[Senate Hearing 117-44]
[From the U.S. Government Publishing Office]
S. Hrg. 117-44
THE COST OF INACTION ON
CLIMATE CHANGE
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HEARING
BEFORE THE
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
April 15, 2021
__________
Printed for the use of the Committee on the Budget
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
45-191 WASHINGTON : 2021
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COMMITTEE ON THE BUDGET
BERNARD SANDERS, Vermont, Chairman
PATTY MURRAY, Washington LINDSEY O. GRAHAM, South Carolina
RON WYDEN, Oregon CHARLES E. GRASSLEY, Iowa
DEBBIE STABENOW, Michigan MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island PATRICK TOOMEY, Pennsylvania
MARK R. WARNER, Virginia RON JOHNSON, Wisconsin
JEFF MERKLEY, Oregon MIKE BRAUN, Indiana
TIM KAINE, Virginia RICK SCOTT, Florida
CHRIS VAN HOLLEN, Maryland BEN SASSE, Nebraska
BEN RAY LUJAN, New Mexico MITT ROMNEY, Utah
ALEX PADILLA, California JOHN KENNEDY, Louisiana
KEVIN CRAMER, North Dakota
Warren Gunnels, Majority Staff Director
Nick Myers, Republican Staff Director
C O N T E N T S
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THURSDAY, APRIL 15, 2021
Page
STATEMENTS BY COMMITTEE MEMBERS
Chairman Bernard Sanders......................................... 1
Ranking Member Lindsey Graham.................................... 3
WITNESSES
Statement of David Wallace-Wells, Editor at Large, New York
Magazine, Author, ``The Uninhabitable Earth: Life After
Warming''...................................................... 6
Prepared Statement of............................................ 35
Questions and Answers (Post-Hearing) from:
Senator Patty Murray..................................... 94
Statement of Robert B. Litterman, Ph.D., Chair, Climate-Related
Market Risk Subcommittee, Commodity Futures Trading Commission
(CFTC)......................................................... 8
Prepared Statement of............................................ 44
Statement of Joseph E. Stiglitz, Ph.D., Professor of Economics,
Columbia University............................................ 9
Prepared Statement of............................................ 71
Statement of George Oliver, Chairman and Chief Executive Officer
(CEO), Johnson Controls, and Chair, Business Roundtable Energy
and Environment Committee...................................... 11
Prepared Statement of............................................ 77
Statement of Richard J. Powell, Executive Director, Clearpath
Inc............................................................ 13
Prepared Statement of............................................ 84
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Statement of Rosalina (Rose) M. Fini, President-Elect, Cleveland
Metropolitan Bar Association/Chief Legal & Ethics Officer,
Cleveland Metroparks Submitted for the Record by Chairman
Bernard Sanders................................................ 97
THE COST OF INACTION ON
CLIMATE CHANGE
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THURSDAY, APRIL 15, 2021
U.S. Senate,
Committee on the Budget,
Washington, D.C.
The Committee met, pursuant to notice, at 11:01 a.m., via
Webex and in Room SH-216, Hart Senate Office Building,
Honorable Bernard Sanders, Chairman of the Committee,
presiding.
Present: Senators Sanders, Stabenow, Whitehouse, Warner,
Merkley, Van Hollen, Padilla, Graham, Grassley, Crapo, Braun,
and Scott.
Staff Present: Warren Gunnels, Majority Staff Director;
Nick Myers, Republican Staff Director; Ethan Hinch, Majority
Legislative Aide; and Becky Cole, Republican Policy Director.
OPENING STATEMENT OF CHAIRMAN BERNARD SANDERS
Chairman Sanders. Let me call the hearing to order. Let me
thank Ranking Member Graham, our colleagues on this Committee,
and our witnesses for being with us this morning.
In my view, we are living through a pivotal moment not only
in the history of our country, not only in the history of the
global community, but in the history of humanity. When we talk
about our responsibilities as human beings, as parents, and as
grandparents, there is nothing more important than leaving this
country and the entire planet healthy and habitable for our
kids, grandkids, and future generations. This is a moral
responsibility that we cannot shirk.
So today let us be clear. The debate is over. The
scientific community has spoken in a virtually unanimous voice.
Climate change is real. It is caused by human activity and is
already causing devastating damage to our country and
throughout the world.
The scientists have told us that we as a global community
have less than a decade, fewer than 10 years, to act boldly to
transform our energy system away from fossil fuels and into
energy efficiency and sustainable energies or our entire planet
will face irreparable harm.
If we do not get our act together, we will see more
devastating and extreme heat. We will see more floods, more
rising sea levels, more extreme weather disturbances, more
ocean acidification, more drought, more famine, more disease,
and more human suffering.
Now, I have heard from some of my colleagues and some very
powerful special interests that the cost of combating climate
change is expensive. And that is true. They are right. But my
response is: Compared to what?
So let us be clear. The cost of inaction, of not combating
climate change, will be far, far more expensive in every way
than transforming our energy system away from fossil fuel. The
economists have estimated that the cost of not acting on
climate change will total some $34 trillion in the United
States alone in lost economic activity and more than $100
trillion throughout the world by the end of the century. And if
you are not worried about the financial costs, the scientists
have told us that the cost of climate inaction may put the
entire planet and life as we know it in serious jeopardy.
In fact, if we do nothing, the effects of climate change
will lead to the deaths of 1.5 million people across the globe
every single year from factors such as malnutrition, heat
stress, and tropical diseases such as malaria. If we do
nothing, the effects of air pollution in the United States will
lead to the deaths of almost 300,000 Americans between now and
the year 2030. If we do nothing, the effects of climate change
will throw over 100 million people throughout the world into
extreme poverty. If we do nothing, the World Bank has told us
that the effects of climate change could result in the mass
migration and displacement of more than 140 million people in
Latin America, South Asia, Sub-Saharan Africa, and other
locations by the year 2050. And when millions of people
migrate, no one doubts that international tensions rise, and
the likelihood of armed conflict increases.
While some of my colleagues may still refer to climate
change as a hoax, let us be clear. This so-called hoax
threatens to destroy our food and water supply, flood our
cities and towns, and displace millions of people from their
homes.
Let us talk for a moment about rising sea levels. What the
scientists have told us is that unless we reverse course, major
portions of New York City, London, and Hong Kong are at risk of
chronic flooding by the end of the century while cities like
Miami, New Orleans, and Atlantic City could be inundated by
severe flooding much sooner.
Let us talk about extreme heat. Last year was tied for the
warmest year on record, and all of the 10 warmest years in
recorded history have occurred since 2005. The Centers for
Disease Control, the CDC, has found that extreme heat events
``are the most prominent cause of weather-related human
mortality in the U.S., responsible for more deaths annually
than hurricanes, lightning, tornadoes, floods, and earthquakes
combined.''
Let us talk about extreme weather disturbances. Last year,
we had the most active Atlantic hurricane season on record.
Further, over the past 5 years, major natural disasters caused
more than $615 billion in damage and nearly 4,000 deaths.
Let us talk about wildfires. Last year was one of the worst
U.S. wildfire seasons in recorded history, and the three worst
U.S. wildfire seasons in terms of acres burned have occurred
over the last 6 years. Scientists tell us that these fires are
getting bigger and more severe because of climate change.
In my view, we have a fundamental choice to make. We can
listen to the fossil fuel industry and climate deniers and not
worry about the impact of climate change. Or we can listen to
the scientists who tell us that we have got to act boldly and
aggressively to prevent a climate catastrophe.
In my view, we have spent far too long and wasted too much
time discussing whether or not climate change is real. This
debate was not driven by science but by a decades-long campaign
of lies, distortion, and deceit funded by the fossil fuel
industry. Oil companies knew by the late 1970s that the
emissions from their products were causing irreparable harm to
the planet. Back in the 1970s they knew that. And yet instead
of working to solve or even acknowledge the problem, they
followed the campaign plan designed by Big Tobacco to make sure
our Government remained inactive in terms of combating this
global crisis.
In the end, sadly, history is likely to judge the actions
of the CEOs of fossil fuel companies as causing more death and
more human misery than the tobacco industry, and that is quite
a legacy.
And let us also understand something extremely important,
not widely known, and that is, despite all of the discussions
about climate change that we have, unbelievably we are
continuing today down the same path. Over the next 10 years,
fossil fuel activity in the United States is on track to
account for 60 percent of the global growth in oil and gas
production. In 2019, the United States was the world's second
largest emitter of greenhouse gases. Our emissions per capita
were 77 percent higher than China, which was the largest
emitter, and 85 percent higher than the European Union (EU).
That is not sustainable.
In my view, we have got to make it clear to the fossil fuel
industry that their short-term profits are not more important
than the future of our planet. At this hearing we will explore
the cost climate change has had and will have on our planet.
Among many other actions that must be taken, we cannot
continue to hand out corporate welfare to the fossil fuel
industry, and that is why today I, along with Senators Merkley,
Markey, Booker, Van Hollen, and Warren, introduce the End
Polluter Welfare Act, which would abolish $150 billion in tax
loopholes, subsidies, and special interest giveaways to the
oil, gas, and coal industry over the next decade. The
devastating impacts of climate change are here, and now is the
time for Congress to take action.
As it happens, I invited the CEOs of Exxon, BP, and Chevron
to testify today and tell their side of the story. All three
declined. But I am pleased that we have an excellent panel of
witnesses who will discuss the cost of climate change and what
taxpayers can do about it.
Now let me turn the microphone over to Ranking Member
Graham for his opening remarks.
OPENING STATEMENT OF SENATOR LINDSEY GRAHAM
Senator Graham. Thank you, Mr. Chairman. I appreciate it
very much. I look forward to the testimony today.
I will just speak for myself here. I have come to conclude
that climate change is real, that human emissions create a
greenhouse gas effect that traps heat, and that you see a rise
in the oceans and acidity in the water and droughts and
disruption of weather patterns. That makes sense to me.
I have been to Norway with Senator McCain, Greenland, I
think, with Senator McCain and Senator Clinton at the time, and
Alaska. The native people in those regions have seen a dramatic
change. So count me in on the idea that the science is real.
The solutions I think are becoming more obvious to me.
There are three areas of carbon emissions, basically, in our
lives: transportation, power production, and living--homes and
offices. So we have some folks from Johnson Controls. They are
going to tell us about how we can lower emissions through
energy efficiency, that we can have toasters and thermostats
and every kind of device we use daily can be more energy
efficient, lowering the cost to consumers and lowering demand
on production. Count me in for that. Weatherizing buildings,
having the buildings of the future, maybe have solar panels on
top of our houses--there are just endless opportunities in the
office space, consumer utilization, and home living that would
be a win for the climate, for the environment, as well as the
consumer in terms of lowering cost. It will take an investment,
but I think it would be an investment worth making.
On power production, wind and solar's footprint is getting
bigger. There are all kinds of new technologies coming on board
that are clean in nature. I think natural gas is a bridge fuel.
