Another example is the Decatur Foundry, in Decatur, Illinois, which produces iron castings for motor and pump components. Decatur has invested in new infrared heating equipment and computerized controls which enable it to significant cut energy use, reduce pollutant emission, increase output and productivity, and create a safer workplace. Annual sales revenue grew from about $6 million to $10 million after these investments were made with their employment level growing to 75 workers.

A final example is the Trigen Corporation, based in White Plains, New York, which owns and operates cogeneration facilities and district heating and cooling systems in 22 locations. For example, Trigen purchased the old district heating system in downtown St. Louis and is upgrading and expanding it. New customers served by the system include the Trans World Dome and the Morgan Street Brewery. By generating electricity and using power plant waste heat for supplying heating and cooling to building, Trigen greatly reduces fuel use and pollutant emissions while helping to revive urban core areas. The company has grown rapidly in the past decade; 760 employees today, compared to 200 in 1992.

These are not isolated examples. There are thousands of small and medium-sized businesses that are manufacturing, selling, or using energy-efficiency and renewable energy technologies. In doing so are profiting from reducing emissions.

The lesson from these examples is that by encouraging technological innovation, we can address the threat powered by global climate change while growing the economy and strengthening our nation's small businesses.

Finally, my last point about the importance of the Federal programs. Small businesses are usually not able to carry out research and development on their own. They often lack technical expertise or dedicated energy and environmental managers. They often do not have information on, or access to, the latest energy efficiency and pollution prevention technologies. Nor are they well equipped to access international markets.

A variety of Federal Programs are helping small businesses to overcome these barriers and develop and implement state-of-the-art energy efficiency and renewable energy technologies. These programs, described in my written statement, include the EPA Energy Star and Green Lights programs, the Department of Energy Industrial Assessment Centers and Building America programs, and the CORECT and COEECT export promotion programs.

President Clinton has proposed expanding these and similar programs in his Fiscal Year 1999 budget request. I urge friends of small business in the Congress to support this funding, independent of the opinions concerning the Kyoto Protocol. Put simply, these programs are good for business. If these technology oriented programs are a success, we won't need to adopt onerous new taxes or burdensome regulations in order to meet our nation's environmental goals, whether it be the goals of the Clean Air Act today or the Kyoto Protocol tomorrow.

In conclusion, implementing the Kyoto Protocol need not be a sellout of U.S. businesses and consumers, Mr. Chairman, if we're smart about how we do it, and how we reduce our emissions.

Thank you considering these views. I'll be happy to take any questions you have.

[Mr. Geller's statement may be found in the appendix.]

Chairman TALENT. Thank you, Mr. Geller.

Our final witness is Mr. Marlo Lewis Jr., the Vice President for policy and coalitions, the Competitive Enterprise Institute in Washington, DC.

STATEMENT OF MARLO LEWIS JR., VICE PRESIDENT FOR POLICY AND COALITIONS, COMPETITIVE ENTERPRISE INSTITUTE, WASHINGTON, DC

Mr. LEWIS. Mr. Chairman, thank you very much for the opportunity to testify on behalf of the Competitive Enterprise Institute before this Committee today. Former EPA Administrator William Riley once quipped that his agency had a ready, fire, aim approach to public policy. In the global warming debate, the modus operandi of the Clinton Administration, the United Nations, and the environmental establishment has also been, act first, think later.

Not only have the pro-treaty forces campaigned for massive energy use restrictions in the absence real-world evidence that global warming is even a problem, and not only have they pushed an ambitious agenda without first bothering to find out what it might cost, they have consistently denied, ignored, or downplayed the many and serious risks of global warming policy. Before rushing off to save the planet from global warming, policy markers should examine those neglected risks and I commend this Committee for doing just that today in examining the impact of the Kyoto Protocol on small business.

What are the risks of global-warming policy? They include, among others, the risk that energy rationing will devastate employment in major U.S. industries, the risk that rising consumer energy prices will depress the living standards of American families, the risk that nonelected, unaccountable bureaucrats will gain greater control over our lives and businesses, and the risk that public attention, political will, and material resources will be diverted from more serious threats to health and safety.

Pro-treaty forces act as if such risks did not exist. They pretend that the only risks worth worrying about are those arising from economic activity. Inconsistently and irresponsibly they demand assurances of no harm, only with respect to actions that government might regulate, never with respect to government regulation itself. But government intervention frequently boomerangs, endangering health and safety. I'll mention just one example because of its direct relevance to the global warming debate.

