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March 31, 2000, Friday

SECTION: PREPARED TESTIMONY

LENGTH: 5274 words

HEADLINE: PREPARED TESTIMONY OF MARGO THORNING, PH.D. SENIOR VICE PRESIDENT AND CHIEF ECONOMIST AMERICAN COUNCIL FOR CAPITAL FORMATION

BEFORE THE SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES

SUBJECT - THE IMPACT OF THE KYOTO PROTOCOL ON ECONOMIC GROWTH: TAX POLICIES TO PROMOTE TECHNOLOGY AND SEQUESTRATION

BODY:
Introduction

I am pleased to present this testimony to the Senate Committee on Energy and Natural Resources.

The American Council for Capital Formation represents a broad cross- section of the American business community, including the manufacturing and financial sectors, Fortune 500 companies and smaller firms, investors, and associations from all sectors of the economy. Our distinguished board of directors includes cabinet members of prior Republican and Democratic administrations, former members of Congress, prominent business leaders, and public finance and environmental policy experts.

The ACCF is now celebrating its 27th year of leadership in advocating tax, regulatory, environmental, and trade policies to increase U.S. economic growth and environmental quality.

We commend Chairman Murkowski and the Senate Committee on Energy and Natural Resources for their focus on the role of technology, science, and incentives in addressing climate mitigation. In our view, tax policy is key to delivery on the promise of new technology. Given the ACCF's extensive studies on the impact of tax policy on investment, my testimony will develop an aspect of what should become the foundation for an integrated climate change policy. We believe that progress on tax proposals such as those in S. 1777, the Climate Change Tax Amendment, is vitally important. My testimony begins with a review of the macroeconomic consequences of reducing CO2 emissions and purportedly stabilizing CO2 concentrations. It includes information from a number of analyses sponsored by the ACCF Center for Policy Research, the public policy research affiliate of the American Council for Capital Formation. These studies describe the economic costs of near-term limitations on U.S. carbon emissions and the impact of emissions limits on the growth of the capital stock, as well as suggest tax incentives for voluntary actions to encourage the purchase of energy-efficient equipment and sequestration initiatives to reduce CO2 emissions both in the United States and abroad. (Summaries of the Center's climate policy studies 'are available on our Web site, www.accf. org.) I also discuss issues related to long-term options for reducing CO2 concentrations. Finally, strategies for a cost-effective, long-term approach to CO2 stabilization are presented. I would like to request that my testimony, as well as the Center's newest volume based on our October, 1999, forum, The Kyoto Commitments: Can Nations Meet Them With the Help of Technology?, be included in the record of this hearing.

Macroeconomic Effects of CO2 Emission Limits

The Kyoto Protocol to the United Nations Framework Convention on Climate Change, which the United States negotiated in December, 1997, calls for industrial economies such as the United States, Canada, Europe, and Japan (called Annex I or Annex B countries) to reduce their collective emissions of six greenhouse gases by an average of 5.2 percent from 1990 levels by 2008-2012. The U.S. target is a 7 percent reduction from 1990 levels; this amounts to a projected 538 million metric ton cutback in CO2 emissions relative to the projected amount in 2010, or about a 30 percent reduction in emissions compared to the U.S. Department of Energy's baseline forecast.

Many experts believe that the emissions reductions called for in the Kyoto agreement have potentially serious consequences for all Americans, and that these consequences have not been fully analyzed and understood. Research conducted over the past decade for the ACCF Center for Policy Research by top climate change scholars such as Professor Gary W. Yohe of Wesleyan University, Senior Vice President Mary H. Novak of WEFA, Inc., Professor Alan S. Manne of Stanford University, Dr. Richard Richels of EPRI, Dr. W. David Montgomery of Charles River Associates (CRA), and Dr. Joyce Y. Brinner of Standard & Poor's DRI (DRI), Dr. John R. Moroney of Texas A&M University, Dr. Brian S. Fisher of the Australian Bureau of Agricultural and Resource Economics, and others, concludes that the cost of reducing CO2 missions in the near term would impose a heavy burden on U.S. households and industry. These studies, as well as the Department of Energy's Energy Information Administration (EIA) report released in October, 1998, stand in sharp contrast to the optimistic projections contained in the Administration's economic analysis prepared by the Council of Economic Advisers released in July, 1998. Impact on GDP

A wide range of models predict that reducing U.S. CO2 emissions to either the Kyoto target (7 percent below 1990 emission levels) or to 1990 levels (the pre-Kyoto target) would reduce U.S. GDP significantly. As CO2 emissions are reduced, economic growth would slow due to lost output as prices rise for carbon-using goods--goods that must be produced using less carbon and/or more expensive processes.

