Feople for the USA March 4, 1998 The Honorable David McIntosh House Government Reform and Oversight Subcommittee on National Economic Growth, Natural Resources and Regulatory Affairs B-377 Rayburn HOB Washington, DC 20515 Mr. Chairman, I am submitting written testimony for yourApril 23, 1998 subcommittee hearing on the costs of the Kyoto Protocol on behalf of the more than 25,000 members of People for the USA. People for the USA is a nonprofit, nonpartisan group with 125 chapters across the West and Midwest. We work with affiliated organizations from Alaska to Florida to Pennsylvania with combined memberships of over 200,000. Our members support common sense and economic balance in the environmental debate and advocate sound land management and natural resource production. We do not believe that the Senate should ratify the Protocol, nor should President Clinton sign it. We also hope that members of your committee and others in Congress will help ensure that the Protocol does not become a reality through executive fiat or backdoor implementation. Scientists have yet to agree on whether global warming exists and if so, what causes it. Central to the problem is the sheer complexity of nature and the relative feebleness of our tools to assess it. In addition to CO2, many other powerful forces -- from clouds to volcanic eruptions to tree growth -- determine the Earth's climate. Put into proper perspective, water vapor accounts for 99% of natural global warming. The remaining 1% stems from CO, and other gases, which are themselves mainly products of nature, not man. CO, accounts for only 1% of the greenhouse effect, and human-made CO2 accounts for only 4% of that 1%. This works out to the human impact on the greenhouse effect being roughly 0.04% of a total annual effect. The other 99.96% is caused by nature. Economically rational policy options have little support. And until the most cost-effective options to reduce greenhouse gases are identified, policy makers are often operating in the dark. One of the few certainties about global warming is that the costs of severely curbing emissions of greenhouse gases now would be huge. The world relies on carbon-based fuels for most of its energy needs. An enforced switch to non-polluting alternatives would savagely cut people's living standards. The costs to the U.S. in terms of jobs, income and economic growth would be incurred without any demonstrable benefit, other than to the developing countries excluded by the Kyoto proposal. We encourage industry/government voluntary partnerships to continue and believe that industry is committed to actions that make economic and scientific sense. P.O. Box 4345, Pueblo, CO 81003 PH: (719)543-8421 FAX:(719)543-9473 e-mail:pfw@usa.net We appreciate any attempts by Congressional leaders to recognize the scientific uncertainties surrounding the popular vision of climate change, and ask members of Congress and the Clinton Administration to stop plans for draconian carbon dioxide reduction and short-term phaseouts of fossil fuels. The costs of the Kyoto Protocol are high -- too high for the average American, especially those in rural areas, who won't have the means to afford higher fuel bills or new, fuel-efficient or alternative energy vehicles for everyday transportation. This is a long-term issue, giving us much more time for more telling science and deciding what we really need to do. There's much more time to do research on how we can reduce emissions without paying a price that American families simply cannot afford. Please do not allow the fears promulgated by environmental extremists and others to outrun scientific knowledge on the subject. With a firmer scientific grip on the influences of climate, we may better afford to make a decision in the future. As future consumers reach voluntarily for the results of proven research, the cost of altering the world's economic structure should be much lower. THE KYOTO PROTOCOL: IS THE CLINTONGORE ADMINISTRATION SELLING AMERICANS? PART II OUT TUESDAY, MAY 19, 1998 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH, The subcommittee met, pursuant to notice, at 10:15 a.m., in room 2154, Rayburn House Office Building, Hon. David M. McIntosh (chairman of the subcommittee) presiding. Present: Representatives McIntosh, Sununu, Barr, Sessions, Tierney, and Kucinich. Staff present: Mildred Webber, staff director; Barbara Kahlow, professional staff member; Keith Ausbrook and Larisa Dobriansky, senior counsels; Andrew Wilder, clerk; Phil Barnett, minority chief counsel; Elizabeth Mundinger, minority counsel; and Alys Campaigne and Brian Cohen, minority professional staff members. Mr. MCINTOSH. The Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs will come to order. Today's hearing is the second in a series that the subcommittee is conducting on the potential impact of the Kyoto Protocol on American citizens, American businesses, the U.S. economy, and our energy system. I would like at the outset of the hearing, to ask unanimous consent that we adopt the rules that allow us to have a 30-minute block of questioning for each of the panels on the majority side and then a 30-minute on the minority side, and then move to the 5-minute rule. Without objection, we will adopt that as the proceeding for today. At our last hearing, we heard from citizens, elected officials from State and local governments, and economic experts who believe that this treaty, which the Clinton-Gore administration negotiated in December 1997, could potentially have very serious consequences for Americans. The Kyoto Protocol commits the United States to reducing greenhouse gas emissions 7 percent below 1990 levels within the timeframe 2008 to 2012. Now, by 2010, the United States is projected to be emitting 34 percent more carbon dioxide, the chief greenhouse gas, into the atmosphere, than it is now. Therefore, in real terms, this treaty mandates an unprecedented 41 percent reduction of fossil energy use from business as usual. This is the equivalent of having to elimi(507) 53-426 99-17 nate all current emissions from U.S. transportation sector, approximately 490 million metric tons, or from the utilities sector, about 500 million