Hearing of the House Energy and Commerce Committee - the U.S. Climate Action Partnership

Hearing of the House Energy and Commerce Committee - the U.S. Climate Action Partnership

HEARING OF THE HOUSE ENERGY AND COMMERCE COMMITTEE
SUBJECT: THE U.S. CLIMATE ACTION PARTNERSHIP
CHAIRED BY: REP. HENRY A. WAXMAN (D-CA)
WITNESSES: JAMES MULVA, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, CONOCOPHILLIPS; JIM ROGERS, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, DUKE ENERGY; FRED KRUPP, PRESIDENT, ENVIRONMENTAL DEFENSE FUND; JOHN ROWE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, EXELON CORPORATION; JEFFREY IMMELT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, GENERAL ELECTRIC; FRANCES BEINECKE, PRESIDENT, NATURAL RESOURCES DEFENSE COUNCIL; DAVID CRANE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NRG ENERGY; EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON GLOBAL CLIMATE CHANGE; PETER DARBEE, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT, PG&E CORPORATION; JEFFRY STERBA, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT, PNM RESOURCES; PRESTON CHIARO, CHIEF EXECUTIVE -- ENERGY AND MINERALS, RIO TINTO; GEORGE NOLEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, SIEMENS CORPORATION; MARK TERCEK, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE NATURE CONSERVANCY; JONATHAN LASH, PRESIDENT, WORLD RESOURCES INSTITUTE

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REP. WAXMAN: (Sounds gavel.) Meeting of the committee will please come to order.

We're here today for a hearing and before we even call our witnesses in the room, we're going to recognize members for opening statements.

Mr. Pallone, are you prepared for your opening statement?

The gentleman's recognized for five minutes.

REP. FRANK PALLONE JR. (D-NJ): Thank you, Mr. Chairman.

I want to first thank you all for -- well, I was going to say thank all the panel, but they're not here yet so I'll forgo that.

The U.S. Climate Action Partnership has shown tremendous leadership in calling for national legislation to slow, stop and reverse the growth in greenhouse gas emissions in the immediate future. It's encouraging to see such a broad coalition of leaders from the energy industry, financial services and the environmental community working together to reduce carbon emissions.

Everyone here understands the serious threat global climate change represents to the world. The fourth assessment report of the Intergovernmental Panel on Climate Change predicted serious risks and damages to species, ecosystems and human infrastructure if action is not taken to reduce emissions. It's time for Congress to pass legislation that will set the necessary emission reduction targets and will ensure that we meet those targets in the short and long term. We can't afford to wait another year to act.

Thank you, Mr. Chairman.

REP. WAXMAN: Thank you very much, Mr. Pallone.

The gentleman from Kentucky.

REP. ED WHITFIELD (R-KY): Thank you, Mr. Chairman. It's my understanding that we have a one-minute opening statement.

REP. WAXMAN: No. We're giving members five minutes.

REP. WHITFIELD: Oh, five minutes. Okay. Thank you, Mr. Chairman.

REP. WAXMAN: You don't have to take five minutes.

REP. WHITFIELD: (Laughs.) Okay.

Well, I want to thank the chairman for having this hearing today with testimony from the United States Climate Action Partnership.

I might note that last night I was looking at the website of the partnership and I noticed that a few months ago they conducted a poll in 46 swing congressional districts and in that poll they asked the question of whether or not stringent climate change enforcement efforts should be taken in the United States even though action would not be taken in China and in India.

And that raised an interesting question in my own mind because, with the economy being what it is today not only in the U.S. but around the world, I think if there's ever a time that we have to be cognizant and aware of additional costs to produce electricity, to produce energy, it is today, and particularly so if other countries are not taking the necessary steps to address this issue as well.

So I would also point out that I was reading an article in The New York Times just recently and it was talking about the cap and trade system in Europe. And it points out that in Europe, which created the world's largest greenhouse gas market three years ago, early evidence suggests the whole approach could fail. It specifically says that this week the European Environment Agency reported that emissions from factories and plants that trade pollution permits rose in 2006 over the previous year and it also rose the first two years of the operation of the cap and trade system.

So while the U.S. Climate Action Partnership is a strong advocate for some of these programs, I think that at this particular time in the history of our country, with the economy being what it is, we have to move cautiously to reflect upon the additional cost that anything we might do will bear on production of energy. And if the U.S. has an undue amount of that cost, then it certainly will place us at an economic disadvantage with other developing economies around the world.

So with that, I yield back the balance of my time.

REP. WAXMAN: Thank the gentleman for his opening statement.

Ms. Capps?

REP. LOIS CAPPS (D-CA): Thank you, Mr. Chairman, for holding this hearing with the U.S. Climate Action Partnership. My remarks will be limited to a minute, but I do want to thank these companies and organizations for their blueprint for legislative action and to let them know that it makes an important contribution to helping solve the global warming problem.

Our witnesses agree that now is the time for action. They agree on the creation of a mandatory economic-wide program to address global warming. They also agree on a more aggressive emission reduction schedule with significantly narrowed ranges. What is more, the companies and groups before us today also make clear that by acting now we can help, and not hurt, the economy. Through global warming legislation, we can drive the development of new technologies, we can create new American jobs, and we can support workers in the transition to a green economy.

It will be a challenge to enact meaningful legislation, but it can be done. And I join you, Mr. Chairman, in supporting that notion. We must face the challenge of global warming now. It is one of the great challenges of our generation, and with the help of groups and businesses like those in the Climate Action Partnership, this is a challenge we can and we will meet.

I look forward to the testimony of our witnesses and to passing the strongest global warming bill that we can.

Thank you, and I yield back.

REP. WAXMAN: Thank you, Ms. Capps.

Mr. Shimkus?

REP. JOHN SHIMKUS (R-IL): Thank you, Mr. Chairman.

A terrible start to hopefully a better year. It started yesterday. Now we're faced with a preparation time of one minute, now granting five.

My complaint yesterday was that it's important for USCAP to hear our comments. Of course, they are not here, and I understand they're doing a press conference. So it's more important for USCAP to do a press conference, probably with the vast majority of my colleagues on the other side of the aisle, versus hearing the concerns of over 670,000 people in my congressional district of how global climate change will cost jobs.

I'm going to hold the fossil fuel Democrats accountable. If there's any place you're going to be held accountable in this Congress, it's going to be in this committee. So if you're from a coal-producing state or a petroleum-producing state, you better get prepared to defend your vote as global climate change will destroy the fossil fuel industry. So I'm just giving you notice, if on the floor we can't get these amendments on the floor, you will be held accountable in this committee if we proceed through regular order on the movement that will destroy coal in this country. It will destroy crude oil production in this country. So be prepared for a battle.

I can't address the staff. They're not here. It's interesting in their first release of their report, guess what they have. It's not in the new one. We only got this -- I mean this was released an hour and 15 minutes ago. In their first release what do they have as a picture in their portfolio? They have a trading floor -- a trading floor. My question is: Why is that trading floor no longer in this report? You know why? Because we're bailing out Wall Street because of traders who abuse the system.

Let's develop -- this is a great idea -- let's develop a trading floor for U.S. emissions and let's let the big-money folks at Goldman Sachs control it. Is that a great idea? In this environment, that's what's being proposed.

I've talked in this committee numerous times about a carbon tax. At least it's honest. Because climate change does a simple premise: it monetizes carbon; it puts a value to carbon. And someone is going to pay that cost. Now the cap and trade system is a shell game to hide the cost from the ultimate person who's going to pay. And who is that person who's going to pay? The person who's going to pay is the individual consumer because industry is going to pass those costs on.

Great idea in a struggling economy -- the best thing we can do to help the economy move forward is increase the cost of energy, when we can only be competitive in a worldwide environment if we have low-cost fuel. We saw part of this recession is because we don't have a diversified fuel portfolio. We have been sending signals to the fossil fuel industry that we do not want to use your low-cost fuel, and what has happened? The supply and demand curve increased the cost. Now we have low-cost fuel. Why? The economy's in a recession. Do we want to continue to move in that direction? This, my friends, guarantees it -- guarantees rural America, coal-producing states more job loss.

How do I know this? It's happened. Go back to the Clean Air Act. Go back to my congressional district. Go back to the numerous coal mines. I've got a picture being produced, sent to me in Kincaid, Illinois, a great picture -- all these miners, all this equipment, all these facilities no longer there, closed. And I know those folks who are from coal-producing states understand.

And, again, I appreciate this extra time, Mr. Chairman. I fear that giving USCAP the opportunity to roll this out in a press conference instead of hearing the concerns from the people in my congressional district is a terrible, terrible, bad start on a very important issue that will take bipartisan activity.

And I will again just put my fossil-fuel Democrats on record. They know the work we did in the last Congress of raising the issue of coal on the floor of the House. With new rules we may not get that chance. I can guarantee you -- I can guarantee you -- coal -- you will get a chance to vote in support of coal as this legislation moves forward.

I yield back.

REP. WAXMAN: Thank you very much.

Ms. Harman?

REP. JANE HARMAN (D-CA): Thank you, Mr. Chairman.

I want to say to you that I appreciate the opportunity to give a brief opening statement. I think it will afford especially our new members a chance to put their views out, and I know based on your history that you will conduct this committee in a way that does give the newest members an opportunity to be heard. So as a fairly old member, I want to thank you on their behalf.

One of my children's favorite books was called "It's a Terrible, Terrible, Very Bad Day," by Judith Viorst, a wonderful Washington writer. Unlike Mr. Shimkus, I don't think it's a terrible, terrible, very bad day. I actually think it's a pretty terrific first hearing for this committee, and I look forward to being back when our witnesses will testify and to putting a few views forward.

USCAP is a partnership between public policy nonprofits and the private sector, and I want to say that in my view, public-private partnerships can work and the model is an excellent one for us to use as the basis for legislation, critical legislation that we are going to be embarked on in the energy area.

This committee, for example, helped broker a public-private partnership on a range of energy efficiency issues in our 2007 Energy Independence and Security Act. Congressman Upton and I were extremely active on one of those partnerships regarding energy efficiency, energy-efficient light bulbs. We worked with leading environmental groups like the NRDC and the lighting industry, including Philips and Mr. Immelt's General Electric.

It wasn't an easy process; the parties started negotiations very far apart. But with lots of work and the willingness of all sides and both sides of the aisle on this committee to listen respectfully to each other, we managed to craft groundbreaking legislation.

We banned the 100-watt incandescent light bulb and required all lighting sold in the United States to be 30 to 40 percent more efficient than it is today by 2014 and 300 percent more efficient by 2020. We laid the groundwork for bringing lighting manufacturing back to the U.S. and to overcoming concerns about mercury, which is in some of the existing light bulbs presently produced.

I think that our public-private partnership can be a model for future legislation, including legislation on the subject of climate change, and I think that USCAP will help us craft legislation that is both far reaching and driven by consensus.

I hope this committee and our witnesses will use the public- private partnership model as we move forward. And again, I thank you for the opportunity to put my views out there.

REP. WAXMAN: Thank you very much.

Mr. Shadegg?

REP. JOHN SHADEGG (R-AZ): Thank you, Mr. Chairman.

I would begin by expressing my support for the comments made by my colleagues Mr. Whitfield and Mr. Shimkus. I think we ought to talk about the procedure for this hearing because I am deeply troubled by it. And I won't make a judgment call as to whether it's fair or appropriate; I'll let the public and the people in this room make that judgment call.

To my knowledge, this is the first time that in a routine hearing for this committee members have been compelled to give their opening statement without the witnesses present. That is one of the opportunities where we as a member of the committee get an opportunity to express ourselves to the full panel about an issue.

It was a concern expressed in yesterday's debate about the denial of opening statements to the members of the panel. But today I don't get the chance to make my concerns about this issue apparent to the members of the panel during an opening statement. Instead, as Mr. Shimkus noted, they are holding a press conference, I understand, over in the Cannon Building, where they can't hear me express either my concerns or the concerns of my constituents about the issue, point one.

Point two, the minority was told that it could not have a minority witness on this panel; if it wanted a minority witness or a minority panel, it had to have it on a separate panel, and they had to be prepared to talk about this report, which was issued only, as my colleague Mr. Shimkus noted, an hour and 15 minutes ago. Pretty difficult to ask a witness to come before a United States congressional committee and be prepared to answer questions about a report that they have for only an hour and 15 minutes. And so the minority declined to have any witnesses. I think that's a stifling of the minority's rights.

Next we are told that these witnesses will have a very limited time, indeed, that the distinguished CEOs who will be here -- the chairman of ConocoPhillips, the chairman of Duke Energy, the chairman -- or president and CEO of Exelon, the chairman and CEO of General Electric, the president and CEO of NRG, the chairman and president of PG&E, the chief executive of Energy Rio Tinto, the president and CEO of Siemens -- all are on a very limited time period, and they can arrive here at 10:00 or 10:30 but will have to leave by 12:30. So therefore, Congressman Shadegg, it's highly unlikely you'll get a chance to ask them any questions, but certainly Mr. Gingrey, at the bottom of this dais, will not get to ask them any questions, again, a repression of the ability of the minority to express its views -- forget majority majority -- just of congressman to express their views to the members of the panel. Now, I am deeply troubled by that.

I share Mr. Shimkus's concern about the effect of carbon cap and trade on this economy. I worry about its impact on jobs. I would like to on the substance of this hearing make the point that I believe we need to act prudently. There are many things that we can do right now to reduce greenhouse gases that will have two benefits, not just one. There are other things that we could do right now to reduce greenhouse gases that will have only one benefit and will have a significant cost.

Let me explain that. If we as a Congress were to require dramatically more efficient buildings in this country, buildings that were built by landlords who didn't care about how efficient they were, to make them more efficient, that would both reduce greenhouse gases and reduce our consumption of energy in general and reduce our consumption of foreign oil -- good policy, two benefits. If we were to do the same with homes, two benefits: reduce greenhouse gases and reduce our consumption of energy and our consumption of foreign oil; same with more efficient automobiles, alternate vehicles, alternate fuels, wind fuel, solar. There are lots of things we can do that will have two benefits. It will reduce greenhouse gases and also reduce our use of energy in general and reduce our reliance on foreign countries, some of whom are not our friends, for energy period. But we don't get to discuss that today because we're only discussing cap and trade. Cap and trade, I would suggest to you, is a single-benefit strategy. It will not reduce our consumption of energy. It will not reduce our consumption of foreign oil.

But I don't get to tell the executives who are coming here any of that, because I don't get that chance. I want them and their lobbyists to know that I intend to submit questions in writing to them to find out if those CEOs came here by corporate aircraft, if they have calculated the carbon footprint of their corporate aircraft, if they know how much it will cost their company to buy the carbon credits to keep all of their corporate aircraft in the air, and if they are willing to report that cost to their stockholders in their annual report so that, as Mr. Shimkus points out, the cost of buying these cap and trade permits, which is going to be borne by the American public and is going to cost us jobs, is known.

I agree with Mr. Shimkus. A straightforward carbon tax would tell the American people what this costs. A cap and trade system is designed to hide that from the American consumers, and the American consumers deserve the truth.

I thank you and I yield back.

REP. WAXMAN: Thank the gentleman.

Just for the record, the members should know the following: The purpose of a hearing is to hear what the witnesses have to say, not to tell the witnesses just what we have to say. But we will have an opportunity to ask questions of the witnesses or their designees if some of the CEOs cannot stay. So members are not going to be denied the opportunity to be questioned -- members aren't going to be denied the opportunity to question or make statements to the people from USCAP.

REP. SHIMKUS: Would the chairman yield?

REP. WAXMAN: And let me just finish this other point.

We did not set any criteria for minority witnesses that they had to say this or they had to say that. We had no requests for minority witnesses. This is not the last hearing on the issue, and we certainly are going to have many witnesses with many points of view.

Who asked me to yield?

REP. SHIMKUS: Mr. Chairman?

REP. WAXMAN: Mr. Shimkus.

REP. SHIMKUS: But it is true that many of these, the titans of industry, are leaving at 12:30, so the individual CEOs who we may want to ask questions of will not be there.

REP. WAXMAN: That's correct, and that was an understanding we had with Mr. Barton, because they are not going to stay, each of them, for the whole hearing. But there will be their designees to answer questions who are very familiar with their proposal.

REP. SHIMKUS: And with all due respect, I don't want to talk to the designee. I want to talk to the CEOs.

I yield back.

REP. WAXMAN: Let's see. The gentlewoman from California, Ms. Matsui.

REP. DORIS MATSUI (D-CA): Thank you, Mr. Chairman. And I thank you very much for calling today's hearing. I applaud your leadership and vision on this critical and pressing issue.

I'd also like to commend Chairman Markey on his tireless work focusing our attention on the problem of climate change. I'm eager to work with both of you and with all my colleagues on this committee and on the Energy and Environment Subcommittee.

In my hometown of Sacramento, we live at the confluence of two great, beautiful rivers. The constant threat of flooding makes it even more urgent than ever that we address the issue of climate change. Unless we take action now, our way of life in Sacramento and California and across this nation will be changed forever.

I look forward to hearing from each of today's witnesses about how we can advance solutions that are effective, innovative and efficient.

Again, thank you for your leadership on this issue, Mr. Chairman. I yield back the balance of my time.

REP. WAXMAN: Thank you very much.

The gentleman from Oregon.

REP. GREG WALDEN (R-OR): Thank you very much, Mr. Chairman. And I want to cover a couple of points.

I had the opportunity as did several of my colleagues last summer to spend an evening with some of these CEOs talking about their ideas and their proposal for cap and trade. And I remember asking the CEO of General Electric at this dinner, I said -- and the others -- I said now, in order for a cap and trade system to work, you have to price energy higher than it is today. And they all agreed with that.

And I said, well, you have some of the smartest financial people in the world working for your companies; how much more does energy have to be priced at to create a trading market? And they hemmed and hawed a bit and I threw out the idea of like ($)20 to $25 a ton of carbon, which I think is what it trades for in Europe. And they didn't disagree with that.

And I said, so the price of energy will naturally be higher once you assume you have to have a higher price to create a market to trade in, and they agreed.

I said, so if the price of energy is higher as a result of the policy that Congress adopts and I'm supposed to go home and sell to my constituents as good for them and for the country and the globe, then would each of you and I would ask them this today if I get a chance -- commit in your companies not to chase cheaper energy elsewhere in the world for your manufacturing? I think that's a pretty simple request. None of them would commit to that and said so.

So it strikes me as odd that at a time when our country is facing unprecedented economic problems that we have these CEOs asking for higher energy costs but unwilling to commit not to chase cheaper energy elsewhere in the world for manufacturing. That bothered me a lot.

Now, I'm not sure what they're about, to tell you the truth. I do know as I look at the people who are involved, they're very, very respected people and companies, but I also recognize some names that frankly the taxpayers are having to bail out right now, like AIG. And many of these companies I think would benefit from whatever happens in a cap and trade proposal, especially if you are a trader.

In meetings I've had overseas with some of the European leaders and all, it seemed to me over time the people most aggressively advocating a cap and trade system were those who were going to be trading in it. And it bothers me because, when we look at what we're going through right now because of the way debt was traded, derivatives and all of those new instruments we're learning about, and the utter collapse of our economy as a result, it perplexes me that we're going to create in theory a new system of cap and trade by driving energy costs higher with no guarantee jobs won't go overseas.

Now, having said that, I'm proud to come from the state of Oregon. I'm probably the only member of my congressional delegation that drives a hybrid in Washington and one in my home district, and I believe in conservation and recycling. It's part of our heritage as Oregonians. And I think we've done a lot in the last nine years or so on improving the environment. Renewable fuels, for example: since 2001, it's a 500 percent increase by 2022. Vehicle fuel economy: a 40 percent increase will occur by 2020. Lighting efficiency -- many of us on this committee have supported the bipartisan effort to improving lighting: a 25 to 30 percent lighting efficiency improvement by 2012 to 2014 and 70 percent by 2020. Appliance efficiency standards up 45 percent since 2001. Federal government operations -- bigger than most countries, by the way, just what operates in the federal government: we've already put in place a 30 percent efficiency and 20 percent renewable fuel use by 2015. Renewable power: 26 states now have that requirement and it's a 500 percent increase to date. Building codes: we've already said federal government promoting a new 30 percent model code. There are many things that we're doing that I think we can be proud of in this country in reducing our carbon emissions, in improving our efficiency, reducing our use of energy.

But the thing that remains here is there is no viable cap and trade -- or, I'm sorry, no viable carbon capture and storage technology readily available in the commercial market today, and I'll get into that more later on, I hope. But before we create new standards and requirements, we better make sure we understand what's going to happen to our economy and what technology's available.

Thank you, Mr. Chairman.

REP. WAXMAN: Thank you, Mr. Walden.

Ms. Christensen?

DEL. DONNA CHRISTENSEN (D-VI): Good morning. Thank you, Chairman Waxman.

And let me take this opportunity at our first official hearing to say what an honor it is that I have been selected to serve on Energy and Commerce, and I look forward to productive tenure on this committee working with you and my colleagues to address issues that come under our jurisdiction that are some of the most challenging in our nation. And climate change is one of these and perhaps considered the greatest challenge facing the world today.

In my district, the U.S. Virgin Islands, and the entire Caribbean region, we're very concerned, of course, about its impact on sea levels, changing weather patterns and, most importantly right now, the bleaching and loss of our coral reefs, coral reefs that are so important to our food, the health of our sea resources, the livelihood of some of my constituents, and our tourism-based economy.

