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Document 1 of 10.

September 21, 2000, Thursday

SECTION: CAPITOL HILL HEARING

LENGTH: 18868 words

HEADLINE: HEARING OF THE SENATE COMMERCE, SCIENCE AND TRANSPORTATION COMMITTEE

SUBJECT: REDUCTIONS IN GREENHOUSE GASES

CHAIRED BY: SENATOR JOHN MCCAIN (R-AZ)

WITNESSES:

ANN MESNIKOFF, WASHINGTON REPRESENTATIVE, SIERRA CLUB;

JEFF MORGHEIM, CLIMATE CHANGE MANAGER, BP;

FREDERICK PALMER, GENERAL MANAGER AND CEO, WESTERN FUELS ASSOCIATION;

JOSEPH ROMM, DIRECTOR, CENTER FOR ENERGY AND CLIMATE SOLUTIONS;

LOCATION: 253 RUSSELL SENATE OFFICE BUILDING, WASHINGTON, D.C.

BODY:
SEN. JOHN MCCAIN (R-AZ): Good morning. Earlier this year we examined the science of global warming as a means of defining the issue of climate change. We followed that hearing with a discussion of the climate change impact on the United States, the national assessment report. Today we hope to examine a few of the many solutions or approaches to reducing greenhouse gas emissions, the suspected cause of global temperature increases.

I hope to have an honest and open discussion of these solutions so that the members of the committee can be better informed on our policy options as we look to the future and address this very important issue. Today's discussion does not represent, nor should it be implied, the totality of solutions available. Today's discussion represents only a sampling of these solutions.

I am pleased to hear that several companies are taking voluntary actions to reduce emissions and become more efficient in their operations. I know that these efficiencies often lead to cost savings, which further motivates their actions. Nevertheless, reduced emissions are helping the environment.

These actions are leading some critics to claim that industry is doing more on a voluntary basis than Congress. If this is true, then it is time that Congress steps up to the plate. The Federal Government will continue to support scientific research concerning climate change. However, we must depend on the industrial base of this country to implement these scientific findings. I would hope that they would apply their ingenuity by using technologies to bring about a cleaner environment.

I am pleased that our witnesses today represent those on the front line of industry implementing programs to reduce greenhouse gas emission. I am also interested in hearing about what else the government can do to improve the current situation or, again, if anything at all actually should be done.

Over the past two hearings, we have heard about the complexity of climate change and the difficulty of understanding the interaction between the atmosphere, oceans, and the land. I believe there are many questions yet to be answered. Many of these are further complicated by the mixing of politics and science. I hope to add some clarity to this situation by proposing an international commission of scientists to study climate change and to provide unbiased, sound scientific analysis to anyone in search of the facts on global warming.

We plan to introduce legislation in the near future to this effect. I hope others will rally and support it to help bring international understanding about this contentious issue.

I welcome all the witnesses today. Finally, there is only 2 or 3 weeks probably left in this session of Congress, so we may not have other hearings this year. I intend working with Senator Kerry and others to take up this issue again early next year since I have become convinced that there are changes taking place out there that we need to understand, and at some point we need to develop some kind of plan of action.

Senator Kerry.

SEN. JOHN F. KERRY (D-MA): Mr. Chairman, thank you very much for having these series of hearings. I really want to congratulate you on doing that. I think you are the only chairman in the Senate providing at this point any ongoing dialogue on this subject, and so I personally want to thank you because I think what it needs more than anything else, frankly, is leadership.

As you know, Mr. Chairman -- and I sort of tire of repeating it a little bit, but I say it as a preface to where I am coming from on it. I have been following this for a long time now through the work on this committee, beginning when the Vice President served here on the committee and he and I became interested in this as members of the subcommittee. Obviously, his views on it are now a matter of record internationally.

One thing we do not want to do is insert politics into it and I do not want to do that. But what I do want to underscore is that the findings of the last years -- I have now followed the emerging science since the 1980's and I have participated in the negotiations for the United Nations Framework Convention. I have been to Rio, been to Buenos Aeres, been to Kyoto, watched this emerge, and I have talked and met with people I have enormous respect for: John Prescott, Deputy Prime Minister in England, others who are sort of heading it up, and many people on the continent, who just have built a consensus.

An enormous scientific consensus exists internationally on this subject. And while you cannot prove precisely that global warming has caused this particular event or that particular event, the following are all consistent with every single projected model of climate change:

Number one, the 1990's were the hottest decade on record.

Number two, the hottest 11 years on record have all occurred in the past 13 years.

Ranges of infectious diseases are spreading. Cases of infection are increasing around the world.

This shift in temperature that is accompanying that, with some parts of the world have warmed by 5 degrees Fahrenheit or more in the last 100 years, the average temperature of the entire planet having risen 1 degree.

Again, all of these consistent. In 1995, after a period of unusual warming, 4.5 degrees Fahrenheit above normal, a 48 by 22 mile chunk of the Larsen Ice Shelf in Antarctica collapsed, and in subsequent years we have seen remarkable sizes of ice falling off.

This summer the North Pole was water for the first time in recorded history. I think it was about a mile wide area of water, but you could not actually stand on the North Pole this summer.

And for the first time in recorded history, a trip was taken retracing a trip of yore which took 2 years, and this trip took about a month, to do the Northwest Passage because there is no ice.

The reason I say all of this, Mr. Chairman, is that the "solution" to climate change -- and we are going to hear from Senator Feinstein, we are going to hear from other members today -- has proven to be elusive. I just want to say the you there are two quick reasons, and I will be very quick. The first is obviously self- interest. Whether it is a country, a company, or citizens in a State, we all benefit from the status quo and everybody is resistant to change. At the international level, we are increasingly the butt of cynicism and doubts about our seriousness because other nations, developing nations, remain very critical of the developed nations for the past emissions and for their desire to hold onto the status quo, while we remain very suspicious of developing nations that think they can not be part of the consensus and do not have to buy into Kyoto, and so we are sort of locked into this funny gridlock now where things get worse and nobody is doing anything.

Within the United States, we have different industrial sectors defending their position, arguing each of them that the pollution cut should come somewhere else. Energy points to transportation sector, and so you go back and forth.

The second reason is the difficulty of the underlying problem. I know that some of the work of Dr. Romm and his colleagues, such as Amory Lovins, points to how existing technology has the potential to reduce emissions. I buy into that, I accept that.

But the challenge is using that technology domestically and internationally, and there you run into this huge political resistance because corporations and governments have invested billions of dollars in the current energy, current transportation, current manufacturing, and current building infrastructures, and those investments are intended to last 30 years or longer. So you have this enormous economic resistance to a reality that is growing around us in significant ways.

So the question for us, Mr. Chairman -- and that is why I so applaud your having these hearings and focusing on this -- is how we take this consensus that has been built internationally and how we translate a reality about a certain set of scientific facts into political action. It is going to take a massive educational effort. It is going to take wise and forceful political leadership, and we need the corporate sector to be part of the solution. We cannot make this a war between politicians and the economy. We have to harness the best creativity of our economy, the best entrepreneurial spirit of our corporations, to implement the solutions.

I believe we can do that and I hope we will do it, Mr. Chairman. The framework is there, but we are going to have to exert enormous political leadership consistent with good common sense in order to make it happen.

So again I thank you for your leadership on this and I look forward to these hearings.

SEN. MCCAIN: Well, I thank you, Senator Kerry. Your involvement predates mine by a number of years and that is why it is important for me and you to work together with other members such as Senator Brownback, who has shown a great interest in the issue as well.

Before we turn to Senator Feinstein, Senator Brownback.

SEN. SAM BROWNBACK (R-KS): Thank you very much, Mr. Chairman. Thank you, John, for your leadership that you have provided on this.

I would like to put my entire opening statement in the record.

SEN. MCCAIN: Without objection.

SEN. BROWNBACK: I just would point out a couple of quick things. Number one is I Senator Kerry has really encapsulated the issue quite nicely. I would hope that we would focus, not on where we disagree, but where we can move forward and progress. There is a lot of dispute about Kyoto. There is a lot of dispute about how we got to the place we are today. But there is not so much dispute about what we can do of common sense steps today to solve some of these problems and start down the right path.

That is what I see in the panel you have got here, is people talking about here are some rational steps we can start now moving forward. I have put in two bills, one to deal with -- both dealing with carbon sequestration, one on an international basis, one on a domestic basis. The international one would provide tax credits to companies that work to keep land from being developed, particularly rain forest areas that are big carbon sinks.

I am going to be going to Brazil to see one of these projects later this year, and I am hopeful that some other members can go as well. This is where private companies, along with NGO's, the Nature Conservancy, have set aside a very large tract of land. It is good for biodiversity and a number of other purposes, but it is also very good carbon sequestration, a carbon sink.

The second one is in U.S. agriculture, what all we can do in different farming practices to incentivize carbon sequestration and pulling carbon out and not releasing it back up. The science is developing well. You have got one presenter here today that is going to be commenting about that. At Kansas State University they are doing a great deal of research on how we can farm to fix carbon or carbon farming, as it is being referred to.

I put in a bill to incentivize that in the U.S., because I think we have got great promise here as well on pulling carbon out of the air, fixing it into the soil, that it is good for farming and it is good for getting some of the CO2 out of the air.

To me these are rational, common sense approaches that we can look at and say, well, I do not know about Kyoto Treaty, I do not know about how we got here, but I do know we have got some solutions that we could pretty much all agree on, and that is the track that I would hope we can move down.

I applaud your holding these hearings.

SEN. MCCAIN: Thank you.

Senator Feinstein, welcome and thank you for coming before the committee today. We are aware of your recent accident and we wish you a speedy recovery.

SEN. DIANNE FEINSTEIN (D-CA): Thanks very much, Mr. Chairman, Senator Kerry, Senator Brownback. I am delighted to be here this morning.

I would recommend, Mr. Chairman, that the committee consider three policies that would most comprehensively address the global warming issue. The first is increasing Corporate Average Fuel Economy standards, or CAFE for short, for our Nation's cars and trucks. The second is increasing the use of energy efficient vehicles, buildings, and appliances and expanding our reliance on renewable energy. The third is encouraging the Senate to take a leadership role and join the 29 other countries which have already ratified the Kyoto Protocol.

I would like to limit my comments this morning to fuel efficiency because I believe that improving fuel efficiency is the most important first step we can take. It produces the largest bang for the buck.

Earlier this year I spent a day at the Scripps Institute in San Diego meeting with various climate change and global warming experts, like Dan Kayan, the Director of the Climate Research Division, Ron Raminafan, the Director of the Center for Atmospheric Science, Michael Mollitur, the Coordinator of Climate Change at UC-San Diego's Institute for Global Conflict and Cooperation, and Charles Kannel, the former head of the National Science Foundation.

