[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
----------
APRIL 21, 22, 23, & 24, 2009
----------
Serial No. 111-29
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009
THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
APRIL 21, 22, 23, & 24, 2009
__________
Serial No. 111-29
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
U.S. GOVERNMENT PRINTING OFFICE
72-878 WASHINGTON : 2012
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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
MICHAEL F. 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
(ii)
Subcommittee on Energy and Environment
EDWARD J. MARKEY, Massachusetts, Chairman
MICHAEL F. DOYLE, Pennsylvania DENNIS HASTERT, Illinois
G.K. BUTTERFIELD, North Carolina Ranking Member
CHARLIE MELANCON, Louisiana RALPH M. HALL, Texas
BARON P. HILL, Indiana FRED UPTON, Michigan
DORIS O. MATSUI, California ED WHITFIELD, Kentucky
JERRY McNERNEY, California JOHN SHIMKUS, Illinois
PETER WELCH, Vermont HEATHER WILSON, New Mexico
JOHN D. DINGELL, Michigan JOHN B. SHADEGG, Arizona
RICK BOUCHER, Virginia CHARLES W. ``CHIP'' PICKERING,
FRANK PALLONE, Jr., New Jersey Mississippi
ELIOT ENGEL, New York STEVE BUYER, Indiana
GENE GREEN, Texas GREG WALDEN, Oregon
LOIS CAPPS, California SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
JIM MATHESON, Utah
JOHN BARROW, Georgia
C O N T E N T S
----------
APRIL 21, 2009
Page
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 1
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 2
Hon. Bart Gordon, a Representative in Congress from the State of
Tennessee, opening statement................................... 3
Hon. Ralph M. Hall, a Representative in Congress from the State
of Texas, opening statement.................................... 4
Prepared statement........................................... 7
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 16
Prepared statement........................................... 18
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 22
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 23
Hon. George Radanovich, a Representative in Congress from the
State of California, prepared statement........................ 26
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, prepared statement.............................. 29
Hon. Lois Capps, a Representative in Congress from the State of
California, prepared statement................................. 30
Hon. Roy Blunt, a Representative in Congress from the State of
Missouri, prepared statement................................... 32
Hon. John Sullivan, a Representative in Congress from the State
of Oklahoma, prepared statement................................ 35
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, prepared statement.................................... 37
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 45
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 46
Hon. Steve Scalise, a Representative in Congress from the State
of Louisiana, opening statement................................ 47
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 49
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 50
Prepared statement........................................... 53
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 56
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 57
Hon. Mike Ross, a Representative in Congress from the State of
Arkansas, opening statement.................................... 58
Hon. Cliff Stearns, a Representative in Congress from the State
of Florida, opening statement.................................. 60
Hon. G.K. Butterfield, a Representative in Congress from the
State of North Carolina, opening statement..................... 62
Hon. Bruce L. Braley, a Representative in Congress from the State
of Iowa, opening statement..................................... 63
Prepared statement........................................... 65
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 70
Prepared statement........................................... 72
Hon. Charles A. Gonzalez, a Representative in Congress from the
State of Texas, opening statement.............................. 74
Hon. Charlie Melancon, a Representative in Congress from the
State of Louisiana, opening statement.......................... 75
Hon. Jim Matheson, a Representative in Congress from the State of
Utah, opening statement........................................ 76
Hon. Donna M. Christensen, a Representative in Congress from the
Virgin Islands, opening statement.............................. 79
Hon. Michael F. Doyle, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 80
Hon. Zachary T. Space, a Representative in Congress from the
State of Ohio, opening statement............................... 82
Hon. Peter Welch, a Representative in Congress from the State of
Vermont, opening statement..................................... 83
Hon. Doris O. Matsui, a Representative in Congress from the State
of California, opening statement............................... 84
Hon. Baron P. Hill, a Representative in Congress from the State
of Indiana, opening statement.................................. 85
Hon. John P. Sarbanes, a Representative in Congress from the
State of Maryland, opening statement........................... 86
Hon. Betty Sutton, a Representative in Congress from the State of
Ohio, opening statement........................................ 87
APRIL 22, 2009
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 91
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 93
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 95
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 96
Witnesses
Lisa Jackson, Administrator, United States Environmental
Protection Agency.............................................. 98
Prepared statement........................................... 101
Answers to submitted questions............................... 380
Steven Chu, Secretary, United States Department of Energy........ 104
Prepared statement........................................... 106
Answers to submitted questions \1\
Ray LaHood, Secretary, United States Department of Transportation 108
Prepared statement........................................... 110
Answers to submitted questions............................... 385
Charles Holliday, Jr., Chairman, DuPont.......................... 159
Prepared statement........................................... 161
Answers to submitted questions............................... 387
Red Cavaney, Senior Vice President for Government and Public
Affairs, ConocoPhillips........................................ 164
Prepared statement........................................... 166
Answers to submitted questions \2\
Jim Rogers, Chairman, President and CEO, Duke Energy Corp........ 172
Prepared statement........................................... 174
Answers to submitted questions \3\
Frances Beinecke, President, Natural Resources Defense Council... 182
Prepared statement........................................... 184
Answers to submitted questions............................... 389
Meg McDonald, Director, Global Issues, Alcoa Inc................. 190
Prepared statement........................................... 192
Answers to submitted questions............................... 391
David Crane, President and CEO, NRG Energy, Inc.................. 194
Prepared statement........................................... 196
Answers to submitted questions............................... 393
John Fetterman, Mayor, Braddock, Pennsylvania.................... 231
Prepared statement........................................... 233
Paul N. Cicio, President, Industrial Energy Consumers of America. 234
Prepared statement........................................... 236
Kevin Knobloch, President, Union of Concerned Scientists......... 239
Prepared statement........................................... 241
Dr. Steven Hayward, F.K. Weyerhaeuser Fellow, American Enterprise
Institute...................................................... 259
Prepared statement........................................... 261
David Kreutzer, Senior Policy Analyst in Energy Economics and
Climate Change, The Heritage Foundation........................ 264
Prepared statement........................................... 266
Nathaniel Keohane, Director of Economic Policy And Analysis,
Environmental Defense Fund..................................... 274
Prepared statement........................................... 276
Myron Ebell, Director, Energy and Global Warming Policy,
Competitive Enterprise Institute............................... 302
Prepared statement........................................... 304
Frank Ackerman, Senior Economist, Stockholm Environmental
Institute--US Center, Tufts University......................... 321
Prepared statement........................................... 323
Answers to submitted questions \4\
Kate Gordon, Co-Director, Apollo Alliance........................ 341
Prepared statement........................................... 343
Answers to submitted questions............................... 396
Denise Bode, CEO, American Wind Energy Association............... 349
Prepared statement........................................... 351
Answers to submitted questions............................... 397
David Manning, Vice President, External Affairs, National Grid... 356
Prepared statement........................................... 358
Answers to submitted questions............................... 399
Yvette Pena, Legislative Director of the Blue Green Alliance..... 365
Prepared statement........................................... 367
Answers to submitted questions............................... 401
----------
\1\ Mr. Chu did not respond to submitted questions for the
record.
\2\ Mr. Cavaney did not respond to submitted questions for the
record.
\3\ Mr. Rogers did not respond to submitted questions for the
record.
\4\ Mr. Ackerman did not respond to submitted questions for the
record.
APRIL 23, 2009
Witnesses
Jeffry E. Sterba, Chairman and CEO, PNM Resources Inc., On Behalf
of the Edison Electric Institute............................... 406
Prepared statement........................................... 410
Glenn English, CEO, National Rural Electric Cooperative
Association.................................................... 424
Prepared statement........................................... 427
Mark Crisson, President and CEO, American Public Power
Association.................................................... 445
Prepared statement........................................... 447
John Somerhalder, II, Chairman, CEO, and President, AGL
Resources, On Behalf of the American Gas Association........... 473
Prepared statement........................................... 475
Richard Morgan, Commissioner, District of Columbia Public Service
Commission, On Behalf of The American Gas Association.......... 489
Prepared statement........................................... 491
Richard Cowart, Director, Regulatory Assistance Project.......... 500
Prepared statement........................................... 502
Robert Greenstein, Executive Director, Center for Budget And
Policy Priorities.............................................. 521
Prepared statement........................................... 524
Robert Michaels, Professor of Economics, California State
University..................................................... 536
Prepared statement........................................... 538
Darryl Bassett, Empower Consumers................................ 542
Prepared statement........................................... 545
Jack McMackin, Principal, Williams and Jensen, LLC, On Behalf of
the Energy Intensive Manufacturers Working Group on Greenhouse
Gas Regulation................................................. 581
Prepared statement........................................... 584
Rich Wells, Vice President for Energy, The Dow Chemical Company.. 603
Prepared statement........................................... 605
Tom Conway, International Vice President, United Steel Workers... 613
Prepared statement........................................... 616
Trevor Houser, Visiting Fellow, Peterson Institute for
International Economics........................................ 625
Prepared statement........................................... 628
Elliot Diringer, Vice President, International Strategies, Pew
Center on Global Climate Change................................ 638
Prepared statement........................................... 640
Lee Lane, Resident Fellow, American Enterprise Institute......... 647
Prepared statement........................................... 649
Reverend C. Douglas Smith, Executive Director, Virginia
Interfaith Center for Public Policy............................ 665
Prepared statement........................................... 667
Howard Gruenspecht, Acting Administrator, United States Energy
Information Agency............................................. 684
Prepared statement........................................... 687
Dan W. Reicher, Director, Climate Change and Energy Initiatives,
Google......................................................... 700
Prepared statement........................................... 702
Dian M. Grueneich, Commissioner, California Public Utilities
Commission..................................................... 712
Prepared statement........................................... 715
James L. Robo, President and Chief Operating Officer, FPL Group.. 725
Prepared statement........................................... 727
Gregory P. Kunkel, Vice President of Environmental Affairs,
Tenaska, Inc................................................... 731
Prepared statement........................................... 734
David G. Hawkins, Director of Climate Programs, Natural Resources
Defense Council................................................ 745
Prepared statement........................................... 747
Eugene M. Trisko, On Behalf of the United Mine Workers of America 760
Prepared statement........................................... 762
Jonathan Briggs, Regional Director of the Americas, Hydrogen
Energy International, LLC...................................... 789
Prepared statement........................................... 791
James Kerr, Partner, McGuire Woods LLP, Former Commissioner,
North Carolina Public Utilities Commission..................... 797
Prepared statement........................................... 800
Jay Apt, Executive Director, Carnegie Mellon Electricity Industry
Center, Associate Professor, Carnegie Mellon University........ 810
Prepared statement........................................... 812
APRIL 24, 2009
Witnesses
Albert Gore, Jr., Former Vice President of the United States..... 851
Prepared statement........................................... 856
John Warner, Former United States Senator........................ 861
Prepared statement........................................... 866
Newt Gingrich, Former Speaker of the House....................... 915
Prepared statement........................................... 923
Ian Bowles, Secretary, Executive Office of Energy and
Environmental Affairs, Commonwealth of Massachusetts........... 965
Prepared statement........................................... 968
Dave McCurdy, President and CEO, Alliance For Automobile
Manufacturers.................................................. 978
Prepared statement........................................... 980
Alan Reuther, Legislative Director, International Union, United
Automobile, Aerospace & Agricultural Implement Workers of
America (UAW).................................................. 988
Prepared statement........................................... 990
Daniel Sperling, Director, Institute of Transportation Studies,
University of California Davis................................. 1004
Prepared statement........................................... 1006
Answers to submitted questions............................... 1251
David Friedman, Research Director, Clean Vehicles Program, Union
of Concerned Scientists........................................ 1009
Prepared statement........................................... 1011
David Gardiner, President, David Gardiner and Associates, LLC (On
Behalf of Energy Future Coalition)............................. 1023
Prepared statement........................................... 1025
Jeff Genzer, Counsel, National Association of State Energy
Officials...................................................... 1028
Prepared statement........................................... 1030
Charles T. Drevna, President, National Petrochemical and Refiners
Association.................................................... 1036
Prepared statement........................................... 1038
Andrew DeLaski, Executive Director, Appliance Standards Awareness
Project........................................................ 1054
Prepared statement........................................... 1057
Charles Richardson, On Behalf of the National Association of
Homebuilders................................................... 1079
Prepared statement........................................... 1081
Tia Nelson, Executive Secretary, Board of Commissioners of Public
Lands, State of Wisconsin...................................... 1105
Prepared statement........................................... 1107
Bill Becker, Executive Director, National Association of Clean
Air Agencies................................................... 1116
Prepared statement........................................... 1119
Carl Royal, Counsel, Schiff Hardin LLP, Formerly Senior Vice
President and General Counsel, Chicago Mercantile Exchange..... 1131
Prepared statement........................................... 1133
Jon Anda, Executive-in-Residence, Fuqua School of Business, Duke
University, Visiting Fellow Nicholas Institute for
Environmental Policy Solution.................................. 1141
Prepared statement........................................... 1144
David Doniger, Policy Director, Climate Center, Natural Resources
Defense Council................................................ 1147
Prepared statement........................................... 1149
Patricia Mulroy, General Manager, Las Vegas Valley Water
District/Southern Nevada Water Authority....................... 1167
Prepared statement........................................... 1169
Anne E. Smith, Vice President, Practice Leader of Climate and
Sustainability, CRA International.............................. 1191
Prepared statement........................................... 1193
William L. Kovacs, Vice President, Environment, Technology and
Regulatory Affairs, U.S. Chamber of Commerce................... 1205
Prepared statement........................................... 1207
Submitted Material
Statement of the American Iron and Steel Institute, submitted by
Ms. Baldwin.................................................... 1235
THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009--DAY 1
----------
TUESDAY, APRIL 21, 2009
House of Representatives,
Subcommittee on Energy and Environment,
Committee on Energy and Commerce,
Washington, DC.
The committee met, pursuant to call, at 3:06 p.m., in Room
2123, Rayburn House Office Building, Hon. Edward J. Markey
[chairman of the subcommittee] presiding.
Present: Representatives Waxman, Dingell, Markey, Gordon,
Stupak, Green, Doyle, Harman, Gonzalez, Inslee, Baldwin, Ross,
Matheson, Butterfield, Melancon, Barrow, Hill, Matsui,
Christensen, Sarbanes, Space, Sutton, Braley, Welch, Barton,
Hall, Stearns, Whitfield, Pitts, Walden, Murphy of
Pennsylvania, Burgess, Blackburn and Scalise.
Staff Present: Matt Weiner, Special Assistant; Alexandra
Teitz, Senior Counsel; Greg Dotson, Chief Energy Counsel; Lorie
Schmidt, Senior Counsel; Cara Anchman, Communications
Associate; Lindsay Vidal, Press Assistant; Phil Barnett, Staff
Director; Kristen Amerling, General Counsel; Melissa Bez,
Professional Staff; Mitch Smiley, Special Assistant; Matt
Eisenberg, Staff Assistant; William Carty, Minority
Professional Staff; and Garrett Golding, Minority Legislative
Analyst.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS
Mr. Markey [presiding]. The committee will come to order.
Today we will begin our legislative hearings on the American
Clean Energy and Security Act discussion draft, which Chairman
Waxman and I released 3 weeks ago. This bill provides a
comprehensive approach to solving our economic energy and
climate crisis. The time for delay and denial and inaction has
come to an end. It is time to put Americans back to work in the
jobs needed to bring about the age of the clean energy economy.
We have an ambitious but achievable schedule before us. The
markup process will begin next week, and we expect to report
the bill from the full committee before the Memorial Day break.
In my 33 years on the Energy and Commerce Committee, I
cannot remember a week of hearings quite like this one. We are
fortunate to have three Cabinet-level officials: former Vice
President Al Gore; national security statesman, Republican
Senator John Warner; dozens of executives from Fortune 500
companies; and many environmental leaders. We have already
heard from more than 60 other witnesses at the subcommittee's
previous hearings this year in addition to nearly 160 witnesses
who appeared at the 24 hearings held by the subcommittee in the
last Congress.
The Waxman-Markey discussion draft uses many of the ideas
put forth in the hearings held last year and this year and
represents a solid start towards a consensus product. This
legislation presents us with an historic opportunity. Of all
the committees in Congress, I believe this committee is best
suited to handle the challenge of passing strong energy
legislation that will help grow our economy, create millions of
green jobs and address the global warming crisis.
We will now begin to hear from Members who wish to give
their opening statements. And I will turn and begin by
recognizing the gentleman from Oregon, Mr. Walden.
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
especially appreciate your comments about the need for jobs.
Oregon is now second only to Michigan in its unemployment rate,
and I dare say the district I represent that is home to 10 or
11 of our Nation's national forests unfortunately comes in with
some of the highest unemployment rates in the country and in
the State.
Unfortunately, the draft bill which I have begun to work my
way through doesn't help us if you are in a forested timber
community. And, in fact, there is no scientific basis for the
definition that is used in here to describe biomass and
prohibit the use of any biomass off Federal forestlands and
most likely off private forestlands to account toward renewable
energy, when, in fact, there is enormous opportunity for
renewable energy to be produced off our Federal forestlands and
our private forestlands. For some reason the definition on page
8 of this bill specifically prohibits any biomass off Federal
land from being included as renewable.
There is no scientific basis for that definition
whatsoever, and I hope it can be changed. I plan to offer an
amendment to change and delete it, frankly.
My district is also home to enormous growth in wind energy,
and I have been a big advocate of wind energy. One of the great
synergisms that occurs in the Northwest is between using the
hydroelectric system to be the battery by storing water to
balance out the curve when it comes to wind power, because as
anybody in the wind energy side knows, wind is not firm power.
And, in fact, in the Northwest you will find times, this
January specifically, where there was 10 days when there was no
wind, which meant no energy release. Other times within an hour
you could have a 1,000-megawatt difference between the output
of the wind energy up or down.
That means that energy has to be firmed up. Hydro systems
are terrific for firming up energy. Yet in this legislation
hydro that predates 2001 is not considered as renewable, and
yet hydro after that is, unless hydro is on a facility that on
page 11 of the definition shows that if the water surface
elevation at any given location or time changes because of that
hydro, then suddenly it is not considered renewable.
Can somebody explain to me how that works? Unless you
simply have in-stream hydro, which really isn't a reality in
most cases, although we have some in irrigation canals, which
is fine, but to do big hydro or new hydro, you are most likely
going to affect the elevation at some point and at some time if
you are going to use hydro that stores the battery, the energy,
that then is used to fill in when wind energy does not occur.
So, Mr. Chairman, there are enormous challenges with the
draft of this legislation when it comes to the definitions.
Some of these definitions defy both logic and science. And yet
there is enormous opportunity to develop renewable energy.
I participated in a Science Committee field hearing
yesterday morning in Vancouver, Washington, that was put on by
our colleague Mr. Baird. And at that hearing one of the
scientists from the University of Washington indicated that
there is plenty of renewable wood fiber in the Northwest to, in
fact, she said, provide replacement fuel for all gasoline
consumption in the State of Oregon using something called
methanol. Methanol, by the way, is what we use today in race
cars. It is a proven technology, it is a proven fuel, and yet
it is discriminated against when we talk about alternative
fuels. Meanwhile our forests go up in smoke at unprecedented
rates.
With temperature change and global warming, we need to be
better stewards of our Nation's forests, and yet you have got
enormous fires. According to the California Forestry
Association, wildfires burning more than 8 million acres spew
as much carbon dioxide into the air as all the cars and
factories in the U.S. combined in the same months. From 2004 to
2008, an average of 8.9 million acres burned in wildfires each
year.
Our forests are going up in smoke, drought, bug
infestation, mortality, 400 million boardfeet a year mortality
alone in the Northwest. There is enormous opportunity to turn
that woody biomass into a fuel source to use it for heat source
with very little emission to improve the habitat and
environment of the forest, and to thin them out to protect some
of the old growth and all that people would like to do, and yet
the very definitions in this bill fail that stewardship.
So, Mr. Chairman, I look forward to the markup. I look
forward to future hearings on the substance of this measure so
that we can fix it and make it workable. Thank you, Mr.
Chairman.
Mr. Markey. I thank the gentleman.
The Chair recognizes the gentleman from Tennessee, Mr.
Gordon.
OPENING STATEMENT OF HON. BART GORDON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mr. Gordon. Thank you, Mr. Markey.
You have a lot of people to make statements today, so I
will be very quick.
Climate change is real. We need to do something about it.
It is the right thing for our country, it is the right thing
for the world. Business needs reasonable, I think, rules of the
road so they can make a business plan and have certainty, and I
think, as you have pointed out, we need to legislate this
rather than have it done by regulation.
I want to thank the committee and its staff for working
with the staff of the Science Committee on some areas of joint
jurisdiction and also some unique jurisdiction. We look forward
to seeing the mark so we will know how to better move in that
direction.
There is one area that I do want to point out that I think
we need to do some more fine-tuning, and that is the renewable
electricity standard. I think that we do need to have a broad
use of the NES. I think that it is important for us as we start
to move toward more energy independence. But it should not be
punitive to different parts of the country.
And I would ask the committee staff please to put a chart
up if you have it. There we go.
So if you can see that chart, and it is not mine, it is the
National Renewable Energy Laboratory, and what you will see
there is the green area is where current technology can be used
for biomass. The blue is for wind, and the red is for solar.
And as you see, there is some broad swaths of the country--you
know, we are all sitting here for our own constituents, so you
can see parochially if you look down on the east side of the
Texas all the way up through the Southeast, up toward Bart
Stupak's up there, there really are very few types of
alternative energies that we can use and that are appropriate
for those communities.
So hopefully, again, we do not want something that is going
to be punitive, and I have some suggestions in that area. First
of all, we should allow real credit for energy-efficiency
improvements. Expanding the definition of what is renewable
power, I think, is important, including giving the Secretary of
Energy some authority for future technologies. If we are going
to get from here to there, we can't do it on today's
technology. And so there is going to be different types of, I
think, renewable power in the future that we need to recognize
in that regard.
I think it is important that we don't apply the mandates to
small and midsize municipalities and cooperative utilities. I
think it is also important that we consider the use of nuclear
power and coal through CCS, and also reducing the alternative
compliance payments.
So while we have begun a conversation or continue that with
you, I suggest any other Members here that would like to be a
part of that, we would welcome you to join in that. And again,
thank you for this hearing and all the hearings you have this
week.
Mr. Markey. We thank the gentleman very much.
The Chair recognizes the gentleman from Texas, Mr. Hall.
OPENING STATEMENT OF HON. RALPH M. HALL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Hall. Thank you, Mr. Chairman. And today we are
embarking on what I would call a mad dash to examine almost 650
pages of text, which includes various mandates and an
incomplete cap and trade proposal containing no specifics on
how CO2 emissions allowances would be allocated in
the unprecedented expansion of environmental litigation placed
and based on perceived risk.
Despite the amount of paper it is printed on, the
discussion draft lacks detailed information on the disposition
of allowances. Will the allowances be distributed or auctioned?
Would there be 100 percent auction? If auctioned, what are the
cost-control mechanisms, and where would the proceeds be
directed?
This lack of clarity, Mr. Chairman, leaves the
Congressional Budget Office absolutely unable to properly score
the bill to start with, and American businesses and consumers
in the dark to suggest how much this bill is going to cost. The
entire promise and the premise on which the climate change
debate hinges is on the idea that we can accurately measure,
monitor and verify greenhouse gas emissions coming from all
sectors of the country.
Second, a cap implies that we know where we currently
stand. We are betting the U.S. economy on the assumption that
verifiable data collection and monitoring is as simple as you
indicate it to be. Without U.S. regulation of greenhouse gases,
what impact would we have if other major carbon-emitting
countries do not follow suit? And would this reality put
America in the position of shouldering the burden of cleaning
up the world and having our citizens bear the high cost? What
would regulations mean for electricity rates? Are these costs
we are willing to accept given the uncertainty about whether
regulations would even help at all?
Recently Energy Secretary Chu mentioned that under the
administration's bill, the price of energy would increase.
These costs will be passed on to the consumers, and the United
States would be at a disadvantage to other nations. Just last
month China's top climate negotiator proffered that any fair
international agreement to curb gases blamed for global warming
would not require China to reduce emissions caused by or
manufactured to meet demands elsewhere in the world. If China,
the world's largest emitter, is not willing to play, are we
comfortable putting America's economic security in further
jeopardy by moving forward with this legislation?
The key question facing all of us here in Congress is,
quote, what is the appropriate policy for the United States to
move our Nation toward affordable, reliable and clean energy
sources? It is not an easy question to answer. We must discuss
what the U.S. could accomplish with the right investments in
energy research and development. For example, many, including
myself, hope that carbon capture and sequestration technologies
will make it possible for coal-fired power plants to limit
their emissions while providing affordable electricity.
Technologies researched and developed by the oil and gas
industry in partnership with universities and national labs and
utilized for enhanced oil recovery make for--the potential for
carbon capture and sequestration make that possible.
This innovation should be nurtured and not stymied.
However, on top of a cap-and-trade system, this bill places a
command-and-control regime on coal-fired power plants.
Mandating that after 2009 no new coal-fired plants without CCS
technology in place may be built sets an unreasonable deadline.
Even Energy Secretary Chu recently acknowledged that such CCS
technologies will take many years to develop and even longer to
be put into practice. What is to be gained by such a short time
line?
The elimination of the use of one of the most abundant
domestic energy resources, while at the same time increasing
the demand for electricity, what energy source will be used to
replace fossil fuels to meet the increased electricity demanded
and triggered by the various mandates in this bill? If not
clean coal, what about nuclear power? Unfortunately, nuclear is
never featured among the almost 650 pages of your text.
Mr. Chairman, I yield back my time. I am very concerned
about this bill, the effect it is going to have on this
country, the effect it is going to have on taxpayers in the
future, the effect it is going to have on those of us who rely
on energy and right now relying on countries that we don't
trust and don't trust us for the energy we have. Surely there
is a better way to go.
I thank you, and I yield back the balance of my time if I
have any.
Mr. Markey. We thank the gentleman.
[The prepared statement of Mr. Hall follows:]
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Mr. Markey. The Chair recognizes the gentleman from Texas,
Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman. And the following week
will now be historic for the Energy and Commerce Committee.
After years of debate on the root causes, impacts and potential
solutions to address global climate change, our committee will
soon consider comprehensive legislation that seeks to reduce
greenhouse gas emissions both home and abroad.
Both the full committee Chair and you, Chairman Markey,
have worked quickly on a discussion draft which sets the markup
for action on climate in the House of Representatives. It is an
understatement to say that all Americans in the entire world
are closely watching how this debate unfolds. That is why I am
pleased you have set an aggressive hearing schedule this week
with distinguished panelists to learn more about the American
Clean Energy and Security Act, or ACES, released shortly before
the April recess.
Since the draft's release, the Environmental Protection
Agency has issued a finding that greenhouse gas emissions pose
a threat to public health and welfare. If Congress does not
act, greenhouse gas emissions could be regulated
administratively without input from Members that represent
diverse constituencies nationwide.
While I commend Chairman Waxman and your work, Chairman
Markey, on the draft, and I hope to support the final product,
I have serious concerns with the impact ACES may have on my
constituents and job base in the overall economy. First, we
must protect our U.S. Energy-intensive domestic industries,
including refineries, so we do not simply export those jobs
abroad to nations without carbon controls and lax environmental
regulations.
I represent the Houston Ship Channel, a petrochemical
complex that stretches along the Texas Gulf Coast and is home
to thousands of chemical industry and petroleum refining jobs.
These energy-intensive industries we left vulnerable to foreign
competitors not facing carbon regulations if we do not
carefully craft transitional policies to prevent job leakage.
We cannot allow the petrochemical and refining industries to
migrate out of America. They are vital to our economy and to
our national security.
I want to thank Congressman Inslee and Congressman Doyle
for putting forward a proposal to provide free allowances of
certain energy-intensive industries regulated under a climate
program. I urge the committee to provide ample allowances
sufficient for all exposed industries, including domestic
refineries, which will place our refineries on an equal footing
with their competitors in the European Union, which are
considered energy-intensive, trade-exposed industries. Border
adjustment policies must level the playing field in the global
market for all trade-exposed products, and our export and
import polices under the cap-and-trade program must not place
our domestic industries at a competitive disadvantage.
None of these proposals, however, can substitute for the
need for a strong international agreement with binding carbon
reductions amongst the world's largest emitters, including
developing countries.
Second, our transportation fuel policy must be based on
sound science, and avoid duplicative regulation, and enhance
our broader national energy security. The draft discussion
includes a low carbon fuel standard, which does not reflect the
consensus-based principles issued by the U.S. Climate Action
Partnership, and raises more questions than answers. Under the
cap-and-trade program, refiners must already purchase emission
allowances for all fuels produced, with the total volume in the
nationwide emission allowances declining over time. Layering an
additional regulatory scheme on fuels may be the least
efficient way to reduce carbon emissions and must be weighed
against the impact the proposal would have on consumer gasoline
prices.
Third, complementary policies addressing renewable
electricity and energy efficiency standards must reflect State
and regional capabilities, avoid overlap, and not unduly burden
low-income Americans with higher home energy bills. A mechanism
must be in place to adjust targets if energy prices escalate,
or if transmission capacity is inadequate.
Fourth, a final proportion of allowances must be allocated
for consumer assistance programs. Assisting with higher
electricity prices is one piece of the puzzle. An effective
rebate program must also address higher gasoline prices as well
as the price of all goods that rely on energy inputs. If our
climate policy leads to energy supply disruptions and price
spikes without effective remediations, consumers and voters
will begin to question that policy, and they will respond.
Finally, the overall design of the cap-and-trade program
must be improved. Any final bill should include realistic
emission reduction targets, more effective cost-containment
mechanisms, and enhance carbon market oversight provisions. I
hope to work with Chairman Waxman, Chairman Markey and all the
members of our committee on other concerns to craft a climate
policy that protects both our environment and our economy.
Mr. Chairman, I yield back my time. Thank you.
[The prepared statement of Mr. Green follows:]
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Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Texas, Mr. Burgess.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. I thank the Chairman, and I thank the Chairman
for the opportunity to have this day of opening statements as
we begin a week of doing these hearings with several dozen
witnesses. And I am assuming that we will hear over and over
again witnesses tell this committee that the draft bill under
consideration is the answer to all of our energy and security
problems, as well as a vehicle that our economy needs to carry
us through this economic downturn.
I would argue that in its current form, this bill may do
more harm to our economy than any bill that is likely to come
before Congress the rest of this year, perhaps during my
natural lifetime. That is because this cap-and-trade proposal
will increase the daily overhead cost for businesses, increase
the cost of running our families to work and school and in jobs
of businesses unless they are explicitly protected in the
language.
Let me say that again: unless they are explicitly protected
in the language. In other words, we will have a system of
earmarks for what businesses we favor. Once again, Congress, in
full transactional mode, will be able to pick winners and
losers.
Credit allocations are conspicuously absent from the
language in this bill.
I would also argue that some of the witnesses the committee
has put together should be scrutinized for their support of
this bill. I believe that some merely see a business
opportunity to create strategic alliances in order to gain a
greater share of future energy market. Certainly we have dealt
with problems in the futures market and energy last summer when
oil went up so high, and interestingly enough, Thomas Friedman,
writing in an article a week, week and a half ago, said if we
are going to be honest about it, let's just tax carbon; let's
not play this elaborate game of hide the ball from the American
public. The American public deserves to know what we are doing,
and we are only going to create a system where the buying and
selling of carbon futures are going to mimic that of energy
futures last summer.
Now, I would like to highlight the fact that some of the
largest corporation industries affected by this draft bill are
absent despite the seemingly unending list of witnesses that we
have had before us this spring and are going to have this week.
I have also noticed for the second time in two attempts the
witnesses representing the U.S. Climate Action Partnership have
avoiding hearing opening statements from members of the
committee. Now, I know they are boring, and I know that people
don't like to pay attention to them, but this is an historic
time, and they should be here.
I am looking forward to hearing from Secretary Chu,
Secretary LaHood, Administrator Jackson at tomorrow's hearings.
As members of this committee, we really haven't had an
opportunity to hear from them. In fact, we have created our
whole budget without any input from the Secretary of Energy or
the Secretary of Transportation. In the previous administration
we would bring the Energy Secretary in, we would bring the
Secretary of Transportation in and get their views and
estimates before we created the budget. We didn't get to do
that this year, so maybe tomorrow will be a good opportunity to
ask about the views and estimates for their budget and how this
bill will be incorporated into each agency's responsibility and
roles in government over the coming years. That opportunity for
Members to question agencies about their budget is an important
role of Congress, and I will appreciate the opportunity to
exercise that tomorrow.
I would also point out that it is up to the Congress to--we
hold the pursestrings, and if indeed the Environmental
Protection Agency is producing regulations that are damaging to
the economy, we do have the ability to withhold funding for
their activities during the appropriations process, and perhaps
some clever person can draft an amendment that will do just
that.
Now, fortunately, this draft legislation today is only a
draft. We still have time to make changes to this bill, and I
hope some of our witnesses will offer suggestions, constructive
suggestions, for how we can do this without further damaging
the economy. For example, if the goal is to reduce emissions, 1
ton saved through energy efficiency should receive the same
treatment as 1 ton saved through technology transfer, fuel
switching or renewable production. I think energy efficiency is
the real common ground in this energy discussion because it
reduces consumption and saves money.
And finally, the aggregate cost of this bill is a very
serious concern. The current draft makes it nearly impossible
to estimate the eventual cost because we are still not sure how
the allowances will be distributed. But comparing this draft to
similar bills that have already been scored brings this bill to
well over $1 trillion. One trillion dollars is still what it
used to be even in the recent time of $1 billion and $1
trillion bailouts.
I have said it before in this committee: Strong and growing
economies are more likely to develop the technology
breakthroughs we needed to spur the next wave in energy
innovation. That is something we can address without imposing a
cap on carbon or establishing a trading platform where
sophisticated investors can work up exotic carbon options to
trade or mandate the use of nonreliant or unavailable
technology.
So I certainly look forward to questioning the witnesses,
Mr. Chairman, and I yield back the balance of my time.
Mr. Markey. Let me thank the gentleman.
The Chair now recognizes the Chairman emeritus of the
committee, the gentleman from Michigan, Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, thank you for holding this
hearing today. Climate change is one of the most serious issues
facing the Nation. The effect the legislation discussed this
week will have both on the environment and the economy cannot
be overstated. The fact that the committee is dedicating such
time in going through the regular order is of the utmost
importance. And both you and Chairman Waxman are to be
commended for your handling of these matters within the regular
order. You are also to be commended for the outreach you have
done to the members of the committee to enable the committee
and its members to understand the issues each of us faces in
our unique and geographical and economically diverse districts.
In reading through the legislation, and in talking to
stakeholders over the recess, I am impressed with the draft
bill before us. Of course, the question of auction versus
allocation still lies before us, and that is a very serious
question, some might say deal breaker, for many Members.
I would note that this bill bears strong similarities to
the recommendation of USCAP and also to language of legislation
introduced by Mr. Boucher and I during the last session of the
Congress.
I do remain concerned about the aggressive nature of the
renewable electrical standard as written in the draft. While a
strong renewable standard is critically important as we move
forward, and would certainly go a long way in preventing the
dash to gas, I worry that 25 percent in 15 years might be more
than States can handle. One possible solution to this would be
to back nuclear out of the baseline that has been done for
waste energy and existing hydro. It is my sincere hope that we
could work together to find a standard that is both workable
and achievable and fair.
I would also like to work with you and Chairman Waxman on
the provisions dealing with autos. Included in this legislation
I would like to see a doubling of the authorization of the
Department of Energy's section 136 Advanced Technologies
Vehicle Manufacturing Incentive Program. I would note that this
country has been in and out of programs like this, like
Murphy's glass eye, and every new administration that comes
along has changes which will give us better, they say,
technology assistance to the auto-manufacturing industry. But
this has left us with a very unstable and unreliable situation.
The program that I refer to has proved wildly successful, and
applications to date far outweigh current funding levels. And
we are seeing how this kind of program will work and has worked
in other countries like Japan, China and Korea, which are now
exporting batteries to this country and other advanced
technology in the automobile industry.
I would also propose dedicating 1 percent of the allowance
values a direct funding source for section 136, and generally
for retooling to help the domestic auto industry meet the
higher fuel economy standard. In addition, I would like to see
the inclusion of the so-called ``cash for clunkers'' bill.
Mr. Chairman, I look forward to working with you and other
members of this committee as we work towards compromise
language between the Sutton bill and the Inslee bill. Any
compromise must favor automobiles built in the United States
and not exacerbate the disadvantages our domestic auto industry
already faces. It would indeed be curious if we were to spend
money to stimulate the economy of the United States by
supporting autos built in Japan, Korea or China.
I also want to applaud Representative Doyle for his work on
ensuring that the United States manufacturing is not placed at
a competitive disadvantage as a result of this legislation. His
leadership has been valuable, and, again, I commend him for it.
I support your efforts also, Mr. Chairman, in this area and
look forward to doing so.
Finally, Mr. Chairman, as we move forward, I am committed
to securing a dedicated fund for natural resource adaptation.
As we heard in the testimony before the subcommittee at a
hearing on adaption, the forest assessment report of the
Intergovernmental Panel on Climate Change noted, and I quote,
observational evidence from all continents and most oceans
shows that many natural systems are being affected by regional
climate changes, particularly temperature increases, closed
quote. In that same report we are warned that in the lifetime
of a child born today, 20 percent to 30 percent of the world's
plant and animal species will be on the brink of extinction if
we don't take action now.
One of my great heroes, and a great conservationist, and
the 26th President of the United States, Theodore Roosevelt,
taught us that conservation is a great moral issue, and that it
is our duty as it ensures the safety and the continuance of the
Nation and mankind.
Mr. Chairman, I look forward to hearing from the many
witnesses over the next several days and working with you as we
continue to work to address climate change in a manner which
protects the environment and which must protect jobs and the
economy. I yield back the balance of my time.
Mr. Markey. We thank the gentleman from Michigan very much.
And we now turn and recognize the gentleman from Kentucky,
Mr. Whitfield.
Mr. Whitfield. Chairman Markey, thank you very much. And
before I give my opening statement, I would like to ask
unanimous consent that the statement of Mr. Radanovich of
California be submitted for the hearing record.
Mr. Markey. Without objection, it will be included.
[The prepared statement of Mr. Radanovich follows:]
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Mr. Markey. And any opening statements from any of the
Members who cannot attend this session will be included by
unanimous consent in the record.
[The prepared statements of Ms. Eshoo, Ms. Capps, and
Messrs. Blunt, Sullivan, and Gingrey follow:]
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Mr. Markey. If the Chair is recognized, we will put it back
at 5 minutes.
The gentleman from Kentucky, Mr. Whitfield, is recognized
for his opening statement.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. Thank you very much, Chairman Markey.
And I would like to say that while climate change may be
one of the most urgent problems facing our country, the way
that this bill affects our production of electricity and the
production of the fuel we use for our transportation needs in
America may very well dwarf the climate change problem. Now,
why do I say that? I say that because it is essential, as we
move forward to produce cleaner energy, that we balance the
need of cleaner energy versus the need of protecting jobs in
the U.S. and keeping the U.S. competitive in the global
marketplace.
Now, President Obama and others have said that the jobs
created as this country moves into clean energy will far offset
the jobs that we lose with our traditional energy sources. I
have read a lot of studies, and there are some studies that say
that that is actually the case. But you can find just as many
studies that say the jobs created as we move into a greener
economy will not offset the jobs of the traditional economy,
and so I think we have to look very carefully at that as we
move forward.
I would also point out that recently we met with a group of
Chinese, and they were very emphatic when they met with us. And
they indicated that every 2 weeks they are bringing on a new
coal-powered plant in China. And also the same type of
activities taking place in India. And I might say that those
coal plants in China and India frequently do not have
scrubbers, they certainly don't have carbon capture and
sequestration, and those countries are utilizing coal because
it still is the most economical way to produce electricity. And
they want to maintain low transportation costs, they want to
maintain low electrical costs, they want to maintain low labor
costs, because they want to be the most competitive country in
the world. And if we move unilaterally to address some of these
issues as is set out in this legislation, I think there is a
real danger that we are going to be less competitive in the
global marketplace.
Renewables under this legislation, we want to produce 20
percent of our electricity by renewables by the year 2025. And
I think Mr. Barton in his testimony showed very clearly that in
States like Missouri, Kentucky, Tennessee, Alabama,
Mississippi, Ohio, Florida, Georgia, you simply cannot produce
that much electricity by wind power and solar power. It simply
cannot be done, and yet this legislation will provide a penalty
for those utilities that are unable to do so.
I would also point out that we know that we produce 51
percent of our electricity by coal, and in order to continue to
do that, and also to help using coal around the world, that we
have to perfect capture and storage technology. Recently I have
had some conversations with Dr. Curt Halice, who is one of the
few people that I know that actually wrote and received a
doctoral degree on carbon capture and sequestration. He has
looked at this legislation, and he is also involved with a
company that right now is featured in the New York Times on
Saturday that they are contemplating building a $5 billion
carbon capture and sequestration plant that will store carbon
dioxide on the ocean floor. But when he made comments on this
legislation, and I think this is very constructive comments
that we should look at as we move forward--and I would also ask
unanimous consent that I be able to submit for the record his
comments on the carbon capture and sequestration part of this
bill. So if there is no objection, I hope that that would be
admitted.
Mr. Markey. Without objection, it will be admitted.
[The information was unavailable at the time of printing.]
Mr. Whitfield. But one of the suggestions that he made, and
this is the only one that I will talk about, and I think it is
something we should think about, was to reduce the bill's floor
for the amount of CO2 that a plant emits before it
can qualify for funding from this act. He suggests lowering it
from 250,000 tons of CO2 to 100,000 tons of
CO2.
He also has some other, I think, very constructive
recommendations on the carbon capture part of this bill which
will play a vital role if we are going to continue to utilize
coal and be competitive in the global marketplace.
So I want to commend the Chairman and the others who have
worked on this bill, and we look forward to working with you as
we move forward.
Mr. Markey. We thank the gentleman very much.
And now we turn and recognize the gentlelady from
California, Ms. Harman.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman, and thank you for
holding what will be 24/7 hearings for the next few days.
There are some young people in the audience that are
wearing green shirts. Those shirts say ``Power Shift 2009,''
and their hard hats say, ``Green Jobs.'' Now, I just want to
say, Mr. Chairman, that what we do here with this legislation
is about you folks. It is about the kind of world you will
inherit and the kind of jobs you will perform. We can get it
right, or we can blow it. I am for getting it right.
I would suggest that your legislation, Mr. Chairman, and
Mr. Waxman's legislation, is very thoughtful, has a few holes
to fill in, but it is based on a sound foundation, and that
foundation is the USCAP blueprint for legislative action. I
know it was no accident that you had USCAP appear here as our
first witness in this session of Congress to talk about climate
change legislation. I would just like to read the list of its
partnership members, or some of them: Alcoa, BP America,
Caterpillar, the Chrysler Group, Duke Energy, the Environmental
Defense Fund, General Electric, Natural Resources Defense
Council, The Nature Conservancy, Shell Oil, Siemens, Xerox.
Now, this is not your average advocacy group, I would say.
This is a, I assume, bipartisan, very bipartisan, and very
unusual group of folks who probably had extremely different
positions when they formed the group, but have now been able to
arrive at consensus principles. It is a sound foundation for
the legislation, and it is a bipartisan foundation for the
legislation. And I think the fact, as the Chairman emeritus
said, that we are moving in the regular order speaks to the
fact that this committee, with a great history, will build on a
sound foundation and bipartisanship and produce a great bill.
I would just like to point out two of its more brilliant
provisions. One is section 211 that relates to outdoor lighting
efficiency. Everyone should know that Congressman Upton and I
introduced this as a stand-alone bill. It is based on the way
we were able to achieve success with respect to indoor
lighting, and it set tough standards over a series of years to
increase lighting efficiency.
That would be one of the brilliant provisions, and the
other might be section 214, which is about cash for clunkers.
It is a system of incentives to get Americans to replace their
older, energy-wasting washing machines, refrigerators and other
household appliances, to trade them in so that they no longer
consume excess energy and get replacements that are efficient.
This is the kind of material in this very thoughtful bill.
It will need, as I said, us to come together on some of the
tough details, but it is built on a sound foundation. And I
predict to you kids out there that we are going to do the right
thing, and that you can feel that you were part of a very
impressive project which the 111th Congress is about to
undertake.
Thank you very much, Mr. Chairman, and I yield back.
Mr. Markey. We thank the gentlelady.
The Chair recognizes the gentleman from Louisiana, Mr.
Scalise.
OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF LOUISIANA
Mr. Scalise. Thank you, Mr. Chairman.
I appreciate the hearings you have scheduled this week;
however, I am very concerned about how we plan to mark up this
bill while the details of how the administration intends to
issue exemptions versus auctioning permits off is not included
in the draft of this bill. Similarly, we cannot know the true
cost of this bill until the permit issue has been decided.
While the debate on the causes of climate change are far
from settled, as well as the cost of this bill, what has not
been disputed is the fact that a cap-and-trade energy tax will
cost this country millions of good jobs and will force the
average American family to pay thousands of dollars in
increased energy costs. This bill is expected to raise over
$640 billion in new taxes on energy. Even the Congressional
Budget Office notes regardless of how the allowances were
distributed, most of the cost of meeting a cap on
CO2 emissions would be borne by consumers who would
face persistently higher prices for products such as
electricity and gasoline.
The President has acknowledged that his plan will lead to
higher electricity prices when he stated, quote, under my plan
of a cap-and-trade system, electricity rates would necessarily
skyrocket, unquote. According to the President's Budget
Director Peter Orszag, the average annual household cost
increase would be about $1,300 a year for a 15 percent cut in
CO2 emissions, which is 80 percent less than the cut
sought in the President's proposed budget. In fact, Peter
Orszag testified last year before Congress that price increases
borne by consumers are essential to the success of their cap-
and-trade energy program.
Rather than a national energy tax, we need a comprehensive
national energy policy that takes an ``all of the above''
strategy. We need to encourage conservation, we need to pursue
an increase in technologies and renewable sources of energy
like wind and solar, but we also need to explore our own
natural resources like oil, natural gas and even clean-coal
technologies; but we also need to make nuclear power part of a
renewable energy portfolio standard, because clearly nuclear
power is a reliable and successful and efficient source of
energy that most of Europe is using, and it emits no carbon.
This bill doesn't include nuclear in part of that strategy.
This cap-and-trade energy tax will send millions of our
energy-intensive manufacturing jobs overseas to countries like
China and India. According to the National Association of
Manufacturers, an estimated 3 to 4 million net American jobs
will be lost under cap-and-trade energy tax. Some estimates on
job losses go even higher, well over 7 million jobs that would
be lost in our American economy. Surely at a time when we need
to be creating jobs, this bill goes in the opposite direction.
Moving into a cap-and-trade tax system would place the
United States' economy at a distinct competitive disadvantage
because it would place additional costs on American
manufacturers and cede market share to overseas competitors
that are not subject to the limits on greenhouse gas emissions.
What this bill will do is redistribute wealth from American
families and consumers to special interests. As we speak, deals
are being cut right now with special-interest groups to grant
them free allowances in exchange for their support on this
legislation.
Is that really the change in the way of doing business that
so many Americans were promised? That is why so many of the
details of this cap-and-trade bill are not yet available to us
on the committee, as well as to the public, and so there is a
clear lack of transparency in this legislation in part because
of the deals that are currently being cut, with those details
that are conveniently left out.
Furthermore, government-run cap-and-trade systems smother
innovation since companies are artificially constrained in
their economic activities, and this will dampen the incentive
to create new products and services.
For those who are concerned about reducing carbon
emissions, this cap-and-trade energy tax will ironically
increase the worldwide carbon emissions, because many of the
millions of American jobs that will be shipped overseas due to
a cap-and-trade energy tax will be, in fact, sent to countries
who do not follow the environmental standards that are in place
here in America. So while those jobs will be shipped overseas,
and we will lose that economic opportunity here in our country,
the countries that don't participate in cap and trade, like
China, India and others, actually emit more carbon in the way
that they produce the same goods.
Again, I appreciate the opportunity to discuss this issue
in a broad context this week; however, without the details on
some of the most significant portions of the bill, this
committee is doing a disservice to the American people by
purporting to have a hearing on a bill that is incomplete.
Thank you, and I yield back.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Washington State, Mr. Inslee.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Inslee. Thank you.
It is Earth Day tomorrow, but I want to point out this is
not just a green bill one way, it is a green bill two ways. It
is not just about decreasing pollution, it is about increasing
jobs. And with this bill we are on the launching pad for the
single most ambitious, the single most promising job-creation
program since the launch of the Apollo project under the
leadership of John F. Kennedy.
And I think we ought to approach this with three basic
American attributes, the first being confidence. And I just
want to share some reasons why I am confident that we will
fulfill America's destiny of being the clean energy arsenal to
the world.
Last week I was at home for a couple of weeks, and I just
want to share some of the people that I talked to in one week.
I talked to the people at the SAFIRE energy company which just
announced yesterday that they intend to have an algae-based
biodiesel biofuels, zero CO2 emission, up and
running by 2011 at twice the levels that they originally
predicted, using only sunlight and salt water and no feedstock.
I talked to the A123 Battery Company that is ready to
manufacture a lithium-ion domestically produced battery to
drive American-produced electric cars. We ought to have
confidence we are not going to allow China to dominate the
world economy in electric cars and lithium-ion batteries. This
bill is going to make sure that that industry stays here.
I talked to the Infinia Company in the Tri-Cities,
Washington, which has a sterling solar-powered engine, which is
now selling well in Spain and we want to start selling well
here, and this bill will make sure that that happens.
I talked to the Ramgen Company. A lot of people have talked
to coal--about the need to sequester coal CO2. We
have a technology at the Ramgen Company that leads the world in
the ability to compress CO2 so we can bury it
permanently and create jobs in this country.
I talked to the AltaRock Company, which is one of the
world's leading companies to do engineered geothermal, which we
can do perhaps in 50 percent of the United States.
The list goes on and on and on. But what these Americans
need is a policy jump-start so that these jobs get created in
America, and fundamentally this is what this bill does. So we
ought to have confidence.
Second, we ought to act as a union, recognizing the very
disparate nature of our country, and that is I am very pleased
to be working with Mike Doyle, to have--and I appreciate
Chairman Waxman and Mr. Markey's including our provision that
will prevent job leakage and not give an advantage to our
international competitors by, in fact, giving some free permits
to domestic high-energy-intensive industry. It is the right
thing to do, and it is our answer to the international
situation.
But further, I want to mention one thing that I hope we
will address as we go forward in the bill. To truly act as a
union, we have to unify the electrical grid system of the
United States. If you look at the map that Mr. Gordon put up
about the disparate access to very renewable sources, we have
to have a grid system that is fitting for this century. And I
hope that we will find a solution to site these grid systems
and finance these grid systems. It is both necessary and
possible to do so. Can you imagine what the Interstate Freeway
System would look like if we just did it county by county? We
need to have a backstop so that Uncle Sam can help out local
communities site these systems.
The third thing we need to do in this bill is be smart, and
I want to mention a couple of things in that regard. The
smartest thing we can do is to learn from the lessons of
Europe. Europe essentially used a cap-and-trade system that we
invented here to deal with sulfur dioxide. It has been
extremely successful in our American experience. We have tamed
sulfur dioxide at probably half the cost that was originally
anticipated. I believe there is a possibility to do the same
with carbon dioxide.
But there are some lessons from Europe. I just want to
mention one of them. When they started the cap-and-trade system
in Europe, they gave away all the permits. And the reason they
did that is it created less controversy to simply give away the
permits. And it was a spectacular disaster when they did that
because it ended up consumers bore the cost, rather than
utilities, of the cost of this program, and there were scandals
galore in Europe about that. And they did not achieve in the
first 3 years of their program what they wanted because they
gave away the permits and did not create an incentive to go to
low-carbon fuels.
We ought to be like the guy who putts second. You always
follow the putt of the guy who went first. And we ought to
learn from the lessons of Europe and have a more reasonable
disposition of these permits. And when we do that--I want to
make one important point here--this is going to be the largest
recycling program in American history because a huge amount of
these dollars are going to be recycled right back to the
American consumers to help with their utility bills. You can
make sure we are going to grow jobs, help consumers and get
this job done. Thank you.
Mr. Markey. We thank the gentleman.
The gentleman's time is expired. The Chair recognizes the
gentleman from Pennsylvania, Mr. Pitts.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Pitts. Thank you, Mr. Chairman. Thank you for holding
this hearing.
Like all of us, I believe we should work to decrease the
amount of greenhouse gas emissions in our atmosphere and be
good stewards of this Earth and its resources. However, I don't
see how these 3 days of marathon hearings will shed light on
how the discussion draft of the Cap and Trade Act proposes to
actually decrease greenhouse gas emissions and not cause
devastating harm to our economy. The discussion draft is
incomplete. The most important provision regarding the
allocation of allowances has yet to be decided or even written.
Because of this, CBO said they cannot score the bill. And
industries, and thus consumers, cannot truly define how the
bill would impact them. How then can we have legislative
hearings and engage in fruitful dialogue and debate about a
bill that is incomplete?
Even though the most critical portion of the bill is not
included, we can talk about the numerous ways in which this
bill will inevitably increase energy costs and negatively
impact working families across America. The last major cap-and-
trade provision considered in Congress was the Warner-Lieberman
Climate Security Act. As far as decreasing greenhouse
emissions, according to the Institute for Energy Research,
Warner-Lieberman would have only reduced global temperatures by
18/100ths of 1 degree by 2050. As far as economic impact,
according to the Heritage Foundation, in the first 20 years
alone, the ramifications of that bill would have resulted in
aggregate real GDP losses of nearly $5 trillion. In the first
20 years, it would have destroyed 900,000 jobs and caused
nearly 3 million job losses in the manufacturing sector by
2029, many jobs driven overseas. In my State of Pennsylvania,
it was projected that over 94,000 jobs would have been lost in
the manufacturing sector by 2030.
Yet the Waxman-Markey draft is far more sweeping than
Warner-Lieberman, and thus economic consequences will be even
worse. The bill imposes a tax on every energy producer for
their carbon emissions. This tax will most certainly be passed
on to consumers. President Obama acknowledged this in a meeting
with the editorial board of the San Francisco Chronicle in
January of 2008 when he said, quote, under my plan of a cap-
and-trade system, electricity rates would necessarily
skyrocket. That will cost money. They will pass that money on
to the consumers, end quote.
In Pennsylvania, 56 percent of energy demand that relies on
coal, with the advent of a harsh energy tax that discriminates
against coal-powered electric utilities, hard-working families
will have to devote a larger proportion of their income to
increasing energy prices.
Every American realizes that we are in a time of economic
trouble, so we must ask the question, is it prudent to pass a
cap-and-trade bill which will increase the cost of energy and
conceivably cause 3.75 million job losses? Is it prudent to
pass legislation that will make matters even worse by levying a
new national energy tax that could cost families over $3,100
per year per family?
Mr. Chairman, we need to carefully consider the negative
impact that a cap-and-trade bill will have upon our economy. I
do not believe it is in the best interest of American families
to pass a bill that will make their way of life harder and more
challenging by job losses and higher energy costs.
In addition, despite the harmful economic consequences, the
bill is even short-sighted in what it considers alternative and
renewable energy. Nuclear energy, a prime source of clean
energy, is entirely excluded from this bill, as is waste
energy, which has been successfully used in my district for
decades to produce energy from municipal solid waste.
Therefore, Mr. Chairman, I hope that these hearings will be
substantive, clarify several aspects of the discussion draft
that are puzzling at best and harmful to the consumers at
worst. I look forward to hearing from our witnesses over the
next 3 days, and I yield back.
[The prepared statement of Mr. Pitts follows:]
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Mr. Markey. I thank the gentleman.
The Chair recognizes the gentlelady from Wisconsin, Ms.
Baldwin.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman. And thank you for all
of your leadership in bringing us to this moment. We have an
opportunity before us to address climate change in a real and
meaningful way.
Our greenhouse gas emissions have put our global
environment, social structure and security at risk, and if we
fail to act boldly, comprehensively and decisively, the impact
will reverberate during the later decades of this new century
with the loss of human lives, declines in health, species
extinction, destruction of ecosystem and increase of social
conflict.
Among the challenges that we face is that we are asking
current generations to conserve and live a lower carbon
lifestyle in order to improve the lives and well-being of
future generations, generations yet to come. I often remind
folks, especially my colleagues, that the future doesn't have a
voice or a lobbyist. Our great, great, great grandchildren
don't have a voice or a lobbyist. The present has plenty of
lobbyists. Those of us who are here on Earth today have a
voice. We know that it is up to us. We know the science, we
know the consequences of inaction and we must act on behalf of
both those who are here today and those who will inherit this
Earth in generations to come.
Now, if we are truly to be successful in our effort, it is
necessary for our energy legislation to address climate change
while spurring innovation, creating jobs and containing costs.
The bill we have before us begins to set us down such a path.
It is not perfect, but with four key components of this
legislation--increases in renewable energy requirements, higher
energy efficiency standards, a cap-and-trade program to address
emissions and assistance incentives for transitioning to a low-
carbon economy--our opportunities for success are achievable.
I cannot overstate, our Nation's security, our planet's
sustainability and our children's future hang in the balance,
and the world is watching our every step. They are looking to
us, with the largest economy, most talented innovators and the
richest resources, to bring leadership and commitment to
Copenhagen and beyond. We absolutely cannot show up empty
handed.
I look forward to hearing from the experts who will address
us in the panels throughout this week and to working with my
colleagues to ensure that we craft a bill that meets all of our
diverse needs regionally, our challenges and our opportunities.
Like my colleague, Mr. Inslee, I also had the chance to
tour cutting-edge businesses in Wisconsin over the spring
recess, who are doing incredible innovative things with regard
to energy efficiency and renewable electrical and liquid fuel
production. I had a chance to go to Orion, who is manufacturing
a solar light pipe technology that can eliminate factory floors
electricity free. I visited Johnson Controls that is focusing
on building efficiency and lithium ion batteries for plug-in
hybrids and fully electric vehicles of the future. I had a
chance to visit We Energies and their carbon capture
demonstration project and a chance to tour a wind farm in my
State and to see a farm with a manure digester generating
enough electricity for 600 homes in the area.
As I toured these innovative businesses throughout the
State of Wisconsin, what I took from that is that we can do
this. Folks are doing it right now. Many are already leading
the way. The goals that we have to confront the challenge of
climate change are within our reach, and we must lead at this
moment.
Thank you, Mr. Chairman. I yield back my remaining time.
Mr. Markey. The gentlelady's time has expired.
The Chair recognizes the gentleman from Pennsylvania, Mr.
Murphy.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman. I
remember as a young boy one day hearing my parents talk about
this thing called Sputnik that was launched into space and they
were worried, as were many Americans, that somehow the Russians
were beating us at something that--what we thought was a
backwards sort of country, the Soviet Union that really didn't
have much science at all.
But it did spark an incredible change in America. In our
schools, it emphasized science. And our universities, they
really began to look more beyond just our streets and into our
skies.
And then came this incredible challenge by the President of
the United States that said, Within 10 years we will put a man
on the moon safely and bring him home. And indeed we did that
because over a 10-year time span, our Nation came together to
meet the challenge of its generation to do that.
Well, now, we have a new challenge for our generation and
that has to do with energy. Now, I am not a climatologist or a
physicist, and I am not here to argue about any of the things
that people do discuss with regard to climate change and its
causes and what that might be. But I have a background in
health, and I am concerned that where we should find common
ground is that we do want a clean planet with clean air and
clean water and clean soil. And we can get there if we pull
together to do that; the question is how. And the question is,
can we do this in a way that boosts our economy and not hurts
it, that creates jobs in America and not sends them overseas
and really and truly works in a way that American families find
opportunity and not the loss of more jobs.
To that end I think we have three things we should do:
One, we need to explore. We need to find domestic energy
sources and make sure we clean them up and not just continue
business as usual. As it is, nothing should sicken us more than
when we find that we are sending hundreds of billions of
dollars overseas and, in essence, funding both sides in the war
on terror when we see other countries use that money from oil
to buy bombs or create them and use them against our soldiers,
and to fund terrorism. That is unacceptable to all of us.
What we need to do is find ways of using our domestic
resources, as abundant as they are, of coal, of natural gas, of
oil, but clean it up so we are not polluting this planet and
leaving it dirtier than when we came.
The second thing we have to do is conservation. Many of my
colleagues and I have companies in our districts that are
coming into their own now as they find many ways to conserve
energy. We will recognize that homes and farms and factories
and offices perhaps use only about 40 to 50 percent of the
energy effectively, but they pay for 100 percent. And--it is
unacceptable for our economy that we waste so much, and we have
to work on ways of conserving that with every conceivable thing
from manufacturing to transportation to education.
The third thing, however, we have to do is innovation. The
Apollo Project of our generation is energy, and we need the
idea, the science, the research and the funding to get there.
We need to have a sense of awe, and wonder what we can do; and
we need to be dealing with, Is this the truth? We cannot afford
to have commercials sniping each other with people pretending
there is no such thing as clean coal. I suppose the Wright
brothers faced the same sort of challenge and other people said
there is no such thing.
If there is any country in this world that can clean it up,
we can do it. My friends, that is Nobel prize stuff to find
someone who will find a lump of coal and find a way of getting
all of the energy out of it, not 40 percent, and do it without
pollution. We ought to be funding that.
We do so many other things with innovation, but where I
must say I have agreement with many parts of this legislation
before us, I hope the door is still open to do some other
things that deal with innovation. I am deeply concerned that
what this bill will do with cap and trade is not really stop
pollution, because it merely sells pollution credits and does
not reinvest in cleaning up our coal plants and, I believe,
will actually send many, many jobs to China, to Brazil and to
India.
We have to gather together and find ways that we can use
our abundant resources in effective ways. We can do that. But
it also means we have to put that money back into these things
and not siphon it off and send it off to the Federal Government
to use for other sources.
It is going to take a lot of work here; and I hope, as we
proceed in this, we remember the awe and wonder in which we
were--many of us were inspired back in the 1960s, and instead
of sniping at each other with regard to political gain, we
gather together. Because the end is something we have to agree
on: energy independence and a clean planet, with a good future
for our children and their children.
I yield back.
Mr. Markey. I thank the gentleman.
The Chair recognizes the gentleman from Arkansas, Mr. Ross.
OPENING STATEMENT OF HON. MIKE ROSS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARKANSAS
Mr. Ross. Thank you, Mr. Chairman, for holding today's
hearing.
Let me begin by stating that, like all of you, I am
concerned about climate change, and I believe that we must
develop a comprehensive plan to reduce greenhouse gas emissions
and invest in alternative and renewable fuels like wind and
solar, cellulosic ethanol, biodiesel, biofuels, as well as
nuclear power and clean coal.
As the leader of the Free World, I also believe we must
lead by example. However, we must embrace a commonsense
approach to imposing regulations that will help to improve our
environment while still maintaining jobs and strengthening our
Nation's economy here at home in America.
In order to do this, we must ensure that we do not allow
our laws to get ahead of our technology, but that when the
appropriate technology becomes available, we demand that
industry use it.
In addition, I think we must be very careful in enacting
climate legislation to ensure that we do not enact a policy
that will simply result in shipping our jobs and our carbon
dioxide emissions overseas, which would do nothing for Planet
Earth. I recognize that few things get done without U.S.
leadership and action, but our action must include compelling
other countries to join us. The reality is that between now and
2040, 97 percent of all new carbon emissions will not be
produced in North America or Europe, but in places like China,
India and the Middle East. We must do all we can to ensure that
the rest of the world works with us towards a goal of improving
our environment and reducing carbon dioxide emissions. We are
not trying to fix a problem in the United States of America; we
are trying to address a problem that affects the entire planet.
I believe that the draft we will be discussing this week is
a significant step in the right direction. Or maybe a better
word would be to say ``correct'' direction. For example, I was
pleased to see that the draft addressed and embraces carbon
capture and sequestration. In my own State of Arkansas, there
are massive deposits of lignite coal, over 9 billion tons to be
exact. However, there must be a serious investment in carbon
capture and other new carbon technologies in order for lignite
to realize its full potential.
The bottom line is that, you know, if you didn't like $4
gasoline last summer, you are really not going to like your
electric bill sometime between now and 2030. We are going to
have an electricity crisis sometime in this country, and I say
we could do it all. We need to do more nuclear. We need to
continue to find ways to clean coal up. We need to do all those
things in the science lab today. We need to find ways to move
them to the marketplace. A few of them, to me, sound a little
goofy, but if we can make them work, we should embrace them.
The sooner we can do that, the fewer dollars we will be sending
overseas and the more of those dollars we can keep at home,
make our energy here at home and put people back to work.
While I believe that the draft is a good first step, there
are a number of concerns I have. I am deeply concerned that the
more traditional renewable resources--wind, solar, geothermal--
do not exist in places like Arkansas in sufficient amounts to
satisfy a Federal renewable electricity mandate, especially an
aggressive one. This draft needs to expand its definition to
include biomass to a much larger degree than what it does
today.
I represent a very rural and poor district. As a result,
any increase in electric rates due to a renewable electricity
standard will fall disproportionately on consumers in my
district. And I want to ensure that this does not happen.
I hope to work with the chairman to ensure this legislation
will not create a burden, much higher electricity bills for
consumers and business, and to ensure that all of our available
natural resources like biomass are included to the fullest
extent possible in that definition.
I also believe that our Nation's farmers and agriculture
community can play an important role in the fight against
climate change by growing our fuels and restoring carbon in
their fields. I am hopeful that we can work to make that
possible in this legislation.
I also believe that we must ensure that energy-intensive
industries like the refining industry are still able to supply
our Nation as we transition to more renewable forms of energy.
This U.S. Industry must remain viable, and I hope to work with
the committee to ensure that.
Finally, I believe that the draft provides a strong
framework to protect natural resources, but I want to ensure
that there is significant funding to protect our Nation's
wildlife and natural resources as well as the low-income
consumers who could be disproportionately affected by this
legislation.
With that, Mr. Chairman, I realize I am out of time, and I
thank you for the opportunity.
Mr. Markey. I thank the gentleman very much.
The Chair recognizes the gentleman from Florida, Mr.
Stearns.
OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF FLORIDA
Mr. Stearns. Thank you, Mr. Chairman.
I think that what concerns us on this side, Mr. Chairman,
is that this economy is obviously struggling in the worst
economic crisis in over 70 years. The majority, I think, should
move very carefully here and not hastily move the bill or craft
an incomplete emissions mitigation plan that lacks any
procedure for distributing the allocations in a very precise
manner.
Since 1997, Europe has engaged in a similar-style cap-and-
trade system that certainly should serve as an example of how
such a hastily crafted system can be manipulated. Their cap-
and-trade-system as been plagued with industry closures, price
spikes and windfall profits. European governments and
industries, in an attempt to head off a negative economic
impact of cap and trade, freely handed out emission allowances
that resulted in an emission permit market that constantly
fluctuated. With the price of carbon up and down by an average
of 17.5 percent per month, with daily price shifts as great as
70 percent, European companies have been left to simply guess
at how much their environmental compliance costs might be every
month. Meanwhile, European consumers have suffered as the rates
for energy have increased, with homeowners in Germany paying 25
percent more for electricity now than they did before the
implementation of the cap and trade.
The intellectual architects of this U.S. cap-and-trade plan
acknowledge higher energy prices would result from an emission
cap here as well. In fact, they rely on it. This will force
manufacturers and small businesses to absorb the cost of higher
energy prices, which they will do by raising prices, cutting
costs by laying off employees or, of course, being forced to
close. This is what we don't want in this economic situation.
Now, the National Association of Manufacturers estimates
that a cap-and-trade plan will cost up to 4 million jobs. The
Heritage Foundation also estimates the loss of up to 5.5
million jobs. The Charles River Associates estimates job losses
as high as 7 million. The consensus seems to be that a cap-and-
trade plan will cost millions of U.S. jobs.
Besides instituting a bureaucratic cap-and-trade plan, the
majority draft here also mandates that 25 percent of U.S.
electricity generation come from a limited list of renewable
sources by 2025. Because my State of Florida and the Southeast
have limited availability of solar, land-filled gas and
virtually no wind power, electric consumers in our region would
be forced to pay through their electric bills for renewable
energy credits, if available; or for alternative compliance
payments essentially amounting to a tax on electricity used by
businesses and other consumers. This will drive up energy costs
and hurt economic growth with no guarantee that the money
collected would actually be invested in generation and
efficiency projects in their State.
If Congress were to enact a 25 percent renewable
electricity standard, as proposed in this bill, it would cost
my State over $10 billion between now and 2030.
Renewable energy programs should be based on consumer
demand, regional differences and appropriate incentives, not on
unrealistic Federal mandates that selectively penalize
electricity consumers in certain regions of our country.
Ultimately, it should be States, not the Federal Government,
that should be responsible for the design and implementation of
renewable energy directives affecting electricity consumers in
their areas.
The fact remains that despite political favoritism and
billions in subsidies, wind power still only accounts for 1
percent of U.S. net electricity generation, and solar power
accounts for just 100th of 1 percent. Any meaningful effort to
achieve long-term, sustainable reduction in global greenhouse
gas emissions will depend on the development and deployment of
new energy technologies, including advanced clean coal
technologies and carbon capture and sequestration. The rapid
development and demonstration and widespread deployment of such
technologies are of paramount importance in any reasoned and
effective effort to address climate change concerns.
The expansion of nuclear power production in the United
States must also be part of this plan to address carbon dioxide
reduction, yet nuclear power is only mentioned twice in the
entire 648-page bill.
So, Mr. Chairman, I think this bill requires amendments,
and I look forward to the markup. Thank you.
Mr. Markey. We thank the gentleman.
The Chair recognizes the gentleman from North Carolina, Mr.
Butterfield.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Butterfield. Thank you very much, Mr. Chairman, for
convening this important hearing this week. I know that you
told us at the beginning of the session this would be a long,
robust debate; and I thank you very much for getting it
started.
You know, I have been listening very carefully to my
friends on the other side of the aisle this afternoon to see if
there is any support for the notion that the science is
unsettled in this area. I have not heard that today and that is
very pleasing to hear that. The science is indeed clear, the
planet is warming, sea level is rising, so I don't see how we
can deny that human beings are indeed contributing to this
warming. To continue to debate the science, if that is going to
happen this week and next week, does a disservice to this
enormous issue.
So we must lead the way on climate change. We simply cannot
wait, and I thank you, Mr. Chairman, for at least getting it
started. I know it would be nice to wait on developing
countries; I have heard that argument made and that is not
wise. We must lead the way. We cannot wait until the recession
ends. I don't know when that is going to be, but we must begin
this debate this week; and so I am ready to engage in this
process.
But, Mr. Chairman, having said that, I have some deep and
serious concern about some aspects of the bill, and I want to
associate myself with some of the comments made by Bart Gordon
earlier in this hearing this afternoon. I also want to thank
Mike Ross from Arkansas for his comments, as well as those of
Mr. Stearns, my friend from Florida.
The RES, the renewable electricity standards, I am very
concerned about that mandate on some of our States,
particularly my home State of North Carolina. We cannot
achieve, Mr. Chairman, a 25 percent mandate by 2025. Not only
is it impractical, it is impossible.
But there are ways that we can address my concerns and the
concerns of others. We can reduce the RES mandate to 15
percent, for example, or some other number by the year 2025, or
we can authorize a greater mix of renewable sources. We can
certainly look at including nuclear power in the mix; I am not
opposed to that. We can look at the possibility of maximizing
the use of biomass; I am not opposed to that, as well.
Also, I would not rule out, Mr. Chairman, a conversation
about allowing special consideration for those States in the
condition of my State. There are several States in the
Southeast who are similarly situated, and I think there could
be some language put in the bill that would allow some special
consideration.
Also, Mr. Chairman, I am particularly concerned that the
economic impact will be devastating on low-income families in
America. Low-income families simply cannot absorb the increase
in consumer prices that are sure to come. We must make sure
that we devise a way to offset the increased prices. We can do
that. We can do it in a variety of ways that we should discuss
and debate, and I have some proposals that will be offered at
the appropriate time.
Finally, Mr. Chairman, I encourage us to move deliberately
on this important legislation, and as Ms. Harman said earlier,
to get it right. If we fail to get it right, the result will be
very painful to many American families.
Thank you. I yield back.
Mr. Markey. The gentleman's time has expired.
The Chair recognizes the gentleman from Iowa, Mr. Braley.
The Chair recognizes the gentleman from Georgia, Mr.
Barrow.
I am sorry. The gentleman from Iowa is here. I think we
should stay in regular order. My apologies to the gentleman
from Georgia. We will recognize the gentleman from Iowa for his
opening statement.
OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF IOWA
Mr. Braley. Thank you, Mr. Chairman, for your extraordinary
leadership on this important legislation. And I want to join
Congresswoman Harman in welcoming all the young people that are
here today because we are really here to talk about a blueprint
for an energy revolution that is going to affect you the rest
of your lives. And for somebody my age--I am not going to be
around as long as you are to see the impact that this bill is
going to have, not just on your lives, but on the future of
this planet; and that is why the work we are doing here is so
significant.
Mr. Chairman, I want to thank you for your efforts on the
American Clean Energy and Security Act. We all know addressing
climate change and energy independence are two of the greatest
challenges facing this country. It has taken a lot of work and
consensus to try to come up with language that balances the
need of people with businesses, but this discussion draft is a
great start, and I am pleased that you have brought so many
people to the table from diverse industries and interest groups
to put together this legislation.
This year I was proud to form the Populist Caucus, the only
caucus in Congress devoted solely to addressing middle-class
economic issues. I can take this bill back to caucus members
and tell them there are provisions here that will help working
class Americans.
I am extremely encouraged by several provisions included in
this draft to appropriate green jobs, and I think that your
presence here today confirms that. This bill should be seen as
an opportunity to put in place a green industry in the United
States and take advantage of a world-class education system to
make sure we have adequately trained workers for careers in
renewable energy, energy efficiency, climate change mitigation;
and the grant program that is a part of this bill will be a
good step toward accomplishing those goals.
Tomorrow, President Obama will be in Newton, Iowa, where I
got my first drivers license at the age of 16, to discuss the
importance of this legislation to economic revitalization. For
over 100 years, Newton was the world headquarters of Maytag
Corporation, a leader in home appliances, making washers and
dryers. When Maytag shut down, the Newton facility, some of my
high school classmates, lost their jobs. Now that facility is
putting Iowans to work building wind turbine components to meet
the growing demand for wind energy in Iowa, the United States
and the world.
These are the kinds of job opportunities that make a
renewable energy investment pay off for America. This is no
silver bullet, but I am proud that Iowa is now second in the
Nation in wind generation; an Iowa success story is further
evidence that investment in renewable energy is working. Iowa
is currently home to six wind manufacturing companies,
representing thousands of green collar jobs and an investment
of nearly a quarter of a billion dollars in our State's
economy. Recently, Iowa surpassed California and now has the
installed capacity over 2,700 megawatts this amount of wind
generation will provide about 18 percent of Iowa's total
electricity needs.
We can all benefit from investments in wind energy and
other renewables through newly created jobs, cheaper energy,
cleaner skies and a reduced dependence on foreign oil.
One of the things I would like to see as a part of this
bill is an allowance allocation for renewable energy
deployment. I have been working with many renewable energy
groups to discuss a subsidy matrix that takes into account
distributed generation versus centralized generation and
matured technologies versus emerging technologies. I hope we
will soon have some language that the committee can consider as
a part of the base language, and I believe this type of
approach will bring new technologies to the market faster and
ensure that effective technologies have resources they need to
expand.
I also think it would be helpful to have an expansion of
the temporary program for the rapid deployment of renewable
energy and electric transmission projects. The program modeled
after the Department of Energy's loan guarantee program is
designed to speed commercial adoption and use of advanced
renewable energy technologies by providing low-interest,
government-backed loans to companies investing in the
implementation of technologies, including advanced biofuels
technologies. The stimulus program expires on September 30,
2011.
I am also glad there is language in place that will help
low- and middle-income Americans lower their energy costs, like
money for weatherization of homes. And I am also hopeful there
will be additional protections for working-class Americans as
part of this legislation. I want to make sure that some kind of
mechanism is in place to provide rebates to middle- and low-
income Americans to help balance their energy costs. Including
additional projects in LIHEAP money would also be welcomed.
I am glad there is a requirement to report and set forth a
unified and comprehensive strategy to address the key legal and
regulatory barriers for the commercial-scale deployment of
carbon capture and sequestration. According to the legislation
that we are considering, the EPA is to write regulations for
certifying, maintaining and trading offsets. I am hopeful they
would see the benefits that farmers can provide in reducing
carbon emissions and include these things such as methane
digesters and no-till farming.
The Energy Revolution has begun. We need your help to make
it a reality. And I yield the balance of my time.
[The prepared statement of Mr. Braley follows:]
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Mr. Markey. We thank the gentleman. The Chair recognizes
the gentlelady from Tennessee, Mrs. Blackburn.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Mrs. Blackburn. Thank you, Mr. Chairman.
Last week the EPA positioned itself to regulate carbon
dioxide emissions under the Clean Air Act without congressional
consent. We are then faced with a choice. We can acquiesce to
bad regulation that will have certain and disastrous impacts on
our economy, or we can legislate an even more harmful system.
It is as though, when faced with a gun to our head, Congress is
going to take it and shoot ourselves in the chest.
For the record, I would remind the committee of my bill,
H.R. 391, which will prohibit the EPA from taking action under
the Clean Air Act and allow Congress the time we need to craft
intelligent legislation. My bill would also save farms who,
under the EPA's proposed regulations, would face steep levies
on livestock.
Laying aside my skepticism of the underlying science that
led us to this bill, I would like to address some of my
concerns on the legislation itself. There are at least two
provisions that we know will be detrimental to the economy at a
very bad time.
First are the renewable electricity standards imposed by
the bill. Currently 3 percent of our electricity is generated
by renewable energy. The chairman's bill calls for 25 percent
by 2025 to meet these standards. Under current electricity
usage levels it would require 20,000 megawatts of renewable
energy to come on line each year until 2025. That is 20,000
megawatts a year.
I would remind my colleagues that only 10,000 megawatts'
worth of renewable electricity came on line last year. The
Energy Information Administration estimates that only 8,000
additional megawatts will come on line over the next 4 years,
and that is in total. This makes the renewable energy
requirements in this bill unrealistic, and that is under
current usage rates.
This bill aims to increase electricity usage without
accommodating the increased usage in the standard for renewable
generation. They also happen to be exceedingly expensive. We
are saddling our States and our energy consumers with
unrealistic demands at prohibitively high prices.
Secondly, while there are large blanks in the chairman's
bill when it comes to the mechanics of a cap-and-trade
proposal, few in this room doubt that we are actually talking
about a cap-and-tax system. Electricity rates are going to rise
and Washington is going to pocket the profits.
I take no comfort from any assurance I hear from my
colleagues across the aisle or down the street that energy
consumers will be compensated in some way. We must be plain,
and we must be honest when we discuss this system. It will pull
thousands more out of the family budget each and every year.
There is simply no way around it, and we are wrong to try and
sugarcoat it.
Mr. Chairman, I wonder if the committee will give as yet
unforeseen compounding effects of this bill due consideration.
We know that the renewable energy standard will increase
electricity costs; there are ample case studies to prove it. We
also know that the cap-and-trade system will drive up
electricity costs. The President himself has told us the prices
will--and I am quoting him--``necessarily skyrocket,'' for
consumers. What we don't know, what we must know before this
bill becomes law, is what the compounding effect of an
expensive renewable energy standard and an expensive cap-and-
trade system will be to the family budget. As my colleagues and
I work on this legislation, that is what I am going to be
paying the closest attention to.
Thank you, Mr. Chairman. I yield back.
[The prepared statement of Ms. Blackburn follows:]
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Mr. Markey. We thank the gentlelady.
The Chair recognizes once again the gentleman from Georgia,
Mr. Barrow.
Mr. Barrow. I thank the chairman. And I want to thank you
for holding this marathon series of hearings this week.
Mr. Chairman, if I were to adopt the mood of my colleague,
Brother Murphy over here, and go back to what I learned as a
child, I would have to recall learning about the wonders, the
miracle of the carbon cycle, the idea that what plants emit as
poison to them is food to us, and what we emit as poison to us
and is food to them just struck me as such a miracle of
evolution. But I have to acknowledge that the Almighty had a
carbon sequestration plan of his own in mind in order to be
able to create the conditions in which this balance could
exist, and we busted the Almighty's carbon sequestration plan
all to hell with our own activities.
So climate change is real, our role in it is real, and I
want to support the work of the committee in trying to do
something about it. I have to say, though, this bill has
potential for far-reaching impacts in our economy, both good
and bad, and we are going to have to be very, very precise
about how we craft the programs that are contained in this
legislation.
There are big gaps that remain in the language. It seems
that we have an awful lot of work yet to do.
I look forward to a productive week of hearings. And I look
forward to working with my chairman and my colleagues to craft
what I hope will be a reasonable bill.
With that, I yield the balance of my time.
Mr. Markey. We thank the gentleman.
The Chair recognizes the gentleman from Texas, Mr.
Gonzalez.
OPENING STATEMENT OF HON. CHARLES A. GONZALEZ, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Gonzalez. Thank you very much, Mr. Chairman. And I will
commend, of course, your fine work and that of the chairman of
the full committee bringing us this far and this quickly. And
we will be moving with great dispatch in the next couple of
weeks.
I will make some very general statements first and then be
specific as to one issue of great consequence, I think. First,
I would hope that all of us will recognize the different
challenges that face the different regions of this country.
While we all must represent our distinct districts we need to
understand that we are all not similarly situated. I do not
have to live in Salt Lake City or Boston or Los Angeles to
understand that their situation there may be different than
those of the citizens in San Antonio, Texas.
I would like to be specific when it comes to automobiles.
We have over 200 million vehicles in the United States, which
are responsible for approximately 20 percent of greenhouse gas
emissions. We will start with a system with greater efficiency
of the internal combustion engines with emphasis on hybrid
technology, with eventual conversion to battery-based powered
vehicles. The question is, how long will this conversion take.
What we do know is that traditional transportation fuels
will be required during this transition period. To determine
the amounts needed during this transitional phase, we must
establish first the number of vehicles in use today using
hydrocarbon-based fuels and the duration of their expected use,
because we know just recently what we used to think in terms of
what would be the replacement rate of vehicles in the United
States has been reduced drastically.
And, secondly, the characteristics of replacement vehicles:
Will it be hybrids and what type of hybrids, battery operated,
hydrogen cell, alternative fuel powered and so on? And the
technological feasibility of placing a sufficient and
affordable number of these vehicles in the marketplace, I
believe that the inevitable conclusion is that the United
States will require an increase in the domestic production in
refining capacity of traditional carbon-based fuels. This does
not mean that we will abandon our clean air objectives, but
rather adopt a transitional approach that allows us to achieve
our goals in a realistic fashion. Should we ignore what will be
required during this conversion period, we will find that we
have created a situation that exposes us to greater dependence
on foreign sources of transportation fuels with the attendant
costs to our Nation's economy and security.
In closing, while a cost-benefit analysis will not be
ignored, we need to understand that increased costs and the
required change in consumption behavior by our citizens in this
country will not represent insurmountable obstacles to the
passage of a meaningful energy reform legislation.
Thank you very much. And I yield back, Mr. Chairman.
Mr. Markey. We thank the gentleman.
The Chair recognizes the gentleman from Louisiana, Mr.
Melancon.
OPENING STATEMENT OF HON. CHARLIE MELANCON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF LOUISIANA
Mr. Melancon. Thank you, Mr. Chairman. I am finally getting
used to being the second Louisiana guy. I appreciate the
opportunity to do an opening statement.
And thank you, Mr. Waxman, for your work on this
legislation.
We are now considering the most important energy
legislation of our generation. This bill and the final version
of this bill will shape our environment, our energy
consumption, our independence and our economy. These issues
deserve thoughtful consideration and diligent debate.
Before we can discuss the specific provisions of this bill
and their merit, we must acknowledge the science of climate.
Some choose to debate whether the cause of climate change is
man-made or a result of natural cycles.
To be frank, the cause does not matter. We have all seen
the impact of change in climate on our land and our oceans.
Droughts damage our crops, while rising water levels threaten
to erode our shores. My home, Louisiana, has the tragic
distinction of bearing witness to increased hurricane strength,
a result of the warming of waters in the Gulf of Mexico.
Energy policy has been at the forefront of American
politics for decades. The shortages of the 1970s, the
manipulation in the 1990s and the technology shifts of today
all reflect our Nation's dependence and growing demand for
energy.
I believe that any responsible energy legislation should
consider the broad spectrum of energy sources that are
available today. Just as American innovation can create new
sources of energy, it can take our existing resources and adapt
them to a low-carbon environment.
America has been blessed with rich deposits of energy that
have driven our economy for decades and through many wars. As
we strive for energy independence, we should focus on reducing
foreign imports first, allowing domestic production to continue
and be the bridge our economy needs to flourish. Technologies
may eventually exist that replace fossil fuels, but even under
the most optimistic of projections, those technologies are
decades away for large-scale commercial viability.
As this country makes the transition to renewable fuels and
electricity generation, we must be open to all energy
solutions. Climate change legislation offers the promise of
millions of green jobs, but those jobs will not materialize
overnight, and to avoid the loss of even more jobs, we must be
deliberate and considerate in the policies we draft. American
innovation has the capacity to make us world leaders in the
export of new energy technologies, and those future firms and
construction opportunities mean good, decent-paying jobs for
Americans.
However, let us not forget the contribution existing
companies have made to that same goal. The oil and gas service
companies in my district have provided gainful employment to
millions of men and women for generations. These are jobs that
require skill and good work ethic, and they pay livable wages
in return. The loss of those jobs would cripple the economy of
Louisiana and many other blue collar and oil jobs in energy-
producing States across the country.
I commend you, Chairman Markey, and Chairman Waxman, for
your diligence on these issues. I would also like to express my
appreciation for the dedication to regular order, allowing
input from all the members of both full and subcommittee. The
staff has also shown tremendous commitments to this legislation
and have produced a solid working document, and I thank them
also.
I look forward to working with this committee now and into
the future on energy policy that will be good for this country.
I yield back the remainder of my time.
Mr. Markey. We thank the gentleman very much.
And we now turn and recognize the gentleman from Utah, Mr.
Matheson.
OPENING STATEMENT OF HON. JIM MATHESON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF UTAH
Mr. Matheson. Thank you, Mr. Chairman.
I have a number of concerns I want to raise. I think I
participated in close to 2\1/2\ years of hearings on climate
change before this subcommittee. We have a 648-page draft that
we are looking at right now. This is a huge piece of
legislation, this is an exceptionally complicated issue, and I
am concerned of moving so quickly that when we go to markup
next week, we may not get it right. And I just want to make
sure that we are deliberate in how we go about this.
The draft has, as many members have pointed out,
significant holes right now in terms of how we will address the
issue of allowances. So I just want to express that concern.
Second, major or landmark legislation that has been passed
through this Congress historically in terms of environmental
issues has often had a bipartisan component. I believe good
policy on this subject should be bipartisan. I implore all
members on this committee, on both sides of the aisle, to step
up to the plate on this issue. It is a serious issue and
everybody ought to get engaged.
Third, the idea, if your goal is to reduce carbon emissions
and you talk about cap and trade, one of the things that people
like about cap and trade is, it provides a certainty about how
the emissions will be reduced year to year and allows the
marketplace to decide the most efficient way to go about doing
that. But then we have other sections in this bill where
Congress starts to dictate how we are going to reach these
emission reductions.
Now, we ought to have a discussion in this committee about
if and when that is appropriate. We have got a renewable
electricity standard here. We have got renewable fuel
standards. We have talked about an energy-efficient standard.
Those are all good discussions to have. But in the context of
the cap and trade where people want to let the marketplace
decide how to achieve emission reductions, how far should
Congress go in stovepiping down into specific issues, as well,
and mandating what happens?
Next issue: I want to talk about targets that were
established in this bill. It is my understanding that this
draft uses the high end of the targets, the most aggressive end
of the targets--the USCAP developed for its year-by-year
targets for emissions.
When USCAP testified before this committee, I asked, how
did they arrive at these targets, what was the justification,
what was the economic modeling. I haven't gotten an answer on
that. That is one of the most significant aspects of any
climate change bill, and this committee needs to have a
discussion about that; and I hope we do that in these
legislative hearings, because we haven't done it yet.
Number five: I have expressed many times in hearings about
this concern of what I call a potential regional income
transfer. There are many ways that this can happen. It can
happen through the way our allowance system is structured. It
can happen through a renewable electricity standard. It can
happen even--through perhaps even the efficiency standard. But
there are a lot of ways that that could happen. And I think
from a substantive and, quite frankly, a political standpoint,
that is a really important issue for this committee to
understand better than it has so far.
Allowances: It has been mentioned many times we have got to
figure out what we are doing with that. It is silent right now.
We don't even have a bill that says how it is going to be
addressed, and yet we are looking to mark up next week.
RPS: Twenty-eight States in the district have an RPS
already. I question whether there ought to be a Federal
standard, and we shouldn't set up a policy to encourage the
rest of the States to do this. If there is a standard, if the
goal here is really to have lower carbon emissions, then should
we care how we produce the electricity if the kilowatt hour
doesn't produce carbon?
So why are we picking just one set of technologies?
Shouldn't we include nuclear? Shouldn't we include zero-
emission coal as the Utah voluntary RPS does right now?
Next issue: Energy efficiency. That is a good thing. And
the energy efficiency resource standard which calls for 15
percent efficiency by 2020 and 10 percent for natural gas by
2020, that is a good thing to have; but I am concerned that we
are piling on when we are already looking at the renewable
electricity standard.
I also think that decoupling for electricity has to be on
the table.
Next issue: Transmission. There is nothing real for
transmission in this draft. People are talking about going to
25 percent renewable electricity generation in this country. If
we don't deal with our transmission issue, you can't do it. So
we have got to get serious about transmission.
Offsets: I am pleased with the Offsets Integrity Board
provision, but I think we are being unfair to businesses by
trying to discount offsets. If the offsets are real, then a
turning of five offsets for full reduction credits doesn't make
sense to me. This should be a one-to-one ratio and it should
also include the western climate initiative offsets.
Next issue: International offsets. This should not link up
with the CDM. Witnesses have testified before this committee
that the international program has had major problems. Language
should be tightened to preclude international offsets are not
of equivalent quality to U.S. offsets.
Next issue: Fuels. This committee wasn't involved in
writing the RFS that went through Congress. It wasn't run by
this committee, and its feedstock mandates don't make any
sense. Our corn ethanol policy is a failure, and we ought to
address that issue as well.
Two more issues, Mr. Chairman; I will be real quick as my
time is running out.
CAFE: I think we have to have some harmony between where
Federal and State policy is on this. I am concerned about
getting the checkerboard pattern of how this policy is set in
this country.
Last issue: Where do revenues go? The President suggested
revenues from auction of offsets should go to pay for the
middle-class tax cuts. I think that is bad policy. I think that
any revenues that come out of this policy need to be plowed
back into the climate change set of issues; and this whole
discussion about costs to rate payers, until you identify where
the money goes from the auction of some allowances--and I am
not for 100 percent auction, by the way--but until you figure
out where those revenues go, any discussion about cost to
consumers is a moot point because we are not talking about
where the money is going to come from to help mitigate those
cost components. So let us address that issue as well.
That was 14 quick issues, Mr. Chairman. Thank you for your
patience and letting me go over time.
Mr. Markey. Let me thank the gentleman. You have crammed
more into a 5-minute statement than--it was like Olympic-level
issue identification.
The Chair recognizes the gentlelady from the Virgin
Islands, Ms. Christensen.
OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A
REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS
Mrs. Christensen. Thank you. And thank you, Chairmen Waxman
and Markey, for your commitment and leadership on this
important issue. It is an honor for me to be on this committee
at such a historic time, because the work that we do in this
committee in this Congress will determine the future of our
country for generations.
I also want to take the opportunity to thank the President
for his commitment to also reducing our dependence on foreign
oil and ensuring a better quality of life for everyone in this
country and, indeed, the world because, as we will discuss in
one of the hearings, this effort to provide clean air, reduce
the process of climate change and mitigate the impact of global
warming has to be one of international collaboration.
We are on the cusp of creating a whole new green economy, a
green revolution through increased adoption of renewable
energy, a green revolution that is reminiscent of the
Industrial Revolution of the 18th and 19th centuries. My
colleagues and I on the Energy and Environmental Task Force of
the Congressional Black Caucus have written to both of you, and
I want to reiterate here, as move we forward, we ensure that
the needs of minority and underserved communities, who are not
a part and do not benefit in the Industrial, be fully included
in this one.
As we support science-based legislation to reduce domestic
greenhouse gas emissions to at least 80 percent below 1990
levels by 2050, we want to see included a serious attempt to
address the education, training and employment of workers who
live in inner-city urban, rural and island communities. We want
to see a career pipeline created for low- and middle-income
communities that will not only lead to the much touted green
jobs, but the entrepreneurial opportunities in distressed
communities, and for educational opportunities at the
vocational schools, community colleges, universities that serve
rural communities, that serve our territories and racial and
ethnic minorities.
We also look for an adequate transition for those who work
in high-emitting industries to meaningful work in the emerging
low-carbon economy.
As a representative of an island community and as a
representative of the other territories of the United States,
it is clear that despite our minimal contribution to greenhouse
gas emissions, we stand to be severely impacted by global
warming, and so reducing it is vital to our interests and
survival. From the loss of coral reefs, to the rise of sea
levels, to the spread of tropical diseases, my colleagues and I
are requesting that the special needs of our offshore areas be
looked at carefully as we prepare this landmark legislation.
The CBC task force has also asked that steps be taken to
ensure that the cost of this new energy is not prohibitive but
affordable to all. It is important to note that energy costs in
the island territories that are part of the U.S. family are
already among the highest in the Nation. At present, provisions
that would address affordability are not yet completely
written.
So I look forward to being involved in that process and to
working with you, Chairman Waxman and Chairman Markey, and my
other colleagues to examine and discuss the other issues,
especially finalizing the details of cap and trade. I look
forward to passing comprehensive energy legislation that
creates a robust economy, that meets the energy needs of today
and also the energy needs and environmental needs of people and
our planet for generations to come.
And I thank you for the opportunity to make an opening
statement.
Mr. Markey. We thank the gentlelady.
The Chair recognizes the gentlemen from Pennsylvania, Mr.
Doyle.
OPENING STATEMENT OF HON. MICHAEL F. DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Doyle. Thank you, Mr. Chairman.
Mr. Chairman, I rise today with a lot of hope that these
hearings will serve as a big first step towards eventually
passing a comprehensive climate bill through our committee, so
that it can continue on to the House and Senate floors and
eventually make it to the President's desk for his signature. I
applaud your decision to use regular order, and I hope that the
members of this committee on both sides of the dais will use
this opportunity to offer constructive ideas so that the
eventual law is reflective of the combined efforts of the
entire committee.
After all, climate change is not a problem that will affect
only Democrats or Republicans. It will affect each and every
one of us, as well as our children and our grandchildren.
As I have said in the past, the draft that you and Chairman
Markey released on March 31st was a good starting point from
which this committee can begin to craft our answer to the
question of climate change. However, I would also like to say
that this bill was just that, a starting point. As everyone in
this room knows, many of the key questions that will define
this bill's workability have yet to be answered, and I, for
one, look forward to working with you, Mr. Chairman to fill in
these blanks.
These are questions such as, where are credits allocated?
What are the appropriate time frames and reduction goals? How
will we minimize the cost imposed on our constituents? And how
will we encourage and deploy next-generation clean energy
technologies? These are not simple questions with simple
answers. They are very complex and challenging issues, one that
will require a careful look at to where we are today, where we
want to be tomorrow and most importantly how are we going to
get there.
As I have said many times, the threat of climate change is
really a question of two things, technology and transition.
What technologies can we bring about through innovation,
research and deployment that will ensure that America has the
energy it needs to power our country for generations in the
future, while at the same time reducing and eliminating the
carbon footprint resulting from the way we power ourselves
today? What are the appropriate transition steps that need to
be made not only to encourage these technological advances, but
to ensure that we preserve current jobs while creating new
green jobs? And what transition steps need to be taken to
ensure we don't greatly increase our constituents' power bills?
This bill gives us a bit of a framework picture as to how
we are going to answer those questions, but much work will need
to be done to fill in these blanks if we are going to
adequately address climate change.
Like most Democrats on this committee, I hope that we can
all work together to answer these questions so that we can
bring about a bill that we can all eventually support. Unlike
some of my friends on the other side of the aisle, I have long
ago taken the position that it isn't enough to just say ``no'';
we must be able to find a way for all of us to say ``yes,'' and
I am committed, as I have been all along, to working to help us
get to that place.
I must admit I have a lot of concerns with the renewable
electric standard as it is currently written. I think a better
standard would be like the one we already passed through the
House in the last Congress. That is a standard that is workable
and one that will not penalize many of our constituents simply
because of where they live.
Any new renewable standard must do more than this bill
currently does to recognize that different regions have
different resources available to them. And I look forward to
discussions on this matter.
Furthermore, we need to do more to encourage CCS
deployment. Without widespread deployment of this technology,
all other reductions in this bill won't matter. This fact needs
to be reflected more in the bill, and we need to ensure the
framework and funding for these technologies is certain.
Similarly, the transmission piece of this bill is quite
inadequate, in my opinion, and I would like to see more work
done there also.
I would also like to see the provisions that Jay Inslee and
I worked on regarding emissions and job leakage tightened.
These are a few examples of places where I think the bill
needs some improvement. It is a good starting point, and I, for
one, am ready to work with our chairman to refine and improve
the starting text. I personally appreciate our chairman's
efforts to this point, especially in areas such as including
the Doyle-Inslee EMPLOY Act provisions, as well as the Boucher
CCS bill.
It will be critical for us to concentrate on transitional
and technological issues as we move forward with our attempt to
fundamentally alter how we produce and use power in this
country for the first time since the Industrial Revolution.
Mr. Chairman, I believe, if done right, this bill will
serve as an engine to transform our economy to ensure that
America is the world's leading manufacturer and exporter of
clean fuel technologies. The jobs that can be created by this
transformation are needed in every region of this country, and
it is critical that Members from all regions of our country
work together to create them.
I, for one, am ready to do my part; and with that, Mr.
Chairman, I yield back the balance of my time.
Mr. Markey. We thank the gentleman.
The Chair recognizes the gentleman from Ohio, Mr. Space.
OPENING STATEMENT OF HON. ZACHARY T. SPACE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Space. I want to begin by thanking you, Chairman
Markey, and also Chairman Waxman, for the initiative you have
undertaken in approaching such a monumental and ambitious task.
Today, we have before us one of the most significant pieces
of legislation that Congress will consider in our lifetime. As
we proceed with our deliberations, we must be mindful that we
are operating in the shadow of history and at a moment pivotal
in the lives of this generation.
Without question, our Nation faces a significant challenge
in addressing the issues of climate change and energy
production. While current sources of energy, such as coal, are
critical components of our Nation's economy, creating a new
energy policy that encourages investment and expansion in new
green jobs offers important opportunities that cannot be
overlooked. It is incumbent upon us in this committee to seize
upon those opportunities.
As the committee considers this critical legislation, I am
mindful of the fact that I represent a district facing
significant challenges of poverty. Even when times are good,
the economy of Appalachian Ohio can claim unemployment rates
approaching 10 percent and poverty rates exceeding 20 percent.
Thus, as the committee proceeds, it is my intention to view
this legislation through the lens not of any one group
represented here in Washington, but through the perspective of
the residents of Ohio's 18th Congressional District.
I believe this legislation offers significant opportunities
for my district. The provisions of this bill pertaining to
carbon capture and sequestration offer the promise of continued
employment for the mine workers I represent as we strive to
create a future for this critical domestic resource.
This bill also includes legislation I introduced, the Renew
Through Green Jobs Act that authorizes grants for new green job
training programs. These training programs are a critical link
in the creation of a new green economy, and I thank the
chairman for the inclusion of this provision.
Finally, this legislation also includes important
investments in building efficiency that will provide badly
needed stimulation to the insulation and glass industries. Many
of these industries have faced layoffs and furloughs in the
face of declining demand, and I am hopeful this legislation can
provide new life to this sector.
However, this legislation is larger than these provisions
and represents an effort to comprehensively overhaul how we
produce and consume energy in this country. As such, we must
move with caution to ensure the same people we are striving to
protect are not harmed by this legislation. We must be cautious
to ensure that this legislation means a brighter future for
those we represent, not darker days to come.
I believe we have an opportunity in this legislation to
create a stronger future for two critical industries in Ohio,
coal and manufacturing. This legislation creates a pathway
forward to real investments and technology, and I appreciate
the time of the committee today and look forward to hearing
more perspectives from the many witnesses over the coming days.
And I yield back my time.
Mr. Markey. We appreciate the gentleman's work.
And now we will, I think, complete--no. We have another
member who is joining, and we will then recognize the gentleman
from Vermont, Mr. Welch, for his opening statement.
OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF VERMONT
Mr. Welch. I thank you very much, Mr. Chairman. I thank you
and Chairman Waxman for the ambitious work you have set before
our committee.
I agree with much of what my colleagues have said. We now
have a consensus that climate change is real, it is urgent, and
we have to address it. And this bill is the first attempt of
this Congress, really any Congress, to undertake a challenge
that we too long ignored.
In the process of moving from a fossil fuel-based economy
to one that is based on efficiency, alternative energy and
getting the most out of the energy that we do use is going to
be very daunting, and it will impose some dislocations. So the
points that have been made by our colleagues on this committee
about the regional interests and about the real-world impact of
climate change legislation is something that has to be taken
very seriously by all of us.
But the big question that will allow us to proceed forward
is whether we have confidence that by undertaking the challenge
that is ours to undertake--and that is to eliminate or
dramatically reduce carbon greenhouse gas emissions by 2050;
and this bill has as its goal an 80 percent reduction by 2050--
the question is, do we have the confidence to undertake that
challenge, knowing if we do it wisely, we do it energetically
and we do it well, we can actually create jobs, create foreign
independence and clean up the environment?
The Union of Concerned Scientists has just done a study
that has found that if we, in fact, enact policies--and we have
to do it the right way, from renewables to efficiency--our
climate bill will bring the cost to consumers and businesses
down.
In 2030, according to this study, the policies implemented
under the blueprint would save business and consumers $465
billion while maintaining the same--the same--rate of economic
growth. An average U.S. household, if we do it right, with
enjoy net savings of $900 on their energy bills and that
includes $580 on transportation costs and $320 on electricity,
natural gas and heating oil. Business collectively would
realize net energy bill savings of $130 billion by 2030.
And what we know is that if we are going to achieve this
goal, we have to start with efficiency. It is the most cost
effective at cost containment. And in fact, one of the
byproducts of our fossil fuel-based approach to economy is this
notion that we had an endless and cheap supply and it led to
wasting energy that we should never waste. This legislation
should focus on a number of things, but first and foremost,
among them is efficiency. And I am delighted, Mr. Chairman,
that you see fit to include in this title an energy efficiency
legislation that I have sponsored and that we have used in the
State of Vermont with real success. And that is for building
retrofits. In the carbon emissions that come out of our
buildings, residential and commercial, it is about 50 percent
of the greenhouse gases.
And if we give the tools to our businesses and our
homeowners to save that energy through energy efficiency, we
are going to create jobs and go a long way towards achieving
our goals. Thank you very much, Mr. Chairman. I look forward to
working with you and our colleagues on this committee to
achieve our goal of an 80 percent reduction by 2050.
Mr. Markey. We thank the gentleman very much. And we
recognize the gentlelady from California, Ms. Matsui.
OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Matsui. Thank you very much, Mr. Chairman. I want to
thank you for convening this week's hearing on the American
Clean Energy and Security Act. I commend you and Chairman
Waxman for both your leadership and your determination to
advance this bill to where it is today. The legislation we are
discussing will be an achievement for the American people. And
it is an achievement for future generations of Americans.
Because of this legislation our children and grandchildren will
live in a country that is more sustainable, more economically
viable and more efficient than the country we live in today.
And for my hometown of Sacramento, the bill is more than an
achievement, it is a necessity.
My district sits at the base of the Sierra Nevada Mountains
and at the confluence of two great rivers, the American and the
Sacramento. The threat of flooding in Sacramento is ever
present and is made worse by a warming planet. California's
Department of Water Resources projects that the Sierra Nevada
snowpack will experience a 25 to 40 percent reduction by 2050.
These are not empty numbers. They represent real impacts of
climate change that translate into serious and unpredictable
risk for my constituents. As California's climate warms more of
the Sierra Nevada snowpack will contribute to peak storm
runoff. High frequency flood events are projected to increase
as a result. In a city like Sacramento we simply cannot afford
to ignore the reality that global warming and flooding are
interconnected. We have no choice but to adapt to these
realities. My constituents realized this long ago.
As a result the majority of them have long supported taking
action to cap the carbon emissions that are warming our planet.
They recognize that taking bold action today means a more
secure future for Sacramento tomorrow. I also recognize this
truth which is why I support the American Clean Energy and
Security Act so strongly. But fighting global warming is not
just about preserving our current way of life, it is also about
creating a cleaner stronger economy that will power the United
States into the future. When I was home last week I saw
numerous examples of how Sacramento is already generating new
clean energy opportunities. I toured a renewable energy testing
center that is about to open at the converted site of the
former McClellan Air Force Base. This center is working to give
small businesses the support they need to take clean energy
companies to the commercial stage. I visited an innovative
company called Synapsis that helps data centers improve their
cooling capabilities.
Synapsis is working HID Laboratories which is developing
energy efficient lighting technologies. Both companies
revolutionize the way commercial businesses save money on
energy efficiency strategies. I also saw UC Davis biogas energy
project, an innovative way of converting organic waste into
biogas fuels and other valuable products. This technology has
so much potential that Campbell Soup is interested in using
biogas digesters to fuel their plant in Sacramento. These
businesses and technologies are not dreams in someone's mind,
they are neither ideas nor concepts on a paper, instead they
are the realities of the modern American economy. They are real
businesses creating real jobs, real technologies, during a
revolution in Sacramento's regional economy. With the help of
the American Clean Energy and Security Act, every city and
community in America can emulate the clean energy blueprint
that Sacramento has pioneered. What is needed today are
strategic investments in clean energy infrastructure that will
help similar projects expand and prosper.
With the American Clean Energy and Security Act we are
making these smart investments. We are giving entrepreneurs the
tools they need to create clean energy jobs that demand
American skills and that put our country in a strong position
to compete internationally. These tools will continue to help
the economy grow even as we reduce the carbon dioxide emissions
that threaten our very way of life. In this way, clean energy
will be the building block of a new era of American economic
strength. With the American Clean Energy and Security Act, we
will show the rest of the world that America is back and they
are ready to lead again. I will look forward to remarks of the
many and varied witnesses who will testify before us in the
coming days in regard to this groundbreaking legislation. And
with that I yield back the balance of my time.
Mr. Markey. I thank the gentlelady. And the Chair
recognizes the gentleman from Indiana, Mr. Hill.
OPENING STATEMENT OF HON. BARON P. HILL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF INDIANA
Mr. Hill. Thank you, Mr. Chairman. Mr. Chairman, thank you
for your work and leadership on this issue. It is not easy to
tackle such a big problem, but this draft represents an
important first step in the process. These hearings will be
instructive for us as we hear an array of viewpoints.
Addressing climate change is an issue of utmost urgency. Though
we may differ on the details of how to tackle this problem, we
agree on the broader picture. This draft represents an
important first step but much more work remains. We must ensure
that States like my own are not unfairly punished for using
abundant resources that are legal and viable. I want to urge
you, Mr. Chairman, to ensure each region of the country is
treated appropriately and that the committee recognizes that
certain areas will be affected more by this legislation than
others.
I would also like to call to the committee's attention to
municipal solid waste. I believe this is a proven technology
that has been improved over the years and will be an important
tool for us to solve climate change. In order to gain the full
benefit from this technology, I believe that it should be
classified as a renewable energy source. I also hope that we
will work with our Republican colleagues to produce a bill that
produces the desired environmental results, spurs investments
in new technologies and creates the new jobs that we
desperately need. I believe entrepreneurs can find the
technology to solve this problem better than any politician
can.
Clean coal technology, while helping us at home, has the
potential to be an important export for years to come. I
believe that farmers by growing our fuels and storing carbon in
their fields are a valuable asset in reducing our greenhouse
gas emissions. I believe that we don't need government
micromanagement. Set smart pollution standards and show
American business what needs to be done. They will figure out
the fastest cheapest way to do it. I recognize that nothing
important in the world gets solved without U.S. leadership and
action. And the U.S. will lead. And that must include
compelling China and other countries to do their part too.
For those who believe China should get a pass I say no
chance. These investments will make our country's economy
stronger and more secure. America has the opportunity to be a
leader in these issues. And I look forward to working with
Chairman Markey and Waxman to ensure that this bill puts us on
the right path. And I yield back the balance of my time.
Mr. Markey. The gentleman's time is expired. The Chairman
recognizes the gentleman from Maryland, Mr. Sarbanes.
OPENING STATEMENT OF HON. JOHN P. SARBANES, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MARYLAND
Mr. Sarbanes. Thank you very much, Chairman Markey.
Chairman Waxman, thank you for your tremendous leadership on
this issue. When it comes to energy policy, this American Clean
Energy and Security Act of 2009 is really turning the titanic
around and setting targets that are going to help us get to a
new place when it comes to energy independence, when it comes
to clean jobs, when it comes to these exciting new technologies
that we are going to see, and obviously with respect to
progress on global warming. My view has always been that
government's role is to take the framework that operates and
every so often move it forward in a significant way.
And if we do that, what happens is the entrepreneurs of
this country and ordinary citizens then come in and they take
up the charge. For too long, that framework has been stuck when
it comes to our energy policy and our environmental policy, and
the pent up passion and creativity and ingenuity of the country
has been held back. Now, what this proposal does is it opens
the floodgates, I believe, to a whole new generation of
ingenuity and creativity.
I come from Maryland. The Chesapeake Bay is a national
treasure. And we consider ourselves stewards of the Chesapeake
Bay. The other day I was at a high school in Anne Arundel
County and I met with the environmental club there. And I know
what is going to happen when we pass this bill. Led by the next
generation, led by young people in this country who are going
to take up this charge, we are going to go places we can't even
conceive of right now. We think about how much we can dent our
energy portfolio with respect to wind power and solar power and
other sources of clean energy and we estimate 5 percent, 10
percent, 15 percent. I will bet you that in 2 years or 3 years,
once we let loose this ingenuity on clean technologies, we will
be making even more progress with respect to that portfolio.
That is what is about to happen.
And we have to seize this moment in time. And I thank you
for your leadership, I thank Chairman Waxman for his
leadership. And I look forward to the hearings that we are
going to be holding. Thank you, and I yield back.
Mr. Markey. We thank the gentleman from Maryland very much.
The Chair recognizes 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. It was not long ago
that gas was over $4 a gallon and people across this country
struggled with those high energy costs. Energy and its related
costs impact every segment of our lives. It impacts our
economy, it impacts our manufacturers and our industries, it
impacts jobs, and it impacts our national security, it impacts
our health and clearly it impacts our environment. And that is
why we are here today. It will be a challenge for our country
to transform the way we operate and to transition to a green
economy. But the cost of not addressing climate change far
outweigh the challenges. We cannot afford to delay but we must
be smart. Scientific evidence confirms that unrestrained growth
in greenhouse gas emissions poses a danger to public health and
the environment. The American Clean Energy and Security Act
boldly seeks to address the global warming crisis, and I would
like to commend Chairman Waxman and Chairman Markey on the
enormous task of drafting this landmark legislation. We most
bolster our national security by mapping out a more energy
dependent future for our country. Today the United States
imports nearly 60 percent of the oil that we consume. By
expanding our energy supply we can reduce our dependence on
foreign oil and increase our energy security.
And most importantly we can bolster our economy by creating
hundreds of thousands of new green jobs. With the economic
recession Americans are hurting, and the resolve of the middle
class is being tested. The economic downturn has taken a toll
on U.S. manufacturing, including the steel plants in my
congressional district.
Ohio's unemployment rate hit 9.7 percent in March and
continues to be higher than the national rate. We can turn our
country around and at the same time bring America to a cleaner
safer more productive future. With the American Recovery and
Reinvestment Act we made a down payment investing billions of
dollars to spread the development of clean renewable energy
production and transmission. Just last night, I spoke at an
Avon Lake city council meeting to explore the potential forming
a community-based wind energy co-op in Lorain County, Ohio. It
is encouraging to see people working toward solutions that will
create jobs, help local economies and improve our environment.
And we must do all we can to continue to encourage this type of
creative thinking and innovation to develop energy from
renewable sources.
I support a national renewable energy standard that shifts
towards wind solar biomass and other forms of energy to meet
our electricity needs. Investments in alternative sources of
energy, clean technology and energy efficiency will create new
industries and jobs, revitalize American manufacturing, jump
start economic growth and revive the middle class. And as we
move forward in our efforts to retool our economy and our
workforce it is important that there are safeguards in place
for worker transition and assistance. We cannot leave our
workers and communities behind. We cannot leave a section of
our Nation in the wake. We have an opportunity but we also have
a responsibility. We must also remember that greenhouse gas
emissions and climate change are global problems. The
atmosphere recognizes no borders. For industries like steel,
some emissions are an unavoidable part of the manufacturing
process.
Currently neither science nor technology exists to mitigate
them. And many in the country make their living as steel
workers. Yet while the U.S. steel industry has become 33
percent more energy efficient since 1990, the Chinese steel
industry emits as much carbon as the rest of the global steel
industry combined. The production of a ton of steel in China
generates anywhere between 2 and 4 times the carbon emissions
of a ton of steel produced in the United States. Any increased
cost imposed by climate change laws must not put domestic
industries at a severe competitive disadvantage to industries
that are not subject to similar environmental rules.
If we allow that to happen, it will work against the very
goals of environmental integrity that we seek to achieve. And
as we put our Nation on a new course in energy policy, as I
said, we must ensure that no region and no state is left
behind. Throughout my district, long established companies want
to be a part of the solution and are transitioning to green
technologies. Companies that have produced brakes for
helicopters are now producing brakes for wind turbines.
Companies that have manufactured bearings for the auto industry
are now finding another market with renewable energy system.
And there are several companies that are trying to start up
during some of the most difficult economic times our country
has ever seen. These companies are developing advanced waste
heat recovery systems, biowaste electricity generation systems
and algae-based biofuels. Recently, President Obama announced
that the General Services Administration will accelerate its
purchase of 17,600 new fuel efficient vehicles produced by
American auto companies. The President's announcement about
modernizing the fleet of a government is welcome news, and I
share his commitment to shoring up jobs for American auto
workers while improving our environment.
That is why I introduced the Consumer Assistance to Recycle
and Save Act of 2009. The CARS Act will help consumers
stimulate our economy, improve our environment, reduce our
dependence on foreign oil and help our domestic auto and
related industries. The President's announcement demonstrates
that finding ways to achieve these multiple goals can be done.
My colleagues, Representative Steve Israel and Jay Inslee have
introduced similar legislation. I look forward to continue a
collaboration with them to enact a green vehicle purchase
incentive program that will meet these multiple goals. And I
look forward to working with Chairman Waxman and Markey and my
colleagues to implement a balanced and effective measure to
reduce greenhouse gas emissions and address global climate
change.
Mr. Markey. I thank the gentlelady very much, and we look
forward to working with her. And with the completion of your
testimony, your opening statement, all time for opening
statements from the members has now been completed. Tomorrow
morning at 9:30 at that witness table we will have the
Secretary of Energy Steven Chu, the Administrator of the
Environmental Protection Agency, Lisa Jackson and the Secretary
of Transportation, Ray LaHood. 9:30 tomorrow morning we begin
to write history in the United States. With that, this hearing
is adjourned.
[Whereupon, at 5:25 p.m., the committee was adjourned.]
[Material submitted for inclusion in the record follows:]
THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009--DAY 2
----------
WEDNESDAY, APRIL 22, 2009
House of Representatives,
Subcommittee on Energy and Environment,
Committee on Energy and Commerce,
Washington, DC.
The committee met, pursuant to call, at 9:40 a.m., in Room
2123 of the Rayburn House Office Building, Hon. Henry A. Waxman
(chairman) presiding.
Present: Representatives Waxman, Dingell, Markey, Rush,
Eshoo, Stupak, Green, DeGette, Capps, Doyle, Harman, Gonzalez,
Inslee, Ross, Matheson, Melacon, Barrow, Matsui, Christensen,
Castor, Sarbanes, Murphy of Connecticut, Space, McNerney,
Sutton, Braley, Welch, Barton, Hall, Upton, Stearns, Whitfield,
Shimkus, Blunt, Radanovich, Pitts, Bono Mack, Walden, Terry,
Rogers, Myrick, Sullivan, Murphy of Pennsylvania, Burgess,
Blackburn, Scalise, and Gingrey.
Staff present: Phil Barnett, Staff Director; Kristin
Amerling, Chief Counsel; Karen Lightfoot, Communications
Director, Senior Policy Advisor; Bruce Wolpe, Senior Advisor;
Earley Green, Chief Clerk; Greg Dotson, Chief Counsel, Energy
and Environment; Alexandra Teitz, Senior Counsel, Energy and
Environment; Michal Goo, Counsel; Alex Barron, Professional
Staff Member; Melissa Bez, Professional Staff Member; Ben
Hengst, EPA Detailee; Jen Berenholz, Deputy Clerk; Caren
Auchman, Communications Associate; Matt Weiner, Special
Assistant; Mitchell Smiley, Special Assistant, Matt Eisenberg,
Staff Assistant; Peter Spencer, Minority Professional Staff;
William Corty, Minority Professional Staff; and Garrett
Golding, Minority Legislative Analyst.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. The committee will please come to order. This
week we begin our consideration of comprehensive energy
legislation, the American Clean Energy and Security Act of
2009. Since the beginning of last Congress, this committee has
been working hard on energy legislation. We held 41 days of
hearings since January. We received testimony from 61
witnesses. This week alone, we will hear from 67 more
witnesses. And I want to thank all the members of the committee
on both sides of the aisle for their intensive involvement on
energy reform. You have made a major commitment of your time,
your staff's time, and this is crucially important to our
success. I also want to warn the members that as hard as we
have been working, the pace is going to accelerate over the
next 4 weeks. There are many issues that we need to discuss and
resolve between now and Memorial Day. We will be working hard
because the goals are so important. The energy legislation we
are considering will create millions of jobs, revive our
economy and secure our energy independence. It will also
protect our environment.
In February, President Obama spoke to Congress and the
nation about the need for comprehensive energy reform. He
called on Congress to pass legislation that would transform our
economy, protect our security, and preserve our planet. Our job
on this committee is to meet those goals. We are fortunate
today to have 3 cabinet level officials testifying to our
committee for the first time, Energy Secretary Steven Chu, EPA
Administrator Lisa Jackson, and Transportation Secretary Ray
LaHood. They will explain the President's objectives and how we
can ensure our legislation meets them.
As Chairman Markey and I worked on the draft legislation
our blue print was a plan proposed by the U.S. Climate Action
Partnership, a coalition of industry CEOs and environmental
organizations. We will hear today from 6 leaders of U.S. CAP,
DuPont, ConocoPhillips, Duke Energy, Alcoa, NRG, and the
Natural Resources Defense Counsel. They will tell us how well
we did translating their blue print into legislative language.
I want to thank them and all our witnesses for their
participation in this hearing. Some have said that true energy
reform will undermine our economy. They argue that there is a
fundamental conflict between economic growth and clean energy.
This is a false choice.
Our economic future and clean energy are inextricably
intertwined. The economy that will grow the fastest in this
century will be the one that makes the greatest investments in
new energy technologies. Nearly 40 years ago this committee
passed the original Clean Air Act. Since then, we have reduced
dangerous air pollutants by 60 percent or more. During the same
period, our population has grown by 50 percent, and our economy
by over 200 percent. Twenty years ago under the leadership of
John Dingell this committee passed the 1990 amendments to the
Clean Air Act. Opponents of the legislation said that stopping
acid rain would bankrupt the utility industry. In fact, we cut
emissions in half at a fraction of the cost the naysayers
predicted.
We have a similar opportunity and responsibility this year.
The legislation we will be considering today has 4 titles. The
clean energy title will spur investment in the technologies of
the future, clean renewable energy, electric utilities,
electric vehicles, and the smart grid. The energy efficiency
title will reduce our dependence on foreign oil and save
consumers billions of dollars by making our homes, our
appliances, and our transportation system more energy
efficient. The global warming title will create a market-based
system for reducing carbon emissions to safe levels, and the
final title will provide our industries, our workers and
American families with the support they need during the
transition to a clean energy economy.
It is no longer a question whether we will act to reduce
CO2 emissions. The endangerment finding released by
EPA last week answers that issue. The real question is whether
we will do so in a way that strengthens our economy, creates
new jobs, and ends our dangerous dependence on foreign oil.
These are achievable goals but to reach them Congress needs to
act, and we on this committee need to lead the way. We can
succeed, but we will need to work together to forge consensus
and a workable solution. And I look forward to working with all
the members of the committee as we embark on this process. I
want to recognize Mr. Barton now for opening comments he wishes
to make.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman. I want to welcome our
distinguished panel of Administration officials, especially Mr.
LaHood, a former colleague. Of course, Dr. Chu, who I had some
dealings with in the laboratories, and the Honorable Ms.
Jackson, we appreciate you being here. I think it is
interesting, Mr. Chairman, that we are trying to go ahead and
move a bill that will reduce CO2 emissions in the
United States to below 83 percent of their base line of 2005.
If you want an idea of what that is like in terms of carbon
foot print, you might try living in Nigeria today because that
is the emission level that they have right now. If you have a
time machine, you might dial your time machine to 1875, and
feel what it is like to live in America back in 1875 with a
carbon foot print of approximately 2\1/2\ tons per person.
I don't think most of the today citizenry in the United
States would enjoy that type of a lifestyle too much. I also
think that it is interesting that a lot of people seem very
determined to raise energy prices in this country. Our current
President, President Obama, has said during the campaign that
capping carbon and trading emissions would make electricity
bills necessarily skyrocket, and that is his quote, necessarily
skyrocket. The people that global warming is religion believe
that carbon dioxide, CO2, which is naturally
occurring in nature, is the devil's brew and they apparently
think that we can only achieve salvation by putting our faith
in the United States Federal Government. Our government will
offer indulgences in the form of emission permits and we all
atone for our past sins and our economy's past sins by paying
through the nose with these expensive new energy carbon taxes.
It is no secret that I am a skeptic. I don't believe that
mankind is the primary cause of climate change. I do accept
that CO2 levels are rising. I think it is a
debatable proposition, whether that is a good thing or a bad
thing, but in any event to put some sort of blind faith in a
cap and trade system that hasn't worked anywhere in the world
in terms of CO2, won't work here in the United
States, and if we take it to the level that the draft bill that
Mr. Waxman and Mr. Markey have put out. It will de-
industrialize the United States of America in the next 40
years. I am not going to be a part of that. I am just not going
to do it. The dark side of economic opportunity will always be
that somebody thinks they can benefit from it, and I believe
that that is one reason so many U.S. companies, some of which
are going to be before us later this afternoon, support the cap
and trade because they think they can benefit economically,
either having allowances to sell or by trading in the allowance
market. And I understand the need to make a dollar, but I think
it is a terrible thing if we are going to set up a system where
the only people that benefit are the people that are in the
trading system and the people that get these free allowances
because of what they have done in the past.
Now I understand that your draft is silent on that. My
understanding is that you and Mr. Markey have decided at least
so far to not have free allowances. You are going to have an
auction system. I hope you stick with that. I was here in the
Clean Air Act amendments when we did SO2 back in the
early 1990s and I remember the fights we had on base line, and
I remember the fights we had on allowances for particular
plants and things like that. That will be a picnic compared to
what we will have if we go down where we start trying to--we,
not me, but you and Mr. Markey start trying to buy votes by
giving allowances to this group or that group or whatever. I
think it is interesting that we don't have a score from CBO
because you have not put anything out that CBO can score so
apparently if and when we go to markup, we are going to have
this miracle draft that comes forward in terms of a manager's
amendment, and lo and behold there will be something to score,
but CBO won't have time to score it.
If it is anything close to what we had last year in the
Senate with the Warner-Lieberman bill, it is going to be very,
very expensive. If it close to what the Obama Administration
put in their budget, according to the CBO director it is
probably going to be score in the neighborhood of $2 trillion
negatively over an 8-year period. That is a pretty expensive
package, Mr. Chairman. If you look at where our economy is
today, what the unemployment rate is today, where the stock
market is today, I don't think that is a cost that we can bear.
As long as we are talking about cost, let us talk about just
the straight increases in energy costs. Every estimate that I
have seen, Mr. Chairman, says that energy costs are going to go
up across the board. The electricity cost could go up somewhere
between 44 to 125 percent, gasoline costs could go up. You name
the cost. It is going to go up.
How does that affect the unemployment rate? Michigan right
now has an unemployment rate of 12 percent. Indiana has an
unemployment rate of 10 percent. Ohio is at 9.7. California and
Georgia are at 9.2 percent. Even my great State of Texas where
the economy is relatively better off has got an employment rate
over 6 percent. I mean if energy prices go up lots and lots of
Americans are going to lose their jobs and then that in turn is
going to cause even more deficit spending on behalf of the
federal government. How is that costed into this draft?
However, you cost it, it is going to be a negative cost. I
could go on and on, Mr. Chairman, but I have already gone over
almost 2 minutes, and I appreciate your indulgence. Put me down
as undecided on your bill and I look forward to hearing from
our panel, and then trying to work with you and Mr. Markey and
members of the committee to do something that is positive.
Mr. Waxman. Thank you, Mr. Barton. I now want to recognize
the chairman of the Energy Subcommittee, 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. First, I
want to thank Secretary LaHood, Secretary Chu, and
Administrator Jackson for being with us here today. The
presence of this all star lineup is a testament to the priority
that the Obama Administration places on developing sound energy
legislation and fighting global warming. Today, Earth Day,
2009, we begin the process of writing history as we work to
pass new energy legislation that will revitalize our economy,
enhance our energy security, create millions of new jobs, and
end the global warming crisis. We arrive at this crucial moment
with much at stake and not a moment to spare.
Winston Churchill once said courage is what it takes to
stand up and speak. Courage is also what it takes to sit down
and listen. In the days ahead, we will need to have both the
courage to speak out and the courage to sit down and listen. If
we do that, we can pass legislation that will create millions
of new jobs and reduce our dependence on foreign oil all in a
way that meets our environmental and economic needs. We have
reached a crossroads where inaction is simply not an option.
Our economy cannot continue to depend heavily on foreign oil.
Our energy system cannot continue to be highly inefficient.
We cannot continue energy policies that look to last
century's energy sources while other nations race ahead to take
the lead in developing and marketing clean energy technologies
and green jobs. Germany's second largest export after cars is
wind turbines. China is becoming the leader in renewable
energy. Japan and Korea are leap frogging America in advanced
vehicle technology. Nor can we pretend that business as usual
has shielded us from harmful, negative changes in our economy
or from increases in energy prices. It has not. Attempts to
seek refuge in the status quo have left us further behind in
the ongoing global economic and energy race.
Those who predict our bill will result in soaring energy
costs fall into a long line of doomsayers who have eventually
been proven wrong. Environmental statutes have saved lives and
smart energy policies have saved money, and done so at a
fraction of the high cost projected by industry. Nor will
global warming or oil-driven foreign regimes wait for us to
act. Just last Friday, Administrator Jackson issued her
proposed endangerment finding stating that climate change is an
enormous problem and ``the greenhouse gases that are
responsible for it endanger public health and welfare.'' Among
the impacts that flow from global warming are increased
drought, more frequent and intense heat waves and wildfires and
harm to water resources, agriculture, wildlife, and ecosystems.
And EPA also emphasized that global warming will have
disproportionate impacts on the very poor, the very young, the
elderly, those already in poor health, and those living alone
are dependent on few resources. Left unabated, global warming
and our dependence on oil will jeopardize America's national
security and increase our economic risk. Whether it is in the
hundreds of billions we send every year to unfriendly regimes
or the hundreds of millions globally who could be without
drinking water from increased drought, we cannot wish away
these problems.
Chairman Waxman and I have developed our discussion draft
with all of these factors in mind. In the discussion draft and
going forward, Chairman Waxman and I will strive to get
reductions in global warming pollution that meets science-based
targets by using cost saving, energy efficiency, and clean
energy solutions. We will continue to develop strategies to
help keep costs low from the use of offsets, to banking and
borrowing, and through the use of a strategic reserve of
allowances that can limit any costs that are higher than
expected. We will continue to fund clean energy solutions that
will allow new American companies to prosper creating clean
energy jobs that can't be shipped overseas, and we will
continue to provide opportunities and incentives for energy
efficiency to save families money.
We will continue to ensure that we assist and benefit
consumers, especially low income consumers. We will ensure that
our most internationally competitive industries are not left
exposed to foreign inaction, and we will hold ourselves to high
standards and we will hold the international community to high
standards. Nor are we finished improving this legislation. As
we proceed through these hearings, we will hear dozens of other
witnesses, some with positive comments and some with
suggestions for improvements. We welcome these comments, and we
look forward to working with all the members of this committee
to develop legislation that will create a new clean energy
economy free of the threat of dangerous global warming and free
of our dependence on foreign energy sources. Thank you, Mr.
Chairman.
Mr. Waxman. Thank you, Mr. Markey. Now I wish to recognize
for an opening statement the ranking member of the energy
subcommittee, Mr. Upton.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Thank you, Mr. Chairman, and before I begin my
opening statement, I would like to submit a number of articles
for the record. First of all, from last week's Washington Post,
India Rejects Calls for Emission Cuts. With regards to the
President's push to combat climate change, Indian officials
said it was unlikely to prompt them to agree to binding
emission cuts. From the New York Times, Thirsty for Energy in
India's Boon Town and Beyond, I quote, ``Almost half of India's
population has no access to the electricity grid. About 700
million Indians rely on animal waste and firewood as fuel for
cooking.'' From the Saginaw News, Terrible Time for Higher
Bills, ``As a result of the recent green mandates sticking
people with an average of $125 utility bill increase seems kind
of cruel in a state that is suffering 12\1/2\ percent
unemployment.'' From the Detroit News, Cap and Trade Plan will
Hit the Heartland, with a quote, ``Cap and trade system is a
giant economic dagger aimed at the nation's heartland,
particularly Michigan.''
From the Hill, Not All Senators Warming to Obama Cap and
Trade. Sherrod Brown, former member of this committee, Obama's
plan would lead to an increased energy cost and would drive
American firms abroad. From the Wall Street Journal, Who Pays
for Cap and Trade, with a quote, ``An economy wide tax under
the cover of saving the environment is the best political money
maker since the income tax.'' And from the U.S. News and World
Report, The Next Bernie Madoff, Emissions Cap and Trade Aids
the Corrupt, Hurts the Little Guy, and on and on.
I would like in advance to thank the 60 some witnesses who
will be testifying before our committee this week, and due to
the limited time, I would like to submit the following 4
questions to each of our witnesses and would ask them to
address these during their opening remarks. Number 1, will the
legislation increase energy costs? If so, is there anything in
the underlying bill that prevents these costs from being passed
on to consumers? 2, since the legislation applies only to the
U.S. but not other nations like China, India, and Mexico, is
there a chance it will result in American jobs being shipped
overseas, and how many jobs will be lost? 3, what is the
cumulative cost per household of this legislation, and, 4,
absent other nations adopting the same reduction policy, how
much will the legislation actually reduce global temperatures,
if at all?
I do believe that we need to reduce emissions, but we must
do it in a common sense way that takes into account the
economic and global realities of the issue. This week it was
reported in the New York Times that China discovered 180 miles
of the Great Wall that they didn't know existed. How on earth
are they going to be able to monitor and reduce their
greenhouse gas emissions, and I wonder how many coal-fired
plants that they might have discovered in the last couple of
years as they were analyzing this new 180 miles. We are not
engaged in a guessing game. We have the luxury of examining
empirical evidence of past forays into different policies. All
one has to do is to examine the results of the EU's cap and tax
scheme. It was a failure.
CO2 emissions in the U.S. fell by 1.8 percent in
2006 compared to a .3 percent increase in emissions in the EU
according to the EIA. Both economies grew at a near identical
pace in 2006 of about 3 percent. Cap and tax, cap and trade,
will essentially kick working families when they are down. And
we thought the American public was angry at $4.25 gas prices
last summer. Just wait till they get their hands on their
utility bills under a cap and tax. In 2008, approximately 21
percent of all utility accounts were overdue with folks
carrying past due balances on average of $160 in electric bills
and $360 for natural gas. And in Michigan the account debt
totaled $367 million with 1 out of 3 behind on their bills in
some of our areas.
Times are tough, yet this proposal puts a bulls eye on the
back of working families who are struggling to feed their
families and to keep the lights on. In fact, in Michigan it
came out just yesterday that we have lost 150,000 jobs in 4
months, and it is expected that according to the University of
Michigan we are going to lose 239,000 jobs in 2009. We are one
of the hardest hit in this weak economy, and we would be
disproportionately impacted with this legislation. NAM did a
detailed analysis of the impact on Michigan, and, quite simply,
jobs are going to be lost, electric prices are going to go up,
and household incomes will be decimated and any growth will
absolutely disappear.
