buttress the conclusion that even with optimistic assumptions about the development of conventional energy technologies that the concentration of CO2 in the atmosphere can be expected to continue rise throughout the century. Thus, achieving stabilization of greenhouse gas concentrations will require an investment in basic research and new technology development well above these assumptions. Technology development is critical to controlling the cost of stabilizing CO2 concentrations. Improved technology can both reduce the amount of energy needed to produce a unit of economic output and lower the carbon emissions per unit of energy used. Analysis conducted under the Global Energy Technology Strategy Program showed that the availability of cost effective renewable, nuclear, hydrogen systems and fuel cells, and a variety of mechanisms to capture and sequester carbon in addition to improved conservation and fossil fuel technologies, could dramatically reduce the cost of limiting cumulative global net carbon emissions. 3. There's No "Silver Bullet." No single technology controls the cost of stabilizing CO2 concentrations under all circumstances. The portfolio of energy technologies that is employed varies across the world's regions and over time. Regional differences in such factors as resource endowments, institutions, demographics and economics, inevitably lead to different technology mixes in different nations, while changes in technology options inevitably lead to different technology mixes across time. Technologies that are potentially important in stabilizing the concentration of CO2 include energy efficiency and renewable energy forms, non-carbon energy sources such as nuclear power and fusion, improved applications of fossil fuels, and technologies such as terrestrial carbon capture by plants and soils, carbon capture and geologic sequestration, fuel cells and advanced energy storage systems, and commercial biomass and biotechnology. The latter holds the promise of revolutionary change for a wide range of energy technologies. Many of these technologies are undeveloped or play only a minor role in their present state of development. Research and development by both the public and private sectors will be needed to provide the scientific foundations needed to achieve improved economic and technical performance, establish reliable mechanisms for monitoring and verifying the disposition of carbon, and to develop and market competitive carbon management technologies. For example, advances in the biological sciences and biotechnology hold the promise of dramatically improving the competitiveness of commercial biomass as an energy form and potentially opening up new pathways for revolutionary breakthroughs in other technologies such as carbon capture and sequestration. 4. Energy Technology Development Is One Part of a Larger Comprehensive Strategy. While technology is pivotal when it comes to controlling the cost of stabilizing the concentration of greenhouse gases, it is only one of four major elements that are needed in a comprehensive program to address climate change. The four elements are: 1. Reduction of scientific uncertainties, Adaptation to climate change, A credible, global commitment that greenhouse gas concentrations will be limited; and Energy technology R&D. In summary, stabilizing the concentration of greenhouse gases at levels ranging up to 750 ppmv represents a daunting challenge to the world community. Energy related emissions of CO2 must peak and begin a permanent decline during this century. Both a credible global commitment to limit cumulative emissions and a portfolio of technologies will be needed to minimize the cost of achieving that end, including technologies that are not presently a significant part of the global energy system. While important, energy technology development alone will not be enough. It must be complemented by a commitment to resolve scientific uncertainties, facilitate adaptation to climate change that cannot be avoided, and a credible, global commitment that greenhouse gas concentrations will be limited. Mr. Chairman, thank you for this opportunity to testify. I will be happy to answer your and the committee's questions. Testimony of Senior Vice President-Environmental Affairs Mr. Chairman, Senator Thompson, Senator Stevens, and Members of the Committee, my name is Dale Heydlauff. I am the Senior Vice President for Environmental Affairs at American Electric Power Company. I am delighted to join on this panel Dr. Jae Edmonds of Battelle, as Dr. E. Linn Draper, AEP's Chairman and CEO, served on the steering group of Battelle's Global Energy Technology Strategy Program and Eileen Claussen, the President of the Pew Center on Global Climate Change, as AEP is one of the founding companies of the Center's Business Environmental Leadership Council. AEP is a multinational energy company based in Columbus, Ohio. AEP owns and operates more than 38,000 megawatts of generating capacity, making it America's largest generator of electricity. AEP generates about 6% of the electricity in the United States, a figure comparable to the annual electric power consumption in Mexico and Australia. We are the largest consumer of coal and the third largest consumer of natural gas in the U.S. AEP provides retail electricity to more than 6.8 million customers worldwide and has more than $55 billion in assets, primarily in the U.S. with holdings in select international markets. Given AEP's reliance on coal and natural gas to produce reliable and affordable electricity for our customers, we are one of the largest emitters of carbon dioxide emissions in the country, and we are committed to dealing with the challenge posed by climate change. At AEP, we accept the views of most scientists that enough is known about the science and environmental impacts of global climate change for us to take action to address its consequences. This recognition led us to be a proactive participant in organizations and activities that seek solutions to the challenge posed by climate change. We have participated in several industry-government programs over the past several years that are designed to mitigate greenhouse gas emissions. We worked extensively with the U.S. Department of Energy in the creation of the Climate Challenge Program, a voluntary partnership with the electric utility industry to reduce, avoid or sequester greenhouse gas (GHG) emissions. We have identified a broad array of activities across AEP operations to limit GHG emissions - ranging from improved efficiencies in our coal and hydroelectric plants, to customer-based conservation efforts, to planting 15 million trees on 20,000 acres of company-owned land. In addition to our interest