[Senate Hearing 113-793]
[From the U.S. Government Publishing Office]
S. Hrg. 113-793
EXAMINING THE THREATS POSED
BY CLIMATE CHANGE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CLEAN AIR
AND NUCEAR SAFETY
of the
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 29, 2014
__________
Printed for the use of the Committee on Environment and Public Works
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.gpo.gov/fdsys
__________
U.S. GOVERNMENT PUBLISHING OFFICE
98-184 PDF WASHINGTON : 2016
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
BARBARA BOXER, California, Chairman
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland JAMES M. INHOFE, Oklahoma
BERNARD SANDERS, Vermont JOHN BARRASSO, Wyoming
SHELDON WHITEHOUSE, Rhode Island JEFF SESSIONS, Alabama
TOM UDALL, New Mexico MIKE CRAPO, Idaho
JEFF MERKLEY, Oregon ROGER WICKER, Mississippi
KIRSTEN GILLIBRAND, New York JOHN BOOZMAN, Arkansas
CORY A. BOOKER, New Jersey DEB FISCHER, Nebraska
EDWARD J. MARKEY, Massachusetts
Bettina Poirier, Majority Staff Director
Zak Baig, Republican Staff Director
----------
Subcommittee on Clean Air and Nuclear Safety
SHELDON WHITEHOUSE, Rhode Island, Chairman
THOMAS R. CARPER, Delaware JEFF SESSIONS, Alabama
BENJAMIN L. CARDIN, Maryland JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont MIKE CRAPO, Idaho
TOM UDALL, New Mexico ROGER WICKER, Mississippi
EDWARD MARKEY, Massachusetts JOHN BOOZMAN, Arkansas
BARBARA BOXER, California (ex DAVID VITTER, Louisiana (ex
officio) officio)
C O N T E N T S
----------
Page
JULY 29, 2014
OPENING STATEMENTS
Whitehouse, Hon. Sheldon, U.S. Senator from the State of Rhode
Island......................................................... 1
Sessions, Hon. Jeff, U.S. Senator from the State of Alabama...... 2
Vitter, Hon. David, U.S. Senator from the State of Louisiana..... 3
Wicker, Hon. Roger, U.S. Senator from the State of Mississippi... 4
WITNESSES
Hedde, Carl G., CPCU, Head of Risk Accumulation, Munich Re
America........................................................ 6
Prepared statement........................................... 8
Responses to additional questions from Senator Whitehouse.... 16
Jacobs Hon. Kristin, Commissioner, Broward County, Florida....... 18
Prepared statement........................................... 21
Responses to additional questions from Senator Whitehouse.... 27
Mook, Bill, President, Mook Sea Farm Raymond J. Keating, Chief
Economist, Small Business and Entrepreneurship Council......... 30
Prepared statement........................................... 32
Responses to additional questions from Senator Whitehouse.... 44
Keating, Raymond J., Chief Economist, Small Business and
Entrepreneurship Council....................................... 48
Prepared statement........................................... 50
Responses to additional questions from Senator Whitehouse.... 61
Lomborg, Bjorn, Ph.D., Adjunct Professor, Copenhagen Business
School and President, Copenhagen Consensus Center, USA, Inc.... 87
Prepared statement........................................... 89
Responses to additional questions from Senator Whitehouse.... 101
ADDITIONAL MATERIAL
Article: Centers for American Progress; Groundhog Days, Utilities
Wrong Again About Safeguard Costs, Daniel J. Weiss and Miranda
Peterson....................................................... 123
EXAMINING THE THREATS POSED BY CLIMATE CHANGE
----------
TUESDAY, JULY 29, 2014
U.S. SENATE
Committee on Environment and Public Works
Subcommittee on Clean Air and Nuclear Safety
Washington, DC.
The subcommittee met, pursuant to notice, at 2:30 p.m. in
room 406, Dirksen Senate Building, Hon. Sheldon Whitehouse
(chairman of the subcommittee) presiding.
Present: Senators Whitehouse, Sessions, Vitter, Boozman,
Markey.
OPENING STATEMENT OF HON. SHELDON WHITEHOUSE,
U.S. SENATOR FROM THE STATE OF RHODE ISLAND
Senator Whitehouse. Let me welcome the witnesses and call
this hearing of the subcommittee to order.
One matter of technical business or procedural business,
perhaps I should say, there is a vote at 2:45. So I think what
we will try to do is try to get through the opening statements,
break at that point so we can all go vote and then reconvene
for the witness testimony and for any further opening
statements that may have emerged. So that is the way I intend
to proceed.
I note that some of my colleagues are from States that
depend on fossil fuels. And they argue that steps to curb
carbon pollution will hurt their economies. And they understand
that we want to protect jobs in those industries. This hearing
is to ask that they look at the other side of the ledger, the
damage to coastal homes, infrastructure and businesses from
rising seas, erosion and saltwater intrusion, hospitalization
and missed school or work for families when asthma attacks are
triggered by extreme heat and smog, forests ravaged by beetle
infestations and unprecedented wildfire seasons, farms
plundered by drought and flood.
A study called Risk Business Commission by former New York
City Mayor Michael Bloomberg, former President George W. Bush
Treasury Secretary Hank Paulson and former hedge fund manager
Tom Steyer found that along our coasts, between $66 billion and
$106 billion worth of existing property will likely be below
sea level by 2050. By 2100, as much as half a trillion dollars
worth of property could be literally underwater. Our side of
the ledger counts too. And those costs are high.
But you don't have to take it from me. Take it from our
witnesses. I met Broward County Commissioner Kristin Jacobs on
my visit to Florida this spring. She explained to me how sea
level rise drives saltwater inland, threatening South Florida's
fresh water supply and fresh water canals. She says they will
have to raise the head of the canals to keep saltwater out of
the drinking supply, even though that ends up leading to more
inland flooding.
Inaction on climate change is not an option for Florida.
And the longer we wait, the bigger the problem and the higher
Florida's price tag.
We will also hear today from the global reinsurance firm
Munich Re, which found a dramatic fivefold increase in weather-
related disasters in North American from 1980 to 2011, racking
up $510 in losses. GAO repots that disaster declarations in the
U.S. have increased sharply over recent decades and potential
losses in the National Flood Insurance Program have created
``substantial financial exposure for taxpayers.'' Insurers like
Munich Re are taking climate change seriously.
Bill Mook is here to discuss how changes in the ocean are
affecting the U.S. shellfish industry, which brought in over $2
billion in 2012. Nearly 7,000 jobs in Rhode Island are directly
connected to harvesting, processing, distributing and selling
fish landed by Rhode Island fishing vessels.
We know the carbon dioxide we dump into the atmosphere
acidifies seawater. That is basic chemistry. You can do that in
a high school lab. Scientists say that the changes in ocean
acidity we have already seen decrease survival rates for
shellfish larvae. In fact, we have already seen dramatic die-
offs on the west coast.
We also know the oceans are warming at an alarming rate.
Ninety-three percent of the heat from climate change and global
warming goes into the oceans. Warming temperatures may be to
blame for the disaster that has been declared in the northeast
groundfish fishery. And research has documented species in this
region shifting northward.
Rhode Island fishermen, who grew up fishing, in fact, one
testified in the seat where Mr. Mook now is, he fished with his
grandfather and he fished with his father. He said never in
their lives did they pull up the fish that they are seeing now
in Rhode Island waters: grouper, tarpon, tropical waters that
have moved up as the seas have warmed.
Climate change is stacking the deck against our oceans,
against our fisheries and against our coastal economies. Carbon
pollution is a challenge that can and must be solved. The
committee has much to learn from our witnesses as we address
this urgent threat.
I thank the witnesses for joining us, and I turn to my
distinguished ranking member, Senator Sessions of Alabama. In
my remaining 30 seconds, I will point out that we have a chart
that actually says that the solar photovoltaic potential of
Alabama is just as good as any State around, it is not a
problem.
OPENING STATEMENT OF HON. JEFF SESSIONS,
U.S. SENATOR FROM THE STATE OF ALABAMA
Senator Sessions. All right. That would be great.
