ROAD FROM KYOTO-PART 2: KYOTO AND THE ADMINISTRATION'S FISCAL YEAR 1999 BUDGET REQUEST THURSDAY, FEBRUARY 12, 1998 HOUSE OF REPRESENTATIVES, Washington, DC. The Committee met, pursuant to notice, at 9:58 a.m., in room 2318, Rayburn House Office Building, Hon. F. James Sensenbrenner, Jr., Chairman of the Committee, presiding. Chairman SENSENBRENNER. The Committee will come to order. Today we continue with our hearings on the Kyoto Protocol, the U.N. treaty that would mandate the United States to cut its greenhouse gas emissions by 7 percent below 1990 levels by 2008 to 2012. As I said in opening the hearing held by the Science Committee on February 4th, I believe this treaty to be seriously flawed-so flawed, in fact, that it cannot be salvaged. In short, the treaty is based on immature science, costs too much, leaves too many procedural questions unanswered, is grossly unfair because developing countries are not required to participate, and will do nothing to solve the speculative problem it is intended to solve. Last week, Dr. Jay Hakes, the Administrator of the Energy Information Administration, testified that the EIA projects the Protocol would require the United States to cut carbon emissions by 550 million metric tons, or 31 percent below the levels expected in 2008 to 2012. Dr. Hakes said that, "It is unlikely the adjustments can be achieved without a significant price mechanism," and that, "Under most scenarios the price mechanism selected would slow somewhat the rate of economic growth." In plain English, what Dr. Hakes was saying was that the only way we can meet the emissions reduction mandated in the treaty is through a significant increase in energy prices and that this will hurt the economy. Such candor is refreshing, and I hope to hear some more of it today. There are basically three ways of increasing our energy pricesall harmful to American consumers and the American economy. One is through a carbon or BTU tax, which the Administration has correctly rejected as political poison. The second is through an international trading and joint implementation scheme outlined in the Protocol, with details to be worked out in Buenos Aires in November-that would require the users of carbon-rich fuels to purchase credits to offset their emissions. And the third is through regulatory fiat. No matter which option is selected, the net result will be the same the U.S. consumer will get stuck picking up the tab. In addition to raising U.S. energy prices, the U.N. treaty imposes the burden of emissions limits solely on the United States and other developed countries, placing Americans at a competitive disadvantage against foreign competition. Higher energy costs and cumbersome regulations will encourage American industries, agriculture, and jobs to move overseas to countries like China, India, and Mexico that are under no such obligations. Whether or not the Kyoto Protocol's fundamental flaws can be worked out in the diplomatic arena remains to be seen and will be the subject of further hearings. In the interim, we will examine the Administration's Fiscal Year 1999 budget requests that are directly related to the Kyoto process. In particular, we will consider the Administration's proposals for the U.S. Global Change Research Program and the Climate Change Technology Initiative. The Climate Change Technology Initiative is a 5-year package of research and tax credits. It includes $2.7 billion research and technology initiative, and a $3.635 billion package of tax credits to reduce U.S. greenhouse gas emissions. The Administration has proposed a significant spending increase in Fiscal Year 1999 for the Initiativesome $473 million, or nearly 58 percent, for all agencies-with the bulk of that increase going to the Department of Energy and Environmental Protection Agency. There is also a large increase, some $50 million, or 22 percent, for the Partnership for a New Generation of Vehicles, which is coordinated by the Commerce Department's Under Secretary for Technology. We know that advances in technology can provide us with a better, cleaner, and more prosperous world for future generations. However, we also know that advances in technology cannot and will not work to a U.N. schedule. Furthermore, we have to be sure that we do not repeat the mistakes of the 1970's by throwing large amounts of money at dubious programs that won't get results. At this point, I have an open mind with respect to the Administration's Fiscal Year 1999 proposals. But I must say, that a cursory examination indicates that there are a number of retreads-with some reminiscent of the Carter Administration-and several appear to be, "unwarranted corporate subsidies," to use a phrase from President Clinton's October 17, 1997, statement on line item vetoes in the 1998 Energy and Water Development Act. In addition, I find it curious that the EPA is requesting a $5.4 million increase for domestic and international implementation efforts related to the Protocol, including, "securing meaningful participation from developing countries," when the treaty has neither been signed by the Administration nor submitted to and ratified by the Senate. I hope that we're not starting on the road toward a constitutional crisis here. It seems to me that these programs should be judged on their merits regardless of their fealty to the Kyoto pact. When considering these budget proposals, therefore, I intend to adhere to the guiding principles I put forth when I took over as Chairman of this Committee. First, federal R&D must focus on essential programs that are long-term, high-risk, well-managed, and have a great potential for scientific discovery. Second, federal R&D needs to be highly relevant to and tightly focused on agency missions, with ac countability and procedures for evaluating quality and results. And third, where possible, international, industry, and state science partnerships need to be fostered in a way to leverage scarce federal dollars. Funding for these programs that do not meet these standards should be eliminated or decreased to reduce budget demands and to enable new initiatives in more promising areas. Finally, I want to remind those who believe that budget utopia has arrived, that the President's overall Fiscal Year 1999 budget increases new spending by $150 billion and that his planned increases for science are to be paid for with unrealized money from the proposed tobacco settlement-money which may not materialize. Further, it breaks the budget agreement and threatens to undermine the goal of a balanced budget and sustainable funding for all programs, including