Digital energy management control systems (EMCS) can continuously gather data about what is taking place in a building and how its equipment is operating, feeding it into a central computer used to control building systems and optimize energy performance. Energy experts at Texas A&M have shown in two dozen Texas buildings that using such an approach can cut energy use 25 percent with an 18-month payback in buildings that have already received on upgrade with the latest energy-saving equipment.4

Increasingly, such technologies will operate over the Internet itself. We know of one major energy service company pursuing the installation of digital EMCS's in the buildings they manage, so they can operate them over the Internet very efficiently and at low cost. A similar arrangement is already operating in Singapore.

Many utilities have begun exploring Internet-based home energy management systems, which would give individual homeowners more control and feedback over their home energy use, or the ability to have an outside energy company or expert software system optimize their energy consumption. Early trials of remote controlled home energy management systems suggest the savings in energy bills could be as high as 10 percent.

Spreading the Gospel: Rousing Corporate America to the Energy Challenge As Fortune magazine noted in 1998, “only a third of U.S. manufacturers are seriously scrutinizing energy usage, where savings in 5 areas can move billions to the bottom line."5 Thanks to low energy prices and the benefits of energy efficiency investments in the 1970s, energy in mid-1980s became a much lower fraction of the cost of doing business. Naturally, companies reduced investments in energy-saving technologies. During the downsizings of the early 1990s, corporate energy staffs were often sharply reduced or eliminated entirely.

As a result, most companies have lacked both the motivation and the management expertise to improve energy performance for most of this decade. Many companies, including some of our largest and most energy intensive, have been making investments in energy-savings technologies only if they paid for themselves within about a year.

There are exceptions. Some companies, including IBM and Johnson & Johnson, have instituted corporate wide policies to adopt energy-saving technologies. They have been able to sustain steady improvements in their corporate energy intensity (energy per dollar of output) of 4 percent per year and 3 percent per year respectively throughout the 1990s. Though virtually every company could do what IBM and J&J have done, they are still the exceptions.

Outsourcing-another New Energy Economy trend-is starting to change this. Soon it may revolutionize corporate energy efficiency investments. Because most companies typically consider energy issues as secondary to core business concerns, they typically pursue only simplest, most obvious solutions, which means investments in energy-efficient equipment only with a payback of a year or so. To an outside contractor, energy is the core business. That means they have more expertise and longer investment horizons that allow them solid returns on energy investments with 5- to 7-year paybacks (or sometimes as high as 10 years).

This means greater energy savings, and more time for companies to do what they do best. Some companies have turned over their entire power supply needs to outside contractors. In March 1999, Ocean Spray announced a $100 million deal with the energy services division of Enron, a major natural gas and utility company based in Houston. Enron will use its own capital to improve lighting, heating, cooling and motors and to invest in cogeneration (the simultaneous generation of electricity and steam onsite, which is highly efficient). Ocean Spray will save millions of dollars in energy costs, have more reliable power and cut pollution, without putting up any of its own capital. In September 1999, Owens Corning, the fiberglass insulation manufacturer, announced a similar $1 billion deal with Enron.

Many other energy service companies are taking a similar approach. Some, like Sempra Energy Solutions, have even gone so far as to finance, build, own and manage the entire energy system of a customer. Substantial investments in such outsourcing deals are a relatively recent phenomena. But I believe these deals will grow very rapidly in the next few years, and are likely to ultimately achieve savings well beyond that achieved by utility demand-side management (DSM) programs, which have scaled back dramatically with the onset of utility restructuring.

4 Joseph Romm, Cool Companies: How the Best Businesses Boost Profits and Productivity_by Cutting Greenhouse Gas Emissions (Washington DC: Island Press, 1999), pp. 28-30, 57–63, 77– 99, 140-156.

