commitments from developing nations as we move forward with further negotiations.

Dr. YELLEN. I cannot give you a precise definition of what that means, but certainly we are engaged through bilateral, multilateral means of engaging with developing countries and seeking to involve them more in reducing emissions. We've gotten a start in the protocol. I think you can consider it a down payment. It's a very meaningful down payment, their inclusion in the clean development mechanism, but beyond that the President has clearly indicated that more is needed before he would feel that he has achieved meaningful developing country participation.

Certainly if key countries could be convinced to take on targets and to participate in a trading system, I believe they would find it quite beneficial, although we have an education and selling job to do there because I don't think they all believe that, but we do. That certainly, to my mind, would qualify, as meaningful participation.

Ms. VELAZQUEZ. Dr. Yellen, do you understand why critics are concerned that this race needs to be defined more precise?

Dr. YELLEN. Yes, because, as I've indicated, developing country participation is important and, without that, we will not ultimately have a solution to this problem, so there is no question that this is something that is very important. That's certainly agreed.

Ms. VELAZQUEZ. In implementation of the protocol, are there any opportunities for small businesses like, for example, American technologies?

Dr. YELLEN. There certainly will be opportunities for small businesses that are created by this protocol. For example, if you just think about the clean development mechanism and how it might operate, this is a mechanism that allows any business, large or small, to look around the entire globe for opportunities to develop and use technology worldwide to reduce emissions in an efficient manner. By so doing, they can earn credits which can then be sold in a domestic market for emissions permits. As we've met with businesses, both large and small, we've seen a huge amount of excitement. Our firms believe, rightly, that they are at the forefront of developing new technologies that they can employ all around the world, particularly in countries that use energy very inefficiently. At very low expense they could go to China or to India or to other countries and put in place devices that would economize on energy use and thereby obtain credits which are essentially money in the bank. These are profitable opportunities and they are excited about it, and rightly so.

Ms. VELAZQUEZ. I don't have any more questions, Mr. Chairman. Chairman TALENT. I recognize Mrs. Emerson.

Mrs. EMERSON. Mr. Chairman, thank you very much for having these meetings. Dr. Yellen, thanks for being here and I'm not being totally facetious when I say I think you're selling yourself short as far being an expert, considering the fact that so many of the experts who signed the IPCC agreement were acupuncturists and psychologists and OB-GYN's, and so, if they were considered scientists and experts on climate change, I think that you and all of us also could be.

The 2,600 scientists who did sign the protocol were not all climatologists or meteorologists, but rather composed of lots of different areas-landscape architecture, for example. So I was just giving you a compliment actually because, I mean, your expertise would be far greater than some of those who signed the document. Let me just followup a little with Congresswoman Velazquez's question about meaningful participation because I was concerned about that, and I realize that meaningful is a real hard word to define, but I was fortunate to be part of the congressional delegation to observe the Kyoto conference and we, in our delegation, had a very lengthy meeting with the Chinese delegation who, after, I'd say 30 attempts at asking them if they would ever voluntarily participate in reduced greenhouse gas emissions, said "no."

Not even when Čongressman Dingle asked them, "Well, in the year 2050 would you voluntarily comply?" and they said, "No, we will not do that because they will impact our economic development.”

Consequently, I guess I asked if China, which is purported to have in 5 years the greatest amount of greenhouse gas emissions, has said many many times that they would not, in fact, participate in any kind of an agreement, then how, if that is the largest emitter of greenhouse gas emissions, could this possibly be meaningful participation. I mean, how can we achieve meaningful participation without the Chinese?

Dr. YELLEN. I would agree with you China is an important—and will be growing in importance as an emitter, and it is clearly important to engage China in dialog and I believe that that is something that we can do. I was recently to China myself and encountered a somewhat more open attitude about discussing participation. Certainly not an agreement to participate, but a willingness to engage in dialog about it. We have an education job to do here. Most countries, I believe, including China, have felt that for them to participate in this agreement will entail a sacrifice in growth. They feel that they're poor, their standard of living doesn't match ours, and for them to make substantial sacrifices in terms of their growth or development prospects in order to solve this problem is something that is unfair for richer, developed countries to ask.

