More disturbing is the fact that labor NGOs were denied the opportunity to speak to the U.N. delegates. While business and environmental organizations were afforded the opportunity to make their views known--as is proper--the representatives of millions of workers were denied that opportunity by an arbitrary decision of one man.

They can try to blindfold us and gag us, but I assure you we will not be silenced.

Mr. Chairman, I delivered the same message to the Administration on October 6 at the White House Conference on climate change as I deliver here today. The U.S. should not sign a treaty in Kyoto based on the Berlin Mandate. Despite calming statements by some in the administration, this is not something that can be easily accomplished at little or no cost. Study after study-including a number by the Clinton administration--has found significant adverse economic effects from greenhouse gas reduction policies imposed over the next decade. The U.S. Commerce Department found significant economic losses in its 1992 studies, the Clinton administration economic analysis released this summer found significant job and output losses, and a study by the WEFA Group announced last week confirms the heavy economic costs of proposed policies.

We believe that the basis of these negotiations--the Berlin Mandate--is fundamentally flawed and unfair to American workers. In 1995, at the first Conference of the Parties to the Rio Treaty, the U.S. capitulated to demands from China, Mexico and other developing countries that they be excluded from any new commitments arising from the Berlin Mandate negotiations. Since developing nations are expected to be responsible for more than half of worldwide emissions of carbon shortly after the turn of the century, a Kyoto protocol based on the Berlin Mandate can have no meaningful effect on atmospheric concentrations of carbon dioxide. Any reductions that we undertake will be more than offset by rapidly growing emissions from the developing countries. Indeed, the U.S. could go to zero emissions in the next few decades and greenhouse gas concentrations will continue to increase.

In short, the exemption for developing countries in the Berlin Mandate ensured that Kyoto has nothing to do with controlling climate change or stabilizing atmospheric concentrations of greenhouse gases. Rather, these negotiations are a debate about trade and jobs.

The UMWA is concerned that proposals on the table2---or anything close to such targets and time frames--will have a devastating effect on American workers, consumers and communities. The U.S. has not yet made a proposal for specific targets and timetables, but has endorsed legally binding commitments and has analyzed policies aimed at reducing emissions in 2010 back to 1990 levels.

2The Alliance of Small Island States (AOSIS), with the support of many environmental groups, proposed a 20% reduction below 1990 levels by 2015. The European Union proposed a 7.5% reduction below 1990 levels by 2005

Because of our desire to learn about the effects of proposed policies, the Union, through the UMWA/BCOA LMPCP Fund3, commissioned a study of the employment and economic effects of climate change policies. The study was conducted by DRI/McGraw Hill, the same economic forecasting firm used by the Bush and Clinton administrations for climate policy analysis. To add a further degree of credibility to the study, we asked the Economic Policy Institute (EPI), a wellknown progressive economic think tank, to review DRI's work and provide

additional insights into the economic effects of climate policies. We asked them to consider the economic and employment effects of two primary policies aimed at:

reducing carbon emissions to 1990 levels by 2010; and

reducing carbon emissions 10% below 1990 levels by 2010.

The results of these studies are quite sobering. A Kyoto agreement based on the Berlin Mandate will mean hundreds of billions of dollars of lost economic output, and over a million-and-a-half lost American jobs. U.S. trade deficits and energy prices are projected to rise significantly, while worker incomes are reduced.

Before detailing the results of our studies, I want to explain how we conducted this analytical effort. We chose DRI specifically because the Clinton and Bush administrations had used the same forecasting firm for climate change analysis. We wanted a consistent and comparable set of analytical tools as those used by the White House. We did not ask DRI to make any particular assumptions that would generate any particular result. In fact, we specifically told them that we would not be involved in establishing the underlying economic assumptions. We asked them to use their best judgment about the future performance of the U.S. economy to establish a base case forecast. This was an objective effort on our part to learn about the effects of proposed policies and to inform the debate.

Here are the major findings of the DRI and EPI analyses that we commissioned.

