Climate Change: Federal Agencies Should Do More to Make Funding  
Reports Clearer and Encourage Progress on Two Voluntary Programs 
(27-SEP-06, GAO-06-1126T).					 
                                                                 
The Office of Management and Budget (OMB) reports on federal	 
funding for climate research and to develop technologies to	 
reduce greenhouse gas emissions, among other things. The Climate 
Change Science Program (CCSP), which coordinates many agencies'  
activities, also reports on science funding. The Environmental	 
Protection Agency's (EPA's) Climate Leaders and the Department of
Energy's (DOE's) Climate VISION programs aim to reduce such	 
emissions through voluntary industry efforts. This testimony is  
based on GAO's August 2005 report Climate Change: Federal Reports
on Climate Change Funding Should Be Clearer and More Complete	 
(GAO-05-461) and its April 2006 report Climate Change: EPA and	 
DOE Should Do More to Encourage Progress Under Two Voluntary	 
Programs (GAO-06-97), which addressed (1) reported changes in	 
federal climate change funding and (2) the status and progress of
two federal voluntary climate programs. 			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-1126T					        
    ACCNO:   A61466						        
  TITLE:     Climate Change: Federal Agencies Should Do More to Make  
Funding Reports Clearer and Encourage Progress on Two Voluntary  
Programs							 
     DATE:   09/27/2006 
  SUBJECT:   Climate statistics 				 
	     Comparative analysis				 
	     Data collection					 
	     Environmental monitoring				 
	     Federal funds					 
	     Financial analysis 				 
	     Funds management					 
	     Program evaluation 				 
	     Regulatory agencies				 
	     Reporting requirements				 
	     Research programs					 
	     Tax expenditures					 
	     Voluntary compliance				 
	     Climate Change Science Program			 
	     DOE Climate VISION Program 			 

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GAO-06-1126T

     

     * Background
     * The Extent of Changes in Federal Climate Change Funding Are
          * Reported Federal Climate Change Funding Increased for Three
          * Reported Funding For Most Agencies Increased, but Unexplaine
     * Voluntary Programs Have Shown Mixed Progress
          * Some Climate Leaders and Climate VISION Participants Have No
          * Participants in Both Programs Have Set Quantitative Emission
          * Both Agencies Had Estimated Their Programs' Coverage and Wer
     * Conclusions
     * Contact and Staff Acknowledgements
     * GAO's Mission
     * Obtaining Copies of GAO Reports and Testimony
          * Order by Mail or Phone
     * To Report Fraud, Waste, and Abuse in Federal Programs
     * Congressional Relations
     * Public Affairs

Testimony

Before the Subcommittee on Energy and Resources, Committee on Government
Reform, House of Representatives

United States Government Accountability Office

GAO

For Release on Delivery Expected at 2:00 p.m. EDT

Wednesday, September 27, 2006

CLIMATE CHANGE

Federal Agencies Should Do More to Make Funding Reports Clearer and
Encourage Progress on Two Voluntary Programs

Statement of John B. Stephenson, Director Natural Resources and
Environment

GAO-06-1126T

Mr. Chairman and Members of the Subcommittee:

I am pleased to participate in the Subcommittee's hearing and to discuss
some of our recent work on federal climate change funding and voluntary
programs.

Increases in the earth's average temperature that have already occurred
over the last 100 years, combined with additional future increases
projected by a consensus of scientists, have the potential to dramatically
change life on earth. For example, changes in the frequency and intensity
of rainfall, both possible effects of climate change, could affect human
health, agriculture, forests, and water supplies in certain locations.
Effects on planetary biodiversity are projected to be even more
pronounced. The Congress and the president have supported research to
improve scientific understanding of the climate system and to develop new
technologies to reduce greenhouse gas emissions. They have also created
various federal programs to help reduce such emissions. These programs are
largely voluntary and encourage private and public sector entities to
adopt goals for reducing emissions.

My remarks today are based on our August 20051 report on federal climate
change funding from 1993 through 2004 and our April 20062 report on
voluntary programs that encourage industry participants to set greenhouse
gas emissions reduction goals.3 I will focus on (1) how total funding,
funding by category, and funding by agency as reported by the Office of
Management and Budget (OMB) and the Climate Change Science Program (CCSP)
changed and the extent to which such funding data are comparable over
time, and (2) the expectations for, and progress being made by,
participants in two federal voluntary programs-the Environmental
Protection Agency's (EPA's) Climate Leaders and the Department of Energy's
(DOE's) Climate VISION-and these agencies' estimates of the programs'
current coverage (the share of U.S. emissions that participants contribute
to total U.S. emissions) and impact (emissions reduced).

1U.S. Government Accountability Office, Climate Change: Federal Reports on
Climate Change Funding Should be Clearer and More Complete. GAO-05-461
(Washington, D.C.: August 25, 2005).

2U.S. Government Accountability Office, Climate Change: EPA and DOE Should
Do More to Encourage Progress Under Two Voluntary Programs. GAO-06-97
(Washington, D.C.: April 25, 2006).

3For the sake of consistency, we describe both Climate Leaders and Climate
VISION participants' targets as goals, even though DOE describes Climate
VISION participants' targets as commitments.