Now, I think that what they don't see, and this is why we need to have dialog, is that there are opportunities here for win-wins, in that their participation can be not only beneficial to us and beneficial to the world in terms of solving a common problem, but also beneficial to them. Just to give you an example, if a country like China or other developing countries, were to take on binding targets then beyond participating in the clean development mechanism which they can already do and which will bring benefits, they would be enabled to trade in an emission permit system and, as we know from all of our experience with international trade, trade is a win-win. It's something that-it's not a I-win-you-lose if we trade, it's I win, you win. They can win, they can come out ahead. Why can they come out ahead? They can come out ahead because they use energy very inefficiently and if they take the steps, which are cheap, to economize on their energy use to produce fewer greenhouse gases, then selling emission permits in a world market will become, in effect, an export industry for them and it's an export in

dustry in which they have a comparative advantage because they produce energy inefficiently.

On top of that, Beijing and other major cities in China have dreadful local air pollution problems, so they have a great incentive to get the side benefits of that in terms of a cleaner environment for themselves. So, I grant you we've got an education job to do, but I believe strongly that this is something that could be in China's interest to participate in and that's what we need to work on. Mrs. EMERSON. That may well be, but the fact is at this point in time, there's a great reluctance I guess you could say there's a great reluctance on their part to have that dialog.

Let me just mention a couple of other things, but then I've got another question. First of all, when you refer to sinks, talk to us a little bit more about that because to the best of my knowledge, when we were in Kyoto, the idea of allowing sinks to be used as an offset, if you will, was perhaps agreed upon but the extent to which sinks were allowed, what defined a sink, all of those questions remain. For example, forest management activities are not included in the protocol and that would say to me, I mean, a forest is a huge sink, or technically should be, but those things weren't included in the protocol, so how do you, I mean, how do we get a more clearly defined definition of that or is that something we have to wait for Buenos Aires for?

Dr. YELLEN. This is one of the things that will be taken up and discussed in Buenos Aires. The role of sinks needs to be clarified, but I believe it is Article 3.3 of the Kyoto agreement clearly states that verifiable sink activity, including that resulting from aforestation and reforestation, will be includable as counting toward emissions credits. But indeed there are questions with respect to sinks that need to be satisfied and you're quite right about that. Mrs. EMERSON. One other thing, and then I do want this as a question. The compliance mechanism, and we talked about-and Mr. Talent asked a question about that. To the best of my knowledge, there was no compliance mechanism worked out in the protocol, as well, and we have had many different ideas floating around about what that compliance mechanism would be, the most of which I've heard it would be, a small international body, with the United States-you know made up of several countries, with the United States having one seat at the table, if you will, and therefore that body would be charged with monitoring compliance in each of the signatory's domains, if you will.

Dr. YELLEN. I believe that this is also a subject which is under discussion in which negotiations will take place and it's a, it's an important issue and that's something-when I say, I think all of us have said, this is a work in progress. These details have not been set.

Mrs. EMERSON. That's a pretty scary process, actually, if you stop and think about the fact if there are 15, even 10 countries, who are part of the compliance mechanism and we are one-ninth, one-tenth of that, then that perhaps allows many other countries to play with our sovereignty, if you will, and it could have very disastrous effect. In other words, if we had an international body telling agriculture, OK, you can't harvest this rice crop, or you can't grow these cattle, or

Dr. YELLEN. Nothing of that sort, no such possibility is included in the protocol, and I believe that Secretary Eisenstadt has already spoken to this issue, that there is no way in which compliance would involve inspectors swooping down on people's farms without their permission to inspect what's happen

Mrs. EMERSON. Then how do we achieve compliance

Chairman TALENT. If the gentlewoman will yield and I don't like to foreclose. We don't often have a witness of this distinction, and I've been kind of lax in terms of the lights, but if you could wrap it up, we have other people who want to ask questions.

Mrs. EMERSON. Excuse me, Mr. Chairman. All right. Let me just ask you one further question because I want to pursue that. That's a subject that is a little bit scary for all of us and it's not a political question at all but one that we need to find the answer to.