Particularly if we had anything like a cost-effective
utilization, that would be fabulous. I am for all of our
alternative sources of energy. I think we should conduct
research in those areas. But I don't think we should press down
on the brow of the working man on inefficient technologies that
require them to pay considerably higher prices for the energy
that they consume. So that is where we will be discussing these
issues.
Hopefully today we will have a good discussion about it. We
have Dr. Lomborg in our hearing this morning. I thought he was
very interesting at the Budget Committee. So there are a couple
of things.
First, do you believe science is sufficient to justify
warming? My view is, it seems like it would, warming would
occur. Although I would acknowledge the numbers haven't borne
out the computer models in recent years. Maybe 15 years, quite
dramatically.
So then the question is, if you share that view, what do
you do about it and how do you react to it and what actions can
be taken. So this committee hearing might help us discover
that. Dr. Lomborg and our other witness this morning said, OK,
we accept these change are occurring, this is our opinion about
how to fix it. I thought it was a valuable discussion, so maybe
we can do that today.
But also we had testimony from Dr. Montgomery this morning
that the way this Administration is doing this, a regulatory
top-down method, would result in four times the cost for the
same amount of environmental benefit you could do if you did
the situation differently.
Second, we continue to talk about storms and so forth. Dr.
Pielke testified before our committee and said, it is
misleading and just plain incorrect to claim that disasters
associated with hurricanes, tornadoes, floods or droughts have
increased on climate time scales either in the United States or
globally. While we have droughts in the western part of the
United States that are severe, the IPCC cites the Palmer Index
to conclude that worldwide, the soil moisture content is
actually more moist than historical norms.
So I would just say to my colleagues, we look forward to
this hearing. We look forward to your testimony. I think we
need to establish policies in this Country that serve the
people of this Country. And spending trillions of dollars now
in a way that does not produce results and results in the
future would be so little affected by what we do today requires
us as policymakers to be very careful about what we do.
I look forward to your testimony and I guess we will be
heading to a vote soon. Thank you, Mr. Chairman.
Senator Whitehouse. Senator Vitter.
OPENING STATEMENT OF HON. DAVID VITTER,
U.S. SENATOR FROM THE STATE OF LOUISIANA
Senator Vitter. Thank you, Mr. Chairman, and thanks to all
of our witnesses. I also look forward to the discussion. I hope
we have a rigorous, nuance discussion about the facts and
specifically where they lead us.
I am frustrated all too often by discussions here on the
subject in Washington, even more so by discussions in the
media, that jump from broad statements like climate change is
happening, well, everyone agrees with that. Climate change is
always happening. Or broad statements that human activity
causes, is a significant contributing factor to some climate
change and some temperature rise. Lots of folks agree with
that.
Jump from there to what I view as a very extreme and very
expensive regulatory agenda being pushed unilaterally by the
Administration.
So I hope we don't have another sort of cartoonish
discussion making those huge jumps. I hope we get into some
rigor and nuance. I have been trying to do that on this
committee as ranking member. I have made specific requests that
serious statements of science be made with precision; precision
in what the science shows and what the level of uncertainty and
modeling has been in presenting what is indicated by empirical
evidence.
Since the beginning of this Congress, Republicans have
invited many well-qualified scientists to testify at our
numerous climate hearings. Each one has spoken to what the
empirical evidence shows. It shows, among other things, for
instance that hurricane and tornado activity has not been
increasing in either frequency or intensity. And you would
never think that from the cartoon presentations up here and in
a lot of the media. It shows that global temperatures have not
been increasing at any rate close to what was predicted 10
years ago.
So I look forward to a rigorous, detailed discussion,
including pointing out certain facts. First of all, carbon is
an inaccurate term to be used in this discussion. We are
talking about carbon dioxide, not carbon monoxide, for
instance, a pollutant already regulated and a known danger.
Another fact, the cost of the domestic economy from actions
undertaken in furtherance of the President's climate action
plan remains unknown as the Administration utilizes and
internally developed social cost of carbon estimate that
captures the global benefits while ignoring the domestic costs.
A third fact, without the co-benefit reductions in
particulate matter and ozone precursors, actions to address
carbon dioxide don't pass a cost benefit analysis.
Fourth important fact, abundant, affordable, reliable
electricity drives economies and raises populations out of
poverty. It drives our current manufacturing renaissance and
our competitive advantage around the world. So if you take that
away, families, communities and small businesses all suffer,
suffering unnecessarily for no tangible gain.
So again, I look forward to a detailed, rigorous, nuance
discussion.
Senator Whitehouse. Senator Wicker.
OPENING STATEMENT OF HON. ROGER WICKER,
U.S. SENATOR FROM THE STATE OF MISSISSIPPI
Senator Wicker. Thank you, Senator Whitehouse. I note the
vote has begun. I will be brief.
As Senator Vitter points out, is the climate changing? Yes,
it is changing. It has always changed throughout tens of
thousands and hundreds of thousands of years. The question is,
what is the cause of this change? Is it a different cause now
in the 20th and 21st centuries from the causes in the past? I
think it is interesting to hear testimony about that.
I think a better title for this hearing, Mr. Chair, rather
than Examining the Threats Posed by Climate Change, I think a
better title would be Examining the Threats Posed by Climate
Change Inaction and of Action. Because as Mr. Lomborg pointed
out in the budget hearing today, there is a cost of inaction,
but there is very much a cost to the poor of climate change
action. Many of the proposed reforms set out by the United
Nations, by the Administration, will have very much a
detrimental effect on the poor, particularly in the short term.
Also I think it is without question that climate action can
and probably will, probably is having a negative impact on job
creation. So we need to balance the costs of climate inaction
against the costs of climate action.
I also think it is interesting to note that the
Intergovernmental Panel on Climate Change has been careful not
to say that the recent cost of storms and disasters is
attributed to climate change. As a matter of fact, the IPCC
Special Report on Extreme Weather says, ``Long term trends in
economic disaster losses adjusted for wealth and population
increases have not been attributed to climate change.'' To me,
Mr. Chairman, that means that the growing exposure of people
and economic assets in the way of storms has increased the cost
and not climate change itself.
I think this is an interesting subject. Certainly we have
had quite a lot of hearings on this topic. I think this will be
one of the more interesting panels that I have attended and
look forward to the testimony and the questions. Thank you,
sir.
Senator Whitehouse. Very well. With the opening statements
concluded, we will now take a recess while we all head over to
the floor and vote. For your own purposes, I would estimate
that that takes five to 7 minutes. So don't go too far, but
don't feel pinned to your seat. We will be back shortly. Thank
you all very much.
[Recess.]
Senator Whitehouse. The hearing will come back to order. I
thank Senator Wicker for returning. We will begin with the
witnesses. We will begin with Carl Hedde, who is the Senior
Vice President and Head of Risk Accumulation in the
Underwriting Services Division at Munich Re America. The Risk
Accumulation that he manages includes catastrophe management,
risk accumulation and geosciences research functions. His
responsibilities include oversight of corporate accumulation
issues, including the use of catastrophe risk models, client
catastrophe risk consulting services and portfolio management
and optimization.
He also manages a group of scientists that provide climate,
seismological and meteorological expertise and research
capabilities to Munich Re America and its clients. He has 30
years of experience at Munich Re America and is a past chairman
of the Insurance Institute for Business and Home Safety and a
founding member of the International Society of Catastrophe
Managers.
Mr. Hedde, thank you very much for being here. Please
proceed with your testimony.
STATEMENT OF CARL G. HEDDE, CPCU, HEAD OF RISK ACCUMULATION,
MUNICH RE AMERICA
Mr. Hedde. Thank you and good afternoon, and thank you for
inviting me to testify.
I am Carl Hedde, Head of the Risk Accumulation Department
at Munich Re America, one of the largest reinsurers in the
United States. Founded in 1917, we have over 1,000 employees
serving our clients in the United States. Our parent company,
Munich Re, is one of the world's leading reinsurers.
The insurance industry relies heavily on historical loss
information to make business decisions. However, the use of
historical data assumes that the risk we see today is the same
as it was in the past. This is not always the case. Where we do
see an upward trend is in regard to losses from weather
catastrophes, which over time have increased in both frequency
and severity.
