[Senate Hearing 111-959]
[From the U.S. Government Publishing Office]
S. Hrg. 111-959
CLIMATE CHANGE LEGISLATION:
CONSIDERATIONS FOR FUTURE JOBS
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 10, 2009
__________
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West CHUCK GRASSLEY, Iowa
Virginia ORRIN G. HATCH, Utah
KENT CONRAD, North Dakota OLYMPIA J. SNOWE, Maine
JEFF BINGAMAN, New Mexico JON KYL, Arizona
JOHN F. KERRY, Massachusetts JIM BUNNING, Kentucky
BLANCHE L. LINCOLN, Arkansas MIKE CRAPO, Idaho
RON WYDEN, Oregon PAT ROBERTS, Kansas
CHARLES E. SCHUMER, New York JOHN ENSIGN, Nevada
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida
ROBERT MENENDEZ, New Jersey
THOMAS R. CARPER, Delaware
Russell Sullivan, Staff Director
Kolan Davis, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
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OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Grassley, Hon. Chuck, a U.S. Senator from Iowa................... 3
WITNESSES
Breehey, Abraham, director, legislative affairs, International
Brotherhood of Boilermakers, Iron Shipbuilders, Blacksmiths,
Forgers, and Helpers, Department of Government Affairs,
Fairfax, VA.................................................... 4
Berrigan, Carol, director, industry infrastructure, Nuclear
Energy Institute, Washington, DC............................... 6
Green, Dr. Kenneth P., resident scholar, American Enterprise
Institute for Public Policy Research, Washington, DC........... 9
Thorning, Dr. Margo, senior vice president and chief economist,
American Council for Capital Formation, Washington, DC......... 10
Ton-Quinlivan, Van, director, workforce development and strategic
programs, Pacific Gas and Electric Company, San Francisco, CA.. 12
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 35
Berrigan, Carol:
Testimony.................................................... 6
Prepared statement........................................... 37
Responses to questions from committee members, with
attachments................................................ 44
Breehey, Abraham:
Testimony.................................................... 4
Prepared statement with attachment........................... 69
Responses to questions from committee members................ 96
Grassley, Hon. Chuck:
Opening statement............................................ 3
Prepared statement........................................... 103
Green, Dr. Kenneth P.:
Testimony.................................................... 9
Prepared statement with attachments.......................... 105
Responses to questions from committee members................ 142
Hatch, Hon. Orrin G.:
Prepared statement of Americans for Tax Reform............... 152
Kerry, Hon. John F.:
``Falling Behind on Green Tech,'' Washington Post article by
John Doerr and Jeff Immelt, August 3, 2009................. 157
Thorning, Dr. Margo:
Testimony.................................................... 10
Prepared statement........................................... 159
Responses to questions from committee members................ 169
Ton-Quinlivan, Van:
Testimony.................................................... 12
Prepared statement........................................... 183
Responses to questions from committee members................ 191
Communications
American Petroleum Institute..................................... 197
Association of American Universities and Association of Public
and Land-grant Universities.................................... 200
Kammen, Daniel M................................................. 203
CLIMATE CHANGE LEGISLATION: CONSIDERATIONS FOR FUTURE JOBS
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TUESDAY, NOVEMBER 10, 2009
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:15
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus (chairman of the committee) presiding.
Present: Senators Kerry, Stabenow, Cantwell, Carper,
Grassley, Hatch, and Roberts.
Also present: Democratic Staff: Bill Dauster, Deputy Staff
Director and General Counsel; Thomas Reeder, Senior Benefits
Counsel; Cathy Koch, Chief Tax Counsel; Pat Bousliman, Natural
Resource Advisor; and Ryan Abraham, Professional Staff.
Republican Staff: James Lyons, Tax Counsel.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The hearing will come to order.
In 1971, the noted economist and Harvard dean Edward Mason
said: ``There seems to be no reason to believe . . . that the
employment-creating effects of restoring the environment will
be any less than those involved in polluting the environment.''
It seems that the debate over jobs and the environment has been
around about as long as we have had either jobs or an
environment.
Today, we will consider whether climate legislation will
create jobs in the energy sector. We will examine further this
committee's role in climate legislation. And we will discuss
what we can do to both create jobs and to ease the transition
to an economy that accounts for the cost of carbon dioxide.
I am committed to passing meaningful, balanced climate
change legislation. I am committed to legislation that will
protect our land and those whose livelihood depends on it. I
want our children and grandchildren to be able to enjoy the
outdoors the way we can today. So I am going to work to pass
climate change legislation that is both meaningful and can
muster enough votes to become law.
Today, we will hear predictions--some optimistic, some
otherwise--about the effects that climate legislation will have
on American jobs and the American economy. We need to consider
these predictions, but we also need to consider the
consequences of failing to act.
We can already see some of these consequences in my home
State of Montana. We can see the consequences in forests near
my hometown of Helena, destroyed by pine beetles that thrive in
warmer temperatures. We can see the consequences in sustained
drought and more frequent wildfires, and hotter wildfires, I
might add. We can see the consequences in decreased snowpack
and lower stream flows, reducing water for irrigated
agriculture and starving out our blue-ribbon trout streams of
cold water--which I might add are a huge tourist attraction for
our State's economy. These are serious consequences, and I
believe that we can mitigate their effects in a way that does
not harm the economy.
History is instructive. As a senior Senator on the
Environment and Public Works Committee, I wrote much of the
bill that became known as the Clean Air Act Amendments of 1990.
That legislation established a cap-and-trade system to curb
sulfur dioxide emissions and nitric oxides, as well. It helped
to combat acid rain.
During the debate on that bill, several industry studies
made dire predictions about the effects of the legislation on
the economy. Even studies from the Environmental Protection
Agency estimated the annual costs at between $2.7 and $4
billion a year. And, during that debate, there were also dire
predictions about job losses. In 1990, the EPA predicted that
between 13,000 and 16,000 coal mining jobs would be lost as a
result of the Acid Rain Program.
But a decade later, an EPA analysis determined that the
cost of cutting emissions was far lower than they had expected.
Reaching the sulfur dioxide goals set by the 1990 Amendments
cost an estimated $1 to $2 billon a year, less than half the
original estimate.
EPA found that job loss was about one-fourth of what was
predicted, and about 95 percent of the job loss that did occur
was due to productivity gains in the industry. Very few jobs
were lost due to the Acid Rain Program itself.
Let me be clear. We should work to minimize any job loss,
but we should recognize that, in the case of acid rain, the
negative consequences were far less than projected. We should
keep this in mind when similar claims are made about the
effects of legislation to address climate change. And we should
recognize that the Bush administration noted how cost-effective
the Acid Rain Program was. The Bush administration found that
its benefits exceeded its costs by more than 40-to-1.
To be fair, the scope of climate change legislation is far
broader than acid rain. And while we must always be mindful of
the cost of legislation--that is particularly true in today's
economy--our unemployment rate remains far too high. And it is
estimated to stay high for a good time yet, not come down soon.
And we must be diligent to create jobs, including in the energy
sector. Again, we can point to some successes.
In recent years, Congress has extended and modified the tax
credit for production of power from renewable resources, such
as wind and biomass. With that credit, wind turbine and turbine
component manufacturers announced, added, or expanded more than
70 facilities in the United States in 2007 and 2008. These
facilities, when fully online, will represent 13,000 new direct
jobs.
I am also very interested in a new incentive that we wrote
earlier this year, a 30-percent credit for advanced energy
manufacturing. We passed this credit to spur domestic
production of clean energy development. I will be keeping a
close eye on implementation of this credit, both in terms of
energy independence and for creating jobs.
I look forward to hearing our witnesses' views. I look
forward to further consideration of these issues in the Finance
Committee, and I very much look forward to our efforts to
protect both jobs and our environment.
I will be asking some questions. Some of them will be along
the lines of a devil's advocate, pressing witnesses to see what
is up, what is real, what is not.
I will now turn to Senator Grassley.
OPENING STATEMENT OF HON. CHUCK GRASSLEY,
A U.S. SENATOR FROM IOWA
Senator Grassley. Thank you, Mr. Chairman.
It is the responsibility of Congress to weigh the costs and
benefits of every policy decision it makes, and the bigger the
issue, the more important it becomes.
The Environment and Public Works Committee is the place for
a detailed examination of the purported environmental benefits
of any climate change proposal, and that is an important part
of the equation. This committee's expertise is in the costs and
economic impacts of new taxes. It, therefore, has the relevant
expertise to evaluate the costs associated with climate change
legislation.
Today's hearing, about the impact of climate change on
jobs, builds on lessons this committee has learned from past
hearings. Last year, then-Congressional Budget Office Director
Peter Orszag testified that, under a cap-and-trade system,
prices for energy would necessarily increase. ``Skyrocket'' is
the term that President Obama has used about price increases.
Dr. Orszag explained, ``Such price increases would stem from
the restriction on emissions and would occur regardless of
whether the government sold emission allowances or gave them
away. Indeed, the price increases would be essential to the
success of a cap-and-trade program. . . .''
Both he and Robert Greenstein of the Center for Budget and
Policy Priorities also testified that the impact of those price
increases would fall most severely on the lowest-income
Americans.
Some have tried to claim that cap and trade would somehow
make enough money through auctioning allowances to cover
increased costs to American families, but this ignores the fact
that this money will be taken from the American people in the
first place.
The current Director of CBO, Doug Elmendorf, addressed this
issue when he testified before the committee in May of this
year. In response to written questions, he made clear that
``the allowances that are created under a cap-and-trade program
do not add wealth to the economy. Rather, they are
simultaneously a cost and a source of income.'' He also went on
to make it very clear that the value of allowances would ``. .
. inevitably fall short of the total economic effects of the
policy. . . .'' In other words, there is no free lunch with
this issue.
At the same hearing, Dr. Elmendorf testified that ``by
channeling productive resources toward reducing (the risk of
damages from climate change) rather than toward producing goods
and services that are measured in gross domestic product, such
policies would be likely to reduce GDP relative to what
otherwise would occur.''
In testimony just last month before the Energy and Natural
Resources Committee, he confirmed that economic productivity
and jobs would be lost as a result of the House-passed cap-and-
trade bill. Despite this, the more stringent Senate version of
this legislation is incredibly entitled the ``Clean Energy Jobs
and American Power Act.''
Like any government regulation, there will inevitably be
winners and losers, and we will be hearing about that in
today's hearing. That is why this hearing is so very important.
However, an honest cost-benefit assessment requires that we
first stop trying to sell this policy as if it will have no
cost for Americans, and accept the basic economic principle
that there is no such thing as a free lunch.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Grassley.
Now, I would like to introduce our panel. The first witness
is Abraham Breehey, who is the director of legislative affairs
for the International Brotherhood of Boilermakers, Iron
Shipbuilders, Blacksmiths, Forgers, and Helpers.
Next is Carol Berrigan, director of industry infrastructure
at the Nuclear Energy Institute.
Third is Dr. Kenneth Green, resident scholar at the
American Enterprise Institute for Public Policy Research.
