Using that bottom-up approach, one would see that there are net savings associated with adopting those technologies can you hear me? Mr. SCHAEFER. Yes, and the Chair will not deduct this from your time, Ms. Tierney. Ms. TIERNEY. All right. What I was trying to say was, this one type of approach, which is to look at the technologies themselves and build up from each technology the cost savings that would accrue from adopting those showing net savings associated with those greenhouse gas emissions reductions. Those are savings that result in reduced energy bills for households and businesses. On the other end of the spectrum are different kinds of studies. These are statistical studies that take the U.S. economy as a whole and look at the response of businesses, car drivers, et cetera, to changes in the price of oil, gasoline, et cetera. Those studies show that there is a wide range of cost estimates as well. Those costs range from $20 a ton of response if you see a quick response to price changes, to very expensive responses, such as $100 a ton of carbon equivalent reduced. Clearly, there is a wide range of cost as I say. The information therefore is not conclusive. We don't have results that are clear on what the costs would be. There is guidance, though, in this literature, and it is guidance that we have used to develop our policy. The literature tells us that if we use advanced technology and save customers energy and decrease energy bills, we have a strategy that can reduce greenhouse gas emissions in the most cost-effective way possible. It is no accident that our strategy is built on technology. It is built on an approach that tries to reduce market barriers to having households and firms deploy and bring those technologies into their use. You see from the array of programs in the President's Climate Change Action Plan that we have some 50 programs, almost all of which are designed to tweak markets and introduce technologies faster than they would be otherwise. Those are building technologies, lighting, automotive, motors, and electric generating technologies. The other aspect of our strategy is to expand the market for introducing these clean, cost-effective technologies, and not just in the domestic market as I have been describing, but the international market as well. Let me come back to that point in a moment. Our focus, then, is on a technology strategy, and we have been making progress over the last year and a half since we announced our Climate Change Action Plan to bring those technologies to customers and taxpayers. The idea, again, is to use very small amounts of Government money to provide technical assistance, information do I have permission to proceed very briefly? Mr. SCHAEFER. Yes. MS. TIERNEY. Thank you. So that households and customers use self-interested voluntary action to adopt technologies, as almost all of our programs are voluntary programs-People are not hit with a club to join our programs, people are hit with market inducements to move into adopt ing cleaner technologies, and they are proving worthwhile and costeffective. Our testimony describes several of these programs. I can provide you with as much information as you would like about the extent to which people around the country are adopting them. Let me mention that in the utility sector and in the industrial sector, for example, under our Climate Challenge Program, under our Climate Wise Program, and under our Motor Challenge, we have hundreds and hundreds of utility companies and businesses that are adopting more efficient technologies, keeping their energy bills lower, and reducing greenhouse gas emissions. Now I would like to return briefly to the international cooperation that is part of this. The Plan is designed to expand the market in which U.S. companies have opportunities to sell cleaner technologies and therefore provide all of us with a chance to have jobs at home and greenhouse gas emissions reduced internationally. We have adopted a strategy that moves our international partners forward in adopting greenhouse gas emissions reductions so that we are not all out there alone. We have three approaches that I have described in my written. testimony. One is our Country Studies Program, a program in which we work with countries to identify places where they can adopt cleaner technologies; our U.S. Initiative on Joint Implementation, in which we have just announced several projects to allow U.S. partners, that are in some cases nonprofit organizations, in some cases private companies working with international partners, and in some cases host countries and companies in those countries, to jointly reduce greenhouse gas emissions. These are voluntary programs, and we are enthusiastic about the responses that we have received so far as opportunities to study the extent to which we can undertake greenhouse gas emissions reductions internationally, more cost effectively than we do back home. Finally, let me mention that Secretary O'Leary has made great strides in moving forward with other countries that have economies in transition, such as India, Pakistan, and China, where they are moving forward in their energy sectors to allow foreign participation, and