In the United States, socioeconomic changes have played a
substantial role in this increase, but do not explain the
entirety of the changes. It is likely that changes in climate,
whether from natural variability or due to man's influence are
playing a role in these trends.
Today we will provide an update on natural catastrophes, or
Nat Cat activity, as well as examples of effective adaptation
efforts for the extreme weather events that our Country will
continue to face.
Globally there were close to 500 loss events due to Nat
Cats in the first 6 months of 2014. Extraordinarily hard winter
conditions affected the U.S. and Japan while parts of Europe
suffered from heavy rainfall, storms and floods. While it was
cold in some parts of the globe during the winter of 2014, it
was not cold everywhere. Alaska and Greenland were much warmer
than normal, as was most of Europe, North Africa and China. The
average global temperature in January 2014 was 1.17 degrees
Fahrenheit, warmer than the 20th century average.
Worldwide, direct economic losses totaled $42 billion and
insured losses totaled $17 billion from the 6-month period,
well below the 6-month average of $94 billion economic loss for
the last 10 years. In the United States, 67 Nat Cat events
caused over $14 billion in economic losses and over $10 billion
in insured property losses during the first half of 2014,
accounting for over 60 percent of the global total.
Insured losses due to thunderstorm-related perils, such as
tornadoes and hail during the first 6 months of 2014 are
estimated at $7.8 billion, accounting for almost 80 percent of
the half-year total insured loss. This is the lowest half-year
total since 2007, due primarily to prolonged winter conditions
across the eastern U.S. which resulted in the late start of the
spring thunderstorm season.
Although drought conditions eased in some locations,
conditions in California worsened and the State is now
experiencing one of its worst droughts.
I would now like to talk about the upward trends we see in
relation to Nat Cat events. We see that worldwide annual totals
of geophysical loss events like earthquakes and volcanic
eruptions have stayed very constant over the past 35 years.
Where we see an upward trend is the increasing number of
weather-related events around the globe as well as climactic
events such as drought and heat waves. Our research also shows
that since 1970 there has been an increase in the frequency and
variability in the large scale atmospheric conditions that
allow severe thunderstorms to develop over the eastern two-
thirds of the U.S.
Other perils we note in respect to notable upward trends
are drought, flood and wildfires. While it is good news that
Nat Cats in the U.S. have been relatively minor so far in 2014,
we should not forget there has been no change in the overall
catastrophic risk situation of the Nation. Our buildings and
infrastructure are very vulnerable to Nat Cats and future large
loss events are inevitable, regardless of climate change,
though climate change would worsen the situation.
Munich Re supports a smart, balanced approach that protects
the public, does not stifle business or innovation. The
insurance industry and the Insurance Institute for Business and
Home Safety have been conducting research and promoting
stronger building codes and stronger construction practices.
Much of the findings are incorporated into the IBA Trust
Fortified Program. In addition to the IBA Trust Fortified
Program, Munich Re also supports further development of the
Resilient Star program, a public-private partnership initiated
by the Department of Homeland Security, with a goal to build
and retrofit homes to be more disaster resistant.
It is in the mutual interest of the Federal Government and
the insurance industry to partner to find solutions in the
areas of adaptation and risk transfer. This makes absolute
sense from a macroeconomic perspective, as lower subsequent
losses will generate savings of several times the investment.
Most importantly, these solutions can protect human lives.
I want to thank you again for providing me this opportunity
to testify today.
[The prepared statement of Mr. Hedde follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. Thank you very much, Mr. Hedde. We
appreciate that you are here.
Our next witness is Hon. Kristin Jacobs. She was first
elected to the Broward County Florida Commission in 1988, and
she is now serving her fourth consecutive term on the
commission. She has served as the commission's mayor twice,
most recently in 2013, and as the vice mayor twice. She serves
on the President's State, Local and Tribal Leaders Task Force
on Climate Preparedness and Resilience, co-chairing the Built
Systems subgroup. And she chairs the White House National Ocean
Council Governance Coordinating Committee. She is also Vice
Chair of an Energy Subcommittee for the National Association of
Counties.
In 2009, Ms. Jacobs brought together four southeast Florida
counties, including Broward County, to sign the Southeast
Florida Climate Compact, which was a bipartisan plan to
mitigate property loss, make infrastructure more resilient and
protect essential community structures like hospitals, schools
and emergency shelters.
We welcome her here and thank her for her travel from
Florida.
STATEMENT OF HON. KRISTIN JACOBS, COMMISSIONER, BROWARD COUNTY,
FLORIDA
Ms. Jacobs. Thank you, and good afternoon, Mr. Chairman.
As a Broward County Commissioner and member of the
President's Task Force, I would like to personally thank you
for your leadership and for convening today's hearing.
I am so honored and grateful to have been able to serve in
one of the most progressive regional governments in the Country
for nearly 16 years. I spent a significant number of those
years tackling the challenges of climate change.
As you know, Florida and especially South Florida is
extremely vulnerable to the effects of climate change. Our
extensive coastline, low land elevations, flat topography and
unique geology combine to put South Florida communities on the
front line for combating climate impacts.
Local governments really are the first responders when it
comes to addressing the hazards of climate change. These
hazards include coastal and inland flooding, storm surge,
saltwater contamination of our well fields, impacts on water
and wastewater systems, beach erosion and threats to public and
private property. We also are experiencing increased severity
of storms, hotter temperatures, impacts to public health and
threats to our natural resources, with cascading effects,
geographically and economically.
In South Florida we have chosen to undertake a regional
approach in planning for climate change, one that emphasizes
collaboration and join action. Our journey has been propelled
by the shared reality of impacts that are already affecting our
communities, especially sea level rise. Already, we experience
extensive flooding during extreme high tide events, with
neighborhoods inundated as seawater pours over seawalls, pushes
up through storm drains and rises up through the ground. Iconic
business districts are impacted, including Duvall Street in Key
West, the famed Alton Road in Miami Beach and Las Olas
Boulevard in downtown Fort Lauderdale. Miami Beach is now
undertaking a $200 million storm water master plan to address
sea level rise, and Fort Lauderdale similarly estimated similar
improvements at $1 billion.
While these provide recognizable examples, in reality our
entire urban landscape is at risk. The discharge capabilities
of our regional flood control system has been reduced such that
even minor storm events can result in extensive flooding.
Severe storms further increase risks, such as the recent one in
a thousand-year storm event when 22 inches of rain fell over
Palm Beach County in less than 24 hours, flooding inland
neighborhoods several miles in.
Other regional impacts include the loss of potable water
capacity within the Biscayne Aquifer, our region's primary
water supply. Replacement water sources and systems are
estimated at $300 million just for Broward County alone. To
reduce risk and the potential for significant economic losses,
adaptation necessitates major investments and upgrading our
infrastructure, coupled with an aggressive plan to head off the
most severe climate change impacts through deep reductions in
carbon pollution, the leading cause of global climate change.
The economic implications of a failed response simply do
not allow for inaction. With just one additional foot of sea
level rise, $4 billion in taxable property will be flooded in
Palm Beach, Broward and Monroe Counties. At three feet, that
figure rises to $31 billion. To provide additional economic
scope, one-third of our State's gross domestic product is tied
to the economies of southeast Florida, and of course,
nationwide with coastal counties, account for 45 percent of the
national GDP.
Critical assets, infrastructure, local business and
households are the very fabric of our economy. As we know from
risk analysis, investments and resilience pay off by a factor
of four to one.
In 2009, recognizing our collective vulnerabilities, the
four counties of Southeast Florida, Broward, Palm Beach, Miami-
Dade and Monroe, united in a historic compact agreeing to work
across party and geographic lines to address climate change
head-on with one voice. In the 6-years since the initial
signing of the Southeast Florida Regional Climate Change
Compact, the four counties have agreed to and are in the
process of implementing 110 specific recommendations to reduce
greenhouse gas emissions and adapt to climate change. Acting
together, we are strong and we are infinitely more resilient.
