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ing concrete and practical ideas of cost-effective emissions reduction options from those experienced in actually implementing real action.

We know there are a lot of people in the United States who have fresh ideas, and we want to hear from them. We also want to hear from organizations and people who have already made voluntary commitments to reduce their own greenhouse gas emissions, and who have already geared up to deliver them.

Let me just spend a moment to give you an example of a particular set of actions that are under way in part of the country that I come from, New England. Let me mention the experience of the New England Electric System (NEES) as it has developed its own NEESPlan to reduce greenhouse gas emissions, as well as other air pollutants.

NEESPlan-which I understand the Chairman of NEES, John Rowe, presented to this committee last year-NEESPlan demonstrates considerable creativity and ingenuity. Rather than adopting a single focus, this company has a program that includes a combination of demand-side management; repowering of existing powerplants; support for pilot projects that capture methane emissions from coal mines; and forest management practices in the Malaysian timber industry. Those programs are already underway.

Other NEES actions are of course, partially motivated by the need to respond to Government mandates regarding regulated air pollutants. I need to add that NEES is motivated in the instance of greenhouse gas emissions reductions to move on a voluntary effort. They have voluntarily committed to reducing their own greenhouse gas emissions by 20 percent by the year 2000.

New England Electric System believes that it can achieve emissions reductions through NEESPlan at a fraction of the cost of command and control alternatives. We want to hear from companies like NEES. My understanding is that the NEES initial work under way has produced a forest management program which would lead to a $1-per-ton of emissions reductions, and their coal methane capture program has led to $5 to $10 a ton emissions reductions capability.

This is good news for that company's ratepayers, good news for the environment, and a tangible refutation of scare stories warning of potential astronomical cost for greenhouse gas emissions reductions. We think that these are good things and we want to hear more. By tapping these good ideas, we can identify best policy approaches that will serve both our economic and environmental objectives.

Let me very briefly review some of the additional issues that will help frame the administration's efforts to develop the plan by August, as Counselor Wirth has described. First, the focus of the plan will be on net emissions of all greenhouse gases, rather than carbon dioxide alone. In order to achieve the President's environmental and economic objectives, we must take advantage of attractive and affordable reduction opportunities across a wide spectrum of activities.

Second, insofar as a diversified plan is consistent with cost-effectiveness, a diverse portfolio of reduction actions is clearly desirable, and we will look for that. Having lots of options helps to reduce uncertainty relative to an alternative that puts all of our eggs in a small number of baskets, and will enable us to develop experience that would be invaluable in structuring far-reaching mitigation efforts, should this be necessary in the future.

A diversified portfolio of actions can also contribute to greater fairness in the distribution of impacts across economic sectors, regions and income classes. Fairness will clearly be a consideration, as we work with the public to develop a plan.

Third, given the inherent uncertainty in the projections of baseline emissions and emissions reductions that I referred to a moment ago, we will need to periodically review our progress to insure that we remain on track in meeting the President's commitment to the year 2000.

Trends in global greenhouse gas emissions and concerns related to American competitiveness suggest that there may also be clear advantages in structuring our plan in a manner that provides encouragement for others to follow through on their own greenhouse gas reduction commitments, perhaps by linking our own long-term plans to actual progress of our trading partners in meeting their own commitments.

My prepared testimony that will be in the record addresses some of the ways in which the energy sector as a whole, and particularly programs included in the Energy Policy Act, can contribute to meeting our Nation's commitment to greenhouse gas emissions reductions.

I should mention, though, that joint during implementation and sink enhancement, both explicitly referenced in your invitation letter to us, do appear to have significant potential as cost-effective approaches to emissions reduction. We recognize the interests of the committee on this point, and I give thanks to the path-breaking efforts of members of this committee in laying the groundwork for us to work on developing ideas for offsets programs.

It is, however, too early to specify exactly what programs we will be coming up with because we need to hear and talk with the public about what various groups think are the appropriate planks of that plan.

In conclusion, Mr. Chairman and members of the committee, I hope you will agree with me that the administration has taken a great step forward in this important area. The Department of Energy and other Federal agencies plan to work closely with the legislative branch, with State and local governments, and with outside stakeholders in crafting a new pro-active approach to mitigate greenhouse gas emissions.

