Mr. SHARP. Thank you very much.

Mr. Hemphill, happy to hear from you now.

STATEMENT OF JOHN HEMPHILL

Mr. HEMPHILL. Thank you very much.

I would like to say it is an honor to be here today and especially in light of the fact that you are-I guess what we call a short-timer here. But I do want to echo the sentiments expressed by others concerning your distinguished career in public service and the fact that many of us will miss you not being here.

I am executive director of the Business Council for a Sustainable Energy Future. It is a relatively new group. We formed about a little over 12 years ago, and we are comprised of business leaders from the energy efficiency renewable energy, natural gas and electric power generation market that share a commitment towards the realization of the Nation's economic, environmental and national security goals through the rapid deployment of sustainable energy technologies and services, and that is technologies that are economical, efficient and low-polluting.

We believe that we, our industries, can play a constructive role in the issue of global climate change. We believe that there are cost-effective solutions available today that can mitigate the growth in the greenhouse gas emissions. And furthermore, we believe that there are some emerging technologies that are on the horizon that will contribute to the possibilities that are afforded to reduce greenhouse gas emissions.

We believe that the further believe that the vision set forth in the Climate Action Plan represents an important first step. But like Mr. Lashoff, we are concerned that more will need to be done, but we believe that the overall framework is correct. It is a matter, I think, of getting it right and getting on with the implementation of these kinds of activities.

We furthermore can look at what is happening in the real world and see that it validates our beliefs. When you look at the most recent data with respect to the U.S. domestic utility industry's purchases of new incremental capacity, you will see that over 70 percent of it comes from either natural gas or renewable resources.

This is happening due to market forces, and again, we think it validates the fact that clean technologies are attractive on their own face. We do believe, however, that there are many things that can and must be done to make sure that these technologies, utilizations are fully realized, and especially when one looks at what is happening internationally. We recently participated in the INC Conference in Geneva, and stated, put forward six principles that we felt were important with respect to-that all countries should adopt with respect to the implementation of their plans. They are essentially aimed at ensuring that the climate is right for the implementation adoption of sustainable technologies and services.

We recognize that ultimately private capital is what is going to determine what investments are made here and throughout the world. But when it comes the emerging technology-emerging countries, we recognize that initially that capital infusion is going to be heavily influenced at least at the margin, by what countries or what public capital decisions are made.

And so we believe it is very important that these multilateral, bilateral institutions put forward not just rhetoric, but programs that clearly are consistent with a notion of reducing CO2 emissions. In the meantime, life goes on and members of our of my association have been very busy, both here domestically and abroad, in projects, some of which has public capital support, but many of them are solely private capital programs.

I just wanted to list a few examples: Honeywell has recently upgraded or in the process of upgrading a district heating system in Krakow, Poland, and it is very similar to the one you described, Governor. They substituted new, efficient boilers, controls and have backed out, reduced the amount of power needed, the size of the boiler substantially and have had very significant reductions in air pollution and energy costs.

Enron Corporation is constructing a natural gas pipeline in Argentina that is adding significantly to the natural gas capacity and thereby reducing Argentina to rely on more carbon-intensive

sources.

Another company is Bergey Windpower is marketing small wind turbines for distributive power in countries like Indonesia and Mexico. They have proven to be very economical and to reduce greenhouse emissions.

Kenetech Power has begun a joint venture project in the Ukraine that will help offset the need to generate electricity from existing, inefficient and unreliable power plants.

And lastly in the Philippines, Magma Power is constructing a geothermal plant to provide the country with environmentally benign, domestic-available energy power sources. And I think these are just illustrative, and I do have a book that we put together that describes these projects, as well as many others, both domestically and internationally, and I will leave that for you.

Let me quickly address the joint implementation issue. We believe, like many, that joint implementation offers tremendous promise. In theory, it is too good to be true, and I guess that is part of the problem right now is there is a lot of misunderstanding about what JI can and should do.

And I think, again, we need to-the only way to make this work is to come forward with some very specific projects on a pilot basis, make them very good, like the one you described, Governor, and overcome this inertia or distrust that exists. But personally, I think that I know our companies are not really waiting for JI because we realize if we wait for JI, the markets will have come and gone. I think, therefore, one has to get on with the business of doing business where there are opportunities to go through a pilot program, you should do them, make them good, and then keep your fingers crossed.

That concludes my remarks.

[The prepared statement of John Hemphill follows:]

THE BUSINESS Council for a SUSTAINABLE ENERGY FUTURE

Testimony for the

Energy and Power Subcommittee

of the House Energy and Commerce Committee

Concerning

US Government Greenhouse Gas Mitigation Efforts

October 6, 1994

INTRODUCTION

The Business Council for a Sustainable Energy Future is pleased to submit testimony to the Subcommittee on Energy and Power of the House Energy and Commerce Committee concerning the US Government's greenhouse gas mitigation efforts and the important role we see industry playing in this effort.