5 Fortune, May 11, 1998, p. 132C.

This is especially true for two reasons. First, traditional DSM often focused on retrofitting individual electricity-using components, whereas outsourcing encourages a whole systems approach to efficiency covering all fuels, an approach that can achieve deeper savings at lower cost. Second, traditional DSM did not in general encourage cogeneration, as the outsourcing deals do. And cogeneration combined with energy efficiency can cut the energy consumption of a building or factory by 40 percent or more in a period of just a few years.6

Climate Commitments Put Smart Companies Ahead of the Pack

Finally, there is one other business trend that has significantly accelerated since industrialized countries signed the Kyoto Pact in December 1997 that will have lasting impact on the economics of global warming solutions. Increasingly, major corporations are making company-wide commitments to reduce their greenhouse gas emissions.

As the Wall Street Journal noted in an October 1999, article:

In major corners of corporate America, it's suddenly becoming cool to fight global warming.

Facing significant shifts in the politics and science of global warming, some of the Nation's biggest companies are starting to count greenhouse gases and change business practices to achieve real cuts in emissions. Many of them are finding the exercise is green in more ways than one: Reducing global warming can lead to energy-cost savings.7

In 1999, Kodak announced that they would reduce their greenhouse gas emissions 20 percent by 2004. DuPont—one of the biggest energy users in the United Statespledged publicly to reduce greenhouse gas emissions 65 percent compared to 1990 levels by 2010. Two-thirds of those savings will come from reducing process-related greenhouse gases; the rest will come from energy. They pledged to keep energy consumption flat from 1999 to 2010 even as the company grows, and to purchase 10 percent renewable energy in 2010.

This year, Johnson & Johnson and IBM each joined the Climate Savers partnership with the World Wildlife Fund and Center for Energy a Climate Solutions, pledging to make substantial energy and greenhouse emissions cuts. Several other major companies are expected to join Climate Savers in coming months. For its Climate Savers commitment, Johnson & Johnson has pledged to reduce greenhouse gas emissions by 7 percent below 1990 levels by the year 2010, with an interim goal of 4 percent below 1990 levels by 2005. IBM, having already achieved an estimated 20 percent reduction in global CO2 emissions through energy conservation efforts from 1990 through 1997, is now pledging to achieve average annual CO2 emissions reductions equivalent to 4 percent of the emissions associated with the company's annual energy use through 2004 from a baseline of 1998. Even major oil companies including BP and Shell have committed to make major emissions cuts, at least some of which will come from efficiency investments in their own facilities.

It may well be that two trends-energy outsourcing and corporate climate commitments-combine. The Center is working with a major energy service company to demonstrate that virtually any Fortune 500 company can make an outsourcing deal to reduce its energy bill, its energy intensity, and its greenhouse gas emissions, without putting up any of its own capital. Should concern over global warming continue to grow, this type of deal may become commonplace.

An Optimistic Prognosis

In conclusion, we find great cause for optimism over the prospects for reducing greenhouse emissions while maintaining a strong and vibrant economy. Indeed, it is that very vibrancy that has improved this prognosis substantially in recent years. And we challenge those pessimists who consider the Internet a problem, rather than a solution, to rethink their interpretation. With or without them, the New Economy is changing the way America uses energy; in concert with sound climate policies, we can count on the Internet revolution to help us protect and preserve our environment as well.

I thank the Committee for its time.

The CHAIRMAN. Thank you very much, Dr. Romm.

Dr. Rosenberg, welcome.

6 See, for instance, Romm, Cool Companies, pp. 117-118 and 159–162.

7 Steve Liesman, "Dropping the Fight On Science, Companies Are Scrambling to Look a Little Greener," Wall Street Journal, October 19, 1999, p. B1.

Do you want to give him the microphone there, please. STATEMENT OF DR. NORMAN ROSENBERG, SENIOR STAFF SCIENTIST, PACIFIC NORTHWEST NATIONAL LABORATORY, BATTELLE WASHINGTON OPERATIONS, WASHINGTON, DC. Dr. ROSENBERG. Thank you. Thank you, Mr. Chairman, Senators, for the invitation to participate in this hearing.

Most of the rise in the atmospheric carbon dioxide concentration in the atmosphere in modern times has been due to the combustion of fossil fuels. It is less well recognized that a considerable portion of that carbon actually came from changes in land use management. Indeed, probably 55 billion tons of carbon that have accumulated in the atmosphere due to the transformation of forests and grasslands to agriculture.

