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58–147 2010

BUSINESS OPPORTUNITIES IN A LOW-CARBON 

ENERGY ECONOMY 

HEARING 

BEFORE THE

SELECT COMMITTEE ON 

ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

OCTOBER 10, 2007 

Serial No. 110–13 

( 

Printed for the use of the Select Committee on 

Energy Independence and Global Warming 

globalwarming.house.gov 


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SELECT COMMITTEE ON ENERGY INDEPENDENCE 

AND GLOBAL WARMING 

EDWARD J. MARKEY, Massachusetts, Chairman 

EARL BLUMENAUER, Oregon 

JAY INSLEE, Washington 

JOHN B. LARSON, Connecticut 

HILDA L. SOLIS, California 

STEPHANIE HERSETH SANDLIN, 

South Dakota 

EMANUEL CLEAVER, Missouri 

JOHN J. HALL, New York 

JERRY MCNERNEY, California 

F. JAMES SENSENBRENNER, JR, Wisconsin 

Ranking Member 

JOHN B. SHADEGG, Arizona 

GREG WALDEN, Oregon 

CANDICE S. MILLER, Michigan 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

PROFESSIONAL STAFF

DAVID MOULTON, Staff Director 

ALIYA BRODSKY, Chief Clerk 

THOMAS WEIMER, Minority Staff Director 


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C O N T E N T S 

Page 

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 1 

Prepared Statement ......................................................................................... 3 

Hon. F. James Sensenbrenner, Jr., a Representative in Congress from the 

State of Wisconsin, opening statement .............................................................. 5 

Hon. Earl Blumenauer, a Representative in Congress from the State of Oregon, opening statement ...................................................................................... 6 

Hon. Jay Inslee, a Representative in Congress from the State of Washington, 

opening statement ................................................................................................ 6 

Hon. John B. Larson, a Representative in Congress from the State of Connecticut, opening statement ................................................................................ 6 

Hon. Emanuel Cleaver II, a Representative in Congress from the State of 

Missouri, opening statement ............................................................................... 7 

Prepared Statement ......................................................................................... 8 

Hon. Jerry McNerney, a Representative in Congress from the State of California, opening statement .................................................................................... 9 

Hon. Candice S. Miller, a Representative in Congress from the State of 

Michigan, opening statement .............................................................................. 9 

Hon. Stephanie Herseth Sandlin, a Representative in Congress from the 

State of South Dakota, opening statement ........................................................ 10 

WITNESSES

Mr. Ralph Izzo, Chairman, President and CEO, Public Service Enterprise 

Group Incorporated (PSEG), member of the Clean Energy Group and its 

Clean Air Policy Initiative ................................................................................... 10 

Prepared Statement ......................................................................................... 13 

Answers to Submitted Questions .................................................................... 91 

Mr. Neil Carson, CEO, Johnson Matthey plc, member of the UK Corporate 

Leaders’ Group ..................................................................................................... 29 

Prepared Statement ......................................................................................... 31 

Answers to Submitted Questions .................................................................... 97 

Mr. Alain Grisay, CEO, F&C Investments, member of the UK and EU Corporate Leaders’ Groups on Climate Change ...................................................... 61 

Prepared Statement ......................................................................................... 63 

Answers to Submitted Questions .................................................................... 102 

Mr. Jonathan Lash, President, World Resources Institute, member of the 

U.S. Climate Action Partnership ........................................................................ 67 

Prepared Statement ......................................................................................... 69 

Answers to Submitted Questions .................................................................... 106 

SUBMITTED MATERIAL

Hon. Edward J. Markey, a letter from Prince Charles of Wales, October 

3, 2007 ................................................................................................................... 26 


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BUSINESS OPPORTUNITIES IN A LOWCARBON ENERGY ECONOMY 

WEDNESDAY, OCTOBER 10, 2007 

HOUSE OF REPRESENTATIVES, 

SELECT COMMITTEE ON ENERGY INDEPENDENCE

AND GLOBAL WARMING, 

Washington, DC. 

The committee met, pursuant to call, at 9:39 a.m. in Room 2172, 

Rayburn House Office Building, Hon. Edward J. Markey [chairman 

of the committee] presiding. 

Present: Representatives Markey, Blumenauer, Inslee, Larson, 

Herseth Sandlin, Cleaver, McNerney, Sensenbrenner, Shadegg, 

Walden and Miller. 

The CHAIRMAN. If the world is to increase energy security and 

avoid the worse impacts of global warming, a large-scale transition 

to a low-carbon energy economy will be necessary. To achieve success, governments, businesses and the public must work together 

to increase energy efficiency and the use of renewable energy and 

decrease global warming in ways that maintain economic vitality 

and create jobs. We must harness the power and creativity of the 

global economy to meet the global energy challenge. 

Business leaders, better known for green eye shades than fondness for granola, are increasingly asking governments around the 

world to adopt smart long-term policies that ensure the true cost 

of energy and global warming is fully reflected in economic transactions and capital investment. They are seeking certainty for business decisions but also the opportunity to make a buck. 

According to the Stern Review of the Economics of Climate 

Change, the value of the global environmental market could be 

$700 billion as soon as 2010 with the adoption of smart policies. 

Companies are already jockeying to gain the most advantageous 

position to capitalize on these new opportunities. Rather than a 

drain on the economy, energy and global warming policies can be 

a boon. 

The European Union has adopted ambitious mandates for increasing energy efficiency and renewable energy use and decreasing global warming pollution. Instead of hindering the EU’s economy, it is roaring. 

As we have seen both in Europe and the United States, smart 

regulation drives innovation. In 1975, cars in the United States 

averaged just 13.5 miles per gallon. Fuel efficiency standards 

pushed the auto industry to innovate, and the fuel economy of cars 

rose to the height of 27.5 miles per gallon in 1987. 


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In the 10 years from 1977 to 1987, U.S. oil imports dropped from 

46.5 percent to 27 percent. Rather than build on that progress, efficiency standards have remained untouched for 20 years. Our reliance on imported oil has risen to 60 percent today, and dioxide 

emissions from the transportation sector now make up a third of 

total global warming pollution in this country. 

After years of stagnation, Congress has an opportunity to move 

our vehicle fleet into the 21st century by passing a strong 35 miles 

per gallon fuel economy standard this fall. By 2030, the fuel economy language in the Senate energy bill would reduce American oil 

consumption by 4 million barrels per day, almost double what we 

currently import from the Persian Gulf and reduce global warming 

pollution by more than 350 million tons per year. By passing the 

energy bill that couples this language with an increase in the renewable fuel standard and establishing a renewable electricity 

standard, Congress can initiate the transformation of a low-carbon 

energy economy and make a significant down payment on the reduction of global warming pollution necessary to save the planet. 

The United States and the United Kingdom have been described 

as divided by a common language, but, as we will hear from our 

witnesses today, business leaders from both countries are united on 

the need for energy and global warming policies that drive innovation and investment towards the creation of a low-carbon energy 

economy. 

I look forward to their testimony; and I will now recognize the 

ranking member of the Select Committee, the gentleman from Wisconsin, Mr. Sensenbrenner. 

[The statement of Mr. Markey follows:] 


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Mr. SENSENBRENNER. Thank you very much, Mr. Chairman. 

Global warming is a complicated problem that can’t be solved by 

the United States alone. International partnerships must be an essential part of any global warming policy, and I am pleased that 

today’s hearing will feature the perspective of two CEOs from the 

United Kingdom who will be able to add some insight from across 

the pond. 

Technology will be another essential part of any essential global 

warming policy, and all four of today’s witnesses will be able to 

give us more perspective on the technology that holds the best hope 

of reducing greenhouse gas emissions. Because it is clear that there 

will be a continued demand for energy from increased economic 

growth here and around the world, it is clear that the technological 

breakthroughs are the only real way for countries around the world 

to continue to meet their energy demands without raising greenhouse gas output. 

While today’s witnesses may share some views on technology, it 

seems that there are at least some differences between them. Some 

investors have different ideas than others about where the future 

of technology may go. Some consumers will obviously have different 

ideas about what type of cars they want to drive; and perhaps they 

won’t be the same ideas as government regulators in Washington, 

London or other parts of the world. I support the development of 

these new technologies; and I want nothing to stand in their way, 

especially government mandates. 

While I agree with our witnesses that technology needs substantial further development, I am afraid I don’t think government 

mandates will get us there. By picking winners and losers, the government could act to block worthwhile technology development 

while advancing substandard technology. It is far too early for Congress or any government regulators to begin deciding what technology will be right for our future energy needs. 

Another concern I have with mandates is that it will result in 

economic harm. Technological transitions can benefit the economy, 

and the Internet is an example of that. However, if government 

regulations thrust technology into an economy that is not yet ready 

for it, the results will likely be havoc. 

I believe that the free market is powerful enough to sort out the 

variety of emerging new technologies and integrate them into the 

economy without hitting our constituents in the wallet. 

At the end, we all want to see greenhouse gas reductions, but 

getting there is not going to be easy. One recent report from a 

group called Open Europe shows that European-based facilities 

covered by the EU emissions trading scheme have actually seen an 

increase in CO2 emissions by 1 percent. While that is not a tremendous increase, it is certainly not a reduction either; and it goes to 

show what a difficult task lies ahead. 