to expand their energy sectors. We have worked very hard to bring to these countries sustainable technologies offered by U.S. companies that would enable them to have a cleaner strategy and reduce greenhouse gas emissions while U.S. companies deliver jobs back home. Our approach, therefore, is to focus on cost-effective actions first, and we are pleased to tell you that we are making great strides in that. Thank you very much. [The prepared statement of Susan F. Tierney follows:] PREPARED STATEMENT OF SUSAN F. TIERNEY, ASSISTANT SECRETARY FOR POLICY, DEPARTMENT OF ENERGY Mr. Chairman and members of the subcommittee: It is a pleasure to appear before you this afternoon. In previous testimony before this subcommittee, Secretary O'Leary described our progress on these topics as of October 1994. I will provide an update from that date forward, covering the 20 specific domestic actions listed in Attachment 1 of her written testimony (also attached here as Attachment 1). I will also discuss progress on our international cooperation actions on climate change, the United States Country Studies Program and the United States Initiative on Joint Implementation. Several of these programs have significant participa tion by other Federal agencies, including by the Department of State and the Environmental Protection Agency. Although there are many uncertainties in the area of climate change, including costs of future obligations under the Framework Convention on Climate Change, many observers believe that the Parties to the Convention should be considering what further steps they can take to reduce future emissions. This administration agrees and will support establishing a process to negotiate such next steps in Berlin. As President Clinton instructed us when he charged us with developing the Climate Change Action Plan, we believe that any actions that will be needed should be costeffective. Under these circumstances, it is important for us to be considering how U.S. programs can enhance the availability of cost-effective choices in our country and internationally. I believe that some excellent examples are being demonstrated in the voluntary partnerships of our Climate Change Action Plan by our programs to improve international cooperation, and by our efforts to stimulate use of environmentally sound technologies in international markets. If we do this effectively, United States private interests will find that participating in these programa is worthwhile. Expanding markets will provide the funding necessary, to carry out these "win-win" programs, advancing our twin goals of sustainable economic development and environmental protection. Potential Costs of Taking Further Emission Reduction Steps Before beginning the status reports, I would like to address the question you posed on the needs for and costs of any additional commitments by the United States and others. This is a difficult question for which there is no single answer. The engineering and economics literature provides only imprecise and even conflicting answers to the question. The literature identifies a wide range of cost estimates, with cost estimates of possible net savings on one hand and, on the other end of the spectrum, with costs of more than $100 per ton of carbon equivalent reduced. Within the range, there is good reason to believe that costs could be shrunk through cooperation among the Parties to the Convention, as I will describe later. The range of cost estimates depends crucially on how one approaches this calculation. Cost analyses of potential options to limit greenhouse gas emissions can generally be divided into two generic classes: -Bottom-up studies, which begin with detailed assessments of engineering costs of a wide range of available or forecasted technologies. -Top-down studies, which use a wide range of methodologies to try to calculate the response of the entire national, regional or global economy to a policy option, typically through the use of an emissions tax, such as a carbon tax. Bottom-up analyses generally conclude that using best available technologies (rather than continuing to use older equipment) would yield very high energy cost savings, even to the point that it would be financially profitable to replace a large quantity of existing equipment. These studies generally conclude, therefore, that a significant quantity of emissions reductions can be achieved without cost-due to the energy savings outweighing the equipment costs-reductions range from 10 to 60 percent below what they would have been in a business-as-usual (baseline) scenario (most of the studies are in the less than 40 percent range). Top-down analyses also yield a range of cost estimates with the estimates varying according to the choice of modeling framework. On one end of the spectrum, general equilibrium studies, which provide for rapid adjustment of markets, yield relatively low cost estimates (for example, $5 to $20 per ton for the reduced carbon emissions needed to meet a goal of stabilization of emissions at 1990 levels over the next decade or two.) On the other hand are macroeconomic studies, which try to represent behavioral responses to actual and anticipated price changes and the