Then, Dr. Margo Thorning, senior vice president and chief
economist with the American Council for Capital Formation.
And, finally, we have Van Ton-Quinlivan. Is that right?
Ms. Ton-Quinlivan. Yes, sir.
The Chairman. Good.
Director of workforce development and strategic programs,
Pacific Gas and Electric Company.
All right. Mr. Breehey, you are first.
STATEMENT OF ABRAHAM BREEHEY, DIRECTOR, LEGISLATIVE AFFAIRS,
INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIPBUILDERS,
BLACKSMITHS, FORGERS, AND HELPERS, DEPARTMENT OF GOVERNMENT
AFFAIRS, FAIRFAX, VA
Mr. Breehey. Chairman Baucus, Senator Grassley, and members
of the committee, my name is Abraham Breehey, and I am the
director of legislative affairs for the International
Brotherhood of Boilermakers. On behalf of the members of my
union, thank you very much for the opportunity to testify here
today.
The members of the Boilermakers Union will be among those
workers on the front lines of our Nation's transition to a
clean energy, low-carbon economy. We recognize that it will not
be easy, but it is essential that the United States not wait to
begin the important work of reducing emissions that cause
climate change.
If Congress moves forward with a comprehensive cap-and-
trade program, the demand for climate solutions will create job
opportunities across the economy. We can put American ingenuity
and skills to work reducing emissions and turn the jobs union
members do every day into the environmental solutions our
Nation needs.
The lack of a comprehensive policy on global warming and
the uncertainty associated with the future regulation of
greenhouse gases is delaying the creation of job opportunities.
Waiting to provide investors, regulated entities, and
entrepreneurs the market signals that will reward innovation
only gives America's competitors a head start in the clean
energy race.
The Senate must demonstrate bipartisan leadership and
develop the kind of policies that will provide certainty,
control costs, and encourage job-creating investments. We must
not miss an opportunity to make the United States the leader in
advanced coal technology development, an undertaking that is
essential to meeting any significant global effort to reduce
emissions.
We greatly prefer effective, balanced legislation to
regulation of greenhouse gases under the Clean Air Act.
Legislation would more effectively balance regional,
environmental, and economic concerns, while providing the
necessary incentives for technology deployment that will create
jobs.
The development and deployment of carbon capture and
storage technology at power plants and industrial facilities is
among the technological breakthroughs that could reduce our
Nation's carbon footprint and create job opportunities for
American workers. The level of investment, both Federal and
private, necessary to ensure that widespread commercialization
of CCS happens is highly unlikely in the absence of
comprehensive clean energy legislation.
We appreciate Chairman Baucus, Senator Carper, and the
other Senators involved, for their work in the development of
the provisions of S. 1733, designed to encourage early and
widespread deployment of CCS at coal plants. The construction
of coal-based generation facilities and CCS technology is
tremendously labor-
intensive. The National Commission on Energy Policy recently
issued a report from its Task Force on America's Future Energy
Jobs.
This task force included representatives of organized
labor, industry, and the academic community. The task force
relied, in part, on job data provided by Bechtel Power
Corporation to estimate the labor needs associated with the
construction of new, clean energy generation infrastructure.
The estimates for alternative generation technologies indicate
that coal-based CCS and nuclear power generation options have
the highest job creation potential relative to other supply
options, such as natural gas.
Based on Bechtel's analysis, the development and
construction phase of deploying a normalized 1 gigawatt of
power generated by an Integrated Gasification Combined Cycle
coal plant equipped with CCS would employ over 2,700 salaried
workers and an hourly workforce of over 8,000 skilled workers.
CCS development and deployment represents tremendous employment
opportunities for the members of my union and other workers in
the building trades. Early deployment and bonus allowance
programs for CCS, included in the comprehensive climate
legislation, will be a tremendous driver for job creation in
our economy.
However, good jobs will not necessarily be created by any
climate legislation without the inclusion of fair, enforceable
labor standards. The application of wage standards to the
deployment of energy infrastructure will ensure that the
benefits of Federal investment are extended not just to
developers and businesses, but to the people whose skills are
necessary to make this transition happen.
For example, under the Clean Energy Jobs and American Power
Act of 2009, workers employed on projects assisted or
incentivized through allowance allocations will be assured wage
rates no less than those prevailing in their local community.
Ensuring these high standards for both workers and contractors
will be particularly important when applied to new, highly
technical construction projects, such as CCS.
While comprehensive climate legislation that establishes a
declining cap on carbon will lead to the creation of new
employment opportunities, Congress must also act to mitigate
adverse employment impacts. Climate policy must not undermine
the competitiveness of U.S. manufacturers in the global
marketplace. An adequate allocation of allowances to an output-
based rebate program for
energy-intensive trade-exposed industries will ensure that the
migration of jobs and pollution to countries that fail to act
does not undermine the goals of domestic action. It is also
important that the Senate include a strong, yet fair, border
measure to prevent so-called carbon leakage.
In addition, it was deeply disconcerting to learn, this
week, that Federal clean energy investments made through the
Recovery Act have been used for projects that generate jobs in
China and not in the United States. As was widely reported, a
Texas wind farm project that will rely exclusively on wind
turbines manufactured in China has applied for financial
assistance from the U.S. Department of Energy. It will be
American workers and American taxpayers making the sacrifices
to reduce emissions. It must also be American workers who
benefit from the job creation opportunities these climate
solutions create.
There are new opportunities for American workers, not just
in the final construction jobs, but throughout the supply
chains of clean energy technology.
I want to close just by reiterating the enormous potential
we believe is available to put people to work building the
climate solutions we need. This includes energy efficiency
through building retrofits, CCS, and countless other
innovations, but the work does not start until Congress
provides the rules of the road and the right incentives. The
time to act is now. We can make our economy more efficient,
more energy independent and provide the low-carbon jobs we need
for long-term, sustainable economic growth.
Again, I want to thank the committee for the important work
you are doing and the opportunity to express our views.
The Chairman. Thank you, Mr. Breehey.
[The prepared statement of Mr. Breehey appears in the
appendix.]
The Chairman. Ms. Berrigan?
STATEMENT OF CAROL BERRIGAN, DIRECTOR, INDUSTRY INFRASTRUCTURE,
NUCLEAR ENERGY INSTITUTE, WASHINGTON, DC
Ms. Berrigan. Chairman Baucus, Ranking Member Grassley, and
members of the committee, I appreciate this opportunity to
express the nuclear industry's views on future jobs under
climate legislation. I am Carol Berrigan, senior director of
industry infrastructure at the Nuclear Energy Institute.
Let me begin by thanking members of this committee for your
long-standing oversight of the Nation's fiscal affairs and for
your support of legislation, like the production tax credit for
new nuclear generation as passed in EPAct 2005, and the tax
credit for manufacturing clean energy technologies afforded
under the American Recovery and Reinvestment Act this year.
Both of these programs are important initial steps towards
the financial incentives necessary to accelerate the deployment
of nuclear energy generation and rebuild the Nation's
manufacturing infrastructure.
Today, the 104 operating reactors in the United States
produce one-fifth of America's electricity. U.S. utilities are
preparing to build advanced-design nuclear power plants to meet
our Nation's growing electricity demand. Currently, 13
applications for 22 reactors are under active review by the
Nuclear Regulatory Commission. Over $4 billion has been spent
on new plant development over the past few years, and the
industry plans to invest approximately $8 billion in the next
few years to be in a position to start construction of the
first nuclear reactors in the 2011 to 2012 time frame.
Nuclear energy represents more than 72 percent of the
Nation's emission-free generation portfolio, avoiding nearly
700 million metric tons of carbon dioxide per year. This is the
equivalent of removing 133 million of the 136 million passenger
cars from our roads.
As Congress and the administration consider climate
legislation, mainstream analyses show that reducing carbon
emissions will require a portfolio of technologies, and that
nuclear energy must be part of that portfolio. Further, they
indicate that the major expansion of nuclear generating
capacity over the next 30 to 50 years is essential.
Nuclear energy can have a significant, positive impact on
the workforce and manufacturing base that arises from current
plants, new plants, and the supply chain. Each current nuclear
unit in operation today directly employs 400 to 700 people. In
addition to direct employment, the industry relies on numerous
vendors and specialty contractors for additional expertise and
services. Over 30 million man-hours are worked by supplemental
craft labor each year.
In addition to payroll spending, nuclear companies procured
over $14 billion in materials, fuel, and services from over
22,500 domestic suppliers last year. While only 31 States have
nuclear power plants, nuclear procurement takes place in all 50
States, with an average of $277 million of procurement
occurring per State. In several States, this procurement is in
excess of $1 billion.
The resurgence of nuclear energy will lead to increasing
demand for skilled labor at all levels. In addition to
producing carbon-free electricity, construction of new nuclear
power plants will create tens of thousands of jobs. According
to a recent analysis by the National Commission on Energy
Policy, the development of a nuclear power plant project will
require 14,360 man-years per gigawatt installed.
A robust nuclear construction program will also
significantly expand the U.S. manufacturing sector and the
domestic nuclear supply chain. The nuclear supply chain
represents a major opportunity for American manufacturers to
expand capacity to meet the needs of a growing world nuclear-
power market. Today, there are 53 nuclear power plants under
construction around the world. In addition, there are 137
plants on order or planned, and 295 projects under
consideration.
Thanks to the increasing world demand for new nuclear
reactors, American companies have an unprecedented opportunity
to expand the nuclear manufacturing base and open new
international markets. In the process, nuclear suppliers can
contribute substantially to job creation, economic development,
and the reduction of greenhouse gas emissions. A program to
expand nuclear energy, to meet U.S. climate change goals, will
require a sustained partnership between Federal and State
governments and the private sector.
Financing is the single largest challenge to accelerated
deployment of new nuclear power plants. An effective, long-term
financing platform is necessary to ensure deployment of clean
energy technologies in the numbers required, and to accelerate
the flow of private capital.
Federal tax stimulus is also an important element that
would accelerate capital investment in new nuclear power
plants. Tax incentives could also help refill the pipeline of
highly trained personnel to build, operate, and maintain new
plants, and restore America's ability to manufacture the
components and other equipment that go into nuclear plants in
the U.S. and abroad, thereby creating additional jobs.
To provide the level of financial stimulus necessary, we
encourage you to create a permanent financing platform to
provide loans, loan guarantees, and other credit support to
clean energy technologies, including new nuclear power plants
and new nuclear equipment manufacturing facilities; provide tax
stimulus for investment in new nuclear power plants, new
nuclear-related manufacturing and workforce development; and
expand the existing production tax credit provided by the 2005
Energy Policy Act.
Mr. Chairman, in conclusion, the role of nuclear energy in
achieving the Nation's climate goals is clearly established.
The expansion of nuclear energy in the U.S. and globally
provides significant opportunities for American workers and
industry, increasing high-wage employment and significantly
expanding our domestic manufacturing sector.
