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REP. JAY INSLEE (D-WA): Thank you. Mr. Connaughton, the last time we were together was it, I think, the (Chorzow power ?) coal plant, which may be Europe's first coal sequestration plant, if things go well for them. And we were excited by that because if that technology works it could be of benefit, but the only reason it will ever be implemented is if we have some economic incentive for it to be implemented, leading us to conclude that we need a cap and trade system to create an economic incentive for that and a whole host of technologies to be implemented. So I would like to ask you if the President will sign a cap and trade piece of legislation passed by this Congress this year.
MR. CONNAUGHTON: As you know, Congressman, we don't comment on specific pieces of legislation that haven't been proposed yet, but we have been, as you know, willing to be quite constructively engaged in this conversation. I would observe when it comes to incentives there are positive and negative incentives. We employ both. And when it comes to carbon capture and storage, because the technology is not yet available, I think most of the emphasis is going to have to be on the positive incentive side because of the ease with which we can fuel switch in America out of coal to natural gas and other sources. And so that creates its own basket of problems, so I just wanted to be sure as we work on this together, that we're thoughtful about that unintended consequence.
REP. INSLEE: Are you going to encourage the President to address the issue of a cap and trade system in the State of the Union speech? And the reason I suggest that would be helpful is that when we went to the moon, Kennedy went and urged us to go to the moon; we need presidential leadership on this. Will you be suggesting to the President that he address the parameters of a cap and trade system that could help us in this challenge?
MR. CONNAUGHTON: One, we don't comment on State of the Union, and my advice and counsel to the President is between me and the President. I would observe that we are very focused on the next steps after last year's energy bill. I would observe that we do see a lot of common ground on advancing the carbon capture and storage agenda, and doing that appropriately; we see a lot of common ground on making sure we stay -- our eye on the ball on the alternatives to petroleum. So I think you will see dedicated action from us on those issues among others. Nuclear is critical, too, and I know we have a little bit of a difference there. But these are all critical, we need action on all these fronts, not just a single front.
REP. INSLEE: So do you believe that we can design a cap and trade system that will inhibit CO2 emissions and help grow our technological response to this? Do you believe we can do that?
MR. CONNAUGHTON: I don't know yet.
REP. INSLEE: And what could we do to help you get over that hurdle, to help us develop more momentum for a cap and trade system, because presidential leadership is important in this, and presidential inertia could also be a drag on our ability to move this legislation. What could we do to help the administration clarify its position, because I think clarity and telling us that this is within something of the realm of the president could sign could be helpful for us in moving this forward. What could we do to help you get over that hurdle?
MR. CONNAUGHTON: Well, I think, first it's going to be important that this committee in particular, and I'm glad the chairman has started so quickly with this set of discussions, is to do a stock taking on what we've got and then tailor what more we need to that. I haven't seen that occur, yet, that's going to be very important. One thing of concern we would have is the idea of putting a mandate on top of a mandate. And so we want to make sure that we've got a regulatory system working in close harmonization with our incentives, the positive incentives, with also then with the private sector initiative. And so it's just going to take a little bit of thought, and if we do that we can simplify. Right now what we see in the Senate are a number of proposals that are highly complicated and highly constituent interest group focused and I think that's not a recipe for success.
REP. INSLEE: So let me ask you this. It is clear, it is absolutely clear, if you'll disagree tell me, but I think it's absolutely clear that for coal sequestration technology ever to be implemented, because it will involve some work, some cost, some investment, there will have to be some economic incentive for its deployment. Now that could be a positive incentive or it could be a negative incentive. I have to have some incentive and you agree with that.
MR. CONNAUGHTON: It has to be positive. We need an incentive. How we structure it matters, but we need an incentive.
REP. INSLEE: It is certainly my belief, and I think most economists who evaluate this, that there has to be some disincentive for putting CO2 in the air to make carbon sequestration through coal technology economically viable. Do you agree with that assessment?
MR. CONNAUGHTON: No, I think we're mixing two different pieces. An incentive, whether it's structured as a positive or negative one, generically will drive more investment toward lower CO2; but when you're looking specifically at the issue of coal and capture and storage, because of the opportunity to substitute something else, or because the opportunity just to shut down operations and move your manufacturing and demand someplace else, you could actually delay the desire to make the investment necessary to prove carbon capture and storage because it's not proven yet.
So step one is you've got to prove the technology, get the liability regime in place, and get the cost within reach; then some of these other deployment strategies, whether it's on the positive or the negative side become effective. That's what we did with SO2. There was a very dedicated period of developing the technology before the system of positive and negative incentives were put in place. So we have to sequence it, and actually the chairman in some of his white papers has done some thoughtful discussion of that, and I think that's where we've got some constructive ground. And again, I'm happy to engage, daily as need be, just to make sure we're getting to the bottom line on some of these questions.
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