As a physician, a member of the Health Subcommittee, and someone who's worked for a long time on national health care issues, the predicted impacts of climate change on health are also frightening, especially because the troubling trends have already started and we have not as a nation taken any meaningful steps to reduce greenhouse gases and global warming.

So I look forward to the testimony of the partnership and the members who are going to be here with us today. Not surprisingly, cap and trade is a cornerstone of their recommended strategy. I would be very interested, though, in our panelists' comments and opinions on another proposal that I've recently learned about and which I find very intriguing, cap and dividends.

So I applaud the diversity of the partnership and the hard work that I know it must have taken to reach consensus on their call for action, and I look forward to their testimony and working with them and you on these important issues.

REP. WAXMAN: Thank you very much, Ms. Christensen.

Mr. Terry?

Who's next in the -- does it goes this -- oh, yes. The gentlelady from

REP. MARSHA BLACKBURN (R-TN): From Tennessee, Mr. Chairman.

REP. WAXMAN: Tennessee, yes.

REP. BLACKBURN: Yes. Thank you so much. I want to thank you for the hearing today, and I will be pleased if the witnesses are here to visit with us today. I join my colleagues in wishing that they would be able to stay and answer some of the questions that we have that are specific to the issue and specific to how their industries are planning to address this issue.

Just a couple of thoughts. Number one, I'm one of the ones on this committee that still has very serious reservations about the plans that we're hearing from the new president, what he is contemplating to stop the growth of greenhouse gases. I think that we have to look at some of the data that is coming in that addresses the issue of climate change and also certainly of cooling.

I've found it very interesting that England, for example, recently has experienced temperatures 2 degrees Celsius colder than Antarctica and that they've had an average temperature in '08 that was 1 degree Celsius less than '07. So when we hear the talk of global warming and we experience what we have experienced in my home state in Tennessee, with colder temperatures, and we hear data such as this, it does cause us to question the global warming science.

Secondly, the mandatory reduction in emissions on greenhouse gases through the cap and trade system, I think that the more we talk to those in business and industry the more we see the impact that this is going to have and the negative impact that this is going to bring to our economy, the transfer of wealth from industries and consumers to companies that are promoting inefficient and inadequate technologies, essentially picking winners and losers in the free market.

The European emissions trading system, when you look at that trading scheme, as they call it  and Mr. Chairman, I find that very appropriate, using the word, the trading scheme -- it provides, in my opinion, ample evidence of how companies game the system for their benefit. But even if the weaknesses of a cap and trade system are addressed, it will still reduce the availability of energy and drive up the cost of economic development, which is something we're actually trying to reduce right now. So this is not only counterintuitive. It appears that it will be counterproductive in many ways.

I also have concerns -- and I know we're not addressing this specifically in this hearing, but it is a related issue -- about the EPA regulating and moving to regulate greenhouse gases and the monster of a bureaucracy that that would require and the need to get permits for everything from cows to schools to churches for greenhouse emissions, and the economic slowdown that this would cause if we were all sitting around waiting for the EPA to issue a $175 tax per cow or $20 tax per hog. For our agricultural interests in our states, this just seems like a very cumbersome and counterproductive bureaucracy.

So we have plenty on our plate today, Mr. Chairman. I thank you for the hearing. I hope that it is a robust discussion of issues.

And I yield the balance of my time.

REP. WAXMAN: Thank you very much, Ms. Blackburn.

Next would be the gentleman from Ohio.

REP. ZACHARY SPACE (D-OH): Thank you, Mr. Chairman.

If I could just express what an honor it is to serve on this committee that deals with so many seminal issues at this crossroads in history.

I'd like to begin by offering my thanks to Chairman Waxman for holding this hearing today. I'm excited to have an opportunity to work with the members of this committee and organizations like USCAP to address the issues of climate change.

Climate change is a very real and very pressing issue facing this country, and we as members of Congress have a responsibility to address it. What remains is the question of how to answer the call to action in a responsible fashion that both lowers our nation's damaging emissions and protects the ability of our economy to grow. I believe that it is a goal that all of the members of this committee share and one we can work together to achieve.

I'm greatly encouraged by the work of USCAP in assembling some of the foremost energy producers and strongest advocates for environmental protection in the nation to proactively address this crucial challenge. I look forward to the testimony today and applaud the participating members of USCAP for their progressive, cooperative and aggressive approach to this critical issue.

I yield back my time.

REP. WAXMAN: Thank you very much, Mr. Space.

Mr. Gingrey?

REP. PHIL GINGREY (R-GA): Mr. Chairman, thank you.

And I join my new-member colleagues in expressing my gratitude and excitement about serving on the committee and this being the first opportunity to utter any words on the committee. I hope they won't come across as sounding too negative because certainly that's not my intent. But I do have some concerns both in regarding process and policy, and I would like to voice my strong concerns first off about the process by which today's hearing has been conducted by the majority.

The mission statement of the United States Climate Action Partnership pledges that the organization will work with Congress on these critical environmental issues. I am deeply troubled that despite this pledge, the majority has elected to give the members of this committee almost no time to digest the recommendations made by USCAP on climate change, although I firmly believe that the committee should not be dismissive -- and certainly I'm not -- of their report.

Mr. Chairman, I believe that we would be better served by the information given to members and staff less than 90 minutes ago if we were to hold this hearing on a future date. With more time, members could properly analyze and scrutinize the important work of USCAP so we could have a more engaging and productive hearing. Unfortunately, due to what seems to me like the political expediency of this organization for the majority, we will not have that opportunity for the American people.

So much of my concerns, then, for the process.

And regarding policy, you know, this cap and trade, which is going to be the focus of the hearing, we heard Mr. Whitfield earlier explaining the lack of really meaningful progress in the European nations over a two- or threeyear period regarding cap and trade where greenhouse gases have not been reduced. And I would hate to see cap and trade go the way of wetlands mitigation, community service in lieu of jail time, and some of these other things that sound so great on paper that really don't work out in the long run.

You know, in the report that we just got I see in the prologue it says, "In January 2007 we issued our call for action in which we joined together to call for prompt enactment of national legislation in the United States to slow, stop and reverse the growth of greenhouse gas emissions over the shortest time reasonably possible."

Now that was in January of 2007. I was a member of the Science Committee at that time. Our first hearing of the year was the Honorable Nancy Pelosi.

Our second hearing of the year, and it was a joint hearing with this committee, was former Vice President Al Gore.

Our economy was far different in January in 2007 than it is today, but USCAP goes on in this report to say today: "U.S. leadership is essential for establishing an equitable and effective international policy framework for robust action by all major emitting countries. For this reason, action by the United States should not" -- should not -- "be contingent on simultaneous action by other countries, i.e., China and India."

I say to my colleagues -- and I'll wrap it up with that, Mr. Chairman -- that there are no specific island nations in immediate danger of being underwater because of global warming and the rise in the sea level, but there are many economies, many companies -- General Motors, Chrysler, etc.  who are under water today. And I think we have a real crisis in our economy and this may not be the time for the United States to take that kind of a chance.

Let's take this slow and let's listen to what these folks have to say today, but let's don't jump to action too quickly, maybe like we did in the $800 billion bailout.

And I yield back the balance of my time.

REP. WAXMAN: Thank the gentleman.

The gentlelady from Ohio, Ms. Sutton?

MS. BETTY SUTTON (D-OH): Thank you, Mr. Chairman. Before I begin I'd like to thank you for holding this hearing and for getting us off to a quick start on an incredibly critical issue before this country and, frankly, the world at large.

I'm truly honored to be a part of this body, where we're going to seek solutions for these complex issues that face us as a nation and certainly, as a representative from Ohio, that face my constituents.

This is critically important to have these folks here today so that we can learn more about the members from the U.S. Climate Action Partnership and about how they think we can best advance our nation's energy policy. USCAP's alliance, which includes major industrial and energy companies and environmental groups, demonstrates that business interests and environmental interests can work together to pursue policy that will meet the multidimensional challenge before us. I'm encouraged by USCAP's efforts to work together as we discuss policies that will both protect our environment and spur the development of advanced technologies and jobs.

Make no mistake, it's critical that we find ways to effectively address global warming, and I'm looking forward to finding the right solutions that will concurrently preserve and create jobs for today and tomorrow.

Thank you.

REP. WAXMAN: Thank you very much, Ms. Sutton.

The chair wishes to recognize the chairman emeritus of the committee, Mr. Dingell.

REP. JOHN D. DINGELL (D-MI): (Off mike) -- when we find that we have the large number of both NGO heads and heads of American businesses coming together. I would like to point out also that the directors of Edison Electric Institute endorsed a set of points in agreement on climate change last week.

All of this points to one fact: Climate change is recognized as being the most critical climate issue facing us by everybody involved.

When USCAP's call to action was released it made news, as well it should. For the first time, a diverse group of entities who oftentimes are at odds on environmental matters agreed on the critical need for action on climate change. The call to action calls for federal climate change legislation to follow six key principles; however, for the most part, it does not get into the level of detail necessary for a complicated legislative resolution to the problem.

Today USCAP released a more detailed set of recommendations. While we have not yet had the opportunity to delve into these recommendations, I do look forward to hearing more about them when our witnesses appear today.

As earlier stated, Mr. Chairman, climate change is the most critical environmental issue facing us. Last Congress we held a number of hearings, issued a number of white papers on the subject of climate change, and in fact Mr. Boucher and I put forward draft legislation that was written specifically to address the six goals in the call to action. All of this was intended to set us up for prompt action this year.

This hearing builds upon that record. I look forward to working with you and all my colleagues to address climate change in a manner which achieves the reduction in amounts that scientists agree is necessary while protecting domestic jobs.

Thank you, Mr. Chairman.

REP. WAXMAN: Thank you, Mr. Dingell.

Mr. Rush?

REP. BOBBY RUSH (D-IL): Thank you, Mr. Chairman.

And I, too, wanted to commend you for holding this hearing, thus quick-starting our activities of this committee on this very, very important issue.

Mr. Chairman, I think that we're going to be well served by the esteemed panel that you have assembled for today, and I certainly want to thank each and every one of them for making such an appearance before this committee. Among those who will be testifying today is my good friend, Mr. John Rowe, who is the president and the CEO of Exelon. I have worked with Mr. Rowe on many energy-related issues, and I find him to be a very hardworking and innovative and forward- thinking individual. I look forward to hearing his remarks regarding the innovative and very, very excellent practices that Exelon has adopted in becoming an industry leader in the production and the distribution of clean and renewable energy sources.

I would also like to say that I look forward to hearing from all of our distinguished panelists as they seek to rally the Congress as well as the other industries to move us all forward in developing cleaner energy policies and technologies that we sorely need for the continuing success of our economy and of our future as a nation and, indeed, of the world's population. I look forward to hearing them outline the steps that their own companies have enacted in order to move this nation forward in that direction.

And Mr. Chairman, in conclusion, I just want to again thank you for gathering us together so that we can have a great beginning as we initiate this 111th Congress.

I yield back the balance of my time.

REP. WAXMAN: Thank you, Mr. Rush.

Mr. Burgess?

REP. MICHAEL BURGESS (R-TX): Thank you, Mr. Chairman. And thank you for holding this hearing -- briefing that we're having this morning. It's an unusual mix of stakeholders who will come before our committee today, and I'm interested to see the recommendations that this group will offer us.

From what I understand, it is a consensus blueprint to help guide future action on climate change legislation for this committee. And the vagueness of the report is an example of the nuances that exist in crafting policy to control consumer energy use without further damaging our economy, which is already under some strain.

One of the leaders in the energy industry today who's unfortunately not going to be with us, Rex Tillerson from ExxonMobil, was in Washington last week. Mr. Tillerson suggested that a carbon tax would be the fair and equitable way to transparently control carbon emissions. I think our former chairman in the last session, the last Congress, Mr. Dingell, also had a similar recommendation.

But when you have an industry leader asking for an additional tax burden to simply provide a better environment for his long-term investments and business planning you begin to appreciate some of the pressure that the CEOs are under to continue to increase revenue in such a strained economic environment. They need transparency; they need clarification to compensate for the unexpected volatility in their marketplace.

Unfortunately, clarity is not part of this 30-page report released from embargo by USCAP this morning. It's somewhat vague on implementation, it's very complex in plan and would require new and integrated systems development. That costs money and increases the number of variables in the regime.

As we've seen in the financial industry, sophistication, complexity, increased variables add distortions and volatility to the market, not to mention variables in complexity add the opportunity for manipulation and would require a strong federal regulator. That's an additional burden on the U.S. taxpayer, so a further strain on our federal budget.

If I had the opportunity, I would ask these individuals here today the following questions: Would a carbon tax provide a clearer signal that industry is asking for, and is it a comparable alternative to what's been outlined in this report? And secondly, do you think the implementation of this report will help turn profits and increase domestic economic activity, and are you willing to step down from your position if it does not? Has the economic downturn already slowed, stopped and reduced carbon emissions, which makes the recommendations in this report unnecessary?

Thank you, Mr. Chairman, and I'll yield back the balance of my time.

REP. WAXMAN: Thank you, Mr. Burgess.

And Mr. Green?

REP. GENE GREEN (D-TX): Thank you, Mr. Chairman. Let me begin by saying I look forward to working with you as our new chair of the Energy and Commerce Committee. Over the years I've known you to be a tireless defender of public health and environment, qualities that will serve our committee well as we begin to tackle the many critical issues facing our nation.

It's timely that our first full committee hearing in this Congress focuses on the U.S. Climate Action Partnership, especially since the blueprint for the legislative action was just released this morning.

President-elect Barack Obama has signaled that his administration will lead the world toward a new era of global cooperation on climate change. To be truly successful, any efforts to reduce greenhouse gas emissions must be global in nature and must result from an extensive buy-in and a range of diverse U.S. stakeholders, from our industrial base to the consumers who pay the bills.

That's what makes the efforts of USCAP so important. USCAP members from utilities and environmental groups came together to form a call for action to reverse greenhouse gas emissions, and today I hope to learn specifics about the USCAP new blueprint for legislative action. And I commend them for attempting the difficult task of compromise on such a complex issue, and I look forward to the testimony.

Following up on my colleague from Texas, I also read the statement last week by the CEO of Exxon. And I guess our committee and the Congress has got a tough decision because I have some concerns about cap and trade because, if you do just have a carbon tax, people know how much it is, industry can produce using that, and as consumers we know, whereas with a cap and trade it's always changing.

And I have to admit, with our most recent economic crisis, with mortgage trading and slicing and dicing things, how much money was taken out of the market, I'm a little concerned about a cap and trade. And I hope the panel will talk about that as compared to just a straight up carbon tax that, again, it's tough to get the votes for in Congress, but it's also  it's probably also the cleanest and most transparent thing that Congress can do, and just put a tax on what we shouldn't be putting in our atmosphere.

So, Mr. Chairman, thank you again for holding our first hearing on this issue.

REP. WAXMAN: Thank you, Mr. Green.

Ms. Schakowsky?

REP. JANICE SCHAKOWSKY (D-IL): Thank you so much, Mr. Chairman.

The science is clear. Global climate change is real and poses an immediate threat to our planet and our way of life. The 2007 report of the Intergovernmental Panel on Climate Change unequivocally found that our climate is warming and that the primary cause of this warming is due to human activities.

And in some ways it's a relief to have arrived at this point where there is such a great consensus in the scientific community and now, as we move forward in the policymaking community, to address this problem. I think for years we have squandered the time by arguing over whether this is real or not real and how we should move.

Human-caused pollution has already caused drastic changes to the world's ecosystem. If emissions continue unabated, our nation and the world will continue to experience unprecedented weather patterns resulting in heat waves, droughts, wildfires, floods, public health threats, and the extinction of thousands of plant and animal species.

This crisis warrants immediate policy response. I've heard some of my colleagues talk about moving slowly, moving carefully. I don't think those are the same things. I think we definitely need to move carefully, but I also think we need to move swiftly and boldly. The longer we wait, the harder and more costly it will be to limit climate change, and therefore I think, Mr. Chairman, it sends an excellent message that our first committee hearing of the year is on this important topic.

And I'm very grateful that the panel is here today. I hope we do have a robust discussion of their recommendations. I for one am a bit concerned about the pace that is recommended here. When they have a little chart about emission reduction targets, it looks like what they're saying is -- the way it reads is that there would be an 80 percent reduction of 2005 levels of emissions by 2050. I think that is inadequate. I think we have to be talking more like an 80 percent reduction of 1990 levels and that we're going to have to move more swiftly to address these problems.

Others of my colleagues have said things like government shouldn't pick winners and losers in the energy arena, while that's exactly what we have done for generations is pick winners and losers, the winners being the big oil companies, the nuclear industry. Government has always made decisions about the most judicious way to achieve our policy goals in terms of helping industry, and now I think it will be our obligation to make sure that those -- that we create systems that will encourage the most efficient ways to reduce pollution and save our planet, be available to -- in the marketplace.

In the weeks and months ahead we must continue to work together in the -- with the players that are going to be here on this panel and with all the different interests within our own Congress to put forward the most aggressive proposal possible to solve this imminent crisis.

So again, Mr. Chairman, I thank you so much for holding this hearing and look forward to working with you.

I yield back the balance of my time.

REP. WAXMAN: Thank you, Ms. Schakowsky.

Mr. Sarbanes?

REP. JOHN D. SARBANES (D-MD): Thank you, Mr. Chairman. I appreciate your holding this hearing. I'm looking forward to serving on the committee and serving under your leadership with respect to this and many other issues.

This is the most pressing issue of our time, really of any time, and it's fitting we're having a hearing so early in the session. I look forward to hearing from these witnesses from USCAP.

I wanted to just cite some statistics about what could happen to the Chesapeake Bay. I hail from Maryland and Chesapeake Bay is clearly a treasure for our state and for the region, but also a national treasure. And to recount some of the projections of what would happen if we don't take the steps we need to with respect to global warming as it would affect the Chesapeake Bay I think really bring this home.

According to a report by the National Wildlife Federation, if we continue on our current course and fail to reduce carbon emissions -- and this assumes an increase in 3 degrees Fahrenheit by the end of this century -- global warming would cause the loss of, with respect to the Chesapeake Bay, more than 167,000 acres of undeveloped dry land, 58 percent of the beaches along the ocean coast, 69 percent of estuarine beaches along the bay, more than half of the region's tidal swamps, and wetland habitats would be replaced by more than 266,000 acres of open water, which is equal to about 415 square miles. This would be cataclysmic. And this is just one example of the effects of not addressing global warming.

What I'm curious to learn more about from this report, from the panel's discussion today and from other hearings that we'll have on the topic is whether the targets for reducing emissions, which are being set forth according to certain time frames, actually correlate to the degree to which we have to slow, stop and then reverse the global warming trend overall, because we can become seduced by the targets for reducing carbon emissions without necessarily linking them to the pace at which we actually have to stop global warming and reverse global warming. And it may be that the targets set are not aggressive enough, as the congresswoman just indicated.

Bringing the market into this enterprise, which is what the recommendation here is of USCAP, is obviously critical. That alone can't do it. I think we're going to have to have a hybrid approach in order to achieve the levels of reduction that we seek and that are going to make a real difference, so there needs to be a multipronged approach.

But more than anything, what should come from this hearing and others that we have on the topic is the urgency with which we need to move with respect to reducing global warming and reducing our carbon emissions. We really don't have any time to wait. And humans are, of course, very capable of delaying on all fronts, and so we've got to move quickly; we've got to move quickly as policymakers.

I know this committee's going to be critical to doing that, and I thank you for holding the hearing today.

REP. WAXMAN: Thank you, Mr. Sarbanes.

Mr. Blunt?

REP. ROY BLUNT (R-MO): Thank you, Mr. Chairman.

As it relates to this hearing today, clearly this is going to be a topic that this committee will deal with during this Congress and spend a lot of time on. I do wish we could have had more time to look at the partnership proposal before we had a hearing on the proposal. Certainly as we look at energy this year, my view has been and will continue to be that we need to find more of it, to find more American energy, to use less of it, and to invest in the future.

One of my concerns as we approach this topic of climate change is that we want to be sure that we're investing in the future in a way that doesn't cost jobs and opportunity and creates new jobs and new opportunities at the same time. You know, even if we knew, Mr. Chairman, where we were going to be in terms of the best way to power the economy 25 years from now, I'm not sure that -- matter of fact, I'm absolutely confident it would not be wise to try to get there in five years. To see the transition in the economy that could occur in a way that cost American jobs and cost American opportunity would be a huge mistake. We're all concerned about passing along a strong economy and a strong environment.

I know that we have many different views on this committee as to whether or not we're in global warming caused by human activity or we're in the climate change activities that have happened throughout the history of the planet. Clearly, there's always been climate change. I think there's a rush to determine that somehow the current climate changes are caused by things that we can impact in a significant way by immediate action. There's less debate about whether the wrong immediate actions would create lost jobs and lost economic opportunity. This needs to be dealt with in the most thoughtful possible way.

I don't disagree at all with the previous comments that what we can do quickly we need to do quickly, but I do disagree that everything should be done in the quickest possible time frame. Everything should be done in a time frame that makes sense for American families, for the American environment, but also for the American competitive position in the world, and those are some of the topics that I'm sure we'll cover.