I encourage you and this committee to continue your legacy
of leadership on these issues and promote legislation that
would provide the necessary financial stimulus to realize these
goals.
Thank you.
The Chairman. Thank you, Ms. Berrigan.
[The prepared statement of Ms. Berrigan appears in the
appendix.]
The Chairman. Dr. Green?
STATEMENT OF DR. KENNETH P. GREEN, RESIDENT SCHOLAR, AMERICAN
ENTERPRISE INSTITUTE FOR PUBLIC POLICY RESEARCH, WASHINGTON, DC
Dr. Green. Chairman Baucus, Senator Grassley, and members
of the committee, thank you for inviting me to testify today on
this timely and important topic.
I am Kenneth Green, a resident scholar at the American
Enterprise Institute. I am an environmental scientist by
training, a policy analyst by avocation, and an economist by
exposure.
I have submitted for the record two AEI policy studies on
the issues before us today, which are part of the research base
underlying what I am about to say.
I have spent the last 15 years analyzing public policy at
think tanks in both the United States and Canada, with an
emphasis on air pollution, climate change, and energy policy.
Specifically, I have studied market-based mechanisms for
dealing with pollution problems of all sorts, and have studied
cap and trade as it has made its appearance in conventional air
pollution control, acid rain mitigation, and now, in greenhouse
gas control.
What I can tell you, based on my research, is this: cap and
trade, the core of greenhouse gas control legislation today, is
an inappropriate policy tool for the control of greenhouse
gases that will cause significant economic harm, will kill
export jobs, and produce little or no environmental benefit.
Current legislation applies an emission-trading model to an
unsuitable pollutant. For emission trading to work, you need
readily available technology to capture emissions, or
alternative sources of energy, that can let some people
generate surplus emissions that can be sold to others. We heard
that with SO2; we do not have that with
CO2. With CO2, as EPA acknowledges, we
are dependent on offsets to control costs, and offsets are
notoriously slippery. Even the economists who first developed
the theory and practice of cap and trade have said that it is
not a suitable mechanism for greenhouse gas control. Earth
First agrees. And when you have that level of agreement from
economists, Earth First, and people like myself at AEI, you are
talking a serious consensus. Cap and trade has not worked in
Europe, and it will not work here.
By design, and despite provisions that try to hide this
from the public, the carbon control bills now circulating will
increase energy prices. That is what they are for--slowing
economic growth, killing jobs, and reducing competitiveness.
And this is a one-way street, since cap and trade does not
only cap emissions, it caps economic growth. When GDP goes up,
energy consumption does also, as do carbon permit prices,
choking off continued growth. The tighter the emission cap, the
tighter the economic straightjacket.
As energy prices rise and as American companies find
themselves less competitive, businesses and jobs will flow to
countries without greenhouse gas controls, and without
stringent environmental controls of any kind, potentially
allowing emissions to increase. The remedy to this, border tax
adjustments, is only likely to cause a trade war, further
damaging the U.S. economy. As increased energy costs raise the
cost of U.S. goods and services, consumption will decline,
causing still more job losses across the American economy.
Legislation now before Congress will cause regional and
sectoral winners and losers, will unjustly redistribute and
export wealth from industrial, coal-powered States into States
with greater hydro, nuclear, and natural gas resources, and
will send taxpayer dollars abroad to countries that are our
economic competitors, and sometimes geo-political adversaries.
Perversely, low-carbon fuel standards might actually
prohibit oil imports from our number-one foreign supplier, our
neighbor to the north, Canada. Cap and trade creates a new,
poorly understood financial instrument that can be used to
leverage debt, potentially creating a massive carbon bubble
that bursts once it becomes clear that we cannot afford to
maintain the regime.
Finally, cap and trade, and all carbon control for that
matter, puts a bounty on ecosystems. As carbon control favors
biofuels, more ecosystems will be planted over, and farmland
used to grow fuel instead of food. A recent article in Science
observes that attempting to limit CO2 concentrations
to 450 parts-per-million--the currently stated goal of carbon
controls--would cause bioenergy crops to expand, to displace
virtually all of the world's natural forests and savannahs by
2065, and actually increase global greenhouse gas emissions.
As for the claim that the green energy provisions of
current legislation will create green jobs that cannot be
exported, this is simply not true. As I testified before
another Senate committee, governments do not create jobs, they
simply move them from one place to the other, inevitably, with
less jobs on net. Economists have known this for over 150
years. Europe has seen much of its green industry exported, and
the U.S. has already seen solar cell and windmill production
being moved to China.
The only thing worse than no energy policy is bad energy
policy, and that is what S. 1733 and approaches like it
represent: bad energy policy wrapped up in misleading
terminology that hides the true nature of the legislation.
Thank you for allowing me to speak to you today on this
timely and important issue. I look forward to your questions.
The Chairman. Thank you, sir.
[The prepared statement of Dr. Green appears in the
appendix.]
The Chairman. Dr. Thorning?
STATEMENT OF DR. MARGO THORNING, SENIOR VICE PRESIDENT AND
CHIEF ECONOMIST, AMERICAN COUNCIL FOR CAPITAL FORMATION,
WASHINGTON, DC
Dr. Thorning. Thank you, Chairman Baucus, Ranking Member
Grassley, for allowing me to testify today on this very
important issue. I am Margo Thorning, senior vice president and
chief economist of the ACCF.
Having watched this debate in Congress for the past 15
years, I am reminded of a situation--I am a life-long horse
lover--of trying to lead a horse over a cattle guard. You have
large segments of the business community and the private sector
concerned about moving forward on this type of legislation,
just as the horse digs in his heels and will not be led through
a cattle guard because he will break his legs; he knows that.
So, I think it behooves us to look very carefully at what these
policies might mean in terms of job growth and employment.
When policymakers are confronted with the decision about
whose model is best, what numbers are right, I think you need
to distinguish between macroeconomic models used to look at the
costs of climate bills and input-output models. Most government
agencies and private think tanks rely on macroeconomic models,
because they are able to capture the dynamic impact of changes
in energy prices: how they flow through the economy, how they
impact production, and how they impact capital stock and
employment. Input-output models, which some organizations use,
are static models; they are not able to capture the dynamic
impacts of changes in energy prices.
I would like to share with you, briefly, the results of a
study that the ACCF and the National Association of
Manufacturers sponsored, examining the impact of the Waxman-
Markey bill. We used a macroeconomic model, the same model that
the Department of Energy uses, the National Incident Management
System (NIMS) model. Our study showed that for the U.S. as a
whole, by 2030, the Waxman-Markey bill would reduce gross
domestic product relative to the baseline forecast between 1.7
percent and 2.4 percent. Two-point-four percent GDP may not
sound like much, but it is about $600 billion. That is about
what we are paying Social Security recipients right now.
Job growth would be slowed. We did show that we would pick
up new green jobs; certainly we will because of the provisions
of the Waxman-Markey bill, but on balance we lose between 1.7
and 2.4 million jobs in the year 2030. Household income is
about $1,200 less than it otherwise would be. Some of the
input-output studies that are out there show job growth, but
again, as the Center for American Progress study admits, they
are not dynamic and they are not able to capture the impact of
higher energy prices on the U.S. economy.
So, what are the positive steps that we could take to try
to ensure job growth, as well as energy security, and also make
an impact on the growth of greenhouse gas emissions? First, we
should expand access to onshore and offshore reserves. We
should also expand and make it easier to build nuclear
generating capacity. Nuclear can certainly be a big part of the
solution here.
We should also accelerate our research on carbon capture
and storage so that we can burn our vast supplies of coal
without negatively impacting job growth. We should continue to
work with the Major Economies Initiative to try to promote best
technologies abroad and accelerate the uptake of clean, less
emitting technologies.
So, on balance, when I look at the impact of the Waxman-
Markey bill or the Kerry-Boxer bill, I can see that most
studies, including some from CBO, EIA, Charles Rivers, and
others, and--as I mention in Table 2 in my testimony which
summarizes those--the macroeconomic study shows significant
costs. As EPA has testified and as the Obama administration has
admitted, if the U.S. goes it alone and adopts these targets,
the environmental benefits would be almost nil. By the end of
this century, there will be virtually no difference in global
greenhouse gas concentrations.
So, when we look at the costs of these bills, and we look
at the benefits, it is pretty clear the costs outweigh the
benefits, and we need to go forward, build a bridge that even
the most skittish horse would be willing to cross, based on
better technology, and accelerating working with developing
economies.
Thank you.
The Chairman. Thank you very much, Dr. Thorning.
[The prepared statement of Dr. Thorning appears in the
appendix.]
The Chairman. Next, Ms. Ton-Quinlivan?
STATEMENT OF VAN TON-QUINLIVAN, DIRECTOR, WORKFORCE DEVELOPMENT
AND STRATEGIC PROGRAMS, PACIFIC GAS AND ELECTRIC COMPANY, SAN
FRANCISCO, CA
Ms. Ton-Quinlivan. Chairman Baucus, Ranking Member
Grassley, and members of the committee, thank you for having me
here today.
I am Van Ton-Quinlivan, director of workforce and
development at Pacific Gas and Electric Company, California's
largest utility.
As our sector looks ahead, we see an aging infrastructure,
the advent of new technologies, and a workforce of
approximately 400,000 people with an average age in the mid-40s
and 50s. Over the next 5 years, 30 to 40 percent of the
industry's workforce is eligible to retire.
Utilities provide a range of employment opportunities for
workers with various skills and education levels. We are unique
in that we are located in every community across the country,
from large cities to small towns. The need for a reliable
stream of workers for our sector would touch every State and
region of the country.
At the same time, according to several studies, not only
will our sector need to replace large segments of the existing
workforce in the next 5 years, but we will also need to ensure
that the workforce exists, able to fill new jobs that our
industry creates, as well as jobs in sectors that support our
industry.
According to a study conducted by the Brattle Group, our
industry is poised to make approximately $2 trillion in capital
expenditures over the next 10 to 20 years to meet future demand
and replace our current infrastructure. Many of the recent
actions taken by Congress have been helpful with regard to
advancing the new energy infrastructure, but they have been
temporary or time-
limited.
For an industry that makes long-term capital decisions and
deploys assets with long lead times, we need a clear, long-term
national policy direction that builds off the strong foundation
Congress has put in place through tax policies, loan
guarantees, and other funding and policy initiatives. Doing so
will further unlock more of this investment and send a signal
to our industry regarding the types of expenditures we need to
make, the workers we will need to hire, and the types of skills
these workers will need to possess.
As opportunities become available, we are focused on having
the right people, in the right place, with the right training,
at the right time. The National Commission on Energy Policy's
Task Force on America's Future Energy Jobs brought together
diverse stakeholders to better understand and start to address
this issue. The task force commissioned Bechtel Power to
provide estimates of the workforce needed for the new energy
economy.
Key insights from that report are: a decline in career and
technical education has stressed the power sector's training
capacity, a large percentage of the electric power sector's
workforce is nearing retirement, and creating a low-carbon
energy system will require more workers than the industry
currently employs and a new set of skills.
