case of the IPCC reports, statements about the limitation of models need to be balanced with findings from other lines of reasoning such as empirical observations about trends.

Droughts

66

Q12. In a press briefing on July 28, Kathleen McGinty was quoted as saying, Severe droughts are expected like the ones we saw in 1988 that cut U.S. agricultural production and productivity by a third." The 1995 IPCC only went so far as to say, “In some cases models also predict more frequent or severe drought periods in a warmer climate." Even Dr. Alan Robock-who supports action on reducing CO2 emissions told the Subcommittee: "The suggestion of increased variability of climate, with more extremes like floods and droughts, is not very strongly supported by existing research,” and we have heard similar testimony from other scientists. What is the scientific basis for the Administration's claim that we can "expect" more severe droughts in the U.S.?

A12. See previous answer re: Extreme Weather Events.

"Do-Nothings"

Q13. Your testimony states that the President “rejected those views urging a ‘do nothing' approach based on the premise that the adverse consequences are the next generation's issue, not ours."

A13.1

Q13.1. For the record, please identify opponents of a treaty who have premised their opposition on the approach that the "adverse consequences are the next generation's issue, not ours." Please be specific and document such claims.

Q13.2. Would it be fairer to say that opponents of a treaty have not been convinced that there will be any adverse consequences for the next generation?

13.2. A good example of the argument that "adverse consequences are the next generation's issue, not ours" can be found in the written testimony submitted by Fred L. Smith of the Competitive Enterprise Institute at this hearing. Mr. Smith believes that advancing the means by which society can adapt to future climate change impacts (the "Resiliency Strategy") is a better way to address climate change compared with near term actions to reduce emissions to mitigate the threat of climate change. Other opponents to strengthening the Framework Convention have used similar reasoning. While many opponents remain unconvinced that climate change poses a threat to future generations, some, like Mr. Smith,

acknowledge that there are some risks. However, Mr. Smith argues that economic development will provide the means for future generations to cope with climate

change, rendering actions by the current generation basically unnecessary.

46-495-18

HEARING OF THE SUBCOMMITTEE ON ENERGY AND ENVIRONMENT COMMITTEE ON SCIENCE

U.S. HOUSE OF REPRESENTATIVES

on

Countdown to Kyoto-Part 3: The Administration's Global Climate Change Proposal

Thursday, November 6, 1997

Post-Hearing Questions and Answers

Mr. Fred L. Smith, Jr.

President

Competitive Enterprise Institute

Technological Change

Q1. Your testimony refers to the costs associated with delaying or blocking economic and technological change. Could you please expand on what some of these costs might be?

Al.

The costs of delaying technological change are opportunity costs - the value of the opportunities that are lost or foregone due to the delay in technological development. It is the value of what we could have achieved, were it not for policies that prevent technological advance and the benefits to human welfare that such advances bring.

The concept of opportunity costs is basic to economics. For instance, in increase in economic wealth creates a new base upon which new growth can occur. If that economic growth is delayed, then we not only lose the additional benefits of economic growth in the first time period, but also the increments that would result from the additional wealth generated through economic growth over time. Economic losses are irreversible just as are the alleged ecological damage that might occur if global warming materializes. All the sacrifices made because of slowed economic growth are lost forever and can never be regained. The poverty that would have been eliminated earlier had energy use not been curtailed can never be alleviated by future wealth increases. In more extreme terms, future economic advances to not alleviate the present suffering of those left without the

The gains associated with suppressed technological growth are of a comparable nature. Technology provides the means whereby mankind can do more with less. Biotechnology, for example, might make it possible to provide greater nutrition. Various natural food substances lack critical nutrients; biotechnology may make possible the augmentation of such natural nutritional values to provide full spectrum nutritional value in a much wider array of crops. Since in many areas of the world, only certain crops are well suited for local cultivation, such change would improve global health and welfare. Blocking biotechnology denies those advantages, possibly for many generations. Similarly, increases in agricultural productivity, brought about by technological advances, alleviate the pressure to clear forest land for cultivation. The cost of preventing these technological advances would be the loss of literally millions of acres of habitat in order to grow food for human consumption.

An analogy with the Food and Drug Administration illustrates well the cost of technological delay. When the FDA announces its approval of a new drug that will save thousands of lives in the next year, then, effectively, they are conceding that thousands of lives were lost in the year prior to that approval. Those lost lives can never be replaced. Only if that testing period adequately reduced risks can we justify those sacrificed lives. It is that challenge - the risk vs risk challenge - that is too often obscured in the biased application of the a so-called “precautionary principle" to global warming.

Opportunities to Improve Efficiency

Q2. Mr. Chupka has testified that: "If we fail to act . . . we risk foregoing significant opportunities to enhance efficiency, improve productivity, and capture growing markets for environmentally sound technologies." In your view, is this a sound argument in favor of a UN treaty?

A2.

Mr. Chupka sees only the gains associated with government investments in politically preferred technologies. To Mr. Chupka, markets are highly inefficient institutions; government, on the other hand, can quickly and accurately invest in those areas most likely to enhance human welfare. In practice and in theory, there is very little evidence to suggest that Mr. Chupka is right. Reductions in energy use may or may not be efficient. The mere fact that the Department of Energy can identify a low-energy appliance does not mean that adopting it is a more efficient use of resources. A Geo Metro may be “efficient” for a solo commuter, but it is hardly so for a family of five or six, despite its high fuel economy.

In evaluating efficiency the challenge is to see whether the overall costs economic and otherwise of a government sponsored technology are less than those of the technologies that would be achieved in the absence of government intervention. The scarcest resources of our society are managerial and entrepreneurial talent the creative energies needed to translate ideas into practical technologies. To divert those efforts to areas valued by political institutions, rather than by the market, is to weaken our ability to reach those results preferred by society.

The history of government sponsored energy R&D scarcely provides any confidence in Mr. Chupka's assertion. During the last major energy crisis in the United States, during the Carter era, the government embarked upon a massive synthetic fuels program. Although some eight billion dollars were spent, essentially no energy was produced. Vast monuments to government hubris and arrogance littered the energy development landscape but few social benefits resulted.

The challenge of knowing which technology path will actually prove useful to mankind is among the more daunting facing society. Only those who have their money at risk are likely to be able to tread that path consistently and successfully. There is no evidence that government sponsored R&D out-performs private R & D, and much evidence to the contrary.

The Administration's Proposal - Will It Ensure our Technological Lead?

Q3.

A3.

Mr. Chupka has testified that the President's plan “is designed to enhance our role as the world's number one economic power by ensuring our continued competitive edge in developing and marketing technologies in an increasingly global marketplace..." Do you think the President's plan does indeed "ensure" this?

Were Mr. Chupka's assertion correct, then one would expect Europe to lead the world. Europe has vastly higher energy prices, encouraging a reduced use of energy compared to other inputs in European production. Yet, the United States is fully competitive in all areas of the world economy, indeed, in most areas, the US is the leading competitor. The argument that politically directed research is a way of assuring competitiveness gains little support from the example of the formerly planned economies of Eastern Europe and the former Soviet Union. The recent turmoil in Asia should also be a warning against engaging in the greencoated industrial policy that the Clinton Administration seems to endorse. The more political entities seek to direct the marketplace through subsidies, tax policies, and other interventions, the less stable the system becomes.