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FULL COMMITTEE HEARING ON 

CLIMATE CHANGE SOLUTIONS FOR SMALL 

BUSINESSES AND FAMILY FARMERS 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

APRIL 29, 2009 

Small Business Committee Document Number 111-017 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

PARKER GRIFFITH, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEES 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

PARKER GRIFFITH, Alabama 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, Pennsylvania, Chairman 

HEATH SHULER, North Carolina 

BRAD ELLSWORTH, Indiana 

PARKER GRIFFITH, Alabama 

MARY FALLIN, Oklahoma, Ranking 

LOUIE GOHMERT, Texas 

(III) 

Subcommittee on Regulations and Healthcare 

KATHY DAHLKEMPER, Pennsylvania, Chairwoman 

DAN LIPINSKI, Illinois 

PARKER GRIFFITH, Alabama 

MELISSA BEAN, Illinois 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

LYNN WESTMORELAND, Georgia, Ranking 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

Subcommittee on Rural Development, Entrepreneurship and Trade 

HEATH SHULER, Pennsylvania, Chairman 

MICHAEL MICHAUD, Maine 

BOBBY BRIGHT, Alabama 

KATHY DAHLKEMPER, Pennsylvania 

ANN KIRKPATRICK, Arizona 

YVETTE CLARKE, New York 

BLAINE LUETKEMEYER, Missouri, Ranking 

STEVE KING, Iowa 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

(IV) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1 

Graves, Hon. Sam .................................................................................................... 2 

WITNESSES 

Yoder, Mr. Fred , Past President, National Corn Growers Association .............. 3 

McNamara, Mr. Rob, Senior Vice President, National Roofing Contractors 

Association ............................................................................................................ 5 

Johnson, Mr. Roger, President, National Farmers Union .................................... 6 

Sharp, Mr. Gordon P., Chairman, Aircuity, Inc., Newton, MA ............................ 8 

Kavanagh, Mr. Lawrence W., Vice President, Environment And Technology, 

American Iron And Steel Institute ..................................................................... 10 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 26 

Graves, Hon. Sam .................................................................................................... 28 

Yoder, Mr. Fred , Past President, National Corn Growers Association .............. 30 

McNamara, Mr. Rob, Senior Vice President, National Roofing Contractors 

Association ............................................................................................................ 35 

Johnson, Mr. Roger, President, National Farmers Union .................................... 42 

Sharp, Mr. Gordon P., Chairman, Aircuity, Inc., Newton, MA ............................ 51 

Kavanagh, Mr. Lawrence W., Vice President, Environment And Technology, 

American Iron And Steel Institute ..................................................................... 59 

Statements for the Record: 

Halvorson, Hon. Debbie ........................................................................................... 64 

Connors, Mr. Corey, Director Legislative Relations, American Nursery & 

Landscape Association ......................................................................................... 66 

Looney, Mr. Robert J., Vice President of Government Affairs, CHS, Inc. .......... 71 

National Oilseed Processors Association ............................................................... 78 

Kozak, Mr. Jerry, President and CEO, National Milk Producers Federation .... 87 

(V) 

(1) 

FULL COMMITTEE HEARING ON 

CLIMATE CHANGE SOLUTIONS FOR SMALL 

BUSINESSES AND FAMILY FARMERS 

Wednesday, April 29, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 2360 

Rayburn House Office Building, Hon. Nydia Vela ́zquez [chairman 

of the Committee] presiding. 

Present: Representatives Vela ́zquez, Dahlkemper, Bright, 

Graves, Luetkemeyer and Thompson. 

Chairwoman VELA ́ ZQUEZ. I call this hearing of the Small Business Committee to order. 

Within the scientific community, a clear consensus has formed 

about the need to address the dangers of climate change. The effects of global warming are indisputable, from rising sea levels, to 

increasingly violent natural disasters. Repercussions like these will 

be disastrous, not only in terms of human suffering, but also for 

our global economy. 

Across the country, America’s small businesses are stepping up 

to help address this problem. Today, the Chicago Climate Exchange 

boasts 3,500 members, and trades $9 million worth of carbon offsets. That is enough to mitigate annual emissions for 320,000 cars. 

Entrepreneurs and family farmers are pioneering innovative ways 

to reduce carbon in the atmosphere. Whether it’s trading carbon 

credits, or developing renewable fuels, small firms everywhere are 

making critical investments in a greener future. 

If it’s done right, reducing greenhouse gas emissions will mean 

more opportunities for our small business economy. As legislation 

to address climate change goes forward, we need to make sure that 

the final proposal not only protects our environment, but creates 

jobs. Properly constructed legislation will result in a win-win. It 

will expand small business jobs, while protecting the planet. 

Despite these opportunities, some businesses understandably 

worry about the expense of addressing climate change. And, of 

course, it is important that entrepreneurs not be unfairly burdened 

as we transition to a carbon constrained economy. Let’s not forget, 

small businesses are some of the largest energy consumers, so we 

need to carefully consider how capping carbon emissions will affect 

them. 

In grappling with these issues, one thing has become clear—the 

only option not on the table is doing nothing. For better or worse, 

2 

the EPA’s recent decision to classify carbon dioxide as a dangerous 

pollutant means that it will now be regulated under the Clean Air 

Act. The Clean Air Act laws, which were enacted in 1970, simply 

were not written with this purpose in mind. Trying to regulate carbon dioxide emissions through the existing Clean Air Act laws is 

trying to put a square peg in a round hole. That means, the question is no longer if we’re going to reduce greenhouse gas emissions, 

but rather when, and how. 

If we are going to both address climate change, and create new 

growth opportunities for small businesses, leadership will be required on all fronts, not just from EPA, but from Congress, as well. 

That is the right way to go about this monumental task. 

The panel before us today can testify about some of the ways in 

which small businesses and family farmers are pioneering the 

green revolution. I look forward to hearing about their experiences 

in the growing field. However, if they are going to continue this impressive work, they will need the proper support from all of us. 

I thank our witnesses for being here today, and I yield to Ranking Member Graves for his opening statement. 

Mr. GRAVES. Thank you, Madam Chair. Good afternoon, everyone, and thank you for participating in today’s hearing. And I want 

to thank Chairwoman Vela ́zquez for holding this timely hearing. 

The debate on climate change has shifted from the global cooling 

concerns of the 1970s to global warming today. There seem to be 

a broad consensus that human activities are increasing carbon dioxide emissions into the atmosphere. However, debate continues on 

how much those emissions are changing the climate, at what rate 

it is changing, and what effects are exactly are going to be. 

It seems that you can find a statistic or a scientist that can support any position on climate change. And with such variation 

among scientists, I think it’s important that we take a very calculated approach towards addressing climate change. 

Dramatic new requirements for industry can also have devastating effects on the economy, both for business, and for consumers. Studies suggest that taxes from proposed climate change 

legislation could cost the American household thousands of dollars 

per year in increased energy bills. Revenues would be collected 

from new mandates on industry, and the cost would be passed on 

to the consumer, both residential, and commercial. 

Considering the lagging economy, this is something that I look 

at as to be a big question; is this something we want to do? And 

when other countries, like China and India, don’t have the same 

strict caps, are we putting businesses in an unfair advantage here 

in the United States? 

Besides these concerns, I also find alarming that nuclear power 

is not being considered as a renewable fuel source. If reducing CO2 

emissions is truly a goal, then ignoring nuclear power is a big mistake, given it already provides this country with 20 percent of its 

electricity. Simply allowing nuclear power to meet new renewable 

electricity standards, I think would moderate costs to consumers. 

Real solutions need to take into account regional differences 

throughout the country, take advantage of clean fuel within our 

borders, including natural gas, and nuclear power, offer incentives, 

3 

and carefully consider how our economy will be impacted, both domestically, and internationally. 

And, again, thank you, Chairwoman, for holding this hearing. I 

look forward to the testimony. 

Chairwoman VELA ́ ZQUEZ. Thank you. And I welcome our first 

witness, Mr. Fred Yoder. He is a corn farmer from Plain City, Ohio. 

Also, he is the past President of National Corn Growers Association, and current member of the 25x25. Mr. Yoder also is part of 

a new task force, NCGA, established to evaluate climate issues. 

The NCGA represents more than 32,000 corn growers from 48 

states. 

Welcome, sir. You have five minutes to make your statement. 

STATEMENT OF FRED YODER 

Mr. YODER. Thank you, Madam Chair, and Ranking Member 

Graves. It’s a pleasure for me to be here, and I appreciate the remarks that you both have shared with us. 

Thank you for the opportunity to testify today on behalf of the 

National Corn Growers Association regarding climate change solutions for small businesses and family farmers. I applaud the Committee’s efforts to focus attention on the important role the agriculture industry has in the area of climate change and the issues 

facing rural America. 

