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Document 7 of 10.

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MAY 20, 1999, THURSDAY

SECTION: IN THE NEWS

LENGTH: 4691 words

HEADLINE: PREPARED TESTIMONY OF
DAVID NEMTZOW
PRESIDENT
ALLIANCE TO SAVE ENERGY
BEFORE THE SENATE ENERGY AND NATURAL RESOURCES COMMITTEE
ENERGY RESEARCH, DEVELOPMENT, PRODUCTION
AND REGULATION SUBCOMMITTEE
AND THE HOUSE GOVERNMENT REFORM COMMITTEE
NATIONAL ECONOMIC GROWTH, NATURAL RESOURCES
AND REGULATORY AFFAIRS SUBCOMMITTEE
SUBJECT - THE WHITE HOUSE INITIATIVE
ON GLOBAL CLIMATE CHANGE

BODY:

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity to testify before you today regarding the White House Climate Change Technology Initiative (CCTI) and its efforts to improve energy-efficiency with the goal of addressing global climate change.
My name is David Nemtzow. I am President of the Alliance to Save Energy, a bipartisan, non-profit coalition of business, government, environmental, and consumer leaders dedicated to improving the efficiency with which our economy uses energy. Senators Charles Percy and Hubert Humphrey founded the Alliance in 1977; it is currently chaired by Senators Jeff Bingaman and James Jeffords as well as Representatives John Porter and Ed Markey.
Seventy companies and organizations currently belong to the Alliance to Save Energy. If it pleases the Chairman I would like to include for the record a complete list of the Alliance's Board of Directors and Associate members, which includes the nation's leading energy efficiency firms, electric and gas utilities, and other companies providing cost savings and pollution reduction to the marketplace.
The Alliance has a long history of researching and evaluating federal energy efficiency efforts. We also have a long history of supporting and participating in efforts to promote energy efficiency that rely not on mandatory federal regulations, but on partnerships between government and business and between the federal and State governments. Federal energy-efficiency programs at the Department of Energy (DOE), the Environmental Protection Agency (EPA), and other agencies are largely voluntary programs that further the national goals of broad- based economic growth, environmental protection, national security and economic competitiveness.
I. INTRODUCTION
Energy-Efficiency: A Bipartisan Tradition From the days of our first national nightmare of gas lines and soaring fuel prices, energy efficiency has had champions in Congress from both sides of the aisle. Sen. Charles Percy, who founded the Alliance to Save Energy in 1977, recognized the need to promote energy-efficiency to address a glaring hole in our nation's economic security. He recruited Sen. Hubert Humphrey for this endeavor in the final days of his life to demonstrate that the need to pursue greater energy- efficiency in the economy obliterated party lines. In addition, he knew that a partnership between business, government, environmentalists, and consumer advocates would not only result in benefits for each sector, it would help avoid the need for coercive regulation when our problems reach crisis level.
That maxim is no less true today, even though oil supplies and prices have eased. Our fossil fuel economy is now believed by many to have put new stresses on our environment. Energy-efficiency has been repeatedly cited as a key solution to slow the loading of carbon and other greenhouse gases into the atmosphere. Fortunately, we now have a quarter-century track record of showing how energy-efficiency reduces emissions of criteria air pollutants as well as carbon.
Support of action by the federal government to promote energy- efficiency has also been historically bipartisan. Though the establishment of the Department of Energy and energy-efficiency programs is most often associated with the Carter Administration, key advancements in federal efforts were made under the Reagan and Bush Administrations. While funding was cut severely from Carter-era levels, President Ronald Reagan signed the National Appliance Efficiency and Conservation Act (NAECA) the law requiring DOE to set energy-efficiency standards for appliances and other equipment. That program has led to tens of billions of dollars in savings for the American people and significant carbon emissions reductions. The Bush Administration, in the context of its support for the Rio Treaty, began to significantly expand funding for DOE energy efficiency and renewable energy efforts and created the Green Lights and Energy Star programs at EPA. In addition, President Bush signed the Energy Policy Act of 1992, which expanded the scope and magnitude of energy- efficiency efforts.
The House and Senate caucuses devoted to promoting renewable energy and energy efficiency continue that tradition of bipartisanship. Currently, the House Renewable Energy Caucus features 65 Republicans and 84 Democrats, while the newer Senate version counts 10 Republicans and 14 Democrats, Such support from all parts of the political spectrum is what has made clean energy a driving force in the American economy.
Today's Testimony
I am here today, Mr. Chairman, to respond to Committee concerns about the Clinton Administration's Climate Change Technology Initiative (CCTI), and to comment on its request for additional funding for energy-efficiency programs. Mr. Chairman, I'm not even going to attempt to sit here and discuss the details of sub-programs in the Partnership for a New Generation of Vehicles or weigh the relative accomplishments of the pulp and paper effort of Industries of the Future. I believe my job is to help keep our eye on the big picture, and try to give context for federal energy-efficiency efforts looking into the 21st century. We need to know where we've come from in order to understand where we are going. Finally, Mr. Chairman, I will make a case for why enhanced federal energy-efficiency efforts are crucial to the nation's future irrespective of climate change, and why the Administration has correctly built its climate change strategy should around energy-efficiency.
II. ENERGY-EFFICIENCY AND CLIMATE CHANGE
Climate Change and the Alliance to Save Energy Let me start, Mr. Chairman, by stating that the Alliance to Save Energy currently has no official policy on climate change. We are not on record regarding targets or timetables, the Kyoto treaty, nor any other proposed form of regulation to address the problem. However, we are very cognizant of both the science and politics surrounding the issue, and even more acutely, the potential for energy-efficiency to be a large part of the solution to global climate change.
Frankly, Mr. Chairman, the Alliance is not surprised that energy- efficiency stands to be a key component of nearly any climate change strategy. And slowing or stemming climate change should rightly take its place with economic growth, reduction of other environmental pollutants, increased national security, and promoting American competitiveness abroad, as a reason to move full speed ahead with research, development, and deployment of energy-efficient technology throughout the economy. We are such believers in the positive effects of energy-efficiency that if you told us it cured the common cold, we might not be surprised.