Let us put the scale of emissions reductions called for
into perspective. Current proposals would mean that the U.S.
cannot emit more in the year 2050 than we emitted in 1910. That
is a pretty daunting task considering that in 1910 the U.S. had
only 92 million people compared to about 420 million expected
in 2050. And to reach the lofty goal of 80 percent reductions
emissions from the entire transportation sector would have to
drop to 0. Emissions from all electricity generation would have
to drop to 0, and then we would need to reduce everything else
by 50 percent. Climate change is a serious problem that
necessitates serious solutions, but how can we address such a
critical issue without nuclear even being addressed in this
measure even though nuclear power accounts for 70 percent of
our nation's emission free electricity.
We are in desperate need of a reality check. Without
international participation jobs and emissions will simply
shift overseas to countries that require few, if any,
environmental protections harming the global environment as
well as the U.S. economy. If our objective is to send
manufacturing jobs overseas, destroy the Midwest, mortgage our
future, and hand the keys over to our super power status, then
I would say job well done. This bill does it. The stakes are
high, the planet is warming, and this is no time to throw in
the towel all in the name of cap and tax. So I guess, Mr.
Chairman, you can put my name as undecided with Mr. Barton. I
yield back.
Mr. Waxman. Thank you very much, Mr. Upton. We are pleased
to welcome 3 representatives from the Obama Administration,
Secretary LaHood, Secretary Chu, and Administrator Jackson.
Your prepared statements will be in the record in full, and we
would like to recognize each of you to make an opening
statement. And we will have a clock that will indicate 5
minutes. When you see the red light on, we would like you to
recognize your time is up and to summarize so we will have
plenty of time for questions and answers by members of the
committee. Administrator Jackson, we would like to start with
you.
STATEMENTS OF LISA JACKSON, ADMINISTRATOR, UNITED STATES
ENVIRONMENTAL PROTECTION AGENCY; STEVEN CHU, SECRETARY, UNITED
STATES DEPARTMENT OF ENERGY; AND RAY LaHOOD, SECRETARY, UNITED
STATES DEPARTMENT OF TRANSPORTATION
STATEMENT OF LISA JACKSON
Ms. Jackson. Thank you. Thank you, Chairman Waxman.
Chairman Waxman, Chairman Emeritus Dingell, Ranking Minority
Member Barton, Congressman Markey, Congressman Upton, and
members of the committee, thank you for inviting me to testify
about the draft American Clean Energy and Security Act, and
happy Earth Day to each and every one of you. Let me begin by
commending this committee for embarking on the serious,
difficult, and essential work of crafting comprehensive,
detailed energy legislation and moving it through an open and
careful process in which representatives hold hearings, make
amendments, and cast votes.
When President Obama was inaugurated 92 days ago, the
United States found itself in the worst economic crisis since
the Great Depression. So the President worked with Congress to
pass the American Recovery and Reinvestment Act. That law is
now creating good jobs for Americans. Thanks to the Act, EPA is
putting Americans to work, overhauling clean water systems,
restoring and redeveloping polluted properties, installing
clean air equipment on diesel engines, and cleaning up leaking
underground fuel tanks. The American Recovery and Reinvestment
Act also injected an essential shot of adrenalin into the
American energy sector. That immediate relief is essential to
economic recovery. But President Obama has also leveled with
the American people. Lasting economic recovery will come only
when the federal government looks beyond the quick fix and
invests in building the advanced energy industries that will
help restore America's economic health over the long term.
So President Obama has called on Congress to pass forward-
looking energy legislation. That legislation should create here
in America millions of the clean energy jobs that cannot be
shipped overseas. It should catapult American innovators past
the foreign competitors who, due to aggressive investments by
their governments, now enjoy a head start in the advanced
energy technologies that represent the new Internet revolution,
the new biotech wave. The legislation should reduce our
dependence on oil and strengthen America's energy security. And
it should start in a real and tangible way to tackle greenhouse
gas pollution, which threatens to leave to our children and
grandchildren a diminished, less prosperous, less secure world.
Three weeks ago, Chairman Waxman and Markey released draft
legislation that strives to accomplish the goals I just listed.
The American Clean Energy and Security Act would introduce a
clean energy requirement for American electric utilities and
new energy efficiency programs for American buildings. Those
initiatives aim to create good American jobs that cannot be
shipped overseas. The legislation would launch programs to
promote electric vehicles and deploy technologies for
capturing, pipelining, and geologically storing carbon dioxide
produced at coal-fueled power plants. Those incentives aim to
help American companies make up for lost time in the advanced
energy industries that will be to the 2010 what Internet
software was to the 1990s.
The legislation would institute new low-carbon requirements
for vehicles and fuels, as well as programs to reduce vehicles
miles traveled. Those proposals aim to increase America's
energy security and cut back on the hundreds of billions of
dollars that America throws away every year on oil. And the
legislation would put in place a declining cap on greenhouse
gas pollution. That market-based system aims to protect our
children and grandchildren from severe environmental and
economic harm and from great threats to our national security
while further invigorating advanced American energy industries.
The American Clean Energy and Security Act draws on the
thoughtful legislation that Chairman Emeritus Dingell and
Congressman Boucher drafted last October, and it tracks many of
the recommendations put forward by the U.S. Climate Action
Partnership, a coalition that includes American manufacturers,
such as Alcoa, John Deere, Caterpillar, Dow, Ford, General
Motors, and General Electric. Now the no, we can't crowd will
spin out doomsday scenarios about runaway costs. I do not claim
that we can get something for nothing, but EPA's preliminary
economic modeling indicates that the investments Americans
would make to implement the cap and trade program in the
American Clean Energy and Security Act would be very modest
compared to the benefits that science and plain common sense
tell us a comprehensive energy and climate policy will deliver.
I ask the members of this committee to recall the Acid Rain
Trading Program, drafted by this committee as amendments to the
Clean Air Act, and signed by a Republican president in 1990.
Beltway corporate lobbyists insisted that the law would cause,
and I quote, ``death for businesses across the country.'' But
as the members of this committee who worked hard on that
legislation know well, it ended up delivering annual health and
welfare benefits of over $120 billion at an annual cost of only
$3 billion. Our economy grew and acid rain was cut by more than
50 percent. The Clean Air Act amendments dealt with
controversial issues, not just acid rain, but smog, hazardous
air pollutants, and the threats to the ozone layer, but once
Chairman Dingell and Chairman Waxman joined forces with other
members of this committee to find consensus the committee
reported the amendments favorably to the full House by a vote
of 42-1. I believe this committee can make history again this
year, and the draft American Clean Energy and Security Act is a
great start. It reflects the President's priorities of reducing
our dependence on oil creating millions of new jobs by
leveraging America's tremendous capacity for innovation and
significantly reducing greenhouse gas pollution.
This Administration wants to see this effort move forward,
and I pledge to work with this committee over the weeks ahead
to help you find consensus. Thank you. I look forward to
answering the members' questions.
[The prepared statement of Ms. Jackson follows:]
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[GRAPHIC] [TIFF OMITTED] T2878A.049
Mr. Waxman. Thank you very much, Administrator Jackson.
Secretary Chu, we would like to hear from you.
STATEMENT OF STEVEN CHU
Mr. Chu. Chairman Waxman and Markey, Chairman Emeritus
Dingell, Ranking Members Barton and Upton, and members of the
committee, thank you for the opportunity to appear before you
today to discuss the American Clean Energy and Security Act.
For decades our energy strategy has been little or no strategy
at all. For our transportation needs, we have become
increasingly addicted to oil at escalating costs to our
economy, our environment, our security. For our electricity
needs, we burn immense amounts of coal, which is cheap and
abundant, but a major contributor to global warming. We will
continue to use coal as a fuel, but we must learn to do it in a
cleaner way. On this Earth Day, we must state in no uncertain
terms we have a responsibility to our children and their
children to curb the carbon emissions from fossil fuels that
have begun to change our climate.
President Obama recognizes that the energy challenge is a
defining challenge of our time, and he is committed to a
comprehensive energy plan that creates jobs, reduces our
greenhouse gas emissions, and reduces our dependence on oil.
The Energy Independence and Security Act and the American
Recovery and Reinvestment Act have made a down payment on clean
energy future. I am pleased to report that the Department of
Energy is getting the Recovery Act money into your local
communities as quickly as possible, while maintaining the
highest standards of transparency and accountability. We are
already putting Americans to work making homes and buildings
more efficient, which will grow our economy and cut energy
bills for families. The Recovery Act also provides financing
options that could double the production of renewable energy
and expands investments in the development of break-through
energy technologies.
But we need to do more. We need not only to jump start our
economy today but to lay the foundation for America's long-term
prosperity. In the years ahead, the work will turn increasingly
to unconventional sources of petroleum, which could lead to
higher prices for consumers. With these rising energy costs and
the mounting challenges of our climate, the development of
clean, renewable sources of energy will be the growth industry
of the 21st century. The key question is who will lead the
world in making energy efficient vehicles when turbines, solar
panels, and other products and technologies that will power
tomorrow's economy? There are 2 dangers, either of which could
dramatically weaken America's future. The first is that the
world will fail to take action on climate change in time to
prevent its worst potential effects. The second is that the
United States will fail to seize the opportunity to lead and
new clean energy jobs will be created overseas rather than in
America.
We can neither let our planet get too hot or let our
economy grow too cold. We must get off the sidelines of the
clean energy race and play to win. To that end, we in the
Administration appreciate Congress' effort in developing the
American Clean Energy and Security Act. While we are still
reviewing the details, it is clear that Chairman Waxman's
legislation would advance the President's goals of launching a
new sector of clean energy jobs, making our economy more
competitive and weaning the nation from its dependence on oil.
The President looks forward to working with members of Congress
in both chambers to pass a bill that would transition the
nation to a clean energy economy.
The Administration believes that a gradual marked-based cap
on carbon pollution would also be a significant step for
restoring America's leadership in the deployment of clean
energy technology. Building on the success of the bipartisan
Acid Rain Program created in 1990 Clean Air Act, this approach
will set clear long-term emission goals that empower the
private sector to find the most innovative ways to reduce
carbon pollution. The Administration also believes a renewable
electricity standard could help create a stable investment
environment for America's innovators to do what they do best,
create new jobs and entire new industries. We also believe it
is important to foster continued development of critical
technologies to give the American people advanced clean
vehicles, to capture and store carbon to limit emissions and
sustain our environment, to accelerate energy efficiency
improvements, and to develop a smart grid to improve the
efficiency, reliability, and security of our electricity
transmission system. I applaud Chairman Waxman and Markey for
bringing this bill forward.
Now is the time to take comprehensive and sustained action
to meet our nation's energy challenge. With the leadership of
the President, the actions of this Congress, and the support
and participation of the American people, I am confident we
will succeed. Thank you, and I will be glad to answer your
questions.
[The prepared statement of Mr. Chu follows:]
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[GRAPHIC] [TIFF OMITTED] T2878A.051
Mr. Waxman. Thank you very much, Secretary Chu. Secretary
LaHood.
STATEMENT OF RAY LaHOOD
Mr. LaHood. Mr. Chairman, Mr. Markey, Mr. Dingell, and Mr.
Barton, and friends all, thank you for inviting me to discuss
the Department of Transportation's commitment to promote a
cleaner, greener America through effective and innovative
transportation policy. I appreciate the opportunity to discuss
the important environment and energy policies laid out in the
American Clean Energy and Security Act. I commend the committee
for drafting this important legislation. Since today is Earth
Day, this is an excellent time to hold a serious national
conversation on the most effective ways to improve energy
efficiency, reduce greenhouse gas emissions, and mitigate the
impact of climate change.
As you know, one of the highest priorities of President
Obama's Administration is to develop a comprehensive energy
plan that will not only achieve these goals but also create
millions of good paying, clean energy jobs and help our
communities become more livable in the process. There is no
question that the United States must be the leader in the
global effort to address climate change, cut pollution, and
find more sustainable ways to keep our society mobile. The
President has already taken concrete steps in this direction.
The Administration has proposed new fuel efficiency standards
for cars and light trucks that would significantly reduce
emissions and save millions of gallons of fuel beginning in
model year 2011. And we are coordinating with the Environmental
Protection Agency and the Department of Energy on new fuel
economy standards to take us through 2016. Our department is
also using new statutory authority to explore new fuel economy
standards for medium and heavy duty trucks. Additionally, the
department continues to invest in buses running alternative
fuels thereby reducing emissions and improving air quality in
cities and towns across America. Our commitment has helped to
quadruple the number of clean fuel bus fleets across and around
the nation since 1998.
Through the Recovery Act, we are making hundred million
dollar grants in grant funds available to help the transit
industry to improve fuel efficiency and reduce emissions for
bus, rail cars and other transit equipment. On the climate
change front over the last several years we have invested in
research and technology efforts that will help us to transition
away from fossil fuels, improve vehicle efficiency, and
optimize our transportation network to reduce congestion and
idling while contributing to higher emission levels. Across the
department, we are committed to programs and policies that
address our environmental concerns. The FAA, for instance, is
working with the private sector on sustainable alternative fuel
for aircraft. The Maritime Administration exploring new
technologies in cooperation with EPA and industries to reduce
emissions from marine diesel engines.
Looking ahead, the Department of Transportation stands
ready to meet the President's ambitious goals for making
transportation an integral part of our approach to addressing
environmental challenges. In the coming months, we will work
with stakeholder groups around the country to determine how
best to invest $8 billion in new funding for high speed
passenger rail service that will ultimately improve mobility
and reduce congestion, and we will work closely with Congress
to develop a new service transportation bill that focuses on
reducing greenhouse gas emissions by investing in green
transportation choices such as bike paths, pedestrian walkways,
and building more affordable housing near transit.
In closing, the Department of Transportation will continue
to be your full partner as we move forward with new legislation
to help America address its formidable energy challenges. I
look forward to working with you, Mr. Chairman, and the entire
committee.
[The prepared statement of Mr. LaHood follows:]
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Mr. Waxman. Thank you very much, Secretary LaHood. We will
now recognize members for questions, 5-minute rounds, and I
will start off. The 3 of you gave us testimony on behalf of the
Administration, and I thank you for your presentations. Our
nation is facing some very difficult energy challenges and we
have ignored them for too long. We are overly dependent on
foreign sources of oil. Our economy is in a recession. We are
no longer leading in the development of clean energy technology
and we are polluting our environment. President Obama is trying
to confront these problems. He has said we need a comprehensive
energy policy that creates new clean energy jobs, promotes
energy independence, and tackles a tremendous threat of global
warming.
Chairman Markey and I tried to draft a discussion, a
proposal that addresses these 3 issues. And what I want to ask
you is whether you think our draft accomplishes the President's
goals. Let me begin by asking about jobs and our economy.
Americans are hurting, and this is the first question on most
of our minds. Administrator Jackson, do you believe the bill
would create jobs here in the U.S. and stimulate economic
growth?
Ms. Jackson. I do indeed, Mr. Chairman. I believe this is a
jobs bill, and it is a jobs bill that focuses our country's
attention on the growth industry of the future, which is the
clean energy industry. There are opportunities here for us to
create literally millions of jobs in the green energy.
Mr. Waxman. Secretary Chu, do you agree, would this bill
put us on the path to a clean energy economy?
Mr. Chu. I absolutely agree with that. I think as you
yourself noted the world has rapidly changed its attitude
towards carbon emissions and it is continuing to do so. So in a
future world, it is very clear that we will be living in a
carbon constrained world so the action will be how do you
transition to a sustainable energy future. The United States
must position itself in a way so that we can lead this
transition, that we take advantage of the full intellectual
opportunities and vigor of this country to develop those
technologies that will add to our economic prosperity.
Mr. Waxman. And, Secretary LaHood, what do you think about
creation of jobs and helping our economy with the Obama
proposal?
Mr. LaHood. Well, Mr. Chairman, I think that nothing has
taken as much time for this Administration than trying to get
the economy going. This is the number 1 priority for this
Administration, and I know it is for Congress also, and I know
that is why Congress passed the Economic Recovery Act, which
many of us in this Administration are implementing to try and
get our fellow Americans back to work, and we are certainly
doing that at the department. I believe that the work that you
all are doing, the bill that you have laid out will go a long
way to creating jobs, and particularly I want to note green
jobs.
And in the area that we work at the Department of
Transportation, we believe there will be a number of green job
opportunities created around the country as a result of the
approach that is being taken by your legislation and this is
the reason that we are here today.
Mr. Waxman. Let me ask you this though. The other
objective, one of the other objectives, is to reduce our
dependence on foreign oil. Americans are tired of sending
billions and billions of dollars overseas for oil in many
countries to countries with hostile governments. Do you believe
this bill would reduce our dependence on foreign oil?
Mr. LaHood. Absolutely. I think it sets the bar very high
and obviously one of the concerns that all of us in public
policy positions have faced is the ire of the public when a
barrel of oil goes up and gasoline goes up, and people are not
able to use their automobiles. And I think this approach will
help. The approach that you are taking in your legislation will
relieve our dependence on foreign oil by creating other
opportunities for people, certainly in the area of
transportation.
Mr. Waxman. Thank you very much. I assume, Secretary Chu
and Administrator Jackson, you agree this will reduce our
dependence on foreign oil as well?
Mr. Chu. Yes, I do.
Mr. Waxman. The third goal of this discussion draft is to
effectively address the danger of global warming. We want to
craft legislation based on science, and that means a bill that
makes the global warming pollution reductions scientists tell
us are necessary to avoid catastrophic climate change.
Secretary Chu, does this bill represent an effective response
to the threat of global warming? Does it take the necessary
steps at home to ensure that American can restore global
leadership on this issue?
Mr. Chu. It does.
Mr. Waxman. And do the other two of you agree with that
position? Administrator Jackson?
Ms. Jackson. Yes, I certainly do, Mr. Chairman. This bill
includes strong targets, and it moves us to addressing global
warming pollution by establishment of a cap and trade program
which I think many businesses agree is the way to harness
private investment and capital into on our side in reducing
pollution and creating the green energy economy.
Mr. Waxman. Thank you very much. My time has expired. Do
you want to add anything, Secretary LaHood?
Mr. LaHood. I agree.
Mr. Waxman. OK. Good. Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman. Before I begin my
questions, I want to commend you and Mr. Markey on one thing
that I didn't in my opening statement. We have had intense
debates about the number of Republican witnesses versus
Democrat witnesses at these hearings. In this case, I want to
commend you on your Administration panel. You went out of your
way to make sure we had a Republican witness and we didn't even
have to ask. I should have commended you for that, so we
appreciate you doing that.
Mr. Waxman. You can commend the American people for that.
Mr. Barton. Very good. Thank you. And the President for
appointing him. Administrator Jackson, your agency yesterday
came up with an economic impact analysis of the pending draft.
How were you able to do that since the most important economic
component of the draft has no allocation cost scheme in it?
Ms. Jackson. At the request of the drafters, we did indeed
release economic modeling and in order to do it, we had to make
assumptions about how allowance revenue would be distributed.
At the request of the drafters those assumptions were put into
the modeling.
Mr. Barton. I haven't seen the analysis, but are those
economic assumptions and allowances cost, are those public?
Ms. Jackson. Yes, they are, and the modeling is public.
Mr. Barton. They are public. Thank you. Your agency also
recently came up with a finding that CO2 is
hazardous to health and therefore should be regulated under the
Clean Air Act. Just what is the health hazard since
CO2 itself is not a pollutant?
Ms. Jackson. Well, the proposed finding would classify
CO2 as a criteria pollutant, and the health impact
associated with CO2, especially for the very young
and for the elderly, are exacerbation of other impacts from
pollution. CO2 acts to make impacts from pollution
worse because the CO2 and the warming that it causes
the climate change is actually----
Mr. Barton. Inhaling CO2, being exposed to
CO2, in and of itself is not a health hazard?
Ms. Jackson. Well, right. Well, CO2 in the
absence of oxygen----
Mr. Barton. You are creating CO2 as you talk to
me.
Ms. Jackson. I think I understand your question, sir, which
is if you inhale only CO2 certainly that would make
you sick. You wouldn't live without oxygen. But the
CO2 and the endangerment finding is based on
scientific analysis of CO2 and 5 other greenhouse
gases and their impact on the welfare of our country and then
human health because of----
Mr. Barton. Do we have examples in your finding of
CO2 pollution causing death or large illnesses? We
know SO2 and we know mercury and we know lead. We
know the criteria pollutants. Even ozone causes asthma or can
exacerbate asthma. We don't have that with CO2.
Ms. Jackson. The finding, the proposal answers the question
put to us by the law and by the Supreme Court, which is do
these greenhouse gases as a class endanger public health and
welfare, and the finding is based on an analysis of what the
greenhouse gases do first to our environment and our planet and
what that means for human health.
Mr. Barton. I thank you for those answers. Mr. LaHood or
Secretary LaHood, former Chairman Dingell in his opening
statement yesterday talked about the need for specific funding
for the automotive industry and some assistance in terms of
meeting their admission requirements under legislation that was
passed last year. Have you looked at former Chairman Dingell's
comments, and, if so, do you support some of the things that he
said yesterday?
Mr. LaHood. I am sorry, I have not seen his testimony. I
will be happy to look at it, but I haven't seen it.
Mr. Barton. He was specifically saying that there should be
a specific funding source in this bill to help the automotive
industry meet the requirements in terms of their emission
improvements that they have to meet, and he also said that for
retooling issues and things that there should be additional
funding so you might just----
Mr. LaHood. You mean the bill that is under consideration
here by the committee?
Mr. Barton. Yes. If I understood him correctly, that is
what----
Mr. LaHood. Well, to be honest with you, Mr. Barton, I
haven't thought about this, but I would say this. I don't know
of another Administration or another Congress that has done
more for the American automobile manufacturer than the Obama
Administration and this Congress in the Economic Stimulus Bill
and also last year in what Congress did in terms of the money
available to the American automobile manufacturers. This
Administration is committed----
Mr. Barton. You don't have to convince me, Mr. Secretary. I
am one of the Republicans who voted for the auto package so you
don't have to preach----
Mr. LaHood. No, if you are asking me if we are committed to
helping the American automobile manufacturer, the answer is,
yes, we have, and I believe the President will----
Mr. Barton. I am specifically asking just to take a look at
what Mr. Dingell said.
Mr. LaHood. I didn't see his testimony, but I will be happy
to look at it.
Mr. Barton. Dr. Chu, I don't want to leave you out. You are
our scientist. I have one simple question for you in the last 6
seconds. How did all the oil and gas get to Alaska and under
the Arctic Ocean?
Mr. Chu. This is a complicated story but oil and gas is a
result of hundreds of millions of years of geology, and in that
time also the plates have moved around, and so it is the
combination of where the sources of the oil and gas----
Mr. Barton. But I mean isn't it obvious that at one time it
was a lot warmer in Alaska and on the North Pole. There wasn't
a big pipeline that we created in Texas and shipped it up there
and then put it underground so we can now pump it out and ship
it back.
Mr. Chu. There are continental plates that have been
drifting around throughout the geological ages.
Mr. Barton. That just drifted up there?
Mr. Chu. That is certainly what happened, and so it is a
result of things like that.
Mr. Waxman. The gentleman's time has expired. Mr. Markey.
Mr. Markey. Thank you, Mr. Chairman, very much. Secretary
Chu, I know you spent a lot of time thinking about new energy
technologies. Are you concerned that we could lose our
leadership in new energy technologies to other countries?
Mr. Chu. I am very concerned of that. It actually tears my
heart out to see what has happened. If you consider what
happened photovoltaics were invented by Bell Labs in the 1930s.
We are not a leading manufacturer of photovoltaics. Wind
turbines, which were first deployed in the United States in the
first energy crisis in the mid-1970s, that had gone overseas to
Denmark--to Germany. Nuclear reactors which we pioneered. Now
Westinghouse, there is a major shareholder in Westinghouse that
is now owned by a company in Japan. I am very concerned. Major
power electronics of the world has drifted overseas. It is in
Europe and it is in Asia. And so I see step by step us losing
the technology lead. We need to bring those high technology
jobs back, manufacturing jobs, back to the United States.
Mr. Markey. Thank you, Mr. Secretary. During the
presidential campaign now President Obama pledged that the
United States could actually deploy 25 percent of our
electricity from renewable resources by the year 2025, which
would be a revolution in the way in which we generate
electricity in our country. Do you agree with that assessment
that we can reach that goal by the year 2025, Mr. Secretary?
Mr. Chu. Yes, I do. I think when the American public and
especially the science and technology part of the United States
gets going it can really move, and so although it might seem
like an ambitious goal, I think with the proper incentives we
can get there.
Mr. Markey. Could I ask you, Secretary LaHood, what role do
you think that new advanced automotive technologies can play in
revitalizing the American economy?
Mr. LaHood. Well, we know from visiting with the automobile
manufacturers that the kind of technology that they are
developing in terms of hybrids, in terms of battery powered
automobiles, and then the standard that we have asked them to
meet in terms of CAFE standards are going to allow the American
people to have many, many choices in the future for
opportunities to have automobiles that will emit far less
CO2, and certainly the case is true with hybrids and
the further development of that. There are a couple of American
automobile manufacturers that are developing an all battery
automobile, and obviously that is going to go a long way to
enhance our opportunities.
Mr. Markey. Are you an optimist, Mr. Secretary, that if we
continue to invest in these new technologies as an American
strategy that we can meet this goal?
Mr. LaHood. I think the American automobile manufacturers
have gotten the message. They need to get where the American
people are, and the American people are ready to drive
automobiles that get good gas mileage in the instance of those
that use gasoline, but if development of hybrids and battery
powered automobiles come on to the opportunities for people and
are allowed to be developed, I think the American people are
ready for that.
Mr. Markey. Thank you. Mr. Secretary. Administrator
Jackson, you have had a chance to look at the Waxman-Markey
draft. Could you tell us in your opinion how that legislation
could help to reduce our use of oil, our dependence upon
imported oil in the United States?
Ms. Jackson. Well, the bill as you drafted it is
comprehensive in that it has several opportunities for
advancing renewable energy, energy efficiency. We just heard
about the opportunity to put forward electric cars, a low
carbon fuel standard, and all of those things along with
especially the energy efficiency, which is such low-hanging
fruit right now for our country, and which could start tomorrow
in reducing our dependence, and then the longer term options as
we move towards a lower carbon future through a cap and trade
program, all of those are drivers that will push us towards
using foreign oil right now as it makes us vulnerable.
Mr. Markey. We produce 8 million barrels of oil a day in
the United States. We import 13 million barrels of oil a day.
That is our weakness. We thank each of you for your leadership
in helping us to address that question. Thank you, Mr.
Chairman.
Mr. Waxman. Thank you, Mr. Markey. Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman. I would first like to
ask Secretary Chu, Secretary Chu, the loan guarantees for
nuclear are certainly, as many of us know, an essential part
for building new projects such as new nuclear reactors. We know
that you have proposed a revision to the DOE loan guarantee
program, but as I understand it, OMB is not satisfied and has
rejected the proposed change. In spite of that, can you comment
on what we need to improve the program? I don't know, is that a
final resolution?
Mr. Chu. No. I believe that nuclear power has to be part of
the energy mix in this century. I stated that many times. I
continue to state that.
Mr. Upton. That would be my follow-up question, but go
ahead.
Mr. Chu. And so we are certainly moving as aggressively as
we possibly can. We are going to work out the differences with
OMB to try to get those initial loan guarantees going. We are
also using our budget of 2008-2009 and going to 2010, we are
helping the getting the NRC licenses, particularly the AP-1000,
so its generic design can be licensed. That is being done with
the aid of the Department of Energy. We fully intend to use the
resources of the Department of Energy to further develop
nuclear technology. This is one of the areas of technology that
the United States should recapture leadership in.
Mr. Upton. During your confirmation, I was heartened when
you said nuclear is going to be part of our energy future. It
has to be, and yet you had a statement a couple weeks later as
it related to Yucca Mountain, as you know, there is no nuclear
title as part of this bill, and I just want to know as you
indicate now that nuclear needs to be part of the equation.
Would the Administration support a nuclear title to this bill
knowing that there is no greenhouse gas emissions, and what are
we going to do about Yucca? And, lastly, would you support
reversing President Carter decision on recycling, something
that our subcommittee actually visited last year as we saw the
French begin to--or they have done it for now a number of
decades, recycle the nuclear waste. It is my understanding that
both Japan and the British are doing it as well. What are your
comments in that regard?
Mr. Chu. What we are planning to do is to appoint a panel
to step back and take a fresh new look at how we are going to--
a comprehensive plan of how we are going to deal with the
nuclear waste. A lot has happened since the beginning of Yucca
Mountain some 25, 30 years ago, and so without prejudging what
these blue ribbon panels are going to find, I think it is an
opportunity to actually develop a much more comprehensive
forward looking plan. The fact that we are doing this, I see,
in no way conflicts with my vision of trying to move the
nuclear industry forward to restart the American nuclear
industry. We can and will develop a comprehensive nuclear waste
plant.
Now with regard to the recycling issue, I think it has
become increasingly apparent even to France and Japan that the
current recycling technology used today, which isolates
plutonium, has proliferation issues, serious proliferation
issues. So what I intend to do is to start a vigorous research
and development program to look for ways to close the fuel
cycle, to actually recycle, but in a way that is proliferation
resistant, so I think it is premature to start today because we
simply don't have those processes today but in the long term I
think that is the goal.
Mr. Upton. Well, as we begin to embark on this legislation
would the Administration support that a nuclear title that
there is no greenhouse--a nuclear title to this bill which it
does not currently have now to encourage the development and
forward movement of additional new reactors?
Mr. Chu. I think the Administration has supported this. We
are trying to, as I said, restart the American nuclear industry
again. It should be----
Mr. Upton. So it ought to be yes.
Mr. Chu. Yes. The answer is yes.
Mr. Upton. We look forward to working with you. OK, good.
Administrator Jackson, last year, I believe it was last year,
in testimony before our committee, your predecessors indicated
that the Lieberman-Warner bill, had it passed the Senate, would
really not changed the--as long as other countries were not
participating, India and China, the largest emitters, they
didn't participate, that the global temperature would change by
a miniscule amount of less than 1 degree. Do you concur with
that same thought now what we have a change in the
Administration?
Ms. Jackson. I certainly concur with the concept, which is
that global warming----
Mr. Upton. It doesn't happen without India and China?
Ms. Jackson. The international leadership, international
action is needed to solve the entirety of the problem, yes.
Mr. Waxman. The gentleman's time has expired. The chair
wishes to recognize the Chairman Emeritus of this committee,
Mr. Dingell, under whose leadership as chairman, we passed the
last revisions to the Clean Air Act with a vote of 42-1. I am
hopeful we can get to 42-1 or that kind of a margin this time
around but I have my suspicions given some of the opening
statements that we may not be able to succeed as you had in the
last go round on the most important environmental legislation
that we had passed. Mr. Dingell is recognized for 5 minutes.
Mr. Dingell. Mr. Chairman, thank you for your courtesy.
Thank you for those kind comments. I intend to try to work with
you to see to it we get a good bill out of here. And I want to
commend you for the legislation that you have brought forward.
Welcome to our panel, and particularly our old friend, Ray
LaHood. Welcome back, Ray.
Mr. LaHood. Thank you.
Mr. Dingell. These questions for Secretary Chu. How many
applications for the Section 136 advanced technology vehicles
manufacturing incentive programs has the department received?
Mr. Chu. Actually the exact number I can't really say.
Mr. Dingell. Would you submit that for the record, please?
Mr. Chu. Yes.
Mr. Dingell. The current authorization for Section 136 is
25 million. What is the total amount that has been requested?
Mr. Chu. Well in excess of that amount.
Mr. Dingell. Would you give us the exact figure? And, Mr.
Chairman, I ask unanimous consent that I be permitted to write
a letter to the departments asking to expand upon the questions
that I am making now and that both that letter and the response
be included in the record of the committee.
Mr. Waxman. Without objection, that will be the order.
Mr. Dingell. Mr. Secretary, this goes to both you and my
old friend, Secretary LaHood. This country has had a wonderful
experience. The new Chevy Volt was driven out of the factory on
electric power, and that wonderful vehicle was driven out on
batteries that were made in Korea. Now we have had a policy in
this country that has gone into effect and gone in and out like
Murphy's glass eye. Each new administration comes in with a new
package to stimulate new technology in the auto industry. And
so we have a constant replacement of these programs and they
never work because they never get a chance to. What do you
think we ought to do in this legislation to see to it that we
finally get Chevy Volts driving out of the factory on American
made batteries and to stimulate the technology of the American
industry so that it will in fact produce cars of the kind that
we want them to produce and to do so in competition, not just
with foreign manufacturers but with foreign governments which
are subsidizing their manufacture?
Mr. LaHood. Mr. Chairman, I wanted to express my thanks for
the warm welcome that you have given me here today and to say
to you that----
Mr. Dingell. You will get a warmer welcome if you give me
an answer.
Mr. LaHood. I am going to let--Secretary Chu knows a lot
more about this, but I want to say this. I do believe that
there are some technology and research going on with respect to
batteries that can be used by the American automobile
manufacturers.
Mr. Dingell. Very little support from our federal
government, very little.
Mr. LaHood. I suspect given your interest in this there may
be a little bit more from Congress in the future.
Mr. Dingell. And I want to get something like that in this
legislation. I need your guidance and that of Secretary Chu to
define what that will be.
Mr. LaHood. You will have our guidance.
Mr. Dingell. All right. I will submit a letter on this but
I want you alerted to the fact something has got to be done on
this. Now to Administrator Jackson. EPA is moving forward with
an endangerment finding for greenhouse gases. When the Congress
wrote the Clean Air Act, which our chairman so kindly referred
to, our assessment at that time was that CO2 was not
a pollutant. In any event, you are now in this wonderful
situation where you are going to have to regulate under the
Clean Air Act unless this committee does something. Our
chairman very happily has recognized this need and in his bill
and Mr. Markey's bill there is a provision which will get us
down to the point where the federal government is going to
regulate those under the new legislation. I commend them for
that. But just how many regulations and regulators will there
be if we regulate under the Clean Air Act? My off the cuff
figuring tells me it would be something on the order of 106. Am
I incorrect in that judgment?
Ms. Jackson. I don't know how you came up with the number
of 106 there but----
Mr. Dingell. Would you give us an answer on that particular
point, please?
Ms. Jackson. Is the question whether there would be
regulation under the Clean Air Act if this----
Mr. Dingell. Well, you are going to have to regulate
everything in sight for CO2 production and I am
asking you how many or I am asking you to deny that we would
have the situation where we would have as many as 106
regulations, perhaps more, on CO2 emissions because
you would have to do it under the state implementation plans.
You would have to do it under all kinds of other regulatory
powers and the states and the federal government, and you would
have, as I have defined it, a glorious mess. Do you deny that
we would have a glorious mess if you had to do it under
existing law?
Mr. Waxman. The gentleman's time has expired but we would
like to have you answer the question.
Ms. Jackson. Thank you.
Mr. Dingell. I look forward to your answers, gentlemen and
lady.
Ms. Jackson. Thank you. First, let me state that I believe
new legislation is the best way as the President has said, and
I certainly agree, to address the problem of global warming and
greenhouse gas emissions in our country. I believe that the
endangerment finding, the proposal that is out, certainly
addresses that which the Supreme Court compels us to do, which
is to speak as the Clean Air Act says EPA must now as to
whether greenhouse gases endanger public health and welfare,
and that draft is out for comment. It certainly means that it
is the first step in a potential regulation of greenhouse gases
via the Clean Air Act.
And if your point, sir, is that it is more efficient to do
it via a bill, via new legislation like this discussion draft
envisions, then I couldn't agree more.
Mr. Waxman. Secretary Chu, do you want to add something to
that?
Mr. LaHood. Yes. To answer Chairman Emeritus Dingell's
question, the American Recovery Act is investing $2 billion in
advanced manufacturing. Also, we are investing a significant
amount of money in R&D to develop next generation of advanced
batteries.
Mr. Waxman. Thank you. Mr. Stearns.
Mr. Stearns. The first question I have is this is directed
at the Secretary of Energy. During your confirmation hearing,
you testified that DOE has a legal obligation to safely dispose
of nuclear waste. You said I am supportive of the fact that the
nuclear industry is and should have to be part of our energy
mix in this century. Doesn't it concern you then that nuclear
energy does not even seem to be a part of this bill, and I
think this is a follow-up to Mr. Upton's question.
Mr. Chu. Well, not specifically a part of this bill. If you
look at the sum package of all the bills like the America
Recovery Act, nuclear energy is supported in those other bills.
Mr. Stearns. But don't you think there should be a separate
title in this bill for nuclear energy, just yes or no?
Mr. Chu. Pardon? What was the question?
Mr. Stearns. Do you think there should be a separate title
in this bill for nuclear energy, just yes or no?
Mr. Chu. We are looking forward to working with the
committee on----
Mr. Stearns. Just yes or no. Do you think it should be? Can
I have your yes or no answer?
Mr. Chu. A separate title on nuclear energy?
Mr. Stearns. Yes. Yes or no.
Mr. Chu. I think nuclear energy can be mentioned in this
bill but again it is working with this committee and the
Administration in developing that.
Mr. Stearns. Is that a no then, you don't think nuclear
energy----
Mr. Chu. No, that was we will look forward to working with
the committee and making sure that nuclear energy is part of
our energy mix.
Mr. Stearns. Last September you made the statement that
somehow we have to figure out how to boost the price of
gasoline to the levels in Europe, which at the time exceeded $8
a gallon. As Secretary of Energy will you speak for or against
any measures that would raise the price of gasoline?
Mr. Chu. As Secretary of Energy, I think especially now in
today's economic climate it would be completely unwise to want
to increase the price of gasoline and so we are looking forward
to reducing the price of transportation in the American family,
and this is done by encouraging fuel efficient cars. This is
done by developing alternative forms of fuel like biofuels that
can lead to a separate source, an independent source, of
transportation fuel.
Mr. Stearns. But you can't honestly believe that you want
the American people to pay for gasoline at the prices, the
level in Europe?
Mr. Chu. No, we don't.
Mr. Stearns. But your statement somehow we have to figure
out how to boost the price of gasoline to the levels in Europe,
doesn't that sound a little bit silly in retrospect for you to
say that?
Mr. Chu. Yes.
Mr. Stearns. OK. You have also stated that the American
electricity prices are anonymously low and that coal is our
worst nightmare largely due to its contribution to global
warming. As Secretary of Energy, will you support coal-fired
electric generation in order to provide affordable electricity
for the American people?
Mr. Chu. I believe the full statement when I made that
statement is that coal as it is used today in China and India
especially where there is no trapping of sulfur dioxide,
nitrogen oxide, mercury particular matter, and no capture of
carbon dioxide, and when China was building coal plants, close
to one a week, without the sequestering of any of these
pollutants, is a nightmare. So I think going forward, I have
also said that the world is not going to turn its back on coal,
and the United States again should take a leadership position,
as we have done in scrubbing the sulfur dioxide, the nitrogen
oxide, the lead particular matter, and working toward----
Mr. Stearns. Does that mean you would support more coal
burning operations generation?
Mr. Chu. I certainly will be looking forward to supporting
coal burning operations as we work towards clean coal,
absolutely.
Mr. Stearns. Because President Obama in the campaign
indicated if we can go to the moon, we certainly can burn coal
cleanly, and he sort of indicated that he would support coal
operation if the coal was burned cleanly. The EPA analysis
contains a rather aggressive assumption about carbon capture
and sequestration technology coming to market. Does the
Department of Energy have any analysis that shows that CCS
being available by let us say 2015?
Mr. Chu. Well, if you look at where we are today in terms
of the capture technology and sequestration technology, we are
beginning--not only the United States, but Europe and Asia are
beginning to look aggressively at piloting and bringing to
commercial scale these projects. So it takes several years to
build them. It takes several more years to have the lessons
learned so that power companies can invest with confidence that
this is not only technically feasible but it is economically
feasible. And so at a minimum, I see 6, 8 years, for example,
as a time when very serious deployment begins, but we are
working as fast as we can to begin the testing both at pilot
scale and at commercial scale.
Mr. Waxman. The gentleman's time has expired. Mr. Rush.
Mr. Rush. Thank you, Mr. Chairman, for this hearing, and I
certainly want to add my kudos and commendations to my friend
from Illinois, Secretary LaHood. It is good to see you again,
Mr. Secretary, and welcome to all of our witnesses today. Mr.
Chairman, I just want to make sure that the record is real
clear here that it is my contention and others contention that
this bill is silent on nuclear simply because of the fact that
nuclear energy doesn't generate any carbon emissions so the
bill is silent on this, and I think that the future of the
nuclear energy field is going to be quite good and quite
positive and the nuclear energy field is subject under this
bill. I want you to know that my state has enormous investments
in nuclear facilities and we look forward to this bill and to
the new era because we look forward to being able to generate
jobs and additional revenues from nuclear energy.
So, Mr. Chairman, the comments of those on the other side
kind of remind me of the phrase this dog just don't hunt no
more because they are operating under kinds of premises here.
So for the record, I want to clear that up. I do have a number
of questions, and I am going to try to ask each and every one
of you, if you will, to try to take a shot at these questions.
I am going to ask them all together, if I might, because if
time permits I got another area of questioning that I would
like to engage on. Currently, the phrase green jobs and green
job training and certification means different things for
different jurisdictions, and each state or locality may define
training and certification differently. In your opinion, should
the federal government set standards for training and
certification and should that be done through legislative
language or through the EPA's administration of the program?
The next question, how do we ensure that local communities
with large percentages of population without college or
advanced degrees be recruited and trained in green job
technologies in order to be a part of the job creation and
economic boom that this new energy sector is create? And,
lastly, how do we ensure that minority and women-owned
businesses are able to gain equal access to federal funding in
order to take advantage of the entrepreneurship and innovative
business opportunities that this new energy section will
enable? Should the rules of the road be written through
legislative action or through the administration and
implementation within the agencies how do we track this funding
and ensure that the people we are trying to reach are indeed
recipients of this fund? Each one of you can take a crack at
it.
Mr. LaHood. Mr. Chairman, let me just see if I can answer
the question on green jobs because an economic recovery plan
the Department of Labor is receiving a lot of money to really
implement the kind of opportunities for training for green jobs
and if Secretary Solis were here, she could really get into
depth on this, but at our cabinet meeting that we had just this
week with the President, she talked about the opportunities
that are going to be created through her department with the
money that comes from the Economic Recovery Plan for training
for people in the whole area of green jobs.
Mr. Chu. Let me also add that Secretary Solis and I had
visited a community college recently where this community
college was providing the proper training for these new green
jobs. I think you raise a very important part. There are
certainly many examples across the country where proper
training programs have been developed. Right now because of the
urgency of what we are trying to do in terms of getting the
economic recovery money out there and in practice, we first
want to just make sure that best practices are shared in
states.
Mr. Rush. Administrator Jackson, would you speak
specifically to the issue of certification and training?
Ms. Jackson. Certainly, Mr. Rush. Let me first say that
environmental justice in the future is going to also mean that
this green economy is green for all as others have said to coin
a phrase as others have coined. So I think that what you are
asking is whether or not there needs to be assurances that all
are actually able and ready to partake as we create and embark
on putting America right in the bulls eye of the green energy
economy, and certainly it should be. Again, I would defer to my
colleague, Secretary Solis, as to how to do that. I am an
environmental specialist myself.
Mr. Waxman. Thank you very much. The gentleman's time has
expired. We would like to at this time recognize Mr. Whitfield.
Mr. Whitfield. Mr. Chairman, thank you very much, and I
certainly want to thank the witnesses for being here today, and
it is great to have Secretary LaHood here with us who many of
us had an opportunity to be in Congress with in 1994. But I
think it is imperative that as we discuss this issue of energy
policy that we not go into this with rose-colored glasses, and
that we just get it all out on the table and then the Congress
will make its decision and the American people will be very
much aware of the pluses and the minuses about all of this. Now
the economists a couple weeks ago or last week had an article
entitled Saving the Planet and Creating Jobs May Be
Incompatible, and in that article they specifically referred to
President Obama when he was in Europe. He gave a speech, and he
said think of what is happening in countries like Spain where
they are making real investments in renewable energy. They are
surging ahead of us poised to take the lead in these new
industries.
This isn't because they are smarter than us or work harder
than us but because they are making investments with government
funds in renewable energy, and these investments are paying off
with good high wage jobs. And then we hear a lot about green
jobs and we want green jobs. We need green jobs, particularly
at this time in our nation's history with our economic
problems. And we have heard a lot of models being used about
the jobs that are going to be created, and we hear models used
about how cap and trade and renewable can improve the health
care of the American people and can reduce dramatic weather
changes and so forth.
And we know that with all models there are all sorts of
problems with models depending on the information that is going
in. But I wanted to ask you all, you, Mr. Chu, particularly,
and Ms. Jackson if you had read Gabriel Alvarez's study. He is
at King Juan Carlos University in Madrid. And he used empirical
data based on the government subsidizing renewable energy in
Spain, and he came up with the conclusion exactly how much
every job cost, and I know that President Obama in this
renewable energy package is using Spain as one of the models.
But for every job created in the renewable energy sector, so-
called green job, they lost 2.2 jobs. And this is a 50-page
empirical study that he conducted. And have either one of you
seen his study?
Ms. Jackson. No, sir, I am not familiar with the study.
Mr. Whitfield. Were you aware of the study? Had you even
heard about in?
Ms. Jackson. Generally, I know that there are many studies
out. That particular study, I have not reviewed.
Mr. Whitfield. Well, you have heard time and time again
that people are concerned about loss of jobs. I mean the issue
on cap and trade, of course, is that, yes, China, they are not
using scrubbers. They are not using carbon capture and
sequestration. They are bringing on one new coal power plant
every 2 weeks. How do we deal with that, Mr. Secretary, if we
unilaterally move to take steps and China and India and other
countries are not, how do we deal with that?
Mr. Chu. Well, this is an issue where I believe the United
States should take a leadership role. The President has
emphatically stated that, and I actually believe that other
developing countries like China, Mexico has already stated that
they want as a goal to reduce their carbon even though they are
a developing country that they would like to reduce their
carbon emission by 50 percent by 2050, and I think if China--if
the United States does take the lead China will follow.
Mr. Whitfield. Well, I hope that as you work with the
committee that you all will keep these jobs as a priority
because if we are losing 2.2 jobs in existing industries as
they did in Spain and they only picked up one job in green, the
economy, then that is a losing proposition. And I would also
just point out a study that Johns Hopkins did, for example,
that said if you replace three-fourths, for example, of U.S.
coal based energy with higher priced energy because we are
doing to increase the price of energy with cap and trade and
other things it would lead to 150,000 premature deaths annually
in the U.S. alone. Now that was a study at Johns Hopkins. Have
you all seen that study because we hear a lot of benefits, you
know, from moving in the direction we are moving but this shows
the negative aspect of it. Have you seen that study?
Ms. Jackson. No, Mr. Whitfield, but I would be happy to
review it.
Mr. Whitfield. OK. Well, my time is expired. Thank you.
Mr. Waxman. The gentleman's time has expired. The chair
would request of the gentleman that he submit that study
because I think the committee would like to look at it
carefully. Ms. DeGette.
Ms. DeGette. Thank you, Mr. Chairman. I would like to
follow up, first of all, on some questions that were being
asked that Mr. Rush was asking about the effect of this
legislation on low income individuals. And I am wondering,
Administrator Jackson, if you could tell us in EPA's analysis
how the discussion draft might affect the economy and
individual households, in particular low income households.
Ms. Jackson. Certainly. The overall message from EPA's
modeling, and again it was based on assumptions from the
drafters that I can discuss in a second was that the impact is
quite modest on the economy in general and that the impact on
the average household annualized over a year, an annualized
impact for a year is around $98 to $140.
Ms. DeGette. And why is that? Why is that impact relatively
modest because to many outside observers they think that this
is going to present a huge cost burden to American families.
Ms. Jackson. Well, one of the opportunities and one of the
things that I know this committee has before it to discuss is
what happens with the money generated from the allowances, The
value in the cap and trade system is in this currency called
allowances. And one of the assumptions we made in the modeling
was that about 40 percent of that money would go back to the
American people to households in the form of rebates.
Ms. DeGette. So even though the discussion draft is silent
as to where the allowances would go if the committee made the
determination to put at least 40 percent back to American
families then that would help reduce the impact on individual
households, correct?
Ms. Jackson. Certainly that is the driver.
Ms. DeGette. Another question that I have, and this is
really for Secretary Chu but also either of the other witnesses
could answer. I am wondering what your thoughts are about how
realistic the discussion draft's reduction targets are both
near term and long term.
Mr. Chu. I think they are aggressive but I think we can
meet them. If you look back in history of how we have actually
met certain things, the Clean Air Act, clean water, how we
dealt with the ozone layer, invariably what happens especially
that aggressive but obtainable target of 2050 that you reduce
carbon by 83 percent, I think it is science and technology that
is going to lead the way to give us those solutions. In the
near term, efficiency will give us most of the gains
immediately and it will also save us money.
Ms. DeGette. Let me ask you this question. Much has been
made by some of my colleagues on the other side of the aisle of
the fact that India and China in particular but also other
developing countries don't seem to have much of a interest in
controlling global climate change right now. Is that a reason
for us to not move ahead with our aggressive goals in the U.S.,
Mr. Secretary?
Mr. Chu. The view of China has changed dramatically in the
last several years. I had the opportunity about a year and a
half ago to speak with Premier Wen Jiabao for about an hour on
this issue. They are taking it very seriously because they see
the impacts of climate change in their own country, and so they
are very----
Ms. DeGette. Well, let me stop you. What about India?
Mr. Chu. India is less far along in this realization.
Ms. DeGette. So to answer my question then in particular
with India but to a lesser degree with China and maybe other
developing countries, is there lack of prioritization of this
issue reason for us not to move forward?
Mr. Chu. No. We have to move forward. Right now the United
States and China represent 50 percent of the carbon emissions
of the world, and as we go forward we have to take those
leadership positions.
Ms. DeGette. Now if, say, we don't get China participating
fully although we hope we will, if we don't get India and the
other developing countries participating, what is that going to
do towards the bill's reduction targets. In other words, are
the draft legislation's targets tied to reductions in these
third world countries or can we maintain some reductions in and
of ourselves?
Mr. Chu. No. I think what the bill is saying is that we
will go forward and we will start to reduce, aggressively start
to reduce the carbon emissions in the United States. But in a
cap and trade scheme, it also provides for offsets. Some of
those offsets, much of those offsets, will be in the United
States to the parts of our country, but some of that could also
be used to help bring in developing countries.
Ms. DeGette. Thank you. Thank you, Mr. Chairman.
Mr. Waxman. Thank you, Ms. DeGette. Representative Bono
Mack.
Ms. Bono Mack. Thank you, Mr. Chairman. And I thank our
distinguished panel of experts for their time today, and I just
want to start by saying my congressional district is probably
one of the most beautiful congressional districts with all due
respect to all of my colleagues, and I am extremely proud of
the work we have done on renewables. We have invested, we
believe, if you start at one end of my congressional district
you will see windmills that we are very famous for. You can go
to the other end and see a lot of geo-thermal capacity and
certainly a lot of hope in between for solar projects. But,
conversely, my congressional district is also one of the top 5
hardest hit in the housing crisis. So this legislation is
keenly important to me and to my district. As a Californian, I
believe in innovation and I believe there is a lot in this bill
that can go a long way towards energy independence. I believe
there is a lot in this bill that will promote the technologies
that we all believe in.
But again I have very, very big concerns about the cost and
what this will do to my constituents. California's rates are on
average about 65 percent higher than the rest of the nation for
electricity, and this truly can be a matter of life and death
for my constituents. In the summertime we see the deaths occur
for people who are afraid to turn on their air conditioning.
Years past, we saw a flawed deregulation bill in California
that created vast, unattended consequences where we saw rolling
blackouts, and we saw what flawed policy, whether it be out of
Sacramento or Washington eventually, can do to harm people.
So my concerns in this bill I believe has been well known
and my colleague, Mr. Upton, has asked each of you answer the
questions in writing about what will this do for the cost of
energy on our consumers, and I look forward to seeing those
answers from all of the panelists. I would like to know from
Administrator Jackson the EU, California's AB-32, the Western
Climate Initiative, and Northeast RGGI system all handle
transportation fields outside of the cap and trade program and
in the case of California in particular works with fuels
through a low carbon fuel standard. We have portions of both
approaches in this draft legislation. Is it your opinion that
putting fuels under the cap and trade is the right approach or
can we separate fuels out with a low carbon standard?
Ms. Jackson. My opinion is that it is extraordinarily
important that we deal with transportation fuels and that we do
it in a way where we see meaningful reductions in the carbon
foot print of those fuels like a renewable fuel standard, like
the low carbon fuel standard which are in this bill. I do
believe that there are alternate approaches, and I think the
committee will have the opportunity to discuss that and find
the most effective way of dealing with it. And I think anything
EPA can do to assist you in those discussions we are happy to.
Ms. Bono Mack. Well, you can start by answering a question,
should it or should it not be under an economy wide cap and
trade system?
Ms. Jackson. Well, I think that it can be addressed either
way and I don't think there is a right or a wrong. I think that
it should be evaluated and discussed in terms of what gets the
best result.
Ms. Bono Mack. Secretary LaHood, I am a firm believer that
the new clean diesel needs to be a little bit more thoroughly
discussed in Washington that there is great promise in clean
diesel but I might be entirely misguided. I would love to know
your thoughts on clean diesel, and if there is a role whether
it be under low carbon fuel standard or just increased CAFE
where clean diesel might fit in.
Mr. LaHood. First of all, I will agree with you that you
have one of the most beautiful districts in the country, and
some of the most beautiful golf courses too, by the way. But I
am not prepared to talk about the diesel standard. I don't know
whether Secretary Chu or Administrator Jackson can do that but
I would be happy to get back to you after I look into it. That
is not something that I have expertise in. I don't know if
either one of these two folks want to say something about it
not.
Mr. Chu. Yes. I think the Department of Energy is certainly
funding programs that develop clean diesels. As you know, there
has been a change in the technology in diesels and moderate
size diesel engines can now satisfy the very stringent
California EPA rules on particular matter on NOX
that we didn't think was possible 5 or 10 years ago. I should
also say that I am very proud of the fact that the Department
of Energy funded a program that works with Sandia Labs with
Cummings that makes large diesel engines to actually use high
performance computing to design a cleaner diesel and it
actually reduced the design time by 15 percent. The engine was
designed in software and built and said it satisfies our design
goal and they went into production. So clean diesel is
something that we will be investing in.
Mr. Waxman. The gentlelady's time has expired.
Ms. Bono Mack. Thank you.
Mr. Waxman. Representative Green.
Mr. Green. Thank you, Mr. Chairman. Like our colleagues, I
would like to welcome our new secretaries, and particularly our
former colleague, Ray LaHood. Ms. Jackson, the EPA produced a
preliminary analysis of the economic impact of the discussion
draft that was publicized yesterday and the analysis did not
measure the overlapping impacts of a carbon cap, the renewable
electricity standard, the efficiency standards, the new plant
regulations, and low carbon gasoline program. From what I
understand, it was a preliminary draft and when can we expect
the analysis measure that includes all parts of the bill taken
together?
Ms. Jackson. Well, I think that we will be happy to provide
additional modeling analysis once the bill is ready, once you
have an actual bill. It was a discussion draft. It was
incomplete. EPA was asked by the drafters to model a narrow
portion of it, and as I mentioned we had to make quite a few
assumptions to do that, but EPA stands ready to provide
additional modeling analysis at the request of the committee.
Mr. Green. I appreciate it. In fact, since we are going to
mark up in our subcommittee next week, I don't know if we can
get those specifics to you because some of those decisions are
being made now but I appreciate the update on the analysis. The
discussion draft both regulates refining through a carbon cap
and imposes a new gasoline standards for carbon essentially
regulating these fuels twice. Last year, when the Senate
considered a climate bill their estimates of gasoline price
increases as high as 129 percent, and of course last year's
price of gasoline was $4 so 129 percent was very substantial
compared to what gasoline may be today.
My question for both EPA and DOE, would EPA and DOE perform
an analysis of the case prices and supply that considers the
impact of the implementation of the second stage of the
renewable fuels program, the new low carbon program, and the
carbon cap before we mark up the legislation. Is that possible
that would look at both of those, the new low carbon program
and the carbon cap before we get to a markup on the
legislation?
Ms. Jackson. Are you asking about the low carbon program in
this bill, sir?
Mr. Green. In this bill, the low carbon program in this
bill, along with the other requirements that we are going to
have on refining capacity and ultimately the price of fuel.
Does EPA and DOE have the capability to do that?
Ms. Jackson. I know that EPA's capabilities are focused
around the impact of the cap and trade on emissions and then
allowance prices, but I am certainly happy to work with the
Department of Energy to make sure we get you whatever we can.
Mr. Green. Secretary Chu, is that possible?
Mr. Chu. Pardon? Is what possible?
Mr. Green. Since we had some estimates in the Senate last
year on the climate change bill as high as 129 percent gasoline
cost increases, does DOE perform an analysis of the gasoline
price and supply that considers the impact of the
implementation of the second stage renewable fuels program, the
new low carbon program, and the carbon cap before we have an
opportunity to mark up the legislation?
Mr. Chu. Yes. We will get the EIA and we will get you that
information.
Mr. Green. Thank you. I guess this one is for Dr. Chu,
Secretary Chu. In testimony you talk about the Administration
believes the renewable electricity standard could help create a
stable investment environment for America's innovators to do
what they do best, create new jobs and entire industries. And I
know coming from the State of Texas, we don't have a
percentage. I know the bill calls for 25 percent renewable
electricity standard. The House in 2007 passed a 15 percent
renewable electricity standard that included electricity
efficiencies. Why is the difference to have a national standard
as compared to what a lot of states are doing? Some
particularly in the south have hard kilowatt hours that they
say this is what we are going to use from renewable
electricity. And Texas is a good example because of growth in
wind power. But why do we need a national standard to allow the
states who are already doing it?
Mr. Chu. Well, surprisingly when I--or maybe not
surprisingly, but when I meet with industry representatives
many of the industries' representatives who are in these
renewable energies want a national standard. It creates a
uniform basis with that plus trading and the option for states
to do this will create a market so that people who want to
develop these new industries and further advance and deploy
them will say that we have a market that we can make these
hundreds of millions of dollars in investment across the
country.
Mr. Green. My colleague, Congresswoman DeGette, from
Colorado pointed out some of the concerns I think some of us
may have about international agreements because I represent an
area that is refining capacity and the refining that we do in
Houston, Texas could easily be transferred to China or India or
Libya or Saudi Arabia who would love to enhance their product.
Instead of being crude oil suppliers, they would love to be
refined product suppliers. Our concern is that the United
States needs to be a leader, but we also need to recognize that
some of the requirements we do similar to what our trade
legislation has in the past that even if a country has very
strong environmental laws they are typically not enforced.
Don't you think particularly dealing with climate change
and carbon because if a ton of carbon goes up in Houston, Texas
and a ton of carbon goes up in China, it is basically the same
on the worldwide impact unlike some of our other pollutants. Do
you feel like this legislation, at least the draft that we have
now, is strong enough in dealing with not only the United
States leading but also bringing the developing world along in
trying to make sure that we don't have that dislocation of some
of our basic industries?
Mr. Waxman. The gentleman's time has expired, but we would
like to ask the witnesses to answer.
Mr. Chu. Very briefly, I think this is the reason why this
bill is advocating cap and trade, the cap and trade allowances
begin in developing countries. I think the Administration wants
to work very much with this committee on deciding how to
dispose of the allocations. We already talked about the
sensitivity, the most vulnerable parts of our society, and also
there is a sensitivity with regard to the heavily energy
intensive industries, so this is something the Administration
will work with the committee in dealing with these issues.
Mr. Waxman. Thank you, Mr. Green. Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman. And I want
to thank our panelists for being here today. The first question
I have given the complexity of this legislation, I just want to
make sure each of you has actually read the draft bill in its
entirety. Can you give me a yes or no, have you read it in its
entirety?
Mr. LaHood. I haven't had time to read all 600 pages.
Mr. Walden. 648, but that is----
Mr. LaHood. I have not had time to read all 648 pages.
Mr. Chu. Neither have I.
Mr. Walden. Ms. Jackson.
Ms. Jackson. Nor have I. My staff have certainly read
through it.
Mr. Walden. OK. Well, then I want to draw your attention to
a couple of issues. First of all, I come from a district that
is very rural, 70,000 square miles, home to 11 national forests
where we have all kinds of catastrophic fires and enormous
overgrowth of wood fiber. Is there a scientific reason, Dr.
Chu, for excluding woody biomass off federal land under the
definition on page 8 of biomass, and why would the
Administration support that exclusion?
Mr. Chu. Well, the Administration will be working with the
draft of this bill.
Mr. Walden. Do you support this draft? Do you support the
definition of biomass as found on page 8?
Mr. Chu. I would certainly look forward to working with you
in terms of looking at how biomass is defined.
Mr. Walden. OK. Well, biomass is defined right now on page
8 as you couldn't take any of this off federal land. Federal
land is completely excluded. I would love to know the
scientific reason for doing that. Second, there are all these
other definitions that private timber growers in my part of the
world tell me would basically make it impossible for them to
participate in woody biomass development. Whether that is a
chip plant, whether that is a pellet plant, whether that is--
all this stuff is being invested in right now. Our department
of environmental quality in Oregon says basically there is
virtually no emissions from heating sources that come that are
heated with the wood pellets. This is a disc. They want to make
these in my district using woody biomass off private and
federal ground, put it in a mix with coal burning power plant
reduce carbon emissions and improve efficiencies, and yet under
this legislation you couldn't do that. It wouldn't count. Let
me move on to hydro. Is hydro renewable or not?
Mr. Chu. Hydro power is renewable.
Mr. Walden. Can you give me the scientific reason for why
hydro power prior to 2001 is not renewable in this legislation?
Mr. Chu. I think whether it is included in this legislation
or not just like the definition of biomass is not a scientific
question.
Mr. Walden. OK. I agree. So there is no scientific reason.
It is a political reason.
Mr. Chu. I think the issue here with hydro power one wants
to encourage new forms of renewable----
Mr. Walden. OK. Let me go to that. Page 11, new forms. It
says the hydroelectric project installed on the dam is operated
so that the water surface elevation at any given location and
time that would have occurred in the absence of the
hydroelectric project is maintained subject to license, et
cetera, et cetera. Now my understanding, we have a lot of wind
energy in my district. All this energy is with the hydro system
being able to store water when the wind is blowing and be able
to balance out the load. This is Bonneville Power. Apologies to
my colleagues here. This is wind energy 1,000 megawatts that
dropped to 0. This is the hydro system. Now is there any way
that new hydro could be used to balance out wind energy if the
pool level cannot be modified?
Mr. Chu. Actually, I think that the--especially in Oregon
and with Bonneville Power Administration, this is something I
heartily not only support but am encouraging them to look at
pump storage as a method of storing wind energy.
Mr. Walden. Right. And I don't have any problem with that.
I think it is great but you are going to store that behind some
dam, right?
Mr. Chu. That is correct.
Mr. Walden. You are going to affect the level somewhere,
aren't you, if you have hydro, if you had a hydro facility?
Could we meet this definition that says at no time and in no
location behind a facility that the water level could change
because you added hydro? How would you read that?
Mr. Chu. Well, I must confess I am not familiar with this
particular part of the----
Mr. Walden. Page 11. And with all due respect, I am going
to move on because I only have 40 seconds. Back to Ms. Jackson.
In your EPA evaluation of the cost of this legislation, you
only included, if I heard you correctly, the cap and trade
provisions, correct, in your analysis?
Ms. Jackson. Correct. EPA was asked to model the impact of
the cap and trade.
Mr. Walden. OK. So in your model since I have not had a
chance to read through it, what percentage do you allocate to
auction, what percent were allocated credits, and what cost per
ton of carbon did you factor in your model?
Ms. Jackson. The allowance price that came out of EPA's
analysis in 2012 is $12 to $15 a ton, $17 to $22 a ton in 2020.
And I forgot the other part of your question.
Mr. Walden. Percent of auction and percent of allocation.
Ms. Jackson. The model did not, I believe, I can double
check this for you, but I don't believe that question needed to
be answered in order for the modeling to occur. I will double
check.
Mr. Walden. Because that hasn't been answered in the draft
text either.
Mr. Waxman. The gentleman's time has expired.
Mr. Walden. Thank you, Mr. Chairman. I thank the witnesses.
Mr. Waxman. Ms. Capps.
Ms. Capps. Thank you, Mr. Chairman. I want to just take a
second to continue for my friend, Mr. Walden, from Oregon. I
grew up in the shadows of Grand Coulee Dam and we do have a lot
of hydro energy in this country, and I know this discussion is
what we should be doing this as a draft bill. My thought would
be that if we counted everything we already have it would less
incentivize us to go forward, and this legislation, I would
hope, from my reading of it is something that we want to push
us forward, and then at some point we will have a debate about
what counts from what we already have just for starters.
As the 39th Earth Day was celebrated on Sunday in my
district, there was a lot of enthusiasm and anticipation that
this year could mark a big turning point, that we are finally
addressing in a very significant way some longstanding energy
issues and the challenge now of global warming. A question
quickly for each of the 3 of you. Secretary Chu, one of the
important features of the discussion draft is that it is a very
comprehensive approach to our energy problems and one title
devoted to clean energy, deployment which will help us win the
race against China and other countries to establish leadership
in clean energy technology. Title 2 on energy efficiency, a
huge title also, and Title 3 that sets up a system to reduce
global warming pollution and hold energy companies accountable.
And, finally, a title seeking to protect consumers as well as
our industries as we transition to this new energy policy huge
shift in the 21st century.
A lot of people have been arguing that this is taking on so
very much, that this comprehensive approach is way too much,
that we should parse these out. Can you give us a brief but
compelling reason why it is important to address these in a
comprehensive way?
Mr. Chu. I think it is because again going back to what the
President has said. We have been doing this piecemeal for
decades, and, quite frankly, because there are going to be
trade offs here, there, and everywhere, so I commend this
committee and the chairman on actually moving forward with a
comprehensive bill. This is what the country needs.
Ms. Capps. Thank you very much. Administrator Jackson, the
recent endangerment finding is showing that greenhouse gases
indeed do threaten the public's health and welfare. And, you
know, despite our very best efforts in this bill and other
legislation as well, the climate is changing, has caused
effects and will despite these efforts continue to do so, and
that is why--I am a public health nurse by background, and I am
committed along with you and others to ensuring that this
legislation helps the American public and also helps developing
countries adapt to the public health impact of climate change.
I actually have some legislation to introduce separately on
this topic. What are some significant and targeted investments
such as monitoring, planning, education, and so forth that
would ensure that we promote and protect public health in a
changing climate?
Ms. Jackson. Well, one of the easiest investments that can
be made is communities or governments investing in heating
centers or places that protect people from extremes of climate.
If we are looking at warming in areas, we have seen the impact,
literally deaths, that happen in heat waves, and one of the
ways that can easily be addressed is by making climate centers
or comfort centers. You see that especially in urban areas. And
on top of that, I think you mentioned education. First, public
health professionals are on the front line of this so I thank
you for your work, and educating people about how to deal with
changes in the climate and how to, if they have health effects
that are going to be exacerbated by that how to be aware and
alert, not unlike we do with ozone alert days making them
understand what is coming so that they take care of themselves
is probably one of the first ways to keep you from having to
take care of them first.
Ms. Capps. Thank you. Thank you so much, and there is more
to come, I know. But, finally, Secretary LaHood, our former
colleague, the average person in the United States now spends
about 20 percent of their income per month on transportation
largely on maintaining and driving personal vehicles. What are
some specific ways this legislation will help invest in
people's ability to take more affordable low carbon and
transportation opportunities?
Mr. LaHood. We think that there are opportunities to
develop a concept called livable communities where you provide
opportunities for people to get out of their automobiles, they
want to walk to work, ride their bike to work, take a light
rail to work, take a bus to work, and the model for this really
is Portland, Oregon. They have done a marvelous job in really
creating an opportunity for people to get out of their car and
have opportunities. And we are working with the Secretary of
HUD in developing a program that I hope can be included in the
authorization bill of transportation and also a program under
HUD to really move forward with livable communities and create
some models around the country and some pilots around the
country to form different alternatives to people just using
their automobiles.
Obviously, the announcement the President made on high
speed rail, the work we are doing with transit districts under
the Economic Stimulus Bill for more buses, cleaner buses, and
the opportunities for light rail, we think this is our
opportunity in transportation and HUD to work with this
committee to create opportunities for people to use
alternatives other than automobiles.
Ms. Capps. Thank you very much.
Mr. Waxman. Thank you, Ms. Capps. Your time has expired.
Mr. Terry.
Mr. Terry. Thank you, Mr. Chairman. Mr. LaHood, my first
question is for you, and this is a parochial question more than
anything that has to do with cap and trade. But in the stimulus
bill to our metropolitan area transit company buses, all we get
is buses. We don't get rail in our area. We are only a
metropolitan area of 700,000 so we don't qualify. Our bus
company is trading out their older diesel for just a newer
brand diesel, not a cleaner energy, not natural gas. Is that
the intention of the stimulus dollars is just to let them trade
out different one piece of diesel equipment for another piece
of diesel bus?
Mr. LaHood. The transit portion of the Economic Recovery
Plan is our ability to work with transit districts around the
country that want to buy new vehicles, build facilities whether
they be bus facilities or bus shelters or facilities where----
Mr. Terry. So the energy efficiency aspect isn't a
criteria?
Mr. LaHood. I visited a bus company in St. Cloud,
Minnesota, and the orders for these buses are way, way up. If
they are building----
Mr. Terry. But I just want to know if energy efficiency or
clean energy is part of the criteria. I thought this was a
softball question. I didn't know it was difficult.
Mr. LaHood. Our people in the Federal Transit
Administration are encouraging transit districts to buy fuel
efficient buses for their transit districts.
Mr. Terry. OK. I appreciate that. Dr. Chu, real quick, this
isn't even a question, just my rhetoric, but you said in your
opening statement that you know coal is going to continue to be
an energy source but we hear statements about cap and trade
being used as a tool to force out coal as a fuel and even
President Obama said when he was campaigning that under my plan
of cap and trade system the electricity rates would necessarily
skyrocket so if somebody wants to build a coal plant they can.
It is just that it will bankrupt them because they are going to
be charged a huge sum for all of the greenhouse gas that is
being emitted. So you can see when the President makes
statements like that that there is some cynicism when we hear
about, well, coal is still going to be a fuel.
Now, Administrator Jackson, does setting the rate at $11 or
$12 per ton of CO2 meet the Administration's goal of
bankrupting coal fired plants? Does that meet their goal?
Ms. Jackson. The Administration has no goal that is
nefarious for coal. The President is on TV in ads. I see him
talking about clean coal and how clean coal is crucial not only
for the environment but to create jobs and make coal which is
right now 50 percent----
Mr. Terry. I am going to interrupt because I only have a
minute, 45. Methane is a greenhouse gas that is in here, and it
is reported that methane is going to be calculated at a time of
25 times the potency of CO2. Can you point me to a
scientific study that says methane is 25 times more potent than
CO2 as a greenhouse gas?
Ms. Jackson. I would be happy to give you scientific backup
for that statement.
Mr. Terry. I would appreciate that. Last, in regard to
methane, what industry do we have in the United States that has
to worry about methane emissions?
Ms. Jackson. Well, methane is natural gas, CH4, so the
natural gas industry obviously if any leaks in many states
addressing leakage from natural gas pipelines is one vey quick
and important way. The other are landfills, landfills gases in
our country. As food waste decays, as organic waste decays it
makes methane. And previously that has been vented----
Mr. Terry. What is the largest emitter of methane gas in
the United States?
Ms. Jackson. It may well be livestock.
Mr. Terry. Welcome to Nebraska, the cattle state. OK. Is it
then the EPA's plan to start regulating the methane from cattle
emissions?
Ms. Jackson. EPA has no plans to regulate cattle emissions.
Mr. Terry. But there is nothing in this bill that exempts
cattle?
Ms. Jackson. This bill takes regulation of greenhouse gases
for sources into this bill away from the Clean Air Act, and it
is the Clean Air Act threat where people have spun these
ridiculous notions of EPA taxing cows or regulating----
Mr. Terry. Well, that has been stated by publicly elected
officials from Congress so it is not spun stories. But the
point is about if nothing is in this bill that exempts the
cattle industry, won't cattle have to be regulated?
Ms. Jackson. I do believe there is an exemption but I will
check on that. Obviously, this discussion draft it meant to
make sure those interests are protected.
Mr. Waxman. Just on that point for the gentleman's
information only very large sources are covered by this and
there is a specific exemption for what would be considered
cattle. We now go to Ms. Harman.
Ms. Harman. Thank you, Mr. Chairman. I recall in the last
century when Ray LaHood and I had offices next to each other in
the back of the back of the Cannon Office Building. Mine at
least was contiguous space. His was divided by some kind of a
construction barrier. My guess is that his digs have improved.
I would like to welcome this panel and say how impressed I am
by your credentials and experience on this issue. You can play
a big role in guiding us, helping us, and helping the
Administration to fashion the right legislation, the right
comprehensive legislation on climate change. I want to hold up
my regular prop which is the U.S. CAP blue print for
legislative action. U.S. CAP is testifying in the next panel,
but I want to say how impressed I am that a diverse group of
industry and environmental representatives has developed a
consensus on basic principles, and then how impressed I am that
this committee has used this as the basis for the bill.
I just want to ask you briefly to comment on whether you
agree that U.S. CAP has played an important role here and
whether you agree that these consensus principles which are not
partisan are a very useful starting point. Let us start with
Ray LaHood.
Mr. LaHood. I am going to defer to these other two folks
but I know from discussing this with staff that they have
played a very valuable role.
Ms. Harman. Thank you. Dr. Chu.
Mr. Chu. My understanding is that document says--I haven't
read it in detail, but my understanding is that document says
that 14 to 20 percent reduction in carbon emission by 2020 is
economically possible to the United States, so that statement
alone coming from industry is a very powerful statement.
Ms. Harman. Secretary Jackson.
Ms. Jackson. I certainly agree with my colleagues.
Ms. Harman. Thank you. Now, Dr. Chu, welcome to a fellow
Californian. Your experience in California is very valuable to
those of us from California, but I think also to this effort
since California, as everyone here knows, has been the leading
state in terms of strict environmental regulation. There was a
New Yorker article in December entitled Note to Detroit,
Consider the Refrigerator. And this is a story by you, little
profile, little picture of you here, and the experience of
California which set out to regulate the efficiency of
refrigerators. Of course, the industry objected but then, guess
what, engineers rather than lobbyists figured out whether
compliance was possible and now lo and behold the size of the
average American refrigerator has increased by more than 10
percent while the price in inflation adjusted dollars has been
cut in half.
Meanwhile, energy use has dropped by two-thirds. I tell
this story, Dr. Chu, because you had a role in this. You talked
about it. In this bill in the efficiency sections we have some
new bipartisan standards on regulating the efficiency of
outdoor lighting, and we also have a cash for clunkers
provision which would encourage folks to trade in old clunker
refrigerators and appliances, trade them in, get ride of them,
not plug them in in the basement, in exchange for efficient
appliances. And I just welcome your thoughts and thoughts by
anyone else on the panel about these provisions and the
experience that California has had regulating the efficiency of
appliances.
Mr. Chu. Well, the refrigerator story is one of several
stories but in fact the efficiency has gone up so that the
present day refrigerators are using one-quarter of the energy
they used in 1975. In fact, it was the anticipation of
regulations, the regulations didn't start for several years,
but as soon as the manufacturers realized that they couldn't go
to either party that both parties in California strongly
supported these regulations the efficiency immediately started
improving. The reason the price went down inflation adjusted by
a factor of 2 was because the better insulation and the smaller
compressor of the refrigerator led to a reduction in the price.
Now I cannot emphasize how important this was. If you look
at the energy saved today, we have roughly 150 million
refrigerators, the energy we are saving today relative to the
1974 standards are actually more energy saved than all of the
wind and solar energy we are now producing in the United
States, just refrigerators alone. And so we can do similar
dramatic improvements in building efficiencies, transportation.
Building efficiencies can be even a bigger success story than
refrigerators.
Ms. Harman. Any other comments?
Mr. Chu. Well, I can go on and on.
Ms. Harman. No. I was asking the others, Secretary Jackson.
Ms. Jackson. Well, he is certainly the expert, but I think
that story is repeated over and over again that often times the
movement toward regulation and the call for national standards
unlocks innovation. I am an engineer, you know unlocks
engineers to move to where the market is going to be and
unlocks the private sector investment to do it. We have seen it
with cars. We have seen it with the phase out of gases that
affect the ozone layer. Every time we have a challenge once we
make up our mind we are going to do it innovation kicks in and
makes it a lot cheaper and quicker.
Ms. Harman. Thank you so much. My time has expired. I just
add that we are now seeing it with indoor lighting which this
committee regulated a couple years ago and California is moving
on to clunker television sets. Thank you, Mr. Chairman.
Mr. Waxman. Thank you, Ms. Harman. Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman. You know, one of the
things Ms. Harman and I are working together on an incentive
program to get us there, and when you look at the places where
we provided incentives the market kicks in faster, cheaper,
better. And I get a little worried that this is a huge
government mandated program that is very complicated. Who is
involved in the trading? Who actually determines at the end of
the day what the value of CO2 or methane is? How do
you quantify it? So a lot of the jobs we are talking about are
going to be folks who aren't really producing anything but they
are going to be living on the backs of those who are producing
something because the government mandated a system that really
hasn't been flushed out all that well.
And I would hope that we would stop and pause for a minute
and try to find ways to incentivize people. I had a bill in
2006, an energy star system for servers, computer servers,
because the largest growing energy use in the United States at
that time were server parts. And lo and behold built on an
incentive system, it has radically changed the way--now they
advertise on those servers which are the most efficient
servers, and it changed the way. If you talk to the people in
the industry, they say it absolutely changed the way we buy,
produce, sell servers. Fantastic. We didn't mandate anything.
And it concerns me for a couple of reasons.
And I wanted to talk to the Secretary for a minute. I come
from Michigan. Nobody is hurt more in this economy than we are,
and to say that this Administration has done more for the car
companies than anyone else is a bit shocking to us who live
there. And I will give a couple examples. They went in and the
guy who cut the work force from General Motors in half got
concessions from the union, produced the Car of the Year last
year, the CTS Cadillac, oh, by the way, produced the Car of the
Year, the Malibu, both of which are built in my district, by
the way, this year. The government came in and said you got to
go, you are fired, oh, and take the board with you and you have
30 days for a viability plan. That is pretty hard to recover
from when you are going through all of those tough times.
And, oh, by the way, they have more cars that get over 30
miles to the gallon than any other car company period in the
world. The government didn't do that. They did that. The Chevy
Volt, which Mr. Dingell so aptly talked about will
revolutionize the way we think about commuting and how we power
our cars. It is the first time it is an electric driven engine
that is charged by gasoline versus the other way around, which
really radically departs even from hybrid technology, very
exciting. Billions and billions of dollars of research,
decades, they were ahead of the curve. And what do we do? We
come to this committee and kick them around. They finally the
attention of the American people. Really?
In 2007 they mandated $80 billion in cost on these car
companies. Gasoline went to $4.50 and they are struggling to
make it and we are losing jobs as fast as we can count them. So
be careful when you tell us that. The proposal for cap and tax
will raise the energy rates for producing everything in the
United States of America. Secretary Chu, you mentioned that,
gee, if we raise the rates of gasoline it is going to hurt
average Americans. Absolutely right. If we dramatically raise
the rates of electricity, we will not be competitive when it
comes to building anything in the United States. It is an
attack on the middle class.
It is an absolute slap in the face to everybody that got up
and built good cars or they built houses or they got in their
car and drove somewhere to build something of use in the United
States. And guess what India said this week? They are not going
to play along. Go ahead, United States, make yourself
uncompetitive because we have got lots of mouths to feed and we
would love to be the new center of the middle class in the next
several hundred years. I am just shocked that you would say
that about a company who has done so much to survive and will
lead the way in 2011 when that Chevy Volt rolls off the line.
Also, in the new proposal there is an inventory tax increase.
And if you produce anything in a just in time manufacturing
system, you are going to be hurt by this inventory tax increase
so manufacturers are going to take it on both ends of this.
That is very frustrating to those of us who represent lots
of people who believe that the middle class is important. I had
questions but the fact that you stand before us and tell us
that you have done more for the automobile companies than any
other administration, as you can tell put a burr under my
saddle. We certainly don't think so, and we would hope that you
would look at every job lost. You talk about green jobs
created. You forgot to tell us how many manufacturing jobs go
overseas, and we know there is a bunch of them. So, Mr.
Chairman, I would argue we better go slow and we better worry
about the middle class in this country that is quickly
evaporating because of all of the weight and burden we are
putting on their ability to produce anything in the United
States.
Mr. Markey [presiding]. The gentleman's time has expired
but, Secretary LaHood, if you would like to make a comment, we
would allow you to do so. Thank you. The chair recognizes the
gentleman from Washington State, Mr. Inslee.
Mr. Inslee. Thank you. I am from Washington. I just want to
tell you I got some constituents who are so happy you 3 are
here today. They have been waiting for you to get to
Washington, D.C. The obvious one is Dennis Hayes, one of the
two co-founders of Earth Day, but the non-obvious ones are the
people at the Sapphire Energy Company, which are developing
algae based biofuels which have 0 net CO2 emissions,
the people at Infinia in Washington that have developed a
sterling engine based solar power system, the people at
AltaRock in North Seattle which are developing one of the
world's leading engineer geothermal systems, the people at
McKinstry that is the world leading energy efficiency
contractor really probably in the world, the Better Place
people that are developing an electrical infrastructure for
electric cars, the Ramgen company in Bellevue Washington, which
has developed a way to sequester CO2 so we maybe can
use coal cleanly and create hundreds of jobs in this country.
These people are thrilled that you are here to promote these
job creation exercises.
Now we have heard on many occasions people have said that
President Obama said that this was going to be bad for the
economy some time. I have heard him say repeatedly that in fact
this bill is going to grow jobs and ultimately be good for the
economy. I think this bill has been quite well balanced because
it speaks to multiple technologies and multiple ways to create
jobs. It hasn't just picked favorites. Is that a fair
assessment of this? I will just ask Dr. Chu that.
Mr. Chu. Yes, it is a fair assessment. I would also want to
emphasize that it is looking towards the future. To use a
sports analogy, when Wayne Gretzky was asked how come he was
such a mortal hockey player he said because I skated to where
the puck will be, and I think this bill actually brings that--
it positions America to go to the future and for the jobs of
the future.
Mr. Inslee. I want to ask you about the low carbon fuel
standard. I think an important portion of this bill that will
promote the development of low carbon emitting fuels. We have
tried to address this so that it is consistent with the other
parts of the bill or other regulatory systems. For instance, it
does not kick in effectively until the renewable fuel standard
essentially expires so we have tried to tailor it in a careful
fashion. It also really drives on the European experience that
a cap and trade bill while very important is not the only game
in town, and I think their experience is you have to take
multiple approaches to this big challenge, not just a cap and
trade system. I just wonder if you have any comments, either
Dr. Chu or Secretary Jackson, in that regard.
Ms. Jackson. I absolutely agree that the design of the
discussion draft is such that it phases the low carbon fuel
standard in after the renewable fuel standards that are
authorized also by a law of Congress are done. And I could not
agree more that experience has shown that a cap and trade
program while an extremely powerful tool to harness the kind of
private capital that you just referenced in your opening
remarks and certainly that is the key. The key is to make those
who are investing in green energy future able to do it in a way
that they know with certainty that this country is turning its
gaze towards that. It makes the private sector full partners in
the game, and I think it is part of why U.S. CAP--it is not
just the big companies of U.S. CAP who have done extraordinary
thinking on this in partnership with NGOs, but also the smaller
folks.
Mr. Inslee. Thank you. I will take that as an answer. I do
want to ask one more question. The longer I look at this, it
becomes apparent that our ability to really maximize these
clean resources of solar and wind and hydrokinetic and the like
depends on the development of a grid system fit for this
century which we do not have today. I think one of the great
quotes I have heard is that the bad news is that Thomas Edison
would recognize our grid system. This is not really a salutary
remark. One of the things I hope we can work on in the
development of this bill is a way to increase the ability to
cite increased transmission systems so that we can access the
solar in the southwest and the wind in the Midwest and the off
shore wind and the hydrokinetic to move it where we need it,
but we have some proposals to try to have back stop authority
for the federal government to assist the siting of transmission
in the event that we can't do it through sort of the typical
channels. Would you encourage us in that regard? Any comments
you have, I would appreciate it. Dr. Chu, perhaps you want to--
--
Mr. Chu. I would encourage you to try to develop this. I
think you are quite right. As we go forward and develop
renewable energy that we have to concurrently develop a new
transmission system that can handle that. The fact that wind
and solar are variable means that you have to have a much more
robust system that is able to port energy very rapidly from
different parts of the country, so increased siting authority
is one element. It can't be the only element because after all
just with increased siting authority alone, I think there has
to be other elements that would help encourage the states and
local areas to allow that, but is a very important part of our
way into the future.
Mr. Inslee. We hope you will continue to encourage us all.
Thanks very much.
Mr. Waxman. Thank you, Mr. Inslee. Ms. Blackburn.
Ms. Blackburn. Thank you, Mr. Chairman. Thank you all for
your patience this morning. Ms. Jackson, I wanted to talk with
you a little bit about your pronouncement of regulating
CO2 under the Clean Air Act and that you could do
that or the agency could do that with or without Congress and
our consent, and I would like to know what your time table is.
How do you see the agency moving forward on that regulation?
Ms. Jackson. I would certainly like to just clarify that.
It is not with or without Congress' consent. It is actually the
Clean Air Act, the law passed by Congress and signed by the
President, that compels us to and the Supreme Court's
interpretation of the Clean Air Act that compelled EPA to make
a finding, and it is a proposed finding. As far as time table,
that time table starts with the proposal and a 60-day public
comment. If it is finalized, and presuming it is finalized
regulatory action would proceed after that. The history of the
Clean Air Act, which is a good guide, is that proposed
regulations under that Act take months to propose and, you
know, after that the process----
Ms. Blackburn. OK. Let me ask you this then. With whatever
emission standard that you use in that as you go through that
period, will sectors of the economy such as Mr. Terry was
talking about farming, and we all have great concerns about
farming. Right now, building construction, we have tremendous
concerns about that. Are they going to be forced to meet that
standard? What do you see coming out at us through that?
Ms. Jackson. If there is regulation under the Clean Air Act
in the future, if that happens, EPA would move as it does on
other regulations to look at the largest sources first, and in
our economy the largest sources of greenhouse gases are mobile
sources, automobiles, and trucks, and then the large stationary
sources, especially the power generation sector, so I think we
could expect that if there were regulations that would be where
EPA's first regulatory actions would be. And, again, I don't
believe we would ever get to the small sources. I think those
discussions are really being made to scare people with a very
unlikely future instead of focusing on the big issue which is
cars and power generation.
Ms. Blackburn. So you see it affecting cars. Would you
apply that also to this bill in addition to your actions under
the Clean Air or your proposed actions under the Clean Air Act,
would you look at the bill and say the same thing that you
would focus more on the large items such as transportation
rather than farming and home construction?
Ms. Jackson. As the drafter pointed out, as the Chairman
pointed out, actually the bill says that regulations would be
for those large sources over----
Ms. Blackburn. OK. Let me come to Mr. LaHood then. And, Mr.
Secretary, I would just like to ask you when you look at the
low carbon fuel standard in the bill. What do you see that
doing to prices at the pump if the focus is going to be on the
large sectors like transportation fuels? What do you see that
doing to the price at the pump?
Mr. LaHood. Well, I wouldn't have any idea. I don't know if
Dr. Chu would or not. I simply don't know the answer to that.
Ms. Blackburn. OK. Dr. Chu, any comment?
Mr. Chu. It will increase the price at the pump but the
other issue is that also in this bill what we are focusing on
is trying to hold transportation costs the same and so this is
also we are encouraging higher mileage vehicles, things of that
nature. And depending on how this committee working with the
Administration works the allocations the impact on the American
people for the total cost of living we hope to be as moderate
as possible.
Ms. Blackburn. So, in other words, you all see this as
increasing the cost to the American consumer, the price at the
pump and the price of electric power generation?
Mr. Chu. We see this as shifting costs so that what happens
as we return the allocations back to the American public and to
the energy sectors that would be most adversely affected that
the overall cost of living, if you will, which is the essential
thing, plus the fact that we are aggressively moving towards
higher efficiency, higher efficiency cars, higher efficiency
homes that those costs actually could be held constant.
Ms. Blackburn. OK. Mr. Chu, let me ask you this about the
renewable energy, the 20,000 megawatts of renewable energy that
would need to come on line every year in order to meet the 2025
deadline at the 25 percent renewable energy standard. Do you
think that that is a realistic goal?
Mr. Chu. Yes, it is.
Ms. Blackburn. And then how did you come to that
conclusion?
Mr. Chu. Well, actually in the following way. I actually
asked the EIA for an analysis several weeks ago, and that we
did is we took a base line of where we saw the base line going.
Then we added to it the stimulus, the Economic Recover Act,
which actually accelerates the deployment of renewable energy.
Also, in the provision of the bill there are small power
producers, for example, a university that has a cogent plant in
a small town, you take those off. You don't want this
university to have a renewable portfolio. You take that off the
mix from the 25 percent. It decreases the target by about 3
percent. Depending on whether efficiency is going to be worked
into this bill to take another 5 percent off, you are now
talking about a difference of doing nothing and the 25 percent
target as something on the scale of 5 or 6 percent additional
beyond what the country--what the EIA projects the country is
doing, so it is actually quite a reasonable bill in my opinion.
Mr. Waxman. The gentlelady's time has expired. Mr.
Matheson.
Mr. Matheson. Thank you, Mr. Chairman. I welcome the panel
here. And, Secretary Chu, maybe following up on the discussion
with Mr. Inslee, I know when I had a chance to see you a few
weeks ago, we had a brief discussion about the electric
transmission issue about the need for finding ways to encourage
greater investment and greater beefing up of that
infrastructure. You had mentioned you had been having
discussions, I think, with EIA and others about this. This
draft probably needs to be beefed up on its transmission
section. Do you have thoughts about how we should be looking at
that issue and things we should incorporate in this draft bill
in terms of encouraging investment in our transmission grid?
Mr. Chu. Well, I am looking forward to actually working
with the committee on this. Let me also say that not only the
Department of Energy but Department of Interior, Agriculture,
CEQ, have been meeting regularly. We have now regularly
scheduled meetings in trying to formulate what we should be
doing in terms of transmission and distribution. And so it is
very much on our mind because as I said before this is a very
necessary part of moving the country forward. We have somewhat
old-fashioned energy and distribution system. It is divided
into vertically organized utility companies, RTOs, ISOs, and in
the past what happened is that these various sectors look out
and they try to make the best judgments they can within their
realm of responsibility.
And what that has led to is we don't have something that
serves the nation in the best possible way, that we have
incredible renewable energy resources, but they are distributed
geographically across the country so I think anything that can
help the siting, anything that can help get the states and the
local communities to say, yes, this is a necessary part of the
development of the United States would be very appreciative.
Mr. Matheson. I think there is broad consensus that we need
to look at transmission policy in this Congress, and I am
pleased to hear you are meeting with these other agencies. I
think any input that you could offer us for legislative action
to help move that forward, I think would be appreciate by all
of us. The next question I want to ask you, Secretary Chu, if I
could, one of the struggles, I think, that I am having right
now with putting this whole bill together is that we have had
hearings on specific issues for 2\1/2\ years, and now we are
trying to look how it all looks as one package. And the concept
of cap and trade is that there is going to be a market base set
of incentives to meet the cap, and that is the driver to let
the market place figure out the most efficient ways to go about
doing this.
And yet there are a number of other sections of the bill
where Congress goes in and specifically says, OK, on this
technology we want to encourage it in this way and for that
technology, that issue, we want to encourage it that way. And
it is hard to find the right mix for how much Congress should
get into those individuals or not. For example, carbon capture
and sequestration, I think it is appropriate that we got to
encourage that with the carbon capture sequestration of this
bill. Have you thought about the context of this bill where we
have a renewable portfolio standard, we have the energy
efficiency standard, we have a lot of different components of
the bill that are trying to achieve lower carbon emissions, but
it is under this broad category of cap and trade.
And should we--do you have concern about is Congress overly
prescribing what we should do as opposed to the cap and trade
mechanism that allows the market place to make those decisions?
Mr. Chu. I think I will agree with you. Overall the cap and
trade allows--it actually incentivizes the United States
industry to look for lower carbon solutions. However, it is not
going to start until 2012. It is going to have to ramp up. We
need to give industry and consumers time to adjust. And so I
view, for example, the renewable electricity standard as a
different tool that is also necessary because a renewable
electricity standard then creates a market place, a guaranteed
market place, for things like wind, solar, new geothermal, the
river hydro, things of that nature. And that guarantees the
market place so if I were an investor and said do I want to
invest tens to hundreds of millions of dollars, will I have a
market for that?
Mr. Matheson. Do you think no carbon emission coal
production should be included in that mix then in terms of
encouraging investors?
Mr. Chu. I think the overall goal should be to encourage
all forms of no or very low carbon emissions, but I would be
glad to be working with the committee on these issues. But just
say that the renewable electricity standard is a different
mechanism that is somewhat orthogonal to cap and trade. It is
to create a market, to create a draw that will guarantee the
investors that they can actually have a customer.
Mr. Matheson. Thank you, Mr. Chairman.
Mr. Waxman. What was that word, octagonal?
Mr. Chu. Pardon?
Mr. Waxman. You said a word that I didn't understand.
Mr. Chu. Oh, orthogonal. That means--sorry. It means the
carbon cap and trade is a way of overall globally putting the
real cost of energy into the market place and letting the
market then seek solutions. It is overall what we need but in
addition to that it is something that more quickly stimulates
investment in new technologies I think is also needed so in
that case it is not exactly the same thing in a different way.
It satisfies a different need.
Mr. Waxman. Thank you. Mr. Scalise.
Mr. Scalise. Thank you, Mr. Chairman. Administrator
Jackson, in your opening statement you talked about the jobs
that would be created, green jobs that would be created, under
a cap and trade bill. Can you quantify how many jobs you
estimate would be created under this legislation?
Ms. Jackson. I believe what I said, sir, is that this is a
jobs bill and that the discussion jobs bill in its entirety is
aimed to jump start our moving to the green economy.
Mr. Scalise. And I think you quoted President Obama saying
that it was his opinion that this bill would create millions of
jobs. I think you used the term millions. Is there anything
that you can base your determination on how many jobs would be
created?
Ms. Jackson. EPA has not done a model or any kind of
modeling on jobs creation numbers.
Mr. Scalise. Because you did do the analysis, and there are
definitely a number of questions I have with the assumptions
that are made in your analysis. I wasn't sure since you used
the term a jobs bill in your opening statement, I just wanted
to know if you had anything to quantify or back that up.
Ms. Jackson. Well, I back it up on somewhat common sense
which is that if we are trying to move to a clean energy
economy, and we heard Secretary Chu talk about the fact that
the innovations that we come up with in this country are being
used by other countries and manufacturing is moving there. The
rhetorical question is what is the plan to keep them here and
how do we convince the private sector that we mean it, that we
are going to be using the technologies.
Mr. Scalise. And this isn't something that you said, some
people in the Administration have claimed that there is no
alternative plan. That is not an accurate statement because
clearly there is an alternative plan that was presented last
year on comprehensive energy. There is one that is being worked
on this year on an alternative plan to cap and trade that would
create jobs, pursue alternative sources of energy, but also
make sure we don't lose the jobs we have. And I think that has
been a big concern raised by many groups predicting the number
of jobs and with the term millions thrown around many industry
groups have used the term that millions of jobs would be lost,
exported out of the U.S. economy into countries like India and
China. Do you have any estimates on how many jobs will be lost
by cap and trade?
Ms. Jackson. All I know--I am not a jobs expert. All I know
is that jobs have been lost and our economy is hurting, and
this is a plan to address that by moving a manufacturing sector
here that the world will need and that our country will need.
Mr. Scalise. While you might not be a jobs expert, you
obviously are talking about and touting this bill as a jobs
bill. If you would claim that it would create jobs, are you
making an assumption that it won't lose any jobs, that no jobs
will be lost or if you don't make that claim, how many jobs
would you expect to be lost? Groups have made very large
claims. I mean the National Association of Manufacturers claims
our country would lose 3 to 4 million jobs as a result of a cap
and trade energy tax, so I just wanted to know if you or any
other members of the panel want to answer that question.
Ms. Jackson. I will go first and then I will turn it over
to the other panelists, but I know that lobbyists claim large
doomsday scenarios, quiet deaths for businesses across the
country. That is what lobbyists said about the Clean Air Act in
1990, and it didn't happen. In fact, the U.S. economy grew 64
percent while this country cut acid rain by more than----
Mr. Scalise. So you don't think that there will be job
losses. You are saying those doomsday scenarios by those
groups----
Ms. Jackson. I believe one of the tasks in moving forward
as this committee discusses is to figure out the cap and trade
process and the other aspects of the bill can be used to jump
start and move us forward----
Mr. Scalise. A lot of those details that aren't in the
language and that has been one of the expressions that has been
by many members of this committee is that a lot of those
details still are not written in this bill, the allowances. A
big portion of the bill how this trading program would even
work isn't in the bill. Since it is silent on allowances, does
the Administration have a position on allowances and how many
allowances should be given for free to industry groups, to
consumers? Do you all have a position on how allowances should
be given away because that is an unanswered question in this
bill? Do you have a position? Does your department have a
position?
Ms. Jackson. The President has said that he believes that
there should be a 100 percent auction of allowances.
Mr. Scalise. Should that be rebated to consumers because
one of the concerns is how much and many predictions are out
there backed up by a lot of evidence on how much money
taxpayers, American families would pay. Peter Orszag, the
President's own budget director, last year gave testimony that
a 15 percent reduction in carbon emissions would lead to a
$1,300 a year increase in utility bills for every American
family on top of the fact that they would be paying higher for
gas prices, which many of you have already acknowledged, as
well as other energy-related items, so some members of the
Administration have actually put some quantified numbers there.
So on the rebate side, would you be willing to rebate any
amount that a consumer would have to pay in higher utility
rates back to them based on the allowances?
Ms. Jackson. The President has also called for allowance
value to be returned to those----
Mr. Scalise. And I am running out of time so just yes or
no.
Mr. Waxman. The gentleman's time has expired so we will
give the witness a chance to answer the question.
Ms. Jackson. Thank you. The Administration looks forward to
working on those questions, and the President, though he has
called for 100 percent auction, is interested in working with
this committee on ways to mitigate impacts on the economy, and
believes that the bones of that are in this discussion draft.
And there is flesh to be put on those bones but that challenge
could be addressed.
Mr. Waxman. Thank you, Mr. Scalise. Ms. Christensen.
Ms. Christensen. Thank you, Mr. Chairman. Three questions,
I think. Administrator Jackson, I even asked several times
about the recently proposed finding that greenhouse gases
endanger public health which list in particular 6 gases. As you
know, the Congressional Black Caucus and the Health Brain
Trust, which I chair, also have as priorities the same
population groups that you identify as being most vulnerable.
And I realize you are still in the comment period and you have
been asked a couple questions about this, but are you satisfied
that this bill could do what is necessary to address this
finding, and, if not, is there anything that could or would be
added to this comprehensive bill which among other things
reduces harmful emissions to address this?
For example, I think we list 5 greenhouse gases. We don't
list the floral carbons, and I am a little rusty on my organic
chemistry, but should we add that to the list?
Ms. Jackson. I do believe we need to address floral carbons
and I do believe that there are easy ways to do that. I know
that one of the things being considered is a Montreal protocol
like address. To answer your larger question, yes, I believe
this bill does a much better job than what EPA could do now
under the authorities it has. This is a better solution. There
are other solutions. The Clean Air Act offers some direction
but it is incomplete at best, and so I believe this bill is a
much better way of addressing the endangerment finding, the
proposal that we released last week.
Ms. Christensen. Thank you. Secretary LaHood, your
department lists in your testimony several very active programs
that reduce greenhouse gases and advocate cleaner energy in
many areas, and I particularly appreciate the livable
communities effort because as we try to address health, we look
at the larger picture and the social determinants, and I think
that this gets to that. And don't forget, we talked about
adding the Secretary of Health and Human Services with HUD, the
HUD secretary in this effort. But do any of the projects that
you have referenced specifically reach out to blighted,
distressed communities, poor communities, minority communities
that need this help the most?
Mr. LaHood. Absolutely, and that is the reason that we are
working with the HUD secretary. And I might mention that I am
working with my two colleagues that are here with me today on
the whole livable-communities issues. But Secretary and Dunham
and I have had numerous discussions about this, how we can
really share the resources from both departments in looking at
communities, not only in terms of housing and different types
of housing, but the transportation needs that need to be met so
people can go to work and go to their doctors appointments. And
we are going to include rural areas in this, too, because the
rural areas have as great a need as any part of our country,
and there will be a real collaboration within the
administration to make the whole livable community include
housing, not only in the urban area, but in the rural areas,
and incorporate some of the activities that are going on in
these departments, too.
Ms. Christensen. Dr. Chu, it seems as though the nuclear-
energy questions have kind of let up for a while, but just so I
am clear, and it follows up on Congressman's Rush's question,
where the bill refers to low-carbon energy producers, doesn't
that automatically include nuclear-energy producers.
Mr. LaHood. I would agree with you that nuclear energy is a
low-end, near-zero-carbon energy source.
Ms. Christensen. So when we talk about supporting and
promoting low-energy carbon producers, we are, in essence,
including nuclear energy.
Mr. LaHood. Yes, I mean, as I have pointed out before,
there are other bills; whether it is incorporated in this bill
is something that the administration will be working with this
committee on. But certainly the restarting nuclear energy has
been supported, has been included in other bills, including the
Economic Recovery Act.
Ms. Christensen. Right, and I think you have been very
clear about the administration's position. Thank you.
Thank you, Mr. Chairman.
Mr. Waxman. Thank you very much. The chair now recognizes
the gentleman from Illinois, Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. I do appreciate the
panel here. It is good to see my friend Ray LaHood, who was a
mentor and a friend, and I am really excited about your
position. Dr. Chu, I look forward to meeting with you
personally and having another chance in this committee to talk
about the numerous things that are going on with the Department
of Energy. I know your background. I have been following your
experience, and I really do look forward to spending some time
with you, and I hope we can get that arranged. Let me start
out, those who have been following this debate for many, many
years, there is no hiding where I am at. This is the largest
assault on democracy and freedom in this country that I have
ever experienced. I have lived through some tough times in
Congress, impeachment, two wars, terrorist attacks. I fear this
more than all of the above activities that have happened, and I
will tell you why as I go through, but I have some questions.
Secretary LaHood, has China agreed to a low-carbon fuel
standard? Yes or no?
Mr. LaHood. I don't know.
Mr. Shimkus. I think it is no. How about India? Have they
agreed to some type of low-carbon fuel standard?
Mr. LaHood. I don't know.
Mr. Shimkus. I would think that would be important to this
debate if we are going to be world competitive.
Dr. Chu, has China agreed to an international regime to cap
carbon dioxide?
Mr. Chu. Not yet.
Mr. Shimkus. Not yet. How about India? Has India agreed to
an international regime to cap carbon dioxide or other
greenhouse gasses?
Mr. Chu. No, they have not.
Mr. Shimkus. Administrator Jackson, what is the largest
emitter of methane gas?
Ms. Jackson. I believe we determined earlier, sir, that it
is probably livestock.
Mr. Shimkus. And I don't think that is correct. I think
that the largest emitter of methane gas is wetlands. So if
wetlands is the largest emitter of methane gas, you are not
proposing that we drain wetlands, are you?
Ms. Jackson. Sir, we are talking about anthropogenic causes
of global warming. Wetlands are a natural feature. We are not
going to regulate wetlands.
Mr. Shimkus. So the answer is, no, you are not proposing
draining wetlands.
Ms. Jackson. No, we are not proposing draining wetlands.
Mr. Shimkus. Thank you. Let me follow up on Congressman
Green's line of questioning. The problem that we have on the
analysis of what Administrator Jack Newjew proposed to us is
not your fault. It is the fault of this draft which has a big
gaping hole, and that is what are the costs of the credits?
What are the allocations? And my fear or my belief is that this
is an intentional move to deceive us so that we are not allowed
to do the cost-benefit analysis. Now, we know the cost-benefit
analysis of the Lieberman-Warner Bill because the allegations
were addressed, and those numbers have that the cost of energy
cost of natural gas is an increase from 26 to 36 percent by
2020, and 108 to 146 by 2030. Now, this is a bill that is less
stringent than this proposal. The electricity cost in 2020
under the Lieberman-Warner Bill was 28 to 33 percent increase,
and in 2030, 101 percent to 129 percent. Do you dispute that
analysis of the Lieberman-Warner Bill, anyone?
Ms. Jackson. I believe that analysis was done between EPA
and DOE, and that is part of the analysis. The analysis of this
discussion draft does not show skyrocketing.
Mr. Shimkus. Because we don't have all of the data. We
don't have all of the credits. It is the height of hypocrisy
for this administration and this leadership to bring a bill to
a hearing when we don't have the data to ask the great
questions about the cost. And here is why: we talk about the
Clean Air Act Amendments and No Job Lost, but I will tell you,
my committee, these folks, have seen these. This is Kincaid-
Peabody Number 10, Kincaid, Illinois. The Clean Air Act of
1990, do you know how many miners lost their jobs? And I have
the ONIDIR stats; 1,200 mine workers lost their jobs. In the
State of Ohio, we have got colleagues in this committee. Do you
know how many jobs were lost in Ohio under the Clean Air Act
Amendments? Let me ask this to Administrator Jackson. Do you
know how many coal-miner jobs were lost in Ohio because of the
Clean Air Act Amendments which you were addressing earlier?
Ms. Jackson. No, sir.
Mr. Shimkus. Thirty-five thousand, so those of us who want
jobs are going to try to defeat this bill, and we are going to
hold our colleagues on the other side accountable, especially
if they are from areas that depend on the fossil-fuel economy.
And I yield.
Mr. Waxman. The gentleman's time has expired. We will now
hear from Ms. Castor.
Ms. Castor. Thank you, Mr. Chairman, and thank you to our
panel for your leadership and your testimony today. The
American people are hungry for a new direction and a modern
energy policy. I think the American people are so far beyond a
lot of the partisan discussions in Washington. This really
isn't a partisan debate. That's not what I hear back home.
First of all, I want to thank you for your efforts on the
recovery plan, because it shouldn't be lost on us, for a
historic foundation for a new direction for energy policy has
already been laid under the recovery plan, and it is marrying
job creation with our new energy future. The weatherization
programs to save people money on their electric bill, greater
energy efficiency, the transmission grid, these are vital
investments for the future of this country. But we have got a
whole lot more to do, and this discussion draft is a good
starting point, but as you can tell, it is not going to be
easy.
Dr. Chu, a couple of months ago, the State of Florida
received a final report on Florida's renewable energy potential
assessment, received by the Florida Governor's Office. The
Lawrence Berkley National Lab was involved as well. It states
that solar technology has the largest renewable energy
potential in the State of Florida. I guess this is not any
surprise for the Sunshine State, but right now, we produce
maybe two percent of our energy in Florida from renewable, and
the leading producer isn't even solar energy. It is biomass.
It has been interesting, because even just with the
discussions at the federal level and the state level, our
electric utilities have started to invest in solar technology.
The FPL is making a significant investment in South Florida in
solar technologies, so I think this lends credence to your
marketplace ideas and how important it is going to be.
Will you go into greater detail on what we can do to make
solar technologies more affordable? And is it going to be on
the large scale? Are we doing enough in the discussion draft?
Could you highlight certain concepts in the discussion draft?
And what role do homeowners have to play, because there is a
hunger out there to install solar panels if they were
affordable and it made sense.
Mr. Chu. Well, I think the first thing is the wonderful
thing about solar energy, and I would agree with you in that
report, is it has an enormous potential in the long run, if you
consider how much sunlight energy is hitting the earth. I did a
quick calculation a couple of years ago which suggested that a
few percent, less than five percent of the world's deserts, if
you can harness solar energy, 20 percent of the energy hitting
that, and distribute it and store it, that would satisfy the
world's current electricity needs, just five percent of the
world's deserts.
So the first thing I think one can do is there are lots of
programs statewide, and also the federal government encouraging
solar, but one of the things is that solar energy is generated
at a time when you need the most amount of energy, during hot
summer days, when the air conditioning is taxing the ability to
generate electricity. So I would advocate to encourage all
states to evolve into what we call real-time pricing. If you
ask, on those hot summer days where people are running their
air conditioning, what is the real cost of energy, well, it is
quite high because the utility companies have to have installed
backup generation systems for those one or two percent of the
days, where in order to avoid a brownout, you have to have them
running. But a lot of the time, most of the time, they are
sitting idle, so that is invested capital sitting idle. So if
you do real-time pricing so that on those hot summer days the
real price of electricity for the electricity company, for the
generators, is quite high. But alternatively, at nighttime, it
is quite low. So that will encourage both businesses and
homeowners to start to, if they can put off the use of energy
at night, and use it during the day, that means we have to
build less new power plants. The return on a particular
investment will be much higher, which will drive the energy
costs down for the businesses and for consumers. Real-time
pricing will allow solar energy to give a big boost, because it
is producing that energy when it is the most expensive.
So that is one thing. The other thing is, quite frankly, we
should be taking a leadership in inventing new solar
technologies. Our first loan the Department of Energy approved
was to a company that is going to next-generation thin-film
solar technology. The company estimates that thousands of new
jobs will be created. The jobs are incredibly important, and we
are also trying to develop the technologies so the United
States resumes its leadership position in new solar
technologies that can drive the cost down considerably. And
that is the other important part of this.
Mr. Waxman. Thank you, Ms. Castor.
Now, the chair recognizes Mr. Radanovich.
Mr. Radanovich. Thank you, Mr. Chairman. I want to welcome
the secretaries and administrator to the committee. Mr. LaHood,
it is great to see you back in the Congress.
I represent the San Joaquin Valley in California. A lot of
farming happens there, and there is a lot more my constituents
are worrying about than global warming right now. We have got
an imposition from the Endangered Species Act that has shut
down the pumps in the delta, and a lot of my farmers are
getting a zero allocation this year. It is costing 40,000 to
60,000 jobs, and it is going to result in about a $9 billion in
the state's industry. And I honestly think that my state is
suffering more from environmental alarmism than it is global
warming, and added to that, this concept of cap and trade to me
just seems to make the problem worse.
Secretary Chu, welcome. I noticed that you paid a visit to
California recently. I think you were quoted in the LA Times
saying that because of global warming, agriculture in
California was going to be gone in about 30 years. And one
other quote, and I just want to have a dialog on this, was a
quote that somehow we have to figure out how to boost the price
of gasoline to levels in Europe, which at the time was $8 a
gallon. My concern for my constituents is that if you adopt
something like a cap and trade system, the math doesn't work.
You add a price of gas onto the fact that we have a manmade
drought in California, taking the water away. If you increase
the price of a gallon of gas or diesel from $5 back up to $6 a
gallon, the way it was last year, you are going to see the
state's largest industry, $90 billion, the main supplier of
fruits and vegetables to the nation, farm out. And if you don't
like the fact that 70 percent of your energy comes from foreign
countries, how would you like to have 70 percent of your food
supply leave the country, because that is what happening in my
neck of the woods?
I, for the life of me, can't figure out how you think that
you can do something like this without dramatically increasing
the national debt and deficit by subsidizing a false economy
and by raising the price to consumers on energy. I think when
the public finds out the true cost of this thing, you are going
to see a smack down that the World Wrestling Federation would
be proud to see by the public towards this plan, which is
unreasonable. I think research, developing efficiencies in
energy, and smoothing this transition to another source of
fuel, I think, is a great idea. But this cap and trade notion,
once the public finds out what their price is in the home at
the fuel pump, they are not going to buy this. This will stop.
This will not go anywhere when you see the true cost of this
thing come down.
In the energy portfolio of the United States, 70 percent of
it consists of fossil fuels, 20 percent is nuclear, 10 percent
is renewable, and of that renewable portion, 10 percent of it
is hydroelectricity. That is about three percent. So you are
proposing to take seven percent of our energy portfolio and
make it how much, how long? And I guess my question to anybody
who is going to answer this is what do you think is going to be
the cost to the household, because I see numbers of $3,000 or
over $3,000 of the cost of this plan to the household. And
then, we have talked about the high price of gas, Secretary
Chu, $8 or whatever. I mean it is an increase on the energy
supply of the United States. How on earth do you think you can
pull this off without breaking the back of the government and
of the consumer?
Ms. Jackson. I will go first, and then, I will turn it over
to the secretary.
EPA's modeling shows not at all those cost ranges, sir. It
shows $98 to $140 for the average household per year, not
$3,000. That is a misstatement of an MIT study that actually
shows something close to----
Mr. Radanovich. In your opinion.
Ms. Jackson. Well, certainly it is my opinion.
Mr. Radanovich. I mean I am not sure I trust you for the
facts as much as I would trust that study. How can I know? I
mean how do I know your modeling is correct, and what are your
assumptions? You mentioned 40 percent of the cap and trade
revenues goes back to the household. How does that work? How
does that happen?
Ms. Jackson. The history of EPA's modeling shows that we
are usually conservative, that we usually overestimate the
cost, not underestimate.
Mr. Radanovich. How does that 40 percent get back to the
consumer?
Mr. Waxman. The gentleman's time has expired. The witness
will have a chance to answer briefly.
Mr. Radanovich. If you could answer, how does that 40
percent get back?
Ms. Jackson. The 40 percent was modeled as a rebate back to
American consumers, to American households.
Mr. Radanovich. A check in the mail?
Ms. Jackson. It gets back to them. I don't know the model.
Mr. Radanovich. Could you let me know how that gets back to
the consumer, please?
Ms. Jackson. Well, sir, it is not my decision to make.
Mr. Radanovich. Well, then, maybe you better remodel so you
can explain to people how that is going to get back in their
pockets. Thank you, Mr. Chairman.
Mr. Waxman. Will the gentleman yield to----
Mr. Radanovich. Well, I don't have any time left, but I----
Mr. Waxman. The statement about California agriculture
being gone, that wasn't because of the bill. That was because
of global warming. Is that correct?
Mr. Radanovich. An interpretation of the results of global
warming 40 years from now.
Mr. Chu. Actually, if that was the quote, it was
inaccurate, because I know about this. I was citing some
studies, two studies, in fact, of predictions of what will
happen if we continue on a business-as-usual model, and they
took two scenarios. An optimist scenario, you keep carbon below
500 parts per million, a target that we are all trying to work
towards, and in that study, in the first part of the century,
by 2050, the snowpack in California will be reduced, and the
optimistic scenario, by 26 percent. We will have 74 percent of
the snowpack that we have today. And in the more pessimistic
scenario, business-as-usual scenario, it would be down to 60
percent. By the end of this century, the 21st Century, it is
considerably less, as much as 93-percent decrease in the
snowpack in California if we continue as business as usual. And
so it was that concern for the agriculture of California that I
was speaking of.
Mr. Radanovich. And I respect that. If I could respond, Mr.
Chairman? Environmental alarmism in the form of the Endangered
Species Act that is a runaway locomotive, and the cost of this
cap and trade system will kill agriculture long before global
warming does. Thank you, Mr. Chairman.
Mr. LaHood. Mr. Chairman, I have a letter here from John M.
Riley, correcting the statement that they made, and it is a
leader to the Republican leader, which has a much lower cost
per family, and if it is possible to have this put in the
record, if not, I will distribute it to the committee, but it
is a corrective letter, which states, correctly, the right
information.
Mr. Waxman. Without objection----
Mr. Shimkus. I would object, Mr. Chairman.
Mr. Waxman. The gentleman would object.
Mr. Shimkus. Just so if my former colleague can do that, I
would like the article from the Weekly Standard that debunks
those numbers also included into the record.
Mr. Waxman. Without objection, we will take both documents
and put them in the record.
[The information was unavailable at the time of printing.]
Mr. Waxman. Ms. Sutton?
Ms. Sutton. Thank you, Mr. Chairman. And thank you for your
testimony. It has been very, very insightful.
I think that at the beginning you all laid out the
challenge that we face. We talked about the potential for jobs
under this bill and your desire to jumpstart us towards that
new green economy. And Secretary Chu, you also agreed that
there is great potential, but you really put your finger on the
point when you said that the question is how do we transition
from here to there? And that is extraordinarily important to
the people that I represent to the people in Ohio, and I think
it is extraordinarily important to people far beyond Ohio. This
is something that is going to require all of us to be a part of
and all of us to benefit from, so not just in the long term,
but in the near term. And so I think it is that near-term
challenge that is the one that is so difficult for us to get
past.
Now, some comments were made by one of my colleagues a
little while ago, and I think that the statement was those of
us who want jobs are going to try to defeat this bill. I am not
somebody who is going to try to defeat this bill. I certainly
want jobs. I want them in the future, and I want them now for
my folks. They need them both now and then. I do want to find
ways--and I believe it can be done-to collaborate, to get to
those jobs of the future, without sacrificing the livelihood of
the people in the process, because that gap in the middle is
where we can lose so much. So that is where I come from with
respect to these complicated issues and challenges we face, but
it has to be done. We have to go where we know we need to go
and we all agree we should go, but we can't lose people in the
process.
So the first question I have, Secretary Chu, is regarding
coal. Of course, about 86 percent of electricity consumed in
Ohio, and more than half of the country's electricity is
produced by coal-fired power plants. Even with aggressive gross
scenarios, and your testimony reflects this, the renewable
energy, combined with energy efficiency measures, coal will
still me a major U.S. energy source, at least in the near term,
and probably well into our future.
Clean coal technology is critical to address climate change
here and abroad, yet there are no commercial scale carbon
capture and storage projects worldwide. Secretary Chu, you have
stated that we must develop an inexpensive way to capture and
store carbon emissions from coal-fired plants, and that the
U.S. has to take a lead. The Recovery Act, obviously, provided
significant funding for CCS demonstration projects, but how
does the administration plan to accelerate the development of
these technologies, including those that offer very high levels
of CO2 capture?
Mr. Chu. Well, what we are doing is the following: we have
had a certain amount of Economic Recovery Act money, $3.4
billion, in total, devoted towards trying to accelerate the
progress on capture and sequestration of carbon from coal. We
are moving forward as fast as we can. We have decided to fund a
number of projects. We are looking forward to exploring all of
the avenues we think have a reasonably good change of leading
to the beginning of deployment in the next eight year, or
optimistically, even less. So right now, what technology we
should use is not there. Gasification is a promising
technology. We would like, very much, to bring that to a
commercial demonstration scale to see if it is economically
viable. But there are other things. We also have to capture
carbon at the stack. There are existing coal plants that have
just been put up. A modern coal plant is a couple of billion
dollars, and you are not going to turn this investment off, and
as I said before, China is rapidly expanding their coal
facilities, so we have to develop technologies that can capture
the carbon at the stack, so we are looking a myriad of ways. I
should also say that there are very active discussions. There
are roughly ten projects being considered in Europe and several
in Asia to really collaborate so that our dollars go as much as
possible. So this is something very important to the United
States. We have the largest coal reserves in the world.
Mr. Waxman. Thank you, Ms. Sutton.
Ms. Sutton. Thank you.
Mr. Waxman. Mr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman.
Like representative Bono, I have one of the most beautiful
districts, at least in North Texas. We have solar. We have
research and development at Entech. We have got academic
research at the University of Texas at Arlington that is on my
Fort Worth campus. Wind energy, we manufacture the big windmill
blades at what was formerly an oil-field-services warehouse up
in Gainesville, Texas. We don't have geothermal. We have got a
lot of landfill and landfill methane, but when you think of the
State of Texas, we have and have had a fairly robust renewable
portfolio standard. We are the leader in wind energy. This is,
of course, the result of the current governor and the previous
governor, Rick Perry and George W. Bush, who made a commitment
to wind energy, but Texas produces a lot of energy. So in order
to meet a percentage in the renewable portfolio standard by
2020, even though we are the nation's leader, by far, in the
production of wind energy, if we are not able to count the
energy that we produce with landfill methane, if we are not
able to count, pound for pound, the amount of carbon dioxide
that we save with energy efficiency, then we will have a very,
very difficult time meeting energy-efficiency standards. Can
you address that? Are there ways that we may write the
regulations such that we could get credit for what we are doing
with energy efficiency?
Administrator Jackson, you said it was up to 40 percent of
the energy that we consume now could be saved, but we are going
to be restricted on how much of that we can count towards our
renewable portfolio standard. Is that correct?
Mr. Chu. Well, I will speak first. I am not sure about the
details of the bill. I mean this is a good point of discussion,
whether you can consider if you begin to capture the methane
from landfills and sewage treatment plants, this is methane,
otherwise, that would have escaped in the atmosphere.
Mr. Burgess. Let me interrupt you because I only have a
limited amount of time, and we have made the point for the
chairman, and I think he heard you.
Dr. Chu, you said in response to a question, United States
is losing jobs, losing being the leader in technology
development. Administrator Jackson, you said in your testimony
that we are going to be producing clean-energy jobs, jobs that
cannot be shipped overseas. Yet Dr. Chu is concerned because
many of the photovoltaics, many of the wind turbines are
manufactured overseas, and if we make an enormous investment in
photovoltaic and wind turbines, are those jobs not already
shipped overseas?
Mr. Chu. Actually, no, there are agreements----
Mr. Burgess. But Secretary, with all due respect, you
answered a question saying we have lost the leadership position
in this country because that manufacturing has gone overseas,
so we are no longer the leader.
Mr. Chu. Well, I said that the technology leadership has
gone overseas. The wind turbines were developed overseas, the
modern wind turbines. But right now, today, the president is in
Iowa.
Mr. Burgess. The second wind-producing state.
Mr. Chu. Yes.
Mr. Burgess. Well under Texas, for the record.
Mr. Chu. But my point is that it is an old Maytag plant
where jobs were lost, but it is now manufacturing the towers
for wind turbines.
Mr. Burgess. But still the point is that those jobs can go
overseas. There is nothing in the legislation that I have seen
before us that would prevent those jobs. When we make a
statement was made in the testimony submitted to us, ``jobs
that cannot be shipped overseas,'' how are you going to ensure
that those jobs are not going to be shipped overseas? Are we
going to have trade barriers or tariffs? What are going to be
the mechanisms that we will use?
Ms. Jackson. Sir, most people refer to energy-efficiency
jobs. Those cannot be shipped overseas because energy-
efficiency work must be done at home.
Mr. Burgess. Photovoltaics and wind turbines?
Ms. Jackson. Now, renewable sources can certainly go
overseas and some have gone. We are in a race to get them back
and to keep them here.
Mr. Burgess. Let me interrupt because I am going to run out
of time, but Dr. Chu, this last question will be for you. We
heard Dr. Radanovich talk about the major economic convulsion
that perhaps could result from the legislation that we are
considering before this committee. We heard Ranking Member
Barton talk about how did the oil get so far up north where it
is so cold to begin with. Mr. Dingell is gone. Mr. Rogers is
gone, but the great Michigan glacier from 15,000, 20,000 years
ago actually melted because of global warming. I will stipulate
that warming is happening. But we have not heard from anyone
who has come and testified in this committee as to the smoking
gun, if you will, that demonstrates that mankind is responsible
for the global warming that is occurring as an aberration
outside of naturally occurring solar cycles. So major economic
convulsion, yet we lack the fundamental piece of evidence that
would tell us that this is what we must do because we are,
after all, causing the problem to occur.
You are a scientist, Dr. Chu. Can you, perhaps, give some
comfort to Mr. Radanovich's constituents and my constituents
that we indeed have that missing link that mankind is
responsible for what is occurring. Perhaps the carbon dioxide
is going up because the solar cycles have changed and the
planet is warming. There is another plausible explanation.
Mr. Waxman. Mr. Burgess, your time has expired.
Mr. Burgess. So I will yield to Dr. Chu for an answer.
Mr. Waxman. Dr. Chu, you can give an answer, and then, we
have to move on.
Mr. Chu. In brief, I think there is very strong, compelling
evidence that the lion's share of what we are seeing, the
warming that we are seeing, is due to human activity. I would
be glad to meet with you and to go over the details of what
that----
Mr. Burgess. I wish you would. Your NOAA scientists could
not provide us that information, so I would very much like to
hear it from an expert such as yourself.
Mr. Waxman. Mr. Gonzalez. Let me announce as I recognize
Mr. Gonzalez, Administrator Jackson and others on the panel
were promised they would be able to leave at 1:00, and I regret
that all of the members won't have a chance to ask questions.
He will be the last one to ask questions, and then, we will
proceed with the next panel, for those who did not get a chance
to ask questions of this panel ask the first questions for the
second panel. Mr. Gonzalez.
Mr. Gonzalez. Thank you very much, Mr. Chairman. My
question will be directed to Secretary LaHood. It is great to
see you, and we do miss you.
First of all, the general observation is that we all
believe that as a result of this piece of legislation that the
cost of energy will increase, and the consumption behavior is
going to be modified, and that is a good thing, actually, and
as I have said before, these are not insurmountable obstacles
in passing a piece of legislation that is reality based. My
concern is going to be more on fossil fuels and the need and
the use of them during this transition or conversion period as
we adopt new technologies, as more efficient vehicles are made
available, alternative-fuel vehicles, battery operated, and
such, because I think that is going to take time.
Taking into consideration some of the following: we assume
that we have a fixed number of vehicles now on the road, and we
have to figure out how many of those are going to be retired,
where are going with sales of vehicles and so on. Historically,
15 to 16 million vehicles were sold in the United States. For
2008, that was reduced to about 12 or 13 million. In 2009, it
is projected it will be 8 or 9 million. Historically, I guess I
will call it the shelf-life of the vehicle, before you turn
that over, is about 11 years. And I don't know when you put all
of these figures together where we are going to end up. I am
trying to get an idea from Secretary LaHood of how long he
thinks this transitional period will occur as we gain greater
efficiencies and such.
We also know that out of all of the millions of cars in the
United States, which I have been told 200 million, and I will
need to check that, there may be only 116,000 that are powered
by natural gas, and that the market share of hybrids comprises
no more than 2.2 percent of our entire vehicle population in
the United States. Taking into account how long it will take
the technology, how long it will take the manufacturers to make
the vehicles available and such, can we determine the need for
the traditional fossil fuels, what I call the transitional or
conversion fuels, as we leave one stage where we presently find
ourselves to that which we are trying to attain when it comes
to greenhouse gas emissions. Secretary LaHood.
Mr. LaHood. Well, we complied with the president's
executive order to have a rule that will require the car
manufacturers to have a much higher CAFE standard by 2011. And
now that that work is done, we are working with EPA and others
to try and figure out the path forward beyond 2011 to develop
with car manufacturers and other the idea that we can get o a
higher gasoline standard. So the direct answer to your question
on fuel efficiency, the car manufacturers have to meet a much
higher standard on CAFE standard by 2011 on the cars they
manufacture. On the battery powered, they are way ahead of the
curve on this. GM is going to be rolling out an automobile that
is run on batteries. The hybrid vehicles are taking off. The
flex-fuel vehicles are taking off. But we know that within the
next couple of years, the American automobile manufacturers
will have automobiles that will be powered by batteries, and we
know that the fuel efficiency standards will be set much higher
by 2011, and then, even higher than that beyond that. So those
are sort of the benchmarks that we are working with, with the
American and other automobile industries.
Mr. Gonzalez. And it does trouble me, because I want to
support this final piece of legislation, that we are not
dealing with realistic expectation of what the manufacturers
will be able to provide out there for a willing and able buyer.
We are not factoring in the economic hard times for the next
few years, because I think they are going to be there, and
people retaining their cars for longer periods of time.
Manufacturers not being able to even meet the needs of vehicles
that are totally more efficiently, but if they are, they are
probably going to be hybrid, meaning that they still have an
internal combustion engine that is going to be run with
traditional fossil fuels. That doesn't mean we are throwing in
the towel and giving up on this endeavor. All I am saying is
let us be realistic about the need for a domestic production
and refining capacity in the United States.
Mr. Secretary, in looking at energy independence when it
comes to fuels, do we need to increase or decrease domestic
production and refining capacity of fossil fuels in the United
States in the foreseeable future?
Mr. LaHood. Well, I can't be specific in answering that
question, but it is something that everyone is investigating,
looking into, debating. But I don't have a specific answer for
that at this point.
Mr. Gonzalez. Thank you very much. I yield back, Mr.
Chairman. Thank you.
Mr. Waxman. Thank you very much, Mr. Gonzalez.
I want to thank our three witnesses. You have been very,
very helpful to us and patient in answering the questions, and
we thank you so much for you input, and we will look forward to
working with you on this legislation. Thank you.
[Recess.]
Mr. Markey [presiding]. The hearing will reconvene. We
thank all of you for your patience, and we would ask our next
group of witnesses to please come up and to take their seats in
front of their names on the witness table.
Thank you all very much for being here. Our next witness is
Mr. Chad Holliday. Mr. Holliday was the CEO of DuPont until his
retirement on January 1 of this year, and now serves as the
chairman of its board. He is also the past chairman of the
Business Roundtables Task Force on Environment Technology and
Economy for the World Business Counsel for Sustainable
Development. He coauthored the book Walking the Talk, the
Business Case for Sustainable Development. Mr. Holliday, we
welcome you. Please begin when you feel comfortable.
STATEMENTS OF CHARLES HOLLIDAY, JR., CHAIRMAN, DUPONT; RED
CAVANEY, SENIOR VICE PRESIDENT FOR GOVERNMENT AND PUBLIC
AFFAIRS, CONOCOPHILLIPS; JIM ROGERS, CHAIRMAN, PRESIDENT AND
CEO, DUKE ENERGY CORP.; FRANCES BEINECKE, PRESIDENT, NATURAL
RESOURCES DEFENSE COUNCIL; MEG MCDONALD, DIRECTOR, GLOBAL
ISSUES, ALCOA INC.; AND DAVID CRANE, PRESIDENT AND CEO, NRG
ENERGY, INC.
STATEMENT OF CHARLES HOLLIDAY, JR.
Mr. Holliday. Thank you very much. It is an honor to be
here today. We appreciate you taking time for our presentation.
I do come here in two roles. I come as the chairman of DuPont
and also a member of the U.S. Climate Action Partnership, a
group of companies and NGOs who have come together to forge a
consensus view regarding the U.S. action on climate-change
issues.
Mr. Markey. Mr. Holliday, could you move the microphone in
just a little bit closer.
Mr. Holliday. We have put together this blueprint, which I
think you are familiar with, which was the result of two years
of work of discussing, greatly, the different options, and I
believe that has been useful, and we are very glad to see that
you have taken this into account in the bill that is before us
today. We look forward to working with you and your colleagues
to further improve the bill as you advance through this
legislative process.
DuPont's approach to greenhouse gas production is for and
by our experience the chlorofluorocarbons, or CFCs in the
1980s, when atmospheric research on the role of CFCs became
actively involved in what is called the Montreal Protocol. This
international agreement allowed us to phase out the use of
ozone-depleting substances, while providing adequate time and
market signals to develop affective alternatives. These
reductions also had great greenhouse gas benefits.
The reduction for the Montreal Protocol were six times
greater than the full reductions from the Kyoto Protocol, if it
was fully enacted. So what we have seen from this experience is
great benefits can come from this kind of activity. I am very
proud of my company's work in that, and I am also very proud of
our country's work in making that a success.
As DuPont has become more aware of the potential business
and environmental implications of climate change, we have
looked for ways to contribute solutions. Since 1990 to 2004, we
have reduced our own greenhouse gas emissions by 72 percent,
while every project returned a positive return to our
shareholders. We did it by using what we call an internal cap
and trade mechanism that mirrored what a cap and trade would do
in the external environment, inside, allowing the recourses to
flow to the very best project. We think that is critical as we
do something across the entire economy.
Yet I want to be clear: voluntary efforts are not enough by
themselves. We need a program that will focus the work and
resources on the best opportunities while we drive the lowest
cost, and that will take legislation across our entire economy.
I firmly believe this is an opportunity for American
industry to reinvent itself. There has never been a bigger
opportunity that is more perfectly sized to what American
company and American universities can come together to make
happen. So we are fundamentally behind this approach, and we
believe it will have a very positive long-term impact to our
overall economy.
U.S. CAP is this diverse coalition I have described
earlier, and we have worked very hard to resolve very difficult
issues with our different perspectives from NGOs and companies
from different industries, and we think it has been very
helpful. We have made substantial progress, but we would be the
first to say we have not answered all of the questions, and we
are very glad to see that you have included much of this in the
work that you have before us today.
We are pleased to see this taking great forward steps, and
we look forward to working with you as we go forward to
hopefully come out with something that has the same power as
the Montreal Protocol did once before. Creating an effective
climate-change program will not be easy, but it is necessary,
and the discussion is moving in the right direction. We
appreciate all of the steps that you are doing to make this a
success, and we believe these steps must be very aggressive and
must recognize and encourage early actions for it to be very
successful. Many companies have taken early actions, and
undoubtedly, there will be a start date to whatever legislation
you end up with. The last thing we want is all action to stop
until that start happens, so including early action is very
critical. We must also encourage innovation, research
development, demonstration and deployment programs throughout
the entire spectrum of our economy to make it a success. We
believe that will be the best way to ensure that consumers are
no unduly burdened by this bill. And we must use policy tools
and offsets to keep the costs of the program manageable while
achieving our long-term goals.
In closing, I will refer to an old saying I think you must
know very well. We must lead, follow, or get out of the way.
Gentlemen, this is a time our country should lead. Thank you
very much.
[The prepared statement of Mr. Holliday follows:]
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Mr. Markey. Thank you, Mr. Holliday, very much. Our next
witness is Mr. Red Cavaney, a senior vice president for
government and public affairs for ConocoPhillips. Mr. Cavaney
is the former president and chief executive officer of the
American Petroleum Institute and American Plastics Council. He
has served on the Senior White House Staffs of Presidents
Ronald Reagan, Gerald Ford, and Richard Nixon.
