[Senate Hearing 111-959]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 111-959

                      CLIMATE CHANGE LEGISLATION: 
                     CONSIDERATIONS FOR FUTURE JOBS

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 10, 2009

                               __________



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                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West         CHUCK GRASSLEY, Iowa
Virginia                             ORRIN G. HATCH, Utah
KENT CONRAD, North Dakota            OLYMPIA J. SNOWE, Maine
JEFF BINGAMAN, New Mexico            JON KYL, Arizona
JOHN F. KERRY, Massachusetts         JIM BUNNING, Kentucky
BLANCHE L. LINCOLN, Arkansas         MIKE CRAPO, Idaho
RON WYDEN, Oregon                    PAT ROBERTS, Kansas
CHARLES E. SCHUMER, New York         JOHN ENSIGN, Nevada
DEBBIE STABENOW, Michigan            MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHN CORNYN, Texas
BILL NELSON, Florida
ROBERT MENENDEZ, New Jersey
THOMAS R. CARPER, Delaware

                    Russell Sullivan, Staff Director

        Kolan Davis, Republican Staff Director and Chief Counsel

                                  (ii)
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman, 
  Committee on Finance...........................................     1
Grassley, Hon. Chuck, a U.S. Senator from Iowa...................     3

                               WITNESSES

Breehey, Abraham, director, legislative affairs, International 
  Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths, 
  Forgers, and Helpers, Department of Government Affairs, 
  Fairfax, VA....................................................     4
Berrigan, Carol, director, industry infrastructure, Nuclear 
  Energy Institute, Washington, DC...............................     6
Green, Dr. Kenneth P., resident scholar, American Enterprise 
  Institute for Public Policy Research, Washington, DC...........     9
Thorning, Dr. Margo, senior vice president and chief economist, 
  American Council for Capital Formation, Washington, DC.........    10
Ton-Quinlivan, Van, director, workforce development and strategic 
  programs, Pacific Gas and Electric Company, San Francisco, CA..    12

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    35
Berrigan, Carol:
    Testimony....................................................     6
    Prepared statement...........................................    37
    Responses to questions from committee members, with 
      attachments................................................    44
Breehey, Abraham:
    Testimony....................................................     4
    Prepared statement with attachment...........................    69
    Responses to questions from committee members................    96
Grassley, Hon. Chuck:
    Opening statement............................................     3
    Prepared statement...........................................   103
Green, Dr. Kenneth P.:
    Testimony....................................................     9
    Prepared statement with attachments..........................   105
    Responses to questions from committee members................   142
Hatch, Hon. Orrin G.:
    Prepared statement of Americans for Tax Reform...............   152
Kerry, Hon. John F.:
    ``Falling Behind on Green Tech,'' Washington Post article by 
      John Doerr and Jeff Immelt, August 3, 2009.................   157
Thorning, Dr. Margo:
    Testimony....................................................    10
    Prepared statement...........................................   159
    Responses to questions from committee members................   169
Ton-Quinlivan, Van:
    Testimony....................................................    12
    Prepared statement...........................................   183
    Responses to questions from committee members................   191

                             Communications

American Petroleum Institute.....................................   197
Association of American Universities and Association of Public 
  and Land-grant Universities....................................   200
Kammen, Daniel M.................................................   203

 
       CLIMATE CHANGE LEGISLATION: CONSIDERATIONS FOR FUTURE JOBS

                              ----------                              


                       TUESDAY, NOVEMBER 10, 2009

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:15 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max 
Baucus (chairman of the committee) presiding.
    Present: Senators Kerry, Stabenow, Cantwell, Carper, 
Grassley, Hatch, and Roberts.
    Also present: Democratic Staff: Bill Dauster, Deputy Staff 
Director and General Counsel; Thomas Reeder, Senior Benefits 
Counsel; Cathy Koch, Chief Tax Counsel; Pat Bousliman, Natural 
Resource Advisor; and Ryan Abraham, Professional Staff. 
Republican Staff: James Lyons, Tax Counsel.

   OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM 
            MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. The hearing will come to order.
    In 1971, the noted economist and Harvard dean Edward Mason 
said: ``There seems to be no reason to believe . . . that the 
employment-creating effects of restoring the environment will 
be any less than those involved in polluting the environment.'' 
It seems that the debate over jobs and the environment has been 
around about as long as we have had either jobs or an 
environment.
    Today, we will consider whether climate legislation will 
create jobs in the energy sector. We will examine further this 
committee's role in climate legislation. And we will discuss 
what we can do to both create jobs and to ease the transition 
to an economy that accounts for the cost of carbon dioxide.
    I am committed to passing meaningful, balanced climate 
change legislation. I am committed to legislation that will 
protect our land and those whose livelihood depends on it. I 
want our children and grandchildren to be able to enjoy the 
outdoors the way we can today. So I am going to work to pass 
climate change legislation that is both meaningful and can 
muster enough votes to become law.
    Today, we will hear predictions--some optimistic, some 
otherwise--about the effects that climate legislation will have 
on American jobs and the American economy. We need to consider 
these predictions, but we also need to consider the 
consequences of failing to act.
    We can already see some of these consequences in my home 
State of Montana. We can see the consequences in forests near 
my hometown of Helena, destroyed by pine beetles that thrive in 
warmer temperatures. We can see the consequences in sustained 
drought and more frequent wildfires, and hotter wildfires, I 
might add. We can see the consequences in decreased snowpack 
and lower stream flows, reducing water for irrigated 
agriculture and starving out our blue-ribbon trout streams of 
cold water--which I might add are a huge tourist attraction for 
our State's economy. These are serious consequences, and I 
believe that we can mitigate their effects in a way that does 
not harm the economy.
    History is instructive. As a senior Senator on the 
Environment and Public Works Committee, I wrote much of the 
bill that became known as the Clean Air Act Amendments of 1990. 
That legislation established a cap-and-trade system to curb 
sulfur dioxide emissions and nitric oxides, as well. It helped 
to combat acid rain.
    During the debate on that bill, several industry studies 
made dire predictions about the effects of the legislation on 
the economy. Even studies from the Environmental Protection 
Agency estimated the annual costs at between $2.7 and $4 
billion a year. And, during that debate, there were also dire 
predictions about job losses. In 1990, the EPA predicted that 
between 13,000 and 16,000 coal mining jobs would be lost as a 
result of the Acid Rain Program.
    But a decade later, an EPA analysis determined that the 
cost of cutting emissions was far lower than they had expected. 
Reaching the sulfur dioxide goals set by the 1990 Amendments 
cost an estimated $1 to $2 billon a year, less than half the 
original estimate.
    EPA found that job loss was about one-fourth of what was 
predicted, and about 95 percent of the job loss that did occur 
was due to productivity gains in the industry. Very few jobs 
were lost due to the Acid Rain Program itself.
    Let me be clear. We should work to minimize any job loss, 
but we should recognize that, in the case of acid rain, the 
negative consequences were far less than projected. We should 
keep this in mind when similar claims are made about the 
effects of legislation to address climate change. And we should 
recognize that the Bush administration noted how cost-effective 
the Acid Rain Program was. The Bush administration found that 
its benefits exceeded its costs by more than 40-to-1.
    To be fair, the scope of climate change legislation is far 
broader than acid rain. And while we must always be mindful of 
the cost of legislation--that is particularly true in today's 
economy--our unemployment rate remains far too high. And it is 
estimated to stay high for a good time yet, not come down soon. 
And we must be diligent to create jobs, including in the energy 
sector. Again, we can point to some successes.
    In recent years, Congress has extended and modified the tax 
credit for production of power from renewable resources, such 
as wind and biomass. With that credit, wind turbine and turbine 
component manufacturers announced, added, or expanded more than 
70 facilities in the United States in 2007 and 2008. These 
facilities, when fully online, will represent 13,000 new direct 
jobs.
    I am also very interested in a new incentive that we wrote 
earlier this year, a 30-percent credit for advanced energy 
manufacturing. We passed this credit to spur domestic 
production of clean energy development. I will be keeping a 
close eye on implementation of this credit, both in terms of 
energy independence and for creating jobs.
    I look forward to hearing our witnesses' views. I look 
forward to further consideration of these issues in the Finance 
Committee, and I very much look forward to our efforts to 
protect both jobs and our environment.
    I will be asking some questions. Some of them will be along 
the lines of a devil's advocate, pressing witnesses to see what 
is up, what is real, what is not.
    I will now turn to Senator Grassley.

           OPENING STATEMENT OF HON. CHUCK GRASSLEY,
                    A U.S. SENATOR FROM IOWA

    Senator Grassley. Thank you, Mr. Chairman.
    It is the responsibility of Congress to weigh the costs and 
benefits of every policy decision it makes, and the bigger the 
issue, the more important it becomes.
    The Environment and Public Works Committee is the place for 
a detailed examination of the purported environmental benefits 
of any climate change proposal, and that is an important part 
of the equation. This committee's expertise is in the costs and 
economic impacts of new taxes. It, therefore, has the relevant 
expertise to evaluate the costs associated with climate change 
legislation.
    Today's hearing, about the impact of climate change on 
jobs, builds on lessons this committee has learned from past 
hearings. Last year, then-Congressional Budget Office Director 
Peter Orszag testified that, under a cap-and-trade system, 
prices for energy would necessarily increase. ``Skyrocket'' is 
the term that President Obama has used about price increases. 
Dr. Orszag explained, ``Such price increases would stem from 
the restriction on emissions and would occur regardless of 
whether the government sold emission allowances or gave them 
away. Indeed, the price increases would be essential to the 
success of a cap-and-trade program. . . .''
    Both he and Robert Greenstein of the Center for Budget and 
Policy Priorities also testified that the impact of those price 
increases would fall most severely on the lowest-income 
Americans.
    Some have tried to claim that cap and trade would somehow 
make enough money through auctioning allowances to cover 
increased costs to American families, but this ignores the fact 
that this money will be taken from the American people in the 
first place.
    The current Director of CBO, Doug Elmendorf, addressed this 
issue when he testified before the committee in May of this 
year. In response to written questions, he made clear that 
``the allowances that are created under a cap-and-trade program 
do not add wealth to the economy. Rather, they are 
simultaneously a cost and a source of income.'' He also went on 
to make it very clear that the value of allowances would ``. . 
. inevitably fall short of the total economic effects of the 
policy. . . .'' In other words, there is no free lunch with 
this issue.
    At the same hearing, Dr. Elmendorf testified that ``by 
channeling productive resources toward reducing (the risk of 
damages from climate change) rather than toward producing goods 
and services that are measured in gross domestic product, such 
policies would be likely to reduce GDP relative to what 
otherwise would occur.''
    In testimony just last month before the Energy and Natural 
Resources Committee, he confirmed that economic productivity 
and jobs would be lost as a result of the House-passed cap-and-
trade bill. Despite this, the more stringent Senate version of 
this legislation is incredibly entitled the ``Clean Energy Jobs 
and American Power Act.''
    Like any government regulation, there will inevitably be 
winners and losers, and we will be hearing about that in 
today's hearing. That is why this hearing is so very important. 
However, an honest cost-benefit assessment requires that we 
first stop trying to sell this policy as if it will have no 
cost for Americans, and accept the basic economic principle 
that there is no such thing as a free lunch.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Grassley.
    Now, I would like to introduce our panel. The first witness 
is Abraham Breehey, who is the director of legislative affairs 
for the International Brotherhood of Boilermakers, Iron 
Shipbuilders, Blacksmiths, Forgers, and Helpers.
    Next is Carol Berrigan, director of industry infrastructure 
at the Nuclear Energy Institute.
    Third is Dr. Kenneth Green, resident scholar at the 
American Enterprise Institute for Public Policy Research.
    Then, Dr. Margo Thorning, senior vice president and chief 
economist with the American Council for Capital Formation.
    And, finally, we have Van Ton-Quinlivan. Is that right?
    Ms. Ton-Quinlivan. Yes, sir.
    The Chairman. Good.
    Director of workforce development and strategic programs, 
Pacific Gas and Electric Company.
    All right. Mr. Breehey, you are first.

