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Chairman SENSENBRENNER. All those in favor of authorizing funds for this purpose will say aye.

[Laughter.]

Ms. RIVERS. Before I hear from Dr. Moniz I have to comment that there was a certain irony to me to find out that the engineer in charge of the Prius project was formerly from GM and was hired by Toyota to do this work. Dr. Moniz?

Dr. MONIZ. Well, I don't have too much to add to Gary's statement. I was going to note that there was a very large subsidy in the Prius, and I would not characterize their development as being ahead of ours technically. I believe we are supplying the right kind of help through partnership with our companies. It may be different in form than the Japanese system, but we are emphasizing partnership, essentially, industry consortium. We are trying to emphasize the competitive kinds of technology developments as reflected in the rather different announcements made by our big three in the last auto show. But I think it's aggressive. I would also add that the fact that the demand for the Prius has sort of been twice that expected by Toyota indicates the desire, I think, for the consumers to have this kind of product. In fact, it reminds me of a statement made in different context by John Brown, the CEO of British Petroleum. He stated that the people want, in this case, energy at a good price. They also want to protect the environment, and a good businessman knows to give customers what he wants. Chairman SENSENBRENNER. The gentlewoman's time has expired.

Ms. RIVERS. Thank you, Mr. Chairman.

Chairman SENSENBRENNER. The gentleman from Pennsylvania, Mr. English.

EFFICIENCY OF TAX PROPOSALS

Mr. ENGLISH. Thank you, Mr. Chairman, and I'd like to welcome the panel. I've been reviewing your testimony, and I'm intrigued by a couple of things. The proposal that the Administration is putting before this Committee seems to be an odd collection of things a group of interesting research proposals and a dog's breakfast of tax initiatives which representing the Ways and Means Committee. I'm not sure that there's much to be said for them from the standpoint of tax simplification, but I'd like to dig into them a little bit.

Dr. Gibbons, have you worked with the Treasury at all to assess the efficiency of the tax proposals that are being offered here? Dr. GIBBONS. They were developed at the Treasury Department. I'm not an economist, sir.

EXISTING TAX INCENTIVES FOR WIND AND BIOMASS

Mr. ENGLISH. I thought I saw their fingerprints on them. Do you have a sense-I guess, can you comment on whether you feel the existing tax program for wind technology and biomass has been an efficient use of our tax preferences?

Dr. GIBBONS. I think time will tell. I am pleased to observe, though, that, for instance, wind technology has moved extraordinarily over these past half dozen years. It is now at the edge of direct_competitiveness, head on for generation and well ahead of

and wind technology and that industry is rapidly growing on account of that. Now, that came about through a number of years of steady advances in the technologies of blade design; of turbines; of electrical power controls, and the like. So, I think this is a good example of where these technologies-if you give them sustained support with public monies flowing in where the private sector hurdle rate is not met but the public good is out there, then you can find that combination of public and private investment really paying off for both sectors.

Mr. ENGLISH. And I think PURPA has also played in it, but I'm

Dr. GIBBONS. PURPA did, indeed, you're right.

EXTENSION OF ETHANOL TAX CREDIT

Mr. ENGLISH. I would think a good deal more than the tax program, but I'd be curious to get an analysis of that. I notice that an extension of the ethanol credit was not included in the Administration proposal and was not part of the Administration budget. Is there any significance to that?

Dr. GIBBONS. I-David, would you want to respond to that?

Mr. GARDINER. Well, I would just say that the-in working with the Treasury Department when we had not only the Treasury experts but the experts in the Administration that worked on climate change that what we were looking for was the most cost-effective investment of those tax credit dollars and

Mr. ENGLISH. You didn't feel that ethanol met that standard?

Mr. GARDINER. That's correct and that the I would just say that the effort is to target the tax credits at those sectors of the economy that have the biggest impact on greenhouse gas emissions. So, that's why we're targeting transportation; that's why we're targeting industry; that's why we're targeting the building sector which is each of

Mr. ENGLISH. That's very interesting, because I know up until to this point the Administration had been supportive of the ethanol program and that's big news.