Welcome, Mr. Cavaney. Whenever you are ready, please begin.
STATEMENT OF RED CAVANEY
Mr. Cavaney. Thank you, Chairman Markey, Chairman Waxman,
and Ranking Member Barton, and members of the committee. On
behalf of ConocoPhillips and our chairman and CEO, Jim Mulva, I
am pleased to participate in this important hearing.
ConocoPhillips supports the development of a comprehensive
national climate protection program that addresses greenhouse
gas emissions, while at the same time, ensuring the supply of
secure and affordable energy that is necessary for our nation's
continued economic recovery and future growth.
We believe the integrated set of policy regulations
contained in the U.S. CAP blueprint for legislative action
represents a viable path forward to this end. I have been asked
to offer U.S. CAP's insights on options to reduce the impact of
climate-change technology on transportation-fuel consumers. In
addition, I will touch on some policy areas that are of
particular interest to ConocoPhillips and our industry.
Our company recognizes that public policy to address
climate change will come at a cost to U.S. consumers and
businesses, but we believe, in the long run, the benefits to
the overall American economy will outweigh these costs;
however, in these challenging economic times, individuals and
companies may not take much comfort in the promise of future
benefits as they struggle to make a mortgage payment or to make
payroll. This is why U.S. CAP believes it is critically
important that any climate-change policy includes provisions
aimed at dampening the impact of policy on both consumers and
businesses.
As a major provider of transportation fuels to the U.S.
consumer, ConocoPhillips is keenly aware of how sensitive most
consumers are to increases in the price of gasoline at the
pump. To address the impact of climate policy on
transportation-fuel consumers, U.S. CAP recommends the
judicious use of allowance value to ensure the consumers
transportation-fuel impacts from allowance prices are generally
proportionate to their electricity and natural gas impacts.
Allowance value for transportation consumers could be applied
over a range of options that reduce transportation-fuel
consumption.
The impact of climate policy on companies that produce and
deliver transportation fuels will also have implications for
the consumer. Under the provisions of the discussion draft, the
U.S. refining sector would face a multibillion-dollar annual
compliance obligation while serving an accounting function for
the government as the point of regulation for the end-users
transportation-fuel emissions. This would be in addition to our
compliance obligations associated with our own greenhouse gas
emissions, with the current renewable fuel standard, and with
any low-carbon fuel standard in the future.
Based on the scale of our potential compliance burden, we
are deeply concerned about our ability to fully pass on these
costs, given the potential implications that even a small
percentage of unrecoverable costs could have on this
historically low-margin business. The consequences of not
getting the policy right could be premature reduction in U.S.
refining capacity, additional increases in gasoline prices,
rising transportation, fuel imports, and further loss of
American jobs.
We stand ready to offer constructive suggestions for fair
and equitable allowances for improving the low-carbon fuel
standard included in the discussion draft, and in a variety of
areas, from containment to market oversight to incentives for
carbon capture and store. Based on the recent and ongoing work
of the committee, we are encouraged by the potential of a path
forward that could gain broad support, both within the halls of
Congress and within homes across the land. We commend the
comprehensiveness with which Chairman Waxman and Chairman
Markey are approaching this legislation and their careful
consideration of U.S. CAP's blueprint for legislative action.
In closing, Mr. Chairman, and on behalf of ConocoPhillips,
I thank you for your leadership and for the opportunity to
participate in today's hearing. We look forward to continued
work with your committee on this very important matter.
[The prepared statement of Mr. Cavaney follows:]
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Mr. Markey. Thank you, Mr. Cavaney, very much.
Our next witness is Mr. Jim Rogers. He is the CEO of Duke
Energy Group. Mr. Rogers has more than 20 years' experience as
a chief executive officer in the electricity-utility industry.
In addition to his position with Duke Energy, he is the
chairman of the Edison Foundation and co-chair of the Alliance
to Save Energy.
We welcome you back, Mr. Rogers. Whenever you are ready,
please, begin.
STATEMENT OF JIM ROGERS
Mr. Rogers. Good afternoon. Thank you very much, Chairman
Waxman, Chairman Markey, Ranking Members Barton and Upton, and
members of the committee. I am Jim Rogers, CEO of Duke. I am
delighted to be here today and delighted to have an opportunity
to support and discuss the discussion draft before us.
More than 30 years ago, I started my career as a consumer
advocate, fighting rate increase at utility companies. I sit
here today as a consumer advocate on behalf of the 11 million
customers that we provide electric service to in five states,
also as a consumer advocate for those consumers in the 25
states where more than 50 percent of the electricity comes from
coal.
To supply our customers, we are the third largest generator
of electricity in this country, third largest coal, third
largest nuclear. We have a very diverse mix of coal, nuclear,
natural gas, hydropower, and we reflect much of the mix of
generation in this country. We also have invested in renewable
such as wind. We have 500 megawatts under operation and 5,000
megawatts under development in the Western United States. We
are also investing in biomass, where our goal is to build 10 to
12 50-megawatt bio power plants throughout the U.S. over the
next five years.
I have been an early, long-time advocate for climate-change
legislation. I was a founding member of U.S. CAP. In our
business, we plan for 40 to 50 years, and one of the reasons
that I have been such a supporter of clear legislation on
carbon is so that I will have the certainty that it will allow
me to plan. I would have the certainty with respect to the
roadmap forward. And most importantly, because we are the third
largest emitter of CO2 in the country, I recognize
that I am part of the problem and that we need to be part of
the solution. And as I look out over the next period of time,
between now and 2050, we recognize that every plant that we own
and operate today will be retired and replaced. So if the
mission is to provide low-carbon generation in the future, but
we need to get started now with a clear path forward, and so I
appreciate the work that you all have done in bringing this
discussion draft forward at this time.
But while I support climate-change legislation, I also
recognize the importance of getting the carbon legislation, so
it works not only for the environment but also for our
customers. I know how difficult it is to achieve the right
balance. U.S. CAP's blueprint was developed after years of
difficult discussion and seemingly endless negotiations. We are
pleased the discussion draft includes many of our key
recommendations from the blueprint, including a market-wide cap
and trade program, a cap trajectory that falls within the
blueprints recommendations, although I would note the early
caps are on the aggressive end of the range, where someone has
said they have to hit the goalpost. It provides for cost-
containment mechanisms, such as offsets, banking and borrowing,
and multiyear compliance. It also provides provisions for
research and deployment of carbon capture and storage to ensure
that coal remains a choice.
The environment is indifferent as to how the allowances are
distributed. Consumers and businesses are not. Timetables and
targets, in my judgment, assure the environment integrity of
the bill. The key is in the transition. Of course, the elephant
in the room is the mission section on how allowances will be
allocated, a critical issue for many of us at the table, and
most importantly for our customers. And I know that you all
plan to work on this because there is much work that needs to
get done to make this a reality.
The other thing I would point out is that it is critical to
get this transition right, and we at U.S. CAP spent a lot of
time focusing on that, and within the blueprint are specific
provisions that really address how we make the transition and
why getting the transition right is so critical.
In closing, I would briefly mention nuclear power. Earlier
today, Secretary Chu mentioned it and his support for it. Any
serious long-term carbon-reduction plan is an empty plate
unless we, as a nation, commit to building zero-emission
nuclear power plants. Other countries meeting carbon-reduction
commitments will be relying on nuclear, and we shouldn't count
it out.
In concluding, we believe it won't be cheap; it won't be
easy; it won't be quick. But I must be fair, and legislation
must be now. Thank you very much.
[The prepared statement of Mr. Rogers follows:]
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Mr. Markey. Thank you, Mr. Rogers, very much. Our next
witness, Ms. Frances Beinecke, is the president of the Natural
Resources Defense Council and is on the Steering Committee of
the U.S. Climate Action Partnership. She has worked with NRDC
for more than 30 years and has held leadership roles in several
other environmental organizations.
We welcome you back before this panel, Dr. Beinecke.
Whenever you feel comfortable, please, begin.
STATEMENT OF FRANCES BEINECKE
Ms. Beinecke. Thank you very much, Mr. Chairman, and
members of the committee, thank you for the invitation to
testify to testify today on this Earth Day as a member of the
U.S. Climate Action Partnership. I am Frances Beinecke,
President of NRDC.
Chairman Waxman and Markey and Ranking Members Barton and
Upton, thank you for holding this hearing on the American Clean
Energy and Security Legislative Proposal. The discussion draft
is an excellent starting point for enacting comprehensive
energy and climate legislation this year. Passing effective
climate legislation to address the eminent threat of global
warming is NRDC's highest priority, and it is vital to enact
legislation as quickly as possible.
We have known for several years that the scientific data on
global warming points towards urgent action, and now the
economic data is telling us that action is required as well.
Rather than a reason for delay, the current recession amplifies
the importance of acting quickly. If this Act were enacted
tomorrow, millions of clean-energy jobs would be created,
starting right away, and we anticipate there will be minimum
increased energy costs in the near term, because the limits on
carbon emissions proposed in this would not go into effect
until 2012, and by that time, the current recession should be
in the rearview mirror.
Inaction is simply not an option. Carbon regulation is
moving forward. Last week, the EPA acted on what the law and
science require and formally found what we have known for many
years, that carbon dioxide emissions endanger public health and
the environment. Congress has the opportunity to shape how
carbon is controlled, going forward, and this committee is at
work on it right now. If we delay and emissions continue to
grow, it will become much harder to avoid the worst impacts of
climate going haywire. In short, a slow start means a crash
finish, with steeper and more costly emission cuts required for
each year of delay. If we enact legislation this year, we can
unleash American innovation and tackle this global challenge
right now.
Today, I want to focus on three critical issues: allocation
of allowance value, cost containment, and international action.
The allocation of the allowance value is a major issue for the
committee to consider and was a central component of the U.S.
Climate Action Partners Blueprint for Legislative Action. U.S.
CAP strongly endorses an approach for distributing emission
allowances that leads to achieving public objectives and not
private windfalls. U.S. CAP believes that we can jumpstart the
transition to a clean-energy economy without creating undue
burden on consumers by initially distributing a significant
portion of the allowances to capped entities and economies
sectors particularly disadvantaged by the secondary effects of
a cap. This free distribution should be phased out over time
with a transition to a full auction.
The Blueprint identifies principals to guide the fair and
equitable allocation of allowances. First, they should go to
end-use consumers of electricity, natural gas, and
transportation fuels. Specifically, a significant portion
should to regulated electric and natural gas local distribution
companies, LDCs, on behalf of their customers, particularly in
the early years of the program. The overall costs of achieving
the environmental goals will be minimized if utilities used
this value first to ensure that they are investing in all cost-
effective energy-efficient opportunities, and then, rebate the
remaining value to their consumers in a transparent matter.
Second, allowances should be given to energy-intensive
industries with trade-exposed commodity products that face
international competition, such as cement and steel. And this
will limit the outsourcing of U.S. jobs and the outsourcing of
U.S. emissions.
Third, allowances should also be allocated for competitive
power generators, low-income consumers, and worker transition
and training, programs that drive low-emission technology to
commercial viability, programs to reduce emissions from
deforestation and forest degradation, 20-percent of emission
sources, and adaptation needs of vulnerable people in
ecosystems at home and abroad.
Previous major environmental initiatives, such as
controlling sulfur dioxide emissions, have proved far less
costly to accomplish than predicted. Nonetheless, there is
uncertainty about the cost of reducing global-warming
pollution, and that is why the U.S. CAP Blueprint addresses
cost containment. Although there are some material differences,
the ACIS discussion draft reflects many of the measures
discussed in the Blueprint. These include a broadly inclusive
cap, emissions trading, unlimited banking of allowances, and
effective multiyear compliance periods. The discussion draft
also includes a larger role for emission offsets, provided that
they meet, and I think this is crucial, strong environmental
quality standards.
Finally, the discussion draft includes a strategic offset
and allowance-reserve pool, intended to prevent allowance price
spikes by releasing additional offsets and/or borrowed
allowances into the market in the event of excessively high
allowance prices.
The third issue I want to discuss briefly is international
action. It is critical that the United States provides a path
forward in environmental discussion as we lead to Copenhagen in
the fall, and we need to provide key tools in the legislation
to aid our climate negotiator in delivering a strong global
warming solution, and we think the draft addresses this
effectively as well. I want to thank you for the opportunity to
testify and look forward to questions.
[The prepared statement of Ms. Beinecke follows:]
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Mr. Markey. Thank you, Dr. Beinecke, very much. Our next
witness is Ms. Meg McDonald, who is the director of global
issues, Alcoa. She also served in Australia as Australia's
Ambassador for the Environment, where she was the lead
negotiator for the Kyoto Protocol and has advised several
Australian Government Trade Ministers. We welcome you, Ms.
McDonald.
STATEMENT OF MEG McDONALD
Ms. McDonald. Thank you, Mr. Chairman, Chairman Waxman,
Ranking Members Barton and Upton, and members of the committee.
Thank you for the opportunity to testify today as a member of
the United States Climate Action Partnership, or U.S. CAP.
I am here today to express Alcoa's support for
comprehensive climate legislation this year. We and others in
U.S. CAP have welcomed the comprehensive approach taken it the
American Clean Energy and Security Act. We, like the other
colleagues at this table that you have heard, believe that
climate change is a global issue, which requires leadership and
immediate action from every sector of society.
Alcoa is one of the world's largest producers of aluminum
and alumina. We are active in all segments of the industry from
mining, refining and smelting to rolling and extrusions with
some 850,000 employees in 34 countries. The majority of our
manufacturing base is here in the United States, and two-thirds
of our smelting capacity, representing 30,000 U.S. jobs. The
current global economic situation has meant significant and
difficult changes in that manufacturing profile here in the
United States and elsewhere.
Aluminum is a globally and heavily traded, energy-intensive
commodity, for which the global price is benchmarked according
to the London Metal Exchange. Since last June, we have
experienced dramatic drops in global demand, and the price of
aluminum has dropped by more than 60 percent. Alcoa has put in
place a detailed plan to weather the economic storm, with the
hope of emerging stronger when the economy recovers.
The energy-intensive nature of primary aluminum smelting
has meant that the location of aluminum production is driven by
energy costs. It has also meant that the industry has been a
leader in energy efficiency. We also believe that aluminum is
part of the solution to climate change because of its
properties of lightweight into transport solution and because
of its infinite recycling potential.
Since 1990, Alcoa has reduced own direct greenhouse gas
emissions by 36 percent, and that is despite a significant
increase in our production over that same period. Alcoa has
been part of U.S. CAP as a founding member and here today
because we believe an economy-wide cap and trade program, as
part of a comprehensive U.S. climate program can be constructed
as to minimize the impact on the economic competitiveness of
U.S. business like Alcoa as we make our transition to a lower
carbon economy.
There is a board consensus that the leakage cause must be
solved to achieve effective climate legislation, and we and our
U.S. CAP colleagues look forward to working with the committee
to achieve this. There has never been such a critical time for
us to be focusing on this issue as many businesses like Alcoa,
our workforce, and our communities confront the very difficult
challenges created by the current economic downturn. During the
evolution towards a comprehensive global emissions trading
regimes, transition arrangements for energy-intensive trade-
exposed sectors like ours will be necessary to protect our
competitiveness and our employees' jobs. It will be essential
to protect the employment base and contribution to the U.S.
economy that industry such as aluminum, steel, chemical, glass,
and paper represent, and we think the most important way of
doing this is through the allocation process as well as
additional complimentary measures. U.S. CAP set out our own
detailed thinking on the importance of inclusion of these in
climate legislation in our blueprint, and we have included in
that additional cost-containment measures, such as offsets in
banking, the technology program, international linking of
trading, and movement to a global system. Importantly, we also
believe there should be specific credit for early action by
companies such as ours, which have been reducing our emissions
voluntarily.
Alcoa believes that a cap and trade program that follows
this approach will be successful in reducing emissions while
avoiding shifting jobs, investments, and emissions from the
U.S. to other nations. This sort of leadership from the United
States is essential for setting the stage for reaching global
agreement on climate change. We also believe that a climate-
change framework established on this basis will bring a new
vision and policy direction which will spur innovation through
the U.S. economy and elsewhere. And we think if we act wisely
and swiftly, this will assist in restoring growth, increasing
jobs, and providing the means for America to be a global leader
in low-carbon technology.
Chairman Waxman and Markey, Alcoa joins our other U.S. CAP
colleagues in looking forward to working with you, the
subcommittee, and the committee in your objective in reporting
a comprehensive and effective energy and global warming bill to
the United States House of Representatives by Memorial Day.
[The prepared statement of Ms. McDonald follows:]
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Mr. Markey. Thank you, Ms. McDonald, very much.
And our next witness is Mr. David Crane. He is the
president and CEO of NRG Energy. Mr. Crane has been the
president and CEO of NRG, a wholesale power-generation company,
since December of 2003. We welcome you back, Mr. Crane, and we
look forward to your testimony.
STATEMENT OF DAVID CRANE
Mr. Crane. Thank you, Chairman Markey and Chairman Waxman,
Ranking Member Barton and Upton. Chairman Markey, as you
mentioned, we are a competitive power-generation company, or
wholesaler, as you say. We produce approximately 70 million
megawatt hours per year, and like others in our industry, we do
it in as a safe, inexpensive, and environmentally benign manner
as postwar technology permits, and when I talk about postwar in
this case, I am talking about post-World War II technology
permits. But as global concern over climate change has grown,
the management, employees, and possibly most importantly, the
shareholders of NRG are aware that we have a moral imperative
to reduce substantially the carbon intensity of our electricity
production. Today, I welcome the opportunity to appear at your
committee as you begin consideration of whether there should be
an economic imperative aligned alongside that moral imperative
to reduce emissions.
And I wanted to also offer you three general observations.
First, combating climate change is inextricably linked to our
country's future energy usage and to a national energy policy,
and the best answer lies in the center, where both
environmental protection and energy security can be enhanced
while avoiding the prospect of short- to medium-term
dislocation to the economy. This, in my mind, is the
fundamental principal upon which U.S. CAP was founded, and it
informs virtually all of the recommendations set forth in the
U.S. CAP Blueprint. A shared concern of five environmental
groups and 25 major American corporations led, over the course
of two years, to a carefully calibrated and interlinked set of
recommendations. As such, we believe all members of the
committee should carefully consider these recommendations,
whether you are more motivated by reducing emittances of carbon
in the atmosphere or by reducing remittances of American wages
and wealth to the Middle East in order to pay for foreign-
source fossil fuel.
My second major point is that the potential embedded within
climate-change legislation for regional wealth transfer and
value destruction is real but can be effectively addressed with
a sensible balanced between auctioned allowances and allowances
allocated on a year-end basis and with complimentary measures
for clean coal and other core technologies, including new,
advanced nuclear projects. Wind, solar efficiency, and smart
meters are all worthy technologies that our company is
investing in, and they all deserve government support. But the
fact is that if you run the numbers, it is nearly impossible to
see how we win the battle against climate change without the
successful demonstration and global deployment of clean coal
technology and advanced nuclear plants.
The transitional, partial allocation approach, which France
has referred to, will help drive these investments as well as
easing regional imbalances. It will give emitters like us a
financial runway of sufficient length to gain lift in our
efforts to innovate and invest in low-carbon technologies that
are critical to success in the fight against global warming.
This is important because carbon will not be conquered just
through increased funding of the Nation's research. It will be
conquered when companies in the electricity sector, like Duke
and NRG, lead the way in demonstrating cutting-edge, low-carbon
technology at scale and deploying it en mass.
To illustrate, in 2006, NRG announced a plan to invest up
to $15 million and 10,000 megawatts of new low- or no-carbon
projects in this country. Since that announcement, we have made
significant advances in major investments in wind, solar, CCS,
and advanced nuclear development. We are doing all of this as
part of our philosophy that NRG wants to be a first-mover in
the technologies, the projects, and the businesses that will be
spawned by sustainability and climate change.
Third and finally, the electricity industry, currently, is
the largest emitting sector in the United States, but as it
decarbonizes, it will become a central part of the solution,
both in our ability to export our new technology to electric
industries in other emitting nations, and in our ability to
displace other forms of carbon-producing energy in other
sectors in this country. At the center of our fossil fuel
energy basis right now are the car, the high-voltage
transmission system, and the base-load powerplants that feed
it. Congress is in the position, right now, to alter
fundamentally and for the better each of the three, but the
electric car or the smart grid and low- to no-carbon base load
power, emphasizing clean coal and advance nuclear, they need to
be advanced together as part of a coherent and coordinated
national energy and environment policy, and I believe it is
exactly right to base that energy and environmental policy on a
free-market basis like the cap and trade approach contemplated
by the Waxman-Markey discussion draft. That will enable us to
unleash the power of our free-market system on this issue. And
even in the weakened state of the American economy, as an
unabashed capitalist, I would say American capitalism remains
the most potent peacetime force for a change on this planet.
To do this, if we do this, I think all of us need to work,
again, to define and find the common ground in the center. If
we succeed, I am convinced that when the history is written of
our age, it will be said that the first giant leap for mankind
into the post-hydrocarbon age began in the ninth year of the
third millennium, when the United States Congress pointed the
American public away from consuming the earth's resources in a
non-sustainable way so that the life experience that all of us
have enjoyed will be enjoyed equally by future generations of
Americans. Thank you, Chairman.
[The prepared statement of Mr. Crane follows:]
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Mr. Markey. Thank you, Mr. Crane, very much, and we thank
all of you.
And now, we will turn to questions from the committee
members, and we will begin by recognizing the gentleman from
California, Mr. McNerney.
Mr. McNerney. Well, thank you, Mr. Chairman. I want to
thank the panel for coming here today, and I find your
testimony good and interesting.
In your testimony, Mr. Holliday, you mentioned that DuPont
reduced greenhouse gas emissions while reducing costs. Am I
correct on that?
Mr. Holliday. Yes, we reduced 72-percent greenhouse gas
emissions over the period of time described, and we did it by
letting the resources go to the very best projects, so every
project we authorized at least earned 12-percent return, which
was good for our shareholders, and so that is what we think is
so key about the cap and trade approach, that it allows the
resources to go to the best projects so people can trade and
develop those. We think it makes a big difference.
Mr. McNerney. Was there a net job gain or net job loss, or
was it neutral?
Mr. Holliday. For the United States, it was a net job gain
from that.
Mr. McNerney. Ms. McDonald, I am going to ask you a similar
question. You said that Alcoa reduced the GHG emissions by 36
percent. Was there an increase in cost or a decrease in cost
for operations as a result of that program?
Ms. McDonald. It was a result of some major changes in
reducing our process emissions, and that has resulted in not
only decreased costs but has increased our efficiency greatly.
Mr. McNerney. Well, thank you, and that brings me to my
point, which is the thing that excites me about this bill is
that if we do it correctly, we can get to the point where we
pay less for energy and have better results and create a lot of
green jobs in the process.
I would like to ask the other panel members that I haven't
asked yet if they agree with that optimism. Do you think we can
reduce energy costs and have a better quality of life and
create jobs at the same time? Starting with Mr. Cavaney.
Mr. Cavaney. I believe on the front end, one of the things
that is particularly important about looking at a framework as
U.S. CAP has pulled together, it has a number of linked
elements that help reduce the higher costs and the more
volatility that we are likely to see in the earlier years. But
as time goes on, as my colleague had mentioned, what you will
find is you find over time the efficiencies will get better,
and better, and better, and therefore, there is less need and
less volatility in the system, and then, you will end up having
made that transition in the most effective way.
Mr. McNerney. Thank you. Mr. Rogers.
Mr. Rogers. I think, over time, you are going to see the
price of electricity rise. I think that is inevitable, and that
is why it is critical that we get the regulatory models correct
so that there are adequate investments in energy efficiency so
that we are able to give consumers control over their use of
electricity, and over time, they can reduce their bills by
reducing their usage levels and productivity gains.
But it is inevitable that the price of electricity is going
to rise over the coming decades, and that comes off a decade-
and-a-half where the real price of electricity has actually
fallen.
Mr. McNerney. Well, that is going to happen. Electricity
prices are going to rise anyway, but I believe we can get ahead
of that cost curve with efficiency gains, and that is the point
that I am trying to make.
Mr. Rogers. I don't want to mislead you. I think the price
of electricity is going to rise in every event. It will rise in
compliance with carbon legislation, but the way we address that
is with productivity gains in its use, because what I envision
is not only do we retire and replace existing plants with new
plants that will drive prices up, but as we go from an analog
grid to a smart grid, that will drive prices up. In 30 states
where they have adopted renewable portfolio standards, that
will drive prices up, and over time, you are going to see
prices continue to rise.
The big question is can we incent energy efficiency
investments to control usage and get productivity gains.
Mr. McNerney. Thank you. Ms. Beinecke?
Ms. Beinecke. I would just like to emphasize that there are
tremendous opportunities in energy efficiency. In California,
you've had great experience. Even though the cost may be higher
per kilowatt hour, the usage is left because of the very great
mandate for energy efficiency there, so energy efficiency is
the cheapest, fastest way to get real reductions in carbon
emissions and that will decrease the direct cost to the
consumer, so the quicker that we can unleash that opportunity,
the better it will be for the consumers across the country. And
there's just huge opportunities in the building sector, in the
appliance sector, in commercial buildings, at home, et cetera,
so there is a huge opportunity there.
Mr. McNerney. Mr. Crane, you've got about six seconds, but
they will give you another 30, maybe.
Mr. Crane. Thank you, Chairman. Congressman, to me, the
answer to your questions depends on what your view of future
fossil fuel prices are. Our company's view is that they are
more likely to be like they were last June than they are right
now. And if you think about that, and you think about where
there money for fossil fuels goes, that there is no doubt in my
mind that the American public will be more prosperous with the
adoption of the type of technologies that will be incented by
this legislation.
Mr. McNerney. Thank you.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Texas, Mr. Barton.
Mr. Barton. Mr. Chairman, are there members on that side
that haven't asked any questions yet? Have we recognized all of
them?
Mr. Markey. No, we have not.
Mr. Barton. Then, let us recognize that.
Mr. Markey. Thank you. We appreciate that. That's very
generous. Thank you.
We will recognize next the gentleman from Maryland, Mr.
Sarbanes.
Mr. Sarbanes. I appreciate it very much, and I appreciate
that courtesy as well.
Mr. Barton. Just give me a vote when we go to mark up.
Mr. Sarbanes. There's no free lunches anymore in America
are there?
Thanks for your testimony. I want to come back a little bit
to the discussion you just had about the extent to which the
expectations about consumer efficiency effect the models or the
projections. And obviously, my view of the auction question, in
other words how much free distribution there should be, at what
levels and for how long, versus auctioning these allowances, as
well as my view of what percentage of the proceeds ought to be
coming back to the ratepayers, is significantly affected by my
confidence or lack of confidence in the consumer, with some
kind of rapidity, put these efficiencies in place. And I assume
that the models that you have done are putting kind of
assumption in place as to how quickly you can move with respect
to the consumers efficiencies.
But it is very elusive, and there is a kind of leap-of-
faith element in many different aspects of this issue. I was
curious of what the incentives are that you are thinking of
offering to your ratepayers to become more efficient
themselves, to take ownership of this, beyond, simply, their
desire to escape the added burden that is going to come from
increased electricity cost as you indicated. I mean what kind
of partnerships are you going to enter into? What sort of
programs will there be? And anybody can answer that.
Mr. Rogers. I think what is going on in virtually every
state that we operate in, there is a total rethink of the
regulatory model. In California, they adopted decoupling, but
quite frankly, that leaves companies just economically
indifferent and not much gets achieved through economic
indifference. What will fundamentally change investment in
energy efficiency will be a model that incents companies to
invest in reducing megawatts in the same way we are incented to
meet the growing demand to building a megawatt.
So we have proposed in each of the states we operate in a
save-a-watt approach, which basically compensates us in the
same way for reducing megawatts, so what you can see is that we
will take hundreds of millions and billions of dollars over
time, once the regulatory model is in place, to actually invest
in our customers, to help them have productivity gains in their
use of electricity, and I believe what will come, if we look
back 5 to 10 years from now, what we call energy efficiency
today will be very primitive compared to what will be done over
the next decade. And I believe that will be driven at the state
level. That will be driven by changing the regulatory models.
Mr. Sarbanes. So your investment could be seen as another
way as giving the consumer kind of a rebate or a reward for
being more efficient, and then, it kind of feeds on itself.
Mr. Rogers. Well, I actually think that technology is
really the key here. I have come to believe to that putting a
list of 15 things on the refrigerator for a family to do to
reduce their usage is going to get the job done. Yes, there
will be 10 percent of the people or 15 percent of the people
that would do that, but the ability to deploy technology, where
you are writing software for the home, software for business,
so you are using technology to match up to the comfort and
convenience of the customer, and that automatically happens, so
it is back of mind in the same way when somebody walks into a
room and throws a switch, the lights come on. Nobody asks is
that nuclear? Is that coal? Is that wind?
We hope that the technology will evolve and the software
will be written that it automatically occurs, and those energy
efficiency gains occur in the home by the way is been
programmed.
Mr. Sarbanes. OK, my time is up. I just wanted Mr. Chairman
to note, for the record, this morning, I was at the U.S. Coast
Guard yard in Baltimore, which, today, became the only U.S.
Coast Guard facility in the world that is now going to be
powered 100-percent by renewable energy. It is a landfill. They
are capturing methane, piping it under the highway and bringing
it into the Coast Guard Yard, and it is a real model for the
federal government in partnership with private enterprise to
take the lead. Thank you.
Mr. Markey. I thank the gentleman very much, and we now
turn and recognize the gentleman from Vermont, Mr. Welch.
Mr. Welch. Thank you, Mr. Chairman and Chairman Waxman. I
thank the panel members for your leadership on this.
As we have been having discussions and getting questions
from both sides of the aisle, a major concern is the economy
and what the impact is of taking action. And I would say there
is two schools of though here. One is that if we take action,
it actually will threaten jobs, and I think many of people who
take that position, it is not just political. It is a
legitimate concern. And the other, and I think this is embodied
by the bill that Mr. Waxman and Mr. Markey have presented to us
for discussion, embraces the confidence that we can actually
create jobs, and it is the better way for our economy.
I want to get your comments on that and how we address
these concerns that some people are making about jobs, because
we can either get stalled or answer the legitimate concerns
that are raised. And I will start, Mr. Holliday, with you. I
mean you have heard all of the concerns, and probably, you have
had those discussions within your own company.
Mr. Holliday. Exactly, and that is why we think in our
Blueprint, the way we have talked about phasing things in,
taking into account how the allowances are allocated so we
don't have a sudden shock to the system is very important.
What I see from our company is in solar systems, biofuels,
energy efficient systems for home, there are so many
opportunities, if we had the market here, we would develop the
manufacturing and new jobs here. It is a very complex
situation. I don't want to say it is simple, but I think it is
very possible.
Mr. Welch. But your company is affected. I mean if we get
it wrong, then employment could be adversely affected in your
company, and obviously, you have got a responsibility to
maintain your bottom line for your shareholders, so you have
come to this conclusion that it is better to act.
Mr. Holliday. Absolutely, without question.
Mr. Welch. And Mr. Rogers, how about you? Same thing, I
mean you are in an industry where the more you produce and
sell, the better your bottom line, and you are talking about a
new way of doing business.
Mr. Rogers. We believe now is the time to act. First, we
are going to get more bang out of the buck that is spent in
that part of the stimulus, the Green Stimulus, if we have a
price of carbon and a roadmap going forward. So we think that
gives us a chance to amplify on the dollars that have been
spent.
Secondly, I believe it is not shovel-ready jobs that we are
going to produce. We are going to produce real 21st century
jobs. As you start to look at deployment, in Indiana, we are
building a coal gasification facility, and that will be the
cleanest coal plant, but it also will become a site where we
can do carbon capture and sequestration and start to scale it.
So in my judgment, there will be lot of jobs developed and tied
to having a price on carbon and having a clear vision with
respect to the roadmap forward.
Mr. Welch. Thank you. Ms. McDonald, how about Alcoa? They
have considered this, obviously.
Ms. McDonald. Yes, we have, and we think that the long-term
certainty that this legislation can provide is really important
in providing that sort of confidence over the long term,
because we believe that this is an issue that really requires
action and requires U.S. leadership. And we believe the sort of
technology that will be unleashed if we get the framework right
will provide a basis for us to invest and for the lightweight
technology has to be a market-faring product.
Mr. Welch. I want to get your opinion on a thought that
came to me as I was listening to the concerns raised by folks
who were worried about us taking action. It is about jobs, and
the people have their points that this will help or will
hinder. And I share the view that you have expressed that it
will help.
But will there be any problem, as people on the panel see
it, if we put into the bill some mechanism by which we could do
an assessment every six months or so about what the impact was
of renewable electricity standards or what the impact was of
the cap and trade so we are answering the question specifically
as we go along and building into the legislation some capacity
to make adjustments that in the implementation of anything
complicated will require adjustments?
I will start, Mr. Crane, with you.
Mr. Crane. I don't exactly about the six-month thing, but I
think the U.S. CAP blueprint talks specifically about cost-
control mechanisms to make sure that you are moderating the
system as it goes along and looking at impact.
Mr. Welch. OK, Ms. Beinecke?
Ms. Beinecke. I think it is a good idea. I think that there
has been a lot of studies done by different organizations,
looking at what the job potential is. There certainly a lot of
believe that the jobs are there, documenting it, and then
calibrating areas that need incentives and those that don't. It
is a good thing to note.
Mr. Welch. Thank you. I think my time is up. I will yield
back. Thank you all very much.
Mr. Waxman. Thank you, Mr. Welch. Mr. Blunt?
Mr. Blunt. Thank you, Mr. Chairman. I don't want to
unnecessarily repeat anything that has already been done here,
but I do have some questions. I know Mr. Rogers, in his
submitted testimony, raised the issue about the renewable
electricity standards that were included and had concerns about
those. Does anybody else share the concerns about the renewable
standards?
Mr. Rogers, can you talk to me just a little bit more about
that, how you think those standards could better serve the
purpose of the bill here?
Mr. Rogers. My judgment is, as a cap and trade, once you
let the market work, the market will select the right
technologies, and the price on carbon will allow that to
happen. We already have 30 states with a renewable portfolio
standard, so we are on the way to that happening. And what you
will note is every one of them is different, because every
state is different in terms of the availability of renewables.
The other point I would make is, in a sense, a renewable
portfolio standard, the way it is designed, it is picking
technologies when those technologies have already got
significant tax stimulus that are investment tax credits,
bonuses. We are all aware of that as a wind producer, the
availability of those incentives. So I think, in a sense,
having a cap and trade system and a renewable portfolio
standard, in a sense, is belt and suspenders, and a picking of
technologies is not needed under a robust cap and trade system.
Mr. Blunt. Should nuclear be one of the available
renewables?
Mr. Rogers. If the goal line is a low-carbon future, you
would expand and transform the renewable portfolio standard
into a low-carbon standard. But now, we are on the road to
command and control, and it raises a fundamental question about
whether you really need a market approach cap and trade if all
of a sudden you are moving to a 60-percent renewable low carbon
portfolio because you are picking the technologies rather than
letting the market pick it.
Mr. Blunt. Now, you think it would be practical at all for
the states to determine in their state what their renewable
standard should be for their states? I thought I heard you
almost suggest that that was a workable alternative.
Mr. Rogers. I think it is a workable alternative, and that
is why 30 states have stepped up and done it, but you will
notice in many of the states, what they have done is they have
included energy efficiency as a component. The other thing they
have done is they have a provision that provides an economic
out because people on the state level are concerned because
they are closer to the consumer. They are concerned about the
price impact of a renewable portfolio standard, particularly if
the prices are extremely high and will drive the price of
electricity up in a sharp and unyielding way for consumers.
Mr. Blunt. Thank you. Mr. Holliday or anybody else can
address this as well. Do you have any sense as where w move
into where we are less competitive because of our utility rates
that the two huge developing nations, India and China, would
not try to move in and take advantage of that option, and is
there any evidence that they have ever held back to not compete
in a way that takes advantage of their new situation?
Mr. Holliday. Well, I think we ought to see China and India
as serious competitors to the country, and that is why I
believe this action that we are talking about today is the
right step if we can become leaders in more efficient energy.
The overall equation is how efficient is our energy? How about
the cost of our energy versus the cost in China or the cost in
India? So we have to make sure that that is the case. Very
much, they are our competitors.
Mr. Blunt. And is the timeframe that we are getting there
the right timeframe in your opinion?
Mr. Holliday. I think we need to lay out the game plan, and
the industries will know what the opportunities are. My
judgment is that science and the technology will come along
faster than we currently think once we know exactly where the
goal line is.
Mr. Blunt. So how long do you think it would take us to get
to the point that we were a lower-cost energy producer? The
transition here is actually what bother me the most. It is not
the goal. It is getting there at a time that doesn't create a
competitive disadvantage for us.
Mr. Holliday. We are working on solar technology now. Solar
is only 15 percent efficient. Fifty percent of the solar cells
are made in China. They are my customers. I make the raw
materials here for those solar cells. So if we could put in the
right systems, I don't see why we couldn't move that solar cell
manufacture here very fast and start making a difference with
only a 15 to 30 percent efficiency. I can't give you an exact
timeline how long that will take, but it will be over a decade.
Mr. Blunt. Well, how does cap and trade make this more
utility efficient?
Mr. Holliday. If cap and trade does, as Jim Rogers
described, lets the resources move to the most efficient
system, which is what is critical about it. That is what we
have done inside our company, but it will take time. This is
not a one- or two-year fix.
Mr. Blunt. But aren't you adding cost to the system? I
guess that is the timeline that I am most concerned about. And
Mr. Rogers, I am going to let you answer this, too, because you
obviously have an answer here, but go ahead, Mr. Holliday.
Mr. Holliday. Yes, I think there will be some increase in
the costs in the system, just as Jim described. I think it is
critical that as you enact this legislation that it have the
right safeguards that if China and India don't ultimately
follow, we have got some ways to make adjustment.
Mr. Blunt. And is it your opinion are any of those
safeguards in the legislation now as you have looked at it?
Mr. Holliday. What we have proposed in our Blueprint from
U.S. CAP, there is. I haven't studied the detailed legislation
to be 100-percent sure.
Mr. Blunt. Mr. Rogers?
Mr. Rogers. Congressman, I think that you have really
focused on one of the key issues, and that is this: we have go
to get the transition right, and that is to smooth out the cost
impact on consumers on a long enough period, and we have got to
map up the transition period to our technology roadmap and the
availability of technologies at prices that make sense. And I
think we can do that.
And I would say one other thing, and this really goes to
the earlier question. I believe now is the time to address
carbon legislation, when the economy is in a recessionary
period, because we will be more focused on the economics of
this than the theology of it. And what I mean by that is this:
we can address climate. We can put a price on carbon. We can
put a cap on emissions and let it decline over time. The key is
to get the transition right, and that is a longer discussion
about allocation of allowances.
Mr. Blunt. Thank you.
Mr. Waxman. Thank you, Mr. Blunt. We have several members
who should be recognized next, because they didn't get a chance
to ask questions of the last panel, but I would ask their
permission, since I have leave for another appointment to be
able to say some points and ask some question first.
Without objection, I am grateful to my colleagues for this
opportunity.
Let me just say I have been involved in environmental
battles for all of the time I have been in Congress, and I have
never seen anything like U.S. CAP and this panel that is making
this presentation today. So often what we have seen is one side
environmentalist and the other side is industry, and then they
fight it out. What you have done is come together over a two-
and-a-half year period and discussed these issues and tried to
figure out some way to accomplish the economic goals and the
low-carbon future that we are going to need, so I want to thank
you very much for the work you have done.
Mr. Rogers, just to follow up on some of the points that
came out in your answers to Mr. Blunt's questions, when
Secretary Chu was asked why do we need a renewable portfolio,
and why don't we just have the cap and trade get us to where we
want to do, his response was that it would take awhile for cap
and trade to get us to some of these points. It would be quite
a while down the road, and he though a renewable portfolio,
which doesn't specific whether it is solar or wind but
specifies among different renewables, that would get us some
reductions right away. Do you disagree with that?
Mr. Rogers. I listened carefully to Secretary Chu's answer
this morning that you suggested, and my point of view kind of
rolls out like this: one is, if you look at the study by EPA,
you see a significant increase in wind already. And that is
driven, and I say that as someone who is in the wind business,
by the tax incentives that exist today, and with the new
incentives, we are driven even more to invest.
I think the key point from my standpoint, you have got 30
states with renewable portfolio standards. An approach would be
to say every state should have a renewable portfolio, but leave
it up to the states to determine what makes the most sense for
them. And a way forward to that would be have a date certain
for the states to design one, because quite frankly, not one
size fits all, and the fact that you have 30 very different
renewable portfolio standards today reflects the differences
that exist in the different geographies and the different
sensitivities around the country.
So we can achieve what Secretary Chu is talking about by
having every state have a renewable portfolio standard, but let
each of them design their own.
Mr. Waxman. Well, that is an interesting concept. Would you
also allocate some help to the ratepayers in all of those
states where there is a renewable portfolio standard driving up
the cost.
Mr. Rogers. What do you mean by help?
Mr. Waxman. Well, under the U.S. CAP proposal, the utility
would be able to lower the rate for the ratepayer as a result
of the increase of cost from the cap and trade. Here we would
be talking about an increase in costs as a result of the
renewable portfolio. Do you think that the ratepayers ought to
get some assistance from the money generated from the cap and
trade system?
Mr. Rogers. It would be my judgment, and maybe I am just a
purist, but to the extent you have a cap and trade system, and
you did the allocation of allowances, I would tie it to the cap
and trade system, and I wouldn't try to add or subtract from
it, because it puts us on a slippery slope that if you are
going to do it for that, why not for this, or why not for the
next thing. Or as we have seen, some people have suggested
using these revenues for purposes far beyond solving our
climate challenge. I am a purist when it comes to----
Mr. Waxman. Well, I would object to that, but this is
related to our climate problems.
Dr. Beinecke, what are your thoughts on both of the issues?
Ms. Beinecke. I think that one of the things that we have
seen, particular in the renewable area is that the uncertainty
with sort of stop-and-start annual tax credits, and one of the
things that Secretary Chu said and I think is really important
is long-term consistent signals to allow investors to really
make a commitment in the sector of renewal. And I think a
renewable electricity standard actually does that because it
provides a long-term, consistent signal to the investor to
allow major investment in that are and increase the percentage
that renewables provide.
We have seen, just over the last year, sort of stops and
starts and uncertainty in investments, and if we are really
thinking about unleashing clean energy over the long term, a
signal for that long-term consistency is important, and I think
a renewable electricity standard does that.
Mr. Waxman. Well, I see my time is about to expire, but we
have heard repeatedly today concerns that passing legislation
like the discussion draft would cripple the economy, yet you
represent the core of our economy, manufacturing, utilities,
and energy, so you are giving us the exact opposite message.
You are saying that our economy and your company's success
depends on the passage of our legislation. Is that the
conclusion I am to draw? And I guess that could be a yes-or-no
answer.
Mr. Rogers. If you get the transition right, I think the
answer is yes.
Mr. Holliday. Yes.
Mr. Cavaney. Transition, yes.
Ms. McDonald. Transition is the key. That is why we are
here, but certainly, as well, it is critical that we have
legislation which provides long-term certainty.
Mr. Crane. I agree with my colleagues, yes, on the
transition.
Mr. Waxman. Thank you.
Mr. Sullivan, you didn't get a chance to ask questions, so
I am going to recognize you next.
Mr. Sullivan. Thank you, Mr. Chairman. My question is for
Mr. Cavaney. How are you doing?
The Waxman-Markey Discussion Draft would include petroleum
refiner within the definition of covered entities in the cap
and trade provision of this bill. Recognizing that the
legislation is currently silent on the choice between
allocation and auction, can you please provide your thoughts on
this issue?
Mr. Cavaney. We are covered, and we are also unique in our
classification. We are covered for both our own greenhouse gas
emissions that our refineries and other facilities make, but we
are also, if you will, the point of regulation for the end
users of our products that we manufacture for all of their
greenhouse gas emissions, so we really dip in two buckets like
no one else does.
One of the challenges that we have is that unlike LDCs and
others, we don't have any legal mechanism where we can pass
along costs or talk among colleagues. That's basically
prohibited by law. There are a number of studies that have been
out in the public that would indicate that if we got zero
allocation, that would assume we are able to pass along 100
percent of our costs, and that is just not the case.
There are only two conditions where you can assume you
might be able to pass along all of your costs. One is that you
have perfectly inelastic demand, and the other is if you have
totally elastic supply, and the U.S. refining industry has
neither of those, so what we are trying to do is working with
the staff and trying to update some studies, because any former
studies really don't reflect the world that we are going to be
in. And we believe that we will come up with some situation
that we would like to present that will show there is some
merit to considering us in an allowance allocation system as a
result of our uniqueness.
Mr. Sullivan. And one other question, Mr. Cavaney,
retention of good-paying American jobs is at the forefront of
policymakers minds as we debate this bill. The Waxman-Markey
discussion draft contains a provision that would supply
additional credit, known as rebates, to energy-intensive
industries that produce products that are heavily traded in the
international commerce. However, it is unclear whether
petroleum refining would qualify for these rebates in the
discussion draft. Your thoughts on this?
Mr. Cavaney. We are the second most energy intensive
industry in America. We employ really good-paying jobs, and it
is not quite clear to us whether we are qualified under that,
but certainly, we would think we should be, because as a
result, right now, there is about 6,500,000 barrels of oil of
refining capacity that is being built outside of our borders,
much of which is being targeted to come into this country, so
if we don't have some similar protections and some guidelines,
we are concerned about leakage and ultimately increasing
imports at the expense of our domestic production.
Mr. Sullivan. Thank you, Mr. Cavaney.
Mr. Waxman. Mr. Braley.
Mr. Braley. Thank you, Mr. Chairman. I want to apologize
for my voice. But I want to share the chairman's enthusiasm for
seeing such a diverse group of people here today, talking about
such an important issue to the future of our economy, our
national security, and our country.
I was very pleased, Ms. McDonald, to see Alcoa's presence
with the U.S. CAP. They have a huge production facility in
Bettendorf, Iowa, which I am very proud of, and I am proud of
the jobs they create, and the incredible contribution they make
to our national defense. But I am also very proud of companies
like John Deere, who also has a presence in my district, and
saw fit to exercise a leadership role in this important topic.
And I think nothing brings that home more than the reason I was
late getting here is because I was meeting with representatives
IBM in the city of DeButte, which is the oldest city in Iowa
and is my district, and IBM and DeButte are embarking on an
important new partnership that grew out of IBM's decision to
locate a global delivery facility in DeButte, creating 1,300
jobs. And because DeButte has been at the forefront of some
innovative leadership in a small- to medium-sized city in
sustainability, there is a perfect combination of forward
thinking by corporate America and a progressive community that
want to completely change the way they look at their energy
footprint.
What I would like the panel to do is start by sharing some
of the vision that each of your companies embarked upon to lead
you to this table today and why this bill is so important to
the future of corporate America. Mr. Crane?
Mr. Crane. I thought with such a far-reaching question I
would maybe get to go at the end. But our vision starts from
the fact that we recognize that we are a major emitter of
carbon, and that was not sustainable in the future, and we
expect to be around for a long time, and we needed to get
there.
But to us, again being the capitalist and believe in free
market solutions, the opportunity here to sort of change the
society we live in and to create, for us, what is essentially a
low-growth industry, the electric industry as it is now, this
is a high-growth opportunity for us, and particular when you
look at the electric car, which for our industry is really the
air conditioner of the 21st century in terms of electricity
demand, we could be the solution, not only for our sector, but
for the transportation sector, so that is what brought us to
this place in time.
Mr. Braley. Ms. McDonald?
Ms. McDonald. We have had a similar journey, because we
recognize that by its primary production, it is a very energy-
intensive process, and we have found that we could successfully
reduce our own process emissions, particularly in our smelting
business, and engage in a lot of energy-efficiency projects.
And we saw that this is something on which we must act, and
there were ways of doing so which would be beneficial. And like
Mr. Crane, we can see that moving to a world where there is
increased emphasis on recycling, saving energy, using more
recycled aluminum, and it is an opportunity for us to reduce
our energy demand, but also to lower the resource overall. And
so we can see growth in using recyclable aluminum, using more
aluminum in transport for lightweight vehicles to save energy,
to use aluminum in buildings, not only because it is
recyclable, but also because it can create some more highly
energy efficient buildings, and so we see the opportunity for
setting up a long-term framework that will actually award those
sorts of energy efficiency and lower resource use, and so we
can see that that is going to be good for our company long-term
and help us restructure into that world and keep locations like
Bettendorf healthy and growing.
Ms. Beinecke. There are so many clean tech companies around
the country who come into our company every day with new ideas,
new inventions, new technology. You see a huge opportunity to
unleash. And what they want to know are what are the rules?
What is the system that we can do this under. There is just a
clamor out there right now.
Mr. Braley. Mr. Rogers?
Mr. Rogers. In the 20th century, it was our company and our
industry's mission to provide universal access to electricity.
The reason we joined U.S. CAP is because we believe in the 21st
century, our mission will be fundamentally different. One will
be to decarbonizes our supply. Two will be to help our
communities be more energy efficiency. And thirdly, we believe
that this translates into energy security. Two statistics: 40
percent of the emissions today comes from the power sector; 30
percent comes from the transport sector. I can envision a world
where you decarbonizes the generation fleets in this country.
With plug-in hybrids and electric vehicles, we will have weaned
ourselves from foreign oil, and we will have the energy
security and independence that we all have dreamed about, and I
believe our industry can play a role in making that happen.
This is a first step on that journey.
Mr. Markey [presiding]. The gentleman's time has expired.
The Chair recognizes the gentleman from Texas, Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman. Mr. Crane and Mr.
Rogers, the current draft has a renewable portfolio standard
for electricity generation that does not include nuclear power.
It doesn't include new hydro, I believe, or old hydro, and it
doesn't include clean coal. Would you gentleman support a clean
energy standard that included those energy sources?
Mr. Crane. I would, yes.
Mr. Barton. OK, Mr. Rogers?
Mr. Rogers. It would be my judgment with a cap and trade
system you don't need a renewable portfolio standard or a clean
technology standard, but if you are going to embrace and pick
wind, and solar is a winner because of their low carbon, you
should include nuclear as part of the low-carbon standard.
Mr. Barton. So your preference, Mr. Rogers, is to have no
renewable standard at all.
Mr. Rogers. My preference is to leave it to the states to
make judgments about whether they need a renewable portfolio
standard in their state.
Mr. Barton. OK, Dr. Beinecke, do you have a position on
that?
Ms. Beinecke. Yes, I should just say that U.S. CAP doesn't
have a position on the renewable electricity standard, so we
are all speaking individually on this point. We actually
support the renewable electricity standard for the reason that
I said earlier, which is predictability of investment, long
term.
Mr. Barton. Would you expand the definition to include some
other things?
Ms. Beinecke. I like the definition that is in the bill
now.
Mr. Barton. So you don't want to include nuclear and you
wouldn't include clean coal?
Ms. Beinecke. I wouldn't, no. I wouldn't.
Mr. Barton. That is fair. Now, here is the $64 question.
All of you gentlemen and ladies that support this cap and trade
system, do you support it if they keep the current draft and
there are no free allowances? It is a pure auction system. Mr.
Crane?
Mr. Crane. If it was 100-percent auction from the first
year, no, we would not.
Mr. Barton. All right, Ms. McDonald.
Ms. McDonald. Likewise, no, we would not support.
Mr. Barton. Dr. Beinecke?
Ms. Beinecke. We support what I talked about earlier which
is in U.S. CAP, we designed an allocation system which the free
allowance is going to----
Mr. Barton. I just need to know whether you want a total
auction like they current have or you think there should be
allowances. I don't need a lecture on----
Ms. Beinecke. No, I am just saying that we designed a
model, and that is what we support, the model in U.S. CAP.
Mr. Barton. So you do not support the current draft because
it doesn't have any free allowanced.
Ms. Beinecke. My understanding was that current draft
hadn't really defined how the allowances would get allocated,
and that was on of the discussions which is why were proposing
U.S. CAP's----
Mr. Barton. I guess that is fair. Mr. Rogers?
Mr. Rogers. I would oppose any legislation that had 100-
percent auction.
Mr. Barton. OK, Mr. Cavaney?
Mr. Cavaney. Oppose 100-percent auction.
Mr. Barton. And Mr. Holliday?
Mr. Holliday. Oppose 100-percent auction.
Mr. Barton. All right, how many of you are CEOs or at least
decision makers in your company? I know Mr. Crane is and Mr.
Holliday is. I think Mr. Rogers is. How many allowances does
DuPont need, Mr. Holliday, either in tons or in millions or
billions of dollars?
Mr. Holliday. I don't have a specific number, but they are
not nearly as critical to us as they would be to some other
companies in the equation.
Mr. Barton. OK, Mr. Rogers?
Mr. Rogers. As I started the testimony, because of the fact
that we are regulated in the five states we operate in, I am
really speaking on behalf of my customers, and I would say that
any cap and trade system that allocates allowances would start
with a base period, and I would be looking at 100-percent
allowance allocation, year one.
Mr. Barton. OK, that's fair. Total free allowance, year
one. Mr. Crane?
Mr. Crane. You know, we operate in competitive power-
generation markets like Texas.
Mr. Barton. We love that you are in Texas and that Mr.
Rogers' company. I am all for you guys being in Texas.
Mr. Crane. The U.S. CAP approach is based on net compliance
costs, so we produce, as an overall company in the U.S., 64
million tons of carbon a year. We don't need carbon allowances
to cover all that because the cost of electricity will rise to
cover part of that. But the European system, which as you
know----
Mr. Barton. Doesn't work.
Mr. Crane [continuing]. Lead to some windfalls, we can
learn from that and do it in such a way so there are no
windfalls, and all we are seeking in the early years is to
cover our net compliance costs and then to ratchet down on a
transitional basis.
Mr. Barton. My time is about to expire, Mr. Chairman. But
there is a dichotomy. To go back to what Mr. Holliday said, you
cannot have a system that puts a price on carbon and doesn't
raise costs. If you have these free allowances, whether it is
for a little bit of time or all of the time, then you don't get
any benefit because you don't price it, and you don't bring the
usage down.
Now, there is another way to do it, and that is to use the
Clean Air Act model where you set a regulatory compliance. You
actually set a performance-based standard, do away with cap and
trade, and there will be a Republican alternative that puts
that on the table here in the very near future, Mr. Chairman.
With that, I yield back.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Arkansas, Mr. Ross.
Mr. Ross. Thank you Mr. Chairman, and thank all of you for
coming today. While I believe there are some good things in
this bill, there are others that cause me to pause and give me
concern, and hopefully, some of you in these panels can help me
with some of that.
I am going to speak first about the shorter the answers,
the more questions I can ask, but I value your opinion, and I
want to hear it.
Renewable electricity standard, if the whole point to this
bill is to get carbon neutral, then, should it really matter
where the energy comes from; and therefore do we need a
renewable electricity standard? To any of you. Don't be shy.
Ms. Beinecke. I think there is a real opportunity to
unleash new technologies. As Secretary Chu mentioned earlier,
even with the cap, the cap is not going to get going until
after 2012, and we need to unleash technologies now. We need to
figure out how to incentivize them. That is one way to do it.
And certainly, we need more renewables to get to a clean-energy
economy, so that is a design to do it. There may be other
mechanisms, too, but unleashing that renewable opportunity, I
think, is key.
Mr. Rogers. I would suggest, Congressman, that with the tax
incentives we have, that is going to stimulate investment in
renewables. The fact that 30 states have renewable portfolio
standards and other states are looking at it, that is going to
unleash investment in these technologies, and in a sense, we
don't need a national standard for a variety of reasons that I
have discussed that is included in my testimony.
Mr. Ross. Let me ask you this. You know, I believe that in
states where renewable works, we should be doing it.
Unfortunately, I come from a state that is not a wind state.
Our options for renewable electricity are limited, which means
they would largely have to be imported at a higher cost to our
consumers.
Let me ask you as it relates to the renewable electricity
standard, what you do think that means for those of us in the
Southeast, those of use in States like Arkansas, where we are
not wind states? Would it mean higher electric bills for our
working families and seniors, or how would we go about trying
to meet such a standard. I mean there is a reason why the
states that do not have one don't have one, as it relates to a
renewable electricity standard. You know, if you were a working
family, a senior in Arkansas, what would this mean if the
standard is passed? What would it mean, do you believe, for
them?
Mr. Rogers. Congressman, I recently spoke at the Clinton
school, and this issue came up there in the questions and gave
me a chance to kind of think about it and respond to it. And my
judgment is if you look at the 30 renewable portfolio standards
we have today, they are all different because every state has
different resources. And clearly, our company does business in
the Carolinas, in Kentucky, in Ohio, and in Indiana, and every
state is different in terms of the ability to produce wind or
the availability of solar. All you have to look at is a wind
map of the United States or a solar map to see the uneven
distribution of those resources.
The short answer to your question is for us that are not
blessed with wind or the right solar concentration, it is going
to mean higher prices without the ability to invest in the
technology within the state.
Mr. Ross. I guess my concern is we are not a wind state.
And I think, you know, where we have wind, we should use it.
Where we have solar, we should use it. I think we need to use
more coal, but we need to clean it up and hold the company's
feet to the fire to invest in the new technologies as they
become available. We need to do more nuclear if we are serious
about global warming. There are very few cleaner options.
Natural gas, we need to do it all, and everything we can move
from the science lab to the marketplace, I think we should.
Anyone on this panel want to speak to how biomass is
defined in this, and a lot of us believe if the definition was
expanded that would help us some, but we still think we would
have a difficult time getting to the required percent in the
time allowed. Does anyone know anything about biomass and how
we might be able to expand the definition of that to help
states like Arkansas that simply don't have enough wind? No?
Wrong panel.
Finally, let me just ask this: I know there is going to be
some exemptions early on for steel, but I notice they are not
for refineries, and yet we are too dependent on other countries
for our energy. Should there be some type of exemption on the
front end for refiners, just as we have for steel today?
Mr. Cavaney. Yes, sir, the refineries are the second most
energy-intensive industry within the country. We now currently
import 10 percent of our crude oil to use in our refineries.
There is about 6\1/2\ million barrels of world-class refinery
construction underway, a good measure of it targeted for the
United States, and if we don't protect those 150-odd refineries
we have here and the good jobs that they have, we are going to
experience both loss of our own production capability here, we
are going to significantly increase our imports, and we will
have some leakage of jobs elsewhere as people try to figure out
how to compete.
So we would like to work with the committee to take a look
at how we might be treated. We are unique. We are the only
covered entity who is both on their own emissions as well as
consumer emissions.
Mr. Markey. Thank you, Mr. Cavaney, and we want to work
with you and with the gentleman from Arkansas.
The chair recognizes the gentleman from Texas, Mr. Hall.
Mr. Hall. Thank you, Mr. Chairman.
I guess I would ask all of the witnesses this. You know,
most of us on this side, and most of the people I deal with and
hear from are convinced that we are going to have a very
weakened competitive position in the United States under cap
and trade, and I think you all recognize that and you probably
observed it from the questions from this side, and maybe from
folks that you have talked to on the streets that think we are
really going to be affected by it. I would like to ask each one
of you, what evidence does U.S. CAP have that China and other
developing nations would not take strategic advantage of what
is going to be a weakened competitive position in the United
States under cap and trade. You may not agree with this. Do you
all disagree when I say I think we are going to have a weakened
competitive position in the Unites States under cap and trade?
Is there anybody that disagrees with that?
Mr. Holliday. We must have provisions in the bill you are
preparing to take into account if China and India and other key
countries don't follow in a significant way that keeps us
competitive to make adjustments. But I think just the opposite
is true. If we start first, we have a much better lead than
letting them start first, and I think in the long run it will
help us to be more competitive.
Mr. Hall. But however we start, if it goes in the direction
it is going now, do you see any way in the world that it can't
present us with a very weakened competitive position under cap
and trade?
Mr. Holliday. Absolutely, I think it will mean that we will
be the leaders in developing the new technologies.
Mr. Hall. We will be paying, too.
Mr. Holliday. Absolutely, and that is what creates the
incentives to create the new technologies, but I think there is
a real opportunity for us, but there will be dislocations in
doing that, and we must take that into account for the
retraining of people for the new jobs.
Mr. Hall. For any of you that have ever been in Sears or
Wal-Mart or anywhere, when you bought something, you noticed a
piece of equipment there between you and the door that you had
to go by, and it is called a cash register, and you have to pay
for what you get. And the United States is going to have to do
that, and there is just one way to do of that I know, and that
is in continued and increased taxes on a generation not even
born yet if we carry out the program that this bill sets in
motion.
So if you don't agree that we are in a weakened competitive
position, just assume that we are going to be in a weakened
competitive position. Give me some evidence that you might have
that U.S. CAP has that China and other developing nations
wouldn't take strategic advantage of it.
Mr. Crane. Congressman, again, we think safeguards should
put in against that. But I would also say there is an
opportunity cost here and that is there is very strong evidence
right now that China, as an industrial entity and as an
exporter, is moving right now to take the lead in the electric
car, to take the lead in gasification, to take the lead in
nuclear power. These are all areas that are partially driven by
concern about carbon, so in a sense by moving forward from
where we sit, this give us, as a country, and opportunity to
lead.
Mr. Hall. You mean you think we have a good opportunity
under cap and trade? You think the United States does as this
proposes?
Mr. Crane. I absolutely think that a well-though-out cap
and trade system will create incentives for innovation that
this country is still the best at that can lead to development
of great export opportunities.
Mr. Hall. Do you think China is going by the cash register?
Mr. Rogers. Congressman, if I may, I would suggest to you
that if we design this bill right, we get the transition right,
it will not weaken our economy. It will put us in a position to
be stronger over time. And I say that as someone who, about 50
percent of the customers that I serve make less than $40,000 a
year, and they are in those Wal-Marts, and they are in Target,
and they are looking for low prices, and they are concerned
about increases, and their disposal income in the states that I
serve are lower than the national average per capita. So I
wouldn't be sitting here today if I thought a cap and trade
bill would hurt them. One that is poorly designed could hurt
them. One that is poorly designed could hurt our country vis-a-
vis China or other evolving countries, but the reality is, we
need to get the design right. If we get it right, it will make
us stronger.
Mr. Hall. But haven't you testified or someone testified
that your customer's rates would go up under the cap and trade
as you see it in this bill.
Mr. Rogers. It is my judgment that our rates are going to
go up anyway as a consequence of aging infrastructure and the
need to reinvest in it. It is a consequence of certain other
factors.
Mr. Markey. The gentleman's time has expired. The chair
recognizes----
Mr. Hall. Mr. Chairman, may I just ask unanimous consent to
include an article by the Washington Post on China Hopes
Climate Deal Omits Exports. I ask unanimous consent to put this
in the record.
Mr. Markey. A unanimous consent request has been made by
Mr. Hall in an unprecedented gesture by Mr. Hall to ask an
article from the Washington Post be put into the record, and
without objection, I want us all to be eyewitnesses to this
historical moment. So without objection, so ordered.
[The information was unavailable at the time of printing.]
Mr. Hall. If you are going to accept it, I may just
withdraw it.
Mr. Markey. It will be included in the record.
The gentleman from Ohio, Mr. Space, is recognized.
Mr. Space. Thank you, Mr. Chairman, and I would like to
thank the panel members for being here today and your testimony
today, but more so for your efforts with regards to U.S. CAP. I
think it really represents a huge step forward in approaching
these very challenging issues. I am convinced that there may be
no more difficult issue for Congress to deal with this term, of
all of those compelling issues out there, than climate change
and would agree that something must be done.
A lot of us are concerned about the effects it is going to
have, clearly and I just heard some testimony about the
international marketplace and how this may affect our ability
to compete internationally. I agree with Mr. Rogers when he
says if it is done right, it may enhance our ability to compete
internationally. My question, however, relates to domestic
marketplaces issues, and specifically, I think most of us who
come from Middle America, from coal-producing states, from
heavy manufacturing states, have some concerns about the
regional discrepancies and inequities that this may incur.
Mr. Rogers. Well, one of the things that U.S. CAP Blueprint
embodies is a focus on making the transition and the allocation
of allowances to help make the transition. We spent a lot of
time talking about that and recognized the linkage between cost
containment, and the transition so that it doesn't hurt our
economy during the transition, and we each can speak to that.
But I think what is missing in the bill today is really is
not addressed is the whole transition issue. How is that done?
I mean President Obama talks about 100-percent appears to have
pivoted off that a little. There is allocation of allowance
approach, and there are many approaches. So I think the
important thing that needs to get done is have a robust
conversation about the impact. In your state, 86 percent of the
electricity in Ohio comes from coal. It would be one of the
most directly impacted of all of the states of the country with
respect to an auction system, for instance.
Mr. Space. Let me stop you, Jim, because I have a limited
amount of time. I have only one more minute, and there was one
more issue I wanted to talk about, and that is carbon capture
and sequestration. The money that is devoted to CCS in the
bill, it is my hope, will help offset some of those regional
discrepancies that occur. Is that sufficient in your mind to
help take care of some of those regional discrepancies?
Mr. Rogers. I think it is great to have money invested in
carbon capture and sequestration, and over time, it will make a
difference in terms of developing the technology, but the short
answer is, what is going to solve the impact on different
regions is how you allocate the allowances, and that needs to
be addressed. That is the key to getting it right.
Mr. Space. I have got 30 seconds. Does anyone want to weigh
in? All right, thank you. I yield back my time.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Pennsylvania, Mr. Pitts.
Mr. Pitts. Thank you, Mr. Chairman.
Mr. Holliday, you said there could be dislocations or there
would be dislocations as a result of cap and trade. What
industry groups might suffer dislocations? I assume you mean
job losses.
Mr. Holliday. I think the opportunities is what I was
focusing on, and I believe that is for solar. I believe that is
for bio-produced fuels that can come from switch grass and corn
or products from this country that we are not using
productively today. And what we will need to do is take people
that are not employed or need retraining and be trained for
these industries. So I think a companion piece of this
legislation should be the training to help people move into the
new industries that will be growing.
Mr. Pitts. Well, how climate legislation treats the
manufacturing sector is a critical issue that is sometimes
overlooked. One specific concern of mine is how legislation
avoids unintended consequences in the manufacturing sector. We
can't pass a bill that creates huge disincentives against
future growth and manufacturing. How would you propose to guard
against a raid rise in energy costs for the manufacturing
sectors?
Mr. Holliday. First, I agree with you completely that is
very critical, and one thing we must watch very closely is
natural gas, because it is a key feedstock to so many
manufacturing plants in your state and across the country, and
we have got find a way that the exiting U.S. industry is not
totally disadvantaged, versus some places in the Middle East.
We need to take that into account in the bill.
Mr. Pitts. I think it is well accepted that a cap and trade
program would make our energy costs and production costs rise
relative to countries without similarly stringent emissions
controls systems, namely China and India.
There would be leakage. We had testimony in the hearing
earlier. There would be leakage of emissions in jobs to less
rigorous regimes. What would your recommendations be for
reducing this leakage, anybody?
Mr. Crane. I think we sound a bit like a broken record, but
I think getting the transition right, we have a very adaptable
economy with very adaptable companies in it, and avoiding a
shock to the system. And that is why we think the committee
should be very much focused on the transition period, and then,
we think the consequences that you are referring to would not
happen to significant extent.
Mr. Rogers. One of our companies is in Indiana, and we the
largest utility in Indiana, and Indiana is one of the largest
steel producing industries, and NewCorp is one of our largest
customers. And if prices went up there dramatically, and they
could if the transition isn't done right, that could lead to a
shutting down of plants and a loss of jobs, so I come back and
say we have go to get the transition right, or it could have a
devastating impact on our economy. The whole sport is around
the transition and protecting our economy.
Mr. Pitts. Well, if we pass the bill, as drafted, do you
foresee an increase in gasoline and electricity process, Mr.
Rogers?
Mr. Rogers. I think without seeing what I described in my
testimony as the elephant in the room, no conversation around
how the transition is going to work, I can't answer that
without seeing what that transition looks like. But I do
believe, over time, electric prices are going to rise in every
event, whether there is carbon legislation or not, and I
believe a renewable portfolio standard will add to pricing. I
think going to a smart grid will add to prices of electricity.
And I think, over time, carbon legislation will lead to
increase in prices. I think that is inevitable, and as I said a
few moments ago, it is not going to be cheap, and we just need
to face up to that and find a way to mitigate the impact during
the transition and find a way to create new technologies and
new jobs along the way.
Mr. Pitts. Dr. Beinecke, you wanted to say something?
Ms. Beinecke. Just to follow up to what Jim said, in U.S.
CAP, we actually dealt with the issue of the transition, and
that is why we made the proposal that we did for how the
allocation of the allowances could take place. I mean the issue
of going to gas or disruption, regionally, additional increased
energy costs, we addressed those directly, and the Blueprint,
actually, is designed to provide a blueprint, in fact, to
address how that transition could take place. I think that, in
many respects, looking back at the document gives our best
thinking on how to have that transition occur most smoothly.
Mr. Pitts. And did you come up with a price cost to remove
a ton of CO2 in the study?
Ms. Beinecke. We didn't come up with a price, but we came
up with both how the allowances could be allocated, and then
what cost-containment mechanisms would be with offsets and
other mechanisms that are designed to do that, and included a
major investment in efficiency to lower the cost of the
consumption, so all of these things are linked, and I guess
that is another important aspect is the linkage.
Mr. Pitts. Thank you. My time is up.
Mr. Markey. The gentleman's time has expired. Just for the
record, it is Dr. Bernanke for the banking crisis, and it is
Dr. Beinecke for the climate and energy crisis. They are two
different doctors for two different problems.
The chair will recognize himself. We are waiting, by the
way, for two roll calls to be called imminently on the House
floor, at which point we will end the questioning for this
panel. We will then break for those roll calls, and then we
will move onto the next panel.
I am going ask each one of you, if you could, quite
briefly, just give us a brief response to the foundation
principle of U.S. CAP, which is that action is needed now.
Could you give your brief individual perceptions of what the
consequences are for failing to act now in your opinion over
the next generation.
Mr. Crane. We are sitting on $1.5 billion that we want to
invest in low- and no-carbon technology, and our assets tend to
be 50- to 60-year assets, so we need certainly, and so we can
start on this problem right now, but we need what the
guidelines are in the Waxman-Markey Bill.
Mr. Markey. Thank you, Ms. McDonald?
Ms. McDonald. Like Mr. Crane, our business is a long-term
business, and we certainly believe that this is an issue that
is a global issue. We are experiencing a lot of regulatory
movement in Europe and elsewhere around the world, and so we
believe that it is important for the United States to act as
well, and we are looking for the certainty that that would
provide for our own long-term investments as well as the market
stimulus that it would have for a lot of our products.
Mr. Markey. Thank you. Dr. Beinecke?
Ms. Beinecke. We are part of U.S. CAP because we think that
the science on global warming is powerful and overwhelming and
we need action soon. We recognize that a solution that works
for the environment has to work for the economy, too, and that
business has to be part of it, which is why were willing to sit
at the table with these companies and many more to try to work
out our differences and come up with a proposal that we think
can move us aggressively to reduce carbon emissions and address
the economic issues that have been raised today in this
hearing.
Mr. Markey. Mr. Rogers?
Mr. Rogers. Mr. Chairman, I adopt all of the statements
that have been made to date and would add to it by saying that
by starting now, it will translate into a lower cost of
compliance over time and a better ability to smooth out the
cost impact on consumers.
Mr. Markey. Mr. Cavaney?
Mr. Cavaney. Mr. Chairman, we are energy providers to the
consumer, and we need investment certainty because the energy
business is very long lead times and long investment cycles. We
think a national approach gives us an opportunity to provide
products without the variability of many states. We think that
is important, and we feel that at the end of the day, the
competitiveness that we will have globally, having gone through
this period and adopting a program like outlined in the
Blueprint makes great sense.
Mr. Markey. And Mr. Holliday?
Mr. Holliday. Two points: if we don't act, China will take
the lead from us in the technology, and that is serious.
Second, I lead, I lead a group of scientists, and they remind
me every day, this science is real, and we need to act now.
Mr. Markey. Thank you. And Mr. Rogers and Mr. Crane, very
briefly, what additional partnerships beyond U.S. CAP do you
think your industries will have to reach with the automotive
industry, with the building industry, with energy-efficiency
industries, in order to put together partnerships to solve the
problem.
Mr. Crane. Well, I think where the electric industry has
come up a little short is working on the transportation sector,
because again, we are focused on solving our own problem, which
is important, but the fact that we can solve the transportation
industry's problem is a big opportunity for us, and I would
like to see our industry do more in that area.
Mr. Markey. Great, Mr. Rogers?
Mr. Rogers. I would say that in U.S. CAP, many of those
industries are represented and have been part of this
discussion, and I would say that we are investing with respect
to the auto industry, and our own company has invested
significantly so that our grid will be ready when the plug-in
hybrid is available.
Mr. Markey. And what does that future portend, Mr. Rogers,
in terms of the viability of the plug-in hybrid future of our
country?
Mr. Rogers. I believe, first, we need to transform our grid
from an analog grid to a smart grid. We are on the way to dong
that. And secondly, I believe that produces an opportunity with
a plug-in hybrid, and I think it is sooner rather than later
because the amount of work that is going into this is
remarkable across the country. And as I talk to many auto
companies, they are at work with respect to this, and so I
believe it is in the future, and it will give us a greater
utilization of our fleet, and will lower cost over time on a
per-unit basis.
Mr. Markey. Great, thank you, Mr. Rogers. And Mr. Cavaney,
we will give you the final word.
Mr. Cavaney. I think one of the key things is to establish
a price of carbon that will work across industries that allows
people to have metrics that are coming even though you have to
cooperate rather than produce the same products, and I think
that the efforts that are underway here now are the beginning
to try to identify what that is, I commend you on it.
Mr. Markey. Thank you, Mr. Cavaney, very much. The chair's
time is expired. I now turn and recognize the gentleman from
Michigan, the ranking member on the subcommittee, Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman. As I indicated earlier
today, I am mostly concerned about jobs and the job loss,
particularly with a cap and trade bill. And Mr. Cavaney, you
talked a little bit about the cost, multibillion compliance
cost that you will all suffer under. And you know, that I think
Aruba has got the largest refinery in the world, Venezuela.
Something tells me that Aruba is never going to be underneath
this legislation. We may try our best to get India and China,
but something tells me that Aruba is not going to have the off
ramp to proceed.
What is going to happen? Can you give some type of
commitment as you look to produce gasoline for American? If you
have additional costs in the multibillions to comply with this,
what is the rest of the industry going to do in terms of
domestic refinery production here?
Mr. Cavaney. Well, that is one of the things that we worked
on together with our colleagues in U.S. CAP was to create these
complimentary measures that address situations like this.
Again, ours is an energy-intensive industry. We are going to be
susceptible to those threats of increased imports if we are too
disadvantaged, but there are the allowance allocations. There
are the opportunities of----
Mr. Upton. But at some point, they come due. You might have
a year or two off, but at some point, they are going to come
back and hit you.
Mr. Cavaney. But our other point is that if we get the
certainty for investment here, we produce world-class materials
in our industries for creating new opportunities. And we are
investing very heavily, not only just in oil and gas, so we
think that given framework similar to this that come through
the system and giving that powerful signal is going to be our
best effort to compete against, as Mr. Holliday as said,
foreign nations which are not standing still.
Mr. Upton. Ms. McDonald, same question for you. Alcoa
produces primary new aluminum and recycled aluminum in a pretty
good quantity, I think, in this country. Is that right?
Ms. McDonald. Indeed.
Mr. Upton. What is going to happen to Alcoa as it relates
to the percentages now, versus other countries where you might
have sizable operations? Isn't there going to be a magnet to
take those jobs someplace else if we impose these new cost
burdens on them?
Ms. McDonald. I think our experience is very similar to
what has been described. The producers of aluminum in Russian
and China, now, are large because they have their own markets.
And there is going to be a global regime impacting greenhouse
gas emissions. Each country is going to be regulating it
differently, but we think that for the United States to start
to move now to provide that sort of long-term certainty and to
provide the sort of transition and cost containment that we
proposed as part of the U.S. CAP Blueprint would be the
required conditions for us to get ahead of that game and to
reduce the costs over the long term.
Mr. Upton. OK, I am running out of time. Thank you. Mr.
Rogers, you confessed that you are the third-largest emitter.
What percentage of electricity, now, do you produce that would
be considered under a sort of Upton-Rogers definition of
renewable?
Mr. Rogers. We are producing about 500 megawatts of wind.
Mr. Upton. But as a percentage?
Mr. Rogers. It is a very small percentage. I think,
nationally, wind represents about one percent of the total.
Mr. Upton. So are you below one-percent wind now?
Mr. Rogers. We are, but if you look at our nuclear, about
96 percent of our electricity comes from coal and nuclear, 70
percent from coal and the remainder from nuclear.
Mr. Upton. As you know, I am one that supports using
nuclear, which is greenhouse-gas emission free, to be counted,
let the market work to that end. But say we are not able to get
that provision in. We are going to try, but let us say we are
not able to get that in, and we have the definition that passed
as the Udall-Platts Amendment in the last Congress. How much
will it cost you, Duke Energy, to meet a 25-percent standard by
2025?
Mr. Rogers. I don't have that number at my fingertips, but
I will send it to you and submit it for the record.
Mr. Upton. Would it be sizable?
Mr. Rogers. It will.
Mr. Upton. And the last question that I have, I have four
seconds left. I had breakfast this morning with the Chairman of
DTE. One in three customers in that region of Michigan are in
arrears on their bills. Hundreds of millions of dollars will be
uncollected. It is the same with other utilities around the
country, more than 20 percent. What is the percentage today for
Duke Energy that is uncollectable?
Mr. Rogers. It is much lower than that, but it varies from
state to state, but I would be delighted to submit that number
to you, also.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Texas, Mr. Green.
Mr. Green. Thank you, Mr. Chairman, and I appreciate the
opportunity for the hearing. Mr. Cavaney, I know a lot of these
questions may have been asked by different members, and the
whole panel, but it is kind of like Congress, we say it is not
said unless all of us say it, so we may have some duplication.
I know the U.S. CAP Blueprint for legislative action called
for the fuel-related GHG performance standards. Does the low-
carbon fuel standard as written into the draft align with the
U.S. CAP Blueprint for legislative action that is called for,
and if not, how is it different?
Mr. Cavaney. No, sir, the Blueprint suggest that we not
have an overlay of a low-carbon fuel standard on top of
renewable fuel standards, and there is very good reasons why. A
discussion draft has what I would call a donut hole in there.
There is a period of time where from 2014 to 2022, we are to
produce a low-carbon fuel with decreasing amounts, but during
that entire period, we are not permitted to include all of the
renewable fuels that we have already incorporated and will be
incorporating into our renewable fuel standard. Also, there is
a reach back to 2005, which does not give us permission to have
a baseline anymore forward. We in North America and parts of
South America rely on heavier fuels, which makes it much, much
harder without the use of renewable and other things to reduce
our standards, so we are going to have a very real problem
trying to satisfy the consumer during that period, so we would
suggest a closer look at the Blueprint in trying to harmonize
that so we end up with one fuel.
Mr. Green. Having heard the question from my colleague from
Michigan for Alcoa, I used to have an Alcoa plant in Houston,
and it had a number of employees who were constituents. The
Waxman-Markey discussion drafts contains the provision that
would supply additional credits. What are you thoughts
regarding whether refineries should be eligible for that, for
those rebates? Do you think refineries ought to be included
with chemicals and aluminum and other products?
Mr. Crane. My view is you should take a look at each of
those and look at their exposure, and find out whether or not
you think that they are going to be somebody who is going to
have leakage during the process. We think, looking at our
industry, that we would like to work with the committee and try
to be able to gain that opportunity.
I don't recall specific conversation about cogen within
U.S. CAP, but I mean cogen, obviously is an exceedingly
efficient form of energy, so I think it's something that should
be supported as a matter of public policy.
Mr. Green. Thank you, Mr. Chairman, and I appreciate the
time and again the responses, because energy efficiency should
include cogeneration in some of our plants if we can do it.
Thank you.
Mr. Markey. I thank the gentleman. And did you exclude the
natural gas from the future base load for some reason, Mr.
Crane?
Mr. Crane. I think natural gas plays a role in the future
base load, but we saw what happened when the country depends
exclusively on natural gas for base load. It leads to a price
spike that is not good for the economy.
Mr. Markey. OK, thank you, Mr. Crane.
The chair recognizes the gentleman from Florida, Mr.
Stearns.
Mr. Stearns. Thank you, Mr. Chairman. My question is for
Mr. Rogers and Cavaney. It turned out in Europe, the granting
of free of allowances led to this huge windfall of profits by
the utilities. I guess the question is isn't the U.S. CAP just
sort of a grand bargain to get the business support in exactly
the same way? I mean that is what it looks like to us on this
side, anyway. You might comment on that, Mr. Rogers, and then,
you, Mr. Cavaney.
Mr. Rogers. There are two important points. First of all,
what happened in Europe was a consequence of not following what
we did with the cap and trade system for sulfur dioxide. One,
they didn't have Bashers, so they couldn't allocate it on
Basher's, and secondly, they had a short-term experimental
period that created some gaming in the process, and it had a
fundamentally different regulatory regime for power companies.
They had deregulated, entirely, the industry there. So you have
a different fact circumstances here in the U.S. today.
Mr. Stearns. OK, I appreciate that.
Mr. Rogers. But here is the second important point, and
that is this: under our proposal all of the allowances go
directly to a local distribution company or a local utility,
which are regulated by the state, and there are no windfalls to
utilities or corporations with respect to the granting of
allowances under our proposals. That is one of the great myths
that have floated around, and it is just wrong.
Mr. Stearns. OK, and Mr. Cavaney?
Mr. Cavaney. Yes, it is called free allocation and there is
a misnomer there. Really, the intent is that this allowance
that is made is to cover the unrecoverable costs of
implementation here so ultimately the beneficiary of this is a
softening of the volatility and increased prices that the
consumer may experience about that, and there is an opportunity
to look at these things and we are not going to be repeating,
as Mr. Rogers says, the kind of incidences that occur in
Europe.
Mr. Stearns. Dr. Beinecke, we went on your Web site, and
your Web site states, ``New nuclear power plants are unlikely
to provide a significant fraction of future U.S. needs for low
carbon energy. NRDC favors more practical, economical,
environmentally sustainable approaches to reducing the United
States and global carbon emissions.'' Now, here is a power
source that emits zero carbon dioxide. Why is this not a
solution to reduce carbon emissions based on what your Web site
says? I mean, it seems to me that you should be at least
neutral on this.
Ms. Beinecke. I would say we are generally neutral because
we don't oppose the existing 20 percent that is already
provided by nuclear power. What we are really saying there is
that we think there is tremendous opportunity in efficiency
first and foremost, in renewables, in new technologies that
need to be unleashed, that nuclear power is a mature power
source in this country that has, you know, been with us for
decades and it will continue to be, but what we are looking at
is, what do we need to unleash in the future to really reduce
carbon emissions, and those are new technologies that and new
investments----
Mr. Stearns. Well, nuclear----
Ms. Beinecke [continuing]. That haven't been experienced
yet.
Mr. Stearns. But nuclear has zero carbon dioxide and no
carbon emissions and you want to reduce carbon emissions.
Ms. Beinecke. Well, what I said is that I wouldn't reduce
the 20 percent that is there but that what we are looking for,
particularly from NRDC's point of view, is, what are the new
things that we have to bring online, and the bill is really
designed to unleash the area of energy efficiency and
appliances and homes and buildings which is both incredibly
cost effective, actually earns money rather than costs money.
So what we are focusing on is what we think the solutions are
going forward that are not yet on the table, and we think, you
know, nuclear is on the table and it will continue to be on the
table and it will be a part of the solution----
Mr. Stearns. Do you think----
Ms. Beinecke [continuing]. But we don't have to be the
advocate for it.
Mr. Stearns. Do you think there should be a title in this
bill for nuclear? Right now there----
Ms. Beinecke. I don't think it is necessary. I think there
is a title in the 2005 energy bill, the 2007 energy bill. I
don't think that all of the subsidies and programs that were
developed in those two bills have actually been fully
implemented yet, so do we need another one right now? I would
say no.
Mr. Stearns. This is in fact based upon we have already
something that is practical, technologically efficient and you
don't think that we should have any encouragement for nuclear.
I understand.
Ms. Beinecke. That isn't what I said. I am sorry, sir. What
I am suggesting is that there was a lot of encouragement in the
last two energy bills and that I don't think that it is
necessary at this time in this bill.
Mr. Stearns. All right. Thank you, Mr. Chairman.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentlelady from California, Ms. Harman.
Ms. Harman. Thank you, Mr. Chairman. I have been sitting
here for a few hours. I know you have too and so have the
witnesses but I want to say that the testimony of this panel as
far as I am concerned is the central testimony that we need,
and their ongoing advice is exactly for me the roadmap forward
for this committee for a couple of reasons. Number one, most of
you on the corporate side are in the business of producing
materials and fuels that are going to be regulated under
whatever we do. You know exactly precisely what the impact of
this regulation will be on you, and I have listened carefully
and all of you are saying that you want certainty so that you
can plan forward, and I have also heard you say, or at least I
heard Mr. Rogers say, and I applaud it, that at a time of
economic downturn, which we are in, no one would quarrel with
that, we can do this better because we are more focused on the
economics than the theology. Does anyone want to quibble with
anything I just said? No? Good.
So my next idea, Mr. Chairman, is, instead of going to the
vote, we ought to lock the doors and get our members here and
sit down with these folks and with the kids in the green tee
shirts for our inspiration and finish this. What do you think,
Mr. Chairman?
Mr. Markey. We will be here late tonight so we might have
to--I don't think we are going to have a problem. We have every
member's attention for 5 hours.
Ms. Harman. I have been, and I think none of you has missed
it, carrying this prop around with me and holding it up at all
occasions. It is at the top of my little folder of materials
and I have had a chance today to read it more carefully than I
had, and I would observe that it is a much more detailed
blueprint than some who have been asking questions might know.
It is not a bill but it surely has at least what I would use,
if I were a thoughtful legislator, which I hope I am, to craft
a bill, and guess what? The draft bill that we have has been
based on these principles. Everybody agree with that? Good.
Let me finally say, because maybe there are a few more
members who want to ask questions before we have to go, that I
have made another point which is that the composition of U.S.
CAP is bipartisan. I don't want to ask anyone your party
affiliation but I do want to ask the group, is that statement
of mine correct? Are some of the members of U.S. CAP, the
leaders of these organizations, Republicans and some of them
Democrats? Is that true?
Mr. Crane. Yes, that is very true.
Ms. Harman. That is very true? Well, good. So let me just
finally say that, Mr. Chairman, I think we should regularly
call on these people and the other 20 members of U.S. CAP who
have participated in this work product and I really want to
commend you again for using this consensus document as the
basis for the legislation. I think we are going to end up
somewhere right about here and we are going to do some very
good work this year and provide the certainty that industry
needs. I yield back.
Mr. Markey. We are going to follow the gentlelady's advice
and the U.S. CAP as well.
To the gentlemen from Illinois, Louisiana and Connecticut,
here is where we are. The gentlemen from Louisiana and
Connecticut have yet to ask questions. There is about 12
minutes left to go. If the gentleman from Illinois would agree
to this, I would like to divide the time in 4-minute segments
between the three of you, if that would be acceptable, and then
we can adjourn with this panel being dismissed. Would you mind?
Mr. Shimkus. I think I can do it that way, Mr. Chairman.
Mr. Markey. Thank you. The gentleman is recognized.
Mr. Shimkus. Thank you. Let me--the devil is in the
details, and with respect to my colleague from California, who
we all have great respect for, there is a gaping hole in this
bill, which is the credits, which is the allocations, and what
we fear is a stimulus-type proposal that gets dumped for markup
at 11:00 the night before a 10:00 markup in which you all don't
know whether you will be incentivized or harmed and it will get
rammed through. Would you not agree that airing out the
allocation issue in a transparent process in a hearing just
like this would be helpful? Mr. Crane?
Mr. Crane. Well, the allocation auction issue I think took
up the most of the U.S. CAP's time over the 2\1/2\ years so I
agree, we all agree, I think that is a very----
Mr. Shimkus. Well, let us ask everyone. Ms. McDonald?
Ms. McDonald. We certainly support the whole approach that
is contained in the blueprint, which is the allocation process.
Mr. Shimkus. But I am talking about, don't you think we as
a Nation would be better if we had these credits here that we
could have a hearing on over a period of days to discuss this
allocation process? How long did it take you all to do it?
Ms. McDonald. We certainly said that we want to work with
the committee on that basis.
Mr. Shimkus. Well, the question is, would we not be better
to have a hearing on the credits and the allocations so that
you would know and the public would know what is in the details
of this bill, yes or no?
Ms. McDonald. It is not up to us I guess to----
Mr. Shimkus. It is up to you. You are testifying. My
question is to you as an individual, would it not be beneficial
to your company to know the details in a transparent process in
a hearing on the bill, yes or no? You don't know what to know?
Ms. McDonald. We certainly want to know and----
Mr. Shimkus. So would it be helpful to have a hearing on
the credit allocations on a global climate change bill, yes or
no?
Ms. McDonald. We would certainly participate in the
process.
Mr. Shimkus. Why don't you say yes or no, yes or no?
Ms. McDonald. If we were invited to a hearing, we would
certainly----
Mr. Shimkus. Would it be helpful to your shareholders to
know the cost of doing business prior to us voting on a bill?
Ms. McDonald. Yes, we would certainly----
Mr. Shimkus. And could we not have that if we had the
allocations published?
Ms. McDonald. We would certainly want it published, yes.
Mr. Shimkus. Thank you.
Doctor?
Ms. Beinecke. If there was a hearing, we would love to come
and discuss it just as we have today with the allocations.
Mr. Shimkus. And that would be helpful in us clearing up a
lot of this issue since there is a gaping hole, a glaring hole
in this bill about who is paying for what?
Ms. Beinecke. I think a transparent process would be
helpful and----
Mr. Shimkus. Thank you very much.
Mr. Rogers.
Mr. Rogers. On behalf of my customers, I would recommend a
hearing on that specific issue.
Mr. Shimkus. Great. Mr. Cavaney?
Mr. Cavaney. If transparent is possible, we will be there
anytime, anyplace, and I think you should publish afterwards
how the allocation was distributed.
Mr. Shimkus. Thank you.
Mr. Holliday?
Mr. Holliday. It is critical you get this part right,
whatever process works.
Mr. Shimkus. And obviously if we had a hearing and it was
transparent, that would be helpful to you?
Mr. Holliday. Yes.
Mr. Shimkus. Let me just finish because I have limited
time, Mr. Chairman. For ConocoPhillips, the section 526 of the
2007 energy bill provides a prohibition. Now, I have a great
refinery collocated near my Congressional district that is
really relying on the ability to use oil sand from Canada.
Section 526 of the 2000 energy bill is a prohibition. Do you
think that that should be addressed?
Mr. Markey. I ask the gentleman to allow it to be submitted
for the record so the other members can get their 4 minutes. Is
that possible? I thank the gentleman. I appreciate it.
The gentleman from Louisiana is recognized.
Mr. Melancon. Thank you, Mr. Chairman. I appreciate the
opportunity to ask questions.
Mr. Cavaney, if I could, one of the things that I am
concerned about with the refining section of the bill has to
deal with, Mr. LaHood insisted that the bill was not going to
harm the refiners, but if we are going to try and hold refiners
responsible for consumer emissions, then do I understand that
you are going to be able to get 100 percent of your money back
out of the----
Mr. Cavaney. No, sir. Using EIA data for, I would say,
2012, and if you use a cost of $25 a ton for carbon, the
allocation, our compliance obligation is going to be $68
billion. The only way we can pass all of that along, 100
percent along, is under two conditions: we either have
inelastic demand or we have elastic supply. Neither one of
those conditions exists in the United States refining business.
So therefore zero is not the answer when you talk about an
allowance allocation for the oil and gas industry. We also have
to cover our own emissions so we are the only industry that is
in both of those buckets, so we are in the process now. We have
looked at all the studies. They don't reflect the world going
forward. We are doing some work with the committee and others
but some adjustment needs to be made there and we also ought to
address the area call for the energy-intensive and the trade
exposed because we also have a lot of opportunities for
incoming imports to displace good jobs here in United States.
Mr. Melancon. And that is one of my major concerns right
there. So if I am producing oil and gas in south Louisiana,
primarily oil, and I start shutting down refineries because you
can't stay in business, then what are we going to do, ship oil
to foreign refineries and then ship gasoline back into the
country?
Mr. Cavaney. Well, that depends on whether people want our
oil. We may not be able to get our oil sold at a reliable price
because other people may want to use different grades and so we
will be just out in that big bucket of worldwide global supply.
Mr. Melancon. So instead of us just being dependent upon
foreign countries for our energy needs in this country, we are
going to be dependent upon their energy that they produced,
their refiners and their ability to supply our country and keep
our economy going?
Mr. Cavaney. It doesn't have to be that way if we design
this properly so that the protections are in place and we get
to cover our uncoverable costs as we go through this
implementation period.
Mr. Melancon. I would hope that the folks in your industry
would work with us. I need to find a way to make sure that the
United States gets as close as it can to energy independence in
the future because we are definitely not anywhere close to
that. This to me is important about carbon emissions but it is
even more important to me about economic stability and the
power of this country to stay an independent and strong Nation,
and without our own energy sources, we are going to be in
trouble.
Thank you. I yield back my time.
Mr. Markey. And we appreciate the gentleman yielding back.
The chair recognizes the gentleman from Connecticut.
Mr. Murphy of Connecticut. Thank you very much, Mr.
Chairman. I thank the panel for sticking with us this long. You
know, we are all very proud of the clean new technology
companies that we have in our districts but they unfortunately
are I think rapidly becoming the exception rather than the
rule. We used to lead the world on solar and wind development
and now places like China and Japan are vying for the top spot
in photovoltaic production, and so I wanted to ask just one
question to the panel, which is, this bill posits that by
creating new market mechanisms through an RES and a cap-and-
trade system that you are going to command the kind of private
investment in clean new technologies that we want and need.
There is also the route that countries like Korea and China
have gone in making major public investments. I think 80
percent of Korea's stimulus bill was directly invested into
these technologies.
So the question is, do you believe that the market
mechanisms in this bill really are going to provide real
stimulus to that clean energy industry or are we going to also
need a real mix of direct subsidy to try to back up the market
mechanisms that we have included here?
Mr. Crane. Jim and I just came back from a green energy
technology conference in California, and the entrepreneurs are
alive and well but what is happening now is, they actually have
the product that they didn't have 1 or 2 years ago but the
market has dried up and the market has dried up because people
like us aren't ready to invest until we know what the system is
going to be. So I actually believe completely that a well-
drafted bill will unleash--it will create the market that will
allow that innovation advantage to actually continue in this
country.
Mr. Murphy of Connecticut. Any other comments? Let me then
ask more specifically, one of the queries and concerns in the
last panel was whether we are going to harness that technology
and those industries domestically or whether the market
mechanisms in this bill is just going to provide incentive for
the production of these technologies somewhere else. Are there
other things we can do in this bill to try to incentivize
domestic production or is that going to happen naturally?
Mr. Holliday. I think speaking from our perspective at
DuPont, we do a lot of research, I would study how other
countries are incentivizing to make sure the technology is not
only developed in this country but commercialized first in this
country. I think there are mechanisms you can put in place the
way you allocate your R&D dollars that could help that greatly.
Mr. Murphy of Connecticut. Thank you very much. Thank you,
Mr. Chairman.
Mr. Markey. Thank you, and we thank this very distinguished
panel. Your work is the basis for the product that Mr. Waxman
and I have put before the members. We will be consulting with
you frequently for your expertise as we fill in additional
details in the legislation but you are providing an enormous
service to your country and we thank you so much.
With that, the hearing will stand in recess until 4:00 at
which point we will recognize the next panel for their opening
statements.
[Recess.]
Mr. Markey. We welcome you all back to this historic
hearing, and we apologize once again for the delay. We have no
control over the length of the roll calls as they are conducted
on the floor of the House, but we now are in a situation since
those were the last roll calls on the House Floor that we can
now have an uninterrupted hearing with brilliant witnesses and
continue to build out this record on how to handle these very
important issues that are facing our country.
Let me begin by yielding for our first witness to the
gentleman from Pennsylvania, Mr. Doyle.
Mr. Doyle. Mr. Chairman, thank you, and it is my pleasure
to introduce one of the witnesses we have on our panel this
afternoon, Mayor John Fetterman from Braddock, Pennsylvania.
Braddock is a community in Allegheny County, and it is
Allegheny County's poorest community. This was once a thriving
blue-collar town of 20,000 people and a place where my father
spent 20 years of his life working at U.S. Steel. Today
Braddock has a population of 2,800 people. John Fetterman has
been someone who has been working tirelessly in his first term
as mayor of Braddock and playing a critical role with youth
employment in Braddock through green jobs. He had with the
assistance of some foundations put together urban farming,
community gardens. He has been assisting residents in Braddock
to create vegetable gardens, and he is currently working on a
program where youth will be assisting in the installation of
the first green roof in the Mon Valley. He is someone who
thinks outside the box and is trying to revitalize a community
that is struggling and is hopeful that what we do today with
this legislation will start a revolution in towns like Braddock
and get people building things again. So it is my pleasure to
have him here today and my pleasure to introduce him to the
committee.
Mr. Markey. And whenever you are ready, Mr. Fetterman,
please begin.
STATEMENTS OF JOHN FETTERMAN, MAYOR, BRADDOCK, PENNSYLVANIA;
PAUL N. CICIO, PRESIDENT, INDUSTRIAL ENERGY CONSUMERS OF
AMERICA; KEVIN KNOBLOCH, PRESIDENT, UNION OF CONCERNED
SCIENTISTS; DR. STEVEN HAYWARD, F.K. WEYERHAEUSER FELLOW,
AMERICAN ENTERPRISE INSTITUTE; DAVID KREUTZER, SENIOR POLICY
ANALYST IN ENERGY ECONOMICS AND CLIMATE CHANGE, THE HERITAGE
FOUNDATION; NATHANIEL KEOHANE, DIRECTOR OF ECONOMIC POLICY AND
ANALYSIS, ENVIRONMENTAL DEFENSE FUND; AND MYRON EBELL,
DIRECTOR, ENERGY AND GLOBAL WARMING POLICY, COMPETITIVE
ENTERPRISE INSTITUTE
STATEMENT OF JOHN FETTERMAN
Mr. Fetterman. Mr. Chairman, Mr. Barton and members of the
committee, thank you for inviting me here today. I am John
Fetterman and I am proud to be the mayor of Braddock,
Pennsylvania.
My testimony this afternoon will be short and straight to
the point. I don't pretend to be an expert in economics or
energy policy but I do know what I have seen with my own eyes.
The path we are on has failed. In my part of Pennsylvania, we
have lost a quarter of a million jobs in the steel industry in
the past decades. Once-thriving towns like Braddock are facing
economic devastation. Communities and families face desperate
times. We need change and we need it now.
For decades we have watched jobs leave America. For decades
we have heard about the dangers of America's addiction to
foreign oil. For decades we have seen real changes blocked by
those who profit from the status quo. If there is a silver
lining to this current economic crisis, and from where I sit,
it is awfully difficult to find one, it is that America may now
finally be ready to find a new path and to face the tough
questions we have ignored for so long.
I believe that new path starts with a cap on carbon
pollution. By driving massive new private investment into clean
energy industries, a cap offers us the chance to create jobs,
and not just high-tech positions making solar cells or exotic
technology but the kind of blue-collar jobs that can revive a
town like Braddock or Akron or Detroit. Jobs making 250 tons of
steel or 8,000 parts it takes to make a wind turbine, jobs
making new windows like they do in an old factory in
Vandergrift, Pennsylvania, a factory that was shut down but
revived to make those very windows, or LED lights like they
make in North Carolina and export to China or one of the
thousands of other products it will take to build this new
energy economy.
The government investment in clean energy in the Recovery
Act was a good start but we will not truly transform this
economy until we spur the private sector into action. This
nation is full of entrepreneurs, investors, inventors and
steelworkers prepared to jumpstart a true energy revolution,
and this will only happen once you pass a cap on carbon
pollution. To win the most jobs and the most economic
opportunity, we must be a market leader in these new products
and technologies, and a cap on carbon in the United States will
spur our companies to be the early movers in these new markets
supplying solutions at home and selling these solutions across
the globe.
So I respectfully ask this Congress to please be bold, to
overhaul our economy and free us from our addiction to imported
oil. I ask you to ignore the scare tactics of the well-funded
interests and to answer the call of Braddock to build a new
energy future and a new American century with the ready hands
of America's workers.
Thank you for this opportunity.
[The prepared statement of Mr. Fetterman follows:]
[GRAPHIC] [TIFF OMITTED] T2878A.085
Mr. Markey. Thank you, Mr. Fetterman, very much.
Our second witness is Paul Cicio. He is the president of
the Industrial Energy Consumers of America, a trade association
of manufacturing-sector companies. Mr. Cicio, whenever you feel
comfortable, please begin.
STATEMENT OF PAUL N. CICIO
Mr. Cicio. Thank you, Mr. Chairman and Ranking Member
Upton. Members of the committee, the Industrial Energy
Consumers of America is the only trade association in the
United States whose members are exclusively from the
manufacturing sector, energy intensive and cross sector. Our
companies employ over 850,000 employees nationwide.
Manufacturing is the only sector of the economy that has a long
history of significant investment in energy efficiency. Our
greenhouse gas emissions are only 2.6 percent above 1990 levels
while other sector emissions are up about 30 percent. We
provide the majority of cogenerated electricity for the
country, which is over 100 percent more energy efficient than
electric utility production. We are national leaders in the use
of recycled steel, aluminum, glass and paper, which is also
extraordinarily energy efficient. Our products provide the
building blocks necessary to grow the economy and reduce
greenhouse gas emissions when our customers use our products.
We are a model for doing the right thing for business and
the environment. Unfortunately, we do not see provisions in the
bill that either reward us for our past energy efficiency
actions, use of combined heat and power or recycling or
encourage us to do more. This is a shortcoming of the bill. We
have several key points: Number one, legislative provisions
that are designed to preserve domestic competitiveness of the
industrial sector and prevent jobs from moving overseas will
create in our concern about retaliatory trade actions. Neither
Congress nor the EPA can effectively regulate our offshore
competitors through their actions.
Number two, we should not impose unilaterally on U.S.
manufacturing costs. A global agreement that addresses the
industrial sector uniformly and in the context of fair trade
and increasing productivity is the only way to avoid job
losses.
Number three, U.S. demand for our products will continue.
It is just a question of whether they will be supplied
domestically or imported. We compete in a global marketplace
where pennies on the dollar can determine whether we win or
lose within a national competition. Unfortunately, as Mayor
Fetterman said, from 2000 to 2008, imports are up 29 percent
and manufacturing employment fell 22 percent, a loss of 3.8
million jobs. These numbers would indicate that we are losing
that competitiveness battle.
Number four, the provisions entitled ``Preserving Domestic
Competitiveness'' provides for 85 percent of average needed
allowances. Without 100 percent allowances and without
reimbursement for higher natural gas and electricity costs, we
will lose competitiveness, relative competitiveness.
Number five, increasing our greenhouse gas costs before
comparable costs are placed on our competitors, our global
competitors, will put competitiveness at risk. Countries like
China and India have said they will not jeopardize their
competitiveness and neither should we. Congress must understand
that when manufacturers from developing countries engage in
international trade, they no longer have developing-country
excuses for not meeting comparable greenhouse gas reduction
requirements and costs. Many of them are world-class
competitors using the latest technology and they are owned by
their governments and often they are subsidized.
Number six, reducing our Nation's greenhouse gas emissions
from about 7 billion tons to 5 billion tons in a relatively
short time period without a readily available abundant supply
of low-cost carbon that is affordable will drive up energy
prices. Energy efficiency and renewable energy will help but it
will not close the gap. Carbon capture sequestration and
nuclear will not be contributors over the next 10 years, which
means the power sector will be dependent upon natural gas for
power generation. Expansion of renewable energy means electric
utility companies will be required to build natural gas-fired
backup plants. It is extremely important to note that natural
gas-fired power generation sets the marginal price for
electricity. The implications are significant. As demand for
natural gas goes up, prices go up and electricity across the
country, a double hit.
Thank you.
[The prepared statement of Mr. Cicio follows:]
[GRAPHIC] [TIFF OMITTED] T2878A.086
[GRAPHIC] [TIFF OMITTED] T2878A.087
[GRAPHIC] [TIFF OMITTED] T2878A.088
Mr. Markey. Thank you, Mr. Cicio, very much. You will have
opportunities in the question-and-answer period to expand upon
your thoughts.
Our next witness is Mr. Kevin Knobloch. He is the president
of the Union of Concerned Scientists. He has more than 30 years
of legislative and advocacy experience and has served as the
president of the Union of Concerned Scientists since 2003. We
welcome you, Mr. Knobloch. Whenever you are ready, please
begin.
STATEMENT KEVIN KNOBLOCH
Mr. Knobloch. Thank you, Chairman Markey, Ranking Member
Upton, distinguished members of the committee. Thank you for
this opportunity to speak to you today on behalf of the Union
of Concerned Scientists. UCS is a national science-based
nonprofit organization that has been working for a healthy
environment and a safer world for 40 years. I applaud the
leadership of this committee for moving this issue forward at
this critical time.
Today I am pleased to share the results of a major study we
have conducted over the last 2 years to examine the energy and
economic implications of a comprehensive suite of energy,
transportation and climate policies that we call the Climate
2030 Blueprint. This comprehensive approach is similar to the
one proposed by Chairman Waxman and subcommittee Chairman
Markey in their draft legislation. We used a modified version
of the U.S. Department of Energy's national energy modeling
system for our analysis.
Our results show that we can build a comprehensive and
competitive 21st century clean energy economy that saves
consumers and businesses money and gives our children a future
without huge, damaging costs of unchecked climate change and
this future is well within our technological and financial
abilities.
To highlight just a few of our major findings, our analysis
found that by 2030, one, under the Blueprint, our Nation meets
a carbon cap of 26 percent below 2005 levels by 2020 and 56
percent below 2005 levels by 2030. The electricity sector
contributes more than half of the emission cuts in 2030. The
transportation sector contributes the second largest area of
emissions reductions. The Blueprint policies will also cut
mercury, acid rain, smog and soot pollution, improving air and
water quality and saving lives. Two, we can achieve these deep
reductions in carbon emissions while saving American consumers
and businesses $465 billion annually in 2030 while maintaining
about the same rate of economic growth as the reference case.
The Blueprint builds $1.6 trillion in cumulative net savings
between 2010 and 2030. Families will see an average household
savings of $900 a year in 2030 while businesses will altogether
save nearly $130 billion a year in the year 2030. Households
and businesses in every region of the Nation, even coal-
dependent States and regions, will see lower energy bills. And
third, we can cut the use of oil and petroleum products by 6
million barrels a day in 2030, as much oil as we currently
import from the OPEC nations.
We did not find that all of these benefits will come for
free but we found cost savings for reductions in energy use due
to efficiency will more than offset the modest increase in
energy prices and upfront investment costs. The key to the
success is a comprehensive policy approach remodel. The
transportation policies get us cleaner cars, cleaner fuels and
better transportation options. The energy policies get us more
efficient appliances, buildings and industry, renewable energy
and more-efficient natural gas generation. A transparent and
smartly designed cap-and-trade policy assures the emissions
reductions the United States needs to help avoid the worst
effects of global warming. This comprehensive approach is so
critical that when we stripped out the sector-specific energy
and transportation policies in our analysis, the cumulative
savings for households and businesses in 2030 were reduced
dramatically from 1.6 trillion to 600 billion.
We have a historic opportunity to reinvent our economy, to
make it more resilient and efficient and to produce a bow wave
of new high-quality jobs, especially in regions that have
strong manufacturing capacity, a seasoned, able labor force and
needed resources and infrastructure. In this new home-grown
economy, we need people to build wind turbines, build carbon
capture and storage infrastructure, weatherize and retrofit
homes, install solar panels and manufacture advanced cars and
fuels as well as to design, transport, maintain, repair, market
and sell all of the above. In my travels around the country, I
hear a growing call for a new clean energy economy that is
designed to also solve large, stubborn problems, by reducing
our dependence on oil, making us less vulnerable to blackouts,
creating jobs, tackling climate change and improving our
families' health. We know that if we continue down a path of no
action, our risks and vulnerabilities will increase, leading to
significantly higher costs than if we act boldly today. The
Waxman-Markey legislation is a strong start on to this path and
on to this clean energy future.
Thank you.
[The prepared statement of Mr. Knobloch follows:]
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Mr. Markey. Thank you, Mr. Knobloch, very much.
Our next witness is Dr. Steven Hayward, who is the F.K.
Weyerhaeuser fellow in economics at the American Enterprise
Institute and a senior fellow at the Pacific Research
Institute. We welcome you, Dr. Hayward.
STATEMENT OF STEVEN HAYWARD
Mr. Hayward. Thank you, Chairman Markey and Ranking Member
Upton. You know, I don't relish being in the role of a
naysayer, partly because it goes against my own optimistic
nature, and I tend to be something of a techno-optimist. I have
a lot of excitement about things I see going on in the areas of
energy research and development, and I am an optimist about a
great many things.
However, I do find myself troubled by an awful lot of what
I think is sort of wishful thinking, and too much, I will just
put it casually, happy talk about the matter.
I mean, the last panel, I kept hearing that there is
nothing but win-win situations out there in the world, and it
seems to me that we seem to feel that we can repeal the laws of
economics and the laws of physics at the same time. It may be
quite true that for certain industries and certain companies,
you do quite well if you give them allowances to emit carbon
for free, but it does seem to remind me of that remark of
Charlie Wilson, from the Eisenhower Era that, to paraphrase his
remark, it is not clear that what is good for GE is good for
America.
Well, I prepared my analysis today in this sort of
confusing schedule, more tailored for the next panel about
green jobs, but a couple of general comments. It seems to me
the difficulty here is that on the one hand, we want to make
carbon more expensive, but on the other hand, we don't want
anyone to pay higher costs for it. To the extent that we have
lots of rebates and give away free allowances, it will mitigate
the reductions you are likely to get from it. It would be, to
use a simple analogy, as if we decided to try and reduce
cigarette smoking by raising the tax on cigarettes, but then
rebated the tax back to smokers at the end of the month. I
don't think that would be very effective, or it would certainly
reduce its effectiveness.
A couple of observations here. It seems to me there are
three questions to answer, or to ponder more deeply. One is,
would a green jobs policy, or narrow RPS mandates, I say narrow
because, for example, the U.S. Conference of Mayors report on
green jobs includes jobs in the nuclear industry as green jobs,
yet the nuclear industry is conspicuously excluded from non-
carbon sources contemplated in the draft discussion. But would
a green jobs policy and renewable mandates result in net
employment gains and net economic growth in the absence of such
policy?
Of course, it is true, in the ordinary sense that when the
Federal Government spends more resources, either directly,
through appropriations, or indirectly, through tax breaks and
subsidies and mandates, you will generate employment where
little or none existed before, just as our very large spending
over the decades for defense spending generated a lot of
employment where it didn't exist before. But I would think the
example of defense spending is one we would want to ponder a
little bit. It is precisely the reason we don't see defense
spending as a route to permanent prosperity, because it does
not necessarily add productive and self-sustaining capacity to
the private economy.
There is a lot of academic literature--I have made some
reference to it in the statement I have submitted to the
committee, and I won't repeat it all here--a lot of academic
literature calling into question a lot of the analysis and
assumptions of the green jobs ideas. I think I will just skip
over that in the interest of time and getting to your
questions, and say that I think, as a summary statement, in the
fullness of time, we are going to look back on this period, say
20 or 30 years from now, as the climate policy equivalent of
wage and price controls to fight inflation back in the 1970s.
Or maybe to pick an example that is a little closer to home,
the Gramm-Rudman approach to cutting the deficit in the late
1980s. And we are going to decide on some fundamentally
different approaches to tackling this problem.
Thank you.
[The prepared statement of Mr. Hayward follows:]
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Mr. Markey. Thank you, Dr. Haywood, very much. Our next
witness is Dr. David Kreutzer, who is the Senior Policy Analyst
in Energy Economics and Climate Change at the Heritage
Foundation Center for Data Analysis. He previously taught
economics at James Madison University, where he served as the
Director of the International Business Program.
We welcome you, sir.
STATEMENT OF DAVID KREUTZER
Mr. Kreutzer. Thank you. I will read the disclaimer first,
at the risk of being redundant. My name is David Kreutzer. I am
the Senior Policy Analyst in Energy Economics and Climate
Change at the Heritage Foundation. The views I express in this
testimony are my own, and should not be construed as
representing any official position of the Heritage Foundation.
Mr. Chairman, I want to thank you and the members of the
Energy and Commerce Committee for this opportunity to address
you concerning the economic impacts of cap and trade policies.
Cap and trade is a tax. It artificially restricts access to
fossil fuels that provide 85 percent of our Nation's energy.
This restriction drives up energy costs, drives down income,
and drives jobs away.
Today, I will discuss several of the most critical economic
impacts. Last year, the Center for Data Analysis at the
Heritage Foundation projected the costs of the Lieberman-Warner
Climate Change Bill. The emissions target for the Lieberman-
Warner Bill was a 70 percent cut by the year 2050. It should be
clearly noted that our analysis could only project for the
first 20 years, at which point, the carbon reduction scheme is
only halfway to this 70 percent reduction goal.
The first impact is on national income. Between 2012 and
2030, gross domestic product, the broadest measure of national
income, drops by nearly $5 trillion, after adjusting for
inflation. The second impact is the tax transfer.
Coincidentally, it is also $5 trillion. So, you have a $5
trillion reduction in the size of the pie, and from that pie,
you cut another $5 trillion piece to spread around. This money
is transferred from energy consumers to the government, or
those lucky enough to be given the pollution permits, which are
also known as allowances.
The third, and arguably, most painful impact is on
employment. Employment drops overall, but the energy intensive
manufacturing sector is especially hard-hit. By 2030,
manufacturing employment loses nearly three million jobs
because of cap and trade's energy restrictions. A map included
in the written testimony shows that this impact will be uneven,
as manufacturing is relatively more important to the economies
of some states than it is to others. Though some of those who
lose or never get manufacturing jobs will find employment in
the service sector, overall unemployment rises by over 800,000
in some years, due to the effects of cap and trade.
Another point to note is that these job losses are net of
any green jobs created by CO2 restrictions. In the
written testimony is a copy of a page from the May 1945 issue
of Mechanics Illustrated. It shows what we would call a green
job in postwar Paris, a cyclist powering an electric generator.
This was an imaginative solution to a lack of coal-generated
current, done by an ingenious beauty shop operator, perhaps.
Today, a human-powered generator could produce about $0.10 of
electricity in an eight hour shift.
Now, I don't think anybody is proposing that, but with
sufficient subsidies, we could induce people to ride and pedal
generators. The problem, of course, is that it moves human
labor from producing output worth over $50 per day, and that
would be at minimum wage, to producing something worth only
$0.10 per day. Yes, we could point to the people riding these
bicycle generators and count them as green jobs created, but
the overall impact is to reduce economic output by at least $50
per day per person.
Energy sources that require subsidies are energy sources
that use inputs whose value is greater than the value of the
output. Just as subsidizing a cyclist to generate $0.10 of
electricity per day will not expand the economy, forcing energy
to flow through uneconomic bottlenecks is not a stimulus.
Rather, it will reduce income.
In summary, we find the first two decades of a 40 year
program to cut CO2 by 70 percent will lead to $5
trillion of lost gross domestic product, will increase energy
taxes by another $5 trillion, will lead to three million lost
manufacturing jobs, and 400,000 to 800,000 fewer jobs overall,
even after accounting for green job creation.
Thank you very much.
[The prepared statement of Mr. Kreutzer follows:]
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Mr. Markey. Thank you, Dr. Kreutzer, very much. Our next
witness is Dr. Nathaniel Keohane, who is--Dr. Keohane. Keohane.
Keohane, Director of Environmental Economic Policy and Analysis
for the Environmental Defense Fund.
Dr. Keohane oversees EDF's analytical work on the economics
of climate change, and helps develop its policy positions on
global warming. Formerly, he was an associate professor of
economics at the Yale School of Management.
We welcome you, Doctor, and whenever you are ready, please
begin.
STATEMENT OF NATHANIEL KEOHANE
Mr. Keohane. Well, thank you, Mr. Chairman, and the
distinguished members of the committee, for holding this
hearing. I am very honored to be here today.
The climate crisis is our responsibility, and it is within
our power to address. We can easily afford strong action. What
we cannot afford is more delay. The catastrophic consequences
of unchecked climate change may seem remote, but they will
happen within the lifetimes of my children and grandchildren.
If we fail to address this problem, we must be willing to tell
our children we could have addressed this crisis for a little
over a dime a day per person, but we chose not to.
My message today is simple. The most expensive climate
change policy is not having one at all. The economic costs of
unchecked climate change are real, and they will be severe.
Fortunately, the best available economic analysis shows that
the U.S. can easily afford the pollution cuts necessary to
solve this problem. In my written testimony, I present results
from a range of economic forecasts published last year by
government and academia, analyzing earlier proposed
legislation. Just yesterday, though, the Environmental
Protection Agency released new results that specifically
analyze the draft legislation released by this committee, and I
would like to highlight some of those results for you now.
First, EPA's new analysis shows that our economy will grow
strongly under the proposed bill before you today. Their study
estimates that if Congress passes climate legislation this
year, U.S. economic output will be 71 percent larger in the
year 2030 than it is today. The difference between that amount
and what the analysis estimates will happen if we do nothing
about climate change amounts to half a percent to a little over
1 percent of GDP in the year 2030.
To put that in perspective, if the economy, if the American
economy will reach $23 trillion in January of 2030 if we do
nothing to address climate change, it will get there by April
or June at the latest with a carbon cap. Now, so far, I have
been telling you about the costs of climate policy, the
estimated costs compared to business as usual. But in reality,
the business as usual scenario in these models doesn't exist.
It is a fantasyland in which there are no economic costs of
unchecked climate change, and we all know that there is no such
future. So, these models that I am talking about just look at
one side of the ledger, the costs of action, but not the
benefits of avoiding climate change and its consequences.
So, still looking at that one side of the ledger, what are
the costs for the average American family? EPA gives us a clear
sense of what those are likely to be and they are small. The
average estimated cost to households in the year 2015 is just
$14 to $75 per year, sorry, in that year in present value, that
is $0.04 to $0.21 a day. Over the entire life of the bill, the
annual cost is just $98 to $140 per household. That is $0.27 to
$0.38 a day for the average American family, or $0.11 to $0.15
a day per person. That includes all of the estimated costs of
this bill, now, of the cap and trade program on carbon.
Now, you might say it is just one study, but in truth, this
study is completely consistent with everything else we know. As
my written testimony describes in detail, the consensus among
credible economic analysis is that the American economy will
grow robustly while cutting carbon pollution and investing in a
clean energy economy.
Now, I am sure we are going to hear lots of numbers in the
next few weeks that have been cherry-picked from reports issued
by whatever modelers for hire can be found to support the
latest or the desired point.
Forecasts aren't crystal balls. They are only as good as
the assumptions that go into them, and some of the assumptions
used to get some of the numbers you may have heard are just
simply not credible. The EPA, in its analysis, has set the gold
standard in this report by using two of the most credible,
transparent, and peer-reviewed models available, and the bottom
line from that analysis is that for around $0.13 a day, and I
brought $0.13 with me, around $0.13 a day, we can solve climate
change, help get our economy off foreign oil, and invest in the
clean energy economy.
As I said in the beginning, the climate crisis is our
responsibility, and it is within our power to address it. We
can easily afford strong action. What we cannot afford is more
delay.
Thank you for inviting me to testify. I look forward to
your questions.
[The prepared statement of Mr. Keohane follows:]
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Mr. Markey. Thank you, Dr. Keohane. And our final witness,
Myron Ebell, is the Director of Energy and Global Warming
Policy at the Competitive Enterprise Institute. He also chairs
the Cooler Heads Coalition.
We welcome you to a place that needs that, Dr. Ebell. Thank
you for your leadership in that area.
Mr. Ebell. Mister.
Mr. Markey. Whenever you are ready, please begin.
Mr. Ebell. Yes. Thank you, Chairman Markey, for inviting me
to testify here today.
Before I begin, let me say that I refer to several studies
and articles in my very short testimony, and I would like to
ask that they be submitted for the record.
Mr. Markey. Without objection.
Mr. Ebell. Great. Thank you.
Mr. Markey. So ordered.
STATEMENT OF MYRON EBELL
Mr. Ebell. My name is Myron Ebell, and I am Director of
Energy and Global Warming Policy at the Competitive Enterprise
Institute. I am speaking here today on behalf of CEI. We oppose
this bill. We hope that it will be defeated, and we will do
whatever we can within our limited resources to defeat it.
Rather than summarize my very brief testimony, I would like
to just respond to several things I have heard today. This
morning, with the Administration witnesses, we heard some
astonishing claims in very matter of fact, conversational
answers, that this bill will create jobs, that it will reduce
our dependence on foreign oil, and that it will help the
economy. I believe Dr. Chu and Administrator Jackson said that
several times, and I think Secretary LaHood said it at least
once.
I think that each one of these is wrong, and certainly,
each one of these claims is arguable. I am not much for
modeling. I think it depends, as Dr. Keohane said, it depends
on what the assumptions are, and you can get almost any answer
you want out of a climate model or an economic model.
I would rather look at historical experience. We have many
of the policies in your draft bill, Chairman Markey, being
tried today, and have been tried for several years in the
European Union and in California. California is falling off an
economic cliff. Now, it is not the only reason that they have
run up the price of energy so that they have the highest
gasoline taxes in the Nation. They have a shortage, a
continuing shortage of refined gasoline. That they have among
the highest electric rates in the Nation, comparable with yours
in Massachusetts. But it is one of the reasons that their
economy is falling off a cliff.
They used to have a very substantial, energy intensive
manufacturing sector. They used to produce aircraft. They used
to produce armaments. They used to produce a lot of
automobiles. They used to have a steel mill and an iron mine.
All of that is gone. Now, that has made them less carbon
intensive. They don't produce as many emissions, but they still
consume all those things. They just buy them from out of state.
Somebody has to still produce stuff.
So, I am very skeptical of these claims. Now, the second
panel from the U.S. Climate Action Partnership, and I have some
very harsh things to say about the members of the Climate
Action Partnership in my testimony. It seems to me that these
are guys on the make. They want to get rich off the backs of
American consumers, and they want you to enable them to do it.
And I would urge you to take a step back from the astonishing
statement in your executive summary, which the Committee put
out on this bill, that says that this, Title III, the Cap and
Trade Program, was designed with, to conform to the
recommendations of the Climate Action Partnership. And I would
also ask to submit for the record, and I am sorry he is not
here, a letter from Chairman Waxman in 2004, to the
Administrator of the EPA, complaining about this very thing,
when it was revealed that an EPA rule had been written with the
cooperation of outside businesses and their lobbyists from a
well-known D.C. law firm. And I think Chairman Waxman was
exactly right then, and I would hope that you would think this
over again.
Now, Mr. Rogers said that this will all work if we have a
well-designed program. I would like to ask you in your
experience how many government programs that have been enacted
in your time in Congress have been well designed. I would just
like you to keep that in mind as you consider this enormous,
huge hit on the American economy, and how easy it will be to
design it so that it is well designed. I just can't see it.
Now, Mr. Barton asked, and since he isn't here, I will
answer his question, do you favor 100 percent auctioning? Would
you still favor this bill? Well, I will still oppose this bill,
but I do favor 100 percent auctioning. I think 100 percent
auctioning of the rationing coupons removes a tremendous amount
of the opportunity for gaming the system, con games, and
corruption. And so, I would encourage you all to vote for an
amendment that would have 100 percent auctioning.
Thank you very much.
[The prepared statement of Mr. Ebell follows:]
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Mr. Markey. Thank you, Mr. Ebell, very much. You hit the
number right on the minute. Let me turn now and recognize the
gentleman from Texas, Mr. Gonzalez, for a round of questions.
Mr. Gonzalez. Thank you very much, Mr. Chairman.
And I wasn't going to ask Mr. Ebell any question, but I,
where did all those jobs go, that left California?
Mr. Ebell. You know, I think most of them went either
abroad or to the heartland states that have lower energy
prices, lower taxes, a less stringent regulatory atmosphere,
and have. You know, I remember when Dr. John Christy from the
University of Alabama at Huntsville testified, I think before
this committee, and he said you know, California used to have a
vibrant auto industry, but in 2008, more automobiles will be
assembled in Alabama than any other state. We have workers who
do harder work, and we have lower----
Mr. Gonzalez. Mr. Ebell, the reason I ask is, look, this is
the obvious, and we go around and around on these things, and I
really don't get something as fundamental as why some jobs
leave certain jobs. Sometimes, it is just that there are
certain concerns that are addressed in certain areas, that may
not be in others, and it increases the cost of labor, such as
fair wages, a living wage, safe working conditions, small
things like that.
I am sure this country could still be incredibly productive
at incredibly low cost had we maintained something like
slavery, or maybe just forgotten about child labor, or safe
working conditions, or minimum wage. There is all sorts of ways
to reduce cost. I would like to think that we have matured and
developed as a country, where sometimes, we just do that which
is fair, equitable, and right, even though it may increase the
cost. And I think there is a fundamental philosophical
difference, I think, that is going on here.
But let us just get to the matter at hand. Dr. Keohane and
Dr. Kreutzer, the only thing that you all share is the first
letter of your last names, because it seems, Dr. Kreutzer, you
simply don't believe that there is a need to act on greenhouse
gas emissions. Would that be a fair statement? I want to start
off with that. I mean, I really want your honest answer,
because I thought we debated that. I thought we were past it.
But if that is your premise, then it goes to the very heart of
maybe some of your opinions.
Do you believe we should be taking any action on reducing
greenhouse gas emissions?
Mr. Kreutzer. I can only talk about the ones that are being
proposed in this bill and elsewhere.
Mr. Gonzalez. No, no.
Mr. Kreutzer. The cost----
Mr. Gonzalez. Well, let us forget about this bill. Should
we be addressing it in any form or fashion?
Mr. Kreutzer. If it is free, yes. OK. Why not? But it is
not free. That is the problem, and----
Mr. Gonzalez. So, what would be the alternative?
Mr. Kreutzer. And Dr. Keohane said that this bill would
solve the climate change problem. It doesn't even come close to
having----
Mr. Gonzalez. All right. So, you are just----
Mr. Kreutzer [continuing]. Impact.
Mr. Gonzalez. It is the approach that you object to, but
you believe, as your colleague----
Mr. Kreutzer. I don't--I don't----
Mr. Gonzalez [continuing]. Believes, that truly, gas
emissions, or greenhouse gas emissions truly pose a problem,
and one that needs to be addressed?
Mr. Kreutzer. They don't pose--I don't think there is
enough evidence to say there is catastrophic problems coming
down the road from greenhouse gas emissions.
Mr. Gonzalez. All right.
Mr. Kreutzer. All right. You know, there will be some
increase in sea level. There will be some without greenhouse,
without manmade greenhouse gas emissions rising. There will be
some when we cut it back by, you know, 70 percent or 80
percent. All right. And I would like to have an economy that is
strong enough that when we have the climate variability that we
are going to have with or without climate action, that we have
an economy that is strong enough to get through it, as we have
done for the past couple of hundred years. We are getting
stronger and stronger. We are going to be able to handle a foot
and a half of sea level rise. And we are not going to stop it
with this bill, and that is the problem.
It is huge cost, very little benefits, and I wish this
committee would look at what is the benefit? If you, this isn't
denier math, that isn't flat Earth math. This isn't man never
went to the Moon math. The IPCC says that a doubling of
CO2 emissions will lead to a 2 to 4.5 degree
increase in world temperature. The EPA, looking at the
Lieberman-Warner Bill, said that bill would lower greenhouse
gas emissions from about 719 parts per million to about 695.
Mr. Gonzalez. Let me ask, Dr. Kreutzer----
Mr. Kreutzer. That is a 0.1 to 0.2----
Mr. Gonzalez. Well, what you are saying is we have plenty
of time, and whatever is inevitable is something we could
handle along the way, as long as we have a strong, robust
economy.
Now, if you were wrong, what might be the consequence of
too little, too late, or would you be able to even address the
adverse effects at a later date?
Mr. Kreutzer. We would be able to address that at a later
date, if it----
Mr. Gonzalez. All right. That is----
Mr. Kreutzer [continuing]. Becomes clear that----
Mr. Gonzalez [continuing]. When I want to go to Dr.
Keohane. Do you agree with any of those basic premises? One,
that it really doesn't pose a danger, we don't need immediate
action? If, as in when, we will be able to deal with it.
Mr. Keohane. It won't surprise you to know, Congressman,
that I don't agree with those premises. I think the--I am not a
scientist, but I read the science and I talk to scientists, and
I think the science is clear that if we don't do anything about
climate change, the consequences will be catastrophic, that
unchecked climate change is going to lead to severe and real
economic damages.
I mean, Dr. Kreutzer says that addressing it won't be free.
The thing that won't be free, the thing that is really going to
cost us is the damages from climate change if we don't do
anything about it. This is a problem where we are not taking
account of those costs at all in what we are doing right now,
and that is the most important problem that we have to solve.
Now, this is a global problem, and this is a problem that
will require concerted international action to address, but the
U.S. is part of that community, and we need to take the lead,
and that is what this bill would do.
Mr. Gonzalez. Thank you, Mr. Chairman.
Mr. Markey. Thank you. The gentleman's time has expired.
The chair recognizes the gentlelady from Tennessee, Ms.
Blackburn.
Ms. Blackburn. Thank you, Mr. Chairman, and thank you all
for your patience today. This has been absolutely fascinating
to listen to, and to hear the different opinions.
Mr. Cicio, I think I want to start with you, because I
appreciated what you said. We should not jeopardize our
competitiveness.
Mr. Cicio. Well, absolutely. We shouldn't. Our organization
and our companies have done an incredibly great job of
continuing to reduce their energy consumption, because it makes
us more competitive, and higher costs are OK, but you have got
to have higher costs on our competitors overseas, or we lose
the jobs.
Ms. Blackburn. Well, and I would like to come, I would like
for you just to touch on what you think the electric industry
will do to achieve efficiencies and meet the renewable
electricity standards that are in the proposed legislation, and
how you balance that, and how we still remain globally
competitive with goods.
Mr. Cicio. Well, the Renewable Portfolio Standard is only
one part of the challenge of higher electricity costs. For one,
paper companies, which are some of my companies, use that, use
renewable energy to biomass as a raw material feedstock. And if
electric utilities are utilizing that to meet the standard, it
could put the paper business industry out of business.
Ms. Blackburn. OK.
Mr. Cicio. But states are endowed with different renewable
resources, and that is why our view is that that is the
decision that should be made at the state level, where they
know how much renewable resources are available and at what
cost.
Ms. Blackburn. And can make those appropriate adjustments.
Mr. Cicio. Yes, ma'am.
Ms. Blackburn. Mr. Kreutzer, when I was talking with Mr.
Chu, and questioning him earlier today, I asked him about the
25 percent standard, and working toward that by 2025, and he
said it was going to be easily achieved. So, do you agree or
disagree with that?
Mr. Kreutzer. Well, it is going to be costly. We actually,
in our analysis, we gave that away. We said let us assume that
all of the renewable standards set up by the states can be met
at reasonable cost. So, when we did our analysis of Lieberman-
Warner, this very difficult to achieve standard, we said we are
going to meet that. Still, $5 trillion worth of lost GDP in 20
years, $5 trillion worth of energy taxes, three million lost
manufacturing jobs. All of that was even though we assumed we
could meet the Renewable Portfolio Standard that was a little
bit less, but close to 25 percent.
Ms. Blackburn. OK. Mr. Hayward, when I had talked with
Secretary LaHood, I asked him about, and then, subsequently Mr.
Chu, about the Low Carbon Fuel Standard and the effect on
prices at the pump. And, as we look at transportation fuels.
And will it lead to greater or lessened dependence on foreign
oil?
Those are two issues that we hear a lot about from our
constituents. They are concerned about the dependence issues.
They are concerned about the price at the pump, so as you look
at the low carbon standards, what do you think?
Mr. Hayward. Oh, boy, I have a hard time making up my mind
about that. Because there are so many moving parts. I mean, the
big, one of the big problems to try and solve in transportation
is how do we have a portable fuel? I mean, that is why we want
gasoline or diesel or biofuels or something. You want something
to put in a tank, or in an energy supply for a car, so we talk
a lot over the years about hydrogen. We are talking about plug-
in hybrids with much bigger battery capacity. We are talking
now about, biofuels from algae is being talked about.
The difficulty here is once again, if the government tries
to pick winners, you may actually clog up the market for
innovation. I don't know that anybody is really happy about the
way the whole ethanol business has gone, including most
environmentalists, but yet, we are kind of path-dependent on
that now, because you have a lot of powerful interests who
don't want to change the program there. I think that is a good
example and case study of how you can actually retard progress.
So, you know, I try to keep an open mind about that, but
that is, I think, very hard to predict, how that is going to
turn out.
Ms. Blackburn. Well, but my constituents say, is this going
to cost us more, or is it going to save us money? So, where do
you think that is going to come down?
Mr. Hayward. In the short run, it is going to cost you
more, I would think.
Ms. Blackburn. Cost more.
Mr. Hayward. Long run, I don't think anyone can say.