However, energy-efficiency becomes an even more crucial component for our nation's near-term future when we think of the fact that a huge amount of our nation's capital stock will turn over in the next 10 years. EPA estimates that fully 60 percent of our carbon emissions in 2010 will come from equipment not yet purchased. Decisions about how we develop and deploy technology will have a profound effect on whether the nation is even able to sufficiently reduce emissions if a political consensus on action to stem climate change should develop. In this context, energy-efficiency becomes an insurance policy that the nation can ill-afford to pass up, and one that should be pursued with no regret.
III. FEDERAL ENERGY-EFFICIENCY EFFORTS
Federal Energy Programs and Climate Change
As you know, Mr. Chairman, the vast majority of energy-efficiency programs in the federal government existed long before climate change became an added rationale for them. Through both the 1993 Climate Change Action Plan, and the 1998 Climate Change Technology Initiative, the Clinton Administration designated many existing programs as part of their climate change efforts. This designation did not substantially alter the basic thrust of the vast majority of energy- efficiency programs. Those programs remained focused on achieving substantially greater energy-efficiency in buildings, industrial processes and transportation, as well as in federal facilities, with the goal of lowering energy waste, oil imports, utility bills, and urban air pollution.
In fact, Mr. Chairman, many supporters of those programs questioned the political wisdom of that designation, considering what have been polarized attitudes surrounding the climate change issue in this decade. In spite of that heated debate, which rages even today, we must not lose sight of the non-climate benefits of the programs. Further, those societal economic, environmental, national security and international benefits must be factored into comparisons of various climate change mitigation strategies.
Energy-Efficiency Research, Development, and Deployment: Why the Federal Government? Back in 1995, when some in Congress were contemplating the dissolution of the Department of Energy, two major reports were released that came to the same conclusion: If we forego federal research and development in energy technologies, it will not be replaced in kind by the private sector. Both the Galvin Commission studying the national laboratories and DOE's Yergin Task Force looked at energy research and development and arrived at this conclusion. Among the reasons they cited as barriers to corporate efforts are high R&D costs, internal cost- cutting which has resulted in widespread downsizing of companies, uncertainty of property rights and the ability to capture all the benefits of R&D, and high initial investment in R&D capability.
In the early 1990's, Mr. Chairman federal energy research efforts were criticized for producing technology and innovation in a vacuum. While research accomplishments were substantial, many business leaders believed that these efforts were not relevant to markets for lighting, building materials, automobiles and other products. This decade has seen an exponential rise in cooperation, planning, and cost-sharing with the private sector to assure that federal research and deployment really do create the maximum value added. These process gains are exemplified by EPA's Green Lights and Energy Star as well as DOE's Industries of the Future and Buildings Roadmap programs.
Technology Deployment is Integral to a Successful Research Agenda Some critics of DOE and EPA energy-efficiency efforts have argued that while basic research is an acceptable activity of the federal government, deployment and market transformation are not.
The need for having deployment in the toolbox of DOE is illustrated by the story of the flame retention oil burner. DOE did not develop this technology. However, in response to the oil price shocks of the 1970s, DOE worked with the oil heat industry to field test and promote the technology as a substantial energy-saver. The key was a program to train fuel oil technicians how to install these advanced burners to yield the most savings for homeowners.
The subsequent realization by the oil heat industry of its attributes created demand, and adoption of the flame retention head oil burner increased about ten-fold between 1979 and 1983. As of 1996, the technology was in use in about 7.3 million households, over half of oil-heated homes. The burner provides an 11-22 percent energy saving, Mr. Chairman, and a conservative energy savings estimate of nearly $7 billion for consumers from a simple, existing technology -- in large part due to deployment efforts by DOE. DOE's responsibility for this. benefit can be traced to addressing barriers that were inhibiting wide use of the technology, and accelerating market penetration.
Federal Programs: Have They Returned Our Investment? In 1996, Mr. Chairman, the General Accounting Office did a study of a variety of success stories which DOE had published in 1994. Unfortunately, the purpose of the study appeared to be political, and it attempted to discredit energy efficiency programs by attacking DOE's methodology for preparing the success stories. But rather than achieving this goal, it ended up validating billions in energy savings for a few key technologies which far outstrip out entire national investment in energy efficiency over the past 20 years.
Mr. Chairman, the accumulated success of these programs at saving money for American consumers and taxpayers is remarkable. The GAO study validated DOE's assertion that just five technologies* developed or assisted by the DOE buildings program resulted in $28 billion in energy savings over the past 20 years for an approximate $8 billion in investment as of 1994. Add FEMP gains and it moves to $40 billion. Add the effect of appliance improvements under NAECA and that figure is multiplied. Add the hundreds of other technologies to come out of the business, industrial, and transportation programs and the additional accrued energy savings of the past 5 years and you get a portrait of an overwhelmingly cost-effective effort which has contributed significantly and directly to the quality of life of Americans.
(*The technologies are: low-emissivity windows, electronic ballasts, advanced refrigerator compressors, the flame retention head oil burner, and DOE-II building design software.)
By the same token, the EPA Energy Star and Green Lights programs, as well as other EPA climate programs, have already returned $6.5 billion to the economy from an approximate one-half billion dollar investment.
It must be noted, Mr. Chairman, that these dollar returns are from just lower fuel and energy bills - they do not include the economic value of reductions in pollution, increases in productivity and comfort of employees and consumers, or national security benefits of oil imports.
A More Comprehensive Audit Must be Performed Mr. Chairman, I believe we need an even more comprehensive review of the accomplishments of energy-efficiency programs in the federal government that spans the work of DOE, EPA, the Agency for International Development, and other agencies. Until we get a clearer picture of the size and scope of the accomplishment of federal energy- efficiency efforts, we cannot fully assess their value in a climate change context.
IV. OTHER FEDERAL OPPORTUNITIES FOR INCREASING ENERGY EFFICIENCY Tax Credits
The Alliance strongly supports efforts by Rep. Bill Thomas, the Clinton Administration, and others to propose tax credits as an addition to the mix of policy options for saving energy - and thus reducing carbon emissions. Whereas tax credits in the late 1970s and early 1980s were poorly targeted and difficult to verify, we now have the knowledge and ability to construct tax credits that both seed high technology and push markets toward more energy-efficient behavior.
Again, Mr. Chairman, the push for energy tax credits is bipartisan. H.R. 1358, the Energy Efficient and Affordable Homes Act of 1999, sponsored by Rep. Bill Thomas, which would provide tax credits for both the construction of highly efficient homes and the substantial upgrade of existing housing. The bill has significant potential to actively engage homebuilders in energy-efficient building practices and encourage homeowners to tackle the lion's share of energy use in existing homes.
V.