In this hearing today obviously we have lots of nameplates in front of us, so if everybody who's going to be testifying gives a five-minute opening statement, everybody that would like to ask questions of this panel today won't be able to ask all the questions we'd like to ask. But clearly this is the launching point for what will be an important debate in this committee, an important debate in this country and will have massive impact on the future of American opportunity if we make the wrong decisions.

And so, Mr. Chairman, again let me thank you for the way you got the committee started yesterday. I look forward to working with you personally. I know that this topic of environment and energy is one that our ranking member, Mr. Barton, has spent an incredible amount of time on, as I have and others have, and we are eager for the right opportunities to discuss what the future should look like for the American environment and American energy.

And I yield back.

REP. WAXMAN: Thank you very much, Mr. Blunt.

I've asked Mr. Barton and Mr. Markey and Mr. Upton to hold off on their opening statements, along with my opening statement, before we hear immediately from the witnesses, but I want to ask if any member wishes to make -- other than the four that I've mentioned  wishes to make an opening statement at this time?

REP. JOE BARTON (R-TX): Mr. Chairman?

REP. WAXMAN: Yes?

REP. BARTON: Did you ask for unanimous consent? I was talking.

REP. WAXMAN: No, no. I was asking if any member wishes to make an opening statement?

If not, I would ask unanimous consent that when we reconvene at 10:30 that opening statements -- the only opening statements we will have will come from the chairman, the ranking member of the full committee, the chairman and the ranking member of the Energy and Environment Subcommittee.

REP. BARTON: Reserving the right to object.

REP. WAXMAN: The gentleman's recognized on his reservation.

REP. BARTON: First let me say that you've just had one of your members come in, so we may want to give him a right to make an opening statement.

REP. WAXMAN: We certainly will.

REP. BARTON: But I will not object to the unanimous consent request, but I want to make the point that in discussions about this proceeding I encouraged you to begin early so that members that wish to make opening statements could and you were agreeable to that.

I think we have shown this morning that opening statements are a positive part of a hearing record.

And I hope that in the future, although we've changed the rule so that opening statements at hearings are now at the discretion of the chair, that you will continue to work with me and others so that we give members that wish to an opportunity to make an opening statement, because I do think it's important that we have members allowed to do that.

And this committee, although it may be one of the few committees that still allows it, has always allowed every member on both sides of the aisle the opportunity to give some sort of an opening statement, maybe a one-minute or a three-minute, before we begin the hearing process.

So I want to thank you even though it's now discretionary because of our rule change that you did use your discretion to start the hearing early so that we could have opening statements, and I hope we continue that discretion.

REP. WAXMAN: If the gentleman will yield, you've certainly made this point very clear to me and I'm open to it, and we'll try to work together.

REP. BARTON: Okay.

REP. WAXMAN: I have a unanimous consent request pending. I'd like to revise it by saying that if the two members that just joined us wish to make opening statements, they'd be permitted to do so at this time.

Mr. Butterfield?

REP. G.K. BUTTERFIELD (D-NC): Thank you very much, Mr. Chairman. I certainly apologize for being late. I've figured out a lot of things since I've been in Washington, but one I haven't figured out is how to be in two places at one time, so thank you very much for recognizing me.

Mr. Chairman, Ranking Member Barton, we certainly have an historic opportunity in this Congress and in this committee to revolutionize our energy and environmental policy. Accomplishing the monumental task of passing and implementing energy reform demands bipartisanship in this body and cooperation between the actors involved in the crafting of the policy, which certainly includes our witnesses today from USCAP. And a transformation of our attitude to one of cooperation and recognition of a common problem is sorely needed, not only to combat the climate change crisis but to mobilize every sector of our society to participate in the process to make us more economically and environmentally secure.

It is certainly our responsibility to confront these issues aggressively but prudently, recognizing that in our policy there will be winners, there will be losers. The poorest among us, those who are least responsible for greenhouse gas emissions, will be the losers in nearly any iteration of policy that puts a price on carbon. When crafting our policy, Mr. Chairman, to curb emissions, we must mitigate the rising cost of energy on America's poor, who contributed the least to the problem and can least afford to bear the weight of a costly solution.

And so I thank the witnesses today for their efforts to find consensus among diverse actors and eagerly anticipate the opportunity we have in the coming months to effect change.

Thank you. I yield back.

REP. WAXMAN: Thank you very much, Mr. Butterfield.

Mr. Murphy, do you wish to make an opening statement?

REP. TIM MURPHY (R-PA): Yes, thank you, Mr. Chairman.

REP. WAXMAN: The gentleman is recognized.

REP. MURPHY: How much time is it? How much time, Mr. Chairman?

REP. WAXMAN: Five minutes.

REP. MURPHY: Thank you.

I thank you not only for the opportunity to make an opening statement but for recognizing the importance of members speaking to these issues.

Earlier this morning I had a chance to go over to the Senate Hart Building and listen to some of the presentations of the United States Climate Action Partnership and had a preview of some of the important things that they'll be saying today.

As we look at this as members of Congress, I hope that this committee can add some other elements to this. Certainly we all want clean air and clean water and clean land for coming generations. Even if there are still disputes about climate change, we need to join our hands together when it comes to making sure we keep this planet clean for following generations.

But it's important as we look at this issues we're also addressing them from the standpoint of how we do this on a global perspective and not just a local perspective. The United States has lost hundreds of thousands, perhaps millions of jobs in manufacturing over the years. Some of it is technologies have changed, but some of it also has come from jobs moving overseas, where there are not the same pollution controls or expectations, where products can be made cheaper because they pay lower wages and don't have legacy costs or health or other elements there. But in the area of producing energy in clean and efficient ways (that is one ?) that we have to look in a global perspective.

I look at my area of Pittsburgh as an example. Pittsburgh in the 1800s was referred to by Charles Dickens as hell with the lid off. It continued to be a highly polluting area where people understood if they went to work, even white-collar workers, they brought a couple of shirts to work and they would change them a couple of times during the day because of the soot that was left in their clothes. Health problems and that sort of dirtiness were seen as part of life, yet Pittsburgh underwent amazing transitions were now it is really a model of a city how things have cleaned up. We have bass fishing tournaments now in rivers that were once ones where nothing seemed to live.

We also have to understand, however, that part of the cost of that came -- that steel left Pittsburgh. We have a great team called the Steelers, but quite frankly, I don't steel is made anywhere within the city limits of Pittsburgh anymore. We've replaced it with other things. There is great companies or headquarters such as U.S. Steel and other manufacturers, but they make that steel throughout the world now.

We also note that U.S. Steel made a tremendous investment in its Clairton coke works by investing over a billion dollars to make sure that coke -- you can make steel without coal  but to make sure that that pollution is reduced (there too ?). We applaud them for that.

But what happens in other countries with regard to how they make steel, how they make manufactured products, and how they make the energy to make those products is of concern. Developing countries like China and India emit an estimated 2.5 to 5.0 metric tons of CO2 emissions per metric ton of crude steel. The United States averages 1.2 metric ton of CO2 emissions per metric ton of crude steel. Cutting emissions in the U.S. has been done, but carbon emissions in other countries is two to four times that amount.

That being the case, if we simply say that a cap and trade program in this country will be looked at and companies are allowed to or will continue to move their factories overseas to make their raw goods and their parts where cap and trade does not apply, we have done nothing to clean up this planet -- nothing. In fact, we've just played this massive shell game by saying we'll make these heavy industry parts in other countries, ship them back over here, put them together and say we cleaned up our area. We have done no such thing.

We have to make sure that whatever we do for carbon emissions and other pollution areas that we do this on a global perspective if we're going to do this at all. I'm tired of seeing our jobs go over to China. I'm tired of continuing to fund both sides of the war on terror with sending things over to the Mideast when we can do so much here with our rich talent.

So I hope that we all as colleagues join together then in seeing what we can do with the United States being a leader in bringing other nations to the table on this. We have to have solutions. We cannot afford to not have solutions, we cannot afford to ignore this, and we cannot afford to simply shuffle the jobs off to other countries and turn away and pretend we did something meaningful.

With that, I yield back. Thank you very much, Mr. Chairman.

REP. WAXMAN: Thank you, Mr. Murphy.

Mr. Welch?

REP. PETER WELCH (D-VT): Thank you, Mr. Chairman and Ranking Member. My opening statement is I'm glad to be here, and I look forward to working with the committee. Thank you.

REP. WAXMAN: Thank you, Mr. Welch.

Seeing no other members that wish to be recognized at this time for an opening statement -- (off mike) -- seeing no other members who wish to be recognized for an opening statement other than the four that I mentioned earlier, the unanimous consent request before us is to recess until 10:30, at which point we will hear from the chairman and ranking member of the full committee, chairman and ranking member of the subcommittee and the witnesses that are before us.

Without objection, that will be the order. I will recess for another five or six minutes.

(Recess.)

REP. WAXMAN: (Sounds gavel.) Meeting of the committee will please come to order. I'm pleased to welcome you all here today for the first hearing of the Energy and Commerce Committee in the 111th Congress. We're holding this hearing on one of the most important issues Congress will face. It concerns our children's future, our economic future, and our security as a nation. It is also about responding to the economic crisis we face.

Today we're going to hear from some of our nation's most prominent leaders in business and the environmental community. These diverse leaders have come together in the U.S. Climate Action Partnership to call for legislation to reduce the threat of global warming. They recognize that the key to a revitalized economy and our long-term prosperity as a nation lies in addressing climate change and transitioning to a clean energy economy.

We are struggling with a grave economic crisis. Many Americans have already lost their jobs, their homes, their retirement savings. Many more are worried about their economic future. As Congress acts to address the immediate crisis, we must also lay the foundation for sustained long-term economic growth and security.

Our environment and our economy depend on congressional action to confront the threat of climate change and secure our energy independence. U.S. industries want to invest in a clean energy future, but uncertainty about whether, when and how greenhouse gas emissions will be reduced is deterring these vital investments.

Companies are caught in a dilemma. They are reluctant to invest in old polluting technologies because they know that tougher regulations are inevitable, but they can't invest in new cleaner technologies until they know what Congress is going to require. Our job is to extend to these industries a way to end the regulatory limbo and set our nation on a responsible path to reducing climate change and achieving energy independence.

Our committee will be acting quickly and decisively to reduce global warming and end our dependence on foreign oil. My goal as chairman is to pass comprehensive climate and energy legislation in the committee before the Memorial Day recess. That's an ambitious schedule, but it's an achievable one. We cannot afford another year of delay.

As of today's hearing, we will show through the testimony a consensus is developing that our nation needs climate legislation. Our job is to transform this consensus into effective legislation. The legislation must be based on the science and meet the various serious threats we face.

We are fortunate that Ed Markey, one of the most experienced legislators in Congress, will be chairing the Energy and Environment Subcommittee. We're also fortunate that we have so many skilled and knowledgeable members on both sides of the aisle on this committee. Finding a consensus is not always easy, but I know that with the leadership that we will be able to have in our subcommittee and from other members, we can succeed.

Climate change, energy independence and health care are going to be the committee's highest priority. Passage of the children's health bill yesterday was a down payment on health reform. Today's hearing starts our work on climate change and energy independence. We'll be working on both issues at the same time.

I welcome our distinguished witnesses and look forward to their testimony. But first we're going to hear from the ranking member of the full committee, the chairman and the ranking member of the subcommittee.

Mr. Barton?

REP. BARTON: Thank you, Mr. Chairman.

Before I give my statement I want to make sure that we have on the record members will be allowed, time permitting, to ask questions of the witnesses, and if time does not permit, we will be able to give written questions that they will submit -- answers will be submitted for the record.

REP. WAXMAN: Without objection, that will be a unanimous consent request that will be adopted.

Any objections? Hearing none, that will be the order.

REP. BARTON: Okay.

Mr. Chairman, I'm very willing to work with you and others on the committee to try to accomplish the goal that you just announced. I think it's good for the new chairman to have goals, and that's certainly a worthy goal.

Having said that, I want to make a couple of comments that are cautionary.

First, several of our members in their opening statements earlier before the panel got here indicated that the science is settled on climate change. The science is not settled. This is not a hearing to debate the science, so I won't do that. I would point out, though, until Christopher Columbus discovered America in 1492, the science was settled that the Earth was flat. I would also point that until the mid-1800s, the science was settled that if somebody was sick, you bled them. And as late as the mid-1940s, the science was settled that airplanes couldn't exceed the speed of sound. Science has a way of being settled in a status quo that turns out not to be.

What I will say is the science is settled that CO2 concentrations are increasing in the atmosphere. That's a true statement. I will also stipulate that in some parts of the globe temperatures are going up. I'm still not sure what average world temperature means to me; what's more important is what's the temperature in Arlington, Texas at a time certain and a place certain.

But having said that, until you show me one of these U.N. models that can predict the past with at least 50 percent accuracy much less the future, I'm not going to stipulate that the science is settled.

Having said that, we're here today because we've got a distinguished list of panelists who have joined together to come up with a matrix on how to help our environmental and our economic issues. And they are distinguished. I know at least two-thirds of them personally, and I will stipulate that they're all men and women of honor and integrity.

One of the things that they say in their statement of principles is that they want a plan that's economically viable. Let me just read the stock prices of the witnesses today that are before us.

We have the CEO of ConocoPhillips. His stock price a year ago was $75.15 a share; it closed yesterday at $48.82. That's a 35 percent reduction.

Duke Energy -- Mr. Rogers, is with us. His stock price a year ago was $20.05; it closed yesterday at $14.89. That's a decline of 26 percent.

Mr. John Rowe, who represents Exelon: His stock price a year ago was $77.49; it closed yesterday at $52.84. That's a decrease of 32 percent.

Mr. Crane, who represents NRG: $40.99, $23.17 yesterday -- minus 43 percent.

General Electric, one of the bedrocks of American industry: $35.27 a year ago, $13.87. That's a decline of 61 percent. Unfortunately, I own some of that stock, so I want my GE folks to get with the program here.

Rio Tinto: $402.09; closed yesterday at $81.52, a decline of 80 percent.

Siemens closed yesterday 61 percent off.

PNM, Mr. Sterba -- who has got a new hairdo, I see: $20.09 a year ago, $10.31 yesterday, a decline of 49 percent.

And the winner in terms of least decline is Pacific Gas & Electric, Mr. Darbee. Their stock a year ago was $44.22. Yesterday it was $36.52, which is a decline of only 17 percent.

There must be something about the California economy, Mr. Chairman, that's helping or maybe Mr. Darbee's just an unbelievably excellent leader.

My point is there's not one CEO here today whose stock price is even close to what it was a year ago. We're in a very serious economic recession and you cannot tell me that if we adopt one of their principles of a mandatory -- mandatory -- cap and trade program on CO2 emissions for our economy that it's going to help their stock prices.

Now, stock price is an inelegant value of the whole economy. I understand that. But we should be about protecting jobs, creating jobs. If we can do things, Mr. Chairman, that improve energy efficiency, if we get more energy or we get more output for less energy, and there's an environmental benefit consequently because of that, that's a good thing. But if we say we have to do things to lessen CO2 regardless of the economic consequences, in my opinion, that's a bad thing.

So I think we should start with solutions that work. Mr. Boucher has a bill that is an R&D program for CO2 carbon capture, conversion and sequestration. There's consensus on both sides of the aisle that that bill is a good first step. We should move that bill, Mr. Chairman. Then, let's look at the experience in Europe of their cap and trade program, which is not working -- which is not working -- and go from there.

And last thing, we don't have the CEO of ExxonMobil here -- I don't know if they're part of USCAP -- but their CEO has come out and said if we have to do something about carbon, let's have a carbon tax.

Now, I'm not an advocate of a carbon tax, but I do believe that if you really, really, really want to reduce CO2, a carbon tax is the most efficient way to do it, and we should get with our friends at Ways and Means and give that some serious consideration.

With that, Mr. Chairman, I'll yield back. I do appreciate the witnesses being here. I've read the synopsis of their program, and I do agree with their conclusion that we want to do things that are sustainable that protect the economy and show that America can be a world leader. I do agree with that.

REP. WAXMAN: Thank you, Mr. Barton.

Mr. Markey?

REP. EDWARD J. MARKEY (D-MA): Thank you, Mr. Chairman, very much.

The coalition of American businesses and environmental groups before us today represents the evolution that has occurred on the issue of global warming. We have emerged from the last decade primordial ooze of discord and delay on global warming action. We have now arrived on terra firma, where hard emissions reductions targets must supplant voluntarily measures that aren't up to the job. And instead of struggling to stay afloat in a mire of skepticism, we're not poised to march forward with a new climate-friendly Obama administration and congressional leadership.

But evolution will only take us so far on this issue. What we now need is legislative intelligent design. Now the hard task of enacting global warming legislation is before us.

The witnesses here today, their shareholders and members, and a growing majority of Americans know that the key to our economic growth, national security and planetary survival is to pass energy and climate legislation that will finally unleash the clean energy revolution that has been building for years.

The CEOs that are testifying before us today are not here to harm shareholder value. They are here to help lay out a plan which will enhance shareholder value in the years ahead, to target where the economic growth opportunities are for our country and to create the jobs that will employ Americans for this generation and generations to come. That is why they are here. They understand the problems better than any that our country is faced with today economically.

Our country has been hit by an economic tsunami. At the same time, we are feeling the early effects of a climate storm that is growing stronger and approaching faster than predicted just a few years ago. Comprehensive clean energy and climate legislation is the solution to both of these problems, and it is a solution for the whole country. High-tech hubs like Massachusetts and sunny California will benefit, but so will steelworkers in Pennsylvania and former Maytag manufacturing workers in Iowa who are building blades for wind turbines. And ranches in Texas and South Dakota are seeing their relentless winds turned into revenue with every turn of the wind turbines sprouting on their lands.

Last year I introduced iCAP, the Investing in Climate Action and Protection Act, as my contribution to the climate policy discussion. Many of the core ideas of iCAP are reflected in the discussion draft put forward by Chairman Dingell and Chairman Boucher this past October, and many are consistent with the blueprint issued by the U.S. Climate Action Partnership today.

Those developments bode well for the work before us, and I look forward to working with you, Chairman Waxman, chosen newly as the chairman, because you have shown such tremendous leadership on this issue. I look forward to working with the other members of the committee, the administration and the American people to enact climate legislation that will save our economy and protect the planet.

As the new chairman of the Energy and Environment Subcommittee, I am committed to moving a bill as quickly as possible in partnership with Chairman Waxman and all of the members, bipartisan, Democrat and Republican, so that we can as quickly as possible deal with this issue because the urgency of the problem demands swift action.

So I thank you, Mr. Chairman. I think it's very appropriate that you made this the first hearing, and the quality of this panel represents the magnitude of this issue.

And I yield back the balance of my time.

REP. WAXMAN: Thank you very much, Mr. Markey.

Mr. Upton?

REP. FRED UPTON (R-MI): Well, thank you, Mr. Chairman.

I just hope that this hearing is not necessarily a sign of things to come. I can remember when Republicans took the majority in the '90s and I can remember sage advice given by my friend Mr. Markey who said that we ought to have the subcommittee chairman of Oversight and then Telco, his advice that we not have more than one panel and not more than six or seven witnesses and always allow the minority to have an equal say in terms of the folks on that panel. And admittedly, we have one panel today, but we have far more than six or seven, and I'm not sure that the minority was afforded the opportunity to in fact insist on a couple of different witnesses.

I also wish that we'd have received this blueprint earlier than this morning. Clearly, it was printed before today. It would have been nice to at least have taken it home last night to be able to digest some of the summaries and the information rather than get it thrust at us literally at 9:00 this morning over in the Cannon Building.

But I would confess that climate change is real. I recognize that we have a problem and in fact we do need to take action. I've never been a fan of cap and trade. We're fortunate to look at the EU's failure and their inability to reduce global gas emissions.

Climate change policy must adhere to a number of different common-sense principles. It must provide a tangible environmental benefit to the American people; it has to advance technology and provide the opportunity for export; it has to protect American jobs; it has to strengthen U.S. energy security, and it does require global participation. I'll support legislation  I won't support legislation that doesn't meet those standards.

In my state of Michigan, things are really, really tough. Our governor told us last week that our unemployment offices across the state are fielding 100,000 calls an hour. By design, a cap and trade approach works by increasing energy costs and slowing down economic growth. We can't afford that in Michigan.

And as a former member of this committee from the other side of the aisle, Sherrod Brown, now a senator from the state of Ohio, during the Senate cap and trade debate last year sent a letter to Majority Leader Reid who said -- and I'm quoting directly from his letter -- that "Cap and trade programs developed in the Lieberman-Warner bill have the potential to raise over $7 trillion. Much of those funds will be indirectly paid for by consumers through increased energy prices." I think he had it right and that the only consensus achieved during that Senate debate was that the cap and trade approach was not appropriate.

Rather than making energy more expensive, hurting our fragile economy and sending American jobs overseas, we need to be pursuing an approach that promotes and encourages clean energy, builds economic strength through exporting American technology, and thus creates jobs rather than exporting them. And I propose instead of setting an arbitrary cap that isn't linked to tangible global greenhouse gas reductions or a recognizable drop in global temperatures that we should begin working on a clean energy policy that spurs investments in that technology and American jobs.

