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tion when we had this tremendous increase in oil prices was really brutal. So if we're wrong about this thing, we're talking about some really brutal consequences.

Chairman TALENT. But I don't think some people would view those consequences as brutal. Mr. Steinbecker

Mr. DAHLBERG. Unless your pension was tied to it.
Chairman TALENT. Yes, exactly.

Mr. STEINBECKER. I just wanted to comment on the comment about Dr. Yellen and her observation regarding deregulation of the electric utility industry. I did not interpret her to say that, it that would force a reduction of CO2. What I was interpreting her to say is that they have also calculated, that consumers will save $20.8 billion due to deregulation so, being the good government that they are, they found a way for us to spend that money. They are not about to let us keep it and now we are going to spend that money on Kyoto, so kind of a net-net logic, that makes them feel better.

Chairman TALENT. Treat that as if that means the costs that they impose are somehow less.

Mr. STEINBECKER. Yes, exactly.

Chairman TALENT. It's a classic. Look, I don't understand economics, and I'm not a businessperson the way you guys are. I'm just an old politician, and I know how politicians think. Look for gas tax increases when gas prices are down, not when they are high because the consumers don't realize it and the voters don't realize it. As far as the international trading scheme goes, again, I know what these countries are going to do. I hope they don't agree to these things because what they will do is they will agree with them, anticipating that they can have the best of both worlds. They will sell us these permits at as high a price as they can possibly get, which, by the way, they will try to price just below the cost of compliance without the permits. That's how the market works. They will sell them as high a price as they can possibly get, sucking wealth out of our country to these countries, and then, they will cheat back home. Look at the system of regulation we have to do to regulate this SO2 trading thing, right? Even if these countries wanted to regulate what was happening in Russia or China, they couldn't possibly do it and they won't regulate it, so the people will be opening up new businesses all the time in Russia and China producing all these greenhouse gases at the same time as they are exacting a price from our businesses so they can try and do the same thing.

This is the result of what intellectuals in Washington have deliberated upon and produced. Maybe that's a good way to end this.

I'll leave the record open for 10 days because members may wish to make additional written questions to you all. Thank you all. This has been a lot of fun, although the problem is very serious and we are going to continue looking

at it. I thank you. [Whereupon, at 2:15 p.m., the Committee adjourned subject to the call of the Chair.)


Statement of Chairman Ja M. T ent

Committee on Small Business
Kyoto Protocol: The Undermining of American Prosperity?

June 4, 1998

Good Morning. Today, the Committee on Small Business will be

examining the impact of the Kyoto Protocol on the backbone of the

U.S. economy- Small Businesses. Small businesses account

for 99.7% of the nation's employers, employ 53% of the private work

force, contribute 47% of all sales in the country, and are responsible for 50%

of the private gross domestic product; and any treaty that hurts the small

business sector poses a threat to the jobs, goods and services available to the

American people. The Kyoto Protocol, often referred to as the climate

change agreement, was agreed to in negotiations which were completed on

December 11, 1997. The Protocol commits the United States to a target of

reducing greenhouse gasses”, mainly carbon dioxide, by 7% below 1990

levels during a "commitment period” between the years 2008-2012.

Moreover, while the protocol mandates that America reduce its carbon

dioxide emission reductions to 1979 levels by 2012, it exempts huge

emissions producers such as China, India, South Korea, Brazil, and Mexico,

as well as other developing nations. As a result, according to the U.S.

Energy Information Agency, the developing countries will surpass the

industrialized countries in carbon output by 2010 under this protocol. All of

this is important because, in plain terms, greenhouse gases are emitted by the

production and use of energy, so the Kyoto Protocol is a substantial,

comprehensive, and unprecedented restriction on the use of energy by the

American economy, both in absolute terms and relative to the rest of the

world. It is vital that we understand the impact of this kind of new order on

the real lives of real people in the communities of America. The Committee

will hear testimony from a number of different witnesses on this issue.

As an example, according to the Wharton Economic Forecasting

Associates (WEFA), ratification of Kyoto would mean that:

• Residual fuel oil prices for industrial facilities would increase by roughly


• Natural gas prices for industry would increase by 90%

• the United States GDP would decline by more than 2.5% per year

• a million good, high-paying jobs would be lost and the U.S. trade deficit

would jump sharply.

What would the protocol mean to the small business community across the

country? Small energy intensive industries such as bakeries, dry cleaners,

auto repair shops, small manufacturers, and, ironically, recycling businesses

would be hit immediately upon ratification of the Kyoto Protocol. Many

other small business that sell to large industries such as steel, aluminum,

chemical manufacturers, paper, and cement would find that they have packed

their bags and moved to countries with no such emission

restrictions such as Mexico. Moreover, small exporting companies would be

forced to raise their prices due to increased energy prices and would not be

able to compete with companies in developing countries such as China and

Mexico. As a result, U.S. exports would become relatively more expensive

on the world market and the trade deficit would skyrocket. Ultimately under

this protocol, small businesses would be forced to pay higher utility bills, pay

higher gas taxes, operate much smaller less useful vehicles and, unfortunately

for some small entrepreneurs, be run out of business.

These kinds of concerns are the reason I have called the Kyoto

agreement the selling out of American jobs, American enterprise, and

American prosperity.

We have two panels of witnesses who have consented to agree to appear before the Committee today, including the Chair of the Council of Economic Advisers, Doctor Janet Yellen. Before we turn to those witnesses, I will recognize the distinguished ranking member for any statement she may wish to make.

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