Facing the threat of global warming, this Committee must decide whether to address the root of the problem or simply to treat its symptoms. I am here today to challenge this Committee to do the former by passing a bill that will start U.S. industries on a path to greater efficiency, less pollution, and put the U.S. in a leadership role as the key exporters of the new and exciting energy efficient technologies that are beginning to emerge. I am also here to warn you against taking the Band-Aid approach to global warming that S.547 now presents.
Any doctor, when treating a patient with high cholesterol, will likely prescribe some type of medication. But no responsible doctor would limit his treatment to just medication. He would insist that the patient address the source of his cholesterol problem by changing his eating and exercise habits. To do anything less would be not only irresponsible, but obviously dangerous to the patient's health. It is widely recognized that one of the inherent dangers in our ever-advancing medical technologies is the belief that there will always be some pill, whether it is for cholesterol, dieting, blood pressure, or otherwise that will solve our problem so that we won't have to change our habits.
In many ways, our global climate shows the symptoms of an ailing patient. Scientists around the world recognize that our glaciers are retreating, our ice caps are thinning, our seas our rising, our violent storms increasing, and rising temperatures are breaking records that go back to the middle ages. To pass S.547 as it currently stands would be like giving this sick patient a pill without addressing the source of the problem -- escalating emissions of CO2 from the burning of fossil fuels. Just as it would have been irresponsible for the doctor in the cholesterol analogy to send his patient off without changing the habits that caused his problem, it would be irresponsible for this Committee to pass a bill that allows companies to continue increasing their emissions while being rewarded for everything from creating tree plantations to unverifiable, self-reported projects almost a decade old.
Our country's history of strong environmental regulation and economic prosperity is the clearest indicator that properly crafted regulations can provide incentives for the innovations that drive our markets. Michael Porter, Harvard Business School professor and former member of President Reagan's Commission on Industrial Competitiveness notes in his most recent book that "the data clearly show that the costs of addressing environmental regulations can be minimized, if not eliminated, through innovation that delivers other competitive benefits." He goes on to suggest that we should "focus, then, on relaxing the trade-off between environmental protection and competitiveness by encouraging innovation and resource productivity."
Like Porter, I do not come at these issues purely as an environmental advocate. While it is my duty as the leader of an environmental organization that focuses on atmospheric protection to speak as one, my background is in business, economics and Wall Street. I spent eight years of my career in decidedly non-environmental roles, and for a majority of that period, working for Jude Wanniski, the high priest of supply-side economics. That is to say, I believe in a very careful use of government intervention, and am as suspicious of corporate welfare as any conservative.
The history of environmental legislation in the United States is one of the government continually raising environmental standards, usually over the strong objections of the affected industries, only to have those standards met by creative innovations that come in at a fraction of the initially projected costs or even as new profit centers for these industries. The Clean Air Act, removing lead from gasoline, phasing out ozone depleting chemicals are just a few of the examples.
The fight against global warming is no different than these other efforts - it's just larger. Cheap and abundant fossil fuels have been important to our economic growth. But so have intelligence, technology and innovation. The most recalcitrant companies are still fighting even the thought that human actions may be contributing to global warming. Meanwhile, the most innovative companies are investing in highly efficient technologies for cars, buildings and homes.
Overall, S.547 is a failure in that it does not promote innovation and resource productivity. Instead, the bill rewards our biggest polluting companies even if they make no changes whatsoever. It also has the potential to pre-empt real emissions reductions, just as a mandate is emerging from the American people, increasingly concerned about global warming.
Specific flaws with S. 547 include:
1605(b) credits: The bill allows for the issuing of emissions credits for past voluntary emissions reductions reported to the Department of Energy (1605(b)). These projects simply cannot be given credit without a tight screen to rule out unverifiable projects (according to the General Accounting Office, more than 1,800 claims under 1605(b) during 1994-1996 have at best a "moderate" level of accuracy) those with negative environmental impacts or those that would have taken place anyway in the course of normal business. Perhaps more importantly, these unverifiable 1605(b) credits could completely offset emissions reductions targets adopted by the U.S., (credits claimed under just two years of 1605(b) reporting represent 80 percent of U.S. emissions reductions requirement). Furthermore, according to the non-profit National Environmental Trust, just a handful of companies reporting under 1605(b) could potentially get credits worth $11 billion for questionable global warming pollution reduction cuts.
