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However, I see from the testimony we will hear today and

from the Kyoto documents that we have some good things here to examine and support. I look forward to focusing on what the Administration has proposed in greater scientific research on this issue; and how we proceed from here to bring in the developing countries before we have a final treaty before the Senate of the United States.

Thank you.

Chairman SENSENBRENNER. This morning we have six witnesses: the Honorable Kathleen A. McGinty, Chair of the Council on Environmental Quality in Washington; the Honorable Jay E. Hakes, Administrator of the Energy Information Administration in Washington; Mr. David Smith, Director of Public Policy of the AFL-CIO in Washington; Mr. Joseph Goffman, Senior Attorney of the Environmental Defense Fund in Washington; Dr. Connie Holmes, Chairman of the Global Climate Coalition in Washington; and Mr. Michael Marvin, Executive Director of The Business Council for Sustainable Energy in Washington.

Without objection, all of your prepared statements will be placed in the record at the beginning of each of your testimony. In the interest of time, I would ask each of the witnesses to summarize in 5 minutes or so what your testimony is so that we will have plenty of time for questions.

And I would like to first recognize the Honorable Kathleen McGinty, Chair of the Council on Environmental Quality in Washington. Ms. McGinty.

Mr. BOEHLERT. Mr. Chairman, before Ms. McGinty starts, are others of us going to be given an opportunity for any opening remarks.

Chairman SENSENBRENNER. At the beginning of the hearing, Mr. Boehlert, I said that all opening statements would be placed in the record at the beginning of the hearing. Generally, what we want to do at hearings is to have one opening statement on each side in order to spend time to hear the witnesses and to have time for questions.

Mr. BOEHLERT. Well, I can appreciate that, but I would just like people to know that there are divergent points of view. And I'm not sure I share the shared statement that the sky is falling as we look at what has happened in Kyoto. It is a work-in-progress, and I very much look forward to hearing the testimony of all—I said, I'm not sure the sky is falling. I want to make sure you got that clearly. [Laughter.]

Mr. Chairman, I will have a statement for the record.

Chairman SENSENBRENNER. The sky is definitely not falling over China and Mexico.

So, Ms. McGinty. [Laughter.]

STATEMENT OF THE HONORABLE KATHLEEN A. McGINTY, CHAIR, COUNCIL ON ENVIRONMENTAL QUALITY, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON, DC

Ms. MCGINTY. Well, thank you, Mr. Chairman, members of the Committee.

In opening remarks, I'd just like to make three basic points. First, a brief reprise of Kyoto; second, the road from Kyoto; and third, the President's budget proposal submitted to the Congress on Monday.

First, in Kyoto, I think this Nation can be proud. Working with the Congress, we have developed a new vision of environmental protection that says the environment and the economy work together. The choice between jobs and the environment is a false one. That is not a vision that was shared by the rest of the world before

Kyoto. But in Kyoto, the power of our ideas, the truth of those ideas won the day. The result is that at the heart of the Kyoto Protocol are those mechanisms which will make true that the environment and the economy work together. The mechanisms briefly are: "where," "when," and "what" flexibility.

"When" flexibility. We pushed back against other nations who thought emissions reductions should happen in the short term, and instead have achieved for ourselves, a decade before that legally binding set of reductions would kick in. One.

Second, some countries thought we should have to reduce emissions in a single year. But we said that didn't make sense. The weather changes; markets fluctuate. We ought to be able to average over a period of time. That's our budgeting idea that we secured in the Kyoto agreement.

And finally, in terms of "when" flexibility, we secured the idea of banking. If you can achieve more reductions in this period than in other periods, you can save them, sell them, use them for your commitments in another period, if that makes the best economic

sense.

"Where" flexibility. We also said this is a global issue and our approach to the issue should be to take it in a global fashion. That means if it's cheaper to reduce emissions in developing countries or in partnership with some other developed nations, we also have the opportunity to do that. The climate does not care if the molecule of CO2 comes from Boston or Bangladesh, and we ought to use the cheapest ways to achieve reductions. That is now secured in the Kyoto Protocol.