 STATEMENT OF ABRAHAM BREEHEY, DIRECTOR, LEGISLATIVE AFFAIRS, 
 INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIPBUILDERS, 
  BLACKSMITHS, FORGERS, AND HELPERS, DEPARTMENT OF GOVERNMENT 
                      AFFAIRS, FAIRFAX, VA

    Mr. Breehey. Chairman Baucus, Senator Grassley, and members 
of the committee, my name is Abraham Breehey, and I am the 
director of legislative affairs for the International 
Brotherhood of Boilermakers. On behalf of the members of my 
union, thank you very much for the opportunity to testify here 
today.
    The members of the Boilermakers Union will be among those 
workers on the front lines of our Nation's transition to a 
clean energy, low-carbon economy. We recognize that it will not 
be easy, but it is essential that the United States not wait to 
begin the important work of reducing emissions that cause 
climate change.
    If Congress moves forward with a comprehensive cap-and-
trade program, the demand for climate solutions will create job 
opportunities across the economy. We can put American ingenuity 
and skills to work reducing emissions and turn the jobs union 
members do every day into the environmental solutions our 
Nation needs.
    The lack of a comprehensive policy on global warming and 
the uncertainty associated with the future regulation of 
greenhouse gases is delaying the creation of job opportunities. 
Waiting to provide investors, regulated entities, and 
entrepreneurs the market signals that will reward innovation 
only gives America's competitors a head start in the clean 
energy race.
    The Senate must demonstrate bipartisan leadership and 
develop the kind of policies that will provide certainty, 
control costs, and encourage job-creating investments. We must 
not miss an opportunity to make the United States the leader in 
advanced coal technology development, an undertaking that is 
essential to meeting any significant global effort to reduce 
emissions.
    We greatly prefer effective, balanced legislation to 
regulation of greenhouse gases under the Clean Air Act. 
Legislation would more effectively balance regional, 
environmental, and economic concerns, while providing the 
necessary incentives for technology deployment that will create 
jobs.
    The development and deployment of carbon capture and 
storage technology at power plants and industrial facilities is 
among the technological breakthroughs that could reduce our 
Nation's carbon footprint and create job opportunities for 
American workers. The level of investment, both Federal and 
private, necessary to ensure that widespread commercialization 
of CCS happens is highly unlikely in the absence of 
comprehensive clean energy legislation.
    We appreciate Chairman Baucus, Senator Carper, and the 
other Senators involved, for their work in the development of 
the provisions of S. 1733, designed to encourage early and 
widespread deployment of CCS at coal plants. The construction 
of coal-based generation facilities and CCS technology is 
tremendously labor-
intensive. The National Commission on Energy Policy recently 
issued a report from its Task Force on America's Future Energy 
Jobs.
    This task force included representatives of organized 
labor, industry, and the academic community. The task force 
relied, in part, on job data provided by Bechtel Power 
Corporation to estimate the labor needs associated with the 
construction of new, clean energy generation infrastructure. 
The estimates for alternative generation technologies indicate 
that coal-based CCS and nuclear power generation options have 
the highest job creation potential relative to other supply 
options, such as natural gas.
    Based on Bechtel's analysis, the development and 
construction phase of deploying a normalized 1 gigawatt of 
power generated by an Integrated Gasification Combined Cycle 
coal plant equipped with CCS would employ over 2,700 salaried 
workers and an hourly workforce of over 8,000 skilled workers. 
CCS development and deployment represents tremendous employment 
opportunities for the members of my union and other workers in 
the building trades. Early deployment and bonus allowance 
programs for CCS, included in the comprehensive climate 
legislation, will be a tremendous driver for job creation in 
our economy.
    However, good jobs will not necessarily be created by any 
climate legislation without the inclusion of fair, enforceable 
labor standards. The application of wage standards to the 
deployment of energy infrastructure will ensure that the 
benefits of Federal investment are extended not just to 
developers and businesses, but to the people whose skills are 
necessary to make this transition happen.
    For example, under the Clean Energy Jobs and American Power 
Act of 2009, workers employed on projects assisted or 
incentivized through allowance allocations will be assured wage 
rates no less than those prevailing in their local community. 
Ensuring these high standards for both workers and contractors 
will be particularly important when applied to new, highly 
technical construction projects, such as CCS.
    While comprehensive climate legislation that establishes a 
declining cap on carbon will lead to the creation of new 
employment opportunities, Congress must also act to mitigate 
adverse employment impacts. Climate policy must not undermine 
the competitiveness of U.S. manufacturers in the global 
marketplace. An adequate allocation of allowances to an output-
based rebate program for 
energy-intensive trade-exposed industries will ensure that the 
migration of jobs and pollution to countries that fail to act 
does not undermine the goals of domestic action. It is also 
important that the Senate include a strong, yet fair, border 
measure to prevent so-called carbon leakage.
    In addition, it was deeply disconcerting to learn, this 
week, that Federal clean energy investments made through the 
Recovery Act have been used for projects that generate jobs in 
China and not in the United States. As was widely reported, a 
Texas wind farm project that will rely exclusively on wind 
turbines manufactured in China has applied for financial 
assistance from the U.S. Department of Energy. It will be 
American workers and American taxpayers making the sacrifices 
to reduce emissions. It must also be American workers who 
benefit from the job creation opportunities these climate 
solutions create.
    There are new opportunities for American workers, not just 
in the final construction jobs, but throughout the supply 
chains of clean energy technology.
    I want to close just by reiterating the enormous potential 
we believe is available to put people to work building the 
climate solutions we need. This includes energy efficiency 
through building retrofits, CCS, and countless other 
innovations, but the work does not start until Congress 
provides the rules of the road and the right incentives. The 
time to act is now. We can make our economy more efficient, 
more energy independent and provide the low-carbon jobs we need 
for long-term, sustainable economic growth.
    Again, I want to thank the committee for the important work 
you are doing and the opportunity to express our views.
    The Chairman. Thank you, Mr. Breehey.
    [The prepared statement of Mr. Breehey appears in the 
appendix.]
    The Chairman. Ms. Berrigan?

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

    Ms. Berrigan. Chairman Baucus, Ranking Member Grassley, and 
members of the committee, I appreciate this opportunity to 
express the nuclear industry's views on future jobs under 
climate legislation. I am Carol Berrigan, senior director of 
industry infrastructure at the Nuclear Energy Institute.
    Let me begin by thanking members of this committee for your 
long-standing oversight of the Nation's fiscal affairs and for 
your support of legislation, like the production tax credit for 
new nuclear generation as passed in EPAct 2005, and the tax 
credit for manufacturing clean energy technologies afforded 
under the American Recovery and Reinvestment Act this year.
    Both of these programs are important initial steps towards 
the financial incentives necessary to accelerate the deployment 
of nuclear energy generation and rebuild the Nation's 
manufacturing infrastructure.
    Today, the 104 operating reactors in the United States 
produce one-fifth of America's electricity. U.S. utilities are 
preparing to build advanced-design nuclear power plants to meet 
our Nation's growing electricity demand. Currently, 13 
applications for 22 reactors are under active review by the 
Nuclear Regulatory Commission. Over $4 billion has been spent 
on new plant development over the past few years, and the 
industry plans to invest approximately $8 billion in the next 
few years to be in a position to start construction of the 
first nuclear reactors in the 2011 to 2012 time frame.
    Nuclear energy represents more than 72 percent of the 
Nation's emission-free generation portfolio, avoiding nearly 
700 million metric tons of carbon dioxide per year. This is the 
equivalent of removing 133 million of the 136 million passenger 
cars from our roads.
    As Congress and the administration consider climate 
legislation, mainstream analyses show that reducing carbon 
emissions will require a portfolio of technologies, and that 
nuclear energy must be part of that portfolio. Further, they 
indicate that the major expansion of nuclear generating 
capacity over the next 30 to 50 years is essential.
    Nuclear energy can have a significant, positive impact on 
the workforce and manufacturing base that arises from current 
plants, new plants, and the supply chain. Each current nuclear 
unit in operation today directly employs 400 to 700 people. In 
addition to direct employment, the industry relies on numerous 
vendors and specialty contractors for additional expertise and 
services. Over 30 million man-hours are worked by supplemental 
craft labor each year.
    In addition to payroll spending, nuclear companies procured 
over $14 billion in materials, fuel, and services from over 
22,500 domestic suppliers last year. While only 31 States have 
nuclear power plants, nuclear procurement takes place in all 50 
States, with an average of $277 million of procurement 
occurring per State. In several States, this procurement is in 
excess of $1 billion.
    The resurgence of nuclear energy will lead to increasing 
demand for skilled labor at all levels. In addition to 
producing carbon-free electricity, construction of new nuclear 
power plants will create tens of thousands of jobs. According 
to a recent analysis by the National Commission on Energy 
Policy, the development of a nuclear power plant project will 
require 14,360 man-years per gigawatt installed.
    A robust nuclear construction program will also 
significantly expand the U.S. manufacturing sector and the 
domestic nuclear supply chain. The nuclear supply chain 
represents a major opportunity for American manufacturers to 
expand capacity to meet the needs of a growing world nuclear-
power market. Today, there are 53 nuclear power plants under 
construction around the world. In addition, there are 137 
plants on order or planned, and 295 projects under 
consideration.
    Thanks to the increasing world demand for new nuclear 
reactors, American companies have an unprecedented opportunity 
to expand the nuclear manufacturing base and open new 
international markets. In the process, nuclear suppliers can 
contribute substantially to job creation, economic development, 
and the reduction of greenhouse gas emissions. A program to 
expand nuclear energy, to meet U.S. climate change goals, will 
require a sustained partnership between Federal and State 
governments and the private sector.
    Financing is the single largest challenge to accelerated 
deployment of new nuclear power plants. An effective, long-term 
financing platform is necessary to ensure deployment of clean 
energy technologies in the numbers required, and to accelerate 
the flow of private capital.
    Federal tax stimulus is also an important element that 
would accelerate capital investment in new nuclear power 
plants. Tax incentives could also help refill the pipeline of 
highly trained personnel to build, operate, and maintain new 
plants, and restore America's ability to manufacture the 
components and other equipment that go into nuclear plants in 
the U.S. and abroad, thereby creating additional jobs.
    To provide the level of financial stimulus necessary, we 
encourage you to create a permanent financing platform to 
provide loans, loan guarantees, and other credit support to 
clean energy technologies, including new nuclear power plants 
and new nuclear equipment manufacturing facilities; provide tax 
stimulus for investment in new nuclear power plants, new 
nuclear-related manufacturing and workforce development; and 
expand the existing production tax credit provided by the 2005 
Energy Policy Act.
    Mr. Chairman, in conclusion, the role of nuclear energy in 
achieving the Nation's climate goals is clearly established. 
The expansion of nuclear energy in the U.S. and globally 
provides significant opportunities for American workers and 
industry, increasing high-wage employment and significantly 
expanding our domestic manufacturing sector.
    I encourage you and this committee to continue your legacy 
of leadership on these issues and promote legislation that 
would provide the necessary financial stimulus to realize these 
goals.
    Thank you.
    The Chairman. Thank you, Ms. Berrigan.
    [The prepared statement of Ms. Berrigan appears in the 
appendix.]
    The Chairman. Dr. Green?

