Senate Commerce, Science and Transportation Committee Holds Hearing on Global Warming

MCCAIN:

Good afternoon.

The National Academy of Sciences said greenhouse gases are accumulating in the Earth's atmosphere as a result of human activities, causing surface air temperatures and subsurface ocean temperatures to rise. Temperatures are, in fact, rising.

The changes observed over the last several decades are likely mostly due to human activities. But we cannot rule out that some significant part of these changes is also a reflection of natural variability. I want to repeat, that is a conclusion of the National Academy of Science.

Over the past five years, the Commerce Committee has held several hearings on climate change. Two of the last five years, 1998 and 2002, have been the warmest in terms of average global temperatures ever recorded. According to a recent report from the National Oceanic and Atmospheric Administration, NOAA, nine of the warmest years have occurred since 1990.
As reported in the "New York Times" on December 31, 2002, many experts think it's more likely than not 2003 will either match or exceed the 1998 average temperature record of 58 degrees Fahrenheit. Researchers at the University of Texas, Wesleyan University and Stanford University recently reported in the journal Nature that global warming is forcing species around the world, from California starfish to alpine herbs, to move into new ranges or alter habits that could disrupt ecosystems.

The report stated that there is very high confidence, defined as having more than 95 percent of observed changes which were principally caused by climate change, that climate change is already affecting living systems. The end result of these changes could be substantial ecological disruption, local losses in wildlife and extinction of certain species.

This and many other reports over the years have highlighted, time and again, the consequences of a warming climate system. We've seen the destruction of heat-sensitive coral reefs, the melting of glaciers at unprecedented levels, the increase of wildfires and the spreading of diseases. A large German insurance company has estimated that global warming could cost $300 billion annually by 2050 in weather damage, pollution, industrial and agricultural losses and other expenses.

Our international partners, the states and private industry are reacting to this challenge. For example, California has enacted legislation that will regulate tailpipe emissions of greenhouse gases. The European Union just recently approved an emissions trading system. The World Bank has estimated that greenhouse gas trading will be a $10 billion market by 2005. Final ratification of the Kyoto Protocol rests with Russia.

Industry is also paying attention to what's happening. Law firms and insurance companies are setting up business units to deal with climate-related risk. Thus far, however, little has actually been accomplished to reduce greenhouse gas emissions.
The United States must do something. But it must also do the right thing. Many have focused on what we do not know or the uncertainties around climate change. I prefer a more sound and scientific approach of staring with what is known or given and then proceeding to solve the problem at hand.

We cannot say with 100 percent confidence what will happen in the future. We do know the emission of greenhouse gases is not healthy for the environment. As many of the top scientists throughout the world have stated, the sooner we start to reduce these emissions, the better off we will be in the future.

In 2001, Senator Brownback and I began working to develop a solution to the climate change problem and introduced legislation that proposed creating a registry system that would facilitate the trading of credits for the reduction of greenhouse gases. Several provisions of that bill were contained in last year's Senate-passed Energy Bill.

Also in 2001, Senator Lieberman and I announced our intention to develop legislation to require mandatory reductions in greenhouse gas emissions and provide for the trading of emission allowances. We have been working with industry and the environmental community to develop legislation to move the country in the right direction and demonstrate leadership on this important issue.

It will be the first comprehensive piece of legislation in this area. Not only will it not place the burden on any one sector, it would allow for the partnering across sectors through the trading system to most effectively meet the required reductions.
The bill, which we hope to introduce in the near future, will propose a cap-and-trade approach to reducing greenhouse gas emissions. It would require the promulgation of regulations to limit greenhouse gas emissions from the electricity generation, transportation, industrial and commercial economic sectors. The affected sectors represent approximately 85 percent of the overall U.S. emissions for the year 2000.

The bill also would provide for the trading of emission allowances and reductions through the government-provided Greenhouse Gas Database, which would contain an inventory of emissions and a registry of reductions.

Given the far-reaching implications of this issue, the secretary of Commerce and the administrator of the Environmental Protection Agency, or their designees, have been invited to testify here today. Although the EPA did not provide a witness, I am pleased that Dr. James Mahoney of NOAA has agreed to appear and discuss the scientific research that we all agree should be the foundation of any action taken in this area.

I also thank the other witnesses here today for testifying and helping us understand the issue and its implications of the legislative proposal. I look forward to hearing how the rest of the world, the states, the industry are addressing climate change.

