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.
[i] Strategies for Reducing Multiple Emissions From Electric Power Plants, U.S. Energy Information Agency, October 2001, x.
[iv] Position on Multi-Emissions Legislation, National Association of Manufacturers, October 2001.
[v] Headquarters Press Release, Environmental Protection Agency, October 18, 2001.