 STATEMENT OF DR. KENNETH P. GREEN, RESIDENT SCHOLAR, AMERICAN 
ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH, WASHINGTON, DC

    Dr. Green. Chairman Baucus, Senator Grassley, and members 
of the committee, thank you for inviting me to testify today on 
this timely and important topic.
    I am Kenneth Green, a resident scholar at the American 
Enterprise Institute. I am an environmental scientist by 
training, a policy analyst by avocation, and an economist by 
exposure.
    I have submitted for the record two AEI policy studies on 
the issues before us today, which are part of the research base 
underlying what I am about to say.
    I have spent the last 15 years analyzing public policy at 
think tanks in both the United States and Canada, with an 
emphasis on air pollution, climate change, and energy policy. 
Specifically, I have studied market-based mechanisms for 
dealing with pollution problems of all sorts, and have studied 
cap and trade as it has made its appearance in conventional air 
pollution control, acid rain mitigation, and now, in greenhouse 
gas control.
    What I can tell you, based on my research, is this: cap and 
trade, the core of greenhouse gas control legislation today, is 
an inappropriate policy tool for the control of greenhouse 
gases that will cause significant economic harm, will kill 
export jobs, and produce little or no environmental benefit.
    Current legislation applies an emission-trading model to an 
unsuitable pollutant. For emission trading to work, you need 
readily available technology to capture emissions, or 
alternative sources of energy, that can let some people 
generate surplus emissions that can be sold to others. We heard 
that with SO2; we do not have that with 
CO2. With CO2, as EPA acknowledges, we 
are dependent on offsets to control costs, and offsets are 
notoriously slippery. Even the economists who first developed 
the theory and practice of cap and trade have said that it is 
not a suitable mechanism for greenhouse gas control. Earth 
First agrees. And when you have that level of agreement from 
economists, Earth First, and people like myself at AEI, you are 
talking a serious consensus. Cap and trade has not worked in 
Europe, and it will not work here.
    By design, and despite provisions that try to hide this 
from the public, the carbon control bills now circulating will 
increase energy prices. That is what they are for--slowing 
economic growth, killing jobs, and reducing competitiveness.
    And this is a one-way street, since cap and trade does not 
only cap emissions, it caps economic growth. When GDP goes up, 
energy consumption does also, as do carbon permit prices, 
choking off continued growth. The tighter the emission cap, the 
tighter the economic straightjacket.
    As energy prices rise and as American companies find 
themselves less competitive, businesses and jobs will flow to 
countries without greenhouse gas controls, and without 
stringent environmental controls of any kind, potentially 
allowing emissions to increase. The remedy to this, border tax 
adjustments, is only likely to cause a trade war, further 
damaging the U.S. economy. As increased energy costs raise the 
cost of U.S. goods and services, consumption will decline, 
causing still more job losses across the American economy.
    Legislation now before Congress will cause regional and 
sectoral winners and losers, will unjustly redistribute and 
export wealth from industrial, coal-powered States into States 
with greater hydro, nuclear, and natural gas resources, and 
will send taxpayer dollars abroad to countries that are our 
economic competitors, and sometimes geo-political adversaries.
    Perversely, low-carbon fuel standards might actually 
prohibit oil imports from our number-one foreign supplier, our 
neighbor to the north, Canada. Cap and trade creates a new, 
poorly understood financial instrument that can be used to 
leverage debt, potentially creating a massive carbon bubble 
that bursts once it becomes clear that we cannot afford to 
maintain the regime.
    Finally, cap and trade, and all carbon control for that 
matter, puts a bounty on ecosystems. As carbon control favors 
biofuels, more ecosystems will be planted over, and farmland 
used to grow fuel instead of food. A recent article in Science 
observes that attempting to limit CO2 concentrations 
to 450 parts-per-million--the currently stated goal of carbon 
controls--would cause bioenergy crops to expand, to displace 
virtually all of the world's natural forests and savannahs by 
2065, and actually increase global greenhouse gas emissions.
    As for the claim that the green energy provisions of 
current legislation will create green jobs that cannot be 
exported, this is simply not true. As I testified before 
another Senate committee, governments do not create jobs, they 
simply move them from one place to the other, inevitably, with 
less jobs on net. Economists have known this for over 150 
years. Europe has seen much of its green industry exported, and 
the U.S. has already seen solar cell and windmill production 
being moved to China.
    The only thing worse than no energy policy is bad energy 
policy, and that is what S. 1733 and approaches like it 
represent: bad energy policy wrapped up in misleading 
terminology that hides the true nature of the legislation.
    Thank you for allowing me to speak to you today on this 
timely and important issue. I look forward to your questions.
    The Chairman. Thank you, sir.
    [The prepared statement of Dr. Green appears in the 
appendix.]
    The Chairman. Dr. Thorning?

  STATEMENT OF DR. MARGO THORNING, SENIOR VICE PRESIDENT AND 
   CHIEF ECONOMIST, AMERICAN COUNCIL FOR CAPITAL FORMATION, 
                         WASHINGTON, DC

    Dr. Thorning. Thank you, Chairman Baucus, Ranking Member 
Grassley, for allowing me to testify today on this very 
important issue. I am Margo Thorning, senior vice president and 
chief economist of the ACCF.
    Having watched this debate in Congress for the past 15 
years, I am reminded of a situation--I am a life-long horse 
lover--of trying to lead a horse over a cattle guard. You have 
large segments of the business community and the private sector 
concerned about moving forward on this type of legislation, 
just as the horse digs in his heels and will not be led through 
a cattle guard because he will break his legs; he knows that. 
So, I think it behooves us to look very carefully at what these 
policies might mean in terms of job growth and employment.
    When policymakers are confronted with the decision about 
whose model is best, what numbers are right, I think you need 
to distinguish between macroeconomic models used to look at the 
costs of climate bills and input-output models. Most government 
agencies and private think tanks rely on macroeconomic models, 
because they are able to capture the dynamic impact of changes 
in energy prices: how they flow through the economy, how they 
impact production, and how they impact capital stock and 
employment. Input-output models, which some organizations use, 
are static models; they are not able to capture the dynamic 
impacts of changes in energy prices.
    I would like to share with you, briefly, the results of a 
study that the ACCF and the National Association of 
Manufacturers sponsored, examining the impact of the Waxman-
Markey bill. We used a macroeconomic model, the same model that 
the Department of Energy uses, the National Incident Management 
System (NIMS) model. Our study showed that for the U.S. as a 
whole, by 2030, the Waxman-Markey bill would reduce gross 
domestic product relative to the baseline forecast between 1.7 
percent and 2.4 percent. Two-point-four percent GDP may not 
sound like much, but it is about $600 billion. That is about 
what we are paying Social Security recipients right now.
    Job growth would be slowed. We did show that we would pick 
up new green jobs; certainly we will because of the provisions 
of the Waxman-Markey bill, but on balance we lose between 1.7 
and 2.4 million jobs in the year 2030. Household income is 
about $1,200 less than it otherwise would be. Some of the 
input-output studies that are out there show job growth, but 
again, as the Center for American Progress study admits, they 
are not dynamic and they are not able to capture the impact of 
higher energy prices on the U.S. economy.
    So, what are the positive steps that we could take to try 
to ensure job growth, as well as energy security, and also make 
an impact on the growth of greenhouse gas emissions? First, we 
should expand access to onshore and offshore reserves. We 
should also expand and make it easier to build nuclear 
generating capacity. Nuclear can certainly be a big part of the 
solution here.
    We should also accelerate our research on carbon capture 
and storage so that we can burn our vast supplies of coal 
without negatively impacting job growth. We should continue to 
work with the Major Economies Initiative to try to promote best 
technologies abroad and accelerate the uptake of clean, less 
emitting technologies.
    So, on balance, when I look at the impact of the Waxman-
Markey bill or the Kerry-Boxer bill, I can see that most 
studies, including some from CBO, EIA, Charles Rivers, and 
others, and--as I mention in Table 2 in my testimony which 
summarizes those--the macroeconomic study shows significant 
costs. As EPA has testified and as the Obama administration has 
admitted, if the U.S. goes it alone and adopts these targets, 
the environmental benefits would be almost nil. By the end of 
this century, there will be virtually no difference in global 
greenhouse gas concentrations.
    So, when we look at the costs of these bills, and we look 
at the benefits, it is pretty clear the costs outweigh the 
benefits, and we need to go forward, build a bridge that even 
the most skittish horse would be willing to cross, based on 
better technology, and accelerating working with developing 
economies.
    Thank you.
    The Chairman. Thank you very much, Dr. Thorning.
    [The prepared statement of Dr. Thorning appears in the 
appendix.]
    The Chairman. Next, Ms. Ton-Quinlivan?

STATEMENT OF VAN TON-QUINLIVAN, DIRECTOR, WORKFORCE DEVELOPMENT 
 AND STRATEGIC PROGRAMS, PACIFIC GAS AND ELECTRIC COMPANY, SAN 
                         FRANCISCO, CA