But at the end of the day, we couldn't have gotten as far
as we have without the partnerships of the Federal Government,
all of which have included their support, including NOAA, in
developing vulnerability mapping and conducting assessments;
the USDOE, for the Florida Goes Solar Initiative, to help
advance residential rooftop installations; and the USGS in
developing advanced hydrologic models.
Increasingly, it is clear that local governments and
regional initiatives like the compact will play an important
role in leading climate adaptation. But there remains a great
need for the technical and financial support of the Federal
Government, along with the transition to a clean energy
economy.
I am pleased to share with you that Broward County has
already committed to a 20 percent renewable energy goal and in
a unanimous bipartisan vote, our board supported the EPA's
Clean Carbon Rule. Climate change is one of the most important
issues facing our Nation. As a grandmother of three, I can
assure you the future is already here. It is our responsibility
as government to act now to ensure that the resources and
prosperity that we have so enjoyed will be there for our
children in the future.
I thank you so much for the opportunity today to speak to
you, and I look forward to a lively and engaged conversation.
[The prepared statement of Ms. Jacobs follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. Thank you very much, Commissioner
Jacobs.
Our next witness is Mr. Bill Mook, who is the President and
owner of Mook Sea Farm, an oyster farm founded in 1985 on the
Damariscotta River in mid-coast Maine. He raises the American
oyster from egg to adult size, producing 80 million to 100
million juvenile oysters annually for sale to other east coast
oyster growers and for cultivation and sale on the U.S. half
shell market.
Mr. Mook was appointed to a 16-member commission created by
the Maine legislature to study ocean acidification and its
effects on shellfish. He has worked as a research assistant at
the University of Maine, prior to his work in the shellfish
aquaculture industry and previously spent several years
teaching science and biology.
Mr. Mook, welcome.
STATEMENT OF BILL MOOK, PRESIDENT, MOOK SEA FARM
Mr. Mook. Thank you, Mr. Chairman.
As already mentioned, I am President and Owner of Mook Sea
Farm, founded in 1985. We are located on the Damariscotta River
in mid-coast Maine. At our hatchery, we produce seed oysters.
Some are sold to other east coast growers and the rest we grow
and sell into the domestic half shell market as Wiley Point and
Pemaquid Point oysters.
My company employs 10 to 14 people, including myself. I
will make a wild guess that I am the only one in this room
whose paycheck directly depends on an oyster's ability to make
its shell. About 25 percent of the carbon dioxide we put into
the atmosphere dissolves into the ocean where it forms carbonic
acid. This process is called ocean acidification. It is
occurring at a rate that may be unprecedented in earth's
history and will accelerate as carbon dioxide emissions
increase.
Ocean surface waters are 30 percent more acidic than they
were at the start of the industrial age. Scientific study of
ocean acidification is young, and we have a lot to learn about
what influences acidification along our coasts, how marine
ecosystems will be impacted or what those impacts will mean for
people and communities.
However, we know that regional climactic and oceanographic
factors can exacerbate acidification of coastal waters. In the
gulf of Maine, where my business is located, the problem is
freshwater, which is more acidic than seawater. And in the last
50 years, there has been a 67 percent increase in very heavy
precipitation.
From numerous studies, we know that acidification of the
marine environment will hurt many shellfish. We know that the
combined negative effects of acidification and other climate
change parameters, like higher temperatures and low oxygen, can
be additive and sometimes synergistic. Not only shellfish are
vulnerable. The survival, health and behavior of species like
the cod, summer flounder, Atlantic silverside and even
clownfish are also compromised in high CO2 conditions.
At Mook Sea Farm, starting in 2009, we tried to figure out
why our oyster larvae were having problems. Fertilized eggs
sometimes showed poor survival. More often, larval growth would
slow down and the larval period, which normally lasts 14 to 16
days, would drag on for an additional week or more. Large storm
events seemed to be the common denominator.
We developed a suite of strategies. They all, and this is
key, assumed that low pH water was the culprit. These methods
were consistently applied to every group of larvae we produced
this year, and for the first time since before 2009, we were 16
for 16. Every group passed through the larval phase in 14 to 16
days.
Taking all this together, we know acidification is not a
future problem; it is a problem now and it will only get worse.
What are the fates of wild populations in uncontrolled
conditions? Based on monitoring our intake water, the prognosis
is not good. I believe that as acidification progresses, larval
success will become increasingly sporadic, reaching a point
where some natural populations won't occur. As I explain in my
written testimony, there are indications that this process may
be underway.
What are the stakes? Every day enormous quantities of
calcium carbonate are trucked around this Country. The $2
billion annual landed value of shellfish increases
substantially as it moves up the supply chain from harvesters
to wholesalers, distributors, supermarkets, fish markets and
restaurants. Even though lobsters and crabs make up half the
value of the U.S. landings, we know little about the responses
to acidification. This is of special concern to us in Maine,
where lobsters are king of marine resources, sustain thousands
of people and are the lifeblood of communities from Kittery to
Eastport.
Because this study of ocean acidification is so new, we
don't have the information needed to fully examine the threats
it poses. There are two critical research priorities: water
chemistry monitoring and understanding species and ecosystem
responses to increasing carbon dioxide.
Mitigating and adapting will only buy us time while
greenhouse gases accumulate in our atmospheres and oceans. As
an American businessman, I believe the greenhouse gas equation
is solvable. Leadership with basic research and American
ingenuity and innovation will yield not only greenhouse gas
reductions but it will also yield many unanticipated benefits.
With American leadership and unity to solve the problem, the
outcomes become exponential.
Thank you very much.
[The prepared statement of Mr. Mook follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. Thank you very much, Mr. Mook.
Our next witness is Raymond J. Keating, who has served as
the Chief Economist at the Small Business and Entrepreneurship
Council since 1995. He is a registered lobbyist who writes,
speaks and testifies before Congress on a wide range of issues
affecting small businesses and the economy. Since 1995, he has
testified before Congress over 15 times.
He is also a lecturer at the Townsend School of Business at
Dowling College. He has co-authored or authored several books
and written articles and many publications. He holds a B.S. in
business administration and economics from St. Joseph's
College, an M.A. in economics from New York University, and an
M.B.A. in banking and finance from Hofstra University.
Mr. Keating, please proceed with your testimony.
STATEMENT OF RAYMOND J. KEATING, CHIEF ECONOMIST, SMALL
BUSINESS AND ENTREPRENEURSHIP COUNCIL
Mr. Keating. Mr. Chairman, members of the committee, thank
you for hosting this hearing today. My focus will be on the
negative effects that regulations tied to climate change have
on small business and the economy.
I am pleased to submit this testimony on behalf of the
Small Business and Entrepreneurship Council and our Center for
Regulatory Solutions. SBE Council is a non-partisan, non-profit
advocacy, research and training organization dedicated to
protecting small business and promoting entrepreneurship. The
Center for Regulatory Solutions is a project of SBE Council.
I would like to start off by saying that the State of the
economy must be weighed when considering any major policy
endeavor, including, of course, significant regulatory measures
related to climate change. After all, on the cost side the
economics of regulation are rather straightforward. That is,
regulations raise the costs of and create uncertainties for
investment, business and entrepreneurship, thereby restraining
critical risk-taking, along with productivity, economic growth
and job creation. The wages and incomes of workers and families
suffer as a result.
Consider some facts on the U.S. economic performance in
recent years. During the recovery we have averaged real GDP
growth of only 2.1 percent annually. That is less than half of
where we should be if you look at the history since 1950. And
of course, GDP shrank by 2.9 percent in the first quarter.
Critical here is the lackluster private investment. That is
really the most troubling issue in this very troubling economy,
given that private investment is idle for economic growth now
and in the future. And if you look at the numbers, we are still
below the recent high hit in 2007 when it comes to private
investment.
This is the worst possible scenario to be imposing an
additional massive regulatory intrusion in the name of climate
change. Indeed, from an economic perspective, when it comes to
the climate change regulatory agenda, the only outcome that we
can be confident in is that new regulatory and/or tax regimes
will impose very real costs on and reduce economic efficiency
in industries, businesses and the economy. All of that
providing anything meaningful in terms of climate benefits or
reductions in global temperatures. In other words, it is all
pain, no gain.