And nowhere does this task become more difficult than dealing 

with countries like China and India, whose emissions continue to 

grow. Already one report puts China’s total emissions ahead of the 

U.S. Countries like China and India will need revolutionary technology of their own in order to slow their emissions growth. 

There will be an increasing demand for cutting-edge energy technology in the United States and Europe, Asia and elsewhere 


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around the world. So there will clearly be business opportunities. 

I am just concerned that if the government gets into that business, 

like it has in Europe, the result might not be the ones we expected 

or hoped to achieve. 

I thank the gentleman and yield back the balance of my time. 

The CHAIRMAN. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Oregon, Mr. 

Blumenauer. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

I am looking forward to the conversation today. The gentlemen 

that are represented here today are part of what I think is perhaps 

the single most important element we will be dealing with in climate change and that is the billions of decisions that are made 

every day by businesses and consumers in our country and around 

the world. I am interested in being able to explore with them the 

way that the government can provide a framework to help advance 

this, to give stability to business, to send a signal about where we 

are going. 

I am pleased to represent a community, Portland, Oregon, where 

there is a strong commitment to green business initiatives, sustainable development and trying to have a regulatory framework for 

energy, transportation and housing that helps those pieces work together. I am looking forward to having this conversation here, and 

I appreciate your scheduling the hearing. 

The CHAIRMAN. Thank you. The gentleman’s time is expired. 

The Chair recognizes the gentleman from Washington State, Mr. 

Inslee. 

Mr. INSLEE. Thank you. I appreciate the witnesses being here. 

When you think about this, America does well any time there is 

a large economic transition, a technological transition. That has 

been our forte. It is where we have had our growth. When there 

was a transition to aeronautics, we have done very well. Where 

there was a transition in the Internet, we have done very well. And 

now when we go into a transition to other than carbon-based fuels 

we are going to do very well if—if—the U.S. Congress adopts the 

free market principles that my friend, Mr. Sensenbrenner, referred 

to when it comes to the limited capacity of the atmosphere to carry 

CO2. And that is why I hope that all of us here will work on a capand-trade system that uses the power of the market to drive these 

technologies forward once there is a price of carbon associated with 

a, quote, market, a free market on the carrying capacity for CO2; 

and I look forward to getting that done. 

I just want to note that folks have entered this discussion with 

fear, and I enter it with amazement at how smart people are. 

Every time I turn around, there is a new technology. I just got a 

little BlackBerry about a group called Konarka that is developing 

a clear, affordable technique for, actually, clear windows. It is just 

amazing what is going on out there, and I look forward to a way 

to help these folks move forward. 

The CHAIRMAN. The gentleman’s time is expired. 

The Chair recognizes the gentleman from Connecticut, Mr. 

Larson. 

Mr. LARSON. Thank you, Mr. Chairman. 


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Mr. Chairman, like the other members, some here on the dais, 

I look forward to the discussion. 

I have a keen interest in fuel cell technology, but also I am interested in the contrast and discussion that exists down here between 

a cap-and-trade system and a carbon tax and am interested in 

what the panelists have to say about that in terms of the dynamics, 

the leverage and how successful they think, for example, European 

Union’s are. And I want to commend the chairman again for his 

efforts in putting this panel together. 

The CHAIRMAN. I thank the gentleman. 

The Chair recognizes the gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. Thank you for calling 

the hearing. 

I would like to express appreciation to our guests for being here. 

I am particularly excited about your presence because of the advancements that we have seen in the EU and, of course, Chancellor 

Merkel calling for the need for a global emissions trading system, 

and I am certainly interested in whether or not you think that is 

practical and workable. 

Of course, the issues that we face here are global because there 

is no such thing as pollution and greenhouse gases just settling 

over parts of the world; and so we look forward to your statements 

and the opportunity to become dialogical. 

Thank you. 

[The prepared statement of Mr. Cleaver follows:] 


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The CHAIRMAN. Thank you. The gentleman’s time is expired. 

The Chair recognizes the gentleman from California, Mr. 

McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman, for holding this important hearing; and I thank the panelists, some who have come 

from quite a distance to participate. 

This is an important topic because it brings in both the international players and a strong business interest. It is my strong belief that the solutions to global warming will make us more prosperous and sustainable. It will create jobs and enhance international cooperation and understanding. I look at this as an opportunity to be exploited in making this a better world. We here in 

the United States can learn from Europe’s experience and from 

known business successes. 

With that, I look forward to a future of cooperation and understanding; and I yield back the balance of my time. 

The CHAIRMAN. I thank the gentleman. The gentleman’s time is 

expired. 

The Chair recognizes the gentlelady from Michigan, Mrs. Miller. 

Mrs. MILLER. Thank you, Mr. Chairman. I want to thank you for 

holding this hearing. 

I certainly want to thank all the witnesses as well for your attendance today. I am certainly looking forward to listening to you 

as you share your expertise. 

Coming from Michigan, the home of the domestic auto industry, 

I am interested to hear the testimony regarding the economic impact of legislation on vehicle technology. I do believe that there 

may be a number of business opportunities in a low-carbon economy. 

However, as you might imagine, I am also very concerned by 

some of the proposals that we should enact legislation to mandate 

a low-carbon economy. These proposals are making the assumption 

that the low-carbon technologies exist or will exist in the near future and that, some of these proposals, people would assume that 

the reason that these technologies have not yet been delivered is 

because businesses do not choose to develop or integrate them into 

their business model. And obviously one of the leading examples of 

this is in the domestic auto industry, constantly suggesting that if 

CAFE standards were increased or other form of binding legislation 

were enacted that the automotive industry would just respond with 

technologies to meet these demands. However, the burden that 

these regulations would place upon the domestic auto industry 

could be very severe, particularly at a time when it is well known 

about the decline that is happening, the economic transition that 

is happening to the domestic auto industry. 

So I would just—as I say, I am very interested to hear about all 

of the different expertise on this issue. I think it is clear what is 

happening in other countries around the world where they are investing in R&D and new alternative technologies, et cetera. At the 

same time, our country really looks to the domestic auto industry 

to do all of the R&D themselves to work it into their business 

model and to produce cars that their customers may not be interested in purchasing. So I will be very interested to hear your testimony. 


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I thank you again, Mr. Chairman. 

The CHAIRMAN. I thank the gentlelady. The gentlelady’s time is 

expired. 

The Chair recognizes the gentlelady from South Dakota, Ms. 

Herseth Sandlin. 

Ms. HERSETH SANDLIN. Thank you, Mr. Chairman; and thank 

you for holding this very important hearing. 

I look forward to hearing from our witnesses today and exploring 

with them the business opportunities that do exist based on their 

experience and insight in a low-carbon energy economy. But, more 

specifically, in representing a rural district, a farm State, the role 

that American agriculture and rural America can play in helping 

find solutions and what the business opportunities are in a low-carbon energy economy in reducing greenhouse gases, what the role 

of American agriculture can be, whether it be certain farming practices or grazing practices, that relate to participation in a cap-andtrade system, if indeed the United States ultimately adopts one. 

So this is an area, whether it is biofuels, wind and solar, carbon 

storage, I look forward to exploring with our witnesses today; and 

thank you very much, Mr. Chairman, again for holding this important hearing. 

The CHAIRMAN. The gentlelady’s time has expired, and all time 

for opening statements has expired, so we will now turn to our very 

distinguished panel. 

I would first like to recognize Ralph Izzo, who is the Chairman, 

President and Chief Executive Officer of Public Service Enterprise 

Group, Incorporated, since April of 2007. This is a company which 

has electric generating capacity in New Jersey, New York, Pennsylvania, Connecticut, Texas, California, New Hampshire and Hawaii. 

He first joined PSEG in 1992 and has served in a number of 

leadership positions in that company. He is trained as a physicist, 

and he has also spent time in the offices of Senator Bill Bradley 

and New Jersey Governor Tom Kean working on science and technology policy. 

We welcome you, Mr. Izzo. Whenever you are ready, please 

begin. 

STATEMENT OF RALPH IZZO, CHAIRMAN, PRESIDENT AND 

CEO, PUBLIC SERVICE ENTERPRISE GROUP INC. 

Mr. IZZO. Thank you. Good morning. 

Chairman Markey, Ranking Member Sensenbrenner and members of the committee, I am honored to appear before you today on 

behalf of PSEG. 

As the chairman has already told you, PSEG is an energy services company headquartered in New Jersey. But in addition to our 

regulated utility we own and operate competitive electric generating consisting of coal, natural gas and nuclear power. 

We believe that climate change is the preeminent challenge of 

our time, and with it come significant business opportunities and 

responsibility. Our company has been a leader in the effort to limit 

greenhouse gases for more than 15 years. Some of the steps we 

have taken include being the first utility in the country to sign a 

pre-Kyoto voluntary greenhouse gas reduction accord. We voluntarily agreed in 2004 to reduce our carbon dioxide emissions by 18 


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percent from 2000 levels by 2008, and we have been a leading advocate for a national economy-wide cap-and-trade program to reduce greenhouse gas emissions to 1990 levels by 2020 and 80 percent below current levels by 2050. We are also improving the efficiency of our own electric delivery system. 

Some initiatives include investing in state-of-the-art distribution 

cables and energy efficient transformers, using a biodiesel fuel 

blend in our vehicle fleet and replacing 1,300 cars and light trucks 

with hybrid electrics and retrofitting 450 bucket trucks with electric drives to power the lifts. 

