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We estimate that these five initiatives could cut U.S. carbon emissions in 2010 by about 300 million tons, about 60 percent of the emissions reduction necessary to meet our Kyoto target.

Chairman SENSENBRENNER. Mr. Geller, I'll give you the same admonition I gave to Montgomery: can you wrap it up in a couple of minutes or so?

Mr. GELLER. I can, Mr. Chairman.

In addition to this large reduction in carbon emissions, we estimate that these initiatives would yield energy bill savings that exceed the cost of the efficiency measures, with net savings for consumers and businesses of over $160 billion during the life of the efficiency improvements. This is equivalent to about $1,600 per household.

So, if we are smart about the policies and measures used to reduce greenhouse gas emissions, we can achieve substantial reductions, with net economic gain, not a penalty.

And finally, President Clinton has proposed expanding energy efficiency and renewable energy programs, as well as providing tax credits to stimulate the commercialization of advanced technologies, his so-called "Climate Change Technology Initiative." I urge members of the Science Committee to support this initiative, independent of opinions concerning the Kyoto Protocol. Put simply: these policies would be good for innovation, good for U.S. business, and good for consumers. If this technology-oriented approach is a success, we will not need to adopt onerous carbon taxes in order to meet the Kyoto Protocol.

Thank you very much for considering the views-these views. I would be happy to respond to your questions.

[The prepared statement and attachments of Mr. Geller follow:] [Mr. Gellers' prepared statement, biography, and financial disclosure statement.]

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TESTIMONY OF HOWARD GELLER, EXECUTIVE DIRECTOR
THE AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY

BEFORE THE SCIENCE COMMITTEE
U.S. HOUSE OF REPRESENTATIVES

ON IMPACTS OF THE KYOTO PROTOCOL ON U.S. ENERGY MARKETS
AND ECONOMIC ACTIVITY

October 9, 1998

The American Council for an Energy-Efficient Economy (ACEEE) is a non-profit
research organization dedicated to advancing energy efficiency as a means of promoting both
economic prosperity and environmental protection. We conduct studies, advise

policymakers, assist with energy efficiency program design and evaluation, work
collaboratively with business, disseminate information, and inform consumers. I appreciate
opportunity to appear again before the Science Committee.

In my testimony today, I would like to make three points:

1) The Energy Information Aduzinistration's (KIA) new study "Impacts of the Kyoto
Protocol on U.S. Energy Markets and Economic Activity" is seriously flawed.

2) Promoting greater energy efficiency can substantially reduce U.S. greenhouse gas
emissions while saving consumers and businesses money,

3) The Federal gov amment should provide greater support for the development,
and deployment of energy efficiency and renewable technologies for a
including but not limited to global warming concerns.

best of

The KIA study

FLAW #1. IGNORING ONGOING AND LIKELY POLICIES, PROGRAMS AND
TRENDS

The ELA study (in all cases) fails to account for ongoing and/or likely policies, programs, and associated technological trends that will lead to reductions in carbon cmissions. These ongoing and/or likely policies, programs, and trends include:

A) isaning new appliance efficiency standards, including new standards where

54-190 99-3

rulemakings are underway and are deemed high priority;

B) tougher Clean Air Act standards which have been announced and are in the
process of being implemented, especially new standards on particulates that will
reduce the cost differential between coal and natural gas-based power plants;

C) adoption of public benefits funds and renewable energy performance standards that maintain or expand utility investment in energy efficiency and renewable technologies in additional states;

D) expansion of the Energy Star programs, regional market transformation initiatives,
Motor Challenge, Steain Challenge, Combined Heat and Power Challenge, Climate
Challenge and Climate Wise programs, and other voluntary programs that are helping
to stimulate energy efficiency improvements;

E) growing willingness on the part of the private sector to take early action and make voluntary greenhouse émissions reductions, as witnessed by BP's recent announcement that it will voluntarily cut its GHG emissions to 10% below 1990 levels by 2010,

F) introduction of new energy-efficient vehicle technologies during the next decade, much as hybrid vehicles and fuel cell electric vehicles, which Toyota, Honda, GM, Ford, Daimler Benz, and other manufacturers have announced they will introduce;

G) rapidly advancing building-integrated solar technologies which are resulting in part from the million solar roofs initiative; and

H) strengthened building energy codes which a few states adopt every year, as well as strengthened model energy codes which serve as the basis for upgrading state codes.

Ignoring these policies, programs, and treads inflates the amount of carbon canissions reduction that must be obtained through other means, thereby raising the level of carbon tax required in a tax-based analysis such as that performed by the EIA.

FLAW #2. EMISSIONS REDUCTIONS DON'T START UNTIL 2005.