I grow corn, soy beans, and wheat near Plain City, Ohio, and I’ve 

been an active participant in climate change discussions for many 

years. In December, I had the opportunity to attend and participate 

in the United Nations World Climate Conference in Poland, where 

I was able to discuss the role of agriculture in reducing greenhouse 

gas emissions. Also, in addition to being part of NCGA’s efforts, 

like you said, Madam Chair, I serve on the boards of numerous 

other ad hoc groups, including 25x25 Working Group for Carbon, 

and also the Ag Carbon Market Working Group here in D.C. 

I feel strongly that as Congress moves forward on climate legislation, that agriculture should be considered as a significant part of 

the broader solution as we evaluate ways to reduce greenhouse gas 

emissions. Our nation’s corn growers can play a major role in a 

market-based cap and trade system through sequestering carbon 

on agricultural lands. Numerous economic analyses have shown 

that a robust offset program will significantly reduce the cost. 

In the near term, greenhouse gas reductions from livestock and 

agricultural conservation practices are the easiest, and most readily available means of achieving reductions on a meaningful scale. 

EPA estimates that ag and forestry lands can sequester at least 20 

percent of all annual greenhouse gases here in the United States. 

Further, agricultural producers have the potential to benefit from 

a properly crafted cap and trade system. Given those opportunities, 

it’s critical that any climate change legislation seeks to maximize 

agriculture’s participation and insure greenhouse gas reductions, 

while also sustaining a strong farm economy. 

For years, corn growers, along with the rest of the agriculture industry, have been proactively engaging in conservation practices, 

such as no till, and reduced tillage, which result in a net benefit 

of carbon stored in the soil. In fact, on my own farm, I do both no 

till and reduced till. For the past five years, I’ve worked with my 

4 

State Association, the Ohio Corn Growers, on a research project 

with Dr. Rattan Lal, from the Ohio State University, on soil carbon 

sequestration research. As part of our research, we have on-farm 

plots at six different locations to study various soils, and their carbon capture capabilities. I’ve been actively engaged from the beginning in defining the research protocols. This is just one example of 

the proactive steps our industry has taken. 

NCGA has identified several priorities, which I believe are critical elements to the agricultural sector within the cap and trade 

legislation. First, NCGA feels the agricultural sector should not be 

subject to an emissions cap. Any efforts to regulate greenhouse gas 

emissions from America’s two million farms and ranches would be 

costly, and burdensome. The agricultural industry accounts for a 

very small percentage of emissions in the overall economy. Only 7 

percent of all greenhouse gas emissions. Therefore, it would be unreasonable to concentrate on regulations for such a small and diffuse industry. 

Furthermore, an important component of creating such a successful cap and trade system is insuring that domestic offsets are not 

artificially limited. Artificial caps will prevent legitimate carbon sequestration, livestock methane capture, and manure gasification 

projects from occurring. 

Another top priority for our industry is the role of USDA. NCGA 

feels that USDA should play a prominent role in developing the 

standards, and administering the program for agricultural offsets. 

The Department has institutional resources, and technical expertise necessary to oversee programs that have the potential to be 

massive in scope. USDA has a proven record of program implementation, and collaboration with farmers. 

One other issues that continues to be of the utmost importance 

to NCGA is the treatment of early actors. Agriculture is constantly 

evolving. As technologies and practices improve, farmers will continue to adopt new and efficient practices. However, producers that 

have taken these steps already should not be placed at a competitive disadvantage by being excluded from compensation for future 

offsets that occur as a result of these ongoing efforts. 

In conclusion, it’s our hope that we can continue to work with 

Congressional leaders to insure Congress—that they choose the 

best path for agriculture and America. Finally, corn growers will 

continue to meet the growing demands of food, feed, and fuel in an 

economical and environmentally responsible manner. 

I thank the Committee for its time, and I very much look forward 

to your questions. Thank you. 

[The statement of Mr. Yoder is included in the appendix at page 

XX.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Yoder. Our next witness, Mr. Robert McNamara. He’s the President of F.J.A. 

Christiansen Roofing Corporation in Milwaukee, Wisconsin. His 

company was founded in 1879, and is one of the largest, most respected roofing contractors in the Midwest. 

Mr. McNamara is testifying on behalf of the NRCA, which was 

founded in 1886, to represent all segments of the roofing industry. 

Welcome, sir. 

5 

STATEMENT OF ROBERT McNAMARA 

Mr. MCNAMARA. Thank you, Madam Chairwoman, and members 

of the Committee for the opportunity to testify today on behalf of 

the National Roofing Contractors Association. I am Rob McNamara, President of F.J.A. Christiansen Roofing, a Tecta America 

Company in Milwaukee, Wisconsin, and incoming President for our 

Association. 

The roofing industry is uniquely positioned to play an important 

role in developing innovative solutions to climate change issues 

now being addressed by Congress. These opportunities include (1) 

increased energy efficiency, including vegetative and reflective, or 

cool roofs, in appropriate climates, as well as daylighting through 

rooftops to reduce interior electric lighting requirements; and, second, production of renewable energy from rooftops via solar electric, 

solar thermal, and wind energy generation. 

First, regarding increased energy efficiency, residential and commercial buildings in the U.S. account for about 30-40 percent of the 

carbon emissions generated by our nation. Providing incentives for 

building owners to adopt more energy efficient roofing systems will 

provide numerous benefits to the public. Current trends toward the 

adoption of green buildings are key drivers of economic growth in 

our industry. NRCA and its members are working to maximize the 

environmental, energy conservation, and economic benefits of expanding green buildings through a variety of energy efficient roof 

technologies that can help reduce carbon emissions, and provide 

other environmental benefits. 

Second, we continue to see the increased use of rooftop technologies to increase energy production from sustainable sources. 

These include photovoltaic roof systems that generate electricity 

from solar power, solar thermal rooftop installations to reduce energy requirements for heated water, and roof-mounted wind turbines for power generation. Roof surfaces across the nation offer an 

economical and ready-to-use platform for the production of renewable energy. If only one-third of the roof area of current U.S. residential and commercial buildings was used for solar energy production, our rooftops could generate over 50,000 megawatts of power 

annually, or about 8 percent of our current electricity generating 

capacity. And these numbers will only increase with expected advances in PV technology, and the resulting efficiencies in the coming years. 

As Congress considers legislation to address climate change 

issues, NRCA urges members to adopt market-based solutions 

wherever possible to achieve public policy goals. 

We are pleased that the discussion draft proposed by Representatives Waxman and Markey recognizes the positive role that energy 

efficient roof systems can play. For instance, this proposal would 

accelerate the adoption of so-called cool roofs that reduce carbon 

emissions by achieving higher levels of solar reflectance. NRCA 

shares the proposal’s objective to accelerate the use of energy efficient roofs, and we look forward to working with Congress to insure 

that roof standards reflect the reality of differing climatic and geographic zones. 

NRCA also shares the goal of achieving accelerating energy efficiency by setting new standards for building codes. However, we 

6 

urge Congress to work with the existing code bodies, the construction industry, and other stakeholders to maximize attainment of 

energy efficient goals that are effective, practical, and achievable. 

NRCA also urges Congress to consider providing tax incentives 

for building owners who install energy efficient roof systems that 

go beyond the requirements of existing building codes. 

While our industry can play a productive role in addressing climate change issues, NRCA does have concerns about the potential 

impact of a cap and trade system for combating climate change. 

Given that a large percentage of roofing products contain asphaltbased materials, the cap and trade program could adversely effect 

the price sensitive roofing industry by raising input prices. 

NRCA urges Congress to remember that higher costs will inevitably be passed on to consumers, and this could inhibit the growth 

of our industry, and the adoption of energy efficient roofing. 

NRCA also has concerns over the Environmental Protection 

Agency’s proposed endangerment finding which would result in 

greenhouse gases being regulated under the Clean Air Act. Many 

of NRCA’s members have already had untold number of projects 

cancelled, or put on hold indefinitely, due to the downturn in our 

economy. The advent of additional regulation and permitting could 

bring our present level of activity to a virtual standstill. 

Finally, NCRA believes that Congress should remove an obstacle 

in current law affecting the expansion of energy efficient roofing by 

passing the Green Roofing Energy Efficiency Tax Act. In lieu of the 

current 39-year depreciation schedule that is well beyond the average life of a roof system, GREETA would provide a more realistic 

20-year tax depreciation schedule for commercial roof systems that 

meet a benchmark energy efficiency standard. By accelerating demand for green roof systems, GREETA will reduce carbon emissions by 20 million pounds per year, and would benefit millions of 

small business owners. 