in technological solutions to the challenge of climate change, I would like to briefly note that AEP has also been active in terrestrial carbon sequestration projects. Our efforts in this regard are part of our larger commitment to environmental stewardship, and our strategy to find effective ways to protect and enhance also reflect our belief that there are many solutions that can result in multiple environmental benefits. We are partners in the largest tropical forest preservation and carbon sequestration project in the world, the Noel Kempff Mercado Climate Action Project in Bolivia. This effort allowed Bolivia to double the size of the Noel Kempff Mercado National Park. It now spans 3.7 million acres – only Denali National Park in Alaska is larger. The Noel Kempff Mercado project protects one of the most biologically diverse areas in the world. AEP is also involved in the Guaraqueçaba Climate Action Project which will restore and protect approximately 20,000 acres of partially degraded and/or deforested sub-tropical forest within the Guaraqueçaba Environmental Protection Area in southern Brazil. It promotes natural forest regeneration and regrowth on pastures and degraded forests within the project area. It will also protect standing forest that still exists but is under threat of deforestation. Most recently, we announced our participation in the Catahoula National Wildlife Refuge Reforestation Project in Louisiana, which results from an innovative partnership that includes the U.S. Fish and Wildlife Service. This project tripled the size of the existing wildlife refuge, and we are reforesting about 10,000 acres with bottomland hardwoods. We recognize, however, that forestry projects alone will not be enough to deal with the magnitude of the challenge that we face. The primary anthropogenic contributor to climate change is CO2 emissions that result from the burning of fossil fuels. AEP has long recognized that we face an enormous challenge if we are to develop and deploy cost-effective technologies to reduce greenhouse gas emissions. Our concern led AEP to actively support the Battelle project and similar efforts by EPRI. These projects not only deal with the infrastructure represented by our fleet of coal-fired power plants, but also address the world's energy system that today is powered by oil, coal, and natural gas. There is every reason to believe that the world will continue to rely on these fossil fuels as its primary energy sources for quite some time. In his recent floor statement, Senator Byrd expressed it well when he said that "what is required, then, is the equivalent of an industrial revolution. We must develop new and cleaner technologies to burn fossil fuels as well as new methods to capture and sequester greenhouse gases, and we must develop renewable energy technology that is practical and cost-effective. Rarely has mankind been confronted with such a challenge -a challenge to improve how we power our economy.” AEP believes that the legislation introduced by Senators Byrd and Stevens represents one of the single most important legislative initiatives yet introduced in Congress to deal with climate change. Mr. Chairman, along with my testimony, I would like to submit for the record a letter to Senator Byrd from Dr. E. Linn Draper, Jr., Chairman of the Board, President, and Chief Executive Officer of AEP, dated May 21, that endorses the bill and notes that the legislation "is inherently an expression of optimism and faith in our future. You forthrightly state that the problem is real and growing. Your bill provides the vision, the commitment, and the framework for the S. 1008 recognizes that our nation's commitment to solving this problem is, in fact, directly related to whether we undertake the necessary research to develop the technological solutions that we will need. But what the public may not be aware of is that even while press coverage and public awareness of climate change is increasing, our national expenditures in the area of research and development have sharply declined. A recent update of research carried out under the Battelle Global Energy Technology Strategy Project demonstrated that US public and private sector investments in energy research and development (R&D) are currently at a 26 year low of approximately $3.7 billion. Energy R&D expenditures have been in decline since approximately 1980 and investments in energy R&D fell in real terms by 47% during the last decade. The U.S. energy industry today invests about 0.5% of its revenues in research and development, and the trend continues to move downward. In comparison, the computer, pharmaceutical, and telecommunication industries invest about 10%, and the overall U.S. industry average is around 7%. Energy has been, and remains, at the bottom of the R&D investment ladder, a prescription leading to a precarious future, especially given the increasingly central role that energy will play in global economic and environmental issues in this century. Earlier analyses carried out by Battelle confirmed that this same disturbing trend of significant disinvestments in energy R&D can be found in many of the other large developed nations that sponsored energy R&D during the past decade. As investments in research and development have declined, the emphasis within many companies has shifted to those technologies that can be brought to market in the near term, to provide tangible solutions to today's pressing problems. In many cases, companies are motivated by the immediate environmental compliance challenges facing them. To the degree that climate change is addressed, it is usually evolutionary improvements in existing technologies, like efficiency increases, not the revolutionary new technologies that will be required in a carbon constrained world. Any technology strategy must also recognize the long lead-time to develop new technologies to the point of commercial viability. New technology becomes cost competitive only when multiple units are constructed and cost savings are identified from engineering improvements. The Byrd-Stevens bill includes provisions to foster this commercial scale development and deployment. Industry alone does not have the financial resources to meet the technology development and deployment challenge, and neither does the public sector. This must be a partnership -- indeed one of the most critical joint efforts that the public and private sectors must undertake during the next century. In the case of the utility industry, deregulation and privatization around the world are introducing competition into the electric power sector, resulting in downward pressure on the future price curve for electricity. The construction of new generation will |