tricity restructuring are designed to interact with the tax incentives and R&D initiatives to further reduce emissions. The components of the President's strategy are designed to be a mutually reinforcing package, and, thus, analysis of the individual elements will likely yield an inaccurately low estimate.

Third, the EIA analysis of the selected CCTI actions is largely limited to changing cost assumptions. This view of CCTI potential again results in inappropriately low estimates. The study presumes that purchasing behavior is largely driven by only one factor-cost. In fact, the entire purpose of the many elements of the CCTI is to address non-cost factors through removal of market barriers to new technologies, better information for consumers, increased industry experience with these technologies, and other actions. EIA does not generally consider these factors.

Finally, the analysis acknowledges, but does not attempt to quantify, the potentially high substantial additional benefits of these programs-for example, reduced air emissions and lower oil imports. In addition, it does not even suggest that there could be substantial cost to our Nation-environmental, competitive, and energy security-of not pursuing such a robust technology strategy. The Fiscal Year 2000 DOE budget request for the CCTI calls for increases to support additional research, development, and deployment of a diverse portfolio of advanced energy efficiency and clean energy technologies.

Mr. Chairman, this is not a new set of programs created only to address the threat of global warming, but rather an expansion of long-existing programs with solid track records that can most costeffectively reduce greenhouse gas emissions while producing other substantial benefits for our Nation. In fact, Mr. Chairman, if there had never been concern about greenhouse gas emissions or if Kyoto had never entered the environmental lexicon, we would still be advocating the budget we do today to cut our Nation's energy bill, to fight air pollution, to enhance national security, and to improve U.S. competitiveness.

The Fiscal Year 2000 budget for DOE programs within the CCTI is $1.124 $1,124 million-up $222 million over Fiscal Year 1999. The budget is carefully designed to seize major opportunities and confront serious challenges by helping the U.S. steel industry compete against foreign imports by radically reducing energy costs; by helping the U.S. oil industry confront historically low prices by cutting energy use and costs in oil production and refining; by helping U.S. agriculture, which is in crisis in many parts of the Nation, to find new outlets for its crops and waste to produce power, fuels, and chemicals; by helping the U.S. forest products industry, which is facing crippling foreign competition, to turn its waste into clean energy to power its mills and sell the excess to the electricity grid; by helping the U.S. automobile industry and its workers lead the world in the production of high-efficiency, low-emission cars, trucks, mini vans, and sport utility vehicles; by helping the construction industry, which is facing "boom times" in parts of our Nation, to build millions of energy-efficient homes and businesses that cost no more up front and save big dollars to operate; by helping U.S. appliance and equipment companies build more efficient, consumer-friendly products to further reduce building energy use; by

helping American taxpayers save billions of dollars in the operation of federal buildings; by helping the natural gas industry find new uses for this clean and abundant energy source in buildings, industry, and transportation; by helping the U.S. renewable energy industry drive down the cost and increase the market share of wind, biomass solar, and geothermal energy here and abroad; by helping the U.S. coal industry dramatically increase the efficiency and decrease the pollution from coal-fired electricity generation; by helping the U.S. nuclear industry develop technologies that can better ensure the viability and safety of our existing nuclear power plants; and, finally, by helping to develop critical technologies to capture and put out of harm's way carbon from fossil fuel use.

In conclusion, Mr. Chairman, and members of the Subcommittee, I believe the Climate Change Technology Initiative is a wise investment for the Nation-one that will substantially help the United States meet the energy and environmental challenges of the next century. This carefully designed technology portfolio will reduce greenhouse gas emissions, cut oil imports, help to resolve local air pollution problems, and save businesses and consumers billions of dollars each year. For the sake of our Nation's future, it should be well funded and broadly supported.

Thank you.

[The statement and biography of Mr. Reicher follow:]

Statement of Dan Reicher

Assistant Secretary for Energy Efficiency and Renewable Energy

Department of Energy
Before the

House Committee on Science

Subcommittee on Energy and Environment

April 14, 1999

INTRODUCTION

The Climate Change Technology Initiative (CCTI) is the cornerstone of the Administration's efforts to stimulate the development and use of clean energy technologies and energy efficient technologies that will help reduce greenhouse gas emissions. The FY 2000 Administration's budget request proposes $1,368 million in spending for CCTI, an increase of $347 million over the FY 1999 enacted level. Led by the Department of Energy (DOE) and the Environmental Protection Agency (EPA), the effort also includes the Department of Agriculture, the Department of Housing and Urban Development, and the National Institute of Standards and Technology.

The FY 2000 budget request also includes $383 million as the first year increment of a proposed five year, $3,600 million package of tax incentives to stimulate the adoption of energy efficient technologies in buildings, industrial processes, vehicles, and power generation. These incentives are designed to accelerate the use of key technologies and help to transform markets in these areas.