I think natural gas has a lower component. To our friends in
the coal world, I met a gentleman a couple days ago who
believes that coal can be transformed, not burned, to create a
product that will go into electric vehicles, batteries.
So I am trying to make this--I am trying to be creative. On
the transportation side--nuclear power is a big deal for me. It
is clean in its emission, but we have a storage problem of
spent fuel, and I think there are ways we can deal with that.
On the transportation side, probably the most exciting of
all, Mr. Chairman, is that many major car manufacturers have
said that they are going to go to an electric vehicle fleet by
2035, 2040. So I would like to sit down with the Chairman and
other Democrats to see if we could redesign the Highway Trust
Fund. Electric vehicles are not paying into the trust fund.
I was told yesterday that the Biden administration opposes
an increase in the gas tax. Well, you know, I am a Republican,
but we have increased gas taxes at home in South Carolina
because the Highway Trust Fund has a huge deficit. And I know
it is a regressive tax, but there are ways maybe we can do
rebates. So count me in for accelerating the electrification of
the transportation system. You may have hydrogen-fueled
vehicles that do not emit CO2.
So there are a lot of things going on, and one of the roles
that we can play at the Federal level is to encourage these
developments through research and development (R&D). Bill
Gates, I have talked to extensively. He thinks that the major
thing that the Government can do is create some robust funding
for R&D and let the private sector sort of flourish.
Now, when you say ``we,'' I hope you mean India and China,
because ``we,'' the family of nations here, it does not do much
good for us to do all this if other people do not follow. But
to my Republican colleagues, it is just a matter of time until
most cars--you know, I do not know how long I am going to live,
but in this century for sure that most vehicles will be running
on something other than gasoline. I have talked to the fossil
fuel industry. I find them very open to change. They just want
to be able to manage that change. It will be a while before we
get away from gas-driven cars, and we are going to need gas as
a transportation fuel. It is possible natural gas as a heating
source is very much with us. So count me in for exploring clean
energy, but thinking outside the box what that would include,
algae and nuclear power.
So I will just end with this: I have tried to learn about
the problem and realize that what we do here has to be done in
a fashion to not destroy our economy in the name of a great
cause. Other people have to come on board, too. I try to be
rational about threats. I think climate change is a real threat
to our way of life. I think over time the way we have lived has
caused this problem, and we can find a way to live a different
way that is good for the environment and will be good for job
creation.
From a foreign policy point of view, imagine the world
where fossil fuels were not so readily available to rogue
regimes. Imagine a world where the Iranian Ayatollah could not
rely on oil production as almost 90 percent of his income. The
Russians. I find it kind of interesting that the foreign policy
consequences of moving to a clean energy business footprint
would change the geopolitics of the world dramatically. Most of
the bad actors out there depend on fossil fuels for their
revenue. So that is a side of it that I think we need to talk
more about.
And, finally, threats. My Democratic colleagues are telling
me that the planet will cease to exist as we know it in a
decade. Maybe so. I am not so sure I am sold on that, but I am
definitely sold on the problem of climate change being real,
and the sooner we address it, the better. And I just wish you
had the same attitude about Afghanistan. We are down to 2,500
troops, and we are going to withdraw them all, and radical
Islam is going to come roaring back unattended. And we know
what they can do if nobody is watching them. So I find it
disappointing that we cannot look at threats rationally across
the board, Mr. Chairman. For a relatively small investment
compared to the past, we could make sure that al Qaeda and ISIS
never come back to receive sanctuary in Afghanistan. And here
is what I want to remind you of: Climate change is real. The
devastation of the planet is definitely happening. At what rate
we can debate, but it is real. If they could get a nuclear
weapon, ISIS and al Qaeda, would they use it? Yes. If they
could find a way to do something other than fly planes into
buildings to kill more of us, would they? Yeah. That threat is
really real, and we are basically leaving it unattended.
So count me in for dealing with threats across the board,
rationally, the lowest cost possible, the least disruption
possible, the least wear and tear on our military. But ignoring
a threat, Mr. Chairman, does not make it go away. Count me in,
in working with you to deal with the threat the planet faces
from climate change. I hope you and your colleagues on the
other side will look at threats that radical Islam presents to
the Nation and the world and see if our policies make sense.
Chairman Sanders. Senator Graham, thank you very much.
We have an excellent group of panelists, and let me begin
with David Wallace-Wells. Mr. Wallace-Wells is editor at large
at New York Magazine and author of ``The Uninhabitable Earth,''
an international bestseller describing the risks we face from
inaction on climate change.
David, thanks very much for being with us.
STATEMENT OF DAVID WALLACE-WELLS, EDITOR AT LARGE, NEW YORK
MAGAZINE, AUTHOR, ``THE UNINHABITABLE EARTH: LIFE AFTER
WARMING''
Mr. Wallace-Wells. Thank you, Chairman Sanders. Thank you,
Ranking Member Graham and other members of the Committee. It is
a privilege to be here today.
In 2020, what was once called at ``novel coronavirus''
killed, according to the CDC, 350,000 Americans. According to
new research, that same number--350,000--die even in an
unexceptional year from the air pollution produced from the
burning of fossil fuels. Decarbonize, and we could save those
lives.
The figures are so large they can seem almost hard to
credit, but this is a familiar paradox from climate science
which offers harrowing assessments, we know, must know, also
offer the clearest picture we have of the uncertain future that
awaits us should we fail to act. Globally, 8.7 million annual
deaths have been attributed to fossil fuel pollution. That is
death at the scale of the Holocaust every single year.
The average resident of Delhi has had his or her life
expectancy cut short by 9 years. Globally, the figure is 2
years.
Now, here in the U.S., we have what qualifies as enviable
air quality. According to the Natural Resources Defense Council
(NRDC), the Clean Air Act is still saving 370,000 American
lives every year, delivering economic benefits of $3 trillion
annually, 32 times the cost of enacting that bill. But,
unfortunately, many of these gains could be undone by pollution
produced by wildfire. In 2020, American fires accounted for
more than half of all air pollution in the western U.S.,
meaning that more particulate matter from the burning of
forests infiltrated the lungs of Americans living in those
States than from all other industrial and human activity
combined.
Now, California is still standing, mostly, after its
horrific fires, as is Australia after 46 million acres burned
there last year, and Houston after five of what were once
called ``500-year storms'' hit in a period of just 5 years. And
we are still here today after a record $22 billion weather
disasters last year, debating what measures to take to stall
the growth and blunt the force of warming--all a sign that
climate impacts are not the whole of our destiny, but instead
form the natural landscape on which our future will be built
and contested.
Now, you may think of climate change as a slow process, but
half of all of the emissions ever produced in the entire
history of humanity have come in just the last 25 years. That
is since Al Gore published his first book on warming; it is
since the premier of ``Friends.'' That means climate
responsibility for the present crisis and preventing its
worsening is alive on the planet today. In fact, it is in this
room.
Now, I am not an old man. I am 38 years old. Almost two-
thirds of all carbon emissions ever produced have been produced
in my lifetime. A quarter have been produced since Joe Biden
was elected Vice President in 2008. A third have been produced
since Senator Graham first joined the Senate.
To pull up short of what was once called a ``catastrophic
level of warming''--2 degrees--requires us to decarbonize at
least as fast as that, and possibly faster. And if we do not?
The future projected by science is shrouded by uncertainty
about how the climate system will react and how humans will,
too, both through mitigation and adaptation, which will be
necessary.
But at just 2 degrees of warming, flooding events that
would have happened once a century will come every year. The
land burned by fires in the American West could grow twofold,
perhaps sixfold. And because there is a natural limit on the
amount of heat and humidity the human body can endure--a
measured called ``wet-bulb temperature''--cities across the
Middle East and South Asia that are today home to millions
would routinely be so hot during summer that you could not go
safely outside and certainly could not work outside for long
periods without risking heat stroke or death.
Past 2 degrees, and the number of deaths from air pollution
could grow by 150 million. At 3 degrees, war could double. And
estimates of the aggregate economic impact of unmitigated
climate change are crude and vary widely, with some older
models suggesting an impact of just a few percentage points,
and others offering much higher estimates. Compared with a
world without warming, between 2.5 and 3 degrees, the world
would lose between 15 and 25 percent of per capita global
output, according to one much cited paper, which means, of
course, that much could be saved by avoiding it.
Now, just a few years ago, it seemed prudent to plan for
scenarios north of 3 degrees. Thanks to a global political
awakening, growing cultural pressure, and rapid improvements in
the cost of renewables, those scenarios now appear considerably
less likely. But even that new measured optimism is shrouded in
uncertainty, too. And as any investor or economist would tell
you, uncertainty itself is a cost--not an excuse for inaction,
but the opposite. As they would also tell you, foregone
benefits are a cost, too, and this I think is the biggest news
on climate, that the benefits of decarbonization, once
considered trivial, are, in fact, enormous. That is why last
year Duke's Drew Shindell testified before the House that a
total decarbonization of the American electricity sector would
entirely pay for itself through the public health benefits of
cleaner air, why estimates of the jobs created by that work
grow into the millions, and why during the pandemic and
independent of any international pressure, ambitious net zero
commitments were made by South Korea, Japan, the EU, and, most
significantly, China, each stitching climate considerations and
the benefits of action into every aspect of their planning and
policy. They all see the gains to be seized. Do we?
Thank you.
[The prepared statement of Mr. Wallace-Wells appears on page 35]
Chairman Sanders. Thank you very much.
Our second witness is Dr. Robert Litterman, the Chair of
the Climate-Related Market Risk Subcommittee at the Commodity
Futures Trading Commission. Dr. Litterman is a leading advocate
for addressing climate risks in the financial markets, and he
was named 2013 Risk Manager of the Year by the Global
Association of Risk Professions.
Dr. Litterman, thanks so much for being with us.
STATEMENT OF ROBERT B. LITTERMAN, PH.D., CHAIR, CLIMATE-RELATED
MARKET RISK SUBCOMMITTEE, COMMODITY FUTURES TRADING COMMISSION
Mr. Litterman. Chairman Sanders, Ranking Member Graham,
members of the Committee, thank you for inviting me to address
the risks that climate change poses and my suggestions for how
to deal with them.
The best science shows that damage from climate change is
already serious and could range in the future from severe to
catastrophic. Risks of this magnitude demand an immediate
ambitious response, including a price on carbon. Today the
world is hopeful for U.S. leadership on climate action, but
appropriate management of climate risk requires action by this
Congress.
My name is Bob Litterman. I am an economist by training and
have spent my career managing financial risk. I chair the
Commodity Futures Trading Commission's Climate-Related Market
Risk Subcommittee, which published its report on managing
climate risk in the U.S. financial system last fall. I worked
at Goldman Sachs for 23 years where I finished as a partner in
2009. I led the firm-wide Risk Management Department and later
managed the Quantitative Strategies Group in the Asset
Management Division. I am currently a partner at an investment
firm, Kepos Capital.