    Ms. Ton-Quinlivan. Chairman Baucus, Ranking Member 
Grassley, and members of the committee, thank you for having me 
here today.
    I am Van Ton-Quinlivan, director of workforce and 
development at Pacific Gas and Electric Company, California's 
largest utility.
    As our sector looks ahead, we see an aging infrastructure, 
the advent of new technologies, and a workforce of 
approximately 400,000 people with an average age in the mid-40s 
and 50s. Over the next 5 years, 30 to 40 percent of the 
industry's workforce is eligible to retire.
    Utilities provide a range of employment opportunities for 
workers with various skills and education levels. We are unique 
in that we are located in every community across the country, 
from large cities to small towns. The need for a reliable 
stream of workers for our sector would touch every State and 
region of the country.
    At the same time, according to several studies, not only 
will our sector need to replace large segments of the existing 
workforce in the next 5 years, but we will also need to ensure 
that the workforce exists, able to fill new jobs that our 
industry creates, as well as jobs in sectors that support our 
industry.
    According to a study conducted by the Brattle Group, our 
industry is poised to make approximately $2 trillion in capital 
expenditures over the next 10 to 20 years to meet future demand 
and replace our current infrastructure. Many of the recent 
actions taken by Congress have been helpful with regard to 
advancing the new energy infrastructure, but they have been 
temporary or time-
limited.
    For an industry that makes long-term capital decisions and 
deploys assets with long lead times, we need a clear, long-term 
national policy direction that builds off the strong foundation 
Congress has put in place through tax policies, loan 
guarantees, and other funding and policy initiatives. Doing so 
will further unlock more of this investment and send a signal 
to our industry regarding the types of expenditures we need to 
make, the workers we will need to hire, and the types of skills 
these workers will need to possess.
    As opportunities become available, we are focused on having 
the right people, in the right place, with the right training, 
at the right time. The National Commission on Energy Policy's 
Task Force on America's Future Energy Jobs brought together 
diverse stakeholders to better understand and start to address 
this issue. The task force commissioned Bechtel Power to 
provide estimates of the workforce needed for the new energy 
economy.
    Key insights from that report are: a decline in career and 
technical education has stressed the power sector's training 
capacity, a large percentage of the electric power sector's 
workforce is nearing retirement, and creating a low-carbon 
energy system will require more workers than the industry 
currently employs and a new set of skills.
    The deployment of new assets will require new design, 
construction, operation, and maintenance skills and more 
workers than the industry currently employs. This is an 
important opportunity for job creation and economic growth. If 
too few individuals with necessary expertise are available, 
however, workforce bottlenecks could materialize and slow the 
industry's ability to take on workers.
    It is the situation that our company is working to avoid. 
In 2008, building off successful training models, we launched 
the PG&E PowerPathway workforce development program. 
PowerPathway collaborates with the community college system and 
the Workforce Investment System to enlarge the candidate pool 
for our skilled craft positions. Program graduates have 
qualified at an unprecedented level on PG&E's pre-employment 
tests, and over 50 percent of graduates have been hired by us 
or by our contractors.
    We are sharing 30 years' worth of energy efficiency 
experience with the community college system to help deliver on 
green jobs training and support the massive investment being 
made in energy efficiency, including weatherization on building 
retrofits. We are working with the California State University 
system to create certificate programs in the power engineering 
and Smart Grid arena.
    When it is time to hire, employers go to where the talent 
exists. Policies need to focus on establishing a pipeline of 
skilled workers throughout the country. The NCEP task force 
made several recommendations with regard to these policies, 
which are included in my submitted testimony.
    We appreciate the efforts Congress has made to date. I look 
forward to working with the Senate to craft a comprehensive 
energy and climate package with a focus on those provisions 
that can quickly transition workers into the new energy 
economy.
    Thank you.
    The Chairman. Thank you very much, all of you.
    [The prepared statement of Ms. Ton-Quinlivan appears in the 
appendix.]
    The Chairman. I am going to ask a question of you, Dr. 
Thorning, in respect to your job loss projections and projected 
cost allowance in future years. There are a lot of projections 
around, probably because this is very difficult for this new 
ground, new territory--and it is difficult.
    Nevertheless, I did note--and I would just like your 
comments on it--that comparing your projections with those of 
EPA and EIA, for example, and CBO, say by the year 2030, your 
projected job loss is much higher than that of other 
projections, and, if I read your chart correctly, you have 
projected an allowance cost of between $48 and $61 per ton by 
2020 that increases to between $123 and $159 per metric ton by 
2030, which is much above that of others.
    Now, much of one's conclusions are because of one's 
assumptions. If you could tell us what your assumptions are 
that led to that result. It is much different from the results 
of other projections.
    Dr. Thorning. Thank you, Senator, for that question.
    The assumptions that we used in our study are attached to 
the appendix. I apologize if that did not get to you last 
night, but I did send it, and it was inadvertently left off. 
But the reason the allowance costs are higher, as shown in 
Table 2, from our high-cost and low-cost case, is that we built 
in realistic assumptions about how quickly new technologies can 
be deployed.
    We assumed in our low-cost case that 25 new nuclear plants 
would be up and running by the year 2030. Now, we have not 
built a nuclear plant since 1978, so to get 25 new plants, 25 
gigawatts up in the next 18 years, we think is, between 2012 
and 2030, pretty generous. Our high-cost case assumed 10 new 
nuclear plants in place by 2030.
    In terms of carbon capture and storage for coal and natural 
gas, the low-cost case assumed 60 gigawatts, the high-cost case 
about 30, and renewables, a similar spread between how quickly 
we can deploy renewables, and all of those assumptions are 
attached to my testimony.
    We tried our best to build in realistic assumptions about 
how much banking would be able to be put in place, how many 
offsets could actually be used. And, when we put in place what 
our consultants and experts from various industries thought 
were realistic assumptions, the allowance prices that are shown 
in Table 2 are what the NIMS model solved for.
    I would like to note that EIA's case, which is also shown 
in my table--one of their cases where they limit international 
offsets, they limit how quickly new nuclear can be put in 
place--shows even higher allowance prices in 2030 than do our 
simulations.
    So, I think it is all, as you point out, a question of what 
assumptions you use. Some of the EPA work assumes 150 new 
nuclear plants in place by 2050. We think that is four a year 
between now and over the next 4 decades. We think that may be 
unrealistic, too. So, it is very important for you to look at 
the assumptions behind an analysis. EIA's base case assumed, I 
think, more than 100 nuclear plants by 2030. We think that is 
not realistic to build four nuclear plants a year for the next 
18 years.
    The Chairman. As we look at these analyses, what 
assumptions do you think are the most relevant?
    Dr. Thorning. I think the assumption about new technology, 
how quickly can we build nuclear, and how quickly can carbon 
capture and storage become commercial, because it is not 
commercial now.
    The Chairman. Any kind of technology in particular? Are you 
talking about CCS? What are you talking about here?
    Dr. Thorning. Well, CCS, exactly, and how quickly 
renewables can be cost-effective sources of energy, how 
construction costs change. And, of course, alternative energies 
we continue to hope will play a larger part, but right now, 
they are fairly expensive.
    The Chairman. Are there assumptions that are particularly 
helpful to examine? If we are going to compare apples with 
apples, it is good to know what----
    Dr. Thorning. Well, of course, when you are doing the basic 
modeling you need to be sure the growth rate assumptions and 
the baseline forecast are the same, and, in our case, our 
baseline forecast for growth is the same as what EIA used in 
2009. So, you want to, as you properly point out, compare 
apples to apples, and also look hard at what the technology 
assumptions are because I think that is the driving force for 
what is going to be the cost of reducing U.S. greenhouse gas 
emissions.
    The Chairman. My time is up. One quick question.
    You are a bit of an outlier, based upon what I know. There 
might be many other projections out there I am unaware of. So, 
if some were to criticize your projections, what would those 
criticisms be? If someone had another point of view, what would 
the most legitimate criticism be?
    Dr. Thorning. They might say that our choice of how much 
offsets is too constraining, but we base that on some of the 
work from GAO, pointing out the problems with documenting and 
using offsets. Some of the constraints in the Waxman-Markey 
bill may make it hard to use those offsets. People could 
criticize that.
    Some people might say, well, renewable energy you have 
constrained, but based on the difficulties of integrating 
renewable energy into the grid and the difficulty in siting 
transmission lines, we think they are realistic.
    The Chairman. My time is up. Thank you very much.
    Senator Grassley?
    Senator Grassley. You can call on Senator Roberts.
    The Chairman. All right. Senator Roberts has asked if he 
could say a few words. He has a very imminent appointment.
    Senator Roberts. I am not sure that ``few words'' and 
``Roberts'' is not an oxymoron. [Laughter.]
    I apologize to my colleagues. I have an 11:15 appointment 
that I simply have to make, and so, I beg your indulgence. And 
thank you, Mr. Chairman. Thank you so much for holding this 
hearing. It is very timely.
    Dr. Thorning, you talked about the macro impact. I am going 
to concentrate on the micro, which is my State of Kansas and 
what it is all about. About 7 percent of the Kansas workforce 
is currently unemployed. We are very fortunate in that respect 
when we are in a 10-percent arena, an unemployment rodeo that 
we are going through that we would just as soon not go through. 
But we really do need an honest and open debate of cap-and-tax 
proposals, like the two bills we are discussing. So, thank you 
to the ranking member and of the chairman, again.
    I want to emphasize that Kansans have long supported 
renewable energy. That is not the question. We continue to make 
investments in these industries. Siemens will soon locate a 
wind turbine manufacturing facility in Hutchinson, KS. We have 
similar investments all over our State.
    Abengoa is locating a cellulosic ethanol biorefinery in a 
place called Hugoton, KS. These decisions are based on a mix of 
market conditions, however, and consumer demand, not because of 
cap-and-trade legislation in the Congress. Cap-and-trade 
proposals, which try to ration domestic energy production, 
would lead to higher unemployment rates and a net loss for our 
State, both in jobs and also economic input.
    Let me give you a few examples, and really what we try to 
do, and I know many members of this committee do, is when you 
get a huge bill like healthcare, or like energy, or like 
whatever we are dealing with, we really appreciate the 
testimony of the panel, and we take it to heart. But, what I do 
is go right out to Kansas and I ask the people involved, is 
this going to work, tell me if it is going to work, will it be 
a benefit to you, or do you want it, or perhaps it will not.
    We rank nine, number nine, with oil and number eight in gas 
production, and together oil and gas contribute $350 million in 
State revenues--that is vitally needed in the situation we are 
in today--each and every year, and employ about 28,000 men and 
women.
    In each of the last 2 years, the Kansas oil and gas 
industry invested over $1 billion--$1 billion--into our rural 
communities, our small communities. You would be hard-pressed 
to find an industry other than traditional fossil fuels and 
agriculture that is able to do this.
    Additionally, three mid-sized communities, by Kansas 
standards, are home of a refining industry, small, but 
struggling and very industrious. In McPherson, with a 
population of 13,500, a small farmer-owned cooperative refinery 
employs 640 hardworking men and women. I said this was going to 
be micro.
    El Dorado, population 12,500, is the home of a small 
refinery that employs 460, with an additional 150 full-time 
contractors. In Coffeyville, KS, the population is 10,350, yet 
another small refinery employs 650 people.
    Now, under this bill that was--I do not know the word, some 
have said it was railroaded, perhaps that is a little harsh, 
out of the EPW Committee last week. These three communities, 
and many others in rural Kansas, have told us they will suffer 
very severe consequences: higher taxes, job loss, even a 
possibility of shutting down these three refineries, and a 
greater dependence on volatile foreign energy.
    I know the proponents of cap-and-trade proposals talk about 
green job creation. I think that is probably the topic of the 
day. Now, I am a seasoned newspaper man, and I get out my 
trusty, worn Webster dictionary, and I do not find a definition 
of a green job.
    So, my question is: what is a green job? And, why should 
the Federal Government, with their definition, pickpocket 
hardworking Kansans with an existing energy industry, as I have 