Mr. Chairman, if you ask whether climate policies have influenced our business decisions and whether we think there are significant opportunities for businesses to participate in the climate 

challenge ahead, the answer is a resounding yes. To do so, PSEG 

and other companies will need to apply our expertise in new ways 

to reduce energy demand, spur development of renewable resources 

and develop carbon-free central station power. In short, we will 

have to change the way we run our businesses and enter into a 

new era of collaboration with State and Federal policymakers. 

Energy efficiency offers one such opportunity, but it will require 

a new regulatory compact. These are investments that can be made 

right now using existing technology. For example, in 1970, a typical 

refrigerator consumed around 2,000 kilowatt hours of electricity 

annually. Today, an Energy Star refrigerator of the same size consumes about one-fifth of that amount. 

The problem is that customers are not making decisions to invest 

in energy efficiency opportunities like this refrigerator. Energy utility companies are uniquely positioned to change this dynamic by 

investing in energy saving appliances and fixtures ourselves and 

receiving compensation as we do for investing in pipes and wires. 

Consider the fact that utilities engage in millions of interactions 

with customers daily and employ a highly skilled work force that 

can be engaged to promote efficiency. Also, utilities can make longterm investments and can assure that all customers, especially lowincome customers, benefit from energy efficiency. 

On the renewable energy front, PSEG has requested State approval to invest $100 million to finance solar projects in New Jersey. PSEG proposes to provide loans to solar developers, making 

solar energy more accessible and affordable for households and 

businesses. We are also anxious to explore direct investment in 

solar energy if Congress enacts a provision in the energy tax package that allows utilities to claim the investment tax credit available to others at present. 

Mr. Chairman, I conclude by saying what you already know. For 

the U.S. to meaningfully address climate change, a uniform national greenhouse gas reduction policy that establishes a market 

price for carbon is needed. This will drive development of new lowcarbon technologies. This should be a single, economy-wide capand-trade program and a single greenhouse gas trading market 

with consistent emissions reduction targets across all States. 

Congress should take its cue from the 10-State Regional Greenhouse Gas Initiative and develop a comparable national program 

that will render regional programs unnecessary. By ‘‘comparable’’ 


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I mean requirements that are at least as stringent as the so-called 

Reggie States. 

Other key components of a national program should include transition to a Federal allowance auction over a 10-year period and 

using proceeds to fund research and development and low-income 

assistance programs. Allocating a portion of allowances at no cost 

to electric generators based on an updating output-based formula, 

this approach will spur investment in higher efficiency power 

plants and provide incentives for investing in advanced low- and 

zero-carbon technologies. 

Mr. Chairman and members of the committee, thank you again 

for the opportunity to participate in these important hearings. I 

look forward to your questions. 

The CHAIRMAN. Thank you, Mr. Izzo, very much. 

[The statement of Mr. Izzo follows:] 


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The CHAIRMAN. Before turning to our next two witnesses, who 

are members of the Prince of Wales Corporate Leaders Group on 

Climate Change, I would like to include in the record a letter that 

Prince Charles, the Prince of Wales, has sent to the Select Committee. Members have a copy of the full letter, which is in front of 

them. 

[The information follows:] 


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The CHAIRMAN. I would like to just read a brief excerpt from 

Prince Charles’ letter to us. He said: 

‘‘I have been following with the greatest attention the most recent policy evolutions in key industrialized countries. To secure the 

future for generations to follow, I hope that the boldest possible 

targets can be set, together with the policies needed to implement 

them. Otherwise, how can we expect developing countries such as 

India and China to take action? The legally binding targets that 

will be put in place in the United Kingdom through the climate 

change bill, together with those being put in place in the State of 

California and steps being undertaken in numerous other States 

and cities in the United States, are evidence of how policymakers 

in both our countries are moving to address this problem. A challenge of the magnitude of climate change requires a coordinated response based on actions across every sector of society, and the business community is going to be critical in achieving this. The companies which are members of my Corporate Leaders Group are playing a highly strategic role, essentially helping to create a political 

space in which effective policies can be introduced and global 

progress can be achieved. I very much hope that the hearing this 

week will be productive and that members of my Corporate Leaders Group will be able to work with members of the Select Committee on Energy Independence and Global Warming in the future 

to develop further policy responses to the most pressing of problems. This brings you my warmest good wishes. Prince Charles.’’ 

So we thank him for that letter, and we thank the next two witnesses for coming here today. 

I would like to recognize a member of the Management Committee for the Prince’s Business and Environment Program and the 

Chief Executive of Johnson Matthey, Neil Carson. He joined the 

company in 1980 and has served in a variety of positions within 

the company and on the board before becoming CEO in 2004. He 

is currently the Chairman of the Business Task Force on Sustainable Consumption and Production. 

Mr. Carson, welcome; and whenever you are ready please begin. 

STATEMENT OF NEIL CARSON, CHIEF EXECUTIVE OFFICER, 

JOHNSON MATTHEY PLC 

Mr. CARSON. Chairman Markey, thank you very much and thank 

you, members of the Select Committee. This is an important issue, 

energy independence and global warming; and I am very honored 

to be here to present evidence. 

As the chairman stated, my name is Neil Carson. I am Chief Executive of Johnson Matthey and a member of the Corporate Leaders Group, which I represent today. 

Johnson Matthey is a specialty chemical company. It is nearly 

200 years old. Our core skills are in catalysts, in pressures metals 

and in fine chemistry; and our largest business, as many of you 

will be aware, is in the business of auto catalysts, that is, supplying catalysts to the exhaust of cars. Lately, trucks and buses 

also have been included in the legislative framework and other pollution control systems. Also, we are a developer of fuel cell technology and have been for many years. 


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Our business model at Johnson Matthey is to invest in R&D, to 

invest in technology; and this we hope will maintain leadership positions in our markets by continuously improving the performance 

of our products and then better servicing our customers as a result. 

I won’t go into great detail about the rest of Johnson Matthey’s 

business, because I think the main points of my evidence today to 

you is that both Johnson Matthey and the Corporate Leaders 

Group believe that, to address climate change and energy independence, industry and government need to work together and that 

time is of the essence and that our goals can be met at the same 

time as growing our economies and growing prosperity. 

The idea is not a new one. The idea to set long-term and binding 

legislation, in this case for CO2 emissions, is a powerful incentive 

then for industry like ours and others to invest in technology to 

find solutions to that issue. And I have got a classic example, 

which doesn’t really need to be raised at this meeting, but, of 

course, California in 1970 realized that its environment was hostile 

to human life and it was identified that cars were the culprit. They 

set demanding legislation into the future, 5 years ahead, and made 

it clear that in order to sell cars in California that legislation would 

need to be met. They didn’t have very much idea about how the 

legislation would be met, nor do I think they cared much. They 

didn’t choose a technology. They just set the outcome that they 

wanted in terms of reduced emissions from vehicles. That was in 

1970. And from 1970 to today the population has grown 38 percent 

in California, the miles traveled has grown 155 percent, GDP has 

grown 164 percent, but the relevant emissions have fallen 31 percent. A good example that prosperity can thrive over the years and 

that this has been a low-cost exercise for California. 

Now I think we can do the same thing with CO2. There are many 

mechanisms. The cap-and-trade mechanism has been mentioned 

today. There is, of course, taxation as well as an option. However, 

it is done from an industrial perspective the essence must be to set 

clear targets for the future and then not pick a technology, not pick 

a winner, but to allow business to find a solution. The solutions 

will be higher cost than currently but perhaps not as high cost as 

clearing up the mitigating, mitigating for the effects of global 

warming looking forward as identified by the Stern Review. 

Other issues for electricity generators are carbon capture and sequestration. These are technically possible, feasible, but expensive 

mechanisms. But, again, they can be invested in because of the cost 

of future emissions from carbon. 

That brings to the end my summary. Climate change is an urgent issue. With wealth comes responsibility. We should look after 

the planet for future generations; and the Corporate Leaders Group 

look forward to working with governments, your government and 

other governments, to find the solutions. 

The CHAIRMAN. Thank you, sir, very much. 

[The statement of Mr. Carson follows:] 


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The CHAIRMAN. I would now like to recognize Alain Grisay. He 

is Chief Executive of F&C Asset Management. He was also appointed an Executive Director and a member of the Executive Committee of Friends Provident on January of 2006. Prior to joining 

F&C in April of 2001, Alain Grisay was at JP Morgan for 20 years 

as a Managing Director responsible for the investment bank’s market client business in Europe. 

Mr. Grisay, please begin when you are ready. 

STATEMENT OF ALAIN GRISAY, CHIEF EXECUTIVE OFFICER, 

F&C ASSET MANAGEMENT, PLC 

Mr. GRISAY. Mr. Chairman and members of the committee, on 

behalf of F&C Management and fellow members of the U.K. and 

EU Corporate Leaders Group on climate change, I would like to 

thank you for giving me this opportunity to testify before the congressional Committee on Energy Independence and Global Warming. 