When focusing on the threats posed and costs imposed by
climate change, the clearest and most significant come from the
resulting government actions. In particular, increased
regulatory and tax burdens, such as mandating reductions in
carbon dioxide emissions, mandating the use of cost and
inefficient alternative sources of energy and/or imposing some
kind of carbon tax.
I noted several studies in my written comments that show
significant losses in terms of economic growth, income and
productivity due to regulatory costs. As for small business,
which is obviously vital for our group, the SBA's Office of
Advocacy published an updated study in 2010 looking at
regulatory costs at the Federal level. I would just like to
highlight two points right now.
For firms with less than 20 employees, the per employee
cost of Federal regulations was 42 percent higher than firms
with employees between 20 and 499; 36 percent higher for firms
with 500 or more employees. Look on the environmental front,
environmental regulations, the costs are even higher. So the
burden of regulation on small business is significant and
disproportionate.
When we look at what has been going on, we have heard a lot
of talk about the EPA's war on coal related to carbon dioxide
emission limits on power plants. I would argue and I have
argued that this is really a war on small business as well.
Just a few quick points.
First, straightforward economics makes clear that whatever
the details of the regulatory schemes that will be used, the
costs, again, will be formidable. We are talking about big
costs on the U.S. economy; we are talking about big costs on
small businesses. Ninety-nine point 9 percent of all
businesses, both employer and non-employer firms, have less
than 500 workers; 98 percent have less than 20.
Second, higher energy costs spell trouble for U.S. firms in
the international marketplace. Again, that is not big business.
That is very much a small business issue. Ninety-eight of U.S.
goods exporters are firms with less than 500 employees.
U.S. manufacturers face increased costs and reduce
competitiveness. And guess what, 98.6 percent have less than
500 workers; 76 percent have less than 20 employees. And again,
97 percent of manufacturing exporters are small and mid-size
businesses.
Finally, I want to touch on the fact that carbon-based
energy sectors are overwhelmingly about small firms. Oil and
gas extraction employer firms, 91 percent less than 20
employees. Among coal mining employer firms, 60 percent have
less than 20 employees. And among the sector that supports
activities in coal mining, 69 percent have less than 20
employees. This is all about small business and they face real
and significant costs.
Thank you for this opportunity. I will be glad to answer
any of your questions.
[The prepared statement of Mr. Keating follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. Thank you very much, Mr. Keating.
Mr. Lomborg, welcome back. We saw one another in the Budget
hearing this morning. So you have a two-fer going today. We
welcome you. Please proceed with your testimony.
STATEMENT OF BJORN LOMBORG, PH.D., ADJUNCT PROFESSOR,
COPENHAGEN BUSINESS SCHOOL AND PRESIDENT, COPENHAGEN CONSENSUS
CENTER, USA, INC.
Mr. Lomborg. I hope you are having the two-fer but yes, I
would love to just show you a little bit. The question is
really on the effects of checked and unchecked climate change
in communities and the economy. I am just going to look at the
economic argument and I think I am going to pick up from
Raymond Keating's point of saying that we need to make sure
that we recognize there are both costs of not doing something
and costs of doing something.
So fundamentally, yes, global warming is a man-made, long-
term problem. For the U.S., it constitutes a problem about 1.2
percent over the next five decades. So remember, this is a
problem, but it is not the end of the world. It gives a sense
of proportion. This is the total cost over the next five
decades, so this is discounted back to today's dollars.
If you look at the cost of inaction over this century, it
is a significant increase in costs. That is certainly an
argument for doing something. But we also need to remember that
there is a cost to that action as well. Here I have a graph of
the GDP growth per year for a lot of countries and
CO2 growth for a lot of countries per year. It shows
that there is a very strong correlation; that is if you grow
more, you will probably also have higher CO2
emissions. Likewise, if you want to cut back on CO2
2 emissions, you probably also will have lower growth.
Now, this is not a one-to-one and it certainly is not that
you have on growth if you cut your carbon emissions back. But
there will be lower growth. So there is a cost, and that is
basically the cost that I showed you up here. This is if we had
the absolutely best outcome, one where all countries around the
world coordinated with one perfect carbon tax increased in
lockstep around all nations across the century. We would have
slightly higher costs in the first part of the century and
slightly lower, a little bit more lower costs toward the end of
the century. So this would actually be a good policy. Of
course, it is probably also a policy that is very hard to
enact.
I have also shown you, and I go through in my paper, why
this is probably a much more likely outcome of action on
climate change where we take strong action mostly in developed
countries and rich countries and we do so in a way that we know
we tend to do, which is less than economically fully efficient.
And then of course, the cost of action actually ends up being
phenomenally much higher, both because we pay many of the costs
of the downside of climate change and a significant part of the
costs of, a Raymond Keating mentioned earlier, in the
regulation part.
So what we have to do is make sure that we don't end up
spending lots of money on things that will not actually help
the world.
If I could also just, and I was asked to make a few
comments on some of the impacts on specific issues. We have
talked about hurricanes; are hurricanes increasing. Well, we
don't know this still from the evidence. But we actually expect
that over the next 100 years there will be stronger hurricanes.
I am taking, if you will, a slightly pessimistic view from one
of the main papers that was cited in Nature a couple of years
ago.
If we assume that we are going to see stronger hurricanes,
what will that impact be? Well, for now, it would be, the U.S.
impact on hurricanes is about a loss of 0.1 percent of GDP. In
2100, because you will be much richer, even if hurricanes are
much stronger, the fact that you will also be much more
resilient, partly because you are richer, we actually estimate
the overall damage will be lower at about 0.05 percentage
points.
So again, the point here is to recognize, yes, there is a
problem, but it is not the end of the world. Again, I think
that argues for possibly having a more relaxed kind of
conversation and a more rational kind of conversation.
Could I also just emphasize, and I think this is part of
the information that is necessary perhaps, from Europe, we have
had some experiments in making pretty poor climate policies. We
have managed to cut carbon emissions, but at fairly low cost.
If you look at the U.K., heating prices in the U.K. over the
last 5 years have gone up 63 percent. This harms especially
poor people. We now know that about a million elderly in the
U.K. stay in bed longer than they want to in order to keep
warm. A third don't warm up more than one room.
Electricity prices, for instance, have dramatically
increased, about 50 percent. That has reduced consumption,
which is what a lot of people argue, see, it actually worked. I
think it is perhaps worth pointing that it reduces consumption
for the poor, but not for the rich, because the rich could
actually afford to keep using as much electricity.
If I could just show you this one graph on electricity
prices from Germany. Germany has the world's second highest
electricity price. I am sorry to say that Denmark leads that.
But they probably pay about three times as much as what you do
on average here in the U.S. As you can see, they have seen an
80 percent increase in price over the last 14 years. So
basically this now means that about 7 million households live
in energy poverty and 600,000 households had their electricity
cut, because they couldn't afford it.
This is just examples, again, of saying there is a real
cost in action as well as inaction. What I want to make sure is
that when we talk about this we don't just talk about there are
terrible things happening with global warming. Yes, there is a
problem. But also, a real conversation about how do we make
sure that the action we take will actually not be more costly
than the inaction we are trying to leave.
Thank you.
[The prepared statement of Mr. Lomborg follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. Thank you very much, Dr. Lomborg.
Let me take a moment to put into the record a few
documents. Two of them relate to information about the small
business view on climate change reflecting that a majority of
small businesses support the EPA regulating carbon emissions
from existing power plants. And 76 percent are in favor of
requiring new power plants to reduce carbon pollution. And
other polling showing that small businesses believe climate
change and extreme weather are an urgent problem that can
disrupt the economy and harm small businesses; 57 percent of
small businesses in this poll are described as an urgent
problem that can disrupt the economy and harm small business.
Four in ten strongly believe this.
So there appears more than a single view of the small
business community.
