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Senator Voinovich Speaks out on Climate Change
June 3, 2008

 Posted By Marc Morano – 1:30 PM ET – Marc_Morano@EPW.Senate.Gov  

Floor Statement on Climate Change

Senator George V. Voinovich

June 3, 2008

Link to Senator Voinovich's Release 

Mr. President,  Today, I rise to address the legislative proposal introduced by Senators Lieberman and Mr. Warner to address global climate change. 

Like many of my colleagues, I share the desire to take proactive steps to address this important global environmental challenge. That said, I have serious reservations about this proposal:  I feel that is both overly aggressive – vastly outpacing what technology can provide and thus ensuring enormous economic pain on the country; and, it is overly bureaucratic and cumbersome in its implementation – representing an unprecedented expansion of government power and a massive bureaucratic intrusion into Americans lives that will have a profound impact on businesses, communities and families.  EPA has stated this program will take between 350 and 400 people to implement.

The major failure of this legislation is that it fails to harmonize our country’s economic, energy and environmental objectives and the consequences to American interests could be devastating.  The international aspect of this problem is particularly troublesome and underscores the need for a better policy approach to climate change than what we have before us.   

The developing world is currently undertaking an intensive expansion of energy infrastructure, and escalating transportation, industrial and commercial expansion to meet the demands of growing domestic and international markets.   

The developing nations' combined emissions shortly will exceed the developed nations' combined emissions.  In 2007, “[t]he International Energy Agency (IEA) issued a…report projecting that global energy demand would increase by more than one-half by 2030, and that ‘Developing countries…contribute 74 percent of the increase in global primary energy use…China and India alone account for 45 percent of that increase.’”

·        China now uses more coal than the United States, the European Union and Japan combined. And it has increased coal consumption 14% in each of the past two years.  During the last two years their energy use grew 12% per year, a rate greater than the growth in their GDP.

·        China puts on line two new coal-fired power plants every week.

·        In June 2007 the Netherlands Environmental Assessment Agency announced that China’s 2006 CO2 emissions surpassed those of the U.S. by 8%.  With this, China tops the list of CO2 emitting countries for the first time—years ahead of projections made only several years ago. 

·        To make matters worse, India is right behind China in stepping up its construction of coal-fired power plants — and has a population expected to outstrip China's by 2030.

 Much like China, those countries with large domestic reserves of coal, and that includes the U.S., will continue to use it.  It is unrealistic to assume that the world would turn its back on this abundant resource.  We must take this reality into account.  And this can be done by jump starting the technology that is needed produce the energy we need in an environmentally sound manner. 

Recognizing the international dynamic of this problem, the Lieberman Warner proposal attempts to impose a tariff-like requirement to hold carbon credits for goods entering the U.S. from counties that do not control emissions.   

But, as the House Energy and Commerce Committee put it, “At this point, there appears to be no consensus as to whether [a tariff]…would survive a potential challenge with respect to WTO rules.”   

Moreover, the U.S. Trade Representative has questioned the plan’s efficacy and China, Mexico and Brazil have signaled that the policy could begin a trade war.  Indeed, top officials from the European Union and United Nations have also raised doubts about whether the U.S. trade penalties would harm the prospects of a new global warming agreement. 

But even if the provision is WTO-compliant, it will not address the underlying competitiveness issues the US would face from the higher fuel, feedstock and electricity prices the bill would impose on US manufactures.   

The Byrd-Hagel resolution bound the U.S. to reject climate proposals unless they encourage comparable action by other nations that are major trading partners and key contributors to global emissions.  This bill creates an economic incentive to avoid U.S. caps.  

A better approach is needed.

Americans are already struggling with the increase in their cost of living due to higher prices for gasoline, home heating fuel, electricity, food and health care. Lieberman-Warner will only make things worse.  We cannot tolerate policies that harm our economy and drive business overseas.  If those businesses locate in countries that do not share our environmental objectives, then we are worse off on two counts—fewer jobs in the U.S. and no net benefit to the environment.

In my opinion, Lieberman-Warner fails to address this fundamental problem.

Over my strenuous objections Lieberman-Warner was voted out of the Environment and Public Works Committee without an analysis of the economic impacts on the country from either the EPA or the EIA. 

We now have at least a half-dozen analyses on the bill from a wide variety of groups.  And when the assumptions for the development and deployment of new technologies are held constant, the analyses are largely consistent.  EPA’s analysis predicts that by 2030, annual losses in gross domestic product (GDP) could be as high as $983 billion.  By 2050, those losses could grow to $2.8 trillion.  To put this in perspective, CBO projects federal budget for FY08 to be $2.9 trillion. This means the potential economic losses from this legislation in 2050 would equal that spent on everything intends to spend this year from Social Security to national defense.    

Yet, in order to meet the caps of the bill, the analysis assumes aggressive growth in nuclear and other clean energy technologies at rates that are widely regarded as unachievable, for example:

·        150% increase in nuclear power by 2050 (there are 104 operating plants today meaning we would have to build up to 150 new plants by 2050)

·        Commercial readiness of CCS beginning in 2015 These assumptions are unrealistic and mask the true costs of implementing the bill. 

In regard to nuclear power – I recently published a paper in “Nuclear News” on the steps that need to be taken to launch the “nuclear renaissance” – and I’ll make certain each member receives a copy.  But, bringing vast amounts of new nuclear power on line will not be a lay-up shot.  For example, there is only one company in the world that the vessels and forgings for these plants and costs of constructing new plants have jumped from $5 billion to $7 billion per plant. 

