The Center believes that joint implementation offers incentives for developing countries and Central and Eastern European nations, as well as multinational companies and other industry to begin to evaluate potential investments through a climate-friendly lens. What this means is that projects or activities that are marginally good investments can be viewed more favorably because of the potential for "shared" greenhouse gas reductions. If you eliminate the added incentive of these "credits" or disqualify all projects that offer a potential rate of return. you tip the scales in the wrong direction and reduce the number of environmentally beneficial international projects that will move forward. To bar both "credits" and financial returns would basically kill all private sector JI efforts outside the forestry sector, thereby defeating the purpose of having a pilot phase.

We encourage the U.S. to continue to take a strong stance in the INC and Conference of Parties meetings for elimination of these unnecessarily restrictive criteria. We believe the USIJI model on both of these issues should be encouraged in the international arena as well. Our greatest concern should be that these projects are environmentally effective; beneficial to and welcomed by the host country and community; and are designed to offer the maximum benefits to all concerned.

U.S. LEADERSHIP ON JOINT IMPLEMENTATION

At home and abroad, the U.S. has taken the lead on joint implementation, and I would like to take this opportunity to commend them on all their efforts. The USIJI program is a model of responsibility and commitment to making a good idea work. The criteria that have been developed address the key issues that are necessary to ensure environmental quality, wise use of natural and financial resources and sharing of U.S. expertise and technology to better the quality of life globally.

Recently, the Administration took a bold new step in furthering its role as a leader in this area. The first-ever statement of intent on joint implementation between two nations was signed by Vice President Al Gore and President José Maria Figueres of Costa Rica. The determined efforts of President Figueres to ensure an environmentally and economically sustainable future for the people of Costa Rica and the U.S. commitment to encouraging U.S. private investment in climate-friendly activities abroad made this historic agreement possible.

While much of the international community continue to debate how to proceed with these joint initiatives, the U.S. and Costa Rica are moving ahead to make these projects a reality. Only through action can we prove that these ideas really work. Much of joint implementation debate is not focused on the real issues of joint environmental issues but is reduced to reduced to finger pointing and the historic grievances of North-South relationships. Instead, bilateral agreements can shape INC thinking by demonstrating that "good" joint implementation projects go beyond the rhetoric toward real environmental action that can benefit everyone.

I know Energy Secretary Hazel O'Leary has been very active in facilitating this and other potential agreements between developing countries and nations with economies in transition and the U.S. I commend her on all her efforts and look forward to seeing more of these agreements come to fruition.

I also wish to thank Secretary O'Leary for her gracious hosting of the Mayor of Decin, the CEOS of the three investing utilities and the Center at the announcement of our joint implementation project in the Czech Republic.

THE DECIN JOINT IMPLEMENTATION PROJECT

Decin is a heavily industrialized center with a population of 55,000 located in the northwestern corner of Northern Bohemia in the Czech Republic. The city sits astride the Elbe River in a deep valley about 10 kilometers wide, at the base of 500 meter tall ridges. Eighty percent of Decin's residents live in multifamily flats. Only about one-fifth of the existing housing is in single-family units.

Most of the City's housing units are heated by local brown coal (lignite) -- used to fuel the district heating systems and individual homes. As of 1992, 75 percent of the square footage in the community was heated by coal, with about half of this total linked to the district heating system. Because the stacks on the district heating plants are low. emissions from the plants lay within the valley. The extensive use of brown coal is the principal source of the high levels of air pollution -- sulfur dioxide (SO,), nitrogen oxide (NO), air toxics and particulates -- suffered by the region. While large power plants within the Czech Republic have begun to receive assistance, district heating plant projects are often too small to attract multilateral funding, despite their devastating effect on the area.

Because of its location in a deep valley and its heavy reliance on brown coal. Decin is one of the most polluted towns in Northern Bohemia. Concentrations of some air pollutants far exceed national and international health standards. For example, the highest twenty-four hour average for SO, concentrations occurred in January 1987 and was more than ten times higher than health standards set by the World Health Organization. Heavily contaminated air threatens human health throughout the region. For example, childhood mortality rates are twice that of the rest of the Czech Republic. Half of the pediatric patients in area hospitals suffer from conditions linked to air pollution. And, on average, life expectancy for residents in the region is five years shorter than in other parts of the Czech Republic. To prevent the large scale relocation of environmental refugees. the prior regime resorted to financial compensation -- termed "burial money" by recipients

to those who stayed in the region.

