Statement
of the Global Climate Coalition
Before
the Senate Committee on Environment and Public Works
Hearing
on S. 556, the Clean Power Act
November
1, 2001
The
member organizations of the Global Climate Coalition, and the over six million
businesses, companies, and corporations we represent, thank Chairman Jeffords
and Ranking Member Smith for the opportunity to comment on S.556, the Clean
Power Act of 2001.
The
GCC is the voice for business in the climate change debate, representing every major sector of the
U.S. economy – including agriculture and forestry, electric utilities,
railroads, transportation, manufacturing, small businesses, mining, oil and
natural gas, and coal. Our members have
participated in domestic and international discussions on the issue of climate
change virtually from their beginning.
Moreover, the industries represented by GCC members, by their own
initiative, are responsible for some of the most innovative and technologically
advanced solutions for addressing greenhouse gas emission issues. We remain committed to applying constructive
approaches to voluntarily address the climate issue.
As
the GCC represents a considerable portion of U.S. economic activity, any
proposals to reduce emissions of criteria pollutants or carbon dioxide will
have a substantial impact on the way our members do business, the states in
which they operate, and on the consumers who use their products to enhance
everyday life. Thus, our interest in
this legislation is motivated by a desire to better understand the proposals
now being considered and to offer the Committee the benefit of our experience,
wherever that experience can add constructively to the debate in the weeks
ahead.
The
GCC believes that S.556, as a proposal to reduce greenhouse gas emissions, is
seriously flawed and virtually unworkable.
We base this assertion on the fact that the structure of S.556 is
virtually indistinguishable from the Kyoto Protocol, and thus prescribes the
same types of unreasonable targets and timetables that would cause immediate
and long-term damage to the U.S. economy, workers, and consumers.
Despite
a continuing long-term trend of improved energy efficiency in our economy, U.S.
economic strength, output, and energy use are directly related to carbon
dioxide emissions. At a time when the
U.S. economy is in a period of dangerous uncertainty, and thus highly sensitive
to negative stimuli, the language regulating carbon dioxide found in S.556
would increase energy costs, restrict productivity and impair overall growth.
S.556
would increase the difficulty of maintaining the reliability of the electricity
grid that links our homes, businesses, communities, cities, and states. Put simply, achieving the goal of reducing
CO2 emissions to 1990 levels in the year 2007 will
require that a significant portion of the nation’s electricity sector be shut
down. Because America’s demand for
energy – specifically, electricity – is growing, this strategy would be unwise.
CO2 emissions from electric power plants, despite efficient technologies
and practices, are projected to increase by 217 million metric tons (or 39%)
over the next twenty years as the demand for electricity increases. While acknowledging that 75% of the increase
in electricity generation between 1999 and 2020 is projected from natural gas,
power sector CO2 emissions in 2020 are
projected to be from 262 to 286 million metric tons above 1990 levels. A reduction of the magnitude required by
S.556 would be impossible to achieve without fencing in a significant portion
of the nation’s electricity generating infrastructure.
The
levels of emissions reduction in S.556 is on par with those called for under
the Kyoto Protocol, which has been rejected by both the Bush Administration and
Congress, in part, as being too costly to the U.S. economy. This notion was recently reinforced by the
U.S. Energy Information Administration (EIA).
In an analysis prepared for the Senate, EIA concluded that a
multi-emissions reduction strategy “[meeting] the individual emissions limits
for NOX, SO2, mercury, and CO2 [in S.556] will all require
significant effort; the CO2 and
mercury limits are likely to be the most difficult to meet.”[i] Moreover, “to meet the assumed CO2 limit, significant
switching from coal to other fuels is expected, because low-cost technologies
for capturing and sequestering CO2 are not expected to be widely available” even by 2020, let alone in
the 2002-2007 timeframe established in S.556.[ii]
While
GCC members, as noted above, remain committed to developing and deploying
technologies and innovations that reduce, avoid, or sequester emissions, we
oppose a command-and-control approach to the issue precisely for the reasons
put forth by EIA: “Among the four
emissions that have limits in these cases, CO2 emissions tend to be the most costly to reduce,
largely through the premature retirement of existing coal plants and the
increased use of natural gas and renewable technologies.”[iii]
It
must also be emphasized that the scenarios with the lowest costs for reducing
CO2 emissions (as outlined in
an earlier EIA report, Scenarios for a Clean Energy Future) are based on
assumptions that EIA itself questions.
