[Senate Hearing 111-1204]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1204

   ECONOMIC OPPORTUNITIES FOR AGRICULTURE, FORESTRY COMMUNITIES, AND 
              OTHERS IN REDUCING GLOBAL WARMING POLLUTION

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 14, 2009

                               __________

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



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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                     ONE HUNDRED ELEVENTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico
JEFF MERKLEY, Oregon
KIRSTEN GILLIBRAND, New York
ARLEN SPECTER, Pennsylvania

                    Bettina Poirier, Staff Director
                 Ruth Van Mark, Minority Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page

                             JULY 14, 2009
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     6
Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee..    71
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................    72
Barrasso, Hon. John, U.S. Senator from the State of Wyoming......    74
Crapo, Hon. Mike, U.S. Senator from the State of Idaho...........    75
Sanders, Hon. Bernard, U.S. Senator from the State of Vermont....    94
Merkley, Hon. Jeff, U.S. Senator from the State of Oregon........    95
Gillibrand, Hon. Kirsten, U.S. Senator from the State of New York   118
Udall, Hon. Tom, U.S. Senator from the State of New Mexico.......   172
Cardin, Hon. Benjamin L., U.S. Senator from the State of 
  Maryland, prepared statement...................................   184
Vitter, Hon. David, U.S. Senator from the State of Louisiana, 
  prepared statement.............................................   185

                               WITNESSES

Hopkins, Jeffrey W., Principal Adviser, Energy and Climate 
  Policy, Rio Tinto..............................................    85
    Prepared statement...........................................    87
    Response to an additional question from Senator Crapo........    93
Hohenstein, Bill, Director, Global Climate Change Program, U.S. 
  Department of Agriculture......................................    96
    Prepared statement...........................................    98
    Responses to additional questions from:
        Senator Baucus...........................................   103
        Senator Cardin...........................................   106
    Response to an additional question from Senator Klobuchar....   107
    Responses to additional questions from:
        Senator Inhofe...........................................   108
        Senator Crapo............................................   114
Krupp, Fred, President, Environmental Defense Fund...............   119
    Prepared statement...........................................   121
    Response to an additional question from:
        Senator Cardin...........................................   134
        Senator Klobuchar........................................   136
    Responses to additional questions from Senator Inhofe........   137
    Response to an additional question from Senator Crapo........   144
Stallman, Bob, President, American Farm Bureau Federation........   145
    Prepared statement...........................................   147
    Response to an additional question from Senator Klobuchar....   160
    Responses to additional questions from:
        Senator Inhofe...........................................   162
        Senator Crapo............................................   164

                          ADDITIONAL MATERIAL

``Fool Me Twice, Shame on Me,'' article from the Center for 
  American Progress..............................................   187

 
   ECONOMIC OPPORTUNITIES FOR AGRICULTURE, FORESTRY COMMUNITIES, AND 
              OTHERS IN REDUCING GLOBAL WARMING POLLUTION

                              ----------                              


                         TUESDAY, JULY 14, 2009

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The full committee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Barbara Boxer 
(chairman of the full committee) presiding.
    Present: Senators Boxer, Inhofe, Alexander, Barrasso, Bond, 
Cardin, Crapo, Gillibrand, Merkley, Sanders, and Udall.

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

    Senator Boxer. Our hearing will come to order. I want to 
welcome everyone on the panel. We will be addressing 
opportunities for businesses and sectors like ag and forestry 
in the fight against global warming. Each member can have 4 
minutes to open.
    This is the first of three hearings scheduled for this week 
to address vital aspects of our plan for legislation that will 
avoid the ravages of unchecked global warming, create clean 
energy jobs here in America, and reduce our dependence on 
foreign oil.
    Agricultural and forestry businesses have opportunities to 
play an important role in efforts to reduce global warming. 
Changes in land use, reforestation and other activities can 
make significant reductions in global warming pollution. As an 
example, a farmer can capture the methane that is emitted by 
waste ponds or change to no-till or low-till land management or 
take other steps to increase the amount of carbon absorbed in 
soils and forests. Then that farmer can sell those documented 
reductions in emissions as an offset on an open market where it 
can be purchased.
    The farmer is paid, and the regulated entity receives 
credit toward cutting its global warming pollution. By 
providing regulated industries with a low-cost way to meet some 
of their pollution reduction requirements, offsets can be an 
important part of cutting our global warming emissions, and 
lowered costs for industry mean lower costs for family as we 
transition to a clean energy economy.
    Groups working in the farm sector have voiced their support 
for Waxman-Markey legislation, including the National 
Association of Wheat Growers, the American Farmland Trust, and 
the National Farmers Union, and I ask unanimous consent that 
their letters be placed in the record.
    [The referenced documents follow.]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Boxer. At the same time, it is essential that 
offsets in fact reduce emissions and that they can be monitored 
and verified. Making sure that offsets have integrity so that 
our clean energy jobs bill reduces pollution as it is designed 
to do is an important part of the work of this committee.
    I want to thank all of our witnesses for being here today 
to address this important subject. I think this is a very 
exciting opportunity out there posed in the form of a 
challenge. And I look ahead and I see if we do this right, I 
see new jobs. I see new opportunities for agriculture and 
forestry. And I believe if we do the right thing, we will not 
only meet the challenge of global warming and avoid the ravages 
of global warming, which have been laid out by the Bush 
administration and now the Obama administration, but will 
create millions and millions of jobs.
    The last point on that, in my home State of California, 
where we are taking the lead on this, the only real growth 
sector in the last 10 years has been alternative energy, 
125,000 new jobs and 1,000 new solar companies. So we can prove 
the fact that even in this very tough recession, that is the 
bright spot in my home State. So I look forward to hearing the 
testimony today.
    At this time, I call on Senator Inhofe.

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

    Senator Inhofe. Thank you, Madam Chairman.
    Let's face it, as anyone familiar with agriculture knows, 
farming is energy-intensive business, so when the price of 
diesel, electricity or natural gas goes up, farmers know about 
it, and they don't like it, and they tell us about it.
    Farming is a business of high costs and low profit margins, 
so it is not surprising that a significant portion of the 
agriculture community opposes cap-and-trade, the purpose of 
which is to raise prices on the energy that farmers use.
    Now, if cap-and-trade achieved its intended effect, that 
is, to prevent the global climate catastrophe, then farmers 
would be the first to sign up to help. In my view, the farmers 
are practical people. When they see a problem, they want to fix 
it, and case closed.
    But if you are asking them to assume an enormous economic 
burden for a meaningless exercise, one that subsidizes big 
cities at the expense of the heartland; one that sends American 
jobs and taxpayers to India and China; one that puts American 
farmers at the disadvantage in the global marketplace, all for 
no impact whatsoever on global warming, then you will get an 
earful.
    What do I mean here? Well, the EPA Administrator, Lisa 
Jackson, stated to this committee just last week, if the U.S. 
chooses to enact cap-and-trade unilaterally without China, 
India and other developing nations which emit a significant 
portion of the world's greenhouse gases, then farmers will be 
forced to pay for a solution that doesn't work. Farmers 
understand what this means. It is all pain and no climate gain.
    Now, one thing I will note about farmers: they are great 
stewards of the land. Farmers have partnered with the Federal 
Government to improve and protect thousands of acres of 
agricultural land. But they are rightly leery of cap-and-trade 
because they suppose the environmental benefits its supporters 
claim it will create are illusory.
    Farmers are also skeptical of cap-and-trade's alleged 
economic benefits. Over the last several months, cap-and-
traders--in a desperate attempt to reverse the inexorable 
decline in public support for the Waxman-Markey bill--have 
claimed cap-and-trade will create economic opportunities for 
farmers. They say that farmers can make hefty profits by taking 
advantage of so-called offsets. These projects allow farmers to 
undertake certain agricultural practices such as no-till 
farming to keep CO2 in the ground and to get paid 
for it. But as farmers have discovered, these projects won't 
defray the increased energy costs and the devastating impacts 
caused by cap-and-trade.
    According to the Heritage Foundation, farm income would 
drop $8 billion under cap-and-trade, and offsets would make up 
less than 10 percent of the lost income. And many of the 
farmers, like fruit, vegetable, rice and cotton farmers, won't 
be able to participate in an offset program because their crops 
are simply not suitable for no-till or other practices to 
sequester CO2 in the soil. They will simply be stuck 
with significantly higher energy costs.
    Also, consider a report by the Congressional Research 
Service which recently confirmed that new EPA estimates of the 
potential for agricultural soil sequestration and no-till and 
other practices are significantly lower than the EPA 2005 
estimates. In plain English, this means that the most viable 
tool for producing offsets with soil sequestration won't be 
available for farmers in the amounts promised.
    This is not just a small adjustment. This was a major 
change by about 10-fold. I learned a good deal of this in 
letters sent by 120 agriculture groups opposing the House 
Waxman-Markey bill. This opposition, I should note, runs the 
gamut of agricultural sector, including the Farm Bureau, the 
American Farm Bureau, the Pork Producers Council, the U.S. Rice 
Federation, the National Cattlemen's and Beef Association, the 
National Chicken Council, the Council for Farmer Cooperatives, 
the American Meat Institute, and the North American Millers 
Association. And I ask that all these be made a part of the 
record.
    Senator Boxer. Without objection.
    [The referenced letters follow:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    [The prepared statement of Senator Inhofe follows:]

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

    Let's face it: as anyone familiar with agriculture knows, 
farming is an energy-intensive business with high costs and low 
profit margins. So when the price of diesel, electricity, or 
natural gas goes up, farmers really feel the pinch. So it's not 
surprising that a significant portion of the agricultural 
community opposes cap-and-trade, the purpose of which is to 
raise prices on the energy that farmers use.
    Now if cap-and-trade achieved its intended effect--that is, 
to prevent a global climate catastrophe--then farmers would be 
the first to sign up and help. Farmers are practical people; 
when they see a problem, they want to fix it, case closed.
    But if you're asking them to assume an enormous economic 
burden for a meaningless exercise, one that subsidizes the 
coasts at the expense of the heartland; one that sends American 
jobs and taxpayer dollars to India and China; one that puts 
American farmers at a disadvantage in the global marketplace--
all for no impact whatsoever on global warming, then you'll get 
an earful. And rightly so.
    What do I mean here? Well, as EPA Administrator Lisa 
Jackson admitted to me last week, if the U.S. chooses to enact 
cap-and-trade unilaterally, without China, India, and other 
developing nations, which emit a significant portion of the 
world's greenhouse gases, then farmers would be forced to pay 
for a solution that doesn't work. Farmers understand what this 
means: it's all pain for no climate gain.
    Now one thing I'll note about farmers: they are great 
stewards of the land. Farmers have partnered with the Federal 
Government to improve and protect thousands of acres of 
agricultural lands. But they are rightly leery of cap-and-trade 
because the supposed environmental benefits its supporters 
claim it will create are an illusion.
    They are also skeptical of cap-and-trade's alleged economic 
benefits. Over the last several months, cap-and-traders, in a 
desperate attempt to reverse the inexorable decline in public 
support for the Waxman-Markey bill, have claimed that cap-and-
trade will create economic opportunities for farmers.
    They say that farmers can make a hefty profit by taking 
advantage of so-called ``offsets.'' These projects allow 
farmers to undertake certain agricultural practices, such as 
no-till farming, to keep CO2 in the ground, and get 
paid for them. But as farmers have discovered these projects 
won't fully defray the increased energy costs and the 
devastating macroeconomic impacts caused by cap-and-trade.
    According to the Heritage Foundation, farm income could 
drop by $8 billion under cap-and-trade--and offsets will make 
up less than 10 percent of this lost income. And many farmers, 
like fruit, vegetable, rice and cotton farmers, will not be 
able to participate in an offset program because their crops 
are simply not suitable for no-till or other practices to 
sequester CO2 in soil. They will simply be stuck 
with significantly higher energy costs.
    Also consider a report by the Congressional Research 
Service, which recently confirmed that new EPA estimates of the 
potential for agricultural soil sequestration (no-till or other 
practices) are ``significantly lower than EPA 2005 estimates.'' 
In plain English, this means that the most viable tool for 
producing offsets--soil sequestration--won't be available for 
farmers in the amounts promised by cap-and-trade supporters.
    I learned a good deal of this from the letters sent by 120 
agricultural groups opposing the Waxman-Markey bill. The 
opposition, I should note, runs the gamut of the agricultural 
sector, including: the Farm Bureau, the Pork Producers Council, 
the USA Rice Federation, the National Cattlemen's Beef 
Association, the National Chicken Council, the Council of 
Farmer Cooperatives, American Meat Institute, and the North 
American Millers Association. I could go on and on but reading 
the list could take up the entire hearing. So I ask that these 
letters be added into the record.
    What's clear to farmers is that cap-and-trade is bad for 
business and meaningless for the environment. It raises prices, 
destroys jobs, and hits farm economies in the heartland. What 
farmers need, and what the Nation needs, is an energy policy 
that makes energy clean, affordable, and reliable, and one that 
increases the energy we can produce right here at home.

    Senator Boxer. Thank you, Senator.
    Let me see, my list here, by order of arrival, next would 
be Senator Alexander.