FIA assumes the country waits until 2005, just three years before the first budget period starts, to begin emissions reductions. This ignores the reality of voluntary commitmen and early action, as mentioned above. It also is contrary to the Kyoto Protocol which ELA was supposed to have modeled. Article 3.2 of the Protocol states: "Each Party included in Annex I shall, by 2005, have made demonstrable progress achieving its commitments under this Protocol." But EIA assumes no demonstrable progress by 2005.

Forcing large emissions reductions in just three years results in higher costs than

would be the case if significant emissions reductions started sooner and were more gradually phased in as new buildings are constructed, vehicles and appliances manufactured and purchased, factories renovated etc. over a 10-15 year period. In short, waiting until 2005 to stant reducing emissions would be dumb and would be contrary to the Protocol.

FLAW #3. POOR TECHNOLOGY CHARACTERIZATION AND EXTREMELY
LIMITED TECHNOLOGICAL RESPONSE.

Outside of one "High Technology" sensitivity run, the ELA ignores or artificially limits key technologies for reducing GHG emissions in the utility, transport, buildings, and industrial sectors. About 75% of the carbon reduction in the low emissions cases comes from switching from coal-fired to natural gas-fired power plants, brought about in the FIA malysis by imposing a very large carbon fee. Once again this is a dumb approach coudering that there are a wide range of available energy efficiency measures that could redace eunissions at much lower cost and in many cases with a net economic benefit, especially if they are gradually phased in,

The ELA analysis also ignores a mumber of key technologies that are rapidly advancing and are either emerging in the marketplace or are expected to be commercially available within two to five years. For example:

• Cogeneration - the ELA study assumes minimal expansion of industrial cogeneration of electricity and thermal energy in the low emissions cases, in spite of rapidly improving cogeneration technologies and much greater reliance on cogeneration for both economic and environmental reasons in Europe.

o Fuel cells for stationary applications - the EIA study assumes no adoption of fuel cells for power generation in any of its emissions reduction scenarios for the next 22 years, in spite of rapid advances and great optimism in all assessments of this technology. In the real world, GE Power Systems and a small fuel cell developer are starting a joint venture to produce and distribute fuel cells for cogeneration in residences and commercial buildings, while companies such as Westinghouse, United Technologies, Ballard, and Sanyo have either started production or announced plans to introduce fuel cells for stationary applications.

o Hybrid and fuel call electric vehicles – outside of a "High Technology" sensitivity case, these technologies are ignored by ELA in its low emissions cases. Again, ELA ignores rapid developments in the real world including a hybrid vehicle that Toyota is producing in Japan and has announced will be sold in the United States in 2000, as well announcements by other major auto companies that they will be selling hybrid hicles by 2001 and fuel cell electric vehicles by 2003-2005.

The ELA study fails to include a scenario where new policies other than a carbon tax are adopted to comply with the Kyoto Protocol. There was no consideration of alternative policy instruments such new minimum efficiency standards, tax incentives, reverse-nentral fees and rebates, federal utility restructuring legislation with provisions to encourage greater energy efficiency and renewable energy measures, etc. Some of these policies have already been proposed by the Clinton Administration. They are no more controversial and in some cases much less controversial than imposing a high carbon tax. Without consideration of alternative policies, ELA has not provided a clear picture of the potential impacts of the Kyoto Protocol.

In spite of these serious flaws, the EIA study shows that a dumb approach to implementing the Kyoto Protocol-an approach that unnecessarily delays action, ignores ongoing and likely policies, programs and trends that are reducing emissions, and ignores or assumes minimal adoption of innovative technologies-would still have a negligible impact on U.S. economic growth if the carbon tax reverme is offset by reductions in either the income or social security taxes. Given this result, policy makers should ask "What could be the impact of a smart approach?" I address this question in my comments below.

Promotime greater

BONGY,

efficiency can substantially reduce greenhouse ga5

A strong commitment to cut U.S. emissions of carbon dioxide and other greenhouse gases (GHGs) does not need to be a drain on the U.S. economy, as some critics of the Kyoto Protocol have claimed. For example, over 2000 economists issued a statement last year which says in part, "Economic studies have found that there are many potential policies to reduce greenhouse gas emissions for which the total benefits outweigh the total costs."

Promoting better technologies such as more efficient appliances, lighting, vehicles, and industrial processes as well as renewable energy sources, rather than onerous taxes or heavy-handed regulations, is the key to cutting GHG emissions without harming the econoury. By taking a technology-oriented approach, the United States and other nations can create new industries and jobs, save consumers and businesses money, reduce all types of air pollution, and greatly reduce GHG emissions.

U.S. energy intensity (total energy use per unit of GDP) declined 34% during 197397; most of this decline was due to energy efficiency improvements. In spite of this progress, there is still enormous potential for cost-effective energy efficiency improvements in the United States. A new study by ACEEE titled Approaching the Kyoto Targets: Five

' "Economists' Statement on limate

e", Redefining Progress, San Francisco, CA,

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