate that each of the
witnesses answered in the affirmative.
Mr. Rogers, you would be next in asking questions. Do you
wish to be recognized?
Mr. Rogers of Michigan. No.
Mr. Waxman. Ms. Schakowsky was next. She is not in the
room at the moment.
Mr. Welch, you are next.
Mr. Welch. Thank you, Mr. Chairman.
I want to go back to a line of questioning that was asked
by Mr. Markey. There are two things. One, this committee, with
Chairman Waxman and Chairman Markey, are intent on having a
significant climate change bill by Memorial Day. It is very
ambitious.
Second, Mr. Rowe, an earlier witness, pointed out the
obvious, and that is: all of us have to make decisions that
minimize risk. And there is a debate, and there will be an
intense debate among members of this committee and in Congress
as to what will be the economic consequences of the action that
we take.
But the question I have for each of you--and I just want to
go down--is this. And I would just like to get a yes or no
answer, because this is really a threshold issue for us.
Does doing nothing to address climate change--in other
words, us getting unable to resolve the debate about the
consequences of action--does doing nothing to address climate
change, inaction, threaten our economy, in your view, yes or
no?
Mr. Pershing. Jonathan Pershing with the World Resources
Institute. Yes, it does.
Mr. Welch. OK.
Mr. Kline?
Mr. Kline. It does, sir.
Ms. Moler. Yes, sir, it does.
Mr. Welch. OK.
Mr. Corneli. Yes, it does.
Mr. Lashof. Yes, it does.
Ms. Klee. Yes, sir.
Ms. Peace. Yes, sir.
Ms. Thompson. Yes, absolutely.
Mr. Bendick. Yes, sir.
Mr. Waxman. There are buttons on the base of the mikes, so
be sure you press them.
Mr. Welch. Well, I want to thank everyone, because the
threshold question is whether we have to act. And one of the
debates we are going to have is whether the risk of acting is
greater than the risk of not acting. And it is that elemental.
And, as you have heard from listening to the questions of
the members of the committee, there is a division of opinion,
less about whether global warming is a threat, but a very
lively debate about whether action will be worse than inaction.
And I find it very heartening that leaders of the advocacy
community and the industrial and energy community are united on
urging Congress to be a partner in acting.
Let me ask--is it Ms. Klee from General Electric?
Ms. Klee. Yes.
Mr. Welch. Mr. Immelt was here, and your company is a
pretty good size, as I understand it. What are the consequences
of inaction economically, as you see it, to General Electric
and the work that you do?
Ms. Klee. I think you heard the CEOs identify some of the
risks this morning. There is the lack of investment that will
be made, because there is uncertainty as to where to put
limited investment dollars.
There is also the fundamental fact that there will be
regulation. EPA will move forward, but it may not move forward
in the most cost-effective way. So we may have a lost
opportunity by not pursuing legislation.
And there will be the additional cost that we believe will
be incurred if we have to act more quickly later.
Mr. Welch. I see.
Ms. Klee. So those three things, I think, combine to make
it a very costly decision one way or another.
Mr. Welch. So I if understand what you are saying, it is
not only important to act, it is important to act sooner rather
than later.
Ms. Klee. That is our belief. And it is important to act
smartly.
Mr. Welch. OK. Well, you are asking a lot for that. But I
am glad you have--hope springs eternal.
Mr. Kline, how about you?
Mr. Kline. I think one of the things that we see is that
both in terms of protecting our customers from the kind of
increases that the first panel talked about in terms of their
electricity rates, we also see an incredible lost opportunity
if we don't act now.
Mr. Welch. That being?
Mr. Kline. That is that there are these amazing,
developing new technology centers across the United States, and
we see those jobs going overseas and that technology
superiority going overseas. And so, in terms of our service
territory, where Silicon Valley is putting a lot of time and
energy into these technologies, we are going to lose that if we
don't act now.
Mr. Welch. OK.