[The referenced information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Whitehouse. I would also like to put into the
record a report from the Center for American Progress called
Groundhog Days, which relates to some of the testimony we had
earlier in this committee from the four Republican EPA
commissioners about the unfortunate track record of industry in
predicting harm and disaster from environmental regulation,
when in fact studies actually usually show that there are huge
benefits, net benefits if you look at both sides of the ledger.
So to my questions. Let me first ask Commissioner Jacobs,
if you could tell me a little bit about what the specific
threats are that Florida faces. What does it mean for your
water supply and for coastal properties from sea level rise?
First of all, there is no controversy in Florida that sea level
rise relates to climate change, is there?
Ms. Jacobs. In South Florida it is a bipartisan
conversation. It is not the kind of conversation you are seeing
up here in Washington. And I think that is primarily because we
are all dealing with it.
Senator Whitehouse. Your colleague Sylvia Murphy is very
ardent protagonist in this area. And she is a Republican one
county south of you, correct?
Ms. Jacobs. Yes. But when you consider in South Florida
that you have over 100 cities in the four counties representing
five and a half million people, all of these cities and the
four counties are struggling with how to pay for the
infrastructure needs, and knowing what is happening.
I want to point out just some of the things that are
happening. For example, in Monroe County, you have a drainage
system that was designed to pull water away during rain and
storm events. But what has happened is that it has actually
become the conduit to draw saltwater in twice a day with the
daily movements of the tides. It has become such a problem that
Ford Motor Company is no longer honoring the warranty to the
police vehicle fleet there, because of saltwater damage to the
undercarriage, and the fire hydrants are rusting away in the
roads. They have just paid to have one of the roads raised
another nine inches as a result of one of these problems.
In Broward County, we have a saltwater intrusion line that
is marching ever inward. Now it stands between three and six
miles inland. Every well on the east side of that saltwater
line--oh, there is a map. Every well on the east side of that
red line has been lost to saltwater.
Now, why that is important is in Broward County, unlike our
sister counties to the north and south, you have 28 water
utilities. So each of the different cities has their own
utility. Whenever your utility loses its water supply, they
must then purchase it from the neighboring city at a cost of 25
percent increase.
So when we talk about the ability for people to be able to
afford moving forward, we know that saltwater is a problem. We
know that we have to find ways to not only address the loss of
well fields and potable water supply. But with 1,800 linear
miles of canal systems just in our county alone, the issues are
not just coastal, they are inland. There are 11 salinity
structures, or flood control gates, that keep saltwater where
it is supposed to be in the ocean, and the freshwater in our
canals. They are designed to lift those gates during rain
events and allow that water to drain out.
Increasingly as sea level rise has come up, we are not able
to open those gates. They remain closed, which requires that
the inland areas stay inundated with water, sometimes up to 2
weeks, which is what we saw in Palm Beach County. They simply
had nowhere for that water to go.
Senator Whitehouse. Does the drainage system that would
take the freshwater, the rain water off of the land, is backed
up against saltwater and it can open the gate?
Ms. Jacobs. Exactly. It would either be, the gates either
lift and you let it drain out to the sea or it is backed into
the Everglades. Neither one of those options available.
And increasingly, there are 18 of them that the South
Florida Water Management District, which has the authority over
the 16 southern Florida counties, has estimated that need to be
replaced because they only have a six-inch head differential
between the salt side and the freshwater side. Those all come
at a cost of $50 million.
The infrastructure needs in South Florida are herculean in
scale. One of the things I think is important to understand is,
at the end of the day, when the sweater has overtopped your
canal wall and it has flooded your swimming pool with saltwater
or your toilets are backing up, they don't care what party you
are when they call. They don't care where they are in the
economic ladder. They want you to answer.
So that is way you see so many elected officials in South
Florida pulling in the same direction. There is not an argument
in South Florida that climate change is real, that the costs
are out of scale and that we need to move forward.
What I would think is one of the most important points that
touches on many of the comments here today, and that is
adaptation action areas. We were able to add into State law
that they needed to be established throughout the State of
Florida. We have asked for the Federal Government to engage in
a similar undertaking. That allows you to figure out where are
your vulnerabilities and how long it is until those changes
come to you and allows you the opportunity to start
prioritizing over what the changes are going to be in your
future.
The idea is, we are already, all of us, whether it is the
Federal Government, the State or local government, spending
significant sums of money. The idea is to spend them smartly,
to understand what the future looks like and build accordingly.
American ingenuity can pull us out of a lot of the scary
scenarios that we are hearing about. But the only way that that
truly happens is to recognize that it is coming, assess that
vulnerability, create a prioritization of what you are going to
do and then take your time in moving through the steps.
Senator Whitehouse. Thank you very much.
My distinguished ranking member, Senator Sessions.
Senator Sessions. Thank you, Mr. Chairman.
Dr. Lomborg, I was looking at one of your charts. I believe
is figure one. It indicates that at least for the next 70 or so
years, the global warming is a net benefit to, is that the
United States or the planet as a whole?
Mr. Lomborg. Yes, that is for the planet.
Senator Sessions. Well, that is a pretty long time. So
would say the predictions of disaster today might be a bit
overdrawn.
With regard to Ms. Jacobs, when you have a huge population
living in South Florida and it draws water out of the aquifers,
that does allow saltwater to infuse itself, does it not? Is
that one of the factors that might be causing the salt increase
in your aquifers?
Ms. Jacobs. Actually, sea level rise is why we are losing
our wells. But I would point out to you that we have taken the
amount of water used in Broward County seriously, and through a
variety of changes made----
Senator Sessions. I just asked, was that one of the factors
that might cause an increase in salt? You draw down your
aquifers, water tends to move in, does it not?
Ms. Jacobs. If you over-drew, than your permitted amount,
then that is possible. That is why Broward County has reduced
its future potable water needs by 50 percent.
Senator Sessions. Dr. Lomborg, with regard to the chart,
figure 13, I am a little uncertain about that. But it seems to
me that you are saying that over on this one, let's take the
other chart, you show a modest alteration in the actual, a
modest cost if nothing is done. And in terms of the entire GDP,
this looks like the chart is $650 billion and it looks like
there is a very small extra cost if we did nothing over the
next century. Is that correct?
Mr. Lomborg. Yes.
Senator Sessions. Can you translate that into dollars?
Mr. Lomborg. There is an unavoidable cost. What I tried to
show is that we are, over the century for the U.S., have a
discounted value in GDP of about $650 trillion. If we have
global warming as we believe it is today and don't do anything,
that is going to cost us about $3.4 trillion. If we are
phenomenally good at how we do our polices, we can reduce that
number by about $200 billion.
That is not nothing. That would be great. But it requires
China, India, everybody else to do all the right things at all
the right times. That is very unlikely.
Senator Sessions. All right, $200 billion over 100 years.
Mr. Lomborg. Yes.
Senator Sessions. That is $2 billion a year, give or take.
Mr. Lomborg. Yes, you can't quite do that, because it is
discounted. But yes. Obviously the whole point here is to
recognize that there is a significant risk that we are going to
end up paying a lot more, and there is only a little upside.
Senator Sessions. So what you are saying is, if we don't
watch it, we will spend a lot more on preventing than we get in
terms of benefit, based on the science that is out there today.
Mr. Lomborg. Yes.
Senator Sessions. And you accept IPCC's basic scientific
data.
Mr. Lomborg. If we look at the peer-reviewed studies on the
cost of the European Union climate policies, which are well-
intentioned but very clearly not well made, we estimate that
the benefit cost ratio to the world, not to the EU, but to the
world, is probably going to be in the order of every dollar we
spend, we will avoid three cents of climate damage for the
world. I would argue that is probably a pretty poor climate
policy.
Senator Sessions. Now, Mr. Keating, I was really surprised
about the percentage, or your contention that small businesses
suffer more under the environmental regulations. Could you
explain why that is, the regulations that impose costs, as they
all do, why it falls more disproportionately on small
businesses?
Mr. Keating. Regulatory costs fall disproportionately more
on small businesses than big firms. Think about the day to day
operations of your average small business. Regulatory costs
come down, larger firms have what, they have lawyers, they have
everybody that can, a whole staff to deal with these things.