These include assumed changes in consumer behavior that are not
consistent with historical behavioral patterns; results from R&D funding
increases that have not occurred; and voluntary and information programs for
which there is no analytical basis for evaluating the impacts. Furthermore, some of the policy assumptions
in Scenarios for a Clean Energy Future require legislative or regulatory
actions that may not be enacted or, if enacted, may become effective at later
dates than assumed.
If the Committee on
Environment and Public Works reports out S.556, it does so in the face of clear
evidence the U.S. manufacturing sector has entered a downturn. Indeed, the manufacturing sector
has been in recession since Fall 2000, triggered, in part, by the sharp
increase in overall energy prices, particularly for natural gas and a concern
over energy-supply reliability. During the
last seven months of 2000, more than 200,000 net manufacturing jobs were lost,
largely due to sudden energy price increases. This human cost, combined with
the $115 billion in higher energy prices paid by all energy consumers during
2000, cut about one-half of a percentage point off anticipated GDP growth just
last year.
Energy-intensive
industries, such as steel, auto making, chemistry, paper, coal mining and oil
and gas extraction are especially affected by rises in energy costs. These costs vary widely across states and
regions, as these industries tend to be located unevenly across the country.
The East South-Central and East North-Central regions, heavy in coal mining and
energy-intensive industry, shoulder a disproportionate share of the burden on manufacturing. Short supplies of electricity and natural
gas, and the world price of petroleum, already have contributed to current
economic hardships. In addition, the
requirements of S.556 would apply to many highly efficient combined heat and
power units and boilers at industrial facilities, which would bear significant
capital costs in addition to rising energy costs.
S.556
would permanently impose these conditions on the economy by forcing electric
generators to choose between investing large amounts of capital to continue
using coal or building the new facilities necessary to switch to more expensive
natural gas – perhaps jeopardizing the energy system’s reliability during the
transition. This, in the words of one manufacturing trade association, is a “Hobson’s
choice” not acceptable “absent an overwhelmingly compelling argument that human
health, the environment or national security requires it.”[iv]
This
last statement prompts the GCC to question the need to establish policy on
emissions reductions whose extent reaches far beyond even the Clean Air
Act. According to the latest
Environmental Protection Agency (EPA) report on national long-term trends in air
pollution, “the trend toward cleaner air has continued since EPA's formation in
1970, while during the same time, the gross domestic product increased 158
percent, miles traveled by cars and trucks increased 143 percent, and energy
consumption increased by 45 percent.”[v] The government’s environmental arm has said
that air is getting cleaner. There is
every reason to expect, with government-private sector partnerships, and
industry’s continued commitment to voluntary approaches, that this trend will
continue to be the norm in the United States even in the absence of legislation
such as S.556.
As we have stated many times in the past, answering the challenge posed by climate change is a long-term proposition that will require new technologies and new ways of doing business. However, S.556, which implicitly assumes the development, deployment, and consumer adoption of renewable energy and energy-efficient technologies by 2007, is unrealistic in this regard.
And
it is a simple fact that renewable energy has not developed in such a way as to
sustain the nation’s growing appetite for energy. Even if it had, there are no assurances of affordability or that
the public would embrace renewables. In
a 2000 analysis of the Climate Change Tax Initiative, EIA argued that consumers
would be "reluctant to invest in more expensive technologies with long
payback periods to recover the incremental costs," and that energy
efficiency is "only one of many attributes" they consider when
purchasing appliances.
GCC
also believes that this particular aspect of the multi-emissions issue suffers
from the tendency by many to express overly optimistic assumptions about
emissions control technology efficiencies on the one hand, and too conservative
estimates of future growth in electricity demand on the other.
The
Global Climate Coalition believes that S.556 should be set aside in favor of a
cooperative approach with the Bush Administration on this issue. The Administration’s cabinet-level review of
climate change policy, and its planning on power plant emissions, are ongoing;
it should at least be given the time to complete its work and propose
policy. S.556’s resemblance to the
Kyoto Protocol – which has been dismissed by President Bush and effectively
opposed by the Senate in the form of S.Res.98 – virtually ensures that it will
be neither enacted nor signed into law.
In
the months ahead, we look forward to continuing to work with both the Committee
and the Administration in fashioning common sense policy approaches to these
very complex issues.