Ms. Moler, a lot of the critics who raise legitimate
questions about cap and trade point to the experience in Europe
that they cite as a failure. Your view on the European
experience and how that should inform us about a cap-and-trade
approach?
Ms. Moler. We do not have substantial operations in Europe
or any significant ones at all. However, as a student of
climate change, I think we have learned a lot of lessons from
the European experience. We need a robust cap-and-trade system.
We need to deal with cost containment, as we call it. We have,
in the mechanics of our proposal on cost containment, we have
applied some of the lessons learned from Europe.
I would also say that, ultimately, we hope there will be a
worldwide program, that it will not be just the United States
and just the EUTS trading system. And so we need a program that
is ultimately going to work on a multilateral basis. And we
hope that, by starting here, we will get it developed.
Mr. Welch. OK, thank you.
Ms. Peace, could you comment on that?
Mr. Waxman. Mr. Welch, your time has expired.
Mr. Welch. Oh. Thank you, Mr. Chairman.
Mr. Waxman. Thank you.
Ms. Castor?
Ms. Castor. Thank you, Mr. Chairman.
And I would like to thank Chairman Waxman and Chairman
Markey for starting us off less than 1 week after the Congress
was sworn in, starting us off on climate change.
And thank you to the panel for your participation.
Can you all chronicle the current research efforts in
carbon sequestration, various research efforts that are showing
some promise at all? Who is conducting that research? What is
being done right now?
Mr. Corneli. Well, Congresswoman Castor, Mr. Chair, that
is a great question. And we actually tend to think that there
are several phases on the continuum from research to deployment
that are involved with all of the promising technologies.
With respect to carbon capture and sequestration, one of
the exciting things is some of the technologies are very close
to commercial deployment. You heard Mr. Nolen from Siemens
earlier talk about part of the need of this program is to get
competition and market customers established for the major
developers of the technology and, with coal gasification, the
technology to actually scrub the carbon out, compress it.
Ms. Castor. But who is conducting that research?
Mr. Corneli. Well,that is not even research anymore. That
is being done by private companies who are ready to do it.
Ms. Castor. OK. What is that private company?
Mr. Corneli. Well, private companies like GE, like
Mitsubishi, like Siemens, like--we can get you more
information.
Ms. Castor. Yes, because there was a utility in my neck of
the words, in Florida, that was held up very early as one of
the prototypes for carbon sequestration, and they have
abandoned their research project for many different reasons. So
I am trying to now get a little more detail on who is
conducting the research.
Mr.Corneli. One of our views as a coalition is that we
need these complementary measures that were described earlier
to jump-start things like carbon capture and sequestration.
Because, right now, all the technology can be put together. It
hasn't gone down the cost curves, like Mr. Immelt said. It is
not cheap enough or widely available enough to use everywhere.
And we think creating more demand and more supply will help
make those things happen quickly.
Ms. Castor. Can anyone else shed some light?
Mr. Bendick. I am Bob Bendick from The Nature Conservancy.
My name tag is somewhere here.
Of course there is a great deal of very specific evidence
on sequestration by trees and by other natural systems. And I
think we know pretty precisely what different forest types
sequester, how quickly, both in the U.S. and outside the U.S.
And that is why, sort of, forest carbon issues are part of
the blueprint, because we know what those are. It is a very old
technology and one we can count on in very specific ways if the
regulations surrounding keeping those trees in place are good
ones. And that is what we advocate.
Ms. Klee. If I could just add, we are working with our
customers and have a project with Duke in Indiana for an IGCC
coal plant with carbon capture and storage and other facilities
to be CCS-ready. And our customers have been very receptive to
that.
And we also have a lot of experience, and other companies
do as well, with CO2 injection as part of enhanced
oil recovery.
So the technologies are there. It is a question of getting
them to be economically feasible. And the research for large-
scale projects is very, very resource-intensive, cost-
intensive. And that is why----
Ms. Castor. So it is mostly going on in the private
sector, not at universities. Or is it?