Financial risk management has several simple principles
that apply to managing climate risk. Most importantly, risk
managers must look at the full distribution of potential future
outcomes. Risk management requires imagining and designing
policies to prevent extremely bad but very plausible scenarios.
Identifying these scenarios is especially hard for climate risk
because we are performing this experiment for the first time on
a very complex system. David Wallace-Wells has done a
commendable job illustrating the scientific research on such
worst-case scenarios.
Another principle of financial risk management which is
perhaps not as obvious is that our objective is not to minimize
risk but, rather, to price risk appropriately. For example, at
Goldman Sachs we would charge traders for the risks that they
took, forcing them to take risks only where the firm would be
more than compensated by the expected returns on their trades.
A third principle of risk management is that time is a
scarce resource. If we have enough time, we can solve almost
any problem. It is when time runs out that risk breeds
catastrophe. The risk from climate change is increasing as we
fill the atmosphere with greenhouse gases. We do not know how
much time we have before we cross a tipping point, after which
the threat of numerous environmental disasters becomes
irreversible. This is an extremely urgent matter.
More colloquially, we are barreling toward a hazard of our
own making. Now we need to brake fast and hard. We must reduce
emissions and move rapidly to a net zero emissions economy. The
scale and urgency of that transformation require that financial
markets immediately and dramatically increase the flow of
capital toward investments that will reduce emissions. Then we
will almost certainly need to follow that by removing
significant quantities of carbon dioxide from the atmosphere.
Making those investments profitable and fostering the
innovation necessary requires putting a price on carbon.
Whether it is the National Academies of Sciences, the Business
Roundtable, or the American Petroleum Institute, to cite some
recent examples, or a Nobel-winning economist like Professor
Stiglitz, experts and interested parties largely agree.
The most straightforward manner to price carbon is placing
a tax on fossil fuel production. The risk management component
of the carbon tax is the incentive it creates to reduce
emissions. The proceeds could be used however Congress
determines. The Climate Leadership Council, which I co-chair
with Kathryn Murdoch, has developed the Baker-Shultz Carbon
Dividend Plan. There the revenues of a tax on fossil fuel
producers would be returned directly to households, a just
approach with progressive outcomes.
Other options include funding clean energy R&D or
infrastructure investments given the significant budgetary
effects of a carbon price.
I recognize that there are a variety of opinions about how
to design a carbon price, but leadership and compromise can
help build strong coalitions of support. To manage climate
risks, the key would be to create a price immediately, set it
high enough to reflect the risks imposed by greenhouse gas
emissions, and apply it to emissions across the entire economy.
I and my colleagues stand ready to help you deliberate on
these policies and do what is best for Americans and the
future. Thank you.
[The prepared statement of Mr. Litterman appears on page 44]
Chairman Sanders. Dr. Litterman, thanks very much.
Our next witness is Dr. Joseph Stiglitz, an economist and
professor at Columbia University. Dr. Stiglitz received the
2001 Nobel Prize in Economics and served as Chairman of the
Council of Economic Advisers in the Clinton administration. He
was also lead author of the United Nations 1995
Intergovernmental Panel on Climate Change report.
Dr. Stiglitz, thanks for being with us.
STATEMENT OF JOSEPH E. STIGLITZ, PH.D., PROFESSOR OF ECONOMICS,
COLUMBIA UNIVERSITY
Mr. Stiglitz. Well, thank you for this opportunity to share
with you some of my concerns about the large economic costs and
huge risks of not taking strong actions now to deal with
climate change and the large benefits of doing so.
Senator Sanders has already described a variety of numbers
characterizing the adverse effects of climate change, and there
are multiple studies providing similar numbers. Some of these
downside risks are already apparent. In one recent year, for
instance, the magnitude of the destruction associated with
extreme weather events in the United States alone was more than
1.5 percent of gross domestic product (GDP), effectively wiping
out more than 60 percent of the growth of that year.
Rising sea levels will put much coastal property under
water, destroying homes and property values. Recent studies
have documented the adverse effects of climate change on
health.
During the past year, we have seen the inequities
associated with COVID-19. Those associated with climate change
are equally severe. But there is an additional dimension of
inequity that speaks to our future: While COVID-19
disproportionately affected older Americans, climate change is
a risk that we impose on our children and our grandchildren. If
we leave them a world in which they will have to confront
climate change and its consequences, we are truly bequeathing
them a real debt, substantial lowering their standards of
living.
We have been treating scarce resources, our environment,
our water, our air, as if they were free. But there is no such
thing as a free lunch. We will have to pay the check someday.
Delay is costly. Taking carbon out of the atmosphere is far
more expensive than not putting it into the atmosphere in the
first place. A smooth transition is far less costly than the
one we will surely face if we do not take action urgently.
There will be, for instance, a repricing of carbon assets.
The price of carbon assets, such as those associated with coal,
do not today adequately reflect the realities of climate
change. The longer we delay dealing with climate change, the
larger the necessary adjustments will be, and the greater the
potential for huge economic disruption of the kind that we have
just heard about, an economic disruption that could make the
2008 recession look like child's play by comparison.
Among the consequences would be devastation to our banks
and our insurance companies. When large calamities occur, the
Government will pick up the bill. This is a huge hidden
liability on the Government's balance sheet. That is why it is
imperative that we start assessing, regulating systemic climate
risk.
I want to end on a sunnier note. Doing something about
climate change could be a real boon for the economy. The number
of jobs that will be lost in the old fossil fuel industries are
dwarfed by those that will be created in the new industries.
The value created in the new industries will also dwarf the
value of the stranded assets in the fossil fuel and related
sectors.
The current focus on changing to a green economy is already
stimulating enormous innovation. The price of renewable energy
has been plummeting. Our country especially has much to gain,
because innovation is a key comparative advantage. If we are
ahead of the game, we will develop technology that will be in
demand around the world.
Government has an important role in enabling, facilitating,
and encouraging the transition to a green economy. This is most
obvious in public investments in infrastructure and R&D. But
there is much more to be done. Ending fossil fuel subsidies is
one example, and I commend the introduction of the bill to do
that, requiring full disclosure of climate risks, changing
statutes governing fiduciary responsibility to mandate looking
at these long-run risks. We should not be insuring banks that
make loans that put our climate at risk. There is, I believe,
the need for the founding of a national infrastructure bank and
for seeding the creation of community, State, and regional
banks to facilitate green investments.
As we have already heard, prices help guide decisions. That
is why assigning a near-zero price to resources that are scarce
is such a bad mistake. We need to employ a significantly high
social cost of carbon accompanied by regulations and public
investments that will enable us to deal with the risks that
have rightly been called ``existential.''
This is a defining moment in history. On the one hand, we
can ignore these risks, at great peril to our future. The costs
of not taking action are huge. On the other hand, we can seize
this opportunity. What we have accomplished in the last 20
years should provide us with the confidence that this new
economy can provide a new era of innovation, creating more and
better jobs and a higher standard of living. This new era will
play to America's strengths, to the determination and ingenuity
of people and the vitality of its institutions, including those
that have long fostered innovation.
Thank you.
[The prepared statement of Mr. Stiglitz appears on page 71]
Chairman Sanders. Thank you very much, Dr. Stiglitz.
Our next witness is George Oliver, chairman and CEO of
Johnson Controls and chair of the Business Roundtable Energy
and Environment Committee. Mr. Oliver previously served as CEO
of Tyco Safety Products and held several leadership positions
during his 20-year career with General Electric. He also sits
on the Board of Directors at Raytheon Company.
Mr. Oliver, thank you very much for being with us.
STATEMENT OF GEORGE OLIVER, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, JOHNSON CONTROLS, AND CHAIR, BUSINESS ROUNDTABLE
ENERGY AND ENVIRONMENT COMMITTEE
Mr. Oliver. Thank you, Chairman Sanders, Ranking Member
Graham, and members of the Committee. I am George Oliver,
chairman and CEO of Johnson Controls. I also serve as chair of
the Energy and Environment Committee at Business Roundtable and
am appearing today on behalf of both.
I want to thank you for holding this important meeting and
for the invitation to appear. Founded in 1885, Johnson Controls
is a global leader in smart, healthy, and sustainable building
technology solutions. Business Roundtable represents over 200
CEOs of America's largest employers from across all sectors of
the U.S. economy.
Climate change is real. It must be addressed. In 2007,
Business Roundtable became the first broad-based business
organization to recognize the threats of climate change and the
need to address the risks. In September, Business Roundtable
released new policies and principles for addressing climate
change. CEOs know that climate change poses significant
environmental, economic, public health, and security threats.
At Johnson Controls, sustainability is our business. We
committed to achieving net zero carbon emissions before 2040
and announced science-based targets for 2030. We are AAA MSCI
rated and proud to be ranked among the 100 most sustainable
companies globally. And that leadership is critical for our
customers.
About 40 percent of global emissions are related to
buildings. We tackle that with building products and digital
capabilities like our OpenBlue platform to cut energy in
buildings 50 percent or more.
One of the reasons companies have taken climate so
seriously is because failure to address global climate change
could mean trillions of dollars in lost U.S. GDP over the
coming decades. It is clear the risks associated with unchecked
climate change are real. They are increasing. They are costly,
and they may be irreversible.
The U.S. must lead by example. Johnson Controls and
Business Roundtable support a comprehensive policy to reduce
greenhouse gas emissions and incentivize new technologies.
Business Roundtable's September climate position outlines 11
principles to guide policy design. These include leveraging
market-based solutions, preserving the competitiveness of
businesses, and minimizing potential negative impacts while
maximizing benefits.
I would like to discuss with you three key areas that will
help us meet the scope of the climate challenge.
The first is energy efficiency. Johnson Controls partners
with Government to deliver emissions reductions while
decreasing the burden on the taxpayer. We are embarking on a
partnership with General Services Administration (GSA) that
will result in guaranteed savings of about $6.2 million per
year in energy and water across several historic buildings,
including the White House Complex. It will also reduce
greenhouse gases by 20,000 tons per year--the equivalent of
removing 4,500 cars from the road. And Johnson Controls is
leading similar efforts for our customers across all sectors.
For example, Mr. Chairman, in your home State of Vermont,
we partnered with Rutland to modernize schools and reduce
emissions. The project cut the need for capital by funding the
upgrades through energy savings.
Senator Graham, in South Carolina we did a similar project
for Charleston where we saved them over $15 million and reduced
carbon emissions by over 45,000 tons.
We encourage Congress to support performance contracting
and public-private partnerships to save money and slash
emissions.
The second is invest in technology. In cases like the
building sector in which Johnson Controls operates, there is a
clear pathway to significant, cost-effective emissions
reductions. In other sectors, like steel, chemicals, and
cement, it will require new technologies, breakthrough
technologies. That is why Business Roundtable supports at least
doubling Federal funding for advanced energy innovation and
deployment of low emissions and carbon removal technologies.
