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6.

Current members of the Environmental Collaborative (excluding NEES
representatives) are:

David Abedon
Michael Bradley
Nancy Brockway
Armond Cohen
Richard Mageary
Nancy Seidman
Richard Schmalensee
Michael Smith

Customer Advisory Council-Narr. Elec.
Northeast States for Coordinated Air Use Mgmt.
National Consumer Law Center
Conservation Law Foundation
Customer Advisory Council-Mass. Electric
EPA Region !
Massachusetts Institute of Technology
Retail Customer-Granite State Electric

7.

The 45% reduction is based on a monetized value for eight types of air
emissions: sulfur dioxide, nitrogen oxides, carbon dioxide, particulates,
volatile organic compounds, carbon monoxide, methane and nitrous oxide.
The eight types of emissions are from an Integrated Resource
Management (IRM) proceeding of the Massachusetts Department of Public
Utilities (MDPU). The 45% reduction assumes externality values ($/ton) for
each of the eight emissions types as proposed by Massachusetts Electric in
May 1991. The externality values ($/ton) proposed by the MDPU in August
1990 would result in a weighted net reduction of approximately 40%. The
MDPU has an ongoing proceeding on the values to be used in the IRM
process. Different values for the eight types of air emissions will yield a
different weighted net percentage reduction.

8.

The carbon dioxide emission rate from natural gas burning is approximately 120 pounds per million British Thermal Units (lb./MMBtu). From residual oil burning, the emission rate is approximately 170 lb./MMBtu. Therefore, the natural gas rate is approximately 29% lower than the residual oil rate.

9 .

The heat rate (amount of fuel heat input needed to generate one kWh of electricity) for conventional boilers ranges from about 8,800 to over 13,000 Btu/kWh. As explained in NEESPLAN 3, Appendix C, the heat rate for the Manchester Street Repowering Project will improve from 13,000 Btu/kWh to 8,200 Btu/kWh, an improvement of 37%.

10.

See Lashof, Ahuja, "Relative Contributions of Greenhouse Gas Emissions to Global Warming," Nature, Table 1 (April 15, 1990) (one ton of methane is equivalent to 10 tons of carbon dioxide). Also see National Academy of Sciences, Policy Implications of Greenhouse Warming, Table 2.1 (1991) (one ton of methane is equivalent to 21 tons of carbon dioxide).

11.

See National Academy of Sciences, Policy Implications of Greenhouse
Warming, p. 47 (1991).

12.

See Testimony of D. L. Holt for Massachusetts Electric Company,
Investigation into Environmental Externalities, DPU Docket 91-131, p. 4-5
(October 4, 1991). The criteria for evaluating the offset pilot programs
include: (1) the environmental effectiveness for offset strategies; (2) the
cost effectiveness; (3) the long-term viability; (4) the public and regulatory
acceptance; and (5) synergies with other company environmental
improvement programs such as conservation and renewable resources.

13.

The National Academy of Sciences, Policy Implications of Greenhouse Warming, Table 2.1 (1991) states that one ton of CFC-11 or -12 is equivalent to 5,400 tons of carbon dioxide. More recently, some scientists believe that CFC's have less effect on global climate.

14.

Carbon dioxide is reduced in three ways: (1) by reducing emissions from the fuel needed to bake raw materials in the rotary kiln; (2) by reducing the amount of limestone used as a raw material, which produces carbon dioxide when heated; and (3) by reducing the energy associated with the mining, transport and processing of raw materials.

15.

Examples of electrotechnologies include electric arc furnaces, electric
vehicles (e.g., substituting electric-powered trains for diesel/gasoline trucks),
information transmittal (e.g., using fax rather than express mail), electric
heat pumps, infrared heating and freeze concentration. See Electric Power
Research Institute, Saving Energy and Reducing CQ, With Electricity -
Estimates of Potential (October 1991), copy of Report Summary attached.
Also see Energy Research Group report for Edison Electric Institute, Carbon
Dioxide Reduction Through Electrification of the Industrial and Transportation
Sectors (July 1989).

16.