All said that there is overwhelming evidence to show that global warming is real and is happening now. Measurements taken in La Jolla, California, at Scripps, at the Institute of Oceanography, since 1925 and in San Francisco show arise in the sea level of 9 inches over the last 75 to 100 years at both locations. According to these scientists, these changes we are now seeing in the climate are unprecedented over a period of 400,000 years. So I think that is good evidence that there is a real problem.

Carbon dioxide emissions from vehicles in the United States exceed the total CO2 emissions of all but three other countries. Carbon dioxide is the number one greenhouse gas. Therefore, if you attack carbon dioxide you attack the greenhouse problem.

CAFE standards regulate how many miles a vehicle will travel on a gallon of gasoline. Better fuel efficiency simply lowers vehicular emissions of pollutants and carbon dioxide. There is what is known as an SUV loophole which allows sports utility vehicles and other light duty trucks to meet lower fuel efficiency standards than passenger cars. So they have higher standards than passenger cars, although SUV's are in fact passenger cars.

Fuel economy standards for automobiles average 27.5 miles per gallon, while the standards for SUV's and light trucks average 20.7 miles per gallon. So there is a 7 mile differential. When fuel economy standards were first implemented in 1975, a separate tier was permitted for trucks, which were not thought to be passenger vehicles. So it is easy to see that SUV's, which were thrown then into the truck category later and are predominantly used as passenger vehicles, escape the stricter standards.

Now, I believe there is no reason to think they should not have to meet the same CAFE standards as station wagons and other cars. Standards for cars have not increased in 14 years and the truck standards have essentially stated the same since 1981. But since many consumers have traded in their cars for SUV's, overall vehicular carbon dioxide emissions have begun to increase significantly.

If SUV's and other light duty trucks were simply required to meet the same fuel economy standards as automobiles, we would reduce CO2 emissions by 237 million tons each year. That is a reduction of 237 million tons each year. That would result alone in saving of a million barrels of oil a day, so it is a consequential change.

A provision in the transportation appropriations bill for the past 5 years has prevented the Department of Transportation from even studying fuel economy standards and whether those standards should be increased, and that is the product of the lobbying of Detroit. Finally this past June, Senator Gorton, Senator Bryan and I had a breakthrough on the floor and, thanks to a compromise we were able to reach, the National Academy of Sciences will be working with DOT to look at whether these standards can be increased without costing domestic manufacturing jobs and without compromising safety. Now, we were not able to achieve any kind of a resolution that said just go do it. It is a study. But up to this point we had not even been able to get a study, so it is just a small step forward.

I am hopeful that the study will disprove once and for all all the excuses used by car manufacturers and their allies to fight raising CAFE standards in this area.

In light of the fuel prices that we have been seeing at the pump this year, raising these standards would also be a big help to the country and to consumers. Closing the SUV loophole would not only save the United States the one million barrels of oil a day, it would also save SUV owners hundreds of dollars a year in savings at the pump. With gas hovering near two dollars a gallon, this is a big deal. I think it also shows that reducing our greenhouse gases can help consumers in very easy to quantify ways. This is quantifiable. We know what it will do. We know it is the largest single thing we can do the easiest.

Now, that is not all we can do. I hope we can explore how to encourage the production of alternative fuel, hybrid vehicle, and fuel cell vehicles. Cars and SUV's are not going to go away, but we can certainly find ways to make them run cleaner and more efficiently. Hybrid vehicles, which run partly on gas and partly on an electric battery that never needs recharging, are already on the market. I understand that fuel cell technology which would make zero emission vehicles, creating water as the only waste byproduct, are just a few years away.

If we can figure a way to get more of these vehicles onto the roads, we will undoubtedly reduce our country's carbon dioxide emissions by millions of tons and go a long way toward combatting global warming. I would hope that this committee would look at a Federal Government fleet purchase and whether we can find ways to ensure that these vehicles meet the highest possible fuel efficiency standards.

Federal vehicles alone comprise about 1 percent of all vehicles sold each year in the United States and local government and State fleets compromise another 1 percent. So if both together would agree to 1 percent of their vehicles being hybrid vehicles, essentially 2 percent of all of the vehicles on the road, government-issue cars, would have this attribute.

If government vehicles were required to achieve better fuel efficiency, it would make a real difference in reducing greenhouse gas and provide incentives for car and truck manufacturers to bring these vehicles more freely to market.

So I urge the committee to consider some of these solutions. What we wind up doing or not doing on global warming as early as the next Congress may well be evaluated for generations to come. I would hope that our children and our grandchildren will be able to look back on the country in this early twenty first century and say that the United States was a leader, not a laggard.

I thank the chair. I thank the committee.

SEN. MCCAIN: Thank you very much, Senator Feinstein. We will be working with you and we appreciate your long-time involvement in this issue. I know how important it is to the State of California as well.

SEN. FEINSTEIN: I thank you very much, Mr. Chairman.

SEN. MCCAIN: Did you want to say something?

SEN. KERRY: I would like to say something. I would like to thank Senator Feinstein for her testimony and for her leadership on this. I simply could not agree with her more, Mr. Chairman. The technology exists today. We can do this. I do not know anybody here who has not driven down a road and you have got some truck in front of you and it steps on the gas at a light and belches out incredible plumes of black smoke, particulates that you can see. You have to practically hold your breath in your own car to drive through it.

We have allowed a loophole to exist. It is an extraordinary loophole. It does not have to exist, and it exists frankly, Mr. Chairman, for one of the reasons that you have been such a leader on in pointing out to Americans, the connection between campaign contributions and what happens in Washington, and the amount of money that gets thrown out by interests that do not want these good things to happen.

The technology is there. I visited California and Los Angeles, went for a ride in one of your fleet, compressed natural gas cars, went out to the station where you could change. It is extraordinary how fast and easy it is. You see the infrastructure beginning to be built in California, the networks that you can get from here to there and refuel.

We should be doing that all over the country and the leadership should be coming from governmental fleet entities and from our effort to help put the infrastructure in place and create the tax incentives and the ability to do it.

So I thank you for your testimony today and I hope my colleagues will take note.

SEN. MCCAIN: Thank you.

Thank you, Senator Feinstein. Get well soon.

SEN. FEINSTEIN: Thanks very much, Mr. Chairman.

SEN. MCCAIN: Our next panel is: Ms. Ann Mesnikoff, who is the Washington Representative of the Sierra Club Global Warming and Energy Program; Mr. Jeff Morgheim, who is the Climate Change Manager at BP of Houston, Texas; Mr. Frederick Palmer, who is the General Manager and Chief Executive Officer of Western Fuels Association; Mr. Joseph Romm, Director, Center for Energy and Climate Solutions; and Dr. Norman Rosenberg, who is a Senior Staff Scientist, Pacific Northwest National Laboratory, Battelle Washington Operations.

We want to welcome all of the witnesses. Mr. Morgheim, is that a proper pronunciation of your name?

MR. JEFF MORGHEIM: Yes, it is, Senator.

SEN. MCCAIN: Mr. Mesnikoff, is that a proper -- Ms. Mesnikoff, is that a proper pronunciation?

MS. ANN R. MESNIKOFF: Yes, it is.

SEN. MCCAIN: Thank you. I will not ask the others.

We will begin with you, Ms. Mesnikoff, and thank you for joining us.

MS. MESNIKOFF: Thank you, Mr. Chairman, and thank you, members of the committee.

Certainly Senator Feinstein has made my job much easier. I was asked today to focus on the Corporate Average Fuel Economy standards for cars and light trucks and I think Senator Feinstein has been a leader on this issue for the past several years in Congress along with Senators Bryan and Gorton, and we certainly thank her for her leadership on this important issue and bringing us to the agreement we reached this past year to allow the National Academy of Sciences to begin a study.

But I would like to point out briefly on that point that, even with today's high oil prices, the Department of Transportation still cannot implement the Corporate Average Fuel Economy law. It cannot issue new standards for our cars and light trucks to reduce oil consumption and thereby reduce the greenhouse gas emissions that are coming out of our cars and light trucks.

SEN. MCCAIN: Why not?

MS. MESNIKOFF: It is an important step forward, but it is a study. It will not allow DOT to actually implement the law and do its job.

I would just briefly like to thank you for holding this series of hearings on climate change and I think this perhaps might be the most important because it is a serious problem. I think this map, which Sierra Club -- unfortunately, I do not have mounted -- Sierra Club produced with other environmental organizations, tells the worldwide story of global warming impacts. It tells about the fingerprints and harbingers of global warming from droughts, spreading infectious diseases, heat waves, and the like.

I think it is a story that demands action on what is a very serious pollution problem. And it is a pollution problem, and America's cars and light trucks are 20 percent of U.S. greenhouse gas emissions. They guzzle 40 percent of the oil we use and transportation is the fastest growing sector of greenhouse gas emissions in the United States.

I think that it is a pollution problem, and the good news is we can do something about it. I think Senator Feinstein made all the key points. I would just like to add a few points to what Senator Feinstein said. I think that actually a report that you asked the Government Accounting Office to do, Mr. Chairman, on CAFE standards which was released in August 2000 does conclude that raising CAFE standards can help reduce U.S. oil consumption and thereby reduce global warming pollution coming out of America's cars and light trucks.

I think the critical point to start is with light trucks. The loophole that Senator Feinstein referred to has been in existence since the original law was passed in 1975. Light trucks then were only 20 percent of the vehicle fleet. Now they are about 50. Minivans, SUV's, these vehicles did not really exist. Light trucks were work trucks. Now we see them being used as passenger vehicles in cities across the country.

A 14 mile per gallon SUV will emit more than 130 tons of carbon dioxide over its lifetime. The average new car will emit only 74 tons, but the new Honda Insight, which utilizes gasoline-electric hybrid technology, will emit only 27 tons.

Even Ford Motor Company has recognized that SUV's threaten the environment by emitting more global warming pollution and more smog- forming pollution and that they also pose a safety hazard for other motorists. I think closing the light truck loophole would slash CO2 emissions by 240 million tons of carbon dioxide a year when it is fully phased in.

It is an essential first step to take, but we must also consider raising CAFE standards for all of our cars and light trucks to even beyond 27.5 miles per gallon. That is a first step, but it is not the last step. The key point to make here is that the technology does exist. The gasoline-electric hybrid technology which Honda is using on its Insight vehicle today, which Toyota is selling in its Prius vehicle, which Toyota has already shown at the Tokyo Auto Show, could make a minivan get 42 miles per gallon, and Ford Motor Company, which has pledged to put hybrid technology into its small SUV the Escape, I think in the year 2004.

So I think we are seeing progress in fuel economy and that these technologies will allow our auto makers to be leaders in the world, to show that we can do even better than 27.5 miles per gallon, which has been in place for 14 years, that we can vastly improve the fuel economy of the American fleet of vehicles and make a real difference and show the world that we are no longer sitting around and waiting for somebody else to move forward, that we are going to take a real step, the biggest single step that we could take to curb global warming.