Third is placing a price on carbon. Business Roundtable
CEOs believe climate policy should begin with a market-based
strategy and a price on carbon. Paired with public support for
R&D and smart regulations, a clear price signal can encourage
innovation, preserve competitiveness, spur growth, and provide
assistance for impacted communities.
So, in conclusion, it is clear the risks and potential
costs associated with unchecked climate change are real. The
United States and the international community must aggressively
reduce greenhouse gas emissions and incentivize new
technologies. At Johnson Controls, we are taking on this
challenge for ourselves and for our customers. We will cut
emissions, cut costs, create good jobs, and more resilient,
healthy infrastructure. I know many other Business Roundtable
members are doing the same.
I want to thank you again for the opportunity to appear
today. Together, I am confident we can tackle this problem. I
would be happy to answer any questions that you might have.
[The prepared statement of Mr. Oliver appears on page 77]
Chairman Sanders. Mr. Oliver, thank you very much for your
presentation.
Our final witness is Richard Powell, executive director of
ClearPath Incorporated. Richard has served on the advisory
committee to the Export-Import Bank of the U.S. since 2019, and
he is also on the Atlantic Council's Global Energy Center's
Advisory Group. Previously, he worked for McKinsey & Company in
their energy and sustainability practices.
Mr. Powell, thanks for being with us.
STATEMENT OF RICHARD J. POWELL, EXECUTIVE DIRECTOR, CLEARPATH
INC.
Mr. Powell. Good morning, Chairman Sanders, Ranking Member
Graham, and members of the Committee. I am Rich Powell. I lead
ClearPath. We advance policies that accelerate clean energy and
industrial innovation. An important note: We receive no
industry funding.
Given your role in America's fiscally responsible approach
to climate change and the economic recovery challenges ahead, I
will discuss five topics today: first, the threat climate
change poses to our economy and Federal budget; second, the
need to invest in targeted solutions versus endlessly spending;
third, the opportunity for investments in clean energy like
implementing the Energy Act of 2020; fourth, the reality that
we can only build new clean energy projects as fast as we can
permit them; and, fifth, the priority to build on the historic
strong, bipartisan support for clean energy innovation.
Climate change is real, and global industrial activity is
the dominant contributor, and the challenge it poses to society
merits significant action at every level of Government and the
private sector.
Lawmakers and businesses across the country are
prioritizing investments in climate change adaptation efforts.
For example, the Republican Florida State Legislature just last
week advanced a bill to Governor DeSantis' desk which would
require a master plan to address sea level rise and flooding
and established a fund providing up to $100 million annually
for climate resiliency projects.
Managing our country's debt will be another defining
challenge of this century. As millions of Americans hand over
their hard-earned income on tax day, they are also wondering
how our national debt recently surpassed $28 trillion.
Since 1980, the United States has spent $1.9 trillion in
disaster recovery from 290 billion-dollar events, all deficit
spending. If we do not invest in adaptation and mitigation now,
climate change will require massively deepening our deficit
spending in the future.
As you consider the budgetary demands of these challenges
and the President's ``skinny budget'' proposal, it is important
U.S. policy synchronizes with the global nature of the climate
challenge. Existing clean technology is simply not up to the
task of global decarbonization.
The global supply of clean energy has remained stagnant
since 2005. To make a dent in the global problem, we need to
focus on breakthrough technologies. Developing countries
choosing to buy and build clean energy technologies over
carbon-intensive ones should be our goal. Today many developing
countries are choosing Chinese coal plants because they are
cheaper to buy, easier to build, and better performing as an
energy system than the clean technologies available to them.
The U.S. cannot regulate or tax our way to a global
solution. We do not have a magical mechanism to simultaneously
regulate other countries' emissions. So what to do? We need to
innovate and demonstrate here and deploy abroad. To do so, we
must realize new energy technologies in the U.S. have not
happened without investments from the Department of Energy
(DOE). Two of the breakthrough clean energy technologies
responsible for the more than 30 percent of carbon emissions
reduction in the U.S. power system since 2005 are hydraulic
fracturing and solar energy. Both followed the same pathway to
success: early Government R&D targeted outcomes, partnerships
with private industry, and tax incentives to facilitate
commercialization.
This Government support, while useful, should expire as
technologies become commercially viable. Without this Federal
support, even a superior energy technology will not be able to
break into the market because the incumbent technologies have
the scale and supporting infrastructure of a 50-year head
start.
The exciting news? At the end of 2020, Congress passed one
of the biggest advancements in clean energy and climate policy
we have seen in over a decade with the monumental Energy Act of
2020. Specifically, the Energy Act supports key research,
development, and demonstration programs for more than 20
commercial scale projects across 5 major technology areas, like
advanced nuclear reactors, carbon capture, or long-duration
energy storage by the middle of this decade. DOE is most
successful when it sets long-term, aggressive milestones to
develop technologies at price points and performance levels
that are meaningful for private markets. The priority now must
be on implementing the Energy Act, fully funding these
demonstration programs and overseeing rapid action at the
Department of Energy.
As we reimagine our energy grid using exciting new
technologies, permitting modernizations must keep pace. This
transition will require tens of thousands of miles of new
pipelines carrying hydrogen and captured carbon dioxide from
power plants and industrial facilities, new transmission
infrastructure to carry electricity around an increasingly
electrified country, and new nuclear reactors and power plants
sited everywhere. This will be the largest continental
construction project in history, and every single project will
begin with a permit.
Making the permitting process more efficient is essential
for two reasons: stewardship of taxpayer resources and scaling
clean energy rapidly. The bipartisan authorizations in the
Energy Act and the most recent fiscal year 2020 and 2021
appropriations bills are great successes. I applaud the
critical programmatic direction on clean energy innovation and
look forward to seeing more bipartisan success this Congress.
Thank you for this opportunity. I look forward to your
questions.
[The prepared statement of Mr. Powell appears on page 84]
Chairman Sanders. Mr. Oliver, thank you very much.
Our final witness is Richard Powell, executive director--
oh, Jesus, I am sorry. That is it.
Senator Graham. I wanted to hear it again.
Chairman Sanders. All right.
Mr. Powell. I am happy to take another turn.
[Laughter.]
Chairman Sanders. All right. I think we are ready for
questions.
Let me begin by asking Mr. Wallace-Wells a question. If we
do not act and act extremely aggressively, tell us what the
future of our country and planet will look like.
Mr. Wallace-Wells. Well, the answer to that question is
covered with several layers of uncertainty, so if we
decarbonize rapidly, the climate system may still prove more
sensitive than we expect, which could bring more warming than
we would like. But taking as sort of a baseline that our best
models are good indications of where the climate is heading, we
are globally--it has been estimated by some of the best people
studying this--on track for about 3 degrees of warming. That
means that we have a long way to go to get to 2 degrees and
below 2 degrees, which is what the scientific community and----
Chairman Sanders. David, you know, to the average person, 3
degrees, so what? What is the problem? It is a little bit
warmer. What is the impact in our country and around the world?
What does 3 degrees mean?
Mr. Wallace-Wells. Well, we could see war doubling. We
could see crop yields falling by at least 20 percent, maybe 50
percent. We could see migration in the tens of millions. We
could see cities all across South Asia become so hot that you
could not walk around outside without risking death. As a
result, you would see, again, huge mass migrations. The effect
on economic productivity even in the northern latitudes, places
like the U.S., would be quite dramatic. There would be extreme
weather hitting, you know, events that used to hit every 50
years, every 100 years, hitting every single year. And the
number of billion-dollar disasters that would be accumulating
even in places like the United States would be quite intense.
Those impacts are all going to hit parts of the world and then
within individual countries hitting parts of those countries,
hitting those people hardest who are least able to respond,
hitting the poorest, the marginalized, and really straining our
ability to promise a future of prosperity and justice and
equity to future generations.
Chairman Sanders. Okay. Thank you very much.
Dr. Litterman, as you know, Wall Street is continuing to
invest hundreds of billions of dollars in the fossil fuel
industry. Why are they continuing these investments despite the
costs laid out by Mr. Wallace-Wells and Professor Stiglitz?
Mr. Litterman. Yeah, the problem is that those costs are
not internalized. These are external costs, and so what, you
know, businesses do, what investors do is they look for
opportunities to make profits given the incentives that they
have. The problem is we have a bug in the Tax Code. We are not
creating the appropriate incentives to reduce emissions, and
this problem is a problem that needs to be identified--I mean,
it needs to be addressed by Congress.
When I chaired the CFTC Climate-Related Market Risk
Subcommittee, we had unanimous agreement that the most
important and most urgent recommendation, Recommendation 1 out
of 53 that we made, is that we put a price on carbon. And that
is because all the participants in the financial markets
understand how efficient they are at moving capital to where
there are opportunities to make money. That is what we do. And
it is given the incentives that we have. We have the wrong
incentives. This is actually very simple to fix. You have to
give the private sector the appropriate incentives to reduce
emissions, and then they will all be moving in the right
direction. Right now we are all moving in the wrong direction
because we have the wrong incentives.
Chairman Sanders. Okay. Thanks very much.
Dr. Stiglitz, economics has been thought of as the ``dismal
science,'' and we are doing a lot of dismal discussion today.
But there is, I think, some positive aspects about transforming
our energy system. Can you talk about what moving aggressively
away from fossil fuel to energy efficiency and sustainable
energy would mean in terms of our economy and the creation of
good jobs?
Mr. Stiglitz. Very much. I wanted to emphasize that there
actually is a real opportunity to transform our economy, create
enormous value. You know, one of the issues is--and it was
emphasized by other people in this hearing--that if you have
more efficient buildings, you save over the long term an
enormous amount of money and resources that can go to other
uses, that the cars that are electric last a long time. And at
the same time, for the next 10, 15 years, we are going to be
creating an enormous number of jobs as we create the green
infrastructure that we need, and we are also going to have jobs
at a higher level where we are creating the R&D and, as we
create that R&D, also emphasize that our ability to export the
new technologies to make this a global effort to reduce carbon
emissions will earn us a lot of money.
So this is one of those areas where we are going to be
doing well by doing good if we can create these new
technologies. There is going to be a strong global demand for
these new technologies, and that plays to our long-term
strength.
Chairman Sanders. Thank you very much, Dr. Stiglitz.
Senator Graham.
Senator Graham. Thank you very much.
Mr. Oliver from Johnson Controls, the Business Roundtable
supports a price on carbon. Is that correct?
Mr. Oliver. A price on carbon. That is correct, Senator.
Senator Graham. And does the U.S. Chamber support that?
Mr. Oliver. The Business Roundtable put a price--you know,
we think that a market-based----
Senator Graham. Do you know if the Chamber supports it or
not?
Mr. Oliver. I am not sure, Senator.
Senator Graham. So, Mr. Powell, what percentage of carbon
emissions come from the United States in terms of the world?
