Hill Heat

10:16 Voinovich There is no reason to disregard CRA International’s analysis. Anne Smith is a highly regarded economist. I have seen nothing that would dispute with this analysis. We are staring down the barrel of a gun. In fact we are staring down two barrels. The evidence suggests this bill will do nothing to help climate change. In states like Ohio, we’re all too familiar with the results. Natural gas prices are up 300% since 2001. End-of-pipe technologies don’t exist. Solving this problem will require a wholesale technology revolution. This bill will be a gigantic administrative undertaking by the EPA. I suggest my colleagues slow down. There are alternatives that must be considered before we move forward.

Boxer My staff walked your staff through a different model yesterday from the Clean Air Task Force. Sen. Lieberman has asked the EPA to do a model.

Inhofe The costs of the bill will be a trillion dollars a year. It will require a wholesale transformation of our society. Manufacturing will be forced overseas.

10:24 Vitter I have very serious concerns about the bill. I agree with Sen. Voinovich about the need for more time. Every day I hear from Louisiana constituents about energy prices. I’d like to see a clear consensus on what this does to energy prices.

11:19 Krupp Not only will it ease the burden on the American economy if we act faster, it will get other nations to move faster. To achieve a cumulative emissions budget between now and 2020 if we act now we would have to average a 2% reduction each year. But if we wait two years we would have to have a 22% reduction instead of 15% because we would have to start from a higher level and cut to a lower level. There’s enormous benefit by acting early.

11:21 Inhofe Would you support new LNG plants?

Book? Yes, we have to have to do it safely. We would support increased funding by Congress to deal with nuclear.

Inhofe You have said a tax is more effective than a cap-and-trade.

Book There is already a SEC, IRS, and EPA. You can use a tax because we have a tax system.

Some folks are going to suffer more than others. The instability of the oil market is due to the maximum capacity. The only thing to do is to find more oil.

Boxer When you say a carbon tax is more honest, I disagree. In cap-and-trade, the free market sets the price.

Inhofe CRA International said this bill would be much more aggressive than $300 billion per year. I think a tax would be more honest.

Boxer This would be quite a switch, you supporting a tax, me supporting the free market.

Inhofe It would be great if you switched the gavel, too.

11:29 Carper Nuclear?

Claussen I think nuclear has to be part of the solution. I think the best thing to do for nuclear is to establish a cap-and-trade system. Nuclear has to solve the problem of waste. I think there are some interim solutions that could move us along the path.

Carper I want to thank the panel for helping us craft this legislation.

Book The world needs more BTUs and nuclear is one of those sources. It has a very high startup costs. Congress has produced significant incentives. It’s not exactly the free market. If we’re not going to use coal, we need nuclear.

Carper Mr. Sims, did you ever run for the Senate?

Sims Yes.

Carper If things had turned out slightly differently, you could have been sitting up here. How can we ensure that investments in transit generate credits or funding within this bill?

Sims We need to reduce total miles traveled.

11:36 Warner You talked, Mr. Sims about the need to reduce vehicle miles traveled. Maybe we need to add incentives to the states.

Sims I would be overjoyed to have states have to reduce overall miles traveled. Incentives for congestion pricing.

Warner Nuclear power will be addressed in our committee deliberations.

Claussen I worked a long time ago on submarines.

Warner I go back a few years myself.

Claussen On Monday Sen. Carper and I were talking about how we see nuclear as part of the solution. We talked about the need for education. If there’s a demand for nuclear, we’ll figure out the way. Again, I think the best way is to put a price on carbon.

11:51 Klobuchar How do we ensure that we can interconnect with other nations?

Claussen Remember that we’re not signatories to Kyoto. We need a global agreement, but I don’t think we’ll get that until we pass a bill. So the urgency of passing this out of committee and getting a law is high.

12:00 Krupp The sooner we have a cap, the sooner we have moral standing. I spent the last year researching all the technologies I could find that could reduce emissions. Doing this two years early will spur a technological revolution.

Lieberman You said the uncertainty created by Congressional inaction is creating problems for developing new energy infrastructure.

Berendt That is correct, Senator. It is very important that we move forward in a way that is functional and liquid. All advanced low-carbon technologies have high fixed costs.

Lieberman That’s why we put added incentives to the power sector to ease the transition.

12:07 Voinovich The AFL-CIO had real problems with this. Duke Energy said its prices would go up 50%. I have also, Mr. Krupp, looked at all the technologies available.

Claussen We work with 45 companies. 37 have already set targets to reduce emissions, and 22 have already met their targets. They’ve done it primarily through efficiency. I think there will be some time for CCS, for more nuclear, because I think we’re going to need that, for renewables. We need both carrots and sticks.

12:18 Craig I recognize the tolerance of the posteriors of those sitting here. I think it is critically important for us to have a EPA/IEA neutral analysis. I don’t disagree that there may be great new economies generated. Reasonable approaches by government can direct economies.

The Chamber’s figures are cherrypicked from Dr. Smith’s testimony. Her calculations are based on a computer model designed and run by her company. Not modeled are the economic impacts of climate change or the possibility of borrowing credits. Her results have not been peer-reviewed nor were reported with degrees of uncertainty.