Ms. Klee. It is going on at both, but it is very cost-
intensive. And that is why getting funding is important, to
ensure that we can take it to that next level.
Mr. Lashof. I just want to say, in terms of universities,
there has been quite a bit of work. Lawrence Berkeley National
Laboratory has done work characterizing the underground
geology. Mr. Chu, nominated to be Energy Secretary, has been
involved in overseeing that work.
There is a lot of work at Stanford University and elsewhere
in the academic community and in the Department of Energy
National Labs, Battelle and other National Labs, as well as
Berkeley.
Ms. Moler. There is also a great deal of collaborative
research being done by the Electric Power Research Institute in
our industry. And then Harvard has a major coal research
project under way, as well.
Ms. Castor. Do you all--go ahead.
Ms. Peace. I would just add that a lot of folks talk about
CCS as being a new type of technology. And they have been using
CO2 for enhanced oil recovery for 30 years in the
Permian Basin. Granted, it is a little bit different if you
want to sink it in to a brine aquifer, and it requires a lot
larger cost, because you are not getting the revenue back from
the oil.
Mr. Waxman. Thank you, Ms. Castor.
Ms. Eshoo?
Ms. Eshoo. Thank you, Mr. Chairman. And thank you for
making the very first hearing in the 111th Congress of Energy
and Commerce on this issue in your new chairmanship. I think
that that bodes very well for the country.
And I want to compliment the USCAP team for the work that
you have done. This has been a very interesting morning, to
listen to all of the testimony.
Our colleague, Mr. Markey, has a saying, and that is that
there is no place to take a sick planet to, no hospital to
treat a sick planet. So I think that, as we talk about the
internals of a national policy of how we clean up and move on
in a new way to not only protect our resources but also to move
on economically and everything that comes with it, that we will
be making a contribution to the world community, as well. I
can't think of anything more important for all of us to be
working on.
I am a member of the House Intelligence Committee, as well
as this one. And back, I think, 2 years ago, there was a CNA
report that was issued, and it was written by admirals and
generals that found that global climate change posed a
significant threat to America's national security. So this
isn't only an issue covering the items that you all have spoken
about this morning and members have asked questions about. This
is an issue that does and will continue to have an impact on
America's national security.
And to that end, both myself and Mr. Markey, chairing the
Select Committee on Global Climate Change, and myself as a
subcommittee Chair at the Intelligence Committee, held an open
hearing, a public hearing, last year on this very issue.
Here are my questions. I would like to know if any of you
can tell us about where the gaps in R&D are, as to the major
research and development that needs to take place on these
issues. And if you have any recommendations to us about what
role specifically the Federal Government should play in these
investments that won't overlap with what currently is taking
place with private-sector R&D that should be considered or are
under way.
That is my first question. I have been here for a long
time, so I am going to get all my questions in first.
I would like to know how you are all measuring your
successes. There are many successes that have been mentioned
this morning. And I hope you had the benefit of hearing what
your forebears at the table spoke about. I would like to know
about that.
And thirdly, given where we are in our country with what
has happened in the private sector and the rip-offs that have
taken place, I would like some of you to comment on what
recommendations you would have to us on how we don't end up in
the traps of not having enough oversight.
I know that Mr. Tercek, before he joined The Nature
Conservancy, was with Goldman Sachs. And I think we still have
someone from The Nature Conservancy here, whether you can
address this or not.
So I guess my question is, do you believe that oversight of
the market is really an issue in this whole debate, and what
Congress can and should do and address as it designs climate
legislation.
I think without effective oversight of the Congress that,
most frankly--and it is not a pretty depiction of what goes
on--is that there are companies and corporations, private-
sector people that end up chewing their limbs off of their own
corporate body in order to get a leg up. And it hurts everyone
and everything. I don't think anyone wants to see a repeat of
what we are experiencing now and the huge toll, the damage that
it has taken on our national economy, not to speak of
individuals and families and communities.
