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know how well the plan is working, and when? What, if any, next steps would our witnesses recommend? Finally, what effect do you foresee the plan having in the international forum, especially with respect to the issue of joint implementation?

The Chair now recognizes the distinguished gentleman from Idaho, Mr. Crapo.

Mr. CRAPO. Thank you, Mr. Chairman. I have no opening statement. So I think we can get right on with the testimony.

Mr. SHARP. I appreciate that. We will make any members who arrive, their opening statements a part of the record at this point. [The opening statement of Hon. Mike Kreidler follows:]

OPENING STATEMENT OF HON. MIKE KREIDLER I'd just like to thank Chairman Sharp for holding this series of very useful hearings on the President's Climate Change Action Plan. It's a complex issue, and I appreciate the opportunity to hear the various viewpoints.

I have questions which I hope I'll be able to get to about verifying emission reductions, backup plans if goals are not met, and the business community's plans with respect to voluntary programs.

In addition, I hope our witnesses will be able to shed some light on the role of utilities in implementing the plan. I was pleased to see that one of the utilities in my area, Puget Sound Power and Light, has recently agreed to work with the administration on this question. Again, I thank the chairman, and I look forward to hearing from the witnesses.

Mr. SHARP. We now welcome our witnesses. Because of transportation problems there has been a need for a change. We are delighted to have Mr. Joe Goffman, a senior attorney with the Global Atmosphere Program of the Environmental Defense Fund.

We have Mr. William E. Davis, the chairman and chief executive officer of the Niagara Mohawk Power Corporation. And we have Mr. Jerry Jasinowski, the president of the National Association of Manufacturers.

Gentlemen, I think you are probably familiar with our process. Customarily, we try to restrict the oral presentations to 5 minutes.

But I think that given the fact we have tried not to encourage multiple witnesses, why don't you take 10 minutes to try to provide, if you wish, oral testimony. We will certainly make your written comments a part of our printed record. Mr. Goffman, we will be glad to begin with you.

STATEMENTS OF JOSEPH GOFFMAN, SENIOR ATTORNEY

GLOBAL ATMOSPHERE PROGRAM, ENVIRONMENTAL DEFENSE FUND, ACCOMPANIED BY ALICE M. LeBLANC, ECONOMIST; WILLIAM E. DAVIS, CHAIRMAN, NIAGARA MOHAWK POWER CORP.; AND JERRY JANINOWSKI, PRESIDENT, NATIONAL ASSOCIATION OF MANUFACTURERS, AND ON BEHALF OF GLOBAL CLIMATE COALITION

Mr. GOFFMAN. Thank you very much Mr. Chairman and members of the subcommittee. EDF appreciates not only the opportunity to testify here today, but your continued interest in this issue and your ongoing dedication to follow it. I think high level congressional interest in this and persistence in monitoring the climate change action plan will be critical to its success.

As you may know, EDF believes that the threat of global climate change is sufficiently urgent to demand that both the United States and the global community adopt policies that mandate production of greenhouse gas emissions.

At the very least, we would recommend that the United States and other nations with high-level or rapidly growing greenhouse gas emissions should adopt mandatory policies modeled on, for example, H.R. 2663, which was introduced and worked on in the 102nd Congress.

Under these policies, major new or modified sources of carbon dioxide would be required to offset their CO2 emissions by ensuring that compensating greenhouse gas emissions reductions were achieved elsewhere.

For better or worse, however, this country's climate change policy will not be driven, at least for the moment, on such mandatory measures but by what is contained in the climate change action plan, at least in the short term.

EDF will continue to work for more aggressive measures, but we also believe that it is essential to capitalize on the opportunities presented by the CCAP and to ensure that the plan delivers on the promises it makes. In short, the plan must be made to work.

Now, this may be a tall order. The plan's centerfold, and I refer to the pages in the center of the document which are the summary table of actions, set forth approximately 40 discrete measures and their individual emissions reduction score.

Unfortunately, while I think the administration intended for us to take great encouragement from that summary table of actions, I fear that in a way that table actually dramatizes rather starkly some of the drawbacks or liabilities of the plan. And I think there are three that are critical.

One is, their continues to be staggering uncertainty as to the actual emissions reduction performance that any one of these measures will deliver in practice. Second, one of the things that is most disturbing about the plan is that there doesn't seem to be any mechanism for sorting out fruitful from futile or at least less productive measures and channeling resources accordingly.