Job Losses

Her written testimony:

By 2020, our scenarios project between 1.5 million and 3.4 million net job losses. There is a substantial implied increase in jobs associated with “green” businesses (e.g., to produce renewable generation technologies), but even accounting for these there is a projected net loss in jobs due to the generalized macroeconomic impacts of the Bill.

GDP

Her modeling finds a net reduction in 2015 GDP of 1.0% to 1.6% relative to the GDP that would occur but for S.2191. The impact rises to the range of 2% to 2.5% thereafter, leading to a loss in the range of $1 trillion by 2050. By way of comparison, the Stern Review estimated the losses due to strong emissions reductions would be about 1% of GDP, and the long-term losses due to inaction from 5% to 20% GDP by 2050 depending on climate feedbacks.

American consumers

It appears the Chamber somehow generated the $6 trillion figure from this testimony:

Our scenarios imply that real annual spending per household would be reduced by an average of $800 to $1300 in 2015. If the percentage consumption impacts projected for each future year were to be stated in terms of current real spending power (we use 2010 spending as the proxy for “current” here), these spending impacts would increase to levels of $1500 to over $2500 by the end of our modeled time period, 2050.

The number of households in the United States is approximately 116 million. $6 trillion divided by 116 million is over $51,000. The US population in 2050 is estimated to be 404 million. The per-person cost would have to be $15,000 for the total to reach $6 trillion.

11:30 Voinovich This bill will cripple our economy.

11:36 Klobuchar This is a hearing to examine the nuts and bolts of this bill.

11:40 Craig If anybody doesn’t believe this is a complex bill, they should try reading it. I’m glad the Bali or bust approach is out. The bill is not ready for prime time.

11:44 Boxer We will start markup on December 5.

11:44 Whitehouse We are putting a lot of our nation’s wealth through this process. I’m not satisfied with the integrity of this process. My concern is that fairness to low-income folks are not part of this discussion. The bulk of the return has to go to the American consumer and the low-income American consumer more than anyone else. I’m interested in the idea of flowing moneys through the EITC.

11:49 Alexander I think we would be better off with a sector-by-sector approach.

11:53 Cardin I hope we can strengthen the use of public transit. Dr. Greene notes we burn 6000 gallons of oil every second to fuel our transportation sector. That sector is responsible for one quarter of the emissions. I think we need to strengthen the bill’s provisions. We need to make a more significant investment in public transit.

11:58 Inhofe I will raise concerns about the untoward impacts of a cap-and-trade bill. I’ve talked about how the poor will suffer. I expressed how farmers would be hurt. Today I address how blue-collar jobs across America are at risk. Many of the blue-collar jobs rely on energy-intensive manufacturing. We know natural gas is critically important. Rising prices will threaten jobs in automotive assembly, steel, fertilizer.

12:08 Hawkins In all the key areas NRDC shares a number of concerns. But we are ready to work to make this bill better. Noone is under the illusion that the bill will go directly from the committee to the President’s desk. We recommend the committee approve certain strengthening amendments and report the bill to the floor this year.

12:10 Greene Analyses such as those by the IEA show the insensitivities to fuel economy to the price of fuel. The market for fuel economy is not efficient. 39% of households never considered fuel economy in purchase decisions. Land development policies must be considered in reducing transportation sector emissions. A low-carbon fuel standard may be needed.

12:15 Baugh AFL-CIO believes action to reduce global warming and reduce oil dependence are mutually reinforcing. We actively participated in the stakeholder process to develop this bill. I’m here to address five areas in the bill that could be improved. We commend the original draft that made critical commitments to technology. Unfortunately the amendments to restrict automotive and coal funding went in the wrong direction. This sets a standard of 70% below 2005 levels by 2050. That should be subject to presidential reviews. We urge the committee to direct the Corporation to invest in domestic investments. The AFL-CIO supports price-control mechanisms. We believe hoarding of allowances will be damaging. Up to 30% of a company’s allowances may come from offsets or international allowances. We believe that is too high. We’re very concerned about the legitimacy of genuine offsets.

12:21 Sharkey We beat our Kyoto targets already. By recycling and efficiency we’ve dropped our emissions by 30%. We are not standing still. Our products lead the way in reducing carbon emissions. For example by using high-strength steel, auto manufacturers can reduce car weight and increase fuel efficiency. Legislation must consider U.S. competitiveness. Our costs will rise in 2012, costs our foreign manufacturers will not face, if at all, until 2020. Foreign allowances invite subsidies from foreign nations. We are concerns ACSA will encourage fuel switching from coal to natural gas. We believe competitiveness provisions should apply equally to domestic and foreign manufacturers. Why not encourage a race to the top? We must find prudent means of addressing climate change.

12:30 Rowlett Wind is not a suitable replacement for baseload needs. Perhaps agricultural offsets will be needed. We will have to switch from coal to natural gas.

12:35 Hawkins This bill is a good start. The emissions reductions in the short term are strong. The longterm reductions need to be stronger. We believe this bill deserves an affirmative vote in this committee.