just discussed, if, at the end of the bill, there are little or 
no environmental benefits? Does the scrap yard owner who has 
Cash for Clunker cars piled up qualify as a green job? How 
about the steel worker whose product is used in wind energy 
generation? If that same steel is used in a coal power plant, 
is it treated differently? Is that a green job?
    How about agriculture? If you are the average Kansas farmer 
or Iowa farmer, or for that matter, Michigan farmer, and you 
are producing enough food for over 145 people and a whole lot 
more in a troubled and hungry world, does that farmer represent 
a green job? Or do you only qualify for a green job label if 
you participate in the Know Your Farmer, Know Your Food 
farmer's market on the weekend at the University of Kansas? 
Ultimately, who determines what is a green job?
    Well, I really appreciate Dr. Thorning's opening comment, 
this is like leading a horse over a cattle guard. I am going to 
use that, madam, and I will give you credit, something that 
does not happen very often in the Congress.
    What market signals do these two bills show to rural and 
traditional fuel-dependent States, including coal, oil, gas, 
and agriculture industries? What would be the ripple effect in 
the State and government field? I know this is a micro 
question, but I represent a micro State.
    Dr. Thorning. Thank you very much, Senator. I give you that 
remark, that analogy.
    But you might want to take a look at the analysis that the 
ACCF and NIMS study did on your State. Our study, based on 
macroeconomic analysis, shows that gross State product in 
Kansas would be $5 billion less in 2030 compared to the 
baseline forecast, and that there would be between 21,000 to 
29,000 fewer jobs as a result of the Waxman-Markey bill. So 
certainly, for an energy-intensive State like yours, this bill 
has pretty serious implications.
    Senator Roberts. I thank you very much, and thank you, Mr. 
Chairman. Maybe, perhaps, we could find enough jobs to de-ice 
the wind turbines when they get iced up just like an airplane. 
They throw that ice about a quarter of a mile, by the way, so 
it would take a lot of folks out there to somehow do that.
    The Chairman. Thank you, Senator.
    Senator Kerry? You are next.
    Senator Kerry. Thank you, Mr. Chairman.
    I just might comment for my friend from Kansas, who knows 
his State better than I do, obviously. But, nevertheless, 
Siemens just celebrated a groundbreaking of a wind turbine 
assembly facility there which will employ approximately 400 
people.
    Senator Roberts. I will be at the dedication, by the way. 
Thank you.
    Senator Kerry. I have six studies, which do not get 
referred to here, six studies: one by the College of Natural 
Resources, University of California, Berkeley; one by the 
Center for American Progress Clean Energy Hub; one by the 
American Council for an 
Energy-Efficient Economy; one by the Perry Group at the 
University of Massachusetts Center for American Progress; 
another by the U.S. Conference of Mayors; and finally, an RDC 
one; and these are among several. Every single one of them 
shows Kansas growing in investment, growing in net jobs, and a 
net reduction in household cost by 2020 on average, about $8.39 
per household, a gain to your citizens.
    The reason for that--and I am not going to spend a lot of 
time, because we do not have a lot of time, 5 minutes, 
obviously. But, this question of assumptions, the question 
asked by the chairman, is really fundamental to this, folks, 
and we have to be realistic about them.
    I would like to ask unanimous consent that a Washington 
Post op-ed by John Doerr, who is a very well-known venture 
capitalist in the United States, and Jeff Immelt, the chairman 
and chief executive officer of General Electric, be made part 
of the record.
    The Chairman. Without objection.
    [The article appears in the appendix on p. 157.]
    Senator Kerry. Let me make it clear: these are 
practitioners. They are not sitting in a theoretical study 
group. They are out there creating jobs and very, very 
successfully, I might add. And they wrote in this op-ed that 
the most basic thing we need to do to get American innovation 
and competitiveness moving is, number one, send a long-term 
signal that low-carbon energy is valuable, put a price on 
carbon, and a cap on carbon emissions.
    Now, countless companies--a bunch of them just dropped out 
of the Chamber of Commerce--have come to the conclusion that is 
the way you make jobs. We have to make an analysis of these 
studies, and, frankly, both you, Dr. Green and Dr. Thorning, I 
just find your studies are not credible.
    You do not take into account the cost of inaction. What is 
it going to cost our taxpayers in the United States if we do 
not act? What is your plan for meeting a 2-degree Centigrade 
maintenance of warming on the Earth's temperature? Do you have 
a plan to do that?
    Can you price carbon and accomplish it without moving down 
one of the two roads that are available to us, either a carbon 
tax--which everybody here knows the U.S. Congress will not 
pass, because in order to change behavior it would have to be 
high enough that just nobody will accept that.
    But when you have assumptions that are so out of whack with 
every other study, for instance, your study, the ACCF study--
and the chairman raised this question--your household cost 
projections are 3 and 4 times higher than the Energy 
Information Agency, which does this every day, professionally 
for us, for the government. The EPA, the CBO, on which we base 
now the healthcare debate and a lot of other debates, you range 
from $730 to $1,248 as your household cost projection, compared 
to $80 to $300 for every other one of those studies.
    You have not only high allowance forecast prices, but then 
you make statements, Dr. Green, like the one where you said 
Europe is not working, the trading system failed. It did not 
fail. It is working. In fact, they have embraced it, and they 
are excited about how well it is working. They began a 2-year 
initial phase, in which they made some mistakes. They 
acknowledged the mistakes they made, and then they fixed those 
mistakes.
    Now they are in their second phase. In fact, they have an 
abatement in the first phase, as much as 5 percent down. There 
was a 1.6-percent drop in EU-15 emissions, contrasted with an 
increase in GDP of 2.7 percent over that period. They have 
reduced emissions, they are growing their economy, they are on 
track to meet their Kyoto targets, and they are a leader in 
green global technology.
    Germany, today, has created more jobs in the green sector 
of alternative renewables. They have 280,000 people working at 
new jobs, more people than in their vaunted automobile 
industry. So, how can you have a study that does not take into 
effect the impact of energy efficiencies, or of the cost of 
inaction in not doing it?
    We do not have time to go into all of this, but I will just 
leave you with this. I would like your comment to it.
    This is today's Reuters, a story out of London: ``The world 
will have to spend an extra $500 billion to cut carbon 
emissions for each year it delays implementing a major assault 
on global warming, the International Energy Agency said on 
Tuesday.'' Every year's delay beyond next year will add another 
$500 billion extra.
    Now, I would ask you. Did you take that into account in 
your studies?
    Dr. Thorning. Those are very excellent questions, and there 
are a lot of them. I will try my best to answer some of them.
    First, you ask, did we take account of the environmental 
impact of not enacting the cap-and-trade legislation?
    Well, EPA Administrator Jackson testified recently that, if 
the U.S. did achieve the targets in the Waxman-Markey bill, it 
really would not matter by the end of this century because 
other countries, China and India in particular, are not willing 
to undertake hard targets.
    Senator Kerry. That is not accurate.
    Dr. Thorning. Well, the Obama administration----
    Senator Kerry. That is not accurate. You have to be 
accurate. China has said they are going to do a specific energy 
intensity reduction. It is a 20-percent target. They have set 
it, and they have exceeded it, thus far.
    Dr. Thorning. Well, we will see whether they are able to 
deliver on that. But until developing countries are willing to 
take on the same kind of targets that developed countries are, 
we really, according to EPA's own analysis, will not see 
meaningful reductions in GHG concentrations.
    Second, if you take a look at the studies you mentioned, 
the Center for American Progress Study and the ACEEE study, 
which I cite in my testimony, they used input-output analysis.
    And let me read from my testimony. This is from the CAP 
report itself. They identify the problems with their analysis. 
They state: ``There are certainly weaknesses with our use of 
the input-output model. The most important is that it is a 
static model, a linear model, and a model that does not take 
into account the structural changes in the economy.'' So they 
admit that there model is inadequate for analyzing the dynamic 
impact of sharp increases in energy prices.
    So, I think, when we look at potential consequences from 
capping carbon emissions, most experts feel a macroeconomic 
analysis is the most appropriate. And, once you have looked at 
a macro model, then you need to look at the assumptions. We 
feel that the assumptions we embedded in our simulations, using 
the NIMS model, are appropriate, given what we know about the 
future development of technology.
    So, another thing to think about, I would like to mention 
two studies, one from Denmark, one from Germany, recent studies 
looking at the cost to the Danish and German economies of 
putting in place solar energy. For example, in Germany, a new 
study by RWI shows each job in Germany is costing about 280,000 
euros, each of these solar jobs. There is a study from Denmark 
showing the wind power jobs are costing the Danish taxpayers 
approximately 160,000 euros. So, I think we need to be aware of 
the cost of this type of initiative and balance how quickly we 
want to move in that direction.
    Senator Kerry. My time is up. I do not want to abuse it, 
but, Mr. Chairman, can I just----
    Well, I would just say again--look, I respect that there 
are costs obviously with transition. But the fact is, the 
Commerce Department devotes a considerable amount of resources 
to maintaining the viability of its input-output analysis. And, 
obviously, there are structural changes that take place. We all 
understand that. But the ones that have been taking place are 
to the plus side of the economies of these countries, and to 
the negative of ours.
    For instance, of the top 30 wind-solar battery companies in 
the world, only 5 are in the United States of America. We 
invented those technologies. We are losing them to other 
places. And, I think in the end, your analysis that you just 
gave us did not answer the question of the costs of inaction, 
or of how you maintain a 2-degree Centigrade warming without 
pricing carbon.
    Senator Grassley. We will move on. I am going to take my 
turn now. Senator Baucus is temporarily out.
    This would be for each of you, but I do not want too long 
of an answer, because I have more than one question I want to 
ask.
    The committee has heard testimony in the past from CBO and 
other economists on a cap-and-trade system that, by diverting 
resources to reducing greenhouse gas emissions through new 
technology or a more expensive form of energy that would not 
otherwise be economical, there is a net cost to the economy.
    In other words, carbon limits cannot increase total 
employment across the economy, with emphasis upon ``total.'' In 
fact, while there will be some jobs created in certain 
industries that produce low-carbon energy--and we have had 
Siemens move into Iowa, so I am well-aware that green energy 
brings with it jobs--high energy prices will result in a net 
loss of jobs that otherwise would have been created or 
sustained in the absence of a cap on carbon. Would everyone on 
the panel agree with that basic economic principle?
    [No response.]
    Senator Grassley. All right. Since everybody is quiet, then 
you agree? All right.
    Dr. Green. I will say it out loud: yes, I agree with that 
principle.
    Senator Grassley. All right. Do you want to comment, sir? 
Mr. Breehey?
    Mr. Breehey. Yes, Senator.
    I think it is impossible to not acknowledge that an 
economy-wide greenhouse gas program would have a net negative 
impact on GDP. But I think some of the studies, and some of the 
doomsday scenarios, fail to acknowledge the net negative 
economic costs associated with the energy efficiency solutions 
that Senator Kerry referred to, and that those represent some 
of the least expensive emissions reductions opportunities 
present in our economy and, over the long run, will have a 
positive economic impact. So, I think some of the doomsday 
scenarios that we are hearing are vastly overstated. And, I 
think, as Senator Baucus alluded to, the innovation that a cap-
and-trade program encourages will result in lower costs than 
most predict.
    Senator Grassley. All right. I have a question for Dr. 
Green.
    It is sometimes argued that a cap on carbon, which raises 
the cost of energy, will create the incentive to develop new 
technologies or undertake new projects to increase energy 
efficiency that otherwise would not be pursued, which in the 
long run will save consumers money. Would you comment on that 
possibility?
    Dr. Green. Well, that is a possibility that, indeed, if you 
raise prices, you will spur research. Consumers will attempt to 
reduce the cost burden by deploying new technologies. The 
question is, if those technologies are genuinely efficient--
economists do not believe in the idea of $100 bills lying on 
the sidewalk. If there are efficiencies to be gained where the 
consumer truly benefits, the consumer will engage in that 
behavior spontaneously. It does not take the government to tell 
me that I should pick a $100 bill up off the pavement.
    And so, the question is whether these are real or whether 
they would happen regardless. But it does not offset the net 
effect that pricing carbon will have an overall net impact on 
the economy, it will reduce economic growth, and it will reduce 
jobs.
    Senator Grassley. Ms. Ton-Quinlivan, I have a question for 
you.
