glass-called the Industries of the Future Program, to develop cooperatively technologies that will reduce energy use and reduce pollution and allow them to be more productive and competitive even as they reduce their CO2 emissions.

It has always been the Department's goal to help industries become more competitive as they reduce their energy consumption and their carbon dioxide; and, indeed, I think we have shown that time and time again that we have done that.

CRADAS

Mr. BROWN of California. Well, the Congress is going to be very much concerned with this, as you know. There is still some feeling that the Department or the whole procedure by which we fund Cooperative Research and Development Agreements (CRADAs) is an indirect subsidy or a welfare payment to certain elements of industry. Now, what that means is you are going to have to justify these, and you are going to have to be able to clearly establish that you are benefiting the whole chain of American industry, not just one part of it, when you do these kinds of things.

That appears to be a problem with the CRADA with Intel, that it might be helping Intel, but it might not be helping some other parts of the electronic food chain, and we would not want that to happen in energy.

Mr. ROMM. No, not at all. I cannot speak to the Intel CRADA. That was done by a different part of the Department of Energy. We have always tried to work-and I think the Department has gotten much smarter in the past years, in the case of the Industries of the Future Program-we work with the entire industry association groups. We do not work with just one aluminum company; we sit down with the entire aluminum-industry trade association, and they tell us what their needs are.

So I think we have tried to move to this consortium approach to work on precompetitive research for exactly the reason you say, that we do not want to be in the business of one company.

Mr. BROWN of California. Mr. Chairman, I know my time is up, but could we address additional questions in writing to the panel? Chairman CALVERT. Oh, absolutely, and I am sure we will have a second round here if the Ranking Member would like to ask some additional questions. Next, Mr. Ehlers.

COAL INDUSTRY

Mr. EHLERS. Thank you, Mr. Chairman. First of all, several comments. There was discussion here that the Kyoto agreement, whatever it may be, might kill coal. I personally think that the particulate matter clean air requirements that have been proposed are more likely to kill coal than anything we do with CO2 requirements. And I do not think if those clean air particulate matter requirements are put in place, the concern is going to be CO2. I could be wrong. We will see.

NATURAL GAS

Mr. EHLERS. Second, I do not think natural gas is a good alternative to be talking about. I heard that mentioned here. Power companies are talking about that as an alternative to coal. If they

are going to have to go to an alternative, natural gas, frankly, is too good to burn, and we are wasting a tremendous national resource, which is very important to the petrochemical industry, particularly if we use it in the vast quantities needed for power generation.

ENERGY EFFICIENCY

Mr. EHLERS. I appreciate Dr. Romm's emphasis on energy efficiency. I think that is extremely important, and I think that is stage I. We should do that regardless. It just amazes me that American industry has been so slow in picking up on energy efficiency improvements, that somehow they have to be shown by DOE or EPA or others to do it. The pay-back periods are remarkably fast on some things, and yet they have been slow to pick up on it. I think there is the suspicion that it is a fuzzy-headed liberal idea, and, therefore, it cannot make economic sense; but it does make a great deal of economic sense.

So I think we have to look at this in stages.

TREATY REQUIREMENTS

Mr. EHLERS. Incidentally, I think-I agree with Mr. Buckner's statement-we should go back to square one on these negotiations. I think it is a gross mistake for this Nation to excuse the developing nations from their requirements. I do not have time to get into the details, Mr. Chairman, but I think it is going to lead to gross inequalities, it is not going to be good for them because they will put in capital investments, and then 10 years from now they will face having to change them all in order to meet requirements. I think it is much better that they aim for those goals right from the start.

ENERGY EFFICIENCY

Mr. EHLERS. So I think the emphasis should be stage I, energy efficiency; stage II, trying to move to non-carbon energy sources; and throughout that try to gather more data on climate change and how much climate change we are really facing.

I very much appreciate the testimony we have heard, but I would appreciate comments from the panel in response to my comments about hitting energy efficiency hard first, then continuing the work on non-carbon sources of energy and all the while trying to finalize or get a better picture of what is really happening with climate change.

And one particular aspect that I am interested in, I have not heard in this discussion, specifically pinpointed, the economic gains from energy efficiency and how will that relate to the job loss that Dr. Montgomery predicted as a result of the CO2 requirements. There are two factors there, and I am interested in the balance between those two. So any comments, I would appreciate. Dr. Montgomery.

Mr. MONTGOMERY. Thank you. I certainly think that you have focused on the key issues in terms of the international agreements and the effects they will have on developing countries. As far as the kind of issue of energy efficiency goes, I think I would start by pointing out that given the things that we have talked about the

restructuring of energy markets, the price signals that U.S. industry faces for industry are pretty much correct in the United States. They reflect the cost of producing that energy, and as far as just thinking about the private market costs, people are seeing what it is.

I take the fact that we do not see progress the amount of improvement in energy efficiency that we see in U.S. industry is, in fact, quite remarkable. We do have an economy that has become much more energy-efficient over the last 20 years, so industry is paying attention. I think that the fact that we are not seeing more is actually evidence that there is something missing in the bottomup studies, and that is exactly what the paper that Dr. Romm referred to that I wrote with Mark Jaccard, based on our work in the Intergovernmental Panel on Climate Change says, that the economist's approach to this is to ask why are people doing the things they are in the market.

If industry is not adopting more energy conservation, that is evidence that there are costs that these bottom-up studies are not seeing to adopting, to integrating into processes, to facing the risks of new technology. And those are real costs that will have to be borne if have the energy efficiency is forced too soon.

There is no question that it is a very important target for research in the short run because it is probably going to take longer to get at developing alternative, renewable fuels that will help us in the long run, but I think in both cases we are looking not at something which we are missing now, but rather something that is an opportunity for the future if we invest in the appropriate R&D now.

