U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

67–102 PDF 2012

CONSUMER PROTECTION PROVISIONS IN CLIMATE 

LEGISLATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

MARCH 12, 2009 

Serial No. 111–14 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


rmajette on DSK2TPTVN1PROD with HEARING
COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

PARKER GRIFFITH, Alabama 

ROBERT E. LATTA, Ohio 

(II) 


rmajette on DSK2TPTVN1PROD with HEARING
(III) 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

EDWARD J. MARKEY, Massachusetts, Chairman 

MICHAEL F. DOYLE, Pennsylvania 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

BARON HILL, Indiana 

DORIS O. MATSUI, California 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

JOHN D. DINGELL, Michigan 

RICK BOUCHER, Virginia 

FRANK PALLONE, New Jersey 

ELIOT ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

JANE HARMAN, California 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

JOHN BARROW, Georgia 

DENNIS HASTERT, Illinois 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

STEVE BUYER, Indiana 

GREG WALDEN, Oregon 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

MICHAEL C. BURGESS, Texas 


rmajette on DSK2TPTVN1PROD with HEARING

rmajette on DSK2TPTVN1PROD with HEARING
(V) 

C O N T E N T S 

Page 

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

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 2 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 3 

Prepared statement .......................................................................................... 5 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 15 

Prepared statement .......................................................................................... 17 

WITNESSES

Steve Kline, Vice-President of Corporate Environmental and Federal Affairs, 

Pacific Gas And Electric Corporation ................................................................. 22 

Prepared statement .......................................................................................... 24 

Answers to submitted questions ...................................................................... 125 

Sonny Popowsky, Consumer Advocate of Pennsylvania, Pennsylvania Office 

of the Consumer Advocate ................................................................................... 56 

Prepared statement .......................................................................................... 58 

Answers to submitted questions ...................................................................... 137 

Robert Greenstein, Executive Director, Center on Budget Policies and Priorities ........................................................................................................................ 69 

Prepared statement .......................................................................................... 72 

Answers to submitted questions 1 ................................................................... 00 

Steven F. Hayward, American Enterprise Institute ............................................. 87 

Prepared statement .......................................................................................... 89 

Answers to submitted questions ...................................................................... 140 

Mike Carey, Ohio Coal Association ........................................................................ 92 

Prepared statement .......................................................................................... 94 

Answers to submitted questions ...................................................................... 146 

John S. Hill, Director for Economic and Environmental Justice, United Methodist Church, General Board of Church and Society ........................................ 99 

Prepared statement .......................................................................................... 102 

1Mr. Greenstein did not respond to submitted questions for the record. 


rmajette on DSK2TPTVN1PROD with HEARING

rmajette on DSK2TPTVN1PROD with HEARING
(1) 

CONSUMER PROTECTION PROVISIONS IN 

CLIMATE LEGISLATION 

THURSDAY, MARCH 12, 2009 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND ENVIRONMENT, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2322 of the Rayburn House Office Building, Hon. Edward J. Markey (chairman) presiding. 

Members present: Representatives Markey, Inslee, Butterfield, 

Matsui, McNerney, Welch, Green, Capps, Gonzalez, Baldwin, 

Matheson, Barrow, Waxman (ex officio), Upton, Hall, Whitfield, 

Shimkus, Pitts, Burgess, Scalise, and Barton (ex officio). 

Staff present: Matt Weiner, Clerk; Melissa Bez, Professional 

Staff; Alex Barron, Professional Staff; Lorie Schmidt, Senior Counsel; Michael Goo, Counsel; and Lindsay Vidal, Press Assistant. 

OPENING STATEMENT OF HON. EDWARD J. MARKEY 

Mr. MARKEY. In over 30 years in Congress one word has always 

come first in every piece of legislation, and that is the word, consumers. From telecommunications to fuel economy standards, I 

have always found that starting with the goal of saving families 

money through technological innovation is the best vehicle for effective public policy. 

For too long American consumers have been unprotected against 

costs from our old energy economy and the threat of global warming. 

First, America’s dependence on foreign oil continues to impact 

our economy. Before the sub-prime and derivatives crisis created a 

financial markets meltdown, $4 gasoline and sky-rocketing goal 

and natural gas prices sent early shockwaves through the economy, 

destabilizing our financial house of cards. 

Second, consumers are losing money on an inefficient, outdated 

energy grid that wastes about half of the energy it transports. 

Third, by delaying action on clean energy and global warming, 

consumers are losing money every day on the lost innovation of 

new, clean energy products. 

Fourth, we have heard in this committee that the cost of climate 

inaction will have negative financial consequences. We have already seen the impact of this on the insurance industry, as storms 

have increased in strength from a warming earth. 

And so, much like the Telecommunications Act and fuel economy 

legislation, climate legislation is consumer legislation, and there is 


rmajette on DSK2TPTVN1PROD with HEARING
2 

a proper way and an improper way to craft this legislation. Improperly done, climate legislation could unjustly enrich corporations at 

the expense of consumers. Improperly done, the investments needed to drive the clean energy economy will be put on consumers, 

while polluters get a free pass. 

Properly done, we will put a cap on pollution that will allow businesses the flexibility to innovate and create highly-profitable clean 

energy solutions. Properly done, we will defray costs to consumers 

as we transition to a clean energy economy. 

Of course, this is where it all gets very tricky, and that is why 

we are here today. Creating a market base global warming bill 

means that the market will set a price on the right to send carbon 

into the atmosphere. These permits will have a financial value, allowing companies that become clean and efficient to prosper while 

polluters will be forced to pay. The key is to protect consumers 

from drawing the short straw and paying for these permits when 

a company decides to pass the cost directly to the consumer. 

The danger here is that if we give pollution permits for free to 

polluting companies, they may actually charge consumers for the 

market value of what they receive free of charge and pocket a huge 

cash windfall. Imagine this. A scalper finds Celtics tickets outside 

the Boston Garden. Will he sell them to the next consumer for free? 

No. He will charge the going rate. 

To address this problem some have suggested that instead of giving away these permits to emitters for free, the bill should ensure 

that the value to local electric utilities and other entities that are 

regulated by the State public utility commissions or otherwise subject to cost of service requirements so that the money actually benefits consumers. 

This position is shared by various groups like the U.S. Climate 

Action Partnership, Edison Electric Institute, and the National Association of Regulatory Utility Commissioners. Others have come 

up with alternatives. The Center for Budget and Policy Priorities 

is here with us today. They have proposed a policy that would completely eliminate any negative financial impacts from climate legislation on the poorest one-fifth of Americans. And we shouldn’t forget that low-income Americans will be disproportionately affected 

by the impacts of global warming. 

It has been suggested that we use some of the revenues from a 

climate legislation to fund energy efficiency programs and invest in 

new cost-saving technology so that we can all benefit from the longterm savings potential afforded by a clean energy economy. 

The bottom line is that there are many options before us on how 

to benefit and protect consumers under a cap-and-trade system. 

The subcommittee looks forward to exploring these options with all 

of the members this morning. 

Let me now turn and recognize the Ranking Member of the subcommittee, the gentleman from Michigan, Mr. Upton. 

OPENING STATEMENT OF HON. FRED UPTON 

Mr. UPTON. Thank you, Mr. Chairman. The title of today’s hearing, of course, is ‘‘Consumer Protection in Climate Legislation,’’ 

which recognizes the undisputable fact that climate legislation will 


rmajette on DSK2TPTVN1PROD with HEARING
3 

increase the cost of energy, and consumers will need to be protected. 

These are some very tough and difficult times for our country. 

Michigan, in particular, where I am from, has been hit very, very 

hard. In fact, in 2008, approximately 21 percent of all utility accounts nationally were overdue, with folks carrying past-due balances on average of about $160 on an electric bill and $360 for natural gas. Total account of debt in Mr. Markey’s Massachusetts was 

about $456 million, with 28 percent of all electricity accounts and 

48 percent of gas accounts being past due. In Michigan the account 

debt totaled $367 million, and in some parts of my State one in 

three consumers are already behind on their bills. One in three. 

And we all know which direction these numbers move when 

prices go up. Congress must make its number one priority to get 

the economy back on track and protect jobs, and that is my top priority as well. Keeping energy affordable is the key to this equation. 

According to an MIT model of a 100 percent auction cap-and- trade, the American people will be taxed $366 billion in 2015, four 

times as much as the President’s estimate of $80.3 billion in 2015. 

Job losses under such a plan would be greater than 6 million. Increased energy costs would near $1 trillion in 2030. Increases in 

electricity costs could be greater than 100 percent. GDP could fall 

perhaps as much as 7 percent by the year 2050. And a family of 

four could expect to pay as much as $4,500 in additional costs by 

the year 2015. 

In written testimony OMB Director Orszag stated that the aver- age household cost would be $1,300 for a 15 percent cut in emissions. This Administration has seen an 80 percent cut. Our former 

colleague, Sherrod Brown, now a senator from Ohio, who opposed 

capped trade last June, said that Obama’s plan, President Obama’s 

plan would lead to an increase in energy cost and would drive 

American firms abroad, and he said this, ‘‘It really does say to 

manufacturing, go to China where they have weaker environmental 

standards. And that is a very bad message in bad economic times, 

in any economic times.‘‘ 

There are not too many absolutes in this business of politics, but 

one thing is irrefutable. As power demands increase, our Nation 

will continue to grow, our power demands as a Nation will continue 

to grow. Unless we pursue coherent, pragmatic policies, we can, in 

fact, send our Nation’s economy into a freefall, and there will be 

great difficulty to keep the lights on in homes in across the country. 

I yield back. 

Mr. MARKEY. Great. The gentleman’s time has expired. 

The Chair recognizes the Chairman of the full committee, the 

gentleman from California, Mr. Waxman. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN 

Mr. WAXMAN. Thank you very much, Chairman Markey. 

Before we start crying about what things are going to be like, let 

us realize where they are right now for consumers. Our consumers 

are paying an average American household $2,800 more in 2008, 

for basic energy needs than they spent in 2001. This is not a consumer-friendly time in the energy sector. Average household exVerDate Mar 15 2010 11:19 Mar 02, 2012 Jkt 067102 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 E:\HR\OC\A102.XXX A102

rmajette on DSK2TPTVN1PROD with HEARING
4 

penditures for gasoline, electricity, and home heating increased by 

81 percent between 2001, and 2008, almost four times the overall 

inflation rate in this same period of time, which was 21 percent. 

And while energy prices climbed, our dependence on oil grew. We 

send more and more of our wealth overseas instead of keeping it 

here at home, and with no plan to address global warming our children’s future is in jeopardy. 

Low-income consumers take a drubbing in the current system. 

Not only do they bear unaffordable energy costs, families with low 

income also find it harder to cope with the public health consequences of unchecked climate change. The poorer often hit the 

hardest by extreme weather events that will increase if we fail to 

reduce global warming. The pictures coming out of New Orleans 

after Hurricane Katrina showed an unforgettable contrast in the 

abilities of the rich and the poor to cope with such catastrophes. 

This committee will have an opportunity to put the country back 

on track. If we enact a comprehensive energy and climate bill, we 

can help low-income families while helping all American families. 

Low-income and all American families will benefit from the increase in domestic jobs that will accompany a clean-energy future. 

They will benefit from reducing our dependence on foreign oil, 

which will, in turn, reduce the need for our military to engage in 

unstable parts of the world. We can turn the page to a brighter future, but we must design our legislation carefully. 

The witnesses you have assembled today will tell us a poorly-designed program to reduce global warming, pollution could impose 

significant costs on low-income consumers. This means that we 

have to be smart about how we are going to design this legislation. 

There are various ways to assist consumers, especially low-income consumers with a transition to clean energy future and reduce global warming pollution. We are going to hear about energy 

efficiency programs that can reduce consumers energy bills, even if 

the rates increase, and reduce the overall costs of the program to 

the country as a whole. By making the country more efficient these 

programs make our economy more competitive. 

The Center on Budget Policy and Priorities suggest that allowances be auctioned and that some of the proceeds be sent to low 

and perhaps middle-income consumers to offset increased costs of 

reduced global warming pollution. Another suggestion is to provide 

allowances for the benefit of consumers to local companies that distribute electricity and natural gas, and we will hear from a consumer advocate and an electricity company about how that approach would work. I think it is important we have this hearing, 

we recognize the consequences of legislation on consumers as we 

obviously have to recognize the consequences on industries, businesses, our trade, and our economic future overall. And that is part 

of the job of making sure that we pass a broad, comprehensive energy bill which we hope to do before the Memorial Day recess. 

Thank you, Mr. Chairman. Yield back my time. 

[The prepared statement of Mr. Waxman follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
5 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 11 67102A.001
6 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 12 67102A.002
7 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 13 67102A.003
8 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 14 67102A.004
9 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the Ranking Member of the full committee, 

the gentleman from Texas, Mr. Barton. 

Mr. BARTON. Thank you, Mr. Chairman. Before I do my opening 

statement, could I just ask a process question? And I don’t know 

the answer, so this is not a set up. 

Mr. MARKEY. Absolutely. 

Mr. BARTON. Most of our hearings are televised where we have 

a TV feed here, and if we want to stay in our office and watch it 

on the internal House channels we can. I notice our cameras aren’t 

on. Is—do we have a technical problem, or is there—— 

Mr. MARKEY. Can I—I thank the gentleman. The gentleman from 

Illinois, Mr. Shimkus, brought this issue to our attention last week. 

Mr. BARTON. Oh, I am sorry. 

Mr. MARKEY. No, that is fine, and on Tuesday the House—— 

Mr. BARTON. I know you are not camera shy. 

Mr. MARKEY. The office responsible for this brought up a separate group of portable cameras that made it possible for all of this 

to be televised as they repair these cameras. We made the same 

request for this morning. We thought that they were going to be 

showing up again this morning with all the portable equipment, 

and they are not here. 

Mr. BARTON. OK. 

Mr. MARKEY. But the request was made. Our goal was to have 

the set-up the same as it was on Tuesday, and I actually don’t 

know what happened, but I know that—— 

Mr. BARTON. But these cameras just don’t work. 

Mr. MARKEY. They do not work. 

VOICE. I thought it was because the Michigan, Iowa basketball 

game in the first round of the Big Ten Tournament is—— 

Mr. MARKEY. What time is that on today? 

VOICE. 2:30. 

Mr. MARKEY. OK. OK. The hearing will be concluded before 2:30. 

Mr. BARTON. Thank you. I just wondered about—thank you. 

Mr. MARKEY. So I don’t—I will find out what happened. 

Mr. BARTON. OK. Not a problem. Thank you, Mr. Chairman, for 

this hearing. 

The task of the hearing consumer protection policies in climate 

legislation is almost an oxymoron. It is not quite, but it is obvious 

that if you have a serious cap in trade component to climate change 

legislation, that there are going to be serious economic consequences. I don’t think those economic consequences can be overcome by some sort of an internal reshuffling of the monies that are 

raised through the carbon tax, through a cap-and-trade policy. But 

it is a noble cause to at least attempt to see if they might, could 

be alleviated. 

The best way to alleviate or guarantee consumer protection in 

climate change legislation is not have a cap-and-trade component 

in my opinion. Having said that, I look forward to hearing the witnesses. We have six excellent witnesses, and we are going to have 

a variety of opinions from these witnesses. I have perused their 

preliminary testimony or the testimony that we have received in 

advance, and I think we will have a pretty lively hearing. 

With that I yield back, Mr. Chairman. 


rmajette on DSK2TPTVN1PROD with HEARING
10 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from California, Mr. McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

We all know that energy usage is a complex and difficulty question. We have peak oil looming, which has related problems of price 

increases. We have climate change, we have national security. But 

we in this committee have the responsibility to address this question in a reasonable and rational way. 

Cap-and-trade I believe can be used as a tool to reduce our consumption, to reduce our greenhouse emissions, but we must be 

doing, we must do it rationally, we must do it thoughtfully. Certainly we have a variety of opinions which need to be taken into 

account. We are not going to shove cap-and-trade legislation down 

the pike without taking these viewpoints into consideration. 

