THE ECONOMIC AND ENVIRONMENTAL IMPACT OF THE PROPOSED AGREEMENT TUESDAY, JULY 15, 1997 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, Washington, DC. The subcommittee met, pursuant to notice, at 1 p.m., in room 2123, Rayburn House Office Building, Hon. Dan Schaefer (chairman) presiding. Members present: Representatives Schaefer, Crapo, Whitfield, White, Rogan, Shimkus, Bliley (ex officio), Hall, McCarthy, Markey, Pallone, and Dingell (ex officio). Also present: Representative Sawyer. Staff present: Catherine Van Way, majority counsel and Sue Sheridan, minority counsel. Mr. SCHAEFER. I would like to start off by welcoming everybody today to the subcommittee's first hearing in the 105th Congress on global climate change, although in the 104th we had four hearings on this topic. For the first time in 21⁄2 years this subcommittee has been looking at the issue, I feel now that we are finally beginning to get some real answers. This morning the administration provided the committee with a draft of its economic analysis and assessment and the peer review comments. We started asking for this information over a year ago, and I am pleased that the administration is finally prepared to inform the American people as to the cost of some of the options it is considering. However, what today's testimony doesn't tell us is what costs the administration does find acceptable. Dr. Yellen's testimony points out that the primary assumption in the draft economic analysis and assessment, stabilizing emissions at 1990 levels by 2010, is not the administration's position. I want to know, however, and the rest of the committee also would like to know, does this mean that the administration believes it is technically feasible or economically sound to do more or to do less? And I hope today, based on the preliminary information we have just received on economic costs, we can begin to narrow the range of options on the table. I don't want the administration to give me its bottom line in the negotiation, but I would like to know what range of options can be realistically achieved without sending American jobs overseas via an environmental treaty. There is a (1) real risk that if we move too aggressively and raise the costs of doing business in the United States too high, that our actions to eliminate emissions will merely result in moving them to one of our European or developing country trading partners. Through the past 22 years of subcommittee hearings on global climate change, I have found that I agree with the administration on many of its principles, that any action we take to address this issue must be real and must be achievable. Whatever steps we take must be flexible and cost-effective, and we must develop a system that sends a long-term signal to industry so that they have time to adapt to it. Today I would like to begin concrete discussions about how these ideals will be embodied in the international agreement that is being negotiated at the present time. And finally, I would like two specific assurances from the administration today: One, that it will not rush to judgment in December 1997 merely because that is an arbitrarily picked date for concluding negotiations. We should only sign an agreement that is achievable, will result in environmental benefits and contain all the detail necessary to implement it. And second, I would also like the administration's assurance today that it will not agree to binding targets and timetables unless it can show that it will not result in transferring emissions and jobs overseas. I am certainly looking forward to hearing the testimony of Dr. Yellen and the Honorable Tim Wirth from the great State of Colorado and would turn it over to the gentleman from Massachusetts, Mr. Markey. Mr. MARKEY. Thank you, Mr. Chairman, very much. I want to commend you for calling this very timely hearing to examine the economic impact of the proposed international global climate change agreement. I would especially like to congratulate you on inviting back one of the most distinguished graduates in the history of the Commerce Committee, Tim Wirth, who will grace us once again with his presence. It has been 11 years since he passed through these portals, and no one has ever distinguished a committee as much as Tim did during the time that he served on the committee. And to Janet Yellen, the Chair of the President's Council of Economic Advisors as well. I can think of no more appropriate day to hold such a hearing than on one of the hottest days of the year where the temperature is expected to top 102 degrees, and ozone levels are expected to reach dangerously high levels. Traditionally, when you are trying to reach an agreement on a particularly difficult issue, you send all parties into a room, and you don't let them come out until they have achieved a compromise. Today, Mr. Chairman, I would respectfully suggest that we send all the interested parties out into the street, into the heat, and refuse to let them back inside until they reach an agreement on this issue. Mark Twain once said, "Everybody talks about the weather, but nobody does anything about it." The success or failure of the current international negotiations to establish a coordinated international response to the risks posed by global climate change will determine whether this proposition remains accurate. Will the current international negotiations amount to little more than highly sophisticated talk about the weather, or will they actually cul minate in the conclusion of an agreement that legally binds all the world's nations to significant reductions in greenhouse gases? A year and a half ago, the worldwide community passed a milestone with regard to global warming. The United Nations Intergovernmental Panel on Climate Change issued a report drawing on the contributions of nearly 2,500 scientists from around the world. The report concluded, "that the balance of evidence suggests that there is a discernible human influence on global climate. This remarkable statement reflects an unprecedented degree