          OPENING STATEMENT OF HON. LAMAR ALEXANDER, 
            U.S. SENATOR FROM THE STATE OF TENNESSEE

    Senator Alexander. Thank you, Madam Chairman.
    Welcome to our witnesses.
    A lot of the prosperity of the United States of America has 
depended on two things: cheap energy and cheap food. That has 
helped us have a high standard of living, create jobs, and have 
the most productive agriculture operations in the world.
    We are here over the next several days to have hearings, 
and I appreciate the Chairman having these on the effects of 
climate change and global warming. I am one Senator who 
believes climate change is a problem and that humans are 
causing it, and that we need to deal with it.
    I think the House-passed bill, though is exactly wrong. It 
is a $100 billion job killing national energy tax that will add 
another utility bill to every American family, and no American 
families need, I mean, farmers are the first people who don't 
need another utility bill because, as Senator Inhofe said, 
farming is one of the most energy-intensive operations we have. 
And every time you add utility bills or costs to existing 
utility bills, prices go up.
    I mean, when the price of gasoline goes up, so does the 
price of seed and feed, and operating all the machines on the 
farm. And the cap-and-trade program deliberately raises the 
price of gasoline. Its purpose is to raise the price of energy.
    If the price of electricity goes up, a lot of the machines 
that go on the farm cost more to operate. If the price of 
natural gas goes up, and we saw it just about 4 years ago go 
up, farmers all over America felt the pain of the high 
fertilizer costs, and that increased the costs of their 
operations.
    And of course, all that increases the cost of food to all 
of Americans. Setting aside land makes land more scarce, which 
is a part of this plan. And that raises the cost of food. When 
gasoline goes up, it costs more to haul the food to the 
wholesaler, and then to the retailer. Sara Lee, a big food 
processing operation in Tennessee that employs 2,000 people 
said if this House-passed bill passes, that they will delay 
their expansions because the cost of food is up.
    So I think we need to stop and think about whether it is 
really the wisest price and policy to try to attack climate 
change by deliberately raising the price of energy, especially 
this cap-and-trade that came from the House is like if you have 
a fly swatter right in front of you, and there is a fly and you 
use a noodle to try to get it. The cap-and-trade effect on fuel 
is about the most inefficient way you could deal with fuel 
because it deliberately raises the price of gasoline, for 
example, without reducing the carbon.
    We have had that testimony before this committee. A better 
way to deal with carbon from fuel would be a low carbon fuel 
standard as people switch to electric cars or to biofuels or 
other things, not deliberately raise the price of gasoline.
    So there is a better way to do all this. Yesterday, I 
offered a blueprint for 100 new nuclear power plants in the 
next 20 years. Republican Senators have proposed 100 new 
nuclear power plants in the next 20 years. That is the cheap 
energy solution. I mean, high cost energy such as that from 
Waxman-Markey would send jobs and food producers overseas in 
looking for cheap energy to create products and to create food.
    So 100 new nuclear power plants, support for electric cars, 
offshore exploration, and doubling energy R&D for renewable 
energy, that is the low cost plan to deal with climate change 
instead of a new utility bill for every American family.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you very much, Senator.
    Our next speaker is Senator Bond.

        OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, 
            U.S. SENATOR FROM THE STATE OF MISSOURI

    Senator Bond. Thank you very much, Madam Chair, and thanks 
to the witnesses for coming today. It is a timely hearing 
because just yesterday I received a disturbing report that the 
proposed cap-and-trade legislation will cost the average 
Missouri farmer up to $30,000 per year.
    Now, we have long suspected that higher energy prices from 
cap-and-trade will hurt farmers with higher production costs. 
In President Obama's own words, electricity prices will 
necessarily skyrocket under cap-and-trade.
    As has been said, farmers use energy in just about 
everything they do. Diesel fuel powers tractors and combines. 
Natural gas is the key ingredient to making fertilizer and 
drying grain. Farm equipment uses energy also for irrigation 
pumps, as well as transportation.
    A new report by the Food and Agricultural Policy Research 
Institute at the University of Missouri--Columbia, along with 
the Iowa State University details how there would be tens of 
thousands of dollars of cost, and I ask, Madam Chair, that this 
be included as a part of the record.
    Senator Boxer. Sure. Will do.
    [The referenced report was not received at time of print.]
    Senator Bond. After examining farm production costs at 
representative farms across the State, we found that Waxman-
Markey would drastically increase farmer costs. A 
representative farm in Missouri, a 1,900-acre feed grain, 
soybean farm in Lafayette County east of Kansas City, would 
face $11,649 in higher energy costs in 2020, rising to $30,152 
in 2050. There would be higher costs for seed, fertilizer, 
chemicals, custom hire and rental, machinery, fuel, drying and 
irrigation energy, machinery repairs and operating interests.
    I can only tell my colleagues here on the committee, many 
of whom come from the coast and may not be familiar with farm 
costs, that $11,000 rising to $30,000 per farm is a jaw 
dropping number for farmers. Forcing farmers to pay this amount 
for cap-and-trade would be a bit more than the postage stamp we 
were told earlier. It would be unconscionable.
    Some say that cap-and-trade is an opportunity that will 
benefit farmers, but those claims are popping as quickly as 
they are made. The Des Moines Register said plans to cut 
greenhouse gas emissions have been sold to farmer groups as a 
potential cash cow for growers, but new government estimates 
suggest farmers would make a lot less money than previously 
believed.
    And as the Ranking Member pointed out, the CRS said a 
particular concern to many in U.S. agriculture is EPA's current 
estimates of the mitigation potential from agricultural soil 
activities such as conservation and no-till are shockingly low, 
only about 10 percent of EPA's estimates.
    Some suggest that big carbon gains are to be had from 
planting trees. Now, I am a big fan of planting trees. I have 
planted over 10,000 trees by hand on some land in Mexico, 
Missouri, including about 200 Asian-American chestnuts. And as 
a side note, if anybody wants to fight global warming, I will 
give you some information on where you can acquire my trademark 
seedlings and make a little cash on the side.
    But I can tell you, as a commercial proposition, a Missouri 
nursery quoted us a price of $1,200 per acre to plant eastern 
cottonwood trees, ideal for the Lafayette County farm we talked 
about. But planting the trees would cost over $2 million. 
Farmers would then earn, assuming a 2.6 ton per acre 
sequestration rate, at $28 a ton of carbon, only $75 in 
sequestration revenues for the $1,200 per acre cost.
    Now, otherwise a farm would make $750 per acre. So no 
farmer will figure that that pencils out to lose $675 for what 
they could get.
    So I will, Madam Chair, I will submit the rest of my 
statement for the record, but I can tell you that this cash cow 
is really a pig in a poke.
    More details later.
    [The prepared statement of Senator Bond was not received at 
time of print.]
    Senator Boxer. Senator, I look forward to those details 
because you were so unclear on where you stand.
    [Laughter.]
    Senator Boxer. I just want to place in the record at this 
time a document that shows the top four agriculture States. 
They are California, Texas, Iowa and Nebraska. I just want to 
place that in the record to clear up something that was said 
about the coast.
    [The referenced document was not received at time of 
print.]
    Senator Boxer. All right.
    Senator Bond. You can plant trees, you can plant chestnuts 
in----
    Senator Boxer. Well, actually, Senator, if you want to go 
over the details of this, California sells 11.4 percent of all 
the agricultural production. That is well over Texas, which is 
second at 7.1 percent. So if you want to come to California, 
come with me and visit my farmland and visit. We have 
everything from dairy farmers to, you know, 200, 300 different 
specialty crops.
    I think it is important that the facts be clear that the 
No. 1 agricultural production State is California, a State I 
know well and love very much.
    Senator Barrasso.
    Senator Bond. I agree with you. I am just sorry. I don't 
want to see your agriculture crippled.
    Senator Boxer. Well, I think our agricultural people will 
speak for themselves through Senator Feinstein and myself, and 
the 52 or 53 other Representatives they have. But thank you for 
offering to speak for them.
    Senator Barrasso.

           OPENING STATEMENT OF HON. JOHN BARRASSO, 
             U.S. SENATOR FROM THE STATE OF WYOMING

    Senator Barrasso. Thank you very much, Madam Chairman.
    The Waxman-Markey bill may create green jobs. It may even 
create green jobs in the agriculture sector. If it does, great. 
We need green jobs in my State. Wyoming welcomes the 
possibility of them.
    But this Waxman-Markey bill also costs jobs, and Americans 
want all jobs, not just some. They don't want to lose the jobs 
they have with the promise that they may get a green job in 
exchange in the future.
    The Administration says the Waxman-Markey bill will create 
millions of new jobs. This Administration also promised that 
after we passed the economic stimulus package, we would create 
or save 3.5 million jobs. Well, since the passage of that bill, 
unemployment has reached 9.5 percent. Last month, 467,000 
people lost their jobs.
    The Administration's economic expert said that the 
unemployment would not exceed 8 percent. It has by a lot. Were 
they wrong? You bet. Vice President Biden acknowledged 
Administration officials were too optimistic earlier this year 
when they predicted the unemployment rate would peak at 8 
percent. Vice President Biden said the Administration ``misread 
the economy.''
    Well, is it possible that the Administration is also 
misreading the economic predictions of millions of new jobs 
being created in this bill? The Administration failed to make 
the grade on the $787 billion stimulus package. It is a fact 
that this legislation will cost jobs in our economy. That is 
why there is language in the bill to retrain workers who lose 
their jobs. Where will those job losses come from?
    Well, according to Robert Murray, who is Chairman, 
President and CEO of Cleveland-based Murray Energy Corporation, 
all Americans in the Midwest, South and Rocky Mountain regions 
will be the most dramatically affected because the climate 
change legislation will destroy the Nation's coal industry, and 
low-cost electricity is what provided for these regions for 
generations. He goes on to say wealth will be transferred away 
from almost every State to the West Coast and New England.
    I believe that Waxman-Markey will create some jobs and will 
destroy many others. There won't be a net job creation in my 
State and many rural States with economies tied to the mineral 
industry and dependent on fossil fuels such as coal and natural 
gas. Jobs will be lost under this legislation, jobs in my 
State, jobs in other rural States dependent on fossil fuels.
    And we need more jobs in all 50 States. We need to keep the 
ones we have. Americans want all of these jobs and more. We 
need them all.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you very much.
    Senator Crapo.

             OPENING STATEMENT OF HON. MIKE CRAPO, 
              U.S. SENATOR FROM THE STATE OF IDAHO

    Senator Crapo. Thank you very much, Madam Chairman. And I 
appreciate the opportunity to be here today to discuss these 
critical issues.
    I share the concerns of my colleagues about the impact of 
the cap-and-trade legislation on agriculture and forestry. 
Although it is very clear that there are offsets that can be 
achieved and utilized--and I want to talk about those in just a 
moment--but I think it is important that we not let this 
legislation and its implementation turn into a mechanism to 
force certain planting or operating decisions that may not be 
beneficial to particular agricultural or forestry operations.
    As I indicated, as we study this bill, I have become 
increasingly concerned that the costs of cap-and-trade will 
outweigh the benefits to foresters and farmers. Agriculture is 
an extensive energy industry, and for some crops energy inputs 
account for as much as 70 percent of the cost of production. 
And my concerns are that these input costs under the cap-and-
trade such as gasoline, diesel and electricity will increase 
and surpass the uncertain monetary benefits from the offsets.
    Additionally, increases in the cost of natural gas will 
result in higher fertilizer prices. And to put it in 
perspective, in 2008 farmers and ranchers spent $60 billion on 
fuel, electricity, fertilizer and chemicals.
    I look forward to the testimony that is going to be 
provided today. I am very focused this morning on issues 
relating to the forestry piece of this issue, as well as the 
agriculture side of it. Responsibly managed domestic forests 
have a golden opportunity in this legislation to participate in 
reduction of greenhouse gases. And although I indicated I have 
very big problems with the legislation, I think we have to look 
at the issues of projects like afforestation and reforestation 
and avoid the deforestation of forests across America.
    And additionally, wood products that harness carbon should 
be eligible for participation in the offsets market.
    Madam Chairman, because domestic forests are ideal 
participants in reducing global warming pollution, I am a 
little disappointed that today don't have a witness from the 
forestry industry to explain the benefits and the challenges of 
domestic participation in this emerging market.
    I do have some comments that have been provided by the 
Alliance of Forest Owners, the National Alliance of Forest 
Owners, and would ask if the Chairman would allow me to submit 
their comments for the record so the committee can have the 
benefit of their input on this issue.
    Senator Boxer. Absolutely. Without objection.
    Senator Crapo. Thank you very much.
    [The referenced document follows:]
    
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    Senator Crapo. Madam Chairman, again I look forward to the 
witnesses' testimony and to the information we will be provided 
today. I do have the strong concerns that I indicated about 
whether this legislation will, in the end, result in a higher 
cost, rather than a benefit to the agriculture and forestry 
industries, but I am willing to listen to the witnesses and see 
if we can find a way to create a win-win situation for 
everyone.
    Thank you, Madam Chairman.
    [The prepared statement of Senator Crapo follows:]

                     Statement of Hon. Mike Crapo, 
                  U.S. Senator from the State of Idaho