But I want to say we don’t want to get trapped by the false 

choice that we can have either clean energy or a good economy but 

not both. That is a false choice. We—the real choice, I think, is to 

become efficient and to create new forms of energy. We can do that. 

Cap-and-trade legislation can help us get there. The real question 

is how do we do it in a way that doesn’t hurt the people at the bottom, hurt the people that are suffering through high utility bills. 

We can use the revenue from cap-and-trade to do that. We can use 

it in a rational way, and I think everyone is going to benefit. Our 

national security is going to benefit. We are going to reduce our 

consumption. We are going to reduce greenhouse gas emissions. 

So I look forward to what the testimony is going to be this morning, and I yield back to the committee. 

Mr. MARKEY. OK. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Pennsylvania, Mr. 

Pitts. 

Mr. PITTS. Thank you, Mr. Chairman, and I would like to thank 

you for convening this hearing today on this important topic. 

As this committee moves forward, I believe that it is essential to 

keep in mind the negative effects that improperly-drafted climate 

change legislation will have on the consumers. The best way to protect consumers is to protect their jobs and keep the economy from 

tanking. 

Unfortunately, cap-and-trade legislation would do exactly the opposite, causing serious economic hardships. If a cap-and-trade bill 

looks anything like the Lieberman, Warner bill we saw last year, 

it will have drastically negative effects on consumers and the economy. According to a Heritage Foundation study, in the first 20 

years alone the bill would have resulted in aggregate real GDP 

losses of nearly $5 trillion. In the first 20 years it would have destroyed 900,000 jobs and caused nearly 3 million job losses in the 

manufacturing sector by 2029. Fifty percent of jobs in the manufacturing sector would have been lost. In Pennsylvania it was projected that 94,500 jobs would have been lost in the manufacturing 

sector by 2030, and according to their model in my district alone 

$260 to $294 million would have been lost in gross State product 

in 2025. 

This does not sound like a consumer protection measure to me, 

and no amount of investment and efficiency measures, direct rate 


rmajette on DSK2TPTVN1PROD with HEARING
11 

reductions or rebates will mitigate the effects of tremendous job 

losses in a terrible economy. 

Mr. Chairman, our economy is suffering right now. We all recognize that. It is my belief that passing a cap-and-trade bill will continue to add to the economic pain most Americans are feeling right 

now. 

So I look forward to hearing from our witnesses today about how 

we can truly help consumers and to protect our environment and 

atmosphere. I yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentlelady from California, Ms. Capps. 

Ms. CAPPS. Thank you, Mr. Chairman. 

Climate change legislation is not only about caps and kilowatt 

hours but also about kids and communities. The legislation we pass 

must account for consumers, especially those who are least able to 

pay for their energy needs. To that end I am very grateful that we 

are holding this hearing today, and I want to thank our witnesses 

for traveling here to talk with us about this incredibly important 

issue. 

In my home State of California we have an unemployment rate 

of more than 10 percent and a poverty rate that is over 13 percent. 

Like my colleagues, I am very concerned about adding any additional financial burden to those already struggling in these difficult 

economic times. Low and moderate-income households are always 

disproportionately affected by hikes in energy costs. 

However, I am greatly encouraged by the proposals on the table 

today that seek to offset costs for lower-income households. Studies 

by the Congressional Budget Office suggest that lower-income 

households could even be better off as a result of a well-executed 

cap-and-trade program, and this assessment does not even include 

the additional benefits that all citizens will experience as the result 

of a reduction in greenhouse gasses and hopefully a slowing or reversal of climate change. 

As we heard yesterday from United Nations Secretary General, 

Ban Ki-moon, the cost of inaction are far greater than the cost of 

action. And these include costs to human health, to our natural resources, and to our infrastructure. So we must act now, but we 

must also act wisely, ensuring that we are always protecting the 

most vulnerable among us. 

Mr. Chairman, I yield back. 

Mr. MARKEY. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Kentucky, Mr. Whitfield. 

Mr. WHITFIELD. Chairman Markey, thank you very much, and I 

want to thank the witnesses for being with us this morning. Also, 

these hearings are vitally important, because it is imperative that 

as we move forward on this very serious issue that we do frame 

what the debate is all about, and I think it is very clear that the 

debate is about the cost of action versus the cost of inaction. And 

from all of the studies that I have seen the cost of inaction really 

does not have a—the cost of action does not have a quantifiable 

benefit that can be calculated in my view. 

The cost of implementing a cap-and-trade system and renewable 

energy mandate definitely does have a quantifiable cost. We asked 


rmajette on DSK2TPTVN1PROD with HEARING
12 

a local cooperative in my district to calculate the 5 cent-per-kilowatt-hour penalty that would be assessed in Kentucky if they were 

not able to meet the proposed renewable energy mandate, and a 

company, a mid-sized manufacturing plant it would cost them 

$18,000 per month more as a penalty. And I think at this time 

with the economy being as weak as it is, unemployment going up, 

that if we are not very careful, a cap-and-trade system and renewable energy mandate can really have a significant negative impact 

on our economy. 

The second part that I would just like to discuss briefly is that 

the President in his budget said that the cap-and-trade system 

would generate around $641 billion of additional revenue for the 

Government, and he has put that in his Budget, but the sad thing 

about it is recognizing that coal is going to continue to play a vital 

role, not only in producing electricity in our country, but also in 

China. There is not $1 of that cap-and-trade revenue that is going 

to go into the carbon capture and sequestration research and technology, and I think that is a mistake. 

But I do look forward to the testimony of our witnesses today, 

and thank you for the hearing. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Utah, Mr. Matheson. 

Mr. MATHESON. I will waive, Mr. Chairman. 

Mr. MARKEY. The Chair recognizes the gentleman from Georgia, 

Mr. Barrow. 

Mr. BARROW. I will waive. 

Mr. MARKEY. The Chair recognizes the gentlelady from California, Ms. Matsui. 

Ms. MATSUI. Thank you, Mr. Chairman. I am very pleased to be 

here today, and I am glad that this subcommittee is taking a broad 

look at this issue; from meeting with the Secretary General of the 

United Nations on international strategies and getting into specifics of helping consumers with our panel today. On that topic, I 

would like to thank today’s panelists. We appreciate your time and 

expertise on these matters. 

I think we all agree that as we craft a comprehensive bill we 

need to ensure that includes protections for consumers. The way 

we distribute allowances and who receives them will greatly impact 

our constituents across this country. That is why I look forward to 

hearing our panelists’ advice on strategies that this committee can 

use as we draft this bill. 

We need to understand how to allocate allowances so that we can 

effectively reduce our overall emissions. We have a responsibility to 

ensure that consumers negatively affected by this bill see some relief, and we must also be aware that there are significant costs to 

our constituents that are associated with inaction. 

I hope our witnesses today can help us all understand the role 

that allocations can play as we craft a climate change bill. This is 

one of the most important topics we will consider during this entire 

process, and I am looking forward to today’s testimony. 

And once again, Mr. Chairman, thank you very much for this 

hearing. I yield back the balance of my time. 

Mr. MARKEY. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Louisiana, Mr. Scalise. 


rmajette on DSK2TPTVN1PROD with HEARING
13 

Mr. SCALISE. Thank you, Mr. Chairman, and our panel. 

As this subcommittee considers climate change legislation, it is 

critical that we also weigh the effects that climate change legislation will have on American families, especially in these tough economic times. Creating a market for emissions will impose costs to 

consumers. This is just basic economics. 

Peter Orszag, now the President’s Budget Director, has verified 

that energy taxes designed to decrease carbon emissions will be 

passed onto American families. Estimates show that the average 

annual household cost will be about $1,300 a year for a tax applied 

to a 15 percent cut in CO2 emissions. Mr. Orszag admitted to Congress last year that the price increases borne by consumers are essential to the success of a cap-and-trade program. In fact, he stated, and I quote, ‘‘Decreasing emissions would also impose costs on 

the economy. Most of those costs will be passed along to consumers 

in the form of higher prices for energy and energy-intensive goods.’’ 

While we consider these increased costs for utilities, we must not 

overlook a very direct impact cap-and-trade legislation will have on 

American jobs. The National Association of Manufacturers estimates a net loss of three to four million jobs as a result of a capand-trade program. Other estimates reach as high as seven million 

jobs lost in our economy. 

And as we know, cap-and-trade will unfairly burden certain regions of our country more than others. In my home State of Louisiana we rely heavily on gas and nuclear for our electricity generation, and under current proposals nuclear is not considered a renewable source of energy, and as we saw here yesterday, Secretary 

General of the U.N. even acknowledges that he considers nuclear 

a renewable source of energy. 

So, Mr. Chairman, I urge caution as we pursue cap-and-trade 

legislation that could have a devastating affect on our economy and 

on American families, especially in these tough economic times. We 

are all working hard to advance renewable and alternative sources 

of energy, but it would be unwise for us to pass policies that will 

only hinder our economic recovery and place further hardships on 

American families. 

I look forward to hearing from our panel today. Thank you, and 

I yield back. 

Mr. MARKEY. OK. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Washington State, Mr. 

Inslee. 

Mr. INSLEE. Thank you. Just to make a couple points, I really 

think this hearing could be turned totally on its head about protecting the consumers because it is very clear that even if we did 

not do anything to help consumers through this process of a capand-trade bill, even if we did nothing and we don’t intend to do 

nothing, but even if we intended to do nothing, we would still reduce the damages that consumers will otherwise experience in the 

next several decades. And the reason is it is very clear that the 

path of inaction, the path of doing nothing about climate change, 

which is the path that many of the people in this room still want 

to pursue unfortunately, we do know that that path will have enormous costs to consumers. 


rmajette on DSK2TPTVN1PROD with HEARING
14 

It was the poor folks in Chicago who died in the heat wave a couple of years ago. Those were the people who were packed into the 

pathology labs were the poor people. It is the people up in the Arctic who today are losing their livelihood. There are Americans 

today who are losing their ability to feed themselves in the Arctic 

today because of climate changes. It is the people in the agricultural sector who are picking our fruit and vegetables who are out 

of work today because of some changes in the climate system. 

So even in the absence of any action today to help consumers in 

the cap-and-trade system, we are preventing more damages those 

consumers and folks are going to experience in this country. So I 

don’t think the path of inaction is the right one. 

Secondly, I just want to say that the one thing I learned in Europe, I went and spent a week there looking at their cap-and-trade 

system, the biggest mistake they made was giving away all the 

permits because it was a scandal. They told me do not, whatever 

you do, don’t give away all the permits. You will be politically embarrassed, and the reason is is because those costs then get, without adequate protection, pushed down to the consumer. We don’t 

intend to make that mistake. 

Thank you. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Gonzalez. 

Mr. GONZALEZ. Waive opening. 

Mr. MARKEY. The Chair recognizes the gentlelady from Wisconsin, Ms. Baldwin. 

Ms. BALDWIN. Thank you, Mr. Chairman. Addressing climate 

change is truly a consumer protection issue as has been mentioned 

already. Today we will look into consumer protection policies for 

climate legislation. We must also keep in mind that by taking steps 

to address our greenhouse gas emissions we are protecting consumers for generations to come. If we fail to act comprehensively, 

the impacts will be felt through drastic losses; loss of life, loss of 

good health, species extinction, loss of ecosystems, and social conflict. 

I believe that a federal cap-and-trade system can be developed in 

a way that balances most of the negative effects on consumers 

against the need to address climate change threats to our economy, 

our environment, and our national security. 

In particular, we must design a system that minimizes potential 

negative aspects that many States, like my own midwestern State 

of Wisconsin, may face due to our significant industrial base and 

in the case of our State, our heavy reliance on coal for electrical 

generation. My home State is moving forward on its own goals to 

reduce our coal dependency and to lower greenhouse gas emissions. 

Our governor has committed the State to supporting a national 

economy-wide cap-and-trade program. However, costs must be 

manageable and how we design this system will determine who 

pays and how much. 

In other words, distribution of allowances and how we apportion 

the revenue will be key to determining the costs and the consumer 

impacts. As we take the necessary and bold actions, we must be 

concerned about the impact of our actions on consumers, which I 


rmajette on DSK2TPTVN1PROD with HEARING
15 

believe we can do if we keep in mind the diverse needs across our 

country and across American households. 

I look forward to the witness testimony today, and thank you, 

Mr. Chairman, for this hearing. 

Mr. MARKEY. Thank you. The Chair recognizes that gentleman 

from North Carolina, Mr. Butterfield. 

Mr. BUTTERFIELD. Thank you very much, Mr. Chairman, for convening this very important hearing and especially to the six witnesses in front of me. Thank you for your participation today. 

Mr. Chairman, this is perhaps one of the most important hearings that we have had to date. No other issue strikes closer to the 

central conflict in this bill, that is, the conflict between acting to 

prevent future climate catastrophic occurrences for future generations and protecting the current generation from bearing an undue 

burden. The CBO, the Center on Budget and Policy Priorities, 

Duke Power, have all projected the increased cost of energy to be 

substantial under a cap-and-trade program. Of families in my district with a child under the age of five, 40 percent. Yes. Forty percent of those live below the poverty line. 

Now, when it comes to a necessity like energy, they cannot afford 

to projected increase. I sat down with my staff last night and we 

worked up a sample budget for a single mom with two dependents 

and making $8 an hour, and it just won’t fit. These people are 

hurting, and they cannot absorb the increase in the cost of electricity. 

To that end I support disbursement of considerable auction revenue to be returned to low and middle-income households to offset 

the cost of our policy. The Chairman’s bill last year took a promising approach to meeting this need by committing to completely 

offset energy cost increases for two-thirds of all U.S. households. 

Further, the CBPP has made extensive proposals to deal with 

this issue, and I eagerly anticipate Mr. Greenstein’s testimony. 

Maintaining an approach that holds at least guilty consumers 

harmless in our policy is absolutely imperative. The problem offers 

us an opportunity, Mr. Chairman, to think creatively, employing a 

variety of techniques, from rebates to energy efficiency to mitigate 

the cost and make this thing work. 

Now, Mr. Chairman, I am certainly not alone in this view. They 

have been expressed by many others. I have a letter with me today 

from the National Rural Electric Cooperative Association that I ask 

unanimous consent to include in the record today. 

Mr. MARKEY. Without objection it will be included. 

[The information was unavailable at the time of printing.] 

Mr. BUTTERFIELD. With that, Mr. Chairman, I yield back. 

Mr. MARKEY. Great. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Green. 

OPENING STATEMENT OF HON. GENE GREEN 

Mr. GREEN. Thank you, Mr. Chairman. I know my colleague from 

North Carolina was talking about Greenstein, Mr. Green Jeans, I 

have been called that a couple times, and I used to say it added 

about ten points to my name ID because that as a childhood—some 

of us watched Captain Kangaroo. 


rmajette on DSK2TPTVN1PROD with HEARING
16 

I want to thank the Chairman for particularly including this in 

our series of hearings on consumer protection policy and climate 

legislation. While several of our subcommittee hearings thus far focused on efforts to protect our environment, I am pleased today to 

hear focus on equal-important policy objectives that protect the 

U.S. consumer under any climate legislation. If we don’t do that, 

no matter what else we try to do, it will not work, because the people in our country will respond. Those of us who to support some 

reasonable control, if we don’t control the cost to the consumer, it 

is kind of like Social Security. I tell people, don’t worry about Social Security. There will be a new Congress if we change Social Security to your detriment. And I think this could happen with us. 

I represent a predominantly blue-collar, low-income district 

where employees must work long hours and oftentimes double 

shifts just to make ends meet, and it is an energy-producing district. It is the east end of Houston, Texas, Harris County, where 

we have petrochemical complexes, and we still produce natural gas 

and oil in our district. But I am also proud to have the largest biofuel refinery in the country. 