In dollar terms, estimates show that meeting the Kyoto target would reduce U.S. GDP by about 1 percent to over 4 percent annually (see Figure 1). This translates into annual losses of $100 billion to almost $400 billion (in inflation-adjusted dollars)'in GDP each year compared to the baseline forecast (see Figure 2). Impact on Net Capital Stock

Output would also fall because of slower net capital accumulation, reflecting the premature obsolescence of capital equipment due to sharp energy price increases. It takes an average of 20 years to "turn over" or replace the entire U.S. capital stock. Thus, meeting the Protocol's 2008-2012 timetable for reducing emissions would mean either continuing to utilize plant and equipment designed to use much cheaper energy, or replacing the capital stock much more rapidly than its owners had planned.Although the short-term outlook for the U.S. economy suggests continued growth, longterm strength and economic stability require that we carefully consider the impact of the Kyoto Protocol on the ability of U.S. business to raise enough capital to invest so that we can remain competitive in both domestic and global markets as well as further our environmental goals. New research by Harvard Professor Dale Jorgenson (the current president of the American Economic Association) shows that new capital investment, including investment in information technology including computers, has been the major factor underlying the recent strong growth in labor productivy without continued high levels of equipment investment, the U.S. economic growth rate will decline because there is little or no slack in the U.S. labor supply. In other words, the only way to maintain strong growth and rising living standards for U.S. households is through continuing or even increasing current investment levels.

Though relatively strong now, investment spending in the United States in recent years compares unfavorably with that of other nations as well as with our own past experience. From 1973 to 1997, gross nonresidential investment as a percent of GDP was lower for the United States than for any of our major competitors, according to data from the Organization for Economic Cooperation and Development.

The U.S. net saving rate during the same period is also low relative to that of most other industrialized countries, averaging 6 percent compared to an average of 10 percent in several other major industrial countries. International comparisons aside, even more disturbing is the fact that net business investment in this country has in recent years fallen to less than 60 percent of the level of the 1960s and 1970s. Net private domestic investment averaged 9.2 percent of GDP from 1960 to 1980; since 1991, it has averaged only 6.1 percent (see Table 1).

If the United States were to ratify the Kyoto Protocol or require sharp near-term emission reductions through "back door" implementation of the treaty via regulatory mechanisms, U.S. capital formation and productivity growth would be seriously impacted. Though the U.S. economy is currently performing better than the economies of most other developed nations, in the long run our low saving and investment rates will inevitably result in a growth rate far short of our true potential. Impact on U.S. Budget Surpluses and Retirement Security

In light of the current debate about how to use the projected federal budget surpluses, policymakers need to consider the potentially large negative impact on GDP growth and federal budget receipts of proposals that address the possible threat of global warming by requiring sharp, near-term cutbacks in CO2 emissions. As described above, estimates provided by various academic, private-sector, and EIA modelers show that requiring the United States to reduce CO2 emissions to 7 percent below 1990 levels by 2008-2012 (the EIA projects U.S. CO2 emissions will be about 40 percent above this target by 2010) would reduce GDP growth in the range of 1 to 4 percent per year. Using a simple calculation based on the relationship of increases in GDP in federal tax receipts, if growth falls by 3 percent per year, the projected on- budget surplus in 2010 would decline from $195 billion to $57 billion (see Figure 3). Therefore, implementation of the Kyoto Protocol would make it much more difficult to sustain tax cuts, "save" social security, or promote the retirement security of the baby boom generation, and could require sharp changes in fiscal policy in order to avoid deficit spending. These budgetary impacts should be considered as policymakers shape the U.S. response to the potential threat of climate change.

- Importance of International Emissions Trading

A major determinant of the cost of curbing emissions is whether the United States can purchase permits from abroad where emissions can be reduced at a lower cost than in the United States. In the absence of an international trading system, the United States would be forced to curb its own CQ emissions by about 30 percent within 10 years. Due to population growth and increases in output, this gap between projected emissions and the Kyoto target will continue to grow.

If the United States is not able to take advantage of "where" flexibility (reducing emissions wherever it is cheapest globally) by using international emissions trading to meet the Kyoto target, the cost in terms of lost output ranges from about 1 percent of GDP, according to a recent study by Professor Alan S. Manne and Dr. Richard G. Richels, to 4.2 percent of GDP as estimated by EIA.