    Madam Chairwoman, thank you for the opportunity to share a 
few words. I would also like to thank the witnesses for being 
here with us today to share your testimony on including 
agriculture and forestry in reducing emissions.
    For many in agriculture and forestry, carbon offsets 
represent opportunities to obtain more value out of the land 
and new land management technologies in addition to the 
possibilities of reducing the costs of a cap-and-trade program. 
Agriculture and forestry offsets are already contributing 
financially to some farms and private forestry operations 
through no-till, anaerobic digesters and other carbon 
sequestration techniques. Estimates from EPA indicate that 20 
percent of all greenhouse gas emissions in the U.S. can be 
sequestered in agriculture and forest lands.
    In the 2008 Farm Bill, Congress recognized the potential 
for farms and forests to participate in providing ecological 
services to society through the creation of the Office of 
Ecosystem Services and Markets at USDA. OESM is working to 
establish technical guidelines for the measuring, reporting and 
registration of the environmental services provided through 
various land management practices. I understand USDA's 
testimony today will touch upon these issues, and I look 
forward to hearing this testimony.
    Responsibly managed domestic forests have a golden 
opportunity to participate in the reduction of greenhouse 
gases. Through projects like afforestation, reforestation, and 
avoided deforestation, forests across America can participate 
in offsets markets. States like Idaho, with unnaturally large 
fuel loads, are ideal locations for carbon sequestration 
through forest health projects that result in net carbon 
sequestration. Additionally, wood products that harness carbon 
should be eligible for participation in the offsets market.
    Because domestic forests are ideal participants in reducing 
global warming pollution, I must express my disappointment in 
not having a witness today from the forest industry to explain 
the benefits and challenges of domestic participation in this 
emerging market. This hearing would have provided a perfect 
opportunity for this committee to learn more about the 
opportunities that we have here in the U.S. to care for our 
forests and to improve our air quality. In lieu of a witness, I 
would like to ask unanimous consent to include the National 
Alliance of Forest Owners' (NAFO's) testimony in the record so 
that the committee has the opportunity to more thoroughly 
review this issue from the perspective of domestic forestry.
    While offsets can potentially benefit our farmers and 
foresters, I have some major concerns with the overall effect 
of cap-and-trade legislation on these industries. For example, 
it is important that legislation and implementation do not turn 
into a mechanism to force certain planting or operating 
decisions that may not be beneficial to a particular 
agriculture or forestry operation.
    Lately, I have become increasingly concerned that the costs 
of cap-and-trade will outweigh the benefits to farmers and 
foresters. For example, I have heard that some crops like 
potatoes and certain specialty crops are not suitable for no-
till or other farming practices that sequester carbon in the 
soil. I also worry that livestock producers will be unable to 
feasibly purchase and utilize anaerobic digesters, which carry 
a price tag of $2 million-$3 million.
    Agriculture is an energy intensive industry. For some 
crops, energy inputs account for 70 percent of production 
costs. I have major concerns that input costs under cap-and-
trade such as gasoline, diesel, and electricity will increase 
and surpass uncertain monetary benefits from offsets. 
Additionally, increases in the cost of natural gas will result 
in higher fertilizer prices. To put it in perspective, in 2008, 
farmers and ranchers spent $60 billion on fuel, electricity, 
fertilizer and chemicals.
    I look forward to the testimony outlining the benefits to 
farmers and foresters of cap-and-trade, but I also would like 
to ensure this committee engages in a well rounded discussion 
of the costs associated with cap-and-trade as well. We all know 
that for farmers and foresters to be able to assist with 
reducing emissions, they must be able to remain on the land.

    Senator Boxer. Yes. We are going to start hearing from the 
witnesses, and if any colleagues on either side of the aisle 
come to this hearing, we will give them 3 minutes to make a 
statement.
    We are going to first hear from Jeffrey Hopkins, Principal 
Adviser, Energy and Climate Policy, Rio Tinto. And for those 
people who don't know, Rio Tinto is one of the world's largest 
mining companies, and it has operations in the following 
States: Colorado, Wyoming, Montana, Utah, Michigan, Arizona, 
California, Vermont, Kentucky.
    And from what we understand, they have had a corporate 
climate policy since 1998. So all these predictions of gloom 
and doom, we are glad you are here, and we would love to know 
how you are doing these past years as you have implemented such 
a policy.
    And welcome, sir.

STATEMENT OF JEFFREY W. HOPKINS, PRINCIPAL ADVISER, ENERGY AND 
                   CLIMATE POLICY, RIO TINTO

    Mr. Hopkins. Thank you.
    Madam Chair and members of the committee, Rio Tinto greatly 
appreciates the opportunity to testify today. My name is Jeff 
Hopkins, and I am Principal Adviser on Climate and Energy 
Policy for Rio Tinto, the largest diversified mining company in 
the U.S. and one of the largest diversified mining companies in 
the world.
    Our U.S. assets include coal holdings in Colorado, Wyoming 
and Montana; copper in Utah; copper projects in Michigan and 
Arizona; borates in California; and talc in Montana and in 
Vermont; as well as an aluminum smelter in Kentucky; with over 
15,000 U.S. employees, all told.
    Our objective is to be the resource developer of choice 
from the mineral exploration phase to mine closure and beyond. 
Rio Tinto's climate position recognizes and accepts the 
conclusions of the Intergovernmental Panel on Climate Change. 
Emissions of greenhouse gases resulting from human activities 
are contributing to climate change, and reducing these 
emissions is an important international goal.
    At all levels of our company, we carry out a three-part 
strategy for achieving this goal. First, we encourage all 
governments to take action to reduce emissions. In the U.S., 
this is exemplified by our participation in the U.S. Climate 
Action Partnership, or USCAP, a group of 25 businesses and five 
NGOs that released its Blueprint for Legislative Action last 
January.
    Second, we take a proactive stance at our own operations to 
reduce greenhouse gas emissions.
    Third, we develop low-emission pathways for our products, 
which include many commodities with positive greenhouse gas 
reduction benefits in use, but which are energy and greenhouse 
gas intensive in production.
    Offsets, the subject of today's hearing, play an important 
role in this strategy. I will be happy to tell you how. But 
first, what is an offset? An offset is a reduction in 
greenhouse gas emissions from an unregulated--that is to say an 
uncapped--entity, which can be marketed to a regulated entity. 
That is what an offset is.
    Offsets are potentially sold by regulated entities such as 
entities with farm or forest land use emissions to regulated 
entities, such as Rio Tinto, that have an obligation to 
purchase and submit an allowance for each ton of greenhouse gas 
emissions.
    For some perspective, the recently passed House bill 
proposed to regulate about 85 percent of U.S. emissions, 
leaving 15 percent of emissions unregulated and potentially 
available to supply offsets, including reductions from 
agriculture and forestry land use emissions.
    Because climate change is mitigated equally by reductions 
from regulated or unregulated sectors, the contribution of 
offsets from unregulated sectors is in all senses equivalent to 
reductions in greenhouse gas emissions from regulated sectors.
    Offsets bring several additional economic advantages as 
well. First, reductions in unregulated sectors could come at a 
much lowered cost in the immediate term than reductions from 
regulated sectors, resulting in some very narrow direct 
benefits and some very broad indirect benefits. Entities using 
cost-efficient offsets will directly benefit by reducing their 
own emissions and their overall compliance costs. And the 
entities selling the offset, including agriculture and forest 
communities, will directly benefit as they harvest the market 
value of that reduction.
    Those who are on the sidelines to this transaction will 
indirectly benefit as well because entities choosing to 
substitute offsets for allowances bring down the price of 
allowances for everybody. As a result, allowing entities in the 
CAP sector to pursue lower cost reductions wherever they exist 
will enable us to progress farther and faster toward 
stabilizing global GHG concentrations.
    The recently passed House bill would allow up to 2 billion 
tons of domestic and international offsets to enter into the 
system each year, with up to 1 billion tons of offsets from 
domestic sources and up to 1 billion tons from international 
sources.
    U.S. EPA analysis of this bill showed that the impact of 
the 1 billion tons of international allowances alone works to 
reduce the prevailing cost of allowances by 89 percent. This 
demonstrates why Rio Tinto and USCAP call for ample offsets to 
contain the costs of climate regulation.
    Additional benefits include that international offsets 
create a funding mechanism for emission reductions in countries 
without carbon regulation.
    Senator Boxer. I am going to ask you to summarize.
    Mr. Hopkins. OK.
    We do not plan to meet our emission reductions solely 
through the use of offsets, and we will first look toward our 
own abatement opportunities. We will never be a carbon neutral 
business due to our energy-intensive nature, supplying 
essential minerals and metals that meet societal needs and 
which contribute to improvement in living standards globally. 
We are determined to deliver shareholder value. Offsets and the 
cost containment they bring are a crucial part of this overall 
strategy.
    Thank you.
    [The prepared statement of Mr. Hopkins follows:]
    
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    Senator Boxer. Thank you. That summed it up well, I think.
    We are going to hear from Senator Sanders, followed by 
Senator Merkley. Both these Senators are running back and forth 
to the Health Committee, so we really appreciate their taking 
the time.
    Three minutes each, gentlemen, if you can.

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

    Senator Sanders. Madam Chairman, thank you very much.
    And that is exactly right. We are doing the markup on 
health care right now, so I am preoccupied there.
    Let me just read a brief statement and thank all of our 
panelists for being here.
    Vermont is a unique State in many ways and benefits from 
being 75 percent forested, with more than 4.6 million acres of 
forests. Vermont also benefits from having a strong 
agricultural sector representing more than 1 in 10 jobs in our 
rural economy. Perhaps, then, it is no surprise that whether 
you measure per capita or on total carbon output, Vermont is 
also the State with the lowest carbon footprint in the United 
States.
    We need to ensure that the lessons learned from States like 
Vermont that have been leaders in early action on energy 
efficiency and environmental preservation are applied to global 
warming legislation. One way to achieve greenhouse gas 
emissions reductions is through our lands and our farms, and 
that is especially true when so many family farmers around this 
country are facing very serious economic problems. We can and 
should provide flexible incentive programs to landowners and 
farmers to achieve tangible greenhouse gas emissions reductions 
through recognized practices.
    We know that preserving forests or reforesting can 
sequester carbon dioxide emissions. We also know that there are 
ways to capture farm emissions. In Vermont, our farmers are 
working to capture methane emissions from cows by using farm 
waste to generate electricity. That is just a very, very 
exciting technology. I was at a farm last year in Addison 
County, and seeing the methane gas being produced from manure 
providing electricity for hundreds of homes, just a very 
exciting technology.
    While offsets will offer an opportunity to engage the 
forestry and agricultural sectors in emissions reductions, we 
should provide funding for targeted incentive programs that 
help small farmers and landowners who may not be engaged in 
carbon trading but can play a valuable role in helping our 
Nation meet and exceed our greenhouse gas emissions reduction 
targets.
    I look forward to working with my colleagues to make this 
happen. The bottom line is: let's not forget about family based 
agriculture in America. They can and should play a major role 
as we combat global warming.
    Thank you very much, Madam Chair.
    [The prepared statement of Senator Sanders follows:]

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

    Vermont is a unique State in many ways and benefits from 
being 75 percent forested with more than 4.6 million acres of 
forests. Vermont also benefits from having a strong 
agricultural sector representing more than 1 in 10 jobs in our 
economy. Perhaps then it is no surprise that whether you 
measure per capita or on total carbon output, Vermont is also 
the State with the lowest carbon footprint in the Nation.
    We need to ensure that the lessons learned from States like 
Vermont--that have been leaders in early action on energy 
efficiency and environmental preservation--are applied to 
global warming legislation. One way to achieve greenhouse gas 
emissions reductions is through our lands and farms. We can and 
should provide flexible incentive programs to landowners and 
farmers who achieve tangible greenhouse gas emissions 
reductions through recognized practices.
    We know that preserving forests, or reforesting, can 
sequester carbon dioxide emissions. We also know there are ways 
to capture farm emissions. In Vermont, our farmers are working 
to capture methane emissions from cows by using farm waste to 
generate electricity.
    While offsets will offer an opportunity to engage the 
forestry and agricultural sectors in emission reductions, we 
should provide funding for targeted incentive programs that 
help small farmers and landowners who may not be engaged in 
carbon trading but can play a valuable role in helping our 
Nation meet and exceed our greenhouse gas emission reduction 
targets. I look forward to working with my colleagues to make 
this happen.

    Senator Boxer. Senator, thank you so much for coming over.
    Senator Merkley.

            OPENING STATEMENT OF HON. JEFF MERKLEY, 
             U.S. SENATOR FROM THE STATE OF OREGON

    Senator Merkley. Thank you very much, Madam Chair.
    I think the title for today's hearing is very appropriate, 
Opportunities for Agriculture and Forest Communities, because 
there are substantial opportunities here as they relate to 
offsets and the practices employed in both sectors.
    Certainly, I wanted to focus a little bit on the forestry 
sector. At a recent event, our Majority Leader, Senator Harry 
Reid, called Nevada ``the Saudi Arabia of solar power,'' and 
then Senator Dorgan stood up and said, well, North Dakota is 
the Saudi Arabia of wind power. And if I was to continue that 
analogy, Oregon would be the Saudi Arabia of forest biomass.
    And indeed, we have a tremendous amount of carbon 
sequestering potential, and the management of our forest lands 
currently may be one of the worst possible practices in which 
we have millions of acres of second growth overgrown in a 
fashion which results in a lower level of carbon being captured 
in terms of the growth rate, but also a very high propensity to 
burn down, which puts all that carbon back in the atmosphere.
    So I want to make sure that we have through this bill the 
opportunity to recognize that those practices can be modified 
in ways that could be very, very helpful. But to have it work 
in the long term, and this applies to the agricultural world as 
well, we have to have a high level of integrity in the models 
that we are using for calculating the impact on carbon dioxide 
with a long-term view. And we have to have some type of 
insurance structure that maintains that if, in fact, we modify 
these practices and then this unit of forest, if you will, 
burns in a forest fire, that we capture those effects in the 
course of it.
    So I really want to emphasize this, because if we are 
really looking at a world where industrialization has been 
fueled by geological carbon being converted into atmospheric 
carbon dioxide, one way of interrupting that is to capture that 
atmospheric carbon dioxide through forests and reutilize it in 
a renewable energy system. And certainly, forest biomass both 
has a potential role in producing heat and electrical energy 
through co-generation and certainly has a potential role as 
research proceeds on cellulosic ethanol, biodiesel, biobutanol, 
and so forth.
    So if we get this right, we have quite a potential. If we 
get it wrong, we'll simply have a loophole that will make this 
whole bill irrelevant and ineffective. So I certainly 
appreciate your expertise being brought to bear on this issue, 
and I thank very much the Chair for the opportunity to come and 
speak.
    Senator Boxer. Senator, thank you. I know how busy 
everybody is. We appreciate it.
    Our next witness is Bill Hohenstein, Director, Global 
Climate Change Program, USDA.