We also achieve "what" flexibility. And the "what" flexibility constitutes two major things. One, most countries said we should only focus on a couple of the greenhouse gasses. We pushed back and said: no, we should focus on all six of them and have flexibility to trade among the six gasses so we are reducing where it is cheapest to reduce.

Second, we said, again, the climate doesn't care if we are reducing our emissions of CO2 or if we are doing things like growing trees or engaging in other kinds of conservation practices that sucks CO2 out of the atmosphere. We secured in the treaty the flexibility to use "sinks" or things that can pull CO2 out of the atmosphere as another cost effective way to get the job done.

So Kyoto is testimony, I believe, to the power and integrity of the U.S. idea that the environment and the economy work together.

Now, having said that, I very much want to echo some of the comments that have been made by Mr. Brown and Mr. Boehlert. This is a work-in-progress. We are involved here not in a sprint at all, but in a marathon, and maybe an ironman marathon. The point is to take steps that make sense now, but to work on the issue progressively. That is true in what we hope to take on domestically; it's also true in the international arena.

While we have secured these flexibilities in the treaty itself, the bottom line is there is work to do. We now have to take the concepts of emissions trading, the concepts of joint implementation, and make them a reality-get the rules of the road, so to speak, into place and up and operational. That's a top priority for us now as we proceed from Kyoto to the years ahead.

The second priority involves more meaningfully engaging the key developing countries in this effort and enterprise. We secured in the Kyoto document the tools to help us do that. The Clean Development Mechanism, or joint implementation as we had called it previously, is one major tool that will enable us to engage those developing countries. We also secured an ability for countries to opt in to the treaty through an amendment to annex B so that they could assume for themselves a target and timetable and, therefore, become part of the treaty. We've got the tools; we need to make them operational, now, in this road post-Kyoto.

The third, and final point has to do with the steps we can take now that make environmental and economic sense to get us started on this job. The President did submit to the Congress for your review his budget proposals this week, and I think that there are four major things to say about those proposals.

First and foremost, they are our suggestions of how we can, again, change this environmental challenge into an economic opportunity. More than anything else, the President's proposals are about tax cuts for working families so that they can procure the efficient cars, the efficient air conditioners and heaters that can make this challenge, again, an opportunity for them to have a more comfortable life and reduce their energy bills.

It's also about tax cuts for our businesses and industry so that they can invest in these new technologies, improving the environment, and enhancing their bottom line.

Third, it's about investments in new technologies, research, and development so that the United States stays on the forefront of building those technologies that will drive the economy of the 21st Century.

The second thing I'd like to note about the President's budget proposals, is that we've tried to be comprehensive. We looked across the economy to those areas where most of the emissions come from, and we tried to speak to each one of those areas in the proposals we've submitted for your review. So the building sector, industry sector, electricity sector, and the transportation sector-in each of these sectors, we have offered up tax cuts and research and development partnerships that we think, again, can help change the challenge into an opportunity.

Having said that, though, the third point about this budget is that like the treaty itself, it is a work-in-progress. We've been working this week to engage constituencies to hear their comments on the ideas we suggested, and we look very much forward to working with the Congress to refine the ideas we've proposed. But we very much think they head us in the right direction.

The final comment about the budget proposals: while they are focused on what we can do domestically investing in technology, assisting our companies and industries in providing tax cuts for American families, there also is an international dimension. There is a dimension which tries to open markets for U.S. companies and technologies abroad by, for example, funding the global environment facility, and a new initiative at U.S. AID which will enable our companies to work in partnership with developing countries and seize those growing markets in developing countries.

Finally, Mr. Chairman, again, Kyoto is an important first step. It represents a triumph, I think, of some of the ideas this Committee and other committees on the Hill have emphasized, and that is the environment and the economy can work together. But this is a long-term process. We have only here taken the first step. What we want to do are those things that make sense both for the environment and the economy, but to engage in this over the long haul for the benefit of our environment, our economy, and the health and well-being of our citizens.

Thank you very much.

[The prepared statement and attachments of Ms. McGinty follow:]

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