Lost Economic Output

DRI found that greenhouse gas reduction policies will have a significant effect on U.S. economic output. Policies designed to reduce emissions to 1990 levels by 2010 are projected to reduce the level of national output as measured by the Gross Domestic Product (GDP) by 1.8 to 2%. If emissions are reduced 10% below 1990 levels in 2010, the costs increase sharply to 2.9% of GDP. While these percentages may sound small they represent huge losses to the economy. In the peak years around 2007 GDP losses would range from $170 billion to nearly $250 billion in constant 1992 dollars. To put that amount of money in perspective, that's about what we spend each year as a society on the Medicare program, or combined federal, state and local expenditures for elementary and secondary education. Cumulative GDP losses would exceed $1 trillion by 2008 and in the 2000-2020 period would be $1.9 to $2.7 trillion. Over the period, the cumulative GDP losses would be about $19,000 to $27,000 per current American household.

The Labor Management Positive Change Process (LMPCP) Fund is a joint labor-management committee established by the National; Bituminous Coal Wage Agreement of 1993.

Lost Jobs

DRI found that a policy to stabilize carbon emissions at 1990 levels by 2010 would cause the loss of nearly 1.6 million jobs by 2005. This compares to an estimate of 900,000 jobs lost in 2005 by a Clinton administration study conducted by the Interagency Analysis Team (IAT), which was released in draft form to the House Commerce Committee in July. A policy aimed at reducing emissions 10% below 1990 levels by 2010 was forecast by DRI to result in the loss of 2.3 million jobs by 2005, rising to a high of 2.6 million jobs lost in the peak year of 2007.

DRI's analysis shows that every region of the country is adversely affected through 2015. Only two regions are projected to recover by 2020, the Pacific Northwest and New England, and within these regions there are likely to be communities that cannot recover. Every other region is adversely affected throughout the forecast period, which runs to 2020. By 2005, the Middle Atlantic region loses 221,000 jobs, the South Atlantic states lose 322,000 jobs, the East North Central region loses 275,000 jobs, the East South Central region loses 151,000 jobs, the West South Central states lose 164,000 jobs and the Pacific Southwest states lose 233,000 jobs. As you can see, these policies are especially hard on the interior region of the country, particularly states whose economies are heavily dependent on fossil fuel production or heavy industrial activity.

Every sector of the economy is adversely affected, with the exception of the federal government. The coal industry is devastated, but numerous other industries are hard hit--110,000 jobs lost in the transportation and public utility sector, 199,000 jobs lost in the manufacturing sector, 426,000 jobs lost in the services sector and 182,000 jobs lost in state and local governments as the local tax base erodes.

The job losses are both broad and deep. States represented by Representatives on this committee are estimated to lose 583,000 jobs by 2005. At today's average production worker wage, those jobs would generate about $6.3 billion in annual wages.

Lower Wages

The Economic Policy Institute study notes that, in addition to job losses, carbon reduction policies are likely to depress wage growth, as higher wage jobs are knocked out of the economy and only partially replaced with lower wage jobs. EPI estimates that future wage growth could be cut by 50%. This will exacerbate the stagnation and decline in real wages that American workers have endured for the last two decades and will tend to increase the already wide income disparity in our economy.

Higher Energy Prices

The policies analyzed by DRI were based upon the U.S. proposal for a carbon permit trading scheme modeled on the U.S. acid rain sulfur dioxide trading program. DRI estimates that carbon permit prices would have to be $180-190 per ton (1995 dollars) in 2010 to reduce emissions to

1990 levels, and would rise to $270-280 per ton in 2020. The administration's IAT study concluded that carbon permit prices would be about $100 per ton in 2010, rising to $125 per ton in 2020.

The carbon permits will act like a carbon tax, raising the price of energy based on carbon content. Coal, with the highest carbon content of all fossil fuels, will be taxed the highest. But all fossil fuels are projected by DRI to increase in price.

Coal prices at electric utilities are projected to be $1.07 per million Btu (1995 dollars) in 2010 in the base case, increasing to $6.23 per million Btu in 2010 and $8.52 per million Btu in 2020 as a result of greenhouse gas policies.

Gasoline prices are projected to increase significantly, up 33% in 2010 and 43% in 2020. In the base case DRI projects gasoline prices at $1.44 per gallon in 2020 (in constant 1995 dollars). Gas prices are projected to rise to $2.06 per gallon due to a policy seeking to reduce emissions to 1990 levels by 2010.