More nuclear, we need to invest in clean coal technologies, like carbon capture; we need to invest more in wind and solar and other renewables like hydro, and we need more conservation. We must take a sector-by-sector approach that cultivates innovations in technology and efficiency rather than arbitrary government mandates, and we must meet our ever-increasing energy demands as our economy begins to move forward and recover from this recession that we've been in, particularly in Michigan, for a long, long time. And you can't exclude China or India.

Mr. Chairman, I look forward to the presentation and the questions that we'll be able to afford ourselves, both in person as well as in writing. I yield back the balance of my time.

REP. WAXMAN: Thank you, Mr. Upton.

Today we're honored to have with us 14 chief executive officers and presidents of a broad range of businesses and leading environmental organizations, all of whom are here as members of the U.S. Climate Action Partnership, or USCAP.

USCAP is a coalition of over 30 businesses and leading environmental groups with a common purpose of urging Congress to adapt climate change legislation promptly. And I would note that two other members -- Alcoa and Deere & Company -- had been invited to testify and ultimately were unable to do so.

This is truly a distinguished panel and I could spend a great deal of time discussing their accomplishments and their portfolios and their stock prices, but I think that since the purpose of this hearing is to hear from them and time is short, I'll forgo a full introduction.

Joining us today are Jonathan Lash, president of World Resources Institute; James Mulva, chairman and chief executive officer of ConocoPhillips; George Nolen, president and chief executive officer of Siemens Corporation; Fred Krupp, president of Environmental Defense Fund; John Rowe, president and chief executive officer of Exelon Corporation; David Crane, president and chief executive officer of NRG Energy; Preston Chiaro, chief executive officer of Rio Tinto; Jeffrey Immelt, chairman and chief executive officer of General Electric; Frances Beinecke, president of Natural Resources Defense Council; Jim Rogers, chairman, president and chief executive officer of Duke Energy; Peter Darbee, chairman, CEO and president of PG&E Corporation; Eileen Claussen, president of the Pew Center on Global Climate Change; Mark Tercek, president and chief executive officer of The Nature Conservancy; and Jeffry Sterba, chairman and CEO and president of PNM Resources.

As I understand it, we're going to hear from six witnesses -- no, in agreement with the witnesses, six witnesses will waive their opening statement and we thank them for their understanding; for the remainder, we'll hear two-minute oral statements from each, and we have written statements from all of the witnesses which we will enter into the record.

I would like to also forewarn members -- which I've mentioned this before  that some members of the panel will have to meet prior engagements this afternoon with the incoming administration, and as Mr. Barton and I have discussed, when this group of witnesses needs to leave, they will leave behind a group of designated replacements who will stay until we have finished with our questions from all of the members who wish to ask questions.

We're going to start a new policy in this committee that all witnesses that testify before us do so under oath, so I'd like to ask you if you would now that you're comfortably seated to please stand and raise your right hands. (Witnesses sworn in.)

Thank you. The record will indicate each of the witnesses answered in the affirmative.

We will turn to our first witness for a statement, Mr. Immelt from General Electric.

MR. IMMELT: Good morning, Mr. Chairman. Thank you. And Ranking Member Barton, members of the committee, good morning. And it's an honor to be here this morning. Thank you for this opportunity.

I'm Jeff Immelt, the chairman of GE. I understand we might have gotten off on the wrong foot this morning. I want to apologize for any process difficulties or misunderstandings we had. But we are honored to be here and we look to be responsive. We've been briefed on what the opening comments were. And please know directly from all of us that there is no intention to be disrespectful in any manner. We are here to be helpful in this process, so let me say that from the outset.

We launched a clean energy initiative in GE about five years ago. Here's what we've learned so far. We've reduced our own carbon footprint from where we were in 2004 by 8 percent between now and then. That represents about a $100 million savings per year. So in an industrial setting we've taken it on internally to great results. We've invested approximately $3 billion in clean energy R&D each year over that time period. That has generated $17 billion in 2008 revenue, 20 percent annual growth.

Ranking Member Barton, if this was our only business, our stock price would be doing much better right now. This is actually a great place to invest. And we've created competitiveness. Twenty percent of our jobs inside GE are tied to green products, and that pulls with it another 60,000 supplier jobs. We're a net exporter of these products, so we view this as being a core of our global competitiveness. So that's just a background of how I've come here.

I represent -- and we've all come together as the members of U.S. Climate Action Partnership. Each one will go through some of the aspects of the blueprint that we've introduced today, but I would just make maybe four points at a very high level. One is that we really have gathered together a very diverse group of leaders. We represent industrial customers, utilities, car companies, oil companies.

We really have tried to put together a representative segment of the industrial complex in the United States as well as having some of the leading NGOs in this field and experts over a long period of time.

The second point I'd make is that what we try to do is a balanced and integrated approach with the understanding that economics are important, that solving the environmental issues are important, and we've tried to link in the proposal the right trade-offs, you know, that can be -- should be considered as we go forward with this kind of legislation.

I'd say the third that we try to do is represent and cap and trade a market-based approach for pricing carbon that we think over the long term will stimulate technology and make that a tremendous source of great strength as we go forward.

The last comment that I would make is that we've always viewed U.S. Climate Action Partnership as a catalyst for change. We don't think we have all the answers. We think this is a starting point that could be built on. And please accept that in the spirit with which it's given. We are people trying to solve what we view as a problem, trying to turn that into an opportunity and trying to do that in the context of being good citizens and being constructive in this dialogue.

So thank you very much, and I'll turn this over to Jim Rogers.

REP. WAXMAN: Thank you, Mr. Immelt.

Mr. Rogers --

MR. ROGERS: I'm Jim Rogers. I'm the CEO of Duke Energy. We serve a population of more than 11 million people in five states in the Midwest and the Carolinas. On their behalf, I want to thank you for holding this hearing on USCAP's blueprint for legislative action.

The song lyrics, "You can't always get what you want, but if you try sometime you might find you get what you need," is not only a great line from a classic Rolling Stones song but I suspect it is a feeling each of us have had as we created this blueprint for legislative action.

We developed legislative proposals to be considered as a package, ones that seek to carefully balance the oftentimes conflicting demands of protecting our environment, our economy and our consumers. De- carbonizing our economy by 80 percent between now and 2050 would be an historic undertaking. It will not be cheap, and it will not be easy. The sooner we pass climate change legislation, the better off our economy and the world's environment will be. If we go about it in the right way we can not only avoid unnecessary economic harm and dislocation, but we can also ignite a lower carbon green revolution and more rapidly put this recession in our rearview mirror.

It's my judgment that if we can couple a short-term stimulus package with this longer-term climate plan, we have the ability to stimulate greater confidence from consumers, entrepreneurs and corporations. And we all know recessions are put in the rearview mirror when you have the capability to build confidence in the future and make investments.

And let me quickly say for our company we plan to invest $25 billion in infrastructure over the next five years. It is critical we know the rules of the road of climate change as soon as possible to make sure that we are making the right investments. Regulatory uncertainty is postponing investments in the renewables and other green technologies. It's postponing the creation of jobs from apprentices to engineers to Ph.D.s.

Our one fear -- and I will leave this with you -- is that many in Congress will look for reasons to postpone action on climate legislation this year. As a former consumer advocate who fought rate increases of utility companies in the '70s, I believe by starting now we have a better chance to smooth out and minimize the inevitable cost increases that will be imposed on U.S. consumers. We have important provisions in the -- in this blueprint that mitigate the cost impact on electric consumers by achieving President-elect Obama's stated objective to reduce carbon emissions by 2020.

Thank you, Chairman Waxman and the committee. I appreciate the opportunity to be here today.

REP. WAXMAN: Thank you, Mr. Rogers.

Ms. Beinecke.

MS. BEINECKE: Thank you very much.

REP. WAXMAN: It's that button on the base. Yep. Good.

MS. BEINECKE: Okay. Thank you.

Thank you very much, Mr. Chairman, and all members of the committee for being here today and hearing the recommendations of USCAP. I'm Frances Beinecke, president of the Natural Resources Defense Council. And I want to congratulate you for devoting the first hearing, Chairman Waxman, of your chairmanship to addressing global warming. You are demonstrating that you share our understanding of the urgency of enacting comprehensive legislation to cut global warming pollution.

The scientific basis for prompt action has become even more compelling in the two years since USCAP issued its call for action. The Nobel Prize-winning Intergovernmental Panel on Climate Change issues its most definitive report. And even more recent findings show that global warming is occurring at a pace that equals or exceeds the upper bounds of earlier predictions. We see this in higher global temperatures, in the shrinking arctic ice sheet, in the increasing acidification of the oceans and increasing sea level rise. Global warming is no longer a distant threat but a present danger to public health, to national security, to biodiversity, to the planet.

Some will suggest that the current economic crisis is a reason to delay comprehensive climate legislation. I believe that the opposite true. The work this committee has already started on economic stimulus legislation can jump-start investments in clean-energy infrastructure and help get our economy back on track. These public investments will leverage much more private spending and will be far more effective if Congress follows the economic stimulus bill by promptly enacting legislation that establishes a clear road map for achieving the 80 percent reduction in global warming pollution that's needed by mid-century.

The targets during the first decade of the program are among the most important and most challenging of a bill's designed features. Since the U.S. is late in cutting emissions, we need to make up for lost time. But some stakeholders are concerned about the cost and feasibility of meeting deep emission reduction targets, particularly in the early years.

This tension has led to a range of views on the appropriate near- term targets. In the blueprints, USCAP recommends emission limits for cap sources and for total U.S. emissions that would be equivalent to an 80 percent reduction by 2050, nearly 50 percent reduction by 2030 and a range of 14 to 20 percent reduction by 2020. It's important to stress that these targets are tightly linked to the other recommendations included in the blueprint, as will be described by my colleagues.

I'd also like to be clear that NRDC believes that the science justifies a reduction of at least 20 percent by 2020. We joined the USCAP consensus because we believe it is critical to enact climate legislation this year, and we believe that the blueprint shows a way to marshal the support from diverse constituencies needed to achieve that goal.

Mr. Chairman and all members of the committee, we have a short window of opportunity to enact effective global warming legislation and secure our physical, economic and environmental future. We look forward to working with all of you to achieve that in the coming year. Thank you.

REP. WAXMAN: Thank you very much, Ms. Beinecke.

Mr. Krupp.

MR. KRUPP: Well, thank you, Mr. Chairman. I'm honored to be here.

This blueprint for climate security is a blueprint because it has a cap that protects the atmosphere. The cap is the legal guarantee that pollution actually goes down. But the cap does a lot more than that. The cap creates customers. And if America has ever needed customers at home and abroad, both for new and existing technologies, now is that time.

And thank you, Mr. Chairman, for your commitment to move legislation out of this committee by the Memorial Day recess.

For the sake of our atmosphere and our economy, we really need Congress to enact this legislation this year.

My role is to talk about cost-control measures, the most powerful of which is the cap and trade program itself. Cap and trade creates competition that will drive costs down while amplifying the effect of any stimulus package that you pass. These measures -- other measures will also be needed, and these measures should protect the economy, drive investment in energy efficiency and maintain the environmental integrity of the overall emissions budget.

Emissions offset -- that is activities that reduce greenhouse gas emissions that are not included in sectors that are not part of the cap -- are a critical cost-control measure recommended in the USCAP blueprint. Since USCAP is recommending stringent emissions targets, we also recommend the generous use of offsets to help moderate the compliance costs. USCAP recommends that Congress establish a board to set an overall annual upper limit for offsets starting at 2 billion metric tons with the authority to increase offsets up to 3 billion metric tons. Since the quality of offsets is an important -- as important as the quantity, we also recommend that Congress direct EPA to establish a rigorous and transparent process for ensuring that all offsets represent real and additional reductions.

In addition, the board should oversee systemwide strategic offset and allowance pool -- a carbon board -- which includes a reserve pool with additional offsets and, as a measure of last resort, the ability to borrow from future compliance periods that could be released into the market to prevent undue economic harm, if necessary. Quality forest carbon tons created by reducing tropical deforestation would be eligible both for the international offset portion and for this strategic offset reserve.

Thank you.

REP. WAXMAN: Thank you, Mr. Krupp.

Ms. Claussen.

MS. CLAUSSEN: Chairman Waxman, Ranking Member Barton, members of the committee, my name is Eileen Claussen and I'm the president of the Pew Center on Global Climate Change. I'm going to say a few words about USCAP's recommendations regarding the allocation of allowance values.

Greenhouse gas emission allowances in an economywide cap and trade system will represent trillions of dollars in value over the life of the program. USCAP believes that distribution of allowance values should facilitate the transition to a low-carbon economy for consumers and businesses, provide capital to support new low and zero greenhouse gas-emitting technologies, and address the need for humans and the environment to adapt to climate change.

USCAP recommends that a significant portion of allowances should be initially distributed free to cap entities and economic sectors particularly disadvantaged by the secondary price effect of a cap and that free distribution of allowances be phased out over time. The USCAP blueprint identifies principles to guide the fair and equitable allocation of allowances to induce consumers of electricity, natural gas and transportation fuels; low-income consumers and workers in transition; energy-intensive industries that face international competition; trade-exposed commodity products; competitive power generators and other non-utility large stationary sources; programs to achieve technology transformation; and adaptation needs of vulnerable people and ecosystems at home and abroad.

One of our main objectives is to dampen the price impact of climate policy on the customers of electricity and natural gas, particularly in the early years of the emissions constraint. And therefore, we believe that a significant portion of emission allowance value should also be allocated to electric and natural gas local distribution companies, which are cost-regulated and where the prices -- the price alleviation would be passed on to consumers.

Thank you.

REP. WAXMAN: Thank you, Ms. Claussen.

Our next witness to testify is Mr. Darbee from PG&E.

MR. DARBEE: Mr. Chairman, Ranking Member Barton, other members of the committee, thank you for the opportunity to be here this morning. I'm going to address the issue of energy efficiency, one of my favorite.

From virtually every angle, be it cost or technology or the size and value of the benefits, one of the best strategies to attack the climate problem is improving our energy efficiency. As Time magazine said in a recent cover story, it's perfectly clean, remarkably cheap, surprisingly abundant and immediately available. Its cost is about 2 or 3 cents a kilowatt hour, which I think is as cheap or cheaper than any alternative energy source. USCAP heartily seconds the appraisal of Time magazine.

Fortunately, for 30 years, PG&E has designed and run some of the world's most effective energy efficiency initiatives. This success is just one of the many indicators pointing to the enormous benefits available nationally in this field. In USCAP's view, these include not only lower energy emissions but also economic investment, jobs and, not the least, savings for our customers. The key lies in the right mix of policies, programs and incentives.

With that as the goal, USCAP's specific recommendations are the following: setting or updating codes and standards for buildings and end-use technologies at the federal and state levels, including improving efficiency in federal buildings; expanding tax credits, incentives and rebates for buildings that outperform energy efficiency codes; fully funding energy efficiency outreach and education; providing incentives to manufacturers and retailers who embrace highly efficient equipment and appliances; using tax and regulatory policies to drive consumers and manufacturers towards more energy efficiency of product and processes; developing a generally accepted approach for measuring and tracking energy reductions and corresponding emissions benefits; encouraging state regulators to align policies so that utilities are incentivized to put a high priority on energy efficiency and demand management -- a prime example of this is revenue decoupling, which eliminates the incentives for utilities to sell more energy as they are currently motivated to do today; tracking and reporting state progress on energy efficiency, potentially rewarding the leaders with additional energy efficiency funding; and finally, labeling buildings to provide information on the value of energy savings and requiring that information be factored into loan applications and underwriting.

Together, we believe these steps would jump-start major progress towards boosting the overall energy efficiency of the U.S. economy. Thank you for this opportunity to speak before you.

REP. WAXMAN: Thank you, Mr. Darbee.

Now we'll hear from Mr. Chiaro from Rio Tinto. There's a button on the base.

MR. CHIARO: Chairman Waxman, Ranking Member Barton and distinguished members of the committee, thank you for agreeing to listen to our views this morning.

I am Preston Chiaro, chief executive energy and minerals Rio Tinto. We're a major minerals and metals producer with operations and markets worldwide. Here in the U.S. we're the second largest coal producer, and we're also the world's second largest producer of uranium for nuclear power generation. Our coal and uranium together provide the fuel for about 9 percent of the nation's electricity generation. Our U.S. businesses employ over 15,000 people in 31 states with major operations in California, Kentucky, Utah and Wyoming.

I want to talk this morning about technology. Many low- greenhouse-gas-emitting technologies already exist, and these technologies will be important for near-term reductions. But we must also develop the long-term critical path solutions that will allow us to meet aggressive reduction targets over time.

Critical path technologies such as carbon dioxide capture and storage, or CCS, needs stable, predictable funding sources not subject to annual appropriations in order to compress and accelerate the technology deployment and commercialization time frames. CCS really is a key enabling technology to unlock an environmentally friendly future for fossil fuels. Our proposals outlined in the blueprint are intended to promote CCS technologies to levels above and beyond what a CO2 market-priced signal alone will yield.

Our specific recommendations include, first, by 2010 a comprehensive national strategy for implementing all necessary rules and removing legal barriers for CCS deployment; second, funding for five gigawatts of projects to demonstrate full integration and viability of CCS with power production and other industrial processes. Demonstration projects must be under way even before a cap and trade program is in place.

Third: direct funding of CCS projects for sequestered CO2 from coal and other fossil fuels made on a first-come, first-serve basis. Funding levels must be adequate to cover the incremental costs of capturing and storing CO2 instead of emitting it into the atmosphere and sufficient to encourage deployment on the order of about 72 gigawatts. We believe this will keep coal in the overall generation mix and avoid a costly dash to gas within the power sector.

Once an adequate regulatory framework and financial incentives are in place and CCS technology has been successfully deployed in commercial settings, we recommend that all new coal plants meet a reasonable performance standard. We believe that these policy recommendations will go far in ensuring that coal remains a cornerstone of electricity generation in the future while responding to the imperative to reduce man-made greenhouse gases.

Thank you.

REP. WAXMAN: Thank you very much, Mr. Chiaro.

And finally, we'll here from Mr. Mulva from ConocoPhillips.

MR. MULVA: Good morning, Mr. Chairman and committee members.

As chairman of ConocoPhillips, the third largest U.S.-based integrated energy company, we support the integrated set of recommendations included in USCAP's blueprint for legislative action.

Greenhouse gas emissions from transportation fuel represent nearly one-third of U.S. total. Clearly this sector must be covered by any comprehensive national policy. However, reducing these end-use emissions is going to be complicated. It will require a systematic approach that involves fuel providers, vehicle and equipment manufacturers, consumers, public officials and policymakers.

Now, the blueprint offers several key recommendations specific to transportation. First, emissions from transportation should be included in an economywide cap. Second, fuel providers should be responsible for securing allowances for the resulting consumer emissions. And third, coordinated performance measures should be established for all factors involved, and that is vehicles, fuels and consumers.

Including transportation within the cap will provide the environmental certainty that's needed. It will encourage efficiency, technological progress and more energy-conscious consumer practices. Recommended performance measures include, one, a greenhouse gas-based fuel performance standard that's challenging but it's also economically and technically feasible; two, improve vehicle emissions standards; and three, strong policies that would reduce emissions from travel, stimulate investments in efficiency, and encourage less carbon-intensive infrastructure development. These measures should be periodically reviewed and updated for their effectiveness.

Our company and other USCAP members are committed to working with Congress and the new administration. We urge you to enact legislation that effectively protects the climate while also assuring a safe, secure and affordable energy supplies that sustain our economy and standard of living.

Thank you.

REP. WAXMAN: Thank you very much for your testimony.

I note that these were the members of your group selected to give oral statements, but we have written statements from the rest of you, and those will certainly be in the record.

I want to start off the questioning by yielding to Mr. Markey.

REP. MARKEY: Thank you, Mr. Chairman, very much.

This is a question to the CEOs. You've heard the concern that adopting the kind of proposal that you're putting before us today could harm your companies. I'm going to ask each one of the CEOs, do you agree with that suggestion or do you disagree?

Mr. Mulva, I just need a yes or no because I have several questions. Mr. Mulva.

MR. MULVA: No. I don't believe that what we are proposing will harm our company and its long-term prospects for opportunities in investment.

REP. MARKEY: Thank you.

Mr. Nolen.

MR. NOLEN: I also don't believe it will hurt our company. It will make it better in the long term.

REP. MARKEY: Mr. Rowe.

MR. ROWE: No, sir.

REP. MARKEY: Mr. Crane.

MR. CRANE: No, sir.

REP. MARKEY: Mr. Chiaro.

MR. CHIARO: No, sir.

REP. MARKEY: Mr. Immelt.

MR. IMMELT: Nope.

REP. MARKEY: Mr. Rogers.

MR. ROGERS: No with respect to our company as well as --

REP. MARKEY: I'm coming back to you with another question. Thank you.

Mr. Darbee.

MR. DARBEE: No, sir.

REP. MARKEY: Mr. Sterba. Mr. Terek (sic) -- Tercek, I'm sorry.

MR. TERCEK: (Off mike.)

REP. MARKEY: Okay, great. Mr. Sterba.

MR. STERBA: (Off mike.)

REP. MARKEY: Okay, great.

Let me go to you know, Mr. Rogers. You say that the current economic downturn actually provides Congress with its best opportunity to pass meaningful and sustainable climate legislation. Could you briefly expand on that?