metric tons, or from industry, about 480 million metric tons. Moreover, while the treaty imposes onerous requirements on the United States and other industrialized countries, it exempts all developing nations from any new commitments, regardless of their economic development or the quantity of greenhouse gases they may emit. Huge emissions occur from countries like China, India, South Korea, Brazil and Mexico, which are excluded from this treaty. At our last hearing, WEFA, Inc., economist Mary Novak testified that our Kyoto target could not be met without significant increases in energy prices. She predicted that the Protocol would result in a loss in GDP of 3.2 percent, or $300 billion. In addition, the United States would lose 2.4 million jobs. Gasoline prices could rise 65 cents a gallon and industrial gas and electric prices would double. For family budget planning, this would translate into about $2,000 more per household for energy and other products. The mandatory reductions would also put the United States at a competitive disadvantage. With sharp increases in energy prices, six large U.S. industries-aluminum, cement, chemicals, oil, paper and steel-could suffer huge job cuts, concluded an analysis by the U.S. Department of Energy. At the same hearing, we also heard from several administration witnesses that the economic impacts of the Kyoto Protocol were likely to be modest. This testimony was based on earlier testimony given by our witness today, Dr. Janet Yellen, chairman of the Economic Council of Economic Advisors, to other congressional committees here on the Hill. As I understand it, according to Dr. Yellen, we can reduce the costs of meeting our Kyoto target significantly through purchasing emission reduction credits from other countries. Economists have noted that her estimates of cost savings assume that we can satisfy approximately 85 percent of our needs through full and unrestricted global trading with both developed and developing coun tries. However, under the treaty, developing countries cannot participate in any emissions trading because they do not have any emissions reductions obligations. Moreover, nothing in the Kyoto Protocol establishes how intercountry emissions trading would work, and the agreement places certain limits on the amount of reductions that can be achieved through trading. Let me point out that on May 17, 1998, leaders of the Group of Eight countries met, so this week the leaders of the Group of Eight, including President Clinton, issued a communique in which they agreed to, "undertake domestically the steps necessary to reduce significant greenhouse gas emissions," and confirmed that, consistent with the Kyoto Protocol's requirements, trading would be used only to supplement domestic actions. Thus, emissions trading will not save us from the real reductions that could prove disastrous for our economy. Our purpose today is to explore these assumptions and find out what would happen if we applied this recent communique in the economic analysis. Moreover, even if unrestricted global trading were feasible, purchasing 85 percent of our emissions reduction obligations overseas would result in an enormous transfer of wealth and jobs out of this country, specifically to countries such as the former Soviet Union, China, India, South Korea, Brazil and Mexico. Finally, I question the benefits that will result from the developing countries' use of the Clean Development Mechanism under the treaty. Through this mechanism, we'll transfer our dollars to developing countries like China and Mexico that do not have any emissions restrictions under the treaty, in order to finance projects that will, in theory, cut back on emissions. The problem is, these countries will gladly take our foreign aid, tear down the polluting factory or put on the scrubber and build another factory down the street that doesn't have the emissions controls, in order to be competitive in the world marketplace. Since they are not covered by a cap on emissions and there is no enforcement if there were a cap, no amount of U.S. aid will allow the treaty to work in its goal of reducing greenhouse emissions. Now, you might ask, how are we going to achieve these Kyoto targets within the designated time period? To reach those levels, President Clinton has submitted a budget request to Congress that would offer U.S. business incentives to spur the development and use of energy-saving and carbon-saving technologies. However, technological advances aren't likely to save the day because they take many, many years to develop. Even the administration has acknowledged this. The much-touted DOE Five National Laboratories Study states that technological breakthroughs, “will require a certain degree of luck to be achieved by 2010." A decade is just a blink of an eye in the energy world in the development of these new technologies. What all this means is that the real way in which Kyoto will be implemented is through extraordinary price increases for energy throughout our society. Dr. Yellen admits that the average fuel costs will increase about $100 per American family, even under her idealized scenario of purchasing 85 percent of our emissions through reductions in obligations overseas and improving the annual rate of energy efficiency. Dr. Yellen predicts an increase in fuel prices of about 5 to 9 percent, natural gas prices of 3 to 5 percent, gasoline prices of 3 to 4 percent, around 4 to 6 cents per gallon, and electricity prices of 3 to 4 percent in her testimony. Now, while many have serious doubts about the science of global warming and the net environmental benefits from the Kyoto Treaty, as it currently stands, are nil, the economic and social effects of implementing the treaty would be catastrophic. The American people must know about the real costs of Kyoto, the factories that would be closed, the jobs that would be lost, the small towns that would be boarded up, the pay cuts, the hidden taxes on everything from food to family vacations and, in short, the knife in the back of the American way. The administration has vociferously criticized the studies that have shown enormous costs in implementing this protocol. How |