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21–708PS 2005

BUSINESS ACTIONS REDUCING

GREENHOUSE GAS EMISSIONS

HEARING

BEFORE THE

COMMITTEE ON SCIENCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JUNE 8, 2005

Serial No. 109–16

Printed for the use of the Committee on Science

(

Available via the World Wide Web: http://www.house.gov/science

(II)

COMMITTEE ON SCIENCE

HON. SHERWOOD L. BOEHLERT, New York, Chairman

RALPH M. HALL, Texas

LAMAR S. SMITH, Texas

CURT WELDON, Pennsylvania

DANA ROHRABACHER, California

KEN CALVERT, California

ROSCOE G. BARTLETT, Maryland

VERNON J. EHLERS, Michigan

GIL GUTKNECHT, Minnesota

FRANK D. LUCAS, Oklahoma

JUDY BIGGERT, Illinois

WAYNE T. GILCHREST, Maryland

W. TODD AKIN, Missouri

TIMOTHY V. JOHNSON, Illinois

J. RANDY FORBES, Virginia

JO BONNER, Alabama

TOM FEENEY, Florida

BOB INGLIS, South Carolina

DAVE G. REICHERT, Washington

MICHAEL E. SODREL, Indiana

JOHN J.H. ‘‘JOE’’ SCHWARZ, Michigan

MICHAEL T. MCCAUL, Texas

VACANCY

VACANCY

BART GORDON, Tennessee

JERRY F. COSTELLO, Illinois

EDDIE BERNICE JOHNSON, Texas

LYNN C. WOOLSEY, California

DARLENE HOOLEY, Oregon

MARK UDALL, Colorado

DAVID WU, Oregon

MICHAEL M. HONDA, California

BRAD MILLER, North Carolina

LINCOLN DAVIS, Tennessee

RUSS CARNAHAN, Missouri

DANIEL LIPINSKI, Illinois

SHEILA JACKSON LEE, Texas

BRAD SHERMAN, California

BRIAN BAIRD, Washington

JIM MATHESON, Utah

JIM COSTA, California

AL GREEN, Texas

CHARLIE MELANCON, Louisiana

DENNIS MOORE, Kansas

(III)

C O N T E N T S

June 8, 2005

Page

Witness List ............................................................................................................. 2

Hearing Charter ...................................................................................................... 3

Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, Committee

on Science, U.S. House of Representatives ........................................................ 9

Written Statement ............................................................................................ 9

Statement by Representative Bart Gordon, Minority Ranking Member, Committee on Science, U.S. House of Representatives ............................................ 9

Written Statement ............................................................................................ 10

Statement by Representative Judy Biggert, Chairman, Subcommittee on Energy, Committee on Science, U.S. House of Representatives ........................... 11

Prepared Statement by Representative Eddie Bernice Johnson, Member, Committee on Science, U.S. House of Representatives ............................................ 10

Prepared Statement by Representative Russ Carnahan, Member, Committee

on Science, U.S. House of Representatives ........................................................ 11

Witnesses:

Mr. James E. Rogers, Chairman, CEO, and President, Cinergy Corporation

Oral Statement ................................................................................................. 12

Written Statement ............................................................................................ 14

Biography .......................................................................................................... 20

Dr. Mack McFarland, Environmental Manager, Fluorochemicals Business,

E.I. DuPont De Nemours and Company

Oral Statement ................................................................................................. 21

Written Statement ............................................................................................ 22

Biography .......................................................................................................... 24

Mr. Ronald E. Meissen, Senior Director, Engineering, Environment, Health

& Safety, Baxter International, Inc.

Oral Statement ................................................................................................. 25

Written Statement ............................................................................................ 27

Biography .......................................................................................................... 32

Dr. Robert H. Hobbs, Director of Operations, United Technologies Research

Center, United Technologies Corporation

Oral Statement ................................................................................................. 33

Written Statement ............................................................................................ 34

Biography .......................................................................................................... 38

Discussion ................................................................................................................. 39

Appendix 1: Answers to Post-Hearing Questions

Dr. Mack McFarland, Environmental Manager, Fluorochemicals Business,

E.I. DuPont De Nemours and Company ............................................................ 68

Page

IV

Appendix 2: Additional Material for the Record

Statement of Tom Catania, Vice President of Government Relations, Whirlpool Corporation ................................................................................................... 70

Climate Change Science: An Analysis of Some Key Questions, Committee

on the Science of Climate Change, National Research Council, The National

Academies ............................................................................................................. 100

(1)

BUSINESS ACTIONS TO REDUCE

GREENHOUSE GAS EMISSIONS

WEDNESDAY, JUNE 8, 2005

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SCIENCE,

Washington, DC.

The Committee met, pursuant to call, at 10:10 a.m., in Room

2318 of the Rayburn House Office Building, Hon. Sherwood L.

Boehlert [Chairman of the Committee] presiding.

2

3

HEARING CHARTER

COMMITTEE ON SCIENCE

U.S. HOUSE OF REPRESENTATIVES

Business Actions to Reduce

Greenhouse Gas Emissions

WEDNESDAY, JUNE 8, 2005

10:00 A.M.–12:00 P.M. 2318 RAYBURN HOUSE OFFICE BUILDING

Purpose

On June 8, 2005, the Science Committee will hold a hearing on what several leading businesses in a variety of industries are doing to reduce emissions of greenhouse

gases.

The Bush Administration has initiated a number of programs to encourage businesses to take voluntary actions to reduce emissions of greenhouse gases. Either as

part of the Administration programs or other efforts, many U.S. companies are

working to reduce greenhouse gas emissions. (See attached list.) Some companies

have begun simply by taking stock of the emissions they produce. Others have set

targets for reducing their emissions and are taking steps to meet them by improving

energy efficiency, switching to energy sources that produce fewer greenhouse gases,

or eliminating greenhouse gases from manufacturing processes.

The motivations of these companies vary. Some find the scientific evidence of a

changing climate compelling. Others face domestic or international competitive pressure, while others face pressure from lenders or shareholders. Some see advantage

in creating new products or businesses that may hold a competitive advantage in

future markets. Still others see financial risk to their businesses should the climate

change substantially.

The Committee plans to explore the following overarching questions at the hearing:

1. What concrete actions are businesses taking to reduce greenhouse gas emissions? In what ways are these actions beneficial to the company?

2. Why are businesses taking these actions and what are the most important

drivers for them?

Witnesses

James E. Rogers, Chairman, CEO and President, Cinergy Corp. Based in Cincinnati, Cinergy provides electricity to 1.5 million customers in Ohio, Indiana and

Kentucky, has more than 7,000 employees, and generated $4.7 billion of revenue in

2004. It owns 13,000 megawatts of electric generating capacity and is largely reliant

on coal as a fuel source. Cinergy and Duke Power, a major utility in the Southeast

United States, recently announced plans to merge.

Dr. Mack McFarland, Environmental Manager, Fluorochemicals Business, E.I.

DuPont de Nemours and Company. As a multinational chemical and product manufacturer based in Delaware, DuPont ranks 66 among the Fortune 500, with 55,000

employees worldwide and 2004 revenues of $27.3 billion.

Mr. Ron Meissen, Senior Director, Engineering, Environment, Health & Safety;

Baxter International Inc. Baxter is a global health care company that supports

treatment of medical conditions including hemophilia, immune disorders, kidney

disease, cancer, trauma and other conditions. Based in Deerfield, Ill., and with facilities throughout the United States and the rest of the world, Baxter has 51,000

employees and generated $8.9 billion of sales in 2003.

Robert Hobbs, Director of Operations, United Technologies Research Center,

United Technologies Corporation (UTC). Ranked 22 among the Fortune 500 and

based in Connecticut, UTC businesses include Carrier heating and cooling, UTC

Fire & Security systems, Hamilton Sundstrand aerospace systems and industrial

products, Otis elevators and escalators, Pratt & Whitney aircraft engines, Sikorsky

helicopters and UTC Power fuel cells. In 2004, UTC had 210,000 employees and

generated $37 billion in revenue.

4

Background

Carbon dioxide (CO2) is a greenhouse gas and an inevitable product of combustion. It is the greenhouse gas that has received the most attention, but others gases

such as methane, nitrous oxide, hydrofluorocarbons and sulfur hexafluoride are also

produced by human activities and have a greater greenhouse effect than CO2.

In a speech in February 2002, President Bush ‘‘reaffirmed America’s commitment. . .to stabilize atmospheric greenhouse gas concentrations at a level that will

prevent dangerous human interference with climate,’’ and initiated a number of voluntary programs aimed at reducing greenhouse gas emissions. Specifically, the

President has committed to reducing the Nation’s greenhouse gas intensity—the

amount of greenhouse gases emitted per unit of economic activity—by 18 percent

by 2012. Several states and other countries have contemplated or are now attempting to implement mandatory emission-reduction policies.

In May 2001, the Bush White House requested a report from the National Academy of Sciences on the status of scientific understanding of climate change. The

Academy’s reply is attached.

What are companies doing to reduce their greenhouse gas emissions?

A number of United States-based businesses have begun to inventory and reduce

their greenhouse gas emissions. These are some of the activities companies are undertaking:

Identifying and tracking greenhouse gas emissions. An inventory is necessary to

establish a company’s baseline of greenhouse gas emissions. It is usually the first

step for any company planning to set a reduction target, to develop options for reducing emissions, and to track progress toward a target. It is also necessary for any

company wishing to accurately assess the risk posed by any particular shareholder

resolution, regulatory proposal, or lending policy related to climate change. Moreover, it is essential for companies participating in voluntary or mandatory greenhouse gas trading market. According to economists, trading markets would lower

the costs of any future greenhouse gas regulation, should one be implemented.

Companies have developed a variety of approaches for inventorying their greenhouse gas emissions. While all companies generally include direct emissions from

internal operations, they must also decide whether to include indirect emissions

generated from the electricity they buy or from the products they sell. Utilities, for

example, tend to count only those emissions that are directly the result of generating electricity. Energy intensive manufacturers, however, include not only the

emissions generated in their manufacturing processes, but also usually include in

their inventories emissions generated by the electricity they purchase to power their

operations. Appliance manufacturers and other companies whose largest emissions

arise from the use of their products often include those emissions in their inventories. Companies participating in emissions trading markets have realized that it

is important to maintain careful accounts of each type of emission to avoid double

counting or trading the same emissions twice. Most companies report that they have

developed their inventories through a ‘‘learn by doing’’ approach.

Setting targets for reduction. A number of companies have set targets for reducing

the greenhouse gas emissions in their inventory. Some have set targets in absolute

terms, while others have pledged to reduce emissions relative to production or revenue. Still others have expressed their commitment in terms of cutting energy use.

Among the companies that have set absolute emission reduction targets, Nike has

pledged to reduce greenhouse gas emissions 13 percent below its 1998 inventory by

2005. DuPont set a goal (and has already surpassed it) of reducing greenhouse gas

emissions 65 percent below its 1990 inventory by 2010. Using the same target date

and baseline date, Alcoa has pledged a 25 percent reduction, British Petroleum 10

percent, and Johnson & Johnson 7 percent. Eastman Kodak has committed to reducing its energy use 15 percent by 2004 below the amount it consumed in 2000.

Among companies that have pledged to reduce emissions relative to output or revenue rather than in absolute terms, Pfizer has plans to reduce its greenhouse gas

emissions by 35 percent for every dollar in revenue the company earns by 2007

using 2000 as its baseline year. Baxter International has pledged to make a 30 percent reduction per unit of production value by 2005 using 1996 as its baseline year.

And United Technologies Corporation committed to a 40 percent reduction per dollar of revenue by 2007 using 1997 as its baseline and has already met that target.

Improving energy efficiency. Improving energy efficiency reduces greenhouse

gases, and may also save a company money. Some companies are improving the efficiency of their manufacturing processes or their lighting and heating systems. Reductions of greenhouse gas emissions, which accompany these efficiency gains, are

often viewed as a bonus. For example, United Technologies Corporation and IBM

5

1See World Resources Institute, ‘‘A Climate of Innovation: Northeast Business Action to Reduce Greenhouse Gas Emissions,’’ (2004); Pew Center on Global Climate Change, ‘‘Corporate

Greenhouse Gas Reduction Targets,’’ (2001); Kolk, A., and J. Pinske, ‘‘Market Strategies for Climate Change,’’ European Management Journal, 22 (3):304–14 (2004); Coalition for Environmentally Responsible Economies (Ceres), ‘‘Electric Power Climate Risk Disclosure: A Comparison of 2004 Reports Released by American Electric Power, Cinergy and TXU.’’ (2005). In addition, a number of companies have issued annual reports, which describe their actions to reduce

greenhouse gas emissions and their rationale. 2The aluminum manufacturer Alcoa, Inc., has said on its website that ‘‘the time for debate

is long past’’ and that while ‘‘the science may or may not be incomplete, [i]f you get this one

wrong, you don’t get a second chance.’’ On its website, British Petroleum says, ‘‘There is an

emerging consensus that climate change is, at least in part, linked to the production and consumption of carbon based fuels. As a major supplier of these fuels it’s only right that we play

a part in finding and implementing solutions to one of the greatest challenges of this century.’’

have found that energy efficiency provides a significant opportunity to save money

and reduce greenhouse gas emissions.

Changing manufacturing processes. Some companies are altering their manufacturing process to reduce emissions of potent greenhouse gases such as nitrous oxide

or fluorocarbons. For example, DuPont met a substantial portion of its commitment

to reduce greenhouse gas emissions by reducing emissions of nitrous oxide in the

nylon manufacturing process. IBM pledged to reduce emissions of perfluorocarbons,

a potent greenhouse gas, by 40 percent per unit of production (and 10 percent in

absolute terms) from its semiconductor manufacturing operations.

Green power purchasing. In states that allow consumers to choose among utilities,

companies can reduce emissions by switching, in whole or in part, to ‘‘green power’’

suppliers, which generate electricity from renewable energy sources that do not emit

greenhouse gas, such as wind, solar, biomass, and geothermal. For example, Staples,

Bristol-Myers Squibb and Johnson & Johnson have purchased or are purchasing

‘‘green power’’ that allows them to claim significant reductions in greenhouse gas

emissions.

Sequestration. A number of businesses have been ‘‘road-testing’’ carbon sequestration projects—the long-term storage of carbon dioxide in its organic form in forests

or soils, or in liquid form in the ocean, so as to prevent its release into the atmosphere. For example, DTE Energy, Wisconsin Energy Corporation, Georgia-Pacific,

and Weyerhaeuser, are working to enhance carbon sequestration in forests and soils

to offset their greenhouse gas emissions. American Electric Power and British Petroleum are developing technologies to sequester carbon dioxide in the ocean or in underground, depleted oil and gas reservoirs, coal seams, or saline aquifers. Many scientists believe that there is much still to learn about whether the carbon dioxide

placed in these so-called carbon sinks can be considered to be permanently removed

from the atmosphere.

Why are companies reducing greenhouse gas emissions?

According to a variety of recent reports that have surveyed business practices,1

businesses that are investing to reduce greenhouse gas emissions do so because they

believe such investments will help them compete.

Reducing greenhouse gases can make a company more competitive in a variety

of ways. Actions to reduce emissions can make a company more energy efficient or

can lead it to develop new products. Such advantages can benefit a company’s bottom line, even if the company never encounters pressure to reduce greenhouse gases

in the future.

Companies also decide to reduce greenhouse gases as a way to manage future

risks as many appear to view as real the possibility that shareholders, creditors, or

governments may some day require them to reduce their emissions of greenhouse

gases. Some companies take the position that the scientific evidence that man-made

greenhouse gas emissions may be harming the climate is credible.2 Others are

‘‘hedging their bets’’ either about future climate change or about future constraints

on emissions. In the process, some companies have discovered that emission reductions can in fact benefit them today. For example, while compiling a greenhouse gas

inventory, some companies have discovered opportunities to improve efficiency that

they had not previously identified.

These are some of the reasons that businesses have found compelling enough to

justify their taking steps to inventory or reduce greenhouse gas emissions:

Increased efficiency saves money. Investments in energy conservation and efficiency can yield direct savings in energy costs and lower the per-unit cost of production for some companies. For example, between 1990 and 2000 DuPont held its energy use constant while boosting its production by 35 percent, saving the company

$2 billion. Efficiency and conservation are particularly valuable to companies whose

6

greenhouse gas emissions come from the energy purchased from electric utilities, as

reducing expenditures for electricity purchases can directly benefit such a company’s

bottom line.

Competitive advantages may go to innovators. A number of companies are betting

that future markets will favor more energy efficient products. For automobile and

appliance manufacturers that make products that use electricity or that themselves

emit greenhouse gases, creating more efficient products may give these companies

a competitive advantage. It may also improve the public’s perception of the company

as being environmentally responsible. For example, a number of automakers are investing in hybrid vehicle technologies, which are up to 50 percent more efficient

than conventional gasoline engines. Whirlpool, whose products are responsible for

95 percent of its greenhouse gas emissions, has committed to reducing the emissions

from its products by three percent between 1998 and 2008. General Electric recently

announced plans to double its spending on developing environmental and energyefficient products and to double revenue from those products to $20 billion by 2010.

Early action is a hedge against future regulations or other pressures. Although

companies are facing a good deal of investment and regulatory uncertainty surrounding reduction of greenhouse gas emissions, some companies have decided that

acting in the near-term is more cost-effective than reacting later when there may

be less uncertainty, but potentially higher costs. They believe that beginning to reduce emissions now and continuing steadily over time will be cheaper than being

forced to make large reductions all at once in the future should it become necessary

to do so. For example, companies are measuring and tracking their greenhouse gas

emissions and participating in a variety of emissions trading programs to learn how

to track and trade emissions. Dow Corning and Baxter International are two of a

number of companies participating in the Chicago Climate Exchange, a voluntary

market to demonstrate trading of CO2 emissions. These companies appear to believe

that first-hand knowledge of how greenhouse gas markets work may benefit them

in the future.

Direct financial risk from climate change. Some companies face direct financial

risks from climate change. For example, insurance companies and the companies

that reinsure them are beginning to recognize financial risks from climate change.

On its website, Swiss Re, one of the leading global reinsurers, says that ‘‘the world

of insurance and re-insurance will have to face a new challenge: developing and implementing strategies and business solutions to deal with climate change and a carbon-constrained future.’’ The company says that climate change may alter not only

the average losses faced by insurers, but the range and annual fluctuations of those

losses.

Pressure from investors and lenders to reduce risk. Individual and institutional

shareholders as well as the lending arms of major financial institutions are increasingly concerned with the risks they might face should regulation, public perception

or other pressures one day induce companies to emit fewer greenhouse gas emissions. They are beginning to recognize that some companies within a given sector

will likely perform better than others should reductions in greenhouse gas emissions

ever be required. To protect the future value of their stocks, an increasing number

of investors have introduced shareholder resolutions calling on companies to develop

climate change strategies, cut greenhouse gas emissions, invest in renewable energy, and disclose greenhouse gas information. In addition, lending institutions,

such as Bank of America and JPMorgan Chase, have committed to figuring out how

to take these considerations into account in their investment decisions. There has

also been growth in specialized stock indices, such as the Dow Jones Sustainability

Index, that recognize companies that are taking early action and that attract some

investors seeking ‘‘green’’ stocks.

Influencing the policy and regulatory debate. Some companies believe that their

experience in applying various approaches to reducing greenhouse gases to their operations will lend credibility to their efforts to shape climate policy. For example,

American Electric Power has committed to reduce or offset emissions by four percent between 2003 and 2007 and is gaining real world experience in tracking, reducing and trading greenhouse gas emissions by participation in the Chicago Climate

Exchange. These actions, the company has said, have put it in a better position to

inform the current policy debate on climate change. Duke Power’s CEO recently announced steps that his company would take to reduce greenhouse gas emissions. In

addition, in an attempt to influence the national policy debate, he also called for

an economy-wide, mandatory carbon tax to reduce the dependence of our economy

on fossil fuels and thus lower greenhouse gas emissions.

Questions to the Witnesses

The witnesses were asked to respond in their testimony to the following questions:

7

James Rogers, Cinergy

• What concrete actions is Cinergy taking to reduce greenhouse gas emissions?

In what ways are they beneficial to Cinergy?

• Why is Cinergy taking these actions and what are the most important drivers

for them?

Dr. Mack McFarland, Dupont

• What concrete actions is DuPont taking to reduce greenhouse gas emissions?

In what ways are they beneficial to DuPont?

• Why is DuPont taking these actions and what are the most important drivers

for them?

Ronald Meissen, Baxter International

• What concrete actions is Baxter Health Care taking to reduce greenhouse gas

emissions? In what ways are they beneficial to Baxter?

• Why is Baxter taking these actions and what are the most important drivers

for them?

Robert Hobbs, United Technologies Corporation

• What concrete actions is UTC taking to reduce greenhouse gas emissions? In

what ways are they beneficial to UTC?

• Why is UTC taking these actions and what are the most important drivers

for them?

The following companies are among those that are taking action to address

greenhouse gases. The lists include companies participating in the

Pew Center’s Business Environmental Leadership Council (BELC)

or the Environmental Protection Agency’s (EPA) Voluntary Climate Leaders Program. Some companies participate in both.

According to the Pew Center’s web site, members of the Business Environmental

Leadership Council (BELC) are taking any of the following types of action to address greenhouse gas emissions: set targets for emissions reductions; implement innovative energy supply and demand solutions; participate in emissions trading; and

invest in carbon sequestration opportunities and research. They also agree on several beliefs:

1. We accept the views of most scientists that enough is known about the

science and environmental impacts of climate change for us to take actions

to address its consequences.

2. Businesses can and should take concrete steps now in the U.S. and abroad

to assess opportunities for emission reductions, establish and meet emission

reduction objectives, and invest in new, more efficient products, practices and

technologies.

3. The Kyoto agreement represents a first step in the international process, but

more must be done both to implement the market-based mechanisms that

were adopted in principle in Kyoto and to more fully involve the rest of the

world in the solution.

4. We can make significant progress in addressing climate change and sustaining economic growth in the United States by adopting reasonable policies, programs and transition strategies.

According to EPA’s Climate Leaders web site, EPA’s Climate Leaders program is

an EPA industry-government partnership that works with companies to develop

long-term comprehensive climate change strategies. Partners set a corporate-wide

greenhouse gas (GHG) reduction goal and inventory their emissions to measure

progress. By reporting inventory data to EPA, Partners create a lasting record of

their accomplishments. Partners also identify themselves as corporate environmental leaders and strategically position themselves as climate change policy continues to unfold.

8

3M Mack Trucks, Inc.

ABB Marriott International, Inc.

Air Products Maytag

Advanced Micro Devices, Inc. Melaver, Inc.

Alcan Aluminum Corporation Miller Brewing Company

Alcoa National Renewable Energy Laboratory

American Electric Power NiSource Inc.

Ball Corporation Noble Corporation

Baltimore Aircoil Company Norm Thompson

Bank of America Corporation Oracle Corporation

Baxter International Outfitters, Inc.

Boeing Novartis

BP Ontario Power Generation

California Portland Cement Pfizer Inc.

Calpine PG&E Corporation

Caterpillar, Inc. Polaroid Corporation

CH2M Hill Praxair, Inc.