    I understand that your company is one of the lead advocates 
of the 50:50 policy found in both the Waxman-Markey and Kerry-
Boxer bills, whereby half of the free allowances are given out 
to energy companies based on retail electric sales as opposed 
to the actual need for allowances. This rewards companies like 
your own that have the good fortune to generate a large portion 
of their energy from hydro-electric. However, it comes at the 
expense of energy users, like my home State of Iowa, who will 
see electric bills go up even further if allocations are based 
solely on need.
    A question. Since companies like yours, who because of 
geography have the ability to generate low-carbon energy, will 
already be relatively better off under a cap-and-trade system, 
how can your company justify a policy that further exacerbates 
the differences between the burdens on constituents in the 
Midwest, as opposed to those who live in California or New 
England?
    Ms. Ton-Quinlivan. Senator, since my area of expertise is 
in the workforce development area, let me constrain my answer 
to that area.
    What we know from California is that our regulators have 
given us a lot of certainty around the sequence in which we 
have to prioritize the source of our energy, with energy 
efficiency on top on the loading order before we can pursue 
demand reduction, renewables, and conventional sources.
    And, what I do know from the energy efficiency side is 
that, as a result of this certainty, our workforce has 600 
people who are focused entirely on energy efficiency, and then 
we built training programs that have fed over 68,000 trainees 
into our third-party contractors to do that work.
    Senator Grassley. All right. It is Senator Cantwell's turn.
    Senator Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman. Thank you very 
much.
    Dr. Green, I do not want to argue with you about whether 
Europe has succeeded in trading because, frankly, I do not 
think the United States has. And, the fact that the derivative 
market still has not had loopholes closed in it is, in my 
opinion, no reason to start a carbon futures market that might 
have the same loopholes. In fact, I do know that Europe did cut 
up carbon futures into tranches, just like we did on the credit 
default swaps, and it was very unfortunate.
    But, I do want to get to your point about SO2 
and CO2 and the difference, because you were saying 
that there is something uniquely different about those two 
markets, and the fact that one, I am assuming, had a more 
limited impact, and thereby we could achieve results. And so, 
now you are almost saying a cap and trade is not the right 
tool. Is that right? It is not robust enough for the challenge 
that we face? And so, if you could talk about that, and then 
whether you think a cap-and-dividend model is a little closer 
to that flexibility that would be needed.
    Dr. Green. Thank you for your question, Senator.
    I would like to praise, by the way, your cap-and-trade bill 
for its remarkably admirable brevity and its close adherence to 
what an economist would say cap and trade should look more 
like.
    I would also like to applaud your concern over the 
financial implications of cap and trade and mortgage-backed 
securities. I call them, actually, poorly understood financial 
instruments, or PUFIs, because we are talking about a huge 
amount of the economy that would be put into these instruments, 
the energy economy. And we have really no idea what the end 
result is going to be. If the scheme is not sustainable, the 
government will burst the bubble, and that could be a very big 
bubble, indeed.
    Now, as to why SO2 and CO2 are 
different, there are many reasons. The first is, with 
SO2, you had readily-available scrubbing technology 
that was only marginally more expensive than operating without. 
Laws have been changed to allow low-sulfur coal to move across 
the country to plants that did not have access to it 
previously. You had a small number of players. You had a single 
jurisdiction, the United States. You had only one industry 
sector, so there was not intra-sectoral competition or rent-
seeking possible, nearly as much as there is under cap and 
trade. You had an easily measured pollutant. SO2 is 
an active substance, easily measured directly, as opposed to 
being estimated through inventories or calculated based on the 
type of fuel input. It was a smaller section of the economy 
being affected as a whole. And, I would point out that, in 
fact, if you look at the modeling that was done on the 
SO2 trading system, some people say that the 
industry groups overestimated the cost, and the fact is, they 
did not.
    As they estimated the cost of early bills, the cost 
estimates were higher. The bills were changed in response to 
those estimates, and the costs were lowered. The final economic 
estimates of cap and trade turned out to be very close to the 
real cost because the earlier estimates had led to changes in 
the legislation.
    This is why the cap and trade--as I said, the economists 
who developed cap and trade and mathematized it pointed out 
that cap and trade is for discrete, local, constrained 
pollutant control. It is an excellent instrument for that, and 
it can be used for not only pollution control, but also things 
like tradable quotas for fish, which is another implementation 
of a market measure, where you cap the withdrawal and you trade 
the rights to withdraw. But it is not appropriate for 
greenhouse gas controls.
    Senator Cantwell. And so the point is, that with something 
where you need a more robust tool to have a cap but then have a 
price collar, the price collar acts as a more effective tool in 
keeping the price, and thereby is closer to the carbon tax that 
you are suggesting.
    Dr. Green. Well, several things. First, auctioning all 
permits. If you are going to do cap and trade, you really do 
not want to get into this freely allocated permit thing because 
it leads to over-
allocation, it leads to early inaction in the market. Full 
auctioning of permits is essential to establish their real 
value.
    Second of all, the price collar. Well, a price collar 
mitigates some of the problems of cap and trade, but not all. 
It does mitigate the price volatility element of cap and trade. 
Again, the difference between SO2 and 
CO2, one of the problems with that is that, when our 
economy grows, CO2 levels spike up, as they have 
spiked down as our economy has tanked. And, when that happens, 
those permit prices are going to shoot up and become quite 
volatile, and they will shoot down. A price collar prevents 
that, but at the same time, it also prevents you from gaining 
the benefits of a low permit price. You do lose the risk of a 
high permit price, but you lose the benefit of a low permit 
price. And, so, it is not a panacea.
    Senator Cantwell. What did you say? PUFI? What did you say?
    Dr. Green. PUFIs, poorly understood financial instruments.
    Senator Cantwell. All right. Thank you.
    Senator Stabenow. Well, as we proceed with our chairman and 
ranking member having had to leave, I will now turn to my own 
comments and questions, and then Senator Hatch, and any other 
members who come in.
    Welcome. We appreciate your comments very much.
    When I look at this, coming from a State that is known for 
making things, and doing a very good job of making things, 
designing things, I look at this whole discussion very much 
through the prism of jobs and how we keep the next generation 
of technology manufacturing in this country.
    I do not want to see what happened with the computer-age, 
where we make all the technology and then it is manufactured 
overseas, so that the President of the United States gives the 
latest technology in the form of an iPod to the Queen of 
England, technology from America, made in China.
    I think, if that happens around clean energy, we will all 
have failed, and so I am very much looking at this through the 
prism of how we create policies that create jobs here. First, a 
couple of comments. From my perspective, we can either do this 
well and jobs will be here, or do this poorly and they will not 
be here.
    And so, a number of questions: how we allocate allowances, 
as well as carbon credits, how we use those; what kind of a 
border policy; what kind of trade enforcement; what kind of 
price collar; and there are a whole range of issues that I 
think we need to be addressing.
    I also think it is important, though, for us to acknowledge 
a couple of things that, while we do not yet have the 
technology readily available in a number of areas--and Dr. 
Green, you have spoken about this a number of times--we have 
the capacity to create the technology, which will create the 
jobs. Some of this is about timing, I think.
    And that is why things like energy efficiency become so 
important. When the McKenzie Consulting Company reports that 
the U.S. economy could reduce emissions equal to the entire 
U.S. fleet of light trucks and cars and save $1.2 trillion 
through 2020, I think that goes to what we have been trying to 
do in the Energy Bill around energy efficiencies, buildings, 
other energy efficiencies, and so on.
    The second piece of this is the role of agriculture and 
forestry, which, while they are not a capped industry under any 
of the bills, an incredibly important part of capturing carbon, 
holding carbon, is making sure we are not cutting down our 
forests, that we are managing them correctly, and we are 
managing agriculture effectively.
    So, I start from the fact that I think there are some 
bridges that allow us to get there, that allow us to capture 
carbon and move forward while we are developing the technology.
    My questions go to how we, in fact, compete in what I 
believe is a race with China and other Asian countries as it 
relates to clean energy jobs. We put a manufacturing credit 
into the Recovery Act. I was pleased to help champion that, but 
there is a cap on that. It is going to expire at some point. We 
have many, many more companies that want to use that than we 
actually have the amount of dollars in there.
    Senator Menendez and I are working on a solar manufacturing 
credit that would create over 200,000 jobs. I know in my own 
State, where we make one-third of all of the polycrystalline 
silicon for the world, and it is shipped overseas, a lot of 
that to Germany, a lot of that to Asian countries, 
incentivizing manufacturing means it is going to be here, and 
we are already starting to see that with the manufacturing 
credit, and so on.
    So, my question goes to the race with China and clean 
technology jobs. How do we ensure that we retain those jobs 
here for U.S. workers--and I am sure everyone thinks that that 
is important--and address our green trade deficit, which is 
billions and billions of dollars? How do we make sure that, in 
the end, we are leading in technology industries, including 
solar, wind, CCS, nuclear, across the board? I would ask anyone 
who would want to respond to that. How do we make sure we get 
there?
    Dr. Green. Well, thank you, Senator.
    If I may, I think it is a very important question, and it 
really comes down to the fact that our manufacturing is more 
costly than China's is. Their labor costs are much lower. Their 
environmental standards, while they are good on paper, are 
often not enforced in practice, allowing them to do a lot more 
low-cost manufacturing, and it is a serious risk that we will, 
indeed, send our dollars over there to buy their technologies.
    The only thing that I would say could fix that is if China 
actually accepted a cap on emissions, which I have to correct, 
Senator Kerry. An emission intensity target does not mean that 
your emissions go down. This was pointed out when the Bush 
administration tried to promote emission intensity measures as 
their approach to climate change in their Clear Skies proposal. 
You can become more energy efficient, and your emissions can 
still grow as your economy grows. So, to say that China has 
adopted a cap on its emissions is not correct. Until they do, 
we cannot compete with them on a level playing field.
    Senator Stabenow. Well, and I am going to stop at this 
point and say, what has been happening in America is, we are 
losing our middle class because we have accepted a race to the 
bottom.
    Saying to people, we can only compete if you work for less 
and lose your health care and pension, is not how we are going 
to keep a standard of living in America. There is a better way 
to do that, I would argue, certainly, if we focus on enforcing 
a level playing field on trade and if we make the investments 
that we need to make. But I am wondering if you would like to 
respond as well. Mr. Breehey? Yes.
    Mr. Breehey. Thank you, Senator, indeed.
    As I alluded to in my testimony, it is tremendously 
disappointing to the labor movement, those of us who represent 
workers and manufacturing, that we are seeing the investments--
that our tax dollars have been made to promote jobs overseas, 
and we have to avoid those mistakes when we put together cap-
and-trade legislation.
    While I know that there are some who will argue that it 
would be protectionist, we would argue that American jobs are 
worth protecting, which is why we would say that any technology 
manufacturer, any power generation company, any wind turbine 
manufacturer that receives an incentive through a cap-and-trade 
bill, either through an allocation of allowances or through 
revenue generated from an auction of allowances, should be 
required to adhere to domestic content requirements, through 
the application of laws like the Buy America Act, to the 
technologies that are going to be produced.
    Senator Stabenow. Thank you very much. I notice that I am 
out of time.
    I will just comment that China has adopted a ``Buy China'' 
policy. Every other country seems to get it but us in terms of 
the need to invest in our own jobs at home, so I hope our 
policy is going to include the ability to create those jobs 
here.
    Mr. Breehey. I could not agree more. Thank you.
    Senator Stabenow. Senator Hatch?
    Senator Hatch. Well, thank you, Madam Chairperson. This has 
been an excellent group, and I have really enjoyed listening to 
your testimony.
    I would ask unanimous consent that the Americans for Tax 
Reform's statement be put formally in the record at this point, 
Madam Chairman.
    Senator Cantwell. Without objection.
    Senator Hatch. Thank you.