Ms. Blackburn. Thank you. I am out of time, Mr. Chairman. I
have got a couple of other questions. I will submit those.
Mr. Markey. And we will ask the witnesses to respond in
writing to those questions. The gentlelady's time has expired.
The chair recognizes the gentlelady from California, Ms.
Matsui.
Ms. Matsui. Thank you, Mr. Chairman. Mr. Chairman, I saw a
recent analysis from Mr. Knobloch's group that stated some
interesting facts.
In 2007 and 2008, more wind power was installed than in the
previous 20 years combined, and more than 70 wind turbine
component facilities opened, expanded, or were announced. The
Renewable Electricity Standard that this legislation contains
is an economic engine for the future. According to the Union of
Concerned Scientists, an RES would create 297,000 new jobs in
renewable energy development. A robust RES would drive
investment to the tune of $263.4 billion in cities and towns
across this country. We can achieve these economic benefits
even while taking the equivalent of 45.3 million cars off our
roads.
Mr. Knobloch, in my hometown of Sacramento, we are
attempting to create a center of clean energy technology that
would drive our local economy, and I visited a number of these
new regional companies when I was back home last week. With
this background, I am interested in hearing your thoughts on
the job creation components of this legislation.
Can you expand a bit on what types of jobs would be created
with this legislation?
Mr. Knobloch. Thank you, Congresswoman.
You know, the great thing about the Renewable Electricity
Standard debate is that we are not dependent on modeling. We
can look at the 28 states that have adopted a renewable
electricity standard, and the success of that policy has been
tremendous. At least half of those states have gone back before
the time limit for the increase percentage of renewables and
increased the percentage, because they were doing so well. A
state like Texas, years ahead of the timeframe went in and
doubled the amount of renewables that they would expect from
that policy, and now, Texas is, of course, the national leader
in wind power, and has three times the installed wind
electricity of the State of California.
And you can also look to before there was any renewable
electricity standard policies. The renewable sector was
floundering. And so here, what happened was that government
came in, set a standard, did not pick winners and losers,
technological winners and losers. It did define what is
renewables, and there are some very legitimate debates going on
as to what belongs in there.
Ms. Matsui. Now, some opponents of this legislation argue
that new jobs would only be created because other jobs will be
lost. In the case of RES, is this a zero-sum game when it comes
to jobs, or are the hundreds of thousands of jobs it creates
going to be on top of the existing job figures?
Mr. Knobloch. Well, this analysis that you are referring
to, which is not part of our blueprint, it was a separate
analysis, showed that the renewables sector, that a national
renewable electricity standard would create three times the
number of jobs that would be created in the same time span in
the fossil fuels sector. So, it nets out positive when it is
well designed.
When you listen to any kind of jobs analysis, you want to
be sure that there is a control for what is happening in the
economy already, and get your arms around that, but we are
quite confident that whether it is, you know, the steelworkers
in Pennsylvania who got laid off, and are now building towers
for wind turbines, truckers, people who pour concrete, people
who design wind turbines and the associated machinery, there is
dozens of different job disciplines that go into making this
technology.
Ms. Matsui. I would like to turn to something that is
really something in my district, I represent the most at risk
river city in the Nation in Sacramento, and studies are seeing
that the Sierra Nevada snowpack would disappear under a
business as usual scenario. So, that represents great
challenges to my district.
This is to Dr. Keohane. With this in mind, will you please
expand on the point you made in your testimony, that the threat
from water-related impacts of climate change could be in the
billions of dollars?
Mr. Keohane. Absolutely. That was a quote from a study that
Frank Ackerman at Tufts University did, as part of just looking
at four types of impacts on the United States, one of them
being increased water scarcity, and when they added up all
those four analyses, all those four costs, the other were
increased energy costs and coastal flooding, which is important
in other areas of the country, and also, increased hurricane
intensity, they got hundreds of billions of dollars in costs
from unchecked climate change. That is what we would pay in
business as usual. That is why I said it wasn't free not to do
anything about this. And that is just from those four costs.
That excludes a huge other number of damages. So, that kind of
concern, that is going to be, the water scarcity is going to be
relevant to the American West, and there are going to be other
concerns that are relevant to other parts of the country.
Ms. Matsui. I thank you. I see my time is up.
Mr. Markey. The gentlelady's time has expired. The chair
recognizes the gentleman from Michigan, Mr. Upton.
Mr. Upton. Well, thank you, Mr. Chairman, and I am
delighted that this is the last panel. We have had eight hours
panel, almost, today.
Mr. Markey. This is not the last panel.
Mr. Upton. Today, it is, the last panel today, right?
Mr. Markey. No. One more to go.
Mr. Upton. There isn't another panel. There is not another
panel. There is?
Mr. Markey. This is an all you can eat. It is all you can
eat. There is no----
Mr. Upton. Who is on the fourth panel? Raise your hand? Oh,
I am sorry. I will stay. I am sorry I asked that question. My
time really shouldn't be--I was going to say that----
Mr. Markey. Let us start. We are going to start. The
gentleman was a little bit disoriented, and we are going to
start again.
Mr. Upton. I didn't realize. I have this big list, I just
didn't turn the page, but there it is. I was going to say that
I am looking forward to co-hosting with you tonight, with
Disney, the show Earth.
Mr. Markey. Perhaps you will be hosting.
Mr. Upton. Is this another panel after this one?
Mr. Markey. No, no.
Mr. Upton. I actually have a detail for us, in terms of our
remarks tonight, so maybe I will get your time. Anyway, I just
want to say a couple things.
For me, I do want to see emissions reduced. I want to see
plenty of incentives to provide cleaner energy for all of our
citizens, but I also want it to be fair, and I don't want to
put the U.S. at a big disadvantage, and the headlines that I
cited in my opening statement some eight hours ago, with India
and China not willing to participate, and every opportunity
that they have been given, and whether it is before this
committee in the last year, or now, in public statements, I
think puts our Nation at a severe disadvantage.
And it is not that we are going to do nothing. We are going
to do a lot, whether it is with energy appliance standards, it
is with building standards. It is with lighting standards. It
is with auto standards. It is, there is a lengthy list that, in
fact, we are going to do a lot to reduce our emissions. And
when I look at, what I cited this morning, and that we have
had, in essence, comparable growth, the United States and EU.
They had a cap and trade scheme. They desperately want us to
participate with them, because their emissions went up while
ours went down.
There was significant leakage, I think, of jobs. Their
energy prices did go up, and when we hear from the Chairman of
AEP, who testified at some point in the last couple weeks that
they thought that their energy prices in Ohio would go up 40 to
50 percent, because Ohio uses more than 90 percent coal, we
know that that is the same for Indiana. Michigan is about 60,
65 percent. Those costs get passed along, and yes, you can help
with the subsidies, I guess run a little bit along the lines of
LIHEAP for low income individuals, so that they don't bear the
brunt of that higher cost, and Dr. Hayward, I loved your
example on cigarettes.
But the jobs don't stay. Not when they can go someplace
else at a lower cost, knowing that they are competing in a
global economy. And so, what we want to do is, and there is no
off-ramps, from my read of this legislation. Yes, there is some
discussion with the idea of allowing us to have an important
that somehow would be WTO amenable, but again, the jury is out.
I don't know whether that is going to work or not.
I have a feeling, Mr. Chairman, that we are going to have a
vote on whether or not the Administration ought to have 100
percent auction here. I know the Administration supported that
in the testimony that they gave in the first panel today. We
will find out where the votes are, whether that ought to be
part of the package, and what happens if, in fact, it is an
amendment that is adopted.
Mr. Ebell, your comments, I think, were right online, as we
look at the costs associated, and what is going to happen to
businesses. But how do you counter that with Dr. Keohane's--am
I saying that right? Keohane? It is not right.
Mr. Keohane. Keohane, but it is close.
Mr. Upton. Keohane, all right. Is it spelled right? All
right. I mean, how do you comport that, your two testimonies
together. Dr. Keohane says that it is going to be $0.07 to
$0.10 a day, and yet, we hear some pretty different numbers
when we actually go into the field, at least as we look at the
Midwest.
Mr. Ebell. Thank you, Representative Upton. I appreciate
your leadership on this issue. We know it can't be that
inexpensive. If it were that inexpensive, we wouldn't be having
these rancorous debates.
The fact is that energy prices have to go up significantly
if emission cuts are going to be made. President Obama
recognized this when he was running for President, and he said:
``Under my plan of a cap and trade system, electricity rates
would necessarily skyrocket.'' Peter Orszag, now the head of
OMB, then head of CBO, when he testified here, said this won't
work unless prices go up.
In the European Union, there has been tremendous
consternation about the price of the rationing coupons, because
they yo-yo up and down, and the people who want to, who are
actually serious about making emissions cuts, keep pointing out
that the price has to stay up in order to force emissions down.
When it keeps yo-yoing up and down, nobody has an incentive to
reduce their emissions, because they are going to hope that
they are going to get some cheap rationing coupons, you know,
if not this month, next month.
So, I just think it is beyond believability that this is
going to be inexpensive. It is going to be incredibly
expensive.
Mr. Upton. So, the answer is yes. Go ahead.
Mr. Keohane. Thank you. Well, with all due respect, I
don't--I am not quite sure how Mr. Ebell knows that it can't
possibly be as inexpensive as the best analysis we have from
the best economic models we have, which is what the EPA
analysis represents. That is what those models estimate. Now,
sure, there are, you know, the models aren't perfect, but if
you look at the record, we have always overestimated the costs
of environmental regulation. That was a finding by some
researches at Resources for the Future, who looked at and found
a consistent pattern of overestimation, and that's because
frankly, we don't know how to model technological change, and
these models, these analyses, can't capture the scope of
technological change that we will see when we use a market-
based system that unlocks American innovation.
Mr. Upton. Well, just to close, because my time is expired,
it seems like based on what you just said, maybe we ought to
have an amendment that would offer a safety valve, that if it
goes up more than $0.20, the whole thing will be struck after
the enacting clause. Maybe we will see an amendment like that.
Thank you.
Mr. Markey. OK. The gentleman's time has expired. The chair
recognizes the, the chair is uncertain here. I am going to
continue to recognize members of the minority. OK, the chair
recognizes the gentleman from Texas, Mr. Hall. We can go to Mr.
Shimkus if you like, Mr. Hall.
Mr. Hall. I am sorry that I haven't been here, because it
seems like you all are having so much fun in here when I got
here. I will stay a while. I want to ask some questions, and
thank you, Mr. Chairman, for recognizing me, and thank you for
accepting that Washington Post. I appreciate that.
You know, it is my opinion, and the opinion of most of us
over here, and the opinion of maybe half of you out there, that
we are going to be in a weakened competitive position in the
United States under cap and trade. I believe it deeply, and
have a lot of reasons to believe it, and you all are in
responsible positions, and know more about your business than I
know about your business, but I know you are a businessman,
successful, or you wouldn't be here.
So, I just can't see why you can't understand, if you don't
understand, why we wouldn't be in a weakened competitive
position under cap and trade as it is written here. We--I
have--the chairman is a good friend of mine, and I like the
chairman. We elect one another, I think. I criticize him in his
district, and he criticizes me in mine, but we have a mutual
understanding, and I respect him. I really do. And he is funny.
But in the Washington Post, China hopes climate deal omits
exports. Now, this ought to tell you how China thinks, and they
are one of the big players, they are the big player in this,
other than us, and if they don't play, and I mentioned this
this morning, it is a little bit, maybe, simple, but when you
go to Wal-Mart or Sears, or your wives go to Neiman's, or
anywhere, you are going to see a machine on your way out, that
you got to go by that machine. It is called a cash register,
and you have to pay, and somebody has got to pay. And China has
never indicated, in one instance, that they want to pay their
share, and they are polluting the air as we sit here today, and
I think I read the other day where about every sixth day, they
open a plant that is not conducive to clean air.
And I am very pro-coal. I am pro-nuclear. I live in Texas,
and we have fossil fuels there, and I don't know how we are
going to do away with fossil fuels. Of course, we have to have
technology and keep continuing to pursue cleansing. Anybody in
their right sense knows that, but anybody that thinks we can
just overnight do away with fossil fuels is just dreaming. They
are just thinking. And it would be wonderful, but that hasn't
happened, and elements here in Washington and around the
country have fought us drilling offshore, fought us drilling
off the coast of Florida, fought us from drilling up in ANWR,
and we could, we don't even have to have any help from anybody
else. We have plenty right here at home if we could just mine
it, and we should have. But we haven't.
So, we find ourselves in the position where it is China,
one of the big players, not only won't agree to curtail their
polluting the skies, but I think they are insolent enough to
indicate, and I am going to read you a little bit from this
Washington Post deal. It says: ``Countries importing Chinese
goods should be responsible for the heat trapping gases
released during manufacturing, a top Chinese official said
yesterday.'' That was Li Gao, I don't know if that is the right
pronunciation, but that is the way it looks to me. Anyway, he
is the climate change, he directs the Climate Change Department
at the National Development and Reform Commission. So, he is
the top guy, so far as I know, over there. He is their top
climate negotiator, and he said that, and he said: ``As one of
the developing countries, we are at the low end of the
production line for the global economy. We produce products,
and these products are consumed by other countries. This share
of emissions should be taken by the consumers, not the
producers.'' They are not even willing to pay for their own
emissions.
Now, please take that into consideration when you make your
decisions. So, I would ask this question. What evidence, and I
will begin over here, Mr. Ebell, I can't see that far, but Mr.
what is his name? Mr. Ebell. That is what I thought it said,
but I couldn't pronounce it.
What evidence does U.S. CAP have that China and other
developing nations will not take strategic advantage of what
will be a weakened competitive position of the United States
under cap and trade?
Mr. Ebell. Representative Hall, I don't believe that they
have any evidence, and in fact, I think they do plan to take
competitive advantage, and they also want to be paid for their
emissions reductions. And I think you can see how expensive it
is going to be to reduce emissions, because everyone believes
it will be cheaper to reduce emissions in developing countries
than it will be in the United States, and yet, they are
talking, in the European Union and in China and in India, about
sending hundreds of billions of dollars a year to developing
countries to reduce emissions. So, the idea that the EPA model
is believable, no, it doesn't pass the laugh test.
Mr. Hall. Absolutely an indication, not an indication, it
is just proof that they are not going to play fair with us.
They are not going to take care of their emissions. Go ahead,
sir.
Mr. Keohane. I just wanted to say, again, with respect to
my fellow panelists, I think the best judges of the businesses
and the competitive positions of the U.S. CAP companies are
those U.S. CAP CEOs and not Mr. Ebell, and I will say there is,
in this bill, I think these concerns you have laid out are
real, but the bill has provisions to deal with them. And I
think the way forward is for the United States to do what it
has always done best, which is to lead. And if we lead on this
crucial issue, then we will be producing the next generation of
low carbon technologies here at home. We will be exporting them
instead of importing them from others.
Mr. Markey. The gentleman's time has expired.
Mr. Hall. May I make one last statement to the gentleman?
Mr. Markey. Yes, you may.
Mr. Hall. The cash register that I spoke about is in all of
these countries, China, Russia, they are going to walk, you are
going to allow them to walk right by the cash register and
leave it to the children that are unborn today, taxes to fall
on their backs. I don't believe you really want to do that. I
yield back my time.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Illinois, Mr. Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. Appreciate the
hearing and being patient. I appreciate the panel for staying
as long as you have.
A couple things. I asked this question to an earlier panel.
Does everyone agree that India does not have a low carbon fuel
standard? Everybody is nodding in agreement with that. Does
everyone agree, I am just doing this quickly, so I can get to
other questions. Does everyone agree that China does not have a
low carbon fuel standard? OK. Everybody is shaking their head.
Mayor, do you agree? Thank you.
What about, does everyone agree that India currently is not
under a cap and trade regime? Does everyone agree with that?
And Mayor, you too? OK. And does everyone agree that India is
not under a cap and trade regime? OK. Well, with heads nodding
in assent.
One of our problems is that, and I have used this
terminology numerous times, all the pain and no gain, because
there is really a debate about whether countries will comply,
if our leadership will spur an international accord. So,
briefly, do you agree that if we lead, China and India will
comply to a low carbon fuel standard and a cap and trade
regime. Real quickly, if you can get yes and no, Mr. Ebell, you
had first. Microphone. Be quickly, though, yes or no would be
helpful.
Mr. Ebell. Yes. I think we can guarantee it, if we put a
provision in the bill saying it will not go into effect until
there is an international agreement that has been ratified that
is binding.
Mr. Shimkus. And we used to talk about that. We used to use
the terminology of an off-ramp, but that has been jettisoned.
Dr. Keohane.
Mr. Keohane. I will say if we do not do anything, then they
won't take a cap on their own, but if we do lead, that is the
only way we will get there.
Mr. Shimkus. No, will they? Yes or no. Will they, if we do
lead, I guess is the question. You believe they will.
Mr. Keohane. I think if we do lead, China and India will
follow.
Mr. Shimkus. China will do it, and India will both do low
carbon fuels and a cap and trade.
Mr. Keohane. I think, I don't know what mechanism they will
use, but I think if we lead, we will see China and India----
Mr. Shimkus. OK. OK. Great.
Mr. Keohane [continuing]. Follow on our----
Mr. Shimkus. Thank you. Mr. Kreutzer.
Mr. Kreutzer. I don't think they will. They certainly won't
accept a cap that the EPA assumes, which will be about half of
the one we are getting.
Mr. Shimkus. OK. Dr. Hayward.
Mr. Hayward. I think it is very unlikely. Here is the
problem. Even in an optimistic scenario, a lot of low carbon
technologies that we can afford as a rich country are still
going to be more expensive than fossil fuels for developing
countries who, by the way, control about 80 percent of the
world's fossil fuels. It takes quite a flight of fancy, it
seems to me, to think that they are not going to use those
fossil fuels, especially if they get cheaper on the world
market as we use less of them.
Mr. Shimkus. OK. Mr. Knobloch.
Mr. Knobloch. I think we are leaving a vacuum. I think if
we lead, they will. China today has a national renewable
electricity standard. They have fuel economy standards that are
competitive with----
Mr. Shimkus. They are also building a new power plant,
coal-fired power plant every week.
Mr. Knobloch. Yes, sir, that is so.
Mr. Shimkus. OK.
Mr. Knobloch. But if we don't lead, it is assured that they
won't adopt that policy.
Mr. Shimkus. Oh, you think they will comply, if we move, on
both low carbon fuel----
Mr. Knobloch. I think if----
Mr. Shimkus [continuing]. And cap and trade regime.
Mr. Knobloch. I think if we lead, and they, and we lead
broadly in negotiations, and they accept a cap, then some of
these policies will flow from there.
Mr. Shimkus. OK. Mr. Cicio.
Mr. Cicio. I don't. I don't. I don't think so, and
particularly for the industrial sector, which is their engine
of jobs growth, so I don't think so.
Mr. Shimkus. Mayor.
Mr. Fetterman. I do believe they will eventually follow,
because the practices that they are currently engaging will,
are not sustainable environmentally, and it will lead to an
environmental catastrophe.
Mr. Shimkus. Well, yes, and I would, and I don't want to
debate you, but carbon dioxide is not a toxic pollutant.
Mr. Fetterman. I am sorry, what was that?
Mr. Shimkus. Carbon dioxide is not a toxic pollutant. Would
you agree with that?
Mr. Fetterman. It is toxic in excessive amounts.
Mr. Shimkus. It is not. Does everyone--does anyone believe
that carbon dioxide is a toxic pollutant? At 15--and we are at,
in the atmosphere right now? 380. OK. Let me go, and so much to
discuss.
Let me talk about real jobs for a second. I just toured a
supercritical new coal-fired power plant in Lively Grove,
Washington County. Washington County has 15,000 employees. This
power plant is, right now has 1,200 construction jobs, an
additional 400 building a coal mine across the street that will
have 500 full-time power plant jobs, and 400 coalmine jobs once
in operation. Those are real jobs that are at risk. Because
what happens in carbon dioxide capture and sequestration, 40
percent, and I will end on this, Mr. Chairman, 40 percent, 100
percent of the electricity output will then be cut to only 60
percent that can go on the market, because it is going to take
40 percent of the energy created by this power plant to
initiate the carbon capture and sequestration provision that is
limiting its ability to really get a return on the investment.
Mr. Markey. OK. The gentleman's time has expired. The chair
recognizes the gentleman from Texas, the Ranking Member of the
full committee.
Mr. Barton. Thank you, Mr. Chairman. I am not going to ask,
I don't think I will take the full five minutes. Mr. Cicio, is
it your view that there should be no cap and trade program at
all? Is that a fair assessment?
Mr. Cicio. We, as an organization, have not taken a
position either for or opposed. What we look at is cost
effectiveness, cost number one, cost number two, cost number
three. In my testimony, I said that our industry has done an
incredibly good job of continuing to drive down energy
consumption and the resulting greenhouse gas emissions. We do
not support policies, any policy, a cap and trade policy or any
other policy that is not cost effective.
Mr. Barton. Well, then let me ask it a different way. Can
you develop a cap and trade program that doesn't add cost to
the economy?
Mr. Cicio. No, sir. I would say in my opinion, that is not
possible.
Mr. Barton. OK. Mr. Hayward, it says that you are a
Weyerhaeuser Fellow. That is a forestry company. Do you think
that we can reforest America with enough offsets to cover the
allowances in, if we had a cap and trade bill that didn't give
away allowances? That is a terribly complicated question.
Mr. Hayward. The Weyerhaeuser Chair at AEI is something the
family set up over 30 years ago, at the same time they set up a
chair at Yale University's School of Forestry and Environmental
Studies. I don't do that much work on forestry, actually. I do
the sludge part of the environment.
But I have looked at some numbers of this. We have actually
been reforesting pretty rapidly in this country, a million
acres a year net forest growth in the 1990s, according to a
study the Clinton Administration set in motion. But it is hard
to get some numbers on this, but I think the general answer is
no, you actually can't take up all of our carbon emissions
through carbon sinks. But some portion of them, and that I am
hesitant to give you a figure on that, but it is not anywhere
near enough to the targets that we are setting out for.
Mr. Barton. I think, Mr. Keohane, do you want to answer
that? Or are you just looking at him?
Mr. Keohane. Well, I was actually going to highlight the
enormous potential for helping to protect the tropical
rainforests, and in doing so, reduce greenhouse gas emissions
there, and help reduce costs here at home.
Mr. Barton. I am not opposed to tropical rainforest
protection. My problem within the United States, if we set up
an offset program, I am reasonably confident that we can
enforce it and implement it. I am not as confident overseas.
So, my problem with the tropical rainforest is not that I don't
want to protect them, and I wouldn't, and I would even be
willing to figure out a way to give some credits, if we could
ensure that they would actually be enforced and implementable
in those countries. And I don't have that confidence level
overseas. That is my problem, what you just said.
Mr. Keohane. Well, I agree that enforcement and
verification is crucial, but I think we have the satellite
monitoring and the on the ground monitoring to do that
reliably.
Mr. Barton. My last question, I am going to ask this to my
friend at the Heritage Foundation, if we have a renewable
energy standard or a clean energy standard, should we include
nuclear power?
Mr. Kreutzer. Yes, I don't understand why that gets left
out. If the goal is CO2, and CO2 is the
worry, nuclear produces essentially zero CO2 per
kilowatt-hour.
Mr. Barton. What about clean coal technology?
Mr. Kreutzer. Clean coal technology, as Mr. Shimkus pointed
out, is pretty expensive. Right now, we don't have, those of us
at Heritage, and I don't speak for Heritage, but I know that
some of the people I talk with are doubtful that it will be
commercially available any time in the next couple of decades.
That is our concern.
Mr. Barton. But theoretically, it----
Mr. Kreutzer. The science is there, but you have to do
something in addition to pulling it out of the effluent, you
have to put essentially supertankers per day worth of
compressed liquefied CO2 someplace. And I think that
is a problem.
Mr. Barton. Thank you. Thank you, Mr. Chairman.
Mr. Markey. I thank the gentleman very much, and we thank
the panel for your expert testimony, and if you would, please
remain available, because over the next several weeks, we would
like to rely upon your expertise. Thank you all so, so much for
your expertise today.
And we are going to now ask the next panel to come up to
testify, as well, before the panel.
Welcome, and we appreciate very much our final panel for
being seated here. And we are going to begin by recognizing,
excuse me, we are going to recognize first Mr. Frank Ackerman.
He is a Senior Economist from the Stockholm Environmental
Institute at Tufts University. We welcome you, sir.
STATEMENTS OF FRANK ACKERMAN, SENIOR ECONOMIST, STOCKHOLM
ENVIRONMENTAL INSTITUTE--US CENTER, TUFTS UNIVERSITY; KATE
GORDON, CO-DIRECTOR, APOLLO ALLIANCE; DENISE BODE, CEO,
AMERICAN WIND ENERGY ASSOCIATION; DAVID MANNING, VICE
PRESIDENT, EXTERNAL AFFAIRS, NATIONAL GRID; AND YVETTE PENA,
LEGISLATIVE DIRECTOR OF THE BLUE GREEN ALLIANCE
STATEMENT OF FRANK ACKERMAN
Mr. Ackerman. Thank you, and based on prior travel
arrangements, I will have to leave the room no later than 6:45.
I can answer questions.
Mr. Markey. I think we are going to be able to accommodate
you.
Mr. Ackerman. OK. So, Mr. Chairman, members of the
committee, thank you for the invitation to testify on my
research on the costs of climate change.
This hearing comes at a crucial juncture, not only because
a new Congress and a new Administration are beginning to make
changes in climate policy. New initiatives are on the table, in
part, because there has been a fundamental shift in the terms
of the debate, with the controversy moving from science to
economics.
In the realm of science, the influence of an isolated
handful of climate skeptics is rapidly waning. The world's
scientists have never been so unanimous and so ominous in their
warnings of future hazards. But while the climate science
debate is approaching closure, the climate economics debate is
still wide opening.
Climate change is happening. It is threatening our future
wellbeing, but how much can we afford to do about it? The most
powerful argument for inaction today is the claim that the
costs of reducing emissions would be intolerable. The damage to
the economy, it is alleged, would be worse than the climate
problem we are attempting to solve.
Other witnesses have addressed the costs of climate policy.
My testimony addresses the other side of the coin, the costs of
inaction. Dr. Keohane mentioned this briefly in his remarks in
the last panel. When it comes to climate change today, there is
no longer any choice of avoiding all costs. The status quo is
no longer an option. That is, the costs of climate change are
not a discretionary purchase, like choosing whether to buy a
new car this year or wait another year. It is more like a
homeowner deciding whether it is time to repair the ever-
widening cracks in the foundation of a house. The longer you
wait, the more expensive it will be. Wait long enough, and it
may become impossible to save the house.
My research shows that for the United States as a whole,
even a partial accounting of the costs of inaction is well
above 1 percent of GDP, rising steadily in dollars and as a
percentage over time. For some parts of the country, such as
Florida, a similar partial accounting of the costs of inaction
in another study we did reaches 5 percent of state income
within this century.
For particularly vulnerable parts of the world, such as the
islands of the Caribbean, the costs will be disastrously
greater, with one likely consequence being a much increased
flow of refugees out of that region.
Damages that will result from inaction include, but are not
limited to the impacts of increasingly severe hurricanes, more
coastal property at risk from rising sea level and storm
surges, increased energy costs for air conditioning, as
temperatures rise, growing scarcity and rising costs for water,
losses in agriculture to hotter and drier conditions, and
losses of tourism revenue as weather conditions worsen.
My written testimony details these, and has references to
the detailed studies from which they are taken. Rather than try
to walk you through any of those calculations, I would like to
take a minute to talk about what some of my newer research
implies about an issue that came up in the last panel, about
competitiveness.
I have been looking at the question of China's trade and
its carbon intensity, and the remarkable fact is that China
does not have a comparative advantage in carbon-intensive
goods. China's imports are as carbon-intensive as carbon-
intensive as its exports, in a sense, more. China has a
comparative advantage in low cost labor, and they export things
that are based on low cost labor, which are not the carbon-
intensive products in the world economy. It is completely a
mistake to think that concerns about competitiveness lead to
thinking that China is going to rush ahead based on lower cost
carbon.
If we want to think about competitiveness on the
environment, I think we would be more useful to think about the
country that is really winning in world trade, in most recent
years, which is Germany. Germany has high wages, it has high
energy costs, and it has a renewable energy standard. It is
part of a cap and trade system. It is the world-beater, in
terms of exports, and they don't seem to be crippled by those
European environmental regulations. They have a big trade
surplus in manufacturing. So, not only is China not the winner
in carbon-intensive things. Germany has a lot of very carbon-
intensive exports, but it is not necessary to cut wages to the
Chinese level, to cut environmental regulations back to the
Chinese level.
Why is it that you can lead the world in exports with
European wages, regulations, and energy costs? I think that is
the question that we ought to be looking at before we jump to
any conclusions about what small changes in climate policy are
going to mean for competitiveness.
So, thank you. I will be happy to answer questions if I am
still here, or in writing, if I have to leave.
[The prepared statement of Mr. Ackerman follows:]
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Mr. Markey. Thank you, Mr. Ackerman, very much. Our next
witness is Ms. Kate Gordon. She is the Co-Director of the
National Apollo Alliance. We thank you so much for being here.
Turn on that microphone, please.
STATEMENT OF KATE GORDON
Ms. Gordon. Thanks for your patience, also, in staying so
late. I also am going to have to run out of here at some point,
so, for a flight.
This is a critical moment. You keep hearing this. We are at
a moment of climate crisis, but also, economic crisis, and
also, an equity crisis. We have an inequality at a high in this
country, and everything has sort of converged. We really need
to consider whether we are continuing with business as usual,
or whether we are looking at a new path, where we can
simultaneously achieve climate stability and energy security,
and economic prosperity.
And this is, I think the bill in front of you is a good and
exciting step toward that, but I also want to say it is
critical, at this moment, that we take a comprehensive
approach. It is not going to be enough just to regulate. We
need to take the kind of comprehensive approach that the
countries that are beating us in this space, which I agree are
the European countries, that those countries have taken.
What those countries have done is to say not only do we
create the regulations that create demand in these sectors for
clean energy and efficiency, they have also invested in their
workforce. They have also invested in their manufacturing
sectors. These countries have not succeeded and they are not
ahead of us because of lower wages and cheaper processes. They
are ahead of us because they have looked both to demand and
supply, when looking at clean energy and energy efficiency.
There is no guarantee. There is no magic pill that is going
to create jobs from this bill if we don't take a comprehensive
approach. There is no guarantee that, for instance,
construction jobs in efficiency will be good jobs, unless we
put in prevailing wage standards and other guarantees. There is
no guarantee manufacturing jobs will stay in the United States,
unless we invest in retooling and scaling up our manufacturing
sector, so that the 70,000 manufacturing firms today, that are
making the component parts that could be part of the supply
chain, unless those firms can retool and retrain to be part of
that supply chain.
There is no guarantee that workers will be ready for the
clean energy economy unless we invest in training programs that
really help all Americans, including those without four year
college degrees. And I would just urge the committee to think
about the workforce provisions of the bill, and really expand
those, to include folks who are not in four year colleges. The
vast majority of the jobs that we have seen coming out of the
green economy in manufacturing and construction operations and
installation, the majority of those will be the kind of middle
skill jobs that are really most available to those with two
year associate degrees, with technical degrees. So, really
looking at those folks as well.
We have seen, I think, in some ways, the Recovery Act as a
precursor to the kind of bill we are looking at today, the way
of doing comprehensive investment, combined with workforce
investment. That bill is already leading, through its sections
on creating demand for efficiency and renewable energy. It is
already leading to jobs throughout the country. In my
testimony, written testimony, I talked about the company,
Serious Materials, which just bought a Chicago window factor,
and is turning it into an efficient window factory, in part,
because of demand created by the Recovery Act for efficient
products.
We also have seen companies in other parts of the Midwest
retool, going from producing regular glass to efficient glass,
going from producing gearboxes for tractors to gearboxes for
wind turbines. This is already happening, and it will continue
to happen. There is a hundred stories from the Recovery Act. We
could turn that into a thousand or ten thousand stories from
this type of bill.
So, we encourage you, as you are looking at the bill, to
think big. Don't just think about, you know, the cap and trade
section. Don't just think about imported oil and energy
savings. Think about workers, and the countless Americans who
might finally be able to earn a living wage, and be able to
enter the middle class, or be able to invent cutting edge
technologies that will put us on the forefront of the clean
energy future.
We have, as a country, always come to crisis, come out of
crisis stronger, and come out of crisis with new innovations
and new leadership, and we can do that again.
And I just encourage you to look beyond the individual
pieces of this bill, to where we want to go as a country, and
how we want to be competitive.
Thank you.
[The prepared statement Ms. Gordon follows:]
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Mr. Markey. Thank you, Ms. Gordon, very much. Our next
witness, Denise Bode, is the CEO of the American Wind Energy
Association. Welcome back.
Ms. Bode. Thank you, Mr. Markey. It is always nice to be
here.
Mr. Markey. We look forward to your testimony.
STATEMENT OF DENISE BODE
Ms. Bode. Thank you very much. I would like to start off by
thanking you all for drafting the American Clean Energy
Security Act. It is an important step forward. In my testimony,
I will focus on all aspects of it, but my oral testimony, I
want to focus on the wind industry's top priority, and that is
early passage of the Renewable Electricity Standard, and what
it means to jobs, good manufacturing jobs, as well as electric
generation jobs in the United States.
Short-term extensions of the Renewable Energy Production
Credit, the PTC, have helped keep wind energy companies
competitive with traditional forms of energy, but the short-
term extensions have created planning and investment
uncertainty. The booms and busts, the extension and the lack of
extension have created uncertainty for new development of wind
generation businesses, and most especially, for the build-out
of brand new manufacturing base in the U.S.
By eliminating this uncertainty, a National Renewable
Electric Standard would provide the long-term commitment to
manufacturers and developers alike to invest billions of
dollars in the American worker, that will be around forever in
an industry where the source of fuel is infinite.
This business certainty will help quickly deploy renewable
energy sources in the short term, to help achieve stronger
emission reductions in the future at a lower cost. If you
thought last year's historic high for wind, contributing 42
percent of new generation capacity in the U.S., just wait to
what you will see with a lasting commitment to renewables.
Last year, while the U.S. economy was shedding hundreds of
thousands of jobs, the wind industry added 35,000 new jobs, in
addition to 55 new expanded or announced manufacturing
facilities across the country. The renewable energy industry,
with wind power playing a major role, is really poised to help
lead the country out of the current recession and create a more
sound economy.
During the Bush Administration, the Department of Energy
concluded that wind energy could feasibly supply 20 percent of
the Nation's electricity by 2030. The 20 percent wind energy
report, that is just one scenario, certainly, we can do more,
and we are already doing more. But I wanted to announce this.
Even this one scenario, that they said that the numerous
benefits from achieving that level of deployment would include
supporting 500,000 new jobs, generating over $1 trillion in
economic impact by the year 2030, decreasing natural gas prices
by 12 percent, saving consumers between $43 billion and $171
billion, and avoided 825 million tons of carbon dioxide
emissions in the electric sector in 2030, the equivalent of
taking out 140 million cars off the road.
Unfortunately, though, the United States is at a
competitive disadvantage compared to the 37 countries around
the world that have national renewable electric energy
requirements, including China and India, which have mandatory
requirements.
The importance and benefits of a national RES are
unbelievable, because we stand at a critical crossroads, as we
determine how to promote job growth, building back a new
economy of jobs that will be there forever.
In addition to keeping our Nation competitive with other
countries, there are many other benefits. Numerous studies
conclude that a national RES would save consumers money, as
renewable energy sources displace fossil fuel, and avoid the
volatility of fossil fuel prices.
An excellent real world example that I was involved in as
the Chairman of the State Commission in Oklahoma was the
renewable electricity development that brought down costs to
consumers, is the experience of Oklahoma Gas & Electric. The
entire cost of Oklahoma Gas & Electric's Centennial Wind
Project in Oklahoma was entirely offset by the natural gas fuel
savings in 2007 alone, saving consumers in Arkansas and
Oklahoma money. And that is a state that clearly can benefit.
A national RES would create jobs. Of course, you know, the
46 states with power plants and manufacturing facilities, job
growth is already expanding in every region of the country. A
national RES will also bring benefits to all areas. The Energy
Information Administration has found that the Southeastern
United States would be a net renewable energy exporter by 2019
under a national RES. Because a variety of resources are
eligible for RES compliance, all regions of the country will be
able to utilize other abundant renewable resources besides wind
to meet the requirements. Further wind energy projects exist in
35 states already.
Whereas other fuels are shipped by rails, pipelines, a
national RES would promote the shipment of wind via
transmission lines, and allow utilities to purchase renewable
energy credits from windy regions. It is a downpayment too, on
the greenhouse gas emissions. And I know I am up against my
deadline, and I know you will pound that, but I want to tell
you more thing.
What is really critical here is the study, just came out
within the last month, that said in Europe alone, the wind
generation that was added has avoided 7 percent of the
greenhouse emissions from electric generation that would have
been there before. So, it is an immediate impact on removing
carbon right now.
Thank you very much for my opportunity.
[The prepared statement of Ms. Bode follows:]
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Mr. Markey. Thank you, Ms. Bode. Our next witness is Mr.
David Manning. He is the Vice President for External Affairs at
National Grid, where he is responsible for federal issues and
relations. He has also served as the President of the Canadian
Association of Petroleum Producers, so we welcome you, sir.
Whenever you are ready, please begin.
STATEMENT OF DAVID MANNING
Mr. Manning. Thank you very much, Mr. Chairman. As you
know, I may be the only one here that was on the rigs in the
high Arctic and also a delegate to Kyoto. So, just quickly,
thank you, Mr. Chairman, Ranking Member Upton, and members of
the committee.
National Grid is a very large natural gas and electricity
provider in the Northeast. We work from New York to New
Hampshire. We serve about 15 million people. I am here to speak
very specifically, however, sir, on the analysis which is
available to us to explain the economic benefits of energy
efficiency investment.
A couple of years ago, at the World Economic Forum, there
was great debate over whether or not we can do climate change,
whether or not we can drive energy efficiency without
bankrupting the economy, and we heard a lot about that this
evening, in terms of the cost of action.
There was a lack of substantive evidence, and a group
pulled together, including ourselves, Shell, DTE, Honeywell,
Environmental Defense, the NRDC, the Natural Resources Defense
Council, and we all partnered with McKinsey, and produced a
study. It took over a year in production, and it analyzed all
of the various means open to us, in terms of investing in
energy efficiency technologies. It was vetted by MIT,
Princeton, Texas A&M, UC-Davis, and if you look at nothing
else, I have attached to my written testimony what I call the
McKinsey Curve. And the McKinsey Curve, which came out in 2007,
demonstrates that about 40 percent of the technologies that
they reviewed fully pay for themselves within their lifetime.
So, there is no net cost to those technologies. Quite
obviously, you start with residential electronics. We know that
computers can be much more effective, much more efficient.
Residential lighting.
And as you work through, you then go into vehicles, you go
into fuel, intensity of carbon fuels. So, we have a pretty
thorough analysis, setting out all of the various
opportunities, and it is to drive a significant shift in
capital investment away from less efficient, more emitting
technologies, and driving us to more cost-effective solutions
that assume no technological breakthroughs, 80 percent of the
options reviewed relied on proven technology. The balance were
considered high potential, and high potential in 2007 included
cellulosic biofuels and plug-in hybrids, and of course, now, a
number of companies are testing plug-in hybrids.
So, it looked at a series of options, going from least cost
to greatest cost, and this is consistent with what New York
City found in its New York City 2030 Program, that a great deal
of the emissions within urban centers are in buildings. So,
your easy and earliest hits were in buildings and appliances.
Moving on, vehicles and fuel carbon intensity. The third move
was industrials, sinks and forests, and then, finally electric
power options.
What it also found was the maximum of all of those
categories, no one category contributed more than 11 percent to
the solution. So, it is widely dispersed through the economy,
and of course, that is part of our point, is that in order to
invest in these technologies, you are driving an entire new
industry.
Just a few examples. Obviously, we have been doing a lot of
work in energy efficiency in New Hampshire. We have been
working throughout New England. In Massachusetts, we go back
some 30 years in this experience.
Just in the last year alone, we are partnering with
Positive Energy. This is a firm doing a pilot in Massachusetts.
They are based on the West Coast, and they are coming up with a
tracking system for customers to demonstrate how their fuel
consumption relates to those with similar properties.
Reflex Lighting Group, now doing state of the art design
work in Boston for commercial space. DMI, R.G. Vanderweil, two
new design firms that are doing energy efficiency programs and
products for commercial and customer installations. We are
working with them.
Evergreen Solar, Sharp Solar, these are made, locally
manufactured solar providers and Solar Design Associates are
designing our new building, which we are about to open just
outside of Boston, which will be the second largest solar array
in New England, and that will be open in May, 330,000 square
foot lead-certified building, dedicated for National Grid,
powered, of course, by a solar array.
So, those are all, those companies didn't exist a year or
two ago, so my point, sir, is that, and panel, is that we have
a very real opportunity to not only pay for these opportunities
and energy savings, but to drive new jobs.
Very quickly, we spend $215 billion annually on the
production of electricity. We only invest $2.6 billion in
energy efficiency.
In natural gas, we spend $1 to $2 per mcf on energy
efficiency, compared to, I mean, the cost, I am sorry, would be
$1 to $2, compared to the cost of the fuel of $6 to $8. And
multiple studies have demonstrated that you can do energy
efficiency for approximately $0.03 per kilowatt-hour saved, and
electricity costs, of course, range anywhere from $0.06 to
$0.12 and beyond.
A lot of this has taken place in New England, because of
our highest cost of energy, but we can do it.
[The prepared statement of Mr. Manning follows:]
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Mr. Markey. Thank you, Mr. Manning, very much. Our final
witness is Yvette Pena, who is Legislative Director of the Blue
Green Alliance, a partnership between labor unions and
environmental organizations, comprising more than six million
people in support of good jobs and a green economy. We welcome
you.
STATEMENT OF YVETTE PENA
Ms. Pena. Thank you. Thank you, Mr. Chairman and members of
the committee. I am testifying today, I am afraid David Foster
was supposed to testify, so obviously, I am not him. He is our
Executive Director. He is very sorry he had to leave. He had a
commitment outside of the country.
The Blue Green Alliance is made up of the United
Steelworkers, the Sierra Club, the Laborers International
Union, the National Resource Defense Council, the Communication
Workers of America, and SEIU. This collaboration of labor
unions and environmental organizations is based on our common
goal to build a clean energy economy, and economy that both
creates good green union jobs and combats global warming.
Several weeks ago, in response to the deepening economic
and climate crisis, the Blue Green Alliance put forward a
policy statement on climate change, the first such statement
issued jointly by both labor unions and environmental
organizations. The policy statement stressed the importance of
including targets that rely on the best scientific evidence in
an economy-wide cap and trade system that contains mechanisms
to prevent job loss and globally competitive energy-intensive
industries. And above all, the statement made clear that
comprehensive climate change legislation should focus on the
creation and retention of millions of family-sustaining green
jobs. I have submitted a copy of our policy statement for the
record following my written testimony.
Solving global warming will not be the economic calamity
that some are predicting. Done right, the transition to a green
economy will be the most important economic development tool of
the Twenty First Century. The American Recovery and
Reinvestment Act of 2009 took the first step in that direction,
with a meaningful down payment on investment in the green
economy. But this down payment could be wasted, if we don't
continue to make the large scale investments that are necessary
to transition the Nation into a clean energy economy.
Policies, such as the strong Renewable Electricity
Standard, which is included in the draft bill, are essential in
creating a regulatory framework that supports renewable energy,
energy efficiency, and new transmission, as they provide
important market signals that will attract private investment
at the scale necessary to put Americans back to work.
A study released by the Blue Green Alliance on the
Renewable Energy Policy Project of component manufacturing in
the renewable energy industry found that 850,000 manufacturing
jobs could be created with $160 billion of investments in
manufacturing.
New wind turbine equipment plans have also been built in
communities across the country, including North and South
Dakota, Minnesota, Iowa, Pennsylvania, Oklahoma, Colorado,
Arkansas, New York, North Carolina, and other places directly
employing thousands of workers.
Comprehensive climate change legislation will also
reinvigorate the construction industry, in which 1.9 million
people are now out of work. We must make greater investments in
both commercial retrofitting and residential weatherization,
with the right standards that others have spoken about.
Such energy savings can be put to use to finance a high
wage, high road weatherization industry, where livable wages
are paid, health care is provided, and essential career and
apprenticeship job training opportunities are made available to
communities across America.
As members of the committee are fully aware, global warming
is a global problem. U.S. climate change legislation must not
create perverse incentives for energy-intensive industries to
close their U.S. facilities because of rising energy costs and
relocate them to countries that do not take effective action to
curb emissions. Nor should energy-intensive industries be left
vulnerable to imports from countries that do not price carbon
in energy-intensive products. In either case, Americans lose
jobs and global warming emissions increase.
Among the mechanisms available to resolve the international
competitive issue are allowance allocations to energy-intensive
industries, border adjustment mechanisms, and globally
measurable and enforceable sectoral agreements within the
framework of an international treaty.
We are confident that this committee can craft the
appropriate combination of these mechanisms to ensure that our
domestic manufacturing industries remain both competitive and
play their critical role in reducing their own emissions.
Global warming is already destroying the livelihood of
workers available. Doing nothing is not an option. Before us
are critical choices and decisions. Will we build the clean
energy economy and put America's factory and construction
workers back on the job? Will we advocate a new development
model for developing countries, that emphasizes consumption in
their economies, instead of unsustainable trade deficits and
hours?
Will we look back a year from now and say that we stood up
for our country, our climate, and all humanity when it
mattered? Your choices will decide which path we go down as a
Nation. I believe that with the vision that has been laid out
in the draft legislation, you have already taken steps down the
right path for our workers and for our environment.
The Blue Green Alliance and its partner organizations look
forward to working with members of the committee as you
continue to work on this critical piece of legislation.
Thank you.
[The prepared statement of Mr. Foster follows:]
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Mr. Markey. We thank you, Ms. Pena, very much. And now, we
will turn and recognize Ms. Castor, from the State of Florida.
Ms. Castor. Thank you, Mr. Chairman. Thank you all very
much for your testimony today. I hear a lot from students and
young entrepreneurs, and they are very motivated these days to
enter a green jobs field.
What is your best advice for a young person, what should
they be studying in school? How should they be preparing? Where
are the opportunities today for those jobs?
Mr. Manning. I would love to start. We have a real issue in
this country, in terms of math and science education. And this
doesn't just apply to the new economy, the new energy economy.
It applies to all of the work that we must do as utilities to
keep our own systems reliable.
So, I would have to say off the top that if you are having
that conversation, if anyone has the aptitude or the interest
to pursue science and--speaking as a retired lawyer, I can
offer great respect for mathematicians, for scientists, for
engineers, but beyond that, of course, I think what is really
significant is that the educational institutions that we now
meet with and talk to, they are designing these programs, in
terms of design, architecture, engineering, science, that it is
very difficult for us to know what we are going to need. The
Bipartisan Action Group is meeting again tomorrow on this very
issue, trying to figure out what sorts of means they will have,
in terms of personnel.
Don't forget also, the average age of an employee within
our company is very close to 50. So, when you talk to these
people, remind them that there is an entire generation of
energy providers who are very close to retirement. So, I think
there is a pretty broad scope open to them.
Ms. Gordon. Thank you for the question. I think it is a
great one. It is incredibly important to not limit the scope of
the notion of what a green job is. Ideally, we would love to
see jobs in inventing, making, installing, using, maintaining,
operating all of these systems here in this country, and that
is a huge range of occupations, and a huge range of areas and
sectors. It is one of the reasons it has been hard to count the
jobs, because they are so diverse across so many sectors.
I think, I would agree that math and science, math and
science are critical not just for engineering, but what we are
hearing from the folks, our union partners who are running
apprenticeship programs in electrical and in the building
trades, is they also need folks to come in with basic math and
science. It is an incredibly important skill.
I would also just reiterate what I said earlier, that many
of these jobs are jobs that don't need a four year degree, and
while we want our young people, who are interested, all the
young people who are interested and excited about going to a
four year college should be able to do that. But not all young
people are in that category.
There is 150,000 dropouts last year in California. The
Gates Foundation surveyed them, and found 80 percent of them
said if they had had job experience while in school, they would
have stayed in school.
And that is an incredibly important statistic, and I think
we need to give opportunities to folks who want to go into the
trades, opportunities to folks who want to be building hands-
on, building these systems that we are talking about.
Ms. Bode. As one of the mainstream, sort of new renewable
industry.
Mr. Markey. Turn on the microphone, please.
Ms. Bode. We want, am I on? OK, now I am. We represent both
the people involved in manufacturing of wind turbines, and
there is over 8,000 parts in a wind turbine, as well as those
people that develop the wind farms. So, we deal with both, so
what we have been trying to do, and are doing through our
Education Committee, is developing curricula that will provide
the job training, and working with a number of educational
institutions, junior colleges, vo-tech schools, as well as four
year colleges, to develop the breadth of training that will be
necessary for these jobs.
We have, at our Wind Power Conference that will be in
Chicago, Illinois the first week in May, we will have
approximately 20,000 people attending that conference. We have
one of the days of the conference set aside for young people
and for people in academics, who want to come in and meet the
1,200 exhibitors who are manufacturer, supply chain folks, as
well as developers, to talk with job possibilities. And we are
there to talk with them as well.
So, contact us. We are putting together an internship
program. We are all about the jobs and the people.
Ms. Bode. And I have another question. It is a bit broader.
You know, last week, the Environmental Protection Agency issued
its proposed endangerment finding, that follows on the U.S.
Supreme Court decision that says EPA has the legal authority
and obligation to regulate greenhouse gases.
And you know, if the Congress, if we can't get it together
and pass a cap and trade, or an Energy Bill here, it will
probably be left to EPA to regulate it. What would that do to
green jobs initiatives and to your growing industries?
Mr. Manning. Again, if I could open. I think we had a
strong preference, which is one of the reasons we are very
pleased to be included in this panel, we have a strong
preference for a legislative response which can provide the
kind of flexibility and the investment opportunities that make
sense.
We are a very large company. We are a very large industry,
all of us collectively. Our preference would be that we come up
with a regime, or that you come up with a regime which we can,
instead of rules that we can live by, and drive the right kind
of investments.
So, Mass. v. EPA, we are very familiar with that case. We
are very familiar with the work of the EPA, in terms of
regulating what we do as power generators. Our preference would
be that we come up with, or that you come up with a set of
rules that will address this problem. We are very anxious to
get on with it.
Ms. Bode. Thank you.
Mr. Markey. Thank you. The gentlelady's time has expired.
Ms. Bode. OK.
Mr. Markey. The chair recognizes the gentleman from
Michigan, Mr. Upton.
Mr. Upton. Mr. Manning, we sort of chuckled back here when
you said you were very glad to be on this panel. If I were you,
I would have asked to have been on panel 2 or 3. I have just a
couple questions, and hopefully, will not take my full five
minutes.
Ms. Pena, you talked about the Blue Green Coalition and how
broad it is, which was exciting to hear. I am a supporter of a
renewable portfolio standard. Obviously, the question is what
is in the details, what is in the base. I am one that happens
to believe that hydro ought to be in there, both old and new.
Waste energy, I think, is very important. We see that in my
district. A gas line runs right through a landfill, and they
provide gas heat or gas for, I believe, 1,200 homes a day from
the methane produced from that.
I am a supporter of nuclear, and that is my question for
you. We have two nuclear plants in my district. We had the
unfortunate incident last fall of having a turbine lose a
blade, and it was destroyed. And there are now 500 folks
working to repair that turbine. As you can imagine, it is
pretty big. That turbine was made in Germany, because we turned
the switch from green to red on nuclear, we lost, we have lost
a lot of jobs. Among them, I think in your coalition, you
talked about the steelworkers.
When my two plants were built, 85 percent of the components
of those two plants were built in this country. Because we have
not turned on a new plant in a couple of decades, 85 percent of
the components are now made someplace else, as we have seen
with this turbine. Would your organization support nuclear,
with no greenhouse gas emissions, as part of the renewable
portfolio standard?
Ms. Pena. We do not have a position on nuclear energy. Some
various organizations----
Mr. Upton. Well, we might be able to convince you.
Ms. Pena [continuing]. Have varying positions on the issue.
Mr. Upton. I just know that the steelworkers, I believe
they are supportive of that. Well, I don't know. It would be
great if you could go back to them, because this would really
create tens of thousands of jobs, if we are able to do that.
Knowing my time is running out, I am going to not use all
my time. Ms. Bode, a question that I have been asking my crew
for a long time, and maybe you know the answer.
This proposal, the draft deal, has a 25 percent standard by
'25. Obviously, a lot of that is wind. Unlike some people from
Massachusetts, I actually support in water, Lake Michigan,
though I don't, maybe Mr. Manning, I don't know whether you
support it off Nantucket or not. Do you? You do. Do you hear
that, Mr. Markey? He supports wind off Nantucket.
Maybe, you will be delegated to panel 5 next time.
Mr. Markey. How about wind in Lake Michigan?
Mr. Upton. I just said that I support that.
Mr. Markey. Oh, you do. OK, oh, good.
Mr. Upton. I do. I do support that.
Mr. Markey. Excellent, excellent.
Mr. Upton. The question, though, that I have for you, Ms.
Bode, is we actually, we have some of those green jobs that
we've talked about. In my district, we actually make the cap,
which weighs 32,000 pounds, on the 80 meter wind turbines.
Great, good jobs, in a little town in my district. Now, they
provide, if we end up going to 25 percent, I don't know what
the wind component of that will be. I would guess what, 10 to
15 maybe, if we don't include--how much, knowing that today, it
is less than 1 percent wind, how much space in America do we
need for, how many wind turbines do we need, at 80 meters tall,
because they are the most efficient, right?
Ms. Bode. Actually, they are actually going up to 100 feet.
Mr. Upton. OK. Well, 80 meters. But in essence.
Ms. Bode. One hundred.
Mr. Upton. How much space do we need, land space do we
need?
Ms. Bode. Right now, there are 35 states that are
producing, that have wind turbines and wind generation.
Mr. Upton. Right.
Ms. Bode. In terms of producing wind. In terms of the space
to do that, I think, I haven't measured it in terms of half of
the state, or part of the state, but I think the footprint is
probably less important, in the fact that the wind turbine----
Mr. Upton. Well, do we need----
Ms. Bode. A wind turbine, put up on land, continues to
allow the land to have multiple uses, and in fact, you know,
that is, you know, in some respects, that is very different
than all----
Mr. Upton. Do we need----
Ms. Bode [continuing]. Other forms of generation.
Mr. Upton. But how close do you put these 80 meter jobs
together?
Ms. Bode. Well, let us put it this way. In Germany, they
have 20 percent penetration, and I think they are very
comfortable with the amount of wind turbines they have put up
in their country. The same thing with Italy, France, and it is
a much smaller space for them to put it----
Mr. Upton. Again, remember, I am a supporter.
Ms. Bode. Yes.
Mr. Upton. Do we need the size of Iowa? Do we need the size
of--I mean, how much space do we need to generate 10 to 15
percent of our energy from wind?
Ms. Bode. I have no idea.
Mr. Upton. All right.
Ms. Bode. Well, I mean, but the point is that you do not--
you are not taking land out of----
Mr. Upton. Can you find out and get back to me?
Mr. Shimkus. If the gentleman would yield, I have got some
stats.
Mr. Markey. Tell you what, the gentleman's time has
expired, and I can recognize from, if the gentleman wouldn't
mind, I can recognize the gentleman from Illinois on his own
time.
Mr. Shimkus. Then I am not going to use my stats instead of
my question.
Ms. Bode. Well, and I would be up to answer to his
question, my brilliant staffer, who has a lot more statistics
than I do at his fingertips, if I could answer.
Mr. Markey. Sure.
Ms. Bode. Apparently, it is, actual land use is 2 to 5
percent of the land covered, which is less than half of the
area of Anchorage, Alaska. So, onshore land use would be
approximately 12.3 million acres, but of course, in almost
every case, that land has continued to be multiple use.
Mr. Upton. OK. Understand that. Thank you.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Illinois.
Mr. Shimkus. Let me just add to that, then. Thank you, Mr.
Chairman. Take a steel mill that uses 545 million kilowatts per
year. It would require roughly 138 wind turbines on roughly
12,443 acres of land, for a total output. However, during peak
load at that steel mill, it requires 100,000 kilowatts. For
that, you would need roughly 825 turbines on 33,000 acres of
land to account for peak load. This wind panacea is just scary.
The President, in his inaugural address, said we will run
our factories, manufacturing factories, on wind and solar. Dr.
Seuss couldn't write a better line. That is irresponsible. Base
load generation will always be major traditional electricity
generation, whether that is coal or that is nuclear power, or
it is going to be major hydro. Now, renewables can help, and I
am probably one of the few Members who climbed a wind turbine,
Mr. Chairman. I know you would be shocked that I actually
climbed one during my break.
I encourage everybody to visit coal-fired power plants or
coalmines. I also did climb all the way up to the top of a
turbine, and got a good tour of that. So, we are not anti-this,
but for people to propose that we are going to solve our
electricity problems and stay competitive worldwide on wind and
solar, are being very disingenuous. And so, that is why part of
our debate is, in this bill, which has a gaping hole, which is
the credit allocation. Are you all comfortable with the fact
that there are some folks cutting backroom deals on the credit
allocations, and that we are not here discussing the allocation
of those credits right now.
Ms. Pena?
Mr. Manning. If I could----
Mr. Shimkus. No, I asked Ms. Pena first.
Mr. Manning. Oh, I am sorry.
Ms. Pena. Thank you for----
Mr. Shimkus. Real quickly. I have only got 2:40, and the
chairman's hot on time.
Ms. Pena. And that question will be answered, and
obviously, we are having a lot of discussions on it. We need
to----
Mr. Shimkus. So, you are part of the backroom deals, too.
Ms. Pena. Well, I----
Mr. Shimkus. Yes?
Ms. Pena. No, no. I mean, obviously, the chairman has----
Mr. Shimkus. No. There is deals being cut right now, so if
you are not back there, you had better get back there, because
folks are negotiating these credits. Now, we should be
discussing these credits out here in the open, so that we can
then also score them. So, do you think we should have those out
for everyone to see, so we can address the benefits?
Ms. Pena. I believe we need allocations, and we need
investments----
Mr. Shimkus. How about transparency?
Ms. Pena [continuing]. Manufacturing----
Mr. Shimkus. How about transparency? You all are for
transparency, aren't you?
Ms. Pena. There is transparency in this process, sir.
Mr. Shimkus. There is. So, can you tell me the credit
allocation right now?
Ms. Pena. It is being discussed.
Mr. Shimkus. And who is discussing it?
Ms. Pena. The chairman, the various constituencies. The----
Mr. Shimkus. In the backrooms. In the backroom, which I
have not been invited to yet. That is not dealing and helping
me on coal production and electricity generation.
Ms. Pena. I can only answer what we believe, and----
Mr. Shimkus. Mr. Manning?
Mr. Manning. Our position has been very public, in terms of
allocation. We believe that----
Mr. Shimkus. Should there be, let me ask this question. My
time is--should there be 100 percent auction? Ms. Pena, yes or
no, 100 percent auction? Yes or no.
Ms. Pena. We need to continue to discuss that.
Mr. Manning. We need to move promptly to----
Mr. Shimkus. 100 percent auction, yes or no.
Mr. Manning. Ultimately, yes.
Ms. Shimkus. Yes. Ms. Bode, 100 percent auction. Should we
have 100 percent auction? Ms. Bode?
Ms. Bode. I don't know what is being discussed in the back
rooms. I am sorry.
Mr. Shimkus. No, the question is should we have 100 percent
auction of credits?
Ms. Bode. Oh, OK.
Mr. Shimkus. The question is, should we have 100 percent
auction of credits? Aren't these important questions? Mr.
Chairman?
Ms. Bode. Yes.
Mr. Shimkus. Well, did you invite the panel here?
Mr. Markey. I don't think there should be 100 percent.
Mr. Shimkus. I am asking the panel that you have invited.
Mr. Markey. OK. Please.
Mr. Shimkus. Should they be answering? Should there be 100
percent auction of credits?
Ms. Bode. I don't know the answer to your question.
Mr. Shimkus. OK. Next.
Ms. Gordon. I think we, our alliance hasn't come to a
specific position on this, but we definitely believe there
needs to be a transition period, where----
Mr. Shimkus. Mr. Ackerman, please.
Ms. Gordon. Ultimately, yes.
Mr. Shimkus. Should there be 100 percent--someone.
Ms. Gordon. But there needs to be a transition period, that
includes some allocations, and we need to make sure we invest
auction proceeds back into the clean energy economy.
Mr. Shimkus. Mr. Ackerman.
Mr. Ackerman. Well, I am in favor of 100 percent auction.
Mr. Shimkus. Thank you. Thank you.
Mr. Ackerman. And I am in favor of transparency in making
these deals.
Mr. Shimkus. Thank you.
Mr. Ackerman. I think the question of is there transitional
assistance needed is a separable question.
Mr. Shimkus. Right. But we should be discussing these
credits. If we move to markup of a bill on Tuesday, and we
don't have the credit allocation, that will pose a question,
Mr. Chairman, one that you asked in past Energy Bills, of who
is writing the bill in the back room. And with that, I yield
back my time.
Mr. Markey. I thank the gentleman very much. And I thank
all of the members of the committee for this historically long
hearing, and you don't hear many witnesses ever say thank you
for inviting me this evening to testify. As one of our
witnesses----
Ms. Bode. Mr. Markey.
Mr. Markey. Yes.
Ms. Bode. I just wanted a point of personal privilege. I
wanted to share the fact that my brother and sister-in-law are
here from Carlisle, Massachusetts. They are in the tiers with
their two daughters.
Mr. Markey. Where are they, please? I would love to see
them, and welcome from Carlisle.
Ms. Bode. And this is the first Congressional hearing they
have ever been to, and so, I just wanted to make sure that
everyone knew that they were here.
Mr. Markey. Hopefully they weren't here at--Carlisle is
like the aristocracy of Massachusetts. So, thank you so much
for being here today, and your sister-in-law did a fantastic
job here today.
Tomorrow morning, by the way, our first hearing is on the
allocation policies of carbon credits, in order to assist and
benefit consumers, and we will have seven witnesses, beginning
at 9:30 tomorrow morning, to begin the discussion of carbon
credits and its implementation, in a way that will protect
consumers in America.
Again, we thank all of you for your patience today, and for
your tremendous contributions to this process. Thank you.
This hearing is adjourned.
[Whereupon, at 6:40 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009--DAY 3
----------
THURSDAY, APRIL 23, 2009
House of Representatives,
Subcommittee on Energy and Environment,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:40 a.m., in
Room 2123, Rayburn House Office Building, Hon. Edward J. Markey
[chairman of the subcommittee] presiding.
Present: Representatives Markey, Doyle, Inslee,
Butterfield, Matsui, McNerney, Welch, Dingell, Green, Capps,
Harman, Gonzalez, Baldwin, Ross, Matheson, Barrow, Waxman [ex
officio], Upton, Hall, Stearns, Shimkus, Shadegg, Pitts,
Walden, Sullivan, Burgess, Scalise, Sutton, Barton [ex
officio].
Staff Present: John Jimison, Senior Counsel; Karen
Lightfoot, Communications Director; Matt Weiner, Special
Assistant; Mitch Smiley, Special Assistant; Melissa Bez,
Professional Staff; Alex Barron, Professional Staff; William
Carty, Minority Professional Staff; Peter Spencer, Minority
Professional Staff; and Garett Golding, Minority Legislative
Analyst.
Mr. Markey. This hearing will come to order.
Today we will begin our second full day of hearings on the
American Clean Energy and Security Act. Yesterday we heard from
three members of the Obama Cabinet, from CEOs of the United
States Climate Action Partnership, from Mayor John Fetterman of
Braddock, Pennsylvania, and from numerous experts, scientists,
and economists, all with a stake in the best way to go about
creating a new energy economy.
Today we will hear from three panels. The first panel will
provide us with input on how best to allocate emission
allowances and ways that can assist and benefit consumers. That
panel includes representatives of major trade associations
associated with electricity production and natural gas usage,
as well as advocates for low-income consumers.
The second panel will advise us on ways in which we can
ensure international competitiveness and help encourage
international participation in our efforts to fight global
warming and maintain a level playing field. It will feature
major stakeholders like Dow Chemical and the United Steel
Workers.
And our final panel will help us to understand how we can
produce low carbon electricity, both from coal with carbon
capture and storage, and from renewable energy sources like
wind, geothermal, and solar.
Today is about the nuts and bolts of our legislation, how
we help consumers, keep jobs here in America, and begin
transforming our energy system. With the information that we
glean from today's witnesses, we can better craft solid
solutions for our energy and environment future.
I look forward to hearing from our witnesses today. And I
turn to recognize our Ranking Member, if he has any
introductory comments.
Mr. Upton. I hope you liked the movie last night.
Chairman Markey and I were the co-host of the Disney movie
on Earth last night. That is one of the reasons we finished
Panel 4 by 6:45, so we could get there to the opening.
But I have no opening statement. Let's just get right to
it.
Mr. Markey. Let me turn to the Chairman of the full
committee, Mr. Waxman, and ask if he has any. And I do not see
Mr. Barton.
So let me then turn and introduce Jeff Sterba. He was
elected chairman of the Edison Electric Institute in 2007.
Edison Electric Institute is a national association of
shareholder-owned electric companies, their international
affiliates, and industry associates. He is also the chairman,
president, and CEO of PMN Resources, an energy holding company
serving New Mexico and Texas.
Mr. Sterba, please begin when you are ready.
STATEMENTS OF JEFFRY E. STERBA, CHAIRMAN AND CEO, PNM RESOURCES
INC., ON BEHALF OF THE EDISON ELECTRIC INSTITUTE; GLENN
ENGLISH, CEO, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION;
MARK CRISSON, PRESIDENT AND CEO, AMERICAN PUBLIC POWER
ASSOCIATION; JOHN SOMERHALDER, II, CHAIRMAN, CEO, AND
PRESIDENT, AGL RESOURCES, ON BEHALF OF THE AMERICAN GAS
ASSOCIATION; RICHARD MORGAN, COMMISSIONER, DISTRICT OF COLUMBIA
PUBLIC SERVICE COMMISSION, ON BEHALF OF THE AMERICAN GAS
ASSOCIATION; RICHARD COWART, DIRECTOR, REGULATORY ASSISTANCE
PROJECT; ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, CENTER FOR
BUDGET AND POLICY PRIORITIES; ROBERT MICHAELS, PROFESSOR OF
ECONOMICS, CALIFORNIA STATE UNIVERSITY; AND DARRYL BASSETT,
EMPOWER CONSUMERS
STATEMENT OF JEFFRY E. STERBA
Mr. Sterba. Thank you very much, Mr. Chairman. I appreciate
the introduction. And I would first like to commend you and
this committee for holding these hearings. This is a complex
topic, and education and understanding of the ramifications of
what you may do is an exceptionally important aspect of it, and
I very much appreciate the opportunity to appear before the
committee.
I am here to represent Edison Electric Institute. And as an
organization, we have endorsed principles associated with
climate change that will help ensure that we can achieve the
kinds of greenhouse gas reductions that are necessary, but to
do it in a way in which we protect the impact on consumers.
That is a very important aspect of, I think, this program,
because electricity is so pervasive in everything that
consumers use, whether you are a business, a residential
consumer, or a major industry.
For our industry, moving to a low carbon future is about
turning over capital stock. These are expensive, long-lived
generation assets that are currently being paid for in
customers' rates. The turnover of this capital stock is not
going to be simple, it is not going to be cheap, it won't occur
overnight. It has to be done in concert with the development of
technologies that will allow us to move to low carbon equipment
to be used to meet customers' needs, things like carbon capture
and storage which you have addressed in your proposed
legislation.
Care in this transition is paramount to ensure that the
resulting cost increases to customers are reasonable and
absorbable by the economy. We strongly believe that an
allocation of allowances for the benefit of consumers is a
critical part of this care and transition that will enable an
affordable path to aggressive greenhouse gas reductions.
I want to spend my limited time talking about why we
believe the allocation of emission allowances to the electric
sector is the most effective way to minimize adverse impacts on
customers, and then to explain a specific proposal that EEI has
developed that our entire membership has endorsed as to how
this allocation could occur.
The cap-and-trade system that Congress established to
reduce sulfur dioxide as part of the Clean Air Act Amendments
of 1990 is truly the most successful example of a cap-and-trade
system in the world. To date, emissions have been reduced by
more than 50 percent, at a cost far less than what was
anticipated at the time it was done and without the existence
or the occurrence of any windfall profits. In that case, 97
percent of all allowances were allocated to regulated emissions
sources and only 3 percent were put up for auction.
In the proposed cap-and-trade system, by having allowances
allocated to consumers or allocated for the benefit of
consumers, you avoid the double whammy. By double whammy, I
mean customers having to pay for the higher cost of new
resources that will have to be added, plus the cost of
allowances to cover what you have to remit, to cover the
emissions that you have from existing fossil fuel resources.
It is important to note that by allocating these allowances
for consumer benefit, the primary goals of a cap-and-trade
system are still intact. There is a price that is placed on
carbon which we need to understand and see so we can make
informed decisions on resources, and the environmental
improvements of greenhouse gas reductions occur just as they
would if the allowances were auctioned.
Some have argued that money raised by allowance auctions
could be provided back to consumers as a means to buffer the
cost impact. So what is the difference between that and
allocating allowances to the distribution company to flow those
benefits back to consumers?
First, most of the proposals to implement either a low
income tax credit or send payments to individuals would not
benefit commercial customers, industrial customers, the source
of jobs within our economy. But it is not just that. It is also
the impact on the balance of the public sector. What happens to
hospitals? What happens to schools? They wouldn't receive the
value. It would be going to consumers. And so hospitals and bus
stations and everything else that provides services to
consumers, their rates would go up, and those costs would then
be flowed on to consumers.
So the increased cost of electricity would affect the
economy through higher prices for goods and services, and
higher taxes for local governments to cover their costs. An
allocation system that benefits all electricity consumers helps
cushion these cost increases through the economy. And I think,
also, the efficiency of not taking the money from consumers
through high electricity prices in the first place seems, at
least to me, a better solution than taking it and then trying
to pass it back to consumers through taxation and/or spending
policies.
Another argument that is made against allocations is that,
look at the European situation, and it led to windfalls. So we
shouldn't let that happen, so we shouldn't have allocations.
But what led to windfalls is because of the structure of their
system in the EU.
First, they overallocated allowances because they did not
have a good baseline on what greenhouse gas emissions were. In
the United States, we have that good baseline.
Second, they made the allocations totally to all
unregulated generators in the electricity sector. And it is a
competitive market that they operated over there, where many of
the States in the United States are not competitive markets on
the retail side. And the result was that they got some benefit
of price uplift and they also got an allocation. That led to
windfalls.
The approach that we are proposing and that EEI has
developed ensures that that will not occur, because we know
what the baseline of greenhouse gas emissions are and we know
how to structure a system through the allocations being given
to the regulated side of the business, to the largest extent,
so that they flow to the benefit of customers.
Let me briefly walk through the EEI proposal so that that
is out on the table. The initial allocation to the electric
public sector should be 40 percent of all allowances, because
that is the proportion of our sector's share of the national
greenhouse gas carbon dioxide emissions. This 40 percent
allocation should remain in place until critical technologies
such as carbon capture and storage, which are essential to
achieving long-term climate policy objectives, are commercially
available. Then our sector share could gradually decline, as
consumer costs for cleaner energy would also decline.
Within the electric sector, these allowances would be
divided among regulated distribution companies and merchant
coal generators. Only merchant coal generators. Merchant coal
generators would receive allowances based on about 50 percent
of their base year emissions. And this is solely to cover that
portion of the cost that isn't recovered through the
marketplace.
There is a clear agreement on our part that there should
not be windfalls to merchant coal generators, and what we are
proposing is very different than what was done in the EU model.
The allowances would enable these generation facilities to
continue to operate, avoid a rush to gas, which would have
consequences to all consumers, while new generation resources
are developed. The vast majority of allowances would be
allocated to the distribution company based on an even split
between emissions and retail sales.
By allocating to the distribution company, we ensure that
the value of that allowance flows through to consumers. And
that is the main point: How do we do this in a way in which we
mitigate the cost impact to consumers?
So, Mr. Chairman, I appreciate the time to visit with you.
I look forward to your questions, and particularly those around
how do we make sure that consumers are not adversed by doing
the right thing.
Mr. Markey. Thank you Mr. Sterba. It was a very important
proposal to put on the table for the members' consideration.
[The prepared statement of Mr. Sterba follows:]
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Mr. Markey. Next, we welcome our former colleague and a
good friend, Glenn English, who is the president of the
National Rural Electric Corporation. He represented Oklahoma's
Sixth Congressional District for many years in Congress. His
organization advocates for consumer-owned cooperatives on
energy and operational issues as well as the rural community
and economic development. We welcome you back to Congress,
Glenn. Whenever you are ready, please begin.
STATEMENT OF GLENN ENGLISH
Mr. English. Thank you very much, Mr. Chairman. I
appreciate that. And I do want to stress we are a cooperative;
we are owned by consumers, and our focus really is to do two
things. First of all, to make sure that our membership have
enough power to keep their lights on and to maintain their
standard of living; the second is to, of course, make sure that
electric power is affordable. So that is where we are coming
from. We are not for profit. We are not for profit.
There are no rewards in any way for a particular fuel, so
we have no fuel choice from the standpoint of generating that
electric power. It all comes down to this question of the cost
of power, and how we can deliver that power to our membership
in the most affordable manner possible.
Now, Mr. Chairman, I am speaking only from a standpoint of
electricity as it applies to the bill, of course. And I would
like to also call the attention of the committee to a
commitment that was made years ago in 1932, first made in 1932
and then reiterated several times over the next ten years by
Franklin Roosevelt when he made the observation that in this
country that electric power is no longer a luxury and had
become a necessity. A necessity.
And I would suggest, as we move to deal with this
particular issue and this challenge, that we keep that in mind.
That probably is a little different category perhaps than other
issues regarding carbon, food, clothing, housing, and then
electricity. I think most people would agree that in order to
maintain that standard of living in this country, that is what
we have to have.
So, anyway, I would like to just lay out a few markers, Mr.
Chairman, as we move forward to deal with this particular
challenge. The first thing is, and the dean of the House, I
think, made this point some time ago about trying to regulate
carbon through the Clean Air Act. I believe he described it as
being a glorious mess. And I think that would probably be the
case. It wasn't designed to do that. I remember, I was here
when we passed it the last time, I believe it was 1990, Mr.
Chairman, and I remember I voted for it. I don't remember any
discussion about the carbon when we were talking about that. So
this is not designed to do that kind of a job.
So in reality, I think we have all got to face the fact
that we have got to have a bill; but I would also suggest not
just any bill. It has got to be a bill, I think, that addresses
the carbon issue and the carbon issue alone. In other words,
what I would suggest, it is a bill that needs to be simple, if
such things can be done. It needs to be flexible. It certainly
needs to be affordable. And it needs to have sustainability.
And what I mean by ``sustainability,'' Mr. Chairman, is one
that is going to last through the years. This is a long-term
project we are embarking on, and certainly the next 10 or 15
years are probably going to be the most challenging as we move
down that road.
And we also need one that is effective. So I would suggest
a commonsense approach as we begin to put these pieces together
to have a workable bill that accomplishes its objective.
The next thing I would suggest is it not be legislation
that is designed to raise revenue. It shouldn't be a revenue
enhancing endeavor. It should be something that is trying to
achieve the objective of reducing carbon emissions in the
country, and that alone. So that means auction is not a good
idea. We would discourage the committee from going down that
road. That means that allowances should be free, particularly
as far as applies to the electric utility industry. And we
would also suggest that it should be done on the distribution
level, so that the full benefit of those allowances should go
to consumers. Of course, our not-for-profit status, that is
where they go.
I would also suggest, Mr. Chairman, that as we look at the
caps, they should be established with an eye toward the
question of technology: What can we do, and when can we do it?
I think we all appreciate and understand that this bill, this
effort, what we are going to try to accomplish here if we are
going to keep the lights on and keep electric bills affordable,
we need technology; and we are going to have to make some very
significant advancements, and we are very hopeful that is going
to be the case.
In some cases I guess you could say, Mr. Chairman, we are
betting on the come, and we need to do everything we can to
make sure that we speed up that technology and get it
developed, get it on line, so it can be utilized, so we can get
back to a full complement of fuels.
And we would also suggest, again looking at it from the
consumers' standpoint, Mr. Chairman, that there should be some
kind of safety valve device that makes certain that consumers
are assured that we will, in fact, have a limit on any economic
damage, that this thing will get out of control, that we are
going to try to contain those costs. I know that you have
addressed that in the draft. I would suggest it probably needs
to be done in a little different manner than what you have in
the draft. I appreciate the thought.
And also as we move forward with renewables, Mr. Chairman,
we are very committed to renewables. We in fact serve 70
percent of the land mass of the United States. So most of the
renewable energy that is going to be generated in this country
is going to be done in rural America and areas served by
electric cooperatives. We just established a national renewable
cooperative which allows small distribution systems all over
the country to invest in renewable projects.
But I would also suggest that there is a wide range of
difference in different parts of the country. Some areas can
produce renewables far more economically, far easier, and far
greater magnitude than you can in other regions. And that is
why we think it should be looked at nationally and what can be
done nationally.
And, Mr. Chairman, I would also suggest that for that
reason there needs to be a small utility exemption, about 4
million megawatts per year. And I think we can make a serious
workable start and move down the road to the objective you are
trying to achieve.
Thank you, Mr. Chairman.
Mr. Markey. Thank you, Mr. English, very much.
[The prepared statement of Mr. English follows:]
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Mr. Markey. And our next witness is Mr. Mark Crisson. He is
the CEO of the American Public Power Association, which is the
service organization for more than 2,000 community-owned
electric utilities. Prior to his current position Mr. Crisson
was at Tacoma Power in Washington State for nearly 30 years.
Whenever you are ready, please begin.
STATEMENT OF MARK CRISSON
Mr. Crisson. Thank you, Mr. Chairman. Good morning. I am
Mark Crisson, president and CEO of the American Public Power
Association. And, as you said, we represent over 2,000 publicly
owned, not-for-profit power systems across the United States,
49 States. We serve cities as large as Los Angeles, but most of
our members, the vast majority of our members serve communities
of 10,000 people or less.
Mr. Chairman, APPA supports congressional action to address
climate change. But as my colleagues have stated we are very
concerned that achieving environmental goals be properly
balanced with affordable costs to the consumers and the
economy. Consequently, we have developed a detailed set of
principles on implementation of a cap-and-trade program.
We believe it is critically important that the transition
to a low carbon future be managed in a way that keeps
electricity affordable and reliable in order to be sustainable
and workable in the long term. Thus, our first principle is
legislation must include a safety valve or other stringent cost
containment mechanism that sets a maximum price on carbon.
While we support the inclusion in your draft bill of an
offset regime and the use of banking and borrowing, we do not
think these are adequate measures. We urge the committee to
include a price ceiling on CO2 in the next version
of your draft. We also have concerns that the provisions
governing the establishment and use of offsets are inadequate
for cost containment purposes, and would like to work with the
committee to improve these provisions.
Regarding the issue of emission allowances, the electric
utilities sector should receive an allowance allocation
proportionate to its share of total emissions, or about 40
percent, all of which we feel should be allocated to load-
serving entities or local distribution companies. This will
provide the industry with allowances sufficient to maintain
reliability and affording time to adapt during a transition
period when low emission technology is under development.
Allowances should go to the local distribution companies
because they are in the best position to ensure that allowance
revenues are used to reduce cost to electric consumers.
Allocating allowances, as opposed to fossil fuel generators,
would eliminate the prospect of windfall profits that have
resulted in some cases in the European Union cap-and-trade
system.
We think the allocation to the LLCs is particularly
important in regions that have restructured wholesale power
markets that are under Federal jurisdiction and run by regional
transmission organizations, such as the Northeast, the Mid-
Atlantic, the Greater Midwest and California, because
allocating allowances to independent generators in these
markets will raise the already high wholesale prices these
markets are producing. This is because fossil fuel generators
nearly always set the clearing price in the wholesale
electricity supply auctions in these markets. Should they
receive allowances, these fossil fuel generators will add the
value of these allowances to their bids into these markets,
thereby adding that cost to other generation bidding into the
market, including no- or low-carbon generations such as nuclear
plants.
EPP also has serious concerns about auctioning allowances.
An auction by its nature disadvantages small entities like most
of my member systems. It is important, therefore, that if an
auction is conducted, that it be designed to restrict
speculation and minimize potential for volatility and allowance
prices.
With a stringent cost-control mechanism in place, APPA
would support phasing in an auction gradually over time. But
without such a control mechanism, we think no auction should
occur until new emissions control technology is commercially
available to industry.
It is also essential that all net auction proceeds be used
only for targeted research and development, energy efficiency,
and mitigation of cost impact on consumers. In other words,
areas directly related to addressing the climate change issue.
Mr. Chairman, regarding the proposed renewable electricity
standard, APPA supports a workable Federal RES of 15 percent by
2020. However, our support contemplates that such a standard
would be in place prior to implementation of a Federal
greenhouse gas reduction mandate, and would serve to provide a
bridge between the present and the time when technology has
been developed to significantly capture and store carbon.
We also believe that once a Federal cap-and-trade program
is implemented, an RES is neither necessary nor property. By
its nature, the RES limits the flexibility of our industry,
while a cap-and-trade program is intended to provide the
industry more flexibility to tailor a compliance program.
Enacting the two simultaneously will increase compliance costs
for many utility systems.
Regarding the Energy Efficiency Resource Standard, we do
not support such a standard but would urge that the RES permit
a significant percentage of the standard be met by using energy
efficiency measures.
Finally, Mr. Chairman, APPA has serious concerns about the
new source performance standards included in Title I, because
several of our members have facilities in various stages of
permitting and construction. These standards would also
effectively create a moratorium on coal in a post-2015 world
and raise some significant challenges for facilities yet to be
permitted between 2009 and 2015, because basically there is no
commercially deployable coal generation technology in the U.S.
that can achieve the proposed standard of 1,100 pounds for
megawatt hours. We would strongly urge the committee to delete
this provision.
Thank you, Mr. Chairman. I look forward to answering any
questions you have.
Mr. Markey. Thank you, Mr. Crisson, very much.
[The prepared statement of Mr. Crisson follows:]
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Mr. Markey. Let me now recognize the gentleman from
Georgia, Mr. Barrow, to introduce our next witness.
Mr. Barrow. I thank the Chair for the courtesy of allowing
me to introduce our next witness.
I want to welcome Mr. John Somerhalder here to the
committee today. Mr. Somerhalder is the chairman of the board,
president and CEO of AGL Resources down in Atlanta. He is a
chemical engineer, has been in the natural gas businesses for
30 years. And I think you will find, as he speaks for the
American Gas Association today, that the folks in natural gas
are already doing a lot of the things we want them to do,
already early starters in the area of efficiency and trying to
reduce our carbon footprint.
So it is a privilege for me to welcome you. Thank you, Mr.
Somerhalder, for being here today.
STATEMENT OF JOHN SOMERHALDER, II
Mr. Somerhalder. Thank you, Congressman. And thank you, Mr.
Chairman, and thank you to the committee.
My company has utilities in addition to, in Georgia and
Florida, Tennessee, Virginia, Maryland, and New Jersey, and
natural gas storage facilities in Texas and Louisiana. I am
pleased today to testify on behalf of the American Gas
Association, of which I am vice chair and chair of the Climate
Change Task Force.
The AGA's 202 members deliver natural gas to more than 171
million Americans. In terms of helping in the fight to reduce
greenhouse gas emissions, natural gas utilities have two great
resources: our fuel and our customers. Our fuel is a clean,
efficient, abundant, and a domestic energy source, with 98
percent of America's natural gas being produced in the United
States or in Canada. It is the dominant source of energy for
residential and commercial heat, hot water, and cooking. Yet it
produces only about 6 percent of the total U.S. greenhouse gas
emissions. Upon combustion, natural gas creates 43 percent less
carbon dioxide than coal and 28 percent less than petroleum.
In terms of our customers, they lead the Nation in energy
efficiency. Since 1970, the number of residential natural gas
customers has increased from 38 million to 65 million, but the
energy consumption and carbon emissions have remained flat in
that time period. This results from a trend of declining use
per customer. This dramatic reduction is attributable to
tighter homes, more efficient appliances, and energy efficiency
measures, many of which were implemented by natural gas
utilities.
Clearly, natural gas is part of the climate change
solution. It offers an immediate answer with technology that is
available today. The most efficient and effective way to use
natural gas is directly in our homes and businesses. More than
90 percent of the energy that leaves the wellhead gets to the
customer, rather than indirectly to produce electricity where
two-thirds of the energy can be lost.
In light of the above factors, we maintain that a national,
programmatic, focused effort rather than a cap-and-trade effort
for these customers is the best way to ensure equity while not
subjecting customers to unpredictable allowance cost. We do not
want to see our customers competing with electricity generators
and large industrials for the allowances necessary to heat
their homes and cook their food.
We believe, and history proves, that programmatic measures
uniformly applied can accomplish what we want without the undue
cost and complexities of the cap-and-trade system. However, if
programmatic measures are not acceptable, AGA supports
including natural gas residential and commercial sectors--
excluding them from the scope of the cap-and-trade system until
2016, as proposed in the discussion draft bill. AGA believes
that most allowances required for residential and commercial
gas customers should be allocated rather than auctioned, as
allocating allowances is the best way to ensure that price
impacts on our customers will be minimized. Local natural gas
utilities, as regulated by State public utility commissions,
make no profit on natural gas prices when they rise. Similarly,
they would not make any profit on allocated allowances. The
natural gas utilities will need the ability to pass on the cost
of these allowances, and the climate change bill should provide
for this rate-making treatment.
We support the proposed carbon footprint labeling in the
draft bill. Giving customers this carbon output information
will provide them with the essential information that they need
to play a role in reducing our carbon output. The discussion
draft bill proposes to establish an Energy Efficiency Resource
Standard for both electric utilities and natural gas utilities.
While the end result is a laudable one, the lack of clarity
in the language addressing EERS causes concerns. First, the
legislation could have the unintended consequence of limiting
carbon-driven fuel switching, and could even increase the
Nation's dependence on foreign oil by preventing conversion to
high efficiency gas applications from less efficient fuels.
Second, the imposition of these penalties could be a
barrier to economic growth and development by raising the cost
of energy to both new and existing customers.
And, third, the focus is on large after-tax penalties
rather than incentives, and it is tied to consumer behavior
which the utility cannot directly control.
Mr. Chairman and committee members, there are many other
issues, including research and development, natural gas
vehicles, and renewable gas that we don't have time to address
now but are included in my written testimony.
That concludes my remarks, and I will be happy to address
your questions.
Mr. Markey. Thank you very much.
[The prepared statement of Mr. Somerhalder II follows:]
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Mr. Markey. Our next witness is Richard Morgan. He is a
member of the Energy Resources and Environmental Committee of
the National Association of Regulatory Utility Commissioners
which represent State public service commissions that regulate
utilities. Mr. Morgan also leads the NARUC Task Force on
Climate Policy. And he is serving in his second term as
commissioner on the District of Columbia Public Service
Commission.
Please begin when you are ready, Mr. Morgan.
STATEMENT OF RICHARD MORGAN
Mr. Morgan. Thank you, Mr. Chairman, and members of the
subcommittee. My name is Richard Morgan, and I am a member of
the District of Columbia Public Service Commission. I am
testifying on behalf of the National Association of Regulatory
Utility Commissioners. I am honored to have the opportunity to
appear before you this morning regarding the American Clean
Energy and Security Act.
NARUC is on record as supporting a well-designed, economy-
wide Federal program to limit greenhouse gas emissions in order
to remove existing uncertainties that are hampering critically
needed investment in electricity transmission and generation.
In concept, NARUC supports the goal of auctioning emissions
allowances under a cap-and-trade mechanism, but we believe it
is appropriate to provide a transitional allocation of free
allowances in order to minimize economic dislocations as we
move toward a 100 percent auction. However, as OMB Director
Peter Orszag correctly points out, when allowances were given
away to European power generators, shareholders, not consumers,
got most of the proceeds as windfall profits. It is precisely
for this reason that NARUC opposes the allocation of no-cost
allowances to electricity generators.
State regulators propose a different approach to ease the
transition in the electric sector. Instead of giving away
allowances to power generators, which are often unregulated,
give them only to regulated local distribution companies which
own the wires used to distribute electricity. These LDCs, as we
call them, are always subject to rate-setting authority such as
State public utility commissions or consumer-owned utilities,
where they can ensure that consumers, not utility shareholders,
receive the benefits of free allowances. In fact, State
regulators already have in place mechanisms for flowing through
to consumers the benefits of free emissions allowances from the
existing acid rain program.
President Obama has stated that reducing carbon emissions
must be done in a way that insulates consumers as much as
possible from potentially dramatic rate increases. Giving
allowances to LDCs as a proxy for their customers provides an
efficient means of softening the impact on consumers and solves
the windfall profits problem at the same time. Under this
approach, revenues associated with pricing greenhouse gases
would be returned to the very consumers who would be at risk
for paying higher energy prices. Regulators could direct a
portion of the proceeds toward mitigating the impacts of
pricing carbon, such as through expenditures on energy
efficiency or low-income energy assistance programs. Meanwhile,
generation decisions would still be influenced by the full
effect of pricing greenhouse gas emissions.
How the proceeds of a cap-and-trade mechanism are spent is
every bit as important as putting a price on carbon in the
first place. Assuming an allocation to LDCs, State regulators
can direct the proceeds toward investments such as energy
efficiency that reinforce the goals of limiting greenhouse gas
emissions and thereby lower the overall costs of achieving
emissions reductions. And you will hear more about this from
our next witness, Mr. Cowart.
Mr. Chairman, you have surely noticed similarities between
NARUC's proposal and those of some industry groups. In fact,
EEI's testimony refers to NARUC's support for an allocation to
LDCs, but that is really where the similarities end. There are
some important distinctions that I want to bring to your
attention. These industry groups, which have unregulated
generators among their members, naturally seek an allocation of
free allowances not just for LDCs but for merchant generators
as well. NARUC objects to giving free allowances to electric
generators under any circumstances, and I would like to explain
why.
First, in many States generators are unregulated, and State
commissions have no way to ensure that consumers would receive
the benefits of these free allowances. There is no reason to
expect an outcome any different from what happened in Europe.
These companies say that they need allowances to cover
their so-called net compliance costs, an argument that we find
curious since there is no commercial technology available to
remove CO2 emissions from an existing generator.
These merchant generators are not trade exposed in the sense of
competing in overseas markets; they are purely domestic.
Free allowances won't help to keep dirty generators
operating even if that were desirable. If carbon prices are too
high, the company could simply shut down its generator and keep
the value of the allowance stream for its shareholders as sort
of a golden parachute.
Under the formula proposed by EEIC, electric sector
allowances would go first to merchant generators based on
historic emissions; LDCs would then get only what is left. And
the generators' share could grow if the utilities decide to
spin off more generators into unregulated subsidiaries.
Finally, any electric sector allowances given to generators
would not be available to help soften the impact of pricing
carbon on consumers through their LDCs. Those who advocate an
allocation to generators have not explained how this would help
consumers in any way or why it would not produce a windfall for
their shareholders just as it did in Europe.
Mr. Chairman and members of the subcommittee, NARUC
believes that through a carefully designed cap-and-trade
mechanism and appropriate distribution of emission allowances,
carbon restrictions can be implemented without undue economic
burden on consumers.
Thank you for your time and consideration this morning. I
would be happy to answer any questions.
Mr. Markey. Thank you, Mr. Morgan, very much.
[The prepared statement of Mr. Morgan follows:]
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Mr. Markey. Our next witness, Mr. Richard Cowart, director
of the Regulatory Assistance Project, has served as
commissioner and chair of the Vermont Public Service Board for
13 years. He was elected president of the New England
Conference of Public Utility Commissioners, and was chair of
the NARUC National Committee on Energy Resources and
Environment.
Mr. Cowart, please begin when you are ready.
STATEMENT OF RICHARD COWART
Mr. Cowart. Good morning, Chairman Markey, Ranking Member
Upton, and members of the committee. I appreciate the
opportunity to speak with you this morning about the critical
role of end-use energy efficiency in reducing greenhouse gas
emissions and containing the cost of climate change
legislation.
Let me begin, Mr. Chairman, by congratulating you for the
comprehensive approach you are taking to global warming
pollution and the progress that Congress is making in
addressing this critical issue.
Given the scale of this issue, it is no surprise that
climate legislation raises concerns about prices and about
impacts on consumers. I have been a State environmental
commissioner, public utilities commissioner, and as an advisor
to many governments. So, for about 25 years I have been working
to protect consumers while promoting advanced utility services
needed for a modern economy.
My testimony boils down fairly simply. I am focusing on the
central role that carbon credit allocation can play in
protecting consumers and containing the costs of climate
legislation.
The good news is that a smart allocation policy linked to a
smart investment strategy can greatly reduce the consumer cost
of the proposed cap-and-trade program. My overall message is
very simple: Congress should design the climate program to
reduce emissions through greater energy efficiency, not just
through higher carbon prices. For the power sector, the best
way to do this is through a consumer allocation for efficiency;
that is, by allocating the sectors' allowances to local
distribution companies or other State-supervised entities
acting as trustees for consumers. The trustees can then auction
the allowances to emitters and recycle the revenue for the
benefit of consumers.
Moreover, the best way to help consumers and to lower the
cost of the entire climate program is to invest a large
fraction of those funds in low carbon resources, especially
cost-effective end-use efficiency.
My written testimony elaborates on four points, so I am
just going to touch on them here.
First, as I just stated, it is essential to think of
climate legislation as a combination of programs, including
both regulatory and market measures to lower emissions. It is
not just cap-and-trade, it is not just a renewable electricity
standard, it is not just better building codes. It is really
all of the above.
When California completed its exhaustive examination of
this issue recently, the Air Resources Board came out with a
scoping plan. At least 75 percent of the carbon reductions in
the California plan are going to be accomplished through
mechanisms that people call the complementary policies. That 75
percent I would view as the foundation for the cap-and-trade
program which is intended to deliver the other 25 percent.
My second point is that energy efficiency is the equivalent
of a low-cost carbon scrubber for the power sector. And the
good news is that utility-scale energy efficiency is relatively
inexpensive at 3 cents a kilowatt hour. It is much less than
the cost of supply and delivery, which is usually two to five
times more expensive.
Efficiency opportunities exist in large quantities in all
regions of the country, whether your system is a coal system, a
gas system, a hydro system; any region of the country, energy
efficiency resources can be tapped to benefit customers.
My third point is on price impacts and cost containment.
Simply put, energy efficiency is the key to cost containment in
the climate legislation. Adding a price signal to the cost of
electricity is useful in trying to reduce carbon emissions. But
trying to meet our goals through price alone will be much more
costly than a cap-and-trade program that builds efficiency
right into its architecture. And this realization has two
sides, and I want to touch on both of them.
First, it is hard to get to where we want to go through
carbon prices alone. People are often surprised to learn how
hard it is to reduce power sector carbon through price signals.
On the consumers' side, it takes a very high price because of
low price elasticity to actually reduce carbon as much as we
need. And, on the generator's side, it takes a very high price
in order to significantly change the dispatch across our power
grids.
This leads to my final point which concerns allocations. As
I have said earlier, the best way to control costs in the power
sector is not by giving allowances for freer generators, but by
allocating them to local distribution companies or other
consumers trustees supervised by state regulators. Those
trustees can sell the allowances and apply the proceeds to
benefit consumers. This will deliver much more low-cost
efficiency than a purely price-driven approach to allowanced
allocation.
Our studies show that for the same dollar cost in rates,
efficiency programs will save five to seven times more carbon
than would result from carbon taxes or credit markets alone.
So, five to seven times greater savings on the environmental
side for the same cost to consumers.
I will close by noting that there is a good model in the
United States for the practice that I am describing here, and
that is the RGGI, the Regional Greenhouse Gas Initiative. If
you look at the experience of RGGI, all ten RGGI States
considered this question and concluded that almost all the
allowances should be auctioned, and that almost all, or 70
percent, of the revenues associated with the program should be
recycled back for the benefit of consumers principally through
low-cost energy efficiency.
Thank you very much. I look forward to your questions.
Mr. Markey. Thank you, Mr. Cowart, very much.
[The prepared statement of Mr. Cowart follows:]
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Mr. Markey. Our next witness is Mr. Robert Greenstein,
founder and executive director of the Center on Budget and
Policy Priorities. He has had a long and distinguished career,
but it included winning a MacArthur fellowship. And he was
appointed by President Clinton to serve on the Bipartisan
Commission on Entitlement and Tax Reform. We welcome you back,
sir. Whenever you are ready, please begin.
STATEMENT OF ROBERT GREENSTEIN
Mr. Greenstein. Thank you very much, Mr. Chairman. As you
know, the work of our center in this area has focused on
developing proposals to protect the budgets of low- and middle-
income consumers in a way that is effective in reaching them,
efficient, and consistent with energy conservation goals. With
these goals in mind, we have designed an energy refund or
rebate to offset the increases in households' overall energy
expenses that would result from an emissions cap, not just
their increases in utilities bills, which will account for less
than half the overall hit to consumers' budgets.
We recommend that consumer relief be provided through the
tax system and existing benefit delivery systems. Under the
proposal we have developed, 95 percent of households in the
bottom fifth of the income distribution and over 98 percent of
those in the middle fifth and the fifth in between would be
reached automatically, without new bureaucratic structures, no
new applications required, and low administrative costs.
Here is how it would work. Most households qualifying for
an energy refund would get it through the form of a refundable
income tax credit that would be provided in paychecks through
adjustments to employer withholding, as is being done with the
tax credit that you enacted in the recovery legislation in
February.
For seniors, veterans, and people with disabilities, they
would get their refund as a direct payment from the Social
Security Administration or the Department of Veterans Affairs,
again, as being done under the recovery legislation. And,
finally, very poor households participating in programs like
food stamps would receive monthly energy refunds through the
debit card systems that every State human service agency in the
country operates to provide other low-income benefits. Those
systems have proved to be efficient and highly effective.
Now, some, including other of my fellow panelists here,
have proposed instead routing funds for consumer relief through
local utility distribution companies. While that may seem
reasonable at first blush, our analysis indicates that such an
approach would be unwise for several reasons.
First, the utility company approach is aimed at electricity
and natural gas bills. It doesn't address the full impact of an
emissions cap on consumers' budgets. Over half of the impact
would be in other areas, gasoline, increased prices for a whole
array of goods and services that use energy in their
manufacture or transportation to market. Consumer relief that
only focuses on home or even business electricity and gas bills
leaves consumers with a large, uncompensated hole in their
budgets.
Secondly, this approach would cause prices for other forms
of energy and energy products other than electricity and gas to
rise even more, and it would increase the overall cost to the
economy of meeting the cap. This is not just our conclusion.
This is in the EPA study of your draft bill released this week,
and it is in the study of Resources for the Future, the premier
environmental think tank.
The issue is that keeping the utility bills low would blunt
the price signal an emissions cap is supposed to send and, as a
result, you get less reduction in electricity and natural gas
use.
Now, if the cap is a given amount of tons of carbon
emissions and you get less reduction from electricity and
natural gas, you must get greater reduction from all other
forms of energy. In order to do that, the price of other forms
of energy has to rise more. In the Resources for the Future
study, they estimated that this kind of an approach would cause
the overall allowance price to be 15 percent higher than it
otherwise would be. In the EPA study released earlier this
week, and I am quoting, ``Returning the allowance value of
consumers of electricity via local distribution companies
prevents electricity prices from rising, but makes the cap-and-
trade policy more costly overall. This form of redistribution
makes cap-and-trade more costly since greater emissions
reductions have to be achieved by other sectors of the
economy.''
A third and final problem here is that while the LDCs are
regulated utilities, the quality of State utility regulation is
uneven across the country. And the fact that they are regulated
is no guarantee that in every area of the country, free
distribution of allowances to the LDCs will produce well-
targeted and effective consumer relief. This is an issue some
consumer organizations have expressed concerns about.
So, to wrap up, a refundable energy tax credit delivered
through paychecks coupled with electronic benefits transfers
and payments from Social Security and Veterans Affairs would be
the most effective way to provide relief to low- and middle-
income consumers. Other mechanisms would provide less consumer
relief per dollar of cost. And this is why the newly formed
Climate Equity Alliance has, as a basic principle, providing
the consumer relief directly through the kind of mechanism I
have described rather than through utility companies. This is
an alliance that includes leading civil rights groups like the
NAACP and the National Hispanic Environmental Council, leading
religious organizations like the U.S. Conference of Catholic
Bishops, SCIU, and the Center for American Progress.
Having said this, we all know that deadlock serves no one.
We all know that agreement needs to be reached to move this
legislation. So, in the spirit of compromise, let me swallow
hard and suggest a possible middle ground from what you are
hearing on this panel.
Mr. Markey. We will give you extra time right now. That is
a very important sentence you just said. Thank you.
Mr. Greenstein. While I believe providing consumer relief
through the local distribution companies is unwise for all the
reasons I have mentioned, it seems that that would need to be a
component of something that would move particularly in this
committee.
So the suggestion would be, rather than, as some have
suggested, combining a very large LDC piece and a small low-
income consumer piece to supplement it, to have a somewhat more
moderate LDC piece combined with an energy tax credit designed
such that the sum of the LDC relief and the tax piece together
fully offset the hit to the budgets of the typical middle-
income household.
The Social Security, Veterans, and debit card pieces
obviously would still be a part of it for those groups. And
then, over time, as energy efficiency and other matters kicked
in over time the free distribution of allowances to LDCs would
phase down, the direct relief, the tax piece would phase up and
would stay at the level based on what was happening with energy
prices that you needed to provide the consumer relief to make
the typical consumer whole.
Mr. Markey. Thank you.
[The prepared statement of Mr. Greenstein follows:]
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Mr. Markey. Our next witness, Dr. Robert Michaels, is a
professor of economics at California State University,
Fullerton. Mr. Michaels is also an adjunct scholar at the Cato
Institute. We welcome you, Dr. Michaels. Whenever you are
ready, please begin.
STATEMENT OF ROBERT MICHAELS
Mr. Michaels. Thank you, Chairman Markey. I am honored to
be here.
I come from California, where we supposedly set a lot of
trends. And the first thing I want to do is summarize a few
problems California has that may be quite important for the
content of the legislation we are talking about here because
your legislation depends, among other things, on a national
renewable portfolio standard.
The thing that is clear now is that California's utilities
are far out of compliance with their standard. It appears that
it is going to be impossible for them to move on to tighter
standards. And there are a variety of reasons, including
regulatory uncertainty and citing problems with transmission.
Second, the supposed effect of energy efficiency policies
in California needs to be reconsidered. It has been highly
touted that California's per capita electricity consumption is
staying constant instead of rising like the rest of the
country. What this really reflects, we can look at the
statistics, it is a departure of industrial customers.
Studies that show for the Air Resources Board that it is
going to be a painless transition that creates jobs to
California's cap-and-trade system, these have been thoroughly
discredited by peer reviewers from places that even include the
Pew Foundation.
The smart grid, cost-benefit figures for the smart grid
have gone in every which way in the applications for
California. They have gone from negative to positive largely on
the basis of assumptions that the utility will be able to
control people's power in their homes.
Those are important, but there is a more important thing
about this bill that I think really matters at the base. This
bill is a tax bill. This bill is very anti-consumer. It has one
acknowledged policy: It is to raise energy prices to Americans;
and, when it does so, it is going to make America less
competitive in an ever more competitive world.
For reasons they can best explain, some people are on
record as favoring higher prices. As important as those prices
are, are the policies that will increase them. Every major
provision of this bill is at base a tax, and every one of them
is called something else.
The renewable electricity standard is a cleverly disguised
tax. None of it is ever going to appear on the Federal books.
Instead, the bill will simply force utilities to purchase
renewable energy, leave State regulators with no choice but to
fold the costs into households bills. Another tax turns up in
the proposed auction of allowances. The official term is
``auction,'' again, the real term is ``tax.'' An easy way to
see this: Look at the plans for spending the revenue. Details
aren't firm, but it is possible to code to consumer rebates,
deficit paydown, health care financing. There are only two
possible sources, debt and taxes. And this is a tax.
Like all other taxes, allowance charges compel business
owners to divert funds they could otherwise have used to
operate their firms and employ people. Those who believe that
the respending of revenue from auctions will create jobs have
been conspicuously silent about the jobs that are going to be
destroyed in the initial allocation process.
The bill's effects start with scarcer energy. They hardly
end there. They will be increasing the prices of all other
goods and services that use energy in their production. If that
is so, we are talking lower standards of living for Americans,
not higher, and talking about making American goods less
desirable to foreign purchasers, not more.
This bill's thrust is to make energy needlessly scarce, and
then somehow we reach a conclusion that this action is good for
the economy.
Think of it simply: If workers work with more talented
workers, they are going to be more productive than workers who
labor alone. Workers with more advanced equipment to work with,
and more of it, are going to be more productive than workers
who are without it. Workers with better and more abundant
energy are going to be more productive than workers who do not
have access to it.
This bill's logic seems to reverse all of that, and tell us
that less energy is going to somehow do the exact opposite of
all these other things that workers work with. There is no
economics in it.
Scarce energy creates jobs by making workers less
productive, so that it takes more of them to get something
done. This bill does not create prosperity. This bill is going
to produce a less competitive, less productive economy that has
lower incomes, less opportunity, and less wealth to hand down
to future generations. Thank you.
Mr. Markey. Thank you, Mr. Michaels, very much.
[The prepared statement of Mr. Michaels follows:]
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Mr. Markey. And our final witness before questions from the
subcommittee members is Mr. Darryl Bassett, spokesman for the
Empower Consumers Coalition. Mr. Bassett formerly served as
ArkansasState Public Utility Commission. Mr. Bassett, please
begin whenever you are ready.
STATEMENT OF DARRYL BASSETT
Mr. Bassett. First of all, I want to thank you, Mr.
Chairman, and members of the subcommittee. Having been
familiar, Mr. Chairman, with your body of work while I was a
commissioner, I have a great deal of respect for that body of
work.
It is a privilege and an honor to be able to come to this
committee and testify on what impacts we believe consumers may
very well face if Congress does in fact adopt energy or climate
policies without adequate cost containments. But I would be
remiss if I went any further without recognizing the presence
of one of Arkansas' favorite sons, Congressman Mike Ross, and
certainly his diligence in representing the people back home.
We are awful proud of him back there.
But it is an honor and it is a privilege to offer my
perspective on how policies in the current draft might very
well impact the poor, the elderly, the consumers on fixed
incomes, those institutions of higher education, hospitals, and
small businesses. These are people, members of the committee,
whose story generally gets kind of lost in the wash anytime
government, whether it be State or Federal, considers sweeping
public policy changes. And as a former utility commissioner, I
am acutely aware that the first question that consumers
generally have when confronted with sweeping policy changes is,
one, how much is that policy going to cost? And, two, who is
going to have to pay it? And, personally and quite candidly,
answering that second question is always easier to do than
answering the first.
So, consequently, I want to certainly applaud the EPA for
their recent analysis. I think, consider, it a great first step
in answering that first question, which is, how much is the
implementation of this proposed draft going to cost the
American people.
However, that analysis that I have had a chance to peruse,
while certainly well intentioned, doesn't go, in my opinion,
far enough given the overlapping mandates in the draft.
The draft, as you know, considers mandates on renewables,
energy efficiency, standards for new power plants, Federal
gasoline standards. There are provisions there for cap-and-
trade and issues involving greenhouse gas. So I think it is
fair to say that the consumer is going to be concerned about
what the total cost of the proposal is going to be, and will
certainly be less than content if we only offer them an
analysis that covers cap-and-trade, as the EPA analysis does.
There is little disagreement among consumers that the cap-
and-trade program is going to cost them a lot of money. We are
looking at studies that go anywhere from an EPA estimate of
$983 billion by 2030 to one done by the American Council for
Capital Formation that says it is upwards of $1 trillion.
Consumers are also aware that renewables are going to be
costly. What one Texas utility pays for wind recently more than
doubled. And Dr. Michaels just gave you some indication about
what is going on in California. They are among the Nation's
highest utility rates, but they also have one of the highest
renewable mandates.
What concerns us quite frankly though is putting the two of
them together, the cap and trade as well as the renewable
portfolio. I believe that if we are not careful what we could
pose is potentially devastating consequences on the most
vulnerable in our country because what we were looking at when
we look at that potentiality, we empower consumers, we then
respectfully ask that the committee before it moves further
consider an analysis that takes into consideration all of the
proposals and what their simultaneous implementation would be
before passing any type of climate change or any type of
renewable legislation.
Our concern, quite frankly and honestly, is not with the
draft. As I said initially, I am familiar with your body of
work and certainly with your reputation for integrity. That
goes without saying. But what we feel, while we feel the draft
is well-intentioned, we are concerned about the unintended
consequences of well-intentioned legislation. And so we feel
that at this critical juncture in our Nation's history we can't
afford to make sweeping decisions on far-reaching legislation
without a full appreciation of the extent to which our people,
your constituents, are going to prosper or are going to suffer.
Now the answer to that second question that I said the
consumers are going to ask, who is going to pay, well, it is
always the consumer. But the answer really, that doesn't
address what they are really trying to ask because at the heart
of this thing we know that some of those consumers are going to
suffer more than others. We know that history tells us anytime
we apply a one-size-fits-all approach nationally, there is
going to be a disproportionate burden placed on some members
across the country. And ultimately it falls on the consumers
who are least able to afford it. That is communities of color,
that is the elderly, that is those living in poverty, those
living on fixed incomes. They are going to pay an inordinate
amount of their monthly income on energy.
So I have to agree with the nonpartisan statement that came
out of the Congressional Budget Office that characterized that
particular effect as being regressive. It said, and I quote,
price increases resulting from a carbon cap would be
regressive; that is, they would place a relatively greater
burden on low income households than on higher income ones. We
know that in 2008 the average American family that had a
disposable income of $52,500 a year last year spent 12 percent
of that income on energy. We also know that those who were
making less than $50,000, which essentially is 51 percent of
all U.S. households, spent 24 percent on energy. And those
making between $10,000 and $30,000 actually spent 26 percent of
that income on energy.
We also know that in 2008 African American households as
well as Hispanic households with incomes less than $50,000
spent over a quarter of that income on energy. So it is not
surprising that consumers are going to be concerned about how
much more they are going to be asked to bear from any type of
legislation.
Mr. Markey. If you could summarize please, Mr. Bassett.
Mr. Bassett. Well, in summary we are concerned that the
bill should address in totality all of the costs that are going
to be incurred. One, we would ask the legislation go through a
rigorous cost analysis. Second, we would ask you that you would
consider mechanisms that would establish some type of floor or
ceiling with regard to carbon allowances so that you can
mitigate any type of unintended consequences.
Mr. Chairman, I would like to thank you for the opportunity
to testify, and Empower Consumers certainly looks forward to
working with this committee as we go forward.
[The prepared statement of Mr. Bassett follows:]
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Mr. Markey. Thank you, Mr. Bassett, very much. Now we will
turn to questions from the subcommittee members. The Chair will
recognize himself and let me turn to you, Mr. Cowart, and you,
Mr. Greenstein, so I can ask you a little bit of a question so
you can both get a chance to expand on the impact on consumers.
Can you talk a little bit about what happens if we put
together a good formula dealing with energy efficiency,
recycling revenues and the cost of inaction? We saw the price
of a barrel of oil spike to $147 a barrel last year if we don't
put together a plan to break our dependence on imported oil.
Mr. Cowart.
Mr. Cowart. I will start. My message is plain here, that
cost-effective energy efficiency is the cost containment
mechanism you are looking for. And I encourage all the
subcommittee members to look really carefully at all the
mechanisms in this legislation that would promote end-use
energy efficiency. And I suspect that Mr. Greenstein and I are
going to agree that that is one of the ways to bring prices
down across the board for everybody.
And secondly, that in particular we should support targeted
low-income energy assistance that would direct cost-effective
energy efficiency, particularly to low-income families, through
such things as dramatically expanding the weatherization
programs.
So there are a lot of mechanisms here to help consumers
both directly and indirectly by lowering carbon prices and
lowering power prices through aggressive energy efficiency
actions.
Mr. Markey. Okay. Let me go to you, Mr. Greenstein.
Mr. Greenstein. I think things like energy efficiency and
consumer relief go hand in hand. The way that we think of and
the way we recommend you think of and I think the way the
committee, as I understand it, is thinking of consumer relief
is that the consumer relief be related to some share of the
permits. The more effective the efficiency and shifts to
alternative forms, cleaner forms of energy, via the price
signal are, then the less will be the amount that the
allowances sell for, and the smaller will be the hit on
consumers' budgets. I don't think this bears one way or another
on the form of the consumer relief. But under the proposal that
I have suggested with tax credits, to payments on Social
Security and veterans and the debit card mechanism, the amount
of the rebate would be tied each year to the price that the
allowances were selling for and thereby to the overall impact
on consumers. So the better the results one gets from
investments in efficiency and alternative energy, the less the
burden both on the overall economy and on consumers. And if X
percent of the permits are going for consumer relief, the
dollar amount of that relief will be less because the impact on
their budgets will be less because the efficiency is working.
Mr. Markey. Thank you, Mr. Greenstein.
Mr. Sterba, in my home State of Massachusetts there are two
large coal-burning power plants, the Salem plant and the
Brayton Point plant. Since our State required utilities to spin
off these plants as part of its restructuring plan, they are
not subject to regulation by the Massachusetts Department of
Public Utilities. If we were to give Dominion Power, which owns
Salem, and PGE which owns Brayton Point, free allocations, what
would prevent them from pocketing that financial windfall
rather than passing on the savings to the consumer?
Mr. Sterba. Mr. Chairman, the primary benefit that will go
to those consumers is the allocation that would be made to the
LDC that serves the consumers in that area. The purpose of a
small allocation--and we are talking about less than 10 percent
of the total allocations to the electricity sector that would
go to coal generators--the purpose of that is to help cover the
costs that are not recovered by that coal generator through the
price of electricity caused by the imposition of a cap and
trade. So it helps cover that small component of cost that is
not recovered through the market price.
Yes, they will sell it. Yes, that generates revenue to
them. What it does do--and let me use Texas, where I am more
familiar, Mr. Chairman, because I operate there--is it helps
ensure that that coal resource stays viable for a period of
time because the allowances that are allocated to that
generator would decline. But it helps ensure that you don't end
up causing that unit to be shut down or mothballed and replaced
with gas generation.
Mr. Markey. Let me go to, if I may, Mr. Morgan. Do you
agree with that?
Mr. Morgan. I agree in part that the benefits to consumers
come through the allocation to the LDCs. But I don't see how
the consumer gets any benefit from giving of free allowances to
the generator because those benefits are--we have no way to
make sure that they get passed along. The company, in fact,
wouldn't necessarily even keep that plant operating. If it
becomes uneconomic because carbon is being priced, the
allowance allocation is based on the baseline and they would
get this perpetual stream of allowances into the future even if
the plant has been retired. So there really isn't any incentive
for them to even keep the plant running. And there is every
opportunity for them to pass along the value of that future
allowance stream to the shareholders and really no way for it
to get to----
Mr. Markey. My time has expired. We have to continue this
conversation, I think. My time has expired. The Chair
recognizes the gentleman from Michigan, Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman. As you know, a number
of States actually exceed 90 percent of their power produced
from coal. And I have always been a supporter of clean coal
technology. And Mr. Sterba, you indicated that you thought that
there should be free allowances until technology is in place
that will actually reduce those emissions.
I was a cosponsor of the Boucher bill last year. I hope
that we can proceed on it this year. But if it works--and I
hope that it does--it is still 8 or 10 years probably away
before it is actually in place and you can actually see it
begin to be implemented with a number of different facilities
around the Nation, particularly in the Midwest.
So assuming that that is all accurate, you would want a
free allocation until that technology is on the shelf ready to
use, is that right?
Mr. Sterba. Yes, sir. In fact, I think that free
allocations in order to help mitigate consumer impact should
last longer than just 8 to 10 years. I think--but they would be
declining as the cap declines. So to me, you should be thinking
about allocations that would last 20 to 30 years. But it is a
declining amount, and that is for the consumer protection
purposes.
Mr. Upton. Now as we talk about consumers getting money
back, in essence a rebate, our State, Michigan, my State,
Michigan, we have lost 150,000 jobs in the last number of
months. Estimates that were released earlier this week by the
University of Michigan show that we are going to lose more than
230,000 before the end of the year. We already provide 79 weeks
of unemployment benefits, and you might have seen the news this
morning that GM is suspected of closing all of their facilities
or virtually all of them for 9 weeks beginning next month,
which will impact even more than what was shown by the U of M.
I know that there is a lot of thoughts about rebating
consumers. Of the panel here, how many believe that consumers
also should be employers eligible for such rebates that you
might impose, as Mr. Greenstein indicated, for those--Mr.
Sterba. Anyone else believe that employers should be able to
receive rebates as well as individuals? Just two? Can I have a
show of hands? Three. Mr. Morgan, you are a ``no'' then, is
that right? Mr. Greenstein, are you a ``no''?
Mr. Greenstein. My sense is the most efficient way to do
this is employers will have some increased cost that they will
pass through to consumers. And the system I recommend, this is
part of the impact on consumers that would be compensated.
Mr. Upton. Okay. Mr. English, you indicated that you are
looking for an out, was it 4 million megawatts, is that what it
was?
Mr. English. Well, I was suggesting that as far as small
utilities are concerned, that is what Small Business
Administration identifies as small utility exemption, so, yes,
I would suggest that on renewable electricity standard.
Mr. Upton. Okay. What is the average renewables now? I
support renewables, wind, solar, a whole number, hydro. What is
the average of your membership in terms of what they would now
provide for renewables? What percentage?
Mr. English. Well, I think it depends on what you define as
renewable. That is part of the difficulty we have. Different
States have different definitions. What we would include, which
would include hydro, is about 11 percent. And you are talking
about roughly we use--about 9 percent of the power that
electric cooperatives use does come from renewable energy that
is hydro.
Mr. Upton. If you include a broader base, include hydro,
include a whole number that waste energy, do you support the 25
by 25?
Mr. English. Well, I am a member of the steering committee
of the group known by 25 by 25 that has that as an objective.
And I think that does comes down as to how flexible you are
going to be, how inclusive.
Let me add quickly, there is another problem here. And that
is, if we are going to produce renewable energy on a large
scale and we would advocate that that is what needs to be done
if we meet these standards, that the one thing that you are
going to have to have as a part of this legislation is siting.
Mr. Upton. That is my last question. I have 28 seconds. I
want to come back to it. Mr. Morgan, Mr. Cowart, there is
nothing as I read this bill--as we look at renewables, we have
had a problem in California. I support renewables, whether they
be off Nantucket or whether they be in Lake Michigan for wind.
With that also comes the siting or the connection to the
transmission lines. We have seen a pretty vocal struggle in
California where the senior center there has announced that the
Mojave Desert should not be a place for solar. We have seen off
San Diego a major solar park being--the transmission lines
trying to be sited sued by the Sierra Club. Is there a length
of time the local PUCs should make a decision before FERC comes
in with a heavier hand?
Mr. English. I think it is going to have to be a very, very
short time if in fact we are going to meet these objectives.
That is the whole point. If you are going to have a carbon cap
on it and we are going to rely heavily on renewable energy, we
have to have siting and have it very, very quickly. And I would
suggest that that has to be focused primarily on renewable
energy, on the building of that high voltage transmission.
Mr. Upton. Mr. Morgan, you agree?
Mr. Morgan. Yes. If I could add, the amount of time
available for commissions to review--first of all, we don't see
any evidence that that is a problem right now. There are many
other problems associated with siting transmission lines. A lot
of the problems, particularly in the West, have been associated
with siting lines across Federal land. And we do, in fact, have
legislation in place now that provides the Federal backstop
where commissions don't act within a certain amount of time.
NARUC would prefer to give a chance for this law to work.
We don't see any evidence that it is not working. And we are,
in fact, open to discussions about further changes in
transmission policy. But we would like to see the current law
given a chance to work.
Mr. Markey. Great. The gentleman's time has expired. The
Chair recognizes the gentleman from Pennsylvania, Mr. Doyle.
Mr. Doyle. Thank you, Mr. Chairman. Mr. Sterba, Mr. Morgan
stated that he is opposed to allowances for merchant
generators. I wonder if you would like to explain why you think
it is important to allocate credits to merchant generators as
called for in the U.S. cap report.
Mr. Sterba. Yes, sir. Thank you. First, I only believe that
it is appropriate to allocate to some merchant generators. In
the typical markets in the United States natural gas sets the
market clearing price. So included in that price will be the
cost of allowance for natural gas. Natural gas emits about 50
percent of the carbon that a coal plant emits. So part of that
50 percent is already being reflected in the price. The only
thing we are proposing--and with this comment I will represent
both EEI and U.S. cap--is the coverage of the other 50 percent
for unregulated coal generation. If we do not maintain for a
period of time that level of unregulated coal generation, which
represents about 16 percent, 17 percent of all generation in
the United States, we run the risk of a switch and a rush to
gas which will increase natural gas prices for all consumers.
That is a very hidden cost that is real. And we have seen what
happens when natural gas prices move from $4, $5, $6 to $14,
$15, $16.
Mr. Doyle. How do you feel about that clarification, Mr.
Morgan?
Mr. Morgan. Well, first of all, having those allowances
available, which are based on the baseline, does not provide an
incentive to keep that plant running. If the plant is not
economic because of pricing carbon, the most efficient thing
for the company to do is shut the plant down and keep the
allowances and you will have the rush to gas anyway. Really
what it is, is just--as I said earlier, it is kind of a golden
parachute for these old dirty plants to help cover their
obligations to their shareholders. It is not going to keep the
plants running. It is not going to help solve that problem.
Mr. Sterba. Mr. Doyle, if I could, and this is a personal
statement. As an owner of unregulated coal generation in Texas,
if I don't have a plant running, I shouldn't get allowances. I
agree with that.
Mr. Doyle. Right. Let me ask you also, Mr. Sterba, the
draft text calls for alternative compliance payments to be set
at 5 cents per kilowatt hour. How does that affect your
membership in the real world? What would the effect of that be?
Mr. Sterba. Well, the effect is to increase cost. I believe
that somewhere in the 2.5 cent alternative cost is appropriate.
I think 5 cents imposes a heavy burden on consumers. One of the
biggest concerns I have got is that we will do the right thing
by putting in place carbon legislation. But we do it in a way
in which electricity prices increase to a point where we get a
consumer backlash. We have seen it happen in California, in the
California gaffufle of 2001. We have seen it happen elsewhere
where things happen and consumers respond by saying ``no
more''. We need to do this smartly, and if we create systems
that cause prices to go up too much too fast, we will get that
consumer backlash.
Mr. Doyle. Mr. Cowart, many of us on the panel here have
concerns that the 25 percent renewable standard is going to be
very difficult to meet in certain regions of the country. And
one of the ideas, one of the ways to lessen that burden would
be to expand the list of qualifying energy sources, to
recognize things such as methane recovery and waste to energy
and distributed generation.
What are your thoughts on expanding the list of qualifying
energy sources to meet a 25 percent standard?
Mr. Cowart. Well, with respect to the list you just gave, I
support it. I think that there are good reasons to expand
certainly the qualified renewables to include methane
conversion, which is, as you know, from a global warming
perspective that is a double winner and definitely ought to be
encouraged. I think that there is some merit to allowing a
piece of a renewable portfolio standard to be met by
accelerated achievement in energy efficiency as well. As a
general matter we like to keep them separate and there are good
reasons for that. But for some regions of the country where
they think that it is going to take longer to get the
renewables going, it allows some efficiency, early action on
efficiency to qualify.
Mr. Doyle. And just a final question because I just have 7
seconds left, just a show of hands. How many on the panel would
support 100 percent auction of these credits?
Mr. Morgan. Now or later?
Mr. Doyle. Now. Well, of course later but right now. Just
one? Okay. I see my time is up, Mr. Chairman. Thank you.
Mr. Markey. The Chair recognizes the gentleman from Texas,
the ranking member of the full committee.
Mr. Barton. Thank you, Mr. Chairman. I am not sure where to
start. I guess I will start by complimenting Mr. Sterba. It is
good to see you, sir.
Mr. Sterba. Thank you.
Mr. Barton. When I walked in, you kind of changed your
look. I thought I was looking at Ming the Magnificent of Flash
Gordon, which is a good look, not a bad look.
Mr. Sterba. I appreciate your taste, sir.
Mr. Barton. Let me just start out by clarifying something
that our distinguished subcommittee chairman said. One of the
reasons we are apparently doing this bill is to become less
dependent on imported oil, which I support the goal. How much
imported oil is used in the generation of electricity among the
member companies of EEI?
Mr. Sterba. Mr. Barton, I don't recall the specific number.
It is fairly small.
Mr. Barton. It is close to zero.
Mr. Sterba. It might be in the 1 percent range.
Mr. Barton. Yeah. So we are not going to get a lot out of
this bill that--because the imported oil is going for the
transportation industry. It is not going for the power
generation industry.
Mr. Sterba. That is correct. And I think that is where
plug-in hybrids come in for the future.
Mr. Barton. Well, speaking of plug-in hybrids, hybrids are
made in my district down in Arlington, Texas. The additional
cost of the hybrid is such that it never pays for itself. At $4
a gallon gasoline it took somewhere between 10 to 15 years. At
$2 gasoline, you are buying a hybrid just because you want to
buy a hybrid. There is no payback to it. And in any scenario,
the GM plant in my district that makes the GMC hybrid, the
Cadillac hybrid, they have the capacity to make approximately
60 per hour. In the entire country I am told they are selling
about 30 a week.
So let's don't kid ourselves. Unless we force America--and
I mean force 'em, this theology that everybody is going to
transition to an electric vehicle or a hybrid vehicle, unless
it is mandated by Federal law, backed up by the Army, it is not
going to happen.
I do want to thank you, Mr. English, for reminding the
committee of jurisdiction that when we passed the Clean Air Act
amendments in 1990, which I voted for too, we explicitly didn't
include CO2. It wasn't serendipitous that we just
kind of forgot about it. We debated it and thought about it,
and we didn't think CO2 was a pollutant and needed
to be regulated as a criteria pollutant under the Clean Air
Act.
The Republican alternative when we put it out for this bill
is going to have a provision from Congresswoman Blackburn, a
member of the committee, that explicitly states that, which is
something that I think the committee members need to keep in
mind.
Mr. Michaels, I want to ask you a question since you talk a
little bit about cost. Could you explain to the committee and
to me how raising the price of any commodity, in this case
CO2, can be absorbed without being passed on to
anybody in the economy, which is apparently what my friends on
the other side think they can do.
Mr. Michaels. The fundamentals of supply and demand say
that no matter what kind of increase in price, increase in tax
there is, there is going to be--part of it is going to be borne
by consumers, part of it may be borne by producers, by
consumers as higher prices, by producers as having lower
profits, fewer funds that they can reinvest in their
businesses. The exact details of how the numbers break down in
the carbon case is a subject of considerable debate, and
certainly in California they haven't settled that issue yet.
Mr. Barton. Let's assume that by some miracle Mr. Doyle, my
good friend, can come up with an allowance system that doesn't
cost anybody anything. Then there is no reason to use less of
the commodity that is being capped, is there, if there is no
cost to it?
Mr. Michaels. But the only way that could happen would be
if allowances were redundant and it was as good as if they
didn't exist at all.
Mr. Barton. My time has almost expired, Mr. Chairman. I do
want to compliment you. Yesterday I learned that the oil and
gas in Alaska is there as a result of continental plate shift.
And I am sure that I may learn something of a similar value as
this hearing progresses with the other 20 witnesses that we
have here today. So I am going to yield back the balance of my
time.
Mr. Markey. I thank the gentleman.
The Chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. I am glad my good friend Mr. Barton mentions
Alaska because as we speak the tundra is melting because of
carbon dioxide. The polar ice cap is disappearing because of
carbon dioxide. The oceans that sustain the salmon fishery of
Alaska are becoming much more acidic because of carbon dioxide.
So I just want to ask you a preliminary question to the
extent I hope you can answer a yes or no pretty much to this
question. I want to just ask each of you very quickly to answer
this.
Do you believe that the threats associated with the
pollutant carbon dioxide and the threats of changing the
climate and the acidity of our oceans are significant enough to
the United States that we should endeavor to cap, to limit the
amount of this pollution in the atmosphere, Mr. Sterba?
Mr. Sterba. Yes.
Mr. English. I think we are doing it no matter what.
Mr. Crisson. Yes, Mr. Congressman.
Mr. Somerhalder. Yes, Mr. Congressman.
Mr. Morgan. Yes, NARUC supports taking Federal action to
reduce carbon emissions.
Mr. Cowart. Absolutely.
Mr. Greenstein. Yes.
Mr. Michaels. The science is not yet clear enough to make a
decision on as drastic a policy as this.
Mr. Bassett. Yes.
Mr. Inslee. The reason I ask that question is that we have
two very significantly different approaches. One side of this
committee believes that this problem demands action. One side
believes that this is not a problem and therefore has not
proposed any action to deal with this problem. So I take the
majority of your answers to be that these industries suggest we
need action. And there has been and there will be much
criticism of the proposal we have made to take action on this
problem. But we have made a proposal. We have stepped up to the
plate to suggest one cause of action. We have come up with
ideas on how to solve this problem. And simply sniping at this
particular proposal, although in the finest American tradition,
is not going to help us solve this problem. And I look forward
to one day where all members of this committee can start being
part of the solution rather than being part of the problem and
not taking any action.
So I want to ask about the action that we should take.
First, the question I want to ask is, could someone help us on
the best way to assist the siting of transmission? I do believe
in this bill there are some additional measures we should
consider that as these renewable sources start to come online
with concentrated solar offshore wind we are going to see a
significant increase for need for transmission lines. And I
think we need some backstop Federal authority to site those.
I will turn to Mr. English for his thoughts.
Mr. English. Well, thank you very much. Let me just say, I
would respond that we have a more practical situation in front
of us right now. I think the Clean Air Act is going to be used
to address this issue. And I think that this committee and the
Congress needs to make sure that we have something that is
deliberately passed to address the carbon issue.
Second is renewables have got to play a huge role in this
thing. And from a practical standpoint we have to move very
rapidly if, in fact, this legislation is going to be timely as
far as--and I think that is what you intend.
Mr. Inslee. When you say move rapidly, are you referring to
transmission?
Mr. English. Particularly transmission. I think efficiency,
we have got to be very aggressive on it. And quite frankly, I
don't think we are anywhere close to what we need to have done
on that.
Secondly, as far as transmission is concerned, I understand
``not in my backyard'' ``I don't want any part of it.'' But
quite frankly if, given the amount of reliance that I expect
that we are going to have on renewable energy and what I think
probably the authors of this bill intend, we have to have that
siting, probably we need the siting yesterday, not tomorrow,
not 2 years from now, not 5 years. We cannot build the
renewable energy that is going to be necessary to move this
country forward and to even approach 15 percent or 20 percent,
much less 25 percent, unless that siting is done within the
next 2 years.
Mr. Inslee. We will be making some suggestions to the
committee about how to move that forward in future drafts of
the bill. And we hope any and all of you can help us with your
insights on how to draft that. Very quickly, as we recycle the
money from the auction proceeds, and I do believe there should
be 100 percent or high level of auction except for the permits
that Mr. Doyle and I have fashioned, a measure to go back to
energy-intensive manufacturing industries. But as we recycle
that, what is the best way to do it if we want to encourage the
use of those recycled dollars back to consumers to use it for
efficiency improvements? Is it just increasing the
weatherization program or some voucher program?
I will take about a 20-second answer if the Chair will
allow it from someone. Mr. Cowart.
Mr. Cowart. We need an entire suite of energy efficiency
programs. It includes weatherization, it includes assistance to
industries. It includes assistance for retooling factories. It
includes commercial energy efficiency as well. The local
distribution companies or other trustees appointed by and
supervised by State regulators are the best means to ensure
that these dollars are returned to customers in the form of
enhanced efficiency.
Mr. Inslee. Mr. Greenstein, we are out of time. I want to
respect the Chair.
Mr. Markey. Quickly, Mr. Greenstein.
Mr. Greenstein. I was just going to say, in terms of
consumers' efficiency investments, you are going to get
consumers investing more in home efficiencies themselves if
they see the price signal in their utility bills and they are
made whole by a direct payment so they still see the--if you
are to officially keep the bill down, there is going to be less
incentive for them themselves to take conservation and
efficiencies.
Mr. Inslee. Thank you. Thank you, Mr. Chairman.
Mr. Markey. The gentleman's time has expired.
The Chair recognizes the gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you. The first question I have for each
of you, and I want a yes or no answer. Have you read the draft
discussion bill yourself in its entirety? Mr. Bassett.
Mr. Bassett. Yes.
Mr. Walden. Mr. Michaels.
Mr. Michaels. No.
Mr. Walden. Mr. Greenstein.
Mr. Greenstein. In its entirety, no. Parts of it, yes.
Mr. Walden. Mr. Cowart.
Mr. Cowart. Same answer.
Mr. Walden. Mr. Morgan.
Mr. Morgan. Same answer.
Mr. Somerhalder. Same answer.
Mr. Crisson. Not entirely.
Mr. English. Not entirely.
Mr. Sterba. Not entirely.
Mr. Walden. I have not either, but I am just about there.
648 pages and I think I am down to about 603 right now.