 STATEMENT OF BILL HOHENSTEIN, DIRECTOR, GLOBAL CLIMATE CHANGE 
            PROGRAM, U.S. DEPARTMENT OF AGRICULTURE

    Mr. Hohenstein. Thank you, Madam Chair.
    Madam Chair, Ranking Member Inhofe and members of the 
committee, thank you for the opportunity to discuss the 
economic opportunities for agriculture, forestry communities 
and others in reducing global warming, focusing specifically on 
offsets.
    We recognize that the development of an offset market will 
require full partnership of relevant Federal agencies, 
including EPA, the Department of Interior, the Department of 
Energy, and others. Indeed, we are already working with other 
agencies on a variety of issues related to climate change.
    Climate change legislation presents both opportunities and 
costs for agriculture and forestry. USDA believes that the 
opportunities from climate legislation will likely outweigh the 
costs. The climate change legislation recently passed by the 
House of Representatives caps over 80 percent of U.S. 
greenhouse gas emissions. While direct agricultural emissions 
are not under the required cap in the House bill, the 
agriculture sector will face higher energy and input costs due 
to a reliance on the products that are included under the cap.
    A well designed cap-and-trade system that includes a robust 
carbon offset program and that promotes renewable energy could 
provide significant economic opportunities for landowners and 
rural communities. To be effective in addressing climate 
change, the offset actions need to be real, verifiable, 
additional, long lasting, and implemented on a broad scale.
    To give some sense of context on scale, H.R. 2454 sets a 1 
billion ton cap, a limit on the use of domestic offsets. USDA 
estimates suggest that this is roughly equivalent to 170 
million acres of trees or switching to no-till farming on 1.5 
billion acres of cropland.
    Now, farmers and landowners have many other options to 
reduce emissions and increase sequestration and do not need to 
rely solely on tree planting or changes in tillage. These 
options include nutrient management, installing anaerobic 
digesters, composting manure, improving ruminant feeds to 
reduce the generation of methane, and reducing fire risks and 
lengthening forest rotations to store greater amounts of 
carbon.
    Taken together, these practices and others have the 
potential to transform agriculture and land management within 
the United States and can provide additional environmental 
benefits as well. A number of important issues need to be 
addressed in the context of the greenhouse gas offsets program 
to ensure environmental integrity. The main considerations 
include permanence, leakage, additionality, and verifiability.
    The issue of permanence refers to the potential 
reversibility of carbon sequestration. To be effective, the 
carbon that is removed from the atmosphere and stored in plants 
and trees needs to remain out of the atmosphere, or there must 
be mechanisms in place to track and replace carbon offsets when 
reversals occur. There are a number of mechanisms for 
addressing permanence that ensure that responsibility for 
sequestered carbon is maintained over time.
    Leakage refers to shifting emissions from one place to 
another. There are several types of leakage, and leakage can 
occur within an entity. It can also occur at broad regional, 
national and international scales as well as markets respond to 
changes in production driven by the implementation of 
conservation practices. The extent to which market leakage is 
an issue will depend largely on whether the mitigation activity 
has an impact on production. There are a number of offset 
activities that will very likely have low leakage. For others, 
efforts can be made to measure or quantify the extent of 
leakage and account for it in awarding offset credits.
    To ensure the offsets are real and provide real atmospheric 
benefits, they must be additional. That is, offset credits must 
not be awarded for actions that would have happened in the 
absence of the offset policy. Given the difficulty in 
projecting a business as usual scenario for offset activities, 
measurements against a base year reference may be more 
practical to implement and less subjecting to gaming, fraud or 
interpretation.
    However, relying on a base year does not account for trends 
that would independently lead to increases or decreases in 
rates of emissions or sequestration. Projected baselines are 
uncertain but allow the reference to reflect such trends.
    H.R. 2454 as passed by the House provides approaches to 
address each of these considerations and in some cases provides 
more than one option. These approaches provide a useful 
starting point for the Senate's deliberation on the role of 
offsets.
    USDA has a number of assets which could be helpful in 
carrying out an offsets program. A summary of them is included 
in my written testimony. Whatever role USDA is asked to play as 
part of an offset program, we would look to partner with EPA, 
DOI, DOE and other agencies to ensure that the program has 
environmental integrity and provides landowners with 
opportunities to contribute to addressing climate change.
    Thank you for the opportunity to discuss these issues here 
this morning, and this concludes my prepared remarks.
    [The prepared statement of Mr. Hohenstein follows:]
    
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    Senator Boxer. Thank you very much.
    I see we have been joined by Senator Gillibrand of New 
York. We welcome her, and you have 3 minutes to make an opening 
statement.

         OPENING STATEMENT OF HON. KIRSTEN GILLIBRAND, 
            U.S. SENATOR FROM THE STATE OF NEW YORK

    Senator Gillibrand. Thank you, Madam Chairwoman.
    I just want to thank you for calling this hearing. I am 
very appreciative.
    I want to thank our witnesses.
    I serve on the Environment and Public Works Committee, but 
I also serve on the Agriculture Committee. And so I thought 
this hearing was particularly of importance to see how our 
farmers, our original green economy, can be part of the energy 
solutions that we are talking about.
    We have so many opportunities in New York in the 
agricultural sector and in the energy market sector, and there 
is a large area of confluence that I hope that we can take 
advantage of. I think some of your testimony on the cap-and-
trade policy and how we can play a role in offsets is going to 
be very important. I also am very excited about opportunities 
for secondary revenue streams for our farmers through 
cellulosic ethanol, other biofuels, methane digesters. There 
are a lot of opportunities for growth in that sector because of 
alternative energy.
    I also am interested in the role of forestry. I think that 
New York, one doesn't typically think of forests, but actually 
more than 62 percent of the State is forested. We have the 
Adirondacks and the Catskill Mountains. We have forestry all 
through western New York as well. The State's forest industry 
employs more than 60,000 New Yorkers and contributes nearly 
$4.6 billion to our economy every year.
    So as we move toward climate change legislation, I hope 
that we will also look at the roles that forests also provide. 
I know that there are technologies that are very interesting, 
particularly in cellulosic ethanol production using wood pulp 
not used in paper-making. So I want to make sure that we look 
at those when we define what alternative crops can be, not to 
exclude inadvertently forests, which don't have necessarily the 
same characteristics of a crop.
    So I look forward to this testimony. I am very grateful for 
your time and attention. And I am very grateful to the Chairman 
and the Ranking Member for their interest.
    Senator Boxer. Senator, thank you very much for coming 
over. And I know we will continue to work one on one on some of 
your concerns about New York's agriculture and how they can 
benefit from our climate change efforts.
    And so now we are going to turn to our next witness, Fred 
Krupp, President of the Environmental Defense Fund. And I think 
it is important to know that the organization has been 
participating in on the ground carbon offsets projects since 
the mid-1990s. So we really welcome you here.

 STATEMENT OF FRED KRUPP, PRESIDENT, ENVIRONMENTAL DEFENSE FUND

    Mr. Krupp. Thank you, Chairman Boxer and members of the 
committee. Thank you for inviting me to speak to you today.
    I am honored to appear before you as you begin your work on 
this historic piece of legislation.
    I would like to begin my remarks by making one point. 
Environmental Defense Fund believes that an effective climate 
solution must include agricultural offsets. American farmers, 
foresters and landowners can provide creditable emissions 
reductions while earning a new income stream, and we must give 
them that opportunity.
    Smart policies in this area, together with policies 
designed to reduce emissions from international deforestation 
and forest degradation, will provide substantial environmental 
benefits and tremendous cost savings for U.S. companies 
operating under an emissions cap.
    Now, my written testimony is quite detailed and the time 
for your right now is short. So I would like to impress this 
upon you: I know the topic of carbon offsets can be 
controversial, and advocates all around have strong feelings 
about various aspects of the program. But as we move forward, 
we cannot lose sight of the fact that we all have an enormous 
stake in achieving a strong and successful offsets program.
    The environmental reasons for this are obvious. But it 
should be equally obvious that the core elements of the offset 
program are critical benchmarks for the market that will 
ultimately put a price, a monetary value, on these tons, and a 
strong offset program means better returns for the landowners 
that participate in it.
    EDF has long advocated the use of offsets in a carbon cap-
and-trade system as a cost-effective means for regulated 
companies to meet their compliance obligations. Cost-effective 
compliance options like high-quality offsets will help get us 
where we need to go with respect to the atmosphere.
    Now, turning to the House bill, ACES, it embraces this 
point of view, relying on offsets as a key cost containment 
strategy. It allows banking of offsets credits, which increase 
opportunities for companies to build up reserves of low-cost 
compliance options that can buffer against higher or volatile 
allowance prices in the future.
    The bill also has very generous offset limits, which can be 
increased overall or shifted between international and domestic 
supplies depending on need. Separately from the offsets 
program, the ACES bill allows unlimited compliance use of 
allowances from comparably capped trading systems in other 
countries.
    These aren't just important cost management devices. These 
are vital. EPA's analysis of the ACES bill concluded that 
allowing domestic offsets to trade one for one, rather than 
five to four, as was the case in the original draft of the 
bill, lowers allowance prices by about 7 percent each year. 
International offsets are also crucial. EPA analysis shows that 
by eliminating international offsets, the cost would increase 
by about 89 percent.
    Additionally, EDF's own modeling shows that the 
introduction of offset credits for reduced deforestation lowers 
allowance prices by an estimated 22 percent based on the cost 
estimates used in the EPA analysis. The potential price 
reductions grow to more than 40 percent of the program and 
include all sources of international forest carbon and are not 
limited to deforestation reductions.
    Now, I am not going to tell you the ACES bill is perfect. 
In fact, I don't think anyone at this table would say so. In my 
written testimony, I have outlined some important areas for the 
committee to consider to improve, with respect to the role of 
science in the program, credit for past activities, 
accountability at the oversight agency, and the use of 
reductions in tropical deforestation. I hope we can cover some 
of this ground during the Q and A.
    In conclusion, I just want to restate that all of us--
farmers, ranchers, landowners, emitting companies and the 
average citizen--have a stake in establishing a good, science-
based offsets program. Carbon offsets must represent real, 
measurable, verifiable benefits to the atmosphere, and the 
program itself must stand up to public scrutiny. If the program 
isn't considered credible, all of our efforts in this process 
will be for naught, and we very well may push the atmosphere 
past the point of recovery. We cannot afford to fail in this 
area.
    Thank you for this opportunity to speak today.
    [The prepared statement of Mr. Krupp follows:]
    
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    Senator Boxer. Thank you very much.
    And our last witness is the minority witness, the American 
Farm Bureau Federation.
    Sir, we welcome you. Mr. Stallman, Bob Stallman.

  STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU 
                           FEDERATION