With family budgets already stretched thin, any additional increase in electricity, natural gas, or gasoline bills as a result of climate legislation will necessitate tough family choices between 

whether to pay bills, put food on the table, or to purchase muchneeded medication. Low-income households already spend more 

than five times their household income on energy than high-income 

households and less likely to be able to afford home weatherization 

services or to purchase more-efficient appliances. 

And our climate change policy leads to—if our climate change 

policy leads to energy supply disruption and price spikes without 

effective remediation, consumers and voters will begin to question 

that policy. Perhaps one of the most important design elements 

with any cap-and-trade addressing the price impacts to the consumers is allocation of emission allowances and the distribution of 

auction allowance proceeds. As evidenced in the President’s budget 

proposal, auction allowances have the ability to generate over half 

a trillion dollars to the Federal Government in less than 10 years 

alone. There will be huge demands for these funds, and consumers 

need more than the government’s promise that they will receive future assistance to dampen the cost impacts of climate legislation. 

In the power sector there is a growing consensus to allocate allowances to the local distribution companies or LDCs, which are required by law to act in the public interest and pass through allocation benefits to consumers. This proposal has merit and must be 

further flushed out to ensure utilities have the infrastructure in 

place to accurately collect consumer data that can target all needy 

consumers in the LCD allocation distribution but not disadvantage 

LDCs that serve low-income families with lower-per-capita energy 

consumption. 

Mr. Chairman, I know I am out of time, so I appreciate your patience today. 

[The prepared statement of Mr. Green follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
17 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 24 67102A.005
18 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 25 67102A.006
19 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Illinois, Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. I see we have no cameras again today. 

Mr. MARKEY. May I say, and we will just hold the time here that 

I already had this conversation with Mr. Barton, and we did make 

the request for these, for the, that portable equipment here, and I 

expected it to be here today, but we were told this morning that 

Armed Services and the Oversight Committee at full committee, 

there is only two of these portable systems that they have, and that 

they were having the hearings in their full committee rooms, and 

we could not, unfortunately, persuade them to move them over 

here. 

But that was my—— 

Mr. SHIMKUS. No. I understand. I just—— 

Mr. MARKEY [continuing]. Expectation this morning. 

Mr. SHIMKUS. Yes. And I understand, and I appreciate your effort. I just say if the world is coming to the end because of climate 

change, that this probably should take precedence over the military 

hearing or the oversight hearing. If the world is ending, the public 

ought to know about it. And I think we are, you know, it begs the 

question of how important these hearings are if we are not willing 

to televise them. 

We are on Universal Service Fund downstairs. It is an important 

issue to my district. I think if the world is ending, this is even 

more important that the Universal Service Fund. So I am going to 

continue to, as you would expect, to belabor the point. 

Mr. MARKEY. And by the way, it is a point worth belaboring. OK. 

This is not something that I understand exactly why House, the 

House can’t fix these cameras. OK. I don’t understand it, and I 

don’t understand how the House Armed Service Committee and 

House Oversight Committee doesn’t have rooms that have a camera in them. I don’t—— 

Mr. INSLEE. Mr. Chairman. 

Mr. MARKEY. Yes. 

Mr. INSLEE. I just want to report that my constituents, they do 

believe the world is ending in not being able to see John Shimkus. 

Believe me. This is a perception that is shared widely in my district. I just wanted to—— 

Mr. MARKEY. I am going to work very hard to solve this problem, 

but, believe me, I have learned more about the operations of cameras in committee rooms in the last 1 week since your point has 

been made, very validly, by the way. 

Mr. SHIMKUS. About the only thing I can get done in this Congress, Mr. Chairman. 

Mr. MARKEY. That is not so. That is absolutely not so. 

Mr. SHIMKUS. But, thank you. 

I have talked about the job loss issue. Kincaid, Illinois, 1,200 

mines because of the 90 amendments. Last hearing I had, I talked 

about 14,000 mine workers just in southern Illinois losing their 

jobs. It is great we got the Ohio Coal Association here, and in his 

testimony on—I will just read it. ‘‘In the 15 years following the 

1990, passage of the Clean Air Act, which imposed drastic reductions in coal production, Ohio lost nearly 120 mines, costing more 


rmajette on DSK2TPTVN1PROD with HEARING
20 

than 36,000 primary and secondary jobs. These impacted areas of 

my State, the State of Ohio, that have spent years recovering and 

some never will,’’ and sir, that is southern Illinois. Exactly the 

same. 

And the more and more we learn about climate change and capand-trade, the more you find out that, what this is all about. This 

is about a simple premise of monetizing carbon, and what it will 

do, it will pay people not to manufacture. If you have a coal-powered plant, and you have credit, and there is a trading floor, you 

can shut that power plant off and make money. Simply put. And 

whose money is it? It is the rate payers’ money. It is taxes. It is 

earning income that is going to go away. This is probably the number one biggest distribution of wealth plan that this country has 

ever seen, and that is why these things have to be covered, televised. And that is why some of us are skeptical that the truth is 

being inhibited from being told to the public. 

One hundred percent option will pay people to stop generating 

electricity. Well, pay them. That is not a policy that we want. It 

deprives us of our economic livelihood. It distributes wealth around 

the world. It is bad policy. We are going to fight it. 

Mr. MARKEY. I thank the gentleman. 

And I would just make this note. When we are talking about 

televising, we are talking about televising on the internal House 

system so that members and staffs in their offices can see this subcommittee hearing. We are not talking about C–Span. 

Mr. SHIMKUS. No. Would the gentleman yield? 

Mr. MARKEY. I will just finish the point. What C–Span has to decide on a daily basis as an editorial decision is which committee 

hearings they are going to actually put on C–Span. And so this 

hearing right now would be competing with about another 30 hearings on the House and Senate side as to whether or not they would 

actually broadcast it on C–Span. 

So what we are talking about principally here is that other offices can see this hearing rather than—— 

Mr. SHIMKUS. No. That is—Mr. Chairman, if the Chairman 

would yield, that is not directly true. We, this also could be 

streamed online right now. 

Mr. MARKEY. But that is not accurate. 

Mr. SHIMKUS. And the other thing is C–Span will air hearings 

throughout the weekend and not in real time. So I understand your 

point. 

Mr. MARKEY. I understand. 

Mr. SHIMKUS. If the firm doesn’t think we are going down the 

wrong path—— 

Mr. MARKEY. No. I agree with—again, I agree with you. I agree 

with you, and this audio stream is going out, and there are print 

press here that are reporting what happens here, but I agree with 

you 100 percent. I wish that this was being televised. 

Let me now turn and recognize the gentleman from Vermont, 

Mr. Welch. 

Mr. WELCH. Thank you, Mr. Chairman. I will waive my opening 

statement. 

Mr. MARKEY. The Chair recognizes the gentleman from Texas, 

Mr. Burgess. 


rmajette on DSK2TPTVN1PROD with HEARING
21 

Mr. BURGESS. Thank you, Mr. Chairman, and I appreciate you 

having this hearing, and I know you are working as hard as you 

can to get the television cameras turned back on. 

We have to face the stark reality that the United States as a Nation is getting older, and we may be looking at a time in the not 

too distant future where those who could least afford to pay for 

more, more for their energy needs are exactly those who are going 

to be affected under a cap-and-trade regimen. 

Last August the United States Census Bureau reported that 

today 40 percent of the United States’ population is over the age 

of 45, and according to their projections 43 percent will be over the 

age of 45 in 2025. In addition, we have a shrinking population 

under the age of 18, so we are talking about a large majority of 

our population who are either past their peak earning years so it 

will be more difficult for them to pay higher energy costs or will 

be living on a fixed income. People on a fixed income cannot afford 

increases in their monthly energy bills. In fact, it is the antithesis 

of a compassionate society that charges more for energy for those 

who can least afford it. 

Even more troubling is the realization that every worker who retires is not replaced with another equal-wage earner. So when you 

look at these numbers you begin to see that we are looking at a 

potentially very troubled scenario in the earning situation in America’s future, which will be directly impacted by high costs for energy. 

People take less flights, drive less, buy smaller houses, use less 

energy, all that may be to the good, but if the goal of cap-and-trade 

is to reduce the use of energy, then maybe it is not the best strategy. Based upon these projections from the United States Census 

Bureau, in 2025, the majority of our population is not going to be 

able to afford the amount of energy they use today, even without 

a new tax through cap-and-trade. 

So, Mr. Chairman, I am anxious to hear from our witnesses 

today about how we can protect consumers from increased energy 

costs and as a result of what we are going to do in this committee 

with our cap-and-tax regimen. 

With that I will yield back my time. 

Mr. MARKEY. Great. The gentleman’s time has expired. The 

Chair recognizes the gentleman from Texas, Mr. Hall. 

Mr. HALL. Mr. Chairman, thank you. I will be very brief, and I 

don’t know what has been testified to. I have seen some of the testimony, but I just make the simple statement that any cap-and-tax 

or cap-and-energy tax and scheme is going to create a regulatory 

nightmare that we can’t live with. But we know that, Mr. Chairman, and I admire you and respect you and you know it, and you 

have numbers on us, and you are going to pass whatever you hand 

out over there. 

I think I have quoted this to you before back through the 28 

years we have been sitting together here, said the young madam 

of Siam to her lover, young Kiam, ‘‘If you kiss me, of course, you 

got to use force, but God knows you are stronger than I am.’’ So 

you are going to pass it, but I just urge you to be as kind and 

gentle with the taxpaying public as you can. 

I yield back my time. 


rmajette on DSK2TPTVN1PROD with HEARING
22 

Mr. MARKEY. Honestly, Ralph, I see this as something—my goal 

is like the Telecommunications Act of 1996, that wound up at 423 

to three, that ultimately we should all work it out, and it should 

be us in Boston as it always is and—— 

Mr. HALL. Were one of the three? 

Mr. MARKEY. I can tell you who those three were, and it is a good 

story. Each one was a good story. 

Mr. HALL. OK. I will still yield back my time. 

Mr. MARKEY. Great. The gentleman’s time has expired. 

The Chair does not see any other members seeking recognition 

at this time. So we will turn to our very distinguished panel, and 

we will ask our first witness, Mr. Steven Kline, to begin testifying. 

Steve is the Vice-President of Corporate Environmental and Federal Affairs for the Pacific Gas and Electric Corporation. PG&E 

Corporation is an energy-based holding company based in San 

Francisco. He has worked extensively on all of these issues. We 

welcome you, sir. 

STATEMENTS OF STEVE KLINE, VICE-PRESIDENT OF CORPORATE ENVIRONMENTAL AND FEDERAL AFFAIRS, PACIFIC 

GAS AND ELECTRIC CORPORATION; SONNY POPOWSKY, 

CONSUMER ADVOCATE OF PENNSYLVANIA, PENNSYLVANIA 

OFFICE OF THE CONSUMER ADVOCATE; ROBERT GREENSTEIN, EXECUTIVE DIRECTOR, CENTER ON BUDGET POLICIES AND PRIORITIES; STEVEN F. HAYWARD, AMERICAN ENTERPRISE INSTITUTE; MIKE CAREY, OHIO COAL ASSOCIATION; AND JOHN S. HILL, DIRECTOR FOR ECONOMIC AND 

ENVIRONMENTAL JUSTICE, UNITED METHODIST CHURCH, 

GENERAL BOARD OF CHURCH AND SOCIETY 

STATEMENT OF STEVE KLINE 

Mr. KLINE. Good morning, Chairman—— 

Mr. MARKEY. If you could move that microphone in a little bit 

closer. 

Mr. KLINE. Certainly. Is that better? 

Mr. MARKEY. Yes. Please. 

Mr. KLINE. Ranking Member Upton, and members of the committee. Thank you for the opportunity to be before you today. 

PG&E is one of the Nation’s—— 

Mr. MARKEY. Move it in just a little bit closer. 

Mr. KLINE. PG&E is one of the Nation’s largest utilities and has 

long been working on clean energy, energy efficiency, and the effort 

to address climate change. We strongly support comprehensive climate change legislation. In our view the best solution is a well-designed, economy-wide, market-based cap-and-trade program. 

In my written testimony I have defined well-designed by detailing certain basic building blocks as the foundation for any cap-andtrade effort. But also to state that even with the best design consumer protections are going to be critical. For electricity and natural gas consumers one of the most effective, efficient, and transparent ways to accomplish this is by directing allowance value to 

regulated local distribution companies or LDCs where it can be put 

to the benefit of consumers. In fact, LDCs are virtually tailor made 

for this role. They are closest to the end-user consumer, they understand better than anyone how to work with individual cusVerDate Mar 15 2010 11:19 Mar 02, 2012 Jkt 067102 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 E:\HR\OC\A102.XXX A102

rmajette on DSK2TPTVN1PROD with HEARING
23 

tomers in their area, and in many cases, like PG&E, they already 

run existing initiatives like energy efficiency, low-income programs, 

and others which can serve as the infrastructure for delivering 

value back to customers. 

Most importantly, LDCs operate under the direct oversight of 

State utility commissions or other governing boards. This provides 

the means to assure that the value of the allowances is returned 

to consumers in a timely, targeted, and transparent manner that 

overall advances the objectives of the National Climate Program. 

There are important built-in advantages that lend themselves 

ideally to this task at hand, and we believe Congress can take full 

advantage of them. In order to do that, we recommend the following framework. 

Allowances should be allocated to LDCs. LDCs would then sell 

the allowances and use the proceeds to buffer consumer impacts in 

a way that doesn’t undermine the incentive to reduce their usage 

and hence emissions. Congress should set guidelines for using allowance value, require timely and transparent reporting on how to 

allocate, and how the value is used. 

Allowance value provided to LDCs for consumer benefits should 

obviously fall under the guidance of State public utilities commissions. LDCs should be required to invest the revenue from selling 

allowances solely to benefit consumers. This includes investing in 

programs to assist low and moderate-income consumers, small 

businesses, as well as to advance energy efficiency and reduce demand. 

This point is critical. Energy efficiency and demand reduction are 

two of the best ways to sustainably contain costs for consumers and 

do it in a manner that improves their comfort and standard of living. In fact, many States have comprehensive energy efficiency programs that save customers $2 to $4 for every dollar invested. These 

programs also create significant new energy service jobs and 

through increased efficiency drive broad economic growth. 

We are convinced that if one of the goals of a national program 

is increasing energy efficiency and lowering demand, that no better 

mechanism exists than directing allowance value through LDCs, 

and leveraging the established relationships between LDCs and 

their customers provides the best opportunity for success. It is 

worth noting that PG&E is not alone in supporting LDC allocations. Others include the NARLC, National Association of Regulatory Utility Commissioners, the Natural Defense—I am sorry. 

Natural Resources Defense Council, Environmental Defense Fund, 

the National Commission on Energy Policy, U.S. Climate Action 

Partnership or U.S. CAP, the Clean Energy Group, the Edison 

Electric Institute, the American Gas Association, and the American 

Public Gas Association. These are submitted as attachments to my 

prepared testimony. 

In closing, let me say that our country has a historic opportunity 

to change the way we produce and use energy, producing huge environmental and economic benefits, but this is a long journey. It 

has to be sustainable over time, and that means we have to take 

careful steps at the outset to assist consumers along the way. We 

believe LDC allocations are one way to do that. Thank you. 

[The prepared statement of Mr. Kline follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
24 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 32 67102A.007
25 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 33 67102A.008
26 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 34 67102A.009
27 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 35 67102A.010
28 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 36 67102A.011
29 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 37 67102A.012
30 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 38 67102A.013
31 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 39 67102A.014
32 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 40 67102A.015
33 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 41 67102A.016
34 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 42 67102A.017
35 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 43 67102A.018
36 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 44 67102A.019
37 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 45 67102A.020
38 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 46 67102A.021
39 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 47 67102A.022
40 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 48 67102A.023
41 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 49 67102A.024
42 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 50 67102A.025
43 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 51 67102A.026
44 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 52 67102A.027
45 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 53 67102A.028
46 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 54 67102A.029
47 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 55 67102A.030
48 


rmajette on DSK2TPTVN1PROD with HEARINGInsert graphic folio 56 67102A.031
49 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 57 here 67102A.032
50 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 58 here 67102A.033
51 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 59 here 67102A.034
52 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 60 here 67102A.035
53 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 61 here 67102A.036
54 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 62 here 67102A.037
55 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 63 here 67102A.038
56 

Mr. MARKEY. Thank you very much, Mr. Kline. 