I think that it is also important to note that, while these technologies are being used today, we need to make sure that they are not being used on single vehicles to reduce oil consumption from single vehicles or oil consumption from a single vehicle or pollution, but to make sure that all vehicles are using this technology, so that we see real improvements across the board by all manufacturers in all vehicles.

The auto manufacturers are having real problems meeting the current CAFE standard, the 20.7 mile per gallon standard for light trucks. They are using all different kinds of games to meet that existing standard. Hybrid technology should not be one more tool in the toolbox to avoid making real improvements. We need to see dramatic changes and we need to see a higher CAFE standard.

Ford and General Motors have made pledges in regard to their light trucks, to improving the fuel economy of their light trucks. But again, we need to see all manufacturers moving forward and we need to make sure that the standards which are in the original CAFE law, maximum feasible technology, cost savings, the need to save oil, that all these factors are considered to get the highest CAFE standard and the best CAFE standard that we can.

The Sierra Club has been calling for a 45 mile per gallon CAFE standard for our cars and a 34 mile per gallon standard for our light trucks. I think that is an important step to take.

I think that the polls show that Americans consistently support using fuel economy standards to reduce our oil consumption and to reduce our greenhouse gas emissions. Two examples: The World Wildlife Fund from August of 1999, a poll of light truck owners showed that 73 percent believe that their light truck should be cleaner and fully two-thirds would pay a significant amount more for their next light truck if it were a cleaner vehicle. 70 percent believe that auto makers will not clean up their light trucks unless they are required to do so.

A Zogby International poll of predominantly independent and Republican voters in New Hampshire revealed that 75 percent favored increasing fuel economy to address global warming, even at an increased cost of $300 per vehicle.

I think the Union of Concerned Scientists has done studies that show that the gas-guzzling Ford Explorer, which is the most popular SUV sold in this country and obviously known in the news for other reasons these days, but that vehicle could go from 19 miles per gallon to 34 miles per gallon using today's technology, and that technology would cost about $900 and certainly at today's high gasoline prices a consumer would make that money back at the gas pump in about 2 years. These are cost effective ways of reducing our emissions and they should be taken.

I think briefly I would like to touch upon a couple of other things that we should be doing.

Certainly cleaning up our power plants, making our homes and our buildings much more energy efficient are steps we must take. Many electric utilities still use coal in this country. I would just point out that coal is especially a dirty fuel, producing nearly twice as much CO2 per unit of heat produced as natural gas and about a third more than oil. I think we can begin to convert these plants to natural gas, which is cleaner burning. We can do more by saving energy in our homes and in our buildings by issuing new energy efficient lighting, appliances, heating and air conditioning.

All these things can help reduce our demand for electricity and energy and make us more efficient. We can also begin to look at wind power and solar power and clean renewable energy that will again reduce our emissions of CO2.

I think in today's high oil price situation, I think that we should begin to look at CAFE standards because they will save us oil, they will reduce our U.S. greenhouse gas emissions. It is a sensible and essential solution to the global warming problem. It is something we can do now. The technology is here, hybrid technology. Fuel cell technology is on the horizon. We will see those vehicles on the road soon.

I have to point out that there are high costs to inaction. If we fail to act to curb global warming, we will impose on our children enormous impacts on their health, on our coasts, on agriculture, and our infrastructure. Then we have to look at the fact that, what kind of a price tag can we put on the lost lives to heat waves and spreading infectious diseases?

Experts have joined in emphasizing that global warming has begun and now is the time to take action. I would urge that we look at the fuel economy solution, to allow the Department of Transportation to begin to implement the law, to look at the study that the National Academy of Sciences does, but to move forward so that we can begin to save oil and begin to make a real dramatic difference in U.S. greenhouse gas emissions.

Thank you.

SEN. MCCAIN: Thank you very much.

Mr. Morgheim, welcome.

MR. MORGHEIM: Thank you. Mr. Chairman and members of the committee: My name is Jeff Morgheim and I am the Climate Change Manager for BP. I am based in Houston, Texas, where I manage BP's emissions trading system.

The BP system is the world's first global trading system for greenhouse gases and is the only trading system that has voluntary participation across a company's entire operations. The BP trading system is the product of a commitment to explore the use of trading systems to control emissions and is becoming a powerful tool that is helping BP meet its reduction target cost effectively.

I would like to recount how we developed the system. In May of 1997, Sir John Browne, Chief Executive Officer of BP, announced that BP would reduce its emissions of greenhouse gases and that we would launch an internal pilot emissions trading system. In July of 1997, BP teamed with Environmental Defense to develop that pilot trading system. Environmental Defense has played a very important part in our initiative and we would like to again express our thanks to Fred Krupp, the Executive Director, as well as Dan Dudek, the Senior Economist of Environmental Defense, for their contribution and their continued support.

The goal of instituting our system has come to fruition. On January 14th of this year the first trade was made with the sale of emissions to our refinery in Toledo, Ohio, and I am pleased to announce that BP has just traded its one millionth ton of greenhouse gases with the sale of permits from our western gas operations to a refinery in Salt Lake City.

You will find more information on the mechanics and the functionality of our trading system in my written testimony. Now I would like to take you live to our Internet site to demonstrate the trading system for you.

[Screen.]

What you are seeing is the home page for the trading system, which contains key price data at the top of the screen, as well as the total volume that has been traded to date. As of right now, we have traded roughly 1.2 million tons of greenhouse permits, which are measured as carbon dioxide emission equivalents.

What I would like to do for my demonstration today is actually put a bid on the system --

SEN. MCCAIN: We are going to join Senator Brownback and get a little closer.

SEN. BROWNBACK: My eyes are not that good.

SEN. KERRY: Mr. Morgheim, why do you not explain exactly what the effect of a trade is, why it is beneficial, what it means.

MR. MORGHEIM: Okay, I will answer that. The purpose of our trading system is that BP is committed to a reduction goal. We are going to cut our emissions by 10 percent from 1990 levels by the year 2010. The purpose of the trading system is to take our annual emission targets and then allocate that to each business unit, and we have over 150 around the world, 55 percent of our assets based right here in the United States.

What the trading allows us to do is to let those business units that have very low-cost reduction options make more investments in carbon dioxide reductions and then sell those permits to business units who may be growing so fast that, even if they deploy the latest technology for controlling their emissions, they are nonetheless going to rise above their emission targets.

So what this allows us to do is make the right investment in the right place, so that we hit the target as a company and we do it cost effectively. That is the spirit behind the trading system.

SEN. MCCAIN: Proceed.

MR. MORGHEIM: Before I put a bid for the Gulf of Mexico deep water exploration, what I would like to do is find out how the market is behaving today.

[Screen.]

I apologize for the delay here. We are live, so we have to put up with things like modems and such.

What you see here, the red dots are offers to sell permits. So these are business units who are emitting less permits than they were allocated, because they have taken reductions in their emissions through energy efficiency or other steps. The green triangles are bids to purchase.

What we see here is a very active market. The screen would show along the X axis the price per ton and the end of the graph runs from zero dollars per ton to $20 per ton on the X axis. The Y axis runs for quantity of tons that are being traded. So you can see we have a very active market, and I am pleased to announce that having more green dots than red triangles means that more businesses than not are actually beating the reduction targets and so it looks like a buyers' market for permits because we are overdelivering on our reduction commitment.

Now, I would like to get an idea of how the price has behaved recently before I set my bid. What this graph shows is a plot of all the traded prices for permits from the trades that have been executed, the one million tons that have been traded. What we see is that here in the past 1 or 2 weeks the price has really come down. I think what this is indicating is that business units are now getting comfortable that they in fact are going to beat the reduction targets, so there is now an oversupply of permits in the system. And like any market, it is driving that price, driving that price down.

So now, just to round this out I am going to go ahead and put a bid on the system. Just to refresh our memories of what the system looks like, we had the four offers out here ranging from two dollars a ton to five dollars a ton. For demonstration purposes only, because I think the business unit would be very upset if they found me buying permits on their behalf, I am just going to go ahead and put in a bid for 10,000 tons at two dollars a ton. The trader can also select how long they want the bid or offer out on the system.

We are going to leave it out there for a month, submit the bid, and we now see that the bid is registered in the system, and if I go back to the active bid sheet we now see my bid of 10,000 tons at two dollars a ton.

I think in conclusion -- that ends my demonstration for this part of today's hearing. But I think in conclusion it is important to point out that trading alone does not deliver emissions reductions. The trading system, however, is providing our managers with the incentive to attack emissions with innovation.

As I stated earlier, this year we not only launched the full trading system across our company, but we traded our one millionth ton. This comes just 2 years after launching our pilot trading system and our commitment to a company-wide system.

We have learned many lessons along the way. The most important lessons are to keep things simple and to get started, to capture learnings and continuously improve the system. Practical experience we have found has been the key to developing a robust system.

Mr. Chairman, I would like to end by saying that BP's experience is that trading can be a powerful tool in managing emissions in a cost effective way. We have not stopped learning and BP seeks to continuously improve our trading system, and we stand ready to share our experience with all interested parties.

Thank you for the opportunity to share our system and our learnings with you today.

SEN. MCCAIN: Thank you, Mr. Morgheim. That is very interesting.

Mr. Palmer, welcome.

MR. FREDERICK D. PALMER: Thank you, Mr. Chairman.

SEN. MCCAIN: Would you pull the microphone.

MR. PALMER: Thank you, Senators.

On a personal note, if I might, I grew up in Phoenix. I have spent 30 years here in Washington, but I also spent 7 years at the University of Arizona undergraduate and law school, and I have followed your career with interest and pride.

My grandfather, E. Paine Palmer Senior, was the first surgeon in the Territory of Arizona and my grandmother, Bertha Louise Palmer, was instrumental in starting the Herd Museum and the Phoenix Symphony. So I am an Arizonan stuck in the East. I like it here, but I love going to Phoenix, particularly in the time of year that is coming at us.

SEN. MCCAIN: Thank you, Mr. Palmer, and thank you for the contributions of your family to our State.

MR. PALMER: Thank you, sir.

I do appreciate being here today and let me open by saying what I can endorse and what I am for. Somehow, Senator, I find myself in the middle of a very large argument and --

SEN. MCCAIN: I think you need a little bit closer. There you go.

MR. PALMER: I have followed the developments in the Senate with interest. I would endorse the Murkowski-Hagel-Craig approach embodied in S. 882 and S. 1776, which would entail the Federal Government being involved in a major way in research and development for carbon sequestration from fossil fuel systems that we currently utilize today, and also Senator Brownback's approach with respect to changing ag practices and forestry practices for carbon sequestration I can heartily endorse as well.

I think, Mr. Chairman, as we go forward in this very difficult issue we will find that our options are limited because of what is currently going on in energy markets, and I want to address that today.