I am John Hemphill, Executive Director of the Business Council for a Sustainable Energy Future. The Business Council, formed in December 1992, is comprised of business leaders from the energy efficiency, renewable energy, natural gas and power generation industries who share a commitment to pursue a new energy strategy designed to realize the Nation's economic, environmental and national security goals through the rapid deployment of sustainable energy technologies and services -- that is, technologies that are economical, efficient, and low-polluting.

Members of the Business Council support the objectives of the international Framework Convention on Climate Change (Climate Treaty), including the long-term goal of stabilizing the concentration of greenhouse gases in the atmosphere.

The Business Council believes that the opportunity costs of delaying actions to achieve this goal are substantial. Furthermore, we believe there are cost-effective solutions available today to mitigate the growth in the concentration of greenhouse gases in the earth's atmosphere. The Business Council calls on the public and private sector to work collectively to ensure that these solutions are implemented.

The vision set forth by the Administration in its Climate Change Action Plan (CCAP) represents an important first step towards reducing US greenhouse gas emissions. The significant role that sustainable energy has in the government's plan for meeting its international treaty obligations is clear -- approximately 90 percent of the energy sector reductions are estimated to come from sustainable business activities such as those pursued by Business Council members.

Recent investment decisions of the US electric utility industry confirm the significant role sustainable energy will play in meeting our Nation's future power needs. In 1992, for example, over seventy percent of the electric industry's capacity additions were natural gas and renewable power plants.

POSITIONS ON CLIMATE CHANGE

At the August meeting of the United Nations' Intergovernmental Negotiating Committee, the Business Council recommended that governments adopt six principles when addressing global warming issues.

(1) Policies Should be Market-Based

To minimize economic distortion and to energize the financial resources and the organizational assets of the private sector, policies targeted to remedy global climate change, to the extent possible, should be marketbased, taking into account the environmental externalities of energy use. Policy instruments should be used that provide economic incentives to deploy and to adopt clean, efficient energy technologies and practices.

Carbon taxes represent one market-based approach to reducing greenhouse gas emissions. Other marketbased approaches focus on public/private partnerships to achieve economic and environmental goals.

A number of Business Council member companies, in fact, are participants in the government's voluntary public/private partnership programs to reduce greenhouse gas emissions. CCAP initiatives such as Climate Wise, the Motor Challenge, and Natural Gas Star have engendered broad support from Business Council members. The Business Council urges the Administration and members of Congress to continue supporting these important public/private initiatives.

(2) Clean-Energy Alternatives Should be Recognized

Technologies and services which have the potential to replace higher emitting technologies should be explicitly recognized. Demand-side and supply-side energy management should be key components of national action plans. Cost-effective, clean-energy technologies and practices deserve priority.

Current activities of Business Council members demonstrate the economic and environmental value of these technologies and services. For example, Business Council member SYCOM Enterprises recently has completed a high-efficiency lighting conservation project at the Meadowlands Racetrack in New Jersey that is expected to reduce costs by $5 million and energy use by 4.5 million kWh per year over the course of its ten year life.

The Sacramento Municipal Utility District (SMUD) has used greater reliance on renewables and efficiency to dramatically improve its ability to serve its customers. Today, SMUD gets nearly half of its energy from renewables and efficiency sources. By the turn of the century -- just six years from now -- SMUD expects to get 75 percent of its power from efficiency and clean-energy sources.

CCAP recognizes that the US government must also play a role in the commercialization of clean-energy alternatives. It promotes the commercialization of high-efficiency natural gas technologies such as fuel cells It also establishes a renewable energy collaborative and encourages renewables technology demonstrations to enhance renewable energy commercialization.

Further, CCAP promotes greater energy efficiency through initiatives such as the Motor Challenge, Green Lights, Energy Star Buildings, and various Golden Carrot market pull programs. Of course, the effectiveness of these programs depends in large part on the support they receive from Congress. This year the Business Council testified before Congress urging that these programs receive adequate funding to accomplish their greenhouse gas emissions reductions goals.

(3) Energy and Environmental Planning Must be Coordinated

Energy and environmental planning cannot be separated. The planning of energy projects in support of economic growth must explicitly recognize the relative environmental consequences of alternative actions, including their impacts on global climate change.

Business Council members like the New York Power Authority (NYPA) and United Solar Systems Corporation (USSC) are demonstrating the importance of accounting for environmental costs when developing energy projects. NYPA is using a cutting-edge photovoltaic array manufactured by USSC to test photovoltaic performance in a utility interconnected system. Environmentally sustainable solar-powered photovoltaics hold great promise for cost-effectively meeting a significant portion of US energy needs. NYPA's evaluation will serve as model for energy planning that seeks cost-effective, environmentally benign alternatives to traditional fuel sources.