Full global trading in emissions, meaning that developing nations such as China, India, and Brazil are participating in a global emissions reduction effort, could reduce costs to 0.3 percent of GDP, according to the Manne/Richels study. Most policy experts, including Professor Manne and Dr. Richels, doubt that these developing countries can be induced to participate in the foreseeable future. Emissions reductions accomplished through limited trading schemes (involving only Annex I and Eastern Europe), which most experts believe are realistic, would cut U.S. GDP growth by between 0.9 percent annually, according to Dr. W. David Montgomery of CRA and Professor John R. Moroney of Texas A&M University, and 1.6 percent annually as estimated by Dr. Joyce Y. Brinner of DRI. The Administration's estimated loss of 0.01 percent of GDP, which assumes full global trading, is far below the costs predicted by many academic and private climate policy experts (see Figure 1 ).

In dollar terms, U.S. GDP losses from either meeting the Kyoto target or restraining emissions to 1990 levels range from about $87 billion (Manne/Richels) to $378 billion (EIA) annually if international trading is not possible. While the dollar amounts in Figure 2 use slightly different base years and thus are not precisely comparable, these model results provide an approximation of the amount of goods and services that the United States would have to forego in order to meet the Kyoto emissions targets.

Real-dollar GDP losses are much less when international trading occurs, with most estimates ranging from around $21 billion annually (Manne/Richels, with full global trading) to $111 billion (Dr. Montgomery, with limited international trading). At $1 billion annually, the Administration cost estimate is far below other models' predictions? Cost of Tradable Permits

Another measure of the burden that near-term reduction of emissions would place on the U.S. economy is the cost of a tradable permit to emit a metric ton of carbon. Undera permit system, permits would trade at the marginal cost of abatement. (Carbon taxes could be imposed instead of tradable permits; there should, in principle, be no difference in the energy prices under the two alternative systems.)

If international trade in permits is not allowed, the cost of a permit to meet the Kyoto target varies from a low of $240, according to Professor Manne and Dr. Richels, to a high of $348 per metric ton, as estimated by EIA (see Figure 4).

When trading among Annex I countries is allowed, the cost of a permit under the Kyoto target varies from about $120 per metric ton (CRA) to $180 according to Dr. Brinner (DRI).

The Administration's estimated permit price of $14, which rests on the unrealistic assumption of full global trading, lies far below all other estimates. Impact on Energy Costs

Cutting back emissions requires raising energy prices in order to reduce demand. According to most models, U.S. households and businesses would face sharply higher costs for gasoline and electricity. Prices for gasoline under the Kyoto emissions target would increase by as much as 53 percent and electricity prices would increase by 86 percent in the EIA projection (see Figure 5). When Annex I trading is allowed, prices go up a bit less sharply, according to other policy experts. For example, the DRI estimates show a 29 percent price increase for gasoline and a 54 percent increase for electricity prices.

Again, the Administration's estimates of cost increases for energy (2.7 percent for gasoline and 3.4 percent for electricity) are far below those of other models, including those of EIA. Impact on Employment, Consumption, Income Distribution, and Living Standards

Policies to curb emissions to meet the Kyoto target would have a significant impact on U.S. households' economic well-being and living standards, as well as negatively affect the distribution of income. For example, estimates of job losses range from 1.3 million (Brinner/DRI) to 2.4 million (Novak/WEFA) by 2010. Consumption by U.S. households falls by over 2 percent under the Kyoto emissions target, according to DRI.

Curbing CO2 emissions would also reduce wage growth by 5 to 10 percent, according to Professor Yohe. Moreover, it would worsen the distribution of income in the United States, according to the analyses of both Professor Yohe and Ms. Novak. For example, based on a standard measure of the degree of income inequality among a country's population called the GINI coefficient, Professor Yohe's analysis of the impact of reducing emissions to 1990 levels shows that carbon taxes, even when recycled through personal income tax reductions, cause relatively large losses in the poorest quintile (lowest one- fifth of the population). These losses, added to modest losses in the middle quintiles, provide gains for the richest fifth of the population (see Figure 6).