MR. ROGERS: Sure. Because as I study many of the proposals for the economic stimulus and I look at sort of the green stimulus that's embedded in that, if that is passed and we have climate legislation passed this year where the economic impact won't be immediate because of the way the plan works, I think the combination of the two together provides the kind of road map that'll allow companies like ours to start making the decision.

And let me also very blunt about this: I don't think it's going to be cheap or easy to achieve the objectives in the blueprint, and the sooner we get started the better. And quite frankly, I believe having a debate about this in the middle of the recession is the right time to debate it because economic considerations will be carefully taken into account.

REP. MARKEY: Thank you, Mr. Rogers.

Mr. Chiaro, you represent the second largest coal producer in the United States.

MR. CHIARO: Yes.

REP. MARKEY: And yet in your testimony, you say that legislation could encourage innovation, enhance America's energy security, foster economic growth and improve our balance of trade. Could you briefly expand on that?

MR. CHIARO: Coal has some fundamental characteristics that I believe make it a viable and in fact essential fuel for the future. Like every other fuel source, it has environmental aspects that must be controlled. We've done a good job controlling particulate emissions from coal, sulfur dioxide emissions from coal, other aspects of coal mining and so on, and this is simply the next step in that procession of technology development to produce a technology, carbon capture and storage, that can address the CO2 emissions from coal- fired generation.

REP. MARKEY: Thank you, Mr. Chiaro.

Mr. Crane, you say in your testimony that addressing climate legislation is the paramount challenge facing our generation and that it is a moral imperative that we act without any further delay. Please expand.

MR. CRANE: I think just to -- from our perspective, our role as business leaders is to target our companies as to the social and economic dynamics with which -- in which we live, and this is the most compelling one. And as a major carbon emitter and someone who stands ready with capital to invest in green technologies, what we really need is to work hand in hand with yourselves to provide clarity so we know where to invest.

REP. MARKEY: Thank you.

Mr. Immelt, you testified that your wind turbine business has grown from $300 million to $6 billion in just six years. And you also state that GE's "clean tech" Ecomagination business is growing at 20 percent a year and will soon reach $25 billion and create tens of thousands of jobs. So you see this as a great economic opportunity for GE, huh?

MR. IMMELT: Sir, I believe not just in the United States but globally the interest in clean technology is high. We see demand for these products on a global basis. And most importantly, we're a net exporter of all these products out of the United States. So I think that investing in clean technology -- in innovation and clean technology is a great business proposition for --

REP. MARKEY: Thank you.

MR. IMMELT: -- many companies in this country.

REP. MARKEY: Thank you.

And Ms. Beinecke, you say that the cost of inaction is very high for our economy and for our country. Would you please expand?

MS. BEINECKE: Well, the evidence -- the scientific evidence of what the consequences of global warming are are just mounting very, very rapidly as I indicated. And so there will be not only severe ecological consequences but severe humanitarian consequences as a result of that. And so every day that we delay in enacting climate legislation and getting on the path to reducing our carbon emissions puts the -- not only all of our ecological systems at risk but puts literally hundreds of millions of people around the world at risk for not being able to have secure and -- secure futures.

REP. MARKEY: Well, Chairman Waxman and I are committed to acting to deal with this urgent problem and to do so in a fashion that represents the urgency of the problem. Thank you all for being here today.

REP. WAXMAN: Thank you, Mr. Markey.

Mr. Blunt.

REP. BLUNT: Thank you, Mr. Chairman.

If we put this or other things into legislation we'll of course have to -- we come up always with a -- with cost estimates, with economic impact estimates.

Ms. Claussen, are there -- those estimates in the report?

MS. CLAUSSEN: No. We do not have them in the blueprint. We have done some economic modeling and we have looked very carefully at the economic modeling that's been done over the last year on pieces of legislation like the Lieberman-Warner bill.

It is our conclusion that you cannot derive point estimates that are meaningful here but you can get a lot of insights. And we took those insights into account when we developed the blueprint. For example --

REP. BLUNT: Well, let me -- let me ask you a couple of questions about that. But they -- they're not here yet. We'll need to look for them -- Lieberman-Warner was the plan that was discussed last year, and the estimates from the Energy Information Administration, from EPA, from the National Association of Manufacturers, they all had estimates that showed significant gross domestic product reductions by 2030. I know in my state alone, in Missouri, the estimate of one of those reports was that we would lose -- have a net loss of 57,000 to 76,000 jobs, obviously, not a loss that we would want to have at any time, and particularly not at this time.

I'm wondering, Mr. Darbee, as you looked at this topic, how of that is offset by new jobs and what's in this report that doesn't create the 140 percent increase in gas prices by 2050, for instance, that Warner-Lieberman was purported to increase? Mr. Darbee?

MR. DARBEE: Well, Congressman, let me say that there were a lot of concerns when we started on the energy efficiency route 30 years ago in California along the same lines, and people felt that really working hard on energy efficiency as well as choosing the route on renewables that we did would hurt the economy. And yet the California economy has grown better than average in the United States over that 30-year period.

So as we look at it, there are tremendous opportunities with respect to investments in energy efficiency, in investments in renewable technology. You've heard from the CEO of GE about the opportunities there. So I think there will be many puts and takes. Some estimates have indicated that the cost would be below 1 percent of GNP. Those costs are not insubstantial, but when one thinks about the consequences of inaction just, for example, in water in the West or hurricane damage in the East, they more than swamp the costs associated with dealing with climate change. And what we've learned from business is the sooner you start working on a major problem, the more degrees of freedom that you have in solving that and the solutions are cheaper. So the costs will not be inconsequential, but they will be less than the costs of inaction.

REP. BLUNT: Well, I'm interested in that argument that Mr. Rogers I thought made effectively that the sooner you start the more you average out the ultimate cost that these things may have to have. Is that in the report somewhere, the averaging out, the goals? Have we -- have those goals been designed in a way that we're really thinking about the incremental cost and the impact that has? I'll let you, Mr. Darbee, answer that, too, if you want.

MR. DARBEE: I don't believe that we have that in the report, although if my colleagues can identify something that I've missed -- I don't think it is there. Supporting that, we've done, as Ms. Claussen indicated, a fair amount of economic analysis, as have others like McKinsey, that suggest that the costs are manageable and less than the cost of inaction.

REP. BLUNT: Yeah. I think Ms. Claussen used the -- we talked some in the hearing already in your testimony about the 2020 figure.

I guess I'll just go down the line, the same line that my friend Mr. Markey went down. And my question would be are you confident that this doesn't have negative economic impact on your companies in terms of job loss or other costs in the first decade?

And Mr. Mulva, I think you got to lead off last. That's really just a yes or no question. It's the first decade as opposed to between now and 2050.

MR. MULVA: Addressing climate change will increase our cost structure of providing energy.

MR. NOLEN: No, it will not as a provider of the technology.

REP. BLUNT: Mr. Rowe?

MR. ROWE: It will not have negative effects on my company, but if we aren't very careful to use the market mechanisms of cap and trade to limit the costs of what we do, it would have negative effects on our customers. That's why we think the cap and trade is so important.

REP. BLUNT: Mr. Crane?

MR. CRANE: In the near term, if taken in its totality, it would not impact us in the near term. In the long term it would hurt us if we don't adapt our technology to change the way we make electricity, which is part of the plan.

MR. CHIARO: On balance, we believe the opportunities will outweigh the risks and the costs.

REP. BLUNT: In the first 10 years.

MR. CHIARO: In the first 10 years.

REP. BLUNT: Yes, sir.

Mr. Immelt?

MR. IMMELT: Congressman, I would agree with my colleagues.

REP. BLUNT: Mr. Rogers?

MR. ROGERS: In the first 10 years, if the allocation method is done appropriate, it will minimize the cost impact, but there will be cost impact on our consumers. We're the third largest consumer of coal in the country. But with 70 percent of our electricity coming from coal and for the 25 states with more than 50 percent of their electricity from coal, it will also, if the allocation of allowances is not designed right, could result in significant increases in prices in each of those states.

REP. BLUNT: And just very quickly -- I'm over my time -- Mr. Darbee and --

MR. DARBEE: The answer is no.

MR. : Like Mr. Rogers, there will be cost increases that our customers will bear. But if it's done appropriately as we've laid out, we can minimize what those cost increases are.

REP. BLUNT: Thank you.

And thank you, Mr. Chairman.

REP. WAXMAN: Thank you, Mr. Blunt.

The chair would like to now recognize the chairman emeritus of the committee, Mr. Dingell for his questions.

REP. DINGELL: Mr. Chairman, I thank you for your courtesy.

This question to Dow and DuPont; I believe Mr. Green and Mr. Sterba are present here. I have a great concern about designing the climate change program so as not to put our own American industry at a competitive disadvantage and driving jobs overseas. I'm particularly concerned about USCAP's views on one issue, and that is chemical companies such as Dow and DuPont, and that is about the possibility of massive fuel switching occurring from coal to natural gas. I have fears that this could create significant increases in the cost of natural gas, which is used both as a process and as a feedstock. Could Mr. Green or Mr. Sterba comment on that and tell me whether this issue was discussed at USCAP?

Gentleman, don't be shy; the clock is running.

MS. CLAUSSEN: They're not here. I mean, I'm happy -- (off mike consultation) --

REP. DINGELL: Oh, they're not here?

MS. CLAUSSEN: I'm sorry, but they're not present. But maybe I could --

REP. DINGELL: Well, could anyone then answer that.

MS. CLAUSSEN: Yeah. Maybe I can reassure you that we spent a great deal of time with our concerns about trying to avoid the dash for gas, which would put DuPont and Dow at a disadvantage. And that is why we have the costs containment mechanisms that we've put in here, and that is why we think it is important when you consider allocations that you do so to companies that could be adversely affected.

REP. DINGELL: Would anybody else like to make a comment?

MR. DARBEE: I would add, Mr. Dingell, that the dash to gas is something that, as has been said, is something that we're very, very focused on. And we must try to avoid near-term price spikes in cost of carbon. And that's why the -- all of the mitigating mechanisms from allocations to the carbon board administering a reserved fund to the use of offsets are a critical component of this; otherwise, we would run the risk of moving on to natural gas to the detriment not just of our chemical companies but also of all consumers that use natural gas to heat their homes.

REP. DINGELL: All right. Now, ladies and gentleman, last year you will recall that Mr. Boucher and I released a discussion draft which was our suggestions as to what the committee should consider as we proceed about this business. I'd like to have each of you give me some comments or those of you who seemed -- who would prefer to do so, to tell us about the blueprint released today and how it meshes with that draft or how it would work, because I believe that this is going to be a very important tool for this committee to use to begin to arrive at a consensus. Who would like to respond?

MS. BEINECKE: Thank you very much for the question. In our analysis there are many elements of the discussion draft that you and Chairman Boucher prepared that is very consistent with what is in the blueprint. And I think we could answer specifically and do an analysis for you going forward, but a lot of the issues, the targets, the cross-containment mechanisms, the various incentives to drive technology I think are quite compatible, and both I think provide a blueprint for the committee to begin their deliberations this year on how to enact climate legislation quickly.

REP. DINGELL: Would each of you who is disposed give us some comments on the question just asked? In other words, do this please for the record. And I ask, Mr. Chairman, that the record remain open so that we may have that -- those responses included into the record on this matter.

REP. WAXMAN: Without objection, that will be the order.

REP. DINGELL: Mr. Chairman, I thank you.

Ladies and gentlemen, thank you.

REP. WAXMAN: Thank you, Mr. Dingell.

Mr. Upton.

REP. UPTON: Thank you, Mr. Chairman.

I think many of you know that our electricity demands are expected to -- in this country are expected to grow by about 50 percent by the year 2030. Your plan as you submitted this morning will reduce -- will have a reduction in emissions by 40 percent by that same year and 80 percent by the year 2050. I wonder if any of you know when the last time our country -- at what year did our country actually achieve the emissions that are mandated in this legislation or proposed by 2050, in other words, an 80 percent reduction? Any of you know?

Mr. Krupp?

MR. KRUPP: Well, I'd have to --

REP. UPTON: I'm told it was about 100 years ago; that our emissions by 2050 in essence would equal what was in the early 1900s.

MR. KRUPP: Excellent question, Mr. Upton. The historical experience that we have in regulating emissions really most clearly is illustrated by the 1990 Clean Air Act, which called for a 50 percent reduction not in 22 years as we're calling here -- for here but a 50 percent reduction in only 10 years. That was achieved ahead of schedule for sulfur dioxide. And in fact, under the current administration, the Bush administration, the president has ordered an additional 70 percent cut in less than another decade. So combined, the two cuts in sulfur emissions that have been ordered are greater than 80 percent in a much shorter time frame and have been achieved at a fraction of the cost that was predicted by the opponents.

REP. UPTON: Well, this, of course, would be carbon emission reductions.

MR. KRUPP: That's absolutely true. I think that the sulfur is very instructive experience. With carbon the opportunities for reducing, especially when you consider offsets, are much broader than with sulfur. With sulfur you really needed end of the pipe technology. With carbon energy efficiency, reducing the input from -- by using offsets from farmers who can contribute to reductions opens up a wider array of possibilities. So I think there's reason to be more optimistic here.

REP. UPTON: Okay. Mr. Rogers, you indicated that unless we perfected the CCS process by the -- certainly by the year 2015 that you would be -- it would be very difficult to achieve the proposed reductions by 2020 as well as 2030 and 2050. You know that Mr. Boucher and I introduced legislation in the last Congress that proposed a path to get that. We appreciated the industry's support for sure. But that legislation languished. It did not move out of this committee. The chairman has indicated that he'd like to pass this -- the overall legislation in the next four months. You indicated that it would be at least five years before we'd see whether this is perfected or not. Can you achieve these reductions without CCS?

MR. ROGERS: It would be my judgment that -- one, I was very supportive of that legislation.

REP. UPTON: I know that.

MR. ROGERS: I think it is critical. And it would be my judgment that without that legislation or a comparable effort that we would be in a place where we can't achieve the targets.

But I would say one other thing that I think is very important for this committee to appreciate. These targets can be met only if we have aggressive energy efficiency. These targets can only be met if we have renewables and renewables that we can actually get to market, which means eminent domain, because renewables without eminent domain will not get to market, given the ability to build and to build transmission.

Thirdly, in every study, and I would refer you to the Eprey (ph) study, a key component of being able to achieve these levels and to supply electricity to our economy is it requires significant build-out of nuclear units going forward.

And if you take any of these off the table -- take coal off the table or if you take nuclear off the table -- our ability to hit these targets, just not a mission that can be achieved.

REP. UPTON: Mr. Darbee, would you agree with that?

MR. DARBEE: I agree that we need all of the different technologies that have been identified. The one thing I would say is that with a cost put on carbon, there are all sorts of new technologies that we haven't identified yet that may be available in 2020 and that they may substitute to the extent that we have a shortfall --

REP. UPTON: I want to get my last question in. I appreciate it.

Mr. Krupp, Ms. Beinecke, did you all support -- did you all take a stand on the CCS legislation in the last Congress?

MR. KRUPP: We did not.

REP. UPTON: On the House-drafted bill?

MS. BEINECKE: Yes, we did. And we supported that legislation --

REP. UPTON: You did support it.

MS. BEINECKE: -- and the CCS provisions because we think getting CCS going rapidly is absolutely critical to solving the problem.

REP. UPTON: Time is expired. Thank you, Mr. Chairman.

REP. WAXMAN: Thank you, Mr. Upton.

I am now recognizing the members on the rules in the order in which they appeared at the committee today. And Ms. Capps, you would be next.

REP. CAPPS: Thank you, Mr. Chairman.

Part of the reason we're here today is that year after year our understanding of climate change science has grown. Computer models that predicted increasing temperature, changes in ocean heat content and decreases in arctic sea ice have been strongly supported by subsequent observation.

As this committee takes up legislation to address climate change, we will need to stay apprised of the latest climate science. We'll also need to think through the economic effects of our actions. If history is a guide, there will be some who will argue that it's simply too expensive to take action. Each time Congress has considered adopting environmental protections in the past we've heard the same story.

And now, Mr. Krupp, I'd like to build on some -- the interaction that you just had with my colleague Mr. Upton. And you and I have had a working relationship. In my congressional district on the central coast in a little fishing village called Morro Bay, you helped us demonstrate that we could save that village by -- and that protecting the environment could actually ensure business growth for those fishermen.

I know that the Environmental Defense Fund employs Ph.D. economists. And I'd like to ask you about the predictive powers of this discipline. Could you talk about the history of cost predictions for previous environmental legislation? Particularly I'd like to hear some background on the accuracy of predictions about the 1990 acid rain program, part of the Clean Air Act's cap and trade system.

MR. KRUPP: Thank you. It's an excellent question. And it turns out that it's very hard for the economic models to predict the impact of a dynamic incentive to come up with new technologies. And these economic models historically have always underestimated the innovation factor.

Specifically you asked about the Clean Air Act of 1990. Costs for removing a ton of sulfur dioxide were estimated anywhere between $800 a ton and over $2,000 a ton. In the first phase of the program, costs turned out to be, which is what the estimates were for, less than $100 a ton. So the estimates were wrong by up to a factor of tenfold. And the reason is that the cap and trade creates buyers for the lowest-cost technology. It creates a hunt. It creates incentives to innovate. And that basically grinds down the cost. And that would be my comment. Historically we've -- economists have always overestimated the costs without exception.

REP. CAPPS: Well, given our apparent difficulties in predicting how the economy would change, it's still a very vitally important topic. Do you have any advice on how policymakers could best make use of economic predictions about climate and energy policy?

MR. KRUPP: Well, I think the models still are useful because they do tell us that the design of the program by your committee will be extremely important in terms of cost. They tell us that the -- I don't think they can give us a number of what the costs will be, but they say there are some things that you can do that will make a big difference, and they show us relatively they'll be more or less expensive. For example, allowing the use of offsets will drive the costs down substantially. And all the models from MIT, Harvard do show that. And I do think those qualitative conclusions are correct. They show that the more trading you allow, the more flexibility between gases and between sectors that you allow, the more you will drive the costs down of the program.

REP. CAPPS: Let me just ask this -- I believe it's an important topic -- if any of the rest of you, particularly those of you who represent an industry, would have some advice along those lines, some examples.

MR. ROWE: Congresswoman Capps, I'd basically agree with what Mr. Krupp said. I think we should extrapolate from sulfur, which is something you didn't want to burn in the first place, to carbon, which is something you're burning by intent rather carefully. So I don't think we can be confident of that level of difference between our hopes and our fears.

But I strongly agree with Mr. Krupp on the importance of the trading system. This is why other measures are not adequate. We know the new president will propose a stimulus package. We're all looking forward to it in hopes. We know this Congress will consider renewable portfolio standards anew.

But, you know, my company has tried very hard to analyze the different costs of low-carbon energy and put it in a common frame of dollars per ton of CO2. And we know that some energy efficiency is as good as free. We just don't know how much because nobody can do a good curve. Reducing carbon through natural gas consumption is somewhere on the orders of $10 a ton for CO2. We think nuclear is something like ($)40 and today's wind something like ($)80, whereas solar is still above ($)100, probably around ($)3. But solar is evolving technologically. If you do this all with a relatively crude tool like RPS, you will tend to get the more expensive solutions, whereas if you have the cap and trade system, as Mr. Krupp has said, in the long run you'll get the lower-cost solutions.

REP. CAPPS: Okay. Thank you very much.

REP. WAXMAN: Thank you, Ms. Capps.

Mr. Whitfield.

REP. WHITFIELD: Thank you, Mr. Chairman.

I also would like to thank all of you for taking time from your busy schedules to be with us today as we explore options and issues relating to this serious subject matter.

I noticed that Mr. Markey in his questions to you, Mr. Chiaro, announced that you operate the second largest coal producer in the U.S. But it was my understanding that you all recently announced your plans to divest that coal operation in the U.S. Now, that would lead me to believe that since you are a part of an organization that wants to put a cap on carbon and you've made a decision to sell the coal- producing part of your company, that you're not optimistic about the profitability of operating a coal company in the U.S. Is that true or not?

MR. CHIARO: Thank you for the question. The impetus behind putting a number of our assets around the world for sale was really the acquisition of a company called Alcan, a major aluminum producer. And the principal reason that we bought Alcan is because they have a large proportion of the power that's required to produce aluminum. It's produced by hydro, a low-carbon emitting form of energy. So only in that sense was the decision to sell a range of assets, including our -- some of our coal assets here in the U.S., related to climate change.

When we looked at the assets that we would sell and the criteria that we used to distinguish those that we would put up for sale versus those that we would keep, climate change was indeed on the list but it was very far down the list. It wasn't even in the top five criteria. The principal reasons for deciding to sell some of our coal assets in the U.S. -- by the way, not all of them -- really was related to profitability. And I must say the Bureau of Land Management does a good job of extracting value for the taxpayers out of the coal deposits in the Powder River Basin, so I congratulate them.

REP. WHITFIELD: And do you all operate any coal facilities outside the U.S.?

MR. CHIARO: Indeed we do. We are the largest coal producer in Australia and we have very active exploration programs under way to find more coal around the rest of the world.

REP. WHITFIELD: Well, what about China?

MR. CHIARO: We do not have any activities underway in China right now. We don't mine coal in China. In fact, we sell very little coal -- of our coal into China. China, as you are aware, is the largest producer of coal in the world right now.

REP. WHITFIELD: Yeah.