    Mr. Stallman. Thank you, Madam Chair, members of the 
committee. I am here today representing the American Farm 
Bureau Federation.
    How you deal with the issue before you is critical to 
farmers and ranchers. There is no question it will affect our 
bottom line. Under our best estimates of the legislation passed 
by the House using EPA assumptions, it will take $5 billion out 
of farmers' pockets. Using the same rosy EPA scenario, but 
imposing the 2050 costs as if they occurred in 2012 gives a 
reduction in farm income of $13 billion. Most likely, the 
reality would be worse.
    So we care a great deal about what legislation you approve 
and what the agricultural offsets will be. With that in mind, I 
would like to respectfully challenge all members of the 
committee to ask a few questions. Your answers will tell you a 
lot about what kind of bill that you produce.
    No. 1, what do we want to accomplish? If we really want to 
change what the world's climate will be in 40 or 100 years, 
then the House-passed bill is not the answer. I believe 
Administrator Jackson said as much last week when she testified 
before this committee.
    Two, do we want to keep U.S. products competitive 
internationally while living up to our WTO obligations? If so, 
then the House bill is not the answer. It could spur trade 
retaliation and promote leakage of carbon emissions. And with 
that leakage, you will see economic activity and jobs leaving 
our country.
    Three, is this about energy independence for America? 
Again, the House-passed bill doesn't measure up. It spells out 
what we can't do. It doesn't really say how we will make up for 
lost energy sources. The best way to have an honest productive 
debate is for everyone to lay their cards on the table. If we 
do, one thing becomes pretty clear: this debate isn't about the 
climate. It is about fossil fuels. Everyone knows it, so let's 
deal with that reality.
    If the proponents honestly want to revamp our energy so the 
use of fossil fuels is minimized, then they have an obligation 
to tell us their alternative. Arbitrary percentages about 
efficiencies, mandates for emissions limitations, promotion of 
international offsets are simply roundabout ways of saying that 
they don't have an energy plan. While emission caps will be 
written into law, the market and power generation structures 
implied in EPA's current analysis are just a set of 
assumptions.
    From an agricultural perspective, there are several changes 
we believe must be incorporated in the bill. One, the 
legislation must, at a minimum, include the provisions 
negotiated by Chairman Peterson of the House Ag Committee. We 
are encouraged by statements of Senator Harkin that say he 
wants to do that and will seek to strengthen them. Even with 
such changes, you need to remember not all agricultural 
producers will be able to avail themselves of offsets.
    Two, other nations must be a part of the solution, or U.S. 
competitiveness will be sacrificed and climate reduction goals 
will fail to be achieved. Absent global commitments, we will be 
engaging in the economic equivalent of unilateral disarmament.
    And three, Congress must not create a hole in America's 
energy supply. If fossil fuels are taken out, something else 
must be substituted. We must plug the hole created by the bill 
or run the risk of congressionally mandated shortages that will 
create spikes in energy prices. The agricultural sector, in 
particular, is poorly equipped to absorb or pass on such costs.
    It is very reasonable to estimate that costs that we 
currently project to occur in 2030 or 2040 might well shift 
forward to 2015 or 2020. Acreage shifts might be more drastic 
than envisioned, and they could well involve greater shifts 
from crop acres to forestry as well as acreage currently 
dedicated to forage production shifting into forestry.
    And once again, some agricultural producers will never 
benefit from the legislation under any scenario, yet these same 
producers will incur the increased fuel, fertilizer and energy 
costs that their counterparts do.
    We are very open to the idea of including an off ramp in 
the legislation. Such an approach could kick in due to job 
loss, a lack of an international agreement, an inability to 
sufficiently commercialize renewable technologies, or a lack of 
alternative energy sources. Without some mechanism to protect 
agriculture, we are greatly concerned about the potential 
adverse impacts on farmers and ranchers.
    Some say agriculture will benefit. If EPA has their way, we 
will only be allowed to plant trees. Any other benefits will 
depend to a large degree on where the producer is located, what 
he or she grows, and how his or her business model can take 
advantage of any provisions in the legislation.
    Not every dairy farmer can afford to capture methane. It is 
a capital-intensive endeavor. Not every farmer lives in a 
region where wind turbines are an option. Not every farmer can 
take advantage of no-till. Not every farmer has the land to set 
aside to plant trees. Yet every farmer has production costs to 
meet.
    Nearly all of us rely on fertilizer and we all drive 
tractors. We all use energy in our production. We know our 
costs will rise, and frankly we are very concerned about the 
impact of this legislation on our livelihood. And I urge the 
committee to consider these factors as you take up legislation.
    Thank you again for the invitation to testify, and I look 
forward to questions.
    [The prepared statement of Mr. Stallman follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Boxer. Thank you, sir.
    Let me just say that the members of the National 
Association of Wheat Growers have a very different view than 
you, Mr. Stallman. And they say they have worked for a number 
of years to ensure that agriculture has a place in any climate 
change legislation and that producers are able to reap 
benefits, rather than except costs. And I think that is our job 
is to work with you, to show you that this change could well 
prove to be a boon for agriculture. A lot of people do believe 
it.
    As I said, the Farmland Trust and others, the National 
Farmers Union, and I understand we have work to do.
    I also want to point out and place in the record, and this 
is important, I think, for those who are naysayers to 
understand that the idea of cap-and-trade was created right 
here in this room years ago when we were fighting the problem 
with acid rain and what was happening. And we set up this cap-
and-trade system, our predecessors did, and there was a 
prediction of the projected costs. And there was a prediction 
of emissions reductions. And it turned out that there were far 
more emissions reductions than were predicted and the costs, 
the actual costs, were five times lower than they were 
projected to be.
    The opportunity of this mechanism allowing a price to be 
set--in this case on sulfur dioxide--in the private market 
really worked as a boon and surpassed our dreams for the 
program.
    So you will be hearing more about that because people will 
make up stuff when it has to do with cap-and-trade, when we 
already have had the experience of cap-and-trade.
    I want to talk about this nuclear plant issue, and Mr. 
Krupp, I think you more than anyone else there have worked with 
this bill in a broader sense because Senator Alexander has put 
out his plan, which he hopes the Republicans will adopt, on 
their solution to this problem. And it is 100 nuclear power 
plants by 2030, built by and paid for by the rate payers with 
no tax credits going to them at all.
    He also has another part of his plan that deals with using 
future revenues from offshore oil drilling for battery 
research, and he would take that funding away from our parks 
and away from deficit reduction for use there. And he has a 
third piece which is $8 billion for research from the 
taxpayers.
    I want to hone in on the nuclear power plant issue. My 
understanding of the modeling by the EPA of the Waxman-Markey 
bill is that instead of 100 power plants being built by 2030, 
they show--the models--261 plants being built by 2050, with tax 
credits going to the rate payers.
    So isn't it true to say that the Waxman-Markey bill, which 
will be the base of our bill, we are going to have some tweaks 
to it, would result in the building of more nuclear power 
plants and help to the rate payers?
    Mr. Krupp. Chairman Boxer, thank you for the question.
    There is no question that nuclear energy now being produced 
is one of the zero-carbon alternatives. And as the head of 
General Electric's Nuclear Division said a few years ago, the 
best thing you could do for nuclear energy is put a cap on 
carbon.
    My understanding is the EPA did not specify a particular 
number of plants, but I think you are right. The number that 
would be built would be in the range of what Senator Alexander 
has called for, certainly by 2050. The way I read the EPA 
modeling, it would be perhaps as many as 95 plants, new nuclear 
plants by 2050, and 35 extra plants by 2030.
    Senator Boxer. OK. Well, just for the record, we called the 
modeler over at EPA, and they told us 261 new nuclear plants 
under the Waxman-Markey bill by 2050.
    Mr. Krupp. I think is depends on what size. They clearly 
specified how many kilowatts and I think the discrepancy----
    Senator Boxer. This is 1,000 megawatts.
    Mr. Krupp. Yes.
    Senator Boxer. One thousand megawatts.
    In any event, I think it is very important that we 
understand that in the approach we are taking, we don't pick 
any winners or losers. We just say when there is a price on 
carbon, nuclear power plants will compete, solar, wind, 
geothermal, any other way that is clean in terms of carbon. And 
the beauty of that is it winds up you have more nuclear power 
plants, if this is your goal. And there are a lot of people in 
the Senate who support that goal.
    I have a more reserved attitude about it, but the fact is I 
am not going to pick the winners and losers. The marketplace is 
going to do it. What I am going to work for is the ultimate 
safety of these plants and all those other things, but that is 
the fact.
    So I want to ask Mr. Hopkins and Mr. Stallman a question. 
We will start with you, Mr. Stallman.
    Will farmers benefit from a climate policy that increases 
efficiency in renewable energy and reduces fossil fuel 
consumption? And will those types of policies help protect you 
as farmers from higher prices, given the volatility in the 
fossil fuel market?
    Mr. Stallman. Well, the answer to that, Madam Chair, is, it 
depends. I mean, what are the alternative sources going to 
cost? And in terms of volatility, producers are pretty good at 
dealing with volatility whether it is weather, whether it is 
prices, whether it is spikes in costs. But it really boils down 
to economics.
    The energy we use on average in this country, 20.4 percent 
of our input costs are related to electricity. As an example, 
for the agricultural sector in California, has $5 billion worth 
of energy-related cost. If the energy costs go up, if they go 
up 20 percent, that is an extra $1 billion of expenses put on 
producers. If the energy costs go down, then obviously that 
reduces those input costs. So it depends on what the cost 
structure is.
    Senator Boxer. Surely. But the one thing I hope, Mr. 
Stallman, you will think about is the fact that we import so 
much foreign oil, and we are at the mercy of a lot of people 
that don't like us. And there is proof positive that many of 
those countries turn around and use that income from our tax 
dollars, yours and your industry, to fight us, to fight us, not 
economically, but to physically fight us. There has been proof 
of that.
    So I would just like you to think about in the long term 
what a better situation it would be if you could choose from 
other options.
    I would ask Mr. Hopkins.
    Mr. Hopkins. Well, Rio Tinto is very interested in the 
future of coal. We are the second largest coal miner in the 
U.S. We are a foundation member of the FutureGen Alliance. 
Carbon capture and storage with coal is, I think, going to be 
the technology that brings us our long-term abatement goals. In 
the near term, the immediate term, that technology isn't going 
to be ready and we are going to have to take advantage of 
offsets. But in the meantime, we are going to become more 
efficient.
    We are going to use renewable energy. In addition to 
supplying the coal that generates 6 percent of the electricity 
in the U.S., we supply the uranium that generates an additional 
3 percent of the electricity in the U.S. So we are very 
interested in maintaining baseload power in the future. We 
think offsets are going to be a key component in keeping 
allowance prices down.
    Senator Boxer. Thank you.
    Senator Inhofe.
    Senator Inhofe. Thank you, Madam Chairman.
    Let me first of all, Mr. Hohenstein, I read portions of 
your statement, and then you repeated that just a few minutes 
ago, the suggestion that the 1 billion ton limit on domestic 
greenhouse gas offsets that are in the Waxman bill is roughly 
equivalent to sequestration potential of planting 170 million 
acres of trees. And according to the USDA Economic Research 
Service, in 2007 there were 310 million acres of harvested 
cropland in the United States. Now, if you do your math, that 
would be 55 percent would be taken out of production.
    Now, I would like to ask if the USDA has done an analysis 
of how many acres of food production we would lose on that 
potential shift, and also how that would affect livestock 
prices. Have they already done it, an analysis?
    [The referenced information follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Hohenstein. Yes. Thank you for the question.
    And that number in my testimony was an attempt to provide 
some sense of the scale at which activities----
    Senator Inhofe. OK. We are going to run out of time.
    Mr. Hohenstein. With regard to analysis, USDA is in the 
process of evaluating the implications of higher energy prices 
on the agricultural sector due to H.R. 2454.
    Senator Inhofe. OK.
    Mr. Hohenstein. We are also looking at the implications of 
offsets as well.
    Senator Inhofe. OK. Very good.
    Mr. Stallman, I talked to some of the Oklahoma Farm Bureau 
people this last week, and they are very emotional about this 
whole thing. You heard what Senator Bond said, he was using the 
2,000-acre farm. We don't have that many 2,000-acre farms, but 
I am sure you can scale it down a little bit. Do you agree with 
his figures in Missouri, and that was taken from the Ag Policy 
Research Institute, of up to $30,000 per farm?
    Mr. Stallman. That report just came out. We see no reason 
to dispute that. Obviously, they used probably slightly 
different assumptions than we did in calculating our aggregate 
net loss numbers for agriculture, but those seem very 
reasonable in terms of what you could expect at the producer 
level.
    Senator Inhofe. I went over and met with the Farmers Coop 
regional group on Friday. They were meeting over in Arkansas. 
And one of the things that concerns him the most is, we haven't 
talked about the specifics, but how intensive it is in terms of 
agriculture in fuel, electricity, fertilizer, chemicals. In 
corn, it is 71 percent of the operating costs are fuel, 
electricity or fertilizer; soybeans, 50 percent; wheat, 72 
percent; barley, 69 percent.
    I assume that we have communicated this to your membership. 
They recognize the magnitude of this thing.
    Mr. Stallman. Oh, absolutely. And that is what generates 
the basic concern we have about the whole bill with respect to 
what it does to energy costs because, on average across the 
country, 20 percent of our input costs have some relationship 
to energy, and we are concerned. Even though we are a strong 
renewable energy supplier in this country, which is positive, 
we still have to deal with the impacts of any future increase 
in energy costs.
    Senator Inhofe. Yes. Well, let me ask you this question. 
The Chairman talked about the National Wheat Growers 
Association, and I don't understand how they could be 
supporting this when all of the large wheat States, or many of 
them, are on the other side of this issue, the North Dakota 
Wheat Commission, the Oklahoma Wheat Growers Association, the 
Texas Wheat Producers Association.
    I wonder why they don't get together with their national 
association. Any ideas?
    Mr. Stallman. Well, I hesitate to speak for other groups, 
Senator. I know the National Association's position. I also 
know the concern that has been expressed to me personally by 
our members who are large wheat growers. So I do not know where 
the disconnect lies. I do know that from an economic 
perspective, we can show no analysis that indicates that even 
with the liberal offsets policy, that the income from that 
would offset the increased cost.
    Senator Inhofe. I see. And has it ever occurred to you to 
ask the question, what are we doing here, after last week when 
the Director of the EPA in response to my question as to what 
effect would it have if we unilaterally here in the United 
States have a cap-and-trade, pass the bill such as we used as 
an example the Markey-Waxman bill. What effect would that have 
on the overall worldwide reduction in CO2, and her 
response was it wouldn't have.
    Now, if that is the case, and I agree with her, I don't 
agree with everything that she says; I certainly agree with 
that. And if we have statements such as we do have from the 
leaders in China and India and other countries saying under no 
circumstances are they going to accept any kind of mandatory 
reduction, what are we doing here?
    Mr. Stallman. Well, that is a question we also raised. When 
we were over on the House side working on the bill and the 
legislative process, the rationale that was given, well, the 
U.S. has to show leadership by passing national legislation 
before we go into the Copenhagen talks. Well, I have been 
involved in international trade negotiations. Leadership 
usually means that the U.S. is supposed to give up something in 
favor of other countries. But there is no reason to have to 
have a bill passed by this Congress to go over to negotiate. 
You can do that without having legislation passed, as most 
countries are doing.
    Senator Inhofe. Yes, there are a lot of people who believe 
the concept, and we heard this of course from Senator 
Alexander. I don't agree with him in this case, but that 
anthropogenic gases cause global warming. But there are a lot 
of them who actually believe that and still think that this is 
a disaster. And I am using the words of James Hansen, Dr. 
Hansen, he is Mr. Greenhouse Gas, I guess you could call him. 
He said, ``The fact that the climate course set by Waxman-
Markey is a disaster course. Their bill is an astoundingly 
inefficient way to get a tiny reduction of emissions. It is 
less than worthless because it would delay by at least a decade 
starting on a path that is fundamentally sound from the 
standpoint of both economics and climate preservation.'' Now, 
here is the guy who is on the other side, the leader on the 
other side, and he was here I guess it was yesterday, in 
Washington.
    So I don't know. You look at these things, and I look at 
them from an Oklahoma perspective and wonder if it is not going 
to make any change and if the countries are, in spite of what 
they say about leadership, if the leaders are saying under no 
circumstances are we going to do it, period. Anyway.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you.
    I am going to ask Senator Udall if he would like to make a 
3-minute statement and ask a question to the panel.