To bring it down to the small business owner's level, they
don't. They are operating on thin margins. They are struggling
to get by, most of them. These regulatory costs fall much
harder on them. That is borne out in the economic analysis, the
work done by the SBA and work done by a whole host of other
people, that the regulations fall much more heavily on small
firms.
Can I ask this to be put into the record? We have a
wonderful handout here. The chairman mentioned polls, and I
love doing poll battles. But we did a poll on regulations
ourselves and the American people, in terms of what they
believe about regulations. And guess what? They think that it
mostly hurts, 70 percent, the American economy, 67 percent of
America's competitiveness, 66 American workers, 66 percent
small business.
Senator Whitehouse. Without objection, that will be a
matter of record.
[The referenced information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Keating. I appreciate that. I can give it as a pdf or a
handout.
Senator Whitehouse. Senator Markey?
Senator Markey. Thank you, Mr. Chairman.
So I am going to give a little good news to the committee,
it is a little depressing hearing some of the testimony here.
Just wanted to give you the history of the American economy
since 1929. This is pretty much true every single environmental
law that was passed in American history, Superfund, Clean Air
Acts of 1970 and 1977, 1990, you can see that we had pretty
much uninterrupted growth all the way with a period of time
where there was some regulatory relief given by the Bush
administration to the financial sector, which did cause a big
economic downturn with that regulatory relief for businesses
across the Country.
But we recovered from that, imposing some regulation and we
continued on our growth and all through the incredible
environmental laws that we now have on the books. So I just
wanted to make that clear, about economic growth.
I also would like to use as an example not Germany or
Denmark, we know little about those countries on the committee,
but we do know something about the United States of America.
And we do know something about the Regional Greenhouse Gas
Initiative that Massachusetts and Rhode Island and New York and
Maryland and Delaware and other States are in.
And here is the good news. Since the Regional Greenhouse
Gas Initiative went into effect, Massachusetts has reduced its
greenhouse by 14 percent. And we have created 80,000 new clean
energy jobs. We are going to 90,000 by the end of this year.
Our unemployment rate has been lower than the national average
over that last six or 7 year period. And while electricity
rates went up 13 percent for the whole Country, they actually
went down 6 percent in Massachusetts because of this incredible
investment we made in energy efficiency and other technologies.
So I just want to give some people out there who live in
the United States and not in Germany or Denmark that we
actually have examples here in America that exist right now
that you can point to if you would like. And know that it can
work, it does work. And it is right now. We don't have to point
to other examples. We have no idea what the other factors might
be in Germany or Denmark.
And Mr. Keating, I agree with you that the impact on small
businesses is disproportionate. There is a proposal to export
our natural gas out of the United States, and the Energy
Information Agency has said that that could lead to a 54
percent increase in the price of natural gas to small
businesses across the Country.
What is your position on the exportation of natural gas if
you know that it is going to lead to a 54 percent increase in
price for small businesses in the United States and that there
is a way of avoiding that and keeping the benefits of that low
priced shale natural gas here for small businesses in the
Country?
And knowing as well that that 54 percent increase dwarfs
any increase in electricity rates that the proposed regulation
at the EPA would be able to impose upon local small businesses?
It is just not even in the same league. How do you feel about
helping us to stop that from happening, Mr. Keating?
Mr. Keating. Thank you, Senator.
First off, the only period of deregulation that we have had
since World War II was during the 1980's.
Senator Markey. I didn't ask you that. Can you answer my
question?
Mr. Keating. I am trying. Are you editing my response?
[Simultaneous conversations.]
Senator Markey. No, I am asking you to answer my question.
Mr. Keating. I am leading up to it.
Senator Markey. No, I have limited time. Please answer my
question. How do you feel about the exploitation of natural gas
for small business which is going to result in a 54 percent
increase in price?
Mr. Keating. LNG exports are a wonderful idea for small
businesses. Your 54 percent number that you threw out there is
complete speculation. It assumes, it is a zero sum outlook on
the economy. And if anything we have seen in the energy sector,
it is just the opposite. How many years ago, we just said that
we felt we were depending on foreign sources of oil forever.
And now we are an energy superpower. We are the No. 1 producer
of oil and natural gas.
Senator Markey. But no, for the record----
[Simultaneous conversations.]
Senator Markey. I am reclaiming my time. You are a guest of
the committee. We import 30 percent of our oil, sir, and we are
talking about exporting oil while we are still importing 30
percent. If we were exporting wheat to Germany while we were
still importing 30 percent of the wheat from other countries,
perhaps Russia, I don't think that we would be happy with that.
So are you going to answer the question about the 54
percent increase? Mr. Lomborg is talking about 2100, which
seems kind of speculative. What we have is near-term economic
analysis of what the impact right now is of exporting natural
gas. And if you could just give us an answer in terms of how
that impacts small businesses today if the price went up 54
percent.
Mr. Keating. Well, first off, I don't buy the premise,
Senator, quite simply.
Senator Markey. Well, there you go.
Mr. Keating. A 54 percent increase is pure speculation by
one analysis. And if you look at the numbers----
Senator Markey. That is my----
Mr. Keating [continuing]. we would see a benefit in terms
of producing more energy here at home both for domestic
consumption and for exports.
Senator Markey. I am reclaiming my time because it is
running out. I am reclaiming my time and I will just say, I am
reclaiming my time. The sheer speculation, sir, is you
projecting these impossible to shoulder electricity rates for
small businesses when the estimates are that the export of
natural gas is going to absolutely drive electricity rates up
in the United States and cost small businesses a tremendous
amount of harm.
So you ignore the economic analysis that you don't like in
order to advance an ideological driven analysis which you come
here, and we would be better if you basically accepted both
premises, it would add a lot more credibility to your argument.
Because we have a New England Northeast agenda which is already
working to lower greenhouse gases and electricity rates at the
same time.
Thank you, Mr. Chairman.
Senator Whitehouse. Senator Vitter.
Senator Vitter. Thank you, Mr. Chairman. Dr. Lomborg, in
your testimony you say that ``Current global warming policies
make energy much more costly. This negative impact is often
much larger, harms the world's poor much more and is much more
immediate.'' Can you elaborate on that, particularly on impacts
on poor and elderly that you have observed, anywhere, Europe,
anywhere else where this has been tried?
Mr. Lomborg. Fundamentally, if you are going to have costs
and increase the cost of energy, because energy is something
that we all need to use, it typically and predominantly falls
harder on the poor. So it is a regressive tax in that case.
Of course you can try to accommodate for that and some
nations try to do this. But I think it is almost universal that
it will end up being a regressive tax that harms the poor the
most.
So as I tried to mention before, we have stories and
indications, for instance, from England that poor people,
especially pensioners, have a very hard time because of the
fact that energy costs have gone up dramatically. Now, this is
not just because of climate policy, but it is a significant
part of it. And there is a huge row, and I am going to leave
that out of here, given that we just have 5 minutes, on exactly
how much that is. But it is certainly in the direction that we
would expect to see more of with harsher climate legislation.
Likewise, we see this in Germany, as I mentioned before. It
also erodes, in the long run, the willingness to engage in
further climate policies. If we look, for instance, in Spain,
Spain is now paying more in subsidies to wind and solar than
they are spending on their entire higher education system. And
clearly, that is not sustainable in the long run. You can't
keep telling people, especially if they are as bankrupt as
Spain, that they are going to keep paying more and more in
green subsidies. I think that is one of the indications that
you really need to find a way to cut carbon emissions and do so
at a cheap rate.
If you will just allow me one more example, because we sit
here in a fairly wealthy part of the world, and talk about
other relatively wealthy nations, there has been a great study
done, for instance, on helping Africa. If you fly from South
Africa up to Europe, you basically a continent that is almost
dark. There is virtually no electricity. They have as much
electricity for 870 million as Arizona has. So it gives you a
sense of the proportion.
Now, for instance, Obama wants to help electrify Africa. I
think that is a wonderful idea. But the issue here is if we do
that with green energy, for $10 billion we can lift 20 million
people out of darkness and poverty. But if we do it with gas,
we can lift 90 million people out of poverty and darkness.