You know, Mr. Immelt, when I go to the Rotary Club down in my district, the people oftentimes complain that on environmental issues the U.S. -- they are advocates that we should lead the way. And your organization is saying that we should lead the way on cap and trade, for example. And yet in China they're bringing on two new coal- powered -- or one new coal-powered plant every two weeks. In fact, I read that last year just electricity produced by coal in China exceeded all electricity produced by every measure in Great Britain last year -- just the new.

And I know that your company is certainly selling a lot of equipment to build some of those new coal-powered plants in China. What about this criticism that if we take the lead on this that China's not following us at all and the detrimental impact it'll have on our economy, the detrimental impact it'll have on -- well, because our electricity costs are going to be higher? What about that argument?

MR. IMMELT: Congressman, we spent quite a bit of time just trying to frame the globalization debate. You'll see an entire section as part of the blueprint where we talk about the ability to drive competitiveness so that our industries aren't disadvantaged versus China and India. And clearly, if you think about Dow, DuPont, GE, Alcoa, the people that are up here, we need to run, you know, kind of globally competitive footprint. And so we think about that.

The other counter I would make, sir, is that, you know, we are a net exporter of clean products, you know. And so I really believe that there is an export opportunity here if we lead and innovate in the area of high-efficiency engines, in the area of super-light materials, and some of the entrepreneurial structure that exists --

REP. WHITFIELD: Did you all actually sell $600 billion worth of wind power equipment last year?

MR. IMMELT: Not $600 billion, no. (Laughs.

) I wish, but that's --

REP. WHITFIELD: Well, Mr. Markey said they went from ($)300 million to --

MR. IMMELT: It's about ($)6 billion last year.

REP. WHITFIELD: How much?

MR. IMMELT: About ($)6 billion last year.

REP. WHITFIELD: Six billion, okay.

MR. IMMELT: Yes, sir.

REP. WHITFIELD: One final comment I would just make, I was reading this article in The New York Times basically a few months ago that said in Europe, which created the world's largest greenhouse gas market three and a half years ago, early evidence suggests the whole approach could fail because emissions are going up. The GAO came out in December of 2008 on a study of the European Union's emission trading system, and they basically said that available information could not substantiate emissions in reductions, could not substantiate any development of new technology, growth in the economy, or any of the things that you all are saying will -- can flow from a cap and trade system.

I say that simply as we move forward; obviously, we're going to get into this. All of us, I think, have the right goals in mind. We want to be fair-minded. We don't want to put the U.S. at a disadvantage economically. So I look forward to working with all of you and the other committee members as we move forward.

REP. MARKEY: The gentleman's time has expired.

The chair recognizes the gentlelady from California, Ms. Harman.

REP. HARMAN: Thank you, Mr. Chairman.

I suggest we look at this panel for just a moment. Not only is it huge but it reflects the gamut of interests in this issue from fossil fuel producers to environmental advocates. And I suggest, as I did in opening remarks about an hour ago before the panel was physically in front of us, that this is the model to solve these problems. My guess is that some of you voted for the incoming administration, some of you didn't. But that doesn't matter. What all of you are doing is trying to help both, I think, the administration and this diverse committee solve a tough problem. And I don't think it should matter on this committee whether we supported the next administration or we didn't. I personally did. But I also think that having all of you buy into a solution is the way that solution will work. And I'm looking at nodding heads, so I'm very happy to see that.

I talked earlier about what I call the public-private model and how we used it to solve one little tiny energy-efficiency issue, and that is the light bulbs. Mr. Immelt, you were part of our conspiracy, and so was the NRDC. And it was hard to figure out a program that would really get us to much more efficient light bulbs by 2020. But guess what. We did, and we got almost unanimous support on this committee and in the Congress for what we came up with. So I just put it out there that what I call the public-private model is the best model to solve these problems.

Now, all of the solutions will depend on something we really haven't talked about this morning, and that's what I want to ask you about and invite any of you to comment on, and that is a smart grid. If we don't have a smart grid, certainly the efficiency pieces of this solution won't work.

I just learned that in our new stimulus package there will be about $10 billion for investments in smart grid development. But I would like to invite you to talk about -- any of you; maybe Mr. Immelt we should start with you -- the smart grid and why it is a critical piece of the solution.

MR. IMMELT: Congresswoman, I believe that -- I would talk about both a grid that is smarter and bigger. Maybe it starts with bigger first. It was mentioned earlier that if we -- if we're going to increase the penetration of renewables in the country, we're going to need a bigger pipe to push the renewables through from a storage and efficiency standpoint. So there needs to be some accommodation there.

And as far as a smart grid, and my colleagues that run utilities here are probably even more expert than we are, there is such a huge advantage in efficiency and empowerment to consumers, and we view this as both a conservation advantage and also a tremendous advantage on -- to reduce global warming. So I think the technology actually exists today; it's just how it gets deployed through the utility structure, you know, what consumer incentives, but, you know, the technology exists to really empower consumers to make substantial -- and industrial customers to make substantial decreases in their use of energy.

REP. HARMAN: Thank you. Before recognizing anyone else, let me just ask if anyone disagrees that the smart grid is a critical part of the solution.

Okay. Who else would like to comment? Yes.

MR. DARBEE: If I can comment -- and my colleague to my right from Duke Energy was struggling to get the microphone. But in answer to your question -- (laughter) --

REP. HARMAN: I'm sure we can accommodate him too.

MR. DARBEE: We're in the midst at PG&E of deploying 10 million smart meters, and this is the enabling strategy for tremendous energy efficiency, demand management and, frankly, one of the things that will solve this country's energy security issues the best. It enables the electric car that is coming down the road and we will see between 2010 and 2020. So it is critically important. We're moving on it. It also provides the opportunity for smart appliances within the home.

What we envision is people pulling up their computer on their home page understanding how much power they're currently using, and noting if there are any deviations, if power's being used in an unusually high level in the cellar, in the bedrooms, in the attic, wherever, so they can call home and say something's wrong here and we got a problem, we ought to turn off the power.

REP. HARMAN: We only have time for one more comment, but I would invite -- Mr. Chairman, may I request that others can submit their answers for the record --

REP. MARKEY: Without objection, they'll be welcome.

REP. HARMAN: Before we call on our friend from Duke Energy, I would just observe too that a smart grid needs to be resilient to withstand a cyber attack or other hacking.

Let's just hear one more comment now.

MR. ROGERS: We support smart grid. In fact, in our five-year capital plan we're going to spend $1.5 billion making our grid smart.

But smart grid means different things to different people. What it means to us is it means taking our analog grid and making it digital. At the end of the day, that will reduce line losses and will save energy.

The second thing it means to us, it means putting smart meters in. And smart meters will really allow us -- and we're deploying them today -- will allow us to have a more sophisticated energy-efficiency approach, as Peter Darbee was talking about. Many people think of a smart grid as simply transmission lines, but the reality of that is that is really not technically the smart grid. It's more in the distribution part of the system.

REP. MARKEY: (Sounds gavel.) The gentlelady's time has expired.

The chair recognizes the gentleman from Oregon, Mr. Walden.

REP. WALDEN: Thank you very much, Mr. Chairman.

I want to touch on a couple of points. I represent a very rural district. We have 10 or 11 national forests within that district, and I've been real active on forest management policy.

Catastrophic wildfires account for vast amounts of greenhouse gas emissions every year. With a hotter and dryer climate projected for the West and for the northern end of our country, this situation will only be exacerbated.

Depending on the fire severity and forest type, up to 100 tons of carbon per acre can be released. And in 2007 alone, 10 million acres of forest burned. Now, by conservative estimates, that means that 60 million tons of carbon dioxide was spewed into the atmosphere, not to mention all the other greenhouse gases and pollutants. That's roughly the equivalent of 12 million vehicle emissions for one year.

According to the EPA, 562.3 million metric tons of carbon were unleashed upon the atmosphere by forest fires between 2000 and 2005. Now, there is a study out on national forests in eastern Washington that showed that those forests left alone will become net emitters of carbon rather than carbon sinks by the late century due to emissions from catastrophic fire. The forest would likely burn at a rate of 1.7 percent per year, meaning the entire forest would burn in less than 100 years. Actively managed forests can lead to at least a 50 to 60 percent reduction in the current level of acreage burned due to wildfire.

So my question to you is -- and we have an obligation as stewards of these great federal forests to better manage them, and I'd like to know if anybody objects to changing federal law to be able to more actively manage these forests along the lines of what this Congress passed several years ago with the healthy forest initiative -- Healthy Forest Restoration Act. Does anybody object to moving forward over the condition class two and three lands, give the Forest Service the authority to do what they do around our communities?

MR. TERCEK: Can I -- I'll address that.

REP. WALDEN: Please.

MR. TERCEK: Mark Tercek from the Nature Conservancy.

REP. WALDEN: Yes, sir.

MR. TERCEK: Fire protection is not part of the scope of our blueprint, but the Nature Conservancy certainly as a conservation organization strongly supports those types of initiatives.

REP. WALDEN: I appreciate that.

MR. TERCEK: On the broad topic of forests, we would like to note that we do call for forest offsets in this document, both domestically and internationally, not only as an important source of cost containment but as an important opportunity to protect our forests for a whole range of benefits.

REP. WALDEN: Okay.

MR. TERCEK: And we also note that the U.S. has an opportunity to be a real leader here on the --

REP. WALDEN: I'm going to have to cut you off because I've only got a couple of minutes. I'm sorry. But I appreciate that, and I appreciate the work. And I've toured some of your sites out in my district where you've done a terrific job doing the thinning that needs to be done.

Mr. Rowe?

MR. ROWE: Congressman, I would point out not only do we not object, but the offset provisions in the USCAP recommendations would create an incentive for folks like us to invest in better forest management.

REP. WALDEN: On federal lands?

MR. ROWE: Either way; that's the way the offset provisions would work.

REP. WALDEN: All right. Then I want to move on to wind because my district probably has as much wind as many others in the -- not many others in the country. And in fact, the Bonneville grid will have up to 30 percent of its power from wind energy within the next two years, which I think is the highest percentage of any grid in the country. The point I raise is that in order to smooth that load, they are now being faced with having to put gas peaking plants in place. So you all recognize the fact that there are limitations to some of these alternatives, correct? Does anybody want to comment on that?

Mr. Nolan?

MR. NOLEN: I mean, it's certainly -- there's a couple issues with winds. And first of all, you've got to move the wind to where the people are. You mentioned your district did not have the numbers of people so you --

REP. WALDEN: The transmission.

MR. NOLEN: -- the grid comes into a very important point with the grid. We need to do more in storage technologies of how to use store. But the facts are, at the present time, wind is not a peak load source, and so you need some sources behind it to --

REP. WALDEN: To firm it up.

MR. NOLEN: -- to firm it up.

REP. WALDEN: Absolutely. And in the Northwest, of course, we use hydro, and one of the issues we have in the Northwest is what sort of credit allocation would there be in a cap and trade system for a system that has traditionally relied on hydro? And who picks the date that decides the water flowing through a dam is renewable and producing energy as renewable and the water flowing through a more modern dam isn't renewable or vice versa? How do you account for hydropower as renewable energy source if it's been in place since Franklin Roosevelt was president? Do you include that as a renewable or not, and if not, why?

MR. KRUPP: Well, the beauty of a cap and trade system, Congressman, is that hydropower would not require any permits, so there would be no costs imposed on it. So although we're not proposing an RPS so that definition, you know, is not directly relevant here, all --

REP. WALDEN: But it would be under an RPS.

MR. KRUPP: It would be, but that's not what we are here to propose.

REP. WALDEN: But it all melds together.

MR. KRUPP: (Inaudible) -- cap and trade system, all hydro is advantaged.

REP. WALDEN: So it's credited?

MR. KRUPP: It doesn't need a --

REP. WALDEN: Early new hydro's credited.

MR. KRUPP: Old and new hydro all generating electricity has no carbon output, yeah.

REP. WALDEN: All right, thank you. I have expired.

Thank you, Mr. Chairman.

REP. MARKEY: The gentleman's time is expired.

The chair recognizes the gentlelady from the Virgin Islands, Ms. Christiansen.

DEL. CHRISTIANSEN: Thank you, Mr. Chairman.

And thank all of the panelists for being here and for the blueprint. I said in my opening statement that given the diversity of the group, we really appreciate the fact that you were able to come up with a consensus document.

I have a couple of I think brief questions. But one of the six key principles in the call for action is be fair to economic geographic regions and economic groups that may be disproportionately impacted.

And some of the more disproportionately impacted communities in our country would be poor and minority or -- and sometimes they're the same. So was any special considerations in the -- I haven't had a chance to go through the entire report -- for low-income, minority, disadvantaged populations?

MR. DARBEE: If I might address that, what is provided for is that in the case of local distribution companies that the benefits of allocations be passed through to customers. And what we're proposing is that they be passed to the local distribution companies and they -- those companies are required to pass those on to the consumers. And in the case of regulated electric utilities, what we're proposing is the local utility commissions would undertake that program.

Specific to your question, in California the approach that we've taken is we have a REACH program, and so those people who don't have the economic resources to pay for their bills in full, we provide economic support for them. We also have a program on energy efficiency where for low-income individuals they can contact our company, we will send people out, do an energy audit, and then the utility will pay for the improvements to their home to make it more energy efficient. So that was the way that we were thinking about addressing the particular question you raised.

DEL. CHRISTIANSEN: Okay. I'll take one more answer then before my next question.

MR. TERCEK: If I might, we also have provisions for funding for what we call adaptation to climate change, inevitable climate change, including overseas, including island countries that we can --

DEL. CHRISTIANSEN: Because that was my next -- that was my next question because I obviously live in the Caribbean and we're small economies, fragile economies, and I was wondering -- so if you would just expand on maybe what you were going to say about the Caribbean.

MR. TERCEK: Yeah. You know, the conservancy -- our scientists advised us that there's great opportunity to invest in natural ecosystems that provide very important adaptation benefits to vulnerable people. And in our blueprint we recommend that funding be made available from the sale of allowances to pay for these programs both overseas and in the U.S.

DEL. CHRISTIANSEN: Thanks. At a retreat I attended last week, I came across a new concept that I also mentioned in my opening statement, which is cap and dividend as an alternative to cap and trade. And I wonder if anyone would like to comment on the differences or the advantages of one over the other, cap and dividend.

MS. BEINECKE: Well, that's a topic that's gotten increased interest over the last year. And one of the things that we envision is first allocations and then move it into an auction system and that the proceeds of the auction, some would go towards technology development but that the bulk of the resources over time would go back to the consumer. And that is the dividend concept. So I think the question for the committee to consider in drafting legislation is sort of what the time frame is for returning that very significant resource to the consumer.

DEL. CHRISTIANSEN: So it doesn't have to be an either/or, it can be a --

MS. BEINECKE: No. We envision a system that actually moves from one to the other over time. I think that those proponent -- proposing the cap and dividend system do envision going totally in one direction. But USCAP's blueprint actually envisions first an allocation then moving to auction over time.

DEL. CHRISTIANSEN: Thank you.

MR. ROGERS: Congresswoman, let me say, a cap and dividend has the potential of creating huge subsidies where most of the money would come from states that are heavily dependent on coal like Indiana, Ohio, Pennsylvania, Michigan, and that, for instance, you would take $100 out of a state like Ohio and only send $40 back and the money would go someplace else. So there is some equity issues associated with the proposed cap and dividend approach.

DEL. CHRISTIANSEN: Thank you. I don't have any further questions, Mr. Chairman.

REP. MARKEY: Gentlelady's time is expired.

The chair recognizes the gentleman from Illinois, Mr. Shimkus.

REP. SHIMKUS: Thank you, Mr. Chairman.

Appreciate the panel being here. I wish you would've been here for a lot of the opening statements. I did find the benefit of the opening statement -- although, Mr. Chairman, as I had to go do other business, had Steering Committee meetings -- and since many of these members are leaving at 12:30 it was my luck that I got back in time to get a round of questions. If we don't have opening statements, then we don't have a chance to talk to you.

One of the arguments I made yesterday is one of the importance for you all you're doing what you think is important for your association or your shareholders. And we have the burden of doing what's critically important to our constituents. And they're not minor. Each of us represent 660,000 voters.

I was interested -- one of the things I said in my opening statement was the interest in your first release, which had the trading floor as part of the debate on how a cap and trade through the trading floor could be helpful; it was very curious that in this new one, no trading floor, no picture. And I would argue that's for a reason. I would argue because in this cap and trade debate which we like to liken to the Clean Air Act and the NOx and SOx, there are distinct differences. One is technology was available then; it's still not available now. What is being proposed in a cap and trade under this venue is bringing in the huge money managers, the Goldman Sachs of the world, into this debate to incentivize.

The other thing about the cap and trade that we need to continue to talk about is the loss of value that has happened in the stock exchange in the past couple months. I want to be clear. You all know -- we've met, had dinner, lot of friends -- I am opposed. But if we want to be clear to my voters, we enact a carbon tax. They know exactly what the cost is going to be to them, the consumers that are going to have to pay for this move. Any other process, I will argue, unless you can convince me, is a shell game meant to hide the costs from the consumer. And I will -- and we'll have a chance to -- it's interesting on the association too. And I know Rio Tinto has some mining operations but no one else. Where is the coal mine operators?

And the other thing about the association is where is the members of organized labor? Where is the United Mine Workers? I'm a Republican. They a lot of times don't like me just by definition, but I have a great relationship with the operating engineers. I have a great relationship with the boilermakers. I have a great relationship, again, with the operating engineers. I have an interesting relationship with the United Mine Workers. I have a good relationship with those who build the next generation of power plants today and tomorrow. Where are they to weigh in on what this is going to affect to the membership? Because I could tell you, as I did in my opening statement, I'm going to go to them and I'm going to want them to be on board so when there is job loss, which I predict will happen -- we could talk about green jobs but the proportional ratio of building a coal-powered power plant and putting up windmills, which are being built in my district too, there is no comparable ratio about the jobs in operating a major nuclear power plant or a coal-fired plant as a windmill. We can talk green jobs all we want. Real jobs are in real manufacturing. I'm going to hold -- as I'm going to talk to my friends on the other side, I'm going to hold that issue.

Mr. Rowe's a good friend. Illinois is a big power state -- coal, marginal oil, now wind, nuclear power. Nuclear power has to be part of this debate. How can we move to nuclear power expansion, Mr. Rowe, if we do not move aggressively on the high-level nuclear waste in Yucca Mountain?

MR. ROWE: Congressman Shimkus, you are indeed a good friend. As you know, I respect you immensely both when we agree and on those rare occasions when we disagree.

One of the things we share is a commitment to the importance of transparency so the public knows what it's getting.

I have, as several of the members of this panel have, in the past supported a carbon tax to deal with this problem for the transparency reason, but it never seems to catch on. Resources for the Future did a study and found most Americans want to deal with the carbon issue. Most Americans don't like a carbon tax because they know it costs them money. They are pretty suspicious of a cap and trade system because they rightly think it will cost them money. But they think renewable portfolio standards will be free.

As I indicated while you were called away to something else, we have at Exelon tried to study the cost of all sorts of low-carbon solutions: energy efficiency, which is free for a while but not forever; gas, which is low cost but an awful lot to bet on one thing; nuclear that we think costs around $40 a ton; and various forms of renewables, which tend to be much higher. I believe we need nuclear in this puzzle.

REP. DIANE DEGETTE (D-CO): Mr. Rowe, if you can finish up, please. The gentleman's time is expired.

MR. ROWE: Sorry, I took too much of your time.

REP. SHIMKUS: Yucca Mountain?

REP. DEGETTE: I'm sorry. The gentleman's time is expired. Gentleman --

REP. SHIMKUS: So he can't answer the question on Yucca Mountain, just yes or no? Needs to be --

REP. DEGETTE: The gentleman would certainly --

REP. SHIMKUS: That was the question.

REP. DEGETTE: Gentleman would certainly be happy -- be --

REP. SHIMKUS: Would Mr. Rowe --

REP. DEGETTE: We've got other --

REP. SHIMKUS: -- if I provide --

REP. DEGETTE: -- (inaudible) -- his responses.

REP. SHIMKUS: Can I --

REP. DEGETTE: The gentleman's time is --

REP. SHIMKUS: -- provide a -- (inaudible) -- response a question in writing?

MR. : Thank you, Madame Chairman.

REP. HARMAN: Gentleman from Ohio, Mr. Space.

REP. SPACE: I come from one of those so-called coal districts that Mr. Shimkus identified earlier in his opening. And apart from that, it's a district that has been suffering from higher than average unemployment rates in a state that suffers higher than average nationwide. Our poverty rates exceed 20 and sometimes 30 percent in some of my counties. The jobs that we do have aren't paying enough to get many people out of poverty. Tens of thousands of people are working in poverty.

And Mr. Shimkus has posed a rhetorical question about labor, where is labor? What about organized labor? And I think that raises a larger question that I'd be curious, Mr. Rogers, if you could respond, what effect would this rather sweeping measure have on the creation of jobs?

MR. ROGERS: First, I appreciate -- because, as you know we serve Ohio also, and have -- we have over 11 million people that we serve, including many in Ohio.