Our next witness is Mr. Sonny Popowsky, Consumer Advocate of 

the State of Pennsylvania, where he represents consumer matters 

with their utility companies. We welcome you, sir, and whenever 

you are ready, please begin. 

STATEMENT OF SONNY POPOWSKY 

Mr. POPOWSKY. Thank you, Mr. Chairman, Mr. Upton, members 

of the committee. My name is Sonny Popowsky. I have been the 

Consumer Advocate of Pennsylvania since 1990, and I have been 

a member of that office since 1979. My office is also a member of 

the National Association of State Utility Consumer Advocates. 

Let me state at the outset that the National Association, 

NASUCA, supports the enactment of federal legislation to reduce 

greenhouse gases on an economy-wide basis. As representatives of 

utility consumers, however, it is NASUCA’s position that any 

greenhouse gas emission reduction program for the electric industry should provide appropriate emission reductions while minimizing the cost to consumers and must not produce windfall gains 

for electric generators at the expense of electric customers. 

Now, the primary focus of the Congressional debate has been on 

the development of a cap-and-trade program for carbon dioxide. I 

think that is understandable given the success from an economic 

perspective of the Clean Air Act of 1990, with respect to the reduction in sulfur dioxide emissions. 

But Congress must recognize that the electric industry of 2009, 

is far different from the electric industry of 1990, particularly in 

those States such as my home State of Pennsylvania that have restructured or deregulated the generation function of our electric 

utilities. What worked to reduce pollution at reasonable costs for 

the United States Electric Industry of 1990, could well result in 

much higher costs to consumers and many billions of dollars of unnecessary payments to generators in the electric industry of 2009. 

This difference is most clear in the question of how to distribute 

emission allowances among electric providers. In 1990, under the 

Clean Air Act allowances were initially allocated at no charge to 

utility generators, but the benefit of those free allowances in 1990, 

could be flowed back to customers through cost-based rates 

throughout the Nation. To the extent that the utilities incurred 

costs to comply with the Act through adding scrubbers or buying 

lower sulfur coal, those costs were passed through to customers but 

no more than that. 

The same is not true in the electric industry in 2009, particularly, again, in States like Pennsylvania and other restructured 

states where electricity is no longer regulated on a cost basis but 

on a market basis. 

So the first point to recognize is the one that you made, Chairman Markey, which is that if you give away an allowance to an unregulated generator, they are going to charge us for them anyway. 

Because in the unregulated markets like the market that we are 

a part of, the market value or opportunity costs of that allowance 

will still be reflected in the price that is charged by that generator. 

Your analogy to the scalper outside Boston Garden is exactly correct. That scalper won’t pick up the ticket and give it away. The 


rmajette on DSK2TPTVN1PROD with HEARING
57 

scalper will pick up the ticket off the ground and sell it at the market price. 

The second point is that the way our markets work and it is 

what is called the single market clearing price in the restructured 

markets, which, again, not just Pennsylvania but in these markets 

that are in a large part of the country, the single market price 

works that the highest cost unit that is operating in that given 

hour sets the price for the whole market. So if that high-price unit 

is a coal or even a gas unit that includes the cost of the—or the 

opportunity cost of the credit, that amount gets charged, gets paid 

to everyone, including, for example, nuclear units that don’t have 

any emissions costs, that don’t have to buy allowances but they will 

still get paid an amount in their charges as if they were incurring 

these costs. 

So the single-market clearing price would work, it is as if in your analogy, Chairman Markey, if the scalper charged $100 to get into 

the Garden, everybody got charged $100. That is the way it works. 

Everybody would have to pay the highest price. So that is another 

source of tremendous cost to customers under a cap-and-trade program if we think it is still 1990. 

Well, I think I agree with Mr. Kline, though, in that one way to 

address this is not to give away allowances to unregulated generators, but you can get around at least part of this by giving the allowances to the regulated distribution companies; the state regulator investor owned companies, the coops, immunities, and the 

other public power organizations. If we give the allowances to the 

regulated entities, at least we can make sure that to the extent 

those allowances are sold that the benefits go to consumers. 

That similar result can occur, as you know, in the RGGI states 

in the Regional Greenhouse Gas Initiative where the states can 

serve a similar role and can sell the allowances to the generators, 

but make sure that the allowance benefits go to customers, and the 

same could even be done at the federal level, but, again, the further away we get from the customer, the more it concerns me that 

the benefits of the allowances will not go to the customers. 

My last point is that simply raising the price of electricity 

through a cap-and-trade system is, I think, harmful and not the 

most cost-effective way to reduce emissions. We need complimentary policies such as increased energy efficiency and replacement of 

existing high carbon units with low or no carbon-emitting units. 

We need these complimentary policies that are designed to reduce 

costs for consumers and provide the environmental benefits at the 

lowest cost. 

Thank you. 

[The prepared statement of Mr. Popowsky follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
58 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 66 here 67102A.039
59 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 67 here 67102A.040
60 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 68 here 67102A.041
61 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 69 here 67102A.042
62 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 70 here 67102A.043
63 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 71 here 67102A.044
64 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 72 here 67102A.045
65 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 73 here 67102A.046
66 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 74 here 67102A.047
67 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 75 here 67102A.048
68 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 76 here 67102A.049
69 

Mr. MARKEY. OK. Thank you, Mr. Popowsky, very much. 

Next witness is Mr. Robert Greenstein. He is the Founder and 

Executive Director of the Center for Budget and Policy Priorities. 

He was recently honored with the Heinz Award for Public Policy 

to recognize his work in improving, the economic outlook of low-income Americans. And he has also won the John W. Gardner 

Award. We welcome you, sir. 

STATEMENT OF ROBERT GREENSTEIN 

Mr. GREENSTEIN. Thank you very much, Mr. Chairman, and in 

this testimony I will provide a different view than those you have 

just heard. 

Climate change policies can be designed in a way that preserve 

the incentives from higher energy prices while using proceeds from 

auctioning allowances to shield consumers. But to do that it is essential that most or all of the permits be auctioned rather than 

given away free. An argument is sometimes made that if the permits are given away free, costs to consumers won’t rise as much. 

Economists across the political spectrum reject that argument. It 

ignores the basic laws of supply and demand. If allowances are 

given away free to firms that emit, the firms and their shareholders will reap on warranted benefits. The Congressional Budget 

Office has explained that and said that the result would be windfall profits. Former President George W. Bush’s Chief Economic 

Advisor, Greg Mancue of Harvard, has explained the same thing 

and said the result would be large-scale corporate welfare. 

Most of the Center on Budgets’ work on climate policy has focused on developing proposals to shield low and moderate-income 

households from increased poverty and hardship as a result of climate policies in a way that would be effective in reaching these 

households, efficient with low administrative costs, and consistent 

with energy conservation goals without lessening incentives to conserve. 

With these goals in mind we have designed a climate rebate that 

would offset the average impact of higher energy-related costs on 

low and moderate-income households. The energy would be delivered in two ways. 

For very-low-income households it would be programmed onto 

the debit cards that every State runs through State electronic benefit transfer systems. These are the debit card systems States already use to deliver food stamps and other forms of assistance to 

low-income families. You simply take everybody who is getting food 

stamps, everybody who is on the low-income subsidy for the prescription drug benefit. You just automatically program them onto 

the debit card. 

For low-income working families we already addressed the 

earned income tax credit each year for inflation. You just adjust it 

further for the energy price impact. What you now have is we have 

covered the bulk of the low-income population. Others who aren’t 

in one of those two could apply. You have done it without creating 

a new bureaucracy, hardly any new administrative costs, no big 

amount of new paperwork, very efficient. 


rmajette on DSK2TPTVN1PROD with HEARING
70 

We would also provide some additional money, must lesser 

amount, to the Low-Income Home Energy Assistance Program to 

fill gaps that otherwise aren’t filled by the rebate. 

Now, recently, we have modified this proposal. So instead of just 

being for low and moderate-income households, it is low and middle-income households as well. That is not hard to do. We remove 

the earned income credit component, and we replace it with a tax 

credit that covers middle-income families and the working poor as 

well. 

How far up the income scale that will go, what the exact size of 

the rebate would be, that is up to you. You could—depends on what 

proportion of the permits you wanted to vote to this mechanism. 

But all of the variations that we have developed have one common 

principle. They all fully offset the average hit on low-income consumers because climate policies need not and should not push more 

Americans into poverty or make those who are poor already poorer. 

Now, we have been working on this for a year and a half, and 

we make these recommendations after careful examination of other 

approaches to consumer relief. I am afraid that other approaches 

have serious flaws. We are particularly concerned about approaches that rely on utility companies to provide consumer relief 

and proposals that would cut tax rates as distinguished from providing a tax credit. 

Let us take the tax rate. CBO has analyzed proposals that would 

auction the proceeds and use them to lower tax rates across the 

board. What they find is the bottom 60 percent of the population 

is worse off, the tax reduction is less, the farther down the income 

scale, the greater degree. The degree to which it is less than the 

increase in energy prices. At the top of the income scale you get 

a tax cut that exceeds your income, your increase in energy prices. 

So that is clearly not a promising approach. 

Turning now to the utility company approach, let me be very 

clear that I do think that allocations to utility companies for energy 

efficiency improvements is something that merits very serious consideration. I am distinguishing that from allocations to utility companies for consumer relief, an approach that is deeply problematic 

for a number of reasons. 

First, utility companies do not routinely collect information on 

their customers’ income, and, therefore, can’t target it on low and 

moderate or lower and middle-income households. To do so they 

would have to set up new bureaucracies to collect income information and audit it, and they would turn to the Federal Government 

for billions of dollars of subsidies that would be needed to pay the 

cost of an administrative infrastructure that would duplicate what 

public programs already do. 

Secondly, we have an issue of millions of renters who don’t pay 

utility bills directly but have them reflected through the rent. 

Thirdly, and particularly important, the utility company approach is aimed at electricity and natural gas bills. Over half of the 

impact on consumers of climate change legislation will come in 

other areas. Impacts on gasoline and in particular for all sorts of 

other goods and services, food and many other, any service that 

uses energy in the manufacture or transport to market is affected, 

you can’t cover that through an allocation to the utility company. 


rmajette on DSK2TPTVN1PROD with HEARING
71 

Fourth, there is no good formula for allocating emissions among 

the more than 3,300 LDCs in the country. I won’t take the time 

to do it here but—in my oral testimony but almost any formula 

that has been suggested results in significant inequities, in many 

cases particularly to low and moderate-income communities. 

Fifth, limiting consumer assistance through utility companies artificially lowers households’ utility bills and thereby reduces the incentives to conserve that are part of what we are trying to accomplish in the first place. 

Last and most important, the approach would necessarily fail. 

Bear with me for a moment. Let me just try and do some basic economics. We have a cap, and we give money to utility companies, 

and they keep electric rates down, then you do not get as much reduction in use of electricity. But the cap is still at the same level. 

So if you don’t get as much reduction in electricity use, you have 

to get a bigger reduction in other energy use. What that means is 

the costs of meeting the cap go up. The price of the emissions allowances ends up being higher, and consumer costs go up more for 

other kinds of energy while they go up less for electricity. 

Bottom line we spend tens of billions of dollars giving allowances 

to the LDCs, and consumer impacts don’t go down that much because other energy prices are jacked up in return. The bottom line 

is it ends up being kind of wasteful and inefficient. 

Mr. MARKEY. I apologize to you, Mr. Greenstein, but you are now 

3 minutes over. 

Mr. GREENSTEIN. I am sorry. I got one final sentence? 

Mr. MARKEY. One final sentence. 

Mr. GREENSTEIN. The main form of criticism is that this would 

represent a tax increase. What I am proposing answers that criticism. You use the money for the broad middle class and the working poor for an offsetting tax cut. There is not net tax increase, and 

we protect people at the bottom. Answers the main criticism efficiently. 

Thank you. 

[The prepared statement of Mr. Greenstein follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
72 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 81 here 67102A.050
73 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 82 here 67102A.051
74 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 83 here 67102A.052
75 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 84 here 67102A.053
76 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 85 here 67102A.054
77 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 86 here 67102A.055
78 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 87 here 67102A.056
79 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 88 here 67102A.057
80 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 89 here 67102A.058
81 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 90 here 67102A.059
82 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 91 here 67102A.060
83 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 92 here 67102A.061
84 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 93 here 67102A.062
85 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 94 here 67102A.063
86 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 95 here 67102A.064
87 

Mr. MARKEY. Thank you, Mr. Greenstein, very much. 

Our next witness is Mr. Steven Hayward. He is an F. K. 

Weyerhaeuser fellow at the American Enterprise Institute, while 

focusing on the environment he has worked with a wide range of 

public policy issues. He is also the co-author of the Annual Index 

of Leading Environmental Indicators. We welcome you, sir. 

STATEMENT OF STEVEN HAYWARD 

Mr. HAYWARD. Thank you, Mr. Chairman, and members of the 

committee for the invitation. 

At the American Enterprise Institute we try to take the long 

view of things, and so my own work and the work of about seven 

of us right now at AEI is trying to clarify the scope and challenge 

of reducing greenhouse gas emissions by 80 percent from 1990, levels by the year 2050, a level of emissions it turns out that the U.S. 

last experienced around the year 1910, when our population was 

about 92 million people. But in 2050, our population will be about 

420 million people, which means our per capita greenhouse gas 

emissions will need to be about 21⁄2 tons down from 191⁄2 tons today 

or 10 tons in 1910. 

What this means in one sentence is that attaining this target 

will require essentially replacing almost the entire fossil fuel energy infrastructure in the United States in the next 4 decades. 

Now, obviously you can’t make a target like that in a single leap 

or even a series of leaps, and so what we are trying to do is get 

a grasp of the various scenarios of developing and scaling up potential technologies and what policy strategies might get us there. 

So the time being that we and lots of other people are talking 

about emissions trading, cap-and-trade, or straight up carbon tax, 

which like most economists we think is more efficient but obviously 

politically problematic. Still the seven of us at AEI have vigorous 

arguments about various parts of this, and it strikes me that if 

seven reasonably like-minded people, economists, one scientist, several lawyers, if seven like-minded people are wrestling with the 

problems of this, how much more difficult it is for you all in Congress with many more moving parts to worry about than we do, to 

wrestle with the policy. 

And it is also sobering to think that even if either carbon tax or 

the first round of cap-and-trade works according to plan, it gets us 

maybe 5 percent towards that 2050 goal. I am not even sure that 

qualifies as a leap. It is more like two hopscotch squares. Still we 

have to start somewhere, and it is difficult to estimate what it is 

going to cost because a lot will depend on whether we auction 

some, half, or all the permits or allocate them for free as has been 

mentioned already. There is some low-end estimates if you give a 

lot of them away, assuming that the savings will be passed onto 

consumers. The caveats have already been made about that. To 

very high if they are auctioned and so forth. 

But still, I think we should take President Obama at his word 

when he told the San Francisco Chronicle last year that, ‘‘Electricity rates would necessarily skyrocket,’’ and they would pass this 

cost onto consumers. Well, these issues are well known. I think less 

well known or harder to work out are some of the what I call 

asymmetries in energy use, and here is where, without disagreeing 


rmajette on DSK2TPTVN1PROD with HEARING
88 

with Mr. Greenstein’s proposal, I am a little skeptical that there 

is this problem. 

There is lots of variation across the country from State to State, 

even within States on energy use, having to do with climate variations, you know, the source of energy, high coal States, cold 

States, western States that have what the Department of Energy 

calls fewer degree cooling and heating days. And so that means 

that to make a scheme work, that means you are going to have to 

figure out some regional and even in-State variations, which necessarily adds the bureaucracy of the matter. Not impossible but it 

is something that has to be wrestled with and has to be worked 

out. 