There are two billion people on Earth that do not have electricity and there are another four billion people scheduled to be on Earth in the next 30, 40, or 50 years. People every day, of course, in living their lives make carbon dioxide and when we use fossil fuels we make carbon dioxide.

I notice this morning from the news that Vice President Gore is calling on releasing oil from the Strategic Petroleum Reserve and Secretary Richardson is on Capitol Hill today talking about oil. But our focus really should not be on oil in the United States on energy. Our focus needs to be on electricity, because electricity is what has driven our economy for the last 20 years, and specifically the coal plants that were built as a part of President Carter's Project Energy Independence. My organization arose out of that time and that is how I got involved in this business and in this debate.

We have had these coal plants that we built in the interior part of our country providing cheap electricity to the U.S. economy for two decades and we have been living off of them. We invested over $125 billion. There are over 400 power plants that burn a billion tons of coal a year or close to it.

In California, where they have had a train wreck on electricity supply and prices, they have not built power plants in the last 10 years. They have been living off the coal-fired electricity in the Rocky Mountain West and the Four Corners region, in Arizona, Colorado, New Mexico, up into the Plains States. Those power plants have been used up. That surplus capacity is gone, and people out there are going to have to start building additional power plants.

What is driving this, what is driving electricity demand in the United States, is the wonderful revolution that is represented by the Internet and by the broadband revolution. We did a study last year called "The Internet Begins With Coal," by Mark Mills. It has had some impact and we are proud of that. But Mark identified that 8 percent of electricity demand in the U.S. goes to Internet-related consumption, and that number now is estimated to be 13 percent.

It is undeniable when you go to cities in the West, to Phoenix, to Denver, when you look at this region -- I live in Northern Virginia -- at what is going on, that the technology revolution is driving electricity demand in a major way.

Intel's vision is for an additional one billion people online within the next several years. That is the equivalent of burning another one billion tons of coal a year. Their estimates for broadband Internet access range up to a billion four hundred million people by 2005. That is the equivalent of another one billion tons of coal burned per year.

All of this activity generates economic growth. You cannot go anywhere in the Rocky Mountain West and not see remote areas where economic growth is occurring today and fiber optics are being put in for Internet access. It is happening before us as we sit here today. It is undeniable.

All of that is going to create more and more carbon dioxide emissions by people living their lives in normal ways, both here and abroad. Abroad it is just starting. In Western Europe it is just starting. Asia is going off the graph. These are undeniable realities, Mr. Chairman.

There are reasonable people, people in good faith, that are very concerned about more CO2 in the air and I understand that and I accept that, and we need to deal with that and we need to create an insurance policy to meet potential climate change threats in the future. But the only way to do that, Mr. Chairman, is to utilize what we use today. Renewables are not going to do it for us. We are going to have to burn coal, oil, natural gas to make electricity.

There are other ways to make electricity. New technologies are very promising. All of those things are true. But more people will mean more CO2, particularly in the high tech revolution we are in today with the wireless and broadband revolution of the Internet.

So therefore, Mr. Chairman, I would embrace an approach with an activist Federal Government involved in this issue in a major way, continuing to do research and development with respect to renewables, continuing to do research and development with respect to climate, watchful waiting, at the same time developing carbon sequestration techniques from existing fossil fuel systems if those should prove to be necessary.

With due respect, Mr. Chairman, I do not believe the science today says it is necessary.

But we have a lot to do between this point and that in any event in developing the technologies. So it is not particularly useful to say today we have to do this, that, or the other in terms of changing the way we live, because it is not going to happen. People are going to continue to live the way they live. Electricity demand is going to continue to grow. Economic prosperity is going to continue because of the high tech revolution.

All of that means more CO2 in the air, Mr. Chairman, and the role of the government should not be to tax, cap, and limit in terms of what we are doing and how we live our lives, but to develop technology solutions should that prove to be necessary as we go forward in the years to come.

Thank you, sir.

SEN. MCCAIN: Thank you, Mr. Palmer.

Dr. Romm, welcome.

DR. JOSEPH J. ROMM: Thank you, Mr. Chairman. It is actually "ROME".

SEN. MCCAIN: "ROME"; I apologize.

DR. ROMM: I really appreciate you holding this hearing today. I do agree with you that businesses are leading the way now on climate change. I think you heard the fine work that BP is doing. I appreciate the mention, Senator Kerry, of my work and my former boss Amory.

I do want to talk about how businesses are leading the way toward cost effective greenhouse gas solutions. But I feel incumbent upon myself to take a couple minutes to refute this bizarre myth that the Internet is an energy hog. Mr. Palmer speculates that the digital economy is making us use energy less efficiently and that the Internet makes it harder for the Nation to reduce greenhouse gas emissions. This speculation is the opposite of the facts.

Let me just give you the key chart here. If you cannot see it, I do have it photocopied. You may want to raise that a little bit if you can. What this is, this is a set of bar charts which looks at really one of the most amazing set of facts to come across the U.S. economy in a very long time.

The left-hand bars are the annual growth rate for electricity, energy, CO2, and GDP for the period 1992 to 1996, which I would call the immediate pre-Internet era. The red bar chart is the same electricity, energy, CO2, and GDP annual growth rates for the 1996 to 2000 period. What is amazing that has happened in the last 4 years is that we have had higher GDP growth, which I think everybody knows and is delighted about. What is particularly amazing is that electricity growth has actually slowed. Energy demand has slowed. This is the growth.

In the first 4-year period energy demand was growing about 2.3 percent per year for 4 years. Now it is growing at 1 percent per year for 4 years. CO2 growth has been almost cut in half and electricity demand growth is down.

SEN. KERRY: Energy growth, you are saying all energy growth?

DR. ROMM: In the United States. I am sorry, this is United States. This is all United States data. What has happened in the last 4 years is the rate of growth of energy demand in this country has slowed by more than a factor of two since the advent of the Internet.

SEN. KERRY: But yesterday Secretary Richardson said fuel demand, oil demand, is up 14 percent.

DR. ROMM: He probably was giving a statistic starting in the year 1990. Fuel demand is certainly not up 14 percent in the last couple of years.

We can have a long discussion about exactly what is going on in the energy economy. These numbers come from the Energy Information Administration. What I think we see here -- and I might urge you to have a separate hearing on this specific subject. I have actually labeled this new trend in a paper I did about a year ago, "The New Energy Economy."

Clearly, if this is a trend it is a very big deal, because it suggests that one can have higher GDP growth and lower CO2 emissions growth, and that obviously would be a very big deal.

I know this committee has played a very important role in accelerating the use of the Internet and I do think it is a shame that Mr. Palmer and his colleagues Mark Mills, Peter Huber have been telling journalists, members of Congress, and business people that the Internet is bad for the environment when the evidence shows that it is not clear.

I think there are, by the way, two reasons why the Internet economy allows us to have higher GDP growth and lower greenhouse gas emissions growth. The first is that the information technology sector, which includes computer manufacturing and software, just is not very energy intensive. So you can have growth in this sector that does not use as much energy as growth in areas like steel manufacturing and chemicals.

But the second -- and I think this is a critical point that people are just starting to catch on to -- the Internet economy makes the overall economy more efficient. As more companies put their supply chain on the Internet and reduce inventories, overproduction, unnecessary capital purchases, and mistaken orders, they achieve greater output with less energy consumption. I think the Internet is pulling out inefficiency from the macroeconomy of the United States.

As Fed Chairman Alan Greenspan told Congress last year: "Newer technologies and foreshortened lead times have thus apparently made capital investment distinctly more profitable, enabling firms to substitute capital for labor and other inputs" -- which from my point of view includes energy -- "far more productively than they could have a decade or two ago."

I do think that the positive impact of the Internet is going to continue in the future, in part because -- a very new trend -- companies are starting to look at how they can manage their buildings remotely over the Internet. Companies like Enron are looking into this. You are probably also hearing about utilities doing experiments in remotely monitoring home energy management so that we can lower consumption when people are not there.

I know that I was invited here to talk about what businesses are doing and I do want to comment on that. I think, Senator, that you are absolutely correct that businesses have really taken a leadership role. Let me just quote from the Wall Street Journal in October 1999: "In major corners of corporate America, it is suddenly becoming cool to fight 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."

I myself wrote a book that came out last year that you may have seen, "Cool Companies: How the Best Businesses Boost Profits and Productivity by Cutting Greenhouse Gas Emissions," which has about 100 case studies. In fact, the lead case study is Malden Mills. I am sure you have met Aaron Fierstein, a remarkable person. His mill burnt down and, instead of relocating, he kept the employees on the payroll and rebuilt it. That is the well-known story.

What people do not realize is that when he rebuilt he put in onsite generation for combined electricity and heat, he put in very sophisticated day lighting and heat recovery, and he probably now has the greenest, most energy efficient textile mill in the world. I asked him why he did this when he was struggling to rebuild his company and he said: "Over the long term, it is more profitable to do the right thing for the environment than to pollute it."

I would say, however, he has one advantage over many other companies: It is a privately held company, which allows him to think longer term than many other companies.

My Center for Energy and Climate solutions is helping a number of Fortune 100 clients do the same thing. We partnered recently with World Wildlife Fund in a program called Climate Savers, and Johnson and Johnson and IBM have both pledged to make substantial greenhouse gas emissions cuts, really following the lead of John Browne and British Petroleum. Johnson and Johnson pledged to cut greenhouse gas emissions 7 percent below 1990 levels by 2010 even as their business is very booming.

IBM has already achieved an estimated 20 percent reduction in carbon dioxide emissions through energy conservation efforts and pledges to continue its remarkable efforts.

Dupont, one of the largest energy users in the United States, pledged publicly to reduce greenhouse gas emissions 65 percent compared to 1990 levels by 2010. Even as they grow 60 percent, they are going to keep energy consumption flat over those two decades, and in 2010 they have committed to purchase 10 percent of their power from renewable energy.

So you see many of the best American businesses believe that reducing greenhouse gas emissions is fully consistent with good business practice. The world is changing. Try to guess which CEO recently called climate change "without question the single greatest environmental challenge we face." He also said: "We cannot proceed under the false reasoning that oil and gas will forever be the central energy resource of our planet." That was Peter Bejour, CEO of Texaco, in June of this year.

He went on to say: "We are moving from being a commodities company to being a company that provides energy solutions. This then is the emerging profile of our industry, one that will harness the profit motive in the service of the environment."

Businesses are taking action today in part because government made wise investments in the past decade in clean energy technology. Indeed, the fuel cells, microturbines, and photovoltaic companies whose sales are rising and whose stock prices are soaring all had their start in government programs. It is important that we keep this R and D pipeline going and encourage these technologies in the marketplace.

I would say in the closing days of Congress I would urge you to support appropriations bills and tax incentives for clean energy technologies. Not only will the environment benefit, but so will the economy.