A great example of the flawed accounting within the 1605(b) program is in a submission from General Motors. GM filed for 1605(b) credits for reduced emissions of their portion in the U.S. vehicle fleet. Twenty-five percent of the reductions GM claimed came not from efficiency improvements, but simply because they didn't sell as many cars and trucks -- their fleet diminished. Awarding credits for lost market share amounts to no more than corporate welfare, a handout to big business.
Nuclear incentives: Sen. Wyden, in his letter supporting the bill, eloquently outlined many of the problems that are embedded in the bill as presently drafted. He drew specific attention to the incentives this bill could provide for increased use of nuclear power and the inadequacy of many of the 1605(b) reported projects. For example, sixty percent of Southern Company's 1605(b) projects are nuclear plant upgrades and increased output from nuclear plants. To further subsidize this moribund industry in the name of global warming, would exacerbate an existing problem, and one the American public has resoundingly rejected. While nuclear energy does not omit carbon, it is unacceptable to trade one environmental threat for another.
International projects: By allowing for the granting of credits for overseas greenhouse gas abatement efforts, this bill diverts the focus from innovative investments at home where they are most needed. It instead relies on difficult-to-measure efforts in the developing world, many of which these companies are undertaking as profitable business investments anyway. In addition, there is great potential to corrupt the international negotiation process, as it will be done ahead of the global effort to create the framework for cooperation within the Kyoto Protocol. For example, S. 547 allows a double standard in which U.S. corporations can get credit for reducing emissions overseas but do not get penalized for increasing emissions overseas.
Sinks: Carbon absorbing "sinks" projects should be left out of the early credit discussion at least until the international scientific body, the Intergovernmental Panel on Climate Change completes its study in the year 2000 and defines the way sinks will be dealt with under the Kyoto Protocol. The science must drive the policy, not the other way around. Any U.S. credits for such actions promised prior to that report have great potential to set false expectations for companies or even to put the U.S. in a position of advocating a less rigorous accounting for these projects. If you can find a way to protect our forests and stop global warming, terrific. But if you are encouraging polluters to offset their emissions by putting their own fences around existing forests or for planting tree plantations destined for the paper mill, then the bill has no environmental integrity. Regardless, to ensure environmental integrity, policy decisions must be based on scientific decisions that are not yet available.
Additionally, as sinks are related to agriculture, it is one thing to promote no regrets measures to insure sustainable farming practices designed, in part, to build up the organic matter in the soils - a process which helps the soil hold more carbon dioxide. However, it is troublesome if false hopes are created that companies will be able to offset their emissions through a change in practices in the agricultural sector. In our opinion, including soil-based sinks could create false hopes and the potential for greater backlash down the road if the international community decides not to include soils in the Kyoto Protocol. There are so many other benefits of soil conservation and other sustainable agricultural practices; there must be a better way to provide incentives for this behavior.
There are other flaws as well. Among them are: any early action program must be capped to provide security that the credits given out prior to a Kyoto Protocol compliance period do not overwhelm and obviate any action during that period; instances where more than one entity might claim credit for the very same action must be avoided; and a static baseline as presently stipulated in the bill is not aggressive enough. A steadily declining baseline target would both encourage real progress and weed out and discourage business-as-usual emissions reductions.
Until these flaws are fixed, any future efforts to lower industrial emissions of greenhouse gases will be met with the cry of "I already gave at the office." Passing the bill before you as a means to combat global warming is like a doctor combating a patient's high cholesterol by giving him a pill and then treating him to a steak and fries dinner. Our global climate deserves better treatment.
In 1960, President Kennedy said, "It is time for a new generation of leadership, to cope with new problems and new opportunities. For there is a new world to be won." His words are as true today as they were almost forty years ago. Today's new world will not be won if we cling to old technologies at the expense of our environment and fail to promote the innovations our companies need to be competitive internationally. The challenge before this Committee is to pass a bill that will address the source of global warming so that the US will continue to lead tomorrow as we have led in the past in both environmental protection and economic strength.