The deployment of new assets will require new design,
construction, operation, and maintenance skills and more
workers than the industry currently employs. This is an
important opportunity for job creation and economic growth. If
too few individuals with necessary expertise are available,
however, workforce bottlenecks could materialize and slow the
industry's ability to take on workers.
It is the situation that our company is working to avoid.
In 2008, building off successful training models, we launched
the PG&E PowerPathway workforce development program.
PowerPathway collaborates with the community college system and
the Workforce Investment System to enlarge the candidate pool
for our skilled craft positions. Program graduates have
qualified at an unprecedented level on PG&E's pre-employment
tests, and over 50 percent of graduates have been hired by us
or by our contractors.
We are sharing 30 years' worth of energy efficiency
experience with the community college system to help deliver on
green jobs training and support the massive investment being
made in energy efficiency, including weatherization on building
retrofits. We are working with the California State University
system to create certificate programs in the power engineering
and Smart Grid arena.
When it is time to hire, employers go to where the talent
exists. Policies need to focus on establishing a pipeline of
skilled workers throughout the country. The NCEP task force
made several recommendations with regard to these policies,
which are included in my submitted testimony.
We appreciate the efforts Congress has made to date. I look
forward to working with the Senate to craft a comprehensive
energy and climate package with a focus on those provisions
that can quickly transition workers into the new energy
economy.
Thank you.
The Chairman. Thank you very much, all of you.
[The prepared statement of Ms. Ton-Quinlivan appears in the
appendix.]
The Chairman. I am going to ask a question of you, Dr.
Thorning, in respect to your job loss projections and projected
cost allowance in future years. There are a lot of projections
around, probably because this is very difficult for this new
ground, new territory--and it is difficult.
Nevertheless, I did note--and I would just like your
comments on it--that comparing your projections with those of
EPA and EIA, for example, and CBO, say by the year 2030, your
projected job loss is much higher than that of other
projections, and, if I read your chart correctly, you have
projected an allowance cost of between $48 and $61 per ton by
2020 that increases to between $123 and $159 per metric ton by
2030, which is much above that of others.
Now, much of one's conclusions are because of one's
assumptions. If you could tell us what your assumptions are
that led to that result. It is much different from the results
of other projections.
Dr. Thorning. Thank you, Senator, for that question.
The assumptions that we used in our study are attached to
the appendix. I apologize if that did not get to you last
night, but I did send it, and it was inadvertently left off.
But the reason the allowance costs are higher, as shown in
Table 2, from our high-cost and low-cost case, is that we built
in realistic assumptions about how quickly new technologies can
be deployed.
We assumed in our low-cost case that 25 new nuclear plants
would be up and running by the year 2030. Now, we have not
built a nuclear plant since 1978, so to get 25 new plants, 25
gigawatts up in the next 18 years, we think is, between 2012
and 2030, pretty generous. Our high-cost case assumed 10 new
nuclear plants in place by 2030.
In terms of carbon capture and storage for coal and natural
gas, the low-cost case assumed 60 gigawatts, the high-cost case
about 30, and renewables, a similar spread between how quickly
we can deploy renewables, and all of those assumptions are
attached to my testimony.
We tried our best to build in realistic assumptions about
how much banking would be able to be put in place, how many
offsets could actually be used. And, when we put in place what
our consultants and experts from various industries thought
were realistic assumptions, the allowance prices that are shown
in Table 2 are what the NIMS model solved for.
I would like to note that EIA's case, which is also shown
in my table--one of their cases where they limit international
offsets, they limit how quickly new nuclear can be put in
place--shows even higher allowance prices in 2030 than do our
simulations.
So, I think it is all, as you point out, a question of what
assumptions you use. Some of the EPA work assumes 150 new
nuclear plants in place by 2050. We think that is four a year
between now and over the next 4 decades. We think that may be
unrealistic, too. So, it is very important for you to look at
the assumptions behind an analysis. EIA's base case assumed, I
think, more than 100 nuclear plants by 2030. We think that is
not realistic to build four nuclear plants a year for the next
18 years.
The Chairman. As we look at these analyses, what
assumptions do you think are the most relevant?
Dr. Thorning. I think the assumption about new technology,
how quickly can we build nuclear, and how quickly can carbon
capture and storage become commercial, because it is not
commercial now.
The Chairman. Any kind of technology in particular? Are you
talking about CCS? What are you talking about here?
Dr. Thorning. Well, CCS, exactly, and how quickly
renewables can be cost-effective sources of energy, how
construction costs change. And, of course, alternative energies
we continue to hope will play a larger part, but right now,
they are fairly expensive.
The Chairman. Are there assumptions that are particularly
helpful to examine? If we are going to compare apples with
apples, it is good to know what----
Dr. Thorning. Well, of course, when you are doing the basic
modeling you need to be sure the growth rate assumptions and
the baseline forecast are the same, and, in our case, our
baseline forecast for growth is the same as what EIA used in
2009. So, you want to, as you properly point out, compare
apples to apples, and also look hard at what the technology
assumptions are because I think that is the driving force for
what is going to be the cost of reducing U.S. greenhouse gas
emissions.
The Chairman. My time is up. One quick question.
You are a bit of an outlier, based upon what I know. There
might be many other projections out there I am unaware of. So,
if some were to criticize your projections, what would those
criticisms be? If someone had another point of view, what would
the most legitimate criticism be?
Dr. Thorning. They might say that our choice of how much
offsets is too constraining, but we base that on some of the
work from GAO, pointing out the problems with documenting and
using offsets. Some of the constraints in the Waxman-Markey
bill may make it hard to use those offsets. People could
criticize that.
Some people might say, well, renewable energy you have
constrained, but based on the difficulties of integrating
renewable energy into the grid and the difficulty in siting
transmission lines, we think they are realistic.
The Chairman. My time is up. Thank you very much.
Senator Grassley?
Senator Grassley. You can call on Senator Roberts.
The Chairman. All right. Senator Roberts has asked if he
could say a few words. He has a very imminent appointment.
Senator Roberts. I am not sure that ``few words'' and
``Roberts'' is not an oxymoron. [Laughter.]
I apologize to my colleagues. I have an 11:15 appointment
that I simply have to make, and so, I beg your indulgence. And
thank you, Mr. Chairman. Thank you so much for holding this
hearing. It is very timely.
Dr. Thorning, you talked about the macro impact. I am going
to concentrate on the micro, which is my State of Kansas and
what it is all about. About 7 percent of the Kansas workforce
is currently unemployed. We are very fortunate in that respect
when we are in a 10-percent arena, an unemployment rodeo that
we are going through that we would just as soon not go through.
But we really do need an honest and open debate of cap-and-tax
proposals, like the two bills we are discussing. So, thank you
to the ranking member and of the chairman, again.
I want to emphasize that Kansans have long supported
renewable energy. That is not the question. We continue to make
investments in these industries. Siemens will soon locate a
wind turbine manufacturing facility in Hutchinson, KS. We have
similar investments all over our State.
Abengoa is locating a cellulosic ethanol biorefinery in a
place called Hugoton, KS. These decisions are based on a mix of
market conditions, however, and consumer demand, not because of
cap-and-trade legislation in the Congress. Cap-and-trade
proposals, which try to ration domestic energy production,
would lead to higher unemployment rates and a net loss for our
State, both in jobs and also economic input.
Let me give you a few examples, and really what we try to
do, and I know many members of this committee do, is when you
get a huge bill like healthcare, or like energy, or like
whatever we are dealing with, we really appreciate the
testimony of the panel, and we take it to heart. But, what I do
is go right out to Kansas and I ask the people involved, is
this going to work, tell me if it is going to work, will it be
a benefit to you, or do you want it, or perhaps it will not.
We rank nine, number nine, with oil and number eight in gas
production, and together oil and gas contribute $350 million in
State revenues--that is vitally needed in the situation we are
in today--each and every year, and employ about 28,000 men and
women.
In each of the last 2 years, the Kansas oil and gas
industry invested over $1 billion--$1 billion--into our rural
communities, our small communities. You would be hard-pressed
to find an industry other than traditional fossil fuels and
agriculture that is able to do this.
Additionally, three mid-sized communities, by Kansas
standards, are home of a refining industry, small, but
struggling and very industrious. In McPherson, with a
population of 13,500, a small farmer-owned cooperative refinery
employs 640 hardworking men and women. I said this was going to
be micro.
El Dorado, population 12,500, is the home of a small
refinery that employs 460, with an additional 150 full-time
contractors. In Coffeyville, KS, the population is 10,350, yet
another small refinery employs 650 people.
Now, under this bill that was--I do not know the word, some
have said it was railroaded, perhaps that is a little harsh,
out of the EPW Committee last week. These three communities,
and many others in rural Kansas, have told us they will suffer
very severe consequences: higher taxes, job loss, even a
possibility of shutting down these three refineries, and a
greater dependence on volatile foreign energy.
I know the proponents of cap-and-trade proposals talk about
green job creation. I think that is probably the topic of the
day. Now, I am a seasoned newspaper man, and I get out my
trusty, worn Webster dictionary, and I do not find a definition
of a green job.
So, my question is: what is a green job? And, why should
the Federal Government, with their definition, pickpocket
hardworking Kansans with an existing energy industry, as I have
just discussed, if, at the end of the bill, there are little or
no environmental benefits? Does the scrap yard owner who has
Cash for Clunker cars piled up qualify as a green job? How
about the steel worker whose product is used in wind energy
generation? If that same steel is used in a coal power plant,
is it treated differently? Is that a green job?
How about agriculture? If you are the average Kansas farmer
or Iowa farmer, or for that matter, Michigan farmer, and you
are producing enough food for over 145 people and a whole lot
more in a troubled and hungry world, does that farmer represent
a green job? Or do you only qualify for a green job label if
you participate in the Know Your Farmer, Know Your Food
farmer's market on the weekend at the University of Kansas?
Ultimately, who determines what is a green job?
Well, I really appreciate Dr. Thorning's opening comment,
this is like leading a horse over a cattle guard. I am going to
use that, madam, and I will give you credit, something that
does not happen very often in the Congress.
What market signals do these two bills show to rural and
traditional fuel-dependent States, including coal, oil, gas,
and agriculture industries? What would be the ripple effect in
the State and government field? I know this is a micro
question, but I represent a micro State.
Dr. Thorning. Thank you very much, Senator. I give you that
remark, that analogy.
But you might want to take a look at the analysis that the
ACCF and NIMS study did on your State. Our study, based on
macroeconomic analysis, shows that gross State product in
Kansas would be $5 billion less in 2030 compared to the
baseline forecast, and that there would be between 21,000 to
29,000 fewer jobs as a result of the Waxman-Markey bill. So
certainly, for an energy-intensive State like yours, this bill
has pretty serious implications.
Senator Roberts. I thank you very much, and thank you, Mr.
Chairman. Maybe, perhaps, we could find enough jobs to de-ice
the wind turbines when they get iced up just like an airplane.