The reason I ask that is not to put you on the hot seat
except that our job here is to legislate. So every word
matters. Despite what my colleagues on the other side may think
that we are not supposed to ask questions, I intend to ask
questions, and I intend to pursue this pretty aggressively
because I think we are about to put into law a policy that will
have enormous ramifications for consumers, small businesses,
every American and our future. And so I am going to take my
time, and I may invoke my rights under the House rules, which
cannot be superseded by this committee, to get 5 minutes for
each of you for questions. Because I think it is that important
of an issue. So let's start out.
Mr. English, I appreciate your testimony today and your
work on behalf of the rural electric co-ops. You have a very
good organization and I work closely with my members in my
district. Explain to me how the provisions in this bill affect
your members, a lot of them very small little cooperatives out
across very rural landscapes, when it comes to them
participating in an auction. Can you explain to me how they
compete with a five-member board or a 10-member board out in
Hood River or John Day or somewhere?
Mr. English. We don't think even our largest members can
compete in that kind of an environment at an auction. It would
be extremely difficult for us to do so. And let me also say,
that does need to take into account the regional ramifications
of an auction.
Mr. Walden. And yet in the Northwest we have enormous wind
energy, a lot of it in my district. I am proud of it. But I
also know that one of the great synergistic actions there is
being able to use the hydro system as a storage battery. There
are provisions in this legislation that both completely
discriminate against hydroelectric power as renewable, if it
was online prior to 2001, as well as any new hydro is not
considered renewable if in some way it affects the pool level
behind a storage facility at any time or any location.
Doesn't that pretty much rule out new hydro as a battery
for wind?
Mr. English. I think it is a mistake to eliminate any kind
of renewable whatsoever. We are looking at biomass, we are
looking at all different aspects of generating renewable
energy. But again I want to go back to the biggest limitation
on renewable energy is transmission and is the question of
siting.
Mr. Walden. I am going to bring this up again. This is
Bonneville Power's hourly measurements of wind energy in the
Northwest. You see the dramatic drop in output of wind. You
have to have something to balance it out. We are going to move
forward with renewable energy, which is a good thing, but it
cannot be done in a vacuum.
So can somebody explain to me how you do not need other
power sources that you can bring online rapidly to balance this
out. The same would go with solar at night.
Mr. English. I will just say very quickly, you are right.
Mr. Walden. I appreciate that. Let's talk about natural
gas. Does anybody believe here that this legislation will not
drive up the cost of natural gas?
Mr. Somerhalder. For the reasons that were mentioned
earlier, clearly even your example related to intermittent
sources of power from renewable, that will require generation
that can back it up. Natural gas is the quickest source of new
facilities that could come on the quickest to back that up.
Mr. Walden. And so everybody is agreeing, yes, natural
gas--anybody disagree? And I don't mean to move fast. But I am
down to a minute. Smart grid. I am going to go back to Mr.
English on this. As I read this legislation, everybody that
serves a power customer is going to have to have a plan put in
place rather rapidly on how to deal with plug-in hybrids and a
smart grid technology. Now out in Fossil, Oregon, there is one
person for every 9 miles of power line. Can you explain to me
if there is a cost associated with that smart grid technology
and that plug-in requirement here and how that would be
addressed?
Mr. English. Well, first of all, let me just say----
Mr. Walden. I drive hybrids, by the way, despite my ranking
member.
Mr. English. First of all, we don't have a clear definition
of what smart grid means. Second, we are very proud. Of course
electric cooperatives seem to be well in advance of the rest of
the industry, according to the Federal Energy Regulatory
Commission, in this area. Third is we think the very need for
efficiency is going to drive a good deal of new technology. And
fourth, you have to have flexibility to address the kind of
situation that you have locally.
Mr. Walden. Mr. Chairman, I realize my time for this round
has run out. I would encourage you each to read this bill in
its entirety word for word because every word in this bill has
an enormous impact, and I can't wait until we get into trying
to figure out biomass which if it comes off of Federal land is
not renewable and probably not even off private forest land and
why municipal solid waste converted into energy is not
renewable. There are a lot of questions here, Mr. Chairman, and
I hope we get time to ask them.
Mr. Markey. I thank the gentleman.
The Chair recognizes the gentlelady from California, Ms.
Matsui.
Ms. Matsui. Thank you, Mr. Chairman. The main electric
utility in my district is the Sacramento Municipal Utility
District, popularly known as SMUD. It consistently receives
high marks of customer satisfaction while investing
significantly in energy efficiency and renewable energy
development. SMUD supports a transparent cap-and-trade system
to get greenhouse gases under control. It has also undertaken a
number of positive and voluntary programs that help people
control their energy usage and increase the amount of energy
they use from renewable sources. SMUD is highly supportive of
allocating emission allowances directly to the LDCs, of which
SMUD is one. The idea behind this is that LDCs are able to pass
potential savings directly onto their rate payers while
avoiding windfall profits.
Mr. Sterba, I know that SMUD agrees with you that
allocation should be distributed directly to LDCs. I know this
is one of the main issues that this committee will have to deal
with before marking up the draft legislation before us. So I
would like to delve a little bit more deeply into the details.
SMUD tells me that giving allowances directly to LDCs would
protect against windfalls to generators and illuminate
opportunities for market manipulation.
Why do you think the LDCs are in a better position than
anywhere else along the energy supply chain to protect the
consumer welfare and guard against windfall profits?
Mr. Sterba. The distribution company is, in our instances,
for shareholder-owned utilities, are regulated. The regulator
is familiar with how to handle the costs and the benefits of
trading in allowances. It is done today relative to
SO2 and in many instances NOX. So we have
proven mechanisms by which those benefits from an allowance are
flowed through to customers, and I know that that would
continue to exist.
Ms. Matsui. Let's assume for a moment that some of the
emission allocations under this bill would be auctioned. In the
case of an auction, is it your opinion that LDC should also
receive the lion's share of the auction revenue to pass through
to the ratepayers?
Mr. Sterba. In the instance that you--for the allocated
share of allowances associated with electric generation, as it
is allocated--I am sorry--as that auction moves on, I believe
the Congress should consider providing the value of those
allowances, cash if you will, back to the regulated entity to
help mitigate impact if it chooses not to do an allocation. The
much simpler way is to allocate and allow the commission in
each State to oversee how those values are provided back to
consumers.
Ms. Matsui. Okay. Just a follow-up on that. We need to
ensure as much discretionary auction revenues go toward
complementary policies to mitigate and adapt to climatic
change. How are the LDCs positioned relative to other entities
in the supply chain to ensure that the auction revenue is spent
on activities that would reduce further global warming,
emissions, weatherization and renewables, efficiency, et
cetera?
Mr. Sterba. I think there are certainly other things that
can be done with proceeds resulting from auctions. For example,
in helping to ensure there is a very robust weatherization
program. The use of those funds to invest in technology. If
what we are about is creating a mechanism or a set of
mechanisms to reduce our carbon footprint, why should not all
of the value that is associated with imposing these costs on
the economy be used for that purpose?
Ms. Matsui. Okay. In your testimony you referenced the oil
fund payment the Alaskans receive every year. I was thinking
about the Alaska situation earlier this weekend and it seems to
me that returning money directly to consumers in this way might
sound good politically but would create problems down the line
when the emissions cap starts to drive down the amount of
revenue generated from the cap-and-trade program.
How can we best ensure that consumers are assisted with
temporary higher energy costs without making them dependent on
a rebate payment from the Federal Government?
Mr. Sterba. The absolute simplest way is to provide an
allocation to the LDC such that that cost is never incurred by
the consumer. Prices at--I agree with Mr. Cowart that prices
don't drive everything. And so having that allocation made to
the LDC such that that cost is not passed back on to consumers
is the best appropriate strategy.
Ms. Matsui. Okay. So the role that the LDC is playing in
ensuring the allocation of revenues, you can really believe the
LDCs can really play an effective role in essence in the
allocation of revenues?
Mr. Sterba. Yes, I do.
Ms. Matsui. Okay. Looks like my time is almost up. Thank
you.
Mr. Markey. Great. The gentlelady's time has expired.
The Chair recognizes the gentleman from Illinois, Mr.
Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. This is a great start
to start really hashing out the numbers as we tried to address
yesterday. And I would appeal to the chairman that once they
decide on a mark that we have a hearing on the numbers. I also
appeal to the chairman that--I know you want to move this
fast--but enough time is given for everyone to score this out.
And let me just ask that to the panel. I did this yesterday.
Do you agree that transparency is better than a lack of
transparency in this process? Everybody agree with that?
Everybody is shaking their head yes. Would it be better for us
to know the numbers that are proposed a week prior to the
markup of a bill? Does everyone agree with that, transparent
process? Everyone agree? Yes, everybody is shaking their head
yes. I am assuming everybody is shaking their head yes. No one
is willing to go on record saying no, we would rather have a
full and transparent process. At least a week amount of time.
Should we have time in a full transparent process, a time
to allow people who are making the economic analysis, the
numbers so that a proper economic analysis of the impacts, good
or bad, those that will help move to a green economy and those
that may--does everybody agree that that should be part of this
process, a full, transparent, regular order process so we can
debate this? Anyone disagree with that? So everyone is
agreeing, Mr. Chairman.
So I would hope that in this--and there is great divergent
opinions. And we have got a lot of committees and a lot of
processes. The marker is really down for these numbers to be
laid out in time for us to really have a credible debate.
Now why is this important? It is important because there
are going to be job losses. There is a supposition that there
will be job gains. There are some people claiming that there
will be an equal amount of job losses to job growth. I reject
that proposal. I think the Spanish study also rejects it. For
every one job created there were two jobs lost.
And so we will continue to focus on job creation. Why is
this important to me? You all have talked about the Clean Air
Act, the 90 amendments. We cannot use the 1990 Clean Air Act
amendments and say that the cap-and-trade provision on a small
amount of emittents with available technology is related to the
huge amount of captured emittents, if you want to call carbon
dioxide that, and the inability to have any technology to do it
at this time.
Peabody Mine Number 10, Kincaid, Illinois, fuel switching,
Mr. Chairman. That is what this natural gas debate is. Fuel
switching cost 1,200 United Mine Workers jobs in one coal mine.
And the commodity was switched. There was a fuel switched.
These guys lost their jobs. Done poorly with no transparency,
you are going to have fuel switching and I am going to lose
more. The number I would like to use was even more.
And they came to our hearings. To the chairman's credit we
had the Ohio Mine Association here a couple weeks ago. You know
how many mine workers' jobs were lost during the 1990 Clean Air
Act amendments in Ohio? 35,000 mine workers' jobs. Now, what
does that mean to rural America? For this piece of coal from
Willow Creek Mine, underground employment, 411 miners. The prep
plant has 51. This is just one mine. 462 jobs. This is in
rural, poor southeastern Illinois. The total economic impact
for this one mine in poor southeastern Illinois is $123
million. That is money that goes to the local schools, to the
local roads, to the local county, to hire sheriffs. That is
what is endangered if we don't do this right. If we are going
to fuel a switch to natural gas, these jobs are lost. Natural
gas is high--especially, Mr. Chairman, if we don't move to more
exploration, location and recovery of natural gas emissions.
Appreciate your panel, and the fight continues. I yield
back my time.
Mr. Markey. The gentleman's time has expired.
The Chair recognizes the gentleman from California, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman. You know the issue
of allowances is really at the heart of cap and trade. It is
difficult and it is politically difficult. So I appreciate the
diversity of opinions that are expressed here this morning. And
I think this panel represents the diversity of the opinions of
the American public. So if we can work in the face of this
diversity to find something that is passable by this committee
and by the House, I think we will have something that will be
beneficial and it will work.
Personally I believe--and in terms of allowances,
allocations that we should go as far upstream as possible, but
I realize politically for a number of legitimate reasons that
that isn't going to happen. And so I appreciate the spirit of
compromise shown by Mr. Greenstein in biting your tongue and
saying well, okay, we will work with the LDC. So I hope that
the committee can work in that spirit and find legislation that
we can live with.
Now I have a couple of questions. Mr. Sterba, I think your
presentation was very good. I appreciate that. I lived in New
Mexico for many years. So I understand the situation.
We have seen though in the past or recent past the
opponents of clean energy crying wolf in the 1990 Clean Air Act
amendments and to a lesser degree with the Montreal Protocol,
and yet those catastrophic predictions were never borne out,
and in fact we saw a good benefit at very little cost. So I
would like to ask you what you think made these estimates so
wrong and what lessons can we learn from that experience?
Mr. Sterba. I think in the instance of the Clean Air Act
amendments for sulfur dioxide, for example, it is that--and the
point that was made by Mr. Shimkus is true. There were
technologies that could be used and what happened is that they
ended up costing a lot less than people assumed. And it is the
power of a market. And that is the value I think of a cap-and-
trade system is it capitalizes on that power of the market to
drive the costs for compliance down. So where $3,000 was an
expected value for the cost of an allowance, it turned out to
be $300. So I think that is--and that is one of the things we
want to capture.
The difference here is there are some new technologies that
must be developed. Carbon capture and storage to ensure that it
is available. And that is what we have to get to.
Mr. McNerney. Well, thank you. One of the things that is
sticky in California particularly is that we have invested a
lot in efficiency. And how do we get credit for that early
efficiency?
Mr. Cowart, could you take a stab at that? How could we
give credit in allowances for this?
Mr. Cowart. There are actually two answers to that
question. First is the good news. The good news is that as I
talk to people in California they think they have an advantage
in an environment such as the one we are entering because in
California you know how to do energy efficiency and that
actually you are not disadvantaged by the fact that you have in
place the human capital and the experience to do the job.
But to answer your question directly, it is through the
selection of a baseline period for the allocation to LDCs. We
are proposing an allocation to LDCs in part based upon
consumption levels, and it is important that that selection of
consumption level be done in such a way as to reward successful
performance over time in the delivery of efficiency so that if
you are successful tomorrow, for example, in delivering
efficiency to your customers, that next year your allocation
doesn't go down just because of that. And the same thing could
be said in terms of back-casting to a baseline.
Mr. McNerney. Thank you. I know the Edison Electric
Institute is leading the effort in terms of small grid, and I
appreciate that because I spent many years in the 1990s
developing a smart grid utility meter for residential use. So I
think there is potential there. One of the things that I think
gives the greatest potential is marrying smart meters with
hybrid vehicles.
Could you comment on that, Mr. Sterba?
Mr. Sterba. Well, smart meters are a part of the smart grid
and it is an essential component of it that allows
communication to occur in two directions instead of only just
in one. And we absolutely in order to facilitate plug-in
hybrids--which today have a cost disadvantage, but frankly I
personally believe that will change dramatically over time. We
have to be able to help ensure that those vehicles cannot just
be users of electricity but also storers of electricity for the
benefit of the grid. And that means that you have to have a
meter or the capacity to measure electricity going both ways
and to communicate price signals so that the ability for
someone who owns a plug-in hybrid to support the grid can be
recognized on an economic basis.
Mr. McNerney. My time has expired.
Mr. Markey. Mr. Pitts.
Mr. Pitts. Dr. Michaels, we often hear that California is
the leader in climate change policy. You testified that people,
using California as an example of effective energy efficiency
policy, have an untenable case. Would you elaborate on that?
Mr. Michaels. I just went through several basic points
about it. Yes, there are some California energy efficiency
programs that have delivered. But as a simple fact, the
California Energy Commission has always looked at projected
resource needs in the future, and they have almost invariably
overestimated what the likely contribution of efficiency is
going to be.
Mr. Pitts. If you could look at the policy of California on
climate change, what would be the main lesson that we could
draw from California utility policies?
Mr. Michaels. It is infinitely more complicated than anyone
could imagine, and there is no precedent for it. Everybody who
talks about using some model to get numbers, the bad news is
you are talking about something unbelievably complex, as much
so as the whole economy plus the whole ecosystem. We don't know
how to do this. The projections you get, if you look at the
Federal figures, use models from the Energy Information
Administration, which itself has shown what incredibly poor
predictors of things they are in its own documents.
Mr. Pitts. Some of your fellow panelists advocate different
types of allocation schemes to protect consumers. Are there any
schemes that will truly insulate consumers and small businesses
from the cost impacts of this cap-and-trading scheme?
Mr. Michaels. How could there be? After all, what you are
doing is making something that was formerly free; namely, the
right to emit carbon, scarce. All you have done is you have
increased the cost of doing business for businesses, you have
increased the cost of living for consumers ultimately, because
some of that is going to be passed on to them.
There is no way to insulate the entire economy or even a
major segment of it from as massive a scarcity as we are
thinking about creating here.
Mr. Pitts. Now, you have said, Dr. Michaels, every major
provision of this bill is at base a tax. Would you elaborate on
that? Why is the renewable electricity standard a tax, for
instance?
Mr. Michaels. The renewable electricity standard is not a
Federal tax that is going to be explicitly paid to this
government; but what it is, is a mandate upon States that their
utilities catch a certain fraction of their power from
renewables over the course of time in the future.
Renewables are not cost effective now. We don't know when,
if ever, they are going to be. Even wind, which is the most
common renewable--and renewable is almost a synonym for wind--
still is not cost effective without a Federal subsidy,
production tax credit, and accelerated depreciation. We are
talking about people's electric bills rising because regulators
have to fold these costs in for regulated utilities. That is as
good as a tax.
Mr. Pitts. From your understanding of the issue, Dr.
Michaels, would imposing this tax on energy lead to any
meaningful global emissions reductions?
Mr. Michaels. I am not an expert on that, but I am aware
that as a fraction of global emissions the U.S. is relatively
small. And my understanding--and I am not an expert again--is
that it is going to take a much larger increase than is ever
contemplated in this legislation to make a dent in it.
Mr. Pitts. Now, you say the bill will have massive effects
on both consumers and small businesses. Does anyone on the
panel disagree with that? Mr. Cowart.
Mr. Cowart. Well, I will disagree to this extent. To the
degree that we are smart about how we implement it and to the
degree that we recycle revenue that advances highly efficient
technologies, the impacts on consumers and businesses can be
quite moderated.
Mr. Bassett. I think the impact is going to be
disproportionate, and that is why I underscored any approach
should be an approach that recognizes regional differences.
Obviously, some consumers in certain parts of the country are
going to be disproportionately impacted because of their coal
dependency. So any formula needs to take that into
consideration.
Mr. Pitts. Mr. Greenstein.
Mr. Greenstein. I think it all depends on how the
legislation is designed. Well-designed legislation that makes
appropriate use of auction proceeds and permit allocations, as
I have indicated, can hold low and middle income consumers
harmless generally. And with regard to businesses, while I
don't think--I am going to commend the answer I gave earlier to
Mr. Upton. While I don't think it makes sense to do allowances
generally for businesses, there may be particular businesses or
particular sectors that need transition help of some sort.
Whether it is through allowances or other mechanisms, I am not
sure what the best mechanism is.
Mr. Pitts. Dr. Michaels, what is your response to that?
Mr. Michaels. It is not at all clear to me how, again--
simply reduces to a question of scarcity. All you are doing is
making something scarce that was relatively abundant before.
And there is no way--there are ways to make a little bit more
or a little bit less be borne by one class of customers or
another; but by and large, this is very, very small relative to
the totality that is being contemplated here, if I look at the
bill.
Mr. Pitts. My time is up. Thank you, Mr. Chairman.
Mr. Markey. The Chair recognizes the gentleman from Texas,
Mr. Green.
Mr. Green. Thank you, Mr. Chairman.
Mr. Morgan, currently what percentage of the District of
Columbia electricity is produced by what is defined as
renewable electricity in this bill?
Mr. Morgan. Well, the District of Columbia currently
imports more than 98 percent of its electricity from outside.
So it is a little bit hard to answer that question.
We do have some solar generation on some Federal facilities
and universities and a growing number of homes.
Mr. Green. But you don't have a percentage?
Mr. Morgan. I don't. I can tell you it is very small.
Mr. Green. I think as a customer, and some Members are
customers. On a yearly basis we get ours in a bill showing what
percentage, and it is very small. I think less than 1 percent.
Mr. Morgan. We do have a requirement for the load-serving
entities to report on the energy mix. Most of that power is
imported and includes renewables.
Mr. Green. Again, whether you import it or what, because we
import power. In fact, that is the goal of this bill, is to be
able to import power from parts of the country that generate it
to parts that don't. But, still, the mandate would cover it.
And I noticed the Public Counsel for Columbia's Equal
Opportunity Council, Betty Knowle, was concerned about the 20
percent mandate that the District's standard would cost about
$26 million annually. Does D.C. Currently have a 20 percent
mandate?
Mr. Morgan. Yes. The City Council recently increased the
renewables portfolio standard for the District to eventually
reach 20 percent in the year 2020. That is correct.
Mr. Green. Let me ask others from groups, the co-ops, the
EEI, and in the public sector. What are the percentage, Glenn,
or does co-ops actually have--and I know you have had a
discussion on what is considered. I know the bill actually
considers qualified hydropower. But what is the percentage of
the real co-ops that have and what would be defined as
renewable energy in the bill?
Mr. English. As I mentioned, as defined by the bill would
be about down to 2 percent, would be roughly.
Mr. Green. Because general hydropower is not, quote,
qualified?
Mr. English. That is correct.
Mr. Crisson. In the case of the publics, Mr. Congressman.
As customers of the power marketing administrations, they use a
lot of hydroelectric. But you are not including hydroelectric
from either the PMAs or the generation that is owned by our
members. It is right around the industry average, which is
about 3 percent.
Mr. Sterba. And I think on the investor-owned side, that
may be a little higher than the general average because we are
complying with mandates in a number of States. But it is
certainly no higher than 4 percent overall.
Mr. Green. And I guess the last one would be the--well, and
that is EEI, I guess, the investor.
Mr. Sterba. Yes.
Mr. Green. That is, I guess, our concern on the electricity
and national standard of 25 percent, although 25 by 25 and--to
get there. And I know in the State of Texas we are doing so
many things with wind power, and actually our public utility
commission committed $5 billion to transmit that power to get
to the Dallas-Fort Worth, the urban markets, Austin, San
Antonio, and Houston, Galveston. And the legislature now is
expanding solar compared to what they did with wind power. But
there is some concern we still may not be able to do 25 percent
in 2025 even with the growth that we are doing. Is there a
response to that or compared to other States?
Mr. Crisson. Mr. Congressman, I would just add that the 15
percent limit that we support for a Federal RES is really a
very aggressive standard. When you look at the fact that right
now the total national renewable resource capacity excluding
hydro is about 3 percent in 2008, we are talking about a five-
fold increase in a little over 10 years with 15 percent. And
even with the recent State renewable energy standards Mr.
Sterba referred to in the recent years, the year over year
increase has been about 5 percent.
To get just to 15 percent, you are talking about nearly a
14 percent year over year increase. And it is a very aggressive
standard.
Mr. Sterba. I would echo that, Mr. Green, and add one other
thing. That it is not just the percentage, but it is also what
qualifies. And that can dramatically change whether or not you
can get to that standard.
There is also an electrical stability issue associated with
intermittent generation. You have to be careful.
Mr. Green. Mr. Bassett, in the few seconds I have left,
some have discussed the EPA's preliminary and economic
analysis. Have you had a chance to review it?
Mr. Bassett. Yes, sir.
Mr. Green. It does not assume an RES or a low carbon fuel
standard. Do you have any thoughts on the EPA's analysis,
economic analysis?
Mr. Bassett. Well, I said earlier I thought it was a great
first step. But it doesn't go far enough, because there are
overlapping mandates in this particular draft that have to be
taken into consideration.
I would think the committee would be remiss if they would
move forward without having a complete analysis of all of the
variables that are included in the draft, and then, further,
understand what the simultaneous implementation of all those
provisions would have, that impact on consumers.
So while I applaud it as a good first step, I don't think
it goes far enough in dealing with the other provisions in the
draft.
Mr. Green. Thank you, Mr. Chairman.
Mr. Markey. The gentleman's time has expired.
The Chair recognizes the gentleman from Oklahoma, Mr.
Sullivan.
Mr. Sullivan. Thank you, Mr. Chairman. And my first
question is for Mr. Sterba and Mr. English, Mr. Crisson.
What is your position with regards to implementing a
domestic cap-and-trade program before there is substantial and
verifiable commitment to emissions reductions by China, India,
and similar emission heavy developing nations?
Mr. Sterba. EEI's position is that we believe that the U.S.
should provide leadership and go forward with some form of
climate change legislation. But it must be in the context of
international negotiations to help bring along the other
countries, because if we are the only ones that do it we don't
get there. But neither do--and this is my personal statement--
do I believe we can just say we won't do anything until the
others do it first.
Mr. English. We agree that other countries should be
included. And certainly someone the magnitude of China needs to
be a party of this. I think there is an issue of who goes
first. And as you said, the problem that we face right now is
that we are going first, unless the Congress wants to stop
that, through the Clean Air Act. I think the Supreme Court
started that ball rolling nearly 2 years ago.
So I suppose we are leading, but I certainly think that
Congress needs to do everything they can to get other countries
to join with us.
Mr. Crisson. Mr. Congressman, we would support moving ahead
with a workable and sustainable cap-and-trade system, some kind
of mechanism to address climate change in order to show
leadership in the international community. We would be very
concerned, however, if there was not some kind of reciprocity
shown in the very near future by countries like China and
India.
Mr. Sullivan. And the next question is I guess for all of
the panelists. What are your concerns or position on leakage,
the process by which companies will move business operations to
foreign countries to avoid higher costs in the U.S.?
Mr. Michaels. In California that has been a very, very
major issue with the implementation of the State program. And
even the most optimistic projections that are coming from
people who have been analyzing the State program--I don't place
much faith in them, but even the most optimistic ones are that
California is going to lose a very substantial fraction of what
industrial load is left.
Essentially, what is going to be left in California is only
the kind of businesses that can't move because of their
closeness to the consumer. Electrically, you are going to be
seeing the same issue, and that is being played out once again
not just in California but in the negotiations over the Western
Climate Initiative. If California outlaws coal-fired power
imports, it just means the plants in other States are going to
produce electricity for those residents.
Mr. Bassett. I think my answer to that question is obvious.
Any time there is a possibility for loss of jobs, whether it is
major corporations or small businesses that will certainly be
affected by this draft, they are concerned. And so that is why
I think that, going forward, we need to make certain that we
are considering all of the variables. And that is why I have
underscored my initial concerns earlier.
Mr. Cowart. Leakage is certainly a problem in any cap-and-
trade regime, and we need to be careful about how we approach
it. It is one of the reasons that we need a national program,
frankly, because of the State-to-State competition problems
that cause leakage across State borders.
And with respect to international arrangements, I support
transitional assistance to industries that are affected by
international trade concerns. And I think I echo the comments
of those made earlier, that we as a nation need to be engaged
quite actively with other countries to make sure that we create
over time as level a playing field as we can.
Mr. Morgan. I agree with Mr. Cowart. I think we need to
look at the issue of leakage in the context of an international
approach. The fact that the United States is thus far not part
of international agreements already is creating a leakage
problem in the other direction. What we really need to do is
work together with other nations to address this problem.
And I also wanted to highlight the issue of leakage when
you are looking at State or regional programs which are already
in place in parts of the U.S. And, as Mr. Cowart said, that is
a problem that could be solved by developing a national program
and having arrangements for dealing with interchange between
U.S. and Canada of electricity and that sort of thing.
Mr. Somerhalder. We have already seen in the past the
comment about rush to gas. We have seen that impact businesses
and industries in our areas when we had gas used so much for
power generation.
What this has the potential to do, in addition to
increasing demand for natural gas, if we have carbon allowance
costs for residential customers and small businesses, that has
the potential to impact their businesses and do just what you
fear. So, for those reasons, we think it is necessary that we
deal with the allowances and allocating those in the
appropriate way to mitigate that impact.
Mr. Crisson. We share that concern. And as Mr. Somerhalder
pointed out, this is one of the big advantages of 100 percent
allocation of allowances, particularly in the transition early
years as we move to a low carbon energy system.
Mr. Sterba. I agree that one of the biggest challenges that
we can face is not just thinking about what is the impact on
electricity but what is the impact on the mix.
If we throw coal out prematurely, out of the mix, we can
have a significant impact on natural gas prices that not only
affect residential customers but all of the industries that use
it as feedstock, and the inability for them to remain
competitive in an international market.
Mr. Welch [presiding]. The Chair recognizes himself for 5
minutes.
Two of the issues that have been raised constantly, among
others, are the impact on jobs but also the impact on cost, the
cost to the consumer.
Mr. Cowart, welcome. You and I worked together in Vermont,
and I appreciate the work you did there and around the country
and the world. I would ask you to further elaborate on the
potential of the efficiency as a means of reducing energy
costs. I mean, if we are going to be concerned about the
consumer, as we must, residential consumer and the business
consumer, to elaborate on how efficiency can be their friend.
Mr. Cowart. Thank you, Mr. Chairman.
I think the efficiency opportunity is well demonstrated
throughout the country. The reservoir is large and it is
largely untapped, and it can be tapped at low cost. We know
that in the power sector we could achieve at least 1 percent,
probably 2 percent, a year in total demand reduction
incrementally through aggressive energy efficiency programs
that would be cost effective. They would save customers more
money than they cost. And what happens when you do that is
really four things.
First of all, every customer who is participating in an
efficiency program or is investing in efficiency will see a
lower bill. That is the first benefit. The second benefit is
that by reducing demand for electricity and natural gas we
reduce the clearing prices. And those benefits occur to
everybody on the system. So the upward pressure that we are
worried about here on clean energy and on energy prices
generally can be significantly moderated by energy efficiency
at the customer level.
The third benefit is that by reducing demand for
consumption, we actually reduce demand for carbon allowances.
And this is part of the answer to Dr. Michaels' concern about
scarcity. One of the ways to affect any scarce resource is to
reduce demand for it, which can be done through energy
efficiency, reducing demand for carbon allowances.
And then the last point, for the half of the United States
that exists in a competitive wholesale power market arena, is
that when you reduce clearing prices and when you reduce carbon
prices, you are reducing the cost of power across almost all
megawatt hours across the entire grid. So the benefits from
being a lot smarter about efficiency can be quite widespread.
Mr. Welch. Thank you.
Mr. Greenstein, given your proposal and your concerns about
LDCs but the objective you have to protect consumers, what are
your thoughts on allocating allowances of 15 percent, I think
is the figure people have used, to LDCs specifically for
efficiency to reduce cost to consumers?
Mr. Greenstein. I don't have any specific percentage. I
agree with Mr. Cowart and others that efficiency is important.
I am not an expert on what is the best way under this bill to
achieve the efficiency gains. To the degree that allocating
permits to LDCs specifically for efficiency would be the best
or one of the best ways to get efficiency gains, if that is the
case, then I would think it is a good idea. I certainly think
that there ought to be some efficiency investment under this
legislation.
Mr. Welch. Mr. Sterba, what about you? Has efficiency got
to be a core component of any approach to address this problem?
Mr. Sterba. Absolutely. And I think that is one of the
areas where State regulators come into play in helping develop
along with utilities, the elimination of disincentives and the
provision of incentives such that we maximize energy efficiency
capacity.
Mr. Welch. And what would you define as the specific
disincentives to utilities to aggressively promote efficiency?
Mr. Sterba. One that exists in many jurisdictions today is
the fact that you are incented to sell more of a product. That
is wrong. We need to change that fundamental business model.
Mr. Welch. Which we would do by what?
Mr. Sterba. It could be done by a number of mechanisms.
People use the phrase decoupling as one. The problem is, it
means a lot of different things to different people. But there
are clearly mechanisms that we can change that business model.
Mr. Welch. Thank you. My time has expired.
The Chair recognizes the gentleman from Arizona.
Mr. Shadegg. Thank you, Mr. Chairman. I want to thank the
members of the panel. Let me try to go through a series of
questions. Mr. Sterba, let me begin with you.
Certain energy sources are subsidized by the Federal
Government. What I would like to do is see if you can quantify
for me how much, whether it is by kilowatt or by megawatt, the
subsidy for natural gas is. Do you know that number?
Mr. Sterba. I do not.
Mr. Shadegg. Would you assume it is zero or near zero? Does
anybody on the panel know? How about the subsidy for coal, per
megawatt or kilowatt? Mr. English.
Mr. English. When you get in and talk about the issue of
subsidy, that gets to be very misleading. If you are talking
about using the Tax Code and providing benefits under the Tax
Code as being part of that subsidy, then I think every fuel has
a subsidy; every fuel receives assistance. But amounts, I don't
have amounts.
Mr. Shadegg. I am trying to get the relative amount of the
subsidy. We know there is a substantial subsidy for solar. Does
anybody know how much it is per megawatt?
Mr. Sterba. Currently, the production tax credit is I
believe 2.1 cents for renewables. And then it could also be
investment tax credit, which is 30 percent, I believe.
Mr. Shadegg. So can you give me a number per megawatt for
solar?
Mr. Sterba. Well, the production tax credit would be 2.1
cents, or $21 a megawatt hour.
Mr. Shadegg. And then the other one you mentioned?
Mr. Sterba. That would be applicable to any renewable at
this time. I would agree with Mr. English, there are certain
built subsidies that have occurred at different stages of fuel
being developed. Any fuel source that was developed probably
had some subsidies at different points in time.
Mr. Shadegg. Do you know what the current subsidy for wind
is?
Mr. Sterba. On the production tax credit, it would be the
same, the 2.1 cents per kilowatt hour.
Mr. Shadegg. I thought it would be useful to know what
those subsidies are relative one fuel to the other, natural gas
or coal, relative to solar and wind.
The next question I would like to ask to the entire panel,
and I would like to get a yes or no answer from each of you, if
I might. Do you agree that this legislation will increase the
cost of energy produced in the United States? Yes or no. Mr.
Sterba.
Mr. Sterba. Yes. The degree to which it does is dependent
on----
Mr. Shadegg. Yes or no? I am short on time.
Mr. English. Yes.
Mr. Crisson. Yes.
Mr. Somerhalder. Yes.
Mr. Morgan. Qualified yes.
Mr. Cowart. Qualified yes.
Mr. Greenstein. Yes.
Mr. Michaels. Unqualified yes.
Mr. Bassett. Yes.
Mr. Shadegg. If you agree that it will in fact increase the
cost of energy in the United States, do you also agree that it
will increase the costs of all goods which require energy to
produce them, steel, or anything?
Mr. Sterba. Yes.
Mr. English. Yes.
Mr. Crisson. Yes.
Mr. Somerhalder. Yes.
Mr. Morgan. To the extent efficiency substitutes for
energy, no.
Mr. Cowart. Yes.
Mr. Greenstein. Yes.
Mr. Bassett. In general, yes.
Mr. Shadegg. Dr. Michaels, did I get my unqualified yes?
Mr. Michaels. Yes, sir.
Mr. Shadegg. Thank you very much. Let me ask another. Isn't
it in fact--and I think either Mr. Cowart or Mr. Greenstein,
you made this point. One of the goals of the legislation is to
increase the cost of energy to induce the efficiency that you
talked about, Mr. Cowart, and to discourage the use of the
consumption of energy? Isn't that correct, Mr. Sterba?
Mr. Sterba. I think the purpose is to provide a price
signal for a commodity that is by public policy opinion being
made scarce.
Mr. Shadegg. Which you do by increasing cost. Right?
Mr. Sterba. Yes.
Mr. Shadegg. Thank you. Mr. English?
Mr. English. I am not going to interpret motives here, but
let me just say I think we have to send on the front end of it
that it is basically to reduce the emission of carbons.
Mr. Shadegg. By setting a price signal.
Mr. English. It does set a price. By putting a limitation
on the carbon being used in the country, yes, that sends a
price signal.
Mr. Crisson. Combination of cap and price.
Mr. Somerhalder. I agree.
Mr. Cowart. I actually don't think that the purpose is to
raise the price. The purpose is to reduce emission.
Mr. Shadegg. Did Mr. Morgan not respond?
Mr. Morgan. Well, I do agree that the purpose is to send a
price signal. Putting a cap on the quantity is one way of doing
that. But price--
Mr. Shadegg. Well, you are not putting a cap on the total
quantity. You are putting a cap on the quantity per industry,
and then charging for that for anyone--actually, you might
charge for that initial catch and then also charge for
exceeding the cap.
Mr. Morgan. Either way. I mean, you are trying to make the
product more scarce, as Dr. Michaels pointed out.
Mr. Shadegg. By increasing the price and sending the price
signal?
Mr. Morgan. That is correct. That is certainly part of the
purpose. Of course, as we pointed out, there are some ways to
offset that.
Mr. Shadegg. Sure. We are not talking about offsetting.
Does it in fact send a price signal, or isn't that a part of
the structure of the bill?
Mr. Cowart.
Mr. Cowart. I think that a price signal is useful, but that
the other policies that are inherent in the bill are actually
more important.
Mr. Shadegg. Thank you.
Mr. Greenstein, I am really looking for does it--is one of
the goals to send a pricing--increasing the pricing of the cost
of energy so that we consume less and therefore reduce
CO2 emissions?
Mr. Greenstein. A key purpose is to send a price signal
both so that we consume less, but also that we switch to
cleaner sources of energy. But the fact that it sends a price
signal should not be interpreted to be a negative for the
economy.
Mr. Shadegg. I was just asking the question. Don't read
motives into my question. Dr. Michaels?
Mr. Michaels. It is a price signal. The real question with
price as well is, what are you getting for it? If in fact we
are getting very little in the way of solutions to the whole
world's carbon problem, then all we are doing is it is a burnt
offering type of sacrifice.
Mr. Shadegg. Mr. Bassett.
Mr. Bassett. I won't ascribe motives to the drafters or to
your question. But I will say that the net effect of setting a
price signal in this instance will raise prices.
Mr. Shadegg. Thank you very much. Unfortunately, my time
has long since expired.
Mr. Markey. I wasn't sure whether Mr. Michaels was in the
Old Testament or the New Testament.
The gentleman from Louisiana, Mr. Scalise.
Mr. Scalise. Thank you, Mr. Chairman.
Earlier, I think some people involved in the discussion
have implied that this is the only piece of legislation that is
out there that addresses an energy policy. I would direct them
to an alternative plan that has been on the table for about a
year now and is actually still out there on debate, something
that we are going to be presenting most of the components of
this bill. The American Energy Act that was filed in the last
Congress will be filed again and debated as part of an
alternative to this cap-and-trade energy tax. But it is a bill
that actually involves an all-of-the-above energy policy that
will not only support and in fact fund research and development
to advance the alternatives, like wind and solar, but also make
recognition of our own natural resources here in this country,
to explore additional natural resources like oil, like natural
gas, sources that we are using today, clean coal technology,
and also nuclear power, which is a very reliable, efficient
source of energy many other countries are using that this cap-
and-trade energy tax does not contemplate at all; and then,
also encourage people to make those efficiencies that they are
making today that many more will make.
So anybody who suggests that one group of people on this
committee is just against everything, they are being very
disingenuous because this is a bill that has been out there for
about a year now, many of the components of which will be
presented as an alternative, a bill that will actually create
American jobs here in this country, create those green jobs
that we are talking about, but not invoke policies that will
export millions of jobs out of this country which the cap-and-
trade energy bill clearly will do. No one has disputed those
findings.
And so, with that, I go to the bill that we are debating
today, and specifically the allocation policies that this panel
is discussing. And I am going to have some questions, but first
for those of us who have been going through this bill, one of
the big frustrations that we feel is not only a frustration to
us as members, I am sure many of you who are trying to do
analysis of this bill, but also to the American people who are
trying to contemplate whether or not this is good policy or
bad, is the main details of this bill, especially what this
committee is talking about today on allocation policies.
If you go to page 478 of the bill, which actually is
supposed to be talking about the main source of how this whole
cap-and-trade scheme would work.
Let's go through. Disbursement of allowances and proceeds
from auctions of allowances. Subsection A, allocation of
emission allowances. The administrator shall allocate emission
allowances established under section 721 in the following
amounts.
So, you want to go read those amounts? It says: To be
supplied. The section is blank.
You go next to section B, auction of emission allowances.
The administrator shall auction emission allowances established
under section 721 in the following amounts: To be supplied.
Subsection 3, funds established. There is established in
the Treasury of the United States the following funds: The
strategic reserve fund, one. Number two: Other funds to be
supplied.
We are talking about what many people have described as one
of the most important initiatives brought before this Congress
in decades, the most important change in energy policy our
country has probably seen, and the bulk of the details don't
even exist today, aren't even presented to the public.
Now, there is discussion that many of these details are
being worked out behind closed doors and some of those deals
are being cut as we speak. Unfortunately, none of that is being
done here in this committee meeting where the transparency is
supposed to be where the people can actually watch and
participate in the discussion, where experts can actually give
detailed analysis of the components of the bill and the
policies that would affect every consumer in America.
So with that, I want to ask Mr. Bassett, because you have
testified that--you talked about the rigorous cost analysis
that you would like to see done on it. When it comes to the
details of this bill that are completely left unanswered, how
do you do a real cost analysis to estimate how much this is
going to cost American families, how many jobs will be exported
to foreign countries, when so many of the details are left out?
Mr. Bassett. Well, you can't. And that is a concern that I
have, as I was reviewing the bill, and I know that consumers
across the country are going to have. So what I would do is
encourage this committee before you move is to consider cost
estimates on every provision that is in the bill. And then go
further, as I have said earlier, then test for the impact that
a simultaneous implementation of those are going to be.
I just don't see how you can reach a conclusion as grave as
this.
Mr. Scalise. And I know we are running out of time. I am
sorry to cut you off. I want to ask anybody on the panel if
they would address the question. Should we, and is it
responsible, to go forward with a debate on a bill this
important when so many of the key components are not even
included that we can assess, analyze, and discuss? Does anybody
think it is responsible to be going forward with this right
now?
Nobody responded. I yield back my time.
Mr. Greenstein. If I could just say, there is every reason
to have debate on all the issues that we already know, all the
parts of the bill that are filled in, and what a number of us
think or are recommending today should be in there for the
parts of the bill that aren't filled in. And I presume, at the
appropriate time, you will get a fully filled in bill and you
all have further debate on it at that time.
Mr. Scalise. Right. And with nine panelists, we probably
have nine different ideas that are very divergent on how that
should be. Unfortunately, we should be all debating one set--
because ultimately this committee would pass one set plan, not
nine different plans. Unfortunately, we can't debate that one
set plan because it doesn't exist and it is not before us
today.
Mr. Markey. The gentleman's time has expired. And unless
the gentleman from New York has questions, then all time for
questioning for this panel has been completed. But you have
provided a very valuable set of testimonies for the committee.
And I can actually see some--I won't call them deals, but I can
actually see some new working arrangements that could be
constructed out of your testimony to create a format, create a
formula that we might be able to use. And amongst your
testimony, I think that it has been perhaps the most productive
that we have had so far because this is a very thorny question.
But yet I can see a lot of desire to find a working formula
that we could use. And we thank you for your testimony.
Mr. Walden. Mr. Chairman, I am not going to trigger the
House 5-minute rule. But following on what you said, because
somebody here on the panel mentioned the importance of worker
transition during this process, I don't remember who it was,
but somebody did. And I would refer them to page 568, where the
section 424 for worker transition is. I would encourage you to
read it fully, because all we can read is: To be supplied.
Mr. Markey. I thank the gentleman very much. And we thank
all of you for your testimony. We would like to stay in close
working cooperation with you in the next month or so. Thank
you.
Now we would ask the witnesses to take their places at the
witness table.
Welcome. Welcome to the second panel. And this panel will
deal with the issue of ensuring U.S. competitiveness and
international participation.
Our first witness is Mr. Jack McMackin. He is a principal
in the law firm of Williams and Jensen, and a Director of Owens
Illinois, a leading producer of glass containers. He is here
today on behalf of the Energy Intensive Manufacturers Working
Group on Greenhouse Gas Regulation.
We welcome you, Mr. McMackin. Whenever you are ready,
please begin.
STATEMENTS OF JACK McMACKIN, PRINCIPAL, WILLIAMS AND JENSEN,
LLC, ON BEHALF OF THE ENERGY INTENSIVE MANUFACTURERS WORKING
GROUP ON GREENHOUSE GAS REGULATION; RICH WELLS, VICE PRESIDENT
FOR ENERGY, THE DOW CHEMICAL COMPANY; TOM CONWAY, INTERNATIONAL
VICE PRESIDENT, UNITED STEEL WORKERS; TREVOR HOUSER, VISITING
FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS; ELLIOT
DIRINGER, VICE PRESIDENT, INTERNATIONAL STRATEGIES, PEW CENTER
ON GLOBAL CLIMATE CHANGE; LEE LANE, RESIDENT FELLOW, AMERICAN
ENTERPRISE INSTITUTE; REVEREND C. DOUGLAS SMITH, EXECUTIVE
DIRECTOR, VIRGINIA INTERFAITH CENTER FOR PUBLIC POLICY
STATEMENT OF JACK McMACKIN
Mr. McMackin. Thank you, Mr. Chairman. The Energy Intensive
Manufacturers Working Group on Greenhouse Gas Regulation
appreciates this opportunity to testify today.
I am Jack McMackin, a Principal in the law firm of Williams
and Jensen, and I have served for 15 years as a Director of
Owens Illinois. OI is headquartered in Perrysburg, Ohio, and it
is the world's leading producer of glass containers.
As this subcommittee is aware, our group was formed early
last year for a limited but important purpose: To engage
constructively with Members of Congress, the environmental
community, labor, and all interested stakeholders to attempt to
solve the economic and environmental problem that is known as
carbon leakage, or job leakage. Our focus has been exclusively
on the Inslee-Doyle type grant of free allowances or allowance
value rebates.
Since I appeared before the subcommittee last month, our
working group has expanded. We include representatives of all
of the traditionally recognized energy intensive sectors as
well as companies from smaller sectors that our work has
identified as subject to leakage. Our members include AK Steel,
Alcoa, Corning, Cliffs Natural Resources, Dow, Wholesome U.S.,
New Page Corporation, New Corps, Owens Corning, Owens Illinois,
PPG, Rio Tinto, Terra Industries, U.S. Steel, and Weyerhauser.
Much has changed, and much progress has been made since last
month. The upshot is that we are more convinced than ever that
the leakage problem can be adequately addressed in climate
legislation.
Since our earlier testimony, Congressmen Inslee and Doyle
have introduced a new and strengthened version of their anti-
leakage bill, and the discussion draft in turn has adopted much
of the Inslee-Doyle mechanism. As a result, the discussion
draft contains a structure that can work.
That said, the draft also leaves critical decisions unmade
and critical issues unfinished. The success of the anti-leakage
provision hangs in the balance. Before turning to what we view
as the two most important remaining issues, let me briefly
mention one of the draft's key advances.
The discussion draft, like the new Inslee-Doyle bill, has
adopted a principled data driven mechanism for determining
which sectors or subsectors should be eligible for anti-leakage
allowances. Industries meeting specific energy intensity and
trade intensity levels would be presumptively eligible, and
others may make individual showings. This was a mechanism we
advocated. We believe it is a major advance, and that it brings
a reasonable level of certainty as well as fairness to the
process.
Now, for the two key remaining issues. The first is funding
of the provision with an adequate number of allowances. The
discussion draft of course is silent on this issue. My written
testimony updates in some detail our submissions to the
committee on this critical issue.
In short, we believe the provision requires in the range of
850 to 900 million allowances. That represents about 16 percent
of the allowances in the discussion draft's highest year, its
fifth.
The second issue is the phasedown or termination of the
anti-leakage allowance program. The solution to the problem
cannot be phased out or terminated before the underlying
problem of regulation-caused production cost disparity is
solved; and, the underlying problem will be solved only when
other countries producing energy-intensive materials adopt
climate change legislation that imposes on their industries
costs comparable to what the ACES bill would impose on ours. We
believe that the Inslee-Doyle bill is very close to creating a
workable mechanism to govern phasedown and termination of the
provision, but that the ACES bill has yet to do so.
Chairman Markey, I would like to mention one final other
matter, an issue upon which you in particular have shown
persistent leadership, and that is recycling. Use by energy
intensive industries of recycled materials in lieu of raw
materials produces enormous savings in energy and even greater
reductions in carbon emissions, greater because not only
combustion emissions, but also process emissions are greatly
reduced.
Those of us in the packaging industry, for instance, can
make a bottle or a can out of recycled bottles or cans with a
fraction of the carbon emissions; yet, we cannot get enough
recycled materials. We urge you to include muscular effective
provisions in the bill to enhance the opportunities for all
energy intensive industries to obtain and make use of recycled
materials.
In summary, Mr. Chairman, we commend you and all who have
worked so hard to make possible the remarkable progress on the
anti-leakage provisions, and we very much look forward to
cooperating with you in any way that we can.
[The prepared statement of Mr. McMackin follows:]
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Mr. Markey. Thank you, Mr. McMackin, very much.
Our second witness is back again. We welcome you, sir, Rich
Wells. He serves as Vice President of Energy for Dow Chemical
Company. He has also had lead position in management at Dow
Chemical's global advocacy activities in the areas of climate
change and energy policy. He was appointed to the Michigan
Climate Change Action Council in 2008.
We welcome you, sir. Whenever you are ready, please begin.
STATEMENT OF RICH WELLS
Mr. Wells. Thank you, Mr. Chairman. I appreciate the
opportunity to provide our views on the competitiveness
provisions of the American Clean Energy and Security Act. I am
Vice President of Energy for Dow Chemical, a leading specialty
chemical and advanced materials company with over 50,000
employees, half of which are located in the U.S.
Today, I would like to address Dow's position on climate
change. As a member of U.S. Climate Action Partnership, or US-
CAP, Dow supports enactment of environmentally effective,
economy sustainable, and fair climate change legislation.
As a representative from an energy intensive and trade
exposed sector, I would like to give you a glimpse into what
the chemical industry is doing to save Americans energy and
reduce their greenhouse gas emissions.
Since 1990, the U.S. chemical industry has achieved energy
efficiency gains of 28 percent. At Dow, that number is 38
percent. In Dow's case, we have saved over 1,600 trillion BTUs
of energy since 1994, the electrical equivalent to power every
home in California for one year. And our track record on
greenhouse gas emissions reductions is equally impressive. At
Dow, we have reduced our greenhouse gas emissions by over 20
percent. This has resulted in preventing more than 86 million
metric tons of CO2 from entering the atmosphere. The
U.S. chemical industry as a whole can report similar numbers,
numbers that would have exceeded Kyoto Protocol targets.
The chemical industry also contributes a number of energy
saving products and materials to American society. This
includes building and appliance insulation, as well as material
that enables solar and wind power and other efficiency
applications such as lighting.
Simply put, the American chemical industry uses energy to
save energy. In fact, a soon to be released McKenzie study
shows that the products of chemistry reduce an average of three
tons of greenhouse gas emissions for every one ton produced in
our manufacturing process. As you can see, from an energy and
greenhouse gas reduction viewpoint, this is an excellent story.
However, from an economic standpoint the situation is much
different.
Over the past 10 years, the U.S. chemical industry, a $660
billion enterprise, has lost over 120,000 jobs, or
approximately 15 percent of our total workforce. For the most
part, this loss of jobs can be attributed to high and volatile
energy prices. As an example, Dow's energy and feedstock costs
have gone from $8 billion in 2002 to over $27 billion in 2008.
In order for a cap-and-trade system to be economically
sustainable, it must be designed such that American energy
intensive and trade exposed manufacturers remain globally
competitive. We see the approach included in the discussion
draft as a positive step towards protecting U.S. manufacturers.
This approach defines these sectors based on objective
criteria, and includes a provision to reduce or eliminate the
allowances when the potential for carbon leakage has been
reduced or eliminated. However, I would caution that it is
critical the number of allowances be adequate to compensate
those sectors that meet the eligibility criteria. If Congress
does not set aside enough allowances to address the carbon
leakage issue, then it will fail to protect American jobs in
the manufacturing sector.
We also believe it is critical that the allowances not be
reduced or eliminated until the competitive disadvantage is
reduced or eliminated. Targeted assistance to energy intensive
industries should be terminated only when the carbon leakage
problem is solved through an international agreement.
In addition to the provisions that pertain to energy
intensive and trade exposed sectors, other provisions of the
bill also would impact the competitiveness of U.S.
Manufacturers. For example, the bill would provide compensatory
allowances to companies that use fossil energy as a feedstock
material rather than as a fuel source.
Unfortunately, this provision is unworkable in its current
form, and we recommend that it be modified to ensure that
nonemissive uses of fossil energy are properly compensated.
Dow also recommends changes to the bill to avoid excessive
fuel switching from coal to natural gas in the power sector.
These changes would include establishing a trigger price for
the release of additional allowances and offsets from the
Strategic Reserve to avoid the so-called dash to gas.
In conclusion, Congress should pass energy and climate
change legislation that maintains the competitiveness of U.S.
manufacturers as we transition to a low carbon economy.
I thank you for the opportunity to speak today. I look
forward to your questions.
[The prepared statement of Mr. Wells follows:]
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Mr. Markey. Thank you, Mr. Wells, very much.
Now let us welcome Tom Conway, the International Vice
President of the United Steel Workers. He has been in the steel
business since 1978. Since working with the United Steel
Workers, he has been involved in most of the major collective
bargaining efforts within the United States steel industry.
We welcome you, sir.
STATEMENT OF TOM CONWAY
Mr. Conway. Thank you. Good afternoon. On behalf of the
members of the Steel Workers, I would like to thank Chairmen
Waxman and Markey and the committee for holding the hearing,
and in particular recognize your leadership and the hard work
you do in crafting difficult climate policy that will ensure
the competitiveness of U.S. workers and their industries.
My name is Tom Conway. I am the Vice President of Steel
Workers Union. The USW has long been a leader in the labor
movement on environment issues, and we support the advancement
of a climate policy. Our members work in nearly every sector of
every economy. We produce a wide range of products, including
paper, grass, cement, chemicals, aluminum, rubber, and of
course steel. All these products are produced in facilities
that are as efficient as any in the world, and we are ready to
lead the way in the development and production in the next
generation of clean energy products that will help revitalize
the American economy and reassert our Nation's leadership on
the cutting edge of new technology. But we can only answer that
call if our jobs are not squandered to the law of unintended
but not necessarily unforeseen consequences.
A well-designed climate policy can fuel America's recovery
and ensure that the economy comes back stronger and cleaner
than before. But a poorly designed policy can have the opposite
effect and cost thousands and millions of American jobs. In
commodity-based industries such as ours, even small differences
in production costs can have a huge effect.
In crafting legislation, Congress must address the critical
need to mitigate the competitive disadvantage that will be
placed on these industries as well as the carbon leakage that
will occur as a result. Only by fully addressing the leakage
issue can Congress meet their environmental and investment
goals, and ensure that the jobs that exist today in energy
intensive industries are not lost nor the manufacturing of
these products offshore. Failure to fully address these issues
not only endangers our recovery from the current recession, but
will likely result in making the problem of climate change
worse instead of better.
For the purpose of time, I am going to get straight to our
suggested improvements in the competitiveness provision, but
ask that members refer to my full testimony which I have
submitted to the record.
One of the most delicate balancing acts in designing an
economywide climate change policy is properly constructing
transition assistance to specific industries that develop clean
energy process and products. We are keenly aware of all the
concerns, such as quantity, time length of assistance, and
windfall profits associated with this assistance. And, from
that perspective, the Inslee-Doyle approach of tying
allocations or rebates to output is the best and most effective
allocation system that has been proposed to date, as
eligibility is targeted very narrowly to those industries which
demonstrate a high energy intensity profile and a potential for
significant competitive disadvantage.
However, while an allocation system such as output-based
rebate systems seeks to mitigate the cost differential between
domestic and international products by reducing the effective
cost of compliance for producers, it is not designed to
completely eliminate that differential. In the discussion
draft, manufacturers and covered sectors or subsectors would be
rebated 85 percent of the sector average carbon cost of
producing each covered good. This rebate level would not only
penalize the worst performers in the sector, but would impose
an unrebated cost and a competitive disadvantage on a majority
of companies in these sectors. As long as that differential
exists at any level, a commensurate amount of leakage will be
unavoidable. Therefore, the rebates must be coupled with a
border adjustment to equalize carbon costs if the carbon
leakage issue is to be fully addressed and America's
environmental economic goals achieved.
Once such a broader adjustment is enacted the rebate level
can and will act as an incentive to producers to reduce
emissions. Until then, however, it will not eliminate the
threat of leakage. In the interim, we must ensure that these
cost pressures do not effectively destroy critical sectors of
the economy until the full extent of the competitiveness
program can be implement.
On the rebate levels, rebates to companies in covered
sectors and subsectors should be increased to 100 percent of
each firm's direct or indirect compliance cost from the date of
enactment of the domestic program until the date of the
enactment of an effective border adjustment. Once the border
adjustmentis in place, we would recommend that the rebates be
paid at 100 percent of the sector's average per unit of output.
This will ensure the producers who are better than average for
their sectors will not be penalized despite their high
performance, and will provide below average producers an
incentive to reduce emissions to avoid paying an unrebated cost
of compliance. As these below average companies improve their
performance, this will drive the sector average emissions down,
prompting companies to continue to reduce emissions.
A border adjustment should be enacted as quickly as
possible. Although we are aware of the arguments that suggest
some period of time is necessary before it can be done to allow
for negotiation of an international treaty and to meet U.N.
international obligations, as such, we are prepared to accept
whatever length of time is necessary for there to be done right
as long as we eliminate leakage concerns during the interim
through a full rebating of compliance costs.
On the issue of presidential discretion, we have strong
concerns with the discretion given to the President under the
International Reserve Allowance Program in the discussion
draft. Under that provision, in 2017 the President is directed
to make a determination whether the rebates have been effective
at preventing leakage, and no requirement that he make any
subsequent determination. If the President does determine that
leakage is occurring, then that leakage and the job loss that
goes with it will be allowed to continue for an additional 2 to
3 years while regulations are written before a border
adjustment is enacted to prevent it. If he decides no leakage
exists, on that day in 2017 there is no recourse should leakage
develop later, either when the rebates begin to phase out, or
foreign competitors simply wait until after that day to flood
our markets with dirty products.
Finally, the decision to implement a border mechanism
should not be left to the discretion of the President or anyone
else. The legislation should require that the border adjustment
begin on a certain date, and direct the President to issue
regulations in sufficient time that it may begin on time.
Addressing the potentially catastrophic issues posed by
climate change is a challenge of our generation, and meeting
that challenge will require the mobilization of everyone in the
world behind a common purpose. It is time for America to
reclaim its position of leadership in the world economy, and
the United Steel Workers are ready to do everything in our
power to assist that process.
Again, I am grateful to Chairmen Waxman and Markey for
holding this hearing, for the leadership provided by them,
particularly Mr. Inslee and Mr. Doyle. We look forward to
working with you and the committee now and in the future.
[The prepared statement of Mr. Conway follows:]
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Mr. Markey. Thank you, Mr. Conway, very much.
Thank you, Mr. Conway, very much.
Our next witness, Trevor Houser, is visiting fellow at the
Peterson Institute for International Economics. Mr. Houser's
work focuses on analyzing energy markets and climate change.
We welcome you, Dr. Houser.
STATEMENT OF TREVOR HOUSER
Mr. Houser. Thank you very much. And thank you for holding
this important hearing.
My name is Trevor Houser. I am a visiting fellow with the
Peterson Institute for International Economics. In conjunction
with the World Resources Institute, we published a book last
year called, ``Leveling the Carbon Playing Field,'' and have
been active in trying to ensure that U.S. climate policy
doesn't undermine U.S. competitiveness. And it is my honor to
be here speaking on that topic before you today.
I would just like to point out before I start that my
comments are those of my own and not of the Peterson Institute.
Climate policy will impact the competitiveness of the U.S.
economy in several ways, and our ability to maximize the upside
and minimize the downside breaks down to roughly four factors.
The first, our ability to create a level playing field for
carbon-intensive industries, the topic of this hearing today,
but it is not limited to that of course. It is our ability to
capture opportunities in low-carbon technology, reduce
dependence on imported foreign oil and catalyze improvements in
productivity more broadly.
I am going to focus my comments on the first, that is the
topic of this hearing, but it is important to keep in mind that
the impact of climate policy on trade-exposed carbon-intensive
industries is just one component of broader U.S. economic
competitiveness.
The bill before you today reduces U.S. emissions along the
lines necessary at a global level to avoid the catastrophic
impacts of climate change. And I commend you for that effort.
It also puts the U.S. in a leadership position for
international negotiations.
But as the outcome of those negotiations remains unclear,
it is appropriate that we think about ways to prevent
aggressive action here at home from undermining the
competitiveness of our industry and risk that it would force
industry to relocate, thus undermining the effectiveness of
climate policy here at home.
In our work looking at trade-exposed carbon-intensive
industries that are vulnerable to leakage, we find that it is a
limited group of industries accounting for about half a percent
of U.S. employment and 1.5 percent of U.S. GDP. Now I don't say
those numbers to say that leakage isn't a challenge. It is to
say that it is a manageable challenge and one that we can deal
with affordably through allowance revenue within the context of
a broader bill.
Using the criteria laid out in the Inslee-Doyle provision,
we assessed how many industries that at a six digit NAICS level
would qualify, and it is a fairly affordable undertaking. About
11 percent of allowance value in the year 2014 would be
required to hold the industries that qualify by the explicit
criteria in the Inslee-Doyle provision harmless.
Of those industries, a fair amount are agriculture and
mining industries. And one of my comments to the committee
would be to assess whether that was explicit intent to include
agricultural industries and mining industries in the criteria,
as our view is that they face different economics than
manufacturing; that if you are mining or you are agriculture,
the factor endowment, where you can actually grow the crops or
mine the copper, is generally a more important consideration
than carbon costs. So it is one issue I would ask the committee
to consider.
We believe that this provision would be sufficient to
address emissions leakage. If it is sufficient, then trade
measures are not required. If it is not sufficient and trade
measures are required, what is important is that to the extent
that a price is put on imported goods, that that is discounted
by the amount of support that we provide for our domestic
industries. It is critical that we don't double pay our
industries through domestic support and adjustments at the
border. That is important because it is a violation of our
trade commitments, but also because it would set a bad
precedent for other countries to do the same, to outwardly
subsidize their industries under climate policy.
The more important question I think is what this
transitions to. Domestic supports are transitionary measures,
and I think everybody on this panel would agree that the goal
ultimately is to get to an international agreement that can
effectively address emissions leakage. I think what is
important in thinking about this legislation is how it can
inform that process and how it can be specific about what types
of international agreement would be necessary to phase out
output-based rebating here in the U.S. I think that in the
draft so far, there has been some vagueness there, and I think
that that bears clarification.
Let me turn to make a couple comments about the
international environment. We have moved a long way from where
we were in 1997, and the outlook for a global agreement I would
say is good. But that doesn't necessarily mean the same
commitments by all different countries, right. Europe is going
to reduce emissions more aggressively likely than here in the
U.S., and countries in the developing world are going to reduce
emissions less aggressively than we are.
Now, from an environmental standpoint, that is okay as long
as we all get to the same 2050 end-point, but that means
different carbon prices for a transitionary period, which has
impacts for trade-exposed carbon-intensive industries. Over the
long term, we can deal with that through a harmonized carbon
tax globally or through linking cap-and-trade systems. But as
we get that infrastructure set up, we would like to see coming
out of international negotiations some specific commitments on
key industries among other major producers to level the playing
field. If we can get that type of agreement between major
producers, then that will more effectively address the issue of
emissions leakage, and we will make sure that we are reducing
emissions of steel produced in China, not just in China for
export to the U.S.
I think that the bill before you today makes an important
start in specifying costs at an industry level that would be
necessary to reduce output-based rebating. I would ask that in
going forward you provide guidance to the negotiators on what
you would like to see.
[The prepared statement of Mr. Houser follows:]
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Mr. Markey. Thank you, Mr. Houser, very much.
Our next witness is Mr. Elliot Diringer. He is vice
president of international strategies from the Pew Center on
Global Climate Change. He has a long, very impressive history
in this area.
We welcome you, sir. Whenever you are ready, please begin.
STATEMENT OF ELLIOT DIRINGER
Mr. Diringer. Thank you, Mr. Chairman, members of the
committee, for the opportunity to appear before you today.
An essential complement to a strong domestic climate
program is an effective international agreement ensuring that
other major economies contribute to their fair share to what
must be a global effort. U.S. domestic legislation must
therefore be designed to maximize prospects for such an
agreement. The Pew Center believes that, on the whole, the
Waxman-Markey discussion draft provides a strong basis for
effective international engagement.
I would like to highlight the draft's many strengths and
suggest ways it could be further refined to help achieve a fair
and effective global agreement. To facilitate strong U.S.
participation in the global effort, domestic legislation must
do several things.
First, the legislation must set a solid foundation for a
verifiable international commitment by the United States. By
establishing ambitious mandatory targets through 2050, the
discussion draft would indeed provide the basis in domestic law
for a corresponding U.S. commitment under international law.
The United States will have greater leverage in international
negotiations, however, if it has the flexibility to take
additional actions that can encourage stronger commitments by
others.
One way this can be done is by facilitating emission
reductions outside the United States above and beyond those
required for domestic compliance. The discussion draft would
establish one such mechanism by using a portion of emission
allowances to reduce deforestation in developing countries. We
encourage the committee to consider allowing the use of
allowance value to facilitate other types of mitigation action
in developing countries as well.
Second, a domestic climate action must create positive
incentives for emission reduction commitments by the major
emerging economies, both through public finance and through
market-based mechanisms. With respect to public financing, the
Pew Center recommends a phased strategy providing some
immediate assistance to developing countries and greater
support once countries commit to effective climate policies.
The International Clean Technology Fund proposed in the
discussion draft would constitute an important element of such
a strategy. We believe the draft could be further strengthened
in several ways.
It should authorize immediate appropriations for two
purposes: first, to support capacity building activities in
developing countries; and second, to fulfill the United States'
pledge to fund the World Bank's new Clean Technology Fund.
For the longer term, the legislation should designate a
portion of allowance value for sustained support for technology
deployment. As proposed in the discussion draft, this support
should be conditioned on a recipient country's ratification of
an international climate agreement. With respect to market-
based approaches, the Pew Center strongly supports the use of
international emissions offsets both as an incentive for
developing country action and as a mechanism to contain costs
in the U.S. cap-and-trade system.
We believe the offset provisions of the discussion draft
would provide a strong incentive for developing countries to
assume reasonable climate commitments. Importantly, the draft
would recognize credits issued by an international body under a
new climate agreement. This would enable the United States to
influence the redesign and reform of the existing clean
development mechanism or the design of a new international
crediting mechanism.
Third, domestic climate legislation must dedicate resources
to help poor vulnerable countries adapt to the impacts of
climate change. The draft would establish a stronger framework
for delivering direct bilateral resistance, and importantly, it
would reserve 40 to 60 percent of the support available for
U.S. contributions to an international adaptation fund.
To help secure a strong climate agreement, the legislation
must establish a clear predictable and sustained source of
funding for these efforts. The Pew Center strongly supports
designating an appropriate portion of allowance value for these
purposes.
Fourth, domestic climate legislation must facilitate the
linkage of the United States' emissions trading system in a
global greenhouse gas market. We believe the discussion draft
would lay the necessary foundation for linkage to other market-
based systems. By recognizing allowances from programs
establishing sectoral targets, it would provide another
important incentive for stronger efforts by countries not yet
prepared to take on economy-wide targets.
Finally, domestic climate legislation must include
transitional measures to address potential competitiveness
risks to energy-intensive trade-exposed industries. The
discussion draft takes a very sound approach to managing these
risks. The use of output-based rebates as proposed would
address the transitional competitiveness concerns likely to
arise under a cap-and-trade system while maintaining the
environmental integrity of the program and providing an ongoing
incentive to producers to improve their performance.
Critically, the draft contemplates the use of unilateral
trade measures only as a last resort and only if the President
determines that the rebate program has not been effective. This
preserves trade measures as an option but defers their use to
allow a reasonable period to assess the efficacy of the rebate
program and to achieve effective international agreements.
In conclusion, Mr. Chairman, the Pew Center believes that
with modest improvements the Waxman-Markey discussion draft
would effectively position the United States to lead efforts
toward an equitable and effective international agreement. I
look forward to your questions.
[The prepared statement of Mr. Diringer follows:]
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Mr. Markey. Thank you, Mr. Diringer, very much.
We have been notified that there are seven roll calls on
the floor of the House. We have 3.5 minutes for the members to
go over to make these votes. So what we will do is we will take
a 1 hour recess until 1:45 so that the Members can make these
votes and our witnesses, if they would like, can grab a bite to
eat. But we will recommence at that point in time. And we
apologize to all concerned. We have no control over the floor
schedule.
So we will take a 1 hour recess.
[Recess.]
Mr. Markey. Thank you all so much for being here.
This is a little bit like the 1950s when your mother was
still home so you went home for lunch as a break in school and
you came back all energized, ready for those final two classes
before you went out into the schoolyard.
So we thank you all for being here.
And our next witness is Lee Lane, who is a resident fellow
at the American Enterprise Institute and is codirector for
AEI's Project on Climate Engineering. Mr. Lane was previously a
consultant to Charles River Associates International where he
produced analysis of climate and energy issues.
Welcome, Mr. Lane, whenever you are ready, please begin.
STATEMENT OF LEE LANE
Mr. Lane. Thank you very much, Chairman Markey.
It is a pleasure to be here this afternoon to discuss with
you a piece of legislation that is obviously quite ambitious
and important. I refer, of course, to the American Clean Energy
and Security Act.
The draft bill is an ambitious effort to grapple with what
I believe is a very serious challenge posed by rising levels of
greenhouse gases in the atmosphere. With climate change,
though, there are no easy solutions, and many purported
solutions are actually likely to amount to costly errors.
If enacted, this legislation would work far-reaching
changes on the American economy, yet the bill's approach
appears to be based on assumptions that clash with what I think
are four basic realities of current climate policy, and my
statement focuses on these, and let me just summarize them
briefly if I may.
First, the costs of the proposed emissions cutbacks would
very probably exceed their benefits. Rapid emission cuts, like
those called for in the bill's cap-and-trade provisions, will
lead to needlessly high costs. Furthermore, the draft bill's
regulatory mandates are likely to raise costs without adding
benefits. You heard some allusions to the problem of a
duplicative system this morning in some of the testimony from
the first panel. I suspect that this is potentially a serious
problem.
Secondly, deep unilateral U.S. emissions cuts will not
improve the prospects for reaching an effective global accord
and may actually harm them. I suspect this is a place where
there are some disagreements on the panel, but I think it is an
issue worth discussing. Greenhouse gas control as an issue is
85 percent about striking a global bargain. It is only about 15
percent a matter of domestic energy and emissions control
policy.
Enacting this bill in its current form would amount to
giving away America's biggest stack of bargaining chips, its
willingness to incur costs in domestic greenhouse gas controls.
And it would amount to giving it away for free and before the
serious bargaining has really even begun. The U.S. has not used
this kind of strategy in its bargains on trade negotiations or
arms controls or other important negotiations and I think for
very good reasons.
Third, with the legislation or without it, the conditions
that would be required to reach an effective global greenhouse
gas control accord are, in fact, absent. For many key nations,
the costs of a greenhouse gas control agreement exceeds its
perceived benefits. Globally, the benefits are both very
unevenly distributed and highly uncertain. These same factors
have defeated previous attempts to reach agreement. My greatest
fear is that this bill could become a step toward another
agreement that is like the Kyoto protocol, both costly and
ineffectual.
Fourth, the U.S. can and should take action on climate
change. My answer to Mr. Inslee's question earlier today is
that, yes, I take climate change quite seriously. But realism
about climate change demands a serious but patient approach to
greenhouse gas curbs. A combination of gradual emissions cuts,
basic science research and adaptation can, I think, protect
U.S. national interests without incurring excessive costs and
without causing undue conflict with other global powers like
China, India, Japan, and Russia.
Some features of the draft bill reflect what I believe are
valuable insights. For example, I believe that it is right to
stress adaptation and the need to advance technology. These are
crucial aspects of climate policy. In these areas, my statement
offers a few suggestions about how its efforts, the bill's
efforts, in these directions might be made more cost effective.
I hope those suggestions are useful and that, as the bill
evolves, it does so in ways that will increase its benefits and
decrease its costs.
Thank you very much.
[The prepared statement of Mr. Lane follows:]
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Mr. Markey. Thank you, Mr. Lane, very much.
Our next witness is the Reverend Douglas Smith. He is the
executive director of the Virginia Interfaith Center for Public
Policy. He was formerly on the staff of the World Council of
Churches in Geneva.
Welcome, sir.
STATEMENT OF REVEREND C. DOUGLAS SMITH
Mr. Smith. Good afternoon Mr. Chairman.
Thank you so much, members of the committee.
I am Doug Smith, the executive director of the Virginia
Interfaith Center for Public Policy, an organization that seeks
to address hunger, poverty, and the care for God's creation
through the development and adoption of sound policy. While the
faith community is so diverse that no one can really claim to
represent it completely, I would like to share with you the
perspective of many of us, including the National Council of
Churches and a number of our ecumenical and interfaith
organizations.
First and foremost, we applaud the inclusion of strong
international adaptation assistance measures in the draft of
the American Clean Energy and Security Act. We see this as a
necessary component of any U.S. legislation, particularly as we
work to ensure strong and robust responses to a post-Kyoto
agreement.
I would like to speak to the importance of this section as
understood by the faith community. We must ensure that
generations know that we acted in good faith to protect all
people from the impact of global climate change. Because of the
interconnectedness of God's creation, we share not only the
need to provide adaptation funding for developing countries but
also the responsibility as people of good conscience and, for
many of us, of common faith.
Our best scientists and global security analysts tell us
that climate change will impact hunger poverty and war very
nearly. By the middle of this century, 1 billion people will
likely face significant water shortages. And with 75 percent of
persons in developing countries subsisting on agriculture, they
can be assured of a famine-filled future. And sadly, we could
be assured of an unstable geopolitical future if we do not act
with boldness, act with compassion, and act with immediacy.
In the faith-based NGO community, we are already witnessing
how climate change is complicating our capacity to serve others
internationally. The Evangelical Lutheran Church in America and
the Virginia Interfaith Center recently sent one of my staff to
Nicaragua. Mr. Rinn tells the story of Santa Marta, an ancient
east coast indigenous Miskito community whose language has
never needed a word for hurricane, and yet, in 2007, Felix, a
category five hurricane, practically wiped Santa Marta off of
the map.
As weather patterns shift as a result of global climate
change, people like the citizens of Santa Marta are struggling
to adapt to emerging realities for which they are unprepared.
This is why it is so important that we provide adaptation
funding to developing countries. It is because the
international consequences of global climate change are already
today impacting millions of people.
And that leads the faith community to be united in our call
to provide for international adaptation assistance to protect
the most vulnerable communities around the world.
We urge the committee to support the language included in
the American Clean Energy and Security Act, but we do ask for
the following legislative priorities to find their way into any
final bill:
Number one, the funds should be appropriately targeted in
terms of recipient countries. They should go to the most
vulnerable developing countries, and no more than 10 percent
should go annually to any one country.
Two, local communities must be engaged in a participatory
process with adequate monitoring, evaluation, and transparency.
Number three, the funds provided should be in addition to
current funding levels of official development assistance.
Number four, the funds should be appropriately targeting
adaptation around climate impacts, around drought, natural
disasters, disease and migration.
And number five, legislation should also enhance developing
country efforts to reduce greenhouse gas emissions by reducing
deforestation, encouraging reforestation, and by transitioning
to cleaner energy technologies.
We in the U.S. have a moral responsibility to those in need
during this global crisis. I would say that loving our
neighbors includes equipping them to protect themselves from
climate change, and I would like to ask you today to commit to
providing substantial financial support annually of no less
than $7 billion per year. That is the minimum that we should be
able to do for those in desperate need.
I thank you for this opportunity to testify on these
important matters and for your time this afternoon.
[The statement of Reverend Smith follows:]
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Mr. Markey. Thank you, Reverend, very much.
The Chair now turns to recognize the gentleman from
Washington State, Mr. Inslee.
Mr. Inslee. Thank you.
Mr. McMackin, Michael and I have been working on an effort
to provide some security against job leakage for some time. We
introduced our bill in October. It has just been the last week
or two we have heard about concerns from the oil refineries,
which surprises me, frankly, that this is now arising. Have the
oil refinery folks attempted to join your coalition or asked to
be involved in your efforts?
Mr. McMackin. No, Mr. Inslee.
In some ways I guess I am not surprised in that it has
always been seen as a unique case. The witness from
ConocoPhillips yesterday I think said it right. There were two
studies. Those two studies may be outdated, but they indicated
that the oil industry might be able to pass along these costs,
unlike the other energy-intensive industries in our coalition.
I do think it is a special case, and it ought to be treated
specially, different than the provision for the energy-
intensive trade-exposed industries.
Mr. Inslee. I think there is good cause to believe they are
in a different situation. That doesn't mean we shouldn't think
about that, particularly small refiners. But I do think there
is a different case.
I want to ask Dr. Houser about this. You have written a
book about this. And I think that there is a concern about
treating them the same where they are different. Do you think
that petroleum refineries are different from other energy-
intensive manufacturing industries from a job-leakage
perspective?
Mr. Houser. Sure. Thank you very much.
First, I would say, in our analysis of the criteria as you
have laid it out in the Inslee-Doyle provision, refineries do
not qualify under either the energy-intensity or the carbon-
intensity metric. So, in our assessment, energy cost as a share
of shipment value for refineries is about 2.5 percent, and the
cutoff line is 5 percent. At 2.5 percent, there are a lot of
other industries that no one would think of as being energy-
intensive that are at that same line.
The refineries have suggested that we look at still gas,
which is not included in the purchase value, in the surveys
that are outlined in the Inslee-Doyle provision. We did that,
and even including a fairly high-priced assumption for still
gas does not put refineries over the threshold to qualify.
As Mr. McMackin said, the empirical studies that have been
done in Europe ex-post looking at the impact of phase two of
the EU emissions trading scheme on refineries found no evidence
of leakage there. I guess the additional point that I would
make is that the output-based nature of the rebating program
that you have developed with Representative Doyle is to try to
ensure that these goods that we need for a low-carbon future,
like steel and glass, can still be manufactured here in the
U.S.
The goal of climate policy is to move away from fossil
fuels. And so we don't want an output-tied allowance for fossil
fuels. It goes against the goal of the program.
Mr. Inslee. So the bottom line, even though we are all
justifiably concerned about job leakage in any sector of our
economy, you think there is a significant reason to distinguish
the oil refineries from the energy-intensive manufacturers. Is
that your statement?
Mr. Houser. I think that is right. There may be legitimate
competitiveness concerns that refineries face. I think that if
they can demonstrate that, it should be dealt with under a
separate provision, not the output-based rebate.
Mr. Inslee. Right. And I would suggest that if those
special provisions have specific proposals, we hope they will
come forward. Actually, there is an ad hoc coalition for small
business refiners that have made a proposal. We are happy to
look at these proposals, but I think it is going to be a unique
case, and it would require a specific criteria in that regard.
So we will be looking forward to any suggestions in this
regard.
I want to appreciate Reverend Smith's comments. Reverend,
just from a non-ecumenical standpoint, is there any faith that
you are aware of, Buddhist, Hindu, Baptist, Catholic, for the
full spectrum of human faith, is there any faith that you think
non-action dealing with climate change would be really
consistent with the sort of stewardship views of those faiths?
Mr. Smith. Sir, I would say that I am unaware of any faith
community who would not want action taken to protect the one
earth that we have. And I am aware of only concern within the
faith community about climate change.
Mr. Inslee. So this is one that, by taking action, fair to
say, we might unite all the Creator's children on this one. Is
that about a fair statement?
Mr. Smith. It is a fair statement.
Mr. Inslee. We hope to do that. That will be another good
reason to pass this bill. Thanks a lot.
Mr. Butterfield [presiding]. Thank you very much, sir.
At this time, the Chair recognizes the gentleman from
Michigan, Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman.
And I apologize for not being here for the testimony of all
the witnesses. I do have a couple of questions, and hopefully
the time won't expire before I am done.
Mr. Conway, I have two nuclear plants in my district, and
we are hoping to add some reactors, thus adding jobs, in the
future. And it is my understanding that the steelworkers are
very supportive of additional nuclear across the country.
And as you know, our energy needs are going to grow by
about 30 to 40 percent by the year 2030. Nuclear has no
greenhouse gas emissions, thousands of jobs. When my two plants
were built, 85 percent of the components came from within the
United States. Today they are looking at a new plant in
Congressman Dingell's district at the Fermi plant on the other
side of the State from where I live. If they are successful in
getting that reactor approved by the NRC, it is likely that 85
percent of the components are going to come from someplace else
other than the United States.
They are currently repairing a steel turbine at one of my
facilities, 500 and some jobs while they are repairing it. It
was made in Germany. Would the steelworkers support--this bill,
as you may know has nothing on nuclear in it. Would the
steelworkers support adding a title to try and streamline the
process to bring back nuclear in maybe a little faster way than
not, knowing that it will add lots of jobs?
Mr. Conway. As you know, we have workers in that industry
and work hard on behalf, on their behalf as well as everyone
else. And we don't believe that a comprehensive energy policy
going forward excludes nuclear. And like everyone else, I guess
we struggle with storage and issues like that. But we are not
naive about that. So we would support anything that does that.
More importantly, your discussion about the supply chain
that centers around that facility and the manufacturing
facilities that are around and located to it, we think that has
been lacking in a lot of the discussion in creating a renewable
sector in this country and that the country hasn't built out
the manufacturing supply chain. So we would welcome it, and we
would be glad to work with you on that.
Mr. Upton. As much as I would like to see the issue of the
disposal of high-level nuclear waste addressed in this bill, I
confess that we probably--that is not a doable thing.
Mr. Conway. I understand.
Mr. Upton. But we can in fact streamline the process and I
think switch the light from red to green. And your support
would be helpful. And I think that it would be strongly
bipartisan as we embark on that issue.
I don't know if you saw last week's Washington Post, but
there was a headline: ``India Rejects Calls for Emissions Cuts.
Officials Say Growth Will Be Compromised.''
It goes on to say, no way that they are not going to
participate.
I know that it is in the interest of a number of members, I
believe Mr. Inslee and Mr. Doyle have an amendment that is
going to be part of this that calls for a border adjustment so
that we would, in essence, be able to have a tax on imported
goods, steel is an example, from countries that don't have a
cap-and-trade program. If, however, the WTO rules that that is
not compliant, would the steelworkers support an off-ramp or in
essence the jettison of that provision?
Mr. Conway. Look, we believe it is compliant with the WTO
provisions. And I guess we would cross that bridge when we get
to it. But we think that border adjustability doesn't come into
play if you are going to make your product the right way. And
so, the way we view it, it is sort of like severance pay. You
ask a company for severance pay. If they are going to fight
about it, they intend to lay off some people. If people are
going to fight about border adjustability, you have to sort of
worry about what their intents are going to be and the way they
intend to make it.
Right now they face steal expansion in China, 400, 500
million tons over the last decade. And If you think about it,
it is the newest steel production that has gone on in the
planet, but still China emits 2.5, 3 times the U.S. steel
industry. So it is easy to deduce that the best of statements
may not match up with intentions.
And one way to make sure that people are honest in a time
of growth in nations like China and India is that there is a
border adjustability. And if you make it the right way and you
make it clean, you don't have to worry about it. But if you
don't, you would pay for it as if you had, and we--
Mr. Upton. But if they rule it out, and Susan Schwab sent a
letter last year to our committee saying that she didn't think
it would be WTO compliant, so let's say the jury is out today;
you have got evidence on both sides, but ultimately if they say
thumbs down--
Mr. Conway. Look, we are not particularly thrilled with
everything the WTO says anyway.
Mr. Upton. I know.
Mr. Conway. I would not look to posit a position on that
until we hear from them.
Mr. Upton. I know my time has expired.
Thank you, Mr. Chairman.
Mr. Butterfield. Thank you.
The Chair recognizes the gentleman from Oregon.
Mr. Walden. Thank you, Mr. Chairman. I appreciate it.
Mr. Butterfield. We have run out of Ds. Can you believe it?
Mr. Walden. That is fine with me if you run out of Ds.
Maybe we could do that more often, maybe when we vote. I am
just kidding.
Mr. Upton. Is it possible now to call up the bill? We can
dispense with the bill quick. We can all catch our planes going
home today and not worry about----
Mr. Walden. I am staying for tomorrow. I am reclaiming my
time.
Mr. Lane, would border tariffs and other trade measures
motivate China to go along and impose stiff emission cuts?
Mr. Lane. Sir, I don't believe that they will, nor do I
think that the prospect of updating subsidy provisions will
have that effect. I think there is every reason for thinking
that China and India will continue to resist imposing on their
economies the cost of significant restrictions on greenhouse
gases. And frankly, I don't believe that there is anything that
the United States and its government is able to do at
reasonable cost to us, to ourselves, that will change their
attitudes on that point.
Mr. Walden. And do you think they are big enough and
capable enough that they would just pay the tariffs anyway and
probably just move on?
Mr. Lane. They probably wouldn't even have to. My own
assessment would be that they would simply increase their
exports to countries like Japan.
Mr. Walden. Oh, and work around----
Mr. Lane. And change the geographic pattern of trade flows
rather than actually reducing their exports at all.
Mr. Walden. So your point is that these countries who don't
participate in a cap-and-trade scheme could get very creative
and work around the tariffs anyway.
Mr. Lane. Yes, very easily.
Mr. Walden. Putting our workers at a disadvantage.
Mr. Lane. I believe so.
Mr. Walden. Costing us manufacturing jobs.
Mr. Lane. And eliminating most of the point of greenhouse
gas controls, because if they----
Mr. Walden. Is it true that China is building two coal-
fired plants basically a week?
Mr. Lane. I have heard numerous figures. I don't know
whether it is one, two, or more, but they are clearly rapidly
increasing their coal-fired electric capacity.
Mr. Walden. I am going to ask this panel like I have I
think every other panel that has been here.
Have you all read the bill? Simple yes or no.
Mr. Lane.
Reverend Smith.
Mr. Smith. No not in it is entirety.
Mr. Walden. Mr. Diringer.
Mr. Diringer. Not in its entirety.
Mr. Walden. Dr. Houser.
Mr. Houser. I read it.
Mr. Walden. You are a good man.
Mr. Conway.
Mr. Conway. Not in its entirety.
Mr. Walden. Mr. Wells.
Mr. Wells. Not in its entirety.
Mr. McMackin. All of the cap-and-trade title.
Mr. Walden. I am talking about the whole bill.
Mr. McMackin. No, sir.
Mr. Walden. I guess I would ask you a question on page 527
of the bill, they have inserted a private right of action so
that any individual can sue anybody for enforcement, even for
fairly de minimis emissions of carbon.
And I am going to flip to that real quick because I want to
know whether you support that provision of the bill because
they define a harm that would include any effect of air
pollution, including climate change currently occurring or at
risk of occurring, and the incremental exacerbation of any such
effect or risk that is associated with a small incremental
emission air pollutant, and then it goes on from there. And the
person would only have to say they might be affected in the
future. Do you support that private right of action in this
legislation?
Mr. Diringer. Mr. McMackin.
Mr. McMackin. Yes, Congressman, our group is focused solely
on the anti-leakage provisions. But I probably wouldn't be
going too far out on a limb to say we would have considerable
problems with a private right of action that is that robust.
Mr. Walden. Mr. Wells.
Mr. Wells. As you have described it, no, I would not.
Mr. Conway. No, I would need to read it more and understand
it.
Mr. Walden. Dr. Houser. Mr. Diringer.
Mr. Houser. I would need to----
Mr. Diringer. I understand this is similar to standard
provision and in many environmental statutes have played an
important role in the enforcement of those statutes over the
years.
Mr. Walden. So you would support it?
Mr. Diringer. I would have to look at the language.
Mr. Walden. Reverend Smith.
Mr. Smith. I am not familiar with the language.
Mr. Walden. Mr. Lane.
Mr. Lane. Let me withhold final judgment while saying I am
extremely skeptical about anything that has so much potential
for generating litigation.
Mr. Walden. All right. I appreciate that.
I want to go on to one of my favorite topics which is
hydropower. I represent a district that has lots of dams along
the Columbia River and gets most of its power, a good
percentage of it at least, from the hydro system.
Mr. Conway, I know steelworkers used to have aluminum
plants in my district, or there were aluminum plants that had
many of your members who relied very much on that hydropower
for the production of aluminum. Those plants now are closed and
gone. Does anybody on this panel think hydropower should not be
considered as a renewable energy source, Mr. Lane?
Mr. Lane. No.
Mr. Walden. Reverend Smith.
Mr. Diringer. No.
Mr. Walden. Dr. Houser.
Mr. Conway.
Mr. Conway. No.
Mr. Walden. Mr. Wells.
Mr. Wells. No.
Mr. Walden. Mr. McMackin.
Mr. McMackin. No.
Mr. Walden. So you all believe hydro should be considered
as renewable. Okay. Good.
Now, Mr. Wells, Dow Chemical, I want to ask you this
question, if I vote and we enact a cap-and-trade system which
necessarily raises energy costs, everybody else has testified
that it will, will your company guarantee me you won't chase
cheaper energy for your manufacturing offshore?
Mr. Wells. If the competitive provisions I have testified
to are included in the cap-and-trade, and energy prices for
trade-exposed and energy-intensive manufacturers stay
competitive, no, we will not. We will go where the energy is
competitive. And as the provision----
Mr. Walden. So you will go where the energy is competitive.
And China and India would not be involved. Are you saying China
and India have to be involved in this same scheme?
Mr. Wells. For this bill to make sense for a trade-exposed
and energy-intensive manufacturing, you would have to have
those provisions that allows us to stay competitive from an
energy perspective with them.
Mr. Butterfield. The gentleman's time has expired.
At this time, the Chair recognizes the Chairman emeritus of
the full committee, Mr. Dingell.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy.
I want to continue on the questions my colleague just
finished. Going across, starting at your right and my left, if
you please, gentlemen. Yes or no, are you content with the
provisions of the bill that deal with countries such as India
or China which do not have a cap of their own? Yes or no,
please.
Mr. Lane. No.
Mr. Smith. I believe the United States needs to be a
leader.
Mr. Dingell. I am sorry.
Mr. Smith. I believe the United States needs to be a leader
in this realm.
Mr. Dingell. So you think it is good that they should not
have a cap, and we should?
Mr. Smith. No, Mr. Chairman. That is not at all what I say.
I think the United States should be a leader.
Mr. Dingell. Just yes or no. I don't want a lot of toe
dancing. Are you content with the provisions that deal with the
United States but don't deal with India and China?
Mr. Smith. I am. Yes, sir.
Mr. Dingell. You are.
And you, sir.
Mr. Diringer. Yes.
Mr. Dingell. And you.
Mr. Houser. I think they come pretty close.
Mr. Dingell. And you, sir.
Mr. Conway. No, not entirely.
Mr. Dingell. Why?
Mr. Conway. We think there is a transition period where our
industries who have to come up to speed ought to be rebated the
full cost of compliance for a period of time and then go to an
average sector. And so we think eventually it is there, but
there is an initial time period where we need it phased in and
protect the jobs that we have.
Mr. Wells. We are supportive of, again, the transition that
it protects those industries that would be in competition with
those places that do not have a cap.
Mr. Dingell. And after the competition?
Mr. Wells. Excuse me.
Mr. Dingell. And after that time?
Mr. Wells. If the transition--those protections would have
to stay in place until places like China, India would have a
similar situation.
Mr. Dingell. Do you know that, or do you just hope?
Mr. Wells. Through working with people like Mr. McMackin,
we are comfortable with that, yes.
Mr. Dingell. And you, sir.
Our next panel member, please, are you satisfied with the
provisions that deal with countries such as India and China
which may or may not have a cap of their own, yes or no?
Mr. McMackin. Yes, Mr. Chairman.
Our group has been focused exclusively on perfecting the
anti-leakage provisions to the extent possible. We believe
those have to be a bridge to an agreement that leads to a
situation where we have equalized costs with foreign producers.
Mr. Dingell. Thank you.
Now going across, same direction again, yes or no, is there
any more that you would like to see in terms of protections for
American industry included in the legislation, yes or no, if
you please?
Mr. Lane. My answer would be yes. Principally in the form
of controls on the overall costs of the bill.
Mr. Dingell. And you, sir.
Mr. Smith. I would say, sir, that I am not familiar with
those provisions within the bill because I am here specifically
to speak about international adaptation.
Mr. Dingell. Thank you.
And you.
Mr. Diringer. I would like to reserve judgment as I focus
particularly on the bill's relation to international
negotiations, and there may be other aspects of the bill with
respect to your question that I would want to look at.
Mr. Dingell. Next panelist.
Mr. Houser. I feel like the phaseout portion of the bill
could use a little bit more clarification.
Mr. Dingell. And again, sir.
Mr. Conway. We think it needs a border-adjustability
provision at its onset and remains in place during the life of
the understandings.
Mr. Dingell. Thank you.
Next panelist.
Mr. Wells. We would like to see the feed stock exemption
for the chemical industry perfected a bit more.
Mr. Dingell. And you, sir.
Mr. McMackin. And, Mr. Chairman, we think the leakage
provision needs strengthened and some of the other provisions,
as Dow has testified, like the non-emissive provisions, need
better definition.
Mr. Dingell. Thank you.
Gentlemen, I happen to think that Mr. Doyle and Mr. Inslee
have done a good job of directing their attention to protecting
trade-exposed industries in this legislation.
Do you feel that the draft bill does an adequate job of
protecting those industries, starting again if you please, sir,
on your far right?
Mr. Lane. I would say that it probably does a better job of
protecting those industries than it does of leveling the
playing field for the U.S. economy as a whole.
Mr. Dingell. Next panelist, please.
Mr. Smith. I would say, sir, that that is not my specialty
within the bill.
Mr. Dingell. Thank you.
Next panelist.
Mr. Diringer. We are very comfortable with the general
framework laid out in the bill.
Mr. Dingell. Next panelist.
Mr. Houser. Yes.
Mr. Conway. Not quite. We think it is close. It needs some
more refinement, as we have discussed earlier, on the border
adjustability in the 100 percent rebate on compliance.
Mr. Dingell. And our next panelist.
Mr. Wells. As long as the protection stays in place until
such time as there is an international level playing field,
yes, we are comfortable.
Mr. McMackin. It is an excellent structure, Mr. Chairman. A
lot will depend on whether it is adequately funded with
allowances. We think that would require between 850 and 900
million allowances a year.
Mr. Dingell. Mr. Chairman, you have been very courteous.
Thank you.
Mr. Butterfield. Thank you, Mr. Chairman.
At this time, the Chair is going to recognize a member of
the full committee. She is not a member of the subcommittee,
but certainly she is welcome and recognized at this time for 5
minutes, the gentlelady from Tennessee.
The members of the subcommittee will, obviously, have
priority.
At this time, the Chair recognizes the gentleman from
Louisiana.
Mr. Scalise. Thank you, Mr. Chairman.
We have heard some testimony from a few of you about
operations you have in other countries. I think, Mr. Wells, you
talked about maybe 50 percent of Dow Chemical's workforce is
out of the country. What are some of the factors in deciding
whether or not you are going to build a plant or expand a plant
in the United States versus going to another country?
Mr. Wells. Certainly the implications of the cost to the
region, and for us, a large part of that is energy, as I have
testified today and testified in front of this group before,
and then certainly the closeness of the market; where is the
market developing? When you apply those two things together,
when you look at what has happened to our industry, the U.S.
chemical industry over the last say 8 years, and you look at
what energy prices have done, natural gas from 2002 to 2008 has
gone up by nearly 500 percent. Chemical industry has gone from
being very positive, from a trade perspective, one of the
highest in the country, to now we have a trade deficit.
Mr. Scalise. So what are some of the top countries that you
go to when Dow goes to another country as opposed to here?
Mr. Wells. From an energy perspective, certainly the Middle
East, where we can get our feed stocks, which are byproducts of
the energy process, natural gas, byproducts of oil, so the
Middle East is where we can get low cost, and of course, we are
moving into the expanding markets, places like China, India.
Mr. Scalise. Do any of those countries that you have just
mentioned, do any of those have any kind of cap policy on
greenhouse gases, specifically carbon?
Mr. Wells. Not the ones that I mentioned, no.
Mr. Scalise. And so, you know, some of us look at the bill,
and of course, there are a lot of details that are left out.
But one of the things, if we go back to President Obama's
actual budget that was passed by the House just a few weeks
ago, his budget envisions raising about $640 billion from a
cap-and-trade energy tax. So, clearly, whether or not the
details are in the bill, and of course many of the details are
not, on how this whole trading mechanism would work and who
would get these free allowances, ultimately the President's own
budget says that they have got to come up with some kind of
mechanism that raises $646 billion in new taxes, in essence.
And so if a bill is going to come out of this committee, I
hope a bill like the one presented does not, as I talked about
earlier, the American Energy Act is a true alternative bill
that we have proposed for comprehensive national energy policy
that will fund the alternative sources of energy, create those
new jobs, while also not running off the existing jobs we have
and encouraging things like clean coal, encouraging more
nuclear power, which emits no carbon.
So there is another alternative out there, but the bill
that we are discussing today clearly has a big cost, $646
billion. How would a company like Dow react if these new
conditions come on, and you are not given the allowances you
think you might be getting, and then you have got to make a
business decision, as you have in the past, to keep those jobs
in the United States or to move them to one of the countries
that doesn't emit or that doesn't control emissions? Ultimately
have y'all started making any of those decisions, or are you
waiting for this bill to come out to see what you are going to
do?
Mr. Wells. If the bill--a bill that comes out is not looked
at such things as carbon leakage, doesn't handle such things as
carbon leakage, the feed stock exemption is extremely important
to the U.S. chemical industry, and then avoiding the dash to
gas, as we have talked about many times; if a bill does not
have those things, and it is safe to say what you have seen
happen because of the rising energy prices over the last decade
would continue to happen, we would be exasperated by the
climate change bill.
Mr. Scalise. Mr. Conway, in relation to the steelworkers, I
am familiar with a steel plant that is proposed to be built.
Right now it is proposed to be built in the United States, in
fact in south Louisiana, but they are looking at two sites,
they are looking at the United States, the south Louisiana
facility, or Brazil, and they have made it clear now--a few
months ago they pulled back on any decisions until they see
what happens with cap-and-trade energy tax bill. And they said
basically if this bill passes, they are going to build that
plant, but they are going to build it in Brazil.
And we are talking about a $2 billion investment, 700 good
jobs, steelworkers, that would be created and that will be
created, and the question is, will they be created in the
United States, which has environmental controls already in
place that are much better than Brazil, or will it be built in
Brazil where they will not have the same controls and, in fact,
if somebody is concerned about carbon emissions, more carbon
will be emitted if that plant is built in Brazil, yet passage
of this bill will dictate whether those 700 jobs and the $2
billion investment go to Brazil; do you, when you are looking
at that, especially as your workforce issues are going to
become more concerned by legislation like this that would run
some of these companies off, what are your thoughts on how that
would affect employees in your industry?
Mr. Conway. Congressman, we think there is much of that
going on anyway, and if, in fact, the purpose of the bill is to
try and reduce carbon on a global basis, we understand that
this leads to a global sectoral agreement where people across
the world agree on what emissions ought to be in a sector.
Mr. Scalise. Of course, countries like Brazil and, as we
have heard earlier, China and India will not comply.
Mr. Conway. A company in Germany, a German company, who is
moving into Alabama, who intends to put up half a steel plant
because it intends to run the other half of the plant in Brazil
where it can emit a lot of carbon, and it will import slabs
there; that doesn't solve the carbon problem. And if what we
are here to do is try and solve the problem of carbon
emissions, then we need that global sectoral agreement. And our
position is, simply, until we reach it, we ought to treat the
steel made in Brazil as if it were made the right way and the
clean way, and that is what the----
Mr. Scalise. Of course, we know it has not, and those
remedies are not in this bill, unfortunately.
So I appreciate the gentleman's time. I yield my time.
Mr. Butterfield. At this time, the Chair will recognize
himself for 5 minutes.
Let me just take a moment to join my colleagues who have
been discussing this today and say that I agree that it is
critical that we must protect our industry and manufacturing
base in this legislation. Without question, we must do that.
And so I want to go on the record publicly thanking my
colleagues Jay Inslee and Mike Doyle for their hard work in
developing a plan. And to make sure that these jobs stay right
here in America.
In my district down in the eastern part of North Carolina,
there are a number of different energy-intensive trade-exposed
industries, such as Nucor Steel, which is in a small town named
Winton, North Carolina. That industry employs nearly 500
people, good-paying jobs, produces $2.8 million tons of steel
plate from recycled scrap each year. These are the kinds of
jobs that we can ill afford to lose in a district where 21 of
23 counties have more than double-digit unemployment.
And so I want to thank these two gentlemen for their work
as well as the other members of the committee. I also want to
thank all of you for your testimony today. Specifically, I want
to address this to Mr. McMackin.
Do I understand from your testimony, sir, both your
testimony today and back in March, that you think that
allocating 15 percent of allowances should be sufficient to
support the eligible trade-exposed industries?
Mr. McMackin. Yes, Congressman, with this footnote: That 15
percent, which was the same number that was in the original
Inslee-Doyle bill, same number which by the way was in the
Senate in the Brown-Stabenow amendment, was based upon the
number of allocations in the Lieberman-Warner bill, about $5.7
billion. The annual allocations in this bill are a little
lower, so, actually, I think the math comes out to about 16
percent.
Mr. Butterfield. I understand that you believe that the
problem at hand can adequately be solved with using free
allocation to eligible trade-exposed industries and that, as
you write in your testimony, the draft has adopted a structure
that can really work. Is this correct?
Mr. McMackin. That is right, Congressman.
Mr. Butterfield. Let me now speak briefly to Pastor Smith.
Thank you for your testimony and for your work in general.
Thank you so very much.
Can you, Pastor, briefly paint a picture for us about how
money to a country like Zimbabwe provides security for that
country as well as our country?
Mr. Smith. Sir, many of us are aware of the situation in
Zimbabwe currently where we have millions of people now that
face famine. We have civil unrest in places. It is really a
dangerous cocktail when you mix famine and poverty with a
government which is nondemocratic. When we add the issue of
climate change in that, it really becomes quite difficult
because what was previously the breadbasket of Africa then
creates an unstable situation continent-wide in this kind of a
situation, because what ends up happening is the investments
that we have made in the past in development essentially gets
wiped out.
And so when we create opportunities for international
adaptation through funding through this Congress, what we do is
we ensure an investment today helps us keep countries like
Zimbabwe able to continue to feed their people, able to
participate in a global economic system, able to resist
nefarious groups that may try to go in and co-op a very
difficult situation in the country. And ultimately, it also
helps to secure the investments that we have made through the
NGO community and USAID in the past years in order to lift that
country out of the desperate situation it finds itself in.
Mr. Butterfield. Thank you.
Finally Mr. Wells, do you concur with the 15 percent
assessment by your colleague to the left, you think that would
be sufficient?
Mr. Wells. Yes, as a member of his organization, yes.
Mr. Butterfield. So 15 percent, you want to go on record
saying----
Mr. Wells. With the caveat that he has already talked
about, yes.
Mr. Butterfield. Thank you.
The Chair yields back the balance of his time.
Now we will go to the gentlelady from Tennessee, a member
from the full committee, Mrs. Blackburn.
Mrs. Blackburn. Thank you, Mr. Chairman, and I will try not
to take all 5 minutes.
I do appreciate being recognized, and I appreciate that you
all would be here.
I tell you it is fascinating listening to your responses. I
think I would like to hear from you on some questions after you
all have had an opportunity to read the bill and weigh back in
with us at that point.
Dr. Houser, I wanted just to ask you, my district, I have
got, I am in Tennessee, have a lot of rural area, ag offsets
that EPA would be able to structure under this bill. They would
had have pretty broad discretion on structuring those ag
offsets, and when we talk about competitiveness and global
competitiveness, I am curious what your opinion is on how EPA
should go about handling the agricultural offsets that they
will be able to put in place, and also if you think that the
imposition of cap-and-trade will diminish the competitiveness
of the American agricultural community.
Mr. Houser. I think it is an important point to bring up,
to think about how this bill impacts competitiveness more
broadly. And agriculture is obviously an important sector
there.
Offsets, domestic agricultural offsets, are important for
several reasons, primarily because they will help reduce the
cost of the bill. The EPA assessment of the Waxman-Markey bill
that came out earlier this week shows that international
offsets and domestic offsets will have a lot of the same cost
benefits, reduce the cost for compliance for the climate bill
by half. So domestic agricultural offsets will play an
important role there.
To the extent that agricultural entities are not capped
themselves, so they don't face direct domestic compliance
costs, but are recipients of offset investments, then that
agricultural industry will have a competitive advantage vis-a-
vis its counterparts in other countries, because it has no
direct compliance cost but is receiving some offset----
Mrs. Blackburn. But do you see this driving up the cost of
our domestic food supply, of our domestic yarn and clothing
supply?
Mr. Houser. Fossil fuels in the economy will--the price of
fossil fuels will certainly increase. The increase in the EPA
economic assessment was fairly modest, but it will certainly
increase. So then the question is, how quickly can we improve
efficiency so that an increase in energy prices doesn't
translate into an overall increase in energy costs?
Dow Chemical has spoken to how, over the past 18 years,
they have reduced the energy intensity of a unit of production
38 percent. That type of improvement in agriculture and
manufacturing is possible and is spurred on by a carbon price.
So we can have higher energy prices and not higher energy
costs. It just all comes down to efficiency.
Mrs. Blackburn. How long do you think it takes us to get to
the efficiency that would allow them to be competitive.
Mr. Houser. I think that the rate of improvement that
companies like Dow and the U.S. steel industry has demonstrated
over the past decade, they have improved efficiency faster than
the current bill would reduce emissions, so just on a business-
as-usual trend, they are outpacing what the increase in energy
price would be. So I am optimistic that other sectors of the
economy have that ability as well.
Mrs. Blackburn. Okay. Thank you.
I will yield back.
Mr. Markey [presiding]. Great. I thank the gentlelady.
Let me give each one of you 30 seconds, tell us what you
want us to know as we are putting together this legislation
over the next several weeks. You have got 30 seconds each, give
us your closing point that you want us to remember.
We will begin with you, Mr. Lane.
Mr. Lane. Thank you, Mr. Chairman.
I guess the single point that I would emphasize is that, as
long as the cost of the bill is so high because of the speed of
the emissions reductions, it is bound to have a negative impact
on the U.S. economy.
Mr. Markey. Thank you, Mr. Lane.
Thirty seconds a piece.
Reverend Smith.
Mr. Smith. Mr. Chairman, I think the one thing that I would
want to leave the committee with is the need to have very
realistic numbers within the bill specifically on international
adaptation funding and knowing that any funding we put today
towards adaptation is investment in the future. And I believe
and many of our coalition believe that $7 billion is the very
minimum where we need to start.
Mr. Markey. Okay. Thank you.
Mr. Diringer.
Mr. Diringer. The prospects for an agreement in Copenhagen
will be greatly enhanced if Congress can provide some certainty
as to the U.S. ability to help fund technology deployment and
adaptation efforts internationally.
Mr. Markey. Thank you.
Dr. Houser.
Mr. Houser. That the competitiveness issues that we are
talking about here today are manageable and can be dealt with
affordably in the context of an economy-wide cap.
Mr. Markey. Thank you.
Mr. Conway.
Mr. Conway. That we would be naive to believe that the rest
of the world that produces products will voluntarily reduce
their carbon on their own without a border-adjustability
mechanism.
Mr. Markey. Thank you.
Mr. Wells.
Mr. Wells. We have the ability here to do a real win-win.
We can work on solving this problem at the same time
maintaining the competitiveness of U.S. manufacturers.
Mr. Markey. Mr. McMackin.
Mr. McMackin. On the leakage problem for energy-intensive
trade-exposed industries, the bill has an excellent structure
by adopting the Inslee-Doyle structure. The key will be
adequate funding of that provision through allowances. We think
that would be about 850 to 900 million allowances a year.
Mr. Markey. Thank you, Mr. McMackin.
Thank you to all of you. I subscribe to Mr. Conway's
philosophy here that we must act in ways that deal with human
nature, even as it is reflected in other nations' behavior, and
we must ensure that as we act in a way that is responsible,
that we don't expose ourselves to other actions which will be
irresponsible. And we must ensure that we construct this
legislation in a way that guarantees that American workers are
not affected adversely because we have not dealt with the
reality of the fact that nations and human beings think the
same and the proper protections must be built in to ensure that
there are no innocent victims that we are creating.
So thank you so much. We will now, with thanks from the
committee, request that you remain available over the next
several weeks so we can continue to consult with you.
And we will then move on to the final panel. Thank you.
Welcome, ladies and gentlemen, to our third panel today.
This is a very, very important set of issues we are about to
discuss.
We will begin with our first witness, Dr. Howard
Gruenspecht. He is Administrator of the U.S. Department of
Energy's Energy Information Administration. He has worked
extensively on electricity policy issues and economy-wide
energy modeling for 25 years. He is a friend of this committee,
a source of information on an ongoing basis.
We welcome you back, Doctor. If you could move that
microphone in, we would appreciate it. And whenever you are
ready, please begin.
STATEMENTS OF HOWARD GRUENSPECHT, ACTING ADMINISTRATOR, UNITED
STATES ENERGY INFORMATION AGENCY; DAN W. REICHER, DIRECTOR,
CLIMATE CHANGE AND ENERGY INITIATIVES, GOOGLE; DIAN M.
GRUENEICH, COMMISSIONER, CALIFORNIA PUBLIC UTILITIES
COMMISSION; JAMES L. ROBO, PRESIDENT AND CHIEF OPERATING
OFFICER, FPL GROUP; GREGORY P. KUNKEL, VICE PRESIDENT OF
ENVIRONMENTAL AFFAIRS, TENASKA, INC.; DAVID G. HAWKINS,
DIRECTOR OF CLIMATE PROGRAMS, NATURAL RESOURCES DEFENSE
COUNCIL; EUGENE M. TRISKO, ON BEHALF OF THE UNITED MINE WORKERS
OF AMERICA; JONATHAN BRIGGS, REGIONAL DIRECTOR OF THE AMERICAS,
HYDROGEN ENERGY INTERNATIONAL L.L.C.; JAMES KERR, PARTNER,
McGUIRE WOODS LLP, FORMER COMMISSIONER, NORTH CAROLINA PUBLIC
UTILITIES COMMISSION; JAY APT, EXECUTIVE DIRECTOR, CARNEGIE
MELLON ELECTRICITY INDUSTRY CENTER, ASSOCIATE PROFESSOR,
CARNEGIE MELLON UNIVERSITY
STATEMENT OF HOWARD GRUENSPECHT
Mr. Gruenspecht. Thank you, Mr. Chairman and members of the
committee. I appreciate the opportunity to appear before you
today to discuss the Energy Information Administration's
analysis of the renewable electricity standard, or RES, program
in Title I.
Mr. Markey. Could I just interrupt you for one second? It
is like being in Yankee Stadium, and all of a sudden in walks
Lou Gehrig or in walks Mickey Mantle. And in walks Bobby
Garcia, the former great Congressman from the State of New
York. So it is so great to see you.
Mr. Gruenspecht. I grew up in New York, also.
Mr. Markey. So it is like being in Cooperstown when one of
the all-time greats walks in.
We will start all over again.
Mr. Gruenspecht. Well, Mr. Chairman, thank you again.
I appreciate the opportunity to appear before you today to
discuss the Energy Information Administration's analysis of the
renewable electricity standard, or RES, program in Title I of
the American Clean Energy and Security Act's discussion draft.
EIA is the independent statistical and analytical agency
within the Department of Energy that produces objective,
timely, and relevant data projections and analyses to assist
policymakers, help markets function efficiently, and inform the
public. We do not promote, formulate, or take positions on
policy issues; and our views should not be construed as
representing those of the Department of Energy or the
administration.
Since I appeared before the committee 2 months ago, EIA has
updated its Annual Energy Outlook reference case to reflect
enactment of the American Recovery and Reinvestment Act, or
ARRA, which provides significant new Federal funding, loan
guarantees, and tax credits to stimulate investments in
renewable energy. The potential impact of the ARRA provisions
on the projected use of renewable generation is large enough
that an analysis of the RES that did not include ARRA in the
reference case could provide misleading results, and we do
include it in this analysis here that I will discuss.
The RES proposal sets a target of 25 percent of coverage
sales of electricity in 2025 and beyond be provided by eligible
renewable energy. However, because of exemptions provided to
small sellers and to sales of electricity from certain
generation sources and the possibility that credits for
qualified State energy efficiency programs could be used to
meet a portion of the RES requirement, the amount of eligible
renewables as a share of total electricity sales required to
comply with the RES would be lower than the nominal target.
EIA modeled two RES policy cases for this analysis. One
case assumes that the maximum level of efficiency credits, up
to one-fifth of the RES target in any given year, are claimed,
while the other case that assumes that States cannot qualify
for or elect not to use efficiency credits.
Turning now to some of the main results from our analysis.
Power sellers will turn to a mix of renewable fuels to
comply with the RES. In absolute terms, the key fuels are
projected to be biomass and wind, but other renewable fuels,
including solar and geothermal, are also projected to grow
significantly in percentage terms.
The higher renewable generation stimulated by the RES leads
to lower coal and natural gas generation. The increased use of
renewables stimulated by the RES also leads to lower
electricity sector carbon dioxide emissions. Electricity sector
carbon dioxide emissions in 2030 are between 7 percent and 12
percent below the referenced case level in the two RES cases.
Given the amount of eligible renewable generation projected
in the referenced case, the RES is not expected to affect
national average electricity prices until 2020. As the required
RES share increases to its maximum value in 2025, the value of
the RES credits increases and the impacts on national average
electricity prices become evident.
The projected peak effect on national average electricity
prices is between 2.7 percent and 2.9 percent in our two RES
cases. Because of regional difference in electricity and market
structure, State RES requirements, and the different
availability of resources in different areas, price impacts may
vary by region, as shown in my written testimony.
The quantitative results I have just discussed reflect the
modeling analysis of the RES provisions on a standalone basis.
We recognize that the RES could have significant interactions
with other programs in the chairman's discussion draft. For
example, in previous analyses, EIA has generally found that a
cap-and-trade program for greenhouse gases leads to significant
growth in the use of renewable energy for electricity
generation, which becomes more attractive when the cost of
using fossil fuels goes up.
To the extent that the proposed cap-and-trade program
induces more renewable resources than required by a concurrent
RES proposal, one might expect RES compliance costs to be
reflected in the value of carbon dioxide allowances. Therefore,
adding our standalone estimates of the cost of an RES to a
standalone estimate of a cap-and-trade program cost would
overstate the project combined costs of implementing the two
programs concurrently.
In contrast, an energy efficiency resource standard which
can reduce or eliminate projected growth and electricity load
and, therefore, the need for additional generation capacity
makes it more likely that a given RES target will require that
generation from new eligible renewable capacity replace
generation from existing capacity rather than from other types
of new capacity. The cost penalty associated with backing out
existing capacity whose capital cost has already sunk is
typically much larger than the cost penalty associated with
backing out alternative types of new capacity.
Mr. Chairman and members of the committee, this concludes
my testimony. I would be happy to answer any questions you
might have.
Mr. Markey. Thank you, Mr. Gruenspecht, very much.
[The prepared statement of Mr. Gruenspecht follows:]
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Mr. Markey. Our next witness is Dan Reicher. He is Director
of Climate Change and Energy Initiatives at Google. He was
previously cofounder of the New Energy Capital Corporation and
served as Assistant Attorney General for Environmental
Protection for Massachusetts. So we thank you for being here.
STATEMENT OF DAN W. REICHER
Mr. Reicher. First, I want to applaud the subcommittee's
work on this path-breaking and comprehensive bill.
I will make three points in my opening statement related to
the renewable energy standard, energy project finance, and
energy information.
First, Mr. Chairman, the renewable energy standard in the
bill is technically and economically achievable. Our Nation has
more than adequate renewable energy resources to meet the RES.
With continued technological advances and policy support, they
become more cost effective every day; and by implementing the
RES in conjunction with the energy efficiency resource
standard, we can dramatically cut the need to add additional
generation.
In my testimony, I highlight what may be the sleeping giant
of renewable energy. Enhanced geothermal systems, or EGS, uses
a common technique in the oil industry to fracture hot rock
deep below the Earth's surface. Water is injected into the
rock, where it is heated to produce steam and then piped to the
surface to generate electricity. A 2007 MIT study found that
just 2 percent of the heat below the Continental U.S. between 3
and 10 kilometers is equivalent to over 2,500 times total U.S.
annual energy use.
At Google, we have mapped the EGS resource State by State;
and I would like to submit the 50-State map for the record, Mr.
Chairman.
Our calculations show that just 2 percent of the EGS
generation potential in South Carolina is almost two-thirds of
current generating capacity. In Texas, it is double. In
Arkansas, it is triple. In Maine, it is quadruple. In Oregon,
it is nine times; in Idaho, 32 times its existing capacity.
And, Mr. Chairman, only half jokingly, if the Big Dig in Boston
had been vertical instead of horizontal, we might be powering a
good chunk of Massachusetts using EGS.
The beauty of EGS is that it provides baseload generation
24 hours a day. The U.S. once led in EGS technology, but
leadership is now in Australia, where commercial projects are
under construction, and Europe, where demonstration projects at
the megawatt scale are already operating. We have a chance to
catch up, thanks to $400 million for geothermal in the stimulus
legislation.
In addition to adopting an RES, the House should look at
providing a credit multiplier for baseload technologies like
EGS. The House should also authorize and appropriate
significant Federal support for EGS for R&D beyond the
stimulus. I would also suggest, Mr. Chairman, an oversight
hearing on this potentially transformational technology.
Turning to my second point, the legislation we are
considering does not directly address a critical issue in
advancing our clean energy economy, increasing access to
capital for the deployment of literally trillions of dollars
worth of clean energy products that will be essential to
meeting our climate and energy goals, including an RES and
EERS. Last week, Senators Bingaman and Murkowski jointly
released the discussion draft of a bill that would create the
21st Century Energy Technology Deployment Administration, or
CEDA. I know Congressman Inslee has also been advancing this
concept, and Congressman Van Hollen introduced a separate
proposal.
The mission of CEDA would be to encourage wide-scale
deployment of clean energy technologies, particularly those
that are perceived as too risky by commercial lenders but with
high potential to address our environmental, economic, and
security challenges.
Moving a technology from small pilot project to full
commercial-scale plan is often the point at which many
promising energy technologies die. We call it the ``Valley of
Death''. I urge the committee to consider incorporating the
CEDA approach into the legislation we are considering today in
order to address this critical problem.
My third and final point involves improving access to
energy information. With a national RES and EERS, Congress
should also ensure that electricity consumers, large and small,
have a more accurate picture of their electricity usage as well
as the source and mix of their power. Congress should work to
ensure that utilities provide consumer access to energy
information through smart meters and other dividers and as near
real-time as possible.
President Obama has talked about how the smart grid funding
in the stimulus bill could support the installation of as many
as 40 million smart meters. However, draft guidance issued by
the DOE on the smart grid program may discourage large-scale
smart meter deployments. Congress should push DOE to support
large investments in smart meter deployments and ensure
consumer access to data.
Finally, I would like to urge the subcommittee to work with
the new administration to determine how the Energy Information
Administration could play a much more vital role in providing
consumers and businesses with critical energy information.
For example, with a national RES and EERS, the Federal
Government will need to collect data at an unprecedented level
in order to ensure compliance. Congress should ensure that EIA
has timely access to critical data to gauge progress on key
clean energy programs. This will require an extension of EIA's
role and an increase in its funding.
Thank you very much.
Mr. Markey. Thank you, Mr. Reicher, very much.
[The prepared statement of Mr. Reicher follows:]
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Mr. Markey. Our next witness, Dian Grueneich, has been
Commissioner of the California Public Utilities Commission
since 2005. She is a nationally recognized expert on energy and
environmental issues. And, to be honest with you, the reason I
have asked her to come here today is because she is the only
witness I have ever heard who knows how to make energy
efficiency sound exciting. So since I have heard her do it
before, I thought I would give her another chance.
So welcome back.
STATEMENT OF DIAN M. GRUENEICH
Ms. Grueneich. Thank you so much. I would love to be
talking on energy efficiency. I have slipped it in a little
bit, but I am actually here today on transmission, renewables
and----
Mr. Markey. Transmission needs even more work to sound
exciting.
Ms. Grueneich. I will start with my first promo.
We are building transmission in California. We are building
it to make renewables. If California, with all of our
environmental rules and all of our environmental activists, can
do it, everywhere in the country can do it.
This is the Tehachapi Wind Project. It is under
development; and, when finished, it is going to bring 4,500
megawatts of wind into the transmission grid. So there we go,
if that is exciting.
But, getting back, let me, first of all, thank you for
having me today. I am speaking on my own behalf, but I also
bring greetings from Mike Peevey, who is President of our
Commission. He has reviewed my testimony and wanted to make
sure that I passed on that he personally feels very strongly
about these remarks as well and agrees with them.
Let's start with renewable energy. As Dan Reichert just
said, there really is no question that the United States is
blessed with renewables. This is not a question that we don't
have the resources. It is not a question that we don't have the
technical capability. It is a question of political will to
make it happen. That is the very good news.
As of January of this year, 33 States have RPSs or
renewable goals, 33 States. At the State level, what we are
waiting for is the national renewable standard. It will make a
dramatic difference in our ability if we can have as a Nation
all the States, all the utilities moving ahead.
In California, we have a 20 percent renewable standard, but
our Governor has now signed an executive order to have our
State get to 33 percent renewables by 2020, and our legislature
is now considering the bills to codify it. If California can
set our goals at 33 percent, again, the rest of the country
really can get to the levels that we are talking about in this
bill.
There is some really smart flexible items in the bill on
renewables. One of the items that Dan talked about was the part
that you can meet your renewable provisions through energy
efficiency. In a pure world, you probably wouldn't do that. You
would probably just say go with renewables. But this is a bill,
in my mind, that is really trying to make this workable. Every
State can do energy efficiency. We need to make sure that that
provision is sensible, that it is not just a loophole but it
lets the States that may be farther removed from renewables
really come in and go after the renewables section.
Another part that I think is very creative that we frankly
hadn't thought of in California, but I have now talked with our
legislators and suggested they think about it, is the provision
that says that you can have a credit of three times the
renewables if you do local distributed generation. That is a
really smart thing to put in the bill, because what it does is
that when you are building renewables out to the areas like the
Tehachapis, believe me, it takes years to plan and permit and
finance and build those transmission lines. But when you can
instead look to do renewables right in your neighborhood, I
mean, you can put solar photovoltaics on the rooftops of
Costcos and Wal-Marts. You can have people in the neighborhood
start to say we will even make it in the our own homes on our
roofs. And when you give it a three times credit, in my mind,
we can have some States who have never even had renewables
before start to become the leaders. And I hate to say put
California and Texas to shame, but that is what we may start
happening by some of these very creative provisions in the
bill.
Let me turn to transmission planning quickly. The
interesting thing about the bill is the most important
provisions on transmission planning are not in the transmission
planning section. These are the provisions that make it a
sensible way to do transmission planning. They are the energy
efficiency provision. They are the renewable electric portfolio
standard. They are the enhancement of the smart grid. They are
the focus on distributed generation. All of those are the
factors that let you reduce the need for transmission. Because
we don't build transmission just to have transmission lines. We
build transmission because it carries electricity.
By having in this bill the fundamental building blocks that
make you look at an entire system that will minimize how much
transmission you need, you have got it right. This is in many
ways the best way that I have seen looking at electricity in 30
years because you have put in place those building blocks that
say when you are doing transmission planning you are actually
doing it in the context of a very sensible approach.
The other thing that I will say about transmission is that
it directs FERC to take into account all of these demand side
aspects when they have an expanded role in transmission
planning. That is absolutely critical. If Congress is going to
give FERC or any other agency at the Federal level a larger
role in transmission, and particularly in transmission
planning, it is essential to have in there the provisions that
they must look at the demand side. In fact, I think that the
bill should go further and direct FERC in all of its decisions
with regard to transmission, including approving transmission
investment, that it does not discriminate against the demand
side or against distributed generation.
Let me just end with the smart grid, that I think that
again it has got it right. The one part that I would add would
be to have some provisions that provide increased technical
assistance to the States. Smart grid is going to happen,
because there are thousands of decisions that government and
the private sector are going to make. What you heard from Dan
about an increasing the information available, that is
critical. But we are all going to need much better technical
assistance, and that would help.
The very last thing that I will say is to thank you very
much for letting me testify today.
Mr. Markey. Thank you very, very much.
[The prepared statement of Ms. Grueneich follows:]
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Mr. Markey. Our next witness is James Robo. He is the
President and Chief Operating Officer of Florida Power and
Light, or FPL, Group. Mr. Robo previously served as Vice
President at that company.
We thank you so much for testifying today.
STATEMENT OF JAMES L. ROBO
Mr. Robo. Thank you, Chairman Markey, Ranking Member Upton,
and members of the committee. I am the President and Chief
Operating Officer of FPL Group, North America's largest
producer of renewable energy; and it is my pleasure to be here
today to talk about the importance of enacting a renewable
electricity standard this year.
FPL Group is the Nation's number one producer of
electricity from the wind and from the sun. Our wind fleet can
power approximately one and a half million homes and makes up a
quarter of the entire U.S. wind energy market. Our solar power
plants in California's Mohave Desert are the largest in the
world.
In Florida, we are building 110 megawatts of solar power,
enough to vault the State into second place in the Nation in
solar production in the span of only 18 months. And just this
week, FPL announced Energy Smart Miami, one of the country's
largest implementations of smart grid technology to improve
energy efficiency and reduce carbon emissions.
We are proud that FPL Group has one of the lowest
CO2 emissions rates of any electric power company in
the Nation. In fact, if every utility were as clean as FPL
Group, CO2 emissions from the power sector would be
reduced by nearly 50 percent. Total U.S. carbon emissions would
be reduced by 20 percent, which is the equivalent of removing
209 million cars from the road, roughly 80 percent of the
Nation's vehicles.
Renewable energy holds tremendous potential for the United
States. Each year, enough solar energy strikes a 90- by 90-mile
patch of the Mohave Desert to meet the annual electricity needs
of the entire country, and enough wind power sweeps across the
Dakotas to meet more than half our electricity needs. We have
barely begun to tap this nearly unlimited resource.
To do so, it is vital that Congress enact a renewable
electricity standard this year; and here is why. First, an RES
will help create a clean energy economy. Many countries are
betting that the world of the future will thirst for low-carbon
energy in the way it thirsts for oil today. We can't afford to
remain on the sidelines while the renewables industry and jobs
that go along with it are created elsewhere. We are already
falling behind even Europe in this regard. In fact, nearly
every one of FPL Group's largest renewable energy competitors
is from outside the United States.
Second, an RES will give the renewable energy industry
certainty and will give utility decisionmakers a sense of
urgency. In the electricity power sector, we make capital
decisions with a 30-year time horizon. We can't spend billions
of dollars to build a clean energy economy without confidence
that demand for low-carbon power will remain strong.
A Federal RES with timelines extending to 2039 will send
the clearest possible signal to investors that demand for
renewables will continue, and the targets that utilities must
meet along the way will provide the urgency needed for prompt
action. The best incentive to ensure timely and proactive
utility decisionmaking around renewables is a reasonable yet
firm target.
Third, a Federal RES will drive down the cost of
renewables. Make no mistake, in many markets today renewables
such as wind are competitively priced, despite the fact that
they are disadvantaged versus fossil fuels due to the lack of a
price on carbon. The cost of wind power has fallen by roughly
25 percent over the past decade even as the average electric
bill in the U.S. Has risen by nearly 50 percent. By stimulating
demand, an RES will continue to drive down the cost of
renewables over time.
Fourth, a Federal RES will ensure that only the most cost-
efficient renewables get built. The current patchwork of more
than 30 different State regimes is cumbersome, costly, and
creates incentives for bad decisions. For example, many States
require utilities to buy only in-State renewable energy even if
it costs more than renewable energy purchased from elsewhere.
That is like forcing grocery stores in Maine to buy oranges
grown only in Maine. It makes no economic sense.
And, finally, an RES is essential to address the threat of
climate change. That is, threat isn't just environmental; it is
economic. Those who say the cost of addressing climate change
is too high assume that doing nothing is free. On the contrary,
unchecked climate change could cost the United States tens of
billions of dollars over the next two decades.
But no matter what your beliefs are about climate change,
investing in renewable energy makes sense for America. It will
replace finite fossil fuels with the infinite energy of the
wind and the sun. It will result in cleaner air; it will
conserve precious water; it will strengthen our energy security
in a volatile world; and, finally, it will keep us competitive
in the race to build a clean energy economy.
Mr. Chairman, thank you for the opportunity to testify this
afternoon.
Mr. Markey. Thank you, sir, very much.
[The prepared statement of Mr. Robo follows:]
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Mr. Markey. Our next witness is Gregory Kunkel. He is the
Vice President of Environmental Affairs at Tenaska. Mr. Kunkel
directs environmental compliance, permitting, and water
resources issues at that company.
We welcome you, sir.
STATEMENT OF GREGORY P. KUNKEL
Mr. Kunkel. Thank you, Chairman Markey, Ranking Member
Upton--and happy birthday, by the way--and members of the
subcommittee, for this opportunity to discuss Tenaska's two
commercial-scale electric generation projects using carbon
capture and storage technologies, Trailblazer in Texas and
Taylorville in Illinois.
My name is Dr. Greg Kunkel; and I am Vice President of
Environmental Affairs of Omaha-based Tenaska, one of the
largest independent power producers in the United States.
Tenaska currently employs nearly 700 people and has developed
approximately 9,000 megawatts of natural gas-fired electric
generating capacity across the United States.
Our affiliates market natural gas, electric power, and
biofuels and also are involved in private equity funds and
acquisition management focused on energy space, including
renewable energy, infrastructure development, natural gas
pipelines and storage, and electric transmission.
The Natural Resource Defense Council benchmarks Tenaska's
power plants as having the lowest carbon footprint of any of
our peers, less than half the national average emission rate of
greenhouse gases. However, as clean as our fleet is, like a
number of our peers in the independent power sector, our older
long-term contract did not explicitly anticipate the cost of
carbon control. To ensure that these clean, efficient
facilities can keep operating, we urge the committee to provide
a mechanism to hold these contracted facilities harmless for
the duration of their contracts.
Now, with regard to carbon capture and storage, Tenaska's
current initiatives, Trailblazer and Taylorville, may give the
subcommittee some sense of the CCS projects that we believe can
be built with today's proven technologies.
When Tenaska embarked on developing these utility scale CCS
projects, natural gas prices were high and volatile, and there
was a glut of gas generation. This encouraged us to consider
coal for baseload power facilities. However, we recognized that
new Federal, regional, and State greenhouse gas emission
controls were very likely during these plants' 50-year life. Of
course, just last week, EPA issued its endangerment finding and
is considering comprehensive rulemaking to regulate carbon
emissions; and now Congress is taking up the issue in earnest.
Tenaska's objective has been to find ways to develop the
baseload resources required for the electricity market, but we
weren't willing to invest in solid fuel projects without
addressing the climate change issue. So the question before us
was how to reduce greenhouse gas emissions in the design of
projects today. To that end, we needed to assure ourselves that
carbon capture technologies are ready for a utility scale
project, a secure home was available for captured carbon
dioxide, and the economics and long-term financing arrangements
for such projects could work.
On February 19, 2008, Tenaska announced the Trailblazer
Energy Center, a 760 megawatt gross and 600 megawatt net output
supercritical pulverized coal electric generation facility with
the capability to capture 85 to 90 percent of its carbon
dioxide. The site is near pipelines to the world's largest
market for carbon dioxide, Permian Basin Enhanced Oil Recovery.
Two railroads serve the site, and the electrical
interconnection also nearby.
The comment period on Trailblazer's draft air permit closed
on April 17, and the Texas Commission on Environmental Quality
will be working toward a final permit over the next months. We
have received competitive proposals for the facility's design
and construction and are working on detailed engineering
studies to support the financial closing and a construction
start in 2010. Commercial operation could be as early as 2015.
Through our work with leading EPC contractors and equipment
manufacturers, Tenaska is increasingly confident that we can
finance the project and negotiate suitable terms for the
plant's construction. Local and State governments have provided
tax incentives for building the plant and are encouraging oil
producers to use the facility's CO2. We still need
some form of Federal incentive participation to make the
project work, but that seems increasingly likely.
Trailblazer's significance is that it will demonstrate
post-combustion capture technology for existing power plants
that today contribute 2 billion tons to the U.S. emission
inventory and 10 billion tons to the worldwide emission
inventory. By locating near a viable CO2 market,
Trailblazer can pioneer this technology at a reduced cost.
The Taylorville Energy Center is a Hybrid Integrated
Gasification Combined-Cycle electric generation facility being
developed by Christian County Generation with Tenaska as the
managing partner. The project will manufacture pipeline-quality
substitute natural gas, or methane, from Illinois bituminous
coal. SNG will fuel the power block.
The amount of SNG produced will significantly exceed our
requirements, annually freeing up 10 billion cubic feet of SNG
for eventual sale offsite. The facility will employ 1,500
construction workers and create hundreds of permanent jobs in
the coal and power sectors.
Taylorville will capture 50 to 60 percent of the carbon
dioxide that would have otherwise been emitted, remove moisture
and sulfur compounds, and compress the carbon dioxide stream
for pipeline transport either to nearby geologic sequestration
wells or for use in EOR operations elsewhere. The power island
will have criteria pollutant emissions equal to those of a
combined-cycle natural gas generation facility. No electric
generation facility utilizing coal-derived fuel operating
anywhere approaches the proposed emission performance of
Taylorville. Yet the project relies exclusively on proven
technologies for coal gasification, gas processing, and power
generation.
