Our proposed tax credits are part of a well-balanced total package that includes research and development, tax credits, and voluntary technology deployment programs. This package will be very effective at speeding up change in capital investment decisions.

And that is what the CCTI is all about: speeding up change. Given enough time, energy-efficient technologies would gradually penetrate the market without federal incentives; market barriers would fall as the benefits of this kind of capital investment became more widely appreciated. But the Clinton Administration wants to speed up the process because the stakes are high. Earlier and faster market penetration is well worth the investment now, not only because we make significant reductions in CO2 emissions, but because of other economic, environmental, and national security benefits.

In other words, the speed at which we move into the future will affect the quality of the future. Today we have an opportunity to speed up the flow of capital investments in technologies that will improve our future quality of life in several important ways. We cannot ignore this opportunity. EPA is prepared to work in partnership with all sectors of the economy, with other federal agencies such as the Department of Energy, and with state and local governments to help deploy tomorrow's technologies today.

Our CCTI programs deserve to be expanded because they work very well. We'd like to carry our past success into the 21st century, and with the support of this Subcommittee and the rest of the Congress, we will.

This concludes my prepared statement. I would be happy to answer any questions that you may have.

DAVID M. GARDINER

ASSISTANT ADMINISTRATOR

OFFICE OF POLICY

U.S. ENVIRONMENTAL PROTECTION AGENCY

David M. Gardiner has served as the Assistant Administrator of EPA's Office of Policy (OP) since June 14, 1993. Mr. Gardiner directs the Agency's analytic and policy development activities regarding climate change. Adminstrator Browner has also charged him with establishing EPA's new Center for Environmental Information and Statistics. In addition, Mr. Gardiner leads several of the Agency's major initiatives to reinvent environmental regulations, particularly in the areas of paperwork reduction, community-based environmental protection, economic analysis, and innovative approaches to specific industries like transportation, electric utilities, agriculture, environmental technology, and metal finishing.

Prior to joining EPA, Mr. Gardiner was the Sierra Club's Legislative Director in Washington, D.C., where he directed efforts on a broad range of environmental issues, including air, water, and waste pollution, energy, the international environment, and land protection policy.

Mr. Gardiner received his Bachelor of Arts degree in history, with honors, from Harvard University. He resides in Arlington, Virginia, with his wife and three daughters.

Chairman CALVERT. I thank the gentleman.

Dr. Hakes, now is your chance to defend yourself. [Laughter.]

TESTIMONY OF DR. JAY E. HAKES, ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION

Dr. HAKES. Thank you, Mr. Chairman.

Mr. Chairman, and, members of the Committee, I want to thank you-I think-for this invitation to compile a report

[Laughter.]

Dr. HAKES. On the likely carbon savings from the Climate Change Technology Initiative and, also, for the opportunity to testify today.

Our assignment from the Committee was to estimate the savings from the baseline estimates of carbon growth in EIA's "Annual Energy Outlook 1999."

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2020

And the first graph that is up here on the screen shows what we project as the normal and expected rate of carbon growth, which is a 33 percent increase from 1990 to 2010.

It is important to note that ongoing efforts in research, development and deployment are assumed in this baseline case. Without these efforts, we would expect the baseline to rise above the levels seen here. It is the new or expanded efforts that have the greatest potential to reduce emissions below the baseline.

Studies of carbon savings and revenue impacts, whether done by us or others, are not exact science. We do believe, however, it is possible to provide the Committee with reasonable estimates.

Some aspects of the initiative are easier to quantify than others. In cases where quantification was particularly difficult, some of the research, development, and deployment programs, to be specific, our report uses qualitative analysis. So in the 50 pages where we were discussing R&D, we were not ignoring it.

We also believe that the EIA estimates are not slanted either in the direction of pessimism or optimism.

With regard to the tax incentives, the tax portion of the initiative contains incentives that are modest and short term compared to earlier tax energy incentives that we have seen. As a result, it is not surprising that the estimated impacts are modest. Carbon savings reach 5 million metric tons in 2004, but after the incentives end, the residual effect falls to about 3 million metric tons by 2010. In 2010, this would represent about one-fifth of a percent drop in estimated carbon levels. Larger incentives of longer duration would produce larger savings.

The results of our model runs suggest that most of the people receiving the proposed tax incentives would have undertaken the purchase of more energy-efficient equipment without the incentives. Existing state mandates to build wind power plants and sell electric vehicles, if they remain in force, will likely have greater impacts than the tax incentives.

The study of potential tax revenue losses by the Treasury Department estimated higher levels of market penetration for solar rooftops and combined heat and power than did EIA, but Treasury estimated lower penetration for the rest of the equipment. As a result, estimation of carbon savings using the Treasury estimates for market penetration would likely produce results that are fairly similar to, or lower than, the EIA estimates.

With regard to research, development, and deployment, research and development plays an important role in improving America's energy options, as well as contributing to the overall economy and the quality of life. More efficient power plants, better insulating windows, and advanced biomass for lighting are but a few of the success stories of R&D.

As I said a moment ago, however, continuation of historic levels of R&D are assumed in the EIA baseline.

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