more gradual adjustment that is typically found in real economies which yield medium to high estimates (such as $40 to over $100 per ton to stabilize emissions at 1990 levels over the next decade or two.) While there are no unequivocal answers in the literature, the wide range of analytic results still leaves us with some policy guidance. The more detailed engineering studies often suggest many opportunities where specific profitable steps, if taken, can reduce greenhouse gas emissions from expected levels at no added cost to the economy. It is important that, as we participate in the climate change negotiations, we also work to assure that such no-cost or profitable opportunities be available to other countries to help meet their commitments under the Climate Change Convention to develop programs and measures to limit greenhouse gas emissions and to increase sequestration of carbon, either through domestic or international action. Opportunities for Cost Reduction These opportunities to reduce greenhouse gas emissions cost effectively are generally of two forms: -bringing new technologies into the market; and -international cooperation to reduce emissions. A recent paper presented at a workshop of Working Group III of the Intergovernmental Panel on Climate Change was instructive on this point. The authors, economists of the Department of Energy and the Pacific Northwest National Laboratory, found that international cooperation pays. The global cost of stabilizing emissions with regions acting individually may be twice as high as when using cooperative agreements. It would therefore seem that pursuant to the Framework Convention's admonition to be cost effective in measures undertaken to protect the Earth from dangerous anthropogenic climate change, cooperative solutions, including joint implementation, should be seriously considered. Indeed, recognition that new technologies together with cooperation will reduce overall costs is what has led this administration to encourage and help facilitate these areas of opportunity. I will discuss our progress in areas of developing and diffusing technology as well as our effort to promote international cooperation. First, as background, I would like to provide a progress review on the domestic actions for which the Department is responsible as part of the administration's Climate Change Action Plan. Progress on the Climate Change Action Plan Domestic Actions The centerpiece domestic actions of the Climate Change Action Plan focus on accelerating energy efficiency and renewable energy actions authorized by the Congress under several laws, the most recent of which is the Energy Policy Act of 1992 (EPACT). By building on the foundations already enacted by Congress and by partnering with private industry, these Climate Change Action Plan programs are built on a premise that we should deliver environmental improvement while reducing government and containing costs. Our programs employ a customer driven approach that includes benchmarking performance against the best in business and measuring outcomes against customer-set standards. Each of the individual actions in the plan have been designed to reduce emissions while producing increased profits for business, increased spendable income for taxpayers, and increased flexibility for all private and public partners. All of these goals can be achieved while improving the quality of the environment. However, without the involvement of the Federal Government to provide seed money, technical expertise, information and other services that reduce or eliminate market barriers, these results will not be achieved. Virtually all of these actions avoid government mandates or "command and control" regulations. They operate, instead, by working with businesses, industry, State and local governments and others in voluntary partnerships to remove market barriers that limit the current use of energy efficiency, renewable energy and advanced gas technologies. This allows the power of the marketplace to seize these economic opportunities. Because capturing these economic benefits while meeting environmental objectives is the cornerstone of the DOE actions, these initiatives are collectively known as Energy Partnerships for a Strong Economy. With the limited funding appropriated by the Congress, we have been able to achieve a great deal in the partnership area. Since October 1994, our new partners number in the thousands of utilities, businesses, consumer groups, and State and local government agencies. Over 1,000 more partners are in the process of joining our programs. Attachment 2 provides a status report on the more than 20 actions assigned to the Department. I will provide next some highlights for several of these programs. The Climate Challenge Climate Challenge is a voluntary joint DOE/Electric utility industry program that encourages utilities to develop actions that will reduce, avoid, or sequester greenhouse gas emissions. The program has enlisted 248 of the 766 utilities that expressed interest in joining last year. We expect that the Climate Challenge utility commitments made to date will reduce greenhouse gas emissions by 44 million metric tonnes of carbon equivalent in