Consumer Protection Provisions in Climate Legislation: Hearing

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. 11114
(
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COMMITTEE ON ENERGY AND COMMERCE

HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan
JOE BARTON, Texas
Chairman Emeritus
Ranking Member
EDWARD J. MARKEY, Massachusetts
RALPH M. HALL, Texas
RICK BOUCHER, Virginia
FRED UPTON, Michigan
FRANK PALLONE, JR., New Jersey
CLIFF STEARNS, Florida
BART GORDON, Tennessee
NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois
ED WHITFIELD, Kentucky
ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois
BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York
ROY BLUNT, Missouri
GENE GREEN, Texas
STEVE BUYER, Indiana
DIANA DEGETTE, Colorado
GEORGE RADANOVICH, California
Vice Chairman
JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California
MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania
GREG WALDEN, Oregon
JANE HARMAN, California
LEE TERRY, Nebraska
TOM ALLEN, Maine
MIKE ROGERS, Michigan
JAN SCHAKOWSKY, Illinois
SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California
JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas
TIM MURPHY, Pennsylvania
JAY INSLEE, Washington
MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin
MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas
PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York
STEVE SCALISE, Louisiana
JIM MATHESON, Utah
PARKER GRIFFITH, Alabama
G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio
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
(II)
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SUBCOMMITTEE
ON
ENERGY
AND
ENVIRONMENT
EDWARD J. MARKEY, Massachusetts, Chairman

MICHAEL F. DOYLE, Pennsylvania
DENNIS HASTERT, Illinois
G.K. BUTTERFIELD, North Carolina
Ranking Member
CHARLIE MELANCON, Louisiana
RALPH M. HALL, Texas
BARON HILL, Indiana
FRED UPTON, Michigan
DORIS O. MATSUI, California
ED WHITFIELD, Kentucky
JERRY MCNERNEY, California
JOHN SHIMKUS, Illinois
PETER WELCH, Vermont
HEATHER WILSON, New Mexico
JOHN D. DINGELL, Michigan
JOHN B. SHADEGG, Arizona
RICK BOUCHER, Virginia
CHARLES W. CHIP PICKERING,
FRANK PALLONE, New Jersey
Mississippi
ELIOT ENGEL, New York
STEVE BUYER, Indiana
GENE GREEN, Texas
GREG WALDEN, Oregon
LOIS CAPPS, California
SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California
JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas
MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
JIM MATHESON, Utah
JOHN BARROW, Georgia
(III)
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CONTENTS
Page
Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachussetts, opening statement ...................................................
Hon. Fred Upton, a Representative in Congress from the State of Michigan,
opening statement ................................................................................................
Hon. Henry A. Waxman, a Representative in Congress from the State of
California, opening statement .............................................................................
Prepared statement ..........................................................................................
Hon. Gene Green, a Representative in Congress from the State of Texas,
opening statement ................................................................................................
1
2
3
5
15
17
WITNESSES
Steve Kline, Vice-President of Corporate Environmental and Federal Affairs,
Pacific Gas And Electric Corporation .................................................................
Answers to submitted questions ......................................................................
Sonny Popowsky, Consumer Advocate of Pennsylvania, Pennsylvania Office
of the Consumer Advocate ...................................................................................
Robert Greenstein, Executive Director, Center on Budget Policies and Priorities ........................................................................................................................
Answers to submitted questions 1 ...................................................................
Steven F. Hayward, American Enterprise Institute .............................................
Mike Carey, Ohio Coal Association ........................................................................
John S. Hill, Director for Economic and Environmental Justice, United Methodist Church, General Board of Church and Society ........................................
1 Mr.
Greenstein did not respond to submitted questions for the record.
(V)
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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, Americas 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
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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 shouldnt 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 todays hearing, of course, is Consumer Protection in Climate Legislation,
which recognizes the undisputable fact that climate legislation will
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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. Markeys 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-andtrade, the American people will be taxed $366 billion in 2015, four
times as much as the Presidents 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 average 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 Obamas plan, President Obamas
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 Nations 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 gentlemans 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 ex-
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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 childrens 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:]
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Mr. MARKEY. The gentlemans 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 dont 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 arent
on. Isdo we have a technical problem, or is there
Mr. MARKEY. Can II 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 dont
know what happened, but I know that
Mr. BARTON. But these cameras just dont 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 aboutthank you.
Mr. MARKEY. So I dontI 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 dont 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.
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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 dont 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. Wethe 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 doesnt 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 gentlemans 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
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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.
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 gentleladys 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 athe 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
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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.
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 todays 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 todays testimony.
And once again, Mr. Chairman, thank you very much for this
hearing. I yield back the balance of my time.
Mr. MARKEY. The gentleladys time has expired.
The Chair recognizes the gentleman from Louisiana, Mr. Scalise.
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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 Presidents 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.
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 dont 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.
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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
dont 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, dont 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 dont
intend to make that mistake.
Thank you.
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
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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 wont 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 Chairmans 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. Greensteins 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.
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 childhoodsome
of us watched Captain Kangaroo.
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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 dont 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 dont control the cost to the consumer, it
is kind of like Social Security. I tell people, dont 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 toif 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 Presidents 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 governments 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:]
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19
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 cant fix these cameras. OK. I dont understand it, and I
dont understand how the House Armed Service Committee and
House Oversight Committee doesnt have rooms that have a camera in them. I dont
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 onI 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
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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 CSpan.
Mr. SHIMKUS. No. Would the gentleman yield?
Mr. MARKEY. I will just finish the point. What CSpan has to decide on a daily basis as an editorial decision is which committee
hearings they are going to actually put on CSpan. 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 CSpan.
So what we are talking about principally here is that other offices can see this hearing rather than
Mr. SHIMKUS. No. That isMr. 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 CSpan 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 doesnt think we are going down the
wrong path
Mr. MARKEY. No. I agree withagain, 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.
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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 Americas 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 gentlemans 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
dont 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 cant 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.
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Mr. MARKEY. Honestly, Ralph, I see this as somethingmy 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.
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 Nations
Mr. MARKEY. Move it in just a little bit closer.
Mr. KLINE. PG&E is one of the Nations 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 cus-
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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 doesnt 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 DefenseI 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:]
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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 NASUCAs 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 wont pick up the ticket and give it away. The
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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 theor the
opportunity cost of the credit, that amount gets charged, gets paid
to everyone, including, for example, nuclear units that dont have
any emissions costs, that dont 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:]
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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 wont 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. Bushs 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 arent
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.
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We would also provide some additional money, must lesser
amount, to the Low-Income Home Energy Assistance Program to
fill gaps that otherwise arent 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 coulddepends 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, cant 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 dont 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 cant cover that through an allocation to the utility company.
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Fourth, there is no good formula for allocating emissions among