The other thing I would mention is, very quickly, is something 

I left out of my prepared remarks is indirect energy use, and this 

is something that we have just started to publish on at AEI, one 

paper just in the last few days. Most of the conversation here and 

elsewhere on the subject is talking about, you know, utility rates 

and you know, the energy that goes into direct energy, electricity 

generation and so forth. 

We have been looking at trying to calculate how much energy is 

used indirectly. Simple example would be the can of soup made by 

Campbell’s or some soup company. It is, you know, a heavy thing, 

you know, make it, put it in the can, and then put it on a truck 

somewhere to get it to markets. And it turns out that our calculation is about almost half of energy use in this country is used indirectly. Pharmaceuticals use a lot of energy in their production and 

distribution. The healthcare industry uses a lot of energy, and we 

have also now done this by the income scales, and so the lowest 

tenth decile of income earners we estimate spend about 5 percent 

of their income on energy indirectly. 

And so a lot of the schemes talked about here today, whether it 

is an energy rebate as Mr. Greenstein says, or something to the 

utilities as Mr. Kline says, probably has trouble reaching to those 

added costs that consumers will bear, and so even if we work on, 

you know, some scheme that keeps consumers reasonably whole on 

electricity rates, we are probably going to see consumers paying 

more for goods and services like in a manner that they will, an 

amount that they will notice. 

Thank you. 

[The prepared statement of Mr. Hayward follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
89 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 99 here 67102A.065
90 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 100 here 67102A.066
91 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 101 here 67102A.067
92 

Mr. MARKEY. Thank you, Mr. Hayward, very much. 

Our next witness is Mr. Mike Carey. He is the President of the 

Ohio Coal Association. As the leader of a trade group with over 40 

producing members, he has gained a wealth of knowledge of the 

coal industry. And we welcome you here today, Mr. Carey. 

STATEMENT OF MIKE CAREY 

Mr. CAREY. Thank you, Mr. Chairman, members of the committee. I want to thank you for the opportunity to speak to you 

today on the potential impact of climate change and how those proposals affect America and the middle class. 

My name is Mike Carey, and I represent the Ohio Coal Association. We are a trade organization that roughly represents 40 coalproducing companies and 50 affiliated industries. In those companies we directly employ close to 3,000 individuals in and outside of 

the mines. The secondary jobs associated with those are roughly 

33,000. It is because of these stakeholders and the thousands of 

Ohioans who rely on our State’s coal industry for their livelihoods 

and the millions of Ohioans who enjoy lower-than-average electricity rates because of coal is why I am here to speak to you today. 

In the coming weeks you will be asked to consider a number of 

proposals that purport to address the perceived manmade climate 

change issue. Many of those proposals offer extremist approaches 

that threaten the very consumer protections set forth by the U.S. 

Congress. You have a unique opportunity to learn from history and 

make your decisions based upon not negatively affecting your customers. 

Fifteen years ago, roughly over 15 years ago the 1990 Clean Air 

Act was passed. In that time period Ohio alone as Congressman 

Shimkus mentioned, lost nearly 120 mines. Associating with that 

close to 36,000 individuals lost their jobs. When you consider the 

basic facts, the picture is even clearer. Coal-fired power plants 

produce anywhere from what National Mining Association said just 

a couple days ago, 27 percent of the world’s electricity, to the industrialized world, which is 40 percent. If you look at the United 

States, it is over 52 percent, and in Ohio we are close to 90 percent. 

U.S. Energy Information Industry has also—or Administration has 

also estimated that electric rates would actually, we would need 40 

percent more by 2025. 

There are three core reasons that climate change legislation 

must be considered in the context of consumer protection. One, the 

effect the extremist proposals would have on our direct coalmining 

and affiliated jobs. Two, the effect that a loss of coal production 

would have on our region’s employers, particularly those with energy intensive manufacturing sector. And three, the impact that 

eliminating or drastically reducing the use of coal as a resourced 

electricity would have on electric rates and on the consumers who 

ultimately pay them. 

Some climate change legislative proposals would force us to limit 

the use of coal, and yet no other source can replace coal at the 

same cost. There are some groups, you have probably seen the commercials, that oppose coal altogether. These are also many of the 

groups that oppose the use of nuclear energy. Natural gas is great. 


rmajette on DSK2TPTVN1PROD with HEARING
93 

It is domestic. Unfortunately, it can be almost three times the cost 

of coal, and there are distribution issues. 

Some continue to encourage the subsidy of alternative energy 

sourcing, which we apply, but unfortunately, energy sources like 

solar, wind don’t have the capability to replace the existing fleet 

and also have high initial costs. While increasing the role of renewable energy is a laudable goal, it is simply not a comprehensive solution to address our Nation’s rapidly-growing demand for electricity. 

First and foremost proposals for cap-and-trade legislation constitute little more than a coal tax on Ohio’s coal producers. Mandatory carbon emissions will bring deep, sweeping reductions in coal 

production and will cause much greater economy carnage and reductions in the quality of life and the standard of living of the 

thousands of Ohio workers who rely on the coal industry. 

Coal is a major industry in the State of Ohio, and yet over the 

last few years we have seen our coal production remain somewhat 

static. We cannot afford to lose those high-paying coal jobs, particularly in these challenging times. 

Secondly, coal impacts many industries like I mentioned earlier 

with the, with energy, massive energy-consuming industries. Capand-trade legislation would hurt those Ohioans who work in those 

industries and not just those who actually are employed in the coal 

mines. 

But I think finally, perhaps the most important, it cannot be 

overstated that reducing or eliminating coal from our electricity, 

what effect it will have on the ultimate consumer. The human toll 

would be substantial. Even the bipartisan Congressional Budget 

Office has agreed that almost one, the lowest one-fifth of the U.S. 

population would suffer the worst losing about 3 percent of their 

take-home income. Clearly, the most vulnerable population cannot 

withstand this hardship. 

Today low-cost electricity is a staple of life for all Americans. 

Further, coal-fired electricity is by far the lowest cost option available to consumers. Our message to you is that coal represents our 

Nation with tremendous economic benefits and even greater potential in the future. 

Our industry has made significant improvements since the 

1970s, but I want to leave you with one final thought. Access to 

reliable, affordable energy supplies is the core tenant of economic 

growth, and the U.S. Energy Policy must be feasible to implement 

economically beneficial and environmentally sound. That could be 

achieved without passage of unreasonable measures that would put 

my industry out of business, threaten job providers who need a 

ready supply of low-cost electricity to power their operations, and 

eliminate the affordable electricity that not just our region’s working families but our region’s individuals that are on fixed incomes 

have come to count on, especially during these hard economic 

times. 

I thank you for the opportunity and appreciate any questions 

that you may ask. 

[The prepared statement of Mr. Carey follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
94 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 105 here 67102A.068
95 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 106 here 67102A.069
96 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 107 here 67102A.070
97 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 108 here 67102A.071
98 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 109 here 67102A.072
99 

Mr. MARKEY. Thank you, Mr. Carey, very much. 

And our final witness is Mr. John Hill. He is the Director for Economics and Environmental Justice for the United Methodist 

Church. He has worked on issues of global warming and worker 

justice as the Chair of the Policy Committee for the National Council of Churches, Eco Justice Working Group. So we welcome you, 

sir. Whenever you are ready, please begin. 

STATEMENT OF JOHN S. HILL 

Mr. HILL. Thank you, Chairman Markey, Congressman Upton, 

members of the committee. I appreciate the opportunity to testify 

before you today. 

As the Chairman said, my name is John Hill. I work with the 

General Board of Church and Society, which is the Social Justice 

Agency of the United Methodist Church. Our church has around 11 

million members across Asia, the United States, Europe, and Africa. 

In addition, I am here representing the National Council of 

Churches, an organization that represents roughly 35 member communions, Christian communions, over 100,000 congregations and 

approximately 45 million people here in the United States. 

Let me begin by stating unequivocally that the United Methodist 

Church and the National Council of Churches take seriously our 

call to be faithful stewards of God’s earth and to love our neighbors, and we believe global climate change is a real and growing 

threat to creation with profound and potentially devastating environmental economic and social consequences. For over 15 years we 

have worked to educate and equip our members and congregations 

to take action to reduce our own contribution to climate change and 

have petitioned our government to provide strong leadership and 

develop domestic and international frameworks to lower greenhouse gas emissions. 

In recent years the faith community has developed a set of principles on global warming, principles that represent key tenants of 

our faith traditions and provide the lens through which we consider 

potential policy solutions. Those four principles are justice, stewardship, sustainability, and sufficiency. 

Justice is our first principle and for a very specific reason. God 

calls us to serve those living on the margins of society and to protect those individuals and communities living in poverty, whether 

in the United States or around the world. Quite frankly, for too 

long climate change advocates have minimized the potential impact 

of climate legislation on the poor, and opponents have used such 

impacts as a justification for inaction. 

Neither course brings us closer to a just future, and neither 

serves the interests of those we are called to be in ministry with. 

I applaud the leadership of this committee for holding today’s hearing where we can explore another way, a course the provides 

strong emissions reductions and protects low-income individuals 

and vulnerable communities. We believe a just climate policy must 

first and foremost contain effective and mandatory emissions reduction targets in order to prevent catastrophic impacts for the 

people and planet we are called to serve. 


rmajette on DSK2TPTVN1PROD with HEARING
100 

While this morning’s hearing focuses on the critical issue of how 

climate legislation will impact consumers, as many of you mentioned in your opening statements, let us not forget the devastating 

impacts of inaction, rising sea levels, more intense storms, floods, 

droughts, and spreading disease factors affect those living in poverty, communities of color, and other vulnerable communities first 

and hardest. The Gulf Coast hurricanes of 2004 demonstrated all 

too painfully the devastating consequences that occur when storms 

of nature interact with the manmade storms of poverty and racism 

that batter daily communities in the United States and around the 

world. 

Our churches were on the front lines and continue to provide aid 

and assistance to those struggling to rebuild, as we will be in every 

disaster that may come. 

And as someone who serves a global church, I am keenly aware 

of the cost of inaction on my brothers and sisters in Africa. Rosemary Miega, who is a woman who founded a farming co-op in 

Uganda told me last year of how her growing seasons are shifting 

because of climate change. Now, for most of us, those of who live 

in the United States, particularly in cities, if the rain falls a few 

weeks late, there is little impact on our lives. For Rosemary and 

her community that shift means crop failure and famine. 

Last year the African bishops of the United Methodist Church 

issued a call for action on poverty and recognized that we cannot 

separate the plight of the poor from the plight of the planet and 

must act now to protect both. Inaction is simply not an option for 

the community of faith. 

But likewise, action must be centered on a vision of justice for 

all God’s people. In developing policies we must ensure that the solutions protect the needs of the poor, that we don’t push families 

deeper into poverty due to higher energy-related costs. 

The good news is is that there are proposals such as those outlined by the Center on Budget and Policy Priorities that we believe 

can efficiently, effectively, and justly provide benefits to offset these 

cost increases for low-income individuals and families. 

We support using established and proven methods to deliver benefits for low-income consumers that provide funds sufficient to offset all energy-related price increases. Mechanisms such as those 

outlined by my colleague from the Center could provide this benefit, and we believe could adequately address many of the valid 

concerns raised by Mr. Hayward with regards to indirect energy 

costs. 

In contrast, proposals such as those put forward by U.S. cap that 

would use local distribution companies or other utilities to deliver 

a consumer rebate would ignore over one-half of the estimates cost 

to low-income families and require the establishment of new delivery systems and outreach programs to encourage participation. 

In closing, the faith community supports strong and quick action 

to address the dangers of climate, while ensuring that solutions 

mitigate rather than compound economic injustices. We believe financial assistance for those living in poverty in the United States 

and international adaptation assistance for vulnerable communities 

abroad must be a part of any climate policy, and we look forward 


rmajette on DSK2TPTVN1PROD with HEARING
101 

to working with the committee as you develop legislation that protects God’s good creation and all of God’s children. 

Thank you. 

[The prepared statement of Mr. Hill follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
102 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 113 here 67102A.073
103 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 114 here 67102A.074
104 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 115 here 67102A.075
105 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 116 here 67102A.076
106 

Mr. MARKEY. Thank you, Mr. Hill, very much, and that completes our opening panel. 

We will now turn to the subcommittee members for questions, 

and the Chair will recognize himself. 

I am going to go down the line, ask Mr. Kline, Mr. Popowsky, 

Mr. Greenstein this question. Is it a good idea to allocate free allowances to admitters? Mr. Kline. 

Mr. KLINE. I would say only under the circumstances that I have 

described. I think absent a delivery mechanism that brings that 

value, assures that value goes to consumers, that the risk that was 

described earlier and the risks that occurred in Germany in the initial phases of the European system, where those dollars went into 

the earnings of utilities and others. At the same time prices were 

going up to consumers is the challenge, and I think what we are 

talking about here would avoid that. 

Mr. MARKEY. OK. Thank you. 

Mr. Popowsky. 

Mr. POPOWSKY. Yes. The way you phrase that question the answer is absolutely not. That is you should not allocate free allowances to emitters, and by that I take it you mean the generators, 

the people who, the companies or the plants that generate the 

emissions. If you are going to allocate free allowances to anybody 

in the utility industry, it has to be to the folks who are regulated 

so that we have a way of recapturing those benefits for customers. 

Mr. MARKEY. Mr. Greenstein. 

Mr. GREENSTEIN. Allowances should not be allocated free to 

emitters. As I noted, most economists concur that that would not 

reduce consumer prices and would confer windfall gains on the 

emitters, and you would lose the resources you need for everything 

from consumer relief to research and to cleaner energy technologies. 

Mr. MARKEY. OK. Now, the Wall Street Journal in a recent article said that the Congressional Budget Office was cited for the 

proposition that a 15 percent reduction in emissions would lead to 

increased costs for the poorest of one-fifth of households. Of course, 

that is only half of the story because there could be mechanisms 

in place in order to deal with that impact, and that could be included in this legislation. 

Could you deal with that, Mr. Greenstein? 

Mr. GREENSTEIN. Yes. The Congressional Budget Office estimate 

is that if you look at the bottom fifth of households, which is less 

than the bottom fifth of people because if you simply look at households by income without adjusting for family size, you get a lot of 

one and two-person elderly households, that the average impact 

from a 15 percent reduction in emissions is a $680-a-year increase 

in cost. We adjust for family size, so we are looking at the bottom 

fifth of the population, the bottom 60 million people. You get somewhat larger households, larger households use more energy, and I 

figure $750. They are all in the same range. 

So there is a significant impact on low-income consumers if nothing is done. But as we have indicated in the proposals we have developed and as you have heard here this morning, the foreign auctions, the permits, one can absolutely offset that cost. The notion 


rmajette on DSK2TPTVN1PROD with HEARING
107 

that a cap-and-trade system inherently has to disadvantage low 

and moderate-income households is simply incorrect. 

Mr. MARKEY. OK. Thank you. 

Mr. GREENSTEIN. It depends on how it is designed, and you can 

design it so it does not have that effect. 

Mr. MARKEY. Thank you, Mr. Greenstein, very much. 

Now, let us go to energy efficiency because that obviously is 

going to be a centerpiece for what hopefully the consequences will 

be of a cap-and-trade system being put into place, that is, we will 

learn how to work smarter, not harder in terms of the consumption 

of energy in our society. 

Mr. Kline, can you give us briefly your view out there in terms 

of the experience that you have? 

Mr. KLINE. From our vantage point and our involvement in the 

recent work with the McKenzie Global Institute, energy efficiency 

is the untold resource that is out there that will allow us to offset 

emissions in a cost-effective manner. Or that will substantially reduce those costs, and that is because if you look across the Nation, 

there is an immense amount of actual negative costs, opportunities 

that aren’t being seized, and with the proper incentives and regulatory structures those low-hanging fruit will be captured in the 

early years, which will help offset these costs. In California we are spending $1 billion this year on energy efficiency, and we are delivering it at a cost of about 4 cents for the 

average customer. If we go out to the market to buy power from 

a new power plant, it is at least 9 cents. 

