[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
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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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    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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    [GRAPHIC] [TIFF OMITTED] T2878A.057
    
    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:]

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    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:]

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    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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