To determine how federal climate change funding by category-science,
technology, international assistance, and tax expenditures-and agency
changed, we analyzed data from annual OMB and CCSP reports as well as
congressional testimony. To determine the extent to which the data on
climate change funding were comparable over time, we analyzed and compared
the contents of the reports and interviewed responsible officials. The
term "funding" in this testimony reflects discretionary budget authority,
or the authority provided in law to incur financial obligations that will
result in outlays, as reported by OMB and CCSP in their reports.4 Unless
otherwise stated, we report funding in nominal terms (not adjusted for
inflation), and all years refer to fiscal years.5 To evaluate the EPA and
DOE voluntary programs, we reviewed and analyzed EPA and DOE documents and
met with these agencies' officials. Most of the information in the report,
except where otherwise noted, reflects the status of the two programs as
of November 2005. As of September 20, 2006, an additional 18 firms had
joined Climate Leaders. To assess the reliability of EPA, DOE, and other
data, we spoke with agency officials about data quality control procedures
and reviewed relevant documentation. We determined that the data were
sufficiently reliable for the purposes of our reports. We performed our
work on the federal funding report between July 2004 and August 2005 and
on the voluntary programs report between June 2004 and March 2006 in
accordance with generally accepted government auditing standards.

4An OMB official stated that there is no mandatory budget authority for
climate change programs.

5When we adjusted for inflation, we used a fiscal year price index that we
calculated based on a calendar year price index published by the
Department of Commerce's Bureau of Economic Analysis. Unless otherwise
specified, figures represent actual funding (not estimates), with the
exception of 1993, 1994, and 2004, where we present estimated funding
reported by CCSP because actual data are not available. For the purposes
of this testimony, the term "agency" includes executive departments and
agencies, and we use the term "account" to describe the budget accounts,
line items, programs, and activities presented in OMB and CCSP reports.
Throughout this testimony, we characterize all climate change science
reports from 1993 through 2004 as CCSP reports, even though CCSP has been
in existence only since 2002, and reports prior to 2002 were published by
a predecessor organization. Totals and percentages may not add due to
rounding.

In summary, we found that:

           o  As reported by OMB, federal funding for climate change
           increased from $2.35 billion in 1993 to $5.09 billion in 2004 (117
           percent), or from $3.28 billion to $5.09 billion (55 percent)
           after adjusting for inflation. During this period, federal funding
           increased for science, technology, and before adjusting for
           inflation, international assistance, according to OMB reports.
           CCSP, which reports only science funding, provided more detail,
           but generally presented totals that were consistent with OMB's.
           However, changes in methods used by both OMB and CCSP to report
           funding data made it difficult to compare the data over time, and
           therefore, to determine whether total funding actually increased
           as reported. We were unable to compare changes in the fourth
           category (climate-related tax expenditures), because from 1993 to
           2004 OMB did not report estimates for existing tax expenditures.
           For individual agencies, OMB reported that 12 of the 14 agencies
           that received funding for climate change programs in 2004 received
           more funding in that year than they had in 1993. However,
           unexplained changes in what was defined as climate change funding
           made it difficult to determine whether funding changed to the
           extent that OMB reported. Funding for the Department of Energy
           (DOE), the agency with the most reported climate-related funding
           in 2004, increased from $963 million to $2.52 billion (162
           percent), or from $1.34 billion to $2.52 billion (88 percent)
           after adjusting for inflation. DOE and the National Aeronautics
           and Space Administration (NASA) accounted for 81 percent of the
           reported increase in funding from 1993 through 2004. However,
           because agency funding totals are composed of individual accounts,
           changes in the reports' contents, such as the unexplained addition
           of accounts to the technology category, make it difficult to
           compare funding data over time. This, in turn, makes it difficult
           to determine if these are real or definitional increases.
           o  EPA and DOE expected the participants in their voluntary
           climate change programs to complete several program steps within
           general time frames, but participants' progress in completing
           those steps within the time frames varied. Moreover, DOE did not
           have a system to track the participants' progress in completing
           the required steps, and neither DOE nor EPA had a written policy
           specifying what actions would be taken to address participants'
           not proceeding as expected. In addition, EPA and DOE had both
           estimated the share of total U.S. greenhouse gas emissions that
           could be attributed to the participants in their programs and were
           working through an interagency process to quantify emissions
           reductions attributable to their programs. However, determining
           reductions attributable to each program will be challenging
           because these programs overlap with other voluntary programs and
           because it is difficult to determine how much of a participant's
           emissions reductions can be attributed to its participation in the
           program, versus what they would have done anyway in the absence of
           the program.

           With regard to reporting of federal climate change funding, we
           recommended that OMB and CCSP use the same format for presenting
           data from year-to-year, explain changes in report content or
           format when they are introduced, and provide and maintain a
           crosswalk comparing new and old report structures when changes in
           report format are introduced. We also recommended that OMB include
           data on existing climate-related tax expenditures in future
           reports.

           Regarding the voluntary programs, we recommended that DOE develop
           a system for tracking participants' progress in completing key
           steps associated with its Climate VISION Program, and that both
           EPA and DOE develop written policies establishing the actions the
           agencies will take if participants are not completing program
           steps on time.

           All four agencies appear to have taken steps to implement our
           recommendations, but we have not comprehensively reviewed the
           extent to which they have done so.
			  
			  Background

           In 1990, the Congress enacted the Global Change Research Act.6
           This act, among other things, required the administration to (1)
           prepare and at least every 3 years revise and submit to the
           Congress a national global change research plan, including an
           estimate of federal funding for global change research activities
           to be conducted under the plan; (2) in each annual budget
           submission to the Congress, identify the items in each agency's
           budget that are elements of the United States Global Change
           Research Program (USGCRP), an interagency long-term climate change
           science research program; and (3) report annually on climate
           change "expenditures required" for the USGCRP.7

           In response to the requirements of the 1990 act, the
           administration reported annually from 1990 through 2004 on funding
           for climate change science.8 From 1990 through 2001, the reports
           presented detailed science funding data for the USGCRP. Federal
           climate change science programs were reorganized in 2001 and 2002.
           In 2001, the Climate Change Research Initiative (CCRI) was created
           to coordinate short-term climate change research focused on
           reducing scientific uncertainty, and in 2002, CCSP was created to
           coordinate and integrate USGCRP and CCRI activities. CCSP is a
           collaborative interagency program designed to improve the
           government wide management of climate science and research.