Baugh There’s the phase-out period for the industry. Some would like us to have 100% auction, which would say to manufacturers you have to buy allowances, and you have to invest in new technologies. I think it’s important that the allowances are available for doing business. We wouldn’t want to see the phase-out tightened. We have reports coming out with the National Council on Energy Policy.

Lieberman This bill would make very serious demands on industry. With that in mind we created the free allowances. I think it’s significant that the AFL-CIO says any shortening of that phase-out period would be unwise.

12:39 Inhofe Nuclear is going to be necessary. Do you support nuclear power?

Hawkins I’d like to answer in two parts. We don’t support additional subsidies for nuclear power. We don’t object to nuclear power being part of an emissions reduction program.

Inhofe You don’t think India and China are going to reduce their emissions, do you?

Baugh No. We think it’s important the investment be done in domestic firms.

Inhofe If we adopt unilateral mandates can we ensure imported steel have the same regulations?

Sharkey Cover imports at 2012, not 2020. Watch against government subsidized allowances.

Inhofe Can you talk about the problem with an auction approach?

Rowlett Before we choose any kind of resource we have to go to regulators. Nothing is automatic. Everything has to go through state regulatory commissions.

12:45 Klobuchar We’re all concerned about the effects on consumers and the economy. What effect has the Europe cap-and-trade had on the economy?

Hawkins It has had some bumpy spots but we have not seen harm to the European economy. We will see economic opportunity by the technologies stimulated by this bill.

Baugh We do have concern about the jobs. We have a particular sensitivity to energy-intensive industries. How is the investment side of the portfolio directed. Ensure that these are domestic investments.

12:54 Voinovich Do you think the Efficiency Board can moderate price shocks?

Baugh Right now I don’t think so. The volatility is too high. There should be a much more restricted market mechanism.

12:56 Boxer The gloom and doom is belied by the facts. Change is hard, we all know that. But if we do nothing that’s very dangerous. Come to my state and see what’s happening in the venture capital community. I’m going to go back and find the naysayers’ comments for the Clean Air Act, Clean Water Act.

For my view, I would do 100% auction out of the box. I’ll support those amendments on the floor of the Senate. I would hate to see you away from the table. This is going to happen eventually, because it has to happen.

1:02 Barrasso The target date is 2050. If we act and China and India does not, how much cooler will the planet be?

Hawkins I am confident that China and India will engage much faster if we don’t take action. I’m sure they won’t take action if we don’t. Countries pay attention to what the U.S. does and does not do. Every time we bring up advanced technology and ask what they’re doing about it, they ask what we’re doing about it. This is a method that works. We took lead out of gasoline in the 1970s and 1980s. They followed suit. We put scrubbers on smokestacks. They followed suit.

1:07 Carper What can we do to reward actions your industry has already acheived?

Sharkey Rewards for early action would be welcomed.

Carper What allowances are going to be given for free?

Hawkins 20% of the allowance pool is available for free to the industry sector, and 20% to the electricity sector.

Carper I’m concerned the allowances are greater than the historical level of emissions.

Hawkins We think the argument the industrial sector will have trouble meeting these targets is not well founded.

1:12 Alexander You said that increased CAFE standards would be the greatest impact on the transportation sector in reducing oil dependence.

Greene Yes, and reducing greenhouse gases.

Alexander If it’s not baseload or peak, why are you investing in wind?

Rowlett We’re taking proactive action to reduce our footprint.

1:17 Whitehouse Offsets.

Baugh I’m concerned about paying for things people are going to do anyway.

Whitehouse The other question is how you regulate the allowance trading itself.

Baugh Goldman Sachs should not be buying allowances. When does banking become hoarding?

Whitehouse Are you convinced that the governance of the board is adequate?

Baugh We think labor should be represented.

Baugh The cap-and-trade system is an effective tax. This will raise the cost of energy. The question is how do we do it? And how do we make this transition? There are allowances for line-transmission agencies. They’re getting allowances, but there are no requirements for investing in high-efficiency transmission.

1:23 Lieberman Sen. Warner was particularly focused on maintaining the integrity of the systems. The Carbon Market Efficiency Board plays a role much more akin to the Federal Reserve.

Hawkins The acid-rain trading system did not develop the problems that concern Sen. Whitehouse. The problem of hoarding, of speculation simply hasn’t occured.

Lieberman The auctions are going to raise a very significant amount of money. We want to make sure the Corporation will set up systems so that it is spent well. Our intention is to reduce the price impacts and to reinvest the money in technologies that will drive efficiencies, creating more jobs. We have phrased our allocations in term of percentages. Outside groups have converted that to dollars. It’s a tremendous amount of money. In fashioning a system we have within our grasp to create the opportunity to make America energy independent and clean up other forms of air pollution. A lot of money will be on the table. It’s important it be used as a vast venture capital pool.

1:29 Lieberman I adjourn the hearing.

9:44 Boxer I believe we have the momentum, the wind at our back. Sens. Inhofe and Barrasso could have thrown a monkey wrench into the process. They did not do that. I want to tell you publicly how much it meant to me and I want to thank you so much.