They throw that ice about a quarter of a mile, by the way, so
it would take a lot of folks out there to somehow do that.
The Chairman. Thank you, Senator.
Senator Kerry? You are next.
Senator Kerry. Thank you, Mr. Chairman.
I just might comment for my friend from Kansas, who knows
his State better than I do, obviously. But, nevertheless,
Siemens just celebrated a groundbreaking of a wind turbine
assembly facility there which will employ approximately 400
people.
Senator Roberts. I will be at the dedication, by the way.
Thank you.
Senator Kerry. I have six studies, which do not get
referred to here, six studies: one by the College of Natural
Resources, University of California, Berkeley; one by the
Center for American Progress Clean Energy Hub; one by the
American Council for an
Energy-Efficient Economy; one by the Perry Group at the
University of Massachusetts Center for American Progress;
another by the U.S. Conference of Mayors; and finally, an RDC
one; and these are among several. Every single one of them
shows Kansas growing in investment, growing in net jobs, and a
net reduction in household cost by 2020 on average, about $8.39
per household, a gain to your citizens.
The reason for that--and I am not going to spend a lot of
time, because we do not have a lot of time, 5 minutes,
obviously. But, this question of assumptions, the question
asked by the chairman, is really fundamental to this, folks,
and we have to be realistic about them.
I would like to ask unanimous consent that a Washington
Post op-ed by John Doerr, who is a very well-known venture
capitalist in the United States, and Jeff Immelt, the chairman
and chief executive officer of General Electric, be made part
of the record.
The Chairman. Without objection.
[The article appears in the appendix on p. 157.]
Senator Kerry. Let me make it clear: these are
practitioners. They are not sitting in a theoretical study
group. They are out there creating jobs and very, very
successfully, I might add. And they wrote in this op-ed that
the most basic thing we need to do to get American innovation
and competitiveness moving is, number one, send a long-term
signal that low-carbon energy is valuable, put a price on
carbon, and a cap on carbon emissions.
Now, countless companies--a bunch of them just dropped out
of the Chamber of Commerce--have come to the conclusion that is
the way you make jobs. We have to make an analysis of these
studies, and, frankly, both you, Dr. Green and Dr. Thorning, I
just find your studies are not credible.
You do not take into account the cost of inaction. What is
it going to cost our taxpayers in the United States if we do
not act? What is your plan for meeting a 2-degree Centigrade
maintenance of warming on the Earth's temperature? Do you have
a plan to do that?
Can you price carbon and accomplish it without moving down
one of the two roads that are available to us, either a carbon
tax--which everybody here knows the U.S. Congress will not
pass, because in order to change behavior it would have to be
high enough that just nobody will accept that.
But when you have assumptions that are so out of whack with
every other study, for instance, your study, the ACCF study--
and the chairman raised this question--your household cost
projections are 3 and 4 times higher than the Energy
Information Agency, which does this every day, professionally
for us, for the government. The EPA, the CBO, on which we base
now the healthcare debate and a lot of other debates, you range
from $730 to $1,248 as your household cost projection, compared
to $80 to $300 for every other one of those studies.
You have not only high allowance forecast prices, but then
you make statements, Dr. Green, like the one where you said
Europe is not working, the trading system failed. It did not
fail. It is working. In fact, they have embraced it, and they
are excited about how well it is working. They began a 2-year
initial phase, in which they made some mistakes. They
acknowledged the mistakes they made, and then they fixed those
mistakes.
Now they are in their second phase. In fact, they have an
abatement in the first phase, as much as 5 percent down. There
was a 1.6-percent drop in EU-15 emissions, contrasted with an
increase in GDP of 2.7 percent over that period. They have
reduced emissions, they are growing their economy, they are on
track to meet their Kyoto targets, and they are a leader in
green global technology.
Germany, today, has created more jobs in the green sector
of alternative renewables. They have 280,000 people working at
new jobs, more people than in their vaunted automobile
industry. So, how can you have a study that does not take into
effect the impact of energy efficiencies, or of the cost of
inaction in not doing it?
We do not have time to go into all of this, but I will just
leave you with this. I would like your comment to it.
This is today's Reuters, a story out of London: ``The world
will have to spend an extra $500 billion to cut carbon
emissions for each year it delays implementing a major assault
on global warming, the International Energy Agency said on
Tuesday.'' Every year's delay beyond next year will add another
$500 billion extra.
Now, I would ask you. Did you take that into account in
your studies?
Dr. Thorning. Those are very excellent questions, and there
are a lot of them. I will try my best to answer some of them.
First, you ask, did we take account of the environmental
impact of not enacting the cap-and-trade legislation?
Well, EPA Administrator Jackson testified recently that, if
the U.S. did achieve the targets in the Waxman-Markey bill, it
really would not matter by the end of this century because
other countries, China and India in particular, are not willing
to undertake hard targets.
Senator Kerry. That is not accurate.
Dr. Thorning. Well, the Obama administration----
Senator Kerry. That is not accurate. You have to be
accurate. China has said they are going to do a specific energy
intensity reduction. It is a 20-percent target. They have set
it, and they have exceeded it, thus far.
Dr. Thorning. Well, we will see whether they are able to
deliver on that. But until developing countries are willing to
take on the same kind of targets that developed countries are,
we really, according to EPA's own analysis, will not see
meaningful reductions in GHG concentrations.
Second, if you take a look at the studies you mentioned,
the Center for American Progress Study and the ACEEE study,
which I cite in my testimony, they used input-output analysis.
And let me read from my testimony. This is from the CAP
report itself. They identify the problems with their analysis.
They state: ``There are certainly weaknesses with our use of
the input-output model. The most important is that it is a
static model, a linear model, and a model that does not take
into account the structural changes in the economy.'' So they
admit that there model is inadequate for analyzing the dynamic
impact of sharp increases in energy prices.
So, I think, when we look at potential consequences from
capping carbon emissions, most experts feel a macroeconomic
analysis is the most appropriate. And, once you have looked at
a macro model, then you need to look at the assumptions. We
feel that the assumptions we embedded in our simulations, using
the NIMS model, are appropriate, given what we know about the
future development of technology.
So, another thing to think about, I would like to mention
two studies, one from Denmark, one from Germany, recent studies
looking at the cost to the Danish and German economies of
putting in place solar energy. For example, in Germany, a new
study by RWI shows each job in Germany is costing about 280,000
euros, each of these solar jobs. There is a study from Denmark
showing the wind power jobs are costing the Danish taxpayers
approximately 160,000 euros. So, I think we need to be aware of
the cost of this type of initiative and balance how quickly we
want to move in that direction.
Senator Kerry. My time is up. I do not want to abuse it,
but, Mr. Chairman, can I just----
Well, I would just say again--look, I respect that there
are costs obviously with transition. But the fact is, the
Commerce Department devotes a considerable amount of resources
to maintaining the viability of its input-output analysis. And,
obviously, there are structural changes that take place. We all
understand that. But the ones that have been taking place are
to the plus side of the economies of these countries, and to
the negative of ours.
For instance, of the top 30 wind-solar battery companies in
the world, only 5 are in the United States of America. We
invented those technologies. We are losing them to other
places. And, I think in the end, your analysis that you just
gave us did not answer the question of the costs of inaction,
or of how you maintain a 2-degree Centigrade warming without
pricing carbon.
Senator Grassley. We will move on. I am going to take my
turn now. Senator Baucus is temporarily out.
This would be for each of you, but I do not want too long
of an answer, because I have more than one question I want to
ask.
The committee has heard testimony in the past from CBO and
other economists on a cap-and-trade system that, by diverting
resources to reducing greenhouse gas emissions through new
technology or a more expensive form of energy that would not
otherwise be economical, there is a net cost to the economy.
In other words, carbon limits cannot increase total
employment across the economy, with emphasis upon ``total.'' In
fact, while there will be some jobs created in certain
industries that produce low-carbon energy--and we have had
Siemens move into Iowa, so I am well-aware that green energy
brings with it jobs--high energy prices will result in a net
loss of jobs that otherwise would have been created or
sustained in the absence of a cap on carbon. Would everyone on
the panel agree with that basic economic principle?
[No response.]
Senator Grassley. All right. Since everybody is quiet, then
you agree? All right.
Dr. Green. I will say it out loud: yes, I agree with that
principle.
Senator Grassley. All right. Do you want to comment, sir?
Mr. Breehey?
Mr. Breehey. Yes, Senator.
I think it is impossible to not acknowledge that an
economy-wide greenhouse gas program would have a net negative
impact on GDP. But I think some of the studies, and some of the
doomsday scenarios, fail to acknowledge the net negative
economic costs associated with the energy efficiency solutions
that Senator Kerry referred to, and that those represent some
of the least expensive emissions reductions opportunities
present in our economy and, over the long run, will have a
positive economic impact. So, I think some of the doomsday
scenarios that we are hearing are vastly overstated. And, I
think, as Senator Baucus alluded to, the innovation that a cap-
and-trade program encourages will result in lower costs than
most predict.
Senator Grassley. All right. I have a question for Dr.
Green.
It is sometimes argued that a cap on carbon, which raises
the cost of energy, will create the incentive to develop new
technologies or undertake new projects to increase energy
efficiency that otherwise would not be pursued, which in the
long run will save consumers money. Would you comment on that
possibility?
Dr. Green. Well, that is a possibility that, indeed, if you
raise prices, you will spur research. Consumers will attempt to
reduce the cost burden by deploying new technologies. The
question is, if those technologies are genuinely efficient--
economists do not believe in the idea of $100 bills lying on
the sidewalk. If there are efficiencies to be gained where the
consumer truly benefits, the consumer will engage in that
behavior spontaneously. It does not take the government to tell
me that I should pick a $100 bill up off the pavement.
And so, the question is whether these are real or whether
they would happen regardless. But it does not offset the net
effect that pricing carbon will have an overall net impact on
the economy, it will reduce economic growth, and it will reduce
jobs.
Senator Grassley. Ms. Ton-Quinlivan, I have a question for
you.
I understand that your company is one of the lead advocates
of the 50:50 policy found in both the Waxman-Markey and Kerry-
Boxer bills, whereby half of the free allowances are given out
to energy companies based on retail electric sales as opposed
to the actual need for allowances. This rewards companies like
your own that have the good fortune to generate a large portion
of their energy from hydro-electric. However, it comes at the
expense of energy users, like my home State of Iowa, who will
see electric bills go up even further if allocations are based
solely on need.
A question. Since companies like yours, who because of
geography have the ability to generate low-carbon energy, will
already be relatively better off under a cap-and-trade system,
how can your company justify a policy that further exacerbates
the differences between the burdens on constituents in the
Midwest, as opposed to those who live in California or New
England?
Ms. Ton-Quinlivan. Senator, since my area of expertise is
in the workforce development area, let me constrain my answer
to that area.
What we know from California is that our regulators have
given us a lot of certainty around the sequence in which we
have to prioritize the source of our energy, with energy
efficiency on top on the loading order before we can pursue
demand reduction, renewables, and conventional sources.