I think, in conclusion, it is increasingly clear that reducing greenhouse gas emissions is much easier for businesses and the country than most people thought. The sooner the Nation as a whole acts, the lower the cost will be. Perhaps most importantly, since it is very clear that the nations of the world are committed to act on global warming and some of the leading businesses are, the country that leads the way in reducing greenhouse gas emissions and getting those technologies into the marketplace is going to capture the lion's share of what promises to be one of the biggest job-creating markets of this century, which is clean energy technologies.

There are going to be maybe $10 trillion in energy investments in the next two decades alone. Clearly, people want energy, as Mr. Palmer said. But what they most want is clean energy and they want to minimize greenhouse gases. So I think the United States is poised to be the leader in these technologies and improve the environment and, as Senator Feinstein said, many other benefits -- reduce the trade deficit in oil, reduce urban air pollution. So this is really a win- win if we have a coherent, aggressive strategy.

Thank you very much.

SEN. MCCAIN: Thank you very much, Dr. Romm.

Dr. Rosenberg, welcome.

Do you want to give him the microphone there, please.

DR. NORMAN ROSENBERG: Thank you. Thank you, Mr. Chairman, Senators, for the invitation to participate in this hearing.

Most of the rise in the carbon dioxide concentration in the atmosphere 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 are 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 now residing in the atmosphere through the initiation of improved agricultural practices, like 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, which I hope you can see from there -- maybe you could raise it, push it up; there you go -- is one fancy technology for getting carbon out of the air and putting it in the soil. Plants capture carbon dioxide from the atmosphere, convert it to cellulose and other organic materials. When the plant is harvested, the litter on the soil can be incorporated into the soil, leaving carbon. 50 percent of organic matter is carbon. And the roots of the plants leave carbon in the soil.

Can we have the next one, please.

[Screen.]

Currently the carbon concentration in the atmosphere is increasing at about 3.4 billion tons per annum. If you can see down below, it is possible to put carbon back in the soil at rates as high as 2.5 tons by the introduction of biomass crops such as switchgrass. The Conservation Reserve Program lands are adding carbon to the soil at a rate of about one ton per hectare per annum, and so on. It can be done. This is not a pie in the sky technology. In fact, farmers do it when they can, because organic matter, carbon, in soil improves tillage condition, improves fertility, and improves productivity.

Can we have the next one, please.

[Screen.]

This is the result of an economic model produced in our laboratory which shows -- and I believe you have it in the written testimony. The number on the left, we are now emitting about 8 billion tons of carbon per annum. If business as usual prevails throughout this century, we will be emitting over 18 billion tons of carbon into the atmosphere every year.

In order to not allow the concentration of carbon in the atmosphere 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, and that is what the bottom wedge in this graph shows. However, between business as usual and the bottom part of the growth you can see that there are about 10 billion tons that need to be captured.

Well, that will not be done by soil carbon alone by any means. The red wedge is energy intensity. It is improving the efficiency of automobiles, refrigerators, and everything else. The fuel mix means going more to gas and away from coal, solar power, biomass, and many others.

But you notice that brown wedge over there, which is about 40 or 50 billion tons over the century, is particularly critical at the first two or three decades of this century because it allows time for existing technologies, existing infrastructure, to live out its design period and therefore lowers costs of replacement and controlling carbon dioxide.

Now, that is a strategic reason for emphasizing the role of agricultural soils and forests in capturing carbon. We know it 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 carbon rotates through the soil, it can be returned to the atmosphere very quickly unless the soil binds it very effectively.

So there are research requirements about how to keep 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 for hundreds of years. Some of the carbon in soil indeed resides there for hundreds of years, if not even a thousand years.

In addition, there is great opportunity to improve the degraded and desertified lands of the world by applying carbon sequestration technologies. There are two billion hectares of such lands around the world. That is five billion acres of these lands, 75 percent in the tropics.

Soil carbon sequestration can help, can be a very useful means of helping the nations that are struggling with this problem to be in compliance or to address the issues of desertification and at the same time make a contribution to controlling climate change.

There is a lot of research needed to find ways to counter desertification, recover soil productivity. This does offer these nations a chance to come to the table on global climate change control.

The big problem 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 programs to sequester carbon. There will be trading mechanisms. 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 some kind of method for verification, some kind of reliable techniques for monitoring.

We have such techniques, but they are tedious, they are expensive, involve sampling and taking 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 created centers for research on enhancing Carbon Sequestration In Terrestrial Ecosystems. The CSITE system, we call it, is managed by Oak Ridge National Laboratory and my laboratory, the Pacific Northwest Laboratory, and we involve many universities and other organizations in the cooperative research we are doing. I will not read off the names to save time.

In addition, the Department of Agriculture has recently provided funds for the creation of a consortium of land grant universities that will address this question as well. We call it CASMS, which stands for Consortium for Agricultural Soils Mitigation of Greenhouse Gases. It is centered at Kansas State University and involves, as I say, about ten land grant universities. Our laboratory is also associated with this, and the research being done at CSITES under Department of Energy auspices and CASMS is coordinated. There are many interactions.

I would 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 that soil sequestration is not a panacea. It will not solve the problem by any means, but it does play or it can play a strategic role over the next few decades and can be important throughout the century, and it is a win-win situation. When you put carbon in soils, you are reducing the threat of greenhouse warming and you are doing 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, Senator.

SEN. MCCAIN: Thank you, Dr. Rosenberg.

Ms. Mesnikoff, Dr. Romm in his written statement said: "The fundamental relationship between energy use and economic growth in the United States has been changed permanently by the spread of new economy technology to every corner of our lives." Do you agree with that statement?

MS. MESNIKOFF: I think I would agree with that statement, and I think that, going back to the issue of the need to use more coal, I think we need to begin to look at the fact that most of the homes in this country still use incandescent lightbulbs, which are tremendously inefficient as compared to the compact fluorescent bulb, which would save about 400 pounds of coal over its lifetime.

So I think we have a long way to go to improving energy efficiency before we start pointing the finger at the advanced technology, the Internet, as an energy hog.

SEN. MCCAIN: Mr. Palmer, do you agree with Dr. Romm's statement?

MR. PALMER: Yes, sir, I do.

SEN. MCCAIN: Mr. Morgheim, if you had it to do over again -- Mr. Morgheim, if you had it to do over again, what would you do differently than when you started 2 years ago?

MR. MORGHEIM: I would probably have to say that we would have definitely taken the path of doing a pilot system first, starting small. At BP we try to do, learn, do, and repeat that cycle to improve the system.

I think what is critical for us and probably something that we would have done slightly differently is that the key to any trading system is having monitoring and verification systems in place, which has been brought up today. I think we have gone through a process of learning and doing on our data that we are glad we did, but we probably would have spent a little more time on the actual measurement side of the emissions earlier.

But we now have concluded an audit with external auditors who are now verifying our emissions and have now gotten us to where we have a robust and verifiable system.

SEN. MCCAIN: Dr. Romm, I do not disagree with your assessment there. In fact, I have a friend or an acquaintance and friend who owns a big trucking company, and he has described to me how in this really fundamental business that no one uses high tech, that through the use of information technology their inventories have gone down, their tracking of their cargo goes up, their maintenance of the trucks is dramatically more efficient.

It is a remarkable story. A lot of Americans do not appreciate how this information technology has been transferred into some of the fundamental kinds of industries or corporations in America that provide goods and services that we thought of in a traditional way.

But at the same time, the economy is booming so much and the energy demands are growing so much. Is that not a counterbalancing or a counterweight to the rather optimistic view of the reduction in the growth of energy requirements? But the energy requirements, thanks to a booming economy, continue to grow, even though the rate of growth is slow. Yes, no?

DR. ROMM: I think there is no question that, if what you are asking is is the Internet going to solve the problem, I think the answer is clearly not. I think that it is pretty clear that the rate of growth has slowed. I personally think it is likely to continue at this slow rate. But clearly CO2 emissions are still going up and CO2 emissions are the principal U.S. greenhouse gas. So I think there is no question that the Federal Government is going to need other policies if we are going to restrain greenhouse gas emissions.

I just believe that the data suggest and the work that I have done suggests that it will be easier to reduce greenhouse gas emissions when we get serious about it because, frankly, the Internet is high quality, real-time information and more information clearly substitutes for energy and materials and allows people to do things more efficiently. Trucking companies auctioning off empty space on their trucks so they can be at greater capacity, like your friend was talking about.

So I think that there is no question that the United States needs to have a set of policies focused on CO2, and we can certainly talk about what those would be. So I would say it is a good news-bad news story. But there is no question that the last 4 years have shown that you can have higher economic growth and lower emissions growth. The minute we get serious about CO2, I think that CO2 bar could shrink down to zero. I think there are a lot of very inexpensive --

SEN. MCCAIN: How do we get serious about it?

DR. ROMM: Well, I think we need legislation to have a nationwide restructuring bill, utility restructuring bill, which would create, for instance, a renewable portfolio standard. Around the world, wind power is the fastest growing form of energy, 25 percent per year growth in the 1990's, followed closely by photovoltaics, 20 percent per year. In this country it tends to stagnate because we have a built-out electric grid, it is hard to compete.

So I think what we need to do is have specific incentives for clean energy technologies.

There are tax --

SEN. MCCAIN: We tried some of that in the seventies and it did not work too well. It worked, but not too well.

DR. ROMM: Well, I think -- yes, and I think the difference is twofold. First of all, most of those technologies in order to be competitive in the seventies required oil prices to keep going up and up and up and up, which they did not. Right now photovoltaics and wind are basically very close to being competitive and I think they only need a very short window to really push them over the threshold.

Wind power now, the next generation turbine that my old office when I was Acting Assistant Secretary of Energy was doing, is now down to about 3 cents per kilowatt hour for wind power. As you know, in Texas they are about to put on in the next 2 years about 800 megawatts of wind.

So I think I am not saying that the Federal Government has to spend a lot of money. What I am just saying is that there is this window of opportunity to get some of these technologies into the marketplace. The same with hybrid vehicles. A tax cut over a few years to basically leapfrog over this period when new technologies cost more.

I think we have to look very seriously at the grandfathered coal plants. We made a deal in the Clean Air Act a long time ago that we would grandfather these coal plants under the assumption, to give them, frankly, a window of opportunity to phase out, as you know, so that we could then transition to cleaner technologies. Nobody knew that they would be kept on line, like some heart patient hooked up to some machine, for decades and decades and decades.

The fact of the matter is that those grandfathered coal plants, which are exempt from the regulations that affect every other power plant in the country, generate most of the utility CO2 emissions, most of the utility particulates, most of the utility SOx and NOx.

So I am not saying we have to stop coal electricity tomorrow. What we need is a grand bargain where we say, how do we get an intelligent transition in this country away from the dirty stuff towards the clean stuff, which by the way the rest of the world is going to be buying in droves and it would be better if we were selling it to them than buying it from them.