Cinergy Corp. PSEG

Cummins, Inc. Quad/Graphics Inc.

Deutsche Telekom Raytheon Company

DTE Energy Rio Tinto

DuPont Roche Group U.S. Affiliates

Eastman Kodak Company Rohm and Hass

EMC Corporation Royal Dutch Shell

Entergy Shaklee Corporation

Exelon Corporation SC Johnson

Fetzer Vineyards St. Lawrence Cement

First Environment, Inc. Staples, Inc.

FPL Group, Inc. STMicroelectronics

Frito-Lay, Inc. Sun Microsystems, Inc.

GAP Inc. Sunoco

GE Transportation Target Corporation

General Motors Corporation Tenneco Automotive

Georgia-Pacific The Collins Companies

Green Mountain Energy Company The Hartford

Hasbro, Inc. Toyota

Hewlett-Packard Company TransAlta

Holcim Tyson Foods, Inc.

IBM U.S. Steel Corporation

Intel United Technologies Corp.

Interface, Inc. Unilever HPC

International Paper Volvo Trucks North America, Inc.

Johnson & Johnson We Energies

Johnson Controls, Inc. Weyerhaeuser

John Hancock Financial Services Whirlpool

Lafarge North America Inc. Wisconsin Energy Corporation

Lockheed Martin Xerox Corporation

Source:

http://www.pewclimate.org/companies¥leading¥the¥way¥belc/company¥profiles/

http://www.epa.gov/climateleaders/partners/index.html

9

Chairman BOEHLERT. Good morning. It is a pleasure to welcome

everyone here this morning for this important and, I hope, eyeopening hearing.

We spend a lot of time in Washington talking about what might

or might not be done about climate change in theory, but meanwhile, out in the ‘‘real world,’’ real companies that make real

money, making real products for real people are taking action.

So we ought to be sure that our debate here is informed by the

real experience. We need to understand why your companies are

taking steps to reduce greenhouse gas emissions and what you

have learned through your actions.

I don’t want to say much more than that. I think today’s testimony speaks for itself, and my own views on climate change are

well known.

I just want to thank our witnesses for being here today. I think

that you and your companies are real heroes. You are taking a

broad view while still remaining hardheaded, bottom line-oriented

business people who have an obligation to protect your companies.

But you are putting the enlightened back in self-interest. Somewhere Adam Smith’s invisible hand is applauding.

I thank you for appearing today.

And I recognize Mr. Gordon for any comments he might care to

make.

[The prepared statement of Chairman Boehlert follows:]

PREPARED STATEMENT OF CHAIRMAN SHERWOOD L. BOEHLERT

It’s a pleasure to welcome everyone here this morning for this important and, I

hope, eye-opening hearing. We spend a lot of time in Washington talking about

what might or might not be done about climate change—in theory—but meanwhile,

out in the ‘‘real world’’ real companies that make real money making real products

for real people are taking action.

So we ought to be sure that our debate here is informed by that real experience.

We need to understand why your companies are taking steps to reduce greenhouse

gas emissions and what you’ve learned through your actions.

I don’t want to say much more than that. I think today’s testimony speaks for

itself, and my own views on climate change are well known.

I just want to thank our witnesses for being here today; I think that you and your

companies are real heroes. You’re taking a broad view, while still remaining hardheaded, bottom-line oriented business people who have an obligation to protect your

companies. But you’re putting the ‘‘enlightened’’ back in self-interest. Somewhere

Adam Smith’s ‘‘invisible hand’’ is applauding.

Mr. Gordon.

Mr. GORDON. Thank you, Mr. Chairman, and good morning. And

as usual, I concur with your remarks. And I want to thank you for

calling this hearing on the voluntary efforts that U.S. businesses

are making to improve their energy efficiency and reduce their

greenhouse gas emissions.

It is refreshing to hear something positive on this issue. The programs these companies have initiated demonstrate that not all efforts to reduce emissions result in economic losses or put our businesses at an economic disadvantage.

These programs are obviously not cost-free, but they appear to be

cost-effective. The firms represented here have made investments

that are returning economic and environmental dividends.

The voluntary programs undertaken by these firms and others

can also help us to better understand how far current technologies

10

can take us in reducing greenhouse gases and what level of investment is required to achieve them.

Perhaps the experience gained through this type of voluntary effort will give us insights into the types of government research and

development efforts we should focus on and the type of adjustment

programs that might be needed to reduce the costs and improve the

effectiveness of technologies that reduce energy consumption and

emissions.

So once again, thank you, Mr. Chairman, for calling this hearing,

and I look forward to hearing from our informed witnesses.

[The prepared statement of Mr. Gordon follows:]

PREPARED STATEMENT OF REPRESENTATIVE BART GORDON

Good morning. Thank you, Mr. Chairman for calling this hearing on the voluntary

efforts that U.S. businesses are making to improve their energy efficiency and reduce their greenhouse gas emissions.

It is refreshing to hear something positive on this issue. The programs these companies have initiated demonstrate that not all efforts to reduce emissions result in

economic losses or put our businesses at an economic disadvantage.

These programs are obviously not cost free, but they appear to be cost effective.

The firms represented here have made investments that are returning economic and

environmental dividends.

The voluntary programs undertaken by these firms and others can also help us

to better understand how far current technologies can take us in reducing greenhouse gases and what level of investment is required to achieve them.

Perhaps the experience gained through this type of voluntary effort will give us

insights into the types of government research and development efforts we should

focus on and the type of adjustment programs that might be needed to reduce the

costs and improve the effectiveness of technologies that reduce energy consumption

and emissions.

These programs demonstrate that we have technologies available today to reduce

energy use and emissions. We may not be able to address all of our energy and environmental security issues through voluntary efforts alone, but the reductions

achieved by these companies show that we can begin to improve our energy efficiency.

I look forward to hearing your testimony and thank you for appearing before the

Committee this morning.

Chairman BOEHLERT. Thank you very much, Mr. Gordon.

[The prepared statement of Ms. Johnson follows:]

PREPARED STATEMENT OF REPRESENTATIVE EDDIE BERNICE JOHNSON

I want to thank Chairman Boehlert and Ranking Member Gordon for bringing the

issue of global climate change and the control of greenhouse gases before the Committee today. I appreciate their continued leadership on science and environmental

policy issues.

I am pleased to hear from businesses that have had the foresight and the capability to begin developing suitable and equitable approaches in solving this shared

problem of the control of greenhouse gases.

Business leadership is necessary if we are to avoid further catastrophic effects of

our actions on the environment.

One of the most profound challenges we face in the 21st century is the problem

of global climate change.

Time and again, the world’s leading atmospheric scientists have warned us about

the devastating impact of climate change. We now have irrefutable proof of its impact on our economy, our way of life, our health and our children.

Because our country is leading the world in the output of those negative elements

that lead to climate change, I am embarrassed that we are one of the last industrialized nations to accept responsibility to clean up our environment.

I realize that solutions may not be easy, quick, or cheap; however, if we do not

address this problem now, future costs will be measured in dire consequences to our

lives and our children’s lives.

Mr. Chairman, I want to acknowledge and applaud TXU and UPS for their clean

air efforts in the right direction in my district. It will take efforts like this where

11

businesses, based on their own set of values and their sense of right and wrong,

will step up to the plate and make the right decisions about what effect their companies activities are having on the environment.

An effective program to fight climate change need not involve huge increases in

energy prices or draconian rules that choke industries and damage a company’s economic well-being. There are immense business opportunities in creating approaches

to sustainable growth and development.

We must invest in the development of new technologies that will provide new and

environmentally friendly sources of energy that include both conventional and nonconventional energy sources. We must work with other nations in a cooperative

manner. A well-crafted strategy can address global climate change and maintain our

preeminent economic position in the world.

What gives me hope is the fact that the same science and technology that discovered and produced the harmful effects of climate change is the same type of science

and technology that Congress and businesses can depend on to come up with solutions to the threat climate change poses.

In Texas, a slight change in the average temperature has already begun to adversely affect our inland and marine fisheries, beaches, forest composition, water

supply, agribusiness and health (more Lyme disease and asthma, for example).

The suffering is unacceptable and unnecessary in the richest and most innovative

country in the world. Increasing health care costs strain an already struggling

health care system.

I urge all of my colleagues to look at this issue closely, and I am looking forward

to working with businesses, non-profits and my colleagues to reduce the impact of

carbon emissions from coal-burning plants, greenhouse gases, and other human-generated pollutants upon our citizens.

[The prepared statement of Mr. Carnahan follows:]

PREPARED STATEMENT OF REPRESENTATIVE RUSS CARNAHAN

Mr. Chairman and Mr. Ranking Member, thank you for holding this hearing.

It is inspiring to hear that the four companies’ represented before us have been

able to simultaneously lower energy costs while voluntarily reducing greenhouse gas

emissions (GHG). The efforts of these companies should be applauded and imitated

by others.

The United States accounts for between one-fifth and one-fourth of current global

GHG emissions annually. These companies have volunteered to help in reducing

GHGs and in doing so have been positive examples. Yet, our nation as a whole has

a responsibility to address our role in GHG emissions and in the larger issue of climate change.

I believe we can do more in the area of reducing emissions. Earlier this year, I

sponsored an amendment to the Energy Bill that would offer tax credits for hybrid

vehicles to both manufacturers and consumers. I hope that industry and government alike can examine areas where everyone can work together to reduce greenhouse gas emissions.

I welcome the witnesses to our committee today and look forward to hearing their

testimony. Thank you.

Chairman BOEHLERT. And our distinguished panel, and it is a

very distinguished panel. It consists of Mr. James R. Rogers, Chairman and CEO and President of Cinergy Corporation; Dr. Mack

McFarland, Environmental Manager, Fluorochemicals Business,

E.I. DuPont de Nemours and Company.

And for the purpose of an introduction, the Chair recognizes Mrs.

Biggert.

Ms. BIGGERT. Thank you, Mr. Chairman.

It is a privilege for me to introduce Mr. Ron Meissen, a Senior

Director at Baxter International who manages the company’s

worldwide environment, health, and safety resources. With an

MBA and Bachelors and Masters degree in civil engineering, Mr.

Meissen is a 30-year employee of Baxter Global Health Care Company that produces medical supplies and biopharmaceuticals for

the treatment of hemophilia, immune disorders, kidney disease,

cancer, trauma, and other conditions. Baxter generated $8.9 billion

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in sales in 2003 thanks to the hard work of 51,000 employees at

64 different facilities in seven states, one U.S. territory, and numerous foreign facilities in other countries.

Headquartered in my home state, Baxter is one of Illinois’ great

corporate citizens in part because of its commitment to reducing

energy consumption and associated greenhouse gas emissions. So I

would like to welcome Mr. Meissen to the hearing today.

Thank you, Mr. Chairman. I yield back.

Chairman BOEHLERT. Thank you very much for that commercial.

It is a pleasure to have that introduction.

And our final witness, Dr. Robert Hobbs, Director of Operations,

United Technologies Research Center, United Technologies Corporation.

And I just might add that all of these witnesses are very distinguished in their careers and their accomplishments, and I very

much appreciate, gentlemen, you serving as resources for this committee, because we have so much to learn from people with reallife experiences in the ‘‘real world.’’ Sometimes we are insulated

from the ‘‘real world,’’ so we welcome the ‘‘real world’’ to Capitol

Hill.

With that, let me start out with Mr. Rogers, who will be—oh, let

me also add that the Whirlpool Corporation has submitted testimony, and we appreciate that, for the record. (See Appendix 2: Additional Material for the Record.)

Mr. Rogers, and all of the witnesses, your full statements will appear in their entirety in the record. We would ask that you try to

summarize your remarks, which will afford us ample opportunity

to sort of pick your brains some more.

Mr. Rogers, welcome.

STATEMENT OF MR. JAMES E. ROGERS, CHAIRMAN, CEO, AND

PRESIDENT, CINERGY CORPORATION

Mr. ROGERS. Thank you, and good morning.

I appreciate the opportunity on behalf of Cinergy to testify today

at what I hope will be a series of hearings on the issue of global

warming.

My name is Jim Rogers. I am the CEO of Cinergy. We serve approximately 1.5 million customers in Ohio, Indiana, and Kentucky.

As you know, we have recently announced a merger with Duke Energy, which is headquartered in Charlotte, North Carolina.

As a Midwest utility, coal fuels most of our generating plants.

We burn approximately 30 million tons of coal a year. That makes

us the fifth largest consumer of coal. And despite this utilization

of coal, which is one of our greatest resources in this country, we

recently, in fact, in 2003, announced a voluntary commitment to reduce greenhouse gas emissions to five percent below our 2000 levels and to do this by the period 2010 to 2012.

To reach that goal, we are going to spend over $21 million on a

variety of projects that we anticipate, with these projects, cutting

about 30 million tons of greenhouse gas emissions.

We are not alone in this country in industrial America in terms

of working to reduce greenhouse gas emissions. There are 94 Fortune 500 companies that are working today to reduce emissions.

13

The question you are probably asking yourself is: ‘‘Why would a

primarily coal-burning utility in the Midwest take on such a commitment?’’ And as I think about it, I look back over the last decade

and we spent $1.7 billion to reduce the emissions of SOΧ, NOΧ, and

Mercury from our plants. We are looking, over the next five years,

to spend roughly $1.8 billion to reduce SOΧ, NOΧ, and Mercury

from our plants.

My position and our company’s position on the issue of global

warming has evolved. This is not an overnight recognition on our

part. We have opportunities for research and participate in domestic and international economic and environmental discussions, and

from these various vantagepoints, we have come to believe several

things. One is the world is warming. Two, human activities have

contributed to the warming. Thirdly, and this is the part that

needs more work, it is not clear, and I don’t think we fully understand what the impact should be.

But understanding all of that, it has led us to the conclusion that

the prudent path at this point in time is to take actions today to

prepare to live in a carbon-constrained world tomorrow.

But the question you have to ask is, and I have asked myself is:

‘‘What if we were wrong. What if the scientists that say this is a

problem are wrong? Will the steps we have taken be inappropriate?

Will it leave the world in a worse spot than it would have been otherwise?’’

And I believe the answer is simply this. As we work to reduce

greenhouse gas emissions, we will work to create environmentallyfriendly technologies. We will be pursuing methods of saving energy far more efficiently than we have before. We will be working

in this country to lower our dependency on foreign oil by encouraging the development of numerous auto fuel sources. These advantages can shape our economy into one that is cleaner and more selfreliant, and who can argue with that outcome?

In our 2004 annual report, we did something quite different. We

focused on the issue of global warming. And the headline was, ‘‘Can

we find common ground?’’ So rather than rely on all of the smart

people, the scientists, and all of the others, we went to the people

who have a stake in our company: the investors, the employees, the

customers, policy-makers. And we asked them: ‘‘How should we, as

a company, be thinking about this issue?’’

And I would urge you to look at our website, because you could

see our annual report there, and you could look at what people

were saying. But let me quickly tell you the signposts that have

motivated us to deal with this issue.

One signpost is the states are increasingly taking on the role of

regulation of greenhouse gas emissions. Just look across this country, and there are over eight states that are now either registering

your CO2 emissions or looking at ways to regulate it.

Congress is continuing to look at this issue as signpost two. Not

only is this committee addressing how businesses are reacting to

global warming, the Senate, as you know, has been tackling the

issue in a number of ways.

We believe that the Clear Skies legislation that is now pending,

this multi-emission legislation, is stalled because of the lack of

progress on carbon.

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The third signpost that we see is that Kyoto was approved, and

we believe that can have possible trade implications going forward.

And the fourth point that I would highlight is that our shareholders are increasingly asking companies to quantify their greenhouse gas emissions. Several years ago, we had a shareholder proposal, and that has helped stimulate and accelerate our thinking

on these important issues.

The other signpost I would mention is that trading markets are

developing both here and abroad, and so smart people that make

money from having markets develop are already anticipating that

this is going to be an issue and that there will be a trading of emission allowances from reduction of CO2. And the last point I would make is as you look around our society, look at the movies, look at the books, and look at the cover of

Business Week and the cover of National Geographic, it is all about

global warming. It is in the consciousness of people across this

country.

So our—my challenge to you, and the challenge that we have, is

to find a way to reduce emissions, to find a way to invest more in

technology, and to make sure that we have technology to do that.

And I would say in conclusion that we have invested in IGCC

coal gasification. We were one of two companies that participated

in a project in the early 1990s. We built a coal gasification facility

using Dow technology. And we are currently in negotiation with

GE and Bechtel to build another coal gasification. We believe that

is an important technology to allow us to utilize one of the greatest

resources we have in this country, and that is coal.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Rogers follows:]

PREPARED STATEMENT OF JAMES E. ROGERS

Good Morning. My name is Jim Rogers, I am Chairman, CEO and President of

Cinergy. Cinergy was formed ten years ago by the combination of PSI Energy in

Indiana and Cincinnati Gas & Electric. As you know, Cinergy also recently announced a merger with Duke Energy based in Charlotte, North Carolina.

Let me tell you a bit about our company before I explore our interest in greenhouse gas emission policies.

Cinergy serves approximately 1.5 million customers in Ohio, northern Kentucky

and much of Indiana. We operate nine coal-fired generating stations that burn almost 30 million tons of coal per year.

As a Midwest utility Cinergy has ample access to coal. And with rising natural

gas prices, coal is the most economical choice for supplying our customers with electricity. Despite our generating choice, in 2003 Cinergy committed to reducing our

greenhouse gas emissions to five percent below 2000 levels during the period of 2010

and 2012. To reach that goal we are spending $21 million to fund projects through

the remainder of the decade. We plan on reaching the goal despite a growing demand for electricity in our region, and taking into account the electricity penalty

we will realize when the bulk of our generating units are outfitted with pollution

control equipment to meet new Environmental Protection Agency regulatory requirements.

All in all we expect that we will need to cut greenhouse gas emissions by a total

of 30 million tons.

While electric rates in the Midwest are likely to increase as a result of pollution

control expenditures to reduce sulfur dioxide, nitrogen oxide and mercury, no increases will be due to our carbon commitment.

We made our decision to reduce GHG emissions despite the fact that there currently is no commercially viable method of capturing and sequestering carbon from

coal fired power plants. However there are new technologies on the horizon and research on carbon capture and sequestration applications will and must continue to

keep coal a viable and necessary fuel for the future.

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In fact, Cinergy is completing a feasibility study on the construction of an Integrated Gasification Combined Cycle power plant (IGCC)—the state of the art coal

plant technology available to us today. It is relatively easier and less energy intensive to capture CO2 from an IRC’s high pressure synthesis gas than from conventional pulverized coal flue gas. In addition, sulfur dioxide, nitrogen oxide and mercury emissions are substantially reduced with IGCC technology and because it is

more efficient even without carbon capture components, it does reduce carbon emissions.

According to industry analysts’ estimates, the cost of IGCC is 10–20 percent more

then traditional pulverized coal. Those costs will come down, however, if the appropriate incentives are made available and we are able to deploy five or more facilities

over the next decade. It is also a technology that is a necessary component of any

international technology transfer program. Developing countries that today operate

plants without even the simplest of pollution control equipment can with technologies such as IGCC begin reducing all emissions more efficiently and completely.

Let me turn to the subject at hand. Why has Cinergy taken on this commitment

and why expend so much attention on greenhouse gas emissions?

I spend a good deal of my time, not just in running the company—but also in researching and participating in domestic and international economic and environmental conferences so that I can appropriate the wisdom from those venues back

to our shareholders and all of our stakeholders. Over the past several years I have

developed a better understanding of climate change and I see the debate in the scientific world honing in on a few basic facts: that the world is warming and that

human activities have contributed to the warming. What the impacts will be I don’t

think we yet fully understand.

Because of this, I believe people increasingly will believe that greenhouse gas

emissions should be reduced and that actions should begin today to prepare for that

eventuality.

But what if I and the multitude of scientists and industries agreeing with that

premise are wrong? If we approach this issue appropriately, then we will have

worked to create new environmentally friendly technologies, pursued methods of

saving energy far more efficiently and work to lower our dependence on foreign oil.

We will have advanced to a multitude of fuel sources and technological configurations that will help move our economy into a cleaner and more self reliant future.

And I don’t know anyone that can argue effectively against that outcome.

Let me share with you some of what I call signposts that I have observed over

the past several years which helped guide me to the development of our position

today. We published these signposts in our 2004 annual report because we chose

not to ignore the issue of greenhouse gases but to address it in a positive manner.

Signpost #1

The states are taking action

Four states have an overall cap on GHG emissions and two have a cap on power

plant CO2 emissions. Eight states regulate GHG emissions. And, eight states have

filed suits against Cinergy and four other utilities to curb their GHG emissions,

while others are involved in suits with EPA over the need to regulate carbon.

A coalition of nine northeast states has initiated the regional greenhouse gas initiative which would create a regional market based cap and trade program.

Governor Schwarzenegger of California an executive order identifying a goal to reduce emissions including:

• By the year 2010, to reduce California’s GHG emissions to less than those

produced in 2000.

• By 2020, to reduce GHG emissions below 1990 levels.

• By 2050, reduce overall emissions a full 80 percent below 1990 levels.

He noted that the state is going to accelerate the timetable to get more energy

from renewable sources 20 percent by 2010 and a third by 2020.

These sources include solar, wind, geothermal, and biomass from agriculture and

other waste.

The state’s fleet of government vehicles, all 70,000 of them, will be replaced with

hybrids.

Signpost #2

An increasing number of Members of Congress are expressing concern

about global warming.

While in 1997 the U.S. Senate voted to reject the Kyoto Protocol, that did not

mean they were rejecting the issue. I think that it is important to remember that

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the ratified 1992 Agreement of the Parties has an objective of stabilizing atmospheric greenhouse gas concentrations ‘‘at a level that prevents dangerous anthropogenic interference with the climate system’’ has never been refuted.

Senators McCain and Lieberman have introduced and modified their climate reduction proposal and those voting favorably have increased even though there are

still not enough votes to pass the Senate.

Multi-Emissions legislation, which I have championed for years, sadly can’t move

past the Senate Environmental and Public Works Committee because the issue of

climate remains unresolved. That hurts the utility industry and its customers because also unresolved are rules that regulate sulfur dioxide, nitrogen oxide and mercury as well—all which will undoubtedly cost rate payers millions in unneeded expenditures because the roadmap for an eventual solution to those issues will be tied

up in courts for years.

Signpost #3

Kyoto has been approved by 38 Industrial nations this year.

Europe wants to accelerate GHG mitigation and some countries, including Tony

Blair with whom I met yesterday, are interested in exploring what lies beyond

Kyoto’s 2012 expiration.

I think that it is also important to consider that while industry in Europe is mandated to deal with emissions reductions, that issue could become increasingly

confrontational in trade discussions as the lack of a U.S. policy could possibly be

considered a trade subsidy.

Signpost #4

A growing number of shareholders are asking companies to quantify the

risks associated with GHG emissions.

Increasingly investor groups are asking utilities and other companies to quantify

their GHG emission risks and to determine what steps are being taken to manage

those risks.

The assets of socially responsible mutual funds are growing faster then the mutual fund industry as a whole.