And, what I do know from the energy efficiency side is
that, as a result of this certainty, our workforce has 600
people who are focused entirely on energy efficiency, and then
we built training programs that have fed over 68,000 trainees
into our third-party contractors to do that work.
Senator Grassley. All right. It is Senator Cantwell's turn.
Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman. Thank you very
much.
Dr. Green, I do not want to argue with you about whether
Europe has succeeded in trading because, frankly, I do not
think the United States has. And, the fact that the derivative
market still has not had loopholes closed in it is, in my
opinion, no reason to start a carbon futures market that might
have the same loopholes. In fact, I do know that Europe did cut
up carbon futures into tranches, just like we did on the credit
default swaps, and it was very unfortunate.
But, I do want to get to your point about SO2
and CO2 and the difference, because you were saying
that there is something uniquely different about those two
markets, and the fact that one, I am assuming, had a more
limited impact, and thereby we could achieve results. And so,
now you are almost saying a cap and trade is not the right
tool. Is that right? It is not robust enough for the challenge
that we face? And so, if you could talk about that, and then
whether you think a cap-and-dividend model is a little closer
to that flexibility that would be needed.
Dr. Green. Thank you for your question, Senator.
I would like to praise, by the way, your cap-and-trade bill
for its remarkably admirable brevity and its close adherence to
what an economist would say cap and trade should look more
like.
I would also like to applaud your concern over the
financial implications of cap and trade and mortgage-backed
securities. I call them, actually, poorly understood financial
instruments, or PUFIs, because we are talking about a huge
amount of the economy that would be put into these instruments,
the energy economy. And we have really no idea what the end
result is going to be. If the scheme is not sustainable, the
government will burst the bubble, and that could be a very big
bubble, indeed.
Now, as to why SO2 and CO2 are
different, there are many reasons. The first is, with
SO2, you had readily-available scrubbing technology
that was only marginally more expensive than operating without.
Laws have been changed to allow low-sulfur coal to move across
the country to plants that did not have access to it
previously. You had a small number of players. You had a single
jurisdiction, the United States. You had only one industry
sector, so there was not intra-sectoral competition or rent-
seeking possible, nearly as much as there is under cap and
trade. You had an easily measured pollutant. SO2 is
an active substance, easily measured directly, as opposed to
being estimated through inventories or calculated based on the
type of fuel input. It was a smaller section of the economy
being affected as a whole. And, I would point out that, in
fact, if you look at the modeling that was done on the
SO2 trading system, some people say that the
industry groups overestimated the cost, and the fact is, they
did not.
As they estimated the cost of early bills, the cost
estimates were higher. The bills were changed in response to
those estimates, and the costs were lowered. The final economic
estimates of cap and trade turned out to be very close to the
real cost because the earlier estimates had led to changes in
the legislation.
This is why the cap and trade--as I said, the economists
who developed cap and trade and mathematized it pointed out
that cap and trade is for discrete, local, constrained
pollutant control. It is an excellent instrument for that, and
it can be used for not only pollution control, but also things
like tradable quotas for fish, which is another implementation
of a market measure, where you cap the withdrawal and you trade
the rights to withdraw. But it is not appropriate for
greenhouse gas controls.
Senator Cantwell. And so the point is, that with something
where you need a more robust tool to have a cap but then have a
price collar, the price collar acts as a more effective tool in
keeping the price, and thereby is closer to the carbon tax that
you are suggesting.
Dr. Green. Well, several things. First, auctioning all
permits. If you are going to do cap and trade, you really do
not want to get into this freely allocated permit thing because
it leads to over-
allocation, it leads to early inaction in the market. Full
auctioning of permits is essential to establish their real
value.
Second of all, the price collar. Well, a price collar
mitigates some of the problems of cap and trade, but not all.
It does mitigate the price volatility element of cap and trade.
Again, the difference between SO2 and
CO2, one of the problems with that is that, when our
economy grows, CO2 levels spike up, as they have
spiked down as our economy has tanked. And, when that happens,
those permit prices are going to shoot up and become quite
volatile, and they will shoot down. A price collar prevents
that, but at the same time, it also prevents you from gaining
the benefits of a low permit price. You do lose the risk of a
high permit price, but you lose the benefit of a low permit
price. And, so, it is not a panacea.
Senator Cantwell. What did you say? PUFI? What did you say?
Dr. Green. PUFIs, poorly understood financial instruments.
Senator Cantwell. All right. Thank you.
Senator Stabenow. Well, as we proceed with our chairman and
ranking member having had to leave, I will now turn to my own
comments and questions, and then Senator Hatch, and any other
members who come in.
Welcome. We appreciate your comments very much.
When I look at this, coming from a State that is known for
making things, and doing a very good job of making things,
designing things, I look at this whole discussion very much
through the prism of jobs and how we keep the next generation
of technology manufacturing in this country.
I do not want to see what happened with the computer-age,
where we make all the technology and then it is manufactured
overseas, so that the President of the United States gives the
latest technology in the form of an iPod to the Queen of
England, technology from America, made in China.
I think, if that happens around clean energy, we will all
have failed, and so I am very much looking at this through the
prism of how we create policies that create jobs here. First, a
couple of comments. From my perspective, we can either do this
well and jobs will be here, or do this poorly and they will not
be here.
And so, a number of questions: how we allocate allowances,
as well as carbon credits, how we use those; what kind of a
border policy; what kind of trade enforcement; what kind of
price collar; and there are a whole range of issues that I
think we need to be addressing.
I also think it is important, though, for us to acknowledge
a couple of things that, while we do not yet have the
technology readily available in a number of areas--and Dr.
Green, you have spoken about this a number of times--we have
the capacity to create the technology, which will create the
jobs. Some of this is about timing, I think.
And that is why things like energy efficiency become so
important. When the McKenzie Consulting Company reports that
the U.S. economy could reduce emissions equal to the entire
U.S. fleet of light trucks and cars and save $1.2 trillion
through 2020, I think that goes to what we have been trying to
do in the Energy Bill around energy efficiencies, buildings,
other energy efficiencies, and so on.
The second piece of this is the role of agriculture and
forestry, which, while they are not a capped industry under any
of the bills, an incredibly important part of capturing carbon,
holding carbon, is making sure we are not cutting down our
forests, that we are managing them correctly, and we are
managing agriculture effectively.
So, I start from the fact that I think there are some
bridges that allow us to get there, that allow us to capture
carbon and move forward while we are developing the technology.
My questions go to how we, in fact, compete in what I
believe is a race with China and other Asian countries as it
relates to clean energy jobs. We put a manufacturing credit
into the Recovery Act. I was pleased to help champion that, but
there is a cap on that. It is going to expire at some point. We
have many, many more companies that want to use that than we
actually have the amount of dollars in there.
Senator Menendez and I are working on a solar manufacturing
credit that would create over 200,000 jobs. I know in my own
State, where we make one-third of all of the polycrystalline
silicon for the world, and it is shipped overseas, a lot of
that to Germany, a lot of that to Asian countries,
incentivizing manufacturing means it is going to be here, and
we are already starting to see that with the manufacturing
credit, and so on.
So, my question goes to the race with China and clean
technology jobs. How do we ensure that we retain those jobs
here for U.S. workers--and I am sure everyone thinks that that
is important--and address our green trade deficit, which is
billions and billions of dollars? How do we make sure that, in
the end, we are leading in technology industries, including
solar, wind, CCS, nuclear, across the board? I would ask anyone
who would want to respond to that. How do we make sure we get
there?
Dr. Green. Well, thank you, Senator.
If I may, I think it is a very important question, and it
really comes down to the fact that our manufacturing is more
costly than China's is. Their labor costs are much lower. Their
environmental standards, while they are good on paper, are
often not enforced in practice, allowing them to do a lot more
low-cost manufacturing, and it is a serious risk that we will,
indeed, send our dollars over there to buy their technologies.
The only thing that I would say could fix that is if China
actually accepted a cap on emissions, which I have to correct,
Senator Kerry. An emission intensity target does not mean that
your emissions go down. This was pointed out when the Bush
administration tried to promote emission intensity measures as
their approach to climate change in their Clear Skies proposal.
You can become more energy efficient, and your emissions can
still grow as your economy grows. So, to say that China has
adopted a cap on its emissions is not correct. Until they do,
we cannot compete with them on a level playing field.
Senator Stabenow. Well, and I am going to stop at this
point and say, what has been happening in America is, we are
losing our middle class because we have accepted a race to the
bottom.
Saying to people, we can only compete if you work for less
and lose your health care and pension, is not how we are going
to keep a standard of living in America. There is a better way
to do that, I would argue, certainly, if we focus on enforcing
a level playing field on trade and if we make the investments
that we need to make. But I am wondering if you would like to
respond as well. Mr. Breehey? Yes.
Mr. Breehey. Thank you, Senator, indeed.
As I alluded to in my testimony, it is tremendously
disappointing to the labor movement, those of us who represent
workers and manufacturing, that we are seeing the investments--
that our tax dollars have been made to promote jobs overseas,
and we have to avoid those mistakes when we put together cap-
and-trade legislation.
While I know that there are some who will argue that it
would be protectionist, we would argue that American jobs are
worth protecting, which is why we would say that any technology
manufacturer, any power generation company, any wind turbine
manufacturer that receives an incentive through a cap-and-trade
bill, either through an allocation of allowances or through
revenue generated from an auction of allowances, should be
required to adhere to domestic content requirements, through
the application of laws like the Buy America Act, to the
technologies that are going to be produced.
Senator Stabenow. Thank you very much. I notice that I am
out of time.
I will just comment that China has adopted a ``Buy China''
policy. Every other country seems to get it but us in terms of
the need to invest in our own jobs at home, so I hope our
policy is going to include the ability to create those jobs
here.
Mr. Breehey. I could not agree more. Thank you.
Senator Stabenow. Senator Hatch?
Senator Hatch. Well, thank you, Madam Chairperson. This has
been an excellent group, and I have really enjoyed listening to
your testimony.
I would ask unanimous consent that the Americans for Tax
Reform's statement be put formally in the record at this point,
Madam Chairman.
Senator Cantwell. Without objection.
Senator Hatch. Thank you.
[The statement appears in the appendix on p. 152.]
Senator Hatch. Now, Dr. Thorning, the Congressional Budget
Office released a report this past September entitled ``The
Economic Effects of Legislation to Reduce Greenhouse Gas
Emissions.'' I would like to highlight several findings from
that report.
The increases in the price of energy caused by the program
would reduce workers' real wages. The cap-and-trade program for
carbon dioxide emissions would reduce the number of jobs in
industries that produce carbon-based energy, use energy
intensively in their production processes, or produce products
whose use involves energy consumption, because those industries
would experience the greatest increases in costs and declines
in sales.
The industries that produce carbon-based energy--coal
mining, oil and gas extraction, and petroleum refining--would
probably suffer significant employment losses over time. The
process of shifting employment can have substantial costs for
the workers' families and communities involved.