V.
ENERGY-EFFICIENCY AND THE ECONOMY
Energy efficiency makes money and puts people to work. The economic gains from energy efficiency come in two forms. The greatest benefit comes form displaced costs -money that households and businesses can spend elsewhere because they no longer have to spend it on energy. That spending includes additional investment and hiring additional workers. Direct economic benefits come from growth in industries that generate energy efficient products and services. Companies that sell insulation or efficient windows domestically and/or for export employ Americans in high-skill service and manufacturing jobs. Secondary economic benefits come from businesses and consumers re-spending these newfound energy savings in sectors of the economy which are more labor-intensive than energy supply.
Energy-Efficiency Must Be Measured as an Energy Source The White House Climate Change Technology Initiative operates against the backdrop of a U.S. economy that has become significantly more energy-efficient over the past quarter century. But we often fail to realize the actual contribution of energy efficiency to our GDP and national well being.
Mr. Chairman, it isn't easy to compare the contribution of energy- efficiency to the environment and the economy with more traditional energy sources such as oil and coal. It requires the observer to regard saved or unused energy as created energy in the same way that oil comes out of the well and coal comes out of the mine. In addition, I think that any economist would tell you that energy-efficiency measures have increased the supply of energy and thus helped to lower the price. Energy not used is just as salable and usable when conserved as when produced. Upgrades in energy-efficiency made to home appliances, industrial equipment, building systems, or car and truck fleets serve as an energy source that increases our overall supply of electricity, coal, oil, and natural gas.
Energy-Efficiency, our Number 2 Energy Source in 1997 Alliance research shows that, for 1997, the most recent year for which we have complete data, energy-efficiency was the second leading source of energy for U.S. consumption, and if we consider only domestic energy sources, it's number one. Mr. Chairman, it would have been number-one if we declined to count oil imports, now more than half of this nation's oil consumption. Our analysis of 1997 energy consumption shows that energy efficiency provided the nation with 29.5 quadrillion Btus (quads), approximately 25 percent of U.S. energy consumption. While energy-efficiency trails our mammoth oil consumption (36.3 quads), it significantly outstrips the contribution of natural gas (22.5 quads), coal (21.0 quads), nuclear (6.7 quads) and hydro (3.8 quads). (See attached chart.)
Mr. Chairman, the contribution of energy-efficiency to our nation's overall supply is now so great that we cannot regard as an esoteric externality anymore. We must promote and support it in the same way we do the coal belt and the oil patch, which enjoy a variety of tax breaks and subsidies based on their use of fuel.
These figures show energy-efficiency for what it is - an unparalleled driver of environmentally sound economic growth.
Mr. Chairman these economic snapshots of efficiency show an energy industry that spans the economy and the populace. But it is not an energy industry that looks like what we have known in the past. However, all the functions of traditional energy industries are represented. But with energy-efficiency, the miners are businesses trying to cut their costs. The roughnecks are homeowners trying to keep their families warmer in the winter. The geologists are mechanical engineers working to get more out of less. Energy- efficiency is highly dispersed throughout the economy. And because of its diffuse nature, energy-efficiency doesn't carry the political clout of the coal-mining regions, or of the oil and gas-producing regions. There is no "energy-efficiency patch."
By the same token there is not a defined energy-efficiency industry. Whirlpool makes highly efficient appliances but they sell washing machines and refrigerators, not energy efficiency. Honeywell sells controls that regulate building systems that can save a company millions of dollars a year, not energy efficiency. Owens-Coming sells fiberglass insulation which can make a house warmer, more comfortable, and more economical to live in, but they sell insulation, not energy- efficiency.