Thank you for the opportunity to share these ideas with you. I would be happy to answer any questions.


DOMESTIC AND INTERNATIONAL ENERGY POLICY, DEPARTMENT OF ENERGY Mr. Chairman, and members of the subcommittee, I thank you for inviting me to discuss the administration's new policy on global climate change. Today, I will address several aspects of this policy. First, I will briefly discuss the President's Earth Day commitment on greenhouse gas emissions. I will then discuss our emissions projections, how we will tap the creativity and ingenuity within both the Government and the private sector to develop and deliver the cost effective action plan caged for by the President, and some key issues that will be addressed as the plan

is assembled. Finally, I will review the Department of Energy's plans for implementing various global climate provisions contained in the Energy Policy Act of 1992.

În his Earth Day address, President Clinton reaffirmed his personal commitment, and announced our Nation's commitment, to reducing our emissions of greenhouse gases to their 1990 levels by the year 2000. This statement marks a clear change of direction from the policy of the previous Administration and reasserts America's leadership in this important environmental policy area.

Numerous existing and proposed activities will help us meet this commitment. The Energy Policy Act, enacted by the last Congress, and in no small part due to the leadership of the chairman and members of this subcommittee, will play a critical role in reducing greenhouse gas emission levels. The proposed Btu tax in the President's comprehensive economic plan, and other elements of that package, will also play a significant role.

The President spoke of the need to continue the trend of reduced emissions. The actions taken to reduce emissions to 1990 levels by the year 2000 will also significantly reduce emissions trends after 2000. The development of improved energy supply and energy use technologies, a key focus of the Energy Policy Act, will be particularly important in lowering emissions trends after the turn of the century.

In 1990, emissions of carbon dioxide, methane, and nitrous oxide totalled between 1,520 and 1,617 million metric tonnes of carbon equivalent (MMTCE)-reflecting a range of uncertainty in estimates for the carbon-equivalency factor for methane and nitrous oxide emissions. By the year 2000, these greenhouse gas emissions could have been projected to grow to between 1,716 MMTCE, and 1,830 MMTCE, had the Energy Policy Act not been passed and the President's economic policy proposals not been made. Most of the growth in greenhouse gas emissions is caused by increased emissions of carbon dioxide due to the burning of fossil fuels in motor vehicles, in electric powerplants, in industrial production processes, and other uses. We estimate that carbon emissions from energy use and industrial processes in 1990 were about 1,381 MMT. Without the Energy Policy Act, our energy models project that carbon emissions would grow to around 1,565 MMTC in the year 2000.

The Energy Policy Act is expected to reduce emissions by about 40 MMTC from the projected year 2000 level. This reduction is achieved through a combination of provisions for efficiency standards, energy market reform, and increased research and development. Standards will begin to act immediately to promote more energy efficient and environmentally beneficial options in homes, business, and vehicles. Increased levels of research and development on clean and efficient energy supply technologies and end-use equipment will have a growing emissions-reducing impact over time as products are commercialized and market penetration grows.

In addition to its support for the Energy Policy Act implementation, the President's economic policy proposes a Btu tax that will promote energy conservation with associated environmental benefits and enhanced energy security. The tax will reduce energy consumption and switch some end-use consumption of petroleum to natural gas, which emits less carbon when burned. By the year 2000, the Btu tax is projected to reduce greenhouse gas emissions by about 25 MMTC from projected levels; by the year 2017, the reduction will be about 35 AMTC.

Additional programs contained in the President's economic package are expected to reduce greenhouse gas emissions by an additional 5 to 25 MMTC in the year 2000. These proposals, such as voluntary “green” energy efficiency programs, weatherization assistance, increased purchases of alternative fuel vehicles, enhanced Federal building energy efficiency, improved renewable energy and energy conservation, increased natural gas utilization, and others are aimed at increasing energy efficiency and the use of environmentally beneficial energy resources.