F&C is a leading European asset management company, nearly 

140 years old, that serves a wide range of institutional and retail 

customers with assets over $200 billion. Our mission is to deliver 

competitive investment returns to our clients and to act on their 

behalf to ensure that investee companies generate profits for their 

shareholders, while ensuring that their businesses will be around 

for the long term. We take our role as active investors very seriously and, in so doing, do not shy away from taking a strong stand 

on matters of public policy where we believe these to be a vital interest to our clients. Climate change is one such issue. 

I have traveled here today from London to share with you the 

fruits of our thinking and experience both as an institution investor 

and as a business that has played a leading role in voicing the concerns of business to U.K. and EU policymakers on climate change. 

My message is simple: Business and investors can only play their 

part in tackling climate change if government takes decisive action 

to make this possible. The costs of moving forward today in a 

planned and deliberate way are modest and will even yield profitable business opportunities for many innovative companies along 

the way. These costs are dwarfed by the costs of inaction when one 

considers the human, natural and economic consequences of a business-as-usual approach. In short, we simply cannot put our heads 

in the sand. 

Most important of all, this problem will not get solved through 

market forces alone in the time that we have left to act, because 

climate change presents a textbook example of market failure. This 

means that voluntary targets won’t do. Business needs a level playing field in order to take on the financial risks that adequate action 

on climate change require. Business will play a pivotal role in marshaling capital to fund the innovative technologies that will overcome climate change, but it needs government to set clear longterm rules and standards. 

I have therefore come here to ask you as legislators of the most 

powerful nation to play a historical part in this effort. Only with 

long-term legislative clarity can investment companies like mine 

return to their day jobs and begin the task of shifting capital on 


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the scale that is needed to transform the global economy to one 

that runs on low-carbon energy. 

What does this mean in practice? That we investors and the companies in which we invest need the U.S. Government to, first, define climate change policy as a top national priority and set binding 

national targets that will be translated into clear, long-term rules, 

regulations and standards; secondly, play a leadership role in engaging other national governments to establish binding global targets and standards; and, thirdly, to introduce policy instruments, 

including cap-and-trade mechanisms, fiscal measures and regulatory standards that would result in a viable carbon price. So as 

long as carbon is valued at zero, capital investments in innovative 

low-carbon technologies will remain embryonic and fail to deliver 

the economy transformation that is needed. 

In conclusion, Mr. Chairman and members of the committee, we 

have two choices: We can act now, with the benefit of a bit of time 

and planning, thereby enabling business to manage the transition 

efficiently and government to cushion the blow for those affected by 

the inevitable disruption; or we can act later and pay a much higher price. There is no third option. Innovative companies and investors stand ready to act, but we cannot compromise our economic 

survival without clear signals from government that reflect the new 

economy reality. 

I hope that the work of this committee will help you lead your 

nation and the community of nations in embracing this challenge 

and create the conditions for businesses to play a vital role in delivering the solutions to climate change. Thank you very much. 

The CHAIRMAN. Thank you, Mr. Grisay. 

[The statement of Mr. Grisay follows:] 


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The CHAIRMAN. I would like to now recognize our final witness, 

Jonathan Lash. He is President of the World Resources Institute 

and a founder of the U.S. Climate Action Partnership. In 2005, 

Rolling Stone described him as the environmentalist who has done 

the most to bridge the bitter divide between industry interest and 

green groups committed to halt global warming. His long career in 

State and local government and environmental organizations as a 

litigator and a leader is a testament to this well-deserved description. 

We welcome you, Mr. Lash. Whenever you are ready, please 

begin. 

STATEMENT OF JONATHAN LASH, PRESIDENT, WORLD 

RESOURCES INSTITUTE 

Mr. LASH. Thank you, Mr. Chairman and members of the committee. 

I appreciate the opportunity to appear before you and particularly appreciate the energy the committee is putting into addressing a compellingly important issue for the country, to develop legislation that will be both in our national environmental interest and 

in our national economic interest. I think that is really our subject 

today. 

My organization, the World Resources Institute, is an environmental think tank that works on global issues, including global climate change, and has partnered with businesses for 15 years developing low-carbon alternatives, finding ways for them to reduce 

emissions to purchase green power and developing the accounting 

protocol which virtually all companies that measure greenhouse 

gases now use to measure and report greenhouse gas emissions. 

I am here today on behalf of the United States Climate Action 

Partnership, a group that now includes six national environmental 

organizations and 27 companies from virtually every sector, including GE, GM, Ford, Chrysler, Caterpillar; six utilities, including 

Duke Energy, the third largest user of coal in the United States; 

Dupont, Dow, Pepsi, Rio Tinto, which is the third largest producer 

of coal in the United States; Conoco, John Deere and many others. 

The group last January issued a call to action, which, first of all, 

emphasized our agreement that climate change is real, immediate 

and urgent. In fact, it is proceeding more quickly than the scientists predicted, with impacts that are occurring earlier than we 

expected. 

The group, of course, shares the committee’s perception that we 

must and can address climate change in ways that help the U.S. 

economy to move forward and compete when tomorrow’s markets 

begin to demand low-carbon alternatives. Specifically, the United 

States Climate Action Partnership has recommended that Congress 

adopt a mandatory economy-wide cap-and-trade system that slows, 

stops and then reverses the growth in U.S. emissions, that achieves 

10 to 30 percent reductions within 15 years and 60 to 80 percent 

reductions by 2050. The group urges the inclusion of the capacity 

to use graphics in order to meet reduction targets and that the policy be complemented by other policies to accelerate efficiency improvements and advance technology. 


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So why? Why are 27 major companies, many of them heavy energy users and heavy coal users, recommending stringent action on 

climate change? 

First, they believe we have to act and that it is better to get 

started sooner, that delay will be expensive and increase the eventual cost to them. 

Second, they want to compete in tomorrow’s markets; and they 

believe tomorrow’s markets will be demanding low-carbon technology, services and products. There will be booming demand. They 

want to be there to meet that demand. 

Third, they are making massive technology investments in technology that will be in use for 50 years; and they want to know 

what the rules will be in the future. 

Fourth, they need a carbon price. You have already heard several 

times from this panel the importance of a carbon price. If we want 

to let the market choose winning technologies, the market has to 

have a price signal to be able to do it. 

Finally, they want a level playing field. We now have 17 States 

that represent the majority of the U.S. economy that are imposing 

their own carbon restrictions. It is an impossible environment for 

multi-national companies to operate in in the United States. 

I would make one quick comment that does not represent the 

U.S. Climate Action Partnership findings. Since you are in the final 

process of approval of an energy bill, there are extraordinarily important provisions in the energy bill which would help both energy 

security and climate change. Those include efficiency measures and 

renewable measures. 

But it is important to realize that not all measures that would 

improve energy security will help with climate change. An example 

is the proposed subsidies for coal to liquids. Since the process of 

producing liquid fuel from coal is energy intensive, it results in far 

higher GHG emissions than other liquid fuel alternatives. 

Thank you very much, Mr. Chairman. I look forward to your 

questions. 

The CHAIRMAN. Thank you, Mr. Lash, very much. 

[The statement of Mr. Lash follows:] 


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The CHAIRMAN. The Chair will now recognize himself for a round 

of questions. We will begin with you Mr. Izzo. 

PSEG is primarily a northern company. A couple of weeks ago, 

we actually had the Vice-President of the Southern Company who 

testified before us. He told us that solar energy would not work for 

the Southern Company down in Florida and Georgia. And yet we 

hear from you today up in New Jersey and the States surrounding 

New Jersey that you are making a massive investment in solar energy. 

And it seems kind of curious, because I think that New Jersey 

seniors as they leave New Jersey to go to Florida say the same 

thing that Massachusetts seniors say as they leave for Florida, 

which is I hate the winters up here; I am going to Florida. So why 

is it that you, a northern company, can make such a massive investment so optimistically in solar energy, but the Southern Company says that it won’t work down there? 

Mr. IZZO. Well, I can’t talk for the Southern Company. I can tell 

you the logic that we put into this. 

Solar energy will work in New Jersey. Its estimate, depending upon assumptions you make, is it would cost anywhere from $5,000 

to $8,000 per kilowatt. That is more expensive than conventional 

gas-fired power. So one could take the approach that, quote, it 

doesn’t work. I would simply say it is more expensive. 

However, that would be looking at only one side of the equation. 

Clearly, the benefits of solar are not only in terms of greenhouse 

gas reductions but also in terms of traditional pollutant reductions: 

NOX, SO2, mercury, fine particulates. So it is our responsibility, I 

believe, to educate consumers that, while there are some places energy efficiency, where you can improve the environment at a lower 

cost, there are other technologies where improving the environment 

will result in higher cost, but it will work. 

The CHAIRMAN. Now, we just voted in the House a standard that 

would be national, 11 percent renewable electricity by 2020 and 4 

percent from efficiency. Can you meet that up in New Jersey? 

Mr. IZZO. The answer to that is yes. The question that others will 

ask is, at what cost? And my response is—that is for policymakers 

to decide. We will do it at the least cost possible. 

But to answer your question, Mr. Chairman, yes, we can meet 

it. And I think through using utilities we have a lower cost to capital, more patient capital, longer amortization schedules, and by removing the investment tax credit exclusion which right now undermines a utility’s ability to invest in that we can do it at the least 

cost for customers. 

The CHAIRMAN. Thank you. 

Mr. Carson, we are also debating auto efficiency here in the 

United States. Can you bring us up to speed on what is going on 

in Europe? What are the standards that are being debated across 

the EU? 