of consensus in the scientific community, and it sends a clear signal to policymakers that this environmental issue is here to stay. Despite some remaining scientific uncertainties regarding the impacts of global warming, I believe the risks of not acting at this time are too great. Fortunately, this view is shared around the world. I applaud the Clinton Administration for the approach they have taken to develop our national policy on this complex issue. The administration continues to emphasize that U.S. policy must be based on both the best scientific information available and on a clear understanding of the economic impacts of any actions we may take to reduce greenhouse gas emissions. They have undertaken a careful economic analysis of various proposals that have been made to stabilize worldwide emissions. I look forward to hearing the results of their analysis and the responses they have received from both the industrial and environmental communities. As we examine the economic impacts of reducing greenhouse gases, I look forward to hearing about the important role that technological innovation, particularly in the field of energy conservation and renewable energy sources could have on our national effort to curb greenhouse gas emissions. I firmly believe that we have not yet reached our technological limit with regard to energy conservation, and certainly the market share for renewable energy resources could be significantly increased. However, to make that happen and to spur the development of new technologies in this area, the Congress needs to send a clear signal to industry and consumers that we are committed to moving forward in these areas. In addition to highlighting the need for improved technology, energy efficiency and use of renewable energy, I believe it is important that we have a discussion today about the effects of increasing competition in the domestic electric utility markets on emissions of greenhouse gases. Given that this committee has shown significant interest in moving forward with deregulation of the power industry, I would like to hear from the witnesses about what is being done to assess the impact of increased competition in electricity markets on our national effort to reduce greenhouse gas emissions. And finally, current trends clearly indicate that greenhouse gas emissions from developing countries will soon overtake those of the industrialized nations. I hope the witnesses today will comment on their continuing efforts to engage the developing world, especially nations like India and China, in the discussion about their future role in reducing greenhouse gas emissions. I thank you, Mr. Chairman, for holding this hearing today and I look forward to the testimony of our witnesses. Mr. SCHAEFER. The Chair thanks the gentleman. I would recognize the chairman of the full committee, the gentleman from Virginia, Mr. Bliley. Chairman BLILEY. Thank you, Mr. Chairman. I, too, want to welcome our two guests today, particularly our old colleague from Colorado. It has been a long time. Mr. Chairman, I want to commend you for holding this timely hearing on global climate change. In 2 weeks, negotiators from the State Department will be in Bonn, Germany, continuing negotiations on what commitments the U.S. is prepared to undertake to address the issue of global climate change. In less than 6 months, if things go as planned, the Clinton Administration will be signing an agreement which could bind the U.S. well into the next century. And yet when I look at the proposal the Clinton Administration has on the table, I see a piece of paper with all the most critical elements left blank. Neither I nor any other Republican or Democratic Member of this body, or any industry, or environmental stakeholder knows what number the administration is considering putting into those blanks, which leads me to wonder if the administration itself knows what goes in those blanks. Only this morning we got a hint of some of the things the administration might be considering in a draft copy of the administration's long-promised analysis and assessment. While we have not yet seen the administration's final report, the draft showed a range of options and their costs to the economy. In very simple terms, the draft indicates that for the U.S. to stabilize emissions at 1990 levels by the year 2010, the U.S. would have to impose the equivalent of a 26-cent-a-gallon gasoline tax and a tax of 2 cents per kilowatt hour of electricity produced, a tax of $52.52 per ton of coal, and a tax of $1.49 per thousand cubic feet of natural gas. Reducing emissions 10 percent below 1990 levels basically doubles that cost to the economy, and allowing emissions to grow at 10 percent above 1990 levels cuts that cost in half. While I am pleased the administration is finally beginning to give us some clues as to the things that they might be considering, the documents we are beginning to receive raise more questions than they answer. For example, how do these costs of limiting greenhouse gas emissions compare to the costs of achieving the same reductions by our developed country trading partners, particularly the European Union? If the European Union's membership increases to include several Eastern European nations, as is anticipated, will aggressive targets and timetables to reduce greenhouse gas emissions give the EU an economic advantage because it is allowed to bubble its emissions target and timetable? And most importantly, if the U.S. finds that the environmental benefit from limiting its greenhouse gas emissions is worth the cost, how can we be assured that the emissions we reduce aren't just moved from the United States to a developing country, taking American jobs with them? Finally, Mr. Chairman, I want to be clear because I have questions does not mean that I believe we should neglect the environment. I merely believe that if we are going to take on a cost in the name of environmental protection, we need to make sure that we are actually having an environmental impact. Unfortunately, in the |