Therefore, I think that we do show in our analysis that there will be substantial, additional investment in energy conservation if there were substantial carbon taxes, that would mean that workers would be shifting into industries that supply that; but, nevertheless, overall it means that we would be producing fewer goods and services to actually be delivered to consumers because people would be working on developing the energy-conservation measures, which industry's choices now show do not provide as large a return.

So we reduce the overall productivity of the economy while we are making this investment in energy efficiency. It is not to say it is not a good idea, because then you have to balance that against what we achieve in terms of carbon-dioxide emission reductions. But just looking at the costs, as the Chairman said, those are costs, and they are not avoided by simply having people work in other industries.

Mr. EHLERS. Other comments from other panelists?

Mr. ROMM. Well, you know, Mr. Ehlers, obviously I share your view that there is a lot of inefficiency in the economy that can be captured, and this Committee has supported, and continues to support, programs that capture those inefficiencies every day; but clearly, when the country gets serious about climate, we are going to have to have a much more significant effort.

POLLUTION-PREVENTION TECHNOLOGY

Mr. ROMM. Let me just talk about the industrial section. The entire regulatory regime, environmental regulatory regime of this

country has for a long time discouraged investment in innovative technologies that prevent pollution, but, in fact, focus on end-ofpipe cleanup and treatment of pollution. Now, this Administration has been working to move towards a prevention-based strategy. The problem with an end-of-pipe strategy is that you have all the energy loss associated with creating the pollution and then the energy loss associated with treating, burning, or hauling it.

If you can move to a prevention approach, you save the energy on the front side, and then you save the energy that you wasted treating or burning or hauling the pollution away. So there are very large opportunities which we in the EPA have been working to capture as we reinvent the regulatory regime. And I just want to, you know, make one point clear here. There are energy efficiency savings that can be captured at no net cost, and I think this is a generic disagreement about the top-down models, such as Dr. Montgomery cites, and the bottom-up ones, such as I cite. But I just want to, you know, be very clear, because this is an important point. It is a very important issue as the country deals with climate.

In Dr. Montgomery's testimony, he says any reduction in emissions below the baseline will cost something. On this I have no uncertainty. In his article in 1996, he says, "If there are market imperfections, if they consistently work in the direction of encouraging excessive use and if policies to reduce the imperfections at a cost less than the net economic benefits of more efficient energy use can be developed, then some reductions in energy use could be achieved at no net cost."

And then he goes on immediately to say the "theoretical issues are reasonably well understood but that there has not been enough empirical work on either hidden costs or on market imperfections to decide which view of the conservation paradox is more correct." So in his testimony he has no uncertainty that there is not any savings below the baseline that can be captured at no cost, and in his 1996 article he says that, in fact, you cannot tell whether there are or not.

The Five-Lab study documents as conclusively as possible, discussing market barriers, there are, in fact, these savings, and it has been extensively peer reviewed, and I think that the Department of Energy and the Environmental Protection Agency have again demonstrated over and over again that those savings can be captured with a more aggressive effort.

Chairman CALVERT. If I could interrupt, we can come back around for another round here pretty soon so the doctor will have plenty of time. Next, Mr. Doyle.

TREATY REQUIREMENTS

Mr. DOYLE. Thank you, Mr. Chairman. Well, I would first like to make a couple of comments, too, and echo some of the things that my colleague, Mr. Ehlers, said. We were here a couple of days ago and listened to scientists talk about the science of climate change, and we heard varying degrees of testimony that said that this was a serious problem to a degree that went down to the more we know about it, the less of a problem it is.

And obviously we are not going to get concrete answers to this question any time soon, yet I think many of us feel that it is prudent that we do something, that we not wait until we are absolutely sure what the answer is, because if the answer is bad news, we may have gone down the road too far already and have much more serious impact.

So the question, in my mind and in a lot of our colleagues' minds, is what should we be doing as a country to address this problem. And I can tell you many of us are very troubled by the Kyoto conference that is coming up along the lines of this Berlin Mandate. We heard testimony from these same scientists that if we were to let developing countries off the hook, so to speak, and not require them to meet any targets while industrial countries do, that the net impact would be negligible.

CHINA

Mr. DOYLE. I have just looked at some information here from the Energy Information Administration that says that under our present trends, that carbon emissions from China-and I believe that is being put up on the screen right now-will exceed those from the United States by the Year 2015, and it also shows on the right there that if our current proposals to reduce our emissions and other industrialized countries' emissions to 1990 levels are implemented with no restrictions on developing countries, carbon emissions from China will exceed the U.S. emissions by 500 million tons in the Year 2015. I wonder how much progress we are really going to be making if we sign an agreement that puts no limits on developing countries yet puts limits on industrial countries.

TREATY REQUIREMENTS

Mr. DOYLE. I think we are also concerned with comments that Mr. Buckner said, too, about this somewhat perverse incentive there may be to locate American industries in some of these countries that are not going to be under some of these restrictions and what that means for American workers and jobs.

So I think that the key is, and I want to echo what Mr. Ehlers said, that I do not think many of us are saying, "Let's not do anything about this situation," but we want to make sure what we do makes sense for this country and actually has some benefit to affecting what is going on, and a lot of us are very concerned that if we sign an agreement along the lines of the Berlin Mandate, that we are absolutely putting this country and its workers at risk for what will be negligible results.

CAPTURING CO2 RESULTS

Mr. DOYLE. I want to address my questions to the Department of Energy because I think we need to do some things right away; and I am curious, I think our country is not spending near enough money in research and development in a lot of these technologies, and I also think we should not assume that we cannot develop technologies to address how we take CO2 and capture it and store it and utilize it, and I think that is the challenge that should be put out through the Department of Energy, through the university community, and the private sector, forming these public-private