And, the California Public Employee Retirement System (CalPERS) announced

that it will sign onto the Global Carbon Disclosure Project, an international effort

to improve the transparency of business risks associated with climate change.

Signpost #5

CO2 and GHG emissions trading markets are developing in Europe and the

U.S.

The EU initiated its emissions trading scheme this year and facilitates the trading of CO2 allowances among 12,000 EU industrial installations.

The Chicago Climate Exchange established in 2003, has grown from 13 to 85

members.

Signpost #6

Global Warming is becoming part of our everyday consciousness.

The issue served as cover stories for Business Week and National Geographic in

2004.

And this past Saturday’s New York Times included a front page story discussing

world-wide technology advances in energy efficiency. The story highlighted countries

that have outperformed the U.S., from Japan with its newly manufactured kilowatt

saving refrigerators and air conditioners to Germany with its impressive new fuel

efficient homes and to Singapore which is placing new restrictions on autos to encourage increased bus and rail usage.

Increasingly, U.S. businesses are stepping up to take action. Not just in the utility

industry but if you look at the President’s voluntary climate reduction program, numerous business have made commitments to reduce emissions. Even Exxon-Mobile

is now advertising voluntary actions it is taking to reduce its impact on climate

trapping emissions.

But what does all of this domestic and international activity mean for the U.S.?

While other countries are incentivizng new technologies in a comprehensive fashion,

we are arguing about what to do. And where will those other countries take those

technologies? To China which according to the New York Times consumes 11.5 times

the energy of Japan to produce the same industrial output.

Despite the fact that Japan is far from meeting its Kyoto target—it is already

moving from industry to home and automobile—in attempts to dramatically increase

efficiency and alternative vehicle use. And who is dominating the world market on

hybrid vehicle sales? The Japanese car manufacturers. Meanwhile Japan has nearly

17

tripled its industrial output from 1973 to today while keeping its overall energy consumption roughly flat.

While the world is deploying leapfrogging technology in an effort to deal with climate change, the U.S. lags sorely behind; concerned that movement to address the

climate issue might create some kind of economic instability.

So how do you and we in industry alter the climate paradigm?

I think that it will require a number of steps—smaller steps then embracing

Kyoto that will set us on the right path.

First, again, there are aspects of climate science that are indisputable even

thought significant additional scientific work remains to refine the unknowns.

Æ CO2 is at its highest concentrations in the past 400,000 years

Æ The Earth is getting warmer

Æ The warming is caused by a combination of human and natural processes.

Second, I think that we have all recognized that Kyoto was a 10,000 pound gorilla, and too much for the U.S. to tackle. As a result, I think that it is important

to eliminate the linkage between any kind of carbon reduction policy and Kyoto.

While I believe that the best approach to climate is an economy wide approach—

I think the path there may need to be more creative and perhaps even incremental

in order to demonstrate the ability to control emissions in an economically viable

way.

Whatever emission reduction approach is adopted, I believe that coupling it with

legitimate methods of advancing technology is crucial. I know that this committee

focuses on Research and Development. I believe that taking a hard look at what programs are funded and what can be jump-started in order to bring them closer to

commercial adaptation is important. Much of the discussion on R&D tends to focus

on the R and not so much on the D—development or what I think we need to see

is Deployment. Getting these technologies into the marketplace earlier and more effectively is an issue that I believe is often overlooked.

And, I think that beyond traditional government programs, the development of

technology funds to help offset the costs of meeting emission reduction targets can

work, not only by spreading out the cost of those targets throughout the entire economy but by also helping the U.S. regain the lost momentum to lead the energy efficiency technology race. Ideas abound about how to fund these off budget—and they

may not be practical right now—however beginning the discussion is important if

optimal solutions to meeting a greenhouse gas reduction target are to be utilized.

Third, I also think it’s important to greatly simplify the implementation of taking

on emission reduction commitments. As a Utility company executive I am mystified

each and every time the issue of meeting climate reduction programs or even the

development of a voluntary registration of emissions arises, with it surfaces the host

of issues that makes a solution all but impossible. How do you deal with past actions, additionality, every household and homeowner taking on a commitment? The

Answer: Don’t.

Let’s not follow the complicated example of our friends across the ‘‘pond’’ that

have developed hundreds of varying allocation rules for every industry or fuel type.

Keep it simple. Make a forward looking commitment, meet it and if you go below

it—allow those tons to be used to trade with others.

And finally as the Committee continues to examine greenhouse gas emissions I

would urge you to be creative. This commitment in my own company has empowered our employees to creatively address how best to meet that commitment. The

Acid Rain Program reforms to command and control regulations helped minimize

the role of the government in business decisions and unleashed the power of the

market by making reductions a good investment. This is the one of the economically

efficient paths forward. To take another approach provides naysayers with the unwavering momentum that challenges the possibility of forward movement.

I believe that the country needs leadership in this area. I don’t believe that I am

being disloyal to the President whom I support, to Congress or to my shareholders

when I say that the time is now to move positively toward reachable goals that will

not only put us on track to operate in a greenhouse constrained environment, but

on a track that will also make this country the technological leader it once was and

can be again.

Measuring Baseline GHG Emissions

The table below summarizes Cinergy’s baseline 2000 GHG emissions. Cinergy is

reporting corporate-wide GHG emissions that include all of Cinergy’s business activities.

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Cinergy GHG Goal Reductions

Cinergy chose to adopt a voluntary GHG emissions cap of five percent below

Cinergy’s 2000 GHG emissions for the period 2010 through 2012 because we wanted

to emphasize on-system GHG reductions. Cinergy could have chosen a different goal

such as committing to reduce our GHG emissions one (1) percent per year beginning

2004. However, such a commitment would probably have to be met through the purchasing of offsets. To identify, design, and implement on-system reductions will require a certain amount of lead-time. Cinergy believes that the results of on-system

reductions will be much more beneficial to the Company and to the electric industry

in general. Cinergy designed its GHG goal to provide an opportunity for the Company to first explore implementation of cost-effective on-system methods of reductions.

Part of Cinergy’s GHG Management Goal was a pledge to spend up to $21 million

on CO2 reducing and offsetting projects from 2004 to 2010. In 2004 and 2005

Cinergy allocated $3 million in each year to various projects designed to reduce, offset, or provide research in the reduction of Cinergy’s CO2 emissions. The projects

selected by the internal Cinergy GHG Management Committee included:

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Prior to 2004 Cinergy has implemented a number of projects and activities specifically for the reduction of GHG emissions or for other business reasons that have

reduced or offset our GHG emissions in the following areas:

• Power plant efficiency

• Combined heat and power

• Landfill gas capture and electric generation

• End-user energy conservation

• Renewable energy generation

• Terrestrial sequestration

• SF6 usage reduction

• Fly ash reuse

• Materials recycling

These past and future projects and activities that are not directly connected to

the expenditure of the $21 million will continue to reduce GHG emissions.

The table below presents the amount of GHG reductions or offsets for each of the

project categories. Emission reductions for 2004 are still being calculated.

The table below provides aggregated data for Cinergy’s GHG emissions and reductions for the years 2001 through 2003. Data for 2004 is still being aggregated. The

company’s reduction target is based on Cinergy’s baseline emissions that include its

large generating plants, non-regulated generating plants, combined heat and power

20

plants, fugitive natural gas emissions, SF6 emissions, and emissions from fleet vehicles.

The reader should not assume that Cinergy has already met its GHG goal of reducing its GHG emissions more than the five percent below our 2000 GHG emissions. While Cinergy’s GHG emissions were below our year 2000 corporate baseline

emissions of more than 73 million tons, the lower emissions are due to the slow

economy in 2001 and 2002 and mild summer and winter weather in 2002 and 2003.

GHG emissions in 2003 were higher because of increased economic activity. The

slow economy and mild weather lowered demand for electricity so Cinergy generated

less and therefore lower associated GHG emissions. Cinergy cannot predict future

weather or economic conditions with absolute certainty. Cinergy uses internal models to project electricity demand into the future. Based on certain scenarios modeled

during evaluation of the Cinergy GHG goal, Cinergy anticipates that the demand

for electricity will grow and that our GHG emissions will exceed our 2000 baseline

emissions anywhere from one million tons to more than 12 million tons annually

during the 2010 through 2012 time period.

BIOGRAPHY FOR JAMES E. ROGERS

Mr. Rogers, 57, has been CEO for more than 16 years—at PSI and now at

Cinergy. Prior to the formation of Cinergy, he joined PSI Energy, Inc., in 1988 as

the company’s Chairman, President and Chief Executive Officer. Prior to joining

PSI, he was Executive Vice President, Interstate Pipelines for the Enron Gas Pipeline Group. Before joining Enron Corp., Mr. Rogers was a partner in the Washington, D.C. office of Akin, Gump, Strauss, Hauer & Feld (a law firm based in Dallas, Texas). He represented energy companies before the Federal Energy Regulatory

Commission (FERC), the Department of Energy, various Congressional committees

and federal courts.

Immediately before joining Akin, Gump, Strauss, Hauer & Feld, Mr. Rogers was

Deputy General Counsel for Litigation and Enforcement of the FERC. In this position he directed all aspects of the FERC’s litigation and enforcement. Previously,

Mr. Rogers served as Assistant to the Chief Trial Counsel at the FERC, as a Law

Clerk for the Supreme Court of Kentucky, and as Assistant Attorney General for

the Commonwealth of Kentucky, where he acted as intervener on behalf of State

consumers in gas, electric, and telephone rate cases. He was a reporter for the Lexington (Kentucky) Herald-Leader from 1967 to 1970.

Mr. Rogers has served more than 38 years cumulatively on the boards of Fortune

500 companies. He is currently a director of the following corporations: Cinergy

Corp., Fifth Third Bancorp and Fifth Third Bank. He serves as 2nd Vice Chairman

of the Board, is on the Executive Committee and is Chairman of the Strategic Planning Committee of the Edison Electric Institute. He previously served as Chairman

of the Environmental Policy Committee. He also serves on the Board of the American Gas Association and the U.S. Chamber of Commerce.

Mr. Rogers also serves on numerous civic boards and has published numerous articles on energy and environmental issues. He formerly served as director of the following corporations: Duke Realty Corp., Bankers Life Holding Corporation; A O

Irkutskenergo (a Russian hydroelectric/coal-fired steam utility), INB (Indiana National Bank) and NBD Indiana Inc. He has testified before Congressional Committees 13 times since 1989.

Mr. Rogers attended Emory University (Atlanta, Georgia) and holds a B.B.A. and

J.D. degree from the University of Kentucky, where he was a member of the Kentucky Law Journal and Beta Gamma Sigma (Academic Honorary Society). He was

named to the Hall of Fame at the Carol Martin Gatton College of Business and Economics and the Hall of Fame of the College of Law, both of the University of KenVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
21

tucky. He also received an honorary Doctor of Law degree from Indiana State University.

Chairman BOEHLERT. Thank you very much, Mr. Rogers.

Dr. McFarland.

STATEMENT OF DR. MACK McFARLAND, ENVIRONMENTAL

MANAGER, FLUOROCHEMICALS BUSINESS, E.I. DuPONT DE

NEMOURS AND COMPANY

Dr. MCFARLAND. Good morning, Chairman Boehlert, Mr. Gordon,

and members of the Committee.

My name is Mack McFarland, and I am the Global Environmental Manager for DuPont’s Fluorochemicals Business.

In that role, I advise our worldwide operations on a range of environmental and business matters. I appreciate this opportunity to

share our experiences regarding greenhouse gas emission reductions with you.

DuPont is a science-driven company with a commitment to safety, health, and environmental protection. We use science to derive

products and services that improve the quality and safety of people’s lives. We also use science to drive how we develop, manufacture, and manage our products throughout their life cycle.

As a 200-year-old company, we take the long view and strive for

sustainable growth that benefits our shareholders, the societies in

which we operate, and the global environment. It is that commitment to sustainable growth and the science that underpins our approach to global climate change.

Our experience with climate change actually began with another

global environmental issue, stratospheric ozone depletion. DuPont

developed the first fluorochemical refrigerating gases, CFCs, in the

1930s. In the 1970s, when it was proposed that CFCs might deplete stratospheric ozone, DuPont delved into the science. In 1988,

based on the scientific consensus presented in the International

Ozone Trends Panel Report and our evaluation of that science, we

voluntarily and unilaterally committed to phase out CFCs.

We also used our science capabilities to lead in the development

of alternative products to meet the growing societal demand for air

conditioning and refrigeration. This experience with the CFC ozone

issue provided us with a keen understanding of the implications of

environmental issues that are global in scope and decades to centuries in duration.

Global climate change was a natural extension of this experience.

With the beginning of the negotiations of the UN Framework Convention on Climate Change, we again delved into the science. We

concluded that the scientific understanding, while imperfect, was

certainly sufficient to indicate a legitimate issue. In 1991, we took

a hard look at our own greenhouse gas emissions and realized that

they were not insignificant. While we recognize that it would take

concerted global action across all economic sectors to address global

climate change, we determined that we needed to take responsible

action and reduce our own emissions footprint.

The largest contributors to our footprint were unintended byproduct emissions, nitrous oxide associated with the manufacture

of a key raw material for nylon, and HFC–23 associated with the

manufacture of a fluorochemicals refrigerant.

22

We set aggressive goals to reduce our greenhouse gas emissions

by 40 percent on a global carbon equivalent basis by the year 2000,

using 1990 as a base year. We also set goals to address carbon dioxide emissions from energy use, aiming to keep energy use flat,

even as production grew.

By the year 2000, we exceeded our original goals globally. In

1999, with our 2000 goals in sight and the scientific case for climate change continuing to strengthen, we reaffirmed our commitment to action on greenhouse gases and set aggressive new goals

for the year 2010. We committed to reduce our global carbon equivalent greenhouse gas emissions by 65 percent, using 1990 as a base

year. We committed to continue to hold our global energy use flat.

And finally, we committed to acquire 10 percent of our global energy in the year 2010 from renewable resources. By the year 2004,

we had exceeded the emission reduction goal and had held energy

use flat while global production grew by over 30 percent.

We are also making steady progress on our renewable energy

goal. We have spent over $50 million to achieve the byproduct

emission reductions and have made additional investments in energy efficiency. On the other hand, achieving the energy flat goal

has saved us over $2 billion.

In conclusion, first, we determined that enough was known about

global climate change to provide a basis for concern and warrant

prudent action on our part. Second, we set and achieved aggressive

greenhouse gas emission reduction goals that, while costly to pursue, have created an overall cost savings for the company due to

reduced energy use. Third, we believe that climate change is clearly an environmental, social, and economic challenge and must be

addressed with all of these aspects in mind. Fourth, although we

have no regrets over taking these actions, we do have a concern

that developing policy regimes around the world do not adequately

account for the actions of early movers. This can place the early

movers at a competitive disadvantage and act as disincentives to

others to step up with bold, voluntary action.

Thank you. I will be happy to answer any questions.

[The prepared statement of Dr. McFarland follows:]

PREPARED STATEMENT OF MACK MCFARLAND

Good morning Chairman Boehlert, Mr. Gordon, and Members of the Committee.

My name is Mack McFarland, and I am the Global Environmental Manager for

DuPont’s fluorochemicals business. In that role I advise our worldwide operations

on a range of environmental and business matters. I appreciate this opportunity to

share our experiences regarding greenhouse gas emission reductions with you.

DuPont is a science driven company with a commitment to safety, health and environmental protection. We use science to derive products and services that improve

the quality and safety of people’s lives. We also use science to drive how we develop,

manufacture and manage our products throughout their life cycle. As a 200-yearold company we take the long view, and strive for sustainable growth that benefits

our shareholders, the societies in which we operate and the global environment. It

is that commitment to sustainable growth and dedication to science that underpins

our approach to global climate change and greenhouse gas emissions reductions.

Our experience with greenhouse gas reductions actually began with another global environmental issue; stratospheric ozone depletion. DuPont developed the first

fluorochemical refrigerant gases, chlorofluorocarbons, or CFCs, in the 1930s. They

were developed as safe alternatives to the more dangerous refrigerants then in use,

such as ammonia. In the 1970s when it was proposed that CFCs might deplete

stratospheric ozone DuPont delved into the science. In 1988, based on the scientific

consensus presented in the International Ozone Trends Panel Report, and our evalVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
23

uation of that science, we voluntarily and unilaterally committed to phase out CFCs.

We also used our science capabilities to lead in the development of alternative products to meet the growing societal need for air conditioning and refrigeration. This

experience with the CFC/ozone issue provided us with a keen understanding of the

implications of environmental issues that are global in scope and decades to centuries in duration.

Global climate change was a natural extension of this experience. With the beginning of negotiations for the UN Framework Convention on Climate Change we

again delved into the science. We concluded that the scientific consensus, while imperfect, was certainly sufficient to indicate a legitimate issue.

In 1991 we took a hard look at our own greenhouse gas emissions and realized

that they were not insignificant. While we recognized that it would take concerted

global action across all economic sectors to address global climate change, we determined that we needed to take responsible action to be part of the solution, and to

reduce our own emissions ‘‘footprint.’’ The largest contributors to our footprint were

unintended by-product emissions associated with manufacture of a key raw material

for nylon and with manufacture of a fluorochemicals refrigerant; nitrous oxide from

our nylon plants and trifluoromethane or HFC–23 from some of our fluorochemical

plants. Both have significant global warming potentials.

We set aggressive goals to reduce our global greenhouse gas emissions by 40 percent on a carbon-equivalent basis by the year 2000, using 1990 as a base year, with

most of our actions targeted at nitrous oxide and HFC–23. We built a detailed inventory of our global emissions and a system to search out the lowest cost emissions

reductions in our global operations, as well as a system to track and publicly report

our ongoing emissions. We also set goals to address carbon dioxide emissions from

energy use, aiming to keep energy use flat even as production grew.

We recognized that this was a significant undertaking that needed to be done in

as flexible and cost effective a manner as possible. This, of course, is as true for

a national or global program as it is for a single company’s actions. The byproduct

emissions were reduced both by traditional abatement technologies and, more importantly, by changing our manufacturing processes to avoid producing them in the

first instance. We pursued our energy goals through a wide variety of large and

small projects, including everything from expanding our use of highly efficient cogeneration to changing light bulbs in our offices.

So, how have we done against these goals? By the year 2000, we exceeded our

original goals globally. In 1999, with our 2000 goals in sight and the scientific case

for climate change continuing to strengthen, we reaffirmed our commitment to action on greenhouse gases and set aggressive new goals for the year 2010.

• First, we committed to reduce our global carbon-equivalent greenhouse gas

emissions by 65 percent using 1990 as a base year (vs. our original 40 percent

goal).

• Second, we committed to continue to hold our global energy use flat using

1990 as a base year. The achievement of this goal will require that our business growth be much less raw material and energy intensive than in the

past—a move that is very consistent with our overarching goals of sustainable

growth.

• Third, we have committed to acquiring 10 percent of our global energy use in

the year 2010 from renewable resources. We want to show that we are serious

about the need for renewable energy to be a part of our future. We also want

to indicate that we are prepared to work with energy suppliers and others

to develop a robust renewable energy market.

We have been making steady progress on our 2010 goals. Through a technology

breakthrough in our fluorochemical operations, we have reduced our global carbonequivalent emissions by over 72 percent. We also continue to hold our energy use

flat while our global production has grown over 30 percent since 1991. This has resulted in a reduction of 420 million cumulative metric tons of greenhouse gas emissions from our global operations versus business as usual. We are also making solid

progress in meeting our renewable energy goal with about five percent of our current energy use from renewable resources such as wind, hydropower and landfill

gas.

In 2004 we divested our nylon business and we are now in the process of recalculating our goals by subtracting the emissions of that business from both our 1990

baseline and from the emissions for subsequent years. We will of course make the

recalculated goals public.

Let me share with you a few of the things we have learned from our experience

with reducing greenhouse gas emissions.

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• First, these kinds of reductions are not a simple matter and have economic

ramifications. We have spent over $50 million dollars in our efforts to reduce

nitrous oxide and HFC–23, as well as spending on energy efficiency projects.

• That leads me to a happier second key learning—the sort of programmatic

actions necessary to address greenhouse gases can lead to unexpected benefits. Our hold-energy-use-flat goal has helped us to focus effort on energy savings activities and projects that might not have otherwise risen far enough

up on our capital spending priorities to have been pursued. The result? We

have saved over $2 billion dollars on energy costs since 1991, and this is the

‘‘gift that keeps on giving’’ in ongoing operating cost savings.

• Third, as various greenhouse gas emissions policy regimes develop around the

world there seems to be little effort to take account of the actions of early

movers like ourselves. This can place the early movers at a competitive disadvantage and act as a disincentive to other entities to step up with bold voluntary actions.

In conclusion:

• We determined that enough is known about global climate change to provide

a basis for concern and warrant prudent action on our part;

• We have set and achieved aggressive greenhouse gas emissions reduction

goals that while costly to pursue, have created an overall cost savings for the

company due to reduced energy use;

• Climate change is clearly both an environmental and economic challenge and

must be addressed with both of these aspects in mind.

Thank you. I will be happy to answer any questions.

BIOGRAPHY FOR MACK MCFARLAND

Summary CV

Mack received a B.S. in chemistry from the University of Texas at Austin in 1970

and a Ph.D. in Chemical Physics from the University of Colorado in 1973. From

1974 through 1983, first as a Post-Doctoral Fellow at York University and then a

research scientist at the NOAA Aeronomy Laboratory, Mack planned, conducted and

interpreted field experiments designed to probe the cycles that control atmospheric

ozone concentrations. These studies included measurements of gases and processes

important to the global climate change issue. In late 1983 Mack joined the DuPont

Company. His primary responsibilities have been in the areas of coordination of research programs and assessment and interpretation of scientific information on

stratospheric ozone depletion and global climate change. During 1995 and 1996,

Mack was on loan to the Atmosphere Unit of the United Nations Environment Programme and in 1997 he was on loan to the Intergovernmental Panel on Climate

Change (IPCC) Working Group II Technical Support Unit. The value of his contributions to DuPont has been recognized through a C&P Flagship Award, Environmental Respect Awards, and Environmental Excellence Awards. In 1999, Mack was

awarded an individual Climate Protection Award by the U.S. Environmental Protection Agency for his contributions in providing understandable, reliable information

to decision-makers.

Education

Ph.D. in Chemical Physics, 1973, University of Colorado. Thesis title: Development

of a Flow-drift Technique for Ion-molecule Kinetic Studies.

B.S. in Chemistry with Honors, Special Honors, 1970, University of Texas at Austin.

Publications

Co-author of over 40 scientific publications primarily in the areas of reaction kinetics and atmospheric measurements of trace gas concentrations.

Work Experience

March, 1998–present: Principal Scientist, Environmental Programs in DuPont

Fluoroproducts, Wilmington, DE.

March, 1997–February, 1998: On loan (from DuPont) to the Intergovernmental

Panel on Climate Change (IPCC), Working Group II (WG II), Technical Support

Unit (TSU), Washington, D.C. Decision-makers rely on IPCC Assessment Reports as their primary source of scientific, technical and socio-economic information on global climate change. The TSUs play lead roles in the IPCC process

by helping to assure that reports are complete, objective and policy relevant.