Mr. MARKEY. Can you briefly respond to that as well, Mr. Greenstein, the economic efficiency as compared to other energy sources? 

Mr. GREENSTEIN. Yes. This is an on the one hand, on the other 

hand. On the one hand, obviously, we want to pursue energy efficiency. On the other hand is—or the caveat is simply that we have 

to be realistic about how much it can do, how fast. Unlike things 

like the earned income credit or the mechanisms I have discussed, 

we don’t have energy efficiency programs that, at any level of government, that serve more than very small percentages of the lowincome population in any given year. The Weatherization Program, 

a good program, maybe gets a few hundred thousand households 

a year. 

So we should recognize both that we need to learn a lot more 

about how to do energy efficiency programs on a much larger scale. 

It will take many years to ramp them up, and even if we are at 

the point in the not too distant future where we are weatherizing 

say one million homes a year, far beyond what we do now, it would 

still take under that approach about 40 years just to reach the 

homes of all the people that qualify for the Low-Income Energy Assistance Program, and that only affects the half of increased costs 

that are home utility related as distinguished from the other half 

of the impact on consumers. 

So—— 

Mr. MARKEY. Mr. Greenstein, yes, my time has run out, and I 

thank you, sir. 

The Chair recognizes the gentleman from Michigan, Mr. Upton. 

Mr. UPTON. Thank you, Mr. Chairman. I think certainly as we 

listen to this hearing, we know that costs are going to go up, and 


rmajette on DSK2TPTVN1PROD with HEARING
108 

not only do we need to protect consumers but almost as equally important if not more is we need to protect those jobs as well, because 

it is no good if you just provide a subsidy to the individual households as they struggle to pay those mounting costs, whether they 

be direct or indirect, but if they don’t have a job at the end of the 

day, that doesn’t help them either. And that is a concern certainly 

that I would think most of us share. 

Mr. Greenstein, you talked a little bit about your rebates, trying 

to shield moderate and low-income households. Do you do anything 

for businesses? And I want to use the example that was pretty well 

publicized a couple of weeks ago, I think the New York Times had 

a story about the cement company in California that was going to 

be, because of the California Environmental Laws was going to 

have to increase their pollution-abating controls that was going to 

cost $200 million to make the changes. And in essence they said 

they are going to go out of business, and all of their people are 

going to be out of work. 

Do you do anything for businesses, large or small? 

Mr. GREENSTEIN. Mr. Upton, our rebate proposal is designed to 

address consumers. Let me be very clear. Our proposal is not to use 

100 percent of the revenue from auctions on consumer rebates. It 

is to use a portion of it, covering middle as well as low-income 

households maybe somewhere in the vicinity of 50, 55 percent of 

the permits. That would leave significant value for other purposes. 

I leave to others who have much more expertise in the business 

aspect of this than I do as to whether—— 

Mr. UPTON. I am just watching the clock, so I got to stop. 

Mr. Kline, what is the percentage of folks, of consumers in your 

area in PG&E that are in arrears for not paying their utility bills? 

I talked about Michigan, some of our areas, one in three households. Do you have a percentage that can’t pay it based on—— 

Mr. KLINE. The last numbers I saw were about 7 or 8 percent. 

Mr. UPTON. Seven or 8 percent. So you are well under the national average. 

Mr. KLINE. That number is growing, however, but it is relatively 

low, and I attribute that partly to our low-income programs that 

build on state and local programs. 

Mr. UPTON. OK. I am going to pass this chart out. I think you 

all, you will have it, and I will pass these down the row here as 

well. This is the electric power sector of coal consumption for ’06, 

and the blue areas are particularly hard hit. We rely heavily on 

coal versus some areas, some of the areas that don’t. When you 

look at some other charts in terms of per capita emitted of carbon, 

I know the cold States and the warm States, the northern States 

and the southern States are particularly impacted as well, North 

Dakota, I can presume might not in terms of what they have to do 

with heating or cooling. 

Mr. Hayward, you made a very good presentation. What happens 

to these regions? I mean, as we try to struggle in the midwest it 

seems as though our area is hit harder than ever, and I note Mr. 

Kline, if you have a chance to comment on this as well, in a May 

letter to Senator Boxer, Lieberman, and Warner, the Clean Energy 

Group of which PG&E is a member said that any allocation must 


rmajette on DSK2TPTVN1PROD with HEARING
109 

recognize the value of low and non-emitting forms of generation 

and should not reward the highest emitters. 

But we are in the south and the midwest because temperature 

for—and because of reliance on coal, you mean to say that customers in those regions shouldn’t receive the allocations based on 

historical emissions? I would like if you both maybe answer that. 

Mr. Kline, maybe in response to that letter. 

Mr. KLINE. I think the intent is not to punish coal by any means. 

I mean, we recognize—— 

Mr. UPTON. Well, that is what it does. 

Mr. KLINE. Sir, it does that only if we apply this in a kind of 

mindless manner. I mean, when I talked about sustainability here, 

I think what I am talking about is we recognize a program can’t 

blow up the economy, and it can’t impact areas in an unfair manner. And our view is that by structuring this correctly, we can send 

price signals which have to happen but do it in a manner that isn’t 

going to abruptly affect—— 

Mr. UPTON. All right. I want to get my last question in. 

Mr. Hayward, I know I didn’t give you a chance to answer, so 

I am going to ask you something else. You talked in your opening 

about where we would go if you reduce it by 80 percent by the year 

2050, in essence back to 1910. So let us say we get rid of all coal. 

There is no more coal, generation, sorry, Mr. Carey, you are not 

able to answer that. So we move to gas. Fifty percent emissions is 

coal. How far do we miss the target by 2050 if we eliminate all coal 

and move to gas? What do we miss it by? 

Mr. HAYWARD. Well off the top of my head I don’t know the exact 

answer to that, but if you switched all coal to gas, that gets you 

about a 50 percent cut in the CO2 emissions from coal, because gas 

emits on a BTU basis, per unit BTU, about half the amount of CO2 

as coal does. 

So, you know, coal accounts for what, I think two-fifths or something of our total greenhouse gas emissions in the country, so that 

maybe gets you one-fifth of the way toward, you know—so in other 

words, you still have a long way to go. 

I have gone through this about, you know, we got—right now to 

give one quick example, we burn about 180 billion gallons a year 

of gasoline and motor fuels. We have to go back to, if we are going 

to, you know, stay within our allegations, that has got to go back 

to about 30 billion gallons by the year 2050, if we are still using 

petroleum-based fossil fuels for aviation, trucking, all the rest. 

So you have to go a long way on everything else, too, including 

natural gas. 

Mr. UPTON. And we still don’t make it. 

Mr. MARKEY. OK. The gentleman’s time has expired. 

The Chair recognizes the gentleman from California, Mr. McNerney. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

I can’t help but remark how stark the testimony we have seen 

here this morning is. Mr. Carey, on the one hand, is showing us 

the impact on people’s lives, not only the producers but the consumers. Mr. Hill, on the other hand, is showing us what will happen if we do nothing. So we are in a position where we have to be 


rmajette on DSK2TPTVN1PROD with HEARING
110 

thoughtful. We don’t want to hurt people, but we have to make 

change. 

One of the things that struck me was Mr. Greenstein’s discussion 

about how to allocate the money to the lowest income and the middle income. Do you think it would be reasonable to use the revenue 

to give a credit, say onto homeowners, for example, to use to purchase efficiency in their homes or cars? Would that be a reasonable 

way to use the revenue or a portion of the revenue? 

Mr. GREENSTEIN. This is not something we have looked into in 

detail. The difficulty here, you only have so much revenue, you 

want to make the best use of it. So what you would need to take 

into account is to what degree would you be using revenue to subsidize people to make purchases they would have made anyway, 

and to what degree would you get increased purchases of more energy efficiency products? 

Now, I guess the reason why I am skeptical of that approach is 

the cap itself provides somewhat of a subsidy. In other words, 

under the cap itself anything that uses fossil fuel becomes more expensive and vehicles or appliances that are energy efficiency or use 

fuels other than fossil fuel become more competitive. And so the 

cap itself gives the consumer a direct subsidy in a sense to move 

from the old style kinds of products to the new ones. 

Mr. MCNERNEY. It is not a subsidy, it is a penalty. 

Mr. GREENSTEIN. A penalty—it gives—— 

Mr. MCNERNEY. Right. 

Mr. GREENSTEIN [continuing]. Them an economic advantage. 

Mr. MCNERNEY. Incentive. 

Mr. GREENSTEIN. Economic incentive. So what one would have to 

do is to say if you take into account the economic incentive the cap 

already gives for the purchases you want to incentivize and the degree to which you would have a loss of, if you used revenue for this 

from the cap, the degree you would have a loss if you would be subsidizing people for purchases they would make anyway as a result 

of the incentives under—— 

Mr. MCNERNEY. Well, a lot of people aren’t going to be able to 

make those purchases because you are getting an incremental increase in your electricity costs or your heating costs, and the purchase of a new car is a $30,000 investment or weatherizing your 

home is $10,000 anyway. So we need to get something out there 

to give people the ability to make those purchases. 

Mr. GREENSTEIN. I understand the notion one would have to an 

economic analysis to see if the increases in the purchases and the 

energy gain you—the efficiency gain you get from them justifies 

spending that proportion of the allowances on them. 

Mr. MCNERNEY. Thank you. Mr. Kline, a simple question. Are 

you advocating free allocation of permits to LDCs? Is that what I 

heard in your testimony? 

Mr. KLINE. That is correct, but let me clarify. I am not talking 

as Mr. Greenstein wasn’t either, about 100 percent of the allowances out there. We are talking about a percentage that represents 

the contribution from electricity and natural gas usage. 

Mr. MCNERNEY. OK. Thank you. I am going to yield back, Mr. 

Chairman. 

Mr. MARKEY. OK. The gentleman’s time has expired. 


rmajette on DSK2TPTVN1PROD with HEARING
111 

The Chair recognizes the gentleman from Louisiana, Mr. Scalise. 

Mr. SCALISE. Thank you, Mr. Chairman. 

Mr. Greenstein, when you are talking about the climate rebates, 

what level of income are you talking about there when you talk 

about the bottom fifth or one-fifth of the, I guess, population that 

would be getting these rebates? Do you have a population range? 

Mr. GREENSTEIN. Well, the bottom fifth has average income of a 

little over $15,000 a year, and I think for a family—— 

Mr. SCALISE. Is your microphone on? Is your microphone on? 

Mr. GREENSTEIN. Sorry. 

Mr. SCALISE. Yes. There we go. 

Mr. GREENSTEIN. The bottom fifth has average income of around 

$15,000. The top of the bottom fifth is maybe $27,000 for a family 

of three or four, but, Mr. Scalise, my proposal is really to incorporate the middle class as well. 

Mr. SCALISE. But, I mean, at some point legislation would have 

to—— 

Mr. GREENSTEIN. Yes. So—— 

Mr. SCALISE [continuing]. What would that limit? 

Mr. GREENSTEIN [continuing]. One proposal that we provided 

some assistance on which is actually in the bill that Chairman 

Markey introduced last year, as I recall I think there were, was a 

full offset of the average hit for married families up to about 

$70,000 a year if I remember correctly, and then I think it phased 

out between $70 and $110,000. 

Mr. SCALISE. And so—— 

Mr. GREENSTEIN. And there was some benefit up to $110. 

Mr. SCALISE. Right. While I oppose any energy tax and would 

also really strongly caution against class warfare being used to basically build in some sort of cap on any of these types of, I guess, 

rebate proposals, and ultimately because what it will end up doing, 

and we were talking about economics earlier, right now the President’s budget estimates that he would generate about $646 billion 

out of this energy tax. 

And so for the President’s budget to be met, if you are exempting 

out one group, you are in essence going to be shifting an even higher percentage to those remaining, and I will give you an example. 

A school teacher married to a police officer is going to be making 

on average $80,000. So that school teacher married to the police officer before would have been paying $1,300 a year more. If you exempt out that many more people, now that school teacher married 

to a police officer might be paying $1,600 a year more. So they actually get an increased burden and you don’t accomplish, I guess, 

what you are trying to achieve on the bottom end because the people making below $70,000 are still going to be paying higher food 

prices, higher—well, according to Mr. Orszag’s testimony he basically says that all energy-intensive goods would have costs added. 

And so I will ask Mr. Hayward, because you had talked in your 

testimony about, you know, the Campbell’s soup example. Number 

one, the school teacher married to the police officer now according 

to Mr. Greenstein’s plan would actually be paying more because 

they would have to have a higher percentage if that lower percentage is completely eliminated, but then what would those people 


rmajette on DSK2TPTVN1PROD with HEARING
112 

that are making below $70 still pay on your estimate on all of 

these other energy-intensive products? 

Mr. HAYWARD. That is a really hard question to answer because, 

you know, it varies from product to product and also the distance 

involved. I mean, one thing we have really been trying to break 

this down pretty finely, and one thing we think is that, in fact, the 

highest effect on consumers of cap-and-trade is not necessarily the 

cold coal States, but it might be the mountain States, partly because of the longest distances goods are transported, more gasoline 

consumption, things of that kind. And that was, you know, a finding that would not have occurred to us without running it through 

a fancy model, and we all have criticisms of our own model about 

this. It is one of those arguments we have. 

But, I mean, we sort of broke this down by, you know, a variety 

of specific goods, and it looks like, you know, between 1⁄2 to 1 percent increase in the direct cost of producing and shipping certain 

goods, and that is just going to ripple through the supply chain in 

some multiplier of—it is hard to say. I couldn’t begin to make a 

good estimate of that. 

Mr. SCALISE. And obviously that same price increase that would 

be shifted over to that school teacher married to the police officer 

would also be shifted over to an even higher percentage that businesses would be forced to pay now because you still have that end 

$646 billion tax that needs to be raised, but now it is a smaller 

group of people that are paying it, so the business taxes would also 

go up, which would lead to even further job losses. 

I guess if coal is out of the picture there for Mr. Carey, I don’t 

know if he can respond to it, but even if coal is being used, what 

does that then do to even further losses of jobs? 

Mr. CAREY. Mr. Chairman, Congressman, the issue is when you 

start looking at what I think Congressman Shimkus said just earlier when, earlier today when he said that you are actually going 

to pay power producers to actually shut down their power-producing facilities. When you shut down poor-producing facilities, 

those poor-producing facilities aren’t consuming coal. If they are 

not consuming coal, we aren’t mining coal, because we are not selling it to those power-producing facilities. So, therefore, those 

coalminers would be put out of business and out of jobs. Also, the 

ancillary of associated industries. 

But I do want to say this. When you are talking about the school 

teacher and the police officer, you talk about a coalminer who on 

average in our region can make anywhere between $45 and 

$75,000 a year, he is not going to be able to pay that bill because 

he is not going to have a job to pay that bill. 

Mr. SCALISE. That is a very important point. Appreciate your testimony. 

I yield back my time. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentlelady from California, Ms. Capps. 

Ms. CAPPS. Thank you, Mr. Chairman. 

Mr. Greenstein, some critics have argued that the proposal to 

place a cap on greenhouse gas emissions to combat global warming 

represents a tax increase. However, this claim ignores the fact that 

a cap-and-trade program, if it is designed wisely, should also raise 


rmajette on DSK2TPTVN1PROD with HEARING
113 

substantial revenue that could be returned to consumers in order 

to offset higher energy costs. 

You might wish to speak on that just very briefly. I do want to 

ask Mr. Kline a question, too. My question to you is, what might 

be the cost, both human, environmental, and economic of a failure 

to act? 

Mr. GREENSTEIN. Well, a failure to act at some point, is it in 10 

years, is it in 50 years, we don’t know, but at some point we could 

have catastrophic changes in climate in the world’s atmosphere 

that would have all sorts of dislocating economic effects that would 

dwarf the shorter-term, much smaller effects we are talking about 

from a cap. 

