TESTIMONY

HON. EILEEN CLAUSSEN, PRESIDENT
PEW CENTER ON GLOBAL CLIMATE CHANGE

At the U.S. House of Representatives, Committee on Ways and Means

February 28, 2007

Regarding The Effects of Global Warming

Mr. Chairman and members of the Committee, thank you for the opportunity to speak to the committee about the important issue of global climate change. My name is Eileen Claussen and I am the President of the Pew Center on Global Climate Change.

The Pew Center on Global Climate Change is a non-profit, non-partisan and independent organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change.  Forty-two major companies participate in the Pew Center’s Business Environmental Leadership Council (BELC), making the BELC the largest U.S.-based association of corporations focused on addressing the challenges of climate change.  Many different sectors are represented, from high technology to diversified manufacturing; from oil and gas to transportation; from utilities to chemicals.  These companies represent $2.5 trillion in market capitalization, employ over 3.3 million people, and work with the Center to educate the public and policy-makers on the risks, challenges and solutions to climate change

As you have heard from Drs. Schneider and Prinn, it is now well established that climate change is occurring and that humans are primarily responsible.  The recently released summary of the IPCC’s 4^th assessment report calls the evidence of climate warming “unequivocal” and expresses over 90% confidence that most observed warming is due to human influence.  Left unabated, climate change will have tremendous consequences on our country and the world.

The greenhouse gas (GHG) emissions that contribute to climate change come from a wide variety of sources and sectors throughout the economy.  These include transportation, electric power generation, use of energy in our homes and offices, manufacturing, and many others.  Just as there is no single sector or emissions source that is responsible for greenhouse gas emissions,   there is also no single technology or policy that will solve global warming.  We need a portfolio of policies and technologies to meet this challenge.

The Pew Center believes there are three things we in the United States must do to reduce the real and growing risks posed by global climate change: First, we must enact and implement a comprehensive national mandatory market-based program to progressively and significantly reduce U.S. greenhouse gas emissions in a manner that contributes to sustained economic growth.  Second, while taking the necessary first step of placing limits on our own emissions, the United States must also work with other countries to establish an international framework that engages all the major greenhouse gas-emitting nations in a fair and effective long-term effort to protect our global climate.  Third, we must strengthen our efforts to develop and deploy climate-friendly technologies and to diffuse those technologies on a global scale.    Only in this way will we achieve our environmental objectives and keep costs to a minimum.

Recently, the Pew Center joined with 3 other NGOs and 10 companies, including BP, Caterpillar, Duke Energy, DuPont, and GE in announcing the US Climate Action Partnership (USCAP).  Together, we are calling for a combination of mandatory approaches, technological incentives and support for demonstration projects.

We chose emission reduction targets with technology in mind:  to allow for capital stock turnover and for the development and deployment of new technologies.   In five years, emissions should be between 100 and 105% of today’s levels, ­ in other words, no more than 5% above current levels.  In ten years, emissions should be 90-100% of today’s levels.  By 2050, we would like to see emissions cut 60 to 80% from current levels.   It is the considered judgment of the US Climate Action Partnership that these cuts are both technologically achievable and economically sound.

The USCAP went into detail as to how we think these goals should be achieved.  Given this committee’s interests and jurisdiction, I will highlight only the recommendations focused on federal technology research, development, demonstration, and deployment.  But let me reiterate that we will need a portfolio of technologies.  The U.S. will continue to burn coal and natural gas; we will continue to use nuclear energy; and we will need to ramp up our use of renewable energy sources.  Transportation will also be a key part of our future, but given our interests in both energy security and climate change, we will need to see far greater use of biofuels, advanced diesels and hybrids in the short term, as well as continuing innovation in fuels and technologies over the longer term – including use of electric- or hydrogen-powered vehicles.

The USCAP recommends the following key characteristics of a technology program:

• A mix of deployment policies to create incentives to use low-GHG technologies and address regulatory or financial barriers.   Such policies could include loan guarantees, investment tax credits and procurement standards.  For example, production tax credits currently available to some categories of renewables could be extended to other zero-GHG electricity sources.  Likewise, tax incentives currently available to a limited number of hybrid-electric cars and trucks could be extended to a larger number of qualifying vehicles.
• Stable, long-term financing (for example, in the form of a dedicated revenue stream or other means not reliant upon annual Congressional appropriations);
• Joint public/private sector cost-sharing and oversight. The Department of Energy’s FutureGen project is an example of a joint public/private initiative, with costs shared between the government and the companies in the project’s Alliance.   The USCAP believes, however, that we need more demonstration projects to demonstrate the potential for long-term sequestration in a variety of geologic structures.
• Establishment of performance criteria and a technology roadmap to guide RD&D and deployment program investment decisions; and
• Establishment of a public/private institution to govern the administration of the RD&D and deployment program fund.

It is important that incentives be consistent enough to provide the certainty needed for large-scale investment decisions.  For example, the short-term nature of the production tax credit for wind power has resulted in a boom and bust cycle in which investments have been strong while the credit is in effect but drop quickly as it expires, hampering consistent growth in this sector.

From our own work on technology policy, the Pew Center has found that government has not always been good at picking technology winners, so it is best to have programs and incentives that serve to promote a variety of technologies and approaches.   Projects could be selected via a reverse auction, allowing proposals for reduction projects to compete on a level playing field for funding.  An auction could specify technology categories as well as offer a broad competition to elicit new, as-yet-unknown technologies.

The committee could also consider incentives for energy efficiency measures in businesses, homes, and vehicles; for capture and sequestration of carbon that would otherwise be emitted from coal burning power plants; for energy efficient transmission and distribution systems; and for transportation planning measures that reduce miles driven.

Many of the companies we work with have set voluntary targets and reduced their GHG emissions significantly.  The majority have done so by finding efficiency opportunities in their operations and most have had no net cost to implement those reductions.  This is not to say that all reductions will be free, or that a regulatory scheme alone would be a sufficient response to climate change.  But it does suggest that moving forward with both a push (through technology incentives) and a pull (through a price signal) could allow us to meet a series of emission reduction objectives such as those recommended in the USCAP proposal.

Here are some examples of what companies have been able to achieve.

• DuPont used seven percent less total energy in 2004 than it did in 1990, and has lowered its GHG emissions by 70% during that time despite an almost 30 percent increase in production. Compared to a linear increase in energy with production, this achievement has resulted in $2 billion in cumulative energy savings.
• From 1990 to 2002, IBM’s energy conservation measures resulted in a savings of 12.8 billion kWh of electricity—avoiding approximately 7.8 million tons of CO₂ and saving the company $729 million dollars in reduced energy costs.
• The pharmaceutical company Baxter reduced its process-related GHG emissions by 99 percent between 1996 and 2002 by phasing out the use of certain solvents. These process changes resulted in reductions equivalent to over 3 million metric tons of carbon dioxide.  Alcoa’s aluminum smelters reduced generation of PFC’s (powerful greenhouse gases) by 75% from 1990 to 2002.

These leading firms are curbing their contributions to climate change, but their voluntary efforts are not enough to achieve the comprehensive reductions in greenhouse gases needed across the economy.  To achieve that goal, we need to enact the measures discussed above.

I thank the committee for considering steps to address global climate change and look forward to your questions.