An analysis by Professor Moroney of Texas A&M University concludes that meeting the targets of the Kyoto Protocol would significantly slow the growth in U.S. living standards. His study shows that the 1.3 percent annual growth in energy per worker in the United States would become a 1.8 percent annual decrease (required by the Kyoto Protocol), thereby cutting productivity growth from 2 percent annually to only 1.1 percent.

The difference between projected productivity growth of 1.1 percent under the Kyoto Protocol and 2 percent without it implies major differences in U.S. living standards by 2010, Professor Moroney states. With productivity growth of 1.1 percent per year, U.S. living standards would be 17 percent higher in 2010 than in 1996. But with productivity growth of 2 percent per year, living standards would be 32 percent higher in 2010. Professor Moroney concludes that a 1.8 percent annual reduction in energy per capita required by the Kyoto Protocol would lead to U.S. living standards that are 15 percent lower in 2010 than they would be with no restrictions on energy use. U.S. Competitiveness for Energy-Intensive Sectors

Several studies, including those by Dr. Brian Fisher and his colleagues of the Australian Bureau of Agricultural and Resource Economics, University of Colorado's Professor Thomas Rutherford, DRI's Dr. Brinner, and WEFA's Ms. Novak, have concluded that near-term emission reductions would result in carbon leakage and the migration of energy-intensive industry from the United States to non-Annex I countries.

A 1999 study by Professor Manne and Dr. Richels analyzed this question. Their model results suggest that the Kyoto Protocol could lead to serious competitive problems for energy-intensive sector (EIS) producers in the United States, Japan, and OECD Europe (see Figure 7). Meeting the emissions targets in the Protocol would lead to significant reductions in output and employment among EIS producers, and there would be offsetting increases in countries with low energy costs. U.S. output of energy-intensive products such as autos, steel, paper, and chemicals could be 15 percent less than under the reference case by 2020 (1.0 in Figure 7 is the reference or base case). In contrast, countries such as China, India, and Mexico would increase their output of energy intensive products. In its present form, the Protocol could lead to acrimonious conflicts between those who advocate free international trade and those who advocate a low carbon environment, Professor Manne and Dr. Richels conclude.

A recent DRI analysis by Dr. Brinner reaches similar conclusions about the Kyoto Protocol's impact on U.S. competitiveness. The DRI study concludes that coal mining, electric utilities, petroleum refining, natural gas, and railroads would suffer sharp declines in demand. Energy-intensive industries such as cement, chemicals, and iron and steel would also face sharp price increases that would depress domestic demand and encourage imports.

The Administration's analysis of the impact of the Kyoto emissions targets on U.S. competitiveness differs significantly from those of Professor Manne and Dr. Richels, DRI, WEFA, and others. In its July, 1998, analysis, the Administration's Council of Economic Advisers notes, "Evaluating how the Kyoto Protocol could affect competitiveness of a few specific manufacturing industries--specially those that are energy-intensive, such as aluminum and chemicals--is complex. However, the modest energy price effects associated with permit prices of $14 per ton to $23 per ton would likely have little impact on competitiveness? This also appears to contradict earlier observations by the CEA in its 1998 Economic Report of the President? Impact on Agriculture

U.S. agriculture would also lose competitiveness if the United States complied with the Kyoto Protocol. Another study based on the DRI model predicts that implementation of the Protocol would cause higher fuel oil, motor oil, fertilizer, and other farm operating costs. This would mean higher consumer food prices and greater demand for public assistance with higher costs. In addition, by increasing the energy costs of farm production in America while leaving them unchanged in developing countries, the Kyoto Protocol would cause U.S. food exports to decline and imports to rise. Reduced efficiency of the world food system could add to a political backlash against free trade policies at home and abroad. Further, "the higher energy costs," the DRI report noted, "together with the reduced domestic and export demand, could lead to a very severe decline in investment in agriculture, and a sharp increase in farm consolidation. Small farm numbers likely would decline much more rapidly than under baseline conditions, while investment even in larger commercial farms likely would stagnate or decline."5

A new report (October, 1999) by CRA for the Business Roundtable also concludes that U.S. agriculture would be harshly affected by the Kyoto Protocol. The CRA study predicts that agricultural sales would decline by 5 to 10 percent compared to the baseline forecast. Flaws in the Administration (CEA)'s Economic Analysis of the Kyoto Protocol

The Administration's July, 1998, economic analysis of the impact of reducing CO2 emissions to 7 percent below 1990 levels, prepared by the CEA, is seriously flawed for three reasons.