9:45 Inhofe I want everyone to be aware that we’ll be working together at 10:45 this morning. I think we need the administrative analysis of the costs of this bill. I think we have some excellent witnesses today. The cap-and-trade concept has been a total failure. Even the European environmentalists say it’s been a failure. If you want to address this thing there are other ways to do it. The supporters of putting brakes on our economy support going going down this path of self-destruction. Costs of up to a trillion dollars a year.

9:48 Lieberman Thanks Chairwoman Boxer for your leadership. We’ve got a problem. I think that the bill we brought forward gets the job done and does it in a way that will ultimately help our economy. There are costs but they’re worth it. Are the American people willing to pay an extra penny over twenty-five years to do something about global warming? Absolutely. These reports don’t take into account the staggering costs if we fail to do something about global warming.

9:55 Voinovich The abbreviated process by which this legislation is moving is not conducive to good legislation. There should be full vetting by the Committee on Jurisdiction. There was only one subcommittee hearing and a hurried up markup. I’m told we’ll only have one more hearing on Tuesday before a markup, and a floor vote on December 5th. At this point it’s not possible to assess the costs and benefits of this bill. We have heard from no witnesses on the efficacy of the Carbon Board. In fact, until being provided with today’s testimony, we’ve been provided with no analyses. Sufficient time has not been provided to members. Multiple analyses were run in 2003-2005 for Clear Skies when I ran the committee. I know Bali is coming up in December, and I know some people would like a scalp in their hand, but this is too important.

10:00 Boxer I don’t think Clear Skies ever became law. I think some people want to get things done. I don’t need to be told this is important. We have held twenty hearings on the various aspects of global warming. The fact is that we have state and local leaders already acting. I take issue to the fact this is being rushed. We may not go to Bali. The fact is that we have a subcommittee bill already. We have planned two legislative hearings. My staff is available. I am personally meeting with every Senator on this committee who wishes to meet. I welcome amendments. I disagree with what you’re saying. We are not rushing this through. If you don’t want to have a bill, I respect that. But I don’t think you should criticize the process. If you want more briefings, we’ll brief every day. You want to debate whether not we should have legislation, but don’t bring up Clear Skies, that’s a failure. The people are tired of partisan bickering. I want to take the strongest objection to what you’re saying.

10:04 Inhofe Our staff has been requesting meetings with your staff and it’s been denied.

Boxer I’d sure like to see evidence of that.

10:05 Klobuchar We have hunters, ski resort owners seeing the effects. I went to Greenland watching the water come out like spigots. With all due respect to Sen. Voinovich, my fellow Slovenian, we have waited too long. We let states be the laboratories of democracy. Now it’s our time. The rhetoric is over and it’s time for action. I know the bill isn’t perfect. I would like the bill to specifically mention cellulosic ethanol and wind. It gives some direction to business to invest. I know there’s issues we should address, to look at the proper incentives for clean energy. I don’t think we should wait until after the presidential election.

10:08 Bond I support cutting carbon emissions but without cutting household budgets. CAFE standards. Wind, solar, zero-carbon nuclear. This is a very problematic bill, among others, for farmers. This is a very complicated bill. Whether the consequences of the bill are deliberate or not, households will feel real pain. We have a farm bill on the floor today. I hope noone thinks this won’t have impacts on farmers. The farm costs of L-W far outweigh the benefits. Fertilizer costs will go way up. I buy a little bit of fertilizer for my operations. I’ve seen the costs go way up. How are we going to get our food supplies? Farmers will deluged with higher fertilizer, transportation, heating costs. I think is just one of the many problems.

10:13 Carper Anyone who might wonder why we haven’t made more progress can just listen to this. There’s a lot of disagreement. It’s not entirely partisan but it’s definitely strong. I want to thank Sens. Lieberman, Warner, Boxer for having the temerity, the strength of will, to forge a compromise. I’m deeply concerned with how we allocate credits in this proposal. I think we should allocate to clean energy. I come from a small state on the coast. We find ourselves on the end of the tailpipe. As governor of Delaware, we could almost close down our state and we’d still not be in attainment for ozone. The people of W. Virginia where I was born, Virginia where I grew up, Ohio where I went to school, Kentucky where my sister and her family live, are producing the pollution. Delaware has the highest rate of child asthma. 24,000 Americans will die from sulfur dioxide emissions this year, over 400 this week.

I eat a lot of fish, maybe you do to. If you happen to be a woman who’s pregnant, your child might not be so lucky. We know that 6000 children will be born this year with high levels of mercury.

I want to support this legislation. I appreciate we’ve tried to address the transportation sector. I would have us focus on three things: clean fuels, clean cars, other options than cars. I think nuclear is part of the solution. We need to come up with a compromise that actually gets the job done.