Mr. Powell. We are now down to about 15 percent of global
emissions.
Senator Graham. Okay. If we put a price on carbon, what
happens if China and India do not?
Mr. Powell. It will not have an effect on decreasing Indian
and Chinese emissions, and China emissions are now about double
our emissions.
Senator Graham. Do you agree with that, Mr. Wallace-Wells?
Mr. Wallace-Wells. Well, a tax here will not have an effect
abroad, but many of those countries are already signaling an
interest in investing in clean energy that goes beyond ours, so
they may yet move faster than we expect.
Senator Graham. I guess what I would say is that we need to
probably move together, because one of the concerns that people
have is if we put a price on carbon here, it could create a
competitive disadvantage, at least in the short term.
What would you say to that, Mr. Wallace-Wells?
Mr. Wallace-Wells. I think the world is shifting on some of
these questions such that we do not think about decarbonization
as a cost but an opportunity, and I think that is especially
clear with the air pollution data that I cited. Because that is
local, the costs are concentrated within national borders, and
it means that the incentives to decarbonize are true for every
country everywhere in the world.
Senator Graham. Agreed. Do you support an increase in the
gas tax to fund the Highway Trust Fund?
Mr. Wallace-Wells. I do not have a particular opinion on
that policy question.
Senator Graham. What about you, Mr. Powell?
Mr. Powell. I think we are going to need multiple sources
of revenue to increase the Highway Trust Fund, especially as we
move more to electric vehicles. The gas tax will not be able to
do it alone.
Senator Graham. Do you also support the idea of an electric
vehicle paying into the Highway Trust Fund somehow?
Mr. Powell. I think we will need to do that if we want to
maintain our infrastructure.
Senator Graham. Okay. So now that is different than an
economy-wide price on carbon. I talked to the Climate
Leadership Council yesterday, and I have talked to Senator
Whitehouse a lot about this. What you do with the money is
really important. If you rebate it to the consumer, it lessens
some of the fears that people have about increased cost at the
gas tank, increased heating costs, you know, running your
business.
So the bottom line for me is I know it is a problem, and
everybody is sort of looking at each other on my side. You all
have gotten solutions that I do not think can get there. It is
a 50-50 Senate. But if the Chamber--you have got the Business
Roundtable. I am just talking from a Republican point of view.
We are going to do a hearing, Mr. Chairman, on electric
vehicles, right? We hope so?
Chairman Sanders. Yeah.
Senator Graham. See, I have got BMW and Volvo in South
Carolina. Senator Stabenow is at sort of the heart and soul of
the car business. And it seems to me that all the people making
cars are indicating that they are going to go to a non-internal
combustion car. And I think they are doing that for multiple
reasons. When the biggest car companies in America are
beginning to change their fleet, I would like to find out why
they are doing that and what can we do on the production side,
energy efficiency side, sort of to lead the world, not just
shame them but actually make money in a lower-carbon economy.
So to Senator Whitehouse, who has been a true leader in all
of this, we will sit down and talk about a 50-50 Senate, what
is possible, but I would like to start a discussion that maybe
can bear fruit over time here and get the Business Roundtable
and other groups on the business side that support a price on
carbon, find out what kind of rebate is fair that will get you
the most political support. So from my point of view, it is
inevitable that we are going to a lower-carbon economy. That is
a good thing.
I would end with this one thought. Do you all agree that it
would be a nightmare for the Ayatollah and Putin if we went to
a lower-carbon economy anytime soon?
I will assume silence means yes. Okay, thank you.
Senator Whitehouse. I will stipulate to that from my
position.
Chairman Sanders. Thank you, Senator Graham.
Senator Stabenow.
Senator Stabenow. Yes, and I would stipulate to that as
well. I want to thank, Mr. Chairman, you and our Ranking
Member, and I want to thank Senator Graham. I want to say
``ditto'' in terms of the discussion we need to have around
electric vehicles and manufacturing and where we go. It is all
about jobs, good-paying jobs, as well as energy independence.
It is how we get the energy for the electricity as well. That
becomes very, very important. But it is absolutely true that
our American automakers are moving toward an all-electric
fleet. And, in fact, General Motors (GM) has said that by 2035,
Ford is doing the same thing. What I find exciting is that they
are now looking at--they are going to be rolling out their
large profit center vehicles like the F-150 truck or the Chevy
Silverado as electric. And so we are seeing the large what
would be carbon emitters now becoming electric as well as,
interestingly, I was at the unveiling of an all-electric Hummer
last week, which was also very exciting to see where they are
going. So count me in on all of that as well as supply chain
and manufacturing and all the things that we can do to help the
economy.
I want to talk, though, with my agriculture hat on. I am
Chairwoman of the Agriculture, Nutrition, and Forestry
Committee, and I am hearing all the time from farmers and
ranchers and foresters, of course, natural disasters getting
worse and worse and worse. They are right at the front of all
of this. We see crops being destroyed. We see all kinds of
challenges because of the climate crisis as well as water
issues and a whole range of things in the Great Lakes.
But the producers on the front lines also know that they
can be a part of the solution, and, in fact, they are already
sequestering carbon, but we can develop policies to support
them, to help them do it even more, to create a way for them to
be able to have a revenue source from selling carbon credits. I
believe that they are ready to do that, very anxious to ramp up
their conservation efforts.
I have several bipartisan bills that really drive this
transition, two with Senator Braun on the Committee. One of
those, the key bill, Growing Climate Solutions, I want to thank
Senator Whitehouse and Senator Graham for also being our
bipartisan cosponsors on an approach through the U.S.
Department of Agriculture (USDA) to really activate what we can
do with agriculture and forestry.
And so I would very much like to hear from all the
panelists or any that wish to respond, speak to the need not
only to reduce emissions from electricity and transportation,
but also to find new ways to cheaply pull carbon pollution out
of the air through things like agriculture and forestry. I
would welcome your comments. Mr. Wallace-Wells, would you like
to go first?
Mr. Wallace-Wells. Well, it is a crucial part of the
equation. Agricultural emissions are a significant contributor
to the warming that we see, even though most Americans probably
do not appreciate that. And as you say, American farmers and
farmers all around the world have been very much, you know, hit
in the face with extreme weather. I believe in several of the
last few years American farmers have actually made more money
on insurance payments than they have made on their crops, and
that is a devastating harbinger of the future.
In terms of the solution side, you know, soil can be used
and plants can very truly be used to have an effect on our
overall emissions. I think that there is an opportunity there
that we have not yet seized, although, as you say, some farmers
are moving in that direction. I think that we need to do more
than just price carbon to push that along because, you know, I
am glad to know that fellow witnesses and other Senators here
agree that pricing carbon higher is effective, but I would
emphasize that those impacts are different from sector to
sector. And while they are very helpful, especially in power
and electricity, they make less of a difference to the bottom
line of farmers. And I would like to see more emphasis on
agricultural policy, regulation, and investment in R&D to help
those farmers do better and farm more responsibly rather than
relying simply on the crude impact of a carbon tax.
Senator Stabenow. Yes, sir?
Mr. Powell. I think this broader topic of carbon dioxide
removal is extremely important, and I thank you for your
leadership on these strategies. I think we should remember that
many, many of the goals that large companies have made have
been net zero emission goals, so that means they will bring
their emissions down as far as possible and then rely on other
offsets or removal technologies. Obviously farms and forests
can play a huge part of that solution. We will probably need
technological solutions as well or even hybrid models which
contain the carbon dioxide removal characteristics of
biological systems with technical systems to permanently
sequester that CO2 underground.
I think one of the things that you could do immediately on
this, in addition to things like the Growing Climate Solutions
Act, is also make sure that the demonstration programs for
carbon dioxide removal that were included in the Energy Act of
2020 are fully funded through the appropriations process. Thank
you.
Senator Stabenow. Yes, absolutely. Thank you.
I know I am out of time----
Mr. Stiglitz. Let me----
Senator Stabenow. I would love to hear from others, I
guess, if we can take a moment. Yes?
Mr. Stiglitz. Let me just emphasize the complementarity
between the incentive systems that are provided by credits,
which I think are very important, with the investments in R&D
and regulations that help direct attention toward better
farming practices, and that terrestrial carbon, the carbon that
is sequestered in the soil and in plants, is a very important
part of our systematic approach to addressing climate change.
About 20 percent of all carbon emissions are related to
deforestation and other agricultural practices. So your
emphasis on agriculture is really very important.
Senator Stabenow. Thank you. And if any----
Mr. Oliver. Yes, and I would agree--excuse me. Senator, I
would agree with that. We had a healthy discussion on this
recently.
Senator Stabenow. Yes.
Mr. Oliver. And as I have learned more, I think as we think
about from a Business Roundtable standpoint, carbon dioxide
removal technologies are going to be critical in the overall
goal to get to net zero carbon emissions. And I think when we
think about a price on carbon, this is going to be one of those
critical elements that we are we going to take a look at or
make sure it is incorporated into the overall structure.
Senator Stabenow. Thank you.
Chairman Sanders. Okay. Thank you, Senator.
Mr. Litterman. And, Senator, if I could just add, first of
all, I agree with all the other witnesses, and I would just
make one other observation, which is that what we need is
innovation. And when governments pick, you know, strategies or
technologies to support, they are making the choices. When we
set up the incentives through a pricing system, every
entrepreneur, every business, every investor has an opportunity
to try and figure out which is going to be the best solution.
Chairman Sanders. Okay. Thank you very much.
Senator Whitehouse has been a leader on this whole
discussion, and, Sheldon, if you need a couple minutes more,
please take it.
Senator Whitehouse. Great. Thank you, Chairman. I
appreciate it very much, and I want to thank you for holding
this hearing. And I particularly want to thank the witnesses
that we have. We have, I think, one of the most impressive
panels of witnesses that have ever gathered on climate change
in this United States Congress. So I am really grateful to you
all for being here.
I did want to make one point before I got to my
questioning, and that is where I think we are in terms of
getting to a solution, and it relates back to some of what Mr.
Oliver has said. The economic risks that we are talking about
are many. They are profound. They are deeply dangerous. And I
have sent to every single colleague in the Senate quite some
time ago this volume which contains 17 of the most serious
warnings of economic crash that are out there. Economic crash
can be viewed as the carbon bubble bursting. It can be viewed
as coastal property values collapse. It can be viewed as
uninsurability, knocking the bottom out of the insurance
industry. And there is no reason that those three cannot all
happen in a cascade of economic collapse.
So these are really dire warnings, and nobody except
Democrats got back to me. I sent these with a personal note. No
one. And I remember when I first got here, Senator Sanders and
I were in the same class; we came at the same time. Senator
Graham was here then. For our first 3 years here, there was a
lot of bipartisanship on climate change. By my count, there
were four efforts in the Senate, all bipartisan, all serious.
And our friend Senator McCain, as the Presidential candidate of
the Republican Party, campaigned on a strong climate platform.