Under the leadership of Mayor Kunc, Decin has placed the highest priority on developing specific projects to immediately begin reducing air pollution in order to improve the health of local residents. In the last several years the City has become a leader in the Czech Republic for its efforts in addressing its environmental problems. A year-long environmental study. completed for the City by the Danish consulting firm of Bruun and Sorenson in April 1993. was Jone to provide a series of recommendations to the City of Decin in their attempts to reduce life threatening pollution.

Three U.S. utilities -- Wisconsin Electric Power Company. NIPSCo Industries. Edison Development are investing in a project with the City of Decin to develop a first-of-its-kind pilot joint implementation project. These three utilities are both deeply concerned about the environmental devastation affecting the Decin region and interested in proving the concept of joint implementation and all the benefits it can offer. They should be commended for their efforts.

The Project

One of the City's five district heating plants. the Bynov District Heating Plant, which provides heat and hot water to the multi-family dwellings and several businesses, will be switched from brown coal to natural gas. At the same time the system's efficiency will be significantly improved, allowing the facility to be downsized from 19 to 10.6 MW. Because of the City's commitment to establishing their community as a model of environmental quality and technological advancement, the City is presently expanding the project to cogeneration.

Currently, the Bynov plant has three 5.6 MW coal fired boilers and one 2.8 MW coal fired boiler. By early 1995 the Czech government will extend an existing natural gas pipeline to the gate of the district heating plant. With partial financing from the three U.S. utilities, the City will be able to replace existing coal fired boilers with new, more energy efficient gas engines. The City will also replace the existing, poorly insulated, pipes that carry the hot water to the multi-family dwellings. The new pipes will also increase the efficiency of the system eliminating the need for conversion from hot water to steam.

At this time, both the apartment blocks and the district heating plant are owned by the federal government. It has already been agreed that in 1995 the Bynov District Heating Plant will be privatized under the new "district heating enterprise" and primary ownership will be relinquished to the City. The apartment blocks will also be privatized under the "housing enterprise."

Mr. SHARP. Thank you very much.

Mr. Hemphill, happy to hear from you now.

STATEMENT OF JOHN HEMPHILL

Mr. HEMPHILL. Thank you very much.

I would like to say it is an honor to be here today and especially in light of the fact that you are-I guess what we call a short-timer here. But I do want to echo the sentiments expressed by others concerning your distinguished career in public service and the fact that many of us will miss you not being here.

I am executive director of the Business Council for a Sustainable Energy Future. It is a relatively new group. We formed about a little over 12 years ago, and we are comprised of business leaders from the energy efficiency renewable energy, natural gas and electric power generation market that share a commitment towards the realization of the Nation's economic, environmental and national security goals through the rapid deployment of sustainable energy technologies and services, and that is technologies that are economical, efficient and low-polluting.

We believe that we, our industries, can play a constructive role in the issue of global climate change. We believe that there are cost-effective solutions available today that can mitigate the growth in the greenhouse gas emissions. And furthermore, we believe that there are some emerging technologies that are on the horizon that will contribute to the possibilities that are afforded to reduce greenhouse gas emissions.

We believe that the further believe that the vision set forth in the Climate Action Plan represents an important first step. But like Mr. Lashoff, we are concerned that more will need to be done, but we believe that the overall framework is correct. It is a matter, I think, of getting it right and getting on with the implementation of these kinds of activities.

We furthermore can look at what is happening in the real world and see that it validates our beliefs. When you look at the most recent data with respect to the U.S. domestic utility industry's purchases of new incremental capacity, you will see that over 70 percent of it comes from either natural gas or renewable resources.

This is happening due to market forces, and again, we think it validates the fact that clean technologies are attractive on their own face. We do believe, however, that there are many things that can and must be done to make sure that these technologies, utilizations are fully realized, and especially when one looks at what is happening internationally. We recently participated in the INC Conference in Geneva, and stated, put forward six principles that we felt were important with respect to that all countries should adopt with respect to the implementation of their plans. They are essentially aimed at ensuring that the climate is right for the implementation adoption of sustainable technologies and services.

We recognize that ultimately private capital is what is going to determine what investments are made here and throughout the world. But when it comes the emerging technology-emerging countries, we recognize that initially that capital infusion is going to be heavily influenced at least at the margin, by what countries or what public capital decisions are made.