SEN. MCCAIN: Do you agree with that, Mr. Palmer?

MR. PALMER: Mr. Chairman, I want to take issue with one thing that was said here. With respect to the coal plants, when he talks about being grandfathered on carbon dioxide, there are no CO2 regulations in any Federal agency today under law. There is none in any State regulatory agency with respect to electric power plants.

Carbon dioxide is not a pollutant. It is a benign gas required for life on Earth. When you talk about SO2 and Nox, those are conceptually different propositions.

With respect to this notion that we are going to phase out coal, I say here today that it is a nonstarter, with all due respect to the doctor. These power plants are needed.

SEN. MCCAIN: Could I interrupt one second. We know there are two different types of coal. I think Dr. Romm and some of us are concerned about the so-called dirty coal as opposed to clean coal. Is your statement a blanket statement?

MR. PALMER: Well, what I would say is this, that, first of all, EPA is extremely active right now on regulatory fronts with respect to coal. That is an understatement. I fully expect that every power plant, every coal-fired power plant in the United States, at some point in the next decade is going to be regulated with respect to SO2 and NOx. I fully expect that. Also, there will be an effort made on air toxics. It is too early to say how that comes out.

SEN. MCCAIN: Would you support such a thing?

MR. PALMER: Do I support it? I think you need to look at these things on the merits in terms of the benefit that that power plant is providing versus the cost associated with regulation. But as a general proposition, I absolutely support air regulation. I always have, I always will.

With respect to phasing these plants out, and I know the Vice President talks about that in his platform, his energy platform, that is not going to happen and should not happen. So long as a power plant that has been put in, fully paid for, can operate cleanly and provide cheap electricity to the American people, that power plant ought to be allowed to run in perpetuity. This notion that we should phase these coal plants out over time to me is a very, very bad idea.

SEN. MCCAIN: Ms. Mesnikoff, I am sure that you are in complete agreement with that statement.

MS. MESNIKOFF: Not exactly. I really do think that Joe Romm made an important point about the fact that the deal made in the Clean Air Act was that these plants were not going to be in existence in the year 2000 and that we would have cleaner technology providing the electricity that we use. That is not the case, but I think we do need to look at going to, switching to natural gas and boosting up the use of renewables in this country to produce a cleaner energy mix and not to continue to rely on dirty coal.

I think that one can get into the arguments about clean coal, but I think the issue is to transition away from coal use and to do it in a way that is good for the economy.

SEN. MCCAIN: I would not disagree with you that in a perfect world we would like to transition away from coal entirely. But there is certainly, at least from my understanding, there is a dramatic difference in the effects of the so-called dirty coal in a broad variety of ways as opposed to the cleaner coal. Do you agree with that?

MS. MESNIKOFF: Well, you can have cleaner, but the question is is it as clean as other things that we can use, that we have the technology to do. Certainly, cleaner -- a power plant that uses coal that is cleaner than a very dirty coal power plant is not as clean as a wind turbine. It cannot be. It is not as clean as a natural gas- fired power plant. There are a lot of things that it is not nearly as clean as, and I think that, as Joe said, it is not the issue of phasing out coal tomorrow. The issue is what direction are we taking the electricity production in this country, and I think there are a lot of cleaner ways we can do that.

MR. PALMER: Mr. Chairman, if I might with respect to that. In these debates we always look at the negative of these plants and never the positive. We always say: We can do this cleaner than that. Natural gas is very expensive. Wind power I have got no problem with, but it is not a good baseload supply for the United States, the huge electricity needs that we have.

These coal plants provide low-cost electricity to people to live their lives, people of low income, people on fixed income, to grow the economy. They have very real and tangible benefits. They never ever get discussed in the context of saying we can do something cleaner. Of course you can do something cleaner. You would have no automobile accidents if no one ever got in an automobile. But people are going to get in automobiles and drive them because they provide benefits. The coal plants provide benefits and that needs to be kept in front of us in this debate.

SEN. MCCAIN: Mr. Palmer, I reject that assertion. I think that if we were not concerned about those benefits we would advocate the abolition of all coal-fueled plants tomorrow.

MR. PALMER: I am sorry, Mr. Chairman. I was not referring to you.

SEN. MCCAIN: So I do not -- well, anyway, but I thank you for your point.

Finally, Dr. Rosenberg -- I understand that the Democrats have objected to us, so we are going to have to stop here within a half hour, I think.

But finally, Dr. Rosenberg, how do you increase soil carbon sequestration? What do you need to do to incentivize this program if it is as important as you say? And I agree with you.

DR. ROSENBERG: You have to have some kind of a trading mechanism where the emitters of carbon --

SEN. MCCAIN: Go ahead. I am sorry, doctor.

DR. ROSENBERG: -- where the emitters of carbon, such as power plants, pay farmers, essentially, let contracts to farmers to sequester reasonable quantities of carbon in the soil. In order to set up -- well, a good example is a group in Canada, western Canada, called GEMCO. A number of utilities got together 10 years ago and decided that they would support research to see how much carbon could be sequestered in soils and they would begin to look at mechanisms for trading carbon permits.

They indeed have been doing it in western Canada for some time and this year or last year began a program with farmers in Iowa to sequester, I believe -- well, I should not say, but I think it is 1.5 million tons of carbon. Through an insurance company acting as a broker, contracts are being let. So there is a monetary incentive.

In addition, there is a stewardship incentive because the practices that are good for sequestering carbon are good for the soil in many other ways and help to maintain productivity.

SEN. MCCAIN: Thank you. Senator Kerry.

I thank the panel. It has been very interesting and very helpful to us, I believe.

SEN. KERRY: Mr. Chairman, thank you very much. It is interesting, an interesting line of questioning.

I was struck, Mr. Palmer, by your conclusion, however. I sort of found it intriguing that in the balance you evidently balance simply that a coal plant gives a benefit and that benefit is low-cost electricity, and that to you outweighs anything else.

MR. PALMER: I did not say that, Senator.

SEN. KERRY: Well, is there not a balance here? I mean, you can heat your home cheaply and you can kill yourself cheaply.

MR. PALMER: I would totally agree with you that there is a balance, and I reiterate that I support air regulation.

SEN. KERRY: Well, but it is not just a question of air regulation, is it? Is there not a larger balance here? I mean, you talked about the benign aspects of CO2. When you say "benign" I assume you mean it does not have the particulate or noxious impact of the NOx or SOx. But you cannot ignore, can you, that it is not benign in the sense it is a greenhouse gas and if it is allowed to simply add to the greenhouse gas effect that is not benign?

MR. PALMER: I used the term "benign" referring to carbon dioxide because it is essential for life on Earth. Without CO2 we would not be here. So it is undeniably a good thing, as air and water is.

SEN. KERRY: Well, the greenhouse effect is also a good thing because without it we would not be here.

MR. PALMER: Correct, and CO2 is, other than water vapor, is the next largest greenhouse gas.

SEN. KERRY: But too much of it -- but the greenhouse effect is this minuscule film that in effect filters out a certain amount of -- I mean, allows the escape of a certain amount of the gas. But if you have too much of it, you do not have sufficient escape.

MR. PALMER: Well, you can have too much water and that would be a flood. So I would agree that you could postulate circumstances where you could have too much carbon dioxide. However --

SEN. KERRY: Well, it is not a postulation.

MR. PALMER: Yes, sir, it is.

SEN. KERRY: I heard you earlier say -- and this concerned me. I think you said: "I do not believe what the science says." I just want to understand where we are coming from in the debate. You do not accept the science, is that the premise on which you are here today?

MR. PALMER: The context for my testimony today is that, with respect to the vision of apocalyptic global warming, that I do not believe the science supports that.

SEN. KERRY: Do you have any science that suggests otherwise? Do you have any study or report that absolutely contravenes what the IPCC or other world consensus scientists have come to?

MR. PALMER: Yes, sir, we do. We have extensive scientific --

SEN. KERRY: These are the oil studies, the studies that have been commissioned by and produced by the industry itself?

MR. PALMER: Actually, my organization has been actively involved in this and we have a group we call the Greening Earth Society. Our web page is GreeningEarthSociety.org, where you can get a full panoply of why we think the way we do on CO2 and its impact on the biosphere.

I would add, too, that we have litigated this question on seven separate occasions in front of State electricity regulatory agencies in the 1990's when environmental externalities were the vogue in front of these agencies, and we never lost except in a very small way in Minnesota. The issue in those cases was an effort to increase the cost of coal-fired electricity on climate change concerns. We sponsored expert testimony and studies, there was cross-examination, there were written hearing records, and we never lost.

SEN. KERRY: Well, I would have to go back and review. I am not familiar with the particulars of the issue litigated and as a lawyer and a former litigator it is meaningless to me when you say we never lost. I do not know what the particular issue was.

MR. PALMER: The issue was the apocalypse.

SEN. KERRY: Well, nobody is -- when you say "apocalypse," I do not think people are predicting "apocalypse." But they are predicting very serious consequences in terms of what happens climatologically. When a particular area of the world suddenly becomes hotter, certain things happen. They happen to crops, they happen to forests, they happen with disease spread. A whole lot of things happen.

MR. PALMER: Yes, sir. All those things, all those things were at issue.

SEN. KERRY: Well, I will certainly review it. It is in direct contravention of almost every major political leader's held tenets. It is extraordinary to me that you would look at the prime ministers of every European country, smart people like Tony Blair and a host of others, major, major scientific analyses, all of which contradict that.

So I do not want to get into the debate here now in terms of that particular component, though I guarantee you l will review the basis of those so that I understand better what the analysis is. But it strikes me as so directly in contravention of every basic political decision being made across the world on the basis of scientific input and evidence.

But let us go further than that. Let me sort of suggest this. I assume you accept the science as to particulates and the damage done environmentally of dirty coal burning?

MR. PALMER: I would agree as a general proposition that the less particulates you put in the air the better.

SEN. KERRY: What about efficiency? Today coal is used to generate about 55 percent of our electricity, 36 percent of the world's electricity. But a typical coal-burning power plant converts only 33 to 38 percent of the energy potential of coal into electricity. The rest is just wasted; it is heat waste.

MR. PALMER: Yes, sir, I would agree that we -- and I believe the Federal Government should take a role in this, to provide research and development money for increased coal-burning efficiency.

With respect to existing plants, however, I would point out and I would draw the analogy between living in a house that you have been in for 20 or 30 years and going out and buying a brand new, energy efficient house, that there are economic tradeoffs associated with utilizing a plant that has lower efficiency versus higher, and those judgments should be made based on fuel prices and things of that nature.

I promise you this: There is plenty of coal to burn in inefficient power plants.

SEN. KERRY: Believe me, I understand there is plenty of dirty coal to burn, too, in inefficient power plants.

MR. PALMER: Yes, sir.

SEN. KERRY: And in many parts of the world that is exactly what they are burning.