    [The statement appears in the appendix on p. 152.]
    Senator Hatch. Now, Dr. Thorning, the Congressional Budget 
Office released a report this past September entitled ``The 
Economic Effects of Legislation to Reduce Greenhouse Gas 
Emissions.'' I would like to highlight several findings from 
that report.
    The increases in the price of energy caused by the program 
would reduce workers' real wages. The cap-and-trade program for 
carbon dioxide emissions would reduce the number of jobs in 
industries that produce carbon-based energy, use energy 
intensively in their production processes, or produce products 
whose use involves energy consumption, because those industries 
would experience the greatest increases in costs and declines 
in sales.
    The industries that produce carbon-based energy--coal 
mining, oil and gas extraction, and petroleum refining--would 
probably suffer significant employment losses over time. The 
process of shifting employment can have substantial costs for 
the workers' families and communities involved.
    Now, Dr. Thorning, other witnesses on this panel have 
stated that the construction of facilities will create hundreds 
of permanent jobs in various parts of the country. Now, do you 
believe that ``create'' is the right word to use in this 
context? Should we not say ``shift,'' if it appears that the 
coal, oil, and gas States would lose a significant amount of 
jobs and reduction in salaries?
    Dr. Thorning. Yes, Senator Hatch. It seems to me what we 
are looking at is a shift of where resources are deployed. 
Based on the study that ACCF and NIMS did, as well as other 
studies cited in my testimony, there would be a shifting of 
jobs. There would be new, renewable energy, energy efficiency 
jobs created, but overall, because of the loss of productivity, 
the premature obsolescence of the existing capital stock, there 
would be a slowing of economic growth overall, compared to the 
baseline forecast.
    Senator Hatch. Dr. Green, you mentioned that cap and trade 
has not worked well in Europe. Can you help us understand how 
and why it has not worked in Europe and whether the bill we are 
considering today in the Senate would have the same problems as 
they have faced in Europe?
    Dr. Green. Well, Senator Kerry pointed out that the first 
phase of the European Trading System was considered a trial 
phase. It is not clear if it was originally designed as a trial 
phase or renamed one after the first time the permit price 
collapsed.
    But, they had repeated collapses of permit price to 
virtually zero and massive permit price volatility. They had 
fraud and offsets where they exported quite a lot of money to 
China for false offsets. They have had protests by various 
sectors as they have tried to auction more permits, with the 
result that those sectors have gotten exemption from needing to 
buy permits, have gotten free allocation maintained for them, 
and I think all of these structural problems with the carbon 
market will play out here. We are going to allocate the 
majority of permits for free. We are not going to auction the 
majority of permits. We have offset provisions that are going 
to be problematic, as has been pointed out by others.
    Several studies of offsets have shown them to be plagued 
with fraud and abuse and illegitimacy, so I think we will see 
many of the same problems play out as has happened with the 
European Trading System here, but on a broader scale, because 
we have a very large economy and we have the opportunity to do 
greater mischief.
    Senator Hatch. Well, I am very interested in how a cap-and-
trade program would affect the poor. I have heard that the 
poorest of the poor spend as much as 50 percent of their 
incomes on energy costs.
    Now, in your view, is it possible to construct a cap-and-
trade program that reduces carbon emissions, that is not felt 
by the poor? And, can you explain why it is possible or not 
possible to protect the poor under such a program, if that is 
possible?
    Dr. Green. Well, it is possible to shield them, to a 
certain extent, by redirecting, if you do auction permit 
revenues, that revenue to lower-income people.
    As you pointed out, low-income people use a 
disproportionately high amount of their income to pay for 
energy, not just directly as we have studied at AEI, not just 
directly in terms of flipping light switches and gassing up 
their car, but the products that they buy are infused with 
energy as well, and so their energy costs are 
disproportionately high.
    But on net, ultimately, the point of this exercise is to 
raise the cost of energy. It was pointed out earlier that a 
carbon tax is not possible because you would have to raise it 
so high that nobody would accept it. Well, cap and trade is a 
carbon tax, it is just applied indirectly, so the permit price 
will have to rise very high if you are going to see actual 
change in emissions.
    But, to sum up my answers, basically, you can shield them 
to a certain extent by targeting them with new resources, but 
overall, as they are going to be mostly affected by the 
downturn in the economy and the downturn in jobs, they will not 
be net winners in a cap-and-trade system.
    Senator Hatch. All right. Senator Kerry, they apparently 
did not start the clock when I began, but I have just three 
more questions. Could I ask those?
    Senator Kerry. Absolutely.
    Senator Hatch. All right. I appreciate your courtesy in 
doing that.
    Toward the end of your remarks, Dr. Green, you spoke about 
how under cap and trade we will have winners and losers. Is 
that true on the international scale? If we implement cap and 
trade and China and India do not, is there any possible way 
that our Nation could come out winners under that scenario?
    Dr. Green. The second question, first. No. If the United 
States implements cap and trade unilaterally, as Dr. Thorning 
pointed out, the emission reductions we can achieve as a 
country pale to insignificance with regard to the growth 
expected in China and in the rest of the world. There would be 
no environmental benefit, but we would, indeed, make ourselves 
considerably less competitive by raising our costs of energy 
goods and services and manufacturing across the country.
    There will be sectoral and regional winners and losers, as 
was pointed out. Some of the coastal areas have access to 
greater amounts of hydro, and they have more temperate 
climates. They have already had to switch to natural gas, in 
California's case, for traditional air pollutant reasons, 
whereas the center of the country is more inclined to rely on 
gas or heavy crudes from Canada, which will be affected by the 
current legislation.
    So, there will be many winners and losers, including 
internationally. We will impair our economy to the benefit of 
our competitors.
    Senator Hatch. Dr. Thorning, do you agree with that?
    Dr. Thorning. Yes, Senator.
    Senator Hatch. All right.
    Now, just one last question of Mr. Breehey. I appreciate 
your efforts for your union, and that is great. You mentioned 
in your remarks that industries such as steel, cement, and 
chemicals are more sensitive to energy cost increases than 
other sectors of the economy. Can you help us understand why 
this is the case, and also what the impact on jobs will be for 
those industries if S. 1733 were to be enacted as written?
    Mr. Breehey. Yes, Senator. In the case of a lot of those 
industries, such as chemicals, energy inputs, both in terms of 
power use, as well as natural gas feedstocks in the 
manufacturing process, make them particularly sensitive to 
price increases and make them particularly sensitive to the 
impacts of a cap-and-trade program.
    I am sorry, sir. I forgot the second part of your question.
    Senator Hatch. You are concerned about it, are you not?
    Mr. Breehey. We are certainly concerned about it, which is 
why----
    Senator Hatch. You would lose a lot of jobs.
    Mr. Breehey. There are certainly a lot of jobs. As Senator 
Kerry has pointed out, though, we do have some concern. We feel 
like we need to take into account the cost of doing nothing.
    I represent workers, for example, along the Gulf Coast. If 
climate change results in more frequent, worse storms, those 
workers are going to be negatively impacted. So we are trying 
to think of, what is the right balanced approach that will 
mitigate negative employment impacts across the economy, both 
considering the cost of action and the cost of inaction.
    But we believe that there are reasonable things that can be 
done within the context of a cap-and-trade program that would 
mitigate the negative impacts on workers and energy intensive 
trade-
exposed industries. Those include a robust allocation of 
allowances to an output-based rebate program, such as has been 
proposed in S. 1733 and was included in the Waxman-Markey bill. 
We believe maybe 15 percent of the available allowances should 
be allocated to such a program.
    We also believe that, as has been indicated, it makes no 
sense for us to take action if major emitters in the developing 
world fail to follow our lead. We will only result in exporting 
both jobs and pollution to countries that fail to act, which is 
why we believe the Senate should certainly include a border 
measure that would put sort of a carbon tariff on energy-
intensive imports from countries that fail to take comparable 
action.
    Senator Hatch. Thank you, Senator Kerry. I appreciate it.
    Senator Kerry. Thank you, Senator Hatch.
    One thing I might mention, Senator Hatch, because I had 
something to do with it at the time, I was at the Kyoto 
negotiations, and none of us was very happy with the outcome of 
that, and I joined in the effort on the floor when we did the 
Byrd-Hagel Amendment, because we felt we had to have everybody 
under the tent, and clearly, that was a failed process.
    In arguing with the Europeans that they should undertake 
the concept of cap and trade, initially they were very opposed 
to it. They did not believe in it. They saw it as a gimmick by 
which people did not actually reduce pollution, and so they did 
not really wholeheartedly embrace it. That is the attitude that 
governed how they went at the initial execution implementation 
in Europe with that effort.
    The problem is that initially they allocated most of the 
allowances to emitters, created a windfall profit situation. 
They had some problems with what they gave to the cement 
industry, aluminum, others, et cetera. They also had a problem 
that they did not allow the banking of allowances between those 
phases, so that allowances became worthless at the end of the 
initial phase, so that drove the market down. They also had 
incomplete market data that was released at one point, which 
scared a lot of people, and it wound up driving the market 
down.
    So, it is fair to say they had some problems and they had a 
collapse, and I accept all of that. So did they, for that 
matter. But that is why they put in place a number of reforms. 
They have begun to transition the amount of auction that they 
will have, and it is working very effectively now. I have been 
meeting over these last months with the environment ministers 
and finance ministers and other leaders, all leading up to 
Copenhagen, with the idea that, indeed--and I say this to you, 
Dr. Green, you are absolutely correct--we have to have a global 
solution. We cannot sit here if the United States does this all 
by ourselves. We all understand. It is a non-starter.
    The President should never think of bringing a treaty here 
to us that does not have a global component. But it is not fair 
to say--and I have had this argument with the Chinese--that 
energy intensity does not result in emissions reductions. It 
can, depending on where they are reducing the intensity, and 
how. And you can, in fact, translate a reduction in energy 
intensity into emissions reductions.
    This is the big argument we are having with China right now 
as we go to Copenhagen, to make certain that what we get out of 
China, India, Brazil, the middle developing countries, the 
near-
developed countries in some cases, is measurable, and 
reportable, and verifiable. Those are the key words that have 
to guide us. If we can get that out of Copenhagen, or beyond 
Copenhagen--I think we may hopefully get a political agreement 
there--then we translate it into a real treaty.
    I join with other people in saying that we are not going to 
disadvantage the United States. What is interesting, Senator 
Hatch, is that other countries are adopting this idea that, 
indeed, if under an environmental international agreement we 
all have agreed to a standard of behavior by which we are going 
to reduce emissions and invest in those efforts, if some 
country stays outside of that and says, aha, we are going to 
take advantage of this, and while you guys are busy making your 
products slightly more expensive or transitioning because you 
are investing in new capitalization to meet the standard, we 
are going to take advantage of it and sell in your country and 
undermine your market. We are not going to let that happen, and 
other countries are not going to let that happen.
    And so, I believe we will for the first time be able to put 
together a global environmental protocol by which people are 
agreeing under international law that, if some outlier country 
decides to try to take advantage of other countries, they are 
going to be the odd person out, because their products are not 
going to come in cheaper than the cost of reducing that carbon.
    So, that is what a lot of folks have argued on that part of 
this. That is in the Waxman-Harkey bill. We have changed it in 
our bill. In fact, this committee will ultimately decide that 
language, and we need to make it WTO-compliant, and I think we 
can. But that way, we stand up for the American worker, 
American businesses, for a fairer playing field, and we have a 
way, hopefully, of addressing this question.
    The final comment I make is that we have to, in these 
analyses, take into account what happens if we do not do this. 
The cost of $500 billion a year cannot just be written off. 
That is going to come back to haunt the American taxpayer, one 
way or the other: crops that are more expensive to produce, 
rivers that are more polluted that we have to clean up. You 
could run the list: fires that are more intense in the west, 
insurance costs that go up as a result; water that disappears 