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March, 1995–February, 1997: On loan (from DuPont) to the Atmosphere Unit of the

United Nations Environment Programme (UNEP), Nairobi, Kenya. Responsibilities during this assignment included representing UNEP at international meetings, assisting in strategy development for the Atmosphere and other UNEP

programs, and preparing policy relevant materials for publication.

December, 1983–February, 1995: Principal Consultant, Environmental Programs

(most recent title) in DuPont Fluoroproducts (formerly Freon(r) Products), Wilmington, DE. Primary responsibilities included management of atmospheric

science research programs; representing DuPont in scientific meetings and before regulatory bodies, the media and customers; facilitating the preparation of

scientific assessments; and analysis and communication of information on stratospheric ozone depletion and global climate change for development and implementation of business strategies.

1975–1983: Scientist in the National Oceanic and Atmospheric Administration

(NOAA) Aeronomy Laboratory (AL), Boulder, CO. While at York University (see

below) and NOAA, Mack planned, conducted and interpreted field experiments

designed to probe the cycles that control atmospheric ozone concentrations.

1974–1975: Post Doctoral Fellow at York University, Downsview, Ontario, Canada.

Since joining DuPont in 1983, Mack’s primary responsibilities have been in the

areas of coordination of research programs and assessment and interpretation of scientific information on stratospheric ozone depletion and global climate change. Coordination of research programs involved two types of activities, both aimed at a cooperative approach to research and assessment to provide policy relevant information: project management through representing DuPont on the industry sponsored

research programs to determine potential environmental impacts of CFCs and their

replacements; and influence of direction of government sponsored research programs

to ensure that they were appropriately focused on providing sound information as

a basis for decisions. Cooperative research efforts tend to build consensus around

key policy relevant scientific information as opposed to isolated research programs

that have led to ‘‘our science/their science’’ politicization of environmental issues in

some other areas.

Mack has been involved as an author, contributor or reviewer of every major

international assessment on stratospheric ozone depletion and global climate

change. Most recently he was a Lead Author of the technology chapter of Working

Group III (Mitigation) of the IPCC Third Assessment Report (TAR—the report released in 2001) and a Lead Author on the Appendix to that chapter: ‘‘Options to

Reduce Global Warming Contributions from Substitutes for Ozone Depleting Substances.’’ He was also a Lead Author of the Technical Summary for the Working

Group I TAR (The Scientific Basis) as well as an Author of the draft Summary for

Policy-makers that was ultimately accepted by the IPCC. In 1999 he was a member

of the UNEP TEAP task force that prepared the report: ‘‘The Implications of the

Montreal Protocol of the Inclusion of HFCs and PFCs in the Kyoto Protocol.’’

Interpretation and communication of scientific information based on these assessments has provided a basis for developing and implementing business strategies.

Mack has given hundreds of presentations on the science of ozone depletion and climate change to DuPont management, DuPont’s customers, media representatives,

government representatives and scientists. The value of his contributions to DuPont

has been recognized through a C&P Flagship Award, Environmental Respect

Awards, and Environmental Excellence Awards. In 1999 Mack was awarded an individual Climate Protection Award by the U.S. Environmental Protection Agency for

his contributions in providing understandable, reliable information to decision-makers.

Chairman BOEHLERT. Thank you very much, Dr. McFarland.

Mr. Meissen.

STATEMENT OF MR. RONALD E. MEISSEN, SENIOR DIRECTOR,

ENGINEERING, ENVIRONMENT, HEALTH & SAFETY, BAXTER

INTERNATIONAL, INC.

Mr. MEISSEN. Mr. Chairman and Members of the Committee, I

would like to thank you for your leadership on this area of global

climate change. I would also like to thank you for holding this

hearing.

I am Ron Meissen, and I manage Baxter’s climate initiatives. I

also manage the reduction of Baxter’s greenhouse gas emissions. I

26

appreciate the opportunity that you have provided to us to describe

the balance between environmental stewardship and business realities.

In my remarks today, I would like to share with you some of the

examples of how Baxter is proactively addressing environmental

issues by driving greater operating efficiencies, adopting new technologies, and collaborating through public and private partnerships.

Baxter is a global health care company based in Deerfield, Illinois that produces biotech, specialty pharmaceutical, and device

products that are used in the treatment of a variety of complex

medical conditions.

In the mid-1990s, Baxter began publicly reporting information

regarding energy use, cost, and associated greenhouse gas emissions, and was the first company to publish an environmental financial statement to demonstrate the linkage between our activities and our bottom line. In 1997, we set a number of long-term,

nine-year goals in environmental health and safety including a goal

to reduce energy usage and associated greenhouse gas emissions by

30 percent per unit.

A key driver in our proactive initiatives has been the realization

that sound environmental practices can provide a competitive advantage. By driving greater operating efficiencies by adopting new

technologies and by sharing ideas and best practices, we have

achieved a 35 percent per unit reduction in greenhouse gas emissions from 1996 to 2004, a 22 percent improvement in energy efficiency during the same period, and our environmental health and

safety investments over the last six years have yielded a savings

of $80 million in 2004. We estimate that our energy savings and

cost avoidance alone in that year exceeded $9 million.

The benefits go far beyond cost avoidance and energy or raw material savings. Many of the initiatives that we have put in place

and investments that we have made have yielded higher quality

levels, greater production output, and flexibility in our operations,

reduced waste, as well as improvements in workplace safety, which

is very important to Baxter.

We have pioneered a Lean and Clean approach by applying Lean

manufacturing disciplines to our environmental processes and environmental know-how to our manufacturing operations. You may be

familiar with Lean manufacturing, which is a process designed to

remove waste and improve quality and efficiency by reducing or

eliminating non-value-added activities and materials.

At Baxter, we have integrated Clean expertise into our Lean

manufacturing initiatives to not only prevent negative environmental consequences but also to identify opportunities for environmental improvement.

Over the past decade, Baxter has grown significantly, investing

in important expansions and upgrades to our manufacturing base.

The investments that we have made also provide great opportunities to implement environmental improvements. For example, in

the process of expanding our facility in Bloomington, Indiana, we

are using new technologies to reduce energy usage and associated

greenhouse gas emissions.

27

I also can not speak positively enough about the benefits of collaboration through public and private partnerships, such as the

U.S. EPA’s Climate Leaders program and the Green Supplier Network.

Last year, Baxter led participation in the health care industry in

the Green Suppliers Network program, which strives to integrate

both Lean and Clean manufacturing principles into the operations

of suppliers common to that particular industry. So far, seven Baxter suppliers have agreed to participate in the program in which

the U.S. Department of Commerce’s Manufacturing Extension

Partnership and the U.S. EPA provide fronts for technical professionals to train suppliers in Lean and Clean manufacturing processes. These professionals conduct a review of the suppliers’ operations and recommend areas for improvement. This program brings

expertise to small- and medium-sized companies that would normally not be considered or it would be unaffordable to them.

We are a global company, and we must remain globally competitive. Our 67 manufacturing facilities are located in 28 countries,

and we hold all to the same high levels of standards.

Accordingly, we must closely monitor the actions proposed and

taken by other countries to address climate change. For example,

one of our food manufacturing facilities in Ireland will be affected

by the phase one of the EU Emissions Trading Directive, which establishes a mandatory carbon cap and trade system. Climate taxes

are also being implemented in some countries, and we currently

pay climate tax for the electricity that we use in the United Kingdom.

We believe we are well positioned to respond to these initiatives,

because our experience has taught us that reasonable improvements in energy conservation and emissions reductions are possible

without huge investment, that investments in technology and improvements in manufacturing processes can bring both environmental and other benefits, including quality improvements, reduced raw material costs, and improved workplace safety, that

companies that have been forward-looking on this issue are in a

better position to compete on a global basis.

In summary, we believe that it is possible to responsibly address

environmental issues and specifically climate change in a manner

that provides economic benefit and is of a competitive advantage to

our company.

Thank you for this opportunity to share with you our experiences

and perspectives.

[The prepared statement of Mr. Meissen follows:]

PREPARED STATEMENT OF RONALD E. MEISSEN

Mr. Chairman and Members of the Committee, I would like to thank you for this

opportunity to testify today on climate change and related activity within the business community, particularly at my company, Baxter International Inc.

I speak to you today both as a representative of one company that has been recognized as being at the leading edge of corporate environmental stewardship and as

a practicing expert in the field. My name is Ron Meissen, and I serve as Senior Director of Environment, Health and Safety Engineering at Baxter. In addition to my

professional interest in the subject of climate change and sustainability, I have a

strong personal interest in this subject as well—I am currently pursuing my Ph.D.

at the University of Wisconsin in Madison in sustainable development. The focus

of my dissertation research, which I am hoping to complete in the next year, is the

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development and application of a strategic business model to reduce energy related

greenhouse gas emissions.

In my role at Baxter, I coordinate the company’s safety, occupational health, industrial hygiene and environmental engineering professionals as they lead their respective functions for the company and provide their expertise to Baxter’s facilities

and employees throughout the world. I also oversee Baxter’s initiatives related to

climate change and greenhouse gas emissions reductions.

Baxter International Inc. is a global health care company based in Deerfield, Illinois that assists health care professionals and their patients with treatment of complex medical conditions including hemophilia, immune disorders, kidney disease,

cancer, trauma and other conditions. Baxter’s 48,000 employees apply their expertise in medical devices, pharmaceuticals and biotechnology to help make a meaningful difference in patients’ lives. In short, we strive to make a positive impact on the

health and well-being of our local and global communities, and to conduct our operations in a manner that minimizes the use of natural resources and impact on the

environment. Because of the life-saving nature of the products that we make, and

the significant impact that we have on human health, Baxter has held environmental stewardship as a priority for more than two decades, and has been a pioneer

in the areas of environmental financial reporting, management of environmental,

safety and health data, and establishing, tracking progress against and reporting on

specific environmental goals, including greenhouse gas emissions. We recognize that

the health of the planet affects the health of the people who inhabit it. As a health

care company, we understand this connection and work toward improving both.

I gave my first speech on global warming in 1989, to a group of my colleagues

attending the company’s annual Environmental Conference. Even then, prior to the

more definitive scientific studies that have emerged over the last decade, some environmental professionals and enlightened organizations concluded that their emissions were having an impact on the atmosphere and environment, and began pursuing initiatives to reduce energy use, reduce emissions and eliminate the use of

compounds and gases believed to contribute to the greenhouse effect. In the early

1990s, I became very interested in sustainable development, especially after the

Earth Summit Conference in 1992, when essentially all the nations of the world

adopted sustainable development as world policy.

In the mid-1990s, Baxter began tracking and publicly reporting detailed information regarding energy use, energy cost and associated greenhouse gas emissions

from all of Baxter’s facilities. Then, in 1997, Baxter set a number of long-term environmental, health and safety (EHS) goals, including a goal to reduce energy usage

and associated greenhouse gas emissions by 30 percent, per unit of production activity, by 2005 from 1996 levels. Also in the late 1990s, the World Business Council

on Sustainable Development (WBCSD) and the World Resources Institute (WRI) organized a group of experts and business leaders to develop the WBCSD/WRI GHG

Protocol for calculating greenhouse gas emissions. I was honored to be a part of that

group to develop what is now the global standard businesses and other organizations use to determine their greenhouse gas emissions.

Baxter has continued its leadership on this issue in the ensuing years, becoming

one of the initial members of the Pew Center on Global Climate Change’s Business

Environment Leadership Council, a non-profit, non-partisan independent organization that is facilitating exchange of information and innovative solutions to address

global climate change, a charter member of the U.S. EPA’s Climate Leaders Program, a voluntary EPA industry-government partnership that encourages companies

to develop long-term comprehensive climate change strategies, and a founding member of the Chicago Climate Exchange, the first voluntary pilot carbon trading platform in North America.

Our leadership and commitment to reducing our environmental footprint and advancing the health and welfare of our communities has been sustained over the

years not just by good intentions. A key driver for these proactive initiatives over

the years at Baxter has been the realization that sound environmental practices can

contribute to and in some cases drive competitive advantage.

By driving greater operating efficiencies, by piloting and in many cases adopting

new technologies, and by sharing ideas and best practices within the company and

through collaborations and voluntary programs sponsored by the EPA and others,

we have achieved among other things:

• A 35 percent reduction in greenhouse gas emissions from 1996 through 2004,

on a per-unit-of-production value basis;

• A 22 percent improvement in energy efficiency from 1996 through 2004, on

a per-unit-of-production value basis; and

29

• Savings and cost avoidance totaling several millions of dollars each year. In

2004 alone, we estimate our energy savings and cost avoidance exceeded $9

million.

And the benefits go far beyond just cost avoidance and energy or raw material

savings. Many of the initiatives we have put in place in our facilities have also

brought higher production throughput, higher quality levels, greater production

flexibility and optimization of manufacturing assets, reduced scrap materials and

waste, as well as improvements in workplace safety.

Given the nature of our products and the nature of our operations, the majority

of Baxter’s greenhouse gas emissions are carbon dioxide emissions related to energy

usage. Therefore, the focus of our greenhouse gas management strategy is energy

conservation—specifically, activities and initiatives that improve the energy efficiency of our facility and reduce our energy costs.

Driving Operating Efficiencies

At Baxter, we view EHS as an integrated part of our operations, not as a separate

or supplemental function. We believe that world-class manufacturing requires excellence in design, process, purchasing, quality and EHS. Successful, world-class companies tap all of those areas of expertise in a seamless manner to reduce waste,

drive efficiency and increase productivity.

By applying Lean manufacturing disciplines to our environmental processes, and

environmental know-how to our manufacturing operations, we have driven both

Lean and Clean concepts and tools through our organization. The results have been

greater efficiencies and productivity in our manufacturing facilities, as well as reductions in raw material and energy use, and reduction in waste generation and

emissions.

Lean manufacturing is a process designed to remove waste and improve quality

and efficiency by continuously identifying, reducing and eliminating non-valueadded activities, materials and other resources in the manufacturing process. Lean

tools like value streams and process mapping help identify opportunities to reduce

raw materials, wasted motion and scrap by standardizing processes and materials

by pinpointing where waste is created. But, Lean manufacturing initiatives, when

taken solely on their own, can sometimes have negative environmental consequences.

At Baxter, we have integrated our EHS expertise and professionals into Lean

manufacturing initiatives to not only prevent negative environmental consequences,

but also to identify opportunities for environmental improvement—we call this Lean

and Clean. First, we apply environmental concepts such as waste, water use and

emissions to such commonly used lean tools as value stream maps to incorporate

environmental considerations into the improvement initiative. Secondly, we apply

lean tools to EHS-focused processes as waste water treatment or safety incident investigations to make our EHS processes more efficient. And, we integrate our tradition pollution prevention techniques into Lean and Clean tools to provide a new way

of systematically looking at waste reduction opportunities.

This enables plant personnel to see and think about their processes differently,

which can and does inspire innovative solutions. In a number of our manufacturing

facilities, projects are underway that use process mapping and other lean manufacturing techniques to reduce the amount of waste or scrap generated in production.

By breaking down all of the steps in a specific manufacturing process and assessing

the resource allocation in terms of materials, utilities and other ‘‘inputs’’ and ‘‘outputs’’ for each step, our plants are able to identify multiple opportunities to reduce

both manufacturing costs and waste. And, since employees themselves generate the

ideas, they have a vested interest in seeing the initiatives through to successful

completion and are motivated to continue to suggest further improvements.

The American Society for Quality recently recognized our facility in Marion, North

Carolina with its Gold Award for International Team Excellence for applying Lean

tools to one area of the facility. Through value stream mapping, the team identified

a number of opportunities to reconfigure production processes, which yielded increased product throughput, decreased the amount of manufacturing floor space required to get the work done, and reduced energy and heating, ventilation and air

conditioning, or HVAC, requirements. As a result of these changes, the facility estimates it has saved in excess of $100,000 per year in utility costs. While $100,000

a year may not seem like a big number, when you consider that we have 67 manufacturing facilities alone, these kinds of projects and incremental savings quickly

add up to much larger numbers and do make a difference.

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Adopting New Technologies

Over the last decade, Baxter has grown significantly, investing in important expansions and upgrades to its manufacturing base. The capital investments that we

have made to expand our manufacturing capacity, assure product quality and advance our product portfolio have also provided great opportunities for us to implement environmental improvement.

For example, we are moving away from sterilization methods that use ethylene

oxide to methods that use e-beam sterilization. Baxter is different from most pharmaceutical companies, because we don’t manufacture pills and tablets. Instead,

most of our products are medications that are administered intravenously or injected, or are devices. The production process for these types of products typically

requires much more extensive sterilization procedures, which can be labor and capital intensive. For decades, many of our products have been sterilized using ethylene

oxide. In this process, finished product is moved along a conveyor belt into a special

room or chamber. Then ethylene oxide gas is released into the room and product

exposed to the gas for a certain length of time to render it sterile. The ethylene

oxide, which is a toxic gas, is then evacuated from the room by means of vacuum

pressure, which is an energy intensive process. Then the product is moved to another well-ventilated area for a period of time to allow for any remaining gas to be

released from the product. All of the exhaust gases are required to be treated with

a scrubber, also an energy intensive process.

Now, we are increasingly using alternative, more energy efficient methods of sterilization that also have considerably less environmental impact—technologies similar to those used to protect your own mail from anthrax and other contamination.

With e-beam sterilization, we use high energy electrons to sterilize our products.

These newer methods are significantly more energy efficient and do not have the

same requirements for ventilation and treatment of exhaust gases.

Because of the sterilization processes we employ and the clean room environments

we must maintain in our facilities in order to produce the highest quality of medical

products, our HVAC requirements are very high, and energy intensive, in some

cases representing 60 to 70 percent of the energy consumption for the facility. Accordingly, this is an important area of focus for us.

For example, we are currently in the process of expanding our facility in Bloomington, Indiana, and are employing new technology to replace clean rooms and

thereby reduce our HVAC and lighting requirements. Through the use of isolators,

special pre-assembled self-contained production and laboratory units, we are able to

confine and more closely control the higher sterility, ventilation and lighting requirements of a clean room to significantly smaller space. Picture if you will a trailer sized unit, with equipment inside and the walls made up of windows. Depending

on the particular application, work may done in the small area within the isolator,

or employees may even work outside of the unit, with their hands and arms inserted

into glove-like apparatus that extends from the window into the unit. Not only will

this approach save a considerable amount in energy costs, less investment is required in HVAC and other infrastructure. And, the risk of employees possibly being

exposed to chemicals used in the process is significantly lower.

Sharing Ideas and Best Practices

I cannot speak positively enough about the benefits of collaboration—the sharing

of ideas, practical advice and best practices within our own organization and

through such formal industry and agency collaborations as the EPA’s Climate Leaders and Green Supplier Network programs.

These programs serve as valuable clearinghouses for sharing of best practices,

real-world experience and multiple perspectives that really set a strong foundation

for continuous environmental improvement across companies and industries. Most

importantly, they are helping to address some of the most difficult environmental

challenges we face today, and extending the progress that large companies like Baxter have made further into the supply chain—to the smaller and medium sized companies that are our suppliers.

Last year, Baxter spearheaded the participation of the health care industry in a

public/private initiative called the Green Suppliers Network. The objective is to integrate both Lean and Clean manufacturing principles into the operations of suppliers

common to a particular industry. While large companies like Baxter are able to tap

the expertise that resides within the organization to drive improvement in operations and reduce their environmental impact, the reality is that few small or medium size companies have that expertise available to them internally. Over the

years, we had tried to share our own expertise with select suppliers through conferences, audits, and meetings, but recognized that the impact that we could have

was limited while the opportunity for improvement was significant. We learned of

31

the Green Suppliers Network and the impact it was having in other industries, like

the automotive industry, and we were immediately attracted to the program. Our

Purchasing and Environment, Health and Safety departments have worked to aggressively promote the program with suppliers. So far, seven Baxter suppliers have

agreed to participate in the program, in which the U.S. Department of Commerce’s

Manufacturing Extension Partnership (MEP) and the U.S. EPA provide funds for

technical professionals to train suppliers in Lean and Clean manufacturing processes. For a small fee, a participating supplier receives access to manufacturing consultants experienced in process improvement and waste reduction, including a weeklong review of the supplier’s operations, help in administering relevant training and

expertise, and a full report detailing areas for improvement and change. Experts

from EPA’s state pollution prevention technical programs also lend their support.

This program brings expertise and insight to these companies that would normally

not be considered or would be unaffordable.

The first of our seven suppliers to participate already has implemented a number

of changes and yielded impressive results, significantly reducing energy consumption and therefore cost, and significantly reducing hazardous waste generation and

emissions—savings that have far exceeded the initial fee and modest capital investments required. The environmental and economic benefits realized have motivated

this supplier to continue with other initiatives. We look forward to similar successes

with the other suppliers that are participating.

While we highly value external collaborations such as these, we also recognize

that some of the best ideas can and do come from within our own company. We have

created a number of ways to share and leverage those ideas and expertise that resides within our global organizations, including global energy engineering conferences, training sessions and awards.

We held our last biannual global energy engineering conference in September

2004 in Austin, Texas, with 60 Baxter energy managers representing 44 facilities

from 21 different countries attended the week long conference. The conference included training sessions dedicated to maximizing the performance of plant utility

systems and sharing information on best demonstrated energy practices. At every

biannual conference, each manufacturing facility is asked to identify three specific

energy projects that its energy management team will commit to implement during

the next two-year period. At the next energy conference, the locations report the results of their three key projects to all conference attendees. This open sharing of

both successful energy projects and unforeseen challenges has been beneficial in

strengthening individual expertise and broadening institutional technical knowledge. As part of the conference, we also present awards to the engineers and facilities that achieve outstanding performance in such areas as:

• Largest percentage of energy cost saved per unit of production

• Largest percentage of energy usage saved per unit of production

• Energy project that has the widest application throughout Baxter

• Most innovative cost saving project implemented at Baxter

• Largest percentage of energy saved of total facility energy cost in a non-manufacturing facility

• Special recognition for outstanding contribution to Baxter’s energy program.

Our next energy conference is scheduled for the fall of 2006, and I am very excited

to hear updates from the facilities on the three projects that they each committed

to in 2004.

While we have achieved reductions in greenhouse gas emissions and improvements in energy efficiency over the years, we recognize that much more needs to

be done. We are a very global company, with more than half of our sales and twothirds of our employees located outside the United States. Our 67 manufacturing

facilities are located in 28 countries, and no matter where a facility is located, all

are held to the same high level of EHS policies, standards and metrics.

We are a global company and we must remain globally competitive. Accordingly,

we must closely monitor actions proposed or taken by other countries to address climate change, such as implementing regional or national carbon cap or trade systems. One of our manufacturing facilities in Ireland will be affected by phase one

of the EU Emissions Trading Directive, which establishes a mandatory carbon capand-trade scheme. Climate taxes also are being implemented in some countries. We

currently pay climate taxes on our electricity use in the United Kingdom. Here in

the United States, 132 mayors from across the country recently announced that they

would voluntarily adopt the Kyoto Protocol reduction target for their cities. In 2001,

Baxter developed its formal position on climate change, which states that we beVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
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lieve, ‘‘The Kyoto agreement represents a first step in the international process, but

more must be done, both to implement the market-based mechanisms that were

adopted in principle in Kyoto and to more fully involve all countries in the solution.’’