I am sure you will appreciate that all of the projections cited above are based on a number of assumptions. Among the most important of these are: economic growth rates, changes in energy prices, and market diffusion rates of energy-efficient technologies. Consequently, actual future emissions might be higher or lower than these emissions forecasts. If economic growth is more robust than expected, for example, more emissions will occur and additional actions will be needed to meet the President's commitment. Higher than expected world oil prices, conversely, would lower emissions by reducing energy demand, making it easier to meet the President's commitment.

Looking beyond the turn of the century, the Department's energy and environmental models project a total increase of about 150 MMTCE in greenhouse gas emissions between 2000 and 2010, even with the full implementation of the Energy Policy Act and proposals in the President's economic package. Although we are projecting that energy efficiency (decline in energy use per unit of Gross Domestic Product) will improve by 12 percent during the 2000-2010 timeframe, energy consumption is still expected to increase by about 12 percent over that period. Of course, assumptions regarding economic growth, energy prices trends, and technology development and penetration necessarily play a large role in projections over this longer time horizon.

The accuracy of our emissions projections will only be revealed as the future unfolds. But, based on our best current estimates, we expect that more actions to reduce greenhouse emissions will be needed to meet the President's commitment.

The President instructed his Administration to produce by mid-August a cost-effective plan to reduce greenhouse gas emissions. The August deadline corresponds to the next intergovernmental meetings on implementation of the Climate Convention.

As announced by the White House last week, an Interagency Climate Change Mitigation Group (CCMG), chaired by the Office of Environmental Policy (OEP), has been charged with the task of preparing recommendations on elements of a mitigation plan for Cabinet-level consideration. The CCMG has designated working groups to examine specific economic sectors and greenhouse gas reduction opportunities and associated policy mechanisms and options. Actions to reduce greenhouse gas emissions, actions to increase sinks that absorb greenhouse gases from the atmosphere, and public and private actions that provide both domestic and international emission reductions will all be considered. The eventual plan could include either voluntary actions, or administrative policy changes, or legislative proposals, or a combination of all three.

The Department of Energy has been asked to chair or co-chair half of the Working Groups, and expects to play an active role in several others. Secretary O'Leary and her cabinet colleagues are emphasizing the need for close consultation and cooperation. Our recent experience of fruitful collaboration with EPA in the analysis of energy taxes is illustrative of a “can do” approach that effectively draws on resources throughout the Government and avoids the unproductive bickering that characterized interagency relationships in the previous Administration.

We recognize that it is impossible to reinvent government or its policies without drawing on the creativity and ingenuity of outside stakeholders and experts. We will do this through a series of public workshops in which stakeholders can bring to the table their action proposals, and especially their experience with ongoing greenhouse gas mitigation projects. We expect to touch base with interested parties on a regular basis throughout the process of developing the mitigation plan. We will also be consulting with Congressional staff and legislative support agencies so that our efforts can benefit from the considerable expertise at this end of Pennsylvania Avenue.

Based on the previously cited projections, a return to 1990 greenhouse gas levels by 2000 would require an additional reduction of 75 (+/- 15) MMTCE's in net emissions of greenhouse gases. This figure may change as recent legislation, private initiatives, and current regulations and policies are reevaluated in the plan development process.

In considering the design of a plan to reduce emissions, several points merit attention. First, even though my testimony here focuses on energy-related emissions, the administration recognizes that policies to address all sources and sinks of all greenhouse gases, both domestic and international, can effectively reduce atmospheric concentrations of greenhouse gases. The Climate Change Convention provides for such a comprehensive approach, and our cost-effective plan for further emission reductions will take maximum advantage of attractive and affordable reduction opportunities in all these areas. While energy-related emissions constitute the bulk of domestic greenhouse emissions and the bulk of reductions already identified, their role in a further reduction increment has yet to be determined.

Second, insofar as a diversified plan is consistent with cost-effectiveness, a diverse portfolio of reduction actions is clearly desirable. A balanced set of actions that avoids putting “all of our eggs” in a very small number of baskets would have the advantage of reducing uncertainty. It would also develop experience that could prove invaluable in structuring more far-reaching mitigation efforts that may be necessary in the future.