First, the Administration (CEA)'s cost estimates assume full global trading in tradable emissions permits (including trading with China and India). Most top climate policy experts conclude that this assumption is extremely unrealistic since the Protocol does not require developing nations (who will be responsible for most of the growth in future CO2 emissions, see Figure 8) to reduce their emissions, and many have stated that they will not do so. Second, the Administration (CEA)'s cost estimates assume that an international Co2 emissions trading system can be developed and operating by 2008-2012. This assumption is unrealistic, according to analysis by Professor A. Denny Ellerman of MIT. Third, the cost estimates are based on the Second Generation Model (SGM) developed by Pacific Northwest National Laboratory. The SGM appears to assume costless, instantaneous adjustments in all markets; the model is not appropriate for analyzing the Protocol's near-term economic impacts, according to CRA's Dr. Montgomery. As Massachusetts of Technology's Professor Henry Jacoby observes, there are no short-term technical changes that would significantly lower U.S. carbon emissions. Tax Policy to Encourage Voluntary Action to Reduce CO2 Emissions

Current U.S. tax policy treats capital formation, including investments that increase energy efficiently and reduce pollution, harshly compared to other industrialized countries. For example, according to a study by the centrist Progressive Policy Institute (the research arm of the Democratic Leadership Council), the marginal tax rate on domestic U.S. corporate investment is 37.5 percent, exceeding that of every country in the survey except Canada (see Figure 9). (The current Canadian budget proposal includes corporate income tax reductions and capital gains tax cuts that will reduce its effective tax rate on investment to less than the rate shown in Figure 9.) The tax rate calculations include the major features of each country's tax code, including individual and corporate income tax rates, depreciation allowances, and whether the corporate and individual tax systems are integrated.

The United States also taxes new investment harshly compared to our own recent past. For example, before the 1986 Tax Reform Act (TRA '86), the United States had one of the best capital cost recovery systems in the world. Under the strongly pro-investment tax regime in effect from 1981 to 1985, the present value of cost recovery allowances for wastewater treatment facilities used in pulp and paper production was approximately 100 percent (meaning that the deductions were equivalent of an immediate write-off of the entire cost of the equipment), according to analysis by Arthur Andersen LLP. Under TRA '86, the present value for wastewater treatment facilities fell to 81 percent, dropping the U.S. capital cost recovery system to near the bottom of an eight-country international survey (see Table 2). Allowances for scrubbers used in the production of electricity were 90 percent before TRA '86; the present value fell to 55 percent after TRA '86. As is true in the case of productive equipment, both the loss of the investment tax credit and the lengthening of depreciable lives enacted in TRA '86 raised effective tax rates on new investment in pollution control and energy-efficiency equipment. Slower capital cost recovery means that equipment embodying new technology and energy efficiency will not be put in place as rapidly as it would under a more favorable tax code. A variety of tax incentives such as partial expensing, accelerated depreciation, tax-exempt bond financing, and more generous loss carrybacks, and other proposals such as those included in S. 1777, the Climate Change Tax Amendment introduced by Senator Larry Craig (R-ID), that reduce the cost of capital for voluntary efforts to reduce greenhouse gas emissions, could be more effective than the "credit for early action" regulatory framework proposals currently before Congress.

The goal of encouraging voluntary, proactive efforts to make beneficial investments and to accelerate new technology to reduce carbon emissions in the United States. and abroad is more likely to succeed with tax incentives which reduce the cost of capital for investments which sequester carbon or reduce CO2 emissions.

There is a substantial body of research by top public finance scholars, including President Clinton's former Deputy Assistant Secretary for Tax Policy, Dr. J. Bradford De Long, and Harvard University's Dr. Dale Jorgenson, which demonstrates that tax policies such as investment tax credits (ITCs) or accelerated depreciation which immediately reduce the cost of undertaking a new investment are effective. A broad-based investment tax credit, ranging from 7 to 10 percent and applicable to most types of equipment purchased in the United States was in effect for most of the 1962-1985 period. For example, under prior law, if a business purchased a piece of equipment for $5,000 which qualified for the 10 percent ITC, the tax credit would be $500 and thus the taxpayer would pay $500 less in taxes the year the equipment was put in place.