The United States is responsible for 25 percent of the worldwide greenhouse gas emissions. It's time for the United States to do its part to address this global problem. And a discussion of mandatory reductions is the form of leadership that's required to address this global problem.I thank my colleagues for their forbearance. That will be the longest opening statement I intend to give as chairman of this committee.

(LAUGHTER)

But we're talking about a very difficult, a very complex and a very controversial issue, but one which I think is of the absolute most critical importance to the future of this nation and the world.

MCCAIN:

Thank you very much, Dr. Mahoney. And your complete statement, which is a very detailed and helpful one, will be made a part of the record. Thank you for appearing here today.

As you have heard discussed a couple of times here, according to your organization, NOAA's data, the 2002 average global temperature was the second warmest on record. The 10 warmest years have all occurred since 1997, with nine of them since 1990.

The Greenland Ice Sheet suffered from the greatest surface melt in the 24-year satellite record in 2002. Many are predicting the global average temperature in 2003 will match or exceed the record 1998 temperature. I could go into many other manifestations of this situation, such as 70 percent of the coral reefs in the world dying, et cetera.

Some of these stories are anecdotal. Many of them are backed with scientific evidence.

How do you explain the significance of all this data?

MAHONEY:

Well, Mr. Chairman, first I'd begin by noting your opening statement began with a quote from the National Academy of Sciences report, the report requested by the administration in 2001. I note that the same quote begins my statement about our strategic plan.

And I think there is a commonality here; that is, we have a body of evidence. We asked the academy to review it.
The IPCC, the intergovernmental panel on climate change, has reviewed this extensively. The U.S. is a major participant there. We are deeply involved in the fourth assessment report planning for IPCC these days.

And in all of that body of evidence, I think we could draw two conclusions—and the president has drawn this as well—that is, that we do have evidence of global change. I think it's important to cite that there are substantial uncertainties about causes. And because of that uncertainty about causes, there is also substantial uncertainty about the mitigation methods that might be effective in time.

So I would not use the time of this committee to try to debate the question of—on my part, I wouldn't sit here and try to debate, yea or nay, is there any evidence of global change? I believe that the president has said that there is. And I believe he has laid out a program, which is aimed at trying to address, on the science side, questions of: let's better understand it. And let's understand, in particular, what we do about it. Because that's not easy to see.

And he has laid out a program to enhance these technology initiatives and a program of a series of steps that are intended to reduce the emissions that would occur otherwise.

So on the point you started with, and I'll stop my answer there, I wouldn't presume to argue your basic point back to the committee.

MCCAIN:

I know that you know what I'm trying to get at here. The National Academy of Sciences went on to say that greenhouse gases are accumulating in the Earth's atmosphere as a result of human activities, causing surface air temperatures and subsurface ocean temperatures to rise.

And I think, in all fairness, at the end he said, "We cannot rule out that some significant part of these changes is also a reflection of natural variability."

But they conclude that it's a result of human activities. And the criticism that has been directed at your very noble efforts is that the U.S. has invested about $20 billion over the last 10 years in research in this area. And yet, as I understand it—and perhaps you can help me out here—the administration's position is that we need to do more research, rather than take concrete action.

Is that an inaccurate characterization of what you're doing?

MAHONEY:

Senator McCain, I believe it's inaccurate. I would—and I think neither I nor you would argue against more research in its place. So I'm not going to say that I have a problem with that part. Yes, we need more research for a number of reasons.

But I fundamentally dispute the concept that there is no action being taken by this administration otherwise.

MCCAIN:

What action could you tell me is being taken?

MAHONEY:

I think there is substantial action underway in the technology development area. I think there is substantial action underway in the voluntary emission reduction program.

And I would note one part of that, because I have had the chance to participate in the administration senior management review and development of that plan, I am delighted, under American jurisprudence, that we are beginning with a voluntary program among companies. And there are many. There are, for example, 31 corporations now in the EPA Climate Leaders Program who are willing to join into the 1605(b) Major Emission Reduction Program voluntarily right now.

In my view, if we started at the beginning with a mandatory program, I would see the possibility of years of litigation about the "devil in the details" kind of issues. How do we credit things when a company sells a division or closes this or opens something else and the like?

MCCAIN:

They're doing that pretty successfully in Europe. Not mired in litigation with a cap-and-trade practice in the European countries.

MAHONEY:

Well, my comment included the comment of the American jurisprudence system. It's my observation that we might well see, under property rights arguments, major challenges to some of those issues under a mandatory system.