10:19 Vitter I certainly agree with you that this is an extremely important issue. I also agree that the stakes are very very high. I agree with Sen. Voinovich and others who have expressed grave concern with the accelerated process. Yes, there have been hearings for years on global warming. But I would urge the committee to have more hearings on this voluminous bill. I don’t think there’s any state who has more at stake, frankly, than Louisiana. Sea level changes could have an enormous impact on Louisiana. At the same time if we act unwisely and do things with our present fuels that aren’t justified, Louisiana will be among the first hit. We need to find out what the impacts are, what the science supports. I am very very concerned that we are taking as complex a bill as we’ve ever seen in the Senate and moving forward with sound bites and not sound policy. I’m eager to hear from more witnesses on this very complex bill. I think we need more hearings.

10:22 Lautenberg Thank you for holding this hearing. Our children and grandchildren will never understand if we don’t take action. We improved the bill in subcommittee. We expanded the bill to include natural gas, created a process for scientists to evaluate if we need stronger laws, protects states’ rights to do more, increased the 2020 target from 10% to 15%. UCS has said we need to get to 80% by 2050. There’s an endangered species here: us! There will be plenty of jobs out there, just not enough people.

The bill gives away cost-free permits to polluters. We need to move to a polluter-pay system much faster. We should think twice before giving out the majority of free permits to the biggest polluters. Some of the permits should be given to clean producers like solar. I am hopeful this bill can be improved as we go forward. I want to respond to our friend Sen. Inhofe who said cap-and-trade doesn’t work it’s done a heck of a job.

Inhofe Cap-and-trade on acid rain is not the same animal.

Lautenberg I said what I said.

Inhofe And I said what I* said.

Lieberman* This reminds me of Popeye, I am what I am.

Barrasso A number of us had the chance to sit down with Thomas Friedman this morning. I don’t think we can shut off our traditional sources. But we also have a lot of renewable sources. China and India. I think it’s important for we in America to invest in the technology. A world that by 2030 by 50% more energy because of soaring demand in China and India. I have concerns with requiring coal plants capture 85% of their emissions. I’m glad Sen. Lieberman is interested with working with me to stair-step to that requirement. I do worry about unintended consequences that energy limitations will have on our economy. I do want to reiterate that I want to address the problem of global warming. We have to show China and India that we can address emissions, create jobs, and develop the necessary technology.

10:31 Cardin ACSA gives us the best hope to pass meaningful climate legislation. I’m proud to be an original cosponsor. I think this more than an issue of climate change. It’s a matter of national security to use less fossil fuels. It’s in our economic interest. It’s a win-win-win issue. ACSA is based on two important pillars. By establishing a declining cap it reduces emissions. As we go through the process it keeps getting better. I hope it continues to get better.

It’s clear to me from the scientific information available we should strive for 80% reduction. It seems to me that from the inception of the cap we do a 100% auction. It gives us the financial wherewithal to help low-income consumers, create jobs, develop technology.

I think this bill is a great start and restores American leadership.

10:35 Craig I don’t fear this process as long as it is fair, open and transparent. My position has been consisent—cap-and-trade is obsolete. I wish Sen. Clinton was here today. She did something in Iowa last week that I was impressed by. She supported a number of incentives that are in line with what the administration supports. I would request of you, madam chair, a thorough analysis by IEA. None of us dispute the magnitude of the effort. None of us dispute the magnitude of impact. The rest of the world is frustrated. They’ve tried and they’re failing. We need new technology. I request the markup be postponed until we have the analyses of shall we say impartial observers.

10:40 Boxer We haven’t even announced when the markup is. We’re going to have so many briefings here. Sen. Clinton’s also on Sanders-Boxer. Let’s not distort her views. I just wanted to set the record straight on that. I went back and looked at the record. We all know what a slow dance is, we weren’t born yesterday. We think the time is now to act.

10:42 Sanders We have come a long way in a year. You deserve a lot of credit. All over the world people are wondering what we’re doing. I believe this legislation does not go far enough. I don’t think it is asking to much of the American people to listen to the scientific community. What the scientific community is saying is “We made a mistake! We underestimated the problem.” We’ve got to be more aggressive, not less aggressive. The time is too late for politics as usual. The world cannot wait. We need to reduce greenhouse gas emissions by 80% by 2050. The 63% at most that L-W gets is just not enough.

There are number of other issues with the auction. We can’t say to polluters you have twenty to thirty more years to destroy the environment. I also am unhappy with the new entrant provisions.

The good news is that we know how to stop global warming. One of the major concerns that I have about this legislation is that there is not one nickel specific to energy efficiency which everyone knows is the low-hanging fruit. With solar, PG&E has signed with an Israeli company to build a solar plant at the scale of a small nuclear plant, producing electricity at 10 cents a kilowatt hour, competitive today. If we put 20 billion of dollars into solar we can produce gigawatts of electricity. A $10,000 small wind turbine can supply 40% of a house’s electricity need. We are not taking advantage of the technologies we already have. I don’t know what the future of clean coal is. But we don’t have to spend hundreds of billions of dollars to find out the future of solar and wind.

10:47 Boxer I ask unanimous consent to place Sen. Isakson’s statement on the record. Here’s a statement from Sen. Warner: “This committee had the chance to hold hearings on Lieberman-McCain and it did not.”