Technology research, development and deployment are key drivers of long-term economic development. In fact, the ability to innovate, develop and deploy new technologies in a wide range of fields has been a key reason for the remarkable success of the U.S. economy in the last fifty years and will likely continue to drive our economic development over the next fifty years. The CCTI is designed to pursue cost-effective technologies that reduce greenhouse gas emissions while also meeting other energy and environmental challenges of the early 21" century. Over the next few years, we will witness the complete restructuring of U.S. electricity markets, we will confront the challenge of global climate change, we anticipate sweeping new federal and state clean air requirements, and we will encounter an increasingly volatile global energy market. In the face of these challenges, our goal is to develop a diverse portfolio of affordable energy sources and use them efficiently and wisely.

Sustained commitment to R&D in both private industry and the public sector has produced remarkable results in energy technologies. Without a substantial federal energy

technology R&D effort -- in collaboration with industry -- many advanced technologies will likely be delayed or not even developed and our nation will suffer the resulting economic and environmental losses.

The subject of today's hearing is the Energy Information Administration's (EIA) Analysis of the Climate Change Technology Initiative - which analyzes the potential of certain elements of the CCTI to reduce greenhouse gas emissions. While the report may appear to be an in-depth treatment of this subject, in fact, it is quite limited in both scope and analysis. As a result, its estimates of the potential of the CCTI are of very limited usefulness in any objective evaluation of the initiative. Today I would like to detail some of these limitations, describe some of the many accomplishments of CCTI programs to date, and summarize some of the elements of the DOE FY 2000 budget request.

SHORTCOMINGS OF THE EIA ANALYSIS

The EIA analysis has numerous shortcomings that are treated more fully later in this statement. I would like to point out the four that I consider to be the most important. In fairness to EIA, numerous caveats in the report underscore the limited scope of its work, but the implications of these shortcomings should be highlighted in this hearing.

First, the analysis is quite incomplete. The study only attempts to assess the potential benefits of the tax incentives component of the CCTI. The EIA does not estimate the benefits of the technology research, development and deployment (RD&D) programs within the CCTI. However, these benefits have been estimated by the Department and independently peer-reviewed. The potential climate benefits of the Department's energy efficiency and renewable energy programs in 2010 alone is 112 million metric tons (MMT) per year. This is documented in a report by Arthur D. Little, Inc. that I would like to introduce into the record.

The lack of EIA consideration of this element is a severe shortcoming because the various components of the initiative - tax incentives, technology R&D and technology deployment programs are designed to work together synergistically. Such complementarity occurs throughout the initiative, and thus analysis of the tax incentives alone gives a very incomplete estimate of the potential of the CCTI.

Second, the analysis only considers one of the nine components of the President's climate strategy. The other components are designed to interact with the tax incentives and RD&D initiatives to further reduce emissions. The components of the President's strategy are designed to be a mutually reinforcing package and thus analysis of individual elements will likely yield an inappropriately low estimate of its potential.

Third, the EIA analysis of the selected CCTI actions is largely limited to changing cost assumptions. This simplistic view of these policy interventions results in inappropriately

low estimates of their potential benefits. The study presumes that purchasing behavior is largely driven by only one factor - cost. In fact, the entire purpose of the complementary elements of the CCTI is to address both cost and non-cost factors through removal of market barriers to new technologies, better information for consumer, as well as direct cost reductions for the technologies.

Finally, the analysis acknowledges, but does not attempt to quantify, the potentially high substantial additional benefits of these programs (e.g., reduced criteria air pollutants and reduced oil imports). In addition, it does not even acknowledge that there could be substantial costs to our nation - environmental, competitive and energy security - of not pursuing such a robust technology strategy.

THE DOE CCTI PROGRAMS: ACCOMPLISHMENTS AND FY 2000 REQUEST

The FY 2000 DOE budget request for the CCTI calls for increases to support additional research, development, and deployment of a diverse portfolio of advanced energy efficiency and clean energy technologies. This is not a new set of programs created only to address the threat of global warming, but rather an expansion of existing programs with solid track records that can most cost-effectively reduce greenhouse gas emissions while producing other substantial benefits for our nation.

These programs, building upon past accomplishments, will result in energy cost savings to consumers, maintenance of our lead in science and technology, enhanced industrial competitiveness, lessened dependence on foreign oil and a healthier environment. To ensure market acceptance of these technologies and responsible investment of taxpayer dollars, DOE generally relies on cost-shared partnerships with the private sector. Our work with states and localities, including critical weatherization assistance to low-income families, also plays a key role in reducing U.S. energy consumption and improving environmental quality. Our programs have a compelling record of success - made possible by the support of the Congress over many years. These successes are highlighted in the following sections.

Likely impacts of these programs are also quite substantial. Externally peer-reviewed estimates of the potential of DOE's energy efficiency and renewable energy programs alone total 112 MMTCE in 2010. As stated in the Arthur D. Little report mentioned above, the potential benefits of the DOE component of CCTI are much higher than the estimates in the EIA analysis.

The FY 2000 budget request for DOE programs within the CCTI is $1,124 million - up $222 million over The FY 1999 level. The following sections highlight selected Departmental programs in each of these areas.