NRCA wishes to thank you, Madam Chairwoman, and also Congressman Moore for co-sponsoring GREETA. 

To conclude, NRCA believes that recent advances in energy-efficient and energy-producing roof systems will provide unique opportunities for our industry to play a significant role in addressing climate change issues, and we thank you for this opportunity to testify today. 

[Mr. McNamara’s prepared statement is included in the appendix 

at page XX.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. McNamara. We have 

three votes, but we will have time for Mr. Johnson to make your 

testimony. So, let me just introduce you formally. 

Mr. Johnson is a third-generation family farmer from Turtle 

Lake, North Dakota. He is also President of the National Farmers 

Union. NFU was founded in 1902 to help the family farmers address profitability issues and monopolistic practices, and today has 

a membership of 250,000 farm and ranch families. Welcome. 

STATEMENT OF ROGER JOHNSON 

Mr. JOHNSON. Thank you, Madam Chairwoman, and Ranking 

Member Graves. We are pleased to have this chance to testify on 

7 

behalf of the agricultural community, and specifically on behalf of 

our 250,000 members. 

National Farmers Union emerged as a leading voice for how agriculture can play a significant role in dealing with climate change 

a few years ago. Our policy adopted by all of our members supports 

a national mandatory carbon emission cap and trade system. We’ve 

seen the impacts of some of the climate change—some of the climate change impacts over the years on our industry, and we think 

it is time that Congress dealt with this issue. 

We also think that it is, as you indicated, not a matter of if, but 

a matter of how and when that this issue gets addressed. We think 

it makes sense for us to use a cap and trade system. It is what 

much of the rest of the world seems to be doing. It provides flexibility that would be important for us. And, hopefully, it will provide 

an opportunity for our farmers and ranchers to participate in a 

meaningful way. 

Climate change legislation, if it is not passed, likely will result 

in EPA regulating. That is not something that our members would 

look forward to being subjected to, so we support a comprehensive 

legislative approach to addressing climate change. 

Agriculture’s role, we believe that, as you heard in earlier testimony, we contribute less than about 7 percent of U.S. emissions in 

agriculture, but we have the potential to offset up to 20, to maybe 

25 percent of all U.S. greenhouse gas emissions, and so we stand 

ready to play a role in that. 

The income potential from using offsets will be significant. Our 

members understand that whatever climate change legislation is 

ultimately implemented, it is going to result in increased costs for 

fuel, and fertilizer, and other inputs. We also want to have an opportunity to participate on the income side by the use of agricultural offsets. 

The distribution of allowances is particularly important, and we 

think that we have some suggestions in the testimony on how those 

allowances can be distributed back to the sector to help mitigate 

some of those cost increases that I referenced just a bit ago. Providing a percentage of those overall allowances back to us would 

be very beneficial. 

The National Farmers Union currently is a member of the Chicago Climate Exchange that you referenced in your opening comments. It is the CCX, the world’s first greenhouse gas emission registry. It’s operated voluntarily, but members of the CCX make legally binding, voluntary commitments to reduce greenhouse gas 

emissions. 

Our organization is currently the largest aggregator of agricultural credits for the CCX. We have about five million acres enrolled 

across 31 states in this country, nearly $9.5 million has been 

earned by about 4,000 of our members across the country. 

We also believe that there needs to be a significant role for 

USDA in running the offset program. As you heard earlier, USDA 

has a lot of the technical expertise, over 20 years of targeted climate change research has been done as USDA. We think they are 

well positioned to work with our farmers, both in terms of providing technical assistance, and also having access to facilities. 

They basically have offices in virtually every county across the 

8 

country, and so farmers and ranchers are used to dealing with 

them. 

We also believe that domestic offsets should be unlimited. There 

are a couple of reasons for that. Certainly, the potential to sequester up to 20 percent of greenhouse gas emissions is something we 

don’t want to overlook. Using offsets provides a mechanism for 

doing that. An arbitrary limit on offsets would work against sort 

of the idea of trying to keep this thing under some sort of cost control. The larger the market is, the more likely it is that the overall 

cost of the system will be reduced, and so offering unlimited offsets 

would help in that fashion, as well. 

We have a number of other concerns. Just quickly, three topics; 

additionality. We think that what you need to do in Congress is to 

establish a static baseline of activities. We want to make sure that 

we don’t punish early actors. In fact, they ought to be rewarded. 

There are systems that deal with reversals, which is an issue that 

some on the other side of this issue have sometimes raised from 

the environmental standpoint. And we also support stackable credits. Just because a farmer implements a practice that it’s good for 

the environment with respect to soil erosion, should not mean that 

that person shouldn’t be able to take advantage of an economic opportunity to also reduce greenhouse gas emissions. 

With that, Madam Chair, I would be pleased to respond to any 

questions, when that time comes. 

[Mr. Johnson’s prepared statement is included in the appendix at 

page XX.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Johnson. And the Committee now stands in recess until we come back from voting. Thank 

you. 

[Recess.] 

Chairwoman VELA ́ ZQUEZ. The Committee is called back to order. 

Our next witness is Mr. Gordon Sharp. Mr. Gordon is the founder and Chairman for Aircuity in Newton, Massachusetts. Mr. 

Sharp is also the founder and former CEO of Phoenix Controls, and 

has more than 25 U.S. patents to his name. Aircuity’s products reduce building energy and operating expenses while simultaneously 

improving its indoor environmental quality. Welcome, sir. 

STATEMENT OF GORDON SHARP 

Mr. SHARP. Chairwoman Vela ́zquez, thank you for the opportunity to speak before you today on how small business can, and 

is addressing climate change. My name is Gordon Sharp, and I am 

the Chairman and founder of Aircuity. I have started, and successfully grown several small businesses built around technology innovation for energy efficiency. 

Aircuity is an example of the impact of small business innovation 

on addressing climate change. Aircuity has commercialized technology to optimize ventilation for commercial and institutional 

buildings without sacrificing comfort, safety, or occupant productivity. 

Since most buildings are actually over-ventilated, properly controlling outside air in building ventilation is the single largest factor affecting both building mechanical system-related energy-efficiency, and indoor environmental performance. 

9 

Aircuity’s innovation was to develop an improved means for 

measuring the indoor environment that enables a reliable demandbased ventilation approach. Borrowing from the data networks 

world, we architected a multiplexed sensing system that routes air 

packets from throughout the building to a centralized set of high 

grade sensors. The result was a cost-effective, accurate, low-maintenance solution that addresses the deficiencies of conventional approaches. For example, this hearing room is a good candidate for 

our technology, since much of the time this space is not fully occupied, requiring less outside air. However, like most buildings, it is 

probably always ventilated at the same high rate, wasting significant amounts of energy on cooling, heating, and fan power. 

In terms of the climate change impact, Aircuity’s forecast for 

2009 should represent more than $7.5 million in annual energy 

savings, or an annual reduction of 38,700 metric tons of carbon dioxide, or equivalently, 85 million pounds of CO2. This is the climate change impact of 30.5 megawatts, or about $225 million of installed solar PV capacity, which is about 7.5 percent of the total capacity that was brought on last year. 

Whereas, Aircuity represents a younger small business in a rapid 

growth stage, Phoenix Controls, another small business that I 

founded, that was later sold to Honeywell, is a more mature business in the field of energy savings, airflow controls for laboratories. 

The climate change impact of their sales last year was roughly 

equal to the total new U.S. solar PV capacity installed last year. 

In fact, Phoenix Controls’ current installed base of systems is reducing energy consumption by about $1.1 billion annually, representing a carbon footprint reduction of 5.6 million metric tons of 

CO2, or the energy equivalent of 1-1/4 days of imported foreign oil. 

Regarding the financial practicality of these energy efficiency solutions, cost is often raised as an obstacle. Whereas, in reality, they 

are solid financial investments. For example, Aircuity systems usually deliver paybacks from one to four years, which represents internal rates of return from 100 percent to about 20 percent. A larger obstacle is actually owner concerns that the projected savings 

are not achievable, or that the technology is too new, and from a 

lesser known small business. 

This credibility gap can be difficult to cross until there is a critical mass of proven installations. As I have personally experienced, 

pioneers are the ones with the arrows in their backs. One means 

to help bridge this gap is to introduce incentives from both utilities 

and the government to reduce the financial barriers for early 

adopting organizations that have effectively been increased by 

these concerns. Additionally, carbon credits may represent another 

helpful financial boost. Over time, this assistance becomes less important as the technology’s true financial returns become known. 