See attached copies of Joskow, Paul L., Dealing with Environmental
Externalities: Let's Do It Right! (1992) and Rebuttal Testimony of R. L.
Schmalensee for Massachusetts Electric Company, Investigation into
Environmental Externalities, DPU Docket No. 91-131, Second Round
Testimony and Exhibits (December 13, 1991). Also see Benjamin, Stan,
"Environmental Externalities -Will a Noble Idea Wrongly Applied Wind Up
Doing More Harm Than Good?", Electric Perspectives (January-February
1992).

17.

The "no regrets" strategy is to implement certain policies now that would
not only reduce emissions of greenhouse gases but would have additional
benefits to society as well. Conservation is a prime example. See
Congressional Research Service Issue Brief, Global Climate Change, p. 4
(updated October 22, 1991).

18.

See Testimony of Dr. William D. Nordhaus for Massachusetts Electric Company, Integrated Resource Management Draft Initial Filing. Testimonies and Exhibits on Environmental Externalities (May 20, 1991), copy attached.

19.

See IFC Resources, Inc. final report to Edison Electric Institute, Assessment of Greenhouse Gas Emissions Policies on the Electric Utility Industry: Costs. Impacts, and Opportunities (January 1992); See attached Summary of this report prepared by Edison Electric Institute.

20.

The NEES Companies recover their conservation expenditures as current expenses. Various incentives are in place to encourage successful implementation of the programs. These vary from jurisdiction to jurisdiction. Among these are fixed bonuses for conservation beyond a set level and shared savings of the value produced by the conservation programs. For a detailed discussion of the innovative conservation cost recovery programs we have developed see J. W. Rowe, "Making Conservation Pay: The NEES Experience", The Electricity Journal, Vol. 3, No. 10 (December 1990), copy attached.

Mr. SHARP. Thank you very much, Mr. Rowe.
Dr. Lashof, we are happy to have you with us today.

STATEMENT OF DANIEL A. LASHOF
Mr. LASHOF. Thank you, Mr. Chairman.

When I testified on the global warming issue almost exactly a year ago before your sister Subcommittee on Health and the Environment, I said, “The Bush administration's continuing refusal to accept targets and timetables for reducing carbon dioxide, the most important global warming gas, remains the largest obstacle to progress,” and unfortunately that statement is just as true today as it was then.

At the negotiations that ended last week, every other industrialized country was prepared to support a treaty that included commitments to stabilize carbon dioxide emissions. Key developing countries, such as Brazil, are already ready to make commitments to protect forests provided industrialized countries make firm commitments to curb their fossil fuel CO2 emissions and provide appropriate financial resources.

Let me skip over some of the discussion in my written remarks to the conclusions. Faced with the dramatic risks, as have been outlined by the Intergovernmental Panel on Climate Change and other assessments that have been done, all nations have agreed in principle on the need for a climate treaty that would achieve stabilization of greenhouse gas concentrations in the atmosphere “at a level which would prevent dangerous anthropogenic interference with climate.”

Based on the analysis of the IPCC and the Stockholm Environment Institute, I conclude that to achieve this objective the atmospheric concentration of greenhouse gases must be limited to 475 parts per million of CO2 equivalent, taking into account the effect of the other gases, which translates into a limit for carbon dioxide of about 400 parts per million. We are currently at 350 parts per million, so we have very little time to reduce our emissions to prevent that limit from being exceeded.

In particular, to achieve the objective of the Convention that the United States and other countries have agreed to, the industrialized countries, which have 25 percent of the world's population and are responsible for 75 percent of global emissions of CO2 from the energy sector, must have the primary responsibility to reduce those emissions.

All industrialized countries should have a binding obligation to reduce energy-related carbon dioxide emissions by at least 20 percent below 1990 levels by the year 2000, and deeper cuts in CO2 emissions will be required at later times in order to stabilize greenhouse gas concentrations.

I want to emphasize that stabilizing emissions at current levels, as mostly is being discussed now, will allow greenhouse gas concentrations in the atmosphere to continue rising roughly at current rates. The only way to stabilize atmospheric concentrations is to cut emissions by more than 60 percent, according to the IPCC.

Fortunately, the opportunities to reduce these emissions are very large and very cost effective. NRDC, along with three other national organizations, recently completed an exhaustive study of the potential for investments in energy efficiency and renewable energy to reduce greenhouse gas emissions at a profit. In this study, we examined four potential energy futures for the United States, our reference case which was based on DOE projections, and four alternative scenarios: a market scenario, an environmental scenario, and a climate stabilization scenario.