Fortunately, because of our foresight on this issue, because of the significant experience we have gained over the years in reducing our greenhouse gas emissions and

energy use, and the experience we have gained through participation in the Chicago

Climate Exchange’s voluntary program for capping and trading greenhouse gas

emissions, we expect to be well-positioned to respond to these and other emerging

cap-and-trade initiatives.

Our EHS policy clearly states that we are committed to continuous improvement

in environmental, health and safety performance. We strive to conserve resources

and minimize or eliminate adverse EHS effects and risks that may be associated

with our products, services and operations. Because we self-manufacture nearly 90

percent of the products that we sell, and because we have in place talented environmental professionals in all of our major facilities, we are able to more closely monitor our environmental impact, and implement appropriate changes.

While we recognize that we are in the minority of companies that voluntarily have

taken action on this issue, we are encouraged by the lessons that our own experience has taught us:

• that reasonable improvements in energy conservation and emissions reductions are possible without huge investment;

• that investments in new technology and improvements in manufacturing

process can bring significant benefits in quality, optimal use of manufacturing

assets, reduced raw material costs, and improved workplace safety as well as

reduced energy requirements and associated greenhouse gas emissions; and

• that companies that have been forward-looking on this issue are in the best

position to build upon the momentum they have created and better compete

on a global basis.

In summary, we believe that it is possible to responsibly address environmental

issues in a manner that provides economic benefit and competitive advantage. Our

experience has proven to us that the business case is indeed there for taking action

to reduce impact on our climate and environment by decreasing energy consumption

and lowering greenhouse gas emissions.

Thank you for this opportunity to share with you some of our experiences and perspectives on climate change.

BIOGRAPHY FOR RONALD E. MEISSEN

Ron Meissen manages worldwide Environment, Health and Safety (EHS) resources for Baxter International Inc. In this position, Mr. Meissen is responsible for

providing EHS services to regional and facility team members through the coordination of Baxter’s safety, occupational health, industrial hygiene and environmental

engineering professionals.

Mr. Meissen joined Baxter in 1975 as a project control engineer and progressed

through a variety of positions in energy management and environmental engineering. He has been actively engaged in the company’s environmental program and reporting and co-founded the company’s EHS sustainability team. For the past 10

years, he has managed Baxter’s greenhouse gas and climate change initiatives and

represents the company in outside climate groups, including the Chicago Climate

Exchange, the Pew Center on Global Climate Change and the U.S. Environmental

Protection Agency Climate Leaders Program.

Mr. Meissen has Bachelor of Science degree in civil engineering from the University of Wisconsin–Platteville, a Master of Science degree in civil engineering from

the University of Illinois, and a masters of business administration from Lake Forest Graduate School of Management. He is currently pursuing his Ph.D. in sustainable development at the University of Wisconsin–Madison, where he is working on

his dissertation about the development of a strategic business model to reduce energy-related greenhouse gas emissions.

Chairman BOEHLERT. Thank you, Mr. Meissen.

Dr. Hobbs.

33

STATEMENT OF DR. ROBERT H. HOBBS, DIRECTOR OF OPERATIONS, UNITED TECHNOLOGIES RESEARCH CENTER,

UNITED TECHNOLOGIES CORPORATION

Dr. HOBBS. Good morning, Mr. Chairman and Members of the

Committee. I am Bob Hobbs, Director of Operations at the United

Technology Research Center, the research and development arm of

United Technologies Corporation. United Technologies, based in

Hartford, Connecticut, is a diversified company that provides high

technology products and services to the aerospace and commercial

building industries worldwide. UTC’s products include Otis elevators and escalators, Carrier air conditioning systems, UTC Fire

& Security products and services, UTC Power fuel cells, Pratt &

Whitney aircraft engines and space propulsion systems, Hamilton

Sundstrand aerospace systems, and Sikorsky helicopters.

UTC is a $38 billion company, the 39th largest in the United

States. Our shareholder return since 1992 is more than three times

that of either the S&P 500 index or the Dow 30 Industrials. UTC

is proud of its record of providing shareholder value within the confines of very good corporate citizenship.

UTC is pursuing its climate change goals directly by reducing

greenhouse gas emissions produced by UTC operations and indirectly by developing and manufacturing products that use less energy and emit smaller amounts of greenhouse gases.

In 1997, UTC resolved to reduce its global energy consumption

by 25 percent by 2007. We exceeded that target halfway through

the 10-year period and so increased the goal to a 40 percent reduction, which we met last year, two years early. Since joining the Environmental Protection Agency Climate Leaders in 2001, we have

reduced our greenhouse gas emissions by 74,000 metric tons as a

result of our energy efficiency goals. In roughly the same time period, our revenues increased by $9.5 billion, demonstrating that environmental quality and economic growth can indeed go hand-inhand. UTC’s environmental performance and achievements recently earned us one of the EPA’s 2005 Climate Protection Awards.

Why is UTC taking a leadership role to address climate change?

The short answer is that our own corporate policy demands it.

UTC’s environmental health and safety policy requires that we

‘‘conserve natural resources in the design, manufacture, and disposal of products and delivery of service.’’

To quote our Chairman, George David, ‘‘We don’t choose between

responsibility and profitability. We pursue both with discipline and

focus.’’ Our vision of corporate responsibility and global sustainability places environmental performance right alongside financial

results. We believe that setting goals for reduced energy consumption, which translates into lower greenhouse gas emissions, has already improved our bottom line performance by reducing production costs and allowing us to be more competitive.

Environmental leadership doesn’t merely enhance our corporate

reputation, it offers our customers world-class quality and products

while increasing efficiency and reducing waste, making them better

stewards of the environment as well.

By creating products that use less energy and help lower greenhouse gases that contribute to climate change, we can differentiate

34

our products in an increasingly environmentally-conscious global

marketplace.

UTC has an expansive and diverse portfolio of energy-efficient

and environmentally-friendly products, but let me talk briefly

about one.

UTC Power has developed the industry’s first integrated microturbine and double-effect absorption chiller system, the

PureComfort 240M. The system converts more than 80 percent of

its fuel input to efficient electric cooling and heating output. I

started to say 90, because we see 90 percent fuel efficiency in our

laboratories. They quote 80 in their literature. We expect it to reduce carbon dioxide emissions by 40 percent and nitrogen oxide

emissions by 90 percent over those of the average central fossil fuel

generation plant. In May, the A&P grocery chain installed a

PureComfort 240M in its Mount Kisco, New York store, citing the

technology as one of the company’s commitments to ‘‘make more efficient use of energy and to protect the environment by minimizing

emissions.’’

New corporate climate policies have proven to be complementary

to good business policies, allowing UTC to understand, manage,

track, and minimize our greenhouse gas emissions and energy use

while simultaneously adding business value.

Thank you, Mr. Chairman, for giving us the opportunity today to

share with you and members of the Committee some of the specifics of our commitment to reducing greenhouse gases throughout

our operation and across all our product lines. If you would like

further information regarding our environmental success story, we

have copies of the UTC 2004 corporate responsibility report available here or on our website.

[The prepared statement of Dr. Hobbs follows:]

PREPARED STATEMENT OF ROBERT H. HOBBS

Good morning, Mr. Chairman and Members of the Committee. I am Bob Hobbs,

Director of Operations at the United Technologies Research Center, the research

and development arm of United Technologies Corporation (UTC). United Technologies, based in Hartford, Connecticut, is a diversified company that provides high

technology products and services to the aerospace and commercial building industries worldwide. UTC’s products include Otis elevators, escalators and people movers; Carrier heating and air conditioning systems; UTC Fire & Security fire safety

and security products and services; UTC Power fuel cells; Pratt & Whitney aircraft

engines; Hamilton Sundstrand aerospace systems; and Sikorsky helicopters.

UTC & Corporate Responsibility

UTC is a $38 billion company, the 39th largest in the United States. Our total

shareholder return since 1992 is close to 1000 percent and is more than three times

that of either the S&P 500 index or the Dow 30 Industrials. UTC is proud of its

record of solid corporate citizenship. We’ve been included in the Dow Jones Sustainability World Indexes since it began in 1999 and have been rated AAA by Innovest

Strategic Value Advisors. We were also named one of the world’s 100 most sustainable companies at this year’s World Economic Forum in Davos by Corporate Knights

and were the only aerospace company included. UTC’s success is rooted in clarity

of organization and total alignment among management about what we want to accomplish. For UTC, that is shareholder value within the confines of very good corporate citizenship. We don’t choose between one or the other, we pursue both with

discipline and focus.

Shareholder value comes in part from research and development. UTC spends approximately $2.8 billion annually, 90 percent of that in the United States, to develop

tomorrow’s technologies. United Technologies Research Center (UTRC) works with

each UTC business to make certain their products and services are the most innovative and technologically advanced in the world. UTRC is an incubator for UTC prodVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
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ucts, researching energy and environmental innovations to assist UTC in developing, and then building, new products for the next generation. Whether its research on hydrogen production and storage technologies, inventing ways to heat and

cool more efficiently or improving jet engine design and efficiency, UTRC provides

valuable technical experience to further UTC’s pursuit of better environmental quality in its products.

UTC Voluntary Commitment

UTC is constantly working to reduce the environmental footprint of our worldwide

facilities and operations. We are accomplishing this objective directly by reducing

greenhouse gas emissions produced by UTC operations and indirectly by developing

and manufacturing products that use less energy and emit smaller amounts of

greenhouse gases. We are driving pollutants in the manufacturing process down to

their lowest achievable levels and reducing our energy consumption so less pollution

is produced in the satisfaction of our energy needs. UTC quantifies environmental

goals, measures progress and reports that progress to our Board of Directors, employees and community.

In 1997, UTC resolved to reduce its global energy consumption by 25 percent (normalized for revenues) from 1997 levels by 2007. Once we exceeded that target, we

increased the goal to a 40 percent reduction in our energy use worldwide, and we

are already meeting that ambitious goal. Even as we revised the goal upward, we

kept the timetable firm and still achieved the enhanced goal two years ahead of

schedule. Since joining the Environmental Protection Agency (EPA) Climate Leaders

in 2001, we have reduced our greenhouse gas emissions by 74,000 metric tons as

a result of our energy efficiency goals. In roughly the same time period, our revenues increased by $9.5 billion, demonstrating that environmental quality and economic growth can indeed go hand-in-hand. UTC’s environmental performance and

achievements recently earned us one of the EPA’s 2005 Climate Protection Awards.

Key Drivers in Reducing Greenhouse Gases

Why is UTC taking a leadership role to address climate change? The short answer

is that our own corporate policy demands it. UTC’s environmental, health and safety

policy requires that we ‘‘conserve natural resources in the design, manufacture, use

and disposal of products and delivery of service.’’ We take this directive extremely

seriously and have established internal environmental standards that both comply

with the law and go beyond it when necessary to achieve the goals of this policy.

We don’t choose between responsibility and profitability; our corporate responsibility

places environmental performance right alongside financial results.

We would not be where we are today if not for strong commitment of our Chairman, George David, senior managers and front-line employees in each of our business units. In a speech given in 1998 at the Earth Technologies Forum, Mr. David

explained his personal motivation in committing the corporation to address the climate change issue by stating: ‘‘I have children and prospectively grandchildren and

great grandchildren whose lives and livelihoods concern me.’’ Mr. David again

stressed UTC’s commitment to sustainability in a 2003 speech to the Society for Organizational Learning in East Hartford, Connecticut. He defined UTC’s approach to

sustainability within the context of five general themes: energy efficiency of our

products and service; environment, health and safety impacts in our own operations;

productivity in its conventional sense (doing more with less); opportunities for employees to develop themselves; and legal compliance and high ethical standards.

Through close coordination among the operating businesses and corporate headquarters, UTC has brought together a tight network of experts to gather and analyze energy consumption data; provide technical assistance; develop benchmarks;

and share best practices across the corporation. We have developed internal guidelines for use across the units in common energy applications such as lighting and

compressed air. In addition to our energy efficiency goals, we are also on track to

achieve a 60 percent reduction in air pollutants and non-recycled waste and a 40

percent reduction in water consumption by 2007 (all normalized for revenue). We’ve

been able to achieve such dramatic progress due in part to our ‘‘Achieving Competitive Excellence’’ (ACE) program. ACE is the internal UTC discipline intended to

simplify procedures, raise efficiency and ensure world-class quality in products and

processes while supporting our environmental commitments. ‘‘Continuous improvement’’ in our operations is the key element of ACE.

Climate change is a growing dynamic in the global marketplace. We believe that

setting goals for reduced energy consumption, which translates into lower greenhouse gas emissions, has already improved our bottom line performance by reducing

production costs and allowing us to be more competitive. Lower energy costs and

improvements in manufacturing processes are leaving us with more resources to deVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
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vote to developing new and innovative products that address climate change and

other environmental and energy problems. We are also keeping ahead of the curve

on potential future climate change regulations by investing in greenhouse gas reductions now. We hope and trust that policy-makers will recognize these early commitments to the climate change solution.

Energy Efficiency, Greenhouse Gases and UTC Products

Genuine corporate responsibility requires that we make environmental considerations priorities in new product development and investment decisions. Environmental leadership doesn’t merely enhance our corporate reputation; it offers our customers world-class quality in products while increasing efficiency and reducing

waste—making them better stewards of the environment as well. UTC continuously

explores ways to increase efficiency and reduce greenhouse gas emissions through

the products it develops.

By creating products that use less energy and help lower greenhouse gases that

contribute to climate change, we can differentiate our products in an increasingly

environmentally conscious global marketplace. Because the energy savings from the

use of our products present our greatest contribution to the reduction of greenhouse

gases, I’d like to give you a snapshot of UTC’s expansive and diverse portfolio of

energy-efficient and environmentally friendly products.

UTC Power/Fuel Cells

Our UTC Power division is a full-service provider of clean power solutions and

is the leading developer and producer of fuel cells for on-site power, transportation

and space applications. UTC Fuel Cells (UTCFC) is a business unit of UTC Power

and manufactures the PureCellΤΜ 200 power system, which provides 200 kilowatts

of electricity and up to 925,000 btu/hr of heat for combined heat and power applications. Each PureCellΤΜ 200 avoids the production of 1,100 tons of carbon dioxide

emissions annually, which is why UTC Power earned one of the EPA’s Climate Protection Awards in 2000. Last month, the PureCellΤΜ 200 fuel cell fleet achieved a

major milestone, providing one billion kilowatt hours of energy production, or

enough to power 91,000 homes for a year. We’ve already deployed a total of 275

units world wide, including 26 in New York to date, avoiding 102 million pounds

of carbon dioxide emissions in the Chairman’s home state alone.

In addition to its demonstrated environmental and energy efficiency accomplishments, the PureCellΤΜ 200 is earning a reputation for reliability as well. A UTC

Power fuel cell kept the Central Park police station operating during New York

City’s famous power outage in 2003, and just last month, Russia’s leading oil and

gas pipeline engineering company, Orgenergogaz, was able to keep operating during

a blackout in southern Moscow because of the PureCellΤΜ 200. We’re keeping lights

on from New York to Moscow and will expand our reach in 2007 when UTC Power

plans to introduce an enhanced version of the PureCellΤΜ 200 with twice the life

span of its existing product.

UTC Power has also developed the industry’s first integrated microturbine and

double-effect absorption chiller system, the PureComfortΤΜ 240M. The system converts more than 80 percent of its fuel input to efficient electric, cooling and heating

output. We expect it to reduce carbon dioxide emissions by 40 percent and nitrogen

oxide emissions by 90 percent over those of the average central fossil fuel generation

plant. This is equal to the benefits of planting 150 acres of trees and taking 250

cars off the road, respectively, during the same time period. In May, the A&P grocery chain, which operates 650 stores in 10 states, installed a PureComfortΤΜ 240M

system in its Mount Kisco, NY store, citing the technology as one of the company’s

commitments to ‘‘make more efficient use of energy and to protect the environment

by minimizing emissions.’’

Waste heat represents an untapped energy resource. According to the U.S. Department of Energy’s May 2003 Thermally Activated Technologies Roadmap, total

energy loss in the form of waste heat in the United States is equal to the amount

of energy annually consumed by the U.S. transportation sector or by the entire Japanese economy. UTC Power, in partnership with Carrier Corporation, another UTC

business unit, developed the PureCycleΤΜ 200 power system to turn waste heat into

electricity, providing a zero-emission alternative to traditional power sources. In addition to the environmental benefits, the PureCycleΤΜ 200 offers high reliability, low

maintenance and cost savings through the reduced fuel use.

In addition to its portfolio of climate-friendly on-site power solutions, UTCFC is

also developing zero emission, energy efficient fuel cells for transportation applications with environmental and energy security benefits. We’ve deployed zero emission

fuel cell buses in Washington, DC, California, Madrid and Turin. Last year, AC

Transit logged over 8,000 miles operating a Thor 30’ hydrogen fuel cell, hybrid-elecVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
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tric bus developed by ISE Corporation and UTC Fuel Cells. This bus was deployed

in the Oakland, California area and achieved double the fuel economy of a 30-foot

diesel bus. This year, we are delivering power plants for four fuel cell buses that

will be operated in California by AC Transit and SunLine Transit.

UTCFC is currently working with major automobile manufacturers, including Nissan, Hyundai-KIA and BMW, and the U.S. Department of Energy (DOE) on development and demonstration programs for automobiles. We are teamed with Chevron

and Hyundai-KIA as part of DOE’s Hydrogen Learning Demonstration Program and

will be deploying a fleet of 32 zero-emission Hyundai-KIA Tucson sport utility vehicles and Sportage cars as part of the initiative.

Carrier

Carrier Corporation is the world’s leading manufacturer of heating, ventilating,

refrigerating, and air conditioning systems and products. Carrier is at the forefront

of its industry, developing systems with ever-more environmentally sound refrigerants and dramatically reducing the power requirements of their products. From

the smallest window air conditioning units to the largest centrifugal chillers, Carrier heating and cooling equipment is distinguished by some of the highest energy

efficiency ratings in the industry. Carrier participates in the EPA’s Energy Star program to provide energy efficient products to residents and businesses. Carrier supports the goals of the Montreal Protocol to phase out use of certain substances that

deplete the ozone layer, and in 1994, pioneered the worldwide phase-out of CFCs.

Carrier is also helping lead a revolution in the way the air conditioning industry

handles chlorine-containing refrigerants and is the only air conditioning manufacturer that provides chlorine-free refrigerants across its entire product line.

Not a company to rest on its laurels, Carrier is a leading advocate for a national

energy policy with a strong commitment to conservation and efficiency improvement, including a consensus energy efficiency standard agreement for commercial

packaged air conditioning products, refrigerants and freezers. Carrier was instrumental in moving the industry to a 13 SEER [Seasonal Energy Efficiency Ratio]

standard, meaning that Carrier residential air conditioning systems shipped in the

United States after January 2006 will be on average 30 percent more efficient than

today’s standard.

Pratt & Whitney

Pratt & Whitney is a world leader in the design, manufacture and support of aircraft engines, gas turbines and space propulsion systems. Through the development

of better heat resistant coatings, more environmentally friendly processes, innovative servicing procedures, more efficient turbine blades and quieter, more fuel efficient engines, Pratt & Whitney has pioneered most major advances in both military

and commercial aviation. And, the company’s new Specialty Materials & Services

business is redefining entire industries by applying environmental technologies in

unique ways. For example, ElectroCoreΤΜ is a new, advanced power plant emissions

control system under development that will control a variety of pollutants from coal-

, wood- and other solid fuel-fired boilers, ushering in a new way to control multiple

pollutants in power plants and manufacturing facilities.

Otis

Another UTC division, Otis, the world largest manufacturer of elevators, escalators and moving walkways, reexamined every aspect of the elevator—from design

and installation to operation and maintenance—and created the Gen2 system that

is up to 50 percent more efficient than conventional elevators. Innovative new regenerative technologies will reduce the net power requirements of new Otis elevators installed worldwide even further.

Forming Partnerships

UTC regularly forms partnerships with others to encourage greenhouse gas reductions and meet energy efficiency goals. As an EPA Climate Leaders partner, UTC

pledged to reduce global greenhouse gas emissions by 16 percent per dollar of revenue from 2001 to 2007. As an EPA Energy Star member, we are helping Americans

to save energy and avoid greenhouse gas emissions by providing energy efficient

products in residential and commercial settings. UTC is a founding member of the

Pew Center’s Business Environmental Leadership Council, a group of companies

committed to responding to climate change challenges, and the U.S. Green Building

Council, a coalition of companies promoting the use of green building practices.

Earlier this year, Global Green USA awarded UTC the ‘‘Corporate Design Award’’

for our Sustainable Cities environmental grant and volunteer effort to advance environmentally responsible building systems in urban areas. UTC Power joined with

the EPA as part of CHP Partners, a public-private partnership committed to proVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
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viding clean, efficient power and thermal energy and reducing pollutants and greenhouse gases. On the state level, UTC is active with the Regional Greenhouse Gas

Initiative, a multi-state effort to reduce carbon dioxide emissions, and Governor

Rell’s Connecticut Climate Change initiative.

UTC also frequently partners with suppliers to help them reach our standards.

For example, Hamilton Sundstrand provides training for its suppliers to help them

attain UTC environmental levels. And, Pratt & Whitney is a corporate sponsor of

EPA’s Strategic Goals Program under which large companies share with suppliers

their best practices in environmental management systems, pollution prevention

and waste minimization.

Conclusion

Good corporate climate policies have proven to be complementary to good business

policies, allowing UTC to understand, manage, track and minimize our greenhouse

gas emissions and energy use while simultaneously adding business value. Thank

you, Mr. Chairman, for giving us the opportunity today to share with you and the

Members of the Committee some of the specifics of our commitment to reducing

greenhouse gases throughout our operations and across all our product lines. If

you’d like further information regarding our environmental success story, we have

copies of the UTC 2004 Corporate Responsibility Report available here and on our

website at www.utc.com.

BIOGRAPHY FOR ROBERT H. HOBBS

Experience

United Technologies Research Center—1971–present

1997– Director of Research Operations

1996–1997 Director, Chemical Science and Fluid Mechanics Dept.

1995–1996 Director, Mechatronics Dept.

1994–1995 Manager, Collaboration Technology

1994–1994 Manager, Network Technology

1978–1994 Senior Theoretical Physicist

1971–1978 Research Scientist

Applied theoretical modeling in the areas of: dynamical systems, quantum chemistry, acoustics, fiber-optics, electro-optics, lasers, semiconductors and diverse physical and chemical systems ranging from atoms and molecules to elevators and jet

engines; and program management.

MIT DSR—Physics Instructor—1971

MIT Center for Theoretical Physics—Research Assistant—1968–1970

Johns Hopkins Univ. Applied Physics Laboratory—Summer 1963–1965

Research Analysis Corporation—Group Leader—Summer 1960–1962

Johns Hopkins Univ. Operations Research Office—Summer 1959

Educational Background

Massachusetts Institute of Technology, Ph.D. Theoretical Physics—1971

Massachusetts Institute of Technology, S.B. Physics—1964

Publications/Patents

38 papers, 1 issued patent

Hobby

Yacht Racing Administration—1968–present including:

United States Junior Olympic Committee—1992–1996

United States Sailing Association (National Governing Body of sailing in U.S.)