Mr. CARSON. Yes certainly, Chairman. I don’t have the actual 

numbers to hand, but we talk in Europe about fuel economy in 

terms of grams of CO2 per kilometer. I think the average for the 

fleet is about 160 grams of CO2 per kilometer, and I would imagine 

that relates to about 40 miles to the gallon. They may be slightly 

more. I think that compares to the fuel economy in the U.S. of 


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maybe 20. Again, I don’t have those figures to hand, but they are 

rough numbers. 

The auto makers in Europe have been working to a voluntary 

program to reduce their emissions of CO2 for the fleet, and that has 

had some success. But, more recently, the governments have decided they want more success than that and are pressing the car 

companies to reduce from 160 to around 140 in a couple of years 

time and then 120 and ultimately to below 100. So very significant 

miles per gallon that equates to. 

Having made that announcement earlier in the year, the Frankfort Motor Show, which was in September, it was interesting to 

note that every single car company showcased high-fuel-efficiency 

vehicles. So these fuel efficiency vehicles are available. 

Of course, it is easy to blame the car companies for selling vehicles that don’t have high efficiency. So the consumers take some 

blame here in what they want to purchase. I accept that point. But 

the other thing that has happened in Europe is that there has been 

a push to diesel vehicles which are 19 percent more fuel efficient 

on a like-for-like basis; and now 50 percent of new car sales in Europe are for diesel fuel vehicles, up from something like 32 percent 

5 years ago. So quite a dramatic change in the engine type used 

in Europe. 

The CHAIRMAN. My time is expired. 

The Chair recognizes the gentlelady from Michigan, Mrs. Miller. 

Mrs. MILLER. Thank you very much, and I will follow up on my 

chairman’s comments. 

Mr. Carson, as I mentioned to you, coming from the Motor City, 

Detroit, Michigan, I obviously have a very large interest in this; 

and I appreciate the fact that you are trying to articulate the differences in what we have as the government regulation for CAFE 

standards, as we call them here, and in Europe, of course, they are 

voluntary. 

I will just make a personal observation. As you travel to many 

of the major European cities, whether it is Brussels, Berlin, Rome 

or whatever, you see all these buildings that are practically blackened. We don’t have that here, and that obviously has had an impact. I am not sure how all the voluntary standards are working 

there, but I certainly commend the European automobile industry 

to be looking at doing these kind of things as well. 

I might ask, if I could, when—and you mentioned in your comments, Mr. Carson, as well, about that you were heavily invested 

in hydrogen fuel cell technologies, et cetera. Perhaps you could 

flesh that out a bit for me. How does your company interact with 

your government as far as any research and development dollars 

either for hydrogen fuel cell or lithium-ion batteries or some of the 

various alternative energy sources? 

Mr. CARSON. Well, firstly, the comment on the black buildings, 

if I may, in Europe. I don’t know the cause exactly of that. But the 

latest technology which has been driven by legislation for the emissions of diesel vehicles, it is now possible to get diesel vehicles to 

exactly the same emissions performance as petrol vehicles; and 

that is for U.S. legislative limits, too. So I think that the emissions 

from diesel and petrol vehicles in the future will actually be the 

same, so not a differentiating factor. 


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The fuel cell business is focused on many applications. The biggest one in the future we believe will be cars, and we are stimulated to work on fuel cells by the car companies who pretty much 

all have some kind of programs to put fuel cell engines into vehicles at some stage in the future. 

This is quite a long-term issue. I think influential here has been 

California in driving towards zero emission vehicles which the car 

companies obviously have their eye on. 

So our main motivation is to work with our customers. We are 

the recipients and grateful to be the recipients of some government 

funds in the area of fuel cells, but our main expense and our main 

driver is through our desire to develop products for future generation cars and residential buildings in collaboration with our customers. 

Mrs. MILLER. Thank you. 

Another difference, of course, between our two continents is the 

way that we tax the usage of gasoline, petrol, and a huge tax burden in the EU which we don’t have here, although there is a lot 

of talk about using taxes as a way to disincent driving. 

One of the things I think that is very important between the U.S. 

and the EU is that we do have an overlay, a mesh of the regulatory 

standards between our two economies and that we don’t have any 

kind of unintended consequences with some of the various regulatory policies that we have had, as we did with the SarbanesOxley. Unfortunately, with the financial services there was an 

overreaction, I guess, in some ways and we didn’t really talk to our 

European friends about that. So we want to make sure in the environmental area that we do so. 

If I could ask a question, again to my European friends here, and 

we certainly appreciate you coming, I was very interested in what 

is happening with the focus of the entire EU really on the airline 

industry, although that is apparently only 3 percent of the emissions as you have interpolated it there, but yet there is a huge 

focus in Europe to utilize the emissions trade. If you could just talk 

a little bit about that. 

Because I noticed in your written background, Mr. Grisay, that 

you were saying the emissions trading scheme really hadn’t delivered on its promise. How is that all working? 

Mr. GRISAY. Well, that is a very interesting point. It is certainly 

one that attracts a lot of attention in the public and a growing 

awareness of the public in respect of the responsibility of airline 

companies, and you see quite a bit of lobbying in that respect. 

As a fund manager, I can assure you that, for instance, in the 

case of the socially responsible funds that we run, and they happen 

to be the largest in Europe, we exclude investments in airline companies for that reason. I think that it is also linked to a degree to 

the growing success in alternative public transportation, in particular fast trains. So this is indeed a comprehensive review of 

what the alternatives are and certainly a growing pressure for 

greater efficiency. I don’t believe airlines will disappear. I don’t believe we should stop flying. But putting pressure on both airlines 

and airports for greater efficiency is certainly the right thing to do. 

Mrs. MILLER. Thank you. Has my time expired? 

The CHAIRMAN. Yes, your time has expired. 


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The Chair recognizes the gentleman from Oregon, Mr. 

Blumenauer. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

Mr. Izzo, in your testimony, you indicate that there is going to 

be a paradigm shift that is going to be necessary in terms of how 

utilities are regulated to provide some incentives for reasonable return on energy efficiency. In my community, our gas company actually was a pioneer in decoupling to disconnect the rate of return 

from just the volume of gas. Are there other specific ideas that 

occur to you that we should be considering in terms of changing 

that regulatory scheme? 

Mr. IZZO. Yes. Decoupling is a necessary but not sufficient condition, to use an old mathematics expression, in that it holds a utility 

harmless. But, today, if I invest in a bigger wire so that more electricity will flow, I can get a return on that investment. If I subsidize a compact fluorescent light bulb, I get zero return on that 

investment. It is strictly what is known as a pass-through. There 

is only so much time in a day, there is only so much management 

attention I can put to certain things, and at the end of the day I 

have to show a certain amount of earnings growth. So I tend to 

therefore focus on the things that produce the profitability that my 

investors seek. So what I would encourage is truly putting energy 

efficiency on a level playing field with supply options and allowing 

you to at least earn returns on energy efficiency. 

Mr. BLUMENAUER. I would welcome some thoughts that you or 

any of the other panel members might have in specific ways that 

we might adjust the State regulatory scheme. This looks to me to 

be one of the real gaps; and I, for one, am willing to encourage 

higher rates of return for the types of behaviors we want. The specifics would be of great interest. 

Mr. BLUMENAUER. Mr. Lash, on page 5 of your testimony you 

have these charts here that—— 

Mr. LASH. The bubble charts. 

Mr. BLUMENAUER. The bubble charts. There is one bubble that 

I noticed that was not there, and that is vehicle miles traveled. We 

have people, Urban Land Institute, Smart Growth America, a number of folks who have done an analysis that suggests that even if 

the Chairman’s CAFE standards are reached, that the exponential 

increase in vehicle miles traveled from outdated regulatory 

schemes, land-use patterns and fewer transportation choices for 

folks will overwhelm any energy savings. 

Do you have any thoughts about that missing bubble and policy 

initiatives that might help address that balance? 

Mr. LASH. I do. I would make two comments. 

First, the explanation of why the bubble isn’t there is, in order 

to make it readable, we tried to only portray those policy initiatives 

that seemed to be immediately before the Congress. So we put 

CAFE there because there was an ongoing debate on CAFE. The 

same with coal liquids. We didn’t see a proposal that was before 

the Congress, when we developed it, on vehicle miles traveled. 

You are absolutely right. In fact, the evidence is what has happened over the last 20 years, the U.S. auto industry has made spectacular increases in performance and efficiency, but they have been 

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miles traveled. So our consumption has gone up. We have not put 

it into reduced consumption of gasoline. 

The recommendations of the United States Climate Action Partnership include the recognition that any policy on transportation 

has to address the technology of the vehicle, the fuels and vehicle 

miles traveled. That means a combination of policies that address 

alternative transportation means and getting at some of the landuse issues that tend to force us to travel long ways to get to work. 

Mr. BLUMENAUER. Mr. Chairman, I would hope that there would 

be time in our agenda at some point, actually maybe even a hearing in Oregon, where we have done some of this work—Mr. Inslee 

has some of it in his book—where we could look at some of the policies that would give people more choices that would end up reducing vehicle miles traveled. 

In our community, because we drive four miles-per-day less on 

average than the national average, we are saving hundreds of 

thousands of gallons of gasoline and over a billion dollars in savings to our constituents. I think it is something that would be a 

lot of fun to explore, and would love to offer some suggestions 

about where to do it. 

