David A. Smith Director, Public Policy Department AFL-CIO Since 1994, Mr. Smith has been a senior fellow at the Twentieth Century Fund and an adjunct professor at the Graduate School of Management and Public Policy at the New School for Social Research. Before joining the AFL-CIO, Mr. Smith served as commissioner of Business Development and as senior deputy budget director for the City of New York. He spent most of the 1980's in Washington as a aide to Senator Edward M. Kennedy and as a senior economist at the Congressional Joint Economic Committee. In 1995 and 1996, Mr. Smith served as Consultant to the Office of the Secretary of the U.S. Department of Labor. Chairman SENSENBRENNER. Thank you, Mr. Smith. The next witness is Joseph Goffman, Senior Attorney of the Environmental Defense Fund. Mr. Goffman? STATEMENT OF MR. JOSEPH GOFFMAN, SENIOR ATTORNEY, ENVIRONMENTAL DEFENSE FUND, WASHINGTON, DC Mr. GOFFMAN. Thank you very much, Mr. Chairman. The Environmental Defense Fund certainly appreciates the opportunity to participate in the first post-Kyoto hearing and we really do appreciate the privilege of the invitation. As you said, my name is Joseph Goffman. I am a senior attorney with the Environmental Defense Fund. As part of my written testimony, I submitted three documents that the Environmental Defense Fund [EDF] developed prior to Kyoto and since Kyoto. And together with our written testimony, we think these documents lay the foundation for the case that EDF would like to make here today. [These documents are contained in Appendix 2.] It is EDF's view that through the use of the market mechanism of emissions trading, as incorporated more or less in the current Kyoto Protocol text, the greenhouse gas emissions reductions objectives of the Protocol can be met ultimately in an affordable fashion. The importance of emissions trading and the emissions trading mechanisms in the Protocol was explained just last week by Senator Robert C. Byrd of West Virginia in a Floor speech on this same Kyoto Protocol. And I'm quoting Senator Byrd here: "The purpose of these mechanisms is to allow advanced nations and their industries to satisfy their requirement for emissions limitations by sharing, buying, and selling credits internationally, and to fulfill part of their obligations by assisting developing nations in developing cleaner technologies and conservation. Emissions trading will allow the industrialized nations to buy and sell credits that can be created by the most cost-effective reduction of greenhouse gasses.' The importance of the regime that Senator Byrd describes, is that it will tap the creative energies of many, many differently situated nations, businesses, and individuals, and entice them to engage in an unending search for ever better ways to reduce emissions at lower and lower cost. In short, a greenhouse gas emissions trading market first and foremost will do what markets do best, continually drive cost down. In other words, there may or may not be a magic bullet or a set of magic bullets out there to address the very real concerns that Mr. Smith just raised. On the other hand, the capacity of markets to find a wide variety of solutions, and to do so at ever increasing or at ever decreasing costs, is really what the Kyoto Protocol, and the U.S. position leading up to the Protocol, delivered here. As discussed more fully in our written testimony and in the accompanying documents, the most striking result of the U.S. acid rain emissions trading program, which was adopted in the 1990 amendments to the Clean Air Act, is its compliance costs which are dramatically lower than predicted. Our own acid rain program probably provides the most extensive evidence to date as to how emissions trading markets can be expected to perform over time. What's happening so far under the U.S. acid rain emissions trading program, is that costs are being reduced by 20 to 45 percent below predicted levels. And remember, at the time those predictions were made, analysts were already taking account of the cost saving benefits of emissions trading. Although EDF has not done its own analysis of the likely costs of compliance with the Kyoto obligations, we believe that looking to experience such as that provided by the cost saving dynamic of the acid rain emissions trading program, provides the most compelling lesson of all-that markets are inherently powerful in lowering cost and stimulating innovation on a virtually continuous and unending basis. Accordingly, in looking at the challenges presented by the Kyoto Protocol specifically and by the climate issue generally, EDF would ask the Committee, and Congress as a whole, and the Administration, to focus on the potential interaction of new market-based proposals and the immediate economic and environmental challenge that the United States faces if it is to meet its responsibilities under the Protocol and to meet the larger environmental objectives. In our testimony, we laid out what we call an early reduction credit approach. And we laid it out for the benefit of this Committee, not only because it represents an important policy initiative in and of itself, but it also is a perfect illustration of how the use of emissions trading will enable the United States to answer "yes" to the question: Can we afford to meet the obligations of the Protocol in an affordable fashion? The proposal laid out in our written testimony for an early reduction credit program is a strictly voluntary proposal. It would allow businesses, both large and small, who choose to, to start taking steps now to lower their costs in the future. These two aspects: action now, and voluntary action now, are critical. It's quite likely that the political controversy surrounding the climate issue could take years to resolve, and from this perspective the resolution is uncertain. Under the early reduction credit approach, that controversy can play itself out without at the same time playing chicken with the health of the U.S. economy and that of individual busi nesses. I would ask, Mr. Chairman, if you would indulge me in putting up an overhead. Chairman SENSENBRENNER. Certainly. Your 5 minutes are up, sir. So if you can wrap it up in a minute or two, then we'll go on to the last two witnesses. Mr. GOFFMAN. Okay. Then perhaps I'll skip the overhead and just try to summarize. Chairman SENSENBRENNER. Thank you. Mr. GOFFMAN. The proposal that we have included in our testimony essentially would use market forces to give businesses an economic reason to reduce their greenhouse gas emissions before they have to, but would at the same time give those businesses an opportunity to earn emissions reductions credits, so that by the time any mandatory budget period began in 2008, businesses participating in the program would already have on-hand inexpensive compliance options, so that the cost to those businesses, and the In the course of earning those credits, individual businesses and the economy generally would start the process now of uncovering the cost-saving innovations ultimately available for meeting the compliance obligations of the treaty. Thank you very much. [The prepared statement and attachments of Mr. Goffman follow:] |