President, United States Sailing Foundation—2004–2000

Chairman, Olympic Sailing Committee—1996–2000

President—1991–1993, Vice President—1985–1991, Board of Directors—

1979–1993

Intercollegiate Yacht Racing Assoc. of NA (NGB of collegiate sailing in U.S.)

CEO—1979–1988

39

DISCUSSION

Chairman BOEHLERT. Thank you very much, Dr. Hobbs.

And Mr. Meissen, thank you for commending our leadership. Let

me say to you, to all of you, we want to commend your leadership.

It is music to our ears up here to hear from leading figures in the

‘‘real world’’ outside Washington, DC and the responsible manner

in which you are dealing with this very important subject.

Let me ask you. When you are out leading the parade, you are

also a target. What has been the reaction that you have had from

your business colleagues? And are you winning any converts, or is

it not in your enlightened self-interest to try to convert the

unconverted?

Mr. Rogers, let me ask you.

Mr. ROGERS. Mr. Chairman, I served as a Chairman of the Environmental Policy Committee for our industry association EEI for

four or five years, and what I have seen in our industry is a movement toward dealing with these issues in a straightforward manner. They are all in a little different place. Some of our companies

have nuclear primarily, and it is easy for them to think about this

issue and deal with it. Some like ourselves are predominantly coal.

It is a different—we start in a different point. But if I look at the

climate programs that existed during the 1990s in terms of greenhouse gas reductions, I look at what has happened over the last

five or six years, our industry is really starting to step up and deal

with this issue in a very responsible way. And I am proud to be

part of an industry, and one that has such a direct impact on so

many, because who doesn’t use electricity. And I see people increasingly look at this issue in our industry, and I think that is a good

thing.

Chairman BOEHLERT. Thank you for that. Thank you for your

leadership. I hope that there is some followership.

Dr. McFarland.

Dr. MCFARLAND. Yes, I agree that there is an increasing trend

of industries stepping forward to deal with this issue in a prudent

manner and take action. You see this initially with global companies that are having to operate in a carbon-constrained world in

other regions. About half of our business and 40 percent of our operations are outside the United States, and we are operating in

carbon-constrained regimes. And there are other global companies

that are having to do the same. So it is—you know, as I said, it

is a social, economic, and environmental reality for many companies.

Chairman BOEHLERT. Mr. Meissen.

Mr. MEISSEN. I do agree with you. Some people struggle with

this concept of climate change. It is happening in distant places. It

is going to happen in the future. But at Baxter, we focus on improving efficiencies, environmental stewardship. We put it in terms

of being more efficient, effective, cost-effective. It makes us more

competitive. And that is—by focusing on our energy management

program, which is—most of our energy greenhouse gas emissions

are associated with that. By driving on that, pushing on that, we

are able to also reduce greenhouse gas emissions.

Chairman BOEHLERT. Dr. Hobbs.

40

Dr. HOBBS. Mr. Chairman, I believe our Chairman, George

David, has been both visible and vocal on the issues of environmental protection and sustainability globally. I am very proud of

the stand he has taken in these issues. UTC also partners with

others, including EPA Climate Leaders, Pew Climate Center, and

closer to home, the Connecticut Climate Change Group. So we are

working with our other industry people to try to both understand

and share practices.

Chairman BOEHLERT. Well, you know, there are some doubters

out there. We are still doing our leveled best to try to convince the

doubters that they shouldn’t be so skeptical.

But Mr. Rogers, in your testimony, you had some interesting

commentary, and I would like you to repeat it a little bit and ask

the others to comment. Suppose we are wrong. What is the worst

case if we are wrong?

Mr. ROGERS. If we are wrong, what it means is we have developed technologies that are more environmentally-friendly. What is

wrong with that?

Chairman BOEHLERT. That is exactly right.

Mr. ROGERS. And we help our customers. Particularly if you are

a power supplier, you help your customers use energy more wisely.

What is wrong with that? And as I see it, we are moving directionally. I see it with SOΧ, NOΧ, mercury, and I see it with carbon.

We are moving more and more to almost, not quite, because I don’t

think the cost-benefit test can be met, but we are moving in a direction of minimizing our emissions from all operations across this

country. I think that that is a standard that we are moving on

around the world. Now there is a place where it doesn’t make sense

to reduce further, but the reality is I think most global companies,

both companies that are looking at what is going on around the

world and are looking at the science are saying, ‘‘We need to deal

with this issue. We need to be responsible about this issue.’’

And I remember, Mr. Chairman, a senior partner of mine when

I practiced law here in Washington, Bob Strauss. And Strauss used

to say, ‘‘When you see a parade form on an issue in Washington,

you have two choices: you can throw your body in front of it and

let them walk over you, or you can jump in front of the parade and

pretend it is yours.’’

Chairman BOEHLERT. Very fortunately, he is still providing leadership in a whole wide range of areas to this day.

Dr. McFarland, do you have a comment?

Dr. MCFARLAND. Yes, I agree entirely that this makes sense anyway from a wide range—for a wide range of issues. With global economic growth, we must learn to use our resources, natural resources, more effectively. Saving energy makes sense, economic

sense, especially when you see rising energy prices, energy security

issues. So even if we are wrong about climate change, which I believe that we are not, and our company believes we are not, then

the actions that we have taken make sense.

Chairman BOEHLERT. Well, as you pointed out in your testimony,

the scientific case continues to be strengthened every day.

Dr. MCFARLAND. Yes.

Chairman BOEHLERT. The scientific consensus is clearly there.

You understand it. You have outlined to us the benefits to your inVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
41

dividual companies and to society. I love Mr. Rogers, and I wish

he would speak some time, but we won’t have him do it now, his

grandkids theory. We were discussing that yesterday. And the test

that he applies in many of his decisions: ‘‘How is this going to impact on my grandkids?’’ Very important.

Mr. Meissen.

Mr. MEISSEN. Well, I don’t see a downside. I only see an upside.

I see an upside to becoming more energy efficient, more—reducing

costs, becoming more competitive. I see an upside working with our

many suppliers, and by working with them on the Lean and Clean

principles that I mentioned, they also become more competitive.

And also, which is very important for Baxter and other companies

that have many suppliers, they are more reliable. And they are

going to be in business longer and be there to deliver the products

and services that they provide our company. And I also think that

there is no downside, just an upside in acting responsibly for the

company. And I believe our customers, shareholders, stakeholders

expect us to do that.

Chairman BOEHLERT. Thank you very much.

And Dr. Hobbs?

Dr. HOBBS. Taking the actions that we have at UTC are not only

protecting the environment, but they are saving us money and

making us more effective in creating better products for us, so all

of that is good. Furthermore, I hope that we don’t have to have the

trash pile up in front of our house before we realize that we should

produce less waste. That is really all we are talking about.

Chairman BOEHLERT. So it is a win-win situation.

Dr. HOBBS. Absolutely.

Chairman BOEHLERT. Thank you all very much.

My time has expired.

Mr. Gordon.

Mr. GORDON. Thank you, Mr. Chairman.

So oftentimes, we have a bad news panel. This is nice to have

a good news panel today. Dr. McFarland, I think you hit a good

note when you reminded all of us that we should not penalize early

movers. That needs to be echoed so that as this process goes forward that we reward and not penalize.

And Mr. Rogers, you were very impressive in laying out the logic

of your case.

But what I would like to do is turn to the international folks

here first.

As we all know, the Kyoto protocol has been ratified by the requisite number of countries. What I would like to better understand

is what you are going to be required to do internationally that you

are not going to be doing here, what is the cost of that in terms

of competitiveness, and what would be necessary to get you to the

Kyoto levels. So I will—maybe we will just do it in reverse order

here.

Dr. HOBBS. Mr. Gordon, UTC is a global company. We make

more of our revenue outside the United States than inside the

United States, or at least have more employees outside the United

States. We have been taking our environmental actions globally

right from the beginning. The kinds of energy reductions and——

Mr. GORDON. But if I could——

42

Dr. HOBBS. I didn’t talk about, like, air emission reductions.

Mr. GORDON. Well, excuse me. I don’t mean to be discourteous,

but we have got a limited time here. More specifically, what are

you going to be doing internationally—what are you going to be required to do internationally that you are not going to be doing here

and how is that——

Dr. HOBBS. Well, what I was about to say is that we are not

going to do anything internationally, because we are already—we

believe we are already doing it.

Mr. GORDON. And are you doing the same——

Dr. HOBBS. We are doing the same thing in the United States.

Mr. GORDON.—domestically? So it has no impact.

Dr. HOBBS. I believe that is the case.

Mr. GORDON. Thank you.

And what about DuPont?

Dr. MCFARLAND. I think it is the same case for DuPont. We view

this as a global issue. We are taking actions. We do have plants

in Europe, for example, that are under the cap and trade, but the

energy efficiency put us in—well positioned right now. The question is going forward. But to date, it—there is no——

Mr. GORDON. So you think domestically you will be meeting the

Kyoto standards?

Dr. MCFARLAND. We reset our goals and we looked at energy efficiency improvements. It is being done globally.

Mr. GORDON. But do you expect that here, domestically, you will

reach the Kyoto standards?

Dr. MCFARLAND. Yes.

Mr. GORDON. Okay. And what about Baxter? I am not trying to

criticize. I am just trying to better understand here.

Mr. MEISSEN. We are working to reduce our greenhouse gas

emissions. To meet the Kyoto standard may require some additional efforts than we currently have. We have been preparing for

a carbon cap and——

Mr. GORDON. Okay. When you say that, do you mean internationally or domestically?

Mr. MEISSEN. Both.

Mr. GORDON. Okay.

Mr. MEISSEN. Both. We are in—we realize that the cap-and-trade

schemes are emerging around the world, and it is taking place in

Europe. And in anticipating that, we became a founding member

of the Chicago Climate Exchange, which is a carbon cap and trade

organization in Chicago, which I might talk about later, but—as a

member company. And there, we are gaining experience in trading.

We are gaining experience in making our greenhouse gas emissions

database more robust. And we are gaining institutional knowledge

in how that operates so that we can better respond to these cap

and trade systems as they emerge.

Mr. GORDON. So do you expect to meet the international Kyoto

standards?

Mr. MEISSEN. We expect to meet the emissions limits for those

facilities that are affected.

Mr. GORDON. Internationally?

Mr. MEISSEN. Right.

43

Mr. GORDON. Indeed. What more will be needed here in this

country for you to accomplish that?

Mr. MEISSEN. I believe that as we go forward into the future, we

are going to be adopting more state-of-the-art technologies, more efficient utility systems. We are going to——

Mr. GORDON. Well, is it the cost? I mean, are you concerned

about losing a competitive advantage to do that?

Mr. MEISSEN. No. I—we are taking—our approach is a global approach, just like these other gentlemen. And we—by driving

down—we are seeing the benefits of being more efficient in seeing

and realizing those benefits, it is spurring us on to achieve more.

Mr. GORDON. Mr. Rogers wrote—go ahead, sir.

Mr. ROGERS. Congressman, let me caution a little bit on Kyoto,

if I may.

Mr. GORDON. I am not trying to—I am not either advocating

or——

Mr. ROGERS. No.

Mr. GORDON. I just want to know where we are to get a benchmark.

Mr. ROGERS. But let me kind of make an important point, if I

may.

If you look at—Kyoto goes back to 1990 levels.

Mr. GORDON. Right.

Mr. ROGERS. I think it is impossible, particularly for the power

industry, to go back to 1990 levels, given how much our economy

has grown over the last 15 years. If you put a stake in the ground

around 2000, it is a more prudent approach, given where we are

today across this country in the growth of the demand for electricity. As I think about going forward, the prudent way forward

is to think more about slowing down the rate of emissions and then

starting to reduce the emissions level. And that is a strategy that

matches up with concerns by environmentalists who talk about the

carbon debt, and also matches up extremely well with a—from a

cost-benefit standpoint.

And finally, I would suggest that Kyoto is such a politicallycharged word. We are much better off, as we think about reducing

carbon going forward, to come up with a son or daughter of Kyoto

rather than that.

Mr. GORDON. Well, let me ask you this. There are other countries

that have adopted Ktoto. I mean, they may game it or not. But

what is going to happen to those power companies in the other

countries? Are they to go back to 1990? I know that, as you pointed

out, they probably have more of a nuclear base that might make

it easier, but are they going to make the 1990 baseline or are they

just going to game it or give up or what is going to happen?

Mr. ROGERS. I had the opportunity yesterday to have lunch with

Prime Minister Blair, and we talked about the United Kingdom.

The United Kingdom is an interesting situation, because they are

meeting their targets and why are they meeting their targets in

the generation? Because they had a lot of coal. What has happened

is, starting in the 1990s, and really with Thatcher, what they have

done is shut down their coal plants and really converted to gas fire

generation in a large movement. That has been responsible for a

lot of their change. They have been able to take natural gas out

44

of the North Sea, bring it into the United Kingdom, and use it. If

you go to a country like France, they already have 75 to 80 percent

of their generation in nuclear, so no problem. The countries who

will have the difficulty will be Germany. Germany is—there the

government has cut a deal with the Green Party to effectively shut

down nuclear by 2025. I don’t see how they are able to hit a Kyoto

target in 2012 if they are facing a shut down of nuclear units in

subsequent years.

The following point on this is it is not clear yet if they will hit

the Kyoto targets, which are really 2012 targets, and are other

countries. Some of the countries have got a head start, and the

United Kingdom would be an example of that because of the conversion from coal to gas that happened in the 1990s.

Mr. GORDON. So what does that mean for our competitive position?

Mr. ROGERS. The troubling competitive issue is if they start to

try to say that U.S. companies are subsidized because they are

not——

Mr. GORDON. You inferred a trade problem. So are you foreseeing

that there could be, again, whatever trade allegations brought

against us and penalties on the international scale?

Mr. ROGERS. I could see the EU and countries and companies in

the EU starting to use that as an argument that U.S. countries are

subsidized because they don’t have to comply with Kyoto, as a consequence, their products are cheaper. I think that is a possibility.

We haven’t seen that yet, but I think that is a possibility.

Mr. GORDON. I wish we could talk more, but my time is up.

Chairman BOEHLERT. Dr. McFarland, did you want to respond to

Mr. Gordon? Okay. Fine.

Mr. Bonner.

Mr. BONNER. Thank you, Mr. Chairman.

Many people back in our Districts have—who have seen corporations move overseas in a global economy have asked questions of

us over the years what are we doing to stop these job losses. You

have got companies that go to India or China or places in Europe

or Central or South America, and the belief is that they don’t have

the same minimum wage standards that we have. They don’t have

the same environmental protection laws that we have. For those of

you who have companies in or plants in other countries, how do our

environmental laws and what we are doing compare with the plant

operations that you have got in China, or in India, or in Europe,

or in other parts of the world? Are we putting our U.S. companies

at a disadvantage in terms of being able to stay on the continent

and provide jobs to American workers? It is an open question.

Dr. MCFARLAND. You know, I would be happy to provide more information, because this is somewhat outside my area of expertise.

But speaking for DuPont strictly, we have one environmental

standard around the world. And wherever we put a plant, it is the

same standard. So you know, that is not an issue for us.

Dr. HOBBS. For UTC, it is much the same. Our—we endeavor to

hold everyone that works for UTC to the same standards of environmental performance, and by the way, the same ethical performance. And we provide things like education evenly all over the

globe. We don’t set wage standards in all of the places that we

45

have factories, but to the extent that we are using our rules, we

have global standards.

Mr. BONNER. And let me just add to Dr. McFarland since he has

the plant in my District, we are grateful for the jobs that DuPont

provides in south Alabama and consider you all very good, outstanding corporate citizens.

Mr. Rogers, I would like to go to a question that comes from one

of the comments you made earlier in your statement, and that is

that states are not—and I want to get your quote right, increasingly taking on added roles in their monitoring and regulation on

greenhouse emissions. In your judgment, since there are 50 states

and obviously 50 different standards, is that an added hardship or

is that something that your company welcomes in terms of the

added emphasis that state governments are applying?

Mr. ROGERS. I think it is an additional hardship from the standpoint—I mean, you create this patchwork of different regulations in

different states, and it—one of the—from a national policy standpoint, we ought to have environmental policies that apply across all

of our country in every state, and we—and it should be a national

policy, not state. I think it would make it very difficult for companies to operate in this country, particularly in the power industry.

If you have one rule in Alabama, you have got another rule in

Georgia, another rule in the Carolinas. The question is how—what

does that mean when power flows between states. And so to have

the states weighing in with specific rules that are different than

the EPA, I believe, would be a problem.

Mr. BONNER. Thank you, Mr. Chairman.

Chairman BOEHLERT. Thank you very much.

Mr. Carnahan.

Mr. CARNAHAN. Thank you, Mr. Chairman.

I want to compliment all of the panel on the work that you are

doing —your leadership in this important environmental area.

I wanted to get some additional comment from each of you quickly, because I guess, Dr. McFarland, you had expressed concern

about being put at a competitive disadvantage, and Mr. Meissen

had indicated that he believed they were actually achieving some

competitive advantage from some of the activities and developments. And I wanted to see if there is really a difference of opinion

here or get your additional comment about that.

Dr. MCFARLAND. I don’t see a difference of opinion on that. What

we are—you know, what Mr. Meissen is talking about is in the current climate. And we, too, are saving money by our energy efficiency goals. However, if some sort of regime is set up where you

are set to a standard that is based on historical performance, then

the companies that have moved early have already picked their

low-hanging fruit. They have done the things that they can do most

economically. So if it is set on a prior performance standard, those

that have moved are going to have to spend more to meet a reduction target, given reduction target, as compared to those who have

not taken action.

So the difference is Mr. Meissen is talking about in the current

climate. And we, too, have saved money in the current climate, but

we are talking about in a regulatory, carbon-constrained regime

46

where you are set to a standard that is based on some prior performance.

Chairman BOEHLERT. Just let me interrupt here, and I will not

take this out of your time.

I want to point out that you should be credited and not penalized

for your early, positive, constructive action, and that is our objective.

The gentleman is——

Mr. CARNAHAN. Thank you, Mr. Chairman.

Mr. Meissen, did you have any additional comment?

Mr. MEISSEN. Okay. Thanks a lot.

I think many companies expect that they would be credited for

the initial activities that they have done. Their participation in the

voluntary programs, such as U.S. EPA Climate Leaders program,

the different registries in different states. I do believe that it is a

challenge to have different regulations in different states, and a

uniform framework and a uniform time frame, I think, will be beneficial for companies. They would provide companies flexibility in

planning, especially capital planning cycles, which are multi-year

cycles, and if there is a requirement to invest in maybe expensive

core generation systems, it has great savings also, then they can

work that into their strategic planning cycle and capital cycle.

Mr. CARNAHAN. I guess I want to also close with a quick question

to get your opinion about what you believe would be some of the

best things we could do from the public policy perspective to

incentivize and encourage companies to continue with some of

these cutting-edge actions. Really, any of the panel.

Dr. MCFARLAND. Well, it—to provide some assurance, regulatory

assurance, that those who have—are taking forward—or are stepping forward with action are credited for those actions going forward.

Mr. ROGERS. I think another thing that the Committee could do

is continue to take a holistic review of the R&D programs the government now funds and look at ways to jump-start some of these

programs and where the focus is on the D part of the programs and

also more toward the deployment and not just the development.

And I think that would be a movement in the right direction.

Mr. CARNAHAN. Thank you, Mr. Chairman.

Chairman BOEHLERT. The Committee is proud of the leadership

provided in advancing clean coal technology, and I would imagine,

Mr. Rogers, you would be a cheerleader in that arena.

Mr. ROGERS. Yes, sir.

Chairman BOEHLERT. Thank you very much.

The distinguished Vice Chairman of the Committee, Mr. Gutknecht.

Mr. GUTKNECHT. Well, thank you very much, Mr. Chairman. And

let me thank you, Chairman, for bringing this distinguished panel

here today.

I want to compliment all of you and your companies for what you

are doing. And I happen to agree that, long-term, this makes good

sense. It makes good business sense, it makes good environmental

sense, and so I just want to congratulate all of you and the companies that you represent, because the testimony here has been excellent, and I agree with the basic point.

47

But I do want to pursue something that Mr. Bonner from Alabama raised. And I think it is—I wasn’t completely satisfied with

the responses that we had. One of the reasons that the Kyoto protocols received a rather chilly reception up here on Capitol Hill, I

think, was because it exempted some of the developing countries,

and in particular, China and India. And there is growing concern

in all kinds of businesses that I talk to on a regular basis in my

District, and I suspect my District is no different than the Districts

of most of my colleagues here on this side of the panel, and that

is that we were going to impose fairly strict standards on American

enterprises but not on those in developing countries, like China

and India. I wonder if you could give us a little more response to

that. And how serious is that problem? And long-term, you know,

where do we go from here?

Mr. ROGERS. Congressman, let me suggest that you can not have

an effective climate program without having both China and India

as part of it.

The question really is raised, well, what do we do as we work to

make them part of it. I think it has to be the industrial countries

of the world, and clearly China and India, given how fast they are

growing, the number of power plants they are building, the number

of factories they are building. So the question is how do you get the

timing right on that. We could, as a country—it was good judgment

not to go back to 1990 levels at this point. But good judgment also

tells you that we need to work to start to reduce the rate of emissions in preparation, and but we have to work hard to make sure

internationally we bring those two countries along. If you could

bring those two countries, then over time, you would bring other

developing countries along, but they clearly have to be part of this

to get a good result.

Mr. GUTKNECHT. Anybody else?

Does it place—particularly small manufacturers. I think it is

easier if you are a big player and you have access to lots of capital

and, more importantly, you have a strong science and technology

base to your company anyway. I think it is relatively—it is easier

for companies like yours, with all due respect, than it is if you were

a smaller company that is building widgets in north Mankato, Minnesota that—you know, they can’t do that kind of thing. And that

is where I think a lot of the fear was.

Anyway, that is not really a question. I would just yield back my

time. And again, thank you for what you do.

Chairman BOEHLERT. Mr. Lipinski.

Mr. LIPINSKI. Thank you, Mr. Chairman.

I would like to, as my colleagues have done, applaud everyone on

the panel here for what your companies have done to improve the

environment.

Now the question that I have, the first question comes from what

Dr. McFarland said, he had talked about he doesn’t want companies to be penalized, those who have picked the low-hanging fruit,

to be penalized if there are some regulations put out that they are

penalized as compared to other companies who still have the lowhanging out there. And I think we certainly all agree about that.

But my question is, and we will start with Dr. McFarland, and I

want to hear from everyone on the panel, how far have you gone

48

now in picking all of the low-hanging fruit. Are you close to the end

now of reductions? You have gotten the low-hanging fruit, and we

all know once it gets tougher, then there is much less economic incentives and other incentives to make further reductions. Is this it?

Are you close to the end of what is going to be easy to do? And

what incentive is there to do any more?