In terms of the tax issue, what you said is precisely right. If one 

uses a significant share of the resources raised by auctioning the 

permits to rebate the money to families and particularly if, as I am 

suggesting, you do it through the tax code other than for people at 

the bottom of the income scale, a lot of people would actually end 

up getting a net tax cut. 

I don’t think I explained clearly what I am talking about here 

in terms of what Mr. Scalise said. I am not proposing a rebate only 

for the electricity or the home utility part. In the way we have designed the rebate it is designed to offset the impact on costs of consumers from everything; gasoline, other goods and services. Businesses generally that have higher costs will pass them through to 

consumers. One wants to cover this at the consumer level. I agree 

that in particular industries like coal there are larger effects, and 

again, we have tried to design our proposal so it does not consume 

all of nearly all of the proceeds so that you have proceeds left to 

decide what to, how to provide relief, for example, to coalmining regions. 

And I agree with Mr. Hayward. There are some variations that 

have got to be taken into effect, and I would hope that some of the 

additional permits would be used to address some of the variations 

that Mr. Hayward talked about. 

Ms. CAPPS. Thank you. Thank you very much. I—Mr. Kline, 

PG&E has served my Congressional District and many others for 

a long time, and I commend the work that your company has done. 

I have seen it firsthand, to implement efficiency measures. In California our energy commission has concluded that for every dollar 

invested in energy efficiency consumers get a $2, some have said 

higher, return. 

My question. If allowance values were distributed to PG&E and 

other local distribution companies, what specific energy efficiency 

measures would you implement so that you could cut costs for consumers and pass that savings onto consumers? 

Mr. KLINE. Congresswoman, I will give you several examples of 

programs that we already have in place that we would expand, and 

one of them is referenced in an attachment to my testimony that 

captures programs that utilities are doing across the country. 

We have a program called Power Partners, which affects small 

businesses and low and moderate-income customers. We literally go 

in and we assess their energy usage, we change out appliances 

when needed, to replace them with energy efficient appliances. We 

do changes to the structure. This is both for renters and for owners 


rmajette on DSK2TPTVN1PROD with HEARING
114 

to make their dwellings more energy efficient, reduce bills, and 

make them more comfortable. 

Ms. CAPPS. Excellent. I am glad this is in your statement so that 

it can be used. 

Final question. How can LDC allocations be structured so that 

we can best achieve these efficiency measures? And also, see the 

immediate consumer benefits. I think there is a great deal to be 

gained by allowing consumers to see how much they are saving. 

Mr. KLINE. I am happy to say that the Edison Electric Institute, 

the Trade Association for Electric Utilities, has created an institute 

for energy efficiency, and a lot of what they are doing is focused 

on the development of and sharing the best practices across the 

country. So I think you are going to find that electric and gas utilities are ready to implement these programs broadly across the 

country. 

Ms. CAPPS. Thank you very much. Mr. Chairman, I yield back. 

Mr. MARKEY. Great. The gentlelady’s time has expired. 

The Chair recognizes the gentleman from Illinois, Mr. Shimkus. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Mr. Carey, I am sorry I missed your opening statement. I did 

read part of it. The Wall Street Journal had an editorial where you 

were referenced and actually submitted for the record 2 days ago 

that talked about the winners and the losers. The winners are the 

coastal States, shocked. I am shocked. And the losers are the midwestern States. No surprise. 

Talk about the, restate for me and briefly because I do have a 

series of questions, the impact of job loss just on the 1990, amendments to the Clean Air Act. I have reiterated them here, not just— 

I have said in one coalmine 1,200 miners lost their job, multiplied 

by that—I know the individual who bargained for the United Mine 

Workers quoted to me, before the 90 amendments 14,000 jobs in 

just southern Illinois. Then he moved to a tri-State region, and all 

he had was 4,000 mineworkers left in a three-State region. Can you 

talk about job loss? 

Mr. CAREY. Mr. Chairman, Congressman Shimkus, yes. In my 

statement we lost close to 120 mines and lost close to 36,000 direct 

and indirect jobs. Penn State University did a study that said for 

every coalmining job there is essentially 12 spin-off jobs. So that 

would be the number to which I am referring to in the 1990s. Particularly we were hard hit in the State of Ohio because of sulfur. 

Mr. SHIMKUS. Yes. And talk about small town rural Ohio. These 

mines are in the rural areas. Are—in many of these mine locations, 

is there a company that comes to the amount of jobs that would 

be employed in a mine? 

Mr. CAREY. Mr. Chairman, Congressman, the answer to that is 

no. The coalmining, in coalmining regions of Appalachia, if you look 

particularly in Ohio, western Pennsylvania, and also in southeast 

or in West Virginia, Kentucky, and all the way down to your State, 

Congressman, many of these small rural communities, the 

coalmining, the mines, the associated businesses that supply those 

mines, they are in many cases the only game in town. Not just the 

coalmining but also the energy producers that are using that product. 


rmajette on DSK2TPTVN1PROD with HEARING
115 

Mr. SHIMKUS. Let me move to, actually since—let me go to Mr. 

Popowsky, consumer advocate. How many jobs were lost in Pennsylvania after the Clean Air Amendments of 1990, in coalmining 

alone? 

Mr. POPOWSKY. I am sorry. I don’t know that figure but certainly 

Pennsylvania is a coal State, and I have, you know, great sympathy—— 

Mr. SHIMKUS. So if you were advocating for consumers and job 

loss, you would probably at least admit the fact that there were 

thousands of jobs lost in Pennsylvania through the Clean Air 

Amendments of 1990? 

Mr. POPOWSKY. I would expect so, and let me just add. One of 

the latest legislative developments in Pennsylvania that I would 

certainly support is the establishment of a coal capture and sequestration program in Pennsylvania. 

Mr. SHIMKUS. Yes, and because my time is short I don’t want to 

hold you up, but the same answer would be for the steel industry, 

would it not? I mean, the coal is either the co-production aspect of 

steel or it is the energy related, and Pennsylvania has been hard 

hit since 1990, in steel production. Is that correct? 

Mr. POPOWSKY. We have certainly lost thousands of steel jobs in 

the time I have been in Pennsylvania. 

Mr. SHIMKUS. And if energy costs continue to rise, it makes it 

more difficult for us to compete internationally in steel production, 

wouldn’t you agree to that? 

Mr. POPOWSKY. Absolutely. 

Mr. SHIMKUS. Yes. 

Mr. POPOWSKY. If it is done—— 

Mr. SHIMKUS. I would agree, too. 

Mr. POPOWSKY [continuing]. On a national basis, not a global 

basis. 

Mr. SHIMKUS. Mr. Kline, when the California power crisis hit, I 

don’t know, 4 or 5 years ago, your company, I do believe, and this 

is just going off of memory, had interruptible power agreements 

with major utility, not utilities but really manufacturing facilities. 

Is that correct? 

Mr. KLINE. Yes. 

Mr. SHIMKUS. And so when, with interruptible power agreements, they actually made money when they shut down their operation during the crisis. Isn’t that correct? 

Mr. KLINE. I think that more frequently happened further up the 

coast in the northwest where there were aluminum producers 

who—— 

Mr. SHIMKUS. That is exactly really what I am talking about. So 

they actually made money by stopping manufacturing aluminum? 

Mr. KLINE. Yes. I—— 

Mr. SHIMKUS. Through the agreements? 

Mr. KLINE. And or exceptional circumstances. 

Mr. SHIMKUS. And I would submit that in the European experience of cap-and-trade, industries are making money off this shell 

game of a cap-and-trade, where they reduce their amount of manufacturing or close down the ability because they have credits to sell, 

and it is money made with no affect. Very similar to this issue of 

this interruptible power of past cases. 


rmajette on DSK2TPTVN1PROD with HEARING
116 

And I think that is a very dangerous precedent. I would also submit now, and I will end with this, Mr. Chairman, my time is out, 

is that a cap-and-trade hides attacks. I think now estimates are 

four-fold. We want to be clear to the public of a cost of engaging. 

We want to have clear transparency, not a shell game labeled capand-trade. 

And I yield back. 

Mr. MARKEY. Great. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Utah, Mr. Matheson. 

Mr. MATHESON. Thank you, Mr. Chairman. 

Mr. Greenstein, when you were giving your testimony I think I 

heard you say that in terms of avoiding unnecessary bureaucracies 

to try to redistribute revenues to consumers affected, disproportionately affected by this, that you would suggest it goes to a tax cut. 

We use the revenues from this for a tax cut for just certain levels 

of income across America? 

Mr. GREENSTEIN. Basically two components. One would be a 

broad, refundable tax credit. 

Mr. MATHESON. OK. 

Mr. GREENSTEIN. The tax credit can go up to whatever income 

level you set, depending on how many resources you want to distribute. Mr. Markey’s bill of a year ago, as I said, it went up to 

$70,000 a year for married families and then phased down to 

$110,000. That doesn’t capture people at the bottom of the income 

scale, elderly, disabled people who aren’t in the tax code. What I 

recommend there is for people at the bottom we use these electronic benefit systems, transfer systems, debit card systems states 

already have, already use to deliver low-income benefits. You just 

program another benefit on. It is the climate rebate. 

And finally, as in the recovery legislation that Congress just 

passed, and that recovery legislation for people who aren’t in the— 

for seniors and people with disabilities, veterans not in the tax 

code, you just have in there a direct payment alongside the work 

pay tax cut. The people who get Social Security, veterans and the 

like, I would do the same thing here. You get them that payment, 

you do the debit card at the bottom, you do a broad tax credit for 

the low-income working families and the middle class, up to whatever income level you feel you can afford, and you have offset the 

impact on consumers for the substantial majority of the population. 

Mr. MATHESON. How do you address the problem that we got 25 

States that rely on coal for the majority of their electricity and 25 

who don’t, and we are going to have a regional difference here, and 

I am concerned about sort of a wealth transfer in different regions 

of the country. 

Mr. GREENSTEIN. Yes. So there is two possibilities here. One 

thing, we are looking at this now. We are still in the process. One 

possibility which I think is probably not going to work out to be 

a good possibility, but we are looking into it, is if we could come 

up with really good data, we, I don’t mean we, if the government 

could come up with really good data on the variation by State, you 

certainly could adjust the amount that each State puts through its 

electronic benefit transfer system on the debit cards. We would 

need to talk to IRS as to whether you could vary the tax credit rebate depending on the, by the State you live in. 


rmajette on DSK2TPTVN1PROD with HEARING
117 

If that turns out not to be feasible, then I think you supplement 

the rebate maybe. You make the tax rebate a little smaller, then 

you supplement it with some other mechanism such as, this is another thing we are looking into, maybe you have some kind of a 

block grant funding stream to States to give further protection to 

consumers where you target the money on the harder-hit States. 

Mr. MATHESON. Mr. Hayward, in your testimony you mentioned 

this issue of the regional price differences. Do you have comments 

on this? 

Mr. HAYWARD. Well, only that even within States there is sometimes substantial variation. I mean, my home State is California, 

and you know, a person on Monterey will use a lot less energy than 

a person in Fresno 200 miles away where it is a lot hotter and colder in the winter, et cetera. And so, I mean, if you are really going 

to be, you know, try to be fairly strict about keeping equity in 

mind, then it is not just the State level. Then you start slicing it 

down, you know, and that just starts to get pretty cumbersome and 

good luck. 

Mr. MATHESON. Another issue I would like to raise with the 

panel is I know a lot of folks have been advocating rebates or funding into existing programs, i.e., weatherization. Those are good programs, but I am concerned that that does not necessarily reflect 

how we should target impacts on consumers in general. 

And how do we figure out the right balance on that? I don’t know 

if anybody—— 

Mr. GREENSTEIN. We have looked at that a great deal. LIHEAP 

is a very good program, and we would give some amount, I mean, 

this isn’t magic. Our recommendation may be 1 percent of the permit value to LIHEAP. LIHEAP can’t handle this on a big scale. 

This is a little program. It serves only one in six or one in seven 

of every low-income household that is eligible. It is run as a block 

grant. There are no national eligibility standards. So I think of 

LIHEAP as a supplement to the kind of system I am talking about. 

No system is perfect. There will always be gaps. There will be people with old homes that have higher-than-average increases in 

their costs, and hopefully you use LIHEAP to supplement the rebates I am talking about through the LIHEAP structure to do that. 

So I definitely would include them, but it is the small piece. It 

is not something you are going to cover the 60 million lowest-income households or the proposals that cover the broad middle 

classes well, you know, over 200 million people in the country. 

Weatherization, you get some of that through LIHEAP and some 

through the separate Weatherization Program. I certainly think 

that is worth doing again. You have to look at what is the, you 

know, can you, for example, actually get the program to weatherize 

more than 1 million homes a year. It is currently much smaller 

than that. So, you know, you would want to really see what you 

can effectively and efficiently do through those programs, but both 

LIHEAP and the Weatherization Program I think should get something. Probably relatively small percentages of the permits but 

something significant. 

Mr. MATHESON. OK. Thanks. Mr. Chairman, I yield back. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Texas, Mr. Burgess. 


rmajette on DSK2TPTVN1PROD with HEARING
118 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. Hayward, let me just ask you because you have the discrepancy question laid out in your testimony. Now, in Texas it seems 

like we have many more cooling days that are necessary for lowincome households than we do heating days, and we never seem to 

come out on the correct end of that equation, and yet there are 

more deaths in this country, heat-related deaths every year than 

there are cold-related deaths. 

So I, forgive me if I am a little skeptical that the LIHEAP is in 

someway going to be the redistributionist’s dream of getting the 

tax, can we call it a tax? Well, the money collected under cap-andtrade, tax-and-trade, we can get that to the people that actually 

need it. 

Mr. HAYWARD. Yes. I am not quite sure what your question is. 

Mr. BURGESS. Well, we don’t—I will just say in Texas we never 

fare well in this light. We talk about LIHEAP in this committee, 

and we never come out on the correct end of that, and yet at the 

same time if you just look at the public health hazard from heatrelated deaths versus cold-related deaths, heat-related deaths are 

far in excess of what happens to people—we lose more people from 

heat-related deaths than we do from cold-related deaths. 

Mr. HAYWARD. That may be true in Texas. Well, two comments. 

One, I have no expertise on the way this funding formula works 

for things like LIHEAP or similar programs, so I can’t comment on 

that. 

Texas—two more comments. Texas, of course, is a different world 

when it comes to energy, of your own grid and own system. It is 

also its own little world that way. 

The final point, and so I have, you know, limited knowledge on 

that. The final point is it may be true in Texas that heat deaths 

outnumber cold deaths, although the data I have seen is that heat 

deaths in Dallas, for example, I have looked at have been declining 

for years because people are generally getting wealthier on average, and there is more air-conditioning even for low-income people. 

For the country as a whole there is actually more cold-weather-related deaths than heat-related deaths. And as I said, it may be different in Texas, but Texas is—— 

Mr. BURGESS. Well, France had that big spike a few years ago 

when they were unprepared for it. Chicago—— 

Mr. HAYWARD. Right. 

Mr. BURGESS [continuing]. Has had a couple of big spikes. 

Mr. HAYWARD. If you look at World Health Organization data for 

Europe and the U.S., Canada, you actually have more cold-related 

deaths. This is one of those counter-intuitive things that most people aren’t aware of. 

Mr. BURGESS. Well, nevertheless, we never come out correctly on 

the LIHEAP formula in the State of Texas. I have never been successful in advocating for my low-income residents if they need more 

help during the cooling part of the cycle than they do the heating 

part of the cycle, and we never seem to be able to get those funds 

to where they are actually needed. So I am very skeptical of us 

being able to redistribute stuff where it needs to go. 