And finally, we fear that the CCAP did not really establish all of the conditions that are critical to innovation. And as you know, innovation I think is going to be the key to dealing with global climate problems over the long term.

To address these problems, we would suggest that the foremost objective of the plan's implementation should be the establishment of a comprehensive emissions monitoring and emissions tracking program. Now, the plan made extensive reference to the administration's intention to do this and referred to the tools that it had at its disposal for doing this.

But in our view, to really make the plan credible, to elicit the voluntary action that the plan relies upon, that monitoring program must be set up as quickly as possible. Again, this is critical because we really don't know prospectively how any of these measures are going to perform.

For example, energy efficiency, a strategy that EDF has long promoted in fact suffers from a track record which demonstrates that measuring kilowatt hours saved, let alone CO2 reduced is devilishly tricky. All you have to do is look at the EPA green lights programs and the many, many attempts over the last couple of years to try to quantify the savings generated by those programs to see how hard the exercise is.

So we really have to couple the proposed measures in this plan with a very active emissions monitoring and tracking system to make sure that the plan is working.

One of the tools that we have in tracking emissions reductions and in assessing the effectiveness of the program is the section 1605(b) program established under the Energy Policy Act of 1992. It's the voluntary registry approach that this committee developed during the last Congress.

In our view, the 1605(b) program should be relied on almost as a guarantor of performance on the part of the individual measures that are proposed under the plan and a guarantor of performance of those companies. For example, the ones that have signed up for the climate challenge and have pledged to make emissions reductions.

The reason I emphasize the 1605(b) program and its importance is that despite the statute's clear emphasis on accuracy and reductions, there seems to be rampant among DOE management and staff and among some of the utility industry the mistaken belief that the objective of 1605(b) is to promote participation.

Now, this could be a harmless error except that we fear that that mistaken premise could be used to justify less than rigorous reporting requirements and the inclusion of measures that merely curb net emissions increases rather than achieve actual net emissions reductions.

Again, it's critical to have the measures in the plan which themselves are designed to promote participation coupled with some kind of mechanism that guarantees performance. And 1605(b) in particular and a broader comprehensive emissions tracking program in general are absolutely essential to making the plan work if it is going to work.

I would suggest that the committee consider, and equally important DOE consider looking back at H.R. 2663, which really was the precursor or ancestor of the 1605(b) plan because H.R. 2663 made a specific effort to define what a qualifying emissions reduction was and to set forth a methodology for measuring that emission reduction.

I know the committee is very interested in the international aspect of the climate change problem. And EDF, among others, actively supports a strategy of joint implementation as a way of addressing the international aspect of a climate change problem.

Without worldwide participation in the effort to curb greenhouse gases, no nation's domestic policies will succeed by themselves. Joint implementation offers a critical opportunity to build such worldwide involvement.

The plan's initiative for joint implementation has to be constructed very carefully both to ensure the achievement of net reductions by actions undertaken under the IJI, but at the same time support the efforts of those firms seeking to achieve emissions reductions overseas.

The ultimate success of the IJI is critical ultimately to whether or not the United States does have a credible strategy for addressing the global aspects of this problem. And joint implementation provides a tool with a very powerful capacity to mesh many of the overriding objectives or what should be the overriding objectives of the United States and international climate policy.

These are specifically: (1) the reduction and the use of and pollution from fossil fuels; (2) cost effectiveness in making reduction investments; (3) sustainable growth in developing economies; (4) the channeling of private funds from the industrialized world to the developing world in a mutually beneficial way; and (5) the protection of global forest resources as well as biodiversity.

You can see that a strategy that can deliver all those benefits is absolutely essential for mastering the problem of global climate change, as well as many of the other global economic and environmental problems that some of those objectives address.

In our view, the criteria laid out for the IJI in the plan actually represent a reasonable good faith foundation for a joint implementation program.

The criteria appear to put the necessary premium on actual net emissions reductions, as this is the cornerstone for building an initiative that reaps the full host of benefits that we just described. But if you turn to our written testimony you will see that we attempt to elaborate on some of the details of those criteria.

I guess I would like to wrap up by saying that one of the unaddressed issues in the plan is I guess a generic issue. And that is, how the plan accounts for efficiency and innovation.