           With respect to federal research, OMB, in annual reports and
           testimony before the Congress, reported climate change funding for
           1993 through 2004 using four categories:

           o  Technology, which includes the research, development, and
           deployment of technologies and processes to reduce greenhouse gas
           emissions or increase energy efficiency. Funding for this category
           focuses on programs for energy conservation, renewable energy, and
           related efforts.
           o  Science, which includes research and monitoring to better
           understand climate change, such as measuring changes in forest
           cover and land use.
           o  International assistance, which helps developing countries
           address climate change by, for example, providing funds for energy
           efficiency programs.
           o  Tax expenditures related to climate change, which are federal
           income tax provisions that grant preferential tax treatment to
           encourage emission reductions by, for example, providing tax
           incentives to promote the use of renewable energy.9

           Over the same time period, the administration also has reported
           annually on funding specifically for climate change science. CCSP
           is currently responsible for preparing these climate change
           science reports, which duplicate to some extent data provided by
           OMB in the science category.

           In 1992, the United States ratified the United Nations Framework
           Convention on Climate Change, which has as its objective the
           stabilization of greenhouse gas concentrations in the earth's
           atmosphere but does not impose specific goals or timetables for
           limiting emissions. In response, federal agencies developed a plan
           for reducing greenhouse gas emissions, primarily through voluntary
           efforts by companies, state and local governments, and other
           organizations. Since that time, federal agencies have sponsored
           voluntary programs that encourage private and public sector
           entities to curb their greenhouse gas emissions by providing
           technical assistance, education, research, and information
           sharing. The administration has promoted such voluntary programs,
           along with other measures, as an alternative to mandatory
           emissions reductions.

           In February 2002, the president announced a Global Climate Change
           Initiative to reduce the rate of increase in greenhouse gas
           emissions in the United States. Specifically, he established the
           goal of reducing the emissions intensity of the United States by
           18 percent between 2002 and 2012. Emissions intensity is a ratio
           calculated by dividing emissions in a given year by economic
           output for that year. In support of this goal, the president
           announced two new voluntary programs aimed at securing private
           sector agreements to voluntarily reduce greenhouse gas emissions
           or emissions intensity.

           o  Climate Leaders, an Environmental Protection Agency
           (EPA)-sponsored government-industry partnership established in
           February 2002, works with firms10 to develop long-term climate
           change strategies. According to EPA officials, as of November
           2005, 74 firms were participating in the program.
           o  Climate VISION (Voluntary Innovative Sector Initiatives:
           Opportunities Now), introduced in February 2003 and coordinated by
           the Department of Energy (DOE) in cooperation with EPA and other
           federal agencies, works with trade groups11 to develop strategies
           to reduce their members' greenhouse gas emissions intensity. Most
           industries participating in the program are represented by a
           single trade group. As of November 2005, 14 industry sectors and
           the Business Roundtable-an association of chief executive officers
           representing diverse sectors of the economy-were participating in
           the program. According to DOE, the trade groups participating in
           Climate VISION typically have high energy requirements.
			  
			  The Extent of Changes in Federal Climate Change Funding Are
			  Difficult to Determine

           OMB reports indicated that federal funding on climate change
           increased from $2.35 billion in 1993 to $5.09 billion in 2004, or
           from $3.28 billion to $5.09 billion after adjusting for inflation,
           and that funding increased in three of the four categories between
           1993 and 2004. However, changes in reporting methods limit the
           comparability of funding data over time, making it unclear whether
           total funding actually increased as reported. OMB reports also
           indicated that 12 of the 14 federal agencies receiving funding for
           climate change programs in 2004 received more funding in that year
           than they had in 1993, but again, unexplained modifications in the
           reports' contents limit the comparability of agencies' funding
           data, making it difficult to determine whether funding increased
           as OMB reported.
			  
			  Reported Federal Climate Change Funding Increased for Three of the
			  Four Funding Categories, but Data May Not Be Comparable Over Time

           We found that federal funding for climate change, as reported by
           OMB, increased from $2.35 billion in 1993 to $5.09 billion in 2004
           (117 percent), or from $3.28 billion to $5.09 billion (55 percent)
           after adjusting for inflation, and reported funding increased for
           three of the four categories between 1993 and 2004. However,
           changes in reporting methods limit the comparability of funding
           data over time, and therefore it was unclear whether total funding
           actually increased as OMB reported. We were unable to compare
           changes in the fourth category-climate-related tax
           expenditures-because OMB reported estimates for proposed but not
           existing tax expenditures from 1993 to 2004. Specifically, for
           1993 through 2004, we found the following:

           o  Technology funding, as reported by OMB, increased from $845
           million to $2.87 billion (240 percent), or from $1.18 billion to
           $2.87 billion (143 percent) in inflation-adjusted dollars. The
           share of total climate change funding devoted to technology
           increased from 36 percent to 56 percent. However, we identified
           several ways that technology funding presented in OMB's more
           recent reports may not be comparable to previously reported
           technology funding. For example, OMB added accounts to the
           technology category that were not reported before or were
           presented in different categories and did not explain whether
           these accounts reflected the creation of new programs or a
           decision to count existing programs for the first time. OMB also
           expanded the definitions of some accounts to include more
           activities without clarifying how the definitions were changed.
           Furthermore, OMB reports include a wide range of federal
           climate-related programs and activities, some of which-such as
           scientific research on global environmental change-are explicitly
           climate change programs, whereas others-such as technology
           initiatives promoting emissions reduction or encouraging energy
           conservation-are not solely for climate change purposes.
           o  Science funding increased from $1.31 billion to $1.98 billion
           (51 percent), according to both OMB and CCSP, or from $1.82
           billion to $1.98 billion (9 percent) in inflation-adjusted
           dollars. However, science's share of total climate change funding
           decreased from 56 percent to 39 percent. OMB and CCSP generally
           presented consistent climate change science funding totals from
           1993 through 2004. CCSP reports also presented more detailed data,
           but these data were difficult to compare over the entire period
           because CCSP periodically introduced new categorization methods
           without explaining how the new methods related to the ones they
           replaced. Specifically, over the period CCSP used seven different
           methods to present detailed science funding data, making it
           impossible to develop consistent funding trends for the entire
           timeframe.
           o  International assistance funding reported by OMB increased from
           $201 million to $252 million (25 percent), but decreased from $280
           million to $252 million (10 percent) in inflation-adjusted
           dollars. Moreover, its share of total climate change funding
           decreased from 9 percent to 5 percent. International assistance
           funding reported by OMB was generally comparable over time,
           although several new accounts were added without explanation.
           o  Tax expenditures were not fully reported by OMB for any year,
           even though climate-related tax expenditures amounted to hundreds
           of millions of dollars in forgone federal revenue in fiscal year
           2004. Although not required to do so, OMB reported proposed
           climate-related tax expenditures. However, OMB did not report
           revenue loss estimates for existing climate change-related tax
           expenditures. Whereas OMB reported no funding for existing climate
           change-related tax expenditures in 2004, the federal budget for
           that year listed four tax expenditures related to climate change,
           including estimated revenue losses of $330 million for incentives
           to develop certain renewable energy sources.

           Table 1 shows federal climate change funding by category between
           1993 and 2004.

           Table 1: Reported Federal Climate Change Funding by Category,
           Selected Years
			  
			  Discretionary budget authority in millions of                       
dollars                                                             
Category                                         1993   1997   2001   2004 
Technology                                       $845 $1,056 $1,675 $2,868 
Science                                         1,306  1,656  1,728  1,976 
International assistance                          201    164    218    252 
Tax expenditures                                    a      a      a      a 
Total                                          $2,352 $2,876 $3,603 $5,090 

           Source: GAO analysis of OMB data.

           aOMB did not report revenue loss estimates for existing
           climate-related tax expenditures for this year.

           Table 2 shows funding data for the seven largest technology
           accounts, which accounted for 92 percent of technology funding in
           2004.

           Table 2: Reported Technology Funding for Selected Accounts and
           Years
			  
			  Discretionary budget authority in millions of dollars
Agency               Account                     1993   1997   2001   2004 
Department of Energy Energy Conservation         $346   $414   $810   $868 
                        Energy Supply - Fossil       250    201    292    455 
                        Energy Research and                            
                        Development (R&D)                              
                        Energy Supply -Renewable     249    244    370    352 
                        Energy                                         
                        Science (Fusion,               b      b     35    333 
                        Sequestration, and                             
                        Hydrogen) a                                    
                        Energy Supply - Nuclearc       b      b     39    309 
National Aeronautics Exploration, Science, and      b      b      b    227 
and Space            Aeronautics                                    
Administration                                                      
Environmental        Environmental Programs and     b     70     96     89 
Protection Agency    Management                                     
Other                                               b    127     33    235 
Total                                            $845 $1,056 $1,675 $2,868 

           Source: GAO analysis of OMB data.

           aSequestration can be defined as the capture and isolation of
           gases that otherwise could contribute to global climate change.

           bOMB did not report a value in the technology category for this
           account for this year.

           cFor 2001 Energy Supply - Nuclear funding, we counted the Nuclear
           Energy Research Initiative and Energy Supply - Nuclear budget
           accounts as presented by OMB. OMB did not separately present these
           accounts for 2004, and included funding for the Nuclear Energy
           Research Initiative within the Energy Supply-Nuclear account.

           OMB and CCSP officials told us that time constraints and other
           factors contributed to changes in report structure and content
           over time. For example, OMB officials said that the short timeline
           for completing the report required by the Congress (within 45 days
           of submitting the upcoming fiscal year's budget for the three most
           recent reports) limited OMB's ability to analyze data submitted by
           agencies. OMB and CCSP officials also noted that each report was
           prepared in response to a one-time requirement and that they were
           not directed to use the same report format over time or to explain
           differences in methodology from one report to another. The
           director of CCSP told us that changes to climate change science
           reports, such as the creation and deletion of different
           categorization methods, were made because CCSP was changing
           towards a goals-oriented budget, and categorization methods
           changed as the program evolved. The director also said that future
           reports will explicitly present budget data as it was reported in
           prior reports to retain continuity, even if new methods are
           introduced. Regarding tax expenditures, OMB officials said that
           they consistently included in the reports those proposed tax
           expenditures where a key purpose was specifically to reduce
           greenhouse gas emissions. They also stated that they had not
           included existing tax expenditures that may reduce greenhouse gas
           emissions but that were enacted for other purposes, and that the
           Congress had not provided any guidance to suggest that additional
           tax expenditure data should be included in the annual reports.
			  
			  Reported Federal Climate Change Funding Increased for Three of
			  the Four Funding Categories, but Data May Not Be Comparable Over
			  Time

           OMB reported that 12 of the 14 agencies receiving funding for
           climate change programs in 2004 received more funding in that year
           than they had in 1993. However, it is unclear whether funding
           changed as OMB reported because of, among other things,
           unexplained changes in what was defined as climate change funding.
           Reported funding for the Department of Energy (DOE), the agency
           with the most reported climate-related funding in 2004, increased
           from $963 million to $2.52 billion (162 percent), or from $1.34
           billion to $2.52 billion (88 percent) after adjusting for
           inflation. DOE and NASA accounted for 81 percent of the reported
           increase in funding from 1993 through 2004. However, because
           agency funding totals are composed of individual accounts, changes
           in the reports' contents, such as the unexplained addition of
           accounts to the technology category, limit the comparability of
           agencies' funding data over time, making it difficult to determine
           if these are real or definitional increases. OMB stated that it
           consistently reported funding data for the 3 years presented in
           each of its reports and that there had been no requirement to use
           a consistent format from one report to the next or to explain
           differences in methodology from one report to another.