PROMOTION OF CARBON SINKS

Mr. ENGLISH. Let me shift in a similar direction. I notice one of the things that no one has included is the idea of using tax preferences or forestry policies to promote carbon sinks which I think is one of the more interesting ideas. Has the Administration explored this option?

Dr. GIBBONS. Yes, in fact, it was most recently visited, as you know, at Kyoto where carbon sinks became an important part of the outcome of the Kyoto agreements. It hasn't been worked out exactly yet in terms of implementation, but we do feel that the sequestration of carbon forest practices is a very important opportunity especially over periods of decades to, perhaps, a century. In the long term, of course, trees decay unless you happen to be the roof beam of a Japanese temple that lasts 600 years. Trees cycle carbon, rather than permanently store it, but I think we will be very actively engaged in trying to encourage a rational way of monitoring the dynamics of carbon as it is stored in forests and a fair

progress of other countries. So, it was emphasized at Kyoto, and there will be additional meetings concerning exactly how we inventory and monitor this.

Mr. GARDINER. Congressman, if I could just note, also, that the Climate Change Technology Initiative that the President has proposed included a $10 million initiative at the Department of Agriculture specifically for the purpose of looking at trees and soils and the related sinks question as well as additional funding at EPA. Dr. Moniz might also want to comment that the Department of Energy has a substantial increase in its funding for bio-fuels which we think represent a very significant opportunity to reduce greenhouse emissions.

Chairman SENSENBRENNER. The gentleman's time has expired. Mr. ENGLISH. Thank you, Mr. Chairman.

Chairman SENSENBRENNER. The gentleman from Pennsylvania, Mr. Doyle.

PRIORITY OF FOSSIL FUEL R&D

Mr. DOYLE. Thank you, Mr. Chairman. I want maybe to just shift the discussion a little bit on to the power generating side. They talked about some of the concerns I have on meeting our energy needs and under the Kyoto Protocol. We have a lot of coal-powered utilities, electric utilities, and, as you know, we're going through this deregulation process, and one of the concerns that a lot of us have is that a lot of companies that use coal as their power source are going to see it becoming more profitable not to become generating companies anymore but get into the transmission end of the business. We've heard talk of natural gas, maybe, filling that void; that there would be an increase in the use of natural gas to meet that need, yet, one wonders how it would be economically practical and in what time frame could we build some of the infrastructure that would have to be built to accommodate this increase in the use of natural gas.

And then I look at the proposal with nuclear. When we look at the nuclear option which emits no CO2, it doesn't seem that we're being very aggressive. We see that there's two modest initiatives aimed at sustaining nuclear energy as a viable option but really nothing on a larger scale to say Okay, for our future energy needs, let's look to nuclear as other countries; as Europe and other parts of the world have done.

It seems to me that everybody agrees that fossil fuels are still going to be very much in the picture in the foreseeable future, and while I see the Secretary in his budget announcement said we're going to see increases in research and development on fossil energy. That these initiatives will help us make better use of these resources. The numbers don't seem to indicate the kind of commitment that I would hope to see in fossil research and development. Carbon sequestration; we're talking about spending in basic research $9 million; in the carbon sequestration R&D, $10 million. To me, the numbers seem low. What is the priority that this Administration is placing on fossil fuel research in Fiscal Year 1999, and more importantly too, what fossil fuel R&D programs were not in

Dr. GIBBONS. Congressman, I'd like to start out on that and then turn it over to Dr. Moniz. We're very much concerned and interested in what's going to happen with electricity deregulation as you are. Clearly, fossil fuels will dominate as they do now. Clearly, there is a very important future role for coal. Changes in the electricity industry generally take a half a century for major changes to roll through. That's why time is so important here to pace ourselves through various transitions. We are hopeful that some really smart ideas will emerge about the capturing of carbon, whether you could turn it into hydrogen and leave the carbon in the ground or other things. It's, in essence, a fishing trip at this point, because it's never been that seriously look at before. So, this is a very serious research effort, and as we find things that have promise, then we'll want to put more resources behind them. We certainly want to preserve the nuclear options, and we hope we will be able to determine in the coming years why it is that nuclear has become expensive, what it takes to resolve the remaining issues in nuclear, but also how to assure that we don't suddenly find ourselves with 20 percent of our electricity which is now produced without CO2 emissions, namely from nuclear plants. If those plants go offline and you switch over to coal-fired plants, we're going to exacerbate the problem. So, we're very much concerned about rates of these plants and whether their lives might be extended.