So when we have to make tough choices about what we do with federal dollars, we must think about energy-efficiency as what it is - an energy source that is essential for the economic health of our nation- and one that is paying off like a gusher for the American people. And yes, Mr. Chairman, that energy is produced cleanly, displacing both conventional air pollutants as well as ones believed by many to be causing a warming of the Earth's climate. It enhances our national security, as this year we again went to war to protect our interests in Mideast oil fields. Energy-efficiency cuts costs for businesses and consumers, and it increases our international competitiveness -- all the things we have traditionally talked about.
The tough choices on energy and climate must be made with a clear eye on the contribution to the environment, the economy, national security, and international competitiveness delivered in the past and promised for the future by energy efficiency.
VI. NON-CLIMATE BENEFITS OF ENERGY EFFICIENCY
Environmental Health Regardless of climate change, the most polluting activity on earth is the production, transportation, and use of energy. Electricity generation, vehicle exhaust, oil spills, the heating and cooling of buildings, industrial processes, and myriad other uses of energy account for what is estimated to be 80-90 percent of environmental pollution in this country. As our population and economic activity increases into the 21 st Century, environmental stresses on our air, water, and land will be heightened.
Alliance research shows that the gains made in energy-efficiency alone during the past 25 years have resulted in 18 percent less air pollution. This massive assistance to our environmental health is in addition to improvements made through the Clean Air Act and other air regulations.
National Security As historians consider the reasons for the Persian Gulf War, one must acknowledge that the U.S. went to war with Iraq in 1991 in large part to defend our critical oil interests in the region. Within the past year, we have again gone to war with Iraq to protect those same interests. When considered by economists, the billions which American taxpayers spent to protect those interests - nevermind the dangers posed to a half a million American soldiers -- should be added not onto our military or diplomatic budget, but onto our national expenditure for energy.
The U.S. has now crossed the line of being dependent for more than half of its oil consumption on foreign sources. Two-thirds of that habit comes from transportation. Without more aggressive research and innovation in automobile technology that situation will grow significantly worse in the coming decades for two reasons. One, U.S. consumption will continue to grow both in the number of vehicles on the road and the amount driven by each one. Two, the concentration of remaining global oil reserves will grow more consolidated in the Persian Gulf region as time goes on, making the U.S. more and more beholden to a region which demonstrates its volatility nearly every day. Consequently, U.S. dependence on foreign oil is projected to rise to nearly 60 percent within 10 years.
In the absence of Congressional support for increasing Corporate Average Fuel Economy Standards (CAFE), the Partnership for a New Generation of Vehicles remains our best bet for the development of cleaner, more fuel-efficient cars with which to reduce our dependence on foreign oil supplies. This program has come under some criticism, and perhaps it is valid to question why the Big Three automakers require millions of dollars in federal research to develop products that are less environmentally harmful. However, cleaner, more efficient cars remain a national priority, and PNGV is making progress. While much of the advancement made thus far through the program has been kept proprietary, the known advances in fuel cells and hybrids are getting us closer to clean cars. In fact, Mr. Chairman, the fact that this information is being kept proprietary is a good sign that progress is being made and that people are expecting money to be made in the future.
Global Economic Development and Competition Mr. Chairman, the Byrd-Hagel Resolution cites as a chief concern the contribution of developing countries to emissions reductions.