the year 2000. The program is championed by utility industry leaders because it is a flexible, affordable approach that will help prevent the need for future regulations. One of the Climate Challenge pollution prevention commitments made by Florida Power and Light generated revenues for their company of more than half a million dollars in only 9 months. Mr. Linn Draper, Jr., the Chairman of a Climate Challenge utility, American Electric Power, said that, "This voluntary, flexible initiative is the best way to tap the utility industry's technical skills and problem solving capabilities, while obviating the need for costly command-and-control requirements." Climate Wise Climate Wise is a joint program of DOE and EPA that encourages industry to adopt a comprehensive approach to reducing greenhouse gas emissions through energy efficiency and pollution prevention strategies. With relatively small Federal funding, the program is achieving very significant results. In the first few months of operation, small Federal investments resulted in industrial pledges to improve operating efficiencies. Dupont, Martin Marietta, Quad Graphics, Weyhauser, Fetzer, Georgia Pacific, Johnson and Johnson, and AT&T have made pledges and are receiving recognition and assistance from Climate Wise to implement their energy efficiency and pollution prevention actions. Their collective commitments exceed 20 million metric tonnes of carbon equivalent. Commercializing Renewable Energy Public interest in the Renewable Energy Commercialization solicitations aimed at providing funds to accelerate the widespread commercialization of photovoltaics, wind, biomass, and geothermal heat pump energy are exceeding our expectations. We have received nearly 400 requests and proposals-far more than we can possibly fund. We expect that up to 250 MW of new renewable electricity capacity will result from the competitive awards to be made later this spring. These collaborative efforts are public/private partnerships that really work because DOE provides the necessary seed money and technical expertise that inspires industry groups to participate in projects that will lower their costs of doing business in the long run. The large volume of commitments that such collaborative efforts engender attracts manufacturers and will increase jobs throughout the country. Utilities believe that by working in collaboration with government they can take steps now to make renewable energy affordable to find the least expensive most accessible and environmentally friendly sources of power for their customers. "At present the issue seems to be one of simply pumping up the volume", noted a New York Power Authority's Senior Vice President, "renewable resources and sustainable energy development are the wave of the future." Motor Challenge In the area of industrial energy efficiency, the DOE Motor Challenge program, a program that increases the market penetration of efficient motor systems through the use of showcase demonstrations, technical assistance, and user education, has attracted nearly 300 members to date. This program is educating manufacturers of the real bottom-line benefits of installing high efficiency motor systems, and providing the technical know-how and information to make these changes happen. Next month 25 Motor Challenge showcase demonstrations will be selected to receive DOE support to demonstrate that more efficient electric motor systems really work. By the year 2000, Motor Challenge is projected to result in more than five billion dollars worth of cumulative energy savings. Longer term, to the year 2010, Motor Challenge is expected to earn $17 billion in cumulative energy savings. The NICE3 Program The National Industrial Competitiveness for Energy, Environment, and the Economy program (NICE3), a program that uses small competitive grants that result in investments in energy efficiency and waste reduction technologies, is likewise helping companies become more profitable. Today, the average NIČE3 private sector investment generated by each dollar of Federal funding is approximately five times that invested. Rebuild America In the commercial and multifamily buildings sector, Rebuild America is DOE'S flagship program to improve the energy efficiency and productivity of the Nation's buildings through efficient retrofitting. It supports partnerships between community organizations, private businesses, utilities, and others at the local level. By 2000, Rebuild America will save building owners and tenants $650 million in reduced energy bills by retrofitting 2 billion square feet of floorspace in existing U.S. buildings. To date, more than 450 organizations have requested program applications. Also, the U.S. Conference of Mayors, representing 1,200 cities, has formed an alliance with DOE to promote energy efficient retrofits in city-owned, and later privatelyowned, buildings. This program is expected to form a similar alliance with the U.S. Chamber of Commerce. DOE's residential energy efficiency programs authorized under the Energy Policy Act of 1992 and other legislation respond to the needs voiced by both the lending industry and the homebuilding industry. Under our leadership, a public-private |