Due to the current high cost of renewable energy, the interest in 

using energy efficiency to address climate change has increased 

dramatically. In fact, our business has nearly tripled in the last six 

months. On a broader front, in the last four years, the value of 

green building construction has gone from about 2 percent, to a 

level approaching almost 10 percent of new construction starts. In 

the next four years, the green building market, even with the curVerDate Aug 31 2005 15:06 Jun 12, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48881.TXT DARIEN
10 

rent economic downturn, is projected to reach between 96 and 140 

billion dollars annually, versus 36-49 billion dollars today. 

There has never been a more important time for small businesses to pursue innovation for energy efficiency and sustainable 

climate change. Aircuity is proud to be one of many small businesses doing its part to achieve these ends. 

I want to thank the Committee for the opportunity to appear 

here today, and I will be happy to answer any questions that you 

might have. 

[Mr. Sharp’s prepared statement is included in the appendix at 

page XX.] 

Ms. DAHLKEMPER. Thank you, Mr. Sharp. I’d like to recognize 

the Ranking Member, Mr. Graves, to introduce our next witness. 

Mr. GRAVES. Thank you, Madam Chair. Our next witness is Lawrence Kavanagh, who’s the Vice President for Environment and 

Technology with the American Iron and Steel Institute. Your members, I believe, make up 75 percent of the steel production in the 

United States, and look forward to hearing your testimony. Thanks 

for coming today. 

STATEMENT OF LAWRENCE KAVANAGH 

Mr. KAVANAGH. Thank you. It’s my pleasure to be here. 

AISI does, in fact, represent three-quarters of the steel made in 

the U.S., and in addition to companies that produce steel, some of 

which are small businesses, we have over 130 suppliers to our industry that are members. And that is a group that has many small 

businesses as part of it, technology suppliers, raw material suppliers, machine shops, et cetera. We depend on them, and they depend on us. 

I would like to start with the steel industry’s most important 

issue regarding climate change policy, and that’s competitiveness. 

The steel industry in our country is the lowest CO2 emitter 

amongst steel companies around the world. For that reason, it’s 

good for the environment to make steel in the United States. We’ve 

reduced our energy use per ton of steel by a third since 1990. And 

as a result of this achievement, and this is a key point, the processes we operate today are pushing their energy limits as defined 

by the laws of physics. 

What this means is that the basic premise of climate policy, 

make energy more costly, and people will use less, doesn’t work for 

steel, because we’re already using less. We’re already at the point 

with today’s processes, which is little as possible. So, when you 

combine that fact with the fact that steel markets are global, and 

we compete with steel from countries that are not subject to the 

same, or will not be subject to the same climate policies, you realize 

we can’t pass those additional costs across. 

On the positive side, our new green economy is going to require 

a major infrastructure investment. That’s a great opportunity for 

steelmakers here, and for small businesses; things like transmission towers, wind towers, pipelines, solar panels are all steelintensive. Steel, we believe, for these products, should be made 

here, which, as I already said, is the best and cleanest place to 

make steel in the world. 

11 

Our ability to stay competitive in a global market means we need 

fair and strong trade laws that are rigorously enforced. That’s the 

same principle that’s true for climate. We need fair climate laws 

with global reach that could be enforced. Any legislation that would 

otherwise undermine the competitiveness of U.S. producers would 

force steel production to other countries, with lower environmental 

standards, and, consequently, lower costs. Such an event would 

have the perverse outcome of actually increasing global greenhouse 

gases. 

To prevent something like that from happening, there are three 

fundamental components that we believe are part of good climate 

policy. One has to do with the stability of emission allowances. As 

I’ve mentioned already, the steel industry is very near the energy 

intensity limits that it can achieve, as dictated by the laws of thermodynamics. 

Now, we are researching, and have been for the last five to eight 

years, new ways to make steel that don’t emit C02. This is an activity that we think, if successful, will be complete about the middle of the decade of the 20s. This is also, I should point out, a great 

opportunity for small businesses in the research community, a lot 

of innovation, a lot of new technology comes through collaborative 

R&D that we do with universities, and private investors. But it 

means that until that technology is ready, the pool of allowances 

needs to be sufficient for steel, and needs to be stable. 

Second would be the cost of energy. Climate policy is going to increase the cost of energy. The steel industry uses coal, electricity, 

and natural gas in large quantities. At least no one that we’ve 

talked to can estimate how much these costs are going to go up, 

but the fact is, they are going to go up, and as a result of climate 

policy, to a degree not experienced by our international competitors, so there needs to be a means to deal with that. The present 

bill falls short in this area, and when you consider that energy 

costs are 20 percent of the cost of steelmaking, you can understand 

that a large increase there goes right at the competitiveness issue. 

And, thirdly, an effective border adjustment measure would account for the difference in the burden of strict carbon policy here, 

versus other places around the world. And these points are elaborated on in the written testimony. 

In summary, we would urge the House not to consider a one-sizefits-all solution. Strong and competitive steel companies provide a 

lot of well-paying jobs for their employees and their suppliers’ employees. We need to keep making steel here in the U.S., and we’ve 

worked for a long time, the last 20 years, the men and women in 

our industry, to get to this point of climate leadership, and we’d 

like to keep it. Thank you. 

[Mr. Kavanagh’s prepared statement is included in the appendix 

at page XX.] 

Ms. DAHLKEMPER. Thank you very much, Mr. Kavanagh. Coming 

from Western Pennsylvania, my District, we’ve got a lot of steel in 

that area, and certainly appreciate your input into this discussion 

going forward. 

I just have a couple of questions here. Mr. Johnson, I also come 

from very much of an agriculture district, too. And farmers have 

often been the leaders in conservation efforts. And many times, 

12 

without public policies driving these practices. As part of a potential cap and trade scheme, I know that the NFU supports rewarding farmers who have already employed such operations. How 

would you respond to critics that believe giving carbon credits to 

so-called early actors defeats the goal of reducing the overall emissions?. 

Mr. JOHNSON. Well, thank you, Madam Chair. There are several 

responses to that. First of all, the broader that you can make the 

offset market, the more efficient economically your climate change 

legislation is going to become. Secondly, it is the early actors who 

really led us— who brought us to this dance, if you will. They 

showed us the ways to try and figure out how to have a reduced 

carbon footprint. 

Those are the last people that you want to penalize. They are the 

first ones that ought to be rewarded. They took a lot of risks on 

the front-end of this thing in order to go to these new—adopt new 

technologies, and new practices that have proven to be beneficial 

for climate change kinds of issues. So, we want to be sure that we 

don’t, in any way, penalize them. So, there needs to be a mechanism to make sure that that happens. 

Ms. DAHLKEMPER. Any thoughts on that mechanism?. 

Mr. JOHNSON. Well, yes. I mean, one of the mechanism— first of 

all, the thing that I described in my testimony is that you need to 

pick a baseline, a static sort of—a time, a period in time in which 

okay, practices that are performing after that time, you allow offsets, allow them to participate in the offset market. If they’re before that time, you have to disallow them. But, if they’re early actors before that time line, that is really the rationale for carving 

out a portion of the allowances that would likely be sold in the 

market, and allocating them back to the sector, so that those revenues could be used to compensate those early actors in a fashion 

similarly to the folks that acted later. 

Ms. DAHLKEMPER. Okay. Thank you, Mr. Johnson. 

Mr. JOHNSON. You’re welcome. 

Ms. DAHLKEMPER. Mr. McNamara, the green roofing products 

and services can provide small roofing firms with a way to diversify 

their business model. Beyond new roofs, have you found retrofitting 

or replacing less efficient energy products to be an increasingly important part of your business? And what has been the drive or demand for such services, if that’s so? 

Mr. MCNAMARA. Yes, that has certainly been the case. We’ve 

seen, certainly, over the last five or ten year period, and with everybody with increased energy costs, obviously, as well, continue to 

move towards greater levels of insulation on either projects that we 

specify and install ourselves, or projects that we’re involved with 

that are being specified by others. We see greater and greater levels of insulation that are provided on rooftops, and that, along with 

other energy-efficiency measures, such as I referred to before in 

terms of daylighting, which works with bringing in sunlight to reduce the energy requirements for electric lighting, and cool roofs, 

or reflective roof surfaces, as well, have become more and more 

popular. 

Ms. DAHLKEMPER. Okay. Thank you. 

13 

Now, Mr. Sharp, given the recent volatility in energy, many large 

entities have taken steps to reduce their energy consumption; ultimately, the greenhouse gas emissions. However, for many small 

firms, these investments remain out of reach. Can you talk about 

the type of clients that purchase your technologies? 

Mr. SHARP. Well, one of the clients—we tend to work with larger 

facilities. I’m sorry. We tend to work with larger facilities, which 

tend to be sort of universities, colleges, as well as corporations, and 

things of that nature. But we do get down into small businesses, 

as well, who have larger facilities. And, to that extent, the paybacks involved with this type of technology are relevant to them, 

as well, so that is a very appropriate use of funds. In reality, it becomes a major financial investment that pays off at excellent rate, 

so it’s a good investment for them. So, it’s really not out of reach 

of them, it really is able to be achieved. And it may require some 

financing, but they’re easy to finance, based on the paybacks. 