             OPENING STATEMENT OF HON. TOM UDALL, 
           U.S. SENATOR FROM THE STATE OF NEW MEXICO

    Senator Udall. Thank you, thank you very much, Madam Chair.
    And I will give just a brief opening statement.
    Farmers and ranchers and foresters face, I think, dire 
threats from global warming. For example, in my State of New 
Mexico, one of our agricultural centers in seven of our 
counties have been struck with persistent drought. And we know 
that part of the overlay there has to do with global warming.
    Our New Mexico delegation has written a letter to the USDA 
on a disaster declaration for these counties, and I am afraid 
that this disaster could turn into a catastrophe while we wait 
for that response.
    The U.S. Climate Impact Report also found that drought 
frequency and severity are projected to increase in the future 
over much of the United States, particularly under higher 
emissions scenarios. Increased drought will be occurring at a 
time when crop water requirements will be increasing due to 
rising temperatures.
    As we debate the impacts of a cap-and-trade on agriculture 
and forestry, do not forget why we are having this debate. We 
must protect American farms, ranches and forests from global 
warming before the time runs out.
    Now, Mr. Hohenstein, will you urge the USDA to respond 
quickly and effectively to New Mexico's drought disaster 
declaration request?
    Mr. Hohenstein. Yes, I certainly will take that back to the 
department.
    Senator Udall. Thank you. Thank you.
    Your testimony finds that the opportunities from climate 
legislation will likely outweigh the costs for agriculture and 
forestry. Your testimony did not directly address costs to 
farms and forests from climate change itself, however. You did 
serve on the USDA's or were the USDA's representative for the 
recent multi-agency U.S. Climate Change Impacts Report, and 
that report found just what I talked about earlier.
    Could you comment on that report and where you see things 
headed? Should farmers and ranchers also consider the avoided 
costs from warming that the legislation is designed to prevent, 
in concert with a global agreement?
    Mr. Hohenstein. Sure. No, thank you for the opportunity to 
talk about that report.
    That report was coordinated by our office and produced last 
May, and looked at the effects of climate change on 
agriculture, land and water resources, and biodiversity. The 
effects of climate change on agriculture can be profound, but 
they are complex. They involve the effects of longer growing 
season and enhanced CO2 fertilization, combined with 
the effects of higher temperature and water stress. The effects 
are not uniform across the United States and are regional. In 
fact, some areas, in particular the intermountain region, will 
be affected by water stress and water availability.
    Areas in the south will increasingly be affected by higher 
temperatures that can affect grain set and pollination. So the 
effects are complex, and they are going to be felt increasingly 
throughout the United States over the next century.
    Senator Udall. And specifically when you talk about the 
west, most of the models talk about temperatures being twice as 
high as other parts of the country. And so, you are well aware, 
I think, being a part of the USDA, that if you have much higher 
temperatures, you impact snowpack, which has the ability and 
capacity to grow the groundwater and recharge the groundwater. 
If that disappears, you realign the whole water situation.
    So it is something that is very worrisome to a lot of us, 
and we hope that your department will be out front in terms of 
speaking of what the consequences are going to be. We know 
there are going to be winners and losers in certain cases, but 
the losers are the ones that I am really worried about, and the 
intermountain west I think is one of those regions where it is 
going to be pretty severe.
    Thank you, Madam Chair. Thank you very much. Sorry for 
running over.
    Senator Boxer. I totally understand. No problem.
    Senator Alexander.
    Senator Alexander. Thanks, Madam Chair, for holding the 
hearing and for bringing such talented witnesses.
    Mr. Krupp, we have had testimony before this committee by 
scientists that a low carbon fuel standard is a more efficient 
way to reduce carbon in fuel than an economy-wide cap-and-
trade. Do you agree with that?
    Mr. Krupp. Senator Alexander, I am glad that you have asked 
because it is absolutely essential that we figure out ways to--
--
    Senator Alexander. Well, I mean, I don't have a lot of 
time. Is it true or not true?
    Mr. Krupp. No, I don't believe that is true.
    Senator Alexander. You disagree with that?
    Mr. Krupp. Yes.
    Senator Alexander. Now, the testimony was that--how much do 
you think the economy-wide cap-and-trade will raise the price 
of a gallon of gasoline, the Waxman-Markey bill?
    Mr. Krupp. About 2 cents a year.
    Senator Alexander. 2 cents a year?
    Mr. Krupp. Yes.
    Senator Alexander. You think that will change behavior in 
terms of lowering the amount that people will drive their cars?
    Mr. Krupp. I think the carbon cap will. You see, Senator 
Alexander----
    Senator Alexander. No, no. Just a moment. It is economy-
wide, how much of the carbon in this country comes from fuel, 
what percent?
    Mr. Krupp. It is roughly about a third.
    Senator Alexander. It is about a third. And you have said 
that the Waxman-Markey bill would only add 2 cents per gallon 
of gas. So do you think anybody is going to change their 
driving habits based on that?
    Mr. Krupp. Senator Alexander, you had it wrong in your 
opening statement because----
    Senator Alexander. No. I am asking you the questions. Do 
you think anyone will change their driving habits based on a 2 
cent increase in the gallon of gasoline?
    Mr. Krupp. I think they will buy more fuel-efficient cars.
    Senator Alexander. On a 2 cent increase?
    Mr. Krupp. Carbon content of fuel will be lower.
    Senator Alexander. A 2 cent increase? You are one of the 
most experienced environmental persons in the city, and you're 
actually telling me that a 2 cent increase in a gallon of 
gasoline will change driving habits.
    Mr. Krupp. It is 2 cents per year, Senator.
    Senator Alexander. Well, how about per gallon?
    Mr. Krupp. Well, 2 cents per gallon per year.
    Senator Alexander. So that will change driving? You are 
saying that if it goes from $2.25 to $2.27 that I am going to 
change my driving habits, or you are?
    Mr. Krupp. We should talk about it the way a cap-and-trade 
system works, Senator, because the cap is a mandatory system 
that will reduce the amount of carbon that can go into the 
atmosphere. So either it will reduce driving or people will get 
more fuel-efficient automobiles, or industries producing 
gasoline will have the option of paying your farmers in 
Tennessee to sequester carbon. I don't care whether it happens 
from reduced driving. I care that the carbon goes down.
    Senator Alexander. Well, then, if you care if the carbon 
goes down, you must----
    [Applause.]
    Senator Alexander. Are we at a pep rally or a hearing, 
Madam Chair?
    Senator Boxer. Well, just a minute. Please, can you just 
halt for a minute and freeze the clock?
    In this committee and in all the committees, we really do 
not have expressions of support or opposition. I understand 
that there is a lot of feelings on both sides, but I am asking 
everyone to please withhold, and if you don't, then we have to 
escort you out of the room, and I don't want to start with 
that, because I am glad you are here.
    So let's continue and show respect to our Senator and all 
of our panelists.
    Go ahead, Senator.
    Senator Alexander. Thanks, Madam Chair. I appreciate that 
very much.
    Mr. Krupp, you understand that I believe climate change is 
a problem, that I have introduced legislation to cap carbon 
from coal plants; that I authored a low carbon fuel standard 
here. And I think we ought to do something about it.
    But I think the idea that you would apply an economy-wide 
fuel standard to try to reduce fuel from gasoline simply 
doesn't work. All it would do is raise the price of gasoline to 
farmers such as those we are talking about but not do the job 
of lowering carbon.
    Why wouldn't we instead build 100 new nuclear power plants 
over the next 20 years? Nuclear produces 70 percent of our 
carbon-free electricity today. Double our number of electric 
cars and trucks. Explore offshore for natural gas, which is low 
carbon. And double energy research and development to make 
renewable energies cost-effective.
    By my calculations, that would get us to within the Kyoto 
Protocol limits by 2030 with a low cost, instead of a high 
cost. And why are we deliberately raising the cost of energy 
when energy is so important to keeping jobs here, to growing 
food, and to helping poor people heat and cool themselves?
    Mr. Krupp. Senator, first of all, I appreciate your 
leadership on this issue and the bills that you have sponsored 
in the past, including the 4P issue. And I appreciate your 
desire to have a low-cost solution. As you yourself recognize, 
2 cents a gallon is a pretty low cost, and that is the beauty 
of the cap-and-trade system. It delivers the goods that you and 
I want, reducing carbon from fuel use as well as the rest of 
the economy, at a low cost. It opens up the option----
    Senator Alexander. But do you support building 100 nuclear 
power plants in the next 20 years?
    Mr. Krupp. Actually, when you were out of the room, I 
predicted that is what will happen under the Waxman-Markey bill 
if you pass it.
    Senator Alexander. So you do support it? Well, why would it 
be necessary to raise the price of energy if we could build 
nuclear power plants, electrify the cars, and do R&D for 
renewable energy? Why do we also have to increase our costs?
    Mr. Krupp. Senator, I would love to partner with you to 
figure out how to make sure that this legislation keeps prices 
at an absolute minimum while doing the job. I would welcome 
that challenge.
    Senator Alexander. Thank you very much, Madam Chair.
    Senator Boxer. Yes, Senator, when you were gone, I talked 
about your plan, and we called the EPA and they have said that 
under Waxman you would have 261 nuclear power plants by 2050. 
These are 1,000 megawatts. And the difference between your plan 
and this on the surface is you have stated that rate payers 
would pay the full cost of those, which means they are going to 
have to pay higher electricity bills.
    So I don't understand how you can--and I would like to ask 
you this question--you don't seem to mind them paying higher 
bills to build nuclear plants, but you, without any tax credit, 
which we have in the Waxman-Markey bill. We would have tax 
credits. You have no tax credits to help folks. You would make 
them carry the whole burden, which is $700 billion, and then 
keep saying it is cheap energy. I am confused on that point.
    Senator Alexander. Thank you.
    Senator Boxer. Could you respond?
    Senator Alexander. I would be delighted.
    Senator Boxer. Yes, yes.
    Senator Alexander. Thank you. I would be delighted to do 
that. Let me use an example, if I may. California has no 
nuclear, very little nuclear power.
    Senator Boxer. Oh, no. We do have some. Oh, yes, we do.
    Senator Alexander. But I read a report just this past week 
that your renewable energy mandates, which are even higher than 
those in the Waxman-Markey bill, are concerning your State 
officials and they are afraid that you may even, and this is 
the quote, ``be tight on electric power as soon as 2011'' 
because you are not producing enough clean electricity from 
renewable energy.
    Tennessee has among the lowest electric rates. We are about 
33 percent nuclear. We are going to 40 percent. TVA is the only 
utility that is now opening new nuclear plants. They have just 
restarted Browns Ferry at a cost of $1.8 billion, and they 
thought it would take 10 years to pay off the construction loan 
and it only took 3. So now all of those profits from that 
Browns Ferry plant are going to keep rates low.
    So my argument would be that over time, nuclear power paid 
by rate payers is cheap electricity and that renewable mandates 
such as requiring us in the Southeast to build huge wind 
turbines, defacing our landscape where the wind doesn't blow, 
is expensive electricity.
    So that is my answer. I would compare California and 
Tennessee electric rates.
    Senator Boxer. Well, it did not answer the question that I 
posed to you, so I will just leave it----
    Senator Alexander. No, I tried to. I mean, well, but I 
would like to answer your question out of respect.
    Senator Boxer. I know. You did, from your perspective. You 
didn't from my perspective, so I want to just restate my 
disagreement with your answer, bringing up California into this 
when we are doing fine, and we are a State that does believe, 
as you do, that the ravages of global warming is going to 
affect us----
    Senator Alexander. But your rates are high----
    Senator Boxer. I didn't interrupt you, sir.
    Senator Alexander. All right.
    Senator Boxer. So here is the point. In your plan, you are 
recommending instead of doing a cap-and-trade system in a 
climate change bill, which as part of it allows offsets so the 
folks in agriculture can participate, which will give many free 
allowances, which will create many jobs, you are suggesting a 
command and control--we order you to build 100 nuclear power 
plants, a $700 billion cost to the rate payers, no tax credits 
for them whatsoever. And you come up with other ideas, some of 
which I support, but costly to taxpayers.
    All I am saying is it is our belief that if we do this 
right, we are going to have those plants built, more plants 
than you want, and believe me, I am not the biggest fan of 
nuclear energy. I believe it has to be part of the solution. 
You are going to have more nuclear plants built, and you are 
going to have tax credits going to consumers, including if I 
might, farmers who purchase electricity.
    So I just feel the difference between us is you are coming 
forward with a command and control system. You are picking a 
winner and attacking other forms of renewable clean energy such 
as wind, which you have always attacked. And I am saying I 
think the marketplace should work through a cap-and-trade 
system, and the private sector putting a price on carbon will 
result in more nuclear power than you would plan.
    The other thing I went through when you were gone is to 
show you, is to show everybody that the same predictions about 
power rates were stated in the acid rain debate. And if I can 
have those papers again, because I only have the second one. 
And it is just exactly the same rhetoric. And I will hold that 
until I get another turn.
    Senator Alexander. Madam Chairman.
    Senator Boxer. Yes.
    Senator Alexander. May I give a short comment on what you 
just said?
    Senator Boxer. Yes.
    Senator Alexander. I mean, the difference is----
    Senator Boxer. Go ahead.
    Senator Alexander [continuing]. In 1990 and 1991 when we 
put a, not I, but a cap-and-trade was put on acid rain, there 
was a clear technological feasible way to deal with that called 
the scrubber. If you put on a low carbon fuel standard today, 
on fuel, you deal with 30 percent of carbon without this whole 
contraption of taxes and mandates, and you gradually lower it, 
and you shift people to what is probably a lower fuel cost, 
which is electric cars or maybe biofuels.
    The problem with coal is that we haven't built a new 
nuclear plant in 30 years because the Government has resisted 
it, and we don't have a commercially viable way to recapture 
the carbon. All we are suggesting is Presidential leadership of 
the kind, the President said in his inaugural address, let's 
make energy from the sun, the wind and the earth. That is 
great. That is a lot more expensive, a lot less reliable and it 
is maybe 7 or 8 or 9 or 10 percent.
    What are we going to use to run the country? I would like 
for the President to be half as interested in 100 nuclear power 
plants as he is in windmills, and then he could say to his 
Administration, please bring me a plan that will help us make 
sure we have at least 100 nuclear power plants.
    I believe if he does that, the private sector will build 
them. The plants are very profitable. The Connecticut Attorney 
General was going to put a windfall profits on them last year 
during the oil crisis, and that, plus electric cars, plus 
energy R&D, which that we agree on, electric cars we agree on, 
would get us where we want to go without this big contraption 
that Mr. Hansen has described accurately.
    Thank you for the time.
    Senator Boxer. Thank you very much.
    I am just going to put something in the record here and 
quote from it, and then we will go--then I am going to call 
on--I forget who's next. We go to Senator Barrasso, and then 
Senator Udall.
    But this is important, and I am very happy that you are 
here, Senator, because President Obama says that the Waxman-
Markey bill is a great start for us, and it will result in more 
nuclear power plants being built than you want. So therefore, 
it is very clear that he doesn't have to support your proposal. 
His proposal results in more nuclear power plants being built, 
plus the rate payers will get relief, whereas under your plan 
they don't.
    Now, I also want to place in the record this very important 
fact and myth situation here. I think this is important for 
colleagues. There are always people who say no, no, no. And the 
history has them on the record. Thank God we keep a 
congressional record--no, no, no. We can't--we cannot do this.
    And let's go back to the cap-and-trade system that was 
designed by our predecessors sitting in this room for sulfur 
dioxide. Here is the thing, rhetoric, this is one of the 
electric utilities: ``We estimate that the acid rain provisions 
alone could cost electric utility rate payers $5.5 billion 
annually between enactment in the year 2000 and increasing to 
$7.1 billion from 2000 to 2010. Therefore, the total cost to 
consumers from enactment of this cap-and-trade system to 2010 
could reach $120 billion.''
    Well, guess what? History has proven these people wrong, 
wrong, wrong. This is what happened. The exact opposite 
happened. Instead of rising, consumer electricity rates 
declined by an average of 19 percent from 1990 to 2006. 