           We recommended that OMB and CCSP use the same format for
           presenting data from year-to-year, explain changes in report
           content or format when they are introduced, and provide and
           maintain a crosswalk comparing new and old report structures when
           changes in report format are introduced. We also recommended that
           OMB include data on existing climate-related tax expenditures in
           future reports. OMB agreed with the recommendations relating to
           report content and format and said it was studying the other
           recommendations. CCSP agreed with all of our recommendations. Both
           agencies appear to have taken actions in response to our
           recommendations, but we have not comprehensively reviewed the
           extent to which they may have done so.
			  
			  Voluntary Programs Have Shown Mixed Progress

           EPA and DOE expect participants in their respective programs to
           complete a number of actions within certain timeframes. However,
           participants' progress toward completing those actions was mixed,
           and neither agency had a written policy for dealing with this
           situation. EPA estimated that the first fifty Climate Leaders
           participants accounted for at least 8 percent of U.S. emissions on
           average for the years 2000 through 2003, and DOE estimated that
           Climate VISION participants account for over 40 percent of U.S.
           greenhouse gas emissions; both agencies believe these to be
           conservative estimates. While EPA and DOE are participating in an
           interagency process to estimate the impact of their programs on
           emissions, we found that accurately attributing specific emissions
           reductions to either program would be difficult.
			  
			  Some Climate Leaders and Climate VISION Participants Have Not
			  Completed Program Steps as Soon as Expected, and Neither Agency
			  Had a Written Policy For Dealing with Such Participants

           EPA and DOE expect participants in their voluntary emissions
           reduction programs to complete a number of actions; however,
           participants' progress toward completing those actions, as well as
           the agencies' efforts to track accomplishments, varied. For
           example, within about 1 year of joining the program, EPA expects
           firms to enter into discussions with the agency to establish an
           emissions reduction goal and to complete these negotiations,
           generally within another year. As of November 2005, 38 of the 74
           firms had established goals, while most of the other 36 firms,
           including 13 that joined in 2002, were still working to establish
           goals; most of the remaining firms had joined the program recently
           and had not yet established goals. EPA officials told us that they
           were developing a system for tracking firms' progress in
           accomplishing the key steps associated with participating in the
           program, but were still in the process of obtaining and validating
           data from participants. While EPA officials told us that they
           would be willing to remove participants from the program if they
           were not progressing as expected, they had not specified the
           conditions under which they would do so. DOE asks that trade
           groups participating in its Climate VISION program develop a work
           plan for measuring and reporting emissions information within
           about 1 year after joining the program and report their emissions
           levels. As of November 2005, 11 of the 15 participating trade
           groups had completed their work plans and 5 groups had reported on
           emissions. As of November 2005, DOE officials said that the agency
           did not have a system for tracking how long each group takes to
           complete its work plan and report emissions data. Furthermore,
           while DOE officials said that the agency would remove groups from
           the program if they did not seem to be taking sufficient action,
           DOE had not yet established specific deadlines for reporting
           emissions. Because DOE did not have a system for tracking how long
           participants take to complete key program steps-and neither DOE
           nor EPA had established written policies for taking action against
           participants not progressing as expected-it will be difficult for
           them to ensure that all participants are meeting program
           expectations.

           We recommended that DOE develop a system for tracking
           participants' progress in completing key steps associated with its
           Climate VISION Program, and that both EPA and DOE develop written
           policies establishing the actions the agencies will take if
           participants are not completing program steps on time. DOE and EPA
           appear to have taken steps to implement our recommendation
           regarding a written policy, but we have not conducted a
           comprehensive review to determine the extent to which the
           recommendations have been implemented.
			  
			  Participants in Both Programs Have Set Quantitative
			  Emissions-Related Goals

           The specific types of emission reduction goals being established
           by Climate Leaders firms and Climate VISION groups varied. Of the
           38 firms participating in Climate Leaders that had established
           emission reduction goals as of November 2005, 19 had committed to
           reduce their total greenhouse gas emissions, 18 had committed to
           reduce their emissions intensity (emissions per unit of output),
           and 1 firm had committed to reduce both its total emissions and
           its emissions intensity. Furthermore, firms' goals differed in
           their geographic scope and the time period they covered. For
           example, Cinergy Corporation pledged to reduce its total U.S.
           domestic greenhouse gas emissions by 5 percent from 2000 to 2010,
           while Pfizer, Inc., pledged to reduce its worldwide emissions by
           35 percent per dollar of revenue from 2000 to 2007. Table 3
           presents information on the 38 firms' goals.

6Pub. L. No. 101-606, 104 Stat. 3096 (1990) (partially terminated pursuant
to the Federal Reports Elimination and Sunset Act of 1995, Pub. L. No.
104-66, S: 3003 (1995)).

7The annual reporting requirement for climate change expenditures was
terminated effective May 15, 2000. The reporting requirement had called
for "(A) the amounts spent during the fiscal year most recently ended; (B)
the amounts expected to be spent during the current fiscal year; and (C)
the amounts requested for the fiscal year for which the budget is being
submitted."

8To maintain consistency with OMB data, which are available from 1993 to
2004, we reviewed reported science funding from 1993 to 2004.