Ms. DAHLKEMPER. So, obviously, as the prices come down, more 

and more small firms are going toMr. SHARP. Yes. I think a lot of the technology is within reach 

now. I mean, a lot of the—I mean, obviously, there’s a range of different investments people can make, and different types of energy 

solutions. But there’s a lot of very low-cost, or no-cost things that 

people can do, as well as things that have excellent paybacks in a 

one to five year period, which is, obviously, good business to invest 

in. 

Ms. DAHLKEMPER. And, Mr. Kavanagh, could you just expand a 

little bit on the R&D opportunities out there for small businesses, 

as you were talking about the CO2 emissions? 

Mr. KAVANAGH. Sure. 

Ms. DAHLKEMPER. And what you see happening right now, and 

where you see that can go? 

Mr. KAVANAGH. Okay. Thank you. 

Right now, we’re engaged in research projects to develop ways of 

making steel that don’t emit CO2, and that means replacing carbon 

as a fuel. So, that means using green electricity, using hydrogen, 

alternatives like that. So, that research now is going on at Massachusetts Institute of Technology, and University of Utah. And 

around such technology centers of those two universities are small, 

independent, but really excellent technology companies that we 

pull in to solve the technical problems as the research advances. 

And then what happens is, as the market for these technologies 

grow, and they become closer to commercial use, and then in commercial use, those companies that have helped in the development, 

they also grow, and they provide jobs, and the technology becomes 

pervasive regionally, and then nationally. So, that’s how the research infrastructure in our industry, and many others, works, and 

how it supports new small business. 

Obviously, the steel industry, as it exists now, has a very robust 

small business infrastructure that as long as we’re healthy, they’re 

healthy, so it works on two levels. 

Ms. DAHLKEMPER. Okay. Thank you very much. 

Mr. KAVANAGH. You’re welcome. 

Ms. DAHLKEMPER. I yield to Mr. Graves. 

Mr. GRAVES. Thank you. 

14 

Mr. Johnson, you said that you all support the cap and trade legislation, and Congress doing something, rather than the EPA doing 

something. Right now, on the cap and trade proposal, there is no 

credits for agriculture. In fact, it’s left up to the EPA to do it. How 

do you plan on addressing that? 

Mr. JOHNSON. Well, thank you very much for the question. We 

hope that you all might figure out a way to address that in the legislation. Very seriously, many of us in the ag community-I understand that the plan here is that the various committees have jurisdiction, will take up different parts of this bill. And our hope is 

that especially members of the Agriculture Committee will soon 

convene and make their recommendations to do the kinds of things 

that I asked for in my testimony, I think that others have asked 

for, as well. 

We don’t really have an issue with EPA sort of having oversight 

over the cap and trade system, if you will. But we believe very 

strongly that USDA, the law needs to require that USDA is the one 

who writes the standards for offsets, who establishes the criteria 

for which they will be granted, provides the technical assistance to 

farmers, all those sorts of things. 

I think if Congress were to pass something that had EPA doing 

all of that relative to offsets for agriculture, a lot of our members 

would be, frightened might be a little too strong, but they’d be very, 

very concerned. They’d much prefer to work with USDA. That’s 

where the expertise is, as well. 

Mr. GRAVES. Question for you, and for Mr. Yoder. I’ll start with 

Mr. Yoder. 

If cap and trade moves more towards cleaner fuels, and that’s 

kind of—that’s pushing us in a big way towards natural gas, getting our electricity from natural gas, and some estimates, we’re 

seeing at least in Missouri, that energy prices could go up, or prices 

for that energy could go up as much as 30 percent. Well, have you 

guys thought about, your organizations thought about what that’s 

going to do to our fertilizer prices? I mean, you’ve got to have anhydrous ammonia before you can produce any other fertilizer, and the 

majority of our nitrogen sources are coming from anhydrous. And 

if those prices—I don’t know if we can stand as an industry another 30 percent increase, particularly in industry that is a pricetaker on both ends, or price-taker for all of our inputs, and pricetaker for all of our output. We have no control over either side. 

Mr. YODER. There’s no question that our inputs will go up, especially fertilizer. In agriculture, we’re very energy-intensive, just 

like the steel industry. Virtually everything we do has got to do 

with energy, again, whether it’s natural gas, or whether it’s fertilizer from—well, that is natural gas, as well as other things that 

emit greenhouse gas, like potassium and phosphorous. 

That’s really why, as we look at this whole thing, our costs are 

going to go up, even if agriculture would remain an uncapped entity, we will be profoundly impacted by everyone else’s carbon footprint, and our costs will go up dramatically. That’s really why it’s 

important, we think, you put a good solid, viable cap and trade system in place, so we can recover some of those costs. And that we 

can go ahead and deliver the best value for food, and feed, and fuel 

15 

in this country, in the world, for that matter. But that’s really what 

we’re looking for as an offset to combat some of those extra costs. 

At the same time, as we do this, I just would like to add this, 

we have to make sure that this is a simplistic enough approach 

that we can have a way that’s easily verified. 

One of the things that I have in my written testimony is the fact 

that we’ve been doing some international work. Like I said, I was 

in Bosnia, Poland last year, and talked to a lot of people about agriculture’s role, and they have lots of questions, and I’m actually 

going on an exchange with a group, the Environmental Defense 

Fund, in July. And we’re going to involve other international countries, as far as this whole cap and trade. 

Just like Mr. Kavanagh mentioned, it doesn’t do us any good to 

have a very expensive, and complicated cap and trade system here, 

if the rest of the world is not going to be on the same page. So, 

it’s important that, as you think about developing a cap and trade 

system, or whatever direction that Congress chooses to go, that it 

reflects what’s workable in the entire globe. And I think that’s why 

it’s important for us to just keep things on a simplistic basis, make 

sure it’s real, make sure it’s verifiable, but keep the credits fungible, or interchangeable, whether it’s a credit created here in the 

United States, or created in China, or wherever. But they need to 

be the same, but that’s really getting back to the original point. We 

have to make sure that we have a mechanism that we can recover 

some of that additional cost, so we don’t have to pass that on to 

the consumer for food. 

Mr. GRAVES. Mr. Johnson. 

Mr. JOHNSON. I would agree very much with what was just said. 

We believe that it’s just a matter of time before this country does 

something relative to climate change. Much of the rest of the world 

is there. If we do nothing, if Congress does nothing on this issue, 

we now have a Supreme Court ruling directing EPA, not saying 

they can, but directing them to do something. That strikes us as 

being a far worse alternative than sitting down around the table 

and figuring out okay, if we’re going to do something on this, how 

should we do it, how should we make it best benefit agriculture, 

while we know costs are going up? 

There is really no question that we’re going to see fuel prices increase, our fertilizer prices, in particular, are likely to go up, as you 

indicated. Those costs are going to go up. If we can get agriculture 

at the table, and get the Ag Committee to weigh-in very quickly 

with the kinds of recommendations that we’re making, it provides 

us an opportunity to not only do the right thing here in this industry, but also to recoup a significant number of those cost increases. 

How much? I don’t know that anybody can answer that, but, clearly, we’re going to be better off if we do something, as opposed to 

letting EPA regulate it. That’s our view, anyway. 

Mr. GRAVES. Real quick, Mr. McNamara. You mentioned that 

with the increased cost of materials, that it’s going to have an impact on your industry, and with cap and trade. Just out of curiosity, most of our roofing materials right now are asphalt-based. I 

mean, what is that going to do to homeowners or consumers out 

there, and all those roofs, millions, and millions, and millions of 

roofs out there that have to be taken care of? 

16 

Mr. MCNAMARA. A lot of shingles out there, and rooftops, for sure 

can be impacted. There are three areas that come to mind, in terms 

of input cost that would be affected in our industry. Number one 

certainly are the asphalt products that relate to shingles on steep 

roofs, which are covering the country, as you mentioned. Millions 

of rooftops with that, steep roofs, and then also even on low-slope 

or flat roofs, we have asphalt-based products that are still a very 

major portion of systems that are put in place yet today. Asphalt, 

liquid asphalt and then also rolled goods that are roofing products 

with that. 

Another area is insulation for our industry that is produced 

through the use of quite a bit of energy, either through the drying 

or blowing agents required to produce the rigid board insulation, 

foam board, and other types of rigid insulation. 

And then the third area that comes to mind for us in terms of 

energy cost, and input costs for us, are simply the fuel costs that 

we also incur, as was mentioned, for both the fleets that we operate, our trucks, our cranes that we operate, and then the rooftop 

equipment that to use. It’s very backbreaking work, so usage of 

rooftop equipment is critical in our industry. 