Adjusting for inflation, they were still 5 percent lower than 
when the Clean Air Act amendments were passed. And coal State 
residents saw rate decreases averaging 35 percent over that 
period.
    Then it goes on. The 1990 Clean Air Act amendments will 
cost America's business upwards of $50 billion. The truth is 
the benefits of the program exceeded the cost by 40 to 1, 
resulting in more than $70 billion in human health benefits 
annually. That is what happens when you take pollution out of 
the air.
    And then the other rhetoric. This is by Chemical Week: 
Clean Air Act amendments may cost America 4 million jobs. 
Reality? America created more than 20 million jobs in that 
period. The economy grew by 64 percent.
    I have lived my adult life, I have been privileged to see 
that when you address environmental issues, the economy gets 
stronger and stronger and stronger. The basic premise there is 
if you can't breathe, you can't work. And if you want to know 
this, if you look at what is going to happen if we have 
unchecked global warming--by the way, I know Senator Alexander 
doesn't want that to happen, and I respect him so much. He is 
very clear on that.
    But if we do nothing and we argue over this to the point of 
stalling everything, the fact is I would predict that the 
farmers in my State will be so desperate as they see more 
droughts, more floods, more infestations, the kinds of things 
that the Bush administration predicted in the work that led to 
this Administration's endangerment finding.
    So there are so many facts out there that get obscured. But 
I would say this, since Senator Alexander is urging President 
Obama to abandon a more comprehensive approach to this and pick 
one winner, nuclear power, and turn his back on all the other 
potentials, I would urge him not to do it because it is a huge 
mistake. Let the free market determine--once we put a price on 
carbon that will be set by the free market--what makes the most 
sense for us.
    And at the end of the day we will create the jobs. We will 
fight global warming. And as Thomas Friedman says, we will lead 
the world in all of these new technologies. It is a rare time 
when you have the confluence of two great challenges that we 
face: this recession that is deep and global, and this issue of 
climate change, which we need to address, and to find a 
solution that really lifts this economy up and makes sure that 
our grandkids don't have to face the ravages of global warming.
    It is an exceptional opportunity here that I hope we will 
get over our fear-mongering and go back to history, take a look 
at what was said by the naysayers.
    And you have another one today that the press has asked me 
to respond to, and that is Sarah Palin wrote this naysaying op-
ed piece on why we shouldn't move forward with Waxman-Markey, 
which I am going to be rebutting later.
    So I would just tell the American people to take a look at 
history. Every single time we have moved forward to go after 
pollution, the naysayers have been wrong about their 
predictions, wrong about their gloom and doom, and we have in 
fact led the world.
    This is our turn, and I know it is not easy to step forward 
and work for change, but I hope, colleagues, that we can do it. 
I won't get everything I want. Senator Udall is not going to 
get everything that he wants. He will get some things that he 
likes. We are not going to get everything, because I could 
write a bill that would get far fewer votes than I need to be 
able to produce. I am going to have to walk away from some 
things that I believe should be in the bill, and so will 
Senator Udall. We all have to do that.
    And at the end of the day, we will have taken a step 
forward. And we will reap the benefits of that step.
    So now, for another side of the coin, Senator Barrasso.
    Senator Barrasso. Thank you very much, Madam Chairman.
    Mr. Stallman, if I could--in your testimony you said that 
any climate change legislation will also impose additional 
costs on all sectors of the economy, will result in higher 
fuel, higher fertilizer, higher energy costs to farmers and 
ranchers across the country. And you also quote EPA 
Administrator Lisa Jackson saying that U.S. action alone will 
not impact CO2 levels.
    What are farmers and ranchers across the country supposed 
to think of this logic? I mean, if passing a bill doesn't solve 
climate change yet dramatically increases their cost of doing 
business, does the ag community think Washington is out of 
touch with what is happening? When I go back home and talk to 
ranchers, talk to farmers in Wyoming, they are very concerned.
    What are you hearing from the farmers and ranchers across 
the country?
    Mr. Stallman. Well, I am hearing that concern specifically 
about the Waxman-Markey bill, about the potential for costs 
without any return. Do a cost benefit analysis, the costs are 
clearly there, with mandated restrictions on the use of carbon 
in a carbon economy, and the benefits, nothing will happen with 
regard to climate change. Administrator Jackson has indicated 
that.
    We actually do have a solution in our policy, and it is a 
voluntary cap-and-trade. It is a true market solution. It is 
not a market where Government mandates restrictions and then 
lets the marketplace work. A voluntary cap-and-trade would 
allow companies to do what they would with carbon reductions, 
and then the consumers and our citizens would pay with their 
dollars. If that is what they desire to have happen, our 
consumers and citizens would pay with their dollars to support 
those companies who reduce carbon emissions.
    That would be an indication of the will of the people, and 
it would also be a true market solution, and our policy 
supports that.
    Senator Barrasso. Senator Udall mentioned the concept of 
the winners and losers in the ag community in the Rocky 
Mountain West and then people across the country under this 
Waxman-Markey bill. I mean, I worry about western ranchers 
whose operations are heavily dependent on the use of Federal 
lands for livestock, as well as very limited opportunity for 
offsets, as you talk about.
    These ranchers are constrained in the types of grazing 
practices they can employ on Federal lands. The Federal lands 
themselves don't qualify for offset opportunities. The majority 
of the West is Federal land. I can't see how the agriculture 
community in the intermountain west States could possibly 
survive under this bill, given your testimony today.
    Are these the intended consequences or the unintended 
consequences, do you think, of this bill in terms of the impact 
on our ranchers and Federal land?
    Mr. Stallman. Well, I don't believe anyone set out to have 
those consequences, so they are unintended consequences, but 
they are very real. And the few agricultural organizations that 
support the Waxman-Markey bill, they gloss over the fact that 
the benefits of the agricultural offsets program included in 
there is varied across the country. And your example of what 
happens to ranchers who are on Federal lands, they have no 
opportunities for real offsets, and yet they have to eat up the 
additional or absorb the additional energy costs that will be 
created.
    And so that is what we are facing. We are facing with only 
a few instances of agricultural producers being able to 
participate in offsets, which according to our analysis will 
not offset their increased energy costs anyway. It just makes 
it better than it would have been. But then some producers, as 
those you have indicated, fruit and vegetable producers and 
others, aren't going to have any real opportunity to 
participate in the offset markets, and that makes it even worse 
for them.
    Senator Barrasso. Do you think this bill can be perfected 
to the point where energy and input costs would be beneficial 
to farmers and ranchers? Or do you think that there is no way 
to do that?
    Mr. Stallman. Under the current structure and what it 
portends for cost increases in the energy sector, I think it 
will be very difficult. I think we will continue to work to 
find provisions, and working with Senator Harkin over here on 
the Senate side to improve the bill on behalf of agriculture. 
And there are things that can be done overall, as I talked 
about earlier, about having more specific ways of plugging that 
energy hole.
    The number of nuclear reactors that are proposed, that will 
occur under the Waxman-Markey bill are basically on the 
assumption that carbon costs get high enough to cause those to 
be cost-effective and that they will be built. We could maybe 
have a different model where we support a different regulatory 
structure for siting and approving nuclear reactors that would 
perhaps make the process quicker so we could plug that energy 
gap.
    So there are some things that can be done that are missing, 
we think, in the Waxman-Markey bill. We still have to worry 
about this international competitiveness issue for farmers and 
ranchers. Those ranchers that you are talking about are 
competing in the international marketplace, and if their costs 
are higher and those costs are solely imposed in the United 
States, and our competitors overseas don't have those same 
restrictions because those governments refuse to accept 
mandates, which many have said that they will, then that just 
puts us in an international competitiveness nightmare in us 
being able to sell our products overseas. So that is another 
clear concern that we hope we can address in the Senate 
version.
    Senator Barrasso. Thank you, Mr. Stallman.
    Thank you, Madam Chairman.
    Senator Boxer. Thank you. And I hope you know we will look 
forward to working with you on those issues.
    Senator Udall.
    Senator Udall. Thank you, Madam Chair.
    When we talk about this issue and the discussion has been 
that you are putting a price on carbon, you are increasing the 
cost on fuel. We forget where we were last summer when we have 
$4 gasoline. And I was out, Madam Chair, and I am sure you 
were, in the agricultural community and the farming community, 
and people were telling us they were going to go broke; that 
they were really hurting in terms of the cost of oil and the 
impact on them.
    And the only reason economists tell us we aren't at $4 
gasoline right now is we have a worldwide recession, which we 
haven't seen since World War II, and we have a deep recession 
here in the United States.
    And so to somehow assume that we are just going to sit here 
and that the cost of gasoline today is going to stay stable for 
the next 10 or 15 years is I think an absolute fantasy. So we 
should be focusing on how we get out of that box. And the 
reason we are in the box is because we are overly dependent on 
foreign oil to the tune of we are headed toward 70 percent 
dependence on foreign oil. And the oil that is left in the 
world we are talking about over two-thirds of it, over 66 
percent, is in six Middle Eastern countries, Russia and Iran, 
and we have 3 percent.
    So we are in a very, very difficult situation in terms of 
how we move forward with developing our oil resources. And many 
of us are for developing our oil resources, but we only have 3 
percent.
    So the vision, I believe, and Mr. Krupp, I would like you 
to comment on this, the vision I think most of us have is that 
through putting a price on carbon, we move ourselves in a new 
direction with our over-dependence on foreign oil. We try to do 
something about that. We move ourselves in a direction of a 
renewable economy.
    And by the way, when we talk about a low carbon fuel 
standard, we actually have a low carbon fuel standard in place. 
We put it in place in 2005 and 2007 in the energy legislation. 
It is called a renewable fuels standard, which we are expanding 
on and improving upon. So let's not pretend we don't have a low 
carbon fuel standard in place and that we are trying to 
generate those kinds of renewable fuels.
    But Mr. Krupp, I wish you could comment a little bit on 
where this contrast of dependence on foreign oil, we are headed 
down this road of becoming more dependent, and where you see 
putting a price on carbon taking us, and what opportunities it 
opens up for us in some job potential and all of those kinds of 
things. Please.
    Mr. Krupp. Thank you, Senator.
    I think the biggest new economy, the biggest new source of 
jobs in the world is going to be these alternative energy 
sources and cleaning up our fuels and cleaning up our energy 
sources. I see if we do nothing a future where a bunch of 
tyrants who don't like us have their foot on our throat. And I 
don't know how we get the foot off of our throat unless we act.
    And this bill, according to MIT and others who have modeled 
it, would reduce our dependency of oil by billions, tens of 
billions of dollars every year. So I do think that the choice 
is between allowing us to continue to be whipsawed by the whims 
of some of these Mideast nations, or by doing something to 
diversify our sources of energy and fuel.
    And the beauty of the bill is it opens up a market for a 
lot of different things. Some farmers will be able to 
participate with bio-energy, others with methane. Some will be 
able to put wind turbines on, not everyone will be. I agree 
with what you have said, Bob. Others will be able to put solar 
panels on their land. There will be a variety of ways that 
farmers and landowners can participate.
    We cannot go with business as usual, America is losing 
jobs. We are dependent on foreign countries for the bulk of our 
oil supply, many of whom are very hostile to our interests. 
Taking action like the ACES legislation provides, allows us to 
get off that dependency and an explosion of new wealth for 
America.
    Senator, those who oppose this legislation may find in a 
few years that they regret it very much because instead of 
importing oil at that point, we may be importing solar panels 
and wind turbines because we failed today to take that step.
    I am not willing to sit by and watch us fail. We have to do 
something different.
    Senator Udall. Thank you very much. And we, I know that the 
Chairman feels this very strongly, we are trying to move on a 
clean energy economy, trying to capture, as you said, the 
industrial potential of the future.
    Thank you very much, and thank you, Madam Chair.
    Senator Boxer. Thank you, Senator, very much.
    And I thought, Mr. Krupp, your comments were beautifully 
put because at the end of the day, no farmer that I know wants 
to be dependent on oil from people who don't like us and who 
are using the proceeds to hurt us. No farmer wants that. No 
farmer that I know wants to sit back and allow climate change 
to ravage this country, this Nation.
    And I am going to ask Senator Udall if you could once again 
share with us what you told us, that if we do nothing and the 
climate changes the way the vast majority of peer-reviewed 
scientists tell us, what happens to your State, the big 
picture.
    Senator Udall. Well, the thing that happens in New Mexico, 
and this is something that all of us can look at the models. 
And I have been told about the models for New Mexico. And 
basically, imagine that you all know how we move a mouse around 
on a screen and grab something and slide it. Well, basically 
what I have been told is that if you look at the intermountain 
west model and looking at double the temperatures of everyplace 
else in the country, you are going to have a dramatic impact. 
And the impact would be the equivalent of taking New Mexico and 
dragging it 300 miles to the south. I don't know how many of 
you have been 300 miles south of New Mexico, but you are in the 
middle of Chihuahua, Mexico. OK?
    The mountains that they have down there are not forested. 
We have fantastic forested mountains, up to 10,000 feet. We 
have ski areas. The snowpack that is on top of those mountains 
recharges the water. Just for example in the city of Santa Fe, 
40 percent of our water comes from our snowpack. So you would 
be changing that whole equation, changing the water situation 
in New Mexico.
    Second what you would do is be drying out those forests. 
The forests might well by mid-century just disappear and you 
would have flora that would obviously adapt, but the forests 
would be gone. You would have increasing forest fires in that 
period because of what is happening.
    So the impacts are going to be dramatic. It was brought up 
about being worried about farmers and ranchers. Well, the 
ranchers, what the U.S. Climate Impact Report found that 
Federal grazing land will be less productive because it is 
going to be hotter. So there will be less forage for the 
cattle, so the ranchers are going to be hurting.
    These are the kinds of things that I think we are trying to 
prevent. And I think we need to look at where we are headed in 
the future, and it is not a pretty future for the intermountain 
west, and the way I would just describe it is more forest 
fires, less water, more thirst, and a real change or wiping out 
of a way of life.
    Senator Boxer. Well, I wanted to end on that note because 
we have a responsibility to protect our kids and our grandkids, 
not just ourselves. We have lived through the years that we 
weren't affected by what was on the horizon. And now it is our 
job to ensure that future generations can live in a hospitable 
environment.
    And every time we have done this as a Senate, it has been a 
winner. I have gone through that. Every landmark environmental 
law was attacked harshly, predictions made that it would be 
just the end of the world. And this is certainly no exception.
    And I would like to close by saying the American Farmland 
Trust really gets it. In their letter of support, they say, 
``Keep in mind the potential cost of not supporting climate 
change legislation. Climate change is a real environmental 
challenge affecting our global ability to produce food and 
fiber in the years ahead.''
    So we need to look at that, and factor in the costs of 
doing nothing, being naysayers; no, we can't; no, we shouldn't; 
no, we mustn't. And I think if we can get over that mind set of 
no, we will do the right thing.
    I just want to say to the panel, I so appreciate each and 
every one of you being here, and we will work with all of you. 
As we take the Waxman-Markey bill and we put our stamp on it, 
we are going to need all of you to work with us.
    Thank you.
    We stand adjourned.
    [Whereupon, at 11:50 a.m. the committee was adjourned.]
    [Additional statements submitted for the record follow:]