So those are my three questions. And I thank you for the
work that you have done.
Mr. Waxman. Well, the gentlelady's time has almost
expired. But I do think it is fair to have her questions
responded to, so I would like to have any of you on the panel
volunteer to answer some of those questions.
Ms. Thompson. Well, I will start with the response on the
market oversight. I am speaking for Environmental Defense Fund,
who believes a lot in cap and trade.
Market oversight is fundamental. That is part of what makes
it work. Transparency, accountability--I think you have already
heard those things throughout the day.
Now, the blueprint does not go into detail on that, in part
because we did not have the experts on that. But I think that
is a serious issue and one that we hope to work with Congress
on.
Ms. Klee. We would support that entirely. I mean, we feel
very strongly that transparency is key to the success of this
program and a strong oversight role is appropriate.
I would like to quickly address how we, from a company
perspective, define success. And Mr. Immelt mentioned it this
morning, but it is really our Ecomagination program. That is
what has shown us that reducing greenhouse gas emissions and
increasing energy efficiency is good from a business
perspective.
We save over a hundred million dollars a year through what
we do internally as a company. And from a product placement,
product perspective, we are increasing our revenues. And we set
targets for that. We will hit $20 billion in revenues next year
and have a goal of hitting $25 billion by 2012.
And those are technologies that increase energy efficiency
and reduce greenhouse gas emissions. So these are key measures
of success for us.
Mr. Corneli. Another measure of success I think that is
important to us as a coalition as oppose to as individual
companies would be measured in the things that you all measure
and produce so well, and that's votes. We really are serious
that we want to see this legislation pass as quickly as
possible. We really want to work with you. We want to sort of
provide a stimulus or a push to Congress, and we want to be
pushed back by members on all sides so there can be an
effective good debate and a very good policy that will be good
for our environmental colleagues, good for our corporate
colleagues, good for the country.
And that's how we will measure success as a coalition. In
terms of the gaps, you know, of R&D, we do think there's a lot
of resource--a lot of technologies ready to go now that can
step into the gap and that can go down that cost curve. We
think there's a whole bunch of new ones that we have not yet
even really been invented yet that with the right price signal
and the right kind of R&D support, we can drastically lower the
cost of powering our economy, building buildings, creating
building materials and information management, food, fiber
without emitting carbon. And we would like to see the United
States be the leader in that. That's fundamental research as
well as strong assistance for continuous deployment of
technologies.
Mr. Waxman. We have very little time left and we have two
members who want to ask questions. As you think about the
questions that Ms. Eshoo and other members have asked, we would
like to invite to you submit additional comments for the
record. Mr. Rogers.
Mr. Rogers of Michigan. I know that Mr. Inslee has a quick
question, so if I could just yield just a minute of my time to
him, and then I will take the remaining time, Mr. Chairman.
Mr. Inslee. Thank you, Mr. Rogers. Just quickly, I want to
ask this issue about how the permits should be allocated for a
cap and trade system. Europe had an experience where they gave
them away instead of auctioning them, instead of using a
market-based system, they just gave them away. And they found
that very suboptimal because it did not create a price on
carbon, citizens felt abused because an asset they own, which
is the atmosphere, was just given away for free and simply
reduced the effectiveness of the program. Many of us think that
we ought to start with a mixture, heavily weighted to an
auction with perhaps some accommodation for energy intensive
industries to ameliorate some of these issues as a preferable
way to do this. I'd appreciate any of your suggestions,
particularly those who sort of agree with me.
Mr. Lashof. Mr. Inslee, that is an excellent question. It
is a very important and consequential decision that this
committee and the Congress has to make about how the
allocations are made. We do I think in the blueprint take
notice of the experience in Europe and make recommendations to
avoid it in several ways. First of all, we do recommend
following the approach that you proposed with respect to energy
intensive industries. So that's one area where we believe an
allocation is warranted as opposed to an auction. Also phasing
out is those things--as those competitive distortions are
addressed. With respect to allocations for the electric
industry, rather than give allocations primarily to generators,
most of the allocations that we're proposing would go to
regulated local distribution companies, specifically on behalf
of their customers. And we specifically talk about the need to
avoid windfall profits as part of that.