10:49 Whitehouse Nothing in the focus on the parts where we disagree should detract from the accomplishments you, Sen. Lieberman and Sen. Warner have achieved. Our targets for greenhouse gas need to be adequate and enforceable. The auction needs to be adequate and needs to have integrity. The process isn’t even subject to the Open Records Act and other oversight mechanisms. I think it’s important to focus on the impact on low-income folks. I am very pleased that the wildlife and conservation issues I’ve introduced are being addressed. I’m looking forward to looking at the role of the distribution utilities. I salute you for what has been accomplished.

10:51 Boxer This issue is fraught with a lot of concern, emotion, and we appreciate your patience. Sen. Inhofe and I need to get to the floor to make closing statements on the water bill override. Welcome to our first panelist, Peter Darbee.

10:53 Peter A. Darbee, PG&E Global warming is a global problem unsolvable without our national commitment. This will be a 1000 mile journey and I believe the world is watching for us to make the first step. In our opinion, ACSA makes that responsible first step. It would benefit from improvements in some key areas. But we believe this bill with a package of complementary measures will set us on the path of racheting down emissions. The cost of energy efficiency is about half that of a new natural gas plant. Policies and incentives should maximize efficiency. One important example is its support for decoupling, a proven strategy.

The bill could give more support for early action to increase efficiency, rather than based on historical emissions.

The sooner we take action, the smaller will be the impact on our economy.

10:58 Jonathan Pershing I’m the director of the climate program at the World Resources Institute. The problem is one of enormous urgency. The science is clear. If the US does not act quickly and aggressively, the world will lag. If we don’t act, the costs will be great. California wildfires will increase. The drought in the Southeast. Hurricanes projected to increase. The cap-and-trade system and the complementary elements in this act provide a clear market signal for investment and action. The WRI has conducted a preliminary analysis. It would cover 82% of the economy in the act. It would reduce 17% by 2020 and 71% in 2050 of covered sectors. There’s a huge range of technology options. There’s less than one percent difference in 25 year GDP growth with the implementation of these policies. The bill sends a strong international signal. There will be three issues on the table: mitigation, forestry, and help for adaptation. The bill addresses the problem of forestry, but it does not address adaptation.

11:04 Anne Smith CRA International. My testimony is my own. By 2015 S 2191 would result in the net loss of 1-2 million jobs, despite the creation of green jobs. Initial compliance requires a disruptive switch to natural gas. But then by 2025 the natural gas infrastructure will become obsolete. S 2191 sets ambitious caps but its near-term targets are overly ambitious.

11:09 Margo Thorning From 1990-2000 we reduced per capita emissions by 0.8 percent. By 2030 we need per capita reductions by 50%. A cap-and-trade system may not be the most appropriate way. Most economists think a carbon tax is preferable. The EU is not on track to meet its emission reduction targets. I think we all agree this is an important problem. I think it requires new technologies. If we look at where the emissions growth is coming from, it’s the developing countries. They’re getting more efficient but still much less efficient than US and Japan. Getting our technology them would help. Our tax code: changing depreciation. Economic growth can be a driver.

11:14 Wiley Barbour Director of Environmental Resources Trust. I’m a licensed engineer. Our expertise is in the monitoring and measurement of emissions. We are an implementation shop, if you will, working with companies who are serious about measuring and reducing their footprint. Some are interested in purchasing emission reductions. These companies want a clear signal from Washington. The exchanges are working to establish a set of contracts that companies need. I chair an environmental committee for NYSE. For the last twenty years we’ve tried voluntary programs. A mandatory cap is necessary. We’ve found the market-based approach works.

11:20 Boxer Is OPEC one of CRA International’s clients? Is ARCO? Is American Petroleum Institute, Chevron, ExxonMobil? The Natural Gas Supply Association? I want everyone to know who your clients are. Did you look at what goings on in California?

Smith I said the caps in the near term are too tight. I’m aware that California has achieved large reductions in energy intensity and I’m aware that it’s in large part energy-intensive industry has moved to other parts of the country.

Boxer I’m going to hand over the gavel to Sen. Lieberman.

11:24 Inhofe Let me ask two yes or no questions. Mr. Darbee, would you still support the bill if you did not receive free allowances?

Darbee Probably not.

Inhofe Would WRI support incentives for nuclear power?

Pershing We’d have to look at it but we’re open to considering it.

Thorning I think people need to be aware that the average production facility last 20-25 years, power plants maybe 60 years. More time to meet tight targets would substantially reduce the costs of these targets.

Inhofe We shouldn’t expect fuel switching until prices of allowances hit $50 a ton.

Smith The costs are lower with a looser cap.

Inhofe What would happen to industries like steel and cement?

Smith I was mentioning leakage when I had to end my testimony. Energy-intensive industries are extremely exposed. Some are so far on the edge that if there are not tax incentives they will like suffer huge losses.

Thorning Autos last 7-8 years, appliances 10-15, production facility last 20-25 years, power plants maybe 60 years.

Inhofe I’ve commented several times that I think a carbon tax would be more honest.