Today, we have pending at the Nuclear Regulatory Commission nine applications for 15 new plants that, if constructed, would not come on line until 2015.  Honestly, we’ll be lucky to get 30 built by 2050, much less 150.

In regard to CCS:

·        No commercial experience or testing at “scale” to date

·        DOE says it will be 10 years (2018) before the 7 large scale demonstration tests are complete

·        DOE says a more robust geologic assessment will not be complete until 2015

·        EPA says the rule for CO2 sequestration will not be complete until 2011

·        Capture technology is not economically viable—adds up to 80% to the cost of electricity

·        Liability and critical infrastructure issues remain unanswered

·        DOE says “commercial” CCS may be 20 years away

The connection between the costs of the program and the availability clean energy technologies is clear.   As EIA points out:  

“The … timing of the development, commercialization, and deployment of low-emissions electricity generating technologies such as nuclear power, coal with CCS, and dispatchable renewable power is a major determinant of the energy and economic impacts of S.2191.”   

The impact of this legislation will be disproportionately felt by states that depend on coal for much of their energy needs.  As the Plain Dealer recently put it: “Coal-dependent states…would take a double hit in economic dislocations and electricity price spikes, with barely any financial cushions to make the disruptions more palatable.  The bill also lacks the kind of consumer fairness and flexibility necessary to avoid fuel price shocks and damage to manufacturing nationwide.”  

The result will be a wealth transfer - moving resources from areas like the South and Midwest -- to states that are less reliant on coal like those in New England or on the West Coast.  And while coal and manufacturing states pay their neighbors and the government to stay in business, the bill establishes trillions of dollars in new entitlements -  with money flowing to over 30 new government spending programs - constituting, as the Wall Street Journal recently pointed out, one of the largest tax and spend bills in our Nation’s history.  

Based on EPA's analysis, the bill would raise over $6 trillion from the allowance auction to owners and operators of utilities and factories who would have to purchase allowances to stay in business.  But the cost of purchasing these allowances would be passed on to consumers as higher prices, which will, as the CBO points out[7], amount to a regressive tax - hitting low and middle income working families hardest. 

And despite the severe economic damage Lieberman-Warner would impose on the U.S. economy, the policy would do little to address global climate change.  EPA’s analysis indicates the policy will reduce global concentrations of CO2 less than 5% by 2095 - having no practical effect on global temperatures.  And even in the unlikely event that the developing world adopts stringent control requirements, CO2 concentrations would continue to increase. 

Addressing climate change will require a technology revolution centered on the way we produce and use energy.  The theory behind Lieberman-Warner is that the more painful it is on businesses, the faster CO2 reductions will occur.  I believe the solution to this problem lies in our ability to increase access to clean energy.  Instead of using the power of the government to increase energy costs, we should use it to decrease barriers to investments in clean energy solutions.

The US takes a lot of flack from other countries for not signing the Kyoto protocol.  But I’m pleased that the Bush Administration has been moving forward on the international front through efforts such as the Asia Pacific Partnership, Methane to Markets and the Climate Technology Initiative – to name a few.     

So while we didn’t sign Kyoto, we do have a base of international activities to build on.  Any one of them could provide the basis for becoming a multinational effort – giving all countries a vested interest in technology advancement and deployment.      

The thing we’ve got to remember is that, above all, the developing world desires sustained economic growth.  Slowing down economic development to address climate change is not an option they are willing to pursue and we cannot force it upon them.  But while they don’t desire our advice on carbon caps, they do seek as broad an application of new technologies as may be available.   

If we are going to be successful in addressing the challenge of climate change, we have got to set a realistic vision for the developing world using what Richard Armitage and Joseph Nye referred to as “Smart Power” when they testified before the Senate Foreign Relations Committee on April 24, 2008.  They argue that the world “look[s] to [the US] to put forward better ideas rather than just walk away from the table.”  This was the perception after Kyoto – and it could be the perception again today if we do not find a way to engage the developing world.   

They go on to say: “The United States needs to rediscover how to be a smart power…[which]… matches vision with execution and accountability, and looks broadly at U.S. goals, strategies and influence in a changing world.”  And they rightly conclude our “challenges can only be addressed with capable and willing allies and partners.”  Without willing partners in China and India, we cannot be successful in addressing climate change. 

Technology development and promotion should drive our national climate change policy; it is the only rational path forward. And it is also the only way to deal with emissions from the rapidly expanding coal-based economies of China and India – who readily admit they have no intention of accepting binding emissions targets.  The public interest and private sector communities agree that the crucial factor that will determine whether we have an effective climate policy is the extent to which that policy will encourage the development and deployment of needed technology.  Regulation without sufficiently available technology will result in high costs for American consumers while offering little hope that developing nations will answer the call to reduce their emissions. 

I agree that we need to act quickly to address climate change.  But we must be smart about how we proceed.  I’m hoping that after this year’s debate we can come together on a bipartisan basis to draft a bill that doesn’t impose unilateral actions that hurt our economy and drive jobs overseas, but jump starts technology and engages our international partners through collaborative, multinational effort to develop and deploy the clean energy technologies that everyone recognizes are necessary to solve this global environmental problem.   ###

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