Dr. MCFARLAND. Well, clearly we have picked the lowest-hanging

fruit, but technology is not static. We are continuing to drive toward lower emissions and improving our performance on these. It

is difficult to answer, because the way we make the decisions is to

provide marginal cost curves for what projects we can undertake to

achieve, you know, the best greenhouse gas emission reductions,

and those marginal cost curves change yearly with advances in

technology. So I am not trying to avoid your question, it is just a

difficult question with the technology changing. We could continue

to focus on making project—process—progress to reducing our

emissions.

Mr. LIPINSKI. Are there—right now, and this is for Dr. McFarland and all of you, are there—do you have items right now that

are in the works in the plans to do more reductions?

Dr. MCFARLAND. Yes.

Mr. LIPINSKI. Mr. Rogers.

Mr. ROGERS. I would approach the question by saying we are in

the business of supplying electricity, and we have to have the capability to meet whatever demand is placed on us in the future, and

we operate in an area where there is growing demand for electricity, so we have to build more generation. So our ability to do

that, if we build gas-fired plants, is o the carbon emission of a coal

plant. Gas prices today are $5 to $7, and the economics of that are

questionable. And the—a broader question of our country, do we

really want to have our power generation increasingly dependent,

ultimately, on foreign sources of natural gas.

We are also looking at an integrating coal gasification facility.

That would allow us to reduce our emissions even further, if we

can build that and it makes economic sense. We are currently, as

I mentioned before, working with GE and Bechtel trying to negotiate the building of a facility like that. And that would be a $1 billion investment. So we continue to look at investments and the environmental footprint of the investment is very critical to how—

what decision we make.

Mr. LIPINSKI. Mr. Meissen.

Mr. MEISSEN. Yes. Most of Baxter’s greenhouse gas emissions are

associated with the use of energy. And because of that, Baxter has

a very active energy management program. We have a network of

energy managers in our largest facilities. We hold energy conferences, a global energy conference every two years. And we are

doing energy audits, energy reviews of all of our major facilities on

a frequent basis. And when we do these reviews, we do find opportunities. The projects, because of the dynamics of our organizations

and many other companies like us, the manufacturing processes

are changing, the fuel costs are changing, the opportunities are

coming before us that we find. People say, ‘‘Well, we have picked

all our low-hanging fruit,’’ and I believe that—my experience at

Baxter is that the tree keeps growing, the fruit keeps coming down

49

lower, and every year we can go around and pick some more fruit.

And so it is a continuous process of being more efficient and looking for projects. And we always have a bank of projects that we are

working on and additional projects that we can work before us.

Mr. LIPINSKI. Dr. Hobbs.

Dr. HOBBS. Mr. Lipinski, UTC is coming to the end of the first

decade of its environmental goals, and we are developing our goals

for the next decade. They will continue to say we will improve in

greenhouse gas emissions and reductions in energy usage. But we

are looking more actively now at other parts of the value chain for

new areas that we can make the impact. So we are looking at our

partners and suppliers. How can we partner with them to make

sure they are doing the same things we are? But we are looking

for additional places to harvest low-hanging fruit as we go forward.

Mr. LIPINSKI. Thank you, Mr. Chairman.

Chairman BOEHLERT. To follow up on Mr. Lipinski’s question,

are there federal technology development or demonstration programs that have or could make a difference? I guess what he is

looking for, and so am I, and I am sure all of us, is sort of guidance. What more can we do? So are there federal technology development programs that have made a difference, or, if they were

more adequately funded, could make a significant difference?

Mr. Rogers.

Mr. ROGERS. I am delighted with that question, because I think

back—on the project we are trying to create today on coal gasification, I think back to the early 1990s. And we were the beneficiary of a grant from the Department of Energy to build a coal

gasification facility, one of only two that were built in the United

States in the early 1990s. And we built it in Indiana, Wabash River

Plant. And we used the Dow technology there. And we took the gas

that came out of that unit and generated electricity. Here we are

today, more than a decade later, working on a coal gas plant that

is going to be closer to being what I call a commercial project

versus demonstration. I think it is going to be very critical to have

additional funding for carbon sequestration projects and carbon

capture projects in these coal gas, because the economics of coal gas

is very close to pulverized coal, depending on your assumptions

about how carbon constrained we are in the future. The thing that

really needs to be funded on these coal gas projects is really the

funding of the carbon sequestration. And I think that would be

very important in order to allow further development of the—because as you know, in technology, it is not the first generation,

often not the second, but it is generally the third, fourth, and fifth

technology, or generations in these technologies where it becomes

very cost-effective. We need more money to experiment with carbon

sequestration.

Chairman BOEHLERT. Does anyone else care to comment on that?

Dr. HOBBS. Mr. Chairman, I personally am from our research

center, and so we have been very pleased to have help from the

government on occasions to help us develop new products more

rapidly that wouldn’t come along as quickly without your help. One

of our projects we are working on recently is basically an air conditioner running backwards. An air conditioner, normally you put in

electricity and you get out cold air. We said, ‘‘Suppose you put in

50

hot air. Can you get out electricity?’’ So we took a Carrier air conditioner, take a thermal waste heat source and get hundreds of kilowatts of electricity out of it. In partnership with the Department

of Energy, we are able to try this in some field tests, for instance,

at some geothermal sites in Alaska we are hoping for later in the

year. There is important opportunity to try some things quickly

that we wouldn’t be able to do on our own and maybe bring some

new products to market that make really good use of waste energy.

Huge amount of waste energy. If we could harvest a lot more of

that to reduce the generation requirements in this country, that

would be really a neat opportunity.

Chairman BOEHLERT. Okay. And I would appreciate after this

hearing, we will probably correspond with each of you, one, to

thank you for your outstanding testimony, and two, maybe to ask

some additional questions. And I would appreciate it if you would

give some thought to that question, specific question, what more do

you think, short of writing a blank check for all research, and that

is obviously not going to happen, but what more do you think, specifically, we should do in terms of the Congress in providing funding for the demonstration programs that offer some real promise?

And so we will follow through on that.

Ms. Biggert.

Ms. BIGGERT. Thank you, Mr. Chairman.

My first question is for Mr. Meissen.

I understand, and it was in your testimony, that there are a

number of companies in the Chicago area that have formed the

Chicago Climate Exchange, the first voluntary pilot carbon-trading

platform. Can you tell me what is its purpose and something about

your participation in that exchange?

Mr. MEISSEN. Okay. Yes. Thank you, Representative.

Approximately two years ago, the Chicago Climate Exchange was

formed. This is the first multi-sector, multi-national carbon trading

scheme performed in—actually in existence in the United States. It

was formed initially by 14 companies. Baxter was one. Currently,

there are over 90 members in different—members in different categories of membership.

The purpose of the exchange is to demonstrate that a carbon cap

and trade scheme can work, to demonstrate the procedures, demonstrate that a metric ton of carbon, there could be a cost assigned

to that in a trading scheme. And for Baxter, we found that very

beneficial to us, because we are learning what that is all about. We

are developing institutional knowledge on how it works. And that

helps prepare us to address carbon cap and trade schemes as they

evolve around the world.

Ms. BIGGERT. And this is the first? There haven’t been any others throughout the country? Have people contacted you on how to

form this or anything? Is this——

Mr. MEISSEN. Oh, yes. We have gotten a lot of good recognition

for this. They have asked us about our participation in it. We have

also been asked to speak on that in a number of forums.

Ms. BIGGERT. How do the energy requirements of manufacturing

at Baxter differ from some of the other companies and industries

that might be involved?

51

Mr. MEISSEN. One of the major differences with energy usage for

Baxter that is a manufacturer of health care products is that we

have to manufacture them in clean rooms under sterile conditions.

And so our clean rooms and production operations relating to them

are very energy-intensive. But we focus a lot of effort on making

those more efficient. And we recently were going to a concept called

isolators where instead of building a large clean room, we are

building a small self-contained production unit where the basic production takes place, and those units are much more effective and

provide higher levels of quality. It assures quality and also reduces

energy costs.

Ms. BIGGERT. Okay. Thank you.

And Mr. Rogers, you mentioned a merger with Duke Power. And

I understand that that company has nuclear facilities.

Mr. ROGERS. Yes, ma’am, they do, indeed. And actually, one of

the reasons why we thought combining with them was a good thing

for us, we were the largest non-nuclear generator in the United

States, primarily coal and gas, and by combining with Duke, who

is a recognized leader in the operation of nuclear, it gives us the

capability to use that technology, because we don’t—there are no

silver bullets for the future, and we don’t know what technology is

going to be the right technology, because we don’t know what the

rules will be yet with respect to environmental requirements. And

there might be a day where nuclear again is important to our country. I sense that it might well be.

Ms. BIGGERT. So I know that even the Administration has just

come out with talking about how we haven’t built a nuclear facility

in years and years and years and that there is some talk about

wanting to further that. Would your company then be in a position

to maybe want to build another reactor?

Mr. ROGERS. It is my understanding that Duke has announced

that they would be very interested in building another nuclear facility. However, it is almost impossible for them to contemplate

that unless there is some resolution on the issue of storage of spent

fuel, and the Yucca Mountain issue has been a major forever issue

in our industry that is yet to be completely resolved. I think it

would be very difficult for anybody in this country to build a nuclear unit in the face of no resolution of that spent fuel issue.

Ms. BIGGERT. Thank you. And we will be having a hearing on

that soon.

Dr. Hobbs, you were talking about the waste heat energy. What

are the obstacles that stand in the way of making this waste heat

productive?

The kind of product that we are looking at works very well now

if there is high-grade waste heat. And the research efforts we are

going to today, particularly, are looking at lower-grade waste heat,

heat that is not as hot when it starts. This includes all things from

solar sources, for instance, solar collectors, to, as I say, geothermal

sites and other sorts of sites. And the technology we are working

on is how to use this lower-temperature heat effectively, and can

you make the whole process work. It is exciting science right now.

Ms. BIGGERT. Are there any other market barriers?

Dr. HOBBS. I have still got to make the product work before I

worry about marketing.

52

Ms. BIGGERT. Well, thanks for all you are doing, and thank you

all.

Chairman BOEHLERT. Thank you, Ms. Biggert.

Ms. Woolsey.

Ms. WOOLSEY. Thank you, Mr. Chairman.

I would like to piggy-back on the last question you brought up

to the panel, because you actually stole my question, so I am going

to just take it and go further with it.

It is clear that it would make a big difference if products and

services that would help you with these new technologies were already available in the marketplace and that they were available,

affordable, and efficient and did what you needed them to do.

So I am asking you a couple of things. I mean, I am so impressed, Dr. Hobbs, that you actually develop your own products

for your solutions. One, if those products were already available on

the market, would you just purchase that solution and those services, and two, are you able to recoup your costs by turning that into

a sellable product yourselves?

Dr. HOBBS. I hope if somebody else had it we might buy the company. We partner with all sorts of people for solutions. And in fact,

the place that my research center particularly is working now is on

integrated solutions. We are looking at more than simple components but at whole systems and how you can take multiple things

and put them together to gain efficiency and lower total cost and

reduce greenhouse gases and so forth in the process. And so having

other people—parts of systems that belong to other people is perfectly fine. The more things that we have to play with, the more

opportunities there are.

Ms. WOOLSEY. Right. Any of you that would like to respond

about what in your own industries you would take advantage of if

it were available in the marketplace, and also with the idea that

I believe green technology is the next future industry of the United

States if we will wake up and get behind it. So what does the Federal Government need to do to help that industry go forward?

Dr. McFarland, you had a——

Dr. MCFARLAND. Yes. You bring up another issue. What you

heard about today, primarily, are the actions that industry is taking to reduce its own emissions. And you have heard the other

panel members, and we as well, provide products to increase the

efficiency of our end users. If you look at how carbon emissions are

spread across the economy, assigning the carbon emissions that—

from Mr. Rogers’ sites and other utilities’ sites, to the end user,

about B of the emissions come from industry. About B come from

buildings. And about B come from transportation. It is not exactly

that. I could get you better numbers on that. You can find them

in the reports.

We have got to engage all of the sectors of the economy. This is

a global issue, as has been pointed out before. We need to engage

all countries. But we also need to engage all sectors of the economy. And what Dr. Hobbs is talking about is a better way to convert energy and more efficiently use the resources, but you have

got to have that pool. The industry is generally very cost-sensitive,

and in some cases, more cost-sensitive than other sectors of the society. So we look at energy already as a—on the bottom line.

53

Projects that we are talking about here today I know go beyond

what we would—what would be normal business, because they

would not normally make the investment hurdle. But again, you

heard from people here that are looking at energy as part of the

bottom line.

Ms. WOOLSEY. Thank you.

Anybody else want to comment?

Thank you, Mr. Chairman.

Chairman BOEHLERT. Mr. Sodrel.

Mr. SODREL. Thank you, Mr. Chairman.

It is great to have a couple Hoosiers here. In fact, I have bought

some of your electricity, Mr. Rogers, as little as possible.

Mr. ROGERS. Well, thank you for whatever you bought. We need

the money.

Mr. SODREL. In my other life, I was in the transportation business, and we found that reducing our energy use was very cost-effective, but there is that 90/10 rule that people talk about: you get

90 percent of the benefit by 10 percent of the money. When we had

trucks getting four miles to the gallon, it wasn’t very difficult to get

five. And when you got five, it wasn’t very difficult to get six. What

we found was that the latest technology in trucks costs more

money to acquire, costs more money to maintain, and burns more

fuel. So it is very difficult to get the user excited about going out

and acquiring the asset. So I—you know, we talked a lot about the

Kyoto protocols and how that affects our business. And I appreciate

the fact that American-based industries that are operating in foreign countries will apply our standards to that operation. That

doesn’t mean that our domiciled in that country will do likewise,

which puts us at a cost disadvantage.

I guess my question is, Mr. Meissen was talking about, you

know, efforts in his plant, how close are we to getting to the end

here? I mean, I always tell people, in our business, we can save 100

percent of our energy and create no environmental problems if we

just lay off 600 people and they don’t come to work today. You

know, then we could save it all. So it is a balance between creating

jobs and doing it with the minimal impact on the environment. And

my question is how close do you think you are to the end where

it becomes almost prohibitively expensive to cut emissions any further?

Mr. MEISSEN. Well, Representative, what we have seen at Baxter

over the last 10 years is we have been able to accomplish an incremental improvement in energy efficiency and an incremental improvement or reduction in energy costs. And I don’t see the end in

the next decade or—I mean, I see incremental improvements continuing to increase, because every once in a while, there is a quantum shift, there is a new technology. We can go 10 percent all of

a sudden in a certain area. I think it is difficult to anticipate where

that end might be, but I think it is a number of years out for Baxter.

Mr. ROGERS. I would respond to that by saying the cost-benefit

curve continues to move, and we really shouldn’t, sort of, have a

preordained spot for it in the future, because as you look at technologies, I look at the combined cycle plants, gas-fired plants have

been developed by GE and how much their efficiency has been imVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00057 Fmt 6633 Sfmt 6601 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
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proved over the last decade. I look at coal gasification and how

much we have brought the costs down and we are going to have

the ability to do it even in a cheaper way going forward. We participated and are joint owner of a coal generation facility at the

Texas City plant with BP where basically the same concept of capturing the heat and fully utilizing it within the system has created

great efficiencies in terms of the utilization of natural gas.

So I think our country is on a road, and if we have clear standards or goal lines with respect to emissions levels, I think we have

the capability in this country to use our ingenuity and our ability

to develop technological solutions. I think there is no end to what

we can achieve.

I had the good fortune in my life to have Neil Armstrong on our

Board of Directors, which always meant that I started every conversation ‘‘one small step.’’ But I think if we had in this country

a kind of a man-to-the-moon type commitment with respect to technology and certain lines of where we need to be in the future in

terms of emissions level, I think this country has got the capability

to get it done.

Mr. SODREL. Just a follow up.

Because all of you have worked very hard on emissions and reducing your emissions, would you work any harder, would you be

any more successful if we passed regulations that moved you faster

than available technology can take you? I mean, is our new law

going to help you become any more efficient than the existing laws?

Mr. ROGERS. Some of my friends in the industry would say, ‘‘Now

you have gone from preaching to meddling,’’ if you require us to do

something that we don’t have the capability to do or there is not

the technology to do. But I believe that we need to be very sophisticated in the way we think about this, because sometimes if you put

a stake in the ground, you go—you are forced and you work hard

and you make it. There might be times where you can’t make it,

and we need to have regulations that are flexible enough that—and

understand that to get the balance right on a stake-in-the-ground,

we are going to make it, plus some flexibility if it doesn’t work out

that way. That is where we have got to have very creative legislation and regulators that really understand what the goals are and

how best to get there, but at the same time not creating something

that is just impossible.

Mr. SODREL. Would anybody else like to respond to that one?

Dr. HOBBS. Let me just add two or three words. I think that if

there is additional legislation, flexibility in the approaches that

companies have to approaching it is the key issue. If—you know,

to Mr. Rogers’ point, it is the ability to use different technologies

and bring different things to the table that will be so important for

continuing to make these strides. So if there is legislation, it has

to be crafted in a way that it doesn’t inhibit our ingenuity and

flexibility.

Ms. BIGGERT. [Presiding.] The gentleman’s time has expired.

The gentleman from Texas, Mr. Green, is recognized for five minutes.

Mr. GREEN. Thank you.

And I would like to thank the Chairman and the Ranking Member. I suppose I am especially appreciative of the Ranking Member

55

for allowing me the opportunity to occupy this space. It is a lot bigger when you get here than it appears to be from the far end of

the table.

I do want to acknowledge, as others have, that we have an outstanding group of experts here today. And I have been more than

impressed with what you have said. I have been inspired. And Mr.

Rogers, just to pick on you, I want you to know that your comments most recently made about what we are capable of doing,

those are truly inspirational comments. Probably, had we been in

another venue, someone would have applauded what you said. I

think you demonstrated to us by way of your articulations that if

we have the will, we can find the way. And that is what we are

trying to gather now: the will to get this done, because Americans

have always had the ability to find the way once we have applied

the will.

I would like to just mention China for a moment, if I may, because having visited China, you really don’t have to be an expert

to see that there really is a problem there. It is quite visible. It is

almost intuitively obvious to the most casual of observers. And

given that it is now a problem, given that they are placing more

cars on the road, given that they are attracting businesses from all

over the world, given that they are constructing more buildings and

industries, if it is a problem now, it surely is going to become a

major problem in the future. And the question that we have to

grapple with is how do we get them to comply to come on board

if we are not on board. And I am saying that with as much sincerity as I can, because I am interested in having you, if you can,

to the extent that you can, give some intelligence with reference to

how do we get this done, which has to be done, without having

done it ourselves. Mr. Rogers, perhaps you can continue to inspire

me.

Mr. ROGERS. That is a very tough question.

I believe very strongly that we have to bring China and India on

board, not necessarily all of the other developing countries at this

time. But it is really a question of leadership. And you are right

in your point that it is pretty hard to preach something when you

are not doing it yourself. But I think the question that we have to

ask ourselves is can we put a stake in the ground on this issue that

moves us in that direction but, more importantly, allows companies

in our country, like the ones here, and other companies, like GE,

who can develop the technologies that they can subsequently sell

into China and India creates a market for their products but they

are products that allow them to create energy in a more efficient

way or to reduce emissions, whether it is SOΧ, NOΧ, mercury, or

CO2. And I think all of those are problems in China and India.

And so my judgment is that we are going to have to lead on this.

I don’t think leadership translates into Kyoto. I think it is something less than that, because I don’t think our country can do it

for now. But I do think we can do something. And we need to do

it and say we will go to this place, and if India and China are not

on board at that place, then maybe we don’t go any further. So we

have—I think, at the end of the day, we are going to have to go

first in order to bring them along with us.

56

And quite frankly, I am impressed with what Prime Minister

Blair is doing. He is taking the G–8 in a couple of months and basically going to make this issue a primary issue. And he believes that

bringing both India and China on board is critical to our success

on this issue.

Mr. GREEN. I welcome any additional comments, Mr. Chairman,

if time permits. If not, I will yield back.

Chairman BOEHLERT. Time does permit. And incidentally, if we

were in a different venue, you had said you would stand up and

applaud. You can stand up and applaud right here. This venue is—

but I don’t want you guys to think, quite frankly, that this is all

going to be a cakewalk as you go forward. You understand that.

Maybe absent today are some of the most critical of our colleagues

in terms of this whole issue, and I am really sorry that they have

conflicts and can’t be here, because I would like them to hear what

you are saying. And what you are saying is you are not just altruistic in doing what you are doing, providing leadership, and you are

not just goodhearted citizens. There is an enlightened self-interest

in doing what you are doing, and it is good for everybody.

So you have got more time, Mr. Green.

Mr. GREEN. Thank you, Mr. Chairman.

If another panel member would care to give a response. Yes, sir.

Mr. MEISSEN. Well, I can’t speak to what other industries and

companies are doing, but given the nature of our products and

services and our manufacturing operations around the world, we

operate—we have the same standards around the world, and these

are the same standards on quality, but also in environmental

health and safety policies but also on energy conservation, water

conservation, and other resource conservation. We have a number

of facilities in China and a few in India that are doing an excellent

job on managing resources and operating in a very cost-effective

manner. Actually, a few best practices are coming. So I think that

it first starts with the company. And in our case, we can’t influence

maybe what other companies or larger organizations can do, but we

can influence what we do. We can set our policies. We can set the

direction we want to go. We can set our strategic focus. We see the

carbon cap and trade schemes emerging around the world, and that

is why we got involved in the Chicago Climate Exchange. The emissions of all of the members of the Chicago Climate Exchange equal

over c the emissions of Great Britain. And in the first year of our

pilot program, we were able to reduce that eight percent on an absolute basis. And that is by finding the most cost-effective in the

different facilities and the different organizations to implement a

project that reduces carbon.

And so when you have a multi-sector, multi-national organization, you can find the lowest—I mean, the cost—incremental cost

to reduce carbon can be determined, and therefore, you, cost-effectively, can reduce it for the whole group.

Mr. GREEN. Yes, sir. Dr. Hobbs.

Dr. HOBBS. Just one more quick thing.

Sometimes applauding what people are doing good is a good

thing, too, so recently our Carrier division and the state Environmental Protection Agency of China established a China Ozone Protection Award. The program recognizes individuals and organizaVerDate 11-MAY-2000 06:48 Nov 12, 2005 Jkt 021708 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 C:\WORKD\FULL05\060805\21708 SCIENCE1 PsN: SCIENCE1
57

tions promoting the use of non-ozone-depleting technologies. That

is not greenhouse, but it is allied, and—but we are trying to project

the same kind of responsible image to China that we do in the

United States.

Mr. GREEN. Thank you, Mr. Chairman. I yield back.

Chairman BOEHLERT. Thank you, Mr. Green.

Chairman Inglis.

Mr. INGLIS. Thank you, Mr. Chairman. That enlightened self-interest you were talking about, Mr. Chairman, comes home with

General Electric who makes those coal gasification turbines in

Greenville, so we are very excited about that. And I think that it

is something that proves the point that you are making, that industry with enlightened self-interest can do things that really can help

the whole world. So that is exciting.