CCAP recognizes the need for this kind of effort. CCAP encourages the utility industry to use integrated resource planning to identify their best cost resource needs. Another initiative in the Plan calls for Federal regulatory reform to promote natural gas use as an environmentally preferable fuel. Finally, CCAP promotes increased reliance on renewable power sources such as wind, photovoltaics, and geothermal in gridconnected utility applications. Each of these programs can make important contributions to reducing US greenhouse gas emissions.

(4) Progress Must be Measured and Adjustments Made

Implementation of global climate change mitigation strategies must be built on good monitoring systems. If strategies for reducing greenhouse gas emissions are not achieving desired results, policies must be modified and results monitored.

There is general consensus among those of us that follow this issue that the US may fall short of its emissions reduction goal -- returning US emissions to their 1990 levels by the year 2000. The United Nations recently released a report stating that scientific evidence suggests additional greenhouse gas emissions reductions efforts may be necessary to adequately respond to the threat of global warming. If it appears additional emissions reductions measures are necessary to adequately combat global warming, the US government must be prepared to take aggressive actions to ensure that US greenhouse gas emissions are reduced.

In this regard, the US Congress should be prepared to demonstrate leadership on climate matters. Congressional hearings on climate-related topics are an important component in increasing public understanding of climate issues. Members of Congress and the Administration should work together to ensure that key provisions of CCAP receive adequate support.

(5) Technology-Transfer Should be Encouraged

A coordinated effort to deploy clean-energy technologies throughout the developing world could substantially lower global greenhouse gas emissions while promoting sustainable economic development.

Business Council members are working in Central and Eastern Europe, the Middle East, Asia, and Central and South America to ensure that clean-energy technologies and services are available to meet the growing energy needs of developing countries. Many specific examples come to mind. Through a USAID program, Honeywell Inc. is upgrading the district heating system in Krakow, Poland, reducing Krakow's air pollution and energy costs. Enron Corporation is constructing a natural gas pipeline system in Argentina, adding significant natural gas capacity to an economy that relies on natural gas for over 40 percent of its energy requirement. Bergey Windpower is providing wind turbines for distributed power applications -- such as water pumping -- and hybrid electrification systems in countries such as Indonesia and Mexico. Kenetech Windpower has begun a joint venture 500 MW wind project in the Ukraine. Energy Conversion Devices is promoting a joint venture defense conversion project in Russia that will bring state-of-the-art photovoltaics production to that country. 1. the Philippines, Magma Power is constructing an geothermal power plant to provide the country an environmentally benign, domestically available source of power.

These projects illustrate the kinds of US clean-energy international business activities that can meet developing countries' energy needs in an environmentally responsible manner. Much more remains to be done if we are to successfully decouple the energy used to fuel economic growth from environmental degradation.

The US Government must take a leadership role in ensuring that clean-energy technologies and services are available to meet the developing world's growing energy needs. Members of Congress, the Administration and the US private sector must work together to devise appropriate measures for bringing state-of-the-art clean-energy technologies and services to developing world markets.

(6) Development Assistance Should Support Economic and Environmental Objectives Private capital ultimately will determine what type of energy investments will be made over the long term. However, public support, especially in emerging economies now making crucial decisions about their development path, can provide important incentives for pursuing sustainable economic growth.

The Business Council urges the US government to ensure that its bilateral aid policies support the goals of the Climate Treaty. The Business Council also urges the US government to make its support for multilateral lending institutions contingent on their adherence to the objectives set out in the climate treaty and in CCAP.

JOINT IMPLEMENTATION AND CLIMATE CHANGE

Joint implementation promises to be an important vehicle for promoting clean-energy technology transfer from developed countries to the developing world. However, standardized measurement, monitoring, certification, and administrative procedures for joint implementation projects must be developed. Likewise, liability rules and responsibilities must be defined.

The Business Council welcomes the Administration's efforts to gain a better understanding of this issue through the US Initiative on Joint Implementation (USIJI). However, the Business Council urges the US government not to view joint implementation as a substitute for taking cost-effective action to reduce domestic emissions of greenhouse gases.

CONCLUSION

The Business Council and its members will continue to work with the government officials and other interested stakeholders in achieving the emissions reductions goals of the Climate Treaty. Specifcally, we stand ready to participate with like-minded organizations to demonstrate the economic viability and environmental benefits of clean-energy technologies and practices.

Members of the Business Council believe an environmentally and economically sustainable energy future lies within our grasp. We urge the Administration, the US Congress, and stakeholders in the climate debate to work to make that future a reality.