in Montana; agriculture, the heart, the bread basket of the 
country. These are all very, very serious issues, and they are 
going to result in massive infrastructure expenditure to pipe 
water somewhere, or to move whole agricultural sectors of the 
county to other parts of the country where things will still 
grow.
    What bothers me is, too many of the studies never factor in 
the benefit of energy efficiency. The MacKenzie Company--which 
I think, I am sure both of you respect--has done a superb 
analysis called the Carbon Cost Abatement Curve. That curve 
shows that, for the first 20 or 30 years of investment, it pays 
for itself. I can show you Hewlett Packard, IBM, Johnson and 
Johnson, BP. There are a host of companies across the country 
that are investing and have reduced their emissions by 20, 30, 
50, 60 percent. We are just talking about trying to grab 20 
percent over 10 years. They have reduced it in the last 5 or 10 
years over that amount, and they are making money, and they 
have increased their market share.
    So, I would like to ask you to take a look at those 
companies, factor in that practical experience, because I think 
it speaks volumes to what the potential growth here is for us. 
And, what I fear is--I do not have the article still, we 
submitted it--but where a lot of business people are telling 
me, people like Lewis Hay, who is the chairman of Florida Power 
and Light, one of the biggest utilities in America, Jim Rogers, 
chairman and chief executive officer of Duke Energy, who 
happens to be also the head of the American Competitiveness 
Council--his job is to make America competitive. He believes 
that if we just sit here the way we are sitting here and do not 
do this, China, India, a host of other countries are going to 
clean our clock economically.
    China has set out to be the number-one country in electric 
car production. They have tripled their wind power targets for 
next year. They have set a higher standard for automobile 
emissions than we have. Now, I agree with you, they do not 
always have the strongest enforcement, and we need to 
strengthen the enforcement structure as we go to Copenhagen and 
work at this.
    But the fact is, in terms of raw job creation and moving 
into this sector, if we do not go there, somebody has to 
explain, to at least this Senator, where America's great job 
growth is going to come from and what products we are going to 
compete in, because the fastest-growing sector of every economy 
anywhere in the world today is in the energy alternative, 
renewable, and efficiency sector.
    And in the 1990s, when Americans made a lot of money, we 
had a technology boom. It was a $1-trillion market, and there 
were 1 billion users. The energy market is a $6-trillion 
market, and there are 6 billion potential users.
    If we do not lead in this, I fear the naysayers are 
stopping our ability to embrace America's next stimulus 
package, if you will, which is the movement into this pricing 
of carbon, and other countries are going to beat us to the 
technologies, and we are going to be sitting there sucking 
wind.
    Maybe you want to respond to that.
    Dr. Green. Well, thank you, Senator. First of all, I am 
very glad to hear you say that you do not believe in unilateral 
action, and I would welcome further discussion of the energy 
intensity question with you because it is entirely possible--as 
you said, you can reduce energy intensity and reduce the growth 
in greenhouse gas emissions. But, on that, you can still grow 
tremendously in your total actual output of emissions.
    I am all in favor of genuine efficiency. I have no problem 
with genuine efficiencies where there are both energy 
efficiency gains and economic efficiency gains. But, when you 
have energy efficiency gains that are not economic, you simply 
raise your costs of goods and services; it is essentially an 
argument. You can foster those changes through government 
incentives, but at the end of the day, you have taken a step 
that is non-ecomonic and you have, therefore, lost money to 
your economy that otherwise would have been better deployed 
elsewhere. That is what markets do, they direct capital to its 
optimum use. The more you distort those markets, the less 
optimal the use is and the less your economy grows.
    As for the cost of inaction, I was a reviewer on the third 
assessment part of the IPCC. I looked at the question of what 
the impacts are. At 2 degrees Centigrade there are very few 
impacts, in fact, negative, and there are quite a few positive. 
You do not have significant impact until you reach 3 degrees or 
higher Centigrade. And it is my opinion, in my assessment of 
the literature, that we are not likely to reach those levels.
    On the other hand, my latest study, which I will be glad to 
submit for the record, lays out an entire strategy of building 
social resilience. In the United States, building resilience is 
climatic resilience for exactly the issues you raised: what 
happens when that snowpack does not come in a certain area; 
what happens if sea level rises in a certain area; what happens 
if you have increased droughts or heavier rainfalls in certain 
areas? Those can be dealt with completely outside of the carbon 
control framework.
    I have a study that details exactly how you would do that. 
I will be glad to submit it for the record and come to your 
office and brief you on it.
    [The study appears in the appendix on p. 125.]
    Senator Kerry. I would be happy to. Well, I need to run in 
a moment, but can I cede to you afterwards? How long are you 
going to be, do you know? Please, go ahead.
    Senator Hatch. What bothers me a lot is that, when I was 
chairman of the Labor and Human Resources Committee, now called 
the Health, Education, Labor and Pensions Committee, I used to 
go over to Geneva to the ILO, the International Labor 
Organization.
    Now, a lot of these nations signed up for all of the 
conventions. We did not. We only signed up for, I think, five 
or six of them at the time, and we have not signed up for many 
more since then. But they signed up for these wonderfully 
glowing conventions that they never lived up to. What I am 
concerned about, yes, I personally believe China may very well 
show up at Copenhagen and say, well, we are for all of this, 
but it is not going to make any difference in what they do.
    Now, on this committee, I have worked very hard to have tax 
credits for wind, solar, geothermal, nuclear, hybrid cars, 
plug-in hybrid cars, and electrical cars. This is something I 
have worked very hard on. And all I can say is, the more I get 
into some of those energy sources, the more I find they are 
extremely expensive compared to oil, gas, and coal, and that 90 
to 95 percent of our total energy needs to come from oil, gas, 
and coal.
    So, as a practical matter, I am very concerned. I think it 
is wonderful to want to have the world to all live in 
accordance with the globalization approach towards this, but my 
experience in the 33 years I have been here is that, if we 
commit to it, we will live up to it, but a lot of the countries 
do not. Is that pretty much the way you feel?
    Dr. Green. If I may, Senator, thank you. That is a very 
important question. I agree with you. I like all the new 
technologies, myself. I tried to distill ethanol back when I 
was a teenager so I could use it to run in our car in 1973, but 
the BATF would not license me. It is quite expensive.
    I am sorry. I just lost my train of thought there; thinking 
about ethanol now takes my point away.
    These technologies are expensive, and that will harm our 
economic growth. But your point about the treaties is vitally 
important. This is often misunderstood. Canada, for instance, 
can agree to a target, and, if they do not do anything, they 
cannot be sued into compliance by their own government. The 
U.S. is unique in the status it gives treaties. When we sign a 
treaty, we live up to it. Other countries can sign treaties and 
not live up to them.
    That is a fundamental difference that makes the United 
States hesitant to embrace treaties as a general rule, and I 
think wisely, because treaties have a very high status in 
American law that is not necessarily reflected in the other 
countries.
    Senator Kerry. Well, actually, Dr. Green, that is not 
entirely true. I am sorry.
    Well, let me tell you why it is not, Senator, because I was 
at the treaty signing, which we ratified unanimously in the 
U.S. Senate, the 1992 Framework Convention which George Herbert 
Walker Bush negotiated, and we did it in Rio, and it has been 
18 years since then, or whatever, and we have not done a thing 
to meet it.
    In fact, the last 8 years, emissions in the United States 
of America, in greenhouse gases, went up 4 times faster than in 
the 1990s. So, that is the reason we are talking about the need 
to move to a mandatory reduction, because we did not, and 
nobody else did either. A few people tried, here and there. So, 
you just cannot throw that stuff out there like that and say we 
do it, they do not, blah, blah, blah.
    Look, you do not accept that you have to hold it at 2 
degrees. You may know something that thousands of other 
scientists do not. They won a Nobel Prize, you and I did not, 
and they won a Nobel Prize for their work that said we have to 
hold it to 2 degrees Centigrade.
    The G-20 just went to Italy and came out ratifying that we 
have to hold it to 2 degrees Centigrade. Now, maybe you know 
something I do not about where the tipping point is. But I have 
a lot of scientists whom I respect--from John Holdren, who is 
now the Science Advisor to the President, to Jim Hansen over at 
NASA, and a bunch of others--who tell us we have a 10-year 
window to try to meet the standard of keeping the temperature 
from rising over 2 degrees Centigrade or you reach the tipping 
point.
    Now, is the tipping point at 2.2, 2.3, 2.5? I do not know. 
I do not think they would tell you if they know. But they know, 
because of the consequences of every model that they have 
looked at, that that is what begins to happen, and all of the 
evidence is coming back faster and to a greater degree than 
they predicted, underscoring the predictions they have made.
    At some point you have to step back and say these guys are 
making sense, because what they said is going to happen is 
happening, and it is happening faster and at a greater risk. To 
wit, the Chinese, I think Senator Hatch said they do not want 
to abide by it or they do not care about it. The Chinese are 
petrified by what is happening in the context of global climate 
change. The reason? The Himalayan glaciers are disappearing, 
and the predictions are they are going to be gone by the year 
2035. Now, do I know what will happen in 2035? No, but I know 
what has happened. Every prediction about when the Arctic ice 
was going to melt has been accelerated to the point now that, 
instead of 30 years down the road, it is now 2013 that they say 
we will have an ice-free Arctic in the summer. That is what 
their predictions are.
    Dr. Green. I think that has been withdrawn. You might want 
to look it up.
    Senator Kerry. I have not seen that withdrawn. In fact, 
they had an ice-free passage during last summer. I have not 
seen that withdrawn. You send me something that says that has 
been changed. All right? And we will make it part of the record 
here.
    Dr. Green. I will do that, Senator. Thank you.
    Senator Kerry. So, the bottom line. Every recent scientific 
update, and I get them periodically, I ask them to come in and 
say what is happening, is it less than, what is the rate, and 
without exception they look at me and they say, Senator, I 
cannot even talk about some of the things that are happening 
today publicly, because people will not believe it, like 
columns of methane rising out of the ocean floor that you can 
light a match and it will explode or ignite where it bursts 
into the open air because the permafrost is melting. We just 
voted $400 million to move Newtok, AK. The citizens voted to 
move it inland because of what is happening in terms of the ice 
melt. There are, I think, some 400 villages threatened now in 
Alaska. Ask Lisa Murkowski or Mark Begich what is happening in 
Alaska.
    So, all I can say to you is that we have to employ the 
precautionary principle here. If I have a few thousand 
scientists over here, and you have a few others over there, the 
weight is pretty heavy to say to me that, as a public person, I 
ought to implement the precautionary principle. And if I have 
chief executives, like Jeff Immelt and Lewis Hay and Chad 
Holliday of DuPont, and a bunch of other people who run Fortune 
500 companies telling me, Senator, we have to price carbon and 
we want certainty in the marketplace, I am going to listen, 
unless you can give me an overpowering reason why those guys 
are all wrong, and I do not think you have.
    Dr. Green. All I can say, Senator, is I read the IPCC 
reports, the Science of Climate Change report, in its totality, 
cover to cover, and I follow the latest journals. My doctoral 
degree is in environmental science and engineering. I daresay I 
am capable of understanding the literature and forming my own 
opinion.
    Senator Kerry. Has your study been peer-reviewed?
    Dr. Green. No, I do not work in the peer-reviewed 
literature, Senator. I do not work for a university.
    Senator Kerry. So, you do not submit your studies for any 
peer review?
    Dr. Green. No.
    Senator Kerry. You realize that there are something like 
2,000 or 3,000 studies all of which concur which have been 
peer-reviewed, and not one of the studies dissenting has been 
peer-reviewed.
    Dr. Green. That is not correct, Senator.
    Senator Kerry. Show me a peer-reviewed study.
    Dr. Green. I will send you a list.
    Senator Kerry. Please, because nobody else has.
    Dr. Green. I will be glad to.
    Senator Kerry. And, in Al Gore's book, he cites the same 
fact, that nobody has ever contradicted it with a peer-reviewed 
study.
    Dr. Green. I will be glad to send you some studies, 
Senator.
    Senator Kerry. I look forward to it.
    We stand adjourned. Thank you.
    [Whereupon, at 12:05 p.m., the hearing was concluded.]
                            A P P E N D I X

              Additional Material Submitted for the Record

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                             Communications

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