Even in our very modest market scenario-if I can get these charts put out—which only includes actions that are profitable for the U.S. economy, disregarding all environmental externalities, by the

year 2000 emissions are no higher than 1990 levels. Emissions gradually decline thereafter to about 30 percent below 1990 levels by 2030.

Achieving these reductions does require a substantial additional investment in energy efficiency and renewable energy compared with the reference case, totaling a net present value of $1.2 trillion over 40 years. However, there is a return on this investment from lower energy costs which would be $3.1 trillion, yielding a net benefit of almost $2 trillion.

I want to emphasize that this case does not involve carbon taxes, it involves cost effective measures, a combination of things that are relatively easy to do, and relatively modest penetration rates are assumed, and we still find that we can stabilize it at that profit.

In the discussion previously, Mr. Gruenspecht talked about a carbon tax of $140 per ton being needed to achieve this kind of result. The reason their analysis differs so dramatically from ours is that the models that are used to project that result assume that the economy is functioning perfectly right now and therefore no cost effective efficiency opportunities exist.

Under that assumption, you conclude that a large carbon tax is needed to reduce emissions, and I would submit that that assumption is the difference between economists and those of us who, like Mr. Rowe, know something about how the world actually works in practice.

These charts display the results that I have just been talking about. The first one shows carbon dioxide emissions from the four scenarios, and you see in the market scenario there, as I said, we essentially stabilize emissions at current levels.

Mr. SHARP. Would you want to point out—just give that to us again.

Mr. LASHOF. Yes. This first chart shows the carbon dioxide emissions in the four scenarios in our study: the reference case, which is similar to DOE projections, based on their projections; in the market case, we stabilize CO2 emissions at current levels; in the environmental case, we increase the penetration rate of similar types of measures and include other policies that are justified for reducing other emissions besides the greenhouse gases, and that is called the environmental case, and in that case CO2 emissions decline about 10 percent by the year 2000 and 50 percent by 2030; and then we have the climate stabilization scenario, which is designed specifically to achieve the CO2 reduction targets that I mentioned; and in that scenario we do add a carbon tax of $25 per ton of CO2, which is about $100 per ton of carbon as being discussed to the other measures, and we conclude that, given the technological opportuni

year 2030.

ties, you would actually reduce CO2 emissions 20 percent below 1990 levels by the year 2000 in that case and 70 percent by the

So while NRDC does believe that a carbon tax should be applied in order to achieve the overall reductions needed, we don't believe that it is necessary to achieve mere stabilization, which unfortunately is all that is really being discussed seriously in the climate negotiations at the moment.

If I can have the next chart which shows the economic analysis, what this shows is the added investments in energy efficiency and renewable energy needed to achieve the reductions in the different cases. The black bar shows the investments which increase from one scenario to the next, and the taller bar that is going up shows the overall savings in energy cost that is a return on that investment, and the smaller bar shows the net profit to the economy.

So what we find is that even in our most aggressive scenario, while you have to spend a lot more money than in the market case, there is a net benefit to the economy, and while I wouldn't necessarily say that every measure in the climate stabilization scenario is cheap, we do believe that it could be implemented through a carbon tax and the kinds of revenue offsets, that Dr. Morgenstern was talking about, that would actually have a net benefit for the economy.

Let me skip most of the rest of my remarks and just conclude by quoting a statement by Nobel Laureate Henry Kendall that was made at the closing session of the climate negotiations last week on behalf of the environmental organizations that were represented there. He said:

Time is running out. As the distinguished delegate from Pakistan told you earlier this week, the environmental clock stands at a quarter to midnight. There is an urgent need to bring an effective climate change treaty to the Rio conference in June, not just an empty framework. The success or failure of these negotiations will also set the tone for the many other environmental and development challenges that confront developing and industrialized countries alike. Given the high stakes, failure of these talks would be a costly and irresponsible act.

Unfortunately, Mr. Chairman, because the United States continues to refuse to make a firm commitment, these talks are on the brink of failure.

Thank you. [Testimony resumes on p. 172.) ĪThe prepared statement and attachment of Mr. Lashof follow:]

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