the more than 3,300 LDCs in the country. I wont take the time
to do it here butin 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 dont 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 dont 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:]
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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 212 tons down from 1912 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 cant 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
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with Mr. Greensteins 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
Campbells 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:]
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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 States 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 worlds 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 alsoor 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 regions 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.
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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 dont 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 Nations rapidly-growing demand for electricity.
First and foremost proposals for cap-and-trade legislation constitute little more than a coal tax on Ohios 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 regions working families but our regions 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:]
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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 Gods 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 todays 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.
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While this mornings 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 Gods people. In developing policies we must ensure that the solutions protect the needs of the poor, that we dont 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
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to working with the committee as you develop legislation that protects Gods good creation and all of Gods children.
Thank you.
[The prepared statement of Mr. Hill follows:]
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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
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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 arent 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 isor 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 dont 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
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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 dont have a job at the end of the
day, that doesnt 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 cant 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 dont. 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
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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
forand because of reliance on coal, you mean to say that customers in those regions shouldnt 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 cant
blow up the economy, and it cant 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 isnt
going to abruptly affect
Mr. UPTON. All right. I want to get my last question in.
Mr. Hayward, I know I didnt 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 dont 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 knowso in other
words, you still have a long way to go.
I have gone through this about, you know, we gotright 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 dont make it.
The Chair recognizes the gentleman from California, Mr. McNerney.
Mr. MCNERNEY. Thank you, Mr. Chairman.
I cant 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 peoples 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
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thoughtful. We dont want to hurt people, but we have to make
change.
One of the things that struck me was Mr. Greensteins 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 penaltyit 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 arent 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 youthe 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 wasnt 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.
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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 Presidents budget estimates that he would generate about $646 billion
out of this energy tax.
And so for the Presidents 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 dont 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, higherwell, according to Mr. Orszags 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 Campbells soup example. Number
one, the school teacher married to the police officer now according
to Mr. Greensteins 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
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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 12 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 ofit is hard to say. I couldnt 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 dont
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 arent consuming coal. If they are
not consuming coal, we arent 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.
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
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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 dont know, but at some point we could
have catastrophic changes in climate in the worlds 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 dont 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. IMr. 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
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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 gentleladys 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 thatI 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. Arein 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.
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Mr. SHIMKUS. Let me move to, actually sincelet 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 dont 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 dont 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,
wouldnt 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
dont 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. Isnt 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.
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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.
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. Markeys 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 doesnt capture people at the bottom of the income
scale, elderly, disabled people who arent 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 arent 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 dont, 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 dont 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.
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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 dont 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 isnt magic. Our recommendation may be 1 percent of the permit value to LIHEAP. LIHEAP cant 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.
The Chair recognizes the gentleman from Texas, Mr. Burgess.
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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 redistributionists 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 dontI 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 peoplewe 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 cant comment on
that.
Texastwo 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 arent 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
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one of our big fights during SCHIP, the State Childrens 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. Hills, 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 dont take it.
They dont sign up for it.
Mr. GREENSTEIN. I understand. What we are suggesting is
everya 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 alreadyand then additionally to the degree that there are
working poor people, a lot of the people that arent 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 havent
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 dont
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 com-
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pensation and whether theywhat requirements they have to meet
with regard to things like Social Security numbers.
Mr. BURGESS. But if we dont meet the needs of that portion of
the population, again, Mr. Hills 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 dont is a
serious problem. We cant 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.
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 anybodyso 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
theirthat 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
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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 dont 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 twowhat 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 dont 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.
The Chair recognizes the gentleman from Vermont, Mr. Welch.
Mr. WELCH. Thank you. I want toI was impressed with the testimony of Mr. Carey. I am from New England. We dont have coal
much there, and it is just the luck of the draw where we live. But
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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 dont 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 didnt
have an opportunity just to answer just a second
Mr. WELCH. Yes, and keep in mind we dont 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 ofand you cant, 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
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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 concretelet 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 wouldnt 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.
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Mr. GREENSTEIN. I think a better way is you give people the rebates, you dont 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 canI 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 gentlemans 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:]
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Consumer Protection Provisions in Climate Legislation: Hearing

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CONSUMER PROTECTION PROVISIONS IN CLIMATE

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

COMMITTEE ON ENERGY AND

MARCH 12, 2009

Serial No. 11114

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

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COMMITTEE ON ENERGY AND COMMERCE

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EDWARD J. MARKEY, Massachusetts, Chairman

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Greenstein did not respond to submitted questions for the record.

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