So we have to face up to the fact that if we focus on
things that are costlier, it does have a real impact on poor
people.
Senator Vitter. OK. Also, Doctor, your testimony talks
about the inaccuracy of the predictions and models over the
last 30 years. You said it is becoming increasingly clear that
if anything, nations should be focusing on preparing for the
low end of what has been forecasted. Would you talk about that
low end, why you come to that conclusion of serious problems in
the science as it pertains to past predictions?
Mr. Lomborg. The simple point is that as many, I am sure,
have argued here before the committee, we have seen a hiatus in
the increase in temperature. There are a lot of different ways
to describe it, but it is certainly a lot less than what the
computer models were predicting for the last 10, 15, maybe up
to 20 years. So the reality here is we are seeing less than we
expected.
Now, this does not mean that global warming is not
happening. But it probably does mean that we are in the lower
end of the sensitivity to CO2 rather than the high
end. That simply indicates that I don't think this is the kind
of thing that we should just say, oh, then there is no problem,
and just move away. But we should recognize that it makes it
less likely that the scary scenarios that we hear are the ones
that are going to come about.
And of course, again, remember, the models that I showed
you are actually based on a relatively pessimistic model of
that. It has slightly higher, not lower, climate sensitivity.
It starts off with a negative right off the bat, from 0.1, and
so on. So if anything, I have shown you an argument that even
when you use a +relatively pessimistic model, shows you that we
have to be very careful in order to not actually end up getting
worse.
Senator Vitter. And Mr. Keating, quickly, because my time
is running out, can you comment on other experiences? Others
have tried this model, basically, Europe, Australia to some
extent, et cetera. Can you comment on what you have observed
and what has been quantified in terms of the effects on their
economies?
Mr. Keating. Sure. And Dr. Lomborg quantified it perfectly
I think in one of his charts right there. What I reference in
my written testimony, Australia had a carbon tax, they realized
the significant costs and the unpopular nature of that and
recently got rid of that. When you look at the costs in
Germany, in particular, what I highlighted in my comments were
how much higher the costs were for businesses there for
manufacturing and how non-competitive those costs make German
manufacturers.
This is one of the big benefits we have seen in this
Country recently with our energy revolution and how wonderful
that has been for domestic manufacturing right here at home. So
why do we want to mess with that, I guess is how I would sum
that up.
Senator Vitter. Thank you very much.
Senator Whitehouse. Senator Boozman?
Senator Boozman. Thank you, Mr. Chairman. I would like to
submit a letter for the record from Governor Beebe, my Governor
in Arkansas. He recently sent a letter to President Obama
expressing support for LNG exports, particularly Senator
Udall's LNG export bill. With your permission, I ask unanimous
consent.
Senator Whitehouse. Without objection, it shall be made a
part of the record.
[The referenced information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boozman. Thank you, Mr. Chairman.
I am curious about the discussion that we are having about
the LNG export. You mentioned that you had problems with the 54
percent, and then again, you were talking a little bit about
the benefits of doing that. Could you, Mr. Keating, and you,
Dr. Lomborg, could you tell us your thoughts concerning the
exports and if that is a good thing or a bad thing for us and
the rest of the world? As you mentioned, I am running all
around Arkansas trying to figure out how we can increase
exports. Exports seem to be a good thing.
Mr. Keating. Sir, I remember that it used to be both sides
of the aisle were in favor of exports. I think we all should
be. I did a paper on this last year, in terms of looking at the
growth that we have seen in natural gas production here at home
and the opportunity on the export front for small business
specifically.
So we broke out each State in terms of where this
revolution has happened in terms of shale energy. And you see
the numbers are unmistakable. Overall economy, the number of
businesses down, the number of small businesses down for the
period we looked at, the number of jobs down. Then you look at
the energy sectors where this is happening and it is all up. In
some States it is up incredibly.
So this has been the one issue that I love talking about,
because it is a positive issue, the economy for the last few
years. But it is not only good news for the energy sector and
the small businesses in that sector, but it has been good news
for the economy overall and for small businesses in terms of
the dramatic decline that we saw in natural gas production.
My bottom line point is that when you look at the
possibility of exports you can't, as an economist, I am always
leery of predicting the future. But I go back to economic
principles. And it isn't a zero sum game, which is what I
started to say before. And we learn that in energy in a
wonderful way. We thought that we were going to be dependent
forever, and we are not. This is what happens in the private
sector with innovation, technological advancement. And there is
no reason to believe that that will not continue in the energy
sector. When you look at the numbers, they are really quite
staggering.
The other thing about energy projections, they always come
up, projections are always far short of what the eventual
outcome is. Because again, technology changes and innovation
happens.
Senator Boozman. The only thing I would say is I can
remember being in class a long time ago and my physics
professor, this was back in the late 1960's, early 1970's,
talking about how we would run out of natural gas in 20 years.
Yes, Dr. Lomborg.
Mr. Lomborg. I am not going to get into that whole
conversation of whether you should export. But I think there
are two things we need to recognize. One, natural gas and the
switch to natural gas has become so cheap, from coal to gas has
dramatically reduced the carbon emissions in the U.S. So we
estimate, the latest here, we have good data, because obviously
other things also happened in the recession and the fact that
you have more wind turbines and so on, we estimate that the
U.S. probably has cut about 300 megatons of CO2 per
year and the year 2012 because of the switch from coal to gas.
That is dramatic. That is more than all the wind and solar
in the world, which is about 275 megatons per year. So you have
done an amazing achievement.
Now, remember, there is still a long, long way to go. But
it is certainly one of the biggest reductions we have seen.
So in that sense, if we can indeed get more production from
the U.S., which seems likely and reasonable, I would imagine,
but again, I am not an expert in that, then certainly wouldn't
you want to export part of this in order to make sure that
other countries would also start to be able to reduce? Because
they would get cheaper gas, which they would then not burn coal
and substitute for.
So if we are talking about global warming, that would
probably be overall a good thing. But of course, in reality,
the real solution will have to be to get other nations fracking
as well.
Senator Boozman. Your statistic about Africa was amazing,
with the analogy about the natural gas, the energy credit there
versus the other.
Thank you very much, Mr. Chairman.
Senator Whitehouse. Thank you very much, Senator Boozman.
The hearing has come to its end. I appreciate very much
that the witnesses took the trouble to come. Mr. Hedde, I am
sorry that you didn't get a question, but your testimony is a
part of the record, and it is clear from your testimony that
there is more going on than just more expensive property in the
way of the storms. I appreciate that you were able to bring
that perspective on behalf of an industry that has huge amounts
of money, and I am trying to get this information right.
Ms. Jacobs, thank you for coming. I appreciate it. You are
dealing first-hand with a very challenging experience, as an
area that you love and a way of live is being challenged in new
and different ways. I appreciate that there are bipartisan
solutions being found in Florida to try to address the problem.
Mr. Mook, again, you struck out on questions, but thank you
for your very thoughtful presentation. You bring to this
committee the hard, practical ground truth reality of someone
whose business is already being affected by the really
undeniable effect of carbon pollution, which is ocean
acidification. That is something one can replicate in a high
school lab. So it is not a complex matter. I appreciate very
much that you were here.
Mr. Keating, thank you for sharing your perspective. I am
very grateful that you were able to come.
And again, Dr. Lomborg, this was twice today, and thank you
very much. We appreciate the perspective you were able to
bring.
Senator Sessions. Thank you, Mr. Chairman, it was a good
group of witnesses. I look forward to continuing to discuss
these matters. Mr. Hedde, if you have any scientific data that
shows we are having increased hurricanes to date, let me know,
please.
Mr. Hedde. We will.
Senator Whitehouse. You can actually broaden that to refer
to storms in case there is a trick to the hurricane word.
Storms and damage, OK? You use your words.
Senator Sessions. Storms, hurricanes or droughts.
Senator Whitehouse. Thank you very much. The hearing is
adjourned. Thank you to my ranking member.
[Whereupon, at 4:10 p.m., the hearing was adjourned.]
[Additional material submitted for the record follows.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]