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

    Madam Chairman, thank you for holding this hearing on how 
the roles of America's farm, forests and the hardworking people 
tied to the land cultivation are impacted by climate change yet 
stand to profit from the offsets that will be included in the 
climate and energy legislation we construct.
    Agriculture both affects and is affected by climate change. 
Australian farmers are contending with an unprecedented--and 
completely unforecasted--7-year drought that has crippled the 
entire continent's agriculture industry. Our changing climate 
creates immeasurable challenges for farmers. Historical weather 
and climate cycles are no longer reliable for planning crop 
selection, sowing and harvesting seasons, or precipitation 
patterns.
    As I mentioned in my statement at last week's Climate 
Change hearing, a 2 percent increase in global temperature can 
create significant heat stress for plants and animals and also 
aids in the spread of both plant and animal diseases. \1\ Much 
of Maryland's agricultural growers and poultry producers are 
located on Maryland's Eastern Shore, and rising sea levels and 
increased salt water infiltration into groundwater sources are 
serious concerns of mine for the future prosperity of 
Maryland's farmers.
---------------------------------------------------------------------------
    \1\ Professor Alan Buckwell, director of the Land and Business 
Association of the United Kingdom.
---------------------------------------------------------------------------
    The measures we are considering may present new challenges 
for farmers and foresters. However, a system of carbon offset 
credits will provide agricultural growers a new commodity to 
effectively sell, in addition to their products, in the 
marketplace and would create new revenue streams for the 
agricultural industry.
    However, in order to achieve actual reductions in 
greenhouse gases from agriculture, farmers must reduce:
     methane,
     nitrous oxide, and
     their overall greenhouse gas production.
    Congress's climate and energy legislation must help them do 
so. Beyond offering offsets for the carbon sequestration of 
agricultural and forestry biomass, climate change legislation 
should also help farmers by:
     incentivizing the conversion of unproductive cropland 
back to its natural state,
     providing for research and development into feed and 
digesters to reduce and capture livestock methane,
     accounting for the carbon sequestration of agricultural 
biomass, and
     increasing the water efficiency of irrigation systems.
    These are ways we can help our farmers and help solve the 
climate crisis at the same time.
    It is important for farmers to understand what they stand 
to gain from this legislation. Agriculture Secretary Tom 
Vilsack is engaging in field visits to rural communities across 
the country to share information about the challenges and 
opportunities a carbon constrained economy present for farmers 
and ranchers. I think it is unfortunate that so much negative--
and often misleading--information is conjuring fears among 
America's agricultural sector, and it is imperative that more 
outreach needs to be done to explain the impacts of climate 
change on growers, the need for action, and the key role 
agriculture plays in fixing the problem.
    With EPA's scientific expertise we can develop an 
agricultural offsets program that is verifiable, effective and 
robust. With USDA's on-the-farm expertise, we can create a 
carbon offset program that is tailored to individual farms. 
With farmers at the center, we can build an effective domestic 
offset program that combats global warming, generates 
significant revenue for our farmers, and keeps our key resource 
lands in production for America and the world.
    I look forward to working with my colleagues to make a 
strong climate bill that benefits farmers, and I look forward 
to our witnesses' testimony.

                    Statement of Hon. David Vitter, 
                U.S. Senator from the State of Louisiana

    Thank you, Chairman Boxer and Ranking Member Inhofe, for 
holding this hearing to discuss what I believe is a very 
important issue.
    This is a significant moment in history, as the societies 
that choose to expand and improve their use of energy will 
advance beyond those that don't. The primary objective of any 
country's energy policy should be to promote abundant supplies 
of affordable energy and to ensure that it is distributed to 
consumers. For examples of that philosophy look no further than 
China and India, where the two nations are attempting to bring 
great numbers of their populations out of poverty and into 
competition in a global economy. Cap-and-trade is the opposite 
of that effort.
    While proponents have argued that the United States needs 
to lead other nations to adopt their own cap on carbon 
emissions, three of the world's top five emitting sources have 
categorically stated their intent to reject meaningful 
emissions limits. China, the world's No. 1 emitter, stated that 
``it is not possible for China to accept a binding or 
compulsory target.'' Russia, the No. 4 emitter, has called the 
emissions target ``unacceptable, and probably unattainable.'' 
India, the No. 5 emitter, has said, ``India will not accept any 
emission-reduction target--period.''
    There are not many in the agriculture industry that trust 
cap-and-trade legislation will make their industry more 
competitive or that Government is likely to get this right. 
Perhaps the Missouri Farm Bureau said it best when they stated:
    `` `Skeptical' and `apprehensive' may understate our 
members' feelings toward proposed legislation and regulations 
to reduce man's supposed impact on the Earth's climate. Whether 
it is called global warming or global climate change, we have 
serious reservations about lawmakers and regulatory officials 
imposing sweeping new regulatory requirements and costs on the 
U.S. economy while it is business as usual in China, India, and 
other countries emitting large quantities of greenhouse gases 
(GHGs).''
    There exists a great misunderstanding in a good portion of 
our society about what exactly energy is and means to people 
and our economy, but the ones that are paying attention to cap-
and-trade are starting to get it. Some people believe that 
advances in efficiency will limit the need for future energy 
sources. Others believe that increasing the cost of energy 
won't have an adverse effect on middle income families or the 
working poor. And still some believe that forcing heavily 
subsidized noncompetitive energy into an energy portfolio will 
have a net positive impact on small businesses, manufacturers 
and farmers. In fact, these beliefs are quite wrong.
    As a society advances and technologies improve we know that 
energy begets the need for more energy. We now produce energy 
in many forms much more efficient than the carbohydrate energy 
farms once required to power the oxen that pulled farm 
implements. As that efficiency has increased so has our need 
for energy. Energy consumption per unit of GDP has been falling 
for thousands of years. We have consistently become more 
efficient. However, energy consumption as a whole has been 
steadily increasing--along with our quality of life.
    Our ability to grow and advance as a society is wholly 
dependent on affordable energy. Low cost energy has proven to 
be the greatest equalizer in the history of mankind. Thanks to 
affordable energy the poor can stay cool in Louisiana's hot 
summers, and the elderly can stay warm in Wisconsin's cold 
winters. And thanks to energy's role in agriculture we are able 
to feed more people than at any time in the history of the 
world. That will only improve with more abundant and affordable 
energy.
    For the agriculture industry, implements once pulled by 
horses and oxen are now pulled by massive Caterpillars and John 
Deere tractors. These machines are much more efficient than 
oxen, but they require more energy. There exists a quite 
recognizable correlation between rising employment and rising 
consumption of conventional fuels. In the ag industry 
conventional fuels provide the energy that processes material 
and powers the increasingly advanced machines that provide 
internationally competitive farm products.
    When the debate over efficiency was lost in the quest for 
affordable and reliable energy, proponents of reducing energy 
consumption realized that the only way to actually reduce 
consumption is by driving up the cost of energy. This cannot be 
done without reducing the standard of living on America's 
middle class and low income earners. To achieve this goal you 
need something bigger and scarier than simply a desire to 
reduce our use of energy.
    From Energy Secretary Chu to the environmental groups that 
support a unilateral reduction in carbon emissions, a 
consistent effort has gone to convincing proponents that the 
only way to decrease fossil fuel consumption is to increase the 
cost of energy. The effort has been made by filing one lawsuit 
after another to prevent domestic production and has included 
challenging onshore and offshore production in Alaska, 
convincing the Administration to cancel or slow offshore 
leasing programs in the Gulf of Mexico, and making every effort 
to increase taxes on domestic production. Yet cap-and-trade 
remains the best option for rapidly increasing the cost of 
energy and thus reducing energy consumption.
    The agriculture industry is quite right to be skeptical of 
the Waxman-Markey legislation or any other legislation capping 
carbon emissions. As they say, the devil is in the details. 
Unfortunately, this devil has the potential to devastate our 
economy, reduce the standard of living for most or all 
Americans, and could make us more reliant on not only foreign 
energy, but also foreign agriculture.
    As this committee works on legislation once touted by Enron 
and now by former Vice President Al Gore as an opportunity for 
``global governance,'' I look forward to working through and 
discussing the many challenges ahead. Thank you.

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