9The revenue losses resulting from provisions of federal tax laws may, in
effect, be viewed as expenditures channeled through the tax system. The
Congressional Budget and Impoundment Control Act of 1974, as amended,
requires that the budget include the level of tax expenditures under
existing law. Like the annual lists of tax expenditures prepared by the
Department of the Treasury, this testimony considers only tax expenditures
related to individual and corporate income taxes and does not address
excise taxes.

10For the sake of brevity, we refer to all participants in the Climate
Leaders programs as firms, even though one of them, the National Renewable
Energy Laboratory, is a federal research laboratory.

11We refer to all Climate VISION participants as trade groups, even though
one participant, the Tennessee Valley Authority, is a utility.

Table 3: Climate Leaders Goals as of November 2005

                     Metric used and percent to be     Geographic   
                                reduced              scope of goal  
                                       Metric for                             
                                       measuring                         Time 
                             Emissions emissions     United            period 
Company         Emissions intensity intensity     States Global    covered
3M                     30                           x              2002-07 
Advanced Micro                   40 Manufacturing           x      2002-07 
Devices, Inc.                       index                        
American                4                           x              2001-06 
Electric Power                                                   
Ball                             16 Production      x              2002-12 
Corporation                         index                        
Bank of America         9                 x              2004-09 
Corporation                                                      
Baxter                           16 Unit of         x              2000-05 
International                       production                   
Inc.                                value                        
Calpine                           4 Megawatt hour   x              2003-08 
Caterpillar                      20 Dollar of               x      2002-10 
                                       revenue                      
Cinergy                 5                           x              2000-10 
Corporation                                                      
The Collins            18                           x              2000-10 
Companies                                                        
Eastman Kodak          10                                   x      2002-08 
Company                                                          
Exelon                  8                           x              2001-08 
Corporation                                                      
First              Net 0a                           x              by 2008 
Environment,                                                     
Inc.                                                             
FPL Group, Inc.                  18 Kilowatt hour   x              2001-08 
Frito-Lay, Inc.                  14 Pound of        x              2002-10 
                                       production                   
GAP, Inc.                        11 Square foot     x              2003-08 
General                 1                                   x      2004-12 
Electric                                                         
General Motors         10                           xb             2000-05 
Corporation                                                      
Green Mountain     Net 0a                           x              2005-09 
Energy Co.                                                       
Hasbro, Inc.           30                           x              2000-07 
Holcim (U.S.)                    12 Ton of cement   x              2000-08 
Inc.                                                             
IBM                    10         4 Energy use              x      Average 
Corporationc                                                        annual 
                                                                    reduction 
                                                                              
                                                                      2000-05 
Interface, Inc.                  15 Unit of         x              2001-10 
                                       production                   
International          15                           x              2000-10 
Paper                                                            
Johnson &              14                           x              2001-10 
Johnson                                                          
Marriott                          6 Available       x              2004-10 
International,                      room                         
Inc.                                                             
Melaver, Inc.      Net 0a                           x              2006-09 
Miller Brewing                   18 Barrel of       x              2001-06 
Company                             production                   
National                         10 Square foot     x              2000-05 
Renewable                                                        
Energy Lab.                                                      
Pfizer, Inc.                     35 Dollar of               x      2000-07 
                                       revenue                      
PSEG                             18 Kilowatt hour   x              2000-08 
Roche Group US         10                           x              2001-08 
Affiliates                                                       
SC Johnson                       23 Pound of        x              2000-05 
                                       product                      
Staples, Inc.           7                           x              2001-10 
St. Lawrence                     15 Ton of                  x      2000-10 
Cement                              product                      
Sun                    20                           x              2002-12 
Microsystems                                                     
United                           16 Dollar of               x      2001-06 
Technologies                        revenue                      
Corporation                                                      
Xerox                  10                                   x      2002-12 
Corporation                                                      

Source: GAO analysis of EPA data.

aNet zero means that the company will substitute emissions it produces by
some other activity such that no new, additional emissions are produced.
Green Mountain Energy, for example, is substituting emissions from fossil
fuel-based energy, such as coal or gas, with the purchase of renewable
energy that produces few greenhouse gas emissions relative to fossil
fuels.

bGeneral Motors pledged to reduce total greenhouse gas emissions from its
North American facilities.

cIBM pledged to achieve a reduction in its average annual carbon dioxide
emissions equivalent to 4 percent of the emissions associated with the
company's worldwide energy use. IBM also pledged to reduce its
perfluorocarbon emissions from its semiconductor manufacturing processes
by 10 percent from 2000 to 2005.

In contrast to EPA's program, 14 of the 15 trade groups participating in
DOE's Climate VISION established an emissions-related goal in
collaboration with DOE or another federal agency upon joining the program.
(The remaining group, the Business Roundtable, did not establish a
quantitative emissions goal because of the diversity of its membership).
According to a DOE official, participants need not establish new goals as
a condition of joining the program. Nine of the 14 groups had set goals to
improve their emissions intensity, 2 groups had established a goal of
reducing emissions of specific greenhouse gases, 2 groups had set goals to
improve energy efficiency, and 1 group had established a goal of both
reducing its total emissions and improving its energy efficiency. For
example, the American Forest & Paper Association pledged to reduce
emissions intensity by 12 percent between 2002 and 2012, while the
American Iron and Steel Institute agreed to a 10-percent, sector wide
increase in energy efficiency by 2012. Some of these groups stated that
their goals would be difficult to achieve, however, without reciprocal
federal actions, such as tax incentives or regulatory relief. Table 4
presents information on Climate VISION industry groups' goals.