Smith I believe it’s far more suited to this climate policy.

11:29 Lieberman I’m going to ask questions on behalf of Sen. Warner as well. To PG&E, you said you’d probably not support the bill without free allowances. Where else would you get money without raising rates? Which is why you’re getting free allowances and some of the proceeds of the auctions.

Darbee We thought it would be better if the board had more transparency, a ceiling for the price of carbon, as well as a floor that would rise over time. There would be certainty over what the price of carbon would be over a range of years. If those standards and prices were public, we think it would be very constructive.

Lieberman How can we expedite the availability of technologies?

Darbee We believe the cap-and-trade system would be the best.

11:34 Pershing I have not seen Dr. Smith’s model in detail, but I believe it does not include feedback benefits or intrasectoral movement.

Lieberman I want to note if you’re Haley Barbour’s wiley cousin, ha ha. Just reelected governor of Mississippi, so we want to congratulate him. What do you think is most important for market efficiency?

Barbour They want the flexibility in when and where. I think the banking provisions are important. It incentivizes companies to overcomply today. I think that this is an essential feature. It’s that failure of banking in the EU system. The initial phase did not allow banking.

11:38 Carper I thought I heard Mr. Barbour and Mr. Darbee talk about offsets. I’d like to ask each of you to talk about the value of offsets.

Barbour The provision of the use of offsets is very wise. I’m a proponent of even greater use of offsets. I think it’s an opportunity to harness the technological know-how of our nation.

Darbee The offset mechanism is one of the reasons a cap-and-trade system is better than a tax. It unleashes the creativity of the free market.

Pershing I would agree with those comments, but mention that verifiability, transparency, monitoring must be a part of it.

Smith Offsets are a good thing to add. The limits of the offsets in the bill have something to do with the high costs of the program. You can do offsets with a carbon tax.

Thorning Verifying the offsets can be a sticky issue. Verifying Chinese offsets has been a problem. You need a real bureaucracy.

Carper I want to thank you all for your willingness to participate. Could you explain how output based allowances work?

Darbee The beauty of output-based allowances instead of historical emissions, there wouldn’t be an incentive for them to change. If you provide allowances to those who have low carbon emissions, you are rewarding that kind of behavior. Allocating emissions on the basis of output rewards those who produce electricity with no or low-carbon emissions.

11:45 Voinovich There are those that look at what we’re doing and conclude that unless we understand this is a global problem and do something more rapid than what this bill provides is fruitless. I think that what should drive this is technology. Technology to capture and sequester carbon. My concern is that there’s an urgency for us to move as quickly as possible and then it’s available for us to sell to other parts of the world. Where can we find the money to move this quickly. I’d like your comments on that. We’ve lost jobs in our state because of high natural gas costs. My heating bill is up 300% since 2000. The chemical industry. We were number one in plastics when I was governor. Are we moving fast enough.

Smith We to time the stringency of the caps, which is why there’s such a switch to gas in some projections. There’s no emphasis in this bill for funding research and development.

Thorning The Asia-Pacific Partnership is designed to do exactly what you’re asking.

11:51 Lautenberg Do you think the pace as structured in Lieberman-Warner would be too rapid, endangering our economy?

Smith It depends on how rapidly you go. The 2012-2025 pace goes too fast.

L* Is the long-term target too costly?

Smith* It’s aggressive and costly but doable.

Smith There would be no differences in the near term environmentally for a looser cap.

Smith US action would do nothing. Global action would be needed.

Lautenberg Don’t you know there’s melting happening all over?

Smith There’s ice melt in parts, and ice buildup in others. But I’m not debating that warming is happening.

Lautenberg Do you think Congress ought to require all coal plants to have the best technology?

Pershing I think Congress should add significant obligations. The cap-and-trade system effectively does that but other provisions could amplifiy that.

12:00 Craig Nuclear?

Darbee We think energy efficiency and renewables may obviate the need for nuclear, but there also may need be need for nuclear.

Coal about 3 cents per kilowatthour, nuclear today 4 cents, existing hydroelectric 3 cents, photovoltaic about 30 cents.

Craig Retirees from California are flowing into our state with our low-cost hydropower. We’re a clean state. WRI’s allocation preference? Free or not free?

Pershing We do believe the allocation should be phased out over time, the more quickly, the more economic efficiency. There are things you can do with the auction revenues. While the electricity price you pay may go up, the amount of electricity you may use may go down.

12:06 Sanders On page 12 of your written testimony you discuss a government report on concentrated solar power that by 2050 the cost could go to 8 cents by 2050. What do you see the potential of solar plants to be?

Darbee I failed to mention that new clean-coal technologies to be about 8 cents, new nuclear about 10 cents. We’re very excited about concentrated solar power because it’s cheaper than PV.

Sanders Am I wrong in saying that fossil costs are going to be going up steeply?

Darbee With solar there’s no input costs or input uncertainty. And the technology is simple.

Sanders How much electricity can we be generating?

Darbee The potential in the sunny parts of the United States, we could deliver more solar-thermal power than nuclear. Very substantial.