The CHAIRMAN. We will be in Portland, Oregon, before long, we 

promise. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

The gentleman’s time has expired. The Chair recognizes the 

other gentleman from Oregon, Mr. Walden. 

Mr. WALDEN. And after the Portland hearing, you could come out 

to, say, Burns or somewhere and look at great distances traveled 

and the need for bigger vehicles. We would like to take a look at 

that, because we need to get efficiency in those as well. 

I want to talk—Mr. Izzo, you made a statement, and I just want 

to make sure I heard it correctly, that solar power was at $5,000 

a kilowatt hour to $8,000 a kilowatt hour? 

Mr. IZZO. Hopefully I did not use the units kilowatt hour. 

Mr. WALDEN. You did. 

Mr. IZZO. Okay. Kilowatt. The installed value is $5,000 to $8,000 

per kilowatt installed. 

Mr. WALDEN. Now, could you translate that, as a rate payer, 

what is it per kilowatt hour? 

Mr. IZZO. Per kilowatt hour, depending upon the amount of sun 

and the conditions, but in New Jersey that would be typically 

about 70 cents per kilowatt hour, which is quite a bit more expensive than fossil fuel. 

Mr. WALDEN. And what would the fossil fuel rate be today? 

Mr. IZZO. Typically, about 7 cents per kilowatt hour. 

Mr. WALDEN. So about 10 times. 

Mr. IZZO. Yeah, some would say that it could be as little as seven 

times, but it is many multiple times more expensive. 

Mr. WALDEN. And what is the energy efficiency rating for solar 

versus some of these other—— 

Mr. IZZO. If I am interpreting your question right, in terms of 

dollars per ton of CO2 saved, solar would cost about $500 in New 

Jersey for a ton of CO2. But that, then, doesn’t account for any of 


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the NOX savings, SO2 savings, the mercury savings, the particulate 

savings. 

Mr. WALDEN. Sure. But what about energy generation efficiency? 

Mr. IZZO. About a 15 percent conversion rate in New Jersey. 

Mr. WALDEN. Okay. Now, I want to make sure you and I are 

talking the same talk here, because, like, I am told for hydro 

power, which we have a lot of in the Northwest and in other select 

areas around the country, we are almost 90 to 100 percent efficient 

in generation conversion. So are we talking the same thing here? 

The solar is what percent? 

Mr. IZZO. No, we are not talking the same thing in that regard. 

Mr. WALDEN. All right. 

Mr. IZZO. I was talking about how often the solar energy is available to be converted into electricity. 

Mr. WALDEN. Right. 

Mr. IZZO. I don’t know the answer to that question about the 

overall efficiency of the solar panel in converting the sunlight into 

electricity. We could get that for you. I don’t know that. 

Mr. WALDEN. Okay. We are actually working on a project in my 

district that would incorporate at least solar and perhaps wind on 

an old military installation. And I am fascinated by the prospect. 

We are working with the Air Force to try to work with the National 

Guard to try to free up the site with the State and develop these 

alternative sites. And I am just curious as to the efficiencies and 

the costs and all and how we can move that one forward. 

Mr. Carson, I think, back to the issue of vehicle emissions and 

all, it seemed to me, when I was on the Energy and Air Quality 

Subcommittee trip to Europe, there was a lot of discussion we had 

about the differences in air quality legal standards in Europe 

versus the United States, and perhaps we have a much higher 

standard under the Clean Air Act than Europe. 

And I am curious if you know about that and what the differences are, especially as they relate to diesel fuel usage in Europe 

and the emissions there and the deaths that are attributed to that 

versus here. I think it is about 10 times as many people die from 

the dirty air in Europe as here. And we don’t want to go down a 

path that exports that here, for example. 

Mr. CARSON. I think, yeah, the issue you are referring to is that, 

in Europe, the strategic decision was made by the governments to 

give a different emissions standard to petrol vehicles than to diesel 

vehicles. 

Mr. WALDEN. Okay. 

Mr. CARSON. Different in that it was recognized that diesel vehicles were much lower emitters of CO2—— 

Mr. WALDEN. Sure. 

Mr. CARSON [continuing]. But they were higher emitters of other 

pollutants like NOX and particulates. So Europe has been tolerant 

to that issue and had two different standards for the different vehicles, whereas here in the U.S. there was no tolerance to that issue. 

So the standards are the same, whichever kind of engine is used. 

And that made the supply of diesel-engined vehicles in America 

very difficult—— 

Mr. WALDEN. And if you—— 


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Mr. CARSON [continuing]. For a number of years until now— 

sorry to interrupt you—where the technology has been driven forward. 

Mr. WALDEN. Right. 

Mr. CARSON. And now it is possible to meet the same standards 

in diesel and petrol engines with more advanced catalyst technology. 

Mr. WALDEN. Did I hear you say the standards in Europe for the 

petrol vehicle are the same as in the United States now for emissions? 

Mr. CARSON. Broadly, yes, and they always have been broadly. 

Mr. WALDEN. So the new standard for diesel in Europe would 

pass air quality standards in the United States? 

Mr. CARSON. It is very hard to do a like-for-like, because the 

drive cycles are all so different in Europe. The driving pattern in 

Europe is somewhat faster than in the U.S., so the test is actually 

different. But broadly, the emissions standards in 2010 in Europe 

for both diesel and petrol vehicles will be pretty much the same as 

the emission standards in the toughest States in North America. 

Mr. WALDEN. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. The Chair 

recognizes the gentleman from Washington State, Mr. Inslee. 

Mr. INSLEE. Thank you. 

Mr. Lash, I wanted to ask about your suggestions, cap suggestions about the cap-and-trade system. You testified that—you suggested that a significant portion of the allowances be initially distributed free to capped entities and economic sectors particularly 

disadvantaged by the cap. 

Could you talk about what you think should be that targeting of 

those? If we are going to have some free allocation, you know, how 

should that be targeted? 

Mr. LASH. On behalf of USCAP, I can’t tell you very much more, 

because, for now, what we have agreed on is the language you just 

read outloud. So let me offer some thoughts as an individual. 

There are 20, 25 States in the country whose electrical utilities 

are heavily dependent on coal. And any way you look at it, if we 

begin to put a price on carbon, the rates will go up more quickly 

in those States than the others that have nuclear, hydro, et cetera. 

So there is a belief that an allocation to those utilities for some 

transitional period will help ease any price shock. 

A second option is to look at earned allocations. So if a utility 

proposes, for example, to make a major investment in carbon capture and storage, free allocations would be one way that the legislation could reduce the cost, which is another 30 percent or so on 

the cost of a power plant to set up carbon capture and storage. 

A third option would be to look through the utilities to the rate 

payers and try to find some way of equalizing burdens for rate payers. I personally believe that is quite complicated. 

Mr. INSLEE. You went on, ‘‘CAP also suggests the free allocations 

be phased out over a reasonable period of time.’’ Why? I mean, 

could you give me the rationale for an auction, I guess, to begin 

with? 


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Mr. LASH. An auction is economically most efficient. You are assuring that those who make the biggest investment in reducing 

CO2 get the biggest economic benefit. So a covered entity, whether 

it is an industry or a utility that makes major investment, for example, in methane to electricity from a landfill and is essentially 

operating at zero CO2 emissions, ought to get a very large benefit. 

One way to assure that is to have an auction of credits, and then 

they don’t have to buy any credits. 

A second question is how you use the revenues from the auction. 

It gives you a chance to put the revenues back into programs, as 

I think Mr. Izzo recommended, to accelerate the adoption of technology or offset costs to low-income consumers. 

Mr. INSLEE. And, by the way, we haven’t talked about this, and 

I agree with you that a huge portion of investment would come 

from the private sector, but would any of you like to talk about the 

pathetically weak U.S. R&D budget from the Federal Government, 

which is one-sixth of what it was on the Apollo Project? Would any 

of you like to agree with my assessment on that? 

Thank you. That is unanimous. I will take that. 

I want to ask my friends from Europe, if you want to give us a 

critique of the cap-and-trade system, maybe the top three lessons 

you have learned from your experience. We were in Europe looking 

at it, and we drew some conclusions. I would be interested in yours. 

Mr. GRISAY. Well, I think that is a very interesting question. Europe has a trade system in carbon certificates which did not work 

at the beginning. And I think we should learn from that. It did not 

work because there were simply too many certificates issued at the 

beginning. And the reason for that was that each country was allowed to issue as many certificates as it felt was necessary. So they 

all protected their own industry and issued as many as possible. 

So, as a result of that, the price of carbon collapsed, and it obviously failed to reach the objectives set. The lesson is, obviously, to 

be much more restrictive of the level of the number of certificates 

to be issued. And I think you can expect the European Commission, 

at the end of this year, to set targets for 2009 that will be a lot 

more restrictive. 

The second observation is that it is probably wrong to let every 

national entity decide how many certificates they need to issue. 

This should be brought at E.U. level, for obvious coordination reasons. 

And, in fact, that leads to a third lesson, which is probably to say 

at some stage, recognizing that the fight against global climate 

change is a global fight, one could envisage a situation where it 

would be a supranational entity that would be in charge of issuing 

carbon certificates. Whether that is some sort of subset of the U.N., 

some sort of equivalent to the World Bank for carbon trade, I leave 

open to your own wisdom. 