The one important thing for all these types of projects--
and we think that they are real projects that can come off in
the near future and begin construction as early as next year--
is providing some sort of regulatory framework and certainty
for these projects. We have provided specific comments on
aspects of the ACES draft in our testimony, and we look to
those provisions. But there is a whole variety of ways that the
bill could support these types of projects.
Mr. Markey. And how much CO2 can you take out of
the coal?
Mr. Kunkel. The Trailblazer project in Texas would take 90
percent.
Mr. Markey. Thank you. I appreciate it.
[The prepared statement of Mr. Kunkel follows:]
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Mr. Markey. Mr. Hawkins, Mr. David Hawkins, the Director of
Climate Programs at the Natural Resources Defense Council, one
of the most frequent visitors to this committee in its history.
He has been working on air pollution issues for over 30 years.
We welcome you back. Whenever you are comfortable, please
begin.
STATEMENT OF DAVID G. HAWKINS
Mr. Hawkins. Thank you very much. Thank you for inviting me
to testify today. I am going to focus today on a pathway for
coal.
NRDC, as an environmental organization, is a strong
supporter of efficiency and renewable energy resources, but we
also believe that it is important to have a pathway for
advanced coal. It is important in order to get the policy
support for the protection of the climate programs that we
need, and it is important to actually make those climate
protection programs happen more easily in the real world. We
think we can get deep cuts in carbon dioxide emissions faster
and at lower costs if coal with carbon capture is on the table
as part of the toolbox, and that is why we very strongly
support it.
NRDC is a member of the U.S. Climate Action Partnership,
and we put forward in that document what we believed was an
integrated package of policy support for carbon capture and
disposal. There were four things that we recommended.
The first was a requirement for the government to get its
act together in terms of developing the necessary permitting
rules.
The second was a program to do early government financial
support so that we could get five gigawatts of coal capacity
with carbon capture deployed by 2015. It sounds like Tenaska
could be part of that five gigawatts.
The third element would be a transitional program where the
early movers in the carbon capture world would get a financial
incentive. This is very important to overcome the competitive
barriers to these kinds of technologies, even in the early
years of a cap-and-trade program.
And the fourth thing we recommended was a set of mandatory
emissions standards for new coal plants so that we would have
clarity and an assurance that we didn't have to rely just on
market forces but we would have that good old-fashioned
regulation that says: Here's a performance standard. You need
to meet it. And, by the way, there will be financial incentives
to help you do even better.
The ACES discussion draft does a great job of embracing
these concepts and articulating them. And while there are a few
places where some added detail would be helpful, we think that
it is a very great job, and we are very supportive of it.
In our view, carbon capture and disposal is a real option.
It can be made into a reality out in the world if it has
adequate policy support. That policy support has been lacking,
but it can be provided through the kind of provisions that are
in the ACES draft and, for that reason, we support it.
Mr. Chairman, we have heard lots of concerns over the last
couple of days about whether the technology is available or
whether it is available at a reasonable cost; and there have
been lots of concerns and legitimately expressed concerns about
the fact that this may cost too much, that we simply can't
afford to do what is being proposed in this legislation.
Well, 73 years ago, the predecessor of this committee heard
from then chairman Sam Rayburn about the need to have a major
energy advance. It was called Rural Electrification Act of
1936, and some of the same arguments that we have heard mounted
today about the need to protect the climate and whether we
could afford to do it were put forward then. It was said that
the technology did not exist to bring electricity to rural
Americans. It was said that, if it did exist, it would be
simply too expensive and ruin us.
Well, 73 years ago, this committee acted, and it passed out
by one vote the Rural Electrification Act of 1936, and the
result was an economy that the world still cannot beat. This is
the world's greatest economy, and it is brought to that level
in large part by electrification. It was that kind of
technological advance and willingness to say, you know, we
think these challenges can be met.
Today, the challenge is even greater and the stakes are
higher and the rewards are greater. But it is going to come
down to the same thing: The men and women of this committee
voting to do what we need to do to create the future that we
need to create. Thank you.
Mr. Markey. Thank you, Mr. Hawkins. And it comes in full
circle, doesn't it? 73 years ago, we were voting to bring
electricity to rural America; now we are going to be voting on
bringing electricity from rural America, the sun and the wind
and biomass, to urban America. And we might only win by one
vote, but that will be the perfect circle then when it is
completed.
[The prepared statement of Mr. Hawkins follows:]
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Mr. Markey. Our next witness is Eugene Trisko on behalf of
the United Mine Workers of America. Mr. Trisko has represented
the United Mine Workers for more than 20 years. He is a member
of the Environmental Protection Agency's Clean Air Act Advisory
Committee and has appeared before the U.S. Court of Appeals for
the District of Columbia concerning the Clean Air Act.
Welcome, sir.
STATEMENT OF EUGENE M. TRISKO
Mr. Trisko. Thank you, Mr. Chairman, Ranking Member Upton.
I am pleased to be here today to testify on behalf of the
United Mine Workers.
The UMWA has sought technological solutions to the
environmental challenges facing coal for decades. The UMWA
recognizes that climate change legislation poses potentially
the greatest threat to its membership and to the continued use
of coal. In July, 2007, the Mine Workers and other industrial
unions endorsed the bipartisan Bingaman-Specter climate change
bill. Achieving the proper balance among technology incentives
and the timing and stringency of emission reductions will be
essential for obtaining bipartisan support for climate
legislation.
One half of our electricity today is generated by coal.
Twenty-three States rely on coal for more than half of their
electric supplies. To reduce coal in our energy mix means using
another fuel to replace it for baseload generation, most likely
a combination of natural gas and nuclear.
There is a great deal in this proposed legislation that
UMWA supports. We strongly endorse section 114, incorporating
the Carbon Capture and Storage Early Deployment Act
reintroduced this year by Representative Boucher and a
bipartisan group of cosponsors. The programs called for by this
section will provide critical nonbudget support for the early
demonstration of CCS technologies on the commercial scale.
CCS technology is the principal means for assuring that
coal can continue to supply a significant share of our electric
generating needs. These technologies also can provide a major
source of new, well-paying low-carbon jobs.
Our statement summarizes a recent study showing that
deployment of 65 to 100 gigawatts of new advanced coal capacity
with CCS could create five to seven million job years of
employment during construction and more than one quarter
million permanent jobs.
UMWA supports the objectives of the CCS incentives provided
in section 115. The Mine Workers recommend that the committee
develop an allowanced-based mechanism for funding qualifying
CCS facilities. Such incentives will be critical to attracting
capital investment in new and retrofit applications.
The timing and availability of section 115 support should
provide planning certainty. We regard the period from 2020 to
2040 as critical for avoiding a large-scale loss of coal
markets. As to scale, we recommend a range of 65 to 100
gigawatts of new and retrofit capacity based on U.S. EPA's
analysis of previous climate bills.
The Mine Workers recommend the bill avoids specifying
CO2 performance standards limited to coal-based
generating units. NSPS are unnecessary for these sources since
all cap sources will be required to comply with the bill's
declining cap.
To avoid the risk of WTO challenges, we suggest that the
bill's international border adjustment provisions be modified
consistent with IBEW and AEP suggested changes submitted to the
committee on April 17.
UMWA favors the largest possible use of allowance
allocations to the electric distribution and independent
generation sectors and to vulnerable manufacturing industries.
We support the recommended approach to allocations outlined in
the recent letter to Chairman Waxman by the IBW and the utility
workers.
UMWA is mainly concerned about the 20 percent reduction
target for the year 2020. This target is well above the 6
percent target proposed by the Dingell-Boucher December, 2008,
discussion draft and President Obama's proposed 14 percent
target.
Commercial use of CCS by 2020 is likely to be limited to a
handful of early mover plants. Recent modeling of similar
emission control proposals shows that one-third to one-half of
coal-based generating capacity could be retired between 2015
and 2030. EPA's preliminary modeling of the bill shows this
occurring by 2040, even with aggressive CCS assumptions. Such
impacts must be avoided if the Nation is to retain domestic
coal as a principal energy supply. The UMWA thus urges
moderation in the choice of the 2020 target, recognizing that
the majority of the emission reductions required by the bill
occur later in the program when technological advances should
facilitate the continued use of coal.
Thank you, Mr. Chairman, members of the committee.
Mr. Inslee [presiding]. Thank you very much.
[The prepared statement of Mr. Trisko follows:]
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Mr. Inslee. The next witness is Jonathan Briggs, who is
Regional Director of the Americas for Hydrogen Energy. Mr.
Briggs is responsible for managing Hydrogen Energy's project in
California and developing other Hydrogen Energy business
opportunities in North America.
Thank you, Mr. Briggs.
STATEMENT OF JONATHAN BRIGGS
Mr. Briggs. Mr. Chairman, members of the committee, thank
you for inviting me to testify before you today.
HEI, or Hydrogen Energy International, offers commercial-
scale deployments of low-carbon hydrogen fueled power plants
with carbon capture and storage. It offers the ability to bring
together the complementary skills of its two parent companies,
BP and Rio Tinto.
Hydrogen Energy, HEI, is currently developing two projects,
one in Abu Dhabi, the other in California. The project in
California is located in Kern County and will distribute 250
megawatts of much-needed, baseload low-carbon power.
The project's primary feedstock is petroleum coke, a
refinery byproduct, along with coal as needed, and will capture
and store 90 percent of its CO2 emissions in the Elk
Hills oil field for sequestration and Enhanced Oil Recovery.
The project has been designed and developed to provide numerous
environmental and economic benefits for the State.
It will conserve freshwater resource by using brackish
groundwater with zero liquid discharge. It will create 1,500
construction jobs and 100 permanent jobs in an economically
depressed region of the State, and the project will also
significantly boost State and local tax revenue from EOR.
Just 2 months ago, the PUC voted 5-0 to direct $30 million
of support to our project. This is unprecedented and a
demonstration of political leadership that first mover projects
such as ours need.
And while I have the opportunity, I would like to thank
CPUC, including Commissioner Grueneich, for recognizing the
need for in-State, low-carbon baseload power. We filed for the
planning permits and the site license and will be up and
running by 2015, contingent on the development of an
appropriate policy support framework.
In order to meet the aggressive emission reduction goals
that are outlined in the draft ACES bill, CCS must be widely
deployed and quickly to drive down the costs of future plants.
Just as pre-combustion capture technology is proven, so is the
storage of CO2.
In the U.S., there are more than 3,500 miles of
CO2 pipelines to support Enhanced Oil Recovery, an
activity which has been conducted safely and without incident
for the last 30 years. We believe that storing CO2
in existing oil and gas fields in connection with the EOR will
significantly advance the near-term deployment of CCS by
bringing down the costs of early moving projects such as ours.
Like other forms of clean energy, CCS is more expensive
than conventional energy. The majority of the extra capital
costs lies with the power plant rather than the sequestration
activity. The cost of CCS today is more than $100 per ton of
CO2. That may seem like a lot, but remember this
technology is still in the early development stages; and
despite other technologies having enjoyed years of learning,
low-carbon hydrogen power with CCS is competitive with nuclear
and renewable energies. So cost, while important, is not a
reason to forgo or stall the rollout of this technology.
The draft ACES bill is a welcome first step to identifying
CCS as a needed technology to mitigate GHT emissions. HEI
appreciates the support shown for CCS in the Waxman-Markey
draft, particularly fixed incentive payments which are critical
to project sanction; feedstock neutrality; and recognition of
geologic sequestration combined with enhanced hydrocarbon
recovery.
In addition, we hope that any climate change bill would
also recognize the need for early movers, provide clear and
definitive performance qualification terms, and tie fiscal
support to the levels of CO2 capture such as the 90
percent that I referred to earlier.
Before I close, I would like to leave the committee with
one other recommendation regarding the regulatory certainty
needed to allow CCS to move forward. We need one regulator, one
set of regulations, and acknowledgement that EOR and
sequestration can act simultaneously.
I would like to thank the committee for inviting me to
testify before you today and remind you that CCS is ready
today. We just need fixed near- and medium-term incentives to
get these projects off the ground.
Thank you.
Mr. Inslee. Thank you, Mr. Briggs.
You have 10 seconds left. I am just dying to know, is your
sequestration through pumping into oil fuels? Is that the
sequestration system you are using?
Mr. Briggs. It will be.
Mr. Inslee. Thank you.
[The prepared statement of Mr. Briggs follows:]
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Mr. Inslee. Our next witness is Mr. James Kerr, who is a
partner with McGuire Woods LLP. He has previously served as
Commissioner on the North Carolina Utilities Commission and is
President of the National Association of Regulatory Utility
Commissioners for 2007-2008. Today, he is appearing on behalf
of the Electric Reliability Coordinating Council.
Thanks, Mr. Kerr.
STATEMENT OF JAMES KERR
Mr. Kerr. Thank you, Mr. Chairman.
My perspective today is that of a former utility regulator,
where I examined regulatory policy to be sure that it was both
cost-effective and equitable among and between customer classes
and across regions.
My testimony focuses on the RES and the CCS portions of the
bill that is before the subcommittee. Let me first focus in
these remarks on what I believe to be certain inequities
concerns and cost-effectiveness concerns with the RES. I am
concerned that the bill, as drafted, will be both ineffective
and inequitable for ratepayers in the Southeast and Midwest
where cost-effective and renewable resources are limited.
The first concern is that the RES conflicts with a market-
based cap-and-trade program. Renewables are simply one option
to decarbonize power fleets and reduce carbon. They may or may
not be the most cost-effective option for doing that, however;
and the price signals set by the cap is supposed to decide
this. Since the RES performance-based standard must be complied
with regardless of the cost, that undermines the cap's basic
least-cost approach. In effect, the RES effects that renewables
and not the other alternatives to be the most cost-effective
solution of carbon reduction under the cap all the way up to
the full amount of the RES.
Most troubling would be is that there appear to be no
economic studies supporting the fact that a 25 percent RES by
2025 will produce the most cost-effective carbon reduction or
cost-effective carbon reduction program in the cap program
itself. Hence, I refer to RES.
Second, the RES gives ratepayers three compliance options,
each of which is uneconomic to them and provides little
benefit.
My second concern is that ratepayers in resource-poor
States will be assessed significant costs to comply with the
RES for which they will receive no benefit. Instead, the monies
will flow to the benefit of the ratepayers in resource-rich
States and either subsidize those ratepayers' RES compliance
costs or those ratepayers' fleet decarbonization efforts and
associated carbon cap costs.
To illustrate this, I thought I would use the example where
I am a utility owner or a regulator or, for that matter, simply
a citizen in a resource-poor State where renewables tend to
cost more than in resource-rich States. I would have three
choices available to me under this legislative proposal.
First, I can build above market. By that, I mean higher
cost renewable power than the prevailing REC price, renewable
facilities in my State. That will ensure that green jobs and
investment capital provided by ratepayers remained in State and
that will provide some benefits towards carbon compliance in
State. But the cost for compliance with the RES will be higher
than if other alternatives are adopted.
However, since I also get a carbon benefit if I build my
own renewables facility, I need to subtract that cost saving
from my renewables costs, and those economics will likely make
me build some and perhaps many above-market renewable
facilities.
That result makes sense to me and my ratepayers, because it
is the lowest-cost solution to the dual-compliance obligations
of the carbon cap and the RES, but it makes no sense as
national policy. The result will be nationally more above-
market renewable facilities in the Southeast and Midwest and
fewer economic renewable facilities in resource-rich States.
And, of course, since renewables will be part of the compliance
with the carbon cap and the overall cost of renewables is
higher than it need to be because above-market facilities are
built, the cost of compliance with that cap nationally will be
higher than they would be without the RES.
My second choice is to purchase RECs, to fund construction
of renewable facilities in another State with better renewable
resources. If I do that, my ratepayers' compliance costs with
the RES will be lower, but I will have to go back to them for
more money to fund investments in carbon reductions for my
system since I have received no carbon benefit from the
renewable power facility funded by my ratepayers REC dollars.
In addition, I will have funded the creation of green jobs
in the resource-rich State but not my own, and I will have
funded fleet decarbonization efforts in the resource-rich State
through construction of a renewable facility but not my own. As
a consequence, I have subsidized the carbon compliance cost of
the ratepayers in the resource-rich State who will not see rate
increases to fund the carbon reductions my renewable power
facility has made for them.
My third choice is to make an alternative compliance
payment. This option would allow my ratepayers to comply with
the RES at a lower cost, but, again, they see no carbon
reduction benefits for the payment, and I will have to go back
to them for additional monies to fund my own carbon reduction
efforts.
In addition, the monies I spend making alternative
compliance payments are returned to the resource-rich States
that complied with the RES and presumably refunded to those
ratepayers. Thus, my alternative compliance payments subsidize
RES compliance cost of citizens in resource-rich States, but my
ratepayers see no benefits.
As a former public servant and citizen, I do not like any
of these choices. None make any economic sense to my ratepayers
and they do nothing to address climate change since the cap
already requires carbon reductions independent of the RES.
Frankly, I am baffled as to why I would have to make a
choice between three such poor options. No one has told me that
renewables up to the full amount of the RES are the most cost-
effective way to reduce carbon, and no one has told me that the
U.S. renewables industry cannot sustain itself based on the
price signal that cap will send the existing plethora of the 33
State RES requirements and other financial incentives available
to renewables. It seems to me that the primary effect of the
RES requirement is to pick winners and losers and that the
ratepayers in resource-rich States will be the clear winners,
while ratepayers in resource-poor States will be the clear
losers.
I want to be clear. I am not against renewables in any way.
They are an important part of the toolkit to address climate
change, and they will be employed at scale under any carbon cap
up to the point that they are the most cost-effective
alternative. What I am against is the imposition of a very
large Federal renewables mandate that effectively advantages
ratepayers in resource-rich States and disadvantages ratepayers
in resource-poor States for no compelling reason.
While I do not see the need for any mandatory Federal RES,
my testimony does have suggestions that will limit but not
eliminate these inequities.
Finally, with respect to CCS, the ERCC supports the efforts
in the bill to generate research, development, and deployment
of CCS. We also, however, provide a couple of comments that
might help shape that piece of the legislation.
Thank you. I am happy to answer any questions.
Mr. Inslee. Thank you, Mr. Kerr.
[The prepared statement of Mr. Kerr follows:]
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Mr. Inslee. Our next witness is Dr. Jay Apt, who is
Executive Director of the Carnegie-Mellon Electricity Industry
Center and an associate professor at Carnegie-Mellon
University. We hope Dr. Apt feels very much at home today,
because he has been in space flying four times and logging more
than 35 days in that environment and over 10 hours in space
walks.
We hope this is as easy an experience, Dr. Apt. Thank you
for being here.
STATEMENT OF JAY APT
Mr. Apt. Thank you, Mr. Chairman. I like to tell people
that I am probably the only person in the room who owes their
life to solar cells.
I appreciate not only the invitation but your stamina.
As you said, Carnegie-Mellon, I am a faculty member in both
the engineering school and the business college. I have studied
the electric power industry for many years at our Carnegie-
Mellon Electricity Industry Center. But burning any appreciable
fraction of the estimated fossil fuel resources on this planet
without carbon dioxide control is going to send CO2
levels to places that humans have never experienced and cause
really dangerous climate change. There is no question that the
singular focus, our goal, ought to be controlling
CO2.
Renewable energy sources are going to be an important part
of whatever we do in this country, but I caution that a
singular emphasis on renewable energy is not the best way to
meet that overriding goal of controlling CO2.
We spend about 3 percent of GDP annually on electricity.
Removing 80 percent of the CO2 from electric power
with the most cost-effective technologies will take about two-
thirds of a percent of GDP. That turns out to be just about
what we spend on the Clean Air Act. That is affordable. But if
we try to specify which technologies, like renewables, are the
only ones that need apply and don't allow the least expensive
technologies to compete, costs can grow to unaffordable levels.
It is important to develop competing low-carbon technologies to
keep costs low, rather than trying to select technologies based
on attributes that have little to do with controlling
CO2.
A national RES is a costly way to reduce CO2
emissions, because renewable and low greenhouse gas are not
synonyms. There are several other practical and often less
expensive ways, and you heard about some of them just now, to
reduce CO2 from electric power generation.
As you know, renewable energy is concentrated only in
certain States. The Southeast doesn't have either good wind or
good solar. It does have biomass, but that is going to be
needed for production of liquid fuels. Legislation should give
each region the greatest flexibility to reduce CO2
at the least cost, including renewables, efficiency,
conservation, fossil fuels with CCS, and nuclear.
Mandating technologies can be much more expensive than
mandating performance. Renewable performance standards
unnecessarily increase costs in an attempt to eliminate the use
of uranium, coal, natural gas, and large hydropower.
What is needed instead is a carbon performance standard
that lowers the limits in a predictable fashion on the emission
of CO2 for every kilowatt hour produced. To
affordably lower CO2, we are going to need
everything that works. No power source is free of problems.
Our research has examined what was then the largest solar
ray in the country in the desert in Arizona. It had a duty
cycle, what we call the capacity factor, of 19 percent averaged
over 2 years. All the wind farms in Texas last year added
together had a capacity factor of 29 percent. That means that
70 percent of the time you have got to use something else. And
our research shows that natural gas turbines used to provide
fill-in powers as the wind rises and falls or clouds cover the
sun produce more CO2 and much more NOX,
nitrogen oxide, than they do when running steadily. That
lessens the beneficial effects of wind or solar.
One solution is to store large amounts of electricity when
these sources are generating. The discussion draft doesn't
appear to me to contain significant incentives for large-scale
storage, and I think it ought to.
If our industries are to be able to afford electricity, it
is essential that demonstration coal plants with carbon capture
be built to improve the technology and show that we can
sequester CO2 without leakage in a range of geology.
The section 114 incentives seem to me to be at the low end of
what is required to demonstrate the commercial viability of
sequestration. It is also essential that we build half a dozen
nuclear plants using new technology to assess their costs and
performance, or we are going to be importing that technology
from abroad.
I hope that you will keep two principles in mind.
First, focus on reducing carbon dioxide, rather than
singling out renewables as the answer. There are significant
savings, from letting all the technologies compete in
satisfying the goals of lowering greenhouse gas emissions and
increasing energy security, while ensuring that energy prices
aren't so high that they derail our economy.
Second, ensure that efficiency gains generating electricity
as well as in using it can count in any low-carbon legislative
mandate such as section 231 of the discussion draft.
Thank you very much for the opportunity to testify.
Along with my written testimony, I provided the
subcommittee with one of our published papers. I think the
research outlined in the paper might be of interest and value
and would ask that that be included as part of the hearing
record.
Mr. Inslee. Hearing no objection, Dr. Apt, thank you very
much.
[The prepared statement of Mr. Apt follows:]
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Mr. Inslee. We will start questioning with Tammy Baldwin.
Ms. Baldwin. Thank you, Mr. Chairman; and thank you all for
your patience and your testimony here this afternoon.
We just returned to session from a recess, and over the
course of my recess I had a chance to do a great tour of some
of the most innovative Wisconsin-based companies that are doing
all sorts of exciting things in the energy area in anticipation
of the work we are doing on the climate change bill.
One of the places I visited is a company called Orion based
in Nashua, Wisconsin; and they are managing a solar light type
technology that can illuminate factory floors electricity free
by concentrating daylight. Just last month, the company was
even touted by President Obama for having innovators and
creating jobs that will foster our economic recovery and create
clean technology to power our long-term prosperity.
Now, like the solar light pipe, there exists a number of
distributed renewable energy resources such as solar water
heaters, solar air heating and cooling, geothermal heat pumps
that deliver measurable and verifiable renewable energy at the
load source. These technologies help businesses and homeowners
lower their utility bills; and because they produce clean
energy at the load source, they certainly lessen the burden on
our Nation's transmission infrastructure.
As I understand it and have looked into it, some States
have included these technologies in their renewable portfolio
standards, and others have not, because these technologies do
not actually generate electricity even though we can sort of
monitor virtually with meters the electricity consumption
displaced by these technologies.
So I want to ask, I think, Mr. Reicher and Commissioner
Grueneich, do you think these types of technologies should be
considered as a part of our renewable energy technologies and
can they provide benefits under a national renewable portfolio
or electricity standard?
Ms. Grueneich. Yes, and yes.
Let me also say I want to congratulate your State. We are
not talking about energy efficiency, but in a recent report you
are ranked number five in the country. I am very happy to hear
about some of the technologies that are being developed. I
think that this is an example where we see innovation at the
State level, and I think that it definitely is an example of
the types of new technologies coming on line that can and
should be included when we are looking at the renewable
standard.
Mr. Reicher. And I would add that, as you know, there is
already a three X multiplier for on-site generation. It would
be interesting to take a look at what of these technologies
might be included and, if not, how that might be adjusted. That
is number one. Number two, of course, the energy efficiency
resource standard would capture some of the value of this as
well by cutting electricity demand.
So I think the interplay between the two of those should at
least help these technologies. What we may want to do is look a
little bit further and see if there is ways to move them
forward even better.
Ms. Baldwin. And that was precisely my second question.
Should this technology be a part of the energy efficiency
resource standard? You sort of jumped to that answer already.
On the distributed generation multiplier, another one of my
stops on my tour last week was to an anaerobic digester on a
dairy farm. Now, I think Wisconsin is the leader in the country
in deployment of anaerobic digester systems, but all of them
are smaller than two megawatts. The one that I visited is
generating enough electricity for about 600 homes in the area.
The proposed definition in our draft discussion bill right
now would exclude small biomass generation systems from
receiving the distributed generation credit multiplier because
they rely on combustion, and the proposal appears to make
distributed solar and wind more valuable than distributed
biomass. And I guess I would want to ask your opinion also on
what guidance you would give our committee as we get into the
details of the bill on this issue of should it count or not.
Commissioner?
Ms. Grueneich. I will say that we are facing in California,
as we have had now a couple of years under our belt--I guess 3
or 4 now--on our renewable standard that as the technology is
improving, and we have got a project that Pacific Gas and
Electric Company is doing also with one of our dairy farms,
where we are seeing that we do have to look at modifying our
definition of what qualifies. And I think that it will be
important for the committee to really take a look throughout
the country at what are the different projects that have
emerged, take a good look at the definitions.
And I totally concur with Dan. Let's make sure that things
don't fall between the cracks of what is considered a renewable
or what is considered an energy efficiency, and it doesn't
qualify for either one. So I think that is real good homework.
We want to capture the most innovative projects.
Ms. Baldwin. Mr. Chairman, I was going to ask a question to
our carbon capture and sequestration experts. I see my time has
expired.
Mr. Inslee. The Chair is extending an additional minute to
all committee members who are so dedicated to be here.
Ms. Baldwin [continuing]. Along with my other stops on my
energy tour I got a chance to visit a coal plant owned by WEE
Energy in Wisconsin that is doing a demonstration project on
carbon capture--not the sequestration part, but they are right
now succeeding in capturing 90 percent of the CO2
emitted, but only doing this demonstration project on 1 percent
of the flue gas. So it is a small demonstration project. A
larger scale project, sort of tenfold the size, will be under
way soon in West Virginia.
I would love our CCS experts to address a couple of quick
questions. One is the job creation potential. The second is, if
we do not have a cap in the end, would you expect whole scale
commercial deployment of this technology without it? I have
concerns that we wouldn't.
And then, finally, this is a huge issue, but Wisconsin is
not particularly geologically--well, we don't have the
geological formations necessary for storage in state which
brings up transportation issues. And I wonder whether the funds
collected by the CCS provisions of the bill will apply to
researchers' transportation for CO2 and the costs
associated with that. But--I know that is broad, but I would
love to hear our CCS experts address those three areas.
Mr. Kunkel. We have been following the WEE Energy project
there too, and they are tackling one of the most interesting
parts of this that could have big promise for reducing the
costs of it, which is the energy efficiency penalty using
ammonia technology. And we think that is very promising, and we
are following that technology and considering that very
closely. That sort of goes to one of your questions.
Your second question was jobs.
Ms. Baldwin. Actually, that was the first question. The
second was the relationship between the cap and the deployment
of this technology.
Mr. Kunkel. Yeah. Certainly large-scale deployment won't
happen without there being some kind of a market value, if
society doesn't value the reduction of emissions in some way.
And--that has to happen, and what we are working at is getting
the cost of that down to where it happens at a reasonable
price; and we believe that that can happen as well.
Jobs, our projects in both Texas and Illinois will--the one
thing, they take a long time to build; it is like a 4-year
construction cycle, 1,500 jobs at the peak and even as many as
2,000 in some cases. So, for a retrofit, that project would be
much less, but it is still a very substantial project employing
a significant number of people.
Mr. Inslee [presiding]. Thank you. We are now moving on to
Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman.
Dr. Apt, I want to come back to your testimony. You talked
about a carbon performance. If you look at that for the base as
an RPS, you probably could include nuclear as part of that,
right, because it has--that has no greenhouse gas emissions?
Mr. Apt. Certainly.
One of the statistics I like to tell people is, in my home
State of Pennsylvania, we are nearly last in renewables, but we
are first in low carbon because of the percentage of nuclear
that we have.
Mr. Upton. You said that the solar array in Arizona was
only 19 percent, which means that it is out?
Mr. Apt. Sure. It can't be more than 50 percent because it
is night half the time.
Mr. Upton. I know they don't have daylight savings time.
That is probably another hour.
Mr. Apt. The thing that surprised us was that it wasn't
higher than it is. That is because of the intermittency caused
by the clouds. We have looked at the solar rays in other
locations. The DOE has a solar roof here, and that is 11
percent as it turns out.
Mr. Upton. Thank you.
Mr. Robo, you mentioned that you are managing the largest
solar bank in the world; is that right?
Mr. Robo. That is right.
Mr. Upton. In the Mojave Desert. How big is it? What is the
size?
Mr. Robo. Three hundred megawatts.
Mr. Upton. What is the footprint? How big is it?
Mr. Robo. The footprint is tens of acres, it is about an
acre a megawatt, so it is about 300 acres.
Mr. Upton. There has been some debate that I have seen in
the press--we mentioned this either today or yesterday at one
of these hearings--that the senior Senator from California has
not been all that supportive. Is that true or not? Is it that
project or is that another one?
Mr. Robo. No. It is not our project. Our project is already
built.
Mr. Upton. Is this another project that is going to rival
you as the largest in the world then?
Mr. Robo. There are several new projects that are being
considered in California. We have several that are under--that
are trying to be permitted right now. Other folks are being--
other folks are trying to permit projects.
Our, actually, two projects that are furthest along in the
permitting process are outside of Senator Feinstein's areas.
Mr. Upton. Now when you began the construction of this or
to get the licensing and the approvals, did you have trouble
hooking it into the transmission lines? And how long did that
take?
Mr. Robo. These projects, the projects we have right now in
California are actually quite old. They were built in the late
1980s-early 1990s and took several years to develop--any large-
scale solar project in any of the areas that we are looking at.
We are developing large-scale solar projects in Florida,
California, Arizona, Colorado. It really depends in the
jurisdiction. We have built 110 megawatts of solar in Florida
in the space of a year. California would take 5 years.
Mr. Upton. Would it be helpful in this bill, if this bill
moves forward, to have some type of allowance to allow FERC to
step in if folks like your seatmate there are not entirely
cooperative in getting things hooked up?
Mr. Robo. We think having FERC have----
Mr. Upton. Constructive.
Mr. Robo. We think having FERC have ultimate siting
authority makes good sense.
Mr. Upton. Ms. Grueneich, you talked about California going
to 33 percent by 2020. I seem to remember at one point they
were 20 percent by next year is; is that right?
Ms. Grueneich. We have--our current law is 20 percent by
next year. There are what some would call flexible provisions
that will allow it to be another year or two probably. But we
are on target.
Mr. Upton. So you think they will hit it?
Ms. Grueneich. Yes.
Mr. Upton. Again, I am not from California.
Ms. Grueneich. Yes.
Mr. Upton. Last question I have in my minute that is
remaining, Messrs. Briggs, Kerr and Trisko, as we look at the
issue of carbon capture, something that has to be part of
coal's future, there is nothing in this bill, as I understand
it, relating to the long-term liability issues.
Does that need to be part of this, if you could each
comment on that?
Mr. Trisko. Yes.
Mr. Upton. I don't know if you had it cited in the longer
part of your testimony or not.
Mr. Trisko. The bill contains a provision for research on
long-term liability issues, and we think that that underscores
the need for resolution of the long-term liability question.
Mr. Upton. Would the others dis--Dr. Kunkel, would you
agree? Just maybe to speed this along in my remaining 5
seconds.
Mr. Kunkel. I do think there is the need for kind of a
study, but there is also some--we have a project that we want
to take to financing next year. So I think there needs to be
some consideration for the pioneering projects, a first group
of projects, and to take care of those.
Mr. Briggs. Just very quickly, one of the advantages of our
parent companies being familiar with the subsurface, we are
willing to move ahead of these sorts of frameworks not being
defined because we are comfortable with it. But we have also
been--we have also suggested a framework for liability as it
moves through a project from operatorship to postclosure.
Mr. Kerr. Congressman Upton, I would say ``yes''
completely, and I would also point out--and I think
Representative Baldwin mentioned the transportation issue in
your question. There are a number of these issues around CCS
that are very important. And one of the things that this
subcommittee needs to focus on is, when you look at EPA
analysis of this bill and bills in the last Congress, there are
very aggressive assumptions about when resources like CCS will
be available, and yet they don't match up with what--the
realistic issues like liability transportation, so I think when
you look at the analysis, look at the presumptions and then
realize there are a plethora of what seem like sort of minor
issues.
The sooner we deal with those in a bill like this, I think
the more rapidly we can deploy these technologies, which then
will maybe justify some of the assumptions being used in the
economic analysis.
Mr. Upton. Dr. Apt.
Mr. Apt. At CMU we have started a large project on the
legal and regulatory environment for deep underground
sequestration. And a lot of paths through the thicket lead to
dead ends.
We have put out a draft of--a working paper on that. We
give presentation on January. We will be happy to talk with you
more about it.
We are expecting to put out a final on that later this
summer, and we would love to work with y'all.
Mr. Upton. Thank you. Thank you.
Mr. Inslee. Thank you. The Chair will proceed.
Mr. Reicher, thanks for being here. Thanks for Google's
vision and the work they are doing. I wanted to ask, you
alluded to the necessity for some financing mechanism across
what has been called ``the valley of death,'' particularly for
the first commercial projects.
There are a couple of approaches that have been proposed. I
have proposed one approach. And we have tried to focus in our
approach somewhat more narrowly than others to make sure we
target the risky adventures that really do not have access to
commercial lending credit--narrower insofar as the target, but
broader as far as allowing the use of the full financial tools
that could be available, multiple systems to really finance
these.
I just wonder if you want to comment on those approaches
and what you think we need.
Mr. Reicher. Congressman, I think the approach that you are
looking at which is quite similar to the approach that Senators
Bingaman and Murkowski are looking at, I do think that is the
right way to go; and let me explain why I reached that
conclusion.
The issue we face is the following: There is today in
developing new energy technology both private and public
capital to get technologies to the pilot stage. We have a
burgeoning venture capital world, there is a variety of funding
available at the Federal level for the lower-cost development
of this to the pilot stage. The valley of death begins when you
get a technology, whether it is renewables, efficiency, clean
coal a whole host of technologies, when you get to that
successful pilot stage and you have got to go from there to
large commercial deployment. But it is those first few large
commercial projects that the bankers will say, too risky, we
are not interested, come back when you have built the first
couple and talk to us then. That is the valley of death, and
that is what your bill and that is what Senator Bingaman and
Murkowski's bill would deal with well.
The tools, as you say, are quite broad--loans, loan
guarantees, other credit enhancements and also secondary market
support so we could, in fact, develop clean energy-backed bonds
as well. So a whole set of tools focused right on that, that
really critical moment where so many technologies across the
entire energy spectrum die, between pilot scale and multiple
large commercial projects being built.
So I salute you in what you are doing, Senators Bingaman
and Murkowski are doing a hearing next Tuesday to try to
advance this.
Mr. Inslee. Great. Thank you very much.
Dr. Kunkel your effort, the Tenaska project, I am told is
in Taylorville, Illinois; is that right?
Mr. Kunkel. Taylorville, Illinois.
Mr. Inslee. Is that Mr. Shimkus's district?
Mr. Kunkel. It is.
Mr. Inslee. It is a great district. He is a great
Congressman, of course.
If you are successful and we have got a great cap-and-trade
bill that helps drive investment into your project, because
your project would be more cost competitive once we have a cap-
and-trade system, would that allow people to continue to mine
coal, also create jobs associated with your project, and
continue the coal-based economy in that area?
Mr. Kunkel. It would definitely spur the development of
these types of projects and that project in particular.
Mr. Inslee. And would the existence of a cap-and-trade
system increase your attractiveness to investors to invest in
that coal-sequestered technology? Would it make it more
attractive vis-a-vis other technologies?
Mr. Kunkel. We believe it is going to be attractive in any
case because of the particular conditions of the project. But
certainly that would be helpful in kind of setting a framework
in which those investments are going to be encouraged in the
future.
Mr. Inslee. Well, I will happily fulfill the responsibility
of conveying that to Mr. Shimkus, that a cap-and-trade system
could help a business in his district and employ perhaps 1,500
people. Thank you for that.
Dr. Apt, you said something that was really interesting to
me. I think--and I want to make sure that I understood your
assessment, and I think you bring up a very interesting point.
As I understand what you told us, if we are successful in
policies that do, in fact, find the least costly ways of
dealing with this--and I understand that is an ``if'' at the
moment, and you have some critique of that effort--but if we
are successful in that regard, do I understand that the costs
you have assessed are about two-thirds of a percent of GDP,
which are in the range of what we did successfully in the Clean
Air Act?
Mr. Apt. That is correct, if the costs are kept to $35 to
$50 a ton of CO2.
The difficulty is that that applies to things like coal
with CCS. It does not apply to things like natural gas with
postcombustion capture that could be about $80 a ton of
CO2. At the moment, the best solar PV or solar
thermal are many multiples of that.
Mr. Inslee. So, if I can, how much loss to the GDP, the no-
action scenario if we do nothing, if we do what some have
suggested here to do nothing, not to address this issue of
climate change, is the amount of loss to our GDP due to drought
and, you know, changes in the climate, perhaps some health-
related impacts?
Do you think those reductions of our economic well-being
will exceed what we tried to avoid in the Clean Air Act? Is
this a worse problem than what we tried to solve in the Clean
Air Act?
Mr. Apt. The answer is a complicated one because it depends
on the details regionally, what happens. In California, one of
the things that drove people to action there was the prediction
that the snowpack in the Sierra would be much worse off a few
years from now without control of CO2. That is not
going to be the case everyplace. There are going to be winners
and losers.
In the Clean Air Act there was a clear--or I should say,
dirty and present danger. It is a conceptual thing at the
moment for most people. That is why downscaling studies like
the Sierra snowpack is so very important in making people
understand how it affects them.
Mr. Inslee. Let me just--I don't want to take too much
time.
But I will just tell you, one Congressman's assessment is
that the danger to our communities and the danger to our Nation
has the capacity to be quite a bit more severe than what we
were suffering under the Clean Air Act for a whole variety of
different reasons and that, because of that, an investment
anywhere close to what we did with the Clean Air Act would make
sense because of the potential danger faced.
Mr. Apt. I would concur. Any investment of the type, the
two-thirds of a percent of GDP that we did in the Clean Air Act
not only makes sense, but it is clear that we accepted that,
although with a great deal of kicking and screaming.
Anything much more than that, certainly many multiples of
that, is probably a very different animal.
Mr. Inslee. Thank you. I appreciate that.
Mr. Walden of Oregon.
Mr. Walden. Thank you very much, Mr. Chairman.
Dr. Apt, let me go back to you because you said solar is
about $80 a ton, carbon equivalent.
Mr. Apt. No. That is natural gas with postcombustion
capture at the moment. Solar PV and solar thermal are many
times that.
Mr. Walden. Many times that?
Mr. Apt. You know, it depends. At the moment, you could
bring in a good solar thermal plant for perhaps $200 a ton of
avoided CO2. And I think Mr. Robo would----
Mr. Walden. The reason I ask that is, yesterday we had
testimony from the EPA Administrator, Ms. Jackson, who
indicated her analysis of this bill, given whatever they
plugged in. I thought she said, in the first few years it was
$17 a ton for carbon, that that is what they used as a price,
and then maybe as much as $20 or $30. We are trying to get all
those data points.
So I find it fascinating, you are saying $35 to $50; it may
be as high as $80.
Mr. Apt. It is one of the reasons why I think that a carbon
performance standard is going to be much more effective than
a--let's say $17 a ton, because it is going to affect
investment. It is going to take $35 to $50 a ton to really
affect investment in the area I know about, the electric power
industry.
Or you can do a carbon portfolio standard that says, as
California has done, you can emit no more than X, in that case,
1,100 pounds of CO2 per megawatt hour; and that
declines.
Mr. Walden. Okay. I am going to move down to Mr.
Gruenspecht because in your testimony you state, in absolute
terms, the key terms are projected to be biomass and wind; but
other renewable fuels including solar and geothermal are also
projected to grow significantly in percentage terms.
What would constitute the biomass that you reference?
Mr. Gruenspecht. Well, there could be both co-firing of
biomass in existing plants that currently burn coal.
Mr. Walden. That would be like woody biomass?
Mr. Gruenspecht. That would be woody biomass. That could be
used in a modest proportion as part of the feed to that
existing plant. That is attractive to the extent there is not a
big capital investment involved.
Mr. Walden. Would that be the primary source you are
looking at when you use the term ``biomass''?
Mr. Gruenspecht. Or you could have dedicated biomass crops.
You could have--switchgrass as well can be burned, as well as--
--
Mr. Walden. And I have raised this issue every other chance
I have had, the deal with woody biomass on Federal land.
Mr. Hawkins, I understand NRDC is the one who is
responsible for the language in the 2007 energy bill that
precluded fuel sources made from woody biomass on Federal lands
from being applied toward the fuel standard; is that correct?
Mr. Hawkins. We supported safeguards so that we would not
have adverse land use changes associated with the renewables.
Mr. Walden. So it was your language or you were the ones
who principally said that?
Mr. Hawkins. I wish we had the power to actually write
language and have it show up in legislation.
Mr. Walden. Did you have any role in the language regarding
biomass in this draft? Did NRDC have any role in the biomass
language in this draft?
Mr. Hawkins. We didn't review any draft before you saw it.
Mr. Walden. Did you submit draft language? Did you
participate in the discussions in what you thought ought to
be--that is not a bad thing, by the way. I am just trying to
figure it out.
Mr. Hawkins. I don't believe we submitted any language on
the biomass provisions.
But if we did----
Mr. Walden. Do you support these biomass provisions that
are in this bill?
Mr. Hawkins. Do we support them? Yes.
Mr. Walden. And so you think it is okay to exclude all
woody biomass on Federal lands as being considered biomass?
Mr. Hawkins. We think that until and unless we have
safeguards in place that address everyone's concerns about the
impact of sourcing some of these biomass resources, that it is
an appropriate safeguard, yes.
Mr. Walden. To just simply say, woody biomass off Federal
land isn't biomass? That is what you say.
Mr. Hawkins. To say that it shouldn't be an eligible source
of a resource for purposes of complying with this obligation,
that is appropriate policy.
Mr. Walden. Obviously you can have that opinion. I disagree
vehemently with it, as you might have noticed by now, and hope
to change it.
Ms. Grueneich.
Ms. Grueneich. Not to be confused with Gruenspecht.
Mr. Walden. Got it. And it is turned as well.
Mr. Gruenspecht. It is a very green panel.
Mr. Reicher. This is the German end of the panel.
Mr. Walden. The German end of the panel, and Mr. Reicher
too.
First of all, Google has got a facility in my district. One
of the reasons is because of our low-cost hydropower, which I
think is renewable, but this bill does not. But I want to go to
geothermal because I think both of you may have mentioned that.
I was told by our scientists at Oregon Institute of
Technology we could replace two-thirds of Oregon's electricity
generation needs by geothermal. I have also been told by
University of Washington scientists you could replace all of
Oregon's gasoline consumption with methanol made from woody
biomass due to the backlog on our forests. So it looks to me
like there are some enormous opportunities here to use new
energy types in a very effective way.
When we move off of that, though, and into distributive
energy, which I think is also a key element and gets at the
real issue of transmission which you have raised, we have got a
huge fight out across my district right now about the siting of
transmission lines, principally because they go over Federal
land.
In one case, a company I believe is trying to avoid any
Federal land because of the siting fights. So now they are
going to try to drive it right over everybody's farm and field,
which is another huge problem.
The other case, we may deny an entire wind project over 180
acres of BLM ground that they need to run the supply line to
private land. How do we address these issues?
Ms. Grueneich. I have spent 4 years on transmission
permitting.
I will just say, it is not in the bill. I think one of the
most significant provisions that somebody needs to put in the
bill on transmission--the planning part is great, and I will
talk a moment about that, but we have huge problems with the
Federal land use agencies in transmission permitting. And I
hear a lot about the problem from the State agencies.
Just about every land permit--every transmission project in
California and it sounds like in Oregon, and it is a lot in the
West--ends up going through Federal lands; and we need
somewhere in all these bills that are going through on
transmission, something in my--this is my personal opinion--
that really talks about the Federal land use, agencies having
to streamline their transmission permitting projects.
We do MOUs with BLM and U.S. Forest Service on a regular
basis that have schedules, and they never stick to the
schedules. We have had projects that an entire year has been
lost after we have permitted them under our sequel, our
environmental review, which is tough, and we still wait another
year to finish the Federal permitting.
So I am a strong believer that this cuts both ways, that it
is the Federal land use agencies, and a little bit of language
in there that has them streamlining some of their processes
could help.
There is a terrific process--I will just be real quick--
going on in the entire western United States called western
REZ, Renewable Energy Zone----
Mr. Walden. Right.
Ms. Grueneich [continuing]. That is looking at every single
State; and nobody is worried about red, green, blue anything
that is really going down to the level again of transmission
planning we need, of what are those resources in the States.
And we are finding some really good information.
We talk about, we think that States are resource poor on
renewables. When we are actually spending time looking at this,
we are finding that there is a lot more, frankly, than we
thought about.
And so I do think that this is a ray of hope that we are
going to be able to come together. And once we know those
resources, that is, where we are able to look at what are the
transmission lines that are going to make sense, and then get
our act together; and if they are the ones we need, let's get
them built.
Mr. Reicher. Mr. Walden, if I could just add, one of other
aspects of this is improving citizen engagement, getting people
involved earlier, giving them the information they need to
understand what the options are in terms of transmission.
We have been working with some organizations, including
NRDC, at actually building mapping capabilities using Google
tools and other kinds of tools to get this information to
people. If you engage them earlier, if you give them the
options, walk them through the process, often some of this,
some of the opposition can be overcome.
But I would second what Commissioner Grueneich said about
the critical need to engage Federal agencies more readily.
Mr. Walden. Mr. Chairman, I know we are over. Are we going
to have a second-round opportunity for questions? This is such
a great panel, but there are so many of them.
Mr. Markey [presiding]. Okay. And there are so few of us
that I think we can do that then as a result. I think it works
out well.
Mr. Walden. Thank you, Mr. Chairman.
Mr. Markey. The Chair will recognize himself at this point
for a round of questions. And, you know, I think there are two
ways you can look at the renewables issue. You can look at it
in a rear-view mirror or you can look out the windshield at the
future as it is arriving.
So you can use two sets of numbers. One set of numbers can
be, oh, my goodness, only 1 or 2 or 3 percent of our
electricity comes from renewables, excluding hydro. That is not
a good picture. How are we ever going to be able to provide the
electrical generation we need for our country in the future?
Of course, another way of looking at it is 2008. 8,500 new
megawatts of wind generated in our country, 400 new megawatts
of solar generated in our country, 205 new megawatts of biomass
generated in our country, 138 new megawatts of geothermal
generated in our country; only 1,100 new megawatts of coal and
9,700 megawatts of natural gas, zero in nuclear. So, my
goodness, when you add it all up, 45 percent of all new
electrical generation in the United States in 2008 was from
renewables, and that is before we pass a national renewable
electricity standard.
If we were looking out the windshield, looking ahead, and
we had a national renewable electricity standard and we had the
incentives that were put on the books in order to give
incentives for States and individual companies to deploy
renewables; if you look at the State of Texas having the
legislature authorize $5 billion to build a transmission system
out to the west in the State to capture the wind and the solar;
if you look at Florida Power and Light initiatives--how many
new megawatts of solar in Florida, Mr. Robo?
Mr. Robo. One hundred ten.
Mr. Markey. One hundred ten.
You can see that all over the country there is massive new
interest.
And, Dr. Kunkel, you have a technology that you believe is
going to give coal a big future, as well, because you believe
that we can capture the carbon that is generated from coal
burning; is that correct?
Mr. Kunkel. No. That is right. And we think there are
technologies we can get financed and go to construction next
year.
Mr. Markey. I am feeling so good, you know, after this
panel. And that is why I do want a second round. This is just--
you know this is--you guys are like walking antidepressant
pills sitting at this panel. So thank you for coming in today.
Mr. Trisko.
Mr. Trisko. Thank you, Mr. Chairman. We didn't comment
directly in our prepared statement on the RES requirements, but
your question recalls----
Mr. Markey. Can I say this, that was not a question. My
question there was in the form of an answer, okay, so I was
just laying out what the answer is going forward.
But you can take it as a question, and please comment.
Mr. Trisko. I will interpret it as such, Mr. Chairman.
It calls to my mind Commissioner Kerr's comments regarding
the effects of a cap-and-trade program on providing significant
incentives in the market to bring new renewable energy supplies
on; and that very much will be the case, particularly if
allowances, as we advocate, are given to the wires companies
and to the distribution companies.
The first power sources that they will want to obtain to
sell to their customers will be power sources for which they
don't have to give up an allowance, that are zero carbon-based
sources. So that will create the correct market incentives in
the resource, the renewable resource-rich States that the
Commissioner referred to, in order to develop those in a very
cost-effective and rational manner.
Mr. Markey. Thank you, sir. Very much.
So in listening to the testimony--and, Mr. Robo, you are
making money on this all across the country. You are very
optimistic about the vast capacity for our country to generate
electricity from renewable sources?
Mr. Robo. That is right.
Mr. Markey. It is going to be a profit-making business?
Mr. Robo. It is a profit-making business and--you can be
successful being green, and I think that has been a critical
part of our strategy over the last decade.
Mr. Markey. Thank you.
And again back to you, Dr. Kunkel. Do you have reason to
give really a sense of confidence to the coal miners, to the
coal industry that there is a real future ahead for them, and
the technology will catch up and make them compatible with our
goals in reducing greenhouse gases?
Mr. Kunkel. We do look at it differently. We are developers
of power projects. That is what we do for a living. And for us,
the impediment is not these rules, but the lack of rules. What
we need is a set of rules where we can move forward. We can
finance projects knowing what the rules are going to be in the
future. And in the absence of those rules, is quite an
impediment to coal-based development.
Mr. Markey. So in your opinion the best friend of the coal
industry will be that we put predictable, consistent rules on
the books and then the technology will come into place that
makes that electrical generating source compatible with the
goals that we are setting for the country?
Mr. Kunkel. I think there have been legitimate concerns
about the viability and the technology. Things that we are
doing are going to be, you know, many times larger than the
next largest one.
And so we do need some time to go through this scale-up
process, but we are convinced we can do it. And we can move
forward. And then once those pioneering projects have
demonstrated themselves, I think the opportunities for broad
deployment are definitely there.
Mr. Markey. Great.
And again, I would like--and maybe, perhaps you, Mr.
Briggs, you could deal with that decline in the cost of
generating renewables that Mr. Robo was talking about earlier,
this 25 percent decline that has occurred over the last decade.
Do you see the same thing happening over in CCS? Do you see
the--kind of the once the marketplace established that we will
see a development of a technology, but then a decline in cost
curve for the deployment of that technology?
Mr. Briggs. I believe so, yes. The main thing is to get out
there and start getting on the learning curve. I wanted to go
on record and answer the question you just asked. Yes. Yes.
Mr. Markey. Thank you, sir.
Mr. Briggs. The technology is there today.
Mr. Markey. Thank you. My time has expired.
Let me turn and recognize the gentleman from Texas, Mr.
Burgess.
Mr. Burgess. Thank you, Mr. Chairman. I don't want to
create any new depression for you, but actually----
Mr. Markey. He is a physician so he won't do it. I know he
won't do it.
Mr. Burgess. I find myself agreeing with you.
Mr. Markey. It is the Hippocratic Oath.
Mr. Burgess. I am so happy that you have recognized the
vision and contribution of not just our current governor of
Texas, but our former governor--that would be George W. Bush--
who had the foresight and vision to create this renewable
portfolio and standard which allows us to be the number one
wind-generating State in the country.
Mr. Markey. I come here to praise Governor Bush for what he
did in the 1990s.
Mr. Burgess. And I will have to tell you too, I didn't
expect to be encouraged today, but I have been. It is probably
more muted than your encouragement.
But, Dr. Apt, your testimony--and I really appreciate your
honesty and recognize that there are a lot of areas where we
disagree.
But your last two thesis statements that you have in your
written testimony, that you related to us, probably may be the
most important testimony that we have received in the last
1,000 hours of testimony we have had on this subject in this
committee: Focus on reducing carbon dioxide rather than
singling out renewables as the answer. The simplicity is
almost--I am going to use it like a--as a haiku or something
that I can repeat for myself.
This is the correct direction for us to go. I have been
terribly disturbed by what I see are some of the inequities in
the draft language for a State like Texas that has made the
incredible investment to get to where it is. And yet if we have
the federally mandated renewable energy standard, we may not
produce a percentage that is going to be required, although as
far as the number of megawatts we are producing with the
renewable energy, we are far ahead of everyone else.
But your concept of, let all technologies compete in
satisfying the goals would mean to me then that the technology
of energy conservation and some of the newer things that are
happening with attic systems and insulation, low-heat glass,
high-efficiency air conditioners, tankless water heaters, those
should be eligible to be considered just the same as the newest
nanotechnology, photovoltaic solar cell.
So I am encouraged when I hear you say that. Unfortunately,
the chairman was out of the room. That is why I wanted to be
sure I repeated it; the chairman was out of the room when you
gave your testimony.
I think this is something that I would like to see us work
on in that draft language, to limit the number of--the
percentage that a State like Texas could take credit for in
creating efficiencies does not seem to me to be fair; the
creation of a standard that is almost unattainable in a State
that is as large as Texas and produces as much power as we do,
those concepts have been very troubling to me, that we may
mandate a Federal system that sends our already robust State
system and moves it into a condition of noncompliance or one
where our ratepayers may be punished because we can't quite get
up to the percentage standard.
I am and I remain concerned about some of the
distributional problems we have--again, a State as large as
Texas.
Mr. Reicher, I apologize. I was out of the room when you
gave your testimony, but picking up on what you were discussing
with Mr. Walden, clearly there are more innovative ways of
going about site and providing the transmission capacity than
what historically has happened in the past. And our good
friend, Boone Pickens, back home, who is anxious to get his
electrons from Amarillo back to the Metroplex, perhaps there
are ways to do that without disrupting all of the farmers and
ranchers and landowners who live betwixt and between, and that
has been the tension and that has been the problem. And then,
of course, it is not just Amarillo and Dallas. It is out
Interstate 10 and back to the Houston metropolitan area, the
San Antonio metropolitan area.
So we have a lot of wind generation capacity. It is just
not where the folks are, and then bringing the electrons back
to where the folks are has been the challenge. Not that they
haven't made great strides; in the last 10 years, they have.
Yes, sir.
Mr. Reicher. Congressman, by way of another antidepressant,
let me point out that your State of Texas--I am looking at
actually the resource map for enhanced geothermal systems. You
have an extraordinary resource in Texas. Your total generating
capacity today is about 100,000 megawatts; that is all
sources--coal, gas, wind. Two percent of your EGS, Enhanced
Geothermal Source, would represent over 175,000 megawatts.
I learned something that you probably know well. You have a
quote-unquote problem in Texas called ``hot oil.'' It turns
out, what hot oil is is when you drill down you find high
temperature oil in many parts of the State, and that is because
there is a really robust geothermal resource down there.
What oil companies in your State are now beginning to look
at quite carefully is how can we both continue to extract oil
and gas but how can we also begin to develop the geothermal
resource? And, as I say, yours is a very vast one. It is well
distributed. You would reduce the need for transmission.
So I actually think you can get to a 25 by 25 quite read
readily. Given the wind resource, given this geothermal
resource, given the solar resource, you can get there and you
can be making money at it.
Mr. Burgess. I don't disagree with that. But I would also--
to Dr. Apt's point, there is no point in discriminating one
technology over another. If we have two nuclear plants, one
which is being doubled in size over the next several years, why
not get credit for that as well? If we have a robust program in
going back and retrofitting homes with energy, products of
increased energy efficiency, why not get credit for that as
well?
Mr. Reicher. You do, absolutely. The RPS, as written, would
allow you to get one-fifth mandate through energy efficiency.
That is, in fact, quite clear and, in my mind, quite an
improvement.
Mr. Burgess. Let me just ask a question of Dr. Apt.
The fact that it is restricted to one-fifth, does that
really comply with your philosophy of treating all carbon
equally?
Mr. Apt. My view is that renewables are absolutely a part
of the solution. But by mandating a particular technology,
whether it be EGS or solar or biomass, you are constraining the
problem so that you increase costs and may have other effects.
EGS, the big effect in Texas will be water. I think that,
in general, you have got to focus on one issue, and here it is
reducing CO2.
Mr. Burgess. And if we use the reduction of CO2
as the currency, then--whether it is from energy efficiency
whether it is from other areas; it does not all have to be
wind, solar and biomass. New hydro.
Yes, sir.
Mr. Kerr. If I might add, one of the points I wanted to
make, if you are going to have an RES, it will be favored and
disfavored States based on the availability of the paper
technologies. If you are going to have an RES--and again I am
not sure if it is consistent with the cap proposal--but if you
would allow efficiency to operate in an unfettered manner,
efficiency is available everywhere. It should be put on equal
footing with generation, would smooth out some of those
resource discrepancies and then the associated costs,
inefficiencies and discrepancies.
If you are going to persist, and I am not sure you should,
I think it would be a huge improvement to allow efficiency to
operate in an unfettered manner.
Mr. Burgess. I really think it is the common ground that I
have with Mr. Markey. And you can see I have depressed him by
going over time.
Mr. Markey. Not at all. Again, I have nothing to do. I am
willing to go on indefinitely on this subject. I love this
subject. I find it exciting.
So the gentleman from Utah, Mr. Matheson.
Mr. Matheson. Well, thank you, Mr. Chairman.
Ms. Grueneich, I should tell you, as someone who represents
a large public land State, your comments about the challenges
of dealing with Federal lands agencies and permitting are
certainly--I am sympathetic to what you are saying. I think as
part of a discussion about encouraging opportunities for new
types of generation, renewable energy to have an opportunity to
get to market in this country, we do have to have a serious
discussion in this committee and legislation about how to
encourage siting of transmission, because it is not happening
now. And there are impediments to it and I think it is
something where the draft legislation is a little light right
now.
So any suggestions people have in that to beef up that part
of the bill, to encourage development of transmission
infrastructure, I think would be very welcome to everyone. I
think that is one of the least--I think everybody on this
committee, actually on both sides of the aisle, has a pretty
strong feeling about the need for enhanced transmission
infrastructure.
At the risk of going a little bit off topic for what this
panel was asked to talk about, which was low-carbon electricity
and carbon capture and storage and renewables, I wanted to at
least frame the issue as also associated with the renewable
fuel standard that was passed by this Congress previously.
Do you think that this legislation ought to revisit that
issue? And I may be asking this panel the wrong question. But
it seems to me that the corn ethanol policy we had in this
country is actually creating far more greenhouse gases in the
life cycle context than people first anticipated. A lot of
organizations have come up with information to help validate
that.
The subsidy of corn ethanol, in my opinion, is--personally,
I think it is bad Federal policy at this point. Do people think
that we ought to take a look at opening that up as part of this
effort as we look at broad-based energy legislation? And again,
I apologize if folks on this panel, it is not their area of
expertise. Has somebody got a thought on that?
Mr. Hawkins. Thank you, Congressman Matheson. I am Dave
Hawkins from NRDC, and NRDC is part of U.S. Climate Action
Partnership, and USCAP has recommended a low-carbon fuel
standard and recommended that it be one that is implemented as
we transition from the renewable fuels standard.
Mr. Matheson. Right.
Mr. Hawkins. And the speed of that transition, the timing
of that transition, the conditions of that transition are
things that this committee will need to wrestle with. But we do
think that having a low-carbon fuel standard that applies to
all of the transportation fuel options, including electricity--
which actually does connect to the topic of this because if we
do produce electricity with carbon capture and storage and use
it to run plug-in hybrids, we can back out oil that way, as
well, and that should be regarded as a low-carbon fuel.
Mr. Matheson. And I concur. I think the low-carbon fuel
standard is the way to go and I think that the current RFS
should be phased out so I think that is helpful.
Mr. Apt. May I make one comment? We have done some analysis
of the California low-carbon fuel standard. It is superb. It is
really an excellent way to reduce greenhouse gas. And it has
the right structure.
Ms. Grueneich. And here I was going to just bring it up. So
I will defer to Dr. Apt.
Mr. Matheson. But I think it is consistent. As you said
before, you are not picking a specific technology; you are
saying, set the standard and let the market figure out the best
way to reach it. I think that that is what we have seen, as
opposed to Congress saying, Oh, well, let's make ethanol from
corn.
Mr. Apt. Let me make just one remark that harks back to
something that was said earlier about transmission.
Bringing in the folks early is really crucial. A Federal
eminent domain is unlikely to do anything more than get people
to dig in their heels. It is just not going to go down that
well.
Mr. Matheson. Well, those are fighting words where I come
from: Federal eminent domain.
Mr. Apt. You know what actually happens, when you look at a
lot of the transmission that has gotten built is that people
monetize their pain. And it happened in Connecticut with a
crosstown cable; it is happening in West Virginia with AEP's
line. And folks get involved and they get their pain
recognized. They get people to respect them, and then the
transmission gets built. It doesn't get built with eminent
domain.
Mr. Matheson. Okay. Mr. Chairman, my time is about to
expire. I will yield back. Thanks.
Mr. Markey. I thank the gentleman.
So we need Dr. Burgess back again because now we are at the
pain management.
But it can be managed. Okay? Willing to pay the price?
The gentleman from Florida, Mr. Stearns.
Mr. Stearns. Thank you, Mr. Chairman. And I obviously
welcome Mr. Robo, who is CEO of Florida Power and Light. I
don't know when you got hired whether they told you this is
part of your job description to sit here on a Thursday
afternoon at 5:15 answering these questions. But we appreciate
your being here.
And also Florida Power and Light is one of the leaders in
Florida in renewables. So that they are in a way ahead of the
curve. So they saw this in advance.
But my question is for Mr. Hawkins and Mr. Kunkel. In Poe
County, Florida, which is a little south of my congressional
district, we have a state-of-the-art coal gasification plant
that has successfully produced electricity since 1996. This
technology is well suited to carbon capture. And so as we look
to coal gasification and other clean coal technologies as part
of the climate solution, the question would be, what do you see
as the best way to incentivize these technologies so that we
can continue to have them available, considering their
efficiency?
Mr. Hawkins. Thank you, Congressman Stearns. Yes, the Poe
County plant run by Tampa Electric is certainly one of the
leaders in doing gasification in the United States and one that
has provided a great deal of operational experience. The first
couple of years of that plant had some operational
difficulties, but they have learned how to run that plant, run
it reliably.
I think that their testimony today, if they were here,
would be that it is the most reliable unit on their system and
the one that is dispatched the most. It was built with some
Federal support. It doesn't capture its carbon. And if we want
to create a structure that will allow plants to be built that
actually capture their carbon, then we are going to need the
kind of policy package which is in the Waxman-Markey discussion
draft, a policy package that combines clear regulatory
requirements both for the storage of the CO2 and
also for the performance of the new coal-fired power plants and
coupling it with financial incentives that are bankable
financial incentives for the early deployment opportunities in
this area.
And it is very important that they be bankable, which means
a different model than applying to the Federal Government for
an award and hope that you win. The odds are better than the
lottery, but they are not all that much more certain than the
lottery.
We need something that--if you want to go to Wall Street
and get your project financed, you need something that is
better than the lottery. And the structure that is in the
Waxman-Markey bill I would commend to your consideration
because what it says is that if you have a project which
captures the CO2, you are entitled to get a payment
of X dollars per ton, captured.
There is no government uncertainty there. There is no sort
of, you know, ``file your application and hope that you win the
lottery.'' You have an expectation that you can go to Wall
Street with, and that will help finance the project.
Mr. Stearns. Why haven't the folks in Poe County done this?
Mr. Hawkins. We don't have the policy enacted yet. But with
your help, maybe they will.
Mr. Stearns. So you say you need a policy before you do it
with the coal sequestration or the carbon capture? You wouldn't
do this on your own; you would need the incentives?
Mr. Hawkins. That is exactly right. We operate in an
electricity generating system where the marginal operating
costs determine how much the plant gets run. And if you don't
have the marginal operating costs covered for this additional
cost of capturing the carbon, then you are not going to install
that kind of capture. It will only happen if you get the
economics right. And for the early projects, that means that
you need a financial incentive payment.
Mr. Stearns. Mr. Trisko, I was going to ask Mr. Kunkel and
then I will ask you. Thank you.
Dr. Kunkel.
Mr. Kunkel. Yes. I really agree with that very much. The
types of project development we do are project-financed
projects. In other words, we will sell the entire output of
electricity for a 25- or 30-year project life right up front
with our, you know, some customer to whom we are selling this
power. And then we will operate that plant for them over the
long term.
These are large, large financings. Each of these projects
we are working on is over $3 billion. So these are very large
financings. And one of the things that is happening to us in
looking at this future commodity market of carbon dioxide is
that it will be a highly volatile potential commodity market.
So if there are incentive systems that give us kind of a
known stream of financial support for these new technologies,
and early on, the program when--if it is designed right, carbon
prices should actually be pretty low. If there is a known
stream for that, then that is something I can take to my
finance guys to put in their pro forma, and they can persuade
investors and lenders that that is real.
So those aspects are critical to really moving these
projects forward.
Mr. Stearns. Mr. Trisko.
Mr. Trisko. Yes, Congressman. Thank you.
And I have also had the pleasure of visiting the Poe County
plant. It is a marvel of technology. I was just going to point
out that we have a precedent in Title IV of the Clean Air Act,
in the acid rain title that was added in 1990 for the provision
of bonus allowances for utilities that employed scrubber
technology early in Phase I rather than later in Phase II, and
that bonus allowance program was so popular that it was
oversubscribed.
It was known before the allowances were to be given out
that there was more demand for them than supply. And the
Utility Air Regulatory Group basically did an allocation of the
available pool among its membership so that everybody had
certainty as to the amount of allowances that they would
receive. And that pool, which was not nearly as large as the
one that the United Mine Workers had advocated, was responsible
for putting about 13 gigawatts of scrubbers on in Phase I
rather than waiting until Phase II.
Mr. Stearns. Thank you.
Mr. Briggs wants to answer and then thank you, Mr.
Chairman.
Mr. Briggs. Very briefly Congressman. I concur with the
MLDC's comments and also add, if one of the reasons why, in the
early phases of these projects, you are looking for all the
value you can get to supplement the value of CO2 as
a commodity value in the absence of incentives.
And it is obviously dependent on States. One of the reasons
we are in California is, you are looking at States who will go
ahead of that policy mechanism and take the lead.
Mr. Stearns. Thank you, Mr. Chairman.
Mr. Markey. Could I just ask, Mr. Robo, what do you think
by 2025 is the achievable goal for Florida under a national
renewable electricity standard? Do you think Florida has
capacity for 25 percent of its electricity to come from
renewables?
Mr. Robo. Chairman Markey, I am very bullish, solar PV
economics. And we have seen just in the last year the cost of
solar photovoltaic come down from July--from our first project
to the ones we are proposing right now--come down from 20
percent; and I think by the middle of this decade we are going
to see grid parity with solar PV in Florida.
And so I think we have a real opportunity to have a big
penetration of solar in Florida, but certainly by the middle of
the next decade.
We have been very----
Mr. Markey. By 2025. But by 2025 do you think 25 percent is
possible?
Mr. Robo. I do think it is possible, depending on how
quickly the technology comes down the cost curve. But I have
been--actually, I have been personally surprised at how quickly
it has come down.
Mr. Markey. But is your gut now telling you that that
decline in the cost curve now is now inexorable, and you can
see how their economies of scale are kicking in?
Mr. Robo. Yes. Yes, sir.
Mr. Markey. The Chair recognizes the gentleman from
Vermont, Mr. Welch.
Mr. Welch. Thank you, Mr. Chairman.
The discussion draft includes energy efficiency resource
standards, as you know, requiring the utilities to achieve a
certain level of electricity or natural gas savings. In many
cases, energy efficiency measures more than pay for themselves
by reducing electricity bills. Not all, but I want to ask a
couple of questions about that; and I will start with you, Ms.
Grueneich.
California has its own energy efficiency resource
standards, so you have had some experience with this type of
policy. Do you think that the energy efficiency resource
standard in this discussion draft strengthens our prospects for
success?
Ms. Grueneich. Absolutely. The energy efficiency
performance standard is certainly among the top three items
that need to----
Mr. Welch. I would like to elaborate on this because the
debate we are having here is whether the action we take creates
jobs or causes jobs, reduces costs or increases costs. And we
are deeply divided on that. And those States that have taken
steps that we are proposing be taken nationally are in a
special place, I think, to offer some practical experience.
Ms. Grueneich. Certainly.
First of all, we in California, as in--everywhere in the
United States and just about everywhere in the world, we are in
terrible, terrible economic times. I haven't heard one person
say, ``And the reason why California is having all these
problems is because you have got ahead of the country on clean
energy.'' I mean, the economic problems we are suffering from
are not stemming from the fact that we have engaged in clean
energy. In fact, a lot of the jobs that we have that we still
have are because people are still pursuing energy efficiency;
and they are expanding because people are looking at installing
solar.
And so the whole job conundrum actually, I think, in the
little bit I have been listening yesterday and today, to me is
turned around, quite frankly. We should be looking at the jobs
we have been able to grow. And here, just quickly, a study that
came out from the University of Berkeley for the jobs that we
have created in California over our--from 1972 to 2006--on our
energy efficiency is that we have created about 1.5 million
full-time equivalent jobs with a total payroll of over $45
billion, driven by well-documented household energy savings of
$56 billion.
As a result of this, it was able to direct a greater
percentage of its consumption to in-state employment-intensive
goods and services, whose supply chains also largely reside
within the State, creating a multiplier effect of job creation.
I want to take a moment to recognize Vermont. You have got
a terrific energy efficiency program and you are doing the same
thing too. You are keeping the jobs within the State and
growing them. And that is what this is all about.
Mr. Reicher. Congressman, could I add that----
Mr. Welch. I was going to ask you a different question, Mr.
Reicher. Good to see you.
Mr. Reicher. Good to see you, Congressman.
Mr. Welch. Some folks are arguing we should just include
efficiency in the renewable electricity standard and skip the
energy efficiency resource standard. And I am asking your
thoughts on that.
Mr. Reicher. I think that what is proposed makes sense,
both standards, but with a--the carve-out of around 20 percent
within the renewable energy standard. I think that how those
get integrated is not completely clear in the bill right now
and needs some further fleshing out. But I think the two
concepts, as multiple States have adopted renewable energy
standards--as we know, multiple States have adopted energy
efficiency resource standards; they are working well--I think
it makes sense for the Federal Government to step up and do
both, but as I say, make sure that there is integration across
there.
I just wanted to add one quick thing about energy
efficiency. The hot new opportunity in the venture capital--the
clean technology venture capital world right now is indeed
energy efficiency. As we sit here in Washington, there is a
whole conference out in California called the Energy Efficiency
Finance Forum. This is bringing financial people to the table
saying, all right, how can we bring even more capital to energy
efficiency? Because that is the low-hanging fruit right now.
And California, as the Commissioner said, has made great
strides keeping energy use flat per capita for the last 20
years while it has grown 50 percent in much of the rest of the
country.
Mr. Welch. Okay. Thank you.
Mr. Robo, how do you see the renewable electricity
standard? Bottom line: job creator or job killer?
Mr. Robo. We see it as a large job creator, Congressman.
Mr. Welch. Thank you.
I yield back. My time has expired. Thank you.
Mr. Markey. The gentleman from Oregon is recognized for a
second round.
Mr. Walden. Thank you, Mr. Chairman. I want to pick up on a
couple of comments here. Ms. Grueneich, you talked about how we
can create and grow jobs. I want to get back to my soap box on
biomass. I can't resist because Harney County, Oregon, is up to
seasonally unadjusted 20 percent unemployment; Oregon is second
to Michigan in unemployment overall.
My district has 11 national forests. There is a lot of
interest in biomass. But when you have got a county that is 70
or 80 percent controlled by the Federal Government and you have
got 20 percent unemployment, they don't get where Mr. Hawkins
is coming from. And why when you have a forest like this--may
look good on a poster like that, but it is completely out of
sync with nature in terms of being managed for old growth
characteristics for Ponderosa pine. That is a fire waiting to
happen.
That forest, exact same scene, has now been thinned. And
that is how an old growth forest should be managed.
The issue before us is, after you have done this work and
thinned it out to where the biologists and botanists and
everybody else say it should be, why shouldn't you be able to
take the waste material that came out of that thinning project
and have it count toward biomass in renewable energy? And this
is the frustration we have.
There was a biomass facility with green investors ready to
go into Harney County, who could not get a guaranteed supply of
woody biomass to make their investor satisfied. And yet the
forest there, at the rate they are treating, will take 25 to 28
years at the current rate of treatment to get it in balance.
So you see why they don't get where Mr. Hawkins'
organization is at when it comes to saying, nothing off this
Federal ground can you count as woody biomass for renewable
energy consideration? Does California have that standard?
Ms. Grueneich. I honestly don't know. I will be happy to
look into it.
It seems to me that the difficult issue here is the
balancing that we know forests are a way in which we are
helping to reduce greenhouse gases because of----
Mr. Walden. If they are properly managed and don't go into
fire.
Ms. Grueneich. And what we want to avoid doing is on the
one hand having more forests cut down in order to then produce
the biomass fuel to meet the renewable standard to satisfy the
climate change, and then on the other hand to think about how
are we going to continue to have sustainable forests.
I am not a forestry expert, so where you draw the line
going into the forests or not----
Mr. Walden. Here is the deal. Here is the deal. This
legislation is so poorly written on those areas.
First of all, it directs the Departments of Interior and
Agriculture to come up with adaptive management plans for the
forest dealing with carbon and do so in 1 year. Each forest
already has to come up with its own management plan, follow
full NEPA, and that is just to do the planning process. Those
often take 5 to 8 years, to develop a 10-year plan. I am not
making this stuff up.
Ms. Grueneich. That, I am aware of.
Mr. Walden. You understand this.
So this legislation says to every agency in all Federal
ground, you will create a plan in 1 year and report back. That
is just never going to happen. I mean these timelines in this
bill are embarrassingly poorly constructed, to be honest with
you.
But then I go to like page 368 and it talks about
electricity sources. And it excludes renewable biomass from, I
guess, the base load. And have you all by the way read the full
text of the bill? I have asked every panel this. Yes or no.
Have you read the whole bill, Dr. Apt.
Mr. Apt. I read the parts a nonlawyer can understand.
Mr. Walden. I stayed in a Holiday Inn, but I am not even a
lawyer. Mr. Kerr.
Mr. Kerr. Not all parts.
Mr. Briggs. Not all parts, no.
Mr. Trisko. Not all parts, sir.
Mr. Hawkins. I have got mine already tabbed and indexed.
Mr. Walden. So you have read the whole bill?
Mr. Hawkins. I have skimmed the whole thing and some pages
faster than others.
Mr. Walden. I understand. I am struggling too.
Mr. Kunkel. Not all parts.
Mr. Robo. Not all parts.
Ms. Grueneich. Just about the whole thing, but I have to
confess, I think I skipped over the biomass definition.
Mr. Walden. Go back to that.
Mr. Reicher. 648 pages. I have looked at every page.
Mr. Walden. Yes, sir.
Mr. Grueneich. Absolutely not.
Mr. Walden. Perfect. All right. As I say, I wore out one
pair of reading glasses. I have got another in my desk.
I am trying to figure out, even on page 368 when it talks
about compliance obligations and then talks about electricity
sources, it excludes renewable biomass as an electricity
source.
Now renewable biomass is already defined early on to be
all--to exclude all Federal lands and all this. So can somebody
tell me why renewable biomass would be excluded in this
electricity source?
Mr. Hawkins. I can answer that one.
It is because if you make electricity from renewable
biomass, you don't have to turn in an allowance. This is the
compliance obligation section of the bill, and this is a
benefit for renewable biomass.
Mr. Walden. Okay. Good. But now we know that if you make it
from woody biomass off Federal ground, which is occurring in my
district now, where they are heating--they replaced an oil-
burning stove in a high school in Enterprise; using hog fuel
wood chips, they are saving an enormous amount of fuel, replace
it with wood, very few emissions, a lot less than that, it
doesn't qualify. How does that make sense?
Mr. Hawkins. Well, you know what I would say? These
hearings are educational experiences for the witnesses
sometimes too.
And you have obviously thought a lot about this issue,
Congressman. And I am not the organizational expert on the
biomass issues. But if you have the time, we would very much
like to come in and visit with you.
Mr. Walden. I would be happy to do that. My door is always
open.
Because the hospital in Harney County, where this biomass--
they switched to a wood pellet-burning stove, and they cut
their fuel costs by two-thirds. And DEQ, our Department of
Environmental Quality--at least the hospital folks told me
this--it has virtually no emissions; and they take out a
garbage-can size of ash every 2 to 3 months, and it is from
wood chips.
In Sweden, 18 percent of their renewable energy now is from
woody biomass.
You have said, from the energy information, this is where
we are going. We have got the Federal land, 47 percent of the
Forest Service budget spent fighting catastrophic fire. You
know that in California. We know that in Oregon.
And my time is way over. You have been most generous, sir.
Mr. Markey. I am learning a lot too. It is an interesting
subject.
Does the gentleman from Vermont wish to be recognized
again?
Mr. Welch. Thank you, Mr. Chairman.
I want to talk a little bit about carbon capture
sequestration, and address my questions to Mr. Hawkins.
Mr. Hawkins, I just wish if you would elaborate on why U.S.
Cap members believe that we need a set of complementary
policies in place for carbon capture and sequestration and,
more broadly, I guess, for coal; and, what would happen if we
don't have a comprehensive approach?
Mr. Hawkins. Yes. The cap-and-trade program by itself in
the early years, especially one that has a substantial number
of offsets and cost containment provisions, is likely to have a
fairly modest economic signal. And as Dr. Kunkel and others
have testified, these early projects, whether it is for carbon
capture or some advanced forms of renewables, these early
projects are likely to have incremental costs that are higher
than the carbon clearing price in the early years of these
programs.
So if you rely solely on the market signal from the cap as
the only device, you are likely to get a bunch of decisions
which look optimal from the standpoint of the individual
investor, but in fact, are suboptimal from the standpoint of
where society needs to head.
We have got to--this is a marathon. Controlling carbon is a
marathon. And if you run it like a sprint, which is what tends
to happen when you have these short-term economic signals and a
high discount rate, you are not going to finish the race.
So we tend to think that having a multiple set of
strategies, which are enabled by the bill and incented by the
bill, is very powerful. I say that a bicycle is more stable
than a pogo stick, a tricycle is more stable than a bicycle,
and a wide-stanced four-wheel vehicle is more stable than all
of them. And we have a bunch of platforms here that can be used
to drive home CO2 reductions.
And so my variant on Dr. Apt's point is, yes, the focus
needs to be on CO2, but sometimes it is good to have
a turtle strategy, have a lot of eggs on the beach, because you
are not entirely sure right now what is going to be the one
that is going to get you to victory, and you probably need more
than one. And having a strategy that gets all of these in the
game so that you have as many things to pick from we think is
the right way to do it.
Mr. Welch. So just describe, what will happen with the
deployment of the new coal-based power plants these provisions
are adopting? And one of the concerns folks have been--things
we need to do, one of the concerns folks have expressed is this
dash for gas and what the displacement would occur and how that
would affect the price in a very disruptive way. Could you
comment on that?
Mr. Hawkins. Yes. We discussed this at great length in the
U.S. Cap group, and everyone was concerned about the dash to
gas being something to be avoided. And that is why there is a
package that says there is an emission performance standard for
new coal and there is a financial incentive, the stream of
payments for carbon capture. And our view is that that payment
stream ought to be sized at a level where an investor that is
looking at a fossil investment plant says, you know, this is a
better business proposition to build a coal plant that captures
its carbon and we get that financial incentive than it is to
build a natural gas plant that vents its carbon and we get no
financial incentive.
Mr. Welch. And there has been lot of concern raised about
the timing of the deployment of the carbon capture and storage
technology, saying that commercial deployment is not expected
until 2025. But those estimates assume there is no cost to
emitting global warming pollution, no requirement to use carbon
capture and storage technology, and no significant financial
support for the technology. What do these estimates tell you
about the timing for deployment of CCS technology if this
legislation in its draft form or close to it is adopted?
Mr. Hawkins. Well, what we do is pay attention to witnesses
like Dr. Kunkel from Tenaska and Hydrogen Energy. And Dr.
Kunkel has testified that they could break ground next year on
their project if they have the right policy support, and that
could be up and running as fast as any coal plant that breaks
ground next year.
Our view is that this can happen very quickly. There are a
bunch of commercial operators that are ready to go as soon as
the policy signals get straightened out.
Mr. Welch. Mr. Trisko.
Mr. Trisko. Congressman, if I could elaborate on David's
point.
First, from a practical standpoint. If you were talking
about having a plant, an operating advanced coal plant equipped
with carbon capture and storage that was online and producing
electricity in the year 2020, that plant in effect would need
to be in the permitting stage today leaving aside all of the
issues concerning financial incentives in the bill and the
like. To get a plant on line by 2020, the plant needs to be in
permitting today. We do not have at this point, beyond the
number of plants such as AEP, the Duke plant, the Tenaska
facilities, we do not have any assurance of significant
penetration at a commercial scale by the year 2020 beyond the
kind of three gigawatt level that is proposed in the Boucher
bill. And the Boucher bill is designed to handle the demand, if
you will, for commercial scale demonstration facilities between
now and 2020. It is after the year--it is after the year 2020
when we would anticipate that the second suite of financial
incentives, those that are to be defined by what is now the
open-ended section 115 that David has spoken about, those
plants would come online after the year 2020. And the
indications are that there would be significant demand for them
going out to 2030 and 2040.
Mr. Welch. Dr. Kunkel, do you agree with the 2020 timeline
assessment?
Mr. Kunkel. Well, not for us. And, of course, we are in
permitting, and our project in Illinois has received a permit
and so on. And, of course, it does take time to develop these
projects.
One of the things I would point out is that in the post-
combustion capture technologies that we are looking at as
opposed to IGCC, that the period of time required to build that
piece on the back of an existing power plant as a retrofit
might be something like two and a half years of construction
time. I mean, these things all take significant amounts of
time. But it is less than the full construction cycle of a
power plant.
So if we could demonstrate that technology at commercial
scale, let's say, at Trailblazer, by 2015, and run it for a
year and convince people this really works, then the designs
and so on could be perfected and a new generation could be
online and operating as retrofits within a couple of years
after that point. So maybe that gets you around to the 2020
time frame for that. But, maybe let hydrogen energy talk more
about the IGCC opportunity.
Mr. Welch. Yield back to the chairman.
Mr. Markey. The gentleman's time has expired. The Chair
recognizes the gentleman from Texas.
Mr. Barton. Thank you, Mr. Chairman. I really came down
here just to ask you to give this panel a meal voucher since
they have been here all day and probably didn't get to eat much
lunch or whatever. But as long as I am here, I thought I would
ask one question.
I want to ask Dr. Apt, I believe--first, thank you for your
service to the country as an astronaut and all that you have
done. But I am told that you testified that you think a
performance-based standard based on the Clean Air Act model is
much better to use in terms of some very complex cap-and-trade
scheme. I just got a synopsis of Congressman Boucher's letter
to Congressman Waxman that is single-spaced, four pages of
changes to the proposed cap-and-trade legislation. And that is
just a summary of the changes.
So, in the Republican alternative that has yet to be
unveiled, we are waiting to see the allocation scheme in the
main bill, but we are going to have a Republican alternative.
We use a performance-based standard for coal based on the best
available clean coal technology, and then put some incentives
in in terms of beating that standard of accelerated
depreciation so that we could encourage new technology but at
the same time allow coal to be used as a fuel source for
electricity. Could you comment on that?
Mr. Apt. Sure. Thanks very much.
In my view, best available technology has frozen technology
in a lot of areas. I would encourage you to look, rather, at an
emissions standard that lowers with time. As you know, the
California standard is 1,100 pounds per megawatt hour. That has
the effect of saying, okay, we will freeze things at natural
gas or better. And that is okay if you just take a snapshot in
time. But it would be better if it declined in time so that you
know you have got to take 80 percent of the CO2 out
of the electric power industry by let's say 2040, 2050, so that
if you had something like that that declined, then Mr. Briggs'
plant that emits 400 pounds per megawatt hour looks pretty
good.
On the other hand, if you think it is going to freeze at
1,100, it doesn't look so good. So that is a modification that
I hope you would consider.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Markey. Does the gentleman from Vermont have any other
questions? Okay. Well, let's do this then, with my apologies to
the ranking member. I was going to give each one of these
witnesses one minute to tell us what they want to remember. But
given the size of the panel, that is double the time which any
member would have to question a witness. But, with unanimous
consent, I will make that motion that we give each one of you a
one-minute opportunity to tell us what it is that you want the
committee to retain as we go through the drafting and ultimate
markup of this legislation. We will go in reverse order of the
original panel. And we will start with you Dr. Apt.
Mr. Apt. Well, since I have got to go back to Pittsburgh, I
will be short. Two things. Focus on CO2. Renewables
and low carbon aren't synonyms. And two, allow efficiencies all
through the system, generation and transmission, as well as on
the customer side of the meter, to count.
Mr. Markey. Thank you. Mr. Kerr.
Mr. Kerr. I would adopt those two points. And I would also
say focus on what you are trying to do, and not put
inconsistent or contradictory pieces of policy together in a
way that will operate to make things less efficient, more
expensive to ratepayers. And, also, that aren't just jobs
following renewables, there are jobs that are followed by CCS
and nuclear and other noncarbon-emitting technologies. And a
job is a job. They don't distinguish between renewable jobs or
CCS or other sorts of jobs.
Mr. Markey. Thank you. Mr. Briggs.
Mr. Briggs. Well, first of all, I am very pleased that CCS
seems to be given as part of the mix. I would also say there is
a distinction, we haven't really touched on it too much,
between our technology and Tenaska's technology pre and post.
It doesn't really matter. CCS is available today. But I think
the right incentive mechanism is important as we have covered,
I think. And then one regulator to cover the actual policy
framework around it is also vital.
Mr. Markey. Mr. Trisko.
Mr. Trisko. Ensure that the targets and time tables that
are adopted in the bill, particularly in the short term, are
consistent with the expected widespread availability of CCS
technology, so as to avoid the result, for example, evident in
EPA's analysis--preliminary analysis of the bill that suggests
that generation from fossil-based electricity would decline
from 4.3 terawatt hours in the year 2050 to 1.3 terawatt hours
in the year 2050 under scenario three. That, to us, is an
unacceptable outcome.
Mr. Markey. Thank you. Mr. Hawkins.
Mr. Hawkins. First, I would say avoid focusing on
technologies, but keep in mind the facts on the ground that
need to change to cut carbon emissions. And I feel quite
confident in predicting that, regardless of technology
pathways, 50 years from now we are going to have electricity,
we are going to have vehicles, we are going to have fuels, and
we are going to have buildings. And we need strategies that are
going to drive decarbonization in each one of those areas. And
you have got a lot of policies in the bill that are aimed at
doing just that, and there can be good and useful debate about
how to focus on harmonizing those so they integrate well. But
those are the four big linemen that we have to think about,
electricity, vehicles, fuels, and buildings.
Mr. Markey. Thank you. Dr. Kunkel.
Mr. Kunkel. One of the most relevant things we can do as
Americans on this large problem is to tackle the problem that
the Chinese and Indians will have, which is CCS, basically.
They are building a lot of coal-fired power plants, new ones,
pretty good ones I bet, and improving ones. But they don't have
this technology. If we can find cost-effective ways to employ
it, if we can develop that, then that will be a huge
contribution.
Mr. Markey. Thank you. Mr. Robo.
Mr. Robo. Enacting a renewable electricity standard is
really critical for the U.S. to continue to drive its success
in the clean energy economy and to retain its competitiveness
globally. Clean tech is the way of the future, and we need to
be competitive as a Nation in that industry.
Mr. Markey. Thank you. Ms. Grueneich.
Ms. Grueneich. Four points. One, the bill, you got it
right. Let's get it passed. Two is we do need the renewable
portfolio standard. We can't just say let's have carbon
standards. To do transmission, you need to plan for something.
And we are just not going to be able to get the transmission we
need unless we have that renewable standard set out there.
Three, States are your partners. In all of this legislation,
think about how you can be really utilizing the States, helping
the States working together. And four as I have two 15-year-
olds, and they thank you. I don't want to go home without being
able to say, you know, we have been working hard at the state
level; we need the Federal level to step up, and my children
need that. Thank you.
Mr. Markey. Mr. Reicher.
Mr. Reicher. Mr. Chairman, there are a broad array of ways
that we can get at this climate crisis that we are facing, and
there are smart ways from both an environmental and an economic
perspective. Energy efficiency is indeed the low-hanging fruit.
We ought to go out and pick it. It does grow back because of
the improvements in technologies. Renewable is coming on
strong. There was a huge array of opportunities. The resource
base is vast in this country. We do need to crack the code on
transmission, or a lot of what we need to get done isn't going
to happen. I think the subcommittee's bill is headed in the
right direction. Please do look at this issue of making sure
there is adequate capital. And I do commend the work that
Congressman Inslee and also Senators Bingaman and Murkowski are
doing on that front.
And, lastly, let's take a look at this geothermal stuff. It
is the sleeping giant. Whether it is Texas or it is Alaska or
it is Florida, there is a lot there. The oil and gas industry
is interested in it. Let's do a hearing and explore it.
Mr. Markey. Thank you. And Dr. Gruenspecht.
Mr. Gruenspecht. Mr. Chairman, beyond endorsing Mr.
Reicher's surprise endorsement of my agency, I would say that
EIA looks forward to providing the committee, both sides of the
committee, with data and analyses to support your policy
deliberations. EIA's first administrator, Lincoln Moses--great
name--once said there are no facts about the future. However, I
think policymakers can definitely benefit from considering how
transparent and objective, if not always prescient, projections
are affected by the different policies that they have under
consideration. So, I am from the Federal Government, the
executive branch. I am here to help you.
Mr. Markey. Thank you, Doctor. And we will leave you out of
this final quick question.
I will ask each one of you, yes or no, do you think we can
construct a cap-and-trade system that can work and can be done
consistent with the long-term economic goals of our country?
Mr. Reicher.
Mr. Reicher. We can and we must.
Mr. Markey. Ms. Grueneich.
Ms. Grueneich. Ditto.
Mr. Markey. Mr. Robo.
Mr. Robo. Absolutely.
Mr. Markey. Dr. Kunkel.
Mr. Kunkel. I think we can. I think the guy on the street
needs to see the benefit to him, and he doesn't quite see it
yet.
Mr. Markey. Mr. Hawkins.
Mr. Hawkins. Absolutely. This is the most important work
that you will do in your career.
Mr. Markey. Thank you. Mr. Trisko.
Mr. Trisko. Absolutely. And the devil will always remain in
the details.
Mr. Markey. Mr. Kerr.
Mr. Kerr. Absolutely. But timing, technology, and the
avoidance of severe economic disruptions in the early years are
key to gaining the public support for the long-term success.
Mr. Markey. Thank you. Dr. Apt.
Mr. Apt. Yes. I think it can. But I worry that you will
labor mightily and give forth with a cap-and-trade that will
produce a carbon price that is too low to affect physical
change. And that really worries me.
Mr. Markey. Thank you. By the way, Doctor, you were born in
Springfield, Massachusetts, and an astronaut. Congratulations.
We are proud of you. Thank you. This is just a fantastic panel.
Thank you all so, so much for your great contributions to this
discussion. Thank you.
[Whereupon, at 5:58 p.m., the subcommittee was adjourned.]
THE AMERICAN CLEAN ENERGY SECURITY ACT OF 2009--DAY 4
----------
FRIDAY, APRIL 24, 2009
House of Representatives,
Subcommittee on Energy and Environment,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:20 a.m., in
Room 2123 of the Rayburn House Office Building, Hon. Edward J.
Markey (chairman) presiding.
Present: Representatives Markey, Inslee, Butterfield,
McNerney, Welch, Dingell, Harman, Baldwin, Waxman (ex officio),
Christensen, Sutton, Upton, Pitts, Walden, Burgess, Scalise,
Barton (ex officio), Radanovich, and Blackburn.
Staff Present: Matt Weiner, Special Assistant; Melissa Bez,
Professional Staff; Earley Green, Chief Clerk; Sharon Davis,
Legislative Clerk; Caren Anchman, Communications Associate;
Karen Lightfoot, Communications Director; Mitch Smiley, Special
Assistant; Matt Eisenberg, Special Assistant; Alex Barron,
Professional Staff; Alexandra Teitz, Senior Counsel; John
Jimison, Senior Counsel; Ben Hengst, Senior Policy Analyst;
Phil Barrett, Staff Director; Kristin Amerling, General
Counsel; and Greg Dotson, Chief Counsel, Environment and
Energy.
Mr. Markey. Good morning, and welcome to this historically
important hearing.
When people look at Vice President Al Gore, they think of
an award winning movie, ``An Inconvenient Truth.'' I think,
however, of a different movie, ``Back to the Future.'' Thirty
years ago, I sat in this same room with Al Gore, who left this
committee to become an outstanding Vice President and to win an
Oscar and a Nobel Prize for, imagine this, a documentary on
climate change.
And with Henry Waxman and John Dingell and I, who, while we
are kind of like Peter Pan, we stayed behind and debated a new
generation, as others went off. But this is our Back to the
Future moment, except today, we gather at a time when the Good
Earth is calling us to energy Independence Day, and that goal
should not take us From Here to Eternity.
Long before greenhouse gases and global warming became a
subject of daily discussions, Al Gore, Henry Waxman, John
Dingell, and I debated ways to improve the Clean Air Act. Vice
President Gore was a leader of the debate in the 1980s, and
now, the whole world knows that he has long been a visionary.
It is sometimes said that a prophet is someone who is right but
too soon. Al Gore is an example of someone who not only was
right early, very early, in fact, but who dedicated his life to
educating our country, so that they, too, saw the threat he
foresaw decades ago.
I am equally pleased to welcome Senator John Warner to our
committee. Late last year, I was fortunate to be at a dinner
honoring John Warner for his outstanding career in public life.
His speech that night confirmed for me that John Warner is an
outstanding leader, who is committed to our national security
and our environmental security. He has given great service to
his state and our country, as someone who stood for what he saw
as the right policy, and did not bend to the politics of the
day. His leadership on climate change legislation was the
culmination of a great career, and we are indeed honored to
have him here with us today.
So, we welcome you both to our committee, and I don't know
if you have any welcoming comments.
Let me turn to the full committee chairman, Mr. Waxman, if
you would like to----
Mr. Waxman. Well, thank you very much, Mr. Chairman, and
thank you for all those references to the movies that are made
in my district.
And I won't try to top you with any film references, but I
think it is a great honor to welcome our two witnesses this
morning. They are very distinguished gentlemen. Senator Warner,
who has had an illustrious career in serving his country in
many capacities. And Vice President Gore, we are always pleased
to see and welcome back to the committee on which he served in
the beginning of his Congressional career. He has gone on to do
great things, and has become a spokesman for an issue that is
very important to our deliberations.
Thank you both for being here.
Mr. Markey. Thank you, Chairman. Let me recognize Fred
Upton, the Ranking Member of the subcommittee.
Mr. Upton. Well, thank you. We welcome you gentlemen. This
is, obviously, a timely issue. This is the third day of where
we have had more than 60 witnesses this week. This is a day
that we are not in session with votes on the House floor. I
would ask unanimous consent that members not on this
subcommittee have an opportunity to ask questions following the
regular order of the subcommittee members, if I might.
Mr. Markey. Without objection, so ordered.
Mr. Upton. We welcome your testimony, and we hope that you
can be here a good part of the day to answer our many good
questions.
Welcome, both of you.
Mr. Markey. Would the Ranking Member of the full committee
like to----
Mr. Barton. Simply to echo your introduction and Mr.
Waxman's introduction, since you talked about Back to the
Future, one of our questions that Dr. Burgess is going to ask
the Vice President is if he is the inventor of the flux
capacitor. But we welcome both of you gentlemen.
Mr. Markey. We thank the gentleman very much.
Now, we turn to our extremely distinguished panel. We
welcome you back, Vice President Gore. Whenever you are ready,
please begin.
STATEMENTS OF HONORABLE ALBERT GORE, JR., FORMER VICE PRESIDENT
OF THE UNITED STATES; AND HONORABLE JOHN WARNER, FORMER UNITED
STATES SENATOR
STATEMENT OF ALBERT GORE, JR.
Mr. Gore. Well, thank you, Chairman Markey and Mr. Upton,
Chairman Waxman and Congressman Barton, Chairman Emeritus John
Dingell.
I was telling Senator Warner in the cloakroom here that it
was one of the greatest honors of my life to be a member of
this committee, and my principal mentor in the Congress was
John Dingell, and I told Senator Warner that just about
everything I learned about the legislative process came from
John Dingell, and it is with great emotion that I come back to
this hearing room, and members of the committee, members of the
subcommittee, members of the full committee, it is an honor to
be able to appear before you here today.
Mr. Markey. Could you move the microphone in just a little
bit closer, please?
Mr. Gore. Sure.
Mr. Markey. Thank you.
Mr. Gore. It is also my great honor to testify with my
friend and former colleague in the Senate, John Warner. I
served on the Armed Services Committee under his chairmanship,
and his long record of service to the Senate and the country is
truly remarkable.
Senator Warner has consistently looked with a steady gaze
past the politics of the day, to thoughtfully and intensely
focus on the national interest. His approach really reminds me
of another great American from another era, the great Senator
Arthur Vandenberg from Michigan, who helped to create the
United Nations and NATO and the Marshall Plan. He understood
that our Nation, when faced with great peril, must rise above
partisanship to meet the challenge.
Mr. Markey. Mr. Vice President, can you push that button.
Is the microphone----
Mr. Gore. There we go.
Mr. Markey. There. Good. Thank you.
Mr. Gore. You want me to repeat all of my words about
Senator Warner?
I believe that we have arrived at another such moment. Our
country is at risk on three fronts. The economic crisis is
clear. Our national security remains at risk, so long as we
remain dangerously dependent on flows of foreign oil from
reserves owned by sovereign states that are vulnerable to
disruption. The rate of new discoveries, as members of this
committee know, is falling, even as demand elsewhere in the
world is rising.
Most importantly, of course, we are, along with the rest of
humanity, facing the dire and growing threat of the climate
crisis. It is at the very heart of those threats that this
committee and this Congress must direct its focus. I am here
today to lend my support to what I believe to be one of the
most important pieces of legislation ever introduced in the
Congress. I believe this legislation has the moral significance
equivalent to that of the civil rights legislation of the 1960s
and the Marshall Plan of the late 1940s. By repowering America
with a transition to a clean energy economy, and ending our
dangerous overreliance on carbon-based fuels, which is, after
all, the common thread running through all three of these
crises, this bill will simultaneously address the climate
crisis, the economic crisis, and the national security threats
that stem from our dependence on foreign oil.
We cannot afford to wait any longer for this transition.
Each day that we continue with the status quo sees more of our
fellow Americans struggling to provide for their families. Each
day that we continue on our current path, America loses more of
its competitive edge, and each day that we wait, we increase
the risk that we will leave our children and grandchildren an
irreparably damaged planet. Passage of this legislation will
restore America's leadership of the world and begin, at long
last, to solve the climate crisis, and it is truly a moral
imperative. Moreover, the scientific evidence of how serious
this climate crisis is becoming continues to amass week after
week.
Let me share with you just a few recent examples. The
Arctic is warming at an unprecedented rate. New research, which
draws upon recently declassified data collected by U.S. nuclear
submarines traveling under the Arctic icecap for the last 50
years, has given us for the first time a three-dimensional view
of the icecap, and researchers at the Naval Postgraduate School
have told us that the entire Arctic icecap, which for most of
the last three million years has covered an area the size of
the lower 48 States, may completely and totally disappear in
summer in as little as five years.
Almost half of the ice in the Arctic cap has already melted
during the last 20 years. The dark ocean, once uncovered,
absorbs 90 percent of the solar heat that used to bounce off
the highly reflective ice. As a direct consequence, some of the
vast amounts of frozen carbon in the permafrost in the land
surrounding the Arctic Ocean are beginning to be released as
methane, as the frozen tundra thaws, threatening a doubling of
global warming pollution in the atmosphere unless we take
action quickly.
Melting of the Greenland ice sheet has reached a new
record, which was a staggering 60 percent above the previous
high in 1998. The most recent eleven summers there have all
experienced melting greater than the average of the past 35
year time series. Glacial earthquakes have been increasing on
Greenland as the melt water tunnels down through the ice to the
bedrock below. Were the Greenland ice sheet to melt, crack up,
and slip into the North Atlantic, sea level worldwide would
rise almost 20 feet.
We already know that the Antarctic peninsula is warming at
three to five times the global average rate. At the time when I
participated in one of the first hearings on global warming on
this committee in the 1970s, a researcher warned that an early
alarm bell that this crisis was reaching emergency proportions
would be if we saw the breakup of large ice sheets on the
Antarctic peninsula. That is why the Larsen--and this warming
has already caused the Larsen B ice shelf, which was the size
of Rhode Island, to collapse. Several other ice shelves have
also collapsed in the last 20 years. Another large shelf, the
Wilkins ice shelf, which is roughly the size of Northern
Ireland, is now beginning to disintegrate right before our very
eyes.
A recent study in the journal Science has now confirmed
that the entire West Antarctic ice sheet is warming. Scientists
have told us that if it were to collapse and slide into the
sea, we would experience global sea level rise of another 20
feet. Each meter of sea level increase leads to 100 million
climate refugees. Recent studies have shown that many coastal
areas in the United States are at risk, particularly Southern
Florida and Southern Louisiana.
Also, carbon dioxide pollution is now changing the very
chemistry of the world ocean. Ocean acidification is already
underway and is accelerating. A recent paper published in
Science described how the seawater off the coast of Northern
California has now already, for some periods of the year,
become so acidic from CO2 that it is actually
corrosive. To give some sense of perspective, for the last 44
million years, the average pH has been 8.2, and the scientists
at Scripps have now measured levels off the north coast of
California and Oregon at a pH of 7.75. Now, the lower the pH,
the more acidic the ocean water.
Coral polyps that make reefs, and everything in the ocean
that makes a shell, are now beginning to suffer from a kind of
osteoporosis, because the acidification levels have reached the
state that it begins to dissolve the shells as they are formed.
Salmon have now disappeared off the coast of California.
Researchers are now working to determine the cause, and whether
or not this is due to acidity and the relationship between
acidity and the so-called ``dead zones'' of extreme oxygen
depletion that now stretch from the West Coast of North
America, Central America, and South America, almost all the way
across the Pacific, in a wedge that stretches to the West. The
health and productivity of the entire ocean is now at risk.
The Union of Forest Research Organizations, with 14
international collaborating partners, have reported that
forests may lose their carbon regulating service, and that ``it
could be lost entirely if the Earth heats up 2.5 degrees
Centigrade.'' Throughout the American West, tree deaths are now
at record levels, with the records being broken year after
year. That is the reason why Canada's vast forest has now
become a net contributor of CO2 to the atmosphere,
rather than absorbing it. The Amazon, the forests of Central
Africa, Siberia, and Indonesia, are all now at risk.
This year, a number of groups, ranging from the National
Audubon Society to the Department of Interior, released the
U.S. State of the Birds Report, showing that nearly a third of
the Nation's 800 bird species are now endangered, threatened,
or in significant decline, due to habitat loss, invasive
species, and other threats, including climate change, the major
shift attributed to the climate crisis related to the migratory
patterns, and a large, consistent shift northward among a vast
range of bird species in the United States.
Some of the most intriguing new research is in the area of
extreme weather events and rainfall. A recent study by German
scientists in the publication Climate Change, projects that
extreme precipitation will increase significantly in regions
that are already experiencing extreme rainfall. Manmade global
warming has already increased the moisture content of the air
throughout the world, causing bigger downpours. Each additional
degree of temperature causes another 7 percent increase in the
moisture content of the world's air, and leads to even larger
downpours when storm conditions trigger heavy rains and snows.
To bring an example of this home, 2009 saw the eighth ten
year flood of Fargo, North Dakota since 1989. Last year, in
Iowa, Cedar Rapids was hit by a flood that significantly
exceeded the 500 year floodplain. All time flood records are
being broken in regions throughout the world. Conversely, those
regions that are presently dry are projected to become much
drier, because higher average higher temperatures also
evaporate the soil moisture.
The American West and the Southeast have been experiencing
prolonged, severe drought and historic water shortages. In a
study published in January 2008 in Science, scientists from the
Scripps Institute estimated that 60 percent of the changes in
the water cycle in the American West are due to increased
atmospheric, manmade greenhouse gases. It predicts that
although Western states are already struggling to supply water
for farms and cities, more severe climatic changes will strain
the system even more. Agriculture in our largest farm state,
California, is at high risk.
Australia has been experiencing what many there call a
thousand year drought, along with record high temperatures.
Some cities had 110 degrees for four straight days two months
ago. And then, of course, they had the mega-fires that caused
so much death and destruction.
Federal officials from our own National Interagency Fire
Center report that we have seen twice as many wildfires during
the first three months of this year, compared to the same
period last year. Due to the worsening drought, the outlook for
more record fires, especially in Texas, Florida, and
California, is not good.
A number of new studies continue to show that climate
change is increasing the intensity of hurricanes. Although we
cannot attribute any particular storm to global warming, we can
certainly look at the trend. Dr. Greg Holland, from the
National Center for Atmospheric Research, says that we have
already experienced a 300 to 400 percent increase in Category 5
storms in the past ten years in the United States. Last August,
hundreds of thousands of people had to evacuate as Hurricane
Gustav hit the Gulf Coast, and then, of course, there is the
destruction of Galveston and areas of New Orleans, where the
residents are still recovering.
The same is happening in the rest of the world. Last year,
Cyclone Nargis killed 20,000 people in Myanmar, and caused the
suffering of tens of thousands more. For these, and many, many
other reasons, now is the time to act. And luckily, positive
change is on the way.
In February, when the Congress voted to pass the stimulus
bill, it laid the groundwork for critical investments in energy
efficiency, renewables, a Unified National Smart Grid, and an
historic transition to clean cars. This was a crucial
downpayment that will create millions of new jobs, hasten our
economic recovery, strengthen our national security, and begin
solving the climate crisis.
But now, we must take another step together, and pass the
American Clean Energy and Security Act. Chairman Waxman and
Chairman Markey have pulled together the best ideas in the
Congress, to begin solving the climate crisis, while increasing
our energy independence, and stimulating our economic recovery.
Let me highlight just a few items in the bill that I
believe to be of particular importance. First, it promotes the
rapid introduction of the clean and renewable technologies that
will create new, good, sustainable jobs, and reduce our
reliance on carbon-based fuels. It is time to close the carbon
loophole, and begin the steep reductions that we need to make
in the pollution that causes global warning.
Second, it helps us use energy more efficiently and
transmit it over a secure, modernized, digital smart grid
system. Of course, this move to repower America must also
include adequate provisions to assist those Americans who would
face a hardship. For example, we must recognize and protect
those who have toiled in dangerous conditions to bring us our
present energy supply. I believe we ought to guarantee good
jobs for any coalminer displaced by impacts on the coal
industry.
And this bill also focuses on intensive R&D to explore
carbon capture and sequestration, to determine whether and
where it can be a key part of the solution. I have always
strongly supported intensive R&D on carbon capture and
sequestration and demonstration projects, and I am happy that
at long last, this committee has found a way to do that.
Our country cannot afford more of the status quo, more
gasoline price instability, more job losses, more outsourcing
of factories, more years of sending $2 billion every 24 years
to foreign countries for oil, and our soldiers and their
families cannot take another ten years of repeated troop
deployments to regions that just happen to have large oil
supplies. Moreover, the best way to secure a global agreement
that guarantees that other nations will also reduce their
global warming pollution is for our country to lead the world
in meeting this historic challenge.
The United States of America is the world's leader. We are
the only Nation in the world that can lead. Once we find and
reestablish the moral courage to take on this issue, the rest
of the world will come along. Now is the time to act, before
the world gathers in Copenhagen this December to solve this
crisis. Not next year, this year.
I strongly urge bipartisan support of this crucial
legislation.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Gore follows:]
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Mr. Markey. Thank you, Mr. Vice President, very much. And
now, we turn to welcome our other distinguished American,
Senator John Warner. Thank you, sir.
STATEMENT OF JOHN WARNER
Mr. Warner. Thank you, Chairman Waxman, Chairman Markey,
and our good friend, Chairman Dingell, and the distinguished
Ranking Members, Mr. Upton, Mr. Barton.
It is really a privilege to come back to the Congress in
the retired status. I assure you that I checked the applicable
laws and so forth, and I am delivering a statement this morning
consistent with those regulations, which I shall follow
carefully.
But I want to say a word about the fine gentleman on my
left. We breakfasted together this morning, just as if we were
still in the Senate together. Talked about the many men and
women that mentored us in our legislative careers, and I just
want to say to you, my dear friend, you have had an
extraordinary public service career, and you are charging ahead
as strongly today as you have ever done in the history of that
career. And as you said, our parents are rather proud of both
of us. So, I thank you, and I thank those in this room that I
have served and worked with these years, and for the gracious
statements.
This is serious business, very, very serious business.
Having served 30 years in the other body, I have seen the
panorama of legislative challenges in that period, and indeed,
prior thereto, I served for five years in the Pentagon, in the
Department of Defense, and testified before the Congress. But
this particular moment in our history is critical, and future
generations will look back at this day and tomorrow and in the
future, and see what we did, and maybe, what we didn't do. So,
I thank the leadership, both the Democrats and Republicans of
this committee, for taking the initiative, and the members to
make it work.
I think, also, the committee should pause to express its
appreciation to the extraordinary number of organizations,
largely the ones I work with today are the nonprofits, but
indeed, the corporate and business center, sectors of our
country, have come together, and I think there is a good,
strong, constructive dialogue going on.
Unfortunately, we are greeted, the Vice President and I
were talking this morning, by articles like the one in the New
York Times this morning, but let us hope that is behind us, and
that as Members of Congress, and as witnesses, we come here and
speak the absolute truth, and if I may underline, speak in such
a way that all levels of America can understand what the
challenges are before us, the complexity, the long, rough road
ahead to reach those goals, that hopefully this legislation
will establish, and that my beloved Senate will join in a
conference, and we will get a law.
All too often, I have watched and each of us have, the
advertisements today. And they oversimplify the problem. I
mean, you see very attractive actors and actresses get out and
say well, clean coal technology is just around the corner. We
know it is not around the corner. They talk about well, wind
power, wind and solar are vital parts of working a way out of
this situation, but each of those requires substantial
planning, engineering, tax subsidies, support.
Take, for instance, we are talking about the smart grid. It
looks to be a quicker approach to begin to correct things with
that smart grid, but to do it, we are going to have to work
through condemnation laws, to get the land over which those
grids have got to travel, particularly, to convey the energy
from the very valuable and abundant source of wind.
I saw the other day where, in California, the solar panels
are using an extraordinary amount of water, so when you go into
one situation, you have got to figure out what it affects
adversely in the other. So, this is a tough road ahead of us,
and I am glad the leadership of this House of Representatives
has tackled it and is going to move forward.
The Vice President very carefully carried a lot of the
factual material here this morning, and I won't try and repeat
it. I would ask unanimous consent my entire statement go in.
Mr. Markey. Without objection.
Mr. Warner. Because I want to move through, somewhat
swiftly, so we can take the questions, and actually hear from
the membership. Since I have retired or left the Senate, I have
continued to work in this area, and will continue to do so,
because I feel very strongly committed.
I was privileged, for 14 months in the Senate, to join with
my very good friend, Joseph Lieberman, an extraordinary,
courageous legislator, in putting together our bill, and with
the support of our chairman, Senator Boxer, and a lean, but
nevertheless majority of the Senate, I was the only Republican
that cast a vote to get that bill out. And I don't say that in
any derogatory sense towards my colleagues. I respect their
views, but I think, as we go along, and one of the things that,
as I go back and wish we had done, was to give a little
territory to get that bill through, and we didn't perhaps give
enough territory to begin to get at least a greater
deliberation than the few days on the Senate floor, to have
laid a stronger foundation for this committee and other
elements of the Congress to cover this subject.
I want to talk about that foundation. In my judgment, this
subject of climate change, the future of energy, and our
national security are all interwoven very closely, and I hope
that the Congress recognizes that they have got to build their
legislation on a foundation with three legs on it: the energy
leg, the global climate change leg, and the national security
leg.
And it is that national security that I want to dwell on
here for a few minutes, because I think that is the most
significant contribution I can make. I want to credit many
national security experts who have expressed their concerns,
most of which I share. Many senior retired officers, and I say
with a sense of humility, I have had an opportunity, many years
in the Pentagon, many years in the Congress on the Armed
Services Committee, to work with the same officers today who
are retired. They don't have a political bone in their system.
They are only speaking out in terms of their projection of the
responsibilities for the Armed Forces of the United States, as
this global situation appears to worsen. And I will address the
specifics on that.
But I want to take, I don't often like to take quotes, but
this one, I think, is worthy of your attention. One
extraordinary soldier, one I worked with, and you did, too, Mr.
Vice President, the former Chief of Staff of the United States
Army, General Gordon Sullivan, who chaired the Military
Advisory Board on the Center for Naval Analysis--that Center
has done a lot of valuable work in this area--succinctly framed
the situation as follows: ``The Cold War''-- and he is
referencing, of course, our, the former Soviet Union--``the
Cold War was a specter, but climate change is inevitable. If we
keep on with business as usual, we will reach a point where
some of the worst effects are inevitable. Back then, the
challenge was to stop a particular action. Now, the challenge
is to inspire a particular action. We have to act if we are to
avoid the worst of the effects.''
If I may, I was hoping that Chairman Dingell would be here
today, I want to go back and, just a brief personal
recollection. I grew up during the Great Depression, and then,
the years of World War II. I was privileged to, in the last
year of the War, wear the uniform of a young sailor, when my
distinguished colleague, Chairman Dingell, was really in the
thick of the fighting. Well, you are now.
Our generation was referred to as the Greatest Generation,
but the thing about it is, and I don't want to be too prosaic,
but I think back, of the inspiration that it took to get
through those periods in American history. Went back and read
that wonderful speech given by Franklin D. Roosevelt in his
first inaugural. ``The only thing we have to fear is fear
itself.''
There is a very substantial element of fear attached to
this subject. Now, we are, as a Nation, together with other
nations in the world, facing one of the most unprecedented and
difficult economic situations ever in history. We also have our
brave men and women of the Armed Forces fighting two wars. And
the question is raised, is this the time to challenge an issue
of this magnitude, which has ramifications of cost to everyone
here in this country, and is going to require sacrifices? And I
say to you, as my distinguished colleague said, yes, it is the
time.
I witnessed personally the Nation survive those trials of
the Depression and the War, and it emerge and redevelop itself,
and become a stronger Nation, stronger than any of us ever
imagined we could achieve in the late '40s and '50s. We can do
that again, but it is going to take your leadership. We will do
it again. We have to, because every day that goes by increases
the cost, as I understand it, involved in this situation.
Let me say that one thing that we have got going for us as
legislators, is that there is a desire among a broad cross-
section of the American people to do something. They want it
done. They don't understand all of the complexity and all the
technical things, but instinctively, they are saying we are
with you. But the duty we have is to be honest with them, tell
them it is going to be a burden, and tell them it is going to
take time. I mean, clean coal technology, which is so important
to my state, Virginia, and I have looked into this question of
capture and sequestration, and transfer and sequestration.
That is going to take big bucks and a lot of time to
perfect it, so I say to you most respectfully, as I look back
at the legislation that we put forward in the Senate, we had in
there provisions, and I used to characterize it, is that the
President of the United States is the engineer driving this big
train. He had the throttle to push, he had the brake to slow
down. In order to allow our power sector, our engineering
sector, transportation sector, manufacturing sector, to do the
job that I think in their heart instinctively they want to do,
we have got to give them the assurance that the timetables we
establish have got to be such that they can keep pace with
their responsibility to meet the needs of the citizens today,
and at the same time, engage in the research and development of
the solutions that we have, but do it in a timely fashion.
The most challenging thing for this committee in this
legislation is to devise that language, to give the President,
and the President has stepped forward, and shown a measure of
strong leadership on this subject, and a willingness to work
with the Congress, but we have got to devise that language that
enables the President, indeed the people in this country, to do
the work that has got to be done in such a way that we don't
put on the burden that they have to bear before the technology
has been done and the infrastructure installed for them to
continue.
I mean, in the coal industry, if we move too swiftly, coal
is likely to switch to natural gas. Now, natural gas, people
think is, you listen to some of them, it is fewer, but it has
50 percent of the greenhouse carbon and so forth, am I not
correct, as does coal, and we don't have identified yet the
sources of gas to meet the demand if the power industry
suddenly were forced, as a matter of necessity, so as not to
violate the law, to shift to gas.
So, give to the President the language, I wrote it in the
previous bill, and I hope that you can even do a better job, to
give the President the authority to correct certain situations
if this country cannot meet its obligations under the law.
So, if I were in the Senate today, I would be doing one
other thing, and that is, I would be working to try and
incorporate language, I hope in both bodies, that would
recognize the enormous benefit of bringing to the table, you
had commerce, you had energy, you had transportation at this
table, but bring to the table the defense sector, the
Department of Defense, the intelligence community, and certain
elements of the infrastructure in the private sector that
support our defense, and let them express their views. Let them
be charged by the Congress in this legislation for the
accountability to do their share to reach these goals, because
as the Vice President recited, the effects of climate change,
and I am not here to argue the science, but certainly, the
reality, he spoke about the Arctic, the Antarctic and the North
Pole and so forth. We were talking about those submarines, and
how they had to do the scientific work to determine the
thickness of the ice, and how that database, which was begun in
1958, now shows you how much that has shrunk over a period of
time.
But it is the members of the military that will be called
upon to help those nations who, as a consequence of the erratic
nature of climate change, could be losing their sovereignty,
suffering mass migrations, political instability, creating a
vacuum. So, many of these nations are now on the verge of
political collapse, and this push from a climatic condition
could shove them over where they lose their sovereignty.
Somalia is an example of that with the drought, on that
littoral of Africa.
We have got to be sure that we are doing everything to
alleviate these situations, because we are the only country
that has the military capability, particularly the lift
capability, the transportation capability, to get there in a
timely way, and do what we can in a humanitarian way to
alleviate the suffering that is occasioned by these situations.
Stability in the world is absolutely critical, and we are
called upon, as you said, Mr. Vice President, we are the
leader, we are the one that has the strongest of the
militaries, and we will be called upon. To the extent that our
military has to perform missions occasioned by climatic
conditions or others, is the extent to which they have less
ability to do missions elsewhere, so there is a direct cause
and effect between what our military are called upon to do, to
do our normal role of protecting freedom in the world, and to
meet these situations. Whether it is crop failures or famine,
disease, mass migration of people across borders, destruction
of the vital infrastructure, all of these things can lead to
failed nations and instability.
So, I just want to conclude by saying we are the best
equipped. We are prepared. The United States has always been of
a soft heart, to help those less fortunate than ourselves, and
this poses a real problem.
I go back to one other admiral. I served with him when he
was NATO Commander, NATO South. And he said, as part of the
Military Advisory Board, national security and the threat of
climate change, he said, this is Admiral Joseph Lopez, I think
Joe has only voted. I don't know if he has ever done anything
in the political world. I have known him that well. And he
said: ``You have a very real change in natural systems that are
most likely to happen in regions of the world that are already
fertile ground for extremism.'' That sums it up, and delaying
action on this just raises costs, leaves us less prepared to
try to alleviate the stress that we have put on our military.
So, I strongly urge that you look at the possibility of
injecting in this record somewhere the views of our
departments, and hopefully, language which will hold them
accountable, and make them as much a partner as the other
departments and agencies of our government. And I am sure my
good friend Congressman Ike Skelton, can work with you to see
that happens.
Thank you very much.
[The prepared statement of Mr. Warner follows:]
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Mr. Markey. Thank you, Senator, very much.
And now, we will turn to questions from the committee, and
the chair will recognize himself, and let me ask you this, Vice
President Gore.
We are in an economic recession right now. Our energy
policies in the past have not protected us against price
spikes, or the impact on our economy, our national security.
Could you talk a little bit about what your view is with regard
to how the legislation pending before this committee could
actually have a positive impact upon the workers of our
country, in the long run?
Mr. Gore. Mr. Chairman, thank you.
I believe that one part of the answer to the economic
crisis is to create jobs with public investments in
infrastructure. Economists across the spectrum, from liberal to
moderate to conservative, all agree that these are the unusual
circumstances where both sides say yes, we need to have public
investment to get the economy moving more quickly again. And
all sides agree that the best short-term investments to create
jobs quickly is in infrastructure.
The focus on green infrastructure, to lay the foundation
for our 21st century economy, is the logical place to make
those investments. Prior to the current era, the largest surge
in economic growth and productivity was the Industrial
Revolution. Historians say that one among many reasons for the
onset of the Industrial Revolution was the perception in
England and Scotland, where it began, that they were running
out of trees, and so, that gave them an extra impetus to go for
the coal, and the new steam engine and the other devices ran on
coal.
Now, it is obvious that we are either at or near peak oil,
especially for, people argue about this, but the affordable
light, sweet oil, of course there is more of this heavy, dirty
oil that is very high priced, and that is a different story
altogether. But we are at or near the peak for the oil that
dominates the market today.
As the rate of new discoveries declines, the secular demand
in places like China and India is rising. If we didn't have a
global recession today, the oil price would be truly at all
time record levels. For the last 35 years, since the fall of
1973, when President Richard Nixon responded to the Arab OPEC
oil embargo by saying we have got to have, become energy
independent, we have been on a rollercoaster, with the price
going up, delivering body blows to our economy, and just as we
summon the political will to do something about it, the price
collapses again, and that political will dissipates.
As President Obama put it, we have gone from shock to
trance. But this rollercoaster is headed toward a crash, and we
are in the front car. So, when you talk about energy prices,
remember last summer, and what happened then. And remember what
is going to happen as the global economy recovers, and the
price skyrockets again, what are you all going to say to your
constituents about what you can do then? Well, you can say
well, we don't have any control over OPEC. We don't have any
control over the world oil markets.
Well, this bill makes it clear that we do have some control
over OPEC. We can form a bipartisan national will to shake off
the trance and keep our eyes on the ball, and protect the
American people from the skyrocketing prices that are in our
future if we just do the same old thing, and expect the same
old results.
So, we can create jobs by putting people to work, building
the Unified National Smart Grid, building the solar panels,
building the windmills, building the geothermal installations,
insulating homes, changing out the heating and lighting
systems. And those jobs can't be outsourced. They are here,
right here, and as the work is done, it makes our country
stronger, and positions us to lead the world in this new energy
revolution.
Mr. Markey. OK. Thank you. My time has expired. I am going
to turn and recognized the Ranking Member, Mr. Upton.
Mr. Upton. Thank you, Mr. Chairman. I want to ask two
questions.
I will ask them in somewhat rapid fire, and let both of you
respond, but it may take me a minute to finish the first one.
All of us here want to reduce emissions, and we want to reduce
emissions without losing jobs, and we want to do it in such a
way that the costs will not impact our Nation's capability to
be competitive with other countries overseas. But we know that
the most contentious issue is cap and trade, which may of the
panelists, the last two days, have said, in fact, it would
increase costs. Last year, Senator Warner, you knew well your
bill failed to get the necessary votes to pass with cloture.
Another 12 that voted for that said that they would vote no on
final passage in a letter, including my two Senators, Senator
Debbie Stabenow and Carl Levin.
This month, April, by almost a two to one margin, the
Senate rejected cap and trade as part of reconciliation, which
of course, would have required only 50 votes instead of 60. You
have seen the headlines. This from last week in the Washington
Post, India rejects calls for emission cuts. The same has been
broadcast as it relates to China. And I would note that it is
pretty interesting to me that some of the same folks in the
Congress who were opposed to entry of the WTO of China, because
the conditions on China weren't tough enough, now are in favor
of, in fact, believing that the WTO will have the framework to
provide for the tariffs on goods produced in China.
But there is a legitimate fear that there is going to be
serious leakage of jobs to China and India, and frankly, my
state can't afford to lose any more. We have lost 150,000 jobs
in Michigan this year already. If somehow, cap and trade defied
all the odds and got to the President's desk, legal challenges
probably taking years will start, not knowing how many jobs
will depart, as it relates to WTO.
As it impacts the planet, by the way, the steelworkers have
indicated that they emit only 1.4 tons of carbon for every ton
of steel produced in the U.S., versus about 4 tons of carbon
per ton in China. What would be wrong with the WTO taking up
the cap and trade debate, and requiring all member nations to,
in fact, have a plank, an enforcement plank, as part of their
participation in WTO, so that we know in advance whether or not
they would comply or not, and would be in agreement?
The second question that I have is, doesn't nuclear have to
be part of this equation? Senator Gore, when you testified, or
Vice President Gore, when you testified before this committee
in the last Congress, many of us noted that there wasn't a word
in your book, or a scene which would have been worth a thousand
words, right, a picture, in the movie about nuclear. EPA's own
analysis said that in order to meet the targets set in this
bill, there has to be a 200 percent increase in nuclear. The
President has called for doubling or tripling renewables.
Shouldn't we be doing the same thing with nuclear?
Mr. Warner. I will be very brief.
On the nuclear, I am proud to say I was part of a Navy that
ran ships all over the world with those plants. We had the best
safety record, still have it. Nuclear power is safe. It is
relegated to the sidelines because of the cost and lack of the
industrial base, and fear. We have got to do a frontal assault,
and explain the safety is there, that it is zero greenhouse
emissions, but the cost initially is pretty heavy, and we have
got to encourage the Congress to put forth the tax provisions,
the guarantees, and other legislation is needed to jumpstart
this industry. I couldn't agree with you more the need to have
nuclear power as a part of it.
As to the WTO, we recognize that greenhouse emissions know
no border. They come from all the countries, and if we in the
United States and other countries begin to take up and burden
our taxpayers with costs to achieve some reduction, and the
others go full-bore in the opposite direction, they will just
cancel out our efforts. The WTO provides a forum in which we
can begin to induce, particularly for China and India, to come
and join. I somehow hope there is a sense of consciousness in
those governments that they are duty bound to step up this
time, at the fourth time international conference in
Copenhagen, and begin to pull on the oar with the rest of us.
Mr. Gore. Thank you, Congressman Upton.
First of all, I am glad you cited the steelworkers, because
the steelworkers have formally endorsed this. They are strongly
in support of this legislation and the cap and trade approach
generally.
Secondly, you mentioned India and China. I think it is
important to have that discussion, and while they are often
lumped together, in my view, they are actually very different,
as they relate to the challenge of the climate crisis. Partway
through this century, India will surpass China in population,
and at some point, may rival China in industrial power.
But the reality today and for the near term future is very
different. China is one of the two largest emitters, along with
us. India really is not. It is growing, but the significance of
China is way larger than that of India, where this crisis is
concerned. And while it is true the headline you quoted, with
respect to India. I gave my slideshow in the Indian parliament.
I have met with them and their leaders numerous times, and I
can tell you, there is a lot of movement in India. But the
position you quoted, at present, is correct.
With China, it is a little bit different. They are now
actively moving. They have far larger investments in green
infrastructure than the United States does, even after the
stimulus bill, even after this bill is adopted. They see the
future. They have, by far, the largest solar installations.
They are moving on every single front, and there have been
active discussions between Beijing and the provincial
governments about internal reduction targets, a kind of
regional cap, region by region, in China. And they have left
the door open to a very different approach at the meeting in
December, compared to what they have done in the past.
Just last week, the head of the International Energy
Agency, in consultation with Chinese authorities, issued a
report showing why it is absolutely essential for China to
reduce their CO2 emissions. So, I think that if the
United States takes the lead, I think it is very likely we will
see a very different response from China this time.
Now, on the WTO issue that you mentioned, there are
provisions in this bill that accomplish substantially the
result that you talk about in your question, and there are
those who say a nondiscriminatory approach, taken by a country
that has established limitations on carbon, if it is applied
evenhandedly, might well survive in the WTO. I wouldn't leave
it up to them to come to an answer, because it might be like
the Doha Round. It might be endless.
I think we can't turn it over to the WTO. I think we have
got to be in charge of our own destiny, and then, if it has an
international dimension, where we say oK, we have got to even
this out, if some Country X doesn't have any limitations, we
will find a legal way to even that out. This bill puts in place
mechanisms to go down that road, if it becomes necessary. So, I
think that is excellent.
Now, finally, the nuclear discussion would take more time.
I don't want to impose on the time restrictions here. But I
will give you a brief answer. I am anti-nuclear. I am skeptical
that will play a much larger role than it does now. And I won't
go through all the reasons. Let us assume, for the moment, that
we solve the nuclear waste storage problem. Let us assume that
we solve the problem of accidents by the people who are
operating these reactors. They are all one-offs. There is not a
single one that is like another one, so they are a little bit
vulnerable. But let us assume that we can solve that.
For the eight years I was in the White House, every single
nuclear weapons proliferation problem we had to deal with was
connected to a reactor problem, and though the technologies are
somewhat different, if you are a dictator in a country that has
a reactor program, and you have got a team of scientists and
engineers capable of managing that and a fuel cycle, you can
force them to work secretly at night to build you nuclear
weapons. That is what North Korea did. That is what Iran is
trying to do. That is what has happened elsewhere.
So, in some of these unstable regions, if we modeled the
behavior to put these nuclear reactors everywhere in the world,
we would rue that day. We would also run out of fuel pretty
quickly, and have to go to these other cycles that enrich the
fuel even more, which would make the weapons problem much, much
worse.
But the final issue is cost. There is not a single
engineering or construction firm anywhere in this country who
can give you an accurate cost projection for what it takes to
build a nuclear reactor, not a single one. And the utilities
are scared of those overruns.
And there is another issue. Along with the expense, they
only come in one size, extra large, because the economies of
scale for the foreseeable decades ahead mandate a very large
size. I know that there are research projects on smaller
reactors. They are at least 15, 20 years away. I hope they get
one.
But here is the problem that the current generation of
reactors poses. The utility managers face an uncertain future
on demand projection. You had a witness earlier this week who
pointed out what the projections for energy use in the 1970s
were, and how high they went, and what the actual results were.
I remember in the Tennessee Valley, TVA, in response to demand
projections showing an annualized compounded 7 percent increase
in electricity demand, started 20 some odd reactors, and then
after that embargo that I mentioned earlier, oil prices shot
up, coal prices ought not be tied to oil, but they are, because
of the substitution, and then electricity prices went up. That
7 percent figure went down to 1 percent, and most of those
reactors had to be canceled, and that is the real reason why
there weren't any orders after 1973. It is the expense, and the
lack of flexibility. If you are looking 15 years out, in a time
which like the 1970s, once again has a lot of uncertainty about
what the future demand is going to be, and what the future
price is going to be, you want more flexibility, smaller
increments.
That is why for each of the last two years, the largest new
increments for electricity generation in the United States were
wind, because they are going for these smaller increments that
give them more flexibility. So, again, I am not opposed to
nuclear. I think it ought to compete in the marketplace. I do
think that for all of those reasons, it is likely to play only
a small increased role from what it does now.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the chairman of the full committee, Henry Waxman.
Mr. Waxman. Thank you, Mr. Chairman. To Vice President Gore
and Senator Warner, I thank you for your testimony, and for
your leadership on the energy and the global warming issues.
Two days ago, we had testimony from a group called the
United States Climate Action Partnership. It is a coalition of
industry and environmental leaders, and their testimony was
remarkable, because instead of corporate CEOs and environmental
leaders opposing each other, which is what usually happens when
we deal with environmental bills, they were united in calling
for strong, effective energy and climate legislation.
And your testimony today is remarkable in a similar way.
You come from opposing political parties, yet you are united in
calling for enactment of market-based controls on carbon
emissions. To succeed, we are going to have to bridge
differences between environmentalists and industry, Democrats
and Republicans, and your testimony shows that we can do that.
In my conversation with my colleagues, I often hear from
Members who tell me they want to do something, but they are
worried about their districts and what will happen in the
transition to a clean energy economy. They are concerned about
meeting the costs of this transition.
How would each of you answer Members of Congress who raise
those concerns? They are legitimate concerns. What would you
tell them, Mr. Gore and Mr. Warner?
Mr. Warner. I would give a short answer. I was privileged
to be in the Senate when we did the Clean Air Act, second
round, the Clean Air Act, and I watched that unfold. I was
privileged to work with George Mitchell, Pat Moynihan, John
Chafee. They were the three, the triumvirate, the three, they
were sort of the Four Horsemen. And it was strong leadership
from the top down in the Senate.
