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gressively, continually trying to find additional measures that make broad sense not just from a climate perspective but from an energy efficiency perspective, from a competitiveness perspective, and from the perspective of other environmental concerns. We are constantly adding to that list. Whether this brings us within the range of some of these proposed targets or not will
depend on other factors, which, as I mentioned, are not directly under our control.
Mr. SHARP. Mr. Reinstein, the first part of your statement suggests that there are obviously methodological problems with targets and timetables in terms of the information that you can readily have that is real and the ability for any country and any bureaucracy to generate data that supplies claims to do a whole variety of things. It is all going to be based on a lot of assumptions, and it is all going to have a lot of data that might be put into the computer, and we all know the old line, "Garbage in/garbage out,” so it may not reflect reality. It may be like the body count in Vietnam where, as I understand it, we actually eliminated more of the enemy than existed, and that was the bureaucracy of the United States attempting to demonstrate achievement.
But the implication in your statement went beyond that, which was, well, they are not concentrating on these other gases, indeed, implying that we are for doing more than some of these other advocates. Is that true? I mean you mentioned we don't believe it should just be CO2, it should be the other gases as well. Are we aggressively promoting actions that will, in your view, change this on several fronts?
Mr. REINSTEIN. I think that the actions that we have proposed certainly match up favorably with the actions that have been proposed by a number of other countries. In the end, it is actions, rather than targets, that will reduce net emissions. By concentrating on actions in one sense, we have jumped ahead to the next logical step. A target gives you a political signal and gives you a little impetus to go out and look for actions, but if you can go out and go directly to the actions, you move ahead rather rapidly.
I think that the actions that we have put forward and are considering measure up rather favorably with actions that have already been committed in other countries.
Mr. SHARP. Well, I basically agree with your statement that a bottomup approach could indeed be more realistic, could actually end up with greater real actions occurring. What I have trouble with is the notion that we really have put forth major action plans, and I hope that is just my ignorance and not an accurate perception of reality. But I must say, it seems to have gotten better in the post-Sununu world, but I would have no difficulty if I thought that on the table are real, concrete actions, and clearly you have some, I don't think there is any question about that, and you have expanded the list, there is no question about that, and I want to be complimentary on that front.
I guess I am torn, like some others, as to whether we should be pushing you hard for timetables and targets under the exact theory you articulated, which is, you don't get action if you don't set some thing out there that drives people, and if we see that people are driven with real world actions that produce results, then we don't necessary need timetables. It can become a meaningless argument, actually, over what to do.
Let me turn to the question of what data you have and what beliefs you have about the ability for us to stabilize CO2 by the year 2000 at 1990 levels. Mr. Gruenspecht, did I understand correctly you said the study that you folks are basing your view on says that you would have to have a $140 per ton carbon tax in order to achieve that result? Am I correct in what I thought I heard from you?
Mr. GRUENSPECHT. The study does, in fact, say that, but I want to emphasize
Mr. SHARP. It does or does not?
Mr. GRUENSPECHT. The study indeed says that. I want to emphasize that the reason we look at carbon charges in the study is not because that is the only instrument you could use. It is a proxy for an efficient program of actions. The reason carbon taxes serve that role is because they do affect activity all throughout the economy and because they are directly focused on emissions. Certainly you would have a choice of policy instruments.
Mr. SHARP. Oh, I understand that, and I understand everybody has got to ensure the “t” word doesn't come up here. Our subcommittee was so courageous that, because the "+" word was mentioned, we should have you folks study that as one of multiple options, it had to be stricken from the bill for fear that a 30-second commercial would defeat half the Members of the U.S. House of Representatives, who aren't capable of defeating themselves otherwise.
Mr. GRUENSPECHT. I was in the audience that day, sir.
Mr. SHARP. But more seriously, you say that is a device, obviously, to give us an assessment.
Mr. GRUENSPECHT. To give us a feel, yes, and as Bob Reinstein and Mr. Volcansek pointed out, there are two things that matter. One is: What are the costs of the actions? And the other one is, of course, where you are starting from. Just how many of those actions you need depends on where you are starting from as well as where you want to get to. I would point out that the $140 number, which is, again, quite similar to the DRI number, is predicated on a set of projections about baseline economic growth, energy prices, the whole ball of wax. But within that context, yes.
Mr. SHARP. Let me ask you, as a professional who has to bring some independent judgment to bear on the various analyses that are put to you, do you really think that is the most realistic assessment of what the cost is?