I think Secretary Eisenstadt spoke before the Senate Foreign Relations Committee last week, or recently, and said that no steps would be taken to implement the Kyoto Protocol without Senate ratification. Now, my colleagues, Ron Klink of Pennsylvania and Joe Knollenberg of Michigan, and I introduced legislation 2 weeks that basically says no funds will be spent to implement any part of the Kyoto Protocol without Senate ratification, so can I take it that if Secretary Eisenstadt did in fact say that in a hearing, that the Administration may well be supportive of legislation that we introduced that said we won't spend any money implementing this protocol without Senate ratification?

Dr. YELLEN. I'm not going to comment on what the Administration's position will be on a piece of, you know a particular pieceMrs. EMERSON. Right.

Dr. YELLEN [continuing]. Of legislation that has not yet been reviewed and analyzed, but the Administration has said that it fully respects the role of the Senate and will not take any steps to make the Kyoto agreement mandatory without the advice and consent of the Senate. However, there are some existing United States obligations under the Framework Convention on Climate Change, of which the United States is a party. As you know, the Administration has included in its budget a climate change initiative that would help to reduce greenhouse gases, but also makes very good sense in its own right as a program to enhance energy efficiency. Of course, that is already fully clear from the budget that's been submitted.

Mrs. EMERSON. I'm not going to ask any more questions. I've taken more of my time. Sorry, Mr. Chairman.

Chairman TALENT. That's all right. They were very good questions.

Mrs. EMERSON. I had another 10 to go but-
Chairman TALENT. Mr. Pascrell.

Mr. PASCRELL. They are good questions, I want you to know. Mr. Chairman, thank you very much. Unlike the chairman, I can accept the science and not accept the policy. I think that, for the most part, what I've read and what I've studied, having worked within our borders on such subjects, the science is pretty strong as to what happens when we capture Europe's gases and what's the impact, but what you brought up the subject of trade, a lot of lights went off in my head.

Most of our trade policies are not reciprocal at all. It is reciprocity that I am mostly concerned about. So that when we begin to establish policy based on what we think is good science, I would hope that that policy reflects a fairness. To me a policy does not reflect a fairness if what we have to do, as a nation, in terms of our compliance, establishes very specific targets while it does not establish specific targets for those quote unquote developing countries. I don't believe that is reciprocity at all. Nor do I think that those developing countries should have the same targets as those countries that we would agree are developed. I would take that into consideration.

As far as I am concerned, there cannot be a fair policy without targets in developing nations. Right now, none are being suggested and I would not support the policy because of that.

If you can't answer the Chairman's question as to what the impact of it's going to have on a gallon of gasoline, not taking into consideration the incentives or sweeteners, or whatever you want to call them, can you answer this question: How much would it cost in terms of the impact on the gallon of gasoline with the incentives?

Dr. YELLEN. As I've indicated in my testimony, our analysis, the Administration analysis, suggests that the cost will be modest under the conditions that constitute the Administration's policy, many elements of which were already in the agreement and, as a concrete example, we've given some results from one specific economic model, the Second Generation Model, and some analysis that takes account of some of the flexibility measures but doesn't even fully include the flexibility measures, for example, it doesn't include the use of sinks to meet this target, it doesn't include any of the climate change initiatives or voluntary work with industry or Federal Government energy efficiency programs that are part of the President's policy.

However, in the testimony, the numbers that we come up in those simulation runs suggest the policy would raise the price of a gallon of gas 4 to 6 cents. So that's a concrete illustration of what such a policy could mean under these cconditions.

Mr. PASCRELL. That, to me, is a practical example to the Chair of an economic impact, of what happens if we put this policy into effect with the incentives that you've already discussed. Let me just change gears for a second and ask you what is the impact environmentally if we do not put this policy into effect?

Dr. YELLEN. If we do nothing whatsoever to address this issue, then I think we're looking at-just within the next hundred years a variety of different kinds of damages that for the United States could result in a loss of 1 percent of GDP or more. Over longer time periods, given that a good share of the increase over the next hundred years is almost preordained at this point, we could be looking at much larger losses. When you look at the variety of different kinds of harm, ranging from loss of our coastal areas, which surely would affect States like Florida, and Louisiana, large loss in coasts, impact on ecosystems, on-it's estimated that in the United States air-conditioning bills would rise more than heating bills would fall. Impacts on agriculture, impacts on species, on fresh water-that's how attempting, as hard as it is, to put a