That was where we were.
Then in January of 2010, all of that bipartisanship stopped
dead as if it had hit a wall. It was like watching an
echocardiogram go dead when the patient went dead. What
happened? What happened was Citizens United in January of 2010.
When Citizens United, when the five Republican appointees who
opened the flood gates to unlimited money in politics made that
decision, the fossil fuel industry instantly went to work to
take advantage of that new power. And since then, they have
run, through secret money, behind front groups, across a whole
variety of election manipulation strategies, a consistent
effort to undermine Congress' ability to address climate
change, with the result that since Citizens United, no
Republican Senator has since gotten onto any serious economy-
wide piece of climate legislation. None. Zip. Zero.
What the fossil fuel industry has done in our politics
makes me think of Winston Churchill's phrase many years ago of
committing a crime that has no name. And I think history will
look back on the covert operation run by the fossil fuel
industry against its own country to debilitate and incapacitate
our own Government from addressing this problem as one of
history's vilest political acts. And that is why we are where
we are right now, and the corporate community is starting to
stand up now. Business Roundtable (BRT) is starting to stand
up. Climate Leadership Council (CLC) is starting to stand up.
But I will tell you, as somebody who sits in Congress, that the
corporate presence on this issue is still net negative. Even if
you take out the fossil fuel industry's continued efforts from
behind front groups and with dark money to stop progress, even
if you remove all of them, the remaining sectors of corporate
America are still net negative.
It is telling that neither Ranking Member Lindsey Graham
nor Mr. Oliver know what the position of the U.S. Chamber of
Commerce is on a price on carbon. It shows that their
statements that they nominally support one are sure nominal.
And I can tell anybody who is listening that my colleagues on
the Republican side, which is where the pressure has been
focused, do not see any countervailing pressure to worry about
from anywhere in corporate America, not from Wall Street. They
have got a big lobbying apparatus; it is not deployed on this.
Not from Silicon Valley. TechNet's performance on climate
politically has been a disgrace. Not from the agricultural
sector, not from big ag. Not from the consumer products
lobbies. Nobody from corporate America who touches Congress
directly is expressing any interest in getting anything done on
climate. And I will tell you that when the BRT has a meeting or
the CLC has a meeting and they make a statement or an
announcement or they send a letter to President Biden, all that
is good. But if it is not touching Congress, it does not have
effect in Congress. And time is running out for corporate
America, if it really cares about this issue, to tell its damn
lobbyists and trade associations to take it seriously.
The discrepancy between what corporate America tells the
public about its attitude on climate change and what it tells
Congress about its attitude on climate change is a disgraceful
discrepancy. Every major American corporation ought to do an
independent audit of its own lobbying and electioneering and
political influence efforts in the last decade, and I think
CEOs will be very surprised to find where their companies'
footprint is on climate change, because I suspect that it will
very often be exactly adverse to their stated public position.
Talk about sustainability. That is not sustainable.
So that is the point I wanted to make. If that changes, a
lot of gateways open, and the measure of when that has changed
is when a Republican Senator or Member of Congress will stand
up and say, ``I am behind this bill. Here is something I will
stake my flag on. I am behind this bill that is an economy-wide
carbon measure.''
So that is the statement I wanted to make. I appreciate it.
I have two questions. The first is for Professor Stiglitz,
who I am really honored is here. I admire so much his testimony
in the young persons lawsuit, his affidavit. Professor, the
International Monetary Fund has calculated the subsidy in the
United States of America for fossil fuel every single year--
every single year--at $600 billion, billion with a ``B,'' $600
billion every year supporting the fossil fuel industry just in
the United States. And, obviously, a number like that is based
on what economists call ``negative externalities,'' the harm
that fossil fuel emissions cause that does not get baked back
into the price of the product, which Milton Friedman and the
most conservative economists would all agree is a fatal
economic problem that needs to be addressed. And yet we do not
address it because of the fossil fuel industry's power.
My question for Professor Stiglitz is: When you have got a
$600 billion subsidy out there operating in favor of an
industry, if you have not offset that with a price on
emissions, what effect does that continuing effective subsidy
have on the economy's ability to make the necessary transition
to clean energy ahead of climate calamity? Professor.
Mr. Stiglitz. Absolute wrong direction. It actually
encourages the use of fossil fuels. It makes fossil fuels more
competitive than they should. You know, the basic principle
that everybody has talked about of a price on carbon, what this
is is a negative price on carbon. When you are subsidizing
carbon, you are encouraging the emissions of greenhouse gases.
And so the first order of business should be eliminating
the negative price on carbon that we have been having. That is
really the first order of business, and that is why at the
beginning of the hearing you said you were going to take
actions to get rid of these subsidies it was such an important
measure.
Senator Whitehouse. Professor, if I could interject one
second, is there any doubt in your mind that negative
externalities count as a subsidy and belong in that pricing
calculus you just described?
Mr. Stiglitz. Absolutely no doubt in my mind that what is
going on here is that we are subsidizing something that is
having a negative effect on our economy. It is going in
absolutely the wrong direction, and----
Senator Whitehouse. And since I am over my time already, I
am going to jump quickly to my last question, which is to Dr.
Litterman, who has made his career assessing risk for Goldman
Sachs. And Goldman Sachs I do not think tolerates ideology in
its risk assessment. It wants to make money, and it only makes
money if it gets its risk assessments right. So the premium on
accuracy of risk assessment is something that Dr. Litterman has
lived with at the highest levels of the American investment
community, and from that perspective, I want to ask him how
urgent--how urgent is it right now that we respond to this
climate risk?
Mr. Litterman. Senator, I am glad you asked that question.
The reality is we do not know how much time we have. And with
respect to the cost of delay, let me tell you a story from my
experience. Years ago, my wife and I were driving on the
freeway when she exclaimed, ``Oh, my God, Bob, watch out.''
From her tone, the urgency in her voice, I knew instantly I had
to pay attention. She had spotted across the divider about a
quarter of a mile in front of us an oncoming 18-wheeler
bouncing out of control and spewing flames from the passenger
side wheel well. I remember immediately slamming on the brakes,
even before I had realized, as my wife already had, that the
truck was not going straight, as I had thought, but was
actually careening diagonally right toward us, which is what
had terrified her. Five horifying seconds later, we managed to
avoid by a fraction of a second plowing head-on into a gasoline
tanker that had exploded right where we would have been. That
quick response to my wife's warning saved our lives because I
was able to safely steer the car through the fire and out the
other side.
We are today, with respect to climate action, in the same
position I was when my wife sounded her warning. A growing
chorus of scientists, CEOs, national security experts, and
financial experts have all seen climate change barreling toward
us, and they are shouting, ``Watch out.''
Senator Whitehouse. Thank you, Mr. Chairman.
Chairman Sanders. Senator Braun.
Senator Braun. Thank you, Mr. Chair.
So in listening to everything before I got here, I think I
can give an update on what the state of the climate is,
especially in the U.S. Senate. I got here a little over 2 years
ago, and I know that a Climate Caucus was being attempted to be
formed for several years. And when Chris Coons asked me
probably within about 6 months of being here, he told me how
hard it was to get that bipartisan discussion going. It was
very easy for me. I have been a lifelong conservationist, have
been into the idea of how we keep Mother Earth in good shape,
have practiced it in my own agricultural involvement, both row
crops and as a tree farmer. And there is more buy-in than what
you can imagine out there.
When you look at this place, which seems to resemble more
the Hatfields and McCoys, in the year and a half we have had
the Climate Caucus, in the probably 20-plus meetings that we
have had, it was the most engaged subject, and I am even more
interested in reforming health care, but there was no
discussion on that because the industry, the health care
industry, is not interested in changing itself. It is the
biggest part of our economy that is broken, and it is the
existential issue of costing, as Warren Buffett describes it,
being a tapeworm on the economy.
The good news is, in climate, the stakeholders are
interested. I was with ConocoPhillips this morning, Commons
Engines riding in my own hometown talking to their CEOs, and
you cannot believe how interested they are in being part of the
solution. And I do not want to overly generalize, but in that
year and a half, almost everyone that heads up a major
company--and that is not just in the emitters of
transportation, electric generation, industrial, about half of
which is in two areas, steel and concrete. Farming, we could
set the example across the world because we emit--about 10
percent of our footprint is agriculture. What most folks do not
know across the world, that is a much larger contributor, means
there is a lot of marginal improvement you can make there. So
the state of the discussion is better than what most might
imagine.
In my own conference, when it took 2 years to get one to
step forward, I did it. There are now six others, including
Ranking Member Lindsey Graham. And we have made a lot of
headway. When you look at the other component that has got to
fall in place on my side of the aisle, you have got to get
grassroots support, and I can tell you there young
conservatives, young Republicans, faith-based, from
evangelicals to Catholics, farmers--farmers especially because
if there is any business that is high risk, low return, that
now not only has the routine weather but the anomalies that all
have measured, they are interested. And being on a Committee
that seems to be the least partisan that I am aware of, and I
am on it, Agriculture, Senator Stabenow said that we have got a
bill. And I think the way this works is you have got to get
something across the finish line. The Growing Climate Solutions
Act, which we put a lot of effort into, rewards farmers, tree
and egg, for good stewardship. And there are voluntary markets
out there to reward it. That is just a start, and I think that
has got a good chance of making headway this year.
So I have a question for each of you, Mr. Wallace-Wells and
Mr. Powell. The biggest question in the room is: How do you pay
for it? The Chairman and I would have agreement on things that
we need to accomplish here, and we are going to probably be
divergent on how you do it, especially in an institution that
has got the poorest balance sheet I have observed in the
history of the country, actually. That does not mean that you
cannot always borrow more money and do things, but that is not
sustainable. Climate and sustainability go hand in hand.
I would love to hear the ideas of how we do this and pay
for it, and I am hoping it is not that the Federal Government
is the only stakeholder in this. I would like to hear what you
think about voluntary markets becoming a bigger deal, and I
asked both Chairs today could a pricing market happen within a
voluntary, you know, paradigm. So address that and any other
ideas on how we pay for it. Mr. Wallace-Wells, you go first.
Mr. Wallace-Wells. Well, what I would say first is that I
think especially when we are talking about decarbonizing the
electricity sector, the costs there are genuinely negative,
that we will be better off as a country in relatively short
order if we move quickly.
I mentioned during my prepared remarks that the NRDC
calculates that the benefits of the Clean Air Act are $3
trillion annually. That alone would be enough to have paid for
the Coronavirus Aid, Relief, and Economic Security (CARES) Act
of last year, the Biden jobs plan this year, and similarly
sized investments every single year going forward. I think when
we are talking about that transition, we can do well very
quickly by moving fast.