Mr. GRAVES. Thanks. 

Chairwoman VELA ́ ZQUEZ. Mr. Bright. 

Mr. BRIGHT. Madam Chairman, thank you very much. And, panelists, thank you for your time in discussing an issue of great significance to the small businesses throughout our communities out 

here. And, as all of you know, over 70 percent of the jobs in this 

country are provided by small business. And it’s important that as 

Congress considers climate change legislation, the interests of 

small businesses, and family farms throughout the country are protected. As we move forward on climate change, we must tread carefully, striving for a bipartisan consensus, with a full understanding 

of the consequences of both inaction, and action. 

And with that, Mr. Kavanagh, determining which entities will be 

regulated under a cap and trade system is a key issue for the small 

businesses out there in the business community. Considering many 

small businesses are considered low emitters, would it be your 

opinion that only the larger, or largest emitters be regulated? 

Mr. KAVANAGH. Well, certainly, that’s the place to start, sir. And 

I don’t know if I can comment, not being an owner of a small business, if I could comment on how they should be regulated. But, certainly, I think I’ve pointed out that there are strong relationships 

between large and small emitters within the economy. And on 

hearing the previous statements from the gentlemen to my left, I 

think they’ve made the point that it’s still not a one-size-fits-all 

package, and that some common sense, and customization would 

need to occur. 

Mr. BRIGHT. How do we determine the proper threshold at which 

greenhouse gases should be regulated, in your opinion? And where 

should that threshold be, or do you have an opinion today? 

Mr. KAVANAGH. I don’t have an opinion on whether the threshold 

that’s established, which is 25,000, is too high, or too low. It seems 

to be, from the coalitions that we’re part of in the industrial sector, 

that it’s not unreasonable. 

17 

Mr. BRIGHT. Good. Any other panelists want to kick in your opinion on that? 

Mr. JOHNSON. The only thing I might add is that, and it kind of 

gets back to the issue of if nothing happens here, what will EPA 

do under the Clean Air Act. I was a meeting earlier this morning 

where a former EPA employee said that under the Clean Air Act, 

their target for regulating emitters begins at 25 tons, not 25,000 

tons, but 25 tons. That’s way too low. I mean, that would have an 

enormous deleterious impact across our whole industry, and so 

we’re certainly—it kind of gets back to the point that we think it 

makes a whole lot more sense to cap the large emitters, and then 

to allow these market forces that we’ve been talking about through 

offsets and things like that, to help provide incentives to get the 

kind of reductions from other sectors of the economy, such as agriculture. 

Mr. BRIGHT. Okay. Thank you. 

Mr. Yoder, as a farmer, in your opinion, what role could the U.S. 

Agriculture sector play in helping to reduce greenhouse gases 

through offsets, if any? 

Mr. YODER. Well, one of the things that we can do, is we can devise a system, a protocol that can create these incentives for farmers to go ahead and sequester carbon. And that’s the thing that I 

would encourage us all to think about, and not just think in a very 

narrow pattern, that there’s lots of things out there that we can 

possibly do in the future that we haven’t even thought about today. 

So, one of the things that originally we’re thinking of is sequestering carbon in soil by conservation tillage, as we go through, and 

we can improve it with, as I said in my earlier testimony, with 

some real scientific evaluation, and what’s possible. 

What the USDA can do, though, is, I think, as EPA sets our parameters of what needs to be done, and what is a real and 

verifiable credit, USDA, I think their role would be to design a protocol that they could put in place, that they could go ahead and implement, give to the farmers, because we have contact with them 

all the time, anyway. And then they could be part of the 

verification system, and it could be very, very low cost. 

The biggest thing that we have to do in all this, is regardless of 

where that threshold is that you were talking about before is, if we 

limit the amount of credits that can be created out there, as we 

know we can—agriculture alone can come up—can mitigate up to 

20 percent of the total greenhouse gases, let’s take the lid off, and 

let’s create those low cost ones, so it’ll cost everyone less to participate. 

Mr. BRIGHT. How do we insure that for farmers, the value of any 

cap and trade legislation exceeds the cost? 

Mr. YODER. Well, that’s a big thing. Obviously, if it costs more 

to implement than you get back out of it, then it’s not going to be 

a win for anyone. That’s why it’s really important to have—instead 

of basing it on the project, base it on protocols, and things like 

that, that are scientifically proven. It greatly inhibits the cost overruns, and makes it more efficient. So, yes, if we can’t get as much 

as what it costs to do, then nobody wins. 

Mr. BRIGHT. Okay. Thank you very much. Madam Chairman, I 

believe my time has elapsed. 

18 

Chairwoman VELA ́ ZQUEZ. Yes. Mr. Luetkemeyer. 

Mr. LEUTKEMEYER. Thank you, Madam Chairwoman. 

The title of today’s hearing is, ‘‘Climate Change Solutions for 

Small Business and Family Farmers’’. And from that, you would 

infer that a solution would be something that we would look for, 

if we had a problem. And my concern is that, at this point, I don’t 

know that we have a problem based on sound science. And it’s difficult for me to look for solutions whenever we’re grasping to find 

a problem. And it’s a little frustrating to-I know you gentlemen are 

all doing a good job here of trying to work within a system that’s 

being proposed, and it’s a little difficult for me to frame questions 

whenever I have a concern about the basic premise of what we’re 

doing here. 

So, with that being said, my concern is, I’ve talked to a lot of my 

energy-producing folks in my own district, or in my state. I’ve got 

three major public utilities that produce most of the electricity in 

our state, and a number of rural co-ops I’ve talked to. And those 

folks say that we’re going to raise our costs from 40 to 125, 150 

percent for the cost of electricity in our state, which is 80-85 percent produced by coal. So, in that situation with us, it looks like 

the impact is going to be pretty significant. 

Mr. Kavanagh, you indicated that 20 percent of the production 

of iron or steel is energy, so we’re looking at 20 percent increase 

in the price of your product. Is that correct? 

Mr. KAVANAGH. Yes, if energy costs doubledMr. LEUTKEMEYER. Is 100 percent. 

Mr. KAVANAGH. Yes, that’s right. That would be a 20 percent increase. 

Mr. LEUTKEMEYER. How devastating would that be to your industry? 

Mr. KAVANAGH. Well, it would be a tremendous impact, because, 

if you say that right now a ton of steel costs $500, let’s say. So, 

that means it’s going to cost $600, and you have steel coming in 

from other parts of the world that is still going to cost $500, so 

you’re at $100 per ton, that’s a huge disadvantage. And, obviously, 

it’s more than could be absorbed and eaten to retain market share, 

and presence, and all of that. I mean, you would—the consequence 

for the steel industry of a case like that, our only response to using 

less energy is to shut production off. So, we would shutdown the 

hot end, the melting ends of our plants, and that’s where all the 

emissions come from, most of the energy is used. But it’s also 

where most of the jobs are. And because steel demand is still going 

to increase, because all of the change in our economy is steel-intensive to support climate policy, the steel is going to come from somewhere else. Okay? So that steel is going to get made, and it’s going 

to get made in a place that’s more damaging to the environment 

than making it here. 

Mr. LEUTKEMEYER. So, what you’re saying is that if this goes in 

place, and we anticipate that the costs as what they’ve been projected out to be, it will probably decimate the steel industry in this 

country. Is that what you just said? 

Mr. KAVANAGH. Yes, it is. At that level, yes, it is. 

19 

Mr. LEUTKEMEYER. Mr. Johnson, Mr. Yoder, you’d like to apply 

the implications of how it’s going to affect the total cost of production for farmers? Are we going to be able to survive? 

Mr. JOHNSON. Well, of course we’re going to survive. I mean, 

there is not much question, everybody I know eats, and that’s what 

agriculture is mostly about, is producing food. So, we’ll figure out 

a way to survive. 

Mr. LEUTKEMEYER. I guess my question, let me reframe my question. I guess my question is, are we going to be able to produce food 

for ourselves, or are we going to have import it, because you no 

longer can compete on an international basis, because of the cost 

of production here in this country? 

Mr. JOHNSON. Sure. 

Mr. LEUTKEMEYER. Just as steel. 

Mr. JOHNSON. Well, you know, as we indicated—as I indicated in 

my opening remarks, we think there’s really not much question 

about what costs are going to go up for agriculture. Fuel costs are 

going to go up, energy costs are going to go up, fertilizer costs are 

going to go up. 

The premise of your question seems to be that there’s no reason 

for that to happen, because there’s a disagreement among the scientific community. That’s not really an area that I have expertise 

to talk about. But I will say that you’ve got the international scientific bodies that have come to the conclusion that climate change 

is a real thing, and it needs to be dealt with. 