those related to climate change. I, for one, believe the American people want us to keep the commitment we made last year to balance the budget without gimmicks, and I intend to work to that end. And I yield to the gentleman from California, Mr. Brown. Mr. BROWN of California. I thank you very much, Mr. Chairman, and with a little luck, we can get me out of the way and take a recess for that vote. First, Mr. Chairman, let me express my admiration for your good judgment in scheduling these hearings and for the witnesses that we've seen on this hearing and the previous one. I think it presents a balanced view of the situation so far, and I want to commend you on that. I would also like to state, as you already know, that we have some differences of opinion on the relative importance of global warming research. I happen to feel that it meets all of the fine criteria that you enunciated and that you use to judge research with. And I believe that it's very much in the national interest. I-referring to my statement, briefly, and then I'll ask that the remainder of it be put in the record. Chairman SENSENBRENNER. Without objection. Mr. BROWN of California. The potential for man to affect the global climate has been recognized by most for the past several decades. Yet, the negotiations in Kyoto have brought the issue into clear focus for the first time. It has forced policymakers to begin the daunting task of balancing environmental, economic, and political values in a single framework and setting the stage for a new, and as yet uncertain, approach towards industrialization for the next millennium. To a great extent, the debate thus far over global warming has been a disservice. Polarized political factions have struggled to define this narrowly as either an economic issue, or, alternatively, an environmental issue-job loss on the one hand versus environmental catastrophe on the other. These definitions may be convenient, and even irresistible in an election year, but they are unfortunately so distorted as to be wrong. We cannot be blind to the fact that the scientific consensus is there; continued unchecked consumption of fossil fuels will very probably affect the climate in the future. Equally, we cannot pretend that taking action will be painless. There probably will be eco E ably will be an impact on consumer habits and even higher costs for some commodities. It's also probable that there will be economic gains in other sectors with whole new industries being created, and there will be consumer benefits by the generation a new array of better appliances and goods. This is how economies always evolve, through the complex interplay of gains and losses. I have to say that I am somewhat puzzled, Mr. Chairman, about your insistence that the science behind global warming is so uncertain and yet you seem to be very positive about the economic impact. Both of these are estimates, projections, and probably equally uncertain when you get down to it. No science can ever be absolutely final or absolutely correct. Neither can economic projections. We have to use a combination of the best scientific knowledge available and the best judgment that we have available. And on this matter, I expect that you and I will continue to have some differences over the future. With that, I'll put the rest of my statement in the record. And let me just announce, but not ask for any action, the appointment of--the changes in the Ranking Democratic Members on our side. Bart Gordon will be the new Space Ranking Member; Tim Roemer will continue on Energy and Environment; Jim Barcia will be Ranking on Technology; the Honorable Eddie Bernice Johnson will be Ranking on Basic Research. And I thank you very much. Chairman SENSENBRENNER. Without objection, the gentleman from California's complete statement will be in the record. [The prepared statements of Mr. Brown and Ms. Johnson follow:] STATEMENT BY GEORGE E. BROWN, JR ROAD FROM KYOTO: PART 2 Mr. Chairman, I look forward to this hearing today in examining the Administration's efforts to address the technical, scientific, and policy issues surrounding global warming. The potential for man to affect the global climate has been recognized by most for the past several decades. Yet, the negotiations in Kyoto have brought this issue into clear focus for the first time. It has forced policy makers to begin the daunting task of balancing environmental, economic, and political values in a single framework and setting the stage for a new--and as yet uncertain--approach towards industrialization for the next millennium. To a great extent, the debate thus far over global warming has been a disservice. Polarized political factions have struggled to define this narrowly as either an economic issue, or, alternatively, an environmental issue—job loss on the one hand vs. environmental catastrophe on the other. These definitions may be convenient--and even irresistible in an election yearbut they are unfortunately so distorted as to be wrong. We cannot be blind to the fact that the scientific consensus is there-continued unchecked consumption of fossil fuels will very probably affect the climate in the future. Equally, we cannot pretend that taking action will be painless. There probably will be economic dislocations and even job loss in some sectors. There probably will be an impact on consumer habits and even higher costs for some commodities. It is also probable that there will be economic gains in other sectors with whole new industries being created and there will be consumer benefits by the generation a new array of better appliances and goods. This is how economies always evolve, through the complex interplay of gains and losses. I regard the proposals we will hear today as a very good first start towards making the transition we will need to make. Yet it would be wrong to "sugar coat" the bitter pill before us and pretend that these proposals will solve the problem. We have a long way to go. Yet, all of our economic models, and our basic intuition tells us that the key to solving the problem is technology. The development of cost effective, energy efficient technologies, together with efforts to incentivize and promote consumer acceptance of these technologies will have long term benefits. Those who believe that we need to act today mitigate global warming and those who believe we need more information before acting converge in one area-we need the basic tools to understand the paths we will need to take to create a more energy efficient society. This is what the Climate Change Technology Initiative seeks to |