Electricity prices will increase 66% in 2010 and 93% in 2020 over the base case. Average electricity prices will increase to 9.58 cents (1995 dollars) per kilowatthour in 2020, up from 4.95 cents per kilowatthour in the base case. Residential natural gas prices will increase from $6.08 per million Btu in 2020 (1995 dollars) in the base case to $10.47 per million Btu to reduce emissions to 1990 levels by 2010.

For an average American family these energy price increases will add nearly $900 per year to the annual household energy bill by 2005, increasing to about $2,200 per household by 2020.

Energy taxes are highly regressive by nature. Families, regardless of income, must heat and cool their homes, cook their food, wash their clothes and travel to work. For example, the U.S. Department of Energy estimates that a family with an annual income of less than $10,000 still spends nearly $1,000 per year in energy costs in the home. Energy taxes, or equivalent carbon permit schemes, will be crushing for low-income workers and seniors living on fixed incomes.

Not only will they pay higher costs for direct energy expenditures, but the cost of all goods and services will rise. They will be faced with higher costs for basic necessities such as housing, food and health care. Farmers will be faced with higher prices for fuel and fertilizer, and the cost to transport their products will increase. Hospitals will face higher prices for lighting, heating and cooling, costs which will be passed on to consumers.

In short, every family will face higher costs. And most of them will do it with less disposable income.

Higher U.S. Trade Deficits

Another important finding of our studies is that the U.S. trade deficit is likely to increase as a result of greenhouse gas policies. EPI noted that the trade deficit could increase by $149 to $240

billion annually, as higher energy prices increase the competitiveness of exporters based in lowwage developing countries exempt under the Berlin Mandate. EPI found that these exporting countries will capture a growing share of the U.S. market. Real imports are expected to increase and U.S. exports are projected to decline, resulting in rising trade deficits. Using output multipliers from the U.S. Commerce Department, EPI found that 2-4 million fewer jobs in gross terms would exist or be created compared to the base case.

EPI further found that the trade effects may be underestimated because of the potential diversion of investment to countries exempt under the Berlin Mandate. EPI noted that "multinational firms in developed countries will have additional incentives to shift investment to developing countries, if those countries do not face limits on their emissions of greenhouse gases."

Those are the major highlights of our studies.

We noted with some interest the release last several weeks ago by the U.S. Department of Energy of a study showing that greenhouse gas emission reductions could be achieved at little or no cost. The study ostensibly looked at energy efficiency gains that might be achievable, but the study also includes an assumption that coal will be replaced by natural gas in the electric utility sector. Mr. Chairman, I think the facile descriptions of “no cost" do a disservice to the American people when we are talking about doubling the cost of fuels at electric power plants. In 1996 the delivered cost of natural gas to electric utilities was $2.64 per million Btu, compared to a cost for coal of $1.29 per million Btu. Even if one chose to ignore the enormous economic costs to the nearly 100,000 coal mining families who would lose their jobs and the hundreds of coal mining communities that depend on them for economic activity, the costs of switching from coal to gas is far from insignificant.

Now, if there are energy efficiency gains that can be had in our economy, we should try to achieve them. But we should not kid ourselves that switching from inexpensive coal to higher-cost fuels is a free lunch. Instead of figuring out how to remove coal from our economy, I suggest we should be investing more money into figuring out how to remove the carbon dioxide from coal combustion and to use our coal resources more cleanly and efficiently.

The Administration also has asserted that costs will be much lower than most estimates because of its proposed trading program. They have continually pointed to the sulfur dioxide trading program under Title IV of the 1990 Clean Air Act Amendments to bolster this claim. The UMWA agrees that SO2 allowance costs are lower than the government predicted in 1990, but there are several reasons that the over-estimation occurred that do not apply in the case of carbon. First, the models used by EPA in the Clean Air Act debate arbitrarily forbid western subbituminous coals from moving east of the Mississippi River. We pointed out to EPA and its vendor at the time that this was a bogus assumption that would not be borne out in reality. As a result, there was expected to be more scrubbing and less switching from high sulfur eastern and Midwestern coals to western low sulfur coals. This led to higher estimates of SO2 allowance In other words, the high estimates of SO2 allowance prices were based on faulty assumptions about the extent of scrubbing that would occur and an under-estimation about the amount of low-cost switching that would occur. Second, there existed in the U.S. a lower-cost,

costs.