Some other sectors of emissions are a little bit more
complicated and a little bit hard to pay for. I think there is
some room for voluntary payment. If you think about, you know,
paying for a carbon offset to cover an airline ticket, so long
as those offsets can be verified, that is useful. But, in
general, I think we have to stop thinking personally about the
cost of action on climate as being enormous, and start thinking
about the cost of inaction as being considerably higher. And it
is from my perspective the view--it should be the view of a
body like this and indeed in the United States Government
generally to be making sure that those investments line up
rather than taking a narrow or shortsighted view about up-front
costs and not considering the payments that will be coming back
to us in relatively short order.
Senator Braun. Thank you. Mr. Powell?
Mr. Powell. Thank you for the question, Senator Braun.
Thank you for your leadership on the bipartisan Climate
Solutions Caucus, on the Nuclear Energy Leadership Act, on the
Growing Climate Solutions Act. You have really dug in here,
even in your just short time so far in the Senate.
As we have discussed, the reason we remain so focused on
innovation policy is we really see that as more investing than
spending. The benefits we have seen from innovation policy,
which is relatively low in cost compared to some other
interventions, just have extraordinary returns. If you look at
the benefits we have seen in the U.S. economy due to the shale
gas revolution, both due to domestic improved air quality,
lower carbon emissions, lower energy costs, and now the
geopolitical security that our domestic shale gas revolution
has provided to us globally, we think that those benefits from
that investment in increased tax dollars, in lower geopolitical
risk, and improved air quality in the United States far
outweigh the relatively modest costs we made in that innovation
investment. Thank you.
Senator Braun. Thank you, and we are moving in the right
direction, so I hope the public understands that.
Thank you.
Chairman Sanders. Senator Warner.
Senator Warner. Thank you, Mr. Chairman. Thank you for
holding this hearing. I think it is good to hear my colleague
Senator Braun and others acknowledge this enormous challenge.
We have lots of members talk about an issue like this that
climate change poses. I see it well from the intel side, and I
see it from the national security side. We have talked a little
bit about the--Dr. Stiglitz talked about the jobs opportunity
side.
One area that I do not think has gotten enough attention,
and I am going to pose my first question to Dr. Litterman----
Chairman Sanders. Mark, it is a little bit hard to hear
you. Could you raise your volume there?
Senator Warner. Yes, thanks. I said a bunch of good things
about you, Bernie, that I am probably----
Chairman Sanders. All right. Then repeat them several
times.
[Laughter.]
Chairman Sanders. No, you are better now.
Senator Warner. Let me get straight to the question, which
is I think one other tool that we have not fully utilized is
this emerging field around ESG, environmental, societal, and
governance standards for public enterprises. I think
increasingly we are seeing investors want to see bottom-line
investments. I think increasingly we are seeing workforce and
customers look to corporations to see how responsible they are
going to be on issues like resilience. I think the Securities
and Exchange Commission (SEC) needs to be involved in this. I
was happy to see that Apple recently endorsed mandatory
disclosure of greenhouse gas emission at the SEC.
Dr. Litterman and Dr. Stiglitz, can you talk about if we
simply made resilience or climate change, an effect on climate
change a material reportable item, what effect that might have
on moving corporations, many of which, I think, actually want
to lean that way--at least their CEOs say they want to lean
that way, but we have not given them the regulatory signal that
this is appropriate?
Mr. Litterman. Yeah, well, thanks for that question. I
would say, look, the reporting of material risks is already
required. That is not the issue. The issue is what climate-
related risks are material. And I see that, you know, on the
CFTC climate-related market risk report we had unanimity we do
have to report material risks. The question is, for climate
risks, they are very different than traditional financial
risks. Traditional financial risks, we have a history; we have
a distribution of potential outcomes, and we can ask
corporations what will the impact be on their balance sheet.
And then we can decide through a stress test is this very
significant or not. With climate, we are talking about business
plans that go decades into the future.
Now, you are right that a huge number of corporations have
already said we see the future, it is going toward net zero
emissions, and we have a plan to be there. But how do you know
as an investor, as an asset owner, is that business plan on
target? You know, what are the goals that are going to be
achieved in the next 5 years, for instance? So corporations and
the private sector have to work with the financial regulators.
And I am really thrilled to see the response from the
regulators. The Fed has joined The Central Banks and
Supervisors Network for Greening the Financial System (NGFS);
the SEC has asked for input about disclosure; the CFTC has
talked about moving in this direction as well.
So I am not worried about the financial sector and about
the regulatory environment. They are all going in the right
direction. The problem is we do not have the right incentives.
This regulatory framework will disclose risks, and investors
will be able to understand the risks facing corporations. But
it is the systemic risk to society that will not be addressed
by financial regulation. It has to be addressed by Congress, by
setting the right incentives in place to reduce emissions, and
by globally, you know, harmonizing those incentives so that
China and India and Europe all have the same incentives that we
have to reduce emissions. And if we do that, I am very
optimistic that we will get the innovation we need; we will get
to that net zero economy and hopefully soon enough to avoid the
worst effects.
Mr. Stiglitz. Let me put it in a little bit broader
economic terms. You cannot allocate resources efficiently if
you do not have information, and one of the key aspects of
information is the risks that a company faces. So it is very
important that there be as full a disclosure on a comparable
basis of those risks. And we talked to some of those risks
today. We talked about the change in the prices of their assets
when we reassess the value of a whole variety of assets, once
we start pricing carbon in. There are risks to property values.
Insurance companies face risks of losses. Banks face losses in
the nonrepayment of certain classes of carbon when they become
stranded assets. So one of the things we have to do is work
towards broader standards so we can make those disclosures
comparable.
But a second thing is, from a regulatory point of view,
just like we saw in 2008 that there are systemic risks that we
did not fully appreciate when we looked at a bank-by-bank point
of view and now we are looking at stress tests that look at how
the whole financial system operates, the carbon risk is not
only in the financial system, it is throughout our economy. And
so we have to begin to do systemic risk not only in our
financial system, not only our banks, our insurance companies,
but more broadly. And the regulators have to take a lead in
making those risk assessments and making those risk assessments
available so that investors know exactly how fragile certain
parts of the economy are.
Senator Warner. And I would simply say--I know we have gone
over my time, Mr. Chairman. I, again, appreciate you having
this hearing. But I think this is an area where we could build
a broad coalition. This ESG movement is a good movement. It has
been too squishy to date. We need to have some set standards
that cut across all industries. Financial Accounting Standards
Board (FASB) and other groups have been working on this for
years. It really needs some extra effort, and my hope is that
the new regulatory regime is coming around to make this happen.
Thank you, Mr. Chairman.
Chairman Sanders. Thank you very much, Senator Warner.
Senator Merkley.
Senator Merkley. Thank you very much, Mr. Chairman, and
thank you all for your testimony. As I went to vote, I missed
some of what you might have said, so if I bring up something
repetitive, my apologies.
I wanted to start with, Mr. Litterman, as you reemphasized,
the right incentives, and maybe one of the wrong incentives are
the tax subsidies that we currently provide for fossil fuels,
and today is the day that Chairman Sanders is introducing the
End Polluter Welfare Act and several of us are cosponsoring it.
Have you done any sort of calculation of how essentially
reducing all those incentives might compare to a price on
carbon? Can you translate eliminating those subsidies that
exist in the law now, American law, to kind of dollars per
gallon or dollars per ton of carbon dioxide?
Mr. Litterman. Well, we start with the fact that, of
course, you want to eliminate the subsidies to fossil fuel
production and consumption, and you want to take a
comprehensive look at all of the incentives that are there,
both subsidies and taxes. And when you look at that, I would
say the subsidies to the fossil fuels are--you know, they are
there, but they are not large relative to the incentives that
we need on the other side to reduce emissions. We need strong
incentives. As I said, we have to act quickly, and we have to
have strong incentives.
The way I would look at it is if we put a ton of carbon
dioxide in the atmosphere today, we are very likely to have to
pull it out at some point in the future, and that is an
expensive proposition. So we need strong incentives. It is not
just that we need to reduce subsidies. We absolutely do. But we
need strong incentives.
Senator Merkley. I wonder if you could fill us in on
perhaps how much eliminating those current tax incentives might
translate to, and, Professor Stiglitz, I do not know if you
have done that kind of calculation either.
Mr. Stiglitz. I have not, but let me just emphasize that
this is a no-brainer. There is what we call ``low-hanging
fruit'' that you just wonder, you know, if we push the world in
the wrong direction, it is hard sometimes to pull it in the
right direction. But stopping pushing in the wrong direction
seems to me a place where everybody can begin by an agreement.
Senator Merkley. All right. Thank you. I wanted to turn to
another piece of the puzzle, and often we are talking about the
demand side in terms of going to more fuel-efficient vehicles,
going to electric vehicles, improving our buildings and so on
and so forth. But there are some of us that feel it is
important to emphasize the supply side as well. Two examples of
that are not building new fossil fuel infrastructure and
another is keep-in-the-ground concept where the fossil fuels
that we own as citizens, we do not pull out of the ground. And
there are three kind of basic arguments about this. One is
reduce the stranded assets. If there are less assets out
there--and you have all--several of you have spoken to the
stranded assets argument.
A second is once you build the infrastructure--and, for
example, there is the potential Liquefied Natural Gas (LNG)
facility in Oregon and the pipeline to connect to it to export
LNG. Once you build it, there is a huge incentive to keep it
operating, and there are huge profits from that that go back
into the political lobbying and the existing jobs and so forth.
So there is a feedback loop that makes it hard and slows the
transition to renewables.
And the third is that in terms of partnering with the
world--and we have a worldwide problem here. If we are not
willing to keep our fossil fuels in the ground, if we are not
willing to stop building our new fossil fuel infrastructure,
then how do we have the moral kind of position to ask other
countries to take action when it would affect jobs and
sometimes in far poorer countries, places that need the
economic development much more than--they are more desperate
than we are.
So there are kind of three arguments there, and I just
thought I would ask both of you, Mr. Litterman and Professor
Stiglitz, if you think there is merit in those arguments.
Mr. Stiglitz. Oh, very much so, and let me emphasize that
the decisions that we are making today affect us 20, 30, 40
years from now when we are talking about infrastructure. So
that is why those decisions are so important now that we are
locking ourselves into technologies that will continue, you
might say, to plague us for decades to come, and then present
an economic problem when they become stranded assets. They are
going to wind up on our balance--and the Government is going to
bail it out, I can assure you. And so those are hidden debts
that are going down that we are going to be accruing.
Your point about more relief around the world I think is
also very important. There are a lot of concerns, for instance,
about the deforestation in Brazil, about people are keeping
this oil in the ground, and we ought to be providing incentives
for them to do it. There is a rainforest coalition trying to
keep the forests in Brazil and Borneo there, which is very
important for climate change. But we lose our moral force when
we do not take actions.
And here let me say one more thing, which is regulations
can be very simple. People often complain regulations are
burdensome. You just have a regulation, no coal-fired, fossil
fuel-fired electric generating plant be constructed. A very
easy regulation to write and to implement.