MR. PALMER: That is true. We should take pride in our system in the U.S. because we do have clean coal-burning power plants versus other parts of the world.

SEN. KERRY: But nobody that I know in this debate is suggesting that we are going to stop burning coal within the next 10, 20 years. Clearly, whatever transitional process takes place envisions continued use of coal in a reasonable way, hopefully in a far more efficient, fluidized bed, coal-burning, two-cycle rather than one-cycle burning, etcetera.

MR. PALMER: I would agree with that.

SEN. KERRY: So given that, I am not sure why the industry is as defensive as it is about the potential for our helping to bring online much cleaner alternatives.

MR. PALMER: I have no problem with that.

SEN. KERRY: I assume you believe that wind or natural gas are cleaner. Are they cleaner?

MR. PALMER: Let me put it this way. Well, first of all, there are environmental side effects associated with making electricity any way you want to look at it, and I would suggest that if you take a state of the art power plant like the Lem River Station that we are involved in in Wyoming, that has very, very low SO2 and NOx emissions, that there are no environmental problems associated with that power plant that need to be avoided by substituting something else just because it is burning coal.

The coal-fired power plants on the ground in the U.S. today by and large are very efficient and are clean-burning.

SEN. KERRY: Well, let me ask you. I do not know what your family situation is, but presuming you had a choice between a complete -- if you could supply all the power of your community through wind versus coal-burning, would you not choose wind?

MR. PALMER: No.

SEN. KERRY: Why?

MR. PALMER: Because the wind does not always blow.

SEN. KERRY: Well, if you have, let us say you have a solar storage capacity in addition to the wind, and you had hydrogen fuel cell alternative cut-in capacity, and all clean, completely clean. Would you not choose them?

MR. PALMER: I would have to look today at, first of all, the availability of that technology and secondly the cost.

SEN. KERRY: Well, let us assume it is available, and it is available. Hospitals today are actually putting hydrogen cell in place as a backup use.

MR. PALMER: Actually, they are, but they are also putting in natural gas units. There is a new company called Capstone Turbine --

SEN. KERRY: And that is clean, that is emission-free.

MR. PALMER: -- and it is backing up very large central station coal-fired power plants.

SEN. KERRY: But my point is, if you had the option of putting that in in a grid that was completely clean, would you not take it?

MR. PALMER: I would if the cost were competitive with the alternative.

SEN. KERRY: Fine, and Mr. Romm tells us it is about to be or close to be, and clearly, if the government were to go back to where we were in the 1970's, where we were in fact encouraging photovoltaics and alternatives and renewables, we might be in a position to actually have them be competitive today.

MR. PALMER: Sir, I do not have a problem with the United States Government being involved with respect to R and D money for renewables, with respect to tax credits for renewables. That has never troubled me, does not trouble me. The coal plants came from there. I would be -- it would be hypocritical to sit here and say I am troubled by that. I am not.

The only thing that we say with respect to the coal plants is no caps, tax, and limits with respect to the operation of power plants that are providing low-cost electricity in a clean, efficient manner to the American people. I would refer you, sir, to we opposed the Btu tax in early 1993 because it was an energy tax. We opposed the Waxman amendments back in the early nineties because they would have capped the operation of these units.

Those are the kind of things that we are opposed to. We are not opposed to an activist government involved in trying to promote renewables through tax policy, tax credits, and things of that nature. But we believe we provide positive good to the American people through these power plants and it would be a mistake to take that away.

SEN. KERRY: Well, again, nobody is talking about taking -- we all recognize that it is going to be a part of our energy supply structure for a period of time. The question is how serious can we get, how quickly, about trying to provide some alternatives.

MR. PALMER: With respect to greenhouse theory, you know, we argue over Kyoto, which is 7 percent below 1990 levels. But under true greenhouse theory, the apocalypse is upon us unless we go 60 percent below 1990 levels. So that is why I made the comments I made in my prepared remarks with respect to really the impossibility of reaching those goals under any mechanism that you choose to pursue, unless you go to some kind of a carbon sequestration, carbon-scrubbing technology, and I think the Federal Government ought to take the lead in developing that, and I believe that.

SEN. KERRY: But carbon sequestration has its own set of serious difficulties --

MR. PALMER: It could.

SEN. KERRY: -- as Dr. Rosenberg has explained. One is how much you can contain, for how long, with what certainty. What happens if it is released when it is stored in large amounts, but suddenly released into the air? Since it is heavier, it has a profound impact on the air we might or might not be breathing under those circumstances. And there is enforcement issues. There are enormous issues attendant to it.

MR. PALMER: I would agree, there are problems with that approach.

DR. ROSENBERG: I do not think that is a danger from carbon sequestered in soils. It is the sort of thing that happens --

SEN. KERRY: No, but if you were to go to storage.

DR. ROSENBERG: Yes, underground geologic storage, yes, it is possible.

We do not know. And I would agree with the gentleman that more research on other means of sequestering carbon is warranted, not only the soils but the geological approaches to sequestration, is warranted.

SEN. KERRY: I would agree with that.

DR. ROSENBERG: I certainly do not agree that carbon dioxide is totally benign. Actually, I am an agro-meteorologist and I have worked on the subject for many years and, yes, elevated carbon dioxide level to a certain degree is beneficial to plants. There is no doubt about that. But the threat to climate, the climatic implications of unlimited carbon dioxide in the atmosphere, are indeed quite threatening.

The group that he alluded to, the Greening Earth Society, has some very good scientists in it, but not particularly specialized in the subject that they are addressing. The preponderance of scientific evidence, as you have said, Senator, is clearly in favor of the notion that too much carbon dioxide in the atmosphere is a threat.

SEN. KERRY: See, Mr. Palmer, my sense is, look, I cannot sit here in good faith and tell you that the models -- I am familiar with the modeling difficulties people have had in the last years, and it is getting more sophisticated and we are getting further down the road. And there are variations, we all understand that. Mount St. Helen's, Mount Pinatuba, all these things have taught us about the difficulty of really measuring what is sort of a short-term loss versus a long- term gain and whether you go cold before you go hot and all these kinds of things, cloud cover, increased moisture. I mean, all these things are very difficult. I understand that.

But from a public policy point of view, the sort of cautionary principle, so to speak, which guides the judgments we have to make, based on the amount of scientific input we are getting, based on the realities of sea level rise, based on what we are seeing in the polar ice cap, polar melt, so forth, based on unknowns about what happens agriculturally and in terms of forest migration and other kinds of issues, it requires us to be thoughtful.

MR. PALMER: I understand that, Senator, and I am not suggesting otherwise. Our work has examined all of these questions in detail before it became the issue that it became here today. I have been doing this for 10 years. I say to you in good faith, I have looked at this thing backwards and forwards and this is a model-driven concern and these models are not good today. They are better than they were, but they are not good today.

The notion that we are going to label carbon dioxide as bad as such as wrong, scientifically wrong.

SEN. KERRY: What do you say to that, Dr. Romm, Ms. Mesnikoff?

DR. ROMM: Well, it is clearly not a model-driven concern. As you said, we had the 11 hottest years. 1998 was the hottest year in the world. 1999 was the second hottest year. You look at what is happening in Texas, you look at the tornadoes where they do not belong, tropical diseases where they do not belong, rising sea levels, the coral reefs are bleaching. We are getting the thinnest ice that we have had in a very long time in the Arctic.

People's concern about global warming is being driven by very substantial changes in the climate that affect ecosystems and people and crops. And I am sure you have more to comment.

SEN. KERRY: Ms. Mesnikoff.

MS. MESNIKOFF: I would simply be very happy to give this copy of this map which Sierra Club produced with other environmental organizations, for him to take a look at. Unfortunately, I do not have it on a nice board that we could all take a look, but I believe that everybody does have copies and we have more than enough copies to send it to people that would like to take a look at it.

But I think if you unfold this map you can really begin to see that, even in the United States and around the world, there is all kinds of evidence of global warming and events that we call harbingers, things that are consistent with the projections of global warming. I think that, as I said before, this is a pretty dramatic image to take a look at and I think it is one that is not model- driven, but one that is based on facts on the ground.

SEN. KERRY: Well, I am going to yield the my colleague, who I know is waiting patiently. I know we are going to have to terminate here soon, so I do not want to waste the time.

Two things. It seems to me that when you look, you look at leaders all over the world whom I have heard and met with and listened to governmental people wrestling with this issue. There is no country in the world that wants to waste money responding to something that is not real, and there is no leader in these other countries that I know of who wants to spontaneously require his people to take sacrifices in their emissions, in their fuel availability, etcetera. But they are all doing it. They are all doing it.

MR. PALMER: I understand that.

SEN. KERRY: It seems to me that when you look at some of the top CEO's in the country who have come to recognize this as a major issue with enormous implications to us, I would love to see the industry that you represent begin to become part of the solution rather than trying to suggest that it really is not a problem.

We can join together to be finding competent solutions here. I wake up in the morning and hear these advertisements directed at us, with great money being spent, on the radio as we drive in to tell us that it is not a problem and so forth and so on. We would be far better advised to be helping Americans to deal with the realities of it.

I might add in terms of the particulates, of CO2, and the emissions, the automobile emissions, where we are fighting it, passenger cars and light trucks, including SUV's, account for 18 percent of our emissions. With the average efficiencies declining for new vehicles and a 21 percent increase in miles driven between '90 and '98, emissions are growing more rapidly in that sector than in any other.

MR. PALMER: Yes, sir, and they will continue to. Porsche is coming out with a 400 horsepower SUV.

SEN. KERRY: And that is why I just wanted to point out that since 1995 provisions in the appropriations acts have literally prohibited the Department of Transportation from even examining the need to raise the Corporate Average Fuel Economy standard. I think it is time for the United States Senate and the Congress to implement the law as intended, to change this. That is where we began this discussion.

In my judgment -- I think you all agree -- that is the place, the single first priority where we have the greatest, most rapid efficiency gain and could make the strongest impact globally in sending a message that we are serious. And everyone in this country ought to stop and ask themselves how it is that a piece of legislation finds itself passing that prohibits an agency of our government from even examining an issue, and if that is not excessive industry influence and sort of a statement about the impact of money in American politics and influence in Washington, I do not know what is.

I yield to my colleague.

SEN. BROWNBACK: Thank you.

I thank the panelists for being here and the information you have put forward. I have got a few questions along the line of carbon sequestration, both internationally and domestically, and I would like to direct those generally to the panel.

Dr. Rosenberg, as I was looking through your information that you have put forward, you have stated that calculations are that through improved management of agricultural lands alone we could remove anywhere from 40 to 80 billion metric tons of carbon from the atmosphere. Is that a correct number? That is quite large.

DR. ROSENBERG: That is the number in the second IPCC report that came out in 1996. The third report is coming out shortly and it is essentially consistent with that number, perhaps a little bit more conservative in some ways, but overall I would say it is consistent.