One of the most effective ways to encourage U.S. businesses, including agriculture, and households to voluntarily invest in carbon sequestration measures and in new capital equipment which emits less CO2 than the equipment it replaces is through the use of tax incentives, such as a tax credit, which directly impacts a firm's (or household's) "bottom line." The tax credit should meet several criteria. First, it should be applicable to all sequestration and energy efficient investments, whether made in the United States or abroad. The credit for international investments could be modeled after the foreign tax credit (FTC) in the current federal tax code; the FTC allows taxpayers to deduct foreign income tax paid against its U.S. tax liability. Second, tax credits for energy efficient investment should be "saleable" in the sense that they can be bought and sold as are sulphur dioxide emission permits under the Clean Air Act. The concept of a "saleable" tax credit is also similar to a provision in the 1981 Economic Recovery Tax Act that allowed companies with no taxable income to transfer (or "sell") the tax benefit of the investment to a profitable company. Making the tax credits saleable will ensure that firms that do not have taxable income (and thus no federal income tax against which to apply a tax credit) are able to benefit from the program. "Saleable" targeted tax credits will also be appealing to industries such as nonprofit rural electric co-ops and the agricultural community (whose members often operate at a loss). Third, the tax credit should not attempt to "pick winners and losers" but should be available for a wide range of sequestration and energy efficient projects.

The tax credit approach to encouraging energy efficient investment is also favored by the Clinton Administration. In the Administration's FY 2001 budget, 5 of the 6 revenue proposals for promoting energy efficiency use tax credits or accelerated depreciation to encourage the desired outlays. For example, the proposal for a tax credit for energy efficient building equipment provides a credit of 20 percent of the purchase price of the equipment (limited to $500 per unit, no matter how great the cost of the equipment). Similarly, a tax credit for energy efficient investments is included in S. 1777, the Climate Change Tax Amendment introduced by Senator Craig, and in S. 1833, the Energy Security Tax Act of 1999, introduced by Senator Thomas Daschle (D-SD).

Conclusions: Strategies for the Future

If, as knowledge of the climate system increases, policy changes to reduce CO2 emissions become necessary, these changes should be implemented in a way that minimizes damage to the U.S. economy. Above all, experts agree that voluntary measures clearly and cost- effectively reduce the growth in greenhouse gas emissions, as the U.S. Second National Communication to the Framework Convention on Climate Change noted in 1997. Modifications to U.S. tax policy that reduce the cost of capital for energy-efficient investment should be part of the voluntary measures.

Reducing global CO2 emissions should be a gradual process, according to Pacific Northwest National Laboratory's Dr. Jae Edmonds, Mr. James Dooley, and Mr. Marshall Wise. Moreover, a recent study by Dr. Edmonds, Mr. Dooley, and Dr. Sonny Kim concludes that the introduction of carbon capture and sequestration from central power facilities, the introduction of hydrogen fuel cells as an option for both power generation and transport, sequestration of carbon in the soil, and afforestation and reforestation would enable the economy to rely less heavily on sharp near-term emissions reductions to achieve a particular concentration level. For example, carbon sequestration at power plants and fuel cell use for electric power generation and transportation could cut the present discounted cost of satisfying a 550 parts per million by volume atmospheric constraint by more than 60 percent.

In short, the consensus of the noted climate policy scholars whose work is discussed in this testimony is clear. Given the need to maintain strong U.S. economic growth to address such challenges as a growing population, "saving" Social Security, the retirement of the baby boom generation, and a persistent trade deficit, policymakers need to weigh carefully the Kyoto Protocol's negative economic impacts and its failure to engage developing nations in meaningful action. Adopting a thoughtfully timed climate change mitigation policy--based on accurate science, improved climate models, global participation, tax incentives to accelerate investment in energy efficiency and sequestration, and new technology--is essential, both to U.S. and global economic growth and to eventual stabilization of the carbon concentration in the atmosphere, if growing scientific understanding indicates such a policy is needed.

FOOTNOTES:

1 Jorgenson, Dale W. and Eric Yip. 1999. Whatever Happened to Productivity Growth? Mimeo. Cambridge, Mass.: Harvard University. 28 June.

2 Council of Economic Advisers. 1998. The Kyoto Protocol and the President's Policies to Address Climate Change: Administration Economic Analysis. July.

3 Council of Economic Advisers. 1998. The Kyoto Protocol and the President's Policies to Address Climate Change: Administration Economic Analysis. July.

4 Council of Economic Advisers. 1998.Economic Report of the President. Washington, D.C.: U.S. Government Printing Office. February.

5 Sparks Companies Inc. 1998. United Nations Kyoto Protocol--- Potential Impacts on U.S. Agriculture. October.

END

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