So, we're paying a lot of attention to these fuels, and if you think we have a concern about the U.S. situation on fossil fuels. If you look at China and their dependence on coal, it even is greater, so basic coal technologies that enable us to burn it more efficiently and with less carbon emissions are not only going to be important for our future, but also as an export technology force to the rest of the world.

AGENCY LEAD ON CARBON SEQUESTRATION

Mr. DOYLE. Well, who's taking the lead on CO2 sequestration? What agency is taking the lead on that, and I understand you say, well, you point more money in it once you find it just seems to me the money in it initially is very inadequate.

Dr. GIBBONS. That's a good chance for me to turn it over to the agency that is leading this, Dr. Moniz, the Department of Energy. Chairman SENSENBRENNER. Dr. Moniz, could you please answer briefly, because we have 4 witnesses left and about 20 minutes before members of the Committee left.

Dr. MONIZ. The question had three parts-I'll answer one for now. The sequestration, the baseline from what I understand is virtually zero, so this is relaunching a new program with many components. We have about a $19 million program which is $10 million will be in the Research, Development, and tests geological disposal in various environments including ocean and mines et cetera, and then in the Energy Research budgets is a brand new program focusing on the biological aspects of sequestration. This is a program which I think will be evaluated. We have a request for competitive proposals at the moment. We view it as, again, a kind of high risk, high payoff research. We definitely want to support it.

Chairman SENSENBRENNER. The gentleman's time has expired. The gentleman from California, Mr. Calvert.

IMPACT OF PROPOSED PROGRAM ON GLOBAL WARNING

Mr. CALVERT. Thank you, Mr. Chairman. I for one, and I'm joined by many; I think some on this Committee, and certainly throughout the House and the Senate. I question the conclusions that the panel used on global warming as its justification for the proposals that you've articulated here before this Committee, and, in fact, I believe that if the Senate would vote today on the Kyoto Protocol it would enjoy very little support from either party. And, in fact, I understand the Administration has decided to push the vote off until 1999, and I suspect the outcome will change very little between now and then.

However, saying that, I'm from California, and we didn't need a treaty to lower our CO2 emissions. If you looked at California, our CO2 emissions are below, I believe, the 1990 levels now, and we did it without a United Nations Treaty Agreement. We did it for dif ferent reasons, and I think for good reasons. We had air quality problems and more specifically in my area of Riverside, California, but we did it through a very difficult process in California of lowering emissions of various types. We've gone through a process where we know what works and what doesn't work, and when we talk about tax incentives and we talk about these incentives and my friend from the Ways and Means Committee mentioned earlier, we try to simplify the tax code that may be contradictory.

However, saying that, we know that there are new diesel engines out there that are much more efficient, much cleaner, and that have lower CO2 emissions, certainly lower particulate emissions; that we can use compressed natural gas for medium trucks that do most of the deliveries. We know that there's some practical things that you can do. California's already moved to regulate its energy. We hope that we're not made a part of the national effort to do that since we're already on a path towards doing that ourselves.

But saying all that, this Committee is in charge of doing basic research for types of energy such as wind, solar-geothermal which I think all of us support. But I don't like to hear about us potentially spending money on some of the proposals that may have very little outcome. I'd like to hear from you, Dr. Gibbons. You believe that we spent all the money that you proposed, on the programs that you proposed, how would that change the outcome of global warming?

Dr. GIBBONS. The farther, the deeper, you go into research the more you come to understand that you're dealing with an inherently uncertain future. The only way you can measure the outcome of research, in a sense, is to look backwards rather than forwards. And if we look backwards to the influence of research on our Nation's economy over the last half century, we find that the rate of return for research has been-accounts for about half of our economic growth over the last 50 years. In other words, it's had ubiquitous applications across our economy. In Energy, we try to choose those areas of research that are most promising in terms of discerning, discovering new fundamental options for our Nation, and

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