Now, Dr. Thorning, other witnesses on this panel have
stated that the construction of facilities will create hundreds
of permanent jobs in various parts of the country. Now, do you
believe that ``create'' is the right word to use in this
context? Should we not say ``shift,'' if it appears that the
coal, oil, and gas States would lose a significant amount of
jobs and reduction in salaries?
Dr. Thorning. Yes, Senator Hatch. It seems to me what we
are looking at is a shift of where resources are deployed.
Based on the study that ACCF and NIMS did, as well as other
studies cited in my testimony, there would be a shifting of
jobs. There would be new, renewable energy, energy efficiency
jobs created, but overall, because of the loss of productivity,
the premature obsolescence of the existing capital stock, there
would be a slowing of economic growth overall, compared to the
baseline forecast.
Senator Hatch. Dr. Green, you mentioned that cap and trade
has not worked well in Europe. Can you help us understand how
and why it has not worked in Europe and whether the bill we are
considering today in the Senate would have the same problems as
they have faced in Europe?
Dr. Green. Well, Senator Kerry pointed out that the first
phase of the European Trading System was considered a trial
phase. It is not clear if it was originally designed as a trial
phase or renamed one after the first time the permit price
collapsed.
But, they had repeated collapses of permit price to
virtually zero and massive permit price volatility. They had
fraud and offsets where they exported quite a lot of money to
China for false offsets. They have had protests by various
sectors as they have tried to auction more permits, with the
result that those sectors have gotten exemption from needing to
buy permits, have gotten free allocation maintained for them,
and I think all of these structural problems with the carbon
market will play out here. We are going to allocate the
majority of permits for free. We are not going to auction the
majority of permits. We have offset provisions that are going
to be problematic, as has been pointed out by others.
Several studies of offsets have shown them to be plagued
with fraud and abuse and illegitimacy, so I think we will see
many of the same problems play out as has happened with the
European Trading System here, but on a broader scale, because
we have a very large economy and we have the opportunity to do
greater mischief.
Senator Hatch. Well, I am very interested in how a cap-and-
trade program would affect the poor. I have heard that the
poorest of the poor spend as much as 50 percent of their
incomes on energy costs.
Now, in your view, is it possible to construct a cap-and-
trade program that reduces carbon emissions, that is not felt
by the poor? And, can you explain why it is possible or not
possible to protect the poor under such a program, if that is
possible?
Dr. Green. Well, it is possible to shield them, to a
certain extent, by redirecting, if you do auction permit
revenues, that revenue to lower-income people.
As you pointed out, low-income people use a
disproportionately high amount of their income to pay for
energy, not just directly as we have studied at AEI, not just
directly in terms of flipping light switches and gassing up
their car, but the products that they buy are infused with
energy as well, and so their energy costs are
disproportionately high.
But on net, ultimately, the point of this exercise is to
raise the cost of energy. It was pointed out earlier that a
carbon tax is not possible because you would have to raise it
so high that nobody would accept it. Well, cap and trade is a
carbon tax, it is just applied indirectly, so the permit price
will have to rise very high if you are going to see actual
change in emissions.
But, to sum up my answers, basically, you can shield them
to a certain extent by targeting them with new resources, but
overall, as they are going to be mostly affected by the
downturn in the economy and the downturn in jobs, they will not
be net winners in a cap-and-trade system.
Senator Hatch. All right. Senator Kerry, they apparently
did not start the clock when I began, but I have just three
more questions. Could I ask those?
Senator Kerry. Absolutely.
Senator Hatch. All right. I appreciate your courtesy in
doing that.
Toward the end of your remarks, Dr. Green, you spoke about
how under cap and trade we will have winners and losers. Is
that true on the international scale? If we implement cap and
trade and China and India do not, is there any possible way
that our Nation could come out winners under that scenario?
Dr. Green. The second question, first. No. If the United
States implements cap and trade unilaterally, as Dr. Thorning
pointed out, the emission reductions we can achieve as a
country pale to insignificance with regard to the growth
expected in China and in the rest of the world. There would be
no environmental benefit, but we would, indeed, make ourselves
considerably less competitive by raising our costs of energy
goods and services and manufacturing across the country.
There will be sectoral and regional winners and losers, as
was pointed out. Some of the coastal areas have access to
greater amounts of hydro, and they have more temperate
climates. They have already had to switch to natural gas, in
California's case, for traditional air pollutant reasons,
whereas the center of the country is more inclined to rely on
gas or heavy crudes from Canada, which will be affected by the
current legislation.
So, there will be many winners and losers, including
internationally. We will impair our economy to the benefit of
our competitors.
Senator Hatch. Dr. Thorning, do you agree with that?
Dr. Thorning. Yes, Senator.
Senator Hatch. All right.
Now, just one last question of Mr. Breehey. I appreciate
your efforts for your union, and that is great. You mentioned
in your remarks that industries such as steel, cement, and
chemicals are more sensitive to energy cost increases than
other sectors of the economy. Can you help us understand why
this is the case, and also what the impact on jobs will be for
those industries if S. 1733 were to be enacted as written?
Mr. Breehey. Yes, Senator. In the case of a lot of those
industries, such as chemicals, energy inputs, both in terms of
power use, as well as natural gas feedstocks in the
manufacturing process, make them particularly sensitive to
price increases and make them particularly sensitive to the
impacts of a cap-and-trade program.
I am sorry, sir. I forgot the second part of your question.
Senator Hatch. You are concerned about it, are you not?
Mr. Breehey. We are certainly concerned about it, which is
why----
Senator Hatch. You would lose a lot of jobs.
Mr. Breehey. There are certainly a lot of jobs. As Senator
Kerry has pointed out, though, we do have some concern. We feel
like we need to take into account the cost of doing nothing.
I represent workers, for example, along the Gulf Coast. If
climate change results in more frequent, worse storms, those
workers are going to be negatively impacted. So we are trying
to think of, what is the right balanced approach that will
mitigate negative employment impacts across the economy, both
considering the cost of action and the cost of inaction.
But we believe that there are reasonable things that can be
done within the context of a cap-and-trade program that would
mitigate the negative impacts on workers and energy intensive
trade-
exposed industries. Those include a robust allocation of
allowances to an output-based rebate program, such as has been
proposed in S. 1733 and was included in the Waxman-Markey bill.
We believe maybe 15 percent of the available allowances should
be allocated to such a program.
We also believe that, as has been indicated, it makes no
sense for us to take action if major emitters in the developing
world fail to follow our lead. We will only result in exporting
both jobs and pollution to countries that fail to act, which is
why we believe the Senate should certainly include a border
measure that would put sort of a carbon tariff on energy-
intensive imports from countries that fail to take comparable
action.
Senator Hatch. Thank you, Senator Kerry. I appreciate it.
Senator Kerry. Thank you, Senator Hatch.
One thing I might mention, Senator Hatch, because I had
something to do with it at the time, I was at the Kyoto
negotiations, and none of us was very happy with the outcome of
that, and I joined in the effort on the floor when we did the
Byrd-Hagel Amendment, because we felt we had to have everybody
under the tent, and clearly, that was a failed process.
In arguing with the Europeans that they should undertake
the concept of cap and trade, initially they were very opposed
to it. They did not believe in it. They saw it as a gimmick by
which people did not actually reduce pollution, and so they did
not really wholeheartedly embrace it. That is the attitude that
governed how they went at the initial execution implementation
in Europe with that effort.
The problem is that initially they allocated most of the
allowances to emitters, created a windfall profit situation.
They had some problems with what they gave to the cement
industry, aluminum, others, et cetera. They also had a problem
that they did not allow the banking of allowances between those
phases, so that allowances became worthless at the end of the
initial phase, so that drove the market down. They also had
incomplete market data that was released at one point, which
scared a lot of people, and it wound up driving the market
down.
So, it is fair to say they had some problems and they had a
collapse, and I accept all of that. So did they, for that
matter. But that is why they put in place a number of reforms.
They have begun to transition the amount of auction that they
will have, and it is working very effectively now. I have been
meeting over these last months with the environment ministers
and finance ministers and other leaders, all leading up to
Copenhagen, with the idea that, indeed--and I say this to you,
Dr. Green, you are absolutely correct--we have to have a global
solution. We cannot sit here if the United States does this all
by ourselves. We all understand. It is a non-starter.
The President should never think of bringing a treaty here
to us that does not have a global component. But it is not fair
to say--and I have had this argument with the Chinese--that
energy intensity does not result in emissions reductions. It
can, depending on where they are reducing the intensity, and
how. And you can, in fact, translate a reduction in energy
intensity into emissions reductions.
This is the big argument we are having with China right now
as we go to Copenhagen, to make certain that what we get out of
China, India, Brazil, the middle developing countries, the
near-
developed countries in some cases, is measurable, and
reportable, and verifiable. Those are the key words that have
to guide us. If we can get that out of Copenhagen, or beyond
Copenhagen--I think we may hopefully get a political agreement
there--then we translate it into a real treaty.
I join with other people in saying that we are not going to
disadvantage the United States. What is interesting, Senator
Hatch, is that other countries are adopting this idea that,
indeed, if under an environmental international agreement we
all have agreed to a standard of behavior by which we are going
to reduce emissions and invest in those efforts, if some
country stays outside of that and says, aha, we are going to
take advantage of this, and while you guys are busy making your
products slightly more expensive or transitioning because you
are investing in new capitalization to meet the standard, we
are going to take advantage of it and sell in your country and
undermine your market. We are not going to let that happen, and
other countries are not going to let that happen.
And so, I believe we will for the first time be able to put
together a global environmental protocol by which people are
agreeing under international law that, if some outlier country
decides to try to take advantage of other countries, they are
going to be the odd person out, because their products are not
going to come in cheaper than the cost of reducing that carbon.
So, that is what a lot of folks have argued on that part of
this. That is in the Waxman-Harkey bill. We have changed it in
our bill. In fact, this committee will ultimately decide that
language, and we need to make it WTO-compliant, and I think we
can. But that way, we stand up for the American worker,
American businesses, for a fairer playing field, and we have a
way, hopefully, of addressing this question.
The final comment I make is that we have to, in these
analyses, take into account what happens if we do not do this.
The cost of $500 billion a year cannot just be written off.
That is going to come back to haunt the American taxpayer, one
way or the other: crops that are more expensive to produce,
rivers that are more polluted that we have to clean up. You
could run the list: fires that are more intense in the west,
insurance costs that go up as a result; water that disappears
in Montana; agriculture, the heart, the bread basket of the
country. These are all very, very serious issues, and they are
going to result in massive infrastructure expenditure to pipe
water somewhere, or to move whole agricultural sectors of the
county to other parts of the country where things will still
grow.
What bothers me is, too many of the studies never factor in
the benefit of energy efficiency. The MacKenzie Company--which
I think, I am sure both of you respect--has done a superb
analysis called the Carbon Cost Abatement Curve. That curve
shows that, for the first 20 or 30 years of investment, it pays
for itself. I can show you Hewlett Packard, IBM, Johnson and
Johnson, BP. There are a host of companies across the country
that are investing and have reduced their emissions by 20, 30,
50, 60 percent. We are just talking about trying to grab 20
percent over 10 years. They have reduced it in the last 5 or 10
years over that amount, and they are making money, and they
have increased their market share.