Mr. GRUENSPECHT. Keep in mind that a $100-per-ton carbon tax-thinking about what kind of level that is—is about 25 cents per gallon of gasoline. If you look at what is going on, that is not necessarily a huge number; it is $55 per ton of coal, which I think would give some people pause, but I think
Mr. SHARP. What you are telling me is, the $140, which looks scary, isn't actually that scary.
Mr. GRUENSPECHT. No. If you look at chapter 11 of volume 2 of our study, if you will, there is a comparison of our study to other studies. Our study is not unreasonable. Compared to the CBO study of a couple of years ago, compared to Mr. Volcansek's studies, if you look at a whole lot of other studies, this is not a DOE result. We would be concerned if our results differed dramatically from everyone else's, but they don't. That is, I think, important to keep in mind.
Mr. SHARP. I want to try to get some perspective on that. I think you left me the implication that, while that is costly, that isn't perhaps as dramatically costly—well, you used the term “chapter 11.” I realize you were referring to your report. Other people want to talk about global warming and use chapter 11 to suggest it would bankrupt the country if we did anything about it, and I gather your chapter 11 does not equate with the bankruptcy law of chapter 11.
That is not a fair question.
Mr. GRUENSPECHT. I would leave that to the Council of Economic Advisors and other macroeconomic representatives of the administration.
I think it is fair to say that analytically our report is not different from what other people would say.
Mr. SHARP. Let me ask Dr. Morgenstern the same question.
In your professional judgment, does that represent what you think is the most realistic assessment of what it would cost us to stabilize, or have you done some work that suggests maybe these reports did not account for—if you use this technique of collecting taxes and how that money might feed back into our economy and do other kinds of things that might be useful to us economically?
Mr. MORGENSTERN. Mr. Chairman, this is a very complex subject, as Mr. Gruenspecht laid out, and there many questions, including what the baseline is and what model you use and other issues. I guess I would point out that there is some work going on around the country now which actually is quite new, and it is being sponsored by the Energy Modeling Forum, which is a group out in Palo Alto that has essentially assembled really the best and the brightest of the modelers who are addressing the very question that you have asked, and I think it is fair to say that there is a range of answers that are coming out of this exercise, and certainly Mr. Gruenspecht's numbers are included in that range, but, frankly, there are some lower numbers that are coming out. Certainly this is an evolving situation.
One of the questions depends upon what you do with the revenues. It turns out that you generate a lot of revenue from an exercise of this sort, a carbon tax type revenue, and what you do with them has great bearing on what the overall cost to the economy is, and it turns out that if you use some mechanisms, for example, which lower certain business taxes, particularly—well, a range of business taxes, that you can have some offsetting effects that could be quite significant.
Mr. SHARP. And I realize the caveat that Mr. Gruenspecht brought in is, while the device of the carbon tax is used as a technique for measuring, trying to get an economic measure of cost, it is not necessarily the strategy. It may be a piece of a larger strategy of a variety of ways in which you might seek to stabilize. The reason I say that: Some people want to focus on that alone, and that is death.
Ms. Claussen, you folks seem to be making some progress on this voluntary effort that has competitively stimulated actions in Congress and elsewhere in the Government. I think that is good. Are you one of those that feel it is very tough to stabilize by the year 2000?
Ms. CLAUSSEN. Let me caveat my answer with two things. The first is, I am not an economist, so
Mr. SHARP. That improves your likelihood of being right.
Ms. CLAUSSEN. And the second thing is, I'm always fully optimistic about what our programs can achieve.
Put that aside, we are now in the process of trying to work through what the administration as a whole thinks these programs can achieve, and I suspect some time later in the spring we will have some estimates that we can all agree with, and I guess I would rather defer until then. We are working toward the dates of the next session, and I expect we will come up with something that we all can live with.
Mr. SHARP. Let me go back, therefore. Dr. Morgenstern, you were talking about the Palo Alto group. Do you have any estimate as to when they hope to have either their preliminary or final work?
Mr. MORGENSTERN. I believe, Mr. Chairman, that they are scheduled to produce a report some time in the month of May, but I would just underscore what Ms. Claussen said, which is that there is an interagency group that is really addressing all these questions—the impact of baseline, the impact of ongoing policies as well as Mr. Reinstein's comment about the actions that he laid forth last week before the United Nations. We are trying to quantify these things, and we do hope to have a resolution within the next several weeks.
Mr. SHARP. Okay. Let me turn to Mr. Synar.