I personally believe that we have the opportunity to prove concepts by engaging those companies—and there are many—who are willing to take this up effectively at this time.

MCCAIN:

Well, I thank you, doctor. We just, I guess, have a fundamental difference of opinion. I don't think a voluntary program meets the urgency of the situation. And to somehow believe that it would be bogged down in lawsuits, I just don't envision that, because we pass laws all the time that require certain actions to be taken in order to comply with the law.

But I thank you. I do appreciate a lot of the work that you are doing. I would be interested in hearing more about the technology that's being developed.

But I would hope also the administration, in its deliberations, would look at what is being accomplished in Europe in the cap-and- trade business which, according to predictions, could be as much as a $10 billion business in a few years.
I thank you for appearing today, Dr. Mahoney. And we look forward to working with you.

MCCAIN:

Thank you, Dr. Mahoney.

Let me just tell you what bothers me a little bit about the voluntary thing before we close here. And there is an article by John Fialca (ph) in the Wall Street Journal. The Bush Administration, Mr. Samuel Bodman, who you work with, deputy secretary at the Commerce Department, said, "U.S. emissions are expected to grow by 30 percent during the next decade, resulting in a net increase of 12 percent if the Bush target is achieved." That is a little disturbing.

But I want to thank you, Dr. Mahoney, for being here today. We look forward to working with you. And I think that the event that you held recently was very helpful in educating a lot of people about the issue.

And we look forward to working with you. Thank you for appearing here today.

MCCAIN:

Thank you very much, Mr. Overbey.

Ms. Claussen, one of the objections to Kyoto—and there are several—is that developing nations are not included. And therefore, it is assumed that they will then generate more and more greenhouse gases and even gain some kind of competitive advantage over the developed countries, particularly the U.S.

What has been your experience with what developing countries have done? And how do you view this issue, in light of your experience?

CLAUSSEN:

Well, let me start this way. I think you have to look at this issue in terms of concentrations of greenhouse gases in the atmosphere. And I think if you look at what is up there now, the developed world is responsible for most of it. And I think it is quite fair that developed countries take the lead in doing this.

That said, you can't really solve this problem unless eventually everybody is a part of it. And so developing countries do have to play a more and more active role.

Now if you look right now, there is activity in developing countries. They do have obligations under the Framework Convention on Climate Change. We have done some analysis that shows that they are actually reducing their emissions.

So it's not as if there is no activity taking place there.

The argument that we should not do something unless the developing countries do, I think, is not a useful one. And I actually am very disturbed by what the administration did in the last meeting in Delhi, where having first said that we should not be a part of Kyoto because developing countries don't have targets, went to Delhi and said developing countries shouldn't have targets, which just sort of strikes me as a rather bizarre way to approach this.

I think developed countries...

MCCAIN:

Tell me that again.

CLAUSSEN:

I mean, part of the reason we do not like Kyoto is because we have targets and developing countries do not. But the administration actually went to Delhi, the last meeting of the Conference of the Parties, and told developing countries, in a formal setting, that they should, in fact, not have targets because they should be concerned with poverty and other issues.

So it is sort of a difficult thing where they come here and say one thing and then go abroad and say exactly the opposite.

MCCAIN:

Don't get logical.

CLAUSSEN:

Well, if your goal is not to do anything at all, it is one way to achieve it.

MCCAIN:

Mr. Cogen, many people, despite the fact that it seems to be already or beginning to be in practice, are skeptical about this trading issue of carbon and greenhouse emissions. What's the current trading price of a ton of carbon dioxide?

COGEN:

Carbon dioxide is not a really well-defined commodity. It's a commodity by jurisdiction. We traded a U.K. allowance for one ton of carbon dioxide—but that's a very special system—yesterday at around five pounds. That's $7.50 for a metric ton.

The range is from ten cents a ton up to the highest trade I think we did was about $15.

MCCAIN:

Where do they get this figure that it will be a $10 billion business?

COGEN:

That I don't know. A lot of the models that people use look at comparatively high prices of carbon, which in these beginning markets at least, we have not seen.

MCCAIN:

What is your prognostication? Will this be a pretty going concern? Or is it sort of just a sideline to...

COGEN:

I think this is going to be a large international market. But from a tradable commodity, it's not the U.S. Treasury market or the gold market. It's more like the copper market. It's a substantial...

MCCAIN:

That's not too bad.