Table 4: Climate VISION Trade Groups' Goals as of November 2005

                         Type of goal                                  
                          Reduce                                                 
 Industry/                emissions  Improve                                     
                Reduce               energy                            Start and
 participant    emissions intensity  efficiency Goal metric            end dates
 Aluminum                 53%                   Combined direct carbon 1990-2010 
                                                emissions intensity    
 Aluminum                                       based on PFC           
 Association                                    reductions and reduced 
                                                anode carbon           
                                                consumption            
 Automobiles              10%                   Carbon dioxide           2002-12 
                                                emissions per vehicle  
 Alliance of                                    produced               
 Automobile                                                            
 Manufacturers                                                         
 Cement                   10%                   Carbon dioxide         1990-2020 
                                                emissions per ton of   
 Portland                                       cementitious product   
 Cement                                         produced or sold       
 Association                                                           
 Chemicals                18%a                  Greenhouse gas         1990-2012 
                                                emissions intensityb   
 American                                                              
 Chemistry                                                             
 Council                                                               
 Electric power           The                   Ratio of carbon          2002-02 
                          equivalent            equivalent emissions          to 
 American                 of                    to generation in         2010-12 
 Public Power                                   megawatt hours         
 Association              3 to 5%                                      
                                                                       
 Edison                                                                
 Electric                                                              
 Institute                                                             
                                                                       
 Electric Power                                                        
 Supply                                                                
 Association                                                           
                                                                       
 Large Public                                                          
 Power Council                                                         
                                                                       
 National Rural                                                        
 Electric                                                              
 Cooperative                                                           
 Association                                                           
                                                                       
 Nuclear Energy                                                        
 Institute                                                             
                                                                       
 Tennessee                                                             
 Valley                                                                
 Authority                                                             
 Forest                   12%                   Greenhouse gas           2000-12 
 products                                       intensity              
                                                                       
 American                                                              
 Forest & Paper                                                        
 Assn.                                                                 
 Iron and steel                      10%        Millions of British      2002-12 
                                                thermal units per ton  
 American Iron                                  of steel produced      
 and Steel                                                             
 Institute                                                             
 Lime                     8%                    Fuel used per ton of     2002-12 
                                                lime produced          
 National Lime                                                         
 Association                                                           
 Magnesium      100%                            Sulfur hexafluoride           by 
                                                emissions                        
 International                                                             2010c 
 Magnesium                                                             
 Assn.                                                                 
 Minerals                 4.2%                  Greenhouse gas           2002-12 
                                                emissions from fuel    
 Industrial                                     combustion             
 Minerals                                                              
 Association                                                           
 North America                                                         
 Mining                              10%        Energy efficiency        2002-12 
                                                                       
 National                                                              
 Mining                                                                
 Association                                                           
                25 MMTCE                        Methane emissions in    2002-12d 
                                                million metric tons    
                                                carbon dioxide         
                                                equivalent/year        
                2 MMTCE                         Million metric tons of  2002-15e 
                                                carbon equivalent      
 Oil and gas                         10%        Energy efficiency        2002-12 
                                                                       
 American                                                              
 Petroleum                                                             
 Institute                                                             
 Railroads                18%                   Transportation-related   2002-12 
                                                greenhouse gas         
 American                                       emissions intensity    
 Association of                                 adjusted for traffic   
 Railroads                                      levels in ton miles    
 Semiconductors 10%                             PFC emissions in           1995- 
                                                million metric tons of      2010 
 Semiconductor                                  carbon equivalent      
 Industry Assn.                                                        

Sources: Climate VISION web site.

aAccording to the American Chemistry Council (ACC), the U.S. chemistry
industry reduced its greenhouse gas intensity by 12 percent from 1990 to
2000, with projections to 2002.

bACC measures its greenhouse gas emissions intensity using a special index
that is particularly suited for an industry with a diverse product base.
The index measures changes in the physical quantity of production, and
where these data are unavailable, the index is based on changes in
electricity consumption and production worker hours.

cThe International Magnesium Association committed to eliminate all SF6
emissions by 2010 and did not define a baseline year because of the nature
of its goal.

dThe National Mining Association committed to maintain annual methane
emissions reductions achieved since 1990.

eThe National Mining Association committed to maximize efforts to reduce
annual carbon reductions projected as a result of the partnership with
DOE. These projections are 600,000 metric tons of carbon equivalent by
2010 and 2 million metric tons by 2015.

Both Agencies Had Estimated Their Programs' Coverage and Were Working to
Estimate Their Impact, But It Will Be Difficult to Attribute Specific Emissions
Reductions From These Programs

EPA and DOE both estimated the share of total U.S. greenhouse gas
emissions attributable to participants in their respective programs and
were working to develop an estimate of the programs' impacts. EPA
estimated that Climate Leaders participants accounted for at least 8
percent of U.S. emissions. According to EPA, this was a conservative
estimate, because it was based solely on emissions from the program's
first 50 participants. DOE estimated that Climate VISION participants
accounted for over 40 percent of U.S. greenhouse gas emissions and noted
that this was a conservative estimate. Both agencies were participating in
an interagency process to estimate the effect of their programs on
reducing emissions, which was expected to be completed in 2006. However,
preparing accurate estimates of these programs' impacts will be difficult.
First, there is considerable overlap between these two programs and other
voluntary programs. For example, 60 of the 74 Climate Leaders participants
also participated in one or more other EPA programs, and 3 of the 14
Climate VISION participants with quantitative goals also participated in
EPA voluntary programs. Such overlap makes it difficult to determine the
effects that are attributable to a given program. Second, it will be
difficult to determine how much of a firm's or trade group's emissions
reductions can be attributed to its participation in the program because
the level of a participant's emissions in the absence of the program is
unknown. For example, higher energy prices or changes in business
operations could lead to emissions reductions, making it difficult to
distinguish reductions attributable to participation in the program versus
other causes.