SEN. BROWNBACK: That is a huge number.

DR. ROSENBERG: Oh, yes.

SEN. BROWNBACK: I am curious, as you are studying this and looking at it, what all you think that we can do here in this country and what you think we can incentivize in other places. You mentioned particularly trying to recapture some of the lands that there has been desertification taking place. Would you support a series of policy objectives to try to do those sorts of issues as a way of incentivizing this carbon-fixing in the soil?

DR. ROSENBERG: Yes, absolutely. With respect to the domestic situation -- and this may be the wrong hearing -- continuation of the Conservation Reserve Program I think is extremely important because a lot of carbon goes back in soils.

SEN. BROWNBACK: Could I stop you there for just a second. I saw in your chart you were saying that the CRP was currently fixing a ton an acre or something like that on your charts.

DR. ROSENBERG: A ton per hectare.

SEN. BROWNBACK: Per hectare, okay. But that you were noting switchgrass could get you up to two and a half.

DR. ROSENBERG: Yes.

SEN. BROWNBACK: Are you advocating or would you advocate different practices being put in the CRP?

DR. ROSENBERG: Well, the practices that they have now, returning to grass or woodland, are certainly beneficial. I would urge that there be more biomass production, that we figure out ways to make better use of biomass, more efficient use, either as a direct fuel, power plant fuel, or for creation of liquid fuel substitutes.

The biomass crops such as switchgrass, which has say a 10-year rotation, can put away over the course of that 10 years probably 7 or 8 tons of carbon per hectare. If there were some conversion to a biomass economy, some portion of our energy needs were met by biomass, switchgrass -- and I am sure there are others that will prove as good or even better -- could make a very good contribution.

SEN. BROWNBACK: You would raise the switchgrass and then use that biomass that it produced for energy production?

DR. ROSENBERG: Right, and that substitutes, of course, for fossil fuel, and so you have one saving there. At the same time, it sequesters carbon in the soils.

SEN. BROWNBACK: Is that being piloted anywhere? Is that being done?

DR. ROSENBERG: Yes, there has been a lot of field research. Oak Ridge Laboratory has organized a number of field trials and their NRIL, the National Resource --

DR. ROMM: National Renewable Energy Laboratory.

DR. ROSENBERG: -- Renewable Energy Laboratory, has done some economic studies of the merits of biomass, how it could be phased into our economy. So there is attention to it. There needs to be more attention, there need to be more field trials, and we need to think about the social implications of converting large areas of agricultural land to the production of energy crops.

SEN. BROWNBACK: Ms. Mesnikoff, we appreciate your perspective and the things your organization has put forward. On the international carbon sequestration bill that I put forward, it got bipartisan support and it is also supported by the Nature Conservancy and the Environmental Defense Fund, along with American Electric Power. I am not sure if BP is on it. We have talked with them about it as well.

Are you familiar with this proposal or these types of proposals?

MS. MESNIKOFF: I am afraid I am not familiar with your particular bill at this point.

SEN. BROWNBACK: Well, I hope you get there. Your organization would be one key one, and we have talked with a number of people in it about it. If I could just describe this approach, and then I would appreciate it if you have a perspective, and, Dr. Romm, your perspective on these types of approaches as well.

It is basically to try to incentivize U.S. businesses through tax incentives to invest in setting aside or moving from a desertification in developing countries towards back to a production, particularly in trees, in tropical, subtropical areas. I think it is an important approach from the incentivizing of investment in these areas and to create more forests or to keep forests from being destroyed in many of those areas where you have a very intensive forest area, where you have situations a lot of times that, if we cut back supply production in agriculture in the U.S., there is an increase in supply production many times in tropical or subtropical areas where you destroy these forests to go into agricultural production.

I would be curious if you do have a reaction to those types of proposals in dealing with CO2?

MS. MESNIKOFF: I think Sierra Club does have very grave concerns about using sequestration in certain kinds of ways. For example, there is a big difference between carbon that stays in the ground in the form of oil or coal as opposed to fossil fuels that are burned and then you try to sequester them and balance it out that way. It is better to leave it in the ground unburned as fossil fuels than to try to recapture it in some kind of sequestration.

But that does not mean that giving incentives to preserve forests, to grow forests, or to try to use agricultural lands in that way is not part of the policies that we can look at. We do have very serious concerns about using this kind of a sequestration system in a trading mechanism, you know, for example American Electric Power, not taking action in the United States but buying trees or growing trees in some other part of the world to offset emissions in that kind of a trading scheme.

First of all, you have to look at the fact that when you burn fossil fuels in a power plant in the United States that there are other pollutants that come out of the smokestack in addition to carbon dioxide. You have the sulfur, you have the mercury, you have other pollutants that come out. So therefore, requiring that power plant to reduce its CO2 emissions by becoming either more efficient or switching to a cleaner fuel will have benefits for air quality as well as taking responsibility for the emissions that we put out in this country and not looking for solutions in some other country that is not nearly putting out as much pollution as we are.

I think that tax incentives and other policies like that for farmers to improve their farming techniques to sequester is one thing. Including that kind of system in a pollution trading scheme is quite another from the Sierra Club's perspective.

SEN. BROWNBACK: In a trading scheme. Now, what I have put forward -- and I really would appreciate it if you would look at the proposal we have put forward -- is a series of tax credits if companies go with NGO's like the Nature Conservancy and go into another country and say, we are going to set this set of forests aside here, and we are trying to incentivize that with tax credits, not a trade that is in the system.

I do not see the down side with doing that. I am not sure if you do, and if you do I am sure you will let me know.

MS. MESNIKOFF: We will certainly take a look. I think, as Dr. Rosenberg mentioned, there are issues of permanence and the like which we are also concerned about. But we will definitely take a look and give a fuller response.

SEN. BROWNBACK: I think a number of these companies have been quite entrepreneurial and have done a nice job of stepping forward without government regulation, but saying this is the right thing to do, which is Dr. Romm's study and looking at.

Mr. Morgheim, do you have a comment to make on this series of questions?

MR. MORGHEIM: Senator, just a brief comment. I think things like carbon sequestration are an example of how when people focus on the problem you begin to develop innovative solutions that people perhaps were aware of or talked about, but they really come to the forefront.

BP is a partner with Nature Conservancy at the Nolkemf-Mercato National Park in Northeast Bolivia. For us, protecting and preserving that forest in partnership involves carbon sequestration, but it also allows firms to play a positive role in the local community and support sustainable development for those local communities, as well as support and protect biodiversity.

DR. ROMM: Senator.

SEN. BROWNBACK: Dr. Romm -- let me say one other thing, if I could, to BP. I was in the Caspian Sea region where BP is doing some oil work and the quality of the drilling that you are doing there versus what was there during the Soviet era is just enormously different and better, what you are doing. Really, hats off to you. I know it is still an intrusive practice into the environment, but the quality that I saw there versus what was there in the Soviet era is substantially better for the environment, what you are putting forward. I want to thank you for that.

MR. MORGHEIM: Thank you for your comments.

SEN. BROWNBACK: Dr. Romm.

DR. ROMM: My old Office of Energy Efficiency and Renewable Energy did a lot of the funding for the biofuels and biomass energy program and demonstrations with taking switchgrass and turning it into ethanol and doing the same for crop waste and developing some fast- growing hybrid poplar trees.

I know there has been a lot of concern about what action on climate change will mean for farmers, and I would urge you to consider really an aggressive strategy of more R and D and tax credits and innovative policies to really get a lot more biomass energy into the U.S. marketplace. Clearly there has been concern about MTBE, so more people are going to need ethanol, and the best kind of ethanol is the ethanol that comes from cellulose as opposed to starch.

There really have been major breakthroughs from the National Renewable Energy Lab and others in converting any type of cellulose -- switchgrass, the non-starchy part of corn, anything. We can now do the whole corn and turn it into ethanol. I think if we had an aggressive program to get cellulosic ethanol into the marketplace, it would be incredibly beneficial to the farmers and it would be incredibly beneficial to U.S. greenhouse gas emissions.

The same for biomass crops. It would be very interesting to have an aggressive program to do cofiring with coal plants, because one can in fact burn pretty easily -- in any coal plant, up to 5 percent could easily be biomass, and with some modifications that can go even higher.

So I think that there is an opportunity for action on climate change to be a boon for the American farmer if we act intelligently.

SEN. BROWNBACK: I agree, because I think that those are the sort of solutions, and it is the ones that I am trying to put forward. We can get into some disputes here, as this panel has been in disputes that I have heard echo around these halls for some period of time, and we can fight about it and we will fight about it. But we can also find a number of these routes that I do not think there is much dispute that these are things that are positive. They may not be perfect, but they are positive and they are things that we can step forward on, and we can do so in a rapid fashion and also a fashion where most people would look at it and say: Well, that is a good thing; I am glad we are doing that. Now, I think we also ought to do this, but we can move and we can progress this, progress this on forward.

Dr. Rosenberg, we will have to close this down shortly. There was a recent Wall Street Journal article that was commenting on carbon farming and carbon sequestration and saying, yes, this is good, but, and then was looking at the issues of releases of other greenhouse gases from carbon farming and was saying, okay, we are going to have to be careful about, you can pull CO2 out of the air but you might release some other minor ones that actually have more problems that they create. They were talking about nitrous oxide.

It was the first that I had seen that particular issue. I am curious if you could comment about that and what we need to research, what we need to be aware of.

DR. ROSENBERG: Right. I have not seen that article, Senator, but I think I know what it is based on. There are two issues. One is the issue of essentially the carbon costs of inputs to farming. It takes energy to make fertilizer and to transport it, package it, and so on. It takes energy to move manure from one place to another, energy to pump water. So one argument has been that the carbon costs of carbon sequestration balance or overcome the benefits.

But it is a very misleading argument, because basically the practices that put carbon in the soil that are better for sequestration are no more likely to lead to the emission of nitrous oxides and methane than any other farming practices. In other words, we have got to grow crops, we have got to use the land. If we use conventional tillage practices, there are still emissions of nitrous oxide and methane. So at the very least, carbon sequestration will counterbalance the natural contribution of agriculture to greenhouse gases. I think it is kind of a specious argument.

SEN. BROWNBACK: I appreciate you putting that forward. I am sorry to cut you off, but I have just been told that, due to the Democrats objecting to us continuing hearings for a period beyond 2 hours, that I have got to close the hearing down. So I apologize to you for that, but we are at the end of the legislative session and these sort of games get played.

Thank you, all of you as panelists. I hope it has not been too uncomfortable for you. I think you can see from the line of questioning of the members here that we are very interested in what we can do in moving this forward. It is going to be an important topic for some period of time and we want to start making these steps to deal with it.

Thank you very much for attending. The hearing is adjourned.

END

LOAD-DATE: September 26, 2000

Document 1 of 10.


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