When the bill came to the floor out of the committee, we
recognized that it was bogged down. George Mitchell then
undertook around the clock, to see Members individually,
singly, and so forth, to try and work through their
constituencies, which oftentimes is different, as we well know,
in different portions of the country. But it was that strong
leadership that got it done, and you ought to go back and
research some of the rhetoric and the press at that time. They
thought the sky was going to fall in if that Clean Air Act were
passed.
Well, what is the result? Energy and the clean air did
survive. The industrial base formulated a means to do it, and
are doing it far below the original cost projections. So, I
would just say we have to muster the courage, and point to
those chapters in history when the Congress has led forcefully
and achieved it, and this time, I think fortunately, the
President is going to be a strong ally.
Mr. Gore. I think that the cost of energy will come down
when we make this transition to renewable energy. Look at
electric cars, for example. The internal combustion engine, for
most of the time it has been used, has had an efficiency of
about 15 percent. An electric motor has an efficiency of about
90 percent. You can run an electric car on the equivalent of $1
a gallon gasoline.
How do we get from here to there? We have to make the
investments, and make the adjustments in the energy marketplace
to accomplish this transition. We have two paths that we can
pick. One is to keep on being hostage to OPEC, even as we know
this marketplace is leading to sky high prices, as the oil
reserves begin to deplete, and as the demand rises. Or we can
decide we are going to control our own destiny, and put in
place this infrastructure that will allow us to give the
American people lower energy prices.
Now, what is the cost of the transition? The latest and
most, what I regard as the most authoritative estimate of the
cost of the transition, is about $0.30 per day. As you said,
Mr. Chairman, the cost of a postage stamp. And that doesn't
even take into account the savings that the same household
paying that $0.30 a day can make if they take advantage of the
other provisions that will allow them to insulate and change
out the windows and lighting, and have sharp decreases in their
energy consumption.
Mr. Waxman. Well, I think you are making a very valid
point. We do have regional differences. We represent different
parts of the country and different constituencies, but we have
a national interest to figure out how to get this done, and to
recognize that we have to reconcile these concerns, that are
very legitimate.
I think the two of you illustrate that. As we heard from
the USCAP the other day, we have got to keep working at it. I
remember that Clean Air Act reauthorization. We worked hard on
this committee, and under the leadership of Chairman Dingell,
we got a bill out 41 to 1 out of committee, and the first cap
and trade program was in that legislation to deal with the acid
rain problem. Industry told us it would cost billions of
dollars, and instead, it was a tenth of what they predicted.
So, I think we need to push things forward, do it in a
responsible way, try to bring everybody along with us, because
we all have a national concern, international concern, as we
address our regional ones as well.
Thank you, Mr. Chairman.
Mr. Markey. Thank the gentleman. The chair recognizes the
gentleman from Texas, the ranking member of the full committee,
Mr. Barton.
Mr. Barton. Thank you, Mr. Chairman. I want to point out,
since we keep talking about the Clean Air Act, amendments of
1990, that I was on the committee, and I was one of those
Republicans who voted with Chairman Dingell. In fact, I was a
cosponsor of the bill, and I know most people think I have gone
over to the dark side now, but at least in my early years in
the Congress, I was in the light. And I think I still am, in
some regards.
I want to point out, before I ask my question, that we have
Lord Monckton in the audience. Republicans had asked that he be
allowed to testify today, and that wasn't possible. He did
testify earlier, as Mr. Markey has pointed out, but we
appreciate you coming over from London to at least observe the
hearing.
I was somewhat taken aback, Mr. Vice President, by your
listing of current environmental problems attributed to global
warming. You did miss a few, though. The Dallas Cowboys have
not won a playoff game in ten years. You didn't mention that.
And you also, as Mr. Markey pointed out to me, the Boston, the
New England Patriots didn't make it to the Super Bowl. I would
add those to the list of problems that you enumerated.
I do want to directly go to one of the problems that you
talked about. You talked about CO2 concentrations
rising in the oceans, and the effect that that is, or could be
having. I have a book here, called CO2, Global
Warming and Coral Reefs, by Dr. Craig Idso, I-d-s-o, who has a
magazine that he publishes each month called CO2
Science, and I am going to read the summary from the book, and
I will put it in the record. ``The rising CO2
content of the atmosphere may induce changes in ocean chemistry
pH that could slightly reduce coral calcification rates, but
potential positive effects of hydrospheric CO2
enrichment may more than compensate for this modest negative
phenomenon. Theoretical predictions indicate that coral
calcification rates should decline as a result of increasing
CO2 concentrations by as much as 40 percent by the
year 2100. However, real world observations indicate that
elevated CO2 and elevated temperatures are having
just the opposite effect. In light of the above observations,
and in conjunction with all the material presented, it is clear
that climate alarmist claims of impending marine species
extinctions, due to increases in both temperature and
atmospheric CO2 concentration are not only not
supported by real world evidence. They are actually refuted by
it.''
Now, I just put that into the record, to point out that
some of the phenomena that you indicate are obviously
occurring. You know, if they are occurring, they are occurring,
but to lay that at the feet of global warming is not
substantiated by the science, and some of these alarmist
predictions are just that. They are predictions. They will not
be fact.
Now, let us get to some things that are fact. We know that
the United States each year creates manmade CO2
emissions in the neighborhood of 7 billion metric tons, 7
billion. If you cost that manmade CO2 at $100 a ton,
which most of the experts who have looked at the cap and trade
system say that the tons cost is going to be between $100 and
$200 billion, if you take the $100 a ton number, that is $700
billion a year. Now, my friend Mr. Markey and Mr. Waxman are
engaging in some trading right now. They are trying to give
free allowances to perhaps get votes. I won't say they are
doing that, but it appears to me that they are doing that. So,
they are going to give some allowances away. Let us say they
give 3.5 billion tons of allowances away. That still means that
there is going to be 3.5 billions of tons that have to be
costed.
Let us say that we take the EPA estimate, that it is only
$20 a ton, not $100. I think it is going to be a lot more than
$20, but we will take the EPA number. That is still, if they
give away half the allowances, and they only cost $20 a ton,
that number is $70 billion a year. How in the world can we have
a cap and trade system that doesn't cost jobs and doesn't cost
the economy, even if it is only half the tons at $20 a ton?
Mr. Gore. Congressman Barton, I want to address your, the
point that you made about the science. I don't question your
sincerity for one moment.
Mr. Barton. And I don't question yours, so we are equal on
that.
Mr. Gore. Thank you. I believe that it is important to look
at the sources of the science that we rely on. With all due
respect, I believe that you have relied on people you have
trusted, who have given you bad information. I don't blame the
investors who trusted Bernie Madoff, but he gave them bad
information. And----
Mr. Barton. I have never talked to Bernie Madoff.
Mr. Gore. I am not saying that you have. But he gave them
bad information, and committed a massive fraud that ended up
hurting, most of all, the people who trusted him.
Senator Warner made reference in his opening statement to
the story on the front page of the New York Times this morning.
Absolutely incredible. The largest corporate carbon polluters
in America, 14 years ago, asked their own people to conduct a
review of all this science, and their own people told them what
the international scientific community is saying is correct.
There is no legitimate basis for denying it.
Then, these large polluters committed a massive fraud far
larger than Bernie Madoff's fraud. They are the Bernie Madoffs
of global warming. They ordered the censoring and removal of
the scientific review that they themselves conducted, and like
Bernie Madoff, they lied to the people who trusted them in
order to make money. And the CEO----
Mr. Barton. Mr. Vice President----
Mr. Gore. --of the largest, if I could just finish my
response, Congressman.
Mr. Barton. Well, I don't--look, I will stipulate that
CO2 concentrations are going up. There is no debate
about that. There are about 380 parts per million, and they are
going to rise in the neighborhood of 500 parts per million in
the next 50 to 100 years. I will stipulate that. Now, the
consequences of that, and whether that is because of manmade
CO2, I think are debatable, and I don't know about
this scientific peer review that you just talked about, but if
somebody lied about something 14 years ago, I am sure Mr.
Waxman and Mr. Markey will conduct an investigation and
oversight hearing into that.
My question to you was about the cost of the allowance
system. How are we going to pay for it, and how many jobs are
we going to lose? Now, if you have got information about
something that happened 14 years ago, I am sure, again, our
chairman and subcommittee chairman, Mr. Stupak, who is the
Oversight Subcommittee chairman, we will look at it. But answer
my question about the cost, please.
Mr. Gore. Yes, it is on the front page of the New York
Times today, by Andrew Revkin.
The leading corporate carbon polluters themselves conducted
a review of the science and found that it is valid, and to the
point you made a moment ago, they verified in their own studies
that manmade global warming is raising temperatures and causing
this crisis.
Mr. Barton. I don't think that can be proven.
Mr. Gore. Like Bernie Madoff, they lied about it in order
to make money, and they themselves profited. The CEO of the
largest got a onetime payment of $400 million. Now, again,
those who have trusted them and believed them are due an
apology. These corporations ought to apologize to the American
people for conducting a massive fraud for the last 14 years.
Mr. Markey. The gentleman's time----
Mr. Barton. My time has expired, Mr. Chairman.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the Chairman Emeritus of the committee, the
gentleman from Michigan, Mr. Dingell.
Mr. Dingell. Mr. Chairman, thank you for holding this
hearing. Thank you for recognizing me. You have made me very
happy today. I get to welcome back two very dear friends, great
public servants, real patriots, men of distinction and ability,
wonderful leaders. My old friend John Warner, who lived down
the street from me, and who has shown himself to be a man of
extraordinary courtesy and decency in all of his activities. My
very special friend Albert Gore, whose father and my father and
families were friends for many years, who served with
distinction on this committee, and I want to say we had a lot
of fun here working on the same questions in earlier days that
we are today. And I want to say how proud I am to see him back,
and to thank him for being here with us today.
Gentlemen, when I was at Kyoto, the Chinese, I asked them,
I said now, you are not going to be covered by this agreement.
They said no. And they said, I said when will you be covered?
They said well, we are a developing country, so we are not
going to be, we are not going to ever be covered by it. And
they indicated that they really didn't intend to be covered by
it.
So, now, we have got ourselves in a situation where we are
going to go forward, and I think we have to go forward, but the
question is how are we, if we go forward, are we going to see
that we don't carry the burdens of the whole situation? Kyoto
gave us the situation where the Eastern Europeans were out,
because they were former Communists, and they were excluded.
The Europeans all had rightly excluded themselves from
coverage. The developing nations were excluded. And when I
looked around the room to see who was going to be covered by
this proposition, I found it was only one country, the United
States.
Now, how do we see to it that these other countries do
things, that we are going to do and that we agree have to be
done, and that we are not the only country who is going to
suffer the economic penalties of going forward on this, while
these other folks ride on our back?
Mr. Gore. Congressman Dingell, thank you for your kind
words.
Mr. Dingell. I meant them.
Mr. Gore. Senator Warner--I know, and I appreciate it.
Senator Warner mentioned your work, others did on the Clean Air
Act. I want to also recall that you were the principal author
of the National Environmental Policy Act, and in the same year
that was passed, the first, the original Clean Air Act was
carried by Ed Muskie, and our good friend Howard Baker, my
fellow Tennessean. It passed 425 to 4 on the House floor, and
because of the bipartisan leadership in the Senate, I believe
it passed unanimously, and I think, I would just express the
hope that we can find our way back to that kind of
bipartisanship.
Now, on your question. I believe that the provisions in
this bill put in place a mechanism for dealing with any
recalcitrant nation that does not go along, and I believe we
have the legal authority under the WTO to do that. But before
we ever get to that stage, I honestly believe that when the
United States leads the way, we are going to see a big shift
with a momentum toward a truly global agreement. We talked a
little bit about India and China earlier. There was a story and
a study last week showing, according to one scientist, 75
percent of all the ice and snow in the Himalayas could be gone
in a decade, partly because of global warming and the black----
Mr. Dingell. I want to make it clear, I don't quarrel with
the----
Mr. Gore. I know you don't, sir.
Mr. Dingell. You and I know each other for a long time, and
I am concerned that other folks are going to skin us.
Mr. Gore. Yes.
Mr. Dingell. We are going to do the things, and they are
going to derive the benefits, and we are going to spend the
money, and we are going to lose the jobs. Now, how do we
protect our people, and how do we see that we provide
protection for the trade exposed industries?
Mr. Gore. Right.
Mr. Dingell. And I am not satisfied that this bill has an
adequate protection for our workers and our industries in those
area, particularly given the attitudes of other countries,
which expect us to carry the load, while they get a free ride.
Mr. Gore. Well, just to briefly finish the point, because
it is in direct response to that question. I was citing that
particular science study as an illustration of why I believe
that China in particular is moving much closer to joining a
global agreement. And I believe that if the United States
leads, we will get a global agreement that avoids the problems
that you are talking about.
Were it not to unfold in that way, I believe that we would
have the means to protect against the problems that you worry
about rightly, and I believe that we should afford ourselves of
that protection, and use those tools.
Mr. Dingell. Now, let me get to one more question, because
the time is running out.
We have a choice between, we have got to finance this, and
we have got to enforce it. Cap and trade is one mechanism.
Energy tax is another. Every economist says that a carbon tax
is a better, more efficient, fairer way of doing it. The
Europeans have had two, and maybe three, fine failures in their
application of cap and trade. How do we avoid the mistakes that
they made, and how do we come up with something that gets us
the best?
Nobody in this country realizes that cap and trade is a
tax, and it is a great big one. And so, I want to get a bill
that works. How do we choose the best course, cap and trade,
carbon tax? At times, my dear friend Albert, you have been an
advocate of a carbon tax as the better way to go. How do we
address this problem?
Mr. Gore. Well, I have, for 20 years, supported a
CO2 tax that is given back to the people, so that it
is revenue neutral, but accomplishes the desired effect, but I
have never proposed it as a substitute for cap and trade. I am
in favor of both.
And a number of the countries around the world that have
done the best job of addressing the climate crisis and
strengthening their economies, have in fact put both in place.
But I believe that the cap and trade approach is the essential
first step, partly because it is the only basis upon which we
can envision a truly global agreement, because it is very
difficult to imagine a harmonized global tax.
Mr. Dingell. I apologize, my dear friend, for interrupting
you, but how do we avoid the mistakes that the Europeans made?
They screwed it up twice real good. How do we avoid those? How
do we get a program that really carries out our responsibility
and our trust to the American people?
Mr. Gore. I know Senator Warner wants to make a comment,
but just briefly, I think by learning from the mistakes that
they made, as they themselves have learned from their own
mistakes.
Mr. Dingell. I am not satisfied----
Mr. Gore. Their initial allocation was off. They have gone
back and made significant changes. I think that it is beginning
to work very effectively there, and country by country, we are
seeing the results there. So, I think we can learn from what
they have already learned.
Mr. Warner. Just a brief reply on the issue of China. You
put your finger on, the man on the street out here is asking us
that very same question. And my response would be as follows.
Because of our inability to reconcile differences in the last
international round, the United States gave cover, they gave
protection to China and India, to stand back behind us and say
they are not going to go, we are not going to go.
That is why I urge this committee, in its deliberations,
you may not achieve all that you set out to do in this very
courageous bill thus far, but as we say, get a beachhead on
this issue in this Congress, because it is only going to get
more complicated and tougher for successive Congresses. Lay the
beachhead, and let us hope that we can build on that
foundation, and go forward in the coming years and achieve
totality of our goals.
Mr. Markey. Thank you, Senator, very much. The gentleman's
time has expired. The chair recognizes the gentleman from
Pennsylvania, Mr. Pitts.
Mr. Pitts. Thank you, Mr. Chairman. Welcome, Mr. Vice
President and Senator. Since we don't have the allocation
language yet. It hasn't been released. Whether it is auction or
allocation of free credits or carbon tax, do you think that
Congress and the American business community, and the American
people would benefit from a complete and open hearing on this
allocation language once it is released, whatever it might be?
Should we have open, transparent hearings on this before we
act?
Mr. Gore. I mean, I support the leadership of the committee
and its approach to gathering information, and that would be my
answer.
Mr. Pitts. OK. Senator Warner.
Mr. Warner. Well, I would join my colleague on that point.
I mean, I think transparency is more vital with this
legislation than anything I have seen in recent times,
because----
Mr. Pitts. So, we should have a hearing if--once we have
the language----
Mr. Warner. Well, I am presumptuous to come over here, as a
member of the former body, and tell you how to go about your
business.
Mr. Pitts. All right.
Mr. Warner. I just strongly urge you to do something in
this Congress. Now, the cap and trade is tough. It is a tough
issue, but we don't want to appear that we are using cap and
trade as a means to just tax those who can pay to distribute it
all over.
Mr. Pitts. OK. Thank you, Senator.
Mr. Warner. Thank you.
Mr. Pitts. Mr. Vice President, I did not hear your answer
to Mr. Barton's question. What is the cost of this bill to
every American family?
Mr. Gore. Well, the study that I think that is most
authoritative, before taking into account the savings in their
energy use that this bill will occasion, is around $0.30 a day.
But again, let me emphasize that I think there will be actual
reductions. And the reason is actually very simple. During the
days of very cheap energy earlier in the century, we developed
patterns that led to huge amounts of waste in energy that we
all began to just kind of take for granted. And with the better
engineering and the better science, the retrofitting and
installation of more efficient ways of using energy really
allow sharp reductions.
In the State of California, which adopted some of the
provisions that are similar to those in this bill, for the last
30 years, there has been a zero increase in energy use per
capita, but while the economy has grown in California, GDP by
80 percent over the same period of time.
Mr. Pitts. OK. Is that $0.30 per family per day, or per
person?
Mr. Gore. I believe it is per household.
Mr. Pitts. Per household.
Mr. Gore. Yes.
Mr. Pitts. And do you concur with that, Senator Warner?
Mr. Gore. About a postage stamp per day, but again, I think
that much more than that will be saved by implementing the
other provisions of the bill.
Mr. Pitts. And can you supply us with the study, or the
reference to the study?
Mr. Gore. I believe that it is the EPA study that was
produced two days ago, three days ago.
Mr. Pitts. All right. Thank you.
Mr. Gore. And I believe it has been presented to the
committee.
Mr. Pitts. Thank you. William Nordhaus, one of the most
distinguished experts on the economics of climate change, has
pointed out that the Kyoto Protocol would have imposed
disproportionately large costs on the U.S., yet it would have
had almost no effect on global temperatures. In large part, the
lack of results stem from the refusal of China and India to
adopt firm, binding caps on their domestic emission. How do you
explain the statements of China and India, that they made at
Bali, demanding that the developed world pay them for any
greenhouse reduction costs that they incur? They have demanded
that the developed world pay them for any greenhouse gas
reductions that they make.
Mr. Gore. Well, the rhetoric between the developed and the
developing countries has been in a rut for years and decades.
The reality of the world today is that China has moved a long
way. China is ready to move at Copenhagen. I think you have got
a very different situation with China today.
Mr. Pitts. So, you do not feel that this principle of
income transfers to the developing countries is valid.
Mr. Gore. I think that technology assistance and
adaptation, I think adaptation to the impacts of climate change
is particularly important, and I think the way it is addressed
in this bill is excellent.
Mr. Warner. I associate myself with the comments of my
colleague here. We just dismiss that type of argument out of
hand. I think world condemnation of China and India will come
about shortly, if there is some foundation in fact, and I
believe it is, of the EPA finding that this is detrimental to
health, those two nations ought to be high on the areas where
that health is going to be affected, and this may change their
thinking.
Mr. Pitts. Thank you, Mr. Chairman. Yield back.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Washington State, Mr. Inslee.
Mr. Inslee. Thank you. Mr. Vice President, I hope you will
convey our thanks to Tipper Gore for her work on this cause as
well. I have got two questions today.
First, I want to ask about a position a relatively well
known individual has taken at one time about a cap and trade
position. I just want to read a question and an answer, a quote
from February 15, 2007. This former Congressman was asked in
2000: ``Candidate George Bush pledged mandatory carbon caps. It
was a campaign pledge. What did you think of it at the time?
Were you for that?'' This former Congressman answered: ``I
think if you have mandatory carbon caps, combined with a
trading system much like what we did with sulfur, and if you
have a tax incentive program for investing in the solution,
that there is a package there that is very, very good. And
frankly, it is something I would strongly support.''
This action plan is essentially what we are doing in this
bill, of a carbon cap, a trading system, and incentives for the
development of entrepreneurship. This former Congressman went
on to say that caps with a trading system on sulfur has worked
brilliantly, because it brought free market attitudes,
entrepreneurship, and technology, and made it very profitable
to have less sulfur. So people said wow, it is worth my time
and effort.
Now, that former Congressman who said that on February 15,
2007 was former Congressman Newt Gingrich, who will shortly
come into this room and testify that this bill is a combination
of bubonic plague and Ebola virus for the U.S. economy.
Is there any scientific reason, of which you are aware,
that would make a carbon cap system, of the type we have
proposed, productive economically, and a wise move on February
15, 2007, and today, unfathomably destructive?
Mr. Gore. I think I will try to dance around that question.
Mr. Inslee. You are entitled to, as a former Vice
President. You have that right. We will take that as a
rhetorical question, and----
Mr. Gore. Well, see, I think that one of the great
questions here, for those of us who believe in capitalism and
the power of the marketplace, is why don't we use this great
tool to solve the biggest crisis we are facing? CO2
is invisible, tasteless, and odorless, and more importantly, it
is not registered on the accounting ledgers. It has no price
associated with it. So, the old aphorism, out of sight, out of
mind, applies. As a consequence, we in this world, today, will
put 70 million tons of it into the thin shell of atmosphere
surrounding the planet.
Scientists have known for 150 years that CO2
traps heat, and for 100 years, have worried that a massive
increase would trap so much heat that it would cause big
changes. And for the last 25 years, we have had the preeminent
scientific organization in the world, the 3,000 best scientists
in the world, from 113 countries, have issued four unanimous
reports saying we have got to deal with it.
So, how are we going to deal with it? The best way to deal
with it is to use the marketplace.
Mr. Inslee. Mr. Vice President, I want to ask you about, in
a local impact, how that would work. I was happening to talk a
guy who runs Taylor Shellfish. They have an oyster farm in
Puget Sound, really reputable business for a long time. They
can't grow oyster seed now in Puget Sound the last couple of
years, and there is a very strong suspicion it is associated
with the acidification of the ocean, which you educated us
about.
By the way, the NOAA research is that this is happening in
the West Coast United States, probably twice as fast, which is
now 30 percent worse than preindustrial times, there is new
research on this. He could lose his business as a result of a
policy of inaction, which some are suggesting here, that we
should not act. And many of us believe that the costs of
inaction here are much greater than the cost of action, that we
will reduce the cost to the U.S. economy by actually acting.
And I have got a lot of business in my district, like right
across the right, Sapphire Energy. They are doing algae-based
biofuels, Infinia Energy, doing Stirling Engine solar. We can
grow the economy and avoid the devastation a lot of these
businesses, like the Taylor Oyster Farm may have. Is that a
fair projection of what the future could be?
Mr. Gore. Well, I think it is, and it is a challenge to the
moral imagination, to deal with the scope and scale of these
changes. The idea that the entire world ocean would grow so
acidic that everything that makes a shell will be unable to do
so, unless we take action, is just astounding. And at the base
of the food chain are these tiny little critters that have very
thin shells. They are already being affected. If the base of
the food chain is affected, then everything up the food chain
is affected.
The coral reefs are already under stress, great stress. A
study just came out showing the Great Barrier Reef of
Australia, the largest reef system in the world, thousands of
miles, will be functionally dead by 2050 without action. Now,
it is a combination of the warming water temperatures and the
acidification, but yes. No, I think you are right on target. We
need to address this.
Mr. Inslee. Thank you.
Mr. Gore. And thank you, Congressman Inslee, for your
outstanding leadership and initiative on this issue over the
years.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman, Mr. Vice
President, Senator. It is good to have you before the
committee.
I wanted to just note that Mr. Vice President, your
reference to $0.30 a day comes from an EPA study, I believe.
Unfortunately, that EPA study also assumes 150 percent growth
in nuclear power in order to achieve that $0.30 a day, and that
nuclear part is not in this bill.
I know there is concern about worker retraining. Mr. Vice
President, you have said you wanted every coal worker who lost
his job to get a job. Unfortunately, the worker transition
piece in this bill, all we have is in parentheses, to be
supplied, page 568 of the bill. And I have asked every other
witness this, have you each read the bill in its entirety? Can
I get a yes or no?
Mr. Gore. Congressman, I have read all 648 pages of this
bill. It took me two transcontinental flights on United
Airlines to finish it.
Mr. Walden. And I get another one at 2:00. Senator Warner,
have you read the bill?
Mr. Warner. The answer is no, I have not.
Mr. Walden. All right. Let us, then let us go on to a
couple of points, because----
Mr. Warner. I am trying to----
Mr. Walden. Mr. Vice President, because you talked about an
issue that is dear to my heart, and I have raised it at every
hearing I have participated in, and that is the health of
America's forests. I come from a district with 11 National
Forests in it, with 20 percent unemployment in some of these
counties, because nothing is happening meaningful in these
forests. I am a big advocate of biomass. Do you support, yes or
no, because we are tight on time, biomass from federal forests
as a renewable energy source?
Mr. Gore. You know, I think the protection of the federal
forest is important, and Congressman, as a matter of curiosity,
are you seeing the tree death in your forests from the----
Mr. Walden. Yes.
Mr. Gore. --beetles and the drying?
Mr. Walden. In fact, this is from 1989. Tanner Gulch fire.
It wiped out Spring Chinook Salmon Run in Oregon's Upper Grande
Ronde River. This is an overchoked forest, although it looks
fairly healthy from this picture. In California federal
forests, here is what happens after you treat it and get it in,
sorry. I am sorry. Here is what happens when you treat it, and
try and manage it for old growth. This is the Malheur National
Forest. It is out in Harney County. They have 20 percent
unemployment right now. This is what happens when you don't
treat it, and it burns.
Mr. Gore. When you say treat it----
Mr. Walden. Get in and manage it the way the biologists
believe it should be managed. We have a 79 year backlog at the
rate we are treating right now, to get these forests into
balance, to deal with the climate change that you outlined. And
the Forest Service, as you know, has done terrific research
work over the years, trying to figure out climate change, and
what needs to be done as management in these forests.
That Malheur National Forest I referenced, they are at
least 25 years out, based on the limited amount of acreage. We
had investors that were ready to go into that county with 20
percent unemployment, and do woody biomass production of
renewable energy, and they cannot even get certainty from the
forest of supply.
This legislation, on page 8, says woody biomass is not
renewable if it comes off federal ground, period. Beyond that,
the way it is written, I have had private land foresters tell
me, even off their private land, it would shut down biomass
facilities if you followed this.
Does that make any sense to you?
Mr. Gore. Yes, sure. Yes. No, I understand exactly what you
are saying.
Mr. Walden. Do you agree with shutting it down? Do you
agree with this language?
Mr. Gore. I don't have a lot of confidence, based on what
has happened in the past, when something, you know, I think
that if you and I could sit down and talk about every little
detail of which tree and so forth. You know, in Canada, they
have this kind, a management approach.
Mr. Walden. Right.
Mr. Gore. And yet, their forests are being devastated.
Mr. Walden. And why is that?
Mr. Gore. It is primarily because the warmer temperatures
are allowing that----
Mr. Walden. OK. So, doesn't that----
Mr. Gore. If I could finish my--you asked me a question. If
I could finish my answer. It is primarily, according to them,
because the warmer temperatures----
Mr. Walden. Right.
Mr. Gore. --due to manmade global warming, are causing the
pine beetles and bark beetles to----
Mr. Walden. Right.
Mr. Gore. --go on the rampage----
Mr. Walden. Right.
Mr. Gore. And they have lost many billions of dollars of--
--
Mr. Walden. Right.
Mr. Gore. And when they die and get dry in the higher
temperatures, they are vulnerable to fire----
Mr. Walden. Right.
Mr. Gore. --and we have had all time record forest fires.
Mr. Walden. So, doesn't that speak to managing those
forests, to thin them out, when you know you are going to have
drought, to open up the stands, get them back in balance with
nature, and to be able to--the thing I am fighting here is,
when you take----
Mr. Gore. No.
Mr. Walden. --that material out, to do exactly what Canada
is doing, to do exactly what needs to happen on the Fremont-
Winema National Forests, where you have more than 200,000 acres
of federal forestland that is exactly that way, bug-infested
lodge pole pine, when that material comes out, why in the Devil
do we say it is not renewable, and can't be turned into pucks
like this, to help reduce carbon from coal? This could be put
in a coal plant in my district, if they could get enough of
this made. This comes out of Canada, by the way. They are doing
that. Why do we preclude it in this bill?
Mr. Gore. Well, I think the record of what has happened
when it has been opened up in the past has given a lot of
people pause, and diminished their confidence that it could be
managed in a way that resembles the right result, but----
Mr. Walden. Now, as you know, Mr. Vice President, every
forest has a management plan, and every activity on that forest
requires full NEPA. Mr. Chairman.
Mr. Markey. I am just tapping you to just, I am not
gaveling you, I am just tapping to let you know that you are
past.
Mr. Walden. Because a lot of these answers have gone on for
twelve minutes after the five. I guess the point here is every
activity on a federal forest already is covered by NEPA, isn't
it? Every management activity.
Mr. Gore. I don't think those provisions of NEPA have been
effective in preventing some of the abuses that occurred during
some times in the past.
Mr. Walden. I will tell you this. I will close. Why don't
you come out, and I will take you to the Malheur National
Forest. And together, we will walk in these stands, or the
Winema, Fremont-Winema National Forests, and we will meet with
the professionals. Or up in the Wallowa-Whitman, where they are
heating the school with biomass. Or the Harney County--
apparently, I am out of time.
Mr. Gore. I appreciate your invitation, Congressman. I have
been to the forests of Oregon. I would love to come back. I was
active in forming the Forest Plan of 1994 for the Pacific
Northwest.
Mr. Walden. The Northwest Forest Plan.
Mr. Gore. Yes.
Mr. Walden. Which has its own set of issues being
implemented.
Mr. Gore. Yes, but it has been largely a great success.
Mr. Walden. I dispute that.
Mr. Gore. Well----
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from North Carolina, Mr. Butterfield.
Mr. Butterfield. Thank you very much, Mr. Chairman. Let me
also thank both of you for your testimony today, and for your
extraordinary service to our country.
Let me try to go in a little different direction if I can,
and this time goes very quickly, as you can imagine. But I
represent a very low income district in Eastern North Carolina,
Greenville, Rocky Mount, Elizabeth City, very low income
district. We are the fourth from the bottom in the United
States of America, in terms of median family income. I think
the income is like $30,400 per year. And so we are,
essentially, a poor district.
And so, I am obviously concerned about the costs of this
legislation, and what it will do to low income families, not
just for electricity, but for everything that we consume,
plastics and rubber, and food and the like. And so, my question
to you is, Mr. Gore, what do I tell a single parent, for
example, in my district, with two children, two young children,
making $8 an hour? What can I say to reassure her that she will
be able to afford the cost of this legislation?
And it may be $0.30 a day, it may end up being much more
than that. I hope that you are right, and that the, those on
the other side of the aisle are wrong, but if it happens to be
expensive, my families, my low income families, cannot absorb
the cost of this legislation. I need some help with that.
Mr. Gore. Well, I think other provisions of this bill can
lead to reductions in the cost for that family. And as we saw
in Hurricane----
Mr. Butterfield. But not immediate reductions.
Mr. Gore. Well, it depends on how quickly they are
implemented, and how they are taken advantage of. And let me
say that, as we saw with Hurricane Katrina, low income families
are often the most likely the suffer the harmful consequences
if we do not address the global warming issue. And the new job
creation that comes from the green energy jobs that are being
created, are going to benefit the same communities of low
income families.
Mr. Butterfield. Well, that is very difficult to explain to
a low income family that is already in the deficit, in deficit
spending. It is very difficult, and we need to do a better job
in crafting this legislation, to make sure that we have an
economic offset, some type of assistance for low income
families, to make sure that they do not pay an inordinate price
for this legislation.
Senator Warner, as you can see from the ebb and flow of the
testimony today, there are some who criticize this legislation
as a measure that will result in fewer American jobs and fewer
investment opportunities. You talked a few minutes ago about
creating a beachhead. I know what that means in military
language, but how can we develop a political beachhead to make
sure that the American people understand this, and to make sure
that the element of fear does not dominate this conversation?
Mr. Warner. I shared the burdens you have, of talking to my
people when I was leading the effort in the Senate. It was a
brand new concept, and we couldn't establish clear cost
parameters. But I would say to that wonderful family, the cost
today, hopefully, will result in an America that they pass on
to their children that they can enjoy, as did their parents.
I do believe, and I say this respectfully, Mr. Chairman,
and when we worked on our bill, I tried to resist a lot of the
efforts, good intentioned, to take such funds that were going
to be developed by the cap and trade concept, and spread them
around in areas other than directly for the goals of increasing
our energy, clean energy output. I think if you begin to try
and utilize this bill as another means by which to take care of
well deserving families and well deserving causes, you are
going to lose public support.
They will pay if they are confident that the dollars in
this bill go towards the goal of clean energy, cost effective
energy, and improved health.
Mr. Butterfield. So, you would not support the concept of
offsetting the economic impact on low income families.
Mr. Warner. Well, there may be other ways to do it than
this piece of legislation. If we make this, I would say, when I
talk to my colleagues, a welfare bill, I don't think the public
is going to begin to support it.
Mr. Butterfield. On the question of the loss of jobs, the--
--
Mr. Warner. The loss of jobs----
Mr. Butterfield. Does taking action on this legislation
come at the expense of American jobs?
Mr. Warner. No, I think quite the contrary. There,
authoritative polling that shows that the American public looks
at this bill as a means to increase the number of jobs, as well
as help improve health conditions, and they are quite anxious
to see that it will help our national security.
Mr. Butterfield. Thank you. Mr. Chairman, I yield back.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Texas, Mr. Burgess.
Mr. Burgess. I thank the chairman. I appreciate both
witnesses being with us today. I appreciate your willingness to
hear from members of the subcommittee.
Vice President Gore, when you were here in our
subcommittee, maybe it has been two years ago, as you were
leaving, I recall the statement was made that, about a carbon
tax that would just replace the existing payroll tax and income
tax, and there is a, certainly Tom Friedman writing in the New
York Times a couple of weeks ago, asked the very same question.
Would we not be better, rather than trying to play hide the
ball with cap and trade, would we not be better just being
honest with the American people, and saying we are going to tax
energy? We are going to tax carbon.
And perhaps to the extent that we tried to make that
revenue neutral by replacing the payroll tax, replacing at
least a portion of the income tax with this new carbon tax,
would that not be a straightforward way for us to go about
this, rather than us try to pick winners and loser?
Mr. Gore. As I said earlier, Congressman, thank you for
your question, as I said earlier, I have supported a revenue
neutral CO2 tax, with the money given back. It could
be given back to the people in a variety of different ways. But
I do not support it to the exclusion of cap and trade. I think
that cap and trade is the essential first step in order to use
the market forces to address this problem, and to secure a
global agreement around that principle, which already has broad
support throughout the world.
Mr. Burgess. And I actually would dispute that concept, but
here is part of our problem. I absolutely agree with both of
you about the economic factors. There is no question that the
energy, cost of energy, the burden of energy costs on our
families has been significant, and it will be significant again
in the future. So, finding ways to deliver energy at a
reasonable cost is important, and I--no argument with that.
No argument about the security question. Our good friend,
Boone Pickens, said it so eloquently last summer, that we are
funding both sides of the War on Terror. People get that. Our
trade deficit that has been so high recently, people get the
negative impact that that has on our economy, and I think one
of you even references peak oil to some degree. At some point,
oil likely is going to be a finite resource, and looking for
other sources. Absolute agreement to that point.
But we always, then, come down to arguing about, did global
warming cause Katrina? Did global warming cause the death of a
polar bear? And there are going to be arguments on both sides.
Why not just leave that aside? Why not focus on the security?
Why not focus on the economy? Why do we have to be in a
position of picking winners and losers?
We have just watched a financial meltdown in this country
the likes of which hasn't been seen in some time. Now, if
people like credit default swaps, they are really going to like
the carbon swaps that are going to occur, and the carbon
futures swaps. We spent a full day in this committee last
summer, talking about the manipulation of the energy futures
market in oil. We are going to create, I fear, another such
system that people who are, have an inclination to react
dishonestly to systems, are going to actually have a new
opportunity. Is that not a problem?
Mr. Gore. Well, let me look at your analogy in a slightly
different way. There were warnings that the credit default
swaps and the subprime mortgages, and the other activities that
caused the financial crisis were going to bring us ruin if we
didn't address them, and nothing was done about it. If I could
finish my answer.
There are warnings now of a far worse catastrophe, and they
are coming from a unified IPCC representing the global
scientific community, and if nothing were to be done about it,
the results would be far worse. Now, let us look at the
subprime mortgages. I remember the days when you made a down
payment and proved you could make the monthly payments. And the
risk, we were told the risk was washed away by securitizing
them and lumping them together, and that assumption collapsed.
We now have several trillion dollars of subprime carbon
assets, whose value is based on an assumption that it is
perfectly OK to put 70 million tons of that pollution up there
every 24 hours----
Mr. Burgess. And this is what----
Mr. Gore. So, the reason, in answering your first question.
Mr. Burgess. I am going to have to interrupt you.
Mr. Gore. Why we--why can't we ignore it----
Mr. Burgess. I am going to run out of time.
Mr. Gore. --because it is the biggest crisis we have ever
faced.
Mr. Burgess. And no one who has come before this committee
from a scientific basis can show us the smoking gun that
mankind is causing this to happen. There are, you can create
relationships between the number of sunspots and the partisan
makeup of the Senate. Anything can be proven, if you are
willing to take the time to have the numbers.
Mr. Gore. Congressman Burgess.
Mr. Burgess. Let me just go to another point, because it
was a terribly important----
Mr. Gore. Could I respond to that?
Mr. Burgess. No, I need to make this point. Dr. Apt, who
was with us yesterday, and he said it so eloquently, that we
have to focus on reducing carbon dioxide, rather than trying to
pick winners and losers in this. If we will focus on what is
the reasonable thing to do, whether we want to focus on
security, whether we want to focus on the economy, or we can
spend a lot more time arguing about the science of climate
change.
When we construct this bill, and Senator Lieberman, or
Senator Warner said it so well, when we construct this bill, we
have to have the flexibility that we give people credit for
doing the energy efficiency things that we want them to do. We
give people credit for creating the newer technologies that we
want them to do, rather than us pick every jot and tittle of
winners and loser in the bill, which is unfortunately the draft
that we have in front of us.
I will yield back, Mr. Chairman, thank you.
Mr. Markey. Vice President?
Mr. Warner. Could I have just a minute, less than a minute?
I think a carbon tax is very simple, very understandable, but I
think it would bring the bill down. I don't think you will get
the votes to support it. The inherent advantages----
Mr. Burgess. And just for the record, I would not support a
carbon tax.
Mr. Warner. Yes, well, all right. The inherent, I think
inherently, in a cap and trade system that can be devised, is
the incentive for the industrial base of this country, the
technological base, to solve the problems and to go forward. It
also, if we have a bill, it begins to enable that same base to
do its long range planning. The power industry has to look
forward 10, 12, 15 years out, as to their requirements, and if
we keep hanging over this, global warming thing over their
head, they can't make their orderly planning. We have got to
get the beachhead. We have got to tell them here is what we are
trying to do, and can you do it, if we give you this
flexibility and this support. And they did it in clean air.
They can do it in this.
Mr. Markey. The gentleman's time has expired.
Mr. Burgess. I would just make the point, this bill does
not have the flexibility inherent in the language as it is
before us today.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from California, Mr. McNerney.
Mr. McNerney. Thank you, Mr. Chairman. First of all, I
would like to ask the committee, with unanimous consent, that I
be allowed to submit comments for the record on behalf of the
National Association of Realtors.
[The information was unavailable at the time of printing.]
Mr. Markey. Without objection, so included.
Mr. McNerney. Thank you. Mr. Gore, I have to, Vice
President Gore, I have to just admire how you have been willing
to put your personal reputation on the line year after year,
for something that you truly believe in, despite the most
vicious attacks on your character, that are totally without
merit. And that takes a great amount of bravery, and I have the
greatest amount of respect for you for doing that.
Mr. Gore. Thank you, sir.
Mr. McNerney. Well, you have been pretty explicit about the
economic rollercoaster that we have been on, due to energy
instability, the price instability of energies. Do you believe,
that I believe, like I believe, that by increasing energy
efficiency, and finding new sources of energy, that we can get
ahead of the energy cost problem, and ultimately, pay less for
energy, for better results with the cap and trade system, which
will also create jobs, and stabilize the economy, and get rid
of that rollercoaster?
Mr. Gore. I certainly do agree with that. I think that if
we made up our minds to lead this transition, we would benefit
not only with millions of new jobs, but also, with lower energy
costs and a much more productive economy. I don't think there
is any question about it. The only question is whether we are
going to lead the world, or whether we are going to follow
those who provide leadership elsewhere. If we lead, we get the
jobs. We get the technologies to sell elsewhere, and we get the
productivity gains. That is the role I think we ought to adopt.
Mr. McNerney. Thank you, Vice President. Senator, do you
want to respond to that?
Mr. Gore, you mentioned the smart grid as a part of the
solution to reducing our carbon emissions. Can you explain the
connection there? I think it is something that a lot of people
don't quite understand.
Mr. Gore. Yes. The phrase smart grid is confusing to some,
because in many parts of the world, it is used to describe the
distribution of energy, and the use of smart meters that give
homeowners and business owners a better way to reduce the
wasteful use of energy, and use efficiency and conservation
more effectively.
But maybe we ought to call it a supergrid. That is what the
Europeans call one of their proposals, because it essentially
has two components. It makes it possible to transmit over high
technology lines, over a long distance, renewable electricity
from the areas with high sunlight, in the desert, for example,
to the cities where it is used. And from the wind corridor,
that my friend Boone Pickens talks about a lot, running up
north and south along the High Plains and the Mountain States,
and take that electricity to the cities where it is used, and
from the geothermal areas. That is the first part, long
distance, low loss transmission, from areas that don't have a
lot of people, but do have a lot of renewable resources, to the
places where it can be used.
The second feature of it involves the use of data
processing, chips, a very cheap but very powerful and effective
information technology, to empower the end users to use less
and get more, and to sell electricity back into the grid, if
they put photovoltaic cells on their roof, or use small wind,
or other forms of what is called distributed power generation.
Mr. McNerney. Thank you. That was a fairly detailed
discussion.
Do you have any comments about the value of using a Green
Bank, in terms of making the transition easier for the American
people, or for the individuals and families in our country?
Mr. Gore. Well, that is not in the draft of this
legislation, and I want to reiterate and make it clear that I
support this legislation, but I am familiar with the proposal
that my friend of 50 years, Reed Hunt, has put together, with
others, called a Green Bank. I think it is a very imaginative,
very excellent idea, and I commend it to your attention.
Mr. McNerney. Well, thank you. You know, your list of
impacts due to global warming was fairly sobering. And if we
are marching along that path, it is fairly risky. Do you think
that that is, do you think we are sort of on a steady state, or
do you think we are accelerating our march down that path?
Mr. Gore. Well, we are presently accelerating in a
direction toward a precipice. We still have time to change
course, and I will answer in a way that is also relevant to the
answer. The time ran out on the exchange that I was having with
Congressman Burgess.
Mr. McNerney. Feel free to end, to respond to that earlier
question.
Mr. Gore. Not too long from now, the next generation is
going to look back at the beginning years of this century, and
ask one of two questions. Either they will ask what were you
thinking? Didn't you hear the scientists? Why did you prefer to
listen to some outlier quack that got money from these carbon
polluters that were engaged in a massive fraud? Why didn't you
listen to the global scientific community? Just because you
didn't have access to the scientific studies of the carbon
polluters themselves, because they hid them, is no excuse. What
were you thinking? Why did you let this happen?
Or they will ask a second question, the one I want them to
ask. How did you find the moral courage to look past the short
term controversies of the day, and rise to solve a crisis that
so many said was inconvenient to address? Thank you.
Senator Warner's generation won a war in the Pacific and in
Europe simultaneously, and then put down the Marshall Plan and
the United Nations and the post-War recovery. It wasn't very
convenient for them to do, but they did it because our national
security was at stake. Our national security is at stake now,
and it is a challenge that this Congress must rise to.
I don't know how to say it. I wish I could find the words,
to get past the partisan divide that both sides have
contributed to, but I really wish I could find the words to,
that would unlock this. It shouldn't be partisan. It should be
something we do together in our national interest. The next
generations are calling out to us.
Mr. Markey. The gentleman's time has expired. The chair
recognizes the gentleman from Louisiana, Mr. Scalise.
Mr. Scalise. Thank you, Mr. Chairman.
As we debate what I agree is a very important piece of
legislation, a piece of legislation, in my opinion, and many
others would have very detrimental effects on our economy if it
was implemented the way it has been drafted. We have been
trying to get a quantifiable grasp on the cost of this bill,
how much it would actually cost American families, how many
jobs would be created and lost, and we have, number one, on the
science side, we have had very divergent views. We have had
dozens of experts come over the last few days and testify,
giving very different opinions on the science.
On the economics of it, we have not had the same kind of
divergence. In fact, most economists and experts that have
testified on the cost acknowledge, in fact, I will refer to
President Obama's own budget, that was just passed two weeks
ago. If you go to page 119 of the President's budget, he is
anticipating generating $646 billion in new tax revenue from
this bill. So, clearly, the President expects this bill to
generate $646 billion in new taxes, that even his own Budget
Director has said would be passed on to consumers.
Senator Warner, we had seen numbers on the Lieberman-Warner
Bill, the President's Budget Director today, he was the head of
CBO last year, when he testified on your bill, he said it would
have cost consumers about $1,300 a year more in their average
utility bills, in addition to everything else they buy that is
related to electricity, gasoline, food, anything else.
Can you, and then Senator Gore, talk to the numbers that
the Congressional Budget Office, and now, the President's
Budget Director, gave to your bill, and how that would relate
to this bill, in terms of the cost to American families, of
implementing a cap and trade energy tax?
Mr. Warner. I would say that the work done by the Budget
Office on the bill that I was privileged to be working with, is
a good foundation, and that you can, I think many of the
assumptions would carry over to this legislation.
But Congressman, we have got to make a start. If we are
looking for absolute certainty, we are never going to get a
bill. We have to start the learning curve, start the process,
and then build on it. And that is why I strongly urge that you
incorporate language, to give to the Chief Executive Officer of
this country the authority to move in when he believes that
corrections have to be made.
Mr. Scalise. And of course, we don't see that in this, and
I am sorry to interrupt, but I know my time is limited. Vice
President Gore.
Mr. Gore. Congressman, you began by denying that there is a
consensus on the science. There is a consensus on the science.
Mr. Scalise. Well, you mustn't have been listening to our
testimony that we have had for the last few days with dozens of
experts that have come in, who have given completely different
views. So, I would----
Mr. Gore. Well, there----
Mr. Scalise. I would encourage you to go back and look at
the testimony this committee has heard.
Mr. Gore. There are people who still believe that the Moon
landing was staged on a movie lot in Arizona.
Mr. Scalise. And neither of us are one of those, and I know
you like giving those cute anecdotes. This is not a cutesy
issue. We are talking about----
Mr. Gore. No. That----
Mr. Scalise [continuing]. Export millions of jobs out of
our economy, out of our country, and testimony has been given
just to those numbers. And so, we are talking about a serious
consequence that there would be on this country, and the carbon
leakage that would occur, where the carbon would be emitted,
but it would be emitted in China, in India, and the jobs would
go to China and India. And that has been testified before this
committee in the last few days as well.
Mr. Gore. Man----
Mr. Scalise. Would you testify about the actual cost. Do
you want----
Mr. Gore. Man----
Mr. Scalise [continuing]. To testify about the cost?
Mr. Gore. Manmade global warming pollution causes global
warming. That is not a cutesy issue. It is not an open issue.
Mr. Scalise. And it is your opinion. Obviously, you have
stated it many times.
Mr. Gore. It is the opinion of----
Mr. Scalise. Would you talk to the cost?
Mr. Gore [continuing]. The global scientific community, and
more importantly----
Mr. Scalise. And not in unanimity. There are others on the
other side.
Mr. Gore. More importantly, Congressman, that opinion is
the opinion of the scientific studies conducted by the largest
carbon polluters 14 years ago, who have lied to you, and who
have lied to the American people for 14 years.
Mr. Scalise. And you talk about carbon--and I have got-- I
am running out of time. We talk about carbon polluters. You
talk about them. It is my understanding that back in 1997, when
you were Vice President, Enron's CEO, Ken Lay, was involved in
discussions with you at the White House, about helping develop
this type of policy, this trading scheme. Is that accurate, is
it inaccurate? It has been reported.
Mr. Gore. I don't know. But I met with Ken Lay, as lots of
people did, before anybody knew that he was a crook.
Mr. Scalise. Right. And clearly, you can see why so many of
us are concerned about this type of cap and trade energy tax,
that would be literally turning over this country's energy
economy----
Mr. Gore. I didn't know him well enough to call him Kenny
Boy.
Mr. Scalise. Well--but you knew him well enough to help him
devise this trading scheme, and obviously, we know what Enron
and these big guys on Wall Street, like Goldman Sachs, and I
know you have got interests with Goldman Sachs.
Mr. Gore. No.
Mr. Scalise. These people--well, it is--that has been
reported. Is that not accurate?
Mr. Gore. No, I wish I did. I don't.
Mr. Scalise. With executives from, you are partnered in
companies with executives from Goldman Sachs. Well, if you are
not. Either way, Enron clearly had an interest in doing this.
When they were around, we saw what they did, and when you see
the types of people involved in wanting to set up this kind of
scheme, you can see why so many of us are concerned about
turning----
Mr. Gore. Are you----
Mr. Scalise [continuing]. Our energy economy over to a
scheme that was devised by companies like Enron and some of
these Wall Street firms----
Mr. Gore. Well, that--I mean----
Mr. Scalise [continuing]. That have wrecked our financial
economy.
Mr. Gore. I don't really know if you want me to respond to
that. I guess what you are trying to say, you are trying to
state that there is some kind of----
Mr. Scalise. I mean, clearly, there would be big winners
and big losers.
Mr. Gore. You are trying to say that there is some kind
of----
Mr. Markey. Mr. Scalise, please allow the Vice President to
answer.
Mr. Gore [continuing]. Guilt by association. Is that your--
--
Mr. Scalise. Not association. I am saying that there are
going to be big winners and big losers in this bill, and that
has been discussed by everybody talking. Big winners and big
losers, but some of the big winners are some of the very
financial experts that helped destroy our financial
marketplace, and I think that should be noted, that companies
like Enron helped come up with this trading scheme that we are
going to vote, in cap and trade.
Mr. Gore. Enron didn't create this proposal in any way,
shape, or form. That is a false accusation.
Mr. Scalise. Well, the details are not in this bill. The
details are not in this bill, and I would suggest that they
are.
Mr. Warner. Mr. Chairman, I do need a few minutes. I really
have had a marvelous opportunity to work with many, many
interested parties across this country on this subject,
including corporate America and the business community. And I
hope that those following this hearing don't get the views that
the wrongdoing by what I hope is a very small minority should
not be brushed across the whole spectrum.
Indeed, if we are going to solve this problem, we have got
to rely on the corporate America, the financial America, the
technical America, to work our way out within the constraints
and directions of the legislation. But I find that there is
far, in the majority, most people are trying to responsibly
come up with solutions to this problem.
Mr. Scalise. And here is an alternative. The American
Energy Act, which was filed last year----
Mr. Markey. The gentleman's time----
Mr. Scalise [continuing]. Which I still think is a better
alternative----
Mr. Markey. The gentleman's time----
Mr. Scalise [continuing]. To cap and trade is still out
there.
Mr. Markey. The gentleman's time has expired, and for the
record----
Mr. Scalise. I yield back.
Mr. Markey. For the record, the proposal that we are
considering has had the CEO of General Electric, of Alcoa, of
Rio Tinto, of corporations across the country, who have
testified in conjunction with major environmental groups. That
is the proposal that we are considering.
The chair recognizes the gentleman from Vermont, Mr. Welch.
Mr. Welch. Thank you, Mr. Chairman. Thank you, Senator.
Thank you, Mr. Vice President.
I am a new member of this committee, and as I have listened
to the questions of my colleagues on both sides, I have come to
the conclusion that there are those of us who, I think,
basically take the view that you have advocated, that we have
to act, and then, some of the opposition comes from folks who
don't believe it is necessary. They essentially deny the
existence of the problem. But there are many good faith
questions about what the impact will be on jobs, the
dislocation, the economy. People like Mr. Burgess, Mr. Walden,
have asked that questions that, frankly, I think those of us
who are advocates have the burden of doing our best to answer.
But at times, it sometimes seems as though those concerns
become not so much addressed to solve the problem, but to avoid
action. And Senator, I am going to ask you, based on your 30
years of service in the United States Senate, having to find
common ground with people on the other side of the aisle, what
advice do you have to those of us who share your view that this
is a bill that has to be passed? How do we find a way to reach
agreement with the good faith objections that come from people
who don't agree with us quite yet?
Mr. Warner. Well, that has been the history of our Congress
since its very inception. We are admired by the world for many
reasons, and one is that we have the longest continuously
surviving form of government, and it provides for healthy
debate. It provides, to the extent possible, for full debate.
Unfortunately, our chamber, the Senate, now has had less
and less debate, because of resorting to certain rules which
are on the book, created by ourselves, but it is important that
the views of those in opposition be heard, respected, because I
think most people are conscientious, who object to this. But we
have got to find a way. You cannot just accept, throw up your
hands. We can't do it. We just must do it.
Maybe you are not going to, and I hope you get as much as
you think you can, but you are not going to get the whole loaf.
You are going to get a part of it, but you will have sent the
signal across America that the Congress is ready to move
forward on this issue, and that will get the attention here at
home, and that will get the attention of the world.
Mr. Welch. Thank you, and Mr. Gore, I want to ask you your
thoughts on a couple of approaches that I think make sense to
take, in order to try to build some of these bridges.
One is efficiency. You have talked about that. My view, and
I have some aspects in this bill, that say we start addressing
this by efficiency. It is within our control. We have got a
provision in the bill, a small one, but important one, to allow
homeowners to get tax credits, businesses to get tax credits
and incentives, for saving. The more they save, the more of an
incentive they get. It is the local jobs that you spoke about.
I would hope that that would be a way of finding some common
ground.
And a second issue may be to incorporate into this
legislation a monitoring device to basically ask these
questions every three months or six months, about what is, in
fact, the job impact, because those are fair questions.
And I want to get your advice and thoughts about
suggestions you might have to try to provide some legitimate
reassurance to legitimate questions that are raised about
dislocation and economic impact.
Mr. Gore. Yes. Well, I think the provisions of the bill in
the current draft adequately and imaginatively address that
question. I think there would be potentially massive job
losses, if we did not adopt this legislation, because if we
just continue on with business as usual, ignoring the warnings,
and then, just sit and wait until the oil prices go sky high
again, that is what would cause the massive job losses.
I think that the creation of jobs by this bill will far,
far outstrip any losses that would be associated with it. I
genuinely believe that.
Mr. Welch. OK. And what do you think about having in the
bill some provision to actually try to monitor that, some
referee that is actually looking at the data, what is the
impact of each provision of the bill, and providing, as we go
along, some data that hopefully is credible?
Mr. Gore. Well, that sounds like a good idea to me. I know
that there are provisions in the legislation now that require
regular reports and regular analyses of several matters, some
of which do relate to this. If they need to be fine-tuned, then
maybe that is a good thing.
Mr. Welch. OK. Thank you very much. Senator.
Mr. Warner. While I haven't read the whole bill, I have
studied those portions I felt that would be addressed today,
and particularly, the area of national security.
So, I think you should monitor. In order to give the
President the guidelines as to move forward with the throttle
or pull back on the throttle.
Mr. Welch. OK. Mr. Chairman, I will yield back, but I just
want to tell the Vice President that my office in 1404
Longworth, I believe was your dad's, that is what they were
saying, when he was in Congress.
Mr. Gore. Oh, that is great. I didn't know that.
Mr. Welch. And I am living in an apartment that you may be
familiar with, it is the Tennessee Apartment in the Methodist
House with Congressman Cooper.
Mr. Gore. Oh, great.
Mr. Welch. And I don't know if you left anything behind,
but we will check.
Mr. Gore. Not that I know of, but thank you.
Mr. Markey. OK. The gentleman's time has expired. The chair
recognizes the gentlelady from Wisconsin, Ms. Baldwin.
Ms. Baldwin. Thank you, Mr. Chairman, and thank you to our
witnesses, Mr. Vice President, Senator Warner. It is an honor
to have you here, and we appreciate your knowledge and insights
on this issue.
Our Nation's security, our planet's sustainability, and our
children's future really do hang in the balance at this moment.
And the world is watching our every step. They are looking to
us, with the largest economy, the greatest innovations, the
richest resources, to bring leadership and commitment to this
issue, and to Copenhagen and beyond. I believe we absolutely
cannot show up to Copenhagen empty-handed.
Mr. Vice President, I know you have met with leaders from
all over the globe on this issue and many others. And so, I
would like you to speak, in perhaps a little bit of a crystal
ball, looking into the future, how would the world respond to
our bringing the policies in this bill to the table in
Copenhagen, and how would the world react if we fail to act,
and we don't have those policies to bring to the negotiating
table in Copenhagen?
Mr. Gore. I think the enactment of this legislation and the
adoption of a position by the Obama Administration, that was in
keeping with this legislation, would be met with great relief
and approval, although I must tell you that the reductions in
this legislation and those proposed by the Obama Administration
are far short of what would cause cheering and celebration in
the rest of the world, because so many other parts of the world
have already gone much farther.
But I think that it would be met with a sigh of relief. I
think there would be, I think it would lead to a major shift by
countries around the world, and would lead to an agreement that
would put in place a mechanism for solving the climate crisis.
Were this legislation not to pass, and if the
Administration went to this global negotiation without this
legislation, then I think we might well see a slow motion
collapse of the negotiation, much as the Doha Round has all but
collapsed. And I think that would be awful to contemplate.
I have no idea how the world could regroup and come up with
some other approach, without wasting decades, and of course, as
many of you are well aware, some of the leading scientists in
the world have said for some time now that we may be within a
decade or so of crossing a tipping point beyond which this
could unravel on us.
I mentioned in my opening statement that the disappearance
of the ice in the Arctic is already leading to methane releases
from the thawing tundra. If that were to accelerate, it would
be one of several tipping points that we really ought to avoid
crossing.
Ms. Baldwin. Well, I have fairly recent recollections of
the December 2007 round in Bali, where one negotiator, I think
it was from Papua New Guinea, was famously quoted as saying to
the U.S., we look to your leadership, we yearn for your
leadership, but if you are not going to lead, please get out of
the way. And I do not want to see any sort of repeat of that
type of thing on the world stage.
Now, I want to relate to your struggle a few moments ago,
to come up with the right words to define this moment, because
we are talking and asking questions based on the concerns that
our current constituents raise with us about this measure. And
I wonder, what if the future generations had a voice, and if
people living in our districts in 2080 or 2090 could speak to
us now, what would they be saying? And I think we would be
acting fairly hastily, if indeed, we could hear their voices as
we hear our constituents today.
I will give you one piece of poetry, actually, that I think
brings it out pretty well, by a fellow named Drew Dellinger. He
says: ``It's 3:23 in the morning, and I am awake, because my
great great grandchildren won't let me sleep. My great great
grandchildren ask me in my dreams, what did you do when the
planet was plundered? What did you do when the Earth was
unraveling?''
And with that, I want to ask Senator Warner if----
Mr. Markey. If you could ask one quick question.
Ms. Baldwin. I had heard an anecdote, and I wanted to hear
from you if it was true, that you came to your position on
climate change, and your leadership role, at the urging of your
grandchildren. Is that correct?
Mr. Warner. Yes, that is quite true, in many ways. But I
also, the gentleman that came from forest country, I went out
in 1943, of course, that was before you were born, and worked
in the forest as a firefighter and a trailblazer. And those
were pristine forests. A couple of years ago, I was out there
in the same region. I asked the Forest Service to take me in. I
didn't know where I was. I couldn't recognize it any. We drank
out of the streams. We swam in the streams. We enjoyed the
pristine forests. It is gone.
So, my children and grandchildren hold me accountable, and
indeed, my own personal experiences were a factor. But it came
always back to national security, as I am urging this committee
to incorporate.
Mr. Markey. The gentlelady's time has expired, and all
questions from the subcommittee members has now expired. Now,
consistent with a prior unanimous consent request to allow
members of the full committee, who are not members of the
subcommittee, to ask questions of our two witnesses, we will
proceed to recognize those members.
However, I want them to know that I am going to rigidly
employ the five minute rule with those four members, and I urge
you, if you want an answer from the witnesses, not to have a
five minute statement with a question at the five minute point,
because you will not be receiving an answer, because we have
Speaker Gingrich waiting for us in the anteroom, and each of
you will be given five minutes, so please try to give the
witnesses time to answer your question in the five minute time
period.
We will begin by recognizing the gentleman from California,
Mr. Radanovich.
Mr. Radanovich. Thank you, Chairman Markey, and I want to
welcome Mr. Vice President and Senator to the committee
hearing.
I was born and raised in the Sierra Nevada Mountains in
California, right next to Yosemite, and I just, this debate,
listening to this debate is very interesting, but I am very
intimate with forest policy, forest management practices in the
Sierra Nevada Mountains, very intimately involved with the
California drought and what is going on out there. And I can
tell you that the things that more adversely affect
California's water supply and forest management practices in
California is environmental alarmism, and it has resulted in
some very bad management of our national forests. Has led to
fuel buildups, more intense fires, that leave the area more
devastated.
In the San Joaquin, in the water supply in California, it
is due to three different lawsuits that have restricted water
deliveries for agriculture for a delta smelt, a worthless
little worm in the delta that needs to go the way of the
dinosaur, you know, and they have shut pumps down and
restricted water deliveries to California over that thing, when
what is eating it is a striped bass, which is a non-native
species in the delta, and yet, the collaboration between
environmentalists and sport fishermen has led to the dealing
with the truth of the situation in the delta. As a result of
that, there are zero water deliveries to my farmers. It is
costing 40,000 to 60,000 jobs this year, and a $6 billion hit
to our economy.
That is not global warming. That is not global warming that
is causing problems in our forests. It is the result of bad
policy, because of environmental alarmism. And I think that the
current debate over global warming and cap and trade is another
result of environmental alarmism. And I want to, you know,
there is a couple of transitions we have made in the history of
the country.
We had the light bulb came up, and we had either to move
from candle power to light bulbs. We had cars. Finally, Henry
Ford came up with the car. We needed to move from horses to
cars. Hell, even when we went to the Moon, we had a Moon to
shoot for. But you are saying on fossil fuels, and setting up a
scheme, frankly, that is causing to leave fossil fuels for an
unidentified replacement. And the notion that you can do that
on renewable energies, and the technology that we have right
now, to me is disingenuous. The fact that you can rely on this
transition with solar and wind energy, and enhance the economy,
and reduce our reliance on foreign fuels, that to me is the
biggest fraud that is being perpetrated in this country right
now.
I think that there is ample evidence that the planet is
warming. I think it is debatable whether it is manmade, caused.
I think that if you want, if you are even concerned about the
world coming to an end, there is nothing that we can do to
prevent that from happening, and that kind of alarmism.
My problem is that you can't make this transition without
breaking the back of the economy of the United States, unless
you have a new fuel that you can jump to. I would much rather
spend billions of dollars that you are planning on spending,
identifying a new energy source, and then let us identify that,
and then we can make the transition to the new energy source.
But I have got to tell you, your notion that this planet is
going to fry in 30 years. This Congress doesn't know what is
going to happen in a week, let alone 30, 40 years.
I think if you, that the way to address this problem is to
put our efforts behind identifying a reliable replacement for
fossil fuels, and you have not identified it so far, and any
transition that you think you are going to make is going to be
so heavily subsidized that you are going to bankrupt this
country on this notion of cap and trade.
I am--no. I am all for efficiencies. We have air problems
in California, renewable energies, things that keep the air
clean out there, but unless you come up with a replacement to
fossil fuels, you are not going to be able to make that
transition, and I think that aside from the sky is falling, we
are going to be dead in 30 years and the planet is going to
burn up, I think the reasonable approach to this problem is
innovation, efficiency, a robust economy, which you will
destroy with cap and trade, and moving toward a new energy
source that we can all start to rely on----
Mr. Markey. The gentleman's time has expired.
Mr. Radanovich. Thank you very much, Mr. Chairman. I have
said what I want to say.
Mr. Markey. I know you have, but I think I am going to
modify my earlier statements.
Mr. Gore. Could I respond briefly?
Mr. Markey. And allow the witnesses--no further
interventions by the members after five minutes will be
allowed. Mr. Vice President.
Mr. Gore. Congressman, I think we actually do have an
excellent idea of where the renewable energy can come from. The
very best----
Mr. Radanovich. If you would like--explain to Congress--if
you are going to bankrupt this country.
Mr. Markey. The gentleman's time has expired.
Mr. Radanovich. So--I should be able to respond.
Mr. Markey. If the gentleman is going--you did not give him
time within your five minutes, which was the request which I
made of the gentleman, is now being given this time under a
unanimous consent request. The Vice President sought several
times to gain your attention to answer your question within
that five minute period.
You did not choose to recognize him.
Mr. Radanovich. If he would give, then----
Mr. Markey. The Vice President is now----
Mr. Radanovich. If he would, then, give me the benefit of
explaining the costs of this----
Mr. Markey. The Vice President is now----
Mr. Radanovich [continuing]. Program to the American
people, then I will----
Mr. Markey [continuing]. Going to answer your question.
Mr. Radanovich [continuing]. Then I would love to hear that
response from the Vice President. Thank you, sir.
Mr. Markey. The Vice President is going to answer your
question. Thank you.
Mr. Gore. I will just say briefly that I think we do know
pretty well exactly what the sources of renewable energy can
be. And the cost is coming down almost as rapidly as in the
early days of computer chips, when you got that Moore's Law
curve. We are beginning to see something like that in
photovoltaics. Concentrating solar thermal, photovoltaics, wind
power, geothermal, efficiency, and conservation are, I think,
now ready to go.
So, I will--well, let me just make one other point. Enough
sunlight falls on the land surface of the Earth in 45 minutes
to provide a full year's worth of energy use for the entire
planet. And the engineers and scientists in this country have
been making fantastic breakthroughs in how to innovate more
efficient versions of it.
Mr. Markey. The gentleman's time has expired. Nothing--
Senator Warner.
Mr. Warner. Something that I said this morning, and I don't
think that my colleague, either, is predicated on we are going
to abandon fossil fuels. It is more how can we do it more
efficiently, and in such a way, consume them so as to have
minimal damage to the environment and to health. So, we are
always going to have that.
But we put such emphasis as we can to encourage wind,
solar, and the like, but it is not going to transplant fossil
fuels.
Mr. Markey. Thank you, Senator. The chair recognizes the
gentlelady from the Virgin Islands, Ms. Christensen.
Ms. Christensen. Thank you, Mr. Chair, and I would like to
welcome Vice President Gore and Senator Warner, and to thank
you for your service, as well, and for the leadership you have
provided on this issue, which has really brought about the
consensus that we have in this country, that we must act today.
I guess I would ask both of you, many in the committee have
complained about the 25 percent reduction in greenhouse gas
emissions, in poor communities especially. The American Public
Power Association on the panel yesterday recommended 15 percent
reduction by 2025.
Is that good enough, and what would you suggest to help
communities and power companies reach that 25 percent that they
don't think they can reach today?
Mr. Gore. No, I don't think that would be good enough at
all. The committee draft already represents a significant
compromise, compared to what the, what others in the global
negotiation are already doing, and what the scientific
community says is advisable.
I support the committee bill, regardless of that, because I
think it is an excellent bill, and will set in motion a process
of change that will lead to steeper reductions in a way that
benefits our economy tremendously. But to cut back from the
reductions in the bill, I think would cross a line that we
should not cross at all.
Ms. Christensen. Did you want to add anything, Senator
Warner?
Mr. Warner. Again, I come back to a basic premise I have.
Let us draft the legislation, so we are directing ourselves
towards resolution of the problems of how do we take our
existing and additional energy sources, and do it efficiently
and healthy.
I tried, as best I could, not to let the Senate bill begin
to be a welfare, or to help the needy. Those needs are there.
They are definite, and how well you know that. But this
legislation is directed towards a new energy policy.
Ms. Christensen. But that being said, and this was my
second question anyway, there are many communities, especially
African-American, Hispanic-American, Native American, that have
not been really benefiting from our economy as it is today. Do
you think that our new green economy can be a vehicle to help
close the gaps for those communities, and bring them into the
mainstream? And I would ask both of you that question.
Mr. Warner. I would say to those groups that you have
identified, who are just as, have every right to the clean air
and clean water and good food as do I, that this bill is
directed to help them improve their quality of life, no matter
what their economic status may be.
Mr. Gore. I will, you know, Van Jones, who is now a part of
the Administration in charge of green jobs, is the most
eloquent spokesman I know on this point. But just to give a
couple of examples. This bill will have a lot of incentives to
unleash many jobs in insulating homes, changing out lighting
and windows, and those jobs can't be outsourced. They are in
the community, and they are good jobs, and there are a lot of
them.
Ms. Christensen. Thank you. It has been mentioned several
times throughout the hearings that the benefits of addressing
the concerns discussed in the bill, as both of you have
basically just said, will over the long term, buffer the costs
for the American people. The bill discusses the necessity for
the Federal Government to establish measures to assist natural
resources adapting to climate change. Are there one or two
specific strategies that we should focus our attentions on?
And additionally, to what extent will support of
international adaptation strategies, such as preventing
deforestation, assist in reducing the pressures levied on the
United States and territories?
Mr. Gore. The U.S. Conference of Catholic Bishops issued a
very eloquent statement this past week, and part of their
statement supports robust measures for adaptation, and both
here at home and internationally. And I think that is very
crucial, and I commend the authors of the bill for including
it, and I agree with you that it is very important to do it.
We look at the fact that poor and disadvantaged people in
our country, as well as in the rest of the world, are those
most likely to be victims of this. Indeed, many already have
been, and so, adaptation is a crucial part of the response.
Mr. Markey. OK. The gentlelady's time has expired. The
chair recognizes the gentlelady from Tennessee, Ms. Blackburn.
Ms. Blackburn. Thank you, Mr. Chairman, and thank you to
both of you for your patience today. Vice President Gore, you
and I have had the opportunity to represent some of the same
people from a truly wonderful state. And you talked a little
bit about people have to have trust in what you are doing, and
I think you know that this bill is going to fundamentally
change the way America works, and it is going to affect
families. We have all talked about how it affects individuals,
and what it is going to do to their budgets, and what it is
going to do to jobs in this country.
And given the magnitude of those changes, I think it is
really important that no suspicion or shadow fall on the
foremost advocates of climate change legislation, so I wanted
to give you the opportunity to kind of clear the air about your
motives, and maybe set the record straight for some of your
former constituents.
And I have got an article from October 8, New York Times
Magazine, about a firm called Kleiner Perkins, a capital firm
called Kleiner Perkins. Are you aware of that company?
Mr. Gore. Well, yes. I am a partner in Kleiner Perkins.
Ms. Blackburn. So, you are a partner in Kleiner Perkins.
OK. Now, they have invested about $1 billion in 40 companies
that are going to benefit from cap and trade legislation. So,
is the legislation that we are discussing here today, is that
something that you are going to personally benefit from?
Mr. Gore. I believe that the transition to a green economy
is good for our economy and good for all of us, and I have
invested in it, but every penny that I have made, I have put
right into a nonprofit, the Alliance for Climate Protection, to
spread awareness of why we have to take on this challenge.
And Congresswoman, if you are, if you believe that the
reason I have been working on this issue for 30 years is
because of greed, you don't know me.
Ms. Blackburn. Sir, I am not making accusations. I am
asking questions that have been asked of me.
Mr. Gore. Well.
Ms. Blackburn. And individuals, constituents, that were
seeking a point of clarity. So, I am asking----
Mr. Gore. I understand exactly what you are doing,
Congresswoman. Everybody here does.
Ms. Blackburn [continuing]. You for that point of clarity.
And well, you know, are you willing to divest yourself of any
profit? Does all of it go to a not for profit that is an
educational not for profit?
Mr. Gore. Every penny that I have made has gone----
Ms. Blackburn. Every penny----
Mr. Gore [continuing]. To it. Every penny from the movie,
from the book, from any investments in renewable energy.
Ms. Blackburn. OK.
Mr. Gore. I have been willing to put my money where my
mouth is. Do you think there is something wrong with being
active in business in this country?
Ms. Blackburn. I am simply asking for clarification of the
relationship.
Mr. Gore. I am proud of it. I am proud of it.
Ms. Blackburn. Thank you, and I appreciate the answer. And
Mr. Chairman, I yield back.
Mr. Markey. The gentlelady yields back, and I will, for the
record, say that for eight years, I sat next to Al Gore on this
committee, and on every one of these issues, he took a stand,
he took a stand decades ago that is identical to the stand
which he is taking as he sits here before our committee today,
and there is one thing that I can say about the Vice President,
is that he was a visionary. He identified these issues. He
forced this committee and the Senate to consider it long before
it was ready to deal with it, and his time has come on this
issue. A prophet is being honored in this committee today, but
by the world. He won a Nobel Prize for his work on this
subject. The world has come to recognize that, and I think that
his service to our country and our planet is something that I
think is absolutely unchallengeable.
We will complete the questioning of our special guests with
the gentlelady from Ohio, Ms. Sutton.
Ms. Sutton. Thank you very much, Mr. Chairman, and thank
you to our witnesses. I regret that this very serious subject
sometimes has turned into something that has resulted in sort
of personal and somewhat, sometimes partisan appearing attacks.
And Senator Warner, if I could just begin with you. You
spent a good deal of time serving this country in the United
States Senate, and one of the questions that I have, as a
Member sitting over here, and certainly dedicated to trying to
find a way to work this out.
I come from Ohio. It is a challenging issue for us, but I
believe in the science, and I believe in the merits of the
potential. I do worry about the transition, and we can talk
about that, so I am looking for solutions, to find a way to get
from here to there. But Senator, in the Senate, I am concerned
about the Senate, and whether or not they will pass a
significant global climate change bill.
Do you foresee that any time in the near future, based on
your experience?
Mr. Warner. I would have to respond that I think the Senate
will, in a very serious and conscientious way, review such
legislation as may be generated by this committee, and
hopefully will, in my own judgment. And I have learned that the
distinguished chairperson of our committee, former committee,
Senator Boxer, is laying plans, possibly, to introduce a bill
in the Senate.
I do believe the time has come that both parties will
conscientiously work on this issue, but quite frankly, I think
it would be not in my province to try and predict what that
outcome will be. We are at the basic threshold of the
legislative process, going through this very important and
extraordinary hearing agenda. We took 14 months to cover much
of the same territory.
But nevertheless, I have faith in the Congress to
objectively and honestly look at this situation, and hopefully
come up with a bipartisan solution.
Ms. Sutton. Thank you, Senator.
Vice President Gore, again, thank you for your work on this
issue, and for the consensus that has finally come to be. And I
just want to talk to you, just very briefly, or get your
opinion very briefly. You mentioned in your testimony about the
need for coal miners to have access to a job. And the question
is kind of twofold. It would, well, threefold, perhaps. How
would that work, and how fast would that happen? And are there
other workers who are going to be similarly displaced, who
should be given that kind of guarantee as well? Thank you.
Mr. Gore. Yes. Yes, I think there ought to be attention to
that. Absolutely. The bill already devotes considerable
attention to it, but I have always had the position that anyone
displaced by this has a right, not just to job training, but to
a job. And I think that we have to manage the transition in a
way that takes care of those who. I think the society as a
whole benefits. I think the economy grows. But those who are
especially affected, I think they have a right to it.
Ms. Sutton. How about manufacture, employees in
manufacturing plants, and that may be impacted by some of the
things that we heard discussed here today, in the moment?
See, my concern is that while I believe in the potential of
green jobs----
Mr. Gore. Yes. Yes.
Ms. Sutton. And we have a very different problem in Ohio
than my dear friend Congressman Inslee described it, as the
causes of global warming, or not the causes, but global warming
is causing job loss for him, you know, in this moment. So, he
wants to stave off that, and I understand and respect that, and
I am with him in trying to address that. But we also have a lot
of, our folks, they care about this issue. They care about the
environment.
Mr. Gore. Yes.
Ms. Sutton. But if you don't have a job today, the concerns
of this bigger issue, and where we need to go, become very
difficult to address, when you have kids you can't, you know--
--
Mr. Gore. Yes.
Ms. Sutton. You can't get what they need, and----
Mr. Gore. Yes.
Ms. Sutton [continuing]. Put food on the table, so it
becomes almost a luxury to try and deal with that.
Mr. Gore. Yes. And I understand your question very well. It
is very well put, and we would still face that challenge, if
the legislation didn't pass. In fact, we have been facing that
challenge. I believe this bill will make it better.
I will give you an example from Ohio. There is a company
that famously, very proud of the fact that they made the giant
bolts for the Golden Gate Bridge, and they went through some
hard times, and had to lay a lot of people off. They are now
hiring people, or have been, to make windmills, to make parts
for windmills.
And I think it is a good example of how new jobs in Ohio
will be created, are being created by the shift to green
energy, and will be created in significantly larger numbers
with the incentives and motivations in this bill.
Mr. Markey. The gentlelady's time has expired.
Let us complete this way. Let us ask each of you to give a
summary statement to the committee before you leave. It has
been our honor to have you with us here today.
Could we begin with you, Senator Warner?
Mr. Warner. Well, thank you, Mr. Chairman. I would say,
very briefly, that the Congress today, in this hearing, has
served their respective constituents well. We have had an open
and free debate. We have clearly expressed to one another our
concerns about this legislation, but it, I hope, renews our
strength to go back and counsel with our constituents, and
listen to our constituents, and seek out a way to lead. The
country has to lead on this issue.
Thank the chair. Having been a chairman myself, I know the
challenges, and I think you have fulfilled them very well.
Mr. Markey. Thank you very much, Mr. Chairman.
Vice President Gore.
Mr. Gore. Mr. Chairman, I began by noting how it brings a
lot of emotions for me to walk in at the beginning of the
hearing this morning, and be, once again, in this room, where I
spent eight years. I have sat through many hearings like this
one in this chamber, many markups like the one you are about to
embark upon.
Having gone through many bills, I have to tell you that I
am extremely impressed with what you and Chairman Waxman and
others have done in really drilling deeply into so many
aspects, virtually all of the aspects of this issue, and I want
to compliment you and Chairman Waxman and the others for the
work product you have produced.
I know that in the committee process, there will be
debates. There will be changes and so forth. That is the way it
works. I would urge you, during that process, to stay on this
side of the line that preserves the effectiveness of this
legislation. And I know you will.
My main point is, I compliment you on the bill. It is an
honor to appear before this committee, agree or disagree with
the views of some. I appreciate the questions and the
exchanges, and thank you very much for inviting me.
It is good to be back.
Mr. Markey. Thank you. And it is our honor to have two of
our greatest citizens of our country to appear before the
committee today with the thanks of the committee and our
country.
We will take a brief recess, while our two witnesses are
able to leave, and before we introduce Speaker Gingrich. Thank
you.
[Recess.]
Mr. Markey. Our next one person panel features another
familiar face to many of us, former Speaker of the House, Newt
Gingrich.
If the last panel was Back to the Future, then I guess this
second panel is Back to the Future II. And the Speaker is
gracing us with his presence here today. He served as Speaker
from 1995 until 1999, and it is an honor for us to have you
with us here today, Mr. Speaker.
We welcome you, and I will turn to the gentleman from
Michigan, if you would like to extend----
Mr. Upton. We are grateful that he is here, and in the
interest of time, I think we will get started.
Mr. Markey. I turn to the chairman of the full committee. I
turn to the gentleman from Texas, Mr. Barton, as well.
Mr. Barton. Just simply say since we are Back to the Future
II, where they went out to the Wild West, your bill would give
us a carbon footprint equivalent to 1875, which is about when
that movie was, so we appreciate our Speaker being here.
Mr. Markey. That is your introduction, Speaker Gingrich. We
look forward to hearing from, your testimony here today.
Whenever you are comfortable, please begin.
STATEMENT OF HONORABLE NEWT GINGRICH, FORMER SPEAKER OF THE
HOUSE
Mr. Gingrich. Well, let me thank you, Mr. Chairman, and I
appreciate the sheer endurance you and the members of this
committee have shown so far.
Mr. Barton. Make sure that microphone is on.
Mr. Gingrich. I am sorry. It should be on. Is it not on?
Mr. Barton. Is the light on.
Mr. Gingrich. Yes, the green light is on. So, this should
be all right. OK.
I just want to thank you, and commend you for the endurance
that you all have shown so far today.
Mr. Markey. Can we say, Mr. Speaker, there are 21 witnesses
after you, if you want to get a sense of the place we are in
the hearing today.
Mr. Gingrich. And I want to ask permission for my written
testimony to be placed in the record.
Mr. Markey. Without objection, in its entirety, it will be
included in the record.
Mr. Gingrich. I, to meet Greg Walden's permanent question,
I did begin reading the draft bill, but to be candid, I stopped
around page 236, where it describes the Secretary of Energy as
a Jacuzzi Czar, under the title portable electric spa.
Actually, it is page 233. And at that point, I decided I had
the gist of the bill, and decided I would develop my testimony.
Let me just say, I want to begin with, from a background, I
taught environmental studies at West Georgia College. I was
coordinator. I participated in the second Earth Day. I
supported the clean air system that we developed for sulfuric
oxide, which actually involved a very limited number of sites
in the initial application. It was 263 units at 110 plants.
Later on, it was expanded to a total of 2,000 units, which the
Jacuzzi section alone would dwarf. And so, I do think there are
some substantial differences between what we did in 1990, and
the bill that as the Republican Whip, I helped pass, and what
you are looking at today.
I want to start with two general observations. One from, I
guess, my namesake, King Canute, and the other, from the Polish
resistance to Communism, which adopted the principle of two
plus two equals four. Canute was asked, in the Middle Ages, by,
his staff had been telling him how powerful he was. And so, he
went down to the ocean, and told the waves to stop. And the
waves did not stop. And he turned to his staff, and said this
is a hint that I am not as powerful as you have been saying.
This bill strikes me as a remarkable inability to learn the
lesson of King Canute. If you look at the housing disaster,
where the Congress decided 15 years ago, people who couldn't
afford houses should buy houses, and banks should loan money to
people who couldn't afford to buy houses, and then you look at
the Federal Reserve, which decided that interest rates should
be kept low enough to create a huge bubble on Wall Street. We
don't seem to be able to learn from any of this. This bill
massively expands the Department of Energy's power, gives all
sorts of authority to the Secretary of Energy. Let me just
quote two examples of why this is a huge mistake.
The General Accounting Office said on the FutureGen
Project, which is very important to this country's future, and
very important to getting to green coal and carbon
sequestration: ``Contrary to best practices, DOE did not base
its decision to restructure FutureGen on a comprehensive
analysis of factors such as the associated costs, benefits, and
risks. DOE made its decision largely on the conclusion that
costs for the original FutureGen had doubled, and would
escalate substantially. However, in its decision, DOE compared
two cost estimates for the original FutureGen that were not
comparable, because DOE's $950 million estimate was in constant
2004 dollars, and the $1.8 billion estimate of DOE's industry
partners was inflated through 2017.''
So, you end up in a situation where, in the most important
clean coal project of our time, the Department of Energy, which
had promised in 2003 to deliver a working plant in 2008,
announced in 2008 it might get to a working plant in 2016. On
efficiency standards, the General Accounting Office said: ``DOE
has missed all 34 Congressional deadlines''--all 34
Congressional deadlines--``for setting energy efficiency
standards for the 20 product categories with statutory
deadlines in the past. DOE's delays range from less than a year
to 15 years. DOE has yet to finish 17 categories of such
consumer products as kitchen ranges and ovens, dishwashers and
water heaters, and such industrial equipment as distribution
transformers. Lawrence Berkeley National Laboratory estimates
that delays in setting standards for the four consumer product
categories that consume the most energy, refrigerators and
freezers, central air conditioners and heat pumps, water
heaters, and clothes washers, will cost at least $28 billion in
foregone energy savings by 2030. DOE officials could not agree
on the cause of delays.''
Now, I just want to suggest to you, to take this
Department, and give it 646 pages of additional power, is an
astonishing avoidance of King Canute's record.
The second is, on page 362 in this bill, you in effect
mandate an 83 percent reduction in carbon by 2050. Now, that is
exactly like telling the ocean to quit moving. The idea that we
are actually going to get an 83 percent reduction in carbon, in
my judgment, is a fantasy, barring a major scientific
breakthrough, which legislators have zero ability to legislate.
You can invest in it, you can hope for it, but to legislate, it
strikes me, is exactly King Canute's rule.
On two plus two equals four, I just want to put in the
record a quote from George Weigel, and a quote from Orwell's
1984, both of which point out that the State can tell you two
plus two equals five, but it isn't true.
Now, Congressman John Dingell captured the two plus two
equals four exactly right, when he said earlier today, this
bill is a big tax increase. And I want to make this quite
clear. This bill is an energy tax. President Obama's budget
makes clear it is a $646 billion energy tax. That is what he
has in the budget with an asterisk that says it will raise more
than that.
The press reports indicate the Administration believes that
that energy tax would actually raise around $1.9 trillion,
which for a 648 page bill means it is between $1 billion and $3
billion a page.
Now, energy tax kills jobs, and Vice President Gore was
talking earlier about how China is improving. I just want to
quote, about India and China, two things. And this is from my
written testimony. India is saying no to crippling its economy,
no to stemming its growth, and no to punishing its citizens.
One particular member, actually, of the Indian delegation to
the U.N. conference in Bonn, said: ``If the question is whether
India will take on binding emission reduction commitments, the
answer is no.'' He went on to say: ``This sort of energy tax is
morally wrong for India.''
China, too, believes emission caps are the wrong answer.
The lead climate negotiator for China said the following
regarding who should pay to cut emissions: ``As one of the
developing countries, we are at the low end of the production
line for the global economy. We produce products, and these
products are consumed by other countries. This share of
emissions should be taken by the consumers, not the
producers.'' And in fact, what the Chinese are saying is, they
want us to pay for their emissions, on the grounds that we buy
their products, which I think is actually a pretty large amount
of chutzpah.
As Energy Secretary Steven Chu has said: ``If other
countries don't impose a cost on carbon, then we will be at a
disadvantage.'' And I think in this economy at this time, that
is the number one thing to look at. An energy tax punishes
senior citizens. It punishes rural Americans. If you use
electricity, it punishes you. If you use heating oil, it
punishes you. If you use gasoline, it punishes you. This bill
will increase your cost of living, and may kill your job. The
Tax Foundation estimates this bill, that an energy tax, could
kill 965,000 jobs, and reduce the economy by $138 billion a
year.
What is even more troubling about this bill, though, is it
continues the recent tradition that Congress has adopted, and
that is to move from Lincoln's government of the People, by the
People, and for the People, towards a government which punishes
the People into behavior. I favor incentivizing the future. I
am opposed to punishing the present.
We did not create the transcontinental railroads by
punishing stagecoaches. I could strongly support an
incentivized bill to maximize new technologies and to maximize
green technologies. I would also point out that Vice President
Gore's reference to $0.30 a day came from an intellectually
dishonest EPA study which included 150 percent increase in the
number of nuclear power plants, and the EPA study itself
indicated that it had been instructed by the committee staff
not to, in fact, base its study on the bill. It is a footnote
in the EPA study.
Now, prudence suggests that we do need to consider the
facts and that there are reasonable, affordable steps that
might work. This committee should look at where we Americans as
a country can move forward. Vice President Gore cited three
risks we face; economic concerns, national security concerns,
and the environment. I would add a fourth risk, which is the
threat of big government, big bureaucracy, big deficits, and
political manipulation.
And I would be glad to engage in a dialogue on how we can
meet these threats, because I think we do need a serious
dialogue. You know, at Vice President Gore's request I made a
commercial with Speaker Pelosi. We said that we would address
climate change, that we needed cleaner energy sources, and that
we needed a lot of innovation. I can accept all three of those,
but a dialogue ought to be both ways. It ought to be not an
automatic agreement or a salute but rather a genuine
conversation.
Vice President Gore made some startling and in some cases I
think deeply misleading assertions. He cited Bernie Madoff and
described bad information and talked about massive fraud, but,
in fact, I think that it is very important to look in detail at
his on testimony. He pointed--he said, for example, the rate--
this is a quote. ``The rate of new discoveries is falling for
energy.'' That is factually not true. In the last 3 years we
have found 100 years of natural gas in the United States,
because we now have new technology drilling at 8,000 feet, and
we have literally found 100 years of natural gas in the last 3
years.
In Brazil they found three fields, the Tupi field alone in
2007, a second field recently, and just in January an Exxon,
Hess consortium found a third field. Brazilian reserves have
gone from ten billion barrels to 100 billion, but, of course,
that is an off-shore Atlantic Ocean field, which was up until
last October illegal to look for in this country.
The Bachen field in North Dakota and Montana has jumped
from a 1995, U.S. geological survey estimate of 151 million
barrels in April of 2008, they raised it by 2,500 percent. They
now believe there are between three and four billion barrels of
oil in the Bachen field.
What Vice President Gore does not tell you is that having
supported the government stopping the exploration for oil,
having supported the government stopping the development of
shale oil in Colorado, having supported the reduction in the
use of coal where we have 27 percent of the world reserves, we
are then told that these government-imposed shortages prove we
have no resources. That is fundamentally not true, and yet the
Obama budget proposes to raise taxes on oil and natural gas
development at exactly the time this economy needs more
development and more jobs.
On the facts of climate change, we need a national inquiry,
and let me be quite clear in the spirit of the commercial I did
with Speaker Pelosi at Vice President Gore's request. I want to
invite Vice President Gore to join in a non-partisan inquiry,
and I would love to have this committee agree to help sponsor
it, so that every high school and college campus this coming
October could have a discussion about the facts.
For example, Vice President Gore in his testimony talked
about the likelihood of a 20-foot rise in sea level. Let me say
if we had a catastrophic 20-foot rise in sea level, that would
be bad. I am happy to stipulate. That would be bad. However,
even the inter-governmental panel on climate change said the
probable maximum is between 7 and 23 inches over the next 100
years.
Now, 7 and 23 inches over 100 years is radically different
than 20 feet, but let me go a couple stages further. A recent
report on Greenland, this is from the American Geophysical
Union, a report said the following. ``So much for Greenland
ices Armageddon.'' This is a quote within that. ``It has come
to an end. Glaciologist Havey Murray of Swanson University in
the United Kingdom, said during a session at the meeting,
``There seems to have been a synchronous switch off of the
speed up.'' She said, ``Nearly everywhere around southeast
Greenland outlook glacial flows have returned to the levels of
2000.'' That is from January of this year.
On the question of whether or not Antarctic ice is, in
fact, shrinking, let me just quote from the Australians who
said, slightly longer, ``Antarctica has 80 percent of the
earth's ice, 90 percent of the earth's ice and 80 percent of
its fresh water.'' According to the Australians, ``Extensive
melting of Antarctica ice sheets would be required to raise sea
level substantially. Ice is melting in parts of western
Antarctica. The destabilization of the Wilkins Ice Shelf
generated international headlines, however, the picture is very
different in East Antarctica, which includes the territory
claimed by Australia. East Antarctica is four times the size of
west Antarctica and parts of it are cooling.'' The Scientific
Committee on Antarctic Research report prepared for last week's
meeting of Antarctic treaty nations in Washington noted the
South Pole had shown significant cooling in recent decades.
Australia Antarctic Division Glaciology Program head Ian
Allison said, ``Sea and ice losses in west Antarctica over the
past 30 years had been more than offset by increases in the
Ross Sea region, just one sector of east Antarctica. Sea ice
conditions have remained stable in Antarctica generally,''
Allison said.
``So ice core drilling and the fast ice off Australia's
Davis Station in east Antarctica by the Antarctic Climate and
Ecosystems Cooperative Research Center shows that last year the
ice had a maximum thickness of 1.8 nine meters, its densest in
10 years.''
Finally on coral die-offs it is hard to understand why
carbon dioxide or current temperatures would lead to coral die-
offs. Coral was very abundant in earlier eras when the earth's
temperature was as much as 10 to 15 degrees warmer and
atmospheric CO2 was two to seven times higher. I am
an amateur paleontologist. I would be glad to take the vice
president to the Smithsonian or the American Museum of Natural
History where we can look at all sorts of marine invertebrate
life, which is collected as fossils, because, in fact, they
used carbon quite effectively.
All I am suggesting is that there is a sufficient debate
over facts, not over theories, over facts, that will be very
useful to have an inquiry on every college and high school
campus, allow everyone to present their evidence, and discuss
in a way, a genuine dialogue about this.
But while I think there is no evidence that we need to rush
to a massive energy tax increase or a massive increase in
government, there are many steps we could take that are
reasonable and that are legitimate. I suggest 38 of them in my
testimony. I am just going to mention a couple quickly here.
First, I think we should rebuild the American economy with
American energy, both for jobs and for national security. I
think it is very important that we have a pro-American energy
bias in our system.
Second, I do think that green coal and carbon sequestration
is the most important single breakthrough we could make because
the objective fact is China is adding one coal-burning plant a
week. There is no evidence they are going to slow down, and
unless you get to an affordable green technology for coal,
there is no possibility that American developments are going to
affect the volume of carbon in the atmosphere because the
Chinese will more than offset any savings we have.
Third, I think that enhanced oil recovery as a component of
carbon sequestration could lead to up to 100 billion barrels of
additional oil coming out of existing fields, which is a key
answer to the peak oil question, which creates jobs in the
U.S., keeps money in the U.S., helps our foreign exchange rate,
solves an environmental challenge, while also solving an
economic challenge.
Fourth, the U.S. should expand the use of biofuels,
including ethanol, and I agree with two questions. One on page
8, why would you exclude biomass from federal forest lands. I
mean, I think that is a--makes zero sense in terms of the sound
management of federal forests and in terms of biomass, and
second, on page 110 why would you exclude energy from municipal
wastes. If we can get methane production from municipal waste,
why isn't that a totally legitimate use of biofuel on a
renewable basis?
Number five, you should add a section on nuclear energy. I
thought the dialogue between the committee and Vice President
Gore was fascinating. China has the largest nuclear building
program in the world. Now, if the vice president wants to come
here and tell this committee he is encouraged by China, then he
has to confront nuclear energy. The French produce 80 percent
of their electricity from nuclear energy. If we maxed that, we
would take 2 billion, 100 million tons of carbon dioxide a year
out of the atmosphere. The fact is that Vice President Gore
mentioned one off reactor. That is entirely a function of
government policy. If we wanted to, we could follow the
Japanese and Canadians develop a clear model of a routine,
repetitive nuclear reactor, build a huge number of them.
If you want to lower the cost to building nuclear power
plants, streamline the permit system and streamline the
litigation system, bring American production down to the rate
of Japan or France. It takes 5 years to build a nuclear power
plant in Japan. It takes 15 to 20 if you can get past the
litigation in the United States.
And finally, any notion that civilian development of
nuclear reactors by the United States has any impact on nuclear
weapons worldwide I think requires you to ignore that North
Korea and Iran are doing quite fine on their own, and they
don't seem to have any need for an American nuclear program to
develop their nuclear weapons.
Sixth, I want to just close by recommending something that,
not just to this committee, but to the whole Congress, and this
may be bolder than anything that is in the current bill. We are
on the edge of a huge opportunity in science. There is going to
be four to seven times as much new science the next 25 years,
65 percent of it coming outside the United States. We have more
scientists alive than all of previous human history. They are
every year getting better computers and better instruments,
they are connected by e-mail and by zip code. I mean, by e-mail
and by cell phone. Today they are then connected to licensing
and venture capital and royalties so they can move from the
laboratory to the market more rapidly than ever.
We recently had an Alzheimer's study group report that you
know fully well about, Chairman Markey, where we proposed a
very bold, fundamental change in the budget act to go from an
accountant design science budget to ask the scientific
community to optimum they could invest. There is no zone other
than health where it would be more appropriate than in the
field of energy and the environment to fundamentally reshape
how we invest in science and to set as a goal very radical,
dramatic breakthroughs to get affordable, reproducible, and
scalable breakthroughs in energy, which I think are possible. I
do think that part of this bill is moving in the right
direction. I would love to find a way to design a very bold
breakout, whether it is hydrogen, new materials technologies,
or a variety of other things. I think they could be there.
But I would just close by urging you don't mandate beyond
the technology. When we passed the act in 1990, we actually
knew the technology existed for sulfuric acid to be dealt with.
We didn't--and we did it for a very limited number of sites.
This is a fundamentally different question, and it threatens
the entire American economy.
But I appreciate very much the chance to be here.
[The prepared statement of Mr. Gingrich follows:]
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Mr. Markey. We thank you, Mr. Speaker, very much.
We will begin by recognizing the chairman of the full
committee, Mr. Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman, for
recognizing me first so I could attend to some other business.
Mr. Gingrich, as I hear what you are saying is it can't be
done, it costs too much, there is really not that great a
threat anyway, and we don't want to rush out and spend
government money and have government programs in the large
government. But it was interesting your proposals were rebuild
the American economy with greener energy. I assume that is
going to cost somebody some money. Green coal and carbon
sequestration. Of course we need it. It is going to cost some
money. Enhanced oil recovery, expand biofuels, nuclear energy.
We ought to ask the scientists how much money they want. I
don't disagree with those ideas, but I don't know how you do it
without spending some money, and quite frankly, I would rather
give the marketplace some incentives to get some of these
results than to have government funds do it, attempt to do it,
because I think the free economic system that we have is the
best way to get results.
But as I look at your basic core argument, it is going to
cost too much, and in fact, you said it is going to be a
glorified $1 to $2 trillion new energy tax will cost households
over $3,000 a year. Is that right? Is that your position?
Mr. Gingrich. Well, those are the numbers I have seen.
Mr. Waxman. OK. Well, those are numbers that have been
cited, and the problem with these numbers if they are simply
not true. Republican members have cited this before at other
hearings, and they say that this is supported by an MIT study,
but the author of this study, Dr. John Riley, said the estimate
is a gross exaggeration, that the study is 2 years old, uses
outdated data, examines a different piece of legislation.
I would like to enter into the record, Mr. Chairman, two
letters that Dr. Riley sent to Minority Leader Bainer
explaining that Republicans are mischaracterizing his work.
Just yesterday Dr. Riley confirmed that, ``The Republican
approach to estimating the cost of cap-and-trade is just
wrong.'' EPA analyzed the----
Mr. Markey. Without objection it will be included in the
record.
[The information was unavailable at the time of printing.]
Mr. Waxman [continuing]. Cost of the bill that Mr. Markey
and I have proposed, and this analysis says the bill will cost
the average family less than 40 cents per day. When the
American people hear statements that you have made, they get
scared, which is exactly what I think is intended. Let us scare
people. This is not a new tactic. I remember over the years we
have heard it over and over again from industry. Twenty years
ago when we were doing the Clean Air Act opponents of the Acid
Rain Provision said it would bankrupt the utility industry. In
fact, we cut emissions in half at a fraction of the cost the
naysayers predicted. They said it was certain that we would
lose the air conditioning in our office buildings and that we
simply couldn't make cleaner automobiles. All of these
predictions turned out to be completely inaccurate.
I believe that you are trying to give us a false choice.
Our economic future and clean energy are inextricably
intertwined. The economy that will grow the fastest in this
century will be the one that makes the greatest investment in
new energy technologies.
Nearly 40 years ago this committee passed the original
Clean Air Act and since that time in 40 years we have reduced
dangerous air pollutants by 60 percent or more. You acted as if
it would be incredible that we could reduce carbon emissions by
huge numbers. Incredible that we did that under the Clean Air
Act and during the same period our population has grown by 50
percent and our economy by over 200 percent.
There aren't that many of us in the room that were here
when we did the Clean Air Act. I don't know if you--you
certainly weren't here in 1970. You were here in 1990. We heard
all of these scare tactics firsthand and what the Congress did
on a bipartisan basis is we let commonsense prevail. We acted
decisively to clean up air pollution, and our Nation has
benefited ever since.
And I would suggest that your ideas are not bold. They are
a repeat of the old scare tactics. Let us get the American
people really scared. The Democrats are going to charge you
more money than it is impossible to achieve. Why only the South
Pole on one side is sinking and other side not. I just think
that the American people ought to see through what you have to
say, and I would hope you would not go to every campus to give
your speeches but urge Republicans and Democrats to work
together, just don't attack Gore and attack the President and
attack the Democrats. Work with us, and if you don't think it
is a problem, then I don't know why you are even giving us
those six or seven solutions, because I think there is a
problem, and you ought to face up to us and help us solve that
problem.
My time has expired and yield back the time.
Mr. Gingrich. Am I allowed to respond?
Voice. The gentleman would be allowed to respond.
Mr. Waxman. Well, I didn't ask a question, and I don't mind
if he responds, but the rules that I understand we have always
had is members have 5 minutes to either ask a question, I asked
you one upfront, and then to say whatever we want to say.
Mr. Barton. Mr. Chairman.
Mr. Waxman. I would certainly think you ought to be able to
respond if you want to, but that is going to be up to the
committee to violate the rules and give you an extra privilege
that other people have not had.
Mr. Barton. Mr. Chairman, we have----
Mr. Markey. The gentleman's time has expired. I can
recognize----
Mr. Barton. Ask to speak out of order, either one.
Mr. Markey. The gentleman is recognized for that purpose.
Mr. Barton. The chairman of the subcommittee explicitly
gave Vice President Gore earlier today the opportunity to
respond to Congressman Radanovich's statement, which wasn't a
question, and Mr. Markey----
Mr. Waxman. Well, in that case if the gentleman would yield
I will ask unanimous consent that the--Mr. Gingrich be given 3
minutes to respond.
Mr. Barton. Well, he should just be given--we should give--
--
Mr. Gingrich. I can do it in much less----
Mr. Barton. --the Speaker of the House the same courtesy we
gave the Vice President of the United States.
Mr. Gingrich. I can do it in much less than 3 minutes.
Let me must say first of all, that the $640 billion tax
increase comes out of the Obama budget and has an asterisk
indicating it will be more than that. That is not my number.
That is the President's director of the budget's number.
Second----
Mr. Waxman. You said that is how much would come in a cap-
and-trade program that would be then redistributed.
Mr. Gingrich. Yes. It is in the budget, so it could be
redistributed.
Mr. Waxman. So you take money, and you redistribute it.
Mr. Gingrich. But it would be redistributed.
Mr. Waxman. OK, and you propose some redistributing of
dollars as well.
Mr. Gingrich. On the MIT study I----
Mr. Waxman. Where does your money come from?
Mr. Gingrich. I would ask permission, if I might----
Mr. Waxman. Where does your money come from for your ideas
here? Where is the money going to come from that we are going
to transform the American economy with American energy?
Mr. Gingrich. Well, look. I think when you----
Mr. Waxman. Where is it going to come from for green coal
and carbon sequestration? That is an expensive proposition. We
have got to do it. We have got to invest in it. Where is the
money going to come from to transform the way scientists are
able to do their work?
Mr. Gingrich. Well, first of all, in a Congress which
passed a $787 billion stimulus without reading the bill, I
think we can find the money. I am perfectly happy to work
together to find the money.
Second, I have never said I am against the government
incentivizing change. I am against the government punishing
change.
Third, I would like to put in the record a recent article
in the Weekly Standard called Fuzzy Math, which is actually
John McCormack's conversation with the MIT professor, and in
terms of citations, I would cite $10,800 cost per family of
four by 2020, according to a laperstudy, $2,700 per family of
four according to Warden econometrics, and $750 per year for
the porous quintile according to the Center for Budget Policy
Priorities as some of my sources.
Mr. Waxman. Mr. Gingrich----
Mr. Gingrich. Finally----
Mr. Waxman [continuing]. I don't object to any of those
going in the record, but Mr. Gingrich, I am sure glad you are
not in charge of foreign policy. Do you think the only way to
incentivize a country is by offering them more and more
carrots? You have got to have some----
Mr. Gingrich. I don't think----
Mr. Waxman [continuing]. And sometimes----
Mr. Gingrich. Chairman.
Mr. Waxman [continuing]. You have to say to incentivize you
we are going to give you some assistance, but there are going
to be consequences.
Mr. Gingrich. Mr. Chairman, I don't think of American
citizens the way I think of foreign dictators, and I don't
think this Congress should punish the American people. I think
this Congress has every right to reward the American people,
but I don't think Lincoln's government of the people, by the
people, and for the people should be turned into a government
punishing the people, and that is the major difference.
Lastly I would point out that in the EPA analysis of your
bill, your bill is not complete, and the EPA analysis included
150 percent increase in nuclear power, and there is no nuclear
power section of the bill. So I would be perfectly happy to
talk to you in more detail when the bill is complete. I would
be glad to come back and testify if the bill gets completed,
but this is an incomplete bill, and the EPA analysis had
certain assumptions that don't relate to the bill. But I am
always delighted to be here with the chairman.
Mr. Markey. The gentleman's time has expired.
The chair recognizes the gentleman from Texas, Mr. Barton.
Mr. Barton. Thank you. Thank you, Mr. Chairman.
I just want to put in the record this famous MIT study is
based between 2015, and 2050, there will be an annual, which
means every year, average of $366 billion in revenues. You take
that number, you divide by the number of households in America,
which MIT estimates to be 117 million, and lo and behold that
equals $3,128 per household.
Now, you can redistribute it, you can play with the
numbers, you can go up on your allowances, down on your
allowances, but the fact remains if we put anything close to
what we think Mr. Markey and Mr. Waxman are going to put on the
table in terms of a cap-and-trade system, it is going to raise
huge amounts of money, billions and billions of dollars every
year, and somebody is going to pay for it, and that somebody is
the American taxpayer and the American consumer. That is number
one.
Number two. When Mr. Waxman asked about how you do the
research and how you pay for carbon sequestration, he well
knows that Mr. Boucher and myself and other members of the
committee have a bill that assesses a very small fee, like per
mill fee, per megawatt or--yes, megawatt of electricity
produced where the industry itself pays for the fund that
develops this sequestration technology for carbon capture, our
conversion, and sequestration.
That bill is part of the 648-page draft. The Boucher
proposal that I support and many Republicans support is in this
draft bill. What is not in this draft bill is the actual
allowance system, scheme and who gets free allowances and who
has to pay for allowances. That is not in this bill. And that
is--there may be good reasons why it is not in the bill, but it
is not in the bill.
Now, my question to you, Mr. Speaker, the draft bill has a
renewable electricity portfolio standard called RES, but it
does not include nuclear power and does not include clean coal
technology. The Republican alternative will have a clean energy
standard which will include both nuclear and clean coal
technology. Which of those two definitions, if any, do you
support?
Mr. Gingrich. Well, obviously I would support including
clean coal technology and nuclear power, but let me point out
in terms of one of the things that the chairman asked me a
minute ago, if you simply pass regulatory and litigation reform
for nuclear power, I suspect you get a dramatic increase in
nuclear power investment at no cost to the Federal Government.
It would be beneficial for the committee to hold a hearing and
invite in the nuclear power industry and say, if we wanted to
have a robust nuclear power industry with no federal
investment, what changes would we need to get to a clean,
simple, guaranteed approach that allowed companies to go out
and actually build a nuclear power plant. And I think you would
be startled at how many nuclear power plants you could build if
they weren't faced with massive litigation, continuous
regulation, and an increasingly difficult-to-deal-with Nuclear
Regulatory Commission, which in effect is virtually guaranteed
that it is too expensive to build the very plant here that is
routinely built in either France or Japan.
Mr. Barton. My last question, Mr. Speaker, I think we have
pointed out repeatedly the problems with the cap-and-trade
system. The fact that it doesn't work, it hasn't worked in
Europe, it is going to be hugely expensive, it is going to cost
lots of money, it is going to cost millions of American jobs.
The Republican alternative does always with cap-and-trade and
puts in its place an efficiency or performance standard similar
to what we put in the Clean Air Act amendments of 1990. We used
existing--the best available technology as the standard in a
given incentive for plants. If they develop better technology,
they then get an accelerated depreciation on their tax returns.
I know you haven't had a chance to look at the Republican
alternative, but does that sound like something that would be
better in your view than a cap-and-trade program that simply
doesn't work?
Mr. Gingrich. I think the history of America is that when
you reward people, when you have prizes, when you have
incentives, you can get extraordinary levels of entrepreneurial
energy and an amazing amount of inventiveness. And historically
whether it was prizes for airlines for aviation breakthroughs
in the '20s and '30s or it was the grants of land in order to
build the railroads, the Transcontinental Railroad in the 19th
century, we have been very successful as a country in
incentivizing the future. We are not very effective when we
either bureaucratize it or punish the present.
Mr. Barton. Thank you, Mr. Speaker. Thank you, Mr.
Chairman.
Mr. Markey. The gentleman's time has expired.
The chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. Thank you.
I must say this has been surprising testimony because I
think many people will ask what happened to the old Newt
Gingrich. We expected an optimist, someone who believes in the
creative power of the American economy, but we have had a
sudden attack of pessimism that we can't solve this problem.
And I want to ask you some questions about that. Perhaps we can
put up a chart here on this screen about some questions you
were asked on February 15, 1970, if we can get the first slide
up.
You were basically asked--you are going to help us out
there, I hope. You were basically asked if you supported a cap
on carbon in 1970, which basically is what this bill is. This
is--excuse me. 2007. And you said, and I am just going to read
several of your quotes. You said, ``I think that if you have a
mandatory, have mandatory caps, combined with a trading system,
much like we did with sulfur, and if you have a tax incentive
program for investing in the solutions, that there is a package
that is very, very good, and frankly, it is something I would
strongly support.''
This bill is exactly that package. It is a mandatory cap.
It protects Americans from unrestrained pollution. It is
exactly what we did for sulfur dioxide, and if you will put up
the next slide, please, we will just take some--just so you
will know I am just picking these at random, in the same
interview said, ``The caps with the trading system on sulfur
has worked brilliantly. It has brought free market attitudes,
entrepreneurship, and technology and made it very profitable to
have less sulfur.'' So people said, wow. It is worth my time
and effort.
Next slide, please. You went on to say, and I will read
this. ``I think,'' I will just read the last paragraph. ``I
think that we are right at a tipping point where you could
begin to imagine the development of an entirely-new generation
of systems where you had a combination of a carbon cap with a
trading system. You had prizes for the invention of major
breakthroughs, and you had incentives for investing in the new
breakthroughs and accelerating their use and their development.
And you could imagine a world 15 years from now that is
dramatically greener than the world we are currently in.''
Now, the bill that we are working on does basically what
you said you wanted to see happen in 2007. It is a mandatory
cap. We are no longer allowed polluting industries to put
pollution in unlimited amounts into the atmosphere, and we are
going to require polluting industries to pay some amount for
the right to put pollution into this atmosphere.
We will use a trading system to have the most efficient as
the market will determine allocation of those scare resource.
We will have investment in these technologies of the ones that
you alluded to. We have incentives in this bill, tax and
otherwise, just as you alluded to in 2007.
So I am trying to figure out why this massive change in
your position, and I ask myself, well, is it because we found
out that this program would be more expensive than we thought.
Well, I know that is not the situation. I am holding a letter
of April 14 from Dr. John Riley of MIT, who is the author of
this report being quoted by Republicans trying to scare
Americans thinking this is going to destroy the economy.
And what he said is, ``Dear Representative Boehner, I write
to correct an estimate I sent on April 13 to counter what we
feel is a misrepresentation of our work by the National
Republican Congressional Committee.'' Continuing, ``A collect
estimate of that cost as opposed to auction revenue for the
average household just in 2015, is about $80 per family or $65
if more appropriately stated in present value terms discounted
in an annual 4 percent rate.''
That is 18 cents per day. The Republican party
unfortunately is trying to tell people that the continued
climate that we have here is too expensive at 18 cents a day. I
don't believe that is too expensive. I also believe it could
end up being cheaper, given the enormous technological
creativity of our economy.
So I will just ask you this. Just a very, very simple
question, Mr. Gingrich. Do you believe a dramatic reduction by
use of a cap-and-trade system that would cost Americans 18
cents a day is too much to pay to save the planet?
Mr. Gingrich. Well, as I said earlier in two plus two
equals four and if you think that the $646 billion Obama tax
increase in this budget can be translated into 18 cents a day,
I think you probably think two plus two equals 700. The fact is
the cap-and-trade system I supposed in 1970, affected 263 units
and at its peak affected 2,000. Now, if you want to write a
bill that covers the 2,000 most polluting places and say, fine,
those 2,000 are part of cap-and-trade, I would be glad to look
at it.
Mr. Inslee. Could I ask you----
Mr. Gingrich. If you want to include as I said in--if I
might, if you include as I said in that quote very strong
incentives, I would be glad to look at it. If you include
prizes, I would be glad to look at it. If you would liberate
the nuclear power industry from trial lawyers and regulatory
controls, I would be glad to look at it. This bill does none of
those things.
This bill actually has the Department of--the Secretary of
Energy regulating Jacuzzis. Now, the idea that we are going to
have a cap-and-trade system that regulates Jacuzzis strikes me
as close to being nuts.
Mr. Inslee. Could I just--I just really would like you--I
would like to know what you think about this. By the way, the
only Jacuzzis this will regulate will have to produce 2,500
megawatts of energy, oK, to be covered, so you don't have to
worry about Jacuzzis.
But just let me ask you this question. In your opinion do
you believe 18 cents a day for the American family is too much
to save the planet? You can give us your thoughts about that.
What do you think?
Mr. Gingrich. I think if you could convince anybody that
that is the real price, I----
Mr. Inslee. Well----
Mr. Gingrich [continuing]. As I said awhile ago, then
explain the $646 billion that is in the Obama budget. I mean,
if you and the President have an argument, you don't have an
argument with me. I am citing the President. Let me just ask
you----
Mr. Inslee. I just think----
Mr. Gingrich [continuing]. Let me ask, because maybe I
misunderstood. So maybe you can help me, Congressman Inslee. On
page 233, line five, portable electric spas. Now, I don't know
what a portable electric spa is. I was told it was a Jacuzzi,
but that is in this bill. Page 233. Now, that is why I said,
when I got to that point, I quit reading the bill.
Mr. Inslee. We will give you a hot spa that is energy
efficient. I hope that doesn't offend you. My point is is that
the economists who are testifying in this committee, including
one called by the Republicans yesterday, said there would be a
minimal cost of this. One yesterday, Dr. Jay Apt, former U.S.
astronaut, told us that it won't cost us any more than
compliance with the Clean Air Act. He said that was well worth
the cost.
Thank you very much.
Mr. Markey. The gentleman's time has expired.
The chair recognizes the gentleman from Michigan.
Mr. Upton. Thank you, Mr. Chairman.
I just want to go back to John Dingell's statement earlier
this morning when he said that cap-and-trade is a tax, and it
is a real big one, and the EU screwed this thing up twice to
put it in his words.
Mr. Speaker, it is good to have you back, and I am one that
believes that we can, in fact, reduce emissions and deal with
the issue in a major way, and you and I were both in the
Congress with Mr. Barton, Mr. Markey, certainly Mr. Dingell
when we took this issue up back in the '90s called the BTU tax.
A lot of us labeled it the big time unemployment, and we knew
at the time that the Senate was never going to take that bill
up, but somehow we had a march in the House. The Republicans
were in the minority, and that BTU tax did pass, 219 t 213, and
the Senate to their word never took the bill up.
As we look at the landscape today with the Senate failing
to take up the Warner, Lieberman bill last year, failing to get
60 votes, with another 12 that said that they would have voted
against it had it made it to closure, when we look at the vote
earlier this month in April where the Senate voted almost by a
two-to-one margin, including my two senators, Evan Bayh, a
number of others in the mid-west region, the rust belt, who,
again, said it should not be part of reconciliation as part of
the budget, thus requiring 60 votes instead of 50. They said
no. And as we try to work together on a bill to me it is quite
apparent that even if the House passes a cap-and-trade tax as
Mr. Dingell called it, it is not going to fly in the Senate. So
why don't we work together on a number of things that, in fact,
can bring us together?
Things like a renewable portfolio standard to include non-
carbon emissions as part of that. Thirty states have moved
forward. Michigan among them. Texas among them. Presume
Massachusetts among them. But as we look at the list of states
with a high percentage of carbon-based fuels, we look at
Massachusetts at 90, better than 90 percent, Michigan 86
percent, Texas at 95 percent, even Wyoming at 97 percent. I
think it is clear that we can take a number of steps to focus
on renewals, and we ought to make sure that waste to energy is
part of that, we ought to make sure that wind and solar
incentives are there. I am one that believes that nuclear,
which, of course, has no greenhouse gases emissions, we ought
to be looking at that as part of that portfolio, and I am
convinced that we will have bipartisan majority on a number of
those issues where we can, in fact, move that legislation
ultimately getting to the President's desk.
You have made some good points about nuclear, and it is not
part of this bill. I intend to work with Republicans and
Democrats to add that title to the bill when we get to markup
in the next week or two. I want to make sure that we don't have
caps on emissions before we have technology that can actually
make sure that we get to those.
What is your sense in terms of the argument that I raised
this morning about the WTO? Would that be a good idea to have
an off ramp?
Mr. Gingrich. Well, I think the people have to recognize
the very grave danger that this bill is going to kill jobs in
the United States and that the bill is not going to have any
automatic affect on other countries except to export factories
and export work. I do want to recognize that the distinguished
Chairman and my very deal friend has come in, and it is a great
honor to be with him, and we did many different things together
over the years, most of them I have to say for the good I would
like to think or for the country.
But I do think his testimony this morning or his comments
this morning when he was talking with the vice president and
with Senator Warner, this is a tax, and here is the core
challenge that I find fascinating, and it is something which
Mr. Butterfield I thought alluded to in his questions earlier
and that Ms. Sutton alluded to. The argument is that we have to
raise the cost in order to get people to transition out of
fossil fuels because fossil fuels are inexpensive. OK. That is
a legitimate argument, however, when you raise the cost, you
are raising the cost, and then people say, but there is not
really a higher cost when they raise the cost because somehow
magically we are going to get to the promised land where there
will be a lower cost after the higher cost.
But if you are a normal person in this economy, if you have
looked at us lose millions of jobs, if you are worried about
your marginal last dollar of your income, the fact that
eventually someday we will reach Nirvana, may not comfort you
while you go broke. And to think that the challenge for
everybody who wants to punish us into change, understand, the
people you are trying to punish are the American people. I am
very much in favor as I think you are, Mr. Upton, to
incentivize us into dramatic change. I think you could write a
bill that will be truly bipartisan that would have a dramatic
number of breakthroughs in getting to a cleaner environment and
to less carbon in the atmosphere.
But it would do so in a positive way, and it would do so by
incentivizing rather than punishing, and it would do so in a
clean way that did not require a massive expansion of
government bureaucracy.
Mr. Upton. Thank you.
Mr. Markey. The gentleman's time has expired.
The chair recognizes the gentleman from Michigan, Chairman
Emeritus of the committee.
Mr. Dingell. Thank you. I would like to begin by welcoming
my old friend, Mr. Gingrich, back. Glad to see you here, Newt.
I share your concern on the points that you have raised as
you have gone over these matters. The question of
competitiveness in this matter is a very important one. The
question of how it is we are to address this business of global
warming at the same time while we are dealing with the other
questions of preserving competitiveness is a matter of great
concern.
China and Indians you have indicated have indicated that
they are going to be developing countries for always and that
means we have some problems. There are others who are out from
under the burdens of this under the Quioto Agreement and will
have a potential for a large advantage over the United States.
These things I find are very, very troublesome to me, and so
the first question is how do we see to it that we don't be the
only country in the world which carries this load? How do we,
for example, address the questions of trade? How do we, for
example, address the questions of dealing with the business of
cap-and-trade so that it doesn't impose excessive burdens on
our people while letting others get away? What do we do with
regard to addressing these concerns within the framework of a
global cap-and-trade package but also within the framework of
things like GAT and the WTO?
Mr. Gingrich. Well, let me say first of all, Mr. Chairman,
you know full well in Michigan, in the area that you have
represented to ably, what the pain has been of unemployment and
of competition killing jobs. I worry a great deal the European
experience was captured in one study in which a cement plant
left Belgium under cap-and-trade and opened up in Morocco,
actually emitting more carbon in Morocco than it was originally
emitting in Belgium, taking the jobs away from Belgians and
giving them to Moroccans. And I do worry that if we
unilaterally adopt this that it would be a disaster. Now,
those, Vice President Gore, for example, was very optimistic
about the Chinese. You know, it might be useful to offer an
amendment that said that the cap-and-trade section of this bill
would only go into effect when it was certified that the
Chinese had adopted a comparable program. I think that would be
one way to guarantee that we, A, I think would probably never
go into effect, but, B, that we wouldn't be kidding ourselves
with what we are going to do to American jobs.
In this economy----
Mr. Dingell. When I was at Quioto told me that they were
only, that they were a developing country, they were not going
to be covered by the agreement, and that they would never be
covered by the agreement because they are always going to be a
developing country.
Mr. Barton. I am a witness to that. That really happened.
Mr. Dingell. Yes. Now, the problem that is our concern here
is we have to do something about the wasteful use of energy in
this country, and I desperately want to support this bill,
principally for that reason.
But the question is if--we have this nasty balancing. On
the one hand we have got to deal with the question of how we
make other countries comply and cooperate, how we at the same
time achieve the efficiencies that we have got to do, how we
force other countries to comply, and how we don't wind up with
a huge mess and a loss of jobs on our own hands.
Mr. Gingrich. I think you are putting your finger on the
heart of the challenge of this bill. Let me just say I believe
you could write a bill that liberated the nuclear power energy
industry and allowed us to move towards dramatically more
nuclear, which would take a great deal of carbon out of the
atmosphere.
I believe you could write a bill which dramatically
incentivized moving towards a green coal system of carbon
sequestration and using the carbon then to have an AMSOIL
recovery. I think you could write a bill which had very
substantial increase in research and development for materials
technology, for hydrogen, and for other breakthroughs. I think
frankly you could move ethanol from 10 to 15 percent of all
liquid fuels and you could move towards a much better use of
natural gas, and the combined effect would both dramatically
increase the American economy, reduce the amount of carbon
loading in the atmosphere, create a lot of American jobs, and
improve our national security.
None of the things I just mentioned requires a national
federal bureaucracy to micromanage Jacuzzis and none of the
things I just mentioned requires punishing anybody. And I think
that has got to be part of the key. We have in a world market,
when we unilaterally punish Americans, we cripple the American
worker in competing with our foreign competitors.
Mr. Dingell. All right. Now, I got one other question. You
and I have been floundering around in this morass for a long
time, and both of us have seen our concerns and interests and
feelings change. In April of 2007, you had some comments on
this, and in April of 2008, you had some other comments.
In 2007, you said my message is that evidence is sufficient
that we should move towards the most effective possible steps
to reduce the carbon loading of the atmosphere and do it
urgently. In April of 2008, we--you said I want to be clear. I
don't think that we have conclusive proof of global warming,
and I don't think we have conclusive proof that humans are at
the center of it.
How do we rhyme those two statements?
Mr. Gingrich. Well, Mr. Chairman, first of all, I believe,
and then I went on to say as a conservative I think
conservation and caution are part of being a conservative. And
I think that as a prudent person you can take steps to limit
carbon loading of the atmosphere without having conclusively
proved anything about that causality of whether carbon loading
has an affect on the temperature of the earth, because I think
frankly it is clear that as Mr. Barton earlier indicated that
there has been an increase in carbon loading of the atmosphere,
and there will probably be a continuing increase.
In the interim I also wrote a book called Contract with the
Earth, and I believe that it--I think one of the reasons I
volunteered to come here today is I believe if we can find and
incentivize a positive way to more to a new generation of
greener energy, and if we can find a way to do it that
increases the competitiveness of the American economy, it is
absolutely in our national security interests and our quality
of life interest to do it.
And so I do think that there are practical steps we could
take, and I would associate myself with Mr. Upton's description
of the kind of bipartisan bill that I think could have very
widespread support that would help Michigan create jobs, that
wouldn't kill more jobs, and it would actually expand the
choices of the American people. It wouldn't try to punish them
into change.
Mr. Dingell. Thank you. It is good to see you back.
Mr. Gingrich. Good to see you, sir.
Mr. Markey. OK. The gentleman's time has expired.
The chair will recognize himself.
You asked, Mr. Speaker, what would the nuclear industry
ask. Well, I can tell you that the asked his committee in 1992,
to combine the construction and operating license. We did that.
That was the 1992, Energy Act. In 2005, President Bush, the
Republican House and Senate, they asked the nuclear industry
what do you need. They said, well, we need to consolidate the
licensing proceedings for modular nuclear reactors. That is
exactly what was in the 2005, Energy Act.
But in addition to that we have authorized the Price
Anderson Act for them for 25 years to protect them against
insurance exposure because they are the only industry that
cannot, in fact, get insurance from the private sector that we
enacted a production tax credit for the nuclear industry. We
enacted a tax credit that allows all nuclear power plant owners
to deduct the cost of the money they put into their nuclear
power plant decommissioning funds from their taxes. We
authorized the DOE to assist companies in helping to get their
power plant licensing requirements through the NRC. We
authorized the wide-ranging DOE R&D Program and nuclear power
plant technologies, and perhaps most importantly, and this is
what they say is absolutely the bottom line need that they
have, we authorized a $50 billion government-backed loan
guarantees for the nuclear industry and other advanced
technologies, which means that if the utility defaults, the
American taxpayer is on the line for the money, which is the
system in France and China. They are Socialist and Communist
countries. We adopted that provision for them.
However, there is no question that even with all that said
and done that if there is a cap-and-trade system put in place
and a low carbon economy is created, that would be the best
marketplace incentive for the utility industry to move back
towards the nuclear industry. Because then a premium would be
placed upon it.
So the marketplace is the best place for them, although
they have been dependant upon government support for the last
50 years, and they have only intensified in that request over
the last 3 or 4 years, which has been met by the Congress. So
that is just the reality of the nuclear industry. It will do
better in a cap-and-trade system.
Second, on your point about the 34 times that the
Department of Energy missed their deadlines for appliance
sufficiency, that is accurate. They did. I know that because I
requested the GAO report on that issue. I know and have a
concern about it because they missed the deadline required in
my appliance sufficiency law.
Now, without question that led to an additional dozens of
power plants that had to be built, fossil fuel plants, in order
to generate the electricity for those appliances. However, the
reality is in addition that when you were speaker, there was
actually a writer that barred adoption of any new or revised
appliance sufficiency standards, and a second writer actually
barred any new standards for fluorescent light bulbs.
So to bring this up to the Jacuzzi amendment, the hot job
amendment, that provision is inside of the appliance efficiency
standards that we are going to require. Now, of all of the
things that we would want to have high energy efficiency, it
would be I would think Jacuzzis. I mean, there is a
discretionary purchase in the American economy, and all we are
saying there is like light bulbs or refrigerators or stoves,
that there should be high standards for energy efficiency in
the manufacture of Jacuzzis and hot tubs. It is just part of
what, it is part of what you were criticizing in the very
beginning in terms of the Department of Energy, not meeting
high energy efficiency standard. And by the way, the standard
that we included is the industry consensus standard, and a
standard they say they believe all industry participants can
meet.
And I would just add this one other thing, which is that
beginning in 1995, there was a rider attached to every
transportation bill, which banned the Department of
Transportation from improving the fuel economy standards of the
vehicles which we drive. So in the same way that not having
high standards for appliances, led to more fossil fuel,
electrical generating plants had to be built, sending more
CO2 up into the atmosphere.
So, too, their delaying the improvement in the fuel economy
standards lead to more imported oil, yes, but ultimately
delayed the point in time in which the auto industry would have
to meet the innovation tests that the rest of the world was
applying to our auto industry.
So I just point all those things out just to let you know
that in the confines of this bill the nuclear industry is a
huge beneficiary. The appliance and other industries will be
dealt with in a way that I think matches the kind of prize that
they should be receiving for innovation, but it is just
creating this ``work smarter, not harder'' economy that depends
upon innovation rather than the importation or the burning of
domestic fossil fuels unnecessarily, although where it is
necessary, we obviously need it to continue.
So that is the only point I would make to you, Mr. Speaker.
These are the things that I have been working on my entire
career, and in a lot of ways this bill that we are now debating
makes it possible for us to move to the innovation economy. It
makes it possible for us to move forward to now deal with the
reality that we only have 3 percent of the world's oil reserves
while consuming 25 percent of it, which is an unsustainable
long-term profile for our country.
Mr. Gingrich. Just two quick comments. You have shown great
fortitude today and great patience. Two comments. One, on the
question of reserves, I would just cite back what I had said
earlier when you realize the U.S. geological survey just
increased the Bachen reserve by 2,500 percent to between 3 and
4 billion barrels from what would have been a very small
reserve, and you realize that the Brazilians went and the last
few years from 10 billion to 100 billion because they have
barrels of reserve, because they actually permitted looking for
oil. I think--and we literally have gotten 100 years supply of
natural gas discovered in the last 3 years. I think that the
reserve issue is not, is actually not valid but is a function
of bad government policy, and I just would say I can't imagine
a much better way to close the difference between being liberal
and conservative in America than whether or not one could allow
consumers to actually evaluate Jacuzzis or whether we needed a
federal department of Jacuzzi regulation.
I think it is a perfect contrast in our two approaches, and
I have great respect for you and what you are trying to do, but
I do think it is a pretty dramatic difference in our view of
how America should operate.
Mr. Markey. Well, I thank you, Mr. Speaker, but, again, I
am only referring back to your own criticism of the Department
of Energy, and by the way, that was the Bush Department of
Energy that missed all 34 deadlines----
Mr. Gingrich. Well, I would say that----
Mr. Markey [continuing]. For energy efficiency.
Mr. Gingrich [continuing]. The mismanagement, for example,
of nuclear waste, clean up processes has been an ongoing
Department of Energy problem across several Administrations.
And I have limited faith in the ability of federal
bureaucracies to operate with agility and alacrity.
Mr. Markey. And I appreciate that, Mr. Speaker, but the
reality is is that the FutureGen product that you talked about
and are critical of the Department of Energy decision to walk
away from was a decision made by the Bush Department of Energy
in 2000.
Mr. Gingrich. I agree with you, and I am happy to be
bipartisan in my criticism.
Mr. Markey. Just so you know we put $3 billion into the
stimulus bill for climate change and sequestration. We have
already $10 billion built into this bill for carbon capture and
sequestration research, development, and demonstration
projects. The fundamental flaw to be honest with you with the
nuclear waste site, because I was here. I was actually chairman
of this subcommittee back in that era, was that rather than
listening to the National Academy of Sciences the--this
Congress back then in that time decided that they would pick
Yucca Mountain in Nevada, ignoring the National Academy of
Sciences. So it was not a science-based decision. It was
strictly political, and that is what we are now reaping the
harvest of because whether you put something near a river, near
an earthquake fall, you are going to wind up long-term with
real problems if you are trying to isolate nuclear materials
for 20 or 30,000 years.
So we are hoping that we can create a bridge here. We are
hoping that we will be able to work together, Mr. Speaker, with
Republicans on this issue to find a way that we can move
forward, because in the long run we only have 3 percent of the
world's global oil reserves. Even if it became 4 percent, we
now consume 25 percent, and it is--in the long run incumbent
upon us to find a technological solution to it, and the quicker
that we get to it, the quicker that we put in place the
incentives for market-based, science-based, breakthroughs. Then
I think the sooner that we will be able to tell those countries
around the world that we import 13 million barrels of oil
from--on a daily basis that we don't need their oil anymore
than we need their sand, but there is no way we are producing
an extra 13 million barrels of oil a day. We only produce eight
million barrels of oil a day today.
So we need a plan in place in order to be successful, and
we want to really work on a bipartisan basis, which would be
the Democrats and Republicans to accomplish that goal. It is an
honor for us to have you with us today.
I would like to conclude by giving you an opportunity to
give us your closing thoughts, your comments in terms of what
you want us to remember as we go forward with the consideration
of this legislation.
Mr. Gingrich. Well, first of all, I am very honored that
you let me come over and share these ideas with you, and I am
very grateful for the patience and the length of time that you
put in today.
I would say that there is a way to develop an incentivized
and a positive approach that can accelerate dramatically our
moving towards more effective energy systems. I think that to
the degree we divert that into trying to build a national
bureaucracy and trying to create a national managed system that
it is likely to carry us down a road we don't do very well, and
I agree with what Chairman Dingell said earlier this morning
that watching the two efforts by the Europeans has not been
very encouraging in terms of the likelihood of designing the
system.
But I do appreciate the way you have approached it, and I
hope that you and Mr. Upton are able to find some common ground
on which to write a bipartisan bill.
Mr. Markey. Thank you, Mr. Speaker.
Mr. Gingrich. Thank you.
Mr. Markey. And, again, it is our honor to have you here
with us.
Mr. Gingrich. Thank you.
Mr. Markey. We have 21 more witnesses to go today, and the
chairman needs approximately a 3-minute break before we begin
the next panel. So we will stand in recess for 3 or 4 minutes.
[Recess.]