Federal fuel economy mandates have forced automakers to produce smaller, lighter, less crash-resistant cars. Whether such mandates actually save oil is a matter of debate. What is clear is that the CAFE program is a killer responsible for 2,000–4,000 traffic fatalities a year, according to a peer-reviewed Harvard-Brookings study. More importantly, overregulation can kill just by squandering wealth. There is, after all, a rather obvious connection between livelihoods, living standards, and lives. Jobs and income are the chief safety nets for most people. For individuals, and even more for communities, wealthier is healthier, richer is safer.

The Kyoto Protocol would require America to reduce its emissions of greenhouse gases, chiefly, carbon dioxide from fossil fuel combustion 31 percent below the level projected for the year 2010. As the Business Roundtable's GAP analysis points out, that means cutting about 552 million metric tons of CO2 per year, which is the equivalent of eliminating all current emissions from either the transportation sector, or the utility sector, or industry. The Administration says that we can meet that goal at the modest cost of $7 billion-$12 billion per year, or about $70 to $110 per family in higher energy prices. How is that possible?

Under the Administration scenario, the United States won't actually have to wring 552 million metric tons of carbon out of our economy; through emissions trading, joint implementation and other so-called flexible market mechanisms, America will be able to pay others to reduce their emissions for a fraction of what we'd have to pay to reduce our own.

Federal energy R&D Programs and subsidies, we are assured, will also lower compliance costs. The Administration's recipe for low-cost Kyoto compliance calls to mind the old Depression-era jest: If we had some ham, we could make ham and eggs-if we had eggs.

There are strong reasons to doubt whether any of the ingredients presupposed in the Administration's cost estimates will ever materialize. Consider the proposal for additional R&D spending for wind and solar power. Taxpayers and rate payers have already spent billions subsidizing these technologies for over two decades, yet electric power from such sources remains twice as expensive as electricity from natural gas-fired plants and three times as expensive as surplus electric power.

Emissions trading has the potential to bring down compliance costs, but by how much is anybody's guess. The larger the market, the greater the number of countries participating, the more likely U.S. firms will be able to purchase inexpensive emissions permits abroad, rather than make expensive emissions reductions at home. But only nations that accept binding emissions targets are eligible to participate in trading and the Kyoto Protocol excludes developing countries, the richest potential source of inexpensive credits from binding commitments. Does anyone really believe that a global emissions trading system, including key developing countries, will be up and running by 2008 to 2012. I don't think so.

Mr. Chairman, the Administration likes to compare the Kyoto Protocol to an insurance policy. Whether or not an insurance policymakes sense, depends in part on the size of the premiums and the extent of the coverage. The Administration's spokesmen assure us the premium payments will be modest, but, as we've seen, their estimates are based on unrealistic assumptions. Also, an insurance policy worthy of the name should help make the insured whole after some unfortunate event has struck. But Kyoto can do nothing of the kind. To the contrary. Whatever resources we apply to prevent climate change, we cannot use to adapt to climate change if and when it occurs. Kyoto is all premium, no coverage. This last point leads to a question that should be at the heart of the global warming debate. Which type of social insurance policy is likely to deliver the most protection? Should we try to stop global

change by further politicizing economic and technological development, or should we try to increase mankind's ability to adapt to change by reducing political barriers to enterprise, invention, and innovation?

Making societies freer and wealthier is inherently desirable and would also improve our ability to survive and recover from whatever shocks and surprises the future may hold.

The Kyoto Protocol would restrict our freedom and mobilize tremendous resources to fend off a threat that may prove to be nonexistent or trivial, compared to the age-old scourges of poverty, hunger, and disease.

America does not need, and cannot afford, that kind of insurance. Thank you. I would be happy to take any questions.

[Mr. Lewis' statement may be found in the appendix.] Chairman TALENT. I appreciate your testimony, Mr. Lewis.

I'll recognize the ranking member, Ms. Velazquez, for any questions she may have.

Ms. VELAZQUEZ. Mr. Keating, would you please tell us how the Administration's analysis show the Kyoto Protocol to be a "killer of businesses and jobs."