When I look at this legislation, at this blueprint, several places where I see jobs at work in your part of the world, one is if we can successfully achieve carbon capture and sequestration, we can deploy it. That keeps coal in the mix in a low-carbon world, and that means jobs. It also means jobs in terms of actually the building of coal gasification facilities in lieu of traditional coal plants. It means building jobs with respect to building the carbon capture and sequestration moving forward. I think it is going to mean new nuclear plants and there are going to be significant jobs that come from that. I believe in terms of energy efficiency there will be jobs. So as I look at this, I believe, not just in the short term but in the longer term, jobs will be created as we fundamentally transform our energy infrastructure.

REP. SPACE: And has thought been given -- and I apologize for not having been able to read the entire report as of yet, but has thought been given to the educational and training process and national policies that could be implemented that would help develop a work force in a comprehensive and practical fashion to fill these potential jobs in the future?

MR. ROGERS: We have not addressed that specific aspect of it. But I do believe, as we look at new technologies, whether they are clean tech, renewables, advanced technologies in nuclear, advanced coal technologies, advanced gas, I think in all these areas it is going to take a significant number of new engineers and technicians in order for this to happen. So I fundamentally believe this is going to happen. I personally believe this is going to happen anyway, because I look at our fleet and by 2050, every power plant we have today will be retired. So if I know what the rules are with respect to carbon, it allows us to make investments consistent with achieving a low- carbon footprint, but at the same time of retiring and replacing, and that process alone will create significant jobs over the future, period.

REP. SPACE: Okay.

MR. : Actually the blueprint specifically addresses, Congressman, the issues you raised and the need for training. It is one of the goals we set out for the allocation system to provide for the training of the work force needed to facilitate these wide-scale transitions.

REP. SPACE: And are specific national policies suggested on how best to implement those goals?

MR. : (Off mike.)

REP. SPACE: Thank you.

MR. : Mr. Space? Two of you have asked the question regarding labor unions, and I'd just like to mention that -- and it was not on the House side, but a year, year and a half ago, I stood with Senator Bingaman, Chairman Bingaman, with the IBEW and I believe the AFL-CIO -- I need to verify that that was the second union -- that endorsed a bill that was put forth on the Senate side which was a cap and trade bill, by Senator Bingaman, Senator Murkowski, and an number of others.

REP. SPACE: Has organized labor been involved in any respect with regards to this USCAP finding? All right. Thank you.

I yield back.

REP. DEGETTE: The chair recognizes the gentleman from Georgia, Mr. Gingrey.

REP. PHIL GINGREY (R-GA): Thank you, Madame Chairman.

And thank all of you for being here and bringing us the blue print.

I want to read from the summary overview in your final -- your commitment, the last paragraph. "We the members of the U.S. Climate Action Partnership pledge to work with the president, the Congress, and all other stakeholders to enact an environmentally effective, economically sustainable and fair climate change program consistent with our principles at the earliest practical date." And I heard either one of the witnesses, or maybe a member of the committee, say earlier that the goal was to have legislation to the president before the Memorial Day break. So that's coming up pretty darn soon.

You know we're obviously in a pretty tough economic environment; in this last year, what, 2.5 million jobs lost. Right now we're on the floor about to vote on a bill on the second trance, the $350 billion of the rescue package to try to get -- to do something about this economy, to get it back on track.

And yet, what I'm hearing from you, from USCAP, is you're recommending something whose cornerstone is cap and trade -- a mandatory cap and trade regime and that it needs to be done with all due haste.

My question to you, and any of you can respond, is this: Are you willing to sacrifice more American jobs to achieve the goals of your report? Are you at this crucial time in our nation's history willing to push forward, with all due haste, maybe by Memorial Day weekend, with legislation calling for mandatory cap and trade as its cornerstone, and at the risk of losing additional jobs?

Anyone?

MR. CRANE: Congressman, it's a great question, and I think it speaks to an important point, which is the timing question. If the climate change legislation is passed, that's got to be implemented with the cap and trade several years time. I believe, and certainly speaking on behalf of my company, the first thing it'll do is unleash additional investment by us in various technologies designed to prepare for the cap and trade system that's coming. So, you know, this may be counterintuitive, but I think quite the contrary; in the near term, it will actually unleash investment and create jobs. And we, and many of the companies that sit here, we have very substantial capital. I think my company and Jeff's are the two smallest at this panel. We sit with $1.5 billion in investment capital ready to invest, but we need to know in what direction.

MR. : Make one comment to say we've talked a lot this morning about costs. I think as a group, and I know for myself, that we're much better at driving costs down than we are with uncertainty. And this is what we have tried to do is bring some certainty to our program so that we then can plan. My personal belief is that it is the uncertainty has caused a lot more of our stock prices and employment loss than the cost.

REP. GINGREY: I want to make sure that you understand my question before we get another response. It's really a value question, a value judgment. Even if you would respond and say, well, no, you believe we won't lose more jobs, we'll create more jobs. But I want you to respond to me in regard to that value judgment, if in fact jobs will be lost. It's a question, I guess, of collateral damage. We ask those questions all the time of our military -- is it worth the sacrifice wherever we're engaged. And so that's my question now. And it's all about the timing and how important is it. Is this something that in 2007, January was clearly appropriate to say with all due haste when everything looked kind of rosy out there. But right now when things look pretty grim, is "with all due haste" really appropriate in regard to mandatory cap and trade, or is it something that might not put too much on the back burner but could wait a couple of years?

MR. CRANE: Congressman, in your job there are no no-risk votes. In my job there are no no-risk energy supply options. We both labor as best we can to make decisions or recommendations that try to minimize risk. In my judgment, the economic efficiency of a cap and trade system radically reduces the risk of dealing with climate change, which we must do. In my judgment, stating soon, with appropriate cost constraints, protects the economy better than putting off a solution and then perhaps doing something more drastic or more disingenuous. It's all a mater of trying in our frail way to handle risk as best we can.

REP. WAXMAN: Thank you, Mr. Gingrey.

Mr. McNerney.

REP. JERRY MCNERNEY (D-CA): Thank you, Mr. Chairman.

Sitting here with this panel in front of me is like a child in a candy store. So unfortunately I only have five minutes. I'd like to start with Mr. Darbee.

I have a long relationship with PG&E as a customer and as a business partner, and I've always found PG&E to be a good business partner to deal with. Now, my question for you is, you're embarking on a very aggressive program for efficiency and bringing in other new technologies to generate new power. Could you explain briefly how that benefits your bottom line?

MR. DARBEE: Well, with energy efficiency we've collaborated with the state of California. And what occurs there is that the cost of new energy efficiency to our customers is about three cents. What we've entered into as a framework in California, of -- where if demand for energy goes up, our revenues go down. It's called decoupling. So we are indifferent to the amount of power we sell. And if we create savings for our customers, what happens is that we share some of the savings, a small fraction of the savings. So on energy efficiency, which is one way that we meet increased power needs, we make money that way. If we build new power plants, and most of the power plants are built by others, if others build new power plants and we procure that power, we'd make zero money. It costs X, we pay X for it, we make no money. If about a third of the new power plants that we build, if we build them, we earn a return on the investment, the equity investment that we have in it.

Is that responsive to your question?

REP. MCNERNEY: It is. Thank you.

My next question will be for Mr. Immelt. GE is a leader in producing new energy technology, renewable energy technology. And I have to say some of the work I did in the earlier life benefited technology that you are using. Do you see this as a growing part of your bottom line, and will cap and trade legislation help that bottom line grow as a part of your business model?

MR. IMMELT: I think, Congressman, -- we're already maybe a 40 or 45 billon-dollar company, just in energy, and we invest heavily in R&D as part of that. And so we have products that do coal, gas, wind, solar, nuclear. We're really almost agnostic as of technology. We do it on a global basis. And so, even without a cap and trade program, we would have a prosperous energy business because we're really technically agnostic.

What I would say as a businessman and an American businessman is that the energy sector has been chronically under-invested for a generation in terms of new innovation and technology. If you just look at a pie chart of where the aggregate R&D dollars have gone in this country since World War II, it is hard to find energy on that segment.

I like solving problems with technology; that's what GE does as a company. So anything that makes technology come to the fore is going to be good for GE over time. And what I believe is that a price for carbon will allow many of these technologies that have been around for a generation -- coal gasification has been for a generation; nuclear's been around for a generation; elements of the smart grid have been around for a generation. We just haven't commercialized them and taken down the cost curve to make them as competitive as they could be.

So I view this as -- you know, we all come to this with a different perspective. I view it at its core as the price for carbon is going to bring energy technology into the 21st century and give the United States a chance to lead.

REP. MCNERNEY: Thank you. Many of my colleagues on the other side of the aisle have decried the failure of the European cap and trade system. Now, when I hear Mr. Krupp and Ms. Claussen talk about offsets, I get nervous because I'm thinking about grandfathering, which, in my opinion, is largely responsible for whatever problems the European cap and trade system has had.

So would you be clearer about whether you are including grandfathering on offsets, Mr. Krupp?

MR. KRUPP: Well, first of all, I want to acknowledge the concern to the members of the minority about the European ETS system. It got off to a rough start; since then they have corrected many of the early problems. The principal problem in Europe is that they didn't have good inventory numbers for the baseline, which in this country, thanks to legislation passed out of this committee in 1990 and part of the Clean Air Act Amendment of 1990, we have long had excellent baseline information about the emissions of CO2 from power plants. I don't think we'll repeat that mistake.

In Europe one of the mistakes, I believe, is that they have not allowed agricultural offsets in the system. And we do recommend that EPA start a process that could lead to verified, scientifically valid offsets from the agricultural sector to be part of the system.

REP. WAXMAN: Thank you, Mr. McNerney.

Ms. Sutton?

REP. SUTTON: Thank you, Mr. Chairman.

Thank you all for being here. I appreciate that you're coming together to try and create a solution.

In fact, Mr. Immelt, I noted in your testimony you said on the final page near the end, "Our commitment as a group now is to work with Congress, both houses, both parties, the new administration and other stakeholders to enact this year, if possible, climate legislation consistent with the principles underlying the call for action and the blueprint; namely, that legislation must be fair, environmentally protective and economically sustainable for our country."

And I would just add a couple of words as a representative from Ohio, that after the word "country," we say, "including Ohio," okay? So from now on when you guys are looking at that statement, I want in the back of your minds to be including Ohio. And I'm sure that that is what's intended.

As a new member to the committee, I do have a question. We've heard some discussion about who's at the table and who's not at the table. Could somebody just briefly explain to me how you all came to be and whether or not there is a place at the table for organized labor, or are they welcome at the table? Could you just -- someone answer that for me?

MR. IMMELT (?): Well, I would say that in -- you know, we've been doing this for maybe two and a half to three years. And the idea was to try to get a representative sample, you know, of different industry sectors and NGOs to come together. In that sense, you know, probably most of us have reviewed a lot of the elements of this for our own unions, our own teams inside the company.

There was never a desire to exclude anyone from the table, but I can tell you with 31 people it's been hard enough to get to this point from a standpoint of how far we've gotten. And we look forward to further dialogue under your leadership to make sure that everybody's represented. But there was none -- there was always a sense that the more people we could have in, the better.

REP. SUTTON: I appreciate that, and also as a member of Congress, the ability to work in a large group.

So a couple of you -- you know, manufacturing, obviously, is important to me and the considerations of manufacturing as we foster this solution that I believe can be attained. Several of you, Mr. Immelt and Mr. Nolen in particular, have talked about the timing of what we're doing -- I think, Mr. Nolen, you more specifically -- and the need to pass this climate legislation quickly for several reasons: one, you said, to send the right signal to get the investment going.

Do you also have concern about the delay resulting in what would be even steeper requirements to be achieved more quickly in the future? And tell me how that would impact your organization.

MR. NOLEN: I think Jeff put it correctly first, is that just like his company, our company is in all of these spaces. We also have limited capital as to where we need to go and to make those investments. In order for me to meet Mr. Rogers' time frame to do more with sequestration and other things, we need to put more capital into that and we need to have more certainty on the return on our investment in those areas.

We have choices as to where we put it. Do we put it more in gas, do we put more in wind, do we put more in these areas? And these are all decisions that we must make, and that's why we need to speed it up in order to make the end of the line really happen, because it starts really with Jeff and ourselves and other large companies who put the capital in to build the innovations of these products.

MR. IMMELT: Certainly in the investment world it is critical for success, and what we lack today is certainty in terms of what's going to happen and when it's going to happen. I would argue that today we have almost the worst of all worlds. We have 17 states that are developing their own programs; we have RPS in some areas, not in others. The fact is that the last 40-plus coal plants haven't been permitted, you know.

So we have an energy policy; just nobody knows what it is. And it shows up in terms of those consequences, so -- look, I'm not -- I say this with great respect to my colleagues -- I didn't come to this as an environmentalist, I come to it as an industrialist. I'm a capitalist, pure, plain and simple. And I just think this system we have today is untenable over the long term insofar as, you know, the science is so compelling on global warming, something's going to happen. The more certainty you can give us, the better we can respond and be efficient on behalf of our shareholders.

REP. SUTTON: Mr. Rogers, did you have a comment?

MR. ROGERS: I see this for the perspective of 700,000 customers just in Ohio and the families and businesses behind them. And I'm making decisions today about what to build and to get prepared, and the sooner we get started, I think the better off we'll be because Ohio is very dependent on coal, and if we can smooth out -- and that's what was appealing about the compromise that was reached here -- there was a recognition that we had to buffer during the transition period on the consumers of Ohio and all the consumers.

So in a sense, as a CEO of a regulated utility, I'm here really standing in the shoes of my consumers, saying let's do this in a way that minimizes cost increases and cost impact -- because there will be increased costs -- and let's smooth it out. If we delay this three years or five years, it's only going to translate, I believe, in a steeper cost curve and a more draconian outcome for consumers.

REP. WAXMAN: Thank you, Ms. Sutton.

Ms. DeGette?

REP. DEGETTE: Thank you, Mr. Chairman. Several of the witnesses today have mentioned the renewable portfolio standard, and I think it was Mr. Rowe who said that as a tool for change it's sort of a blunt instrument and that he would prefer to see a cap and trade system that might be more flexible.

And I was kind of struck, too, by what Mr. Immelt just said, which is we have this patchwork of energy policies right now, different renewable portfolio standards in many of the states, nothing in some states, different standards in other states. But I've always felt that giving people some kind of a goal for reduction is a good idea. The devil's always in the details; what would that standard look like?

And as many of you probably know, last year we were actually able to pass the RPS through the House, and it was -- it narrowly failed in the Senate. So I guess I'd like to ask you whether you feel that a national renewable portfolio standard could be developed that would be part of the overall framework and that would be workable as helping to set goals?

MR. IMMELT: I'd start, but then have my colleagues. I would say that that's an area where you'll see different opinions on the panel. Some are in favor of it; some aren't in favor of it.

REP. DEGETTE: Well, let's hear from somebody who's not in favor of it.

MR. ROGERS: I would raise a question about it that hasn't been resolved. For instance, we're in the wind business. We have over 500 megawatts under operation, 5,000 under development in Texas, Oklahoma and Colorado because that's where the wind is. But we're not developing wind in North and South Carolina because there is no wind. We're not building it in southern Ohio or Kentucky or southern Indiana because there's no wind.

If you look across the country and you put a wind map on the country and then you put a solar map on the country, what you see, certain regions are very attractive for making investments in either wind or solar, but it's not uniform across the country.

REP. DEGETTE: Well, sure. And you're right -- you are absolutely right about that.

But on the other hand, those other states -- nobody's going to do RPS that says you have to get a certain amount of your energy from wind or a certain amount of your energy from solar. And in truth, as someone who's worked on these issues for a long time, I'll tell you, every region of the country has some kind of renewable energy. The trick is to set this standard at a level that would be a workable level for everybody.

MR. ROGERS: And I think you're absolutely right about that in terms of getting the right renewable level.

But what I find that's been the most difficult, I talk to people who want wind because I'm in that business, but the same people that support ITC in supporting wind are also the same people that oppose eminent domain so I can build a transmission line and get it to the customer.

So until there's some consensus, it is unrealistic to hope for wind without passing eminent domain legislation.

REP. DEGETTE: I understand.

Let's hear briefly from somebody who supports a national RPS standard.

MR. : Ms. DeGette, I happen to be one of those rare maybe utility folks who does support a national standard, and frankly the reason is I have seen in the West what happens when states create their own individual standards and they take the view that it's not renewable unless it's in my state. And that disadvantages --

REP. DEGETTE: Right.

MR. : -- renewables because it creates the least effective resources being built as opposed to the most effective.

So we need to develop the system -- and I 100 percent agree with Jim that along with this we have got to address the issue of transmission, transmission access and siting. And it just doesn't make sense for natural gas pipelines to built under one set of rules and electric transmission lines be built under another set of rules where we cannot get this infrastructure that's necessary.

REP. DEGETTE: I would just say that in Colorado we passed, as most of you know, we passed an RPS several years ago as part of a voter initiative because all of the utilities opposed it, and within about one year we had exceeded that standard. The legislature adopted a new standard that was a much more stringent standard that they worked with the utility companies to agree to.

So I think this -- I hear you, what you're saying about some of the eminent domain issues, but I think we could arrive at something, a fairly low threshold, and then build from that.

MR. ROGERS: I don't want to leave you with a wrong impression.

While I might not support a national renewable portfolio standard, I have supported a renewable portfolio standard that was approved in North Carolina as well as one that was approved in Ohio, so I've actually within the states approved it because the local law was written in a way to reflect what the opportunities were for renewables there rather than trying to have a national standard where one size fits all.

REP. DEGETTE: I think, though, you could take into account the regional differences.

Thank you, Mr. Chairman.

REP. WAXMAN: Thank you, Ms. DeGette.

Next would be Mr. Sarbanes.

REP. SARBANES: Thank you, Mr. Chairman.

I wanted to go back to the consumer question for a minute because that's the one that could create the kind of political blowback that would make all of this just an academic exercise. So I assume you've built some models along with these projections, and I was curious, if you take the 2020 target, which was to get to 80 percent to 86 percent of 2005 levels, if you went forward over this next period and up to that year without the kind of buffering that you've suggested needs to happen -- and I confess I don't quite understand how the buffering would work  but without it, you know, give me an average ratepayer and tell me what the percentage increase would be in their bill if you didn't have the accommodations in place, and then tell me what you think you could achieve if you did do the buffering that you mentioned.

MR. ROGERS: We did a lot of modeling, the Liebermann-Warner bill and all the various aspects of it, and so I'm going to kind of recall a lot of those studies. It won't be precise, but it will give you a zip code.

If you go -- it depends really on the state. If you're in a state like Ohio, where 86 percent is coal, versus a state like Indiana where it's 94 percent versus a state like South Carolina with 24, it produces different answers. And I think in Maryland I think it's pretty close to 50 percent of the electricity comes from coal in Maryland.

But under scenarios like that you're looking at 20 and 40 percent increases in the price of electricity without -- without -- any ability to mitigate cost. And that is why it became so critical in this blueprint that we had provisions in there that allowed for the mitigation of cost because, absent that, I agree with your observation that if we could pass legislation and if it translates into a 20 to 40 percent increase in the price of electricity, the backlash to that could be devastating to our ability to address climate change long term.

And that is why it is so critical and why this group came together around allowances and came together around the recognition that 40 percent of the allowances should go to the utility sector, where 40 percent of the emissions come from, and that a significant portion of those should be used to mitigate cost increases during the transition period.

REP. SARBANES: With the goal of getting them to what kind of level against the 20 to 40 that you've --

MR. ROGERS: We didn't agree to the specifics of that, but we all recognized by using the words "significant portion" that we had to make sure it didn't translate into a draconian increase in prices during this interim period.

MS. CLAUSSEN: I mean, if I could just add one thing to that. This blueprint stands as a whole. Everything is linked. Our ability to meet the kind of targets that we've put here, which are quite aggressive, is based on having some allocation to the local distribution companies. It's based on the cost-containment measures that we have in here, including the use of verified real offsets. So we sort of view this as a way -- as a whole, to protect the environment and have a sustainable economy and not increase prices hugely to consumers.

MR. : Congressman, I would add --

REP. SARBANES: Yes?

MR. IMMELT (?): -- one other thing is that, you know, the way to think about what we've proposed, there's probably an 80 or 90 percent overlap with an energy policy and really taking control over technologies that are going to give us long-term control over energy costs.

Our electricity bills did go up by 40 percent a year -- (laughs) -- ago as the spike in oil and other natural resources took place. And I think when we execute on this plan, we're going to have over the long term a set of technologies that I believe are going to allow us to have more control over time and more security over time about how to think about energy technologies and productivity.

REP. SARBANES: Yeah. Did the projections of what the unbuffered scenario would be account for what you hope the new technologies will produce in terms efficiency or they did not?

MR. ROGERS: It did. We did take into account the availability of the technologies.

REP. SARBANES: Right.

MR. ROGERS: How long it would take us to bring a nuclear unit on and shut down coal unit so we'd reduce our CO2 footprint and what the cost implications would be. We looked at the prospect of bringing on carbon capture and sequestration with respect to existing facilities. We looked at energy efficiency and did scenarios on really aggressive energy efficiency and succeeding there. And we actually looked at different scenarios on renewables in terms of the cost implications as well as the availability on a 24/7 basis and that implication.

REP. SARBANES: My time's up. I'd just say that all the more reason to be as aggressive on the energy technologies. You're trying to be -- I'm troubled that so much of that technology is being purchased overseas because I think we've lagged far behind.

REP. WAXMAN: Thank you, Mr. Sarbanes.

