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TESTIMONY OF DAVID M. GARDINER



TESTIMONY OF
DAVID M. GARDINER
ASSISTANT ADMINISTRATOR FOR POLICY
U.S. ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE
SUBCOMMITTEE ON ENERGY RESEARCH,
DEVELOPMENT, PRODUCTION AND REGULATION
OF THE
COMMITTEE ON ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
AND
SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,
NATURAL RESOURCES AND REGULATORY AFFAIRS
OF THE
COMMITTEE ON GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES

May 20, 1999

Messrs. Chairmen and Members of the Subcommittees, I am David Gardiner, Assistant Administrator for the Office of Policy at the U.S. Environmental Protection Agency (EPA). I want to thank the Chairmen of the Subcommittees holding this joint hearing for inviting EPA to testify today on our climate change program and related FY 2000 budget request.

THE PRESIDENT'S CLIMATE CHANGE PLAN

Global climate change is a very real and very serious problem. The President has put forth a plan, articulated most fully in a speech in October 1997, to address this problem responsibly and effectively in both the domestic and international arenas. EPA's voluntary programs included as part of the Climate Change Technology Initiative (CCTI) are an important part of that plan. Our programs are achieving solid results, results that can be measured, results that today are reducing energy use, saving businesses and consumers money, and cutting emissions of several different air pollutants in communities across the country. Because EPA's programs have proven so successful, and because we see more opportunities to apply them fruitfully, the President is requesting increased funding for them in FY 2000.

In addition to these budget proposals, the Administration has recently submitted to Congress an electric utility industry restructuring bill that would lead to CO2 emission reductions of 40-60 million metric tons of carbon equivalent per year, while reducing energy bills for consumers. Bipartisan legislative proposals have been developed that would encourage and give credit to American businesses for making early, voluntary reductions in pollutant emissions. As I will explain, there are three elements in the President's plan to address climate change -- the CCTI programs, electric utility industry restructuring, and early credits. All require action and approval by Congress. We stand ready to work with Congress on these three elements so the American people can enjoy the economic and environmental benefits that will result.

The President's plan is premised on the fact that man-made emissions of carbon dioxide and other greenhouse gases are undoubtedly changing the composition of the earth's atmosphere, trapping more of the sun's radiation. Over the past century the average temperature on earth has increased between a half and one degree Fahrenheit. Sea levels have risen 4 - 10 inches. According to the Intergovernmental Panel on Climate Change (IPCC), which reflects the expertise of more than 2000 scientists, "the balance of evidence suggests that there is a discernible human influence on global climate." The best available science suggests that over the next century a worsening greenhouse effect could impose high costs on natural habitat, certain species of wildlife, coastlands, estuaries, drinking water aquifers, and human health. According to the IPCC, global warming in the future will have "wide-ranging and mostly adverse impacts on human health, with significant loss of life."

In response to these risks, the President has proposed to proceed pragmatically in three stages. In the first stage, EPA and other agencies are taking actions that help reduce greenhouse gas emissions while providing direct and immediate benefits to the economy. Specifically, the EPA voluntary partnership programs I am testifying about today are included in this first stage.

During the second stage, programs implemented during stage one will be reviewed, evaluated, and -- depending on their success -- extended. A pilot emissions trading program will be put in place and tested.

The third stage of the President's plan envisions implementation of an emissions cap and trading system -- based on the successful experience with the acid rain program -- to harness the power of the marketplace to limit greenhouse gas emissions as flexibly and efficiently as possible, and at the lowest possible cost.

EPA'S CCTI PROGRAMS

The EPA programs for which we are requesting FY 2000 funding are part of the CCTI. The CCTI represents a balanced three-part approach to cost-effectively address climate change:

Let me emphasize some important aspects of EPA's CCTI programs. First, they are completely voluntary; each of our 7,000 partners in private businesses, non-profit organizations, and state and local governments has chosen to participate. Second, our partnership programs impose no regulatory costs on the private sector; on the contrary, they help our partners save money, thus making them more profitable and competitive. Third, our programs provide no financial subsidies; our partners become involved simply because our programs make economic and environmental sense.

Furthermore, our programs foster earlier market penetration of cost-effective, environmentally-protective technologies by overcoming marketplace barriers. These barriers include the lack of accurate, reliable consumer information on the environmental and economic benefits of different products, and low incentives for private-sector research and development. EPA's technology deployment programs minimize or remove these barriers in the marketplace so that businesses, households, governments, and industries develop and deploy clean technologies much faster than they would in a business-as-usual environment.

Faster, more extensive use of these technologies generates an additional benefit for the United States economy, because the technologies typically are developed and sold by American companies. Rapidly increasing sales of new technologies create profits and jobs for Americans. Moreover, because these technologies usually reduce emissions of many air pollutants besides greenhouse gases, they help us achieve a number of our long-term health goals.

Perhaps the most important quality of these programs is that their benefits are immediate. When an investment is made today in energy-efficient technology, energy use drops immediately. Money is saved immediately. Air pollutants, including greenhouse gases, are reduced immediately. All the savings resulting from new technology deployment continue to accrue for decades to come, resulting in enormous aggregate benefits.