Mr. KEATING. How whose? I'm sorry. I didn't

Ms. VELAZQUEZ. The Administration's analysis show the Kyoto Protocol to be, and I quote, killer of businesses and jobs. You stated that in your testimony.

Mr. KEATING. Right, my testimony was that practically all of the analysis shows that it is a killer of businesses and jobs. The latest installment from the Clinton Administration is that it's not, as we heard earlier from Dr. Yellen, but as I noted in my written testimony, several other studies that have come out of the Clinton Administration previously, show losses in real GOP. At least three other studies that the Clinton Administration has had done show losses. Now suddenly, voila!, by magic, we have a study that claims very modest costs and I think, as some of the other individuals that testified, the assumptions under that economic model are just not realistic at all, I mean especially when you stack that against so many other economic studies of the impact of the Kyoto Protocol as I outlined in my written testimony.

Ms. VELAZQUEZ. I haven't seen those reports. Based on the testimony that Dr. Yellen presented this morning, she never showed those the Administration agreement to be a killer. Let me just say to you, listen to me, that that type of rhetoric doesn't help, you know at this time-not to bring irrational debate on this issue, but rather to make that issue an emotional issue.

Mr. KEATING. It's meant to clarify what the impact is, or emphasize what the impact of the Kyoto Protocol is going to be. Again, I welcome you looking through all the studies we quote and cite in my written testimony and tell me if it's not a killer of jobs. Ms. VELAZQUEZ. I will. Mr. Steinbecker

Mr. STEINBECKER. Yes.

Ms. VELAZQUEZ [continuing]. Historically, the United States has achieved major energy efficiency gains during the last decade or so. A Rocky Mountain Institute study showed an average gain of 1 point percent annually since 1973. Do you have any reason to believe that this will not continue? Do you know whether the studies

show-you relied on in your testimony included an assumption about continued efficiencies. If so, what it was.

Mr. STEINBECKER. I know most directly as to what my testimony is regarding H Joseph Light and Power Company. At our company, we simply took our long-range forecast, which goes through the year 2007, we do a 10-year forecast each year-we update it—and we factored in the impact of the Kyoto Protocol as it would impact us under the way it exists today and that resulted in a 41 percent increase in prices for our customers. Now did we factor in more efficiencies and things like that? I guess indirectly, you can say we did, just by going through past experience and how we do forecasts. We factored in what our load was going to be and those sorts of things we made no direct input of assuming X percent or whatever it was of more efficiencies.

Ms. VELAZQUEZ. Do you know why these studies assume that we will not make gains in the future comparable to those that we have made in the past?

Mr. STEINBECKER. I'm not sure they don't assume that. I think what we're seeing here and I know one thing many people are taking some comfort in is the very positive impact of the trading program that did do a wonderful job with the SO2 requirements under the Clean Air Act amendments, but I think what we need to keep in mind with that, is that that program was successful largely because the delivered price of low-sulphur coal was much lower than the high-sulphur coal and so that lead to a great deal of over-compliance.

So that trading program was very successful. What we're seeing here in the studies, is what we put into our forecast, there is no lower-cost fuel or technology for CO2 unlike the SO2 solution. So, what are you left with? Again, with no detail at all on emissions trading and all the complexities related to that, we simply assumed our only alternative was to go from what we are today, the lowest cost utility in the State of Missouri, because we are very dependent on a low-cost, low-sulphur coal, to a company that becomes much more dependent on a much higher priced natural gas. That results in, literally a 150 percent increase in our energy supply costs.

Ms. VELAZQUEZ. Mr. Geller, you stress the importance of an innovation-based strategy in addressing concerns like global warming and reduction of greenhouse gas emissions. I am sure that other Members of this Committee join me in saying that this is something which we'll strongly support, but the concern has to be that it seems that the Kyoto targets are mandatory. How can reliance on a voluntary approach be sufficient? What if those efforts fall short and we fail to meet our international obligations? What recommendations do you have for Congress, first, to help ensure that such innovation-based approaches do not fail; and second, to screen those other approaches, perhaps to take effect only if certain milestones are not reached, which will supplement the innovationbased approach.

Mr. GELLER. I certainly feel if this treaty entered into effect and we had a national requirement as part of the international treaty, that it would make sense to have something like an emissions cap and trade system in effect. I suggest emphasizing the promotion of advanced technology, stimulating stimulating efficiency improvements,