Before I recognize other members for questioning, I know that a number of you have to leave and I want to express my appreciation. I know you were going to leave at 12:30 and you've extended your time to be with us and this has been very helpful. I've listened to your responses to the questions -- very important and legitimate questions -- from the members, and I think it's been very helpful in clarifying the matter.

You do represent a remarkably diverse panel, a cross-section of American industry and environmental advocates, and your call to us is to adopt comprehensive, environmentally protective, economically sustainable and fair legislation to arrest global climate change and the economic crisis. As I've heard you all say, there's not a reason to not move forward, but there's a real reason why we should move forward at this time.

So I thank you so much for being here, and I appreciate all the work you've done as a panel in developing the proposals you've sent to us. I am looking forward to working with members of the Congress and our committee, both sides of the aisle, from various regions, with the various stakeholders, with the new president, with members of the House and the Senate in leadership positions on both sides of the aisle as well and seeing if we can accomplish this goal this year. It's a very aggressive timetable.

So I'm going to excuse those who have to leave, but I know we have others that will stay behind to answer further questions from the members of the committee. Thank you so much.

In fact, it probably isn't a bad idea if any members that are -- any of the witnesses that are going to be testifying want to take a quick break, we can do that. Otherwise we don't have -- (off mike consultation). No, no, we have a whole new group that's coming in from USCAP that are prepared to answer questions. They're not the CEOs, but they're people who have been very involved in the issues.

We're going to pick up questions where we left off, but I want to introduce a new set of witnesses. (Sounds gavel.)

We have Elizabeth Thompson, the legislative director of the Environmental Defense Fund; Betsy Moler, executive vice president of government and environment affairs for Exelon Corporation; Ann Renee Klee, vice president for corporate environmental programs for General Electric; Daniel Lashof, Ph.D., the director of the NRDC Climate Center for NRDC; Steven B. Corneli, senior vice president, market and climate policy for NRG Energy; Janet Peace, vice chairman -- no, vice president for markets and business strategy for the Pew Center on Global Climate Change; Steve Kline, vice president of corporate, environmental and federal affairs for PG&E Corporation; and Robert L. Bendick Jr., director of U.S. government relations for The Nature Conservancy.

We're delighted that you're all here to further answer questions from members of the committee.

As I indicated, it's the practice of -- going to be the practice of our committee that all witnesses testify under oath, so before you sit down and get too comfortable I'd like to ask if you would stand and raise your right hand. (Witnesses are sworn in.)

The record will indicate that each of the witnesses answered in the affirmative.

Mr. Rogers, you would be next in asking questions. Do you wish to be recognized? No.

Ms. Schakowsky was next. She's not in the room at the moment.

Mr. Welch, you're next.

REP. WELCH: Thank you, Mr. Chairman.

I want to go back to a line of questioning that was asked by Mr. Markey. There's two things. One, this committee, with Chairman Waxman and Chairman Markey, are intent on having a significant climate change bill by Memorial Day; it's very ambitious. Second, Mr. Rowe, an earlier witness, pointed out the obvious and that is all of us have to make decisions that minimize risk and there's a debate and there will be an intense debate among members of this committee and in Congress as to what will be the economic consequences of the action that we take.

But the question I have for each of you, and I just want to go down, is this, and I'd like to just get a yes or no answer because this is really a threshold issue for us: Does doing nothing to address climate change -- in other words, us getting unable to resolve the debate about the consequences of action -- does doing nothing to address climate change, inaction, threaten our economy in your view, yes or no?

And I'll start -- is it Mr. Bendick?

JONATHAN PERSHING (director, Climate, Energy and Pollution Program, World Resources Institute): Jonathan Pershing with the World Resources Institute.

Yes, it does.

REP. WELCH: Okay.

And Mr. Kline?

STEVE KLINE (vice president of corporate, environmental and federal affairs, PG&E): It does, sir.

REP. WELCH: Yeah.

MS. : Yes, sir, it does.

REP. WELCH: Okay.

MR. : Yes, it does.

MR. : Yes, it does.

MS. : Yes, sir. (Off mike.)

REP. WELCH: Well, I --

REP. WAXMAN: There are buttons on the base of the mike, so be sure you press them.

REP. WELCH: All right. I want to thank everyone because the threshold question is whether we have to act, and one of the debates we're going to have is whether the risk of acting is greater than the risk of not acting and it's that elemental. And as you have heard from listening to the questions of the members of the committee, there's a division of opinion, less about whether global warming is a threat, but a very lively debate about whether action will be worse than inaction. And I find it very heartening that the leaders of the advocacy community and the industrial and energy community are united on urging Congress to be a partner in acting.

Let me ask the -- is it -- it's Ms. Klee from General Electric? I -- yeah, Mr. Immelt was here and your company's pretty good sized, as I understand it. How -- what are the consequences of inaction economically as you see it to General Electric and the work that you do?

REP. WAXMAN: There's a base -- a button on the base.

ANN KLEE (vice president for corporate environmental programs, General Electric): I think you heard the CEOs identify some of the risks this morning. There is the lack of investment that will be made because there's uncertainty as to where to put limited investment dollars. There's also the fundamental fact that there will be regulation.

REP. WELCH: Right.

MS. KLEE: The EPA will move forward, but it may not move forward in the most cost-effective way, so we may have a lost opportunity by not pursuing legislation.

And there is -- there will be the additional cost that we believe will be incurred if we have to act more quickly later.

REP. WELCH: I see.

MS. KLEE: So those three things I think combine to make it a very costly decision, one way or another.

REP. WELCH: All right.

So if I understand what you're saying, it's not only important to act, it's important to act sooner rather than later?

MS. KLEE: That's our belief, and it's important to act smartly.

REP. WELCH: Okay. (Laughs.) Well, that's -- you're asking a lot -- (laughs)  for that, but I'm glad you have -- hope springs eternal.

Mr. Kline, how about you?

MR. KLINE: I think that one of the things that we see is that both in terms of protecting our customers from the kind of increases that the first panel talked about in terms of their electricity rates, we also see it as an incredible lost opportunity if we don't act now.

REP. WELCH: That being?

MR. KLINE: That is that there's this amazing, developing new technology centers across the United States and we see those jobs going overseas and that technology superiority going overseas. And so in terms of our service territory, where Silicon Valley is, you know, putting a lot of time and energy into these technologies --

REP. WELCH: Yeah.

MR. KLINE: -- we're going to lose that if we don't act now.

REP. WELCH: Okay.

Ms. Moler, a lot of the critics who raise legitimate questions about cap and trade point to the experience in Europe that they cite as a failure; your view on the European experience and how that should inform us about a cap and trade approach?

BETSY MOLER (executive vice president of government and environment affairs, Exelon Corporation): We do not have substantial operations in Europe or any significant ones at all; however, as a student of climate change, I think we have learned a lot of lessons from the European experience.

We need a robust cap and trade system. We need to deal with cost containment, as we call it. We have -- in the mechanics of our proposal on cost containment, we have applied some of the lessons learned from Europe.

I would also say that ultimately we hope there will be a worldwide program, that it will not be just the United States and just the EUTS, the trading system, and so we need a program that is ultimately going to work on a multilateral basis. And we hope that --

REP. WELCH: Okay, thank you.

MS. MOLER: -- by starting here we'll get it developed.

REP. WELCH: All right. Thank you.

Ms. Peace, could you comment on that?

REP. WAXMAN: Mr. Welch, your time has expired.

REP. WELCH: Thank you, Mr. Chairman.

REP. WAXMAN: Thank you.

Ms. Castor?

REP. KATHY CASTOR (D-FL): Thank you, Mr. Chairman. And I'd like to thank Chairman Waxman and Chairman Markey for starting us off less than one week after the Congress was sworn in, starting us off on climate change.

And thank you to the panel for your participation.

Can you all chronicle the current research efforts in carbon sequestration, various research efforts that are showing some promise at all? Who is conducting that research? What is being done right now?

MR. : Congresswoman Castor, Mr. Chair, that's a great question, and we actually tend to think that there's several phases of -- on the continuum from research to deployment that are involved with all of the promising technologies.

With respect to carbon capture and sequestration, one of the exciting things is some of the technologies are very close to commercial deployment. Your heard Mr. Nolen from Siemens earlier talk about part of the need was -- of this program is to get competition and market customers established for the major developers of the technology, and with coal gasification, the technology to actually scrub the carbon out, compress it and mix it --

REP. CASTOR: But who is conducting that research? It's been --

MR. : Well, that's not even research anymore. That's being done by private companies 

REP. CASTOR: Okay.

MR. : -- who are ready to do it.

REP. CASTOR: What is that private company?

MR. : Well, private companies like GE, like Mitsubishi, like Siemens, like other, you know, that we can get you more information.

REP. CASTOR: Yeah, because there was a utility in my neck of the woods in Florida that was held up very early as the --

MR. : Right.

REP. CASTOR: -- one of the prototypes for carbon sequestration and they've abandoned their research project for many different reasons, so I'm trying to --

MR. : Well --

REP. CASTOR: -- now --

MR. : One of our views is --

REP. CASTOR: -- get a little more detail on who's conducting the research.

MR. : One of views as a coalition is that we need these complementary measures that were described earlier to jump-start things like carbon capture and sequestration because right now all the technology can be put together; it hasn't gone down the cost curves. Like Mr. Immelt said, it's not cheap enough or widely available enough to use everywhere, and we think creating more demand and more supply will help make those things happen quickly. So --

REP. CASTOR: Are there -- can anyone else shed some light on it?

ROBERT L. BENDICK JR. (director of U.S. government relations, The Nature Conservancy): I'm Bob Bendick from The Nature Conservancy. My nametag is somewhere here.

Of course, there is a great deal of very specific evidence on sequestration by trees and by other natural systems, and I think we know pretty precisely what different forest types sequester how quickly, both in the U.S. and outside the U.S., and that's why sort of forest carbon issues are part of the blueprint because we know what those are. It's a very old technology and one we can count on in very specific ways if the regulations surrounding keeping those trees in place are good ones, and that's what we advocate.

MS. KLEE: If I could just add, and we are working with our customers and have a project with Duke in Indiana for an IGCC coal plant with carbon capture and storage and other facilities to be CCS- ready, and our customers have been very receptive to that. And we also have a lot of experience -- and other companies do as well -- with CO2 injection as part of enhanced oil recovery.

So the technologies are there. It's a question of getting them to be economically feasible. And the research for large-scale projects, it's very, very resource intensive, cost intensive, and that's why --

REP. CASTOR: So it's mostly going on in the private sector, not at universities or is it?

MS. KLEE: It's going on at both, but it is very cost intensive and that's why getting funding is important to ensure that we can take it to that next level.

MR. : I just want to say in terms of universities, there has been quite a bit of work. Lawrence Berkeley National Laboratory has done work characterizing underground -- the underground geology. Mr. Chu, nominated to be energy secretary, has been involved in overseeing that work.

There's a lot of work at Stanford University and elsewhere in the academic community and in the Department of Energy National Labs at Tahoe and other national labs as well as Berkeley.

MS. MOLER There's also a great deal of collaborative research being done by the Electric Power Research Institute in our industry. And then Harvard has a major coal research project under way as well.

REP. CASTOR: And do you all -- go ahead.

JANET PEACE (vice president for markets and business strategy, the Pew Center on Global Climate Change): I would just add that a lot of folks talk about CCS as being a new type of technology, and we've been using CO2 for enhanced oil recovery for 30 years in the Permian Basin. Granted, it's a little bit different if you want to sink it into a brine aquifer and it requires, you know, a lot larger cost because you're not getting the revenue back from oil.

REP. WAXMAN: Thank you, Ms. Castor.

Ms. Eshoo?

REP. ANNA G. ESHOO (D-CA): Thank you, Mr. Chairman. And thank you for making the very first hearing in the 111th Congress of Energy and Commerce on this issue in your new chairmanship. I think that that bodes very well for the country.

And I want to compliment the USCAP team for the work that you've done. This has been a very interesting morning to listen to all of the testimony.

Our colleague Mr. Markey has a saying and that is that there's no place to take a sick planet to, no hospital to treat a sick planet. So I think that as we talk about the internals of a national policy of how we clean up and move on in a new way to not only protect, you know, our resources but also to move on economically and everything that comes with it that we will be making a contribution to the world community as well. I can't think of anything more important for all of us to be working on.

I'm a member of the House Intelligence Committee as well as this one, and back in  I think two years ago there was a CNA report that was issued and it was written by admirals and generals that found that global climate change posed a significant threat to America's national security. So this isn't only an issue covering the items that you all have spoken about this morning and members have asked questions about. This is an issue that does and will continue to have an impact on America's national security.

And to that end, both myself and Mr. Markey, chairing the Select Committee on Global Climate Change, and myself as a subcommittee chair at the Intelligence Committee, held an open hearing, a public hearing, last year on this very issue.

Here are my questions: I'd like to know if any of you can tell us about where the gaps in R&D are as to, you know, the, you know, the major research and development that needs to take place on these issues and if you have any recommendations to us about what role specifically the federal government should play in these investments that won't overlap with what currently is taking place with private sector R&D either being considered or under way. That's my first question. I've been here for a long time, so I'm going to get all my questions in first.

I'd like to know how you are measuring your successes. There are many successes that have been mentioned this morning, and I hope you had the benefit of hearing what your forbearers at the table spoke about. I'd like to know about that.

And thirdly, given where we are in our country with what has happened in the private sector and the rip-offs that have taken place, I'd like some of you to comment on what recommendations you would have to us on how we don't end up in the traps of not having enough oversight. I know that Mr. Tercek before he joined The Nature Conservancy was with Goldman Sachs and I think we still have someone from The Nature Conservancy here, whether you can address this or not.

So I guess my question is: Do you believe that oversight of the market is really an issue in this whole debate and what Congress can and should do and address as it designs climate legislation?

I think without effective oversight of the Congress that most frankly  and it's not a pretty depiction of what goes on -- is that there are companies and corporations, private sector people that end up chewing their limbs off of their own corporate body in order to get a leg up and it hurts everyone and everything. I don't think anyone wants to see a repeat of what we're experiencing now and the huge toll, the damage, that it's taken on our national economy, not to speak of individuals and families and communities.

So those are my three questions, and I thank you for the work that you've done.

REP. WAXMAN: Well, the gentlelady's time is almost expired, but I do want  I do think it's fair to have her questions responded to, so I would like to have her call -- any of the volunteers -- any of you on the panel volunteer to answer some of those questions?

ELIZABETH THOMPSON (legislative director, the Environmental Defense Fund): Well, I'll start with the response on the market oversight. I'm speaking for the Environmental Defense Fund, who believes a lot in cap and trade.

Market oversight is fundamental.

That is part of what makes it work. Transparency, accountability -- I think you've already heard those things throughout the day. Now, the blueprint does not go into detail on that, in part because we did not have the experts on that, but I think that is a serious issue and one that we hope to work with Congress on.

MS. KLEE: We would support that entirely. We feel very strongly that transparency is key to the success of this program and a strong oversight role is appropriate.

I'd like to quickly address how we from a company perspective define success, and Mr. Immelt mentioned it this morning, but it's really our Ecomagination program. That's what's shown us that reducing greenhouse gas emissions and increasing energy efficiency is good from a business perspective. We save over $100 million a year through what we do internally as a company.

And from a product placement product perspective, we are increasing our revenues and we set targets for that. We will hit $20 million (sic) in revenue -- $20 billion in revenues next year and have a goal of hitting $25 billion by 2012. And those are technologies that increase energy efficiency and reduce greenhouse gas emissions, so those are keys measures of success for us.

MR. : On the -- another measure of success I think that's important to us as a coalition as opposed to individual companies would be measured in things that you all measure and produce so well and that's votes.

We really are serious that we want to see this legislation passed as quickly as possible. We really want to work with you. We want to sort of provide a stimulus or a push to Congress and we want to be pushed back by members on all sides so there could be an effective, good debate and a very good policy that will be good for our environmental colleagues, good for our corporate colleagues, good for the country. And that's how we will measure success as a coalition.

In terms of the gaps of R&D, we do think there's a lot of resource, a lot of technologies ready to go now that can step into the gap and that can go down that cost curve. We think there's a whole bunch of new ones that have not yet even really been invented yet that with the right price signal and the right kind of R&D support we can drastically lower the cost of powering our economy, building buildings, creating building materials and information management, food, fiber, without emitting carbon, and we would like to see the United States be the leader in that. That's fundamental research as well as strong assistance for continuous deployment of technology.

REP. WAXMAN: We have very little time left and we have two members who want to ask questions. As you think about the questions that Ms. Eshoo and other members have asked, we'd like to invite you to submit additional comments for the record.

Mr. Rogers?

REP. MIKE ROGERS (R-MI): I know that Mr. Inslee has a quick question, so if I could yield just a minute of my time to him and then I'll take the remaining time, Mr. Chairman.

REP. JAY INSLEE (D-WA): Thank you, Mr. Rogers.

Just quickly I want to ask about this issue of how the permits should be allocated for a cap and trade system. Europe had an experience where they gave them away instead of auctioning them. Instead of using a market-based system, they just gave them away, and they found it very suboptimal because it did not create a price on carbon, citizens felt abused because an asset they own, which is the atmosphere, was just given away for free, and it simply reduced the effectiveness of the program.

Many of us think that we ought to start with a mixture heavily weighted to an auction, with perhaps some accommodation for energy- intensive industries to ameliorate some of the issues as a preferable way to do this. I'd appreciate any of your suggestions, particularly those who sort of agree with me.

MR. : Mr. Inslee, that is an excellent question. It's a very important and consequential decision that this committee and the Congress has to make about how the allocations are made.

We do I think in the blueprint take notice of the experience in Europe and make recommendations to avoid it in several ways. First of all, we do recommend following the approach that you've proposed with respect to energy-intensive industries, so that's one area where we believe an allocation is warranted as opposed to an auction, also phasing out as those things are -- as those competitive distortions are addressed.

With respect to allocations for the electric industry, rather than give allocations primarily to generators, most of the allocations that we're proposing would go to regulated local distribution companies specifically on behalf of their customers, and we specifically talk about the need to avoid windfall profits as part of that.

And finally, with respect to merchant generators such as NRG, we do propose some allocations, but they're limited to the net compliance cost that those companies have.

REP. INSLEE: Thank you. And I want to thank Mr. Rogers for his assistance.

REP. WAXMAN: Mr. Rogers?

REP. ROGERS: Thank you. And time is short, so I'll be quick if I can.

Ann, from General Electric, is your company still in the appliance business, build appliances? What percentage of those appliances by component is built outside of the United States?

MS. KLEE: You know, I don't have that information for you, but I can get it to you.

REP. ROGERS: Yeah. It's pretty significant, though, isn't it? You over time have moved quite a bit of the manufacturing -- at least components?

MS. KLEE: We have significant manufacturing in the United States.

REP. ROGERS: Sure. But you've also moved significant manufacturing outside of the United States?

MS. KLEE: We have --

REP. ROGERS: And that's --

MS. KLEE: -- manufacturing and partnership consortium outside as well.

REP. ROGERS: And did the federal government tell you that you needed to go into Ecomagination?

MS. KLEE: No, sir.

REP. ROGERS: You did that on your own?

MS. KLEE: That was an entirely voluntarily effort that --

REP. ROGERS: Great program and I -- my point here being that -- congratulations. I think the market is showing that you can do this on your own.

And is it not true that General Electric would benefit significantly financially from their business model if we passed a cap and trade bill?

MS. KLEE: I think what Mr. Immelt said this morning is that our energy business is strong right now and we will do with it regardless.

REP. ROGERS: He's also quoted as saying, and I quote -- well, he has made it clear that he would be getting rid of -- this is not a quote -- made it clear that they would be getting rid of lower-margin businesses. Manufacturing in today's day and age is a low-margin business.

MS. KLEE: I did not see that quote, but I am quite certain that he was not referring to the energy business in the United States.

REP. WAXMAN: Mr. Rogers, will you yield to me just to point out to you that there's two minutes and 40 seconds left on the vote on the floor, and I'll let you go ahead and continue your questions.

REP. ROGERS: Okay. I won't go on. My point being here, Mr. Chairman, is that I think climate change is incredibly important as well. But there are some great industries that are voluntarily getting into the economics of the environment, which is fantastic; we all win when that happens.

And I think we need to be very careful about witness panels who are basically saying they're going to -- especially a company like General Electric, who has already skirted rules and regulations in the United States to make money overseas -- perfectly legal. If we make it more difficult to manufacture things -- and that's what we do in the state of Michigan -- you are going to kill a state like Michigan.

And it worries me a lot that there is maybe a better approach to this rather than this very complicated cap and trade system that has brought corruption to Europe  and I think you addressed that through your transparency question, which is great -- but the reason that you don't have it in your blueprint is because nobody knows how to do it that you don't run into these corruption problems.

I just hope that we take our time, we do this right -- maybe not at all -- or build in an incentive for businesses to adopt what General Electric has done and is excited about in their environmental sector of business. And if we don't do that, I think we are all certainly going to regret it. And from a state that still likes to build stuff in America and built the middle class in America that is slowly eroding away because we can't build things anymore, we better we better understand what that means for the average person who gets up and still builds things in this country.

So I appreciate the opportunity and the chairman was very gracious to let me go. And now I'm going to introduce a rule change package here in the House. (Laughter.)

But thank you very much. I appreciate your time.

END.

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