Mr. Markey. Ladies and gentlemen, we apologize to you but
we had historic guests visiting the committee today. We are
moving at a rapid pace to try to construct our historic
legislation that matches the quality of the witnesses which we
have appearing before us. On this next panel, we have a group
of nationally recognized experts in their subject area and we
are going to begin with Ian Bowles. Mr. Bowles is the secretary
of the Executive Office of Energy and Environmental Affairs for
the Commonwealth of Massachusetts. He also served as associate
director of the White House Council on Environmental Quality
and senior director of the Global Environmental Affairs
Directorate at the National Security Council. We welcome you,
Mr. Bowles. By the way, I will introduce all of you so you
won't have to reintroduce yourself, which might save you 15 or
20 seconds in your testimonies, so whenever you are ready, Mr.
Bowles, please begin.
STATEMENTS OF IAN BOWLES, SECRETARY, EXECUTIVE OFFICE OF ENERGY
AND ENVIRONMENTAL AFFAIRS, COMMONWEALTH OF MASSACHUSETTS; DAVE
McCURDY, PRESIDENT AND CEO, ALLIANCE FOR AUTOMOBILE
MANUFACTURERS; ALAN REUTHER, LEGISLATIVE DIRECTOR,
INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE &
AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW); DANIEL
SPERLING, DIRECTOR, INSTITUTE OF TRANSPORTATION STUDIES,
UNIVERSITY OF CALIFORNIA DAVIS; DAVID FRIEDMAN, RESEARCH
DIRECTOR, CLEAN VEHICLES PROGRAM, UNION OF CONCERNED
SCIENTISTS; DAVID GARDINER, PRESIDENT, DAVID GARDINER AND
ASSOCIATES, LLC (ON BEHALF OF ENERGY FUTURE COALITION); JEFF
GENZER, COUNSEL, NATIONAL ASSOCIATION OF STATE ENERGY
OFFICIALS; CHARLES T. DREVNA, PRESIDENT, NATIONAL PETROCHEMICAL
AND REFINERS ASSOCIATION; ANDREW DeLASKI, EXECUTIVE DIRECTOR,
APPLIANCE STANDARDS AWARENESS PROJECT; AND CHARLES RICHARDSON,
ON BEHALF OF THE NATIONAL ASSOCIATION OF HOMEBUILDERS
STATEMENT OF IAN BOWLES
Mr. Bowles. Thank you, Mr. Chairman, for your terrific work
on this legislation. I am sure as you stare at this panel, it
feels like Heartbreak Hill in the Boston Marathon, so I commend
you for your patience in these proceedings and thank you for
having us here today.
Let me say at the outset, Mr. Chairman, that Governor
Patrick and the work we have been doing on clean energy is very
much aligned with the legislation that you and your team have
produced and we appreciate the thoughtful approach to
developing a federal-state partnership that advances the goals
of clean energy and greenhouse gas reduction. I also want to
note that many States have been leading in this area for recent
years and we all welcome this important legislation.
In short, the legislation builds on, buttresses and
accelerates but doesn't supplant proven State programs on
energy efficiency and renewable energy. On energy efficiency,
the bill creates a strong new set of federal standards but also
recognizes that much of the retail work retrofitting will be
done and implemented at State and local levels. On renewable
energy, the legislation recognizes the regional diversity of
clean power solutions and the fundamentally regional nature of
electricity markets and the need to bolster, not eliminate,
such markets. And on transmission, I think it carefully resists
the call for some top-down central planning that would disrupt
competitive energy markets such as we have in the Northeast and
instead creates a market-based set of mandates that in our view
is a superior way to accelerate renewable energy.
On regulation of greenhouse gases, the bill rightfully
crafts unified, robust national program but it still leaves the
States tools to innovate and continue to contribute to low-
carbon solutions. As you consider the design of the cap-and-
trade program, we in Massachusetts endorse 100 percent auction
approach. No other system provides the clarity and simplicity
to the private sector and it also allows the federal government
acting on behalf of the public interest to put the proceeds to
work to mitigate economic and consumer impacts, accelerate
renewable energy and energy efficiency and realign our public
transportation infrastructure. Let me say in the case of our
experiment with RGGI in the Northeast, our permit auctions have
run smoothly and we are putting tens of millions of dollars to
work creating jobs and reducing energy costs for our consumers.
As you consider a transition to the federal program, we believe
such programs are needed and should be funded, not just for the
RGGI States but for all 50 States, and the federal recovery
legislation begins that process with the State energy program
funding. As you develop your priorities for spending auction
proceeds, we really strongly encourage the committee to put a
big push on energy efficiency and make it a large part of your
investment.
The proposed Energy Efficiency Resource Standard also
represents a complementary tool to accomplish this. In
Massachusetts, we have restructured our electricity market so
that efficiency now competes with power generation on price to
meet the low demand. The EERS would create a similar mandate
for other States.
For those who say the EERS may be too stringent, I would
note that in Massachusetts we have met through measures over
the last decade 8 percent of our load through energy efficiency
investments. In rough terms, that would be equivalent to the
2017 mandate in your legislation. So I encourage the committee
to retain, include robust measures on energy efficiency and I
would encourage you also to add some more significant measures
on monitoring and verification so that we can demonstrate to
the public what these investments in energy efficiency are
producing.
In building codes, I think the work based on the IECC and
ASHRAE standards is terrific. We in Massachusetts are building
our new code currently on the 2009, not 2006 code, and I would
encourage the committee to look closely at the 2009 code
potentially as the basis.
On transportation, the bill breaks new ground by
incorporating greenhouse gas standards for vehicle emissions
and transportation planning. I encourage the committee to go
further even by tying federal highway funds to greenhouse gas
reductions, consider incentives for vehicle mile traveled
reductions and give the States some flexibility to set and
enforce greenhouse gas targets.
On fuels, the proposal in the legislation is a transition
to the renewable fuel standard, to transition that standard
into a low-carbon fuel standard. We think that is the right
policy. If anything, we would encourage you to move the
timeline more quickly but also to recognize some of the
regional opportunities and the special considerations such as
we have in the Northeast where we don't want to have leakage
out of transportation fuels into things like home heating oil.
In a related vein, we fully support the higher efficiency
standards for appliances, especially the provision that allows
States to set more-stringent standards where conditions
warrant. As you may know, in the Commonwealth we have a State
law that requires furnace efficiency standards for cold weather
States. We think there are some important regional differences
there.
In sum, I would say this is a terrific piece of
legislation. We commend you and your staff for your hard work
and I would be delighted to take the committee's questions.
Thank you.
[The prepared statement of Mr. Bowles follows:]
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Mr. Markey. Thank you, Mr. Secretary, very much.
Our next witness, Dave McCurdy, is a former extremely
distinguished Member of the United States Congress, former
chairman of the Intelligence Committee, and he is now using all
of those political skills and intelligence as the president and
CEO of the Alliance for Automobile Manufacturers and he was
previously the president and CEO of the Electronic Industries
Alliance. We welcome you back, Dave. Whenever you are ready,
please begin.
STATEMENT OF DAVE McCURDY
Mr. McCurdy. Thank you, Mr. Chairman, for the opportunity
and Ranking Member Upton and Chairman Dingell. It is always a
pleasure to be back. I will tell you, I have chaired a lot of
hearings in my career as well but I am not sure any would match
the marathon of the last 4 days, so I commend you for your
interest and endurance, and I would respectfully suggest that
if there is only one thing you recall from my testimony today,
just remember this, that automakers are committed to reducing
greenhouse gas emissions from the vehicles we sell and from our
assembly plants, and today I am going to focus on how we can
work together to accomplish that.
To begin with, the Alliance supports federal legislation
for an economy-wide greenhouse gas emissions reduction program.
We agree with the chairman, Administrator Jackson and others
that a comprehensive legislative approach is superior to
regulating greenhouse gas under the existing Clean Air Act.
When we look ahead and envision what a low-carbon future for
automobiles will look like, here is what we see. It is going to
require substantial investment in advanced vehicle
technologies. Secondly, our country needs complementary
policies for fuels, and third, we need a single national
program for improving fuel economy and reducing greenhouse gas
emissions.
Let me start with investment in technologies. Providing
clean energy necessary for continued economic growth and
prosperity will require rapid development and commercial-scale
deployment of advanced technology across many sectors including
motor vehicles. We strongly urge the committee to use revenues
generated from the proposed cap-and-trade system to help fund
research, development and implementation of new technologies
and upgrading and retooling of manufacturing facilities to
provide the next generation of green vehicles. According to the
endangerment finding released by EPA last week, light-duty
vehicles, cars, trucks and SUVs that we drive, account for
around 17 percent of manmade greenhouse gas emissions in the
United States. In order to realize the significant reductions
we know we will have to achieve in our sector, we need sizable,
sustained investments to take advanced low-carbon vehicle
technologies from our laboratories to our customers' garages.
Frontloading investments in these technologies is particularly
critical for automakers, given the long lead times to develop
new technologies, the extended periods needed to ramp up
production of new technologies and the long-lived nature of our
products. Given the importance of this sector, we urge at least
5 percent of annual allowance value, either in the form of
allowances or revenue, be dedicated specifically to development
and deployment of advanced technologies for light-duty
vehicles. We are open to further discussions with the committee
on how to allocate such resources among manufacturers,
suppliers and consumers.
With regard to fuels, the draft bill's approach of capping
emissions primarily upstream at the fuel source allows for the
broadest possible coverage and also will result in price
signals at the rate of about 8.5 cents, 8-1/2 cents per gallon
of gasoline for every $10 ton of carbon. Clean vehicles need
clean fuels so the Alliance supports a low-carbon fuel standard
such as the one included in section 121 of the draft. Lowering
the carbon content of the fuels we put into our fuel tanks will
help lower greenhouse gas emissions from the fuel source to our
tailpipes for years to come, and the benefits of cleaner fuels
can be realized by all the 250 million autos on the road today.
Finally, a key concern for automakers is that we not be
subject to duplicative and incompatible State and federal
regulatory approaches either from mobile sources or stationary
sources. It is well known that the Alliance strongly supports a
single national program for motor vehicle greenhouse gas
emissions and fuel economy to bridge State and federal
programs. We support the authors' efforts to clarify the roles
of existing regulatory framework and the States with regard to
our manufacturing facilities. We will continue to work
constructively with Congress, the Administration and all other
stakeholders to ensure a national vehicle program administered
by the federal government that not only enhances energy
security and addresses climate change but also gives automakers
a clear roadmap to compliance.
Before I close, I wanted to raise one other issue that is
important to members of this committee. Last month President
Obama pointed to a fleet modernization or so-called cash for
clunkers programs that had been successful in Europe and
announced he would work with Congress to fund the program from
existing dollars in the Recovery Act. The Alliance welcomes
presidential as well as Congressional support for fleet
modernization program. We will continue working towards
creating a program available to all manufacturers and
consumers. A well-crafted fleet modernization program will
deliver two important benefits. In the near term, it will
stimulate auto sales during the current economic credit crisis
and in the long term it will help replace older, less fuel-
efficient vehicles with cleaner, safer, more fuel-efficient
ones.
In closing, Mr. Chairman, the transition to a new way of
using energy and new energy sources requires that we
collaborate with government and other industries like never
before. The next generation of vehicles will require a new
generation of fuels and supporting infrastructure. You have our
commitment to continue reinventing the automobile. We will
continue to provide Americans with a wide range of vehicles
that are highly fuel efficient and we will be at the leading
edge of the world's low-carbon economy, an economy in which
green auto jobs are a fundamental part of the engine driving
our communities. Thank you.
[The prepared statement of Mr. McCurdy follows:]
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Mr. Markey. Thank you, Dave, very much.
Our next witness, Mr. Alan Reuther, is the legislative
director for the International Union of the United Auto
Workers. He is a member of one of the most aristocratic
automobile families in the history of our country and we are
honored to have you with us today, sir. Whenever you are ready,
please begin.
STATEMENT OF ALAN REUTHER
Mr. Reuther. Thank you, Mr. Chairman. I am pleased to be
here on behalf of the UAW, which represents over 1 million
active and retired members, many of whom work for or receive
retirement benefits from the auto manufacturers and parts
supplies. We appreciate the opportunity to testify before this
subcommittee.
The UAW supports the provisions of Title II establishing an
economy-wide cap-and-trade program to reduce greenhouse gas
emissions. We welcome the inclusion of mechanisms to contain
costs. However, we believe the provisions in Title IV that seek
to preserve the competitiveness of domestic industries need to
be strengthened in a number of ways. For example, these
provisions should be expanded to include products such as auto
parts that contain large amounts of energy-intensive materials.
Most importantly, the UAW believes a substantial amount of the
revenues from the auction of carbon allowances should be used
to help auto manufacturers and parts companies with the major
upfront costs associated with meeting tougher vehicle
efficiency standards. This includes at least another $25
billion to fund the existing section 136, advanced technology
vehicles manufacturing incentive program, as well as funds for
the new program that may be established under section 124 of
Title I.
In addition, revenues should be used to pay for other costs
associated with meting tougher vehicle efficiency standards
beyond those linked to advanced technology vehicles. Because of
their current difficult financial situations, the Detroit-based
automakers and many parts suppliers do not have the resources
to make the necessary investments.
The UAW also supports the clean fuels and vehicles
provisions in Title I of the discussion draft. The low carbon
fuel standard can make a major contribution to reducing our
Nation's consumption of oil and greenhouse gas emissions. The
provision supporting large-scale demonstrations of electric
vehicles can create demand for the production of these vehicles
and the provisions in section 124 granting financial support to
automakers to retool plants to build plug-in electric drive
vehicles in this country can accelerate the introduction of
these vehicles but also ensure that they will be produced in
the United States by American workers.
The UAW applauds the transportation planning requirements
in Title II which recognize that initiatives to reduce vehicle
miles traveled must be an important part of any effort to
reduce oil consumption and greenhouse gas emissions from the
transportation sector. Although the light-duty vehicle
efficiency provisions in Title II take the commendable step of
calling for the harmonization of standards that may be set by
NHTSA, EPA and the State of California, they do not purport to
establish any minimum benchmark for such standards beyond 2015.
Instead, they merely provide a green light for subsequent
regulatory action by the State of California. The UAW believes
this approach has several deficiencies. It fails to provide any
certainty that there will be guaranteed minimum improvements in
vehicle efficiency over an extended period of time and it fails
to provide automakers with certainty as to what will be
required of them. In lieu of this approach, the UAW submits
that it would be preferable to mandate minimum national
harmonized vehicle efficiency standards that must be met by the
automakers for specified dates extending through 2030. These
could be set at specific MPG targets or as percentage
improvements from a certain baseline. The UAW recognizes that
this alternative approach would have to embody a negotiated
agreement between NHTSA, EPA and the State of California as
well as other stakeholders. This could reflect the desire of
California for more-stringent reductions in vehicle emissions
and oil consumption. However, we believe it also should reject
some of the deficiencies in California law AB 1493 including
the exemption of foreign automakers, the one-size-fits-all flat
MPG approach and the lack of any anti-backsliding rule. Under
the alternative approach that we are suggesting, the
legislation could specify that it is not altering existing law
regarding the authority of California and other States after
the end date of any negotiated agreement on a harmonized
national vehicle efficiency standard.
In conclusion, the UAW appreciates the opportunity to
testify before this subcommittee. We look forward to working
with you, Mr. Chairman, and the other members of the committee
and the entire Congress to craft improved provisions relating
to vehicle efficiency standards and providing the resources
needed by automakers and parts supplies to meet new efficiency
standards. Thank you.
[The prepared statement of Mr. Reuther follows:]
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Mr. Markey. Thank you, Mr. Reuther, very much.
Our next witness is Dr. Dan Sperling. Dr. Sperling is the
founding director of the Institute of Transportation Studies at
the University of California Davis. He was appointed to the
automotive engineering seat on the California Air Resources
Board by Governor Schwarzenegger and served as co-director of
the California Low Carbon Fuel Standards Study. We welcome you,
Dr. Sperling.
STATEMENT OF DANIEL SPERLING
Mr. Sperling. Thank you. It is a pleasure to be here, and
it is a special pleasure because I bring important news on the
low-carbon fuel standard from California. Last night the
California Air Resources Board made history. We voted to adopt
a low-carbon fuel standard. It will take effect in January
2011. It requires a 10 percent reduction in greenhouse gas
emissions per unit of energy for gasoline and diesel fuel by
2020, and I note that 11 other States have signed MOUs to also
adopt the low-carbon fuel standard and that the European Union
is also moving toward adopting policies that closely resemble a
low-carbon fuel standard.
So I would like to point out that there are a number of
reasons why the United States should follow California's lead
and adopt a low-carbon fuel standard. One, it applies to all
potential transportation fuels, unlike the current renewable
fuel standard that Congress passed in 2007, which only applies
to biofuels. Another feature is the emissions are measured on a
lifecycle basis, and this is the scientifically correct way to
regulate greenhouse gases to include all the emissions in the
energy chain from the oil well, the coal mine or the cornfield
all the way to the vehicle. Neither cap and trade nor the
renewable fuel standards program are based on lifecycle
measurements. Another key feature is it uses a performance
standard, not volumetric mandates, as is the case with the
renewable fuel standard and thus it allows industry and it
allows customers to pick the winners. The winners are not
picked and the losers are not picked by government in this
case. It harnesses market forces to stimulate innovation. The
low-carbon fuel standard allows the energy providers to buy and
sell credits among each other, creating a market for these low-
carbon fuel standard credits and reducing the overall cost of
developing low-carbon fuels. And so what it is doing is, it is
creating a durable, permanent framework for orchestrating the
transition to low-carbon alternative fuels.
The history of alternative fuels is one of ad hoc short-
lived policy actions. We have seen policymakers and the media
jump from one solution to another, from syn fuels to methanol
to battery electrics to hydrogen to corn ethanol and now the
fuel du jour, the technology du jour is plug-in hybrids. We
need a more permanent policy framework that sends consistent
signals to industry and consumers and that doesn't pick
winners. And very importantly, it also achieves both energy
security and climate goals, and I would note that producers of
oil sands complain that they will be put out of business with a
low-carbon fuel standard, and this is just not true. The low-
carbon fuel standard does not preclude any fuel. Rather, it
provides an incentive to produce fuels more efficiently and
with less carbon, and indeed, senior oil executives have
indicated to me that with sufficient incentive they could make
gasoline from oil sands with less greenhouse gas emissions than
gasoline from conventional oil. And lastly, a low-carbon fuel
standard reduces oil price volatility and it caps petroleum
price increases.
So the proposed national LCFS is modeled on the California
low-carbon fuel standard but it has two differences. First is
that the proposed national standard in this bill does not
include biofuels until 2023. It assumes that the renewable fuel
standard enacted in the EISA of 2007 will handle the biofuels
until then. The result is that until 2023 the national low-
carbon fuel standard only targets petroleum and non-biofuel
options, mostly electricity, natural gas and hydrogen. Failure
to integrate the renewable fuel standard into the low-carbon
fuel standard until 2023 is problematic. Keeping the biofuels
separate from other alternative fuels reduces the flexibility
of the market to respond to the targets and it also reduces
incentives to produce the very lowest carbon fuels. So unlike
the renewable fuel standard, the low-carbon fuel standard
provides incentives for continuous improvements.
The other difference, the second important difference
between the two is that the national standard has more modest
targets. The California low-carbon fuel standard has a target
of 10 percent reduction in greenhouse gases per unit of energy
by 2020 with further reductions to follow. The national one
sets a target of zero percent improvement until 2022 and then
in 2023 when the RFS and the biofuels are folded in, it jumps
to 5 percent but it is still considerably less, and then it
goes to 10 percent in 2030. I would argue for higher targets.
OK, so the recommendations, just very quickly, the RFS
should be integrated into the national LCFS as soon as
possible. Targets should be more aggressive and the federal
program should not preempt the State programs but the priority
is, adopt this low-carbon fuel standard. It is a good idea,
even in a limited fashion. Thank you.
[The prepared statement of Mr. Sperling follows:]
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Mr. Markey. Thank you, Dr. Sperling, very much.
Our next witness, David Friedman, is the research director
of the clean vehicles program at the Union of Concerned
Scientists. Mr. Friedman has served on three major committees
for the National Academy of Sciences covering fuel economy,
fuel-efficient tires and fuel cell vehicles. We welcome you,
sir.
STATEMENT OF DAVID FRIEDMAN
Mr. Friedman. Thank you, Mr. Chairman, and thank you,
members of the committee for the opportunity to testify before
you today. I would also like to thank you specifically for your
leadership on fuel economy. That was the important first step
on transportation.
But now as we look to where we need to go from here, the
discussion draft before us represents the essential next step,
and as my testimony will show, the transportation system can go
much farther than the progress delivered under the 2007 energy
bill. What America needs is a comprehensive approach that
addresses transportation as a system of vehicles, fuels and
infrastructure and a strong cap that covers all parts of the
economy including transportation.
We released a 2-year peer-reviewed study on Wednesday
before the full committee. Our Climate 2030 Blueprint
demonstrates the need for a well-designed cap-and-trade system
and a comprehensive set of policies for the energy and
transportation sectors. With this approach, we can accumulate
$1.6 trillion in savings through 2030. Let me say that again:
we can save money while tackling climate change. Now, if we
remove some of the complementary policies, we will still save
$600 billion but it will go down. These complementary policies
are essential to saving money while addressing climate change.
Now, the results of our study highlight that the draft bill
will also require significant action by the Administration to
make these policies work. For example, the Environmental
Protection Agency will need to set strong global warming
emission standards for all vehicles and off-road equipment.
There are opportunities to save money and cut carbon emissions
from every vehicle, every ship, every plane. The EPA must also
protect and defend State authority to help bring about cleaner
cars and fuels in recognition both of the unique circumstances
in those States and the history of leadership on these issues
from California and many others. Thanks in large part to
California and the States that have supported its efforts, cars
and trucks today are 90 percent cleaner when it comes to smog
than those sold 40 years ago. So I believe that EPA can head a
partnership with States and with NHTSA that provides the
clarity and certainty that automakers need.
Now, automakers that don't invest in this future and in
these clean and efficient technologies will be left by the side
of the road but as a result of this, in these hard economic
times, it does make sense for the federal government to help
the auto industry. However, taxpayers deserve a return on their
investment, a requirement that automakers at least meet
nationwide the same global warming emission standards adopted
by California and 14 other States. That said, we cannot, we
must not put all the responsibility on the auto industry. Oil
companies and fuel providers must step up and that is why EPA
will also need to make a transition from a renewable fuel
standard that covers only 10 percent of today's transportation
fuels to a low-carbon fuel standard that covers all fuels and
counts all direct and indirect emissions.
State and local governments and everyone who drives must
also step up. The Department of Transportation will have to
build on their plans to develop a smarter transportation,
working with local governments to help get people where they
need to go with fewer miles and less pollution. This will
require investments in transit and support for pay-per-mile
programs that will keep our roads and bridges repaired. EPA
also has a significant role to play here in setting up
standards to evaluate local transportation plans but there must
also be consequences associated with making and meeting
effective plans.
Finally, we need our scientists and engineers to step up
and to deliver on the promise of fuel cell, plug-in and battery
electric vehicles and the lowest carbon fuels. If Congress and
the Administration step up to the plate, the UCS Climate 2030
Blueprint shows that the United States can cut carbon emissions
from cars and light trucks to 40 percent below 2005 levels by
2030. We can hold carbon emissions from freight trucks steady
despite an 80 percent growth in the economy through 2030. At
the same time, we can deliver net annual savings of $120
billion to consumers and businesses in 2030 alone. Consumers
specifically will save about $580 per household per year. We
are not talking about how much it will cost, we are talking
about how much money they will save as a result of cutting
global warming emissions.
Now, by 2030, we will also have additional benefits. We can
reduce transportation's addiction to oil by more than 3 million
barrels per day, more than we currently import from the entire
Persian Gulf region, and this is all on top of the benefits
that you helped deliver through the 2007 energy bill. When you
look at today's economy and the prospect of rising gas prices
and rising carbon emissions, once we beat this recession we
simply cannot afford to ignore this opportunity to invest in a
cleaner transportation future and the jobs that investment will
create.
[The prepared statement of Mr. Friedman follows:]
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Mr. Markey. Thank you, Mr. Friedman, very much.
Our next witness is Mr. David Gardiner. He is the founder
and president of David Gardiner and Associates, an energy and
climate consulting firm. He previously served as the executive
director of the White House Climate Change Task Force during
the Clinton administration. We welcome you, sir.
STATEMENT OF DAVID GARDINER
Mr. Gardiner. Thank you, Mr. Chairman.
This morning Congressman Butterfield asked a question about
what he could say to his low-income consumers in his district
about this broad legislation and we believe that a key part of
the answer to that question is, we are going to deliver a lot
more energy efficiency to you and particularly as contained in
your discussion draft, we should adopt an energy efficiency
resource standard. An energy efficiency resource standard, as
in your bill, Mr. Chairman, would require utility companies to
deliver increasing amounts of energy efficiency to their
customers, specifically that we would deliver 15 percent more
energy efficiency by 2020 in the electricity area and 10
percent for natural gas. With this requirement, which we have
in place in 19 States already today, what utility companies do
is to turn around and offer rebates to their customers for
investing in energy efficiency appliances and making energy
efficient homes. Colorado, for example, has just adopted a
standard and the utility there, Excel, has recently launched
two programs to offer rebates to homebuilders because it is
cheaper for Colorado to pay for a more efficient home than it
is to build a power plant to serve that. Now, under your draft
discussion bill, Mr. Chairman, this provision for an energy
efficiency resource standard saves consumers $170 billion by
2020. It is exactly the kind of thing that Congressman
Butterfield is looking for for his low-income consumers. It
also creates 220,000 new net jobs because there is a lot of
jobs out there making homes more energy efficient and building
more energy-efficient appliances. It also will avoid the
equivalent of $48 million automobiles worth of greenhouse gas
emissions.
Now, there are some who have suggested that what we should
do is to merge the energy efficient resource standard with a
renewable electricity standard. That is an unwise path because
that will lead to less energy efficiency and it will increase
consumer costs. Our own analysis indicates that could be as
much as a $70 billion increase for consumers. On the converse
side, the energy efficiency resource standard and the renewable
electricity standard actually lower the costs of meeting a cap
on carbon dioxide and they do so by approximately 15 percent.
They do it because they eliminate the barriers that are out
there for cost-effective investments in energy efficiency. The
chief barrier to that is that in most States in the country,
electric utility companies lose money if there are significant
investments, that they make significant investments in energy
efficiency. So an energy efficiency resource standard turns
that around and makes energy efficiency a profitable venture
for electric utility companies and starts to deliver the kinds
of savings that consumers are going to want to need and can be
an important component of making sure that the achievement of
our greenhouse gas reductions is done at the lowest possible
cost. So we urge the committee to not only retain the
discussion draft provision on the energy efficiency resource
standard but to make sure that we move forward as rapidly as
possible to get this in place because energy efficiency is a
resource that we can start taking advantage of today. We can
start saving consumers money today and we can start creating
those jobs in energy efficiency today so it is urgent that the
Congress move forward with adopting the energy efficiency
resource standard.
[The prepared statement of Mr. Gardiner follows:]
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Mr. Markey. Thank you, Mr. Gardiner, and your testimony was
consistent with your energy philosophy. You yielded back 1
minute to us. We appreciate that, really a great gift to us
today.
Our next witness, Mr. Jeff Genzer, is counsel for National
Association of State Energy Officials. Mr. Genzer, we welcome
you, and whenever you are ready, please begin.
STATEMENT OF JEFF GENZER
Mr. Genzer. Thank you, Mr. Chairman.
The energy efficiency programs within the bill are solid
and we generally support them. I won't focus on the appliance
provisions since Mr. DeLaski will be discussing that.
Number one, NASEO supports specific 30 percent increases in
both residential and commercial building energy codes and
standards. These should be federal and mandatory and need to
happen quickly. The residential code should be adopted and
effective on January 1, 2010, which represents a 30 percent
increase over the 2006 international energy conservation code.
It has become clear to State energy officials that the
residential consensus code process has become dominated by
interests that refuse to recognize the role that new homes play
in energy use and climate change and that seek to maintain the
status quo despite the very acceptable costs, in fact cost
reductions for consumers of moving to much more efficient
buildings.
On the commercial side, ASHRAE should be given an
opportunity to achieve a 30 percent commercial building
standard increase over ASHRAE 90.0 2004. However, it needs to
be effective on January 1, 2011. We cannot achieve our energy
and climate goals without this. We have waited far too long
already. We simply cannot accept the ridiculous argument that
it is never a good time to raise energy-efficient building
codes, never good in flush times, never good in bad times.
Homeowners live in these homes and consumer energy for
centuries. Every day we wait is another day of dollars out the
pockets of homeowners and taxpayers. The costs of achieving the
same gains in energy efficiency is an order of magnitude higher
when we retrofit than during the initial construction. Funding
will be required for States and local governments to conduct
compliance, training and enforcement. The only possible source
is at the federal level but we would maintain that the national
interest in reducing the 10 percent share of global greenhouse
gas emissions that comes through out buildings warrants that
federal investment.
Two, we support the Retrofit for Energy and Environmental
Performance program that was sponsored by Representative Welch.
It will lead to significant increases in energy efficiency for
homeowners, commercial buildings and public buildings. This
will lead to local jobs, putting building contractors back to
work and it will produce real energy savings for real people
and return dollars to communities.
Third, we supply the rebate program to get homeowners out
of the older pre-1976 manufactured housing. We support the
program sponsored by Representative Baron Hill.
Number four, we support a building energy performance
labeling program. We don't understand why anyone engaged in
helping Americans make wide decisions when owning, operating,
buying or selling a building would reject an effort to allow
consistent, comprehensive and understandable information about
that building's energy consumption to be readily and indeed
publicly available.
Fifth, most state energy offices support an energy
efficiency resource standard but want to ensure the State-
administered programs will be allowed to continue.
Six, the State Energy and Environmental Development Fund,
the SEED Fund included in the bill, is another positive program
and would provide a good overlay for energy and environmental
program initiatives. We look forward to working with the
subcommittee and the committee in examining these programs. A
number of items that have been discussed and will be discussed
at these hearings are certainly worth including.
Commissioner Grunich discussed yesterday a proposal on
State planning. Bill Becker will be on the next panel from
NACAA. He will be discussing our desire to avoid State
preemption and permit States to run programs on the
environmental side that are more robust than the federal
program. Third, Representative Van Hollen made a good proposal
for a federal energy loan bank. While it is a good idea at the
local level, we are concerned that it will be very difficult
for the Department of Energy despite Secretary Chu's monumental
efforts to get their loan program going at DOE to run it from
the federal level.
I want to, in my 19 seconds left, mention to Congresswoman
Baldwin that my daughter is a junior at Wisconsin and I have a
rising freshman. Thank you.
[The prepared statement of Mr. Genzer follows:]
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Mr. Markey. We thank you, Mr. Genzer.
Our next witness is Mr. Charles Drevna. He is the president
of the National Petroleum and Refiners Association. He has more
than 35 years of experience in that field. We welcome you, sir.
STATEMENT OF CHARLES T. DREVNA
Mr. Drevna. Thank you, Mr. Chairman and Ranking Member
Upton and Congresswoman Baldwin. Thank you for having me here
today.
Addressing climate change requires realistic long-term
strategies that recognize the vital role that all forms of
energy will play in maintaining our country's security,
economic strength and quality of life. NPRA supports the
advancement and deployment of new technologies that will bring
reliable, affordable and clean supplies of domestic energy to
consumers. We do, however, have some serious concerns with the
ability of the discussion draft, the American Clean Energy and
Security Act of 2009, to achieve these goals, particularly in
relationship to the transportation sector regarding the
discussion draft, but rather than attempt to simply condense
the written statement in the time allotted, I will briefly
reiterate some specific areas of concern.
These include the adoption of a low-carbon fuel standard.
At best, the LCFS is redundant and overly costly. More likely,
it is contradictory and punitive. We do not need the LCFS if
fuels are regulated under the cap through a scientifically
achievable timeframe. The compliance timeframes in the
discussion draft are, in our opinion, again, on the
transportation sector, overly aggressive.
Another area of concern is the refining industry, we
believe and we hope to demonstrate, that the refining industry
is indeed energy intensive and subject to international
competition as opposed to what the findings of the discussion
draft. And finally, we have some questions concerning the
allocation of emission allowances. There seems to be a dearth
of knowledge on how those will be handled in the discussion
draft. Now, I anticipate that the committee will have questions
regarding these items among others and I look forward to
discussing them with you.
In the remaining time I have, I want to focus somewhat on
links. A rather rudimentary description of the petroleum
refining process but one that must be achieved in order to
facilitate technological and commercial success is a
rearrangement of the links between and among hydrocarbon
molecules. It has been a very long time since refineries were
described as structures that boil oil or simply are a bubble in
the oil pipeline. Today's refineries are complex,
sophisticated, state-of-the-art facilities that operate most
efficiently while providing consumers with the reliable
products that drive the Nation's economy from clean burning
gasoline, diesel and home heating oil to the petrochemical
feedstocks that are building blocks for a multitude of
products, asphalt to aspirin, cosmetics to computers, heart
valves to helmets, pharmaceuticals to patio furniture. The
domestic refining industry is the linchpin for these products.
Transforming various hydrocarbon molecules, again, rearranging
the molecular links of the oil in a technologically advanced,
environmentally sound and economically viable fashion is vital
to the success of the domestic refining industry and the
overall economy it drives.
There are more consequential links as well, the link
between energy and economic strength for the entire Nation and
the link between energy and American security. The question
before this committee today and ultimately for the entire
Nation is, will the current draft of the American Clean Energy
and Security Act of 2009 or similar legislation forge stronger,
more viable links than these vital chains or will doing so lead
to adverse economic impacts not on just the domestic refining
industry but on the Nation's economy. The answers to these
questions must be fully investigated, understood and documented
before enactment of any legislation. Most likely, we have but
one chance to get it right. The Nation simply can't afford
anything short of a complete understanding.
Lastly, the provisions of the draft legislation neglect to
ensure one other link, the link between international
participation and the ultimate success of the initiative. For
example, and we have heard this over and over today, China
continues to state that it will not participate in any program
that restricts its emissions. International participation is a
critical issue as we need to implement any program. One ton of
CO2 emitted in Columbus, Ohio, is indistinguishable
from one ton emitted in Beijing, Mumbai or Moscow.
The possible consequences should determine the pace or else
the pace could determine the consequences. Mr. McCurdy stated
that you good people have sat here for 4 days in a marathon and
I commend you for that. Again, I really commend you for that.
But don't try to sprint to the finish line. Keep the marathon
going. It is a marathon, not a sprint. We have to know
everything before we can go forward, and to that extent, I
would ask that we have some more hearings on the transportation
sector of this bill. Thank you very much.
[The prepared statement of Mr. Drevna follows:]
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Mr. Markey. Thank you, Mr. Drevna. I have been on the
Energy Committee for 33 years, the Natural Resources Committee
for 33 years, so that is 66 years of hearings that I have gone
to, and the Speaker created a Select Committee on Global
Warming and Energy Independence and that gave me 3 more years
of hearings that I have had on the subject, so I do think of it
as a marathon, believe me. Most of these issues have been
percolating around here for a long, long time. That much I can
promise you.
Our next witness is--and I don't think anyone else is ever
going to try it again, go to the number of hearings I have gone
to on these subjects. You can already see the effect that
today's hearing has had on our membership.
Our next witness is----
Mr. Upton. If the gentleman would yield for just a second,
I remember when Mr. Dingell had hearings like these and he had
coffee in front of everybody and so they went maybe a little
faster.
Mr. Markey. In many ways they went a lot faster with that
coffee in front of them.
Mr. Andrew DeLaski is the executive director of the
Appliance Standards Awareness Project, a coalition dedicated to
advancing cost-effective appliance and equipment efficiency
standards. He is joining us here today from my home State of
Massachusetts, so we welcome you, Mr. DeLaski.
Mr. Sperling. Excuse me, Chairman. I have to leave. I have
a flight back to California out of Dulles now. I am really
sorry.
Mr. Markey. And we apologize to you, Dr. Sperling, and by
the way to all of the witnesses and those who are accompanying
our witnesses today, you could, I think, capture the intensity
of interest which the members had in the questioning of Vice
President Gore and Newt Gingrich, so it went for an
unexpectedly long period of time and it is with our apologies
to you that we request that you work with us over the next
month or so towards developing a bill which does reflect, you
know, the highest aspirations. Thank you, sir.
Mr. Sperling. Thank you.
Mr. Markey. Again, back to you, Mr. DeLaski. Whenever you
are ready, please begin.
STATEMENT OF ANDREW DeLASKI
Mr. DeLaski. Thank you, Mr. Chairman. I will just say a
word about ASAP. ASAP is a coalition project which consists of
representatives of energy efficiency advocacy organizations,
environmental and consumer groups including low-income advocacy
organizations, State government and utilities. Our mission, as
you said, is to advance cost-effective energy efficiency
standards for appliances, lighting and equipment.
My testimony today is limited to subtitle B concerning the
appliance and equipment standards in the bill. I will summarize
just a few key points from my in-depth testimony. Congress
first enacted natural appliance, equipment and lighting
standards in 1988, as Chairman Markey well knows, in
legislation that you authored. It added new standards in 1992,
2005 and 2007. In general, Congress has established initial
standards by statute and directed the Department of Energy to
review standards on a set schedule, increasing to higher
efficiency levels if shown to be technically feasible and
economically justified. The American Council for Energy
Efficient Economy, ACEEE, estimates that absent existing
national standards, U.S. electricity use of peak electric
demand would be about 10 percent higher in 2010 than currently
projected. ACEEE also estimates that consumers and businesses
which buy the affected products will net more than $400 billion
in net savings from already existing standards.
The enormous energy, environmental and economic benefits
delivered by national product efficiency standards have
contributed to a history of strong bipartisan support and
cooperation for new standards and enhancements to the
Department of Energy's program structure. The bill before us
today builds on this successful history.
We thank Chairman Waxman and Subcommittee Chairman Markey
for including the important appliance efficiency subtitle in
ACES. The subtitle consists of three parts. Sections 211 and
212 enact specific new standards for six categories of products
including portable electric spas, as we learned earlier.
Section 213 provides critical enhancements to improve overall
effectiveness and responsiveness of a DOE program, and sections
214 and 215 provide the voluntary programs including
EnergyStar. We estimate that the specific standards included in
ACES will save at least 17 billion kilowatt-hours annually by
2020, or roughly enough to meet the needs of 1\1/2\ million
typical U.S. households. The standards included in the bill
would reduce power sector carbon dioxide emissions by about 12
million metric tons per year in 2020.
I would like to especially call out the outdoor lighting
standard initially introduced by Representative Harman. This
standard offers the lion's share of the savings from the
specific standards in the bill. Discussion between members of
the industry and efficiency proponents that I work with are
ongoing. We remain optimistic that we will have further joint
recommendations to present to you shortly on outdoor lighting.
The program reforms in ACES are just as important as the
specific efficiency standards. As we have gained experience
with DOE rulemakings through the course of several
Administrations, we have learned some of the shortcomings of a
statutory structure which can stand in the way of cost-
effective efficiency gains. The bill contains several important
reforms which address some of these shortcomings, and I will
highlight just two but we support the entire package of reforms
for the Department of Energy's program. First, the bill makes
clear the DOE authority to apply more than one efficiency
metric as part of a single product's efficiency standard. While
Congress has set more than one requirement for at least a dozen
products in statute, DOE has recently held that the law
prevents the agency from including more than one requirement
per product. Often a standard for a given product must include
more than one element to capture different aspects of a
product's efficiency, for example, energy and water efficiency,
gas and electric efficiency in the case of a furnace which uses
both gas and electricity, or to capture the cost-effective
savings from controls or other technologies that are not
reflected in a product's test method. For example, successful
application of smart grid technology and demand response
technology may depend on specific appliances including
particular control features. Such features are typically not
represented in a performance test method but may be a critical
feature of future energy efficiency standards. The Department's
current interpretation of the law will prevent this sort of
requirement in future appliance standards. This provision
passed the House in 2007 and we strongly urge you to act on it
again.
Another area I would like to highlight concerns the
preemption limits that national standards place on State
building codes. House and Senate energy bills have proposed
federal targets of 30 percent savings in new buildings in the
near term and 50 percent savings later through better building
codes. However, the preemption associated with national
appliance standards effectively puts savings from space and
water heating and air conditioning off limits even when such
savings would be very cost-effective for new construction and
major renovations. The discussion draft will create new
flexibility for State building codes while still preserving a
basic structure, a basic federal preemption framework.
There are several other program reforms which we also
support. Suffice it to say that as a package, these reforms
significantly strengthen the national appliance standards
program and will pave the way for greater energy savings and
benefits.
Finally, with respect to the voluntary programs, we are
concerned that the limits in section 215 which are placed on
the EnergyStar program would make some of the existing
EnergyStar programs, home furnaces and other products, would
end those programs. We urge that section be modified.
In sum, we support the subtitle and look forward to working
with the committee to make it even better.
[The prepared statement of Mr. DeLaski follows:]
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Mr. Markey. Thank you, Mr. DeLaski, very much.
Our final witness is Mr. Dwight ``Sonny'' Richardson. He is
the chairman of the National Association of Home Builders
Construction Codes and Standards Committee. He is also
president of Richardson Home Builders in Tuscaloosa, Alabama.
Please begin when you are ready, Mr. Richardson.
STATEMENT OF CHARLES RICHARDSON
Mr. Richardson. Thank you, Mr. Chairman, Ranking Member
Upton and Ms. Baldwin. I appreciate the opportunity to travel
to Washington to discuss the energy bill, the carbon cap bill,
global climate change bill with you on behalf of the 200,000
members of the National Association of Home Builders, NAHB.
As you well know, we in the home building industry are
facing devastating times in addition to the environmental and
energy challenges facing our country. From building 2 million
homes in 2006, we expect to construct less than 500,000 this
year nationwide. Nonetheless, amidst the worst housing downturn
since the Great Depression, I can personally attest to the
strides our industry has made in energy efficiency and
sustainability for our Nation's new homes. According to the
Energy Information Administration, newer homes, those built
since 1991, account for only 2.5 percent of all energy consumed
nationally. Our industry has pioneered development of the only
national green building standard approved by the American
National Standards Institute and has invested millions in an
industry-transforming green building program, saving both
energy and natural resources.
Drawing on my lifetime experience, I am a second-generation
home building, in the construction field, I believe that some
of the policy approaches put forth in the American Clean Energy
and Security Act draft are unlikely to produce the expected
energy savings. In particular, the provisions in section 201
aggressively increase energy targets for new homes, provide
greater authority for the Department of Energy to modify codes
and give little flexibility to State or local areas with
specific geographic and climatic conditions. The current
language is problematic for a number of reasons. In the
broadest sense, seeking significant savings from new homes,
smallest, most energy efficient misses the target. Increasing
costs and reducing affordability for newer, more efficient
homes adversely affects lower and moderate income families that
spent the most as a percentage of income on energy. In some
instances, the provisions in section 201 exceed a number of
successful programs such as EPA's Energy Star for Homes and
many green building programs, not just the new national green
building standard. Striving solely for small incremental
savings without accommodation for the more robust
sustainability framework of a green program means that the more
environmentally sound green homes could be noncompliant with
the targets outlined in section 201 yet these homes have a
smaller carbon footprint because of sustainable design and
resource considerations not covered by energy codes alone.
On the other hand, NAHB is pleased to see that section 202
of the draft legislation provides resources to consumers to
upgrade their existing homes and buildings and equally pleased
that Vice President Gore supports this path. This will direct
the resources of the federal government at the largest consumer
of energy in the residential sector, older homes. According to
the Census Bureau, there are roughly 128 million homes in the
United States today and fully 74 percent, or 94 million, were
built before the existence of modern energy codes. Home
builders have done their part and are doing their part to make
newer homes more efficient. Now the federal government can help
residents of existing homes continue to help to do their fair
share to reduce energy consumption.
Despite our economic challenges, our home building industry
has voluntarily taken the initiative to develop a rigorous
national green building standard, continues to implement energy
efficiency in new construction and is working diligently to
preserve housing affordability for the next generation of green
and energy efficient homes. NAHB supports improving efficiency
in national model codes and participates along with many others
in the development process of the International Code Council.
Because codes by their very nature do not address all aspects
of energy consumption in housing, NAHB hopes that Congress will
carefully consider an integrated energy strategy for the
residential sector. This includes many aspects beyond the reach
of codes such as equipment efficiency, occupant behavior, plug
loads and appliance choices. Our NAHB members are stakeholders
in both the building and energy efficiency industries. We look
forward to working with the subcommittee to craft policies that
effectively address the energy challenges facing our Nation and
housing.
My written comments provide additional details on these
points as well as recommendations for changes to the draft
legislation the committee will soon consider. Thank you for the
opportunity to appear today and testify on behalf of my
National Association of Home Builders.
[The prepared statement of Mr. Richardson follows:]
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Mr. Markey. Thank you, Mr. Richardson, very much, and now
we turn to questions from the subcommittee members and we begin
with the gentlelady from Wisconsin, Ms. Baldwin.
Ms. Baldwin. Thank you, Mr. Chairman, and Mr. Genzer, I am
not starting with you just because your daughter goes to UW
Madison but I do have a question because I think you would be
great to answer.
I have been sharing with my fellow committee members about
how I spent my spring recess, which included an energy tour of
my home State and meeting with innovators and renewable energy
producers. One of the sites that I had the chance to visit was
Johnson Controls. Johnson Controls does a wide range of things
but they have a building energy efficiency segment of their
business and in fact we had a representative of Johnson
Controls testify a few months back before our subcommittee.
Just a couple of weeks ago the company announced that they
would be involved in retrofitting the Empire State Building
using innovative processes and state-of-the-art tools that
should help reduce the building's energy consumption by a
pretty impressive 38 percent per year with technologies that
will pay off in a 2-year timeframe. That would probably place
it, I think, in the top 10 percent of all U.S. office buildings
in terms of energy efficiency. But one of the things I found
interesting in my discussions with employees at Johnson
Controls was an interesting conundrum. Because many of the
commercial buildings turn over ownership so often, sometimes as
rapidly as every 3 years or so, the incentive of owners to make
energy efficiency improvements and investments often just don't
exist, and so I would love to hear your thoughts about how we
on this panel could incentivize this sort of energy efficiency
improvement in some of these buildings. I have been tossing
around a few ideas of my own but I would to hear yours right
now.
Mr. Genzer. Thank you. First of all, the whole energy
service performance contracting programs that Johnson Controls
is really one of the leaders in is a great model. In fact, a
lot of the funds that came through the stimulus package
targeted to the State energy program, what we are seeing in a
lot of the states is that a lot of those funds are being
targeted to energy service performance contracts. So that is
one of the real preeminent examples and we can certainly give
you more information on a state-by-state basis as that moves
forward. In terms of incentives for commercial building owners
where they need payback periods in a shorter period of time,
one of the elements of the draft bill now, the Retrofit for
Energy and Environmental Performance program that is in the
bill, I think Representative Welch is the chief sponsor of
that, included targets for commercial buildings on a per-
square-foot-basis for extra incentives. So we think that is a
great idea. It is one of the steps. There is also additional
things that could be done in terms of energy service
performance contracts.
We are trying to do a lot more at the State level on that
and extension of the commercial building energy efficiency tax
deduction is another one that would be helpful. We are spending
a lot of time working with commercial building owners on a
State-by-State basis to try to see if there are additional
incentives. So we would certainly work with them and it is a
great idea, and also I think Mr. Gardiner might have a comment
about the tie-in with the energy efficiency resource standard.
Ms. Baldwin. Absolutely, and I actually have another
question and a time limit, so if you want to make a quick
comment, Mr. Gardiner, and then I have----
Mr. Gardiner. Just as I said in my opening statement, that
under an energy efficiency resource standard what happens is
that utility companies offer rebates including to commercial
building owners to do this and so it takes away the problem
that you identify, which is one of the serious barriers to
efficiency which is the builder or the landlord isn't
necessarily the person who is responsible for paying the energy
bill, may not own the building for a long period of time so the
rebates that utility companies offer under the provisions in
the draft discussion under the energy efficiency resource
standard are, I think, a critical incentive.
Ms. Baldwin. Let me jump in quickly with my second
question, and I am very supportive of the EERS in the bill.
Based on information I have received from my constituency, I
feel like Wisconsin is well suited to comply with the EERS
through at least 2012. However, I do have a question. One of
the things we talked about in another section of the bill is
the potential for widespread deployment of electric vehicles
over the next 15 or more years, and if we see this widespread
deployment, the base quantities for retail electricity
distributors could grow quite rapidly and thus the amount of
electricity savings that they will be required to achieve could
grow rapidly, could kind of potentially transform the EERS
savings required, making them a little bit more challenging to
meet, and expensive to meet, and I am wondering if this is the
intent, and if not, is there anything we should be looking at
modifying in anticipation of the potential of widespread
deployment of electric vehicles.
Mr. Gardiner. The Energy Information Administration says
today that actually if you look out towards the future that the
amount of electricity that vehicles like that might consume is
still projected to be relatively small. That could, of course,
change in the way that you suggest and we think that was a good
idea so I think that there could be some provision that would
allow the Secretary of Energy, for example, to modify that if
he or she saw that the amount of electric vehicles were
consuming a large amount of energy. But I think at the moment
it looks like it is a relatively small problem, at least
through 2020, but it is an issue and I think it is certainly
worthy of further discussion to look at.
Mr. Friedman. If I could just make a quick comment, our
blueprint included a significant ramp-up in plug-in hybrids to
reaching 20 percent of sales by 2030, so expecting very
aggressive progress on that technology, and under our blueprint
when you invest in efficiency and when you invest in renewable
electricity, the grid can handle that, and frankly, I would
love to have the problem where we have too many plug-ins on the
road. That is a problem I look forward to having some day.
Mr. Markey. The gentlelady's time has expired. The chair
recognizes the gentleman from Michigan, Mr. Upton.
Mr. Upton. Well, thank you, Mr. Chairman, and I too sadly
will have to leave you with the last panel on your own, I am
afraid, I regret to say. Before I start, I want to put into the
record a letter from the International Code Council addressed
to yourself, Chairman Waxman, Mr. Barton and myself.
[The information was unavailable at the time of printing.]
Mr. Markey. We will include it in the record without
objection.
Mr. Upton. And I want to focus just a little bit on autos
before I get in my auto and depart. Mr. McCurdy and Mr. Reuther
are good friends of mine too. I appreciate all the work that
you have done for our State as we try to have the auto industry
survive. Mr. McCurdy, you talked a lot about having a single
standard, and of course, that is in the bill but the standard
is California, and the way that I read it, it allows them to in
fact change the standard, and when they change it, that is
California, so does the rest of the Nation then follow their
lead. Is that your understanding of the way that it is in the
draft as well?
Mr. McCurdy. Mr. Upton, thank you for your comments earlier
too and I very much appreciate working with you and I have for
a number of years. Section 221, I believe, is the section you
are referring to and sub 4, and I think the draft made an
effort to address at least three of the concerns in the first
three sections about the standard. The fourth section, I think
Mr. Reuther and I both would concur, needs work and that is the
area that we would like to see the committee continue
conversations. I think the Obama Administration has an
opportunity to create a single national approach that would be
administered by the federal government so that we eliminate the
duplicative and potentially conflicting standards. The reason
there are concerns, it is not just a question of stringency.
The structure is one of the major challenges of compliance,
enforcement, and several other provisions, and that has to be
harmonized and I think the Administration is going to try to
address that, and I think they are going to have to work with
Congress as well. So again, you know, we do strongly support a
single national standard.
One comment that my friend, Mr. Reuther, made with regard
to future. It is clear that under the EISA, the energy bill of
2007, which we supported and the CAFE provisions that we can
see our way to 2016. Beyond that, though, is an area of major
concern. It is a concern because of the need for clarity and
predictability because of the need to ramp up to produce the
kinds of technologies. Mr. Friedman mentioned 20 percent plug-
in hybrids by 2030. That is an extremely aggressive number. We
would like to be there but I am not sure that without proper
incentives, without a real energy policy that incentivizes
consumers, there is certainly no guarantee that that will
occur. So we need--there is not one single silver bullet
technology but it is clear we need certainty and
predictability, and I think that section is one that on a
bipartisan basis that we should address and look forward to
working with you on it.
Mr. Upton. And Mr. Reuther, do you want to comment on that
at all?
Mr. Reuther. We read the draft bill a little bit
differently. To us, it appears to say through 2015 there would
be a harmonized standard but after that point in time nothing
is clear except there is a green light for California to go
ahead, and as I indicated in testimony, we would like to see
longer-term harmonization and certainty both for the
environmental fuel savings benefits but also because it will
assist the companies in knowing what is required of them, where
they have to put their emphasis in terms of investments and
technology.
Mr. Upton. Now, both of you talked about substantial
investment to be able to get to that point and I presume that
that comes from, as you said, Mr. McCurdy, 5 percent of the
allocation. I would presume then if the Obama Administration's
request of 100 percent auction, therefore leaving nothing to be
taken out of that for allocations, you all would be opposed to
the bill. Is that right?
Mr. McCurdy. Well, I said either allocations or revenue, so
it is a question. I think that section in the bill is not
clear. I am sure it is something that the committee is going to
be working on but the point I hope is clear, and that is, if we
are going to be held accountable or responsible for EPA's
number of 17 percent of the emissions and we understand the
incredible cost associated with addressing that, that there
should be dedicated revenues or allocations for the investments
needed for research and development, production, retooling,
which is going to be quite substantial.
Mr. Upton. Just in closing, I know my time is expired, I
was glad to hear you talk about the clunkers bill. I think that
is very important to get the consumers back into the showroom
and send the green light to all of our autoworkers, whether
they be suppliers or assembly folks. It is key and I am glad
that we have bipartisan support led by our colleague, Betty
Sutton from our committee and Candice Miller from Michigan,
which I am a cosponsor. Thank you.
Mr. Markey. The gentleman's time is expired. We recognize
another sponsor of the cash for clunkers legislation, Mr.
Inslee, for questioning.
Mr. Inslee. Thank you.
Mr. McCurdy, some of us have been looking at the Project
Better Place model of trying to improve infrastructure for
charging and swapping out batteries. Could you give us your
group's thoughts about it? How do we make that work? We do have
a provision in the bill that will help development of
infrastructure. I appreciate your comments on that.
Mr. McCurdy. Thank you, Mr. Inslee.
Mr. Inslee. And I don't mean to limit my comments to
Project Better Place. There are other companies involved in
this as well.
Mr. McCurdy. No, you are exactly right. It is good to see
you and I appreciate your support. As I indicated in my written
statement, fuels and autos are a system and for the past few
decades I think the focus has been on the autos and not as much
on fuels or the system. If we move to the electrification of
vehicles, whether it is--and again, there are a number of
business models out there, we can't comment on which one is
most likely to succeed but it is clear the infrastructure has
to be there and you have to move now in order to pave the way
for whether it is plug-ins, fully electric vehicles, whether it
is--and that is where the smart grid comes in. It is also where
utilities, I think, are going to be incentivized to address
that as well. What you need is the ability to recharge, whether
it is home, through a smart grid at night when the rates are
lower or your place of work or if you moving around urban
environments, and it is clear the current infrastructure is not
there to support that, so this is an important investment.
Better Place, that you mentioned, is one where they have a
different business model but they want to have fast charging or
replace the batteries themselves. Again, we are not going to
down-select one particular technology but we think the
infrastructure could be supportive of the entire
electrification process.
Mr. Inslee. Thank you. I appreciate it.
Mr. McCurdy. I wanted to ask Mr. Sperling and Mr. Drevna,
the discussion about the low-carbon fuel standard, Mr. Drevna--
and I missed your oral testimony but I was just reading your
testimony and you were making reference that you thought that
there was a possibility that the approach to the bill would
discriminate against certain petroleum products, I think you
were referring to Canadian tar sands, and I don't understand
that criticism. Basically the bill would have ``some
discrimination'' but it is based on carbon content. All the
creators' children would be treated the same, it is just
dependent on how much carbon content is in each fuel source. So
I don't consider the bill discriminatory in that sense. It
simply judges each system based on its carbon content. Perhaps
Mr. Drevna and Mr. Sperling could comment on that.
Mr. Drevna. Thank you, Mr. Inslee. Unfortunately, Mr.
Sperling had to catch an airplane. The question about the low-
carbon fuel standard, what you are saying, there are two parts
to it that we see. One is that the bill, the draft itself has a
cap, a cap-and-trade mechanism, and the bill also contains a
low-carbon fuel standard. We view those two things, as I said
in my oral testimony, at best duplicative and redundant and at
worst is punitive and counterproductive. We have no control
over the--the only way to get low-carbon fuel standard is to
blend non-carbon fuels into gasoline or diesel. We have no
control over the technology, advancing those new fuels. We have
no control over the infrastructure. If you have a cap, that is
a performance standard. Then you are saying you have to do
more, do a low-carbon fuel standard and then when you look at
the renewable fuel standard that we are still obligated under
EPACT 2005 as amended by EISA 2007, we have got three
potentially competing kinds of legislation and regulation we
have to look at. I think there is a misconception among a lot
of folks, and I know the draft says well, we are going to phase
out the RFS as we ramp up the LCFS. In theory, that sounds
marvelous. In practicality, it is very difficult for refiners
to do so. We don't have a magic switch that we flip one day and
say oK, now we are out of the RFS and went to the LCFS. It is
almost like the proponents believe that there are two dimmer
switches, one we are going to raise on the LCFS while we lower
the RFS. Unfortunately, Mr. Inslee, it simply doesn't work that
way, and again I go back to saying, if you have a cap, you have
a performance standard, you know, it is one thing to have a
belt and suspenders, you know, but these two are competing.
They could potentially be competing because there are many
studies out there right now that suggest that a low-carbon fuel
standard is actually more energy intensive than other ways of
reducing carbon, and I will be more than happy--I don't want to
use up all your time. I will be more than happy to----
Mr. Inslee. I appreciate that. I think you came up with
three criticisms I hadn't even heard yet.
Mr. Drevna. Well, and again, I will be more than happy to
discuss these with you. This is why I suggested that, you know,
we would suggest another hearing on this for the transportation
sector. We heard a lot this morning about a lot of things
involving electricity. We really--you know, from my parochial
interest, and I shouldn't even say parochial. This is a
nation's interest. From our interest, we have to fully
understand what the impact is going to be on transportation
fuels because as we all know, this is what drives the economy.
Mr. Inslee. I appreciate it.
Mr. Friedman.
Mr. Friedman. Thank you, Congressman, and thank you very
much for your leadership on the low-carbon fuel standard. You
have been very important to making progress in this area. I
think part of what we are seeing, when people don't want to
make progress they try to make things sound a lot more
complicated than they really are. The low-carbon fuel standard
is a very straightforward policy that creates market for
cleaner fuels, and one of the problems, one of the challenges
with a cap-and-trade system is if we do it right, if we add in
the complementary policies, sure, we will maybe increase
gasoline prices 15, 20 cents a gallon. Well, it took a near
quadrupling of gas prices last summer to get significant change
out of consumers. Fifteen or 20 cents a gallon is not going to
stimulate low-carbon biofuels, it is not going to stimulate
electric vehicles, it is not going to stimulate fuel cell
vehicles. A low-carbon fuel standard will do just that. Also,
it is not just about alternative fuels. Refineries have the
potential to increase efficiency 10 to 20 percent. We have got
a wellspring of efficiency improvements that can be sent
throughout the economy and refineries are part of that. So
there is a lot of potential. This is really a lot simpler than
I think people make it seem. It is really the same case with
vehicle standards. Once EPA sets strong enough standards,
California has already made clear they will cede to EPA's
authority when they set strong standards.
Mr. Inslee. Thank you. I am over my time. I just want to
make one closing comment. Throughout these discussions, one of
the things we are trying to do is really promote the creation
of new technology. We have to have new technologies here, and
even if we could do certain things at zero cost today that
don't get us to the ultimate goal, we have to create these new
technologies. I think this helps.
Mr. Markey. The gentleman's time has expired. I would like
to continue on a little bit with the subject that Congressman
Inslee was discussing, and that is fuel economy standards and
the automotive sector, and ask if I could, Mr. Reuther and Mr.
McCurdy and Mr. Friedman, if we could just have a little
discussion about the 2007 fuel economy standard, 35 miles per
gallon for the fleet by 2020, combined with the $25 billion in
the Green Car Factory Funds, combined with the $2 billion for
the Battery Fund that has been created in the stimulus, and
just give me some sense of your optimism about how we just
might reach a tipping point in 3, 4, 5 years where we move much
more rapidly than even the law requires because of the adoption
of these green car new technologies that will be manufactured
by every company not only in the United States but around the
world. Mr. McCurdy.
Mr. McCurdy. Thank you, Mr. Chairman. We obviously applaud
the efforts to dedicate some revenue or some funds after the
passage of EISA, $25 billion section 136 funds. As we know,
that was over a year ago. Those funds are just now--the loans
are just now starting to be made available. The battery money
is important. You have particularly strong interest in those
technologies. That is a step, a small step in the right
direction. If you recall, the NHTSA estimates for the cost to
the U.S. sector for compliance with CAFE was going to be
roughly $85 billion. So 25 is a down payment. I think it is an
important step. But if you want to accelerate that, which is
really where you would like to go, it is going to take
considerable more investment, and it is not just a question of
money. I mean, with all due respect to Mr. Friedman, it is not
as easy as perhaps some would say in theory. I mean, you
actually have to go beyond the laboratory and get it deployed.
In the manufacturing world and when you are dealing with
consumers, the real key is being able to have it where it is a
warrantable product that will last whether it is in the rather
cold climate of Wisconsin in the winter or the summers in
Arizona, and so batteries, that is a big challenge to battery
and electrification. But having said that, we are very
optimistic and hopeful about transformation to the new
technologies and we want to work with Congress and the
Administration in order to make that happen.
Mr. Markey. Thank you.
Mr. Reuther.
Mr. Reuther. We believe that the 2007 law was a very good
law and we are optimistic the companies will be able to meet
the standard in that law and perhaps do even better than that.
It is my understanding that already enough applications have
been submitted to exceed the $25 billion. It has already been
appropriated for the section 136 program and that is part of
why we believe that there is a need to provide additional
funding going forward. I also have to underscore, though, that
the ability of the companies to achieve better results in the
future is being impacted by the current severe recession in the
industry, which is severely straining the financial resources
of the companies. It is also changing the underlying
assumptions. I mean, one of the key assumptions that goes into
the cost-benefit analyses is the number of vehicle sales. That
affects the reductions that you get and emissions. It affects
the cost of diffusing the technology across the entire fleet.
So I think everyone is going to have to go back and revisit the
calculations on what can be achievable going forward, given the
dramatic change that we are seeing in the nature of the auto
market.
Mr. Markey. As the auto marketplace once again goes from 10
million cars a year back up to 16 or 17 million cars per year
which are sold in the United States, and I do subscribe to Vice
President Gore's analysis that as we recover and as the Chinese
and Indian economies and other developing countries' economies
continue to expand, we will see an inexorable rise in the price
of gasoline here in the United States. Do you think that it is
likely that the automotive industry will plan now that they
have this much lower demand for that 16- or 17-million-vehicle
world that will be re-created in 3 or 4 years hopefully in a
way that has a higher percentage of vehicles coming from this
energy efficient or plug-in hybrid or straight hybrid vehicles,
Mr. Reuther?
Mr. Reuther. Well, I think a lot of analysts are
questioning whether we will be getting back to the 16, 17
million vehicles sales level, that there may have been a long-
term change in the overall demand. So I think that is an
important thing. We do agree that over time the gas prices are
going to be going to higher levels. I mean, we believe there is
a need for the government to try and incentivize and drive the
electrification of the industry and to drive that process as
quickly as possible, and we want to work with you to be
supportive of that.
Mr. Markey. I am just working from my own personal set of
assumptions, that maybe we do have to pay cash for clunkers,
which I think we ultimately will wind up doing here, but there
is going to be a point at which people spend their own cash for
new cars, and that is when the economy recovers and I think it
is a pretty good bet that people will not like riding around in
clunkers if they have got the cash back in their pockets and I
think that is a good planning premise.
Mr. Friedman?
Mr. Friedman. Thank you, Mr. Chairman. As I said in my
testimony and I will reinforce today, I think that there are
good reasons to try to help the auto industry through these
difficult times to invest in the auto industry to help them get
through these difficult times. Any time you invest in
technology you create more jobs, and if we invest in the auto
industry tied to performance standards, any time the federal
taxpayers put out money, they should expect something in return
so there should be performance standards tied to those
investments. If we make those investments, I do think the auto
industry can make significant changes. In fact, we are already
seeing it. This is an article from Business Week. Detroit finds
green in recycled fuel economy ideas. It is about how Ford
wants mixed fuel saving tricks from the 1950s and is now using
them to boost mileage and cut emissions. The auto industry has
the technology. The engineers and autoworkers are incredibly
talented. If you give them the chance, if you make the
investment in them, if you trust them to help cut our emissions
and make us less dependent on oil, they will deliver.
Mr. Markey. Thank you, Mr. Friedman.
Let me ask you, Mr. McCurdy.
Mr. McCurdy. I just have one comment on that Mr. Chairman.
As you know, I have had long discussions and conversations
about this. Four dollar gasoline did more to move consumers to
fuel-efficient vehicles and choices than any regulation, any
edict, any government action, and if prices do recover--and
just one other point, your numbers are accurate on production
levels. We have dropped from a high of 17 million vehicles to
below 10 million vehicles currently annualized sale. Assuming a
V-shaped recovery, and that is an optimistic assumption, you
are looking at 2014, 2015 minimum to get back to those kinds of
levels. We would welcome 12 and 13 million unit sales at this
point. But the important thing is, even with this downturn,
this industry continues to invest more than any other industry
in those technologies, in research and development.
Mr. Markey. Thank you, Mr. McCurdy.
And let me ask you, Mr. Bowles, one final question, and
that is to relate to us the lesson, if you can succinctly, that
the regional greenhouse gas initiative that Massachusetts and
nine other States are a part of that has kind of an equivalent
system out in California, the West Coast and that other States
are looking at. What can we learn from what happened in terms
of having a system in place that creates new incentives for
reducing the amount of greenhouse gases that are emitted into
the atmosphere?
Mr. Bowles. Thank you very much, Mr. Chairman, for the
question, and really on behalf of the 10 RGGI states, I think
we can report remarkable success. We learned from the
experience of the European Union and the windfall profits that
were given to power generators when they were given on an
allocation basis their permits and then held them in reserve
and ultimately sold them later at a greater price and ended up
making money off the permits when the point was to reduce
greenhouse gas emissions. In Massachusetts, we have adopted 100
percent auction policy. We have been through three auctions in
the Nation's first functioning cap-and-trade. The price of the
auctions have gone up modestly at each point from about $3 a
permit to about $3.50 a permit. In Massachusetts we have raised
$43 million that we are plowing back into energy efficiency. We
are seeing jobs being created by people saving money on their
electric bills from those investments. So I think what we have
taken from it is that an auction system works, it works
brilliantly. We haven't had big surprises. We have generated
resources back for economically efficient returns that are
protecting the environment and creating jobs at the same time.
Mr. Markey. And can you give us some sense of what the
response is in those 10 States to this system that right now is
limited to the utility sector?
Mr. Bowles. Yes, very well. I mean, in Massachusetts we are
spending about $150 million a year on energy efficiency anyway
as a baseline. We are adding significant new resources and
expanding those programs so I would say it has been very well
received in Massachusetts and I think across the footprint of
the 10 RGGI States.
Mr. Markey. OK. Great. Here is what I am going to ask each
one of you to give us your 30-second summary as we move forward
in terms of what you want this committee to remember as we move
forward over the next month on passing a climate change and
energy bill out of this committee. We will go in reverse order
and we will give you, Mr. DeLaski, the first shot.
Mr. DeLaski. I will just reiterate that our support for the
subtitle concerning appliance standards and urge you to keep
that subtitle strong and to maintain the reforms to enable the
Department of Energy to set standards stronger as they move
forward to get their program back on track.
Mr. Markey. Thank you very much.
Mr. Drevna.
Mr. Drevna. Thank you, Mr. Chair. If I could sum it up in
30 seconds or less, I would urge the committee and the Congress
to make sure we know all the consequences intended and
unintended as we forge on, as you forge on with the
legislation. It is just too important, and again from the
transportation sector, I think we should sit down again and
talk about the transportation sector and talk about what is in
the discussion draft and where we have some concerns and where
we have some other ideas for you. Thank you very much.
Mr. Markey. Thank you, Mr. Drevna, very much.
Mr. Genzer.
Mr. Genzer. The stimulus package was a good start, a great
start on energy efficiency funding, things you have been
fighting for for 35 years. The Retrofit for Energy and
Environmental Performance program and the other elements of the
efficiency part of this bill should definitely good forward and
it is also time to move forward aggressively on building codes,
both at the residential and the commercial level.
Mr. Markey. Thank you, Mr. Genzer.
Mr. Gardiner.
Mr. Gardiner. The energy efficiency resource standard that
is contained in the discussion draft is a great deal for
consumers. It is going to save them $170 billion. It is also a
critical--coupled with the renewable electricity standard, it
is a critical cost containment strategy that will yield the
lowest cost carbon reductions as we go forward to reducing
greenhouse gas emissions.
Mr. Markey. Thank you.
Mr. Friedman.
Mr. Friedman. Thank you, Mr. Chairman. The key to
addressing transportation is looking at it as a system,
addressing vehicles, fuels and a smarter transportation
infrastructure and more investment in transit. This bill
deserves to pass because it addresses all of these issues. It
requires leadership from the Administration on top of that but
it sets us down the right path. The thing that we have to do is
prepare for our future, and if we look back at $4-a-gallon
gasoline, one of the things that that did is, it started moving
consumers away from car companies that weren't ready and to the
car companies that were ready with the best technology. We
can't afford for that to happen again. We need to make sure
they all have the best technology.
Mr. Markey. Thank you, Mr. Freidman.
Mr. Reuther.
Mr. Reuther. UAW believes that discussion draft has many
excellent provisions. We look forward to working with you and
the entire subcommittee to refine the vehicle efficiency
standards to provide longer-term certainty both on fuel economy
environmental benefits and certainty to the companies on the
directions they need to go with the technology, and we look
forward to working with you to make sure that the resources are
there so that the companies can do that.
Mr. Markey. Thank you, Mr. Reuther.
Mr. McCurdy.
Mr. McCurdy. Mr. Chairman, I said earlier automakers are
committed to reducing CO2 from the vehicles that we
sell and the plants where we manufacture them. We think the
discussion draft provides a platform for discussion. We share
some of the concerns as indicated by Mr. Reuther and believe
that we can work to improve those.
Mr. Markey. Thank you, Mr. McCurdy.
And Mr. Bowles.
Mr. Bowles. Mr. Chairman, thank you again for this hearing
today and the opportunity. Three points to recall. One is,
please keep the strong federal-State partnership found in the
draft. It builds on mechanisms that work and accelerates them,
not replacing them. Second, with due respect, we urge you to
get on with it. Congressional leadership on clean energy and
climate change is long overdue. You have personally been a
tremendous advocate. Movement through this body is vitally
important. And third, the promise of the clean energy economy
is real. It is happening in the Commonwealth of Massachusetts.
We thank you for your leadership.
Mr. Markey. Thank you, Mr. Bowles, very much. And by the
way, I just would like to say that any three of you would be a
fantastic panel alone at an ordinary time and I appreciate your
understanding that time is of the essence. This is the year.
Copenhagen is in December. We have to move and we have to have
these issues, and you are right, we are getting it on, Mr.
Bowles. You saw that today with the Vice President and Speaker
Gingrich. We are in the middle of an historic debate in this
committee. We thank you all, very much, for your participation.
While this panel leaves and the next one assembles behind
their names, we will take a 2-minute break.
[Recess.]
Mr. Markey. Ladies and gentlemen, thank you so much. We
invite our witnesses to come and to sit behind their nametags
at 4:25 on Friday afternoon. I just want you to know that this
is all part of our plan to get rid of everybody so we could
have the most important panel to ourselves with unlimited
questioning by the chairman and by Ms. Baldwin, and so the
whole day, this has been the plan, just so we have this special
panel for that purpose.
To begin, I am going to ask Congresswoman Baldwin to
introduce our first witness.
Ms. Baldwin. Thank you, Mr. Chairman. I am pleased to
introduce a constituent whose expertise in conservation and
climate change is well known and well documented. During her 17
years with the Nature Conservancy, Tia Nelson led that
organization's climate change program where she played a key
role in developing forest protection and restoration as a
climate change mitigation strategy. Tia received the EPA's
climate change leadership award in the year 2000. Since 2004,
Tia has served as executive secretary of the Wisconsin Board of
Commissioners of Public Lands, and in 2007, Governor Jim Doyle
appointed Tia as co-chair of the Governor's Task Force on
Global Warming, a broad coalition of Wisconsin's experts and
leaders that in 2008 produced a nearly unanimous report on the
ways Wisconsin can be a leader in addressing the challenges
presented by climate change, reduce our dependence on fossil
fuel and advance the State's energy independence objectives. As
the daughter of Wisconsin's great Congressman, governor and
U.S. Senator Gaylord Nelson, the founder of Earth Day, you can
certainly say that Tia's dedication to preserving land and
water resources is in her blood. She is carrying on her
father's great environmental legacy and forcefully creating her
own. He would be justly proud to see her with us today. Tia.
STATEMENTS OF TIA NELSON, EXECUTIVE SECRETARY, BOARD OF
COMMISSIONERS OF PUBLIC LANDS, STATE OF WISCONSIN; BILL BECKER,
EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF CLEAN AIR AGENCIES;
CARL ROYAL, COUNSEL, SCHIFF HARDIN LLP, FORMERLY SENIOR VICE
PRESIDENT AND GENERAL COUNSEL, CHICAGO MERCANTILE EXCHANGE; JON
ANDA, EXECUTIVE-IN-RESIDENCE, FUQUA SCHOOL OF BUSINESS, DUKE
UNIVERSITY, VISITING FELLOW NICHOLAS INSTITUTE FOR
ENVIRONMENTAL POLICY SOLUTION; DAVID DONIGER, POLICY DIRECTOR,
CLIMATE CENTER, NATURAL RESOURCES DEFENSE COUNCIL; PATRICIA
MULROY, GENERAL MANAGER, LAS VEGAS VALLEY WATER DISTRICT/
SOUTHERN NEVADA WATER AUTHORITY; ANNE E. SMITH, VICE PRESIDENT,
PRACTICE LEADER OF CLIMATE AND SUSTAINABILITY, CRA
INTERNATIONAL; AND WILLIAM L. KOVACS, VICE PRESIDENT,
ENVIRONMENT, TECHNOLOGY AND REGULATORY AFFAIRS, U.S. CHAMBER OF
COMMERCE
STATEMENT OF TIA NELSON
Ms. Nelson. Thank you so much for your very kind
introduction. I am quite grateful. I am proud to be represented
by you in Congress and grateful too for your environmental
leadership. Thank you, Chairman Markey, for your endurance this
week. I am grateful to be here today. In the interest of
conservation and efficiency, I plan on trying to be very brief
and talk very fast.
I am here to share with you a little bit about Wisconsin's
experience. Governor Doyle, who has been a leader on the issue
of climate change, appointed a task force which I co-chair with
my distinguished colleague, Roy Filley from WPPI Energy, and
Roy and I co-chaired a group of 29 stakeholders representing
industry, tribes, environmentalists, manufacturers, labor
interests, agricultural interests, citizens, and we reached
near-unanimous consensus on our report which Tammy just held up
for you.
The governor tasked us with three objectives. Number one
was to identify short- and long-term targets for emissions
reductions. Number two was to present policy recommendations to
achieve these goals. Number three was to identify opportunities
to address climate change while growing Wisconsin's economy and
creating jobs. We worked for a year. We produced a report, as I
said, near-unanimous support. That report has many similarities
to your bill, Mr. Chairman. The renewable energy and efficiency
titles are quite similar. The renewable portfolio standard, the
low-carbon fuel standard, the energy efficiency language, the
building codes, the lighting standards and a few others are
remarkably similar to our report. These are the measures that
are most cost effective, as you know, and we in our process
identified them similarly.
So first and foremost, Mr. Chairman, I would like to
applaud you. The committee draft offers real solutions to
address climate change, promote energy independence and
modernize our energy infrastructure, and I support the draft
you have put forward and believe if we work together it will
work for Wisconsin and for the Nation.
The biggest challenge for us is working on cost
containment. Wisconsin, as progressive and long of an
environmental tradition as we have, Wisconsin is heavily
reliant on coal. About 70 percent of our energy comes from
coal. We are the third largest manufacturer in the United
States. This means that cap and trades poses some real cost
challenges for us but we believe that we can work with you on
those costs. The draft does not propose an allowance structure
and I am not here to support a particular approach but I
thought it would be valuable to share with you what we did in
the task force because what we did in the task force ended up
uniting this diverse group of stakeholders to support a bill
that has strong emission reduction targets. They are almost
identical to yours, a little tougher in the mid term and a
little weaker in the long term but effectively about the same.
We have tough targets. We have tripling conservation and
efficiency increasing renewables two and a half fold and it is
quite--and endorsing a cap and trade, not a State cap and trade
but a federal cap and trade.
The biggest issue for us to discuss was how to do cost
containment as a heavy coal-dependent State. We came up with an
idea that I haven't heard yet that I hope you will seriously
consider. The discussion to date has been about allocation
issues and whether to auction all allowances or allocate them
for free. These are the two extremes. What we did was come up
with a compromise. That compromise united the group. That
compromise suggested that up to 90 percent of the allowances in
the early years, maybe for a period as long as 10 years, up to
90 percent would be allocated but not for free, would be
allocated at a small fee, and that you would increase the
auction percentage and decrease the allocated at a fee
percentage over time to give us time to transition our economy
in essence. That fee structure gives you cost certainty, gives
you cost containment. It creates a predictable revenue stream
which you can then draw on to help low-income folks do energy
efficiency, do investments in climate research and so on. So
that is how we got at the issue of cost abatement. For a State
like Wisconsin, offsets will also be important. We have very
important forest and farm industries and we believe that
changes in land-use practices can help mitigate climate change.
I was thrilled to see in your bill that you included offsets
both international and domestic and recognized the role of
forestry. Many people don't know that deforestation is more
than 20 percent of annual greenhouse gas emissions globally and
as a matter of fact, those emissions exceed the emissions from
all of the planes, trains and automobiles in the world. You
cannot address climate change without addressing the issue of
deforestation and assisting developing countries in funding
alternatives to destroying not only their forests and emitting
greenhouse gases but other environmental benefits of the
forest.
So those are the two most important issues for us in terms
of cost containment. We want to embrace most strongly your
draft bill and discuss with you ways to help make it work for
Wisconsin. We are grateful for your leadership and I thank you.
[The prepared statement of Ms. Nelson follows:]
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Mr. Markey. Thank you. In the same way that we had Mr.
Reuther earlier, the Nelsons of course are environmental
aristocracy, and I think everyone is feeling good to be on this
panel with you here on the 39th anniversary and hopefully by
the 40th anniversary of Earth Day we will have resolved all of
these issues.
Ms. Nelson. I am going to hold you to that.
Mr. Markey. Well, I think we can do it but it is, as you
can see from the earlier preliminary rounds that we had here,
it is going to be contentious but I think ultimately
achievable.
Ms. Nelson. Well, you have a big challenge but I want you
to know that Wisconsin is keen to work with you on overcoming
some of those challenges.
Mr. Markey. Thank you. I appreciate it.
Our next witness is Bill Becker, executive director of the
National Association of Clean Air Agencies. He served as the
first executive director of the State and Territorial Air
Pollution Program Administrators and the Association of Local
Air Pollution Control Officers. So whenever you are
comfortable, Mr. Becker, please begin.
STATEMENT OF BILL BECKER
Mr. Becker. Thank you, Chairman Markey and Congresswoman
Baldwin. My name is Bill Becker. I am the executive director of
the National Association of Clean Air Agencies. We are an
association of air pollution control agencies in 53 States and
territories and more than 165 major metropolitan areas across
the country, and undoubtedly every one of them is watching this
hearing through the Internet today and into the evening.
Chairman Markey, our association applauds you and Chairman
Waxman and your staffs for not only the incredible amount of
hard work that went into drafting this proposal but for your
leadership and the level of commitment being put forth for
moving this legislation so quickly and yet so thoughtfully. By
carefully balancing the vast array of diverse interests, you
found a center point around which consensus can ultimately be
achieved. You have put the prospect of success on this critical
issue which for so long has been so elusive within reach and
taken together the core components of this bill comprise a
solid foundation for a realistic and federal climate program.
We are particularly pleased that you have included a mandatory
economy-wide greenhouse gas reduction strategy with
quantifiable and enforceable limits and significant near, mid
and long-term reduction targets, generally strong language
protecting the rights of States and localities to exercise
leadership in responding to global warming, performance
standards for stationary sources of greenhouse gases, a
renewable electricity standard, a low-carbon fuel standard,
requirements for cleaner, more efficient transportation,
provisions for adapting to global warming and many others.
Is this precisely the bill that our association would have
written had we held the pen? No, not exactly, but we fully
understand the perspective from which you crafted this
legislation and toward that end have developed a set of
recommendations that we believe are consistent with that
perspective and can be incorporated into the bill without
upsetting the balance you worked so hard to achieve. Our
written testimony details each of our recommendations, and what
I would like to do is spend a couple of minutes highlighting
three of them.
First, we agree with the emissions reduction targets in the
bill that are significant and that they are part of a
compromise, part of the U.S. CAP proposal. At issue, however,
is whether they are sufficient to avert dangerous anthropogenic
warming. Since the last IPCC report was released in early 2007,
scientific developments have shown that global warming is
proceeding more quickly and with greater impacts than
previously thought. Accordingly, we urge that you consider
strengthening the reduction targets or at the very least ensure
that these targets not be weakened as the bill moves through
Congress.
Second, while we support the offset integrity provisions in
the discussion draft, which are designed to ensure that any
offset credit represents permanent, enforceable, additional and
verifiable emissions reductions, we are concerned about the
generous offset credit pool which would allowed capped sources
to use up to 2 billion offset credits each year to meet their
compliance obligations. When cap sources purchase offset
credits rather then reduce their own greenhouse gas emissions,
this dilutes the effectiveness of the cap.
And finally, we are pleased that the bill would amend the
existing Clean Air Act savings clause to make clear that States
and localities have the authority to enact various important
measures and strategies. I am sorry Congressman Upton isn't
here for this because we think it is very clear in the bill
that you have preserved not only California's ability to retain
its own greenhouse gas standards for motor vehicles but you
have not tampered with the authority in the Clean Air Act under
section 177 for other states to opt into California's program.
We are troubled by the provision in your bill that would
preempt State and local governments from 2012 through 2017 from
implementing or enforcing their own caps, thereby compelling
the dissolution of regional cap-and-trade programs such as
RGGI, the Midwestern Accord and the Western Climate Initiative
as well as California's program. We recognize this provision
may be intended to create a breather during which the federal
cap-and-trade program would be the only one in existence.
Nonetheless, this would revoke an important state and local
authority. Moreover, we fear that if the bill is weakened as it
moves through the legislative process yet this timeout remains,
States would be required to surrender their successful programs
and revenue in exchange for an inferior federal program.
Instead, these State and regional path-breaking programs should
be provided the option to decide whether the federal program is
rigorous enough and the choice to transition into the federal
program.
So in conclusion, a successful national climate protection
program must be predicated on a strong local-State-federal
partnership. In order for our Nation to meet our greenhouse gas
targets, we must ensure that all levels of government are fully
engaged in the design and implementation of this program. We
look forward to working with the committee as it moves through
Congress and to President Obama's desk for signature. Thank
you.
[The prepared statement of Mr. Becker follows:]
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Mr. Markey. Thank you, Mr. Becker, very much.
Our next witness is Carl Royal, a member of the Securities
and Futures Regulation Practice Group of Schiff Harden LLP. He
has over 30 years of experience in the regulation of markets
and market participants under the federal securities and
commodities laws and he has spent 14 years at the Chicago
Mercantile Exchange serving as senior vice president and
general counsel, and on a day when we heard Ken Lay's name
mentioned again, Mr. Royal can perhaps give us good instruction
as to how to construct this marketplace in a way that will
protect against fraud and manipulation. We welcome you, sir.
STATEMENT OF CARL ROYAL
Mr. Royal. Thank you, Mr. Chairman. I recognize that this
bill and this committee's jurisdiction is covering a very wide
territory as the various other speakers have already covered. I
am going to focus on a very narrow aspect of that, and that is
the trading part of cap and trade and how that market should be
regulated.
I think there are two basic themes that are of critical
importance here. First is just recognizing that it is very
important to have a well-regulated market to avoid some of the
abuses that we have seen in other markets. In this market in
particular, because it has such an impact over so many sectors
of the economy and there is going to be of great importance to
users of emissions and the general public so I do believe that
it is essential that the regulatory framework to be created by
Congress protect the integrity of the market and ensure that
the market achieve its environmental purpose. It therefore
should meet the following objectives. It should be designed to
be as transparent as possible. Participants in the market
should be protected from manipulation and fraud and the market
should resist the development of speculative bubbles that
divert prices away from the fundamental drivers of supply and
demand.
Because this market is one that is being created de novo,
this gives Congress an opportunity to create a market that can
avoid some of the problems that we have seen in other markets.
In my view, if we can provide a regulatory framework that
combines an exchange trading requirement, strict limitations on
traders such as position limits and margin requirements, and
tough enforcement provisions, it then would be possible to
achieve protection of the public in those areas. I recognize
that there have been other markets in recent months where there
have been some serious problems, credit default swaps, for
example, but I would point out that that was a market that
exists in the unregulated over-the-counter market and is not
necessarily a problem with the instruments but perhaps in the
market and how it was not regulated effectiveness. If you move
a market to an exchange environment, I think you can avoid many
of those problems.
I think first that exchange trading maximizes market
transparency because all parties in the market as well as the
federal regulators have access to pricing information in real
time and can see what other traders are doing. Second, exchange
traded products have standardized terms that make them easy to
understand easy to price. That improves market liquidity which
helps keep the cost of trading low. Third, exchange trading
comes with clearing by a central clearinghouse acting as
central counterparty to all transactions. Under central
counterparty clearing, all positions are valued every day based
on market prices as determined by a neutral party. If a
position's value goes down, there is a daily call for cash
called variation margin. This financial discipline would have
prevented many of the problems that are now being faced by
banks and other participants holding mortgage-backed securities
and other forms of OTC derivatives that are worth much less
than the banks are valuing them on their balance sheets.
Further details on some regulatory suggestions are
contained in my written remarks, and I thank the committee for
this opportunity.
[The prepared statement of Mr. Royal follows:]
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Mr. Markey. Thank you, Mr. Royal, very much.
Our next witness, Jon Anda, is a visiting fellow of the
Nicholas Institute for Environmental Policy Solutions at Duke
University. Mr. Anda was previously president of the
Environmental Markets Network at the Environmental Defense
Fund. He has worked to create a framework for the U.S. carbon
market that is fair, efficient and responsive to lessons
learned in the financial crisis. And that is very important
because we have many people who are saying well, how can we
create a new market here, and won't that be dangerous, you
know, mentioning Bernie Madoff or mentioning Ken Lay or
mentioning credit default swaps or other machinations of the
marketplace that have occurred. The truth is that what Bernie
Madoff did was illegal and there were clues actually to track
him down 10 years ago that just were not followed up on, and in
credit default swaps there were many warnings over the years as
well as there are in many of these other areas that ultimately
came to hurt confidence in the marketplace. But at the same
time we are not going to abandon the New York Stock Exchange or
the NASDAQ or the Chicago Mercantile Exchange and say trading
just can't occur because that would bring capitalism to its
knees. And so that is why we have Mr. Royal and Mr. Anda here
today to help us to frame the way in which we can create a
marketplace that will work, be transparent, honest, and if
manipulation does occur, lead to the apprehension of and
ultimate imprisonment of someone who abuses the system.
So we welcome you, Mr. Anda, and whenever you are ready,
please begin.
STATEMENT OF JON ANDA
Mr. Anda. Thank you, Mr. Chairman. I think we obviously
have a risk with creating a new financial market for carbon but
we also have a great opportunity. Carbon actually could set a
standard that could be used in other markets, and Carl referred
to that and I certainly support that point.
Let me just write down some comments about the work the
committee has done. I think you did two things really right in
establishing fairness efficiency but also taking some lessons
from the recent financial crisis. The first one was in
allowances. The discussion draft sets a best execution standard
for allowances. That means that anyone who buys an allowance is
assured of getting the best price available in the market. That
is something we do in our equity markets under something called
the national market system and that was a great thing for the
committee to do.
Secondly, the committee made a very important decision in
derivatives. In derivates, the discussion draft says that
derivates will basically be traded on listed regulated markets,
the kind that Carl described, rather than in the OTC market
which is very common for commodities. Sometimes people put
carbon the commodities world. I think those were bold decisions
and set the right tone for the bill. So I will talk maybe a
little bit more about those later but I want to add some
context to these decisions. I know it is late on a Friday
afternoon but I think just a few numbers are instructive.
Over the life of the bill, you are going to be issuing 131
billion allowances but initially we might have as little as 5
billion outstanding of we just do an auction for 1 year. So in
the financial world we call this a really small float, 131
billion over the life and 5 years out in the first year. Now,
another way to think about that is that you are telling
emitters that they have to abate carbon over 38 years, that
they want to manage that risk, they only have 1 year of
allowances worth to trade to manage their risk. So what will
that lead to? That is going to lead to huge demand for
derivatives, absolutely huge demand, and I don't think that is
a problem. I just think it is a good idea if you are going to
have huge demand for derivatives recognize it and have those
derivatives traded transparently and in a way that the system
doesn't get out of control.
As an aside, I would encourage you to think about
increasing the flow. You can do that as you have already
provided in the discussion draft. You can auction an extra 4
years worth upfront. But if you think about using that
provision, if you did it you have maybe 25 billion tons to
auction in the first 5 years. If that was $20 a ton, you would
hosting a half a trillion dollar auction. That is a little too
big. So that is a tough way to do it. But to the extent that
you do have free allocations, either for all the topics we have
talked about the last few days, leakage or giving them to LDCs,
do it up front so that we have more allowances and a less
derivatives-dependent market.
Lastly, I would encourage you to think about something like
rights. The government auctions rights to emitters to buy
allowances in, say, 5 years' time at a fixed price, say $20.
That would be a way of sort of pre-selling the rights and
providing some financing to emitters and clearly I won't
discuss that late on a Friday afternoon in my 5 minutes.
Let me just go back to the best execution point and make
one little comment. I love the national market system. In my 20
years at Morgan Stanley, I came mostly out of the equity
business and we certainly are--our markets have benefited from
that rule. But carbon isn't, you know, thousands of stocks, it
is basically one instrument, and I think certainly one option
for the allowance market would be to have a central
marketplace, one electronic, what I call a CLOB for carbon, a
central limit order book where all the trades occur, everybody
can see the bids and offers. I think that is something that
might be a good idea and might even be embraced by the market
participants.
In the derivatives area, I just want to make one important
comment, what goes hand in hand with requiring listed exchange
trading of derivatives. You have to have rationale accounting
so that emitters can use these instruments. So if an emitter,
one of your local utilities, wants to buy a future and their
intention is to exercise that future in a few years and turn it
in for compliance, don't make them market to market. They are
just locking in an expense and deferring it. If you do market
to market, one of the main reasons people do OTC highly
structured derivatives is to avoid market to market so get the
accounting right. U.S. CAP mentions rational accounting in
their blueprint and I think what we want to do, we want these
derivative markets to be kind of like farmers use derivatives
all the time. It is part of their normal course of business and
I hope it can be for emitters too.
So just to conclude, I apologize for this being a bit
technical but if you want to go a little further you can read
my written testimony and also included in my testimony as an
appendix is a primer on carbon markets that we at the Nicholas
Institute wrote just a couple months ago and it gives a lot of
background on this important topic, but again, I congratulate
the committee on setting the tone for a fair and efficient U.S.
carbon market that does take lessons form the financial crisis.
Thank you.
[The prepared statement of Mr. Anda follows:]
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Mr. Markey. Thank you, Mr. Anda, very much. Just for your
information, the regulation of the securities marketplace was
proposed here in this committee until the year 2000 when the
Republican majority moved it over to the Banking Committee and
so I was the chairman of the subcommittee with jurisdiction
over the financial marketplace so I find this a fascinatingly
exciting subject that you are talking about, and I would only
note to you that in 1994, the last year I was chairman, I had
introduced a bill to regulate derivates. Alan Greenspan sat
where you are sitting and his testimony was that counterparties
have a stake in the stability of the system so we did not need
any kind of regulatory system in the derivatives marketplace. I
think we have now learned that derivatives in and of themselves
are not good or bad but unregulated derivatives in a non-
transparent marketplace is like a hydrogen bomb aimed at the
economy, and so by learning these lessons, putting in place a
well-structured regulatory marketplace, I think we have a
chance to incorporate each one of these instruments in a
rational financial system.
Our next witness, David Doniger, is the policy director of
NRDC's Climate Center. Mr. Doniger works on policies to cut
global warming pollution from power plants, motor vehicles and
other major industries and leads NRDC's work to complete the
phase-out of chemicals that deplete the earth's protective
ozone layer. David also served for 8 years in the Clinton
Administration where he was director of climate policy at the
Environmental Protection Agency. We welcome you here, sir.
Whenever you are ready, please begin.
STATEMENT OF DAVID DONIGER
Mr. Doniger. Thank you very much, Mr. Chairman.
I want to focus today on the relationship between your new
bill and the current Clean Air Act. The Supreme Court found in
Massachusetts versus EPA that EPA already has the authority and
responsibility to control carbon dioxide and other heat-
trapping pollutants under the Clean Air Act. NRDC salutes
Administrator Lisa Jackson and the Obama Administration for
issuing the endangerment determination a week ago, officially
recognizing what she called the compelling and overwhelming
evidence that global warming is dangerous to our health and
well-being. We can take a big bite out of global warming
pollution using the Clean Air Act we have today but we cannot
do all that is needed under the current law. We need the
legislation before this committee to cap and cut carbon
emissions, to raise energy efficiency and energy standards and
to rebuild the economy and create millions of new jobs on a
foundation of clean energy.
The ACES bill wisely proposes to keep and in most instances
strengthen provisions of the current Clean Air Act. Despite the
Supreme Court decision, there are some who claim that no part
of the existing law should ever be used because if EPA ever
starts using the Clean Air Act to address big sources like cars
and power plants, it will not be able to stop itself from
regulating every donut shop and barbecue in the land. But EPA
has the tools to focus on the big sources, not the tiny ones.
Donut lovers and barbecue fans can sleep soundly at night.
NRDC supports the ACES provisions reaffirming the Clean Air
Act authority to set performance standards for vehicles. We
support the goal of coordinating the Clean Air Act and CAFE
standards and setting new ones that meet or exceed California's
pioneering levels. This is a plan that retains California's
critical leadership while also giving the auto industry the
benefits of practical national uniformity. For power plants and
major industries, EPA also had authority under section 111 of
the current Clean Air Act. Indeed, Administrator Jackson is
required to act soon on power plants in another case, a
companion case to the Massachusetts case. The ACES bill tailors
the current Clean Air Act provisions for power plants. We
support those provisions.
The bill does contain a number of proposed exemptions from
the Clean Air Act. Two of the changes NRDC believes make sense,
that is, not to regulate greenhouse gases under the ambient
standards or hazardous air pollutant programs. We support the
bill's provisions to set new source standards for sources
outside the cap but we disagree with exempting sources covered
by the cap from those same new source standards. And we also
disagree with the complete elimination of the case-by-case new
source review for large, new and expanded carbon emission
sources to meet the donut shop concern. It is sufficient to
limit new source review to sources of more than 10,000 tons of
CO2 equivalent.
Let me say a word about the role of the States. During the
long period of federal abdication, States have led the way, and
if the federal program should come off the rails at some future
point, it is critical that States be able to pick up the slack
once again. States have capabilities to curb emissions and
deliver energy efficiency and renewable energy that the federal
government can't match, and for these reasons NRDC strongly
supports the many provisions of the ACES bill that would
harness State capabilities and protect their role. There is one
very troubling exception though, a 6-year suspension of State
authority to implement or enforce cap-and-trade-type programs.
NRDC doesn't believe a real case has been made for why any such
suspension is needed. We suggested in the written testimony a
possible way forward that would keep States in the game and
keep a strong state program.
One last word about equal access to justice. The ACES bill
expresses an entirely commonsense intent that persons with
either environmental or economic injuries should have equal
access to the courts when EPA's compliance with the new is in
question. These provisions are fair and balanced and they
should be retained.
So I covered carbon market regulation issues in my written
testimony. I would be happy to comment on those too in Q&A. But
thank you very much for the opportunity to testify.
[The prepared statement of Mr. Doniger follows:]
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Mr. Markey. Thank you so very much for being here, Mr.
Doniger.
Our next witness, Patricia Mulroy, is the general manager
of the Las Vegas Valley Water District and Southern Nevada
Water Authority. Ms. Mulroy oversees the operations of the Las
Vegas Valley Water District and the Southern Nevada Water
Authority, which is responsible for acquiring, treating and
delivering water to southern Nevada. We welcome you.
STATEMENT OF PATRICIA MULROY
Ms. Mulroy. Thank you, Mr. Chairman. I am also here today
on behalf as a member of the board of the Association of
Metropolitan Water Agencies and on the board of the Water
Research Foundation, and on behalf of America's water
utilities, I want to congratulate you and thank you for your
ship on a bill that many of us have been awaiting anxiously for
some time.
While the primary focus of the bill is energy, water and
energy are inextricably linked and must be considered together.
The Department of Energy estimates that 4 percent of our
country's energy is consumed by the treatment, transmission and
delivery of water while conversely the generation of energy
consumes vast amounts of water resources. We in the water
utility business are on the frontline of climate change and for
us it is happening right now. Water utilities are learning to
adapt to this reality and we have to if we are going to provide
safe, reliable water supply to our Nation. My experience
reflects the challenges facing the American Southwest where the
flows of the Colorado River support nearly 30 million people
and irrigate 15 percent of the Nation's crops. During this
decade the seven States that share this river had witnessed
cumulative flows drop 11.8 trillion gallons below average. If
this drought continues, in 3 years Hoover Dam will cease
generating electricity. Other regions are also beginning to see
the effects, whether it is floods in the Midwest or groundwater
aquifers beginning to see saltwater intrusion, and you know
only too well the drought that has been ravaging the Southeast.
My agency's first adaptation strategy was to adopt one of
the Nation's most aggressive water conservation programs,
having paid our customers $110 million to remove grass and
replace it with desert vegetation. This has resulted in
reducing our water use by 22 billion gallons over the same time
period where our population swelled by 400,000 inhabitants. We
are also racing to build a new intake that goes deeper within
Lake Meade. In California, officials are grapping with not only
worsening Colorado River conditions but a drought in the Sierra
and restricted use of in-State supplies. My purpose today is
not to induce alarm but rather to convey the magnitude of the
situation and offer water industry perspective on adaptation
strategies.
One of our most immediate needs is research, not just more
research but more focus applied research. There are nearly two
dozen climate change models but none of them adequately predict
effects on a watershed-specific scale. The development of these
strategies requires actionable research that explores the full
range of impacts. To that end, we recommend that the federal
government partner with the Water Research Foundation to
optimize the value of these research investments. I encourage
you to incorporate into your legislation the Climate Change
Drinking Water Adaptation Research Act, which was sponsored
last year by Representative Diana DeGette and Senate Majority
Leader Harry Reid, which provides funding for climate change-
related research from a small percentage of the cap-and-trade
proceeds. This applied research will help provide information
water managers need to make sound policy decisions. But even
the best-studied strategies won't work if they cannot be
implemented. Climate change adaptation also means new water
infrastructure. Our new Lake Meade intake will cost $1 billion
and this is only one project in one community. Considering all
the water agencies that will likely be affected, the financial
implications are staggering.
To help communities capitalize the necessary investments,
we propose your legislation also include a concept similar to
the proposed green bank for energy investments. A blue bank for
water infrastructure would provide municipal water agencies the
necessary capital to enact adaptation strategies utilizing a
portion of the proceeds from a cap-and-trade system. Providing
access to low-cost loans for climate change-qualified projects
would enable us to proactively adapt. To be clear, I feel
strongly that water agencies should be financially self-
sufficient. These funds would be subject to repayment by the
water agencies which are historically among the country's most
secure borrowers.
Again, on behalf of the water industry, I would like to
thank you very much for including us in this historic
conversation and respectfully ask that you support our efforts
to adapt and surmount the challenges of our changing climate.
Thank you.
[The prepared statement of Ms. Mulroy follows:]
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Mr. Markey. Thank you so much.
Our next witness is Anne Smith, who is vice president of
and practice leader of climate and sustainability for CRA
International. At CRA, Ms. Smith specializes in environmental
policy and corporate compliance strategy. Before joining CRA,
Ms. Smith was a vice president at Decision Focus Incorporated,
leading that company's policy analysis. We welcome you here,
Dr. Smith. Whenever you are ready, please begin.
STATEMENT OF ANNE E. SMITH
Ms. Smith. Mr. Chairman, members of the committee, thank
you for inviting me. My testimony today is my own and does not
represent my company, CRA, or any of its clients.
Let us be honest here. Reducing global greenhouse gas
emissions in order to actually substantially reduce the risks
of climate change will be a costly undertaking no matter how it
is done. Therefore, a successful emissions policy that is both
credible and enduring is going to have to have a laser-like
focus on cost minimization. The ACES bill lacks this focus
right now. Even though it does contain a cap-and-trade program,
which is often thought of as a cost-minimizing approach,
achieving cost-effectiveness will be elusive with this bill for
two reasons, first, its other non-market regulatory schemes,
and second, uncertainty in the allowance prices in the cap and
trade.
First, the bill piles on excessive and redundant regulatory
schemes on top of the cap and trade that reflect the command
control mentality of yesteryear such as a renewable electricity
standard, a low-carbon fuel standard, energy efficiency
resource standard and many more including even a Jacuzzi-
specific that we have been hearing about today. These
prescriptive provisions will undercut the transparency and
predictability of the carbon prices under the cap and that will
only increase the costs of meeting the greenhouse gas
objectives or the target for greenhouse gases in the bill. To
minimize costs, Congress needs to remove those mandates, but
even without those redundant programs, the bill's cap-and-trade
program has its own barriers to cost minimization and this is
allowance price uncertainty and volatility. These will hinder
business planning and disrupt a company's credit worthiness.
The U.S. experience with SO2 and NOX
caps tells us that emission prices will be very unstable.
SO2 prices varied between $100 and $1,500 per ton in
just the past 4 years, and that was despite a large bank of
allowances. Europe's carbon cap has seen prices cycling up and
down by a factor of four in the space of a few years. And
despite assurances early on that Europe's carbon price
volatility was only a feature of that cap's so-called learning
phase, now we can see that those price swings are actually a
feature of the cap's mature phase as well. In the E.U., this
carbon price uncertainty has inhibited companies from investing
in the low-carbon technologies that are desired, and that same
problem will occur under U.S. CAP that allows that same price
uncertainty to occur here too.
Carbon price volatility introduces another concern that has
not been discussed widely, credit risk. Companies will need to
buy and hold allowances whose total value may be very large
compared to their current cash flows and balance sheets.
Allowance price variations can create cash-flow crunches and
balance sheet variations that in turn will translate into
credit ratings being reduced and increased difficulty in
raising funding for new investments.
The ACES bill has no provisions for providing the necessary
price certainty and price stability to avoid these problems.
Banking does not eliminate volatility. We have seen that in the
U.S. and European experiences. Offsets do not either. The
experience with the clean development mechanism says they may
actually increase price uncertainty. And the bill's strategic
reserve of allowances also does not. This provision would let
prices vary by at least a factor of two before it would even
come into effect and it doesn't ensure any actual price ceiling
when the prices do spike.
The bill needs to directly and transparently establish
allowance price ceilings and price floors in order to remove
these financial uncertainties which are only going to serve to
exacerbate the policy's costs. Some fear that price ceilings
will take away the certainty of adequate reductions in
emissions. However, the certainty that is needed for emissions
is their long-term reduction to nearly zero globally, not any
specific reduction in a specific year in the United States.
Achieving that long-term zero-emissions goal will require
sustained investment over a very, very long period of time in
utterly new directions and this is more likely to happen under
a policy that establishes a carbon price signal that is
predictable and credible for decades to come.
And finally, we need a full accounting of the cost of this
bill. EPA's analysis of the cost of the cap doesn't consider
the command and control aspects of the bill nor the costs that
are created by the allowance price uncertainty that we can
expect. So it is misleading to present EPA's analysis as even a
preliminary estimate of the impacts of this particular bill.
Thank you.
[The prepared statement of Ms. Smith follows:]
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Mr. Markey. Thank you very much, Dr. Smith.
Our next witness is William Kovacs, the vice president of
environment technology and regulatory affairs for the United
States Chamber of Commerce. In government service, Mr. Kovacs
served as vice chairman and chairman of the Commonwealth of
Virginia's hazardous waste facilities siting board and chief
counsel and staff director of the House Subcommittee on
Transportation and Commerce. Was that on this committee, sir?
Mr. Kovacs. Yes, sir. I am really that old.
Mr. Markey. And what years were those?
Mr. Kovacs. Nineteen seventy-four, 1975, through about
1978.
Mr. Markey. So when I was here?
Mr. Kovacs. Yes.
Mr. Markey. So you were the chief counsel for Brock Adams?
Mr. Kovacs. Fred Rooney.
Mr. Markey. For Fred Rooney. Yes, great. Good to see you
again. Welcome back. Whenever you are ready, please begin.
STATEMENT OF WILLIAM KOVACS
Mr. Kovacs. Thank you for inviting us here today, and I
have to tell you that when I was listening to you say this was
your 66th year of hearings and I am your 60th witness, all I
can say is what pressure. I have to say something really quick
and something he has never heard, so that is quite a task.
Let me start off by saying, the Chamber really does support
trying to find ways to reduce greenhouse gases, we have made
that clear in all of your testimony, accelerate the use of
energy efficiency and certainly find new ways to put green
technologies into the marketplace, and with that I just want to
add a few suggestions because I think that they would really
help move your bill forward. The first is, as you consider how
you are going to do this, probably the one part that troubles
us the most is, you have very steep emission reductions over
the course of the years but there is really no assurance in the
bill that as you force fossil fuels out of the system, that
there is a mechanism for bringing substitute technologies into
the system, and I say that because, and I am just going to use
one example. If you just take the 115,000-megawatt windows that
you are going to need, that is going to take enough space that
is literally going to equal going around the earth twice, and
it is an enormous land mass, and the problem you are going to
run into is not that price isn't going to drive technologies
but many times NIMBYs are going to drive technologies out, and
one of the things we have done with this project is we have
tried to identify the fact that in the last 18 months there
have been 65 renewable facilities that have not been able to
get to the marketplace because of NIMBYs and 13 grid systems.
So we think long term that is a very serious problem.
Second, in terms of the Clean Air Act, we just think it is
inappropriate, and if you are going to set up a structure you
ought to set up a structure for carbon because it is going to
be more workable. I think this idea of capping the large
businesses with cap and trade and then going into new source
performance standards for the medium-sized businesses and then
leaving it unclear and vague as to the small businesses what
you run the risk of with the small business is once an
endangerment finding is made, there is going to be a lawsuit
and you are going to have 26 million small businesses trapped
in a new source performance standard. I don't think the agency
can handle that.
In terms of citizen suits, this might be the most
troubling. I mean, you really--the cause of action has expanded
so far. It is not just against government but it is against
government with some limited monetary damages so that is the
beginning of waiver of sovereign immunity. You remove the
article 3 type actual case and actual harm for thought of harm,
and long term that is just going to be more citizen suits, more
projects stopped. And then when you have unlimited attorneys'
fees, you are giving an incentive to the lawyers to bring these
lawsuits. That is just not going to help you get the technology
into the marketplace that you need.
And then finally, on the preemption of State laws, again
this is just going back to where we were before and that is you
can't preempt it for 5 years and then let the States act. If
the federal government is going to do it, you need one
comprehensive unified law that makes sense, that the industry
understands so that we can start developing the technologies as
opposed to trying to fragment it to please a lot of different
interests.
With that, thank you very much for having me here.
[The prepared statement of Mr. Kovacs follows:]
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Mr. Markey. Thank you, Mr. Kovacs, very much.
We will now recognize the gentlelady from Wisconsin, Ms.
Baldwin, for a round of questions.
Ms. Baldwin. Thank you, but before I begin, I would ask
unanimous consent to submit for the record the testimony of
Thomas Gibson from the American Iron and Steel Institute on the
bill.
[The information follows:]
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Mr. Markey. Without objection, so ordered. Thank you.
Ms. Baldwin. Tia, I appreciated your testimony and telling
us a little bit about the real diversity among the stakeholders
on Governor Doyle's task force on global warming and the fact
that you were able to reach near consensus on a number of
recommendations that you note are similar to the provisions
contained in the draft discussion bill before us. We have also
taken in this committee testimony from representatives of U.S.
CAP that had a similarly diverse array of stakeholders and they
were also able to reach substantial agreement around a
blueprint for taking action on climate change, and I see
similarities when I look across the Congress and this committee
in terms of the diversity of interests and diversity of
districts that we represent. So in many ways we have a similar
task immediately before us in trying to gather support and gain
a majority. While we would love to have a nearly unanimous vote
in this committee on climate change legislation, I think we
will be happy if we get a good majority vote on this. But I
wonder if you can tell us about your yearlong experience
leading the governor's task force on global warming with these
diverse stakeholders, how they were able to come together to
reach a set of goals and reduction targets that satisfied so
many varied perspectives and if you could tell us particularly
what were some of the key issues that you had to surmount and
the perhaps significant points of contention that you were able
to overcome.
Ms. Nelson. Yes. Thank you for your question. Part of our
success was, I think we just fatigued everyone. We were at it
for--and I see that Chairman Markey is pursuing the same
strategy, so I wish him a lot of luck. We met for--we were
originally set to meet for 9 months. We met for well over a
year and it was a difficult process. I think everyone came to
the table in good faith, which obviously helped quite a bit.
Ultimately what we did, and I give enormous credit to my co-
chair for this particular strategy, after listening to multiple
stakeholders about multiple strategies, agreeing that we wanted
strong targets, recognizing that we would need to dramatically
increase investments in conservation and efficiency and
renewables to meet those targets, and then realizing that we
couldn't without a cap-and-trade program, it became clear to
Roy and I that we were going to have to put in front of the
group in essence a straw man proposal that we hoped was
delicately balancing the tradeoffs between constituencies
without compromising the environmental integrity of our
product, our report which the governor accepted in its
entirety, I failed to mention before, and which is going to be
introduced hopefully in the legislature, we are drafting it
now, in the fall.
For industry, manufacturing, utilities, the cost
containment issue was huge so the way we kept them on board was
a very frank, you know, recognition that Wisconsin will have
challenges in competitiveness as a heavy coal dependent, heavy
manufacturing, and our manufacturing sector tend to be more
energy intensive. We have to be extremely sensitive to global
competitiveness. And so by paying a lot of attention to the
cost containment measure, we moved our RPS up, our existing
RPS, and then increased it two and a half fold, the same as in
the chairman's draft bill, 25 by 25. So really the compromise,
for the environmentalists the cap and the integrity of the cap
was essential, and for industry it was essential to recognize
that Wisconsin is in a very economically vulnerable position
being so heavily dependent on coal, and this allocation
proposal that we came up with that allows for a transition--
this is just for a limited period of time--it allows us to
transition. Really that allocation got us where we needed to
go.
Ms. Baldwin. Thank you.
I have a question. I will say that I have very limited
knowledge on the market structure discussion but I find it
incredibly important on this and so maybe you can help me
understand it better. I will start with Mr. Anda and certainly
Mr. Royal can comment on this. As I understand the futures
market, you have hedgers and speculators. You have people who
would want to possess futures on carbon that might actually use
them some day because they are emitters, and then you have
those just want to be a part of this market. Do we treat these
two groups differently? Do you propose that we do? And how do
we--especially with speculators, what sort of safeguards would
you advise us to build into this market as we develop it?
Mr. Anda. Well, I will let Carl perhaps handle the point
about speculators but it is important that the market be open
to all. The two points that I wanted to make are, number one,
let us have that derivative trading in a place where we can see
it, not over the counter but on listed, transparent exchanges,
number one. Number two, market-to-market accounting is fine for
financial institutions and hedge funds. They do that anyway.
But let us create something for the covered entities where they
can effectively cover their carbon risk using futures and
options, because we might not give them any allowances to bank.
Let us let them use those instruments, and if their intention
is to submit for compliance, let us have accounting for them
that in effect is special because they would treat this as a
deferred expense whereas a speculator would market to market.
Mr. Royal. Just very briefly, you do need to have
speculators in the market, otherwise called liquidity
providers, because when somebody wants to buy you need somebody
on the other side to be the seller or else you don't have a
market. In terms of treating them differently, I think you can.
I mean, for example, in the area of position limits, an emitter
would need to have a larger quantity of allowances because, you
know, it actually needs it for its business where as a
speculator is doing it just to provide liquidity for the market
and so wouldn't need to have such a large limit, and I think
the regulatory agency could, you know, establish different
standards for those different types of market participants.
Ms. Baldwin. Do you have any early guidance for us on what
sort of position limits we would be looking at?
Mr. Royal. I don't know the market well enough to how it is
going to develop to be able to answer that. I think that is
probably an area that might be delegated to the agency that is
in charge of the market.
Mr. Anda. I would just comment that the exchanges today do
a pretty good job of setting limits because their members don't
want to create excessive risk within the exchange, so where
things get onto exchanges, you know, things tend to avoid
blowups. When they are off exchange, that is a different story.
Mr. Doniger. My colleague, Andy Stevenson, who is in the
same field as these gentlemen, in our written testimony we
recommended 5 percent position limits in the futures for any
given vintage of a future, delivery date, with an adjustment
that if an emitter had the kind of need that Mr. Royal
suggested, that they might be holding 5 percent above their own
needs. But a 5 percent seems to be an adequate amount in our
judgment.
Mr. Markey. The gentleman's time has expired. Let me turn
to you, Ms. Mulroy, and I am very intrigued by your blue bank
idea. I had testimony from the mayor of Philadelphia recently
and he talked about the need for some way of dealing with his
water supply problem and the protection of his watershed. Could
you tell me how, let us say for Philadelphia's purposes, a blue
bank might work to deal with those two problems?
Ms. Mulroy. Yes, sir. I am not as familiar with
Philadelphia as I am with New York, who shares a similar
concern to Philadelphia, and actually are a member of the
Climate Coalition that eight of us have formed in the United
States. For them, the question is, increased flooding will
contaminate reservoirs that today feed New York City and do not
require treatment. At some point in time they are going to have
to build treatment facilities which will cost them billions of
dollars for treating water they have never had to treat before,
because as those flood flows increase, it will contaminate
those reservoirs.
Mr. Markey. So how would the blue bank then work for New
York City?
Ms. Mulroy. For the blue bank, let us say in the case of
New York, it would help them finance those treatment plants to
protect New York City and allow them to build them in a timely
fashion and not sit through 3 years of a boil order in New York
after the contamination has occurred.
Mr. Markey. Interesting. So just so I can understand a
little bit about this concept that you have, does it have a
coalition behind it or is this an idea that you have
personally?
Ms. Mulroy. No, there is a coalition of water agencies in
the United States behind it. I think all of us whether we were
in Florida, whether we are in New York or whether on the West
Coast know that the way we have been managing water resources
for the last 100 years is obsolete and whether it is
investments in helping our communities make changes,
investments in conservation that we can capitalize or whether
it is new facilities because our water supplies are either
being contaminated or disappearing before our eyes. We know we
are facing those challenges.
Mr. Markey. Thank you.
Mr. Anda and Mr. Royal, let us take the European
marketplace right now, and talk a little bit about how the
price of a carbon credit has fluctuated between $40 a euro and
$6 or $8 a euro. Is that a good thing, a bad thing or that is
the way the market works and it is better than the government
making decisions about where the price should be and differing
economic circumstances. Mr. Royal?
Mr. Royal. Yes. I mean, I am not familiar with that exact
market but I think in general, I mean, markets do go up and
down and that is one of their functions. I think in this
context, it could even serve a useful purpose because it would
be countercyclical because in times of booming economies, you
would expect more demand for the allowances and that would tend
to increase prices at a time when it could be afforded whereas
in times like we are having now where industries are closing
plants, you would have less need, less demand for the
allowances which would then tend to drive the price down, so in
a way having a market-based mechanism would be self-correcting
and it would, you know, help smooth out some of these economic
cycles.
Mr. Markey. See, that is how I view markets, but, you know,
some people would say that is an indication of a market not
working, but I would basically argue that is a perfect example
of the market working.
Mr. Anda, your comments.
Mr. Anda. I just think two things. First of all, to
highlight the point about the major factor in the market is the
global economic recession. If you look in the EPA's recent work
on evaluating your draft discussion, there was an interesting
chart in there that showed that in 2006 our business as usual
or reference scenario for emissions in the United States was,
we were going to go from 6 billion to over 8 billion. The
current numbers go from 6 billion to about 6.3 billion. So
think about the impact. We have really changed our assumptions
about how much we are going to emit without policy where those
same factors have driven prices down in Europe, point number
one.
Point number two, let us not forget that the European
market ends on the last day of 2012 and so while allowances are
bankable into the next period, we don't really know what the
next period is going to be so I don't think it is fair. The
world emits, as you know, 30 billion tons of emissions from
CO2. A little over 2 billion are covered in the
European trading system. They were bold enough to start with a
small market. When we come in, I think we will have less
volatility and a bigger market.
Mr. Markey. Thank you.
Mr. Doniger?
Mr. Doniger. If I may add two points to that, and partial
response also to Anne Smith's comments about volatility, the
$40 mark was hit at a point in the early experiment with the
E.U. when they received for the first time accurate information
about emission levels. In other words, they started their
program without full information about how much was being
emitted in the first place and there was a systemic
overestimate of how many emissions there were going to be and
people paid more for the allowances on the basis of that. When
the data came in, there was an adjustment. This problem will
not happen here because we already have much better data about
actual emissions from the power sector, and thanks to the EPA's
proposal of a more comprehensive emissions inventory system,
even in advance of your legislation, we are going to have much
better information across the board when the program starts.
The other thing is, as Jon was just mentioning, if a
program comes to an end, then there is a possibility that the
allowances become valueless near the end. That is the advantage
of your sketching out a long-term carbon budget with a
declining cap, and since there will be long-term continuity,
there won't be that problem of the program coming to an end or
appearing to come to an end and people having doubt about what
the allowances are worth.
Mr. Markey. There is very little likelihood of the European
program coming to an end either.
Let me go to you, Mr. Kovacs. Some of the members on the
Chamber board, Duke Energy, Alcoa, testified before this
committee earlier this week, and while your board represents a
broad coalition, it appears that many and possibly most of your
members support a domestic policy that would set goals and the
means for reducing the overall levels of U.S. global warming
pollution. How do you reconcile the Chamber's position with
those of some of the firms that sit on the Chamber board who
are testifying before our committee asking us to pass a cap-
and-trade bill?
Mr. Kovacs. I guess I thought you would never ask. Look,
within our federation, we have roughly about 3.5 million
members, 3,000 state and local chambers and 1,000 trade
associations. That is an enormous difference, so when we
analyze a bill like yours, for example, and there was an
example I used today, let us just take the application of the
new source performance review. You have one group which is
relatively small in numbers, 30, that would sit there and
literally be exempt from the new source performance review
because of the caps. Then you have the second tier, you know,
thousands of members that would be subject to it, and then you
have the 26 million small businesses out there that in some way
have no idea whether they are going to be subject or not but
could be challenged, and every one would be hit by an
attorney's fee, so what we tried to do is, we take the entire
policy. We apply our principles to what it is you are trying to
do and we make a determination of whether or not it meets those
principles, which are, does it harm the economy, does it
promote competitiveness, does it accelerate technology, do we
have enough energy in the environment and how is it going to
affect the international structure, and that is how we do it.
Mr. Markey. Is the Chamber willing to come forward with
proposals that tell us what they would be comfortable with as
the regulatory scheme?
Mr. Kovacs. I thought you would never ask. We actually had
a debate on this issue today, 3 hours, where we had the
proponents of a carbon tax, the proponents of a cap and trade
representing U.S. CAP and we had quite a spirited discussion,
and you know, frankly, it was probably the most optimistic
discussion I have had. I don't know that I am free to tell you
the results but there certainly was a lot of talk and a lot of
willingness to find out how it is we get reductions in a way
that helps the economy.
Mr. Markey. And your statement that Congress should not
mandate the use of technologies before they actually exist, we
don't have any mandates for any specific technologies in the
legislation so I am just wondering what you are referring to.
Mr. Kovacs. I will give you an example. Probably the
biggest issue that we care about is that we don't think you can
get enough energy back in the system as a substitute for what
you are going to take out. I will give you an example, clean
coal, the Bard facility in Ohio. Here was an example where they
went through the DOE loan guarantee process. They literally got
all of their permits. They were about to break ground and then
they were notified by several environmental groups that they
were going to sue. DOE then decided that the risk of that
lawsuit was so great, they were going to pull the loan
guarantees. This is clean coal, and so what happened is, the
company walked away from the project, and if that was the only
project, we probably wouldn't care but we have right now
looked, and we have only been doing this a month, we have got
about 300. I mean, there are other, it is not just energy. The
other day we had a presentation on cell towers and someone said
well, there are 800 on hold because of this. This is a big
issue and we have to deal with it, and we got a lot of
cooperation in the stimulus plan when we started off, how do we
move this through. We wanted a time limit, and Senator Boxer
and Senator Barrasso finally came to an agreement that we would
use the most expedited route. But this is an issue that I think
if you can solve and start making us feel like we are going to
have real energy in this country and it is not going to get
stopped, you are going to then find that some of our major
concerns are really starting to be addressed.
Mr. Markey. Again, we are not mandating any particular
technology in the legislation, but I would say this to you in
terms of kind of an extension of the optimistic meeting that
you had today. Were you in two places at once or how did that
work today for you?
Mr. Kovacs. That was from 8:30 to 12. I am not closing in
on the number of years of hearings that you have had.
Mr. Markey. No, what I am saying is, I thought that you
might be, you know, ubiquitous and omniscient, like super
Chamber of Commerce. In 2008, there were about 9,500 new
megawatts of natural gas capacity installed in the United
States. There was about 1,500 new megawatts of coal installed
in the United States. But the really, I think, kind of ``O.
Henry ending'' to this is that while there was no new nuclear,
there hasn't been for 15 years and there won't be for another
10 years because it takes that long to build a new plant, there
were 8,500 new megawatts of wind installed in the United States
in 2008, 400 new megawatts of solar, 150 new megawatts of
geothermal and 100 new megawatts of biomass, so that is 9,000,
more than 9,000 new megawatts from renewables. In other words,
45 percent of all new installed capacity in the United States
in 2008 were renewables, and that is before we pass a national
renewable electricity standard. That is before we build
incentives for a low-carbon economy. So while we are not
mandating any specific new technology, it is obvious that the
technologies are there and would be improved as the economies
of scale kicked in as the market grew larger and larger. So I
am a little bit perhaps more of an optimist because of my own
experience with the 1996 Telecommunications Act, which I
introduced in 1993 before this committee. After it finally
passed in 1996, we went from a point where not one home in
America had broadband in 1996, not one home, to a point where
10 years later there is a whole new vocabulary, YouTube,
Google, eBay, Amazon, Hulu, thousands of companies, millions of
new jobs. They didn't exist because the market wasn't there
before 1996 for broadband. It was all narrowband.
So here we are talking about the same kind of a situation
where there was an equivalent copper wire that we just had to
move to digital, we had to move to broadband, we had to move to
fiber optic. Well, we have another copper wire for electricity
in America and it really hasn't been improved upon, and I agree
with the chairman when he says, you know, we might go back 70,
80 years and the truth is that Thomas Alva Edison would
recognize our electricity grid if he came back today. We need a
revolution. But I think that the problem that I have with the
Chamber is that the Chamber opposed the Telecom Act of 1996,
and it was basically making the same arguments, you know, how
do you move from a black rotary dial phone to a world where
everyone has got devices in their pockets and you have all
these new, you know, companies that are going to be created,
and so you are right, it does take a little bit of a leap but a
leap based upon our own American experience with technology and
the entrepreneurial spirit. So my hope is that the meeting that
you had today will lead to a more optimistic view about what
the private sector can do when a new marketplace is created and
unleash the opportunities for thousands of companies that will
be created, that will create a whole new vocabulary 10 years
from now when people look back at this antiquated energy system
which we have. And by the way, I would include in that a carbon
capture system that probably won't look anything like anyone is
talking about today and probably involves enzymes and acetic
acids that are reformulating the way in which coal is burned
and turning it into a positive product. But we have got to get
on with that business, Mr. Kovacs, and I really urge the
Chamber to just look back at its own history, especially with
the Telecommunications Act and opposing that.
Mr. Kovacs. Do you want me to respond?
Mr. Markey. Yes, please.
Mr. Kovacs. On the telecom issue, first of all, I wasn't
there but my recollection is, especially as it had gone into
broadband, is that they didn't want regulation on it because
the wire system as being a regulated system was drying up and
they needed a non-regulated system to put in $150 billion in
investment. Here in this Act, all I am trying to say is, you
have got a structure here which layers cap and trade in two
capacities, then you have regulations, then you have
litigation. What I am saying is, is that I don't know that that
structure will work, and the fact that you have 8,500 new
megawatts of wind capacity, that is wonderful. What we are
saying is, to get to the 10 percent you need 115,000. That is a
long leap and it is a lot of land mass and it is a lot of
litigation and----
Mr. Markey. Can I say this? It is really not a big leap if
you just take us from now to 2025 and you add just--well, it is
actually nine total and just go nine times 15 years or 16
years, we have got the number. That is if we don't do any
better between now and 2025 if we just keep the pace that we
are right now before we pass a national law. So all I am saying
to you, Mr. Kovacs, it is such a rear-view-mirror view of what
technology can accomplish. You know, if we look out the
windshield towards the future, just using 2008 as the metric,
we wind up doing it, creating the jobs here and just
revolutionizing our Nation's relationship with imported oil and
with greenhouse gases. So that is really I am--in a lot of
ways, you know, we do need the Chamber of Commerce to look at
this and to look at it optimistically and to realize that the
benefits will flow right across the whole society.
And I will just give you one other example and I won't hold
you beyond that. I am going to ask each one of you to give us
in 30 seconds what you want us to remember about your
testimony. But here when I was the chairman, we moved over 200
megahertz of spectrum in 1993. Why did we do that? We took it
from the defense department, we gave it over to the Department
of Commerce because there were only two cell phone companies in
the United States. They were both analog. They were both
charging 50 cents a minute. They both projected relatively
limited American use of cell phones. Obviously at 50 cents a
minute there weren't a lot of people going to be carrying that
around in their pocket. So what we did was, we moved over the
spectrum but said for the third, fourth, fifth and sixth
license in every marketplace from Philadelphia to Las Vegas,
they couldn't be owned by the first two companies. Well, guess
what the third, fourth, fifth and sixth companies did? They
went digital. By 1995, their price was under 10 cents a minute
and the first two companies, guess what? They both had to go
digital and they were both under 10 cents a minute and then it
was a race on to see can we put pictures on that phone, can we
put data on that phone, can we have a huge basket of minutes,
and here we are today all walking around, everyone in this
room, with one or two devices in their pocket, none of it
possible before that.
So I guess what I am saying to you and really I would say
to everybody who is interested in this issue, is that with just
a little bit of optimism, not looking at some rocket science or
putting a man on the moon but just what is already happening in
America. If we gave the right boost to it, we could have this
revolution just so far exceed anything that we are even talking
about today. That is what happened in the telecommunications
sector, both wireless and wireline, and I think if we give
people a chance in a new marketplace that the same thing will
happen, Mr. Kovacs. So that is my message and I just hope that
it is received in the Darwinian, paranoia-inducing, market-
oriented way that we are going to try to construct this bill
and put in the right market protections, transparency, anti-
fraud, anti-manipulation and then just step back the way we did
after 1996 and we don't know who the winners and losers are
going to be. We don't know if there is going to be a NYNEX or a
Bell Atlantic or a Bell South. All we know is that the
companies that win will be the ones that adapt quickly and that
is how it should be in our country, really Darwinian, and in a
lot of ways, I hate to say it, that is what we are talking
about for our planet too. It is a real challenge for us in this
Darwinian moment that we can adapt so that we can put in place
the incentives that make people rich while also protecting the
planet.
So we will come back to you, Ms. Nelson, and we will give
you an opportunity for 30 seconds to tell us what it is that
you want us to remember.
Ms. Nelson. Thank you, sir. You deserve the endurance
prize. I am grateful for your interest. My message is simple.
Help States like Wisconsin mitigate costs without compromising
the integrity of the emission reduction goal and we will be
your partner in finding a climate change solution.
Mr. Markey. Thank you, Ms. Nelson.
Mr. Becker.
Mr. Becker. Thank you. I have three points to make. The
first is that you and Congressman Waxman and others who worked
on this bill should be very proud of your efforts. It is a very
good bill. The second point is, as you know full well, this was
a compromise and yet this will be probably be the high water
mark before this gets signed into law. It is going to undergo
significant change and it is going to get weaker. And the third
point is, in light of that, it is very important that you
strengthen the federal, State and local partnerships and
preserve the rights of States and localities to not only fill
whatever gaps exist but to be able to address emerging problems
in the future.
Mr. Markey. Thank you, Mr. Becker.
Mr. Royal.
Mr. Royal. I will be very brief. In a cap-and-trade market,
it is essential that Congress create a regulatory framework
that protects the integrity of the market and ensures that the
market achieve its environmental purpose.
Mr. Markey. Thank you, Mr. Royal.
Mr. Anda.
Mr. Anda. Three technical comments and one other. Increase
the initial flow, think about a central marketplace to get your
best execution requirement, the CLOB for carbon I talked about,
and make sure that emitters can use the exchange-traded
derivatives that you want to create. Lastly, I would just say I
heard a lot of testimony today. Chairman Markey, I hope that
you are in a position as Mr. Gore was this morning to be a
witness. Your comments are great. I think they should be--I
would like to see them expanded in a nice half-hour, hour
format and good luck to you in your work.
Mr. Markey. Thank you, Mr. Anda, very much.
Mr. Doniger.
Mr. Doniger. Thank you, Mr. Chairman. What this committee
is doing is writing the next generation of the Clean Air Act
and we have the existing Clean Air Act and what you are doing.
We need them both and we need these things to merge and it can
be done in a way that makes for an effective carbon control
program and an integrated system that takes advantage of the
best of the clean air laws that we have already.
Mr. Markey. Thank you.
Ms. Mulroy.
Ms. Mulroy. Yes, Mr. Chairman. We in the water industry,
many of us have been anxiously awaiting this day where we in
this country take this issue of climate change head on and
begin to make the necessary changes for us. Because it is a
decadal issue, we will feel the impacts and we are looking for
assistance for research which is so desperately needed to
quantify those implications and in making the necessary
adaptations that we have to make. Thank you.
Mr. Markey. Thank you.
Dr. Smith.
Ms. Smith. Two points. First, get back to cost minimization
by stripping out the prescriptive and redundant measures so
that that market-based approach can work in its Darwinian
glory, and by incorporating features that provide price
predictability so that you can unleash those investments.
Second, I would like to correct the record. The prices in the
E.U. did go up in the range of $40 a ton twice, once during the
early phase and the second time just about a year ago. So it is
not just a phenomenon of the learning phase. Thank you.
Mr. Markey. Thank you, Dr. Smith.
And Mr. Kovacs, you have the final word of our historic
hearings.
Mr. Kovacs. Well, thank you for your good humor, if nothing
else. I just wanted to say the success of broadband was really
due a lot to what you did but also you didn't regulate it and I
think that that is something we need. I am not saying we
shouldn't have a regulatory system here but if you are going to
do it, it needs to be transparent, understandable. You need to
avoid overlapping and confusing regulatory structures between
the Clean Air Act and whatever it is you are going to do. You
need to find some way to limit litigation so we can get the
projects moving, and I think at the end you need to appreciate
the fact that if we are really going to reduce GHGs in the
atmosphere, we have to have some way in which to engage the
international community and we would suggest that the way to do
that is an international treaty.
Mr. Markey. Thank you, Mr. Kovacs, very much. The paradox
of telecommunications regulation and regulation here is that
you actually need new regulations in order to undo all of the
old regulations that protected industries against change and
that is the paradox, that in order to create a truly
competitive marketplace that just doesn't play into the needs
of the largest utilities whether they be telephone, cable or
electric utilities because all of the laws have been written on
their behalf at the state and federal level for 100 years. You
actually have to create a whole new set of laws, of regulations
that ensure that the smaller distributed competitors can then
begin to deploy their technologies. That is the paradox. But
ultimately you wind up with many, many more, thousands of
additional competitors trying to provide information services
or here they will be energy and efficiency services for our
country. And so that is kind of the paradox here, and while it
seems as though we are regulating, what we are really doing is
undoing the regulatory protection that was given to these
industries for 100 years while the assumption of monopoly on
the wires was taken for granted when in fact it is just the
opposite if you change the regulatory dynamic. So that is what
we are trying to do in this legislation. We have already done
it in telecommunications. We have done it in cable. And this is
the final wire going into the home. This is the final set of
issues that we have to deal with across the board, and if we do
it, then we can get out of the way because people's interests
in becoming millionaires and billionaires will completely trump
anything that we can do because they will be out turning green
into gold all across our country with their new technologies
and their deployment.
This has been a historic set of hearings. We thank all of
you for your participation, and please stay close to us over
the next month or so. We are going to need your ongoing advice.
Thank you.
[Whereupon, at 5:50 p.m., the subcommittee was adjourned.]
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