Hearing of the Senate Energy & Natural Resources Committee on Cap & Trade Legislation Analyses

Hearing of the Senate Energy & Natural Resources Committee on Cap & Trade Legislation Analyses

Opening Statement

U.S. SENATOR PETE V. DOMENICI

Good morning and thank you, Senator Bingaman, for holding this hearing.

We have five cap and trade bills in the Senate and at least 11 attempts have been made to analyze them. Every single study - 11 out of 11 - has concluded that these bills would result in higher energy prices, lower economic growth, and minimal environmental benefit.

There are seven sets of analysis on the Lieberman-Warner bill alone. They don't agree on much - one study projects 264 Gigawatts of new nuclear plants while another projects no more than four - but all of them anticipate a negative impact on our Gross Domestic Product. Even those estimated impacts vary, however, from a low of $444 billion to a high of $4.8 trillion.

Addressing global climate change is one of the great challenges of our time. I have the greatest respect for the goals and efforts of each bill's authors, and I also appreciate the hard work that has gone into these studies. But a range of nearly $4.5 trillion is as massive as it is inconclusive, and I remain concerned about the dire consequences that Lieberman-Warner could have for our nation.

We must also remember that projections are just that, projections. The best estimates by our most capable minds often prove inaccurate. Take, for instance, EIA's projected oil price for 2010 as it appeared in their 2005 Annual Energy Outlook. I certainly hope that oil prices decline to $25 per barrel over the next 18 months, but right now we're paying five times that amount. On a projection just five years into the future, what a difference the past three years have made.

Even the projected environmental impacts of climate change have varied significantly. In 2001, the IPCC predicted that sea-levels would rise by three feet by 2100; in their latest assessment that number was lowered to between 7 and 23 inches. On a projection that sought to look a full century forward, what a difference the past seven years have made.

Compounding this uncertainty is perhaps the worst kept secret on Capitol Hill - that what was reported from EPW will be replaced by a manager's amendment. Very few will have been able to provide input on that amendment and even fewer will have had a chance to properly evaluate it. Today, this leaves us to learn about legislation that will never be taken up on the Senate floor.

Given what we lack in future projections, it is critical to look at what other countries have tried to do, including the signatories to what was supposed to have been a binding treaty. It caught my attention last December when President Clinton appeared on the Charlie Rose Show and lamented the fate of the Kyoto Protocol. He said, "A hundred and seventy countries signed that treaty and only six—six of 170—reduced their greenhouse gases to the 1990 level, and only six will do so by 2012 at the deadline."

One hundred and sixty-four out of 170 is a staggering rate of failure, and we should give that precedent the attention it deserves. If the Wright Brothers had been among 170 others seeking to be the first in flight, I am certain they would have wanted to know why all but a handful of their fellow aviators came crashing back to earth.

I am not endorsing the status quo, but our nation has done reasonably well compared to those who have implemented cap and trade programs. The European Union began operating its system in 2005, but according to the Wall Street Journal their carbon dioxide emissions have continued to rise by about one percent per year. During that same period, American carbon dioxide emissions actually declined by about one percent.

Any reasonable amount of time spent looking at cap and trade proposals leads to more questions than answers. While that may be acceptable for scientific endeavors, it is not a very sound footing from which to embark upon policy-making. One of these questions is particularly troubling.

Assume for a moment that the Congress passes, and the President signs, the Lieberman-Warner legislation. What then will we have accomplished for the environment? As it turns out, the answer is ‘next to nothing.'

This is a global problem, but without further international action, the Lieberman-Warner bill would reduce the atmospheric concentration of greenhouse gases by a mere one percent by 2050. To achieve that reduction, we may subject America's economy, prosperity, and global competitiveness to irreparable harm.

My concerns are no different than those shared by the full Senate in 1997, when on a vote of 95 to zero, we passed a resolution indicating that we did not support Kyoto. Our economy grew by 5 percent in the quarter before that vote. In the midst of robust growth, the Senate overwhelmingly rejected the idea of a treaty that did not include developing nations or "could result in serious harm to the United States economy."

With many factors now limiting our economy, which expanded by just 0.6 percent last quarter, today should be no different,. Our determination to involve developing nations in these efforts should be stronger than ever, since we now know that China has surpassed us in greenhouse gas emissions decades before they were estimated to do so. There is a fine line between success and failure in the global economy, and we must not let a disproportionate sense of urgency tip the balance away from our economic strength and competitiveness with emerging economies.

Addressing climate change is a great challenge, but it is not the only challenge that we face. Between 1990 and 2006, America's reliance on foreign oil increased from 42 percent to 60 percent, and as a result, nearly half a trillion of our dollars will be sent overseas this year for energy we are capable of producing at home. Our trade deficit ballooned from $81 billion in 1990 to more than $700 billion last year, and our national debt tripled, to over $9 trillion, during that same time period. These are bipartisan shortcomings that have played out over the course of decades.

During those same years, we did make progress on one front—and a front that is central to this debate. Between 1990 and 2007, the greenhouse gas intensity of our economy dropped by nearly 27 percent, even as many other problems became much more serious. We may see an increase in emissions in some years, but over the past two decades, our ability to reduce greenhouse gases emissions relative to GDP has been very instructive.

We have already experienced record prices for oil, gasoline, and other commodities this year. To me, it is more than a little ironic that the free market, which so many of my colleagues have criticized as responsible for those high prices, is the very same mechanism they ask us to trust for containing the costs associated with a cap and trade regime.

We, as a Congress and as a nation, must realize that cap and trade is neither our only option nor our best option for addressing global climate change. Rather than choosing among cap and trade proposals, we should look at alternative measures - promoting nuclear power; advancing clean energy tax incentives; and accelerating clean technologies.

The energy bills we passed in 2005 and 2007 are the equivalent of a clean energy Manhattan Project. There is no question that fully funding those measures, and the additional progress made possible by my Clean Energy Investment Bank legislation, would result in even lower emissions.

It will take decades to adequately reduce the global concentration of greenhouse gases, but the moment that matters most will arrive long before then. Soon, the Congress must decide upon the best approach to reducing our own emissions. Every cap and trade bill that has been analyzed would increase energy prices and lower economic growth. Furthermore, at home and abroad, they could prove ineffective at mitigating the global threat of climate change.

In closing, I remind my colleagues of the importance of choosing the right path for our nation on climate change, and the enormity of the consequences if we fail to choose wisely. I look forward to hearing from the witnesses and I thank them for appearing this morning.

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