So, I would like to ask you to take a look at those
companies, factor in that practical experience, because I think
it speaks volumes to what the potential growth here is for us.
And, what I fear is--I do not have the article still, we
submitted it--but where a lot of business people are telling
me, people like Lewis Hay, who is the chairman of Florida Power
and Light, one of the biggest utilities in America, Jim Rogers,
chairman and chief executive officer of Duke Energy, who
happens to be also the head of the American Competitiveness
Council--his job is to make America competitive. He believes
that if we just sit here the way we are sitting here and do not
do this, China, India, a host of other countries are going to
clean our clock economically.
China has set out to be the number-one country in electric
car production. They have tripled their wind power targets for
next year. They have set a higher standard for automobile
emissions than we have. Now, I agree with you, they do not
always have the strongest enforcement, and we need to
strengthen the enforcement structure as we go to Copenhagen and
work at this.
But the fact is, in terms of raw job creation and moving
into this sector, if we do not go there, somebody has to
explain, to at least this Senator, where America's great job
growth is going to come from and what products we are going to
compete in, because the fastest-growing sector of every economy
anywhere in the world today is in the energy alternative,
renewable, and efficiency sector.
And in the 1990s, when Americans made a lot of money, we
had a technology boom. It was a $1-trillion market, and there
were 1 billion users. The energy market is a $6-trillion
market, and there are 6 billion potential users.
If we do not lead in this, I fear the naysayers are
stopping our ability to embrace America's next stimulus
package, if you will, which is the movement into this pricing
of carbon, and other countries are going to beat us to the
technologies, and we are going to be sitting there sucking
wind.
Maybe you want to respond to that.
Dr. Green. Well, thank you, Senator. First of all, I am
very glad to hear you say that you do not believe in unilateral
action, and I would welcome further discussion of the energy
intensity question with you because it is entirely possible--as
you said, you can reduce energy intensity and reduce the growth
in greenhouse gas emissions. But, on that, you can still grow
tremendously in your total actual output of emissions.
I am all in favor of genuine efficiency. I have no problem
with genuine efficiencies where there are both energy
efficiency gains and economic efficiency gains. But, when you
have energy efficiency gains that are not economic, you simply
raise your costs of goods and services; it is essentially an
argument. You can foster those changes through government
incentives, but at the end of the day, you have taken a step
that is non-ecomonic and you have, therefore, lost money to
your economy that otherwise would have been better deployed
elsewhere. That is what markets do, they direct capital to its
optimum use. The more you distort those markets, the less
optimal the use is and the less your economy grows.
As for the cost of inaction, I was a reviewer on the third
assessment part of the IPCC. I looked at the question of what
the impacts are. At 2 degrees Centigrade there are very few
impacts, in fact, negative, and there are quite a few positive.
You do not have significant impact until you reach 3 degrees or
higher Centigrade. And it is my opinion, in my assessment of
the literature, that we are not likely to reach those levels.
On the other hand, my latest study, which I will be glad to
submit for the record, lays out an entire strategy of building
social resilience. In the United States, building resilience is
climatic resilience for exactly the issues you raised: what
happens when that snowpack does not come in a certain area;
what happens if sea level rises in a certain area; what happens
if you have increased droughts or heavier rainfalls in certain
areas? Those can be dealt with completely outside of the carbon
control framework.
I have a study that details exactly how you would do that.
I will be glad to submit it for the record and come to your
office and brief you on it.
[The study appears in the appendix on p. 125.]
Senator Kerry. I would be happy to. Well, I need to run in
a moment, but can I cede to you afterwards? How long are you
going to be, do you know? Please, go ahead.
Senator Hatch. What bothers me a lot is that, when I was
chairman of the Labor and Human Resources Committee, now called
the Health, Education, Labor and Pensions Committee, I used to
go over to Geneva to the ILO, the International Labor
Organization.
Now, a lot of these nations signed up for all of the
conventions. We did not. We only signed up for, I think, five
or six of them at the time, and we have not signed up for many
more since then. But they signed up for these wonderfully
glowing conventions that they never lived up to. What I am
concerned about, yes, I personally believe China may very well
show up at Copenhagen and say, well, we are for all of this,
but it is not going to make any difference in what they do.
Now, on this committee, I have worked very hard to have tax
credits for wind, solar, geothermal, nuclear, hybrid cars,
plug-in hybrid cars, and electrical cars. This is something I
have worked very hard on. And all I can say is, the more I get
into some of those energy sources, the more I find they are
extremely expensive compared to oil, gas, and coal, and that 90
to 95 percent of our total energy needs to come from oil, gas,
and coal.
So, as a practical matter, I am very concerned. I think it
is wonderful to want to have the world to all live in
accordance with the globalization approach towards this, but my
experience in the 33 years I have been here is that, if we
commit to it, we will live up to it, but a lot of the countries
do not. Is that pretty much the way you feel?
Dr. Green. If I may, Senator, thank you. That is a very
important question. I agree with you. I like all the new
technologies, myself. I tried to distill ethanol back when I
was a teenager so I could use it to run in our car in 1973, but
the BATF would not license me. It is quite expensive.
I am sorry. I just lost my train of thought there; thinking
about ethanol now takes my point away.
These technologies are expensive, and that will harm our
economic growth. But your point about the treaties is vitally
important. This is often misunderstood. Canada, for instance,
can agree to a target, and, if they do not do anything, they
cannot be sued into compliance by their own government. The
U.S. is unique in the status it gives treaties. When we sign a
treaty, we live up to it. Other countries can sign treaties and
not live up to them.
That is a fundamental difference that makes the United
States hesitant to embrace treaties as a general rule, and I
think wisely, because treaties have a very high status in
American law that is not necessarily reflected in the other
countries.
Senator Kerry. Well, actually, Dr. Green, that is not
entirely true. I am sorry.
Well, let me tell you why it is not, Senator, because I was
at the treaty signing, which we ratified unanimously in the
U.S. Senate, the 1992 Framework Convention which George Herbert
Walker Bush negotiated, and we did it in Rio, and it has been
18 years since then, or whatever, and we have not done a thing
to meet it.
In fact, the last 8 years, emissions in the United States
of America, in greenhouse gases, went up 4 times faster than in
the 1990s. So, that is the reason we are talking about the need
to move to a mandatory reduction, because we did not, and
nobody else did either. A few people tried, here and there. So,
you just cannot throw that stuff out there like that and say we
do it, they do not, blah, blah, blah.
Look, you do not accept that you have to hold it at 2
degrees. You may know something that thousands of other
scientists do not. They won a Nobel Prize, you and I did not,
and they won a Nobel Prize for their work that said we have to
hold it to 2 degrees Centigrade.
The G-20 just went to Italy and came out ratifying that we
have to hold it to 2 degrees Centigrade. Now, maybe you know
something I do not about where the tipping point is. But I have
a lot of scientists whom I respect--from John Holdren, who is
now the Science Advisor to the President, to Jim Hansen over at
NASA, and a bunch of others--who tell us we have a 10-year
window to try to meet the standard of keeping the temperature
from rising over 2 degrees Centigrade or you reach the tipping
point.
Now, is the tipping point at 2.2, 2.3, 2.5? I do not know.
I do not think they would tell you if they know. But they know,
because of the consequences of every model that they have
looked at, that that is what begins to happen, and all of the
evidence is coming back faster and to a greater degree than
they predicted, underscoring the predictions they have made.
At some point you have to step back and say these guys are
making sense, because what they said is going to happen is
happening, and it is happening faster and at a greater risk. To
wit, the Chinese, I think Senator Hatch said they do not want
to abide by it or they do not care about it. The Chinese are
petrified by what is happening in the context of global climate
change. The reason? The Himalayan glaciers are disappearing,
and the predictions are they are going to be gone by the year
2035. Now, do I know what will happen in 2035? No, but I know
what has happened. Every prediction about when the Arctic ice
was going to melt has been accelerated to the point now that,
instead of 30 years down the road, it is now 2013 that they say
we will have an ice-free Arctic in the summer. That is what
their predictions are.
Dr. Green. I think that has been withdrawn. You might want
to look it up.
Senator Kerry. I have not seen that withdrawn. In fact,
they had an ice-free passage during last summer. I have not
seen that withdrawn. You send me something that says that has
been changed. All right? And we will make it part of the record
here.
Dr. Green. I will do that, Senator. Thank you.
Senator Kerry. So, the bottom line. Every recent scientific
update, and I get them periodically, I ask them to come in and
say what is happening, is it less than, what is the rate, and
without exception they look at me and they say, Senator, I
cannot even talk about some of the things that are happening
today publicly, because people will not believe it, like
columns of methane rising out of the ocean floor that you can
light a match and it will explode or ignite where it bursts
into the open air because the permafrost is melting. We just
voted $400 million to move Newtok, AK. The citizens voted to
move it inland because of what is happening in terms of the ice
melt. There are, I think, some 400 villages threatened now in
Alaska. Ask Lisa Murkowski or Mark Begich what is happening in
Alaska.
So, all I can say to you is that we have to employ the
precautionary principle here. If I have a few thousand
scientists over here, and you have a few others over there, the
weight is pretty heavy to say to me that, as a public person, I
ought to implement the precautionary principle. And if I have
chief executives, like Jeff Immelt and Lewis Hay and Chad
Holliday of DuPont, and a bunch of other people who run Fortune
500 companies telling me, Senator, we have to price carbon and
we want certainty in the marketplace, I am going to listen,
unless you can give me an overpowering reason why those guys
are all wrong, and I do not think you have.
Dr. Green. All I can say, Senator, is I read the IPCC
reports, the Science of Climate Change report, in its totality,
cover to cover, and I follow the latest journals. My doctoral
degree is in environmental science and engineering. I daresay I
am capable of understanding the literature and forming my own
opinion.
Senator Kerry. Has your study been peer-reviewed?
Dr. Green. No, I do not work in the peer-reviewed
literature, Senator. I do not work for a university.
Senator Kerry. So, you do not submit your studies for any
peer review?
Dr. Green. No.
Senator Kerry. You realize that there are something like
2,000 or 3,000 studies all of which concur which have been
peer-reviewed, and not one of the studies dissenting has been
peer-reviewed.
Dr. Green. That is not correct, Senator.
Senator Kerry. Show me a peer-reviewed study.
Dr. Green. I will send you a list.
Senator Kerry. Please, because nobody else has.
Dr. Green. I will be glad to.
Senator Kerry. And, in Al Gore's book, he cites the same
fact, that nobody has ever contradicted it with a peer-reviewed
study.
Dr. Green. I will be glad to send you some studies,
Senator.
Senator Kerry. I look forward to it.
We stand adjourned. Thank you.
[Whereupon, at 12:05 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
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Communications
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