The IPCC, Intergovernmental Panel on Climate Change, concluded in its second report that it is possible to recapture perhaps two-thirds of that carbon through the initiation of improved agricultural practices such as minimum tillage, no-till, and other conservation procedures. 40 to 80 billion tons can be taken out of the atmosphere over the course of the next century by those practices and restored to soils.

[Screen.]

Now, this picture shows one fancy technology for getting carbon out of the air and putting it in the soil. Plants capture carbon dioxide from the atmosphere and, through photosynthesis, convert it to sugars, starch cellulose and other organic materials. When the plant is harvested, the litter left on the soil can be incorporated into the soil, thereby sequestering carbon. 50 percent of soil organic matter is carbon. And the roots of the harvested plants also leave carbon in the soil.

[Screen.]

Currently the carbon is being added to the atmosphere at a rate of about 3.4 billion tons per annum. The graph shows that it is possible to put carbon back in the soil at rates as high as 2.5 tons per hectare by the introduction of biomass crops such as switchgrass. Conservation Reserve Program lands are adding carbon to the soil at a rate of about one ton per hectare per annum. Soil carbon sequestration can be done. This is not a pie-in-the-sky technology. In fact, farmers sequester carbon in soil when they can, because organic matter (50 percent carbon) in soil improves tillage conditions, improves fertility, and improves productivity.

[Screen.]

This graphic shows the results of an economic model produced in our laboratory. The scale on the left is millions of tons of carbon emitted into the atmosphere annually. We are now emitting about 8 billion tons of carbon per annum. If business as usual prevails, by the end of the 21st century we will be emitting over 18 billion tons of carbon into the atmosphere every year.

The concentration of carbon in the atmosphere cannot be allowed to rise in an unlimited way. We have concluded that it is possible to control the rise of atmospheric carbon dioxide concentration to 550 parts per million (ppm) (it is about 365 ppm now). The bottom wedge in this graph shows the carbon emission pathway that will be required to achieve stabilization at 550 ppm. However, between

business as usual and the bottom wedge you can see that by 2100 about 10 billion tons of carbon will need to be captured annually. Well, that will not be done by soil carbon sequestration alone. The red wedge is energy intensity. It represents improvments in the energy efficiency of automobiles, refrigerators, and everything else. The fuel mix wedge means going more to natural gas and away from coal. It includes other substitutes for fossil fuels such as solar power, biomass, and other technologies.

But notice that brown wedge at the top of the graph. This is soil carbon sequestration of about 40 or 50 billion tons over the century. Note that this technology is particularly critical in the first two or three decades of the century because it allows time for existing technologies and infrastructure to live their design period. Such a strategy allows new technologies to be phased-in, lowering the costs of controlling carbon dioxide emissions.

Thus, we have a strategic reason for emphasizing the role of agricultural soils and forests in capturing carbon. We know that soil carbon sequestration can be done, but there are many scientific questions yet to be answered. For one thing, we need to find ways to make carbon more stable in soils. As organic matter is broken down, carbon cycles through the soil. It can be returned to the atmosphere very quickly unless the soil binds it effectively.

So research is needed to develop ways of keeping carbon in the soil: how to get more in, how to keep it for longer periods of time, how to literally sequester it, lock it away, perhaps for hundreds of years. Indeed, some of the carbon in soil resides there for hundreds of years, some perhaps for a thousand years.

In addition, there is a great opportunity to improve the degraded and desertified lands of the world by applying carbon sequestration technologies. There are two billion hectares (five billion acres) of such lands around the world, 75 percent in the tropics. Soil carbon sequestration is a way in which the nations that are struggling with desertification address the problem and, at the same time, make a contribution to controlling climate change. A lot of research is needed to find ways to counter desertification and recover soil productivity. Soil carbon sequestration offers these nations a chance to come to the table on global climate change control.