Third, given the trends of global greenhouse gas emissions, there is clear value in structuring our plan in a manner that provides maximum encouragement for others to follow through on their own greenhouse gas reduction commitments. For this reason, it may be useful to link our long-term emissions reduction planning to the actual progress of our trading partners in meeting their own near-term greenhouse gas reduction objectives, and to mobilize emissions reductions in developing countries where emissions are growing the fastest. Given the role of assumptions in emissions projections, periodic reviews will also be required even in the period before 2000 to assure that we remain “on track” towards meeting our commitment. Ultimately, the content of the Plan will depend on the emissions reduction impact of available options and their costs, to the Government, directly affected parties, and society at large. The administration will be developing emission reductions and associated cost estimates for the actions that it will be proposing in the Plan that is expected to be announced this August. At this time, however, it is premature to speculate about how easy or difficult and how cheap or expensive it might be to achieve the President's goals.

The administration's mitigation plan will contain a number of actions that improve energy efficiency and reduce greenhouse gas emissions in the economy through support for increased use of environmentally beneficial resources and energy efficient equipment. In electricity supply, DOE has active programs in both the renewable energy and clean coal technology areas, which offer opportunities for substantial reduction in the carbon intensity of electricity production. The Department recently selected five additional clean coal technology projects which will result in high efficiency, environmentally clean electric power generation from coal.

Integrated resource planning in the utility encourages both innovative supply technologies and reduction in electricity demand growth. The administration is committed to supporting such efforts, as directed by the Energy Policy Act. DOE is also pursuing increased energy efficiency in buildings, industrial, and transportation activities, through standards and labeling requirements, and through initiatives in materials processing and electric motor drives, as well as alternative fuels, electric and hybrid vehicles, and fuel cell research and development.

Programs that combine the development of new energy efficient technologies with information programs that allow consumers to choose the energy technologies that are best for them will help accelerate the trend of improving energy efficiency in our economy. This Administration recognizes the value of encouraging emission reductions through voluntary programs to increase the market penetration of economically viable technologies that reduce greenhouse gas emissions in the energy sector and elsewhere. Programs such as EPĂ's “Green Lights”, DOE's outreach and deployment support efforts, and the Energy Information Administration's (EIA) database for recording voluntary emission reductions pursuant to Section 1605 of the Energy Policy Act will be key components of the administration's efforts to reduce greenhouse gas emissions.

These voluntary action programs will work in conjunction with utility demandside management (DSM) activities, funded by electric utilities at $1.8 billion in 1991, and energy efficiency research and development to reduce energy consumption. Although it is desirable to disaggregate the costs and benefits of each of these components, it is analytically impossible to do so credibly, since the results of these programs are intricately tied together. For example, research and development of more energy efficient devices leads to new technologies which require less energy. Utilities then target these technologies for adoption. Utility DSM programs, supported by voluntary action programs, identify these technologies and accelerate their penetration in the market.

Other Energy Policy Act provisions also have significant potential for reducing worldwide greenhouse gas emissions. As noted in your invitation letter, the Act authorizes the establishment of three global technology transfer programs covering innovative renewable energy (section 1211); innovative clean coal (section 1332); and innovative environmental technologies (section 1608). These programs are to be developed in conjunction with the Agency for International Development (AID) and in consultation with other members of the Committee on Renewable Energy Commerce and Trade (CORECT), the Committee on Energy Efficiency Commerce and Trade (COEECT), and the Clean Coal Technology (CCT) Subgroup.

The Department is proceeding with a number of “presolicitation” activities. We have recently completed negotiations for an umbrella Memorandum of Understanding with the Agency for International Development (AID) that it is currently making its way through the Department's final review process. We would hope to be able to sign this agreement soon.

Other ongoing “pre-solicitation” activities conducted by the Offices of Fossil Energy (FE) and Energy Efficiency and Renewable Energy (EE), the program offices responsible for implementation of these provisions, include developing a list of eligible technologies and potential projects, investigating different solicitation mechanisms, and considering forms of financial assistance (loans, advanced payments, and insurance) that would serve to maximize the export potential of each program. Our efforts have included discussions with the EXIMBANK, the Overseas Private Investment Corporation (OPIC), AID, industry trade groups, corporations, and CORECT. In conjunction with this activity, a public forum will be held in early Fiscal Year 1994 to gather comments on a proposed solicitation structure and financing mechanisms.

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