                                  Conclusions

In conclusion, we found that the lack of consistency and clarity in OMB's
and CCSP's reports made it difficult to identify trends in federal climate
change funding. A better understanding of these expenditures is needed
before it is possible to assess CCSP's and other federal agencies'
progress towards their climate change goals. We therefore made a total of
seven recommendations to OMB and three to CCSP to clarify how they present
climate change funding information. OMB agreed with most of our
recommendations and CCSP agreed with all of our recommendations. Both
agencies appear to have taken steps to implement our recommendations, but
we have not comprehensively reviewed the extent to which they have done
so.

We found that opportunities remain to improve the progress of both
voluntary programs, since some industry participants in both programs
appeared not to be progressing at the rate expected by the agencies. We
also found that it will be difficult for the agencies to estimate the
emissions reductions attributable to their programs, due to overlaps
between organizations participating in more than one voluntary program and
to the fact that it was difficult to know how much of a participant's
emissions reductions were a direct result of the program or other factors,
such as higher energy prices, which generally lead to lower emissions.
Therefore, we recommended that DOE develop a system for tracking
participants' progress in completing key steps associated with the
program, and that both EPA and DOE develop written policies that establish
the actions the agencies will take if participants are not completing
program steps on time. EPA did not comment on our recommendation; DOE
stated that it agreed with our recommendation regarding a tracking system
and would consider our recommendation regarding establishing a written
policy. We have not fully reviewed the extent to which the recommendations
have been implemented.

Mr. Chairman, this concludes my prepared statement. I would be pleased to
respond to any questions you or other Members of the Subcommittee may
have.

                       Contact and Staff Acknowledgements

For further information regarding this testimony, please contact me at
(202) 512-3841 or [email protected]. John Healey, Anne K. Johnson, and
Vincent P. Price made key contributions to this testimony. John Delicath,
Karen Keegan, and Charles Egan also made important contributions.

(360768)

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Highlights of GAO-06-1126T , testimony before the Subcommittee on Energy
and Resources, Committee on Government Reform, House of Representatives

September 27, 2006

CLIMATE CHANGE

Federal Agencies Could Do More to Make Funding Reports Clearer and
Encourage Progress on Two Voluntary Programs

The Office of Management and Budget (OMB) reports on federal funding for
climate research and to develop technologies to reduce greenhouse gas
emissions, among other things. The Climate Change Science Program (CCSP),
which coordinates many agencies' activities, also reports on science
funding. The Environmental Protection Agency's (EPA's) Climate Leaders and
the Department of Energy's (DOE's) Climate VISION programs aim to reduce
such emissions through voluntary industry efforts.

This testimony is based on GAO's August 2005 report Climate Change:
Federal Reports on Climate Change Funding Should Be Clearer and More
Complete (GAO-05-461) and its April 2006 report Climate Change: EPA and
DOE Should Do More to Encourage Progress Under Two Voluntary Programs
(GAO-06-97), which addressed (1) reported changes in federal climate
change funding and (2) the status and progress of two federal voluntary
climate programs.

What GAO Recommends

GAO recommended actions to improve OMB's and CCSP's reporting. GAO
recommended that both EPA and DOE develop written policies on what to do
about participants not meeting program expectations. All four agencies
appear to have taken steps to implement our recommendations, but we have
not fully reviewed the extent to which they have done so.

Federal funding for climate change, as reported by OMB, increased from
$2.35 billion in 1993 to $5.09 billion in 2004 (117 percent), or from
$3.28 billion to $5.09 billion (55 percent) after adjusting for inflation.
OMB reports show that, during this period, funding increased for
technology, science, and--before adjusting for inflation--international
assistance. CCSP, which reports only science funding, generally presented
totals that were consistent with OMB's, but provided more detail. However,
changes in reporting methods used by both OMB and CCSP limit the
comparability of funding data over time, and therefore it was unclear
whether total funding actually increased as reported. Furthermore, we were
unable to compare changes in the fourth category (climate-related tax
expenditures), because from 1993 to 2004 OMB reported estimates for
proposed but not existing tax expenditures. With regard to individual
agencies' funding, OMB reported that 12 of the 14 agencies receiving
funding for climate change programs in 2004 received more funding in that
year than they had in 1993, but it is unclear whether funding changed as
OMB reported because of unexplained changes in what was defined as climate
change funding. Reported funding for DOE, the agency with the most
reported climate-related funding in 2004, increased from $963 million to
$2.52 billion (162 percent), or from $1.34 billion to $2.52 billion (88
percent) after adjusting for inflation. DOE and the National Aeronautics
and Space Administration accounted for 81 percent of the reported increase
in funding from 1993 through 2004. However, because agency funding totals
are composed of individual accounts, changes in the reports' contents,
such as the unexplained addition of accounts to the technology category,
limit the comparability of agencies' funding data over time, making it
difficult to determine if these are real or definitional increases.

EPA and DOE expected participants in their voluntary climate programs to
complete several program steps within general time frames, but
participants' progress in completing those steps within the time frames
was mixed. Furthermore, DOE did not have a system for tracking groups'
progress in completing program steps, and neither DOE nor EPA had a
written policy specifying the consequences for participants not proceeding
as expected. In addition, EPA and DOE had both estimated the share of
total U.S. greenhouse gas emissions attributable to participants in their
respective programs and were working through an interagency process to
quantify emissions reductions attributable to their programs. However,
determining reductions attributable to each program will be challenging
because of the overlap between these programs and other voluntary programs
and because it is difficult to determine how much of a participant's
emissions reductions can be attributed to its participation in the
program, since the participant's emissions in the absence of the program
cannot be known.
*** End of document. ***