For all of the signers of that resolution and all others concerned with the future of global carbon emissions, the infrastructure development occurring in developing nations should be of the utmost importance. Whether nations develop their commercial and industrial systems with energy-efficient technology or cheap, inefficient equipment will again affect not only whether the world addresses climate change, but whether it will even have the power to.
Burgeoning economic development throughout the world presents massive opportunities for American business to parlay its technological leadership into economic gain. Whether one puts a higher value on environmental protection or the economic value of American exports, the United States should be the technical leader in cost-efficient energy technology, and we should be the ones to sell it to the world.
The potential for the global market for energy efficiency products and services over the next 10-15 years has been estimated at $84 billion. All Americans want to see the fulfillment of a large part of that market potential come back as U.S. jobs and revenue. However, U.S. exporters face strong competition from a variety of nations in energy technologies, many of which give aggressive R&D and international marketing assistance to native businesses. For example, as of 1996, the U.S. government now spent less on research and development than the Japanese government -- not less per capita, less outright.
Mr. Chairman, now is not the time to back away from technological investment that can significantly contribute to our nation's future economic growth and ability to compete in international markets. In addition, as global environmental concerns become more and more key to our own quality of life, we must staunchly defend the technological leadership we now hold and be able to provide environmentally sound technologies to the developing world.
V. INVESTMENT ENERGY-EFFICIENCY: NOTHING TO LOSE AND EVERYTHING TO GAIN
Mr. Chairman, I have described here how energy efficiency has been a transforming force in the American economy, and, how federal energy efficiency efforts have played a key role in that expansion. Investments in research, development, and deployment of energyefficient technology pay for themselves many times over in economic, environmental, and national security benefits. In addition, these are strides forward that would happen much more slowly or even not at all without federal leadership.
Any evaluation of climate change programs must fully factor in the benefits of energyefficiency gains in any cost-benefit analysis. In order to do that, we must undertake a more comprehensive accounting of the benefits of federal energy-efficiency programs that began 25 years ago, and have continued through today.
Mr. Chairman, I believe that energy-efficiency efforts at DOE, EPA and other agencies should be escalated with or without their inclusion in a climate change program, and the Alliance strongly supports the President's fiscal year 2000 budget request for these programs. I have yet to learn of a federal investment that has yielded such rich rewards so broadly dispersed over the economy.
That being said, if we believe that climate change is a threat to our environment and economy, we can find no better insurance policy for dealing with that problem in the future than to make every effort to improve the energy-efficiency of our transportation, our industrial technology, and our homes and offices. To attack these programs, or to walk away from federal leadership on the issue is to shrug our shoulders and say that -- in the absence of scientific or political consensus on climate change - the global environment we leave to our children is not worth the relatively modest expenditure that has been asked for by the President.
Thank you for the opportunity to testify before your Committees today. I'm happy to address any questions you might have.
END

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