We have a U.S. Supreme Court ruling now that is directing EPA 

under the Clean Air Act to deal with it. 

Mr. LEUTKEMEYER. Let me interrupt just one second. The crux 

of my question is this. Because of what’s going on, what kind of impact are those rules going to have on you? Is it going to cause us 

to continue to not be able to expand, or be able to utilize our farming ground in this country? And, if so, how much of an impact is 

it going to have, because at the end of the day, in order for us to 

find a solution, if there is a problem, we’ve got to find a way to 

mitigate that impact. 

Mr. JOHNSON. Yes. That is the principal reason that we are here 

suggesting the robust use of offsets in climate change, because as 

these costs increase relative to the policy choices that are made 

here, and in other places around the world, there needs to be an 

opportunity for farmers, and ranchers to recoup some of those 

costs. And the prescription that we’ve sort of—that I’ve outlined in 

my testimony is that we want agriculture to be able to use offsets 

as one of those methods for adding some income to the bottom line, 

instead of it just being a cost contributor. And we would argue very 

strongly that USDA has the expertise in that area, and that they 

should be weighing in on it. 

Mr. LEUTKEMEYER. I’m over my time. Thank you, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Time has expired, but I will allow for 

the gentleman to respond. 

Mr. YODER. Just quickly, I’d like to say, Congressman, that that’s 

why it’s so important to do this correctly. If it’s done wrong, it 

could be horrible for agriculture. It could be detrimental, and put 

people out of business. So, that’s why it’s so important to have a 

real robust program for offsets, and plentiful offsets, so that, espeVerDate Aug 31 2005 15:06 Jun 12, 2009 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48881.TXT DARIEN
20 

cially in this time—this country is really reeling from economic 

downturns. The last thing we want to do is thwart any kind of recovery with this new obligation to make changes. So, the least 

amount of pain that we can cause, and that would be with a robust 

cap and trade system, where plentiful offsets can be bought, so that 

that transition cannot thwart that movement of steel being bought 

away from this country, and so forth. So, it can be done terribly 

wrong, and have horrible consequences, or it can be done in a less 

impactive way, where we can all survive. 

Mr. LEUTKEMEYER. Thank you. 

Chairwoman VELA ́ ZQUEZ. I just want to say that I have to leave 

the room to go and vote in my Financial Services Committee, but 

I really appreciate you coming here. This is a very important topic, 

and I just want to make sure that the voice of small businesses is 

represented, and that we get it right, because it’s important. Especially now, given the fact of how our economy is doing. We need 

to get this economy growing again. And with this, it offers some opportunity to create new jobs. 

So my question, Mr. McNamara, is, in your testimony, you highlighted how NRCA supports measures to promote cool roof, but express concern about insuring flexibility based on region. How can 

Congress promote the use of these roofs, while maintaining the 

flexibility the industry seeks? 

Mr. MCNAMARA. Yes. Very simply, this is simply a matter between different climates in the U.S., areas such as my part of the 

country in Wisconsin, where we have winters which we’re looking 

more for heat absorption from the outside than we are losing, trying to reflect or avoid heat during our cold winters, and so forth, 

and dealing with snow loads. And, so, really it’s just a matter of 

being able to promote those. In the areas in the south, whether it’s 

a city like Atlanta, or Florida, or what have you, and realizing 

those differences throughout the country. 

Chairwoman VELA ́ ZQUEZ. Good. 

Mr. Yoder, NCGA has been engaged in developing guidelines for 

climate change legislation. And I understand your organization has 

worked with agricultural leaders on creating a framework to reduce 

emissions. Who are your industry partners, and what is the consensus you have been able to develop? 

Mr. YODER. Well, actually, it’s been difficult to get all commodity 

groups engaged in climate. Because, as some know, it’s controversial of whether it’s real or not, but the point, in fact, is it’s here. 

There’s enough scientific knowledge that we need to engage in this, 

and there’s going to be some climate legislation. So, we have 

worked very closely with other organizations, like the Soybean Association, and the Wheat Growers Association, and National Farmers Union, and Farm Bureau, and while we all have maybe a different perspective, we all are at least engaging in trying to figure 

out what’s best for our industry. So, yes, we’ve got some details to 

work out, but at least we’re all finally talking. 

Chairwoman VELA ́ ZQUEZ. That’s important. 

Mr. Sharp, small firms attempting to develop energy-efficient 

technologies are confronted with two major challenges. The first is, 

developing the technology, and the second one is moving this product to the market. As you point out, small firms often struggle to 

21 

cross the chasm. How was your firm able to address this challenge? 

And, do you believe that there are ways to assist entrepreneurs 

overcome this obstacle? 

Mr. SHARP. I think the simple answer would be persistence, and 

money, because it takes time to get through this, particularly with 

newer technologies that people aren’t aware of. So, I think, looking 

at it from a policy standpoint, I think part of this is helping to create incentives. As I said, I think the—when people look at these 

new technologies, the concern is not that it’s expensive, it’s really 

more on the lines of—because the paybacks typically are quite good 

for a lot of the technologies that have been proposed. But what 

happens, is that the people in industry look at this, and they well, 

okay, it’s supposed to be a three-year payback, but in reality, perhaps it’s six, maybe it’s nine. I really don’t know. Do I believe what 

they say? So, the ability then is, if there are incentives, whether 

that’s from utilities, or from the government, that then creates a 

situation where that nine-year payback that I think it might be, 

they can offset it down to maybe more like three years. 

In time, obviously, as people then try the technologies, they realize gee, there really is a three-year payback. And, at that point, the 

incentives become less important, the economics fuel it. But, I 

think in that early stage, with new technologies, and maybe there’s 

a—whether that’s a time frame, or something, the ability to have 

some incentives around that is very important. 

For us, it’s been just persistence, pushing hard. I mean, it’s 

taken a lot of cash, more than my investors ever expected. But, in 

the end, as I say, if people hear it for the sixth time, it suddenly 

becomes obvious. You’ve got to get through that period in that 

time, and other assistance in the form of incentives may be a way 

to help that. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Kavanagh, it has been stated that regulations reducing 

greenhouse gas could adversely impact our nation’s manufacturing 

sector. And while recognizing these concerns, it also seems there is 

potential for business opportunities with the creation of new energy 

system, and a green grid. Do you believe that the domestic steel 

industry can play a role in greening our economy? 

Mr. KAVANAGH. Absolutely. Not only from the side that the components of the green grid are very steel-intensive, and if you make 

them with the steel that has the lightest CO2 footprint, i.e., domestic steel, then that’s a great contribution to greening of the grid. 

And then we get the benefit on the other side, also, is by using energy that’s much more green. That lowers the carbon footprint of 

our industry, and flows all the way down through small businesses, 

as the gentlemen to my left have made that point many times. So, 

certainly, I think achieving a sound and functioning green grid, 

there’s a major role for steel. Thank you. 

Chairwoman VELA ́ ZQUEZ. Okay. 

Mr. McNamara, there are a number of policy tools to encourage 

the adoption of energy-efficient practices. What is the most effective way, in your opinion, to accelerate energy-efficient roofing, in 

order to reduce carbon emissions? 

Mr. MCNAMARA. Well, the piece of legislation that we have being 

proposed, GREETA, the Green Roofing Energy Efficiency Tax Act, 

22 

I think is a wonderful measure to do that. It’s a win for all. It, 

number one, for building owners brings down the depreciation 

term, like I had mentioned previously, from an unrealistic period 

of 39 years, down to a realistic period of 20 years. A study we had 

done at the time that we proposed this, done by Ducker Worldwide, 

an industrial research firm, found that average roof lives were really 17.5 years, so a 20-year period would seem to be very reasonable. And then we have the opportunity to marry that along with 

a increase in energy-efficiency, and making that a benchmark requirement in order to obtain, and be able to utilize the 20-year period. And so, as I mentioned, I think it would be a win for all parties. 

Chairwoman VELA ́ ZQUEZ. Okay. Mr. Johnson, the National Farmers Union instituted a carbon credit program in conjunction with 

the Chicago Climate Exchange. How many of your farmers are involved in this program? And, do you think this program can be a 

model for Congress in cap and trade legislation? 

Mr. JOHNSON. We have about 4,000 members that are participating in the Chicago Climate Exchange Offset program right now. 

I do believe that can be a model that should be used. Our view is 

that the model that is most appropriate there is the marketplace 

part of that model. 

One of the things that CCX had to do in order to create this market, have it function, was they also had to have put in place a scientific panel that would establish the protocols, and then they put 

another system in place to verify compliance, all those sorts of 

things. That’s really not a role that the market, itself, should play. 