Mr. INSLEE. The presidency of that would be determined by the 

winner of the World Cup, too. 

The CHAIRMAN. Thank you. 

The gentleman’s time has expired. The Chair recognizes the gentleman from Connecticut, Mr. Larson. 

Mr. LARSON. I thank the Chairman, and I thank the panelists. 


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And I want to continue along this same line of questioning, having had the fortunate opportunity to travel to Europe with the 

Chairman and the Speaker. But my question is a little bit different. I believe that the best system for us to proceed on is a carbon tax. I believe that it is more simplified, it is more direct, and 

you don’t have to have any specific economic knowledge to implement it. You don’t create any new bureaucracy. Many countries in 

Europe have utilized it successfully and are greener and farther 

ahead. 

I understand the pragmatic political applications here in our own 

country. You say ‘‘taxes’’ and our colleagues on the other side of the 

aisle just go into almost apoplectic seizure. And there isn’t, you 

know, in election years oftentimes the desire to move forward, albeit I am agnostic with respect to a cap-and-trade system. 

But on an issue as vital as this, as critical as this is to the Nation and, as Mr. Grisay said, to the globe—and we project out into 

the future, and while it is very important for the United States to 

step up to the plate and lead the way, ultimately we are looking 

at major nations on the verge of industrial lift-off, like India and 

China, whose major resource is carbon, and ironically turn to Western Europe and the United States and say, ‘‘So, you want to put 

a cap-and-trade system on us after you have already put up most 

of the carbon into the atmosphere.’’ 

So my question is, isn’t it fairer and more direct and more efficient to go to a system that taxes carbon, taxes something that we 

know is bad and know is harmful, and, in return, have payroll deduction relief for American citizens? Your response? 

Mr. CARSON. Chairman, can I make a quick comment on that? 

I am sure my colleagues will also want to comment. 

But I guess the beauty of the cap system is that, in Europe, the 

debate has been revolving around how do we keep the level of CO2

in the atmosphere below a certain level, be it 550 parts per billion 

or whatever that level is, in order to limit the temperature rise of 

the planet in the future. And if you have a cap, I guess you have 

some certainty that you will get to that. 

Mr. LARSON. Where is the transparency and the accountability in 

that? 

Mr. CARSON. Well, there could be some calculations done, I am 

assuming, that will mean a cap has more bearing on the outcome 

than a tax, which I guess, ahead of time, you don’t know how much 

tax you have to set, and then you don’t know the effect of that tax 

in reducing CO2 output. Again, I guess the experts are the governments of Europe who have come to that decision. 

Mr. GRISAY. What I would like to add to that is I don’t think any 

measure taken on its own is going to provide the right solution. So 

I think that, if we take a long-term view, you are probably looking 

at a mixture of cap and trade, fiscal and long-term standards. 

Now, to comment on the long-term standards, I think it is really, 

really important that we provide industry with a long-term certainty in respect of the standards they will have to meet, because 

that will drive them to do the long-term, very expensive investment 

that they would be required to do to meet or beat those standards. 

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nologies. And that is how we will basically be able to deal with the 

threat, the competitive threat of emerging countries. 

The reality is I don’t think we can escape the consequences of climate change. And what looks like moderately embarrassing or annoying regulations today or taxations today would be very mild 

compared to what will be needed in 10-years’ time or 15-years’ time 

if we don’t do this. So by pushing it now, by incentivizing this research now, we give industry the chance to really become very, 

very competitive by the time it would be required. 

Mr. LARSON. Mr. Lash. 

Mr. LASH. As you know, USCAP recommended cap and trade 

rather than a tax, although a tax could be included as a complementary measure to pick up those parts of the economy that a 

cap system isn’t applied to. The reasons are really the ones that 

were just explained by Mr. Grisay, the wish for certainty as to the 

level of emissions and the path of reducing emissions. 

I would add one observation, myself. I know, Congressman, that 

you have been looking closely at the idea of tax shift, which is very 

appealing as a way of improving equity as well as the environment. 

Our experience in working with companies for 15 years now has 

been that price signals don’t work as quickly as they should. I 

know economists say there are no $10 bills lying on the floor, but 

with the companies we have worked with there have been some, 

quite a lot. And this is a case where we need to get the action 

started from large emitters quickly. 

The CHAIRMAN. The gentleman’s time has expired. The Chair 

recognizes the gentleman from Missouri, Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Mr. CARSON, we are, of course, having some debate here over a 

carbon tax. And as Mr. Larson mentioned, you know, the word 

‘‘tax’’ in some quarters is almost reason for civil war. But is it at 

all possible for Europe to have one system and the United States 

another, considering the fact that we are if not already a global 

economy, we are moving almost hourly toward that? 

Mr. CARSON. I think the important issue is that all the economies get to do something, and harmonization of that something is 

something that ought to follow later. That is my personal view. We 

have never had the same system of tax regime on fuel for cars for 

a very long period of time. And that has driven differences in the 

market. And I understand that, you know, a tax on fuel is an emotive issue here. It seems it has been less emotive in Europe over 

the last 20 years. 

So I think if there is a view that we must wait until everybody 

is lined up with the same system before implementing it, then that 

will take too long, is my personal view. And some action, just like 

in Europe with the action on cap and trade, which wasn’t perfect— 

at least it was a starting point from which we can build. And I 

think that ought to be the way we operate and head toward a global agreement later. 

Mr. CLEAVER. Do you or Mr. Grisay have any idea of the estimate of the carbon dioxide output per individual in the U.K.? I 

think Germany, for example, is around 11; the United States is 20. 


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Mr. GRISAY. I think the U.K. has a modest, but nevertheless 

frightening, 2 percent contribution to total emissions, so one reason 

why the action needs to be lower and not just restricted to the U.K. 

But if I can come back just to what—— 

Mr. CLEAVER. Yes. 

Mr. GRISAY [continuing]. He was saying a second ago, I think 

there are two different objectives in my mind. One is to get the carbon level down fast across the globe, and that may imply indeed 

different approaches on different continents and different countries. 

But there is a second objective, which is to make sure that industry remains competitive, that we create a growing economy, that 

we do create jobs. And that is about making industry competitive. 

And that is where I am coming back to making sure that standards 

are being set so there is a long-term guidance as to where industry 

needs to reach. It would be much more practical to have similar 

standards, because, otherwise, those countries that have the strictest standards are, by definition, going to be a lot more competitive, 

going forward. 

So I would add a word of warning there. You may take a different point of view on taxes, but on standards I think it would be 

very useful if we had some sort of global approach. 

Mr. CLEAVER. Thank you. 

Just one last question. Mr. Lash, are you at all familiar with the 

American Electric Power settlement with the EPA and a number 

of other not-for-profit entities? 

Mr. LASH. Yes. 

Mr. CLEAVER. Do you think that settlement, $4.6 billion over a 

10-year period, will have any impact upon corporate America? I 

mean, a positive impact, where people recognize that if you pollute, 

you are going to have to pay enormously, and therefore people will 

move into some kind of compliance without Government? 

Mr. LASH. Congressman, I started working on environmental 

issues in Washington about the time that Congressman Markey arrived in Washington. And I started as a litigator for NRDC, suing 

companies because they seemed to just refuse to meet national 

standards. 

Mr. CLEAVER. My kind of lawyer. 

Mr. LASH. Yeah. And I have moved to a completely different approach to these issues. Now I spend half my time working with the 

CEOs of big companies. I don’t think that is just because I have, 

you know, crossed the 60-year-old line. We have seen a huge 

change in approach and attitudes from companies, as a new generation has taken over. They see it as in their commercial interests 

to address environmental issues proactively. And I think that is 

what gives me hope that we are going to be able to address the climate change issue. 

I do think that the good companies need to be backed up by EPA, 

by knowing that if there are companies that violate the laws, they 

are going to be penalized. Otherwise, there is always the risk that 

a company that is meeting high standards has to compete with 

somebody who isn’t. 

The CHAIRMAN. Great. 

The gentleman’s time has expired. The Chair recognizes the 

gentlelady from South Dakota, Ms. Herseth Sandlin. 


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Ms. HERSETH SANDLIN. Thank you. 

And thank all the witnesses today. 

I would like to explore an area that we haven’t touched on yet, 

and that is agriculture as a participant in a cap-and-trade system. 

And in response to Mr. Inslee’s questions, Mr. Grisay, I think 

you had a number of helpful observations on what has worked effectively, maybe what hasn’t worked effectively, and lessons to be 

learned. 

We did come to find, when we traveled earlier this year in some 

meetings in London, that agriculture is not a participant in the European emissions trading system. I, for one, feel strongly that if the 

United States adopts a cap-and-trade system that agriculture must 

be a participant, and have some constituents and companies in 

South Dakota and throughout our region that are working on appropriate measures for how you value what grazing or farming 

techniques and how you measure those. 

The response that I received in the London meeting about why 

agriculture isn’t part of the European system is sort of disagreement of how you accurately measure and appropriately measure. 

So I am wondering if you would cite that as a lesson learned and, 

moving forward, including agriculture. 

And, Mr. Lash, if you have any thoughts, as well. 