Again, we fear that the laundry list approach captured in the summary table of actions may be too rigid and may be more conducive to waste and less conducive to innovation than the plan needs to be. The idea of listing forty actions and assigning a tonnage reduction score could well degenerate into nothing more than interagency budget and turf battles.

Unfortunately, it would be easy to envision a scenario whereby different programs compete for budget allocations based on their tonnage reduction score. And having those battles be resolved on the basis of those scores and not on the basis of which programs are doing the best job would be a disaster.

Somewhere, whether it's in the congressional process or in the executive branch process, we need to introduce a mechanism that sorts out the fruitful investments from the less fruitful investments.

And finally, we need to make sure that this laundry list does not become a chain which restrains innovation in the marketplace that the plan is trying to reshape. Thank you very much.

Mr. SHARP. Thank you very much, Mr. Goffman. Mr. Davis, we would be happy to hear from you now.

[Testimony resumes on p. 357.)

[The prepared statement and attachments of Mr. Goffman follow:)

STATEMENT OF THE ENVIRONMENTAL DEFENSE FUND

The Environmental Defense Fund appreciates the opportunity to present testimony to the Energy and Power Subcommittee of the Energy and Commerce Committee. The Environmental Detense Fund, a leading, national, NY-based nonprofit organization with over 200,000 members, links science, economics, and law to create innovative, economically viable solutions to today's environmental problems. Through its scientists, economists and lawyers, EDF has been active in all aspects of the climate change issue both nationally and internationally. During this past summer, EDF statt participated actively in the Administration's public workshop on the Climate Change Action Plan. In the 101st Congress, EDF worked successtully with the Members of this Committee to the inclusion of a carbon dioxide monitoring program in the Clean Air Act. In the following Congress, EDF worked with Members of this committee to develop a mandatory CO2 oftset bill which eventually made its way into the National Energy Policy Act as a voluntary greenhouse gas emissions reduction registry.

A PERFORMANCE-DRIVEN STRATEGY FOR INNOVATIVE VOLUNTARY ACTIONS

Once it became clear during the past summer that the Clinton Administration was intent on centering the CCAP on voluntary actions, EDF formulated a comprehensive proposal for such an approach. We offer this proposal here because we attempted to embody in the proposal the critical characteristics of a successtul program. Our proposal can be seen, then, as a toil against which the Administration's CCAP can be critiqued. Briefing materials supporting the proposal are attached.

The EDF proposal attempted a "reinventing government strategy. Founded on a reiteration of the President's pledge to reduce greenhouse gas emissions and on an irondad system for monitoring and tracking total emissions, the proposal would have established a comprehensive, competitive framework for tostering innovative actions and ensuring that government and private sector resources were directed exclusively to the most fruitful programs, ideas and technologies.

Under our proposal, the federally-funded programs to achieve emissions reductions would not be set down according to a rigid prescription. Instead, the CCAP would operate through a Greenhouse Gas Reduction Fund financed from the same sources that otherwise would support what are the government programs presarbed in the current CCAP and from a portion of the funding authorized under Title XVI of the Energy Policy Act. Both tederal agencies and private parties would submit bids to finance greenhouse gas reduction projects or programs. The bids would be ranked on the basis of cost-effectiveness, quality of reductions, innovation, leveraging of private sector resources and stimulation of U.S. market opportunities. The President's Council on Sustainable Development could play a role in recommending awards. Those private sector activities that received financing under this program would have to commit to achieving net reductions and to establishing mechanisms both to verify the reductions achieved and to guarantee the underlying reduction commitment. By establishing a direct competition for an explicit financial reward, the EDF proposal sought to assure that numerous actors would undertake emissions reductions and do so in a way that put a premium on ingenuity, creativity and innovation.

Among the things we were trying to accomplish in promoting this approach was to illustrate the critical characteristics of a successtul climate change policy whether mandatory or voluntary. The foundation would be a firm emissions constraint, implemented by a rigorous emissions accounting system. In meeting the emissions reduction target, policy-makers and private actors would be given tull flexibility. This flexibility is critical because there are many paths to the emissions reduction target and the goal of any policy should be to maximize the likelihood that the one that will be followed is not only cost-effective, but succeeds in establishing a long-term course tor success. On this foundation of a firm commitment to emissions reductions and flexibility, a climate change policy could be built to ensure that continuing emissions reductions are achieved by a dynamic, openended process emphasizing actual emissions reduction etficacy, innovation and cost-effectiveness.

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