Mr. Greenstein, if I could ask you, I am not sure I understand 

how this electronic benefits transfer is actually going to work, and 


rmajette on DSK2TPTVN1PROD with HEARING
119 

one of our big fights during SCHIP, the State Children’s Health Insurance Program, a few months ago or really for the past 18 

months, is there are 800,000 children according to CBO, Congressional Budget Office, estimates that just simply are outside the system who should be inside the system but are outside the system 

because they are hard to find; single-parent homes, they move 

around a lot. These are people who are unlikely to have a place in 

which to deposit the benefits transfer if, even if you have that in 

place. 

But yet these are the individuals who are going to be most hurt 

by the fact that they have now higher heating and cooling bills 

under a cap-and-trade scheme. 

So how are we going to capture the people that are probably in 

Mr. Hill’s, included in your mission statement on your Web site, 

how are we going to capture those folks and make certain we are 

not hurting them with this tax? 

Mr. GREENSTEIN. That is precisely what proposal I am outlining 

is designed to do. These electronic benefit transfer systems already 

exist. Every State, your State of Texas has been running them for 

years. 

Mr. BURGESS. Let me just interrupt, because my time is going to 

grow short. The current 47 million estimated uninsured in this 

country, 20 percent according to some estimates have Medicare aid 

and SCHIP available to them, and they just simply don’t take it. 

They don’t sign up for it. 

Mr. GREENSTEIN. I understand. What we are suggesting is 

every—a lot of these people are on food stamps. Everybody who is 

on food stamps, all the elderly and disabled people who, low income 

who get the drug subsidy for the Medicare drug, they are automatically just put on the debit card system that States already operate. 

They already—and then additionally to the degree that there are 

working poor people, a lot of the people that aren’t signed up for 

SCHIP are working poor. They file tax returns, they get the earned 

income credit. When you put those two together, you have a relatively small proportion of the low-income population you haven’t 

reached. We would have to do outreach and urge them to sign up. 

Mr. BURGESS. But what about in a State like Texas where we 

have a significant number of people who fall between the cracks because they are in the country without the benefit of a Social Security number? And they are inherently hesitant to sign up for these 

types of programs for fear that someone will discover they don’t 

have a Social Security number. How are they going to be made 

whole in this equation, or are we even going to try? 

Mr. GREENSTEIN. That is a very good question. I think as we envision that Congress would need to determine in designing this 

what the rules are for this rebate. Do you need a Social Security 

number, what are the requirements? Whatever the requirements 

are people who meet them, if they are not already in one of the programs where you are automatically put on the debit card, you could 

go and apply and enroll. 

But you are getting into a question that is sort of beyond what 

I have a specific proposal on. It is kind of what you all decide you 

want to do with regard to who is eligible for the consumer comVerDate Mar 15 2010 11:19 Mar 02, 2012 Jkt 067102 PO 00000 Frm 00125 Fmt 6633 Sfmt 6633 E:\HR\OC\A102.XXX A102

rmajette on DSK2TPTVN1PROD with HEARING
120 

pensation and whether they—what requirements they have to meet 

with regard to things like Social Security numbers. 

Mr. BURGESS. But if we don’t meet the needs of that portion of 

the population, again, Mr. Hill’s mission statement on his Web site 

of economic opportunity and security for all, is not going to be met. 

Now, I grant you, we should do something about the problem we 

have with immigration in this country, the fact that we don’t is a 

serious problem. We can’t fix our healthcare system until we do, 

but this, we are opening the door to significant other problems with 

this tax that you are talking about creating, and it will hit this portion of the population disproportionately. 

I yield back, Mr. Chairman. 

Mr. MARKEY. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Washington State, Mr. 

Inslee. 

Mr. INSLEE. Thank you. While we have been having this hearing 

I got a little blurb on my Blackberry that said they just got a report in California that climate change will cost the State of California somewhere between $2.5 and $15 billion a year. So there is 

a cost of, if we do what some suggest we do here, which is nothing, 

we are going to have costs associated that particularly will fall on 

lower-income people. 

The best evidence that I have seen comparing the costs of that 

scenario, which is an inaction scenario, to an action scenario is the 

Stern Report out of the England, and it suggests that we will have 

five times more cost on low and high-income people if we do nothing, compared to if we do something. 

Does anybody—so does anybody have any other evidence to suggest that figure is wrong, that there is a different analysis? Does 

anybody have any other better assessment of this? 

Mr. KLINE. Sir, I would say the one piece of analysis I have seen 

that was done in California is on an integrated basis by Berkley 

and Stanford, is that the immense affects in California would occur 

primarily through water, which would have a huge impact on, if 

the State were very hydro-dependent as I know you are, and an immense cost due to fire and to storms. 

So the costs were substantially greater than any cost that could 

be put together for action. 

Mr. INSLEE. Well, the reason I point this out is I think it is very 

important for us to address this issue, but I just want to point out 

that it is going to be worse, it is just really clear. It is going to be 

worse for our constituents. It is going to cost them more money to 

do nothing in this chamber than to do something. 

I want to ask Mr. Greenstein about the ideas about sort of cash 

cushions for low-income folks. You have suggested some very intriguing ways to do that. How do we balance that against the idea 

that we ought to be making investments in the efficiency to reduce 

those low-income folks’ energy costs over time? 

I have to say I do have some concern that if we rely just on a 

cash cushion as opposed to an efficiency investment that will lower 

their—that will clearly give us more bang for the buck, because 

clearly these efficiency investments actually reduce costs, they have 

a positive net economic return. So I think it is very clear that if 

we can help a person in a low income get a weatherized home, that 


rmajette on DSK2TPTVN1PROD with HEARING
121 

same expenditure will save them a lot more money, be a lot bigger 

cushion over time compared to just say cash distribution. 

How do we oppose those, realizing it is more difficult to do some 

efficiency measures? 

Mr. GREENSTEIN. I don’t think it is an either or. Again, I am not 

proposing a cap and dividend where all the money goes out in cash 

payments. I am proposing a portion of it. I do think energy efficiency should be one of the uses of the remaining auction proceeds. 

And this all fits together because the way we envision the rebates working, they are tied to how much energy costs go up in the 

economy, which will be reflected in the price of the permits. The 

more effective we are on efficiency, the less the price of the permits 

will go up, and the smaller the cash rebates will be to the people 

that I am talking about. The two—what you are talking about and 

what I am talking about, they really fit together. The one caveat, 

I mentioned earlier, is that most energy efficiency programs like 

Weatherization now operate on a pretty small scale. We need to 

make them bigger. 

But it is not like overnight or in 5 or even 10 years that we can 

weatherize the home of every low and moderate-income person in 

the United States. And even if we weatherize a million low-income 

homes a year, it would take about 37 years to weatherize the 

homes of everybody eligible for—— 

Mr. INSLEE. So what is the best, if we do want to make a substantial investment in efficiency for low-income people, what is the 

best mechanism to do it? A voucher program? A some kind of cash 

or other infusion to distributors that somehow we mandate is used 

for efficiency? What is the best system? That is an open panel question to the whole panel. 

Mr. GREENSTEIN. This is something we are still looking at. I 

frankly don’t think the answer is crystal clear, and I do want to 

clarify. I have been very critical, and I am very critical of giving 

free allowances to the LDCs to lower electricity rates. Actually, we 

are going to get more incentive for people to use, for example, some 

of the rebates I am proposing for efficiency if they feel the sticker 

shock of the increase in rates. 

But I want to distinguish that and listen carefully to Mr. Kline, 

from what he was talking about in terms of energy efficiency. It 

may make sense to give allocations to the LDCs for energy efficiency. 

Mr. INSLEE. Could I just real quickly ask Mr. Kline, is there a 

way to do distributions to distributors or utilities, and in fact, know 

that they are going to be used for efficiency? 

Mr. KLINE. Absolutely. You can mandate that those dollars be 

used and reporting accordingly. So it is going to be transparent. 

You are going to see the numbers on an annual basis of achievement, and you are going to be able to judge if it is working. 

Mr. INSLEE. It is a little tough on some planting issues, but 

thank you very much. 

Mr. MARKEY. OK. The gentleman’s time has expired. 

The Chair recognizes the gentleman from Vermont, Mr. Welch. 

Mr. WELCH. Thank you. I want to—I was impressed with the testimony of Mr. Carey. I am from New England. We don’t have coal 

much there, and it is just the luck of the draw where we live. But 


rmajette on DSK2TPTVN1PROD with HEARING
122 

the point you make about the jobs, about the economy are compelling, and it is just a matter of whose ox is being gored. 

On the other hand, there is a lot of sentiment in Vermont, and 

maybe it is because it is easier for us that we don’t rely on coal 

to really focus on this question of global warming. 

And what I am trying to understand is given the responsibility 

you have towards those coalminers and your industry and appreciate the risk of any plan that has a tax or a cap-and-trade system, 

is it your view after you assess all of that that the harm that would 

be done by taking some action, however well intentioned, to the 

people that you represent is a cure that would be worse than the 

disease? 

Mr. CAREY. Mr. Chairman, Congressman, you know, first I want 

to kind of address your question and kind of answer what I didn’t 

have an opportunity just to answer just a second—— 

Mr. WELCH. Yes, and keep in mind we don’t have a lot of time. 

Mr. CAREY. The first thing is is where is the information coming 

on the true cost of global warming on any State and on any given 

community. 

Mr. WELCH. OK. So let me stop you here, because that is what 

I am trying to understand. 

Mr. CAREY. Right. 

Mr. WELCH. You dispute that? 

Mr. CAREY. Right. I do dispute that, because I think you have to 

look at the sources. I think the other question is is what is the true 

economic cost and the social cost behind not having reliable, affordable, and increasingly clean energy. 

Mr. WELCH. Right. So then there is a big risk is what you are 

pointing out. 

Mr. CAREY. There is a huge risk. 

Mr. WELCH. But do you, what is your view on the environmental 

threat? 

Mr. CAREY. I think it is key to, that we continue to research in 

clinical technology, which is carbon sequestration. I think that any 

proposals that we have out there whether there be some type of 

safety valve legislation so there would be a certain level of cost that 

would be associated with any type of—and you can’t, you have to 

separate. You have to—— 

Mr. WELCH. I want to understand this because I think if I am 

fairly summarizing your view, there is a big cost that is associated 

with taking action, whatever plan we advance, that may be more 

costly than whatever benefits occur, and you want more research, 

and you have some skepticism about the environmental impact 

compared to other impacts. 

Mr. CAREY. Mr. Chairman, Congressman Welch, I think what I 

have heard from this panel is how we are going to protect these 

low-level consumers. Who is going to protect them? It is going to 

be the taxpayer. It is going to be the individuals that are paying 

the electricity rates, whether it is in small business, whether it is 

in heavy manufacturing, whether it is just the people that I represent that go in the mine every day. They are not looking for a 

handout, Congressman. They are looking to be able to provide—— 

Mr. WELCH. Oh, no. They want to work, and listen, they do hard 

work, you know, the folks who go in those mines and bring that 


rmajette on DSK2TPTVN1PROD with HEARING
123 

coal out. That is tough work. There is no question about it. I mean, 

there is just, and there is always disruption when you are going 

to make a transition from a way of doing business to a new way 

of doing business. 

Do you have any concrete—let us just say for a minute you were 

faced with the likelihood of there being action on a cap-and-trade 

or a carbon tax. Are there any concrete steps you would recommend that would mitigate the impact on your workers and your 

miners, your companies? 

Mr. CAREY. Mr. Chairman, Congressman, it would be hard for 

me to advocate for anything that I disagree with, but what I would 

say, Congressman, is any time, there has to be a level of practicality. 

Mr. WELCH. Right. 

Mr. CAREY. There has to be a level, you know, I am hearing 

about, you know, I have heard in testimony today that, you know, 

well, we got to look how this helps or how this would affect—— 

Mr. WELCH. Right. 

Mr. CAREY [continuing]. The coal communities. Well, that, you 

know, it is very easy for us to sit up on this—— 

Mr. WELCH. Yes. OK. No. I appreciate—— 

Mr. CAREY [continuing]. Table and say that. 

Mr. WELCH [continuing]. Your comments and only because I only 

have limited time I am going to go to Mr. Greenstein. 

Mr. Greenstein, you raised a red flag about proposals to reduce 

the impact of climate change legislation on consumers’ budgets 

through policies that would provide permits to utility companies, 

and that is one of the proposals that some folks favor, relying on 

the utility companies to keep their bills down. And obviously, that 

is where consumers pay a big bill, hits them hard, and why do you 

think that would be a problem, basically providing the utility companies opportunity to lower those bills? 

Mr. GREENSTEIN. As I mentioned, I think it might be a good idea 

for delivering energy efficiency, but in terms of doing that as a way 

to offset the impact on consumers’ budgets directly rather than 

through rebates, and this is for both low and middle-income families, I think it would be a large mistake for a variety of reasons. 

Let me just mention two. One, we have over, about 3,300 LDCs 

in the electricity sector alone. How do we know how many permits 

to give each LDC? Most of the proposals say, well, you allocate 

them based on electricity use. Higher-income people use more electricity per capita than lower-income people, so we would overcompensate in areas. 

But I think the two biggest problems are that it would reduce incentives to conserve, and that frankly it wouldn’t effectively protect 

consumers. The premiere environmental think tank is resources for 

the future. RFF in a paper that came out last summer explained 

that if you gave free allowances to the electricity sector, to the 

LDCs to lower electricity rates, that in order to hit the emissions 

cap, prices for other energy products would have to go up more. So 

you would spend a lot of money, but you would have a partial affect 

at best on consumers’ budgets. So it would be a very inefficient way 

of doing it. 

Mr. WELCH. OK. 


rmajette on DSK2TPTVN1PROD with HEARING
124 

Mr. GREENSTEIN. I think a better way is you give people the rebates, you don’t artificially depress their energy bills. The whole 

point is to have the energy bills go up in order to create incentives. 

And then you supplement that with things like efficiency, where I 

think the LDCs can be very important. 

Mr. WELCH. OK. Another question. The policy choice, does it 

matter whether you give emission allowances free to energy companies and other emitters or auction them? 

Mr. GREENSTEIN. You need to auction them. Consumer prices—— 

Mr. WELCH. Why? 

Mr. GREENSTEIN [continuing]. Economists say that consumer 

prices will go up either way, as a result of which the free giveaways to the emitters effectively gives you, gives them windfall 

profits and means there are no resources to help consumers to fund 

alternative energy research. If one can—I am not an expert on this, 

if one can come up with the appropriate remedies to mitigate the 

pain in coal communities, whatever they may be, you need the resources to do these things. 

Mr. WELCH. OK. Thank you. 

I yield back. 

Mr. MARKEY. Great. The gentleman’s time has expired, and all 

time for this hearing has expired. I think we have really been benefited by the testimony from this panel. We are right at the heart 

of the matter here in this discussion. We know we have a big problem. Global warming is real. The planet is running a fever. There 

is no emergency room for a planet, so we have to act in preventative ways in order to make sure that the problem does not get 

worse. 

So we have to figure out something here that helps to deal with 

the impact of the actions we have to take in order to protect the 

planet, and your testimony today has helped us a lot in helping to 

frame those issues. Thank you. 

This hearing is adjourned. 

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


rmajette on DSK2TPTVN1PROD with HEARING
125 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 136 here 67102A.077
126 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 137 here 67102A.078
127 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 138 here 67102A.079
128 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 139 here 67102A.080
129 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 140 here 67102A.081
130 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 141 here 67102A.082
131 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 142 here 67102A.083
132 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 143 here 67102A.084
133 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 144 here 67102A.085
134 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 145 here 67102A.086
135 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 146 here 67102A.087
136 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 147 here 67102A.088
137 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 148 here 67102A.089
138 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 149 here 67102A.090
139 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 150 here 67102A.091
140 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 151 here 67102A.092
141 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 152 here 67102A.093
142 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 153 here 67102A.094
143 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 154 here 67102A.095
144 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 155 here 67102A.096
145 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 156 here 67102A.097
146 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 157 here 67102A.098
147 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 158 here 67102A.099
148 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 159 here 67102A.100
149 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 160 here 67102A.101
150 


rmajette on DSK2TPTVN1PROD with HEARINGInsert offset folio 161 here 67102A.102