Mr. GRISAY. I think it is a very relevant question. Agriculture, 

in my mind, should be included. I think the whole issue about 

biofuels is really one of first recognizing that there is probably very 

substantial potential in that industry, but that we need to do a better job at understanding the full life cycle of the development of 

those products. Because it appears that the so-called first generation of biofuel products may not come from sustainable sources, 

and that we may, in the course of producing them, either be totally 

inefficient or actually cause damage. 

So the issue, in my mind, is to be very open-minded toward agriculture and biofuels, but making sure that we have a number of 

new technologies and the so-called second generation of biofuels, 

which would come, for instance, from sustainable lands, probably 

not from food crop, and probably use mostly waste land or highfiber-contained products. 

So there is a future there but, again, one that requires investments and investigation. 

Mr. LASH. I was hoping you were going to bring up this issue. 

One aspect of it needs to be addressed in whatever climate change 

legislation you pass, and that is the question of whether agriculture can participate as a seller of credits into a trading system 

under a cap. It is an opportunity for farmers and larger-scale operators to make reductions to sequester carbon and then to get credits for it. 

A second—the question of measurement I think we have made 

some progress on. The Voluntary Carbon Exchange that operates 

in Chicago, Chicago Climate Exchange, has, in fact, done quite a 

lot of work on measurement of agricultural offsets so that they 

could be included in the CCX system. The USCAP recommendations would allow agricultural offsets to be included. 

The second set of issues are ones that would be covered in other 

legislation relating to the whole issue of biofuels, technical assistVerDate Mar 15 2010 01:43 Nov 13, 2010 Jkt 058147 PO 00000 Frm 00091 Fmt 6633 Sfmt 6602 E:\HR\OC\A147.XXX A147

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ance to the agricultural community, and the movement from cornbased ethanol to cellulosic ethanol from waste materials or forest 

products. 

Ms. HERSETH SANDLIN. Thank you. 

And that leads to my other questions, in terms of beyond 

biofuels, wind, solar, the health of our forests and enhancing them 

as carbon sinks. 

But would you agree with me that to achieve the potential that 

we have with the renewables of wind and solar, in particular, but 

then with biofuels and the flex fuel vehicles that are being manufactured and getting CAFE credits, but yet the availability of the 

fuel not being as comprehensive as we would like, that, in addition 

to whatever investments we make at the Federal Government level 

and R&D combined with private-sector investment in technology, 

that the Federal Government has to make investments and perhaps impose requirements as it relates to transmission capability 

across the country to get the wind resources from the Great Plains 

to other parts of the country, as well as the fuel distribution infrastructure to make sure that we are achieving both the objectives 

of energy security and the positive climate impact? 

Mr. LASH. Again, not speaking on behalf of USCAP, because we 

haven’t addressed this, the transmission issues are very, very real, 

particularly because wind power is growing so fast. 

I would defer to Mr. Izzo in terms of the specifics of how best to 

address that. 

Mr. IZZO. We are a firm believer in open access to transmission; 

however, not simply designating what type of supply would get earmarked a slice of that transmission, but letting the market determine what the best solutions are for moving power back and forth. 

But the specific answer to your question is, yes, there is clearly 

a need for transmission infrastructure to move renewable energy 

from the places that are more suitable for siting and building those 

facilities. 

Ms. HERSETH SANDLIN. Thank you. 

And thank you, Mr. Chairman. 

The CHAIRMAN. The gentlelady’s time has expired. 

Here is what I would like each of you to do: Give us a 2-minute 

summation of what you want the committee to remember as we are 

moving forward. We have an energy bill that we are trying to resolve between the House and the Senate over the next 6 weeks, 

which would be the most historic energy bill in the last 30 years 

here in the United States. 

And subsequent to that, we have an intention to take up the debate on climate change in terms of a cap-and-trade system or, as 

Mr. Larson is saying and Senator Dodd, a carbon tax. But the 

Speaker of the House has said that she wants a bill that passes 

that has a mandatory cap-and-trade system that reduces our emissions by 80 percent here in the United States. 

So this energy bill is up right now, and hopefully we can resolve 

that in the next 6 weeks, and then we will move on. 

So let us go in reverse order, give each one of you a 2-minute 

summation so that you can tell us how you believe we should be 

viewing these issues and your recommendations as to how we 

should proceed. 


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We will begin with you, Mr. Lash. 

Mr. LASH. Thank you, Chairman. 

I would begin by echoing what you were saying just a moment 

ago. The energy bill is a very good first step. The energy efficiency 

provisions, the renewable provisions will make a significant difference for both of the issues mentioned in the title of this committee. And it is there, it is available, it is waiting to be passed. 

It will reduce costs for the country, ultimately. 

Secondly, we should not assume that it isn’t possible to pass 

strong greenhouse-gas-reduction legislation in this Congress. I met 

with Senator Lieberman yesterday. I believe that the Senate Environment Committee will get a strong bill out this year, and I think 

there is a real potential. 

The important thing is to keep our eye on the ball, to remember 

that we need legislation that gives industry and investors a longterm road map that we are going to start reductions and continue 

reductions over a period of decades, so that they can make investments in light of those signals. 

The CHAIRMAN. Thank you, Mr. Lash. 

Mr. Grisay. 

Mr. GRISAY. Thank you, Chairman. 

I would just summarize conversations I have had before with 

Prime Minister Blair, Brown, and President Barosso on that very 

question. And I think the strong message that I would like to share 

with you is that there is a need for urgent action. We just cannot 

wait. And there are opportunities and risks in front of us, but the 

costs of delay are just absolutely staggering. 

And maybe one suggestion there is to see the U.S. Congress supporting the equivalent to a stern review, as was done in the U.K., 

in case there were still people around who had some doubts. 

Practically speaking, I look forward to implementing, as part of 

the energy bill, binding regulations. And I would certainly welcome 

a mixture of cap and trades, fiscal measures, and standards for energy efficiency going forward, because I think all three are necessary for the reasons that we discussed. 

The CHAIRMAN. Thank you, Mr. Grisay. 

Mr. Carson. 

Mr. CARSON. Similar message from me, Chairman. Urgent action 

required. Not one solution, but very many solutions to this issue. 

Some are simple, and some we must be getting on with right away. 

And I am sure business is now getting on with its resource efficiency issues, because that is going to save money. But the others 

that need a technology solution also need to go hand in hand with 

a framework for future binding targets, in order that industry can 

spend its own money in finding those solutions. And we and our 

colleagues are very keen to work together with governments to try 

to make that happen sensibly. 

The CHAIRMAN. Thank you, Mr. Carson. 

Mr. Izzo. 

Mr. IZZO. With regard to the energy bill before the Congress now, 

there are two imperatives that we would identify. Number one is 

elimination of the investment tax credit exclusion for utilities to 

participate in solar energy so that we can help develop solar power 

in a least-cost method. Number two would be incentives for States 


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to encourage utility participation in energy efficiency in ways that 

benefit both customers and investors. 

On the broader issue of the global climate change legislation, we 

would argue that a bill with reduction targets and timetables that 

are strong enough to obviate the need for regional and State programs is an imperative. Regional and State programs will create 

competitive distortions that could actually not only raise rates for 

customers, but result in environmental degradation through a phenomenon known as leakage. We have heard already about the importance of harmonization at the international level and at the 

E.U. level. It seems to me that a single national greenhouse-gasemissions credit-trading market would be an obvious first place for 

us to begin here in the United States. 

Thirdly, a fair allocation approach in the electric sector that acknowledges the investments already made by companies in cleaner 

technology and incents those types of investments going forward. 

And lastly, consumer protections in the form of assistance for 

low-income customers from any proceeds that are derived from the 

auctioning of allowances. 

The CHAIRMAN. Thank you, Mr. Izzo, very much. And as you 

know, much of what you are recommending is in either the House 

or the Senate energy bill right now. And we will fight to maintain 

that, because I do agree with you that the utility sector has a huge 

role to play, and we have to construct a newer and smarter set of 

incentives for the utility industry to fully participate. 

And I want to actually tell you this, too, especially our friends 

from across the ocean, that the energy bill that we are considering 

and we are debating over the next 6 weeks, if the best elements 

of it remain intact and are in the final package, it would meet, by 

2030, 40 percent of the United States’ goal to reduce heat-trapping 

gases that the United States has to do in order to save our planet—40 percent of our goal. 

So, because we are dealing with the electric utility industry and 

the automotive sector, buildings, all of the appliances in our country, combined, that 40-percent number is something that is very realistic in terms of contribution to climate change, and I think sets 

the stage, as Mr. Lash said, for a more comprehensive climate 

change bill. But not to understate what 40 percent means in terms 

of demonstrating the resolve that the United States has to deal 

with these issues and send a signal to the rest of the world that 

we no longer will be the laggard but, rather, a leader in setting 

standards. And I think that is a very important statement for us 

to make. 

So this bill that is pending before us is very, very important. And 

if we have a 40-percent solution by 2030, I think that the rest of 

it will be able to be followed on, because it will give the utility industry, the automotive industry and all other sectors a stake, then, 

in finding a way to put together a comprehensive cap-and-trade 

system, which, ultimately, I think will become a model for the rest 

of the world, partnering with the E.U. 

So we thank each of our witnesses. We thank Prince Charles for 

his contribution to our hearing today. 

And, with that, this hearing is adjourned. 

[Whereupon, at 11:15 a.m., the committee was adjourned.] 


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