Senator Merkley. The simplicity of keep-in-the-ground is no
new leases. You do not sign new leases, leases which often are
exploited for decades, sometimes up to 50 years.
Mr. Stiglitz. Exactly.
Senator Merkley. My time is now up, so, Mr. Litterman, I
apologize. I asked you for your response, but I will probably
have to take that offline unless the----
Mr. Litterman. No, I think Professor Stiglitz answered
well. Thank you.
Senator Merkley. Okay. Thank you very much.
Chairman Sanders. Senator Merkley, thanks very much.
Senator Van Hollen.
Senator Van Hollen. Thank you, Chairman. Thank you to all
our witnesses here today. Professor Stiglitz, thank you for
first talking about the huge costs of doing nothing to address
climate change, costs that we are experiencing right now around
the country, including in my State of Maryland where we have
rising sea levels. The historic sort of boat show in Annapolis,
Maryland, has been threatened by floods, and that is just one
example. But also thank you for focusing on the huge economic
opportunities and job opportunities of moving immediately and
quickly into a clean energy economy.
On that score, I have been working for years to establish
what we used to call a ``green bank.'' This is a clean energy
accelerator, a financing authority that would be publicly
capitalized, but then it would be self-sustaining. And the idea
would be to mobilize a lot of private capital and have that
multiplier effect.
Senator Markey and I have introduced a bill called the
``National Climate Bank,'' also runs as the clean energy
accelerator, if people prefer to call it that, and I was
pleased to see that the President, President Biden, in his
American Jobs Act included $27 billion to capitalize that. We
proposed $100 billion. We hope to get it there. But I was
really glad to see this is part of the President's plan.
Can you comment on that initiative as part of an overall
effort to move in this direction?
Mr. Stiglitz. I think it is very important. I have been a
strong supporter of green banks, green development banks. And,
you know, bipartisan, there is now a broader understanding of
the role of industrial policy that the financial market often
does not do well in the long-term support that you need, and
particularly when there is what we call an ``externality''
associated with green.
My concern is it is a little too small--or much too small.
It needs to be scaled up. I even think that your bill may be
too small when you compare, for instance, what some other
countries have done. The European Investment Bank is an EU
investment bank, and one of their main mandates is green
investment. And they are bigger than the World Bank, and they
are really focusing now on that kind of green transition, and
if we want to remain competitive, we have to devise ways of
making sure that we have the finance for investment. And let me
say one of the things I like about your bill, I think it needs
to be--this kind of finance has to be done at the national
level, at the State level, the community level. And so thinking
of a framework that allows for that kind of greening
institutions at these multiple levels--here in New York State
we have a successful green bank, but, of course, it needs to be
expanded as well. Within its confines, it has been doing well.
But having this as a national program would be fantastic.
Senator Van Hollen Well, thank you. You know, years ago we
had an initiative like this included in a bill that passed the
House back in, goodness, 2009 or 2010, but that did not make it
through the Senate. So I was glad to see many States move
forward, like New York, in establishing the green banks. But
the idea here, as you said, is to really do this at the
national level. If you can help us get this--increase the
capitalization above even $100 billion, that would be great.
Another initiative I have been working on for over a decade
is putting a price on carbon but doing it in a way that would
make sure that any higher costs passed along do not hurt or
burden lower-income or middle-income families. And the proposal
was a cap and dividend. You put a cap on the first sellers of
carbon-intense polluting fuels into the market and then
dividend 100 percent back to consumers based on Social Security
numbers.
Mr. Litterman, can you just talk briefly about that
approach and, if we have time, Mr. Oliver as well.
Mr. Litterman. Sure, it is a great approach. The Climate
Leadership Council plan also has a carbon dividend, and the
beauty of the carbon dividend is it makes most people better
off, in particular, those at the lower end of the income
strata. So it makes sense. It is a good policy. Again, how you
spend the money is up to Congress, but what is absolutely
essential is to create the appropriate incentives so that the
private sector gets behind this and the capital flows at the
scale that we need and at the urgency we need. So, absolutely,
I support it.
Mr. Oliver. And, Senator, if I could go back and talk a
little bit about the green banks, for us we think that is a
great idea. As we launch our performance contracting and our
private-public partnerships, it is a great way to be able to
finance green projects and what we can do to upgrade
infrastructure and buildings. We have a performance contracting
business, as I mentioned in my remarks, that hopefully is going
to be economic--create economic returns. So what can we do to
make green infrastructure while creating returns?
And as far as the Business Roundtable does not endorse a
specific market-based mechanism to reduce emissions, we do
believe placing a price on carbon would send an important price
signal that will help drive efficiency and spur innovation in
low-carbon alternatives. And there are various mechanisms that
can be used, and we do believe and are in agreement that the
comprehensive climate change policy should be guided by core
principles, including preserving the competitiveness as well as
effectively reducing emissions. And a price on carbon can and
should be designed in a way that it supports economic growth
and does not disadvantage Americans, particularly low-income
Americans and those whose jobs and communities are affected by
the transition to a clean energy economy.
Senator Van Hollen Well, thank you. I see my time is up,
but I would just emphasize the point that you and Mr. Litterman
made, which is actually the overwhelming majority of households
actually have more money in their pocket at the end of the day
if you do the 100 percent dividend than before. In fact, over
70 percent of households are better off under a University of
Massachusetts, Amherst study.
Thank you all very much. Thank you, Mr. Chairman.
Chairman Sanders. Thank you, Senator Van Hollen.
Senator Padilla.
Senator Padilla. Thank you, Mr. Chair. I appreciate all the
witnesses and their participation today.
Let me dive right into an urgent matter for the country,
but particularly my home State of California. 2020 was
devastating on so many fronts, including being California's
worst wildfire season on record. California experienced 10,000
fire incidents with more than 4.2 million acres burned, more
than 10,000 structures damaged or destroyed. We will continue
to have record wildfire seasons unless we take bold action to
address climate change. And according to the U.S. Forest
Service, wildfires will be twice as destructive by 2050 as they
are today, and we know wildfires are just one of the emerging
climate-driven threats to our economy.
Climate change is increasing the frequency and severity of
various types of natural disasters and extreme weather events
which create significant risk to human health, our financial
system, and entire sectors of the economy. So with that being
said, a question for Mr. Wallace-Wells and one for Dr.
Litterman.
Mr. Wallace-Wells, beyond the physical damage, can you
elaborate on how wildfires have a devastating impact on human
health and how climate change will continue--if you can just
add to what you previously said, how climate change will
continue to exacerbate the harm and destruction caused by
wildfires and other natural disasters. And then for Dr.
Litterman, a specific question about the National Flood
Insurance Program, which paid out more than $1 billion in
claims for the sixth year in a row, meanwhile flooding
increased in areas known as being ``low risk.'' So this is just
one way that climate-driven disasters are creating a fiscal
risk for the Federal Government specifically, and if you could
discuss the need to mitigate these risks to help protect the
Federal budget and our economy. Mr. Wallace-Wells first.
Mr. Wallace-Wells. There is basically no aspect of human
health that is not damaged by small particulate pollution which
is produced by wildfires, and I think most Americans, first of
all, do not truly appreciate that when forests burn, carbon is
released, which means already the gains of California's
ambitious clean energy proposals and policies are undone almost
every year by the emissions released by those fires, but also
that all those many millions of Californians who live in that
State are breathing in air that affects their respiratory
health, that affects Alzheimer's, that affects developmental
disorders, that affects autism and attention deficit
hyperactivity disorder (ADHD) and associated with rises in
schizophrenia. You know, the effect of pollution is so intense
that when we instituted E-ZPass toll plazas in America, they
reduced the rates of premature birth and low birth weight right
around those toll plazas by between 10 and 15 percent just
because people living around them were not breathing quite as
much air from the exhaust of those cars.
I think this is one of the great underappreciated features
of climate change and the climate impacts, is the effect of air
pollution. In California, there was a small-scale unintended
study when there was a pollution event that forced schools to
put air purifiers in their classrooms, just $700 air purifiers,
and the educational gains of breathing in cleaner air was
equivalent to halving the class size in those classrooms. That
is how horrible to cognitive performance bad air is, and the
more wildfires will be burning, the more Americans will be
breathing that air going forward. You mentioned a doubling of
wildfires. The scientists I know think that we could see six
times as much or more by the middle of the century if we do not
take action. And, unfortunately, one significant way of taking
action is by doing what is called ``prescribed burning'' and
``thinning of forests,'' which I think is a good idea, but also
involves the burning of forests, which will also produce carbon
and also produce particulate pollution.
So as with many other features of the climate crisis, there
is not anymore an easy way out. We have already backed
ourselves into a corner where we are choosing between worst
alternatives. But I think in the American West the pollution
from wildfire will become a bigger and bigger part of our
understanding of the climate crisis and a bigger argument for
faster action.
Mr. Litterman. Senator, I happen to be sitting here in
California, and if you can see this window behind me, September
9th of last year that was pitch black this time of day because
of the smoke from the wildfires. And the insurance issue that
you raise is an important one. The impacts from climate are
going to be more severe over the next several decades, no
matter what we do. And individuals and businesses should insure
against those physical risks.
The problem is that they are going to become more
expensive. If you are living in the forests in California,
insurance rates are going to go up. In a free market economy,
that increased rate of insurance is a signal that you either
have to harden your infrastructure, your buildings, or you have
to move to a safer location. And the same thing with flood
insurance that you mentioned. The Federal flood insurance is a
subsidy to those who live in flood zones. That is not right.
That gives the wrong signals, and people will respond to the
signals they get.
Once again, I want to emphasize how fundamental incentives
are. Incentives are anything that change behavior, and so if
you want to change behavior, and we do need to change behavior
because of the physical risks that we have created, then you
have to create the appropriate incentives. Thank you.
Senator Padilla. Thank you both.
My time is up. Thank you, Mr. Chair.
Chairman Sanders. Thank you very much, Senator Padilla.
As we come to a close, let me thank the five panelists.
Without exception, I think your contributions were enormously
important. I think there is a growing sense of understanding
that in this country and around the world we are facing an
existential threat, and that is, we are literally talking about
the future of this planet. We are talking about whether or not
we are going to have to spend trillions and trillions of
dollars trying to repair the damage done by climate change. We
are talking about millions of people dying unnecessarily. So I
hope that this hearing today makes a contribution to
understanding that together we have got to act, and act
extremely aggressively, and to act in as quickly a fashion as
we possibly can.
With that, as information for all Senators, questions for
the record are due by 12:00 noon tomorrow with signed hard
copies delivered to the Committee clerk in Dirksen 624. Email
copies will also be accepted due to our current conditions.
Under our rules the witnesses will have 7 days from receipt
of our questions to respond with answers.
With no further business before the Committee, this hearing
is adjourned. Thank you all very much.
[Whereupon, at 12:57 p.m., the Committee was adjourned.]
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