COGEN:

Not too bad at all. But on the other hand, it doesn't change the world each day.

MCCAIN:

Absent U.S. participation, how long do you think it will be before it's a pretty robust business?

COGEN:

I'd say over the next two years. Europe already has the rules pretty much in place. We're already looking at trading in anticipation of the final rules.

MCCAIN:

Mr. Krupp, you have said that since 1990, DuPont has succeeded in holding energy use at 1990 levels without economic loss, saving $325 million alone, $1.65 billion. Why don't other industries look at DuPont, ALCOA, et cetera? They are the exceptions, rather than the rule, aren't they?

KRUPP:

I think there are more and more companies that are looking at the future of the world and seeing that it is going to be a carbon-constrained future. And to the extent the biggest companies operate in many different jurisdictions and multinational companies, the future of that world is quite imminent because all the other industrialized countries except for us and Australia have signed on.

MCCAIN:

But if DuPont and ALCOA have actually saved money, why wouldn't a CEO or board of directors sit down and say, "Hey, this is a way we can actually increase our profits and our business."?

KRUPP:

Well, some of them are. I would say different companies are in different positions. So I wouldn't assert that all companies can save money by reducing their emissions. For some, there will be a cost.

But I think as more companies look, there will be a surprising number of companies that find out that there is actually savings from reducing waste. One of the things, Senator McCain, that one of our other partners, BP, found out was when they set up an internal trading system like the one sort of system that ALCOA, I've just heard, is contemplating, they found out that once they gave incentives to the different business units, 110 business units, that parts of the company that had never bothered to look at installing valves in Houston for methane pipes, they said, "Hey, if I can get a few dollars from another business unit that is going to increase their emissions for us to decrease the leakage of methane, it's worthwhile for us to do it."

And as a result of creating a hunt-down emissions reductions opportunities system, the cap-and-trade system that causes this hunt to go on, when they added up the benefits, they were surprised that they too saved several hundred million dollars in the process.

Not every company can do that. I'm not asserting that.

But I think if we give incentives for the American businesses to do that, we will not only have far lower costs than the doomsayers are saying, but we will also be innovating and develop the sort of products and processes that the world needs to have a robust economy while meeting this challenge.

MCCAIN:

Mr. Overbey, I understand ALCOA wants to reduce its greenhouse gas emissions by 25 percent below 1990 levels by 2010. Does that require some new technology?

OVERBEY:

It does not. It requires implementation of process changes and technologies of which we are aware. That's how we've been able to get to 23.5 percent already.

And fortunately, we have a technology exchange network worldwide in ALCOA that allows us to take learnings from one plant and rapidly move them to another plan so that those gains can be quickly achieved. So we believe we can achieve the 25 percent with process management and technology and without substantial capital to support it.

MCCAIN:

Ms. Claussen, you have heard me repeat the statement of the National Academy of Sciences ad nauseum. Do you believe that there is sufficient evidence that we should begin to act?

CLAUSSEN:

Absolutely.

MCCAIN:

The United State of America should act?

CLAUSSEN:

Absolutely.

MCCAIN:

Mr. Krupp?

KRUPP:

Absolutely.

MCCAIN:

Mr. Cogen?

COGEN:

I don't know about the science. I know from a business point of view, everyone else is going there.

(LAUGHTER)

MCCAIN:

Good elbow, Ms. Claussen.

(LAUGHTER)

MCCAIN:

Thanks for the straight talk, Mr. Cogen.

Mr. Overbey?

OVERBEY:

Our company, as I said, has already taken the position that we are no longer going to debate the science, but move forward with actions as rapidly as we can.

MCCAIN:

Can you divine the reasons, Ms. Claussen, why, given this overwhelming body of evidence, that there would be a reluctance, at least, to start beginning to put into place policies that would reduce the threat of climate change; i.e. reduced greenhouse gases?

CLAUSSEN:

No, actually, I really don't understand it. Because I think you can look at the companies that have already taken action—and there are 40 companies with target—and most of them have not found it to be very costly in the beginning because what they are doing is energy efficiency and improvements. And those things do not hurt the bottom line.

I mean, I think, if you look out 20 years, there are going to be real costs here. And I don't think we should shy away from that.

But in the early stages, I think virtually everyone has found that there are things that they can do that make a difference that are positive. And why we can't have a system that at least starts to get at some of that is absolutely beyond me. I just don't understand it.

MCCAIN:

I thank the witnesses for being here today.