Those procedures should be done by USDA. 

Chairwoman VELA ́ ZQUEZ. Why is that? 

Mr. JOHNSON. Because they don’t have that expertise. I mean, 

they had to get it. I mean, the Chicago—the role that the CCX 

should play, should be a role of handling the money, being the market exchange, if you will, so that there are fair prices, so there’s 

transparency, all those kinds of things. The scientific—there have 

been questions raised by some about whether they used the right 

science, all those sorts of things. The way you avoid those questions 

is, you have those decisions made by the scientists, as we would 

propose it, they should be at USDA. These are the real experts. 

They’ve done lots and lots of research. The research is peer reviewed. It’s accepted widely, not only in this country, but in other 

countries, as well. So, it’s kind of a long answer, but I think the 

model of the CCX is a very good model for trading offsets. It’s a 

good, efficient mechanism, doesn’t take a lot of resources to do it. 

It’s very efficient, but it needs to be coupled with something that 

everyone can have a high degree of confidence in. And that, in our 

judgment, is the scientists at USDA. 

Chairwoman VELA ́ ZQUEZ. Thank you. Mr. Thompson. 

Mr. THOMPSON. Madam Chairwoman, Ranking Member Graves, 

thank you for holding this thoughtful and timely hearing. 

Now, I represent one of the most rural districts this side of the 

Mississippi, and the number one economic driver for the Commonwealth of Pennsylvania remains agriculture. And, as is for my district. From the northeastern dairy farmers, to timbering harvesting 

in the Allegheny National Forest, to mushrooms and tomato farms 

23 

in the southeast, the Commonwealth has over 63,000 farms, many 

of which are mom and pop operations, just like my history, my 

family of dairy farmers back a generation ago. As you can imagine, 

proposals increase taxes on small businesses, and any move towards a cap and trade policy, frankly, scares me, and puts my constituents, those small farmers who are back home, or the backbone 

of Pennsylvania’s economic engine, in a very tough position, when 

we’re looking at what looks like very unacceptable costs proposed 

for speculative benefits, just impacting the 4 percent of carbon dioxide emissions, or the scientific consensus is that humans contribute towards. 

Evenly so, in Pennsylvania, the Pennsylvania Utility Commission, has removed decades of old rate caps that come off in 2010, 

and it will cause electric rates to increase 30-40 percent above the 

current price. Now, that paired with the federal increase brought 

on by—federal tax increase brought on by cap and trade, I’m afraid 

my constituents, farmers, manufacturers, families, are going to face 

unnecessary burdens, even more so during a time of economic 

downturn. 

Now, we’re hearing proposals to switch to cleaner burning natural gas as a fuel, and I support this move. However, at current 

prices, and limited production capacities, this seems haphazard, especially for the agriculture industry that depends on natural gas as 

a feedstock for fertilizer. Now, just last summer we witnessed some 

of the highest energy costs in memory. Energy prices that threatened to make America non-competitive in comparison to our neighbors globally. 

Now, there are proposals on the table to open up areas, both onshore and off-shore, as a means to supply this much needed natural gas. And, in turn, prices would be reduced, and jobs would be 

created, and our nation could lower its dependence on foreign imports. 

Because natural gas burns clean, there undoubtedly would be an 

increased demand if cap and trade, or a carbon tax should be instituted. And, so, relative to the gentleman representing the farmingrelated industries, I know Mr. Graves had gone down this road in 

terms of—I just wanted to affirm, in terms of the price of fertilizer, 

and the impact, I assume there’s a consensus that as they agree 

that the price of fertilizer will go up as demand for natural gas 

goes up, could you briefly describe how fertilizer costs respond to 

the increase or decrease of natural gas prices? 

Mr. YODER. Well, it’s very much tied to that. I mean, as natural 

gas prices go up, we experience some of the highest nitrogen costs 

that we’ve ever had in the history of the United States. So, it’s 

very, very susceptible to that. And that’s why I still want to go 

back and say, we saw record amounts of fertilizer costs go up in 

the last two years. And they’ve been down some this past spring, 

but they’re still at record amounts. And it’s just run away, whether 

it was speculative, or whether it was real, but it hit the pocketbook 

here. And it scares all farmers about the viability, and that’s why 

it’s just adamant that we—if we’re going to go down this road, that 

we’re going to have to have some sort of mechanism to offset those 

additional costs, or we won’t survive, absolutely. And I hear what 

you’re saying, I know this is farms. 

24 

I’m an independent businessman, myself, and I paid—I used less 

fuel last year than I’ve ever used in history as far as gallonage, but 

I still paid way more than I ever did. So, all these things are going 

to have to be considered. That’s why it’s absolutely imperative that 

we be careful as we go through this. But, in my mind, a cap and 

trade program would be much less cost-prohibitive to our survival, 

versus a carbon tax. And, as I understand it, those are our two alternatives. And I just think that one offers an offsetability, and the 

other one is just flat, a higher cost of doing business. 

Mr. THOMPSON. Mr. Johnson, any opinion? 

Mr. JOHNSON. Well, yes, I agree with what was just said. I just 

happen to have come from a meeting earlier with someone from the 

Fertilizer Institute, and so I’ve got a chart in front of me that 

shows fertilizer prices, FOB Gulf Coast from December of ‘07 to the 

current time. About $350 a ton in December of ‘07, it peaked right 

around harvest time of ‘08, as you know, at about $900, dropped 

to $100 as of the first of the year, and now has come back up to 

around $300. The whole point of saying that is, this is a very volatile market. And fertilizer prices are tied to it, and so we see them 

yo-yo’ing all over the place. 

It does underscore the point that was just made, and that we 

have made repeatedly, at least the two of us representing production agriculture; that it’s important that we have a robust offset 

program that provides some income opportunities for farmers, besides just cost increases. And that’s really the message that we 

want to get through here today, and to encourage folks in the Ag 

Committees, and others, to, as quickly as possible, weigh-in on this 

bill, so that the interests of agriculture can be dealt with in a very 

positive fashion. 

Mr. THOMPSON. Thank you, Mr. Johnson. 

Mr. JOHNSON. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Graves, do you have any more 

questions? 

Mr. Sharp, at a recent roundtable on climate change, a major 

issue discussed was meeting workforce needs in a green collar 

economy. Can you talk about workforce challenges you see with 

this transition to a green economy? 

Mr. SHARP. Well, I think the—in many respects, green jobs are, 

in some cases, no different than normal jobs, other than that they 

are in industries that have a green focus, such as energy-efficiency, 

or maybe in the renewables industry. In fact, many times, like roofing or other areas, these are opportunities that are no different 

than other ones, other than the fact that they’re in areas that people are now pursuing in the green jobs area. So I think it’s not as 

big a challenge in terms of training or things like that, and I think 

a lot of the skills that people need are ones that they already have. 

It’s more of a marketing focus to look at how do I develop products 

that are focused on climate change, focused on energy-efficiency. 

And I see the industry making that shift. It’s actually moving now 

to saying all right, I was making a product that was of some type. 

I can make some changes to it, now it cuts the carbon emissions, 

and many times those are easy changes to make. It’s having the 

interest, and the will to do it. And I think that provides opportunities then for what become green jobs. 

25 

Chairwoman VELA ́ ZQUEZ. How do you think we should insure 

that both rural and under-served areas are able to take advantage 

of these new opportunities? 

Mr. SHARP. Well, I think that may be in the form of incentives 

around some of these newer technologies, number one. I think in 

terms of being able to help people develop innovations, and help 

them bring them to market, as I was saying earlier, so I think 

that’s one way that it could be done. 

I think in some of those under-served areas the costs of labor are 

going to be less, so that provides opportunities to provide a more 

economic approach. 

Chairwoman VELA ́ ZQUEZ. Okay. Well, let me just take this opportunity to thank you all. This is an issue that’s not going away, and 

we’d rather be at the table, and something is going to happen. And 

we have to make sure that the concerns, and issues that are important to the small business sector are represented and discussed. 

As you know, here in Washington, when we pass legislation, so 

many—often we find unintended consequences, so I hope that we 

could be proactive in having an open, honest discussion as to what 

legislation is drafted, and passed here reflects the issues of everyone that is going to be, in one way or another, directly, or indirectly 

impacted by such legislation. So, I want to thank the witnesses for 

today’s testimony. 

The Committee will continue to play an active role as climate 

change legislation goes forward. In coming days, I will be writing 

to our colleagues on the Energy and Commerce Committee, with a 

number of recommendations for how legislation can be crafted in 

a way that protects the needs of small businesses. 

Now, thank you, again, and the Committee, and the hearing 

stands adjourned. Thank you. 

[Whereupon, at 3:25 p.m., the Committee was adjourned.] 

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