Let me offer one further insight. According to an EPA analysis, sixty percent of U.S. greenhouse gas emissions in the year 2010 will be generated by manufacturing plants, equipment, and products that are not now in place, but will be purchased between now and then. EPA's partnership programs can help the American people tangibly address their concerns about air quality and climate change in the investment and purchasing decisions they make today. In other words, if we are concerned about air quality in 2010 and beyond, we can address those concerns today in the decisions we make to purchase new capital stock. If American businesses and families fail to make these investments, the nation will miss out on a huge opportunity to improve our environmental and economic future over the next decade.

Clearly, EPA's CCTI programs have been successful. Through the hard work and innovative thinking of our corporate and community partners, we have consistently surpassed our annual programmatic goals for greenhouse gas emissions reductions. We have demonstrated beyond any doubt that these voluntary partnership programs are win-win situations for the American economy and the quality of our environment. EPA estimates that every federal dollar spent on these programs drives 20 dollars of private investment, which in turn saves more than 70 dollars in energy costs while reducing carbon dioxide emissions by more than two tons.

Examples of EPA's CCTI Programs

EPA's CCTI programs already funded by Congress are helping American businesses, communities, and consumers make better investment and purchasing decisions, and those decisions are already cost-effective, improving worker productivity, and cleaning up the air. Let me give you just a few examples:

These are just a few examples of how thousands of American businesses, schools, governments, and families -- and some international companies -- are using EPA-sponsored technology deployment programs to cut energy use while making sizeable reductions in a number of different pollutants. Anyone looking for a real-world measure of the programs' effectiveness should talk to the people that have installed these technologies. Ask them about the results. Ask them if their actions resulted in real economic savings and real environmental improvements. I think you'll find that EPA-sponsored technologies -- like the "sleep" function of today's computers -- have become the performance standard around the world, even in some developing countries.

We have equally high expectations for the Clean Air Partnership Fund, a new program for which we have requested funding in FY 2000. The Clean Air Partnership Fund will help states, tribes, and communities investigate and demonstrate new technologies and other strategies that would address multiple pollutants simultaneously, including smog, soot, toxic air pollutants, and greenhouse gases. It is expected that the Clean Air Partnership Fund would support the development of capitalization mechanisms that can leverage federal dollars and substantially increase the Fund's impact. As is the case with other CCTI programs, the Clean Air Partnership Fund is voluntary, and it would help stimulate innovative technology.

EPA' Goals for CCTI Programs

EPA's year 2000 goals for our CCTI programs, which will serve all major sectors of the American economy, are to:

These programs are working. But we think we can do even more, which is why the Administration is requesting a $107 million increase over this year's funding for EPA's CCTI programs. We want to target other cost-effective, environmental-protecting opportunities. If the proven results of current programs continue into the future, as we expect, by 2010 this new funding would result in:

What's more, we expect overall program effectiveness to improve as EPA's programs mature and more energy-efficient technologies become available. As the head of the Energy Information Administration testified before Congress last month, the early market penetration of energy-efficient technologies, the kind of early penetration accelerated by EPA's CCTI programs, may reduce future costs "through learning, establishing the infrastructure, and increasing familiarity with new technologies."

EPA's CCTI programs deserve to be expanded because they work very well. We'd like to carry our past successes into the 21st century, and with the support of the joint Subcommittees and the rest of the Congress, we will.

THE KYOTO PROTOCOL

Let me reiterate the Administration's commitment not to implement the Kyoto Protocol unless it is ratified by the U.S. Senate, and nothing in our budget request attempts to do so. As I said at the outset of this testimony, the President's policy to address climate change involves international as well as domestic action. Climate change is a global problem that requires a global solution. The United States is an important contributor to the problem of climate change, but Americans did not cause the problem all by themselves, and they cannot solve the problem all by themselves. Consequently, we have sought to develop an international framework for appropriate action by all nations that contribute to the problem. The Kyoto Protocol, adopted in December 1997, was a monumental achievement towards that objective. The Protocol establishes emission reduction targets for more of the world's most developed economies. It covers all the important greenhouse gases and gives credit for enhancing forests and other carbon sinks. It establishes a highly flexible, market-based structure in which to meet these targets, including five-year budgets to deal with normal economic cycles and other factors. It creates new international market mechanisms such as emissions trading and the clean development mechanism, to reduce costs by allowing emission reductions to be taken where they are least expensive.

To be sure, the Protocol remains a work in progress. Under the President's direction, the Administration continues to work to spell out the important operating rules for emissions trading and other provisions of the Protocol. And we continue to work to obtain meaningful participation by key developing countries, whose emissions are growing and who must be part of an effective global solution. Important progress was made towards both of these goals last fall in Buenos Aires, where several developing countries agreed to participate more fully in the Protocol, and where the Parties agreed to elaborate the operational rules I have referred to over the next two years. Clearly, the Protocol cannot enter into force for the United States unless and until ratified by the Senate, and we are committed not to attempt to implement the Protocol unless and until ratification takes place.

This concludes my prepared statement. I would be happy to answer any questions that you may have.


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