Excuse me, Mr. Synar. First, I want to ask unanimous consent to insert in the record a statement of Chairman Dingell on the subject in the hearing here. [The prepared statement of Mr. Dingell follows:]
PREPARED STATEMENT OF HON. JOHN D. DINGELL Mr. Chairman, I commend you and this subcommittee for your leadership in this area of domestic and international climate change policy. I believe the hearing today is timely and will be helpful.
I also want to express my appreciation for the efforts of the Deputy Assistant Secretary of State for Environment, Health and Natural Resources, Mr. Robert A. Reinstein, and others of the U.S. Delegation who have labored mightily over the last year in an effort to negotiate an international agreement. You have worked hard and well. I commend all of you.
Clearly, this climate change negotiation process is a difficult one and certainly not similar to the Montreal Protocol negotiations initiated in 1986 to control chlorofluorocarbons. The success of that endeavor cannot be easily duplicated in the development of an international agreement on climate change.
As the chairman knows, I am generally a supporter of the international negotiation process, although my support is not without limits. In the case of this negotiation, I want to see a fair, reasonable, and flexible agreement that while protecting the environment does not adversely affect the U.S. economy and its workers and that applies to all countries, not just the industrialized nations.
I am concerned that the European Community and other trading partners not be able to take actions that will harm the United States economically.
I am also concerned that some important countries, like South Korea and India, are not parties to the Montreal Protocol and the London amendments to that Proto col. It is even more important that the developing countries, which include such large nations as China, India, Brazil, Argentina, and South Korea, become signatories to any climate agreement. Indeed, I think there is a question whether the United States should even consider signing such an agreement until such countries also agree to be parties to the convention. At the moment, I do not believe there is a real commitment on the part of these countries to reach agreement or to sign.
I note that over the past year the group of 77 developing countries have emphasized that: (1) The developed countries, such as the United States, the European Community, Japan, Australia, and the Nordic countries, should contribute “new and additional funds” amounting to billions of dollars to an international climate fund, as compensation for helping to protect the world's environment; they want to control the distribution of the money independent of existing mechanisms; (2) such developed countries should provide “access to technologies and know-how required for compliance with this convention on concessional, preferential, and most favorable terms, to developing countries”; and (3) that the developing countries should not be subject to commitments to address climate change, unless their incremental costs are “met” by new, adequate, and additional financial resources by the developing countries. Even then they want most favorable treatment.
Last week, the administration announced a total of $75 million in U.S. aid for developing countries. That is a substantial sum, particularly at a time when our Nation is in recession and our budget deficit is astronomical and when many in this country are questioning our priorities in providing any funds for other nations at a time when our domestic needs are so great. Indeed, it is not clear to me what the source of this $75 million is. Are other programs going to be cut to provide this sum? I clearly want to know if there will be cuts in programs or agencies under the jurisdiction of this committee and the impact on those programs and agencies.
Subject to those concerns, I thought this financial proposal by the administration was both timely and helpful toward meeting the concerns of the developing countries and reaching agreement on a global climate convention. However, I note that the day after the announcement, the Washington Post quoted one developing country negotiator as saying that it is merely “a good PR exercise.”
I find that statement quite offensive and firmly believe that the group of 77 developing countries with their three conditions for an agreement are more interested in scuttling these negotiations than in trying to achieve, in good faith, a reasonable and sound agreement. I am particularly appalled that they do not want any commitments now or in the future to control greenhouse gases. Many of the studies that I have seen indicate that the most growth of greenhouse gases will come from these countries. Unless developing countries control emissions, reductions by industrialized countries will have limited effect. In taking this position developing countries seem to want to place the blame for a lack of agreement at our doorstep rather than their own.
I hope that I am wrong and that all of the countries will work together in the remaining few weeks to resolve their differences and reach agreement on a sound convention that we can all be proud of. However, I am not optimistic.
Moreover, I do not want to see the administration and Mr. Reinstein agreeing merely to get an agreement for agreement's sake or for political reasons. The deadline is the conference in Rio de Janeiro in June. However, that is an artificial deadline which was set before most understood the difficulties and complexities involved in reaching an agreement.
Mr. SHARP. Mr. Synar.
Mr. Reinstein, the OECD text includes explicit commitments to encourage tree planting and other techniques known as carbon sequestration. Since the United States endorsed that cost-effective approach, what is the official position of the United States on tree planting?
Mr. REINSTEIN. We encourage all measures that would contribute to the reduction of net greenhouse emissions, and tree planting, in the near and midterm, is estimated, according to the studies we have, to be quite cost effective in that timeframe, and it is one of the measures that we have supported very strongly.
Mr. SYNAR. That is correct, because the Center for Clean Air Policy found a major utility could cut its compliance cost by a