A serious problem in implementation of soil carbon sequestration programs is monitoring and verification. We are not talking about a hundred or a thousand power plants. We are talking about millions of farms that will have to participate in such programs. Trading mechanisms will be needed. In fact, trading is already beginning. I do not have time to go into that part of it, but the marketplace is beginning to show interest in this question. But when you make a deal—I am going to pay you to put a ton of carbon away for 30 years there needs to be methods for verification, some kind of reliable techniques for monitoring.

We have such techniques today, but they are tedious, they are expensive, they require soil sampling in the field, transport of samples to the laboratory, and so on. We need to find better ways to observe the changes and the compliance for contracts relating to carbon sequestration.

There are many scientific questions yet to be solved, technological questions as well, and the government is aware of this.

There has been some progress, some encouragement given. The Department of Energy has created a center for research on enhancing Carbon Sequestration In Terrestrial Ecosystems. The CSITE system, we call it, is managed jointly by Oak Ridge National Laboratory and my laboratory, the Pacific Northwest National Laboratory. We involve many universities and other organizations in the cooperative research we are doing.

In addition, in FY 2001, the Department of Agriculture will provide funds to a consortium of land grant universities that will also address soil carbon research. We call the consortium CASMGS, which stands for Consortium for Agricultural Soils Mitigation of Greenhouse Gases. It is centered at Kansas State University and involves about ten land grant universities. Our laboratory is also associated with this activity. The research being done at CSITE under Department of Energy auspices and CASMGS will be coordinated. There will be many interactions.

I urge that this Committee take note of what is happening, be aware of the fact that some research is beginning, that much more research needs to be done, and also that soil sequestration is not a panacea. This technology will not solve the problem, but it can play a strategic role over the next few decades and can be important throughout the century. And soil carbon sequestration is a win-win situation. When you store carbon in soils, you reduce the threat of greenhouse warming and you do good things for farmers. If, as well, farmers have an incentive, another, even if modest, cash crop called carbon, that is good for everybody.

Thank you, Senators.

[The prepared statement of Dr. Rosenberg follows:]

PREPARED STATEMENT OF DR. NORMAN ROSENBERG, SENIOR STAFF SCIENTIST, PACIFIC NORTHWEST NATIONAL LABORATORY, BATTELLE WASHINGTON OPERATIONS, WASHINGTON, DC.

Storing Carbon in Agricultural Soils to Help Head-off a Global Warming

We know for sure that addition of organic matter to soil increases water-holding capacity, imparts fertility with the addition of nutrients, increases soil aggregation and improves tilth. Depending on its type-humus, manure, stubble or litter-organic matter contains between 40 and 60 percent carbon. We also know that carbon (C, hereafter), in the form of carbon dioxide (CO2), is currently accumulating in the atmosphere as the result of fossil fuel combustion, land use change and tropical deforestation (Table 1). The atmospheric concentration of carbon dioxide has increased by ~32 percent, from about 280 ppmv (parts per million by volume) at the beginning of the industrial revolution (ca. 1850) to about 370 ppmv today.

There is a strong consensus among atmospheric scientists that continued increase in the concentration of atmospheric CO2 and other greenhouse gases such as methane (CH4) and nitrous oxide (N2O) will enhance the earth's natural greenhouse effect and lead to global warming (Intergovernmental Panel on Climate Change, IPCC, 1996). Some scientists argue from the fact that 1997 was the warmest and 1998 the second warmest years on record that the global climate change "footprint" is already detectable.

CO2, the greenhouse gas of primary concern with regard to climate change, is also essential to photosynthesis. Elevated CO2 concentration [CO2] stimulates photosynthesis and growth in plants with C-3 metabolism (legumes, small grains, most trees) and reduces transpiration (water use) in both C-3 and C-4 plants (tropical grasses such as maize, sorghum, sugar cane). Together these phenomena are termed the "CO2-fertilization effect."

Table 1 gives current estimates of global sources and sinks for C. Fossil fuel combustion, land use change and tropical deforestation are adding ~9.1 Pg C y-1 (1 Pg is equal to 1 billion tonnes or 10 g) to the atmosphere. About 3.4 Pg C y1 remains in the atmosphere. Regrowth of forests in the temperate regions and the oceans