And finally, with respect to merchant generators, such as
NRG, we do propose some allocations. But they're limited to the
net compliance cost that those companies have.
Mr. Inslee. Thank you. And I want to thank Mr. Rogers for
his assistance.
Mr. Waxman. Mr. Rogers.
Mr. Rogers of Michigan. Thank you, and time is short, so I
will be quick if I can. Ann from General Electric, is your
company still in the appliance business? You build appliances?
Ms. Klee. Yes, sir, it is.
Mr. Rogers of Michigan. What percentage of those
appliances by component is built outside of the United States?
Ms. Klee. I don't have that information, but I can get it
for you.
Mr. Rogers of Michigan. It is pretty significant though,
isn't it? You over time have moved quite a bit of the
manufacturing, at least components?
Ms. Klee. We have significant manufacturing in the United
States.
Mr. Rogers of Michigan. Sure. But you have also moved
significant manufacturing outside of the United States?
Ms. Klee. We have manufacturing and partnerships and
sourcing outside as well.
Mr. Rogers of Michigan. Did the Federal Government tell
you that you needed to go into Ecomagination?
Ms. Klee. No, sir.
Mr. Rogers of Michigan. You did that entirely on your own.
Ms. Klee. That was an entirely voluntary effort.
Mr. Rogers of Michigan. Great program. My point here being
that congratulations. I think the market is showing that you
can do this on your own. And is it not true that General
Electric would benefit significantly financially from their
business model if we passed a cap and trade bill?
Ms. Klee. I think what Mr. Immelt said this morning is our
energy business is strong right now, and we will do well with
it regardless.
Mr. Rogers of Michigan. He's also reported as saying, and
I quote--well, he has made it clear that he would be getting
rid of--this is not a quote--made it clear that they would be
getting rid of lower margin businesses. Manufacturing in
today's day and age is a low-margin business.
Ms. Klee. I did not see that quote but I am quite certain
that he was not referring to the energy business in the United
States.
Mr. Waxman. Mr. Rogers, will you yield to me just to point
out to you that there is 2 minutes and 40 seconds left in the
vote on the floor. I will let you go ahead and continue with
your questions.
Mr. Rogers of Michigan. I won't go on too much. My point
here being, Mr. Chairman, I think climate change is incredibly
important as well. But there are some great industries that are
voluntarily getting into the economics of the environment,
which is fantastic. We all win when that happens. And I think
we need to be very careful about our witness panels who are
basically saying--especially a company like General Electric
who has already skirted rules and regulations in the United
States to make money overseas perfectly legal. If we make it
more difficult to manufacture things--and that's what we do in
the State of Michigan--you are going to kill a State like
Michigan. And it worries me a lot that there is maybe a better
approach to this rather than this very complicated cap and
trade system that has brought corruption to Europe. And I think
you addressed that through your transparency question, which is
great. But the reason that we don't--you don't have it in your
blueprint is because nobody knows how to do it, that you don't
run into these corruption problems. I just hope that we take
our time, we do this right, if maybe not at all, or build in an
incentive for businesses to adopt what General Electric has
done and is excited about in their environmental sector of
business.
And if we don't do that, I think we are all certainly going
to regret it. From a State that still likes to build stuff in
America and build the middle class in America that is slowly
eroding away because we can't build things anymore, we'd
better, we'd better understand what that means for the average
person who gets up and still builds things in this country. So
I appreciate the opportunity, and the chairman was very
gracious to let me go. And now I'm going to introduce a rule
change package here in the House. Thank you very much. I
appreciate your time. I am adjourning the hearing. This may be
the only time I get to do this in 2 years. Hearing adjourned.
[Whereupon, at 1:30 p.m., the committee was adjourned.]
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