Also, Mr. Rogers, we are excited about Duke Power looking at a

nuclear power plant. I think the best—one of the best sites they

could look at is in South Carolina’s Savannah River Site, particularly if they use that technology—use that opportunity—your new

company uses that opportunity to create hydrogen as a byproduct

out of that nuclear reactor that they would build. We know a lot

about keeping hydrogen under pressure at Savannah River Site,

because we have kept tritium under pressure for 30 years there,

and so it would be a fabulous place for Duke Power to do this, to

start moving us toward fixing what Dr. McFarland was talking

about, at least B of that sector being transportation. If we can create hydrogen and move toward a hydrogen economy that could propel us in cars, it would be a fabulous thing. And we have got an

opportunity with that next nuclear reactor. And I hope, Mr. Chairman, that that becomes an opportunity for us to work in a very bipartisan way, and also biophilosophical, if that is a word, way between conservationists and environmentalists. Conservationists are

people who want to conserve things. Environmentalists are people

who have, perhaps, a slightly different worldview or a different

worldview than conservationists, but there is agreement, it seems

to me, or potential for agreement on things like moving toward hydrogen, especially if you did it through nuclear.

So that is a little bit of preaching there about the opportunities

that are available.

And the question—I would follow up in what Mr. Green was asking about. It seems to me that if we are to encourage China and

India to do what we have now figured out to do because our technology has gotten us to the place where we can do it, if we can get

them, in some way, to go with that technology right off the starting

line rather than to retrofit later. I have got to assume it is far more

expensive—and this is your experience. I have got to assume it is

far more expensive to retrofit an investment you already have. If

we could encourage them to somehow get involved in this new technology, like coal gasification turbines made by General Electric, to

buy those first rather than build the quick and easy now, come

back later and find it cost-prohibitive to go that—can—anybody

want to comment on how you can encourage people to do that? Obviously, your companies are leaders in this.

Mr. ROGERS. I think it is really critical that when new power

plants are built in China and India they use the best available

58

technology. And you are right. I mean, as a company that in the

Midwest we will have spent, over the last decade and looking forward to 2010, almost $4 billion on retrofits in terms of putting

scrubbers on the back end of plants and putting SCRs to take NOΧ

out and take SO2 out and to combine they take mercury out. It is

smarter to do it on the front end. And when you build a power

plant, whether you build it in China or you build it in the United

States, you are building that plant to be there for 40 to 50 years.

And that is why it is so important in this country, and that is why

I am so much a pragmatist about this. I am—all across our country, power companies, over the next three to five years, are going

to be making decisions about the next generation of power plants

to build. We don’t even know what the rules are on SOΧ, NOΧ, and

mercury. We don’t know what the rules are on carbon. But we all

instinctively know that they are going to be tighter than they are

today and that we will have carbon rules. And because we will, we

are forced to look at nuclear more, look at coal gasification because

those are lower-cost approaches to taking it out. If you looked at

a coal plant today and you—and if this is the coal plant where the

retrofits have been put on, probably only that much of the coal

plant is where the power is generated. All of the rest is to clean

up the air byproduct. If you look at a coal gasification facility, what

you see is you could do it cheaper, take the SOΧ, NOΧ, and mercury

out, on the front end, and so you don’t have to build this huge facility on the back end of the power generation. And that is about as

technical as I ever get.

But my point is that these decisions are 40- and 50-year decisions. And so to your point, if we can lead with our technology and

to set—help them and do it ourselves, set guidelines and goal lines,

I think we have the ability to make the right decisions, rather than

make the wrong decision and have to fix it 15 years from now.

Mr. INGLIS. Anybody else want to comment about that?

Dr. MCFARLAND. On the issue of leadership and bringing the

other countries, China and India, on board, it is also a matter of

implementing those technologies here to bring the costs down. And

also, there is a long-term issue here that we, to solve this issue,

are going to have to have breakthrough technologies, and developing and providing the market signals to implement those technologies in the long run are going to be absolutely critical to solving this long-term global issue.

This isn’t a sprint. It is a marathon. We have got to get started

now. It is going to take decades to really, truly address this issue.

You know, just to put it in perspective, to achieve the goals of the

Framework Convention on Climate Change, which I like to talk

about rather than the Kyoto protocol, some time in the next 75 to

150 years, global average per capita emissions of carbon must be

one-tenth of what they are today in the United States and continuing to fall. The more you emit now, the less you can emit in

the future. So it says you start now, you take incremental steps,

and you prepare for the future.

Chairman BOEHLERT. Thank you.

The gentleman’s time has expired.

59

To paraphrase an old adage, Dr. McFarland, a journey of decades

starts with the first day of forward movement, and you guys are

moving forward. Thank you.

Mr. Wu.

Mr. WU. I would like to commend the Chairman for his leadership on this issue and thank the panel, Mr. Rogers, Dr. McFarland,

Mr. Meissen, Dr. Hobbs, for your private sector leadership and the

enterprises which you represent, whether it is Cinergy or DuPont

or United Technologies or Baxter. Thank you very much for providing that private sector leadership.

I don’t have a question for you all so much as I have a comment

about what is going on in the public sector on this issue. Now I am

way past the age where I take newspaper stories at face value, but

there is a front-page story in today’s New York Times by Andrew

Revkin. And anything that says that a former American Petroleum

Institute official is now the Chief of Staff for the White House

Council on Environmental Quality sort of gets me to read the rest

of the article. And the rest of the article proved rather interesting,

because it turns out that this attorney with an economics background has been editing science reports on climate. And here is an

example of a paragraph, which he crossed out from a scientific report.

The paragraph would have read, and this is all crossed out,

‘‘Warming will also cause reductions in mountain glaciers and advance the timing of the melt of mountain snow peaks in polar regions. In turn, runoff rates will change, and flood potential will be

altered in ways that are currently not well understood. There will

be significant shifts in the seasonality of runoff that will have serious effects on native populations that rely on fishing and hunting

for their livelihood. These changes will be further complicated by

shifts in precipitation regimes and a possible intensification in increased frequency in extreme hydrologic events.’’

‘‘Extreme hydrologic events’’ is what I think we, in the Northwest, call a flood. And this is all redacted from a scientific report.

And it would be disturbing in and of itself were it not for the fact

that in the story, it said that ‘‘critics admit that while all Administrations routinely vet government reports, scientific content in such

reports should be reviewed by scientists,’’ and that, further,

‘‘politicization by the White House has fed back directly into the

science program in such a way as to undermine the credibility and

integrity of scientific programs with a chilling effect and has created a sense of frustration among scientists.’’ And there is a comment of the National Academy of Sciences that they warn that the

Administration’s procedures for vetting reports on climate could result in excessive political interference with science.

Now you all have provided terrific private sector leadership in

this arena, and Mr. Chairman, you and others on this committee

have provided leadership on this issue in terms of science. And I

would submit that we have an oversight responsibility to make

sure that the integrity of the scientific process is maintained no

matter what the current political climate may be. There is always

a limit to what we can do, whether that is technologic or political,

but we must exert best efforts.

60

As you know, Mr. Chairman, on my side of the aisle, I have been

a relative moderate on climate change issues. I have been more focused on backyard issues than global change issues, but I do find

that a twisting of the scientific process is very disturbing to me,

and I would like to submit this June 8 New York Times article into

the record of the hearing and yield back the balance of my time.

[The information follows:]

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Chairman BOEHLERT. Thank you.

From one relative moderate to another, the Chair now recognizes

Dr. Ehlers.

Mr. EHLERS. Thank you, Mr. Chairman. I would just observe

that when I stopped reading the New York Times, I increased the

amount of time I had available and reduced my anxiety level. That

is offered in jest, by the way. I don’t want a New York Times editorial about the know-nothing attitude in the Science Committee.

I had several questions I was going to ask. Many of them have

been touched upon.

Let me summarize with a few comments and some additional

questions.

First of all, on Mr. Green’s question and the answers.

I certainly agree that China and India are the greatest problem

in the near future, but I think the Kyoto treaty was fatally flawed

by not setting up a timeline for every nation. And the reason for

that was alluded to by Mr. Rogers, in your comment that energy

investments tend to be very long-term investments. And if, for example, Uganda and Costa Rica knew that they were going to be

subject to the treaty requirements in 2020, they would make far

different investment decisions now than they would make if they

knew they didn’t have to worry about it until some time in the future, and they wouldn’t have to make retroactive changes. So I

really think every nation has to be—has to know it is going to affect them, because clearly in sunny climates, particularly central

Africa, our good investments in solar energy over the long run

might be much more productive than investments in burning coal.

That was just a comment.

But Mr. Rogers, also in your testimony, you seemed to suggest

that restrictions on greenhouse gas emissions can result in leadership and technology and advanced competitiveness. I think that is

a very important factor that we tend to overlook too often on the

Congress, and I have been impressed with those countries that

have adopted, including, at times, the United States, that have

adopted advanced requirements. They have led to developments of

entire new industries in environmental control and which immediately becomes an export business when other countries have

dropped those same requirements. But it seems to me that is always forgotten, or else ignored, by those who say there is no climate change. We could—if in fact we are wrong in that, or they are

wrong on it, we could be in the situation of having to import our

environmental controls rather than being in the position of developing them, as Dr. Hobbs says, and exporting them. Does that

make sense to you, or am I in La-La Land here?

Mr. ROGERS. No, I think you make a very good point. And at

great risk, I am reminded of a series of articles that were in the

New York Times over the last week talking about the innovation

and the new technologies in Japan, because they are very focused

on reducing their emissions of carbon and greenhouse gases. And

it reminded me that, you know, there is an advantage to countries

who know they are going to have to deal with this. It is an advantage of going to work, developing the technology, and solving the

problem. And I believe that we might be left behind, because we

don’t have the same motivation here, although these companies are

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just such wonderful examples of people that are looking ahead. Because I think the reason that they are looking ahead is because

they know eventually, or inevitably, that there are going to be requirements and that they will make money off of these technologies. And they see it as a trend that is occurring, and they are

positioning themselves for it.

So I support your point very strongly.

Mr. EHLERS. It seems to me that our business community in the

United States is, in many ways, ahead of both the political community and the general public on that issue, and that is particularly

displayed by the folks represented here.

Two other quick points.

First of all, Dr. Hobbs, I—as a scientist, I have to take a little

exception to the suggestion that you can just reverse an air conditioner and put in heat and get electricity out. I don’t want people

to think that they can buy this thing and just put a switch on it

and flip it and run it backwards.

Dr. HOBBS. Yeah, you have to change a couple of valves, but it

is not much worse—not much more than that.

Mr. EHLERS. Well, we will have to talk about that.

But your second point that you added later is the most important

one. It is very much dependent on the quality of the heat you are

working with. If you have high-energy content heat, it is very simple. If you have low-energy content, it is hard to beat the economics, and I hope we can. One thing we can’t beat are the laws of

thermodynamics, of course. That is our ultimate limitation.

Just quickly picking up on Mr. Sodrel’s excellent question.

I think another factor that is involved in this is that as fuel

prices increase, and this is not a short-term phenomenon, even

though they may drop next year for a few years, but long-term,

there are going to be sharp uptake as we deplete our fossil fuel,

but particularly petroleum and natural gas resources. Many new

approaches are going to become economically feasible, so that is another factor that says, you know, things that don’t look feasible

now, from an economic standpoint, will be feasible in 10 years, 15

years, and so let us get the ground work done.

And I can’t let this pass without getting in a very strong statement saying that that is why it is absolutely important for the government to continue to support fundamental research so that you

fellows can pick up the results of that and apply it in a very pragmatic way and solve these problems and make things more economically feasible. If we don’t step up to the plate, as we should

in the Congress and fund the fundamental research, it is going

leave you folks high and dry in the future. If we do that, it is going

to give you lots of opportunities for applied research technology development that is going to benefit not only you but the entire country.

As you said, it is better to preach than to meddle, and so I decided I should preach instead of meddle in your business.

So that is the end of my sermon, Mr. Chairman. Thank you very

much.

Chairman BOEHLERT. Thank you, Pastor—I mean, Dr. Ehlers.

Listen, we have got truth in advertising. Dr. Ehlers is a very distinguished scientist in his own right. He is a fellow of the American

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Physical Society and one of the strengths of this committee. And

I thank you for your observations.

I am going to speak shortly. I am going to have a whole room

full of lobbyists from the high-tech industries meeting on Capitol

Hill. And part of my message to them is we want you to lobby us

more, because we have to be strong advocates for more investment

in fundamental research. We have to be strong advocates in more

investment in K–12 science and math education. We are competing

in the global marketplace, and we are not doing as well as we

should.

And so—but part of the reason we are doing better than some

people think is the panel before us and the companies you represent and the leadership you are providing in a very important,

sensitive area.

So I thank you for being facilitators and resources for this committee. We will follow-up with some additional questions, as I indicated. In the meantime, have a good day.

This meeting is adjourned.

[Whereupon, at 12:05 p.m., the Committee was adjourned.]

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Appendix 1:

ANSWERS TO POST-HEARING QUESTIONS

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ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Mack McFarland, Environmental Manager, Fluorochemicals Business, E.I. DuPont De Nemours and Company

Q1. If you have any views on federal technology programs that you believe could help

reduce greenhouse emissions with improved focus or additional funding, please

provide them to the Committee.

A1. While many of DuPont’s greenhouse gas reductions have involved non-CO2

process gases, we recognize that energy related technologies will be the predominant

source of GHG reductions. We therefore believe the following areas are important

to pursue (not all of which lie in the Committee’s purview).

• There are a range of energy efficiency and alternative energy provisions in

the House and Senate energy bills currently in conference that we believe are

beneficial, including from the Senate bill provisions 1521, 1522, 1529, 1527,

1524, 1506, 1508, 1501, 1507.

• As a general matter support for co-generation and other forms of distributed

generation can help to make energy use more efficient.

• The Department of Energy’s biofuels program, under which we are collaborating on an Integrated Corn Based Biorefinery, provides great promise to advance non-fossil fuels.

• There are a range of energy efficiency and renewable energy matters on

which additional R&D can yield significant benefits. They include;

• Continuing advances in low cost, distributed process energy instrumentation that can be installed without a shut-down. Concurrent advances in

control room energy monitoring supervised by expert systems.

• Continuing development to improve the reliability and efficiency and decrease the capital cost of: insulation and steam traps, topping cycles, recovery of waste b pressure generators, modern motors.

• Long-term development of separation technologies that are an alternative

to distillation.

• Decreasing the capital cost for renewable energy equipment with particular attention to solar and large stationary CHP and fuel cells.

• Significantly reducing the purity required for any fuel used in a fuel cell.

• Addressing the large scale electrical energy storage problems (environmental footprint, durability and cost).

• Improving the efficiency and reliability and reduce the cost for the transmission of electricity.

• Decreasing the environmental impact of storage and production of all

forms of biomass.

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Appendix 2:

ADDITIONAL MATERIAL FOR THE RECORD

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PREPARED STATEMENT OF TOM CATANIA

VICE PRESIDENT, GOVERNMENT RELATIONS

WHIRLPOOL CORPORATION

Whirlpool Corporation is the world’s leading manufacturer and marketer of major

home appliances with annual sales of over $13 billion, producing 42 million appliances per year, and employing 68,000 employees. We have 50 manufacturing and

technology research centers around the globe. Whirlpool markets Whirlpool,

KitchenAid, Brastemp, Bauknecht, Consul, and other major brand names to consumers in more than 170 countries. We have nine major manufacturing facilities in

the United States. Of these, our plant in Clyde, Ohio is the world’s largest clothes

washer plant. Our plant in Marion, Ohio is the world’s largest dryer plant and our

plant in Findlay, Ohio is the world’s largest dishwasher plant.

Whirlpool Corporation respectfully submits the following testimony together with

the attached slides describing what we are doing to reduce greenhouse gas emissions. Some may still debate whether the science is definitive about the causes of

global climate change or even whether it is, in fact, occurring. Despite any remaining uncertainty, though, Whirlpool Corporation believes prudence dictates that,

when existing solutions are available to mitigate a company and its products’ impact

on the environment, they are worth pursuing especially where, as has been our experience, many of those solutions are not only a win for the environment and the

consumer, but also for our employees and our shareholders.

Whirlpool Corporation is first and foremost a consumer and brand focused home

appliance company. Our tens of thousands of shareholders and employees and tens

of millions of consumers expect us to fulfill our commitments to them to the utmost

of our collective ability, and they also assume that we can exceed their expectations

while minimizing our impact on the environment. We take those expectations to

heart. We have found that reducing the greenhouse gas emissions impact of our

company and its products is quite compatible with what some see as a more narrow

mission of being a profit-maximizing home appliance manufacturer and marketer.

Market-based Incentives and Public/Private Partnerships

We believe that GHG emissions reductions can be achieved most effectively and

quickly through an appropriate balance of regulatory measures, market-based incentives, and public/private partnerships. Such incentives include a manufacturer’s tax

credit such as the one being debated in the current Energy Bill for super energyefficient appliances. It could also include demand-side management incentives to

consumers that encourage them to choose more energy efficient appliances. One example nearby was the state of Maryland’s exemption of ENERGY STAR appliances from state sales tax. This program saw a 21 percent increase in the sales of

ENERGY STAR appliances.

If the Appliance Manufacturer Tax Credit were passed by Congress this year in

the Energy Bill, it would save over 200 trillion BTUs of energy, or the equivalent

of taking 2.3 million cars off the road, or eliminating the need for 6 coal-fired power

plants for a year. The bill would also reduce the amount of water necessary to wash

clothes by 870 billion gallons or approximately the amount of water necessary to

meet the needs of every household in a city the size of Phoenix, Arizona for two

years.

If, for example, the state of Ohio were to pass a four-year, state sales tax exemption for consumers of ENERGY STAR clothes washers, dishwashers, refrigerators,

and dehumidifiers, the carbon savings would be 224,107 m/t. The CO2 avoided

would be 822,472 m/t; and consumers would have $261 million more to put back

into the economy and pay for other products and services.

Public-private market transformation partnerships that have been successful include the ENERGY STAR program implemented by the U.S. Environmental Protection Agency and the Department of Energy. This program is voluntary and yet

has become competitively mandatory in the sense that, if a manufacturer does not

participate in the program, the manufacturer risks losing market share. It is an excellent program that transforms consumer education into an opportunity for manufacturers to successfully market a more environmentally friendly product at a premium. Today, over 40 percent of the appliances in the ENERGY STAR product

categories meet or exceed the ENERGY STAR levels.

If all new appliances sold in the United States were ENERGY STAR qualified,

the electricity saved in one year would be 3.4 billion kWh, the gas saved would be

109 million kWh, the carbon emissions avoided would be 2.4 million metric tons,

and the savings in monthly electricity bills would be $618 million.

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Voluntary Cap and Trade Program

If a voluntary cap and trade program offers true incentives for our industry to

reduce GHGs, then such a program would be helpful, too. However, the current

thoughts on cap and trade programs do not incentivize our industry to participate

since the proposed programs do not credit our industry with savings from the lifecycle use of the product—the largest portion of GHG emissions reductions for appliance manufacturing. In 2000, the Energy Information Administration (EIA) reported

that in 1999, 28 percent of all residential electricity consumption in the U.S. came

from the use of white goods (refrigerators, dryers, freezers, clothes washers, cooking,

and dishwashers). The UK Ecolabelling Board reported in 1992 that the cradle-tograve assessment of the environmental impact of clothes washers was allocated such

that less than 10 percent of the impact came from production, distribution, and disposal of the product. Whereas, life-cycle use of the product accounted for over 90 percent of the environmental impact. This shows that, if the government wants to motivate appliance manufacturers to participate in a meaningful cap and trade program,

then it needs to provide credit for the power plant emissions reduced or avoided

through the increased energy efficiency of our products.

We currently do not participate in the 1605b voluntary emissions reduction program because there is no clear benefit for our participation since our indirect emissions reductions would not be credited in the proposed final interim guidelines. They

should be. Also, we are already reducing emissions voluntarily and so there is no

incentive to become mired in a complex and burdensome emissions reporting program. Additionally, 1605b fails to recognize emissions reductions made before the

2003 reporting period.

Unilateral Reductions

Whirlpool Corporation has committed to reducing its GHG emissions globally by

three percent during the period 1998 through 2008 despite a nearly 40 percent projected increase in production volumes. A description of this commitment is in the

attached presentation. Whirlpool Corporation made this commitment because it is

the right thing to do and it is a possible thing to do while still addressing our business objectives of producing consumer-demanded products, employing people, and

generating profits. As national, regional, and global plans are developed to address

climate change, care should be taken to analyze the overall climate impact of any

particular measure. For example, banning the use of a particular greenhouse gasemitting compound as a refrigerant or refrigerator wall insulation material, may be

a net climate detriment if its impact in the product is to decrease its energy efficiency.

What Whirlpool has done and will continue to do

I am submitting a detailed presentation of what Whirlpool Corporation has done

in the past to address GHG emissions, however, I will briefly cover a few of the

highlights here.

Whirlpool has earned the ENERGY STAR Partner of the Year award six times

since 1999. Whirlpool has led in the crafting of all major appliance efficiency legislation since 1975 and in the crafting of every appliance efficiency standard since 1990.

The appliance industry as a whole has contributed significantly to energy efficiency and consumer savings over the years. Today’s refrigerator uses 61 percent

less energy than in 1983, saving the consumer $59/year vs. a 20-year old unit.

Whirlpool’s side-by-side refrigerators use 619 kWh/year, equal to a 75-watt light

bulb. In 1980, as reported by the EIA in 2001, it took $87 per year to operate the

average clothes washer and, in 2001, the cost dropped to only $25 a year for the

highly efficient Whirlpool Duet.

Whirlpool was the first appliance manufacturer to announce in 2003 a global

greenhouse gas emissions reduction target. Using 1998 annual total global emissions from product manufacturing, product lifetime energy use, and any emissions

associated with product disposal as our baseline, Whirlpool will decrease our absolute total emissions by three percent by 2008. This reduction will occur despite a

projected increase in unit sales by nearly 40 percent during that period. Such a reduction results in an annual savings of four million metric tons of carbon in absolute savings and fifteen million metric tons of carbon annually compared to our 1998

per unit rate of emissions. Fifteen million metric tons represents the elimination of

28 coal-fired power plants and the equivalent of 10 million fewer cars on the road.

This commitment is a global effort. This is something very important to recognize

given that the Kyoto Protocol and a few other recent climate change proposals do

not address climate change on a truly global basis. Our emissions per unit reductions from 1998 to 2008 are projected to be over 20 percent for production in Europe,

India, and China and nearly 30 percent for production in the U.S. and Canada.

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Closing

I appreciate the opportunity to provide comments on this important subject today.

In summary, Whirlpool Corporation knows that it can contribute meaningfully to a

reduction in greenhouse gas emissions without jeopardizing its leading global position in the industry. In fact, working on energy and water efficiency has helped us

develop some of the products that are most profitable and loved by consumers. However, we believe this virtuous cycle is created through market-based mechanisms

that encourage technological innovation, allow flexibility in global production, credit

indirect emissions reductions that occur during the use of the product, and consistently support public-private partnerships that stimulate consumers into action. We

look forward to working with you in the future on this important matter. Thank

you.

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