Sanders They’re talking about solar plants producing seven times the state of California’s needs.

Darbee That’s conceivable, yes.

Sanders I want to explore the potential of clean coal. They’re talking about getting hundreds of billions of dollars of subsidies. With solar subsidies we could get costs down to 4-5 cents pkwh.

Darbee That’s correct.

Sanders I noticed in your remarks you talked about new sources. Can you elaborate?

Darbee If one gives enough allowances to coal plants, the costs for running them will be zero. Shifting allocations will change that.

12:12 Craig Let me ask this question. It frustrates me a great deal when we move money around that doesn’t produce clean energy. Is that not a transfer of wealth?

Pershing Of course. The question is to what end. The shift should be from high-carbon-intensive processes to low-carbon intensity.

Craig Your analysis implies that emissions reductions will be achieved by the transfer of industry to other countries.

Smith What you’ve described is what we call leakage. I did not say that the cap is not met entirely by leakage. I did say provisions are missing from the bill.

Thorning The targets are so tight it would clearly impinge on consumers’ lifestyles. It would require much dimmer lighting, much more emphasis on building efficiency. We need to look very carefuly at the challenges in this bill.

Craig How can we be certain a cap-and-trade system doesn’t suffer the volatility of the European system?

Barbour There was an over-allocation to industry. There was no provision for banking into the next period. We have yet to discover how well it will work; 2008-2012 is the first period of Kyoto compliance.

12:17 Whitehouse I’d be interested in anybody’s thoughts on how to police the integrity of the auction and trade system. We’ve seen overheated markets. We have the SEC to police the capital markets. We’ve had unpoliced markets in California energy. Enron traded in energy futures and that was a nightmare. There have to be some pretty major safeguards, especially when you consider the billions, perhaps trillions of dollars in the market. This thing right now looks like the Wild West. Where would you recommend we go for models?

Darbee We’ve given a lot of thought, having been in California during that time. In general the SEC is a good model. Many people think Sarbanes-Oxley may have gone to far. And monitoring of the synthetic instruments. Secondly we’d like to propose extending on the Fed model and work with a collar with a ceiling and floor where the board would borrow against the future to maintain the ceiling.

Pershing One comment—how can you monitor it effectively. The continuous emissions monitor. We need a registry and to allow for full transparency. Almost 40 states have been providing that registry.

Smith I’d like to comment on the idea of a collar. It would provide some certainty. The only problem is that a collar will not be viable to sustain unless those prices are consistent with the cap. A safety valve type ceiling is necessary.

Thorning The SEC you have buyers and sellers on opposite ends of the transaction. But when you have an ETS it can be in both parties’ interest to collude.

Barbour I think the legislation addresses that as well as we can.

12:27 Sanders I would say that in Burlington we’ve grown reasonably well over 16-20 years without increasing electricity consumption. What is the potential of energy conservation?

Pershing The models range quite extensively. Even China has a very aggressive energy efficiency program. Energy efficiency programs improve local pollution, create jobs, etc.

Darbee I’ve heard people in out industry suggest the technology doesn’t exist. It does. We have actually entertained delegations from China. They’re gobbling up that information. They want to be more competitive than they are today. There is a lot we can do today just with energy efficiency. Waiting is not the appropriate course of action.

12:30 Sanders This hearing is adjourned.

Sanders and Barrasso introduced several other amendments which were not adopted. Here are some:

Sanders Update: See this post for more on the Sanders amendments

• Amendment 1 would have designated most of the funds in the zero/low-carbon emissions fund for solar, wind, and geothermal energy. Sanders pointed out that the bill has explicit funding for coal, cellulosic ethanol, and the auto industry but none for renewables.
• Amendment 2 would have replaced the advanced tech auto funding with funding for local and state energy efficiency grants. Sanders argued that the auto language was too weak to ensure any benefits, saying “If we do not act aggressively Detroit will be shutting down and moving to China.”
• Amendment 4 would give EPA authority to revise targets. Withdrawn after suggestion to work on issue by Lautenberg to have EPA action with Congressional veto
• Amendment 5 would have moved to full auction of allowances by 2026
• Amendment 6 would have put a moratorium on new coal-fired power plants that do not capture and sequester at least 85% of their emissions.
• Amendment 8 would have replaced the 15% offset allowance for companies with a system-wide cap on total offsets purchased. The amendment was supported by U.S. PIRG, UCS, and NRDC.
• Amendment 9 would have required economy-wide cuts by 15% by 2020 and 80% by 2050. Lieberman voted no, arguing that the 63% cuts would keep concentrations below 550 PPM by 2100 and saying “Your amendment would break the coalition and have possible other negative impacts.”

Barrasso

• Amendment 1 would have set up the Rocky Mountain Center of Coal Studies at the University of Wyoming.
• Amendment 2 would have supported high-altitude Western state (Wyoming) coal gasification demonstration projects.
• Amendment 5 would have pushed back coal capture and sequestration targets.
• Amendment 8 would have sunset the bill in five years. Barrasso said that China and India need to implement cap-and-trade programs in that time period.